PracticeAuditEU accounting: the Spanish inquisition

EU accounting: the Spanish inquisition

The public cannot, at the moment, be sure about the integrity of standards applied to the European Union's annual £61bn budget, according to whistle-blower Marta Andreasen.

Since making her allegations Andreasen, a Spanish national with a Danish father, who at the time of her statements was chief accountant at the commission, has been suspended from duty.

Though there is support for her claims – chiefly from European parliament members after they heard ‘an ice cream shop’ couldn’t have got away with accounts like the commission’s – Andreasen has continued her campaign alone.

Crucial to Andreasen’s complaints is her charge that the European Commission, the executive civil service arm of the European Union, has failed to apply elementary bookkeeping principles to the accounting of its funds.

The claims apply to both before the fall of the disgraced Santer commission, in March 1999, for mismanagement, and the so-called upgraded system, Sincom 2, brought in by the clean-sweep set of commissioners headed by Romano Prodi.

The commission, believes it does not, in fact, require an accounting system as complex as that of, say, a government ministry. This is because the commission feels it more resembles a bank – it shuffles money in and out – than a public administration.

Marta Andreasen said at her first major public appearance – a press conference arranged for her in Brussels on 17 September – that she was a qualified accountant who was brought into the commission as an accounting officer, as she thought, to get things into shape.

However, soon after taking up her post at the senior grade of director, she found ‘serious and glaring shortcomings with the commission’s accounting system, which threw serious doubts on the accuracy of the 2001 accounts’.

Overall, the accounting system was so vulnerable, she claimed, that it could allow fraud to take place. The end result was that the problems of financial mismanagement which prompted the mass resignation of commissioners under Jacques Santer had, in fact, not been resolved.

Andreasen claimed that the commission’s balance sheet was built with reports received from directorates (divisions of the European Commission) on spreadsheets only. She claimed the commission did not have a secure, coherent and exhaustive computer system on which financial transactions could be processed and moreover, that the system does not allow trace-ability. Her central arguments, however, were that even basic principles such as double-entry book keeping were not in operation; the commission did not have ‘official’ accounting books; there had not been a treasury audit for the past ten years, and the same treasurer has been in the post for more than 12 years.

She also strongly criticised planned revisions of the current system.

Andreasen insisted that when the commission promised to have the revised system in operation by 2005 it might just as well have told taxpayers: ‘Sorry citizens: you will not have reliable accounts until 2005.’

Since making her claims Andreasen has received some support, notably from the commission’s own internal audit department which conspicuously failed to bless the current systems saying they were ‘fragile in their reliability for both management and accountability purposes, as they do not ‘in reality’ represent double entry booking’.

Andreasen claims that after discovering the accountancy crisis she has reported her concerns to the commission’s hierarchy. This included the commissioner in charge of budgets, Michaele Schreyer, who was informed of a ‘serious risk of error and fraud in which the commission was involved and the urgent measures that need to be taken’. Andreasen believes the immediate expansion of financial software is required.

Not long after reporting her concerns, Neil Kinnock, the commissioner in charge of reform, pushed for a decision on 22 May to with-draw Andreasen’s responsibility as accounting officer.

‘Later he launched a disciplinary procedure against me on alleged infringement of staff regulations in relation to loyalty and discretion. This was to stop me from giving evidence before the European parliament, where I had already presented a petition that had been declared admissible,’ said Andreasen.

Andreasen believes the commission has been slow to transform its accounting systems and that the reason could lie in the controversy that would be caused by establishing opening balances on change-over.

‘The issue could be how to explain any differences in the opening balances with those reported in previous years,’ she said.

Marc Oostens, the new commission accounting officer, said that the commission’s accounting framework for budget accounts and general accounts had been traditionally cash-based and followed single entry bookkeeping principles.

According to Oostens, double entry principles are applied to cash inflows, cash outflows, payment orders and recovery orders. In 2001, the commission registered more than four and a half million accounting entries.

The commission’s budget director general has put out a statement saying: ‘A lot of nonsense has appeared in the media recently about the state of the accounts of the European institutions. The general reader has been asked to believe that the commission has no accounts, that problems have been hidden, and that the commission is not accountable to anyone. What nonsense.’

For more information on the European Parliament go to:

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