THE ANNUAL REPORT OF THE EUROPEAN COURT
OF AUDITORS FOR 1996
INTRODUCTION AND
SUMMARY OF
CONCLUSIONS AND
RECOMMENDATIONS
1. In 1996, the European Community spent some £57
billion, 3.6 per cent more than in 1995. The Community's revenue
for the year, including some £7 billion brought forward from
the previous year, totalled some £60 billion. The United
Kingdom is a net contributor to the Community Budget, paying in
£6.1 billion in 1996 and receiving back £4.4 billion.
2. The European Court of Auditors (the Court) are
the external auditors of the European Community and examine the
implementation of the Community Budget. The Court prepare an Annual
Report presenting their audit findings and observations on how
the Budget has been managed, and an annual Statement of Assurance
on the reliability of the Community's accounts, and the legality
and regularity of the underlying transactions.
3. On 18 November 1997 the Court published their
Annual Report on the implementation of the 1996 Community Budget
which incorporated their Statement of Assurance on the Community's
1996 accounts. The majority of European transactions in the United
Kingdom pass through the Appropriation Accounts of government
departments. It is clearly important that these European funds
are spent in accordance with the regulations and with due regard
for value for money, and that they are properly accounted for.
The same high standards of accountability should apply to them
as apply to the spending of United Kingdom funds.
4. In February 1996 this Committee's predecessor
considered a note by the Comptroller and Auditor General on the
Court's Annual Report and Statement of Assurance for 1994.[1]
The Committee were concerned by the Court's view that, generally
across the Community, within the European Commission (the Commission)
and in Member States, financial systems were often unreliable
and inadequate; that Community funds were being used without policy
objectives being achieved; and that the Court were unable to provide
a global positive Statement of Assurance.
5. The United Kingdom hold the Presidency of the
European Union during the first half of 1998. This is, therefore,
an opportune time for the Committee to review the Court's Annual
Report. We have therefore considered the Comptroller and Auditor
General's report on the Court's Annual Report for 1996. We are
disappointed to find that standards of financial management and
accounting across the Community are still too low; and that there
is evidence of waste, error and fraud in the Community's expenditure
programmes. We draw the Government's attention to the following
key conclusions and recommendations:
On the Court's Statement of Assurance
(i) The Committee is seriously concerned
that, for the third year in succession, the Court have declined
to provide a positive assurance on the legality and regularity
of Community payments because of the large number of errors identified
(para 18).
(ii) We note the number of exceptions to
the Court's assurance on the reliability of the Community's accounts,
and we endorse the Comptroller and Auditor General's conclusion
that the Commission have some way to go before they attain the
quality of financial reporting expected of public sector financial
statements, such as government accounts in the United Kingdom
(para 19).
(iii) We welcome the Commission's publication,
for the first time, of the Community's accounts for 1996 alongside
the Court's Annual Report; but we consider there is scope for
further improvements to information on the Community's finances.
We urge the Government to press for the Commission to produce
clear and simplified financial statements of the implementation
of the Community Budget with more accessible financial information.
We also endorse the recommendation of our predecessors that the
Statement of Assurance should be published with the financial
statements of the Community Budget (para 20).
On the Common Agricultural Policy
(iv) We are disturbed at the significant
level of unnecessary expenditure resulting from the failure of
agricultural compensation scheme regulations to take account of
movements in world market prices. We urge the Government, through
the Council of Ministers and other Community links, to press for
regular review of such schemes in future to ensure that they provide
only the level of subsidy intended (para 23).
(v) We support the Court's concern about
the high levels of subsidies paid to tobacco growers, which had
little effect on tobacco quality. We encourage the Government
to press for the effectiveness of current tobacco subsidies to
be assessed, and for reconsideration of whether it is appropriate
for there to be such subsidies given the consequences of tobacco
use (para 24).
On Community revenue
(vi) We are concerned that the systems for
ensuring recovery of customs and other duties payable to the Community
have not always operated effectively. We expect the relevant government
departments to continue to rectify problems arising in the United
Kingdom and we urge the Government to press for improvements in
procedures throughout the Community (para 27).
On the Structural Funds
(vii) We consider that the high level of
error found by the Court in payments from the Structural Funds
and the delay in the evaluation of the outcome of these programmes
for 1990-93 is unacceptable. Given the high rate of error, we
expect departments in the United Kingdom to ensure that applications
are rigorously vetted and that claims are thoroughly checked.
We also encourage the Government to press for improvements in
vetting and checking procedures throughout the Community, and
in procedures for evaluating the outcome of existing programmes
(para 34).
(viii) The work of the Court and the National
Audit Office shows that there are still grounds for concern so
far as fraud and irregularity against the Structural Funds are
concerned. We welcome the action taken by the National Audit Office
in the United Kingdom, and by the Commission under the Sound and
Efficient Management 2000 initiative, in an effort to improve
management and control of Structural Fund programmes in future
years (para 35).
On general conclusions
(ix) The Committee notes that the United
Kingdom hold the Presidency of the European Union during the first
half of 1998, and that this provides a valuable opportunity for
the Government to take new initiatives to improve the way Community
funds are managed. We welcome moves which the Government have
already made during its Presidency, such as the increased consultation
between the Council and the European Parliament on the discharge
decision on the 1996 budget, and the consideration given to the
Court's Annual Report in the Council of Finance Ministers. We
encourage the Government to continue to promote sound financial
management of Community funds throughout the European Union during
the remainder of its Presidency and in the future (para 36).
1 Committee of Public Accounts, Tenth Report, Session
1995-96 (HC 250). Back
| 
