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Last Updated: Tuesday, 18 November, 2003, 17:30 GMT
EU accounts fail to pass muster
European Commission buildings
The commission is struggling to improve financial image
The European Union's court of auditors has failed to give EU accounts a clean bill of health for the ninth year.

The court has criticised the system of accounting used by the European Commission and the way in which much of the 100bn euro annual budget is spent.

The auditors can give assurance to less than 10% of the European Union's annual budget for 2002, they say.

The news came as European Commission President Romano Prodi faced a grilling over a multi-million dollar EU fraud.

There will be a new early warning system for collecting information relating to allegations of fraud, irregularities and wrongdoing
Romano Prodi

Mr Prodi admitted to the European Parliament in Strasbourg that his commission had missed the early signals of the fraud at the EU statistics arm, Eurostat.

He told MEPs there had to be a better alarm system in the EU to warn of any future fraud.

"There will be a new early warning system for collecting and cross-checking all information relating to allegations of fraud, irregularities and wrongdoing," Mr Prodi said.

He proposed an improved code of staff conduct and better links with the EU's fraud investigation office Olaf.

"The period 2000-2003 must be seen as a transitional period in which a new culture of responsibility and transparency is gradually being instilled but in which reform has not yet had time to be fully effective," he told parliament members.


However, the BBC's Quentin Somerville says MEPs were unimpressed. Some have called for the resignation of Pedro Solbes, who has overall responsibility for Eurostat, or Neil Kinnock, who is in charge of reform at the commission.

In the separate report from the court of auditors, there was criticism for the EU's system of farm subsidies, which swallow nearly half of the annual budget.

Controls over the payments to farmers were often shaky, the report said.

Aid to poorer regions - again a huge slice of the cash-pie - was tainted by the same types of error with the same frequency as in previous years.

Promised change

And the European Commission's own system of accounting was inadequate - the record of assets and liabilities was incomplete.

The commission itself says that a new type of accounting will be brought in two years' time and that much of the mismanagement is in the hands of member states.

The BBC's Tim Franks in Brussels says that will be of little comfort to those concerned that when the European Union enlarges next year to include 10 new countries, financial management may become even tougher.

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