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.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Featured Stings

EU agricultural production no more a self-sufficiency anchor

Time to be welcome: Youth work and integration of young refugees

EU rewards organisations that make eco-innovation pay

Education expenditure in the EU not hurt much by crisis

COP21 Business update: Companies urge now for carbon pricing as coal is still a big issue

In China things are moving in the right direction

Ukraine-EU deal sees the light but there’s no defeat for Russia

Unemployment and stagnation can tear Eurozone apart if austere policies persist

“Will TTIP solve the massive EU-US unemployment? Absolutely not!” A revealing Sting Exclusive with Tim Bennett from the Transatlantic Business Council

Italy’s dilemma after Merkel-Hollande agreed loose banking union

New skills needed for medical students in Industry 4.0

Is Erdogan losing game and match within and without Turkey?

The European Commission to stop Buffering

The EU Consumer Policy on the Digital Market: A Behavioral Economics View

EU Commission expects consumer spending to unlock growth

The Commission tries to stop the ‘party’ with the structural funds

Why are the financial markets shivering again?

The EU Parliament blasts the Council about the tax dealings of the wealthy

Mobile 360 Africa 11-13 July 2017

A money laundering case on Vatican Bank’s road to renovation

Entrepreneurship in a newly shaped Europe: what is the survival kit for a young Catalan and British entrepreneur in 2018?

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

A Sting Exclusive: Paris Climate Change Summit, a defining moment for humanity, by Ulf Björnholm Head of UNEP Brussels

Industrial products: Lifting the last impediments in the EU single market

Finance for SMEs: Alternative supply mechanisms do exist

EU Parliament semi worried over democratic deficit

Pro-EU forces won a 70% triumph in the European elections

Italy’s Letta: A European Banking Union soon or Eurozone collapses

ECB asks for more subsidies to banks

Europe’s top court hears Intel and sends € 1.06 bn antitrust fine to review

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

What lessons to draw from the destruction of Syria

A sterilised EMU may lead to a break up of Eurozone

Lack of involvement, or lack of opportunities?

Is South Korea set to lose from its FTA with the EU?

European Commission determined to conclude EU-Mercosur trade deal this year despite French concerns

Why Eurozone’s problems may end in a few months

The EU Parliament unanimously rejects Commission’s ideas about ‘seeds’

“As German Chancellor I want to be able to cope with the merger of the real and digital economy”, Angela Merkel from Switzerland; the Sting reports live from World Economic Forum 2015 in Davos

“Beating pollution for our planet”, a Sting Exclusive by Mr Erik Solheim, the Executive Director of the United Nations Environment

COP21 Breaking News_09 December: The Draft Agreement Updated

The inhumane face of crisis mirrored in numbers

How the Irish people were robbed by banks, the Commission and their own government

The DNA of the future retail CEO

Travel the world, find yourself

Bank resolutions to remain a politically influenced affair

Mental health in medical students: the deciphered quandary

The Peoples are missing from EU’s monetary union

Can Kiev make face to mounting economic problems and social unrest?

The European Commission cuts roaming charges. But “it’s not enough”…

Chinese economy to raise speed and help the world grow

The Irish Presidency bullies the Parliament over EU budget

G20 LIVE: “International communities and leaders have great expectations for 2016 G20 summit in Hangzhou China”, Mr Wang Xiaolong, the Chinese Foreign Ministry’s special envoy stresses live from G20 in Antalya Turkey

EU Parliament says ‘no’ to austerity budget

ZTE @ MWC14: ZTE excels in all areas at this year’s Mobile World Congress

Why Commissioner Rehn wants us all to work more for less

Counting unemployment in the EU: The real rate comes to anything between 16.1% and 20.6%

EU and Japan agree on free-trade deal and fill the post-TPP void

Can the EU afford to block China’s business openings to Europe by denying her the ‘market economy status’?

A shortened EU Summit admits failures, makes risky promises

More Stings?

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 )

Twitter picture

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

Facebook photo

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

Google+ photo

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

Connecting to %s