Brussels, 10/11/2011 (Agence Europe) - The European Court of Auditors' Annual Report on the EU budget 2010, published on Thursday 10 November, highlights that there are “significant risks” related to the regularity of payments, not only when it comes to cohesion policy but also when external aid is concerned (interim and final payments). However, “there have been overall improvements in the effectiveness of systems, particularly at Commission level and in agriculture”, the president of the Court of Auditors, Vitor Caldeira, told the European Parliament committee on budgetary control. These have been accompanied by a downward trend observed in the Court's estimated error rates for the budget as a whole, from over 7% in 2006 to below 4% in 2010.
With publication of the Annual Report for the financial year 2010, the Court of Auditors has launched discharge procedure relating to the execution of the EU budget for that period. Vitor Caldeira, President of the European Court of Auditors, will also present the report to the European Parliament meeting in plenary session on Tuesday 15 November, in Strasbourg, and to the Ecofin Council at the end of November.
Error rate 3.7% for payments. In the Court's opinion, revenue underlying the EU accounts for the year ended 31 December 2010 (€127,795 million) is legal and regular in all material respects. Similarly, commitments underlying the accounts for the year ended 31 December 2010 are also legal and regular in all material aspects. In contrast, the payments underlying the accounts were affected by material error, with an estimated error rate of 3.7% for the EU budget as a whole (€122.2 billion in payments in 2010). The Court does not, however, believe this to be an estimate of fraud as there are many reasons why errors occur. Overall, the control systems were found to be only partially effective in ensuring the regularity of payments.
Cohesion, energy and transport are areas most prone to errors. The Court finds that the two biggest groups of policy areas - agriculture and natural resources and cohesion, energy and transport - are materially affected by error and systems are partially effective.
Cohesion, energy and transport (€37,556 million in spending reimbursed) was the most error prone area of EU spending with an estimated error rate of 7.7% in 2010. Forty-nine percent of the 243 payments under audit were found to be affected by errors.
“However, (…) a degree of caution is necessary before drawing any conclusions from a year to year comparison of estimated error rates. Due to the multi-annual nature of the expenditure programmes and the corrective measures the Commission may impose in any given year, the population of payments can change considerably from one year to another”, the president of the Court of Auditors explained.
Although almost half of the payments audited in cohesion, energy and transport included errors, much of the estimated error rate was accounted for by a relatively small number of wholly ineligible projects and serious breaches of EU and national procurement rules. In the majority of cases, the Court considers that the member state authorities had sufficient information available to have detected and corrected at least some of the errors before payments were made.
Despite progress made by the Commission in following up the Court's previous recommendations, the Court considers there is still room for improving member states' correction mechanisms and audit activities, and it makes further recommendations to that effect.
Agriculture. For agriculture and natural resources (€55,990 million in spending reimbursed), the estimated error rate was 2.3% and systems were partially effective. Direct payments covered by the Integrated Administrative Control System (IACS), which accounted for almost €40 billion of the €57 billion spent, were found to be free from material error but spending on rural development remained prone to error.
The Court found a high frequency of errors due to outdated database information about the size of land parcels as well as weaknesses in the measurement checks of land areas conducted by national inspectors in a number of the member states visited, namely Bulgaria, Romania, Greece, the Czech Republic and the Netherlands. Recommendations to address these issues are made in the report.
EU external aid. In the two groups of policy areas, research and other internal policies and external aid, development and enlargement, the Court concludes that overall transactions were not materially affected by error although systems remain only partially effective. In addition, a significant risk of error remained for interim and final payments which were found to be subject to material error. The Court notes that 23% of payments to beneficiaries were affected by error.
External aid is also provided through the European Development Funds, on which the Court issues a separate annual report. For 2010, the Court found that payments were materially affected by error - estimated at 3.4% - and that systems were partially effective.
Administrative expenditure. By way of conclusion, the Court considers that it was not affected by material error and that systems were effective, as in previous years.
Reliability of EU accounts. On this point, the Court concludes that the 2010 accounts present fairly the financial position of the European Union and the results of its operations and its cash flows for the year. Nevertheless, there remains scope to improve the quality of financial reporting and the underlying information systems - not least so as to provide better disclosures of the risks to financial management. For example, this year the Court notes that accounting rules and supervision have not been adjusted adequately to reflect the considerable rise, especially for cohesion policy, in the proportion of advance payments - pre-financing - in the EU budget.
One might ask to what extent the results of the Court's audit compare to the results of the Commission's assessment. The annual progress reports by the Commission directorates-general and the Commission summary report contain some reservations regarding the ability of internal control systems to ensure regularity of spending in the various policy areas. Nonetheless, the Court finds that the scope and scale of reservations made should have been greater in several areas, including in cohesion where the Court considers that the Commission's approach may lead to an underestimation of the amounts at risk. (LC/transl.jl)