ECA/09/68
Luxembourg, 2009/11/10
The European Court of Auditors' Annual Report on the implementation of the 2008 EU Budget
Are the EU accounts wrong ?
No, the Court gives a clean opinion on the accounts - the problems are in the underlying payments.
The Court's Statement of Assurance (DAS) provides opinions on both the reliability of the accounts and on the extent to which underlying transactions have been handled in a correct and legal way. The accounts give a fair presentation, in all material respects, of the EU's financial position and results. However, in specific spending areas, the transactions underlying payments made have too high level of error.
15th year without a clean opinion –
Does the Court's audit approach make it impossible to get one ?
No, but the situation has to improve more before this will be possible.
The Statement of Assurance reflects the present situation. The Court's opinion is derived on the basis of a number of specific assessments covering the different parts of the budget. For a number of these, the opinion is clean whereas for others it is qualified or adverse. There is nothing, in the Court's approach, precluding the latter from progressing to a clean opinion.
However, the situation has to improve further before this can happen.
By nature, EU expenditure - millions of euros paid on the basis of cost declarations by beneficiaries in many different countries - bears a high inherent risk. The complex rules in many areas, such as rural development, can be difficult to apply and result in errors.
The Court’s audit approach has been designed in consultation with external private and public sector experts. The ambition is to get a good overview of the situation for the whole budget. The approach includes detailed testing by statistical sampling in compliance with international auditing standards.
Are EU funds in general paid out incorrectly ?
No, most payments checked are made in compliance with the rules.
Legal and regular spending is defined as expenditure implemented in compliance with the existing rules. Thus an error, as identified by an auditor, represents a deviation from the regulatory requirements. A material level of error means that the Court estimates the financial impact by value to be above 2%. For the areas affected by a material level of error, except for Cohesion Funds, the estimated level of error is under 5 %.
Do errors mean fraud ?
No, they don't.
Errors are made for a variety of reasons by beneficiaries claiming funds and by the authorities responsible for making payments. Fraud is a deception deliberately practiced in order to gain a benefit. If the Court has reasons to suspect that fraudulent activity has taken place, it will report this to OLAF, the Union's antifraud office. OLAF is responsible for carrying out any resulting investigations.
Is the Commission doing something about the level of error ?
Yes, there have been improvements but it is too early to assess the impact of all of the measures taken.
Since 2000 the Commission has been working on a reform programme to improve the management of the EU budget. An important part of this has to do with making responsibilities more clear and improving the internal reporting standards. Annual activity reports are now produced for all of the departments of the Commission - the Directorates-General (DGs). They are accompanied by declarations by the Directors-General that head them where they have to certify that the controls work. The annual activity reports and declarations are compiled in a synthesis report signed by the Commission as a whole. At this stage it is too early to asses the full impact of these measures.
Do the Member States also have a role to play in reducing the level of error ?
Yes, but the Commission retains the overall responsibility.
For around 80% of spending - cohesion and agriculture - the task of budget implementation is shared between the Commission and the Union's 27 Member States. Depending on the spending schemes, which differ substantially between policy areas, national administrations may be responsible for setting spending strategies, selecting beneficiaries and projects, making payments and checking the expenditure.
Although the Commission retains the overall responsibility for the implementation of the budget, Member States play an increasing role in supervisory and control systems. 2008 was for example the second year for which they were required to produce an annual summary of required available audits and declarations on EU spending. Some Member States also issue national declarations on their own initiative concerning the management of EU funds.
Are there any improvements compared to last year ?
Yes, improvements in the management of the budget in the recent years are reflected in the overall results for 2008.
The overall improvement in 2008 is a consequence primarily of the better results in the largest policy group “Agriculture and natural resources”. For “Agriculture and natural resources” as a whole the Court for the first time does not give an adverse opinion. Within Rural Development, the estimated level of error, though still material, is lower than in previous years.
An estimate of at least 11 % error in Cohesion:
Have the measures to improve the situation not helped ?
It is too early to assess.
In early 2008 a specific “Action plan to strengthen the Commission’s supervisory role under shared management of structural actions”, was adopted. Since errors committed in previous years are still affecting the expenditure reimbursed by the Commission, it is too early to asses the impact of these actions.