68. In all the proposals we have reviewed, there
are references to the use of risk analysis and risk management
including cost-benefit analysis in the control context. This approach
enables the targeting of control resources to where the risks
to the budget are greatest. Thus, the Commission's Roadmap proposed
the introduction of a common methodology for risk assessment and
for ensuring control requirements are proportionate to risk. According
to Ivan Lewis MP, this position is supported by the UK government
which is prepared to accept higher levels of risk in some programme
areas, for example humanitarian aid (Q 1).
69. According to written evidence from Mr Muis,
a common methodology for risk assessment would require a common
accounting system "held together by one data architecture"
(p 119), an outcome which he believes the 2004 accounting reform
has not achieved. In the absence of this, risk assessment for
programmes should still be fundamental and routine, using qualitative
assessments until the quantitative tools are available.
70. We fully support the proposal in the Roadmap
to introduce a common methodology for risk assessment. However
we recognise that that the accounting system is not tailored to
provide the data to which such a common methodology could be applied.
We consider that efforts should be made to develop the accounting
system to produce the necessary data. We endorse the use of qualitative
methods to assess the risk in the meantime.
71. A number of witnesses raised concerns with
us over the Commission's attitude to debt and its debt recovery
procedures. In her evidence, Ms Andreasen pointed out that when
she first joined the Commission, she noticed a discrepancy of
130 million between the closing balance for 2000 and the
opening balance for 2001.
On investigation, she claimed these proved to be loans which had
been written off without any explanation. However, according to
Mr Gray, "the loans were not written off". Rather a
provision was made in the accounts to reflect doubts regarding
their recoverability (p 98). Ashley Mote MEP expressed concern
in his written evidence that Article 87 (4) of the 2002 Financial
Regulation allows the writing off of debts below 1 million
without any attempt at recovery. He claimed that this loophole
was being "ruthlessly exploited" (p 57).
72. The Commission's Accounting Officer, Mr Gray,
set out the formal position. He told us that debts are recorded
by the authorising departments and it is his responsibility as
Accounting Officer to recover them.
In the system as currently operated by the Commission waivers
are always recorded with those over 100,000 being reported
to the European Parliament (15 were reported in 2005). Most of
the waivers granted relate to overpaid or ineligible grant monies;
very few concern commercial relationships. For debts above 1
million, the College of Commissioners must decide whether to grant
the waiver. Below that figure decision rests with the Directors
General, in consultation with the Accounting Officer. Indeed,
Mr Gray questioned whether the involvement of the College of Commissioners
for debts in excess of 1 million increased the level of
scrutiny given to waiver process: "I wonder whether going
to the College has any added value because the system is the same"
73. We are generally satisfied with the Commission's
procedures and reporting requirements on debt waivers. We see
no evidence of the "ruthless exploitation" of these
procedures that some have suggested.
28 Q 330. Back
Communication from the Commission: Progress Report as at 31 March
2006 on Modernising the European Commission's Accounting System.
COM (2006) 358 Final. Back
EM 11399/06 para 18. Back
QQ 371, 419. Back
The Internal Audit Service's functions are set out under Articles
85, 86 and 87 of the Financial Regulation. Back
European Commission, Annual Report to the Discharge Authority
on Internal Audits Carried out in 2005, COM (2006) 279 Final,
7 June 2006. Back
European Court of Auditors, Opinion no. 2/2004 on the 'single
audit' model (and a proposal for a Community internal control
framework), Official Journal of the European Union C 107, 30 April
2004, pp 1-20. Back
European Union Committee, 12th Report (2000-01): The European
Court of Auditors: The case for reform (HL 63), paragraph
The Directorate General responsible for Budget, tasked with managing
Community expenditure in the medium-term financial perspective
and ensuring that the annual budgetary procedure runs smoothly. Back
For example Lord Kinnock, Jules Muis and Brian Gray. Back
p 103. Back
ECOFIN conclusions, 8 November 2005, 13678/05 (Presse 277). Back
Q 413. Back
p 87. Back