IMPROVING FINANCIAL MANAGEMENT OF THE
COMMUNITY BUDGET
(21116)
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| Commission Action Plan for improving financial management and procedures.
|
| Legal base:
| — |
| Document originated:
| 11 February 2000 |
| Deposited in Parliament:
| 14 April 2000 |
| Department:
| HM Treasury |
| Basis of consideration:
| EM of 14 April 2000 |
| Previous Committee Report:
| None |
| To be discussed in Council:
| 8 May 2000 |
| Committee's assessment:
| Politically important |
| Committee's decision:
| Cleared |
Background
9.1 Following publication in November 1999
of the European Court of Auditors (ECA) Annual Report for 1998[23],
the Commission undertook a review of ways in which the Community's
financial management and procedures could be improved. An Action
Plan for improving financial management, reflecting the outcome
of this review, was sent by the Budget Commissioner to the Finance
Ministers of Member States on 11 February 2000. It takes account
not only of the findings of the ECA Annual Report but also of
the reports of the Committee of Independent Experts.[24]
The ECA Report drew attention once again to persistent weaknesses
in the financial management of the EU Budget. It pointed to the
need for Member States to intensify efforts to reduce continuing
management and control weaknesses, bearing in mind that over 80%
of the Budget is administered by or in the Member States. The
Commission is, however, responsible in Community law for the overall
management of the whole Budget and not just that element which
it manages directly.
The document
9.2 The review was led by the Budget Commissioner
(Michaele Schreyer) and reflects the endeavour of the new Commission
to improve its performance in discharging its responsibilities
for the Budget. The Commissioner's Action Plan analyses each main
category of the Budget in the light of what it acknowledges to
be the "unacceptably high rate of errors detected by the
Court's global Statement of Assurance". It makes proposals
which, together with actions already in hand, it hopes "will
achieve a substantial reduction in the rate during its period
of office" but it does not define substantial.
9.3 The Plan notes that error rates vary
considerably between the various categories of expenditure. In
the case of the EAGGF Guarantee expenditure (on agriculture)
which is still nearly half the Budget, the rate of substantive
errors[25]
is significantly lower than in other categories, and a high proportion
of the irregularities projected by the ECA will in practice be
recovered later in sanctions by Member States or through corrections
in the Commission's clearance of accounts procedures. It also
notes that some of the errors the ECA identified are strongly
contested by the Commission and the Member States. Half the substantive
errors found involved slight over-declarations of farm land size
or numbers of animals by final beneficiaries. The Plan points
to measures already in hand to reduce errors and commits the Commission
to do "everything possible" to improve matters. However,
it concludes that to lower substantially the number of errors
would require a very substantial increase in the resources allocated
to control by Member States, which it questions whether Member
States would regard as cost-effective.
9.4 As regards the Structural Funds,
the Plan notes that "although the possibility of subsequent
corrections exists, the underlying level of errors appears to
be much higher, even if all disputed cases were discounted".
Expenditure on these funds accounts for about one third of the
Budget. The Plan outlines a range of remedial actions already
in place, or in hand, or planned. It notes that "because
of the multi-annual nature of the Structural Fund programmes and
the fact that it is not possible to change the rules for current
programmes retrospectively, these measures will take some years
to impact fully on the error rate". However, it expects them
to lead to "a significant reduction in the error rate",
at any rate by the time of the ECA Report for 2001. It also says
that the Commission intends to be "more robust" in its
checks on Member States' applications of the rules.
9.5 As regards the other elements of the
Budget (internal policies, external action programmes),
the Plan details the measures already taken or planned to improve
performance. It also notes that the ECA found a relatively higher
rate of substantive and formal errors in these two categories.
9.6 In respect of internal actions,
errors related mainly to over-charging by contractors or issues
of contract signatures. In respect of external actions,
the report notes that the ECA found "a low level of substantive
errors but a high number of formal errors". It notes that
the Commission can rarely directly manage external actions, a
large part of which are necessarily de-centralised to the beneficiary
government authority (for example, the programmes for central
and eastern Europe and the European Development Fund programmes
on Africa, the Caribbean and the Pacific), or administered through
non-governmental organisations (NGOs). It concludes that "sustained
improvements will depend on the adequate match between expenditure
provision and the available staff resources", noting that,
by comparison with other major donor programmes, the management
of the Community programmes is poorly resourced.
9.7 The report also outlines a number of
procedural improvements which the Commission hopes can be introduced
in collaboration with the ECA to expedite the production of ECA
reports, to clarify their factual basis at the earliest possible
stage, and to take better account of the comments of Member States.
The Government's view
9.8 In her Explanatory Memorandum of 14
April 2000, the Economic Secretary to the Treasury (Miss Melanie
Johnson) says:
"The Government welcomes this Action Plan and
invites the Commission to implement it with all due speed. ...
The Government notes that, when the ECOFIN Council recommended
on 13 March 2000 that the European Parliament discharge to the
Commission for its management of the 1998 Budget, a series of
detailed recommendations were made for improvements in each sector.
The Council will monitor the Commission's progress on these recommendations
in addition to the proposals in the Action Plan.
"While the Action Plan contains many useful
and important proposals, the Government regrets that it lacks
a detailed timetable for a phased reduction in errors by sector,
and appropriate targets or milestones for the evaluation of progress.
However, this is a working document and the Government will press
the Commission to tighten up the Action Plan."
Conclusion
9.9 We share the Government's general
welcome for this Plan, both because of its frank acknowledgement
of the unacceptably high rate of errors found by the ECA and its
attempt to take a comprehensive look at what can and should be
done. We are glad to see that the Government intends both to monitor
progress through the Council and to seek to sharpen up timetables
and targets. We note that the Commission seeks to improve the
procedures and working relations with the ECA. We hope that this
will lead to fewer occasions when the ECA and the Commission appear
to disagree over findings in the ECA Reports, which have in the
past created the impression, rightly or wrongly, that the Commission
is unwilling to acknowledge that its procedures are at fault.
We clear the document but ask the Minister to let us know in due
course what progress the Government has made in its objective
of tightening up the Plan so as to include more targets and timetables
for getting measurable improvement.
23 (20764) OJ No. C 349, 3.12.99, p.1; see HC 23-vi
(1999-2000), paragraph 11 (26 January 2000). Back
24 A Committee convened under the auspices of the European Parliament
and the Commission to investigate financial mismanagement in the
Commission. Its first report was published on 15 March 1999 and
its second on 10 September 1999. Back
25 So-called substantive errors affect expenditure, formal errors
do not. Back
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