Lax controls to blame for EU budget errors

Today’s independent NAO report for Parliament makes clear that both Brussels and London must get their act together in monitoring the use of EU funds in the UK.

NAO head Tim Burr commented: “There has been some improvement in financial management of EU funds in 2006, but there are still significant challenges to achieving a positive Statement of Assurance on the legality and regularity of expenditure.

“To reduce the level of error the Commission needs to strengthen its supervision of Structural Measures expenditure.

“But with some three-quarters of European expenditure managed by member states, they too have a major role in improving the financial management of European Union funds.”

The report highlights the fact that the scale of financial error – far more common than fraud – remained too high in 2006 in the key regional, social and farm funds.

The EU auditors did, however, approve more than 40% of EU budget payments compared with about 33% in 2005 – and only 6% three years earlier.

The NAO report says regional spending programmes in 2006 were hampered by “generally ineffective or moderately effective” national control systems, and only “moderately effective” supervision by the Commission.

Siim Kallas, European Commissioner responsible for administration, audit and anti-fraud, today focused on the NAO’s conclusion that the UK authorities had to play a full role in ensuring that EU funds handed to Britain are spent properly.

“The report will no doubt contribute to further improvements in financial management of EU funds in the UK, as well as to the quality of public debate on this issue,” said Mr Kallas.

Edward Leigh, chairman of the Commons Committee of Public Accounts, acknowledged progress made by the Commission and EU governments in managing EU funds but added: “It is worrying that, according to the work of the European Court of Auditors, the UK does not appear to be performing any better than the EU average in terms of the level of error.”

South Norfolk MP Richard Bacon, a public accounts committee member, said: “The EU’s accounts have failed to get a clean bill of health for the 13th year running. Although some painfully slow progress is apparently being made in strengthening the way the EU looks after our money, it’s not enough to compensate British taxpayers for 13 years of incompetence and fraud which have cost them dearly.

“The saddest thing about this report is that it will not come as much of a surprise to anyone. This is the same old song. It’s about time the EU changed the tune”.

The Treasury has already agreed to publish annual declarations for MPs in future detailing EU spending. The first is expected in June this year - something Mr Burr said would be a “helpful development”.

Mr Leigh said the move was partly prompted by pressure from his committee: “This will for the first time give Parliament and taxpayers a clear view of what is being spent and where it is going.”

Meanwhile Mr Kallas said the Commission was determined to achieve a “positive statement of assurance” from the EU auditors by the end of the current Commission mandate in 2009.

A Treasury spokesman welcomed the NAO report’s recognition that progress had been made in strengthening the EU financial management, and added:

“It is encouraging that the NAO have recognised that the UK, and others, have taking steps to improve reporting of its use of EU funds.

“However it is still highly disappointing that the 2006 EC Budget failed to gain a positive Statement of Assurance for most budget payments. This sends a negative message to the European taxpayer and member states and the European Commission must do more to improve control systems.

“The UK will publish its first Consolidated Statement and Audit Opinion on the UK use of EU funds in 2006-07 this June.”