THE ANNUAL REPORT OF THE EUROPEAN COURT
OF AUDITORS FOR 1996
THE COURT'S
STATEMENT OF
ASSURANCE
14. From their work on the Statement of Assurance,
the Court concluded that the 1996 accounts reliably reflected
the European Community's revenue and expenditure for the year
and financial situation at the end of the year, with the exception
of five significant mis-statements. The Court concluded that transactions
underlying the revenue entered into the accounts for 1996 were,
taken as a whole, legal and regular, subject to standard restrictions
on the scope of revenue audit in relation to the completeness
of the figures. With the exception of an understatement of outstanding
commitments, the Court also concluded that the commitment transactions
for the financial year 1996, taken as a whole, were legal and
regular.
15. However, for the third year in succession, the
Court could not give any assurance as to the legality and regularity
of the transactions underlying payments, because of the high likely
rate of error. On the basis of the findings in their sample, the
Court estimated that the overall most likely rate of "substantive"
error, that is quantifiable error which directly affected the
amount of European Community funds spent, was 5.4 per cent or
£3.1 billion. The Court noted that the error rate in the
Structural Funds was substantially higher than for the Budget
as a whole whilst the rate was lower for the Common Agricultural
Policy.
16. Our predecessors were concerned that improvements
should be made to the Community's financial statements, in order
to provide more usable information and enhance the accountability
of the Commission for the Community Budget.[3]
They recommended that the United Kingdom Government press for
publication of audited accounts in a clear format accompanied
by the Statement of Assurance. In their response the Government
promised to raise the matter with the Commission.[4]
17. The Commission published the Community's accounts
for 1996 at the same time as the Court's Annual Report, but separately
from the Statement of Assurance. The Commission also published
a separate document containing summarised and unaudited financial
statements for 1996. Notwithstanding this progress, the Court
noted in their 1996 Statement of Assurance that there was "a
need for a clear statement of the accounting principles and policies
applicable to the accounts of the European Community". The
Court went on to conclude that this was the basic framework from
which to produce a concise, easy to understand and transparent
set of financial statements showing the Commission's financial
position.
Conclusions
18. 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.
19. 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.
20. 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.
3 Committee of Public Accounts, Tenth Report, Session
1995-96 (HC 250). Back
4
Treasury minute on Tenth Report, Session 1995-96 (Cm 3279). Back
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