Auditors find EU overpaying farmers in error

European Union auditors gave a cautious welcome Nov. 10 to improvements in how the bloc spends its huge budget, but pointed out billions of euros of subsidies continue to be paid out incorrectly.

Persistent errors and weak internal controls in areas like agriculture, especially countryside projects, and regional aid were highlighted.

In its annual report, the EU’s financial watchdog came closer than it has done before – in 14 years – to giving a clean bill of health to EU spending, saying the 2007 accounts now gave a “fair presentation” of the EU’s financial position.

The real problems, it said, lurked underneath, especially with EU cash doled out to end-beneficiaries like farmers and promoters running EU-funded projects, made worse by “complicated or unclear legal requirements”: red tape, in other words.

The European Commission, the EU’s executive arm, administers much of the bloc’s annual spending, along with the EU’s 27 national governments. For 2007, the year under scrutiny, EU budget payments amounted to 114 billion euros (US$147 billion).

“The court notes that the commission is not yet able to demonstrate that its actions to improve supervisory and control systems have been effective in mitigating the risk of error in large areas of the budget,” the European Court of Auditors said.

It singled out EU regional aid spending, around 42 billion euros in 2007, for particular attack, estimating that at least 11 per cent of the value of claims should not have been paid out.

On agriculture, a problem area for the auditors every year, cash payments for projects to enhance the countryside were far more riddled with error than direct handouts to farmers and formed a “disproportionately large part of the overall error,” mainly due to complex rules and poor documentation.

Last year’s ECA report also criticized high levels of error in administering EU regional aid payments. The commission says the situation has improved, since national governments are themselves now tightening up on how their EU cash is spent.

“The idea is that the member state detects the problem first, not the commission,” one official said recently.

“We have signs the work we are doing with member states to get their systems up to scratch without having to resort to financial corrections is having an effect. By the end of next year, we will be able to see how effective our actions are.”

The court, which credited the commission for its efforts to improve spending controls and administration via a reform program, was sympathetic, saying it was too early to assess the plan’s impact since it had not yet been totally implemented.

“Corrections”

For 2008, the commission has already ordered “corrections” of 843 million euros from EU countries, more than three times than in 2007. When the commission makes such a decision, the cash is recovered from the country concerned for the EU budget.

While the court cannot block spending, the commission has the power to suspend EU payments and also claw back money from a country if it has been misspent. For agriculture, it usually carries out a clawback exercise three times a year.

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