Examination of Witnesses (Questions 520-533)|
Ambassador de Marchant et d'Ansembourg and Mr Peter
17 OCTOBER 2006
Q520 Lord Blackwell: Do you
think there are other changes that the Commission could make in
the way it releases funds and the conditions under which it releases
funds to favour those countries that do have a national audit
or national certification, as an incentive?
Mr Bartholomeus: We hope so, but at this moment
we only have the main features of our pilot. We have had our first
talks with the Commission. At this moment, they are not promising
more than I answered to the last question. When we prove it is
a success and there are improvements in our system, perhaps in
a few years' time, we can gain more advantage from the European
Commission or the European Court of Auditors, but at the moment
that is not the case.
Q521 Lord Cobbold: How do
you see your admirable system being adapted to countries where
there is a regional parliament or a strong regional structure
and various ways of distributing European money?
Mr Bartholomeus: That will be difficult. At
this moment in The Netherlands, we are looking for a solution
where everything will be centralised. We will have a central certifying
authority, a central audit authority, and everything will be at
a national level. In a country where there is a lot of regional
decentralisation, then you have to have another system. Maybe
that system will not be as good at change as our system to meet
the requirements of the European Commission regarding the national
declaration. I have talked with my colleague in Germany, and they
are dealing in a decentralised way with those EU funds. It is
hard to have the same solution in Germany as the one we have chosen
in The Netherlands. I think each country will have to make its
own choices on how to deal with such an initiative.
Ambassador d'Ansembourg: It is a national responsibility.
We cannot determine how the Spaniards or the Germans, who are
very decentralised, will want to arrange their own system, I suppose.
We are trying to do it nationally. We have a tendency to re-centralise.
Q522 Lord Cobbold: Has this
country thought about it because we have the Scottish and the
Ambassador d'Ansembourg: With devolution, you
have a problem too.
Q523 Lord Maclennan of Rogart:
I wondered whether the motivation was more to move towards the
lightening of the load of audit from the European Union or to
make assurance doubly sure. The picture of your own national practices
does not suggest that you have great problems in this area in
auditing nationally European expenditure. Do you find the European
Union's audit intrusions oppressive or in some way unacceptable?
Mr Bartholomeus: No, that is not the case. There
are two main reasons for introducing this project. First, it is
the wish of our minister to perform this audit as a first pilot
perhaps to get more follow-up by other countries in Europe. We
hope that this is a first step towards a positive declaration
of assurance. There is another reason, and that is our own financial
management of EU funds within The Netherlands. We do not have
severe problems but we have problems with our EU funds. A couple
of years ago, we had a problem with the European Social Fund.
We had a claim from the European Union. We had to pay back a lot
of money. At the present time, we are having some discussions
on the European Regional Development Fund with the European Commission.
Our minister is very motivated to improve our system. In particular
with the European Regional Development Fund, we have the use of
a decentralised system. In our new centralised system we will
have an overview at a national level as to how we perform within
that system and to what degree we have problems with irregularities.
Our minister has said, especially as we have a new programme period,
that we will introduce a centralised system in which we will take
the lead for the regions; we will develop the audit approach;
we will appoint the auditors to conduct the audits in the regions;
and we will have a centralised certifying authority. This is to
get a system where financial management at a national level will
be more transparent.
Q524 Lord Maclennan of Rogart:
In your answer to an earlier question, you did say that you would
anticipate that if this all went well and some years down the
track, you would hope you would experience less audit at European
level. Would you accept or would you take the view that there
would still be a requirement or a capability for the European
Union to check that the system was continually operating as well
as it appeared to be at that point?
Mr Bartholomeus: We accept that but we hope
that in a couple of years if the European Union wants to check
our system, there will be a system of single audit. Of course,
the European Union will conduct an investigation on our system
and they will look at the consequences of what we have developed.
When they see that our system is working well, then we hope that
they will allow us to perform our own audit and that they will
introduce the single audit principle for our country. At this
moment, they have not promised that that will be the case within
a couple of years. We heard last week at the European Court of
Auditors that some members of the Court are in favour of a single
audit but there are other countries that do not believe that a
single audit is a good instrument. We will have to wait. There
is no guarantee that we will get the single audit.
Q525 Lord Jones: As the Union
expands and moves east and as we look more and more at structural
funds and agricultural funds, in the hard-pressed regions, if
there are any, possibly if there are any in The Netherlands, does
public opinion foresee that in the future these funds in the hands
of the rich nations are going further east? Is public opinion
aware that there will in time be fewer structural funds and less
agricultural subsidy to assist your own? Do you find that emerging
in the debate?
Ambassador d'Ansembourg: I think, generally
speaking, yes, that is the case. This is already taking place,
of course. This will not come as a surprise. We did not have very
much in the way of structural funds in the first place. There
is only one region which has this advantage. I am not quite sure
how much we receive at the moment, but, no, this will not be a
surprise for the Dutch public. It is also true, and the public
does play an important role, in the problem of audits because,
after all, these are public funds and the people want to know
what happens with these funds. That is one of the reasons that
motivated our Minister of Finance to be as precise and as accurate
in this field as he is.
Q526 Lord Inglewood: In his
helpful comments, Mr Bartholomeus explained quite fairly that
the system that you are devising in Holland is based on a centralised
system of audit. He commented that of course in countries with
a federal structure that would not work properly. Is it not the
case that the key components of the Dutch approach are that you
should have competent independent audit applying appropriate agreed
international standards? Therefore, if you apply those principles
to federal countries, you ought to be able to find a way, within
the constitutional frameworks that they have, of delivering the
kind of financial assurance that I think we are all looking for.
Mr Bartholomeus: Yes, that is true. In The Netherlands,
we have a system of audit which is slightly different from most
other countries in Europe. We have our audit department within
the ministry. The minister has an overview of that whole department.
The audit department already meets international standards, and
our national audit office, our Court of Auditors, meets those
standards as well. When you have another system at the regional
level, there should be a system where there is an independent
audit body that also meets international standards. That is true.
Q527 Lord Jordan: You spoke
earlier about the difficulties that devolved systems pose for
your scheme, but there is another serious problem in that the
scheme requires that the national statement is signed off by the
minister of Finance. Across the European Union there are long-established
practices, even constitutional objections, to such a move. Do
you think in your discussions on this issue that that can be broken
down or are you prepared to amend your own proposals to the fact
that it may not be a politician but it could even be a senior
civil servant that signs off?
Mr Bartholomeus: We are aware that the solution
we have chosen is a solution that only works within our system.
There are a lot of countries where the constitution does not permit
having a national declaration given by a minister. We do not think
it is necessary for a minister to give the national declaration
and that it is also a very good system when other bodies, and
that could be a civil servant but also the court of auditors,
give an opinion that could be the national declaration. In our
case, we took the decision for the national declaration to be
given by the minister. It is a fact that in our own national system
our minister also gives the statement on the account of the ministry.
A few years ago, we introduced a new system in which each minister
has to give a statement on his own national accounts for his ministry.
In that statement he declares that there is sound financial management
and when that is not the case, then he has to describe the problems
and the improvements he will make. He has to report the amount
of irregularities that have been found by his own audit department
and he has to give an overview of the efficiency and effectiveness
of the policy he is taking. That statement is part of our annual
statement which the minister has to send each year to parliament.
Our national audit office audits that statement. We do have a
tradition now in our country that ministers are used to giving
statements. In that way, it is not a big step in our country for
the Minister of Finance now to give the declaration himself. I
can imagine that in other countries where the case is not as in
our country that the minister is not permitted to give the declaration
himself. Then there will be another solution. I have learned from
the results of the ECOFIN that the Commission is a strong believer
in having statements from ministers, but I also learn that many
countries cannot fulfil that responsibility.
Q528 Lord Jordan: It seems
to me that providing responsibilities accepted for a statement
by the government ultimately is what is required. That is a bit
different from having what is called an independent audit where
the government is not necessarily taking the ultimate responsibility
Mr Bartholomeus: Yes. Our minister is giving
his national declaration on behalf of the whole cabinet, the Council
of Ministers. It is also a decision of the Council of Ministers
to approve the national declaration that our minister will send
to the parliament and also to the European Commission. As for
the way that other countries develop their national declaration,
there is one thing in my opinion that is absolutely the same in
each country and that is the responsibility of the government
for the spending of EU funds.
Q529 Chairman: The Dutch court
of auditors in your scheme will actually have an input, of course,
will they not?
Mr Bartholomeus: Yes. When our minister has
sent his national declaration to the national parliament, then
the court of auditors will perform an audit on that national declaration.
The report of the national audit office will be sent to our national
parliament and our minister of Finance will send the national
declaration with a copy of the report of the court of auditors
to the European Commission. It is not the case that our national
court of auditors sends the report immediately to the European
Q530 Chairman: Have you done
a cost analysis on this scheme?
Mr Bartholomeus: We have done more or less.
We have incurred costs and more will be spent to improve the system.
We will centralise the certification authority. In a few years,
we will have centralised the audit of the funds. I think that
money will be needed to improve the system. At this moment, we
do not have a clear view of what those costs will be. Then there
is the question about what benefits there will be coming out of
this pilot. We hope that we will have the benefit of more sound
shared financial management of the European Fund, that we will
have fewer irregularities and less chance of receiving a claim
from the European Union. We think that in a couple of years when
we have a centralised certification authority working well and
a centralised audit authority, then that will be more effective
and efficient than what is the case now where everything is decentralised
and every body is doing its own audits.
Q531 Lord Blackwell: On the
broader question of the problem we are trying to deal with, the
irregularities in the EU accounts, you said at the beginning that
the Dutch Government had been concerned for a number of years
that the court of auditors had not signed off the EU accounts.
I wonder how big you feel that problem is and whether you think
the risk of misuse of funds and indeed potentially fraud of funds
in some parts of the EU is significant and whether you think we
actually have a reliable measure or estimate of how big the problems
Mr Bartholomeus: Our minister had a discussion
in the ECOFIN Council over several years about the reason why
there is no positive declaration of assurance. We learnt from
the people in the European Court of Auditors that they have exceeded
the materiality thresholds a great deal, by several per cent.
Our minister is concerned that in a couple of years, and it has
already gone on for 11 years in the same way, there can be no
good feeling about the amount of irregularities all over Europe.
We also learnt that the European Court of Auditors has assembled
a sample; it is not a mathematical sample but only 500 audits.
Maybe they have results from that sample that are not good enough
to give a positive audit opinion, but maybe there are more problems
than they can see as a result of their audit. Our minister has
a strong feeling that the improvement has to be in the system
because when you have a good system, then your transactions will
be regulated. He is in favour of improving the system, not only
in the European Commission in Brussels but also in the European
countries. That is why he is in favour of the roadmap initiative.
When that was not agreed last November at ECOFIN, he thought that
if our country and others were to give a good example, maybe in
a couple of years other countries will also be interested in following
Q532 Lord Blackwell: The implication
is that if you do not have confidence in the systems, you cannot
have confidence that you have identified the scale of any irregularities
that may be going on?
Mr Bartholomeus: At this time, we think that
every country needs the same interest in having sound financial
management with regard to EU funds and taking responsibility.
In practice, we see that there are differences. We think that,
given the example, other countries could improve and maybe they
will follow our way of doing this in a couple of years.
Q533 Lord Inglewood: You have
touched on a point which I wanted to raise with you if there was
time, which is: does the Dutch Government have a view about the
adequacy or otherwise of the Commission's internal systems of
financial control and internal audit? We have heard a lot of evidence,
with some saying it is quite good and other people saying that
no, it is not. Does the Dutch Government have a view about it?
Mr Bartholomeus: We think that, in the last
couple of years, it has improved a lot. There has been an introduction
of management statements of Directors General in the European
Commission. At this time, there is an internal control division
within the European Commission which audits the statements and
there is improvement. They have also introduced new systems of
financial management within the Commission. For example, the European
Commission will be introducing in the next year a new accounting
system based on international accounting standards. That is one
example. There are not many countries in Europe that have already
adopted those accounting standards for their own national accounts.
The European Commission is really setting a good example on that
point. With the introduction of management statements and the
start of an internal audit department with internal control, we
see that this has improved a great deal. Perhaps it has to improve
more but there have been many improvements.
Chairman: Thank you very
much indeed. We are very grateful for your help and advice.