The two Arthur Andersen reports referred to were commissioned by my Department in 1997 to review the financial management and control systems within the European Regional Development Fund (ERDF) and the Cohesion Fund. Regulation 2064/97 was issued by the EU Commission during the course of the Arthur Andersen investigations. Given this time scale, it is not surprising, therefore, that the contents of this Regulation had not been implemented at the time of the 1998 ERDF report. The 2000 report referred to the Cohesion Fund, a fund which was not covered by EU Regulation 2064/97.
The EU audit in 2001 on the implementation of EU Regulation 2064/97 found that there were certain provisions which had not been implemented to their satisfaction. These provisions had not previously been clarified by the EU Commission, and, following negotiations with that body, my Department issued a letter in July 2001 to the Government Departments concerned, stressing the importance of fully meeting the EU requirements.
EU Commission Regulation 2064/97 was adopted in October, 1997. It established a new set of requirements in respect of the financial controls to be applied by member States for operations co-financed by the EU Structural Funds. I understand that the Department of Enterprise Trade and Employment did, in its Final Report on the Small Business Operational Programme submitted to the EU Commission, confirm that the requirement, established by the Regulation, to audit 5% of programme expenditure had been exceeded and that the audits conducted had included expenditure that had taken place in 1995 and 1996.