Criticism over penalties for misused funds

Date: 04/07/1996

By Rory Watson

UNION governments are divided over possible moves to introduce tough new penalties on member states which misuse EU funds.

Such penalties already exist for illegal expenditure under the Common Agricultural Policy and the Commission, as part of its new financial management plan, is floating the idea of similar sanctions in other policy areas.

But an interim report due to be presented to Union finance ministers on Monday (8 July) will make clear that the suggestion, which will be examined in greater detail after the summer recess, has generated a decidedly mixed response.

Earlier this year, the Commission used its powers to force 11 member states to repay 787 million ecu illegally paid out from CAP programmes.

With the Court of Auditors warning that financial loopholes in EU regional and social programmes might be exploited by fraudsters, pressure is growing for similar sanctions to be available for funds which will hand out 170 billion ecu between 1994 and 1999.

The Commission's three-stage sound and efficient management programme, under the combined authority of the Finnish and Swedish Commissioners Erkki Liikanen and Anita Gradin, is promoting internal and external financial reforms to ensure proper use of the Union's 85-billion-ecu annual budget.

With 80&percent; of the money administered within the member states themselves, Commission and national officials have until the end of the year to establish a medium-term programme to improve national handling of Union funds.

While all member states agree on the need for action against deliberate fraudulent or inefficient use of EU expenditure, they are divided over how to achieve this.

Some believe existing controls over the way regional and social funds are spent are sufficient, while others argue they should be strengthened.

A similar lack of consensus has emerged in initial discussions between EU governments on ways of improving the collection of customs and excise duties. The Union has lost at least 750 million ecu in unclaimed duties because of transit fraud alone since 1992.

The group is having more success in establishing clear guidelines on the eligibility of projects financed under EU regional and social programmes.

The initiative, say its backers, is not designed to hinder the flexibility of such schemes, but to ensure that any which fall foul of EU rules are not automatically replaced by others with the same degree of Union subsidy.

Agreement is also emerging on ways to improve the forecasting of annual budget expenditure so that the Union no longer continues to call up unnecessary funds from member states which then have to be returned.