Watchdog set to widen its patrol

Date: 29/01/1998

By Chris Johnstone

THE EU's financial watchdog is preparing to double the number of special investigations which it carries out each year into the way European taxpayers' money is spent.

Bolstered by 50 extra staff, the Court of Auditors is drawing up plans to increase the number of hard-hitting reports it produces annually from the current five or six to about 12.

Sources say that work on the idea is well advanced, although it has yet to receive final approval.

The Court's special reports are amongst its highest-profile weapons, and an increase in the number of ad hoc investigations it conducts would, it is hoped, significantly increase the watchdog's impact.

Two of last year's reports, one on the use of Tacis technical assistance funds in Ukraine and another on the application of decentralised management for Phare projects, cast large shadows over both programmes and forced the European Commission to review its working methods.

An earlier report castigated the European Parliament for not following its own financial rules when it signed a new lease on its Strasbourg home.

Topics for special reports are usually selected on the basis of suspicions raised by the Court's annual scrutiny of the EU's accounts, under a rolling four-year programme. This is aimed at ensuring most corners of the Union's financial records are investigated on a reasonably regular basis.

The move to carry out more special probes comes as the Court is still involved in a separate battle to ensure that it can properly scrutinise the expanding activities of the European Investment Bank (EIB), the Union's leading lending institution, and the European Investment Fund (EIF), the main source of credit for transport and small and medium-sized businesses.

Negotiations are continuing between the Court and the EIB on a new framework for auditors to examine the bank's books. The current arrangement is due to expire at the end of the year.

A similar formula has been suggested by the Court to win access for the first time to the accounts and activities of the EIF - the public-private institution which provides favourable credit conditions and guarantees for loans at better than market rates.

The EIF, set up by the EIB, the EU and member state banks, has until now kept its books closed to the auditors. This has prevented the Court from giving an independent opinion on the fund's risk management, its financial holdings and operations.

The EIF has argued that Court scrutiny is inappropriate, given that its mixture of private and public cash makes it a 'mongrel' rather than an EU institution.

At the same time, the Commission is looking to the fund to take on a greater role in creating jobs within small and medium-sized enterprises.

One of the three strands of the growth and employment initiative adopted by the Commission last week called on the EIF to provide support for risk capital funds which invest in small businesses, when they are just beginning or are newly established, to try to plug a gap in the provision of venture capital.