In presenting the Annual Report of the Court of Auditors, President Bernhard Friedmann told MEPs that there were too many irregularities in the EU's €80 billion budget for 1997 and that it could not give Parliament a positive "statement of assurance".
As in the past previous years, the incidence of "errors" affecting transactions is considered - at around 5 per cent - too high in the Court's view for it to provide assurance about their legality and regularity. But Mr Friedmann emphasised the report shouldn't be considered a "fraud report". As he put it, "As you know, the European Court of Auditors repeatedly encounters actual or presumed examples of fraud or malpractice during its audits. To some extent the public even expects us to target fraud and malpractice in our work. On this point I would like to make it clear that the Court of Auditors is not a criminal investigation department, nor is it a police force."
"It is required to consider whether the EU's budgetary management complies with the principles of legality, regularity and sound financial management. In doing that, we look at areas that are particularly prone to fraud and malpractice. It is a method of procedure which helps to prevent fraud and malpractice, and to that extent prevention can be said to take precedence over investigation in our audit work. If we do encounter actual cases of fraud or malpractice we work together with UCLAF, the Commission department responsible for combating fraud, and - if necessary - with the national police," he said.
Many of the Court's findings relate to financial mis-management affecting the two largest areas of expenditure, the CAP and the regional and social funds, most of which takes place in the member States, who are criticised for poor monitoring of regional spending programmes. Revenue amounting to some €410 million was he said, lost to the EU budget as a result of the incorrect application of the rules in the United Kingdom with regard to butter and cheese imports from New Zealand. And he added, some €118 million of this amount should still be recovered.
Another area singled out for poor management concerned compensation arrangements for modernising or scrapping old fishing boats. Some €298m was paid for 290 fishing boats but the Court's investigations discovered that there were errors in the calculation of compensation and it could not always be proved that the boats in question were in fact scrapped or where funds for modernisation were allocated, it could not necessarily be proved that the boats in fact remained in service.
Nuclear safety
In addition, some aid was provided for non-existent boats. The Court recommends that the Commission should take measures to recover misused EU aid from the member states concerned. The Commission came in for some harsh criticism over its management of the EU's aid and budget for Eastern Europe and the Third World. The management of the EU's nuclear safety programme in Eastern Europe also comes in for criticism. Some €850 million has been allocated to this area during 1990 and 1997 but only €300 million has so far been spent and as Mr Friedmann put it, "it is particularly worrying that at the end of 1997 it was not possible to judge whether there had been any actual progress in terms of nuclear safety." He was also critical of co-operation arrangements with other international bodies in this area, pointing out that "western experts" were able to make "excessive" profits from lucrative contracts.
Mr Friedmann noted that over half the world's aid for the 1992 - 1997 period, some €4 billion came from the EU but that Commission staff under the ECHO programme were unable to cope. Much of the work was contracted outside with the result that monitoring was in many cases insufficient leading to suspicions of widespread fraud.
MEPs will be spending the next few weeks digesting the contents of the report before returning to Strasbourg to decide whether or not to give the Commission a clean bill of health with regard to its management of the 1996 budget.
The Commission has already been given until December 1 1998 to hand over evidence to police in France, Belgium and Italy relating to another inquiry over fraud in Mediterranean aid programmes. Should the Commission fail to act, it faces being hauled before the Court of Justice.