Commission Regulation (EC) No 2035/2005 of  12 December 2005  amending Regulation (EC) No 1681/94 concerning irregularities and the recovery of sums wrongly paid in connection with the financing of the structural policies and the organisation of an information system in this field
Date: 2005-12-12
Institutions: European Commission
Subjects: EU financing, Structural Funds, exchange of information, fraud against the EU, information system

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Official Journal of the European Union

15.12.2005

COMMISSION REGULATION (EC) No 2035/2005

of 12 December 2005

amending Regulation (EC) No 1681/94 concerning irregularities and the recovery of sums wrongly
paid in connection with the financing of the structural policies and the organisation of an
information system in this field

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty
Community,

establishing the European

Having regard to Council Regulation (EC) No 1260/1999 of 21
June 1999 laying down general provisions on the Structural
Funds (1), and in particular Article 53(2) thereof,

After consulting the committee established under Article 147 of
the Treaty, the Committee on Agricultural Structures and Rural
Development and the Standing Management Committee on
Fisheries Structures,

Whereas:

(1)

(2)

(3)

(4)

Article 54 of Regulation (EC) No 1260/1999 repealed
Council Regulation (EEC) No 4253/88 of 19 December
1988 laying down provisions for implementing Regu-
lation (EEC) No 2052/88 as regards coordination of
the activities of the different Structural Funds between
the European
themselves and with the operations of
Investment Bank and the other
financial
instruments (2).

existing

Article 54 of Regulation (EC) No 1260/1999 provides
that
references to the repealed Regulation (EEC) No
4253/88 should be construed as references to Regulation
(EC) No 1260/1999. Accordingly, Commission Regu-
lation (EC) No 1681/94 (3) applies to the measures
adopted under Regulation (EC) No 1260/1999.

Regulation (EC) No 1681/94 should be updated in order
to enhance the effectiveness of the system for reporting
irregularities.

it is necessary to clearly
For reasons of legal certainty,
the provisions of Regulation (EC) No
specify that
1681/94 must also apply to all
financial
assistance under Regulation (EC) No 1260/1999 as

forms of

they are described in Regulation (EC) No 1783/1999 of
the European Parliament and of the Council of 12 July
1999 on the European Regional Development Fund (4),
in Regulation (EC) No 1784/1999 of
the European
Parliament and of the Council of 12 July 1999 on the
European Social Fund (5), in Council Regulation (EC) No
1263/1999 of 21 June 1999 on the financial instrument
for fisheries guidance (6), and in Council Regulation (EC)
No 1257/1999 of 17 May 1999 on support for rural
development from the European Agricultural Guidance
and Guarantee
and amending and
repealing certain Regulations (7).

Fund (EAGGF)

(5)

(6)

(7)

(8)

It is necessary to clarify to what extent a Member State
participating in cross-border transnational and interre-
gional cooperation under Article 20(1)(a) of Regulation
‘Interreg’
(EC) No
programmes, or in any other programmes having a
transnational character, are required to notify irregula-
rities.

1260/1999,

known

the

as

It is necessary to specify that the definition of ‘irregu-
larity’ used for the purposes of Regulation (EC) No
1681/94 is taken from Article 1(2) of Council Regulation
(EC, Euratom) No 2988/95 of 18 December 1995 on the
protection of
financial
interests (8).

the European Communities’

It is necessary to define the term ‘suspected fraud’, taking
fraud contained in the
account of
Convention of 26 July 1995 on the protection of the
European Communities’ financial interests (9).

the definition of

It is necessary to establish that the definition of ‘First
administrative or judicial finding of fact’
is taken from
Article 35 of Council Regulation (EC) No 1290/2005
the common agricultural
relating to the financing of
policy (10).

(9)

It is also necessary to define the terms ‘bankruptcy’ and
‘economic operator’.

(4) OJ L 213, 13.8.1999, p. 1.
(5) OJ L 213, 13.8.1999, p. 5.
(6) OJ L 161, 26.6.1999, p. 54.
(7) OJ L 160, 26.6.1999, p. 80. Regulation as last amended by Regu-

(1) OJ L 161, 26.6.1999, p. 1. Regulation as last amended by Regu-

lation (EC) No 2223/2004 (OJ L 379, 24.12.2004, p. 1).

lation (EC) No 173/2005 (OJ L 29, 2.2.2005, p. 3).

(2) OJ L 374, 31.12.1988, p. 1.
(3) OJ L 178, 12.7.1994, p. 43.

(8) OJ L 312, 23.12.1995, p. 1.
(9) OJ C 316, 27.11.1995, p. 49.
(10) OJ L 209, 11.8.2005, p. 1.

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(10)

(11)

(12)

(13)

(14)

In order to enhance the added value of the reporting
system,
suspected
the obligation to report cases of
fraud for the purposes of risk analysis should be more
closely determined, and for this purpose the quality of
the information supplied should be ensured.

HAS ADOPTED THIS REGULATION:

Article 1

Regulation (EC) No 1681/94 is amended as follows:

It should be clearly stated that Regulation (EC) No
1681/94 will remain applicable to cases of irregularities
of less than EUR 10 000 already reported.

1. Article 1 is replaced by the following:

‘Article 1

It is necessary to clarify the question as to the charging
of unrecovered amounts in connection with the forms of
assistance governed by Regulation (EC) No 1260/1999
and to specify the information needed for dealing with
such cases.

In order to reduce the burden imposed by reporting on
the Member States and to improve efficiency,
is
necessary to increase the minimum threshold above
which irregularities have to be reported by Member
in which no
States and to determine those cases
reporting obligation arises.

it

Regulation (EC) No 1681/94 should apply without
prejudice to Article 8 of Commission Regulation (EC)
No 438/2001 of 2 March 2001 laying down detailed
rules
the implementation of Council Regulation
(EC) No 1260/1999 as regards the management and
the
assistance
control
Structural Funds (11).

granted under

systems

for

for

(15) Account must be taken of the obligations arising out of
Regulation (EC) No 45/2001 of the European Parliament
and of
the Council of 18 December 2000 on the
protection of individuals with regard to the processing
of personal data by the Community institutions and
bodies and on the free movement of such data (12) and
Directive 95/46/EC of the European Parliament and of
the Council of 24 October 1995 on the protection of
individuals with regard to the processing of personal data
and on the free movement of such data (13).

(16)

Conversion rates should be established for Member States
outside the euro zone.

(17)

Regulation (EC) No 1681/94 should be
accordingly.

amended

(18)

The measures provided for in this Regulation are in
accordance with
the Advisory
Committee on the Development and Conversion of
Regions,

opinion

the

of

(11) OJ L 63, 3.3.2001, p. 21. Regulation as amended by Regulation

(EC) No 2355/2002 (OJ L 351, 28.12.2002, p. 42).

(12) OJ L 8, 12.1.2001, p. 1.
(13) OJ L 281, 23.11.1995, p. 31. Directive as amended by Regulation

(EC) No 1882/2003 (OJ L 284, 31.10.2003, p. 1).

1. Without prejudice to the obligations arising directly
out of Article 23 of Regulation (EEC) No 4253/88 and
Article 38 of Regulation (EC) No 1260/1999, this Regu-
lation shall relate to all
intervention
provided for in Regulations (EEC) No 4254/88, (EEC) No
4255/88,
(EC) No 2080/93 and in
Regulations (EC) No 1783/1999, (EC) No 1784/1999 and
(EC) No 1263/1999. This Regulation shall also apply to the
measures financed under the first indent of Article 35(2) of
Regulation (EC) No 1257/1999 (Guidance Section).

(EEC) No 4256/88,

forms of

financial

Irregularities

2.
relating to the Interreg programmes
provided for in Article 20(1)(a) of Regulation (EC) No
1260/1999, and other programmes of a transnational
character,
shall be reported by the Member State in
which the expenditure was incurred. The Member State
shall at
the same time inform the managing authority
and the paying authority for the programme and the
person or body designated to establish declarations on
winding-up under Article 15 of Regulation (EC) No
438/2001.’;

2. the following Article 1a is inserted:

‘Article 1a

For the purposes of this Regulation the following defi-
nitions shall apply:

1. “irregularity” means any infringement of a provision of
Community law resulting from an act or omission by an
economic operator which has, or would have, the effect
of prejudicing the general budget of the Communities
by charging an unjustified item of expenditure to the
Community budget;

2. “economic operator” means any natural or legal person
or other entity taking part
in the administration of
assistance from the Funds, with the exception of
Member States exercising their prerogatives as a public
authority;

3. “primary administrative or judicial finding” means a first
written assessment by a competent authority, either
administrative or judicial, concluding on the basis of
specific facts that an irregularity has been committed,
without prejudice to the possibility that this conclusion
may subsequently have to be revised or withdrawn as a
result of developments in the course of the adminis-
trative or judicial procedure;

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4. “suspected fraud” means an irregularity giving rise to the
initiation of administrative and/or judicial proceedings at
national level in order to establish the presence of inten-
tional behaviour, in particular fraud, such as is referred
to in Article 1(1), point (a), of the Convention on the
protection of
financial
interests;

the European Communities'

5. “bankruptcy” means insolvency proceedings within the
meaning of Article 2, point (a), of Council Regulation
(EC) No 1346/2000 (*).

___________
(*) OJ L 160, 30.6.2000, p. 1.’

3. Article 2 is deleted;

4. Article 3(1) is replaced by the following:

‘1.
During the two months following the end of each
quarter, Member States shall report to the Commission any
irregularities which have been the subject of a primary
administrative
end
judicial
Member States shall in all cases give details of:

finding. To this

and/or

(a)

or

Fund(s)

financial

Structural

the
instrument
concerned, the objective, identification of the form of
and the operation concerned and the
assistance
ARINCO or CCI
(common identification code)
numbers;

(b)

the provision which has been infringed;

(c)

the date and source of the first information leading to
suspicion that an irregularity had been committed;

(d)

the practices employed in committing the irregularity;

(e) where appropriate, whether the practice gives rise to a

suspicion of fraud;

(f)

the manner in which the irregularity was discovered;

(g) where appropriate,
countries involved;

the Member States and third

(h)

the period during which, or the moment at which, the
irregularity was committed;

(i)

the national authorities or bodies which drew up the
official report on the irregularity and the authorities
responsible for administrative and/or judicial follow-
up;

(j)

the date on which the primary administrative or
judicial finding on the irregularity was established;

(k)

the identity of
legal persons
the natural and/or
involved or of any other participating entities, except
where this information is irrelevant for the purposes of
combating irregularities, given the nature of the irre-
gularity in question;

(l)

the total budget approved for the operation and the
distribution of its co-financing between Community,
national, private and other contributions;

(m) the amount affected by the irregularity and its distri-
bution between Community, national, private and
other contributions; where no payment of the public
contribution has been made to the persons and/or
other entities identified under point (k), the amounts
which would have been wrongly paid had the irregu-
larity not been identified;

(n)

the suspension of payments, where applicable, and the
possibilities of recovery;

(o)

the nature of the irregular expenditure.

By way of derogation from the first subparagraph,
following cases need not be reported:

the

— cases where the irregularity consists solely of the failure
to partially or totally execute an operation co-financed
by the Community budget owing to the bankruptcy of
the final beneficiary and/or the final recipient. However,
irregularities preceding a bankruptcy and cases of
suspected fraud must be reported,

— cases brought

to the attention of

the administrative
authority by the final beneficiary or the final recipient
voluntarily or before detection by the relevant authority,
whether before or after the granting of
the public
contribution,

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— cases where the administrative authority finds a mistake
regarding the eligibility of
the financed project and
corrects the mistake prior to payment of the public
contribution.’;

(c) a copy of the recovery order;

(d) where applicable, a copy of the document attesting
the final beneficiary’s or final recipient’s insolvency;

5. Article 5 is amended as follows:

(a) The second subparagraph of Article 5(1) is replaced by

the following:

(e) an outline description of the measures taken by the
Member State, with indication of their dates,
to
recover the relevant amount.’;

judicial decisions, or

‘Member States shall report to the Commission admin-
istrative or
the main points
thereof, concerning the termination of such procedures
and shall state in particular whether or not the findings
are such that fraud is suspected.’;

(b) paragraph 2 is replaced by the following:

6. the following Article 6a is inserted:

‘Article 6a

The information required under Articles 3, 4 and 5(1) shall
be sent, whenever it is possible to do so, by electronic
means, using the module provided by the Commission
for the purpose via a secure connection.’;

‘2. Where a Member State considers that an amount
cannot be recovered or is not expected to be recovered,
it shall inform the Commission, in a special report, of
the amount not recovered and the reasons why the
the
amount
Community or by the Member State.

view, be borne by

should,

in its

This information must be sufficiently detailed to allow
the Commission to decide as soon as possible, after
consulting the
the Member States
concerned, on the apportionment of:

authorities of

7. the following Article 8a is inserted:

‘Article 8a

The Commission may use any information of a general or
operational nature communicated by Member States under
this Regulation to perform risk analyses, using information
technology support, and may, on the basis of the infor-
mation obtained, produce reports and develop early-
warning systems serving to identify risks more effectively.’;

— the financial consequences referred to in the third
indent of Article 23(1) of Regulation (EEC) No
4253/88,

8. the second sentence in Article 9 is

replaced by the

following:

— the

amounts

assistance
1260/1999.

falling

concerned as

regards
under Regulation

forms of
(EC) No

‘The committees referred to in Articles 48, 49, 50 and 51
of Regulation (EC) No 1260/1999 shall also be informed.’;

This information shall

include at least the following:

9. Article 10(3) is replaced by the following:

(a) a copy of the award decision;

(b) the date of the last payment made to the final

beneficiary or the final recipient;

‘3.
The Commission and the Member States shall ensure,
when processing personal data pursuant to this Regulation,
that
the Community and national provisions on the
protection of personal data, in particular those laid down
by Directive 95/46/EC and, where applicable, by Regulation
(EC) No 45/2001, are complied with.’;

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10. Article 12 is replaced by the following:

‘Article 12

1. Where the irregularities relate to amounts of less than
EUR 10 000 chargeable
to the Community budget,
Member States shall not send the Commission the infor-
mation provided for in Articles 3 and 5 unless the latter
expressly requests it.

convert

2. Member States which have not adopted the euro as
their currency by the date when the irregularity is estab-
lished shall
incurred in national
expenditure
currency into euro. The amount shall be converted into
euro by using the Commission’s monthly accounting rate
for the month in which the expenditure was or would have
been entered into the accounts of the paying authority
responsible for the operational programme in question.

The Commission publishes this rate electronically once a
month.’

Article 2

Article 5 of Regulation (EC) No 1681/94, as it applied prior
to the entry into force of this Regulation, shall continue to
be applied for those cases involving an amount of less than
EUR 10 000 which are notified before 28 February 2006.

Article 3

This Regulation shall enter force on the third day following its
publication in the Official Journal of the European Union.

It shall apply from 1 January 2006.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, 12 December 2005.

For the Commission

Siim KALLAS
Vice-President