The role of National Audit Institutions in the audit of EU funds

1. The role of National Audit Institutions in the audit of EU funds An EU perspective by Irena Petruškevičienė, Member of the European Court of Auditors Vilnius, 20 March 2007

2. Over €100 bn is raised each year to fund the EU budget, mostly from Member States contributions based on their Gross National Incomes (GNI) and Value Added Tax bases €108,4 billion ≈1% of GNI

3. The majority of EU funds are spent within the EU implementing the Community’s agricultural and structural policies

4. Arrangements for implementing the EU budget are complex; the majority of spending involves shared management between the Commission and Member States EU EU-budget Admin External actions Internal policies Structural policies Agriculture Payment - Advance - Payment - Advance - Payment - Advance - Payment Payment Verification Documentation Documentation Declaration Declaration Third country Member state National budget Paying and implementing agencies Payment Beneficiary Beneficiary Beneficiary Verification Activity Activity Activity 4

5. Shared management results in responsibilities for controlling and auditing the use of EU funds at both EU and national level

6. The relative importance of EU funding is different from the Lithuanian national budget perspective than from the EU budget perspective

7. The Court adds value by auditing EU policies (not Member States) from Commission level down to the level of the final beneficiary of EU funds

8. Cooperation by the ECA with NAIs is required by the Treaty and professional standards, and takes a number of forms Contact committee & Liaison officers Correspondence Participation in on-the-spot visits

9. Were the rules followed? Was the money well spent? The Court must provide assurance on the reliability of accounts and the legality and regularity of underlying transactions, and examine whether financial management was the sound. Are the accounts correct? 9

10. The Court presents its findings to the European Parliament and Council and publishes its reports and opinions in the Official Journal of the EU and on its website Annual Report: Statement of Assurance, observations on the implementation of the EU budget Specific Annual Reports: on EU organisations or agencies Special Reports: on specific budgetary areas or management topics Opinions: on new or amended legislation with financial impact www.eca.europa.eu  10

11. Key messages of the Court’s Annual Report 2006 are in line with previous years; material level of error in some areas but significant progress made in others • EU accounts are reliable • Material error in some areas of expenditure, particularly structural policies • Marked fall in error rate in agriculture due to the operation of the Integrated Admin. and Control system (IACS) • Revenue, administration, pre-accession strategy and part of external actions free from material errors

12. No major observations about Lithuania in the annual report but illustrative observations about other Member States identify risky areas on which to focus audit work • the Court audits by policy area not Member State, so reference to Member States in the reports of the Court are often illustrative • Lithuania receives only 0,8 % of EU funds; the number of audit missions carried out in Lithuania reflects this • Lithuania only recently joined the EU so funding still in the “take off” phase • National administrations are in similar situations, so observations about other Member States could apply • Such observations can and do help National Audit Institutions like the National Audit Office of Lithuania to identify risks