EUROSAI. Magazine N21 - 2015

EUROPEAN ORGANISATION OF SUPREME AUDIT INSTITUTIONS Information on EU 40 www.eurosai.org · N.º 21 - 2015 On 10 November 2015 the European Court of Auditors (ECA) published its annual reports on the implementation of the EU budget and the European Development Funds for the 2014 financial year. The objective of the annual reports is to provide findings and conclusions that help the European Parliament, the Council and citizens to assess the quality of EU financial management, and to make useful recommendations for improvement. Central to the 2014 annual reports are the annual statements of assurance on the reliability of the EU accounts and the regularity of the transactions underlying them. In 2014, the EU spent € 142.5 billion. The EU budget is agreed annually — within the context of 7-year financial frameworks — by the European Parliament and the Council. Ensuring that the budget is properly spent is primarily the responsibility of the Commission. Some 76 % of the budget is spent under what is known as ‘shared management’, with individual Member States distributing funds and managing expenditure in accordance with EU law (for example, in the case of expenditure in the area of economic, social and territorial cohesion and spending on natural resources). Overall results The ECA concluded that the EU accounts for 2014 were correctly prepared in accordance with international standards and present a true and fair view. The ECA was therefore able, once again, to give a clean opinion on their reliability. However, payments for 2014 were materially affected by error; the ECA therefore gave an adverse opinion on their legality and regularity. The estimated level of error, which measures the level of irregularity, for 2014 payments was 4.4 %, close to that of 2013 (4.5 %) and persistently above the materiality threshold of 2 %. The ECA found the same estimated level of error (4.6 %) under shared management with the Member States and for expenditure managed directly by the Commission. The highest levels of error were found in spending under ‘economic, social and territorial cohesion’ (5.7 %) and for ‘competitiveness for growth and jobs’ (5.6 %). Administrative expenditure had the lowest estimated level of error (0.5 %). It appeared that there was a clear relationship between expenditure types and levels of error. The estimated level of error for cost reimbursement schemes (5.5 %), where the EU reimburses eligible costs for eligible activities on the basis of cost declarations made by beneficiaries, was double that for entitlement programmes (2.7 %), where payments are made on meeting conditions rather than reimbursing costs. Corrective action by authorities in the Member States and by the Commission had a positive impact on the estimated level of error. Without this action, the overall estimated level of error would have been 5.5 %. There is further scope for the Commission to improve its assessment of risk and the impact of corrective actions. If the Commission, authorities in the Member States or independent auditors had made use of all information available to them, they could have prevented, or detected and corrected a significant proportion of the errors before these were made. A closer look at revenue and spending areas The ECA’s overall opinion on payments is supported by specific assessments of the spending areas. All individually assessed areas of EU spending were affected by material error with the exception of administrative and other related expenditure (€8.8 billion). Revenue (€143.9 billion) was not affected by material error. The estimated level of error was 0.0 %. The audit covered the EU’s revenue, through which it finances its budget. In 2014, revenue contributions calculated on the basis of Member States’ GNI and the VAT collected by them provided 66 % and 12 % of the total respectively. Traditional own resources, mainly customs duties collected on imports and the sugar production charge collected ANNUAL REPORT OF THE EUROPEAN COURT OF AUDITORS ON THE IMPLEMENTATION OF THE EU BUDGET FOR THE 2014 FINANCIAL YEAR