The report of the EU Court of Auditors published today will scarcely do much to enhance the image or standing of the EU in the eyes of many European citizens. Rather, it will confirm the stereotypical view in some quarters that the EU adopts a freewheeling approach towards public money. And that it dispenses huge amounts of the cash - all of it provided by EU taxpayers - with a lack of control that borders on recklessness.
This view is often advanced by those - like the Eurosceptics in Britain - who are firmly opposed to European integration. That said, the auditors' report assembles a very strong prima-facie case to support the view that financial controls on the EU multibillion pound budget are totally inadequate. The EU Commission has promised for several years now that controls will be tightened but, on the basis of the auditors' report, it has still to deliver on this promise.
As a result, the Court is again "unable to give an affirmative statement regarding the legality" of the transactions underlying the payments detailed in its report. The auditors can only deliver a qualified approval of the accounts, such is the scale of irregularities uncovered in their random checks. The court will tell MEPs in Strasbourg today that some £3 billion of the Union's £58 billion expenditure was inadequately accounted for last year.
Some of the irregularities derive from what might be called structural deficiencies: the compensation scheme established under the CAP reform over-compensated farmers by thousands of millions of pounds; inadequate provision was apparently made for an increase in the world market price of cereals and beef. Some of the irregularities were more opportunistic: some 60 per cent of staff in the EU's Economic and Social Committee - which brings together representatives of the social partners from all over the Union - made false claims for air travel expenses.
The report uncovers a plethora of other such cases involving all kinds of irregularities. In fairness, an audit of most large institutions - especially one with a multinational and multi-lingual staff like the EU - would uncover a high degree of irregularities and/or sloppy procedures. But given the enormous level of public funds committed to the EU budget, an overall error rate in the accounts of over 5 per cent cannot be easily justified. The EU Commission - and the members-states who administer CAP funds - are vulnerable to the charge that they have failed to give the reports - furnished by the Luxembourg-based court - the kind of priority they deserve. Remarkably, this year's report is no better and probably no worse than a succession of reports that the court has completed in recent years. But its political impact is likely to be much greater.
The court's findings, especially the wholesale irregularities it uncovers in CAP payments, will strengthen the hand of those favouring a further radical reform of the CAP. The compensation system has clearly worked to the benefit of farmers. But the auditors' report appears to suggest that the reform programme has failed to limit overproduction and it has failed to redirect more funding towards the smaller farmers. The payment uncovered by the auditors of £19.5 million to just 15 large-scale cereal farmers provides a strong case for more fundamental CAP reform. The challenge facing the Government is to prepare the ground now for the next, much more difficult, phase of CAP reform.