Kinnock plans shake-up of financial controls

Date: 18/11/1999

By Simon Taylor

EUROPEAN Commission Vice-President Neil Kinnock has called for a complete transformation of the institution's financial controls to stamp out a "false sense of security" among senior officials in the administration.

In his first report to fellow Commissioners on the reform blueprint due to be finalised by February, Kinnock argues that the EU executive should set up an internal audit department rapidly to make "urgent progress on the important task" of improving financial management and control. Responsibility for financial controls should also be transferred to individual managers, he argues, so that internal checks are made within each department.

Kinnock's report highlights financial control problems as one of three key areas to be tackled, together with setting policy objectives and allocating staff and budget resources appropriately, and personnel issues.

It echoes the warning from the independent committee of wise men earlier this year that the existing system of checks carried out centrally by the financial controller "seriously reduced the responsibility of decision-makers" and has not been able to prevent "significant wrongdoing in a number of important cases".

Kinnock said the system was not able to "effectively prevent the potential for, and occurrence of, fraud and irregularities within the Community budget". Under the current arrangements, transactions are approved provided they comply with a set of rules and procedures.

To address these problems, Kinnock recommends creating an internal audit service staffed by qualified specialists. Equally importantly, responsibility for financial control should be devolved to individual departments, with a central 'help desk' set up to assist them.

The report says that although there would have to be some kind of transitional period to the new regime, rapid action to overhaul financial controls would "send powerful signals that the Commission has learned an important lesson".

Kinnock also stresses the "urgent need" to create a merit-based career structure for Commission officials. "Excellence should translate into faster career development," he argues, with more emphasis put on evaluating performance against objectives and better-defined job descriptions.

Kinnock's plans have been welcomed by MEPs on the European Parliament's budget control committee. "It is a pre-condition for the Parliament before we can move ahead on anything that there is an absolute separation between the two arms of budget control - the audit and the financial control functions," said Dutch Liberal MEP Lousewies van der Laan.

She added that the report showed the Commission was serious about reform and Kinnock was trying to build support among his colleagues for the very difficult changes to be made within the institution.

In his first report to fellow Commissioners on the reform blueprint due to be finalised by February, Commission Vice-President Kinnock argues that the EC executive should set up an internal audit department rapidly to make 'urgent progress on the important task' of improving financial management and control.