Auditor: EU agencies mismanaging their budgets

The agencies do studies on issues ranging from drug addiction to trademark registration and police co-operation. They are an object of national pride and hotly contested negotiations between member states when it comes to deciding on their seat.

In its introduction, the report notes dryly that "the first two agencies were created in 1975" and that 10 more were formed in the 1990s "after a considerable gap." The process sped up in the past 10 years, when 19 more were set up.

As most of the bodies' budgets are based on EU subsidies, the Court of Auditors looked at their book-keeping practices and found that "increased vigilance is required in respect to the establishment of an agency's budget."

Eleven out of the 22 surveyed could not properly account for half the expenses they filed in 2010, the auditors found.

"A low degree of correspondence between accruals [justifications] and carry-forwards [planned expenditures] may indicate that an agency is committing budget unrelated to the budgetary year or is experiencing delays in the implementation of its budget. Eleven agencies show a correspondence, in 2010, of accruals versus carry-forwards of less than 50 percent," the report says.

Another problem are the large "management boards" of some agencies - normally comprising around 30 representatives of member states, the European Commission, industry stakeholders and observers.

Three agencies mainly dealing with social and labour-related studies employ 84 members each on their respective management boards, as each country sends one government representative and two more representing employers and workers.

The agencies in question are the Thessaloniki-based European Centre for Development of Vocational Training in Europe, the European Foundation for the Improvement of Living and Working Conditions in Dublin and the Agency for Safety and Health at Work based in Bilbao, Spain. Their management boards only met once or twice each year.

The auditors' report noted that "the board should meet sufficiently regularly to discharge its duties effectively" and "should not be so large as to be unwieldy."

All 31 agencies except two are subject to the European Parliament (EP) budgetary control. MEPs in 2010 already refused to sign off the accounts of a police training agency which used EU funds to purchase furniture, cars and mobile phones for personal use.

"The competent institutions may wish to consider whether all agencies, including self-financed agencies, should be subject to discharge by the EP, since their assets and liabilities comprise part of the balance sheet of the EU," the auditors say.

One of the agencies not under the scrutiny of MEPs is the Office of Harmonisation for the Internal Market (Ohim) which is self-financing because it cashes in on the creation of EU trademarks. "Nearly 50 percent of the total amount of cash [of EU agencies] is held by Ohim. Considerable annual surpluses have been recorded by the agency over successive years, leading to a surplus, in 2010, of €495 million," the report notes.

On its website, the Alicante-based agency says it is a "non-profit" organisation with an annual income of "over €180 million." The surpluses it ran also benefited from good interest rates, the report shows: 4.7 percent in 2008, 1.5 percent in 2009 and 1.1 percent in 2010.

"It is scandalous that at a time when governments are struggling to borrow money at high costs, these agencies do not return anything to the EU budget. It is as if they are living in a parallel world, untouched by the economic crisis," Romanian centre-right MEP Monica Macovei, who will draft the parliament's position on signing off the accounts of each agency, told EUobserver.

A former justice minister and anti-corruption campaigner, Macovei said she will not recommend to sign off the accounts of several agencies, as she is appalled by the lack of transparency and accountability found in certain quarters.

In one example, the director of the London-based European Medicines Agency, Thomas Lonngren, quit his job in December 2010 and announced only a few days later he was going to take up a job for a pharmaceuticals company whose products he was authorising in his previous job.

Macovei's report will also call on the European Commission to carry out an evaluation of all agencies by 15 July "in order to detect occurrences of unnecessary or overlapping activities and to analyse the merger of some of the agencies."

The auditor's report comes shortly after Belgian eurosceptic MEP Derk Jan Eppink wrote a stinging analyis of how two other mini-institutions - the Brussels-based Committee of the Regions (CoR) and the European Economic and Social Committee (EESC) spend their money.

He noted that their budgets have balooned by 50 percent in the past eight years, with around 50 officials in each body earning more than €123,000 a year.

The average cost of an EESC opinion in 2010 weighed in at €660,000 each even though they have little noticeable impact on EU policy.

The president of the Liberal group in CoR, Flo Lucas, responded in a letter to EUobserver saying the budget increases are "challenged constantly."

She noted that CoR increases democratic accountability by giving a voice to municipal officials in the EU capital. "Democracy is difficult to build and secure. It takes time, effort and yes, money. Is it possible to quantify the return that citizens get from the money invested in democracy?" she said.