The EU: 12 years of dodgy accounts

James Gubb, 24 October 2006

The European Court of Auditors have, for the twelfth year running, refused to sign off EU accounts. The Court did, this time around, certify administration, development and some agricultural spending, but found errors elsewhere accounting for around two-thirds of the EU’s £70bn budget. Most significantly the Court found that the EU Commission still has inadequate mechanisms to ensure beneficiaries do not claim more than they have the right to claim. This of course lays the budget open to error, but also to fraud.
It is worth referring to the NAO’s report earlier this year on the EU’s accounts for 2004, which found evidence of fraud to the tone of £667m. This was a 12% increase on the previous year – despite the Commission’s insistence it was reforming its accounting procedures. One might therefore be sceptical of Siim Kallas’ counter-attack on the Court’s decision to refuse to sign off accounts this year. He claims the auditors are not playing fair, particularly given that three-quarters of the EU budget is spent by Member States, not the Commission, and ignore the fact that money mis-spent one year is often clawed back the next. For example, the Commission got back E2.17bn of mis-spent EU cash from Member States in 2005 and wrote off just E90bn. But while this clawing back may look good for the Commission, it comes directly from the domestic taxpayers pocket. Secondly where the Court has been most critical – in the 44% of agricultural spending not covered by IACS (Integrated Admin and Control System) and in structural measures (totalling about E56bn) – are precisely the areas the NAO reported as the most fraudulent.
The fact is EU accounts are so ridiculously complicated at least in part because the tide of regulation coming from the Commission is still unrelenting. For example, of the 22,000 pieces of legislation on the EU statute book, about 12,000 were introduced in the eight years between 1997-2005. It is unsurprising the EU is so vulnerable to fraud and dodgy accounting when beneficiaries have to wade through streams of complex rules and regulations to access the EU budget. Yet another reason why deregulation is so vital.