Poor management in a multilevel system rather than corruption is the

insoluble problem with which the EU is confronted. Discuss.

In November 200! the European "ourt of #uditors $E"#% refused to &sign
off' the European Unions accounts for the eleventh year running! with the "ourts
president (urbert )eber stating to *EP's that &the vast ma+ority of the payments
budget was again materially affected by errors of legality and regularity'
$Politics.co.u, 200%. It is clear purely from this statement that the EU! as a whole
has been under heavy criticism for a long time! particularly for its methods of
auditing and controls. Indeed! the E"# have been critical! in particular! for many
years of the European "ommissions practices! but only in the last -0 years has
there been any ,ind of reform $.affan 200/%. )ith this ,ind of mismanagement
e0isting within the EU! issues of corruption and fraud could be considered a
natural conse1uence. If poor controls are in place! it is no wonder that frauds
such as the awarding of four fictitious contracts $and therefore embe22lement of
money% to several companies could occur! as happened during the reign of the
3anter "ommission $*acmullen -444%. (owever! is corruption or fraud the main
problem5 6r is it actually mismanagement within a large bureaucratic system!
with some of its symptoms being cases of corruption and fraud5 7efore we
become too critical though! we should bare in mind that it has been shown by the
"E# that EU funds are not wasted on corruption very often $Peterson -44894%.
Indeed the main problem faced by the EU is perhaps mismanagement. :irstly
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though! it is important to loo, at how it is managed! i.e. what measures e0ist in
the EU for overseeing that the other institutions are doing their +obs effectively
;he EU system has three distinguishable levels< these being the
supranational! national and local levels= the EU implements on all these levels
$.evy 200092-/%. (owever! the main operating level of the EU is that of the
supranational level! where all its institutions are based. ;he three main
institutions are of course the European Parliament $EP%! the European
"ommission and the "ouncil of the European Union. ;he "ommission is
particularly important! as it essentially manages policy and programmes in the
EU. It is within the "ommission that management of the EU! very broadly
spea,ing! occurs. 3ince the "ommission has the main responsibility for Europe!
it itself has to be carefully monitored. ;his is achieved through internal audit
systems and through the annual assessment of the E"#. ;he E"#s audits offer
suggestions and are often critical! as demonstrated by the fact that for many
years the "ommission and E"# did not have a good relationship until really the
3anter "ommission $.affan 200/%. ;he 6mbudsman can also play a critical role!
as he or she can put political pressure on issues of maladministration! i.e.
mismanagement! which he so successfully achieved in 2000 with his creation of
a new European doctrine on &good administrative behaviour' which became
incorporated in the "harter of :undamental >ights $*agnette 200/%.
# final method of control ? accountability which e0ists is that of the &discharge
procedure'! which belongs to the 7udgetary "ontrol "ommittee of the EP. ;his is
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the procedure where the EU budget $which is the responsibility of the
"ommission% is either discharged to the "ommission! or held bac,! and the
decision for this is based on the audits of the E"#! as shown in -44@ when it
held bac, the budget to &encourage' the "ommission to ta,e measures ordered
by the EP $Pu+as 200/%. )ith the E"#! although one would assume the advice
provided would always be acted on by the various institutions! this has shown to
be rarely the case! and only when a particular issue has become one of wider
political importance! i.e. the 3anter "ommission resignation! has the E"# been
listened to $.affan 200/%. 6ne organisation which warrants a mention is that of
the European #nti<:raud 6ffice $6.#:% which investigates alleged fraud and
corruption throughout the EU! and indeed within the institutions. #lthough it has
no power of prosecution! it can launch investigations and provide prosecution
evidence for *ember 3tates $Pu+as 200/%.
It is important we identify these institutions and their interrelationships! as they it
could be said! are responsible for whether good or poor management and
corruption occurs within the EU! and have the power to hold people accountable.
;he sheer number of these institutions also gives rise to the degree of comple0ity
which e0ists in the management structure. )e shall now loo, closer at the
management structure of the EU! and its problems.
;he management structure of the EU has been shown to be 1uite diverse
and fractured. Indeed! .evy has stated that the EU has a comple0 set of
accountability relationships! due to it occupying a status which is not 1uite a
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conventional state or an international organisation $-44A9%. .evy continues
that9
[the EU] suffers from the many of the managerial deficiencies associated with
such organisations. There are multiple actors involved in the management
process located at local, national and supranational levels, divergent
administrative cultures and practices, variable uality of information, records and
capabilities, and an attenuated and unclear system of reporting.!
$.evy -44A9%
;his 1uote identifies clearly why the system of management is diverse and
fractured= multiple actors interacting with each other on varying levels $i.e.
supranational! national ? local% with non<uniform practices trying to mesh
together and wor, efficiently. :or e0ample! in the "ommon #gricultural Policy
$"#P%! it is difficult to reconcile different organisational cultures and traditions in
the management of common programmes= :rance has nine paying agencies for
guarantee e0penditure! the UB has one $.evy -44A9C-%. 3o these different
practices cause problems for evaluation and monitoring! as results from different
*ember 3tates aren't going to fit into simple categories of interpretation $.evy
-44A%. #lso! these complicated management systems are going to cause
problems with auditing< how can an effective audit of EU budget spending be
conducted when *ember 3tates have different administrative practices! variable
1uality of information! records and capabilities as stated before5 ;his point has
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been highlighted many times by the E"#! and .affan $200/% has directly 1uoted
them with this point9
"ea#nesses in accounting systems and procedures mean that information
presented is in some cases incorrect or incomplete. The problems in
management and control systems covering operational e$penditure, both at the
%ommission and in &ember 'tates continue to give rise to a significant
incidence of errors.!
$"ourt of #uditors 20009<C! 1uoted from .affan 200/988/%
;his 1uote also raises relevant points about the "ommission causing problems in
this area! as well as the *ember 3tates! and is the reason why the EU audit has
not been &signed off' for over a decade. 3o the problems of differing practices and
lac, of uniformity! may be considered to be rather insoluble= *ember 3tates
practices are going to be different! because the EU is not a federation. ;his
means the evaluation ? indeed management methods of the various EU
institutions will be irrelevant! as they are more the responsibility of the *ember
3tates than the EU as an organisation. (owever! to understand this problem
better! it is important we briefly identify the way the "ommission in particular runs
its programmes! and how it is structured.
In relation to the organisation structure of the "ommission! its Directorates
Deneral $DD% are hori2ontal to each other! and their responsibilities can overlap!
thus causing a lac, of ,nowing who is responsible for what. $.evy -44A= Nugent
-444%. Indeed! Peterson has stated that9
5
the %ommission is highly fragmented as an institution. The gap is wide
between its administrative (services), or policy*concerned +irectorates ,eneral,
on one hand and the college of %ommissioners and their personal advisors, or
cabinets on the other. +ivisions and -ealousies are rife even within the services,
which often compete with each other for control of the policy agenda.!
$-4489C2%
3o this is one of the reasons of poor management in the EU= the "ommission
itself! which oversees all of this is not perhaps as efficient as it could be. 6ne of
the factors in this is a lac, of resources. :or e0ample! in -44! in DDEE -0
officials were responsible for authorising /C0!000 re1uests for spending in
programmes or pro+ects! in addition to other tas,s such as on the spot controls!
meaning monitoring of pro+ects or programmes was going to be optimal in the
least $.evy 200092-/<-@%. Indeed! if there was more capital available for the
"ommission! it could have further resources and be able to monitor e0penditure
better.
;his problem means that the vast ma+ority of Union activities are regulatory! not
fiscal! in nature $Peterson -4489C@%. #lso that it cannot be directly responsible
for programmes all the time! and has to delegate management to *ember 3tates
at national and local level. (ence this is why! as stated earlier! responsibility for
monitoring is going to be more with the *ember 3tates than with the
"ommission! due to the ma+ority of the "ommissions management of
programmes being of a decentralised or shared nature $.evy 200092-%. Even if
6
the "ommission had better resources! it could not necessarily improve
monitoring systems in *ember 3tates! as it may infringe national sovereignty.
;here is also the problem within the "ommission of its poor internal auditing
system! where practices vary considerably according to both the programme
area $and hence from DD to DD% and *ember 3tate! for e0ample with the "#P
and 3tructural funds $.evy -44A9C2%. ;his means once again that it is highly
difficult for the E"# to do its +ob properly! that is to audit effectively the
"ommissions spending of the EU budget. 3o as well as the monitoring and
evaluation for pro+ects and programmes being a problem for the "ommission!
due to lac, of resources! its internal fragmentation leads to competition rather
than cooperation. ;here is also this problem of a lac, of single coherent audit
system.
:inally! there is the recurring problem of the relationship between the *ember
3tates! the "ommission! and the EU as a whole. ;he *ember 3tates have their
own uni1ue practices as mentioned earlier! ma,ing it difficult for the E"# and the
"ommission to successfully audit and evaluate how money is spent on EU
pro+ects and programmes. #lso! as stated by .evy! the "ommission and *ember
3tates blame each other for poor practices in evaluation $-44A9C@%. 7ut are these
problems in the "ommission! and the EU as a whole solvable5
Peterson $-448% has suggested that the main problem with the structure of
the EU is that 1uite simply! as a result of pooled sovereignty! we have a situation
of divided accountability! and this is going to ma,e it very difficult to solve. #lso as
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the "ommission are reliant on *ember 3tates to run most programmes! when
*ember 3tates themselves sometimes have poor management systems! this
leads to further problems. ;hese are not the fault of the "ommission as if it had
the resources it would do the +ob itself $.evy 2000922%.
)ith these ,inds of basic problems! reforms have and are being attempted. ;he
"ommission is currently attempting to standardise its systems! and has been
streamlining its DDs! while also trying to improve partnership relations between
itself and *ember 3tates $.evy 2000922C<28%. ;his can be seen with the
reorganisation of the DDs by the Prodi "ommission $Nugent -4449/00<0-%.
3o these poor networ,s! poor information and high conflict need to be eliminated
before there can be effective evaluation and audit $.evy -44A9C4%. 7ut with
*ember 3tates not been willing at all to have much encroachment on their
sovereignty! how can these problems be eliminated5 ;he "ommission is unli,ely
to have a massive increase in its resources so therefore monitoring cannot be
dramatically improved! and with *ember 3tates been reluctant to change their
systems anyway! the li,elihood of eliminating poor management is 1uite unli,ely.
6nly if the EU becomes an established federation could these management
problems be truly eliminated! but this is unli,ely for some years. (owever! is poor
management more of an insoluble problem then corruption5 ;o answer this
1uestion fully we need to loo, at corruption in the EU as a whole.
8
:irst! corruption has been described as a far less endemic! e0pensive and
serious problem than fraud in the EU $Peterson -4489C@%. If we use Peterson's
definition! corruption is9
.ehaviour by a public servant, whether elected or appointed, which involves a
deviation from his or her formal duties because of reasons of personal gain.!
$-4489C0%
#s he further states! the EU is a relatively clean and corruption free system of
government $-4489C0%. "orruption is combated through the audit process and
the $1uestionable% systems of management in the EU! and this has wor,ed to a
degree. Indeed! corruption has being identified using these systems! but as
illustrated by the 3anter "ommission scandal! when internal warning signals
were constantly ignored and responses slow $*acmillan -4449200%! it doesn't
mean the systems necessarily wor,. It is important we briefly consider the few
,nown cases of corruption that have occurred! using the informative e0ample of
the 3anter "ommission scandal.
;he scandal involved several cases of deviation from formal duties for
personal gain= for e0ample! it was shown that the senior "ommission official with
the ran, of (ead of Unit! who was directly in charge of the ;ourism unit! used his
position to gain contracts with companies which would benefit him! he being a
shareholder or manager within those companies $*acmullen -4449-44%. ;here
was of course also Edith "resson! a "ommissioner! whom infamously used her
position to appoint a friend as a &visiting scientist'! who helped with her duties by
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being mayor of a :rench town $which in itself was a conflict of interest%
$-4449200%. 6verall though! the cases of corruption only involved a few officials
and so was not particularly widespread overall $-444920-%= in fact! these few
cases do not ma,e the EU seem that corrupt in reality. (owever these cases did
damage the credibility and standing of the "ommission in the eyes of the
European electorate $-444920@%.
7ut importantly! we have to consider how this corruption emerged. In other
words! how was it allowed to happen5 #s indicated earlier! poor controls have
allowed this to happen< Pu+as and >hodes have stated that9
The production of tens of thousands of regulationstheir comple$ interaction
with the regulatory systems of member states, the transfer of vast sums from the
agricultural support and regional structural funds budgets, and inadeuate
auditing procedures, have all created a system that is easy to infiltrate and
e$ploit but very difficult to monitor.!
$-444980-%
Indeed! Pu+as and >hodes have further said that EU institutions contain
corruption incentive structures $-444980-%. 3o with these structures! the reality is
that corruption is in a way going to be encouraged rather than discouraged. It has
also been shown that 6.#: as a watchdog has been 1uite ineffective with
stopping corruption! as of course it cannot prosecute! and also has no +urisdiction
on *ember 3tates= if it did! it would be infringing on sovereignty $Pu+as 200/%.
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"orruption may not be detected with the "ommission delegating programmes!
pro+ects and money to national and local agencies! which may have inade1uate
and also differing administrations. ;his amount of decentralisation is a result of
the lac, of resources in the EU .7ecause *ember 3tates want to reduce the
amount of &interference' by the "ommission as much as possible $.evy -44A9C@%!
this leads to more corruption opportunities. )ithout perhaps infringing national
sovereignty the EU will have problems tac,ling it. 3o what are the solutions to
these problems5
"urrently! according to .evy the "ommission is centralising and
standardising systems and procedures both internally and within *ember 3tate
managing agencies! as well as trying to build strong partnerships with *ember
3tate agencies $-44A9CC%. ;he idea of this is of course to improve the running of
the EU and reduce chances of corruption through standardisation. ;his means
auditing will be much easier! and management theoretically more efficient. 3o
rather than try to impose itself on *ember 3tates! it is in fact trying to improve
coordination! although whether this overall strategy will help is debatable! as it
&assumes a competence on behalf of the "ommission and *ember 3tate
agencies which is simply absent.' $2000922A<24%.
Dreater resources for 6.#: would also help immensely in fighting corruption!
which may occur in the future. (owever! one method perhaps of reducing
corruption would be to create EU directives where *ember 3tates were re1uired
to have acceptable accounting systems and ade1uate internal controls as well as
good auditing standards. Non compliance would mean loss of received EU funds
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and perhaps even sanctions. *ember 3tates though would probably never allow
an admittedly slightly draconian set of directives to be promulgated
$unfortunately%. 6f course what is clear here is that poor management is leads to
corruption $although as stated earlier it is not necessarily prevalent throughout
the EU%. Poor management is maybe the real problem! not corruption.
:rom the above! what seems clear is that firstly! poor management is the
insoluble problem facing the EU. "orruption is merely an illustration or symptom
of this! as to solve it fully would be to improve the poor management which is
prevalent through out the EU! and this is perhaps much harder to do. )hy5 ;he
differences in Europe itself< .evy has stated 1uite wisely that the multi<level
accountability systems not fitting well together is a reflection of the political
environment! and this fits in with the political realities of Europe= any new system
which tries to ignore these realities would be unli,ely to wor, $-44A9C%. 3o the
*ember 3tates differences are going to be impossible to solve! as there is very
little way to create highly standardised systems across Europe which ignore the
differences! as these systems wouldn't wor,! according to .evy. Until countries
are willing to see the benefits of some ,ind of standardisation! realising it won't
affect sovereignty! or even maybe more dramatically give up some sovereignty!
these problems of poor management at national and local level will be hard to
remedy.
(owever! with reform at the supranational level! in the "ommission particularly!
this is more feasible. 3trengthening and standardising their management and
internal audit systems! reducing the fragmentation of its structure! encouraging
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cooperation rather than competition are perhaps more feasible than national and
local level reform. #lthough the different administrative cultures within the
"ommission could be a problem i.e. &clash of cultures' as identified by Pu+as and
>hodes $-444980-%! supranational level reform is still more reasonable.
"orruption is not the ma+or problem in the EU! it is the poor management at the
various levels! and this is certainly a more insoluble problem! for the reasons +ust
stated. "hronic mismanagement is the illness of the EU! with corruption its
occasional symptom.
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