The Financial Regulation applicable to the General Budget of the European Union states in article162.5 that as soon as the Court of Auditors (the Court) has transmitted its Annual Report, the Commission shall inform the Member States concerned immediately of the details of that report which relate to management of the funds for which they are responsible, under the rules applicable. Member States should reply to the Commission within sixty days and the Commission transmits a summary of the replies to the Court of Auditors, the European Parliament and the Council before 28 February of the following year.

Following publication on 6 November 2012 of the Court's Annual Report for the budgetary year 2011, the Commission duly informed Member States of details of the report. This information was presented in the form of a letter and three questionnaires (presented as annexes) which Member States were required to complete: Annex I was a questionnaire on the paragraphs in the report referring to individual Member States; Annex II was a questionnaire on the audit findings which refer to each Member State[1] and Annex III was a questionnaire on general findings related to the policies and programmes under shared management.

This Staff Working Document (SWD), which comprises the Member States' replies to Annex I and Annex III[2], accompanies the report from the Commission "Member States' replies to the Court of auditors' 2011 annual report".

ANNEX I. Paragraphs in the 2011 Annual Report and for each of the 2011 findings made by the Court referring to each particular country

Paragraph || Observation in the 2011 Annual Report || Member State reply

CHAPTER 1 – The Statement of Assurance and supporting information

Table 1.4 || Reservations issued by Commission's directorates-general for 2011 || Germany: The Managing Authority for Berlin/Brandenburg (ERDF) provided the following remarks: On the basis of an analysis of the grounds for the errors flagged up in the Annual Control Report, an Action Plan to improve the management and control system was drawn up and implemented. Further checks were carried out in respect of irregularities in the award procedures and training was given on public procurement law and guidelines drawn up. For the other reservations, please refer to the remarks in Annex II. Austria: No. Belgium: Budget : En effet, la Cour des comptes européenne a des doutes quant à l’exactitude des montants RPT transférés vers le budget de l’UE. L’administration générale belge des Douanes et Accises (AGDA) a demandé le remboursement de 126 MIO EUR, c’est-à-dire 75% d’un total de 169 MOI EUR enregistrés erronément comme RPT dans la comptabilité de l’AGDA belge au cours de la période 2008-2010. La DG Budget (Commission européenne) a fait dépendre le remboursement d’un audit de système comptable par un auditeur indépendant. Cet auditeur doit également certifier le montant redemandé par la Belgique afin d’autoriser le remboursement de l’UE. L’adjudication pour la passation du marché avec un auditeur est terminée. La mission sera lancée début janvier 2013. On attend la certification du montant à rembourser par l’UE vers mars 2013. FSE : l’Agence FSE n’a pas fait l’objet d’un contrôle de la CCEur en 2011, donc aucune réserve. Bureau d’Intervention et de Restitution Belge : néant Autorité de Gestion PO FEDER (Région Bruxelles – Capitale) : néant Autorité d’audit (Région Bruxelles- Capitale) : néant SPF Fin. Affaires fiscales : néant Autorité d’audit (Région wallonne – Communauté française) : néant PO FSE Compétitivité régionale et Emploi de la région de Bruxelles-Capitale 2007-2013 : néant ESF Vlaanderen (MA/CA/AA) : néant EFRO Vlaanderen (MA/CA/AA): néant ELFPO: néant Communauté germanophone de Belgique: pas concerné par le rapport de la Cour des comptes européenne Autorité d’audit du programme opérationnel développé dans le cadre du fonds social européen pour la période de programmation 2007-2013 : pas concerné par le rapport de la Cour des comptes européenne Hungary: Hungary considers an effective and efficient financial management in connection with programmes supported by the Structural and Cohesion Funds to be of particular importance. For that reason, we have carried out continuous checks since 2007. In recent times, we have achieved significant progress in the supervision of public procurement. Since 8 December 2010, a centralised public procurement audit system has been in operation at the National Development Agency. A specialised unit, the Public Procurement Supervisory Department was created with the primary responsibility of performing mandatory ex-ante and ex-post public procurement audits, drafting guidelines and providing expert supervision of the first-level controls carried out by intermediary organisations in the case of public procurements with a lower contract value. The competences required to carry out the above tasks are laid down in national legislation. If a beneficiary wishes to claim support from the Structural and Cohesion Funds in order to realise a project, it may not launch a public procurement procedure and may not conclude or modify a contract without the Department’s consent. Statistical data concerning the checks completed so far clearly attest to the decisive role the Department plays in ensuring legal compliance in public procurement. The National Development Agency carried out a concentration check in order to detect potential anomalies arising during the awarding of contracts and to prevent a distortion of competition in connection with Hungarian public procurement procedures. The results of the check prove that the degree of consolidated concentration is not excessive. However in order to maintain this level, we will regularly analyse such data. Since the system has been improved significantly and, according to the checks carried out to date, its concerns have proved unfounded, we sincerely hope that the European Commission will soon lift Hungary’s unwarranted reservation status. Ireland: The Commission’s reservations derive from preliminary findings based on an initial examination of closure documentation submitted. A contested procedure is currently underway. Ireland is confident of the robustness of its financial management and control systems and will vigorously defend them in the ongoing contested procedure. Furthermore, no such issues have been identified during the 2007-2013 round despite extensive checks and audits. Italy: NOT NECESSARY Lithuania: Reservations of DG EMPL and REGIO presented in the table are related to the shortcomings identified in the Public Audit Report on operational programmes implementing the 2007-2013 strategy of Lithuania on the use of the EU structural support to achieve the convergence objective, the functioning of the management and control system (hereinafter referred to as the MCS) and the expenditure declared to the European Commission in 2010 (the annual control report under Article 62 of Regulation (EC) No. 1083/2006). The expenditure mentioned is essentially justified by the error rate identified by the aforementioned DGs of the EC (which, as estimated by the EC services, would be 4.36%, and the expected error rate given in the annual control report is 1.93%). We would like to point out that the Lithuanian audit authority carries out continuous monitoring of the implementation of recommendations to the MCS institutions given in the annual control report in accordance with the measures and within the deadlines for implementing the recommendations by the MCS institutions audited. At present 91% of the recommendations made in 2010 have been implemented. Netherlands: Explanatory Note: in May 2012, the European Commission launched the procedure to suspend payments to the ‘North' and 'South' programmes (two of the four management authorities) on a temporary basis. This was because the auditing authority (AA) had noticed that their management and control systems needed improving and that there had been too high a percentage of errors two years. The AA was supposed (in consultation with the management and certifying authority) to provide information to the European Commission (EC) regarding three questions within two months. The AA sent the letters to the EC in June. Subsequently, in August, the EC then launched the more cumbersome procedure for suspending payments to North and South. This was because it had been concluded that there were serious weaknesses in the management and control systems of these programmes as the AA had found an error rate above the standard 2% for 2010. This was the conclusion for almost half of all the ERDF programmes in Europe (130 out of the 317). Within two months, the EC was informed of the approach taken in certain cases. On this basis, the EC decided at the end of October to stop the suspension procedure. Poland: 1. Measure 4.5 of the OPIE Reservation of the European Commission pertained to the effective functioning of the management and control system in Measure 4.5. of the Operational Programme Innovative Economy (OPIE) in the process of selecting projects for funding. The functioning of the management and control system in Measure 4.5. of the OPIE has been verified by the Audit Authority for the European Commission. The audit report was submitted to the European Commission on 27 June 2012. Pursuant to the report, the management and control system for the above measure was evaluated in the category 1 (the system works well, only minor improvements are required). The audit of the MA of OPIE in the Implementing Authority for the aforementioned measure, conducted on 29 May - 1 June 2012, confirmed that the procedures in place in the Implementing Authority ensure the compliance of the selection and implementation of funded projects with Community regulations concerning the incentive effect, the risk of reallocation of funds, innovation and that they ensure the efficiency of public funds spending. As a result of remedial actions undertaken, the European Commission has resumed the certification of expenditures for projects under Measure 4.5. of the OPIE. 2. 7th axis of the OPIE Reservation of the European Commission pertained to the effective functioning of the management and control system in the 7th priority axis of the OPIE. Remedial actions were undertaken at the turn of 2012 - immediately upon the receipt from the Supreme Chamber of Control and from the Central Anti-Corruption Bureau of information on the irregularities in the implementation of projects funded under the 7th priority axis of the OPIE. Information on the implemented remedial actions was submitted to the European Commission, inter alia, in letters dated 10 and 18 May 2012. On 31 May the Remedial Action Plan was submitted to the European Commission (a document including detailed information on the corrective measures applied in order to ensure proper implementation of projects under the 7th priority axis of the OPIE). The most important remedial actions implemented since the beginning of 2012 included: withdrawing from the certification of expenditures suspected of irregularities, subjecting the projects to increased monitoring, inter alia by closer linking of the procedures for settling expenditure with the verification of the material progress of projects, conducting in-depth trainings on public procurement and anti-corruption procedures for project beneficiaries and employees of institutions involved in the implementation of projects under the 7th priority axis of the OPIE. Due to the nature of remedial actions implemented - in particular, the increased project monitoring carried out on an ongoing basis - the measures undertaken should be treated as actions in progress. As a result of remedial actions undertaken, the European Commission has resumed the certification of expenditures for projects under the 7th priority axis of the OPIE. Portugal: As of July 2011 the national authorities implemented the second stage of the LPIS-GIS Action Plan. The measure involved all the plots of land declared in connection with the aid application, of which there were about 1 800 000, and its main objective was to update the land occupation register and correct the boundaries of the reference plots. The audit carried out in September 2012 by DG AGRI confirmed the improvements made to the system, noting that the Parcel Map action plan had been carried out in its entirety, with the exception of measures 2011.05 (establishment of the farmer's block) and 2011.9 (communication to farmers). Implementation of measure 5 was postponed for reasons to do with technical conditions; it was the subject of a specific action plan presented to DG AGRI on 6 November, which is supposed to be completed by February 2013. Measure 9 is also to be completed by this date, as it is dependent on the completion of measure 5. Specifically as regards the section of Table 1.4 supplied by DG AGRI (Reservation 3 – Deficiencies in the supervision and control of certified organic products), we would inform you that there is no connection between this point and the 2011 Activity Report. These issues are set out in Special Report No 9 of 2012, which deals with the auditing of the system of checks on the production, processing, distribution and importing of organic products and which was published in May 2012, although the issues are presented in a general way that applies to all the Member States. Czech Republic: 1. As regards audit authorities: the report refers to a selected sample of 7 AAs (out of 112) whose work was assessed by the ECA. The negative assessment of the Czech Republic is based on an assessment of the situation in 2011, including a system which had originally been set up in 2007 (and subsequently approved both by the EC and the audit firm PricewaterhouseCoopers). At the time of the ECA audit, work had already been commenced to change this system, following an agreement with the EC. In their opinions, the ECA auditors even took into account assessments made of certain selected aspects from 2010 (Annual Control Reports). Including these into the Annual Report for 2011 is not systemically correct. 2. The differences in the results of the assessments performed by the Czech auditors and the ECA auditors were due, amongst other things, to the fact that until 2011 the Czech auditors assessed individual projects with consideration to the decision-making practice of the Office for the Protection of Competition (OPC) and the Czech courts, in order to ensure a specific degree of legal certainty for grant beneficiaries – this led to a discrepancy between the findings of the ECA and the AA, which thus resulted in a negative assessment of the Czech audit. In no case did this involve any deliberate modification of the results of the audits (and indeed the ECA’s Annual Report does not allege any such thing), and the work of the auditors was not therefore of poor quality. For example: a. During the performance of their verifications in 2011, the EC and the ECA stated that the decisive issue is the practice of institutions at EU level, not national level - i.e. in particular the OPC and the Financial Administration of the Czech Republic (the Commission’s Strategy Paper relating to the new programming period 2014-2020 is very critical in regard to the decision-making practice of the OPC in particular). Differences in aspects of evaluation existed, for example, in relation to contractual penalties, which Czech legislation did not prohibit at that time (now prohibited), although in some of the cases which the ECA criticised these did not have an impact on the choice of the best tender – the tenderer with the lowest price won. A further case was the assessment of eligibility criteria relating to a required level of turnover (nowhere specified) and changes to projects during their implementation. b. For this reason, an agreement has already been made with the EC that starting from mid-2012 the Audit Authority will assess individual cases in accordance with EU practice, regardless of national practice. This may, however, result in an increase in the number of court cases brought against the Czech Republic by grant beneficiaries (or, alternatively, if a finding with a financial impact is made according to EU practice it will not always be possible to demand the repayment of the grant by the beneficiaries). 3. The Czech Republic is aware of the seriousness of this situation and wants to resolve these problems. At the end of last year it therefore began intensive discussions with the EC regarding steps aimed at improving the situation. The outcome was an “Action Plan”, whose implementation was approved by the EC in June, and based on which the EC lifted the blocks on funding for some operational programmes. 4. In addition to the main problems associated with management control at grantors (the managing authorities of operational programmes), the tendering of public contracts and speeding up the process for the treatment of irregularities, in the context of auditing the Action Plan also focuses on issues including, for example: a. increasing the independence of the authorised audit bodies currently existing in the management structures of the relevant ministries and regional councils b. the overall quality of auditors’ work, and methodological assistance c. as part of the measures under the Action Plan, commencing from 1.1.2013 audit activities will be centralised (auditors will be relocated from the managing authorities of the relevant ministries to the MF as required by the EC), thus ensuring greater independence and improving the quality of their work. 5. Most of the ACRs of the Audit Authority contained material findings in relation to the management and control systems of operational programmes. For these reasons, the Audit Authority could not provide the EC with assurance of the proper functioning of the operational programmes, and in its annual opinion on the legality and regularity of expenditures it issued a qualified opinion for most of the operational programmes (10 out of 19 OPs). In the case of some problematic operational programmes, financial corrections have already been applied based on the findings of the auditors of the AA. 6. During audits there are inherent limitations on the detection of serious economic crime. An auditor cannot, for example, make use of the means available to law enforcement authorities (audio surveillance, IT and other forensic techniques), and frequently does not have access to information from investigation files. The Audit Authority works together with all the law enforcement and criminal justice bodies (the Czech Police, the Public Prosecutor’s Office and the courts). The use of certain documents, such as the report from the Security Information Service (SIS), is also problematic, because the information designated for the public in the SIS report is only of a general nature, and the potential for it to be used in the context of a Structural Funds audit is minimal. 7. In line with the audit strategies of the Audit Authority approved by the EC for individual OPs, audits were carried out which focused on reliance on the work of authorised audit bodies, and material deficiencies were found. 8. The errors found in public procurement and the evaluation of project applications which are mentioned in the ECA report are also frequent findings of the auditors of the Audit Authority. 9. In recent years, there have been dramatic developments in particular in the areas of public procurement and the decision-making practice of the OPC and the Czech courts, and national institutions are now adopting a stricter approach. The final reports from the EC and from the ECA (the 2010 DAS) are delivered very late, and inevitably this leads to delays in the application of the latest practices of the EC/ECA by the Audit Authority. 10. It must be pointed out that the ECA report is not based on a representative sample of projects from all the operational programmes in the Czech Republic (but only OP Transport and ROP Southeast). The ECA auditors audited all of the 8, respectively 4, projects of each of these operational programmes. The Audit Authority annually examines 650 projects from all the operational programmes. The conclusions drawn by the ECA auditors on the basis of this negligible sample are not, therefore, conclusive (especially from a statistical perspective) as regards the system of financial control and audit used for all the operational programmes in the Czech Republic. Romania: In 2011, following the identification of a series of weaknesses in the management and control system for the Sectoral Operational Programme Human Resources Development, DG Employment commissioned the MA SOP HRD to draw-up an Action Plan (RoadMap) for the Managing Authority for Sectoral Operational Programme Human Resources Development to enhance SOP HRD absorption capacity. The RoadMap is based on a proper assessment of the needs and problems encountered in the implementation of projects financed by SOP HRD. The plan is divided into 3 lines of action, namely: increasing direct support provided to beneficiaries, reinforcing administrative capacity, and improving the activity of the entities involved in implementing SOP HRD. As required by DG Employment, MA SOP HRD reports quarterly the implementation status of RoadMap measures. (ACIS) United Kingdom: Scottish Government Audit Authority (SGAA): We note that the four programmes – Lowlands and Uplands Scotland (LUPS), the European Social Fund (ESF), the European Regional Development Fund (ERDF) and the Highlands and Islands (H&I) ESF and ERDF – were interrupted in early 2011 but have subsequently been lifted on 25 July 2011. Slovakia: Slovak Ministry of Education, Science, Research and Sport: Measures concern the shortcomings defined in the Final Commission Audit Report for OP Education (Commission Report No A-Rep 2010-1222) dated 11.5.2012. DG HOME – Statement on behalf of Slovak Ministry of Interior: Point 1 – The Security and Protection of Freedoms programme is managed directly by the European Commission; no shortcomings were found in the projects obtained from the programme by the Slovak Ministry of the Interior. Point 2 – SIS II project Preparations for the launch of the 2nd generation Schengen Information System (SIS II) are ongoing. Testing is currently taking place of the functionalities and it is due to be completed by the end of January 2012 – Slovakia will complete testing on 5.1.2012, to be followed by data migration, with launch of the whole system expected for the 1st quarter of 2013. DG MARE – Statement on behalf of Slovak Ministry of Agriculture and Rural Development: Measures adopted on an action plan to remedy shortcomings found in the management and control system of the EFF for Slovakia were sent in a letter from the Slovak Ministry of Finance dated 14.08.2012 Slovak Ministry of Transport, Construction and Regional Development - RO OP Transport With reference to the findings of the Auditors’ Report on Government Audit No 5/2010 (A336, K2250) the MA for OP Transport was sent a Warning Letter (Letter from the Commission’s DG REGIO No REF(2011) 850395 dated 4.8.2011) concerning the suspension of payments for OP Transport from the Commission. The reply of the MA for OP Transport (Remedial measures adopted by the MA for OP Transport) to the Warning Letter was sent to the Commission as letter No 06140/2011/SRP/z.58728 dated 09.11.2011. With reference to the preceding list from the MA for OP Transport a further letter No 15398/2012/SOPD-32926 dated 11.06.2012 was sent to the Commission ‘s DG REGIO concerning further subsequently implemented procedures from the MA for OP Transport as part of preventive and remedial measures for the period from 11.11.2011 to 30.05.2012. In its letter No REF Ares (2012) 802048 dated 03.07.2012, the Commission ‘s DG REGIO sent the Commission’s final reaction to the Warning Letter and also advised on the unblocking of payment for the MA of the OP Transport (except for Slovak Railways projects). On the matter of suspended payments for Slovak Railways projects, the MA for OP Transport sent the Commission letter No 04305/2012/SOPD-36885 dated 25.06.2012 about the state of investigations into suspicions of corruption in railway infrastructure projects. In its letter No Ares (2012)1117883 dated 25.09.2012 the Commission sent its reply to the explanatory letter of the MA of OP Transport dated 25.06.2012 Payments are still suspended at Commission reimbursement level, until the MA for OP Transport provides the Commission with satisfactory explanations on the issue of suspicions of corruption and conflict of interest in Slovak Railways projects. Sweden: The Court of Auditors makes no remarks giving rise to comments from Sweden

CHAPTER 2 – REVENUE

Table 2.1 || Revenue – Key Information 2011 || Netherlands: not applicable United Kingdom: Her Majesty’s Treasury (HMT): This is just a factual table on revenue and requires no response. Sweden: The Court of Auditors makes no remarks giving rise to comments from Sweden

2.5 || The United Kingdom is granted a correction in respect of budgetary imbalances ('the UK correction') which involves a reduction in its payments of GNI-based own resources3. In addition, Germany, the Netherlands, Austria and Sweden benefit from a reduced call rate for VAT, and the Netherlands and Sweden have a gross reduction in their annual GNI contribution for the period 2007-20134. The principal risk is that the Commission makes an error in these calculations, notably in respect of the complex UK correction calculations. 3 Article 4 of Decision 2007/436/EC. This reduction was approximately 4 billion euro in 2011. The 52 million euro referred to in Table 2.1 represents the effect of exchange rate differences. 4 Articles 2(4) and 2(5) of Decision 2007/436/EC. The 1 million euro reduction in the GNI-based contribution in Table 2.1 is the effect of exchange rate differences. || Germany None, only implementation of the Own Resources Decision Austria: According to the text under 2.5, the main risk is "that the Commission makes mistakes in these calculations". Thus, Austria is not affected. Netherlands: not applicable United Kingdom HMT: This is just a factual statement which includes reference to the fact that the UK receives an abatement and requires no response. Sweden: The Court of Auditors makes no remarks giving rise to comments from Sweden

2.8 || Annex 1.1, Part 2, of chapter 1 describes the Court's overall audit approach and methodology. For the audit of revenue, the following specific issues should be noted: (a) The audit involved examination at the Commission level of a sample of 55 recovery orders5 covering all types of revenue (see Annex 2.1). (b) The assessment of systems covered: i) the systems for TOR, VAT-based and GNI-based own resources; ii) the Commission systems underlying the calculation of the UK correction (including an examination of the calculation of the definitive amount in respect of 2007)6; iii) the Commission's management of fines and penalties; iv) the Commission's management representations, in particular the Annual Activity Report of Directorate-General for Budget (DG BUDG). 5 A recovery order is the procedure by which the Authorising Officer (AO) registers an entitlement by the Commission in order to retrieve the amount which is due. 6 See paragraph 2.16 of the 2010 Annual Report. || United Kingdom: HMT: This simply states that the Commission undertook an examination of a representative sample of recovery orders and again requires no response.

2.10 || The Court carried out an assessment of supervisory and control systems in Germany, Spain and France, which together contribute more than one third of the total of TOR. It reviewed their accounting systems and examined the flow of TOR from establishment until declaration to the Commission in order to obtain reasonable assurance that the amounts recorded were accurate and complete. The audit included testing key controls relating to the application of preferential duty rates in France, Local Clearance Procedures (LCP) in Germany and Spain, and warehousing and the treatment of freight and insurance costs in Germany, Spain and France. || Germany: None, only a description of the control activities of the Court France: La Cour affirme avoir mené des « tests de contrôles clés relatifs à l'application de taux de droit préférentiels (...) et au traitement des coûts du fret et de l'assurance ». Cette affirmation apparaît discutable. Tout d'abord, les tests menés par la Cour (sélection de 31 déclarations d'importation sur le thème de l'origine et de 50 déclarations sur le thème du traitement du coût du fret et d’assurance), non inscrits sur la lettre d’annonce, ont semblé un élément secondaire par comparaison aux autres thèmes de cette mission inscrits, quant à eux, sur la lettre d’annonce et le temps consacré à l'examen de cet échantillon (une demi-journée), couplé à l'absence de demandes de la part de la Cour au sujet de la réglementation et de la politique des contrôles, en amont ou lors de la mission, conduisent les autorités françaises à nuancer cette affirmation. A cet égard, en matière de contrôle de la valeur, la méthode de travail des auditeurs s'est déroulée en deux phases sur une sélection non aléatoire, à savoir les déclarations portant les incoterms EXW, FOB ou FCA pour lesquelles la valeur facturée est inférieure à la valeur en douane (50 déclarations sous le seul et même régime de l'entrepôt) puis identique à la valeur en douane (6331 déclarations soit 706281 articles tous régimes confondus). La seconde phase s'est déroulée 18 jours après la clôture de la mission des auditeurs en France. De plus, sur le fond, il est admis que l'essentiel du contrôle de l'origine préférentielle des marchandises, qui conditionne l'application du taux de droits préférentiels, repose sur la coopération administrative. Cette coopération implique que le pays importateur (ici la France) sollicite, a posteriori et non au moment où l'opérateur réalise les formalités de dédouanement, la communication des documents justificatifs de l'origine préférentielle visés par les autorités douanières du pays d'exportation, et les adresse au pays d'exportation, seul compétent pour apprécier l'authenticité du document et la régularité de son émission, comme le confirme une jurisprudence constante de la CJUE. Pour les autres sujets, cf point 2.20 infra.

2.11 || In addition, the Court reconciled the seven TOR recovery orders included in the sample referred to in paragraph 2.8(a) with the corresponding monthly statement from the Member States concerned7. 7 Belgium, Germany, Spain and the Netherlands. || Germany: None Belgium: Budget : N/A Pas d’erreur pour les sept ordres de recouvrement. FSE : l’Agence n’est pas concernée par les droits de douane perçus à l’importation (RPT) Bureau d’Intervention et de Restitution Belge : néant Autorité de Gestion PO FEDER (Région Bruxelles – Capitale) : néant Autorité d’audit (Région Bruxelles- Capitale) : néant SPF Fin. Affaires fiscales : néant Autorité d’audit (Région wallonne – Communauté française) : néant PO FSE Compétitivité régionale et Emploi de la région de Bruxelles-Capitale 2007-2013 : néant ESF Vlaanderen (MA/CA/AA) : néant EFRO Vlaanderen (MA/CA/AA): néant ELFPO: néant Communauté germanophone de Belgique: pas concerné par le rapport de la Cour des comptes européenne Autorité d’audit du programme opérationnel développé dans le cadre du fonds social européen pour la période de programmation 2007-2013 : pas concerné par le rapport de la Cour des comptes européenne Netherlands: not applicable

2.20 || In the Member States visited, the Court's audit (see paragraph 2.10) revealed deficiencies in national customs supervision in: a) the application of preferential duty rates10; b) the control and ex-post audit of Local Clearance Procedures (LCP)11; c) the ex-post audit of customs warehousing12; d) the risk analysis applied at import stage13; e) the treatment of freight and insurance costs14. Partially effective national customs supervision increases the risk that incorrect amounts of TOR are collected. 10 France 11 Germany and Spain. In addition the Commission's own inspections of LCP revealed system weaknesses in 11 of the 21 Member States it inspected in 2011. 12 Spain and France. 13 Germany and France. 14 Spain and France. || Germany: Germany has issued a blanket rejection of the Court’s conclusion that the risk analysis system, the local clearance procedure, the customs warehousing procedure and the customs value control procedure present significant weaknesses which cast doubt on the completeness of the collection of traditional own resources. Spain: With regard to the local clearance procedure, measures have been adopted consisting of drawing up of two Internal Circulars (NS 19/2011 of 30 December and NS 06/2012 of 21 September from the Director of the Customs and Excise Department) and a ministerial order that is pending approval. Inspection of warehouses: the establishments inspection plan will be published at the end of 2012. France: Selon la Cour « [d]ans les États membres visités, l'audit de la Cour [...] a fait apparaître des insuffisances affectant la surveillance douanière au niveau national, en ce qui concerne [(a)] l'application de taux de droit préférentiels (...) et [(e)] au traitement des coûts du fret et de l'assurance ». S’agissant du point (a), le fondement réglementaire initialement cité par la Cour était erroné, non seulement parce qu'il ne visait pas une disposition applicable dans le cadre du SPG, mais également parce qu'il faisait mention de la règle traditionnelle de « transport direct ». La Cour a rectifié ses observations en admettant l'application du nouvel article 74 des DAC relatif à la présomption de non manipulation, qui remplace la règle du transport direct depuis le 1er janvier 2011 : « Conformément à l'article 74-2 des DAC pour le Système de préférences généralisées (SPG), les autorités douanières peuvent demander au déclarant de produire des preuves du respect des dispositions du point 1 de l'article 74 qui peuvent être apportées par tout moyen, y compris des documents de transport contractuels tels que des connaissements, ou des preuves factuelles ou concrètes basées sur le marquage ou la numérotation des emballages, ou toute preuve liée aux marchandises elles-mêmes. Une telle preuve (ou une preuve de non manipulation en vertu de l'article 74-1 des DAC) n'ayant été produite, bien que demandée préalablement par la Cour, l'observation est maintenue. » En revanche, la Cour n'a pas tiré les conclusions appropriées de cette correction réglementaire. En effet, l'article 74-2 dispose que « le respect des dispositions [de la non-manipulation] est présumé, à moins que les autorités douanières n'aient des raisons de croire le contraire [...] ». Par conséquent, la faculté dont disposent les autorités douanières de solliciter la preuve de la non manipulation est exercée uniquement dans l'hypothèse où ces autorités ont un doute sur ce point. Le déclarant n'est pas tenu de présenter cette preuve de façon systématique. Dans la mesure où la non manipulation est présumée et qu'une preuve formelle n'est demandée que si les autorités ont un doute sur ce point, l'absence de cette preuve à l'appui des deux dossiers identifiés par la Cour ne permet pas de conclure au non respect de l'article 74-1 des DAC. Il est réglementairement inexact d'affirmer que le bénéfice de la préférence tarifaire doit être refusé pour ce motif. Les autorités françaises contestent la conclusion de la Cour sur ce point et maintiennent donc que l'application de droits préférentiels pour les deux opérations d'importation en cause n'est pas remise en cause. S’agissant du point (c), selon la Cour, les opérateurs devraient faire l’objet d’un audit approfondi au moins une fois tous les trois ans et la fréquence des audits en France fait planer un doute concernant l’efficacité des contrôles mis en œuvre pour s’assurer de l’exhaustivité de la perception des RPT dans le cas du régime de l’entrepôt douanier. Sur les cinquante entrepôts douaniers sélectionnés par la Cour, seuls deux n'ont jamais été audités par les services douaniers, ce qui représente une part très faible. Sur ces mêmes cinquante entrepôts douaniers sélectionnés, seuls huit n'ont pas été contrôlés dans un intervalle de trois ans, ce qui est également assez faible et n'est, contrairement à ce qu'avance la Cour, pas forcément significatif en soi, dans la mesure où l'efficacité des contrôles en matière de dédouanement ne s'examine pas à l'aune de leur fréquence. Le jugement de la Cour sur les justificatifs fournis par la direction régionale de tutelle en matière de contrôles semble excessif, la plupart des directions douanières ayant pu justifier des contrôles effectués (dans le cadre de l'autorisation d'entrepôt elle-même ou de la procédure de dédouanement utilisée, ou encore d'audits réalisés sur un aspect annexe). La Cour ayant pourtant refusé de prendre en considération des pièces du dossier qui attestaient de la réalité des contrôles, la DGDDI s'interroge sur la teneur des informations qui selon elle doivent impérativement apparaître dans les comptes-rendus des contrôles réalisés. Dans la dernière version de la Constatation préliminaire n° 1005 du relevé de la Cour relatif à la mission d'audit effectuée en France en octobre 2011 dans le cadre de la DAS 2011, la DGDDI demande aux auditeurs de préciser la teneur des informations qui selon eux doivent apparaître dans les comptes-rendus des contrôles réalisés par la douane. Mais il est indiqué sur le même document que la Cour a pris en compte les éléments apportés a posteriori par les directions régionales et a abandonné toute critique en la matière. L'informatisation début 2013 du processus de délivrance des autorisations d'entrepôt douanier par le biais de la télé-procédure SOPRANO va en tout état de cause conduire les services douaniers à procéder à un réexamen des autorisations d'entrepôt douanier déjà délivrées (avant intégration dans le système informatique), ce qui sera de nature à améliorer leur intégration dans la politique des contrôles mise en place au sein des directions régionales. S’agissant du point (d), selon la Cour, le système de dédouanement ne comporte aucun élément aléatoire pour sélectionner les déclarations à soumettre aux contrôles et, d'après des données synthétiques relatives à la réalisation d’une analyse de risque et de contrôles dans la région de Bretagne pour la période allant de février à août 2011, seuls 9,2 % des déclarations jugées à risque ont ensuite fait l’objet d’un contrôle correspondant. La sélection aléatoire automatisée a été implantée dans le système de dédouanement en ligne par traitement automatisé Delt@ (-C, -D et –X) le 8 décembre 2011. Les déclarations sont sélectionnées de manière aléatoire par le système parmi les déclarations validées et orientées en circuit vert. Le taux de sélection est de 0,02% à l'importation et à l'exportation. Ce point ne nécessite donc plus que des mesures soient prises par la DGDDI. S'agissant de la constatation que les déclarations en douane ciblées par l'analyse de risque automatisée ne font pas suffisamment l'objet d'un contrôle douanier, en juin 2012, la DGDDI a remédié à cela en modifiant les circuits de contrôle des déclarations en douane. L'objectif recherché est d'améliorer le ciblage en distinguant les risques réels des risques potentiels, tout en accélérant le dédouanement des marchandises correctement déclarées a priori. Cette modification comporte : la création d'un circuit noir Afin de bloquer les marchandises dont l'exportation ou l'importation est prohibée ou restreinte, et de distinguer les risques réels des risques potentiels, il est apparu nécessaire de créer un circuit noir avec timer illimité (profil bloquant) pour les DELT@ (DELT@-D inclus) l'allongement du timer pour les déclarations en circuit rouge Afin d'éviter que les déclarations ne soient mises en contrôle abusivement dans le seul but d'éviter leur libération et non pour être contrôlées, la possibilité d'allonger le timer rouge pour une déclaration donnée est proposée à l'agent. Ce dernier dispose ainsi d'un délai de réflexion supplémentaire avant de décider ou non de la mise en contrôle. Afin de ne pas nuire à la fluidité du trafic, les agents ont la possibilité d'allonger la durée du timer pour les déclarations en circuit rouge uniquement, selon les modalités suivantes : – le timer ne doit être prolongé qu'une seule fois d'un temps égal à la durée initiale du timer. La durée du timer peut donc être doublée. L'agent chargé de la veille écran a la possibilité de l'écourter en contrôlant la déclaration ou en la libérant ; – l'allongement du timer ne doit intervenir qu'une fois la déclaration ouverte ; – l'allongement du timer ne doit pas être « suspensif », c'est-à-dire qu'il ne doit pas tenir compte des horaires de fermeture du bureau. Par exemple, si la durée du timer est de 15 minutes et que l'agent demande l'allongement du timer à 11h55 (alors que le bureau ferme entre 12h00 et 14h00), la fin du timer doit intervenir à 12h10 et non à 14h10 la libération immédiate 24h/24 des déclarations en circuit vert L'agent chargé de la veille écran n'a plus accès aux déclarations orientées en circuit vert qu'en mode consultation. Cela rend impossible toute action de surveillance ou de mise à l'état « contrôle » de ces déclarations. Les autorités françaises considèrent donc qu'elles ont pris les mesures de correction nécessaires. S’agissant du point (e), les anomalies retenues sur les 15 déclarations en douane sur les 50 déclarations d'importation sous le seul régime de l'entrepôt montrent une mauvaise utilisation des incoterms qui, pour 5 déclarations, est sans incidence sur les ressources propres traditionnelles. En effet, il est démontré que : - pour deux déclarations, l'opérateur déclare un prix CIF avec un incoterm FOB, - pour trois déclarations la valeur en douane est correctement déclarée. Les autorités françaises considèrent également que la demande portant sur 6 331 déclarations supplémentaires, communiquée après la clôture de la mission, ne relève pas, d'une part, du périmètre initial de la mission et, d'autre part, que les déclarations portant sur des valeurs facturées égales aux valeurs en douane ne sont pas nécessairement des anomalies, comme démontré dans l'échantillon des 50 déclarations contrôlées par les auditeurs.

2.21 || In its 2010 Annual Report the Court reported that, for one A statement relating to a Member State15, it was not possible to reconcile the amount of TOR declared with the underlying accounting documents. In DG BUDG's Annual Activity Report for 2011 there is now a reservation on the reliability of the accounting data of this Member State . 15 Paragraph 2.15: Belgium. || Belgium: Budget : voir ci-dessus Chapitre 1, Tableau 1.4. FSE : l’Agence n’est pas concernée par les droits de douane perçus à l’importation (RPT) Bureau d’Intervention et de Restitution Belge : néant Autorité de Gestion PO FEDER (Région Bruxelles – Capitale) : néant Autorité d’audit (Région Bruxelles- Capitale) : néant SPF Fin. Affaires fiscales : néant Autorité d’audit (Région wallonne – Communauté française) : néant PO FSE Compétitivité régionale et Emploi de la région de Bruxelles-Capitale 2007-2013 : néant ESF Vlaanderen (MA/CA/AA) : néant EFRO Vlaanderen (MA/CA/AA): néant ELFPO: néant Communauté germanophone de Belgique: pas concerné par le rapport de la Cour des comptes européenne Autorité d’audit du programme opérationnel développé dans le cadre du fonds social européen pour la période de programmation 2007-2013 : pas concerné par le rapport de la Cour des comptes européenne

Table 2.2 || VAT reservations as at 31 December 2011 || Austria: On account of the audit in autumn 2011, it is not possible to establish conclusively the number of reservations as at 31.12.2011. There was an intensive bilateral exchange in the period following the control of VAT own resources, and the latest situation with regard to the number of reservations upheld will be confirmed only in the comprehensive audit report which is expected at the end of 2012. As at November 2012 three reservations in connection with Austria can be confirmed in the following areas: WAR; Infringement proceedings No 2007/2453 – application of the Sixth VAT Directive (VAT exemptions); Infringement proceedings No 2010/2055 – application of the Sixth VAT Directive (VAT exemption for postal services). The above-mentioned reservations come from the draft audit report and reflect the current situation (as at 20.11.2012). Belgium: Budget : la réponse à cette remarque sera transmise sous peu. SPF Fin. Affaires fiscales : La mesure consiste à entamer un contrôle multilatéral avec les Pays-Bas et le Royaume-Uni (code FMCS/010). La première réunion de coordination a eu lieu le 15 octobre 2012. Sur la base de ces premières discussions, les États membres concernés poursuivent actuellement leur réflexion quant à l'opportunité et à la manière de poursuivre le contrôle multilatéral. Quoi qu'il en soit, l'administration belge réexamine en ce moment de manière globale l'ensemble de la problématique des livraisons et services à bord des navires, trains et avions lors de la partie intra-communautaire du transport de personne. Cette action se place plus spécifiquement dans le cadre d'un rapport récent des services de la Commission européenne qui touche directement à la problématique abordée dans le cadre du contrôle multilatéral. Report from the commission to the council on the place of taxation of the supply of goods and the supply of services, for passengers on board ships, aircraft, trains or buses drawn up in accordance with Article 37(3) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, 22.10.2012). Bureau d’Intervention et de Restitution Belge : néant Autorité de Gestion PO FEDER (Région Bruxelles – Capitale) : néant Autorité d’audit (Région Bruxelles- Capitale) : néant Autorité d’audit (Région wallonne – Communauté française) : néant PO FSE Compétitivité régionale et Emploi de la région de Bruxelles-Capitale 2007-2013 : néant FSE : néant ESF Vlaanderen (MA/CA/AA) : néant EFRO Vlaanderen (MA/CA/AA): néant ELFPO: néant Communauté germanophone de Belgique: pas concerné par le rapport de la Cour des comptes européenne Autorité d’audit du programme opérationnel développé dans le cadre du fonds social européen pour la période de programmation 2007-2013 : pas concerné par le rapport de la Cour des comptes européenne Bulgaria: New calculations have been presented or are being prepared, as recommended by the Commission inspectors, on three of the reservations. Legislative amendments are being made in respect of the other reservations. Cyprus: On 31 December four reservations were pending. The summary report on the findings and observations arising from the Commission inspection in Cyprus on the VAT bases for 2005-2007 was sent to the Cypriot authorities on 31 January 2011. According to this report, of the six reservations pending in 2010, two were lifted by the Commission and four were still pending at the end of 2011. The Cypriot authorities started action to remove the Commission’ reservations immediately after the conclusion of the inspection by Commission inspectors in November 2008. Additional measures were taken in 2010 and the Commission was sent the clarification report on 30 April 2010 and additional clarifications (Observations) on 16 September 2010. The Cypriot authorities continued their efforts to remove the remaining reservations by the end of 2011. From 6 to 10 February 2012 a team from the Commission carried out an inspection in Cyprus on the VAT own resources bases statements for the years 2008-2010. During the inspection various points raised by the Commission inspectors were presented and explained, and there was discussion of points where the VAT own resources bases statements needed improvement and/or further explanation. The above inspection visit in Cyprus resulted in the removal of all four pending reservations. Denmark: As of 31 December 2011, eight reservations have been registered concerning Danish VAT compensation. 1. One reservation concerns the correction for zero-rated newspapers. The compensation is based on information from Statistics Denmark on the sale of newspapers. Statistics Denmark’s definition does not cover Weekend Avisen or Computerworld, and a standard correction for these has been carried out in the compensation. The Commission has asked that the correction be carried out on the basis of annual turnover figures for these two newspapers. The desired changes were performed in 2012, and the reservation was subsequently cancelled. 2. One reservation concerns the VAT exemption for small enterprises (artists). A new computation has been carried out, which the Commission approved at the verification visit in June 2012. The reservation was therefore cancelled in 2012. 3. One reservation concerns foreign long-distance buses and taxis engaged in transport within Denmark. A computation concerning Swedish taxis that run to and from airports has been produced in connection with the verification visit in 2012, while there is still an outstanding problem concerning long-distance buses which do not have a sales office in Denmark and which are therefore not included in Danish transport statistics. Scope for an approximate calculation is being investigated. 4. One reservation concerns the inclusion of the deficit cover in public bus transport with a view to adjustment back to 2006. Because the Commission has cancelled its reservation (according to which the deficit cover need no longer be included in the compensation), the reservation was accordingly cancelled in 2012. The excessive compensation will then be adjusted as from 2006. 5. One reservation concerns the exemption for repair and maintenance of aircraft, the illegality of which became known in connection with the Cimber Air judgment relating to domestic flights (EU judgment C-382). The corrections were dealt with at the verification visit in 2012, and there is still an unexplained question concerning the computation performed for flying schools’ and clubs’ repair and maintenance of aircraft, which was not resolved at the verification visit in 2012. 6. One reservation concerns a treaty infringement case concerning VAT group schemes. A judgment has still not been handed down in the case. 7. One reservation concerns a treaty infringement case concerning VAT exemption for charities. A judgment has still not been handed down in the case. 8. One reservation concerns exemption for catering services provided on board transport (ferries in foreign trade between EU countries). There have been doubts about the interpretation of the VAT rules in force in this area. There is also uncertainty about how such a computation could be performed. Spain: Table 2.2 in Annex I of the Court of Auditors' Report contains three outstanding reservations as of 31 December 2011 concerning VAT in Spain. Two of these arise from infringement proceedings opened against Spanish legislation for violation of EU law concerning: - The special VAT regime for travel agencies. Reservation issued by the European Commission in 2003. With the information available it is not possible to ascertain whether an adjustment is needed in the VAT base and if so, the amount of the adjustment, pending a decision on the infringement proceeding and pending guidance from the Commission to all the Member States affected by this reservation. - Exemption from VAT on services provided by notaries public in relation to certain operations. Reservation issued by the European Commission in 2008. Spain will include an adjustment once the possibility of its quantification has been verified. The third reservation issued by the Commission from 2009 onwards concerns the method of calculating the adjustment in revenues from farming under the flat-rate scheme. Spain will propose to the Commission an improvement in the method of selecting the group affected by this calculation, which could resolve the Commission’s objections concerning this matter. Finland: The Commission's most recent inspection in Finland to examine VAT-based own resources calculations took place between 22 and 26 March 2010. The next inspection will take place between 10 and 14 December 2012. The last inspection dealt with the 2006-2008 VAT base statements. The outstanding VAT reservations were also discussed during the visit and some of them were lifted. Before the visit there were ten VAT reservations, but in the course of the 2010 inspection two were lifted and two combined, leaving seven outstanding. At the end of 2010 there were eight reservations, of which two were laid down by Finland. One reservation was lifted in 2011. The reservation lifted by the Commission concerned the 2001-2009 VAT exemption for the supply of services on board ships sailing through the Åland Islands to another EU Member State. The VAT own resources base statement for 2009 was incomplete in this respect, but Finland remedied this satisfactorily shortly after giving its reply concerning the statement in December 2010. The reservation was lifted in a letter dated 1 April 2011 (Ares(2011)361398). In 2011,three new reservations were set. In the draft summary report of the inspection, the Commission added a new reservation that had not been dealt with during the inspection. The reservation concerned the fuel calculation included in the car compensation related to the VAT own resources base (item 5.3.7 of the summary) in 2007 and 2008. When examining the calculation the Commission inspectors found it unusual that the average fuel consumption per 100 kilometres of cars running on diesel was higher than that of cars using petrol. Finland revised the fuel calculation satisfactorily in autumn 2011, and the reservation will be lifted. In its replies contained in the 2010 audit report Finland also mentioned that it will examine the Commission’s reservation related to the pro-rata of non-deductibility of exempted industries for the years 2004 to 2008. The calculation was revised during 2011 and the changes were notified to the Commission’s inspectors in July 2011 in connection with Finland's VAT-based own resources statement for 2010. The tables with the new weighted average rate for 2004-2008 were delivered to the Commission satisfactorily in autumn 2011, and the reservation will be lifted. In a letter dated 7 July 2011 (Ares(2011)743162), the Commission sent a claim for payment and notified that a new reservation concerning tax exemptions for passenger transport services between Member States was being too broadly applied to also cover restaurant and catering services. The reservation applied from 2007-2010. Finland delivered the calculations requested and accounted for the corresponding payments with default interest in autumn 2011. At the same time, Finland set its own reservation for the same topic. The calculations are still being inspected. As a result of the above-mentioned changes, the number of remaining VAT reservations was ten as at 31 December 2011, of which three were reservations made by Finland. The oldest reservation is Finland’s reservation concerning the Åland Islands, made in 1995. Three reservations concern infringement procedures. The summary report of the inspection concerning 2006-2008 was received on 8 February 2012. Eight of the reservations it refers to remain. France: Il subsiste encore sept réserves après le dernier contrôle sur place effectué par la Commission européenne du 28 novembre au 2 décembre 2011. Trois réserves portent sur des litiges en phase juridictionnelle : Pour deux d’entre eux, la Cour de justice de l’union européenne, a déjà rendu son arrêt, il s’agit des litiges suivants : Ø le taux réduit sur les chevaux de courses, (l’arrêt de la CJUE a été rendu le 8 mars 2012 ; la France a modifié les dispositions du code général des impôts, cependant la commission considère ces nouvelles dispositions comme demeurant non-conformes au droit communautaire) Ø la taxation de l’électricité, (L’arrêt de la CJUE a déjà été rendu et la directive énergie a été transposée en droit français par la loi du 7 décembre 2010 portant organisation du marché de l’électricité) Pour le dernier, la Cour n’a pas encore rendu son arrêt, il s’agit de : Ø la taxation au taux réduit des services à domicile Deux réserves portent sur sujets en phase précontentieuse, il s’agit de : Ø la mise à disposition de bateaux, (la procédure juridictionnelle n’est pas encore engagée, la commission ayant adressé aux autorités françaises, en date du 21 novembre 2012, un avis motivé au titre de l'art 258 du TFUE préalable à l’ouverture d’un contentieux juridictionnel) Ø les transports de biens entre la France continentale et la Corse, la procédure juridictionnelle n’est pas encore engagée Une réserve porte sur un sujet technique (l’impact des terrains à bâtir sur le calcul du taux moyen pondéré) dont la Commission pourra vérifier les éléments lors du prochain contrôle sur place (en septembre 2013). La dernière réserve porte quant à elle sur des divergences d’interprétation des textes communautaires, qui pourront être abordées lors du prochain contrôle sur place et qui concernent le calcul de la compensation relative à la distribution d’eau en exonération de taxe. Greece: With regard to the number of the (7) outstanding reservations (control of VAT own resources - 9/2010), we would like to inform you that the Commission controllers have announced in a letter their response to the comments of our country submitted on 13 May 2011 and have removed two (2) more reservations. This has resulted in the number of outstanding reservations being limited to five (5). Ireland: Following recent ACOR meeting in Brussels, the number of reservations now stands at 4, the reservation from 1998 has been lifted. Italy: Not necessary Lithuania: Having regard to the 2009 control report on the VAT-based own resources in Lithuania by the European Commission, on 5 March 2010 Lithuania submitted its observations to the Commission presenting updated calculations with a view to rectifying errors and lifting reservations identified during the control visit. At the request of the European Commission, additional explanations were presented on 10 May 2010 and 22 June 2010. On 22 October 2011 at the meeting of the Advisory Committee on Own Resources of the European Commission (ACOR) the EC representatives presented the 2009 control report and a summary document of Lithuania’s observations and explanations lifting 5 of 7 reservations. 2 reservations remained valid until the European Commission representatives scrutinised the justification documents for rectifications (the calculation methodology presented by Lithuania was acceptable). During the VAT-based own resources control visit in Lithuania on 18-22 June 2012 the representatives of the European Commission scrutinised the justification documents for rectifications. Those documents contained official data used for calculations necessary for lifting the remaining 2 reservations. After this control visit the European Commission representatives lifted the 2 reservations valid until 31 December 2011. Lifting of those reservations was officially confirmed in the 2012 VAT-based own resources control report by the European Commission published on 12 September 2012. Malta: The Commission’s summary report dated 5 July 2012 shows that after the control visit of November 2011, 9 reservations were lifted while around two reservations were placed. This meant that Malta only had 3 outstanding reservations as at 5 July 2012. The National Statistical Office will address the said outstanding reservations in the next VAT Declaration, due by 31 July 2013. It should be noted that Malta’s VAT base far exceeds 50% of its GNI and is thus capped at 50% of its GNI of own resources. Netherlands: The numbers mentioned by the Netherlands have been correctly reproduced. The outstanding reservations will be discussed with the Dutch authorities during the European Commission’s planned control visit in June 2013. Poland: In order to remove the reservations, corrections of the statistical data were made in the verified reports for the years 2008-2010 and in the report for 2011 the data was recognised accordingly. Changes must be approved by the EC. Portugal: A - Infringement procedures 1. Farmers In accordance with the ECJ's judgment of 8 March 2012, the state budget for 2013 provides for the revocation of Article 9, No 33 of the Portuguese VAT Code, so that transactions carried out by farmers will in future be covered by the general VAT rules. This will mean that such transactions will no longer be exempt; rather, they will be subject to VAT at the reduced rate, and will be included in List 1, which is an annex to the VAT Code. 2. Travel Agencies As the ECJ has not so far handed down a judgment on this subject, there is no change in the tax authorities’ interpretation. 3. Taxes on tolls Given that European law has been amended in this respect, the procedure against Portugal is now closed. B – Other reservations 1. Transport As regards compensation in respect of own resources in connection with the total exemption applicable between mainland Portugal and the Portuguese islands and vice-versa, it is the tax authorities’ understanding that Portugal is not to determine such compensation on the basis of a statement in the Council's minutes, as such statements do not supercede the Treaty of Accession of Portugal to the European Communities, according to which the derogation provided for by Article 15(15) of the Sixth Directive (now Article 149 of the VAT Directive) does not affect the calculation of own resources. 4. Tax on nappies Since these are deemed to be 'similar products', as referred to in 2.4(c) of List 1 in the annex to the VAT Code, the transfer of such products is taxed at the reduced rate. Czech Republic: The large number of reservations was, amongst other things, explained at the 68th meeting of ACOR - VAT, where the commissioner for audit stated that the large number of reservations in regard to the calculation of the EU’s VAT own resources base was caused by the breakdown of the general reservation in the calculation of the VAT weighted arithmetic rate (falls within the competence of the Czech Statistical Office - CSO), and also by 5 irregularities (“infringements”) in connection with EU VAT legislation. Romania: Following the submission of Romania’s observations to the European Commission Report on VAT Base Declarations of its own resources for 2007 and 2008, the reservation placed by COM on VAT receipts – amounts for electronic commerce was raised. The checking cycle for 2007-2008 closed with the submission by the COM of its conclusions as adopted within the Advisory Committee on Own Resources (ACOR) – VAT of 20.10.2011. As regards the 4 remaining reservations, efforts are being made to solve them. UCRBUE United Kingdom: Her Majesty’s Revenue and Customs (HMRC): The Commission carried out a VAT own resources control visit to the UK during October 2012. As a result, it is anticipated that a number of the outstanding reservations for the UK will be lifted. Confirmation will be included in the Commission’s report on the visit (due to be issued in mid-January 2013). Slovakia: Slovak Ministry of Finance: The Slovak Republic has adopted measures to remedy the reservation stated on the calculation of the Harmonised Basis for VAT for the years 2008 to 2010. The services of international water transport provided by foreign entities were calculated in addition and sent to the Commission on 31.8.2012. The Commission assessed this additional calculation as being relevant and correct and on 11.10.2012 in its Summary Report on the Results and Findings arising from inspection of the VAT base proposed that the stated reservation be cancelled. Sweden: The Court of Auditors makes no remarks giving rise to comments from Sweden

2.26 || General reservations18 existed at the end of 2011 on the GNI data of EU-15 Member States for the period 2002 to 2007, EU-10 Member States for 2004-2007, and Bulgaria and Romania for 2007. 18 Article 10(7) of Regulation (EC, Euratom) No 1150/2000, as amended, states that, after 30 September of the fourth year following a given financial year, any changes to GNP/GNI shall no longer be taken into account, except on points notified within this time-limit by either the Commission or the Member State. These points are known as reservations. A general reservation covers all the data of a Member State. Commission's reply to 2.26 2.26. As the Court acknowledges in paragraph 2.28 the situation had changed markedly by January 2012 when general reservations remained in place only for Bulgaria and Romania || Romania: General reservations on the GNI data of Romania and Bulgaria have been applied since their accession to the European Union (the last to join in 2007), while on the GNI data of other Member States there are specific reservations. Romania’s GNI data were subjected to the standard verification process by the European Commission (Eurostat) under Council Regulation No. 1287/2003 of 15 July 2003 on the harmonization of GNI at market prices. The direct methodological checks on the GNI data resulted in certain Action Points to be solved by Romania until 2014. The first solutions to Action Points were submitted for approval by Eurostat within the GNI Quality Report and the GNI Questionnaire of 21 September 2012. INS

2.27 || At the beginning of 2011, there were four open specific GNP reservations19 relating to the period 1995 to 2001. The Commission subsequently lifted two reservations concerning the United Kingdom, leaving a balance of two[3]0 at the end of 2011. 19 A specific reservation covers discrete elements of GNI (GNP until 2001, GNI thereafter) such as gross value added of selected activities, total final consumption expenditure or gross operating surplus and mixed income. 20 These concerned Greece and the United Kingdom and related to methodological and compilation aspects. Commission reply to 2.27 The Commission is making progress via its cooperation with the two countries that still have GNP reservations for the period 1995-2001 (1 for Greece and 1 for the United Kingdom at end 2011) so that these reservations can be lifted || United Kingdom: HMT: ONS have resolved outstanding issues on UK GNP reservations and these should be lifted shortly.

2.35 || Based on its audit work24, the Court concludes that, for the year ended 31 December 2011, (a) Member States' declarations and payments of TOR, (b) the Commission's calculation of Member States' contributions on the basis of the VAT and GNI data received from Member States, (c) the calculation of the UK correction, and (d) other revenue were free from material error. 24 For reasons explained in paragraphs 2.13 and 2.14, this conclusion does not provide an assessment of the quality of VAT or GNI data that were received by the Commission from Member States || United Kingdom: HMT: This just includes reference to the fact that the UK receives an abatement and requires no response

2.36 || Commission reply to 2.36 2.36.(a) The Commission will follow up the Court's findings with the Member States concerned. 2.36.(b) The number and proportion of reservations long-outstanding according to the Court's definition continues to decrease – it is now less than 10% of the total. There will always be some long-outstanding reservations as there may be many ramifications for Member States to explore and to remedy. There has been an ongoing improvement in the frequency of consultations with Member States plus enhancement of the levels of cooperation between the Commission and Member States which will continue. 2.36.(c) The administrative processes necessary to provide each of the 25 Member States simultaneously with confirmatory official notification of the lifting of the general reservations and the specific reservations set concerning them were completed in early 2012. 2.36.(d) The Commission is making progress via its cooperation with the two countries that still have GNP reservations for the period 1995-2001 (1 for Greece and 1 for the United Kingdom at end 2011) so that these reservations can be lifted || United Kingdom: HMT: ONS have resolved outstanding issues on UK GNP reservations and these should be lifted shortly.

Annex 2.2 || Results of examination of systems for revenue || United Kingdom: HMT: This relates to the Commission’s calculation of the UK abatement and again no UK response needed.

Chapter 3 – Agriculture : Market and Direct Support

3.4. || The main measures financed by EAGF are: - The direct aid “Single Payment Scheme” (SPS). SPS payments are based on "entitlements"4 each of which is activated with one hectare of eligible land declared by the farmer. In 2011 SPS represented 31 082 million euro of expenditure (77 % of direct aids). - The direct aid “Single Area Payment Scheme” (SAPS) provides for the payment of uniform amounts per eligible hectare of agricultural land and is currently applied in 10 of the Member States5 that joined the EU in 2004 and 2007. In 2011 SAPS accounted for 5 084 million euro of expenditure (13 % of direct aids). - Other direct aid schemes linked to specific types of agricultural production (such as suckler cows, cotton etc). In 2011 those schemes accounted for 4 012 million euro of expenditure (10 % of direct aids). - Interventions in agricultural markets covering e.g. intervention storage, export refunds, food programmes and specific support for the fruit/vegetable and the wine sectors (in total amounting to 3 533 million euro in 2011). 4 The number and value of each farmer's entitlement was calculated by the national authorities according to one of the models provided for under EU legislation 5 Bulgaria, Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Poland, Romania and Slovakia. || Hungary: Community legislation on aid has been reviewed and changes to it followed up continuously since Hungary’s accession. Poland: The paragraph informs about how the JPO system functions in Poland and does not include any reservations. Czech Republic: Not applicable – there is no error involved. Romania: APIA As of 2007, Romania applies the single area payment scheme (SAPS) which involves granting direct payments as single payment per hectare, whereas the payment is done uniformly by dividing the national ceiling allocated to the Member State to the eligible area, which is the utilized agricultural area of the country. Slovakia: Agricultural Payments Agency: Appropriate measures were adopted for the findings, see Appendix II Slovak Ministry of Agriculture and Rural Development: considers the Commission reactions to the ECA comments as adequate.

3.9. || Annex 1.1, Part 2, of Chapter 1 describes the Court’s overall audit approach and methodology. For the audit of market and direct support for agriculture the following specific issues should be noted: - the audit involved the examination of a sample - of 180 interim and final payments; - as regards cross compliance, the Court focused its testing on selected GAEC obligations9 and SMRs10. Where cross compliance obligations were not met, the Court treated such cases as errors11. These errors were included in the calculation of the overall error rate provided that it can be established that the error already existed in the year in which the farmer applied for aid12. This represents a change from previous years, when the failure to meet cross compliance obligations was not included in the error rate calculation; - reductions and exclusions (applied in cases where beneficiaries of EU aid over-claim the actual area or number of animals13) are not included in the Court’s error rate calculation; - the assessment of systems covered IACS in five paying agencies in Member States applying the SPS – Austria, Denmark, Finland, Italy (Lombardia) and Spain (Galicia) – and in one paying agency in a Member State applying SAPS (Hungary); - the Court examined the implementation (at national level) of cross compliance standards and the control systems implemented by Member States. The results of this work are presented in Chapter 4 at paragraphs 4.30 to 4.32 but are also applicable to this Chapter; - the Court reviewed the work carried out by the certification bodies of Romania and Bulgaria under the new reinforcement of assurance procedure14; - the review of the Commission’s management representations covered the annual activity report of DG AGRI concerning EAGF-related issues; - in the context of the Commission’s clearance of accounts procedure the Court reviewed 17 of the EAGF certification bodies’ certificates and reports relating to 17 paying agencies. The results are presented in Chapter 4 (see paragraph 4.36). 9 Avoiding the encroachment of unwanted vegetation, retention of terraces, maintenance of olive groves and respect of minimum livestock stocking rates or mowing obligations. 10 SMR 4 relating to the nitrates Directive. 11 Cross compliance obligations are substantive legal requirements that must be met by all recipients of direct aid and are the basic and in many cases the only conditions to be respected in order to justify the payment of the full amount of direct payments, hence the Court’s decision to treat failure to meet such requirements as errors. 12 For each infringement, the national system for reduction of payments has been used for the quantification of the error. 13 Regulation (EC) No 1122/2009 provides that, where the claimed area is found to be overstated by more than 3 % or two hectares, the aid amount shall be calculated on the basis of the area determined reduced by twice the area claimed irregularly. If the difference is more than 20 % no aid shall be granted for the crop group concerned. Similar provisions apply to animal premia. 14 See paragraphs 3.34 and 3.35. || Austria: See points 3.14 and 3.15 Denmark: The Danish AgriFish Agency notes the Court of Auditors’ comments under point 3.9 and deals more specifically with the criticism in points 3.19, 3.22, 3.23, and 3.24 below. Finland: This section describes the actions of the Court of Auditors, which the description shows as having been carried out. The Member State has no comments to make in this respect. The inspection results reported as a result of the Court of Auditors’ work are discussed in the later sections of this document. Hungary: Community and national aid conditions are being kept up-to-date and applied continuously. Italy: See following points Romania: See the answer to question 3.34

3.14. || Commission’s reply to 3.14 and 3.15 3.14 and 3.15. The Commission considers that IACS, which accounts for 91 % of total EAGF expenditure, is generally an effective control system for limiting the risk of error or irregular expenditure. The overall effectiveness and constant improvement of the IACS is confirmed by the results of the conformity audits which the Commission has carried out over the past years in all Member States and by the low error rate indicated in the control statistics which it receives from Member States. These statistics are verified and validated by the certification bodies and show a level of undue payments which is below the 2 % materiality threshold. Remaining deficiencies are generally of a lesser nature. Many of these deficiencies pertain to a rather limited scope, e.g. some kind of alpine pastures in Austria, and are not undermining seriously the effectiveness of IACS. All these deficiencies are followed up through conformity clearance procedures which ensure that the risk to the EU budget is adequately covered. Given that the deficiencies the Court detected in Austria are of a minor nature, the Commission considers the supervisory and control system in Austria to be effective. || Austria: Additional on-the-spot checks were carried out in 2012 for improving the administration of the Land Parcel Identification System (LPIS). In order to enhance the internal control system, new quality controls were introduced that become effective from the end of 2012 – ongoing measures are being taken.

3.19. || EU legislation provides that after expiry of a specified deadline, farmers can no longer declare additional parcels and that any anomaly detected by the paying agency will lead to a reduction of the aid amount. However, the administration may correct a claim at any time without applying an aid reduction in the case of an obvious error defined as an inconsistency21 which becomes apparent from the data contained in the claim itself. The Court found that four paying agencies (Denmark, Finland, Italy (Lombardia) and Romania) incorrectly applied the obvious error concept, by allowing the replacement of ineligible or double claimed parcels, with the result that the paying agencies did not apply aid reductions (see example 3.3). 21 Such as clerical error, inconsistency between graphical and alphanumerical information contained in the application, map reading errors, etc. Commission reply to 3.19 As regards Denmark, Finland and Italy, the national authorities have taken or are taking corrective actions by amending their internal instructions and procedures and, where necessary, by recovering overpaid amounts. As regards Romania, the Commission services' own audit found that the national guidelines for the determination of obvious errors were not always applied correctly by the regional paying offices || Denmark: The Danish AgriFish Agency agrees on the criticism raised by the Court of Auditors in the specific cases. Instructions for case handlers have been rectified. Finland: See the reply in Annex II, in the section entitled “2.2. Obvious error corrections do not meet the obvious error concept”. Italy: The ECA has criticised the use of the obvious error concept to accept applications for insurance contributions under Article 68 for farms which, although they had concluded the insurance policy, did not cross the application for contribution box in the 2010 single application. OPLO (Lombardy paying agency) considered it admissible to accept the obvious error request on the following grounds: · in order to apply for the contribution, a flag had to be inserted in a box in the aid application. The problem was a box that had not been filled in, and as it was the first time it might have been an oversight; • the good faith of the farmer and no possibility of fraud; • an error was detected by the paying agency when the individual applications were being checked against the supporting documents, which in this case were in the SIAM Insurance database. In any case, OPLO accepted the ECA's position and withdrew the contribution by Order No 4188 of 15 May 2012. On 30 June 2012 it completed recovery of the amounts withdrawn when the balance for 2012 single applications was paid. 64 applications were concerned, for which the total contribution granted was EUR 33 755.00, of which the Community share was EUR 20 063.95.

Example 3.3. || In the case of Romania the incorrect application of the obvious error concept was systematic. Parcels affected by over-declarations or double declarations are replaced in a significant number of cases by other parcels in different locations and of a different size or shape. Such replacements cannot be considered as a correction of obvious errors22. 22 The Court had already observed in its 2008 Annual Report (paragraph 5.38) that in Romania 5 500 farmers had benefited from a total of 2,2 million euro in EU SAPS aid as a result of the incorrect application of the obvious error concept. || Romania: APIA According to EC working documents (Working Document No. 2011/2009) “... decisions on whether or not to apply the concept of “obvious error” depend on the circumstances of each case and the competent authority must be satisfied by the obvious nature of that error. The concept of obvious error can not be applied systematically; it is necessary to analyze each case. Secondly, considering the complexity of the procedures related to the submission and processing of aid applications, and especially the different procedures applied in the Member States, this document can not classify each type of potential error. Thirdly, Regulation (EC) No. 1122/2009 provides a series of procedural rights for farmers, and a special mention is made ​​in Article 73 and Article 74, which state that in some cases no penalty shall apply.” The management and control procedure for area payment applications provides the definition of obvious error as follows: “In establishing obvious errors after re-identifying a parcel in the physical block general criteria will be taken into consideration, which must be met cumulatively: the lack of points of reference in the two physical blocks and maintenance of specific elements of the plot initially declared (surface, crop). Re-identifying a parcel in another physical block can be considered/classified as obvious error if the APIA official finds that the aforementioned criteria have been met, except the results of on-the-spot checks. Only if the APIA official finds that the farmer had insufficient elements for a correct identification of the parcel in the physical block and the circumstances indicate that this is the case of an obvious error, then the re-identification of the parcel in another physical block can be considered/classified as obvious error.” Starting with 2010, the use of the IPA Online application allowed the physical location of the parcels within physical blocks. The concept of obvious error of was correctly applied, in accordance with the law, EC working documents and internal procedures.

Example 3.4. || In two Member States23 (Italy (Lombardia) and Spain (Galicia)), the Court found cases where “permanent pasture” reference parcels were recorded in the LPIS as being 100 % eligible despite the fact that they are fully or partially covered with dense forest or other ineligible features.The Court also observed that the LPIS was not updated with the results of on-the-spot inspections performed by paying agencies (Hungary, Italy (Lombardia) and Spain (Galicia)). 23 The Court has already made this observation for Spain in Annual Reports for 2008, paragraph 5.36, for 2009, paragraph 3.38, and for 2010, paragraph 3.31, and for Italy in the 2009 Annual Report, paragraph 3.38. Commission reply to Example 3.4 Incorrect data in the LPIS According to the Italian authorities, the issue has been rectified as from 2011. The Commission is pursuing this through the conformity clearance procedure of accounts. The Commission is aware of the issues related to the eligibility of pasture areas in Spain. The Spanish authorities were requested to act on this matter and presented the LPIS Improvement Plan in November 2010 including, notably, measures to implement the application of an eligibility coefficient to pasture parcels and to ensure systematic update of LPIS with the results of on the spot checks. The Commission will continue to monitor the implementation of this plan by the national authorities. The Commission has also found some cases in Hungary where LPIS was not updated with the results of the on the spot checks and has requested the Hungarian authorities in writing to take action in this respect. || Spain: One of the measures, specifically measure No 14, implemented as part of the plan to improve the LPIS update focuses on establishing objective criteria for applying the eligibility coefficient to pasture. The aim of this measure is to establish a series of parameters that will enable automatic calculation of an eligibility coefficient for areas of pasture in all the Autonomous Communities, so that they can be uploaded to LPIS-GIS at a national level after calculation. In the RD on the application of direct payments for agriculture and livestock breeding, the eligibility coefficient for pastures has been introduced from 2013. This means that areas of pasture with characteristics preventing full use of these areas because of the presence of unproductive elements, steep slopes or other characteristics determined by the competent authority are assigned a coefficient in the Geographical Agricultural Land Information System (LPIS-GIS) reflecting the eligibility percentage in terms of the LPIS-GIS ‘recinto’. In this LPIS-GIS ‘recinto’ the maximum eligible area for the purpose of the direct aid schemes is the area of the ‘recinto’ multiplied by this coefficient. In the event of disagreement with the coefficient assigned, a reasoned objection can be submitted to the LPIS-GIS. Another of the measures in the plan of measures to improve updating of the LPIS-GIS is to check that the changes detected in the inspections are entered in the LPIS-GIS as indicated in EU law and in the coordination circulars drawn up for that purpose by FEGA. LPIS-GIS update following on-the-spot checks: As evidenced in the European Court of Auditors’ audit, in the Galicia Autonomous Community the LPIS-GIS is updated systematically using the results of the on-the-spot checks carried out in aid management. Since the 2009 marketing year this work has been based on the geographical information obtained by a GIS application called CONSUPAC developed specifically to carry out these checks. Despite this, in the 2009 and 2010 marketing years, in some cases it was not possible to update the new uses in the graphic display in time before the publication of the data corresponding to the following marketing years, due basically to two reasons: delays in completing the checks relating to completion of the new control system (the CONSUPAC application) and temporary halts to the editing of changes in the SIGPAC owing to the process of convergence with the land register. However, these problems, which had already been overcome in 2011, did not prevent appropriate inspection of these areas, since although the graphic changes could not be seen on Internet they were carried out from the start in the alphanumerical database used to manage the case files. These changes were notified to the farmers by various different methods, in particular using the pre-applications provided to them. Hungary: The case should be regarded as isolated; the error identified has been corrected. At a systemic level, LPIS data have been updated continuously based on the findings of on-the-spot checks carried out in previous years, thus no systematic measure was necessary. Italy: As regards the updating of the LPIS with the results of on-the-spot checks, the AGEA started to do this with the 2011 on-the-spot inspections;it updated the reference parcels in real time directly on OPLO’s LPIS-GIS via photo interpretation per block of parcels and subsequent matching up with the reference parcel. The problem has therefore been resolved. As to the permanent pasture parcels, wrongly registered in the LPIS as eligible, when system is updated under the 2012 ‘refresh’, the parcels/areas identified as ineligible by the inspectors in the years prior to 2011 will be checked for any incorrect payments to be recovered. This procedure can also be used for the rough pastures, for which photo interpretation more in line with the ECA's comments is planned.

3.21. || For SPS aid to be granted, every entitlement held by the farmer needs to be declared together with one hectare of eligible land. The Court has observed that this principle is not respected in certain circumstances in Austria (see example 3.5). Commission’s reply to 3.21 The Commission has so far imposed 0,214 million euro in financial corrections on Austria concerning entitlements for alpine pastures in claim years 2005, 2006 and 2007 in the context of the conformity clearance procedure. See also joint reply to paragraphs 3.14 and 3.15. || Austria: The conformity clearance procedure is still ongoing.

Example 3.5. || In Austria, when an applicant claiming Alpine pasture areas does not have enough hectares to activate all entitlements the national authorities, contrary to EU legislation, reduce the number of applicant’s entitlements (to match it with the number of hectares) and increase their values proportionately24 24 The Court has raised this issue already in its 2006 Annual Report (paragraph 5.23). ||

3.22. || All payment entitlements should be recorded in the entitlement database the total value of which must not exceed a ceiling laid down in EU legislation. In two Member States the Court found inaccurate information in the entitlements databases due to the incorrect treatment of unused entitlements25 (Denmark) and to differences between regional and central databases (Spain26). 25 EU legislation provides that entitlements not activated during two consecutive years revert back to the national reserve, see Article 42 of Regulation (EC) No 73/2009. 26 This issue has already been reported by the Court in its 2008 Annual Report (paragraph 5.37) Commission reply to 3.22 As regards Denmark, the Commission has found similar issues and Danish authorities have agreed to take appropriate corrective measures. The Commission will follow this up in the context of the conformity clearance procedure. || Denmark: The work on analysing the causes and scale of the problem is on-going. Payment rights that have not been exercised two years in succession will subsequently be revoked and improperly paid support reclaimed. Spain: Concerning the European Court of Auditors’ queries, the 2011 Annual Report (which includes, inter alia, the final conclusions of the audit of the IACS-SPS systems carried out by the Court) emphasises, with regard to the Single Payment Scheme in points 1.2 and 2.2. of Annex II, the differences detected in the databases during the visit to the Galicia paying agency (PF 4805). In FEGA’s report replying to the preliminary findings of the Court of Auditors (on 6 June 2012 and 3 September 2012), it provided reasons for and clarification of the origin of the discrepancies detected in the data sent to the Court by FEGA and FOGGA. These discrepancies were owing to the different versions provided by the two bodies for the 2009 bound duties (versions 2 and 3). FEGA supplied the version of the 2009 duties that FOGGA had initially supplied (V2). We then compared the two sets of statistics. This comparison revealed slight differences between the data supplied by each body for bound duties both in 2009 and 2010. However, as was attempted to explain and demonstrate in these reports and subsequently in the Court of Auditors’ visit to FEGA on 29 October, these discrepancies did not really correspond to different data but rather each body, using the same data, employed a different accounting system in terms of working and organisational methods. This had no impact or effect on the related payments. However, an error was admitted by the Galicia Autonomous Community when drawing up the 2010 statistics submitted to the Court of Auditors, since it included in the calculation 42 codes more than those actually assigned and notified by FEGA for correct payment. Therefore, once again, this discrepancy did not have any impact on the payments or cross-checks made, since the error in question was an inconsistency in accounting when drawing up the summary table submitted to the Court. This body wishes to state and confirm that the consistency and uniformity of the system for identifying and recording single payment duties in Spain is guaranteed, which is why no measures were adopted in relation to this comment by the Court of Auditors. As the coordinating body, FEGA is responsible for maintaining the National Databases created for identifying, recording, maintaining and managing single payment duties and ensuring that they operate properly. As we attempted to explain during FEGA’s visit on 29 October, the main feature of the National Databases (BDA, GDR and BDD) is the constant flow of information between these databases and the Autonomous Communities. This means that the databases are fed with information from the Autonomous Communities, as Paying and Management Agencies, while FEGA makes all the information available to the Autonomous Communities once it has been validated, the necessary cross-checks performed (both between databases and between the information sent by the various Autonomous Communities) and all the processes enabling the duties corresponding to a marketing year to be calculated and assigned have been carried out. In this way, our databases are constantly updated, either through the different versions generated throughout the marketing year, which incrementally incorporate the processes corresponding to the year (v0- advance, v1- decoupling of sectors, v2- allocation of national reserve...) or through the RI application, through which the information sent in a given year can be corrected and updated for one or more specific beneficiaries. To conclude, we can confirm that this is a single Database which is uniform for the whole of Spain. It is a dynamic database due to the constant flow of information. The discrepancies found by the Court are therefore due solely to the different methods use by the two bodies (Autonomous Community and FEGA) for accounting and drawing up statistics based on the same data.

3.23. || The quality of the on-the-spot measurements is of key importance for the correct determination of aid amounts. The Court has re-performed a number of measurements carried out by the paying agencies. In three Member States the Court’s measurements differed from the results reported by the paying agencies (in Denmark for five out of 18, in both Spain (Galicia) and Finland for four out of 21 measurements). || Denmark: It should be pointed out that quality assurance and improvements in quality are performed continuously. Spain: The system for measuring parcels in the Autonomous Communities of Galicia is in accordance with the conditions laid down in EU law and in the Commission documents As mentioned in point 3.4, in Galicia a specific GIS application has been developed called CONSUPAC, with undeniable advantages with respect to any other system possible for Galicia. These include: · It is possible to carry out inspections with computer tablets on the spot. The inspector can at all times clearly see his position on the digital ortho-photos and the LPIS division into parcels. In this way the inspector travels round the perimeter of the parcels and verifies whether it is necessary to make discounts or differentiate uses. This benefit is fundamental in a region of mini-holdings such as Galicia. Since it is so thickly wooded, this often distorts the measurements obtained solely with GPS. · The application makes it possible to consult plentiful information on declarations, LPIS, etc, in a very operational form. · It has numerous checks of the consistency of the information and alerts which largely avoid errors. · It provides total consistency between the graphic and alphanumerical information obtained on the spot, enables the photos taken on the spot to be clearly linked to the 'recintos’, optimises subsequent use of the information, etc. However, the checks can only be carried out properly if the rules are applied correctly by each inspector. The computerised system itself requires all the ‘lots’ of field work to be supervised before the meeting with the farmer. This guarantees an appropriate general quality level. Four of the five errors mentioned by the Court of Auditors relate to the same inspection file. In the other case, the error committed in measuring was to class as eligible certain vegetation masses located on the edge of extensive meadow ‘recintos’, in a steeply sloping area beside a river. The other four measurements, corresponding to parcels very close together and included in a single report, showed that the inspector did not comply with the rules. § In two cases, unproductive land that could be seen in the LPIS ortho-photo in the computer tablet was not discounted. § The inspector found that the applicant had erroneously declared a reference next to his own (which could be considered to be a ‘manifest error’) but did not correct the declaration because he wrongly considered that it was not necessary, since the error did not affect the payment. § The last parcel was a wooded area next to the main meadow in the holding, with trees growing spontaneously (i.e. not planted). Clear proof was found (numerous animal droppings) that the livestock habitually uses this area at the same time as the adjacent meadow as an area for resting protected by trees. Although there were almost no signs of grazing (this may have been due to a persistent drought lasting many months, which is not usual in Galicia), clearly there was evident and highly intense livestock activity in the wooded area. The inspector therefore classed it as eligible, bearing in mind the definition of ‘eligible hectare’ laid down in Article 34(2) of Council Regulation 73/2009. In the training courses for inspectors held each year in Galicia, participants are continually reminded of the procedures for carrying out inspections correctly and the need to conduct monitoring as effectively as possible before drawing up the reports. Finland: The Finnish Agency for Rural Affairs makes reference to the reply in Annex II, Section 3.1.2. and takes the view that the areas must not be determined in the manner suggested by the Court of Auditors. The Agency for Rural Affairs is of the opinion that the method of measurement suggested by the Court of Auditors is not compliant with Commission Regulation (EC) No 1122/2009. The calculations performed by the Agency for Rural Affairs indicate that the measurement results of two parcels were outside the duplicate deviation. However, the Agency for Rural Affairs is of the opinion that this will not result in a risk to the fund, because the audits performed by the Court of Auditors have found that the subject parcels have more eligible area than what was measured in the control (or declared by the farmer in the aid application).

3.24. || The Court examined the accounting records of the paying agencies audited to establish if the amounts to be recovered are properly accounted for and if these amounts are correctly reported to the Commission. In Denmark the Court could not reconcile the amounts reported with underlying records. Commission reply to 3.24 The Commission shares the Court's assessment that four out of the six systems audited were effective and two partially effective (see Annex 3.2). The Commission also considers that the debts management and recovery systems have improved in the last years, not least due to the introduction in 2006 of the so-called 50/50 rule, which gives a strong incentive to Member States to recover undue payments as effectively and as quickly as possible. This is the reason why the Commission has proposed a ‘100 % rule’ for the 2014-2020 period (i.e. 100 % of unrecovered amounts after a 4 or 8 year delay – depending on whether the case is under administrative or judicial procedure – will be charged to the Member States concerned)1. In the specific case of Denmark, the Certifying body also identified some reconciliation issues with regard to recovered amounts or between the reporting to the Commission through the Annex III tables and the paying agency's debtors' ledger. The Commission will review the compliance with the accreditation criteria and the infrastructure and control systems put in pl