Commission spares its auditing blushes

By Tim King

Date: 09/06/05

The European Commission will next Wednesday (15 June) set out its plans to end the annual embarrassment of a damning report from the European Court of Auditors on the EU's accounts.

Each November for the past ten years, the court, which is the external auditor of the EU institutions, has announced that it cannot certify the reliability and regularity of the transactions underlying the Commission's accounts.

The plan of action drawn up by the Commission's budget department, which will be put to commissioners next Wednesday, will attempt to satisfy the court's doubts with a series of improvements to controls, both inside the Commission and in the member states.

It also seeks to exact from the Court of Auditors a more detailed specification of what would be needed to obtain unqualified approval of the accounts.

The Commission's critics make much political capital from reporting that the auditors will only certify the reliability and regularity of a tiny proportion of EU spending - around 5%.

The Commission protests in vain that this does not mean that 95% of spending is irregular. Equally ineffectual are protests that the bulk of its spending is devoted to regional aid and agricultural spending and is channeled through the national administrations of the member states. It is weaknesses in national administrations, the Commission argues, which particularly provokes the Court of Auditors' admonishments.

Privately, Commission officials concede that they cannot hope to obtain "positive assurance" until 2009 at the earliest, but they want to show that they are on course.

Under the plan, commissioners will be presented with the annual report of the internal auditor, Walter Deffaa, and with the synthesis of the annual activity reports from each of the Commission's directors-general. Both reports are supposed to highlight any weaknesses in financial management and internal control.

Deffaa told European Voice that he attached particular importance to a proposed change to the EU's financial regulation to have the Commission accountant sign off on the accounts, declaring that they had been prepared in according with the required principles, rules and methods. That should, he said, provide additional assurance and strengthen the Commission's corporate governance.

The Commission is taking up the suggestion put forward by the European Parliament that the national administrations should be required to give assurances as to the controls that they put in place over the spending of EU money.

UK Labour MEP Terry Wynn, who recommended introducing such a reform, said: "If these measures are now implemented we will see an end to the bad press which occurs every time the Court of Auditors publishes its annual report. This is now a golden opportunity for the incoming UK presidency to get these recommendations through [the] Council [of Ministers]."

The Commission has now to persuade the member states to take on this task. An equally delicate political task will be to persuade the Court of Auditors to change its ways. Despite reforms introduced two years ago to the court's procedures, some in the Commission believe that the auditors do not pay sufficient attention to risk assessment and are too ready to generalise on the basis of small samples.

• The commissioners will also see an assessment of administrative reform inside the Commission. The report will acknowledge that some reforms may be imposing too heavy an administrative burden. Siim Kallas, the commissioner for administration, has indicated that he believes that the system of staff assessment (career development review) is too complex and will not allow speedy promotion of the most talented.

Article reports on a plan of action drawn up by the Commission's DG Budget to get clearance of its accounts from the European Court of Auditors, to be announced on 15 June 2005. Each November for the previous ten years, the Court, which is the external auditor of the EU institutions, announced that it was not able to certify the reliability and regularity of the transactions underlying the Commission's accounts.