A common complaint from the UK press is that the EU accounts have not been “signed off” (for example, see articles from the Daily Mail, the Telegraph and the BBC). In fact, the European Court of Auditors (ECA) has signed off the accounts for each year up to 2012 – although it has never given a wholly positive assessment of how EU funds are spent.
The most recent audit
The ECA is charged with auditing the EU budget. This is a formal external audit which results in an annual report to the European Council and Parliament.
The ECA has signed off the accounts for each year up to 2012 (the most recent year for which accounts have been audited). However, the ECA has never provided a fully positive assessment of the spending of EU funds. The most recent ECA report was published in December 2013 and refers to the 2012 Budget.
In each year the ECA has identified ‘irregularities’. Irregularities are not instances of fraud, but genuine errors in the use of EU funds, normally linked to misinterpretation of the rules and requirements that stipulate how funds can be used.
In 2012, the ECA estimates that 4.8% of payments were affected by ‘material error’ (irregularities), compared to 3.9% in 2011. Overall, the ECA found that control systems were “only partially effective” at ensuring the regularity of payments.
It is important to note that over 80% of the EU budget is spent under ‘shared management’, which means that Member States, not the European Commission, have responsibility for distributing the funds. The ECA report is therefore mainly concerned with systems that the Member States (including the UK) have in place to manage EU funds. Many of the financial irregularities may have occurred as a result of shortcomings of Member States’ financial management.
The European Commission budget pages provide further information on the EU budget audit process.
In addition to a formal audit by the ECA, the EU budget must go through a process of ‘discharge’. This is the final approval of the EU Budget by the European Parliament, based on the recommendation of the European Council. This is the opportunity for Member States to express their views on the Budget.
For three years in a row, the UK (along with the Netherlands and Sweden) has voted against the Council’s decision to recommend discharge of the Budget. These countries voiced their disapproval of the Budget in a joint statement published in February 2014 which criticised the 2012 Budget.
However, despite their opposition, the Council still voted to recommend discharge of the Budget.
- Background information on the EU budget and the audit process in particular can be found in the House of Commons Library Research paper, The European Communities (Finance) Bill, 2007.
- More up to date information on the EU budget can be found in the Library note, EU Multiannual Financial Framework (MFF) 2014-2020.
- Information on the broader economic relationship between the EU and UK can be found in the Library note, The economic impact of EU membership on the UK.
Author: Chris Rhodes