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Sir John Bourn, the head of the National Audit Office, reported to Parliament today on the financial management of the European Union. His report summarises the main findings of the European Court of Auditors’ report, published in November 2005, on the European Council’s accounts for 2004. Sir John also highlighted other key developments in financial management of the European Union, including the developments in this area during the United Kingdom’s Presidency of the European Council in the latter half of 2005.

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The European Court of Auditors concluded that the European Union’s accounts were reliable except in one area, as it had for the 2003 financial year. The Court also concluded that, taken as a whole, the transactions underlying the accounts were legal and regular with respect to revenue, commitments, administrative expenditure, and some areas of expenditure under the Common Agricultural Policy. The Court did not issue a positive Statement of Assurance for the remaining payments under the Common Agricultural Policy, Structural Measures, Internal Policies, and External Aid. Its opinion on Pre accession aid was not qualified, which it was for 2003.

The Court agreed with the European Commission’s own assessment that improvements to internal control systems had been made, but that more action was required to improve their effectiveness. The Court also reported the Commission’s progress in introducing a new accruals accounting system, an important part of the Commission’s programme to improve financial management, but was concerned that the opening balances (for the 2005 financial year) had, at the time the Court reported, not been established. The Commission responded that it expected these balances to be established in line with the project’s timetable.

Sir John’s report noted that, during 2004, Member States (see note 3) notified the European anti fraud office (OLAF) of some 9,400 cases of irregularities, including possible fraud, with a value of €978 million (£663 million). The number of cases increased by 12 per cent and their value by five per cent compared to 2003.

He also reported that there had been some valuable developments in relation to financial management during the life of the United Kingdom’s Presidency focused, mainly on the Commission’s ‘roadmap’ which is intended to move the European Union towards a positive Statement of Assurance from the Court by 2009. This work culminated in the publication of an Action Plan by the Commission in January 2006. The Action Plan is intended to address gaps between the current system of internal controls and those proposed in the Commission’s ‘roadmap’.

“I am pleased to see the Court was able to issue a positive Statement of Assurance on a larger percentage of EU spending than it had done at any time in the previous decade and that it reported that the Commission had made progress in a number of key areas of financial management, such as the development of its internal control framework.

“Last year, I said that the United Kingdom’s Presidency of the European Union in the latter half of 2005 presented the United Kingdom authorities with an opportunity to push for improvements in financial management. I am pleased to see therefore that the United Kingdom Presidency made a substantial contribution to initiatives in this area. The challenge is to keep up the momentum during the Austrian and Finnish Presidencies in 2006.”

Sir John Bourn


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