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Amyas Morse, Comptroller and Auditor General, has qualified his audit opinion on the 2008-09 Consolidated Statement on the use of EU Funds in the UK.

This Statement, prepared by HM Treasury, consolidates the EU Funds accounted for by a number of individual government entities and gives an overview of the cost to the taxpayer of implementing EU schemes in the UK.  It reports confirmed financial corrections, or ‘disallowance penalties’, being imposed on the UK by the European Commission of £398 million and provisions for further corrections of £601 million.

According to yesterday’s report, where the European Commission determines that its scheme regulations have not been complied with, it may impose financial corrections on the UK.  In the year to the end of March 2009 and in the period prior to the Accounting Officer's signing the Consolidated Statement, £398 million of such corrections were confirmed.  The C&AG has concluded that this expenditure has not been applied to the purposes intended by Parliament because it represents a crystallised loss to UK funds. The bulk of these £398 million losses and the future provisions of £601 million arises from administering the EU’s Agricultural Schemes.

Yesterday’s report notes that significant progress has been made since 2006 in the preparation of this annual Consolidated Statement. Nonetheless, there are material issues at the core of producing the Statement that HM Treasury and the UK authorities have still to resolve before the annual Consolidated Statement can be seen as a true and fair report of the use of EU funds in the UK.

The C&AG has been unable to confirm that the debtors, creditors and related expenditure entries have been compiled on a consistent basis and are materially correct.  He has been unable to confirm the figures reported for Temporary UK Funding or Receipts from the EU.  In addition, he does not consider that the Rural Payments Agency accounted correctly for euro transactions in 2008-09.

Amyas Morse, head of the National Audit Office, said yesterday:

"Preparation of a Consolidated Statement on the use of EU Funds makes a lot of sense given the scale of the UK’s interaction with the EU, and of the payments and receipts involved. The full range of information necessary to allow a positive audit position is not yet available, so I have qualified my opinion on the Statement for 2008-09."

Notes for Editors

1. The annual UK Consolidated Statement is prepared by the government on a voluntary basis, to help detect weaknesses in controls and promote sound management in EU funds. The C&AG’s audit of the Statement is in response to a request by HM Treasury, which has overall responsibility for the preparation of the Statement.

2. Press notices and reports are available from the date of publication on the NAO website, which is at http://www.nao.org.uk/. Hard copies can be obtained from The Stationery Office on 0845 702 3474.

3. The Comptroller and Auditor General, Amyas Morse, is the head of the National Audit Office which employs some 900 staff. He and the NAO are totally independent of Government. He certifies the accounts of all Government departments and a wide range of other public sector bodies; and he has statutory authority to report to Parliament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources.

• Full report - Consolidated Statement on the Use of EU Funds in the UK for the year ended 31 March 2009