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.