Time to admit mistakes, says audit chief

Date: 06/03/03

By Peter Chapman

THE European Commission should come clean and admit that EU cash under its management can and still does disappear without trace, says the head of the executive's internal audit service.

In a frank admission of the institution's weaknesses, Director-General Jules Muis claims that the Commission finds it difficult to look in the "financial mirror" - even when it is preaching good housekeeping to others, from developing countries to multinational companies.

"I have never seen the Commission, for instance, step off the plate and say 'ladies and gentlemen, once in a while and on these particular scores, what we delivered was a load of crap'.

"I can't see the Commission doing that, I can't see the SEC [US Securities and Exchange Commission] doing that, I can't see any president of a professional institution doing that. Their constituencies won't go for it.

"Yet unless we are willing to put on the table that we are part of the solution, but also the problem, with no exception to that rule, we will keep window-dressing the problem," Muis said.

He was referring to the clamour for new rules on corporate governance, accounting and auditing after the collapse of Enron and Dutch supermarket firm Ahold, which last week admitted overstating earnings of €500 million.

However, the outspoken former World Bank financial watchdog insisted that reforms he has masterminded will be the "silver bullet" to help the Commission shed its tarnished image and become one of the world's tightest-run public bodies.

He highlighted the new requirement for directorate chiefs to produce an annual statement to demonstrate that they know exactly "where the money went".

"Last year, for the first time, 35 directors-general had to sign off the €100 billion that we spend. They had to certify the integrity of the numbers and the regularity of the expenditures. And they had a very mean bottom line, saying that nothing else has come to their attention that could embarrass the Commission.

"It was the first time they had to put their signature to the money they sent out of the door it was very salutary, the supreme wake-up call."

Muis said the directors made "about 155 qualifications", admitting that they could not exactly account for money in particular areas under their management.

But rather than be a cause for criticism, the Dutchman insisted these qualifications should be welcomed because they would ensure policymakers fully appreciate the high risks attached to EU funding in areas such as development and enlargement.

"Hallelujah, you are maturing into building a risk profile that is realistic it will distinguish the manageable from the non-manageable.

"On the non-manageable, political decisions will have to be taken.

"Do we want to be in this business or can we not handle the risk? The politicians should take full responsibility for this high-risk business.

"On the manageable side, let's hold people accountable. If we don't have adequate resources let's say so - that we don't have enough auditors or accountants to follow the money."

Nevertheless, the former head of the Dutch accountancy profession acknowledged there would still be officials who prefer to remain quiet instead of raising the red flag - and frauds and scandals will never be totally wiped out.

"If you want to be a crook you will be a crook," he added.

The European Commission should come clean and admit that EU cash under its management can and still does disappear without trace, says the head of the executive's internal audit service.