Financial management in the European Union : thirty-second report of session 2008-09, report, together with formal minutes

In 2007, European Union expenditure totalled 114.0 billion euro and revenue was 117.6 billion euro.

The sums involved emphasise the need for sound financial management and control within European Union Institutions and the Member States.

For the first time the Court of Auditors did provide a positive statement of assurance on the reliability of the accounts because the accounts accurately recorded the underlying transactions, but it could not provide a statement of assurance, for the fourteenth year, on the legality and regularity of expenditure.

Since 2005, the Commission has reduced the level of errors across the budget but a major barrier to improving financial management in some areas of expenditure is the continued complexity of the regulations, which applies particularly to Cohesion policy.

This policy continues to be the biggest source of error, with an estimated 11 per cent of irregular spending.

The Court considers errors as material if in total they exceed 2 per cent of total expenditure in each of the main policy areas. The Committee is concerned at a proposal to accept variable levels of error dependent on complexity of the policy because it would remove the incentive to simplify the rules for the European expenditure regimes.

The fundamental review of the European Union budget, currently underway, offers the Commission the opportunity to modernise the budget and strengthen its financial management.

If the Commission does not take this opportunity, a positive Statement of Assurance is extremely unlikely and European Union citizens will continue to think that their funds are badly managed.

In 2007, Member States reported irregularities to the European Anti-Fraud Office (OLAF) totalling 1,425 million euro, including suspected frauds of 316 million euro.

The March 2009 National Audit Office report on this topic ("HC 349", ISBN 9780102954692) is available to buy separately.