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

the European Sting Milestones

Featured Stings

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

Cameron’s “No Brexit” campaign wins top business support as Tory front breaks

Seaweed, enzymes and compostable cups: Can ‘Big Food’ take on plastic and win?

A new European banking space is born this year

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

Low quality healthcare is increasing the burden of illness and health costs globally

Can the US deal a blow to EU and Russia together over Ukraine?

Do men and women really have different leadership styles?

The German banks first to profit from public subsidies of trillions

How leaders can use ‘agile governance’ to drive tech and win trust

Right2Water initiative: Is the Commission ready to listen to citizens?

Removing sweets from supermarket checkouts could help fight obesity

EU budget: Commission proposes to increase funding to support the environment and climate action

EU-China relations under investigation?

UN Security Council urged to act against ‘worst-case scenario’ Syria’s war-battered Idlib

Costa Coffee products (Copyright: Costa Coffee; Source: Costa Coffee website, Press area)

The start of the “Caffeine rush”: Coca-Cola acquires Costa Coffee days after Nestlé-Starbucks deal

‘Time is of the essence’ for refugees on Greek islands – UN agency

The JADE Spring Conference 2017 is casting its shadows before

EU Migrant Crisis: Italian Coast Guard Headquarters and Italian Navy to give host national opening addresses at Border Security 2016 in Rome

COP21 Breaking News_04 December: Launch of CREWS, climate risk & early warning systems

Feeding families remains complex task in war-torn Syria – UN relief agency

FROM THE FIELD: How the smell of fresh bread transformed one refugee life

ECB: The bastion of effective and equitable Europeanism keeps up quantitative easing

High-technology manufacturing saves the EU industry

EU: The Member States to pay for national banking problems

MWC 2016 LIVE: Mobile World Congress shows off planes, trams and automobiles

Is deflation a real danger for Eurozone?

To Brexit, or not to Brexit…rather not: 10 Downing Street, London

A Sting Exclusive: “Delivering on the Environmental Dimension of the new Sustainable Development Agenda”, Ulf Björnholm underscores from UNEP Brussels

EU budget: the Common Agricultural Policy beyond 2020

Saudi Arabia: UN experts push for prompt release of women human rights defenders

Finally an answer to the hottest question of European youth today: How to make sure Juncker’s Investment Plan works for youth

UN gender agency hails record-breaking number of women in new US Congress as ‘historic victory’

MEPs to vote on overhaul of road transport rules in July

YO!FEST ENGAGES 8,000 YOUNG EUROPEANS IN FUTURE OF EU

Youth2030: UN chief launches bold new strategy for young people ‘to lead’

Parliament compromises on Banking Union but sends market abusers to jail

The succesful cooperation

Polish PM chooses to focus on economy, amid questions on rule of law in Poland

Education and Training: where do we stand in 2014?

What makes America the world’s most competitive economy?

Sustainability, peace, security ‘best guarantee against instability’ Guterres to Security Council

What we need for a better European Solidarity Corps

G20 LIVE: World Leaders in Turkey for G20 Summit. Global Economy will be discussed in Antalya

How will Brexit affect higher education in the EU?

The New Year 2016 will not be benevolent to Europe

The US bugged Europe: Is this news?

EU should promote immigration as a humanitarian issue in order to provide a more permanent solution

The European Parliament fails to really restrict the rating agencies

Drowning in the Mediterranean this summer? Many happy returns

Cyber defence: MEPs call for better European cooperation

Is Eurozone heading for disinflation?

The US + Britain trivialize mainland Europe, NATO and the EU

5G mobile is nearly here – but we should share networks to make it affordable

Women’s rights in Asia – how far have we come?

Trying to cure bank cancer with analgesics

Migration Crisis: how to open the borders and make way for the uprooted

Data show EU Economy in a stubbornly subdued state

MEPs propose more transparent legislative drafting and use of allowances

The next EU President will first have to drink his tea at Downing Street

European Union: From financial consolidation to deeper political division

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 )

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