New EU financial rule will aid corruption fight

Mandatory disclosure of funds recipients will increase transparency

The financial regulation adopted today by the European Union Council of Ministers will aid the fight against corruption and help prevent the mismanagement of EU taxpayer money by shining light on the recipients of EU structural funds and agricultural support.

“Disclosure of recipients will increase public scrutiny and ensure transparency in the use of taxpayers' money,” said Miklos Marschall, Regional Director for Europe and Central Asia at Transparency International (TI). “This long awaited move to a mandatory disclosure scheme is in the interest of recipients as well as taxpayers. With today’s agreement, the ball is in the member states’ court. Now they must lead by demonstrating compliance with the new regulation.”

He added, “Transparency International has long advocated an EU-wide debarment system and the disclosure of EU fund recipients. Today’s action represents real progress in both fields.”

Disclosure of EU fund recipients

In today’s action, the Council of Ministers adopted a revised financial regulation that establishes rules for spending and control of the more than €100 billion annual EU community budget.

As a result of the new rule, recipients of structural funds and agricultural support will be disclosed beginning in 2008 and 2009, respectively.

Member states have also committed to implement efficient internal control systems and make agreed checks on EU funds under their management. These initiatives are an important step towards more transparent and reliable use of the EU budget.

“With more than 75 percent of the Community budget being distributed by member states, there was an urgent need to improve transparency and control of spending,” Marschall continued. “Now it is a question of implementation, and we will be keeping an eye on this. If properly executed, the revision of the financial regulation will be an important step in the right direction.”

Debarment: good move, more is needed

Until now, when organisations made irregular use of EU funds at the national level this information has not been shared with other member states or with the Commission, though they all manage the Community budget.

With today’s agreement, organisations and companies and other contractors found guilty of misusing EU funds can be prevented from receiving further funds from any part of the EU budget, including from the Commission and other member states.

“Fraudsters will now think twice before cheating the European taxpayer,” says Transparency International’s Revenue Transparency Manager Juanita Olaya.

The database established under the new regulation should be just the first stage of an effective debarment system for the EU. The fact that organisations can continue to get access to other areas of the budget after being convicted of fraud is contradictory. It should be obligatory for authorities to consult the database before awarding a contract, rather than depending on a voluntary system as foreseen in the regulation. “Access is currently restricted to the purchasing institutions that manage the budget, but the database must also be available to the general public,” says Olaya. “Open access is in the companies own interest as it does ensure fairness.”

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