WIREDGOV

There has been a detectable improvement over recent years in the financial management of European funds across the European Union, the National Audit Office has reported. However, there remain seemingly intractable problems with reducing the high levels of error in some significant areas of EU spending.

For the second successive year, in November 2009 the European Court of Auditors provided a positive Statement of Assurance, without qualification, on the reliability of the European Union’s accounts. However, for the fifteenth successive year, the Court did not provide a positive Statement of Assurance on whether the underlying transactions conformed to applicable laws and regulations. Material error was found in categories making up some 53 per cent of total expenditure, including Cohesion Policy funds, which are still associated with the highest level of error in the EU budget, and Rural Development. The value of irregularities, including fraud, reported by Member States decreased by 24 per cent in 2008 while the number of cases reported increased by 9 per cent.

The NAO points out that, while controls can be tightened and administration improved, many of these high levels of error are in part down to the sheer complexity of administering the programmes in question. Some changes have been introduced for programmes in the 2007-2013 period, but it is too early to judge their impact.

Weaknesses in the administration of European programmes in the UK continue to have an impact on the taxpayer. During 2008-09, the Commission confirmed £140 million of disallowances of expenditure and UK departments have made provisions for some £350 million of further disallowances and reported the potential for liabilities beyond that.

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

"I welcome the signs of improvement in financial management of European funds across the EU but the persisting high levels of error are explained by the sheer complexity of these programmes. UK departments should press for programmes to be designed with clear measurable objectives and in such a way as to promote efficient administration.

"Weaknesses in the administration of European schemes in the UK, such as the Single Payment Scheme, continue to have an impact on the taxpayer. It is not acceptable that departmental mismanagement reduces the funding available from the European Union and places an additional burden on Exchequer funds. The Treasury should set targets for departments to reduce the level of financial corrections."

Notes for Editors 

1. This report to Parliament draws upon the results of the European Court of Auditors’ audit of the EU’s accounts for 2008; the results of the NAO’s own published work; and the extent to which various initiatives to improves financial management have been taken forward.
2. The European Court of Auditors is the external auditor of the European Community. The Court reports annually on its findings on the management of Community funds. It also provides an annual Statement of Assurance on the reliability of the Community’s accounts and the legality and regularity of the underlying transactions. The Court is made up of one member from each Member State.
3. EU expenditure in 2008 was some €116.5 billion, with €2.8 billion in net UK contributions.
4. The Annual Report of the Court of Auditors concerning the financial year 2008 was published in the Official Journal of the European Union in November 2009.
5. Press notices and reports are available from the date of publication on the NAO website, which is at www.nao.org.uk. Hard copies can be obtained from The Stationery Office on 0845 702 3474.
6. 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 - Financial management in the European Union