Lack of Real Time Data Enables Corruption

::: nBlog :::

For the last 16 years, the European Court of Auditors (ECA), the independent audit institution of the European Union, has issued predominantly negative statements about EU’s budget implementation, especially on the largest accounts like Agriculture and Energy.

In the latest report from September 2011, the court states:

XI. The Court concludes that overall the supervisory and control systems are partially effective in ensuring the legality and regularity of payments underlying the accounts. The policy groups Agriculture and Natural Resources and Cohesion, Energy and Transport are materially affected by error. The Court’s estimate for the most likely error rate for payments underlying the accounts is 3,7%.

XII. In the Court’s opinion, because of the significance of the matters described in the basis for adverse opinion on the legality and regularity of payments underlying the accounts paragraph, the payments underlying the accounts for the year ended 31 December 2010 are materially affected by error.

The XI conclusion concerns a sum of 93 billion euros.

If the EU were a regular corporation, its operations would have long been suspended and directors charged with multiple accounts of bookkeeping fraud and mismanagement.

ECA’s work is prudent, but the main problem is that they have more than one year delay. People who apply for and are granted EU funding with false grounds like nonexistent olive plantations or biomass power plants burning coal are already elsewhere when the auditors start their work.

It would be easy to blame the EU’s almost institutionalized, French and Belgian style nepotism and open bribery (remember the MEPs bragging about doubling their salaries with forged receipts?), but this is just part of normal growing pain, already being cleansed away by younger generations.

What would really solve the accountability problem would be real time monitoring and auditing of results in all EU funded endeavors. The EU (perhaps a real time ECA?) could demand standardized raw data from budget spenders with, say, 24 hour intervals. Not an issue with today’s communications, sensors and bookkeeping systems. Forging raw data every day is far more difficult than carefully sending in one false report per year.

The Big Data repository created this way would also serve a multitude of other purposes like detecting early warning signs of production drops and increases in order to balance supply and demand unionwide.

I hope that the current debt crisis does not annihilate the valuable and increasing cooperation that the EU has brought us. Perhaps we can save it by making it real time.

PS. The language is careful, but in the light of the debt crisis this is quite revealing:

1.30. Since 2009, there has been a significant increase in payments mainly in financial engineering instruments (FEIs) for which justification of costs and/or activity is only expected at a later date. The audit has brought to light a significant number of cases where initially the Commission did not properly record payments as giving rise to an asset. Thus, in contradiction to the principle of substance over form ( 26 ) the accounts gave the impression that recipients have provided full justification for use of the funds, when in practice this was not the case.

See the whole report at ECA

//Pasi