Commission follow-up report on the 1998 financial year.
||27 October 2000|
|Forwarded to the Council:
||30 October 2000|
|Deposited in Parliament:
||22 November 2000|
|Basis of consideration:
||EM of 2 December 2000
|Previous Committee Report:
|To be discussed in Council:
||Not cleared; further information requested
5.1 On 26 January 2000, we reported on the
Annual Report of the Court of Auditors for 1998.
We noted that the Report and the Statement of Assurance (on the
reliability of the accounts and the legality and regularity of
the underlying transactions) are taken into account by the Council
and the European Parliament in the procedure for the discharge
of the Budget. As part of its discharge of the 1998 Budget, the
Council associated with its discharge Recommendation a number
of detailed comments, addressed to the Commission, on the improvements
it wished to see in the management of the Communities' resources.
5.2 On 19 April, we reported on a Commission
Action Plan for improving the financial management of the Community
The Action Plan analysed each main category of the Budget in the
light of what the Commission acknowledged to be the "unacceptably
high rate of errors" detected by the Court of Auditors. It
made proposals which, together with actions already in hand, it
hoped would "achieve a substantial reduction" in the
error rate during its period of office.
5.3 In accordance with its now established
practice, the Commission has made a report to the Council giving
an account of its actions taken in response to the Council's comments
on the discharge of the 1998 Budget. The report also includes
an analysis of Member States' responses to the 1998 report of
the Court of Auditors. The Commission's report makes extensive
reference to its Action Plan for improving financial management,
and also to its proposals for recasting the Financial Regulation,
on which we reported on 29 November 2000.
The Council's comments covered both general matters and those
relating to specific areas of budget resourcing and expenditure.
As regards the general comments, the Commission indicates that
it shares the Council's views on budget management and will incorporate
them in the new Financial Regulation, which has as one of its
main objectives the improvement of financial management. Whilst
accepting that error rates are too high, the Commission points
out that the Court of Auditors does not publish error rates and
that existing clearance and inspections systems, particularly
in respect of agricultural expenditure, succeed in recovering
most of the losses incurred. The Commission confirms its intention
to maintain the Personal Representatives Group on Sound Financial
Management (on whose reports we regularly report). It also agrees
to present an annual action plan for improving financial management
and procedures, which will be updated after six months to reflect
5.4 The report goes on to outline the actions
the Commission has taken in respect of all the specific areas
on which the Council had commented, set out under the main budget
category headings: the common agricultural and fisheries policy,
structural measures, internal policies, external aid, and administrative
expenditure. It also summarises the Commission's responses to
the Council's comments on the various Special Reports made by
the Court of Auditors during 1999.
5.5 The second part of the report deals
with the comments made by the Member States in response to criticisms
of them made by the Court of Auditors.
The Government's view
5.6 In her Explanatory Memorandum of 2 December,
the Economic Secretary to the Treasury (Miss Melanie Johnson)
provides a helpful summary of the specific responses in the Commission's
report. She says that the Government welcomes the report as a
necessary follow-through to the Annual Report of the Court of
Auditors and the Council Recommendation on Budget discharge. She
notes that it was the UK which first proposed that Member States
should respond to relevant criticisms in the Court of Auditors
reports. She does not refer specifically to the Commission's proposal
to produce an annual Action Plan, with six-monthly updates. Rather,
she regrets that the promised update on progress with the Action
Plan (on which we reported last year) has not yet been received.
She says that the Government will continue to press the Commission
for that document.
5.7 We are glad to see this report, which
the Commission failed to produce last year in respect of 1998.
It provides much evidence to show that the Commission is actively
pursuing the Council's observations on improving financial management
and procedures. On the face of it, it is difficult to criticise
the Commission for lack of effort. The detailed progress indicated
in specific areas also needs to be seen in the more general context
of the Commission's commitment to radical internal reform, and
the updating of key instruments such as the Financial Regulation
and the Staff Regulation.
5.8 However, we are aware (though we
have not yet reported on it) that the Court of Auditors Annual
Report for 1999 has, according to its President, "revealed
once again an unacceptable incidence of error" and that the
Court has refused to approve the management of the Community accounts
as they relate to payments appropriations. That Report will, no
doubt, also point out that the vast bulk of the errors relate
to management of the Community's resources by Member States and
other agencies, not the Commission itself. We shall report on
the Court of Auditors Annual Report for 1999 in the New Year.
5.9 In respect of the Commission report
we now have, we can only express the hope that the many actions
identified will before too long lead to identifiable improvements.
To that end, we are pleased that the Commission intends to produce
an annual report, regularly updated, which may prove a way of
assessing progress. We note the Government's concern about the
Action Plan published by the Commission last year. We invite the
Minister to tell us when an update is likely to be available and
to explain the relationship between the Action Plan and the annual
action plan the Commission has proposed in its report. Bearing
in mind that we will shortly be considering the Court of Auditors
Report, we leave the document we now have uncleared so that we
can review it again alongside that Report.
18 (20764) OJ No. C 349; see HC 23-vi (1999-2000), paragraph
- ; see HC 23-xv (1999-2000), paragraph 9. Back
12598/00; see HC 23-xxxi (1999-2000), paragraph 11. Back