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Last Updated: Tuesday, 13 November 2007, 17:01 GMT
EU accounts failed for 13th year
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The EU's accounts have failed to receive a clean bill of health
The auditors for the EU have refused to sign off the bloc's financial accounts - for the 13th year in a row.

A report by the European Court of Auditors (ECA) criticises nearly every major area of the EU's expenditure.

The auditors say there are weaknesses across the board and complain of neglect and presumed attempts at fraud.

The European Commission has blamed member states for audit failings, and says it has suspended 1.2bn in payments to English regions.

Errors persist

Errors of legality and regularity still persist in the majority of the EU's 106bn euro annual budget (75bn), according to the Court of Auditors. Its President, Hubert Weber, calls on the commission to lead by example in making improvements.

HEAD TO HEAD
The auditors have concluded every year since 1994 that the accounts are reliable
Terry Wynn, ex-head of European Parliament budget committee

There has been a lot of window-dressing but essentially the auditors' criticism has not changed
Marta Andreasen, former Commission chief accountant

The report explains that much of the misspending is caused by poor knowledge of complex rules but presumes that fraud also exists.

On the plus side, the auditors say that there has been a marked reduction in the estimated overall level of error in the Common Agricultural Policy (CAP), responsible for some 40% of all EU expenditure.

The commission is responsible for overseeing the handling of the budget and the auditors praise the "considerable efforts" made to address the weaknesses in its management of risk to EU funding.

Payments to UK

But the second biggest slice of the budget - regional development funding (32.4bn euros in 2006) - is said to have seen little improvement. The Court estimates that at least 12% of the total paid out was affected by errors, and complains of poor control by member states.

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The commission says it suspended 1.7bn euros (1.2bn) in structural payments to the UK in April 2007 although that figure has now fallen to 326m euros (229m).

In response to the report, the Vice-President of the European Commission, Siim Kallas, says he's "glad to see the Court now gives its green light to over 40% of total payments".

He points out that around a third of the budget was approved last year and only 6% three years ago.

Interpreting figures

Marta Andreasen, a former European Commission chief accountant who now works for the United Kingdom Independence Party, says 80% of the budget is still suspect.

AUDIT FINDINGS
Graph showing breakdown of EU spending
The IACS system, which covers 70% of agriculture spending, "is effective at limiting the risk of irregular expenditure"
At least 12% of regional development aid was affected by errors, including money paid out to ineligible claimants
Significant errors were found in internal spending, mainly due to claimants inflating costs
She arrives at this figure by including the whole of the agriculture budget, even though a large part of it - 70% - has now been cleared by the auditors.

Mr Weber describes Ms Andreasen's analysis as "the more orthodox approach", but says Mr Kallas's statement that 40% of payments get the thumbs up is also valid.

The BBC's Jonny Dymond in Brussels says it is clear is that huge strides have been made in controlling the way that money is spent by the EU.

"There is now a determination, bordering on desperation, in some quarters, to show that the commission is not handing out cash willy-nilly to greedy famers and the like," he says.

He adds that commission officials complain that there is little they can do when money is disbursed by the governments of member states, as 80% of it is.

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