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Last Updated: Tuesday, 24 October 2006, 11:29 GMT 12:29 UK
Auditors attack EU spending again
By Stephen Mulvey
EU reporter, BBC News

cow on UK farm
Last year auditors said control over farm spending was improving
European Union auditors have drawn attention to irregularities in EU spending for the 12th year running, in their report on the 2005 budget.

The auditors declared the accounts reliable overall, but criticised the spending of funds on the ground, particularly aid for poorer regions.

As in previous years, most problems were connected with payments made by the EU's 25 member states.

Spending on the EU administration once again got a clean bill of health.

Reliability of accounts: Are transactions, assets and liabilities accurately recorded?
Regularity/legality of transactions: Is there enough evidence that money has been spent according to the rules?

"Within... areas representing the majority of EU expenditure, the court's audits continue to identify (errors) in transactions and weak internal control systems," the auditors said.

They said irregularities had involved problems with paperwork and poor management, and also "presumed attempts to defraud the EU budget".

The Court of Auditors' president, Hubert Weber, criticised "deficiencies in internal control - particularly, but not solely, in the member states".

Fraud 'rare'

The European Commissioner for Administration, Audit and Anti-fraud, Siim Kallas criticised aspects of the auditing procedure, in advance of the report's publication.

The Commission says the Court of Auditors:

  • Ignores the fact that money mis-spent one year is often clawed back the next year
  • Draws sweeping conclusions from analysis of only a small number of transactions - a few hundred out of many millions
  • Considers money lost even when it may have been spent as intended - if say, a grant recipient makes a minor mistake with the paperwork
  • Refuses to name and shame member states that are routinely lax in controlling use of EU funds

In 2005, Mr Kallas says, the Commission clawed back 2.17bn euros (1.45bn) from member states, and wrote off only 90m euros (60m).

"You lost your wallet and you get it back with some money inside, but you still consider it a catastrophe. This is our main debate with the Court of Auditors."

However, the Court of Auditors said that recovery procedures were "increasingly slow, and the sanction mechanism largely inadequate".

It says that when money is clawed back from member states it is usually at the expense of the taxpayer, rather than the people who mis-spent the money in the first place.

Mr Kallas says mistakes will always occur in any large organisation, but that instances of actual fraud such as the 2003 case at the statistics agency Eurostat - described by investigators as a "a vast enterprise of looting" - are rare.

National controls

A positive verdict from the auditors on the reliability of EU accounts means that all transactions, assets and liabilities have been completely and accurately recorded.

A negative verdict on the regularity and legality of transactions in one area of spending or another means that there is insufficient evidence that funds have been spent in accordance with the rules.

Most of the problems occur with payments made by member states, because 76% of EU payments are delegated to them, but efforts are under way to encourage them to exercise greater care when spending EU funds.

Last year, the auditors praised a new system for monitoring farm aid payments saying that it was helping to make improvements.

However the latest report says agricultural spending is "still materially affected by errors".

How the EU has tried to improve its finances

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