EU - #3bn black hole in Europe's accounts

A 3.9bn ecu (#2.8bn) underestimate of the European Community’s potential off-balance sheet liabilities has forced the European Court of Auditors to qualify the community’s accounts for 1997.

The annual report, published this week, reveals a catalogue of inconsistencies and errors. These include 3.7bn ecu underestimated aid payments to member states and inaccuracies in up to 2.5% of payments to farmers and fishermen under the 41bn ecu agricultural subsidy plan.

Having qualified EC accounts for the previous three years, the community’s Luxembourg auditors repeated their call for the commission to clarify whether its accounts should be prepared using cash or accruals methods.

The resulting inconsistencies included 776m ecu of understated commitments in the financial statements, ‘several hundred million ecu’ outstanding from the cash balances disclosed and a 4.3bn ecu understatement of funds owed by debtors.

The auditors noted the commission published a draft manual on accounting and consolidation procedures, but it specifically excluded the budgetary operations where the problems were identified.