Auditors refuse to clear the EU's budget

Some Good News

For the European Commission, the high point of the auditors' report was the verdict that the accounts for 2007 were accurate.
The auditors concluded that the accounts “in general give a fair presentation, in all material respects, of the EU's financial position and results”.
Siim Kallas, the European commissioner for audit, administration and anti-fraud, said the unqualified opinion was “one piece of really good news”.
In the past, the auditors have qualified their opinion on the accuracy of the accounts, disputing both their accuracy and the methodology behind them.
Before the switch to accruals-based accounting was made in January 2005, it was a persistent complaint of the auditors that the Commission did not have an accurate picture of its assets and liabilities. But even after that switch, there were problems. Two years ago, for instance, the auditors said the net assets in the opening balance-sheet and the consolidated closing balance-sheet were overstated by €132 million and €314m respectively. They said that the accounting systems in some Commission departments could not ensure the required quality of financial information. The problems at that time were particularly acute in the education and culture department, where the omissions, double-postings and wrong-postings were so great that it was impossible to quantify the over- or understatement of assets and liabilities.
But there are no such complaints about the 2007 accounts.
Vitor Caldeira, the president of the Court of Auditors, told MEPs: “This is a positive development: for the first time under the accruals-based accounting rules, the court provides an unqualified opinion on the consolidated accounts.”
The positive verdict is a minor triumph for Brian Gray, the Commission's accountant, who is also deputy director-general for budget.
He has overseen the switch to accrual accounting and the integration of the local accounting systems of the various Commission departments with the central accounting system.
That job is not yet complete. As the auditors point out, the local systems of the directorates-general for external relations and for education and culture have still not been validated.
And although the auditors were ready to give a positive verdict on the 2007 accounts, they nevertheless pointed out that “weaknesses in the accounting systems...still put at risk the quality of financial information of certain directorates-general of the Commission [which...] led to a number of corrections after the presentation of the provisional accounts”.
So this year's unqualified verdict is no guarantee that the auditors will be similarly positive in years to come.