Toespraak Voorzitter van de Europese Rekenkamer Caldeira over financiële jaar rapport 2007 (en)

ECA/08/28

SPEECH BY MR VITOR CALDEIRA - PRESIDENT OF THE EUROPEAN COURT OF AUDITORS

PRESENTATION OF THE 2007 ANNUAL REPORT TO THE COUNCIL OF THE EUROPEAN UNION (ECONOMIC AND FINANCIAL AFFAIRS)

BRUSSELS, 2 DECEMBER 2008

The spoken text will prevail in the event of differences

President,

Ministers,

Ladies and Gentlemen,

It is an honour for me to be able to present to you today the European Court of Auditors' Annual Reports on the 2007 financial year. [I have already presented to the European Parliament’s Committee on budgetary control on the 10th November and to its plenary session in Strasbourg on the 20th November].

Overall, the Court's audit opinion on the EU accounts is now unqualified (“positive”) but the opinion on underlying transactions is broadly similar to that of last year.

Due to improvements in the preparation of the accounts, the Court concludes, for the first time, that they give a fair presentation, in all material respects, of the financial position, results and cash flows of the European Communities.

As regards the legality and regularity of underlying transactions, the Court gives unqualified opinions for revenue, commitments and payments in two areas, "Economic and financial affairs" and "Administrative and other expenditure".

For the other areas of expenditure, “Agriculture and natural resources”, “Cohesion”, “Research, energy and transport”, “External aid, development and enlargement”, and “Education and citizenship”, the Court concludes that payments are still materially affected by errors, although to different degrees.

Supervisory and control systems covering these areas are judged to be, at best, only partially effective. However, the Court notes certain improvements in “Research, energy and transport” and, at the level of the Commission, for “External aid, development and enlargement”.

“Cohesion”, which accounted for 42 billion euro of expenditure, is the area most affected by error. The Court estimates that at least 11% of costs claimed should not have been reimbursed. The Court's 2007 audit findings concerned payments in respect of the 2000-2006 period, as spending for the 2007-2013 period for 2007 is only in the form of advances. As such, any improvements in the control systems for the new period will only become evident in future years.

For “Agriculture and natural resources”, where 51 billion euro was spent in 2007, the Court found that “Rural development” continues to account for a disproportionately large part of the overall error rate, whilst the error rate for EAGF expenditure is estimated to be slightly below the materiality threshold (2%).

So, why is the situation for the underlying transactions broadly similar to last year?

The simple answer is that, in many areas of EU spending, there continues to be a high level of inherent risk of error and weaknesses in supervision and control by the Commission and the relevant authorities within Member States.

Much of the EU budget, including in the areas under shared management, is disbursed to millions of beneficiaries across the Union. The rules and regulations governing the payments are often complex. And, the payments are, in many cases, based on the self-declarations of the final beneficiaries themselves. These inherently risky circumstances lead to errors both by final beneficiaries and by those paying out the funds.

As most errors occur at the level of the final beneficiary, they can often only be detected reliably by detailed controls carried out on-the-spot by the Commission or by the relevant authorities of Member States. Such checking is costly and so usually only a small proportion of individual claims are covered.

Again in 2007, the Court found that Member States and the Commission, are not always effectively identifying the weakness in the systems for checking individual claims. The Court finds weaknesses concerning the checks in agriculture and cohesion policies corresponding to weaknesses within the relevant authorities of the Member States. Weaknesses were also found for direct management, for example in the checks by the Commission on reimbursements to research beneficiaries and poor quality audits carried out by independent auditors on individual claims.

In addition, the Court found that there is not yet sufficient, reliable information to conclude on the effectiveness of corrective actions, such as those to recover incorrectly made payments from beneficiaries or those that "disallow" some Member State expenditure from the EU budget, where Member States have incorrectly administered expenditure schemes.

All of this said, it is fair to acknowledge that the Commission has made significant efforts since 2000 to address the weaknesses in supervision and control. It has implemented an internal reform programme and, in 2006, launched an action plan to further improve the supervisory and control systems of the Union.

Annual activity reports and declarations of the Directorates General of the Commission, a key part of the reform programme, now present a picture that is more in line with the Court's own assessments but some reservations still appear to underestimate the problems.

However it is still too early to judge the impact on the legality and regularity of underlying transactions of measures taken to implement the action plan to improve systems.

For example, 2007 was only the first year for which Member States were required to produce an annual summary of available audits and declarations. In addition there have been voluntary initiatives from some Members States to issue National Declaration and/or by some Member State’s supreme audit institutions to certify the use of EU funds. The Court believes that Annual Summaries and National Declarations could, in time, stimulate improved management and control of EU funds. But they do not yet provide a reliable assessment of the functioning and effectiveness of the systems.

The Court already endeavours to make use of the national SAIs' audit work on national declarations, under the conditions outlined in its opinion 6/2007. In fact, the Court aims to improve the cooperation with national SAIs in general by developing common auditing approaches, and by bilateral cooperation with individual SAIs.

This is the current situation. But, looking forward, we need to ask what more should be done, which measures for the future should be considered?

The Court suggests that any such measures need to take the following considerations into account.

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  First, the benefits of efforts to reduce errors have to be weighed against the costs.
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  Secondly, some risk of error is unavoidable.
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  Thirdly, the appropriate (or tolerable) level of risk needs to be agreed on at the political level for the different individual areas of the budget.
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  Fourthly, schemes that cannot be satisfactorily implemented at an acceptable level of cost and with tolerable risk should be reconsidered.
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  And finally, due consideration needs to be given to simplification, not least in areas such as rural development and research, because well designed rules and regulations which are clear to interpret and simple to apply decrease the risk of error and enable streamlined cost-effective control arrangements.

The Court, therefore, encourages the Commission to conclude its analysis on the cost of controls and the inherent risks in the different spending areas. It also recommends the Commission to continue working with Member States to make effective use of annual summaries and to improve recovery systems.

In addition to simplification and making use of the concept of tolerable risk, in its response to the Commission communication “Reforming the Budget, Changing Europe”, the Court suggests applying the principles of clarity of objectives, realism, transparency and accountability when designing arrangements for EU spending. The Court also encourages the political authorities to explore the scope for recasting expenditure programmes in terms of outputs and to critically consider the appropriate level of national, regional and local discretion in managing programmes.

To conclude, President, while acknowledging that progress is being made, the Court underlines that further improvements in the financial management of EU funds will depend on the success of ongoing and future measures to reduce risks to an acceptable level and develop cost-effective systems to manage them.

The proposal for a “European framework for action” in response to the current financial crisis discussed by this Council today, potentially provides an early opportunity to consider starting to put the principles I have just outlined into practice, in particular when designing the governance arrangements for the measures envisaged.

President, Ministers,

In presenting this annual report, it is our objective to contribute towards transparency and promote accountability. Both are essential to securing the trust of EU citizens in the Institutions responsible for the functioning of the Union and for giving it the direction needed to sustain it into the future.

I kindly thank you for your attention.