Austria misrepresentation of government debt data23 February 2017
by eub2 -- last modified 23 February 2017
The European Commission adopted a proposal for a Council implementing decision on 22 February for Austria to pay a fine of EUR 29.8 million for the misrepresentation of some government debt data.
Following an investigation and exchanges with the Austrian authorities, the Commission has found that serious negligence of government entities of Land Salzburg led to the misrepresentation in the statistical notifications of 2012 and 2013 of Austria's deficit and debt data for 2008-2012 to Eurostat.
The Austrian debt and deficit figures, once corrected in April 2014, have since been published without reservation by Eurostat.
On what basis has the Commission concluded that three entities within the general government sector of Austria were seriously negligent?
On 3 May 2016, the Commission announced the launch of a formal investigation into the possible misrepresentation of statistics in Austria. According to the Commission Delegated Decision 2012/678 on investigations and fines related to the manipulation of statistics, the Commission must adopt a report with its findings and observations within 10 months of the decision to initiate the investigation. The Member State in question has the right to comment on any findings before the final report on the investigation is published, and the observations submitted by Austria are annexed to the report. This report is the basis for the decision to recommend to the Council to impose a fine.
The investigation showed that severe irregularities took place in the compilation, control and reporting of financial, as well as non-financial, transactions in Land Salzburg for several years. By serious negligence, public accounting rules were not followed, control was lacking, financial and non-financial transactions were not appropriately reported, and recommendations from the Austrian Federal Court of Audit (Rechnungshof) were ignored.
The report concluded therefore that the Excessive Deficit Procedure (EDP) data transmitted to Eurostat in 2012 and 2013did not include part of the debt incurred by Land Salzburg, amounting to misrepresentation of debt data. The report can be found here.
What is the procedure for the preparation of the final report?
The Commission Delegated Decision 2012/678/EU of 29 June 2012 on investigation and fines related to the manipulation of statistics as referred to in Regulation (EU) No 1173/2011 of the European Parliament and of the Council on the effective enforcement of budgetary surveillance in the euro area lays down detailed rules concerning the procedures for investigating misrepresentation of general government deficit and debt data that are the result of intentional or serious negligence, detailed rules concerning the right of defence and confidentiality and detailed criteria establishing the amount of the fine.
Why does the Commission recommend to the Council to impose the fine?
Article 7(4) of the Commission Delegated Decision lays down that any Commission recommendation to the Council to impose a fine on the Member State concerned shall be based on the report.
The report on the investigation related to the misrepresentation of statistics in Austria concluded that the Court of Audit, State Office and State Government of Land Salzburg, i.e. entities within the general government sector of the Republic of Austria, were seriously negligent in not ensuring appropriate compilation controls and reporting procedures, leading to incorrect reporting of debt to Eurostat in 2012 and 2013. Furthermore, the report concludes that whereas the Commission (Eurostat) was only informed of this case on 10 October 2013, the Austrian statistical authorities were aware of the possibility of misrepresentation of the accounts of Land Salzburg since, at least, 6 December 2012.
On this basis the Commission recommends to the Council to impose a fine on Austria.
How is the recommended fine calculated?
The fine has been established using a two-step methodology in line with the Commission Delegated Decision 2012/678/EU.
At first the Commission determines the reference amount. Second, it may modulate that reference amount upwards or downwards taking into account the specific circumstances of the case.
In this case, when defining the fine, the Commission has taken into account one aggravating factor, concerning the fact that the misrepresentation concerned, in the October 2013 EDP Notification, two years (2011 and 2012). The Commission has also taken into account a series of mitigating factors such as the fact that the misrepresentation of data had no significant impact on the functioning of the strengthened economic governance of the Union, due to the limited impact on the debt of the Republic of Austria as a whole and that although the misrepresentation was the work of three entities it cannot be considered that these entities have acted in a concerted way. The Austrian authorities have fully cooperated with the investigation and the misrepresentation has ended. Taking into account these specific circumstances, the fine proposed by the Commission has therefore been reduced to 25% of the reference amount (€119.2 million).
What powers does the Commission have to investigate irregularities in Member States' statistics?
Since 2011, the Commission (Eurostat) has powers to look in more detail into the quality of Member States' statistics for EDP purposes. It can carry out on-the-spot visits and check government accounts at central, state, regional and local levels, including the underlying accounting information and other relevant sources. It does this through "dialogue visits", which aim to verify the quality of the data flow from various sources to the national statistical offices, in cooperation with the national Courts of Auditors. If there is suspicion that a Member State has misrepresented its deficit and debt data, either intentionally or through serious negligence, the Commission can open a formal investigation. If this shows that there was misrepresentation of data, the Commission can recommend to the Council to impose a fine on a Eurozone Member State according to Article 8 of Regulation (EU) No 1173/2011of the "Six Pack".
What rules apply to Member States when compiling and reporting their national statistics for EDP purposes?
Statistics are the backbone of EU economic governance, and fiscal policies under the EDP are determined based on Member States' deficit and debt data. Therefore, it is crucial that statistics on Member States' economies are compiled in a consistent, comparable, reliable and up-to-date way. For that reason, there are clear and binding rules and procedures that Member States must follow in compiling, recording and reporting their national debt and deficit data. These are set out in Regulation (EC) No 479/2009 and in Regulation (EU) No 549/2013 on the European System of Accounts (currently ESA 2010) and elaborated in the Manual on government deficit and debt.
Member States are legally obliged to ensure that the debt and deficit data which they transmit to the Commission (Eurostat) are compliant with EU rules and of the highest possible standard. National authorities are also responsible for ensuring that the correct rules and procedures are applied at all levels of government (national, regional, local), so that the source data used to compile the general government statistics are reliable and accurate.
Each Member State is responsible for certifying the local and regional accounts that feed its own general government statistics, including through internal and external audits. They are obliged (under Council Directive 2011/85/EU of 8 November 2011 on requirements for budgetary frameworks of the Member States) to have an effective system to ensure that the accounts that are used by the national statistics office are properly checked.
Since it was given increased powers in 2010 and 2011, Eurostat has intensified its verification programme for EDP data. It has carried out special visits in Member States, to check that systems are in place to ensure that good quality data is transmitted from local, regional, and other government sources to the national statistics bodies.
Source: European Commission