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Wednesday, November 05, 2014

Court of Auditors highlights errors in EU spending again

Each year the EU's Court of Auditors issues its opinion on the EU's spending and each year it is the same - "material errors" amounting to billions of euros probably misspent.

First of all, let's get the usual caveats out of the way - the auditors have signed off the accounts, which means that they are a reliable picture of EU revenue and spending. However, there remain significant errors in how the money was spent.

This is from the ECA press release:
The ECA’s estimate of the error rate is not a measure of fraud, inefficiency or waste. It is an estimate of the money that should not have been paid from the EU budget because it was not used in accordance with EU rules.
The other defence that the European Commission will make is that much of this spending is a shared responsibility between national governments and the EU institutions. But that does not excuse the fact that the errors keep rolling in year after year with little improvement and that much of this results from the complexity and Byzantine nature of EU spending programmes.

So how bad was it this year? 

Well here are some of the main findings for 2013:
    Illustrative examples of waste highlighted by the EU's Auditors:
    • Claims under the CAP for grassland that was actually forest.
    • Claims for four Spanish border control helicopters that spent little time controlling borders.
    • The salary of a private school director in Portugal charged to an EU project.
    • €150 million of pre-accession exenditure validated by the Commission on the basis of estimates rather than for incurred, paid and accepted costs.
    Is control of spending getting better?
    Rate at which EU funding is misspent
    One of the more depressing aspects of the EU budget is that the rate at which money is misspent remains consistently high. As we can see over time, it has gone down and then back up leading to the conclusion that the problem is persistent. This year it was 4.7%, which is lower than some previous years but still higher than others pointing to the fact there has been no "solution" to poor financial control.

    Same old suspects?

    Although there are a number of examples of misspending in Southern Europe, examples are also catalogued across the EU including in regional funding within richer states such as Germany. This begs the question as to why the EU is funding poorly controlled programmes in states that are net contributors and able to pay for their own, probably better quality programmes.

    A solution - reform the budget?

    Cutting regional funding in rich EU states would cut the EU error total, the EU budget and give states more autonomy all in one go as Open Europe has consistently argued.. Likewise Open Europe has also proposed radical CAP reform moving spending back to national governments. This would allow for more scrutiny of spending as well as well as remove some of the incentives to national governments to spend the money as fast as possible whatever the quality of projects.

    Other Court of Auditor suggestions:

    The Auditor's make a number of sensible recommendations and observations, including the following which are particularly interesting: 
    • A better harmonisation of how GNI is calculated: The Court of Auditors has found that there are inconsistencies as to how different states calculate their "unofficial" economies. Given that the EU budget contributions are based on relative sizes of member states GNI and that recent statistical revisions have led to the UK receiving a large £1.7 surcharge any inconsistencies will no doubt be looked at very closely in HM Treasury.
    • EU value added often difficult to discern: The EU's globalisation fund was picked out as an example of funding that has a low rate of EU "value added." That begs a question as to why it exists.
    Verdict: Good report but, unfortunately, we will no doubt be returning to the subject of misspending when next year's report comes out... 


    Jesper said...

    This is the typical bureaucrat defense:
    "The other defence that the European Commission will make is that much of this spending is a shared responsibility between national governments and the EU institutions."

    & it is as always completely misleading. The money is in the EU budget, therefore they are solely responsible. If they take all the credit for when money is spent well (and they do) then they are also responsible for when it is spent badly.

    Anonymous said...

    This sad story possibly worse in the UK.

    For years, the NAO has qualified the accounts of the UK government (http://www.nao.org.uk/wp-content/uploads/2014/06/Whole-of-government-accounts-2012-13.pdf) and it does not expect this to change for years to come.

    It has qualified on the grounds of:
    failing to follow its own accounting rules;
    lack of evidence of valid spending;
    it even says there is over £1bn of missing money in the balances owing between government bodies.

    Rik said...

    Heading ErrorS iso erros.

    Rik said...

    The inconsistencies in the blck economy calculation gives a good opportunity to start a discussion.
    If you include it like now the South and East should have much higher increases compared to the West and North.
    Which would mean Italy/Spain/Portugal/Greece should be paying iso the Britishers and Swampgermans.

    Anyway it looks better to keep the political dimension of it as the main one.

    Gives another great opportunity for an attack by the likes of Farage. The longer you get these issues in the news preferably with the focus on real life examples (for the targetgroup) the better it will be for them.

    jon livesey said...

    I don't see the problem. They can just fine the UK some more for doing too well economically, and that will cover any funding gap.

    Unknown said...

    I suggest we put this in perspective; 7 billion is not important in comparison to the 167 billion lost on the VAT gap, due to fraud and failure to pay.
    A simple change in the collection process to a real time settlement during the actual payment of a bill will eradicate well over 50% of this loss. More than enough to cover this 7 billion - and the UK's 1.7 billion if you like - with lots to spare.
    That is not to say that any misappropriation of EU funds is acceptable, but let's focus on the big picture.

    Jesper said...

    The gentleman who brought up real time settlement of VAT in this discussion shares a name with a gentleman providing software for real time settlement of VAT...

    Not sure if there is a need for such software, the accounting software that I've come across tend to be very very good at handling VAT.

    My view is that new IT and modern accounting packages has reduced the burden of handling VAT significantly while the proponents of real time VAT collections claim that VAT collection and reporting systems are largely unchanged since the 1950s.

    But maybe the discussion about the pros and cons should be taken elsewhere?

    Average Englishman said...

    @ Anonymous
    Sad is not really the word for it; criminal would be more appropriate in my view and it is not excused by any failings cloaser to home with the UK finances. At least as a UK voter I have a chance to do something about any problems in the UK but no real chance at all of changing things in the EUSSR; only an opportunity to get my cheque book out to pay for it as @ jon livesey pointed out.

    @ chris williams
    Just because there are bigger problems elsewhere doesn't mean that this particular rip off should be ignored. Try your argument out on someone being denied life saving or sight saving drugs by 'NICE' on the grounds that the country cannot afford them and see what their reaction is.

    Let's just leave this EUSSR mess and keep our cash, and the sooner the better.

    Laura | Dutch Law Firm AMS said...

    I think "material errors" is a bit of a misleading term. Although most of the budget is probably spend well, there is still a very big amount that should not have been paid out from the EU budget.