Special Report No 14/98 on the closure of the forms of ERDF assistance together with the Commission's replies (submitted pursuant to Article 188c(4) (b) of the EC Treaty)
Date: 1998-09-23
Institutions: European Court of Auditors
Subjects: European Regional Development Fund, closing of accounts, financial intervention, financial year, implementation of the budget, validation of expenditure

27.11.98

EN

Official  Journal  of  the  European  Communities

C  368/1

I

(Information)

COURT  OF  AUDITORS

on  the  closure  of  the  forms  of  ERDF  assistance  together  with  the  Commission’s  replies

SPECIAL  REPORT  No  14/98

(submitted  pursuant  to  Article  188c(4) (b)  of  the  EC  Treaty)

(98/C  368/01)

CONTENTS

Paragraph
reference

Page

1.  INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.1 — 1.3

2.  STATE  OF  CLOSURE  ON  31  DECEMBER  1997 . . . . . . . . . . . . . . . . . . . . .

2.1 — 2.6

3.  OBSERVATIONS  ON  THE  CLOSURE  PROCESS . . . . . . . . . . . . . . . . . . . . .

3.1 — 3.23

Delays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.2 — 3.12

General remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.2 — 3.4

Delays  in  the  initial  submission  of  closure  documents  by  the  Member
States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.5 — 3.7

Delays  in  processing  applications  for  payment  of  the  balance . . . . . . . . . .

3.8 — 3.12

Inspections  in  the  Member  States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.13 — 3.20

Volume  of  the  Commission’s  checks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.13 — 3.14

Inspection  reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.15

Account  taken  of  inspection  findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.16 — 3.20

Events  following  closure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.21 — 3.23

4.  CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.1 — 4.6

Tables  1-3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2

2

3

4

4

4

4

5

5

5

5

6

7

9

Commission  replies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12

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1.  INTRODUCTION

1.1. As  part  of  its  Annual  Report  concerning  the
financial year 1996 (1), the Court examined the closure of
measures  jointly  financed  by  the  ERDF  covering  the
period  prior  to  the  1988  reform  of  the  Structural
Funds (2)  and  the  1989-1993  programming  period (3).
The  Court  recommended,  in  particular,  a  more  active
closure  policy  in  respect  of  the  measures  and  greater
strictness 
in  granting  deferrals  of  commitment  and
payment  deadlines  in  the  Member  States.  In  the  light  of
the anomalies it observed, the Court emphasised the need
for  inspection  systems  which  would  make  it  possible
genuinely  to  check  the  reliability  of  the  declarations  of
expenditure  submitted  by  the  Member  States.

1.2. Given  the  large  number  of  measures  yet  to  be
closed  on  31  December  1996 (4),  this  survey  was
extended in 1997 to include checks in six Member States
(Germany,  Greece,  Spain,  France,  Italy  and  the  United
the  Commission.  These  checks
Kingdom)  and  at 
concerned a sample of 53 measures decided upon prior to
1994, 18 of which had been closed and 35 had not. This
sample  was  taken  in  order  to  illustrate  the  closure
process  and  therefore  does  not  aim  to  be  statistically
representative.  This  selection  was  considered  to  be  the
most  appropriate  given  the  stages  of  closure  that  had
been  reached.  As  well  as  looking  at  regularity  and
legality, the Court wished to place emphasis on assessing
progress  made  with  closing  the  measures.  Lastly,  the
Community  Support  Frameworks 
the
programmes  for  the  1989-1993  period  were  examined
and  their  impact  assessed  in  the  Court’s  report  on  the
evaluation  of  Structural  Fund  measures.

(CSFs)  and 

1.3. The  checks  carried  out  in  the  aforementioned
Member States confirmed the observations the Court had
made  in  paragraphs  6.21  to  6.30  of  its  Annual  Report
concerning  the  financial  year  1996  as  regards  the

(1)  OJ  C  348,  18.11.1997.
(2)  Non-quota  measures 

integrated 

development
(NQ), 
operations  (IDO),  national  programmes  of  Community
interest 
integrated  Mediterranean  programmes
(IMP),  Community  initiative  programmes  (CIP)  and  projects
governed  by  Council  Regulation  (EEC)  No  1787/84  (OJ  L
169,  28.6.1984,  p.1).

(NPCI), 

(3)  In  particular,  operational  programmes  (OP)  or  projects
decided  on  in  the  context  of  the  Community  Support
Frameworks  (CSF)  and  Community  initiatives  (CI).  The
corresponding  legislation  is  based  on:
—  Council  Regulation  (EEC)  No  2052/88,  as  amended  by
Regulation  (EEC)  No  2081/93  (OJ  L  193,  31.7.1993,  p.
5);

—  Council  Regulation  (EEC)  No  4253/88,  as  amended  by
Regulation  (EEC)  No  2082/93  (OJ  L  193,  31.7.1993,  p.
20);

—  Council  Regulation  (EEC)  No  4254/88,  as  amended  by
Regulation  (EEC)  No  2083/93  (OJ  L  193,  31.7.1993,  p.
34).

(4)  Not  including  projects  governed  by  Regulation  (EEC)  No

1787/84  (see  paragraph  2.5).

the 
the 

final  beneficiaries’ 
ineligibility  of  much  of 

unreliability  of  the  declarations  of  expenditure  made  by
the  designated  authorities  in  the  Member  States (5),  the
supporting
unreliability  of 
documents  and 
the
expenditure. The corresponding observations were sent to
the  appropriate  authorities 
the  Member  States
concerned  and  to  the  Commission  which,  pursuant  to
Article  24  of  amended  Regulation  (EEC)  No  4253/88,  is
responsible  for  carrying  out  the  necessary  checks  and,
where appropriate, for recovering amounts paid in error.
Thus,  rather 
the
following  paragraphs  will  assess  the  extent  to  which
measures had been closed by 31 December 1997 and will
examine  the  closure  process  itself.

than  re-examining 

these  aspects, 

in 

2.  STATE  OF  CLOSURE  ON  31  DECEMBER  1997

2.1. The  majority  of  measures  approved  prior  to  1994
had to be covered by legal and financial commitments in
the  Member  States  by  31  December  1993 (6),  except
where  an  extension  had  been  granted.  As  a  rule,  final
beneficiaries in the Member States then had two years to
make  their  payments  and  the  Member  States  were
required to submit to the Commission within six months
the  documents  needed  for  closure,  in  particular  the
request  for  payment  of  the  balance  and  the  final
implementation report. As a rule, and provided that these
documents  were  admissible,  the  Commission  then  had  to
pay  the  remainder  of  the  financial  assistance  within  two
months,  i. e.  by  31  August  1996 (7).  In  some  cases  the
Commission  deferred  deadlines  for  commitments  and
payments by a maximum of one year; for some Objective
1  programmes  during  the  1989-1993  period  in  Italy  the
the
deadlines  were 
Commission’s  consent (8).

extended  until  1998  with 

(5)  The  statement  of  expenditure  is  the  document  issued  by  a
designated  authority  in  the  Member  State  and  sent  to  the
Commission.  It  includes  actual  expenditure  incurred  in
connection  with  payments  effected  by  the  final  beneficiaries
of  the  measures.  This  expenditure  must  be  justified  by
receipted  invoices  or  accounting  documents  of  equivalent
evidentiary  effect  which  are  not  sent  to  the  Commission  but
must remain available from final beneficiaries in the Member
States.

(6)  With  the  exception  of  Objective  2  OPs  in  the  1989-1991
period,  for  which  commitments  had  to  be  made  by  31
December  1991.  The  Objective  2  OPs  were  actually  covered
by  two  programming  periods  (1989-1991  and  1992-1993).
(7)  31 August 1994 in the case of the Objective 2 OP during the
1989-1991  period  to  which  reference  is  made  in  footnote  7.
These  deadlines  are  set  by  Article  21(4)  and  Article  25(4)  of
Regulation  (EEC)  No  4253/88.

(8)  The  reasons  for  this  consent  are  described  in  the  sixth  and
seventh reports on the Structural Funds concerning 1994 and
1995 (COM(95) 583 final, Chapter 5, paragraph 1.1, p. 148
and  COM(96)  502  final,  Chapter  1,  pp.  56-57).

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2.2. The  commitments  still  to  be  settled  are  shown  by
budget heading in Table 1 and by Member State in Table
2.  However,  these  two  tables  do  not  include  outstanding
commitments  (shown  in  Table  3)  in  respect  of:

(a) projects  decided  upon  by  the  Commission  prior  to  1
January  1989  and 
the  automatic
subject 
decommitment  provisions  laid  down  in  Article  12  of
Regulation  (EEC)  No  4254/88  on  the  ERDF;

to 

(b) projects  adopted  by  the  Commission  in  1989  that  are
governed  by  Regulation  (EEC)  No  1787/84  but  are
not  subject  to  automatic  decommitment  provisions.

2.3. Outstanding  commitments  in  respect  of  all  ERDF
measures  totalled  ECU  2 389,7  million  on  31  December
1997  (ECU  2 067  million  in  Table  1,  and  ECU  271,9
million  and  ECU  50,8  million  in  Table  3),  as  against
ECU  3 290,7  million  on  31  December  1996  and  ECU
4 658,9  million  on  31  December  1995 (9).

2.4. The amount still to be settled in respect of measures
decided  upon  after  the  1988  reform  was  ECU  1 795,3
million  on  31  December  1997,  as  against  ECU  2 527,4
million  on  31  December  1996  and  ECU  3 259,4  million
on  31  December  1995  (see  first  part  of  Table  1).  This
outstanding  amount  accounted  for  6,2 %  of  total
commitments entered into during the financial years 1989
to 1995, i. e. ECU 28 597,5 million (10), as against 8,8 %
on  31  December  1996  and  11,4 %  on  31  December
1995.  As  the  remaining  amount  outstanding  essentially
represented only the balance of the last annual instalment
in  respect  of  the  measures  (i. e.  in  general  20 %  of  this
last  instalment) (11),  the  number  of  measures  still  to  be
closed  provides  a  more  accurate  picture  of  the  scale  of
the  task  still  to  be  completed.  For  the  period  after  the
1988  reform,  the  figure  is  435,  as  against  617  on  31
December 1996 and 753 on 31 December 1995; the total
number  of  measures  begun  over  the  period  concerned
was  approximately  800.

million  on  31  December  1996  and  ECU  1 399,5  million
on  31  December  1995.  This  amount  concerns:

(a) commitments totalling ECU 271,7 million entered into
under  budget  headings  for  CSFs  and  CIs  and  special
budget  headings  for  NQ  measures,  IDOs,  IMPs,
NPCIs and CIPs (as against ECU 385,9 million on 31
December  1996  and  ECU  496,9  million  on  31
December  1995)  (see  second  part  of  Table  1);

(b) commitments  totalling  ECU  271,9  million  in  respect
of projects decided upon by the Commission before 1
January  1989  under  the  ERDF  and  subject  to  the
automatic  decommitment  provisions  laid  down  in
Article  12  of  the  amended  ERDF  Regulation  (as
against ECU 325,5 million on 31 December 1996 and
ECU  842,4  million  on  31  December  1995)  (see  Table
3);

(c) commitments totalling ECU 50,8 million in respect of
projects  adopted  by  the  Commission  in  1989  but
governed  by  former  Regulation  (EEC)  No  1787/84
and  not  subject  to  the  automatic  decommitment
provisions  (as  against  ECU  51,9  million  on  31
December  1996  and  ECU  60,2  million  on  31
December  1995)  (see  Table  3).

2.6. ERDF  measures  in  Italy  accounted  for  more  than
50 %  of  the  outstanding  amounts.  In  Italy,  the  1997
closure  exercise  concerned  almost  exclusively  measures
prior  to  the  1988  reform;  only  four  out  of  123
subsequent  programmes  had  been  closed.  Of  the  four
other  Member  States  which  accounted  on  31  December
1996  for  approximately  10 %  of  amounts  still  to  be
closed, the sums outstanding for the United Kingdom and
France  fell  by  25 %,  whereas  Spain’s  fell  by  37 %  and
Greece’s  by  68 %  when  compared  with  the  situation  on
31  December  1996.  In  terms  of  the  number  of  measures
still  to  be  closed,  the  main  Member  States  are  Italy,
France  and 
the  United  Kingdom,  which  account
respectively  for  30 %,  20 %  and  11 %  of  the  total.

2.5. As  regards  measures  jointly  financed  by  the  ERDF,
initial  decisions  in  respect  of  which  predate  the  1988
reform,  the  amount  to  be  settled  on  31  December  1997
totalled  ECU  594,4  million,  as  against  ECU  763,3

3.  OBSERVATIONS  ON  THE  CLOSURE  PROCESS

(9)  In  the  light  of  additional  reappraisals  and  commitments,  the
data  given  in  paragraphs  2.3-2.5  may  differ  from  those
contained  in  paragraphs  6.10-6.12  of  the  Annual  Report
concerning  the  financial  year  1996.

(10) The  sum  of  ECU  34 507,8  million  indicated  in  the  fifth
annual  report  on  the  implementation  of  the  reform  of  the
Structural  Funds  (Annex  on  financial  implementation)  also
includes  other  commitments.

(11) Article  21  of  Regulation  (EEC)  No  4253/88.

3.1. The  Court  noted  that  the  Commission  had  drawn
up  for  Belgium,  Germany,  France,  Italy  and  the  United
Kingdom  a  summary  of  programmes  not  closed  by  31
December  1997  which  sets  out  the  financial  data  and
describes  the  problem  preventing  closure  and  the  steps
taken  to  resolve  them.  A  summary  of  this  kind  and
covering the other seven Member States concerned would
have  been  a  useful  management  tool.

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Delays

General  comments

3.2. A  significant  weakness  in  the  closure  process  is
failure  by  the  Member  States  and  the  Commission  to
observe  the  deadlines  laid  down  in  the  Regulations  (see
paragraph  2.1).  The  closure  of  measures  by  these
deadlines  is  however  important  for  the  beneficiaries  of
aid  and  for  the  Member  States’  central  or  regional
authorities which are responsible for implementing them,
as  the  balance  of  the  last  instalment  is  settled  by  the
Commission  only  at  the  end  of  the  closure  procedure.

3.3. Furthermore,  the  avoidance  of  unjustified  closure
delays is a sound budgetary practice entailing the regular
decommitment of unused amounts allocated to Structural
Fund 
new
programmes  commence.

interventions,  which 

accumulate 

as 

in 

result 

closure  delays 

3.4. Lastly, 
increasing
overlapping  between  the  various  programming  periods,
which  affect  the  adoption  of  new  programmes.  The  fact
is  that  part  of  the  resources  available  in  the  Member
States’  regions  are  still  accounted  for  by  closure  tasks
which are sometimes regarded by the manager concerned
as  purely  formal,  such  as  the  submission  of  a  final
implementation  report  on  the  impact  of  a  programme
completed several years earlier while other measures have
commenced 
the
shortcomings  responsible  for  these  delays  are  likely  to
recur  when  new  measures  are  introduced.

Furthermore, 

interim. 

the 

in 

3.7. The  following  reasons  explain  delays  in  providing
the  documents  required  by  the  Commission:

(a)  the  difficulty  experienced  by  the  national  authorities
concerned  in  obtaining  supporting  documents  from
final  beneficiaries,  which  delays  the  updating  of
closure  tables  and  of  final  reports;

(b) the 

to 

lack  of  transparency  of  certain  Community
concepts due to the lack of a precise definition, in the
Regulations and in Commission Decisions, of some of
the  Commission’s  requirements, 
in  particular  as
regards  the  nature  and  content  of  documents  to  be
(certificate  of
sent 
final  reports (12)).  This
expenditure, 
imprecision  often  leads  to  different  interpretations  of
the  concepts  in  question.  However,  as  regards  the
eligibility  of  expenditure,  the  sheets  adopted  by  the
Commission 
to
in 
should, 
facilitating closure (13)

the  closure 

tables  and 

it  during 

contribute 

future, 

Delays  in  processing  applications  for  payment  of  the
balance

3.8. Once  the  closure  documents  have  been  provided,
the  geographical  unit  of  DG  XVI  with  responsibility  for
the  Member  State  is  asked  to  give  an  opinion  on  the
adequacy  of  the  final  report  and  on  the  declaration  of
expenditure.  It  is  sometimes  difficult  to  identify  the
definitive 
successive
amendments. The ‘Budgetary and Financial Management,
Controls  (COFIN)’  unit  subsequently  determines  the
balance  to  be  paid  and  prepares  the  payment  order,
which  must  be  submitted  to  DG  XX  for  approval.

financial 

because 

plan 

of 

Delays  in  the  initial  submission  of  closure  documents  by
the  Member  States

3.5. On  31  December  1997,  in  most  of  the  Member
States there were programmes in respect of which closure
documents  had  not  yet  been  sent  to  the  Commission.
This  was  true,  for  example,  of  two  measures  in  Belgium,
six  in  Germany,  eight  in  France  and  six  in  the  United
Kingdom.  In  the  case  of  approximately  half  of  the  53
measures  in  the  sample  examined,  these  documents  were
first  submitted  by  the  Member  States  after  delays  of  up
to  30  months.

3.9. The  Member  States  often  experience  delays  when
the Commission is slow to close programmes for which it
has  been  sent  the  closure  documents.  At  the  same  time,
they  are  not  informed  of  the  reason  why  the  two-month
deadline  for  paying  over  the  balance  has  not  been
observed.  For  example,  in  November  1997  the  Italian
authorities  sent  a  letter  to  the  Commission  criticising  the
total lack of action in respect of 99 requests for payment
of  the  balance  which  had  been  submitted  between  three
and  28  months  earlier.  Two  measures  had  experienced
delays of more than two years, 29 measures delays of one
to two years and 68 measures delays of between one and
seven  months.  Furthermore,  in  the  case  of  France,

3.6. Contact had supposedly been made several times, as
early  as  1996,  with  the  relevant  authorities  in  those
regions  of  the  United  Kingdom  which  had  not  yet
submitted  closure  documents.  However,  the  Commission
departments  questioned  were  unable 
to  produce
documents  describing  the  action  they  had  taken  and  the
corresponding  follow-up.

(12) As  regards  the  final  report,  the  Commission  drew  up  a
standard  document  to  be  used  by  the  Member  States  during
the  1994-1999  period  only  in  June  1995.

(13) See  the  elgibility  documents  annexed  to  the  Commission
the  decisions
Decisions  of  23  April  1997  amending 
approving  the  Community  Support  Frameworks,  Single
Programming  Documents 
initiative
programmes adopted in respect of the 15 Member States (OJ
L  146,  5.6.1997,  p.32).

and  Community 

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although  in  December  1997  19  requests  for  payment  of
the  balance  had  been  submitted  more  than  one  year
earlier  the  corresponding  measures  had  not  still  been
closed.

3.10.
It  was  observed  that  four  of  the  53  measures
examined had resulted neither in a request for additional
information nor in the authorisation of the final balance,
even  though  the  Commission  had  received  the  closure
documents  between  six  and  22  months  earlier.

it  must  be  pointed  out  that  a
3.11. Nevertheless, 
frequent  cause  of  delay 
in  processing  requests  for
payment of the balance is the unsatisfactory nature of the
documents submitted: either the final report is considered
inadequate  or  the  declarations  of  expenditure  provided
by  the  Member  State’s  authorities  are  incomplete  or
incorrect  (data  are  not  broken  down  by  individual
measure;  there  is  a  lack  of  information  needed  to
establish a link between expenditure listed in ecus and in
national  currency;  reference  is  made  to  an  incorrect
eligibility  period  or  financial  plan;  declarations  of
expenditure  and  final  reports  contradict  one  another,  or
expenditure  is  ineligible).  These  problems  are  generally
the  consequence  of  serious  shortcomings  in  terms  of
organisation and internal control which should have been
noted  earlier,  especially  given  the  mechanisms  envisaged
within  the  framework  of  partnership  and,  in  particular,
the Monitoring Committees, on which the Commission is
represented.

3.12. Where  inconsistencies  are  identified  in  closure
documents  (18  of  the  53  measures 
in  the  sample
examined),  the  Commission  and  the  authorities  of  the
Member  State  concerned  exchange  correspondence  so  as
to  clear  up  the  problem.  In  two  of  these  cases,  the
Commission  took  a  year  to  send 
its  request  for
clarification  to  the  Member  State.  In  five  cases,  the
Member  States  subsequently  took  more  than  a  year  to
meet  the  Commission’s  requests  for  information  and  in
four  cases  the  Member  States  did  not  submit  the
information  requested.  The  maximum  interval  noted
between  the  initial  submission  of  a  request  for  payment
of  the  balance  and  the  establishment  of  a  payment  order
after  clarification  of  problems  raised  was  29  months.

Inspections  in  the  Member  States

Volume  of  the  Commission’s  checks

3.13.
In  its  reply  to  paragraphs  6.19  to  6.20  of  the
Annual  Report  concerning  the  financial  year  1996,  the
Commission  stated  that  it  had  taken  appropriate  action
to  guarantee  the  legality  and  regularity  of  Community
payments,  including  the  final  payment.  Furthermore,  in
its eighth report on the Structural Funds, the Commission
states that the 26 checks made in 1996 by DG XVI were

to 

the 

check 

intended 

primarily 
existence  and
effectiveness  of  systems  applicable  to  the  management
and  inspection  of  operations,  and  the  reliability  of  the
information  sent  to  the  Commission  (in  particular  of
certificates  of  expenditure).  Secondly,  they  must  make  it
possible  to  check  the  regularity  of  the  use  of  ERDF
appropriations,  the  accuracy  of  the  accounts  and  the
legitimacy,  regularity  and  quality  of 
financial
management,  in  the  light  of  the  objectives  of  each  form
of  assistance  and  of  the  Community  rules.  Following
these checks, the Commission takes the necessary steps to
ensure  that  any  irregularities  discovered  by  its  own
officials  or  by  the  Court  of  Auditors  are  monitored  and
corrected.

the 

3.14. As  regards  the  volume  of  checks  made  by  the
Commission,  some  120  measures  belonging  to  the
1989-1993  programming  period  were  checked  over  the
1994-1997  period.  Given  the  shortcomings  noted  by  DG
XX  during  its  audit  of  the  systems  for  checking  and
managing  Structural  Fund  measures (14),  it  cannot  be
concluded,  even  assuming  that  each  check  meets  the
requisite criteria, that the percentage of measures checked
during  the  programming  period  or  prior  to  closure  can
adequately  guarantee  the 
legality  and  regularity  of
Community  payments,  including  the  final  payment.

Inspection  reports

3.15. Only  27 %  of  the  reports  by  DG  XVI  which  the
Court has obtained contain analysis of or opinions on the
Member States’ management and inspection systems. The
reports,  which  are  limited  in  scope,  contain  only  a
description  of 
financed  measures  and  an
examination  of  specific  problems.  No  report  was
produced  in  respect  of  several  missions.

jointly 

Account  taken  of  inspection  findings

is 

the  difficulty 

3.16. Another  shortcoming  observed 
in  the  closure
process,  on  the  basis  of  the  sample  of  measures
examined, 
the
Commission  in  taking  account  within  a  reasonable  time
of  the  comments  made  as  a  result  of  its  own  inspections
in the Member States or of the Court’s audits. This is the
case,  in  particular,  where  irregularities  detected  in  the
lead  to  an  enquiry  by  the
course  of 
Commission’s  Anti-Fraud  Unit  (UCLAF).  Given  the

experienced  by 

inspections 

(14) Document  SEC(94)  1654  final.

C  368/6

EN

Official  Journal  of  the  European  Communities

27.11.98

nature  and  complexity  of  the  problems  to  be  examined,
the  corresponding  work  is  particularly  time-consuming.

3.17. Although the problems identified during the audits
generally  concern  only  a  very  small  number  of  projects,
or  even  a  single  project,  in  the  majority  of  cases  the
whole  programme  is  suspended,  thereby  often  delaying
closure  by  several  years.

3.18. The  Commission  formally  decides  to  reduce
in  exceptional  cases (15).  The
Community  aid  only 
instructions  of  15  October
Commission’s 
internal 
1997 (16)  on  net 
the
framework  of  Article  24  of  Regulation  (EEC)  No
4253/88  are  certainly  a  sign  of  progress,  but  that  does
not mean that regulatory standards should not be drafted
at  a  later  date.

financial  corrections  within 

(c) In  April  1996,  DG  XX  inspected  the  Ireland  and
Northern  Ireland  Interreg  CI  on  the  spot.  In  January
1997,  the  closure  documents  were  submitted  by  the
Member  State  and  in  February  1997  the  inspection
report,  which  drew  particular  attention  to  categories
of  ineligible  expenditure,  was  sent  to  DG  XVI  and  to
the  appropriate  authorities  in  the  Member  State.  In
November  1997,  payment  of  the  final  balance  was
made  on  the  basis  of  the  documents  submitted  10
months  earlier;  no  detailed  analysis  was  performed
and  account  was  not  taken  of  any  adjustment.

3.20. Lastly,  in  the  sample  examined  the  Court  drew
attention  to  five  Commission  inspections  (three  by  DG
XVI  and  two  by  DG  XX)  the  findings  of  which  were
sent,  together  with  a  request  for  comments,  to  the
national authorities more than a year after the inspection.
In  one  of  these  cases,  DG  XVI  sent  its  observations  two
years  after  the  on-the-spot  inspection  of  two  Objective  2
OPs  (1989-1991  and  1992-1993  programming  periods).

3.19. The following examples, which are taken from the
sample  examined,  illustrate  the  problems  which  may
arise.

Events  following  closure

(a) An  on-the-spot  inspection  carried  out  in  February
1996  by  DG  XVI  in  respect  of  the  Extremadura  (E)
Objective 1 OP detected several shortcomings. In July
1996,  the  Commission  authorised  payment  of  the
balance  even  though  it  was  only  at  the  stage  of
sending  its  inspection  findings  to  the  Member  State.
Furthermore,  although  the  Spanish  authorities’  reply
dated  October  1996  gave  assurances 
the
problems  encountered  could  not  recur  because  a
computerised  system  for  monitoring  the  projects  had
been introduced, the audit carried out by the Court in
April  1997  once  again  did  not  enable  the  declaration
of  expenditure  to  be  reconciled  with  the  management
that
department’s  accounts. 
ineligible  projects  totalling  approximately  ECU  15
million  had  been  included  in  the  declaration  of
expenditure  and  that  five  road  projects  worth  a  total
of ECU 3,8 million had been financed both by the OP
in  question  and  by  the  Spain-Portugal  Interreg  OP.

It  was  also  noted 

that 

(b) Following  an 

inspection  of 

the  Objective  1
Saxony-Anhalt (D) OP carried out on the spot by DG
XVI  in  November  1996  on  the  basis  of  closure
documents  received  in  June  1996,  amendments  were
made  to  the  final  report.  In  April  1997,  the  final
balance  was  authorised  even  though  a  difference  of
ECU  3,2  million  still  existed  between  the  final  report
and  the  declared  expenditure  and  although  account
was  taken  of  expenditure  which  had  merely  been
approved  rather  than  of  expenditure  which  had
actually  been  incurred  (see  also  paragraph  3.22).

3.21.
In  practice,  the  closure  of  a  programme  and
payment  of  the  balance  do  not  result  in  discontinuation
of the monitoring which the designated authorities in the
Member  State  and  the  Commission  are  required  to  carry
out. The Court noted that in Germany and in the United
Kingdom  projects  may  still  be  inspected  by  external
auditors  on  behalf  of  the  Member  States’  managing
authorities  after  the  certificate  of  expenditure  has  been
submitted.  For  example,  the  Annual  Report  concerning
the financial year 1996 (17) noted that, following an audit
subsequent  to  the  presentation  of  the  certificate  of
expenditure 
in  respect  of  the  East  Midlands  (UK)
Objective  2  OP  (1990-1991),  the  declared  eligible  cost
should  have  been  reduced  by  ECU  1,32  million.  This
reduction was not subsequently taken into account by the
Commission.  In  the  case  of  the  Objective  1  (1990-1993)
Brandenburg (D) OP, for 179 out of 761 jointly-financed
projects  (23,5 %)  compulsory  checks 
in  respect  of
definitive documentation of expenditure were not carried
out  when  the  declaration  of  expenditure  was  drawn  up
by  the  region.  Similarly,  in  the  case  of  the  Objective  1
(1990-1993)  Saxony-Anhalt  OP,  417  out  of  1 428
to  be
jointly-financed  projects 
checked.  Revenue  totalling  approximately  ECU  70,7
million  from  these  projects,  the  collection  of  which  was
deemed  necessary  by  the  regional  authorities,  had  not
been  excluded  from  the  Member  State’s  certificate  of
expenditure.

(29,2 %)  were  still 

3.22. Furthermore,  certain  conditions  for  granting  the
aid  concerned,  such  as  the  creation  or  preservation  of
jobs,  can  be  checked  only  several  years  after  the

(15) Decision  taken  pursuant  to  Article  24  of  Regulation  (EEC)

No  4253/88.

(16) C(97)3151  final-II.

(17) See  paragraph  6.26.

27.11.98

EN

Official  Journal  of  the  European  Communities

C  368/7

investment  has  been  completed.  Thus,  in  Germany  there
is  a  five-year  surveillance  period  during  which  created  or
preserved posts must be occupied permanently for at least
three  years,  failing  which  the  surveillance  period  is
extended  by  three  years.  If  the  requisite  number  of  posts
is  not  created,  the  final  beneficiary  is  asked  to  refund  all
or  part  of  the  aid.

It 

3.23.
is  therefore  possible  that  refunds  to  the
Community budget may still be made after the three-year
period,  following  the  last  payment  in  respect  of  the
measure,  during  which  the  relevant  body  and  authorities
are  required  to  keep  at  the  Commission’s  disposal  all
supporting  documents  relating  to  the  measures (18).  For
the  projects  concerned  by  these  events,  beneficiaries’
commitments  should  continue  to  be  monitored  by  the
authorities  designated  by  the  Member  States  and  a  final
settlement  procedure  should  be  introduced.

information,  for  examining  information  received  and
for systematically pursuing Member States which have
not  provided  closure  documents  by  the  stipulated
deadlines  or  which  have  not  submitted  replies  to
additional  requests  (paragraphs  3.5-3.12);

(b) send  to  the  Member  States  a  document  explaining
how  the  closure  balance  is  calculated,  as  it  emerged
that the national authorities responsible for managing
measures  were  not  always  able  to  explain  the
calculation  in  question;

(c) apply  provisional  closure  where  one  or  more
measures  are  still  to  be  examined  (see  paragraph
3.17).

4.4. As  regards  checks  carried  out  by  the  Community
authorities 
in  the  Member  States,  the  Commission
should:

4. 

CONCLUSION

4.1. The  Court’s  audit  revealed  shortcomings  in  the
Member  States  (final  account  of  final  beneficiaries,
certification  of  expenditure,  final  reports  and  submission
of documents) and at the Commission (analysis of closure
documents, and calculation and payment of the balance).
These  shortcomings  occasionally  resulted  in  significant
delays and in decisions and payments that were incorrect
or  lacking  in  transparency  (see  paragraphs  1.3,  3.5-3.12
and  3.19).

in  order 

4.2. Swifter  closure  of  ERDF  measures  is  necessary,  not
only  in  the  interest  of  the  beneficiaries  of  completed
to  allow  proper
measures  but  also 
implementation  of  programmes  in  the  1994-1999  period
(see  paragraphs  3.2-3.4)  which  are  soon  to  be  closed,  in
particular  Objective  2  OPs  in  the  first  programming
the
period 
Commission 
in
partnership  with  the  Member  States,  to  remedy  the
shortcomings  that  have  been  identified.

for 
the  necessary  measures, 

(1994-1996).  Thus, 

is  essential 

take 

to 

it 

(a)  strengthen 

the 

for
administrative 
monitoring  checks  that  have  been  carried  out  (see
paragraphs  3.16-3.19);

procedures 

(b) ensure  that  the  findings  of  its  inspections  are  sent  to
the  Member  States  within  a  much  shorter  time,  not
only  to  speed  up  the  closure  of  the  measures
concerned  but  also  to  enable  the  Member  States  to
introduce  as  quickly  as  possible  corrective  measures
that will also benefit the more recent programmes still
being  implemented  (see  paragraph  3.20).

for 

it  provides 

is  genuinely 

In  future,  the  Commission  should  also  ensure  that
4.5.
the  new  Commission  Regulation  (EC)  No  2064/97 (19),
which  adopts  detailed  arrangements 
financial
inspections carried out by the Member States, is properly
implemented and, in particular, that the financial control
for  which 
independent.
Furthermore,  as  the  moment  when  the  final  balance  is
paid  over  is  the  stage  at  which  there  is  a  risk  that
ineligible  expenditure  may  be  definitively  co-financed  by
the  Community,  the  Commission  should  pay  particular
attention to payments made during the closure stage and,
if  necessary,  check  the  measures  to  be  closed  itself  so  as
to guarantee the validity of all corresponding Community
payments  on  the  basis  of  samples  (see  paragraphs
3.13-3.15).

In  order  to  close  measures  more  quickly,  the

4.3.
Commission  should:

(a)  introduce,  within  the  framework  of  an  active  closure
policy,  concrete  procedures  for  requesting  additional

(18) Article  24(3)  of  Regulation  (EEC)  No  4253/88  lays  down
that  any  amount  subject  to  the  recovery  of  undue  payments
procedure  must  be 
the  Commission.
refunded 
Furthermore, Article 23(3) of the same Regulation lays down
that  the  supporting  documents  must  be  kept  for  three  years
after  the  last  payment  in  respect  of  a  measure.

to 

they  do  not  preclude 

4.6. Lastly,  as  regards  financial  adjustments,  although
the  Commission’s  internal  instructions  represent  a  step
forward, 
the  possibility  of
subsequent  legislation  (see  paragraph  3.18).  As  regards
events  occurring  after  closure  which  may  lead  to  the
collection of revenue, a final settlement procedure should
be  introduced  (see  paragraphs  3.21-3.23).

(19) OJ  L  290,  23.10.1997,  p.  1.

C  368/8

EN

Official  Journal  of  the  European  Communities

27.11.98

This  report  was  adopted  by  the  Court  of  Auditors  in  Luxembourg  at  the  Court  meeting  of  23
September  1998.

For  the  Court  of  Auditors

Bernhard  FRIEDMANN

President

Situation  of  sums  still  to  be  settled  in  respect  of  ERDF  measures  approved  prior  to  1994,  by  budget  heading (1)  —  1  January/31  December  1997 (2)

Table  1

Budget heading

B2-1 2 0 0  Objective  1

B2-1 2 0 1  Objective  2

B2-1 2 0 2  Objective  5b

B2  148  IC

B2  1 9 0  New.  L.

B2  1 8 2  ERDF

Subtotal

Amount  on
1.1.1997

1 184,3

481,5

107,7

593,2

77,6

83,1

2 527,4

Programmes/projects  after  the  reform  (first
generation)

IMPs,  OQ,  NCIPs,  CIPs,  etc.  from  various
budget  headings

385,9

Total

2 913,3

Source:  SINCOM.

Number  of
measures
commenced

Decommitments
1.1.1997-
31.12.1997

Number  of
measures  closed

Payments
1.1.1997-
31.12.1997

Number  of
measures  closed

Situation  at
31.12.1997

(million  ECU)

Number  of
measures
commenced

147

110

53

178

6

123

617

152

769

21,6

22,7

2,5

17,7

1,8

7,0

73,3

35,5

108,8

12

2

4

11

1

3

33

17

50

319,3

105,2

15,3

163,7

36,4

19,0

658,9

78,7

737,5

35

18

9

45

1

41

843,4

353,7

89,9

411,8

39,4

57,0

149

1 795,3

31

180

271,7

2 067,0

100

90

40

122

4

79

435

104

539

(1)  Except  for  individual  projects  decided  upon  on  the  basis  of  the  old  rules,  which  are  included  in  Table  3.
(2)  Differences  when  compared  with  the  tables  included  in  the  report  on  the  financial  year  1996  are  due  to  additional  re-evaluations  and  commitments.

.

2
7
1
1
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

3
6
8
/

9

 
 
 
 
 
 
Situation  of  sums  still  to  be  settled  in  respect  of  ERDF  measures  approved  prior  to  1994,  by  budget  heading (1)  —  1  January/31  December  1997 (2)

Table  2

Country

Amount  on
1.1.1997

Number  of
measures
commenced

Decommitments
1.1.1997-
31.12.1997

Number  of
measures  closed

Payments
1.1.1997-
31.12.1997

Number  of
measures  closed

Amount  on
31.12.1997

(million  ECU)

Number  of
measures
commenced

Belgium

Denmark

Germany

Greece

Spain

France

Ireland

Italy

Luxembourg

Netherlands

Portugal

United  Kingdom

Subtotal

Unspecified

Source:  SINCOM.

43,8

2,9

158,2

269,1

290,4

261,0

33,4

1 332,6

6,7

23,2

58,9

331,5

2 811,6

101,7

Total

2 913,3

27

8

46

54

59

143

13

180

5

16

18

83

652

117

769

1,3

0,2

4,8

15,8

6,7

5,1

2,8

24,6

0,1

1,3

3,9

35,6

102,2

6,6

108,8

1

0

11

8

1

4

0

8

1

1

1

4

40

10

50

7,9

0,9

59,5

167,9

101,3

55,4

13,4

233,4

0,0

5,7

7,0

46,7

698,9

38,6

737,5

5

2

15

21

22

32

7

11

0

4

5

17

141

39

180

34,6

1,8

93,8

85,4

182,4

200,5

17,2

1 074,6

6,7

16,3

48,0

249,1

2 010,5

56,5

2 067,0

21

6

20

25

36

107

6

161

4

11

12

62

471

68

539

(1)  Except  for  individual  projects  decided  upon  on  the  basis  of  the  old  rules,  which  are  included  in  Table  3.
(2)  Differences  when  compared  with  the  tables  included  in  the  report  on  the  financial  year  1996  are  due  to  additional  re-evaluations  and  commitments.

C

3
6
8
1
0

/

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
7
.
1
1
.
9
8

 
 
 
 
 
 
27.11.98

EN

Official  Journal  of  the  European  Communities

C  368/11

Situation  of  sums  still  to  be  settled  in  respect  of  individual  projects  decided  upon  on  the  basis  of  the  old  Regulations  —  1  January/31
December  1997

Table  3

Amount  on
1.1.1997

Decommitments  in
1997

Payments  in  1997

Re-evaluation  on
closure  of  the
financial year

Situation  at
31.12.1997

325,5

27,1

25,2

−1,3

271,9

(million  ECU)

51,9

0,1

0,4

−0,6

50,8

Individual  projects  decided  upon  by  the
Commission  prior  to  1  January  1989
under  the  ERDF  and  subject  to  Article
12  of  the  amended  ERDF  Regulation

Individual  projects  decided  upon 
in
1989, but governed by Regulation (EEC)
No  1787/84

Source:  SINCOM.

C  368/12

EN

Official  Journal  of  the  European  Communities

27.11.98

COMMISSION  REPLIES

1.  INTRODUCTION

1.  many  Member  State  final  reports  are  of  insufficient

quality;

of 

operations. 

ERDF-co-financed 

1.1-1.3. As the Court remarks, it has already addressed,
in  its  previous  annual  report,  the  subject  of  the  financial
closure 
The
Commission  gave  a  full  reply  on  that  occasion.  The
Commission  continues  to  close  operations  as  rapidly  as
its  resources  and  the  quality  of  the  Member  States’
it  only  approves
closure  documentation  permit; 
extensions  to  programmes’  commitment  and  payment
periods  when  the  extensions  are  justified.  Commission
Regulation  (EC)  No  2064/97  now  specifically  provides,
in  Article  8,  for  presentation  by  the  Member  State  at
statement  providing  an
programme  closure  of  a 
independent  opinion  on  the  validity  of  its  request  for
final  payment.  It  remains  the  responsibility  of  the
Member  States 
their
declarations  of  expenditure.

the  accuracy  of 

to  ensure 

The Commission corrects or requires the correction of all
known  Member  State  financial  irregularities.  However,
many  corrections  are  made  by  the  Member  State  itself
and do not require the formal application of Article 24 of
Regulation  (EEC)  No  4253/88.

The  Commission  understands  that  the  sample  of  53
ERDF 
interventions
audited  by  the  Court  in  the  Member  States.  The  sample
may  therefore  not  be  representative,  since:

interventions  consists  mainly  of 

—  the  Court,  in  selecting  operations  for  audit  in  the
Member States, works on the basis of risk assessment;
it  is  thus  more  likely  to  control  operations  posing
problems,

—  where  the  Court  does  indeed  identify  a  problem,  the
action  required  of  the  Commission  to  settle  the
problem may in itself tend to delay the closure of the
programme  concerned.

Many of the Court’s observations in this report are based
on  findings 
in  the  Commission’s  files.  The  Court
presented  summary  information  on  its  findings  in  July  at
the  Commission’s  request.  Because  of  the  tight  timetable
for  the  preparation  of  its  reply,  the  Commission  was  not
in  a  position 
this
information.

to  examine  and  comment  on 

2.  other  information  necessary  for  the  closure  of  many
programmes  has  not  been  provided  by  the  Member
States 
(e.g.  results  of  court  cases,  satisfactory
settlement  of  control  observations,  presentation  of
programme  financial  plans  as  modified  by  the
Monitoring  Committees);

3.  the  closure  date  for  a  number  of  programmes  has
been  deferred  for  justified  reasons;  this  concerns  in
particular  Italy  and  helps  explain  why  (point  2.6)  a
outstanding
proportion 
considerable 
commitments  involve  this  Member  State.

the 

of 

The  Court’s  figures  show  that  both  the  number  of  open
operations  and  the  volume  of  outstanding  commitments
have  been  significantly  reduced  during  1997.  As  the
Court  remarks,  it  only  remains  in  any  case  to  make  the
payment  of  the  balance  (20 %)  of  the  final  annual
instalment  of  the  multiannual  operation.  Moreover,  the
volume  of  outstanding  commitments  does  not  represent
the sum owed by the Commission to the Member States:
in  many  cases,  underspending  on  programmes  will  mean
that decommitments or even recoveries may be necessary.
The  Commission  is  continuing  and,  indeed,  intensifying
its  efforts  to  settle  all  operations  which  can  properly  be
settled  on  the  basis  of  the  information  available.  In  the
first six months of 1998, for example, 48 further projects
and  75  further  programmes  were  closed  and  the  total
volume  of  outstanding  commitments  was  reduced  by
ECU  220  million.  Outstanding  commitments  now
represent  only  some  3 %  of  the  total  ERDF  envelope  of
the  pre-1994  programmes,  or  about  six  weeks’  worth  of
the  current  1994-99
commitments 
programmes.

respect  of 

in 

3.  OBSERVATIONS  ON  THE  CLOSURE  PROCESS

Delays

General remarks

2.  STATE  OF  CLOSURE  ON  31  DECEMBER  1997

2.2-2.6. The  Commission  explained  in  its  reply  to  the
Court’s 1996 Annual Report why a significant number of
pre-1994  operations  remain  open:

3.2-3.4. As  the  Court  states  in  paragraph  2.1,  the
regulatory requirement on the Commission as regards the
making  of  payments  is  that  payments  are  to  be  made  ‘as
a general rule’ within two months, and depend on receipt
of  an  acceptable  application.  So  there  is  no  absolute

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deadline for these payments. However, the Commission is
aware  of  the  problems  which  may  be  created  by  the  late
settlement  of  operations  and  it  does  its  best  to  advance
matters.  The  overlapping  of  financial  operations  relating
to successive programming periods is inevitable under the
Regulations  and  Structural  Fund  managers 
the
Member  States  need  to  be  able  to  cope  with  this  and,  in
particular, 
the
documentation  required  for  programme  closure.

to  provide 

the  ability 

retain 

to 

in 

points 

1.1-1.3.  However, 

the reasons explained in the fourth paragraph of its reply
to 
the  Commission
acknowledges  that  in  many  cases  programme  closure
takes  a  long  time.  This  is  partly  because  of  the  limited
human  resources  which  can  be  devoted  to  the  task  and
partly  because  of  weaknesses  in  Member  States’  closure
documentation  which  have  to  be  taken  up  with  the
authorities  concerned.

Delays  in  initial  submission  of  closure  documents  by  the
Member  States

3.5. The  Commission  regularly  reminds  the  Member
States of the need to present the information required for
the  closure  of  programmes.

It 

3.6.
limited
is  not  necessarily  a  good  use  of 
Commission  staff  resources  to  make  a  written  record  of
every  telephone  contact  or  meeting  with  a  Member  State
or to produce a document such as that mentioned by the
Court.

Contacts with the United Kingdom authorities on closure
of the 1989-1993 programmes have been maintained at a
variety of levels at least since 1995. For example, a letter
was sent by the Department of Trade and Industry to the
Commission  in  January  1996  undertaking  to  present  all
outstanding  final  reports  by  April  1996.  A  considerable
correspondence on final reports has been exchanged with
the  United  Kingdom  national  authorities  and 
the
Regional  Government  Offices.  A  number  of  meetings
have  also  been  organised  with  the  Government  Offices.
The  same 
frequently  been  raised  by
Commission  representatives  in  Monitoring  Committee
meetings.

issues  have 

3.7 (b) The  Commission  considers  that  the  application
of  Regulation  (EC)  No  2064/97  and  the  eligibility  rules
adopted in April 1997 together with the increasing use by
Member  States  of  the  annual  report  model  (see  the
Commission’s reply  to paragraphs 6.34-6.36 of  the 1996
Annual  Report)  will  considerably  improve  the  quality  of
closure  documents  and  allow  quicker  closure  of  the
programmes.

The  Commission  would  refer  also  to  the  Court’s
statement  in  paragraph  6.40  of  the  1996  Annual  Report
that  it  is  at  the  moment  of  programme  closure  that  any
ineligible  expenditure  in  Member  States’  declarations
risks  being  definitively  co-financed  by  the  Community
budget.  For  this  reason,  a  considerable  number  of
verifications  by  the  Commission  are  necessary.

Problems  which  such  verifications  raise  may  result  either
in  a  formal  request  to  the  national  authorities  for
clarifications  or,  often,  in  informal  requests  to  the
competent  national  officials.  The  absence  of  a  written
record of such a request does not mean that the problem
has  not  been  raised  with  the  Member  State  in  the  course
of  the  multiple  informal  contacts  which  take  place
between  the  services  concerned.

In  the  case  of  Italy  the  Commission  has  given  a  specific
assurance that outstanding closures will be made as soon
as  possible  in  spite  of  the  considerable  complexity  of  the
operation.

3.13. The  Commission  is  not  in  a  position  to  guarantee
that  all  its  payments  are  correct,  since  they  are  based  on
certified  Member  State  payment  declarations  which  may
nevertheless  include  ineligible  expenditure,  in  spite  of  the
Commission’s  efforts  to  ensure  that  Member  States
discharge  efficiently  their  duty  of  ensuring  proper
financial  management  and  control  of  Structural  Fund
programmes.

Inspections  in  the  Member  States

Volume  of  the  Commission’s  checks

It  should  be  noted  that  Article  36  of  the  new  general
Regulation  proposed  by  the  Commission  for  the  next
programming  period  gives  details  of  what  should  be
contained  in  the  annual  and  final  report.

3.14. The  Commission  carries  out  as  many  on-the-spot
checks as its resources allow. But these checks cannot, in
themselves,  ensure  the  absence  of  irregularities.  They
lead,  however,  to  the  correction  of  the  irregularities
which  are  discovered.

Delays  in  processing  applications  for  payment  of  the
balance

Inspection  reports

3.9-3.12. The  Commission  cannot  form  an  opinion  on
the specific findings resulting from the Court’s sample for

3.15. The services concerned are seeking to improve the
documentation  relating  to  their  on-the-spot  checks  and

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the  speed  with  which  it  is  produced.  However,  the  DG
XVI  control  reports  are 
include  only
necessary  information:  the  control  objectives,  a  short
description  of  the  operations,  the  findings  and  the
recommendations.

intended  to 

3.18. As  mentioned  in  reply  to  paragraphs  1.1-1.3,
financial  corrections  are  often  made  without 
the
Commission  having  to  take  a  formal  decision  under
Article  24.  The  Commission  has  proposed  a  new
regulatory  basis  for  making  financial  corrections  in  the
next  programming  period.

the 

co-financed  operations 

Given  the  variety,  the  number  and  the  geographical
the
spread  of 
beneficiaries,  it  may  be  difficult  to  form  a  valid  overall
opinion on the Member State management system on the
basis of a one-week check by two officials; in such cases,
DG  XVI  limits  its  observations  to  problems,  including
system  aspects,  which  have  been  sufficiently  documented
by  the  control.

and 

Account  taken  of  inspection  findings

3.16. The Commission follows up all reported problems
with  a  view  to  correcting  them,  or  requiring  their
correction by the Member State, before the closure of the
programme concerned. This procedure is often laborious,
depending  on  the 
information  available  about  the
problem  and  the  reactions  of  national  authorities  and
beneficiaries.  Article  7  of  Regulation  (EC)  No  2064/97
includes  specific  provision  for  the  satisfactory  settlement
by  Member  States  of  reported  problems.

Problems  engaging  the  attention  of  UCLAF  often  involve
court  cases  which  may  take  a  long  time  to  settle.
Conversely, a considerable number of problems identified
by  the  Commission  services  may  be  corrected  quickly,
without  a  formal  exchange  of  letters  with  the  national
authorities.

in  relation 

It  is  true  however  that  the  Commission  encounters
difficulties  and  delays 
the  Court’s
preliminary  audit  findings  included  in  the  ‘sector  letters’
which are sent to the Member States for comments . The
Commission  receives  copies  of  such  letters  and  of  the
Member State’s reply, but it would also be useful for it to
be informed of the Court’s final position on such cases; it
is  discussing  this  possibility  with  the  Court.

to 

3.19 (a) The  Spanish  authorities  were  made  aware
informally  of  the  DG  XVI  control  findings  at  an  early
stage.  This  allowed  them  to  follow  the  problems  up  and
present corrected information to the Commission in June
1996, on the basis of which the Commission effected the
closure of the programme in July 1996. The Commission
has now seen the Spanish authorities’ reply to the Court’s
observations.  The  national  authorities  take  a  different
view  from  the  Court,  with  which  the  Commission
therefore  intends  to  discuss  the  case  before  adopting  a
final  position.

The  Commission  would  point  out  however  that  this  case
may  well  have  no  impact  on  the  Community  budget
because of the considerable overspending by the Member
State  for  this  programme:  according  to  the  financial
plans,  the  ERDF  co-financiable  expenditure  amounted  to
ECU 439 million and the expenditure declared amounted
to ECU 470 million; the difference of ECU 31 million not
co-financed  by  ERDF  may  well  be  sufficient 
to
compensate 
the  exact
calculations  by  sub-programme  will  be  made  by  the
the  corrected
Commission  only  after 
declaration  of  expenditure.

these  errors.  However, 

receipt  of 

for 

(b) The German authorities have presented to the Court
information  to  reconcile  the
of  Auditors  sufficient 
amounts indicated in the final report with those indicated
in the final declaration of expenditure. Please see also the
reply  at  paragraph  3.21(b)  below.

(c) The  file  on  this  control  mission  remains  open,  a
letter  of  reminder  having  been  sent  to  the  national
authorities on 21 January 1998. Should any modification
of  the  ERDF  contribution  already  paid  be  necessary
following  receipt  of 
information,  an
the  required 
appropriate  adjustment  will  be  made.

However,  the  amounts  of  expenditure  declared  for  the
are
sub-programmes 
considerably  higher 
sums
indicated in the programme financial plans; the likelihood
of  any  financial  correction  being  necessary  is  therefore
limited.

affected  by 
than 

the  co-financiable 

the  problems 

3.17. The  Regulations  imply  that  partial  closure  of  a
programme  should  not  normally  take  place.  However,  in
certain  exceptional  cases,  where  the  Member  State
presented,  for  example,  clear  evidence  of  judicial  delays
affecting  certain  projects  forming  part  of  a  programme,
the  Commission  has  adopted  a  decision  permitting
closure  of  the  rest  of  the  programme.

3.20. Delays in the presentation of control reports often
result  from  the  workload  of  the  control  departments  as
well  as  from  the  need,  in  certain  cases,  to  make  a
supplementary  mission  before  drawing 
final
conclusion.

a 

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Events  subsequent  to  closure

3.21 (a) UK:  The  Commission  has  reminded  the  United
Kingdom  authorities  of  the  requirement  to  present  a
revised  expenditure  declaration.

(b) DE:  The  Commission  will  request  from  the  Land
authorities  the  conclusions  of  their  controls  and,  if
necessary,  a  corrected  declaration  of  expenditure.

3.22. Under 
the  German  Gemeinschaftsaufgabe
(common  task),  if  the  conditions  set  for  granting  the  aid
are  not  respected,  all  or  part  of  the  aid  may  be  recalled.
In  such  a  case,  the  national  authorities  should  present  a
corrected  declaration  of  expenditure  to  the  Commission
in  order  to  allow  it  to  make  the  necessary  adjustment  to
the  Community  aid  paid,  even  after  programme  closure.

3.23. The  documentation  requirements  of  Article  23  of
Regulation  (EEC)  No  4253/88  constitute  a  minimum;
Member  States  may  and  should  establish  more  rigorous
national  rules  where  necessary.

4.  CONCLUSION

4.1-4.2. The  Commission  accepts  that  there  is  room  for
in  particular  of  the  time  sometimes
improvement, 
required  for  the  closure  of  a  programme.  It  underlines
however  that  the  delays  in  the  closure  of  the  1989-1993
programmes  have  resulted  mainly  from  extensions  of  the
programme period for justified reasons and from the lack
of  information  (or  satisfactory  information),  necessary
for  the  closure  procedure  from  the  Member  States.
Shortage  of  human  resources  in  the  Commission,  and
probably  in  the  Member  States,  is  also  a  permanent
problem.

4.3 (a) The  Commission  considers  that  the  annual
report  model  (which  also  provides  the  basis  for  final
reports)  made  available  to  the  Member  States  and  the
application  of  Article  8  of  Regulation  (EC)  No  2064/97
providing  for  the  presentation  of  a  control  statement  by
an 
the  Commission  at
programme closure will substantially improve the quality
of  closure  documents,  thus  allowing  their  more  rapid
settlement.

independent  authority 

to 

(c) The  Commission  effects  partial  closures  in  certain
cases, but the Regulations imply that programmes should
normally  be  closed  in  their  entirety.

4.4. The  Commission  shares  the  Court’s  opinion  that
the results of on-the-spot checks should be communicated
to  the  Member  State  as  soon  as  possible.  One  of  the
principal  objectives  of  the  protocols  concluded  between
the Commission’s Financial Controller and Member State
audit  services  is  to  improve  cooperation,  in  particular  by
providing  faster  and  more  complete  information  on  the
results  of  on-the-spot  checks.  The  regular  bilateral
meetings  held  with  Member  States  within  the  framework
of  the  protocols  provide  a  forum  for  discussion  of  these
for
results.  Furthermore, 
Financial  Control  is  currently  developing  the  means
necessary  to  rationalise  the  preparation  and  execution  of
on-the-spot checks as well as the reports on these checks.
The  use  of  these  means  should  thus  allow  a  faster
transmission  of  results  to  Member  States.

the  Directorate-General 

The  Commission’s  proposal  for  new  regulations  for  the
forthcoming  programming  period 
formal
provision  for  extensive  cooperation  between  Member
States and the Commission in respect of financial control,
with  special  reference  to  on-the-spot  checks.

includes 

system 

4.5. Commission  Regulation  (EC)  No  2064/97  provides
for  all  the  steps  necessary  to  ensure  proper  financial
control  by  Member  States: 
examination,
on-the-spot  checks,  satisfactory  settlement  of  problems,
annual reporting to the Commission and the presentation
of an independent control statement providing an overall
conclusion  as  to  the  validity  of  the  final  payment  claim
and the final declaration of expenditure. The Commission
reserves  the  right  to  make  controls  of  its  own  at  closure
but emphasises the primary responsibility of the Member
States  for  ensuring  that  closure  takes  place  on  a  proper
basis.

(b) The Member States normally have the information in
question  in  their  possession;  the  Commission  provides
any  clarifications  requested  by  Member  States  in  relation
to  the  closure  calculations  and  the  amount  of  the  final
payment.

4.6. The Commission’s regulatory proposals for the new
programming  period  include  substantial  improvements
concerning  financial  corrections.  Existing  rules  and
procedures enable the Commission to make any necessary
financial  recoveries  after  programme  closure.