Controls over EU's £62bn budget 'worse than Enron'

The European Commission's former chief accountant is to be disciplined for claiming that the EU's €98bn (£62bn) budget is "massively open to fraud", even though a report from auditors backed many of her claims.

Marta Andreasen, who was shunted sideways from her job on full pay in May, was embroiled in an acrimonious row yesterday when she damned the Commission's financial regulation as out of control and said fraud was harder to track than in Enron or WorldCom.

In an angry reaction, the European Commission dismissed her allegations as old complaints and criticised her per-formance in her job. A statement from Michaele Schreyer, the EU budget commissioner, described the appointment of Ms Andreasen as a mistake and claimed she "rapidly generated extreme ill feeling in essential relationships" with colleagues.

The argument, orchestrated with the help of Conservative MEPs, put officials in Brussels on the defensive, raising question marks over three years of reforms pioneered by the European Commission's vice-president, Neil Kinnock. The Commission was also on the losing end of a public relations battle that culminated in the unusual sight of a disgruntled EU official giving a press conference in Westminster.

The Spanish-born Ms Andreasen, who refused to sign the EU's accounts for 2001, has been in a new post with few responsibilities since May.

Yesterday she said there were "serious and glaring shortcomings" in parts of the budget management process, and that there was a "dangerous failing at the heart of the [EU's] system" because of a "complete lack of compliance with basic and minimum accounting standards.

"Unlike the issues surrounding Enron and WorldCom, where you can at least trace transactions and accounts, you cannot do so within the EU accounts as there is no system in place for tracing adjustments and changes to figures presented," she argued.

Her comments coincided with the leak of a draft report from the EU's Court of Auditors, which confirmed that the accounting system had obvious risks because of a lack of security of its computer system and other accounting failures.

"The Commission has been warned about them but to date has not taken any remedial action," it added. The Court of Auditors has been warning about problems at the heart of the accounting system since 1999 and repeated its criticisms in the annual report for 2000.

The Commission says it acknowledges the weaknesses and is reforming the system. But Ms Andreasen was particularly critical of the computer system, Sincom 2, both for its suitability and because, she said, officials could change figures without being detected. As chief accountant, she said she was asked to approve accounts that could not be reconciled.

That was denied by the Commission, although other sources suggested that auditors testing the system had altered figures without detection. While all parties seem to agree on the problems, Ms Andreasen appears to have disagreed strongly with the proposed solutions.

The dispute also focused on the credibility of Ms Andreasen, who was suspended as head of accounting at the Organisation for Economic Co-operation and Development in 2000. The OECD refused to comment on claims that it failed to tell the Commission before Ms Andreasen got her job in Brussels.

The Commission is disciplining Ms Andreasen for breaching the staff code in not using formal channels to report her concerns. She angered officials by contacting MEPs directly.