"The EU's budget will always be mismanaged; the system and procedures are so complex that they are open to large-scale abuse and fraud. Far better, surely, not to send money to Brussels in the first place... European government does not work, will not work and can never work."
by Jonathan Arnott MEP
•For the 19th year in a row, the EU's Court of Auditors has refused to give a clean bill of health to the EU's accounts for the year ending 31st December 2013. The EU's Court of Auditors registered an 'adverse opinion' about the legality and regularity of EU payments, blasting them as being "materially affected by error" - with almost €7 billion being paid out improperly.
With multinationals claiming small business relief, farms claiming buildings as grazing land and officials pocketing 5 times the going rate for their jobs, I wonder whether people realise just how bad the situation is in terms of mismanagement of the EU's funds - at a time when Britain is being asked to hand over an additional €2.1 billion to the European Union within weeks?
The official error rate is 4.7% for 2013 (with rural development and regional policy completely out of control at almost 7%), roughly holding steady after a huge increase the previous year. In actual fact, errors are higher - around 6.3% of the budget - but 1.6% had been rectified. At today's Budgetary Control Committee meeting in the European Parliament, I was handed a copy of a monster 319-page report. It was the Court of Auditors' annual report [pdf] on the financial year 2013.
So far I've picked out just a few of the most shocking pieces of information from that document. Bear in mind that these (and 14 further cases of fraud) have been found in a small sample of all EU projects:
1. EU money spent on IT equipment in Africa was claimed to have been given to the lowest bidder, but that just wasn't true. The Commission's auditor didn't even spot the problem. (p206)
2. A legal training firm claimed using incorrect hourly rates, claiming subcontracting costs as though they were regular employees, and declaring costs for periods of time that weren't part of the project. More than a quarter of such projects had illegible costs. (p221)
3. The Commission signed a contract for a French legal expert, who was paid 98,000 euros for advisory service in Tunisia, in breach of the financial regulations. (p207)
4. The Commission accepted millions of foreign aid expenditure to Moldova which hadn't actually been incurred. (p207)
5. In Romania officials were paid 5 times the usual salary, but no action was taken because the rules were unclear. (p185)
6. Illegal awards were made under the Regional development fund in Germany and 5 other countries. (p148)
7. In Latvia the body responsible for checking that EU aid is genuine itself claimed €2 million in ineligible aid (p118).
8. In Poland, a farmer was given payments for early retirement support despite being of pension age (p114).
9. Multinational companies in Portugal claimed €500,000 of EU aid aimed at small businesses. Similar problems were found in FIFTEEN other countries (p112; p25, EU Audit in Brief).
10. An Italian company was paid not to use harmful plant protection products, but it used them at least twelve times. (p112)
11. In 10,000 cases in Italy aid was granted for land which was excluded from such aid (p89).
12. In Ireland, farms claimed subsidies for grazing land. Some so-called 'grazing land' had buildings and roads built on it, and couldn't possibly be used for grazing. This was found in four out of the six farms randomly surveyed (p88).
13. In Greece and 5 other countries land covered in trees, shrubs and bushes was claimed as grassland (p84).
14. Errors in French and British trade with Germany have been simply ignored for 15 months (p64).
15. In Holland, 90% of monies involved in fraudulent activity in textile imports haven't been reclaimed (p63).
Defenders of the European Union usually point to the fact that a lot of money is spent in the member states, and say that it's the member states' responsibility to police the problem. They act as though the Commission is a blameless victim of national governments' incompetence.
Well that was certainly true today! Speaker after speaker on the Committee lambasted national governments for not doing more. They're probably right that national governments don't police EU funding well enough, but it's also fair to say that they're the ones bearing the brunt of having to interpret complex EU rules.
But the Commission also routinely ignores instructions from the Court of Auditors. For example (p70), the Court of Auditors criticised them for ignoring last year's recommendations for improvement. The Commission declined to even comment. In fact 21% of all of the Court of Auditors' recommendations (p17, EU Audit in Brief) were completely ignored by the Commission, and many others were only partly implemented.
But whilst they're aiming their bullets at national governments, is the record of the European Union itself really okay - or are they just seeking to deflect criticism? For projects directly administered by the Commission, the error rate is still 3.7%. Yes, it's a tiny bit lower than the overall error rate but that's to be expected because there's one less tier of administration. So when the pro-EU lobby blames member states, they're doing nothing more than using it as a way to muddy the waters. The fact is that the system itself is broken and unreformable. There's even a 1% error rate within the EU's own expenditure.
The EU's budget will always be mismanaged; the system and procedures are so complex that they are open to large-scale abuse and fraud. Far better, surely, not to send money to Brussels in the first place and then apply to receive a small portion of that money back with strings attached? We want to be good neighbours with Europe and to trade freely with Europe, but outside the EU trading freely with the globe. European government does not work, will not work and can never work.