Commission Report — Member States' replies to the Court of Auditors' 2000 Annual Report
Date: 2002-06-29
Institutions: European Commission
Subjects: EU Member State, European Court of Auditors, activity report

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COMMISSION REPORT

Member States' replies to the Court of Auditors' 2000 Annual Report

(2002/C 155/02)

1. INTRODUCTION

the Financial Regulation,

1. In accordance with Article 276(3) of the Treaty and Article
the
89(8) of
Commission's follow-up report is to set out the measures
it has taken in response to the observations accompanying
the decisions giving discharge and other observations by
Parliament concerning the implementation of expenditure,
and to the comments accompanying the recommendations
on discharge adopted by the Council.

the purpose of

on

sound

conclusions

and
the Commission has

Since the 1996 Dublin European Council, and in line with
efficient
its
financial
management,
requested Member
States to reply to the observations made by the Court of
Auditors in its Annual Report and special reports and to
provide information on any corrective measures they have
adopted. These measures are complementary to those taken
by the Commission.

2. The Court of Auditors presented its 2000 Annual Report to
the European Parliament on 13 November 2001. On the
same day it presented its report
to the Council Budget
Committee in accordance with an agreement reached at
the meeting of the Group of Personal Representatives of
Foreign Ministers (PRG) on 8 June 2001, where it was
decided that
the Court's observations were submitted
the Member States would have more time to
earlier
transmit
that
reason, on 13 November 2001 the Commission sent a
letter
to all Permanent Representatives asking them to
provide these replies before the end of December 2001.

to the Annual Report. For

replies

their

if

3. In an attempt

to provide a coherent and harmonised
framework for the national contributions, the Commission's
request was accompanied by a questionnaire drawn up in
close collaboration with the Court of Auditors. It consisted
of general questions concerned mainly with the sectors
covered by shared management, a list of specific references
to each Member State in the Annual Report and a summary
of Statement of Assurance (SOA) errors for each Member
State. This general framework created by the Commission
and the Court of Auditors served a dual purpose:

Auditors, since, with the exception of the information
provided as part of the audits (replies to sector letters),
the Member States play very little part in the prep-
aration of the Annual Report, even though they are
one of
the main managers of Community appro-
priations. The Member States were therefore invited to
submit their replies to the points in the Annual Report
which concerned them directly (specific references, SOA
errors), but also to comment on the Court's more
general observations on the sectors covered by shared
management.

— Secondly, the Member States would be able to use their
replies to add to or comment on the Commission's
answers to the Court's observations. In this way their
replies would provide additional information about cases
relating directly to management at national level. It is
also an opportunity to support or,
if appropriate,
challenge the Court's recommendations.

4. This report is therefore based on the contributions from the
Member States. It should be pointed out that despite the
creation of the general framework these contributions are
still fairly heterogeneous both in form and in substance.
Nevertheless, a general analysis (II) highlights the salient
points of the Member States' replies, and an analysis of
these replies by financial perspective heading (III) shows
that some areas of activity have particularly caught
the
attention of the Member States.

2. GENERAL ANALYSIS

contributions

are mainly
Although the Member States'
concerned with the parts of
the Annual Report which
concern them most directly, a general analysis reveals two
the Member States' assessment
broad characteristics. Firstly,
of the Court of Auditor's observations and conclusions vary.
Secondly, the corrective action proposed or adopted remains
largely
existing
management and control systems.

limited to a better

implementation of

— Firstly, it would allow the Member States to give their
the Court of

opinion on the main observations of

There are two types of reply: on general questions or on the
observations directed towards specific Member States:

2.1. The Member States agree, variations apart, with the

Court's overall findings

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— Generally speaking, the Member States do not contest the
Statement of Assurance, and the overall opinion of the
Court of Auditors that substantial weaknesses still persist
and that further efforts are needed,
including at national
level. Moreover, this acceptance of the Court's conclusions
applies equally to the quantitative part of the Statement of
Assurance (incidence of errors) and to the results of the
systems audits. Although the principal systems examined
by the Court
and control
system — IACS in the agricultural sector, Commission
Regulation (EC) No 2064/97 in the case of the Structural
Funds) were regarded as satisfactory overall, the Member
States
legal
framework could be improved.

(Integrated administrative

implementation of

recognise

that

this

all

rise

to a

reply,

errors gave

— Nevertheless, when the Court's observations are directly
concerned with their management, many Member States
challenge the findings or conclusions of the Court. This
disagreement is particularly marked in the case of errors.
Although not
the
contributions received reveal a large number of challenges.
Altogether, 109 errors were notified to the Member States,
which replied to 70 % of cases. In their replies the Member
States challenge a third of errors in the agricultural sector
and a quarter in the case of structural measures, which
represents a quarter of all errors relating to Member
States detected by the Court. According to their replies,
the Member States disagree on the facts or on the Court's
This
interpretation
disagreement with the observations of
is to
some extent in contradiction with the overall acceptance
of the Statement of Assurance and the criticism of the fact
that the incidence of errors remains high. In addition, some
Member States consider that the SOA methodology of the
Court is doubtful in two respects. They believe implicitly
that the Court does not take sufficient account of their
replies or comments. This is due to the fact that there is
no adversarial phase as the time available is very short.
More importantly,
the
Court draws general conclusions on the basis of a minor
transaction which may be affected by mistakes which are
themselves very minor.

framework.
the Court

some Member States

regulatory

that

feel

the

of

2.2. A limited number of reforms and no fundamental

reappraisal

applies,

finding a

the Community budget

to which
Given the proportion of
shared management
solution to the
problems detected by the Court of Auditors is largely a
matter for action at national
level. The Member States were
therefore asked to describe the corrective action adopted or
planned, whether
they were one-off measures or more
directed towards the implementation of management and
control systems. The Member States also wanted to widen
the scope of
their comments by proposing reforms which
they felt were necessary at Community level.

2.2.1. National reforms and corrective measures

It should be remembered first of all that the disagreements
between the Member States and the Court of Auditors mean
that action has not been taken on all the problems raised.

Where the Member States accept the Court's criticism three
main types of action have been taken:

the

establishment or

— Upgrading of management and control systems where these
were non-existent, incomplete or ineffective. Thus, in the
agricultural sector the introduction of the IACS (integrated
administrative and control system) is continuing, with, for
example,
the
instruments needed for it to operate properly (databases
such as
the
stepping-up of on-the-spot checks in the Netherlands, and
improvement of the herd register in Ireland, etc.). Similarly,
several Member States which regularly have problems with
the supplementary levy on milk adopted measures in
response to the
the Court of Auditors
(Greece, Italy).

the olive cultivation register

improvement of

criticism of

in Greece,

— Clarification measures

legal

to improve

the application of
existing procedures. Many Member States have provided
manuals,
interpretation and training time to ensure
that Community regulations are uniformly and effectively
applied. These measures are regularly accompanied by a
clarification of
responsibilities within national adminis-
trations and a review of internal procedures to improve
their efficiency. Measures were adopted to this effect, for
example,
in relation to the checks to be carried out in
connection with the Structural Funds (implementation of
Regulation (EC) No 2064/97 in France, Sweden and the
Netherlands) or the application of anti-dumping duties
(Portugal, United Kingdom, Sweden).

— In a few cases, the Member States conducted a more radical
review of their domestic legislation. In response to repeated
observations from the Court of Auditors,
for example,
national regulations leading to deductions affecting direct
agricultural aid were repealed in Greece and Sweden.

and the bodies

— Among the measures planned or adopted by the Member
States, one of the most interesting is a special initiative in
the Netherlands which is examining a bill to clarify and
organise the chain of responsibility between the central
government
in charge of managing
is based on three essential
Community funds. This bill
to
provisions, namely the government's general
information about the funds administered, the power of
to public bodies
the government
to give instructions
responsible for administering funds, and its power
to
adopt corrective measures where the State may be held
responsible for the management of these public bodies.

right

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2.2.2. Specific reforms planned at Community level

The Member States' replies suggest that the Community regu-
lations are broadly satisfactory and provide a framework which
is generally felt to be adequate. Nevertheless, some Member
specific reforms
States would like to see a number of
undertaken, particularly where a review of the existing regu-
lations is already planned. In the agriculture sector this is the
case particularly of the common organisation of the markets in
fruit and vegetables (France and Portugal) and sheep and goats
(United Kingdom). In the case of staffing costs, several Member
States expressed positions which they wanted to be taken into
in remuneration
account, such as the recognition of merit
(France),
lifelong
employment (Sweden) or recruitment procedures (Germany).
However, these calls generally come from a small number of
Member States and there does not seem to be a majority in
favour of any particular specific action.

reconsideration

principle

the

of

of

pretation, coordination, and information, for example as to
best practice. Greater involvement by the Commission in
shared management would ensure that the existing rules
were applied in a more uniform and satisfactory manner.

3. SECTOR-BY-SECTOR ANALYSIS

3.1. Own resources

On the own resources front, there are two particular points in
the annual report which concern the Member States — anti-
dumping measures and the keeping of the separate account (B
account).

Finally, several Member States have expressed a particular
in the Commission's reform process, especially the
interest
recasting of the Financial Regulation. Although the Member
States'
comment directly on the
Commission proposal,
it is expected to lead to a significant
improvement in the situation and to the elimination of some
of the weaknesses highlighted by the Court of Auditors.

contributions do not

3.1.1. Anti-dumping duties

The Court highlighted shortcomings in a number of Member
States, particularly in relation to inspections, the retroactive
collection of duties and inadequate follow-up to mutual
assistance messages.

2.2.3. Strengthening the Commission's

coordinating role

in the

sectors to which shared management applies

Most Member States feel that a substantial proportion of the
problems and mistakes found in national management result
from the complexity of the Community regulatory framework.
This complexity, to which some Member States would add
instability, is felt to increase the risk of misinterpretation and
hence irregular practices. The majority of Member States
therefore insist on the need for two further measures:

the AICS regulations is considered,

— Simplification and clarification of Community regulations
to make the task of the managing bodies and the final
the recent
recipients easier. From this point of view,
if not a
reform of
good example, at
least an important step in the right
direction. It is significant that the texts which are most
often criticised by the Member States are also those
whose implementation is most often criticised by the
Court of Auditors and which are central to the Member
States' replies to the Annual Report (anti-dumping duties,
AICS, standards and control methods laid down by Regu-
lation (EC) No 2064/97).

— In tandem with this call for simplification, many Member
States expect the Commission's help in the form of inter-

In general,
the Member States have accepted the criticisms
levelled by the Court and announced measures to rectify the
main problems detected. Ireland, however, has pointed to an
inspection by the Commission which concluded that
its
practices were satisfactory.

for

Over the last two years, France has decided to devote more of
its customs operations to the monitoring of anti-dumping
duties. The United Kingdom, Germany and Portugal have
also decided to take steps to rectify problems detected by the
Courts of Auditors,
example by reviewing internal
procedures. This should serve to tighten up the management
and recovery of anti-dumping duties (United Kingdom), to step
up inspections, making greater use of risk analysis (Portugal)
and to improve the handling of messages received under the
mutual assistance arrangements (Germany, United Kingdom).
At the same time, a training and information drive should
help reduce the number of problems encountered. Meanwhile,
Sweden has decided to clarify the breakdown of responsibilities
for the retroactive collection of anti-dumping duties within its
national and regional government departments.

Italy, however,
effective.

feels that

the inspections it carries out are

The Netherlands points out
guidance it
duties in the event of successive sales.

received the
requested on the application of anti-dumping

it has not

that

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3.1.2. Separate account

The Court's observations focus on two main aspects. It found
shortcomings in the keeping of the separate account, while also
criticising the way in which certain amounts are booked to the
B account. On this point the Court warned that infringement
proceedings could be opened against a number of Member
States.

The attitudes of the Member States in question vary:

Some of them accept the criticisms and have taken or intend to
take remedial action. For example, the United Kingdom reports
on an improvement plan that should resolve the problems
detected by 31 March 2002. The Netherlands is reviewing its
accounting methods in order to determine how it
fails to
comply with the legislation and whether
this has led to
delays in making funds available to the Commission.

from that of

Denmark on the other hand feels that its accounting practices
do not contravene Community legislation and puts forward an
interpretation of the legislation,
in particular Council Regu-
lation (EEC, Euratom) No 1552/89 and Commission Regulation
(EC) No 1150/2000, which differs
the
Commission and the Court of Auditors. Denmark disagrees
with the Court's views, arguing that customs debts arising
from transit operations should remain in the B account for
as long as the amounts in question have not been recovered.
It
is a view shared by Austria and Germany, which are
particularly concerned that Member States should not be
required to transfer funds that they have not yet collected.
Infringement proceedings are currently in motion against
Germany regarding the keeping of the separate account, but
the German authorities feel that their practice is in line with
the regulations.

etical VAT calculated and the amount which can in fact be
collected.

3.2. Common agricultural policy

3.2.1. Integrated administration and control system (IACS)

All the Member States agree with the Court that the IACS is a
good system that is vital to the sound management of agri-
cultural expenditure in the areas it covers. However, several
Member States feel that improvements are needed to make
the system easier to implement at national
level. Five of
them (Denmark, France, Netherlands, Sweden and the United
Kingdom) consider that further simplification measures should
be taken to make the rules easier to interpret and hence to
avoid some of
level. Two
Member States (France and the Netherlands) suggest that the
Commission should provide more assistance and be more
closely involved in its coordinating capacity.

the errors detected at national

A number of Member States have reported on action taken to
remedy the shortcomings detected by the Court, for example
the Netherlands has stepped up on-the-spot inspections and
made improvements to databases, while Austria has established
a central server and improved its system for administering rural
development expenditure.

3.2.2. Clearance of accounts

In the chapter on clearance of accounts, the Court of Auditors
analyses the decisions taken by the Commission, but also
reports on problems arising at national level. In a number of
significant cases the Member States in question disagree with
the Commission's views:

3.1.3. VAT

in connection with problems

Only two Member States have expressed views on VAT-related
matters, namely Germany and Italy, which were cited in a
in the
Commission report
collection of VAT. Italy did not refer to this specific point,
but mentioned the difficulties in administrative cooperation
arising from the complexity of existing legislation, which
in the
needed amending. Such amendments are, moreover,
pipeline.

Germany, however, was keen to reiterate its position regarding
it challenges the
the Commission's statements. In particular,
validity of
recoverable VAT
the theoretical calculation of
underlying the Commission's analysis, as the indicator used
creates a substantial discrepancy between the amount of theor-

— The flax sector has come under particular scrutiny from
both the Court of Auditors and the discharge authority.
Besides cases of fraud, one of the points raised concerns
the growing of flax in the United Kingdom. The authorities
there do not agree with the Court's conclusions, particularly
as regards the ineligibility of the flax variety grown on its
territory. They believe they have fully complied with the
rules on experimental varieties, including the tests required
for inclusion in the common catalogue of plant varieties.
Regarding the lack of outlets for this crop,
the United
Kingdom points out that restrictions on cultivated areas
were introduced only by Council Regulation (EC) No
1673/2000. Spain did not wish to make any direct
comment on the Courts of Auditors' observations, stating
simply that it was in the process of drafting replies to the
Commission's proposal for a financial correction and to the
report by OLAF.

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— Paying agencies. The Courts found that some of

these
bodies had excessive levels of error, a view contested by
some Member States. France, for example, argues that the
Court has counted what were in fact warnings,
i.e. the
detection of irregularities leading to administrative investi-
gations, as errors. The Court also found that some bodies
were failing to recover debts. The United Kingdom reports
that it has taken remedial action in this field, while Spain
claims that the Court's criticism is unjustified, pointing to a
positive audit conducted by the Commission.

— Inspections performed and audit trails. The Court found
problems in inspections in the Member States and in the
handling of these cases by the Commission, particularly as
regards flat-rate corrections. While not replying to this
specific point, Denmark disagreed with the Court's
appraisal of its inspections on export refunds. However,
Denmark also reported that the problems underlying the
Court's observation had been rectified as a result of specific
measures. Portugal acknowledges the Court's criticisms and
to
has adopted the necessary measures,
upgrade its inspections (sheep and goat register, creation
of a unified control system for Community aid, estab-
registering and identifying
lishment of a system for
bovine animals, which was recognised as operational
in
to change the
March 2001). Greece has
means by which it pays direct aid (bank transfers)
in
order to provide a satisfactory audit trail.

in particular

taken steps

3.2.3. Follow-up of previous observations

On the question of the common organisation of the market in
sheepmeat and goatmeat, a number of Member States, such as
France and the United Kingdom, have expressed satisfaction
with the
launched by the Commission. Those
Member States which have replied seem to agree with the
change in the system for setting aid, which will now be on a
flat-rate basis.

reforms

the problems of
that producers' organisations

There appear to be mixed views on the common organisation
of the market in fruit and vegetables. Some Member States
(France, Portugal) agree with the Court's assessment that the
system needs to be reformed once again. France wants to
competitiveness, while Portugal
resolve
believes
should be given a
bigger role. However, the Netherlands has merely taken note
of the Court's observations and argues that the 1996 reform
has achieved the objective of reducing expenditure on with-
drawals. Finally, Spain disagrees with some of
the Court's
criticisms, particularly as
inadequate controls and
regards
certain inconsistencies (contradiction between withdrawal aid
and production aid).

In reply to the Special report on potato and cereal starch, the
Netherlands feels its inspection arrangements are adequate.

3.2.4. Other agricultural matters

that

levy

feels

Budgetary management falls mainly within the Commission's
sphere of responsibility. Nevertheless, some Member States
have taken the opportunity to express their views on the
(reduction in advance payments).
additional milk
Portugal
the Court's observation relating to it
should be seen in context, as it concerns only a very small
proportion of localised production in the Azores, which, as it
happens, does not give rise to the collection of additional milk
levies. Greece stresses the progress it has made: 92 % of the
amounts due in 2000 were collected. Spain considers that it
has no problems in this sector and recalls that it has brought
an action before the Court of Justice concerning the amount of
the financial corrections decided on by the Commission.

3.2.5. Specific appraisal in the context of the Statement of Assurance

— Errors

The Member States are mentioned on a number of occasions in
the specific observations in the context of the Statement of
Assurance.
the Court of Auditors summarises the
finding of the audit it conducted on a sample of transactions.

In fact,

the 68
the Member States have replied to 51 of
In all,
substantive errors found by the Court. Their replies fall into
three different categories:

3.2.5.1. In some cases the Member States challenge all or some

of the Court of Auditors' conclusions

Of the 53 replies received, 18 challenge all or some of the
In these 18 cases, the Member States
Court's observations.
the
contradict
relevant legislation:

the Court's findings or its interpretation of

— The Member States call into question the accuracy of the
facts. Regarding the overstatement of agricultural areas, for
example (six cases), some Member States feel that the Court
of Auditors failed to take all the relevant parameters into
consideration or itself committed errors (taking account of
hedges, changes in land use), or they express their reser-
vations on the grounds that they still have to verify the
In other cases they challenge the
auditors' conclusions.
Court's findings outright. For example, France considers
that it did impose appropriate penalties for a delay in the
supply of food aid to Russia, while Portugal claims that it
did carry out the requisite number of inspections in the
olive oil sector.

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— The Member

feel

States

they have

complied with
Community legislation. Some Member States adopt a
different
interpretation of Community legislation from
that of the Court and therefore feel that certain transactions
tainted by errors. Examples include the cases
are not
relating to aid for dried fodder and bananas in France
and the deduction for land surveys in Sweden.

3.3. Structural measures

Three main topics crop up in the Member States' replies to the
Court's annual report.

3.2.5.2. In most cases the criticisms have been accepted and

remedial action taken:

— In most of the other cases (35 cases), the Member States are
taking the requisite remedial measures, whether
it be
reforming management procedures (interministerial French
circular on aid for the public storage of milk), establishing
the necessary management and control instruments (olive
oil and land registers in Greece — five cases), financial
measures
rejection of aid applications), or
amendments to legislation (abolition of deductions on
direct agricultural aid in Greece — 14 cases).

(recovery,

3.3.1. Implementation of controls — Regulation (EC) No 2064/97

The Court made a number of criticisms
regarding the
implementation of Regulation (EC) No 2064/97 on the
financial control by Member States of operations co-financed
by the Structural Funds, in particular in its specific appraisal in
the context of
the Statement of Assurance and in Special
Report No 10/2001.

In their replies, all the Member States stressed the very positive
nature of this Regulation, which is designed to ensure that
structural appropriations are used properly.

— However, in some cases, the Member States (France, United
Kingdom) stress that, although the Court's findings are
justified, they require no remedial action, for example in
the case of overstatements that are so minor as to come
within the tolerance limit or errors that have no real
financial impact.

3.2.5.3. Questioning of the Court of Auditors' methods

Some Member States feel that the Court's findings need to be
qualified, particularly as regards the overstatement of agri-
cultural areas. France, Sweden and Denmark argue that the
measuring method used by the Court is different from that
used to calculate aid. All
three Member States stress that
inspections should concentrate on farms rather than on indi-
vidual plots of land (several errors affecting plots on one farm
may well even each other out). For example, Sweden reports
that, where inspections were carried out over an area of
155 000 hectares, a difference of only 0,8 % was found
compared with the declared surface areas.

Extending this logic further, Sweden argues that it is difficult to
draw general conclusions by extrapolation, particularly as
to which over-
regards the losses incurred or the extent
statements are widespread.
the audits
that
It also notes
carried out were extremely limited in scope and in number
(a few dozen plots at European level).

3.3.1.1. Inspection target of 5 % of expenditure

Most Member States consider that the 5 % target for checks has
been or will be met by the deadline in June 2002. Some of
them, such as the United Kingdom, stress that they have gone
even further than the statutory requirements. Others, such as
Greece, criticised by the Court for failing to begin the required
inspections in the spring of 2001, have promised that the
inspections would be completed by the prescribed deadlines.
its
Ireland has acknowledged the Court's
inspections did not cover payments to final beneficiaries.
It
has called in an independent auditor to carry out the missing
inspections and,
it has amended the
instructions issued to the relevant departments.

looking to the future,

criticism that

3.3.1.2. Quality of inspections and methods used

The Court noted problems with the interpretation of the Regu-
lation with regard to the methods to be used (size and
composition of the sample, risk analysis, inadequate documen-
tation, etc.). Some Member States (Greece, Netherlands, United
Kingdom, Sweden) admit that they have experienced difficulties
as a result of the complexity of the Regulation, a certain lack of
precision and also its
these
Member States now consider that they are in a position to
conduct the appropriate inspections or even to go beyond
what is required by the Regulation (United Kingdom). Efforts
interpretation and supply
have been made
in the United Kingdom, France
information,
in particular
(circulars in 1998 and 2001), Spain,
the Netherlands and
Sweden.

retroactive nature. However,

to clarify

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closer Commission involvement,

In any event, many Member States have highlighted the need
for
the
Commission should provide them with assistance in the form
of guidelines or interpretative notes to ensure that the rules are
(Germany,
applied in a satisfactory and uniform manner
Greece, France, Netherlands, United Kingdom, Sweden).

arguing

that

3.3.2. Beginning of the 2000-2006 programming period

The Court of Auditors felt that the introduction of a new
led to as much progress as
legislative framework had not
in the time
expected, particularly as
required to adopt programmes.
In reply to this criticism,
most Member States reported on how long it had taken to
adopt programmes falling under their responsibility. Where
they mentioned the reform itself, they expressed mixed views
on the rules applicable to the 2000-2006 programming period.

reductions

regards

3.3.2.1. Evaluation of the new legislative framework

Some Member States feel that the new legislative framework
has improved matters by taking on board the experience
acquired in the 1994-1999 period. For example, the United
Kingdom finds the rules simpler and clearer and considers
the reduction in programmes of Community interest a step
in the right direction. Portugal feels that the provisions on
inspections have been improved. However, other Member
including Austria and Denmark, are more reserved
States,
the expected
and share the Court's view that not all of
improvements have materialised, partly because of
the
persistent complexity of the legislation and the long discussions
with the Commission prior to adoption of the programmes.

3.3.2.2. Compliance with the five-month deadline for adopting

programmes

A number of Member States admit that they failed to meet the
prescribed deadline (Denmark, Netherlands, United Kingdom),
having sometimes exceeded it by several months.

However, these countries have pointed to two reasons for the
delays that are not their responsibility. The Member States
the new legislative framework claim that
most critical of
some of
that occurred were caused by the
complexity of the rules. Another reason cited is the length of
the discussions with the Commission required to finalise
programmes.

the delays

Some Member States, such as the United Kingdom and Spain,
have taken pains to explain the under-utilisation of appro-
priations in 2000, stressing for example that the adoption
than
and implementation of programmes
this
expected. However,

took longer
that

the United Kingdom feels

the entire
situation will be rectified and will not disrupt
2000-2006 programming period, whereas Spain considers
that
the late payments for programmes adopted in 2000
pose a real financial problem.

3.3.3. Specific appraisal in the context of the Statement of Assurance

The Court's audit focused on both systems (implementation of
Regulation (EC) No 2064/97, see above) and transactions.

The Member States have replied to 24 of the 41 errors notified
to them. Many of
these errors concern the ineligibility of
expenditure and breaks in the audit trail or inadequate docu-
mentation. In more than a quarter of cases, the Member States
contest all or some of the Court's conclusions, refusing to
acknowledge the errors in question either because they reject
the accuracy of the facts or they do not share the Court's
interpretation of the applicable rules.

However, in most cases the Member States have — after verifi-
cation — accepted the Court of Auditors' conclusions and
taken appropriate action. These cases fall into two categories:
corrections or recoveries where payments have been made in
error; and the reform of management systems that caused the
problem, particularly where the error detected was a direct
consequence of flaws in that system's operation.

3.4. Other chapters

3.4.1. Administrative expenditure

Some Member States have raised the question of personnel
expenditure for different reasons:

— Reminder of specific budgetary concerns: France reiterates
its position regarding the staff of the decentralised bodies
(definition of a minimum management framework) and the
European Schools (justified in some cases).

— Representation within the institutions: Germany believes
that its nationals are under-represented in the Community
civil service because recruitment procedures do not match
the expectations of Germans (open competitions, timetable
for recruitment). Germany regrets that the Commission has
not taken this factor into account in its proposed reform
and would like to see a quota system established.

— Community public service: Sweden wants the automatic
increase in salaries as well as the job for life for officials
abolished.

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3.4.2. Internal policies

these policies falls under

Expenditure under
the exclusive
responsibility of the Commission and is therefore the subject
of very few observations. Nevertheless, the United Kingdom
was keen to lend its support to the Court of Auditors' recom-
mendations on research policy,
in particular as regards the
harmonisation of administrative and financial procedures and
the tightening of controls. However,
the
Commission's reply, stating that measures are planned as part
of
fails to set precise
objectives or deadlines for implementing the planned reforms.

the future framework programme,

regrets

that

it

3.4.3. External action

recasting of

The United Kingdom expressed interest in this chapter, picking
up on the Court of Auditors' criticisms, while acknowledging
the Commission's efforts (elimination of commitments
that
outstanding,
should
help improve the situation. The United Kingdom also took
the opportunity to ask the Court to extend the scope of its
investigations, which,
in 2000, were restricted to the TACIS
programme. For its part, France encourages the Commission to
continue the process of decentralising its resources.

the Financial Regulation)

4. CONCLUSION

1. First of all, the Commission would stress the improvement
in the quality of replies from Member States, which have
demonstrated their concern to use the Court of Auditors'
annual
financial
management, and also their determination to take full
recommendations
the
account
addressed to them.

observations

improving

report

tool

and

for

of

as

a

The Commission believes that this trend towards greater
involvement of
the Member States is a necessary one.
Although the ultimate responsibility for executing the
Community budget rests with the Commission, those in
charge of implementing the common policies also bear a
management
responsibility. This point has been given
increasing prominence by the Court of Auditors, which in
its annual report tends to distinguish more clearly between
the roles of the individual players.

As the Court's observations become more individualised, it
is natural that they should elicit a precise response from the
organisations directly responsible. In scrutinising the use of
is necessary to pinpoint precisely
Community funds,
where the problems lie in order
to envisage possible
solutions.

it

The recasting of the Financial Regulation plays a vital role
here. The aim is to provide a clear and consistent legislative

framework for involving the Member States in the replies to
the Court of Auditors' annual report. By focusing more
sharply on the different facets of the management of the
Community budget, the annual report and the replies to it
will become more effective diagnostic tools as part of the
budgetary control exercised by the discharge authority.

2. It

is precisely in order to make maximum use of

the
Member States' replies that
the Commission wishes to
launch a discussion based on the national contributions it
has received. Although the replies often vary, a number of
salient points can be detected:

— The replies to the annual report from both the Member
States and the Commission reveal major disagreements
between the auditor and the auditees, as evidenced by
the diverging views on many of the errors and the fact
that
the
the Commission too does not share all of
Court's views and feels that some errors should not
have been included. This state of affairs is unsatisfactory,
as it may obscure the analysis and evaluation of the
management
The
Commission would therefore like to see some thought
given to defining a more common approach, particularly
in particular by laying
on what constitutes an error,
down
subsequent
disagreement. This could be done in whatever forum
the institutions concerned consider the most appropriate
and should involve the Member States and the Court of
Auditors.

principles which

of Community

appropriations.

prevent

any

In any event, this agreement on errors should form part of
the wider debate on the methodology for the Statement of
Assurance, following on from the discharge procedure for
2000.

— Some Member States have sent the Commission specific
recommendations on certain common policies. These
suggestions will be examined to determine whether
they can be incorporated into the proposed reforms
which the Commission wishes to undertake. This is
the case for example in research policy or the reform
of the common organisation of the markets in fruit and
vegetables and sheepmeat and goatmeat. In the last two
cases, Member States can present their proposals to the
management committees.

— The Commission has also taken note of

the desire
expressed by a number of Member States to tighten
up the machinery for ensuring satisfactory implemen-
tation of Community legislation. In shared management
the Commission believes that discussions and
areas,
consultations should be launched on how to strengthen
powers to conduct inspections and impose penalties,
which in the medium term could lead to practical
proposals based on existing mechanisms, where appro-
priate.

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29.6.2002

this

— According to some Member States,

supposed
complexity causes divergences in the interpretation and
implementation of Community legislation and is hence
the source of many of the Court of Auditors' obser-
vations. This being so, the same Member States feel
that the Commission should step up its coordination,
scrutiny and assistance to the Member States.

The Commission already makes a major effort to clarify
interpretation and provide assistance, in particular through
the management committees, whose role is precisely to
support the implementation of the common policies. The
Commission is of course willing to provide any assistance
which the Member States may require to ensure the proper
and efficient application of legislation. However, this can be
done only within the existing framework for each of the
relations between the
common policies,
Commission
relevant
national
departments.

through direct

authorities

and

the

The Commission sees a number of problems in a more
general approach of stepping up its involvement in moni-
toring the proper implementation of European legislation by
national authorities. First, each sector has its own specific
features, which do not necessarily lend themselves to an
approach based on very broad principles. Second, there
are major drawbacks in adopting a general approach, for
example the question of compliance with the principle of
subsidiarity and the danger of
introducing yet more
complexity. Finally, the Commission would point out that
its resources allow it to carry out only isolated measures in
response to specific requests from the Member States.

legal

some

extent

framework. To

— Finally, a number of Member States have pointed out that
some of the flaws in the implementation of legislation in the
Member States may result from the complexity of the
European
the
Commission shares this view and is endeavouring to
resolve the question of complexity.
It has already
launched major initiatives in this field. The Commission
already set up a simplification committee composed of
Member States' representatives at the end of 2000 and
had even earlier carried out studies for which it invited
the Member States to present their simplification proposals.
These activities will be further encouraged and expanded
and have already produced results such as the reform of
legislation on the IACS and simplification of procedures for
small amounts. Moreover, commitments have already been
made to provide a framework for a legislative activity and
specifically to take on board the concern for simplicity (1)
— a factor which the Commission takes into account in
exercising its regulatory powers.

that

The Commission therefore feels
this very broad
objective of simplification should be discussed in greater
detail to determine whether the Member States are calling
into question particular common policies or whether their
suggestions are aimed more generally at the exercise of
legislative power by the Community. The Commission will
consult the Member States on this broad question of the
simplification of
legislation in order to obtain a more
this
precise idea of
matter extends far beyond the framework of the replies to
the Court of Auditors' annual
report and, before any
initiative is taken, the Member States' positions and expec-
tations must be clarified. On the basis of their contributions,
an initial analysis could be conducted, if appropriate within
the same forum set up to address the question of errors.

their expectations. The fact

is that

(1) Since the Edinburgh European Council

in 1992,

the need to
legislate better, i.e. to have clearer and simpler texts that correspond
legislative practice, has been recognised at
to best
the highest
level. The Council and the Commission have taken a
political
number of measures to meet
this need, which was confirmed
once again by Declaration No 39 on the quality of the drafting
of Community legislation, attached to the Final Act of the Treaty of
Amsterdam. Following this Declaration,
the three institutions
involved in the procedure for adopting Community instruments,
Parliament, the Council and the Commission, laid down common
guidelines designed to improve the quality of
the drafting of
Community legislation in the Interinstitutional Agreement of 22
December 1998.