Tuesday, October 24, 2006

False Accounting

If only they'd worked for the EU

Enron's Jeffrey Skilling has just been sentenced to a 24 year prison term for false accounting. Quite right too. That's what happens if managers of private sector companies fail to produce accurate and timely accounts.

But in the public sector, it's a whole different ball-game...

Item 1: the EU's auditors have just refused to sign off its accounts for the 12th successive year:

"The auditors certified the EU’s administration, development and some agricultural spending, but found errors in programmes accounting for around two-thirds of its €105bn (£70bn, $130bn) budget, particularly structural funds going to poorer regions. These included incorrect paperwork, missing documents and possible fraud."

And the Commission's response? They say the auditors are being far too picky, and they want laxer standards. The Admin Commissioner says:

“The Commission is frustrated... If this methodology continues, we will never have a positive audit.”

"Frustrated"? Let me rephrase that for the Commissioner: the EU is such a total shambles it cannot manage its affairs according to the same high standards we routinely expect from the private sector. It cannot be trusted with our money.

Item 2: the Public Accounts Committee yesterday grilled HM Revenue & Customs on the tax credits fiasco (see previous blog). As we know, the National Audit Office qualified HMRC's accounts after discovering £1.17 bn's worth of fraud and error- and that only relates to 2003-04, with later years not yet even assessed.

No wonder the PAC Chairman described it as a "disgrace", and a "matter of shame". Although I don't seem to recall anyone going to jail. True, after July's damning NAO report, the previous head of HMRC did leave rather suddenly... but only to move next door to HMT (see this blog).

Moral: What these two cases illustrate is that the public sector is far behind the private in matters of basic financial probity. No matter how good its original intentions, Big Government's complexity and inefficiency mean that it just cannot be trusted with our money in the way our leading companies can.

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