Deja vu anyone? EU auditors refuse to sign off EU spending for 18th year running

This morning, the EU’s Court of Auditors published its report on the EU’s 2011 accounts. Although the auditors concluded that the Commission’s accounts are reliable, they also found that the actual spending was “affected by material error”, and for the 18th year in a row they refused to sign off on it.

Here are the key points:

Total spending in 2011 was €127.2bn, of which 3.9% - or €4.96bn - was “affected by material error”. In 2010, the corresponding figures were 3.7% and €5.38bn, meaning an increase of €580m in the amount of erroneous spending.

Breaking down the budget into policy headings, we see that only the areas of External relations, aid and enlargement and administrative spending were deemed to be “free from material error”, i.e. an error rate of below 2%. For the other policy areas:

Agriculture: market and direct support
Total Spending = €43.8bn
Estimated error rate = 2.9%
Erroneous Spending = €1.27bn

Rural development, environment, fisheries and health
Total Spending = €13.3bn
Estimated error rate = 7.7%
Erroneous Spending = €1.02bn

Regional policy, energy and transport
Total Spending = €33.4bn
Estimated error rate = 6%
Erroneous Spending = €2bn

Employment and social affairs
Total Spending = €10.2bn
Estimated error rate = 2.2%
Erroneous Spending = €0.22bn

Research and other internal policies
Total Spending = €10.6bn
Estimated error rate = 3%
Erroneous Spending = €0.32bn

The Court also found that controls over 86% of the EU budget were only "partially effective".

The Court also highlighted a few practical examples of how such errors were made. Here are a few examples from the report:

• A farmer was granted a special premium for 150 sheep. The Court found that the beneficiary did not have any sheep. The corresponding payment was therefore irregular.
• In two Member States Italy (Lombardia) and Spain (Galicia), the Court found cases where ‘permanent pasture’ reference parcels were recorded as being 100% eligible despite the fact that they are fully or partially covered with dense forest or other ineligible features.
• European Social Fund - one of the so-called structural funds - gave money to a commercial association, as support for its activities, which included advising small and medium-sized enterprises (SMEs). The costs of several staff members of the association were charged to the ESF project, although evidence supporting the charging of their time to the project could not be provided. The Court considers that the project staff costs have been overcharged by 60%.
• A beneficiary from the EU's research funding pot declared overheads amounting to €366,891 and included the indirect costs of all its departments while only considering the research personnel as an allocation key when charging these costs to research projects. This resulted in non-related costs being charged, leading to an over-claim of €180,670.

Vitor Caldeira, the ECA's chairman, is quoted in the Telegraph as saying that auditors had "found too many cases of EU money not hitting the target or being used sub-optimally", an argument we have also made repeatedly, not least in recent reports on the EU’s largest spending areas – Regional and Agricultural policy. Caldeira concluded that: 

“With Europe's public finances under severe pressure, there remains scope to spend EU money more efficiently and in a better targeted manner. Member states must agree on better rules for how EU money is spent, and member states and the commission must enforce them properly. In this way, the EU budget could be used more efficiently and effectively to deliver greater added value for citizens." 

We couldn't have put it better ourselves. Brussels needs to get its own house in order (albeit many of the faults lie with national managing authorities) rather than demanding ever more money from European taxpayers.