Report from the Commission - Member States' replies to the Court of Auditors' 2000 Annual Report
Date: 2002-07-17
Institutions: European Commission
Subjects: EU Member State, European Court of Auditors, Member States' contribution, activity report, economic analysis, multiannual financial framework

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 17.7.2002
COM(2002) 423 final

REPORT FROM THE COMMISSION

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

TABLE OF CONTENTS

1.

2.

2.1.

2.2.

3.

3.1.

3.2.

3.3.

3.4.

4.

Introduction.............................................................................................................. 3

General analysis ....................................................................................................... 5

The Member States agree, variations apart, with the Court's overall findings ............ 5

A limited number of reforms and no fundamental reappraisal ................................... 6

Sector-by-sector analysis .......................................................................................... 8

Own Resources......................................................................................................... 8

Common agricultural policy ..................................................................................... 9

Structural measures ................................................................................................ 12

Other chapters ........................................................................................................ 14

Conclusion ............................................................................................................. 16

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1.

1.

2.

3.

INTRODUCTION

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

by Parliament
comments

and to the

observations

discharge

and

Since the 1996 Dublin European Council, and in line with its conclusions on sound
and efficient financial management, the Commission has 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.

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 if the Court's observations were submitted earlier the Member States
would have more time to transmit their replies to the Annual Report. For 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.

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:

– Firstly, it would allow the Member States to give their opinion on the main
observations of the Court of 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 preparation of the Annual Report, even though they are one
of the main managers of Community appropriations. 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
if
appropriate, challenge the Court's recommendations.

is also an opportunity to support or,

level.

It

3

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.

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2.

GENERAL ANALYSIS

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

2.1.

The Member States agree, variations apart, with the Court's overall findings

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

– 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 (Integrated
administrative and control system – IACS in the agricultural sector, Regulation
No 2064/97 in the case of the Structural Funds) were regarded as satisfactory
overall, the Member States recognise that implementation of this legal framework
could be improved.

– 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 all errors gave rise to a reply, 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 interpretation of the regulatory framework. This disagreement with the
observations of the Court 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, some Member States feel that the Court
draws general conclusions on the basis of a minor transaction which may be
affected by mistakes which are themselves very minor.

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2.2.

A limited number of reforms and no fundamental reappraisal

Given the proportion of the Community budget to which shared management applies, finding
a 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:

– 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 establishment or improvement of the instruments needed for it to
operate properly (databases such as the olive cultivation register in Greece, 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 criticism of the Court of Auditors (Greece, Italy).

– Clarification measures to improve the application of existing procedures. Many
Member States have provided manuals, legal 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 administrations 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 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.

– 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
and the bodies in charge of managing Community funds. This Bill is based on
three essential provisions, namely the Government's general right to information
about the funds administered, the power of the Government to give instructions to
public bodies responsible for administering funds, and its power to adopt

6

corrective measures where the State may be held responsible for the management
of these public bodies.

2.2.2.

Specific reforms planned at Community level

The Member States' replies suggest that the Community regulations are broadly satisfactory
and provide a framework which is generally felt to be adequate. Nevertheless, some Member
States would like to see a number of specific reforms undertaken, particularly where a review
of the existing regulations 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 account, such as the
recognition of merit in remuneration (France), reconsideration of the principle of 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.

Finally, several Member States have expressed a particular interest in the Commission's
reform process, especially the recasting of the Financial Regulation. Although the Member
States' contributions do not 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.

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:

– Simplification and clarification of Community regulations to make the task of the
managing bodies and the final recipients easier. From this point of view, the
recent reform of the AICS regulations is considered, if not a 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 Regulation 2064/97).

– In tandem with this call for simplification, many Member States expect

the
Commission's help in the form of interpretation, 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.

7

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 separate account
the Member States - anti-dumping measures and the keeping of
(B account).

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.

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.

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, for 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
the same time, a training and
assistance arrangements (Germany, United Kingdom). At
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, feels that the inspections it carries out are effective.

The Netherlands points out that it has not received the guidance it requested on the application
of anti-dumping duties in the event of successive sales.

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.

8

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 Regulations
1552/89 and 1150/2000, which differs from that of 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.

3.1.3.

VAT

Only two Member States have expressed views on VAT-related matters, namely Germany
and Italy, which were cited in a Commission report in connection with problems in the
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 needed
amending. Such amendments are, moreover, in the pipeline.

Germany, however, was keen to reiterate its position regarding the Commission's statements.
In particular, it challenges the validity of the theoretical calculation of recoverable VAT
underlying the Commission's analysis, as the indicator used creates a substantial discrepancy
between the amount of theoretical 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 agricultural expenditure in the areas it covers. However, several
Member States feel that improvements are needed to make the system easier to implement at
national
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 the errors detected at national 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.

level. Five of

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.

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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:

– 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 Regulation 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.

– 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 investigations, 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
the problems underlying the
refunds. However, Denmark also reported that
Court's observation had been rectified as a result of specific measures. Portugal
acknowledges the Court's criticisms and has adopted the necessary measures, in
particular to upgrade its inspections (sheep and goat register, creation of a unified
control system for Community aid, establishment of a system for registering and
identifying bovine animals, which was recognised as operational in March 2001).
Greece has taken steps to change the means by which it pays direct aid (bank
transfers) in order to provide a satisfactory audit trail.

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 reforms 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.

10

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 resolve the problems of
competitiveness, while Portugal believes that producers' organisations 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
withdrawals. Finally, Spain disagrees with some of the Court's criticisms, particularly as
regards inadequate controls and 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

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
additional milk levy (reduction in advance payments). Portugal feels that
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. In fact, the Court of Auditors summarises the
finding of the audit it conducted on a sample of transactions.

In all, the Member States have replied to 53 of the 68 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 Court's observations. In these
18 cases, the Member States contradict the Court's findings or its interpretation of the relevant
legislation:

– The Member States call into question the accuracy of the facts. Regarding the
overstatement of agricultural areas, for example (6 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 reservations on the grounds that they still have to
verify the auditors' conclusions. In other cases they challenge the 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.

11

– The Member States feel 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 are not tainted by errors.
Examples include the cases relating to aid for dried fodder and bananas in France
and the deduction for land surveys in Sweden.

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
procedures
be
(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 - 5 cases), financial measures (recovery, rejection of aid applications), or
amendments to legislation (abolition of deductions on direct agricultural aid in
Greece - 14 cases).

reforming management

it

– 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 agricultural 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 individual 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 regards the losses
incurred or the extent to which overstatements are widespread. It also notes that the audits
carried out were extremely limited in scope and in number (a few dozen plots at European
level).

3.3.

Structural measures

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

3.3.1.

Implementation of controls - Regulation 2064/97

The Court made a number of criticisms regarding the implementation of Regulation 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.

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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. Ireland has acknowledged the
Court's criticism that its inspections did not cover payments to final beneficiaries. It has called
in an independent auditor to carry out the missing inspections and, looking to the future, it has
amended the instructions issued to the relevant departments.

3.3.1.2. Quality of inspections and methods used

The Court noted problems with the interpretation of the Regulation with regard to the
inadequate
methods to be used (size and composition of
documentation, 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 retroactive nature. However, 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 have been made to
clarify interpretation and supply information, in particular in the United Kingdom, France
(circulars in 1998 and 2001), Spain, the Netherlands and Sweden.

risk analysis,

the sample,

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

3.3.2.

Beginning of the 2000-2006 programming period

The Court of Auditors felt that the introduction of a new legislative framework had not led to
as much progress as expected, particularly as regards reductions in the time 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.

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 States, including Austria and Denmark, are more
reserved and share the Court's view that not all of the expected 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.

13

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 most critical of the new legislative framework claim that
some of the delays 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.

Some Member States, such as the United Kingdom and Spain, have taken pains to explain the
under-utilisation of appropriations in 2000, stressing for example that the adoption and
implementation of programmes took longer than expected. However, the United Kingdom
feels that
the entire 2000-2006
programming period, whereas Spain considers that the late payments for programmes adopted
in 2000 pose a real financial problem.

this situation will be rectified and will not disrupt

3.3.3.

Specific appraisal in the context of the Statement of Assurance

The Court's audit focused on both systems (implementation of Regulation 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
inadequate
documentation. 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.

trail or

However, in most cases the Member States have - after verification - 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.

14

– Community public service: Sweden wants the automatic increase in salaries as

well as the job for life for officials abolished.

3.4.2.

Internal policies

Expenditure under these policies falls 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' recommendations on research policy, in
particular as regards the harmonisation of administrative and financial procedures and the
tightening of controls. However, it regrets that the Commission's reply, stating that measures
are planned as part of the future framework programme, fails to set precise objectives or
deadlines for implementing the planned reforms.

3.4.3.

External action

The United Kingdom expressed interest in this chapter, picking up on the Court of Auditors'
criticisms, while acknowledging that the Commission's efforts (elimination of commitments
outstanding, recasting of the Financial Regulation) 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.

15

4.

1.

CONCLUSION

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 report as a tool for improving financial management, and also their
the observations and recommendations
determination to take full account of
addressed to them.

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 Community funds, it is necessary to pinpoint precisely where the problems
lie in order to envisage possible solutions.

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 Commission too
does not share all of the 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 of Community appropriations. The
Commission would therefore like to see some thought given to defining a more
common approach, particularly on what constitutes an error, in particular by
laying down principles which prevent any subsequent diagreement. 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.

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.

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– 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
ensuring satisfactory
Member States
to tighten up the machinery for
the
implementation of Community legislation. In shared management areas,
Commission believes that discussions and 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 appropriate.

legislation in the Member States may result

– Finally, a number of Member States have pointed out that some of the flaws in the
implementation of
from the
complexity of the European legal framework. To some extent 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 simplicity1 - a
in exercising its regulatory
factor which the Commission takes into account
powers.

The Commission therefore feels that 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 precise idea of their
expectations. The fact is that this 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 expectations must be clarified. On the basis of

1 Since the Edinburgh European Council in 1992, the need to legislate better, i.e. to have clearer and simpler
texts that correspond to best legislative practice, has been recognised at the highest political level. The
Council and the Commission have taken a 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,
laid down common
guidelines designed to improve the quality of the drafting of Community legislation in the Interinstitutional
Agreement of 22 December 1998.

the Council and the Commission,

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their contributions, an initial analysis could be conducted, if appropriate within
the same forum set up to address the question of errors.

– According to some Member States, this supposed complexity causes divergences
in the interpretation and implementation of Community legislation and is hence
the source of many of the Court of Auditors' observations. 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 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
common policies, through direct relations between the national authorities and the
relevant Commission departments.

the implementation of

The Commission sees a number of problems in a more general approach of
stepping up its involvement in monitoring 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.

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