The sound bites might have been lifted straight from any number of reports issued by the U.S. Government Accountability Office.
"A relatively high incidence of errors at the level of payments was detected. This was linked to poor internal controls in these organizations, and underlines the necessity for the commission to have a comprehensive approach to their supervision, control and audit.""For the remainder of payments' budget -- agricultural spending, structural measures, internal policies and external action - the court is again not in a position to provide an unqualified opinion on the legality and regularity of underlying transactions."
"A greater effort is needed to implement the supervisory and control systems effectively and to address the weaknesses in the areas where payments are still materially affected by errors."
If misery loves company, the GAO's soul mate must be the European Court of Auditors. The court recently published its annual report containing the above assessments of the implementation of the 2004 general budget of the European Union, refusing for the 11th year in a row to approve the European Union's accounts.Stateside, the U.S. GAO appears to be heading towards a refusal to vouch for the accuracy and completeness of its own government's fiscal report for a ninth year in a row, running a deficit that averaged more than $1 billion a day in 2004. In addition to his doomsday messages about the federal deficit converging with the balance-of-payments and personal savings deficits, GAO Comptroller General David Walker has added a new bit to his repertoire -- the potentially ruinous failure of companies to account for billions of dollars in unfounded pension benefits.
The court of auditors regularly reviews the accounts of the E.U.'s revenues and expenditures and evaluates its financial management, working to ensure maximum value. In 2005, the European Union is expected to spend 106.3 billion euros, equal to about 1 percent of its members' gross national income. According to the BBC News, the vast majority will be spent on aid to farmers and rural development (46 percent) and on aid to poorer regions (30 percent).
For the past decade, the court has said it can't verify the bulk of those disbursements. The E.U. mostly relies on people to spend the cash as they promise to, a system with no paper trail, nevermind a solid set of internal controls. According to the most recent report, the court cannot vouch for at least 65 percent of E.U. funds. Fingers have often been pointed in the past at suspicious outlays in the Balkans and Russia, but there appears to have been little followup. The court has no legal powers of its own, and just passes along information of possible fraud, in the hope the member bodies remedy the problem.
In the executive summary of the report, the president of the court, Hubert Weber, said, "The court found that the vast majority of the payments' budget was again materially affected by errors of legality and regularity in the underlying transactions. This is a result of inherently risky transactions, and supervisory and control systems that are ineffective in terms of limiting the risk of irregularity to an adequate level."
With all the talk about aligning international accounting standards, about the controls that need to be put in place for public companies, about the need to protect investors, it's disappointing that the U.S. and the U.K. governments are so reticent to provide actual spending accountability to their taxpayers. It's nice to know that it's not just our government struggling with the pesky problems of implementing internal controls, but on both sides of the Atlantic, the do-as-I-say, not-as-I-do accounting can't go on forever.
