Verbatim report of proceedings

Tuesday, 15 November 2005 - Strasbourg

6. Presentation of the Court of Auditors’ annual report – 2004

  President. The next item is the presentation of the Court of Auditors’ annual report for 2004.

  Hubert Weber, President of the Court of Auditors. (DE) Mr President, let me thank you, on behalf of the members of the European Court of Auditors, for the invitation to the debate on the Court’s report – its 28th – on the financial year 2004, which I presented to the Committee on Budgetary Control yesterday evening. In this, my first year in office as the President of the Court, I am glad to be able to be present at the commencement of the annual process of giving discharge in respect of the handling of the EU’s Budget.

Among the main sources for the annual report are the financial audits and checks on legality and propriety that the Court has carried out. By way of contrast, the general practice is to publish the Court’s findings on financial soundness in the form of special reports.

What made the financial year 2004 noteworthy was the accession of 10 new Member States, which meant that the estimates for payments rose from EUR 98 billion in 2003 to EUR 105 billion in 2004. Improvements in planning and in management made possible a marked increase in the use of funds in comparison with previous years. The surplus in 2004 – EUR 2.7 billion – was significantly lower than that in 2003, being, indeed, half the amount.

I would now like to consider the main statements in the Court’s Statement of Assurance, also known as the ‘DAS’, starting with the statement on the reliability of the accounts. When considering the financial year 2004, the Court came to the conclusion that the consolidated financial statements gave a faithful picture of the income and expenditure for the year and of the financial position at its end, with the exception of the entry for ‘sundry debtors’. As was the case in the past, the accounting system used to draw up the annual accounts for 2004 is not equal to the task of listing all the assets and liabilities in the balance sheet, although it has to be said that the Commission made distinct progress in introducing accrual accounting in time for the financial year 2005. At the time of the audit, though, it did appear to the Court that further progress would be needed, as the figures needed to draw up the opening balances for 2005 had not yet been validated by the Commission’s authorising officers. If appropriate action is not taken by the end of this year, the reliability of the accounts for 2005 may well be compromised by the defects highlighted by the Court.

As regards the lawfulness and regularity of the underlying transactions, the Court stated, in its Statement of Assurance, that consideration of the financial year 2004 led the Court to the conclusion that the supervision and monitoring systems that had been installed were operating effectively and that the underlying transactions, considered overall in relation to receipts, commitments, administrative expenditure and the pre-accession strategy as part of the payment appropriations were lawful and regular. As regards the other appropriations – agricultural expenditure, structural measures, and both the internal and external policy areas, the Court again finds itself unable to give unreserved confirmation. The supervision and monitoring systems were not yet fully installed, were not yet operating effectively, and payments continue to be largely blighted by errors.

The Court is able to report, and for the first time, that the efforts by the Commission and the Member States in connection with the introduction of the Integrated Administration and Control System– abbreviated to ‘IACS’ – which covers 59% of agricultural expenditure, have had a positive effect. When properly used, IACS is a highly effective instrument for reducing to an acceptable level the risk of irregular outgoings.

I would now like to discuss in greater detail the specific assessments of the individual areas of activity as contained in the Statement of Assurance. The Court came to the view that transactions relating to receipts were conducted lawfully and in good order, but systemic faults were discovered in the handling of GNI own resources, both within the Commission and at Member State level.

In the same way as in previous years, the Court has found more evidence indicating that errors are still endemic in expenditure under the common agricultural policy as a whole. Although the Court has stated that IACS is effective when used properly, there is, in the case of agricultural expenditure not made under IACS or for which IACS was not used in an appropriate manner, a higher risk of irregularities by reason of weaknesses in the monitoring systems.

The Court, having conducted spot-checks on the structural programmes, again found weaknesses in all of their administration and control systems at Member State level. On auditing the Member States, the Court found such weaknesses as the failure to carry out checks or to document them, the failure to check eligibility criteria for funding and lack of evidence of the co-funded services having been performed.

The Member States’ returns of expenditure, on the basis of which the Commission makes payments, have revealed frequent errors. The Court examined a spot-check of 167 projects and discovered a broad spectrum of problems, including a large number of cases in which expenditure was reported on projects not eligible for grants.

In the internal policy areas directly administered by the Commission, the Court discovered that the supervision and control systems – despite the progress achieved in some areas – did not operate in an appropriate manner, and that there was a high incidence of errors in the underlying transactions.

The complexity of regulations is a frequent cause of error. It seems likely that the risk of error will remain high for as long as the legal framework remains unchanged and procedures are not simplified. The main cause for this state of affairs, which shows no improvement over against previous years, was, in the main, the entry of excessive or non-eligible costs or the absence of documentation, for example evidence of services paid for having actually been rendered.

Turning to expenditure on external policy areas, the Court found that the systems had been improved and that few errors were being made in the underlying transactions at delegation level, but weaknesses were again found in the internal monitoring systems of the organisations tasked with the implementation of projects, along with a fairly high incidence of errors.

Overall, the Court was able to pass a favourable verdict on the pre-accession strategy, as the underlying transactions were essentially lawful and in order. The supervision and monitoring systems in the central Commission offices, the delegations and the certifying authorities are fundamentally reliable and function well in practice. The Court did, however, uncover weaknesses at national level in the systems of the implementing organisations in Bulgaria, Romania, Turkey and other Sapard countries.

The underlying transactions in the area of administrative expenditure were essentially lawful and regular, and the supervision and control systems generally worked in an appropriate manner.

What are the most significant statements that can be made on the basis of this? The Court has established that there were, again, fundamental illegalities and irregularities in much of the payment appropriations at the level of the underlying transactions. These were attributable to the risks inherent in the transactions themselves and the fact that the supervision and monitoring systems fail to limit the risk of irregularities with an acceptable degree of effectiveness.

It was, however, evident that improvements had been made to the systems, particularly to IACS, the most important system for supervising and monitoring agricultural expenditure by the Member States, but also to the systems in the Commission, where the process of reforming the administration and finance systems, initiated in 2000, has produced good results. Much, however, remains to be done, particularly at Member State level.

The legislation, rules and procedures applicable to expenditure are still often over-complicated. There are, in any case, risks inherent in much of the expenditure, the sole evidence for which is to be found in statements by its recipients. It has to be said that the European Union has itself expanded to a considerable degree, and has undergone major changes, since the DAS was introduced in 1994.

In the eleven intervening years, annual expenditure on payments has risen from EUR 60 billion to EUR 100 billion, whilst the number of Member States has increased from 12 to 25. It follows that management has expanded and become more complex with the involvement of an ever-increasing number of authorities and organisations. This, in turn, makes ever more effective systems for supervision and monitoring necessary.

In its Opinion No 2/2004 on the ‘single audit’ model, the Court proposed the creation of a common internal audit framework including every level of administration, whether Community institutions, Member States and recipient countries. The Court’s Opinion on the ‘single audit’ model was a contribution to policy debate on the improvement of administration and control of Community funds. The Commission has gone even further by adopting what it called a roadmap for the creation of an integrated internal audit framework. This roadmap will serve as the basis for the extension of the reform to the management of all types of funds, notably to those areas of administration that are shared with the Member States; it is here that cooperation between the Commission and the Member States is indeed crucially important.

The Court welcomes this initiative on the part of the Commission for a roadmap. In its capacity as the EU’s external auditor, the Court will closely observe progress and assess the effects of these changes on financial management and the control of the EU’s finances over the coming years.

It has to be said that the Court’s position on another issue, that of the future of the finance, management and control of the common agricultural policy and the structural measures, should be taken into account in the final formulation of these important pieces of legislation. The provisions relating to the retention of documents in the present draft Regulations on structural measures would make it impossible for the Court to audit some of the items of expenditure concerned.

The Court is well aware of its need, in a constantly changing Union, for continuing self-improvement and for the best possible use of its resources. We aim to work for the interest of the European Union as effectively and efficiently as possible.

Although the view is sometimes expressed that the Court should give no further ammunition to those in whose interest it is that the EU should be depicted in a poor light, I am firmly persuaded that the public interest is best served by the intervention of an external auditing body, one that is capable, objectively and independently, of making clear and even-handed statements on the basis of objective facts.

There are those who see the latest events – the voters’ rejection of the draft constitution in two referenda in two Member States, and the difficulty of coming to any agreement on the 2007-2013 Financial Perspective – as indicating a lack of confidence on the part of the public in the European Union and its institutions. I am quite convinced that the EU’s legitimacy can be guaranteed only if our institutions function smoothly and if management – whether in the making of policy or in its implementation – is of high quality. The Member States, too, must discharge their responsibilities in connection with the administration and control of much of the EU’s Budget. The Court of Auditors has a key role in this respect: it must convey an independent, professional and objective picture of the way in which the EU’s finances are managed and help to ensure that change is in the public interest.

(Applause)

  Siim Kallas, Vice-President of the Commission. Mr President, I should like to thank the President of the Court, Mr Weber, for the fair presentation of the 2004 annual report and the Members of the Parliament for giving me the opportunity to give the Commission’s first reaction.

The Court’s report is fair and balanced: it says that the Commission is having success in implementing tangible improvements in its management systems, but that many areas still need to be improved.

The Commission welcomes the Court’s positive opinion on the reliability of the accounts, which faithfully reflect the revenue and expenditure of the Communities for the year and their financial position at the year-end. The Court has only one reservation, which has been resolved through the introduction of the accrual-based accounting system in 2005. This means that the accounts met their primary objective and that the accounts have been drawn up according to the provisions of the Financial Regulation in force.

The Court gives a positive assurance on the accounts, on revenue, on commitments, on pre-accession aid, and on administrative expenditure. It is also satisfied with EDF development aid, some EUR 2.4 billion outside the budget.

The Court also notes two key improvements since last year: in a large part of the common agricultural policy and in aid to candidate countries to the EU. The system used to check much expenditure under the common agricultural policy – the integrated administration and control system (IACS) – is considered an effective control system in limiting the risk of irregular expenditure, when properly applied. This system will be applied to an even greater percentage of agricultural expenditure in the coming years.

So simplifying greatly, in addition to the several positive assurances I have already mentioned, the Court is now reasonably satisfied with the systems of control and spending in an increasing part of the EU budget, roughly estimated to represent one third of the budget. This is tangible and quantifiable progress towards a positive statement of assurance.

The conclusions of the Court have not always been fully understood by the general public and the media. I liked very much the remark in the President of the Court’s speech that makes it clear that the Court’s qualified opinion on certain areas cannot be interpreted as meaning all transactions of the 2004 payment budget are affected by error, nor can it be interpreted as an indicator of fraud. We must all understand the comprehensive nature of this large budget discharge exercise. This procedure shows that the Commission is accountable to directly elected Members of Parliament.

This may be the eleventh consecutive non-positive Statement of Assurance, but I hope it is clear from my initial remarks this does not imply that we are not making progress. Members of Parliament have pointed out repeatedly that the Commission alone cannot ‘produce’ a positive DAS. The 2003 discharge resolution gave very valuable guidance on how to further improve, and we are working to do that. As you know, this Commission has proposed a ‘roadmap to an integrated internal control framework’, looking for support in Parliament and Council.

While I am very grateful for Parliament’s support on the roadmap, the ECOFIN Council’s statement of 8 November was not as radical as the Commission had hoped it would be; political declarations at national level were not accepted. But a cascade of operational management declarations by payment and similar agencies is not an impossible goal, though a national synthesis report for each sector, similar to that which the Commission draws up on the basis of the annual activity reports of its directors-general, will be more difficult to achieve.

We will go ahead with our proposals. Our action plan towards an integrated internal control framework will be published next month. It is based on the results of the ‘gap assessment’ between the control framework in place for all types of budgetary expenditure and the general principles defined by the Court in its opinion No 2/2004 on a single audit. We hope that the legislation being finalised for the new series of programmes in the years after 2006 will reflect the new thinking. The proposed revisions to the Financial Regulation and the implementing rules also reflect this thinking.

Court sampling reveals substantial errors that we are of course concerned to reduce to a minimum. To do so, we are focusing and seeking assurance on the procedures for managing the risk of irregularity. This is the way to ensure, within a limited resource base, that the costs of extra controls provide added benefits in terms of reducing risks of error.

I would especially mention here two quotations from the speech made by the President of the Court: ‘in structural matters, the Court found weaknesses in the management and control systems in the Member States across all programmes’; and the second quotation: ‘in the area of internal policies the Court notes that the errors often stem from complicated rules’.

Certainly I agree with these remarks. Need for simplification of rules was repeated yesterday at the meeting of the Committee on Budgetary Control but, if I look for the individuals who are responsible for the large number and complexity of the programmes and rules, I find hardly anyone. Everybody talks about the need for simplification but, when business goes into detail, it is not so simple any more. A large part of the complexity often comes not from the officials but from clients, policy makers, politicians in Member States and Members of the European Parliament. The changes are often resisted by the same players.

I use this opportunity to call on all policy makers, when the creation of another goal, plan and programme is under consideration, to look critically at aspects of fiscal management and the need to control and audit these programmes.

There is a lot more to be said, but the budget discharge process is now only at the beginning and within the coming months Members of Parliament will have all the answers to their questions. Parliament and the Commission will work together to finalise the process of discharge of the 2004 European budget.

  José Javier Pomés Ruiz, on behalf of the PPE-DE Group. – (ES) Mr President, this is the eleventh time that we have been given a non-positive Statement of Assurance.

I no longer know whether I should say that this is scandalous; it has become customary. Efforts have clearly been made all over the place, but, at the end of the day, this is an unachievable goal following the 11 examinations of the accounts by our Court of Auditors.

Things are improving, but not to a sufficient extent. What is the political consequence of this non-positive Statement of Assurance? Well, for our House, for our officials who have to take decisions, it is highly demoralising. It seems a pointless effort to try to comply with the rules, because we never achieve a positive Statement of Assurance. There is a lack of will to take responsibilities and all of the officials are tempted not to spend, in case there is any doubt and they have any problems. It is therefore demoralising on the inside.

And on the outside? A great loss of credibility. What are the European citizens going to think if our Court of Auditors, for the eleventh time, says that the accounts are not managed here properly! A scandal. More of the same. Very bad.

Even when there is a change of Parliament, a change of Commission, a change of make-up of the Council, things carry on in the same way. Perhaps we should cast our minds back to the Santer Commission, which had to resign as a result of this kind of problem: it does not matter, things remain just as bad.

And the Member States? Where is the British Presidency? The Council spends 80%. Where is the British Presidency? It is not here: this really is scandalous, because the Council spends 4 out of every 5 euros but is not even attending this presentation of the accounts. This really is scandalous.

The Member States are happy. While their national courts approve their accounts, it is not their problem whether the Union, the money of all the Europeans, is managed properly or not. There may even be some Member States that actually feel quite happy and say to themselves, ‘my money is getting to the farmers, although I am not conforming precisely to the requirements that the Court of Auditors is demanding of me’. They are pleased with themselves. They are not even here.

Mr President of the Court of Auditors, as you know, at the last discharge, this European Parliament called for national statements of conformity on the part of Finance Ministries. The objective was to help the Court to publish a positive Statement of Assurance. The ECOFIN of 8 November, as Commissioner Kallas has said, has rejected such national statements.

I would like to ask you, Mr President of the Court of Auditors, about what you think of the usefulness of these statements to your work, in terms of your relations with the national authorities, and about the future without such statements.

Finally, Mr President of the Court of Auditors, it is of no use to us for you to say that the average across a class of 25 Member States is a fail. Tell us – and this well help you – which are the three best Member States and which are the three worst.

  Dan Jørgensen, on behalf of the PSE Group. – (DA) Mr President, thank you for giving me the floor. I should also like to thank the Court of Auditors for a constructive annual report. One of the areas in which the EU has the biggest image problem of all is specifically in relation to the issue of how the Community’s money is managed. We know from numerous opinion polls that Europe’s populations do not have a particularly high degree of confidence that their money – that is, the money they pay in taxes – is properly managed. This distrust is partly justified and partly based on misunderstandings. I wish to thank the Court of Auditors for an annual report that helps us MEPs fulfil two objectives: firstly, that of eradicating the misunderstandings and, secondly, that of coming up with good advice and helping solve those problems that do in actual fact exist, for problems there undoubtedly are.

With regard to myths and misunderstandings, anyone who takes the trouble actually to read the Court of Auditors’ annual report will be able to see that the scare stories circulated by the press and also by the opponents of the EU here in Parliament are not credible. It will become apparent that all these stories are based on myths and misunderstandings and that matters are not as bad as the frequent horror stories would suggest. Particularly by highlighting the agricultural sphere, in which we have now reached a point at which approximately 60% of the resources are managed properly, the annual report documents the fact that big improvements have taken place. That is obviously a good thing. Some praise is in order, because progress is being made. That being said, it must naturally be emphasised that the mere fact that improvements are taking place in certain areas does not of course mean that we can live with the overall picture. It is simply not good enough. I agree with the previous speaker, Mr Pomés Ruiz, who said that it is scandalous.

That brings me, of course, to the second task. The first task was to explode myths. The second task is, of course, more important, for it consists of finding out how we are to solve these problems. I quite agree, moreover, that, on this subject, a clear picture emerges. It is in those areas in which there is shared administration – in other words, in which the Member States have just as high a degree of responsibility for managing the money – that the problem area in fact lies. The Member States are simply not complying with their responsibilities and are not doing enough. I agree that we must do further work on the recommendation made last year to the effect that there is a need for what have been called political statements from the finance ministers of each individual country every single year. Over the next few months, we must debate the annual report in more detail and implement the discharge procedure. I can now already see that the responsibility of the Member States is one of the issues on which we must focus most of all.

  Jan Mulder, on behalf of the ALDE Group. – (NL) Mr President, I too would like to add my thanks to the President of the Court of Auditors for his report. I can only echo the sentiments that have already been expressed by other speakers, namely that it is extremely regrettable that, for the eleventh time in succession, a positive Statement of Assurance has not been forthcoming, and that is something that will stick in people’s minds. We must work on turning the DAS into a positive one, and as far as I can see, the root of the problem lies with the Member States.

It is unfortunate that the President did not take the trouble to be here today. The other benches are also exceptionally devoid of representative of the Member States this morning. I do not know whether that is symptomatic of the interest in financial control as a whole. To me, the essence still is last year’s resolution in which we insisted that the highest financial authority of each Member State – and I am pleased that these are listening so intently – should be called to account every year about the spending of funds. This is something to which most of the Member States are opposed.

This is, I think, something that this House must continue to work on. The suggestion mooted in the Court of Auditors’ report, namely that certification bodies be established for all the components of the budget other than agriculture, strikes me as one that needs further exploration.

It is to be welcomed that a positive DAS can be given for pre-accession aid. In 2004, experience in the new Member States had not yet been taken into consideration. We hope that in future, the control mechanisms will remain in place in the new countries too. I welcome the peer review, which the President of the Court of Auditors did not mention this morning, but did announce yesterday, about the running of the Court of Auditors itself. No institution can be without criticism, without constructive criticism that is. If the Court of Auditors’ work over the past few years were to be assessed, that could, to my mind, benefit the whole functioning of the Court of Auditors in Europe.

  Bart Staes, on behalf of the Verts/ALE Group. – (NL) Mr President, this debate is kick-starting the 2004 discharge procedure. An initial cursory reading of the annual report tells us that the Commission has organised itself more effectively since the fall of the Santer Commission and since the start of the reform process. The good news is that spending of the European budget has improved for the third year running. The bad news is that, for the eleventh time in succession, the Court of Auditors has failed to issue a positive Statement of Assurance (DAS). There is therefore no certainty about the reliability of the figures.

The reason is clear: the monitoring and control systems have either not yet been implemented, or they are ineffective, or the payments show up errors of significant importance. We are talking about the agricultural and structural policy, as well as the internal and external policy, which involve more than 4/5 of the entire European budget of 105 billion. A central problem in this connection is that 80 to 85% of the management and supervision is shared with the Member States. The Finance Ministers refuse to accept their part of the responsibility in this respect, which is an absolute disgrace. They want money from Brussels, but not the accountability that goes with it.

Once again, the annual report calls attention to the problem of export restitutions which account for EUR 3.6 billion, or 7.5% of the agricultural budget. In terms of value, though, they account for 26% of the irregularities reported to the Commission. The Member States should physically check 5% of the export restitution dossiers, but they fail miserably in that respect too. I was pleased to see that point 4.30 and note 20 of the annual report contained the recommendation to have the inspection take place at the level of the final beneficiaries, and I quote: ‘such a reach would form a stronger and clearer chain in terms of accountability for CAP spending.’

That is why I would make another urgent plea to make the lists of final beneficiaries public. That is precisely what Estonia, Denmark, the United Kingdom and the Netherlands did. Flanders and Belgium, on the other hand, opted for mock transparency by lumping all the figures together, which made proper analysis impossible. We can, however, learn a great deal from those tables in terms of anomalies in our agricultural policy. For example, over the past five years, Philip Morris, the tobacco giant, has received EUR 6.5 million in the Netherlands for adding sugar to cigarettes. Given the high sugar price at EU level, Philip Morris has been compensated for this.

Similarly, the KLM catering service received EUR 646 000, because it uses sugar, dairy products, vegetables and fruit on flights outside of the European Union. They are considered as exports and are therefore eligible for export restitution aid. Surely that is too crazy for words, but it is only the tip of the iceberg. Europe, the European Union and the European agricultural policy will be acceptable to its citizens only if these excrescences are addressed. I wish all rapporteurs in the discharge procedure, and particularly Mr Mulder, much success and I hope that in the next few months, we will be able to carry out our work effectively and issue sound discharge reports in the April part-session next year.

  Jeffrey Titford, on behalf of the IND/DEM Group. – Mr President, here we go again. I stood here nearly a year ago to comment on the tenth anniversary of the European Court of Auditors’ refusal to sign off the EU accounts. I said then and I will say again that it is time to admit that this form of European government is an abject failure and that it should be abolished. The nation states would be far better off looking after their own interests. Personally I would not trust the European Commission, past or present, to look after my grandchildren’s pocket money. Three weeks ago I made a speech in this House calling for the 2006 budget to be rejected on the grounds that this Parliament has no business authorising further expenditure when we have the shame of a decade of dodgy unapproved accounts behind us.

Well, this is year eleven; it is a shameful situation that cannot continue. The Court’s latest report is another litany of the failings of European Commission bureaucracy. We were promised that a new computer system would close all the loopholes. The reality is that that the accounts will still be about as watertight as a colander.

The Members of this institution should feel a strong obligation to the taxpayers of Europe, for it is their money that is pouring through the holes of the colander. The British Government is under an obligation to spend taxpayers’ money wisely and yet it goes on tamely writing the cheques to the European Union.

Make no mistake, I shall go on being the conscience of this institution. I shall keep pointing out what a disaster it is. My conscience is clear. Is yours, I ask? Incidentally, I look at the attendance of Members here today as an indication of the importance they attach to the handling of the taxpayers’ money by the European Union. Enough said.

  Hans-Peter Martin (NI). – (DE) Mr President, what Europe could really do with, particularly under present circumstances, is a Court of Auditors like a dynamic tiger, prowling through the landscape and pouncing where necessary. This annual report, though, is yet more evidence that it is not, perhaps, really a predator, but rather a toothless creature sitting in a cage. It is toothless because it is impossible that such an institution should have teeth. If you compare the powers of the European Court of Auditors with those of its Bavarian counterpart, the two are worlds apart. I know of only one institution constituted as a Court of Auditors that is even worse equipped in terms of theoretical and practical powers than the European one, and that is the Audit Office in Vienna. Whenever discussion turns to how it might act transnationally, the constant refrain goes like this: ‘I can assure you that the Court of Auditors welcomes any debate on potential improvements to the audit procedure.’

What I suggest is that you should be constructive. Put out a memorandum in which you, the Court of Auditors, cannot really discharge your duties because you lack the powers, because there are things that you are not allowed to do, and because the way in which your staff are selected – which, politically speaking, is what makes everything happen – means that you are not in a position to perform your functions. Do that, and you really will be doing Europe a service. That would be a first step towards transparency and towards making monitoring possible, both of which we need if we are to help this Union of ours regain its credibility.

  Alexander Stubb (PPE-DE). – Mr President, listening to the UK Independence Party talking about the Commission not being able to manage its grandchildren’s pocket money, I must say that I would rather have the Commission managing it than the UK Independence Party! In any case, I would like to make three main points, firstly a general point, and then two points aimed at the Commission and then the Council.

My first and general point is that I think this is a good report. The aim of the report is to improve the control environment as it stands, to make the use of money more transparent and more understandable and to get rid of fraud and mismanagement. There have been some improvements but, as many have said, a lot remains to be done. Having said that, I do not think any company would receive a positive Statement of Assurance – DAS – using the method that the Court of Auditors does.

My second point is that I would like to congratulate the Commission. I know that it gets a lot of flak for the way in which it uses the money at its disposal, some of which is justified, but most of which is not. It has made a lot of improvements. I like what it has done on establishing a roadmap to a positive DAS and what it has done on accounting.

My final point is a criticism of the Council, not merely of the fact it is not present today but of the fact that – just as the UK Independence Party was doing a second or two ago – it is trying to create the illusion that everything is the fault of the Commission or the other EU institutions. That is simply not the case. Eighty per cent of the money used in the European Union is used in the Member States. That is why I condemn the fact that, at the Ecofin Council two weeks ago, the Finance Ministers once again refused to sign a declaration of assurances. I think we could go very much further in this whole process of the management of finances if the Finance Ministers were to take their responsibility.

To sum up: one, we are improving the system; two, the problem is not the Commission, but the Member States; and three, I am optimistic that in five years’ time we will have a positive DAS.

  Szabolcs Fazakas (PSE). – (HU) Mr President, 2004 was the year of enlargement, so the 2004 annual report is the first that relates to all twenty-five Member States. This is another reason why it is good that the report before us gives a positive, realistic and balanced statement regarding how European Union money was spent in both the old and new Member States.

The Court of Auditors’ Annual Report 2004 shows the impact of the reforms launched last year. This was the aim of the report produced by my colleague, Terry Wynn, and adopted by Parliament by a large majority; it is also the aim of the integrated administration and control system announced by the European Commission and Commission Vice-President, Siim Kallas.

The reform is based on mutual trust and close cooperation between the European Parliament, the Commission and the Court of Auditors. In addition to these, to bring the reform about the Council would need to intervene to introduce declarations of assurance at national level, but there seems to be continued resistance to this. Without it, however, we cannot move forward; we need a declaration of assurance from the Council too.

  Margarita Starkevičiūtė (ALDE). – (LT) Reviewing the results of the audit of the Community financial accounts for the year 2004, I am delighted to see that the auditors’ evaluation in respect of the administration of pre-accession funding allocated to my homeland, Lithuania, has been positive.

Unfortunately, the same cannot be said about the general evaluation of the status of EU accounts. A paradoxical situation has arisen where the beneficiaries are unable to access the funds appropriated to them since the various supervisory requirements are overly-complex and disproportionate in relation to the benefit obtained, while the auditors maintain that such requirements do not provide sufficient grounds for debate.

It is obvious that the current support accounting system prevents the attainment of the main fiscal objective of the EU – to transparently and efficiently use the funds of the EU budget. Therefore I would like to call on the European Commission and the auditors to urge the implementation of the reform plan and speak more decidedly of the problems that constitute vast and inexhaustible resources. I am optimistic in believing that the reforms and an integrated internal control system may be instrumental in coping with the outstanding problems.

  Nils Lundgren (IND/DEM). – (SV) Mr President, I wish to begin by issuing a protest against our having to debate the Court of Auditors’ report without having access to it in advance, a state of affairs that puts us at a big disadvantage. Fortunately, we recognise more or less everything from previous years. We could perhaps have read last year’s report and put forward the same views. What we have here are the same problems and the same accounting deficiencies, and we learn that the problems will remain. We are told that the Court of Auditors ‘cannot guarantee’ etc. The talk is of dicey transactions, defects in the monitoring systems and hosts of errors etc, etc. There is a road map for an internal monitoring system, which I greatly welcome, but matters are mostly as they were before, that is to say in a bad state.

I wish nonetheless to point out that the European institutions are of course audited by the European Court of Auditors, while the national systems are obviously audited by various national auditing bodies. As in so many other areas, there applies, in this context too, a rule whereby an 80/20 ratio applies according to which a fifth of the cashflows may be controlled here and the remaining portion on a national basis. It is incredibly important for us to put forward a proposal concerning the way in which we can produce some structured cooperation on this issue. Otherwise, the Court of Auditor’s task will continue to be impossible in practice.

The main problems we see stem from the common agricultural policy, the Structural Funds and the Committee of the Regions. There is good cause for abolishing the agricultural policy, the Committee of the Regions and the European Economic and Social Committee. These are all things that belong to another era and perform no function in today’s EU. Instead, amounts from the Structural Funds should begin to go directly to the EU’s poorer Member States. All the problems about which we are now talking would then largely disappear.

  Simon Busuttil (PPE-DE). – (MT) At a moment when Europe is not going through a good time in public opinion it is not easy to explain to the people that the European Union, which for many is a model of how things should be done well, is in fact not only not perfect, but it needs to do much more to guarantee that the money passed to it is in fact being used as it should. The report we have in front of us is a case of déjà vu; it told us again that the Court cannot be sure that every Euro spent was in fact spent in a completely regular way, although the report notes as well that some progress has been made in a problematic sector such as agriculture, which after all takes up an enormous share of the budget. However it would be a mistake if we give up looking for a more effective system of budgetary control. On the one hand, we feel a sense of sorrow when we hear that there are still a lot of shortcomings in the control system, however, on the other hand there is the frustration that it looks like we are always seeking further perfection, a perfection represented by the DAS system, up to a perfection which year after year we are continually realising that yes, we can come closer to it, but that we will surely never reach. Now we can either play the game of those who want to make everything look black or else admit that nobody is perfect and everybody shoulder their responsibilities. This applies both to us at the European Parliament, as well as to the European Commission, but also to the Member States themselves.

  Herbert Bösch (PSE). – (DE) Mr President, I very much want to congratulate the Court of Auditors on this report. In the short time in which it has been available to us, it has become evident to me that it contains much data that provides us with outstanding criteria for what is, in the final analysis, our task – that of giving or withholding discharge.

So often has it been said that the finance ministers have to sign their accounts, but let us consider the areas where it is the Commission alone that has responsibility for what is spent: it is there that we will see terrible things. In the internal policy sphere, six out of eleven Directors-General are unable to give an unconditional guarantee. Show me a minister of finance who would do so in their position! I have never come across one yet.

This outstanding report leads me to press on the Court of Auditors the urgency of our focusing on the directly-managed expenditure and trying to get that absolutely right. If we do that, we will be much more successful in our dealings with the Member States than we are at present.

  Markus Ferber (PPE-DE). – (DE) Mr President, Mr President of the Court of Auditors, Commissioner, ladies and gentlemen, I can echo what Mr Bösch said. I think we are oversimplifying things if we say that, as 80% of funds are administered by the Member States, it is for them to see to it that everything is in order.

We have indeed had problems over recent years, and it is true to say that they led to the Commission standing down in 1999, but none of them had to do with resources managed at national level – all of them, on the contrary, were administered by the Commission itself.

We, in the Terence Wynn report – and let me make this quite clear – said that we wanted to involve the national and – where they exist – provincial Courts of Auditors in the discharge procedure. Looking today at the way in which things are done at the national and European levels, it is clear to me that the two are incompatible. Do not misunderstand me: I object to the idea that what we in Europe do, those things that you are there to do, Mr President of the Court of Auditors, should be handed over to the national systems; instead, we should be giving some thought, where the auditing framework is concerned, to doing things the other way around. There is room for improvement in Europe, too, and we can certainly learn from the Member States. What is needed is for the Heads of State or Government to be astute enough and wise enough to provide the legal framework that is needed to make that possible.

It is not your problem, Mr Weber; it is a problem for those from whom you receive your mandate, and that is not us, but rather the Heads of State or Government. Speaking, among other things, as a Member of the Committee on Budgets, let me say quite plainly that we need to denounce the attitude they adopt, of not wanting to pay anything into the EU, of wanting their own countries to get as much back as possible out of it, while not wanting to let anyone in Brussels see what is going on. It is this attitude that we have to deal with; that is where we have to make a start. If we do, we will really have done something for Europe, for its credibility and for its people.

The Court of Auditors’ report is important, but not crucial; what is crucial is what we in this House do with it. I look forward to the debates in the Committee on the Control of Budgets and to the discharge procedure, which will be completed early next year.

  Terence Wynn (PSE). – Mr President, a week ago the Ecofin Council rejected Parliament’s proposals for national declarations, which in effect means that we will not see a positive DAS in the foreseeable future. The Ecofin proposals are a poor substitute for real action and came out of a two-day panel of experts meeting which I attended. It was a meeting that reminded me of Margaret Thatcher’s comments at a similar meeting when she complained of being surrounded by people who found every reason for not doing things and not changing things rather than giving her solutions to the problems she had.

Parliament needs to know which Member States agree, and which disagree, with its position.

In all seriousness, the comment from the UK Independence Party should not be disregarded. Why, indeed, should we agree a new financial perspective when supervisory and control systems are so blatantly flawed within the Member States? That is a message that must be conveyed to the Council loudly and strongly.

  Hubert Weber, President of the Court of Auditors. (DE) Mr President, our being able to present our report to policymakers, among them the Vice-President of the Commission, Mr Kallas, makes this a great day for the Court of Auditors. We are grateful for the responses our activity elicits from policymakers.

Our report shows that considerable improvements have been achieved. Without doubt, there is a certain amount that remains to be done in some areas, not only by the Commission, but also by the Member States. The importance of the declarations has already been mentioned, and I can only agree with that, but they are not everything. What we really should be doing is pressing on to find the source of the errors and seek there the incentive for reforms. Hundreds of times over, we have done spot-checks and examined transactions. We have discovered hundreds of errors – errors both of form and of substance. The Commission knows about these errors, and it will deal with them. The Member States know about them too. This is where we should start.

I believe – and I am saying this also for Mr Martin’s benefit – that our mandate is an excellent one; we are satisfied with it, and we need no other. International comparisons show us in a very good light. What matters is that our conclusions be taken seriously and acted on in good time. It is not enough for us to bring in a new system; we also need to make use of it and make it practicable.

What has also become apparent is that the legal framework needs to be simplified. There are many areas in which no improvements will be made if procedures continue to be so complicated.

I also have to say that, if we apply such rigorous standards to the offices and departments we audit, then we cannot complain if the same standards are applied to us. It is planned that this should be done through a peer review.

We are always being told that the Court of Auditors wants more audits. On the contrary, we want no such thing. We do not want more audits; we want more effective, more efficient audits, from which lessons can be drawn in due course.

  President. That concludes the debate on this item.

(The sitting was interrupted for a few moments.)

Written Statement (Rule 142)

  Véronique Mathieu (PPE-DE). – (FR) It is disappointing and frustrating that the Statement of Assurance should once again be negative. This means that there is still no guarantee that spending is legal and above-board and means that doubts persist as to the reliability of the accounting practices.

Who should be held responsible for this? The Member States, for the methodology used and for the poor implementation of the payment system? The Commission which, in accordance with Article 274 of the Treaty, is responsible for executing the European budget?

Let us draw some lessons from the observations made by the Court of Auditors: it is vital to make the national administrations aware of their responsibilities so that the European appropriations may be properly accounted for. The Court also has to provide a clear outline of the practical measures that the Commission has to adopt in order to achieve a positive DAS.

In Europe’s present context of disrepute, the weak points in the management and control systems must not allow the Eurosceptics to undermine the fundamental principles and main policies of the Union, which are aimed at strengthening territorial, economic and social cohesion. The Commission and the Member States must enhance their efforts in order to achieve a positive DAS. The credibility of the Union and the people’s confidence in it depend on this being done.

IN THE CHAIR: MR BORRELL FONTELLES
President

(The sitting was resumed at 10.15 a.m.)