12 Financial management
| (a)
(35342)
14273/1/13
+ ADD 1
COM(13) 682
(b)
(35343)
14289/13
+ ADDs 1-2
COM(13) 668
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Commission Communication: Protection of the European Union budget to end 2012
Commission Report on the follow-up to the discharge for the financial year (Summary)
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| Legal base | —
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| Documents originated | (a) 20 September 2013
(b) 26 September 2013
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| Deposited in Parliament | 4 October 2013
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| Department | HM Treasury
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| Basis of consideration | (a) EM of 22 October 2013
(b) EM of 21 October 2013
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| Previous Committee Report | None
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| Discussion in Council | None planned
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
12.1 The Commission receives a "discharge" of the annual
General Budget from the European Parliament, on the basis of a
recommendation by the Council, which follows from the European
Court of Auditors' audit. The Commission is required to report
on its actions in response to recommendations made during the
discharge process.
The documents
12.2 The Commission Communication, document (a), is a response
to a European Parliament request made in the context of the 2011
discharge and concerns protection of the EU Budget. The Commission
gives:
· an
overview of the mechanisms used to identify and to deal with administrative
errors, irregularities and suspected fraud detected by EU bodies
and by Member States;
· an estimate
of the total amounts of financial corrections and recoveries for
2012, alongside the cumulative impact over four years (2009 to
2012), to give a better picture of how the EU budget is protected
from errors and how the Member States are involved and impacted;
and
· information
on the amounts recovered in relation to pre-financing (advances)
that have not been used by beneficiaries and on the additional
corrections reported by Member States under agriculture and cohesion
policies, following their controls and audits for the current
programming period.
12.3 An accompanying Staff Working Document provides
more detailed information on the stages and forms of preventive
and corrective measures, as well as the financial impact on the
EU and/or national budgets, under the different policy areas and
implementation methods. The Commission is of the view that the
figures presented in the document demonstrate efforts in ensuring
that the EU budget is adequately protected from expenditure incurred
in breach of applicable law.
12.4 The following statistics in the Communication
show the result of financial corrections and recoveries in 2012
and cumulatively over four years (2009-12):
· the
total financial corrections and recoveries implemented (which
mostly relate to irregularities of past years) amounted to €4.4
billion (£3.7 billion), or 3.2% of all payments in 2012,
€139 billion (£116 billion), to Member States;
· the
average amount of financial corrections and recoveries implemented
by the Commission during the period between 2009 to 2012, was
€2.6 billion (£2.2 billion) or 2% of the average amount
of payments from the EU budget;
· the
cumulative amount of recoveries implemented between 2009 and 2012
was €2.5 billion (£2.1 billion);
· the
total amount borne by national budgets from financial corrections
in 2012, amounted to €3.7 billion (£3.1 billion), 3.5%
of the total payments received from the EU Budget;
· concerning
agriculture (European Agricultural Guarantee Fund and Rural Development),
the amount of financial corrections imposed by the Commission
since the first clearance of accounts decision in 1999, totals
€8.3 billion (£6.9 billion);
· the
cumulative corrections, following controls and checks made by
the Member States for Cohesion Policy, over the current programming
period, amounted to €1.7 billion (£1.4 billion); and
· the
recovery of pre-financing amounts was €575 million (€481
million) for expenditure policy areas and €293 million (£245
million) for Own Resource revenues during the period.
12.5 The Commission Report, document (b), is on the
follow-up to the European Parliament discharge resolutions and
the Council Recommendation for 2011. The Commission sets out the
actions it has taken, intends to take, or is unable to follow
up, in response to both the Council and European Parliament discharge
recommendations. It focuses on the four priority actions of "institutional
accountability and financial nature" highlighted by the European
Parliament in the general discharge resolution for 2011:
· a
Communication on protection of the EU budget (that is, document
(a));
· error
rates in shared management;
· the
Commission's Evaluation Report[23]
and enhanced use of performance audits; and
· revenues
and traditional own resources.
12.6 The report is accompanied by two Commission
Staff Working Documents that detail its responses to the 387 requests
from the European Parliament and 87 from the Council. In total,
the Commission agreed to action 181 requests (143 from the European
Parliament and 38 from the Council), considers that required action
has already been taken or is ongoing for 252 requests (205 from
the European Parliament and 47 from the Council), though in some
cases the results of the actions will need to be assessed, and
has not accepted 41 requests (39 from the European Parliament
and two from the Council), with the reasons given relating to
the existing legal and budgetary framework or its institutional
role or prerogatives.
The Government's view
12.7 In her Explanatory Memorandum on the Commission
Communication, the Economic Secretary to the Treasury (Nicky Morgan)
says that the Government supports the use of both preventive and
corrective measures to reduce error rates in shared management
and works closely with the Commission to implement remedial action
plans to ensure interruptions and suspensions are lifted as promptly
as possible. She adds that the Government believes, however, that
the Commission must:
· be
transparent and consistent in its application of the corrective
measures; and
· maintain
good communication, so Managing Authorities are able to respond
quickly and positively where concerns over the management of funds
have been raised.
12.8 In her Explanatory Memorandum on the Commission
Report the Minister says that:
· the
Government is a strong advocate of sound financial management
and budget discipline in relation to EU budget expenditure; and
· it notes
that this Report provides useful a summary of the actions taken
by the Commission in response to the discharge recommendations
of the 2011 EU budget.
12.9 The Minister then comments on two particular
points. She says, first, in relation to improvements to interruptions
procedures, that:
· the
Government supports in principle, the amendments to Commission
Regulation (EC) No. 883/2006 to facilitate interruptions of rural
development payments, as a means of promoting sound financial
management;
· it believes
however that these amendments would not necessarily, in themselves,
address the underlying problem of high error rates in scheme payments;
and
· there
is a continuing need for simplification of the regulations in
such a way that policy objectives (for example, environmental
benefits) can be maximised and error rates in expenditure minimised.
12.10 Secondly, in relation to actions concerning
revenues in the UK, the Minister says that HM Revenue and Customs
(HMRC) is working closely with UK trade bodies to assess the national
impact of delay to the implementation of the Modernised Customs
Code, with a primary focus being on the current timetable for
the Union Customs Code implementation in 2015.[24]
She also explains some of the detail of work HMRC is undertaking
against fraud and evasion of own resources, in the context of
European Court of Auditor EU-wide findings.
Conclusion
12.11 Whilst clearing these documents, we draw
them to the attention of the House as illustrative of continuing
efforts to limit abuse of the EU's financial resources.
23 See (35142) 11859/13 + ADDs 1-2: HC 83-xiii (2013-14),
chapter 55 (4 September 2013). Back
24
(33713) 6784/12: see chapter 11 of this Report. Back
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