Presentation of the Court of Auditors' Annual Report - 2005 (debate) 
President
The next item is the Court of Auditors' Annual Report. I am delighted to welcome the President of the Court of Auditors, Mr Weber, to this House.
Hubert Weber
Madam President, Vice-President Kallas, honourable Members, ladies and gentlemen, I am delighted to have the opportunity today of participating in your debate on the 29th Annual Report of the Court of Auditors, for the 2005 financial year, at the plenary session of the European Parliament.
I presented this report to the Committee on Budgetary Control in Strasbourg on 23 October and to the Economic and Financial Affairs Council (Ecofin) in Brussels on 7 November. Each annual report from the Court is the culmination of complex and exhaustive audit work performed in situ by our auditors over the course of the preceding 12 months at all levels of the administration of EU resources.
In accordance with the principles of international auditing standards and as corroborated by external experts, the audit evidence of the Court is based on the exhaustive examination of samples of transactions from the individual budget areas and on assessments of the functioning of the internal control systems for expenditure. Only serious formal errors and errors with financial consequences, inflated expenditure claims, ineligible beneficiaries and expenditure form the basis of the Court's Statement of Assurance.
One of the Court's primary duties, and one that it has been required under the Treaty to carry out since its inception, is to perform cost-benefit analyses, the results of which the Court publishes in its special reports. In addition, the Court's assessments of the internal control systems, which are required for the annual Statement of Assurance, form an important basis for these cost-benefit analyses.
Allow me now to turn to the Court's key audit findings for 2005. In respect of those areas in which considerable improvements have been achieved, the Court duly recognises the Commission's success in managing and implementing the change from cash-based to accruals-based accounting. The Court has reached the conclusion that the consolidated annual accounts of the EU general budget for 2005, totalling EUR 105 billion, are reliable. I must qualify this audit opinion, however, in the light of the net overvaluation of assets and the inconsistent application of cut-off procedures.
As regards the legality and regularity of underlying transactions, the Court again provides an unqualified opinion on revenue, funds commitment, EU administrative expenditure and pre-accession strategy, excluding Sapard.
A positive view can also be taken of the Integrated Administrative and Control System (IACS), which covers 56% of expenditure within the framework of the common agricultural policy. As in 2004, the Court confirms that the IACS has, where properly implemented, successfully played its part in preventing irregular agricultural expenditure. In practice this is the case in the EU15, with the exception of Greece. In the new Member States, the implementation of IACS has progressed well, although these systems are not yet fully effective.
As the Court's detailed audit evidence shows, the remainder of the areas of expenditure, which accounts, in terms of value, for the majority of the EU budget, is still characterised by material errors of legality and regularity in the underlying transactions. In other words, the Court is once again unable to approve without qualification the expenditure areas, in particular, of agriculture (taken as a whole), structural measures and internal and external policies. This is the result of the high level of irregularities found, which include inflated expenditure claims, duplicated cost listings, ineligible beneficiaries and/or projects, claims for expenditure not actually incurred and breaches of the rules governing public tendering procedures.
These irregularities are able to occur because the current internal controls on EU expenditure are inadequate. According to the EC Treaty it is the responsibility of the Commission to ensure that the internal control systems are in place and work effectively in practice at all levels of EU administration. Not only has the Court found evidence of the inadequate performance of checks on payments under shared management, namely agricultural expenditure and structural measures, but it has also found that the Commission has failed to lead by example in respect of EU expenditure managed directly by it, that is to say internal and external policies. Thus, in the field of research, for instance, the Commission considerably reduced its checks on expenditure claims in 2005 despite the continuing high levels of error and the inherent risk in this type of expenditure.
The Commission argues that the errors found and reported by the Court are of little import since the various multi-annual correction mechanisms detect and correct errors and irregularities when the programmes are finalised.
The audit work of the Court shows that in practice these corrections are insufficient and that they are not directed towards the final beneficiaries in all areas. Furthermore, there are numerous shortcomings in recovery procedures. In the areas of shared management with Member States, for example, the Court's findings were as follows. As regards agricultural spending, the financial clearance procedures are much delayed - the last fully cleared financial year was 1998 - and, due to failures in the system, the conformity decisions imposed fines only on the authorities of Member States. Since, in most cases, excess amounts paid to the final beneficiaries are not recovered, the burden is borne by the national taxpayer rather than by those final beneficiaries who overclaim.
As regards structural measures, the 1994-1999 programmes have still not been completely closed and the Court finds that a number of the programmes that have been closed still exhibit substantial error levels. Moreover, the Commission closed a number of programmes without making financial corrections despite there being significant reservations in respect of the certified expenditure. This clearly highlights the risk that errors in intermediate payment claims may not be corrected in practice.
I would like to emphasise the fact that the Court, clearly, welcomes recoveries to the benefit of the EU budget. However, it must be pointed out that flat-rate financial corrections are made for weaknesses in the control systems of the Member States. As a consequence of this, these corrections do not, as a rule, lead to rectification of the errors of legality and regularity in the underlying transactions at the level of the final beneficiaries.
In the Court's opinion, there are a number of measures that should be taken to address these shortcomings. There needs to be a logical chain of effective internal controls based on unambiguous and appropriate rules and on common principles and standards, taking into account risk assessment of the nature of transactions and types of management. Effective recovery and sanction systems should likewise be applied in all areas of the EU budget.
For its part, the Court of Auditors is keen to explore more intensively areas of common interest with the national audit institutions. For the meeting of the Contact Committee of the Heads of the Supreme Audit Institutions in Warsaw next month, the Court has suggested extending current levels of cooperation to cover assessment of internal control systems in the Member States.
The European Union is facing renewed challenges in the shape of the rules of operation, the completion and closure of the current structural funds spending programmes and the opening of the 2007-2013 programmes, as well as the imminent accession of two new Member States. Allow me to conclude by setting out how EU financial management should approach these challenges.
The Commission, together with the authorities in the Member States, must ensure that there are efficient and reliable internal control systems across all levels of EU administration; that these systems, in turn, include sufficient checks which are properly carried out, reported and followed up; and that the systems in question are based on simplified regulations governing EU expenditure.
We should all be aiming for a European Union which has its budget under effective control for the benefit of its citizens. Thank you for your kind attention.
Siim Kallas
Vice-President of the Commission. (ET) Madam President, Mr Weber, ladies and gentlemen, I presented my initial position concerning the annual report to the Committee on Budgetary Control on 23 October. The committee is presently actively taking follow-up action and correcting the errors that have been identified. On the day after the Court of Auditors' Report was published, the committee sent a letter to the Member States, in which it asked them to present comments and clarifications concerning errors identified in the countries concerned, and eliminate those errors.
Thus we will take the conclusions of the Committee on Budgetary Control into consideration fully and promptly. Like you, however, the committee has also contemplated the political significance of the report after its publication. It is clear that the above-mentioned report is not yet a general positive statement of assurance.
As Mr Weber, the President of the Court of Auditors, said, the Court submits a statement of assurance concerning the 'legality and regularity' of expenditures, obligations, pre-accession strategy expenditure, administrative expenditures and common agricultural policy expenditures that are part of the Integrated Administration and Control System. The Court of Auditors does not, however, present a positive statement of assurance concerning other areas, for instance research programmes and structural funds. The main reason for this is that the Court of Auditors has found too many errors in the sampling of transactions in these areas. As Mr Weber stated, the cause for these errors is 'simple negligence or oversight, poor knowledge of the complex rules and presumably also fraud connected with the EU budget'.
I think that the criticism in the area of research programmes that was presented as a result of last year's control is, unfortunately, justified. The reduction of the number of auditors in this sensitive area by nearly half, and our recovery procedures should be more rapid and more forceful. It is true that we failed to notice many errors that the Court of Audits later detected.
I believe that in both this and other areas, the poor knowledge of complex rules is the main cause of errors. Frankly, I think the Commission has done too little too slowly to simplify and clarify the rules and guidelines. We are addressing these questions in the Action Plan and in proposals for the new programming period. We welcome the continued attention and advice from the Court on how to improve the situation.
I would also like to look at the topic of fraud. How much fraud is there in the performance of the European Union budget? Any suspicions of fraud will be investigated thoroughly by OLAF, as witnessed by the two cases recently reported in the media in connection with the Chernobyl project and the Office for Infrastructure and Logistics in Brussels. Yet is the entire European Union budget 'riddled with fraud', as some journalists write year after year?
Let me quote from the report on the management and auditing of EU funds published yesterday by the UK's House of Lords. The report finds that 'much of the coverage in the press suggests that there is a significant culture of corruption in Europe's institutions. Our investigation has uncovered no evidence to support this suggestion'.
Based on data from the Member States, the Commission possesses fraud estimates concerning two areas in which spending is greatest - agriculture and regional aid. These estimates show that 13-15% of notified irregularities are cases of suspected fraud, corresponding to 0.05% of the expenditures of agricultural funds and structural and cohesion funds. Last year the Commission wrote off EUR 90 million as irrecoverable financial losses, representing some 0.09% of the budget. Thus the rate of fraud is marginal. That does not, of course, mean that we should not seriously combat each specific case.
This also appears to be confirmed by the Court's audit work in 2005. Of all the information, audits and about nine hundred sampled transactions the Court looked at in 2005, in only four cases did the Court have cause to suspect fraud or serious violation of the rules and regulations and inform the European anti-fraud office (OLAF). After analysis, however, OLAF was unable to confirm any of the fraud cases of which it had been informed. However, the Court traditionally has once again provided useful data that is useful to OLAF in its operational work.
Mr Weber, Madam President, now that these comments on our weaknesses, the need for simplification and the level of fraud have been presented, I presume the discharge authority would also like to assess the impact of the errors on the 'price-quality relationship'.
The Court of Auditors' report (page 138) reveals that the Court audited 95 projects funded from structural funds, and found significant errors in 60 of them. Does this mean that two thirds of structural funds has been lost or wasted? Does this mean that the objectives of these projects have not been achieved? It clearly does not. Some ground-breaking research may have been done without all the necessary paperwork, and conversely, one can find projects that were brilliantly executed in terms of the formal rules, and all the paperwork was done, but the objectives were not achieved.
Unfortunately the report gives no information on the true impact of the Community funding. Thus one wonders what conclusions Parliament and the ordinary citizen in Member States can draw based on the Court's overview of the errors in structural policies.
The Court often states that it is only a messenger, and that the Treaty obliges the Court to give a statement of assurance on the whole budget each year. It does this through its samples of transactions and other audits. It tests compliance with the rules. This work, the Court does professionally, within the limits of its human resources.
Who, though, then evaluates the impact of these errors on the achievement of policy objectives? On what basis should Parliament make such evaluations? After all, together with Council, you are the budgetary authority and have the final word on future budget allocations. The Court's report should offer you a basis for evaluating the effectiveness of budgets approved in the past.
In this perspective, I think one should invite the Court to evaluate how significant an impact the errors have had. We know the Court has the expertise to do this. It does this kind of 'price-quality' evaluation in special reports, which we highly appreciate. So why is such analysis absent from the annual report?
For the Commission, sound financial management means reaching policy objectives in an efficient way and at a reasonable cost. It necessarily takes a multi-annual view of each aid programme, and ensures that the expenditure on control over the programme is in balance with the costs and benefits.
The Commission is well aware that few university professors who apply for funding for research programmes are qualified accountants, and it knows that some will make mistakes in their applications for EU funding. Should the funding of research stop for this reason? Absolutely not. We reduce the scope for error, but live with what remains. In terms of choices, there is clearly something missing between a negative DAS and a positive discharge.
The Treaty - Article 248.2 of the Treaty on the European Communities - requires the Court to assess the soundness of financial management. Could it not also assess whether, in a given year, the Commission has indeed taken the steps necessary to ensure value for money? This would not simplify the Commission's task, but it would give us all a clearer point of view!
You may think this sounds too radical. Perhaps it is, but the UK House of Lords goes even further in a very serious report published yesterday. The House says that 'substantial improvements are needed to the methodology underpinning the Statement of Assurance' and proposes, among other things: that the Court 'should distinguish clearly between irregularity and fraud, publishing separate figures for the level of fraudulent transactions and administrative mistakes'; that 'the Statement of Assurance should focus on giving a detailed summary of financial management in each of the spending categories and Member States' listing those Member States demonstrating poor management of European funds'. The Commission will carefully study this interesting report.
Allow me also to touch on the issue of recoveries, or 'clawbacks'. In this year's DAS statement, the Court appears to cast doubt on the relevance of clawbacks for the DAS, arguing that recoveries do not right wrongs, nor do they dissuade the final beneficiary from making errors.
This Commission thinks this does not fairly represent the actual situation. Every year, very significant amounts are clawed back by the Commission from Member States and by Member States from the final beneficiaries. This system contributes to the effective protection of the Union's financial interests. It has a preventive effect, by giving Member States an incentive to improve their management and control systems, to prevent, detect and recover irregular payments to final beneficiaries.
We - actually the Member States - should receive the credit for that, and it should affect the DAS declaration as well. I would like, Madam President, to continue on a more positive note. The Commission has established working relations with many national audit offices and found a positive attitude towards auditing EU funds in shared management. I am very encouraged by the announcement made by President Weber that the Court is intending to propose joint audits with these national audit offices, starting with the areas of Structural Funds and financial corrections performed in Member States.
Indeed, we could much more effectively convince Member States to take more responsibility for spending from EU budget, if the Court were willing to work with - and eventually use - the results of audits produced at the national level.
I would like to end with a comment on some of the good news in the Court's report. Its President, Mr Weber, has pointed out that 'the Commission successfully implemented the new accounting system with notable rapidity, and it now offers additional key information that is significantly more complete than that provided through the previous cash-based system'. We are proud of this achievement.
To sum up: the DAS is once again negative. The Commission regrets this. It will correct the errors made and take further actions to correct systemic weaknesses, as announced in the Action Plan for an Integrated Internal Control Framework. In acknowledging that there is still much work to be done, the Commission also notes that important progress is made every year and that the overall management of EU funds is sound. It is under control, but there is further scope for simplification of complex rules. Together with my colleagues, I look forward to the more detailed sectoral discussions in the discharge hearings ahead.
Finally, the Commission would like to re-emphasise that there is a missing link between the list of errors reported by the Court and the discharge procedure. The Commission would welcome an audit approach which also looks at effectiveness or 'value for money'. We believe this would assist the discharge authority in carrying out its important task.
Thank you for your attention.
Salvador Garriga Polledo
on behalf of the PPE-DE Group. - (ES) Madam President, President Weber, Commissioner, this year we are once again being presented with the report by the Court of Auditors on the management of the Community budget and, this year once again, the European Parliament will pay the greatest possible attention to it, since it represents the most credible and reliable reflection of the state of the European public accounts. As the Commissioner responsible for Agriculture, Mrs Fischer Boel, said yesterday, we are genuinely going to subject the Union's finances to a proper health check.
I do not intend to demand that the institutions take responsibilities that go beyond their particular competences. The Court of Auditors plays its role, often with little cooperation from the Member States and their national control institutions. I hope that Mr Weber will achieve in Warsaw what we have not been able to achieve over all these years.
Despite its defects, the European Commission does an extraordinary job, an extremely difficult job, given its lack of resources and the huge quantity of work. We do not therefore want this report to become an object of controversy, but rather a genuine instrument for improving public accounts.
The Council and the Member States also have their own responsibility, since, with the current institutional architecture, it is difficult to go any further with financial control of the budget and the execution of spending. Previous speakers have already said it: 80% is spent in the Member States but we do not even get the Finance Ministers in those Member States to declare the reliability of spending.
There still remains much to be done, therefore. Amongst other things, I intend to use 'value for money' as a basis for the cost-benefit analysis. The guiding principle of our report will be good financial management. We shall attach great importance to management, both shared management and direct management and decentralised management, and to the recovery of funds.
Finally, Madam President, we would like to see a new approach to the statement of assurance, but we shall talk about that over the coming months.
Dan Jørgensen
on behalf of the PSE Group. - (DA) Madam President, those of us in the Socialist Group in the European Parliament too are, of course, unhappy about the fact that it is now getting on for many years in a row that the Court of Auditors has not been able wholeheartedly to approve the EU accounts and to give a positive statement of assurance as to their reliability. We should like to begin by, of course, emphasising this but, at the same time, also saying that, although there are many points of criticism, we are working in a balanced, progressive and proactive way with a view, of course, to solving the problems. It is not only a question of criticising. It is, first and foremost, about discovering what specific type of problems we are facing and how we can solve them.
We think there is good reason to commend the Court of Auditors on its detailed report. We in the Socialist Group have on many occasions asked for further details. We have sought a higher degree of differentiation in relation to the various types of error. This has been provided, but the situation is still not good enough. We might have wished, for example, for more of a distinction to have been made between what is, factually speaking, fraud and what are, factually speaking, errors.
Praise is due to the Commission for introducing a new accounting system: the integrated financial control system for agricultural expenditure. There are quite a few areas in which progress has been made, but there are, of course, also grounds for criticism, especially in relation to internal policies, where the Court of Auditors' report shows that things have in fact deteriorated since last year. We shall, of course, use the discharge procedure to look more closely at these matters, to demand some answers and, presumably, also to look ahead and come up with some better proposed solutions. We in the Socialist Group earnestly call on Commissioner Kallas and the Court of Auditors to continue their cooperation with a view to solving these problems in the best way possible.
Jan Mulder
on behalf of the ALDE Group. - (NL) Madam President, this debate is one we have been having for many years, with a number of recurring themes. Yet again, there is no Statement of Assurance, much to the discontent of everyone who is well disposed towards European cooperation, and yet again, it is not entirely clear why this should be.
Every year, we ask the Court of Auditors for more detailed information and every year, we are faced with those typical phrases in the report, of which I should like to quote you a few: 'The Court of Auditors has concluded that generally, where CAP spending is concerned, mistakes of material interest still occur'. With regard to the structural funds: 'For both programme periods (1994-1999 and 2000-2006), the Court of Auditors has concluded that spending was not free from irregularities of material interest'. Indeed, we have been asking for high-risk and low-risk budget components for years. Is it not possible for the Court of Auditors to be a little more precise and, among other things, to specify what error percentages would be acceptable? This would allow us to measure any improvements that are made.
I get the impression that the Commission is becoming a little more assertive, and I see that as totally justified. It is not only a matter of bookkeeping, but also a matter of effectiveness. It is unfortunate for this Parliament that neither the President of the Court of Auditors, nor Commissioner Kallas have spoken one word about the new financial perspectives. This is new. We would ask that someone who carries political responsibility at a certain level would issue a statement of assurance annually. For Parliament, the question is essentially: How does the Commission intend to do this? It is unfortunate that the Commission has given no indication of this, and that the Court of Auditors, for that matter, has not mentioned it either. Since it forms part of the multi-annual budget, it is up to the Member States and the Commission to implement it.
Bart Staes
on behalf of the Verts/ALE Group. - (NL) Madam President, Mr Weber, Commissioner Kallas, I am, above all, grateful to the Court of Auditors for the report, which I regard as a sound one. I also think that the standard of its editing is continuing to improve. The report has been written in clear language and, above all, has recourse to 'naming and shaming', something I appreciate enormously. We are facing a special discharge, because this is the first budget year for the whole of which, the enlarged Union has had 25 Member States, and that falls entirely within the current Commission's remit.
In that sense, I have to say that I am a little surprised, even shocked, about the rather defensive speech Commissioner Kallas gave here today - shocked, because when he came into office, he was the very man who stated on this platform that, during his tenure, we would at last see a positive Statement of Assurance being issued. What do we see now, though? The Court of Auditors' criticism of key components of the budget remains unchallenged, and Mr Kallas goes into the defence with a report, which I read last night, and which is actually worth reading, from the House of Lords. This is not, of course, the right way of going about things.
Having read the Court of Auditors' report, I can tell Commissioner Kallas that it contains very specific elements. For example, the integrated management and control system for agriculture works perfectly for those Member States that apply it. Greece does not. This was already mentioned in last year's report by the Court of Auditors and was an important component in Mr Mulder's discharge last year. What have you done about this since then? What have you done to call Greece to account? According to the same report by the Court of Auditors, there are serious problems involving export refunds. In Denmark and the Netherlands, exporters can simply seal their lorries without customs officers having to be present. What have you done to counter this? These are, after all, specific questions, and there is no need to adopt a defensive stance.
I have two specific questions for Mr Weber. The first question is: On 7 November, when you addressed the Economic and Financial Affairs Council, did you finally make it clear to the Ministers that it is vital for them to sign off their accounts? Secondly, will you entertain the request made by the House of Lords that a black list should finally be drawn up of Member States that do not manage European funds very well? I should like to have an answer to both those questions, Mr Weber.
Kartika Tamara Liotard
on behalf of the GUE/NGL Group. - (NL) Today, Parliament has the pleasure of discussing the enlightening report by the European Court of Auditors about the spending of European funds in 2005. Once again, the auditors are not impressed. There are still too many errors that are too substantial and too structural in the way in which European funds are spent. In that sense, this report is not very different from its eleven predecessors. What is different, though, is the reaction to the Court of Auditors' negative verdict.
European institutions, the Commission among them, would formerly indulge in regular sessions of mea culpa and promises of improvement. This time round, the Commission has mounted a full-on offensive, and the Court of Auditors is being accused of being overly critical and having produced an ambiguous report. They even claim that we must learn to live with some mistakes.
It is a fact, however, that Europe is the proud owner of 200 000 virtual cows that receive subsidies even though they do not exist. It is a fact that major errors have once again been flagged in the areas of olive oil, the export subsidies and the structural funds. It is a fact that, as a result, funds do not end up where they are most needed. Also, it is a fact that, as a result, the European public is increasingly losing faith in the Union. A grown-up institution should be able to use criticism to its advantage. The European institutions are demonstrating that they, even at the age of 50, have not yet reached this level of maturity.
Nils Lundgren
on behalf of the IND/DEM Group. - (SV) Madam President, all of us in this House are saying that the Court of Auditors has produced a good report - it is informative and clearer than it usually is. What does the report tell us? Well, it tells us that anomalies are continuing to occur just as much as before, and we have to ask ourselves whether we are to continue living with such anomalies. What we have here is, of course, an entirely unreasonable approach to the problems. What is needed is an examination of how and why things have got into this state and clear proposals from the Commission concerning what is to be done. Any examination of this nature would necessarily lead one to observe that most of what goes wrong has to do with the agricultural policy. There are, besides this, very many other reasons to change the agricultural policy, in fact to do away with it all together. If that happened, a very large proportion of the problems that we see in this context would simply disappear.
I would nonetheless still like to remind the House that it bears a very great part of the blame for the EU losing its good reputation among the peoples of Europe. This House always votes to back everyone up but in practice never insists on responsibility. It was pathetic to see the leaders of the Socialist Group in the European Parliament and the Group of the European People's Party (Christian Democrats) and European Democrats standing here in Parliament, practically in tears, telling us that they felt compelled to postpone the granting of discharge to Parliament itself as a result of the scandal relating to the buildings here in Strasbourg. Despite the fact that I pointed out that discharge should not be granted to the Committee of the Regions, it was granted anyway. We cannot go on like this.
Ashley Mote
Madam President, the Court of Auditors has confirmed there is no independent audit of any part of these accounts, including the treasury function, which sometimes sits on a pile of EUR 20 billion or more. I would like the Court to explain precisely how many years it has carried out a full and specific audit of the treasury function, and would also like confirmation as to how frequently, such as once annually, it might undertake such a task in the future.
The Court has also confirmed that EU funds are held in the individual Member States before being allocated for use there. The cash flow and interest-bearing consequences of that are important and hitherto unknown. Net contributors like the UK and Germany are at a disadvantage, because a large proportion of their funds are stored in recipient countries. The French, on the other hand, are always holding the funds of net contributors and routinely earning interest on the overnight money markets. How much money has been lost to British and German taxpayers through the use of this system?
Finally, I should point out that I have been asking Mr Weber these questions for over six months, and still await a reply.
Daniel Caspary
(DE) Madam President, ladies and gentlemen, as well as for the control of the Commission's budget, this House is responsible for monitoring the budgets of what are termed the 'other' institutions, and if they are to be given a positive discharge, it must be clear that they have used European taxpayers' money properly. It is at this point that we have a number of things to discuss.
If we take our monitoring role seriously, we also have to audit those items of expenditure that we formerly disregarded, for example, the Council's common foreign and security policy - and I regret that the Council is not present today to hear me say this, for it is in close cooperation with the Chairman of the Committee on Foreign Affairs, Mr Brok, that I am, quite deliberately, making reference to this policy area today and making a demand for transparent cooperation on the part of the Council.
There will be several issues in relation to the Committee of the Regions in which closer examination will be required; the ones I would give as examples are the failure to implement the internal auditor's recommendations and the questionable use of the weighting, not to mention the wholly inadequate consideration of this topic by the committee itself.
The buildings policies of the Committee of the Regions, the European Economic and Social Committee and of the Court of Justice raise issues that also have to be addressed, and there are many other matters to be sorted out.
OLAF, our anti-fraud office, has also exercised an effective monitoring role with respect to the institutions over recent years, and I wonder why it is that neither the Ombudsman nor the Data Protection Supervisor have as yet concluded an agreement with it. These bodies, too, will have to answer that question.
I call on all the interested parties to answer the questions in a transparent manner, to play their part in enabling this House to get an all-round picture and to work together in devising ways of improving things. Only if this is done will we be able to give discharge for 2005.
Szabolcs Fazakas
(HU) Madam President, the report by the European Court of Auditors, which, as in previous years, is the result of very thorough, high-quality work, states that the expenditure of the European budget has been carried out essentially with legality and regularity. I wish to emphasise the significance of this statement because once again this year, as in the past 12 years, the Court is unable to give an unqualified positive opinion.
The reason for this is that some 80% of the European Union's budget is spent under the system of joint responsibility by the Member States, where the Court of Auditors has, in the course of its very thorough inspections, found fairly high levels of error that have a financial impact. This does not in any way mean that all expenditures of the Union's budget are burdened with error, nor can these errors be interpreted as indications of fraud.
In its initial reaction, the European Commission objects to the methodology of the Court of Auditors, but continues to set as its goal a positive DAS by 2009. To this end, it has launched a process of reform, within the framework of which it has developed an integrated internal control system; the introduction of a goal-oriented budget management can also be counted as a significant step forward. Now that the Member States have recognised, at the behest of the European Parliament, that the declarations they are being asked to provide are necessary, we can look forward to a very successful Court of Auditors.
Jeffrey Titford
Madam President, I am tempted to ask you simply to read the speech I made last year. The comments from the President of the Court of Auditors sum it up very neatly. Overall, the situation has not substantially changed since last year. In fact, the Court's press statement makes it abundantly clear that nothing has changed, with comments like 'due to continue in high levels of error' and the pièce de résistance, 'errors with a financial impact are found too frequently for the Court to conclude that all is well'. The only real difference this year is that the Commission has been more strident in denying its responsibility for the mess. I must thank Commissioner Kallas for providing me with the rib-tickler of the year, when he said that the perception of fraud in the EU finances is 'highly unfair' and that the spending of money in the EU is under tight control. Yes, and Santa Claus really does come down the chimney!
Blaming the nation states for most of the fraud is an easy way out. The Commission is supposed to enforce the rules and oversee spending. Therefore it must take the blame for all those invisible cows in Slovenia, a country that has only been a member for two years but has quickly learnt to play the system. Nothing has been learnt and the mistakes go on being repeated.
José Javier Pomés Ruiz
(ES) Madam President, as the Court of Auditors' report says, we have made progress in many areas. I would like to thank it for its report. But there is one area in which we have not made any progress: in pointing to Member States individually. We are a group of twenty-five and we cannot just give one mark for the whole of the class
The 300 pages of its report contain references to Greece, but you have never said which Member States are mainly responsible for our not achieving the target or - if you do not just want to be hatchet men - which Member States are doing well or are greatly improving.
Other institutions do it: the European Central Bank points to individual Member States by name. You are not an assembly of diplomats defending national interests. In your press communiqués, you must point out, amongst other things, which States are doing things well and which are not.
The Finnish Presidency is not even represented here, but on the basis of the report by the House of Lords, a report for which we have great respect, I am going to ask, on behalf of the group that I coordinate, the Group of the European People's Party (Christian Democrats) and European Democrats, for an initiative report to look into the Court of Auditors' methodology.
I well remember how one of its members, the Belgian member, Mr Pinxten, took his post without giving up any of his economic or political responsibilities. In the end, when he was threatened with being brought before the courts, he had to leave by the back door. That shameful episode was not unfortunately the finest hour of the Court of which you are the worthy President.
I would like to say one thing to Vice-President Kallas. In your speech to the Committee on Budgetary Control on the 23rd, you said that 2 100 million had been recovered. You criticised the auditor harshly - I do not know whether that is the best you could do - but I would like you to specify, if possible, which policies, programmes and Member States that 2 100 million recovered relates to.
Herbert Bösch
(DE) Madam President, I want to congratulate the Court of Auditors on a good report, which holds up a mirror to quite a few things; the only thing is that certain people do not want to look at it.
I have to tell Commissioner Kallas that it is not acceptable that the new Commission, acting on the 'shoot the messenger' principle, should close its ears to the bad news from Luxembourg. If we re-read the treaties, we will find that they state that the Commission - and nobody else - is responsible for the implementation of the European budget.
Yet I, Commissioner Kallas, read everywhere references to things for which you are not responsible, for the agencies, as you yourself say - and we will have more to say about that - or, for example, for Greece's failure to implement an integrated administration and control system (IACS); everywhere, the Commission is disappearing from the scene, and that is something that - since we have to deal with the new Commission for the first time - we will have to have serious discussions about. Commissioner Kallas, you must start taking on responsibility, or else you are in the wrong job.
Hubert Weber
Madam President, I would like to start by expressing my thanks to the Members of your House who have had some very friendly things to say about our report, in particular to Mr Staes, Mr Lundgren, Mr Pomés Ruiz and Mr Bösch.
If I may come back to Vice-President Kallas, he has lamented the constant focus in the media on the subject of fraud. I can assure you that, together with the many of your Members who have spoken today - among them Mr Jørgensen, Mr Fazakas and Mr Titford - we are giving the Commission our wholehearted backing. It is not acceptable that the same old tune - 'fraud, fraud, and more fraud' - should be playing all the time; it is unjustified, it is damaging, and it is something we can do without. We do have rules.
Let me now return to the second aspect, that being the recommendation from the British House of Lords, on which Mr Kallas believes we should act. We have a system. Our report cannot confirm that fraud has been committed; that is for judges, rather than the Court of Auditors, to determine. We will, though, look carefully at the report from the House of Lords, which reached us only around yesterday lunchtime. I myself had a hand in an agreement we reached with the Commission, according to which, if we suspect that fraud is in play, the matter is passed on to OLAF. As I have already said, the procedures are subject to rules.
I can wholeheartedly endorse what Mr Garriga Polledo said; collaboration with our sister authorities is vitally important, and we will take with us to Warsaw your best wishes, for which we are grateful.
Mr Mulder asked why it is that the accounts have once more not been approved without qualification, and the answer to that is quite straightforward. It is that the transactions to which the accounts refer are still, to a large degree, not subject to appropriate risk management. Only as and when they are will it be possible to give a positive Statement of Assurance. Here, too, though, the incidence of errors would only result in the media once more putting the spotlight on fraud.
I am much obliged to Mr Staes for pointing out that a positive Statement of Assurance would be one result of improvements in the internal auditing systems, and for citing a number of examples; I can do no other than endorse what he said. I expressed myself very forthrightly before Ecofin, and the British House of Lords has highlighted a number of problems, among them countersignature and the blacklist. We received their report yesterday and must first examine it very closely.
I will respond to Mr Mote's comments by saying our concern today is with the Statement of Assurance, although the great importance of the matters to which he alluded is not in doubt, and I am quite happy to continue with him the dialogue on which we have already embarked.
I have now answered, in essence, most of the questions put to me.
Siim Kallas
Vice-President of the Commission. Madam President, I should like to thank all the Members for their remarks. This is just part of the process, and next week will see the start of more detailed hearings on the implementation of our budget.
In response to some of the remarks, I would like to say that the Commission is not pointing the finger at anyone. It is seeking to achieve an accurate picture enabling adequate, balanced evaluation of the implementation of the European budget. We are fully responsible for everything we do, and we are willing to bear that responsibility.
However, it would be unrealistic to expect, in response to an analysis of the implementation of the European budget the thrust of which is that the Commission is bad, for the Commission to say that it is not bad, but even worse. That would be inappropriate, although we fully recognise our weak points. Internal policy issues will be the most vulnerable area of our 2005 activities. During the three budgetary discharge processes in which I have been involved, I have seen real improvements and I know what can be done to improve the situation further. We will do our utmost to improve that situation, and are looking for comprehensive, adequate professional evaluation of the implementation of the EU budget in all its aspects, be this its achievements or weaknesses, errors or fraud, etc. It is our aim and desire to show everybody that although the machinery is huge and could be improved, things are not bad at all. Being familiar with the experiences of Member States in the sphere of public administration, and knowing what happens in different Member States and in other international organisations, I can state that things are indeed not bad at all. It is our desire for the general public, Members of Parliament and the Court of Auditors to also see this side of our activities.
Concerning Mr Mulder's question on the financial perspective and the idea of increased participation by Member States in this process - the question of national declarations - I welcome the change in stance. When we started discussing this issue, only one or two Member States shared the attitude that Member States could take more responsibility. That attitude is changing but, as I know from my limited experience in European affairs, this will obviously take time. We are pleased that the Member States have agreed to provide a summary of the declarations of paying agencies, which is a step forward, and we are working with the Member States to take things further.
Regarding the declaration itself, I fully share the opinion of the Court of Auditors that this will not solve everything per se. It is part of the much broader issue of systemic and structural control and audit, which should bring the expected results.
Let us therefore discuss every aspect and not omit anything from the scope of our discussions. Let us also discuss the question of methodology and our actions and weaknesses. Let us hold a comprehensive, professional and adequate discussion on this issue, and then we will all be happy.
Ashley Mote
Madam President, I was interrupted in the middle of my speech because apparently you were not correctly informed of the amount of time available to me. I was unable, therefore, to make what I believe is a very important point and draw to the attention of this House other words that are included in the House of Lords' report published last night, which say - and Mr Kallas omitted to mention them - that the Commission should focus on requiring officials and existing audit bodies to take responsibility for their systems and accounts, and that this process should culminate in the requirement for the Secretary-General of the Commission to sign an assurance that the Commission's annual accounts are true and fair. That seems to me to be one of the most important statements we have yet had on the process of improving standards in this House, and I wish to make sure it is fully understood.
President
You were speaking on behalf of your group, which was given one minute's speaking time in this debate, and so it follows that I interrupted you at the right moment, and it is not right and proper that you should now, as it were, be using points of order to secure yourself even more speaking time.
Jan Mulder
Madam President, I would just like to ask Commissioner Kallas something for clarification. He was a little ambiguous in his answer to my question, so I would just like to ask him again: when will the Commission remind Member States about the obligations in respect of the financial perspective?
Siim Kallas
Vice-President of the Commission. Madam President, we already reminded Member States of this obligation in our letter to them and we will also do so during the Council meeting when these issues are discussed again. We are trying to promote the idea and do whatever we can, but, just as in the case of Parliament, there is a limit to what we can do in this matter.
President
The debate is closed.
Written statements (Rule 142)
Richard Corbett
EU spending shares the weakness common to many large organisations, governments, ministries and international organisations: money is spent over such a range of activities and in so many places that the auditors cannot guarantee that the exact amounts were always spent correctly. The US federal budget has not had a positive statement of assurance for about eight years. Britain's Department for Work and Pensions has not had its equivalent statement for the last 15 years - and its budget is larger than that of the whole EU!
As the UK's House of Lords reported yesterday, there appears to be relatively little actual fraud on the EU budget. The auditors have rather found cases of technical irregularities, which normally result in a refund to the EU budget anyway, or a late payment, or incomplete paperwork which gets chased up later. Sensationalist press articles then classify all these as 'fraud', which they are not.
Further progress in eliminating such errors is needed. I would like to see a system where the annual statements of assurance had to be given to the Commission departments and each of the 25 national governments individually, rather than in one single statement for the whole EU.
Véronique Mathieu
(FR) In its annual report, the Court of Auditors gives a positive statement of assurance on the EU 2005 accounts and congratulates the Commission on putting in place the new accounting system for the fiscal year. However, as regards the legality and regularity of underlying operations - that is to say, payments to and from the EU coffers - the Court notes that adapted risk management is not always guaranteed when it comes to important areas of expenditure.
Most of these mistakes are the result of ignorance of the applicable rules, ineligible expenses or attempted fraud on the part of end beneficiaries (farmers, local authorities or project managers).
Who is to blame for this? Firstly, the Commission, which, according to the Treaties, is directly responsible for the implementation of the European budget. It has to strengthen the quality of internal control, and procedures must be simplified to prevent non-compliance with eligibility criteria, the double charging of costs and the overstatement of costs. Lastly, the Member States must also assume their responsibilities, given that 76% of the funds are spent by national or local administrations. It is in my view of paramount importance that the Member States undertake to submit their annual statements on how the EU funds that they manage are spent.
