Brussels, 08/03/2007 (Agence Europe) - On Wednesday 7 March, the European Commission adopted a progress report by European Commissioner Siim Kallas on what has been achieved over the past 12 months in terms of implementing the European Commission action plan to improve the internal control framework as part of the Commission's goal to obtain a clean bill of health on EU spending from the auditors. Despite some delays, the Commission believes it will be possible to meet its objective of having the foundations in place by the end of 2007 for properly managing the risk of errors and providing increased assurance. At the start of next year, the Commission will publish a final report on implementation of the action plan and any provisions required to consolidate integrated internal control.
The action plan was adopted in January 2006. It seeks to improve all aspects of the control structures in place to ensure the European Court of Auditors (COA) gives a clean bill of health for the entire EU budget. On 24 October 2006, the Court of Auditors refused, for the twelfth year in a row, to give a Statement of Assurance (SOA) for all the EU's budget operations (see EUROPE 9293). The European Commission is still aiming to get a full SOA by the end of the current term of office in 2009.
The Commission says that 'considerable progress' was made in 2006 in the 16 actions listed in the action plan. The following measures were implemented last year:
Management and control of Structural Funds: The Commission has introduced improved assessment of controls by member states, and indicators of legality and irregularity.
Control responsibilities in shared management: The 2007-2013 rules for farm aid and Structural Funds beefed up the control structure and better outlined the responsibilities of member states in this field. Two 'confidence contracts' were signed on national control and audit strategy systems. With regard to management statements, the interinstitutional agreement on the Financial Perspectives and the revised Financial Regulation oblige member states to submit audit summaries and any statements available.
Monitoring of payment organisations under shared management systems: Payment bodies for farm funding in the new Member States were authorised when the countries joined the EU. Under the new rules that came into force in 2007, all EU27 payment bodies must be permanently monitored by the competent authorities, which must report to the Commission every three years on their findings. When it comes to the Structural Funds, each Member State is required to validate a management and control system. For both agriculture and the Structural Funds, the Commission can check whether the controls have been respected and suspend payments or introduce financial corrections where appropriate.
Costing: To correct errors detected in past programmes, the Commission has designed measures for the 7th Framework R&D Programme to verify beneficiaries' costing methodologies at the start of programmes.
Good practice: The Commission has issued advice about verifications to be made by member state authorities, recovering irregular payments, and closure and information requirements for beneficiaries of EU Structural Funds.
Cooperation with national Supreme Audit Institutions (SAIs): The Commission has sent SAIs reports on payments made in their country in 2005, and will continue with this in 2007, with the view of facilitating the work of SAIs in assessing the use of EU funding in member states.
Experience obtained during the first year of implementing the action plan 'has shown that a number of actions need to be refined to provide a further impetus to increased assurance,' explains the Commission. In addition, certain proposed actions were not supported by the legislator, and adjustments and modified actions are therefore proposed in some areas.
Link between control weaknesses and potential suspension of payments: Legislation foresees the suspension of payments and the introduction of financial corrections and recovery of funding where justified. Under the approach set out in its 2005 summary report, the Commission will apply these rules and clearly explain assurance concerns in annual activity reports giving a breakdown, where appropriate, by sector or member state, along with information about corrections and recoveries implemented.
Importance of recoveries: In 2006, the European Court of Auditors highlighted the importance of recovering unduly paid funds for the SOA, pointing out that the European Commission and member states had not recovered enough of the suspected level of irregular funding. To improve recoveries, the Commission pledged to monitor the amounts recovered in 2005 and 2006 for the Structural Funds, and funding managed by the Commission centrally, to check the extent to which the sums recovered match the errors detected in audits.
Cost of controls: The notion of “tolerable risk” was not taken up by the legislator in the revised financial regulation. The Commission nonetheless hopes to ensure that the cost of control is justified. Work is in progress to determine the cost of controls in agriculture, the Structural Funds and research programmes.
Simplification of rules: The Commission notes that, in some sectors, simplification has made it possible to reduce the risk of error, mainly in shared management. The challenge posed at present consists of simplifying and clarifying application of the new rules in practice.
Audit data sharing: Based on the existing data-sharing in the field of aid to research and Structural Funds, the Commission will continue to study ways to increase the effectiveness of sharing information on audits, mainly those on Community fund beneficiaries. (lc)