16 FINANCIAL MANAGEMENT
(28488)
7687/07
+ ADD1
COM(07) 118
| Member States' replies to the Court of Auditors' 2005 Annual Report: Commission Report
|
| Legal base | —
|
| Document originated | 21 March 2007
|
| Deposited in Parliament |
28 March 2007 |
| Department | HM Treasury
|
| Basis of consideration |
EM of 16 April 2007 |
| Previous Committee Report |
None |
| To be discussed in Council
| Not known |
| Committee's assessment | Politically important
|
| Committee's decision | Cleared
|
Background
16.1 The Commission is obliged to inform Member States of the
references to them in the annual reports of the European Court
of Auditors and to invite them to respond. The Commission publishes
annually a report on those responses.
The document
16.2 In this document the Commission reports on the responses
of Member States to the references to them made in the European
Court of Auditors' 2005 Annual Report.[41]
The Commission gives examples of general comments that Member
States made on the overall audit approach, provides a summary
of Member States' responses to specific observations of the Court
and presents the Commission's conclusions. The staff working document
accompanying the report summarises all the general and specific
responses from Member States.
16.3 Reactions to the Court's latest report show
that Member States once again disagreed with a significant number
of findings which were used by the Court as the basis for it being
unable to give a positive statement of assurance. The main results
of the Commission's analysis of Member States' responses are:
- Member States tended to agree
more with the Court's findings made in relation to agricultural
policy than to structural actions;
- substantive findings in which the Court deemed
the total amount of the transactions in error were more than twice
as prevalent in structural actions than in agricultural policy;
- a discrepancy between the size of a field as
measured by the Court and the area claimed by the farmer was the
most prevalent substantive findings in agricultural policy. Member
States accepted more than 80% of these findings; and
- absence of essential supporting documents was
the most common substantive finding in relation to structural
actions. Member States accepted less than 40% of these findings.
16.4 The Commission also notes that:
- Member States sometimes indicated
corrective actions, such as providing missing documentation or
issuing better guidelines or instructions, taken in instances
where the Member State agreed with the Court's findings;
- depending on the outcome of the recovery procedures,
the final financial impact may be considerably smaller than that
estimated by the Court; and
- several Member States argued that the rules governing
the structural measures were open to various interpretations.
16.5 The Commission draws attention to what it suggests
is a significant timetabling matter in relation to the 2005 audit
procedure:
- the Court must prepare its
annual report and statement of assurance within an extremely tight
Treaty imposed deadline — in 2005, because of introduction
of the new Financial Regulation the already tight timetable was
shortened by a month;
- although the Court is the external auditor only
for the Commission, in practice Member States implement around
80 per cent of the Community Budget. So feedback from Member States
is of importance to the Commission when preparing its replies
which are published in the annual report together with the Court's
observations; but
- the Commission had not received feedback from
all Member States by the time the report was finalised, so that
some issues identified in the Court's 2005 report, including at
least one that received considerable media attention, were subsequently
resolved.
16.6 The Commission's conclusion in the report identifies
several issues which it says need further consideration:
- the Court needs political guidance
from the European Parliament and Council as to the acceptable
level of risk, which should also take into consideration the costs
and benefits of controls;
- the strictly annual nature of the statement of
assurance exercise may lead the Court to over-estimate the financial
impact of error on the Community budget as the Court takes no
account of corrective actions taken subsequently by Member States;
and
- communication between the Court and Member States
during preparation of the Court's annual report should be improved,
to deal with issues such as timetabling and common interpretations
of audit procedures.
The Government's view
16.7 The Economic Secretary to the Treasury (Ed Balls)
says the Government welcomes the Commission's report and reminds
us that we were sent a copy of the Government's response in December
2006.[42] He comments
that considering responses of Member States alongside the Court's
own findings improves understanding of the problems encountered
in management of the Community budget and says that the Government
broadly shares the conclusions drawn by the Commission in its
report.
Conclusion
16.8 This report gives useful background to the
preparation and conclusions of the European Court of Auditors'
2005 annual report and more generally to the audit process. Thus,
whilst content to clear the document, we draw it to the attention
of the House.
41 (28017): see HC 41-v (2006-07), para 1 (10 January
2007) and Stg Co Deb, European Standing Committee,
26 February 2007, cols. 3-28. Back
42
See annex in HC 41-v (2006-07), para 1 (10 January 2007). Back
|
