Brussels, 06/11/2012 (Agence Europe) - For the 18th consecutive year, the EU Court of Auditors has not been able to give a favourable opinion on the legality and regularity of all 2011 budget spending. In its annual report on the 2011 budget published on Tuesday 6 November, the Court considers that payments were affected by material error, with an estimated error rate of 3.9% for the EU budget as a whole. The estimated level of error was similar to 2010 when it was 3.7%.
The following policy groups are affected by a significant rate of error, the Court of Auditors notes: - agriculture (market support and direct subsidies); - rural development, the environment, fisheries and health; - regional policy, energy and transport; - employment and social affairs; - and research and other internal policies.
Agriculture. The rate of error estimated by the Court amounts to 3.9% for all agricultural spending, which is higher than in 2010 (2.3%). The Commission, however, notes that this is the first time a distinction is made between the measures under the first pillar of the CAP financed by the EAGF (European Agricultural Guarantee Fund - direct aid and market measures) for which the error rate is 2.9%, and rural development measures, for which the error rate is 7.7%. The rate of error, which is higher for rural development measures than for measures under the first pillar, is mainly due to the fact that support for some measures, such as the agri-environmental measure, is subject to a large number of often very specific conditions which are likely to increase the risk of error by beneficiaries and make controls by national authorities more difficult. According to the European Commission, the most likely rate of error estimated by the Court for the 2011 financial period year, although slightly above that of the previous year, remains within the normal margin of statistical variation between two budget years and does not denote deterioration in the overall quality of management or control of spending by member states. The Commission considers that, taken all together, the rates of error determined by the Court over the past financial years allow it to be reliably confirmed that the most likely rate of error for agricultural spending is relatively close to the relative threshold of importance of 2%. EAGF spending over the 2011 budget year was, on the whole, well managed, it states.
Regional policy. On the subject of regional policy, energy and transport, the rate of error is estimated at 6.0%. The Commission notes that, for the third year running, the rate of error remains largely below the levels noted by the Court during the period 2006-2008. This positive development, the Commission states, is due to the strengthening of control provisions for the 2007-2013 planning period and the rigorous policy for interruption and suspension that it applies when failings are noted. The combined rate of error for “regional policy”, “transport”, “energy” and “employment and social affairs” has decreased considerably compared to 2010, from 7.7% to 5.1%, the Commission notes.
EU accounts. As far as the Union's accounting is concerned, the Court of Auditors has issued a certificate of good health for the accounts of the Union for the fifth year running. The Court concludes that the 2011 accounts faithfully reflect the financial position of the European Union as well as the results of its operations and cash flows for the last financial year. Revenue and payment commitments were free from material error. Payments, however, were affected by significant material error, with an estimated error rate of 3.9% for the EU budget as a whole, i.e. an estimated level of error close to that in the 2010 financial year, when it reached 3.7%.
President of the Court says there is still too much material error.
The president of the European Court of Auditors, Vitor Caldeira, who addressed the budgetary control committee of the European Parliament, said: “This Annual Report's message is consistent with previous years', but this year it matters more than ever. With Europe's public finances under severe pressure, there remains scope to spend EU money more efficiently and in a better targeted manner”.
In practical terms, the Court has found too many cases of EU money not hitting the target or being used sub-optimally. Caldeira cited a number of examples set out in the report: - subsidies for land claimed as “permanent pasture” when actually parts of it were densely forested; - training specifically intended for employees in the electronics sector begin given to employees from other sectors; - costs reimbursed on a building claimed to be for agricultural purposes when it was not; - over-claimed personnel costs on research projects; - recipients of development aid not respecting the rule of origin when purchasing equipment; - and public procurement procedures designed to ensure best value for money not being properly applied.
The Court found errors in payments related to many different expenditure programmes and schemes. It also found that, overall, the control systems examined were only partially effective. In other words, “control systems were not realising their full potential to prevent or detect and correct errors”, commented Caldeira.
The Court has concluded that only two areas - or “policy groups” - were free from material error in 2011. They were “external relations, aid and enlargement” and “administrative expenditure and other expenditure”.
The other five policy groups were affected by significant material error, in particular those including the areas of rural development and regional policy. The Court of Auditor's estimated rate of error for the spending of the policy groups “rural development, environment, fisheries and health” - the most error prone spending area - was 7.7%. The estimated error rate for “regional policy, energy and transport” also remained high at 6.0%.
“It is here, in these areas”, said the president of the Court of Auditors, “that we found the member states are not doing their job as fully as they should. There needs to be a greater degree of commitment on the part of national authorities to the management and control of EU money. Because national authorities operate the first - and most important - line of defence in protecting the financial interests of EU citizens”.
The Court identified many instances of control failure. For example, in over 60% of the audited regional policy transactions affected by error, sufficient information was available for the member state authorities to have detected and corrected at least some of these errors before claiming reimbursement from the Commission.
Similarly, in rural development, the Court found that on-the-spot checks had not always been carried out properly.
Caldeira said the European Union cannot wait any longer. It is possible - and necessary - to act now, he said. Member states should agree on better rules and then ensure that they are applied, he added, also saying that the European Commission must “step up its supervision of the member states”. To do this, however, it must be able to obtain reliable information from member states about how EU money is being spent as well as on the financial corrections and recoveries they make. These areas fall within the 80% of EU funds managed by member states.
Twenty percent of those funds - especially in the essential area of research - are therefore managed directly by the Commission. The Court therefore concluded that the area “research and other internal policies” was affected by material error, estimating that error rate for 2011 at 3%. Many of the types of error and control failures found in “research” were similar to those in the areas of shared management. The main source of error was the over-declaration of costs by beneficiaries for projects funded by the research framework programmes. Under applicable rules, such cost declarations must be accompanied by audit certificates from independent audit firms. In over 80% of the projects with positive audit certificates that it examined, the Court found errors. The Court also found material error in interim and final payments in “external relations, aid and enlargement”, which is also largely under direct management by the Commission, and in payments made through the European development funds.
Another way in which the Commission discharges its responsibility for implementation of the EU budget is by reporting on financial management. This includes reporting on the regularity of transactions and performance achieved. The Court notes that the amount the Commission's directors general consider to be at risk of irregularity rose from €0.4 billion in 2010 to €2.0 billion in 2011. “This estimate reflects the recognition by the Commission of a high risk of error in rural development, cohesion and research”, Caldeira explains, concluding by saying that the management of EU finances is still not optimal as many problems brought to light in the past remain, albeit to a lesser extent. After publication of the Court of Auditor's Annual Report, the Council will forward to the European Parliament a recommendation relating to the decision as to whether, or not, to give discharge to the Commission for implementation of the Union's 2011 budget. The European Parliament will state its position in May 2013 on its discharge resolution concerning the 2011 budget. (LC/transl.jl)