EduBourseActualitésSiim Kallas Vice-President of the European Commission responsible for Administrative Affairs, Audit...

Siim Kallas Vice-President of the European Commission responsible for Administrative Affairs, Audit and Anti-FraudEuropean Court of Auditors’ Report on the 2006 financial year European Parliament plenary sessionBrussels, 29 November 2007

European Parliament plenary session
Brussels, 29 November 2007

The Commission welcomes the Court’s report and the comments of President Weber.

Overall, the Court’s Annual Report on 2006 gives a more positive assessment than the 2005 edition.

Thanks to the Court’s system of “traffic lights”, it is now possible to measure this progress in detail. In the Court’s report, you will see, from one spending area to the other, where our systems are considered satisfactory, and where errors found are below the Court’s materiality threshold of 2%.

Comparing this with previous years, the Commission is pleased that, in total, the Court now gives its “green light” to over 40% of total payments, compared to roughly a third last year, and only 6% two years ago. This is real progress towards our common goal of getting a positive Declaration of Assurance (DAS).

The Court also reports improvements in internal policies such as research programmes, and external actions.

The Court said our 2006 accounts are true and fair in all material respects, except for certain small overstatements comprising 0.13% of operating expenditure.

The Court recognizes that the “the Commission has made considerable efforts to address the weaknesses in the management of the risks to the EU funds.”

Overall, however, this is again a negative DAS concerning the legality and regularity of transactions.

While we’re moving in the right direction, I would now like to focus on the major stumbling block on our road to a positive DAS.

The big remaining challenge is to ensure that “structural policies” are properly implemented.

For spending on structural policies — €32.4 billion in 2006 — the situation remains similar to previous years, and the Court again identified a material level of error in the area.

The most frequent errors were claims for ineligible expenditure and failure to carry out tender procedures as well as a lack of evidence to support the calculation of overheads or the staff costs involved.

The supervisory and control systems in the Member States were generally ineffective or moderately effective, and the Commission maintains only a moderately effective supervision of their functioning.

The Court goes on to say that it is “reasonably confident” that at least 12% of structural and cohesion fund payments in 2006 should not have been reimbursed.

The Commission’s own report for 2006 (“Synthesis report”) reported that we did not have confidence in the systems managing structural funds in parts of Italy, in Latvia, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom. Reserves were made by the Director General in the Annual Activity Report.

The Court looked at a sample of 19 regions in 2006, and found none to be fully effective (annex 6.1 on page 135 of the Official Journal edition). The Court found various control systems to be “ineffective” in England, France, Germany, Greece, Italy, Poland, Portugal, Scotland, Slovenia, and Spain, and for the Interreg project between Austria and Hungary.

We believe things will improve under the new legislation, but this will not reduce the continuing high risk for payments made to the 2000–2006 programmes, where the situation could remain critical up to their closure in 2009/2010.

We need to act together on this state of affairs. I have written to the Council President, Member States and the European Parliament, setting out the additional efforts the Commission will undertake.

In ECOFIN earlier this month, I also called on Member States to fulfil their responsibility to provide “annual summaries of audits and declarations” by 15 February 2008. This is the deal we reached with you and Council when adopting the revised Financial Regulation.

The annual summary has to be more than another reporting exercise without added-value. It must give real analytical information for the Commission to use in giving assurance to the Court and Parliament about the state of controls in each Member State.

The 2006 discharge hearing that the Budgetary Control Committee has organised on 18 December for the main structural fund Commissioners will be attended by representatives of national budgetary control committees. The Commission welcomes this innovation, and hopes it will help mobilise the commitment at national level to improve the management of EU funds.

We need to follow a policy of “warn — solve or suspend”. The Commission has stated its intention to suspend structural fund payments, where the Commission cannot obtain the necessary assurance that Member States’ systems are working well.

This may lead the Commission to take a few unpopular decisions. But we have reached the conclusion that progress will be too slow if we do not display a sense of urgency.

Before concluding, let me say a few words about how the media covered this year’s report.

Over the last two weeks, the Commission has been asked by journalists for comments on two main points:

First, we have been asked to comment on the Court’s findings that “golf clubs” and other bodies not normally associated with farming received EU subsidies last year. Even an otherwise serious newspaper ran a headline that “EU Aid For Poor Misspent on Golf Clubs”, which managed to get 3 facts wrong in only 8 words:

First, the CAP’s multiple policy objectives cannot be reduced to “aid to poor”

Second, the aid in question was not spent “on golf clubs”, but as subsidies for eligible agricultural activities, in these cases on land adjoining and owned by golf clubs.

Therefore, third, the money is not “misspent”, but is in fact both legal and regular, and the Court does not seem to question this.

Rather, the Court has drawn attention to a policy issue and to the end result of an agreed policy. We welcome these discussions, and as you know, this Commission has worked hard to achieved full transparency on the beneficiaries of EU funds, which we believe leads to better informed policy discussions, such as the CAP “health check” launched by my colleague Mariann Fischer Boel earlier this month. The same approach is behind the Commission’s initiative of sending the Supreme Audit Institutions in all Member States a complete list of all payments made to recipients in that Member State.

Regrettably, in some media reports, this “golf club” issue entirely overshadowed the Court’s statement that agriculture is the area where the Commission and Member States have progressed most, and for which the Court came very close to giving an overall “green traffic light”.

So I wanted to clarify this today.

The second issue is the 12% of structural funds that according to the Court “should not have been reimbursed”. Accordingly, most journalists have happily picked up that the Court sees a problem with almost €4 billion paid out last year.

Also on this point, more explanation is needed. President Weber said in COCOBU that he could not state that the funds were either “lost or stolen”, “systemic” or “one-off”.

It therefore falls on the Commission to explain the 12%. In this speech, I have given some explanations, pointing to some of the problems we face and the action we intend to take. My colleagues commissioners Hübner and Spidla will elaborate further in their COCOBU hearings next months.

As a final remark, I wish to stress that — despite some of the media coverage — we believe the Court’s report does in fact help us to focus on the real issues. The Commission is working hard to ensure that improvements are made on those key points.

Pierre Perrin-Monlouis
Pierre Perrin-Monlouis
Fondateur de Rente et Patrimoine (cabinet de gestion de patrimoine), Pierre Perrin-Monlouis est un analyste et trader pour compte propre. Il vous fait profiter de son expérience en trading grâce à ses analyses financières et décrypte pour vous les actualités des marchés. Son approche globale des marchés combine à la fois l'analyse technique et l'analyse fondamentale sur l'ensemble des marchés : crypto, forex, actions et matières premières.