By Michelle Fitzpatrick - 2nd May 2006
The EU must improve the way it controls financial spending or risk losing all credibility, a senior UK politician has warned.
Treasury minister Ivan Lewis told the House of Lords EU sub-committee on the management and audit of EU accounts that “the credibility of the EU will never recover if it doesn’t get its accounts sorted out.”
For the past 11 years, the European court of auditors has been unable to sign-off the EU accounts because of a lack of clear information about how the money has been spent.
The Lords sub-committee began its own investigation into the commission’s auditing problems last February.
Giving evidence before in London on Tuesday, Lewis stressed that the EU had to improve its financial regulations if it wanted to win the backing of the auditors.
He said that it was wrong to attribute the discrepancies in the EU budget to fraud.
Lewis claimed that accounting irregularities - not fraud - accounted for 0.9 per cent of the agricultural budget and 2 per cent of the structural funds budget in 2004.
Fraud accounted for just 0.02 per cent, or €11m, of misplaced agriculture spending and 0.4 per cent, or €118m, of structural fund payouts.
“I won’t minimise the problem,” said Lewis. “If you told the public that the fraud issue was exaggerated and then showed them the figures, the public would say it was a very important issue.”
“But we don’t monitor every single payment.”
Lewis continued to say it was important to counter the misinformation put out “through the media and eurosceptics” that there is massive institutional fraud in the EU.
One way this could be achieved is with clearer communication, he said.
“The commission’s job is to create a framework where we can be assured that EU money is being spent appropriately. Ultimately, the solution is nation states being able to demonstrate that their levels of accountability meet certain specified standards,” he said.
According to Lewis, the commission will be moving forward with important improvements to financial management and control.
An action plan for an integrated control framework is to be presented to the Ecofin council of finance ministers next week.
Lewis believes that this control framework, if implemented and delivered, is a step forward, “although it lacks the concept of national assurance,” he added.
Draft legislation on the simplification of financial regulation is also in progress but has yet to be ratified.
“So yes, there is an appetite for simplification. Regulations now are incredibly complicated and technical,” he said.
Lewis also defended the independence of OLAF, the European anti-fraud office, when one committee member wondered whether this job would be better left to an external organisation.
“The European court of auditors has looked at OLAF’s independence and the auditors agreed that the current status is acceptable,” said Lewis.
However, he admitted “there is an opinion that says that maybe we’d have more credibility if OLAF was independent”.
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