European Court of Auditors' annual report

On November 14 the president of the European Court of Auditors presented the ECA's annual report to the Committee on Budgetary Control of the European Parliament. The report was discussed the following day by the European Parliament meeting in plenary. The report covers the implementation of the 2004 EU general budget, the first that refers to the enlarged union.

The ECA's annual report is specifically foreseen in the Treaty. It is transmitted to the European Parliament and the Council as a crucial element in the annual budget discharge procedure of which it is, effectively, the first step. It is the release of the ECA's report that sets off the relevant discussion and eventual decision whereby the European Parliament is ultimately entrusted with the responsibility to approve the way in which the European Commission has implemented the previous year's budget.

In its verification of the EU's accounts, the role of the ECA is that of an external auditor. Consequently, in carrying out its function, the ECA acts independently of the Commission and of the other EU institutions. The ECA's overall audit opinion is expressed in the form of a declaration of assurance (better known through its French acronym DAS), which forms an integral part of its annual report. This statement of assurance looks at the reliability of the community accounts but also at the legality and regularity of the underlying transactions.

The EC treaty specifically states that the budget must be implemented in accordance with the principles of legality and regularity which, otherwise put, means that all the relevant rules and regulations must be adhered to. These regulations do not concern only the way in which the money that is spent is reported in the Commission's accounts but also other factors, such as, for example, public procurement procedures and state aid rules.

Apart from the Treaty, there is a specific community legal act, agreed on by all of the member states and known as the financial regulation, which sets out detailed rules for the budgeting and use of EU funds, and these must be properly followed.

Independently of the checks made by the ECA in the execution of its role as external auditor, there are numerous controls and checks on spending and reports on the use of EU funds, which are performed by the Commission as well as within the member states. Although the Commission is responsible for the implementation of the EU's budget, the management involved in the expenditure of these funds is largely shared with the member states.

However, even where the Commission does not implement the budget centrally and directly through its services, it must still ensure adequate control (i.e., it still has a responsibility for the proper disbursement of EU funds).

Having said this, it must be emphasised that the member states do have a major role to play in the proper accounting and judicious expenditure of EU funds and this aspect is acknowledged in the Treaty, which requires that member states endeavour to protect EU financial interests to the same extent that they look after their own national budgets.

At this point, the discussion on the budget discharge is back within the European Parliament's budgetary control committee, which is holding a series of 'hearings' where the individual EU Commissioners are invited to answer questions on the implementation of the budget in their respective areas of responsibility.

These questions are formulated on the basis of the findings and comments in the ECA's annual report and, for this reason, one or more members of the ECA are also in attendance at these 'hearings' to provide additional insight, if required, on the ECA's assessment.

I was present at the very first of these 'hearings' last Monday, in Brussels, when the Budgetary Control Committee discussed the implementation of the budget on structural measures. This heading effectively combines expenditure under the Cohesion Fund, the European Regional Development Fund (ERDF) and the European Social Fund (ESF), and covers the remit of two Commissioners, Danuta Hubner (Regional Policy) and Vladimir Spidla (Employment, Social Affairs and Equal Opportunities), who were both in attendance.

As is the case in most activities involving participants from different EU institutions, there is always an unavoidable formality in the way in which these meetings are structured. Although they are all part of the EU, the European Parliament, the Commission and the ECA have different functions and must be seen to be acting independently, especially to safeguard their prerogative to criticise the other institutions if required.

Perspectives will differ not only because functions are different but also because the subject matter is vast and inherently complex. Hence the various institutions can and will often have different points of view, even though the ultimate objective is identical, namely to secure the best possible benefit for European citizens.

The budget discharge process is one of those occasions where criticism (in this case by the ECA and the European Parliament) will be forthcoming, if and wherever it appears to be warranted. It should be like that and it is a good thing (for the EU and its citizens) that it is.

Unfortunately there will always be those who will try to use what is stated to discredit the EU, often quoting comments out of context or in a knowingly biased manner. It is up to us to move beyond such a superficial perspective and to appreciate the checks and balances that have been built into the EU system in an effort to secure better value for money for EU citizens.

These points were ably addressed by ECA president Hubert Weber in the conclusion to his speech to the European Parliament, after presenting the ECA's annual report.

"Some consider that the court (ECA) should avoid giving ammunition to those who have an interest in creating a negative picture of the Union. I firmly believe, however, that the interests of the citizens are best served by an objective and independent external audit institution, which provides clear and balanced messages based on impartial evidence. The court should give criticism where it is needed, recommendations that can help and praise where it is deserved.

"In this way we can work together towards a Union that is known for its successful financial management. I strongly believe that it is only through the good functioning of our institutions and high quality management, both of policy and spending, that the legitimacy of the Union will be assured.

"The European Court of Auditors plays a key role in providing an independent, professional, objective overview of financial management and helping promote change for the benefit of the citizens of the Union."

(To be continued)