Local view for "http://purl.org/linkedpolitics/eu/plenary/2005-11-15-Speech-2-013"
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"en.20051115.6.2-013"2
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".
Mr President, let me thank you, on behalf of the members of the European Court of Auditors, for the invitation to the debate on the Court’s report – its 28th – on the financial year 2004, which I presented to the Committee on Budgetary Control yesterday evening. In this, my first year in office as the President of the Court, I am glad to be able to be present at the commencement of the annual process of giving discharge in respect of the handling of the EU’s Budget.
The Member States’ returns of expenditure, on the basis of which the Commission makes payments, have revealed frequent errors. The Court examined a spot-check of 167 projects and discovered a broad spectrum of problems, including a large number of cases in which expenditure was reported on projects not eligible for grants.
In the internal policy areas directly administered by the Commission, the Court discovered that the supervision and control systems – despite the progress achieved in some areas – did not operate in an appropriate manner, and that there was a high incidence of errors in the underlying transactions.
The complexity of regulations is a frequent cause of error. It seems likely that the risk of error will remain high for as long as the legal framework remains unchanged and procedures are not simplified. The main cause for this state of affairs, which shows no improvement over against previous years, was, in the main, the entry of excessive or non-eligible costs or the absence of documentation, for example evidence of services paid for having actually been rendered.
Turning to expenditure on external policy areas, the Court found that the systems had been improved and that few errors were being made in the underlying transactions at delegation level, but weaknesses were again found in the internal monitoring systems of the organisations tasked with the implementation of projects, along with a fairly high incidence of errors.
Overall, the Court was able to pass a favourable verdict on the pre-accession strategy, as the underlying transactions were essentially lawful and in order. The supervision and monitoring systems in the central Commission offices, the delegations and the certifying authorities are fundamentally reliable and function well in practice. The Court did, however, uncover weaknesses at national level in the systems of the implementing organisations in Bulgaria, Romania, Turkey and other Sapard countries.
The underlying transactions in the area of administrative expenditure were essentially lawful and regular, and the supervision and control systems generally worked in an appropriate manner.
What are the most significant statements that can be made on the basis of this? The Court has established that there were, again, fundamental illegalities and irregularities in much of the payment appropriations at the level of the underlying transactions. These were attributable to the risks inherent in the transactions themselves and the fact that the supervision and monitoring systems fail to limit the risk of irregularities with an acceptable degree of effectiveness.
It was, however, evident that improvements had been made to the systems, particularly to IACS, the most important system for supervising and monitoring agricultural expenditure by the Member States, but also to the systems in the Commission, where the process of reforming the administration and finance systems, initiated in 2000, has produced good results. Much, however, remains to be done, particularly at Member State level.
The legislation, rules and procedures applicable to expenditure are still often over-complicated. There are, in any case, risks inherent in much of the expenditure, the sole evidence for which is to be found in statements by its recipients. It has to be said that the European Union has itself expanded to a considerable degree, and has undergone major changes, since the DAS was introduced in 1994.
In the eleven intervening years, annual expenditure on payments has risen from EUR 60 billion to EUR 100 billion, whilst the number of Member States has increased from 12 to 25. It follows that management has expanded and become more complex with the involvement of an ever-increasing number of authorities and organisations. This, in turn, makes ever more effective systems for supervision and monitoring necessary.
Among the main sources for the annual report are the financial audits and checks on legality and propriety that the Court has carried out. By way of contrast, the general practice is to publish the Court’s findings on financial soundness in the form of special reports.
In its Opinion No 2/2004 on the ‘single audit’ model, the Court proposed the creation of a common internal audit framework including every level of administration, whether Community institutions, Member States and recipient countries. The Court’s Opinion on the ‘single audit’ model was a contribution to policy debate on the improvement of administration and control of Community funds. The Commission has gone even further by adopting what it called a roadmap for the creation of an integrated internal audit framework. This roadmap will serve as the basis for the extension of the reform to the management of all types of funds, notably to those areas of administration that are shared with the Member States; it is here that cooperation between the Commission and the Member States is indeed crucially important.
The Court welcomes this initiative on the part of the Commission for a roadmap. In its capacity as the EU’s external auditor, the Court will closely observe progress and assess the effects of these changes on financial management and the control of the EU’s finances over the coming years.
It has to be said that the Court’s position on another issue, that of the future of the finance, management and control of the common agricultural policy and the structural measures, should be taken into account in the final formulation of these important pieces of legislation. The provisions relating to the retention of documents in the present draft Regulations on structural measures would make it impossible for the Court to audit some of the items of expenditure concerned.
The Court is well aware of its need, in a constantly changing Union, for continuing self-improvement and for the best possible use of its resources. We aim to work for the interest of the European Union as effectively and efficiently as possible.
Although the view is sometimes expressed that the Court should give no further ammunition to those in whose interest it is that the EU should be depicted in a poor light, I am firmly persuaded that the public interest is best served by the intervention of an external auditing body, one that is capable, objectively and independently, of making clear and even-handed statements on the basis of objective facts.
There are those who see the latest events – the voters’ rejection of the draft constitution in two referenda in two Member States, and the difficulty of coming to any agreement on the 2007-2013 Financial Perspective – as indicating a lack of confidence on the part of the public in the European Union and its institutions. I am quite convinced that the EU’s legitimacy can be guaranteed only if our institutions function smoothly and if management – whether in the making of policy or in its implementation – is of high quality. The Member States, too, must discharge their responsibilities in connection with the administration and control of much of the EU’s Budget. The Court of Auditors has a key role in this respect: it must convey an independent, professional and objective picture of the way in which the EU’s finances are managed and help to ensure that change is in the public interest.
What made the financial year 2004 noteworthy was the accession of 10 new Member States, which meant that the estimates for payments rose from EUR 98 billion in 2003 to EUR 105 billion in 2004. Improvements in planning and in management made possible a marked increase in the use of funds in comparison with previous years. The surplus in 2004 – EUR 2.7 billion – was significantly lower than that in 2003, being, indeed, half the amount.
I would now like to consider the main statements in the Court’s Statement of Assurance, also known as the ‘DAS’, starting with the statement on the reliability of the accounts. When considering the financial year 2004, the Court came to the conclusion that the consolidated financial statements gave a faithful picture of the income and expenditure for the year and of the financial position at its end, with the exception of the entry for ‘sundry debtors’. As was the case in the past, the accounting system used to draw up the annual accounts for 2004 is not equal to the task of listing all the assets and liabilities in the balance sheet, although it has to be said that the Commission made distinct progress in introducing accrual accounting in time for the financial year 2005. At the time of the audit, though, it did appear to the Court that further progress would be needed, as the figures needed to draw up the opening balances for 2005 had not yet been validated by the Commission’s authorising officers. If appropriate action is not taken by the end of this year, the reliability of the accounts for 2005 may well be compromised by the defects highlighted by the Court.
As regards the lawfulness and regularity of the underlying transactions, the Court stated, in its Statement of Assurance, that consideration of the financial year 2004 led the Court to the conclusion that the supervision and monitoring systems that had been installed were operating effectively and that the underlying transactions, considered overall in relation to receipts, commitments, administrative expenditure and the pre-accession strategy as part of the payment appropriations were lawful and regular. As regards the other appropriations – agricultural expenditure, structural measures, and both the internal and external policy areas, the Court again finds itself unable to give unreserved confirmation. The supervision and monitoring systems were not yet fully installed, were not yet operating effectively, and payments continue to be largely blighted by errors.
The Court is able to report, and for the first time, that the efforts by the Commission and the Member States in connection with the introduction of the Integrated Administration and Control System– abbreviated to ‘IACS’ – which covers 59% of agricultural expenditure, have had a positive effect. When properly used, IACS is a highly effective instrument for reducing to an acceptable level the risk of irregular outgoings.
I would now like to discuss in greater detail the specific assessments of the individual areas of activity as contained in the Statement of Assurance. The Court came to the view that transactions relating to receipts were conducted lawfully and in good order, but systemic faults were discovered in the handling of GNI own resources, both within the Commission and at Member State level.
In the same way as in previous years, the Court has found more evidence indicating that errors are still endemic in expenditure under the common agricultural policy as a whole. Although the Court has stated that IACS is effective when used properly, there is, in the case of agricultural expenditure not made under IACS or for which IACS was not used in an appropriate manner, a higher risk of irregularities by reason of weaknesses in the monitoring systems.
The Court, having conducted spot-checks on the structural programmes, again found weaknesses in all of their administration and control systems at Member State level. On auditing the Member States, the Court found such weaknesses as the failure to carry out checks or to document them, the failure to check eligibility criteria for funding and lack of evidence of the co-funded services having been performed."@en1
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