No One in the EU Can Keep Books as Badly as the EU

by Christopher Booker

If it were discovered that our government had given £15 billion a year to an organisation whose auditors had refused to approve its accounts for 12 years in a row, one might expect this to blow up into a scandal to make the Enron affair look petty. A mystery of our time is why there is not more outrage about the accounts of the European Union, to which British taxpayers gave £15 billion in 2005.

Every public company in the EU must present its annual balance sheet according to strict rules, yet the EU itself produces accounts that break all the rules it imposes on everyone else. They don't use double entry bookkeeping: tens of billions of euros float in and out of the books without explanation, and year after year the EU's Court of Auditors refuse to approve the accounts because they are riddled with "material errors" and "irregularities".

Anyone who dares question this shambles is treated with the same distain as the small boy was when he pointed out that the emperor was wearing no clothes. The most famous such whistleblower was Marta Andreasen who, after the corruption scandal that forced the resignation of the entire European Commission in 1999, was made the EU's Chief Accountant. She was the first accountant in the post (her predecessors included an architect and engineer) and she was so appalled by what she found she refused to sign the accounts.

Her reward was to be suspended within weeks by way of a fax from Neil Kinnock, then the commission's vice-president in charge of cleaning up its affairs. Last summer, she was among those invited to give evidence to the House of Lords committee on "the management and audit of EC accounts". She was politely tolerated by a largely Europhile committee, then Lord Kinnock appeared before them to dismiss everything she had said. His picture was so distorted that Mrs Andreasen had to send the committee a whole series of factual corrections.

Someone greatly impressed by Mrs Andreasen was Andrew Hamilton, an Edinburgh accountant who organised two meetings, in Edinburgh and Birmingham , for her to put her case to hundreds of accountants, lawyers and other professionals. They were horrified by her picture of "an Augean stables of untraceable payments and myriad bank accounts with no ascertainable controls or signatories".

Mr Hamilton decided to download the 139 pages of the EC's 2005 accounts and the accompanying 228 pages of the Court of Auditors' report. He found it just as bad as Mrs Andreasen said. Although, with implausible precision, they gave the EC's operating revenue for the year as 107,890,098,56 euros, it was impossible to discover where most of this money had come from or gone to, because the accounts do not use the double-entry system used by every corner shop. They are just a maze of meaningless figures.

For instance, a figure for the EU's "long-term and short-term pre-financing" suddenly goes up from zero to 28 billion euros, without explanation. When on another page, it might seem that this is partly explained by the sudden appearance of a figure of 26 billion euros, under "long-term receivables", this turns out to relate instead to the "EC's long-term pension liability".

It is possible to work out that the average salary of the Commission's 22,657 employees is 159,465 euros (which may account for the rather hefty pension liability - Lord Kinnock alone receives some £175,000 a year for his decade in office). But the accounts do not even provide such basic information as how much each country pays in and takes out.

Even more astonishing than the EU's inability to apply basic accounting rules to itself is it ruthlessness in protecting this corrupt system from investigation. Mrs Andreasen was sacked. Last week in the European Parliament, Ashley Mote, a British MEP, wanted to ask her successor, Brian Gray, some pertinent questions arising from her criticisms. The rest of the committee hastily voted to bring the session to an end.

When Mr Gray was given the job by Lord Kinnock and others, he had previously been finance chief of the directorates for agriculture and regional funding, the two biggest spenders of them all. It seems unlikely that he will want to rock the boat.