Presentation of the Court of Auditors' annual report - 2006 (debate) 
President
The first item is the presentation of the Court of Auditors' annual report for 2006.
Hubert Weber
President of the Court of Auditors. - (DE) Mr President, Vice-President Kallas, ladies and gentlemen, I am delighted to be able to take part today in your debate on the annual reports of the Court of Auditors for the 2006 financial year. On 12 November I presented the annual reports to the Committee on Budgetary Control of the European Parliament, and the following day I presented them to the Economic and Financial Affairs Council.
Let me begin with a brief review of the key messages contained in the annual reports for 2006. My first point concerns the reliability of the final annual accounts for 2006. The consolidated financial statements for the 2006 financial year provide a true picture of the assets and liabilities and the financial position of the Communities and the results of their operations in that year with the exception of an overstating, in the statement of assets and liabilities, of accounts payable and of the amount of pre-financing. The Commission has made further progress in the implementation of accrual accounting, although some weaknesses are still observable.
The Court noted that the Commission has made considerable efforts to eliminate defects in the system of risk management for EU finances. Some changes are already yielding visible benefits in areas such as the agricultural budget.
I shall move on now to legality and regularity. The Court has once more delivered an unconditional favourable opinion on transactions underlying revenue and commitments as well as payments for administrative expenditure and expenditure under the pre-accession strategy, with the exception of expenditure under the Sapard programme. In addition, there was a minimal error rate for payments managed and controlled directly by Commission delegations in respect of external actions. The Court, however, has once again delivered an unfavourable opinion on the legality and regularity of the bulk of EU expenditure transactions. This applies primarily to expenditure under the common agricultural policy that is not subject to the integrated administration and control system - IACS for short - and to expenditure on structural measures and internal policies and to a considerable proportion of expenditure on external actions. In these areas payments to final beneficiaries are still affected by material error rates, albeit at varying levels.
The Court's observations on the areas of the budget that are subject to shared management are as follows: in the realm of agriculture, to which a budget of EUR 49.8 billion was allocated in 2006, the Court noted a sharp decline in the estimated overall error rate, although the rate is still slightly above the materiality threshold. If properly applied, IACS, which covers some 70% of agricultural expenditure, can effectively reduce the risk of illegal and irregular expenditure payments. Financial corrections to agricultural payments, such as those deriving from the Commission's annual clearance decisions in the framework of the balancing procedure, relate to large sums, which the Member States have to repay to the Community budget as corrections or financial penalties because of their failure to establish adequate control systems. These recoveries to the Community budget continue to be funded by national taxpayers and not by the beneficiaries who have obtained Community resources by irregular means.
Besides highlighting problem areas by citing illustrative cases, the Court also considers it has a duty to flag up developments which may be important for political decision-makers to know about. For example, the Court pointed out that, while the single-payment system facilitates application and payment procedures, it also has side-effects, such as entitlements being allocated to landlords who have never farmed. While this may be legally permissible, it has perceptibly shifted the focus of EU aid from farm proprietors to landowners. The new recipients of agricultural subsidies include railway companies, riding stables, stud farms, golf and leisure clubs and local authorities. Moreover, the legal provisions governing the single-payment system have given Member States wide scope in the allocation of entitlements, which has resulted in unequal treatment of beneficiaries.
With regard to structural measures, to which a total of EUR 32.4 billion was allocated in 2006, the situation prevailing in previous years has not changed. The Court observed a material rate of error, which it estimated to be at least 12% of the aggregate amount of reimbursements to beneficiaries. The most common errors involved applications for the reimbursement of ineligible expenditure and failure to carry out a tendering procedure. In addition, documentation substantiating overheads and personnel costs was often missing.
In the view of the Court, the Commission should set a good example in its handling of the expenditure it administers directly, that is to say expenditure on the Union's internal policies and external actions. Although improvements are discernible, the internal policies administered by the Commission, on which nine billion euros was spent in 2006, were once again subject to a material rate of error. The main reason for this was the payment of reimbursements to beneficiaries who had submitted declarations overstating project costs. The causes of the errors in the underlying transactions include negligence, insufficient knowledge of rules that are often complex, and applicants' wilful attempts to defraud the EU budget. In addition, for agricultural expenditure not covered by the IACS and expenditure on structural measures and on internal policies, checks on requests for payment, which are largely based on the information provided by beneficiaries, are in many cases inadequate in terms of frequency and coverage and are often short on quality too.
In past years the Commission has taken action to enhance the recovery system and to improve the protection of the Union's financial interests. Because of the complexity of its procedures, however, the Commission is still not being reliably informed of the various amounts and recipients of unduly paid funds and of their financial impact on the EU budget. In fact, only six Member States responded to last November's request from the Commission for a report on the recovery of irregular payments. In its single-audit model, the Court recommended the establishment of an efficient framework for all internal control systems relating to EU funds. All such systems should be based on common principles and standards; they should take account of inherent risks as well as striking the right balance between the cost of controls and the benefits they bring.
One of the main innovations of recent times is the obligation imposed on Member States to present annual surveys of their audit and control findings. There are also the voluntary initiatives launched by some national audit bodies to issue national declarations and produce audit reports on the management of EU funds in their respective countries. The Court takes the view that the national declarations and the national auditing efforts could help to raise awareness in the Member States of the importance of internal control of EU funds. In its opinion No 6/2007, the Court stated that such national procedures were a means of focusing and demonstrating national accountability for the use of EU funds. Moreover, they can serve to identify rectifiable defects and examples of good practice as well as enhancing transparency and accountability in the realm of financial management.
The Court is also continuing to play an active part in fostering cooperation with the Supreme Audit Institutions in the Member States and is the lead body in a new working group dealing with common auditing standards and comparable auditing criteria designed for the EU context.
This brings me to the conclusions. In spite of considerable efforts on the part of the Commission to eliminate the weaknesses in the system of risk management for EU funds, the Court has once again delivered an unfavourable opinion on the legality and regularity of transactions in most areas of the budget. The greatest improvements were observed in relation to the common agricultural policy. The high error rate in the underlying transactions is due in part to the fact that complicated legal requirements and provisions and unclear eligibility criteria sometimes cause beneficiaries to overstate their costs when claiming reimbursement, but it is also partly due to persistent defects in the realm of internal control.
The basic prerequisite for effective management of budgetary funds is the existence of reliable internal control systems at every administrative level in all Member States and recipient countries. In my opinion, the people of Europe have a right to proper administration and control of EU funds throughout the Union.
Siim Kallas
Vice-President of the Commission. - Mr President, the Commission welcomes the Court's report and the comments from President Weber.
Overall, the Court's Annual Report for 2006 gives a more positive assessment than its 2005 edition. Thanks to the Court's system of traffic lights, it is now possible to measure progress in detail. The Court's report sets out, from one spending area to another, where our systems are considered satisfactory and where the errors found are below the Court's materiality threshold of 2%.
Comparing this with previous years, the Commission is pleased that in total the Court has now given its green light to over 40% of total payments, compared to roughly a third last year and only 6% two years ago. That is real progress towards our common goal of getting a positive Statement of Assurance (DAS).
The Court also reports improvements in internal policies, such as research programmes, and external actions. The Court said that our 2006 accounts are true and fair in all material respects, except for certain small overstatements, comprising 0.13% of operating expenditure. The Court recognises that the Commission has made considerable efforts to address the weaknesses in the management of the risks to EU funds.
Overall, though, there is, again, a negative DAS concerning the legality and regularity of transactions. While we are moving in the right direction, I would therefore like to focus on the major stumbling block on our road to a positive DAS. The big remaining challenge is to ensure that structural policies are properly implemented. For spending on structural policies - EUR 32.4 billion in 2006 - the situation remains similar to previous years, and the Court has again identified the material level of error.
The most frequent errors were claims for ineligible expenditure and failure to carry out tender procedures, as well as a lack of evidence to support the calculation of the overheads or the staff costs involved.
The Court goes on to say that it is reasonably confident that at least 12% of structural and cohesion fund payments in 2006 should not have been reimbursed. We agree that there are real problems in this area. The Commission's own synthesis report for 2006 stated that it did not have confidence in the systems for managing Structural Funds in parts of Italy, Latvia, Slovakia, Slovenia, Spain, Sweden and the United Kingdom. Reserves were expressed by the directors-general in their annual activity reports.
The Court looked at a sample of 19 regions in 2006, and found none to be fully effective. The Court found various control systems to be ineffective in England, France, Germany, Greece, Italy, Poland, Portugal, Scotland, Slovenia and Spain, and for the Interreg project between Austria and Hungary.
We believe things will improve under the new legislation, but this will not reduce the continuing high risk for payments made to the 2000-2006 programmes, where the situation remains critical up to their closure in 2009-2010. We need to act together on this state of affairs. I have written to the Council President, the Member States and the European Parliament, setting out the additional efforts the Commission will make.
At the Ecofin meeting earlier this month, I also called on Member States to fulfil their responsibility to provide annual summaries of audit and declarations by 15 February 2008. That was the deal we reached with Parliament and the Council when adopting the revised Financial Regulation.
The annual summary has to be more than just another reporting exercise without added value. It must provide real analytical information for the Commission to use in giving assurance to the Court and Parliament about the state of controls in each Member State.
The 2006 discharge hearing that the Committee on Budgetary Control has organised for 18 December 2007 for the main Structural Fund Commissioners will be attended by representatives of the national budgetary control committees. The Commission welcomes that innovation and hopes it will help mobilise commitment at national level to improve the management of EU funds.
We need to follow a policy of warn, solve or suspend. The Commission has stated its intention to suspend Structural Fund payments where the Commission cannot obtain the necessary assurance that Member State systems are working well. That may lead the Commission to take a few unpopular decisions, but it has reached the conclusion that progress will be too slow if we do not display a sense of urgency.
Before concluding, let me say a few words about how the media covered this year's report. Over the last two weeks, the Commission has been asked by journalists to comment on two main points. First, it has been asked to comment on the Court's findings that golf clubs and other bodies not formally associated with farming received EU subsidies last year. An otherwise serious newspaper ran the headline 'EU aid for poor misspent on golf clubs'. It managed to get three facts wrong in only eight words. Let me clarify. Firstly, farm subsidies are not aid for the poor; secondly, the aid in question was not spent on golf clubs, but as subsidies for eligible agricultural activities - in these cases on adjoining land owned by different owners. It follows that, thirdly, the money was not misspent, but was in fact both legal and regular expenditure, which the Court is not questioning. Rather, the Court has drawn attention to a policy issue and to the end result of an agreed policy: the introduction of the single-payment scheme.
We welcome such discussions and, as honourable Members will be aware, this Commission has worked hard to achieve full transparency on the beneficiaries of EU funds, which it believes is leading to better-informed policy discussions, such as the common agricultural policy health checks launched by my colleague, Marian Fischer Boel, earlier this month.
The same approach lies behind the Commission's initiative of sending the supreme audit institutions in all Member States a complete list of all the payments made to recipients in that Member State.
Regrettably, in some media reports, this golf club issue has entirely overshadowed the Court's statement that agriculture is an area in which the Commission and the Member States have made most progress, and for which the Court came very close to giving an overall green light. That is why I felt a need to clarify this today.
The second issue is that 12% of Structural Funds, according to the Court, should not have been reimbursed. Most journalists have picked up on the Court seeing this as a problem when almost EUR 4 billion was paid out last year. This point also needs explaining. There is no clear picture as to whether the funds were lost or stolen, and whether the errors are systemic or one-off errors. It therefore falls to the Commission to explain the 12%. In this speech I have given some explanations, and pointed to some of the problems we face and the action we intend to take.
My colleagues, Commissioners Hübner and Špidla, will elaborate further in their Committee on Budgetary Control hearings next month.
As a final remark, I wish to stress that, despite some of the media coverage, we believe the Court report does in fact help us to focus on the real issues. The Commission is working hard to ensure that improvements are made on these key points.
José Javier Pomés Ruiz
on behalf of the PPE-DE Group. - (ES) Mr President, Hans-Gert Pöttering, I am pleased that you are attending this debate, underlining the importance which the Parliament attaches to the auditing of its accounts, and that Vice-President Kallas and President Weber are also here, but where is the Council? Where is the speaker who can tell us what the Council is doing with all the suggestions and comments that the President of the Court of Auditors, Vice-President Kallas and I myself have been putting to the Council?
Thank you, Mr President, for attending this debate.
(Applause from certain quarters)
I would like to begin by thanking the Court of Auditors for its excellent work, especially chapter 2 of its report, which is very well presented. You are getting better at this job all the time and are helping not only the Parliament, but also the man in the street, to realise what it costs to run the European Union.
Farmers should be congratulated because now that we are reducing direct payments to them they have managed to improve their management of the money they receive significantly.
However, such praise cannot be heaped on structural funds. It is now three years since this Parliament said that the Council, the great absentee, should be involved in order to account for how it spends the greater part of the budget which it controls. One thing is clear: it is now obligatory, under the new Financial Regulation, for Member States to submit their summary national management declarations. It is not an option, it is mandatory. They have to do this before mid-February next year; and as we know - and here we agree with Mr Kallas - the Member States are unwilling to do so: it seems as though they are not required to present accounts. If they have an obligation, they should be the first ones to set an example. You said that only six Member States are accounting for how they recover funds. That is scandalous, it deserves a headline: only six Member States are telling us what they are doing about recovering funds which they have misused. That really is a scandal.
To sum up, I would like to tell you that this Parliament will continue its work; may you continue with yours. You and Mr Kallas have our full support in continuing to strive towards the goal of a positive DAS, and we take our share of the blame for all those particularly burdensome procedures; we are to blame there because sometimes we ask for the impossible. We offer our collaboration in order to simplify procedures as far as possible.
Thank you, Mr Weber, for your magnificent report.
Herbert Bösch
on behalf of the PSE Group. - Mr President, the situation as regards the Union's financial management is mixed. I welcome the efforts made by the Commission as regards agriculture. The Court reports a marked overall reduction in errors in agricultural expenditure. That should be welcomed as a major success.
On the other hand, there is little positive said about the Structural Funds. The Court is of the opinion that control systems in the Member States are generally ineffective or moderately effective. That is why Parliament's call for national management declarations as an instrument to improve national accountability is more relevant than ever.
I am also very disappointed that the internal control system within the Commission is still not all it should be, seven years after the reform. There are significant weaknesses, and I welcome the Court's solid analysis in chapter two of its annual report.
Let us look to the future. The Court has proposed interinstitutional discussions on the concept of 'tolerable risk of error'. I welcome that initiative. Parliament and the Commission have already, in different ways, given some follow-up to this proposal. When will the Council - which is not present today - give its view on this?
The Reform Treaty states that: 'The regulations shall lay down the control and audit obligations of the Member States in the implementation of the budget and the resulting responsibilities.' Parliament will carefully follow the implementation of that new rule.
As regards the Union's audit arrangements, I am not going to repeat what I said in Luxembourg on 18 October 2007. I just want to stress that Parliament is very interested in the outcome of the ongoing peer review at the Court. I congratulate Mr Weber, and in particular Mr Engwirda, for having been able to start that exercise.
Jan Mulder
on behalf of the ALDE Group. - (NL) Mr President, I would like to start by thanking the Court of Auditors for its new system of reporting to the European Parliament. For years we have been asking whether the errors in the various chapters might not be quantified rather precisely. For years the Court said that it was not possible and now, happily, we see for the first time that the Court of Auditors too can change its mind; it now uses a 'traffic light' system of reporting - red, yellow and green. We welcome that very much and hope that in years to come the system will be refined further so that we can see where things have been improved. On the matter of improvements - Mr Kallas has made the point already - the Commission can of course be proud, because three years ago only 6% of expenditure was deemed to have been legal. Now the figure is 40% and the Commission came close to giving agriculture the green light. That is progress. The big question is, does the man in the street think enough progress has been made? Well, I can tell you, the answer is no. It beggars belief that the Statement of Assurance still is not positive after so many years, and it is a reason for great concern.
An even greater problem is the Structural Funds; 12% is of course far too high. It would be good if in future reports the Court of Auditors could explain exactly where this 12% comes from. From incorrect form-filling? Are these real errors? When I hear, out in the field, how hard it is to obtain money from the Structural Funds, I find it scarcely credible that the controls are not adequate, because more and more I am hearing people say 'someone else can have my share - it is far too complicated being involved with the Funds'. At least that is what I am hearing in some of the Dutch provinces.
Now as we start the discharge procedure for the Commission, I think what matters most is this: what has the Commission done in response to Parliament's earlier recommendations in its resolutions on discharge? Because does the Treaty not say that the Commission must take all appropriate steps to act on these discharge resolutions as far as possible? To my mind there are two things in them that need to be spelled out more clearly - not just in a resolution but in the Treaty too in the section on the multiannual budget, regarding the declarations by Member States. Other people have also made reference to this; two Parliament resolutions state that the commissioners must sign off the declarations submitted annually in whatever form by the directors-general. To Parliament this means that the responsibility lies not with the Commission as a collegiate body, but that commissioners are individually responsible for their budgets. I would be glad to hear more about this.
Lastly, the new Treaty says that the Commission and Member States are jointly responsible. In the light of these Member States' declarations it would be interesting to know how the Commission is preparing to implement the new Treaty now and in the future.
Bart Staes
on behalf of the Verts/ALE Group. - (NL) Mr President, Members of the Court of Auditors, Commissioner, ladies and gentlemen, in 2006 the European budget was about EUR 106 billion. Admittedly, that is only 1% of the gross national product of the 27 Member States, but it is still a tidy sum. It is money coughed up by you and me and all taxpayers and so it has to be subjected to proper scrutiny. That is one of the European Parliament's core responsibilities. Now for the thirteenth time in a row we see that the Court of Auditors refuses to guarantee the total legality and regularity of this expenditure.
Ladies and gentlemen, this is no minor occurrence. It is cause for some indignation. It is a serious warning to the Commission but also to the Member State governments that they need to do something. Karel Pinxten, the Belgian Member of the Court of Auditors, wrote about it in De Tijd and Echo de la Bourse, saying that if an internal or external auditor of a listed company with assets the size of the EU budget refused to sign off the accounts in this way it would send shockwaves through the financial markets. He is only too right, and we cannot just let this rest.
What are the sticking points? Agriculture, still the most important budget heading, at about EUR 50 billion. The improvement on that is unquestionable, thanks chiefly to operation of the Integrated Administration and Control System. But let us be clear on this, ladies and gentlemen, some Member States, notably Greece, are refusing to be part of the system. So this money is being managed by the Member State administrations and I think we should definitely show Greece the red card here. We should repeat our call for the payment of agricultural monies to Greece to be suspended until such time as Greece comes into line.
The second problem concerning agriculture is the payment - Mr Weber alluded to it and Mr Kallas picked up on it - of agriculture monies to golf clubs, railway companies, stud farms and landowners who are manifestly not real farmers and are pocketing money from the agriculture budget. And these are usually members of the aristocracy or royalty. There is a little game of 'oh yes it is, oh no it isn't' going on here: Mr Weber says it is true, Mr Kallas says it is not. The European Parliament's Committee on Budgetary Control held a hearing at which Mrs Fischer Boel, the Agriculture Commissioner, said that all this was an exaggeration and played down the whole thing. I would now like to hear Mr Kallas and Mr Weber giving us answers as to the truth of the matter. Can the Court of Auditors substantiate its claims? Does it stand by them?
The second large budget heading is still the Structural Funds. Twelve per cent of these monies ought not really to have been paid, according to the Court of Auditors' report. That is not good enough. We have to do something about that. Hence our call to Member States, to the Member State governments, Mr President, because part of the responsibility is theirs. 80% of the European funds is managed by them. So I repeat here the insistence of Parliament, of the plenary, that they must sign a declaration to the effect that European monies have been properly spent, and so fulfil their political responsibilities. Denmark, the Netherlands and the United Kingdom have done so. Where are the other Member State governments? Where is Belgium, France, Germany? Should they not also discharge their political responsibilities?
Esko Seppänen
on behalf of the GUE/NGL Group. - (FI) Mr President, Commissioner, once again it is that time of the year when the Court of Auditors gives a negative opinion on the legality and relevance of the previous year's expenditure. In the spring it will be time for Parliament to grant discharge in respect of the parties concerned, despite the negative report. At least that has been the practice in recent years, except for one year when there was an election.
I would like to draw your attention to Diagrams V and VI in the Annex to the Court of Auditors' report, which are for calculating Member States' net contributions. Member States' tariffs, including those charged on goods shipped to other Member States, have been included under traditional own resources. This gives a misleading picture of the actual net contribution made by some Member States, particularly the Netherlands and Belgium, especially when the unreasonably large 25% tariff commission is taken into account.
It is also hard to accept a method of calculation, which apparently originates with the Commission, which does not include administrative expenditure in the Union's expenditure in this context. The audit numbers purely and simply do not tell the whole truth on the use of resources, therefore: they also comprise political elements. It is a positive sign that the country which has not applied the monitoring and administration system for agricultural expenditure properly is mentioned by name, i.e. Greece. The examples of the misuse of agricultural payments the President of the Court of Auditors cited in his presentation speech need to be corrected. The problems were not just about golf clubs, Commissioner Kallas.
A good example of the positive influence the auditors' recommendations has had is the attention given to the remuneration paid to Members' assistants. The revised rules are plainly far too strict, but better that than permitting neglect.
(Applause)
Nils Lundgren
on behalf of the IND/DEM Group. - (SV) Mr President, so for the thirteenth year running the Court of Auditors has rejected the implementation of the EU budget. Why has that happened? Are the politicians, bureaucrats and citizens of the EU notorious fraudsters? Of course not! The problem is that the EU wants to regulate in detail what happens in a region with 23 countries and half a billion inhabitants. It is this that opens the door to fraud, abuse and error. The entire organisation needs to be reformed from the bottom up. There are two ways to go.
Firstly, we must move from perverse detailed regulation to systems in which poor Member States get aid without detailed stipulations on how it is to be used. Secondly, we must ensure that the guilty are identified. This in turn requires maximum transparency, that whistleblowers should be treated as heroes, not traitors, and that journalists should be welcome to scrutinise the EU's stewardship. None of these three requirements are in fact met. A relevant example is the fate of journalist Hans-Martin Tillack. He detected fraud in Eurostat but was himself charged with offences by OLAF. He lost his case in the Belgian court system and in the European Court of Justice, but now he has been cleared by the European Court of Human Rights. The EU's role in this sad story shows how far we have to go if we want to change its nature as a bureaucratic establishment. Is there the will to do that? I doubt it.
Hans-Peter Martin
(DE) Mr despotic President, the rule of law, democracy and control based on the principle of equality would be a bulwark against despotism, yet these are the very things that are lacking here.
This annual report from the European Court of Auditors may, however, be of some help and may yet put some things right. Once again I refer specifically to the facts which, under your responsibility, Mr Weber, have thankfully been placed on record at long last in points 10.9 to 10.12 inclusive. They are a slap on the wrist for the European Parliament. In that part of its report the Court observes that Parliament's control of Members' expenditure is extremely inadequate and sets out a catalogue of omissions. What are the practical implications? It means, Mr President, Mr Secretary-General of this House, that undesirable individuals are singled out, Mr Herbert Bösch, that a cowardly report is made to OLAF and then, after years of investigation, it emerges that there was nothing at all - no fraud, absolutely nothing. But here, where there really was something to be found - and you said yourself, Mr Weber, that only 22% of all expenditure was properly processed - nobody looked. And that is despotic behaviour.
People in this House, including the President and the Secretary-General, Mr Rømer, know that at least EUR 80 million in Members' expenditure is not covered by the proper supporting documentation. Why is that not investigated? Why are appropriate steps not taken? Why are various deadlines continually extended? The things that are happening here - and let me reiterate my thanks to the Court of Auditors for putting their finger on them - lead to a despotic system and to this body here that cannot seriously be described as a parliament. And then those who are responsible take to their heels. This cannot go on.
I make the following appeal to Parliament and to you in the Court of Auditors: please investigate these cases in detail and find a solution. It is a fact that a great deal of real fraud lies below the surface.
Herbert Bösch
(DE) Mr President, I have learned to put up with a lot from Mr Martin in this House, but I must protest against the description 'cowardly report'. I would be very grateful if the record could be put straight on this point, for I believe Mr Martin is the last one who has the right to make such accusations.
Alexander Stubb
Mr President, I was going to end my speech by saying that the discharge report provides a wonderful source for anti-European propaganda, but since that is what Mr Hans-Peter Martin has just said I will instead start by saying it, and that I am glad Mr Bösch intervened.
I would like to make three points. The first is a general point, which is to congratulate the Court of Auditors on its report. Since it is a better report than last year's report we should also congratulate the Commission. I like the system of traffic lights. For simple MEPs like myself it gives quite a good picture of what is going well and what is not going well. Nevertheless, we in the European Parliament, as always, have three possibilities. The first is to approve and give discharge to the Commission, the second is to delay, and the third is to reject. We must bear that in mind at the start of every debate.
My second point concerns the policies, and firstly the common agricultural policy (CAP). My congratulations on that. The only problem there seems to be with Greece, as many have noted. The golf course problem, as has already been said, is not really a problem. It has been over-exaggerated by the media. I am not saying this solely because I used to play for the Finnish national golf team, and have no direct vested interest!
The other area is structural policies, where there is an estimated 12% error. That can be improved upon. There are also the so-called 'RALs' or restes à liquider, which amount to EUR 130 billion. The Commission must work hard on that area.
My third and final point is that the discharge procedure provides an easy target for anti-EU propaganda, as we have just witnessed, and also that there is indeed some bad news in this report, which is that not everything is in order and that there is room for improvement. However, the good news is that there has already been improvement. We have reliable accounts and we have achieved improvements on the CAP. Also, the Commission should be congratulated for getting a green light on its administration.
I would therefore call for a critical, but constructive, debate on the discharge procedure with the distant hope of there being a positive DAS in 2009.
Dan Jørgensen   -
(DA) Mr President, I would also like to begin by thanking the Court of Auditors for an excellent report and a good presentation here today. It is clear that it is an incredibly useful instrument in our work to ensure that EU citizens' money is managed well and in a legitimate and appropriate manner. Unfortunately, the report's general conclusion is unsatisfactory. It is clear that when it has not been possible to provide a positive audit statement for 13 years in a row, there is cause for deep, deep criticism. Unfortunately, it indicates that there is no control over taxpayers' money, and unfortunately it indicates that here in Parliament, together with the Commission and the Member States, we have a major task ahead of us. We need to do things better. Things must be done better.
In the Committee on Budgetary Control the annual procedure is now underway - that is, we are consulting the relevant commissioners and thoroughly reviewing the documents that are now available to us. Only when we have completed this process will we be able to say to what extent we can give what is technically known as a 'discharge' - in other words, the extent to which we approve the accounts and the implementation of the budgets for 2006. There are some arguments in favour of doing this: there has been progress in some areas. However, unfortunately there are also some very, very serious criticisms, and consequently some very serious arguments against approving the accounts for 2006.
Allow me to begin with the positive aspects. Fortunately, it has been the case that in the agricultural sector things are going very well, as has been mentioned by other Members, and as both the Court of Auditors and Mr Kallas mentioned in their contributions. The system referred to as an 'integrated financial control system' has proved to be effective. It must be said that in the areas where it has been implemented there has been good financial control. We can look citizens in the eye and say that the money they have paid in taxes has been managed well and appropriately. In the case of Greece, where this system has not been implemented properly, I believe that the Commission has acted responsibly by saying that it will suspend payments. This is both good and positive. In the research sector too there is good reason to be positive. It is almost a textbook example. Over the last year, we have certainly highlighted some criticisms, which Commissioner Potočnik has subsequently taken into account, and naturally this is the way in which we will work. It is certainly a very good thing we are not here to be populist, as some members would like to be. We are not here to run errands for the EU's opponents; we are here to highlight the points that are worthy of criticism and come up with good and constructive proposals for solutions.
That said, there are huge problems relating to the Structural Funds. We have not been given an explanation of the 12% that you mentioned, Mr Kallas. It is possible that there is an explanation. We hope that there is. However, we have not received such an explanation. Unfortunately, we can also see that it is of course unsatisfactory that the control systems are being labelled as ineffective in all cases investigated by the Court of Auditors. In addition, we must say that there is also a lack of control in connection with foreign policy concerning the EUR 1 billion that is being used jointly with other institutions in international trust funds. In conclusion, I will say that there has to be some very clear answers. If we are to recommend discharge, there must be some very good explanations.
Helga Trüpel
(DE) Mr President, Commissioner Kallas, ladies and gentlemen, we Greens commend the work of the Court of Auditors. We need the information it provides, but we regret that many areas of activity have seen no improvement for years, because these findings bring the European Union into disrepute. We have no wish to be fobbed off any longer; what we want is efficiency at long last.
Mr Kallas cut a fairly conciliatory figure today, but when the content of the Court of Auditors' report became public, he called it too harsh and also attacked the Member States. That was not a wise move on the part of the Commission, for it bears political responsibility, and we expect the Commission to exercise that responsibility and to ensure that improvements finally materialise.
We Greens have serious doubts as to whether we can grant discharge for the 2006 budget, and what we have just heard may well have political consequences for certain Commissioners too. That is why we urge the Commission to change its budgetary practices and start making significant improvements.
Jeffrey Titford
Mr President, we have a baker's dozen! We have now reached 13 years of unapproved accounts. It is not new auditors that are required, but a new payments system. It never ceases to amaze me how many politicians in this House, and the one in Westminster, are prepared in good conscience not only to continue to tolerate the parlous state of the EU accounts, but to continue to increase the amount of taxpayers' money given to the EU. As usual, we get the same round of excuses for incompetence and turning a blind eye, the principal one being to put the blame on the Member States, but that just will not wash.
How can the European Commission hand over money to the Member States without seeing paperwork confirming how and where it is spent? I cannot imagine any other professional organisation allowing this to happen, and for so long. If Member States are not prepared to provide the necessary paperwork - i.e. receipts and cheques - then the financial tap should be turned off. In fact, the tap should be turned off at both ends. If the EU is not prepared to put its house in order, then the politicians at Westminster should stop pouring taxpayers' money into the EU bucket, which still seems to have more holes than a colander!
Jana Bobošíková
(CS) Ladies and gentlemen, we have already tolerated a highly alarming and unacceptable situation for 13 years. The Commission and the Member States manage taxpayers' money badly and illegally. The European Court of Auditors' Report clearly shows that the Commission and the Member States proceed negligently and are not thoroughly familiar with the rules of budgetary expenditure.
Now there are also suspicions of attempts to misuse money from the Union's budget. Completely contrary to Commission regulations and the laws of individual states, public tender procedures are not carried out, claims are made for payment of ineligible expenditure, recipients are unable to support the legitimacy of overheads or staff costs, while controls are also faltering.
Ladies and gentlemen, if the citizens whose money we are so shamelessly squandering managed their own firms and households like this, the European Union would be full of socially excluded, homeless people. Now I am asking the Commission and the Council to pull themselves together and start to regard taxpayers' money as if it were their own. This is the only way we can strengthen trust in the European integration process.
Gabriele Stauner
(DE) Mr President, Mr Weber, ladies and gentlemen, reports from audit offices are always interesting and important. That applies especially to Europe, for the prudent and efficient use of European funds is always the subject of particularly close public attention.
The report rightly focuses most sharply on the use of funds in the Member States. A great deal certainly remains to be done there with regard to the structural funds in particular. This, however, should not take our eyes off the expenditure practice of our own institutions, especially the Commission and the Council. It is in the realm of directly managed expenditure that there is most room for improvement on the part of the Commission. The Commission, in short, is not only the guardian of the treaties; it must also be a paragon of sound financial management. When I look at the shift in agricultural policy, beginning with subsidies and extending to the promotion of landscape conservation, I do wonder whether the aim here is perhaps to subsidise equestrian-sports clubs and golf clubs. Such an aim is out of tune with the real purpose of agricultural support.
Buildings policy continues to give the Court of Auditors plenty to think about, whether it be the extension to the seat of the European Court of Justice in Luxembourg or the Council and Parliament buildings in Brussels. The Court of Justice rightly pursues a consistent approach of exposing uncomfortable truths, particularly in cases where tendering procedures have been flawed or non-existent. It surely cannot be right that the Court of Justice has to foot the bill but is not involved in formulating the contract and putting it out to tender.
Let me take this opportunity in passing to remind the Commission of its answer to my written question of 2 August on this matter. It simply creates a bad general impression if the local authority of every little municipality in the EU has to issue an EU-wide call for tenders before it can award any contract worth more than EUR 200 000, whereas the European institutions themselves can casually dispense with tendering procedures for contracts worth millions. Our citizens cannot understand that.
I would also like to address the Economic and Social Committee and the Committee of the Regions, for each of them must also present the report we have requested. May I also ask the Council to ensure that increases in operational expenditure on the common foreign and security policy are not slipped in under the heading of administrative expenditure.
Paulo Casaca
(PT) Mr President, I would like to begin by congratulating the Court of Auditors, especially its president, Hubert Weber, who is coming to the end of his term of office and with whom we, the Socialists in the Committee on Budgetary Control, have enjoyed excellent cooperation. I want to thank him very much for his work and I especially want to highlight the work the Court has done on many specific issues, such as in helping to clarify European Union policy on export refunds.
I would like to say I am very concerned about the European Union external aid budget. A large proportion of the EUR 5 billion we spent in 2006, around EUR 1 billion, was spent by multilateral funds. In addition to this a lot of other funding was spent by certain international organisations funded by the European Commission - I would like to know on what basis and whether this was authorised, legitimate and transparent. Although we already asked for detailed figures and clarifications last year, the Commission continues to flout the Financial Regulation and has still not provided us with a report on how European money is being spent in many Middle Eastern countries.
At the same time, the European Commission refuses to listen to us when we say that the European Agency for Reconstruction has been an essential mechanism for ensuring the visibility of the European presence in the Western Balkans, ensuring European political leadership and ensuring sound and effective financial management. It now wants to close it down even though it is currently the only available instrument for carrying out work that we believe to be effective in situations that are anything but transparent. This is unacceptable and I would like to say, particularly to Vice-President Kallas, that he cannot simply turn his back on this, and that in the discharge procedure we are going to closely scrutinise everything in this budget, including all the organisations which are not using funds in a transparent way.
Sylwester Chruszcz
(PL) Mr President, the auditing and control of EU funds in the Member States is a basic requisite for efficient and transparent management of Community budget resources. The Commission's latest proposals are worrying, however, since they may seriously affect beneficiaries of EU funds. The Commission wishes to make the procedures stricter and impose penalties for tender irregularities, often without objective reasons.
I am referring to the document entitled 'Structural Funds: Guidelines on the principles, criteria and indicative scales to be applied by Commission departments in determining financial corrections'. The EU proposal for penalties is particularly threatening to local and regional authorities. We cannot have a situation in which, as Members have already pointed out, the EU funds golf courses in the 15 old Member States while elaborating a system of sanctions and penalties that hit the less developed European countries, including Poland.
Ingeborg Grässle
(DE) Mr President, President and members of the Court of Auditors, Commissioner, ladies and gentlemen, we wish to convey our sincere appreciation to the Court of Auditors for a better-compiled report, and we ask you to keep pursuing this path. We have not yet reached the bounds of the possible, for the more comprehensible your reports are, the more they help us and the more they help the Commission to act on all your findings. So please continue along these lines. We are very satisfied with what we have received so far.
We also congratulate the Commission. What has been achieved in the realm of agriculture is truly a milestone, and it shows that years of hard work do actually yield improvements.
Now we come to the structural funds. The fact is that we have to get things right in this area too and at least come close to the standard achieved in agriculture. We are prepared to engage in the necessary discussions. We are not seeking the impossible. That is why we speak of a tolerable risk. We are aware of the Commission's problems, but we are also aware that the only way for us to progress is by supporting the Commission. You therefore have the support of this Parliament and its Committee on Budgetary Control, Commissioner Kallas, for the structural-fund guidelines. We warmly encourage you to make tangible progress in this matter. We must move forward.
Sadly, we have no one from the Council to address. We shall, however, take the Council to task on the next best occasion. We cannot go on like this. We cannot meet here next year and draw the same conclusions. We have been making ourselves a laughing stock for long enough.
Lastly, a few words on the parliamentary budget: what the Members of Parliament expect of others, they naturally demand of themselves too. I wish to thank the Court of Auditors for enabling us to carry forward the parliamentary budget for 2006 as far as the Members' assistance allowance is concerned. In the meantime, the problem of supporting documents for the assistance allowance that was noted in 2006 has been regulated and resolved for all but six Members. That is a message, President Pöttering, that we must also convey to European taxpayers. We have an interest in resolving the old cases and shall do so together with the parliamentary administration. We shall find a solution, and the solution will be no different from what we expect of others.
Francesco Musotto
(IT) Mr President, ladies and gentlemen, I should first like to highlight the very positive attitude and valuable work of the Court of Auditors and in particular to draw attention to the figures which we have received as regards the 2006 annual report.
There is an improvement in the use of Community funds. This year, the Court has positively assessed the way in which 40% of funds have been spent, in comparison with 30% last year. The positive development of which we can be sure, even though funds are far from being fully used, is that progress is being made every year. Years ago the Court gave the green light to only 6% of total expenditure.
It is therefore interesting to note that most of the problems encountered are largely to do with irregularities rather than fraud. The most frequent types of errors are missing documents, failure to respect eligibility criteria, inaccurate declarations and failure to comply with procedures. Complying with the formalities is obviously a problem.
The new Financial Regulation is a step forward towards simpler and more transparent governance. Mandatory disclosure in respect of funds administered directly by national and regional authorities, which account for some 80% of the Community budget, is of particular importance.
Much remains to be done to streamline the formalities with a view to simplifying the provisions governing the release of funds. That would make it possible substantially to reduce irregularities, especially on the part of small beneficiaries, many of whom lack the facilities required to carry out the necessary procedures.
Lastly, a key point of the European financial control system continues to be the issue of recoveries. If recovery work is to be made easier, more detailed information and data need to be made available to the Court of Auditors, Parliament and the Commission and more binding legislative instruments, such as guarantee and performance bond systems, need to be introduced.
Although the results set out in the annual report of the Court of Auditors show some improvement, I would conclude by saying that simplifying procedures and improving cooperation by states during the control stage continue to be major challenges.
Richard James Ashworth
Mr President, firstly I want to thank Mr Weber and the Court of Auditors for the report they have produced this year, which I have read with great interest. I have often made the point that it is regrettable that the auditors do not adequately name and shame in the areas where improvement is urgently needed. If they were to do that, it would give the Members of this House the information they need to more accurately direct their efforts towards achieving a positive déclaration d'assurance, or 'DAS'.
Despite this, it is perfectly clear that by far the largest single issue to be tackled is the fact that 80% or more of the transactions of the European Union are carried out under joint management agreements within the Member States, and usually by agencies. By this I do not mean the fact that 80% are carried out by agencies, but the fact that those agencies have a distinct lack of accountability for the monies which they handle on behalf of the European Union. It is to the great credit of the Committee on Budgets and the Committee on Budgetary Control that they recognised this weakness and forced the inclusion of Article 44 of the Interinstitutional Agreement in 2006. That article, I would remind you, made it a requirement for the Member States to submit self-certification for the monies and transactions they have handled.
That was a positive step, but, to date, little, if any, real progress has been made towards meeting that goal. It is therefore reasonable to assume that, even if progress is made right now, it will be something like 2012 before we have any chance of achieving a positive DAS, making it 18 years that we have failed to get a positive DAS.
The Council and the Commission have to understand that this is not acceptable. They have to understand that this annual failure to achieve a positive DAS is extremely damaging to this House. The time is coming for the elected Members of this House to exert more pressure on both the Council and the Commission to attach greater urgency to this essential task. I, for one, have never voted for discharge of the accounts. I will continue to refuse to do so until I see more urgency being attached by both the Council and the Commission.
Hubert Weber
President of the Court of Auditors. - (DE) Mr President, allow me first of all to offer my sincere thanks for the many kind words that have been spoken about the Court of Auditors, its report and its presentation. I attach great importance to these comments, and I shall gladly pass them on in Luxembourg. I believe they will also be a very strong motivating factor for our staff. I was also pleased by the very frequent references to the new beneficiaries of the common agricultural policy. Nevertheless, I think I have the opportunity to put some things straight, as indeed Mr Staes directly asked me to do.
I must begin with a little background information. The single-payment system is essentially something that was welcomed from the outset by the Court of Auditors. It simplifies matters considerably, and we are seeing the effects of that. In conjunction with IACS, it has resulted in a sharp reduction in the frequency of errors. But whenever new rules are created, of course, there is always the possibility that they will not be observed. We should also look at this whole area and not focus exclusively on a single phenomenon, such as non-compliance with the ten-months rule and the resulting heavy financial losses.
We must also bear in mind, of course, that the rules have been formulated very broadly and that a great deal is left to the Member States' discretion. That has given rise to certain phenomena. To be sure, there are what have been termed the side-effects, which may have less serious financial implications but which have perhaps attracted more public attention. It must also be noted that the general concept of agricultural activity has been very broadly defined. It is sufficient today to manage an area of land in accordance with good agricultural and environmental practice. It is enough simply to mow the lawn and claim a subsidy. We seek to highlight that point in order to query it. We have a total of 700 cases, and so I cannot say at the present time whether all of these cases are legally relevant, for each of them will have to be examined on its merits. It goes without saying that, if the support received by a golf club also covered the area of the golf course itself, such a situation would certainly not be lawful. As I said, however, we must deal with these things on a case-by-case basis, and the Commission is invited to do likewise.
I also pointed out, however, that there were other effects to consider. The introduction of a dynamic model means that a redistribution will take place from land managers - farmers - to landlords. I am very pleased that we have also been called upon to comment on the implications of policies.
Siim Kallas
Vice-President of the Commission. - Mr President, I wish to thank the honourable Members for their comments. The main issue, which is that of better governance of the Structural Funds, will be discussed in detail during the hearings in the Committee on Budgetary Control on 18 December. These will be followed by extensive hearings concerning overall governance and internal control systems in January.
Thank you again for your comments. The Commission will be ready to answer all your questions in more detail during the hearings.
President
That concludes this item.
Written statements (Rule 142)
Mairead McGuinness  
in writing. - I welcome the European Court of Auditors' 2006 Annual Report as it identifies welcome improvements, particularly in relation to agricultural spending. Where errors are identified these mainly relate to weaknesses in internal control systems both in the Member States and in the Commission.
Positive developments in agriculture spending underlines the effectiveness of the integrated administrative and control system IACS and the simplification of claim and payment procedures in the newly introduced Single Payment Scheme.
For agriculture as a whole - €49.8 billion in 2006 - the Court found a marked reduction in the estimated overall level of error.
The Court notes that the Single Payment Scheme has side effects, such as the allocation of entitlements to landowners who never exercised previous agricultural activity, leading to a substantial redistribution of EU aid away from farmers to landlords.
I do not accept this broad statement - as in the single farm payment is paid to active producers NOT landowners.
For the court to say that golf clubs are getting the single farm payment is erroneous. If they are, they should not be, as the payments can only be made to active producers, who farm and keep land in good agricultural condition. Golf courses do not qualify
