# EUR-Lex - 52013SC0284 - EN

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# 52013SC0284

**COMMISSION STAFF WORKING DOCUMENT Statistical evaluation of irregularities reported for 2012 Own Resources, Natural Resources, Cohesion Policy, Pre-accession and Direct expenditure Accompanying the document REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Protection of the European Union's financial interests - Fight against Fraud Annual Report 2012 /* SWD/2013/0284 final */**

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TABLE OF CONTENTS

COMMISSION STAFF WORKING DOCUMENT Statistical
evaluation of irregularities reported for 2012 Own Resources, Natural
Resources, Cohesion Policy, Pre-accession and Direct expenditure.................. 1

1........... Introduction.................................................................................................................... 7

1.1........ Scope of the document................................................................................................... 7

1.2........ Structure of the document............................................................................................... 7

Part I - REVENUES.................................................................................................................... 8

2........... Traditional Own Resources............................................................................................. 8

2.1........ Introduction.................................................................................................................... 8

2.2........ General analysis – Trend analysis.................................................................................... 8

2.2.1..... Reporting Years 2008-2012: Cases of fraud and irregularities.......................................... 8

2.2.1.1.. Irregularities reported as
fraudulent.................................................................................. 9

2.2.1.2.. Irregularities not reported as
fraudulent............................................................................ 9

2.2.2..... Established and estimated amounts................................................................................ 10

2.2.3..... Recovery...................................................................................................................... 11

2.2.3.1.. Recovery rates............................................................................................................. 11

2.3........ Specific analysis............................................................................................................ 12

2.3.1..... Irregularities reported as
fraudulent................................................................................ 12

2.3.1.1.. Modus operandi........................................................................................................... 12

2.3.1.2.. Method of detection of fraud cases............................................................................... 13

2.3.1.3.. Smuggled cigarettes...................................................................................................... 14

2.3.1.4.. Fraud cases by amount category................................................................................... 14

2.3.2..... Irregularities not reported as
fraudulent.......................................................................... 15

2.3.2.1.. Modus operandi........................................................................................................... 15

2.3.2.2.. Method of detection of irregularity
cases....................................................................... 15

2.3.2.3.. Non-fraudulent irregularities by amount
category........................................................... 16

2.4........ Member States’ activities.............................................................................................. 17

2.4.1..... Member States’ classification of
cases of fraud and other irregularities and related rates.. 17

2.4.2..... Recovery rates............................................................................................................. 17

2.4.2.1.. Fraud........................................................................................................................... 17

2.4.2.2.. Other Irregularities........................................................................................................ 18

2.4.2.3.. Historical recovery rate................................................................................................. 18

2.4.3..... Commission’s monitoring.............................................................................................. 18

2.4.3.1.. Examination of the write off
reports............................................................................... 18

2.4.3.2.. Commission’s inspections............................................................................................. 18

2.4.3.3.. Particular cases of Member State
failure to recover TOR............................................... 19

2.4.4..... Conclusions / Recommendations................................................................................... 19

Part II - EXPENDITURE........................................................................................................... 21

Section I - Shared Management.................................................................................................. 21

Natural Resources...................................................................................................................... 21

3........... Common Agricultural Policy (CAP).............................................................................. 21

3.1........ Introduction.................................................................................................................. 21

3.2........ General analysis – Trend analysis.................................................................................. 22

3.2.1..... Irregularities reported as
fraudulent................................................................................ 22

3.2.2..... Irregularities not reported as
fraudulent.......................................................................... 23

3.3........ Specific analysis............................................................................................................ 24

3.3.1..... Irregularities reported as
fraudulent................................................................................ 24

3.3.1.1.. Modus operandi........................................................................................................... 24

3.3.1.2.. Type of control / Method of
detection........................................................................... 25

3.3.1.3.. Complexity of the irregularities reported
as fraudulent.................................................... 26

3.4........ Anti-fraud activities of Member
States........................................................................... 27

3.4.1..... Detection – Reporting Efficiency................................................................................... 27

3.4.2..... Detection of irregularities
reported as fraudulent in 2012 by Member State..................... 29

3.4.3..... Fraud detection rate...................................................................................................... 30

3.4.4..... Ratio of established fraud
2008-2012........................................................................... 30

3.5........ Recovery cases............................................................................................................ 32

4........... Common Fisheries Policy (CFP)................................................................................... 35

4.1........ General analysis............................................................................................................ 35

4.2........ Specific analysis............................................................................................................ 35

4.2.1..... Types of irregularity detected........................................................................................ 36

4.2.2..... Method of detection..................................................................................................... 36

4.3........ Control activity by Member States................................................................................ 36

Sustainable Growth..................................................................................................................... 37

5........... Cohesion Policy............................................................................................................ 37

5.1........ Trend analysis............................................................................................................... 38

5.1.1..... Irregularities reported as
fraudulent................................................................................ 38

5.1.1.1.. Trend by programming period....................................................................................... 38

5.1.1.2.. Trend by Fund.............................................................................................................. 40

5.1.1.3.. Trend by objective........................................................................................................ 42

5.2........ Specific Analysis –
Irregularities reported as fraudulent in relation to the Programming Period
2007-13            43

5.2.1..... Priorities concerned by the
irregularities reported as fraudulent in 2012.......................... 43

5.2.2..... Types of irregularities / modus
operandi detected - Irregularities reported as fraudulent in 2012            44

5.2.3..... Type of control / method of
detection – Irregularities reported as fraudulent................... 45

5.2.3.1.. Complexity of the irregularities
reported as fraudulent.................................................... 46

5.3........ Anti-fraud activities by Member
States.......................................................................... 47

5.3.1..... Detection – Reporting Efficiency................................................................................... 47

5.3.2..... Detection of irregularities
reported as fraudulent in 2012 by Member State..................... 48

5.3.3..... Fraud detection rate...................................................................................................... 49

5.3.4..... Ratio of established fraud
2008-2012........................................................................... 50

Section II - Decentralised Management....................................................................................... 52

The EU as a global player / Pre-Accession
Policy........................................................................ 52

6........... Pre-Accession Policy
(Pre-Accession Assistance and Instrument for Pre-Accession)..... 52

6.1........ The Pre-accession Assistance
(PAA), 2000-06 and Instrument for Pre-Accession (IPA), 2007-13     52

6.2........ General analysis – Trend analysis.................................................................................. 55

6.2.1..... Trend analysis............................................................................................................... 55

6.2.2..... Reporting efforts........................................................................................................... 56

6.3........ Specific analysis – Financial
year 2012.......................................................................... 57

6.3.1..... Pre-Accession Assistance (PAA).................................................................................. 57

6.3.2..... Instrument for Pre-Accession (IPA).............................................................................. 58

6.3.3..... Method of detection..................................................................................................... 59

6.3.4..... Recovery for the Pre-Accession
Assistance (PAA) – Cumulative results 2002-2012...... 59

Section III – Centralised
Management......................................................................................... 61

7........... Centralised Direct and
Centralised Indirect Management............................................... 61

7.1........ Introduction.................................................................................................................. 61

7.2........ General analysis – Trend analysis.................................................................................. 62

7.2.1..... Trend analysis 2011-2012............................................................................................ 62

7.3........ Specific analysis – Financial
year 2012.......................................................................... 62

7.3.1..... Recoveries according to legal
entity residence................................................................ 63

7.3.2..... Method of detection..................................................................................................... 64

7.3.3..... Types of error.............................................................................................................. 65

7.3.4..... Time delay.................................................................................................................... 65

7.3.5..... Recovery...................................................................................................................... 65

COUNTRY FACTSHEETS...................................................................................................... 66

Belgium...................................................................................................................................... 66

Bulgaria...................................................................................................................................... 67

Czech Republic........................................................................................................................... 68

Denmark.................................................................................................................................... 69

Germany..................................................................................................................................... 70

Estonia....................................................................................................................................... 71

Ireland........................................................................................................................................ 72

Greece....................................................................................................................................... 73

Spain.......................................................................................................................................... 74

France........................................................................................................................................ 75

Italy............................................................................................................................................ 76

Cyprus....................................................................................................................................... 77

Latvia......................................................................................................................................... 78

Lithuania..................................................................................................................................... 79

Luxembourg............................................................................................................................... 80

Hungary...................................................................................................................................... 81

Malta.......................................................................................................................................... 82

Netherlands................................................................................................................................ 83

Austria........................................................................................................................................ 84

Poland........................................................................................................................................ 85

Portugal...................................................................................................................................... 86

Romania..................................................................................................................................... 87

Slovenia...................................................................................................................................... 88

Slovakia..................................................................................................................................... 89

Finland....................................................................................................................................... 90

Sweden...................................................................................................................................... 91

United Kingdom......................................................................................................................... 92

ANNEXES................................................................................................................................ 93

ANNEX 1.................................................................................................................................. 94

ANNEX 2.................................................................................................................................. 95

ANNEX 3.................................................................................................................................. 96

ANNEX 4.................................................................................................................................. 97

ANNEX 5.................................................................................................................................. 98

ANNEX 6.................................................................................................................................. 99

ANNEX 7................................................................................................................................ 100

ANNEX 8................................................................................................................................ 101

ANNEX 9................................................................................................................................ 102

ANNEX 10.............................................................................................................................. 103

ANNEX 11.............................................................................................................................. 104

ANNEX 12.............................................................................................................................. 105

ANNEX 13.............................................................................................................................. 106

ANNEX 14.............................................................................................................................. 108

ANNEX 15.............................................................................................................................. 109

1.           Introduction

1.1.        Scope
of the document

The present document[1] is based on the analysis of the
notifications provided by national authorities of cases of irregularities and
suspected or established fraud. The reporting is performed in fulfilment of a
legal obligation enshrined in sectoral European legislation.

The document accompanies the Annual Report
adopted on the basis of article 325 of the Treaty on the Functioning of the
European Union (TFEU), according to which “The Commission, in cooperation with
Member States, shall each year submit to the European Parliament and to the
Council a report on the measures taken for the implementation of this
article”.

For this reason, this document should be
regarded more as an analysis of the achievements of Member States.

The methodology (including the definition of
terms and indicators), the data sources and the data capture systems are
explained in detail in the Commission Staff Working Document – Methodology for
the Statistical Evaluation of Irregularities.

1.2.        Structure
of the document

The present document is divided in two parts.

The first part is dedicated to the analysis of
irregularities reported in the area of the Traditional Own Resources
(Revenues).

The second part, concerning the expenditure
part of the budget, is composed of three sections, dedicated, respectively, to
shared, decentralised and centralised management modes.

The section dedicated to shared management,
covers the natural resources (agriculture, rural development and fisheries) and
the cohesion policy. Decentralised management refers to the pre-accession
policy, while the centralised management section mainly deals with internal and
external policies for which the Commission directly manages the implementation.

The document is completed by 27 country factsheets,
which summarise, for each Member State, the main indicators and information
that have been recorded through the analyses.

15 Annexes complement the information and data
of this document, providing a global overview of the irregularities reported
according to the relevant sector regulations. Annexes from 1 to 10 concern
Traditional Own Resources, Annexes 11 and 12 Natural Resources and Annexes from
13 to 15 the Cohesion Policy.

Part I - REVENUES

2.           Traditional
Own Resources

2.1.        Introduction

For more information about how information
concerning irregularities and fraud related to Traditional Own Resources are
collected and analysed, see paragraph 1.3 of the Commission Staff Working
Document ‘Methodology’.

Charts TOR1 –TOR4 provide an overview of the
number of cases of fraud and irregularities per reporting year, established
amounts and recovery rates as published in the previous years’ reports and to
compare them with the reporting trends observed for the period 2008-2012.

The following analysis is based on the data
available on the cut-off date and aims to provide an overview of the reported
cases of fraud and irregularities reported for 2012 together with their
financial impact.

2.2.        General
analysis – Trend analysis

2.2.1.     Reporting Years 2008-2012: Cases of fraud and irregularities

The number of cases reported via OWNRES for
2012 (4 594) is currently 5 % lower than the average number of
cases of fraud and irregularities reported for the period 2008-2012 (4 812).

Conversely, the total established amount of TOR
irregularity cases involved (EUR 444 million) is 20 % higher than the
average established amount for years 2008-2012 (EUR 371 million)[2].

Chart TOR1: Total cases of fraud and
irregularities and amounts affected (2008-2012)

Member States continuously update information
on cases of fraud and irregularities regarding previous years.

Annex 1 shows the situation on the cut-off date
for the last five years.

The increase of the total amounts affected by
fraud and irregularities in 2012 was influenced by six big cases reported by
Belgium, Germany, the United Kingdom, the Netherlands and Romania with a total established
amount of about EUR 104 million.

2.2.1.1.  Irregularities
reported as fraudulent

The number of fraud cases communicated to
OWNRES for 2012 (682) is currently 20 % lower in comparison with the
average number of fraud cases reported for period 2008-2012 (the average number
of cases reported for 2008-2012 was 851). The total established amount of TOR
involved (EUR 78 million) is 22 % lower than the average established
amounts for the years 2008-2012 (EUR 100 million)[3].

CHART TOR2: Cases of fraud and established
amounts (2008-2012)

Annex 2 shows the situation on the cut-off date
for the last five years.

The Czech Republic, Estonia, Luxemburg, Cyprus,
Portugal and Sweden did not communicate any case of fraud exceeding an amount
of 10 000 EUR.

2.2.1.2.  Irregularities
not reported as fraudulent

At the same time, the number of irregularities communicated
to OWNRES for 2012 (3 912) is 1 % lower in comparison with the
average number of irregularities reported for 2008-2012 which was 3 961).

The total established amount of TOR (EUR 370 million)
is 20 % higher than the average established amounts for the years
2008-2012 (271 EUR million)[4].

CHART TOR3: Cases of non-fraudulent irregularities
and established amounts (2008-2012)

For 2012, Malta and Luxemburg did not report
any case of irregularity exceeding an amount of EUR 10 000. On the cut-off
date, OWNRES had recorded only one case of irregularity reported by Greece for
2012[5].

Annex 3 shows the situation on the cut-off date
for the last five years.

2.2.2.     Established
and estimated amounts

The largest part of all amounts of TOR
established are recovered without any particular problem and made available to
the Commission via the A-account. For 2012 around EUR 21.9 billion TOR (gross)
have been collected by the Member States and thereafter made available to the
EU budget after deduction of 25 % collection costs. In comparison,
according to the OWNRES communications, around EUR 461 million have been established and estimated by the
Member States in connection to detected cases of fraud and irregularities where
the amount at stake exceeds EUR 10 000.

The total established and estimated amounts
reported in OWNRES represent 2.10 % of the total collected TOR (gross) of
2012[6]. This proportion has increased in comparison to the previous years’
reports where a percentage of 1.73% was calculated in 2011 and 2 % in 2010.
A percentage of 2.10 % reflects that out of each EUR 100 of TOR (gross)
collected an amount of fraud and irregularities is registered as irregular or
fraudulent in OWNRES of EUR 2.10. Within the Member States there are
differences. In six Member States the percentage is equal or above the average
of 2.10%.

For 2012 the highest percentage can be seen in
Romania with 17.95 %. This is due to two big cases with a total financial
impact of EUR 27.3 million.

For 7 Member States which collected most TOR,
the percentage of the established and estimated OWNRES amounts to collected TOR
for 2012 was equal to 2.10 %. In comparison to the previous year, these
Member States show an increase by almost 0.5 percentage points. For Belgium,
Germany and the Netherlands the increase was higher than 0.5 percentage points.
Only for Italy, the proportion between established and estimated OWNRES amounts
to collected TOR decreased in 2012 when compared to the previous year.

TOR MAP1: Visualising the percentage of established and
estimated amounts in OWNRES to collected TOR

2.2.3.     Recovery

The fraud and other irregularity cases which
have been detected in 2012 show an established amount of EUR 444 million. Thereof EUR 186 million
were recovered in cases where an irregularity was at stake and EUR 22 million in
fraud cases. In total EUR 208
million were recovered by all Member States for all cases which were detected
in 2012. In absolute numbers Germany recovered most with EUR 82 million followed by the United
Kingdom with EUR 34 million in 2012. In addition, the Member States continued
their recovery actions related to detected cases of previous years. EU-27
recovered EUR 83 million in 2012 which related to cases detected between 1989
and 2011.

2.2.3.1.  Recovery
rates

Over the last five years the annual RR has
varied between 38 % and 52 %. At present the recovery rate for 2012
is 47 %[7]. In other words, of every over EUR10 000 of duties established and reported for 2012 in OWNRES,
approximately EUR 4 700
has already been paid.

CHART TOR4: Annual recovery rates 2008-2012

There are big differences of the recovery rate
within the Member States. For 2012, the highest recovery rates are in Slovakia
(100 %), the Czech Republic (98 %), Hungary (97 %) and Germany
(81 %). Differences in recovery results may arise from factors such as the
type of fraud or irregularity or the type of debtor involved. Because recovery
is on-going, it can be expected that the recovery rate for 2012 will also go up
in the future.

The overall recovery rate for 2011 recorded in
the last year’s report was 51%, and it has since then climbed to 61%. On the
cut-off date, the overall recovery rate (RR) for all years (1989-2012) was 51.81 %[8].

2.3.        Specific
analysis

2.3.1.     Irregularities
reported as fraudulent

2.3.1.1.  Modus
operandi

In 2012, the most cases (83 %) and the
majority of established amounts[9]
(95 %) for fraud cases in EU-27 are related to the customs procedure ‘release
for free circulation’. A total of 7 % of all cases and 1 % of all
established amounts in OWNRES fraud cases registered for 2012 involve the
transit procedure. The percentage of established amounts for fraud cases involves
customs warehousing and inward processing 2 %[10] and 1 %
respectively.

A breakdown of frauds by mechanism type reveals
that most cases of fraud relate to false declarations. Incorrect use of
preferential arrangements, incorrect origin or country of dispatching, or
classification are most frequently mentioned. Smuggling as a fraud mechanism ranked
second place in 2012.

2.3.1.2.  Method
of detection of fraud cases

In 2012, most fraud cases (32 %) were revealed during a customs
controls at the time of clearance of goods (either physical inspections or
inspections of documents). Other frequently featured methods were inspections
by anti-fraud services (28 %), tax audits (22 %), and post-clearance inspections (11 %).

CHART TOR5:
Fraud cases - % of the method of detection by cases and established amounts in
2012

in terms of amounts, out of EUR 77 million[11] established in fraud cases
registered for 2012, around 51 % were discovered by anti-fraud services, 25 % by tax audits, whereas 14 % of all cases — in monetary terms — were detected during a
clearance control. Only in Spain, tax audits were the most important detection
method for fraud cases in monetary terms. In the following five Member States
more than 50% of all fraud cases — in established amounts — were detected by
anti-fraud services: Belgium, Germany, Italy, Austria and Romania. Clearance
controls were the most important method — in amounts — for the detection of
fraud in Bulgaria, Latvia, Lithuania and Finland.

2.3.1.3.  Smuggled
cigarettes

In 2012, there were 224 cases of smuggled
cigarettes registered (CN code[12]
24 02 20 90) involving estimated TOR of around EUR 25 million. In 2011 the
number of smuggled cigarettes was 291, totalling around EUR 48 million.

Table TOR1: Cases of smuggled cigarettes in 2012

Italy reported 68 cases of smuggled cigarettes,
totalling an estimated or established amount of EUR 8.7 million. This is the
highest number of cases and the highest amount reported by a Member State in
2012.

No cases were reported by the Czech Republic,
Denmark, Estonia, Cyprus, Luxembourg, Malta, the Netherlands, Portugal, Slovakia
or Sweden.

2.3.1.4.  Fraud
cases by amount category

In 2012, in 502 cases of fraud (74 % of all fraud cases) the established
amount was below EUR 50 000,
whereas for 180 cases (26 %)
the established amount was above EUR 50 000.

Table TOR2: Fraud by amount category in
2012

The total established amount in fraud cases
where the amount at stake was above EUR 50 000 amounted to EUR 69 million (89 % of all the established amounts in fraud cases).

2.3.2.     Irregularities
not reported as fraudulent

2.3.2.1.  Modus
operandi

In 2012 with regard to non-fraudulent
irregularities, the greatest part of established amounts in OWNRES (88 %)
in EU-27 related to the customs procedure ‘release for free circulation’[13]. In all, 6 % of all
established amounts of OWNRES cases in 2012 involved inward processing.
Furthermore, 2 % of all established amounts of OWNRES regard customs
warehousing and 2 % transit procedure. There was no significant difference
among Member States. In Ireland, 49 % of the amounts established regarding
irregularities relate to ‘release for free circulation’ and 48 % to inward
processing. For 2012, high amounts established regarding inward processing were
reported by Spain and the United Kingdom.

A breakdown of non-fraudulent irregularities by
mechanism type confirms that most cases of irregularity relate to incorrect
declarations (incorrect classification, value, country of origin or use of
preferential arrangements); and formal shortcomings (failure to fulfil
obligations or commitments).

2.3.2.2.  Method
of detection of irregularity cases

In 2012, most irregularity cases (59 %) were revealed during a
post-clearance customs control. Other frequently featured methods of detection
for irregularities were inspections by clearance controls (12 %) and tax audits (11 %) followed by anti-fraud services (7 %)[14].

CHART
TOR6: Non-fraudulent irregularity cases - % of the method of detection by cases
and established amounts in 2012

Of all non-fraudulent irregularity cases
registered for 2012, around 57% — in established amounts — were
discovered by post-clearance controls whereas 15 % were detected through an inspection by anti-fraud services, 12 % during a tax audit and only 6 % at the time of clearance of goods. In
eight Member States, more than 50 % of all irregularity cases — in amounts — were detected by a
post-clearance control[15]. In Estonia, Greece, France and Romania In the following five Member
States more than 50% of all irregularity cases — in amounts — were detected by
anti-fraud services. In the following five Member States more than 50 % of all irregularity cases — in
established amounts — were detected by primary inspections: Bulgaria, Latvia,
Lithuania, Poland and Finland. Spain reported irregularity cases that were
admitted voluntarily.

2.3.2.3.  Non-fraudulent
irregularities by amount category

In 2012, in 3 008 cases of irregularity (77 % of all irregularity cases) the established amount was below EUR 50 000 whereas for 904 cases (23 %) the established amount was above
EUR 50 000.

The total established amount in irregularity
cases where the amount at stake was above EUR 50 000 amounted to EUR 310 million (85 % of all the established amounts in irregularity cases).

Table TOR3: Non-fraudulent irregularities by amount
category in 2012

2.4.        Member
States’ activities

2.4.1.     Member
States’ classification of cases of fraud and other irregularities and related
rates

For 2012, Member States classified 682 cases as
fraud out a total of 4 594
cases reported via OWNRES, which implies a Fraud Frequency Level (FFL) of 15 %. The differences between Member
States are relatively large. In 2012 most of the Member States categorised
between 10-50 % of all
cases as fraud. However, six Member States categorised zero cases as fraud[16]. Five Member States categorised between 1 % and 10 % of
the cases as fraud.[17] Four Member States registered more than 50 %[18] of the cases as fraud.

In 2012, in the EU, the total established and estimated
amount affected by fraud was EUR 91 million and the overall Fraud Detection Rate
(FDR) was 0.42 %. For 2012, the highest percentages can be seen in Bulgaria
with 2.63 % and Spain 2.60 %.[19]

The total established and estimated amount
affected by irregularities was more than EUR 370 million which implies an Error
Rate (ER) of 1.69 %. The highest percentages can be seen in Romania (16.87 %)
and Latvia (6.54 %).[20]

The differences between Member States’
classification are large which can also depend on the Member States’
classification practises. This can influence the comparison of the amounts
involved in fraud and irregularities by Member States. Also, individual bigger
fraud cases detected in a certain year may affect importantly the annual rates.
Such factors as e.g. the type of traffic, type of trade, the level of
compliance of the economic operators, the location of a Member State factors
can influence the rates significantly. Under these variable factors the rates are
also affected on the way how the Member State's customs control strategy is set
up to target risky imports and to detect TOR related fraud and irregularities.

2.4.2.     Recovery
rates

2.4.2.1.  Fraud

Over the period 1989-2012 OWNRES show that in
average 16 % (1989-2012) of the initially established amount was corrected
(cancelled). The recovery rate (RR) for all years (1989-2012) is 24.37 %[21]. The
RR for fraud cases detected in 2012 was 27.9 %[22]
which is above the average rate of 25.5 % for fraud cases for the period 2008-2012[23]. The RR in fraud cases is
clearly much lower than that for irregularities.

2.4.2.2.  Other
Irregularities

OWNRES shows that on the cut-off date, in
average 37 % (1989-2012)
of the initially established amount in relation to irregularities was corrected
(cancelled) since 1989. The RR for irregularity cases reported for 2012 is
50.95%[24].
On the cut-off date, the annual RR for the last five years varies between 51%
and 78 %. The overall RR
for all years (1989-2012) for irregularity cases combined is 64.32 %[25].

2.4.2.3.  Historical
recovery rate

Also in the long term, the HRR indicates an
equally strong relation, showing that recovery in fraud cases is generally much
less successful than in cases of irregularity (see table TOR4). Classification
of a case as fraud is thus a strong indicator for forecasting short- and
long-term recovery results.

Table TOR4: Historical recovery rate (HRR)

2.4.3.     Commission’s
monitoring

2.4.3.1.  Examination
of the write off reports

In 2012, 168 new write-off reports amounting to
EUR 42 million were communicated to the Commission by 17 Member States. Including
also earlier reported cases for which Member States sent additional
information, the Commission processed in 2012 in total 263 cases totalling to
almost EUR 68 million. In 88 of those cases amounting to EUR 17 million[26], Member States were asked to
pay the outstanding amounts as they were not considered diligent in recovering
those debts.

Examination of Member States’ diligence in write
off 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.

2.4.3.2.  Commission’s
inspections

In its TOR inspections, the Commission has put
a special emphasis on Member States' customs control strategies and monitors closely
Member States' action in relation to the observations made during its
inspections. Member States show their willingness to adapt their control
strategies and to implement progressively systems that provide for efficient
and effective risk analysis for the protection of the EU’s financial interests.
Thematic reports consolidating the results of the inspections and evaluating
and comparing Member States performance are frequently prepared and discussed
with the Member States in view of remedying the individual shortcomings found[27]. A general conclusion which the Commission draws from its last years inspections
in Member States is that the
Member States’ control strategies are more and more shifting from the customs
controls at the time of clearance of goods to post-clearance customs controls.

2.4.3.3.  Particular
cases of Member State failure to recover TOR

If TOR is not established because of an
administrative error by a Member State, the Commission applies the principle of
financial liability[28]. In 2012 Member States have been held
financially liable for over EUR 24.3 million and new cases are being given
appropriate follow-up.

2.4.4.     Conclusions
/ Recommendations

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. To ensure effective monitoring, reliable
information regarding the number of fraud and irregularity cases and follow-up 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.

(1) 
The total number of
cases of fraud and other irregularities reported in 2012 was lower than in 2011.
The total established amount was, on contrary, higher than in the previous year
and totalled to EUR 444 million. This is mainly due to the significant increase
of the total amount established for non-fraudulent irregularity cases. The fraud figures reported in relation to
TOR vary significantly from one Member State to another and can also be result
of different interpretations of the provisions and practices among the Member
States. Analysis clearly shows a decreasing trend of
the total number of fraud cases over the last five years.

(2) 
For EU-27, the established and estimated amounts
(related to both fraudulent and non-fraudulent irregularities) in OWNRES
represent 2.10 % of the TOR collected for 2012. The percentage varies among
the Member States. Based on experience from previous years, it is likely that
this figure for 2012 will change in future years due to new establishments
and/or corrections of establishment.

(3) 
During its last years' inspections in the Member
States, the Commission observed a shift in Member States’ control strategies
from customs controls carried out at the time of clearance of goods to controls
carried out after the clearance. The data retrieved from OWNRES confirms this
development in the Member States and shows that in particular for the detection
of irregularities, customs controls carried out after the clearance of goods
are an effective method.

(4) 
Analysis reveals that for the detection of fraud
cases, customs controls carried out at the time of clearance of goods are an
important method and results in classifying cases as fraud more often than
other control methods. During inspections carried by anti-fraud services and
tax audits, fraud cases with higher amounts are detected.

(5) 
Based on the above mentioned analysis, it can be
concluded that the customs controls at the time of clearance of goods are of
high importance for fraud detection. Therefore, Member States should take this
fact into account when developing their customs control strategies. In parallel
with developing their post-clearance customs controls activities, Member States
should ensure that they have effective systems of risk assessment allowing them
also to carry out at the time of clearance well targeted controls on imports with
high risk of fraud.

(6) 
Almost 47 % of all established amounts in
relation to cases of fraud and irregularities reported in 2012 have been
already recovered. Analysis shows that certain particulars of a case may be
used as indicators for forecasts of recovery. Cases regarding fraud decrease
the chance of successful recovery.

Member States should continue their activities
in the field of establishment and recovery and 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

Section I - Shared
Management

Natural
Resources

Success in previous decades in guaranteeing
sufficient food production, has led to a shift in emphasis to, producing higher
quality food for consumers, increasing farms' profitability, diversifying the
rural economy and protecting the natural environment. There is a direct
management component but the majority of expenditure is disbursed by Member
States under the following shared management funds.

· 
The European Agricultural Guarantee Fund (EAGF)
which finances direct payments to farmers and measures to respond to market
disturbances, such as private or public storage and export refunds.

· 
The European Agricultural Fund for Rural
Development (EAFRD) which finances the rural development programmes of the
Member States.

· 
The European Fishery Fund (EFF) which provides
funding and technical support for initiatives that can make the fishery
industry more sustainable.

Table NR1 shows the financial resources
available for this policy area.

Table NR1: Financial instruments and 2012
appropriations for the Natural Resources Policies

3.           Common
Agricultural Policy (CAP)

3.1.        Introduction

For the last 50 years the Common Agricultural
Policy (CAP) has been the European Union's (EU) most important common policy.
This explains why traditionally it has taken a large part of the EU's budget,
although the percentage has steadily declined over recent years.

The CAP is financed by two funds, EAGF and
EAFRD, which form part of the EU's general budget.

Under the basic rules for the financial
management of the CAP, the Commission is responsible for the management of the
EAGF and the EAFRD. However, the Commission itself does not make payments to
beneficiaries. According to the principle of shared management, this task is
delegated to the Member States, who themselves work through national or
regional paying agencies. Before these paying agencies can claim any
expenditure from the EU-budget, they must be accredited on the basis of a set
of criteria laid down by the Commission.

The paying agencies are, however, not only
responsible for making payments to the beneficiaries. Prior to doing so, they
must, either themselves or through delegated bodies, satisfy themselves of the
eligibility of the aid applications. The exact checks to be carried out are
laid down in the different sectoral regulations of the CAP and vary from one
sector to another.

The expenditure made by the paying agencies is
then reimbursed by the Commission to the Member States, in the case of the EAGF
on a monthly basis and in the case of EAFRD on a quarterly basis. Those
reimbursements are, however, subject to possible financial corrections which
the Commission may make under the clearance of accounts procedures.

Table NR2 shows the financial resources
available for the CAP.

Table NR2: Financial instruments and 2012
appropriations for the CAP

3.2.        General
analysis – Trend analysis

3.2.1.     Irregularities
reported as fraudulent

Table NR3 presents the trend of the
irregularities reported as fraudulent by Member States for the period 2008-2012
in relation to the fund concerned.

The share of the irregularities reported as
fraudulent affecting the EAFRD in 2012 is stable in comparison with the five
years period. It is somewhat higher than the part of the financial resources
that this fund enjoys within the agriculture policy area.

Table NR3: Irregularities reported as
fraudulent by Fund – 2008-2012 for the CAP

The EAFRD has been established since 2007 and
therefore the low number of irregularities reported as fraudulent in 2008 is
linked to the initial implementation of this fund. Since 2009 the number of
irregularities reported as fraudulent has remained stable, while those linked
to the EAGF (referred also partly to financial years before the 2007 reform)
have more significant fluctuations.

3.2.2.     Irregularities
not reported as fraudulent

Regarding irregularities not reported as
fraudulent, the number of those reported relating to EAFRD has been constantly
increasing, while those related to EAGF has remained relatively stable.
Consistently with this trend, also the irregular amounts linked to the rural
development instrument have been increasing, but with a trend that is more
evident in the last three years.

As a positive remark, which underlines the
increasing quality of the information received, the number of the
irregularities that could not be related to any fund has been continuously
decreasing until disappearing entirely in 2012.

Table NR4 displays the information related to
the trend in irregularities not reported as fraudulent.

Table NR4:
Irregularities not reported as fraudulent by Fund – 2008-2012 for the CAP

Unlike fraudulent irregularities the largest
share, both in terms of numbers and amounts, in 2012 is for the non-fraudulent irregularities
linked to the EAFRD.

The increase in the irregular amounts related
to the EAFRD is also determining the situation that 2012 represents the highest
peak in relation to irregular amounts linked to non-fraudulent irregularities
of the last five years.

Table NR5 shows the information concerning the
years 2008-2012.

Table NR5:
Financial amounts linked to irregularities not reported as fraudulent by Fund –
2008-2012 for the CAP

3.3.        Specific
analysis

3.3.1.     Irregularities
reported as fraudulent

3.3.1.1.  Modus
operandi

Table NR6 compares the types of irregulary / modi
operandi linked to fraudulent cases detected in 2012 with those detected
from 2008 to 2012 (included).

The most recurrent modus operandi is related to
the infringement of limits, quotas or thresholds (related, respectively to
products, species or land). However, this is the result of the reporting from
Denmark of 56 cases, all presenting the same modus operandi and, probably
linked to the same investigation.

Anyhow, the most recurring other modi operandi
identified have not significantly changed in relation to the period 2008-2012,
and are those directly linked to the idea of fraudulent behaviour, i.e. 'false
or falsified declarations', 'false or falsified documents' and 'false or
falsified request for aid'.

'False or falsified documents' also remains the
most "dangerous" type of fraudulent irregularity in relation to the
amounts which are affected by this practice.

Table NR6: Types
of irregularities in relation to the CAP

A single case of corruption has been reported
(it is comprised within the category 'OTHER') and involves an amount of about
EUR 28 million (on the 30.5 million of that group). This case, reported by the
Netherlands, is related to the financial year 1998 and due to its complexity
and the secrecy of investigations has been reported only in 2012.

3.3.1.2.  Type
of control / Method of detection

Table NR7 shows the types of controls having
identified the irregularities reported as fraudulent in 2012.

Table NR7: Control methods having identified the irregularities
reported as fraudulent in 2012

The bodies having identified the majority of
the irregularities reported as fraudulent are mainly the anti-fraud bodies,
while the criminal investigations deal with the cases with the highest
financial impact as showed in Table NR8.

Table NR8: Types of controls having detected
the irregularities reported as fraudulent in 2012 in relation to the CAP

Among the 90 cases related to Anti-fraud
controls, 56 were reported from Denmark and 27 from Italy.

3.3.1.3.  Complexity
of the irregularities reported as fraudulent

Table NR9 provides a first estimation of the
level of complexity of the irregularities reported as fraudulent. It also compares
the situation of those reported in 2012 with those communicated in the
reference period 2008-2012 (included).

The share of the 'complex' cases remains stable
in 2012 in relation to the reference period, while share of the 'simple'
fraudulent irregularities decreases with a consequent increase of the 'moderate'
complexity category.

The 'complex' cases are exclusively referred to
the EAGF, while none concerns the EAFRD (not only in 2012, but in the whole
reference period).

Table NR9: Complexity of fraudulent
irregularities detected in relation to the CAP

This is the first attempt of estimating the
proportion of 'complex' cases on the total fraudulent irregularities
identified. Therefore the method is liable of being improved in the next years.

3.4.        Anti-fraud
activities of Member States

Previous paragraphs have examined the trend and
main features and characteristics of the irregularities reported as fraudulent.

The present paragraph aims at examining some
aspects linked to the anti-fraud activities and results of Member States. Four
elements are taken into account:

(1) 
the time that runs between the beginning of the
fraudulent practice and its detection/establishment by the competent authority
and reporting to the Commission;

(2) 
the number of irregularities reported as
fraudulent by each Member State;

(3) 
the fraud detection rate (the ratio between the
amounts involved in cases reported as fraudulent and the payments occurred in
the financial year 2012);

(4) 
the ratio of cases of established fraud on the
total number of irregularities reported as fraudulent.

3.4.1.     Detection
– Reporting Efficiency

Table NR10 shows the average number of months
between the moment in which the fraudulent practice is put in place and when
the fraudulent irregularity it is detected/established (Detection Efficiency –
DetE) and then the average number of months between its establishment and the
reporting (Reporting Efficiency – RepE) to the Commission.

The EU average is almost four years (47 months)
between the first and the last of those events (DetE + RepE).

The duration of the DetE should not be seen as
a sign of inefficiency per se. More relevant, in this respect, is the
RepE, which is, in average, about 7 months, an acceptable time frame.

For most of the Member States (17) having reported
fraudulent irregularities in 2012, have a DetE lower than 40 months. Only three
(Italy, Denmark and the Netherlands) are above this average.

Table NR10: Detection
and Reporting Efficiency by Member State

However, it should be taken into account that
Italy and Denmark are also among the countries having reported the highest
number of fraudulent irregularities, while in the case of the Netherlands, the
result depends exclusively on a single case related to an irregularity linked
to the financial year 1998, having involved a criminal investigation[29].

3.4.2.     Detection
of irregularities reported as fraudulent in 2012 by Member State

Map NR1 divides Member States in four groups,
depending on the number of irregularities reported as fraudulent in 2012:

(1) 
Group 1: no irregularities reported as
fraudulent irregularities in 2012;

(2) 
Group 2: between 1 and 9 such cases reported in
2012;

(3) 
Group 3: 10 to 30 irregularities reported as
fraudulent;

(4) 
Group 4: more than 30 cases reported.

The composition of these groups is similar to
the previous years, with the significant exception of Denmark, which is in
Group 4, while in previous years it was in Group 1 or 2.

Map NR1: Number of irregularities
reported as fraudulent in 2012 by Member State - CAP

The detailed figures of Map NR1 are showed in
Table NR9.

3.4.3.     Fraud
detection rate

The fraud detection rate compares the results
obtained by Member States in their fight against fraud with the payments
received by them in a given financial year. This implies that a single case reported
as fraudulent and involving a significant financial amount can produce a better
result that that achieved by the sum of the financial impact of several
irregularities affecting lower amounts. For this reason, this indicator should
be read in conjunction with the number of irregularities reported as fraudulent
and for this reason they are presented together in Table NR11.

In 2012, the highest fraud detection rates are
referred to the Netherlands, Estonia, Italy, Romania, Hungary and Denmark.

Table NR11:
number of irregularities reported as fraudulent in 2012, amounts involved and
fraud detection rate by Member State

In relation to the Netherlands, the result, as
already mentioned, is due to a case related to the financial year 1998,
established in 2011 (after a complex criminal investigation in the Netherlands
and Belgium) and reported in 2012. In this case, the picture provided by the
indicator is clearly distorted and this should be taken into account.

3.4.4.     Ratio
of established fraud 2008-2012

Table NR12 shows the ratio between the cases of
established fraud and the total number of irregularities reported as fraudulent
(including suspected and established fraud) in the period 2008-2012. Taking
into account only cases reported in 2012 would be meaningless, as the criminal
proceedings leading to a conviction for fraud may take several years.

In this respect, the average ratio of
established fraud at EU level is 6%, with Latvia, Bulgaria, Germany, the United
Kingdom and Slovenia showing a rate above this level, and Poland presenting a
rate in line with the EU average.

Table NR12:
number of cases of suspected and established fraud and ratio of established
fraud – cases reported between 2008-2012 in the CAP

A significant impact on the rate is determined
by the number of irregularities reported as fraudulent by Member States. In
this respect, the countries which influence the EU average results are Italy,
Poland, Bulgaria, Romania and, as of 2012, Denmark.

3.5.        Recovery
cases

Regulation (EC) No 1290/2005 introduced an
automatic clearing mechanism under which 50% of any undue payments which the
Member States have not recovered from the beneficiaries within 4 years or, in
the case of legal proceedings, 8 years, will be charged to their national
budgets (50/50 rule). Even after the application of this mechanism, Member
States are, however, obliged to pursue their recovery procedures and, if they
fail to do so with the necessary diligence, the Commission may decide to charge
the entire outstanding amounts to the Member States concerned. Moreover, since
2008, Member States are required to off-set any outstanding debts against
future payments to the debtor (compulsory compensation).

Undue payments that are the result of
administrative errors committed by the national authorities also have to be
deducted from the annual accounts of the paying agencies concerned and, thus,
excluded from EU financing.

Regarding financial year 2012, Member States
reported the information about irregularity cases by 1 February 2013. Based on
the information available in March 2013, Member States recovered during
financial year 2012 EUR 169.4 million from the beneficiaries, and the overall
outstanding amount still to be recovered from the beneficiaries at the end of
that financial year was EUR 1 216.8 million. The financial consequences of non-recovery for cases
dating from 2008 or 2004 will be determined in accordance with the 50/50 rule
mentioned above by charging approximately EUR 14.3 million to the Member States
concerned. Moreover, around EUR 31.8 million will be borne by the EU budget for
cases reported irrecoverable during financial year 2012. Due to the application
of the 50/50 rule for the seventh time since its introduction, important
non-recovered sums have already been charged to the Member States for EAGF
expenditure. Out of the EUR 1 216.8 million to be recovered from the final beneficiaries at the
end of financial year 2012 the amount outstanding towards the EU budget was to EUR
961.4 million (the difference having already been charged to the Member States
via the 50/50 mechanism). As regards the recovery of undue payments financed by
the EAFRD, it has to be noted that the 50/50 rule will only commence being
applied after the closure of the rural development programmes.

The new clearance mechanism (50/50 rule)
referred to above provides a strong incentive for Member States to recover
undue payments from the beneficiaries as quickly as possible. As a result, by
the end of financial year 2012, 43% of the new EAGF debts from 2007 and
thereafter had already been recovered, which is a significant improvement
compared to the past. The detailed breakdown of this recovery rate has
developed as indicated in Table NR13.

Table NR13:
Rate of recovery from beneficiaries of irregularities detected since 2007
(EAGF)

It is worth noting that some of these new debt
amounts were already written off by Member States in the period 2007-2012 (EUR
43.5 million) and therefore they will most likely not be recovered. For more
details on the recovery rates at Member State level, see the Table NR14.

Table NR14: Recoveries
from beneficiaries for cases detected since 2007 in EUR (EAGF)

The recovery rate of 43% is significantly
affected by the low rates displayed by six Member States (below 30%), while it is
worth pointing out that 13 Member States have recovered more than 70% of the
amounts at stake.

During the years 2008-2012, the Commission has
been auditing the correct application of the new clearance mechanism through 21
on-the-spot controls in 14 Member States (including all EU-15 Member States
with a low recovery rate for the cases detected since 2007). In general the
Member States' authorities have adequate procedures in place to protect the
financial interest of the European Union. Deficiencies found during these
audits are being followed in the context of conformity clearance procedures.
The diligence of the Member States' authorities in the recovery of the most
significant individual irregularity cases is assessed in the context of a
further 22 conformity clearance procedures (desk audits).

4.           Common
Fisheries Policy (CFP)

As the activities of each fishing fleet affect
the opportunities of other fleets, the EU countries have decided to manage
their fisheries in collaboration, through the common fisheries policy (CFP).
This policy brings together a range of measures designed to achieve a thriving
and sustainable European fishing industry.

Among the most important areas of action of the
CFP is the provision of funding and technical support for initiatives that can
make the industry more sustainable. These actions are supported by the European
Fisheries Fund (EFF).

4.1.        General
analysis

Implementation of programmes financed by the
EFF is proceeding more slowly than that of other policy under shared management.
For this reason, the number of irregularities reported by Member States in
relation to this fund is limited and has started in 2010.

Table NR15 shows the overall number of
irregularities (fraudulent and non-fraudulent reported by year and the related
financial amounts.

The increase from one year to the other simply
reflects the increased level of implementation of the programmes.

Table NR15: EFF
- Irregularities (fraudulent and non-fraudulent reported by year – 2010-2012

Table NR16 provides an overview of the payments
and of the detected irregular amounts since the beginning of the implementation
of the EFF funded programmes and until the end of 2012.

Table NR16:
EFF - Payments and detected irregular amounts 2010-2012

4.2.        Specific
analysis

Given the limited number of irregularities
reported so far, the analysis covers the whole period 2010-2012.

4.2.1.     Types
of irregularity detected

The number of irregularities reported in
relation to the EFF is limited and to some extent incomplete in relation to the
typologies of irregularities detected by national authorities.

This is reflected by the circumstance that of
the 116 detected irregularities (fraudulent and non-fraudulent), 13 do not
indicate the modus operandi (almost 10% of the total).

The most detected typology is 'Not eligible
expenditure', followed 'Absence or late declaration' and 'Infringements of
public procurement rules'. These three types alone cover almost 60% of the
reported irregularities.

In relation to the 5 irregularities reported as
fraudulent, the most frequent modus operandi is, the use of 'False or
falsified supporting documents'

4.2.2.     Method
of detection

In relation to the methods of detection, the
most frequently reported are 'Control of documents', 'Administrative controls'
and 'On-the-spot checks'.

4.3.        Control
activity by Member States

Table NR17 shows the results of the control
activities in the Member States.

Irregularities have been detected and reported
by 13 Member States; fraudulent irregularities by 5 Member States. In terms of
numbers of irregularities, the majority has been detected by Spain and Poland,
while in terms of amounts the highest results have been obtained by Romania and
Spain.

Table NR17:
EFF – Irregularities (fraudulent and non-fraudulent) reported by Member State –
2010-2012

Sustainable
Growth

Cohesion for Growth and Employment is key to
achieving the goal of Sustainable Growth to support and promote a competitive,
inclusive and green economy. The aim is also to create inclusive growth by
ensuring that all citizens and regions can compete and contribute to the
economy. Cohesion Policy is promoted using three shared management instruments.
Shared management means money is distributed to Member States who adjust to
local priorities compatible with the EU aims. Sustainable growth is also
promoted through centralised direct management by the Commission and
centralised indirect management where the Commission distributes funds to EU
and other agencies (see chapter 6).

5.           Cohesion
Policy

The resources for the Cohesion policy support
three main objectives:

· 
Convergence: aims to modernise and diversify
regional economic structures, to support sustainable integrated economic
development and create sustainable jobs.

· 
Regional competitiveness and employment: covers
environment and risk prevention, access to transport and
telecommunications services; Innovation and the
knowledge economy.

· 
The European Territorial Cooperation objective:
focuses on development of economic and social cross-border activities;
transnational cooperation, and networking and exchange of experiences between
regional and local authorities.

Three financial instruments are the vehicles to
achieve the goals of this policy:

– 
The European Regional Development Fund (ERDF) is the largest
fund and aims to support the development and structural adjustment of less
developed regions in all Member States through investments in research,
infrastructure, business support or direct financial support to SMEs.

– 
The European Social Fund (ESF)
prevents and fights unemployment, by making Europe's workforce and companies
better equipped to face new challenges and preventing people losing touch with
the labour market. Training programs are the primary method; however advice,
coordination and sometimes microfinance are also provided to entrepreneurs and
SMEs.

– 
The Cohesion Fund promotes sustainable development in Member states with a per person GNI below
90% of the EU average. The fund has two components: Transport and Environment.

Table CP1 shows the financial resources available
for the Cohesion Policy under the different financial instruments.

Table CP1:
Financial instruments and 2012 appropriations for the Cohesion Policy by
programming period and financial instruments

5.1.        Trend
analysis

In comparison with the other budget sectors,
the analysis of the Cohesion policy poses a higher level of complexity, given
by the fact that the information received is related to different programming
periods, which are regulated by different rules.

5.1.1.     Irregularities
reported as fraudulent

5.1.1.1.  Trend
by programming period

Table CP2 analyses the trend linked to the
communication of the irregularities reported as fraudulent in the last five
years (2008-2012), making a distinction by Fund involved and the relevant
programming period.

In the last three years, while the fraudulent
irregularities linked to the PP2000-06 have been decreasing, those linked to
the PP2007-13 have been constantly increasing. These trends are linked to the current
implementation of the latter period and the closure of the previous.

Table CP2: trend of the number of
irregularities reported as fraudulent between 2008 and 2012 by programming
period – Cohesion Policy

Table CP2 and its associated chart do not
include irregularities reported as fraudulent related to previous programming
periods, which have been communicated until 2011.

Table CP3 provides in the same form of Table
CP2 information about the trends linked to the amounts involved in cases
reported as fraudulent and confirms the raising trend related to the PP2007-13,
although in this domain fluctuations are much more significant as individual
cases involving high amounts can easily distort the overall picture.

Table CP3: trend of financial amounts linked
to the irregularities reported as fraudulent between 2008 and 2012 by
programming period – Cohesion Policy

5.1.1.2.  Trend
by Fund

The analysis of the same data presented in
Table CP2 but focussed on the distribution of the irregularities reported as
fraudulent by Fund (Table CP4), highlights two circumstances:

(1) 
The increase since 2010 of cases concerning the
ERDF and Cohesion Fund

(2) 
A significant decrease, in relation to the years
2009-2010, of the cases related to the ESF.

Table CP4: trend of the number of
irregularities reported as fraudulent between 2008 and 2012 by Fund – Cohesion
Policy

Table CP5 analyses these trends examining the
financial amounts linked to the irregularities reported as fraudulent in the
reference period.

In this respect, the weight of the ERDF on the
total is accentuated by the higher amounts with which this fund contributes to
the co-financing of development projects.

Since 2010 the increasing weight of the
Cohesion Fund and of the ERDF is confirmed also in relation to the amounts
involved.

Table CP5: trend of financial amounts linked
to the irregularities reported as fraudulent between 2008 and 2012 by fund –
Cohesion Policy

5.1.1.3.  Trend
by objective

A significant specificity of the Cohesion
Policy is that programmes and financial resources available to implement them
are closely linked to the geographical dimension, that is to say that the
objectives that they pursue depend on the region (and its level of economic
development) in which they are implemented. For this reason, the analysis by
objective is important.

From this point of view, the analysis of
irregularities reported as fraudulent in the last five years do not change the
trend already highlighted in previous years.

The fraudulent irregularities detected and
reported by Member States mainly concern programmes implemented under the
Convergence objective (previously Objective 1), linked to the less economically
developed regions in Europe.

Table CP6:
trend of irregularities reported as fraudulent between 2008-2012 by Objective

5.2.        Specific
Analysis – Irregularities reported as fraudulent in relation to the Programming
Period 2007-13

5.2.1.     Priorities
concerned by the irregularities reported as fraudulent in 2012

The operational programmes financed by the
Cohesion Policy are implemented in relation to the already mentioned
objectives, but also along identified Priorities and Themes.

The information provided by Member States
allows for an analysis of the priority areas in relation to which Member States
have identified projects affected by potentially fraudulent practices.

Table CP7 shows the number of reported
fraudulent irregularities and their related financial amounts.

In terms of numbers, the 'Priorities' most
concerned were 'Research and Technological Development', 'Improvement of the
access to employment and sustainability' and 'Environmental protection and risk
prevention'.

From the amounts point of view, the most
significant results concern 'Transport', 'Environmental protection and risk
prevention' and 'Investment in social infrastructure'.

Table CP7: PP2007-13 - Irregularities
reported as fraudulent by Priority

More than 40% of the irregularities used for
this analysis did not provide information in relation to the priority area
concerned.

5.2.2.     Types
of irregularities / modus operandi detected - Irregularities reported as
fraudulent in 2012

The analysis of the detected practices used
in connection with the irregularities reported as fraudulent in 2012 (Table
CP8) reveals a relative decrease of those generically described as
'not-eligible expenditure' and a significant increase of those described linked
to the use of 'false or falsified or incorrect documents, certificates or
declarations', which intuitively represent the type of behaviour directly
linked to fraud as aimed at deceiving the administration/body paying the
resources.

However, the most significant increase is
linked to 'infringement of public procurement rules' and 'abuses'.

Although marginal on the total, five cases
potentially involving corruption have been detected and reported, bringing the
total number to 13 in the period 2008-2012. Interestingly, these 13 cases
affect the highest amounts reported in the reference period (almost EUR 90
million), followed by 'infringement of rules concerning public procurement'.

Table CP8: Programming Period 2007-13 -
Types of irregularity/Modus operandi detected in relation to irregularities
reported as fraudulent

5.2.3.     Type
of control / method of detection – Irregularities reported as fraudulent

The analysis of the information concerning the Programming
Period 2007-13 shows an important shift in relation to the previous programming
period. The number of fraudulent irregularities detected by administrative
controls is proportionally significantly higher than what was the case in the
previous period, where the administrative verifications, on the spot checks and
audit of operations would detect less than 20% of the cases, while in the
current period they detect about 60%.

Table CP9: Programming Period 2007-13 - Type
of checks having detected the irregularities reported as fraudulent

The results of this analysis may be influenced
by the accuracy of the information reported by Member States, which may have
highlighted the subsequent activity of bodies in charge of the management and
control of the funds and neglected the detection activity of the anti-fraud
bodies.

Another element to be kept into account is that
for 107 cases reported in the years 2009-2011, it was not possible to determine
the type of check.

5.2.3.1.  Complexity
of the irregularities reported as fraudulent

Table CP10 provides a first estimation of the
level of complexity of the irregularities reported as fraudulent. It also
compares the situation of those reported in 2012 with those communicated in the
reference period 2008-2012 (included).

The share of the 'complex' cases remains stable
in 2012 in relation to the reference period, while share of the 'simple'
fraudulent irregularities increases with a consequent decrease of the
'moderate' complexity category.

The 'complex' cases are mainly referred to the
ESF.

Table CP10: Complexity of fraudulent
irregularities detected in relation to the CAP

This is the first attempt of estimating the
proportion of 'complex' cases on the total fraudulent irregularities
identified. Therefore the method is liable of being improved in the next years.

5.3.        Anti-fraud
activities by Member States

Previous paragraphs have examined the trend and
main features and characteristics of the irregularities reported as fraudulent.

The present paragraph aims at examining some
aspects linked to the anti-fraud activities and results of Member States. Four
elements are taken into account:

(1) 
the time that runs between the beginning of the
fraudulent practice and its detection/establishment by the competent authority
and reporting to the Commission;

(2) 
the number of irregularities reported as
fraudulent by each Member State;

(3) 
the fraud detection rate (the ratio between the
amounts involved in cases reported as fraudulent and the payments occurred in
the financial year 2012);

(4) 
the ratio of cases of established fraud on the
total number of irregularities reported as fraudulent (Ratio of established
fraud - REF).

5.3.1.     Detection
– Reporting Efficiency

Table CP11 shows the average number of months
between the moment in which the fraudulent practice is put in place and when
the fraudulent irregularity it is detected/established (Detection Efficiency –
DetE) and then the average number of months between its establishment and the
reporting to the Commission (Reporting Efficiency – RepE).

The EU average is more than three years (39
months) between the first and the last of those events (DetE + RepE).

The duration of the DetE should not be seen as
a sign of inefficiency per se. More relevant, in this respect, the RepE,
which is, in average, about 12 months, but in 2012 it has decreased to 8 months
that is an acceptable time frame.

For nine Member States having reported
fraudulent irregularities in 2012, the DetE is lower than 31 months, while 8
are above this average.

The overall time gap between the initial moment
and reporting (DetE + RepE) is increasing in 2012 in comparison with previously
reported information.

Table CP11: Cohesion Policy – Detection and
Reporting Efficiency

Three Member States (United Kingdom, Finland
and Ireland) have not reported fraudulent irregularities in 2012 in relation to
the programming period 2007-13. For Finland and Ireland, information provided
in relation to cases reported in previous years did not allow calculating any
average time gap.

5.3.2.     Detection
of irregularities reported as fraudulent in 2012 by Member State

Map CP1 divides Member States in four groups,
depending on the number of irregularities reported as fraudulent in 2012:

(1) 
Group 1: no irregularities reported as
fraudulent irregularities in 2012. 9 Member States belong to this group.

(2) 
Group 2: between 1 and 9 such cases reported in
2012. 10 Member States belong to this group;

(3) 
Group 3: 10 to 30 irregularities reported as
fraudulent. 3 countries are included in this group;

(4) 
Group 4: more than 30 cases reported. It counts
5 Member States.

Map CP1:
Number of irregularities reported as fraudulent in 2012 by Member State –
Cohesion Policy

5.3.3.     Fraud
detection rate

The fraud detection rate compares the results
obtained by Member States in their fight against fraud with the payments
received by them in a given financial year. This implies that a single case
reported as fraudulent and involving a significant financial amount can produce
a better result that that achieved by the sum of the financial impact of
several irregularities affecting lower amounts. For this reason, this indicator
should be read in conjunction with the number of irregularities reported as
fraudulent and for this reason they are presented together in Table CP12.

In 2012, the highest fraud detection rates are
referred to the Italy, the Czech Republic, Latvia, Bulgaria, Romania and
Germany (all above 0.3%).

The highest number of detected fraudulent
irregularities for the period 2007-13 originates from Germany, Poland, the
Czech Republic, Bulgaria and Romania.

Table CP12:
number of irregularities reported as fraudulent in 2012, amounts involved and
fraud detection rate by Member State

The high amounts related to Italy and the Czech
Republic depend on two cases each which affect very large sums of money.

5.3.4.     Ratio
of established fraud 2008-2012

Table CP13 shows the ratio between the cases of
established fraud and the total number of irregularities reported as fraudulent
(including suspected and established fraud) in the period 2008-2012. It would
be meaningless to take into account only cases reported in 2012, as the
criminal proceedings leading to a conviction for fraud may take several years.

In this respect, the average ratio of
established fraud at EU level is 3%, with Cyprus, Slovenia, Estonia and Latvia
showing a rate above this level, and Germany presenting a rate in line with the
EU average.

Table CP13:
number of cases of suspected and established fraud and ratio of established
fraud – cases reported between 2008-2012 in the Cohesion policy

A significant impact on the rate is determined
by the number of irregularities reported as fraudulent by Member States. In
this respect, the countries which greatly influence the EU average results are
Germany, Poland, the Czech Republic, Romania, Italy and Bulgaria.

Section II - Decentralised
Management

The EU as a
global player / Pre-Accession Policy

The goal of the EU as a global player is also
promoted through direct management. Pre-Accession Assistance (PAA) is provided
through decentralised management where third countries distribute funds but
account to the EU for how it is spent. In the last stages new member states
manage pre-accession funds under shared management to help them complete the
transition.

6.           Pre-Accession
Policy (Pre-Accession Assistance and Instrument for Pre-Accession)

The assistance in pre-accession is provided on
the basis of the European Partnerships of the potential candidates and the
Accession Partnerships of the candidate countries. The current candidate countries
are Croatia, Iceland[30],
the Former Yugoslav Republic of Macedonia, Montenegro, Serbia and Turkey. Accession negotiations were opened with Croatia and Turkey in
October 2005, and with Iceland in July 2010.

6.1.        The
Pre-accession Assistance (PAA), 2000-06 and Instrument for Pre-Accession (IPA),
2007-13

The old Pre-accession Assistance (PAA),
regarding the period 2000-06, was financed by series of European Union
programmes and financial instruments for candidate countries or potential
candidate countries, namely the programmes for candidate countries, PHARE, SAPARD and ISPA, Phare Cross-Border Cooperation (CBC) and Coordination, Pre-accession financial assistance for Turkey[31], Assistance for reconstruction,
development and stabilisation for potential candidate countries (CARDS)[32] and Transition facility[33].This assistance has nearly
been closed except for a few payments in CARDS.

The current Instrument for Pre-Accession
Assistance (IPA), which covers the period 2007-13 is delivered through five
components. The policy and programming of IPA consists of Multi-Annual Indicative Financial
Framework (MIFF) on a three year basis, established by country,
component and a theme, and Multi-Annual Indicative Planning
Documents (MIPDs) per country or per groups of countries (regional
and horizontal programmes). The Candidate Countries submit also Strategic
Coherence Frameworks (SCF) and Multi-annual Operational Programmes, both
regarding IPA Components III and IV. Their principal aim is to prepare
beneficiary countries for the future use of the Cohesion policy instruments by
imitating closely its strategic documents, National Strategic Reference
Framework (NSRF) and Operational Programmes (OP), and management modes.

The financing of IPA is provided by the five
following different components and DG Enlargement leads in the coordination of
the instrument:

(1) 
Component I, Transition Assistance and
Institution Building (TAIB), is managed by the European Commission's Directorate General for Enlargement;

(2) 
Component II, Cross-Border Cooperation,
is managed by the European Commission's Directorate General for Enlargement and part
is managed, under shared management with Member States, by European
Commission's Directorate General for Regional
Policy;

(3) 
Component III, Regional Development, is
managed by the European Commission's Directorate General for Regional
Policy;

(4) 
Component IV, Human Resources Development,
is managed by the European Commission's Directorate General for
Employment and Social Affairs; and

(5) 
Component V - Rural Development, is
managed by the European Commission's Directorate General for
Agriculture.

The pre- and post-accession assistance is
implemented through a variety of management modes which take into
account different levels of preparedness of the beneficiary countries.
The assistance under IPA is designed also to prepare the beneficiary countries
to assume full responsibility for the management of financial assistance
granted by the EU.

The eligibility for IPA components differs
depending on the state of preparedness. In the use of funds the IPA beneficiary
countries are divided into two categories. The EU candidate countries Croatia, the
Former Yugoslav Republic of Macedonia, Serbia and Turkey are eligible for all
five components of IPA. While the new candidate countries, Iceland and Montenegro (candidate status awarded in 2010), currently remain
outside the scope of intervention of IPA Component III, the regional
development. The Potential candidate countries in the Western Balkans (Albania,
Bosnia and Herzegovina, Montenegro and Kosovo under UN Security Council
Resolution 1244/99) are eligible only for the first two components.[34]

Implementation of Components I and II falls
under the responsibility of DG Enlargement, which initiates the components under
a centralised management mode, with a view to transferring implementation
management powers to the beneficiary countries as soon as their administrative
capacities are considered sufficiently developed to ensure sound financial
management. The EU Delegations play a major role in the
delivery of IPA, in particular under the de-concentrated and decentralised
management modes.[35]

The implementation can be handled:

· 
directly by central management: funds are
managed by DG Enlargement at headquarters;

· 
directly de-concentrated: funds are managed by
EU Delegations under the supervision;

· 
directly centralised: cross-delegated when funds
are managed by another service of the Commission through cross sub-delegation;

· 
indirectly in a centralised indirect management:
funds are managed by executive agencies, specialised Community bodies (such as
the European Investment Bank or the European Investment Fund) and national or
international public-sector bodies or bodies governed by private law with a
public-service mission;

· 
indirectly decentralised with ex ante control:
funds are managed by accredited national authorities of the beneficiary
country, but procurement is subject to ex ante control by the EC Delegation;

· 
decentralised without ex ante control: funds are
managed by accredited national authorities of the beneficiary country and are
not subject to ex ante controls by an EC Delegation;

· 
joint: funds are jointly managed with
International Organisations (EBRD, EIB, Sigma, UN agencies, etc.)

In Croatia, the implementation of Pre-accession
assistance is decentralised to national authorities. Montenegro is preparing for
conferral of management powers for IPA Component I and II. Decentralised
management is still under development in the Former Yugoslav Republic of
Macedonia. Payments in decentralised programmes remained less than half of the
initial forecasts in FYROM. In Serbia, the national authorities submitted an
application for the conferral of management in June 2012 and it could be
granted by the end of 2013. Absorption capacity under decentralised management
in Turkey is not optimal, with delays in tendering, contracting, as well as
execution of payments.[36]

For the financial year 2012 in the old
pre-accession assistance PAA there have been paid only 7.4 million euros
in CARDS. As regards the current pre-accession instrument IPA there have
been 818.1 million euros paid in 2012. Table 1 presents payments for financial year 2012 for the component I
and II and country made under the centralised management mode (IPA) and
completion of CARDS assistance (PAA) in 2012[37].

Table PA1 –
Payments made in financial year 2012 per component and country (IPA and
PAA-CARDS)

Multi-beneficiary programmes under Component I
are designed to complement national programmes and to strengthen multilateral relations
in the Western Balkans and Turkey.

6.2.        General
analysis – Trend analysis

6.2.1.     Trend
analysis

In the area of the Pre-Accession Assistance,
PAA (2000-06) in 2012 the number of irregularities
reported as fraudulent continued to decrease. This is due to the fact that support
for EU-10 and EU-2 countries is being phased-out and the Pre-Accession
Assistance (PAA) is nearly completed with the exception of a few projects and
remaining payments as part of CARDS, which is reflected in the current reporting
from Hungary, Poland, Bulgaria and Romania and the acceding country Croatia.

Table PA2 –
PAA irregularities reported as fraudulent – 2002-2012

For the total number of irregularities (reported
as fraudulent and not reported as fraudulent) for the PAA, there were
230 irregularities reported in 2012 and the amount affected EUR 89 million
while in 2011 there were 247 irregularities and the amount affected was EUR 58,
5 million.

Generally it can be said that the trend in relation
to IPA (2007-13) reporting has not been developing in a stable upward
sloping curve and for the year 2012 it even drops[38]. The low numbers in reporting
are result of a poor level of absorption of aid and a backlog in IPA
implementation in Croatia, the Former Yugoslav Republic of Macedonia and Turkey.[39]

6.2.2.     Reporting
efforts

In general the communications received via IMS
are complete and in terms of timeliness the reporting behaviour is
satisfactory. The level of completeness of the reported information has been
improving depending on experience with reporting.

Croatia started to use the IMS in the third
quarter of 2012. FYROM is getting ready for reporting into IMS as well as
Serbia, a new candidate country, which started to send reports to OLAF in the fourth
quarter of 2012. Small inconsistencies regarding correct assessment of
irregularity, dates related to the irregularity (and detection) remain.

Turkey has continued in consistent reporting. Croatia
increased the number of reported irregularities due to its connection to IMS in
October 2012. FYROM continued reporting its first irregularities. Serbia sent
the first irregularity report.

6.3.        Specific
analysis – Financial year 2012

6.3.1.     Pre-Accession
Assistance (PAA)

In total 27 irregularities were reported as
fraudulent with the amount affected EUR 44.5 million. The higher amount
reported this year is attributable to two bigger cases (making EUR 38.5 million
in total), notified as a suspicion of fraud by Romania regarding the ISPA fund.
Without these two exceptional cases the curve would continue in a downward
sloping trend in the irregular amounts, as in the previous year.

Table PA3 – Irregularities reported as
fraudulent per country (PAA)

Table PA4 – Irregularities not reported as
fraudulent per country (PAA)

Table PA5 –
Irregularities reported as fraudulent per fund (PAA)

Table PA6– Irregularities not reported as fraudulent per fund (PAA)

As in 2011, the majority of cases relating to PAA
in 2012 concern again SAPARD (the Special Accession Programme for Agriculture
and Rural Development). The trend of SAPARD, as the fund representing in the
previous years the most important exposure to cases of suspected fraud, is
being confirmed.

With 18 irregular fraudulent cases reported,
the SAPARD fund remains the most fraudulent (compare with 38 cases in 2011), followed
by PHARE with 5 cases and ISPA with 4 cases with higher amounts.

The practices repeatedly employed in committing
fraudulent irregularities are mainly falsified supporting documents, followed
by manipulation of tendering procedures. Amongst others belongs the conflict of
interest, action not carried out in accordance with rules or other cases of
irregular documents.

6.3.2.     Instrument
for Pre-Accession (IPA)

In IPA (2007-13), there were 23 irregularities
reported in total involving the amount of EUR 1.6 million, which is a slight
increase in both, the number of notified irregularities and amounts involved,
in comparison with 20 cases and EUR 1.3 million reported in 2011.

There were 6 fraudulent irregularities reported
for 2012 (1 from Croatia, 3 from FYROM, 2 from Turkey) with the total amount
affected of EUR 0.3 million, while in 2011 there were 9 cases in total
affecting EUR 0.98 million. Croatia, FYROM and Turkey have been receiving
assistance during both periods of pre-accession.

Table PA7 – Irregularities reported as
fraudulent per country (IPA)

Table PA8 – Irregularities not reported as
fraudulent per country (IPA)

Table PA9 –
Irregularities reported as fraudulent per fund (IPA)

Table PA10 – Irregularities not reported as fraudulent per fund
(IPA)

Poor absorption of aid and backlog in IPA
implementation in countries using decentralised management (i.e. in Croatia,
the Former Yugoslav Republic of Macedonia and Turkey) is an explanation for
these low numbers of reported irregularities.[40]

As regards Croatia, the beginning of the IPA
period was affected by a substantial back-log in the implementation. As a
result, the payments were lagging behind the contracting and remained rather
low until 2011 and in 2012 there was only a slow and gradual reduction of the
accumulated backlog, considering the further IPA funding allocated to Croatia.

Problems with in the management and control
systems under decentralised management led to interruption in the payments to
FYROM in 2012.

The absorption capacity under decentralised
management in Turkey remained in 2012 suboptimal, with delays occurring in
tendering, contracting, as well as execution of payments.

Therefore, following a delay, more reports are
likely to come from Croatia, FYROM and Turkey for the 2007-13 IPA.

The key characteristics of practices repeatedly
employed as regards the irregularities reported as fraudulent are mainly the
following ones: conflict of interests, missing, incorrect or incomplete
documents and falsified supporting documents.

Amongst other practices employed either
separately or in combination with the previous ones, there are actions not
carried out in accordance with rules, infringement of rules concerned with
public procurement, undeclared revenue or non-eligible expenditure.

6.3.3.     Method
of detection

Most of the irregularities in 2012 were
detected by the means of European Commission service or EU institution, i.e. by
the Community controls (in particular in Romania and Bulgaria), associated
controls (Romania), additional controls on the request by the Commission
(Croatia) or other controls (Bulgaria, Lithuania, Romania), followed by the
control of the documents (Croatia, Poland, Romania). This finding is
underlining the importance of audits performed by responsible Commissions
services and investigations conducted by OLAF.

6.3.4.     Recovery
for the Pre-Accession Assistance (PAA) – Cumulative results 2002-2012

The table demonstrates the recovery situation
per country. It provides an overview for all years and funds regarding the
period 2000-06 as reported into IMS. It represents the recovery rate which is
the percentage of total amount recovered on the irregular amounts effectively
disbursed.

Table PA11: Recovery by beneficiary country,
cumulative results

The figures do not take into account the
recoveries and financial corrections made by the Commission.

Section III – Centralised
Management

7.           Centralised
Direct and Centralised Indirect Management

7.1.        Introduction

This chapter contains a descriptive analysis of
the data on recovery orders issued by Commission services in relation to
expenditures managed under ‘centralised management’ mode[41], which is one of the four
implementation modes the Commission can use to implement the budget.

The implementation can be handled:

· 
directly by its departments; in this case the
Commission and its departments perform the operations required to carry out the
measures concerned without any involvement of the Member States or non-member
countries where the recipients of the expenditure reside; or

· 
indirectly, by various entities to which such
tasks have been entrusted.

For financial year 2012, a total of EUR 17.3
billion[42]
has been effectively disbursed under the centralised management mode.
(Centralised direct: EUR 11.4 billion; centralised indirect: EUR 5.9 billion.)
Table CM1 presents the actual payments made in financial year 2012 for the
seventeen policy areas corresponding to 98% of the overall payments made under
the centralised management mode.

Table CM1 –
Payments made in financial year 2012 per policy area

7.2.        General
analysis – Trend analysis

In 2012, for the seventeen policy areas, the
Commission services registered 1674 recovery orders in ABAC that were qualified
as irregularities for a total financial value EUR 121.4 million. Among these
recovery orders, 26 have been reported as fraudulent[43], involving EUR 2.7 million
irregular amounts.

7.2.1.     Trend
analysis 2011-2012

As a trend analysis, the comparison between
financial years 2011 and 2012 will be hereunder provided.

Generally it can be said that there was an
increase in terms of number and related amounts regarding recovery orders
qualified as irregularities. Table CM2 summarises the main figures for these
two financial years. In 2012 the total irregular amount for all irregularities
has almost doubled compared to 2011, meanwhile expenditure under the
centralised management mode in relation to the policy areas concerned remained
stable. As a consequence, the ratio between irregular amounts recovered and
payments made has also doubled.

However, this increase should be interpredted
as a result of the efficient irregularity detection systems in place.

Table CM2 –
Irregularities not reported as fraudulent and related amounts, 2011 and 2012

Table CM3 –
Irregularities reported as fraudulent and related amounts, 2011 and 2012

Table DE3 proposes a comparison between the two
financial years with regard to irregularities reported as fraudulent. In 2012,
there were less recoveries qualified to be fraudulent however these cases
involved higher recovery amounts. As a result, the ratio between fraudulent
amounts recovered and payments made has also increased.

7.3.        Specific
analysis – Financial year 2012

Table CM4 provides a more detailed
classification of the policy areas and related irregularities with financial
values. The list follows a descending order according to the payments made in
the seventeen policy areas in financial year 2012.

Table CM4 –
Irregularities reported by policy areas and related amounts, 2012

As it appears from the table, most of the
'irregularities reported as fraudulent' are linked to payments made in the area
of external relations. This policy area alone counts for almost half of the
number and two-third of associated amounts of recovery orders that proved to be
fraudulent.

Regarding the 'irregularities not reported as
fraudulent', the 'Energy' policy area stands out with the highest aggregate
irregular amount, however almost the entire amount is linked to one single
case. It is followed by policy areas ‘Information society and media’ and
‘Research’ that rank second and third in terms irregular recovery amounts. The
explanation for the relatively high number of irregularities resides in the
fact that Commission services duly detect and report irregularities in ABAC.

7.3.1.     Recoveries
according to legal entity residence

Table CM5 summarizes the recoveries according
to the country of the recipient legal entity. In 90% of the irregular cases
(qualified as fraudulent or not) the legal entity was resident in one of the 27
Member States of the European Union. It should be noted at the same time, that
the residence of the legal entity is not necessarily the same as that of the
main beneficiary. In cases where the legal entity resided in one of the 27 EU
Member States, and where the irregularity was qualified as 'irregularities not
reported as fraudulent', exactly 90% of the recoveries and 92% of the related
recovery amounts were registered for main beneficiaries that were also resident
in one of the EU Member States. Meanwhile, in case of 'irregularities reported as
fraudulent' the ratio was only 38% and 33% respectively.

Table CM5 –
Recoveries per country of residence of the legal entity, 2012

7.3.2.     Method
of detection

For each recovery order, the Commission service
that issues the order has to indicate how the irregularity 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 CM6 gives a breakdown of the
recoveries by source of detection and by qualification.

Table CM6 –
Irregularities reported by source of detection and by qualification, 2012

OLAF detected the vast majority of the cases
qualified ‘irregularities reported as fraudulent’: the 19 recoveries account
for 86.7% of the irregular amounts.

In case of ‘irregularities not reported as
fraudulent’, it has been by means of ‘Community controls’ that most of the
irregularities were discovered, which all together represent 86.2% of the
irregular amounts.

7.3.3.     Types
of error

The Commission services also have to indicate
the type of error that was detected when the recovery order was issued. Several
types of error can be attributed to one irregular case. Largely it can be
observed that error 'Action not in accordance with the rules' and error
'Expenditure not covered by the legal base' appear most frequently, in 60% of
cases of irregularities (reported as fraudulent or not). Besides, 'Missing
documents' and 'Incomplete documents' are marked very often as components of
the errors description of an irregularity.

7.3.4.     Time
delay

For the recovery orders issued in 2012, which
were qualified as the ‘irregularity reported as fraudulent’, the average delay
between the occurrence of the irregularity and its detection is 4 years and 3
months. However, the time delay varies significantly, so the average does not
represent the series. Half of the cases were detected within 5 years following
the year when the irregularity was committed; meanwhile in the other half of
the cases the delay varied between 5 and 10 years.

7.3.5.     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 or the
amount is offset from remaining payments.

For the recovery orders issued in 2012, full or
partial recovery was recorded in almost all of the 1674 irregular cases (reported
as fraudulent or not). The financial amount already cashed is EUR 100.9 million
(out of EUR 121.4 million). The recovery rate for recoveries qualified as
‘irregularity reported as fraudulent’ is 53.9%; meanwhile the rate for other
irregularities is higher: 83.8%.

COUNTRY FACTSHEETS

Belgium

Bulgaria

Czech
Republic

Denmark

Germany

Estonia

Ireland

Greece

Spain

France

Italy

Cyprus

Latvia

Lithuania

Luxembourg

Hungary

Malta

Netherlands

Austria

Poland

Portugal

Romania

Slovenia

Slovakia

Finland

Sweden

United Kingdom

ANNEXES

ANNEX 1

ANNEX 2

(The number of irregularities reported as
fraudulent measures the results of efforts by Member States to counter fraud
and other illegal activities affecting EU financial interests; it should not be
interpreted as the level of fraud in their territories)

ANNEX 3

ANNEX 4

ANNEX 5

ANNEX 6

ANNEX 7

ANNEX 8

ANNEX 9

ANNEX 10

ANNEX 11

Irregularities
reported in 2012 under Regulation 1848/2006 by Member State

(The
number of irregularities reported as fraudulent measures the results of efforts
by Member States to counter fraud and other illegal activities affecting EU
financial interests; it should not be interpreted as the level of fraud in
their territories)

ANNEX 12

Irregularities
reported in 2012 under Regulation 498/2007 by Member State

(The
number of irregularities reported as fraudulent measures the results of efforts
by Member States to counter fraud and other illegal activities affecting EU
financial interests; it should not be interpreted as the level of fraud in
their territories)

ANNEX 13

Irregularities
reported in 2012 under Regulation 1681/1994 by Member State

(The
number of irregularities reported as fraudulent measures the results of efforts
by Member States to counter fraud and other illegal activities affecting EU
financial interests; it should not be interpreted as the level of fraud in
their territories)

a)
Number of irregularities

b) Irregular amounts

ANNEX 14

Irregularities
reported in 2012 under Regulation 1831/1994 by Member State

ANNEX 15

Irregularities
reported in 2012 under Regulation 1828/2006 by Member State

(The
number of irregularities reported as fraudulent measures the results of efforts
by Member States to counter fraud and other illegal activities affecting EU
financial interests; it should not be interpreted as the level of fraud in
their territories)

a)
Number of irregularities

b)
Irregular amounts

[1]               This document does not represent an official position
of the Commission.

[2]               For
comparability reasons the figures of 2008-20011 are based on the data used for
the reports of those years.

[3]               For
comparability reasons the figures of 2008-20011 are based on the data used for
the reports of those years.

[4]               For
comparability reasons the figures of 2008-20011 are based on the data used for
the reports of those years.

[5]               Further
cases have been added after the cut-off date.

[6]               See
annex 4.

[7]               See
annex 5.

[8]               This calculation is based on
73 841 cases, an established amount of EUR 5.4
billion and a recovered amount of EUR 2.8 billion.

[9]               See
annexes 6.

[10]             One fraud case was detected in
Spain amounting almost to EUR 1.5 million.

[11]             See
annexes 7 and 8.

[12]             Combined
nomenclature or CN –nomenclature of the Common Customs Tariff.

[13]             See
annex 6.

[14]             See
annex 7 and 8.

[15]             The
Czech Republic, Denmark, Italy, Latvia, Hungary, the Netherlands, Slovakia and
the United Kingdom.

[16]             Luxembourg did not communicate
any OWNRES case.

[17]             Germany (6%), Hungary (5%),
Slovakia (5%), France (4%) and the Netherlands (2%).

[18]             Malta (100%), Greece (97%), Spain
(75%), Bulgaria (67%) and Slovenia (52%).

[19]             See
annex 4.

[20]             See annex 4.

[21]             This calculation is based on 14 420 cases, an established amount of EUR 1.69 billion (after already processed corrections) and a recovered
amount of EUR 0.41 billion.

[22]             See annex
9.

[23]             On the
cut-off date, for years 2008-2012, the annual RR for fraud cases varied between
22% and 33%.

[24]             See annex
9.

[25]             This calculation is based on 59 421 cases, an established amount of EUR 3.7 billion (after already processed corrections) and a recovered
amount of EUR 2.38 billion.

[26]             See annex
10.

[27]             A report on Member States’
local clearance procedures summing up the results of the inspections carried
out in 2011in all Member States was presented to the Advisory Committee on Own
Resources on 6 December 2012.

[28]             Case
C-392/02 of 15/11/2005. These cases are identified on the basis of Articles
220(2)(b) (administrative errors which could not reasonably have been detected
by the person liable for payment) and 221(3) (time-barring resulting from
Customs’ inactivity) of the 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 Customs Code giving rise to
legitimate expectations on the part of an operator.

[29]             Judicial
authorities performed searches on the premises of involved persons in 2003,
first in Belgium, and later on in other Member States including the
Netherlands, which reported it in 2012 due to the secrecy of the penal
procedure, which was levied at that date. The case represents an anomaly not
caused by flaws in the Dutch system of control and financial management.

[30]             The report reflects situation as of 2012. In June 2013
Iceland's Foreign Minister Gunnar Bragi Sveinsson informed the European
Commission that the newly elected government intended to "put negotiations
on hold".

[31]             Turkey
has been receiving pre-accession assistance since 2002.

[32]             Albania, Croatia, FYROM,
Serbia, Kosovo under United Nations Security Council Resolution 1244, and
Bosnia Herzegovina, Council Regulation (EC) No 2666/2000 of 5 December 2000.

[33]             The EU-10 that joined European
Union in 2004 received a Transition facility during 2004-2006. However the EU-2
received a Transition facility in 2007 which is regarded as a post-accession
assistance.

[34]             Potential
candidate countries were defined at the Santa Maria da
Feira European Council
of 20 June 2000.

[35]             Following the entry into force of the Treaty of Lisbon,
Delegations have become a part of the European External Action Service, with
effect from 1 December 2010.

[36]             2012 Annual Activity report, DG ENLARGEMENT

[37]             Except the CARDS payments (7.4 million euros,
nomenclature 22
02 05 02), no payments were made for old pre-accession
assistance (PAA) including the Transition Facility in 2012.

[38]             The data available for demonstration of the trend would
show only two reporting years.

[39]             More analysis under 6.3.2

[40]             2012 Annual Activity report, DG ENLARGEMENT

[41]             The
Financial Regulation provides for three types of management, one of them is the
centralised 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’).

[42]             Own calculation based on ABAC
data for the seventeen policy areas representing 98% of payments under the
centralised management mode, excluding administrative expenditure.

[43]             Recovery
orders that have been qualified by the Commission services as suspected fraud
and subsequently reported to OLAF, or recoveries made following to OLAF
investigation.