EU BUDGET: COMMISSION SETS OUT PRIORITY STEPS FOR BETTER CONTROLS.

In search of auditors' approval.

Last year, the Court of Auditors failed to sign off the Commission's spending in 2004, giving only a qualified assurance on the "legality and regularity" of the underlying transactions. The EU financial watchdog's report was nevertheless positive for about 35% of the budget including parts of farm spending, administrative expenditure and aid to candidate countries. This was the eleventh time that the Court has refused to give assurance on all underlying transactions. Getting a positive statement of assurance (DAS) from the auditors is one of the Commission's strategic objectives by the end of its mandate in 2009.

The Commission and Council are also coming under political pressure from the European Parliament to do more to get a positive DAS from the Court. MEPs want to have personally signed guarantees from Finance Ministers that they have properly spent EU funds and have made this a criterion for agreeing the 2007-13 budget deal.

In order to reach a situation where the Court of Auditors signs off the entire accounts, the Commission has drawn up a list of 16 actions which would apply to itself but also crucially to the member states who are responsible for spending 80% of all EU funding (mainly under the Common Agricultural Policy and the Structural Funds). Under the Treaty, the Commission is legally responsible for all spending.

The Commission's approach involves ensuring that management and controls of spending are carried out to a uniform standard, using, where useful, common methods, definitions and guidelines.

Spending under the Structural Funds is a key priority because there has been less success in improving the quality of controls in this area compared to farm spending, the other main spending policy, and the new member states are anxious for more guidance to avoid losing funding through rejected applications for EU money.

Themes.

The actions are grouped in four "themes". These are:

- simplification and common control principles;

- management declarations and audit assurance;

- single audit approach: sharing results and prioritising cost-benefit;

- sector-specific gaps.

For example, under the first "theme", simplification and common control principles, the Commission is proposing establishing common principles "emphasising clarity, simplicity and a consistent approach to evaluating the risk of error in the underlying transactions".

One example is that the Commission wants to make it clearer for...