27 October 2006
Europe's head of audit has initiated urgent discussions with Brussels' financial watchdog over the accounting system used for the European Union, after experts refused to sign off the accounts for the twelfth successive year.
Siim Kallas, the Estonian vice-president of the European Commission, and the man in charge of accounting and anti-fraud work in Brussels, told Public Finance that it was 'high time' that Europe's Court of Auditors changed the way it scrutinises EU spending.
The CoA's annual report, published on October 23, once again raised concerns about the mismanagement of agricultural cash and regional aid and the opportunities for fraud, within the £70bn spent in 2005.
However, Kallas told PF that the figures were 'the healthiest set of accounts for many years', and bemoaned the CoA's system, claiming that Europe is subject to an 'incomparably tougher' and potentially misleading accounting system than its member states.
There are also concerns that auditors extrapolate their estimates from a small sample of EU spending. However, there was a consensus that Europe's switch to an accruals accounting system last year had been successful.
While the auditors gave a 'positive statement of assurance' about the 2005 accounts, they could not give an unqualified opinion because many 'underlying transactions' by member states were 'irregular'.
Many of these were likely to be accurate, Kallas claimed, but the member states had not provided sufficient documentation to assuage auditors' concerns.
Member states undertake 80% of the transactions from the EU budget. Using a sample of just 800 out of 1.5 million transactions, auditors found problems with around 0.2% of the agriculture budget, for example, but many of them involved poor administration by member states.
This raised fears over fraud or incompetence within Britain, the Netherlands, France, Greece, Spain and Italy.
Payments to some new member states also caused concern: Slovenia's livestock count seems to have doubled, for example.
Kallas cited the problems with the UK's Single Payment System for farmers as an example of the problems his team faces.
The National Audit Office last week warned that the EU could disallow hundreds of payments to farmers because they had been made inaccurately by the Rural Payments Agency. Kallas' office will seek to claw back some of that cash – forcing the UK taxpayers to foot the bill.
But Kallas said that the auditors' current system fails to account properly for the cash that the commission later claws back from member states – which amounted to £1.5bn last year.
PFoct2006
