WRITTEN QUESTION E-3488/02 by Charles Tannock (PPE-DE)and Christopher Heaton-Harris (PPE-DE) to the Commission. Fraud in the European Union and the disciplining of Marta Andreasen.
Date: 2002-12-09
Institutions: European Parliament, Provisional data
Subjects: Community budget, European Commission, European official, administration of the Institutions, administrative sanction, financial regulation, implementation of the budget, management accounting

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Concerning the length of the Commission investigations in this sector, the Commission is assessing several
complaints concerning State financing of public broadcasters. While the Commission was carrying out the
analysis of these complaints, new legislative developments (such as the Amsterdam Protocol, the new
Commission Communication on services of general interest (2) and the new Transparency Directive (3)) have
occurred. The necessity to take into account these developments as well as the need to treat consistently
the various cases has slowed down the investigation of the State aid procedures. In this connection the
Commission has decided to draft a Communication on the application of State aid rules to public
broadcasting which was adopted on 5 November 2001. Following the Communication, decisions have
already been taken in cases involving Portuguese TV, Belgium local TV stations and BBC digital channels.
Decisions concerning RAI and other broadcasters are expected to be taken this year.

As to the issues specifically relating to the RAI case, it can be emphasised that the investigation of the
Commission is at an advanced stage. As soon as this investigation will have been completed,
the
Commission will take a decision dealing also with the points you are raising. Of course, the Commission
position on these issues cannot be anticipated, but some remarks can be made. As to the issue relating to
the existence of an appropriate authority or appointed body monitoring RAI’s activity, RAI is, as to the
knowledge of the Commission, subject to the control of a specific Parliamentary Commission and to the
control of the ‘Autorità per le garanzie nelle Comunicazioni’. As to the issue of the evaluation of the
proportionality of the public funding received by RAI, the Commission will carry out this assessment, in
the framework of the pending State aid case concerning RAI, on the basis of the criteria set out in the
above mentioned Communication of 5 November 2001. Finally, as to the separation of accounts, also this
issue will be dealt with in the context of the pending procedure.

Also on this point the Commission decided in December 2002 to launch an action before the Court of
Justice against Italy for non-transposition of the latest modification of the ‘transparency’ directive.

(1) OJ C 320, 15.11.2001.
(2) COM(2002) 689 final.
(3) Commission Directive 2000/52/EC of 26 July 2000 amending Directive 80/723/EEC on the transparency of

financial relations between Member States and public undertakings (cid:1) OJ L 193, 29.7.2000.

(2003/C 280 E/019)

WRITTEN QUESTION E-3488/02

by Charles Tannock (PPE-DE)
and Christopher Heaton-Harris (PPE-DE) to the Commission

(9 December 2002)

Subject: Fraud in the European Union and the disciplining of Marta Andreasen

Following claims by the recently-suspended Chief Accountant Marta Andreasen that the EU’s accounting
system is deeply flawed, the European Court of Auditors has refused for the eighth year running to certify
the EU budget, admitting that it can only guarantee that five per cent of taxpayers’ money is being spent
properly. In addition to stating that the monies could not be controlled once they had been handed-over to
Member States or dispersed in aid, the Court has also made serious criticisms of the Commission’s own
finances which continue to be based on out-dated and discredited cash-based accounting systems.

There are varying reports as to when the Commission intends to replace the cash-based system. In view of
the criticisms of previous years, could the Commission indicate why it has taken so long to accept the
need for change, and why a more modern accounting system cannot be introduced within a matter of
months rather than years?

Does the Commission accept that its monitoring arrangements both for money distributed to Member
States and in the form of aid outside the European Union are woefully inadequate and in need of urgent
review, and, if so, does the Commission have any concrete proposals as to how the monitoring procedures
might be improved?

Finally, could the Commission indicate why it felt the need to suspend Marta Andreasen, given that the
Court of Auditors would appear to be in substantial agreement with her assessment of the state of the
European Union’s finances? What effect does the Commission believe that the decision to suspend her has
had on the reputation of the Commission and on its commitment to openness and transparency? Does the
Commission acknowledge the validity of her criticisms, and what plans does the Commission have to
reinstate her?

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Answer given by Mrs Schreyer on behalf of the Commission

(10 March 2003)

1.

The Commission does not agree with the Honourable Members’ statements.

The Honourable Members may know that the accounting rules for the Community budget are defined by
the Financial Regulation. The former Financial Regulation which applied until recently (31 December
2002) did not forsee the obligation for accrual based accounting. It endorsed on the traditional rules of
cash accounting for the public sector.

Although the Commission has proposed the introduction of accrual based accounting for the new
Financial Regulation, which was adopted by the legislative authority in June 2002, the Commission does
not share the judgement of
the Honourable Member that cash based accounting is ‘outdated and
discredited’ as it is still dominant in the public sector in most countries. The Commission will maintain the
traditional reporting to the budgetary authorities of the public budgets. Honourable Members regularly ask
implementation of payments on different budget-lines. A cash
the Commission about
accounting system is needed to provide this information. Furthermore the statement that the funds ‘once
transferred to the Member States or the grants paid out’ become ‘uncontrollable’ is incorrect. There are
horizontal as well as sectoral regulations defining the control obligation by Member States. In addition the
Commission has various mechanisms at its disposal to recover funds unduly transferred and has informed
the Parliament repeatedly about progress made in this respect (1).

the state of

2.
As in other administrations where accounting system reform has been undertaken, the accounting
modernisation in the Commission is a major undertaking which requires considerable time, effort,
expertise and financial resources to put in place. Back in 2000, with the launching of a multi-annual plan
for the modernisation of the accounting, the Commission started its steady move towards accrual-based
financial statements in which several accrual-based elements have been introduced.

The multi-annual plan for the modernisation of its accounting framework comprised:

(cid:1) a study on the establishment and presentation of the accounts of the Community, delivered in mid-

2000 by high-level experts on public accounting;

(cid:1) drawing up by June 2001 an action plan for modernisation, which was discussed with the Court of

Auditors. The Court has welcomed the document’s orientations;

(cid:1) introducing new elements of accrual accounting in the presentation of the financial statements and
calculating the economic out-turn since 2000, which, as the Court of Auditors put it, ‘represents a
step forward, which is in line with the general trend observed in the public sector at international
level’ (2), and adopting an accounting and consolidation manual for all the Institutions;

(cid:1) adopting the new Financial Regulation (3)

accounting principles (Article 133)
(Article 181);

that requires the introduction of new accrual-based
in order to be fully effective for the budgetary year 2005

(cid:1) On 24 July 2002 the Member of

the budget presented a
memorandum (4) to the Commission describing the wide-ranging work to modernise the accounting
framework and information system;

the Commission responsible for

(cid:1) On 17 December 2002, the Commission adopted a new Communication (5) that developed the action

plan to implement full accrual accounting by 2005.

This document had two purposes:

(cid:1) to adopt a detailed proposal to allow the Commission to decide on the accounting framework, in

particular on how generally-accepted accrual accounting principles can be implemented;

(cid:1) to set out the action to be taken as regards project organisation, resources and the timing of the
work to develop an integrated computerised system. The system options are appraised in detail,
with a view to identifying a preferred solution in the months to come.

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Detailed development of both the accounting framework and the system is undertaken in 2003 with the
relevant testing and implementation phases beginning in 2004. In particular, the issues relating to the
implementation of accrual accounting principles will be examined in detail to identify the accounting
treatment of each type of transaction for each different service or activity.

The Commission is not alone in moving towards the respect of generally accepted accrual accounting
principles. Many developed countries are also engaged in the same process and, encouraged by
international bodies and organisations such as the OECD (6) and IFAC (7), have begun to modernise their
accounting systems over the past few years, switching from a cash-based to an accrual-based system.

Experience in the Member States shows that reforming public accounting systems represents a major
upheaval both in terms of the introduction of new practices and in human terms, not to mention the
financial resources required. IFAC Study 14, Chapter I, mentions that a transition period for accounting
reforms can be short (up to 3 years), medium (4 to 6 years) or long (over 6 years). There is no instance in
which accrual accounting has been, or could be, ‘introduced within a matter of months rather than years’.

in its annual synthesis report on annual activity reports and declarations,

3. With the exception of reservations made by the Court of Auditors in its Annual Report and by the
Commission itself
the
Commission considers that its arrangements for checking the use of Community appropriations by and
in the Member States are broadly satisfactory. When problems and shortcomings are detected, either by it
itself, or by the Court of Auditors, the Commission endeavours to take the necessary measures in order to
solve them.

Major efforts have been made over the last few years to improve management and control systems,
particularly in the area of shared management, both by putting in place and constantly developing the
Integrated Administration and Control System (IACS) for agriculture and through reform of the Structural
Funds which provides for strengthened control standards and norms. Likewise, in the field of external
action, the Commission set out in detail a raft of significant measures in its Communication of 16 May
2000 on the reform of the management of external assistance (8).

However, it remains the case that the quality of management and control of Community funds is partly
dependent on the efforts made by the Member States, which have considerable responsibility in this area.
For this reason the Commission is continuing to put in place and implement a set of incentives and
binding measures on the Member States, for both agriculture and structural measures; in the latter domain,
the incentives are intended to boost coordination and promote simplification of the regulatory framework,
while the binding aspect of the strengthening of the financial corrections contributes to the same objective.

The Commission’s synthesis report (‘Synthesis of the Annual Activity Reports and declarations of the
Directors-General and Heads of Service’ (9)) is accompanied by an action plan, providing for a series of
specific actions in this area.

Several of these actions are targeted at the management of external aid, shared management of the
Structural Funds, and clarification of the responsibilities of the key actors in audit and control.

Furthermore, the Commission also drew up an action plan in connection with the 2001 discharge, which
it communicated to Parliament on 23 December 2002, on the basis of recommendations by the Court of
Auditors in its last annual report.

The Honourable Members will understand that the Commission can only reply in general terms to
4.
in
their questions as far as they are directly related to a disciplinary procedure that is presently still
progress. This procedure is related to alleged breaches of the Staff Regulations of the European civil
service.

The Commission is aware of the fact that disciplinary proceedings initiated in relation to the former
accounting officer have been misinterpreted in some parts of the press and elsewhere. Reference to the
past assessments of
the Court of Auditors and the Commission, and to the action designed and
increasingly implemented by the Commission, and to the dates of events demonstrates that any inference
that
link between the former accounting officer’s ‘claims’ and the Court’s
conclusions would be inaccurate and misleading.

there is a consequential

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Meanwhile, it should be noted that the active commitment to openness and transparency given by the
Commission does not diminish the obligation of all officials to respect the rules and procedures.

(1) See for example most recently the Communication COM(2002) 671 of 3.12.2002.
(2) Court of Auditors (cid:1) Annual report concerning the financial year 2000 (cid:1) OJ C 359, 15.12.2001.
(3) Commission Regulation (EC, Euratom) No 2342/2002 of 23 December 2002 laying down detailed rules for the
implementation of Council Regulation (EC, Euratom) No 1605/2002 on the Financial Regulation applicable to the
general budget of the European Communities (cid:1) OJ L 357, 31.12.2002.

(4) SEC(2002) 853 final.
(5) COM(2002) 755 final.
(6) OECD: Organisation for Economic Co-operation and Development.
(7)
(8) http://europa.eu.int/comm/external_relations/reform/document/communication_en.pdf.
(9) COM(2002) 426 final.

IFAC: International Federation of Accountants.

(2003/C 280 E/020)

WRITTEN QUESTION E-3615/02

by Benedetto Della Vedova (NI) and Marco Cappato (NI) to the Commission

Subject: State aid for France Telecom from the French Government

(16 December 2002)

It has been announced that the French Government intends to adopt a ‘revival plan’ for the telephone
group France Telecom (FT),
in which it has a 55,5 % holding and which has a global debt of nearly
EUR 70 billion.

The plan envisages an immediate injection of EUR 9 billion from the State, as an advance payment in the
context of recapitalisation amounting to EUR 15 billion, probably to be completed by next spring.

The advance of EUR 9 billion would consist in transferring FT shares from the French State to the
‘Entreprise de recherches et d’activités pétrolières’
(ERAP), which would then take steps to borrow
EUR 9 billion from the ‘Caisse des dépots et consignations’ (CDC), which it would in turn lend to FT. The
CDC loan to ERAP would be guaranteed by the French State.

1.
Does the Commission not consider that if the guarantee offered by the French State allows FT to
acquire, via ERAP, financial resources at an interest rate lower that which an operator on the private
market would have asked, this constitutes an instance of State aid of the kind which ought to be notified?

Does it not also consider that the very guarantee provided by the State for debts incurred by a public
inaccessible to private competitors needing comparable

2.
company (a guarantee which is, obviously,
financing) constitutes State aid?

3.
Does it not also consider that, at a particularly difficult moment for the telecommunications sector,
this kind of intervention on the part of national governments (cid:1) who are both ‘referees and players’ in the
same sector and are therefore involved in an obvious conflict of interest (cid:1) constitutes a serious distortion
of competition which makes the situation of operators (cid:1) both businesses and employees (cid:1) who cannot
count on State aids even more critical?

Answer given by Mr Monti on behalf of the Commission

(12 February 2003)

On 4 December 2002 the French authorities have submitted to the Commission a document describing
the intervention of the French State in respect of France Telecom. The Commission has studied this
document to see whether or not this intervention raises doubts under State aid rules. The Commission has
carried out a preliminary examination focused on the question of whether the intervention is in line with
the market economy investor principle, i.e. non implying State aid, and, if State aid is involved, whether
such State aid could comply with the State aid rules. Following this preliminary examination the
Commission has doubts as to the compliance of the French intervention with State aid rules. Accordingly,