Brussels, 05.01.2005

COM(2004) 859 final

REPORT FROM THE COMMISSION

Member States' replies to the Court of Auditors' 2002 Annual Report

TABLE OF CONTENTS

1. Introduction 3

2. Synthesis of Member States reactions to the Court of Auditors' main observations, by sector 5

2.1. Own resources 5

2.1.1. Accounting for traditional own resources 5

2.1.2. Customs surveillance of arrivals of goods at airports 5

2.1.3. VAT/GNP own resources 6

2.2. Agriculture 6

2.2.1. Systems of management and controls 6

2.2.2. Clearance of accounts 7

2.2.3. Other issues 8

2.3. Structural Funds 8

2.3.1. Delays in the closure of the oldest projects 9

2.3.2. Compliance with Regulation No 438/2001 on control of the Structural Funds 10

2.3.3. The reservation given by the Director-General for Regional Policy 11

2.3.4. Controversial observations 11

2.4. Other sectors 12

3. Areas of agreement and disagreement 14

3.1. Methodological problems 14

3.2. DAS errors 14

4. Conclusion 15

1. INTRODUCTION

a) Since the 1996 Dublin European Council, and in line with its conclusions on sound and efficient financial management, the Commission had requested Member States to reply to the observations made by the Court of Auditors in its Annual Report and special reports and to provide information on any corrective measures they have adopted.

Article 143 (6) of Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities[1] has taken over this practice by requiring the Commission to 'inform the Member States concerned immediately of the details of that report which relate to management of the funds for which they are responsible under the rules applicable.' After having received this information, the Member States have to reply to the Commission within 60 days. The present report, which is transmitted to the Court of Auditors, the Council and the European Parliament, summarizes the Member States' replies to the Court of Auditors' 2002 Annual Report.

In its 2002 Annual Report,[2] the Court of Auditors has once more pointed out that the areas of the budget for which management is shared between the Commission and the Member States "pose particular challenge due to their complexity and the many layers of administration involved ".[3] For its part, the Commission has taken steps to ensure that weaknesses are corrected. The 2001 Synthesis Report action 12[4] has been achieved and will be complemented by concrete steps to promote a convergence of audit methodologies. Besides, in its 2002 Synthesis Report, the Commission has committed itself to making all appropriate recommendations to clarify the respective responsibilities of Member States and of the Commission in case of shared management.[5]

Furthermore, given the importance of shared management and subsequently the place it occupies in the Court of Auditors' reports, it is particularly necessary to know the Member States' positions on the problems raised by the external auditor. Firstly, it allows the Member States to give their opinion on the observations and recommendations drawn up by the Court.[6] Secondly, Member States can present the corrective measures they have implemented or are planning to implement. Lastly, It should also give the Commission a general picture of various problems encountered at national level and allow it to take proper remedial action.

b) The Court of Auditors presented its 2002 Annual Report to the Commission on Budgetary Control of the European Parliament on 17 November 2003 and to the Council Budget Committee on 20 November 2003. After this early presentation, the Commission sent a letter to all the Permanent Representatives asking them to provide their replies before the 19th of December. In an attempt to provide a coherent and harmonised framework for the national contributions, the Commission's request was accompanied by a questionnaire drawn up in close collaboration with the Court of Auditors. It consisted of a list of specific references to each Member State in the Annual Report and of a summary of Statement of Assurance (DAS) errors for each Member State.

c) This report is therefore based on the contributions from the Member States. It should be pointed out that despite the creation of the general framework, these contributions remain fairly heterogeneous both in form and especially in substance. The Member States thus replied in full or in part to the points or DAS errors submitted to them and in a few cases made recommendations or more general observations. The time limits set by the Financial Regulation were not fully complied with and some contributions arrived several weeks late. In so far as some Member States either fail to reply to specific observations concerning them or give only fragmentary information related to the failures highlighted by the Court of Auditors, it is sometimes difficult to get a complete picture of Member States' positions regarding important findings. Only four Member States made general comments on specific matters dealt with in the Court's Annual Report. One Member State did not transmit any reply at all.

d) A large part of the Community budget is administered in the form of shared management. Therefore, Member States’ systems of management and control are a central feature of the Annual Report by the Court of Auditors. The purpose of this procedure is to give the Member States an opportunity to put forward their views, observations and any recommendations following publication of a report which concerns them both directly and in the more general framework of the discharge procedure. Although they do not bear the ultimate responsibility for the implementation of the budget, their contribution, in summary form, throws particular light on the management of Community appropriations.

The national contributions can thus be used to identify a number of major issues which are of particular interest for analysing sectors involving shared management. They highlight in particular the specific problems encountered in the Member States and on the solutions which might be contemplated at that level. That is why the first part of the report concentrates as usual on Own Resources, Agriculture and the Structural Funds. The issues which have held the attention of several Member States are highlighted for each of these sectors.

After this presentation by sector, two more analytical parts give an account of areas of agreement and disagreement between the Member States and the Court of Auditors and then try to identify the main conclusions which can be drawn.

2. Synthesis of Member States reactions to the Court of Auditors' main observations, by sector

2.1. Own resources

The Member States focus on three main issues which are the accounting for traditional own resources, the customs surveillance of arrivals of goods at airports and the VAT/GNP own resources.

2.1.1. Accounting for traditional own resources

Most Member States (in particular United Kingdom, Netherlands, France, Germany, Italy, Sweden, Finland, Belgium, Denmark, Greece and Ireland) still bring up this question and, on the whole, they do not dispute the Court's observations about the existence of remaining errors in keeping the B accounts or relating to delays, discrepancies between B and A accounts, as well as several other anomalies in reporting the B account balances to the Commission. However, in a number of cases, they point to their compliance with the pertinent provisions of Regulation 1150/2000, the lack of any financial impact, the negligible nature of the errors or the various actions taken to follow them up. Most of the Member States concerned also announce that they have taken, or are in the process of taking, measures to improve the situation (e.g. the French, Swedish and German computerisation of the procedure, the further standardization of some procedures in Sweden and the Dutch and Italian technical amendments). Finland expresses the opinion that there is no unanimity between the Commission and the Member States on the B-account procedures and urges the Commission to ensure that all Member States uniformly apply the rules in force. Finally, the United Kingdom expresses support for the Commission's proposal (COM 366) to amend Regulation No 1150/2000 in respect of improved management of amounts entered in B-Account.

2.1.2. Customs surveillance of arrivals of goods at airports

Some Member States concerned acknowledge differences in control practices and weaknesses in control arrangements pointed out by the Court of Auditors.

The United Kingdom mentions significant effort having been made to address properly the question of apparent outstanding consignments.

Sweden considers that in some respects the Court of Auditors takes a different view from Swedish Customs of how customs clearance and other controls should be carried out. It maintains that EU legislations are complied with and that the risk analysis and quality checks used are sufficient to ensure that mistakes are kept to an acceptable level from the point of view of risk in all essential aspects. As regards customs clearance by fast couriers, Sweden believes that in some respects the Court of Auditors has taken a different view of how customs clearance and other controls should be carried out.

Italy gives a detailed picture of the control system applied at Italian airports.With regard to the goods moved by road between airports under a transit system, France mentions new progress made from 2003 onwards and is planning to repeal the simplified Community procedure known as collective de transfert from 2005 onwards. Austria reports also on measures taken in this area and considers that the guarantees that the goods will be correctly processed are no less with customs warehouse schemes than with temporary storage.

2.1.3. VAT/GNP own resources

As regards VAT collection in Member States, France has recalculated the receipts related to fines and default interest for Metropolitan France and the receipts for the overseas departments for the years 1999 and 2000. Portugal acknowledges that it sent its VAT statement for 2001 much later than the deadline laid down in Community legislation and announces that this will be also the case for 2002. It intends to resolve definitively this question and is considering setting up an interministerial working party to that effect. Portugal also mentions that it has reconciled the VAT receipts and the figures from the State accounts for 1998 and has sent them to the Commission.

2.2. Agriculture

As a general comment, one Member State (Netherlands) underlines the necessity of good control systems and straightforward Community regulations for guaranteeing the legality of the operations. It considers that, as a result of the forthcoming agricultural reform, a larger proportion of CAP expenditure will be managed and audited using the integrated administration and control system (IACS).So Member States need to make the necessary efforts to optimise the control systems required, but that, because Regulations are sometimes open to differing interpretations and are regularly subject to revision, it can prove difficult to apply them fully and correctly.

Greece indicates that progress in implementing the integrated administration and control system (IACS) has been confirmed by thorough inspections at all levels by Community inspectors, who have consistently found that positive steps have been taken.

The other Member States' contributions reveal two main issues: the Court's criticisms of the various systems of management and control, based on the errors detected, and the clearance of accounts as regards the paying agencies.

2.2.1. Systems of management and controls

With regard to the area aid schemes, where important discrepancies between the arable area declared by farmers and the area found when parcels were measured in the presence of Court's auditors, some of the Member States concerned (France, Greece, the Netherlands) do not dispute that there were errors. Nevertheless, the Netherlands question the extent of the error rate detected by the Court and the methodology applied. In one case, France also questions the method used by the Court of Auditors for measuring the extent of the discrepancy and would like the Court to consider changing its position. Both Member States concerned stress that the Court's observations do not question either the reliability of their own inspections or their compliance with pertinent regulations and that sanctions laid down by the Community regulations have been imposed. Portugal disputes the Court's assessment according to which a significant difference between the average size of claim submitted and the average size of claim checked may have an impact on the rates of error revealed. Any interpretation should take into account the weighting of different factors, including those relating to geographical reality, i.e. in the case of Portugal the different sizes of areas concerned in the North and in the South of that country. Sweden also raises an objection on the Court's methodology since the Court is carrying out its checks with a two-year time-lag it cannot tell if it is measuring the field boundaries as they were in the year to which the audit relates, as the field boundaries often change over the years.

As regards the animal premiums, Portugal disputes the accuracy of the high error rate detected in the number of suckler cows claimed. It considers that the error rate should be determined on the basis of the number of ineligible animals found compared to the number of animals being checked. The United Kingdom accepts the Court's findings and announces that it has taken steps to recover amounts paid out in error. The Netherlands criticize an extrapolation made by the Court on the basis of one random check.

2.2.2. Clearance of accounts

- The Court of Auditors highlights that 22 paying agencies out of a total of 86 received a qualified or negative opinion in the context of the Commission's annual "financial clearance" decision on the acceptance of the paying agencies' accounts for the preceding budgetary year. The Commission took 3 conformity decisions in respect of expenditure in 1996-2001, a sum of 301,4 million euro being 'disallowed' from Community financing and corrections made accordingly.

- As regards the breaches of accreditation criteria and control weaknesses, France mentions that the French offices cited were in fact the subject of reservations expressed by the Commission de certification des comptes des organismes payeurs (CCCOP) which initially considered it impossible to formulate an opinion on some expenditure lines, in particular with regard to export refunds. Since then, the CCCOP has transmitted to the Commission additional reports and certificates lifting the reservations expressed. France states that the accounts of the paying agencies concerned meet now the conditions of completeness, accuracy and veracity required by Community rules. Belgium states that the Flemish administrative authorities replied to the Commission in 2003 and that a new body including an internal audit service has been set up. Germany reports improvements leading to the satisfaction of the accreditation criteria.

- As regards the paying agencies, France, Germany, Belgium, Greece, the United Kingdom and Portugal have accepted the validity of the Court's criticisms and reforms are planned, under way or have been made.

- As regards the financial corrections, most of the Member States concerned emphasise that the procedures are still under way internally or with the Commission. The corrections relating to milk quotas are the most contested. One Member State (Spain)) has also referred corrections relating to the milk quota policy to the Court of Justice. On the same point, Italy has stressed that the problems in collecting the levy are due to internal administrative and legal procedures which should not lead to corrections. Germany, on the other hand, recognises the difficulties which have led to the flat-rate corrections following the control of export refunds (supervisory agencies) and states that it has taken far-ranging measures to resolve the problem.

2.2.3. Other issues

With regard to 'other expenditure' (support of agricultural markets, subsidies for the production and disposal of fruit and vegetables, restructuring and conversion of vineyards), Spain cannot identify the source on which the Court of Auditors has based its observation according to which the Commission has "identified numerous weaknesses in the way a posteriori checks are performed and planned and errors recorded and corrected". The United Kingdom refers to the Commission's reply to the Court's Annual Report according to which major improvements have occurred. The Netherlands stress that the conclusion reached by the Court of Auditors in the case of an audit relating to the design and implementation of a posteriori cheks under Regulation No 4045/89 is not consistent with the conclusion communicated by the Commission following this control visit.

2.3. Structural Funds

3 Member States comment on Structural measures' observations presented in Chapter 5 of the Court's Annual Report.

- The United Kingdom agrees with some of the criticisms in the report. For instance, it considers that, for a variety of reasons, there will be a decommitment despite the aptitude of the new financial profiling for ensuring a regular flow of funds to the programmes.Nevertheless, it disagrees with the Court of Auditors on the following points:

- extrapolation of criticism from a limited number of audits;

- Court's own audits of Member States are not always completed, and even when they are, the delays mean that little can be done to make improvements;

- impact of the rule "n+2" on the volumes of funds needed to be spent at the end of the end of the programming.

The United Kingdom also feels that it did distribute sufficient guidance to managing authorities on the necessary management and control systems by the end of 2002. It adds that it is the inconsistencies from the Directorates-General that incite inconsistent interpretations by Member States and that this question has been raised on several occasions with the Commission.

The United Kingdom recalls that the Court of Auditors considered that little progress had been made in closing interventions from the 1994-99 programming period. Despite the lateness of the guidance issued to Member States, all the English regions made great efforts to submit the closure documents to the Commission by the deadline of 31 March 2003. A number of queries on these documents have since been raised and are being dealt with. The United Kingdom has prepared a “lessons learned” document which examines the difficulties experienced during the closure of the 1994-99 programmes and which will benefit the management of the 2000-2006 programming period.

On the whole, the United Kingdom supports the Commission’s responses to the Court's 2002 Annual Reports, especially in the areas of evaluation and audit visits. In the former, the Commission has undertakena variety of evaluations which will be extremely beneficial to both existing and new Member States, whilst the decision to dovetail United Kingdom's audits with Commission audits wherever possible is to be lauded.

- Ireland's comments.

Ireland agrees with the Court of Auditors’ view that the Commission was late in producing regulations and clarifications to Member States. Regulation 2064/97 establishing detailed arrangements for the implementation of Council Regulation (EEC) No 4253/88 as regards the financial control by Member States of operations co-financed by the Structural Funds was adopted in November 1997, nearly 4 years after the beginning of the programming period. According to Ireland, clarifications on this and other regulations came as late as 2001 and 2002.

- Netherlands' comments.

The Netherlands share the views expressed by the Court of Auditors and considers that the internal management and control systems in the Member States are still inadequate. According to this Member State, the Commission has still not made enough progress in winding up the period 1994-99. Finally, new guidelines were drawn up in the middle of the aforementioned programming period, leading to confusion in the Member States about which rules were to be applied in particular situations, with the result that they were unable to take the measures required within the prescribed time limits.

Particular comments made by the Member States in this sector cover issues which cut across the main sections of Chapter 5 of the Annual Report:

- the closure of the oldest projects;

- the compliance with Regulation No 438/2001 on control of the Structural Funds;

- The reservations given by the Director-General for Regional Policy.

Furthermore, several Member States do not agree with some of the Court's observations.

2.3.1. Delays in the closure of the oldest projects

The Court has pointed once again to difficulties in closing old projects. It has ascribed them to the late issuing of guidelines and to the fact that the control systems had not been set up in the Member States early enough for them to be effective before the closure of the programmes. The Court observed that the Commission itself found significant shortcomings at a stage when the final declarations were due to be sent. Generally speaking, the Member States which have replied recognise that problems may have been encountered, thus generating excessive delays. With regard to 11 Objective 3 (ESF) programmes, Spain mentions that it has sent the final balances including the financial corrections known about when they were drawn up between August 2001 and May 2003. Denmark is completing supplementary investigations into the completion of the FIFG programmes from the period 1994-1999, as well as carrying out supplementary controls concerning 1999 as regards the PESCA programmes. Ireland reports progress made in the closures. However, Germany challenges the Court's comment according to which closure statements relating to the closures from the period 1994 to 1999 should have been rejected because of doubts about the independence of the auditors carrying out checks, or of the provider of the closure statement. The reason for rejection was due to the inadequacy of details regarding the independence of these persons. These descriptions have been, or are being, completed.

2.3.2. Compliance with Regulation No 438/2001 on control of the Structural Funds

The Court of Auditors analysed the management and control systems operated by Member States under Regulation No 438/2001 which set standards for the control of the Structural Funds in the 2000-06 programming period. As regards the weaknesses identified by the Court of Auditors in the management and control systems operated by Member States in the framework of the implementation of the aforementioned Regulation, France reports on the measures put in place in order to complete the audit trail. Nonetheless, France disagrees with the findings made by the Court of Auditors stating that it had put in place a procedure for checking applications for payment in relation to centralised management measures. Finally, France is planning to complement the monitoring of actual payments.

Spain admits that its auditors had carried out ten sample checks on operations in the period 2000 to 2006 when the 2002 Court of Auditors’ Annual Report closed. This was due to the fact that the efforts were focused on the closure reports for the 1994 to 1999 period. However, Spain stresses that its auditors have made up for part of the delay that occurred during the initial years of the current programming period. Spain also mentions that it has informed the Commission in October 2003 of the application in 2001 and 2002 of the checks referred to in Article 10 of Regulation (EC) 438/01. Spain details numerous actions taken for putting into effect Regulation 1386/2002 of 29 July 2002 laying down detailed rules for the implementation of Council Regulation (EC) No 1164/94 as regards the management and control systems for assistance granted from the Cohesion Fund and the procedure for making financial corrections.

The United Kingdom reports in detail on the observations relating to the assessment of management and control systems for ESF in West Wales and the Valley and mentions that the Scottish Executive has prepared a proposal for monitoring of ERDF projects in Scotland.

2.3.3. The reservation given by the Director-General for Regional Policy

This reservation concerns Greece, Spain and Italy.

Greece reports that it it passed on to the Commission the views of the CSF Management Authority and the paying authority regarding improvements in the management and control system by the end of January 2003.

Italy reports some follow-up made.

Spain finds that the reserve expressed is not very clear and sets out the wide range of national measures taken for putting into effect Regulation 1164/1994 following the publication of Regulation 1386/2002 of 29 July 2002.

2.3.4. Controversial observations

It should finally be noted that at least 6 Member States dispute some Court's observations.

Germany disputes the one according to which closure statements from the period 1994 to 1999 relating to EAGGF Guidance programmes were not accepted because of doubts about the independence of the auditors carrying out checks or of the provider of the closure statement[7]. On the contrary, Germany assesses that all closure programmes regarding the programme referred to were accepted. The Länder concerned had presented some closure statements at an early stage before the Commission had issued guidelines and they have completed or are in the process of completing further questions from the Commission.

Austria disputes the table and the corresponding negative statement of the Court relating to the assessment of the implementation of the management and control systems, as far as they concern the European Regional Development Fund in Upper Austria[8]. Austria requests that the Court of Auditors 'corrects' them.

As regards the closures of several programmes (ESF) from the period 1994 to 1999, Spain states that none of the closures processed were rejected while the Court states that the final payment was not made because the approval of the Monitoring Committee was not obtained before submitting the final reports to the Commission.

Greece states that Regulation (EC) No 438/2001 does not require the paying authorities to carry out direct checks to establish whether the statements of expenditure meet the requirements of the second paragraph of Article 9(b)(ii) of that Regulation regarding their reliability and that the paying authority may thus satisfy the requirements of the regulation by other means. For its part, the Court of Auditors has criticized in its Annual Report the lack of "sufficient checks (as specified in the Regulation) before certifying statements of expenditure" [9].

France challenges the observation of the Court of Auditors according to which there was no manual of procedure at the time the Court performed its audit relating to the 2000 to 2006 Nord-Pas-de-Calais Objective 1 (ESF) programme. In this case, France also contests the alleged lack of independence of the certification of expenditure body.

Referring to the Commission's approval, the United Kingdom states that since no expenditure had occurred, no financial management, control or monitoring had been undertaken in the United Kingdom in 2001 and that there was therefore no need to refer to Regulation 438/2001 in its Financial Control Annual Report for 2001.

2.4. Other sectors

Some Member States have drawn up replies on subjects other than shared management. Their main concern is to express their views on the forthcoming reforms which were recommended by the Court or which they themselves deem necessary.

As regards External action, Pre-accession Aid and European Development Funds, only the United Kingdom makes general comments. According to this Member State, the Court’s review continues to raise concerns because of the similarity with last year’s Annual Report particularly on key policy and implementation issues. For External actions these would include the uneven pace of deconcentration (on which more was expected from the Court, particularly with respect to the implications for the future), the increase in the stock of old and outstanding commitments (the RAL), and weaknesses in financial management, internal control systems and monitoring. Together, these factors are of particular concern given the reform process was expected to be completed by the end of 2003. There are also concerns over the skills mix required to ensure that the Commission can engage in policy dialogue. Chapter 2 (on budgetary management) of the Court of Auditors' 2002 Annual Report underlines the uneven level of spend between regions. The Commission’s reply illustrates the importance of making allocation decisions based on performance and need .These principles are supported by the introduction of Activity Based Budgeting and should be taken into account when planning the preliminary draft budget (PDB).

According to the United Kingdom, the slow pace of payments for pre-accession aid within a few months of Accession is of even more concern than it was last year. The shortcomings which account for delayed information in the Accession countries are in themselves quite serious since they point to insufficient institutional capacity. This raises fundamental questions about measuring the effectiveness of these payments once they are made and the capacity to monitor and account for them accurately. Chapter 2 (Budgetary management) summarises the problems starkly. The Commission’s replies suggest that the problems encountered should have been foreseen and addressed.

The United Kingdom is expecting the Court’s and Commission’s views on the value of including a brief summary of specific recommendations for clearly identified Commission follow-up action, together with dead-lines. These might reinforce the multi-annual aspect of the Commission’s work, and provide a baseline for subsequent reports. As regards the Annual Report's chapter on financial instruments and banking activities Spain considers that the Court's observation pointing out problems of efficiency in eight of the 10 projects of the global loan examined and a waste-water treatment is wrong. According to Spain, public aid programmes allow to stimulate the channelling of investment towards certain sectors and to speed up implementation of infrastructure projects. As far as the conditions for the global loan are concerned, Sweden stresses that the Commission should examine if the rules on procurement have been followed in the cases brought up by the Court of Auditors. According to this Member State, the Commission should examine the facts with the European Investment Bank and take appropriate action because it is of vital importance that the EU follows the rules on procurement.

From a more general point of view, the Netherlands emphasize that it is important the Commission take steps in the immediate future to remedy the shortcomings identified in its financial management and that the statement of assurance (DAS) becomes positive. They also consider that the reforms have stalled because progress in various areas of the reform is still inadequate: simplification of financial management and enhanced financial control of research programmes, the clarification of the respective powers and responsibilities of the Commission and the Member States in shared management and the introduction of internal control standards.

3. Areas of agreement and disagreement

3.1. Methodological problems

As with the reports concerning previous years, the Member States still express a number of methodological criticisms about the Court of Auditors' procedures, especially as regards the examination of transactions. First of all, some Member States state that the Court of Auditors should not extrapolate observations from what they consider as a too limited number of audits (United Kingdom, France, the Netherlands). Others consider in some cases that the audit method used by the Court is misleading ( e.g. Sweden as far as the audit of the area aid scheme for cereals is concerned). Sometimes factual findings are disputed ( e.g. France in the case of the Court's audit relating to 2000 to 2006 Nord-Pas-de-Calais Objective 1) and the interpretation of legal provisions is different ( e.g. Greece as regards Regulation (EC) 438/2001).In general, Member States are often prompt to stress that some findings made by the Court of Auditors are not the result of systematic faults in their own on-the-spot checking procedure. They also play down the importance of some errors found by the Court by stressing either that are formal or that their financial impact is insignificant.

This raises once again the question of the introduction of a contradictory procedure which would allow both Member States and the Court of Auditors to defend their respective viewpoints.

3.2. DAS errors

It may be noted that in general the Member States devoted less attention to the DAS errors and that few of them replied systematically and in detail to the cases referred to them . No specific conclusions can thus be drawn from examining them. Nevertheless, for some limited cases, Member States having replied either challenge the method of control used by the Court of Auditors or the findings. In most cases, those Member States report on corrections made and/or remedial measures taken.

4. Conclusion

A relatively limited number of conclusions, lessons and recommendations may be drawn from an analysis of the Member States' replies to the Court of Auditors' Annual Report for 2002.

These replies principally defend the validity of their management and the controls they carry out. This approach occurs at a number of levels: formal disagreement with the Court of Auditors, playing down the significance of its findings and the conclusions it draws, and presentation of specific or structural corrective measures to remedy the shortcomings detected. This stratification of arguments presented in their defence varies from one Member State to another; some are more inclined to question the Court's critical observations against them.

This attitude is not particularly surprising, since the Member States – apart from their replies to sector letters - do not have the possibility to defend contradictorily their point of view before the Court of Auditors when the latter question their management of EU funds.

The number of structural corrective measures announced is limited. For instance, in the Own Resources area, Member States have taken steps to improve the accounting and control procedures. As regards Agriculture, the need for better legislation and good control systems is expressed. Several Member States also expect more input from the Commission in the Agriculture and Structural funds areas, as regards simplification of legislation, timely issuing of guidance and better monitoring of management and control systems.

[1] OJ L 248 of 16.9.2002.

[2] OJ C 286 of 28.11.2003.

[3] Idem, p. 6.

[4] For Action 12, see COM(2002) 426 of 24.7.2002, point 5.2.2., p. 25.

[5] COM(2003) 391 of 9.7.2003, point 5.3.3., p. 22 and 23.

[6] This in no way affects the contacts between the Commission and the Member States concerned in order to take follow-up action on the Court's observations. Follow-up action by the Commission and the Member States on the Court's sector letters is a specific exercise focusing on measure which may need to be taken to correct problems detected.

[7] See OJ C 286 of 28.11.2003, p. 173.

[8] See OJ C 286 of 28.11.2003, p. 191.

[9] See OJC 286 of 28.11.2003, p. 170.