The European Court of Auditors (ECA) has signed off the European Union (EU) accounts for fiscal year 2012, but errors persisted in all main spending areas, where the ECA observed legislation was not fully complied with.
The ECA, an EU institution whose role is to audit the finances of the union, signed off the 2012 accounts worth €138.6bn ($187bn), as it concluded they fairly present the financial position of the EU in all material respects.
However, the ECA has also found an estimated error rate of 4.8% in the EU accounts, up from 3.9% in the previous year, and therefore it hasn’t given assurance on these non-compliant expenditures.
The ECA explained in a statement that the error rate is not a measure of fraud or waste but an estimate of the amount of money that shouldn’t have been paid out from the EU budget because it wasn’t used in compliance with the applicable EU legislation.
According to the ECA, typical errors included payments made to companies for hiring unemployed people without keeping them on for an agreed period of time; or granting construction of public works without the required tender process.
In particular, the ECA was critical of member states’ authorities that had had "sufficient information available to have detected and corrected errors before claiming reimbursement from the EU budget."
Out of the €138.6bn spent in 2012, 80% was jointly managed by the EU Commission and the member states. According to the ECA, examples of weaknesses in management and control systems were found at both levels.
The ECA estimated the error rate for expenditure jointly managed by the Commission and the member states was 5.3% and 4.3% for the rest of operational expenditure directly managed by the Commission.
Year-on-year the EU financial management remained relatively stable, according to the ECA, although it varied from one policy to another.
"For example, there has been a rise in the estimated error rate in the area of agriculture over several years. For structural funds, the estimated error rate has increased every year since 2009, after having fallen in the three previous years," the ECA said.
The Luxembourg-based institution also called for a "rethink" of the current EU spending rules as they provide "limited incentives for member states to use financial management systems more effectively."
The ECA added it has "repeatedly recommended" further simplification of the rules to improve the quality of spending and reduce the level of error.