The EU auditors have made their annual report on the Brussels budget today – grim reading as usual.
Auditors arrive in their luxury EU limos to deliver their verdict on Brussels accounts for 2012
More unusually, a senior German MEP, close to Angela Merkel, has accused the European Commission of nobbling the report.
This could be important, just a couple of months ago, Herman Van Rompuy, the EU president, was caught on film asking the European Court of Auditors (ECA) to tone down their reports so as to permit more “nuanced reporting” of misspending.
“Your reports are not released into a void but into the rough and tumble of political life and media reporting,” said the EU prez. “Every year, they generate headlines that ‘yet again the EU’s accounts have not been signed off’, with deceptive allegations of fraud and mismanagement. You and I know that such headlines can be misleading.
“Given this media handling of information, and its impact on public opinion in some countries, the court might want to give some further thought as to how it can encourage more nuanced reporting.
“In the end we are all responsible for Europe and its image… In times of crisis, it is more vital than ever to foster confidence. We should also be teaching, to convince Europeans and demonstrate clearly that Europe is not the source of problems, but the solution.”
I asked Vitor Caldeira, the ECA’s president, about Mr Van Rompuy’s comments and whether his auditors would be more biddable in the interests of polishing up the EU’s rather tarnished image.
“We have not nuanced our report,” he told me. “The duty of the ECA is to speak the truth.”
Nevertheless, Ingeborg Gräßle, an MEP for the EPP and a panjandrum on the European Parliament’s budgetary control committee, says “numerous questions arise concerning the willingness of the court, to significantly correct downward, the level of error rate after discussions with the audited authority, the EU Commission”.
“Obviously, the one subject to an audit outwitted his examiner. This is the reason that half of the errors in the structural funds sector were excluded from the estimate of the damage of the court, otherwise the numbers would be even worse,” she said.
This is what she is talking about, the percentage, 53%, of what are called “non-quantifiable errors” in the regional projects audited by the ECA.
The commission has come back hard on the accusation.
“We'd totally disagree with her claims and I think the Court would too. The process of the ECA and Commission going over the samples they have audited (contradictory procedure) is a long established one and fully in line with international professional standards for audits. An auditor has to check that his/her findings are based on solid evidence.”
The commission and ECA have two criteria before deciding whether errors are “quantifiable” or not.
“ 1. If we have good reason to believe that one of their findings is actually wrong, we point it out. An example would be where they may have overlooked some legal provision that makes a payment eligible, when they thought that it was not.
“2. If we have problems with some of their sampling, we will also raise that. But they are not obliged to take this on board.
Here, a simple example from 2012 is when the auditors turned up on a farm and the farmer was mad so wouldn't let them on his land to check it. The auditors wanted to classify this sample as 100% error (to be extrapolated out to hundreds of farms which the sample was supposed to represent). We argued that they could have checked another farm instead, and that it is not representative to put 100% error rate on hundreds of farms on the basis of one mad farmer. They agreed and removed this sample.”
The ECA are getting back to me. But basically the error rate discovered by auditors is initially twice as high as that in the final report before the haggling, as described above, begins.
Political maths.
Update from the ECA.
"The ECA, like any auditor, is obliged to back its reports with solid objective evidence. This includes the transaction testing supporting the statement of assurance conclusions. ECA auditors visit beneficiaries in Europe and beyond, checking the facts – existence, accuracy, reality etc – about the randomly selected payments. The transactions are often complex, and sometimes not all supporting documentation is available at the time of the audit visit. The so-called adverserial process (as set out in the Financial Regulation governing EU budgetary matters) provide the opportunity for the auditee to respond to draft observations, including providing any additional evidence or explanations they consider would be useful. This is taken into account by the ECA when finalising its findings, and helps ensure the reliabilty of its observations. Such an approach is a normal professional procedure, provided for in auditing standards.
"Errors are distinguished between those whose impact can be quantified (and therefore included in the error rate) and those where their effect cannot be quantified. By definition the latter cannot be included in the error rate calculation, but are reflected in the frequency of error percentage provided for the budget as a whole, as well as each policy group (see Table 1.2). More information on the classification of errors is given in para 8 of Annex 1.1."It is completely incorrect to conclude that the 53% of non-quantifiable errors in regional policy, energy and transport spending is a result of any form of 'downgrading' following discussions with the Commission. As explained above, as well as in the annual report itself, the classification depends on the nature of the individual errors."
