Verbatim report of proceedings

Thursday, 22 November 2012 - Strasbourg

7. Presentation of the Court of Auditors’ annual report - 2011 (debate)

  President. − (IT) The next item is the debate on the Annual Report of the Court of Auditors for 2011.

It is my great pleasure, on behalf of the House, to welcome the President of the Court of Auditors, Mr Vítor Manuel da Silva Caldeira.

  Vítor Manuel da Silva Caldeira, President of the Court of Auditors. − Mr President, it is a great honour for me to present to this Parliament today the annual report on the implementation of the 2011 European Union budget. I will start with its main conclusions.

The 2011 accounts present fairly the financial position of the European Union, the results of its operations and its cash flows for that year. Revenue and commitments for payments were free from material error. However, payments were affected by material error, with an estimated error rate of 3.9 % for the European Union budget as a whole. The estimated level for 2010 was similar at 3.7 %. Put simply, the Court found too many examples of European Union spending not hitting the target or being used sub-optimally.

This Annual Report’s message is consistent with previous years. Despite an overall fall in the estimated error rate over the current programme period, there remains scope to spend European Union money more efficiently and in a better targeted manner in many different areas and schemes and expenditure programmes.

Overall, the control systems examined by the Court were found to be only partially effective and not realising their full potential to prevent or detect and correct errors. The two areas – or ‘policy groups’ – with the highest estimated error rate were ‘Rural development, environment, fisheries and health’, where the error rate was estimated at 7.7 %, and the policy group ‘Regional policy, energy and transport’, where the error rate was estimated at 6.0 %.

In these areas, as in all areas under shared management, national authorities operate the first – and most important – line of defence in protecting the financial interests of EU citizens. But the Court found many instances of control failure at Member State level. For example, in the majority of transactions in regional policy where the Court found errors, sufficient information was available for the Member State authorities to have detected and corrected at least some of those errors before claiming reimbursement from the Commission.

That said, the Court also found similar problems in certain areas directly managed by the Commission, including the policy group ‘research and internal policies’, where the Court estimated the error rate to be 3 %.

The Court notes in this report that the Commission’s directors-general have also recognised a high risk of error in rural development, cohesion and research. They increased their estimate of the spending at risk of irregularity from EUR 400 million in 2010 to EUR 2 billion in 2011.

There have been improvements over the current programming period, but there is still some way to go before European Union financial management is up to standard in all areas of the European Union budget. Many of the problems we have identified in the past still remain, albeit to a lesser extent. In fact, the fall in the Court’s estimated error rate for the European budget as a whole under the current framework shows that improving the rules and design of spending schemes from one period to the next does make a difference. And now, with legislative proposals for the next framework period under discussion, there is a golden opportunity to address their underlying causes.

For many years, the Court has called for single schemes with clearer objectives, easier-to-measure results, and more cost-effective control arrangements. This year’s Annual Report confirms this message.

Member States and Parliament must now agree better rules for how European Union money is spent, and Member States and the Commission must enforce them properly. In this way, the European Union budget could be used more efficiently and effectively to deliver greater added value for citizens.

At the same time as considering the legislative proposals for the next financial framework period, European institutions and Member States are also engaged in setting up new European systems, mechanisms and governance arrangements in other domains related to public financial management, notably regarding the supervision of the financial system and the coordination of fiscal and economic policies.

The success of these initiatives will depend also on ensuring that the necessary democratic legitimacy and accountability arrangements are in place. In the Court’s view, appropriate public scrutiny and audit of all public funds put at stake to meet the European Union objectives is a key component that must be clearly safeguarded from the outset of such initiatives.

Ensuring sound public finances has never been more important for the European Union. The Court is committed to contributing, as best it can, to the European Union’s efforts to achieve this important goal, through our work and the Annual Report that I have had the honour to present to you today.

  Algirdas Šemeta, Member of the Commission. − Madam President, President Caldeira, Mr rapporteur, honourable Members of the Parliament and of the Court of Auditors, the Annual Report of the Court of Auditors is published at a time when the legislative and budgetary authorities are about to finalise the design and the resources for the next multiannual financial framework.

Drawing lessons from previous budgetary discharge procedures, new management and control mechanisms were proposed for the future programmes. The new Financial Regulation introduces considerable reforms, focusing strongly on European added value and simplification. The Commission proposals for the next programming period aim also at strengthening the accountability of all financial actors. Finally, cost-effective control mechanisms were proposed throughout all EU programmes. These measures are likely to address effectively the weaknesses and errors which are currently observed.

At the presentation of the Court’s Annual Report in the Budgetary Control Committee earlier this month, Members of this House asked themselves what they could do to improve further the situation. I would like to stress that you – this Parliament – have already substantially contributed to that goal.

Firstly, getting the error rate from 7.3 % in 2006 to 3.9 % in 2011 can be explained largely by the follow-up given by the Commission to your recommendations. It serves to demonstrate the usefulness and added value of a constructive dialogue between the Commission and the discharge authority.

Secondly, the substantial improvements in the new Financial Regulation would have been impossible to achieve without the very strong cooperation between our two institutions. Thirdly, we still have to get the other proposals adopted by the co-legislators, including programmes under shared management. The Parliament, as discharge authority and co-legislator, has a crucial role to play in promoting sound financial management principles in this context.

The Council shares with the Parliament the responsibility of putting in place a solid legal framework for the next financial period which will guarantee that the sound financial principles are respected. But the Council will also issue a recommendation to the Parliament on the discharge. This is a unique opportunity to look at what the Member States can do specifically, with the Commission, to improve the performance of the programmes under shared management. Therefore, I call on the current and future Presidencies to organise extensive discussions with the Member States on these important issues.

Let me now pass to a few points regarding the Court of Auditors report on the financial year 2011.

Firstly, for the fifth consecutive time, the Court of Auditors has issued an unqualified positive opinion on the annual accounts of the EU. Secondly, the overall error rate for all payments made in 2011 remains stable compared with 2010, even though the risk profile of the transactions increased in 2011.

Thirdly, commitments and revenues for the entire budget are free from material errors. So, moreover, are the payments for external aid, development, enlargement and administrative expenditure. Fourthly, following the increased error rate for rural development, a thorough action plan is being implemented to identify, in collaboration with the Member States, the root causes of these errors and to address the weaknesses under the current and future programming period.

Fifthly, the error rate for internal policies increased, up to 3 %. The Commission is looking into the cases in order to prevent the occurrence of similar problems in the short term. In the longer term, Horizon 2020 will lead to further simplification and fewer errors.

Finally, in cohesion policy the error rate significantly decreased from 7.7 % in 2010 to 5.1 % in 2011. The report of the Court is a clear signal that more has to be done. The Commission will focus its supervision and assistance on the riskiest areas and partners, and it will pursue a strict management and control policy for the programmes under its direct responsibility. But the Member States have to step up their efforts as well.

According to the Court, more than 60 % of those errors identified for the Regional Fund and 76 % for the European Social Fund should have been detected by the national authorities before they sent their claims to the Commission. The room for improvement there is very clear indeed. There will be no let-up in the efforts of the Commission’s services to reduce further the risk of errors. I believe, nonetheless, that it is appropriate to put the estimated error rate into perspective, bearing in mind the main financial responsibility of the Commission: to defend the EU’s financial interests.

It is essential to stress that the weaknesses identified by the Court do not lead to massive loss of money or fraud. This becomes clearer when taking into consideration the multiannual dimension of the spending programmes and their preventive and corrective mechanisms.

The Commission has recovered or corrected EUR 1.84 billion in incorrect payments in 2011. Even if those amounts also relate to payments made in previous years, in financial terms these financial corrections and recoveries represent 1.4 % of the payments made in 2011. This figure does not yet include amounts recovered or corrected by Member States in the area of cohesion following their own audits and controls.

The Commission will endeavour to get more reliable data from the Member States in order to be able to present next year a more complete picture of the corrective measures implemented at EU and national levels.

Following past discharge recommendations of this House, the Commission has taken major steps in order to prevent further errors. In cohesion, the Commission decided in 2011 to initiate 13 suspension procedures and to interrupt the deadlines for 105 payments amounting to a total of EUR 2.75 billion. These instruments will also be strictly applied in the future. From 2014, they will hopefully be complemented by the net correction mechanism proposed for all programmes under shared management.

Honourable Members of Parliament and of the Court of Auditors, the Commission takes its responsibility seriously and will continue its work to achieve better results in the future for the benefit of EU citizens and taxpayers. It will take all necessary measures to address the weaknesses observed by the Court and intensify its cooperation with the discharge authority to bring about the anticipated improvements. The role of the Member States is essential in this respect, as is their commitment to assuming their responsibility and obligations under shared management. As I have said, I count on the current and next Presidencies to contribute actively to this goal in the Council.

  Markus Pieper, on behalf of the PPE Group. – (DE) Madam President, Commissioner, Mr President, unfortunately, the Court of Auditors’ annual report, notwithstanding all of the progress made, gives no cause to silence the alarm bells. The error rate is rising again, with a second consecutive increase in 2011. There are surprisingly high anomalies in rural development and the Cohesion Fund. What I find especially annoying is that 62 % of the errors found by the Court of Auditors should in fact have been detected by the Member States themselves, and this is on the increase. Ladies and gentlemen, this is not the way to build trust and confidence. However, the fact that the Court of Auditors steadfastly refuses to publish a breakdown of its statistics on the errors made by each Member State is not the way to do so either.

In my view, there are three lessons to be learned from the report. Firstly, it is clearer than ever, in my view, that EU funds should only be channelled to properly functioning administrations. In other words, what is needed here is more supervisory responsibility for the Commission, but as another logical consequence, there must be conditionalities in relation to the Structural Funds and the agricultural funds. European funds should only flow if European legislation – for example in the field of competition law and procurement – is genuinely being implemented. There should be no cash for unreliable governments and poor administrations!

The second lesson is this: surely the error rates must be more transparent, based on a country breakdown? There is still a lingering impression that there is something to hide, and that is not a good signal to send out at a time when we are seeking to build trust and confidence in the EU.

Thirdly, Parliament should do more than simply act as a referee between the Court of Auditors and the Commission. Now, for the first time, we share the responsibility of putting in place a legal framework, notably in respect of agricultural and structural policy, which are the largest areas of the budget. However, do we genuinely have the capacity to exert effective budget control? In other words, are our capacities commensurate with this newly acquired responsibility?

The Court of Auditors, the Commission and the European Anti-Fraud Office (OLAF) are powerful and well-established structures. If we genuinely want to exert independent parliamentary control, the European Parliament must have more authority. Exactly where is something that we need to discuss in the discharge procedure.

  Jens Geier, on behalf of the S&D Group. – (DE) Madam President, President Caldeira, Commissioner Šemeta, ladies and gentlemen, I would like to begin by thanking the Court of Auditors for presenting this annual report, our most important tool in the discharge procedure for the Commission’s budget. My sincere thanks for this transparent report, which I believe will do much to help us more forward.

This report makes it clear that for the 18th time in succession, there can only be a limited statement of assurance for the work of the Commission, and as Mr Pieper has already said, the trend towards an improving error rate year on year has stopped.

This House abides by its demand, however: what we want to see is a clear trend towards an improving error rate in the implementation of the EU budget. We are not prepared to accept the present situation.

The Court of Auditors’ annual report also sends out a clear message to the Council, however, which is meeting this evening in order to find a compromise for the multiannual financial framework. Poorly functioning management and control systems in the Member States, overdue financial corrections at a high level, unnecessarily complicated rules in the Member States: anyone who wants better spending and does not use this as camouflage for cuts can start here.

Anyone who wants better spending must improve the controls in the Member States, not cut the budgets. Anyone who wants better spending must also do their homework in their own country, for in Germany, the Netherlands and the United Kingdom, the control systems, according to the Court of Auditors and the Commission, are only effective to a limited extent.

What concerns us about budget management in 2011 is that in some areas of the budget, the figures have got worse, as Mr Pieper has already pointed out. In research policy, for example – an area of the budget that is, in fact, directly administered by the Commission – the error rate has doubled from 1.4 to 3 %. Here, we must demand a plan of action from the Commissioner for Research, setting out how the Commission intends to reduce these error rates.

In the common agricultural policy, the error rate generally hovered around the materiality threshold of 2 %. Now, the Court of Auditors estimates the error rate in rural development to be an incredible 7.7 %, meaning that spending on rural development has by far the highest error rate of any area investigated.

We cannot be consoled by the explanation that the programmes in the Member States have now reached full maturity, or by the explanation that the number of development projects is also increasing, so the errors are rising as well. No, what we want to see here is a remedy, and the Directorate-General for Agriculture and Rural Development and Commissioner Cioloş should be resolute in their efforts to move Member States towards better controls, as has already been achieved in regional policy. This is a good example of how tackling the causes can have a positive effect.

The figure of 6 % for erroneous payments as a proportion of the total is still too high but the trend is moving in the right direction. The action plan adopted in 2008 has done much to improve the situation by greatly increasing the Commission’s supervision of the national management and control systems. Commissioner Cioloş should therefore start by seeking ideas for his own action plan to reduce the growing error rates in agricultural policy as well.

There is room for improvement in regional policy too. We want retrospective projects to be removed from funding at last. We want the Directorate-General for Regional Policy to take the same robust action as the Directorate-General for Employment by suspending and cancelling funding programmes if Member States cannot guarantee proper and lawful control, and we want net corrections: Member States should only be able to transfer funds to other projects if they themselves detect errors in project management. If they are unable to detect the errors themselves, as is so often the case, the funding should revert to the Commission.

  Jorgo Chatzimarkakis, on behalf of the ALDE Group. – (DE) Madam President, President Caldeira, ladies and gentlemen, first of all, I would like to thank the Court of Auditors for the important work that it undertakes on behalf of the European taxpayer every year. Mr Caldeira, you and the Court are and will remain a valued partner for us as Members of this House, the representatives of the European Union’s discharge authority.

A year ago, as we sat here discussing the Court of Auditor’s previous report, I said that the Court’s report presented a positive picture, but there were some grey areas. The picture is becoming steadily brighter, but there are still some spots of grey. The sum of EUR 130 billion was available in 2011, and of this figure, EUR 5 billion should never have been disbursed. That is an error rate of 3.9 %. Compared with previous years, that is an improvement, but it is still much too high. I am at a loss to explain how these figures can possibly be justified in view of the budget constraints throughout the EU.

However, there are some positive aspects. The instruments that Parliament, in its discharge reports, has given the Commission, especially in recent years, are being utilised at last and are working. This is happening to an exemplary – extremely exemplary – degree in the field of employment and social affairs. The Directorate-General for Employment, Social Affairs and Inclusion and its Commissioner, Mr Andor, have since 2008 applied a consistent policy of suspending and discontinuing payments if current projects simply do not work. As a result, the error rate here has fallen to 2.2 %. I would like to congratulate you, Commissioner Andor, on these consistent efforts, which show how it should be done. I would like to extend these congratulations to Commissioner Šemeta as well, for he is of course involving in overseeing these efforts.

I myself, as one of the previous rapporteurs for the budget discharge, together with my parliamentary colleagues, reminded the House that funds that have been disbursed without justification must be recovered. This measure is also being used to an increasing extent, and I would like to congratulate you on this as well. My perusal of the Annual Summaries, which we Members are now permitted to inspect, has convinced me that this instrument is working.

As regards efficiency, there are still some problems here. The evaluation report has rightly been criticised by the Court of Auditors for being too vague. I would like to offer Mr Geier, who is reporting on the budget discharge this year, the support of the House as a whole in order to ensure that the procedure is improved.

  Bart Staes, on behalf of the Verts/ALE Group. – (NL) Madam President, Commissioner, members of the Court of Auditors, ladies and gentlemen, the book in front of us does not present a pretty picture. For the eighteenth time in a row it has not been possible to give a statement of assurance and the margin of error has increased again, albeit slightly, to 3.9 %. The Court of Auditors found errors in a great many policy areas: agriculture, rural development, fisheries, research, health, regional policy, energy, transport. That is no trivial matter. Every one of these policy areas are under the joint management of the Commission and the Member States.

Mr Šemeta stressed it once again in his speech. He reiterated the figures from the Court of Auditor’s report: 60 % errors in the Regional Fund, 76 % errors in the Social Fund. The Member States should have taken action on this. They knew it but they did not do it.

I therefore ask the Court of Auditors: would it not be useful to be clearer in your report on which Member States are at fault? Which are doing it right and which are doing badly? That would be useful for our exercise with rapporteur Geier, because we could then tackle the poor performers more forcefully, give better guidance and get them to face up to their responsibilities. Then we might be able to avoid much of the criticism.

I have one final point: I think that we also need to pay far more attention to our own resources, particularly VAT. VAT fraud is estimated at around EUR 100 billion. That is not a trivial matter, certainly in times of crisis. When everyone is having to make savings, I think it is extremely important that, in the fight against fraud, we focus more intensely on combating the criminal organisations that make off with vast amounts of our taxes.

  Andrea Češková, on behalf of the ECR Group. – (CS) Madam President, overall I think that the findings of the European Court of Auditors as worrying. I am of the view that the greatest problem is the error rate in the distribution of Union resources under shared management at Member State level. In view of the fact that there are two areas with an alarming error rate, it is essential to adopt a regime that would enable the Commission to evaluate Member States’ individual difficulties and to react to them in a timely manner.

Financial resources were expended in 2011 in many areas of EU policy in contravention of the rules. The examples mentioned in the Court of Auditors’ Annual Report are often a sad picture of the way in which public resources are handled. Farmers are taking subsidies for more land than they are actually farming and the data in land registries often differ from reality. The employment and social affairs policy has paid out for inappropriate costs, there has been overestimation of personal costs and unsuitable participants have been sent for training. Recipients of Union resources have claimed unjustifiable or unspent costs. The reason for the errors is overestimation of costs on the part of recipients and non-existent supporting documentation.

A considerable number of errors are also associated with the way in which the selection and award procedures are handled. There have been contraventions of conditionality and incorrect data have been provided by both recipients and Member States. The question arises as to whether the rules are actually too complicated or are these shortcomings the result of a reluctance to become thoroughly familiar with them and to be guided by them, or the result of other less honourable intentions. For example, in the regional policy programmes, more than half of the audited operations were beset by errors, even though the Member States’ authorities had sufficient information to be able to detect and correct most of the errors prior to the submission of certified expenditure to the Commission. Indeed, this problem affects not only regional policy, but also other areas of European Union policy.

It is clear that control in the Member States is failing. I believe that the competent authorities in Member States should work more efficiently and bear more responsibility, since this has been under discussion for a long time now. The control systems in most areas of European Union policy have been considered only partially fit for purpose, and we know that it is essential to put in place transparent rules and strict controls at all levels. Apart from formal controls, however, it is also vital to direct financial resources correctly and to invest in meaningful projects. Even if a given project is formally in order, it need not always be of benefit for European citizens.

  Marta Andreasen, on behalf of the EFD Group. – Madam President, this is now shamefully the 18th year in a row that the auditors cannot clear the EU budget. Worse, 50 % of the samples taken by the auditors show irregularities. The excuses the Commission puts forward are always the same: it is the fault of the Member States: they commit the irregularities. But taxpayers entrust their monies to the European Commission, which abjectly fails to perform essential controls before it hands the cash over to the Member States.

This House is also to blame by continually rubber-stamping the EU budget on the basis that ‘error’ does not necessarily mean ‘fraud’. Well, if a farmer gets money for the welfare of his 150 sheep and the auditors find that he does not have any, in the real world this would be considered fraud. The point is that if the Commission refuses to take responsibility for taxpayers’ money and blames Member States, why does it ask for more money to fund those same Member States? This is yet another reason why the EU budget should be cut. What are we waiting for?

  Søren Bo Søndergaard, on behalf of the GUE/NGL Group. – (DA) Madam President, I would like to thank the Court of Auditors for a good report. Unfortunately, as has been said, it documents the fact that things are moving in the wrong direction. From 2006 to 2009, the incidence of errors in the EU accounts as a whole fell to 3.3 %. This was a good development, but the error rate has increased since then. In 2010 it rose to 3.7 %, and in 2011 it was 3.9 %. It is also interesting to see that the number of errors in the transactions tested has increased considerably, from approximately 33 % in 2010 to 40 % in 2011. This is not good enough.

When things were going in the right direction, the Commission took the credit, and, as I said at the time, I do not hold a grudge against the Commission for that. However, it is also clear who is responsible when the error rate increases. Since that time, two years ago, the error rate has risen two years in a row, and it is not right that the Commission deflects the blame onto everyone else, because ultimately it is the Commission that is responsible for the money paid out from the EU budget.

Next year will therefore be crucial. If we see an increase in the error rate for the third year in a row, it will be impossible for us parliamentarians to justify it to our voters. We can live with it going in the right direction, albeit slowly and from an excessively high level. However, we cannot live with it going in the wrong direction year after year. If so, the voters will punish us hard – and with good reason.

  Nicole Sinclaire (NI). – Madam President, my constituents will not be too surprised to learn that their hard-earned money taken by taxes and passed on to the EU is being negligently handed out by the net recipients of the EU budget. In a week when many Member States are seeking an increase in the EU budget to just over EUR one trillion, my constituents in the UK say this is unacceptable in a time of austerity. The blame for the failure to have the audit signed off for the 18th year lies firmly at the door of the unelected bureaucrats of the EU. They have failed the taxpayers of Europe once again.

I note that 60 % of the errors found by the Court could have been detected by Member States, yet it is the quagmire of rules and unnecessary complications that is at fault. And what is the EU doing to correct this? It is not even notifying the Member States concerned of the direct problems.

One of the examples of the billions wasted is the EUR 700 million to establish the rule of law and reduce corruption in Kosovo, but the results are poor according to the report. Staff delegated were not even sufficiently trained, yet the EU thinks that by throwing in taxpayers’ money without reasonable constraint it can solve the problem. And what about pan-European parties? What about public financing of political parties such as the right-wing extremist parties to which some UKIP Members have signed up, some Nazis – what about the financing of that? A colleague of mine talked about confidence. Well, the people of the UK have less and less confidence in the EU, which is why we need an in-or-out referendum, sooner rather than later.

  Eva Ortiz Vilella (PPE). – (ES) Madam President, I would like to thank the President of the Court of Auditors for his presentation and the Commissioner for his statement.

The figures show that a number of issues need to be examined and we all – Parliament’s Committee on Budgetary Control, the President of the Court of Auditors and the Commission – need to attend very carefully to our own areas of responsibility, to ensure that we always achieve the best possible results.

Furthermore, the Member States have a very important role to play and must take on a task that, in my opinion, is vital if we are to succeed in ensuring that the results achieved and the image we convey when allocating funds are as good as they can possibly be. It is all the more important that money is spent soundly since that is why we are all here.

  Georgios Stavrakakis (S&D). – (EL) Madam President, first of all I would like to thank President Caldeira for his presentation of the annual report by the Court of Auditors for 2011.

In the context of the current economic and financial crisis, pressure on public finances is now even greater and, consequently, the effective use of public money is more important than ever.

According to the information in the report by the Court of Auditors, the combined error rate for regional policy in transport, energy, employment and social affairs decreased significantly in comparison with 2010, from 7.7 % to 5.1 %. We must ensure that the European Union’s money is spent more effectively; this does not call for spending cuts, but better control.

The national authorities must commit themselves to better management of the European Union’s funds, given that according to the Court of Auditors, more than 60 % of the errors noted in the course of implementation of regional policy could have been identified by the Member States if appropriate audits had been carried out.

  Jan Mulder (ALDE). – (NL) Madam President, first I would like to apologise to the President of the Court of Auditors and the Commissioner that I was not able to be present at the beginning of the debate. I had another important meeting.

It has no doubt already been said in many ways by many others: it is the eighteenth time that the Court of Auditors has not given an unqualified statement of assurance. If Parliament nevertheless discharges the Commission of liability for the seventeenth time, this will be very difficult to defend in the eyes of the general public.

I think that the Commission must come up with strong proposals to improve the controls. We have tried many things over the years: higher fines, stopping payments. I think we have tried all of the available options.

There is only one thing that we have not tried yet, despite the fact that Parliament has been pressing for it for years. That is that if we give money to the Member States, there must be greater political accountability in the Member States that make the most errors. Parliament has tried all kinds of ways to get a Member State statement. These efforts resulted in the annual summaries, as they are called in the Interinstitutional Agreement. I ask myself whether they are effective; I think not.

The new Financial Regulation enables Member States to make a statement voluntarily. I think that the Commission should pursue a very active policy to promote that. The Member States who do that should get obvious benefits as a result. If the European and national audit bodies judge everything to be in order, if their statement is good, the Commission should reward those countries with fewer audits, less bureaucracy, and so on. The Member States should gain from making a political statement on how they have spent the money from Europe.

  Oldřich Vlasák (ECR). – (CS) Madam President, anyone reading the European Court of Auditors’ annual report gets the feeling that someone somewhere has made a big mistake. According to the auditors, the budget is not credible, the error rate is high, controls are failing and individual programmes have such shortcomings that no added value can be demonstrated for the European Union.

One of the areas where drawdown has been most criticised is regional policy. According to the auditors, 59 % of the operations assessed in this area are beset by errors. The most common error is contravention of the rules for the award of public contracts and inappropriate payments for projects. Indeed, this is where I see the main problem. The fact is that it is not that recipients of European funds are committing fraud or falsifying projects. Recipients simply do not know their way around the extremely complex rules and bureaucratic procedures. They often carry out work in good faith and subsequently find out that they had been barking up the wrong tree and undertaken work which was not allowed or that the Union flag on the facade was the wrong size and so they would have to return the money.

The Court of Auditors recommends improving this area by issuing more instructions, closely monitoring the implementation of Union rules, exerting more control and enforcing penalties. This is the wrong way, however. The only way to make a radical reform of the bureaucratic rules is to simplify the whole process and strengthen the participation of end recipients in the projects to be implemented. We should then all be able to implement more simply projects which make sense to us, because they are not cheap.

  Lucas Hartong (NI). – (NL) Madam President, once again the Court of Auditor’s report for 2011 makes splendid reading for our citizens. Here is an example: a farmer gets a subsidy for 150 sheep, the Court of Auditors discovers that the recipient did not have any sheep at all and so the payment was unlawful. That is clear reporting. I congratulate the Court of Auditors on its work.

Unfortunately, this is just the tip of the iceberg and for the eighteenth year in succession it turns out that Member States in the east and south of the Union especially are somewhat casual when it comes to applying for subsidies and are not too fussy about their auditing when it comes to taxpayers’ money from the citizens of northern Europe. Thriftiness is lost on them, it seems, so naming and shaming please.

I will just mention a couple of striking observations by the Court of Auditors: first, that it is difficult to determine the added value of the EU and, second, that economy and efficiency appear nowhere in the reports. The PVV has been saying this for years and it is gratifying to note that our point of view has now been confirmed by the Court of Auditors.

  Ingeborg Gräßle (PPE). – (DE) Madam President, President of the Court of Auditors, Commissioner, ladies and gentlemen, I feel ashamed for others’ behaviour this morning. Firstly, I am ashamed that the Council is not here, despite claiming that it has a role to play in this discharge procedure and insisting that we must respond to its recommendation. Now it is conspicuous by its absence. Secondly, I must say that some of the comments made by fellow Members today are of lamentable quality.

(Applause)

I do think that, for once, we should talk about the aspects where we have not voiced any criticism, at least so far, namely the 96 % that was executed without errors. We need to ask ourselves which policy goals we have achieved. We have mass demonstrations throughout Europe. What have we achieved in relation to youth unemployment with the money that we provided through the European Union? What have we achieved in relation to jobs with the funding for innovation and research? What have we achieved with everything that we are doing in the Member States? I would like to talk about that. I would like to hear more about that, quite frankly. In view of the present situation in the European Union, it could have been a positive moment, when we drew attention to the EU’s positive achievements. That is my first point.

I think that we should focus on the discharge procedure and on what we have actually done and what the outcomes are, and what we have to show the EU’s citizens and taxpayers. The other aspect cannot be achieved without good administration in the Member States, and it cannot be achieved in the EU either. Commissioner Šemeta, what are we doing, if only one payment in every five in the context of the Cohesion Fund is now correct? Last year, it was one payment in four.

In my view, we urgently need a report from you that offers an overview of how the financial crisis is impacting on public administration in the EU Member States, because we can see that this financial crisis is having an effect here. What should we do then? How should we react? How must we react? I would like us to give some consideration to this issue, and that means the Commission as well: it should consider how to influence the rules in future. After all, the rules determining the type of projects that are eligible for assistance from the Structural Funds are made by the Member States. If the Member States then opt for eligibility criteria that cannot be monitored by us later, we are shooting ourselves in the foot. This means that the Commission must work very closely with the Member States to avoid the minor disasters that we lament here in the House every year.

  Derek Vaughan (S&D). – Madam President, as rapporteur for the report on protecting the financial interests of the European Union, I certainly welcome the Court of Auditors’ Annual Report. As colleagues have heard already, the annual rate estimated is 3.9 %, however, I do think there are some other things which need to be said as well. For example, I think it is important that the Court has pointed out that there is a difference between error and fraud. Only about 0.2 % of payments are subject to fraud.

I think the Court of Auditors perhaps needs to look at its systems and methods here. For example, overpayments and underpayments are categorised in exactly the same way, minor errors in terms of providing information and filling in documents are also classified as errors. I just wondered if in future the Court might find it possible to make a distinction between those different types of things.

I also think it is important that, for the first time, the Court, in Chapter 10, has started to look at the improvement assessment of the Commission as well. I know the Court says that this does need to be improved. I think it is a good start, because I think part of the Court’s function should be to look for improvement. I think, indeed, we all need to look for improvements, whether in the Court, in Parliament, in Member States or in the Commission – improvements in terms of the procurement policy, in terms of simplification, maybe having a more risk-based audit in the future: these are all things which can lead to improvement. At the end of the day audits are good, but audits should also lead to improvements in our systems.

  Martin Ehrenhauser (NI). – (DE) Madam President, ladies and gentlemen, I think we are going round in circles. Every year, we hear about similar error rates. Every year, we hear that a positive statement of assurance cannot be issued, in the same area. Every year, we are forced to note with regret that the Commission President, Mr Barroso, has not met the target he set in January 2005.

Our progress can be measured in millimetres. One problem is surely that the EU budget is, in a sense, the European Union’s Achilles heel. It is also the source of so many unnecessary disputes; this can clearly be observed in Brussels or, indeed, here in plenary today. There is a massive and fundamental need for action as regards the reform of the European budget, on both the revenue and the expenditure side.

On the expenditure side, and this has already been mentioned, it is important for the Member States to take responsibility at last, firstly for the error rate in the administration of funds, and secondly as regards the recovery of funds. For the revenue side, it is essential, in my view, to make the abolition of the national contributions our long-term goal and to replace them with key instruments such as the financial transaction tax. This could avoid unnecessary conflicts over the EU budget at last, and, above all, put an end to the ceaseless debates about rebates and rebates of rebates. I think that would be an important step forward.

  Inés Ayala Sender (S&D). – (ES) Madam President, we are once again in the paradoxical situation of having succeeded, on the one hand, in monitoring and keeping free from error 96 % of the EU budget, in one of the most complex financial years from the point of view of the allocation, implementation and amount of funding, while that budget continues, on the other hand, to remain below 1 % of the European Union’s gross domestic product.

In spite, then, of having managed to operate one of the most complex, refined and advanced control systems, thanks to the fruitful dialogue between the Court of Auditors, Commission and Parliament, the results of which will be seen, moreover, in the discharge exercise overseen by my colleague Jens Geier, we are again complaining about not having broken free of a sort of cycle of victimisation.

Nevertheless, I think that, this year, the focus of our concerns should be far more tangible issues, namely the errors made by Member States, for instance, with regard to rural development. We knew that, by abandoning direct assistance for rural development under the common agricultural policy, we would increase the risk of errors in the Member States. However, we also know, from our experience with regional development, that when we exercise firm control and step up our demands, as has been the case with cohesion policy, the Member States react. We therefore need to refine and develop this control further in respect of the Member States; one day, perhaps, we will also have to scrutinise what their audit authorities are doing. Ms Sinclaire should take note: there will surely be some interesting surprises in store for us.

As regards the Commission – and Mr Šemeta has a certain responsibility in this respect – we are greatly concerned by the errors affecting research policy. As this very policy is one of our weapons for defeating this crisis, he needs to explain to us how we can go about rectifying these errors.

  Tamás Deutsch (PPE). – (HU) Madam President, ladies and gentlemen, first of all I would like to thank Mr Caldeira and his staff at the Court of Auditors for this annual report. It is a very good starting point for Parliament to carry out the discharge procedure over the coming months.

Second, according to a well-known Hungarian saying, two people may be talking about the same thing but one says that the glass is half full and the other says that it is half empty. I fall into the camp that thinks that the glass in this case – rigorous implementation of the European Union’s budget – is half empty. It is unacceptable that not only has the downward trend in the error rate disappeared, the error rate has actually increased for the second year running. My voters would not accept that European money has been spent less optimally in recent years than before. They would not be able to support this report.

Third, allow me also to make the point that it is unacceptable that Council representatives are absent from Parliament when we discuss this issue. For nearly three years now the European Council has had a permanent President, but both he and his staff have been constantly absent. The European Council always has a President-in-Office, but the staff of the President-in-Office are also consistently absent. If 62 % of the errors identified for cohesion policy should have been detected by national governments, the Council should be present here in Parliament to represent those governments.

Last but not least, I agree that the trend is better as far as the use of cohesion resources is concerned. The error rate fell from 7.7 % in 2010 to 5.1 % in 2011. I think this is a good message to send to the European Council summit which gets under way today, and where the key issue is whether it will be possible to uphold one of the EU’s fundamental principles, that of solidarity, in the seven-year budgetary period by way of sustaining cohesion funding.

  Mojca Kleva (S&D). – (SL) Madam President, the fact that as much as 60 % of the errors identified in the implementation of regional policy could and should have been detected by Member States is extremely worrying.

It is vital for greater attention to be focused in the future on preparing projects with clear objectives, which will truly bring European added value and thus ensure efficient spending.

I join with those who have mentioned today that the situation needs to be monitored in all Member States.

It is vitally important that cohesion policy, which is one of the most important tools for promoting economic growth and new investment, remains in the coming seven years a strong and financially supported European policy.

For this reason it is all the more important at this point to highlight the fact that we will not achieve better spending by cutting funds, but only through effective control and specific commitments from Member States to better management of funds.

  Jean-Pierre Audy (PPE). – (FR) Madam President, President of the Court of Auditors, I would like to start by thanking you and all of the members of the Court – including Ms Kaljulaid, who is here with you – for the work you do and in particular for the attention you pay to Members of the European Parliament. You pay us a great deal of attention and I really wanted to thank you for that. I would also like to thank Commissioner Šemeta, who, following on from the remarkable work of his predecessor, continues to improve the auditing of our accounts and the quality of special reports. I would like to apologise on behalf of my colleague, Bogusław Sonik, who has been detained by other parliamentary commitments. I too regret the absence of the Council, which is the budgetary authority.

Mr President, this report comes too late. That is not your fault. I tabled amendments to the Financial Regulation to change the timetable. The European Commission must present the accounts before 31 March each year, the Court must publish its report before 30 June, and Parliament must vote before 31 December.

It is inconceivable that today, in November, we should still be talking about matters concerning 2011. I suggest that the working group that I have proposed should meet to change this timetable.

I would like to make a few observations: Article 323 of the Treaty suggests that Parliament should ensure that the necessary financial means are made available to the European Union. I wonder if the Court could not play a role in raising the alarm about the Union’s cash position: we have learned that we had a shortfall of EUR 9 billion and we are incapable of paying our bills. I would therefore suggest that the Court can help us to monitor the functioning of the Union.

A final word about shared management: I think that we need to take another look at it here. I wonder about the independence of the audit authorities and about relations with our national audit institutions, and I think that the shared management system – which has proved useful in its time – should be re-examined. I wonder if we should not create our own finance function at Union level and get rid of this system of shared management, which contains a lot of errors, is very expensive and the efficiency of which merits re-examination.

  Iliana Ivanova (PPE). – Madam President, allow me to join my colleagues in welcoming the European Court of Auditors’ Annual Report on the implementation of the budget concerning the financial year 2011. I would like to briefly comment on some aspects of it that I find particularly important.

Firstly: shared management. The report states that the highest error rates were found in policy areas under the shared management arrangements, namely in rural development and regional policy. If we want to improve the efficiency of control systems, all stakeholders should take their responsibility – including the Commission – but also, and especially, the Member States.

Secondly: direct management. 20 % of EU money is spent directly by the Commission, and the findings of the Court state that the error rate for research and other internal policies increased from 1.4 % to 3 % in 2011. Like my colleagues, I would be curious to learn the reason for this increase and what measures are being considered by the Commission to remedy this situation.

Thirdly: the link between inputs and results. I really welcome the new Chapter 10 of the Annual Report entitled ‘Getting results from the EU budget’. I believe that it is a step in the right direction. The EU budget should shift from a compliance-oriented to a performance-oriented model of spending – a model that looks at the results achieved. We need clear indicators, base lines and target levels in order to assess the achievements of these EU policies. The Court of Auditors’ report states clearly that there is scope for improvement. The Union faces a very important challenge: to do more with less money. Therefore, it is all of us together – Commission, European Parliament, Member States – who should find a way to spend every euro in a more efficient and effective way, to bring maximum results in these times of austerity. This is what European citizens are expecting from us.

Finally, please allow me, since this is my last speech in plenary, to use this opportunity to thank all my colleagues from the European Parliament – especially the colleagues from the Budgetary Control Committee and our secretariat – for the excellent cooperation we have had throughout the years. I am grateful for these years full of dynamic and lively discussions from which I have learned a lot, and I hope we will continue this cooperation. You can rest assured that dialogue with this Parliament will be a key priority in my future work.

(Applause)

Catch-the-eye procedure

  Ildikó Gáll-Pelcz (PPE). – (HU) Madam President, in general, we can say that the European Union has spent the money at its disposal, some EUR 129 billion, better than in the previous year. Although the Council and Parliament decide jointly on the annual budget, it is primarily the Commission that has to ensure that the money is used properly and, let us be honest, there is room for improvement there. The 2011 report shows that we are moving in the right direction but the error rate is high, as we have discussed. Indeed, in the area of research and development expenditure the error rate is on the rise, but it is very significant under the agricultural and cohesion headings, which make up 80 % of expenditures. Inaccuracy is on the increase in other areas too, and there are also inappropriate payments. Responsibility for this is shared of course between the Commission and the Member States, but it shows that the problem is systemic. The Commission mechanisms are only partially effective and, sadly, these resources are increasingly failing to reach their intended targets, or could not be used effectively. I agree with the Commissioner that we need added value and simplification. The task ahead is clear: with an increasing deficit paired with reduced resources we need to reform our system in this way and monitoring will be much more effective.

  Chris Davies (ALDE). – Madam President, I would like to know what excuses Member States are offering for failing to keep their accounts in proper order. I wonder whether they compare with the excuses being offered by Mr Nigel Farage, the leader of the UK Independence Party, for failing to keep his personal accounts in order. He has made a commitment to complete transparency, but you take one look at his website and you can see that the accounts are unaudited make-believe. By way of excuse, he said that he has lost his receipts, but then, on another occasion he said ‘I have an awful lot of receipts that aren’t there’ – whatever that means. He has gone on to say that he has not had the time to sort out his expenses, despite employing his wife to do these things, and then he said ‘there were some receipts lost, but so what! ‘

Can the President of the Court of Auditors tell me whether any Member State has ever come up with an excuse quite so pathetic as ‘we have lost the receipts, but so what’?

(End of the catch-the-eye procedure)

  Algirdas Šemeta, Member of the Commission. − Madam President, the debate clearly shows that shared management is still one of the main topics also for this year’s budgetary discharge procedure. But there remain issues for the funds under direct management by the Commission.

I can assure you that the Commission will carefully analyse the Court’s observations and that it will implement its recommendations in due course. The work has already started and I would like to draw your attention to the annual activity reports of directors-general of the Commission which for the first time in their history almost completely correspond with the assessment of the Court and on the basis of those annual activity reports and on the basis of reservations made by the Director-General of AGRI, the Director-General of Research and other directors-general, they have to produce concrete action plans on how to improve the situation in the areas under their management.

I believe that my colleagues, Commissioner Cioloş, Commissioner Geoghegan-Quinn, Commissioner Hahn and others will participate in the discharge procedure and will explain what concrete actions they will implement in order to address the problems reflected in the reservations of their directors-general. I would like also to draw your attention to one aspect, which is that when we talk about complicated rules it is not only complicated rules at an EU level; and as I said in my introductory statement, we made proposals for the next financial period to significantly simplify EU rules. It is also very problematic that Member States introduce even more complicated rules and quite a significant amount of errors are caused by complicated rules at Member State level. This issue, I believe, has to be addressed very thoroughly.

Bart Staes raised the issue of own resources and VAT fraud and the Commission is working very hard on this subject and we tabled a proposal on a fast reaction mechanism. We are looking forward to a swift adoption of this proposal by the Council which will significantly reduce the risk of fraud on VAT and next month I will come with a package of proposals on how to fight tax fraud and evasion, including measures on further improvements in the VAT area. I hope that these measures will provide sufficient tools in order to improve the situation in the area of VAT collection.

The rapporteur also mentioned the issues related to net corrections and I think that it is very important that the legislation which is currently on the table includes the net corrections for the next financial programming period and as I understand it we are moving in this direction. I hope that finally legislation will be adopted containing this very important provision.

I count on your support during this discharge procedure and expect close cooperation with the Council Presidencies to ensure that issues highlighted in this discharge procedure will be given the necessary attention by the Member States.

  Vítor Manuel da Silva Caldeira, President of the Court of Auditors. − Madam President, let me first thank the honourable Members for their kind words to me and to those working in the Court of Auditors. Rest assured that we do our utmost to contribute to the effort that addresses the key priority we face today: to ensure sound financial management of public finances in the European Union.

I have been asked whether, if receipts are missing, an auditor can accept a reply of ‘So what?’ I would say probably in some instances the receipts are not there, and you can go to our report and see that we have identified the problem and said there is a missing receipt and we have to draw the consequences. An auditor cannot accept ‘So what?’ as a reply.

Those responsible, like those in this House, also have a role to play in addressing the underlying courses of the problems. Many Members have stressed the need to improve from where we are. But we should remember where we were at the beginning of this framework programming period and note where we are today. This shows improvement: what the Court is saying is that to make the best use of the funds available, there is scope to use them more efficiently and in a better targeted way. But here, indeed, the national authorities have a key fundamental role to play, because they are the first line of defence in terms of the best use of these funds. Of course, if you add complexity because you devolve to national authorities the eligibility conditions for payments to be made, then you may end up with 27 different sets of eligibility conditions. That will certainly lead to complexity.

But now, whilst we are addressing the future regulations for the next framework period, we have a golden opportunity to address the causes of the problems. Systems are there for a period, so we would not expect that error rates or the most likely error will move from 0 to 10 or from 1 to 100. No: systems are there; if you do not solve the causes of the problems we cannot expect huge changes afterwards.

Our recommendation, honourable Members, is clear: for a long time we have been calling for simpler schemes for using the funds, and for action on defining them and assigning to them clear objectives and cost-effective control systems. We should also aim to be in a position to see whether we want to tolerate the risk of error in some situations. That is a task this House and the Council were invited to reflect upon by the Court of Auditors in 2004.

Our task, as auditors, is to address the risk areas. This is a matter of priority for us. We draw up clear recommendations for improvements. That is our role and we are doing that as much as we can. We are also aware, Mr Vaughan, that administrative errors may occur and if they are there they indicate that we have a potentially high risk in the system that will materialise afterwards in quantifiable situations which may put all of the money at risk.

I fully share the view of Mrs Gräßle that Member States and the Commission need to work together to make things revolve when they have a shared responsibility, and I want to reassure Mr Audy that I have taken good note of his suggestion of the Court’s rôle d’alerte. There is scope to make an effort to bring problems to the attention of this House. My colleagues and I will duly consider that request.

  President. − (IT) The debate is closed.

Written statements (Rule 149)

  Monica Luisa Macovei (PPE), in writing. – For 2011, 30 agencies, with a total budget of more than EUR 1.3 billion, will have their accounts reviewed. This is six more than for 2010. Last year, the Court delivered no comments for most of the agencies. I am glad to see that this year this is no longer the case: the Court took its responsibilities more seriously. This will help the discharge authority to fulfil its duties although our work goes far beyond stamping the Court’s reports. I am concerned that procurement procedure rules are not always respected. This led to a qualified opinion on the ECDC’s accounts due to irregularities over a EUR 9 million framework contract. Twenty-two agencies still need to improve transparency of their recruitment procedures. In general the newly-created agencies face the greatest challenges, especially concerning budgetary and financial management. I encourage them to get-up-to-speed quickly. I commend that the conclusions of the Court’s Special Report on conflict of interest have been integrated in the reports on EMA, EFSA, EASA and ECHA. I note that one comment in the EEA report relates to the issue. The work started on conflict of interest during the 2010 discharge will continue and progress will be monitored.

  Franz Obermayr (NI), in writing. – (DE) It is shameful that the Court of Auditors, for the 18th time in succession, cannot give a positive assessment of the management of EU funds. Most errors have, once again, occurred in the largest areas of expenditure, namely agriculture and cohesion. Once again, the Court of Auditors has uncovered the blind spots in the EU’s cohesion policy. Vast amounts of funding have bypassed their original target. The Court of Auditors’ report is, therefore, hardly a glowing testimonial for the Commissioner for Regional Policy, Dr Johannes Hahn. Like many Austrians, I would have expected Dr Hahn to take steps to correct this unhappy situation, instead of making the error rate worse. In the context of the Cohesion Fund, for example, not even one payment in five was correct in 2011, whereas the previous year, at least it was ‘only’ one in four! The amount of funds not paid out also reached record highs, even though some Member States are funding their projects entirely from the EU. In difficult economic times, the EU needs efficient investments. Turning on the financial taps is not enough, however. As regards Greece in particular, the Commissioner should dispense with this creed. In Greece, a great deal of money trickles away into dubious channels due to a lack of structural reforms; even Dr Hahn has admitted that billions of euros have failed to reach their intended target due to the inefficiency of the Greek authorities.