Select Committee on European Union Fiftieth Report


CHAPTER 5: External audit and the role of the European Court of Auditors

116.  In Session 2000-01 we reported on the European Court of Auditors, its structure, functions and relationships with other Institutions[57]. Thus, although some of our witnesses have commented on these issues, it was not the purpose of our inquiry to retread this same ground. However, we will comment on those developments which have taken place since 2001 as they affect the Court and external audit more generally including the national Supreme Audit Institutions.

The role of the Court and its workings with national Supreme Audit Institutions

117.  In common with all Supreme Audit Institutions, the Court treads a fine line with the policy making and implementing bodies. The Members of the Court we met were very aware of the potential pitfalls of becoming "part of the political game" (Q 121) as they felt it would compromise their independence. However, through its reports, opinions and recommendations, the Court has contributed a steady input to the reforms. Many of the Court's recommendations were swept up into the Prodi-Kinnock White Paper and action plan. Of particular note are the new internal audit system within the Commission and the phasing out of the ex ante expenditure approval system of which, as we have recorded above, the Court argued in favour. In spite of these there was some dissatisfaction from the Court that their contributions "are not fully regarded by those who are addressing the problems" (Q 106).

118.  We note the desire expressed to us by Members of the Court not to become "part of the political game". We consider that it would be highly inappropriate for the Court to promote a political agenda.

119.  In relation to its relationships with national auditing bodies, the European Parliament has a different, more activist conception of the role of the Court than the Court itself. The Parliament's discharge decision for the financial year 2003 examined the extent of incremental reform made to the Statement of Assurance over the years by the Court. While welcoming the elaboration of the Statement of Assurance methodology, the Parliament considered it "too modest"[58] and asked the Court to engage with national Supreme Audit Institutions in pursuit of the "single audit" concept. The Parliament also argued in favour of extending the "qualitative" aspect of the Statement of Assurance to take into account the multi-annual nature of many programmes. As a start, the European Parliament called on the Court to conduct a series of annual "benchmark" audits of the same programme area in all 25 Member States.

120.  We have already alluded to witness evidence concerning the trepidation of Supreme Audit Institutions to engage in a national Statement of Assurance with a single audit model. In its 2/2004 Opinion, the Court said nothing about the development of a common external audit or of the incorporation of the Court's or national Supreme Audit Institutions' activities into an overall control framework as suggested by the European Parliament. As external auditors, the Court argues that neither itself nor the national Supreme Audit Institutions are a direct element of the European Union's internal control framework—to be so, would compromise their ability to provide an independent overview. This is the view supported by ECOFIN as we have seen.

121.  The Treaty requires that Supreme Audit Institutions "cooperate with the Court in undertaking its duties". To facilitate this, the Court has established a Contact Committee comprising representatives of the Member State Supreme Audit Institutions. There are Supreme Audit Institution Liaison Officers whose role is to facilitate Court missions in the Member States. However, this has not resulted in joint, let alone single external audit because of the many practical, methodological, reporting and political obstacles in the way. With the adoption of common international accounting standards which the Court and the Supreme Audit Institutions support, this may become less of a problem.

122.  In line with the proposals for national Statements of Assurance audited by the Supreme Audit Institution in each Member State there would be a supervisory role for the Court in setting down the accounting and auditing standards to be followed. In this respect the Court would audit the systems of each Supreme Audit Institution to ensure that the audits they produced were reliable.

123.  We are pleased to see the work the Court has done to develop its relationships with the Supreme Audit Institutions in the Member States. We hope that these will be further developed in the future with a view to giving the Court a supervisory role over the audits of European expenditure conducted by the Supreme Audit Institutions in the Member States.

Value for money audit

124.  If the Member States are to play a role in the Statement of Assurance through the eventual adoption of a national Statement of Assurance process, this may leave scope for the Court to develop other aspects of its work. Some witnesses referred to the importance of the Court's special reports which do look at issues of economy and effectiveness, much as the National Audit Office does[59]. In their evidence, the members of the Court also compared it on a few occasions to the US General Accounting Office (QQ 86, 105).

125.  We call upon the Court to bring forward concrete proposals to extend the aspects of its work which are not directly concerned with the annual Statement of Assurance. We consider that developments in the value for money and performance auditing side of the Court's work would be particularly valuable.


57   European Union Committee,12th Report (2000-01): The European Court of Auditors: The case for reform (HL 63) Back

58   Op.cit. Back

59   This was also the case in evidence to the Committee's inquiry into the Court in session 2000-01. European Union Committee, 12th Report (2000-01): The European Court of Auditors: The case for reform (HL 63), paragraph 8. Back


 
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