The European Union’s Court of Auditors has failed to give the accounts a clean bill of health for the 22nd year in a row. The report, which can be read here, blasts the payments underlying the accounts as being ‘materially affected by error’, leading the Court to issue an adverse opinion on the legality and regularity of the payments underlying the accounts. An adverse opinion is rare in accountancy, and is issued only in serious cases where there has been a substantial departure from generally accepted accounting principles.
In the 320-page report, the Court of Auditors blasted various examples of EU waste and mismanagement. But the Court of Auditor’s findings only told a small part of the true scale of EU wastefulness, because only a small sample of all expenditure is scrutinised by the Court. There are undoubtedly many similar examples which will simply never be found. The error rate is 3.8%, almost double the 2% threshold which is the maximum considered acceptable by the Court of Auditors, affecting a whopping €5.4 billion of EU spending.
UKIP MEP Jonathan Arnott, a member of the EP’s budget control committee said: “It’s a good thing that the British people voted to leave the European Union when we did because the levels of waste and bureaucracy are absolutely breath-taking. That’s the nature of a system that simply isn’t fit for purpose.
“These examples of waste would make you think the EU is being run by ‘Count Von Count’ from Sesame Street. Taxpayers’ money is being wasted left, right and centre, the EU has obviously lost control of the money tap. I am sure that when we’re outside the EU we can cut waste, when we can cut out the middleman and look after our own businesses ourselves.”
Some examples of the problems that are highlighted by the report are below (n.b. the page number corresponds to the page numbers in the actual report, not the page numbers on the Adobe Reader):
1. The Commission committed to more expenditure last year than it did in any previous year in history. (p53)
2. The European Union’s liabilities now exceed its assets by a huge €72.4 billion. Last year the deficit was a further €10.3 billion. (p15)
3. The error rate for Economic, Social and Territorial Cohesion was much higher, at a massive 5.2%. This is partly explained (p147) by Commission failings: “In 16 cases of quantifiable errors, the Commission, national authorities or independent auditors had sufficient information to prevent, or detect and correct the errors before accepting the expenditure.” [Note: this is 16 cases from the Court of Auditor’s sample, not from the whole EU accounts]. This does not include projects which were effectively money wasted.
4. There is not yet any procedure in place to ensure that projects actually provide value for money, or that they have been used in the way that they were intended.
5. Even within the Horizon 2020 project, where some performance indicators do exist, the Court of Auditors blasts the structure of the spending, stating “The mechanics of Horizon 2020 do not consistently drive a focus on performance”
6. The European Union fines member states if projects fail to breach the rules. But instead of using the money to deal with unpaid bills, the European Union has spent the money on additional projects (p53, footnote 12)
7. Other ‘amending budgets’ throughout the year cost the taxpayer an additional €500 million.
8. A €4,000 mountain bike, a €10,000 donation to a local church and a €3,500 panoramic spyglass were claimed for in Italy as part of an €80,000 spending spree on unnecessary items for a project. (p238)
9. A youth club in Azerbaijan was given €16,500 but the Court of Auditors was unable to actually trace the youth club, leading to fears that the money had disappeared altogether (p260).
10. The Court of Auditors points out that many objectives for EU funding aren’t properly set out. For example (p107): ‘To secure investment for climate related issues’ is not specific as it does not indicate the volume of investment to be secured, and it is not time-bound as there is no deadline to achieve it.
11. Some projects (p108) were designed to achieve results but were defined by the amount of money put in: “Indicators presented as result indicators but were instead input-oriented, for example in DG AGRI ‘Total investment in renewable energy production’ — This indicator measures the activity directly realised by the intervention instead of focusing on the increase in renewable energy resulting from the investment.”
12. The Court of Auditors states that when countries found themselves in financial difficulties, “warning signs went unnoticed by the Commission, with the result that it found itself unprepared when requests for financial assistance started to arrive” (p110)
13. A €250,000 euro grant for cloud computing services (p149) was used to pay staff for hours they didn’t work, and give them bonuses that they weren’t entitled to.
14. Part of a grant for SMEs in the UK (p170) was never passed on to SMEs. In the Czech Republic (p171) similar funding was given without first checking that it was actually going to a small business.
15. In Germany (p173) the cost of building a road was claimed under regional development funding, giving over 50% of the job to a single company without following EU procurement rules.
16. Seven projects which breached EU state aid rules (p175) were EU-funded. EU state aid rules have hampered the UK, for example making it more difficult for us to help our steel industry to survive, but the EU itself is effectively paying countries to breach those rules.
17. In Hungary (p182) a company claimed EU funds, which it then loaned to another company in its own group.
18. European Agricultural Guarantee Fund (EAGF) – (Includes the direct aid ‘Single Payment Scheme’ (SPS), 29.3 billion euro in 2015, and ‘Single Area Payment Scheme’ (SAPS), 7.8 billion euro in 2015.)
The huge CAP funds were found to have errors, the main reason being that EU funds were being granted for areas of land that were reported larger than they actually were. These errors were found in 12 of the 18 Member States investigated. (Page 215)
19. In Spain a case was found where 48 hectares of land had wrongfully been granted money when a portion of it was clearly not in use. (p216)
20. In France the authorities approved EU funds for grazable land but examples were found that these in part or in full were not eligible due to some of the land being forested or otherwise clearly un-grazable. (p217)
21. In Romania it was found up to 152 million euros in animal welfare payments were ineligible (page 220)
22. In Slovakia (p237) a company charged to the EU the cost of building materials at 6 times the going rate.
23. In Italy nearly €100,000 was awarded for building dry stone walls which the Court says had no link to any EU objectives (Page 240)
24. In Mozambique an agency claimed €874,309 for office and lab supplies, but no documentation or proof was provided for these items (p303)
25. According to the Commission only 58% of the expenditure declared for the European Regional Development Fund (ERDF), Cohesion Fund (CF) and European Social Fund (ESF) operational programmes (OP) were “free of a material level of error”. (p188)