Annexes to SEC(2010)898 - Analyse statistique des irregularites resources propres, agriculture, fonds structurels et de pre-adhesion et gestion directe annee 2009-document accompagnant le Rapport de la Commission au Conseil et au Parlement Europeen sur la protection des interets financiers de l'Union europeene-lutte contre la fraude-rapport annuel 2009 - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | SEC(2010)898 - Analyse statistique des irregularites resources propres, agriculture, fonds structurels et de pre-adhesion et gestion ... |
|---|---|
| document | SEC(2010)898  |
| date | July 14, 2010 |
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4.1. Management of Traditional Own Resources (TOR) 16
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4.1.1. Monitoring of establishment and recovery of TOR 16
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4.1.2. Procedure for managing Member States’ reports for write-off 17
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4.1.3. Particular cases of Member State failure to recover TOR 18
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4.2. Reporting discipline 18
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4.2.1. Year of discovery versus year reported 19
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4.3. General trends 19
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4.3.1. Types of irregularity and fraud 20
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4.3.2. TOR and cigarettes 21
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4.3.3. Data main sectors TOR 21
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4.4. Recovery 21
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4.4.1. Recovery rate 22
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4.5. Detection of fraud and irregularities 22
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4.5.1. Member States' control systems 24
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4.6. Conclusions 26
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PART II - EXPENDITURE 28
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5. AGRICULTURAL EXPENDITURE (Annexes 14-15) 28
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5.1. Introduction 28
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5.2. Reporting discipline 30
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5.3. General trends 34
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5.3.1. Irregularities in perspective – cases reported in 2009 34
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5.3.2. Impact on the budget – cases reported for the financial years 2006 - 2009 37
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5.3.3. Impact on the budget – overview per budget chapter financial years 2006 - 2009 39
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5.3.4. Financial follow up of irregularity cases 41
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5.3.4.1. Method of detection – Controls by national authorities 41
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5.3.4.2. Method of detection - Controls by the Commission 42
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5.3.4.3. Recovery 43
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5.4. Specific analysis 45
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5.4.1. Introduction 45
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5.4.2. Sector 050203: direct payments for arable crops 46
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5.4.3. Sector 050302: beef and veal 47
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5.4.4. Sector 050401: rural development 49
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5.4.5. Other sectors: fraud rates 50
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5.4.6. Patchy reporting 50
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5.4.7. summary: 2004- rates and levels 53
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5.5. Conclusions 54
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6. European Fisheries Fund 56
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7. COHESION POLICY (Annexes 16-20) 57
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7.1. Reporting Discipline 57
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7.2. General Trends 59
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7.2.1. Yearly trends 59
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7.2.2. Irregularities reported in 2009 61
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7.2.3. Detection methods 62
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7.2.4. Types of irregularity 63
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7.2.5. Suspected frauds 64
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7.3. Specific analysis – Irregularities related to the programming period 2000-2006 66
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7.3.1. Irregularities affecting the different funds 68
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7.3.2. Irregularities by Objective 69
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7.3.3. Irregularities by Member State 71
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7.3.4. Suspected frauds 73
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7.3.5. Preventive action and Recovery 76
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7.3.6. Cohesion Fund 78
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7.4. Conclusions 79
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8. Pre-accession funds (Annexes 21-23) 81
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8.1. General overview 82
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8.2. IMS and reporting discipline 82
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8.3. General Trends 83
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8.3.1. Overall trend 83
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8.3.2. Trend related to Member States and Candidate countries 2009 83
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8.3.3. Irregularities affecting different funds 83
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8.3.4. Amounts involved 83
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8.3.5. Impact on the budget and irregularity rate 83
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8.3.6. Method of detection 83
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8.3.7. Types of irregularities 83
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8.4. Specific analysis 83
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8.4.1. Suspected fraud 83
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8.4.2. Recovery 83
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8.5. Conclusions 83
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9. DIRECT EXPENDITURE – CENTRALISED DIRECT MANAGEMENT 83
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9.1. Methodology and scope 83
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9.2. General analysis 83
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9.2.1. Financial amounts involved 83
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9.2.2. Financial amounts involved by geographical area and Member State 83
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9.2.3. Method of detection 83
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9.2.4. Types of irregularity 83
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9.3. Specific analysis 83
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9.3.1. Irregularity versus Suspected Fraud 83
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9.3.2. Time delay 83
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9.3.3. Trends 83
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9.4. Recovery 83
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9.5. Conclusions 83
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ANNEXES 83
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PART I - INTRODUCTION
1. INTRODUCTION
1.1. Structure of the document
The present document This document cannot be considered as an official poistion of the Commission. is divided in four parts. [1]
This document cannot be considered as an official poistion of the Commission.
The first introductory part is composed of four chapters which contain, respectively, the definitions of the specific terms used throughout the document; give a short description of the European Budget and its different “management” modes; describe the legal background for the reporting of irregularities and the new reporting system.
The second is dedicated to the analysis of irregularities reported in the area of the Traditional Own Resources (Revenues). The implementation mode for this part of the budget is that described under chapter 2.2 letter b) – shared management.
The third is composed of 5 chapters dedicated, respectively, to Agricultural expenditure, European Fisheries Fund, Structural measures (for these three sectors the management mode is that indicated under chapter 2.2 letter b. – shared management), Pre-accession Assistance (the implementation mode for this sector is indicated under letter b. – decentralised management) and Direct expenditure (whose implementation mode is that described under chapter 2.2 letter a.).
The fourth part summarises the main conclusions of parts 2 and 3.
1.2. Definitions
For the purposes of this document, the following definitions apply.
1.2.1. Irregularity
Irregularity : means any infringement of a provision of Community law resulting from an act or omission by an economic operator which has, or would have, the effect of prejudicing the general budget of the Communities by charging an unjustified item of expenditure to the Community budget.
1.2.2. Fraud
Fraud : There is clear distinction between the legal notion of fraud and a more common sense's notion of the term.
The former refers to definition(s) contained in legal acts which establish the behaviour and its subjective and objective elements that constitute a fraud. These elements need to be ascertained in a court of law decision which is not open for (further) appeal (‘res iudicata’).
The "European" legal definition of the behaviour characterising fraud is contained in article 1(1), point (a), of the "Convention on the Protection of the European Communities' Financial Interests" according to which, “[…] fraud affecting the European Communities' financial interests shall consist of:
a) in respect of expenditure, any intentional act or omission relating to:
– the use or presentation of false, incorrect or incomplete statements or documents, which has as its effect the misappropriation or wrongful retention of funds from the general budget of the European Communities or budgets managed by, or on behalf of, the European Communities;
– non-disclosure of information in violation of a specific obligation, with the same effect;
– the misapplication of such funds for purposes other than those for which they were originally granted;
b) in respect of revenue, any intentional act or omission relating to:
– the use or presentation of false, incorrect or incomplete statements or documents, which has as its effect the illegal diminution of the resources of the general budget of the European Communities or budgets managed by, or on behalf of, the European Communities;
– non-disclosure of information in violation of a specific obligation, with the same effect;
– misapplication of a legally obtained benefit, with the same effect.”
National legislations contain several articles in the criminal and civil code that describe the conducts and the related penalties. Some of these provisions are the result of the implementation of the Convention into the national legal system.
The distinction between irregularities and fraud is that fraud is a criminal act that can only be determined by the outcome of judicial proceedings. As such, it is only when the judicial procedure has come to an end that the actual amount of fraud can be determined. While awaiting the results, the Commission works on the basis of the information supplied by Member States concerning cases of irregularities some of which, in the opinion of the reporting Member States, give rise to suspicions of fraud. The Commission's statistical assessment of and ability to respond to, irregularities are influenced by the accuracy and timeliness of the notifications made by the Member States.
1.2.3. Suspected fraud
Suspected fraud : means an irregularity giving rise to the initiation of administrative and/or judicial proceedings at national level in order to establish the presence of intentional behaviour, in particular fraud, such as is referred to in Article 1(1), point (a), of the Convention on the protection of the European Communities' financial interests.
This definition has been introduced in Commission Regulation (EC) N. 2035/2005. It has been "confirmed" in Regulation N. 1828/2006 for the Programming Period 2007-2013.
In their communications of irregularity to the Commission, Member States have been requested to indicate whether a reported irregularity can be regarded as 'suspected fraud'. This notion was introduced in order to provide some data for statistical purposes and to avoid the necessity of waiting until the end of criminal procedures for a final indictment.
1.2.4. Irregularity and Fraud Rates
The Irregularity Rate (IrR) is calculated using Equation 1-1 below:
Equation 1 1 : Irregularity Rate
Irregularity Rate (IR) Total financial amount affected by irregularity x 100
Total payments/expenditure
The Fraud Rate (FrR) is calculated using Equation 1-2 below:
Equation 1 2 : Fraud Rate:
Fraud Rate (FrR) Total financial amount affected by suspected fraud x 100
Total payments/expenditure
The IrR and FrR can be calculated by financial year (as in the case of the Agriculture sector – see Chapter 6) or on the entire Programming Period (as in the case of Structural Funds – see Chapter 7) and by Member State. Please note that the FrR is calculated using amounts linked to cases of suspected fraud These rates and the following levels had already been introduced in the 2008 Report and Statistical Annex with similar names. This year’s Statistical Annex defines precisely these concepts in order to use them in the years to come. In other parts of the Statistical Annex or in the Report itself, the Fraud Rate may be referred to also as Suspected Fraud Rate. The calculation method remains the same. . In the 2008 report the same concept was identified as “suspected fraud rate” or “estimated fraud rate”.[2]
These rates and the following levels had already been introduced in the 2008 Report and Statistical Annex with similar names. This year’s Statistical Annex defines precisely these concepts in order to use them in the years to come. In other parts of the Statistical Annex or in the Report itself, the Fraud Rate may be referred to also as Suspected Fraud Rate. The calculation method remains the same.
1.2.5. Fraud Frequency and Fraud Amounts Levels
The Fraud Frequency Level (FFL) represents the percentage of cases qualified as suspected frauds on the total number of reported irregularities and is calculated using Equation 1-3 below.
Equation 1 3 : Fraud Frequency Level
Fraud Frequency Level (FFL) Total number of suspected fraud cases x 100
Total number of reported irregularities
The Fraud Amounts Level (FAL) represents the percentage of financial amounts involved in cases qualified as suspected frauds on the total reported financial amounts affected by irregularities and it is calculated using Equation 1-4 below.
Equation 1 4 : Fraud Amounts Level
Fraud Amount Level (FAL) Total financial amount affected by suspected fraud x 100
Total amount affected by irregularities
FFL and FAL can be calculated by financial year (as in the case of the Agriculture sector – see Chapter 6) or on an entire Programming Period (as in the case of Structural Funds – see Chapter 7) and by Member State.
2. The European Union Budget
Taxpayers' money is used by the European Union (EU) to fund activities that all Member States and parliaments have agreed upon in the Treaties. A small amount – around 1% of the Union's national wealth, which is equivalent to about EUR 235 per head of the population – comes into the EU's annual budget and is then spent mainly for its citizens and communities.
2.1. Revenues
The European Union has its 'own resources' to finance its expenditure. Legally, these resources belong to the Union. Member States collect them on behalf of the EU and transfer them to the EU budget.
Own resources are of three kinds:
– Traditional own resources (TOR) — these mainly consist of duties that are charged on imports of products coming from a non-EU state.
– The resource based on value added tax (VAT) is a uniform percentage rate that is applied to each Member State’s harmonised VAT revenue.
– The resource based on gross national income (GNI) is a uniform percentage rate applied to the GNI of each Member State.
The budget also receives other revenue, such as taxes paid by EU staff on their salaries, contributions from non-EU countries to certain EU programmes and fines on companies that breach competition or other laws.
Revenue flows into the budget in a way which is roughly proportionate to the wealth of the Member States. The United Kingdom, Germany, the Netherlands, Austria and Sweden, however, benefit from some adjustments when calculating their contributions.
Chart 2-1 shows how the four elements indicated above contribute to the EU budget, while Annex 1 provides a summary of financing by type of own resource and by Member State.
Chart 2 1 : Source of financial resource to the European Budget
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2.2. Expenditure
The EU Budget for 2009 included 6 headings of expenditure:
– Sustainable Growth represents the largest share of EU budget the biggest share of the EU budget, which will go to research, innovation, employment and regional development programmes;
– Natural Resources cover the second largest portion of the expenditure supporting the agricultural expenditure and direct aids, rural development, fisheries and environment;
– Citizenship, Freedom, Security and Justice supports initiatives aiming at strengthening active citizenship or addressing issues like terrorism, crime and immigration;
– The EU as a Global Player sets the resources for the Common Foreign and Security Policy, the EU Neighbourhood Policy, Pre-Accession Assistance, Humanitarian Aid and Development Cooperation;
– Other expenditure includes the running costs for the European Institutions and some compensation to New EU Countries.
Chart 2-2 shows the distribution of the EU financial resources among the six different headings, while Annex 2 provides a more detailed overview of the 2009 budget by sub-heading.
Chart 2 2 : Distribution of the expenditure financial resource by Budget Heading
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2.3. Management of the Budget and Legal Framework for the Reporting of irregularities
According to article 317 of the Treaty on the Functioning of the European Union (ex Article 274 of the Treaty establishing the European Community), the Commission shall implement the budget. Council Regulation (EC, Euratom) No 1605/2002 Official Journal L 248 of 16.09.2002 of 25 June 2002 on the Financial Regulation (FinR) applicable to the general budget of the European Communities indicates that the Commission implements the budget:[3]
Official Journal L 248 of 16.09.2002
(1) on a centralised basis: implementation tasks are performed either directly by its departments or indirectly by executive agencies created by the Commission, bodies set up by the Communities - provided that this is compatible with the tasks set out in the basic act - and, subject to certain conditions, national public-sector bodies or bodies governed by private law with a public-service mission;
(2) on a shared or decentralised basis: implementation tasks are delegated to the Member States (shared management) or third countries (decentralised management); the Commission applies clearance-of-accounts procedures or financial correction mechanisms enabling it to assume final responsibility for the implementation of the budget;
(3) by joint management with international organisations: certain implementation tasks are entrusted to international organisations.
3. The Legal Framework for Irregularities Reporting and the Reporting Systems
3.1. The Legal Framework
European legislation provides for the protection of the Union’s financial interests in all areas of activity See in particular Article 3(1) of Council Regulation (EEC) No 595/91 of 4 March 1991 (OJ L 67, 14.3.1997), Commission Regulation (EC) No 1681/94 of 11 July 1994 (OJ L 178 of 12.7.1994), as amended by Regulation (EC) No 2035/2005 of 12 December 2005 (OJ L 328 of 15.12.2005), and No 1831/94 of 26 July 1994 (OJ L 191, 27.7.1994), as amended by Regulation (EC) No 2168/2005 of 23 December 2005 (OJ L 345 of 28.12.2005), for expenditure, and Article 6(5) of Council Regulation (EC, Euratom) No 1150/2000 for traditional own resources. . The FinR sets the principles and rules for the correct implementation of the budget. Member States are required to notify the Commission of evidence of fraud and other irregularities. This need is particularly evident in those sectors of the Community budget where the main responsibility for management is with the Member States, namely, in the fields of Agriculture and Structural Funds (on the expenditure side) and Own Resources (on the revenue side). In these areas, Member States must inform the Commission of all irregularities involving more than €10°000 of community finances. This applies at all stages in the procedure for recovering monies unduly paid or not received.[4]
See in particular Article 3(1) of Council Regulation (EEC) No 595/91 of 4 March 1991 (OJ L 67, 14.3.1997), Commission Regulation (EC) No 1681/94 of 11 July 1994 (OJ L 178 of 12.7.1994), as amended by Regulation (EC) No 2035/2005 of 12 December 2005 (OJ L 328 of 15.12.2005), and No 1831/94 of 26 July 1994 (OJ L 191, 27.7.1994), as amended by Regulation (EC) No 2168/2005 of 23 December 2005 (OJ L 345 of 28.12.2005), for expenditure, and Article 6(5) of Council Regulation (EC, Euratom) No 1150/2000 for traditional own resources.
Regulation No. 1150/2000 specifies the requirement for own resources and Regulation No. 1848/2006 As of 1st January 2007, also the threshold for the agriculture sector has been increased to €10,000 following the provisions contained in article 6(1) of Regulation (EC) 1848/2006 of 14 December 2006 (OJ L 355 of 15.12.2006). for the agriculture sector. For the cohesion policy, which runs over multi-annual programmes the legal framework is more complex and is covered by Regulations Nos. 1681/94 Regulation 1681/94 applies to the Structural Funds, that is to say European Regional Development Fund (ERDF), European Social Fund (ESF), European Agriculture Guidance and Guarantee Fund (EAGGF) – Section Guidance and Financial Instrument for Fisheries Guidance (FIFG). It has been amended by Regulation No. 2035/2005 of 12 December 2005 and 1831/94 Regulation 1831/94 applies to the Cohesion Fund. It has been amended by Regulation No. 2168/2005 of 23 December 2005. for the programming periods until the 2000-2006 and by Regulation No 1828/2006 Commission Regulation (EC) No 1828/2006 of 8 December 2006 setting out rules for the implementation of Council Regulation (EC) No 1083/2006 laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund and of Regulation (EC) No 1080/2006 of the European Parliament and of the Council on the European Regional Development Fund, OJ L 371, 27.12.2006. This repeals Regulations (EC) No 1681/94 and (EC) No 1831/94. Commission Regulation (EC) No 498/2007 of 26 March 2007 laying down detailed rules for the implementation of Council Regulation (EC) No 1198/2006 on the European Fisheries Fund. for the period 2007-2013 Regulation (EC) No 1080/2006 of the European Parliament and of the Council of 5 July 2006 on the European Regional Development Fund and repealing Regulation (EC) No 1783/1999; Regulation (EC) No 1081/2006 of the European Parliament and of the Council of 5 July 2006 on the European Social Fund and repealing Regulation (EC) No 1784/1999; Council Regulation (EC) No 1083/2006 of 11 July 2006 laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund and repealing Regulation (EC) No 1260/1999; Council Regulation (EC) No 1084/2006 of 11 July 2006 establishing a Cohesion Fund and repealing Regulation (EC) No 1164/94, OJ L 210, 31.7.2006. . In the case of pre-accession funds the obligation to report irregularities is specified in Community legislation and in the Pre-Accession and Accession Agreements the European Community and the Candidate and Acceding States. [5][6][7][8][9]
As of 1st January 2007, also the threshold for the agriculture sector has been increased to €10,000 following the provisions contained in article 6(1) of Regulation (EC) 1848/2006 of 14 December 2006 (OJ L 355 of 15.12.2006).
Regulation 1681/94 applies to the Structural Funds, that is to say European Regional Development Fund (ERDF), European Social Fund (ESF), European Agriculture Guidance and Guarantee Fund (EAGGF) – Section Guidance and Financial Instrument for Fisheries Guidance (FIFG). It has been amended by Regulation No. 2035/2005 of 12 December 2005
Regulation 1831/94 applies to the Cohesion Fund. It has been amended by Regulation No. 2168/2005 of 23 December 2005.
Commission Regulation (EC) No 1828/2006 of 8 December 2006 setting out rules for the implementation of Council Regulation (EC) No 1083/2006 laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund and of Regulation (EC) No 1080/2006 of the European Parliament and of the Council on the European Regional Development Fund, OJ L 371, 27.12.2006. This repeals Regulations (EC) No 1681/94 and (EC) No 1831/94. Commission Regulation (EC) No 498/2007 of 26 March 2007 laying down detailed rules for the implementation of Council Regulation (EC) No 1198/2006 on the European Fisheries Fund.
Regulation (EC) No 1080/2006 of the European Parliament and of the Council of 5 July 2006 on the European Regional Development Fund and repealing Regulation (EC) No 1783/1999; Regulation (EC) No 1081/2006 of the European Parliament and of the Council of 5 July 2006 on the European Social Fund and repealing Regulation (EC) No 1784/1999; Council Regulation (EC) No 1083/2006 of 11 July 2006 laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund and repealing Regulation (EC) No 1260/1999; Council Regulation (EC) No 1084/2006 of 11 July 2006 establishing a Cohesion Fund and repealing Regulation (EC) No 1164/94, OJ L 210, 31.7.2006.
Member States are required to report detected irregularities within two months of the end of each quarter. The initial communication has to be updated with follow-up communications to provide relevant information about the financial, administrative and judicial follow-up.
3.2. The irregularity reporting systems
Two main systems are in place for the reporting of irregularities to the Commission: Own Resources (OWNRES) managed by the Directorate General for Budget and the Irregularity Management System (IMS) managed by the European Anti-Fraud Office (OLAF).
3.2.1. Own Resources
Under Article 6(5) of Regulation No 1150/2000, Member States are required to communicate to the Commission, via the OWNRES system, cases of fraud and irregularity, if the TOR amount exceeds €10 000.
3.2.2. Irregularity Management System
The Irregularity Management System (IMS) is an application of the Anti-Fraud Information System (AFIS), developed and maintained by OLAF for a secure exchange of information between Member States and the Commission.
IMS is a complex application divided in several modules which enable Member States to report irregularities and (suspected) frauds under the different sectoral legislations mentioned in paragraph 1.2. The modules are named after the corresponding Regulation.
Figure 3-1 summarises the architecture of IMS and distinguishes between modules under development (framed by a dotted line) and modules currently operational (framed by a continuous line).
Figure 3 1 : IMS architecture
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IMS is a web based application that can be accessed directly via internet; this easies accessibility to the system, which has led to an enormous increase of the number of users in relation to the previous electronic reporting system which was using a more rigid connectivity and therefore a more limited number of users.
Another important feature of IMS is also the possibility of creating different cascade levels for each Member States, allowing establishing a “workflow” which effectively reflects the complexity of the reporting system which normally involves several bodies with different levels of responsibility, often requiring the superior to approve the transmission of the notification further on up to OLAF.
This flexibility of the system , however, implies an increased complexity in its setting up, considering that Member States’ organisation for irregularity reporting ay involve many bodies and authorities, which, then, need to be set up into the system. To exemplify such complexity, it could be mentioned the case of Spain for the Structural Funds, for which 1 organisation needs to be set up for each Operational Programme (OP). For the Programming Period 2007-2013 alone, 46 OPs (excluding those of the Territorial Cooperation Objective) have been approved.
Due to these complexities, 2009 needs to be seen as a transition year for irregularity reporting, because it implied a great effort from Member States and OLAF for the design and implementation of the reporting structures, the creation of the users, the verification and migration of existing communications. Chapter 6, 7 and 8 provide more details about the implementation of IMS in the relevant fields.
3.3. Implementation of the Reporting Obligation
The practices of the national administrations still vary, though improvements have been achieved thanks to the efforts made to harmonise their approaches. The data communicated by Member States is sometimes incomplete. Furthermore, the distinction between “suspected fraud” and other irregularities is not consistent as Member States do not always have the same definition of criminal risk. Consequently, a certain proportion of communications received by the Commission does not distinguish between suspected fraud and irregularity.
The Commission works in close cooperation with the Member States to improve the notification system for irregularities, in particular to clarify the concepts of “fraud” and “irregularity” The Commission opened a dialogue with the representatives of the Member States to clarify basic concepts and to re-assure Member States that the communication of irregularities in no way prejudices the outcome of criminal judicial proceedings. A working document on the practical modalities for the communication of irregularities was established. Discussions are continuing in the Advisory Committee on the Coordination of Fraud Prevention. and as a result of this, attempts to measure the possible economic impact of fraud in certain sectors have been made. However, for the reasons outlined above, the figures presented in the document should be interpreted with caution. It would be particularly inappropriate to draw simple conclusions about the geographical distribution of fraud or on the efficiency of the services which contribute to the protection of financial interests . The findings can not be considered as empirical evidence of the level of fraud and irregularity .[10]
The Commission opened a dialogue with the representatives of the Member States to clarify basic concepts and to re-assure Member States that the communication of irregularities in no way prejudices the outcome of criminal judicial proceedings. A working document on the practical modalities for the communication of irregularities was established. Discussions are continuing in the Advisory Committee on the Coordination of Fraud Prevention.
PART II - REVENUES
4. TRADITIONAL OWN RESOURCES (ANNEXES 3-13)
4.1. Management of Traditional Own Resources (TOR)
The Community must have access to Traditional Own Resources (‘TOR’) These are mainly customs and agricultural duties but also include anti-dumping duties and sugar levies under the best possible conditions. In conformity with Regulation (EC, EURATOM) No 1150/2000 Regulation No 1150/2000 of 22 May 2000. Member States are responsible for making TOR available to the Commission, within the deadlines set, that they have established. Established amounts of customs or agricultural duties, that have been recovered, and debts, that are guaranteed and not under appeal, are to be made available via the A-account . However, if TOR have been established by a Member State but not yet recovered and if no security has been provided or the established amount has been disputed, Member States may enter these TOR amounts in the B-account . These amounts of TOR are not made available until actually recovered. Most fraud and irregularity cases relate to B-account items. [11][12]
These are mainly customs and agricultural duties but also include anti-dumping duties and sugar levies
Regulation No 1150/2000 of 22 May 2000.
4.1.1. Monitoring of establishment and recovery of TOR
In order to get the right picture of Member States’ TOR recovery activity, it is important to keep in mind that over 95% of all amounts of TOR established are subsequently recovered without any particular problem. These amounts are entered in the A-account and made available to the Commission. This covers most of the ‘normal’ import flows where release for free circulation gives rise to a customs debt. The remaining exceptional items are entered in the B-account. This proportion should be borne in mind, when evaluating Member States’ recovery activity.
In return for their collection task, and to support sound and efficient management of public finances, Member States may keep 25% of the amounts recovered. In its capacity as Authorising Officer responsible for executing the EU budget, the Commission (DG Budget as delegated Authorising Officer) monitors Member State activity concerning establishing and recovering TOR.
The following three methods are used:
– Overall monitoring of recovery of TOR via the write-off procedure;
– Regular inspection in Member States of the establishment and recovery of TOR, and B-account entries;
– Specific monitoring (in close cooperation with OLAF, DG TAXUD and DG AGRI) of Member States’ follow-up of recovery in individual cases, which have a significant financial impact and usually involve Mutual Administrative Assistance.
These three methods allow the Commission to monitor Member States’ performance without interfering too much in their day-to-day operations.
4.1.2. Procedure for managing Member States’ reports for write-off
Member States must take all requisite measures to ensure that established amounts of TOR are made available to the Commission. This requirement, mentioned in Article 17(1) of Regulation No 1150/2000, also implies that a Member State is only released from its obligation to make available TOR if it can prove that the debt is irrecoverable either:
(1) for reasons of force majeure ; or
(2) for other reasons, which cannot be attributed to that Member State.
Amounts of TOR become irrecoverable by one of two routes. The first is by a decision of a Member State declaring that they cannot be recovered — this declaration may be made at any time. However, TOR must be deemed irrecoverable by a Member State at the latest five years from the date on which the debt was established, or in the event of an administrative or judicial appeal, the final decision was given, or the last part-payment to the debt was made, whichever is the later. If the amount of the written-off debt is less than EUR 50°000, Member States do not have to communicate the case to the Commission, unless the Commission makes a specific request. However, if the irrecoverable amount of TOR exceeds EUR 50°000, the write-off must be reported to the Commission which has to decide whether the necessary conditions are fulfilled in order to release the Member State from the obligation to make the TOR available.
A 2004 amendment to Regulation No 1150/2000 Regulation No 2028/2004, amending Regulation No 1150/2000. introduced certain timeframes within which a Member State has to provide the Commission with information on amounts of established entitlements of TOR declared or deemed irrecoverable where these exceed EUR 50°000. Consequently, the reports by Member States to write off established TOR amounts deemed irrecoverable increased significantly to 589 in 2008 compared with 100 reports in 2007. In 2009 the quantity of new reports was 168. The increase in 2008 primarily consisted of old cases not yet reported to the Commission. [13]
Regulation No 2028/2004, amending Regulation No 1150/2000.
A new IT application called WOMIS WOMIS: W rite- O ff M anagement and I nformation S ystem. was introduced in January 2010 to support Member States and the Commission in managing write-off reports.[14]
WOMIS: W rite- O ff M anagement and I nformation S ystem.
In 2009 168 write-off reports amounting to EUR 108 016 054.15 were communicated to the Commission by 11 Member States. In total, 527 reports were processed in 2009 Origin of the cases: 4 from Austria, 2 from Belgium, 1 from the Czech Republic, 243 from Germany, 9 from Denmark, 1 from Greece, 61 from Spain, 4 from France, 4 from Finland, 1 from Ireland, 60 from Italy, 106 from the Netherlands, 2 from Portugal, 3 from Sweden and 26 from the UK. with the following result The breakdown between the amounts for each of the positions is, at present, only an estimate, because sometimes elements from the same case may be partly accepted, considered not suitable or refused. Additional information from the Member States (in particular on the proportion covered by guarantee) is then needed to provide the final classification and quantification of the amounts concerned. : [15][16]
Origin of the cases: 4 from Austria, 2 from Belgium, 1 from the Czech Republic, 243 from Germany, 9 from Denmark, 1 from Greece, 61 from Spain, 4 from France, 4 from Finland, 1 from Ireland, 60 from Italy, 106 from the Netherlands, 2 from Portugal, 3 from Sweden and 26 from the UK.
The breakdown between the amounts for each of the positions is, at present, only an estimate, because sometimes elements from the same case may be partly accepted, considered not suitable or refused. Additional information from the Member States (in particular on the proportion covered by guarantee) is then needed to provide the final classification and quantification of the amounts concerned.
Table OR1: Write-off reports treated in 2009
Commission position|cases|% cases|EUR|% amount|
NON- ADMISSIBLE WRITE-OFF CASES|4|0.1%|330°889.10|0.13%|
WRITE-OFF CASES ACCEPTED|218|41.7%|91°055°286.24|37.06%|
ADDITIONAL INFORMATION REQUIRED|244|46.5%|142°767°541.03|58.11%|
WRITE-OFF CASES REFUSED|61|11.7%|11°521°494.31|4.69%|
TOTAL|527|100%|245°675°210.68|100%|
Examination of Member States’ diligence in these cases constitutes a very effective mechanism for gauging their activity in the field of recovery. It encourages national administrations to step up the regularity, efficiency and effectiveness of their recovery activity, since any lack of diligence leading to failure to recover, results in individual Member States having to foot the bill.
4.1.3. Particular cases of Member State failure to recover TOR
If TOR are not established because of an administrative error by a Member State, the Commission applies the principle of financial liability Case C-392/02 of 15 November 2005. These cases are identified on the basis of Articles 220(2)(b) (administrative errors not detectable by the operator) and 221(3) (time-barring resulting from Customs’ inactivity) of the Community Customs Code, Articles 869 and 889 of the Provisions for application of the Code, or on the basis of non-observance by the customs administration of articles of the Community Customs Code giving rise to legitimate expectations on the part of an operator. . In 2009 Member States have been held financially liable for over EUR 9 million and new cases are being given appropriate follow-up. [17]
Case C-392/02 of 15 November 2005. These cases are identified on the basis of Articles 220(2)(b) (administrative errors not detectable by the operator) and 221(3) (time-barring resulting from Customs’ inactivity) of the Community Customs Code, Articles 869 and 889 of the Provisions for application of the Code, or on the basis of non-observance by the customs administration of articles of the Community Customs Code giving rise to legitimate expectations on the part of an operator.
Altogether all cases up until the end of 2009 total nearly EUR 280 million. The main objective of these procedures is to encourage individual Member States to improve their administrative performance and to address weaknesses leading to a loss of TOR. Payments for these cases are made available via the A-account and they reduce in effect the contribution of the Member States via the GNI resource in proportion to their contribution to the EU budget.
4.2. Reporting discipline
Under Article 6(5) of Regulation No 1150/2000, Member States are required to communicate to the Commission, via the OWNRES system OWNRES is an abbreviation for Own Res ources. , cases of fraud and irregularity, if the TOR amount exceeds EUR 10 000. The requirement to report such cases is designed to inform the Budgetary Authority of the state of play relating to fraud and irregularities in TOR. This political dimension is a clear signal to all stakeholders of the importance of prompt, accurate and complete reporting. The OWNRES database is a key tool for obtaining data for global analyses of fraud and irregularities, and presents valuable information to the Budgetary Authority.[18]
OWNRES is an abbreviation for Own Res ources.
Because all TOR amounts exceeding EUR 10 000 in the B-account normally represent an irregularity (fraud included) by definition, therefore the match between the two - from the standpoint of the B-account - should be 100% Items registered in OWNRES are not necessarily also in the B-account. If a debt has been paid or not established (for instance where goods have been seized and confiscated), the amounts should not be entered in the B-account. . This match is checked during the regular inspections in the Member States; however, no significant shortcomings have been found in recent years At the end of 2009 the total amount that is still to be recovered according to OWNRES is higher than the amount of not yet recovered TOR in the B-account. This difference can mostly be explained by the fact that OWNRES is updated with a regulatory delay, as recovery actions should be registered that have taken place. Other explanations are cases seized and confiscated cigarettes and – unfortunately – undue delays. .[19][20]
Items registered in OWNRES are not necessarily also in the B-account. If a debt has been paid or not established (for instance where goods have been seized and confiscated), the amounts should not be entered in the B-account.
At the end of 2009 the total amount that is still to be recovered according to OWNRES is higher than the amount of not yet recovered TOR in the B-account. This difference can mostly be explained by the fact that OWNRES is updated with a regulatory delay, as recovery actions should be registered that have taken place. Other explanations are cases seized and confiscated cigarettes and – unfortunately – undue delays.
4.2.1. Year of discovery versus year reported
Cases should be included in OWNRES upon the initial discovery of the irregularity or fraud case. As a result the year of the customs operation and the year of discovery of the irregularity or fraud can diverge. Member States are continually adding new cases and updating existing items. So the information generated by OWNRES represents the situation on the date of the query. For instance, the number of irregularities and frauds concerning 2008 in last year’s report was 5 344 cases, whereas the number of cases now shown for 2008 is 6 075 cases The information generated by OWNRES to produce the figures in this chapter was all obtained from queries made on 5 March 2010. . This continuing development is inherent to the system.[21]
The information generated by OWNRES to produce the figures in this chapter was all obtained from queries made on 5 March 2010.
4.3. General trends
The number of cases communicated to OWNRES for 2009 is currently 23% lower in comparison with 2008 (from 6 075 to 4 684). The amount of TOR involved is likewise 8.5% smaller (from EUR 375 million to EUR 343 million ) See Annex 3 (table) and Annex 4 (chart). . The trend for the number of belatedly discharged Community Transit operations to decrease continued In 2005 the number of cases of belatedly discharged Transit was 2 374, being 38.2% of the total number of cases registered and 27.9% of the total amount initially established. In 2006 there were 1 479 cases (24.2% of cases and 19.5% of the total amount) and in 2007 there were 1 395 cases (22.2% of cases and 16.5% of the amount), in 2008 there were 1 136 (18.7% of cases and 13.8% of the amount). In 2009 the figures are respectively 738 (15.8% of cases and 13.8% of the amount). whereas the amount involved remained stable . In the case of Transit practice shows that up to 90% of the initially established debts are ultimately cancelled, because of proof of regular discharge after all.[22][23]
See Annex 3 (table) and Annex 4 (chart).
In 2005 the number of cases of belatedly discharged Transit was 2 374, being 38.2% of the total number of cases registered and 27.9% of the total amount initially established. In 2006 there were 1 479 cases (24.2% of cases and 19.5% of the total amount) and in 2007 there were 1 395 cases (22.2% of cases and 16.5% of the amount), in 2008 there were 1 136 (18.7% of cases and 13.8% of the amount). In 2009 the figures are respectively 738 (15.8% of cases and 13.8% of the amount).
The number of communications from the ten new Member States showed continued growth since their accession in 2004 until 2007. In 2008 the growth stopped and 2009 shows 2% less communicated cases compared with 2008 although the amount of TOR increased by 20% from 2008 to 2009.
The OWNRES database now contains 57 183 cases in total (1989-2009) and shows an increase of nearly 11% during 2009 This percentage will gradually decrease since the cumulative number of existing cases in OWNRES will exceed the number of new cases added every new reporting year (last year this percentage was 14%). . Significant changes in the number of registrations in 2009 compared with 2008 can be seen for Greece (- 68%), Estonia (- 35%), Austria (+ 61%), Bulgaria (+ 79%) and Slovenia (+ 92%). , and Significant changes of amounts can be seen in Estonia (- 69%), Portugal (- 60%), Austria (+ 39%), Denmark (+ 121%), Bulgaria (+ 146%), Slovakia (+ 375%) and Malta (+ 467%) Significant changes in amounts involved generally relate to one or a few (very) big cases, e.g. Austria: 5 cases totalling to €14.8 million (involving Clothing from China, CN 61); Denmark: 2 cases totalling €5.4 million (involving Clothing from China, CN 62 and Chemical Products from China, CN 29). . [24][25]
This percentage will gradually decrease since the cumulative number of existing cases in OWNRES will exceed the number of new cases added every new reporting year (last year this percentage was 14%).
Significant changes in amounts involved generally relate to one or a few (very) big cases, e.g. Austria: 5 cases totalling to €14.8 million (involving Clothing from China, CN 61); Denmark: 2 cases totalling €5.4 million (involving Clothing from China, CN 62 and Chemical Products from China, CN 29).
4.3.1. Types of irregularity and fraud
A breakdown of frauds and irregularities by customs procedure and by mechanism type confirms that most cases of irregularity or fraud relate to the procedure of release for free circulation (73% of cases See Annex 5. In 2005 there was a decrease in importance of the customs procedure release for free circulation (53% of cases) which was linked to an improvement in registering those cases. ). False declarations (false description, incorrect value, origin and preferential arrangements) and formal shortcomings (failure to fulfil obligations or commitments) are the mechanisms most frequently mentioned, but also smuggling is highly placed.[26]
See Annex 5. In 2005 there was a decrease in importance of the customs procedure release for free circulation (53% of cases) which was linked to an improvement in registering those cases.
The goods (defined by the first two numbers of the CN code Combined nomenclature or CN — nomenclature of the Common Customs Tariff. ) most affected by fraud and irregularities in 2009, as in previous years, are TVs/monitors etc. (CN 85), Clothing (CN 61) and Tobacco products (CN 24). Cars/motors (CN 87) increased in importance when compared to 2008, as did Food (CN 16), Chemical products (CN 29) and Articles of iron and steel (CN 73) See Annexes 4 and 5. . [27][28]
Combined nomenclature or CN — nomenclature of the Common Customs Tariff.
See Annexes 4 and 5.
Chart OR1: Fraud and irregularities breakdown by good in 2009 (in million EUR) The product description in the chart is a generic description of the goods involved. See Annexes 4 and 5 for detailed analysis. [29]
The product description in the chart is a generic description of the goods involved. See Annexes 4 and 5 for detailed analysis.
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Evaluation of the origin of goods subject to fraud and irregularity See Annex 8. reveals that, just as in 2008, goods originating from China, the US, Japan, South Korea and Bangladesh remain very much affected. The number of cases originating from Hong Kong, Vietnam and Argentina increased. [30]
See Annex 8.
4.3.2. TOR and cigarettes
In 2009 there were 204 cases registered of seized and confiscated cigarettes (CN code 24 02 20 90) involving estimated TOR of over EUR 19 million. In 2008 the number of registered cases concerning seized and confiscated goods was 312, totalling over EUR 23 million. The decrease of the number of cases is related to the EUR-15, of which the UK shows the most significant decrease, from 152 cases in 2008 down to 82 cases in 2009.
4.3.3. Data main sectors TOR
See Annexes 3-12.
4.4. Recovery
· Member States have to recover established amounts including those they register in OWNRES. For a variety of reasons an established amount may not be completely recovered, despite Member States’ efforts. The proportion varies from Member State to Member State.
· Amounts established may change because of additional information or judicial procedures when, for instance, revision shows that there was no customs debt after all or the value or origin of the goods is different than initially thought.
OWNRES shows that approximately 45% of the initially established amount is corrected (cancelled). For closed cases related to Community Transit this may reach up to 90%. As a consequence, Belgium and the Netherlands show more corrections than average, because establishments related to Community Transit occur more frequently. This is due to the ports of Antwerp and Rotterdam.
4.4.1. Recovery rate
Differences in recovery results arise from factors such as the type of fraud or irregularity or the type of debtor involved. The recovery rate for all years (1989-2009) is 45.1% This calculation is based on 57 183 cases, an established amount of €4.3 billion (after corrections) and a recovered amount of €1.9 billion. . [31]
This calculation is based on 57 183 cases, an established amount of €4.3 billion (after corrections) and a recovered amount of €1.9 billion.
The overall recovery rate for 2008 recorded in last year’s report was 38%, although it has since then climbed to 52%. At present the recovery rate for 2009 is 44% See Annex 9. . In other words, of every €10 000 of duties initially established in 2009 in OWNRES, approximately EUR 4 400 is actually paid. Because recovery is ongoing, the recovery rate is constantly changing (payments are obtained, new establishments are made and corrections are taken into account).[32]
See Annex 9.
4.5. Detection of fraud and irregularities
OWNRES uses the following definitions for fraud and irregularity:
Fraud is defined Source: Article 1 of the Convention (Council Act of 26 July 1995) drawn up on the basis of Article 235 (protection of the Communities' financial interests) of the Treaty establishing the European Community. as any intentional act (also cases of organised crime) or omission[33]
Source: Article 1 of the Convention (Council Act of 26 July 1995) drawn up on the basis of Article 235 (protection of the Communities' financial interests) of the Treaty establishing the European Community.
relating to:
● the use or presentation of false, incorrect or incomplete declarations or documents or non-disclosure of information, which has as its effect the illegal reduction of Traditional Own Resources (TOR),
● misapplication of a legally obtained benefit, with the same effect.
Irregularity is defined Source: Council Regulation n° 2988/95 on the protection of the European Communities financial interests. as:[34]
Source: Council Regulation n° 2988/95 on the protection of the European Communities financial interests.
● any breach of a provision of Community law (also unintentional),
● resulting from an act or omission by an economic operator
● which has, or would have, the effect of reduction or a loss of own resources (e.g. customs duties).
Irregularity includes negligence, errors, mistakes etc.
Of all the cases registered in OWNRES in 2009 19% (893 out of 4 684 registered cases) are categorised as fraud, which is the same proportion as in 2008 See Annexes 11 and 12. . However, like in previous years, the differences between Member States are relatively large. In 2009 most of the Member States categorised between 10-50% of all cases as fraud. However, six Member States categorised less than 10% Germany (5%), France (8%), Sweden (9%), Czech Republic (3%), Estonia (0%) and Latvia (5%). Luxemburg reported no cases of fraud and irregularity in 2009. of the cases as fraud, whereas four Member States registered more than 50% Greece (83%), Italy (58%), Bulgaria (65%) and Malta (100%). of the cases as fraud. These figures demonstrate that the categorisation of irregularity and fraud in OWNRES may still not be fully reliable because of differences in the interpretation of the definition of fraud and irregularities.[35][36][37]
See Annexes 11 and 12.
Germany (5%), France (8%), Sweden (9%), Czech Republic (3%), Estonia (0%) and Latvia (5%). Luxemburg reported no cases of fraud and irregularity in 2009.
Greece (83%), Italy (58%), Bulgaria (65%) and Malta (100%).
Chart OR2: Fraud and irregularities breakdown by Member States in 2009 (in million EUR)
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According to OWNRES the moment of discovery is an indicator for classifying a case as fraud, since primary inspections more often result in classifying cases as fraud than post-clearance inspections.
Chart OR3: Percentage of fraud cases detected by primary inspection – 2007-2009
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OWNRES is not a fully reliable source of data on fraud alone, isolated from irregularity. This is because (until a court judgment is obtained) the distinction between fraud and irregularity is usually made on subjective grounds, and, these grounds vary between national administrations.
4.5.1. Member States' control systems
The methods of detection of irregularities or fraud cases registered vary between Member States. There are several possible explanations for these differences, for instance the customs control strategies applied, the way of classifying a method, the reporting authorities involved or the relative presence or absence of type of customs procedures.
A range of detection methods can reveal irregularity or fraud. Judging from the 2009 data national post-clearance inspections and primary national inspections (either physical inspections or inspections of documents — the latter category featuring most frequently) are detection methods that have revealed most cases. Post-clearance inspections feature in 44% of the cases discovered, whereas primary national inspections cover 31%. All in all, the vast majority of cases (75%) were detected in 2009 by means of either primary national inspections or post-clearance control audits.
It is clear that the shift from primary to post-clearance inspections, which could already be seen in previous years, continued in 2009. The relative importance of inspections by anti-fraud services was stable with 7% in 2009. Since the final results of such inspections take more time than regular inspections, a (slight) increase in the percentage for 2009 may be expected in future registrations.
Chart OR4: Method of detection – 2007-2009
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The map below illustrates by which methods OWNRES cases - in amounts - have been discovered by the Member States For details see annex 13. Luxemburg did not register any OWNRES case in 2009 in 2009. For reasons of presentation the following methods are included in the term "ex-post controls": audit of the accounts, Community inspections, inspections by anti-fraud services, inspection visits, national post-clearance audits and tax audits.[38]
For details see annex 13. Luxemburg did not register any OWNRES case in 2009
Map OR1: Detection methods by Member State - 2009
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4.6. Conclusions
In its capacity as Authorising Officer, the Commission (DG Budget is the delegated Authorising Officer) monitors the establishment and recovery of TOR by Member States in various ways. The monitoring is carried out in partnership with different Commission departments, including OLAF.
(1) Because of the particular interest the Budgetary Authority has in recovery, reliable information regarding the number of cases of irregularity and fraud and their development must be entered in OWNRES. Member States have a special responsibility to ensure that appropriate statistical information on irregularity and fraud is provided to the Commission. Regarding the reliability of information in OWNRES, making a distinction between irregularity and fraud or analysing fraud separately is risky and the outcome is not very useful. Only court decisions make it certain whether a case is one of irregularity or fraud, whereas within OWNRES this distinction is usually based on a prognostication made by Member States’ administrations. The figures in OWNRES showing marked differences in the proportions of cases denoted as frauds or irregularities between Member States point this out clearly. OWNRES can only be used for global analysis and monitoring.
(2) The goods involved in irregularities and frauds demanding Member States’ attention are very diverse. TVs and monitors, clothing and of course tobacco keep their relevance in 2009 and are like in previous years the most important goods involved in registered cases of irregularity or fraud. The origin of the goods concerned is likewise varied, although some countries remain continuously at the top of the rankings (such as China, the US, Japan). Irregularity or fraud are mostly discovered by a Member State in the customs procedure of release for free circulation (false declarations, formal shortcomings or simply smuggling), as in previous years.
(3) The amounts of TOR at stake in irregularity and fraud are, according to OWNRES, up to €343 million in 2009. Of the amounts initially established, approximately 45% is later cancelled and in the case of establishments related to Community Transit up to 90% of the established amount may be cancelled later. And payment is required only for the part which is not cancelled. The initial recovery figures for 2009 are comparable to those of previous years.
(4) The methods of detection vary between Member States, however, in 2009 post-clearance inspections and primary controls (during the clearance) are creating 75 % of all OWNRES cases. The Commission encourages Member States to continue their activities in the field of recovery and to provide required statistical information. The Budgetary Authority is entitled to have available the best possible information when monitoring TOR and recovery issues.
PART II - EXPENDITURE
5. AGRICULTURAL EXPENDITURE (Annexes 14-15)
5.1. Introduction
The Common Agricultural Policy (CAP) has been one of the most important common policies over the years, as a large part Almost 40% of the total 2009-budget was spent in the agricultural sector. of the European Union's (EU) budget is spent in the agricultural sector. [39]
Almost 40% of the total 2009-budget was spent in the agricultural sector.
The agricultural expenditure is financed by 2 funds:
· EAGF
· EAFRD
The European Agricultural Guarantee Fund (EAGF) finances direct payments to farmers and measures to regulate agricultural markets such as intervention and export refunds, while the European Agricultural Fund for Rural Development (EAFRD) co-finances the rural development programmes of Member States.
The EU-budget for the year 2009 was about EUR 137 billion. More than EUR 52 billion The amounts include "assigned revenue" of EUR 1.6 billion negative expenditure, representing amounts recovered for cases of irregularities (including fraud), superlevy from milk producers and temporary restructuring amounts. was spent in the agricultural sector, of which EAFRD expenditure accounts for about EUR 8.2 billion.[40]
The amounts include "assigned revenue" of EUR 1.6 billion negative expenditure, representing amounts recovered for cases of irregularities (including fraud), superlevy from milk producers and temporary restructuring amounts.
The basic rules for the financial management of the CAP can be found in Reg. 1290/2005.
The Commission retains overall responsibility for the management of EAGF and EAFRD but does not make payments to the beneficiaries. Member States make the payments to the beneficiaries. This takes places under the principle of shared management. Member States are not only responsible for making payments to the beneficiaries. Member States are also obliged to prevent and deal with irregularities and to recover amounts unduly paid. Granting subsidies, setting up audit strategies, performing audits, reporting irregularities and recovery of unduly paid amounts go hand in hand.
Commission Regulation (EC) No 1848/2006 obliges Member States to report irregularities to OLAF. Member States report irregularities via Module 1848. A web based application which facilitates reporting in digital format.
Module 1848 was introduced in 2008 and is used by all Member States. It concerns a web based application that can be accessed directly via internet. Accessing Module 1848 via internet is only possible since 16 May 2009 due to the later approval of the security protocols. Till that moment, Member States had to use the old-fashioned CCN -gateway (ISDN-line) to get access to Module 1848.
Access via internet led to an enormous increase of the number of users of Module 1848. In the past, only 1 or 2 persons per Member State could submit communications in electronic format. That changed with the introduction of "access via internet". The number of users became in principle "unlimited". Having access to internet means that access to Module 1848 can be obtained.
The year 2009 should therefore again be seen as a transition year for irregularity reporting due to the introduction of access via internet, the introduction of the cascaded reporting structure and the enormous increase of the number of users.
The introduction of the cascaded reporting structure made it possible to have reporting authorities and users on different levels. The total number of users increased from less than 50 to more than 800. Germany for instance has now 40 reporting authorities and 237 users. The increase of the number of users of Module 1848 has also led to an increase of the number of cases reported, higher data quality and a higher compliance rate. Many hands make lighter and better work!
2009 was also the year in which the 1848-liaison-officer was introduced. The 1848-liaison-officer is the linking-pin between OLAF and the Member States. All information concerning Module 1848 is communicated via the 1848-liaison-officer. The 1848-liaison-officer is also responsible for the reporting structure of a Member State. Only the 1848-liaison-officer can modify a reporting structure and grant or revoke access to Module 1848. The 1848-liaison-officers play also an important role in the process of quality checks. Before a communication is submitted to OLAF, a quality check is performed and necessary corrections are made.
Member States reported 1°621 new irregularities under Reg. 1848/2006 compared with 1°133 irregularities in 2008. The total amount affected in 2009 was about EUR 125 million, as against approximately EUR 102 million in 2008. Luxembourg and Slovenia did not report any irregularity in 2009. Irregularities notified in this sector represent 0.24% of the agricultural budget.
Annex 13 provides an overview of the financial impact for the period 2000 – 2009 as annex 14 gives an overview per Member State of the number of irregularities, the amounts involved and the percentage of agricultural expenditure.
The analysis of the reported cases is a descriptive analysis based on the communications forwarded by Member States under Reg. 1848/2006. It should be noted that not all irregularities have to be reported. Member States must only inform the Commission of irregularities involving more than EUR 10°000. The threshold of EUR 10°000 was introduced by Reg. 1848/2006 that came into force on 1 January 2007. Reg. 1848/2006 replaced Reg. 595/91, which had a threshold of EUR 4°000. The increase of the threshold from EUR 4°000 to EUR 10°000 has to be taken into account when this report is compared with reports of years before 2007. The number of reported irregularities in 2009 is about half (1/2) the number of reported irregularities before 2007. The descriptive analysis of this report therefore, cannot be right away compared with the results of previous years.
5.2. Reporting discipline
Article 3 and article 5 of Reg. 1848/2006 lay down the reporting obligations of Member States. The reporting obligations as stipulated in article 3, paragraph 1, letters a – p of Reg. 1848/2006 are used to determine the reporting discipline and the level of compliance of the Member States. The focus will be on those obligations that are crucial for (strategic) analysis and can be summarised with the typical questions that are used in every (fraud) investigation: who, what, when, where, why and how.
The main purpose of forwarding information is to enable the Commission to perform risk analyses Art. 10 Reg. 1848/2006: Without prejudice to Article 11, the Commission may use any information of a general or operational nature communicated by Member States in accordance with this Regulation to perform risk analyses , using information technology support, and may, on the basis of the information obtained, produce reports and develop systems serving to identify risks more effectively. . For that purpose, OLAF needs to receive reliable, consistent and complete data and as early as possible (timely!). [41]
Art. 10 Reg. 1848/2006: Without prejudice to Article 11, the Commission may use any information of a general or operational nature communicated by Member States in accordance with this Regulation to perform risk analyses , using information technology support, and may, on the basis of the information obtained, produce reports and develop systems serving to identify risks more effectively.
Table AG1 provides an overview of the compliance rate per reporting obligation. Member States are ranked in order of their overall 2009 compliance rate.
Table AG1: compliance per Member State year 2009
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Luxembourg and Slovenia had no irregularities to report and are therefore considered to be 100% compliant and are put on top of the table.
Table AG1 focuses on reporting obligations that have a high added value for analysis purposes. The letters above the columns refer to the reporting obligations of Art. 3(1) of Reg. 1848/2006. The fourth column from the right hand side shows the compliance rate per Member State for the financial year 2009. The second and third column from the right hand side contain the compliance rates for the years 2007 and 2008 in order to make it possible to compare 2009 with previous years.
A first conclusion is that the overall reporting discipline improved. This is thanks to a positive attitude of all Member States, the introduction of a new reporting system and the enormous increase of the number of users of Module 1848.
19 Member States have a compliance rate above 90%. 4 Member States (NL, PL, MT and AT) have a compliance rate between 80% and 90% as 2 Member States (UK and FI) have a compliance rate below 80% . . Luxembourg and Slovenia did not report irregularities, therefore, are not taken into consideration.
Latvia is the Member State with the highest compliance rate: 100%.
Finland has the lowest compliance rate: 70%.
It is clear that Finland should pay more attention to the reporting obligations of Reg. 1848/2006. Other Member States that should pay more attention to the reporting obligations are Austria, Malta, the Netherlands, Poland and the United Kingdom.
Finland, Malta and Poland could improve their compliance rate by reporting personal data. The non-reporting of personal data led to a relatively low compliance rate. Finland Finland reports personal data for irregularities concerning structural funds. and Poland Poland used to report personal data but stopped doing that in 2008. informed the Commission that due to national data protection legislation no personal data could be submitted. The obligation to report personal data is based on EU-regulations. By granting subsidies, Member States also accepted the reporting obligations of Reg. 1848/2006, including the reporting of personal data.[42][43]
Finland reports personal data for irregularities concerning structural funds.
Poland used to report personal data but stopped doing that in 2008.
Timely reporting is still a concern for Austria, Finland, the Netherlands, Slovakia and the United Kingdom.
For all Member States count that the reporting of the measure affected deserves some extra attention. Some Member States still use a budget line of the running year in stead of indicating the budget line that was really affected by the irregularity. A simple example: a budget line of 2009 is used for a payment made in 2004.
The overall compliance improved strongly since 2007. It went up from 78% to 95%. Member States that made a big step forward are Germany (↑54%) and Spain (↑49%). This enormous improvement can be explained by the fact that both started to report in electronic format. Some Member States had a small setback and need to pay some extra attention to their compliance.
Overall compliance rate is 95% The compliance rate is based on a quantitative analysis of data provided by Member States. A Member State is being considered as compliant as soon as information has been provided. The quality of the information is not relevant. That will change in 2010. The quality of the information provided will also be taken into account to determine the compliance level. .[44]
The compliance rate is based on a quantitative analysis of data provided by Member States. A Member State is being considered as compliant as soon as information has been provided. The quality of the information is not relevant. That will change in 2010. The quality of the information provided will also be taken into account to determine the compliance level.
The map on the next page provides an overview of Member States' compliance.
(...PICT...)
(...PICT...)
(...PICT...)
The map indicates Member States’ compliance. The darker the colour, the higher the compliance. Especially the Member States that are coloured light need to work on their compliance. It concerns Finland, United Kingdom, Austria, Malta, Poland and the Netherlands. As already mentioned in the introduction, granting subsidies, setting up audit strategies, performing audits, reporting irregularities and recovery of unduly paid amounts go hand in hand.
5.3. General trends
In previous years, the statistical annex provided overviews of the expenditure of that financial year and the irregularities that were reported during that financial year. These irregularities however, did not necessarily refer to the expenditure of that year. Irregularities are normally detected and reported 3 - 5 years after expenditures have taken place. In order to bring expenditure and cases of irregularities in line with each other, the statistical annex will contain from this year on analyses of expenditures and irregularities related to these expenditures.
In order to make it possible to make a comparison with reports of previous years, an overview of the irregularities reported during the financial year 2009 (FY2009) will be provided. That overview can be found in paragraph 5.3.1. and table AG2.
It is good to keep in mind that the analysis a descriptive analysis is. The aim of the analysis is to provide feedback to the Member States on the communications that were received by the Commission in the financial year 2009 and to give an overall view for the period 1971 - 2009.
It is also good to bear in mind that Member States must only inform the Commission of irregularities involving more than EUR 10°000.
5.3.1. Irregularities in perspective – cases reported in 2009
Table AG2 provides an overview per Member State of the irregularities reported in the period 2006 - 2009.
Table AG2: Irregularities reported in the financial year 2009
(...PICT...)
These irregularities concern expenditures for the financial years 1991 – 2009 and were first reported in the period 2006 – 2009.
Member States reported 1,621 cases during the financial year 2009. These 1,621 cases amount to approximately EUR 125 million.
In the period 2002 – 2006, Member States reported about 3°200 cases per year. In 2007, a new threshold, under which no irregularities have to be reported, was introduced. The threshold increased from EUR 4°000 to EUR 10°000 and led to a strong decrease of the number of cases in 2007 and 2008, respectively 1°548 and 1°133.
The number of irregularities increased in 2009 with almost 500 cases (± 43%). A reason for this remarkable increase is the becoming operational of IMS IMS = irregularity management system , which made it possible to access Module 1848 directly via internet. Till 2009 it was only possible for Member States to process communications on a central level, which implies that only a limited number of users had access to the electronic reporting system. That changed with the introduction of IMS. Module 1848 can be accessed directly via internet. This made it possible to have an unlimited number of reporting authorities and users. Having access to internet means also that access to Module 1848 can be obtained. In 2009, the number of users increased from less than 50 to more than 800. This implies that far more users were able to process communications, which had a direct impact on the number of cases reported. [45]
IMS = irregularity management system
Member States reported 30 cases with an amount affected below the reporting threshold of EUR 10°000. Cases below the threshold of EUR 10°000 should only be reported if there is a specific reason to report these cases, as for instance fraud or a clear link with other cases. For another 24 cases counts that Member States indicated a zero as amount affected by the irregularity. For almost all these cases counts that no specific reasons were given why these cases were reported. Only Belgium and Romania indicated that it concerned "suspected-fraud-cases".
Spain and Italy were the Member States that reported the highest number of cases with 404 and 288 cases respectively. Portugal reported as usual a relatively high number of cases (121) considering the fact that the total Portuguese expenditure is relatively low, about 2% of the total expenditure (EU-27). Austria reported a relatively low number of cases: 3.
In monetary terms, Italy reported the highest amounts affected by irregularities, more than EUR 54 million, followed by Spain which reported a total amount of approximately EUR 28 million.
Member States reported in total 11 cases in which the total amount affected by irregularities was higher than EUR 1 million. Italy reported 2 cases for which the total amount affected was even more than EUR 10 million.
The amounts affected by irregularities increased with about 23% to approximately EUR 125 million (see also annex 14 and annex 15).
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The chart on the right hand side reflects the trends for the period 1971 – 2009.
5.3.2. Impact on the budget – cases reported for the financial years 2006 - 2009
Table AG3 provides an overview of the expenditure Expenditure is based on DG AGRI's database CATS - table 106 (download 26 May 2010) of the financial years 2006 – 2009 and the cases of irregularities related to this expenditure. Experience learns that Member States submit cases of irregularities in the first 3-5 years after expenditures have been made. This means that more cases of irregularities can still be expected for the financial years 2006 – 2009. There are also still ex-post audits going on which findings can lead to more cases of irregularities. These figures therefore, cannot be considered as final figures but need to be seen as half-time-result.[46]
Expenditure is based on DG AGRI's database CATS - table 106 (download 26 May 2010)
Table AG3: Expenditure and irregularities per budget chapter
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Member States are ranked on basis of the total expenditure. The total expenditure in the period 2006 - 2009 was almost EUR 201 billion. France spent, with almost EUR 40 billion, the highest amount and can be found on top of the table. Malta had an expenditure of about EUR 25 million and can be found at the bottom of the table.
The third column on the left hand side indicates the relation between a Member State's expenditure and the total expenditure (EU-27). France spent about 20% as Germany and Spain spent about 13%.
In column 5 an overview is given of the number of cases reported by Member States. Member States reported in total 2,086 cases for the financial years 2006 – 2009. The highest number of cases is reported by Spain: 377 cases. Some Member States reported a rather low number of cases. Luxembourg, Slovenia and Austria reported 0, 1 and 6 cases respectively.
Column 6 indicates the amounts affected by the irregularities. The total amount affected is about EUR 97 million. The highest amount is reported by Italy. Italy reported a total amount affected by irregularities of about EUR 14.2 million. It concerns 108 cases. Remarkable is the high amount affected by irregularities already reported by Belgium: EUR 13.9 million. As mentioned, these irregularity figures relate to the 2006-2009-expenditure, which implies that more cases can be expected.
Column 7 provides the so called irregularity rate (IrR) See also chapter 5.4. Specific analysis , See for a more in depth explanation paragraph 1.2.4. . It is the total amount affected by irregularities divided by the total expenditure (e.g. for France 0.03% = EUR 11°761°063 / EUR 39°873°055°647). The overall average is 0.05%. These figures should however be interpreted cautiously. As indicated at the beginning of this chapter, this should be seen as a "half-time-result". There are still ex-post audits going on which means that more cases of irregularities can be expected. Big spenders like Poland, Ireland, France, Greece, Germany and United Kingdom have an irregularity rate that is below the average of 0.05%. The other 2 big spenders, Spain and Italy, have an irregularity rate just above the average, respectively 0.06% and 0.07%. The 3 Scandinavian countries (DK, FI and SE) have a comparable and rather low irregularity rate: < 0.02%. [47][48]
See also chapter 5.4. Specific analysis
See for a more in depth explanation paragraph 1.2.4.
The number of cases reported does not necessarily mean that more irregularities are committed in a Member State. A more developed audit strategy, tailor made audits, higher number of performed audits and so forth will normally lead to a higher number of detected irregularities. In other words, it could be possible that Member States with a higher irregularity rate perform better than Member States with a lower irregularity rate.
A higher expenditure leads normally to a higher number of cases. The figures in table AG3 confirm this hypothesis. The Member States with the highest expenditure (Spain, France, Germany and Poland) reported the highest number of cases. Portugal is the exception on the rule. It reports traditionally a higher number of cases. Portugal reported for the period 2006 – 2009 already 155 cases. The number of cases reported by France, Italy, United Kingdom, Greece and Austria is relatively low. It concerns however a "half-time-result" therefore it is possible that more cases will be reported in the near future. It indicates however, that these Member States detect and/or report their cases later than other Member States. The United Kingdom informed the Commission that due to technical problems not all cases were submitted. Also here counts that more cases can be expected in the near future. The Reports on the Protection of EU Financial Interests of previous years mentioned that Austria is rather late with the reporting of irregularities See OLAF’s website: http://ec.europa.eu/anti_fraud/reports/ . This could be the explanation for the rather low number of cases reported by Austria. [49]
See OLAF’s website: http://ec.europa.eu/anti_fraud/reports/
5.3.3. Impact on the budget – overview per budget chapter financial years 2006 - 2009
Table AG4 provides an overview per budget chapter of the expenditure and irregularities reported for the financial years 2006 - 2009. The budget chapters are ranked on basis of the expenditure. It still counts that this should be seen as a "half-time-result". Audits are still ongoing, therefore, more irregularities will be reported.
Table AG4: Amounts affected per budget chapter
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The highest expenditure concerns budget chapter 050301 "decoupled direct aids". The total expenditure is about EUR 110 billion, which is 55% of the total expenditure. It can be assumed that a sector that "consumes" already 55% of the total agricultural budget will get more attention of the authorities. Member States reported also the highest number of irregularities for this sector: 585 cases. The total amount affected was about EUR 14.8 million.
Budget chapter 050302 "other direct aid" can be found on the second place. An amount of about € 35 billion has been spent for this sector. That is about 18% of the total expenditure. These 2 sectors consume together already more than 70% of the total 2006-2009 expenditure. For both sectors count that the amounts affected by irregularities are rather low. Both sectors have an irregularity rate of 0.01%
Sectors that have a rather high irregularity rate are:
· 050205: sugar 0.71%
· 050215: pigmeat, eggs and poultry etc. 0.51%
· 050401: rural development 0.29%
· 050208: fruits and vegetables 0.27%
· 050210: promotion 0.23%
No cases of irregularities were reported for the sectors "sugar restructuring fund" (050216) and "textile plants" (050207) although there was a substantial expenditure. The latter counts especially for the sector sugar restructuring fund now the total expenditure was almost EUR 4.9 billion.
050301 decoupled direct aids
As mentioned, about 55% of the expenditure concerns "decoupled direct aids" which justifies a closer look at this sector. The overall irregularity rate for "decoupled direct aids", which is controlled through the Integrated Administration and Control System (IACS), is rather low. It differs however strongly per Member State. Table AG5 provides an overview.
Remarkable is that a rather large number of Member States with a relatively low expenditure reported a relatively high number of cases.
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Germany reported the highest number and the highest amounts: 107 cases and a total amount affected of more than EUR 2.5 million. The latter seems to be logic as Germany is the Member State with the highest expenditure: ± EUR 21.1 billion.
France spent the second highest amount for this sector: ± EUR 17.2 billion. It did not report any irregularity. It has to be noted that decoupled direct aid payments started in France only in 2007.
Other Member States that had a rather high expenditure and reported a relatively low number of cases are the United Kingdom, Italy and Greece. The United Kingdom spent almost EUR 13.9 billion and reported 8 cases with a total amount affected of EUR 106°481, which is 0.001% of the total expenditure. As already mentioned, the United Kingdom has some (IT-related) problems with forwarding cases in electronic format, therefore, it is possible that the United Kingdom still has some cases in the pipeline. Italy spent an amount that is more or less comparable with the United Kingdom: ± EUR 11.9 billion. Italy reported 26 cases with a total amount affected of about EUR 1.1 million. Greece spent almost EUR 5.8 billion and reported 7 cases with a total amount affected of EUR 202°232. The irregularity rates for the United Kingdom, Greece and Italy are respectively 0.001%, 0.003% and 0.009%.
Ireland, Romania and Bulgaria reported a relatively high number of irregularities for the sector "decoupled direct aids". The Irish expenditure was about EUR 4.9 billion, which is less than one quarter of the total German expenditure but the number of reported cases is almost the same. Romania and Bulgaria have a comparable irregularity rate, respectively 0.198% and 0.188%.
Austria and Hungary had also a substantial expenditure, respectively EUR 2.2 billion and EUR 2.0 billion, but did not (yet) report any irregularities.
Reporting may also be effected by the EUR 10°000 reporting threshold, given that most payments concern smaller amounts.
5.3.4. Financial follow up of irregularity cases The text, analysis and table of paragraph 5.3.4. is provided by DG AGRI. Under Reg. 1848/2006 Member States are not required to indicate the amounts to recover to OLAF.[50]
The text, analysis and table of paragraph 5.3.4. is provided by DG AGRI. Under Reg. 1848/2006 Member States are not required to indicate the amounts to recover to OLAF.
5.3.4.1. Method of detection – Controls by national authorities
Under the common agricultural policy, a ccording to the principle of shared management the Member States are responsible for paying the agricultural subsidies to the final beneficiaries through paying agencies Regulation (EC) No 1290/2005 (OJ L 209, 11.8.2005) , accredited by the competent authorities of the Member States. They are responsible in particular for checking the admissibility of claims and compliance with EU rules before payment.[51]
Regulation (EC) No 1290/2005 (OJ L 209, 11.8.2005)
For each aid scheme, the relevant sector regulations lay down detailed rules on checks to be carried out by the paying agencies or by delegated bodies operating under their supervision.
All aid applications are subject to administrative checks before any payment is made. On-the-spot checks are carried out on a sample basis which normally ranges between 5% and 100%, depending on the risk in the sector concerned.
The most important control system is the Integrated Administration and Control System (IACS). It covers all direct payments to farmers. IACS includes a computerised database, an identification system for farmers, for agricultural parcels and for animals in case of payments linked to animals, and a system for identification and registration of payment entitlements and aid applications. For aid schemes which do not fall under the IACS such as storage of products or export refunds, complementary checks must be carried out after the payment to the beneficiary has been made.
At the end of each financial year, the certification body draws up a certificate stating whether it has gained reasonable assurance that the accounts transmitted to the Commission are true, complete and accurate and that the internal control procedures have operated satisfactorily.
Member States must send to the Commission the annual accounts of each paying agency, accompanied by a statement of assurance signed by the paying agency's director. The statement of assurance may be qualified by reservations, which must quantify their financial impact. In that case, it must include a remedial action plan and a precise timetable for its implementation. The statement of assurance must be based on an effective supervision of the management and control system in place throughout the year and is subject to an opinion of the certification bodies.
Member States with more than one paying agency must also draw up at the end of the financial year an annual summary report (synthesis) covering the statements of assurance and certificates issued by the certification bodies. Coming on the top of the statements of assurance and certification, this is designed to strengthen the chain of responsibility between the Member States and the Commission.
5.3.4.2. Method of detection - Controls by the Commission
The Commission firstly clears the accounts of the paying agencies on an annual basis as regards their completeness, accuracy and veracity and, secondly, mostly by means of on-the-spot audits, verifies whether the expenditure has been effected by Member States in conformity with the EU rules. Where this is not the case, it excludes the expenditure concerned from EU financing (financial corrections). This latter mechanism, called "conformity clearance", has over the years proven to be a very effective means of protecting the EU's financial interest.
Conformity clearance shields the EU budget from expenditure which should not be charged to it. It is not a mechanism by which irregular payments to final beneficiaries are recovered, something which, according to the principle of shared management, is the sole responsibility of the Member States. Financial corrections are determined on the basis of the nature and gravity of the infringement and the financial damage caused to the EU. The amount is calculated on the basis of the loss actually caused or on the basis of an extrapolation. Where this is not possible, flat-rates are used which take account of the severity of the deficiencies in order to reflect the financial risk for the EU. In financial year 2009 the Commission excluded EUR 655 million from EU financing under the EAGF and the EAFRD Decisions 2008/960/EC (OJ L 340, 19.12.2008) and 2009/253/EC (OJ L 75, 21.3.2009) on grounds of its non-compliance with EU rules.[52]
Decisions 2008/960/EC (OJ L 340, 19.12.2008) and 2009/253/EC (OJ L 75, 21.3.2009)
Where individual irregular payments are or can be identified as a result of the conformity clearance procedures, Member States are required to follow them up by recovery actions against the final beneficiaries. However, even where this is not possible because the financial correction relates exclusively to deficiencies in the Member State's management and control system, the correction remains an important means of improving the functioning of that system and thus of preventing or detecting and recovering irregular payments to final beneficiaries. The conformity clearance thereby contributes to the legality and regularity of transactions at the level of the final beneficiaries.
5.3.4.3. Recovery
Article 32 of Council Regulation (EC) No 1290/2005 provides for an automatic clearance mechanism for unsuccessful recoveries of unduly paid amounts. If a Member State fails to recover an unduly paid amount from the beneficiary within four years of the primary administrative or judicial finding (or, in the case of proceedings before national courts, within eight years), 50% of the non-recovered amount is charged to the budget of the Member State concerned within the framework of the annual financial clearance of the EAGF and EAFRD accounts. Even after the application of this mechanism, Member States are obliged to pursue their recovery procedures and to credit 50% of the amounts effectively recovered to the EU budget. If they fail to do so with the necessary diligence, the Commission may decide to charge the entire outstanding amounts to the Member State concerned.
Undue payments that are the result of administrative errors committed by the national authorities have to be deducted from the annual accounts of the paying agencies concerned and, thus, excluded from EU financing.
In the year 2009, the 50/50 mechanism was applied by the financial clearance decision for the financial year 2008 Commission Decision 2009/367/EC (OJ L 111, 5.5.2009) on all pending non-recovered cases dating from 2004 or 2000 (cases that were four or eight years old respectively). EUR 31.4 million was charged to the Member States in this way and EUR 20.1 million was borne by the EU budget for reasons of irrecoverability. A further EUR 0.8 million was charged to the Member States by a subsequent decision Commission Decision 2010/56/EU (OJ L 32, 4.2.2010) that cleared the accounts for financial year 2008 of those paying agencies that were disjoined in April 2009.[53][54]
Commission Decision 2009/367/EC (OJ L 111, 5.5.2009)
Commission Decision 2010/56/EU (OJ L 32, 4.2.2010)
During financial year 2009 Member States recovered EUR 167.3 million and the outstanding amount still to be recovered from the beneficiaries at the end of that financial year was EUR 1 136.2 million. Table AG6 provides an overview of the recovered, irrecoverable and outstanding amounts at the level of beneficiaries at the end of financial year 2009.
Table AG6: financial information on recovery (EAGF, EAFRD, TRDI)
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The financial consequences of non recovery for cases dating from 2005 or 2001 was determined in accordance with the 50/50 rule mentioned above by charging EUR 22.8 million to the Member States concerned Commission Decision 2010/258/EU (OJ L 112, 5.5.2010) . Moreover, EUR 20.3 million was borne by the EU budget for cases reported irrecoverable during financial year 2009. For those paying agencies for which the 2009 accounts were disjoined from the financial clearance decision, a further EUR 11.9 million will be charged by subsequent Commission Decisions .[55]
Commission Decision 2010/258/EU (OJ L 112, 5.5.2010)
Due the application of the 50/50 mechanism since its introduction in 2006 the amount outstanding from the Member States towards the EU budget was reduced to EUR 830 million Amount includes updated financial information provided by Member States for Financial Year 2009. .[56]
Amount includes updated financial information provided by Member States for Financial Year 2009.
During the years 2007-2009 the Commission was auditing the correct application of the new clearance mechanism through 15 on the spot controls covering 14 paying agencies in 11 Member States. In general the Member States' authorities have adequate procedures in place to protect the financial interest of the European Union. Deficiencies found during these on the spot controls are being followed up in the context of conformity clearance procedures.
5.4. Specific analysis
5.4.1. Introduction
The statistical annex introduces this year some new rates and levels. The rates and levels that are used are the Irregularity Rate (IrR), Fraud Rate (FrR), Fraud Amount Level and Fraud Frequence Level (FFL) IrR, FrR, FAL and FLL are explained in paragraphs 1.24 – 1.2.5. .[57]
IrR, FrR, FAL and FLL are explained in paragraphs 1.24 – 1.2.5.
To calculate reliable rates and levels, a time frame should be used that can be considered as "finalised". The financial year 2009 cannot yet be used to calculate rates and levels as a large number of irregularities concerning the financial year 2009 will be reported in the coming 3 – 5 years. The same counts for the period 2006 – 2009. Member States still need to finalise audits and to report detected irregularities.
To determine reliable rates and levels, a financial year should be selected that can be considered, from an irregularity reporting point of view, as "closed" or "finalised".
The financial year 2004 can be considered, from an irregularity reporting point of view, as finalised In next years report, the financial year 2005 will be used to determine the different rates and levels. . Member States had set up audit strategies and audit plans and performed audits on basis of these strategies and plans. Audit findings have become definitive and irregularities have been reported. Tables AG7, AG8 and AG9 also support the assumption that the financial year 2004 can be considered as finalised. Most of the cases were reported in the first 2-3 years after the expenditure. Almost no cases were reported in the last 2 years. [58]
In next years report, the financial year 2005 will be used to determine the different rates and levels.
The total 2004-expenditure was about EUR 43 billion. Member States reported 2°216 cases of irregularities with a total amount affected of about EUR 99 million, which implies an overall irregularity rate of 0.23%. Member States classified 73% of these cases as "irregularity" or as "suspicion of fraud". 608 cases were not classified. The largest part of these "non-classified-cases" was reported by Germany and Spain. Both were not using the electronic reporting system at that time and did not yet update all their 2004-cases.
9 Member States (EU-25) classified 37 cases as "suspicion of fraud", which is 1.67% of the total number of reported cases and 2.30% of the total number of classified cases. More than 60% of the suspected-fraud-cases were reported by Italy. The total amount affected by suspected-fraud-cases is about EUR 14.9 million, which would imply an overall fraud rate of 0.03%. The fact that more than 60% of the cases were reported by only 1 Member State makes already clear that one cannot speak about an overall fraud rate or EU-25-rate.
Approximately 70% of the 2004-expenditure concerns 3 sectors:
1. budget chapter 050203 : direct payments for arable crops ± EUR 17 billion
2. budget chapter 050302 : beef and veal ± EUR 7.8 billion
3. budget chapter 050401 : rural development ± EUR 4.7 billion
These 3 sectors will be used to make a more precise estimate of the different rates and levels.
Member States reported 1,471 cases for these 3 sectors, which is ± 66% of the total number of cases reported for the financial year 2004. In ± 82% of these cases, Member States classified a case as "irregularity" or as "suspicion of fraud".
5.4.2. Sector 050203: direct payments for arable crops
Table AG7 provides an overview of the cases that have been reported by Member States concerning the 2004-expenditure for the sector "direct payments for arable crops" (budget chapter 050203).
Table AG7: direct payments for arable crops – rate and levels
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The second column of the left hand side provides an overview of the 2004-expenditure per Member State. Only those Member States that had a 2004-expenditure are shown. The total expenditure was about EUR 17 million. In the third column the total amount affected by irregularities can be found.
The irregularity rates (IrR) can be found in the fourth column of the left hand side. The overall rate is 0.06%. Italy has the highest rate: 0.36%. Austria, Spain and Luxembourg did not report any cases of irregularities for this sector, therefore, their irregularity rates are 0%.
The right hand side part of the table provides an overview of the years in which the irregularities concerning the 2004-expenditure have been reported. Member States reported in total 307 cases of irregularities. 106 of these cases were already reported in 2004. The highest number was reported in 2005: 172 cases.
A downfall of the number of reported cases can be seen in the period 2006 – 2009. This is also logic. Irregularities are normally reported in the first years after the discovery of an irregularity. The sharp downfall of cases in the period 2006 – 2009 confirms, from an irregularity reporting point of view, that the financial year 2004 can be considered as finalised.
France had the highest expenditure, e.g. more than EUR 5.1 billion, and reported a total amount affected by irregularities of about EUR 0.6 million. This leads to an irregularity rate of 0.01%. Almost all cases were reported in 2005. Only 1 case was reported in 2006. No more cases were reported in the period 2007 – 2009, therefore, it can be expected that no cases of irregularities will be reported anymore.
Germany reported in the years 2004, 2005 and 2006 respectively 28, 16 and 2 cases. No cases were reported after 2006. Germany reported a total amount affected by irregularities of about EUR 0.9 million. This means an irregularity rate of 0.03%.
Rather high are the irregularity rates of Italy, the Netherlands and Ireland, respectively 0.36%, 0.26% and 0.22%.
No irregularities were reported by Austria, Spain and Luxembourg.
The middle part of table AG7 contains the rates and levels linked to suspected fraud.
Only 1 Member State reported suspected-fraud-cases: Italy. It reported 4 cases with a total amount affected of about EUR 6.6 million. The fraud rate for Italy is 0.35%.
The EU-25 FrR would be 0.04%. Be aware that only 1 Member State reported suspected-fraud-cases. This makes immediately clear that it is hard to speak about an EU-25 fraud rate. It is better to speak about the Italian fraud rate or even better of the fraud rates of the regions or provinces that reported the suspected-fraud-cases.
The FAL is almost 98% now almost the total irregular amount was linked to suspected-fraud-cases. The FFL is 50% now 4 out of 8 cases were classified as suspected-fraud-cases.
5.4.3. Sector 050302: beef and veal
The total 2004-expenditure for "beef and veal" was almost EUR 7.8 billion as the total amount affected by irregularities was about EUR 10.7 million. This implies an overall irregularity rate of 0.14%. Member States reported in total 264 cases. Table AG8 provides an overview.
Table AG8: beef and veal – rates and levels
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The total amount affected by irregularities is higher for the sector "beef and veal" than for the sector "direct payments for arable crops" although the expenditure for the sector "beef and veal" is far lower.
The Member State with the highest expenditure was France, it spent almost EUR 1.8 billion. France reported 3 cases of irregularities which were reported in 2006, 2008 and 2009. It concerned in all 3 cases export of beef and veal. The export took place in 2004. The irregularity rate is low: 0.003%.
The highest amounts affected by irregularities are reported by Spain and Italy.
Spain spent about EUR 830 million and reported 34 cases with a total amount affected by irregularities of about EUR 4.9 million. This means an irregularity rate of 0.59%. The highest number of cases was reported in the year of expenditure: 16 cases. In the following years, the number of cases decreased slowly.
Italy spent a bit more than EUR 540 million. The total amount affected by irregularities was almost EUR 4 million. It concerned 19 cases, which were reported in 2006, 2008 and 2009. The Italian irregularity rate is 0.73%.
Poland is the Member State with the highest irregularity rate: 7.18%. That is high but it should be taken into account that the Polish expenditure was rather low: EUR 506°010. This means that 2 cases with a total amount affected by irregularities of EUR 36.332 have a rather high impact on the irregularity rate.
No irregularities were reported by Greece, Hungary, Lithuania, Luxembourg and Slovenia. These countries had a relatively low expenditure.
The key-figures concerning suspected-fraud-cases can also here be found in the middle of the table.
Member States classified 6 out of 264 cases as suspected-fraud-cases. Italy reported 5 of these cases as Belgium reported 1 case. Italy has a fraud rate 0.57% as the fraud rate for Belgium is 0.01%.
The EU-25-fraud rate would be 0.04% which is equal to the rate for the sector "direct payments for arable crops".
It has to be mentioned again that these figures need to be interpreted very cautiously now only 2 Member States reported suspected-fraud-cases. It is better to speak about the Italian and Belgium fraud rate.
The same counts for fraud amount level (FAL) and fraud frequency level (FFL). Italy has a FAL of 77.51% and a FFL of 26.32% as Belgium has a FAL of 16.66% and a FFL of 5.56%.
5.4.4. Sector 050401: rural development
The 2004-expenditure for rural development was almost EUR 4.8 billion. Member States reported 900 cases of irregularities with a total amount affected of almost EUR 17.8 million. This makes an irregularity rate of 0.37%.
In comparison with the other 2 sectors, "direct payments for arable crops" and "beef and veal", is the irregularity rate rather high for "rural development".
The number of reported irregularities is also rather high. Member States reported the highest number of cases for the sector "rural development". Member States as France, Portugal, Italy and Germany reported a relatively high number of cases for this sector.
The Netherlands and Portugal have the highest irregularity rates, respectively 2.66% and 1.25%.
Belgium did not report any irregularity.
Table AG9 shows that only 2 Member States reported suspected-fraud-cases. France reported 1 case with a total amount affected of EUR 131°065 as Italy reported 8 cases with a total amount affected of EUR 550°695. Also for this sector counts that Italy is responsible for the reporting of almost all suspected-fraud-cases.
Table AG9: rural development – rates and levels
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The fraud rates (FrR) for France and Italy are respectively 0.02% and 0.09%. The EU-25 fraud rate would be 0.01%. Once again, be aware that only 2 Member States reported suspected-fraud-cases, therefore, it is more correct to speak about the rates and levels of France and Italy.
France has a FAL of 4.65% and a FFL of 0.38%. The Italian levels are 13.16% for the FAL and 7.14% for the FFL.
5.4.5. Other sectors: fraud rates
As already mentioned, it is hard to speak about an "overall fraud rate" now only a limited number of regions of a limited number of Member States reported suspected-fraud-cases. The fraud rates for the 2004-expenditures therefore are low. The overall fraud rate is 0.03% as the rates for the 3 above discussed sectors are 0.04%, 0.04% and 0.01% respectively.
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The question arises if there would be any sectors where the fraud rate would be rather high. Table AG10 provides an overview of all sectors for which suspected-fraud-cases were reported. The sector fruits and vegetables (chapter 050208) has, in comparison with all other sectors, a rather high fraud rate: 0.24%. The 8 suspected-fraud-cases together, amount to EUR 6.6 million. All other sectors have a fraud rate of 0.04% or lower.
5.4.6. Patchy reporting
Most Member States reported "patchy". The sector "rural development" is a good example of patchy reporting. The total expenditure for this sector was about EUR 4.8 billion and these expenditures were spread across all regions of all Member States. Member States reported 900 cases of irregularities with a total amount affected of about EUR 17.8 million. These irregularities are not spread across all Member States and within a Member State not across all regions. 2 examples will be given to visualise patchy reporting. Austria and Spain will be used as example now the total expenditures of these 2 Member States are more or less comparable. What counts for Austria and Spain, counts for almost all Member States. Only Denmark and Portugal reported irregularities across almost all regions.
Example Austria.
The total expenditure was about EUR 469 million. Austria reported 4 irregularities with a total amount affected of EUR 141°368. This would mean an irregularity rate of 0.03%. All irregularities were reported by 1 Bundesland: Steiermark. No irregularities were reported by the other 8 Bundesländer. It would therefore be better to speak about the irregularity rate of Bundesland Steiermark and not about the Austrian irregularity rate. The irregularity rate of Bundesland Steiermark is 0.21%, which is far higher than an overall Austrian irregularity rate of 0.03%.
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Example Spain:
The Spanish map provides the same image. The total Spanish expenditure was about EUR 514 million. The expenditure was spread across all provinces. The irregularities however, are not spread across all provinces. Spain reported 63 cases with a total amount affected of about EUR 2.9 million. These irregularities were reported by 12 out of 50 provinces. The overall irregularity rate for Spain would be 0.56%. If the irregularity rate would be calculated per province, it would vary between 0.11% for Huelva and 21.72% for Malaga.
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Remarkable is the huge difference in number of cases and amounts affected between Austria and Spain. Both have a comparable total expenditure but Austria reported 4 cases with a total amount affected of EUR 141°368 as Spain reported 63 cases with a total amount affected of EUR 2°876°082.
Again, what is said for Austria and Spain can be said for almost all Member States: irregularities are concentrated in a limited number of regions and not equally spread over all regions and Member States (see also table AG9).
Patchy reporting has also its impact on the classification of suspected-fraud-cases. The following map shows an overview of the suspected-fraud cases reported for the sector "rural development" concerning the financial year 2004.
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Member States reported 900 cases of which 9 cases were classified as "suspected-fraud". That is exactly 1% of the total number of irregularities. France reported 1 case as Italy reported the other 8 cases. The total amount affected by these suspected-fraud-cases is almost EUR 0.7 million which is approximately 0.01% of the expenditure. The map provides an overview of the regions in which fraud took place.
Remarkable is that almost all suspected-fraud-cases can be found in the same area: Rhone-Alpes, Piemont, Liguria, Emilia-Romagna, Veneto and Marche. This implies that no (suspected) fraud was committed in all other Member States. In other words, in almost all Member States no irregularities were committed intentionally.
The impression is that not all irregularities are reported and classified correctly. A cause could be the heavy workload for those persons that had to process the communications. In the past, communications had to be processed on a central level in a Member State. This meant in practice that only 1 or 2 persons per Member State could submit communications. That has changed with the introduction of Module 1848 and the cascaded reporting structure. The number of persons that can process a communication became in principle unlimited. Therefore, the number of users increased enormously during 2009. At the end of 2009, more than 800 persons were able to process communications via Module 1848. It can be expected that the quantity and quality of the data will improve. The increase of the number of cases in 2009 indicates already that more cases and a higher quality can be expected. Many hands make lighter and better work!
The patchy reporting and the limited number of suspected-fraud-cases makes however clear that no EU-27 rates or levels can be determined yet. Only rates and levels per region can be determined. The year 2010 should be used to check and, if necessary, update cases of irregularities in order to provide next year fraud rates and levels.
5.4.7. summary: 2004- rates and levels
· number of suspected-fraud-cases is rather low: 37 on a total of 2°216 (± 1.67%);
· 9 Member States (EU-25) reported suspected-fraud-cases;
· 16 Member States (EU-25) indicated that none of the reported irregularities were committed intentionally;
· suspected-fraud-cases are mainly reported by 1 Member State: Italy (> 60%);
· difficult to determine overall fraud rates and levels;
· sector "fruit and vegetables" has the highest fraud rate: 0.24%;
· fraud rates and levels need to be interpreted very cautiously!
5.5. Conclusions
(1) 2009 was a transition year for irregularity reporting thanks to the introduction of access to Module 1848 via internet, the introduction of the cascaded reporting structure, the appointing of 1848-liaison-officers and the enormous increase of users.
(2) The EU-27-compliance-2009 increased to 95% thanks to a positive attitude of all Member States, the introduction of a new reporting system and the enormous increase of the number users of the reporting module. All Member States used Module 1848 to submit communications. Member States that should pay extra attention to issues as timely reporting, personal data and measures affected are Austria, Finland, Malta, the Netherlands, Poland and the United Kingdom. Finland and Poland did not report personal data although there is a clear obligation to do so. Latvia has the highest compliance rate as Finland has the lowest.
(3) In the Financial Year 2009, Member States reported 1°621 new cases with a total amount affected of about EUR 125 million. These cases concern expenditures for the Financial Years 1991 – 2009. The number of cases and the amounts affected are not equally spread over all Member States. Spain reported the highest number of cases (404) as Italy reported the highest amounts affected (EUR 54 million). Austria and the United Kingdom reported a relatively low number of cases as Luxembourg and Slovenia did not report any irregularity. 11 cases had a total amount affected of more than EUR 1 million.
(4) Member States recovered during the Financial Year 2009 about EUR 167 million and declared irrecoverable about EUR 64 million. The overall outstanding amount at the end of Financial Year 2009 is about EUR 1.1 billion at final beneficiary level and EUR 830 million towards the EU-budget.
(5) The figures concerning the financial years 2006 – 2009 can be used to identify trends. These figures should be considered as half-time-result now still cases of irregularities will be reported. Definitive figures can only be determined of financial years that can be considered, from an irregularity reporting point of view, as "finalised".
(6) The total expenditure for the financial years 2006-2009 was about EUR 201 billion. The highest expenditure was made by France (20%) and the lowest by Malta (0.01%). Member States reported for these financial years 2°086 cases with a total amount affected of about EUR 97 million which means a provisional irregularity rate of 0.05%. The highest number of cases was reported by Spain (377) as the highest amounts affected by irregularities were reported by Italy (EUR 14 million). France, Italy, United Kingdom, Greece and Austria reported a relatively low number of irregularities.
(7) 55% of the total 2006-2009 expenditure concerns the sector "decoupled direct aids". Member States reported for this sector 585 cases with a total amount affected of about EUR 109 million. The provisional irregularity rate for this sector is 0.01%. Sectors with a rather high irregularity rate are sugar (0.71%), pigmeat, eggs and poultry etc. (0.51%), rural development (0.29%), fruits and vegetables (0.27%) and promotion (0.23%).
(8) The Financial Year 2004 can be considered as finalised now audit plans have been executed, recovery procedures have been started and irregularities have been reported. The total 2004-expenditure was about EUR 43 billion. Member States reported in total 2,216 cases with a total amount affected of about EUR 99 million, which implies an overall irregularity rate of 0.23%.
(9) Member States classified 37 of the 2004-cases as suspected-fraud. 23 cases (62%) were reported by 1 Member State: Italy. The other 14 cases were reported by 8 Member States. All other Member States (16) did not classify any of their cases as fraud or suspected-fraud. An EU-25 fraud rate (FrR), fraud amount level (FAL), fraud frequency level (FFL) cannot be determined now only a very limited number of suspected-fraud-cases were reported by a limited number (of regions) of Member States. Rates and levels can only be determined for regions that reported (suspected-) fraud cases or submitted zero notifications.
6. European Fisheries Fund
Commission Regulation (EC) No 498/2007 of 26 March 2007 OJ L120, 10.05.2007. lays down detailed rules for the implementation of Council Regulation (EC) No 1198/2006 which establishes the European Fisheries Fund (EFF) and defines the framework for Community support for the sustainable development of the fisheries sector, fisheries areas and inland fishing.[59]
OJ L120, 10.05.2007.
Chapter VIII of Regulation (EC) No 498/2007 contains the relevant provisions for the reporting of irregularities to the Commission, establishing a set of rules that are very similar to those foreseen for the Structural Funds.
During 2009, no irregularities have been reported by the Member States concerning this Fund. As indicated in Chapter 1 of this document, the reporting module for the EFF irregularities is currently under development.
7. COHESION POLICY (Annexes 16-20)
The approach followed for the 2009 Statistical Annex changes in relation to previous years. The focus will be much less on yearly developments and will concentrate more on the Programming Period developments in order to reflect the real functioning and implementation of the Cohesion Policy measures.
In 2009, Member States reported 4°931 irregularities under the different regulations that cover the reporting obligation for the Cohesion Policy. 4°653 were reported under Regulation (EC) No 1681/94 which covers the four Structural Funds The four Structural Funds are: The European Regional Development Fund (ERDF), supporting primarily productive investment, infrastructure and development of SMEs; The European Social Fund (ESF), supporting measures to promote employment (education systems, vocational training and recruitment aids); The Guidance Section of the European Agricultural Guidance and Guarantee Fund (EAGGF-Guidance), supporting measures for the adjustment of agricultural structures and rural development; The Financial Instrument for Fisheries Guidance (FIFG), supporting measures for the adjustment of the fisheries sector and the ‘accompanying measures’ of the common fishery policy. ; 92 under Regulation (EC) No 1831/94 (on the Cohesion Fund, with the exception of the period 2007-2013) and 186 irregularities under Regulation No 1828/2006, which covers the programming period 2007-2013. Annexes 18 to 20 provide more details about the irregularities reported under the different regulations.[60]
The four Structural Funds are:
a) The European Regional Development Fund (ERDF), supporting primarily productive investment, infrastructure and development of SMEs;
b) The European Social Fund (ESF), supporting measures to promote employment (education systems, vocational training and recruitment aids);
c) The Guidance Section of the European Agricultural Guidance and Guarantee Fund (EAGGF-Guidance), supporting measures for the adjustment of agricultural structures and rural development;
d) The Financial Instrument for Fisheries Guidance (FIFG), supporting measures for the adjustment of the fisheries sector and the ‘accompanying measures’ of the common fishery policy.
The total amount affected by irregularities in 2009 was EUR 1.22 billion, EUR 1.15 billion of which was from the Structural Funds and EUR 67.3 million from the Cohesion Fund. Irregularities reported in this sector were equivalent to 2.53% of the resource allocations for 2009.
7.1. Reporting Discipline
In 2009 the new reporting system IMS was launched also for the Cohesion Policy area, following the Agricultural sector. Member States were involved at several stages (training, definition of the reporting structure and assistance during the migration).
In particular, Member States were requested to provide a description of the national reporting structure and provide assistance, if needed, for the migration of the data from the old system to the new.
To date, all Member States have communicated their reporting structures (or at least an interim structure) except France. Ireland has provided a reporting structure only for the European Social Fund (ESF). Sweden has indicated the reporting structure for the new programming period, but no responsible authorities has been indicated for previous periods. The Czech Republic and Spain have communicated their reporting structures, but they have not been implemented yet in the system due to some technical problems (for CZ) or their particular complexity (in the case of ES). OLAF puts in place everything that is possible to solve these situations in the shortest possible delay, but in the absence of the necessary information this is not possible.
Map SF1 shows the situation of IMS implementation for each Member State.
Map SF1: Implementation of IMS by Member State
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If a Member State has communicated an interim structure, it should be noted that the system is fully operational for the Member State concerned. All countries with a value of 4 or higher are to be considered at a satisfactory level of implementation. Problems still exist with the Member States presenting a value of 3 or less, with the exception of the Czech Republic for the reasons explained above.
As long as module 1828 is not fully deployed, module 1681 has been designed to temporarily accept irregularities concerning the programming period 2007-2013.
Given the complexity of the implementation of module 1681, module 1831 has suffered some delays of implementation and only few countries (presenting a less complicated reporting structure) have received access to this module in 2009 as showed in Table SF 1. The full implementation of module 1831 is expected in 2010.
Table SF 1 IMS module 1831: status of implementation by beneficiary country
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7.2. General Trends
7.2.1. Yearly trends
In 2009 the number of reported irregularities and related financial amounts involved increased in relation to 2008 and represent the highest peak registered so far in the Cohesion Policy. 4°931 irregularities were received throughout the year, involving an overall amount of EUR 1.22 billion, the highest ever. The number of irregularities increased by 23%, while the irregular amounts increased by 109%.
Chart SF 1: 1994-2009 trend concerning number of reported irregularities for the Cohesion Policy
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Three concurring elements contribute to explain this further increase:
(1) Reported irregularities concern three programming periods, as highlighted in Chart SF 1;
(2) The number of irregularities reported by the 2 new Member States (Bulgaria and Romania) is for the first time significant;
(3) 2009 is the year before the closure of the majority of the programmes. Also for the closure of the previous programming period (1994-1999) a comparably significant increase was registered. Periods of programmes closures always coincides with increased checks, audits and reporting.
Since 1998, the impact of reported irregularities on the Cohesion Policy budget has showed two important increases, the first in 2002 and the second in 2009, as showed in Chart SF 2. In proportion, the increase in 2002 (more than doubled the value of 2001) has been higher than that in 2009 (almost the double of the value of 2008). In both cases, the explanation rests in the approaching closure of the corresponding programming period.
Chart SF 2: Impact of irregularities on the Cohesion Policy budget
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The second interesting aspect is that, in the period between 2003 and 2007, the impact on the budget of the reported irregularities has remained rather stable supporting the impression that a certain consistency and continuity have been achieved in the reporting of irregularities by Member States. In general, the increased level of impact of reported irregularities on the Cohesion Policy budget should be interpreted positively, as increased controls and compliance with the reporting obligations.
However, on the other hand, figures showed in Chart SF2 are still difficult to interpret because the reported irregularities refer to programmes and projects that are of a multi-annual nature and, furthermore, as already indicated the reported irregularities refer to three different programming periods In reality the programming periods (and the related irregularities) are four : 1989-1993 ; 1994-1999 ; 2000-2006 and 2007-2013, but the overlaps involve a maximum of three periods. . Furthermore, the budget for the year 2009, on which the impact of irregularities reported by the Member States has been calculated, is indicating the resources allocated to the third year of the programming period 2007-2013, while only a very limited number of the reported irregularities are referred to it.[61]
In reality the programming periods (and the related irregularities) are four : 1989-1993 ; 1994-1999 ; 2000-2006 and 2007-2013, but the overlaps involve a maximum of three periods.
This implies that a correct estimation of the impact of irregularities and suspected frauds on the part of the European budget dedicated to the Cohesion policy is possible only by analysing irregularities by programming period. Paragraph 7.3 will deal with these specific issues.
7.2.2. Irregularities reported in 2009
Chart SF 3 shows the distribution among the Funds of the irregularities reported in 2009. As in previous years, the highest number of irregularities was reported in relation to ERDF.
Chart SF 3: Distribution of irregularities by Fund - 2009
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The predominance of ERDF is even more evident in relation to the amounts affected by irregularities, of which about 78% are related to it, as showed in Chart SF 4.
Chart SF 4: Distribution of irregular amounts by Fund - 2009
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The countries having reported the highest number of irregularities in 2009 were Italy, the United Kingdom, Portugal and Germany. Annexes 18.1, 18.2, 19 and 20 detail the number of irregularities and related amounts reported by Member State.
7.2.3. Detection methods
Table SF1 shows the most frequent detection methods (TOP 10) and the related detected amounts.
Table SF1: detection methods
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The “TOP 10” detection methods relate to 76% of the total reported irregularities and 66% of the irregular amounts. The main two types of controls emerging from the table are documentary checks and on-the-spot controls.
It should be emphasised the excessive use of generic codes such as "Other facts" and “Other controls”. The lack of further information on these methods is particularly regrettable, as they concern about 30% of detected amounts. In comparison with 2008, the “National administrative or financial control has become the most frequently reported detection method.
7.2.4. Types of irregularity
The majority of cases involve irregularities of an “administrative” nature that are normally detected in the course of the routine documentary checks which are conducted before any payment of European money is made. As a result, among the most frequent types of irregularity reported by Member States are the “not eligible expenditure” and “missing or incomplete supporting documents”.
Table SF2 shows the most frequent types of irregularities together with the amounts involved and the indicative average amount:
Table SF2: Most frequent types of irregularities reported by Member States
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It is important to underline that the most frequent types of irregularities are almost the same as in the last four years confirming a certain consistency in patterns and trends relating to structural measures and consistency in reporting by the Member States.
Unfortunately, the generic code “other irregularities” is still the second most used category and it is also the typology presenting the highest average amounts.
The “nature” of the detected and reported irregularities points at the fact that detected irregularities mainly are related to the “Implementation stage” of the project life cycle, while only a smaller part refers to the “Selection / Procurement Stage”.
7.2.5. Suspected frauds
First estimations of which proportion of the reported irregularities could be defined as “suspected fraud” were presented in the Annual Reports since 2004. These attempts were mainly based on specific analyses of the information reported by the Member States concerning the modus operandi , the type of irregularity, the administrative status of an irregularity and the additional information given in text fields.
After the modifications introduced by Regulations Nos 2035/2005 and 2168/2005 to the basic Regulations Nos 1681/94 and 1831/94, as of January 1st 2006, Member States have to “qualify” the reported irregularity, indicating whether the reported irregularity is a “suspected fraud” or not. The concept of “suspected fraud” is necessary, because a given situation can be defined as fraudulent only after a sentence is issued by a competent court The definition of suspected fraud is explained in Paragraph 1.2.3. . [62]
The definition of suspected fraud is explained in Paragraph 1.2.3.
Thanks to the introduction of the new reporting system IMS, Member States have classified (that is to say that they indicated whether the reported situation was evaluated as an administrative irregularity or a suspected fraud) 85% of the reported irregularities. It is a further encouraging progress in relation to the previous year, when 78% of the reported cases provided for this indication. France, Spain and partially Ireland are the only Member States that still do not comply with this obligation.
About 8.9% of the 4°128 irregularities for which qualification has been provided were qualified as “suspected fraud” or “established fraud”. This result is one percentage point higher than last year.
Furthermore, by applying the same analytical techniques of the previous years The estimation method has remained basically the same, with some minor variations, following the lessons “learned” in analysing the cases directly classified by the Member States. This slightly “revised” method has been applied again to the entire database of reported irregularities for the years 2000-2009 in order to produce Chart SF5. to the data set classified by the Member States, the results obtained are rather consistent with those obtained on the portion of information received from the Member States. In fact, the results differ in only 2.3% of the cases. However, all these differences are related to cases that according to the analysis by the Commission should have been classified as cases of suspected frauds.[63]
The estimation method has remained basically the same, with some minor variations, following the lessons “learned” in analysing the cases directly classified by the Member States. This slightly “revised” method has been applied again to the entire database of reported irregularities for the years 2000-2009 in order to produce Chart SF5.
It should be also highlighted that from a very detailed analysis of the cases where differences exist, elements provided by the Member States induce to consider correct the re-classification operated by the Commission The descriptions provided by the Member States of the modus operandi linked to these communications of irregularity show that falsified documents, declarations of certificates were used. Under these circumstances, the Commission believes that those communications of irregularities should have been classified as “suspicion of fraud”. .[64]
The descriptions provided by the Member States of the modus operandi linked to these communications of irregularity show that falsified documents, declarations of certificates were used. Under these circumstances, the Commission believes that those communications of irregularities should have been classified as “suspicion of fraud”.
Despite this, still some caution is recommended in assessing the meaning of these figures. A 100% qualification (towards which the system is approaching every year) from the Member States would remove this caution, but these results are, indeed, encouraging.
Chart SF5 As data referred to the Cohesion fund are considered not entirely reliable for this type of estimation, they have been excluded from this chart. See also footnotes 62 and 63 for more details about data showed on this chart. presents the trend of FFL FFL is defined in paragraph 1.2.4. and FAL FAL is defined in paragraph 1.2.5. in the last nine years calculated according to the Commission’s estimations.[65][66][67]
As data referred to the Cohesion fund are considered not entirely reliable for this type of estimation, they have been excluded from this chart. See also footnotes 62 and 63 for more details about data showed on this chart.
FFL is defined in paragraph 1.2.4.
FAL is defined in paragraph 1.2.5.
Chart SF 5: FFL and FAL from 2000 to 2009
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Table SF3: FFL and FAL from 2000 to 2009
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The analysis of the Commission highlights a decreasing tendency of the reported suspicion of the amounts related to cases of suspicion of fraud (expressed as percentage of the total reported irregular amounts) from 2006 to 2009, while the FFL has been slightly increasing from 2008 to 2009, but its variation is not significant. It is premature to conclude about a diminution of fraud in the sector, as results may be easily influenced by the detection of cases of suspicion of fraud with bigger or smaller amounts involved.
On the basis of this estimation, the FrR The definition of FrR is in paragraph 1.2.4. for the annual budget 2009 of the Cohesion Policy is 0.23%.[68]
The definition of FrR is in paragraph 1.2.4.
However, this does not necessarily mean that this amount turns out into a loss for the European budget. In fact, these amounts relate to suspected fraudulent behaviours that have been detected by national authorities and for which recovery procedures are ongoing. Moreover, when these situations were detected in early stages of the process, the “potential” loss is even decreased, because no payments or only interim payments have been granted. The amounts still to be recovered linked to cases of “suspected fraud” concern 0.11% of the EU budget.
7.3. Specific analysis – Irregularities related to the programming period 2000-2006
The specific analysis focuses on the programming period 2000-2006; the data set is composed of all the irregularities related to it reported until the fourth quarter 2009. In order to improve the comparability among the different Member States, the irregularities referred to the Cohesion Fund are not included and a specific sub-paragraph is dedicated to it at the end.
Chart SF6 shows the trend of reported irregularities (both in terms of numbers and financial amounts involved) referred to the programming period 2000-2006 as from the year 2000.
Chart SF6: 2000-2009 trend concerning number of reported irregularities and irregular amounts – Programming Period 2000-2006
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Irregularities related to this programming period have been steadily increasing year after year. This is due to the fact that controls on the projects also progressed with the advancing of the financed operations. It is worth remembering that the projects financed through the Structural Funds are implemented during several years. 2009 is the year approaching the final closure of the programmes and this explains the further increase in relation to the previous year in terms of reported irregularities.
Table SF 4 shows the data displayed on Chart SF 6 and also includes the amounts of annual payments from the Commission to the Member States indicating the related Irregularity Rate (IrR) The definition and calculation method for IrR is in paragraph 1.2.4. .[69]
The definition and calculation method for IrR is in paragraph 1.2.4.
Table SF 4: number of reported irregularities, irregular amounts, payments and irregularity rate – Programming Period 2000-2006
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The irregularity rate for the year 2009 should not induce any alarm. It was already predicted in the Annual Report 2008 that it would be increasing due to the decrease in the payments and the incoming of more irregularities. The interesting information in Table SF 4 is in particular the overall IrR for the whole programming period of 1.6%.
Chart SF7 puts in comparison the trend related to the programming period 2000-2006 with that of the previous round in terms of numbers of reported irregularities, in order to show that even after the year of closure of the period 1994-1999 (Year 9), irregularities keep on being communicated.
Chart SF 7: Comparison between Programming Periods 1994-1999 and 2000-2006
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The chart clearly shows that the number of irregularities related to the current programming period reported in the first 9 years from its beginning are many more than those related to the previous.
This is due to a number of reasons. The increased resources allocated to the structural measures, the higher number of Member States that benefit from them, a better understanding of the reporting obligations from national authorities, but also, probably, increased checks in quality and quantity which result in more detected and reported irregularities.
7.3.1. Irregularities affecting the different funds
Table SF5 summarises, in relation to each of the Structural Funds, the number of irregularities, the related irregular financial amounts, the payments and the IrR.
Table SF5: Irregularities, payments and IrR by Fund
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Chart SF 8 displays the distribution of the 21 028 irregularities and the related irregular financial amounts among the different Funds. The inner circle represents the distribution of irregularities by number, the outer by irregular financial amounts.
Chart SF8: Distribution of irregularities and related irregular financial amounts by Fund
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While in terms of number of reported irregularities the ERDF seems slightly under-represented in comparison with its share of the payments (52%), the irregularities financial amounts related to it have a higher relative weight that is greatly exceeding its share of the payments (76% of the total irregular amounts against 58% of the total payments). This difference may be justified by the fact that the ERDF finances projects of a higher value and therefore irregularities tend also to have a greater amount.
It is interesting to note that in Table SF 5, the other three funds have an IrR that is very similar, while that of the ERDF is more than their double.
7.3.2. Irregularities by Objective
The Cohesion policy aims at supporting the economy of regions lagging behind or in a difficult contingent economic situation. The European support; which is always accompanied by a national support, varies according to the fact that a region falls within the area of a given objective Three general objectives are foreseen for the programming period 2000-2006: Objective 1: promote the development and structural adjustment of regions whose development is lagging behind; Objective 2: supporting the economic and social conversion of areas experiencing structural difficulties; Objective 3: supporting the adaptation and modernisation of education, training and employment policies and systems in regions not eligible under Objective 1. Furthermore, through the Funds are also financed the so called “Community Initiatives” , aimed at intervening on specific aspects such as, for example, stimulating interregional cooperation (INTERREG); promoting the design and implementation of innovative models of development for the economic and social regeneration of troubled urban areas (URBAN). . [70]
Three general objectives are foreseen for the programming period 2000-2006:
a) Objective 1: promote the development and structural adjustment of regions whose development is lagging behind;
b) Objective 2: supporting the economic and social conversion of areas experiencing structural difficulties;
c) Objective 3: supporting the adaptation and modernisation of education, training and employment policies and systems in regions not eligible under Objective 1.
Furthermore, through the Funds are also financed the so called “Community Initiatives” , aimed at intervening on specific aspects such as, for example, stimulating interregional cooperation (INTERREG); promoting the design and implementation of innovative models of development for the economic and social regeneration of troubled urban areas (URBAN).
Table SF6 summarises, in relation to each of the Objective, the number of irregularities, the related irregular financial amounts, the payments and the IrR.
Table SF6: Irregularities, payments and IrR by Objective
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Chart SF9 shows how the irregularities related to the programming period 2000-2006 were distributed among the different objectives.
Chart SF9: Distribution of irregularities and related irregular financial amounts by Objective
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The distribution of the irregularities is to a certain extent in line with the allocation of the financial resources among the different objectives, with an over representation of irregularities related to objective 2 programmes and an under representation of irregularities affecting objective 3 programmes.
Furthermore, the IrR for the Objective 2 programmes is the highest (2.2% of the payments). The IrR for the Objective 1 equals the overall IrR (1.6%), while that for Objective 3 programmes, Fisheries out of Objective 1 regions, the Equal community initiative, and Leader+ are lower or significantly lower (respectively 1.1%, 0.4%, 0.7% and 0.3%).
These elements may imply some under-reporting in relation to programmes / initiatives presenting a very low IrR. The interpretation of the irregularity rate of Objective 2 programmes is more difficult as it may indicate a greater effectiveness of the control systems of these programmes in detecting the irregularities or denote some problematic aspects in the implementation of these programmes. Information currently available does not allow solving this dilemma.
7.3.3. Irregularities by Member State
Table SF7 summarises, in relation to each Member State, the number of irregularities, the related irregular financial amounts, the payments and the IrR. For convenience, irregularities related to INTERREG programmes have been grouped together and have not been related to a specific country.
The Initiative “PEACE” has been grouped together with the INTERREG programmes.
Table SF7: Irregularities, payments and IrR by Member State
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Map 2 displays the IrR by Member State highlighting the high values of Luxembourg, United Kingdom, the Netherlands and Slovenia and the low values of France and Ireland in particular. Low IrR does not necessarily imply that good management and control systems have been put in place. In general this is more the case for IrR around the average value of 1.6%.
The IrR of the Netherlands and of the United Kingdom could also explain the fact that Objective 2 programmes have the highest IR, as indicated in Table SF 6 and could also have its explanation in a higher percentage of the expenditure audited in these two countries. Unfortunately, at the moment of closing this document, data about audited expenditure were not available for all Member States and therefore did not allow for this type of analysis to be conducted.
Map SF2: IR by Member State
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7.3.4. Suspected frauds
On the basis of the method used for classifying the reported irregularities as illustrated in paragraph 7.2.6, it is possible to give an attempt of identifying the impact on the programming period 200-2006 of the suspicion of fraud calculated on the basis of the irregularities reported until the 4 th quarter 2009.
Table SF8 shows an overview of the number of suspicions of fraud detected and reported and the related financial amounts, the payments and the FrR by Fund.
Table SF8: Fraud rate by Fund
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ERDF shows the highest FrR, followed by FIFG. The overall FrR is 0.25%. This figure is exclusively the result of the detected and reported cases of suspected and established fraud and therefore is still far from a real estimation of how much fraud affects the Cohesion Policy budget.
In order to obtain a more accurate picture it would be necessary to establish the exact extension of audits or checks from which these results were obtained.
Table SF9 shows the number of detected and reported suspicions of fraud, the related financial amounts, the payments and the FrR by Objective
. Table SF9: Suspicions of fraud, payments and FrR by Objective
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The analysis by Objective adds some further elements to establish the impact of suspicions of fraud on the budget. In particular, among the Objectives, programmes referred to the Objective 1 regions present the highest rate (0.30%), about the double than the second highest of the Objective 3 programmes (0.17%). The two Objectives represent, somehow, two extremes, as regions benefitting from Objective 1 programmes are those lagging behind, while those interested by the Objective 3 programmes are the richest. Objective 2 programmes present a lower rate (0.10%), especially in consideration of the fact that those programme presented the highest IrR. URBAN and EQUAL initiatives have the lowest FrR (0.04%).
Table SF 10 shows the number of detected and reported suspicions of fraud, the related financial amounts, the payments and the FrR by Member State. Again, suspicions of fraud related to INTERREG programmes have been grouped together and have not been related to a specific country, and the Initiative “PEACE” has been grouped together with INTERREG programmes.
. Table SF10: Suspicions of fraud, payments and FrR by Member State
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Map 3 displays the FrR by Member State highlighting the high values, in particular, of Italy, Poland, Estonia and Slovakia. The high FrR of these two countries should be interpreted in a positive way, rather than negative.
Looking at the low values, among these are Malta (0%), Ireland, France, Austria, Belgium, Cyprus, Denmark, Spain, Finland, the Netherlands, Portugal, Slovenia and Sweden. If very low values are explainable especially in very small countries like Malta and Cyprus, they seem less realistic in larger Member States like, in particular, France and Spain. Their result could indicate either a lower detection capability or the non reporting of a part of eventually detected fraud. In the case of these two countries, it should also be emphasised that values displayed on the table are entirely the result of Commission estimation, as they failed to provide any qualification (see par. 7.2.5).
Map SF3: FrR by Member State
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Good anti-fraud systems show, inevitably, bad figures. By good anti-fraud system it is meant a system that does not only detect fraud, putting in place adequate means and resources; but also duly reports it according to the existing rules.
7.3.5. Preventive action and Recovery
An interesting aspect to examine in the framework of the protection of the Communities’ financial interests is how effective is the preventive action of national authorities and, when not prevented, what proportion of the detected irregular amounts is effectively recovered from the beneficiaries.
Table SF11 shows the irregular amounts reported by each Member State on the whole programming period 2000-2006 (column A); the part of these irregular amounts for which payments were made to beneficiary (column B); the balance that still remain to be recovered Member States continue to report the amounts recovered also after (partial) programme closure and must return the recovered amounts to the Commission. The Commission monitors the correctness of the financial follow-up given by the Member States to pending recoveries. (column C); the percentage of the irregular amounts which was not paid to beneficiary (column D – prevention rate); and the percentage of the paid irregular amounts that remains to has been recovered (column E – recovery rate.[71]
Member States continue to report the amounts recovered also after (partial) programme closure and must return the recovered amounts to the Commission. The Commission monitors the correctness of the financial follow-up given by the Member States to pending recoveries.
Table SF 1 1: Irregular amounts, prevention rate and recovery rate by Member State – Programming Period 2000-2006
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Looking at column D, very high prevention rates emerge especially in the Netherlands, Sweden, Hungary, Poland, Italy, Czech Republic and Lithuania. Some caution is needed on these data, because some Member States may have not reported the irregularities they detected before payment.
Looking at column E, very high recovery rates are those of Luxembourg (100%!), Ireland, Finland, Belgium, Spain, Poland and Greece. Also in this case some caution is due. In many Member States is a common practise to exclude projects found as irregular from the expenditure declaration to the Commission In fact, in order to correct detected irregularities, Member States have two choices: they can choose to either immediately withdraw irregular expenditure by deducting it from the next payment claim or they can choose to deduct the irregular expenditure from a future payment claim only once recovery has been affected from the final beneficiary. This is a choice left to the Member States’ discretion. . This implies that EU resources are somehow protected and those resources can be re-used to finance other eligible projects, but the full burden of recovery is shifted on national budgets. When this decision is taken, the Commission does not receive anymore data about recovery of those sums and therefore the picture presented here is only partial.[72]
In fact, in order to correct detected irregularities, Member States have two choices: they can choose to either immediately withdraw irregular expenditure by deducting it from the next payment claim or they can choose to deduct the irregular expenditure from a future payment claim only once recovery has been affected from the final beneficiary. This is a choice left to the Member States’ discretion.
7.3.6. Cohesion Fund
A total of 499 cases were reported since 2003, concerning the Cohesion Fund for the programming period 2000-2006. A total amount of EUR 278 million was reported of which EUR 73 million remain to be recovered.
Table SF 12 details the information by Member State benefitting from this Fund.
Table SF 12: N° of irregularities, related irregular amounts and amounts to be recovered – Cohesion Fund 2000-2006
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There table presents great disparities that do not allow comparing the different Member States.
More interesting are the results of the analysis focusing on the typology of projects financed by the Cohesion Fund affected by irregularities.
As showed in Table SF 13, the majority of irregularities and related irregular amounts affect Environmental projects. However, the irregularities affecting Transport Projects are of a higher average value (more than double of the Environmental Projects).
Table SF 13: N° of irregularities, related irregular amounts and amounts to be recovered by type of project – Cohesion Fund 2000-2006
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Table SF 14 shows the irregularity by category of project and highlights that Environmental Projects present an irregularity rate that is higher than all others.
Table SF 14: Irregularity Rate by type of Cohesion Fund Project 2000-2006
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7.4. Conclusions
(1) In 2009, 4 931 irregularities were reported, involving an overall amount of EUR 1.22 billion. Reported irregularities and related financial amounts have been increasing in relation to 2008. The increase has been significant both in terms of number of reported irregularities (+23%) and irregular amounts (+109%). A number of elements could explain these increases: reported irregularities concern three different programming periods (1994-1999, 2000-2006 and 2007-2013); Romania and Bulgaria have both reported irregularities; the approaching closure of the programming period 2000-2006 and an increase in checks and audits linked to this event.
In particular, the last seems the most relevant explanation also considering that a similar situation has been encountered (and with even higher differentials in relation to the preceding year) for the closure of the programming period 1994-1999.
(2) Given the multi-annual nature of the programmes run under the Cohesion Policy, the analysis by Programming Period provides more interesting elements than an analysis based on yearly budgets.
Throughout the Programming Period 2000-2006, which is approaching its closure (2010), the overall Irregularity Rate is about 1.6%, while the Fraud Rate is about 0.25%. These rates exclusively represent the impact on the payments from the Commission to the Member States of, respectively, irregularities (including suspected and established fraud) and suspected and established fraud (alone). In both cases, therefore, these rates do fail to indicate what the real dimension of irregularities and fraud is. These rates represent the results of the checks and audits of national competent authorities and no extrapolation is allowed unless the size of the audited and checked sample would be known.
(3) The highest Irregularity Rates concern the ERDF (2.1%) and Objective 2 programmes (2.2%). For the ERDF the most plausible explanation is that this Fund finances projects of a higher value and therefore irregularities tend also to have a greater amount. For the Objective 2 programmes, the very high Irregularity Rates of the United Kingdom and the Netherlands which mainly benefit from this type of programmes may have influenced the overall rate.
(4) In terms of Fraud Rate, looking at the funds, ERDF shows the highest rate of suspected fraud (0.29%), followed by the FIFG (0.26%); from the objectives perspective, Objective 1 programmes present the highest rate (0.30%), followed by the Objective 3 programmes with 0.17%. Given the fact that regions benefitting from the Objective 1 programmes are the less prosperous regions and those benefitting from Objective 3 programmes are the richest, need and greed seem the principal drivers behind fraud.
(5) Italy, Poland, Estonia and Slovakia present the highest Fraud Rates among Member States. Higher Fraud Rates do not indicate countries where more fraud is committed, but are more likely to point at good anti-fraud systems (capable of detecting fraud and willing to report it), which always produce higher results.
(6) Among the Member States with very low fraud rates emerge Spain and France (especially in relation to their size and to the financial support received) in particular, whose results could indicate either a lower fraud detection capability or the fact that a part of eventually detected fraud remains unreported.
(7) Recovery rates throughout the Programming Period 2000-2006 are good (exceeding 50%) but may be heavily influenced by the practise of excluding projects found to be irregular from the expenditure declaration to the Commission. In this way EU resources can be re-used to finance other eligible projects and the burden of recovery is shifted on national budgets.
(8) Data related to the Cohesion Fund remain too fragmented to provide a reliable picture, but highlight that Environmental projects present an irregularity rate higher than the others. The Commission is working on the full deployment of IMS also for the Cohesion Fund and this is expected to improve the quality ad reliability of available data in the coming years.
8. Pre-accession funds (Annexes 21-23)
Descriptive statistical analysis presented hereinafter relates to the developments in the area of enlargement and assistance provided to enhance administrative capacities during the pre-accession period for candidate countries and to assist in the fulfilment of the Copenhagen criteria for EU membership.
The forthcoming analysis is limited to the programmes implemented under decentralised management subject to irregularity reporting obligation established by Financing Agreements and other relevant Community legislation. It covers programming period 2000-2006.
Agenda 2000 On 26 March 1999, at the Berlin European Council, the Heads of Government or States concluded a political agreement on Agenda 2000 set up two financial mechanisms: a pre-accession structural instrument (ISPA) to support improved transport and environmental protection infrastructures and a pre-accession agricultural instrument (SAPARD) to facilitate the long-term adjustment of agriculture and the rural areas of the applicant countries. ISPA ISPA programme dealt with large-scale environment and transport investment support in candidate countries. and SAPARD SAPARD programme has supported agricultural and rural development in candidate countries. complement the actions of the PHARE PHARE programme applied to candidate countries, principally involving institution building measures (and associated investment) as well as measures designed to promote economic and social cohesion , including cross–border co–operation . programme, which has been the EU aid programme for the current EU-12 since 1990.[73][74][75][76]
On 26 March 1999, at the Berlin European Council, the Heads of Government or States concluded a political agreement on Agenda 2000
ISPA programme dealt with large-scale environment and transport investment support in candidate countries.
SAPARD programme has supported agricultural and rural development in candidate countries.
PHARE programme applied to candidate countries, principally involving institution building measures (and associated investment) as well as measures designed to promote economic and social cohesion , including cross–border co–operation .
The 10 Member States that joined the EU in 2004 received a Transition Facility in 2004-2006. Bulgaria and Romania received a Transition Facility in 2007 which is regarded as post-accession assistance.
Croatia benefits from several types of pre-accession assistance like Community Assistance for Reconstruction, Development and Stabilisation (CARDS) (2001-2004), PHARE and ISPA (2005-2006) as well as SAPARD (2006). It is the only country subject to reporting CARDS Community Assistance for Reconstruction, Development and Stabilisation applied to Western Balkan countries irregularities since 2006 Commission Decision PE/2006/148 of 07/02/2006 conferring management of aid provided under PHARE and CARDS to an Implementing Agency in Croatia .[77][78]
Community Assistance for Reconstruction, Development and Stabilisation applied to Western Balkan countries
Commission Decision PE/2006/148 of 07/02/2006 conferring management of aid provided under PHARE and CARDS to an Implementing Agency in Croatia
Turkey has been receiving pre-accession assistance since 2002 Community financial contribution in the framework of pre-accession strategy was first granted to Turkey under Council Regulation 2500/2001. . The financial support provided falls under two periods: 2002-2006 - Turkish Pre-accession assistance (TPA) with a total allocation of EUR 1°249 million and 164 projects and 2007-2013 – Instrument for Pre-accession Assistance (five components) with a total allocation of EUR 4°873 million[79]
Community financial contribution in the framework of pre-accession strategy was first granted to Turkey under Council Regulation 2500/2001.
Since 1 January 2007 EU pre-accession assistance has been channeled through a single Instrument for Pre-accession Assistance (IPA) Council Regulation (EC) No 1085/2006 designed to deliver support for candidate and potential candidate countries. The preliminary allocation for IPA country programmes in the period 2007-2013 is EUR 8.4 billion (in 2009 – EUR 1.3 billion).[80]
Council Regulation (EC) No 1085/2006
8.1. General overview
In 2009 European Anti-Fraud Office (OLAF) received 2°607 reports on pre-accession funds (PHARE, SAPARD, ISPA, Transition Facility (TF), CARDS, Turkish pre-accession instrument (TPA)) from the Member states and Candidate countries. The received information consists of 706 new cases detected by the national authorities in 2009 and 1°901 follow-up reports on the previously reported cases. The number of new cases received on pre-accession assistance has reached another peak with an increase of 35% in the number of cases and 18% in the number of communications comparing to 2008 figures.
The first IPA cases were received (1 for Turkey, 2 for Croatia). All of them concern Technical Assistance component and were detected at the initial stages of tendering.
The total Community amount affected by irregularities in 2009 (programming period 2000-2006) was EUR 116°660°911 where PHARE accounts for EUR 13°283°054 (124 cases), SAPARD – EUR 88°015°555 (482 cases), ISPA – EUR 11°747°682 (55 cases), TF – EUR 1°065°499 (5 cases), TPA – EUR 2°378°737 (26 cases), CARDS – EUR 170°384 (14 cases).
8.2. IMS and reporting discipline
In line with the developments in the area of Structural Funds on Irregularities Management System (IMS) a module for Pre-Accession Assistance (PAA Module) irregularity reporting is being finalised. This module addresses the need to shift from paper reporting to electronic reporting and allows OLAF to concentrate on quality checks and the analysis of the reported information. Reporting authorities get more responsibilities for correct filling of the reports as some of the fields are compulsory. Once the module becomes fully operational it will manifest a number of advantages like improved compliance, less technical nature mistakes, possibility for reporting authorities at different levels to access information on all the (open) irregularities already reported.
At the end of 2009 reporting authorities in 12 Member States and 2 Candidate countries were requested to send a reporting structure on the basis of which user rights are granted.
Bulgaria is the first reporting country that entered into a pilot phase for using PAA module. Fourth quarter irregularity notifications were received electronically.
In response to the need created by the Instrument for Pre-Accession Assistance – IPA for 2007-2013 period, IPA electronic reporting module is being developed. Croatia, Turkey and FYROM are the target users for IPA components under DIS accreditation.
The obligation to report irregularities in the area of pre-accession assistance is established in the Financing Agreements/Memoranda signed between the acceding countries, Candidate countries and the European Community and is in accordance with the provisions of Commission Regulation (EC) 1681/1994 As amended by Regulation (EC) No 2035/2005 and 1828/2006 As amended by Regulation (EC) No 846/2009 . This obligation is yet enhanced by the Commission decision granting conferral of management on extended decentralised basis (EDIS).[81][82]
As amended by Regulation (EC) No 2035/2005
As amended by Regulation (EC) No 846/2009
In contrast to the report from the previous years the current report focuses less on compliance issues. Intensive bilateral cooperation on the spotted mistakes, controversies and drawbacks is maintained throughout the year. More systematic administrative inefficiency on the recovery and follow-up side (failure to start administrative recovery procedures, report external audit findings on time) has lead to returning the reports back for amendments. In general, reporting countries are well aware of the shortcomings and are wiling to progress. The data quality is expected to considerably improve with the introduction of the electronic reporting module (see par 3.2.2).
The most common mistakes are incorrect or incomplete financial aspects of the reports, missing practices employed in committing irregularities, missing types of irregularities. Insufficient or obscure reported information still hampers an in depth analysis. Failure to comply with the requirement to classify reported cases as ‘suspected fraud’ or 'irregularity' limits the analysis carried out by OLAF.
Table PA 1 provides a rate of compliance with respect to classification of irregularity.
Table PA 1: Compliance in 2009 - classification of irregularities
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Romania and Poland should pay more attention to providing classification in the notifications. On average 96% of cases were classified. There is a visible increase in compliance if compared with 2008. Admittedly, reporting countries are putting more efforts in fulfilling the necessary obligations.
As established by the regulatory requirements, within two months following the end of each quarter irregularities which have been the subject of initial administrative or judicial investigations need to be reported to the Commission. The date of the first written assessment by a competent authority Primary administrative or judicial finding as defined in the Commission Regulation 2035/2005. serves as a reference date to assess whether reporting countries fulfilled their obligations. The average time span between detection of an irregularity and reporting it to the Commission is 5.8 months. However, this figure needs to be interpreted with caution. Many reporting countries do not indicate dates when filling in reports so the analysis is limited to the ones provided. Yet, it is apparent that Slovakia was very late (34 months), followed by Turkey (7.7), Bulgaria (6.5), Poland and Check Republic (6.2).[83]
Primary administrative or judicial finding as defined in the Commission Regulation 2035/2005.
The estimation of a time span to detect irregularities takes the date of first information and date of administrative and judicial finding as reference points. The overall average result of 2.5 years manifests that some cases were only traced at the end of the project cycle. To illustrate it, Check Republic took 4.2 years, Poland – 3.8, Estonia 2.7, Romania and Slovakia (2.5).
8.3. General Trends
The intention of this descriptive analysis is to provide an overview of the reported irregularities in 2009 and to compare the reporting trends observed during the period 2002 -2008.
8.3.1. Overall trend
The number of cases reported (first communications) in 2009 increased by 35%, while the number of follow-up reports increased by 18% in comparison to 2008.
The reporting tendencies for 2009 require to limit generalized analysis on all 14 reporting countries as it does not reveal the precise picture in terms of irregularity prevention, detection, and reporting. There are several reasons behind this tendency. Firstly, a wider variety of pre-accession instruments is covered due to different programming periods. Secondly, ongoing enlargement process changes beneficiary countries. Thirdly, Member states and Candidate countries do not have the same approach towards reporting.
Reporting countries happen to be at different stages of the project cycle. EU-10 have finalized the projects and report very few new cases, the focus, however, remains on administrative and judicial follow-up. EU-2 report a considerable number of newly detected cases which certainly affect the overall tendency. Croatia and Turkey have become more active in reporting and increasing tendencies are expected in the coming years. Therefore, Chart PA 1 only presents an overview; further on the analysis attempts to show the situation behind the rising trends.
Chart PA 1: Irregularities communicated by reporting countries (2002-2009)
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8.3.2. Trend related to Member States and Candidate countries 2009
Irregularities are not distributed equally among the reporting countries due to different periods of eligibility of expenditure, implementation phases, as well as varying types of support instruments.
Three groups of reporting countries can be distinguished, namely 2004 accession Member States, 2007 accession Member States, and Candidate countries – Croatia and Turkey.
In 2009 EU-10 account for 12%, Bulgaria and Romania – 81%, Croatia and Turkey – 7% of the total number of cases. Talking about the total EC affected amount as reported, EU-10 make 5%, Bulgaria and Romania - 93%, Croatia and Turkey – 2%.
Chart PA 2: Distribution of reported cases by groups of countries (2009)
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The charts manifest that the greater part of the data set (irregularity reports received in 2009) analysed originates from Romania and Bulgaria. Consequently, the trends are highly influenced by their reporting patterns.
Comparing 2008 and 2009 figures a rising tendency in cases reported and EC affected amounts is observed for Bulgaria (134% for cases), Croatia (39%), Poland (15%), and Turkey (44%). The remaining countries disclose a falling tendency.
8.3.3. Irregularities affecting different funds
The total number of cases reported augmented in comparison to 2008 (by 30%). The biggest change observed in the reporting tendencies is the sharply rising number of SAPARD cases. 64% of those cases were detected in Bulgaria, 23% were discovered in Romania.
As demonstrated by Chart PA 3 the highest number of cases reported in 2009 concerned SAPARD and made more than half of the total cases reported in numbers (67%). The biggest share of irregular amount was also reported for SAPARD (77% of the total).
Chart PA 3: Distribution of communications per fund in 2009
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8.3.4. Amounts involved
For the purposes of this report the term eligible amount stands for the amount committed to be paid when the contract is concluded under the condition that the expenditure incurred is justified and eligible.
With regard to the amounts involved in the irregularities reported to the Commission, the total irregular amounts went up by 71% and reached EUR 117 million, while the total eligible amount went down by 27% and stands at EUR 832 million.
The downfall of the eligible amount is explained by changes in ISPA (-41%) and PHARE (-45%) expenditure, whereas the rise of irregular amount is mainly affected by SAPARD (+109%) and by ISPA (+48%).
The overall figures have to be interpreted rather carefully. Pre-accession assistance funded projects run over several years while the affected amounts are calculated with reference to the reporting year. So the closing years are becoming peak years. With the appearance of new instruments and new programmes also new irregularities are spotted on the field.
Furthermore, it is very important to differentiate between cases with potential financial impact detected before the payments and real financial impact resulting in recoveries (see Table PA 4).
A deeper analysis into the EC amount affected by irregularities for reporting period 2002-2009 demonstrates that the majority of cases for all the programmes accumulate within a range of EUR 10°000 to 40°000. There are some deviations from the overall pattern for TF and TPA. ISPA, PHARE, and SAPARD are spread throughout.
As for the total Community contribution in the cases that were found irregular, the range is around EUR 10°000 to 50°000. For SAPARD it is broader.
In general, one can observe that controls are well spread but mostly low value irregularities are found in high value projects or medium value projects are found almost fully ineligible (80-90% irregular).
8.3.5. Impact on the budget and irregularity rate
Estimation of the impact on the budget is based on the information provided in the irregularity reports and is totally linked to countries’ approach to reporting and cooperating with the Commission.
While estimating the impact of pre-accession assistance irregularities on the budget one needs to take into account different groups of beneficiary countries benefitting from pre-accession assistance and varied periods of allocations.
Chart PA 4: Share of irregular amount in eligible amount of reported cases
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The comparison is drawn between the total values of the projects reported and the total irregular amounts per country. The share of irregular amount reached 14% in 2009 while in 2008 it was 5%. Although the figure has increased, Chart PA 4 illustrates that the share of irregular amount in relation to the total value of expenditure is relatively little.
In comparison to the overall tendency, the share for Croatia and Slovakia is very low. Slovenia, Latvia, Hungary, Lithuania, and Poland report cases with rather high irregular share, which sometimes equals the total value of the project.
The impact of irregularities (irregularity rate) reported in 2009 on the payments made that year would be 14.49%. Nevertheless, irregularity rate on the budget for the same year becomes 9.75% if calculated on the payment appropriations (EUR 117 million irregular on EUR 1.2 billion of payment appropriations). However, this figure should be taken with great caution as irregularities are not necessarily from that payment year. In most cases irregularities have occurred earlier, but were only traced (or reported) in 2009. Moreover, irregular amounts keep rising, but the amounts for payments are declining each year; therefore, it is inevitable that irregularity rate has a rising tendency.
It would be more precise to calculate the impact of irregularities (irregularity rate) on the whole programming period (2000-2006) and the 'actual' beneficiary countries. Thus the result is 1.4% (EUR 266 million total irregular amount reported so far on the overall budget of roughly EUR 19 billion).
8.3.6. Method of detection
Most of the irregularities and the highest irregular amounts in 2009 were detected by means of ‘Control of documents’ (EUR 24 million). The second most frequent method is audit which detected almost the same affected amounts (EUR 23 million). Control of documents and audit make key responsibilities of the national authorities implementing EU funds under decentralised and shared management modes. According to the dataset, the same methods seem to be used while detecting suspected fraud cases.
On the spot controls account for 6% of the detected irregular amount and were effectively used in Bulgaria, Croatia, Lithuania, Poland, Romania, and Turkey.
5 % of irregular amount were discovered by means of EC interventions and their role remains to be significant in Bulgaria, Croatia, and Romania.
Interestingly, the majority of Bulgarian suspected fraud cases were detected by audit (EC audit, external audit companies, and national internal audit). Fraud detection is not the main task of audit but rather part of due professional care.
In general, the most frequent methods of detection imply both ex-ante and ex-post controls. It is a natural outcome since the data set involves projects under different stages of implementation.
8.3.7. Types of irregularities
The most common type of irregularity by the number of received cases and amounts affected in 2009 was 'Falsified supporting documents' (33% of amounts) followed by ‘Failure to respect other regulations/contract conditions' (13%) and 'Infringement of rules concerned with public procurement' (11%).
Although cases involving falsified supporting documents were detected in Romania, Poland, Slovakia, cases from Bulgaria are the most abundant (16% of the total number reported in 2009). Most of them affect SAPARD programme.
8.4. Specific analysis
8.4.1. Suspected fraud
In 2009 cases classified as suspected fraud (fraud frequency level) made 37% (262) of irregularities and 50% of the EC affected amount (fraud amount level) (EUR 117 million). For the sake of transparency it is worth mentioning that OLAF reclassified 3% of cases into 'suspected frauds'.
In general, reporting countries do not classify only some 4% of the reported cases so there is a visible improvement in compliance which positively affects the analysis. However, some cases need to be reclassified before their closure. Countries reporting high numbers of cases (e.g. Bulgaria) so far have not done it. Once this exercise is accomplished the drastically rising share of suspected fraud is expected to stabilize.
Meanwhile, it is important to note that the analysed cases are just 'suspected frauds' and are undergoing investigation by the relevant national authorities. The final precise figures can only be presented on 'established frauds' when the court rulings are made. At the moment there are only two cases of established fraud reported by Romania on PHARE.
18.7% of cases reported in 2009 had an element of fraud i.e. falsified supporting documents, certificates, requests. In PHARE they make 2% while in SAPARD 27% of the reported cases. This has to be interpreted with caution as reporting countries sometimes classify the case as suspected fraud but indicate the modus operandi which is more likely to be an administrative infringement rather than criminal offence. An in depth analysis is necessary of a case basis.
Chart PA 5: Share of suspected fraud in reported cases
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To illustrate the situation better and to show what looms behind the reporting trend lines a breakdown by county is presented. It appears that 6 out of 14 reporting countries reported suspected fraud cases in 2009. The highest number of suspected fraud cases was reported by Bulgaria. Suspected fraud cases detected in Bulgarian SAPARD clearly dominate the picture. They make 67% of all the cases from this country. Another observation is that Bulgarian SAPARD cases make 92% of all SAPARD suspected fraud in 2009 reported to OLAF. Nonetheless, this should not be surprising taking into account the number of ex-post and external audits and checks carried out by the Commission on SAPARD programme, audit findings and operational work undertaken by OLAF. The rising figures of SAPARD cases in the last years reveal a reactive approach by Bulgarian authorities. The greater part of suspected fraud cases were initiated by external controls/interventions rather than internal/national ones. However, in general, it needs to be mentioned that high pressure put on Bulgarian authorities by the Commission to enhance control systems, to carry out additional checks is reflected in the rising figures of detected and reported suspected fraud cases.
Romanian SAPARD suspected fraud cases account for 14% of the total reported. A new element in the picture is added by the Turkish instrument for pre-accession where suspected fraud makes 31%.
Looking at both amounts at stake and number of cases from various programmes, SAPARD appears to be mostly affected.
Chart PA 6: Suspected fraud cases by country and fund in 2009
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Distribution of fraud cases across the funds is not adequate. The numbers of cases received since 2002 manifest predominance of SAPARD (348 out of which 224 for 2009). PHARE counts 151 for all years and 29 in 2009, while ISPA only 2 (1 in 2008 and 1 in 2009).
Due to a particular situation with SAPARD, OLAF carried out a pilot exercise to measure the fraud rate (FR) against payments made for this programme under the budget lines 05.050101 and 05.050102.
The total fraud rate for the whole programming period of SAPARD is at the level of 2.8%. However, looking at the individual reporting countries in Table PA 2, it becomes obvious that the rate is highly affected by a particular situation in Bulgaria. Bulgarian fraud rate for SAPARD is 20%, which is the highest rate seen by OLAF in all the funds analyzed (see chapters 6 and 7). Meanwhile, the Czech Republic, Estonia, Latvia, and Slovakia have zero fraud rate. Even though a few cases were reported by Estonia and Latvia their financial impact is rather small to be reflected in the fraud rate or no impact indicated at all. Taking into account the fact that SAPARD programme was prone to particular irregularities, and the same modus operandi for suspected fraud were identified in several countries, there are some doubts whether all the detected cases of suspected fraud were reported to OLAF.
Map PA 1. Fraud rate for SAPARD by reporting country
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Table PA 2: SAPARD fraud rates by reporting country
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SAPARD projects present a very broad range of EC contribution from EUR 10°000 to EUR 7 million, yet the higher the project value the lower the number of detections. It implies that big scale frauds are single instances, however medium scale frauds are spread around. Mostly that observation refers to Bulgaria being the country mostly affected by suspected fraud in SAPARD programme.
The majority of the projects affected by suspected fraud fall in a range of EUR 10°000 -70°000 while there appear single cases of high impact in all programmes except CARDS and TF.
In 2009 suspected fraud value in relation to the eligible value of the reported projects made a share of 6.89% (in 2008 it was 1.17%). The total irregular amount of all the reported projects in relation to the total eligible amount is 14%.
In 2009 fraud rate which stands for suspected fraud value divided by actual payments of 2009 accounts for 7.12%. If the rate is calculated on the payment appropriations for 2009 it becomes 4.70%. It needs to be emphasized here that this is a pilot attempt to estimate suspected fraud rate on payments. One needs to be very cautions to prevent far-fetched conclusions on this figure. Most suspected fraud cases appeared earlier but were only traced (or reported) in 2009. As already mentioned, the greater part of them is Bulgarian cases. The payments in 2009 were made to Bulgaria, Romania, Croatia and some remaining parts to EU-10. Part of these projects with allegations of suspected fraud has not been paid for or deductions were made before submitting payments requests to the Commission.
The percentage of the sum of suspected fraud in the total allocated amount for period 2002-2009 is respectively even lower – 0.48%. The figure, however, is much higher in comparison to 2008 report data. This outcome is explained by the fact that no new allocations were given to the reporting countries for PHARE, SAPARD, and ISPA but follow up reports were received and the financial aspects were specified. In addition, a high number of new cases were detected in 2009.
In general, amounts involved in suspected fraud cases keep rising, but the amounts for payments are declining each year; therefore, it is inevitable that fraud rate has a rising tendency.
It needs to be taken into account, that the cases classified as suspected fraud do not imply actual losses for the EU budget. The real pre-accession assistance related losses for EU budget could only be estimated when the programmes and the reported cases are closed (when deductions are made, recoveries are finalized, or final court rulings are published).
The summary table provides an overview of the rates which result at different stages of the analysis on pre-accession assistance for period 2000-2006.
Table PA 3: Summary table
Rates %|2009|Explanation|2000-2006|Explanation|
Irregularity rate - IR|9.75%(14.49%)|The total value of irregularities reported for 2009 divided by payment appropriations 2009 (or by actual payments for 2009) |1.4%|The value of irregularities reported for the whole period by indicative allocation for the whole period|
Fraud frequency level - FFL|37.16%|Total number of 2009 suspected fraud cases by the total number of reported cases|20.08%|Total number of suspected fraud cases divided by the total number of reported cases|
Fraud amount level - FAL|49.56%|Total amount involved in 2009 suspected fraud cases divided by the total amount reported as irregular|34.74%|Total amount involved in suspected fraud cases divided by the total amount reported as irregular|
Fraud rate - FR|4.70%(7.12%)|The total value of 2009 suspected fraud cases by payment appropriations 2009 (or by actual payments for 2009)|0.48%|Total amount of suspected fraud cases divided by indicative allocation for the whole period|
Fraud rate SAPARD|||2.77%|Total amount involved in suspected fraud SAPARD cases divided by actual payments for the whole period for SAPARD|
8.4.2. Recovery
Recovery becomes a topical issue when the project cycle is about to close. Administrative procedures (recoveries and sanctions) together with effective prosecution are the cornerstones of fraud prevention.
In 2009 the amounts reported to be recovered increased by 135%. Table PA 4 demonstrates the recovery situation per country. The table provides an overview for all the years and all the funds. It presents the recovery rate which is the percentage of the total amount recovered and the total amount to be recovered. Malta has the highest recovery rate, followed by Estonia.
The highest amount to be recovered in 2009 comes from SAPARD (EUR 61.6 million while EUR 41 million are due for Bulgaria). The amount to be recovered for PHARE is second highest – EUR 6.9 million. Romania and Bulgaria need to recover around EUR 3 million each for PHARE projects. ISPA amount to be recovered is yet lower - EUR 4 million.
In general, the recovery rate got worse in comparison to 2008 (36.16%) and reached only 27.22% in 2009.
Analysis on recovery rate for suspected fraud reveals a rate of only 4.6% for the whole programming period. It seemingly suggests that recovery process in cases undergoing prosecution is even more difficult. Frequently recoveries are not even initiated when the case is under pre-trial investigation or they are stopped waiting for the court ruling. Administrative procedures and criminal investigation in most countries do not go hand in hand, therefore recovery rates are influenced.
Table PA 4: Recovery by reporting country
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The overview in Table PA 4 points out delays in the recovery process. There are some amounts to be recovered detected in 2003 where the risk of losses is high. Actually, the rate for 2003 increased only slightly. The highest recovery rate is for cases dated 2004. It might be influenced by a special procedure required by SAPARD Multiannual Financing Agreement.
The situation with respect to 2005 and 2006 shows that only half of the amounts due were recovered and more efforts need to be taken to speed up the process. 2007 reveals a substantial rate; however, the amounts might be written off or covered by the national funds. Reporting countries should undertake recovery measures soon after the detection of irregularities and inform the Commission about the deductions made. The figure for 2009 is very low.
Table PA 5: Recovery rate by reporting year
(...PICT...)
However, this figure reflect only the information provided in the irregularity reports, but does not take into account the recoveries and financial corrections made by the Commission.
8.5. Conclusions
(1) In 2009 706 newly detected irregular cases with an affected amount of EUR 117 million were received from the national authorities in 14 reporting countries (EU-10, EU-2, Croatia and Turkey). An increase of 35% in the number of cases is recorded. It demonstrates that detections in the area of pre-accession assistance are not phasing out but rather shifting towards a smaller group of countries, i.e. EU – 2 and Candidate countries (Croatia and Turkey). Bulgarian and Romanian irregularities together make 81% of cases and 93% of irregular amounts reported in 2009. Yet, the rising tendency is only applicable to Bulgaria with an increase of 134% in cases. Consequently, the trends are highly influenced by their reporting patterns and thus the focus of analysis is narrowed down.
(2) Controls seems to be well spread but mostly low value irregularities are found in high value projects as a result of desk controls or medium value projects are found almost fully ineligible after on-spot checks.
(3) Control of documents and audit are the most frequently applied methods of detecting irregularities in 2009. The majority of suspected fraud cases in Bulgaria were detected by audit. The primary goal of audit is not related to fraud detection but assurance of the reliability and regularity of financial transactions. The exceptional situation in Bulgaria seemingly implies some weaknesses in the national anti-fraud system.
(4) The affected EU amounts keep rising and thus accumulate with reference to the whole programming period, while allocations remain fixed and payments are gradually declining. As a consequence irregularity and suspected fraud rates (see Table PA 3 for rates) manifest a rising tendency.
(5) 6 (Bulgaria, Hungary, Poland, Romania, Slovakia, and Turkey) out of 14 countries reported suspected fraud cases in 2009. The highest number of suspected fraud cases was reported by Bulgaria. Suspected fraud cases detected in Bulgarian SAPARD clearly dominate the picture. They make 67% of all the cases from this country. In fact, Bulgarian SAPARD cases make 92% of all SAPARD suspected fraud in 2009 reported to OLAF. High pressure put on Bulgarian authorities by the Commission to enhance control systems, to carry out additional checks is reflected in the rising figures of detected and reported suspected fraud cases. The drastically rising share of suspected fraud is expected to decline following the finalisation of judicial procedures and communication of updated reports in the coming years.
(6) The total fraud rate for the whole programming period of SAPARD is at the level of 2.8%. Bulgarian fraud rate for SAPARD is 20%, which is the highest rate seen in all analysed funds (Cohesion Policy and Agriculture). Meanwhile the Czech Republic, Estonia, Latvia, and Slovakia have zero fraud rate which puts in question the reliability of the reported information or the fraud detection capability in this specific sector
(7) Analysis on recovery rate for suspected fraud reveals a rate of only 4.6% for the whole programming period. The recovery process in cases undergoing prosecution is complex and lengthy. Administrative procedures and criminal investigation in most countries do not go hand in hand, therefore recovery rates are influenced. Safeguarding/conservation measures should be put in place for suspected fraud cases to make sure that after final court ruling recovery can still take place (in the form of seizure of assets, suspension of payments, bank guarantees, et cetera ).
9. DIRECT EXPENDITURE – CENTRALISED DIRECT MANAGEMENT
9.1. Methodology and scope
This chapter contains a descriptive analysis of the data on recovery orders issued by Commission services in relation to expenditures managed under ‘centralised direct management’ In accordance with Article 53a of the Council Regulation (EC, Euratom) No 1605/2002 (‘Financial Regulation’) and Commission Regulation (EC, Euratom) No 2342/2002 (‘Implementing Rules’). , which is one of the four implementation modes the Commission can use to implement the budget. This chapter is based on data retrieved from the ABAC system, which is a transversal, transactional information system allowing for the execution and monitoring of all budgetary and accounting operations by the Commission. The system was developed by the Commission to facilitate compliance with the requirements of the Financial Regulation and its implementing rules.[84]
In accordance with Article 53a of the Council Regulation (EC, Euratom) No 1605/2002 (‘Financial Regulation’) and Commission Regulation (EC, Euratom) No 2342/2002 (‘Implementing Rules’).
One of the functionalities of the ABAC system is the ‘Recovery Context’, which gathers detailed information on recovery orders issued by the Commission services and registered in ABAC. The information introduced into the recovery context relates, amongst others, to the qualification of the recovery order: financial officers have to indicate for each recovery order whether it relates to an error, an irregularity or a suspected fraud that has been identified in the implementation of a grant agreement or contract. In case the recovery order is qualified as 'suspected fraud', OLAF has to be notified. For each recovery order, information is given on the method of detection as well as the type of irregularity or suspected fraud that constitutes the basis for the recovery.
The recovery context is a relatively new functionality within ABAC. The collection of data from the Commission services only started recently and the current data available in ABAC refer to recovery orders issued since 2008. This first exercise conducted in 2008 revealed a number of practical problems, which are related to different interpretations throughout the Commission of definitions used in ABAC; the omission of certain information in the 'Recovery Context' and the link of the information with other data in ABAC. The Commission has tried to diminish the impact of these shortcomings to provide more accurate analysis of the irregularities in expenditures managed directly by the Commission. Nevertheless, the limitations of the data have not been removed completely and they might still influence the analysis which therefore should be treated extremely cautiously.
For the financial analyses in this chapter, the following data were used from ABAC:
· The number and corresponding financial amounts of recovery orders, which were registered after validation by the authorising officer, including information on the place of residence of the contract partner of the Commission and the budget line concerned; the method of detection; the type of irregularity identified and the time span between the approval of a budget commitment, the notification of a recovery order and the return payment of the undue funds to the Commission;
· The amount of a commitment to which a recovery order is linked and for which a payment has been made to a beneficiary.
· In the remainder of this chapter, the term recovery refers to the recovery order and the financial amount involved, whereas the term qualification refers to the qualification of the recovery order: irregularity or suspected fraud.
9.2. General analysis
In 2009, the Commission services registered 705 recovery orders in ABAC that were qualified as irregularities or suspected fraud. The committed budget for these 705 recoveries was EUR 2.5 billion, of which EUR 27.5 million was identified as irregular The financial impact of a case of suspected fraud can only be determined following the conclusion of an OLAF investigation. It is only at the end of judicial proceedings (‘ res judicata ’) that a case can be qualified as fraud and that the actual amount of fraud can be established. .[85]
The financial impact of a case of suspected fraud can only be determined following the conclusion of an OLAF investigation. It is only at the end of judicial proceedings (‘ res judicata ’) that a case can be qualified as fraud and that the actual amount of fraud can be established.
9.2.1. Financial amounts involved
The financial impact of the 705 recoveries registered in 2009 was EUR 27.5 million, which includes an amount of EUR 1.5 million for the 15 recoveries, qualified as suspected fraud and notified to OLAF. Table DE1 gives an overview of the aggregated financial commitments by policy domain as well as the number and financial amounts of recoveries. The classification into policy domain is provided for ‘internal policies’ and ‘external actions’. Table DE2 gives a more detailed classification of the policy area to which the recovery orders relate. The recovery orders have been issued for commitments that relate to several budget exercises, some even dating back to the 1990s, during which different budget headings were used. The budget structure of 2008 was used for the table DE2. In cases where the budget title of a commitment from an earlier budget exercise does no longer exist, the most resembling budget title from the 2008 budget was used. In both tables the column ‘commitments’ contains the aggregate of all the commitments made during previous budget exercises for which recovery orders were issued in 2009. In the table DE1 the last column indicates the amount to be recovered (including suspected fraud) as percentage of the aggregated commitments.
Table DE 1: Commitments and Recoveries (number and amounts) by policy domain, 2009.
Area|Commitments|Recoveries|Recoveries as % of commitments|
|€ 1,000|%|Average € 1 000|N|%|€ 1,000|%|Average € 1 000||
Internal policies|2°041°939|81.6|3°398|601|85.2|23°093|83.9|38.4|1.1|
External actions|460°667|18.4|4°429|104|14.8|4°436|16.1|42.7|1.0|
Total|2°502°606|100.0|3°550|705|100.0|27°529|100.0|39.0|1.1|
The table shows that the irregular amounts only represent 1.1% of the value of the commitments for which recovery orders were issued . More recovery orders were issued for commitments made under the internal policies domain than the external assistance actions, but the relative share of recoveries in commitments for both policy domains remains at the same level.
Table DE2 further specifies the recoveries by budget title. It should be observed that there is not always a direct link between the budget title or budget line and the Directorate General dealing with its implementation, as several DGs can share the appropriations on a budget line. The information in this table does not refer to the number of irregularities or suspected fraud per Directorate General. In seven cases recovery orders were linked to commitments from more than one budget line; in order to calculate the number of recoveries per budget title, a recovery order was assigned to the budget title to which the highest irregular amount was linked. Therefore some budget titles make reference to an irregular amount for which there is no link to a specific recovery order.
Table DE 2: Recoveries (number and amounts) by qualification and budget title, 2009
Budget Title|Commitments € 1 000|Recoveries|
||Irregularity|Suspected Fraud|
||N|%|€1 000|%|N|€1 000|
Economic and financial affairs|1°841|1|0.1|97|0.4| | |
Enterprise|117°419|13|1.9|483|1.9| | |
Competition|141|1|0.1|24|0.1| | |
Employment and social affairs|9°546|12|1.7|138|0.5| | |
Agriculture and rural development|1°288|2|0.3|8|0.0| |4|
Energy and transport|142°434|27|3.9|2°037|7.8|1|63|
Environment|38°291|31|4.5|3°163|12.1| |13|
Research|903°686|109|15.8|4°589|17.6|1|369|
Information society and media|716°102|115|16.7|5°181|19.9|3|463|
Fisheries and maritime affairs|15°031|5|0.7|468|1.8| | |
Regional policy|367|1|0.1|8|0.0| |68|
Education and culture|35°811|192|27.8|3°053|11.7|1|25|
Communication|849|6|0.9|112|0.4| | |
Health and consumer protection|5°979|1|0.1|143|0.5| | |
Area of freedom, security and justice|22°461|68|9.9|2°374|9.1| | |
External relations|407°947|61|8.8|1°593|6.1|3|237|
Trade|451|2|0.3|1|0.0| | |
Development and relations with African, Caribbean and Pacific (ACP) States|40°037|7|1.0|1°683|6.5|1|94|
Enlargement|7°925|24|3.5|700|2.7|1|23|
Humanitarian aid|4°306|3|0.4|83|0.3|2|22|
Commission's administration|29°621|8|1.2|95|0.4|1|8|
Statistics|1°071|1|0.1|10|0.0|1|98|
Total|2°502°606|690| |26°043| |15|1°485|
9.2.2. Financial amounts involved by geographical area and Member State
Table DE3 summarizes the recoveries per geographical area, where the beneficiary of the Community funding resided. The column 'average' indicates the average amount (in EUR 1,000) per recovery.
Table DE 3: Recoveries (number and amounts) by region of residence and qualification, 2009
Contractor place of residence|Commit-ments € 1 000|Recoveries|
||Irregularity|Suspected Fraud|
||N|%|€1 000|%|Average|N|€1 000|%|Average|
ACP|58°237|8|1.2|74|0.3|9.2| | | | |
Africa|7°429|1|0.1|1°013|3.9|1°013.1|1|8|0.5|8|
Asia & Pacific|135°328|4|0.6|69|0.3|17.2| | | | |
EFTA|164°385|17|2.5|434|1.7|25.6| | | | |
EU|2°274°563|608|88.1|23°663|90.9|38.9|14|1°477|99.5|106|
NEP & PA|157°297|52|7.5|790|3.0|15.2| | | | |
Most of the entities concerned have their residence in the European Union: 622 recovery orders (88.2% of 705) were issued for an amount of EUR 25.1 million (91.3% of EUR 27.5 million). 83 recovery orders (11.8%) were issued to entities residing outside the EU, for a total amount of EUR 2.4 million (8.7%). In the latter category, more than 40% of the amount of recoveries relates to an entity residing in South Africa (EUR 1 million), followed by countries eligible for assistance under the neighbourhood policies and pre-accession assistance (EUR 0.8 million).
There was only one case qualified as suspected fraud involving beneficiaries residing outside the EU. The case concerned a beneficiary registered in South Africa and amounted to EUR 8°116.
Table DE4 gives an overview of the recoveries per Member State of residence of the entities in the European Union and the qualification of the recovery. This table details the findings for the European Union reported in table DE3. The 'average' column is the average amount, in EUR 1°000, per recovery.
Table DE 4: Recoveries (number and amounts) by Member State and qualification, 2009
Contractor place of origin|Commit-ments€ 1 000|Recoveries|
||Irregularity|Suspected Fraud|
||N|%|€ 1 000|%|Average|N|€ 1 000|
AT|69°448|23|3.8|645|2.7|28.1| | |
BE|169°857|83|13.7|3°055|12.9|36.8| | |
BU|947|6|1.0|189|0.8|31.6| | |
CY|1°281|8|1.3|101|0.4|12.6| | |
CZ|856|7|1.2|118|0.5|16.9| | |
DE|493°946|70|11.5|2°201|9.3|31.4|1|25|
DK|29°449|6|1.0|64|0.3|10.6| | |
EE|332|7|1.2|99|0.4|14.2| | |
EL|60°083|28|4.6|916|3.9|32.7|1|81|
ES|96°551|24|3.9|908|3.8|37.8|3|373|
FI|50°198|10|1.6|257|1.1|25.7| | |
FR|521°771|85|14.0|3°555|15.0|41.8|2|130|
HU|5°991|9|1.5|173|0.7|19.2| | |
IR|21°636|11|1.8|190|0.8|17.3| | |
IT|130°915|46|7.6|1°453|6.1|31.6|2|29|
LT|280|1|0.2|12|0.1|12.1| | |
LU|3°857|5|0.8|89|0.4|17.9| | |
LV |1°460|6|1.0|62|0.3|10.3| | |
MT|541|4|0.7|316|1.3|79.0| | |
NL|156°487|39|6.4|2°272|9.6|58.2| | |
PL|14°854|15|2.5|128|0.5|8.5| | |
PT|71°074|14|2.3|517|2.2|36.9|1|235|
RO|8°624|2|0.3|21|0.1|10.6| | |
SK|5°570|3|0.5|179|0.8|59.5| | |
SL|650|3|0.5|45|0.2|14.9| | |
SV|33°307|18|3.0|1°146|4.8|63.7|1|369|
UK |324°598|75|12.3|4°953|20.9|66.0|3|237|
Total EU|2°274°563|608|100.0|23°663|100.0|38.9|14|1°477|
Most of the recoveries were made from beneficiaries residing in 5 Member States: France (14.0%), Belgium (13.7%), the United Kingdom (12.3%), Germany (11.5%) and Italy (7.6%). Entities residing in the Member States of the EU account for more than 90% of the amount of the recoveries. Entities from whom the highest aggregated amounts have to be recovered are residing in the United Kingdom (20.6%, EUR 5.2 million), France (14.7%, EUR 3.7 million), Belgium (12.2%, EUR 3.1 million), the Netherlands (9.0%, EUR 2.3 million) and Germany (8.9%, EUR 2.2 million). These five Member States account for 65% of the amounts of recoveries. The high rates of Belgium can be explained by the fact that most of the European Institutions have their seats in this Member State: this leads to the conclusion of a relative higher number of contracts and grant agreements with entities residing in this country.
In 2009 almost all recovery orders involving cases of suspected fraud were reported to involve beneficiaries residing in the EU. The highest number of recoveries with suspected fraud qualifications concerned beneficiaries in Spain and the United Kingdom, 3 in each. The highest amounts involved per project in cases quantified as suspected fraud were recorded for Sweden (EUR 368°686) and Portugal (EUR 235 146). Both countries have only one case of suspected fraud but of a considerable amount.
9.2.3. Method of detection
For each recovery order, the Commission service that issues the order has to indicate how the irregularity or suspected fraud has been detected. Six different categories have been pre-defined, two of which fall under the direct responsibility of the European Commission: On-the-spot checks and the verification of documents by desk officers and financial officers responsible for the implementation of the commitment. Table DE5 gives a breakdown of the recoveries by method of detection.
Table DE 5: Recoveries (number and amounts) by method of detection, 2009
Method of detection|N|%|€ 1 000|%|Average € 1000|
Community control / Check on the spot|210|29.8|10°810|39.3|51.5|
Community control / Desk check documents|348|49.4|11°126|40.4|32.0|
Control by national authorities|1|0.1|20|0.1|19.5|
European Court of Auditors|2|0.3|13|0.0|6.3|
Independent control (supervising engineers, auditors)|103|14.6|3°261|11.8|31.7|
OLAF|8|1.1|669|2.4|83.6|
Other|33|4.7|1°631|5.9|49.4|
Total|705|100|27°529|100.0|39.0|
Most of the irregularities or suspected fraud for which a recovery order was issued, were detected on the basis of Community controls: 558 recoveries (79.1%) accounting for EUR 21.9 million (79.7%). Within the ‘Community controls’ desk controls and on the spot checks generated amounts of recoveries of the similar magnitude. However checks on the spot detected irregularities involving 60 % higher amounts per project than desk checks. The average amount for recoveries is EUR°39°048. Recoveries detected by OLAF and Community controls on the spot have a substantially higher average. Recoveries issued on the basis of OLAF activities had the highest value per recovery (EUR 83°643) but account for an amount to be recovered of 2.4%. Table DE6 gives a further breakdown of the recoveries by method of detection and by qualification. The last column is the average amount per recovery.
Table DE 6: Recoveries (number and amount) by method of detection and by qualification, 2009
Qualification|Method of detection|N|%|€ 1 000|%|Av. € 1000|
Irregularity|Community control / Check on the spot|207|30.0|10°523|40.4|50.8|
|Community control / Desk check documents|345|50.0|10°712|41.1|31.0|
|Control by national authorities|1|0.1|20|0.1|19.5|
|European Court of Auditors|2|0.3|12.5859|0.0|6.3|
|Independent control (supervising engineers, auditors)|103|14.9|3°261|12.5|31.7|
|OLAF|1|0.1|106|0.4|105.6|
|Other|31|4.5|1°409|5.4|45.5|
Total of Irregularity|690|100.0|26°043|100.0|37.7|
Suspected fraud|Community control / Desk check documents|3|20.0|286|19.3|95.4|
|Independent control (supervising engineers, auditors)|3|20.0|414|27.9|138.1|
|OLAF|7|46.7|564|37.9|80.5|
|Other|2|13.3|221|14.9|110.6|
Total of Suspected fraud|15|100.0|1°485|100.0|99.0|
Total|705| |27°529| |39.0|
Table DE6 shows the differences in the method of detection between irregularities and suspected fraud. ‘Community desk checks of documents’ was the most common method of detection of recoveries classified as irregularity for both the number of recoveries and the associated amounts, it constituted half of all the recoveries and over 40% of the amounts. The Community controls are the most important method of detection concerning recoveries classified as irregularity, they make around 80%, both of the number of recoveries and amounts involved. Their share in recoveries classified as suspected fraud drops considerable, the 'Community desk check documents' makes 20% both by the number of recoveries and amounts. Surprisingly, Community on the spot checks did not lead to detection of any suspected fraud recoveries. Most of the recoveries classified as suspected fraud were detected by OLAF: 7 out 15 (46.7%), representing EUR 0.6 million (37.9%) of the recovered amounts. The second most efficient detection method was 'Independent control' carried out by external actors. 'Independent control' allowed for the detection of the same number of suspected fraud cases as Communities desk controls, however the amounts involved were considerable higher in recoveries detected by independent controllers. This method of detection seems to be the best way to identify big cases involving fraudulent actions.
9.2.4. Types of irregularity
The Commission services also have to indicate the type of irregularity that was detected when the recovery order was issued. The number of categories is relatively high compared to e.g. the method of detection, and the interpretation of these findings must be done with care as interpretation problems easily occur with the identification of the correct type of irregularity. It can not be excluded that the same irregularity is scored differently by different financial officers or that some of the categories used in this classification have a small overlap.
Table DE7 presents recoveries by main types of irregularities.
Table DE 7: Recoveries (number and amount) by type of irregularity, 2009
Type of irregularity|N|%|€ 1 000|%|Average €1 000|
Action not implemented|53|7.5|2°734|9.9|51.6|
Action not in accordance with the rules|105|14.9|5°254|19.1|50.0|
Advances not correctly reflected|11|1.6|793|2.9|72.1|
Beneficiary ineligible|9|1.3|132|0.5|14.7|
Calculation error|75|10.6|2°439|8.9|32.5|
Deadline not respected|14|2.0|276|1.0|19.7|
Expenditure declared not related to the action|37|5.2|974|3.5|26.3|
Expenditure not covered by legal base|108|15.3|4°534|16.5|42.0|
Falsified documents|7|1.0|330|1.2|47.2|
Inappropriate accumulation of aid|4|0.6|449|1.6|112.3|
Incomplete documents|46|6.5|2°249|8.2|48.9|
Incorrect rates used in calculating the claim|57|8.1|1°835|6.7|32.2|
Lack of necessary co-financing|1|0.1|243|0.9|243.2|
Missing documents|118|16.7|3°211|11.7|27.2|
Not Applicable|10|1.4|74|0.3|7.4|
Public procurement procedures not respected|11|1.6|329|1.2|29.9|
Quality of action inadequate|27|3.8|1°593|5.8|59.0|
Recoverable VAT, interest received not correctly reflected|12|1.7|80|0.3|6.7|
Total|705|100.0|27°529|100.0|39.0|
The most common type of recoveries qualified as irregularities is ‘Missing Documents’ (118 recoveries or 16.7%). The average amount per recovery for this type however is modest and only ranks 13 th of the 18 types. The qualification 'Expenditure not covered by legal base’ follows with 108 recoveries (15.3%). The third most common type is ‘Action not in accordance with the rules’ (105 recoveries or 14.9%). The last type for which the share exceeds 10% is ‘Calculation error’ (75 recoveries or 10.6%). The four most frequent types of irregularity amount to more than 55% both by number and irregular amount.
For 134 recoveries, more than one type of irregularity was indicated. The most frequent pair of identified irregularities was ‘Missing documents’ combined with ‘Incorrect rates used in calculating the claim’. This pair of irregularities occurred in 23 recoveries. The second pair consisted of ‘Missing Documents’ and ‘Incomplete documents’, which occurred in 20 recoveries. The pair ’Recoverable VAT, interest received not correctly reflected’ and ’Incorrect rates used in calculating the claim’ occurred in 16 recoveries. The following table presents the four types of irregularity which most frequently appeared in cases involving more than one type of irregularity.
Table DE 8: The most frequently indicated pairs of irregularity types, 2009
Type of irregularity|Missing Documents|Incorrect rates used in calculating the claim|Expenditure not covered by legal base|Expenditure declared not related to the action|
Action not implemented|1|1|3|2|
Action not in accordance with the rules|5|4|3|2|
Beneficiary ineligible|1|0|1|1|
Calculation error|6|3|2|5|
Deadline not respected|5|1|0|0|
Expenditure declared not related to the action|11|7|7|N/A|
Expenditure not covered by legal base|17|13|N/A|7|
Falsified documents|1|0|0|1|
Inappropriate accumulation of aid|1|2|1|1|
Incomplete Documents|20|5|5|12|
Incorrect rates used in calculating the claim|23|N/A|13|7|
Lack of necessary co-financing|0|0|0|2|
Missing Documents|N/A|23|17|11|
Public procurement procedures not respected|0|0|1|0|
Quality of action inadequate|3|1|1|1|
Recoverable VAT, interest received not correctly reflected|6|16|4|4|
The most common modus operandi identified in parallel with other modus operandi is ‘Missing documents’. It is indicated in 100 recoveries, which represents 74.6% of recoveries with more than one type of irregularity indicated. The second most frequent modus operandi is ‘Incorrect rates used in calculating the claim’, which occurred in 76 recoveries.
Table DE9 provides an overview of the recoveries by type of irregularity, broken down by qualification of the recovery. For recoveries qualified as suspected fraud, only the categories were reported where the cells were not empty.
Table DE 9: Recoveries (number and amount) by type of irregularity and by qualification, 2009
Qualification|Type of irregularity|N|%|€ 1 000|%|Average|
Irregularity|Action not implemented|53|7.7|2°733.7|10.5|51.6|
|Action not in accordance with the rules|101|14.6|4°275.8|16.4|42.3|
|Advances not correctly reflected|11|1.6|793.4|3.0|72.1|
|Beneficiary ineligible|9|1.3|132.1|0.5|14.7|
|Calculation error|75|10.9|2°438.5|9.4|32.5|
|Deadline not respected|13|1.9|188.9|0.7|14.5|
|Expenditure declared not related to the action|37|5.4|973.8|3.7|26.3|
|Expenditure not covered by legal base|107|15.5|4°507.0|17.3|42.1|
|Falsified documents|3|0.4|225.0|0.9|75.0|
|Inappropriate accumulation of aid|4|0.6|449.0|1.7|112.3|
|Incomplete Documents|45|6.5|2°224.8|8.5|49.4|
|Incorrect rates used in calculating the claim|56|8.1|1°806.7|6.9|32.3|
|Lack of necessary co-financing|1|0.1|243.2|0.9|243.2|
|Missing Documents|117|17.0|3°196.1|12.3|27.3|
|Not Applicable|10|1.4|74.4|0.3|7.4|
|Public procurement procedures not respected|9|1.3|107.4|0.4|11.9|
|Quality of action inadequate|27|3.9|1°593.2|6.1|59.0|
|Recoverable VAT, interest received not correctly reflected|12|1.7|80.1|0.3|6.7|
Total of Irregularity|690|100.0|26°043|100.0|37.7|
Suspected fraud|Action not in accordance with the rules|4|26.7|977.8|65.8|244.4|
|Deadline not respected|1|6.7|86.7|5.8|86.7|
|Expenditure not covered by legal base|1|6.7|27.4|1.8|27.4|
|Falsified documents|4|26.7|105.3|7.1|26.3|
|Incomplete Documents|1|6.7|24.0|1.6|24.0|
|Incorrect rates used in calculating the claim|1|6.7|28.1|1.9|28.1|
|Missing Documents|1|6.7|14.9|1.0|14.9|
|Public procurement procedures not respected|2|13.3|221.2|14.9|110.6|
Total of Suspected fraud|15|100.0|1°485|100.0|99.0|
Total |705||27°529||39.0|
Among the recoveries qualified as irregularities ‘Missing documents' was the most frequent identified category (117 recoveries or 17.0%). The next category was ‘Expenditure not covered by legal base’ (107 recoveries or 15.5%). The four most frequent categories account for 58.0% of the recoveries qualified as irregularity, which shows a big variety in modus operandi used in irregular transactions. It should be observed that the share of these categories is very similar (55.4%) if the amounts involved in the recovery are taken into account.
Among the recoveries qualified as suspected fraud, ‘Falsified documents’ and 'Action not in accordance with the rules' are the most frequent types of irregularity (each 4 recoveries or 26.7%). Suspected fraud in public procurement is identified in two cases qualified as suspected fraud. However, the amounts involved in the recovery show a different pattern: the four cases where the type of irregularity is 'Action not in accordance with the rules' account for 65.8% of the amounts, whereas the category ‘Falsified documents’ only accounts for 7.1%. The two cases with type of irregularity 'Public procurement procedures not respected' involve 14.9% of the amounts identified as suspected fraud.
9.3. Specific analysis
9.3.1. Irregularity versus Suspected Fraud
Only 2.1% of the 705 issued recovery orders were qualified by the Commission services as suspected fraud, but they account for 5.4% of the amounts involved in the recoveries. Table DE10 provides an overview of these findings.
Table DE 10: Recoveries (number and amounts) by qualification, 2009
Qualification|Commitments |Recoveries|
|€ 1 000|%|Average|N|%|€1 000|%|Average|
Irregularity |2°376°019|94.9|3°444|690|97.9|26°043|94.6|37.7|
Suspected fraud|126°587|5.1|8°439|15|2.1|1°485|5.4|99.0|
Total|2°502°606|100.0|3°550|705|100.0|27°529|100.0|39.0|
The average irregular amount per recovery is two and a half times higher in suspected fraud recoveries than in recoveries qualified as irregularity. The average for recoveries qualified as irregularity is EUR 37°744 compared to EUR 99°031 for recoveries qualified as suspected fraud. The commitments in which irregularities qualified as suspected fraud were identified were substantially higher as well. It should be noted that the financial impact of suspected fraud cases could be revised following OLAF's investigations.
9.3.2. Time delay
Half of the irregularities for which a recovery order was issued in 2009 occur within one year after the first payment was made by the Commission. More than 80% of all irregularities are perpetrated within the first three years from the first payment. The average time delay between payment and committing an irregularity is only 11 months. The contract value does not play an important role: irregularities in both big and small contracts appear within the first year from payment. The average delay between first payment and occurrence of the irregularity, taking account of the amounts involved, is 9 months.
For the recovery orders issued in 2009, the average delay between the irregularity and its detection is 2 years and 11 months. There is a limited number of irregularities that are detected almost immediately: 12.1% of the irregularities for which a recovery orders were issued, were detected during the first year after. The percentage of detected irregularities does not change substantially for the period between 2 and 6 years after the irregularity was committed. This clearly reflects the project management cycle in the Commission and shows the systematic way in which the Commission implements its controls. There is no relationship between the amount of the irregularity and its duration at the moment of its detection. Taking account of the amounts involved in the weighted average of time delay it takes 2 years and 7 months, from the moment an irregularity starts to the moment it is detected.
The chart below presents the recoveries registered in 2009 by number (line) and amounts (bars) of commitments by a year in which the commitment was made (e.g.: in 2009, 101 recoveries were registered in ABAC that were made in 2006. The corresponding amount to be recovered is EUR 3.9 million). For recovery orders issued in 2009 for direct expenditures commitments, most commitments were made in 2004 and 2008. In both years more than 120 commitments were made for which a recovery order was issued in 2009. More than 90% of the recovery orders concerned commitments which were made between 2002 and 2008. The corresponding amounts account for almost 85%.
Chart DE 1: Recoveries in 2009 (number and amounts) by year of commitment
(...PICT...)
9.3.3. Trends
The total number of recorded recoveries decreased in 2009 in comparison to 2008 by 24.4%. The number of recoveries qualified as suspected fraud decreased by 21.1%. The corresponding amounts decreased by 20.6% (all recoveries) respectively 54.0% (suspected fraud). The main reason for the decline in the number of recoveries is the proportional decrease of the number of payments made by the European Commission in recent years. The decline in the amounts to be recovered could be explained by the improved and stricter controls applied by the Commission as well as the decrease of the amounts paid from the Communities budget under centralised direct management.
The distribution of irregularities between internal and external policies follows the share of the amounts committed in the two policy areas. Internal policies account for 80% of the commitments, which is reflected in its share of recoveries and corresponding amounts. The recoveries follow the same pattern as the previous year. However, the number of irregularities in the area of external actions slightly increased in 2009 while the corresponding amounts decreased. This brings the average amount of an irregularity in external actions more in line with the ones observed in internal policies. In 2008, the average amount of an irregularity in external actions was two times higher than the one in internal policies whereas in 2009, the average values for the two areas are at the similar level – the difference is only 10%.
In comparison to 2008, there are no major shifts in the most frequent methods of detection and the most frequent types of irregularities. 'Community controls' was the most frequent method of detection in both years, with share of 'Desk check of documents' around 50%. Among cases qualified as suspected fraud 'Independent controls' increased its significance as an efficient method of fraud identification.
The average delay between the first payment to a beneficiary and the detection of an irregularity for recovery orders issued in 2009 was 3 years and 9 months. For 2008, this figure was 4 years and 8 months, which represents a reduction of almost 20%. An even stronger progress can be observed if the average delays are weighted with the corresponding amounts: the average delay then drops from 5 years and 6 months in 2008 to 3 years and 6 months in 2009, which represents a reduction of 36%.
9.4. Recovery
This paragraph describes the payments made to the Commission further to the issuing of the recovery orders. Once a recovery order is issued, the beneficiary has to pay back the undue payment. For the recovery orders issued in 2009, full or partial recovery was recorded in 478 cases (67.8% of the 705 recovery orders), which represents an amount of almost EUR 15.5 million (56.1% of the amounts to be recovered). In 463 recovery orders (65.7%) the full amount has already been recovered. However there are still 242 (34.3%) outstanding recovery orders which account for EUR 12 million (43.9%).
Table DE 11: Recoveries in 2009 (number and amount) by payment status and qualification.
Qualification|Recovered|To be Recovered|
|N|Cashed Amount€ 1 000|N|Open Amount(€ 1 000)|
Irregularity |471|14°886|233|11°157|
Suspected fraud|7|559|9|927|
Total|478|15°445|242|12°084|
The recovery rate for recoveries qualified as irregularity is 57.2% and is higher than for cases qualified as suspected fraud (37.6%). The latter percentage represents a substantial improvement as it increased from 18.6% in 2008 to 37.6% in 2009, despite the fact that there are more suspected fraud recovery orders of 2009 still open (60%) than there were in 2008 (31.6%).
9.5. Conclusions
The analysis of the irregularities detected in the expenditure managed by the Commission on a centralised direct basis, as registered in the recovery context of the Commission's financial system, is only at its beginning. Taking into consideration its limitations described in the methodological section as well as the relatively short time the recovery context functions, the findings in this chapter must be interpreted with care.
Following the rates presented in previous chapters the respective figures for expenditures managed directly by the Commission are presented in the table below.
Table DE 12: Summary table for 2009
Rates in %|2009|2008|Total 2008-9|
Irregularity rate - IrR|0.17|0.17|0.17|
Fraud rate – FrR|0.01|0.02|0.01|
Fraud frequency level - FFL|2.13|2.04|2.08|
Fraud amounts level - FAL|5.39|9.31|7.58|
(1) Only a small part of the Commission expenditures is concerned by irregularities. Recovery orders issued in 2009 relate to 0.17% of the overall amounts paid by the Commission, whereas recovery orders classified as suspected fraud are lower and affect less than 0.01% of the those payments. The aggregated amount of the recovery orders issued in 2009 represents 1.1% of the commitments made by the Commission for internal policies and external actions. This is an improvement compared to 2008 when this rate was 6%.
(2) The number of recovery orders issued in 2009 decreased by 24.4% in comparison to the previous year, which could be explained by the decrease of payments in the respective areas. The number of cases qualified as suspected fraud decreased from 19 in 2008 (2.0%) to 15 in 2009 (2.1%). The corresponding amounts decreased more rapidly: from EUR 3.2 million in 2008 to EUR 1.5 million in 2009, which represents a reduction of 54%.
(3) The majority of the irregularities were committed by a beneficiary residing in one of the Member States. The beneficiaries registered in the EU committed 88.2% of irregularities, which corresponds to more than 90% of the irregular amounts. For recovery orders qualified as suspected fraud, there is even a higher concentration of the beneficiaries in the European Union - 14 out of 15 beneficiaries, corresponding to almost 100% of the amounts, had one of the Member States as their place of residence.
(4) The most successful method of detection is 'Communities controls': almost 80% of the irregularities (numbers and corresponding amounts) were identified on the basis of 'On-the-spot checks' and 'Desk checks of documents'. The average amount of the irregularities detected with "on-the-spot checks" was 60% higher than the average for "Desk checks of documents". It was only in a few recoveries that desk controls led to a ‘suspected fraud qualification’. 'Independent controls' carried out by e.g. engineers and external auditors detected a similar number of cases involving higher amounts. This might indicate the need to increase such controls of the EU financed projects in order to better tackle the fraud question.
(5) The types of irregularity show a large variance. In recovery orders qualified as irregularity, ‘Missing documents’ and 'Expenditures not covered by the legal basis' are the most frequent categories, whereas the type of irregularity most frequently observed in recovery orders qualified as suspected fraud is ‘Falsified documents’. However if the irregular amounts are compared the most frequent type of irregularity among suspected fraud cases is 'Action not in accordance with rules' (65.8%).
(6) Commitments made in 2004 have a high share in the recovery orders issued in 2008 and 2009. The Commission has already recovered or offset 56.1% of value of the recovery orders issued in 2009. 65.7% recovery orders issued in 2009 have already been fully recovered.
ANNEXES
ANNEX 1 – SUMMARY OF FINANCING 1 OF THE GENERAL BUDGET BY TYPE OF OWN RESOURCE AND BY MEMBER STATE (in million Euros)
(...PICT...)
ANNEX 2
(...PICT...)
ANNEX 3 – NUMBER OF CASES OWNRES AND AMOUNTS – PERIOD 2004-2007 PER MEMBER STATE
Number of cases OWNRES and amounts for the period 2006-2009 by Member State|
Member State|2006|2007|2008|2009|% Change cases 2008- 2009|% Change amount 2008-2009|
|Cases|Amount €|Cases|Amount €|Cases|Amount €|Cases|Amount €|||
AT|75|5°877°026|94|36°532°901 |103|15°446°113 |166|21°479°526 |61.17%|39.06%|
BE|442|12°071°264|462|22°233°141 |368|15°001°626 |286|9°496°939 |-22.28%|-36.69%|
DE|1°156|57°451°497|1°614|76°134°997 |1696|87°012°563 |927|73°591°941 |-45.34%|-15.42%|
DK|67|6°068°089|54|7°209°425 |47|4°196°196 |44|9°277°407 |-6.38%|121.09%|
ES|643|33°379°949|464|20°660°465 |485|23°650°089 |432|23°880°689 |-10.93%|0.98%|
FI|28|1°989°495|34|1°820°185 |21|1°035°615 |31|1°747°094 |47.62%|68.70%|
FR|314|28°824°380|327|32°430°736 |317|17°024°066 |285|20°551°562 |-10.09%|20.72%|
GR|48|11°697°070|57|2°976°051 |37|1°751°545 |12|534°742 |-67.57%|-69.47%|
IE|48|2°864°369|34|2°426°561 |53|1°839°749 |49|2°003°110 |-7.55%|8.88%|
IT|341|64°913°724|288|22°940°129 |320|33°744°661 |312|39°859°261 |-2.50%|18.12%|
LU|1|49°291|0|- |1|109°902|0|- |-100.00%|-100.00%|
NL|1°404|36°376°427|1°145|27°768°747 |912|45°817°303 |742|33°280°727 |-18.64%|-27.36%|
PT|21|807°725|23|1°635°142 |29|2°253°594 |22|901°744 |-24.14%|-59.99%|
SE|47|2°164°111|44|2°620°160 |71|6°503°546 |58|4°871°519 |-18.31%|-25.09%|
UK|1°086|64°492°022|1°161|108°342°942 |1078|90°150°802 |791|65°659°462 |-26.62%|-27.17%|
EUR-15 TOTAL|5°721|329°026°439|5°801|365°731°582 |5°538|345°537°370 |4°157|307°135°723 |-24.94%|-11.11%|
CY|9|192°160|11|750°964 |14|787°523 |11|718°211 |-21.43%|-8.80%|
CZ|63|2°298°548|50|2°202°574 |65|4°893°646 |67|3°668°883 |3.08%|-25.03%|
EE|5|178°010|12|362°193 |17|838°216 |11|259°221 |-35.29%|-69.07%|
HU|103|7°654°127|69|6°260°184 |71|6°069°639 |59|6°403°096 |-16.90%|5.49%|
LT|39|1°548°735|41|1°069°437 |64|1°580°853 |47|1°842°512 |-26.56%|16.55%|
LV|29|2°274°172|41|2°265°331 |25|944°250 |19|1°011°059 |-24.00%|7.08%|
MT|11|1°226°978|10|404°949 |3|279°533 |6|1°585°808 |100.00%|467.31%|
PL|69|1°739°568|159|8°419°370 |141|5°361°790 |142|6°033°647 |0.71%|12.53%|
SI|24|950°848|27|1°579°108 |26|897°474 |50|2°652°248 |92.31%|195.52%|
SK|28|1°561°967|21|950°725 |17|520°789 |22|2°474°719 |29.41%|375.19%|
EUR-10 TOTAL|380|19°625°113|441|24°264°835 |443|22°173°713 |434|26°649°404 |-2.03%|20.18%|
BG|0|0|15|308°192|19|502°373 |34|1°235°236 |78.95%|145.88%|
RO|0|0|37|3°770°239|75|7°151°645 |59|8°419°903 |-21.33%|17.73%|
EUR-2 TOTAL|0|0|52|4°078°431|94|7°654°018 |93|9°655°139 |-1.06%|26.14%|
EUR-27 TOTAL|6°101|348°651°552|6°294|394°074°848 |6°075|375°365°101 |4°684|343°440°266 |-22.90%|-8.51%|
ANNEX 4 – OWNRES CASES PER MEMBER STATE
ANNEX 5 – IMPACT ON CUSTOM PROCEDURE FREE CIRCULATION
(...PICT...)
(...PICT...)
IMPACT ON CUSTOMS PROCEDURE FREE CIRCULATION|
YEAR|CASES|IMPACT CASES % OF TOTAL|AMOUNTS ESTABLISHED|IMPACT AMOUNTS ESTABLISHED % OF TOTAL|
2005|3°316|53.37%|259°674°964|81.69%|
2006|3°922|64.28%|263°562°760|75.59%|
2007|4°131|65.63%|327°655°670|83.15%|
2008|4°157|68.43%|311°176°854|82.90%|
2009|3°428|73.19%|286°236°587|83.34%|
ANNEX 6 – TOP 10 CHAPTER HEADINGS
2007|2008|2009|
CN|PRODUCT|AMOUNT €|CASES|CN|PRODUCT|AMOUNT €|CASES|CN|PRODUCT|AMOUNT €|CASES|
85|TVs and parts etc.|86°803°868 |1°087|85|TVs and parts etc°|105°108°766 |970|85|TVs and parts etc°|76°663°396 |724|
64|Footwear|48°263°851 |284|24|Tobacco / cigarettes|32°724°945 |457|61|Clothing|35°668°571 |250|
24|Tobacco / cigarettes|35°393°266 |459|61|Clothing|29°733°092 |418|24|Tobacco / cigarettes|23°647°113 |340|
87|(Parts of) cars / motors |21°258°981 |341|84|Machines|16°652°468 |412|87|(Parts of) cars / motors |22°367°120 |258|
07|Edible vegetables|19°523°232 |92|62|Clothing|16°530°654 |456|62|Clothing|16°413°636 |338|
61|Clothing|17°851°469 |390|87|(Parts of) cars / motors |15°600°151 |383|84|Machines|15°379°233 |338|
62|Clothing|14°239°112 |448|02|Meat|12°114°908 |149|29|Chemical products|13°851°751 |161|
84|Machines|14°018°082 |397|39|Plastics|10°584°566 |253|16|Food|12°747°855 |86|
63|Other textile articles|10°471°221 |80|64|Footwear|10°375°890 |253|64|Footwear|12°269°915 |165|
73|Articles of iron and steel|8°693°476 |187|07|Vegetables|9°442°210 |158|73|Articles of iron and steel|12°106°655 |194|
||||||||||||
ANNEX 7 – GOOD AFFECTED BY FRAUD AND IRREGULARITY – PERIOD 2005-2007
GOODS AFFECTED BY FRAUD AND IRREGULARITY PERIOD 2007-2009|
2007| |2008| |2009|
TARIFF CODES|CASES|AMOUNTS €| |TARIFF CODES|CASES|AMOUNTS €| |TARIFF CODES|CASES|AMOUNTS €|
64039998|39|30°825°995| |85219000|124|30°512°258| |85219000|87|21°575°586|
85282190|75|23°793°372| |24022090|393|28°261°950| |24022090|270|20°367°653|
24022090|353|22°828°664| |85282190|26|18°607°596| |61091000|43|12°575°370|
07032000|49|18°056°964| |61046300|3|9°674°750| |16041416|28|9°677°039|
85281298|4|13°221°267| |85393190|99|9°498°895| |61046300|1|9°500°000|
87031018|50|9°399°746| |02071410|60|7°779°662| |87032410|19|8°565°338|
64030000|6|6°706°330| |07032000|116|7°404°350| |85393190|41|8°133°673|
63039118|1|6°468°283| |85366990|22|6°140°220| |07032000|80|7°473°658|
85393190|102|5°995°910| |28046900|6|5°565°548| |85365080|4|5°427°349|
02071410|116|4°307°828| |96131000|21|4°803°557| |85287119|37|4°964°827|
85219000|116|4°155°951| |24012010|11|3°766°811| |85285990|62|4°257°315|
61103099|89|3°829°741| |85287220|6|3°613°262| |38249091|3|4°008°418|
24031010|43|3°711°910| |61101190|12|3°512°930| |29310095|3|3°962°877|
24012010|9|3°711°817| |39232100|68|3°017°653| |04021019|4|3°914°753|
62034231|21|3°460°033| |85285990|48|2°997°649| |87032319|13|3°771°018|
20031030|45|3°326°846| |83112000|1|2°765°919| |55032000|16|3°581°021|
61101190|14|3°157°134| |61091000|47|2°743°745| |84279000|36|3°546°120|
96131000|20|3°073°440| |61103099|59|2°568°161| |29371200|1|3°356°160|
04051000|1|3°071°722| |87031018|20|2°564°623| |85269120|11|3°014°630|
85281294|42|2°635°082| |17019999|2|2°376°061| |61159399|2|2°860°760|
85369010|2|2°549°674| |02023090|22|2°216°134| |39232100|75|2°647°302|
64039938|3|2°548°693| |84099100|5|2°214°657| |08030019|5|2°516°879|
85254091|12|2°484°027| |62046231|27|2°156°788| |87120030|29|2°474°057|
48103900|1|2°111°908| |85269120|20|2°138°476| |85299092|30|2°184°703|
85253090|14|2°060°399| |15119019|3|2°130°303| |64041990|14|2°092°903|
ANNEX 8 – FRAUD AND IRREGULARITIES: BREAKDOWN BY ORIGIN OF GOODS
FRAUD AND IRREGULARITIES: BREAKDOWN BY ORIGIN OF GOODS DURING 2007-2009||||
2007| |2008| |2009||||
COUNTRY|€|CASES| |COUNTRY|€|CASES| |COUNTRY|€|CASES||||
China|171°060°976|1°814| |China|154°752°686|1°922| |China|136°708°058|1°700||||
USA|43°341°410|793| |USA|39°622°046|700| |USA|34°799°342|506||||
Japan|26°401°632|271| |Japan|20°723°309|259| |Japan|18°002°252|202||||
South Korea|17°472°146|178| |Brazil|15°286°109|168| |Hong Kong|16°860°334|70||||
Brazil|11°691°233|266| |South Korea|14°957°163|109| |Not specified|10°649°807|443||||
Taiwan|11°659°218|136| |Bangladesh|13°056°184|185| |Vietnam|10°281°100|32||||
Bangladesh|8°836°565|188| |Not specified|10°702°944|608| |Argentina|9°884°440|37||||
Vietnam|8°572°969|64| |Switzerland|9°188°001|99| |Seychelles and dep°|8°255°834|2||||
Thailand|6°486°764|98| |Malaysia|7°242°777|63| |South Korea|7°451°742|84||||
Not specified|5°614°034|686| |Russian Federation|6°807°555|131| |Bangladesh|7°394°940|113||||
ANNEX 8.1: RECOVERY RATE (RR) BREAKDOWN BY ORIGIN OF GOODS 2006-2008
FRAUD AND IRREGULARITIES: BREAKDOWN BY ORIGIN OF GOODS DURING 2007-2009|
2007| |2008| |2009|
Country|Recovered €|RR | |Country|Recovered €|RR | |Country|Recovered €|RR |
China|68°632°686|40%| |China|71°966°983|47%| |China|53°816°471|39%|
USA|35°665°619|82%| |USA|27°145°501|69%| |USA|24°290°222|70%|
Japan|23°053°039|87%| |Japan|18°582°660|90%| |Japan|16°555°497|92%|
South Korea|7°627°144|44%| |Brazil|6°508°892|43%| |Hong Kong|1°398°600|8%|
Brazil|6°856°801|59%| |South Korea|10°263°429|69%| |Not specified |4°251°269|40%|
Taiwan|4°846°428|42%| |Bangladesh|5°630°766|43%| |Vietnam|1°141°529|11%|
Bangladesh|5°191°437|59%| |Not specified |2°640°954|25%| |Argentina|9°560°508|97%|
Vietnam|8°033°229|94%| |Switzerland|1°173°408|13%| |Seychelles and dep°|0|0%|
Thailand|3°093°715|48%| |Malaysia|1°997°391|28%| |South Korea|4°880°536|65%|
Not specified|4.193.562|75%| |Russian Federation|1.837.503|27%| |Bangladesh|1.652.680|22%|
ANNEX 9 – RECOVERY RATES OWNRES
RECOVERY RATES TRADITIONAL OWN RESOURCES (RR)|
MEMBER STATES|2008|2009|
|AMOUNT € 2008|RECOVERED € 2008|RR 2008|AMOUNT € IN 2009|RECOVERED € IN 2009|RR for 2008 IN 2009|AMOUNT € 2009|RECOVERED € 2009|RR 2009|
AT|5°028°046|1°678°042|33.37%|15°446°113|1°876°662|12.15%|21°479°526|1°711°593|7.97%|
BE|12°670°490|2°216°020|17.49%|15°001°626|5°823°112|38.82%|9°496°939|1°744°655|18.37%|
BL|502°373|289°569|57.64%|502°373|289°569|57.64%|1°235°236|482°555|39.07%|
CY|787°523|134°134|17.03%|787°523|134°134|17.03%|718°211|99°147|13.80%|
CZ|5°025°048|1°292°086|25.71%|4°893°646|1°358°064|27.75%|3°668°883|1°564°753|42.65%|
DE|65°894°342|40°753°580|61.85%|87°012°563|58°118°848|66.79%|73°591°941|50°871°218|69.13%|
DK|3°963°276|3°295°562|83.15%|4°196°196|3°604°634|85.90%|9°277°407|6°722°362|72.46%|
EE|1°358°643|411°651|30.30%|838°216|443°820|52.95%|259°221|173°933|67.10%|
ES|19°019°835|10°662°361|56.06%|23°650°089|11°810°143|49.94%|23°880°689|12°355°734|51.74%|
FI|708°003|384°491|54.31%|1°035°615|392°807|37.93%|1°747°094|1°117°717|63.98%|
FR|17°548°870|11°235°749|64.03%|17°024°066|13°263°839|77.91%|20°551°562|10°739°506|52.26%|
GR|1°444°289|387°361|26.82%|1°751°545|387°401|22.12%|534°742|6°684|1.25%|
HU|5°852°076|2°988°620|51.07%|6°069°639|3°398°654|55.99%|6°403°096|3°883°932|60.66%|
IE|1°645°639|1°544°260|93.84%|1°839°749|1°797°003|97.68%|2°003°110|1°978°926|98.79%|
IT|31°320°103|2°812°556|8.98%|33°744°661|4°144°365|12.28%|39°859°261|3°062°519|7.68%|
LT|1°544°550|688°732|44.59%|1°580°853|934°818|59.13%|1°842°512|950°076|51.56%|
LU|263°046|0|0.00%|109°902|109°902|100.00%|0|0|0.00%|
LV|944°415|73°706|7.80%|944°250|113°970|12.07%|1°011°059|36°509|3.61%|
MT|449°940|20°319|4.52%|279°533|20°319|7.27%|1°585°808|0|0.00%|
NL|54°597°249|8°289°082|15.18%|45°817°303|30°497°688|66.56%|33°280°727|14°365°082|43.16%|
PL|5°609°503|1°832°197|32.66%|5°361°790|2°545°038|47.47%|6°033°647|3°290°563|54.54%|
PT|2°186°424|328°155|15.01%|2°253°594|395°325|17.54%|901°744|431°807|47.89%|
RO|7°175°419|5°516°513|76.88%|7°151°645|5°533°457|77.37%|8°419°903|1°115°411|13.25%|
SE|6°331°784|4°501°990|71.10%|6°503°546|6°084°758|93.56%|4°871°519|4°595°049|94.32%|
SI|915°631|613°472|67.00%|897°474|613°472|68.36%|2°652°248|964°737|36.37%|
SK|469°810|236°534|50.35%|520°789|294°696|56.59%|2°474°719|320°365|12.95%|
UK|98°362°245|29°851°886|30.35%|90°150°802|39°392°170|43.70%|65°659°462|29°378°179|44.74%|
EUR-27 TOTAL|351°618°572|132°038°628|37.55%|375°365°101|193°378°668|51.52%|343°440°266|151°963°012|44.25%|
ANNEX 10 – SEIZED AND CONFISCATED GOODS
SEIZED AND CONFISCATED GOODS (Cigarettes CN 24022090)|
MEMBER STATES|2007|2008|2009|
|CASES|ESTIMATED AMOUNT OF TOR €|CASES|ESTIMATED OR ESTABLISHED AMOUNT OF TOR €|CASES|ESTIMATED AMOUNT OF TOR €|
AT|2|11°958|2|48°255|1|20°227|
BE|6|12°580|4|13°903|4|462°439|
DE|2|151°597|6|94°985|3|51°261|
DK|0|0|0|0|0|0|
ES|0|0|0|0|0|0|
FI|8|139°145|6|160°326|4|88°151|
FR|29|1°679°953|33|21°101|20|989°920|
GR|13|2°072°640|10|1°206°270|5|767°505|
IE|5|388°821|13|2°540°368|6|1°174°410|
IT|4|345°467|13|1°694°276|16|2°426°867|
LU|0|0|0|0|0|0|
NL|0|0|0|0|0|0|
PT|0|0|0|0|0|0|
SE|3|385°600|3|116°014|5|265°589|
UK|131|9°809°628|152|13°080°541|82|5°846°358|
EUR-15 TOTAL|203|14°997°389|242|18°976°039|146|12°092°727|
BG|0|0|2|52°543|0|0|
CY|1|33°673|0|0|0|0|
CZ|0|0|1|204°578|0|0|
EE|1|41°304|0|0|0|0|
HU|6|193°168|4|669°162|4|416°536|
LT|0|0|3|78°624|2|115°057|
LV|4|693°930|4|365°572|9|490°369|
MT|2|205°013|0|0|1|60°912|
PL|34|809°383|36|1°068°633|30|828°588|
RO|19|3°211°696|16|1°134°311|11|4°941°994|
SI|6|187°055|4|261°035|1|83°209|
SK|1|144°760|0|0|0|0|
EUR-12 TOTAL|74|5°519°982|70|3°834°458|58|6°936°665|
EUR-27 TOTAL|277|20°517°371 |312|22°810°497|204|19°029°392|
ANNEX 11 – PERCENTAGE CLASSIFICATION OF FRAUD PER MEMBER STATE
(...PICT...)
ANNEX 12 – AMOUNTS INVOLVED IN FRAUD
AMOUNTS INVOLVED IN FRAUD PER MEMBER STATE PERIOD 2007-2009|
MEMBER STATE|2007| |2008| |2009|
|CASES|FRAUD CASES|FRAUD IN €||CASES|FRAUD CASES|FRAUD IN €||CASES|FRAUD CASES|FRAUD IN €|
AT|94|31|34°103°931||103|25|11°299°158||166|63|13°646°462|
BE|462|56|2°193°816||368|46|3°411°591||286|46|2°224°292|
DE|1°614|222|15°081°027||1°696|214|14°684°577||927|43|14°128°607|
DK|54|2|213°813||47|6|671°103||44|10|2°895°762|
ES|464|196|10°482°321||485|216|14°900°293||432|193|15°355°224|
FI|34|21|1°207°186||21|11|651°465||31|12|441°108|
FR|327|153|6°064°600||317|123|4°415°700||285|22|23°659|
GR|57|57|2°976°051||37|37|1°751°545||12|10|440°791|
IE|34|4|134°805||53|13|0||49|6|0|
IT|288|101|11°231°037||320|179|19°490°171||312|182|21°935°990|
LU|0|0|0||1|0|0||0|0|0|
NL|1°145|341|22°388°674||912|101|2°455°234||742|75|7°165°386|
PT|23|2|394°483||29|5|1°676°333||22|4|0|
SE|44|3|0||71|3|0||58|5|0|
UK|1°161|193|15°453°616||1°078|144|12°668°045||791|80|6°001°044|
EUR-15 TOTAL|5°801|1°382|121°925°360||5°538|1°123|88°075°215||4°157|751|84°258°325|
BG|15|8|79°536||19|15|447°721||34|22|901°678|
CY|11|3|26°456||14|3|378°947||11|2|237°313|
CZ|50|3|559°995||65|5|79°088||67|2|23°656|
EE|12|1|41°304||17|1|100°592||11| |0|
HU|69|16|2°505°463||71|26|2°438°843||59|9|1°866°737|
LT|41|7|77°041||64|15|469°924||47|14|563°629|
LV|41|0|0||25|0|0||19|1|173°160|
MT|10|5|285°766||3|2|259°214||6|6|1°585°808|
PL|159|68|5°940°049||141|49|1°793°594||142|38|940°331|
RO|37|19|3°211°696||75|27|1°501°929||59|15|6°458°174|
SI|27|6|187°055||26|5|277°754||50|22|1°187°798|
SK|21|10|189°623||17|4|125°579||22|11|1°278°880|
EUR-12 TOTAL|493|146|13°103°984| |537|152|7°873°185| |527|142|15°217°164|
EUR-27 TOTAL|6°294|1°538|135°029°344| |6°075|1°275|95°948°400| |4°684|893|99°475°489|
Annex 13-Methods of detection of OWNRES cases – Year 2009
|Primary inspections|Ex-post controls|Voluntary admission|Total amounts|
|Amounts|%|Amounts|%|Amounts|%||
AT|1°877°336|8.7%|19°287°039 |89.8%|315°151|1.5%|21°479°526|
BE|629°744|6.6%|8°844°645 |93.1%|22°550|0.2%|9°496°939|
DE|7°170°543|9.7%|61°017°116 |82.9%|5°404°282|7.3%|73°591°941|
DK|6°169°327|66.5%|3°108°080 |33.5%|0|0.0%|9°277°407|
ES|5°843°876|24.5%|15°605°530 |65.3%|2°431°283|10.2%|23°880°689|
FI|807°561|46.2%|773°687 |44.3%|165°846|9.5%|1°747°094|
FR|8°185°614|39.8%|12°365°948 |60.2%|0|0.0%|20°551°562|
GR|428°565|80.1%|106°177 |19.9%|0|0.0%|534°742|
IE|186°528|9.3%|1°678°616 |83.8%|137°966|6.9%|2°003°110|
IT|19°114°574|48.0%|20°555°217 |51.6%|189°470|0.5%|39°859°261|
LU|0|0.0%|- |0.0%|0|0.0%|0|
NL|9°018°593|27.1%|24°262°134 |72.9%|0|0.0%|33°280°727|
PT|130°633|14.5%|645°251 |71.6%|125°860|14.0%|901°744|
SE|0|0.0%|4°871°519 |100.0%|0|0.0%|4°871°519|
UK|6°100°562|9.3%|59°558°900 |90.7%|0|0.0%|65°659°462|
CY|0|0.0%|718°211 |100.0%|0|0.0%|718°211|
CZ|103°219|2.8%|2°945°652 |80.3%|620°012|16.9%|3°668°883|
EE|30°586|11.8%|228°635 |88.2%|0|0.0%|259°221|
HU|1°179°822|18.4%|5°223°274 |81.6%|0|0.0%|6°403°096|
LT|509°056|27.6%|1°333°456 |72.4%|0|0.0%|1°842°512|
LV|507°905|50.2%|492°576 |48.7%|10°578|1.0%|1°011°059|
MT|1°136°012|71.6%|449°796 |28.4%|0|0.0%|1°585°808|
PL|1°912°436|31.7%|4°095°516 |67.9%|25°695|0.4%|6°033°647|
SI|2°096°793|79.1%|528°451 |19.9%|27°004|1.0%|2°652°248|
SK|98°727|4.0%|2°375°992 |96.0%|0|0.0%|2°474°719|
BG|0|0.0%|1°235°236 |100.0%|0|0.0%|1°235°236|
RO|5°263°491|62.5%|3°156°412 |37.5%|0|0.0%|8°419°903|
Total|78°501°503|22.9%|255°463°066|74.4%|9°475°697|2.8%|343°440°266|
(...PICT...)
(...PICT...)
ANNEX 16
STRUCTURAL FUNDS
IRREGULARITIES* COMMUNICATED BY MEMBER STATES 2000-2009**
(...PICT...)
(...PICT...)
*The concept of irregularity includes fraud. The qualification as fraud, meaning criminal behaviour, can only be made following a penal procedure.
** Data have been updated in relation to those published in the 2007 report in order to take into account the updates sent by Member States during the reporting year 2008.
ANNEX 17
COHESION FUND
IRREGULARITIES* COMMUNICATED BY MEMBER STATES 2000-2009
(...PICT...)
(...PICT...)
*The concept of irregularity includes fraud. The qualification as fraud, meaning criminal behaviour, can only be made following a penal procedure.
ANNEX 18.1
STRUCTURAL FUNDS
REGULATION No 1681/94
IRREGULARITIES RELATED TO THE PROGRAMMING PERIOD 1994-1999 REPORTED IN 2009
N° OF IRREGULARITIES BY MEMBER STATE
(...PICT...)
FINANCIAL AMOUNTS INVOLVED IN IRREGULARITIES BY MEMBER STATE
ANNEX 18.2
(...PICT...)
STRUCTURAL FUNDS
REGULATION No 1681/1994
IRREGULARITIES RELATED TO THE PROGRAMMING PERIOD 2000-2006 REPORTED IN 2009
N° OF IRREGULARITIES BY MEMBER STATE
(...PICT...)
IRREGULAR AMOUNTS BY FUND AND BY MEMBER STATES
(...PICT...)
ANNEX 19
STRUCTURAL FUNDS
REGULATION No 1828/2006
IRREGULARITIES RELATED TO THE PROGRAMMING PERIOD 2000-2006 REPORTED IN 2009
N° OF IRREGULARITIES BY MEMBER STATE
(...PICT...)
IRREGULAR AMOUNTS BY FUND AND BY MEMBER STATES
(...PICT...)
ANNEX 20
COHESION FUND
IRREGULARITIES COMMUNICATED BY MEMBER STATES UNDER REGULATION N. 1831/94 IN 2009
(...PICT...)
Annex 21
PRE-ACCESSION ASSISTANCE
IRREGULARITIES REPORTED IN 2009
(...PICT...)
(...PICT...)
(...PICT...)
(...PICT...)
(...PICT...)
(...PICT...)
(...PICT...)
Annex 22
PRE-ACCESSION ASSISTANCE
IRREGULARITIES REPORTED – 2002-2009
(...PICT...)
(...PICT...)
(...PICT...)
(...PICT...)
ANNEX 23
IRREGULARITIES COMMUNICATED BY MEMBER STATES AND CANDIDATE COUNTRIES
(...PICT...)
ANNEX 24
IRREGULARITIES REPORTED BY MEMBER STATES IN 2008 – AGRICULTURE, COHESION POLICY, OWN RESOURCES
(...PICT...)
[1] This document cannot be considered as an official poistion of the Commission.
[2] These rates and the following levels had already been introduced in the 2008 Report and Statistical Annex with similar names. This year’s Statistical Annex defines precisely these concepts in order to use them in the years to come. In other parts of the Statistical Annex or in the Report itself, the Fraud Rate may be referred to also as Suspected Fraud Rate. The calculation method remains the same.
[3] Official Journal L 248 of 16.09.2002
[4] See in particular Article 3(1) of Council Regulation (EEC) No 595/91 of 4 March 1991 (OJ L 67, 14.3.1997), Commission Regulation (EC) No 1681/94 of 11 July 1994 (OJ L 178 of 12.7.1994), as amended by Regulation (EC) No 2035/2005 of 12 December 2005 (OJ L 328 of 15.12.2005), and No 1831/94 of 26 July 1994 (OJ L 191, 27.7.1994), as amended by Regulation (EC) No 2168/2005 of 23 December 2005 (OJ L 345 of 28.12.2005), for expenditure, and Article 6(5) of Council Regulation (EC, Euratom) No 1150/2000 for traditional own resources.
[5] As of 1st January 2007, also the threshold for the agriculture sector has been increased to €10,000 following the provisions contained in article 6(1) of Regulation (EC) 1848/2006 of 14 December 2006 (OJ L 355 of 15.12.2006).
[6] Regulation 1681/94 applies to the Structural Funds, that is to say European Regional Development Fund (ERDF), European Social Fund (ESF), European Agriculture Guidance and Guarantee Fund (EAGGF) – Section Guidance and Financial Instrument for Fisheries Guidance (FIFG). It has been amended by Regulation No. 2035/2005 of 12 December 2005
[7] Regulation 1831/94 applies to the Cohesion Fund. It has been amended by Regulation No. 2168/2005 of 23 December 2005.
[8] Commission Regulation (EC) No 1828/2006 of 8 December 2006 setting out rules for the implementation of Council Regulation (EC) No 1083/2006 laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund and of Regulation (EC) No 1080/2006 of the European Parliament and of the Council on the European Regional Development Fund, OJ L 371, 27.12.2006. This repeals Regulations (EC) No 1681/94 and (EC) No 1831/94. Commission Regulation (EC) No 498/2007 of 26 March 2007 laying down detailed rules for the implementation of Council Regulation (EC) No 1198/2006 on the European Fisheries Fund.
[9] Regulation (EC) No 1080/2006 of the European Parliament and of the Council of 5 July 2006 on the European Regional Development Fund and repealing Regulation (EC) No 1783/1999; Regulation (EC) No 1081/2006 of the European Parliament and of the Council of 5 July 2006 on the European Social Fund and repealing Regulation (EC) No 1784/1999; Council Regulation (EC) No 1083/2006 of 11 July 2006 laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund and repealing Regulation (EC) No 1260/1999; Council Regulation (EC) No 1084/2006 of 11 July 2006 establishing a Cohesion Fund and repealing Regulation (EC) No 1164/94, OJ L 210, 31.7.2006.
[10] The Commission opened a dialogue with the representatives of the Member States to clarify basic concepts and to re-assure Member States that the communication of irregularities in no way prejudices the outcome of criminal judicial proceedings. A working document on the practical modalities for the communication of irregularities was established. Discussions are continuing in the Advisory Committee on the Coordination of Fraud Prevention.
[11] These are mainly customs and agricultural duties but also include anti-dumping duties and sugar levies
[12] Regulation No 1150/2000 of 22 May 2000.
[13] Regulation No 2028/2004, amending Regulation No 1150/2000.
[14] WOMIS: W rite- O ff M anagement and I nformation S ystem.
[15] Origin of the cases: 4 from Austria, 2 from Belgium, 1 from the Czech Republic, 243 from Germany, 9 from Denmark, 1 from Greece, 61 from Spain, 4 from France, 4 from Finland, 1 from Ireland, 60 from Italy, 106 from the Netherlands, 2 from Portugal, 3 from Sweden and 26 from the UK.
[16] The breakdown between the amounts for each of the positions is, at present, only an estimate, because sometimes elements from the same case may be partly accepted, considered not suitable or refused. Additional information from the Member States (in particular on the proportion covered by guarantee) is then needed to provide the final classification and quantification of the amounts concerned.
[17] Case C-392/02 of 15 November 2005. These cases are identified on the basis of Articles 220(2)(b) (administrative errors not detectable by the operator) and 221(3) (time-barring resulting from Customs’ inactivity) of the Community Customs Code, Articles 869 and 889 of the Provisions for application of the Code, or on the basis of non-observance by the customs administration of articles of the Community Customs Code giving rise to legitimate expectations on the part of an operator.
[18] OWNRES is an abbreviation for Own Res ources.
[19] Items registered in OWNRES are not necessarily also in the B-account. If a debt has been paid or not established (for instance where goods have been seized and confiscated), the amounts should not be entered in the B-account.
[20] At the end of 2009 the total amount that is still to be recovered according to OWNRES is higher than the amount of not yet recovered TOR in the B-account. This difference can mostly be explained by the fact that OWNRES is updated with a regulatory delay, as recovery actions should be registered that have taken place. Other explanations are cases seized and confiscated cigarettes and – unfortunately – undue delays.
[21] The information generated by OWNRES to produce the figures in this chapter was all obtained from queries made on 5 March 2010.
[22] See Annex 3 (table) and Annex 4 (chart).
[23] In 2005 the number of cases of belatedly discharged Transit was 2 374, being 38.2% of the total number of cases registered and 27.9% of the total amount initially established. In 2006 there were 1 479 cases (24.2% of cases and 19.5% of the total amount) and in 2007 there were 1 395 cases (22.2% of cases and 16.5% of the amount), in 2008 there were 1 136 (18.7% of cases and 13.8% of the amount). In 2009 the figures are respectively 738 (15.8% of cases and 13.8% of the amount).
[24] This percentage will gradually decrease since the cumulative number of existing cases in OWNRES will exceed the number of new cases added every new reporting year (last year this percentage was 14%).
[25] Significant changes in amounts involved generally relate to one or a few (very) big cases, e.g. Austria: 5 cases totalling to €14.8 million (involving Clothing from China, CN 61); Denmark: 2 cases totalling €5.4 million (involving Clothing from China, CN 62 and Chemical Products from China, CN 29).
[26] See Annex 5. In 2005 there was a decrease in importance of the customs procedure release for free circulation (53% of cases) which was linked to an improvement in registering those cases.
[27] Combined nomenclature or CN — nomenclature of the Common Customs Tariff.
[28] See Annexes 4 and 5.
[29] The product description in the chart is a generic description of the goods involved. See Annexes 4 and 5 for detailed analysis.
[30] See Annex 8.
[31] This calculation is based on 57 183 cases, an established amount of €4.3 billion (after corrections) and a recovered amount of €1.9 billion.
[32] See Annex 9.
[33] Source: Article 1 of the Convention (Council Act of 26 July 1995) drawn up on the basis of Article 235 (protection of the Communities' financial interests) of the Treaty establishing the European Community.
[34] Source: Council Regulation n° 2988/95 on the protection of the European Communities financial interests.
[35] See Annexes 11 and 12.
[36] Germany (5%), France (8%), Sweden (9%), Czech Republic (3%), Estonia (0%) and Latvia (5%). Luxemburg reported no cases of fraud and irregularity in 2009.
[37] Greece (83%), Italy (58%), Bulgaria (65%) and Malta (100%).
[38] For details see annex 13. Luxemburg did not register any OWNRES case in 2009
[39] Almost 40% of the total 2009-budget was spent in the agricultural sector.
[40] The amounts include "assigned revenue" of EUR 1.6 billion negative expenditure, representing amounts recovered for cases of irregularities (including fraud), superlevy from milk producers and temporary restructuring amounts.
[41] Art. 10 Reg. 1848/2006: Without prejudice to Article 11, the Commission may use any information of a general or operational nature communicated by Member States in accordance with this Regulation to perform risk analyses , using information technology support, and may, on the basis of the information obtained, produce reports and develop systems serving to identify risks more effectively.
[42] Finland reports personal data for irregularities concerning structural funds.
[43] Poland used to report personal data but stopped doing that in 2008.
[44] The compliance rate is based on a quantitative analysis of data provided by Member States. A Member State is being considered as compliant as soon as information has been provided. The quality of the information is not relevant. That will change in 2010. The quality of the information provided will also be taken into account to determine the compliance level.
[45] IMS = irregularity management system
[46] Expenditure is based on DG AGRI's database CATS - table 106 (download 26 May 2010)
[47] See also chapter 5.4. Specific analysis
[48] See for a more in depth explanation paragraph 1.2.4.
[49] See OLAF’s website: http://ec.europa.eu/anti_fraud/reports/
[50] The text, analysis and table of paragraph 5.3.4. is provided by DG AGRI. Under Reg. 1848/2006 Member States are not required to indicate the amounts to recover to OLAF.
[51] Regulation (EC) No 1290/2005 (OJ L 209, 11.8.2005)
[52] Decisions 2008/960/EC (OJ L 340, 19.12.2008) and 2009/253/EC (OJ L 75, 21.3.2009)
[53] Commission Decision 2009/367/EC (OJ L 111, 5.5.2009)
[54] Commission Decision 2010/56/EU (OJ L 32, 4.2.2010)
[55] Commission Decision 2010/258/EU (OJ L 112, 5.5.2010)
[56] Amount includes updated financial information provided by Member States for Financial Year 2009.
[57] IrR, FrR, FAL and FLL are explained in paragraphs 1.24 – 1.2.5.
[58] In next years report, the financial year 2005 will be used to determine the different rates and levels.
[59] OJ L120, 10.05.2007.
[60] The four Structural Funds are: The European Regional Development Fund (ERDF), supporting primarily productive investment, infrastructure and development of SMEs; The European Social Fund (ESF), supporting measures to promote employment (education systems, vocational training and recruitment aids); The Guidance Section of the European Agricultural Guidance and Guarantee Fund (EAGGF-Guidance), supporting measures for the adjustment of agricultural structures and rural development; The Financial Instrument for Fisheries Guidance (FIFG), supporting measures for the adjustment of the fisheries sector and the ‘accompanying measures’ of the common fishery policy.
[61] In reality the programming periods (and the related irregularities) are four : 1989-1993 ; 1994-1999 ; 2000-2006 and 2007-2013, but the overlaps involve a maximum of three periods.
[62] The definition of suspected fraud is explained in Paragraph 1.2.3.
[63] The estimation method has remained basically the same, with some minor variations, following the lessons “learned” in analysing the cases directly classified by the Member States. This slightly “revised” method has been applied again to the entire database of reported irregularities for the years 2000-2009 in order to produce Chart SF5.
[64] The descriptions provided by the Member States of the modus operandi linked to these communications of irregularity show that falsified documents, declarations of certificates were used. Under these circumstances, the Commission believes that those communications of irregularities should have been classified as “suspicion of fraud”.
[65] As data referred to the Cohesion fund are considered not entirely reliable for this type of estimation, they have been excluded from this chart. See also footnotes 62 and 63 for more details about data showed on this chart.
[66] FFL is defined in paragraph 1.2.4.
[67] FAL is defined in paragraph 1.2.5.
[68] The definition of FrR is in paragraph 1.2.4.
[69] The definition and calculation method for IrR is in paragraph 1.2.4.
[70] Three general objectives are foreseen for the programming period 2000-2006: Objective 1: promote the development and structural adjustment of regions whose development is lagging behind; Objective 2: supporting the economic and social conversion of areas experiencing structural difficulties; Objective 3: supporting the adaptation and modernisation of education, training and employment policies and systems in regions not eligible under Objective 1. Furthermore, through the Funds are also financed the so called “Community Initiatives” , aimed at intervening on specific aspects such as, for example, stimulating interregional cooperation (INTERREG); promoting the design and implementation of innovative models of development for the economic and social regeneration of troubled urban areas (URBAN).
[71] Member States continue to report the amounts recovered also after (partial) programme closure and must return the recovered amounts to the Commission. The Commission monitors the correctness of the financial follow-up given by the Member States to pending recoveries.
[72] In fact, in order to correct detected irregularities, Member States have two choices: they can choose to either immediately withdraw irregular expenditure by deducting it from the next payment claim or they can choose to deduct the irregular expenditure from a future payment claim only once recovery has been affected from the final beneficiary. This is a choice left to the Member States’ discretion.
[73] On 26 March 1999, at the Berlin European Council, the Heads of Government or States concluded a political agreement on Agenda 2000
[74] ISPA programme dealt with large-scale environment and transport investment support in candidate countries.
[75] SAPARD programme has supported agricultural and rural development in candidate countries.
[76] PHARE programme applied to candidate countries, principally involving institution building measures (and associated investment) as well as measures designed to promote economic and social cohesion , including cross–border co–operation .
[77] Community Assistance for Reconstruction, Development and Stabilisation applied to Western Balkan countries
[78] Commission Decision PE/2006/148 of 07/02/2006 conferring management of aid provided under PHARE and CARDS to an Implementing Agency in Croatia
[79] Community financial contribution in the framework of pre-accession strategy was first granted to Turkey under Council Regulation 2500/2001.
[80] Council Regulation (EC) No 1085/2006
[81] As amended by Regulation (EC) No 2035/2005
[82] As amended by Regulation (EC) No 846/2009
[83] Primary administrative or judicial finding as defined in the Commission Regulation 2035/2005.
[84] In accordance with Article 53a of the Council Regulation (EC, Euratom) No 1605/2002 (‘Financial Regulation’) and Commission Regulation (EC, Euratom) No 2342/2002 (‘Implementing Rules’).
[85] The financial impact of a case of suspected fraud can only be determined following the conclusion of an OLAF investigation. It is only at the end of judicial proceedings (‘ res judicata ’) that a case can be qualified as fraud and that the actual amount of fraud can be established.