EU Referendum: After 20 years the auditors still haven’t signed off the accounts…

One of the criticisms of the EU which Nigel Farage trots out at every opportunity is that the European Court of Auditors (ECA) has never given a clean opinion on the EU’s annual accounts. We are left to understand that this must be due to incompetence and corruption on the part of the European Commission.

This is a situation in which only a small part of the story is told, so as to give an impression which is actually false.

The EU Treaty requires ECA to provide each year an opinion on “the reliability of the accounts” and the “legality and regularity of the underlying transactions”. The first such opinion, given on the 1994 accounts, said in effect that the accounts were reliable, subject to a number of qualifications, but that errors affecting the underlying payment transactions were too prevalent for any positive assurance to be given. It was made clear that the vast majority of the errors – affecting more than 5 per cent of total expenditure – were in programmes administered by public authorities in member states. Where the Commission was directly administering the programmes, the error rates were much lower.

Over the years the Commission improved its accounting systems and the presentation of the accounts, and the qualifications were gradually lifted, to the point where an unqualified opinion was given on the 2012 accounts – and this has been maintained for the subsequent years.
But the incidence of error in regional, urban and social programmes (5.7% of % 55.7bn Euro in 2014) and agriculture spending (3.6% of 57.5bn Euro) – the vast bulk of which are administered by the member states, not the Commission – remains obstinately high. Problems have been found over the years in all member states including the UK. Some of the losses are recovered through fines imposed by the Commission as a result of financial checks. The National Audit Office (NAO) has warned recently that the poor performance of the English Rural Payments Agency exposes the UK to a serious risk of such fines.

It is not only the EU accounts which have not been signed off. NAO has qualified the accounts of UK social benefits every year since 1988-89. The overall error rate was put at about 2 per cent of expenditure of £169.6bn (an amount more than 50 per cent greater than the whole EU budget) in 2014-15. Where benefits are means-tested the error rate is much higher – about 6 per cent of expenditure of £23.9bn. Total errors were £3.2bn overpayments, and £1.4bn underpayments. The total of these errors is about the same as the 4.4 per cent found by ECA averaged across the whole EU budget.

John Wiggins worked in the Treasury for 20 years before becoming Head of the Oil Division at the Department of Energy, and then Deputy Secretary (Director-General) at the Department for Education. He was UK Member of ECA 1993-2001, and oversaw the EU financial audit for its first five years.