European Court of Auditors

The European Court of Auditors is the fifth institution of the European Union (EU). It was established in 1975 in Luxembourg to audit the accounts of EU institutions. The Court is composed of one member from each EU member state and its current president (as of 2008) is Vítor Manuel da Silva Caldeira.[1]

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Main article: History of the European Union

The Court of Auditors was created by the 1975 Budgetary Treaty and was formerly established on 1977-10-18, holding its first session a week later. At that time the Court was not a formal institution, it was an external body designed to audit the finances of the European Communities. It replaced two separate audit bodies, one which dealt with the finances of the European Economic Community and Euratom and one which dealt with the European Coal and Steel Community.[2]

The court did not have a defined legal status until the Treaty of Maastricht when it was made the fifth institution, the first new institution since the founding of the Community. By becoming an institution it gained some new powers, such as the ability to bring actions before the European Court of Justice (ECJ). However its audit power related only to the European Community pillar of the EU, but under the Treaty of Amsterdam it gained the full power to audit finances of the whole of the EU.[2]

Functions

Despite its name, the Court has no judicial functions. It is rather a professional external investigatory audit agency.[3] The primary role of the court is to externally check if the budget of the European Union has been implemented correctly, in that EU funds have been spent legally and with sound management. In doing so, the court checks the paperwork of all persons handling any income or expenditure of the Union and carries out spot checks. The court is bound to report any problems in the Courts reports for the attention of other states and institutions, these reports include its general annual report as well as specific and special reports on certain bodies and issues.[1][4] The Court's decision is the basis for the European Commission decisions, for example: when the Court found problems in the management of EU funds in the regions of England, the Commission suspended funds to those regions and prepared to fine those who did not come back up to acceptable standards.[5]

In this role the Court has to remain independent yet remain in touch with the other institutions, for example a key role is the presentation of the Court's annual report to the European Parliament. It is based on this report that the Parliament makes its decision on whether or not to sign off the European Commission's handling of the budget for that year.[1] The Parliament notably refused to do this in 1984 and 1999, the latter case forced the resignation of the Santer Commission.[6] The Court, if satisfied, also sends assurances to the Council and Parliament that the taxpayers money is being properly used[1] and the Court must be consulted before the adoption of any legislation with financial implications but the opinion is never binding.[4]

Organisation

The Court is composed of one member from each EU state who are appointed by the Council of the European Union for a renewable term of six years.[1] They are not all replaced every six years however as their terms to not coincide (four of the original members began with reduced terms of four years for this reason). Members are chosen from people who have served in national audit bodies, who are qualified for the office and whose independence is beyond doubt. While a serving in the court, members can not engage in any other professional actives.[7] As the body is independent they are free to decide their own organisation and rules of procedure, however they have to be ratified by the Council of the European Union.[8] Since the Treaty of Nice, the Court can set up "chambers" (with only a few Members each) to adopt certain types of reports or opinions.[9]

The Court is supported by a staff of approximately 800 auditors, translators and administrators. Auditors are divided into auditor groups which inspect and prepare draft reports for the Court to take decisions upon. Inspections take place not only of EU institutions but any state which receives EU funds given that 90% of income and expenditure is managed by national authorities rather than the EU. Upon finding a fault the Court has no legal powers of its own an instead informs OLAF which is the EU's anti-fraud agency.[1] The court is also assisted by a Secretary General, elected by the court, who draws up draft minutes and keeps archives of decisions as well as ensures the publication of reports in the Official Journal of the European Union along with general management and assistance to the President.[10]

President

The members then elect one of their members as the President of the Court for a renewable three year term. The election takes place by a secret ballot of those members who applied for the presidency. The duties of the President (which may be delegated) are to convene and chair the meetings of the Court, ensuring that decisions are implemented and the departments (and other activities) and soundly managed. The president also represents the court and appoints a representative for it in contentious proceedings.[10]

At present the President is Vítor Manuel da Silva Caldeira (of Portugal), elected in 2007.[1] Previous presidents have been Sir Norman Price (1977, United Kingdom), Michael Murphy (1977, Ireland), Pierre Lelong (1981, France), Marcel Mart (1984, Luxembourg), Aldo Angioi (1990, Italy), André Middlehoek (1992, Netherlands), Bernhard Friedmann (1996, Germany), Jan O. Karlsson (1999, Sweden), Juan Manuel Fabra Vallés (2002, Spain) and Hubert Weber (2006, Austria).[11]

Criticism

Declaration of assurance

Since 1994 the Court has been required to provide a "declaration of assurance" (Cf. positive assurance). This has proved a problem due as ever since then they have been unable to provide it due, refusing to endorse large parts of the budget despite on declaring the accounts to be "reliable". This has led to media reports of the EU accounts being "riddled with fraud" where as the problems centre more on errors in paperwork despite correct spending. Hence the system has drawn criticism due to creating this perception. The Commission in particular have stated that the bar is too high and that only 0.09% of the budget is subject to fraud.[12]

The EU had to issue a press release on 2006-10-24, to answer to the falsehood that "Annual accounts have not been certified by the external auditor since 1994"[13]: "Myths or facts – what do you prefer?"[14] [15]

Terry Wynn MEP who served on the Parliament's Committee on Budgetary Control has also backed these calls stating that it is impossible for the Commission to fall within these standards. By comparison, the Auditor General for the United Kingdom stated that there were 500 separate accounts for the UK and "in the last year, I qualified 13 of the 500. If I had to operate the EU system, then, because I qualify 13 accounts, I might have to qualify the whole British central government expenditure". Despite the problems, the Barroso Commission has stated that it aims to bring the budget within the Court's limits by the end of its mandate in 2009.[12]

Size

The size of the court has also come under criticism. Based on the one member per state system its members grew from nine to twenty-seven as of 2007. Attempting to get consensus in the body has thus become more difficult leading to the number of its special reports per year shrinking from fifteen to six between 2003 and 2005 despite its staff growing by 200 over the same period. Some proposals have been for the size to be reduced to five members or just one, possibly with an advisory board with members from each member state. However, neither the European Constitution or the Lisbon Treaty proposed any changes to this system despite calls to address it by former court members and MEPs.[16][3]

References

  1. ↑ 1.0 1.1 1.2 1.3 1.4 1.5 1.6 "Institutions of the EU: The European Court of Auditors". Europa (web portal). Retrieved on 2007-10-15.
  2. ↑ 2.0 2.1 "European Court of Auditors". European NAvigator. Retrieved on 2007-10-15.
  3. ↑ 3.0 3.1 Bösch, Herbert (2007-10-18). "Speech by Herbert Bösch, Chairman of the European Parliament's Committee on Budgetary Control". Europa (web portal). Retrieved on 2007-10-17.
  4. ↑ 4.0 4.1 "Power of audit of the European Court of Auditors". European NAvigator. Retrieved on 2007-10-15.
  5. ↑ "EU may force region to repay cash". BBC News (2007-10-16). Retrieved on 2007-10-17.
  6. ↑ "Budgetary control: 1996 discharge raises issue of confidence in the Commission". Europa (web portal) (1999). Retrieved on 2007-10-15.
  7. ↑ "Composition of the European Court of Auditors". European NAvigator. Retrieved on 2007-10-15.
  8. ↑ "Organisation and operation of the European Court of Auditors". European NAvigator. Retrieved on 2007-10-15.
  9. ↑ "Glossary: The European Court of Auditors". Europa (web portal). Retrieved on 2007-10-15.
  10. ↑ 10.0 10.1 "Organisation of the European Court of Auditors". European NAvigator. Retrieved on 2007-10-15.
  11. ↑ "Presidents of the European Court of Auditors". European NAvigator. Retrieved on 2007-10-15.
  12. ↑ 12.0 12.1 Mulvey, Stephen. "Why the EU's audit is bad news". BBC News. Retrieved on 2007-10-15.
  13. ↑ "EuroFAQ". EuroFAQ. Retrieved on 2008-04-04.
  14. ↑ "Get the facts right". ec.europa.eu. Retrieved on 2008-04-04.
  15. ↑ "Myths". PressReleases.info. Retrieved on 2008-04-04.
  16. ↑ Karlsson, Jan; Tobisson, Lars. "‘Much talk, little action’ at European Court of Auditors". European Voice. Retrieved on 2007-10-15.

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