Court of Auditors lambasts member states on EU spending

The European Court of Auditors today published its annual report on EU spending in the year 2004. This is the first full budget year of the enlarged EU reviewed by the Court in its new, post-enlargement, composition, and the positive effects are already visible: The Court is much more outspoken than previous years in its criticism of the EU member states.

And rightly so! After all, no less than 80% of the EU budget is spent directly by the administrations of member states, not by the European Commission. And the only reason why the Court has refused, for the eleventh year in a row, to deliver a Statement of Assurance (Dťclaration d’Assurance, DAS) on the 2004 budget, is that it finds it impossible to check whether spending by the member state administrations, not the Commission, is done in accordance with the rules.

This is a crucial difference with the usual “Brussels fraud” rants found in national newspapers, as first of all most of the money not properly accounted for is not lost (and certainly not on “fraud”) but just badly administrated, and secondly this does not happen in Brussels but in national capitals, by national civil servants supervised by national governments and parliaments.

Not surprisingly then, most of the transactions which the Court of Auditors finds have been accounted for in accordance with the rules (revenue, commitments, administrative expenditure and pre-accession strategy) all fall directly under the Commission. Correspondingly, most of the budget refused a DAS (agricultural spending, structural measures, internal policies and external action) is administered jointly with the member states.

It will be interesting to watch the follow-up of this report during the coming year. Not so much with respect to the European Parliament’s annual discharge of the Commission (although the Santer Commission fell in 1999 after it was refused discharge on the 1996 budget), but in the way member states’ governments handle the European Commission’s roadmap towards a positive DAS within a couple of years. As part of the plan, national accounting systems have to be made irregularity-proof so that the European Commission and the European Court of Auditors will be able to trust their findings without having to do it all over themselves (Single Audit principle).

Even more interestingly, the next step of the plan is that national governments sign an declaration each year, saying that their administrations have spent EU monies in accordance with the rules. And although, obviously, there is every reason to have faith in the quality of the financial control systems of each and every one of the member states, asking for a signature to confirm that causes a bit of unease among our ministerial friends. At least that is true for some of them, as becomes obvious from the way this crucial element of the plan carefully is not mentioned in the conclusions of their latest meeting as Ecofin Council.

Press reports (BBC, FT) have it only the Dutch and Danish governments supported the plan. The Financial Times explains:

However, finance ministers decided at a meeting in Brussels that signed declarations went too far, and could lead to them being dragged before the European parliament to explain themselves.

And we couldn’t have that, could we?

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