THE ANNUAL REPORT OF THE EUROPEAN COURT
OF AUDITORS FOR 1996
THE STRUCTURAL
FUNDS
28. The Court's 1996 Annual Report concluded that
the error rate in the Structural Funds was higher than the average
for the Community Budget as a whole. The Court found that most
errors occurred in Member States, mainly at final beneficiary
level but also at the level of local and central authorities responsible
for managing the operations. The majority of "substantive"
errors concerned expenditure not meeting the required eligibility
criteria and expenditure claimed which had not been disbursed
at the time of declaration.
29. The Court drew attention to deficiencies in the
way in which Structural Fund operations were planned, managed
and accounted for by the Commission and Member States. In particular,
the Court noted that: objectives had not been set in a way which
enabled progress to be measured; there had been insufficient clarity
in prescribing expenditure eligible for Community assistance;
reliable accounting systems had not been put in place; and there
had not been sufficient controls to ensure that expenditure declarations
reflected only eligible expenditure. The Court emphasised that
the main responsibility for proper financial management and control
rests with Member States, although they concluded that the regulations
themselves needed to be reconsidered to provide an unambiguous
control framework.
30. The Court found substantial delays in the closure
of co-financed measures under the European Regional Development
Fund. At the end of 1996, 75 per cent of the measures for the
1989-93 programme period had still to be closed. The Court's audit
of programme closures also found that final reports submitted
by Member States were of poor quality and final declarations contained
ineligible expenditure and expenditure which was not adequately
substantiated.
31. The Court reported a steady increase in the financial
value of irregularities detected in European Social Fund projects
and reported to the Commission. The Court examined 69 European
Social Fund projects and found errors in 50 of them, including
39 errors having a potential financial impact. The Court concluded
that the Commission's controls should be supplemented by an audit
and verification programme of beneficiaries by the responsible
authorities in Member States.
32. The Court recognised that the Commission had
taken action under the Sound and Efficient Management 2000 programme
which should result in some improvements in the management and
control of Structural Fund programmes for future years. Some of
the actions taken by the Commission included new eligibility rules
and a new Regulation on arrangements for the financial control
by Member States of operations co-financed by the Structural Funds.
The Commission also stated their intention to review fundamentally
existing Council regulations for the next programming period starting
in 2000.
33. The National Audit Office have identified the
Structural Funds as a particular risk area warranting attention.
Their audits have uncovered similar problems to those identified
by the Court. In November 1997, the National Audit Office hosted
a seminar on "Working Together to combat Fraud and Irregularity
in the Structural Funds" with the support of the Commission's
anti-fraud unit. The seminar was attended by some 80 officials
from the United Kingdom and provided a valuable opportunity for
the exchange of information and views on how management and financial
control of the Structural Funds in the United Kingdom could be
improved.
Conclusions
34. 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.
35. 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 is 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.
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