EU Commission indifferent on Court of Auditors’ recommendations

Janusz Lewandowski, Member of the European Commission in charge of Financial Programming and Budget, gave a press conference following the agreement reached on the EU budget for 2014. (EC Audiovisual Services, 12/11/2013).

Only a few days after the European Court of Auditors, the independent audit institution of the Union, said that EU money is spent with “little interest in the results achieved”, the Commission published its own assessment on the effectiveness of EU spending, alleging that the “EU budget (is) increasingly an investment tool”. The ECA is regularly auditing EU budget spending and publishes the relevant reports, but its recommendations rarely serve for corrections. The Commission is fortifying its policies behind the finding that EU budget money is spent by and large according to the letter of the law, but says nothing about the accusation, that “EU budget money is there to be spent not to create value”.

Debilitating auditing

During this month, ECA published two reports on the legality and the effectiveness of two of the largest spending chapters of EU budget, singling out inappropriate, ineligible and on many occasions illegal spending. One of the reports concerned spending on rural development, which is probably the second largest single budgetary item. The Court’s ruling was that “The European Union spent €100 billion on rural development projects (RDPs) during the seven year period 2007 – 2013 with “little interest in the results achieved””.

As for the cohesion funding, probably the largest spending line of EU budget, effectiveness seems to be of limited interest. Some time ago the European Sting writer Suzan A. Kane reported that, “Ovidiu Ispir, Member of the European Court of Auditors, gave yesterday a press conference following the publication of the ECA special report concluding, that only 11 of the 27 audited infrastructures projects co-financed by the Structural and Cohesion Funds in the 2000-06 programme period were effective”.

Pure ‘investment’

Despite all that criticism the European Commission issued yesterday a Press release, praising itself over the growth boost to EU economy resulting from EU budget spending. The relevant passage goes like that: “The 2012 Financial Report published today by the European Commission shows that 94% of the total €135.6bn of the EU 2012 budget was dedicated to beneficiaries across Europe such as researchers, students, small and medium enterprises, towns and regions and NGOs”.

With this statement the Commission wants to avoid the criticism that the Brussels bureaucracy has become very expensive for the European taxpayers. It subtracts from total spending the administrative expenditure (salaries, pensions, buildings…) amounting at 6% of the total EU budget. The remainder 94% is then swiftly termed as ‘investment’.

Unfortunately for the Commission some days earlier the ECA had audited the 2012 EU budget, amounting at €135.6bn as stated above. The results are not at all supportive of the Commission conclusions. The reason is that, expenditure in order to be termed as investment it has to create more value than its cost. Consequently every euro invested has to create an income stream for a number of years. This income doesn’t necessarily have to be directly pecuniary. It may contain measurable returns to the society as a whole, as for example is the case when an investment reduces road or rail transport costs, benefiting all users. This is more or less a definition of a socially effective investment, and this is exactly what the ECA contests about 2012 EU budget expenditure.

As if ECA doesn’t exist

At the beginning of this month, on 5 November, the Sting reported on the results of the ECA control of EU 2012 budget. It’s the same budgetary exercise the Commission considers as being 94% a European investment. Seemingly this is not at all the case. George Pepper, the Sting writer, observed that “The European Court of Auditors, the independent audit institution of the EU, today signed off the 2012 EU Budget, but it added a lot of asterisks and remarks over the Union’s payments for last year, singling out inappropriate, ineligible and illegal spending”.

After that the Commission’s allegation that 94% of EU 2012 budget spending was an ‘investment’ cannot stand. The EU’s executive arm should have been much more susceptible to criticism. The Commission should have at least mentioned the reserves of the ECA, concerning budget spending. It’s completely inappropriate to pretend that the ECA report on the same budgetary exercise never existed.

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