Special Report No 2/98 on the Commission's Decisions of 23 April 1997 and 30 July 1997 on the clearance of accounts for 1993 of guarantee expenditure for agriculture of the European Agricultural Guidance and Guarantee Fund (EAGGF), accompanied by the Commission's replies (Submitted pursuant to Article 188C(4)(2) of the EC Treaty)
Date: 1998-02-19
Institutions: European Court of Auditors
Subjects: EAGGF Guarantee Section, closing of accounts, financial analysis, financial loss, financial year, report

20.4.98

EN

Official  Journal  of  the  European  Communities

C 121/1

I

(Information)

COURT  OF  AUDITORS

SPECIAL  REPORT  No  2/98

on  the  Commission’s  Decisions  of  23  April  1997  and  30  July  1997  on  the  clearance  of
accounts  for  1993  of  guarantee  expenditure  for  agriculture  of  the  European  Agricultural
Guidance  and  Guarantee  Fund  (EAGGF),  accompanied  by  the  Commission’s  replies

(Submitted  pursuant  to  Article  188C(4)(2)  of  the  EC  Treaty)

(98/C 121/01)

TABLE  OF  CONTENTS

Paragraph
reference

Page

1.

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1—1.3

2. FINANCIAL  ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1—2.4

3. METHODOLOGY  OF  THE  COMMISSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1—3.12

Staff  resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1

Risk analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2—3.7

Execution  of  the  work. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8—3.12

4. CORRECTIONS  MADE  BY  THE  COMMISSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1—4.7

Flat  rate  corrections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2—4.6

Ad  hoc  corrections. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.7

5. CASES  INVOLVING  THE  CONCILIATION  BODY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1—5.6

2

2

7

7

7

8

8

8

9

9

6. CASES  WHERE  NO  OR  INSUFFICIENT  CORRECTIONS  WERE  APPLIED . . . . . . . 6.1—6.13

10

7.

IRREGULARITIES  AND  RECOVERIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1—7.6

8. EXPENDITURE  EXCLUDED  (DISJOINED)  FROM  THE  1993  CLEARANCE . . . . . 8.1—8.4

9. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.1—9.9

Commission’s replies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12

13

14

15

C 121/2

EN

Official  Journal  of  the  European  Communities

20.4.98

1.

INTRODUCTION

1.1.
Article  5(2)(b)  of  Council  Regulation  (EEC)  No
729/70 (1)  requires  the  Commission  to  clear  within
one  year  the  annual  accounts  submitted  by  the  Member
States  of  payments  made  by  them  under  the  Guarantee
Section  of  the  EAGGF.  The  aim  is  to  ensure  that
only  expenditure  legally  incurred  in  conformity  with
Community  rules 
is  financed.  To  achieve  this,  the
responsible  DG  VI  Commission  department  carries  out
inspections  of  expenditure  in  the  Member  States.  Errors
or weaknesses detected are notified to the Member States
which  have  the  opportunity  to  reply.  Bilateral  meetings
are  later  held  at  which  the  services  of  the  Commission
and  the  Member  States  can  clarify  their  respective
positions.  The  Commission  then  notifies  its  conclusions
to 
the
conciliation  procedure  (see  Chapter  5).  The  Commission
subsequently finalises its Summary report (2)  and  presents
it  to  the  EAGGF  Committee  before  taking  the  final
clearance  decision.  The  final  clearance  decision  for  the
1993  financial  year  was  only  taken  in  July  1997  due  to
various  reasons.

the  Member  States  opening 

the  way 

for 

1.2.
The  responsibility  for  the  supervision  of  paying
agencies  falls  primarily  to  the  Member  State,  which
authorises  them  to  make  payments  charged  to  the  Fund.
A  Member  State  is  required,  under  Article  8  of  Council
Regulation  (EEC)  No  729/70 (3),  to  satisfy  itself  that
operations  financed  by  the  Fund  are  actually  carried  out
and  meet  the  legal  requirements.  However,  the  failure  at
the level of Member States to carry out adequate control
checks  means  that  significant  additional  effort  needs  to
be  made  by  the  Commission.  Council  Regulation  (EC)

financial  year, 

No  1287/95 (4)  which  applied  for  the  first  time  to  the
1996 
introduced  greater  clarity  as
concerns  the  respective  roles  of  the  Commission  and  the
Member  States  and  may  result  in  quicker  clearance
procedures  in  future.

1.3.
In  view  of  the  significant  findings  in  its  previous
Report  on  the  Commission’s  clearance  of  accounts
procedure,  the  Court  has  decided  to  examine  the
decisions  the  Commission  took  in  clearing  the  1993
accounts.  The  Court  examined  the  summary  reports
produced  by  DG  VI,  mission  reports  and  related
correspondence  with  the  Member  States.  Discussions
were held with representatives of both UCLAF (5) and the
Conciliation  body  and  the  reports  of  the  Directorate
General  for  Financial  Control  (DG  XX)  were  also
reviewed. The Court did not undertake any specific audit
visits  to  the  Member  States.

2. FINANCIAL  ANALYSIS

2.1.
The  first  Commission  decision  of  23  April
1997 (6)  made  540,2  Mio  ECU  of  corrections  (see
Table  1)  relating  to  1993  expenditure.  As  part  of  the
1993  expenditure  was  still  eligible  for  or  subject  to  the
conciliation  procedure  as  at  23  April  1997, 
the
Commission  took  a  second  decision  on  30  July  1997 (7),
which  determined  107,6  Mio  ECU  of  additional
corrections  (see  Table  1).  Thus,  the  total  amount  of
corrections  applied  for  the  1993  clearance  for  the  two
above  decisions  amounts  to  647,8  Mio  ECU.  However,
as  the  1992  clearance  decision  already  included  106,9
Mio  ECU  for  1993,  the  total  correction  relating  to  the
1993  financial  year  amounted  to  754,7  Mio  ECU.

(1) OJ  L  94,  28.4.1970.
(2) Doc.  VI/5210/96  of  15  April  1997  and  Doc.  VI/5360/97  of

30  June  1997.

(3) OJ  L  94,  28.4.1970.

(4) OJ  L  125,  8.6.1995.
(5) Directorate  F  —  Co-ordination  of 
Secretariat-General  of  the  Commission.

fraud  prevention,

(6) Commission  Decision  97/333/EC  (OJ  L  139,  30.5.1997,

p.  30).

(7) Commission  Decision  97/608/EC  (OJ  L  245,  9.9.1997,

p.  20).

TABLE  1

CLEARANCE  OF  ACCOUNTS  1993

(Commission  Decision  97/333/EC  of  23  April  1997,  OJ  L  139,  30.5.1997,  p.  30  and  Commission  Decision  97/608/EC  of  30  July  1997,  OJ  L  245,  9.9.1997,  p.  20)

Expenditure  disallowed  by  market/Member  State  in  national  currency  and  (ecu)

By  market  in  national  currency  and  (ecu)

Total  in  national  currency  and
(ECU)

%

Milk  and  Milk
Products

Export
Refunds

Oils  and  Fats

Cereals

Meat  and  Fish

Rural
development
schemes  —
Ewe/suckler
cow  Premiums

Tobacco

Products  of
vine  growing
sector

Other (1)

National
currency

ECU

0

(0)

413 309 611

(10 145 356)

0

(0)

− 261 767

− (34 829)

0

(0)

0

(0)

0

(0)

− 285 373

− (7 005)

− 523

− (70)

0

(0)

987 723

(131 418)

0

(0)

0

(0)

196 533 052

17 598 687

102 574 200

23 750 791

(29 545 845)

(2 645 703)

(15 420 518)

(3 570 581)

4 516 992

(679 063)

0

(0)

0

(0)

0

(0)

0

(0)

0

(0)

0

(0)

0

(0)

413 024 238

(10 138 351)

1,6 %

725 433

(96 520)

0,0 %

30 157 034

(4 533 665)

3 416 265

(513 585)

378 547 021

(56 908 960)

8,8 %

Member  State

1st  Decision

Belgium

Denmark

France

Germany

602 075

38 372 261

56 199

9 079 510

− 69 288 107

69 195 613

(305 196)

(19 451 153)

(28 488)

(4 602 464)

− (35 122 599)

(35 075 713)

518 964

(263 066)

0

(0)

2 405 806

50 942 321

(25 822 999)

4,0 %

(1 219 519)

Greece

− 391 080 215

4 444 731 183 11 228 869 398

252 092 853

20 861 503

− 19 843 837

2 002 118 984

257 829 179

− 4 670 832

17 790 908 216

(57 607 262)

8,9 %

− (1 266 324)

(14 392 115)

(36 359 269)

(816 281)

(67 550)

− (64 255)

(6 482 895)

(834 855)

− (15 124)

Ireland

− 51 715

− (69 889)

0

(0)

0

(0)

0

(0)

2 264 931

(3 060 875)

0

(0)

0

(0)

0

(0)

− 34 011

− (45 963)

2 179 205

(2 945 023)

0,5 %

Italy

336 386 167 986 17 361 126 678 27 188 473 822 13 114 452 131 53 652 415 828 − 5 321 377 039 23 662 386 781 17 317 359 265 3 917 012 067 487 278 017 519

(252 826 336)

39,0 %

(174 535 438)

(9 007 897)

(14 106 859)

(6 804 491)

(27 837 791)

− (2 761 020)

(12 277 333)

(8 985 188)

(2 032 359)

Netherlands

283 153

16 608 021

(127 389)

(7 471 868)

− 297

− (134)

− 2 378

− (1 070)

− 4 715

− (2 121)

Portugal

17 054 363

(85 390)

0

(0)

713 581 873

− 193 269 689

204 360 919

(3 572 840)

− (967 684)

(1 023 217)

31 089

(13 987)

0

(0)

Spain

15 082 187 605

592 758 909

735 103 559

− 266 851

734 804 904

− 496 815 838

(90 855 481)

(3 570 795)

(4 428 282)

− (1 608)

(4 426 483)

− (2 992 831)

0

(0)

0

(0)

0

(0)

0

(0)

18

(8)

16 914 891

(7 609 927)

1,2 %

60 008 012

102 353 240

904 088 718

(4 526 690)

0,7 %

(300 455)

(512 473)

5 902 000

111 841 887

16 765 516 175

(100 995 895)

15,6 %

(35 553)

(673 738)

.

2
0
4
9
8

.

E
N

O

f
f
i
c
i
a
l

J
o
u
r
n
a
l

o
f

t
h
e

E
u
r
o
p
e
a
n
C
o
m
m
u
n
i
t
i
e
s

C
1
2
1
/

3

 
 
 
 
 
By  market  in  national  currency  and  (ecu)

Total  in  national  currency  and
(ECU)

%

Member  State

Milk  and  Milk
Products

Export
Refunds

Oils  and  Fats

Cereals

Meat  and  Fish

Rural
development
schemes  —
Ewe/suckler
cow  Premiums

Tobacco

Products  of
vine  growing
sector

Other (1)

National
currency

ECU

United
Kingdom

199 507

(296 508)

0

(0)

0

(0)

20 804

13 938 264

− 252 455

(30 919)

(20 715 108)

− (375 200)

0

(0)

0

(0)

15 204

13 921 324

(20 689 932)

3,2 %

(22 597)

Total  ECU

(264 834 360)

(93 585 028)

(61 141 307)

(26 697 237)

(25 708 303)

(29 575 457)

(19 023 295)

(14 689 716)

(4 913 193)

(540 167 895)

83,5 %

%  of
1st  Decision

2nd  Decision

France

Italy

Spain

United
Kingdom

Total  ECU

%  of
2nd  Decision

Grand  total
ECU

%  of  grand
total

49,0 %

17,3 %

11,3 %

5,0 %

4,8 %

5,5 %

3,5 %

2,7 %

0,9 %

0

(0)

0

(0)

0

(0)

0

(0)

(0)

154 553 632

(23 379 243)

0

(0)

0

(0)

0

(0)

0

(0)

0

(0)

0 27 581 807 418

(0)

(14 267 953)

0

(0)

0

(0)

0

(0)

0

(0)

7 416 056 857

(44 458 641)

0

(0)

0

(0)

0

(0)

49 792 305

25 761 970

(298 501)

(154 441)

10 536 887

4 809 374

(15 671 263)

(7 152 868)

(23 379 243)

(44 458 641)

(14 267 953)

(15 969 764)

(7 307 309)

0

(0)

0

(0)

0

(0)

0

(0)

(0)

0

(0)

0

(0)

0

(0)

0

(0)

(0)

154 553 632

(23 379 243)

3,6 %

27 581 807 418

(14 267 953)

2,2 %

0

(0)

0

(0)

384 496 080

7 876 107 212

(47 216 604)

7,2 %

(2 305 022)

0

(0)

15 346 261

(22 824 131)

3,5 %

(2 305 022)

(107 687 931)

16,5 %

0,0 %

21,7 %

41,3 %

13,3 %

14,8 %

6,8 %

0,0 %

0,0 %

2,1 %

(264 834 360)

(116 964 271)

(105 599 948)

(40 965 190)

(41 678 067)

(36 882 766)

(19 023 295)

(14 689 716)

(7 218 215)

(647 855 826) 100,0 %

40,9 %

18,1 %

16,3 %

6,3 %

6,4 %

5,7 %

2,9 %

2,3 %

1,1 %

Source:  European  Court  of  Auditors.
NB: Figures  in  brackets  represent  national  currency  converted  to  ecus  at  the  date  the  amounts  were  booked.

Negative  amounts  represent  the  excess  of  reimbursement  following  Court  of  Justice  decisions  relating  to  a  prior  year,  against  an  adjustment  on  the  same  budget  line  following  a  Commission  disallowance  decision.

(1) The  category  ‘other’  accounts  for  less  than  1 %  of  the  total  and  includes  fruit  and  vegetables,  set-aside,  sugar  and  other  measures.

C
1
2
1
4

/

E
N

O

f
f
i
c
i
a
l

J
o
u
r
n
a
l

o
f

t
h
e

E
u
r
o
p
e
a
n

C
o
m
m
u
n
i
t
i
e
s

2
0
.
4
.
9
8

 
 
 
 
 
20.4.98

EN

Official  Journal  of  the  European  Communities

C 121/5

In  Table  2,  it  can  be  seen  that  the  largest  corrections  for  1993  concern  milk  and  milk
2.2.
products  (as  was  the  case  for  1992),  followed  by  corrections  relating  to  export  refunds.
Together, these two categories accounted for 481,9 Mio ECU or nearly 64 % of all corrections
for  1993  (after  adjusting  for  expenditure  included  in  the  1992  clearance  that  relates  to  1993
export refunds). Financial corrections concerning milk for 1993 decreased by 40 % compared to
1992.  Export  refunds  represented  nearly  a  third  of  the  EAGGF  budget,  and  constitute  an  area
where  the  risk  of  irregularity  is  relatively  high.

Analysis  of  expenditure  disallowed  for  the  1992  and  1993  clearance  of  accounts  by  market

TABLE  2

Market

Total  1992
Mio  ECU

%

Total  1993
Mio  ECU

%

Milk  and  milk  products

438,8

56 %

Export  refunds

Oils  and  fats

Cereals

Meat  and  fish

Rural  development  schemes  —  ewe/suckler  cow
premiums

Tobacco

Products  of  vine  growing  sector

Other

12,1

33,6

44,5

205,6

6,3

31,6

5,2

10,5

1 %

4 %

6 %

26 %

1 %

4 %

1 %

1 %

264,3

217,6

114,3

41,1

39,4

36,9

19,1

14,7

7,3

35 %

29 % (1)

15 % (2)

5 %

5 %

5 %

3 %

2 %

1 %

Total

788,2

100 %

754,7

100 %

Source:  European  Court  of  Auditors.
(1) Adjusting  for  expenditure  included  in  the  1992  clearance  of  accounts  that  relates  to  1993:  Item  1002  (99,2  Mio

ECU).

(2) Adjusting  for  expenditure  included  in  the  1992  clearance  of  accounts  that  relates  to  1993:  Item  1220  (7,7  Mio

ECU).

C 121/6

EN

Official  Journal  of  the  European  Communities

20.4.98

In  Table  3,  details  are  shown  of  the  expenditure  by  Member  State  disallowed  by  the
2.3.
Commission  for  the  1992  and  1993  clearance  years  and  taking  into  account  106,9  Mio  ECU
that  was  disallowed  in  1992  but  which  related  to  the  1993  financial  year.  Overall  the
expenditure  disallowed  decreased  from  788,2  Mio  ECU  to  754,7  Mio  ECU  between  1992  and
1993  (a  reduction  from  2,6 %  to  2,3 %  of  total  declared  expenditure  coming  under  the  1993
clearance).  However,  1 565,9  Mio  ECU  (see  paragraph  8.1)  representing  4,8 %  of  the  total
expenditure  declared  was  excluded  from  the  1993  clearance  and  carried  forward  to  future
clearance years. For the Member States with the highest percentage rates of disallowance in the
1992  clearance,  the  situation  improved  in  1993  in  the  case  of  Ireland  (where  the  disallowance
was  reduced  from  6,3 %  to  0,2 %)  as  well  as  Spain  (7,1 %  to  4,6 %).  Greece  remained
unchanged  at  approximately  2,5 %.  However,  the  situation  worsened  in  Italy  (8,3 %  to  8,6 %)
and  France  (0,9 %  to  1,1 %).

Amount  and  percentage  of  expenditure  disallowed  by  Member  State  for  the  1992  and  1993  clearance
years

TABLE  3

1992  clearance  of  accounts

Belgium

Denmark

France

Germany

Greece

Ireland

(Mio  ECU)

Expenditure  declared

1 473,80

1 249,04

7 370,69

5 175,59

1 747,12

Disallowed  in  respect  of  1992

Disallowed  in  1992,  relating  to
1993

%  expenditure  disallowed 
respect  of  1992

in

1993  clearance  of  accounts

− 3,09

0,00

− 4,24

0,00

− 66,54

− 7,70

− 27,55

0,00

− 42,93

0,00

0,21

0,34

0,90

0,53

2,46

1 418,84

− 90,22

0,00

6,36

Expenditure  declared

1 296,68

1 310,88

7 710,63

4 735,44

2 305,04

1 736,83

Disallowed  in  respect  of  1993

Disallowed  in  1992,  relating  to
1993

Total  disallowed  in  respect  of
1993

%  expenditure  disallowed 
respect  of  1993

in

− 10,14

0,00

− 0,10

0,00

− 80,29

− 7,70

− 25,82

0,00

− 57,61

0,00

− 10,14

− 0,10

− 87,99

− 25,82

− 57,61

0,78

0,01

1,14

0,55

2,50

− 2,95

0,00

− 2,95

0,17

1992  clearance  of  accounts

Italy

Luxembourg The  Netherlands

Portugal

Spain

United
Kingdom

Total

Expenditure  declared

Disallowed  in  respect  of  1992

Disallowed  in  1992,  relating  to
1993

%  expenditure  disallowed 
respect  of  1992

in

1993  clearance  of  accounts

Expenditure  declared

Disallowed  in  respect  of  1993

Disallowed  in  1992,  relating  to
1993

Total  disallowed  in  respect  of
1993

%  expenditure  disallowed 
respect  of  1993

in

1,21

2 572,57

375,24

2 871,70

2 139,28

30 512,22

4 117,14

− 340,90

− 99,20

− 0,01

0,00

2,72

0,00

8,28

0,83

− 0,11

− 4,19

− 202,87

0,00

1,12

0,00

7,06

− 8,42

0,00

− 788,24

− 106,90

0,39

2,58

4 236,55

− 267,09

− 99,20

7,11

0,00

0,00

2 305,75

423,17

3 243,12

3 085,45

32 396,65

− 7,61

0,00

− 4,53

− 148,21

− 43,51

0,00

0,00

0,00

− 647,86

− 106,90

− 366,29

0,00

− 7,61

− 4,53

− 148,21

− 43,51

− 754,76

8,65

0,00

0,33

1,07

4,57

1,41

2,33

Source:  Commission  clearance  decisions  for  the  1992  and  1993  financial  years.

20.4.98

EN

Official  Journal  of  the  European  Communities

C 121/7

that 

Although  the  Commission  was  aware  during
2.4.
the  first  half  of  1997  (at  the  time  of  the  1993  clearance
decisions), 
totalling
approximately  68,3  Mio  ECU  were  also  needed  for  the
1994  financial  year,  no  immediate  decision  was  taken  to
recover  these  funds.  An  additional  12  months  may  now
elapse  before  recovery.  The  cases  involved  include:

adjustments 

certain 

(a)

the  prefinancing  of  beef  and  cereals 
involving
Belgium  (9,5  Mio  ECU),  Germany  (17,3  Mio  ECU),
France  (29,7  Mio  ECU),  Italy  (2,4  Mio  ECU)  and
The  Netherlands  (7,5  Mio  ECU);

(b)

fruit  and  vegetables  in  Spain (8)  and  in  Italy (9),
amounting  to  nearly  ECU  1,9  million.

3. METHODOLOGY  OF  THE  COMMISSION

Staff  resources

3.1.
The  European  Parliament  has  already  drawn
attention  to  the  matter  of  staff  resources  at  the
Commission,  in  its  discharge  resolution  for  the  1991
EAGGF  clearance  of  accounts (10).  More  recently,  it  has
stressed  the  importance  of  this  issue  in  its  discharge
resolution  of  21  February  1997 (11)  postponing  the
granting  of  a  discharge  on  agricultural  expenditure  for
the  1992  financial  year  and  calling  for  the  enlargement
of  the  Commission  service  responsible  for  the  clearance
of  accounts  by  15  posts.  The  Court  noted  that  the
Commission  had  allocated  one  new  post  between
21  February  1997  and  31  December  1997.

Risk  Analysis

The 

3.2.
lack  of  sufficient  staff  meant  that  risk
analysis  was  again  a  vital  consideration  for  allocating
resources.  Nevertheless,  no  overall  work  plan  for  1993
was  prepared.  However,  the  approach  applied  for  1993
was  much  the  same  as  for  1992.

3.3.
In  its  Special  Report  on  the  1992  clearance  of
accounts (12),  the  Court  observed  that  risk  analysis  was
carried  out  by  market  and  not  at  a  central  level.  This
meant  that  priorities  were  set  and  the  work  planned
according  to  the  staff  resources  available  per  market
rather  than  by  reference  to  the  amounts  at  stake  or  the
relative  risks  as  between  different  markets.  Nevertheless

(8) Mission undertaken to Spain from 12—16 September 1994,
in  connection  with  compensation  for  withdrawals  from  the
market  of  tomatoes.

(9) Mission  undertaken  to  Italy  from  13—17  March  1995,  in

connection  with  the  processing  of  citrus  fruit.

(10) OJ  C  141,  13.5.1996,  p.  107,  paragraph  7.
(11) OJ  C  85,  17.3.1997,  p.  185.
(12) Court  of  Auditors  Special  Report  No  1/97  (OJ  C  52,

21.2.1997,  part  2.3).

for  1993,  while  the  teams  for  the  different  markets  still
remained  responsible  for  preparing  the  detailed  control
plans  and  risk  analyses  per  market,  they  were  at  least
provided  at  central  level,  with  the  necessary  information
and  guidelines  to  plan  their  work.

3.4.
The  Commission  has  also  made  progress  towards
ensuring  increased  on  the  spot  coverage  of  all  the
important  markets  judged  to  be  at  risk,  and  the  more
important  beneficiary  countries 
the
exception  of  milk  and  milk  products  (see  paragraph  3.7
(a)), their control coverage of the measures on the spot in
the  Member  States  ranged  from  nearly  61 %  in  the  case
of  fruit  and  vegetable  expenditure,  to  over  85 %  for
expenditure  concerning  oils  and  fats.

involved.  With 

3.5. More  attention  was  paid  than  previously  to
coverage  of  export  refund  measures.  The  Commission’s
work covered the prefinancing of export refunds, ex-post
scrutiny  carried  out  under 
terms  of  Council
Regulation  (EEC)  No  4045/89 (13),  and  to  a  limited
extent  measures  relating  to  non-Annex  II  products (14).

the 

3.6.
According  to  the  Commission’s  clearance  of
accounts  work  on  Regulation  (EEC)  No  386/90 (15)
dealing  with  customs  controls,  in  most  of  the  countries
visited  there  was  a  lack  of  suitably  qualified  staff  with
sufficient  experience  in  the  often  complex  fields  (i.e.
non-Annex  II  products).  There  was  also  an  absence  of
instructions  on  the  respective  roles  and  duties  of  the
customs  offices  and  the  paying  agencies  in  each  Member
State.  These  factors  gave  rise  to  the  numerous  problems
encountered.

3.7.
The approach adopted precluded regular coverage
of  all  other  smaller  market  measures  or  countries.  Thus,
there remains a risk that by excluding particular Member
States  or  smaller  measures  from  periodic  on  the  spot
control  coverage, 
important  weaknesses,  errors,  or
systematic  abuses  of  the  systems  concerning  different
measures,  may  remain  undetected  for  extended  periods.
from
Several 
examination  for  1993,  the  most  important  of  these
being:

types  of  expenditure  were  excluded 

(a) Milk  and  milk  products  intervention  expenditure
(2 923,8  Mio  ECU):  despite 
the  amount  of
expenditure  concerned,  and  the  previous  experience
of  the  need  for  substantial  corrections  in  this  sector,
the  risk  analysis  was  not  implemented.  This  was
because  all  available  staff  were  engaged  in  following
up  the  consequences  of  the  Council  Decision  on  the
milk  quotas  in  Italy,  Greece  and  Spain  and  the  milk

(13) OJ  L  388,  30.12.1989.
(14) Products  not  covered  by  Annex  II  to  the  Treaty.
(15) OJ  L  42,  16.2.1990.

C 121/8

EN

Official  Journal  of  the  European  Communities

20.4.98

quota  system  in  force  since  the  1992  clearance (16).
Therefore,  there  was  only  very  limited  coverage
undertaken  of  other  types  of  expenditure  and  no
control  plan  identifying  priorities  for  the  audit  of
1993  expenditure  was  prepared.  Also,  no  control
for  Belgium,  which
coverage  was  carried  out 
represented  nearly  6 %  of  the  total  milk  budget  for
1993;

(b) Dried  fodder  (267,9  Mio  ECU):  this  measure  was
not  reviewed  for  France,  The  Netherlands,  and
Germany,  (which  together  accounted  for  74 %  of
the  market);

(c) Cotton  (183,6  Mio  ECU):  no  mission  was  carried
out to Spain for aid for cotton for at least five years
due  to  lack  of  both  time  and  staff  resources;

(d) Fish (32,4 Mio ECU): there has been no coverage of
fish for the past 7—8 years since it accounts for only
a  low  proportion  of  the  expenditure;

(e) Prefinancing  of  export  refunds  (15,0  Mio  ECU):  no
on  the  spot  control  was  carried  out  in  the  United
Kingdom  during  the  three  year  period  up  to
February 1996 for the prefinancing of export refunds
despite  evident  problems  found  in  other  Member
States.

The  average  delay  between  missions  and  the
3.11.
report  conveying  the  results  to  the  Member  State  was
found  to  be  approximately  five  months,  extending  to
12  months  in  some  cases  representing  an  improvement
over the situation in the previous year. However, there is
still  room  for  improvement  in  this  area.

The  two  previous  Special  Reports (20)  of  the
3.12.
Court  on  the  clearance  of  accounts  referred  to  the  need
for  the  Commission  to  introduce  computer  tools,  which
would, inter alia, allow statistical sampling methods to be
used.  During  the  current  1993  clearance,  monetary  unit
sampling has been used in the case of the controls of the
paying  agencies  and  where  possible  in  the  on  the  spot
compliance  controls,  except  when  practical  reasons  did
not  permit  it  (i.e.  where  the  Member  States  transmitted
the  necessary  computer  data  late).

4. CORRECTIONS  MADE  BY  THE  COMMISSION

4.1.
The  Commission’s  clearance  of  1993  expenditure
led  to  three  types  of  correction:  flat  rate  corrections,
other  ad  hoc  corrections  and  accounting  corrections.

Execution  of  the  work

Flat  rate  corrections

3.8. Most  of  the  work  scheduled  for  the  1993
clearance  was  carried  out  by  the  Commission  as
originally  planned.  The  Commission  services  also  sought
to  improve  inter-service  communication  between  DG  VI
and  DG  XX,  and  the  other  services  involved.

3.9.
To  keep  track  of  missions  and  work  carried  out
on  the  spot  in  the  Member  States,  DG  VI  established  a
computer  programme (17)  for  this  purpose.  However,  the
extent  to  which  DG  VI  were  able  to  use  this  programme
was  limited  due  to  the  insufficient  information  contained
in  the  various  data  fields.

3.10. Where  problems  are  encountered,  it  can  take  up
to  three  years  before  further  missions  are  undertaken
to  evaluate  their  full  impact (18)  and  resolve  them.  Also,
important  control
on  occasion,  despite  evidence  of 
weaknesses 
the
relating 
Commission  services  do  not  always  necessarily  extend
its  control  coverage  to  other  Member  States  not  yet
visited (19).

to  particular  measures, 

(16) Council  Regulation 

(EC)  No  1288/95 

(OJ  L  125,

8.6.1995).

(17) Database  entitled  Avancement  des  travaux  —  exercice

19XX.

(18) Case  involving  the  additional  milk  levy  in  Ireland.
(19) Cases  relating  to  the  promotion  of  milk  and  milk  products
in  the  United  Kingdom,  Germany,  France  and  Ireland.

A  Commission  document (21),  agreed  by  the
4.2.
EAGGF  Committee,  governed  the  use  of  these  flat  rate
corrections. Under it, flat rate corrections of 2 %, 5 % or
10 %  were  imposed,  depending  on  the  seriousness  of  the
systems  weakness  identified.  The  Commission  only  takes
into  account  remedial  action  —  if  effective  —  by  the
Member State concerned in cases where there is doubt as
to  which  of  the  three  rates  (2,  5  or  10 %)  to  apply.
Higher rates may be applied in exceptional circumstances
as  occurred  for  livestock  premiums  in  Corsica  where  a
correction  rate  of  25 %  was  applied.

4.3.
As  the  Court  already  mentioned  in  its  previous
report (22)  recourse  to  the  flat  rate  corrections  is  only
necessary  in  cases  where  the  actual  financial  impact  of
systems  weaknesses  cannot  be  established.  Furthermore,
there  must  be  coherence  and  transparency  in  their
application.  A  new  guideline  concerning 
flat  rate
corrections  was  formally  introduced  by  the  Commission
on  8  December  1997.  In  this  guideline,  a  new  higher
correction  rate  of  25 %  is  included,  as  demanded  in  a
resolution  adopted  by  the  European  Parliament  on
21  February  1997 (23).

(20) OJ  C  10,  15.1.1996  and  OJ  C  52,  21.2.1997.
(21) Doc.  No  VI/216/93  Rev.1,  12.9.1994.
(22) OJ  C  52,  21.2.1997.
(23) OJ  C  85,  17.3.1997,  p.  186.

20.4.98

EN

Official  Journal  of  the  European  Communities

C 121/9

As  in  respect  of  1992,  many  flat  rate  corrections
4.4.
were  made.  Out  of  a  total  of  647,8  Mio  ECU  (see
Table  1)  41 %,  265,1  Mio  ECU  were 
flat  rate
corrections.  53 %  by  value  of  all  flat  rate  corrections
were at the 10 % rate; 16 % at the 5 % rate and 14 % at
the  2 %  rate;  8 %  related  to  a  combination  of  the
different rates; 9 % concerned corrections applied using a
penalty  rate  of  1 %  per  day,  or  10 %  per  month.

The  lack  of  clearly  defined  criteria  means  that
4.5.
the  choice  of  a  particular  correction  rate  still  remains  a
rather  subjective  exercise.  There  were  some  apparent
inconsistencies  in  the  Commission’s  decisions:

(a)

in  the  case  of  expenditure  for  milk  and  milk
products market development measures (Budget Item
B1-2062),  the  final  flat  rate  corrections  adopted
were:  Ireland  10 %,  Germany  2 %,  and  the  United
Kingdom  2 %.  Following  an  earlier  report  of  the
Conciliation  body,  the  Commission  had  decided  to
revise the adjustment for the United Kingdom from 5
to  2 %.  However 
to  be  some
inconsistency  in  applying  a  2 %  correction  to  the
United  Kingdom,  since  on  the  basis  of  the  Court’s
analysis  of  the  Commission’s  reports  it  would  seem
that  there  were  more  systems  weaknesses  in  the
United  Kingdom  than  Germany.  Germany  has  since
appealed  to  the  European  Court  of  Justice  against
the  decision  of  the  Commission;

there  appears 

(b) a  2 %  correction  initially  envisaged  for  Ireland  for
beef  arising  from  the  non-use  of  proper  sealing
procedures,  was  also 
later  dropped,  whereas
Germany  and  Italy  were  both  still  penalised  with  a
5 %  correction  for  the  same  weakness.

4.6.
In  one  case  relating  to  consumption  aid  for  olive
oil  in  Portugal,  a  correction  of  15 %  was  initially
proposed  but  later  reduced  to  10 %,  following  the
Conciliation  body’s  observation  that  the  mission  control
justify  the  presence  of  exceptional
report  did  not 

circumstances  necessary  for  a  15 %  correction  and  that
subsequent  improvements  had  not  been  properly  taken
into  consideration.  The  Court  notes  that  subsequent
improvements  alone  cannot  justify  a  reduction  from  15
to  10 %  since  the  improvements  at  issue  only  occurred
after  the  end  of  1993.

Ad  hoc  corrections

inspections  carried  out  by 

4.7.
The  Commission  also  made  corrections  on  the
basis  of  the  estimated  amount  of  actual  financial  loss.
However,  in  at  least  one  case,  Member  States  appeared
not  always  to  have  been  treated  equally.  For  a  budget
line  involving  225,3  Mio  ECU  for  ewe  premiums,
physical 
the  national
authorities  in  Ireland  and  Portugal  revealed  fewer  ewes
than  claimed.  In  the  case  of  Ireland,  documents  were
produced  by  farmers  within  10  days  following  the
disappearance  of  the  ewes  and  accepted  as  adequate
proof  by  the  national  authorities  while  being  later
rejected  by  the  Commission.  In  the  case  of  Portugal,
however,  comparable  documents  were  accepted  by  the
national  authorities  and  later  by  the  Commission.  As  a
consequence,  a  limited  correction  for  Ireland  (1,4  Mio
ECU)  was  proposed,  based  on  the  actual  shortfall
observed (24),  while  no  correction  was  applied 
for
Portugal.

5. CASES  INVOLVING  THE  CONCILIATION  BODY

5.1.
Flat  rate  corrections  by  definition  bear  no  direct
relation  to  the  amounts  of  losses  to  the  EAGGF  budget.
Despite  the  use  of  statistical  sampling  procedures  it
is  often  not  possible  to  determine  the  actual  amount
of  financial  loss.  Re-examination  of  a  referral  to  the
conciliation  body (25) 
the
can 
Commission’s  officials  to  moderate  their  views  as  to  the
seriousness  of  the  non-compliance,  and  therefore  to  the
size  of  the  corrections  required.

sometimes 

bring 

(24) This  correction  is  recorded  under  Table  1  heading  —  meat

and  fish  for  Ireland.

(25) See  paragraphs  3.1—3.4.  of  the  Court’s  Special  Report  on
the  clearance  of  accounts  1992  (OJ  C  52,  21.2.1997).

C 121/10

EN

Official  Journal  of  the  European  Communities

20.4.98

A  total  of  29  cases  were  submitted  to  the  Conciliation  body  (see  Table  4).  Three  cases
5.2.
were  judged  to  be  ‘non-receivable’,  as  the  amounts  fell  under  the  minimum  level  of  0,5  Mio
ECU,  and  one  was  withdrawn.

TABLE  4

Analysis  of  1993  corrections  notified  to  the  Member  States

(as  at  30  July  1997,  the  date  of  the  second  Commission  clearance  decision)

(I) Total  cases  involving  corrections  for  1993  notified  to  the  Member  States

(II) Cases  relating  to  1993  corrections  submitted  to  the  Conciliation  body

(i) cases  rejected  by  Conciliation  body

(ii) cases  withdrawn  after  being  received

(iii) cases  examined  by  Conciliation  body

— correction 
decision

finally  reduced  or  dropped 

in 

the  Commission

— correction  maintained  in  the  Commission  decision

(iv) cases  still  in  procedure (1)

(III) Cases  for  1993  submitted  to  the  Court  of  Justice

(i) directly

(ii) after  submission  to  the  Conciliation  body

Number

77

29

3

1

23

11

12

2

27

8

19

%

100

38

4

1

30

14

16

3

35

10

25

Source:  DG  VI  internal  statistics.
(1) These  cases  were  submitted  on  19  June  1997  and  29  July  1997  respectively  and  were  still  in  procedure  as  at

31  December  1997.

5.3.
The  conciliation  procedure  has  added  additional
delays  of  up  to  six  months  to  the  overall  clearance
process.  The  supplementary  decision  taken  on  30  July
1997 reflected the fact that two important cases were still
before  the  body  on  23  April  1997,  the  date  of  the  first
Commission  decision.  Six  further  disputed  corrections,
relating to the supplementary levy for milk, could not be
dealt  with  in  the  1993  clearance,  as  the  discussions  were
not  completed  before  the  second  decision.

5.4.
Following the experience gained after the first full
year  of  operation  of  the  Conciliation  body  procedures,
the  Commission  had  prepared  a  ‘reflections  paper’  in
October  1996  on  the  present  system.  The  Commission
decided, however, that it was still too early after only one
full  year  of  experience  to  attempt  a  balanced  assessment
of 
the
Commission  decided  on  15  July  1997  to  extend  the
mandates  of  the  members  of  the  Conciliation  body  for
three  further  years  to  the  year  2000.

conciliation  procedure.  Accordingly, 

the 

Justice. Table 4 provides an analysis of cases lodged with
the  Court  of  Justice,  but  it  is  too  early  to  determine
whether the conciliation procedure has effectively reduced
the  number  of  cases  to  be  examined  by  the  Court  of
Justice.  Once  final  judgments  are  delivered  it  will  also
become  clear  what  significance  is  attached  to  the  reports
of  the  Conciliation  body.

A 

reliable  database 

should  be  established
5.6.
concerning  cases  submitted  for  conciliation  to  the
Conciliation  body,  and  cases  lodged  with  the  European
Court  of  Justice,  as  well  as  the  amounts  of  proposed
financial  corrections.  Two  databases  exist  at  present  at
the  Conciliation  body  and  at  the  Commission.  As  these
are  not  interlinked,  at  present  an  important  management
analysis  tool  is  missing.

6. CASES  WHERE  NO  OR  INSUFFICIENT  CORRECTIONS

WERE  APPLIED

5.5.
It  was  originally  hoped  that  the  creation  of  the
Conciliation  body  would  lead  to  a  reduction  in  the
number  of  cases  referred  to  the  European  Court  of

6.1.
There  were  cases  where,  despite  evidence  of
weaknesses  in  Member  States’  systems,  no  or  insufficient
corrections  were  made:

20.4.98

EN

Official  Journal  of  the  European  Communities

C 121/11

(a) Olive  oil  production  aid  in  Italy

6.2.
DG  VI  found  important  control  weaknesses  in
this  area  in  a  series  of  four  missions  to  Italy  between
April  1996  and  March  1997.  Two  DG  XX  missions  in
1995  and  1996  confirmed  that  the  weaknesses  also
affected  1993.  It  therefore  appears  that  a  correction
would  have  been  appropriate  for  1993  (the  value  of  the
budgetary  expenditure  for  the  year  was  approximately
700  Mio  ECU).

(b) Olive  oil  consumption  aid  in  Greece

for 

the 

third 

The  Commission  had  recognised  that  there  was  a
6.3.
irregularity  associated  with  olive  oil
high  risk  of 
consumption  aid (26).  Greece  was 
largest
beneficiary  (accounting  for  nearly  97  Mio  ECU).  Despite
this,  the  Commission  carried  out  no  control  visits  to  this
financial  year.  The
the  1993 
Member  State 
Commission attempts to justify this on the grounds that a
number  of  missions  had  already  been  carried  out  in
Greece  and  that  further  missions  there  would  not  be
consistent  with  the  equality  of  treatment  between  the
Member  States.  However,  the  Court  considers  that  the
risk  analysis  justified  control  missions  for  1993.  In  July
1996,  audit  work  concentrated  only  on  the  1994  and
1995  financial  years  and  significant  weaknesses  were
identified in the management of the scheme. The fact that
the  control  system  in  Greece  did  not  change  radically
between  1993—1995  confirms  that  control  visits  should
have been made for 1993. Therefore, it appears that large
corrections  were  necessary  for  1993.

(c) Ex-post scrutiny carried out under Regulation (EEC)
No  4045/89 (27)  in  Germany,  the  United  Kingdom,
Italy  and  Greece  by  the  national  authorities

6.4.
The  Commission’s  examination  found  that  the
depth of the work performed in Germany and the United
Kingdom  under  the  terms  of  the  above  regulation
(involving  expenditure  totalling  3 163  Mio  ECU  for
1993)  was  not  made  clear  in  the  reports  produced.  A
similar  situation  was  found  in  Greece  (87  Mio  ECU  for
1993).  However,  no  financial  corrections  were  proposed
for  these  Member  States.

6.5.
For  Italy  (involving  expenditure  totalling  1 011
Mio  ECU  for  1993),  even  though  work  carried  out  in
1994 in respect of the 1992 financial year indicated poor
implementation of the regulation, no such correction was
made  for  1993  when  the  same  problems  would  have
applied.

(d) Administration  costs  for  ewe  and  goat  premiums  in

Greece

6.6.
The Commission found that the Greek authorities
were incorrectly retaining 2 % of ewe and goat premiums

to  cover  the  administration  costs  for  the  measure.  In
1993  this  amounted  to  approximately  3,4  Mio  ECU.
Charging  of  VAT  in  some  cases  raised  the  total  amount
to  2,4 %,  or  more.  This  practice  is  contrary  to  Article  1
(4)  of  Council  Regulation  (EEC)  No  729/70 (28),  yet  no
financial  correction  was  applied.

6.7.
Frequently,  corrections  have  been  reduced,  or
even  withdrawn  entirely  if  the  Member  State  concerned
could demonstrate that remedial action had been taken to
correct  any  identified  weakness.  This  occurred,  even
where  such  remedial  action  had  only  taken  place  long
after  the  year  under  examination.  The  cases  described  in
paragraphs  6.8—6.11  below  were  noted  where
corrections  had  been  withdrawn  entirely.

(a) Withdrawals  from  the  market  for  disposal  of

peaches,  nectarines  and  citrus  fruit  in  Greece

6.8.
For the withdrawals from the market for disposal
of  peaches,  nectarines  and  citrus  fruit  in  Greece,  the
Commission applied no corrections for the 1993 financial
year.  This  was  despite  evidence  of  serious  shortcomings
in  control  procedures.  In  correspondence  sent  to  the
Greek  authorities,  the  Commission  proposed  that  a
to  1992  and  1993
‘General  Reserve’  be  applied 
expenditure,  to  which  the  Greek  authorities  responded
that  they  would  take  steps  to  improve  the  systems  in  the
future (29). Later on, the Commission informed the Greek
authorities  that  significant  progress  was  still  required
given  continuing  doubts  about 
the  quality  and
effectiveness  of  controls  being  carried  out.  Although  a
10 % correction for citrus fruit was initially proposed for
1992,  1993  (3  Mio  ECU)  and  1994,  the  Commission
later  informed  the  Greek  authorities  that  the  proposed
‘General Reserve’ for 1992 and 1993 had been lifted. The
reason was that on the spot controls carried out in 1995
showed  an 
systems.
However,  any  improvements  to  the  systems  which  took
place  in  1995  could  not  possibly  affect  1993.

improvement 

the  control 

in 

(b) Cotton  in  Greece

6.9.
In  its  Special  Report  on  the  1992  clearance  of
accounts (30),  the  Court  observed  that  the  necessary
improvements  to  the  weak  system  were  only  introduced
from 
the  1993/94  campaign  year  onwards.  The
Commission  made  no  correction  for  1993  despite  clear
evidence  that  the  control  systems  still  needed  to  be
reinforced. Thus it appears that a correction was justified

(28) OJ  L  94,  28.4.1970  which  states  that  ‘Expenditure  relating
to  administrative  costs  and  personnel  borne  by  Member
States  and  by  recipients  of  aid  from  the  Fund  shall  not  be
taken  over  by  the  Fund’.

(26) See part 3.1 of the 31.12.1994 DG VI/G3 ‘Matières Grasses

(29) The  Court’s  Annual  Report  concerning  the  financial  year

plan  d’activité  1995/97’  audit  plan.

(27) OJ  L  388,  30.12.1989.

1994  (OJ  C  303,  14.11.1995,  Chapter  2).
(30) Special  Report  No  1/97  (OJ  C  52,  21.2.1997).

C 121/12

EN

Official  Journal  of  the  European  Communities

20.4.98

(declared  expenditure  amounted  to  543  Mio  ECU) (31).
No  financial  correction  was  made  on  the  grounds  that
the  Greek  authorities  had  introduced  improvements  to
their  management  and  control  procedures.  However,  the
first  meeting  of  a  joint  Commission-Greece  working
group, specially set up to improve the system did not take
place  until  21  November  1994.  At  this  meeting,  the
Commission  presented  a  document  that  still  indicated  a
poor  overall  picture  of  the  control  situation  in  place  to
November  1994.

(c) Dried  fodder  in  the  United  Kingdom

In  the  1992  clearance  a  5 %  correction  was
6.10.
applied  to  the  United  Kingdom  in  connection  with
systems  weaknesses  relating  to  aid  for  the  production  of
dried  fodder.  No  correction  was  applied  for  the  United
Kingdom in respect of 1993 where aid totalling 11,0 Mio
ECU was paid. Remedial measures adopted by the United
Kingdom  authorities  entered  into  force  only  in  1994.

(a)

(b)

(d) Ewe/goat  premiums  in  Spain

6.11.
Following  a  Commission  enquiry  relating  to  the
1993  financial  year  into  ewe/goat  premiums  in  Spain,
where  serious  deficiencies  in  controls  over  milk  producer
declarations  were 
the  Commission
encountered, 
envisaged  a  flat  rate  correction  of  10 %  amounting  to
2,3 Mio ECU. In 1995, the Spanish authorities improved
the  systems,  and  so  the  amount  of  the  ‘proposed’
correction  was  limited  to  5 %.  Finally,  following  the
conciliation  procedure  the  Commission  decided  to  apply
a  flat  rate  correction  for  1993  of  2 %.

to 

the 

review 

records  and 

6.12.
The  1993  accounts  of  23  of  the  paying  agencies
in the Member States were audited by private audit firms,
which  were  engaged  by  the  Commission  to  reconcile  the
annual  declarations  of  expenditure  to  the  underlying
internal
accounting 
organisation  of  the  paying  agencies.  The  audit  work
performed  varied  from  Member  State  to  Member  State,
and was more thoroughly carried out in some cases than
in  others.  These 
system
descriptions and revealed rather important weaknesses in
controls 
in  The  Netherlands,
Denmark,  Italy  and  Greece.  Most  of  the  important
findings  were  later  mentioned  in  the  summary  reports
for  1993 (32),  but  no  financial  corrections  were  made
following  the  Commission’s  legal  advice.

reports  provided  useful 

in  paying  agencies 

6.13.
Certain  cases  were  noted  where  amounts  had
not  been  included  and  recovered  in  the  1993  clearance.
Examples  noted  concerned:

(31) The  Commission’s  1992  summary  report  Doc  VI/6355/95
stated  that  ‘the  new  instructions  (for  cotton)  were  not
actually  applied  until  the  1993/1994  and  subsequent
marketing years’.

(32) Doc.  VI/5210/96  of  15  April  1997  and  Doc.  VI/5360/97  of

30  June  1997.

for  the  additional  levy  for  milk  involving  disputed
payments,  it  has  not  been  possible  to  collect  certain
supplementary  deductions  in  the  Member  States
because  of  legal  disputes  between  buyers/producers
and  the  competent  authorities.  The  amounts  due  to
be  corrected  will  only  be  finally  determined  once  all
the  Member  States  involved  have  communicated  the
necessary additional information to the Commission.
Although it would have already been possible to deal
with  certain  Member  States  in  the  1993  clearance,
the Commission chose not to do so, wishing to treat
all  Member  States  equally.  Two  large  proposed
corrections  were  not  made 
to  milk
supplementary  levies  in  France  (17,4  Mio  ECU)
and  The  Netherlands  (1,4  Mio  ECU).  As  at  30  July
1997  these  matters  were  still  being  dealt  with  in
discussions  with  the  Member  States;

relating 

for  the  milk  abandonment  programme  in  Spain  a
programme  —  aiming  at  restructuring  production
and  reducing  the  number  of  marginal  producers  —
was  started  in  1993.  In  a  report  following  a  mission
to  Spain,  the  Commission  proposed  a  correction  of
approximately  0,8  Mio  ECU.  Subsequently  it  was
decided 
the
programme, in order to establish the precise amount
due.  Meanwhile,  the  recovery  of  this  amount  was
delayed  and  carried  forward  to  the  1994  clearance.

the  completion  of 

to  wait  until 

7.

IRREGULARITIES  AND  RECOVERIES

specifies 

7.1.
Article  8(2)  of  Council  Regulation  (EEC)  No
729/70 (33) 
case
irregularities  or  negligence  on  the  part  of  the
of 
administrative authorities or other bodies of the Member
States, the financial consequences of irregularities shall be
charged  to  the  Community’s  budget.

except 

that 

the 

in 

for  monitoring 

Since  early  1995,  the  UCLAF (34)  service  has  been
7.2.
responsible 
the
agricultural  sector  and  for  proposing  whether  the  non-
recovered amounts should be charged to the Community’s
budget. Previously, the DG VI-G4 service was responsible
for  this  task.

irregularities 

in 

7.3.
In  the  Commission’s  first  summary  report  of
31 December 1996 dealing with the results of inspections

(33) Article  8(2)  of  Council  Regulation  (EEC)  No  729/70  (OJ
L  94,  28.4.1970)  specifies  that  ‘In  the  absence  of  total
recovery, the financial consequences of irregularities shall be
borne  by  the  Community,  with  the  exception  of  the
consequences  of  irregularities  or  negligence  attributable  to
the administrative authorities or other bodies of the Member
States’.

(34) UCLAF  (Directorate  F-Coordination  of  fraud  prevention)
falls  under  the  Secretariat-General  of  the  Commission.

20.4.98

EN

Official  Journal  of  the  European  Communities

C 121/13

concerning  the  clearance  of  the  1993  accounts (35),
reference  was  made  to  work  carried  out  by  UCLAF.  A
table  setting  out  88  cases,  totalling  23,5  Mio  ECU,  was
attached  indicating  amounts  due  for  recovery  from  the
Member States. In a later version, of 15 April 1997 (36), it
was  mentioned  that  as  Member  States  had  complained
that  bilateral  discussions  had  been  inadequate,  it  had
been  decided  to  postpone  the  final  decision  and  to
withdraw the related figures. In a final supplement to the
report (37),  dated  30  June  1997,  this  situation  remained
unchanged  and  it  was  proposed  that  any  further  action
taken would be postponed until the 1994 clearance year.
As  a  result,  the  23,5  Mio  ECU  outstanding  was  not
included  in  corrections  for  1993.

7.4.
This is mainly due to difficulties in agreeing upon
the  allocation  of  responsibilities  between  DG  VI  and
UCLAF.  Only  in  June  1996,  nearly  18  months  after
UCLAF  was  given 
its  present  responsibilities,  did
inter-service  discussions  first  take  place  regarding  the
need  to  clarify  procedures.  As  a  result  of  the  lack  of
clarity  as  to  which  service  was  responsible  for  the
recovery  procedures,  these  procedures  were  not  held  in
time.  Another  example  of  this  lack  of  coordination
concerns  a  case  regarding  Belgium  involving  an  amount
of  0,4  Mio  ECU  where  UCLAF  erroneously  advised  DG
VI at the end of February 1997 that it should be reported
in 
the  1993  clearance  of  accounts.  The  Court
subsequently  found  that  this  case  had  already  been
treated  and  recovered  in  the  framework  of  the  1990
clearance decision. As this was not detected by either DG
VI  or  UCLAF,  the  Commission  should  take  steps  to
ensure  the  accuracy  of  listings  produced.

UCLAF, in its annual report for 1996 (38)  referred
7.5.
to  1 508  cases  totalling  548,5  Mio  ECU (39),  representing
71 %  by  value  of  the  irregularities  involving  EAGGF
guarantee  funds  communicated  prior  to  1993,  still
unrecovered  at  31  December  1996.  These  cases  were
reported  under  the  terms  of  Council  Regulation  (EEC)
No  595/91 (40)  of  4  March  1991.  The  other  29 %  by
value  of  all  the  cases  initially  notified  under  the  terms  of
the  above  regulation,  had  been  resolved  within  the
preceding  four  year  period.  Of  this  29 %,  17 %  had
already  been  recovered  from  final  beneficiaries,  4 %
charged  to  the  Member  States,  and  the  remaining  8 %
was  due  to  be  borne  by  the  EAGGF  fund.

263,6  Mio  ECU,  representing  48 %  of  the
7.6.
548,5  Mio  ECU  of  funds  still  to  be  recovered,  were
subject  to  ongoing  judicial  procedures  in  the  Member
States.  A  further  28,2  Mio  ECU  (5 %  of  funds  still  to  be
recovered)  related  to  cases  where  the  Member  States  had
introduced requests to declare the amounts irrecoverable.
The  final  balance  of 
‘cases  still  unaccounted  for’
represented  256,7  Mio  ECU  or  47 %  (by  value)  of  all
outstanding  cases  still 
to  be  recovered  based  on
notifications  communicated  before  31  December  1993.
This figure of 256,7 Mio ECU in turn represents 33 % of
all  cases  communicated.

8. EXPENDITURE  EXCLUDED  (DISJOINED)  FROM  THE

1993  CLEARANCE

8.1.
The  Court  examined  the  1 565,9  Mio  ECU  that
was  excluded  (disjoined)  from  the  1993  clearance.
Certain  observations  are  described 
in  paragraphs
8.2—8.4  below  that  relate  to  1 459,0  Mio  ECU  of  this
above  amount:

(a) 1 369,3  Mio  ECU  of  Compensatory  payments
amount  paid  by  way  of  advances  to  producers  of
oilseeds

in  March/April/May  1994, 

As  final  payments  for  the  1993  oilseed  harvest
8.2.
were  only  made 
the
Commission  took  a  decision  to  carry  forward  all
expenditure  relating  to  these  advances  until  the  1994
clearance.  This  decision  is  questionable  because  these
advances  had  been  paid  from  the  1993  EAGGF  budget.

(b) 73,3  Mio  ECU  of  suspect  olive  oil  in  intervention

storage  in  Italy

This  amount  had  already  been  previously
8.3.
excluded from the 1992 clearance pending on-going legal
investigation. This matter was finally resolved on 14 July
1997  but  the  amount  was  not  included  in  the  final
clearance  decision  of  30  July  1997.

(c) 16,4  Mio  ECU  for  the  abandonment  of  vines  in

Italy

(35) Part  6  of  Commission  Document  VI/5210/96-FR  of
31.12.1996,  (prepared  by  DG  VI/G/3  —  Clearance  of
Accounts).

(36) Part  6  of  Commission  Document  VI/5210/96-EN  of
15.4.1997,  (prepared  by  DG  VI  —  Clearance  of  EAGGF
Accounts).

(37) Part  6  of  Commission  Document  VI/5210/96-FR  of
30.6.1997,  (prepared  by  DG  VI.A.I.3  —  Clearance  of
EAGGF  Accounts).

(38) COM  Doc.  (97)  200  final  of  6.5.1997.
(39) Table  8  of  the  1996  UCLAF  report.
(40) OJ  L  67,  14.3.1991,  p.  11.

Expenditure 

8.4.
totalling  16,4  Mio  ECU  was
excluded  from  the  1992  clearance.  Because  the  Italian
authorities  did  not  respond  to  two  requests  sent  in
1996 (41)  requiring  details  of  results  and  findings  relating
to  a  special  investigation  carried  out  by  them  into  illegal
planting in Italy, the Commission was unable to complete
its  action.  This  amount  was  carried  forward  by  one
further  year,  until  the  1994  clearance.  Because  of  the

(41) Requests  transmitted  on  14  June  1996  and  a  reminder  sent

on  26  November  1996.

C 121/14

EN

Official  Journal  of  the  European  Communities

20.4.98

delays  by  the  Italian  authorities,  the  Commission  should
consider  the  possibility  of  charging  interest  on  the
amount  outstanding  when  it  is  taken  into  account  in  the
1994  clearance  decisions.

9. CONCLUSION

This  Special  Report  comes  at  a  time  of  transition
9.1.
for  the  entire  clearance  of  accounts  process,  where  there
are  now  simultaneous  clearances  being  governed  by  the
old  rules  (financial  years  1993—1995)  and  by  new
legislation  (for  exercise  1996  onwards).

9.2.
Article  5(2)(b)  of  Council  Regulation  (EEC)  No
729/70  states (42)  that  the  accounts  of  a  particular  year
must  be  cleared  by  the  end  of  the  following  year (43).  As
in  the  case  of  the  two  preceding  clearance  exercises,  the
clearance  decisions  for  1993  were  taken  more  than  two
years  late.  This  meant  that  647,8  Mio  ECU  were
recovered 
than
necessary.  The  1993  clearance  decision  also  does  not
reflect  the  fact  that  an  amount  of  approximately
19,6  Mio  ECU  is  still  due  to  be  recovered  in  respect  of
certain  programmes  for  milk  (see  paragraph  6.13).

the  Community’s  budget 

later 

to 

The  problem  of 

9.3.
current  and  needs 
paragraph  3.1).

inadequate  staffing  remains
(see
tackled  urgently 

to  be 

9.4.
The  Commission  should  consider  the  possibility
of  charging  interest  on  amounts  outstanding  where
Member  States  fail  to  act  within  a  reasonable  time  (see
paragraph  8.4).

9.5.
The  Commission  has  properly  sought  to  ensure
coverage  of  almost  all  important  market  areas  judged  to
be at risk (see paragraph 3.4). In particular detailed work

was  carried  out  in  the  important  area  of  export  refunds.
Most  of  the  work  scheduled  was  carried  out  by  the
Commission  as  originally  planned  (see  paragraph  3.8),
and  the  different  Commission  services  have  improved
both inter-service communication and the coordination of
their  work,  except  as  noted  for  UCLAF  (see  paragraph
7.4).  However,  the  approach  precluded  regular  coverage
of  all  other  smaller  market  measures  or  countries  (see
paragraph  3.7).

9.6. Nevertheless  cases  were  found  concerning  a  total
budget  line  value  of  5 058  Mio  ECU  (see  paragraphs
6.2—6.5) where the Commission failed to apply financial
corrections,  despite  being 
in  full  possession  of  the
necessary information. Also 68,3 Mio ECU of corrections
have  been  postponed  to  1998  in  respect  of  the  1994
clearance  (see  paragraph  2.4).

9.7.
The  Commission  needs  to  coordinate  better  its
efforts  to  recover  amounts  which  have  been  subject  to
irregularities.  Such  recoveries  as  should  have  been
included in the 1993 clearance decisions (estimated value
approximately  23,5  Mio  ECU)  were  postponed.  In
addition,  other  large  sums  relating  to  prior  years  still
remain  to  be  recovered  (see  paragraphs  7.3—7.6).

The  introduction  of  the  Conciliation  body  has,
9.8.
over  the  past  two  years,  provided  a  mechanism  in  which
Member  States  have  carried  out  in-depth  dialogue  with
the  Commission.  The  Commission  considers  that  no
balanced  assessment  of  the  conciliation  procedure  is
possible  until  the  end  of  a  three  year  trial  period  (see
paragraph  5.4).

The  Court  reiterates  that  it  is  inappropriate  to
9.9.
reduce  the  level  of  flat  rate  corrections  in  recognition  of
subsequent 
improvements  to  systems.  The  proposed
corrections  should  have  been  maintained  (see  paragraphs
4.6,  6.2—6.3,  6.5  and  6.8—6.11).

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 19 February
1998.

For  the  Court  of  Auditors

Bernhard  FRIEDMANN

President

(42) OJ  L  94,  28.4.1970.
(43) Article  5(2)(b)  of  Council  Regulation  (EEC)  No  729/70
states  that  the  Commission,  after  consulting  the  EAGGF
Committee  shall,  before  the  end  of  the  following  year,  on
the  basis  of  the  annual  accounts  and  supporting  documents
transmitted  by  the  Member  States,  clear  the  accounts.

20.4.98

EN

Official  Journal  of  the  European  Communities

C 121/15

COMMISSION’S  REPLIES

3. METHODOLOGY  OF  THE  COMMISSION

Execution  of  the  work

Staff  resources

3.10.
analysis  is  altered  as  little  as  possible.

The  mission  programme  based  on  the  risk

3.1.
The  Commission  will  allocate  the  majority  of  the
new  posts  recommended  by  Parliament  to  the  unit
responsible for the clearance of accounts in the course of
1998.

Risk analysis

3.2.
The  control  missions  for  1993  were  intended  to
continue the work begun in 1992 on the basis of the risk
analysis  for  the  1992  programme.

3.7. (a)
The  milk  quota  system  was  indeed  regarded
as  the  principal  risk  in  the  milk  sector,  having  given  rise
to major financial corrections in the period from 1989 to
1993.

A  more  extensive  survey  of  the  producer
3.7. (b)
countries  had  recently  been  conducted  using  the  1992
data.  The  results  led  to  a  reform  of  the  dried  fodder
market,  with  tighter  controls  in  this  area.

As  in  the  case  of  all  new  market  organisations,  Member
States  were  given  some  time  to  adjust.

3.7. (c)
starting  in  the  1995  exercise.

Cotton  in  Spain  was  the  subject  of  a  control

for  1994, 

Following  remarks  made  by  the  Court  in
3.7. (d)
Chapter  3  of 
the
its  Annual  Report 
Commission conducted a general enquiry into controls in
the  fisheries  sector,  with  specific  reference  to  the
compensatory  allowance  for  tuna.  This  enquiry  was  led
by DG XIV and covered operations in Spain, France and
Portugal.  The  clearance  of  accounts  Unit  was  consulted
and  informed  of  progress,  and  a  financial  correction  of
ESP 52 391 965 is envisaged in the clearance of accounts
procedure  for  the  1994  financial  year.

4. CORRECTIONS  MADE  BY  THE  COMMISSION

Flat  rate

4.5. (a)
It  is  correctly  stated  in  the  audit  report  that
the  final  flat-rate  corrections  in  the  1993  clearance  for
the  promotional  measures  for  milk  and  milk  products
were  as  follows:  Ireland  10 %,  Germany  2 %  and  United
Kingdom  2 %.

the  Commission  accepted  during 

With  regard  to  the  promotional  measures  in  the  United
Kingdom, 
the
conciliation  procedure  a  reduction  of  the  financial
correction from 5 % to 2 %. This reduction was based on
a  new  assessment  of  the  effectiveness  of  the  monitoring
of  the  promotional  measures  under  Regulations  (EEC)
No  585/93  and  (EEC)  No  595/93,  and  in  particular  of
the  risk  that  adjustments  to  the  programmes  were  not
made during the period of the contract in order to ensure
that  the  objectives  of  the  campaigns  were  achieved.

The  same  situation  prevailed  for  the  milk  sector  in
Germany.

4.5. (b)
The  corrections  for  Germany  and  Italy  were
justified  by  a  number  of  serious  weaknesses  in  physical
controls of beef at entry into the prefinancing regime and
during storage. Inadequate sealing procedures represented
only  one  of  these  weaknesses.  In  Ireland,  physical
controls  were  found  to  be  much  tighter,  in  particular
the  physical  verification  of  10 %  of  entries  into  the
prefinancing regime.

4.6.
The  conciliation  body  took  the  view  that  the
exceptional  circumstances  invoked  did  not  justify  a
correction of more than 10 %. The Commission accepted
the  opinion  of  the  conciliation  body  on  this  point,
irrespective of the improvements subsequently introduced
by Portugal.

Given  the  low  expenditure  on  fisheries  in  the  context  of
EAGGF  guarantee  expenditure,  and  the  fact  that  other
Commission services have conducted a general enquiry in
this field, it is not deemed necessary to return to it in the
near  future.

The  corrections  (1992  to  1994)  for  Ireland  arise
4.7.
from  the  non-application  of  legislative  sanctions  when
claimants  did  not  provide  satisfactory  explanations  for
absence  of  sheep  at  the  time  of  inspection.  The  situation

Ad  hoc  corrections

C 121/16

EN

Official  Journal  of  the  European  Communities

20.4.98

in  this  respect  was  less  clear-cut  in  Portugal,  and  no
correction  was  thought  justified.

5. CASES  INVOLVING  THE  CONCILIATION  BODY

The  Commission  will 

the  Court’s
5.6.
suggestion  and  bring  together  in  a  single  table  the  data
on  cases  submitted  to  the  conciliation  body  and  cases
lodged  with  the  European  Court  of  Justice.

take  up 

6. CASES  WHERE  NO  OR  INSUFFICIENT  CORRECTIONS

WERE  APPLIED

6.2.  and  6.3.
The  Commission’s  investigations  were
not  sufficiently  advanced  at  the  time  of  the  decision  on
the  1993  financial  year  to  enable  any  conclusions  to  be
drawn  about  the  regularity  of  expenditure  in  the  sectors
in  question.  The  main  reason  for  deferring  missions  to
these two Member States was the limited number of staff
available  in  the  relevant  department.

the  Greek  authorities.  The 

The  Commission  presence  in  Greece  was  highly  visible
during  the  controls  in  the  oils  and  fats  sector  in  general,
thus  influencing  the  efficiency  of  the  controls  carried  out
shortcomings  of
by 
consumption aid in Greece derive mainly from the lack of
penalties  when  controls  reveal  irregularities.  This  subject
will  be  dealt  with  in  the  clearance  of  accounts  for  1994
and  subsequent  financial  years.

6.4.
The  Commission  cannot  conclude  from  unclear
reports  that  the  scrutiny  work  was  not  performed  as
required by Regulation (EEC) No 4045/89, and therefore
no  corrections  could  be  justified.  The  effectiveness  of  the
scrutiny  work  is  at  present  being  examined  during  visits
to  beneficiaries  in  the  Member  States.

The  financial  corrections  envisaged 

6.5.
in  1994
concern the 1993/94 scrutiny programmes in the Member
States, which in turn concern expenditure declared in the
1992 financial year, the first for which these programmes
were  examined  by  the  clearance  auditors.

authorities 

demonstrated 

The  Greek 

a
6.8.
constructive  attitude  to  making  improvements  to  various
aspects  of  the  procedures  for  recognising  and  monitoring
producers’  organisations  as  well  as  the  system  for
withdrawing produce from the market. In the light of this
it  was  decided  to  lift  the  reserve  that  had  been  applied
earlier.  The  corrections  finally  proposed  concern  the
years  actually  examined  and  were  therefore  sustainable.

6.9.
It  is  true  that  the  positive  and  constructive
attitude  of  the  Greek  authorities  in  the  joint  monitoring
committee  led  the  Commission  to  adopt  a  positive
position.  However,  the  main  reason  for  not  applying  a
correction was the fact that the controls have largely been
carried  out  in  accordance  with  the  rules  since  the  end  of
1992  and  the  ex  post  controls  on  ginning  plants  helped
to  uncover  irregularities  amounting  to  around  ECU
3  million.  It  was  therefore  difficult  to  justify  a  flat-rate
correction.

Given  that  the  UK  authorities  had  remedied  the
6.10.
shortcomings identified and the amount of expenditure in
question  was  small,  no  control  was  carried  out  for  the
1993  financial  year.

The 

flat-rate  correction  of  10 % 

6.11.
initially
envisaged  was  reduced  to  5 %,  mainly  because  of
statistics  produced  by  Spain  in  the  dialogue  phase  of  the
clearance procedure, which showed the risk of loss to the
fund to be low. The introduction of improvements to the
Spanish  control  system  in  1995  carried  some  weight,  but
given  the  low  risk  of  loss,  the  guidelines  on  fixing
flat-rate  corrections  gave  the  Commission’s  services  no
scope  for  a  10 %  flat-rate  correction.

Following  the  conciliation  body’s  conclusions,  which
the
were  against  correcting  at  more 
Commission’s  services  agreed  to  further  reduce 
its
proposal.

than  2 %, 

6.12.
The  reform  of  the  clearance  of  accounts,  which
came  into  force  in  1996,  provides  a  legal  basis  for  a
correction  based  on  shortcomings  in  the  audit  work.

6.6.
The  Commission’s  opinion  is  that  corrections  for
the  administrative  fees  in  question  may  only  be  applied
on  the  basis  of  specific  provisions  forbidding  deductions
from  aids  paid,  as  exist  in  the  case  of  some  other
intervention  measures,  and  not  on 
the  basis  of
Article  1(4)  of  Regulation  (EEC)  No  729/70.  In  the
absence  of  specific  provisions,  there  was  no  scope  for
corrections  to  ewe  premium  expenditure  declared  by
Greece.

6.13. (a)
The  question  of  disputed  supplementary
levies  has  been  discussed  repeatedly  in  correspondence
with  the  Member  States  concerned  and  in  the  course  of
on-the-spot  visits  to  determine  the  exact  amount  of  the
levies  that  had  been  collected  too  late.  The  Court’s
suggestion  that  certain  Member  States  could  have  been
dealt with in the 1993 clearance was impracticable, given
the  time  needed  for  this  work  and  for  the  bilateral  and
conciliation procedures.

20.4.98

EN

Official  Journal  of  the  European  Communities

C 121/17

This  milk  abandonment  programme  was
6.13. (b)
funded  from  an  advance  charged  to  the  1989  clearance
decision 
assistance
supplemented  by  Community 
provided as part of the 1992 clearance. It was introduced
pursuant to the joint Commission and Council agreement
of  21  October  1994  on  the  question  of  milk  quotas  in
Spain  and  Italy.

Following  the  Court  of  Auditors’  criticisms,  the  Council
supplied  a  legal  basis  for  this  programme  by  adopting
Regulation  (EC)  No  1288/95.  EAGGF  controls  revealed
that  the  quantity  that  will  in  fact  be  bought  back  and
paid  for  will  be  slightly  less  than  the  total  eligible,  but
given  that  some  applications  still  to  be  settled  and  that
some  payments  have  proved  to  be  unjustified,  it  is
necessary to wait until the final annual instalment is paid
(1998)  before  establishing  the  exact  amount  to  be
recovered.

During  their  mission  of  23—27  June  1997,  the  EAGGF
auditors  monitored  the  course  of  this  programme  by
checking  the  payment  of  the  instalments  for  1995,  1996
and  1997.  It  transpired  from  this  that  the  amount  to  be
recovered  has  fallen  from  ESP  134,1  million  to  ESP  83,2
million,  because  more  applications  are  being  settled  as  a
result of appeals decided in favour of producers. As there
are  still  appeals  pending 
is  possible  that  other
applications will also have to be settled, so for this reason
alone,  i.e.  the  impossibility  of  determining  the  exact
amount  to  be  recovered  before  the  final  instalment  is
paid  (1998),  no  correction  was  made  in  1993.  If  the
Commission  had  followed  the  Court’s  suggestion  in  the
1994  clearance  procedure,  it  would  have  had  to  refund
the  difference  of  ESP  50,9  million  to  Spain.

it 

7.

IRREGULARITIES  AND  RECOVERIES

7.1  to  7.5. No  decision  on  the  clearance  of  accounts
may  be  proposed  without  offering  the  Member  State  in
question  the  opportunity  for  a  bilateral  procedure  and,
possibly,  conciliation.  A  decision  to  charge  sums  to  the
Community  budget  pursuant  to  Article  8  of  Regulation
(EEC)  No  729/70,  as  referred  to  by  the  Court,  is  taken
after  completion  of  these  procedures,  carried  out  as
quickly  as  possible  by  DG  VI,  and  on  the  basis  of  a
reasoned  proposal  by  UCLAF.  If  possible,  the  cases
referred  to  will  be  decided  in  the  course  of  the  clearance
procedure  for  the  1994  accounts.

8. EXPENDITURE  EXCLUDED  FROM  THE  1993

CLEARANCE

8.2.
The  advances  paid  before  September  1993
pursuant  to  Article  7a  of  Regulation  (EEC)  No  2294/92
were  excluded  from  the  clearance  decision  to  enable  the

Commission  to  include  the  amounts  concerned  in  a
correction  if  the  controls  carried  out  on  the  entire
expenditure  for  that  marketing  year  warranted  it.

This procedure will not, however, be used if the advances
themselves do not comply with the rules. In this case any
financial  consequences  will  be  determined  in  respect  of
the  financial  year  in  which  the  advance  was  paid.

8.3.
As  the  Court  explains,  the  decision  on  this  point
was  taken  on  14  July  1997,  whereas  the  Commission’s
decision  dates  from  30  July  1997.  It  was  therefore
objectively  impossible  for  the  conclusions  about  the  case
in  question  to  be  incorporated  into  the  clearance  of  the
1993  accounts,  given  that  allowance  has  to  be  made  for
the  bilateral  procedures  and  possibly  also  conciliation.

The 

financial 

correction 

8.4.
the
expenditure  of  ECU  16,4  million,  excluded  from  the
1992  and  1993  clearances,  will  be  included  in  the  1994
clearance  procedure.  The  Commission  has  no  legal  basis
for  charging  interest  on  outstanding  amounts.

relating 

to 

9. CONCLUSIONS

9.2.
As the Court of Auditors remarks in points 3.8 to
3.12  of  its  report,  numerous  procedures  have  to  be
complied  with  in  the  clearance  of  accounts,  particularly
as  regards  collecting  all  the 
information  from  the
Member States and enabling them to refer matters to the
conciliation  body.  The  large  number  of  procedures  to  be
followed  does  not  make  it  any  easier  to  clear  the
accounts  by  the  end  of  the  year  following  the  financial
year in question. This applies to the clearance of accounts
up  until  the  1995  financial  year.  One  of  the  aims  of  the
reform  introduced  in  1996  is  to  reduce  decision-making
time.

This  problem  will  be  largely  solved  in  the  course

9.3.
of  1998.

The  Commission  has  no  legal  basis  for  charging

9.4.
interest  on  outstanding  amounts.

the  clearance  procedure  has 

Because all the stages of the process take so
9.6 to 9.8.
long, 
into
consideration  all  the  new  elements  that  are  added
to  the  case  as  the  work  proceeds.  Some  Member  States
wait for the conciliation process to start before supplying
additional 
the
Commission’s  original  proposals  for  correction  may  be
revised  downwards  or  dropped  altogether.

information.  The 

result 

take 

that 

to 

is 

C 121/18

EN

Official  Journal  of  the  European  Communities

20.4.98

Interdepartmental  relations  and  coordination  within  the
Commission are improving all the time. The departments
are  extremely  diligent  in  their  efforts  to  recover  all  the
amounts  that  remain  outstanding  for  various  reasons
from  earlier  clearance  exercises.

The  Commission’s 

9.9.
flat-rate
corrections  were  amended  on  8  December  1997  to
include  the  principle  formulated  by  the  Court  to  the

guidelines  on 

effect  that  the  level  of  flat-rate  corrections  should  not  be
reduced  in  recognition  of  subsequent  improvements  to
systems.  It  is  important  to  remember,  however,  that  a
financial  correction  may  only  be  imposed  if  there  has
been a failure to comply with Community rules, and that
the correction must be in proportion to the financial loss
suffered  by  the  fund,  or  the  risk  of  loss.  If  the  Member
State  can  demonstrate  that  these  two  conditions  are  not
met,  any  proposed  correction  must  be  withdrawn.