By Richard Johnstone | 10 December 2013
Auditors have urged the European Union to undertake greater checks on member states’ measures of national income to ensure contributions to the economic bloc’s budget are calculated correctly.
The European Court of Auditors said the European Commission must increase checks on ‘major components’ of gross national income measures, with a particular focus on nations where there was a risk of lower quality data.
More than two-thirds of the union’s budget comes from member state contributions, which are set as a percentage of GNI. For example, it was set at 0.7554% in 2012.
These levies are used to balance revenue and expenditure in the bloc by funding any part of the annual budget not covered by other sources of income. As a result, auditors warned that any errors in one country’s calculation of economic wealth could have the effect of increasing the respective contributions from the other member states.
Therefore, the commission must do more to verify the figures, they said. GNI is different from the gross domestic product measure of economic output as it includes net income from abroad.
Milan Martin, the ECA member responsible for the report, said the court concluded that the commission’s verification work was ‘not sufficiently structured and focused’ to ensure the quality of the data.
Auditors examined the effectiveness of the commission’s GNI verification from 2002 to 2007, based on best practice guidelines drawn up by the court to comply with EU accounting rules.
The commission did not plan and prioritise its work in an appropriate way, and did not carry out sufficient work in individual countries, the ECA said. In addition, it did not apply a consistent approach when carrying out verifications.
Auditors called on the commission to carry out a fuller analysis of the risk factors in national estimates, and to set clear criteria that could lead to ‘reservations’ being placed on national figures.
‘Although we found cases of non-compliance and lack of quality in the audited verification cycle, the effectiveness of the commission’s work in the next cycle after September 2015 is likely to be improved through the implementation of our recommendations,’ Martin added.
The commission said it accepted the recommendations.
