[an error occurred while processing this directive]
BBC News
watch One-Minute World News
Last Updated: Monday, 13 November 2006, 00:53 GMT
Peers say auditors too hard on EU
Euro coins and bill
Peers want auditors to judge each branch of EU spending separately
A House of Lords committee has called for changes to EU auditing procedures which it says paint a misleading picture of fraud and mismanagement.

The EU budget suffers no more fraud than the UK's, despite black marks from auditors for 12 years running, it says.

The peers back calls for states to give an annual statement confirming that they have spent EU cash efficiently.

And they say those countries which exercise poor control of European money should be publicly named and shamed.

'Serious problem'

Lord Radice, chairman of the House of Lords European Union Committee, criticised press coverage which suggested there was a "significant culture of corruption" in Europe's institutions.

We consider it particularly unacceptable for the government of a member state to treat European money with less care than national funds
House of Lords report

"Our investigation has uncovered no evidence to support this suggestion," said the Europhile peer.

The peers say they undertook their study because they regard the fact that the auditors have never given a positive statement of assurance on the regularity and legality of EU spending as a "serious problem".

They draw attention to evidence submitted to them by the head of the UK National Audit Office, Sir John Bourn, who said he would be unable to give a positive statement of assurance regarding the spending of UK public money if the UK operated a similar system.

The peers call on the auditors to:

  • Make a clear separation between the audit of the Commission's accounts - which has always been positive - and the statement of assurance on the regularity and legality of underlying transactions - which has always been qualified
  • Give separate verdicts on each different category of spending, instead of one overall verdict
  • Make a clear distinction between fraud and other kinds of irregularity, giving separate figures for each
  • Stop drawing conclusions about how EU money has been spent on the basis of an examination of a small number of transactions, which cannot "lead to an accurate picture of financial management"
  • List member states which demonstrate poor management of EU funds

'Inadequate' internal audit

"We consider it particularly unacceptable for the government of a member state to treat European money with less care than national funds," the peers say.

An annual statement of assurance by each member state on the spending of EU money - as proposed by the European Commission and the European Parliament - would help to encourage better practice, they add.

The report does contain some criticism of the European Commission.

It describes the European Commission's internal audit system as "inadequate" and calls for an investigation into possible weaknesses in the system of double entry book keeping.

But the peers also hail improvements made by the Commission in recent years.

They note comments by Ed Balls, Economic Secretary to the Treasury, describing the Commission as "one of the leaders in public accounting terms" following its switch in 2005 from a cash-based accounting system to an accruals-based system.

The peers also reject criticism by former EU accountant Marta Andreasen, of a system introduced by former Commission Vice-President Neil Kinnock, to ensure that people who authorise payments are not the same people who execute them.

The head of the European Commission in the UK, Reijo Kemppinen, said he welcomed the House of Lords' efforts to keep the EU's accounting problems in perspective.

The BBC is not responsible for the content of external internet sites

Has China's housing bubble burst?
How the world's oldest clove tree defied an empire
Why Royal Ballet principal Sergei Polunin quit


Americas Africa Europe Middle East South Asia Asia Pacific