EU auditors expose 'dodgy' pounds 3bn payouts

The EU's spending watchdog will today slam European governments for mishandling at least pounds 3bn in taxpayers' money last year. For the second year running, the European Court of Auditors will announce that it cannot certify the legality and regularity of EU payments - totalling pounds 55bn - because it has found so many discrepancies.

The court estimates that almost 6 per cent of all payments from the 1995 budget were subject to "substantial and serious" error.

"The court's audit revealed that the transactions underlying the payments for the financial year contained too many errors for the court to be able to provide global positive assurance as to the legality and regularity of the transactions concerned", it concludes.

Fraud is involved. But the auditors also blame a mix of waste, mismanagement and sloppy controls or lax application of the rules by member states, particularly in the two biggest spending areas: regional or social grants and agriculture, which together account for 75 per cent of payments.

"What we are saying is that payments of the order of pounds 3bn were dodgy. We are decidedly unhappy about the handling of those sums. If the auditor of a private company entered this reservation in the annual accounts, there would be uproar among the shareholders," one senior court official said yesterday.

The harsh judgment appears to give British critics a further stick with which to beat the Brussels bureaucracy. But the report is more an indictment of national administrations.

The auditors found that 90 per cent of the errors relating to payments were in member states, not in Brussels. Frequently, it was at the level of local or regional organisations who were found to be dishing out cash to schemes which were ineligible for funding.

Farmers were given money for setting aside non-existent fields or for owning herds of non-existent cows or sheep. Even pounds 3m from a fund to help governments combat farm fraud went missing because of lax controls, the auditors say.

Denmark paid out pounds 12m in EU subsidies to exporters of cheese to Iran who were not entitled to claim it. The notorious olive oil regime which benefits Italy, Spain, Greece, France and Portugal is once again cited for its total absence of reliable controls.

The auditors are scathing about the operation of the EU's vast social fund which has disbursed pounds 22bn since 1993: it requires an urgent overhaul, the auditors say.

In Greece, a state body received subsidies for a retraining scheme for the unemployed. The money was spent on training civil servants who could not legally be dismissed.

Regional funding also fell victim to a number of scams: a rural tourism scheme in Spain involved the spending of pounds 200,000 on the renovation of a building. The auditors discovered that the building was in fact a weekend retreat for someone who was not even a local resident.

Another scheme in Spain involved the fitting out of a building for the breeding of par- tridges and rabbits to develop hunting in the area. The investigators found that pounds 30,000 had been spent on refurbishing apartments for people running the project.

The Court of Auditors is obliged to deliver a "statement of assurance" on the annual accounts under new rules written into the Maastricht Treaty.