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The European Commission and Member States have made progress in strengthening the financial management of European Union funds, according to a report today from the National Audit Office. But for the thirteenth year in a row the European Court of Auditors (ECA) did not provide a positive Statement of Assurance on the legality and regularity of expenditure.

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Today’s report summarizes the results of the Court’s examination of the European Union’s accounts and progress on the range of initiatives being taken forward by the Commission and Member States.

In the Common Agricultural Policy (which represents the largest expenditure component), the Court noted a marked reduction in the overall error to a point where it was just above the level at which a positive opinion could be given. Despite problems with its implementation in the UK, there are indications that the introduction of the Single Payments Scheme and the continued application of the Integrated Administration and Control System have helped achieve a lower error rate in those Member States which have adopted the Scheme.

Achieving a positive Statement of Assurance in funding for Structural Measures, which are designed to reduce disparities in the level of development between regions and Member States, remains the most challenging component of the budget. Generally ineffective or moderately effective control systems within Member States, and only moderately effective supervision by the Commission, led the Court to conclude that this expenditure was subject to material error.

In March, the Commission confirmed a decision to impose a financial correction of some €25 million (£17 million) on the United Kingdom for not exercising its supervisory role in an effective manner in a European Regional Development Fund programme in the North-West.

A number of Member States, including the United Kingdom, have indicated their intention to improve transparency of the expenditure of European Union funds through some form of enhanced reporting to their national parliaments. As part of this initiative the Treasury will publish, in June 2008, its first annual consolidated statement on the United Kingdom’s use of European funds.

“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 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 United Kingdom’s forthcoming account of its own use of European Funds is a helpful development.”

Tim Burr, head of the National Audit Office


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