Report from the Commission - Member States' replies to the Court of Auditors' 2001 Annual Report
Date: 2003-06-30
Institutions: European Commission
Subjects: EU Member State, European Court of Auditors, European Union membership, activity report, exchange of information, implementation of the budget, management audit

EN

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 30.06.2003
COM(2003) 324 final

REPORT FROM THE COMMISSION 

Member States' replies to the Court of Auditors' 2001 Annual Report

 
 
 
TABLE OF CONTENTS

1.

2.

2.1.

2.2.

2.3.

2.4.

3.

3.1.

3.2.

4.

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

Main observations by the Court of Auditors, by sector ............................................... 5

Own resources.............................................................................................................. 5

Agriculture ................................................................................................................... 6

Structural Funds ........................................................................................................... 8

Other sectors............................................................................................................... 10

Areas of agreement and disagreement ....................................................................... 12

Methodological problems .......................................................................................... 12

DAS errors ................................................................................................................. 12

Conclusion ................................................................................................................. 13

2

1.

a)

b)

c)

1

2

INTRODUCTION 

Given the importance of shared management and the place it occupies in the Court of
Auditors' reports, it is particularly necessary to know the Member States' positions on
the  problems raised by  the  external auditor.  Firstly, it allows  the  Member  States  to
give their opinion on the observations of the Court.1 Secondly, they can present the
corrective  measures  they  plan  to  implement.  Lastly,  this  exercise  is  of  particular
significance  as  regards  the  improvement  of  management  since  it  offers  Member
the  conclusions  and
States 
recommendations  drawn  up  by  the  Court;  it  also  gives  the  Commission  a  general
picture of various problems encountered at national level.

their  views  on 

the  opportunity 

to  express 

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. 

The new Financial Regulation has taken over the practice existing since this date and
has  formalised  and  provided  a  framework  for  this  procedure,  in  particular  by
introducing strict time limits.2

The Court of Auditors presented its 2001 Annual Report to the European Parliament
on 5 November 2002 and to the Council Budget Committee on 6 November. When
making  this  early  submission,  the  Commission  sent  a  letter  to  all  the  Permanent
Representatives asking them to provide these replies before the end of December. 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 a list of specific
references to each Member State in the Annual Report and a summary of Statement
of Assurance (DAS) errors for each Member State.

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. The Member States thus
replied in full or in part to the points or DAS errors submitted to them and sometimes
made recommendations or more general observations, etc. The time limits set by the
Commission  were  not  fully  complied  with  and  some  contributions  arrived  several
weeks late.

This in no way affects the contacts between the Commission and the Member States concerned in order
to  take  follow-up  action  on  the  Court's  observations.  Follow-up  action  by  the  Commission  and  the
Member States on the Court's sector letters is a specific exercise focusing on measure which may need
to be taken to correct problems detected.
Article 143(6): "As soon as  the  Court  of  Auditors  has  transmitted  the  annual  report,  the  Commission
shall  inform  the  Member  States  concerned  immediately  of  the  details  of  that  report  which  relate  to
management of the funds for which they are responsible under the rules applicable. Following receipt of
such  information,  the  Member  States  shall  reply  to  the  Commission  within  60  days.  The  latter  shall
transmit  a  summary  to  the  Court  of  Auditors,  the  Council  and  the  European  Parliament  before  15
February."

3

                                                
d)

The  Member  States  administer  a  large  part  of  the  Community  budget  and  their
systems of management and control are a central feature of the Annual Report by the
Court  of  Auditors.  The  purpose  of  this  procedure  is  to  give  the  Member  States  an
opportunity  to  put  forward  their  views,  observations  and  any  recommendations
following publication of a report which concerns them both directly and in the more
general  framework  of  the  discharge  procedure.  Although  they  do  not  bear  the
responsibility  for  the  implementation  of  the  budget,  their  contribution,  in  summary
form, throws particular light on the management of Community appropriations. 

The  national  contributions  can  thus  be  used  to  identify  a  number  of  major  issues
which are of particular interest for analysing sectors involving shared management.
They highlight in particular the specific problems encountered in the Member States
and on the solutions which might be contemplated at that level. That is why the first
part  of  the  report  concentrates  on  own  resources,  agriculture  and  the  Structural
Funds.  The  issues  which  have  attracted  the  attention  of  several  Member  States  are
highlighted for each of these sectors.

After this presentation by sector, two more analytical parts give an account of areas
of  agreement  and  disagreement  between  the  Member  States  and  the  Court  of
Auditors and then try to identify the main conclusions which can be drawn.

4

2.

MAIN OBSERVATIONS BY THE COURT OF AUDITORS, BY SECTOR

2.1.

Own resources

The Member States mentioned four main issues.

2.1.1.

Separate account (B account)

Several Member States (in particular SF, IRL, B, NL, S, I, F) have brought up this question
and, on the whole, they do not dispute the Court's observations about the existence of errors.
However, in a number of cases, they point to the lack of any financial impact, the negligible
nature of the errors or the action taken to follow them up. Most  of the  Member  States  have
also  announced  measures  to  improve  the  situation  (e.g.  the  Italian  or  German  computerised
systems). 

Only one State (SF) calls on the Commission to standardise the accounting rules in order to
avoid  errors  or  to  avoid  describing  as  errors  simple  divergences  in  the  interpretation  of  the
rules. As regards one error detected in Sweden, the Member State explains that the Court of
Auditors  is  taking  a  different  legal  interpretation  to  that  expressed  by  a  national  court  and
which the customs administration considers it has to respect.

2.1.2. Customs warehouses 

Italy, France and Germany recognise to varying extents that their control systems might have
led to errors or are open to improvement. They also announce corrective measures. However,
one  Member State  (UK)  considers  that  all  the  controls  carried  out  make  up  for  the
shortcomings noted by  the Court  of  Auditors, given the very specific nature of the  problem
detected. The Netherlands considers its controls to be adequate. Sweden states that it bases its
controls on risk analysis; if no controls were carried out in 2001, this is because they were not
considered  necessary  by  this  analysis.  Detection  of  an  error  involving  a  small  amount  does
not allow general conclusions to be drawn about the suitability of the existing control system.
Sweden also considers that a low frequency of controls does not have any financial impact in
itself. 

2.1.3. UK rebate

The  United  Kingdom  stresses  that  none  of  the  Member  States  contest  the  method  of
calculation used and, although it is aware of the complexity of the system, points out that it is
linked to the own resources decision and to the fact that it has agreed to abandon a method of
calculation from which it derived excessive benefit.

2.1.4. Making own resources available

The  Court  has  given  a  favourable  assessment  of  the  reliability  of  accounts  in  the  own
resources  sector  except  for  the  deferred  payment  applied  in  Germany,  on  which  it  does  not
express  an  opinion.  Germany  has  stated  that  the  problem  relating  to  documentation  and  to
maintaining a transparent audit trail has been resolved. It also agrees that its control system is
not  fully  satisfactory,  but  considers  that  the  position  expressed  by  the  Court  is  exaggerated
given the relative importance of the problem detected.

5

A  number  of  errors  of  minor  importance  have  also  been  corrected  by  the  Member  States
concerned.

2.2.

Agriculture

The  Member  States'  contributions  reveal  three  main  issues:  the  Court's  criticisms  of  the
various  systems  of  management  and  control,  based  on  the  errors  detected,  the  clearance  of
accounts  as  regards  the  paying  agencies  and  the  CATS  data  base.  Some  Member  States
brought up other subjects.

2.2.1. Control systems and errors

In its specific appraisal for the purposes of the statement of assurance, the Court bases itself
on  an  analysis  of  the  management  and  control  systems  (e.g.  the  IACS)  and  on  a  sample  of
transactions to corroborate the systemic analysis. The examination of transactions occupies a
large part of this chapter of the Annual Report and obviously lays the blame on the Member
States on whose territory the errors are detected. The Court of Auditors states that many of the
errors  occur  at  final  beneficiary  level,  which  means  that  the  controls  carried  out  at  national
level have been inadequate. 

In  their  replies  the  Member  States  addressed  two  aspects;  each  national  contribution  has
established  its  own  balance  between  them.  The  first,  specific,  aspect  relates  to  the  case  at
hand, i.e. the facts which led the Court of Auditors to establish an error; the second relates to
the more general conclusions drawn from these errors. 

Thus, generally speaking, few errors as such are contested and usually recovery or corrective
measures are announced. However, a certain emphasis is placed on defending the quality of
management  and  controls  at  national  level.  The  Member  States'  replies  can  therefore  be
grouped  into  three  categories  depending  on  the  extent  to  which  they  accept  the  Court  of
Auditors' criticisms.

–  Few  Member  States  question  outright  the  Court  of  Auditors'  observations  on  a  specific
sector. However, three of them have (F and D: the control in the rural development sector;
and IRL: implementation of the controls relating to the extensification premiums).

–  On  the  other  hand,  when  Member  States  do  not  contest  the  errors,  it  is  their  importance
which is mentioned in a number of replies which aim to play down the significance of the
Court's findings. A number of arguments are put forward.

In some cases the fact that the errors were known to the national administrators was said to
prove  the  effectiveness  of  the  controls  (P:  rural  development).  The  United  Kingdom  also
states  that  the  errors  noted  by  the  Court  had  been  detected  by  the  IACS  before  payment
(which was not then made). 

In other cases, the Member States seek to play down the Court's findings. The errors detected
are linked to very specific cases. Ireland states that errors were noted concerning the number
of animals kept but that a review of the  controls  carried  out revealed  that this situation  was
confined to a specific region. The United Kingdom suggests  a link  between the  outbreak of
foot  and  mouth  disease  (suspension  of  on-site  controls)  and  the  number  of  errors,  but
emphasises  that  the  rules  provided  for  alternative  controls,  which  were  carried  out.  The
Netherlands  and  Austria  adopt  the  same  argument  in  connection  with  animal  premiums,

6

pointing  out  that  the  controls  relating  to  animal  premiums  were  concentrated  on  only  one
undertaking (NL) or that the pastures eligible were overestimated in only one case (A).

Sometimes they also underline the restricted significance of the Court of Auditors' findings. In
the olive oil sector, Spain underlines the formal nature of the errors noted and states that the
size of the sample audited by the  Court  does not allow  general  conclusions to be  drawn.  In
one case in which the  area  declared  was  too large, Greece  considers that  the  error is  purely
formal and sets out the system for the measurement and control of agricultural areas. In  the
cotton sector, Spain states that the Court has not been able to take account of its replies which
were sent to the Court after the Annual  Report was finalised and  which show that it carries
out the necessary controls.

–  Finally, few Member States recognise the difficulties encountered, but set out the measures
undertaken  or  planned.  For  example,  this  is  the  case  in  the  olive  oil  sector  with  Greece,
which recognises that the olive oil register is still in the introductory phase. However, three
Member States (DK, UK, NL) have implicitly recognised that there is a general problem in
implementing the IACS and/or the system for the identification and registration of bovine
animals at national level. They  have emphasised the  need  to  make  an  effort  in  this field,
but it is mainly a case of drawing conclusions from the Court of Auditors' observations and
not recognising a problem which is specific to them. 

2.2.2. Clearance of accounts

–  The Court made a number of criticisms of the paying agencies and the certification of their
accounts.  It  also  points  to  Commission  decisions  establishing  financial  corrections.  As
regards the paying agencies, France, Greece and Portugal have accepted the validity of the
Court's criticisms and reforms are planned or under way. 

–  As regards the financial corrections, most of the Member States concerned emphasise that
the  procedures  are  still  under  way  internally  or  with  the  Commission.  The  corrections
relating  to  milk  quotas  are  the  most  contested.  One  Member State  (E)  has  also  referred
corrections  relating  to  the  milk  quota  policy  to  the  Court  of  Justice.  On  the  same  point,
Italy has stressed that the problems in collecting the levy are due to internal administrative
and  legal  procedures  which  should  not  lead  to  corrections.  Germany,  on  the  other  hand,
recognises the difficulties which have led to the flat-rate corrections following the control
of export refunds (supervisory agencies) and states that it has taken far-ranging measures
to resolve the problem.

–  The problem of the CATS database containing all the data on payments by the EAGGF has
prompted  a large number  of  replies.  The Court  pointed  out that the data provided  by  the
Member  States  suffered  from  shortcomings.  This  finding  has  not  been  contested  even
though some of them try to play down the significance (for example, Netherlands complies
with  three  of  the  four  criteria,  Finland  mentions  a  98.7%  rate  of  data  transmitted
satisfactorily, Spain mentions that it sends written documents allowing reconciliation of the
ledgers,  while  Austria  and  Denmark  state  that  no  further  data  were  required).  Moreover,
virtually  all  the  Member States  expressing  their  position  are  implementing  or  planning
corrective measures.

2.2.3. Other issues 

Some Member States brought up, on their own initiative, specific issues in the Annual Report
that were taken from special reports or were a follow-up to previous observations.

7

–  As  regards  the  special  report  on  the  extensification  premium,  Spain  and  France  tend  to
confirm  the  Court's  critical  analysis  of  the  scheme's  incentive  effect.  Austria  and  Ireland
question the Court's criticisms about implementation of the scheme. Austria states that the
criticism  is  based  on  one  very  specific  error  while  Ireland  states  that  a  management  and
control  system  which  it  considers  effective  was  introduced  between  1999  and  2000.  The
United Kingdom  points  out  that  this  scheme  has  been  in  place  for  only  a  short  time  and
that improvements will gradually be made. 

–  As for the reform of the CMO for sugar, the United Kingdom shares the Court's criticisms
about the inadequacy of the Commission's proposals. However, it remains cautious about
the need put forward by the Court to reduce aid to durum wheat, even though it supports
the principle of revising the support scheme.

2.3.

Structural Funds 

The Member  States'  replies in this  sector  cover  four  main  issues  which  cut  across  the  main
sections of Chapter 3 of the Annual Report:

–  the under-implementation of payment appropriations;

–  the closure of the oldest projects;

–  the errors resulting in particular from the problem of inadequate checks of eligibility;

–  compliance  with  Regulations  Nos  2064/97  and  438/2001  on  control  of  the  Structural

Funds. 

2.3.1. Under-implementation

This  point  attracted  the  attention  of  the  United  Kingdom,  Austria  and  France.  France
subscribes  to  the  Court's  comments  while  the  United  Kingdom  emphasises  that  this  is  due
partly  to  the  delays  incurred  in  the  programming  for  2000-06  and  partly  to  the  inadequate
quality of the expenditure forecasts. As regards the latter point, it calls on the Commission to
go  further  than  its  current  initiatives  and  suggests  a  revision  of  the  expenditure  estimates
every six months. 

Austria  emphasises  the  pressure  exerted  on  the  Member  States  by  a  number  of  factors,  in
particular the time limits for approval of the programmes, adoption and interpretation of the
financial  rules.  Austria  is  worried  about  the  consequences  of  late  commitments  in  2001
underlined by the Court of Auditors. It considers that this imposes a particular constraint on
implementation  in  the  Member  States  given  the  rule  that  appropriations  are  automatically
decommitted  in  n+2.  It  expressed  its  concern  about  the  pressure  on  the  utilisation  of
appropriations  in  connection  with  the  new  rules  limiting  the  number  of  annual  payment
requests  to  three.  As  regards  this  specific  point,  the  United  Kingdom  does  not  approve  the
introduction of a restriction on presenting payment requests.

2.3.2. Delays in the closure of the oldest projects

The Court points to considerable delays in the closure of programmes and the problems which
this generates (finding the documentation, detecting errors, etc.).

8

Generally speaking, the Member States which have replied recognise that problems may have
been  encountered,  thus  generating  excessive  delays.  However,  the  United  Kingdom  and
Portugal have stated that the outstanding cases are the most difficult. Nevertheless, the United
Kingdom points out that, except for those cases which are still covered by legal procedures,
the rule calling for the automatic decommitment of appropriations at the end of 2002 should
resolve a large number of cases and help reduce the level of outstanding commitments. France
too stressed the importance of this rule. 

2.3.3.

Errors resulting in particular from ineligibility of expenditure

The Member States have replied in various ways to the Court's observations. 

Two Member States consider that their control systems prevent the emergence of any errors,
especially in the new programming period. Portugal and Finland do not agree with the Court
of  Auditors'  conclusions.  Portugal  also  states  that  the  expenditure  incurred  is  entered  in  a
separate account and checked in detail in both the private and the public sector.

In a number of cases, Member States point out that their observations following Court audits
have not been included in the annual report (D, DK). Spain states that it is unable to express
an opinion on the Court's findings as they are not specific enough (two cases). 

In the case of other errors, the facts themselves are contested, by Ireland (one case involving
the Cohesion Fund) and by the United Kingdom (one error was reported in connection with
Objective 2 in Northern Ireland although this area does not qualify). Denmark contests certain
legal interpretations by the Court of Auditors and thus the errors (ineligibility) which it lists.
Spain also disagrees with the Court in two cases, stating that, in one of them, its replies to the
Court  of  Auditors  had  not  been  taken  into  consideration  and  that,  in  the  other,  a  control
carried out by the Commission had not revealed any problem.

Finally, several cases have been accepted, in particular by Ireland, the United Kingdom, Italy,
Greece and France. In their replies, these Member States set out the measures which they have
taken  or  are  planning  to  correct  the  errors  detected  (during  the  payments  of  balances  in
France,  Greece  and  Italy)  as  well  as  to  improve  their  control  systems  (French  ministerial
circular to ensure reliable controls on declared expenditure).

2.3.4. Controls

The  Court  of  Auditors  analysed  implementation  of  Regulations  Nos  2064/97  and  438/2001
which  set  standards  for  the  control  of  the  Structural  Funds  in  the  1994-99  and  2000-06
programming  periods.  Two  main  aspects  are  examined:  introduction  of  reliable  controls  in
accordance with the legal provisions and implementation of the controls themselves.

In their replies, most of the Member States link the problems of the two programming periods
because of the closeness of the two regulations as well as the continuity of their activities in
the Structural Funds sector.

The core of their argument is linked to the time limits for adopting the rules and the working
and explanatory documents. The delays might thus have led to a succession of time-lags, for
example  between  the  closure  of  operations  from  the  period  1994-99  and  their  control  or
between adoption of the new programmes and the introduction of systems to control them. 

9

–  As regards the period 1994-99 in particular, several Member States put forward arguments
based on the late adoption of the regulatory framework. Three Member States (D, IRL, A)
also  claim  that  they  did  not  receive  all  the  necessary  documents  until  very  late  (2002).
These  time-lags,  in  addition  to  the  time  needed  to  establish  the  necessary  structures  and
procedures and the extent of the control to be carried out on operations relating to 1994-99,
could  have  led  to  delays.  Portugal  puts  forward  an  argument  based  on  the  fact  that
Regulation  No  2064/97  has  increased  control  standards  and  requirements,  adding  to  the
time needed (P).

However,  all  the  Member States  have  pointed  out  that  the  problems  encountered  with  their
systems are now limited and, if not resolved, had at least being largely cleared up (F, UK, P).
As  for  compliance  with  the  5%  objective,  some  Member States  consider  that  they  have
already met this objective (F, SP, SF), while others are confident that they will soon be able to
meet it and report more or less considerable progress (I, B, UK, P).

–  For  the  new  programming  period  covered  by  Regulation  No  438/2001,  most  of  the
Member  States  admit  that  they  needed  time  to  introduce  reliable  control  systems.
Similarly,  as  regards  the  objective  of  checking  a  sample  of  operations,  they  also  usually
agree  that  the  controls  carried  out  in  2001  were  limited  in  number.  However,  they  play
down these observations on the basis of four arguments. 

First,  they  point  out  that  the  Regulation  was  not  adopted  until  March  2001,  the  necessary
explanations and interpretation left them only limited time to comply with all the provisions
(I, B, SF, P, A, with the latter underlining the Commission's shortcomings in connection with
the explanatory documents leading up to implementation of the regulation). 

Second, they state that 2001 was largely devoted to introducing and checking the systems to
ensure that they were fully operational in 2002 or 2003 (F, SF, P, G).

In addition, the means available have been concentrated on completing the controls covering
the previous programming period, resulting in a certain time-lag. (I, B, F, P, D, A). 

Finally,  slow  implementation  of  the  programmes  limited  the  number  of  operations  which
could  be  covered  by  a  control  by  sampling,  restricting  the  possibility  and/or  value  of  the
overall objective  of checking 5% of  expenditure (B, SF, P, D,  A,  G).  Some  Member  States
consider that they have achieved the objectives (SP, UK).

Generally speaking, the United Kingdom agrees with the Court of Auditors' observation that
the reform of the Structural  Funds had  not attained  all  its  objectives  as  regards  simpler  and
swifter procedures.  France's suggestion that elaboration of  the regulatory  framework  for  the
next programming period should be brought forward may also be related to this.

2.4.

Other sectors

Some Member States have drawn up replies on subjects which have nothing to do with shared
management. Their main concern is to express their views on the forthcoming reforms which
were recommended by the Court or which they themselves deem necessary. It is interesting in
this respect to see the situations in which the Member States agree and the cases in which the
national contributions are opposed. 

–  Internal policies: The Court of Auditors concentrated on the research sector and it  is this
sector which attracted most comments from the Member States, particularly in connection

10

with  the  recommendations  made.  France  is  the  only  Member State  to  express  its  clear
support  for  the  recommendations,  and  in  particular  the  recommendation  on  the
simplification  of  reimbursement  schemes  in  order  to  make  it  easier  to  carry  out  controls
and the recommendation that it should be possible to sanction beneficiaries.

Austria,  on  the  other  hand,  stressed  the  improvements  introduced  by  the  6th  research
framework  programme  and,  like  the  United  Kingdom,  opposes  the  Court  of  Auditors'
supplementary  recommendations.  It  also  considers  that  the  research  sector  possesses
specific features which make it acceptable for a number of irregularities to be noted. 

–  External action: some convergence of views may be noted between France and the United
Kingdom  for  the  reform  of  the  management  of  external  aids  undertaken  by  the
Commission (decentralisation, in particular) and they are also worried about the difficulties
in  implementing  pre-accession  aid.  However,  the  United  Kingdom  is  more  critical  and
points  to  the  recurrent  nature  of  the  Court  of  Auditors'  criticism  of  external  action.  It
emphasises  the  slow  or  unsatisfactory  progress  made  in  terms  of  budget  implementation
(outstanding  commitments)  and  improvement  of  financial  or  personnel  management
(decentralisation). It therefore calls for a  firm undertaking from the Commission  in  these
fields  and  suggests  that  a  precise  timetable  be  drawn  up.  As  regards  pre-accession  in
particular,  the  United  Kingdom  is  also  concerned  about  the  administrative  institutional
problems underlying the underutilisation of payments and the  consequences  they have or
will have on payments, including after accession.

–  Banking and financial instruments, administrative expenditure and the EDF:

–  The  Member  States  adopt  varying  positions  on  the  geographical  distribution  of
EIF  appropriations.  Ireland  intends  simply  to  promote  this  instrument  while
Sweden  considers  that  it  is  up  to  the  Commission  to  remedy  this  situation.  The
United  Kingdom  feels  that  a  financial  instrument  like  the  EIF  need  not  comply
with  considerations  as  to  the  geographical  distribution  of  appropriations  even
though it welcomes the measures planned by the Commission in this field. France
favours  an  even  distribution  of  appropriations  and  considers  that  balance  was
restored in 2002.

The Court observed that some SMEs benefited from the EIF as well as from the
ERDF without any real control on this cumulation of assistance. Austria contests
this assessment and considers that cumulation was normal (action under a number
of arrangements corresponding to different situations and requirements)  and  was
carefully  monitored.  Portugal,  on  the  other  hand,  does  not  consider  that  it  has
sufficient information to reply to this observation by the Court of Auditors.

–  As regards administrative  expenditure, only  France  has spoken up  to  call  on  the
institutions to display vigilance concerning regularity and discipline in respect of
remunerations.

–  As  regards  the  EDF,  the  Netherlands  states  that  it  lodged  its  instrument  for  the
ratification  of  the  9th  EDF  on  20  December  2002.  Austria  is  confident  that  the
new  Financial Regulation will have a positive effect  on  the  9th  EDF,  but  points
out  that  delays  in  implementation  do  not  necessarily  pose  a  problem  given  the
specific constraints on development aid.

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3.

AREAS OF AGREEMENT AND DISAGREEMENT

3.1.

Methodological problems

As  with  the  report  concerning  2000,  the  Member  States  still  express  a  number  of
methodological  criticisms  about  the  Court  of  Auditors'  procedures,  especially  for  the
examination of transactions. Several of them feel that they are unable to express their point of
view  properly,  either  because  the  cases  mentioned  by  the  Court  cannot  be  identified  or
because the deadlines have not allowed their replies to sector letters to be taken into account
by  the  Court  of  Auditors.  This  sort  of  observation  indirectly  raises  the  question  of  the
application  of  the  principle  of  the  adversarial  examination  of  the  auditors'  findings.  It  also
limits the scope of the Member States' replies to the annual report as some States do not feel
able to submit their comments.

Faced with this situation, the Court of Auditors has already stated that, generally speaking, the
arguments put forward by the Member States (which are systematically analysed) rarely lead
to  any  change  of  opinion.  It  has  also  pointed  out  in  the  past  that  its  controls  are  regularly
carried out on the spot, often in the presence of representatives of the Member States, who are
then able to present their arguments.

More fundamentally, irrespective of obvious disagreements, it appears that in a large number
of  cases  the  Member  States  try  to  play  down  the  significance  of  the  observations  in  the
Annual  Report.  Some  contributions  concerning  the  2000  Annual  Report  openly  expressed
doubts about the validity of the conclusions drawn by the Court from a number of cases. This
year, as there were fewer replies to the DAS errors, this position appears less clear. In several
cases, the national contributions point instead to the specific nature of the problems detected
(e.g. limited to a region or undertaking) or to the fact that there is little or no financial impact
(error  relating  to  intermediate  payments).  This  approach  allows  a  more  or  less  implicit
objection to the general conclusions on the reliability of management and control systems. In
this  connection,  the  United  Kingdom  openly  wonders  about  the  basis  for  the  Court's  claim
that the IACS could not detect all the errors.

3.2.

DAS errors 

It may be noted that the Member States devoted less attention to the DAS errors and that few
of them replied systematically to the cases referred to them on 6 November 2002. No specific
conclusions can thus be drawn from examining them. 

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4.

CONCLUSION

A number  of  conclusions,  lessons  and  recommendations  may  be  drawn  from  an  analysis  of
the Member States' replies to the Court of Auditors' Annual Report for 2001.

The national contributions are clearly an attempt by the Member States to defend the validity
of  their  management  and  the  controls  they  carry  out.  This  approach  occurs  at  a  number  of
levels: formal disagreement with the Court of Auditors, playing down the significance of its
findings  and  the  conclusions  it  draws,  and  presentation  of  specific  or  structural  corrective
measures to remedy the shortcomings detected. This stratification of arguments presented in
their defence varies, of course, from one Member State to another; some are more inclined to
question the Court's observations against them.

As  a  result,  the  number  of  structural  reforms  announced  remains  fairly  limited,  except  for
implementation  of  Regulation  No  438/2001  concerning  the  Structural  Funds.  In  fact,  it
appears  that  there  is  more  of  a  question  of  adapting  existing  structures,  for  example  by
making  an  effort  with  training,  information,  interpretation  and  auditing  the  systems.  Few
in-depth  reforms  are  actually  planned.  Only  a  handful  of  fairly  radical  measures  may  be
noted, such as the withdrawal of a paying agency's accreditation or the amendment of certain
rules on the making available of own resources.

Similarly,  the  Commission  has  made  only  a  small  number  of  recommendations  which  are
generally limited to one or a few Member States and, in most cases, follow the same lines as
those  made  by  the  Court  of  Auditors.  This  is  the  case,  for  example,  with  the  reform  of  the
CMO for sugar (UK), the monitoring of macrofinancial aid (F),  controls  in  connection  with
internal policies (F), the geographical distribution of the EIF (S) and the standardisation of the
rules for keeping the B account (SF).

On the other hand, like last year, a general demand for the simplification of Community rules
emerges  either  explicitly  or  implicitly  from  a  number  of  contributions  (F,  UK,  NL  in
particular).  It  appears  that  the  complexity  of  the  legislation  is  a  source  of  errors  as  well  as
delays resulting from the need to give clarification and seek interpretation.

13