WRITTEN QUESTION P-0093/02

by Gabriele Stauner (PPE-DE) to the Commission

(21 January 2002)

Subject: Irregularities involving ESF funds in North Rhine-Westphalia

The European Court of Auditors states in paragraph 3.39(d) of its annual report for 2000(1) that an audit concerning the European Social Fund in North Rhine-Westphalia showed that the 1998 closure of an operational programme (CI Employment 1994 to 1999, Germany) included a proportion of ineligible expenditure amounting to 15,7 %.

The Court of Auditors found that advance payments had been declared instead of actual expenditure, whilst the use of flat rates had also led to overstatement of expenditure and parts of the public co-financing had not been identified.

In its reply to the Court's findings, the Commission stated that its Employment DG had contacted the competent authorities to rectify the situation described by the Court.

Can the Commission say:

- how much money was wrongfully claimed?

- how it has rectified the situation?

- whether the circumstances identified by the Court constitute an isolated case, or whether it must be assumed that similar errors have occurred in other programmes implemented in North Rhine-Westphalia?

(1) OJ C 359, 15.12.2001, p. 163.

Answer given by Mrs Diamantopoulou on behalf of the Commission

(26 February 2002)

The European Court of Auditors states in paragraph 3.39 (d) of its annual report for 2000 that an audit concerning the European Social Fund (ESF) in North Rhine-Westphalia showed that the 1998 closure of an operational programme (CI Employment 1994-1999, Germany) included a proportion of ineligible expenditure amounting to 15,7 %. According to the sampling methodology of the Court of Auditors the Integra share of North Rhine-Westphalia was selected. The Court decided to make an in depth audit and to control the expenditure declarations for all 30 projects.

As a result of the control the Court identified three types of error:

- Advance payments had been declared instead of actual expenditure

The last advances were paid end 1998. The annual expenditure declarations were only made in January 1999. In some cases the declared expenditure was lower than foreseen which is caused by early departures of participants (e.g. after finding of a new job). The promoters reimbursed the difference in February 1999. This was thus accounted for in the ESF accounting system for 1999.

This situation was considered as an error by the Court because the Declaration of Assurance (DAS) exercise focuses only on the financial year 1999, but it has no financial impact as it is an adjustment problem.

- The use of flat rates had led to overstatement of expenditure

North Rhine-Westphalia has as all Länder its own Integra Guidelines (Förderrichtlinie). There the use of flat rates for expenditure items is foreseen without the need to justify of the expenditure incurred for the project. This method makes administration and control easier and prevents increased costs, but it is against the principle of real costs. The Court checked the real costs for the projects and found in some cases an overfinancing. In most cases the real costs were at least as high as the flat rates. The overfinanced part was correctly treated as an error by the Court and will be corrected by the Commission at the closure of the programme by a reduction in the 1999 final claim.

- Parts of the public co-financing had not been identified

This problem of lack of documentation and justification of the so-called passive public cofinancing was already identified by the Commission as a general weakness in ESF administration. In a recent interpretation note(1) the need for this documentation was emphasized. In the case controlled by the Court, the co-financing consisted of social allowances paid to the participants by the municipalities or allowances paid by the Bundesanstalt für Arbeit. In many cases the payment proofs were not in the files and confirmations could not even be found at the co-financing administrations involved (e.g. for documentation on social allowances, the retention period was already over). The non-justification of expenditure renders it ineligible. This type of error forms the greatest part of the irregularities and will be corrected at the closure of the federal programme. Only then can the financial impact of the error on the Community Budget be definitively quantified.

The Commission made her last control visit to North Rhine-Westphalia in 2000. The audit of the administration of mainstream programmes by the Versorgungsämter came to a quite positive judgement. The use of flat rates and the lack of justification were not detected as audit findings.

(1) Ref.: Council Regulation 1260/1999 Article 32 (1) Subparagraph 3.