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European Court of AuditorsAnnual Reports 2013
Vítor Caldeira, President
5 November 2014
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A moment of change
• New Parliament
• New Commission
• New spending programmes and financial rules
for 2014 - 2020
• Need to make best use of limited financial
resources
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Lessons from 2013
• EU financial management not yet good enough overall
• Significant room for further improving how funds are spent
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EU financial management challenge
• Use all available resources, and
• Ensure spending complies with EU rules, and
• Ensure it achieves valuable results for citizens
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Spending
• 2013 payments almost 99% of the maximum available
• Total spending €148.5 billion - €290 for every EU citizen.
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Clean opinion
• A clean audit opinion on the reliability of the EU accounts
• As since start of programming period in 2007
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Managing cash-flows
• Outstanding commitments and other liabilities continued to grow
• €322 billion at year end - likely to rise
• Commission should prepare a long range cash-flow forecast.
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Financial engineering instruments
• Commission plans to make even greater use of
them
• Slow to reach recipients
• Complex and difficult to account for correctly
• Commission should ensure contributions to such
instruments reflect real cash-flow needs and
are properly accounted for
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Compliance with the rules
• Revenue regular
• Financial commitments regular
• Payments materially affected by error
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2013 error rate
• Estimated error rate for 2013 payments =
4.7%
• Close to 4.8% for 2012
• Persistently higher than “materiality threshold”
of 2%
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Error in different spending areas
• All spending areas apart from administrative expenditure affected by material error
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Higher errors for shared management
• Spending shared between the MS and the Commission is 80% of EU funds
• Error rate for payments under shared management = 5.2%
• In areas mostly managed directly by the EC = 3.7%
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Effective internal controls can make a significant difference
• EC and national authorities took corrective actions on errors they found
• Otherwise, overall error rate would have been
6.3 % rather than 4.7%
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Internal controls could be more effective
• National authorities had sufficient information available to have detected and corrected many errors before claiming reimbursement
• In rural development, could have reduced error rate from 6.7% to 2.0%
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What needs to be done
• EC and MS need to generate better information about errors in spending and the corrective action they take
• Address the source of the problem
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Main sources of error
• Claims for ineligible costs, projects, activities or beneficiaries
• Serious breaches of public procurement rules
• Incorrect declarations of agricultural areas
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Financial managers not focused on results
• Primarily on spending the money available
• Secondly on complying with the rules
• Only to a limited extent on achieving results
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Current spending culture
• Officials under pressure to spend or lose funding - lack incentives to achieve results
• Systems set up to use resources and to ensure compliance, rather than get results
• Need for change
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Towards a culture of performance
• Court welcomes Commission initiatives • Must be based on genuine commitment at EU
and national level• Essential that right incentives are in place • Need suitable targets for results up-front • Need reliable information on progress towards
achieving them
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Framework for reporting performance
• Better information is a pre-requisite for more effective accountability • Annual evaluation report produced by
Commission• Framework too fragmented – needs further
improvement• Does not cover EU added-value or progress
towards Europe 2020
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Recommendations to Commission
• Propose more coherent performance reporting framework at next review
• Summarise progress towards 2020 targets in annual evaluation report
• Further develop responsibility for contribution of EU spending to policy achievements
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Conclusions
• EU Budget management could – and should – be better
• Not a choice between spending, compliance and results - need all three at once
• More manageable budget = clearer objectives and simpler arrangements for spending
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European Court of AuditorsAnnual Reports 2013
Vítor CaldeiraPresident
5 November 2014