Mr. Kevin Cardiff:

On Brexit, the European Court of Auditors is not the first in line for information on the plans for the future. While we will have a number of roles, we do not yet have much information. An audit is a verification of something that has happened or even a negotiation. However, since these things have not yet happened, we have not yet acted.

We can imagine two or three different roles the Court of Auditors may have to play. First, when legislation is being produced, we may be asked to comment on it, which would allow us to bring our understanding of the EU budget into play. The second role is that when negotiations are completed and moneys have to change hands, I am sure we will audit the transactions and calculations involved and the way in which the process operates. We hope we will continue to audit all EU transactions where they remain EU moneys. Even post-Brexit, we will have a role if there are EU moneys at stake or EU moneys are being spent. If eligible criteria that were subject to a timeframe, in other words, cases where moneys were paid in year one but one cannot see whether they were properly utilised until year two or three for whatever reason, we would expect to be still involved at that stage, unless some agreement is made to the contrary.

We have done audits in recent years, in Turkey, in Afghanistan and in all sorts of places where EU funding is spent. For us, it is not a question of whether a country is in the EU. It is a question of whether the EU funding is being spent that applies. Naturally, within the EU constitutes most, but not necessarily all. There is no particular reason we should cease auditing EU moneys spent in the UK until those programmes have expired in terms of eligibility criteria, etc. If, for example, EU money is spent in 2019, and Brexit was to be in 2020, we would expect to be auditing UK transactions in 2020, barring some global agreement to the contrary.

We are not yet there on Brexit. Nobody is. No one has told us - no one has told anybody - what are the negotiating positions. In fact, in formal terms, there has not yet even been a reference under Article 50. We are not in a position to say precisely what we will do but we expect to be involved in the audit of the financial transactions involved and we hope or expect to be asked to give opinions on key financial aspects of any legislation that is involved. I was asked the legal position post-Article 50 and whether we will continue to audit. I have just answered that. We should, unless there is some global arrangement that says this is no longer regarded as EU money in return for something else happening.

On the special reports, I was asked how do we assess a group of member states to be looked at. For the annual report, we use a random sampling approach. It has to be purely representative of a particular type of spending on that basis. For the special reports, we make assessments on a judgment basis. Usually, for a special report, what we look at is, for example, which countries use a particular programme most. There is not much point in looking at doing an aquaculture audit in Germany, for example, where there is not much aquaculture. In Romania, in fact, there is a lot because of the way rivers are used for carp farms. In some cases we go where the funding is spent most but then we adjust that. We might go to a country that has particularly good systems for control so that we can see what the messages from those good systems are and then see how those systems might have helped in a country with what we expect might be poorer controls and sometimes we are surprised. Sometimes the countries we expect to have the better controls are not exactly the ones that we have picked out.

For each audit, we might typically visit six or eight countries at the top. In effect, that means instead of doing one audit we are doing six or eight audits and it becomes a complex product. As for why we do not do every country, the committee can imagine that with 28 countries we have to cover 23 or 24 different languages. When our auditors arrive on the spot, they do not only have to speak in some common language, for example, they do not only have to speak to officials in English who speak English. They have to be able to read the national legislation in the national official languages. They have to be able to respond in those official languages. It is just too much to cover every country and we try to get a grouping of countries that will represent the best chance of finding the lessons that we feel are most likely to be needed in that particular audit.

On Deputy Durkan's questions on error reductions etc., it is good that it is reducing. As for whether there are particular countries that are prone to shortcomings, for our annual report, because we are sampling across the EU, we do not get a sufficiently large random sample for each member state. For Ireland, there are only eight transactions, and as I said, one can be happy that there are no errors in Ireland but one cannot say it is representative because eight transactions out of all the Irish transactions does not give one a sufficient basis for saying so, whereas 1,200 transactions for the whole of the EU gives one reasonable grounds for saying that one has a representative sample of EU transactions. However, the Commission has to make a different set of distinctions because it has to decide to whom to continue making payments and from time to time the Commission blocks payments for a period, makes estimates of errors, etc. For example, one or two countries in the eastern side of the EU had payments blocked for quite a long period of months. I do not have them to hand but if members wish, we could get for the committee a list of the Commission's assessment of who to block at different times and its assessment of where it should take money back.

One point, to be clear, though, is there is not a single member state where we would generally find that there are no errors. There are one or two very small member states which do not feature much in our samples because they are so small, but everybody that we visit is prone to error. That applies as much to the highly sophisticated very highly developed economies as to those which are more rural. In the past we have found, for example, in agriculture, systems problems in many member states, including the most developed, including in Ireland and in the UK. It is not the case that there is some significant east-west divide with all the errors happening on one side of the economies and not on the other.

In terms of the extent of frauds, we report frauds to OLAF where we are fairly clear that there is a fraudulent activity. From the annual process, we reported 12 this year. We also see potential frauds when we are conducting special reports and other activities and in a typical year, we might send 20 or so to OLAF. It does not suggest that most of the places we audit are engaged in large and obvious frauds. Obviously, where there is a small error, one has to wonder if the error was a beneficiary who was just trying it on a bit and trying to push the envelop a little bit beyond where it should, in other words, a small fraud, or whether this was just an error. Most of the time, we think it is just errors. In terms of significant frauds that need to be reported to the fraud institution, it is 20 or so a year in our estimation. It is not large in numbers. The problem is that, of course, a single fraud could involve a large amount of money, and, even more importantly, that where one has even a small amount of fraud or corruption, it tends to undermine general faith in the process and it is really important that those be squeezed out. In the court, we are looking at how we can address those even more than we do at present and whether there are particular characteristics of systems that are fraud or error-prone so that we can look at the systems and reduce the level of fraud by reducing the level of systemic weakness and that will be a feature of our work in the next year or so.

In terms of audits on programme countries, our audits were of the EU's interaction. We were auditing the EU actions in those countries, not the countries themselves. The Commission would make an assessment of the country. We were looking at its process rather than at the particular country assessment. We did not assess Portugal, for example, for its progress. We assessed the Commission's activities in Portugal. On this particular audit, I was involved in the negotiations on the programme at the other side and I will not comment any further on that particular audit. I was not even the slightest bit involved in the carrying out of that audit. We have fairly strong expectations in the court about avoiding conflict of interest and if the Deputy does not mind, I will not get into the detail. We can arrange for someone to do so, with him or with the committee, if that is okay. It is a matter of propriety.

On the questions of Ms Harkin MEP about whether member states have sufficient information to reduce the level of error, in quite a high number of cases where we find an error we also find that the member state had more information than was used in terms of reducing errors.

It is at least theoretically the case that if member states could use all the information they had, the error rate would sink close to 2%, which would be the material level. There is, of course, a question of the cost-benefit. In some cases, the cost of reducing all errors might be more than the errors cost. However, it is one of the reasons we do not say we are happy with the reduced level of error. It is because we see that there is scope for activity within the existing system without enormous amounts of new controls to reduce the error rate to an even greater extent. It is a matter for the European Parliament and the Council, however, to decide whether they are happy with the error rate. We do not, in the end, give the discharge to the Commission for its activities. That is done by the Parliament and the Council.

It is good to see the error rate starting to reduce again. There had been a couple of years where it was on a slightly upward trend whereas it is now on a slightly downward trend. It is not the case that the European Union budget is organised and run by a bunch of people who do not really care about waste. It is exactly the opposite. The systems are full of intensive controls which are quite costly and which have improved considerably over the years. In the 1990s and in the early 2000s, much of what concerned the European Court of Auditors related to the European Union's accounts and whether they were properly managed and the moneys properly accounted for. We no longer have those concerns because all of those systems have improved. We now make regular recommendations which sometimes relate to member state systems as well as the Commission but it is a system which no longer has the very broad weaknesses we used to find in the 1990s and early 2000s. In other words, it is an improved system albeit at some cost in terms of the cost of systems.

I might have missed a question or two by mistake, but I have tried to address everything. On the number of special reports, there were approximately 30 in 2016 and we expect approximately 30 in 2017. It is a considerable increase in terms of my own experience. When I arrived three years ago, we were doing approximately 15 to 20 per year. We are trying to be more productive. Occasionally the people in the Parliament tell us we are producing too many reports, but Parliament is also reacting by changing the systems for dealing with our reports which we very much appreciate. I ask Mr. Ross to deal with two points I have passed over.