Background information : 07-02-97
BACKGROUND NOTE 2 .
Brussels, 7 February 1997
Clearance of CAP spending for 1992: THE
Court of Auditors confirms the scepticism
of MEPs - ECU 895 m unaccounted
On 23 January 1997, Mr Maarten ENGWIRDA, Member of the
Court of Auditors, presented to the committee on budgetary
control (chairman: Diemut THEATO (EPP, D)) Special Report 1/97
on the Commission decision on the clearance of the EAGGF
accounts for 1992 (and certain expenditure for 1993). This
report was drawn up at the request of Parliament and will be the
basis for suspending, granting or withholding the discharge to the
The Commission is required to clear the annual accounts
submitted by the Member States for the expenditure carried out
by them and financed from the EAGGF/Guarantee section. The
aim of this procedure is to ensure that only transactions that are
in order are financed from the Community budget. The
Commission has the job of carrying out audits and the Member
States are given a chance to respond. In the event of the figures
being challenged by the latter, there is provision for a 'conciliation
procedure'. It is then up to the Commission to adopt its final
clearance decision. It may therefore arise that a Member State
is required to refund the sums where it is unable to justify their
utilisation. This is what is known as a 'correction' to the sums
which a Member State has received by way of EAGGF/Guarantee
funding for a given financial year.
The Commission decisions (adopted in April and November 1996)
which are the subject of this special report resulted in corrections
to the amounts of expenditure for the various sectors of (ECU
895,1 m). The Court of Auditors even believes that this figure
should be higher since it pinpoints cases (including cotton
production in Greece and the storage of beef in Ireland) where the
corrections were revised downwards by some ECU 134,7 m.
The Court of Auditors highlights the inadequate resources allocated by the Commission to
auditing and to staff in particular: forty officials for funds exceeding ECU 30 billion. This poor
staffing level, which is a constraint, has prompted the Commission to introduce 'risk analysis'
as the main method of identifying sectors which should be checked. It follows that checks are
not carried out in all areas (e.g dairy sector). This is also why the Commission has carried out
only limited audits in the area of export refunds which accounts nevertheless for a third of the
EAGGF/Guarantee section and is a 'high-risk area.'
The Court of Auditors also pinpoints the substantial delays by the Commission in conveying the
audit results to the Member States and believes that this state of affairs has been prejudicial to
the application of corrections.
As for the conciliation procedure which was implemented for the first time in 1996 for the
clearance of the 1992 accounts, the Court of Auditors, while seeing its introduction as a
positive development, believes that it has caused additional delay to the clearance procedure.
The Court's major criticism concerns the fact that 37,5% of the corrections made during the
1992 clearance procedure accounting for ECU 336 m out of a total of ECU 895,1 m 'were flat-rate corrections', or a variable formula used to calculate losses and claw back a percentage of
expenditure. The rate of correction applied by the Commission (2%, 5%, or 10% of the sums
in question) is chosen on the basis of a calculation of the fraud risk against the Community
budget. The Court of Auditors highlights the cases of olive oil and cotton production in Greece
and the storage of beef mainly in Ireland but also in Germany, Italy, France and the UK. It
points out that the flat-rate correction is a practice which ought to be restricted in the light of
Parliament's resolution on the discharge granted to the Commission for the clearance of the
EAGGF accounts in 1991. The decision of the Commission to overrule its own Financial
Controller by applying a lower correction figure of 5% rather than the 10% recommended after
the discovery of inadequate controls on beef storage in Ireland is also mentioned.
Parliament's view is that every effort must be made to calculate the amount of financial
corrections to be made on the basis of the objective evidence of actual losses, rather than the
use of the flat-rate correction formula. The Court of Auditors concludes that flat rate
corrections should be applied in a transparent and equitable manner when it is not possible to
ascertain the actual loss to the EAGGF budget.
In addition, the Court of Auditors criticises the Commission for reducing the amount of
corrections when it feels that the Member States are making an effort to improve procedures.
It takes the view that, if there is to be a reduction, this can take effect only from the time when
the improvement has actually taken place. The Court of Auditors accordingly challenges the
Commission's practice of using incentives of a financial nature so that a Member State actually
gets down to the job of carrying out what it is required to do anyway under existing Community
The Commission takes the view that the question of extra staff must be settled under the 1998
budgetary procedure. It believes that, given the constraints under which it operates, it has
practised risk analysis as effectively as possible. It rejects the criticism that it made reductions
in the amounts of corrections on any other basis than an assessment of the risk of loss to the
EAGGF budget. It adds that, in relations based on the spirit of partnership between the
Commission and the Member States, the risk of financial corrections hanging over the Member
States is an incentive for them to comply with Community legislation.
The rapporteur, Jan MULDER (ELDR, NL), believes that the Commission should swiftly redeploy
staff to upgrade as necessary the unit responsible for monitoring the clearance of accounts. He
also reiterates Parliament's position that the clearance exercise should be based on the loss
actually incurred by the Community budget for the financial year in question. The flat-rate
correction method should be used only when it is impossible to ascertain the real losses to the
EAGGF budget. Lastly, he too, like the Court of Auditors, challenges the use of financial
incentives in order to ensure Member States perform the tasks required of them under
BUDGETARY CONTROL: DISCHARGE TO THE COMMISSION FOR
CLEARANCE OF THE 1992 EAGGF ACCOUNTS TO BE DEFERRED
The committee on budgetary control when adopting on 6 February the resolution in the report
by Jan MULDER (ELDR, NL), adjourned its decision on the discharge for the clearance of the
1992 EAGGF accounts until such time as the committee has increased the number of staff
responsible for this task (an extra 15 posts for redeployment).
This decision to adjourn the discharge which will be submitted to plenary at the February part-session in Strasbourg also seeks to compel the Commission to amplify and define clearly the
rules and criteria governing the calculation of flat-rate corrections. The committee want to see
added a fourth correction rate of 25% of the sum received by the Member State concerned (the
present rates being 2%, 5%, and 10%). The Commission has stated its readiness to make the
necessary changes on these lines.
The Committee criticises both the Dutch and EMI???? financial correction applied to Ireland in
respect of beef (ECU30,3 m) and the Commission decision to reduce by ECU 96,2 m the
correction applicable to Greece in respect to the cotton sector where controls were clearly
inadequate. It calls on the Commission to make a provision for an appropriate financial
correction for cotton in Greece when clearing the accounts for 1993.
Lastly the Committee stresses that the actual amount of the correction should exclusively reflect
the losses incurred by the Community budget. It warns the Commission that, unless it wants
to run the risk of being refused a discharge, it will henceforward have to cease its practice of
'negotiating' the amount of the financial correction to be applied on the basis of anticipated
steps by the Member States to remedy their shortcomings in the area of monitoring.
Further Information: Georgios GHIATIS - Tel: 284.22.16