Commission set to wield stick on budget spending

Date: 16/11/1995

By Rory Watson

THE European Commission and national authorities are preparing to explore new ways of cooperating in the fight against fraud and ensuring better value for money from the annual EU budget.

Budget Commissioner Erkki Liikanen is canvassing support for the creation of a senior group of national and Commission officials to work out joint strategies to close existing financial loopholes.

One stick it may consider wielding is the imposition of fines to punish the wrongful use of EU funds.

Liikanen will also use a ministerial meeting on next year's EU budget in Brussels tomorrow (17 November) to brief governments on the internal changes the Commission has already begun to introduce into its own financial management.

The final stage of the three-part programme is expected to be unveiled early in 1996 and to focus on the legislative changes needed to improve the Union's overall budgetary culture.

The need for improvements was underlined in the annual financial report released by the European Court of Auditors this week, which calculated that over 500 million ecu had been paid out last year from EU funds on activities which were either not eligible for aid or did not meet policy objectives.

André Middelhoek, the Court's outgoing president, warned of a financial culture in the Union that reflected poor budgetary planning, weak management of available funds and a lack of urgency in recovering amounts wrongly paid.

“Significant weaknesses in mechanisms for planning, approving, monitoring, controlling and evaluating Community actions were again discovered,” he told MEPs in Strasbourg as he presented the Court's assessment of 68 billion ecu of EU spending last year.

The Court's criticism focused on traditional areas such as the Common Agricultural Policy and overseas aid. It noted that Greece, France, Italy and Spain had all been overpaid for farm produce that was either substandard or did not exist. It also criticised the absence of an autonomous evaluation mechanism six years after EU aid programmes to Central and Eastern Europe had begun.

But the tone was less trenchant than in previous years. Middelhoek, who has frequently clashed with the Commission in the past, went out of his way to say that he and his colleagues were “encouraged” by the Commission's three-stage financial improvement programme, which is being developed with the help of a seconded UK Treasury official.

He also provided Liikanen with extra ammunition for his campaign to upgrade the status and role of financial control, by insisting more and better qualified staff needed to be allocated to the management and control of existing policies. The new climate, he suggested, would not only produce savings, but would raise the Union's credibility in the eyes of the public.

Despite the softening of tone, the auditors produced their usual lengthy litany of financial mismanagement. Their criticism covered not just EU spending, but also its income - a criticism directed more at member states than at EU institutions.

The report singled out Germany, Greece, France, Ireland, the Netherlands and the UK for delays “at every level of customs administrations” in collecting customs duties, agricultural levies and value added tax for the Union budget.

It also indicated that provisional budget contributions for four countries - Greece, Ireland, Luxembourg and Portugal - have been consistently under-estimated over the past five years, as they initially failed to take account of economic growth and the increased proportion of gross national product due to the EU in calculating their contributions.

Despite their criticism, the auditors gave their first-ever statement of assurance for last year's budget, confirming their satisfaction with the overall reliability of the accounts, and the legality and regularity of the underlying transactions.

The Commission, however, is likely to press for a more precise methodology when the auditors carry out future audits.

The auditors drew specific attention to the role of member states - which are responsible for 80&percent; of EU spending - in tightening up existing procedures.

The same message was delivered by Liikanen, who said: “The problem with member states is that they are very active in maximising the amount of money they get from the Community, but not so active in trying to get value for money.”

He also referred to the contradictions in the EU's budget policy, complaining that the Commission was responsible for the budget, but only formally executed 20&percent; of it. The Commissioner gave a possible insight into the next stage of his financial management programme when he called for a clear-cut division of financial responsibility between member states and the Commission “so we can put a reasonable burden on the member states to carry out their responsibilities properly”.