Auditors sign off on EU budget but warn errors persist in all main areas

By bne IntelliNews November 6, 2013

bne -

Almost €7bn, or 4.8%, of the total €139bn that the EU spent last year was subject to "error", up from the 3.9% in 2011, with countries from the new eastern member states featuring prominently in the blacklist.

According to the annual report on the EU budget by the European Court of Auditors (ECA) published November 5, the EU's auditors signed off on the accounts, as it has done each year since the 2007, but warned that errors persist in all the major spending areas.

The ECA said all operational spending areas were affected by "material error" in 2012. "The [4.8%] estimate of the error rate is not a measure of fraud or waste. It is an estimate of the money that should not have been paid out because it was not used in accordance with the legislation concerned," the auditors said. "Typical errors include payments for beneficiaries or projects that were ineligible or for purchases of services, goods or investments without proper application of public purchasing rules."

The ECA identified rural development, environment, fisheries and health as the most error prone spending area with an estimated error rate of 7.9% of a €15bn budget. This was followed by regional policy, energy and transport with an estimated error rate of 6.8% of a €40.7bn budget.

The report has been gleefully seized upon by the EU's critics; The Daily Telegraph got from various Eurosceptics a few good sound bites such as, "In Brussels, it's "Carry on Squandering" (Philip Bradbourn, MEP); or, "It is about time the peoples of Europe were able to get this EU albatross off their backs, or at least out of their pockets" (Nigel Farage, leader of Ukip).

And things may well get worse before they better. Vitor Caldeira, president of the ECA, criticised in a statement the European Commission for its planning of spending and warned that a backlog of project bills "will put added pressure on EU cash flows and may increase the risk of error over the next few years."

Of particular worry to those in favour of EU enlargement, the new member states of Central and Southeast Europe figure prominently in cases the ECA highlights.

For example, with the European Regional Development Fund, the ECA identified "serious deficiencies in the functioning of the management and control systems" in programmes in the Czech Republic, Romania and Slovakia, as well as "serious problems" in a Romanian European Social Fund (ESF) programme.

On the revenue side (ie. payments based on gross national income made to the central EU budget), the ECA compiled a list of "reservations" it has about certain deductions that member states have made (see table). Three of the top four member states with the most reservations are from CEE (Poland, Hungary and Latvia).

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