EUROPEAN COMMISSION Brussels, 8.10.2015 SWD(2015) 195 final COMMISSION STAFF WORKING DOCUMENT Accompanying the document REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND TO THE COUNCIL on the follow-up to 2013 discharge - Replies to requests from the European Parliament {COM(2015) 505 final}

{SWD(2015) 194 final}



TABLE OF CONTENTS INTRODUCTION3 European Parliament resolutions on 2013 discharge 25/8/20154 The Court of Auditors' Statement of Assurance5 Revenue: GNI Based own resources11 Agriculture13 Regional policy, transport and energy23 Employment and social affairs35 External relations42 Research and other internal policies54 The European Anti-Fraud Office (OLAF)63 Administration66 Getting results from the Union budget71 Tobacco smuggling74 SR 11/2013 Getting the Gross National Income (GNI) data right: a more structured and better-focused approach would improve the effectiveness of the Commission’s verification75 SR 13/2013 EU Development Assistance to Central Asia78 SR 15/2013 Has the Environment component of the LIFE programme been effective?80 SR 16/2013 Taking stock of 'single audit' and the Commission's reliance on the work of national audit authorities in cohesion81 SR 17/2013 EU Climate Finance in the context of External Aid83

SR 18/2013 The reliability of the results of the Member States' checks of the agricultural expenditure87 SR 1/2014 Effectiveness of EU-supported public urban transport projects92 SR 2/2014 Are Preferential Trade Arrangements appropriately managed?96 SR 3/2014 Lessons from the European Commission’s development of the second generation Schengen Information System (SIS II)100 SR 4/2014 Integration of EU water policy objectives with the CAP: a partial success101 SR 6/2014 Cohesion policy funds support to renewable energy generation — has it achieved good results?104 SR 8/2014 Has the Commission effectively managed the integration of coupled support into the single payment scheme?106 SR 9/2014 Is the EU investment and promotion support to the wine sector well managed and are its results on the competitiveness of EU wines demonstrated?108 SR 10/2014 The effectiveness of European Fisheries Fund support for aquaculture109 SR 13/2014 EU support for rehabilitation following the earthquake in Haiti113 SR 15/2014 The External Borders Fund has fostered financial solidarity but requires better measurement of results and needs to provide further EU added value117 SR 16/2014 The effectiveness of blending regional investment facility grants with financial institution loans to support EU external policies119 SR 19/2014 EU Pre-accession Assistance to Serbia122 SR 21/2014 EU-funded airport infrastructures: poor value for money124 Eighth, ninth and tenth European Development Funds125 Performance, financial management and control of EU agencies131 Bodies set up under the TFEU and the Euratom Treaty136 INTRODUCTION This Commission Staff Working Paper completes the Report from the Commission to the European Parliament and the Council on the Follow-up to the 2013. It presents in detail the answers to 319 specific requests made by the European Parliament in its Resolution forming an integral part of its Decisions on the 2013 Discharge European Parliament resolutions on 2013 discharge

The Court of Auditors' Statement of Assurance 1.(§ 17 - 2013/PAR/0252) The Parliament calls on the Commission to analyse whether the shift in methodology from confirmed corrections to implemented corrections, which took place in 2012 is best suited for reflecting the reality of control and management systems in a given financial year. Commission's response: The Commission provides information on both confirmed and implemented corrections in the EU annual accounts and in its annual Communication on the protection of the EU budget. This gives a broader view of the financial corrections' situation for a given financial year. 2.(§ 25 - 2013/PAR/0253) The Parliament asks the Commission and the Member States to put in place sound procedures to confirm the timing, the origin and the amount of corrective measures and to provide information reconciling, as far as possible, the year in which payment is made, the year in which the related error is detected and the year in which recoveries or financial corrections are disclosed in the notes to the accounts, taking into account the pluriannuality of the whole procedure. Commission's response: The Commission has always stated that linking financial corrections to the original year of payment is not feasible. 3.(§ 27 - 2013/PAR/0254) The Parliament asks the Commission to further clarify the calculation of the amount at risk (Annex 1 to the synthesis report explains "amounts at risk" as the value of the fraction of the transaction which is estimated not to be in full conformity with the applicable regulatory and contractual requirements after the application of all controls (corrective measures) intended to mitigate compliance risks.) in explaining the estimated impact of corrective mechanisms on this figure and to issue in its synthesis report a proper "Statement of assurance" based on the Directors-General annual activity reports. Commission's response: The Commission further clarified the methodology for its calculation in the 2014 Synthesis report, ensuring consistency in the terms and concepts applied by the DGs in their annual activity reports. The Synthesis report included for the first time a consolidated estimation of the amount at risk for the entire budget under its responsibility (so not only for the part of the expenditure under reservations as it was the case in previous years) alongside its best estimate of the volume of errors and irregularities that could be corrected in the future. However, the Commission will not issue in its synthesis report a proper "Statement of assurance". Replacing the managerial responsibility of the Directors-General by a political one would only dilute responsibility and weaken the accountability structure. Also, The College takes political responsibility by adopting annually the Synthesis Report. The combination of AARs and the synthesis report fulfils the internal and external accountability objectives defined by the Court. 4.(§ 32 - 2013/PAR/0255) The Parliament calls on the Commission and Member States to therefore a shift from spending to a performance culture focussing on the results achieved based on the principles of efficiency, effectiveness and economy. Commission's response: The Commission accepts the recommendation of the European Parliament. The MFF 2014-2020 programmes already reinforce the performance culture putting emphasis on results achieved and the Commission aims to further strengthen the performance focus in the near future. In this context, the Commission has launched two initiatives: a) the setting-up of an Inter-Institutional Working Group on Performance Base-Budgeting to agree on a common understanding of performance framework of the EU budget and b) the first annual conference on 'Budget focused on results' in September. A communication on 'budget focused for results' is planned for spring 2016. 5.(§ 34 - 2013/PAR/0256) The Parliament urges the Commission to once again prepare and publish a 'long-range cash flow forecast' projecting future payment requirements to ensure that necessary payments can be met from approved annual budgets; demands that the Commission present, if necessary, modifications to existing regulations in the event that the annual budgets cannot provide sufficient appropriations to match the necessary payments level. Commission's response: The Commission is taking the recommended action. The Commission presented in March 2015 “Elements for the payment plan to bring the EU budget to a sustainable track” which aims at eliminating the abnormal backlog of unpaid claims that emerged at the end of 2014. See Recommendation 2013/COU/0190. As regard long term forecasts, the Commission presented its detailed methodology for forecasting payments for the 2014-20 financial framework within the framework of the negotiations of the MFF. This was the basis for fixing the payment ceilings. The Commission is regularly reviewing its assumptions to take into account all new developments (adoption of the “payment plan”, preparation of the 2016 budget and the information included in the schedules of payments, progress in adoption of the delayed programmes in the shared management, etc.).

However, the most important variable in the medium to long term forecasting exercise is the evolution of interim payment claims of shared managed programmes in Headings 1b, 2 and 3. A significant number of these programmes could not be adopted in 2014 and had to be reprogrammed. By end 2015, all programmes under shared management shall be adopted. Only then the Commission will receive Member States payment forecasts for all programmes and also first information on the actual implementation of the shared managed programmes will become available. This will allow the Commission to prepare a thorough analysis of the needs for the second half of this MFF and propose adjustments, if appropriate, in the framework of the mid-term review of the MFF in 2016 in line with the provisions of the MFF Regulation. Improving the reliability of forecasts is a continuous effort by both the Commission services and the Member States. 6.(§ 38 - 2013/PAR/0257) The Parliament calls on the Commission to be more transparent and to regularly report on leverage, losses and risks such as investment bubbles (in the context of financial instruments). Commission's response: As regards financial engineering instruments supported from Operational Programmes under the 2007-2013 period, Regulation (EC) No 1083/2006 laid down limited reporting requirements by Member States (MS) for financial engineering instruments; these requirements do not include obligatory reporting on leverage, losses or number of enterprises or projects supported. Nevertheless, some of this information is provided by MS on a voluntary basis and is made available by the Commission in the annual summary of data on the progress made in financing and implementing financial engineering instruments. As regards financial instruments (FI) to be supported from ESIF programmes under the 2014-2020 period, the Common Provisions Regulation (EU) No 1303/2013 lays down detailed reporting requirements on volume of investment supported, leverage, losses and gains, resources paid back to financial instruments, number of enterprises supported as well as output indicators specific to the type of instruments. The European Commission will submit on an annual basis a summary report to the budgetary authority and will make this report available to the public. 7.(§ 38 - 2013/PAR/0258) The Parliament urges the Commission to give a full overview of the number of projects financed under each of the financial engineering instruments and the results achieved, to indicate clearly how much Union budget allocations were used to co-finance these FEI projects and to present a comprehensive cost-benefit analysis of the instrument of FEIs compared with more direct forms of project funding. Commission's response: Concerning the request to give a full overview of the number of projects financed under each FIs, in article 49 (3) of Regulation (EC) 1083/2006 an ex-post evaluation of all the Structural Funds is foreseen. Within this ex-post evaluation one work-package is specifically addressing the efficiency and effectiveness of the financial engineering instruments for SMEs in the 2007-2013 programming period. The ex-post evaluation shall be completed by 31 December 2015. It is also important to emphasize that a cost-benefit analysis comparing grants with financial instruments would be of little added valued as, even if grants and financial instruments are both delivery modes of Cohesion Policy, they target different types of projects. 8.(§ 40 - 2013/PAR/0259) The Parliament recommends, in light of the pressure on the budget for payments and the fact that Article 140(7) of Regulation (EU, Euratom) No 966/2012 (the Financial Regulation) requires that excessive balances should be avoided on financial instruments, that the Commission ensures that contributions from the Union budget to such instruments reflect a real cash-flow need. Commission's response: As regards financial engineering instruments supported from operational programmes under 2007-2013 period, bearing in mind the approaching end of eligibility, new contribution from the programme to such instruments (if any) will be inevitably linked to the immediate demand at the level of final recipients. As regards financial instruments supported by ESIF programmes under the 2014-2020 period there are safeguards in the legislative framework which ensure that: 1) ESIF contribution will reflect market needs thoroughly assessed in ex-ante assessment , and 2) ESIF contribution will be paid in phased instalments reflecting the progress in implementation on the ground, hence, the ESIF contribution to the FIs linked to the disbursement to final beneficiaries and excessive balances on the accounts should be avoided. 9.(§ 42 - 2013/PAR/0260) The Parliament asks the Commission to disburse funding only when the funds are actually needed by the beneficiary and to improve its monitoring of the Union grant implementation. Commission's response: The Commission is taking the requested action. The work related to the disbursement of funds has already been carried out (see responses to the Court of Auditors' recommendations from the Special Report 16/2014). As regards monitoring, best practices have been elaborated in the guidelines accompanying the application form. However, specific monitoring criteria for blending projects is under preparation. 10.(§ 46 - 2013/PAR/0261) The Parliament calls for a sanction system if Member States transmit incorrect programme information and declarations. Commission's response: The current legislative framework does not provide for sanctions for incorrect or unreliable reporting. Rather, when control systems prove to be partially effective or ineffective the Commission concentrates on the existing corrective measures available under the legal framework (suspension or interruption of payments, financial corrections).

11.(§ 47 - 2013/PAR/0262) The Parliament calls on the Commission and the Council to take concrete and meaningful steps to enable the necessary progress in sound financial management, including the increased use of the instrument of national declarations which in practice do not require much extra effort (reportedly less than 1 full-time equivalent on a yearly basis per Member State), while also noting that it is of great importance that Member States take political responsibility for the use of Union funds by means of a public document. Commission's response: The Commission will continue to promote this accountability instrument, on the basis of the recommendations and templates resulting from the inter-institutional working group. It will continue providing support and feedback to Member States who issue already or are interested in issuing a national declaration. 12.(§ 47 - 2013/PAR/0263) The Parliament calls on the Commission and the Member States to publish not only the national declarations but also the annual summaries and management declarations in order to give more insight in and achieve a real improvement of the financial management. Commission's response: The Commission cannot take the requested action as it does not have the right to publish national declarations, annual summaries and management declarations. This is the prerogative of the Member States. 13.(§ 47 - 2013/PAR/0264) The Parliament urges the Commission to submit a recommendation to Parliament and the Council to promote the use of national declarations in line with the recommendations by the interinstitutional working group for the establishment and use of national declarations. Commission's response: The Commission does not consider that the requested measure will promote the use of national declarations, as the adoption of an additional act or document does not have a binding legal effect. Therefore, it does not consider to take action related to this recommendation. 14.(§ 49 - 2013/PAR/0265) The Parliament reiterates its previous demand that the Commission evaluate and, if necessary, correct the Member States' data in order to establish reliable and objective annual activity reports. Commission's response: The Commission has a good overview of how first level management verifications are performed in the Member States that gives full credibility to the annual activity reports drafted by its services. This overview is based on a robust and solid process encompassing the detailed assessment of the management and control systems through 15 key requirements including on the quality of management verification, the detailed analysis of the audit opinions and the national audit reports the Commission receives, of the Commission's own audits and any other community audit. As a result the Commission keeps updating this assessment of the key-requirements on a bi-weekly basis. In case after throughout assessment and analysis the Commission considers that data from Member State are not correct, this will be clearly disclosed in the respective annual activity report of its services. 15.(§ 50 - 2013/PAR/0266) The Parliament requests that the Directors-General report in detail in their annual activity reports on the error rates notified by the Member States and on the corrections made by the Commission, where appropriate, at the level of operational programmes. Commission's response: The requested action has been taken. This information was already provided by the DGs for all operational programmes under reservation. As from reporting year 2014 this has been extended to all operational programmes. 16.(§ 55 - 2013/PAR/0267) The Parliament calls for the early adoption of the Directive on the fight against fraud to the Union's financial interests by means of criminal law. Commission's response:

The Commission is already working on the requested action. The 2012 Commission proposal for a Directive on the fight against fraud to the Union's financial interests by means of criminal law (PIF Directive) has been discussed in trilogues since October 2014. The Commission is fully committed to see an adoption of the PIF Directive as soon as possible, however, with a content improving the level of protection of the EU budget currently provided for by the 1995 Convention on the protection of the European Communities' financial interests (PIF Convention) and its Protocols. The Commission fully supports the co-legislators in finding acceptable compromises, in particular as far as the inclusion of VAT into the scope of the directive and the level of harmonisation of sanction levels are concerned. On both issues, the Commission and the European Parliament share similar points of view. 17.(§ 56 - 2013/PAR/0268) The Parliament calls on the Commission to carefully examine the current situation and present recommendations or even legally binding solutions if necessary; considers that the same should apply to the candidate members and members of the Commission (in some Member States, legislation concerning conflicts of interests of members of the parliament, members of government and members of local councils is vague and insufficient). Commission's response: Rules are in place to avoid conflicts of interests at the level of the Commission. These apply to staff at all levels. Commissioners have to respect similar principles: they have to declare their interests and are bound by the provisions of the Treaties and Code of Conduct for Commissioners, which defines their ethical environment and sets the guiding principles for the relations between Commissioners and Commission departments. Regarding the conflicts of interests at the level of the Member States, the Financial regulation foresees the obligation for MS to take the necessary measures to avoid conflict of interest, and to report to the Commission on the systems put in place to ensure their avoidance. Still, a legally binding EU solution is not foreseeable as the avoidance of conflict of interest at national level lies within the competence of MS. Revenue: GNI Based own resources 18.(§ 58 - 2013/PAR/0269) The Parliament demands that the Commission to ensure that Eurostat's and Member States' data are identical, as the indicator of GNI represents the key benchmark not only for Union revenue but also for expenditure. Commission's response: The GNI data used for Own Resources purposes is provided to Eurostat by Member States according to Regulation 1287/2003. Both data sets are by definition identical. 19.(§ 65, 1st indent - 2013/PAR/0270) The Parliament urges the Commission to shorten the duration of its verification cycle of the GNI data used for own resources to a maximum four years, if needed, in launching infringement proceedings and/or in imposing strict delay to lift the reservations. Commission's response: Please see response to Recommendation n° 2 to the European Court of Auditors Special Report No 11 2013 Getting the Gross National Income (GNI) data right A more structured and better-focussed approach would improve the effectiveness of the Commission’s verification. 20.(§ 65, 2nd indent - 2013/PAR/0271) The Parliament urges the Commission to limit the use of general reservations to exceptional cases where there are significant risks that the financial interests of the Union are not protected: i.e. when a Member State carries out a major revision during the verification cycle or at irregular intervals. Commission's response: A new annex to the Memorandum of Understanding between DG Budget and Eurostat was signed in April 2013; this will reduce significantly the number of general reservations. Yet they remain essential to ensure the EU’s financial interests are protected and cannot be foregone completely. 21.(§ 65, 3rd indent - 2013/PAR/0272) The Parliament urges the Commission to draft an action plan to remedy the deficiencies detected by the Court of Auditors in its Special Report No 11/2013 and to report on it to Parliament and the Court of Auditors by the end of June 2015. Commission's response: An action plan was submitted to the Parliament and the Court of Auditors on 30 June 2015 (ref: Ares(2015)2777865) 22.(§ 65, 4th indent - 2013/PAR/0273) The Parliament urges the Commission to put in place and closely monitor a detailed action plan with clear targets to address the problems in the compilation of Greece's national accounts. Commission's response:

A comprehensive action plan, the Joint Overall Statistical Greek Action Plan (JOSGAP), aimed at resolving the deficiencies in the Greek Statistical System has existed since 2010. This consists of a large number of detailed, targeted and monitored actions, including in the area of national accounts. Under this programme there have been many visits of experts to advise the national accounts department of the Hellenic Statistical Authority (ELSTAT); recently there has been a focus on the specific issue of the resolution of particular problems concerning GNI data. Please see response to recommendation n°2 to the European Court of Auditors 2013 Annual Report. 23.(§ 65, 5st indent - 2013/PAR/0274) The Parliament urges the Commission to introduce a modification to the abovementioned Commission proposal COM (2014)0704 in order to empower the Commission to defer the reimbursement of the amounts in case of "negative" balances and adjustments. Commission's response: The Commission is currently examining possible amendments to the existing provisions in view of modifying the treatment of VAT and GNI balances. Agriculture 24.(§ 68 - 2013/PAR/0275) The Parliament calls on the Commission to re-examine the agricultural budget support in light of this (the measures initiated by the Commission in agricultural policy have so far been unable to correct the demographic imbalance). Commission's response: In 2010 7.5% of EU-27 farmers were under 35, while 53% were over 55. But in 2007 only 6.3% of EU-27 farmers were under 35. Between 2007 and 2010 the ratio of old to young farmers moved from 9:1 to 7:1. This means that the agricultural sector in the EU is still characterised by an aged and in many Member States ageing - farming population, though recently there have been signs of improvement. In its proposal for the latest CAP reform, the Commission had acknowledged the necessity to tackle generation renewal issues in agriculture and had presented a proposal for a mandatory payment for young farmers in the framework of the direct payments. Despite Council's strong opposition against a mandatory payment for young farmers under direct payments system, the final political agreement provided that the payment remained mandatory. It is to be noted that the payment for young farmers is to be implemented from 2015 and it is too early to conclude about its effect. In addition, there is a wide range of support measures for young farmers under the new RD policy (e.g. business start-up aid for YF subject to a business plan, a higher support of up to 90% for investments in physical assets, support for information, advice and training, for cooperation activities, etc.). 25.(§ 71 - 2013/PAR/0276) The Parliament calls on the Commission and the Member States to better balance their beneficiaries' structure. Commission's response: The recommendation should be more precise, as it is, the Commission cannot identify what a "better balance" would be. 26.(§ 71 - 2013/PAR/0277) The Parliament demands that the Director-General of DG AGRI attach yearly to its annual activity report indicative figures on the distribution of CAP direct aid payment to producers by Member States and category of beneficiaries. Commission's response: An annual report on direct payments is already published (see http://ec.europa.eu/agriculture/cap-funding/beneficiaries/direct-aid/pdf/annex2-2013_en.pdf) and available on the Internet site of DG AGRI. Therefore, the Commission believes there is no need to give additional reporting in the AAR. 27.(§ 75 - 2013/PAR/0278) The Parliament requests that the Commission report by the end of 2015 on how these simplification measures worked out in practice and which additional measures could be taken with regard to any remaining complex rules and eligibility conditions. Commission's response:

The Commission has launched a simplification exercise for the CAP and will present its results before the end of 2015 to the European Parliament and the Council. 28.(§ 86 - 2013/PAR/0279) The Parliament calls for Union officials to increase supervision and to monitor and coordinate more closely national paying agencies within the relevant Member States. Commission's response: The Commission gives the highest priority to the exercise of its responsibilities for implementing the budget under Article 274 of the EC Treaty. The supervisory and monitoring role of the Commission under shared management for agricultural funds has been reinforced through new preventive instruments (e.g. reductions and suspensions for both EAGF and EAFRD and interruptions for EAFRD) made available under the new CAP legal framework. Moreover, the Commission has implemented actions to increase the effectiveness of first-level verifications in the national paying agencies, which are the primary line of defence against errors. In that respect, the Commission organised seminars for managing and paying authorities for the identification of root cause of errors, including public procurement seminars, and guidance for on-the-spot checks. The Commission made significant efforts to improve the guideline on financial corrections and key and ancillary controls. Furthermore, continuous guidance has been offering to the Certification Bodies in order to prepare their readiness for the new reporting expectations on the legality and regularity as from financial year 2015. 29.(§ 89 - 2013/PAR/0280) The Parliament calls on the Commission to ensure that financial risks for the budget are covered by net financial corrections. Commission's response: Any time a risk to the budget for agricultural expenditure is identified immediate actions are taken in order to cover it through conformity clearance procedure which will claw back the unduly spend amounts. Reading this recommendation in the context of the paragraph 89, notably the deficiencies detected in LPIS, the ECA acknowledged that notwithstanding the weaknesses in the LPIS and administrative checks, the IACS makes a significant contribution to reducing the error rates in the expenditure it covers (see § 3.29 of the ECA's Annual Report 2013). Since 2007, the persistent weaknesses established during DG AGRI's audits led to action plans being initiated in 7 Member States (3 have been already completed). Independently of these specific action plans, as part of normal procedure, when audit findings show weaknesses Member States are to take actions to address the situation. In all cases, for the years prior to the finalisation of the plan, the risk for the Fund has been covered via the application of net financial corrections and net recoveries. 30.(§ 92 - 2013/PAR/0281) The Parliament calls on the Commission to make a detailed analysis of this situation (the Court of Auditors' findings as regards the fact that Italian authorities did not record whether debts were due to irregularities or administrative errors which could potentially lead to charging the Union budget) and report back before the end of the year. Commission's response: In DG AGRI AAR 2014 (Annex 10, Part 5) the Commission has reported on the progress made with the Italian authorities to address the deficiencies in the debts' management by the end of 2015. It will continue to up-date the information in the following AARs. The Commission would like to stress that the deficiencies in the irregularities' and debts management in Italy are followed up in the context of a number of conformity clearance procedures. The on-going conformity clearance procedures will protect the EU budget through net financial corrections. 31.(§ 110 - 2013/PAR/0282) The Parliament recommends that the Commission actively monitors the application of remedial actions with regard to the deficiencies in the control system applicable to Union aid for the recognition of producer groups for fruits and vegetables in Poland, and in the operational programmes for producer organisations in Austria, the Netherlands and the United Kingdom. Commission's response:

The Commission always monitors the action plans and remedial actions put in place and reports on them in its AAR. DG AGRI reported in the AAR 2014 (Annex 10, part 3.2) on the follow-up of the remedial actions. • The 2013 reservation for pre-recognition of producer groups in Poland was maintained in the AAR 2014 considering the implementation of an on-going action plan which will be closely monitored during 2015. • The system deficiencies in the operational programmes for producer organisations in Austria, the Netherlands and the United Kingdom are currently addressed through on-going action plans. The conformity clearance procedure will ensure that the financial risk to the EU budget is covered. The reservations for the Netherlands and the United Kingdom are carried over. 32.(§ 111 - 2013/PAR/0283) The Parliament urges the Commission to demonstrate the Union added value of the agricultural market measures. Commission's response: The Commission has demonstrated the added value of the agricultural market measures in the impact assessment for the proposal on the new Common Market Organisation, eventually adopted by the legislator on 17 December 2013. The Commission adopted also in March 2014 a report on one of the most relevant market policies, namely on the provisions on the fruits and vegetables regime (reference: COM(2014)112 final). In this report there are recommendations to improve the added value and to address the shortcomings of the current support scheme. This report has been discussed with member states and with the EP and it will be a basis to further improvements of the scheme. 33.(§ 111 - 2013/PAR/0284) The Parliament asks the Commission to report in the 2013 Commission discharge follow-up report on the actions taken by the European Anti-Fraud Office in light of the audit mission for poultry export refunds in France. Commission's response: The Commission is already working on the requested action. The OLAF investigation report for this case is currently in the process of being finalised. Within the limits of confidentiality, the Commission will inform the Parliament on the actions undertaken by OLAF. 34.(§ 112 - 2013/PAR/0285) The Parliament asks to the Commission to draft proposals with a view to sanctioning false or incorrect reporting by paying agencies including the three following dimensions, namely inspection statistics, statements by the paying agencies, and the work carried out by the certification bodies. Commission's response: The Commission is concerned about allegations of "false" or "incorrect" reporting by Paying Agencies and Certification Bodies, as it is not aware of cases where the Member States provided false information to the Commission; Member States appear to simply provide the actual results of their actual controls. The control systems may be deficient but this does not mean that the reporting is false or incorrect. To manage the problem of errors going undetected by the Member States, DG AGRI systematically adjusts the error rate in all cases where there is evidence that the control system is deficient. The Financial Regulation (Article 59.6 of R. 966/2012) does not provide for sanctions against Member States in case of incorrect reporting, but only for corrections in case the applicable rules were breached. Changes such as those recommended by the Committee would necessitate a review of the Financial Regulation. The Commission has already at its disposal a series of corrective measures available under the legal framework which can be used as sanctions for the paying agencies in case their control systems is partially effective or ineffective: conformity clearance procedures to estimate the amount at risk and result in net financial corrections that protect the EU budget, and reservation in the ARR triggering remedial actions by the Member States and, where remedial actions are not implemented, suspension/reduction of the payments to the Member State. 35.(§ 112 - 2013/PAR/0286) The Parliament asks that the Commission be empowered to withdraw the accreditation of the paying agencies in cases of grave misrepresentations. Commission's response: Granting and withdrawal of accreditation is under shared management the responsibility of Member States. Empowerment to the Commission in this respect would imply a modification in the Horizontal Regulation. Nevertheless, the Commission takes the view that new powers to withdraw accreditation in cases of "grave misrepresentations" would not solve the problem because there does not appear to be misrepresentation, but only deficient controls. Withdrawing accreditation in case of deficient controls would be rather counter-productive as it would not address the fundamental issue of the deficiencies in the control systems. The Commission therefore prefers focusing on assisting the Paying Agencies to improve their control systems. 36.(§ 113 - 2013/PAR/0287) The Parliament urges the Director-General of DG AGRI to consider the real added value of delaying year after year reservations justified by deficiencies in the LPIS while those deficiencies have clear horizontal dimension. Commission's response: The assertion that reservations are delayed "year after year" in the AAR is factually incorrect. Reservations justified by the deficiencies in LPIS are not "delayed", but they are carried over until the corrective actions are considered as implemented and the risks reduced. In the meantime the conformity clearance procedures and the resulting financial corrections will systematically cover the financial damage to the EU budget.

The time and the financial cost required to up-date LPIS as part of an action plan should not be underestimated. The following aspects have to be kept in mind when assessing an action plan for LPIS: – The fact that there is an action plan means usually that for a number of years a Member State has not updated its LPIS. In general, remedial action means almost starting from scratch, whereby little (old) available source material (i.e. imagery) can be "used". – The fact that there is an action plan means usually that for many years a Member State has not updated its LPIS. In general, remedial action means almost starting from scratch, whereby little (old) available source material (i.e. imagery) can be "used". – For a renewed LPIS to be effective for year N, it needs to be "ready" before 1.3. of year N at the very latest. Not meeting this deadline means farmers do not have the renewed information available for lodging their claim, which de facto means shifting the full use of the renewed plan to the next year. – Considering the level of payments and the (detailed) conditions under which payments are granted the level of accuracy requested by the legislator regarding the LPIS is calling for highly accurate imagery and skilled expertise of the staff involved. Developing an LPIS requires action on: – Acquisition of imagery and making it fit for use For the acquisition of the imagery, Member States have the option to perform / contract their own flights or purchase off-the-shelf-available imagery. Whatever their choice, Member States need to ensure that the imagery is to the required standard and, when deciding to purchase off-the-shelf imagery, sufficiently recent. – Interpretation of the imagery i.e. defining the maximum eligible area for each reference parcel Once imagery is available, the maximum eligible area for each reference parcel has to be determined. This means: defining the boundaries of the reference parcel, delineating the ineligible features inside it and ascertaining its land cover. Subsequently, it is important that for those parcels where the photo-interpreter has a doubt i.e. (s)he cannot determine if a specific area is (in)eligible, there is a field visit instigated to confirm the situation. – Use of the new information in the Administration and Payment system. The whole process described above is subject to a quality check if the deliverable can be accepted or not. If a predefined level of error is found during this check, the whole batch needs to be reviewed. Once the information is then finally accepted by the administration and available, a procedure (i.e. the new information is compared with previous years' claims) needs to be instigated to evaluate retro-actively over-claimed amounts (ie the risk for the Fund). For example, France opted to work with self-supplied aerial images (fly its country). Assuming that all source information would be ready and available for the whole of the Country, and counting only 1 minute to digitise a reference parcel, for the total ±6.000.000 reference parcels that need to be looked at it would take 100 staff working full-time for about 8 months to finalise the work. This is without taking into account time needed for overflying the Country, preparing the imagery, changing national instructions to ensure compliance with EU-rules, confirming the changes with farmers etc. This means that for France with a plan established in November 2013, starting work on LPIS in beginning of 2014 and finalisation to be achieved in early 2016 (with the majority of actions finalised in 2015), considering the work to be done, the timing is as such not abnormal. Until this work is assessed as being correctly implemented, DG AGRI will continue to monitor progress, take action where considered necessary, and reports in the AAR. 37.(§ 114 - 2013/PAR/0288) The Parliament asks the Commission and the Member States to take the necessary measures to ensure that the IACS is used to its full potential, and in particular to ensure that the eligibility and size of agricultural parcels are correctly assessed and recorded by the Member States. Commission's response: The Commission shares the ECA's view that IACS makes a significant contribution to reducing the error rates in the expenditure it covers. At the same time, the Commission is aware that most critical issues concerned permanent pasture in a limited number of Member States. The Commission has asked the Member States to put in place action plans in all cases when systemic deficiencies, and thus risks for the fund, were identified, while in other cases the Member States themselves initiated the corrective actions. The Commission closely monitors the implementation of the action plans; additional resources have been allocated for this purpose. DG AGRI reports in its AAR on all preventive and corrective measures implemented in the year concerned. 38.(§ 115 - 2013/PAR/0289) The Parliament urges the Commission to shed a light on the facts reported by the Court of Auditors in Ireland and Italy in points 3.24 and 3.25 of its Annual Report for 2013 as regards irregularities in recovering undue payments, to take the necessary corrective measures and to report on those to Parliament by June 2015. Commission's response:

DG AGRI dully considered these deficiencies in its risk analysis and carried out an audit mission in Italy in September 2014 (a final position regarding the financial correction to be applied can probably be taken by the end of 2015) while an audit to Ireland will take place in the 2015-2016 audit year (DG AGRI will be able to conclude on the situation in the second semester 2016). The Commission has disclosed more information about the progress monitoring of the corrective actions for debts' management in Ireland and Italy, in DG AGRI AAR 2014 (see Annex 10 – Part 5). The Commission considers it is not necessary to issue an additional report by June 2015 (the information disclosed in the AAR 2014 remain valid by that date). 39.(§ 116 - 2013/PAR/0290) The Parliament urges the Commission to take steps to further reduce the backlog of open audit files in the clearance of the accounts procedure so as to enable all audits carried out prior to 2012 to be closed by the end of 2015. Commission's response: The Commission would like to emphasise that at the end of 2013, there were 542 audits on-going. The number was reduced to 315 at the end of 2014 (representing a decrease of 48% in the number of backlog files). The backlog is expected to be fully under control by end 2016. In the Implementing Regulation No 90/2014, the Commission lays down new mandatory deadlines for the conformity clearance procedure which will ensure that procedures launched from 2015 onwards are carried out in a timely manner. For procedures opened in 2012 and before, a specific "backlog" indicator was established with interim milestones for finalisation of procedures which so far have been met and even exceeded. The Commission has dedicated specific resources to tacking backlog cases and continues to address the issue of open files as a high priority. For the specific backlog identified (cases open from 2012 and before), clear interim targets were established which so far have been met and exceeded and the Commission is on schedule to close all cases within the targeted deadline. 40.(§ 117 - 2013/PAR/0291) The Parliament asks in particular that the mandate of the Members of the conciliation body involved in the clearance of accounts procedure will be limited in time to an initial term of three years possibly prolonged for maximum one year. Commission's response: The terms and duration of the mandate of the members of the Conciliation bodies were set out in regulation n°885/2006, article 13, in particular its paragraph 2. The article stated that members of the Conciliation body are appointed for an initial term of office of three years, renewable one year at a time afterwards. The same provisions have been maintained under Regulation n°928/2014, article 37, which apply from 1 January 2015. There is no limit on the number of one-year renewals, as long as the Committee on Agricultural funds is informed and the member fulfils all the necessary conditions, in particular of independence (article 38 of Regulation n°928/2014) , to be appointed. The duration of the appointment (e.g. 3 + 2 or 3 years) has never caused any problem. On the contrary, the experience that members build up with the years is regarded as an asset to their work. It allows the members to go back to previous cases and foresees in the need of having an 'institutional memory'. 41.(§ 117 - 2013/PAR/0292) The Parliament requests furthermore that any possible conflicts of interest be avoided in the handling of those files (open audit files in the clearance of the accounts procedure) and that the Member States are not represented in the conciliation body when they are directly concerned by financial corrections. Commission's response: The Commission has no reason to question the independence of the Conciliation body or of its individual members. The President and the members are independent from the Commission and from the Member States. They are appointed on the basis of their expertise in the field and do not represent any national or EU institution or a particular Member State, in accordance with articles 38 and 39 of Regulation n° 908/2014. A newly appointed member is required at the first meeting of the Body at which he or she is present, to confirm not to take part in the work of the Body, or sign a report, concerning cases for which the member has or has had a direct or indirect responsibility. More specifically, members abstain from cases • relating to a paying agency or management authority (including coordination or certification bodies) in which the member worked during the 5 years prior to being appointed, • relating to a Member State , in which the member worked during the period of 5 years in a central authority in which he or she had responsibility for the implementation, or overseeing the implementation, of measures under the CAP, or • in which the member has or has had otherwise any involvement or personal interest.

The confirmation is recorded in the minutes of the meeting and communicated to the Director General of DG AGRI by note from the President of the Conciliation Body. Should otherwise a doubt about the independence of a member occur, the President would raise the issue with the member and decide, in the light of the information obtained, whether the member can take part in the proceedings concerning the case in question. 42.(§ 118 - 2013/PAR/0293) The Parliament asks to the Commission to report in detail to Parliament on the implementation of the capping in CAP direct payments Member State per Member State. Commission's response: Information on the implementation of the reduction in Direct payments provided for in art 11 of regulation 1307/2013 has already been made available on DG AGRI's website (http://ec.europa.eu/agriculture/direct-support/direct-payments/docs/implementation-decisions-ms_en.pdf) in the framework of the usual reporting on Direct payments 43.(§ 119 - 2013/PAR/0294) The Parliament calls for a less bureaucratic CAP with a view to reducing the error rates. Commission's response: The Commission has launched a simplification exercise for the CAP and will present its results before the end of 2015 to the European Parliament and the Council. The focus in 2015 is on changes that can be implemented quickly. Further changes, in particular to the basic acts, will depend on decisions to be taken by the co-legislators. 44.(§ 119 - 2013/PAR/0295) The Parliament calls for persistently underperforming paying agencies to be stripped of their accreditation in extreme cases. Commission's response: The Commission is not empowered under shared management to grant and withdraw accreditation; this remains solely under the responsibility of Member States. However, under its supervision responsibilities, the Commission checks on a risk basis that the paying agencies complies with the accreditation criteria set in Annex 1 to Regulation n° 907/2014 and, where necessary, requests the Member State concerned to take remedial actions and put the paying agency under probation. In the meantime the conformity clearance procedure protects the financial interest of the EU. 45.(§ 120 - 2013/PAR/0296) The Parliament calls on the Commission to present in due time a detailed plan for reducing red tape in the CAP by 25 % within the following five years. Commission's response: While the Commission is committed to simplification of the CAP (see reply to recommendation 19), this process is based on a consultation of all stakeholders and it is not possible to pre-judge the measures that will be implemented. Furthermore, it is worth remembering that a large part of the management of the CAP falls upon the Member States and the Commission has therefore no say in their administrative arrangements. 46.(§ 122 - 2013/PAR/0297) The Parliament recommends that the Commission ensure that the Member States' action plans in rural development are completed by including all regions and measures within their scope. Commission's response: Action plans under implementation in the Member States are continuously monitored by the Commission and discussed in detail with the MS authorities. The completeness and effectiveness of the action plans is notably taken on board in all Annual Review meetings and Monitoring Committees with the Managing Authorities. The result of DG AGRI's assessment of the follow up is discussed with Member State's managing authorities and paying agencies in the framework of periodic seminars. The main goal is to take stock of the overall situation, inform about new findings from audits, verify and validate the achieved results and propose reflection and good practices on certain topics.

DG AGRI reports in its AAR on its evaluation of the completeness of the action plans. 47.(§ 123 - 2013/PAR/0298) The Parliament asks the Commission about the follow-up given the cases of suspected intentional infringement reported by the Court of Auditors to OLAF. Commission's response: OLAF opened 2 cases as a result of information communicated to it by the European Court of Auditors in relation to the rural development measure "adding value to agricultural and forestry products". "Council Regulation 1698/2005 setting out the measure "adding value to agricultural and forestry products" and its implementing rules laid down in Commission Regulation 1974/2006 were repealed as from 1 January 2014. However, the Commission takes into account the Court of Auditors' findings when planning its conformity clearance activities in order to check Member States management and control systems and protect the EU budget." 48.(§ 123 - 2013/PAR/0299) The Parliament asks the Commission to fully review the design of this measure in the light of the critical remarks in the follow-up report to the 2013 Commission discharge. Commission's response: As regards the rural development measure 'adding value to agricultural and forestry products', it has been amended in the new regulatory framework for 2014-2020 (for details see Reg. 1305/2013). 49.(§ 124 - 2013/PAR/0300) The Parliament urges the Commission to closely monitor the implementation of the rural development programmes and in its conformity audits to take account of the applicable rules including those adopted at national level where relevant. Commission's response: Audit findings, covering both EU and national rules, are systematically followed up in the conformity clearance procedure. Any source of error attributable to the national implementing rules triggers a request to the Member State concerned to take immediate remedial actions. Lessons extracted from the implementation of the programmes and national rules thereof, will be shared through the ENRD and dedicated seminars on error rates. The responsibilities of the Member States have been enhanced under the new legal framework by requiring both Managing Authorities and Paying Agencies to assess the verifiability and controllability of the measures in their new Programmes. The new legal framework for CAP 2014-2020 contains also provisions which reduce risk of error. Various measures have been merged and streamlined. Provisions have been clarified, eligibility rules have been modified in order to be easier to implement and contract conditions have been made more flexible. Simplified costs options, i.e. standard scales of cost units, lump sums and flat-rate financing can be applied so that the processes of claiming, administering and auditing reimbursement for payments made will be easier for everyone. Regional policy, transport and energy 50.(§ 132 - 2013/PAR/0301) The Parliament underlines that the Commission should ensure that it obtains consistent and reliable information from the Member States on the use of ERDF's funding and considers that this information should indicate the Operational Programmes' progress, not only in financial but also in performance terms (see Court of Auditors' Special Report No 20/2014, point 68). Commission's response: For the 2007-2013 period, the Commission requires the managing authorities to report on the implementation of the programmes in line with the applicable ERDF regulations. However, the 2014-2020 ESIF programmes have been designed to put a stronger emphasis on results based on targets. At priority axis level the indicators will capture the overall performance in the axis, but not the individual performances of all types of action that might be included in that axis. See also replies to 2013/PAR/0261 and 2013/PAR/0321. 51.(§ 137 - 2013/PAR/0302) The Parliament asks the Commission to report in future all details in changes of error rates made by DG REGIO. Commission's response:

The Commission recalls that this information was provided by the directorates-general for all operational programmes in their 2014 AARs. 52.(§ 138 - 2013/PAR/0303) The Parliament asks the Commission to demonstrate if and how their flat rate corrections imposed to protect the Union budget remedied the situation. Commission's response: In the frame of its supervisory role, as soon as the Commission detects deficiencies, it takes preventive actions - through interruptions or suspensions of payments as long as the Member State has not taken the relevant remedial actions defined in an action plan - and corrective actions through the imposition of (flat-rate) financial corrections. Weaknesses and deficiencies in the management and control systems are remedied through the implementation of action plans. The Commission puts in place remedial action plans aiming at improving the effectiveness of systems and remedying the causes of the deficiencies. It follows and verifies the implementation of these action plans up and considers it as implemented once all request exit points are fulfilled. Flat rate corrections, imposed by the Commission to programmes or parts of programmes, aim to protect the EU budget against the risk of irregular expenditure being certified due to the malfunctioning of the system. They apply not only for past expenditure already certified to the Commission but can cover preventively future expenditure not yet declared to the Commission. Once the flat rate correction is applied, the EU budget is protected. In their 2014 AARs, the respective DGs describe the financial corrections decided/implemented as a result to identified deficiencies, and the follow-up to previous year's reservations. 53.(§ 140 - 2013/PAR/0304) The Parliament asks the Commission to report in future about error rates per programme. Commission's response: See reply to 2013/PAR/0302 54.(§ 142 - 2013/PAR/0305) The Parliament calls on the Commission to provide further guidance and technical assistance to the Member States; requests that the Commission and Member States pay particular attention to simplifying procedures, including those for beneficiaries, which can have benefits for both auditing and decreasing error rates, while in parallel increasing the effectiveness of the management and control systems. Commission's response: The Commission is already providing the programme authorities the necessary guidance and targeted trainings for each of the implementation phases of the programmes. This includes sharing good practices and developing knowledge. DG Regional and Urban Policy has set-up a specialised competence centre to improve the administrative capacity in Member States with difficulties and also to support public administrations managing EU funds to improve their capacity to efficiently and effectively plan, implement and evaluate high quality investment programmes under Cohesion Policy. The competence centre has launched three initiatives to improve administrative capacity, public procurement and State aid through: additional guidance targeted to common errors; targeted action plans to address the causes of weak administration; setting-up of a Common Expert Exchange System for better sharing the existing expertise and good practices in the programme authorities. At DG Employment level, a number of events giving practical guidance on simplification have been organised in Member States since 2012 to optimize the use of Simplified Cost Options in the current programming period and a survey on the use of SCOs was launched to all DG EMPL managing authorities in June 2015 and an updated Guidance note for the Member States on SCOs was issued in October 2014 and has been translated in all EU languages early 2015. This was followed by guidance notes on both the use of delegated acts under Article 14(1) ESF and joint actions plans (JAPs) in June 2015. DG EMPL has organised a number of seminars aimed at offering practical guidance at assistance to member states which wish to pursue SCOs, especially Article 14(1) ESF. By the end July, 7 of these will have taken place in 2015. The Commission also set up an independent high level expert group on monitoring of simplification for beneficiaries of ESI Funds in June 2015 and the first meeting is foreseen in October 2015. This group will look at the commitments made by Member States to reduce the administrative burden for beneficiaries as part of their programming for the 2014-2020 period and the take up of the simplification measures introduced for the current period such as e-cohesion and greater use of simplified cost options. The conclusions and recommendations from this group will assist in the implementation of programmes in the current period as well as providing input to the planning for the post 2020 regulatory framework. In addition, audit capacity initiatives are carried out. DG Regional and Urban Policy reviewed the work of the most important audit authorities covering around 96% of ERDF and CF allocations and is continuously following-up identified weaknesses and monitoring the situation where the single audit status has been granted. This audit work - that includes on-the-spot re-performance of audits including at the level of beneficiaries and operations, associated with the issuance of continuous audit guidelines and methodological tools thoroughly discussed by the Commission services with the audit authorities - has enabled comprehensive capacity-building for the audit authorities since 2009. They benefit also from extended support and guidance from the Commission through strict supervision, technical meetings, and trainings. 55.(§ 144 - 2013/PAR/0306) The Parliament points out that in 50 out of 75 cases, reservations remained in place for a year or longer; calls on the Commission to provide information to assess if the weaknesses and the regions remained the same and to find out why national management authorities did not manage to correct the errors effectively. Commission's response: The Commission is already implementing this recommendation and reports on the follow-up of the N-1 reservations in the AAR for the year N. The AAR also provides a description of the identified deficiencies in the OP/part of the OP for each programme under reservation. It identifies reservations which are carried over from the previous year when problems are not solved. 56.(§ 146 - 2013/PAR/0307) The Parliament calls on the Commission to provide a list of these cases (serious deficiencies detected by the Commission or the Court of Auditors after the submission of the accounts will lead to net financial corrections) in time for the 2014 Commission discharge procedure.

Commission's response: The Commission agrees to provide this list. However, as the first assurance documents on the basis of which net financial corrections may be decided will be received by the Commission from February 2016 onwards, and taking into account the time necessary to carry out the analysis of the assurance documents as well as the contradictory procedure with the Member State that is clearly framed in the regulation (Article 145 of Regulation 1303/2013) the Commission will be in a position to provide the requested list in 2017 for the 2016 AAR at the earliest. 57.(§ 151 - 2013/PAR/0308) The Parliament calls on the Commission to carry out progressive performance assessments during the implementation of projects and following their completion, with a view to enhancing the effectiveness of projects and stepping up checks on the use of public funds and thus being able to detect any abuses and fraudulent behaviour occurring during the implementation of projects. Commission's response: The Commission does assess performance of programmes, not of projects. Member States are responsible for the implementation of projects under shared management. See also reply to 2013/PAR/0321. 58.(§ 152 - 2013/PAR/0309) The Parliament calls on the Commission to set up a system for the exchange of information between national audit authorities so that accounting entries for transactions between two or more Member States may be cross-checked, with a view to combating cross-border fraud and, in view of the new arrangements applying under the 2014-2020 multiannual financial framework, in order to take a cross-cutting approach to the protection of the financial interests of the Union. Commission's response: The Commission does not intend to set up a new system as recommended above, for the following reasons: 1) The provisions set out in the Regulation (EU) No 1299/2013 of the European Parliament and of the Council of 17 December 2013 on specific provisions for the support from the European Regional Development Fund to the European territorial cooperation goal, already provide an adequate framework that allows the exchange of information between Member States for cross-border programmes: a. the programme's audit authority is assisted by a group of auditors composed of a representative from each Member State or third country participating in the cooperation programme and carrying out the functions provided for in Article 127 of Regulation (EU) No 1303/2013; b. each Member State or, where it has accepted the invitation to participate in a cooperation programme, each third country shall be responsible for audits carried out on its territory; c. each representative from each Member State or third country participating in the cooperation programme shall be responsible for providing the factual elements relating to expenditure on its territory that are required by the audit authority in order to perform its assessment; d. the group of auditors shall be set up within three months of the decision approving the cooperation programme and shall draw up its own rules of procedure and be chaired by the audit authority for the cooperation programme; These rules of procedure should ensure an effective cooperation between the auditors involved, thus enabling the audit authority of each cross-border programme to have reasonable assurance on the proper functioning of the management and control system and the legality and regularity of the expenditure. 2) The provisions set out in Regulation (EU) No 1303/2013 of the European Parliament and of the Council (hereafter CPR) oblige the Member States, namely the managing authorities (including the ones responsible for cross-border programmes), to put in place a minimum set of effective and proportionate anti-fraud measures and to carry out a fraud risk assessment. The audit authority must verify that the managing authority' fraud risk assessment is credible, provides a true and fair assessment of the risks and verify that adequate anti-fraud measures in place to mitigate risks. In this context, some Member States decided to use the ARACHNE Risk Scoring Tool, developed by the Commission and made available to all Member States. ARACHNE aims at establishing a comprehensive and complete database of projects implemented under the Structural Funds and Cohesion Fund in Europe enriched with the data from the publicly available sources in order to identify, based on a set of more than 100 risk indicators, the most risky projects, beneficiaries, contracts and contractors. The data-mining tool ARACHNE is available to MA and might be one part of effective management verifications, including proportionate anti-fraud measures. 3) According to Article 122(3) of CPR, Member States shall ensure that no later than 31 December 2015 all exchanges of information between beneficiaries and managing authorities, certifying authorities, audit authorities and intermediate bodies can be carried out by means of electronic data exchange systems, i.e. the so-called "e-cohesion". Concretely for cross-border programmes, the Commission is aware that a group of Member States has put in place a monitoring system developed by INTERACT together with 4 Interreg programmes; according to INTERACT, this system (called "e-MS") fulfils the e-cohesion requirements and it is given to Interreg programmes for free. This shows that Member States are actively working together in order to promote effective systems for exchange of information between national authorities (including audit authorities), thus improving the management and control systems that ultimately would be useful in combating cross-border fraud. 4) The Commission and the national authorities meet regularly each year and share information on the audit work performed. In particular for cross-border programmes, the Commission participates actively in several meetings organized by Member States, namely through INTERACT. In conclusion, the Commission does not see the need to set up an additional system for the exchange of information between national audit authorities. The Commission will of course seek assurance that the arrangements described above (among others) are in place and are functioning properly. 59.(§ 154 - 2013/PAR/0310) The Parliament calls on the Commission to identify the problems that lie at the root of this situation in those regions (i.e. regions inable to take up the funding available; decommitment of EUR 397,8 million in 2013). Commission's response:

In order to address the underlying problems leading to decommitments, a task Force for Better Implementation was set up in November 2014 to assess the situation in countries with a back log in terms of financial execution rate (BG, RO, CZ, SK, IT, HR, SI, HU), and to identify the bottlenecks hampering successful implementation and to assist those countries to draw up concrete action plans to address these potential risks of de-commitments. In the case of Greece a Joint Working Group (including experts both from the Commission services and the Greek authorities) has been set up which closely cooperates with the Task Force for Better Implementation. This arrangement enables the Commission services to ensure a consistent approach to implementation issues while also taking account of the unique challenges... At the end of May 2015 all action plans had been agreed with the Commission services with a mid-term assessment of progress made due in June and July 2015 for most countries covered. The optimal use of flexibility provided within the Closure Guidelines will play an important role in this context. The following measures are expected to be the most widely used in the countries concerned: the possibilities to compensate lower absorption in one priority by over declaration of expenditures in performing priorities (10% flexibility), flexible arrangements regarding phasing of projects or disbursement of funds from financial instruments to final beneficiaries identifying and implementing new projects to the programme. 60.(§ 154 - 2013/PAR/0311) The Parliament calls on the Commission also to draw up and submit a detailed plan for enhancing the take-up capacity of regions with a very low take-up rate. Commission's response: See reply to 2013/PAR/0310 61.(§ 158 - 2013/PAR/0312) The Parliament is worried about the implementation of the priority projects in Greece under the Task Force management and calls on the Commission to provide an update on the priority projects for the 2013 follow-up report. Commission's response: The Commission (TFGR included) has no responsibility for the management (from selection to implementation) of the so-called 181 "Priority Projects"; their management occurs solely under Greek responsibility. The choice of the "Priority Projects" was undertaken primarily by the Greek authorities with the support of Commissioner for Regional Policies. Upon Greek authorities requests, and where possible and appropriate, the TFGR was assisting on an on-going basis the Greek authorities in setting-up a monitoring mechanism for the PP. The 181 Priority Projects have no legal basis and result from a political initiative of the Commission (Commissioner Hahn) and the Greek authorities in order to boost growth and jobs and raise the awareness of the citizens and the business representatives on the benefits of the Cohesion Policy to continue supporting investments with visible results in their daily life. The current situation, as at 17 July, according to data taken from the Greek MI System, is – 68 out of 181 priority projects have been completed (total co-financed budget EUR 1.367 million) – 40 are being implemented on schedule (total co-financed budget EUR 3.457 million) – 56 projects need to be accelerated (total co-financed budget EUR 5.690 million) – 11 projects are unlikely to be concluded (total co-financed budget EUR 730 million) – 6 project were cancelled (total co-financed budget EUR 275 million) A full list of all the projects and their current status is on the open access website http://www.eu4you.gr/ 62.(§ 159 - 2013/PAR/0313) The Parliament calls on the Commission to inform Parliament about further developments (concerning potential irregularities in connection with Union assistance for the cycle path around Lago Trasimeno in Italy) in the follow-up report on discharge for 2013. Commission's response: Information of potential investigative interest was verified by OLAF and was complemented by an additional fact finding mission.

In the selection stage it was verified that no resources from the shared management of the EU budget within the programming periods 2000-2006, 2007-2013 and 2014-2020 had been committed and/or paid for the finalisation of the cycle lane around Trasimeno Lake. It was however confirmed that EU co-financing had been allocated for the execution of the first stage of the works, coming from the resources of the programming period 1994-1999. There has been no recovery in the past because the allegations about an environmental infringement were unfounded and because no proof has been presented that, at the time, the original 1996 project was not correctly implemented. This programme was closed in February 2004, i.e. more than 10 years ago, therefore the deadline for keeping supporting documents, three years after the date of confirmation of closure, has elapsed. Having regard to the remote date of the co-financed activities, the limited chances for obtaining recovery and possible time-barring, OLAF deemed that investigative action would not be proportionate and not an efficient use of the available investigative resources. 63.(§ 161 - 2013/PAR/0314) The Parliament calls on the Commission to inform Parliament about all cases in which projects (in the regional policy area) with a Union share of at least 30 % were afterwards privatised. Commission's response: The Commission manages programmes and not projects under shared management. Except for major projects, it therefore does not possess a list of projects with an Union share of minimum 30% privatised afterwards. As regards major projects, for the 2014-2020 programming period, the information reported in the annual and final report will contain information on the privatisation only if it affects the compliance with the Commission decision and/or the implementation conditions (durability). 64.(§ 162 - 2013/PAR/0315) The Parliament calls on the Commission to explain how the shortcomings in delivering emergency aid to the Abruzzi region, detected by the Court of Auditors, were remedied in the revised regulation, in particular with regard to the establishment of up-to-date national disaster management plans, the establishment of emergency procurement arrangements, the setting up of temporary accommodation in disaster-struck areas and the transfer of any revenue generated by solidarity fund projects back to the Union budget. Commission's response: While the Commission has not generally accepted the Court’s conclusions, it has proposed to include with the amended Solidarity Fund Regulation a clear definition of “temporary accommodation” and a new provision on the use of potential net revenue generated by EUSF projects. Council and the Parliament accepted these modifications which entered into force in June 2014. The establishment of national disaster management plans goes beyond the scope of the EU Solidarity Fund; the Commission has however adopted extended civil protection legislation in 2014. Public procurement rules in place cover emergency arrangements. Guidance on the avoidance of the most common errors in public procurement of projects funded by the European Structural and Investment Funds has been finalised in June 2015 which contains emergency arrangements also applicable to the EUSF. 65.(§ 163 - 2013/PAR/0316) The Parliament calls on the Commission to report in detail on progress made with MCSs considered partially effective MCS in 2013 in time for the 2014 discharge procedure. Commission's response: The Commission provided such a requested report in time for the 2014 discharge procedure through the 2014 AARs that present a follow-up to partially effective MCS in 2013 and the reservations on programmes due to lack of sufficient progress. 66.(§ 164 - 2013/PAR/0317) The Parliament calls on the Commission to carry out an assessment of the 'first level checks' performed during the 2007-2013 programming period in accordance with Article 32(5) of the Financial Regulation. Commission's response: The Commission has implemented the recommended action. The annual activity report is the document where in first instance is made the assessment the European Parliament calls on. As regards the assessment of the first-level checks for 2007-2013 the Commission considers it is already carrying out such assessment since 2010 through targeted audits on high risk programmes in the frame of its audit enquiry ‘Bridging the assurance gap’. Results of these risk based are presented in the 2014 AAR of DG Regional and Urban Policy (see page 50 and Annex 8). 67.(§ 164 - 2013/PAR/0318) The Parliament calls on the Commission to add an assessment of the reliability of the information transmitted by the certifying bodies in the Member States to the annual activity report of DG REGIO.

Commission's response: The Commission agrees to add an assessment of the reliability of the information transmitted by the certifying bodies in the Member States to its annual activity report. This was done in the 2014 AARs, and information on reported data not taken into account is provided. 68.(§ 166 - 2013/PAR/0319) The Parliament calls on the Commission to request that audit authorities certify the accuracy of the data on financial corrections reported by certifying authorities for each OP. Commission's response: The Commission agrees. The detailed information requested will be published for the 2014-2020 programming period. 69.(§ 167 - 2013/PAR/0320) The Parliament calls on the Commission to consistently disclose in its annual activity report the reasons for not making reservations where this is due to exceptions to applicable Commission guidance or approved audit strategies. Commission's response: In its reply to the recommendation 6 of Chapter 5 of the annual report of the Court for the financial year 2013, the Commission agreed to disclose further details in the relevant annual activity reports (AAR) for those individual cases where, based on its assessment of the specific situations, it has taken a reasoned decision not to make reservations or not to include the issue in the quantification of the reservation. This has been done in the 2014 AARs by the respective DGs. 70.(§ 169 - 2013/PAR/0321) The Parliament calls on the Commission to ask national authorities to give feedback on whether the established project objectives in the area of ERDF/CF were accomplished. Commission's response: In 2007-2013 programming period, the Member States provided feedback on achievements at priority axis level in their annual implementation reports. The Commission will complement this information with the results of the 2007-2013 ex post evaluation. This evaluation will examine the extent to which the resources were used, their reported achievements and impact. In the 2014-2020 policy framework, performance and evaluation have been strengthened. Implementation of the policy will be characterized by transparency and accountability for what is achieved (result orientation), not only absorption of the funds. The introduction of the performance framework creates an incentive for projects and programmes to deliver what is planned. In 2019 the Commission will review what has been achieved up to the end on 2018 and only successful priorities will gain access to the performance reserve. The Commission will summarise the information from the annual implementation reports and present its analysis to the European Parliament and the European Council. DG REGIO intends to build its OPEN DATA project to publish on its website the data on the progressive achievement of the targets for the common indicators. Evaluation requirements for the Member States have been strengthened for the 2014-2020 period as part of the orientation on results and performance The evaluations will be focused at the level of the specific objectives in the priority axis and will ask how the projects co-financed are contributing to achieve the results. Managing Authorities must establish an evaluation plan within a year of the adoption of the programme. In 2022, Managing Authorities will produce a report for each programme which summarises the findings of evaluations carried out and the main results achieved. This will feed into the ex post evaluation of the programmes, to be completed by the Commission by the end of 2024. 71.(§ 169 - 2013/PAR/0322) The Parliament calls on the Commission to ask national authorities to give feedback on whether the established project objectives in the area of ESF were accomplished. Commission's response: In order to ensure transparency concerning support from the ESF, in the 2014-2020 programming period Member States shall make accessible electronically a list of operations by Operational Programme which shall be updated at least every six months. Moreover, the Commission will publish summary reports of Member States' Annual Implementation reports every year starting from 2016 and strategic reports summarising the Member States' progress reports in 2017 and 2019 which will analyse progress in achieving the ESF objectives on employment, social inclusion, education and institutional capacity building. All reports will be submitted to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions.

72.(§ 170 - 2013/PAR/0323) The Parliament calls on the Commission to clarify the "inaccuracies" in the FEIs and to assess the results in detail in the DG REGIO's 2014 annual activity report. Commission's response: Concerning the issues regarding the reporting of data to the relevant managing authorities: - In the case of Hungary the "inaccuracies" refer to the fact that amounts constituting reflows from financial engineering instruments are reported as disbursement to final recipients and therefore constitute double counting. The amounts incorrectly reported are very limited and have only marginal effect on the high disbursement rate achieved. - In the case of Italy a limited number of financial engineering instruments were not reported within the deadline and could therefore not be included in the annual summary of data. Despite the fact that the numbers do not provide a full picture this "inaccuracy" has only limited effect on the data presented.). Furthermore in the framework of preparing the reporting on the year 2014 the Commission provided guidance to managing authorities (on 20 March 2014, updated in May 2015) and stressed the importance of reliable reporting within the regulatory deadline. 73.(§ 171 - 2013/PAR/0324) The Parliament asks the Commission to include in its Management Plan and Annual Activity Report an assessment of its work in relation to increasing the efficiency, effectiveness and impact of the cohesion policy. Commission's response: In line with the applicable templates in use across the Commission services, DG REGIO illustrates and reports annually on its efforts to increase efficiency, effectiveness and impact of the policy in the Management Plan (section "Procedures and controls for optimizing economic, efficient and effective implementation of programmes") and in the Annual Activity Report (section "Specific efforts to improve economy and efficiency of spending and non-spending activities"). In addition, DG REGIO identifies annually operational priorities which have the greatest influence on the delivery of policy results and thus enhance policy performance. For 2015, the DG has identified 20 such priorities. In its next AAR, the DG will report on their implementation. In addition in the AAR, the DG reports on a number of horizontal actions (under the overall action plan) such as the administrative capacity initiative, the public procurement initiative, the audit capacity initiative and the specific task force on better implementation which, by mitigating the main risks and weakness identified, aim at increasing efficiency, effectiveness and impact of the cohesion policy. 74.(§ 171 - 2013/PAR/0325) The Parliament invites the Commission, in addition to the budget execution approach, to check the performance against objectives and better use the evaluations, as well as to support Member States and their Managing Authorities in maximising the quality of their evaluation reports. Commission's response: DG REGIO will put in place an external support during the second semester 2015 to review the evaluation plans, provide some methodological support for Member States and quality assess the findings of evaluations. The DG will also check the performance against objectives more systematically (see reply to 2013/PAR//0321 with the introduction of the performance framework and the fact that the performance will also now be discussed during the Monitoring committee meetings) Data from these reports as well as summaries from evaluations carried out at national level will then be synthesized each year for the report to the Council/Parliament (art. 53). The performance of the 2014-2020 programmes will be assessed annually. This will be largely based on the values of indicators reported by member States associated with the policy specific objectives and this will complement the evidence regarding policy performance gathered through the evaluation activities. In 2014, DG REGIO has defined and carried out a pilot exercise aimed at systematising the assessment of the programme performance for the 2007-2013 programmes. This will be reconducted in 2015. 75.(§ 172 - 2013/PAR/0326) The Parliament calls for a detailed analysis of the fund’s performance, on which Parliament’s political assessment of the ESF will hinge, to be submitted by the end of the year. Commission's response: For the 2007-2013 programming period: According to Article 67 of Regulation (EC) No 1083/2006, each year as of 2008 and until 2017, Member States/Managing Authorities have to submit an annual implementation report (or final report in 2017). In this context, the Commission and the Managing Authority examine the progress made in implementing the operational programme, the principal results achieved over the previous year, the financial implementation and other factors with a view to improving implementation.

For the 2014-2020 programming period: The Commission has introduced a set of common output and result indicators for the programming period 2014-2020 described in the ESF Regulation ( Regulation (EU) No 1304/2013 of 17 December 2013). This includes common indicators for outputs and results for all policy areas, including for the Youth Employment Initiative (YEI). All Managing Authorities will report yearly on those indicators by investment priority, allowing the Commission to monitor performance and results achieved by ESF notably in terms of participants' access to employment, self-employment, gaining qualifications or being on training. Further, targets to be reached by 2023 were set for each specific objective in the programmes, allowing comparing actual achievements with targets. Further, a performance framework was set up, where intermediary targets had to be set (the so-called milestones to be reported in 2019). Evaluation obligations for Managing Authorities have been strengthened, notably through the requirement to assess impacts for each priority, at least once during the programming period, and as regards the achievement of Europe 2020 targets. Managing Authorities have to report the findings of the evaluations carried out during the year in their annual implementation report to the Commission. The Commission itself will report on performance based on these elements through its yearly summary report starting from 2016, and in its strategic reports in 2017 and 2019. Unlike the annual implementation report, the Regulations do not set any reporting obligation for the Commission with regard to the data submitted by Member States in 2015 for the YEI. In spite of the absence of a legal obligation, the Commission will also report to the European Parliament before the end of the year on these data. The Commission is of the view that the presentation and discussion of this initial reporting in the European Parliament will be important to assess what further actions should be taken to ensure the YEI achieves its objective and on whether the YEI resources should be increased for 2016 to 2020. Moreover, and according to Article 16 of the Common Provisions Regulation the Commission will prepare a report on the outcome of the negotiations concerning the Partnership Agreements and the programmes, including the key issues for each Member States. This report will be submitted to the EP, Council, EESC and CoR simultaneously by 31 December 2015. This report will provide information on the main results to be achieved by the ESI Funds and will constitute a basis for future performance analyses. Employment and social affairs 76.(§ 176 - 2013/PAR/0327) The Parliament calls on the Commission to support Member States in implementing the Union funds and make sure that this money will be spent for its indicated purpose (youth employment). Commission's response: Helping Member States to tackle the high levels of youth unemployment is at the core of the Commission's priorities. The Commission has continuously been asking Member States to make good use of the EU funds, in particular the Youth Employment Initiative and the ESF, for the implementation of the Youth Guarantee. Member States should use the EU funding available to support good-quality measures for young people and introduce the necessary reforms in the labour market and education systems. The Commission has been strongly committed to help Member States to address any bottlenecks in the implementation of the YEI: The Commission has given priority to the adoption of all the operational programmes with a Youth Employment Initiative (YEI) component, supporting Member States in their design through technical guidance, with a number of actions, such as constant contact with national authorities, preparation of guidance notes, a helpdesk to set up apprenticeships and traineeships, and technical level events on the YEI. Policy guidance was also provided in the context of the Youth Guarantee and on how best to help implement it with YEI support. The adoption of a proposal to increase the initial pre-financing for the YEI (which has already been adopted by the European Parliament and the Council) is also a good example of this strong commitment. This measure has allowed Member States to overcome delays in the implementation of projects due to lack of funding by providing around 1 billion EUR of funding for the implementation of projects under the YEI. 77.(§ 176 - 2013/PAR/0328) The Parliament calls on the Commission to establish a system, for the 2014-2020 programming period which allows for reports on progress made in integrating disadvantaged people or groups of people (i.e. youth, elderly, long-term unemployed, Roma) into employment. Commission's response: The Commission has already started working in the direction indicated by the EP. For the period 2014-2020, the ESF Regulation (N° 1304/2013 of 17 December 2013) has set up common immediate result indicators for disadvantaged participants engaged in job searching, education/training, gaining a qualification, in employment, including self-employment, upon leaving (the ESF action), and long-term result indicators for disadvantaged participants in employment, including self-employment, six months after leaving (the ESF action). Common indicators are binding and will be reported by investment priority. Immediate results indicators will be reported by the Managing Authorities annually from 2016 to 2023. Long-term result indicators will be reported twice (2019 and 2025). 78.(§ 178 - 2013/PAR/0329) The Parliament calls on the Commission to support effective implementation of National Roma Integration Strategies at local and regional levels and to ensure that budget spending targets the objectives of the mainstream policies. Commission's response: The Common Provisions Regulation and the ESF Regulation set the framework to support the effective implementation of National Roma Integration Strategies. Member States which need to offer ESIF support to Roma, have to respect the related ex ante conditionality (requiring the development of a national Roma inclusion policy framework) or, if this conditionality cannot be met, to submit an action plan which has to be fulfilled not later than 31 December 2016. 17 action plans have been included in ESF Operational Programmes (2 BG, 1 CZ, 12 GR, 1 IT, 1 SK). Operational Programmes of Member States with Roma communities are targeting a mixture of explicit but non-exclusive investments addressing Roma in relation to employment, social inclusion and education. The managing authorities of the ESI Funds are setting up monitoring and evaluation committees with the participation of the Commission to ensure the efficient implementation of the chosen objectives and investments for the period 2014-2020. In that regard, the ESF Regulation contains one common output indicator that cover minorities including marginalised communities such as the Roma. Furthermore, the Commission supports a capacity-building programme (ROMACT) which helps local authorities to translate National Roma integration strategies at their level. Concretely ROMACT helps municipalities in designing and implementing effective Roma integration measures. It also assists them in submitting quality applications for support from EU and national funds. It should eventually lead to the provision of inclusive public services at the local level. 79.(§ 189 - 2013/PAR/0330) The Parliament points out that in 30 out of 79 cases, reservations remained in place for a year or longer, not considering recurrent reservations issued for the same programmes; calls on the Commission to provide information in order to assess if the weaknesses and the regions remained the same and to assess why national management authorities did not manage to correct the errors effectively. Commission's response: The Commission considers that the number of reservations and the fact that some of them are maintained for a year or longer confirms the well-functioning of the control procedures put in place in the Commission and MS. The preventive, detective and corrective measures implemented by the Commission on the basis of the multi-annual supervisory and control systems offer reasonable assurance that the EU budget is adequately protected from expenditure in breach of law and risks arising from deficiencies in MS' management and control systems giving rise, inter alia, to recurring reservations in the AAR. The number of reservations in the 2013 AARs is not due to a deterioration of the control systems or to a lack of accountability, but is the result of an enhanced and more targeted approach of the Commission, inter alia as a result of the ongoing strict policy of interruption and suspension of payments. Reservations are generally linked to action plans that are closely supervised by the Commission. 80.(§ 189 - 2013/PAR/0331) The Parliament asks the Commission, in this context, why these reservations (recurrent reservations in several Member States) occurred repeatedly and which measures the Commission has taken to remedy the situation.

Commission's response: See reply to recommendation 2013/PAR/0330. 81.(§ 193 - 2013/PAR/0332) The Parliament asks DG EMPL to include the table on national ACRs, provided in response to question 19 in the discharge questionnaire, in its annual activity report. Commission's response: DG EMPL has introduced in its 2014 Annual Activity Report the table on national ACRs provided in response to question 19 in the 2013 discharge questionnaire. Please refer to annex G entitled "cumulative residual risk" of the annexes of the 2014 Annual Activity Report (page 142-146) from DG EMPL. 82.(§ 194 - 2013/PAR/0333) The Parliament calls on the Commission to ensure that the national authorities responsible for managing the Structural Funds address the problem of personnel costs being charged for at higher rates for Union projects than for nationally funded projects. Commission's response: The Commission accepts this recommendation, but believes that these issues need to be addressed on a case-by-case basis. This point has already been raised in several audit reports issued by the Commission (DG Employment, Social Affairs and Inclusion). For certain Member States, where the problem was considered to be of a systemic nature, action plans have been requested addressing specifically this phenomenon. In the area of Regional and Urban Policy (DG REGIO) staff costs represent only a limited part of the investments. Staff costs occur mostly in investments in Research, Innovation and Development. In some of those cases, and when considered overpriced, the Commission reacted with financial corrections and agreements with the Member States on amendments of the elements to the charged to the Funds. 83.(§ 196 - 2013/PAR/0334) The Parliament reiterates its demand to further develop gender-specific indicators and data to allow assessments of the general budget of the Union from a gender perspective and to monitor efforts on gender budgeting. Commission's response: The set of common output and result indicators that are obligatory for reporting as annexed to the ESF regulation have to be broken down by gender. Furthermore, in the operational programmes where the dedicated ESF investment priority has been selected (AT, CZ, DE, ES, FI, GR, HU, IT, PL, PT, SK, UK), gender-specific indicators have been included. The implementation of these programmes will be assessed in light of these indicators. It will therefore still be possible to analyse who benefits from the ESF throughout the programming period. With the reinforced obligations in relation to equality between men and women (Article 7 ESF Regulation), Member States will have to report on how this principle was taken into account in the different programming phases and which specific targeted actions they implemented. This will give more visibility to gender issues and the Commission will monitor the implementation of the gender perspective and of specific targeted actions through the programming period. The set of common output indicators set out in the ERDF/CF regulation refer to interventions that do not have a gender-specific character and do not, thus, allow for further development. 84.(§ 199 - 2013/PAR/0335) The Parliament calls on the Commission to ensure, when approving the OPs for the new programming period, that Member States have considered all simplification possibilities. Commission's response: A number of events giving practical guidance on simplification have been organised in Member States since 2012 to optimize the use of SCOs in the current programming period. In order to gain a better idea of the current situation on the use of SCOs in the last period, and to understand Member States wishes for the new programming period, ESIF DGs launched in June 2015 a survey aimed at all ESIF managing authorities. The results of this survey are still arriving and will be processed by ESIF DGs in the Autumn.

An updated Guidance note for the Member States on SCOs was issued in October 2014 and has been translated in all EU languages early 2015. This was followed by guidance notes on both the use of delegated acts under Article 14(1) ESF and joint actions plans (JAPs) in June 2015. DG EMPL has organised a number of seminars aimed at offering practical guidance at assistance to Member States which wish to pursue SCOs, especially under Article 14(1) ESF. By the end of July, 7 of these will have taken place in 2015. DG EMPL also set-up an internal Task Force for SCOs and Joint Action Plans. The aim of the task force is to draw together internal expertise across directorates in ESIF DGs to promote the use of SCOs, notably under Article 14(1) ESF and JAP, and provide support to the MS in order to meet the objective of having 50% of ESF expenditure claimed under a Simplified Cost Option by 2017. An important novelty is also the ex-ante approval of simplified costs by DG EMPL using a delegated act under Article 14(1) of the ESF Regulation. This Article allows the Commission to adopt standard scales of unit costs and lump sums. This provides legal certainty for the Member State, and thus offers a major opportunity for simplification. Also, the scope of