Press Release - Financial Management in the European Union: The
European Court of Auditors report for the year 2001
12 June 2003
Head of the National Audit Office Sir John Bourn has reported to
Parliament on the financial management of European Union funds.
Today's report highlights the main findings of the latest Annual
Report by the European Court of Auditors (November 2002) which
covers the management of the General Budget of the European Union
for 2001. The Commission has overall responsibility for
implementing the Budget, which totalled £57.4 billion in 2001,
but over 80 per cent of expenditure is managed by authorities
within the 15 Member States of the European Union.
For the eighth year in succession the Court of Auditors
qualified its opinion on the reliability of the Community's
accounts. The Court again criticised the persistent weaknesses in
the Commission's accounting systems, particularly the lack of
reliable information on the completeness of assets held, and
recommended urgent action be taken to address these problems.
The Court noted the fact that the Commission had made some
progress in implementing its strategy of financial management
reforms. In particular, the Court welcomed the introduction of
individual declarations by the Commission's Directors General (the
heads of the main administrative units of the Commission) on the
reliability of the financial controls in their areas which the
Court considered offered "an unprecedented degree of openness as
regards accountability". But the Court also observed some
weaknesses, such as a lack of consistency in the declarations of
individual Directors General. The Commission has since issued
guidance to clarify how Directors General should approach their
declarations.
The Commission secured approval from the Council for a new
Financial Regulation in June 2002 which came into force on 1
January 2003. Among the important changes this established were the
transfer of responsibilities for checking and approving requests
for commitment and payment to staff in individual Directorates
General, the strengthening of the Commission's internal audit
capacity and requirements to comply with the principle of sound
financial management and develop a system of evaluation using SMART
(specific, measurable, achievable, relevant and timed)
objectives.
The new Financial Regulation also provided for the introduction
of full accruals accounting by 1 January 2005. However, the
Commission does not have a comprehensive accounting framework nor
an integrated computerised accounting system capable of
automatically generating all the figures required for
accruals-based financial statements. While supporting the
Commission's intention, therefore, Sir John considers that the
Commission faces a very tight timetable to introduce the required
improvements successfully, test them fully and train staff by the
beginning of 2005.
The number and value of cases of suspected fraud or other
irregularity detected and reported by Member States to the
Commission in 2001 were substantially lower than in 2000, with the
overall reported number of cases falling from 6,634 to 5,455 and
the estimated value falling from £678 million to
£364 million. However, no firm conclusions on trends can be
drawn from this because cases of fraud and irregularity tend to be
identified unevenly within programmes and reported levels can
fluctuate considerably from year to year. Also different practices
continue to exist between Member States in defining irregularity
and fraud and reporting it to the Commission.
In December 2002, accession negotiations were completed with ten
Candidate Countries due to become new Member States of the European
Union on 1 May 2004 (namely, Cyprus, Estonia, Hungary, Latvia,
Lithuania, Malta, Poland, the Slovak Republic, the Czech Republic,
and Slovenia). While all ten have provisionally concluded
negotiations on financial control, the Commission noted that most
needed to accelerate the pace of reform or undertake significant
administrative strengthening to ensure effective implementation of
financial controls by the date of accession. Sir John recommends
that the UK government continue to use its influence to ensure that
financial management issues continued to be given a high priority
in Candidate Countries.
Sir John Bourn said today:
"My report on the financial management of the European
Union draws attention once again to continuing problems in the
management of funds. It is a matter of concern that, for the eighth
year in succession, the Court of Auditors has qualified its opinion
on the reliability of the accounts. I also endorse the Court’s view
that the Commission should take urgent, in-depth action to deal
with the persistent weaknesses in its accounting
system.
"It is vital that the UK government carries on doing all
it can, through the Council of Ministers and its other links in the
Community, to support the reform progress put into effect by the
Commission. We in the National Audit Office will continue to give a
high priority to examining how Community funds are managed by UK
government departments."
Notes for Editors
- The European Court of Auditors is the external auditor of the
European Community. The Court reports annually on its findings on
the management of Community funds. The Court also provides an
annual Statement of Assurance on the reliability of the Community’s
accounts and the legality and regularity of the underlying
transactions. The Court comprises 15 Members, one from each Member
State, supported by some 550 staff. This is the eighth time that
the head of the National Audit Office has reported to Parliament on
the Court’s Annual Report and Statement of Assurance.
- Accruals accounting aims to show the true cost of
activities and the assets and liabilities at the year-end rather
than just cash spent and received.
- Press notices and reports are available from the date of
publication on the NAO website at http://www.nao.org.uk/ Hard copies can
be obtained from The Stationery Office on 0845 702 3474.
- The Comptroller and Auditor General, Sir John Bourn, is the
head of the National Audit Office which employs some 800 staff. He
and the NAO are totally independent of Government. He certifies the
accounts of all Government departments and a wide range of other
public sector bodies; and he has statutory authority to report to
Parliament on the economy, efficiency and effectiveness with which
departments and other bodies have used their resources.
Press Notice 45/03
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