Select Committee on European Union Fiftieth Report

FOREWORD—What this report is about


The European Court of Auditors has now been unable for twelve successive years to give a positive Statement of Assurance to the accounts of the European Communities. This, together with its attendant press coverage, is an extremely serious problem for the European Union and the governments of the Member States.

However the failure to give a positive Statement of Assurance does not tell the whole story. This report puts the Court of Auditors' successive qualified Statements in context. Firstly, we argue that the lack of a positive Statement of Assurance does not necessarily indicate that high levels of fraudulent or corrupt transactions have taken place. Secondly, we note that Sir John Bourn, head of the National Audit Office, were he required to do so, would be unable to give a similar positive Statement of Assurance on the UK's accounts. We propose that:

  The Court should distinguish clearly between irregularity and fraud, publishing separate figures for the level of fraudulent transactions and administrative mistakes;

  Substantial improvements are needed to the methodology underpinning the Statement of Assurance to ensure that it is based on accurate and full data; and

  The Statement of Assurance should focus on giving a detailed summary of financial management in each of the spending categories and Member States.

The report continues with an analysis of the internal control systems operated within the Commission. We argue that audit of the Commission's accounts should be separated from the much broader remit of the Statement of Assurance. We have been presented with no evidence to support allegations of a culture of corruption within the Commission's administration. We consider that:

  The decentralised system of control introduced by the Prodi-Kinnock reforms has allocated financial responsibility to the appropriate level, so long as effective control systems are in place;

  Further responsibility should be taken on by Commission officials in the form of a system for signing off the accounts which culminates with the Directors General and the Secretary General; and

  Similar additional responsibilities must be taken on by the existing audit bodies within the Commission.

The report makes an assessment of the relationship between the Commission and the Member States in the expenditure categories which are jointly managed by them. These include agriculture and regional policy (structural fund) expenditure and account for over 80% of the total expenditure. To improve management in this area we call for:

  As over 80% of European funds are disbursed within the Member States, the Commission alone cannot be held responsible for the regularity of these transactions;

  The introduction of national Statements of Assurance signed by a minister or senior civil servant, audited to internationally recognised standards by the national Supreme Audit Institution and submitted to the Commission and to the national parliament;

  A list of those Member States demonstrating poor management of European funds to be produced by the European Court of Auditors; and

  Responsibility for the Court of Auditors' annual Statement of Assurance and audit to reside with the Budget Council, which is responsible for drawing up the budget, rather than, as now, the ECOFIN Council.

The report ends with a review of the role of the European Court of Auditors itself and an analysis of the fight against fraud. We conclude that, while the level of fraud is no higher than in comparable public expenditure programmes, including in the UK, the fight against fraud must go on.

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