Widespread errors across the accounts of the European Union, are unlikely to improve until a comprehensive reform of its accounting system is completed, according to the head of the National Audit Office.
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Sir John Bourn, speaking as part of the NAO’s annual review of the EU’s accounts, also revealed that there were 10,000 cases of suspected fraud reported to the European Anti-Fraud Office during 2002, with an estimated value of £700m.
Basing his review on the annual report of the European Court of Auditors, Sir John said that the qualification of the EU’s accounts for nine years in a row was a major concern.
‘My report draws attention to continuing problems in the management of EU funds. It is a matter of concern that, for the ninth year in succession, the Court of Auditors has qualified its opinion on the reliability of the accounts,’ said Sir John.
The NAO said until improvements were made in IT systems and accruals-based accounting bedded down, the accounts will continue to be qualified.
The report will be particularly worrying to observers of European affairs, given the accession of 10 new countries to the union. Corporate governance and accounting standards have come under the microscope in the new members states.
The NAO warned that the expansion of the union would bring with it extra pressures and that enlargement would provoke ‘more intense scrutiny’ of EU revenues and expenditures.
The NAO’s report coincides with concerns that Cyprus, the Czech Republic, Hungary and Poland still need to implement legislation on financial control, including measures intended to address internal audit.
Material rates of error in payments were made in EUspending for agriculture, structural measures, internal policies and external action ð areas that make up around 90% of total EU expenditure. Currently the EU’s budget runs to around £59bn of which £4bn is accounted for by UK contributions.
Plans are in place for the NAO to work with the audit bodies of the new member states to ensure that all revenues and spending are audited according to international accounting standards.
The NAO also intends to continue work with the Netherlands Court of Audit on a set of indicators that will help assess improvements in financial management.