Errors and fraud cost EU taxpayers €5bn in 2011


Allegations of fraud and misappropriation of public funds often trouble negotiations when EU budget talks get under way.

Five billion euro, or 3.9 per cent, was lost to misuse in the 2011 budget, according to the European Court of Auditors.

But some areas of funding are more prone to error than others. European Court of Auditors spokesman Aidas Palubinskas said rural development, environment, fisheries and health, which make up a single policy group, was the most error-prone spending area, at 7.7 per cent in 2011. Regional policy, energy and transport was also high, at 6 per cent last year.

Misuse of funds in these two areas accounted for €1 billion and €2 billion of taxpayers' money respectively in 2011 alone.

The court has expressed concern about the high level of errors in the EU's accounts for the past 18 years.

There have been shocking examples of misuse of EU funds, with colourful cases in the expenditure of European structural funds.

This money, intended for regional development and social projects in member states, has been targeted in the past by organised criminals. In southern Italy a branch of the Mafia, the Ndrangheta, accessed the funds by demanding protection money from contractors, who in turn inflated the cost of works on the A3 Salerno-Reggio Calabria highway. The case took years to come to court and to date no one has been prosecuted.

In the Canary Islands millions were given to developers who built hotels in Unesco-protected areas. Although Spain was penalised for the misuse, the funds have yet to be recouped.

No centralised records

One of the biggest problems is the lack of centralised records and accountability for the use of the funds.

For some areas, such as the €347 billion worth of European structural funds, there is no centralised database of expenditure. This leaves national and regional authorities to keep records, meaning the commission has little oversight of how the funds are being used.

The European fraud squad, Olaf, investigates cases of misuse and hands over all its cases to national authorities.

However, cases can take years to come to court and prosecutions are rare.