Report from the Commission on the investigation related to the manipulation of statistics in Spain as referred to in Regulation (EU) No 1173/2011 of the European Parliament and of the Council on the effective enforcement of budgetary surveillance in the euro area (Commission Decision of 11 July 2014)

On 11 July 2014, the European Commission launched a formal investigation into the possible manipulation of statistics in the Autonomous Community (AC) of Valencia (Comunidad Valenciana), Spain. The investigation aimed at assessing whether the serious indications of misrepresentation of deficit and debt data in 2012 could be confirmed and, if so, whether it was a result of intent or serious negligence.

This report presents the findings of the Commission in the light of the investigation conducted, together with the key facts supporting those findings. The written observations submitted by the Kingdom of Spain on the Commission preliminary findings are also included. The report contains a detailed description of the main reasons for the 1.9 billion euro revision in the government deficit of Spain in 2012 on the basis of an analysis of how government expenditure was compiled, recorded and reported in the AC of Valencia.

The report concludes that severe irregularities took place in the accounting, recording and reporting of expenditure of the AC of Valencia during many years. The accrual principle was not respected, extra-budgetary accounts were used against the rules in place, expenditure was sometimes left unrecorded for considerable periods of time, and the statistical information communicated from the regional authorities of Valencia to the national authorities was misleading, leading to the misreporting of the deficit data for Spain. Consequently, the EDP (Excessive Deficit Procedure) data transmitted to Eurostat did not include part of the expenditure incurred by this region, in breach of ESA 95 rules.

Another key finding of the report is that information on unrecorded expenditure was publicly available through the yearly reports of the Regional Court of Auditors of Valencia, which recommended that the Regional Audit Office of Valencia (IGGV) should ensure a correct recording of such expenditure. However, the practice of not recording expenditure incurred for considerable periods of time was only brought to an end after the central government introduced a special financing mechanism for unpaid expenditure of the regions in 2012. In this context, it is concluded that an entity (IGGV) belonging to the general government sector of the Kingdom of Spain was seriously negligent concerning the non-recording of expenditure in national accounts.

Based on the findings in this report regarding the behaviour of the authorities of the Member State in the period from 13 December 2011 until the launch of the investigation on 11 July 2014, the Commission may decide to adopt a recommendation to the Council to impose a fine on the Kingdom of Spain.

• Primary Source

EUR-Lex: COM(2015)211: Follow the progress of this report through the decision-making procedure http://eur-lex.europa.eu/legal-content/EN/HIS/?uri=COM:2015:211:FIN

ESO: Background information: Commission recommends imposing a fine on Spain for misreporting of deficit data in Valencia http://www.europeansources.info/record/press-release-commission-recommends-imposing-a-fine-on-spain-for-misreporting-of-deficit-data-in-valencia/

EUR-Lex: SWD(2015)105: Relevant underlying factual information concerning the misrepresentation of data in the Autonomous Community of Valencia http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=SWD:2015:105:FIN

EUR-Lex: COM(2015)209: Recommendation for a Council Decision imposing a fine on Spain for manipulation of deficit data in the Autonomous Community of Valencia http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM:2015:209:FIN

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