LIVESTOCK farmers in Slovenia, only two years after joining the European Union, are proving as imaginative as Italian olive growers when claiming Brussels subsidies.

Inspectors found that half the cattle that Slovene farmers said they owned, so qualifying them for special EU cow and beef grants, did not exist. A quarter of their sheep and goats were equally invisible.

Discrepancies between farming fact and fiction, which are equally strong among the older members of the EU, cost almost €1 billion (£670 million) last year — about 2 per cent of the agriculture budget.

Nine payments worth €2 billion to olive oil producers in Spain, Greece and Italy last year were either inflated or wrong, according to the annual report of the European Court of Auditors, the EU spending watchdog. In the case of Italy, it went even further, describing two cases as irregular.

The auditors discovered that two thirds of the 95 EUfinanced regional projects that they examined, which include new roads and bridges, contained “material errors”. These ranged from a lack of proper invoices for expenditure being reclaimed to declaring costs that had no relation to the scheme being funded. There are also considerable variations in the way that national authorities apply EU rules.

Last year Poland simply gave a warning to anyone who did not apply good farming practices. Under EU law, they should have been fined almost €1 million. In Greece, farmers’ unions input agricultural data into insecure computer systems that can be modified externally at any time.

After investigating how the €105 billion EU budget was spent last year across a range of policy areas, the auditors identified “a material level of error in underlying transactions and weak internal control systems”. As a result, for the 12th year in succession, they refused to sign off the accounts, giving them only qualified approval.

They did, however, note that in 2005 the Commission moved to an accruals-based accounting system that should make the flow of EU funds more transparent.

The auditors also concluded that administrative expenditure on EU staff and premises and aid to new member states before they joined the union was “legal and regular”. They welcomed the new integrated control system that now applies to large parts of the Common Agricultural Policy and is proving effective in stamping out fraud.

Presenting the findings, Hubert Weber, the Court of Auditors’ president, said: “The underlying reason why most errors occur is that beneficiaries — farmers, local authorities, project managers — claim more than they have the right to claim.” They did so, he added, either through neglect, error or attempt to defraud.

Siim Kallas, the Administrative, Audit and Anti-fraud Commissioner, reacted angrily to the auditors’ criticism, attacking the way in which the court interpreted any errors that it found. He pointed to a German project, where the auditors rejected all the expenditure involved, although they had examined only 5 per cent of it.

“The work of finding errors by auditors is normal and eternal. What is not normal in our case is that the errors in filling formulas feed high-profile political judgment. Everything is mixed into one pot,” he said.

He also pointed out that the auditors failed to attach sufficient importance to the Commission practice of clawing back from national budgets any EU funding, especially farm payments, that had been spent fraudulently or incorrectly. Last year he claimed that this raised €2.1 billion.

However, David Bostock, the British member at the court, disputed the benefits, pointing out that this simply transferred the financial burden.

“The effect is to shift the cost of disallowed transactions from the European taxpayer to the national taxpayer,” he said.

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