EU auditors: "Independent auditing more important than ever"

EU auditors: "Independent auditing more important than ever"
The Members of the European Court of Auditors (January 2020) with President Klaus-Heiner Lehne in the centre, first row, credit: ECA

The European Court of Auditors (ECA) is focusing increasingly on assessing the performance and added value of EU spending and regulatory action, according to its recent annual activity report published during the coronavirus crisis.

The crisis has hit in an area of public health, where the EU has little competence. Member states, initially at least, have reacted on their own and measures were mainly taken at national level.

“Due to the COVID-19 pandemic, the EU and its member states are facing unprecedented challenges,” said ECA President Klaus-Heiner Lehne last week (7 May). “It’s more crucial than ever that the Union delivers, and in helping citizens to overcome this crisis demonstrates the added value of European cooperation and solidarity.”

The ECA is an independent external audit institution and EU’s counterpart to the supreme audit institutions (SAI) in the member states. Based in Luxembourg, it was established in 1977 and has developed over the years. It operates as a collegiate body of 27 Members, one from each member state, and employs around 900 staff. Two thirds of its workforce are auditors of all EU nationalities.

Its budget in 2019 was €147 million, 98 % of which was used during the year. The budget represents less than 0.1 % of total EU spending, or around 1.5 % of the EU’s total administrative spending.

For that budget, ECA is auditing EU spending in the order of magnitude of €157 billion (2018), accounting for 2.2 % of EU member states’ total government spending and 1 % of EU gross national income. Its flagship audit report is the annual financial and compliance audit of the EU accounts that passed as “clean” while errors in spending were not “pervasive”, with an overall error rate of 2.6 %.

“We see this as an encouraging sign,” ECA writes in the activity report but is aware of the risk that the error rate could increase because of the temporary relaxing of spending rules during the coronavirus crisis. According to a recent ECA opinion, member states need to adjust their audit approach and pay attention to what extent the spending is actually incurred for COVID-19 related measures.

Investigating fraud is not within the scope of ECA’s mandate and in 2019 it reported only 10 cases of suspected fraud to EU’s anti-fraud agency (OLAF). That said, it has developed expertise in fraud-related matters, publishes reports on fraud issues and advices the Commission on EU’s anti-fraud system. The Commission, for example, took its findings into account when defining its 2019 anti-fraud strategy.

Besides the annual report on EU’s budget, including the Statement of Assurance for the European Parliament and Council, ECA is producing an increasing flow of performance audit reports on the three E’s - the effectiveness, efficiency and economy - of EU policies and programmes.

Added value

The 2019 activity report gives an extensive account, with figures and graphs, of ECA’s audits and engagement with its main stakeholders during last year. The report also includes key information on ECA’s staff, governance and finances, applying standards of transparency and accountability that the EU institutions should apply themselves.

Judging by the report, ECA is doing more than ever in checking if and how EU policies and spending is delivering added value on the ground. A follow-up by ECA shows also that around 95 % of the recommendations made in 2015 reports had been put into practice by 2019. The Brussels Times asked ECA which performance audits in 2019 it would you like to highlight.

“In 2019, we published 36 special reports and reviews addressing many of the challenges the EU is facing, such as food safety policy, renewable energy, e-commerce, border controls, fiscal governance and ethical frameworks in selected EU institutions, to name but a few,” ECA´s press team replied. “Sustainability concerns have been prominent audit subjects in recent years.”

The activity report mentions that ECA published an Audit Compendium on how auditors across the EU scrutinise public health. To what extent have the national audit institutions (SAIs) audited this sector, including hospital preparedness, before the outbreak of the coronavirus crisis?

“A number of national auditors regularly carry out audits on hospitals,” the team replied. “The compendium presents some examples in this regard. Due to the COVID-19 pandemic, public health has obviously become an even more important subject for external audit in Europe. Currently, EU SAIs are having an ongoing exchange on COVID-related work, including possible audit-related collaborations.”

“How Europe copes with this unprecedented crisis is also an area where EU SAIs could and should cooperate more.” The crisis pushed ECA to change its working practices and to speed up digital transformation. “Since the start of the pandemic, we have succeeded to move 100 % of our operations online within 48 hrs, and have since then carried out our work without any major disturbance.”

Networks and peer reviews

ECA’s own engagement with the European Parliament can serve as good practise for the SAIs and their relations with the national parliaments. As usual, in 2019, ECA invited all committees in the European Parliament to suggest potential audit topics for its work programme. Following the European elections last year, ECA also carried out an awareness campaign to inform MEPs about its work.

While ECA decides in full independence which topics will finally be part of the work programme, external input is an important aspect of its programming and allows it to identify areas where it can add most value.

“This year, we have already received suggestions from a record number of parliamentary committees, which we will carefully assess for next year’s work programme,” ECA said to The Brussels Times. The proposals are focusing increasingly on policy and regulatory matters, not merely on spending areas and procedures. Around two thirds of the Parliament’s suggestions are generally covered in ECA’s work.

ECA cooperates with SAIs on the European and international levels. Cooperation with the SAIs in member states and candidate countries takes place within the framework of special Contact Committees of the heads of the SAIs. These networks enable ECA to promote the work of independent external audit in Europe.

There are still SAIs, not only among the candidate countries, that need to strengthen their independence of the executive power, increase performance auditing and add more to the transparency and accountability of the public sector. Independent audits are even more important in times of crises when some governments have imposed states of emergency and abolished normal checks and balances.

An example of good practice is peer reviews. In 2019, a group of four SAIs (Estonia, the Netherlands, Denmark and the United States) carried out a peer review of ECAs current strategy. Their report was recently published and will provide input for ECAs next strategy from 2021 onwards.

Overall, the peers concluded that ECA has made good progress in meeting its strategic goals but apparently there is room for improvement. ECA needs to increase the focus in its performance audits on assessing the added value of EU action, and to explore the possibility of cooperating with other EU SAIs to identify good practices of how best to implement EU policies and funding schemes.

M. Apelblat

The Brussels Times

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