EU auditors fail to find pounds 2bn missing cash

KATHERINE BUTLER

Brussels

The European Union's spending watchdog will today refuse to certify the Community's 1994 accounts because more than pounds 2bn - 4 per cent of the budget - cannot be properly accounted for. In total, more than pounds 11bn, or a fifth of the pounds 56bn spent by the EU in 1994, is open to question, the Court of Auditors will say.

In a report to be unveiled to the European Parliament in Strasbourg today the court discloses that "serious and substantial errors" have been found in transactions underlying 4 per cent of last year's spending. It cannot vouch for a further 14 per cent because auditing and accounting procedures were so frequently ignored or flouted.

The revelations will be seized on by Euro-sceptics but most of the blame for lax financial management and inadequate control over taxpayers' money is placed at the door of national governments, not Brussels. "The errors and systems' weaknesses detected

The European Commission has traditionally claimed that no more than 1 per cent of the annual budget is lost to fraud. While the Luxembourg-based auditors stop short of suggesting they have uncovered fraud totalling 4 per cent of spending, they warn that a mix of fraud, waste, mismanagement and poor financial housekeeping is affecting a large part of the budget. Accounting errors do not in every case represent a loss to the taxpayer, the auditors stress, but they are evidence of inadequate financial administration in virtually every area of EU spending.

They call for urgent introduction of tighter controls and condemn the failure of both member-states and the Commission to heed past warnings. The court is complying for the first time with a Maastricht Treaty requirement to provide Parliament and the Council of Ministers with a statement of assurance on the legality of the annual accounts.

The court expresses particular concern at the absence of proper controls over payments to farmers and food traders at national level.

A litany of mismanagement and ineffective or non-existent controls is reported in the fruit-and-vegetable regime, where the court complains about Greek, Spanish and Italian farmers being systematically overpaid for destruction of unwanted produce. But once again the finger is pointed at national authorities, who in many cases leave control "in the hands of the most interested parties - the claimants".

Poor control over pay-outs under regional development schemes also draws heavy criticism. Of the 270 projects to foster co-operation between the Republic and Northern Ireland under the Interreg programme, only 39 were found to have any cross-border content.

In Eastern Europe, meanwhile, where multi-billion-pound schemes are being run to regenerate the economies of the former Soviet-bloc states, there is severe criticism of EU spending on apparently futile studies.