Auditors haven’t refused to sign off EU accounts

Myth: Auditors have refused to sign off EU accounts

InFact: The EU budget has been signed off every year since 2007. Auditors says there are errors, but these aren’t a measure of fraud or waste.

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Eurosceptics hold it as an article of faith that the EU is so crooked that its auditors refuse to approve the annual accounts. “The EU budget is so wasteful and so corrupt that the Court of Auditors has not signed off the accounts for the last 20 years,” according to Boris Johnson. Bernard Ingham, Margaret Thatcher’s press secretary, says it shows the EU is “corrupt” and “riddled with fraud”.

Not only is this incorrect, the error is repeated elsewhere almost annually.

In fact, the European Court of Auditors has signed off on the EU budget every year since 2007.

Failure to do so before this has much to do with the way the EU budget is audited. In 2006, John Bourn, then comptroller and auditor general at the UK’s National Audit Office, said he too would have been unable to sign off the UK’s accounts if he had been required to audit them in the same way as the ECA does. That was because the year before he had issued a qualified opinion on 13 of the government’s 500 accounts (22).

Eurosceptics, in their hurry to condemn the EU, confuse the auditors’ seal of approval with something called the “estimated error rate”. This is an estimate of the total money the EU should not have paid out because it was “not used fully in accordance with EU rules”.

This can happen for a number of reasons. For example, farmers may exaggerate the amount of land or livestock they own, or administrators become confused by the “complex eligibility rules” of EU funding (see VIII). Alongside its latest report, the Court of Auditors stressed that error is “not a measure of fraud, inefficiency or waste”.

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If the error rate in a spending area is less than 2% it is classified as “free from material error”. For the 2014 budget, the only category to meet this target was administrative expenditure (see 21). All other spending areas failed the test. The overall rate of “material error” was 4.4%. This is too high, but error is fairly common when large budgets are concerned – the EU’s budget last year was over 162.2 billion euros (£123.4 billion).

The European Commission also points out that 80% of EU funds are actually managed by member governments, and when undue payments are made the Commission works with the EU countries concerned to recover the money. The ECA’s consistently critical reports are evidence of a high degree of transparency in EU spending. What’s more, all beneficiaries of  EU funding are a matter of public record.

Confusion over the EU budget audit, wilful or otherwise, turns into a story for the British media every year. Last November The Times said a whopping 133.6 billion euros of EU spending was to be considered “irregular and possibly illegal”. It reached this figure by adding the totals of each spending area affected, rather than just payments which didn’t follow the rules. The paper also suggested that auditors had not approved the 2014 budget, a trap that the Daily Mail,Telegraph and others have all fallen into over recent years.

This article was updated on 22 April to include the quote from John Bourn, former Comptroller and Auditor General at the UK’s National Audit Office.

This article is an adaptation of a piece that previously appeared on InFacts.

Edited by Alan Wheatley