Documents considered by the Committee on 30 October 2013 - European Scrutiny Committee Contents


12 Financial management

(a)

(35342)

14273/1/13

+ ADD 1

COM(13) 682

(b)

(35343)

14289/13

+ ADDs 1-2

COM(13) 668


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)

Legal base
Documents originated(a) 20 September 2013

(b) 26 September 2013

Deposited in Parliament4 October 2013
DepartmentHM Treasury
Basis of consideration(a) EM of 22 October 2013

(b) EM of 21 October 2013

Previous Committee ReportNone
Discussion in CouncilNone planned
Committee's assessmentPolitically important
Committee's decisionCleared

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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Prepared 8 November 2013