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Wednesday 7 November 2012

Publication of the annual report of the European Court of Auditors is something that I look forward to more than most. I have, over the years, developed an unhealthy appetite for the audit reports and their coded, cautious criticism.

I also take the view that if European Voice does not take the audit report seriously and report on its contents, then there is a risk that no one else will – aside from the formulaic condemnation that “for the nth year running the auditors have refused to approve the accounts”. But if reform of the EU is to be taken seriously, then improvements to the financial administration must be part of the mix and the comments of the auditors have to be examined and aired, even if not swallowed whole.

My colleague Toby Vogel has dissected the report for tomorrow's newspaper. In the same edition is an editorial arguing that there is a tension between the claims made in the context of the negotiations over the EU's budgets for 2014-20 that the EU can provide economic stimulus for growth and jobs and the demands that spending complies with the EU's cumbersome rulebook.

As the rules are currently configured, if money is to be disbursed without error or irregularity it will either go out slowly or in paltry amounts.

Whatever my unnatural interest in auditors' reports, I admit that even I find the jousting between the auditors and the European Commission over how each side estimates the frequency of errors to be verging on the catatonic. A discussion of the methodology of calculating something called a residual error rate is not why journalists read such a report. What they are looking for are just a few juicy morsels that they can recycle – a bit of scandal, a whiff of fraud, an admission of either cock-up or conspiracy.

One easily comprehensible nugget is a paragraph on a contract held by the European External Action Service for the EU's delegation in Venezuela:

“The invoice related to the monthly payment of €5,340 for the provision of security services to the delegation to Venezuela was wrongly endorsed as ‘certified correct' whereas these services had not yet been provided. This practice is contrary to Article 79 of the Financial Regulation. In addition, the related security contract has been in force for 24 years without modification. The audit also noted that the delegation had only obtained informal exemption from paying VAT, although the VAT recovery legislation has been in force in Venezuela since the year 2000. It has not calculated the amount of VAT unrecovered over this period.”

The EEAS's response to this criticism (included in the report) is eloquent in its brevity:

“The delegation has been instructed to tender a new security contract and to recover the VAT unduly paid since 2000.
“More generally, the delegations have been repeatedly and all levels reminded about he importance of regular new tendering of their services contracts.”

That roughly translates as: “We have not got a leg to stand on.” - with the not-so-subtle implication that the staff in Venezuela had been ignoring instructions from headquarters.

It does all rather beg the question, what have staff in Venezuela been doing? You couldn't even blame these oversights on the stress of starting up the EEAS, since they long pre-date that and go back to the days when the delegation was run purely by the Commission. The introduction of VAT recovery legislation seems to have passed them by. Not to have modified a contract in the course of 24 years (since 1987!) is an impressive achievement – so impressive that it cannot be the work of one official. Given how often the heads of administration are rotated, a succession of administrators must have been negligent.

With some EU delegations, you can bring to mind political, economic or humanitarian crises that will have rushed staff off their feet for months at a time. While there is some aid from the EU to the Venezuelan government and some projects with non-governmental organisations, it's hard to think that the delegation in Caracas is the world's most stressful.

But clearly the staff were unprepared for a visit from the auditors.

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