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President of the Republic at the 40th anniversary of the European Court of Auditors

12.10.2017

Excellencies, ladies and gentlemen, but above all – dear friends!

In the name of the Estonian Council Presidency – congratulations for this important milestone, 40th anniversary of this institution! You have been a true thorn in the executive side of the EU and you can be truly proud of your achievements! May your teeth stay sharp, because European taxpayer needs you. And may your tongue remain sharp as well, because the main tool of this institution is its leverage through public opinion. The Court has a mandate to report to EU taxpayers. This reporting trail starts from the European Parliament and ends with the proverbial man on the bus. Obviously, for the leverage to be truly effective the Court must find the right means, the right words, and the right level of anxiety over protection of the public finances.

When the main worry of the European Parliament used to be the quick spending of the EU budget, there was practically no demand for exact audit data. I still remember the times when the Court used qualitative, rather than quantitative basis for its reporting. It was not easy to understand the level of problems and they went mainly unnoticed by the wider public.

I remember the first times the Court reported its audit findings in the quantitative format, about 2006, only timidly in one Chapter of the Annual Report, in the Area of Cohesion, where the problems were considerable. The sentence went something like that: at least 12% of the Funds should not have been paid out. As you see, the sentence refers to the lower error limits, because the MLE at that moment was so close to one sixth that the Court did not want to scare the taxpayer.

This was a clear wake-up call for both the Parliament and Commission. Obviously, the catchphrase was also interesting for media, and the Court's work started to have some real traction with wider public. The Court soon went out with comprehensive quantitative data and guess what – the old saying what you measure that you get worked even on supranational public spending level. The MS and the Commission started to get their house in order. The error rate for the whole budget in 2017 AR referring to the budget year of 2016 is just 3,1%. The Court's special reports have also over the years gone through of an important process of becoming clearer, sharper, shorter.

Of course, all this good progress has been made against a background when people started to think more about correct throughput and economy, efficiency and effectiveness of the public spending. Specialists – like the Court – have dealt with these questions since their birth. But since 2008, when difficult adjustments in public spending in numerous Member States made it clear to wider public that budget deficit is not something you cannot feel or taste, quite to the contrary, it feels hairy and tastes bitter, wind has been in the sails of all public governance bodies.

The Court has used this wind well. It has learnt to report more to wider public and less to specialists. It has developed its relations with its auditees to make sure methodological misunderstandings will not lead to unnecessary disputes over the facts, which could lessen the impact of its work. It uses digital environment to report and discuss its reports with stakeholders.

But challenges never end. EU has a great system of consolidated accounts. But underlying these accounts are millions of transactions in the formats which are not that easy to use neither by the accountant nor the auditor. The digital environment of EU paper train is restricted to pdf-format pictures of documents, which may make going through them even more cumbersome than is on paper. The EU needs digital billing, digital payments and digital trail of all transactions in sortable databases, which would truly allow every minute a real time overview of the financial position of our union. It would greatly add to transparency of EU budget and lessen the boring old fashioned financial audit burden of the Court and also of the numerous bodies of internal audit chain of the budget. It would leave the managers and auditors more time to deal with three E-s. It would build trust into our Union's finances. It would reduce the error rate while demanding less resources to achieve this progress. Because this reduction of the error rate we have seen during the last decade has come with increase in resources spent on managing and controlling the budget expenditure. We need to reduce these resources now, the technological tools for this exist and can be easily adapted if there is political will to do so. And ECA has a wonderful position to create this will.

It is only ECA who can bring on this change in the EU public finances. The examples exist – Denmark was the first in Europe to demand e-bills from all the partners of the State. Yes, Denmark, not Estonia. Estonia came second in this race. But what is important is that it can be done on grand scale, necessary for EU budget. Yet at the same time, EU budget would be a good sandbox for quick technological transfer, and can set good example for MS own accounting. I hereby challenge you to kill pdf and use technology to make financial audit almost unnoticeable in your resource base. In truly digital world it happens almost on the background. You will be able to deal with more interesting audit questions, while algorithms sneak through the digital trail of the bills relating to the EU budget.

Because, there are interesting tasks you need to tackle. Public money is scarce. EU Budget is an especially tiny amount of the global EU GDP, but with particularly high expectations as far as results are concerned. To be fair, as the budget has not met the ambitions of the Union, quite considerable amounts of resources have been brought to serve the EU via alternative channels. For example, EIB annual financing volume is 80bn, not that different from the Budget's 140bn. There is also the ESM, currently lying outside of the Treaties, but undoubtedly needed for the functional euro area.

While the Union has searched, understandably, to find ways to make the ends meet when the discussion of rising the budget ceilings has not been possible, this Court has always stood for good governance. While the decision makers have struggled to plug the holes and invent new structures, this Court has always been present. It has sometimes been truly the only one which has warned – there is the day of institutional innovation, budgetary development easier done off-balance sheet, but there will also come the day of reckoning. It is the Court's achievement that ESM got an independent external audit mechanism as it was born. It has been the work of this Court that together with MS audit bodies has pointed out that while modifying and consolidating the euro area will also need a rethink of the audit mandates of institutions responsible to audit both MS Central Banks and the ECB.

These are just a few examples of what Court has meant to the good governance of the EU Budget, and of course also the MS budgets, because there is a knowledge transfer to MS thinking of public audit. This is of course a two-way street, the Court has always been interested in MS work and learned from it. Contact committee may take few decisions, but over time it has had considerable effect on harmonizing the thinking of governance of public finances in the whole of the EU. The Court has contributed internationally to develop public audit methodologies, particularly in compliance audit.

The Court has always been the smallest of the main EU institutions. Therefore, it has had to search for innovative management models within the constraints of the staff regulations in order to rise its capacity without much growth in organigram. It has even finished its new buildings within allocated budgets and on time. Its strive for excellency has obviously been motivated by the fact that you have to practice what you preach.

I wish you the best of the future. And from a small MS currently carrying the Presidency responsibility, I would like to end with a notice that big changes often need a catalyst. Catalyst, as we all know from school chemistry, is a substance which starts an important change, without needing to be present in big quantities. May ECA remain this catalyst for good management and control of the EU budget and transparent public environments in the whole of our union!