Court of Auditors: EU spending infested with errors well above the materiality threshold of 2%

Working lunch between Members of the European Court of Auditors and Members of the European Commission. Handshake between Vítor Manuel da Silva Caldeira, President of the European Court of Auditors in the foreground, 2nd from the right, and Neven Mimica, Member of the EC in charge of International Cooperation and Development, in the presence of Danièle Lamarque, ECA Member for Audit Quality Control, Baudilio Tomé Muguruza, Dean of ECA Chamber "Regulation of markets and competitive economy", Klaus-Heiner Lehne, President-elect of the European Court of Auditors, Iliana Ivanova, Dean of ECA Chamber "Investment for cohesion, growth and inclusion", Ville Itälä, Dean for Institutional Relations, Phil Wynn Owen, Dean for "Sustainable use of natural resources", and Lazaros S. Lazarou, Dean of "Financing and administering the Union" (from left to right). Date:26/09/2016. Location: Brussels - EC/Berlaymont. © European Union, 2016/Source:EC - Audiovisual Service / Photo: Georges Boulougouris.

Working lunch between Members of the European Court of Auditors and Members of the European Commission. Handshake between Vítor Manuel da Silva Caldeira, President of the European Court of Auditors in the foreground, 2nd from the right, and Neven Mimica, Member of the EC in charge of International Cooperation and Development, in the presence of Danièle Lamarque, ECA Member for Audit Quality Control, Baudilio Tomé Muguruza, Dean of ECA Chamber “Regulation of markets and competitive economy”, Klaus-Heiner Lehne, President-elect of the European Court of Auditors, Iliana Ivanova, Dean of ECA Chamber “Investment for cohesion, growth and inclusion”, Ville Itälä, Dean for Institutional Relations, Phil Wynn Owen, Dean for “Sustainable use of natural resources”, and Lazaros S. Lazarou, Dean of “Financing and administering the Union” (from left to right). Date:26/09/2016. Location: Brussels – EC/Berlaymont. © European Union, 2016/Source: EC – Audiovisual Service / Photo: Georges Boulougouris.

Last Thursday 13 October, the European Court of Auditors, the institution which carries out the audit of European Union finances, published its report on the implementation of the 2015 EU budget. In the chapter of revenue transactions the ECA found no errors. As expected though, the picture changed drastically when the Court audited the expenditure accounts. According to Vítor Manuel da Silva Caldeira, President of the European Court of Auditors, “As in previous years, we conclude that the 2015 EU accounts are reliable but spending continues to be affected by a material level of irregularity”.

Now, how can the accounts be reliable, but still be affected by materially important irregularities remains a European mystery or probably a miracle. In detail, the relevant passage ‘X’ of the report authored by the competent auditors states bluntly, “In our opinion, because of the significance of the matters described in the basis for adverse opinion on the legality and regularity of payments underlying the accounts paragraph, the payments underlying the accounts for the year ended 31 December 2015 are materially affected by error”. Yet, the President of ECA finds that the accounts are reliable. He must know something that we ordinary people cannot understand.

It’s 1% of all our GDP

Last year, EU spending reached €145.2 billion, or around €285 for every European citizen. Traditionally, the EU expenditure equals 1% of the total GDP or 2% of the aggregate spending of the 28 governments. The volume of EU budget is agreed every year by the European Parliament and the Council, after a relevant proposal of the Commission. However, the yearly accounts come under a seven year financial framework, which more or less foresees the annual expenditure and sets a firm limit for the total amount to be spent under this long-term plan.

Reading through the densely printed two column 320 pages of the ECA report, one will be struck with this observation of the competent researcher: “Our estimated level of error for payments underlying the accounts is 3.8%”. Mind you, the Court checks a sample of accounts in every chapter of the budget and the results take a statistical form. It’s easy then to calculate that this 3.8% error margin, on a total budget spending of €145.2 gives a stunning amount of €5.51bn of payments, infested with errors. Obviously this is misspent money.

Over and above the tolerance margins

The ECA has more to say about that. President da Silva Caldeira observes candidly that “Our estimate of the overall level of error in 2015 is 3.8 %, which is an improvement on recent years but still significantly above our materiality threshold of 2 %”. This simply means that EU misspending is almost double the acceptable error margin of 2%. In 2014, misspent money was 4.4% of the total. If this tempo of improvement is maintained, there is a long way the EU has to cross in order to put its accounts in order.

As for the Commission’s response to the audit report, there is in it concealment of the truth, distortion of the truth and a direct lie. Let’s take one thing at a time. The corresponding Press release firstly contains concealment of an important conclusion of the Court’s auditors. Not a word that the 3.8% error margin found in 2015 EU spending is almost double 2%, a value which the ECA has defined as the materially important error threshold. In short, the EU spending is materially in disorder. Again not a word about this either.

Accounts in disorder

Another Commission’s swindle of truth is found in its Press release. It says :“The Court found that, in particular in cohesion policy and agriculture, the overall estimated level of error for payments has further declined from 4.4% in 2014 to 3.8% in 2015”. This may lead the unsuspected reader to the conclusion that the 3.8% error margin may refer only to cohesion and agriculture expenses. The truth is that in Cohesion policy accounts the error margin in 2015 was much higher at 5.2% from 5.7% in 2014.

Last but not least the Commission tells a flagrant lie. In its Press release an interesting passage says: “As the ECA points out itself, the “level or error” is not a measure of fraud, inefficiency or waste”. The truth is that, legally the ECA cannot tell if the error means fraud, inefficiency of waste. This is the exclusive duty of the Commission to find out, and only in certain cases is done adequately.

Lying about what an error is

What the ECA has to say about that is the following: “Typical errors in this area include: *ineligible costs included in cost claims, *ineligible projects, activities and beneficiaries and *serious infringements of public procurement rules”. Every first year student of law knows that all these simple ‘errors’ may conceal serious crimes. Despite that the Commission wants us to believe that the term ‘error’ is quite innocent and doesn’t mean fraud, inefficiency or waste, this may very well be the case.

In conclusion, the European Court of Auditors has performed its duty by identifying the payments which may conceal serious financial crimes. It’s the Commission’s duty to dig into that. As the ECA plainly states, “The Commission bears the ultimate responsibility for the legality and regularity of the transactions underlying the accounts of the European Union (Article 317 of the Treaty on the Functioning of the European Union – TFEU)”.

This is a kind of direct conflict of interest; the Commission being the erring part and at the same time being the supervisor of that. But in Brussels one may encounter many miracles, because this is the city of illusions. The most renowned illusion being George Orwell’s that “All are equal, but some are more equal than others”. It seems that ‘1984’ was delayed for some time but is finally here.

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Building climate resilience and peace, go hand in hand for Africa’s Sahel – UN forum

Myanmar military committed ‘routine, systematic’ sexual violence against ethnic minorities, UN experts find

London is becoming the world’s first National Park City

These are the places with the most climate change deniers

Amending Guatemala ‘reconciliation law’ would lead to unjust amnesty, warns Bachelet

What next for Europe? Three (completely) different Davos views

Afghanistan: UN mission welcomes new polling dates following election delays

Can privatisation be the panacea for the lack of growth in Europe?

Office workers in these economies clock up the most extra hours

A Sting Exclusive: “Asia-Pacific response to COVID-19 and climate emergency must build a resilient and sustainable future”, by the United Nations Under-Secretary-General

‘Being open about my mental health created a better work culture’

Actions not words: what was promised at the UN’s landmark climate summit?

Localized microfactories – the new face of globalized manufacturing

Chart of the day: These countries have the largest carbon footprints

Mexico: Helping refugees go into business, a ‘win-win situation’, says UNHCR’s Grandi

Commission’s feeble response to financial benchmarks fraud

Migration: Better travel safe than sorry

Universal Health Coverage will ‘drive progress’ on 2030 Development Agenda

European Council: Choosing new leaders for the EU betrays efforts for a wider arrangement

The 28 EU leaders don’t touch the thorny issues

How the United States is falling in love with secondhand clothes

Wednesday’s Daily Brief: Libya ‘war crime’ attack, Sudan, Myanmar rights violations continue, ‘xenophobia’ in Assam, South Sudan update

Steps taken to end Saudi ‘guardianship’ system for women, ‘encouraging’ start

25 years on from landmark conference, millions of women and girls still in danger: UN deputy chief

Partner countries get €3bn in loans to prop up economies affected by pandemic

Ukraine’s Poroshenko implicates NATO in his duel with Putin

This is the life of a refugee: the constant destruction and construction of dreams every day

Global leaders and companies pledge to reduce the gender pay gap by 2030

EU to present a “hefty” exit bill to the UK moments before Brexit negotiations

Prisoner executions in Belarus ‘simply unacceptable’, says UN rights body

Four in five adolescents failing to exercise for even 60 minutes a day, UN health agency warns

Central African Republic militia leader and football executive, transferred to ICC

Deeper reforms in Korea will ensure more inclusive and sustainable growth

The vehicles of our future

Coronavirus update: Countries urged to fight ‘controllable’ pandemic

Philippe de Backer of ALDE at European Business Summit 2015 stresses: “Reinvent your business”

The Red Cross’s health chief explains how business must respond to coronavirus

What is the Coral Triangle?

The Challenger Within – Mental Health In Romania During Lockdown

Refugee crisis update: EU seeks now close cooperation with Africa while Schulz is shocked to witness live one single wreck full of immigrants

We must prevent a post-COVID ‘carmageddon’. Here’s how

Millions of Bangladeshi children at risk from climate crisis, warns UNICEF

Bahamas: ‘Clock is ticking’ to help those who lost everything in Hurricane Dorian, says UN

UN chief welcomes prisoner exchange between the Russia and Ukraine

World is closer than ever to seeing polio disappear for good

Major UN aid operation for 650,000 gets underway across Syria-Jordan border

Theresa May expresses her optimism about Britain’s economic success while UK business outlook seems ominous

Draghi: Germany has to spend if Eurozone is to exit recession

Theresa May’s global Britain against Philip Hammond’s Brexit fog

Can we balance conservation and development? Science says yes

Commission challenges Council over EU 2014 budget

Why we need to rethink geo-economics to beat climate change

Hospitals among seven health centres attacked in Syria’s north-east

ITU Telecom World 2017: exploring smart digital transformation

Guterres underlines climate action urgency, as UN weather agency confirms record global warming

Human Rights Council election: 5 things you need to know about it

EU to fail 2050 Green targets due to lack of European citizens’ engagement

G20 LIVE: “Re-envisioning the economy to enable women to reach their full potential” live from Antalya Turkey

India’s Largest Entrepreneurship Event is Back! (23-24th August 2016)

The Japanese have a word to help them be less wasteful – ‘mottainai’

More Stings?

Advertising

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s