Policies

BUDGETARY CONTROL AND COMBATING FRAUD

The EPP-ED Group in the European Parliament gives a very high priority to budgetary control and the combating of fraud. European citizens justifiably demand that the European Union demonstrates that it is providing value for money by delivering programmes and policies as effectively and as efficiently as possible, including the careful management of all expenditure and a vigorous fight against fraud.

To achieve this, the group has taken the lead in two ways.

• Firstly by making sure that there are bodies in place that can undertake this work. For example, the establishment of the Court of Auditors, the European Parliament's Budgetary Control Committee and the fraud prevention unit within the Commission (now known as OLAF) had their origins in EPP initiatives. The EPP-ED is now urging the introduction of new fraud prevention mechanisms including, in particular, the creation of a post of European Public Prosecutor to be responsible for proceedings against all acts affecting the Union's financial interests.
• Secondly by energetically using the powers that are in place as effectively as possible.

The power of the European Parliament

The main tool in the hands of the European Parliament is the annual review of past expenditure, based on a assessment prepared by the Court of Auditors, culminating in a report adopted by the whole Parliament. This report makes specific demands for future corrective action to be taken where necessary. This process is known as the "discharge procedure" and the Commission is required to react to the criticisms made. Action taken by the European Commission to address serious mismanagement in Eurostat in the middle of 2003 was a direct result of demands included in the Parliament's discharge report adopted earlier that year. EPP-ED members of the Budgetary Control Committee, which prepares this report for the Parliament, seek to ensure that the highest standards of management be sought and attained as a result of its reports.

The Budgetary Control Committee also has other powers:

• It controls the implementation of the budget. This involves regular examination of expenditure, with officials of departments in which expenditure is lower or higher than the objectives set being called upon to account for this situation.
• It assesses the impact of Community expenditure, particularly in co-operation with the Court of Auditors, which draws up special reports on its own initiative or at the request of Parliament. Parliament assesses the cost-effectiveness of Community policies.
• It pushes for improvements to protect the Community's financial interests by considering administrative, technical and legal possibilities with regard to detecting, preventing and prosecuting the misappropriation of Community funds. To that end, it is also the parliamentary authority responsible for monitoring the work of OLAF, the body responsible for internal investigations in the institutions concerning fraud or corruption.
• It deals with legislation relating to financial controls. The Committee considers legislative proposals relating to Community expenditure, with a view to ensuring that appropriate control measures are provided for. In connection with specific control measures, the EPP-ED Group has sought the adoption by the Council of measures placing greater emphasis on risk analysis, with information activities focused on risk sectors. Emphasis has also been placed on fraud prevention based on greater co-operation between Member States' customs authorities, better information and training of competent officers.

Recent EPP-ED initiatives

The European Commission has now embarked on a major reform programme as a direct result of Parliamentary action, largely inspired by EPP-ED members. The catalyst for change was a detailed draft report, prepared by an EPP-ED member as part of a discharge procedure, which outlined the Commission's failings and mismanagement. The group drove it through the Parliament despite initial opposition from the socialist and liberal groups. A "wise-men's" enquiry was set up to investigate the cases revealed by the Parliament which ultimately resulted in two important reports. As a consequence of this pressure the then Commission felt obliged to resign. It was a turning point in the history of the European Union and the management of its activities. In response to these reports and inspired by their conclusions, the new Commission published a "Reform Strategy" in March 2000 and then a detailed Action Plan which listed specific steps which needed to be taken to transform the European Commission into a world class administration.

Measures taken so far include the following.

• An independent European Anti-Fraud Office was established in July 1999 and is now making full use of its extensive powers to investigate suspected cases of fraud or misconduct.
• New rules on whistle-blowers have been agreed to encourage staff to expose suspected cases of fraud or mismanagement. It is now essential that potential whistle-blowers have confidence in the system and that the Commission deal effectively with any allegations.
• There has been a major overhaul of management responsibilities and procedures for financial matters.
• The Commission has restructured its audit and control systems, including the creation of a new Internal Audit Service.
• A new Financial Regulation came into force in January 2003 to provide a framework to enable the Commission to take further steps to modernise its accounting and financial information systems.
• A new statute for European Union officials has been proposed. This should improve the quality, motivation and deployment of the European Union's officials by:
• improving internal management;
• introducing a new appraisal system;
• rewarding good performance;
• strengthening the rights of whistle-blowers.

The process of reform is still far from complete but enormous strides have been taken. The EPP-ED is now focused on remaining constantly vigilant to ensure this programme is implemented in full. The group is specifically monitoring the actions being undertaken to improve the accounting systems used by the European Commission by calling for an independent expert assessment to be undertaken of the measures proposed and for a full parliamentary hearing to be held to review progress.

EPP-ED Group proposals for further action


The EPP-ED Group seeks further progress in six key areas:

• the evaluation of EU programmes
• the information policy of the institutions
• the protection of the financial interests of the European Union
• the operational activities of the Council of Ministers
• the enlargement of the European Union.

Evaluation of EU Programmes: Increased attention must be given to consideration by the Budgetary Control Committee of the output of the evaluation and audit departments of the European Commission. We will prioritise certain policy areas where concerns are most acute.

Information policy of the Institutions: It is essential that all institutions and agencies in their expenditure of EU funds have in place systems of openness and transparency to enable proper checks to be undertaken. A key element of this is access to documents. We will continue to push for improved systems to ensure that the function of the discharge authority can be fully exercised. We will monitor the implementation of the new Financial Regulation to ensure it is providing an adequate framework for our work.

Protection of the Financial Interests of the European Union: More must be done to protect the financial interests of the Union, particularly in the way funds from the European Union budget are spent in Member States. Misuse of these funds remains at unacceptable levels. Action must be taken to identify cases of abuse and to secure repayment of misspent money.

We attach a high priority to the establishment of the European Public Prosecutor, as set out in the Commission's Green Paper, to help achieve this objective.

It is also vital that the European Union institutions give greater attention to instances of fraud in the collection of its own resources.

Operational activities of the Council of Ministers: Where resources of the EU budget are used to finance operational aspects of the activities of the Council of Ministers, as opposed to their purely internal administrative work which are subject to a long-standing 'gentleman's agreement', the Committee will seek proper accountability for monies spent.

Enlargement of the European Union: We are already focusing on the need of the institutions of the applicant countries to cope with responsibilities of managing EU programmes and expenditure. As these applicant countries become full members we will support their efforts to ensure that administrative arrangements are successful in attaining the standards required.


Conclusion

Most European Union expenditure is well spent and for the purposes intended. The Court of Auditors has said that 95% of the EU budget is used properly but that 5% of expenditure, causes concern, mainly because of poor policy design and inadequate management. The reform programme can in principle get to grips with these problems which is why it has the group's support and why it must be implemented in full.

The EPP-ED Group believes that 5% is still an unacceptable level and the EU must have zero-tolerance for any incompetence, mismanagement or fraud to ensure all the money entrusted to it is spent in accordance with the expectations of the Union's citizens. We will remain vigilant to ensure that the necessary action is taken to fulfil this ambition.

Stephen Woodard