Ecofin slow to follow the money

By Tim King

Date: 06/10/05

Efforts to improve the financial management of the EU budget have run into serious disagreements between MEPs and the Union's member states.

MEPs have been rebuffed in their attempts to make national finance ministers take direct responsibility for EU spending in their country.

An agreement between the Parliament, Commission and Council of Ministers on control was supposed to be reached by finance ministers at their 8 November Ecofin Council. But those close to the negotiations think that meeting this deadline is now improbable.

The British Socialist MEP Terry Wynn, who has been pressing for such an agreement, warned that without it Parliament would not approve any deal between the member states on spending in the next budget cycle, 2007-13.

At the heart of the disagreement is the question of how to improve management of the bulk of the EU budget (about 80%) which is spent in the member states. The Commission has ultimate responsibility for EU money but under so-called shared management it delegates tasks to authorities in member states.

Parliament has been pressing for each member state to be obliged to make statements of disclosure and assurance as a condition of receiving EU money. "Both should be signed by each member state's highest political and managing authority," says a Parliamentary draft, adding that this would usually mean the finance minister.

At a meeting of member state officials (21-22 September) there was strong opposition to the idea of finance ministers being made accountable effectively to the European Parliament. Reporting to Parliament's budgetary control committee on Tuesday (4 October), Wynn, who was present at the meeting as an observer, cited forceful opposition from France, Portugal, Spain, Austria and Germany.

Siim Kallas, the commissioner for audit, administration and the fight against fraud, told MEPs that a consensus on a declaration at ministerial level was "not possible". But he said it was crucial to hold on to the idea of declarations from officials of the national authorities.

The Commission's concern is to establish a chain of accountability for the use of EU money that will satisfy the Court of Auditors, which for ten years has withheld assurance on the legality and regularity of the payments underlying the accounts, particularly because of weaknesses in control and management in the member states. One of the issues still being argued over is whether audit bodies in the member states should give assurances to the EU about the quality of controls and the regularity of payments. Some of the national audit offices have objected that that would call their own independence into question.

The Court of Auditors too is unwilling to be tied down, even though it is coming under pressure from the Commission and the Parliament to define what would have to be done to obtain a positive verdict on the EU's accounts. V'tor Caldeira, a member of the court, warned MEPs that it would be wrong to reduce the EU's financial management to a problem of obtaining a positive statement of assurance from the court. That would, he said, be to confuse "responsibility for the quality of the EU's financial management with the role of its independent external auditor to provide objective opinions".

Observers in the Parliament, Commission and Council detect divisions within the court on how much to co-operate with the Commission's roadmap for improving internal controls.

Some in the court believe that the roadmap and the accompanying preoccupation with getting a positive statement of assurance on the accounts are a distraction when the Commission should be concentrating on reforms to its accounting systems and practices.

Nevertheless, the court has been supportive of the Commission's efforts to create a chain of accountability about EU spending.

After Tuesday's meeting, Wynn said anti-British sentiment among other governments made it unlikely that an inter-institutional agreement would be done under the UK presidency.

"I do not think that some of the member states will allow the British to agree this. It would be too big a success for them," he said.

But EU officials said that more fundamental problems were still blocking an inter-institutional deal. The UK presidency is going to press for Ecofin at least to agree on what the next steps should be.

Ian Ball, of the International Federation of Accountants, criticised the lack of transparency in the Commission's accounts and said that the EU should be setting higher standards as a model to the private sector.

The declaration of assurance (DAS)

• What it is:

The opinion of the European Court of Auditors on the reliability of the EU's financial statements and on the legality and regularity of the underlying transactions

• What it is not:

A judgement on whether EU money has been spent wisely, efficiently or effectively

An assurance that the activities of the EU are free from fraud

• What it has been:

A qualified opinion, withholding assurance on the legality and regularity of underlying payments

• What some (but not all) would like it to be:

A positive declaration of assurance

Article reports that efforts to improve the financial management of the EU budget had run into serious disagreements between MEPs and the European Union's Member States. An agreement between the European Parliament, the European Commission and the Council of Ministers on how to control how money from the EU budget is spent in the Member States was supposed to be reached by Finance Ministers at their Ecofin Council meeting on 8 November 2005.