4. COURT OF AUDITORS SPECIAL REPORT
NO. 3 ON THE MANAGEMENT AND CONTROL OF INTEREST RATE SUBSIDIES
BY THE COMMISSION (10121/99)
Letter from Lord Tordoff, Chairman of
the Committee, to Melanie Johnson MP, Economic Secretary to the
Treasury
At its meeting on 21 October, Sub-Committee
A considered this document with the help of your Explanatory Memorandum.
It decided to clear the document, but asked me to write to you
expressing its concerns. We understand that much of the financial
and technical work in this area is delegated to the European Investment
Bank. However, it is certainly the case (as stated in the Commission's
reply to the report) that the Commission "bears the overall
budgetary and political responsibility of the measures discussed".
As we understand it, the EIB is not subject to audit by the European
Court of Auditors. Is the Government satisfied that the criticisms
made in this report will be properly taken on board (pending the
fundamental change in the system for which you say that the Government
is arguing)?
26 October 1999
Letter From Melanie Johnson MP, Economic
Secretary to the Treasury, to Lord Tordoff, Chairman of the Committee
Thank you for your letter of 26 October, a copy
of which your office sent me on 10 January, the original apparently
having gone astray.
You ask whether the Government is satisfied
that the criticisms made in the Court of Auditors report on interest
rate subsidies will be properly taken on board given that the
EIB, which manages many of the subsidies on behalf of the Commission,
is not subject to audit by the European Court of Auditors.
I should explain first that although the EIB
is not subject to audit by the Court of Auditors in respect of
its own resources, the Court has access to information held by
the Bank which is necessary for the audit of Community resources.
This is in accordance with an agreement between the Court, the
Bank and the Commission as provided for under Article 248 of the
EC Treaty. We can therefore expect the Bank to co-operate closely
with the Court and the Commission in accounting for the use of
Community resources, including interest rate subsidies.
The terms under which the Bank manages such
resources on behalf of the Commission are set out in various agreements
concerned with specific measures or facilities. I note that the
Commission's reply to the report states (paragraph 4.3) that the
"EIB provides the Commission with sufficient financial and
technical data to allow for an efficient control". I believe
that this statement provides some reassurance that the Commission
does not see the Bank as undermining its responsibility to ensure
that proper controls are in place.
In addition to the controls exercised by the
Commission, there are certain Committees of Member States which
examine all EIB operations involving Community finance and give
an opinion on proposed projects. Ultimately, all EIB operations,
including those involving Community finance, are subject to approval
by the Bank's Board of Directors, on which both the Treasury and
the Department for International Development are represented.
I should also mention that the Bank's accounts are submitted to
both internal and external auditors, overseen by an independent
Audit Committee which is directly accountable to the Board of
Governors (Finance Ministers).
All of these arrangements should help to ensure
that proper account is taken of the points made in the Court of
Auditors report. This is of particular importance following recent
agreement between the EU and the African, Caribbean and Pacific
States that interest-rate subsidies will continue to be a feature
of Community finance for projects in these countries. The UK will
continue to argue against interest-rate subsidies in other contexts
and for their improved management in cases where they continue
to operate.
22 January 2000
Letter from Lord Tordoff, Chairman of
the Committee, to Melanie Johnson MP, Economic Secretary to the
Treasury
At its meeting on 15 February, Sub-Committee
A considered your letter of 22 January (replying to mine of 26
October). Members were grateful for your explanation of the various
pressures which would encourage the EIB to take account of any
criticisms in the Court of Auditors' Report, and hope that these
will result in any necessary changes being made. They will, of
course, maintain their interest in the issue of the degree of
access which the European Court of Auditors should have to the
EIB.
17 February 2000
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