EN    EN EN 
 
EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 24.2.2009 
SEC(2009) 257 
  
COMMISSION STAFF WORKING DOCUMENT 
Annex to the   
 
REPORT FROM THE COMMISSION 
 
Member States' replies to the Court of Auditors' 2007 Annual Report 
 
{COM(2009) 96} 
 
EN 2   EN The European Court of A uditors (ECA) published its Annual Report on the 
implementation of the budget co ncerning the financial year 2007  (2007 Annual 
Report)  on 10 November 20081. In the report, the ECA presented its Statement of 
Assurance (DAS) and the supporting informa tion, including observations concerning 
management in Member States. 
As required by the Financial Regulation2, the Commission sent a letter to each 
Member State immediately, informing them of the ECA's observations as well as the errors attributed by the EC A to their country. The Commission also asked Member 
States to fill in a questionnaire which fo cused on Member States' follow-up of the 
ECA's findings.  
This Commission Staff Working Document  accompanies the summary report on 
Member States' replies to the Court of Auditors' 2007 Annual Report and presents 
Member States' replies to the questionnair e in more detail. Contributions from 
Member States have been shortened in some cases so that only main issues are presented. 
The questionnaire contained 3 parts. Part A
 included a question on the SPS (single payments system) in the 
Agriculture/Natural resources chapter. Memb er States were invited to state whether 
they had addressed improvements in this ar ea. There were also, questions related to 
the Cohesion chapter, where the Court found weaknesses in the supervisory and 
control system, mainly related to the 1) Ma naging authorities 2) Paying authorities 3) 
Audit bodies. Member States were invited to  reply focusing on the shortcomings in 
the supervisory and control systems, and action taken by them to address these 
shortcomings. Finally there were two ge neral questions concerning the overall 
number of errors identified by the Court, the tripartite discussions with the Commission, the Court of Auditors and the Member States and finally the 
Commission's supervisory role  in shared management. 
Part B
 offered Member States the opportunity  to make any general remarks on the 
2007 Annual Report or general issues re lating to the discharge procedure. 
Part C  contained a list of all observations in the 2007 Annual Report relating to the 
specific Member States as well as a list of  DAS errors attributed by the ECA to the 
Member State. For each observation/error, th e Member State was invited to indicate: 
1) if action had been or w ould be taken, 2) the timing of  any action taken, and 3) the 
content of action taken or (if no acti on) the reason for not taking action. 
Member States were required to submit their replies by 15 December 2008.  The Commission received replies fro m almost all Member States, cf. table 1 . The 
overall quality of replies was generally good and no Member State failed to submit a 
reply. 
                                                
 
1 The report was published in the Official Journal C 286 of 10.11.2008. It is available on the ECA 
website: www.eca.europa.eu. 
2 Article 143(6) in The Financial Regulation app licable to the general budget of the European 
Communities, Council Regulation (EC, Euratom) No 1605/2002 of 25.6.2002. 
 
EN 3   EN Even if the approach of the Member States  was generally cooperative, some of them 
did not reply to all parts of  the questionnaire or only repl ied partially to part A and 
part C. Where appropriate, the Commi ssion sent reminders to Member States. 
Table 1. Replies received by the Commission from Member States. 
 Part A Part B Part C 
(Ref) 
Austria Reply Comment provided Reply 
Belgium Reply No comment Reply 
Bulgaria Reply Comment provided Reply 
Cyprus Reply No comment Reply Czech Republic Reply No comment Reply 
Denmark Reply Comment provided Reply 
Estonia Reply No comment Reply Finland Reply Comment provided Reply 
France Reply Comment provided Partial reply 
Germany Reply Comment provided Reply Greece Reply Comment provided Partial reply 
Hungary Reply Comment provided Reply 
Ireland Reply Comment provided Reply 
Italy Partial reply Comment provided Partial reply 
Latvia Reply No comment Reply Lithuania Reply No comment Reply 
Luxembourg Reply Comment provided Reply 
Malta Reply Comment provided Reply Netherlands Partial reply No comment Partial reply 
Poland Reply Comment provided Reply 
Portugal No reply No comment Partial reply Romania Reply No comment Reply 
Slovakia Reply No comment Reply 
Slovenia Reply Comment provided Reply Spain Reply No comment Reply 
Sweden Reply No comment Reply 
United Kingdom Reply Comment provided Reply 
 
A detailed overview of general comments made by Member States (part B) is 
provided in table 2  whereas Member States' reactions  to specific observations made 
by the ECA in the 2007 Annual Report (part C) is presented in table 3 .  
 
EN 4   EN TABLE 2. GENERAL REMARKS 
Member State Reply 
Bulgaria Bulgaria's institutions are paying close attention to the findings of the European Court of Auditors. Measures are being consid ered 
to remedy shortcomings, to improve management and cont rol systems and to address the Report's other findings. 
We are pleased with the new structure of the Annual Report. It  guarantees an appropr iate degree of concordance between the 
Report and the object of the Report, namely the EU budget. It ma kes the EU institutions' examination and adoption of the Report 's 
findings faster and clearer, and it makes it easy for the public to obtain information on the financial management of EU funds.   
The report is of crucial importance for the discharge procedure. The Court exam ines all accounting transactions in the course o f 
the year and draws up a statement of assura nce as to the reliability of the accounts and the legality and re gularity of the und erlying 
transactions. It thereby enables th e European Parliament to exercise one of its pow ers, namely that of a pproving or rejecting t he 
manner in which the Commission manages and spends the EU budget.  
We would point out that the translation of  the Annual Report is unclear  in places, which is an obstacle to its  being fully 
understood and to the adoption of optimal meas ures to remedy the shortcomings identified. 
 
Denmark Annual report for 2007 
Denmark is happy to see that every year since the statement of assurance was intr oduced, with effect from 1994, the Court of 
Auditors has, with some reservations, cons idered the EU’s accounts to gi ve a true and fair view of  the Communities’ revenue and  
expenditure and financial position. On the w hole, therefore, this part of the statement of assurance has been positive every ye ar 
and is again unblemished for the financial y ear 2007 (with no rese rvations at all). 
However, Denmark considers it clearly unsatis factory that the Cour t of Auditors has, for the 14th  year running, given a negativ e 
statement of assurance (with reservations) about the legality and regularity of underl ying payments for most areas of expenditu re 
in the EU budget (errors in over 2% of paym ents in 55% of EU spending sectors). Th ere is no question of the situation being 
unchanging and thus static since, despite its repeated reservations in parts of the st atement of assurance,  the Court of Audito rs 
again acknowledges the progress that has been  made in recent years in the financial ma nagement and internal control of the EU 
 
EN 5   EN TABLE 2. GENERAL REMARKS 
Member State Reply 
budget. In the Court's annual report for 2007 this mainly concerned improvements in the control systems.  
Denmark welcomes the fact that the Cour t of Auditors puts forwar d a number of recommendations in its annual report for 2007. 
The main recommendations are: Political decision-making on accepta ble risk levels for the financial control of the implementati on 
of the EU budget; continued improvement of controls and control reports; and, not leas t, simplification of complicated rules an d 
regulations. The Court of Auditors has for several years recommended th at the current rule s and regulations should be simplifie d 
as much as possible, reducing the possible risk of error. The recommendations are put forward with particular emphasis in the 
annual report for 2007, in which the political authorities are called on to consider simp lified legislation in fields such as r ural 
development and research.  
The Danish authorities would like careful c onsideration and detailed examination of th e Court's recommendations as part of the 
Council's discharge procedure.  
In the current situation Denmark considers that the most important contribution to c ontinued progress in the financial manageme nt 
and internal control of the EU budget should come from the following measures: 
• Continued implementation and follow up of the Commission’ s Action Plan towards an Integrated Internal Control 
Framework in respect of the impl ementation of the EU budget. In pa rticular, this concerns contro l of the Cohesion Fund and the 
establishment of acceptable levels of erro r for the implementation of the budget. 
• Provision of better and more comprehensib le information on the use of financial corrections, penalties, etc., and amounts 
recovered and amounts outstanding in the latest financial y ears, broken down by country, se ctor, etc. The Commission should 
report to the Council and to Parliament on th is subject at least once a ye ar. The Member States should of course contribute to this 
with the necessary reports. 
• Continued close cooperation be tween the Court of Aud itors and the supreme national audi t authorities (the National Audit 
Office in Denmark) through the exchange and reciprocal use of audit findings, etc.  
• Simplification of rules and provisions (see above in conn ection with the Court of Auditors' recommendations). The 
possibilities for simplification should be examined in greater de tail. The Court of Auditors s hould clarify its position and th e 
Commission should also propose practical changes to legislation, et c., to facilitate the management and control of the way EU 
 
EN 6   EN TABLE 2. GENERAL REMARKS 
Member State Reply 
assistance is used.  
Discharge procedure The Council’s discharge procedure should be  supported by an extended and more regu lar treatment of questions of financial 
management and control throughout the year.  
The Council – and thus the Member States  – should involve themselves more with the sound financial management of the EU 
budget, i.e. the regularity as well as the effectiveness and efficiency of budget implementation. The Council’s Budget Committe e 
in particular should deal more regularly with issues in connection w ith the financial management, control and evaluation of bud get 
implementation. In the current situation this  calls for continued discussion of the Co mmission’s action plan and recovery issue s 
(see above).  
In future the Council’s Budget Committee should also discuss the following annual documents:  • The Court of Auditors’ special reports which typically deal with the extent to which EU citizens get “value for money”. 
The special reports are now discussed only by the appropriate se ctoral committee, which does not appear satisfactory. For its 
discussions on both the drafting and the current implementa tion of the budget, the Council’s Budget Committee should once a 
year gain a general view of the main poi nts of the special reports together with the Council's conclusions. This could strength en 
the link between the Council's establishment of the budget a nd the Court's management audit. The Budget Committee's 
comprehensive examination of the special reports should take place before the Commission pres ents its proposal for the new 
budget for the following year. 
• The Commission’s synthesis management report containing, for instance, lists of the statements of assurance of the 
individual Directors-General in  their areas of responsibility (with detailed reservations). 
• The Commission’s report on the Member States’ replies to the Court of Auditors’ Annual Repor t. This important report – 
which represents a regulatory part of the discharge procedure – should, at least, be  presented by the Commission and commented 
on by the Court of Auditors at a special meeting of the Budget Committee. 
If the Council’s Budget Committee does not have the capacity needed to expand its treatment of questions of financial 
 
EN 7   EN TABLE 2. GENERAL REMARKS 
Member State Reply 
management and control, the Court should consider appointing a special working party on the impl ementation of the EU budget. It  
should be pointed out that the Council has already a ppointed a special working party for combating fraud.  
Finland As regards the cohesion policy, the Court of Auditor's report gave examples of errors identified in the audits. Because of the large 
number of errors identified relating to the legitimacy and re gularity of projects, fuller details  of the audit findings would b e 
welcomed, to provide a more precise and repres entative explanation of the Court's comments. 
The background to the incorrect expenditure submitted by the fina l beneficiaries often contains complex rules and the high leve l 
of error does not necessarily mean that failure to comply with the rules was a deliberate attempt to defraud. At EU level, as p art of 
its action plan to strengthen c ontrols on the shared management of structural  measures, the Commission has drawn up guidelines 
for the Member States on important issues regarding eligibility. These guidelines clarif y the interpretation of the complex rul es 
and will reduce the amount of ineligible  expenditure in the future. The training organised by the Commi ssion for the Member 
States on questions related to management of the structural funds (c ontrol of structural funds, closure of programmes) is 
particularly useful in this respect.  
 
France The instructions provided by the Commission (under the format of " guidelines") on a particular issu e should be more coordinated  
or consolidated from a communication to the other one, in  order to allow a faster a nd more correct application.  
Germany  1. Germany appreciates the efforts by the Commission a nd the Member States to improve the budget execution. 
2. However, the ECA didn't give a positive DAS according to Article 248 EU Treaty on EU for the 14th consecutive time. On the 
basis of the current procedures, it is not foreseeable that a pos itive DAS will be achievable in medium term or in the long ter m. 
The controls, imposed by the Commission, are so  extensive that they hinder the implem entation of structural actions. The ECA's 
observations in the area of shared manage ment are indicating only insignificant improve ments, compared to the previous year. In  
Germany's view this indicates, that the DAS procedure according to Article 248 EU Treaty on EU is not working. Instead, the 
budget authorities and the Commission shoul d think about a new DAS approach and should agree on a new procedure as an 
alternative to the current DAS procedure which didn't lead to a positive DAS in the last 14 years. In this regard, Germany supp orts 
 
EN 8   EN TABLE 2. GENERAL REMARKS 
Member State Reply 
the ECA's idea of tolerable risk of error for each policy area. 
Germany supports the ECA's recommendation to simplify management and control regulations. 
 
Greece 1) Our service notes point 1.41, in which the ECA finds that ‘its audits in the areas of ‘Agriculture and Natural Resources’, 
‘Cohesion’, ‘Research, Energy and Transport’ as  well as ‘Education and Citizenship’ show  that complicated or unclear eligibilit y 
criteria or complex legal requirements have  a considerable impact on th e legality and/or regularity  of underlying transactions’ . 
 
Our service has repeatedly emphasised its agreement with th e above ECA finding and maintain s that these ECA observations 
should be taken into account with regard to simplif ication of the regulatory framewor k governing the implementation and 
financing of expenditure in the above areas. 
 2) Our service comments that the broade r picture from the ECA observations is th at the situation re garding execution of 
expenditure from the Community budget is clear ly improved in relation to previous ECA observations and that the institutions, a s 
well as the Member States, are cooperating and taking corrective actions to deal with any errors identified. In particular, we note 
that the overall assessment by the ECA of the supervisory and cont rol systems in the Cohesion area improved from ‘not effective ’ 
to ‘partially effective’. 
 
Hungary We were glad to see that the European Court of Auditors (hereinafter: ECA) issued an unqualified opinion concerning the 
reliability of the report for the financial year 2007. In other words, according to ECA assessment, the report gives a true pic ture, 
from all material aspects, about the financial situ ation and the operating and cash-flow results of EU. 
Unfortunately, ECA repeatedly gave a nega tive opinion concerning the le gality and regularity of th e underlying transactions in 
 
EN 9   EN TABLE 2. GENERAL REMARKS 
Member State Reply 
most areas of expenditure. 
The recommendations included in the report identify specific  steps and actions for the Co mmission and for the competent 
authorities of the relevant member states . In our opinion, such steps and actions coul d be useful for the targeted elimination of the 
deficiencies present in the management and audit systems. However, we consider it im portant that ECA also include in the report  
or any supplementary document examples of  good practice found during the a udits. Not only the faults identified during the audi ts 
but also the systems successfully implemented  in practice could greatly assist the member states in the elimination of their 
respective deficiencies.  
Although the report mentions that there was great progress in the field of the actio n program initiated by the Commission, the 
practical impacts of such progress cannot be felt yet and, th erefore, cannot be assessed at  the moment. However, the 
implementation of certain measures included in the action program would be indispensable so that the relevant processes can sta rt 
also in the member states. For instance, the too complicated re gulatory environment can be simplified at the level of member st ates 
only after a simplification in Community regulations. 
For the establishment of an efficient and successful management  and control system it is necessary for the Commission to provid e 
detailed guidelines for the member states. As in the previous year, we would again suggest that  ECA should encourage – with due  
recognition of the work done so far – an improvement in furthe r methodological guidelines and pay more attention to checking th e 
content of such guidelines. 
Ireland Cohesion  (Special EU Programmes Body) -SEUPB found the discharge pr ocedure very useful for the reasons outlined in question 
8.  
Natural Resources  
Para 5.15 (a ) Agri-Environmental Schemes: On-the-Spot checks by Audito rs, farmers had not met all the eligibility conditions. 
Please see additional information for a deta iled response to individual farm findings . Para 5.32 (c)  Inadequate verification of the 
eligible area under agri-environmental measures in cases where this area did not correspond to the data on the IACS database.  
Land areas claimed under the REPS scheme are cross-checked and ve rified with the Area Aid/LPIS database. Differences between 
 
EN 10   EN TABLE 2. GENERAL REMARKS 
Member State Reply 
REPS and Single Payment Scheme (SPS) areas are systematically identified during the processing of annual REPS payments, and 
these payments are withheld until differen ces are resolved. When over 60,000 REPS clai med land areas were checked against the 
Area Aid Land Parcel Identification System (LPIS), minor errors were found in less th an 300 cases representing 0.5% of the tota l 
area. From 2008, as part of an integrated REPS/SPS/DAS risk analysis, all field inspectio ns of REPS participants include a full  
On-the-Spot verification of clai med areas. Further, all inspected REPS participan ts in 2007 are now the subject of an On-the-Sp ot 
verification of areas claimed. With  the exception of one farm visited by auditors , any measured LPIS areas were shown to be 
correct and demonstrate the integr ity of the Department’s LPIS database as a land area verification system. From 2009, Ireland 
will impose conformity between ar eas eligible for payment in SPS and REPS (pre viously, some areas such as farmyards and 
internal roadways have been elibigible for REPS payment for not for SPS, but this will no longer be the case). Fuller details w ill 
be provided to the Commission shortly. 
Para 5.32 (e)  Inconclusive and poorly documented ad ministrative and on-t he-Spot controls 
Administrative Controls 
Administrative checks are carried out on 100% of REPs applications. Both Articl e 67 of Commission Regulation 817/2004 and 
Article 11 of Commission Regulation 1975/2006 affo rd some discretion to member states in relation to the checks to be carried 
out. While acknowledging the Commission’s obse rvations, Ireland remains sa tisfied that previous pr ocedures, involving cross-
checking of applications with its area and animal identification databases, gave a very high level of assurance as to their val idity. 
The data on Irelands’ Land Pa rcel Identification System are regularly updated a nd demonstrably accurate to a very high degree. 
The Animal Identification and Movement System is also ba sed on a framework of very re gular updating, verification and 
validation. Ireland contends therefore that  its systems for the measur ement of land parcels and animal numbers are extremely 
accurate and therefore that the risk of ineligible payment was extremely small. 
Article 67(1) pf 817/2004 provides that “The  Member States shall define suitable methods and means for verification of 
compliance with the conditions for granting support. Article 11 of 1975/2006 provides that “administrative checks on payment 
claims shall cover all elements that it is possible and appropr iate to control by administrative means. All REPS Plans are chec ked 
during the administrative procedure. “Effective Verification” in  Ireland does not rely on assumptions of Planners though it was  
clear from the inception of the scheme in 1994, and throughout  its many years of implementa tion, that these Professional 
 
EN 11   EN TABLE 2. GENERAL REMARKS 
Member State Reply 
Agronomists have a key role to play in the implementation of this complex measure. 
Ireland does not accept that the Plan is no t checked in an exhaustive manner. Chec ks are clearly evidenced and outcomes 
recorded.  
Notwithstanding Ireland’s pos ition as regards checks conducted  previously, a new system is being introduced from early 2009 
which requires all REPS farm plans to be prepared using the late st version of eREPS, the electr onic planning system approved by  
the Department of Agriculture, Fisheries a nd Food (the latest version includes a number of automatic checks which will in most 
cases prevent the submission of erroneous data). 
On-the-Spot Field Inspections 
In cases that are selected for 5% on the spot insp ection the administrative checks include the following:  
•Eligibility of lands: Re-check of REPS area -v- LPIS area  
•Ownership and Lease documents, Grazing rights & Commonages doc uments are all examined to ensure they meet REPS 
Specifications. •All maps are checked for compliance with the scheme specifications; •Nutrient Management: Ensure that the potential of grassland/tillage  areas to take animals and othe r wastes have not exceeded t he 
maximum permitted in the Specifications and that calculations are correct. •Soil analysis reports are checked against the Plan and the Specifications. •The calculation of maximum permitted chemi cal P and the lime requirement is checked. 
•Planned livestock numbers on REPS Plan are compared with  the AIMS/CMMS information (the Departments animal 
identification and movement database) The Aim System has been  recognised as a very reliable and accurate means of showing 
livestock movements and locations. •The calculation of Nitrogen (N) from  animal/other wastes is checked. 
•Check that the maximum number of livestock is consiste nt with details of livestock enterprise on the Plan. 
•Check that the N quantities (chemical/anima l waste) do not exceed the maximum permitted. 
•Check that the Plan has adequately a ddressed the over wintering of animals a nd the planned animal housing facilities. 
 
EN 12   EN TABLE 2. GENERAL REMARKS 
Member State Reply 
•Check that the Plan has adequately addressed fodder st orage facilities and silage effluent storage facilities. 
•Check the planned facilities for storage of farm wastes and the diversion of cl ean run-off from buildings and yards. 
•Check the undertaking for specific habita t types are outlined  in the Agreed Farming Condi tions and that Non-Commonage 
Measure A lands comply with the specific  farming conditions for the habitat type. 
•Where appropriate check that the undertaking required to achieve  the conservation objectives fo r the particular commonage as 
outlined in the Framework Plan and that Commonage  Measure A lands comply with these conditions. 
•Where appropriate the destocking calcul ation is checked and the maximum ewe e quivalents allowed must be verified. 
•Where appropriate Measure A lands and Non Commonage Target  Area lands, should meet the requirements of the REPS 
Scheme. •The remaining REPS Measures detailed on the Plan are examined. •The annual works prescribed for the duration of the Plan are examined. •REPS Biodiversity Options indicated on Plan  are checked to ensure the options chos en meet with the Pl anner Specification. 
•Supplementary Measures (if applied for) are examined. 
Ireland is satisfied that the 5%  on-the-spot check is sufficien tly robust and was always suffici ently robust to meet the contro l 
requirements of REPS 2 and REPS 3.  We are equally satisfied that the 5% on the spot check for REPS 4 meets these requirements. 
Control Report 
The format of the control report in use for On-the-Spot checks was deemed insufficient to allow for complete verification of th e 
controls. While the control repo rt in use in 2007 did allow for a full evidencing of control of eligibil ity criteria, revised c ontrol 
reports were put in place from May 2008 onw ards to take account of audit opinion . Para 5.32(f)  Inadequate consideration of risk 
factors for the selection of sample  of farmers to be controlled. 
It is acknowledged that in accordance with Commission Regu lation 2419/2001 (as superseded by Commission Regulation (EC) 
No 796/2004) that the proportion of the sample selected randomly  for on the spot inspections should have been 20–25% rather 
than 50%. The proportion of the sample selected randomly is now based on 20–25%. 
In relation to the risk criteria used for se lecting the remainder of the sample the se lection of the sample has been amended fr om 
 
EN 13   EN TABLE 2. GENERAL REMARKS 
Member State Reply 
2008/2009 onwards to include the additional factors: 
•the number of agricultural parcels and the area; 
•changes from the previous year. 
However, the Irish authority would contend that as ERS2 e ligibility and payment are based on land area (and Good Farming 
Practice applies, not cross-compliance) , the two additional factors specified under Article 19 of Commission Regulation 
2419/2001 (as superseded by Article 27 of Comm ission Regulation (EC) No 796/2004) are not relevant to ERS2. These factors 
are: 
•cases of non-compliance with Regulation (EC) No 1760/2000, which rela tes to the identification and registration of bovine 
animals and the labelling of beef. •replacement of animals pursuant to Article 58, which relates to  the time limits for the repl acement of bovine animals and 
indicates that “Bovine animals present on the holding shall only be  regarded as determined if th ey are identified in the aid 
application.” 
Italy (NOTE: This reply has been provided by the Ministry of Education and research  and by the Authority for the ERF  on the 
issues related to their competence) 
Ministry of education: There are some problems concerning the al ignment of the amounts record ed in the last report of the Commission (Ref. REGIO 
J3/FM/djdd D (2008)) and those recorded  in the Annex II of your letter. 
With regard to the determination of staff costs, the general e xpenses and the need of more ch ecks on the financial operations, our 
Administration has adopted some important measures. We have de tailed the conditions to evaluate  the staff cost, the worked hour s 
and the general charges. The calcu lation of the general expenses as  60% of the staff cost has been eliminated (no more than 50% , 
and this figure has to be supported by an adequate accountability  documentation). We have eliminated the 5% deduction for the 
absences. Concerning the additional documentation require d, we will transmit it to you as soon as possible. 
Authority for the ERF: 
 
EN 14   EN TABLE 2. GENERAL REMARKS 
Member State Reply 
With reference to the table 2.1 of the Chap ter "Education and citizenship ", we would like to point out the weaknesses of the 
management and control systems for the European Funds for Refugees. On the 4th December 2008, the Commission for the 
exercise 2007 has audited this Administra tion. The General-Director of  the DG LSJ has demanded to the audit authority to do 
some additional verification on the regularity  of the operations for 30% of the expend iture (instead of 10% minimum required in  
the art 7, par.2 of the Decision 2006/401/CE).  
We would like to point out that for the EFR II 2008-2013, Italy ha s already established a new Ma nagement and Control System 
with an annual and multiannual framework, approve d by the EC with the decision C (208)7727 del 5.12.2008. 
Luxemburg ESPON : The programmes for the European terr itorial cooperation are more complicated th an the national ones. It could be useful  
to go further on the formulation of appropriate sp ecific rules which make ea sier such programmes  
Malta The European Commission adopted ‘Action Pl an towards an Integrated Internal Cont rol Framework’. This Action Plan, divided 
into 16 main points, is addressing gaps in the control system s where EU funds are concerned and is already bearing fruit. 
In areas such as ‘Administrative Payments’ and “Economic and Financial Affairs' no ma terial errors were identified and therefor e 
it was concluded the the control systems in these areas are func tioning properly. On the contrary, areas such as 'Research, Ene rgy 
and Transport’ are still suffering from mate rial arrors. The Directorate feels that the basic principles of the control systems  that are 
functioniung properly should be applied to those areas still afflicted by material e rrors, although it is unde drstood that in t hese area 
expenditure is more complex. 
Accounts for 2007 are the third set of accounts prepared on the principle of accrual acc ounting and one has to point out that i n this 
year’s accounts there is an improvement on t hose of the previous two years. This is evident, for example, from the fact that th ere is 
a better categorisation of information about recove ry of payments which should not have been made. 
Poland Please note that the ECA's preliminary findings of the aud it mission for the Statement of Assurance for the financial ye ar 2007 (DAS 2007) in 
respect of the Operational Programme 2004PL06GDO001 (Temporary Rural Development Instrument (Ref. PF 2565), conducted by the EC A 
in Poland from 2-6 and 23- 27 July 2007 have not been covered. 
We therefore present comments on the ECA audit (Ref. 2565) for the DAS 2007. 
 
EN 15   EN TABLE 2. GENERAL REMARKS 
Member State Reply 
Ref. no. II (1) No on the spot checks prior to the decision granting aid. 
In line with the findings of the STAR Committee, presented in document VI/185/250/04-rev1 Guidelines for Meeting Standards, in the case of 
projects of a value of over EUR 10 000 the Agency for the Restructuring and Modernisation of Agriculture (ARiMR) visits holding s before 
taking a Decision. These visits are part of the verification of whether the investment concerned really is necessary on the hol ding (i.e. whether 
there are not already suitable premises/installations) and whethe r investment in the holding has already begun before a Decisio n granting 
financial aid for the adjustment of agricultural holdings to EU standards has been taken under the rural development plan. We w ould also 
stress that a further visit is made after submission of the statement on the farmer's implementation of the investment.  
At the same time, in the plan for the adju stment of the holding to EU standards, submission of which is a basic precondition of  the aid, the 
farmer is obliged to give information c oncerning, above all, the installations for the storage of natural fertilisers with whic h the holding is 
already equipped. The adjustment plan defining the state of the holding before the investment, the scope of the planned measure s, a brief 
technical description of the measures and the target state of the holding. In the case of adjustment of dairy holdings, the nee d for adjustment is 
confirmed by a decision of the district veterinary officer refu sing to certify that the holding complies with minimum standards  of hygiene and 
animal welfare. At the farmer's request the district veterina ry officer defines the scope of measures necessary to achieve mini mum standards 
of hygiene and animal welfare.  
The results of the checks are entered in the system and provide  the basis for further verification procedures. A simple adminis trative control 
has also been introduced in th e ARiMR to check the data entered on the appli cation against the data already in the database on the farmer 
concerned.  
Ref. No II (2) Actions in connection with comments made during on- the-spot checks and their impact on risk analysis. It should be clearly 
stated that Action 6 of the Rural Development Plan on the adjustme nt of agricultural holdings to EU standards is an action in w hich support is 
provided on a one-off basis and hence the results of the checks co nducted cannot contribute to selection for controls in subseq uent years.  
Ref. No. II (3) The managing institution relies to too great an ex tent on the declaration of the final recipient before authori sing final payment.  
With respect to the above form, which raises the issue that the statement of the final recipient is an inadequate basis for eff ecting the final 
payment, we would explain that for projects of a value of l ess than EUR 10 000 the ARiMR conducts on-the-spot checks on a 5.5% sample of 
applicants. The complaints about the benefi ciary's statement, on the grounds that is  not sufficient eviden ce that the measures have been taken, 
is unjustified since after the statement that measures ha ve been completed checks are carried on 5.5% of cases.  
It should be borne in mind that Article 69 of Commission Regulati on (EC) No 817/2004 of 29 April 2004 laying down detailed rule s for the 
 
EN 16   EN TABLE 2. GENERAL REMARKS 
Member State Reply 
application of Council Regulation (EC) No 1257/1999 on support fo r rural development from the Eu ropean Agricultural Guidance an d 
Guarantee Fund (EAGGF) provides that on-the-spot checks are to be  made in accordance with Title III of Regulation (EC) No 2419/ 2001. 
They are to cover at least 5% of beneficiaries each year and all the different types of rural development measures set out in t he programming 
documents.  
It should also be emphasised that Article 72(1) of Co mmission Regulation (EC) No 817/2004 of 29 April 2004 laying down 
detailed rules for the applic ation of Council Regulation (EC) No 1257/1999 on suppor t for rural development from the European 
Agricultural Guidance and Guarantee Fund (EAGGF) provides that any beneficiary found to have ma de a false declaration as a 
result of serious negligence must be excluded from all rural de velopment measures under the rele vant chapter of Regulation (EC)  
No 1257/1999 for the calendar year in question.  
It should also be borne in mind that under  Article 75(2) of the Code of Administra tive Procedure, if a provision of the law doe s not require the 
facts or the legal situation to be officially confirmed by me ans of a certificate issued by th e competent administrative body, the public 
administrative body must accept, on application by the party, a stat ement made by that party, who is subject to criminal liabil ity if the 
statement is false.  
Ref. No III (2) Administrative checks are poorly docu mented and do not allow conclusions to be drawn. 
The aid is a lump sum covering 100% of the value of the planned investment. It is not therefore calculated on the basis of invo ices submitted. 
The aid is granted on the basis of the pa yment rates set out in the Regulation of the Council of Ministers of 18 January 2005 o n the detailed 
rules and procedures for granting financial assistance for adjusti ng agricultural holdings to European Union standards under th e rural 
development plan (Dziennik Usta w No. 17, item 142, as amended).  
In cases giving rise to doubts, the control body may demand comme rcial documents confirming the purchase of necessary construct ion 
materials, although this means of verification is not compulsory . The main focus of the analysis of invoices is to establish wh ether the 
investment was undertaken before the decision was taken to award financial aid. This is why the result of the verification by t he control body 
was a list of the dates on which the documents were issued. Under Paragraph 12 of the above Regulation, a farmer to whom a paym ent is 
granted is obliged to keep documents rela ting to the payment granted, including comme rcial documents within the meaning of Regu lation 
4045/89/EEC of 21 December 1989 on scrutiny by Member States of tran sactions forming part of the system of financing by the Gua rantee 
Section of the European Agricultural Guid ance and Guarantee Fund and repealing Direct ive 77/435/EEC, for five years from the da y of 
completion of implementation of the adjustment plan.  
 
EN 17   EN TABLE 2. GENERAL REMARKS 
Member State Reply 
 
Slovenia Managing authority (SVLR – the Slovenian Government Office for Local-Self-government and Regional Policy):  In its 
annual report for 2007 the European Cour t of Auditors give s each Member State the oppor tunity to examine the main 
shortcomings, errors and problems that aris e in the implementation of st ructural policies. Because of the transparency and publ ic 
nature of the data, each Member State is able to focus beforehand on certain bot tlenecks and problems in implementation.  
The managing authority  of the Republic of Slovenia does not have any mo re substantial comments on the European Court of 
Auditors report as the Court did not carry  out any audits in Slovenia in 2007. However,  there were a number of audits by other 
supervisory bodies (the Court of Audit of the Republic of Slovenia, the Budge t Supervision Office and the European 
Commission). The last two audits, by DG EMPL and DG REGIO, are cu rrently in the final stages.  
Within its sphere of responsibilities, the managing authority w ill be more active in supervising implementation of the manageme nt 
and control system for Structural Fund and Cohesion Fund resources and start immediately on the task s conferred on it in respon se 
to the needs arising from certain flaws in  the system for impl ementing cohesion policy. 
Paying authority (Ministry of Finance, Budget Director ate – SUSEU – Department for Management of EU Funds):  The 
certifying authority does not have any comments to make about the 2007 annual report. 
Ministry of Finance, Budget Directorate - Unit for cooperation on the EU budget  welcomes the Commission decision on the 
introduction of proactive arrangements for the lifting of reservations concerning the VAT resource and GNI. 
 
United Kingdom 1.1. CLG 
There has been a unique process in one particular region where sub regional bodies delive r the funding programmes which 
presented additional challenges. In particular, the Commission had concerns around the physical on-site checking of projects. T his 
resulted in ERDF in England being affected by flat rate correcti ons for deficiencies in manageme nt and control systems. However , 
the issues were or are being amicably resolved and actions have been taken to improve those management and control systems. In 
 
EN 18   EN TABLE 2. GENERAL REMARKS 
Member State Reply 
support of the actions taken to improve, the value of suspension origina lly indicated has been signi ficantly reduced because of  
these improvements. Additional resources have been implemented to ensure that we get in line with the EC proposed error rate of  
2%, which we believe is unreasonabl e and which we doubt any member state will be able to achieve.  
There has been greater emphasis on working with the regions to increase the number of on-site checks. We have revised and 
strengthened guidance on monitoring and inspection activity, additional resources ha ve been employed. Regions are taking action  
to ensure ineligible expenditure is identif ied and dealt with and that any ineligible  expenditure is deducted from declarations  to the 
Commission. The ERDF IT system will automatically deducted any ineligible amounts once a clawback of grant has been 
instigated. 
 
 
EN 19   EN TABLE 3. SPECIFIC OBSERVATIONS IN THE 2006 ANNUAL REPORT 
Paragraph Observation in the 2006 Annual 
Report Member State reply 
CHAPTER 2 – COMMISION INTERNAL CONTROL FRAMEWORK  
Bulgaria : Action taken in June 2008. Content of 
the action: In the period May-October 2008 Bulgaria reformed its systems for the management and control of the Cohesion Fund (formerly 
ISPA). The Republican Road Infrastructure Fund 
was transformed into a National Road Infrastructure Agency (NAPI) reporting directly to the Ministerial Council. NAPI has been designated an intermediate body, accountable to 
the managing authority at the Ministry of 
Transport. The two authorities have reached an agreement dividing competences between them and delegating powers for the implementation of 
road projects. The internal rules of procedures 
governing the systems' working have been 
updated (public procurement, reporting of irregularities, verification of expenditure and works, etc.). By order of the deputy prime minister, a working party of directors and competent deputy ministers was set up to monitor 
the NAPI's activities. The communication referred 
to in Article 5 of Regulation (EC) No 1386/2002 was updated and sent to the Commission.  Council of Ministers Decree No 224 of 10 September 2008 established a council for the 
coordination and monitoring of EU resources.  
The National Assembly has adopted: an amendment to the Highways Act, an amendment to the Public Procurement Act and an Act on the prevention and detection of conflicts of interest. Measures to strengthen administrative capacity: 
Council of Ministers Decree No 197 of 
5 August 2008 introduced an incentive system of performance-related bonuses for staff managing EU financial assistance. A European Commission audit to assess the compliance of management and 
control systems (indicative chart) is expected in 
February-March 2009. 
Czech Republic, Spain: referred to its reply to 
Table 2.1 (see above) 2.3 The Commission acknowledges 
nevertheless that further efforts are needed to resolve a number of weaknesses, in particular those 
highlighted in the reservations of the 
delegated authorising officers and those belonging to the budget areas that were not considered satisfactory by the Court of Auditors. In this 
respect the Court considers that the 
scope of some reservations should be greater than presented by the Commission’s Directors-General. 
Hungary : In 2007 and 2008 Government Decree 
360/2004 (XII. 26.) Korm. (on the elaboration of the financial implementation, accounting and control systems related to accepting funds linked to projects financed from the Operational 
Programs of the National Development Plan, 
 
EN 20   EN TABLE 3. SPECIFIC OBSERVATIONS IN THE 2006 ANNUAL REPORT 
Paragraph Observation in the 2006 Annual 
Report Member State reply 
EQUAL Community Initiative and the Cohesion 
Fund) was amended several times with regard to the following: handling of irregularities, first-level 
audits, statement from the directors of managing 
authorities/participating bodies on the proper operation of internal control systems. 
Ireland: in relation to the reserve imposed on 
Ireland. A response was issued to DG REGIO on 10th October 2008. This is currently being considered by the Commission and we understand 
that a further response is to issue to Ireland early 
in 2009. 
Latvia: The single payment scheme under 
Chapter III of Regulation No 1782/2003 is not being implemented in Latvia, because the single area payment scheme under Article 143(b) of Regulation No 1782/2003 is being implemented.  
Luxemburg: Action taken in 2005, 2006 and 
2007. Content of the action: reinforcement of the 
control. 
Poland : action taken on April 2007. In April 
20007 the European Commission sent Poland the 
Action Plan for 2004-2006, intended to contribute to improving existing management and control systems. Action taken on the basis of this document included: checks under Article 4 of 
Regulation (EC) No 438/2001, checks under 
Article 10 of Regulation (EC) No 438/2001, expanding the methodology for the conduct of controls on public procurement, improving the system for reporting irregularities, completing work on the IT system. As a result of the EC and 
ECA audits in 2006 and 2007 and the conclusions 
in the "Action Plan for Poland for 2004-2006", no reservations were presented concerning the CF management and control system established. Therefore the comments presented in Table 2.1 
and in points 2.3 and 2.11 do not concern the CF 
management and control system in Poland. 
 
EN 21   EN TABLE 3. SPECIFIC OBSERVATIONS IN THE 2006 ANNUAL REPORT 
Paragraph Observation in the 2006 Annual 
Report Member State reply 
Slovakia: action taken on 30.10.2006 (Opinion of 
the Human Resources SOP MA, MA for SPD NUTS II Bratislava Objective 3: Action Plan); on 
08/2008 (Opinion of the Agriculture and Rural 
Development SOP MA: increased number of controls); on 14.11.2007 (Opinion of the Ministry of Finance, Resolution of the Government of the Slovak Republic No 974/2007 on an action plan 
further to findings made in certification checks, 
controls and audits for the first half of 2007). 
Sweden: the Commission’s Directors-General had 
a reservation concerning Sweden relating to 2006. This reservation is not maintained in respect of 2007, which is why no further measures are planned.  
Czech Republic, Spain: See table 2.1 
Hungary, Luxemburg, Poland, Sweden: See 2.3  
Slovakia: Action taken on 30/10/2006 (Opinion 
of the Human Resources SOP MA, MA for SPD NUTS II Bratislava Objective 3: Action Plan) and on 5/2008 (Opinion of the Agriculture and Rural 
Development SOP MA: Approval of a system for 
the control and auditing of EAFRD expenditure) 
Latvia: Latvia has prepared answers to the 
observations by the EC auditors. The coordination and discussion process for the ESF report is ongoing 2.11 For Directorates-General for 
Regional policy and for 
Employment, Social Affairs and 
Equal Opportunities the total estimated financial quantification of the impact of their reservations increased from approximately 140 million euro in 2006 to nearly 
725 million euro in 2007
 (5). For the 
Directorate-General for Agriculture and Rural Development the new reservation for 2007 on Rural Development expenditure is based 
on information from Member States 
which shows an error rate in excess of 3 %. However, this information had not been validated by the certification bodies or accepted by the Directorate-General. 
 Greece: action taken in December 2008.Content 
of the action: submission of a new plan of corrective actions for the EAGF, showing the 
measures taken to tackle the weaknesses 
concerning approval of payment applications in the IACS that were noted by the Certifying Agency. 
Table 2.1 Czech Republic: Cohesion Fund: in 2007 DG 
REGIO carried out a "Follow-up system and project audit".  The response of the Czech 
authorities to the report from this audit was 
dispatched on 29 August 2008. The conclusions of audit missions carried out by the Commission do not contain any findings of significant irregularities of a systemic character in the area of 
 
EN 22   EN TABLE 3. SPECIFIC OBSERVATIONS IN THE 2006 ANNUAL REPORT 
Paragraph Observation in the 2006 Annual 
Report Member State reply 
management and control.  Therefore, the 
Managing Authority of the Cohesion Fund is not aware of any reasons why the Czech Republic was 
included among the Member States against which 
the Commission has raised certain reservations for year 2007. 
Hungary, Ireland, Luxemburg, Poland, 
Sweden: see 2.3 
Latvia, Greece : see 2.11 
Slovakia: action taken on 30.10.2006 (Opinion of 
the Human Resources SOP MA) et on 12/2007 (Opinion of the Agriculture and Rural Development SOP MA, A doption of a financial 
management system for 2007-2013 RDP SR 
measures financed by the EAFRD, approved by 
the Slovak Government; adoption of a draft scheme of control and aid from the EAFRD, approved by the Slovak Government 
Spain: action taken in February 2008. Content of 
the action: instructions to MA and PA from the UAFSE to carry out an adequate control. With 
regard to the period 1994/99, Spain is working 
jointly with the Commission. 
UK: action taken and on-going. Content of the 
action: additional resources, more robust monitoring and follow-up on findings. 
CHAPTER 3 – BUDGETARY MANAGEMENT  
3.10 13 % of the unused commitments 
(18,1 billion euro) concerned the Cohesion Fund, despite the fact that it represents only around 5 % of total authorised commitment appropriations for 2007. This is an increase of 2,7 billion euro or about 15 % compared to 2006. The high level of outstanding Czech Republic : The spending expected for the 
individual projects will be compared with progress in the actual implementation and discussed at the biannual meetings of th e monitoring committees. 
The reason why there were large differences in the 
previous years was lack of experience in the first 
years of implementation and the fact that when spending forecasts were made, contracts had not yet been concluded for most projects and the forecasts were not based on a realistic vision. 
 
EN 23   EN TABLE 3. SPECIFIC OBSERVATIONS IN THE 2006 ANNUAL REPORT 
Paragraph Observation in the 2006 Annual 
Report Member State reply 
budgetary commitments 
regarding the Cohesion Fund represents 2,5 years worth of commitments or 4,2 years worth of payment at the 2007 spending rate and reflects also the fact that this fund is not subject to the n+2 rule (see paragraphs 3.12 to 3.17). The spending rate for the Cohesion Fund was less than expected, especially for projects in Spain, Czech Republic and Slovenia. An amending budget reduced the payment appropriations by 0,67 billion euro (14 %). 
 Spain : The remarks of the Commission are 
accepted: because the eligibility in the projects of the Fund of Cohesion spreads until 2010, some 
organisms proposed modifications in the 
establishment of the decisions for delays in the projects. Also, during 2007, the information requests from the EC have increased, principally in case of the requests of the balance (last 
payment) of the projects. This has generated a 
delay in the received income diminishing the percentage of payment of the Fund of Cohesion in 2007 and carried over in 2008. 
CHAPTER 4 – REVENUE  
Bulgaria: The Bulgarian customs administration 
did not receive an opinion from the ECA under this audit.   
Spain: in this paragraph, the Court just declared 
the scope of the inspection.  4.5 The Court audited a random 
sample of 30 import declarations in each of six Member States
 (4). 
It also carried out an assessment of supervisory and control systems in those Member States as well as at the Commission.  
 
(4) The Court selects Member States 
for detailed audit on a cyclical basis, 
with the largest contributors being examined more frequently. For 2007 the countries audited were Bulgaria, Denmark, Germany, Spain, Romania 
and Portugal.
 
 Denmark: action taken in May 2008. The court's 
audit findings are also described in the National 
Audit Office's statement on the audit of EU funds in Denmark. See pages 129-131 (points 630-632) of the National Audit Office's report No 19/2007 to the State auditors on the audit of the State accounts for 2007. 
4.7 Furthermore, a specific 
examination on customs warehousing was performed both at the Commission and in seven Belgium: Action taken on 12/2006 and 06/2005. 
Content of the action: payment to the European Commission as a result of the legal action. Adaptation of the OWN RES files. 
 
EN 24   EN TABLE 3. SPECIFIC OBSERVATIONS IN THE 2006 ANNUAL REPORT 
Paragraph Observation in the 2006 Annual 
Report Member State reply 
Czech Republic: four of the original nine 
findings of the ECA (PF 2503/07) have been settled and the Commission has closed them. The 
Permanent Representation submitted the 
comments of the Directorate-General for Customs on the remaining five findings to the Commission in letter 5062/2008-SZEU/FÚ.  
Italy: Observations already presented with a letter 
to BUDG/B/03/KPS/sa D(08)59078, on the 27/12/2008. Member States. (6). 
(6) Belgium, Czech Republic, 
France, Italy, Slovakia, Sweden and United Kingdom. 
Sweden: Action taken in 2007, going on in 2008. 
- The results of controls in connection with 
management of authorisations are documented in 
a checklist for controls carried out. Applications for authorisation for storage in a customs warehouse are accompanied by a description of procedures which must be approved by the 
customs authority before authorisation is granted. 
A control strategy for monitoring recently issued authorisations has been established. A number of physical checks of storage sites are carried out in connection with the management of authorisations. Revision and reassessment of 
conditions for authorisations granted after 1 July 
2001, in accordance with Annex 67 of the implementing rules. Updating of control strategy for customs warehouses. Th e following types of 
customs warehouse are now given priority for 
checks: warehouses with deficient inventory 
records, warehouses which handle goods subject to the highest tariffs, warehouses storing high-value goods, warehouses whose operator has infringed conditions applicable to other authorisations issued by the customs service. An 
increase in the number of documentary checks of 
customs warehousing declarations. A check that the correct procedure code is used in the removal declaration and that warehouse book-keeping contains mandatory information is part of the 
follow-up of authorisations. Subsequent checks 
are carried out and include a review of customs warehouse activities. 
 
EN 25   EN TABLE 3. SPECIFIC OBSERVATIONS IN THE 2006 ANNUAL REPORT 
Paragraph Observation in the 2006 Annual 
Report Member State reply 
UK: Actions to address concerns about the 
frequency and depth of assurance activity were already being drawn up at the time of the ECA 
audit in December 2006, following findings from 
a national project and prior European Commission audit. Two-thirds of the action plan has already been implemented. We expect the remainder, covering the development of new training, to be 
completed during 2009. The action plan contains a 
number of activities including issuing enhanced guidance, developing an improved risk methodology, issuing a new operational assurance 
strategy for customs wa rehousing and developing 
enhanced training for assurance staff.  
Slovakia: action taken immediately. Opinion of 
the Customs Directorate SR: authorization 
modified in accordance with Community legislation, addition of  written document ‘Report 
on an inspection and the resultant assessment’, authorizations include detailed handling methods with the application of Article 533 of the Customs 
Code Implementing Regulation, production of 
national guidelines, - document DV1 was added immediately SADs were rechecked and, in individual cases, the missing supporting documents were added, ECA recommendations on 
physical checks, based not on a set number of 
checks, but on risk factors, were accepted. Regulation of the SR CD DG No 43/2008 adopted, the Slovak Customs Administration subsequently prepared an amendment of Section of Act No 199/2004, the Customs Act, which, 
following approval in the legislative process at the 
Slovak Customs Directorate, is ready for further procedure consistent with the legislative process in the Slovak Republic. 
4.10 On 7 June 2007 the Council 
adopted a new Decision on the Germany: actions from the Member State are not 
required 
 
EN 26   EN TABLE 3. SPECIFIC OBSERVATIONS IN THE 2006 ANNUAL REPORT 
Paragraph Observation in the 2006 Annual 
Report Member State reply 
system of the European 
Communities’ own resources (2007/436/EC, Euratom) (9), which will come, retroactively, into effect from 1 January 2007. This Decision introduced a uniform rate of call for the VAT-based own resource (0,30 %) and brought about additional reductions in the VAT- and GNI-based contributions of certain Member States for the period 2007-2013 (10) . Accordingly, the 2007 Member States’ VAT and GNI-based contributions will be recalculated retroactively upon 
completion of the ratification procedure, which is expected to occur in early 2009. 
 
(9) OJ L 163, 23.6.2007, p. 17. 
(10) Reduced VAT rates of call 
for Austria, Germany, the Netherlands and Sweden and gross reductions in the GNI-based contributions of the Netherlands and Sweden. 
 Sweden: action will be taken in Spring 2009. A 
number of changes to our calculation system will be made after the formal decision has been taken. 
Portugal: action taken in January 2007. No IT 
system has been introduced in 2009 to overcome the communication problems between DG AIEC and DG CI regarding enforceable recovery, but a weekly control procedur e has been used since 
January 2007 and this has significantly reduced 
the time lag between effective recovery and entry in the accounts. 4.13 Concerning the A account, in 
Denmark the data input in the electronic clearance system by the economic operators frequently did not reflect the reality of the import and therefore were not reliable. This has led to a net underpayment to the Commission. In Portugal the duties collected under enforced recovery are accounted for and made available to the Commission with systematic delay. 
Denmark: action taken on 18 June  2008. This is 
an ongoing action. The internal memo of 28 September 2007 concerning the treatment of output – list C describes the following procedures”A list of firms' drafts is drawn up 
daily for each Tax Centre. Each Tax Centre with 
customs responsibility follows up its list after a specific objective evaluation The data input by the 
 
EN 27   EN TABLE 3. SPECIFIC OBSERVATIONS IN THE 2006 ANNUAL REPORT 
Paragraph Observation in the 2006 Annual 
Report Member State reply 
 economic operators does not reflect the reality of 
imports; which is not at all the intention as firms are able to store their own "drafts" on data space 
in SKAT’s Import system
 
Austria : referred to its reply to Table 4.2 (see 
below) 
Belgium: The opened reservation  since 1989 will 
be lifted before the end 2008. We will deal with 
the other reservations during the year 2008. The EC will be doing a control on this issue at the beginning of February 2009.   4.20 Reservations are a device to keep 
doubtful elements in the VAT 
statements submitted by Member 
States open for correction after the statutory time-limit of four years. Of the 35 reservations lifted in 2007(16), nine related to 
1997 or earlier. 21 reservations in respect of 1997 or earlier (including two relating to 1989 and 1993) remained open as at 31 December 2007. 
 
(16) In addition there were six cases, three in Germany and three in Italy, where a reservation was partially lifted. 
 Bulgaria: At this stage the European Commission 
has entered no reservations (an instrument whereby contested entries in VAT returns 
submitted by the Member States can be corrected) 
obliging Bulgaria to take appropriate measures. Bulgaria prepared and presented by the deadline fixed by the European Commission (31 July 2008) a report/declaration on the national VAT base in 
2007 for the purposes of the European 
Communities' own resources. The information was prepared in accordan ce with the European 
Commission's methodological and technical requirements
.  
 
 
EN 28   EN TABLE 3. SPECIFIC OBSERVATIONS IN THE 2006 ANNUAL REPORT 
Paragraph Observation in the 2006 Annual 
Report Member State reply 
Cyprus: Measures were taken in 2007 on the 
three reservations regarding Cyprus:  1) calculation 
of the compensation for building land and 
buildings; 2) pro rata calculation of 
non-deductibility for the intermediate consumption of exempt industries and gross fixed capital formation; 3) the reservation raised by DG TAXUD of the European Commission regarding 
implementation of the system for travel agencies’ 
profit margin. The two reservations regarding calculation of the compensation for building land and buildings and implementation of the system for travel agencies’ profit margin were removed in 2008 (10-14/11/08 following and audit by officials 
from DG BUDG of the European Commission). 
Efforts have been made to address the third reservation since 2007 and will continue in 2009. As regards the calculation of the compensation for building land and buildings, a new calculation 
method has been applied, which has been deemed 
satisfactory by officials from DG BUDG of the European Commission.  As regards 
implementation of the system for travel agencies’ profit margin, please note that the 2005, 2006 and 
2007 VAT base statements used the usual 15% 
VAT rate (in accordance with the EU Directive), even thought this is not provided for by the relevant national VAT legislation.  National 
legislation was amended on 20 June 2008 (Regulatory Administrative Act 242/2008) to 
bring it into line with Directive 2006/112/ ΕC. The 
audit carried out on Cyprus in January 2006 by DG BUDG of the European Commission raised two reservations (see reservations 1 and 2 in question 3). A further reservation was raised by 
DG TAXUD (see reservation 3 in question 3). 
Czech Republic: see table 4.2 
Denmark: Previous reservations related only to 
the methods used for the statement of the 
calculation base. The Danish authorities 
subsequently adjusted the method in agreement with the Commission.  
 
EN 29   EN TABLE 3. SPECIFIC OBSERVATIONS IN THE 2006 ANNUAL REPORT 
Paragraph Observation in the 2006 Annual 
Report Member State reply 
Finland: Action taken after the Commission's 
inspection visit on 29 September 2007. The Commission conducted an inspection visit in 
Finland from 24 to 28 September 2007 and 
examined Finland's VAT own resources statements based on the VAT base for 2004 – 2005. Existing reservations were also discussed, some of which were deleted, but others were 
added. After the visit there were still eight 
reservations. The oldest reservation concerns 1995, for which both Finland and the Commission still have reservations. Finland's reservation concerns the turnover to be  used to calculate the 
compensation; the problem will be resolved on the 
basis of a decision pending in a comparable case 
concerning Austria's non-physical gold. The Commission's reservation concerns the place of the supply of services and the place of the supply of goods on ships, i.e. how the Member States 
should calculate compensation. The legal 
interpretation on which the Commission's reservation is based is still uncertain. The Commission's legal experts have examined the possible interpretations of two key judgments by 
the ECJ. The first of these is the Köhler case, 
which concerns the definition of the place of the supply of goods and th e second is the Faaborg-
Gelding case which concerns the place of the performance of services. The reservations since 1998 concerning own-use taxation in the 
construction sector and the associated 
compensation, and calculation of the average rate of taxation, are to be deleted because Finland has approved the Commission views on their calculation and these reservations should be 
deleted by the next Commission visit at the latest. 
The Commission also has a reservation from 2002 concerning non-VAT paid on car tax. The decisions of the Court on car tax and non-VAT lay down only the necessary judgments on the calculation of the average rate of taxation and 
compensation; the reservations concerning them 
can be deleted. From 2003, the Commission has had a reservation concerning travel agents. An infringement procedure is under way and a decision is pending. 
 
EN 30   EN TABLE 3. SPECIFIC OBSERVATIONS IN THE 2006 ANNUAL REPORT 
Paragraph Observation in the 2006 Annual 
Report Member State reply 
France: the reservations concern the differences 
between the national legislation and the rules for the calculation of the harmonised VAT. On the 
31
st December 2007, the oldest reservations for 
France concern motorway tolls (since 1993) and calculation of TMP (since 1999).  
Germany: action taken on the 11/07/2008. 
Content of the action: Several corrections of the basis of the VAT-based resources. 
Greece: Following submission of the Commission 
observations (expected in December 2008) further to the audit that took place in September 2008.  
Hungary: Hungary has no reservation for the 
period before 1997 as it was not an EU member 
state yet at that time. 
Ireland: Of the 12 reservations, 6 of these apply 
to the C.S.O and 6 apply to the Revenue Commissioners. The C.S.O action began in April 2008. While the Revenue Commissioners have started actions on a number of the outstanding reservations.  The Revenue Commissioners would 
expect a number of the outstanding reservations to 
be resolved by the Irish responses to the Commission report of their visit to Ireland in 2008. Content of the action:  a number of changes 
have been made to the calculations used in the 
statements of previous years at the request of the 
Commission. 
Italy: action taken after EC letter with 
observations on 22/09/2008. Content of the action: presentation of a document with the Italian proposition to lift the outstanding reservations for the years 1996-2006. This document will be sent to the EC. 
Latvia: In 2008, letter No. TAXUD D3 LV/fd D 
(2008) 28073 dated 22 Au gust 2008 was received 
from DG TAXUD announcing that the European Commission has decided to close infringement proceedings No 2006/2558 concerning the special VAT regime for travel agencies. The European Commission's DG Budget in turn, has not yet 
lifted the reservation made in relation to the above 
infringement procedure. In our opinion, this 
 
EN 31   EN TABLE 3. SPECIFIC OBSERVATIONS IN THE 2006 ANNUAL REPORT 
Paragraph Observation in the 2006 Annual 
Report Member State reply 
reservation could be discussed with the 
representatives of the European Commission during the next control mission of VAT own 
resources. 
Malta: action taken in 2008. The statements that 
are being/are going to be sent will take in consideration the factors that led to the creation of reservations, ex. penalties and interest. 
Poland: does not concern the period in which 
Poland has been a member of the EU. 
Spain: on the occasion of the visit of examination 
of the declarations presented by Spain concerning 
the own resources based on the VAT 2004-2006, 
realized in accordance with the article 11 of the Regulation 1553/89, the necessary documents appeared to lift 4 of 6 outstanding reservations. After the control visit of VAT-basis realized in 2008, 4 of six reservations were lifted. Two are 
still outstanding (one from 2001 and the other 
from 2003) because of the differences of interpretation of the 6th Directive. 
Sweden: Prior to the inspection visit in June 2007, 
Sweden had nine reservations. One concerning the years 1997-1998, which was lifted following the visit. Three concerning the years 1995-2005 
which were lifted after the visit. One concerning 
the years 1995-2005 which will be lifted after the next visit in 2009 once the underlying material has been verified. One concerning the years 2004-2005 which will be discussed during the next visit 
and is then expected to be lifted. Three 
reservations concern unresolved interpretation issues, where the Swedish and the Commission interpretations differ. (One concerns the years 1995-2005 and charitable organisations, one concerns the years 1999-2005 and Äland, and one 
concerns the years 2001-2005 and transfer of 
tenancy rights). The Ǻland issue will be discussed 
at a management meeting in Sweden in 2009, when it is hoped that the Commission will agree with us on a solution. 
 
EN 32   EN TABLE 3. SPECIFIC OBSERVATIONS IN THE 2006 ANNUAL REPORT 
Paragraph Observation in the 2006 Annual 
Report Member State reply 
UK: The UK reservations are currently under 
review and will be lifted in due course. In one case, a source of information is being sought to 
enable the WAR to be adjusted. For the others, we 
are in dispute with the Commission and cannot provide a date of resolution at this stage. The information in Table 4.2 is correct. At the 31/12/2007, the UK had 5 reservations 
outstanding and 1998 is the oldest one. For your 
information, we were audited in November 2007 and the Report was issued on 28/02/2008. As a result of the audit, 1 new reservation was placed and 2 were lifted leaving a balance of 4. 
4.22 During 2007 the changes to the 
EU-27 VAT base following the Commission’s control work in Member States resulted in an increase in the aggregate VAT resource of about 50 million euro. In addition the upward revisions to the GNI of Greece (see paragraph 4.28), which in turn had an impact on capping, resulted in an increase in that Member State’s VAT contribution of around 300 million euro. Greece: Taking account of the provisions of the 
decision on the system of own resources, the VAT 
resource paid by Greece is calculated on the 
adjusted VAT basis; given the agreed revision of Greece’s GNI, it became necessary to recalculate the VAT resource.  
4.28 The data included in the GNP 
/GNI Questionnaire 2007 of Greece showed a retroactive increase of between 8,5 % and 9,9 % for the years 1995 to 2005. In the GNP/GNI Questionnaire 2006 Greece had transmitted revised data showing increases of between 13 % and 26 %, representing an exceptionally significant revision. As it considered that it did not have sufficient information on the revised data and the underlying methodological changes reported by Greece, the GNI Committee had taken the view that the Greece: action taken on the 22/10/2008. Content 
of the action:  New GNP/GNI questionnaire. A 
new GNP/GNI questionnaire was sent with 
corrected information, which was accepted by the 
GNI Committee.  
 
EN 33   EN TABLE 3. SPECIFIC OBSERVATIONS IN THE 2006 ANNUAL REPORT 
Paragraph Observation in the 2006 Annual 
Report Member State reply 
existing unrevised GNP/GNI 
series should be used for own resources purposes, until the Commission had fully verified the new data and reported the results of its verification to the GNI Committee (22). 
 
(22) See paragraphs 4.24 to 4.26 of the Court’s Annual Report concerning the financial year 2006. 
 
4.29 In 2007 Greece transmitted only a summarized GNP/GNI Questionnaire with no GNP/GNI components and a short explanatory note instead of a Quality Report. Although the GNI Committee considered that, taking due account of the existing reservations, the new Greek 
GNP/GNI data notified in 2007 
were adequate for own resources purposes (see paragraph 4.27), it invited the Greek National Statistical Institute (NSI) and Eurostat to continue their cooperation on outstanding issues, including on some more detailed calculations. Greece: action taken on the 14/12/2007. Content 
of the action:  GNP corrections. Greece agrees 
with Commission's reply.  
4.30 The Commission had carried out 
beforehand on-the-spot visits in June and September 2007 to verify the Greek inventory and calculated estimates of revised GDP (23) figures for the reference year 2000. The total increase was consistent with the revision included in the 
GNP/GNI Questionnaire 2007. 
 Greece: see 4.29 
 
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Report Member State reply 
(23) Gross domestic product. 
4.31 The Commission and the Greek 
NSI set up an action plan for further work to be carried out in order to finalize th e calculation of 
national accounts components. In November 2007 the Commission stressed the importance of checking the reconciliation between total revisions and changes linked to specific reservations as well as the need for the Greek NSI to provide full documentation on them. The action plan also required the Greek NSI to send the official detailed figures in accordance with ESA95’s transmission of national accounts data (24) by 10 December 2007. 
 
(24) Regulation (EC) No 1392/2007 of the European Parliament and of the Council of 13 November 2007 amending Council Regulation (EC) No 2223/96 with respect to the transmission of national accounts data (OJ L 324, 10.12.2007, p. 1). Greece: see 4.29 
4.32 In the absence of the complete 
information on GNP/GNI required by the GNI Regulation 
(see paragraph 4.29) and as the 
details on GNP/GNI components and documentation on reservations required by the action plan (see paragraph 4.31) were not available by February Greece: see 4.29 
 
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Report Member State reply 
2008, the Court was not able to 
review the calculation of the GNP/GNI for the years 1995-2006 nor to check whether GNP components revised by Greece are covered by specific reservations set for the period 1995-2001. As a consequence, the Court could not assess the accuracy of the adjustments to the GNI balances for these previous years. 
Austria: referred to its reply to Table 4.3 (see 
below)  
Denmark : Previous reservations related only to 
the methods used for the statement of the calculation base. The Danish authorities 
subsequently adjusted the method in agreement 
with the Commission.  
Germany: we are not affected 
Ireland: no reservations outstanding. 
Luxemburg: action taken in 2006 as a 
consequence of the revision. All the outstanding 
reservations (1995 to 2001 ) have been lifted in 
June 2008. Content of the action: reinforcement of the control. 
Spain: in this paragraph the Court only observed 
the elimination of 5 reservations to Spain on the subject of RNB.  
Sweden: No action foreseen. Sweden has no 
outstanding reservations.  4.33 At the beginning of 2007, there 
were 43 open specific GNP/GNI reservations rela ting to the period 
1995 to 2001. During 2007, the Commission lifted 18 reservations leaving a balance of 25 at the year end. These open reservations relate either to out-of-date sources underlying certain estimates or to methodological and compilation aspects. Excluding the case of Greece, most of the issues underlying reservations have already been addressed by Member States through the transmission of the annual GNI data in 2007 or previous years. 
 
UK: there is no specific UK reference in this 
paragraph, which relates to the outstanding GNI 
reservations shown in Table 4.3. No action 
required. 
 
 
EN 36   EN TABLE 3. SPECIFIC OBSERVATIONS IN THE 2006 ANNUAL REPORT 
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Report Member State reply 
Greece : action taken on the 8/09/2008. Content of 
the action: new GNI Questionnaire. Briefing by the GNI Committee that 6 out of 7 reservations 
will be withdrawn  
Spain: we presented the documentation to the EC 
in order to eliminate the fifth reservation. For this reason, we agree with the Commission's contestation.  4.35 The Court examined a sample of ten 
specific reservations lifted in 2007, relating to Spain, Denmark and France. It found that the Commission’s work to enable the 
lifting of reservations involved 
neither desk checks to corroborate the reliability of the information provided by Member States through comparison with external sources, 
nor on-the-spot control visits to 
perform direct verification of national accounts’ aggregates. For these reasons, the Court considers that these checks were not sufficient 
to provide reasonable assurance of 
the accuracy of the underlying data 
amended
. 
 Denmark: previous reservations related only to 
the methods used for the statement of the 
calculation base. The Danish authorities 
subsequently adjusted the method in agreement with the Commission. 
Austria : Action taken in 2008. Content of the 
action: the BNE inventory had to be reduced and a further version of the BNE chart had to be produced. A first BNE audit from Eurostat has been done in September 2008. 
Bulgaria: Action taken in May 2008. Content of 
the action: participation in the Phare 2006 
multinational programme for the preparation of the inventory of the sources and the methods for the measurement of GNI. The project's implementation period is expected to be extended to May 2009. Participati on of a representative of 
Bulgaria's NSI in a Eurostat fact-finding visit to 
the Czech statistical service from 24 to 28 November 2008 concerning the description of GNI prepared by the Czech Republic. 4.38 Some Member States (28) did not 
provide the Commission with the 
complete version (including process 
tables) of updated or new GNI 
inventories by the end of 2007, even 
though the deadline was 31 December 
2006 (29). This delay had an impact 
on the planning of the Commission’s on-the-spot verification missions foreseen for the period 2007 to 2009. 
Visits were carried out in three 
Member States (Greece, Malta and Estonia) in 2007. 
(28)Luxembourg did not send its 
inventory and process tables; Austria, 
Cyprus, France, Malta and United 
Kingdom did not send the process 
tables. 
(29) 31.11.2007 for Sweden (which 
sent its inventory and process tables at the end of January 2008) and 
31.12.2009 for Romania and 
Bulgaria. Cyprus: The GNI inventory (except process 
tables) was drawn up within the year and sent to Eurostat in October 2007. Work on the process 
tables was completed at the beginning of the years 
and the tables were sent to Eurostat on 9 January 2008. Content of the action: preparation 
 
EN 37   EN TABLE 3. SPECIFIC OBSERVATIONS IN THE 2006 ANNUAL REPORT 
Paragraph Observation in the 2006 Annual 
Report Member State reply 
and sending of process tables.  
France: The process tables have been provided to 
Eurostat in June 2008. 
Greece: This observation does not concern 
Greece, which had sent the Commission the relevant information within the prescribed time-limit. 
Luxemburg: action taken in June 2008. The 
inventory of sources and methods GNP was 
transmitted to the EC. The process tables will be 
transmitted before the end of the year. 
Malta: The Statistics Office point out the DGN 
inventories were sent to Eurostat within the required time-frame, i.e. not later than 31 
December 2006. In addition, Malta reached an 
agreement with Eurostat to send its process tables not later than April 2008 and in fact Malta has 
honoured this agreement and sent them within the 
agreed time-frame. Therefore, the European Court’s remarks that Malta did not send its 
process tables are incorrect.
 
Romania: action taken in February 2008. 
Content of the action: Review of the inventories of 
sources and methods relating to GNI for 2006  
Sweden: no action foreseen. Despite the slight 
delay concerning Sweden’s GNI inventory and process tables, the verification visit to Sweden 
will be settled in 2008.  
UK: The UK sent an updated version of its GNI 
inventory on 2 July 2007. Eurostat were advised in advance that the UK would not meet the 31 
December 2006 deadline as  it coincided with a 
resource conflict created by the modernisation process being implemented by the Office of 
National Statistics.  
4.39 In 2007 direct verification on GNI 
aggregates was only performed in the 
particular case of Greece. The Greece : This observation does not concern 
Greece since, as moreover noted by the European Court of Auditors, direct verification of GNI 
 
EN 38   EN TABLE 3. SPECIFIC OBSERVATIONS IN THE 2006 ANNUAL REPORT 
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Report Member State reply 
objective of the visits to Malta and 
Estonia was principally to obtain clarification on the sources and 
methods used for the calculation of 
GNI. The Court has in the past urged 
the Commission to undertake direct 
verification in order to obtain 
assurance that Member States really 
do use the procedures they describe in 
their GNI inventories (30). 
(30) See Annex 4.1 of the Court’s 
Annual Report concerning the 
financial year 2006.  aggregates was undertaken. 
4.44 The updated figures for Greece did 
not include the detail necessary for 
the Court to verify the accuracy of the 
adjustments to the GNI balances, in 
particular for the period 1995-2001 
(paragraph 4.32). Greece: see 4.29 to 4.32 
Austria: Action taken in November 2007. In 
November 2008 the Commission announced they will drop reservations as a result of 2006/07 
controls. In addition, the management review of 
2008 will lead to the lifting of reservations which exist since 1995 
Belgium: See 4.7 
Bulgaria: At this stage the European Commission 
has entered no reservations (an instrument whereby contested entries in VAT returns submitted by the Member States can be corrected) obliging Bulgaria to take appropriate measures. 
Cyprus: Action taken in 2007 and continuing into 
2009. 
Czech Republic: Action taken in 2006.  Content 
of the action:  improving data base quality through 
consultations with the specialised departments of the ministries concerned. The Czech Republic received only an unofficial observation (contained in the summary report on the 2004 audit mission). This definitely was not a reservation.  Table 4.2 
 
Denmark, Finland, Latvia, Germany, Greece, 
 
EN 39   EN TABLE 3. SPECIFIC OBSERVATIONS IN THE 2006 ANNUAL REPORT 
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Report Member State reply 
Ireland, Malta, Spain, Sweden: See 4.20 
Hungary: action taken following the receipt of 
the Summary Report on the audit visit of 29 May - 
2 June 2006. For the first reservation, in the 
summer of 2006 the Central Statistical Office (KSH), responsible for the calculation of weighted average rates, contacted directly the Eurostat auditors in order to clarify the methodology. 
Several letters have been exchanged since that. It 
is expected that Eurostat will make a decision during or after the 2009 audit. For the calculation of average rates in 2004 the data of year n-2 i.e. 2002 had to be used. However, the Simplified Business Tax (EVA) did not exist yet in 2002. 
Although KSH used the estimation methods in 
accordance with a former Eurostat guideline, it gave rise to problems of interpretation. For the second reservation, It will be possible to eliminate it as soon as reservation no. 4 can be released. For 
the third reservation, if the Commission approves 
the applied methodology and data then this reservation can be released as early as during the 2009 audit.
 Based on border traffic data and using 
the established estimation method, we have already calculated in subsequent reports with the 
income realized by foreign companies in 
Hungarian road sections. For the fourth reservation, as it is a complex one, only a partial release or division into several elements can be 
expected in the near future. a) Our attempts to 
obtain adequate data on newly registered 
passenger cars from the database managed by the Central Office for Administrative and Electronic Public Services have been unsuccessful yet. b) 
We are expecting the Commission’s policy 
position on how to take open-end leasing into 
consideration. c) We are also expecting the 
Commission’s policy position on how to take the positive element of second-hand cars into consideration. d) In an attempt to clarify fuel data, 
we have tried to find an  alternative data source 
(Hungarian Petroleum Association). However, as 
the consumption of private individuals is not separated there, we are still using the current data source (Energiaközpont Kht.). For the fifth reservation, if the Commission approves the 
applied methodology and data then this 
reservation can be released as early as during the 
 
EN 40   EN TABLE 3. SPECIFIC OBSERVATIONS IN THE 2006 ANNUAL REPORT 
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Report Member State reply 
2009 audit. As from 2008 the new VAT Act 
already stipulates harmonized rules for tour operation activities. We ha ve quantified the VAT 
base implications for 2004-2006 and forwarded 
the calculation, together with the detailed methodology, to the Commission. The 2007 calculation will be completed in 2009, probably before the annual audit. 
Lithuania : Measures to resolve the reservations 
relating to VAT statements about which Lithuania 
was notified were taken as soon as the 
Commission's comments on Lithuania's observations were received on 6 June 2006, following the Commission's VAT own resources control visit in April 2006. This document also 
indicated two reservations. A VAT own resources 
control visit to Lithuania is planned by the Commission in June 2009, during which the Commission is due to assess actions taken in respect of reservations and it will be possible to resolve these reservations. The reservations about 
which Lithuania was notified have been discussed 
in detail and were taken into account when drawing up subsequent VAT own resources base statements. 
Poland: action taken in 2007. New calculations 
were sent to the Commission in June 2008; they will be discussed during the control visit in 
September 2009. Content of the action: new 
calculations carried out. 
Slovenia:  no action taken. Slovenia has still not 
received the definitive final Commission report containing the reservations and grounds for these reservations and is therefore unable to start lifting the reservations. We will start lifting the 
reservations immediately after receiving the 
Commission's final report and, in any event, before the next visit. Slovenia welcomes the Commission's more active approach to lifting reservations concerning the VAT report and GNI, also in the form of bilateral contacts 
(“management meetings”) which do not form part 
of the regular inspection visits. 
UK: table 4.2 is a list of outstanding VAT 
reservations which will be the subject of continuing discussion between HM Revenue and 
 
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Paragraph Observation in the 2006 Annual 
Report Member State reply 
Customs and the European Commission.  No 
specific action is required.      
Austria : no reservations for Austria 
Denmark, Germany, Greece, Sweden: see 4.33  
Ireland : see 4.20 
Spain : see 4.35 Table 4.3 
UK: table 4.3 is a list of outstanding GNP/GNI 
reservations which will be the subject of continuing discussion between HM Revenue and Customs and the European Commission.  No specific action is required.      
Germany : action taken in 2004, since then several 
reports to the Commission on clarifying the case, the latest report has been sent on 25/09/2008. 
Content of the action:  Clarifying the case, already 
provided own resources (328.670,02 €) and default interests (486.005,20 €), as well as an explanation why further contributions are not justified. We are waiting for Commission's 
reaction and appraisal. 
Greece : We agree with the Commission’s reply 
and await the drawing up of a joint revision policy 
by Eurostat. 
 
 Annex 4.2 
 
  
CHAPTER 5 – AGRICULTURE AND NATURAL RESOURCES 
5.3 The Single Payment Scheme (SPS) 
financed by EAGF: the SPS was introduced in order to break the link between agricultural production and 
the payments made to farmers 
(“decoupling”). In order to qualify under the SPS farmers must first obtain "entitlements". The number and value of each farmer's Malta: Payments under the Single Payments 
System were made by the Agency in June 2008 in 
accordance with the legal requirements. At present 
the Directorate of Internal Auditing and Investigations is carrying out a certification audit 
for the year ending 15 October 2008. This audit 
also covers the Single Payments System. 
 
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Paragraph Observation in the 2006 Annual 
Report Member State reply 
entitlements was calculated by the 
national authorities according to one of the models provided for under EU 
legislation (3). Every entitlement, 
together with one hectare of eligible land declared by the farmer and kept in good agricultural and environmental condition (GAEC), 
gives rise to an SPS payment at least 
until 2013. SPS has been growing in importance and now constitutes 55 % of expenditure (28 199 million euro) compared to 12 % (6 260 million euro) paid for 
direct coupled payments and 10 % 
(4 869 million euro) for intervention measures in agricultural markets. It is applied in 17 MemberStates with the remaining 10 (4)  scheduled to 
apply the scheme from 2010 
onwards.  (3) Under the historical model each farmer is granted entitlements based 
on the average amount of aid 
received and area farmed during the reference period 2000 to 2002. Under the regional model all entitlements of a region have the same flat-rate value and the farmer is 
allocated an entitlement for every 
eligible hectare declared in the first year of application. The hybrid model combines the historical element with a flat rate amount and, 
if it is dynamic, the historical 
component decreases each year until it becomes a predominantly flat rate-system.  (4) The Member State which joined 
the EU in 2004 and 2007 except for 
Slovenia and Malta, currently apply a simplified version of SPS called the Single Area Payments Scheme (SAPS) as the farmers did not 
receive EU subsidies during the 
reference period.  
 
EN 43   EN TABLE 3. SPECIFIC OBSERVATIONS IN THE 2006 ANNUAL REPORT 
Paragraph Observation in the 2006 Annual 
Report Member State reply 
Spain: in this paragraph, the Court just declared 
the scope of the inspection  5.9 As regards its assessment of 
supervisory and control systems, the Court has conducted an extensive 
audit of the establishment of SPS 
entitlements and the related payments in all Member States applying SPS, with the exception of Slovenia and Malta. During 2007 it 
examined the reliability of the 
supervisory and control systems applicable to Single Payment Scheme claims in selected paying agencies in Finland, France, Greece, the Netherlands, Italy, Portugal, 
Sweden, Spain (Andalucia) and the 
United Kingdom (England) (7).  (7) The ten Member States which 
first applied SPS were audited in 
2006. See the Annual Report 
concerning the financial year 2006, paragraphs 5.15 to 5.38. 
  UK: The reference to the UK in Paragraph 5.9 is 
simply in respect of them being one of the 
Member States whose control systems in respect of the Single Payment Scheme had been examined 
by the Court in 2007.     
Germany: Audit in Bavaria 
Spain: see 5.9 5.10 The Court has also tested the 
supervisory and control systems for 
direct coupled payments in 
6 Member States (8). The audit covered an assessment of the functioning of the administrative controls of all claims and the selection and execution by the 
paying agencies of on-farm 
inspections for a sample of a minimum of 5 % of the claims, depending on the scheme. In addition, the Court’s auditors 
conducted a number of re-
performances of controls on-the-spot.  (8) Germany (Bayern), Italy (AGEA), and Portugal which have 
introduced SPS in 2005; France, 
Greece and Spain (Castilla y Leon) which have introduced SPS in 2006.  Greece: Evaluation and mainstreaming of the 
findings is undertaken via the secondary checks and supervisory checks carried out by OPEKEPE (Payment and Control Ag ency for Guidance and 
Guarantee Community Aid). Total secondary 
checks account for 2% of OPEKEPE checks and 
5% of the sample of the Directorates of Rural Development. 
 
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Paragraph Observation in the 2006 Annual 
Report Member State reply 
Portugal: action taken immediately after the 
Court's mission. From 1 January 2007 with the introduction of STADA – export and link up with 
SSA (automated system of customs declaration 
selection), authorisation for release of goods is not required until the end of the period indicated in the box for entry of the final date of loading if the accompanying document authorising the goods' 
movement is available. This problem has been 
drawn to the attention of the Alverca customs office in order to avoid similar situations. As part of the process of standardisation of procedures DG AIEC's internal rules, which have since been published, cover these situations to ensure stricter 
compliance with regulations. This was an isolated 
case which was not covered by usual procedures and the conclusion reached in point 5.14 that there was insufficient control of export refunds is considered to be unreasonable. 
Spain: The Paying Authority disagrees with the 
Court's observations. 5.14 In the EAGF, the following errors 
were identified by the Court’s sample: 
SPS: farmers overclaimed and/or the 
entitlements were wrongly calculated, resulting in incorrect payments. SPS: overpayments to certain olive 
oil claimants as a result of being 
allocated extra entitlements from the national reserve when they were not eligible to receive them (Spain);the beneficiary audited was paid an amount considerably in excess of the 
average payment over the reference 
period (1999-2002) but did not meet the investment criteria of the programme under which the extra entitlements were awarded. 
SPS: in its Annual Report 
concerning the financial year 2006(10), the Court pointed out that in Greece, Spain and Italy the olive cultivation GIS data, was neither 
complete nor reliable, and could 
have an impact on the integration of the olive oil production aid scheme into the system. These weaknesses persist in Italy and Greece where four out of five transactions audited 
contained errors, some of which led 
to significant overpayments. Direct Coupled Payments: significant overpayments were found as a result of area discrepancies for 
nuts and dried grapes (Spain and 
Greece) and, in one case, large unexplained differences were noted between the number of sheep recorded in the farmer’s register, upon which EU aid was paid, and 
the actual number identified (Spain). 
Other schemes (Non IACS):  errors relate to illegal deductions from payments to farmers(11)and failure to charge interest on debts (various 
Member States), weaknesses in 
export refund controls (Portugal) and missing quantities of rice from public storage (Greece). Greece: action taken on 2007. An administrative 
check is made on 100% of applications that 
include sheep and goats, during which the latest 
entry of the register submitted together with the application is compared with the declared animals in the single application. The results of this check are recorded in the system and taken into account 
for payment. During the on-the-spot checks by the 
inspectors a comparison is made between the animals identified and the holding register and only those animals correctly recorded in the register are counted as eligible. The results of this control are recorded in the system and taken into 
account for payment. The farmer himself is 
responsible for completing the application. He must en-sure that the data concerning him (personal data), as well as the detailed information about the land parcels he is declaring, are 
completed within the deadline and correctly, as 
precisely requested in the various fields of the application, with-out gaps, erasures or omissions. With regard to cases wher e he mistakenly declares 
areas different from the actual ones and where his 
application does not re-quest correction of the 
declared data, the services are not able make any possible corrections on their own initiative, based 
 
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Report Member State reply 
 
(10) Paragraphs 5.82 to 5.84. 
(11) Ref. Article 23 of Commission 
Regulation (EC) No 1227/2000 (OJ 
L 143, 16.6.2000, p. 1), according to which the payments due shall be made in full to the beneficiaries. on the results of the on-the-spot check, so as to 
offset the negative with the positive discrepancies in the on-the-spot checks. Moreover, the method 
of calculating the discrepancies, and, by 
extension, the penalties imposed for the crop groups; in no case entail a charge for the Fund. As regards land parcels which the administrative cross-check identifies as being declared twice, the 
payment corresponding to the disputed land parcel 
is blocked in order for the actual beneficiary to be ascertained through the appeals procedure, following an administrative and/or on-the-spot check. Finally, with regard to the comment by the auditors that ‘…as regards non-automatic 
blocking of payment of aid, there is a risk of 
payments being made before completion of the necessary checks’, we would clarify that processing of payments is  only undertaken after 
completion and recording of the results of the 
administrative and on-the-spot checks. However, 
in individual cases in which correction is made to the application data (appeal, manifest error) after issue of the payment, the payment software offsets the ‘new’ positive or negative amounts that result 
in a subsequent payment to the producer. 
Consequently, no risk results for the Fund. 
After weighing the product the quantities that 
exceeded the tolerance limit were listed for the intervention agencies. There are no further rice stores in Greece from the 2008 financial year. 
Each year volume measurement is carried out on 
100% of stores in the annual inventory. There are no further rice stores in Greece from the 2008 financial year. 
5.15 With regard to rural development 
operations, the Court found the following types of error: 
a) agri-environmental schemes- in 
nine out of thirteen cases audited the farmers had not met all the eligibility conditions (France and Ireland); b) interest rate subsidies: the procedures in place do not ensure an 
adequate audit trail with the result 
that the regularity of the payment of the EU subsidies to the final France: on this point, France admits that the 
existent system includes imperfections. Nevertheless, France plans to set up an unique 
reference base allowing to perform a 
rapprochement between databases of CNASEA and those of the banks, and it for the improved loans set up till the end of 2006. Eventually, this device will allow to pass to an invoicing by CNASEA of expenses as the supply, and so to 
control real-time bills issued by banks. In this 
way, the tracing of the loans of the bank to the final beneficiary will be more obvious. 
 
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Paragraph Observation in the 2006 Annual 
Report Member State reply 
beneficiaries cannot be verified 
(France); additionally, irregularities detected through Member State 
inspections were not taken into 
account in the computation of the payment claims to the Commission resulting in the declaration of unjustified expenditure which was 
charged to the EU accounts. 
 Ireland: referred to its comment on the Table 2 
General remarks (see above) 
Germany: Audit in Spain – German payment 
authorities are not affected 5.16 As regards environment, fisheries, 
and health and consumer protection, the payments audited revealed the following errors:  (a) projects financed through 
the LIFE instrument included 
ineligible expenditure;   (b) inadequate documentation was presented to demonstrate that the invoiced work had actually been performed (Spain); 
(c) a disease eradication 
programme payment was made without adequate supporting documentation; in addition, there was a non respect of ceilings per test 
for eligible costs and failure to 
undertake recommended technical checks (Germany). Spain:  see 5.14 
5.22 As an illustration, the following 
significant shortcomings, whose financial impact is difficult to estimate, were identified in the calculation of the entitlements:  
(a)in the United Kingdom (England) 
the four entitlements audited were erroneously calculated mainly due to failure to take account of changes in land parcels; while these errors did 
not have a significant impact on the 
2007 payments, since England applies the "dynamic" model (16), these initial entitlements, unless corrected, will result in significant 
over/underpayments in future years; 
(b)The Netherlands initially allocated entitlements in excess of the national ceiling of 4,9 million euro and have carried out individual Netherlands: The second linear reduction based 
on Article 42(7)of Regulation 1782/2003 was 1.5%. The Netherlands authorities took a decision to this effect on 10 Augus t 2007, to be backdated 
to 18 January 2007. The amounts overpaid, i.e. 
1.5% per entitlement, have been or will be 
recovered, except for amounts smaller than €100 (application of Article 73(8) of Regulation 796/2004). The Netherlands authorities fail to see how this finding applies to them. The instruction 
at that time stated that livestock which did not 
meet the premium conditions  could not be counted 
as “animals determined” and thus could not be 
taken into consideration in the calculation of payment entitlements either. The Netherlands 
authorities will take up this finding with the 
Commission in the light of the inspection visit conducted by the Commission from 22 to 26 September 2008 and the ongoing discussion of this matter. 
 
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UK: action taken on 6/6/2008. The UK have 
recalculated the entitlements that were incorrectly calculated.  
Spain: see 5.14 
 payments on this basis. Although the 
total payments made were less than the national ceiling, individual 
farmers were overpaid. At the time 
of the Court’s visit (January 2008) no formal recovery action had been taken. (c)when calculati ng the farmer's 
reference amounts, the Dutch and 
Greek authorities included bovine animals which were not eligible for premium in the reference period; furthermore the Greek authorities allocated reference amounts to 
farmers of arable land without taking 
into account the reductions that had been made during the reference period; (d)when calculating the number of 
entitlements, the Greek and Spanish 
authorities systematically disregarded forage area requirements for farmers that benefited during the reference period exclusively from 
premia that did not require any land 
and allocated special entitlements (17) to them instead of the entitlements based on areas (18) , thereby generating much higher payments per hectare, and a 
consequent reduction in areas 
required to be subject to GAEC; (e)unjustified withdrawal of entitlements, thereby depriving potential beneficiaries of aid 
(Greece). 
 (16)
 Under this model the payment 
for each entitlement consists of two elements: i) an amount based on an historic reference period for each 
farmer, and ii) a flat rate amount 
which is the same for all farmers. In 2005 the ratio was 90:10 but each year the flat rate increases and will reach 100 % in 2012. If too many 
entitlements have been given to the 
farmer he will receive more and more money under the flat rate component which outweighs the loss Greece: no action foreseen. OPEKEPE, under 
Decision No 324032/24.12.05 of the Minister for 
Rural Development and Food, was designated as the competent agency  for calculating and 
managing single payment entitlements.  Annex 1 to Joint Ministerial Decision No 292464/27-07-2005 on ‘Supplementary administrative measures 
to apply and calculate the number and value of 
entitlements for beneficiaries of single payment pursuant to Council Regulation ( ΕC) 1782/2003 
and Commission Regulation (EC) No 795/2004’ states that the reference am ount for olive oil is the 
four-year average of the total payment amounts 
granted to the farmer in the marketing periods 1999/2000, 2000/2001, 2001/2002 and 2002/2003. The average payment granted to olive producers was determined from the computerised payment files of OPEKEPE, physical payment files and 
Tables X. Greece chose to calculate the reference 
amount for olive oil on the basis of the payments actually made to each producer and not by combining quantities at the determined price. This is because the price at which the payments had 
been calculated differed from the determined price 
by 0.8% and concerned the fees of the producer organisations. Account was also taken of the following: These payments corresponded fully with the quantities that the producers had produced in recognised olive oil mills and for 
which payment applicatio ns had been submitted 
and had also been declared eligible. Consequently, taking account of the payments, the Greek authorities were certain that the quantities for which aid had been paid were those that, for the 
producers, had to be added in for the reference 
period. Olive oil production during the reference period had suffered major disasters (fires of 2000, frosts of 2000, 2001 and 2002) and the anticipated applications for revision of single payment interim 
entitlements by means of a request for exclusion 
of years from the reference period was leading to the olive oil component, and, by extension, the 
 
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on the individual component. 
(17) Payment entitlements subject to special conditions are set by article 
47 and 48 of Regulation (EC) No 
1782/2003 mainly for cases when the farmer was granted livestock premiums but had no hectares or the entitlement per hectare results in an 
amount higher than 5 000 euro. 
(18) Regulation (EC) No 1782/2003, Chapter 3, section 1.  national ceiling, being significantly exceeded. 
Otherwise, if the reference amounts were calculated on the basis of the quantities produced 
by a producer, the Greek authorities had to face 
serious risks. There were quantities that had been excluded from the aid as ineligible for various reasons and there was a risk, with the new calculation method, of exceeding the approved 
quantity of olive oil for aid for each olive-growing 
period and exceeding the ceiling on the olive oil component. Secure checking of the olive oil pressing documents that w ould be supplied by the 
olive producers in revision applications was impossible because these documents were not 
always computerised and the data held by the 
producer groups could not be used by OPEKEPE with certainty. It is noted that, as found by the ECA auditors, the reference amounts calculated on the basis of the payments made to olive 
producers were below those calculated in 
accordance with Annex VII to Regulation ( ΕC) 
1782/2003. Greece, in order to com-ply with its national limit, applied a linear reduction of 2.72% to all producers when, in calculating the reference 
amount for olive oil, it took account of payments 
made and not quantities. If the quantities eligible for aid to olive oil at the deter-mined aid price were taken into account to calculate the reference amount, the result would be application of a higher percentage linear reduction in order, in any 
case, to comply with our national limit.  The 
above shows that, in essence, no practical problem was created for olive producers. The strictness of the action was aimed at safeguarding Community inputs in Greece. As regards supply of supporting 
documents for consideration of the samples, we 
note the following: In the sample most of the producers checked were olive producers. The reference period for the olive oil scheme covers four years, the first year being 1999. OPEKEPE was set up in 2001 and did not, therefore, have 
direct access to the primary data concerning the 
olive-growing periods 1999/2000 and 2000/01, given that the primary data was kept at the Directorates for Rural Development and the Unions of Rural Cooperatives. Nevertheless, 
activities were undertaken and the data collected 
were provided for all the producers, supplying, in the case of some producers, payment applications for the years in the reference period, in the case of 
 
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some producers, payment lists and, in the case of 
some producers, both payment applications for the years in the reference period and payment lists. 
Any deficiencies noted concern the olive-growing 
period 1999/00, when the time that elapsed between granting of the payment for olive oil production and February 2008, when the control took place, was considerable.  
 
5.24 (a)  The audit found several weaknesses 
in the use of the national 
reserve :various instances of misuse 
of the national reserve (France): two 
ineligible programmes (totalling 
42,4 million euro), failure to respect the statutory deadline for four other programmes, acceptance of investments based on short term 
rented equipment, failure to 
systematically apply mandatory provisions to new farmers who commenced farming during the reference period leading to an 
overallocation of 20,8 million euro.  France: The legal basis of the programme is the 
article 42.5 of the regulations (EC) n°1782 / 2003 of the Council. Indeed, French agriculture (France corresponds to a zone as pointed in the article 42.5), would have been able, of the simple fact of 
the implementation of the reform of CAP (public 
intervention according to the article 42.5), to suffer a strong restructuring, consequence of the suspension of the agricultural activity of many farmers whose income would have strongly 
diminished between 2005 and 2006. The 
application of the article 42.5 with the supplementary programme avoid that farmlands 
are left and compensate for the artificial losses of income from which the farmers would have been 
able to suffer. Indeed, for many farmers, without 
the implementation of this programme, the payments obtained in 2006 after decoupage would have strongly diminished in comparison with the income of 2005, what would have jeopardised the viability of these farms.  
 
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Netherlands:  In reply to ECA letter PF 2720, the 
Netherlands authorities state that they do not agree with the ECA interpretation that the Netherlands 
applied the penalties incorrectly because of the 
untimely submission of the applications for assistance. According to the minutes of the Management Committee for this area, the European Commission shares the opinion that the 
deadline of 15 May was substantially postponed. 
On the basis of the attached “MINUTES of the 55th meeting of the Management Committee for Direct Payments 14 June 2006” the Netherlands authorities take the view that Article 1 of Regulation 1187/2006 was applied correctly. The 
document reads as follows: “Late applications:  
Exchange of views and vote on a draft Regulation derogating to Article 21 of R. 796/2004 for 2006 (DS/2006/26). The Commission clarified that following Article 1 of the draft Regulation the 
reduction of 1% per working day will not be 
applied until after the date specified (31 May or 15 June) for the Member State concerned. After that date, i.e. from 1 June or 16 June, the 25 days 
where a reduction by 1% per working day is 
applied starts to count. 25 days after the specified date, i.e. the 25 June  or 10 July 2006, the 
application becomes inadmissible and shall be excluded.” 
Portugal : The Court of Auditors has only now 
clarified its views on this matter. As the 
Commission has indicated, PT's interpretation of the application of the derogation provided for in Article 1 of Regulation (EC) No 1187/2006, 
although very rigid, does not pose a fundamental 
risk.
 5.26 (a) As regards the management and 
monitoring of SPS entitlements, the following weaknesses were noted: 
incorrect application of late claim 
penalties (Netherlands, Portugal and the United Kingdom (England);   
UK: barcodes were introduced in 2006 for 
electronic receipt and tracking.  The system continues to be enhanced and is supported by full desk instructions.  
5.26 (b) As regards the management and 
monitoring of SPS entitlements, the following weaknesses were noted: in 
the United Kingdom (England) the 
same parcel can be claimed by two “farmers” under different area related EU aid schemes. In 9 out of 12 on the spot visits to "new UK: This has been discussed at bilateral meetings 
with the Commission.  RPA is now undertaking a review of a sample of new entrants to SPS where 
an RD scheme is claimed by a third party, 
although the UK Authorities maintain, as agreed by the Commission, that the Regulations provide for such circumstances. Where necessary the “new 
 
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beneficiaries" of EU direct aid that 
the Court had highlighted in its Annual Report concerning the 
financial year 2006 , the area 
declared for SPS was not eligible in whole or in part either because it was not in good agricultural condition, its main use was not 
agricultural or the beneficiary was 
not eligible because he did not carry out any agricultural activity on the land; beneficiaries” have been inspected and the results 
are being assessed. Any necessary corrections will be made.  
5.26 (c) As regards the management and 
monitoring of SPS entitlements, the following weaknesses were noted: 
Portugal has allocated entitlements 
and paid SPS aid to farmers who declared areas on “baldio” land. This land is usually public land of very poor pasture and mostly covered by bushes and trees. There are no limits 
as regards the number of trees 
allowed on such land and there is no obligation for farmers to respect GAEC on this land. In 2007 Portugal paid 3,5 million euro for “Baldio” 
land. In Italy it was found that the 
areas accepted as permanent pasture for SPS payments were bigger than the eligible part actually covered by grass or herbaceous forage. Portugal: No measures have been taken as the 
Portuguese authorities consider that the options they have chosen comply with Community 
legislation. The baldio is a traditional form of 
(common) farming of forage areas by local farming communities. These areas generally consist of extensive pasture land, usually containing trees, which are used for extensive grazing for small ruminants and became eligible 
in 2005 under the Single Payment Scheme. The 
Portuguese authorities cannot accept the Court's view that beneficiaries of direct aid who farm these areas are not required to comply with agricultural and environmental good conditions 
(GAEC) and Statutory Management Requirements 
(SMR). The only condition which does not apply to these farmers is to check there is no undesirable woody vegetation in accordance with Article 5 of Regulation (EC) No 1782/2003. All other GAEC and SMR standards apply to these farmers. 
 
5.26 (d) As regards the management and 
monitoring of SPS entitlements, the 
following weaknesses were noted: payments were made to 275 farmers in France and 33 farmers in Spain (Andalucia) who did not hold 
payment entitlements; no recovery 
action has been taken France: Population 1
: for 77 dossiers representing 
247.882€, the amount of decoupled payment is 
zero; a title of transfer had been issued after the payment for the same sum; therefore there is coherence between the absence of DPU and the absence of the payment. Population 2
: for 185 
dossiers representing 534.356 €, the instruction of 
the dossier DPU was not accomplished at the moment of the constitution of the database DPU for the auditors (March 05th, 2007) and led then to the attribution of DPU to the concerned farmers. 
The decoupled payment for these dossiers is in 
line with the presence of DPU. Population 3
: for 
13 dossiers representing 178.085 €, the dossier was provisionally jammed in the computer 
 
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because of ongoing checks.  For this reason, these 
dossiers DPU did not appear in the database of March 05th, 2007 transm itted to the auditors. 
They were then released, without adjournment of 
attribution and of decoupled payment to the farmers. The list of dossiers recovering from these 3 populations appears in 3 files Excel transmitted to the Court as a supplement to the answer to the 
corresponding letter of sector. 
Spain: see 5.14 
Germany: Production-linked direct payments 5.27 The direct coupled payments 
managed under IACS totalled some 5 500 million euro in 2007. For the animal-based schemes the systems are generally functioning satisfactorily, reflecting the 
reliability of the IACS for this 
purpose. However, the Court found a number of systems weaknesses in administrative and on-the-spot controls of  the area aids:  
a) administrative controls 
weaknesses, leading to errors such as: wrong input of application data (Greece),  payment for multiple incompatible aid schemes on the 
same parcel (Italy), and a failure to 
correctly apply penalties and sanctions, which lead to overpayments (Greece, Italy, Spain and Portugal); b) lack of documentation of the 
reasons why certain criteria of the 
risk analysis have been selected, and absence of yearly reassessment of the risk parameters by the paying agencies, for the selection of the 5 % 
on-farm inspections (Portugal, 
Spain).  Greece: Changes and/or corrections to application 
data are only made following an appeal/application by the beneficiary producer using the procedures outlined in the circular on management of administrative operations. Thus, if 
there is no writ-ten request from the producer, it is 
not possible to change the application data. Consequently, the identified corrections to applications have been made using the procedure 
in question. As regards the procedure for 
administrative checks, these are made a) on 100% 
of original applications and evidence submitted with them, by the Regional Directorates of OPEKEPE, taking ac-count of any changes to the applications within the framework of the 
procedure for administrative operations and b) on 
10% as regards correct computerized registration of the applications by the competent agencies. As regards the erroneous recording of the date of performance of on-the-spot  checks in the IIS, on 
checking this was found to be mainly due to 
inadvertent error by the operator in re-cording the 
date of entry of the control results by the operator. As regards completion of the results of 2006 on-the-spot checks and in accordance with the instructions that had been given to the inspectors, 
‘…In identifying the area of each land parcel, the 
D(eclared) area is al-lowed in place of the 
 
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M(easured) area if the difference between them 
(as absolute values) is at most equal to the ‘al-lowed measurement tolerance’, i.e. when |D-M| ≤ 
max (Mx5%, Px1.5), when P is the perimeter of 
the land parcel, expressed in hectares (area in m²/10000)….The heading ‘Control of eligible area’ records the area, e ither eligible for the 
scheme or eligible for the entitlements and equal 
to: The declared area, wher e the difference, as an 
absolute value, between the declared area and the measured area is within the prescribed tolerance limits. The measured area, where the difference, as an absolute value, between the declared area and the measured area is outside the prescribed 
tolerance limits….’ Therefore recording of the 
measurement did not constitute a compulsory field. The tables of statistical data, as laid down in Article 76 of Regulation (EC) No 796/2004, have been sent to the services of the European 
Commission under documents Nos 45493_1.4.08 
and 93511_25.06.08.  
Portugal: action taken in 2007. Content of the 
action: Correction of the use of the average unitary value of entitlements for areas cleared after penalties now forms part of the SPS clearance system. The method of selecting 
samples has been changed. 
Spain: see  5.14  
5.28 The re-performances of controls 
carried out by the Court found  a Spain: see 5.14 
 
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number of specific weaknesses in 
the quality of the on-the-spot controls and identified ineligible 
areas or  parcels that should have 
been excluded by the national inspectors. (Greece, Italy, Spain, Portugal). In Italy, a farmer had received aid for a parcel of pistachio 
nut trees. While the parcel had been 
subject to an on-the-spot control by the Italian authorities in 2005, the Court’s audit found the parcel to be long established general forest land and, thus, not eligible for aid. 
 Greece: action taken between end of 2008 and 
start of 2009. Content of the action: new LPIS. 
Germany: see 5.27 5.29 As indicated at paragraph 5.19, the 
effectiveness of the supervisory and control systems incorporated in IACS forms a key element of the overall effectiveness of the system. This applies to each of the main aid 
schemes covered by IACS. Greece: action taken in June 2007. Α) As regards 
the checking procedure, these checks are carried 
out: on 100% of original applications and evidence submitted with them, by the Regional Directorates of OPEKEPE or, as appropriate, the 
Directorates for Rural Development, 
administrative checks to verify eligibility conditions, taking account of  any changes to the 
applications within the frame-work of the procedure for administrative operations and on 
10%, by the Regional Directorates of OPEKEPE, 
as regards correct computerized registration of the applications by the competent agencies. On 8%, by the Regional Directorates of OPEKEPE or, as appropriate, the Directorates for Rural Development, on-the-spot checks to verify 
eligibility conditions. On 100%, cross-checks. 
With specific regard to the cross-checking procedure, the following applies: At the stage of completion of the applications by the competent body (Association of Rural Cooperatives), 
computerized checks are made regarding 
correctness of completion of the recorded data and completeness of the application fields. 
At the stage of finalization of the applications in 
the central system of the Paying Agency and 
simultaneous receipt of an electronic reference 
number, computerized cross-checks are made at 
national level as regards the completeness of the GNI fields, the correctness of the data, the uniqueness of the GNI, the compatibility of the carto-graphic data, and so on. After the closing 
 
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date for completion of applications, including the 
25 working days, central computerized cross-checking is undertaken with regard to the carto-
graphic data concerning the parcels at national 
level before issue of the computerized sample of on-the-spot checks. Before payment, central computerized cross-checking is undertaken at national level, taking ac-count of the data in the 
applications and the results of the administrative 
and on-the-spot checks. In addition, on the basis of the results of the secondary checks and with a view to improving the quality and reliability of the primary checks, the following improvement initiatives have been undertaken: Improvement of 
the control forms and issue of more detailed 
instructions for undertaking checks and completing the relevant forms. Training of inspectors from both prefectural administrations and Regional Directorates of OPEKEPE and 
evaluation of those trained. Start of performance 
of secondary checks immediately after the start of primary checks so that any weaknesses are identified in good time for immediate programming of corrective actions (e.g. provision 
of additional staff, undertaking of checks by 
OPEKEPE, provision of training materials for control, and so on). 
Netherlands: The Netherlands is adapting its plot 
register to ensure that, probably by 2010, it will include only the exact eligible area for which payments are made. Until the measure is fully implemented, the Netherlands will inter alia  carry 
out strict administrative and physical checks of the 
eligible area. This is also stated in the communication on the sector. After more detailed analysis of the findings of the inspection visit by the Commission in October 2007, the Netherlands 
identified some gaps in the LPIS-GIS. The 
Netherlands discussed this  with the Commission 
on 24 November 2008. 
Portugal: In accordance with subparagraph (d) of 
Article 12(1) of Regulation (EC) No 796/2004, the surface area of parcels forming an integral part of a particular application may be rounded up to two 
decimal places only if the parcels are declared to 
have a surface area equal to or more than 0.01 hectares.  The Portuguese authorities consider this satisfies the condition laid  down in Article 14(4) 
 
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of the Regulation obviating the need for national 
rules on this requirement to be published. 
Spain : see 5.14 
UK: The RLR data refresh project is underway.  5.30 (a) Administrative controls to establish 
eligibility of surfaces: the effectiveness of the administrative controls depends on the quality of 
the information recorded in the Land 
Parcel Identification System (LPIS(21)), the use of computerised geographical information techniques for the graphical layer of the LPIS 
which is the Geographic Information 
System (GIS) and the use of up-to-date aerial or spatial orthoimagery:  the administrative controls in the United Kingdom (England) do not provide assurance that EU aid is paid 
out correctly. The United Kingdom 
(England) do not avail of the option to use aerial or spatial orthoimagery in support of the GIS. The English LPIS does not always contain 
information on eligible area of the 
reference parcel;   (21) LPIS is a database in which all the agricultural area of the Member 
State is recorded with a unique 
identification number.  Greece: action taken between end of 2008 and 
start of 2009. Content of the action: new LPIS. The project has been completed and delivery took place of the data from digitisation of the cartographic database of single payment 
applications for 2006. During implementation of 
the project in question, correlation was also undertaken with the base of existing registers (vineyard and olive-growing). After digitisation of the 2006 files, the digital files of single payment 
applications for 2007 were checked and then used 
to correct the cartographic material. It is planned to introduce new orthophotomaps from satellite pictures and also to renew the system for recognition of single-application land parcels in 
the system. 
 
France: The actualisation of orthophotos is 
conditioned by their availability in IGN, responsible for orthophotos used to update RPG. From 2009, IGN should reduce to 5 years the delay between the date of the provision of a new 
orthophoto and the date of the shot of the previous 
orthophoto. This should allow amore frequent renovation of  5.30 (c) Administrative controls to establish 
eligibility of surfaces: the effectiveness of the administrative controls depends on the quality of the information recorded in the Land 
Parcel Identification System (LPIS), 
the use of computerised geographical information techniques for the graphical layer of the LPIS which is the Geographic Information 
System (GIS) and the use of up-to-
date aerial or spatial orthoimagery: in France and the Netherlands  the Netherlands: The Netherlands is adapting its plot 
register to ensure that, by 2010, it will include only the exact eligible area for which payments 
 
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are made. Until the measure is fully implemented, 
the Netherlands will inter alia  carry out strict 
administrative and physical checks of the eligible 
area. This is also stated in the communication on 
the sector. After more detailed analysis of the findings of the audit visit by the Commission in October 2007, the Netherlands identified some gaps in the LPIS-GIS. The Netherlands discussed 
this with the Commission on 24 November 2008. paying agencies do not sufficiently 
deduct ineligible features visible on orthoimages from the eligible area 
recorded in the LPIS and do not 
update their LPIS with the results of on-the-spot inspections. In Portugal the update is carried out with significant delays. France and 
Sweden use orthophotos some of 
which are more than 5 years old;  Sweden: Since 2007, ortho-photos have been 
updated more often
. 
 
France: see 5.30 (c) 
Portugal: no action taken. Areas under permanent 
pasture have been identified in accordance with Community regulations and this information is used to check the eligibil ity of areas declared to 
activate set-aside entitlements. Administrative 
cross-compliance checks of aid applications based on information in the LPIS database are affected electronically and cover 100% of aid applications. 5.30 (d) in France, Portugal and Sweden the 
eligibility of land declared for activation of set aside entitlements (22)
  is not reliably verified .  
(22) Determination of set aside 
entitlements is set by article 53 of 
Regulation (EC) No 1782/2003  
 
Sweden: no action foreseen. The Swedish 
authorities merely undertak e the necessary checks 
to ensure that set-aside entitlements are linked to 
parcels of land eligible for set-aside.  
5.32  The imprecise definitions in national 
legislation of some eligibility 
conditions and the often complex rules, particularly those related to agri-environmental measures, adversely affect the quality of the 
controls carried out to verify the 
farmers’ compliance with the relevant requirements. These controls have once again, been found  deficient. The principal weaknesses detected were:  
insufficient checks on the validity of 
the bids submitted in the context of private procurement. The checks carried out do not provide reasonable assurance as to the France: Concerning the databases for the animals 
(rare races), the French authorities remind that 
DDAF will have access at the root of data HARASIRE of the national Hars farms to prove the number of horses used for the PRM. Currently, the counting of the animals is only made in on the 
spot controls. Concerning the analysis of risk for 
the selection of the samples, the French authorities iterate that controls of place lean on a procedure of reliable selection with the aid of secured tools, for the analysis of risk in zone of remote sensing, tested and founded on 5 main criteria of risk 
described in R. (EC) n°796 / 2004. This procedure 
allows to respect principles governing the installation of controls and to prove good management and use of public funds. Finally, concerning the official report of break of the audit 
 
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trail, France considers that difficulties of the Court 
constitutes a formal error due to the absence of the file of the Credit agrico le corresponding to loans 
chosen for the mission of audit, and not in a 
substantial and systematic e rror. In this regard, the 
French authorities want to remind that during the audit carried out diligently by the services of the Commission in October, 2008 ( n°2008 / 16), the 
auditors could retrace correctly the audit trail of 
the selected samples and certify the regularity of the EU payments.  
Ireland: referred to its comment on the Table 2 
General remarks (see above).  legality of the required tendering 
procedure which may consequently affect the eligibility of the project as 
a whole (Romania); 
lack of cross checks with the specific animal databases (rare breeds) to validate the number of animals declared by the farmer which is the 
basis for the agri-environment 
payments (France);  inadequate verification of the eligible area under agri-environment measures in cases where this area did not correspond to the data in the 
IACS database. As a consequence, 
not all the conditions for granting the support could be checked (Ireland); lack of systematic verifications as to whether detailed agri-environment 
commitments tailored to the farm 
fulfil the overall requirements of the measure (e.g. the maximum permitted level of chemicals); inconclusive and poorly documented 
administrative and on-the-spot 
controls with an over reliance on beneficiaries’ declarations before approving final payments (Ireland); inadequate consideration of the risk factors stipulated in EU legislation 
for the selection of a sample of 
farmers to be controlled on-the-spot (France and Ireland); inadequate verification of the existence of private co-financing. 
Projects were often approved 
without the required certificate from a financial institution , increasing the risk that EU funds are paid to beneficiaries who are unable to pay their share of the investment 
(Romania); 
the inadequate audit trail for projects receiving interest rate subsidies made it impossible to trace the final beneficiaries who benefited from EU 
funding. Consequently, the auditors 
could not verify whether the amounts declared were correct or if beneficiaries respected all eligibility Romania: The procurement tender procedure for 
private beneficiaries, which was accredited by the European Commission (EC), took place before the conclusion of financing contracts between the 
private beneficiaries and the Paying Agency for 
Rural Development and Fisheries (PARDF). No measures have been taken to improve/change this 
procedure, since contraction of the funds under the SAPARD Programme has been finalised. Both the selection of tenders by private beneficiaries and 
the approval of the procurement dossiers at 
PARDF level were in accordance with the European Commission's accredited procedures. We therefore consider that these procedures were compliant. The Note at the end of the table 
contains details concerning the selection and 
evaluation of the tenders. The PARDF procedure accredited by the European Commission requires the beneficiary, in order to guarantee the provision of private co-financing, to submit a "bank account statement approved and dated by the bank at least 
five working days before the date for submission 
of the financing application, where co-financing is to be provided by private sources (self-financing)". We consider that the projects comply with this condition, in accordance with the 
procedure. Furthermore, all four projects referred 
to in the Court of Auditors' preliminary audit report have been completed, which demonstrates 
 
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requirements. 
 that the beneficiaries had the capacity to ensure 
their own financial contribution to implementation of the projects. 
 
 
Austria: see annex 5.3 
Belgium : Wallonia contests the materiality of the 
error under EAFRD in a letter of 30/01/2007 (p.84). Further explications have been provided to the EC on the 15
th of April. Flanders: action taken 
the 1/04/2008. Content of the action: more 
dossiers tested for EAGF. 
Finland : Action taken in 2009. Content of the 
action: Supplementing the work of the certifying authority. 
Germany : For the EAFRD funds, the 
Commission didn't clear the accounts of the payment authorities in Bavaria and Baden-Württemberg, related to the key date 30/4/2008 for the financial year 2007. This happened 
because the certifying authorities didn't make a 
fault localisation despite the fact that the materiality limit was exc eeded. In the meantime 
the work by the certifying authorities has been completed. The Commission send an email in 
which it said that the work which has been done is 
sufficient and that a clearing decision can be expected in the beginning of 2009. 5.40 On 30 April 2008 the Commission 
took three financial clearance decisions for the expenditure made under EAGF, EAFRD and TRDI and cleared all paying agencies accounts.  
These decisions are based on 
certificates provided by independent auditors (certifying bodies). The Court’s audit did not detect
 
expenditure cleared by the 
Commission which should have 
been refused (disjoined) in the financial clearance decisions. 
 
Malta : action taken in 2008. The Commission did 
not approve the amount in question because the Payment Agency was put in a state of provisional 
accreditation. The Maltese Competent Authority 
and Payments Agency together with Italian experts which are taking part in the Twinning 
Light project together with the Maltese, held 
meetings with the Commission on the factors that led to the Agency not being granted with full 
accreditation.
 In addition, in the certification audit 
for the year ending 15 October 2008 that the Directorate of Internal Auditing and Investigations 
is at present carrying out is also considering 
 
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whether there were any improvement in those 
factors that led to the Agency not being granted 
with full accreditation.   
Netherlands : the Commission has reviewed the 
EU conformity of the certification operations. All 
concerned are satisfied with the outcome. The 
Netherlands is still awaiting the decision approving the 2007 EAGF account.
 
Greece: Following an instruction from the 
European Commission, the Certifying Agency 
carried out a supplementary check on 2007 
expenditure and issued a new certificate. We were informed that financial closure for 2007 and 2008 will be examined in April 2009. Closure will take place after evaluation of the supplementary report. 
5.43 Despite the Spanish paying agencies 
making payments for the first time under the SPS during the year, the 
Spanish certifying bodies did not 
include the required verification of entitlements in their work.  
 Spain : see 5.14 
Germany : referred to its observation to 5.27 (see 
above) 
Portugal : action taken in 2007. Although Portugal 
does not agree with the Court's conclusions, procedures have been adopted to clarify concepts, 
including the detailed conditionality rules to be 
observed in controls and these have been sent to inspectors. The inclusion of models for area and animal checks in a standard model will remedy the situations identified by the Court. 
Spain: see 5.14 Annex 5.1.1 
Greece: In line with the Integrated Action Plan 
for Greece, the following applies: The project has been completed, as has the delivery of the data 
from digitisation of the cartographic data base of 
 
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single payment applications for 2006. In 
implementing the project in question, correlation with the base of the existing registers (vineyard 
and olive-growing) also took place. After 
digitisation of the 2006 files, the digital files of single payment applications for 2007 were checked and then used to correct the cartographic material. 
It is planned to introduce new orthophotomaps 
from satellite pictures and also to renew the system of land parcel recognition for single payment in the system by the end of 2008. Additionally, the recommendation concerning the orthophotomaps showing the layout and position 
of the land parcel is made by the producer. Within 
the framework of the computerised cross-checks performed in the system, the land parcels are checked regarding the correctness of their cartographic code and, if a land parcel is found to 
have a duplicate or non-existent or incompatible 
code or to exceed the island, its payment is automatically blocked. Ch anges and/or corrections 
to application data are only made following an appeal/application by the beneficiary producer 
using the procedures out-lined in the circular on 
management of administrative operations. Thus, if there is no written request from the producer, it is not possible to change the application data. Consequently, the identified corrections to applications have been made using the procedure 
in question. As regards the procedure for 
administrative checks, these are made a) on 100% of original applications and evidence submitted with them, by the Regional Directorates of OPEKEPE, taking account of any changes to the 
applications within the framework of the 
procedure for administrative operations and b) on 10% as regards correct computerised registration of the applications by the competent agencies. As regards the erroneous recording of the date of performance of on-the-spot  checks in the IIS, on 
checking this was found to be mainly due to 
inadvertent error by the operator in re-cording the date of entry of the control results. As regards completion of the results of 2006 on-the-spot checks and in accordance with the instructions 
that had been given to the inspectors, ‘…In 
identifying the area of each land parcel, the D(eclared) area is allowed in place of the 
 
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M(easured) area if the difference between them 
(as absolute values) is at most equal to the ‘al-lowed measurement tolerance’, i.e. when |D-M| ≤ 
max (Mx5%, Px1.5), when P is the perimeter of 
the land parcel, expressed in hectares (area in m²/10000).…The heading ‘Control of eligible area’ records the area, e ither eligible for the 
scheme or eligible for the entitlements and equal 
to: The declared area, wher e the difference, as an 
absolute value, between the declared area and the measured area is within the prescribed tolerance limits. The measured area, where the difference, as an absolute value, between the declared area and the measured area is outside the prescribed 
tolerance limits….’Therefore recording of the 
measurement did not constitute a compulsory field. The tables of data, as laid down in Article 76 of Regulation (EC) No 796/2004, have been sent to the services of the Eu ropean Commission under 
documents Nos 45493_1.4.08 and 
93511_25.06.08.  
France : The French authorities contest the 
assessment made by the Court of the IACS relating to the SPS. 
Netherlands : The findings in Annex 5.1.2 affect 
the LPIS-GIS on the one hand and eligibility on the other. The contents of the measures (where relevant) are specified in this letter in the findings 
on the 2007 Statement of Assurance. 
Portugal: no action taken. In accordance with 
subparagraph (d) of Artic le 12(1) of Regulation 
(EC) No 796/2004, the surface area of parcels forming an integral part of a particular application may be rounded up to two decimal places only if the parcels are declared to have a surface area 
equal to or more than 0.01 hectares. The 
Portuguese authorities consider this satisfies the condition laid down in Article 14(4) of the Regulation obviating the need for national rules on this requirement to be published. 
Spain: see 5.14 
Sweden : see 5.30 Annex 5.1.2 
 
 
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Germany : The backlogs in completing checks 
according to Council Regulation 4045/89, reminded by the Commission, occurred in the 
payment authority in Lower Saxony and have 
been cleared in the meantime. Therefore, the Commission has suspended the audit without accusing any financial impact. 
Netherlands: The Netherlands is currently 
examining the Commission's findings from the audit of 22-26 October 2008 on the establishment 
of payment entitlements. The Commission's 
findings are very similar to those of the ECA.  
Spain: see 5.14 Annex 5.2 
Sweden: see 5.30 
Austria : Action taken, additional documents sent 
to EC on 2/6/2008 
Belgium, Germany, Netherlands : See 5.40 Annex 5.3 
 
 
Malta: action taken in 2008. The Commission did 
not approve the amount in question because the Payment Agency was put in a state of provisional 
accreditation. The Maltese Competent Authority 
and Payments Agency together with Italian experts which are taking part in the Twinning 
Light project together with the Maltese, held 
meetings with the Commission on the factors that led to the Agency not being granted with full 
accreditation.
 In addition, in the certification audit 
for the year ending 15 October 2008 that the Directorate of the Internal Auditing and 
Investigations is at present carrying out is also 
considering whether ther e were any improvement 
in those factors that led to the Agency not being 
granted with full accreditation.  
 
 
CHAPTER 6 – COHESION 
 
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Czech Republic: Action taken in September 
2008. Content of the action: When carrying 
on−the−spot checks, a checklist is used to verify 
the transparency of the selection of contractors. 
Training focusing on the performance of 
on−the−spot checks, destined for all employees of 
the OPIE/OPEI implementation structure. An 
external company has been hired to help reduce the error rate and subsequent risks in the verification of the project progress and 
performance of on −the –spot checks; this 
company exercises supervision before payments 
are authorised. 
Denmark: The Court of Auditors considers that 
the supervisory and control systems for the Social Fund in Denmark (objective 3) are effective.  
France: we will provide a further reply. 
Greece: with regard to the Court's observations on 
the Greek ESF audit, the matter was closed following the first reply from the Greek 
authorities.  
Ireland: action taken in July 2008. Content of the 
action: project has been advised 25% penalty 
likely.  MA awaiting Commission confirmation. 6.28 The Court's findings on the 
management and supervisory systems in the Member States for the 16 
operational programmes which it 
assessed are set out in Annex 6.1. In 11 cases, the Court rated management systems as 'partially effective', in three cases as 'not effective' and in two cases 
as 'effective'. The continued high level 
of error identified by the Court's substantive testing of underlying transactions similarly suggests that systems in general in the Member States were only partially effective in 
managing the risk of illegality and 
irregularity in reimbursements. 
 
Portugal: Portugal disagrees with the findings of 
the Court regarding the PO Norte. The Court failed to take on board the facts presented by the IGFSE at the tripartite meeting in Luxembourg. The Court's arguments in the consultation 
procedure were based on inaccurate and incorrect 
facts, as was shown by supporting documents during the contradictory procedure. Portugal disagrees with the Court's finding that Article 4 and Article 9 controls do not work. Furthermore, 
the EC carried out a more comprehensive audit 
than the Court's on PO Norte (systems audit report 
No 1999PT161PO017 PONORTE), a few months after the audit of the ECA, auditing the period from 2000 to 2007 (including the period of analysis of the Court – 2007), and issued an 
unqualified opinion on the existing management 
and control systems (exercised by the IGFSE and manager of PONORTE) and established an error rate of close to 0%.
  
 
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Slovakia: action taken on 1/08/2007. Opinion of 
the Ministry of Finance, the body under Article 10 of Commission Regulation (EC) No 438/2001: the document ‘Procedures for the financial control of the Structural Funds and the Cohesion Fund – 
Version 3’ was published together with a guide, 
and the sample checks under Article 10(1) (b) of Council Regulation (EC) 438/2001 are carried out more rigorously. Building on an amendment to Act No 502/2001 on financial control and internal 
auditing, the document ‘Procedures for 
government auditing of the Structural Funds, the Cohesion Fund and the European Fisheries Fund’, effective as of 20 August 2008, was published. This document lays down uniform procedure for 
the performance of systems audits and sample 
checks (audits on operations) for the 2004-2006 and 2007-2013 programming periods. Guidelines (effective as of 1 Octobe r 2008) were published in 
connection with this document.    
Spain: action taken in June 2008. Content of the 
action: revision of all management systems in order to address the shortc omings. As a follow-up 
to the Court's observations on the Spanish ESF 
audit, Spain took action in July 2008 to bring in an apportionment method that complies fully with national and Community rules, to implement a sub-contracting system compliant with the 
applicable rules and in October 2008 proposed the 
application of standard costs to validate real costs. Measures have been introduced to prevent double financing and intermediate bodies have received a manual and guidance on management and control. 
The IGAE (audit body) will revise its work 
programmes with a view to extending verifications as regards subcontracting.  
 
Czech Republic : referred to its reply to 6.28  
Germany : action taken in 2nd half of 2008. 
Actions are taken to comply with the procedures which were aligned with the ECA Annex 6.1 
Ireland, Spain: see 6.28 
 
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UK: action taken and on-going. Content of the 
action: revised & strengthened guidance plus additional resources. Closer co-operation between 
those involved to increase the number of on-site 
checks. 
CHAPTER 8 – EXTERNAL AID, DEVELOPMENT AND ENLARGEMENT 
8.12 However, in Bulgaria it was found 
that in spite of EDIS accreditation having been given (thus waiving the Delegation’s ex-ante  control) the 
systems in question contain significant weaknesses. In two 
implementing agencies that had 
received EDIS accreditation in June 2007 there were weaknesses concerning respect of the applicable tendering and contract award 
procedures, as well as the fulfilment 
of contractual implementation conditions. This has been confirmed by the Commission services and has given rise to a reservation in DG Enlargement’s Director General’s 
Annual Declaration. 
 Bulgaria : Action taken on the 3
rd March 2008. 
Content of the action: adopting a detailed action plan, fixing deadlines and assigning responsibilities, for implementation under the day-to-day supervision of the National Authorising Officer. Priority was given to 
sensitive issues of great importance such as 
transparent public procurement, strengthening administrative capacity, improving the handling of irregularities and barring contractors involved in irregularities under contracts co financed by the 
EU, reinforcing the supervisory functions of the 
National Authorising Officer and improving the system of reporting to the European Commission. Detailed replies were sent to the EU in our letters of 31 March 2008, 16 June 2008, 1 July 2008 and 15 October 2008 presenting the measures taken to 
implement the action plan. 
8.33 d In order to mitigate these 
weaknesses, the Court recommends that further steps should be taken urgently to correct the weaknesses in the management of EU funds in 
Bulgaria, and the necessary 
monitoring maintained in Turkey; 
 Bulgaria : action taken on 26 March 2008. On 
26 March 2008 the Council of Ministers adopted an action plan of corrective measures when carrying out EU pre-accession programmes and structural instruments, implementation of which 
came to an end in June 2008. Measures were taken 
to: 9  strengthen administrative capacity; 
9 improve interdepartmental coordination;  
9 prevent corruption and conflicts of interest; 
9 upgrade rules and procedures; 
9 carry out a policy of greater publicity and 
transparency with the active involvement of civil society. 
(2) In follow-up to the report on Bulgaria's progress published by the European Commission 
in July 2008, on 7 August 2008 the government 
adopted an action plan containing practical measures to tackle the shortcomings identified in the management of EU resources, namely: 9 strengthening the administrative capacity 
to manage EU resources; 
 
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9 abolishing existing or potential networks 
of conflicts of interest; 
9 improving the supervision and 
transparency of public procurement procedures at 
central, regional and local levels; 
9 increasing control of the legality and 
regularity of expenditure by conducting real and regular on the spot checks and audits; 
9 building on the initial steps taken in 
improving co-ordination between ministries, between the various stakeholders as well as between central, regional and local authorities.  
(3) The following measures have been taken: - the Republican Road Infrastructure Fund has 
been transformed into the National Road 
Infrastructure Agency;   - the staffing of the OP managing authorities and the Phare intermediate bodies has been increased; 
- Council of Ministers Decree No 197 of 
5 August 2008 has introduced an incentive system 
of performance-related bonuses for staff managing EU financial assistance; - Council of Ministers Decree No 131/2005 defining the role and functions of the National 
Authorising Officer has been amended to extend 
his powers to guarantee and strengthen his key role in the management of Phare resources;  (4) Council of Ministers Decree No 224/2008 has established a council for the coordination and 
monitoring of EU resources; 
- the Public Procurement Act has been amended to include specific provisions aimed at strengthening the control and transparency of public procurement procedures, including those for 
projects co financed by the EU; 
- an Act on the prevention and detection of conflicts of interest has been adopted; - a Council of Ministers Decree has transformed the Ministry of Finance's Audit of EU Funds Directorate into an Audit of EU Funds Executive 
Agency at the Ministry of Finance. The Decree's 
publication in the Official Gazette is pending. 
 
8.34 A summary of the results of the 
Court’s follow-up of key observations in recent Statements of Assurance may be found in Annex 
8.2. Romania : action taken on the 2
nd of April 2007. 
EDIS accreditation was obtained from the Ministry for Employment, the Family and Equal Opportunities. All three PHARE implementing 
 
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 agencies obtained EDIS accreditation. EC 
Decision (C (2007) 1281 final) of 2.4.2007. 
CHAPTER 9 – EDUCATION AND CITIZENSHIP  
9.20 (b) The assessment by the Commission 
is based on information sent by Member States and is still ongoing 
in the form of monitoring visits to 
Member States. Its value as an instrument to ensure that Member States supervisory and control systems are in line with the regulatory framework is reduced by: 
the limited number of monitoring 
visits to Member States (10 Member States out of the 26 had been visited by the end of 2007) and the fact that most of them were not performed 
within the 12 month period 
following submission of the systems' descriptions as required by EU rules. Denmark:
 Denmark does not participate in the 
European Refugee Fund II.  
Italy: action taken in June 2007. Content of the 
action: the system of Management and Control has been completed. The description of this system has been sent to the EC (DG JLS) to be 
approved. 
Luxemburg: action taken in November 2008. The 
detailed description of  the management and 
control system was presented to the EC in November, 2008. The multi annual plan 2007-2013 as well as the annual plan for 2007 was approved by the Commission. The financial assistance for 2007 is 46 116 euro, the public co 
financing is 15.372 €. 9.21 As descriptions of the Member 
States supervisory and control systems for the External Borders Fund (EBF) were only provided (12) 
to the Commission in the last quarter 
of 2007, the Commission could not assess the Member States’ systems by the end of the year 2007. As a consequence there were no transfers of funds to the responsible 
authorities in Member States during 
the financial year 2007 (13). 
(12) With the exception of Italy, 
Luxembourg and Malta who had not provided the required documents by 
December 2007. 
(13) The payment appropriations for 
2007 amounted to 95 million euro 
 Malta: action taken in July 2008. The Programme 
Implementation EU Funds Unit within the 
Ministry for Justice and Home Affairs sent the description of the monitoring and control systems of the External Borders Fund to the Commission in July 2008. 
 
  
 
EN 69   EN  
      
 
ANNEX 
Questions put to Member States concerning Agriculture/Natural resources 
and Cohesion 
In the 2007 report, the Court has again expressed concerns (previously expressed in the 2006 report) 
about the reliability of payments made under the SP S (single payments system). The Court identified 
the most urgent issues to be addressed as: 
• Improving identification, registration and management of entitlement 
• Eliminating from the database ineligible area s and beneficiaries and ensuring up to date 
information on land parcels 
• Clarifying and simplifying the rules underpinning the measures-in particular the case of the 
National Reserve 
Question 1: Please state whether in the last year  you have addressed any one or all of the above 
mentioned. 
In the Cohesion chapter, the Cour t found that in some cases the supervisory and control systems were 
partially effective and in a certain number of cases  they were not effective. The main weaknesses 
identified were related to:  
• Managing Authorities- insufficient day-to-day check s of the reality of expenditure, failure to 
identify expenditure declarations not supported by appropriate evidence and failure to identify weaknesses in tender procedures; 
• Paying Authorities- failure to identify when  Managing Authorities had not carried out 
adequate day-to-day checks; 
• Audit Bodies- failure to carry out sufficient checks to obtain assurance on the effective 
functioning of the control systems. 
It would be helpful to be informed of the meas ures taken by your Member State to address these 
shortcomings. In particular:
  
 
EN 70   EN Question 2: Have any new members of staff joined managing authorities and paying authorities in the 
last 12 months? (total staff increased by  % in managing authority/paying authority)                
Question 3: In the case of managing authorities, have members of staff been trained in financial 
management and control in the last year? If yes,  can you state the number of authorities benefitting 
from the training programmes and the number of employees trained? (% of staff trained last year) 
Question 4: In the case of paying authorities, ha ve members of staff been trained in financial 
management/control in the last year. If yes, can you state the number of authorities benefitting from 
the training programmes and the number of employees trained? (% of staff trained last year) 
Question 5: Do Managing Authorities provide a starter pack containing documents and guidelines for new staff members? If yes, please indicate wh ich of the following documents are included. 
(5a)  Checklists 
(5b)  Guidance notes on control strategies (5c)  Guidance notes on reporting control findings and error rates 
(5d)  Digest of eligibility rules for checking claims 
(5e)  Public procurement rules (5f)  Final payments-rules and checks to be made 
(5g)  Irregularities-the consequences 
(5h)  Any other procedure manuals 
Question 6: The Court cites failure on the part of the audit bodies to carry out sufficient checks. This 
occurs as a result of: 
(6a) Guidelines not systematically provided to audit bodies 
(6b) Scope of audit too limited 
(6c) Auditee cooperation questionable 
(6d) Any other reasons 
Question 7: Has there been an overall reduction (compared to last year) in the number of errors 
identified by the Court for your country? ( % reduction in number, % reduction in financial impact)        
Question 8: Please indicate whether you participated in the tripartite discussions with the Court of Auditors and the Commission in May/June this year before the contradictory procedures? Did you 
consider these discussions useful? 
Question 9: Can you indicate any areas in which the Commission could improve its supervisory role in shared management?