Oireachtas Joint and Select Committees
Tuesday, 16 December 2014
Joint Oireachtas Committee on European Union Affairs
Annual Report of the European Court of Auditors 2013 and Related Matters: Discussion
I apologise to our guests for the delay. A number of Senators were obliged to attend in the Upper House for a vote. I will begin by reminding members, our guests and those in the Gallery to switch off their mobile phones completely. It is not sufficient to put them on silent because they can still interfere with the recording equipment.
Our first session today relates to the work of the European Court of Auditors, its annual report for 2013 and landscape reviews it has carried out. As I informed members, we will then have an informal briefing session with representatives from Dóchas on the European year for development 2015.
On behalf of the committee, I welcome the current Irish member of the European Court of Auditors, Mr. Kevin Cardiff, and his colleagues, Mr. Ned Fennessy and Ms Mary Kerrigan. The European Court of Auditors is the independent external audit institution of the European Union. In its annual reports on the EU budget, the court gives its opinion on the reliability of the accounts and the legality of the transactions underlying them. The committee also will be briefed on landscape reports undertaken by the court, which is a very interesting development. We are starting late and there is limited time for discussion. If we could manage to conclude this section of our business by 3.30 p.m., it would be helpful to Mr. Cardiff.
Before we begin, I remind members of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable. By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of the evidence they give the committee. However, if they are directed by the committee to cease giving evidence in regard to a particular matter and they continue to do so, they are entitled thereafter only to qualified privileged in respect of the evidence they give. Witnesses are further directed that only evidence connected with today's proceedings is to be given. Witnesses are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against a person or entity either by name or in such a way as to make him, her or it identifiable.
I invite Mr. Cardiff to give his opening statement.
Mr. Kevin Cardiff:
Thank you, Chairman. It is very kind of the committee to have Mr. Fennessy, Ms Kerrigan and me before it for the second time. The European Court of Auditors publishes its annual report every year and, in accordance with the Lisbon treaty, sends that report not just to the European Parliament, but also to national parliaments. Our attendance here is to show that we exist, have some information to convey that may be of interest to the committee and are available today and at other times to inform members if we can.
In regard to the 2013 report, the first point to make is that the accounts of the European Union are proper. That is to say, we have not found any significant failings in the accounts themselves. They are, in other words, a fair representation of the Union's balance sheets, inflows and outgoings. There is always some confusion every year in that the claim is made that we do not actually sign off on the accounts. In fact, we do sign off on them, as well signing off as on the EU's revenue. We are saying, in effect, that the funds it raised were raised in a legal and proper way. What we do not do in any year is say the accounts are entirely legal and regular, or at least that spending is entirely legal and regular. This is because when we investigate individual payments on a random basis, as we are required to do by the treaty, we find that some of them are made without any appropriate sanction or, more likely, with small, medium or large errors in the transactions. The accounts are fine, in other words, but some of the spending is done in an irregular fashion. In fairness to the European Commission, which is in charge of most of this, it makes a real effort to keep that level of errors low, and we give an estimation of the impact of that effort in our annual report. Were it not for its efforts both to make corrections in a given year and claw back moneys that should not have been spent, the 4.7% figure referred to on page 3 of our submission would have been nearly 6.5%. That effort by the Commission makes a real difference.
The key messages of the 2013 annual report will seem quite similar to last year but a few items are worth noting from an Irish point of view. First, as for last year and indeed for quite a few years, the most error prone spending areas were regional policy, energy and transport, and rural development, environment and fisheries, most of that being in the rural development area. As I said, the Commission makes real efforts to make corrections and recoveries, as do the member states. Without those efforts the estimated error rate would have been 6.3%.
While we measure individual transactions on a random basis and sample basis, and estimate the level of error in those, we also look at the supervisory and control systems member states and the Commission use in maintaining control over the spend. Some 80% of the EU spend happens at the member state level so it is important that member state systems are quite good.
In this year's report there were some investigations of Irish systems in the agricultural area, particularly on direct payments, and we had some criticisms. I suspect that if we did the same audit in two years' time things would be different because perhaps we would have caught the Department of Agriculture, Food and the Marine in the change of the system. It had been updating its systems for mapping agricultural land and evaluating whether the land involved is properly claimed for but at the time we did the audit we found that those systems were not fully compliant. We also found there was a backlog of corrections in that some individuals who had perhaps over-claimed were only being approached some years later in terms of recoveries and so forth. To put it in perspective, we did not say that the systems were ineffective but that they were partially effective and we pointed out where improvements could be made and, I suspect, are already being made.
Unfortunately, from the Irish point of view, although it is not really a function of our work, the European Commission also did an audit and made some similar discoveries. There is a discussion between the Irish authorities and the European Commission about whether and how much the European Commission should recover funds from Ireland in respect of those errors. That is not my business. I cannot tell the members about it because it is between the Commission and the member state. There is a system called the conciliation process where the member state and the Commission engage about this, and I understand there were meetings under that conciliation process even last week.
Mr. Kevin Cardiff:
I suspect tens of millions at least. I imagine what happens is that the Commission sets a very high number and the Irish authorities set what they would see as the realistic number, and there is a discussion on that.
Last year we noted to the members that the commitments in the budget were growing. In other words, in every year, as with anybody, certain cash payments are made but certain commitments for the future are made also. The European Court of Auditors has a concern that over time the future commitments are growing. We regularly recommend that the European Commission should produce more focused, extensive cash flow projections so that it can keep control of this small risk.
We also know that this year, spending in the 2007 to 2013 programming period - this report was in respect of the last year of that - tended to be focused on absorption. In other words, when member states receive money the last thing they want to do is hand it back to the EU so they could find a way to spend it but sometimes there is pressure to spend it even where the rules are not fully followed or, more likely, where the actual objectives of the particular scheme will not be fully met by the particular spending.
I will show the members the trajectory over the years. In the mid-2000s the figure was very high at 6.9%. In fact, in 2006 it would have been even higher. It has been relatively stable in the past few years at 4.7%, 4.8% and 3.9%. We give a point estimate but as with an opinion poll it is this number plus or minus an amount, and the upper and lower level lines show that.
Therefore, it could be said that the rate has been relatively stable for the past two or three years.
In regard to the 2% rate, which is what we say is material, we do not decide what is acceptable. It is the European Parliament and the Council which are the discharge authorities and they decide whether they accept that or not. Whether a 5% level is either a good achievement or a bad achievement probably depends on the particular scheme. In other words, some schemes are very difficult to control while other schemes are less difficult to control.
I will move on to the issues that tend to be of more importance in Ireland because we are net receivers. In the rural development area, most issues come from non-compliance with eligibility requirements for particular schemes or projects, especially in regard to agri-environment commitments. When one receives money in the rural development area, there is very often a commitment to particular agricultural practices which have to be met, and there may be specific requirements for investment projects which are sometimes not met or there are procurement rules which are sometimes not met. Some people ask whether that means there is a lot of waste. In fact, in many cases it means that the money is not wasted in that the particular project the money is being paid over for may be carried through, but some of the conditions of that project, for example, that the member state will do X, Y and Z, may not be fully met.
We regularly find that if the member states had used all the information available to them, the error rate could have been maintained at a much lower rate - in theory, at 2% instead of at 6.7%. In practice, that would probably be very difficult to achieve but, nonetheless, it does show there is a scope for improvement at the member state level.
We are often asked whether this is all about fraud. It is not. Most of the errors we find are mistakes or failures to comply with conditions. We report some 14 suspected fraud cases to OLAF, the European Anti-Fraud Office, every year. In addition to those 14 cases, we would also pass on some cases that are referred to us in error by members of the public which were more appropriate for OLAF. After that, while we keep an eye on them, those cases are really for OLAF to follow up on from that point on, and sometimes also for the national authorities, which might also start a criminal case.
Those are the basics on the annual report. This year, we have been making a real effort to produce some other products. The year 2013 was the end of a seven-year programme period so we were trying to do a little bit more strategic thinking. We produced three or four projects this year that are aimed at looking back over the past few years and looking into the future with regard to what ought to be addressed by policymakers and what might be useful to policymakers from our work, by bringing together various aspects of our work.
Two of these products are called landscape reviews, which are overview studies that are not audits but are based on the experience and evidence we have collected in the course of audit work. The first of these, for which I was the reporting member, concerns accountability and public audit arrangements. In other words, we looked at the way the European Union accounts for its spending and activities, whether that meets reasonable standards and also whether the audit arrangements in place are reasonable. It turns out this is quite a big question.
In a way the system is quite simple, the European Commission spends most of the money and accounts for its activities to the European Parliament and Council, and the European Court of Auditors steps in to inform the process with our studies and work. It should be relatively simple, but although the European Commission is the principal spender, many bodies use European money and European legal frameworks to progress the European agenda. Approximately 40 separate agencies, banks and funds, including the European Investment Bank, the European Investment Fund, the ECB and the Court of Auditors, and the European Court of Justice spend European money.
Much of the European effort is done in partnership, with many types of international bodies or through PPP arrangements. A total of 80% of the spend is managed through national, regional and local authorities. The beneficiaries themselves have reporting obligations. I believe there are 12 million farmers and €8 million for the Common Agricultural Policy alone. The number of people who must account for their activities with European money is pretty substantial. The number of people to whom they must account is also substantial. We have 750 MEPs and ten different configurations of the European Council. There are also obligations to be accountable to national parliaments and we are all supposed to account to our people, who amount to 500 million. As with everything else, there are quite a few auditors in the mix, including ourselves and national audit officers. Some of the institutions have their own audit boards and committees or hire private external auditors and the Commission has internal auditors. There is a lot going on in this.
European Union accountability is itself a complex and very large industry. It would be no surprise to hear there are gaps and overlaps in the system. Many of these come from how the work of the EU is done. The EU co-ordinates activities happening at member state level, such as the Lisbon agenda and Europe 2020. Many of the actions under these are supposed to happen at member state level but the co-ordination and initiative is at European level. How does one account for this and who audits it? It is very fragmented. Similarly we have arrangements whereby some member states are involved and others are not, and Schengen and the eurozone are classic examples. Not all member states are involved, but the eurozone institutions go to the European Parliament to account for themselves. Many MEPs are not even in the eurozone or Schengen area. It creates a certain amount of complication. One can say it is fine and it works, but in the past year ten or 11 Ministers from various member states have said that perhaps eurozone accountability should be to a subset of the European Parliament. It sounds like it would be very difficult to organise, but the question is out there in the ether.
As I stated, much work is done through partnerships, through PPPs and with international institutions. The problem here is that audit tends to stop at the point where the funds are paid over to the project, but the partnership continues and does its work and it may not be as accountable to the European polity as if the Commission or a member state were spending the funds directly. There is a need, especially now with the big Juncker initiative, to ask whether, if we are to have these big partnerships, we will have ways in which parliaments can scrutinise them, and not necessarily just the European Parliament.
In the European Union institutional set-up there are inconsistencies and various levels of audit and parliamentary scrutiny according to the bodies. The ECB and EIB each have different arrangements based on their particular nature. The EIB the accounts to the European Parliament but does not have a formal obligation to do so.
However, it may not in all cases consider that it has an obligation to account nationally. Some agencies have audit arrangements that are different because they have their own cashflows and so forth. Those inconsistencies are not wrong but their continued existence ought to be at least considered and justified.
A big problem for audit and accountability, as we have seen, is that there are often errors and weaknesses in front-line governance of the moneys. If the governance is not right then obviously the information flow backwards will not be correct so there is an accountability deficit.
A lot of scrutiny and audit is about following the money which is reasonable but the impact of the EU is, very often, not about money at all but regulation, legislation, co-operation and so forth. All of those things are not easily audited or accounted for.
The system has got even more complicated with the financial crisis. We have more new bodies and structures with different arrangements, some of them outside the European Union framework altogether like the ESM. There are new uses being made of existing structures and new sets of rules. The public perception of the EU systems is damaged and is in need of repair.
Since national parliaments, European parliamentary scrutiny, national auditors and European auditors are all in this mix then there may be a need for at least a consideration of whether there should be more collaboration between those bodies. We need more consistent arrangements and where there are inconsistencies they ought to be justifiable. We need better member state level scrutiny to ensure that governance is done well close to the point where the money is spent. We need a better focus on results for the EU spend. That is a job for the auditors to work together to reduce the level of duplication of audit work. I mention some of that in part because the committee's work programme includes looking at the accountability of some of these EU institutions. We have done some work on the subject and it might be of some use to the committee. We might be able to guide the committee as to some of our sources if that is also of use.
One of my colleagues, along with a team, has done a landscape review on the risk framework for the financial management of the EU budget. He is looking at what are the big drivers of risks to the financial management. It is not that risks are being unnecessarily entered into, it is that in every financial system there is a set of risks which ought to be addressed and considered. Based on our audit work of the past several years, we have produced a survey of risks for financial management. The work provides a high level overview and these four risks, which Members can see before them, are the four key aspects. The document goes through each of the policy areas of the European Union spend and in the case of each of those policy areas it examines what are the key issues that might arise.
The project amounts to a financial management risk register for the EU which ought to act as an agenda for action for policy makers for the next several years. As legislation is being prepared and as the mid-term review of the next financial framework arises, policy makers should be able to take account of this very extensive document in order to guide their work to improve the governance systems.
Some of the factors leading to risks, eligibility rules and other conditions for receiving EU support are often not applied correctly. A huge issue is that public procurement rules and procedures are not applied correctly.
European public procurement systems are a terrible nuisance. They are complicated and it is sometimes difficult for bodies which are spending EU money to apply them. On the other hand, they serve a particular purpose, namely, to ensure that the free market operates, that national discrimination does not occur, that there is no inappropriate discrimination between the large and the small, and that there is no collusion on practices. If one stated that 25,000 bodies were engaged in applying these public procurement practices, one would reach the conclusion that the system is very complex. The number of organisations involved is not 25,000, it is actually 250,000. This means that literally millions of public procurement processes, which involve the use of EU money, are in train each year. The capacity for a system as complex as this to get things wrong is, therefore, large. However, getting it right also becomes a very important mechanism for driving the Single Market.
We discuss in our document to quite a degree the capacity of member state authorities to manage and spend EU moneys, and we also refer to the impact of the EU's budget on activities, cashflows and the commitments that are outstanding. It is a 100-page document and it would take some time to go through it. I do not plan to take the committee through it. However, I suggest that members take the opportunity to peruse it because they might find some matters of interest to them. The other document we provided contains a few tables and interesting facts at the end but I do not believe members need to read them for the moment.
The graph on slide 6 of the PowerPoint presentation refers to the error rate from 2007 onward. It appears the rate is holding steady at approximately 5%, albeit it has risen slightly in four of the past five years. However, it falls within the margin for error. Are there sufficient mechanisms in place to force a reduction in the error rate? What is outlined is not a great result. One of the purposes of measurement is to try to force improvements and drive the rate downward. I previously worked in the private sector and I would have expected that, in light of the amount of monitoring taking place, we would have been able to drive down the error rate. I do not think the result is brilliant. Is Mr. Cardiff of the view that achieving a better result would prove too costly? The law of diminishing returns can apply. Are we just going to be obliged to be satisfied with a figure of 5% or does Mr. Cardiff believe that member states can do more? Is there a need to use more carrots and sticks? Is it the case that the system is too complex and that achieving a better result would just prove too costly?
Mr. Kevin Cardiff:
There are diminishing returns and the control system is very expensive. Within the existing control system, the auditors who do the work find errors which ought to have been noticed by the national authorities when they were making their inspections. There is considerable room for improvement simply by means of a greater amount of attentiveness at member state level. I do not wish to oversimplify matters because it is not as easy as that. The auditors who do the work find opportunities that were missed in the context of keeping the rate down. We say that the error is material if it reaches 2%. As already stated, 2% is not an acceptability threshold. Rather, it is a materiality threshold - it is big enough to be of importance and to be noted. There is a mix of issues to be considered. There is a possibility that member states could - in some cases, they should - improve their systems and their levels of attentiveness.
Sometimes we say we need more control, but we also say we need more simplicity in the systems, because some of the errors arise from complexity. They do not all arise from breaches of EU rules. Some arise from breaches of national rules, because the EU rule is that one must also comply with national environmental standards, for example, so one might be meeting the EU regulation but not meeting the national standard and still be in error. A combination of looking at the simplicity of the schemes, improving the governance at the national level and greater attentiveness could drive it down somewhat. Whether it could be reduced to 2%, I do not know, but it could certainly be reduced.
I welcome the witnesses. The report is not country-specific and it is general under the different headings of expenditure, but would Mr. Cardiff respond to what is said to us at all our respective advice clinics and when we meet people on the street - that Ireland is far too compliant and we are far too much the good boy of Europe, that we are the best pupil in the class, to the detriment of our people and their interests, and that we over-adhere to rules and are overly oppressed by them? Could he respond to that?
In a similar vein, Mr. Cardiff said the over-declaration of land area is the most frequent error. I find in my clinic work that many farmers experience huge hardship in the area of maps. My experience from clinic work - I do not know if this is replicated in other agricultural constituencies - is that the farmers produce their maps in good faith, as per their own understanding of their holdings, and because of something from the digitised maps or whatever, they are alleged to be non-compliant, to have over-declared, perhaps because of a bog bank or old land ownership structures. It causes immense hardship for a number of individuals and we spend a great deal of time unravelling this for people in our constituency office. I presume that if we do this, so do many agricultural planners and professional people. I would like Mr. Cardiff's response to that.
There is another issue around procurement. I would be interested if Mr. Cardiff would elaborate on what he means by non-compliance in the area of procurement. An issue that affects a Border constituency in a big way is that many small jobs up our way in Cavan, Monaghan and along the Border must, under strict interpretation of EU laws, go to open tender, which means they must be cross-national. This means they must have tenders from Northern Ireland, and because of various considerations, such as wages, social welfare and other matters, it is possible for many small contractors on the northern side of the Border to do jobs much more cheaply in the Republic. Consequently, under EU regulations and as per the rules, they get the contracts. Is it the case that derogations are given in other states for small contracts and for a situation like ours? Is there potential for our Government to seek derogations for contracts under a certain level from the rule of international tendering or procurement? If there is not such a potential, am I wrong in thinking that it happens in other countries? It has been said to me - and truthfully I do not have the detail and I would be interested in Mr. Cardiff's response - that in France, for example, and other countries, the state has negotiated a situation where public procurements up to a certain value can be domestically sourced within EU law, by virtue of a concession granted.
From my practical interaction with the agricultural spend, I find that farmers go through awful hardship around the maps issue - the digitisation of maps, the lands, occasionally bog banks, old rights of way, etc. - and it costs them a great deal of angst and professional fees to sort it out. Sometimes the fees are a high proportion of the grant in the first case.
My second issue is around procurement in a Border area, where people across the Border in Northern Ireland can get a small job in the Republic of Ireland. They may have cheaper labour, there are all sorts of issues around social welfare and the black market economy, etc., which would be a breach of procurement, but a number of issues arise that might make it easy for competitors to come in and get a contract in the Republic. Many small contractors in my Border constituency of Cavan-Monaghan, and I presume also in Donegal and Louth, are greatly hampered by the rule that dictates that procurement must be offered into Northern Ireland. Is there potential for a derogation for a certain level of contract? I would be interested in Mr. Cardiff's response to all of that.
To follow on, we in urban Ireland, particularly in Dublin, have an acute interest in agricultural issues, given the importance of the agricultural sector and the history of abuses within this sector. We would be extremely disturbed that yet again in the reports we see of, for example, farmers claiming ownership of more land than they possess.
Let me continue. I read in the report that perhaps they are reporting scrubland as viable agricultural land, for example. The first question, which has been provoked by the previous speaker from me, as an urban representative, is whether Mr. Cardiff thinks there is a culture of defrauding the EU in the field of agriculture.
-----that there is a huge amount - there has been in the past, although hopefully it will not continue - of movement of cattle illegally across various landmasses, switching and cutting, or whatever they do, with the ear tags on sheep or cattle, for which Ireland must be infamous? To ask, therefore, have-----
Can Mr. Cardiff give us an idea of who might be the five worst offenders in fraudulent activity? Can he reassure me that any overpayments that are not properly obtained are recouped by the Commission?
We have association agreements and regional partnerships with aspiring EU members like Ukraine, Moldova and Georgia. We also have the Eastern Partnership. Does the court monitor the EU funding that will go to these countries prior to their accession?
I will conclude by thanking the witnesses. I found their documentation fascinatingly interesting. I would like to hear their opinions on whether my statements about the removal of ear tags are factual. We are talking about analysing this activity. Are the witnesses happy that the Commission and the member states are taking a sufficient interest in the findings and acting on them?
Before I call Deputy Durkan, I would like to assure Deputy O'Reilly that I will allow him back in after we have heard from our guests. Sectoral committees are also able to invite in the court of auditors if they want to talk about specific issues such as agriculture, transport or expenditure. I am sure time could be provided for a more detailed discussion than we are having in the limited time available to us during today's meeting. We still have a little time left. If details on any particular sector are needed, they can be dealt with by the sectoral committee.
I thank our guests. I apologise for having to absent myself. I was trying to cover two headings at the same time. It is a very difficult thing to do. Those of us who are familiar with urban and rural areas would always be quick to point out that the qualification guidelines for European-based or European-assisted payments to farmers or anybody else are very rigid. They are much more rigid than they were. It makes great copy to put out the word in some quarters that there is huge scope for abuse in a particular area. It suffices to say that everything is now guided by satellite. All measurements are governed by satellite. On my way in this morning, I saw one of these mapping planes overhead. There is a revision taking place at present. It comes down to the last 5 ft. or 10 ft. It is even closer than that. They are down to the last foot. The same grids are used for sowing corn, cereals and all this kind of stuff. It is unbelievably minute in terms of its determination of area and space. The sowing of corn and cereal is done with the assistance of satellites at present. All one has to do is follow the GPS map and away one goes.
The degree to which severe penalties are applied to the overlooking of guidelines, which could be accidental or deliberate, is another issue. No really fair method of assessing why they were overlooked has been identified. The penalties are very severe. In some cases, a penalty of three years of non-payment or non-qualification can be applied. My view is that this system is overly bureaucratised at present. Simplicity has gone out the window for a long time. With modern technology, it should not be as difficult to deal with areas as it was in the past. The farmer does not need to be the owner of the property. He is quite entitled to the same thing if he has the property leased. If one sows a garden on the corner of the property one has leased, that will be spotted by the aerial sector. The general rule is that the farmer, businessperson or whoever he is should over-estimate and err on the side of safety in order to ensure he is covered if he digs up a cabbage plot or something and takes it out of the area aid area and he will not be penalised for loss of supports over a wide area. We spoke before the meeting started about the protection of rural Ireland.
We spoke about irrigation, drainage, flood plains and all this kind of stuff. We now live in a time when it is a sacrilege to drain areas of wetlands on the basis that some little slug who is living there and worming his way into infinity needs to be protected at all costs. Some years ago, €20 million had to be spent to divert a motorway after one of these slugs was discovered. His name was vertigo angustior.
It is just about to become massively apparent.
I am talking about waste, overlapping and duplication. To what extent has the court seen such situations? How does it examine and deal with them? My colleagues have rightly referred to what happens in the agriculture sector. How we can eliminate the issuing by one Department of a directive that is in violation of another Department's objectives, for want of a better description? If the two of them are in conflict with each other, the only way this can be resolved, even if it leads to massive losses, is to get massive input from legal experts and bring all kinds of consultants on board.
I asked earlier for an identification of the issues that create Euroscepticism. What are the issues that create Euroscepticism in this country? The one that comes immediately to mind is the habitats directive. The issue of turf cutting was a major issue in the most recent European elections. It does not affect urban areas, but it certainly affected vast tracts of rural areas. Aircraft were sent to monitor the activities of some guy who was cutting turf in a small area where his grandfather and his grandfather's grandfather had cut turf previously. To my mind, it is utterly and totally ridiculous for that kind of thing to happen. It has to be possible to find an alternative way of doing things, other than by spending money on heavy-handed activity to ensure a directive is complied with. If the directive cannot be complied with, it should not be there in the first place. The degree to which we contribute to the debate beforehand is limited to say the least. We do not normally get a chance to contribute. When I was serving as Chairman of this committee, I was told at a meeting in Brussels by a number of people that they represented millions of people all over Europe. None of them were politicians at all. They had no such function at all. They were never elected by anybody anywhere.
They were consultants, experts and scientists, etc. All of that must be provided for. I am concerned about the degree of duplication and the cost involved. The famous case of the hen harrier would be another example. The designation of special areas of conservation certainly caused the generation of a great deal of antipathy towards Europe, towards politics in general and towards the European institutions.
I would like to make a final point in this whole area. If we do not identify the issues that are causing antipathy towards Europe, we are walking lemming-like towards the cliffs. In such circumstances, we will not solve our problems here or across Europe. It is up to ourselves. Simplification is one of the issues we must consider. Reason is another. I will give a classical example of a contradiction we must not forget. In order to qualify for a particular payment in some special areas of conservation, one can get a grant for fencing from the relevant Government Department. Under another directive, one is not allowed to create a fence in the same area. One cannot create a fence and, at the same time, one must create a fence and one gets a grant to provide the fencing necessary to keep livestock in off the roads and the special areas. It is utterly crazy when we go down that road. Large columns of what we are doing are totally and absolutely in conflict with itself.
Mr. Kevin Cardiff:
I will run through the questions in order. I was asked whether the schemes are overly complicated. We think they are. That is what we are saying. At other times, we point out that certain schemes are capable of being abused and therefore require extra complications here and there. As a general principle, the European Court of Auditors regularly suggests that simplification would lead to less error.
On the area of maps, our job is to indicate problems and maps are used by all the control systems, both in terms of deciding how much a person can claim but also in terms of deciding when something has been over-claimed. Of course, while it is a problem, I do not know whether we could manage without them at any level of the control system, whether it is the European Court of Auditors or the Department of Agriculture, Food and the Marine. At least, as they improve, we will have the benefit of some additional precision, as Deputy Durkan said.
On the question of whether we are worse or better than anybody else, we have produced some national data this year to cover the 2007-13 period. We work on a sample basis and small countries get sampled less, so we do not have enough information on Ireland to come to definitive conclusions. However, while there is no evidence to say we are wonderful, nor is there anything to suggest we are a lot worse than anybody else. We are not immune from errors, at the least. As I said earlier, we reported 14 suspected cases of fraud to OLAF this year, not 100, 200 or 300. Our auditors are not arriving at the farm gate, the factory gate or the sites of European spending and saying there is a lot of clear, out-and-out fraud afoot. While some of the errors are egregious, and are out-and-out, pull-the-other-one stuff, most of the errors we find are smallish relative to the spend involved. Of course, with small things, it is always very difficult to say whether it is deliberate or not. Perhaps I have solved the urban-rural divide by saying there is a little truth in everything but that we should not exaggerate this.
On the culture in existence in agriculture, I am from Santry and I do not know. We certainly see some small number of cases in every country across Europe that suggest people are simply not attending to their obligations, but not all by any means. The auditors on the ground do come across the cases that other people were talking about, where people simply under-claim to avoid getting it wrong. Of course, we never report an under-claim.
Are over-payments recouped by the Commission? Yes, they are, and also by the member state. One of the issues is that if something is caught late - for example, if an over-claim is noticed four or five years on - is one statute-barred from chasing back? By the time it is found, investigated, reported to the Commission and brought back, it can take quite a long time. It is clear that member states in general do not recoup anything like the amount the Commission might demand from them as a recovery but they certainly do have a practice of going back and doing that.
With regard to Ukraine, Moldova and so forth, we have a division of the court that looks at external actions, and it does go into those places where European money is spent. There is an audit ongoing on Ukraine and some of my colleagues came back two weeks ago and hung up their flak jackets after a visit to Afghanistan. Where European money is spent, one might find a Court of Auditors person there, unless it is really very hot, in which case discretion might be the better part.
I was asked whether member states and the Commission take sufficient interest in our findings. We live in hope. The world is not changing as rapidly as we would have liked, so the answer may be that things could be better. However, we find that the Commission at least makes an effort to address our recommendations, and it is usually a fairly honest effort, even if it does not always go as far as we would have hoped. An auditor's job is a dream one in the sense that one can make all the recommendations one likes; one does not have to be responsible for carrying them out. It is perhaps a bit hard on the Commission sometimes because our job is to criticise, not to implement.
For example, we published a report yesterday about good practice. We went looking for good practice in countries in terms of ensuring the reasonableness of costs in rural development with a view to helping the Commission and the member states to identify what other countries do that works and to spread that message around. In a sense, we have access rights that others do not have so that was an attempt to be positive.
On the question of what issues create euroscepticism in Ireland, such as the habitats directive, the lack of accountability is one issue we are trying to address. I have relatives in the same part of the country as the Deputy's slug, or was it a snail?
Mr. Kevin Cardiff:
On the issue of NGOs pretending to represent loads of people, we have not done an audit on that. However, I was at a conference some six months ago where members of the European Parliament were discussing precisely that issue of how representative these people are, whether they are too influential or not influential enough, and whether the Commission gives them too much money in order to lobby. Those kinds of questions are at least in the European Parliament if not in our organisation.
Mr. Kevin Cardiff:
The Commission gives them money and they lobby the Commission. The Commission says that these groups represent people and topics that would not otherwise get represented and, if it did not, industry would have too much of a say in things.
With regard to internal conflicts, we do what we call special reports or performance reports where we pick a topic and we look through how European policy works in that area. We did one recently on the interaction of water policy in the environmental part of the Commission and the Common Agricultural Policy, and whether the two are well aligned or not. The answer is that the situation could clearly be better. A full list of these special reports is available. More than occasionally, we look at how different types of EU policy are interacting with each other to find whether there are these overlaps and so forth. It is probably inevitable in a very complex world that these issues will sometimes arise. I do not know about the specific issue of the fencing except that, if people are in a special area of conservation, they are probably not allowed a fence, even if they can get a grant for it.
That deals with most of the questions. I might ask Mr. Fennessy to deal with the issue of public procurement.
Mr. Ned Fennessy:
First, on the Chairman's comment on controllability and so forth, we were asked whether 5% is a reasonable achievement and whether 2% is impossible. There has been a lot of debate over time about the tolerable rate of error. In dealing with that, it was proposed that, for certain policy areas, the tolerable rate of error should be higher, perhaps up to 5%. The consensus was that this was a licence to tolerate too much error, so it was rejected at the time.
With regard to public procurement, while I am not expert in the domain, from my experience, the requirements are graduated depending on the amount of money involved. For instance, if it is less than €50,000, the obligations are a lot less than if it is more. The business of opening up the tender procedure to a wider audience is very much dependent on the amounts involved. The Deputy made a comment about some possible derogations for France. I am not aware of any such derogations for any individual country, and I would be surprised if that were the case.
Maybe there is a derogation in the sense that not everybody speaks French, so it is a natural constraint. I would also say that price is only one element in public procurement. It does not necessarily have to be the primordial element. It does not have to be the cheapest price that prevails. If there is reason to justify another tender it is perfectly feasible and correct to do so.
I welcome Mr. Cardiff and the officials. Apologies I am late, I was at another committee meeting and missed the witnesses' presentation. I head the end of the interaction between the two colleagues concerning the agricultural side of things and I know the Department of Agriculture has received notice of a fine of €180 million which they actively challenging. They are confident they will be able to get that reduced.
As Deputy Durkan has explained, there have been huge inroads made on satellite inspections. Because of the increasing use of technology over the last years, retrospective penalties have been applied to farmers. One might say this is somewhat unfair, but the EU has stated that this money has gone out and must be recouped. The increased and better use of technology has enabled these penalties to be applied. A lot of this comes across my desk as a rural Deputy and often it is a case of farmers applying for the same thing every year and not changing it rather than intending to apply for things erroneously. They have declared the same areas of land every year without updating them, rather than going out of their way to do something incorrectly. In the future, I imagine, the impact on agricultural payments will be reduced as the technology improves because there will be certainty about what farmers can apply for.
Regarding the rural development side of things, I imagine the leader programme is a big part of that. Is there any scrutiny of it or of its comparable programmes across the EU? I know in some cases there are groups applying for monies. I would imagine there have been very few problems but I have come across some issues. For example, a group has maybe been approved for funding by the Department, and has not done anything wrong, but subsequently through audits and investigations the Department decides they should not have been approved under the rules. The leader company, for example, may have sanctioned funding and misinterpreted the rules in concluding that it fell under a category which was eligible for funding. Is that something the witnesses have come across?
I am sorry my two colleagues have left; they represent rural Ireland. I want to admire the farming community, the farmers who farm properly and in accordance with the directives, be it the Habitat Directive or whatever, because biodiversity is a hugely important thing. Deputy Durkan came across, sadly, with a eurosceptic position on biodiversity and habitat directives. He insulted----
I am concluding now. He insulted the snails by calling them slugs, but both have a very important role to play in biodiversity. I praise the directives that have now managed to allow us to reintroduce species that had been eradicated in the past by incorrect application of agricultural methods. I praise the grant assistance to the farming community to reintroduce the corncrakes. I praise the reintroduction of the hen harriers in Wicklow, and the eagles we bring in from Scotland. However, the negative of that is that we are losing disproportionate numbers of our wildlife by incorrect agricultural processes, i.e. the cyanide poisoning of carcasses to kill off foxes, which in turn is killing off these rare species.
In the past, DDT was one of the major agricultural killers. There is a balance to be struck. Farmers have got to be praised when they are operating to the rules. Farmers who put the cyanide on the carcasses, which is illegal, should never be praised.
I appreciate that. I welcome Mr. Cardiff, Ms Kerrigan and Mr. Fennessy to our meeting. I get very little representation from people who have difficulties. Farmers are terribly compliant and have always shown great respect for the European Union. We have our own organic farm so I know. I suppose there is really, quite frankly, an over-supervision of Irish farming from the Department's point of view. Maybe at times they just want to send people out. Farmers love their land and their stock.
Are the witnesses averse to anyone making representations to them if there are problems for any particular individual, or are they completely aloof and not responsive to anyone that might have a very good case? I have not got one by the way, I am just wondering if they would respond if they saw a case and saw that it concerned an honest, decent genuine person living on a small farm. I fill out some of these forms, Chairman, and you would not believe them. They were unreal.
They are complex and too bureaucratic. This brother and sister would have very little involvement and they are really scared. Simplification is a great thing and maybe the witnesses could bring that about too when they are looking at the whole system. Finally, I hope they will be invited back to the Oireachtas shortly in the context of the banking inquiry, which is starting tomorrow. Mr. Cardiff has a lot of important knowledge that I think he would like to share with the members of that committee. I am not a member but I am sure he will be more than welcome to come back because they are carrying out a very crucial task.
Mr. Kevin Cardiff:
That would be a bonus. Regarding leader programmes, we did an audit on it some years ago now. In fact it was picked up on a little in debate here. We were quite positive about the community nature of how leaders worked here but there were some negatives in the leader system more generally. We can certainly send that to Deputy Kyne, though it is now a little bit out of date.
On the question of responding to individual representations, there is not much point because we do not audit the farmer. We might turn up at a farm but we are really auditing the member state, the Commission and the work they do. We never impose a penalty. In our training we do make a certain amount of effort to ensure that when auditors turn up at a farm, they understand that this is a stress and a strain on the farmer concerned and that they must deal properly, respectfully and reasonably with people. We would expect the same standards from other auditors. It is a problem for us that when we turn up at a farm there may be two of us and the paying agencies or the Department of Agriculture might come along as well. In some countries, the national audit office would come along as well, so there might be ten people turning up because we have turned up.
Mr. Kevin Cardiff:
Or even more sometimes. We audit the farm but we are interested in the process and the control, not the individual farmer. That is not our focus. Since we are not in control of any of the penalties there is no real point representing to us.
That was with regard to the various bio-directives involved.
We spoke about the banking crisis. On whether people should have known a banking crisis was looming, we know that globally there is strong potential for an environmental crisis in the next ten, 20 or 30 years. The European Union and everybody else should at least be engaged on that issue which we should not avoid because it is unpleasant to deal with. The question of how one deals with it is much more complex and, of course, as auditors, when we are compiling special reports in particular, we look at how they will be implemented. When somebody has received funding on condition that some environmental measure will be adhered to, we check that there is cross-compliance. That is part of the audit process.
That brings this session to a conclusion. We have a technical issue to deal with before our next session. I thank Mr. Cardiff, Mr. Fennessy and Ms Kerrigan for answering our questions. We look forward to hearing from them again next year and I wish them well in their work.