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Embargo: 00:01 Monday 13 November 2006

Contact: Owen Williams 020 7219 8659

LORDS PUBLISH REPORT ON FRAUD AND FINANCIAL MANAGEMENT IN THE EU

The European Court of Auditors has now been unable for twelve successive years to give a positive Statement of Assurance to the accounts of the European Communities. A House of Lords Report published today argues that this, together with its attendant press coverage, is an extremely serious problem for the European Union and the governments of the Member States.

The Report maintains that the lack of a positive Statement of Assurance does not necessarily indicate that high levels of fraudulent or corrupt transactions have taken place. To reflect this the Committee argues for a clear distinction between administrative mistakes and fraud, with the Court of Auditors publishing separate figures for each.

Commenting, Lord Radice, Chairman of the Committee which conducted the inquiry said that:

" Much of the coverage in the press suggests that there is a significant culture of corruption in Europe's Institutions. Our investigation has uncovered no evidence to support this suggestion. However, we must not be complacent: our Report concludes that, while the level of fraud is no higher than in comparable public expenditure programmes, including in the UK, the fight against fraud must go on.

"The Court of Auditors' annual Statement gives a misleading picture of the health of Europe's financial controls. I was particularly interested in the evidence my Committee heard from Sir John Bourn, head of the National Audit Office. He told us that were he required to do so, he would be unable to give a similar positive Statement of Assurance on the UK's accounts as he currently has to qualify 13 of the Government's 500 accounts

"In addition, more than 80% of European money is managed by the Member States rather than directly by Brussels: the Commission alone cannot be held responsible for the regularity of these transactions."

The Report argues that Member States must be encouraged to take more responsibility for good management of European funds. To this end the Committee argue for:

  • A system of naming and shaming those Member States who have poor records of financial management;

  • A national Statement of Assurance produced by each Member State and signed by a minister or senior civil servant;

  • Responsibility for the Court of Auditors' annual Statement of Assurance and audit to reside with the Budget Council, which is responsible for drawing up the budget, rather than, as now, the ECOFIN Council.

Notes to Editors

  1. The report is published by The Stationary Office: Financial Management and Fraud in the European Union: Perceptions, Facts and Proposals, House of Lords European Union Committee, 50th Report of 2005/06, HL paper 270

  2. The report will be available shortly after publication at: http://www.parliament.uk/parliamentary_committees/s_comm_a/s_comm_a_reports_and_publications.cfm

  3. The Committee heard from a number of high profile witnesses during their inquiry including: Lord Kinnock, Ed Balls MP (Economic Secretary to HM Treasury), Ivan Lewis MP (then Economic Secretary, HM Treasury), Sir John Bourn (Comptroller and Auditor General at the National Audit Office), EU Commissioner Kallas, OLAF (the EU's anti fraud body), Marta Andreasen (former Accounting Officer at the Commission) and many others.

  4. The members of the Committee who conducted the inquiry were:

Lord Radice (Chairman)

Lord Jordan

Lord Blackwell

Lord Kerr of Kinlochard

Lord Cobbold

Lord Maclennan of Rogart

Lord Inglewood

Lord Steinberg

Lord Jones

Lord Watson of Richmond

For further information, or to request and interview with Lord Radice, please contact Owen Williams on 020 72198659.