Communication to the Commission - Communication from Commissioners Hübner and Špidla to the Commission giving an interim progress report on the action plan to strengthen the Commission's supervisory role under shared management of structural actions {SEC(2008) 2755}
Date: 2008-11-05
Institutions: European Commission
Subjects: European Commission, Structural Funds, action programme, audit, financial control, financial management, report

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 5.11.2008 
SEC(2008) 2756 

COMMUNICATION TO THE COMMISSION 

Communication from Commissioners Hübner and Špidla to the Commission giving an 
interim progress report on the action plan to strengthen the Commission's supervisory 
role under shared management of structural actions 

{SEC(2008) 2755} 

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COMMUNICATION TO THE COMMISSION 

Communication from Commissioners Hübner and Špidla to the Commission giving an 
interim progress report on the action plan to strengthen the Commission's supervisory 
role under shared management of structural actions 

1. 

EXECUTIVE SUMMARY 

In  response  to  the  conclusions  of  the  European  Court  of  Auditors  in  its  Annual 
Report for 2006 on the high level of errors in reimbursements for structural actions 
and  weaknesses  in  the  Member  States  management  and  control  systems,  the 
Commission  adopted  an  action  plan  on  19  February  2008  to  strengthen  its 
supervision of Member States. Based on the recommendations made by the Court of 
Auditors, the Action Plan sets out 37 actions, under 10 main headings, to be carried 
out by the end of 2008. 

The  actions  cover  preventive  measures  to  achieve  more  effective  controls  by 
Member  States,  corrective  measures  to  ensure  that  irregular  reimbursements  are 
detected  and  recovered  for  the  EU  budget,  and  measures  to  improve  the  quality  of 
reporting  of  key  data  by  Member  States  and  by  the  Commission  essential  for 
monitoring  the  effectiveness  of  multi-annual  control  systems.  The  approach  is  to 
reduce  the  residual  risk  of  error  by  applying  measures  on  one  side  to  improve 
supervisory  and  control  systems  to  reduce  the  occurrence  of  error  and  by  taking 
actions on the other side which will increase the rate of recovery. 

The Commission has reported to the European Parliament on progress on the Action 
Plan by the transmission on a quarterly basis of monitoring tables whose format had 
been previously discussed with the European Court of Auditors. The reports for the 
first two quarters were sent to Parliament on 30 April and 10 July 2008 and the main 
results  were  presented  to  the  Budgetary  Control  Committee  of  the  European 
Parliament  by  Commissioner  Špidla  and  Commissioner  Hübner  on  2  June  and  10 
July  respectively.  The  Committee  expressed  its  satisfaction  with  progress  and  with 
the  evident  commitment  of  the  Commission  to  achieving  the  planned  targets  on 
schedule. The present communication will be sent to the European Parliament as the 
third  quarterly report. The Commission is  also reporting on a quarterly basis to the 
European  Parliament  the  financial  corrections  resulting  from  the  Commission's 
actions. 

This interim progress report sets out the outputs of the Action Plan achieved up to 30 
September 2008, with reference to the indicators fixed for each action. The progress 
on  each  action  is  set  out  in  section  2  of  the  communication.  A  summary  of  the 
financial corrections and payment suspensions applied and in progress in 2008 is set 
out in annex 1. 

As at the end of the third quarter, 18 of the 37 actions in the Action Plan have been 
completed, and progress on the remaining actions is well-advanced to meet the target 
set for the end of the year. In a few cases under the actions relating to the follow up 

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of remedial action plans and financial correction procedures, the targeted outputs will 
not be fully achieved by the end of 2008, for reasons set out in section 2. 

The completed actions include the following: 

– 

– 

– 

– 

– 

– 

DG REGIO and DG EMPL provided in their Annual Activity Reports for 2007 
complete  details  of  follow  up  on  deficiencies  detected,  action  plans  and 
financial  corrections  and  suspensions,  and  justification  of  the  inclusion  or 
otherwise of a programme in the reservation. 

The  Commission  carried  out  the  assessment  of  the  Annual  Summaries 
submitted by Member States, followed up compliance issues and launched an 
infringement procedure in the one case of serious failure to meet the regulatory 
requirements (Germany). 

DG  REGIO  and  DG  EMPL  have  put  in  place  and  implemented  a  policy  of 
suspending  payments  by  Commission  decision  as  soon  as  possible  following 
detection  of  serious  weaknesses  in  national  systems  in  order  to  increase  the 
impact of Commission audit activity. 

DG  REGIO  and  DG  EMPL  established  procedures  and  improved  IT 
applications in order to improve the monitoring of audit recommendations and 
therefore reinforce the impact of their audit activity. 

A  seminar  in  September  2008  and  numerous  bilateral  meetings  have  raised 
Member  States' awareness of  the closure guidelines for the 2000-2006 period 
issued by the Commission in 2006. 

The Commission issued guidance notes and organised a seminar in June 2008 
to promote improvement in primary controls at national level. 

The main conclusions to be drawn from the progress on the individual actions of 
the Action Plan are: 

– 

– 

– 

The responsible DGs have taken steps to execute the actions in the Action Plan 
in  accordance  with  the  time  frame  set  out,  and,  with  the  few  exceptions 
indicated, the actions are on track to be completed by the deadlines fixed. 

The Commission has demonstrated the more rigorous approach required in the 
exercise  of  its  supervisory  role  through  the  adoption  of  11  decisions  on 
financial  corrections  and  6  decisions  to  suspend  payments  under  Actions  1.2 
and  1.3.  (see  annex  2).  The  increased  number  and  more  rapid  adoption  of 
suspension decisions following the detection of serious deficiencies also shows 
that the new procedures under Action 8.1 are taking effect1. 

The  Commission  has  advanced  satisfactorily  in  its  core  activity  of  audit  and 
follow-up work directed at the 2000-2006 programme period. 38 audits of high 
risk  management  bodies  have  been  carried  out,  and  the  follow  up  of  10 

1 

For  the  3  suspension  decisions  affected  by  the  revised  procedures,  the  average  time  from  final  audit 
position to decision was 7 months. 

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remedial action plans has been concluded. This activity serves the priority aim 
of ensuring that irregular expenditure is removed from reimbursements to these 
programmes and projects. 

The  intensity  of  this  activity  is  shown  by  the  increased  volume  of  financial 
corrections relating to 2000-2006 programmes and projects already applied in 
2008  (EUR  680  million).  The  overall  figure  for  financial  corrections  for  the 
first  3  quarters  of  2008  resulting  from  the  Commission's  activity  is  EUR  843 
million, compared with EUR 287 million for the whole of 2007 (see annex 1). 
The current estimate of potential financial corrections likely to result from the 
suspension and correction procedures underway is at least EUR 1.5 billion. 

The  Commission  is  applying  in  line  with  the  regulations  for  the  2007-2013 
period the reinforced preventive measures to ensure that reliable systems are in 
place  at  the  outset,  through  the  rigorous  scrutiny  of  compliance  assessment 
reports  for  103  programmes  and  audit  strategies  submitted  for  296 
programmes. 

The  execution  of  the  actions  linked  to  improved  reporting  –  Annual  Activity 
Reports,  reporting  on  financial  corrections,  and  annual  summaries  -  have 
strengthened the assurance process for structural actions. 

– 

– 

– 

Apart from the corrective measures covering the programmes and projects identified 
in the Action Plan, the Commission is also taking action on other cases for which DG 
REGIO and DG EMPL entered reservations in their 2007 Annual Activity Reports. 
The 2 responsible DGs are following up remedial actions for 95 programmes, have 
launched  suspension  or  correction  procedures  covering  37  programmes,  and  have 
completed the follow up on 21 programmes. 

The  impact  of  the  Action  Plan  cannot  yet  be  measured  in  relation  to  an  actual 
reduction in the error rate at the level of interim reimbursements. As was explained 
in  the  Communication  on  the  Action  Plan  (point  8.2),  for  the  2000-2006  period, 
errors already committed will continue to affect payments which will be made up to 
2010  and,  for  the  Cohesion  Fund,  up  to  2012.  However,  by  increasing  the 
effectiveness of the post-payment controls undertaken by the Member States and the 
impact  of  the  Commission's  audit  activity,  the  work  done  under  the  Action  Plan 
should  increase the level of correction of these past errors by the time the 2000-06 
programmes and projects are closed. At the same  time, for  the 2007-13 period, the 
Action Plan should ensure that the Member States' systems function effectively from 
the  beginning  of  the  programme  implementation,  or,  if  not,  that  deficiencies  are 
detected early so that corrective measures can be applied. 

The data to make it possible to carry out a first evaluation of the impact in relation to 
the error rate in reimbursements to the Funds will be available at the end of 2009 for 
expenditure for the new programmes of the 2007-2013 period, and at the end of 2010 
for the closure of programmes of the 2000-2006 period. 

Overall,  the  results  set  out  in  this  progress  report  show  that  under  the  Action 
Plan  the  Commission  is  exercising  its  supervisory  role  more  effectively  to 
address  both  the  causes  and  effects  of  the  high  rate  of  error  found  by  the 
European Court of Auditors in structural actions expenditure. 

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2. 

PROGRESS AND IMPACT OF THE ACTION PLAN 

Action 1 – Actions under the joint audit strategy for 2000-2006 

1.1.  Targeted audits on 55 high risk management bodies 

Action in progress 

DG  REGIO  and  DG  EMPL  have  carried  out  38  of  the  planned  audits  up  to  30 
September 2008 and have sent out reports on 20 of the audits. The effective results 
on the 20 audits already reported are that in 4 cases there is a positive conclusion on 
the  functioning  of  the  system,  in  2  cases  the  opinion  was  adverse  and  the 
Commission  has  launched  a  procedure  to  suspend  payments  and  apply  financial 
corrections, and in the other 14 cases the Commission auditors have given a qualified 
opinion  and  are  following  up  the  audit  findings  with  the  national  authorities  to 
determine  the  corrective  measures  required.  Most  of  the  audits  relate  to  Member 
States  and  programmes  and  projects  for  which  the  2007  Annual  Activity  Reports 
entered reservations. The follow-up of the audits through to possible suspensions of 
payments  and  financial  corrections  will  continue  into  2009,  where  necessary.  The 
remaining  17  audits  are  scheduled  to  take  place  between  October  and  December 
2008. 

1.2.  Follow up of 27 remedial action plans 

Action in progress 

DG  REGIO  and  DG  EMPL  have  completed  the  follow  up  on  10  of  the  27  action 
plans  which  were  under  way  in  2007.  The  27  action  plans  cover  32%  of  the  total 
committed amounts for 2000-06 programmes. The effective results of the 10 action 
plans completed are as follows:  

– 

– 

in  9  cases  there  is  a  positive  conclusion  on  the  completion  of  the  required 
actions and on the functioning of the system, including in certain cases on the 
application of financial corrections by the Member State at the request of the 
Commission; 

in  1  case  the  remedial  action  plan  resulted  in  the  application  of  financial 
corrections by Commission decision.  

Of the 17 action plans not yet concluded: 

– 

– 

the Commission has suspended payments or launched a procedure to suspend 
payments in 8 cases; 

it will review Member States reports or carry out audits before the end of the 
year to check implementation in a further 9 cases. 

The DGs will have completed the follow up by the end of the year by taking a final 
position  either  that  the  action  plan  has  been  satisfactorily  executed  or  that  a 
suspension and financial correction procedure should be launched, except in 3 cases 
where the deadline for completing the remedial action plans has been extended. They 

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will  conclude  any  consequent  suspension  and  financial  correction  procedures  in 
2009. 

1.3.  Conclude  20  suspension  and  financial  correction  procedures  for  2000-2006 
and 34 procedures for 1994-1999 

Action in progress 

1.3 a) 2000-2006 period 

The  20  open  suspension  and  correction  procedures  related  in  total  to  32  ERDF 
programmes  and  12  ESF  programmes  and  60  Cohesion  Fund  projects.  DG  REGIO 
and DG EMPL have brought to a conclusion 8 of the procedures and 4 procedures 
have been partially concluded. The results in terms of programmes and projects for 
these 12 procedures are as follows: 

– 

to 
Commission  decisions 
approximately EUR 58 million have been adopted for 54 programmes/projects; 

financial  corrections  amounting 

to  apply 

–  Member  States  accepted  financial  corrections  amounting  to  approximately 

EUR 20 million for 11 programmes/projects; and 

– 

the  procedure  was  closed  with  no  correction  for  8  programmes/projects 
because  the  Commission  was  able  to  accept  the  arguments  presented  by  the 
Member State. 

Under  the  procedures  not  yet  concluded  covering  31  programmes/projects,  the 
Commission  has  adopted  suspension  decisions  for  6  programmes/projects.  The 
remaining  cases  are  well  advanced  and  except  for  4  Cohesion  Fund  projects, 
Commission decisions to suspend or correct will be taken by the end of the year. 

Where suspension decisions have been adopted in 2008, in cases where the Member 
State does not carry out the required action, the financial correction will be applied in 
2009. 

1.3 b) 1994-1999 period 

The  34  procedures  referred  to  in  the  Action  Plan  concern  ERDF  and  result  from 
closure  audits.  DG  REGIO  has  brought  to  a  conclusion  7  of  these  procedures  with 
financial corrections amounting in total to EUR 19.5 million and expects to conclude 
a  further  17  cases  before  the  end  of  2008  with  estimated  corrections  of  EUR  1.5 
billion. It is likely that 10 out of the 34 procedures for 1994-99 programmes will not 
be  finalised  by  the  end  of  2008  but  by  the  end  of  the  first  quarter  of  2009.  This  is 
because  each  audit  covered  approximately  40  projects,  the  follow  up  generates 
voluminous  documentation  and  complex  legal  issues  have  been  raised  in  certain 
cases.  Furthermore  the  concentration  of  cases  in  a  small  number  of  Member  States 
has led to delays in fixing the hearing with the Member State which is an essential 
part of the rights of the defence for the Member State which must be respected before 
a correction is applied. 

In  addition,  DG  EMPL  is  currently  engaged  in  completing  7  further  financial 
correction procedures on 15 ESF programmes of the 1994-1999 period. 

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1.4.  Follow up of DAS error cases for 2006 

Action in progress 

DG REGIO and DG EMPL have taken a final position on 47 of the 74 cases. In 23 
cases, the Member State has itself made the required correction. In 14 cases the DGs 
have launched a financial correction procedure or are about to do so. In 10 cases the 
case was closed with no correction, as the Commission was able to accept the further 
evidence submitted by the Member State. For the remaining cases, the Commission 
has  been  delayed  in  reaching  a  final  position  because  of  the  need  to  obtain  further 
information from the responsible authorities, but it will achieve this target by the end 
of the year. 

Action  2  –  Actions  under  Action  Plan  toward  an  Integrated  Internal  Control 
Framework 

2.1.  Action 9 - Constructing effective tools for sharing audit and control results 

Action in progress 

The  audit  results  under  the  enquiry  to  review  the  work  of  winding-up  bodies  (see 
action 3.1) are being shared between DG REGIO and DG EMPL. 

2.2.  Action  10  –  Conduct  initial  estimation  and  analysis  of  costs  of  controls  for 
ERDF 

Action completed 

DG  REGIO  sent  the  report  on  the  results  of  the  survey  of  the  costs  of  controls  in 
ERDF  to  DG  BUDG  in  May  2008  to  be  used  in  the  preparation  of  the 
communication on tolerable risk. 

2.3.  Action  11N  –  Examine  the  reliability  of  national  reporting  systems  for 
recoveries and financial corrections 

Action in progress 

See Action 6.2 below. 

2.4.  Action 14b – Provide guidelines for beneficiaries and/or intermediate levels on 
controls and responsibilities in the control chain 

Action completed 

See Action 5.1 below. 

2.5.  Action 15 – Promote “Contracts of Confidence”  

Action partially completed 

One new contract of confidence will be signed by the Commission with Cyprus for 
ERDF  and  Cohesion  Fund  by  the  end  of  November  2008.  Two  other  contracts  are 
currently being negotiated (ESF UK/England and Denmark). 

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2.6.  Action 16 – Co-ordination of audit standards 

Action partially completed 

The  Commission  has  finalised  the  guidance  documents  on  sampling  and  systems 
assessment  methodology,  and  DG  REGIO  and  DG  EMPL  are  now  drafting  further 
sections of the Structural Funds audit manual which will be discussed with national 
audit authorities at a technical meeting in December 2008. 

Action 3 – Preventive actions for closure of 2000-2006 programmes and projects 

3.1.  Audit enquiry on 36 winding up bodies 

Action in progress 

Up to the end of September 2008 DG REGIO and DG EMPL have carried out 22 of 
the  36  planned  audits  of  winding-up  bodies  which  will  be  responsible  for  issuing 
declarations on the legality and regularity of expenditure before the closure of 2000-
2006 programmes, and they will complete the remaining planned missions by the end 
of  the  year.  The  conclusions  to  date  are  that  there  are  some  deficiencies  in  the 
winding-up bodies' preparation for closure and the Commission will follow-up on its 
recommendations  to  verify  that  these  issues  are  corrected  so  that  the  winding  up 
declarations  submitted  at  closure  can  be  relied  on.  The  follow-up  will  continue  in 
2009. 

3.2.  Internal procedures to ensure rigorous examination of closure documents 

Action partially completed 

The  internal  procedures  for  the  closure  process  have  been  finalised  in  DG  REGIO, 
and  will  be  followed  by  DG  EMPL  to  complete  and  align  its  own  internal 
procedures.  These  procedures  put  emphasis  in  particular  on  the  assessment  of  the 
reliability  of  the  winding  up  declarations,  and  on  the  examination  of  reported 
irregularities and financial corrections for each programme. 

3.3.  Raise  awareness  of  Member  States  of  closure  guidelines  issued  by  the 
Commission in 2006 

Action completed 

DG REGIO and DG EMPL organised a seminar entirely dedicated to closure issues 
on the control of Structural Funds on 10 June 2008 which was attended by over 500 
participants from national authorities (see Action 5.1). At this seminar Commission 
speakers  presented  key  issues  for  the  preparation  of  closure  of  Structural  Funds 
programmes. 

DG  REGIO  and  DG  EMPL  organised  a  second  seminar  entitled  "Towards  a 
successful  closure  of  Structural  Funds  programmes  2000-2006"  in  Brussels  on  15 
September, which covered in detail all elements of the programme closure process. 
Over 700 representatives from all Member States participated. The topic of closure 
has  also  been  discussed  at  30  annual  bilateral  meetings  with  managing  authorities 
and control bodies of Structural Funds since the beginning of 2008, and has been the 

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subject of specific bilateral seminars in 10 Member States (HU, FR, DK, LT, IT, CY, 
SK,  GR,  BE,  PL,)  and  in  a  special  Interreg  seminar.  Following  up  on  the  15 
September  seminar,  on  21  October  a  specific  session  of  the  Technical  Working 
Group of the ESF Committee, gathering all ESF national coordinators, was dedicated 
to the issue of management actions to be taken before the end of the eligibility period 
in order to ensure a proper closure for 2000/2006 programmes. 

Action 4 – Preventive actions for the 2007-2013 programming period 

4.1.  Review of compliance assessment reports and opinions 

Action in progress 

The  Commission  scrutinises  the  compliance  assessment  reports  and  opinions 
submitted  by  Member  States,  which  are  due  within  12  months  of  programme 
approval, in order to confirm that the control systems set up by the Member States 
comply  with  regulatory  requirements.  Until  the  Commission  has  approved  the 
assessment, it will not reimburse interim payment claims. 

By  the  end  of  September  the  Commission  had  received  compliance  assessment 
reports  from  Member  States  covering  103  of  the  431  approved  programmes, 
representing  the  majority  due  at  that  date.  Of these it has accepted the assessments 
for  20  programmes  and  rejected  those  for  32  programmes  (which  will  be  re-
submitted after correction. The remainder have been interrupted or are still subject to 
examination. The provisional conclusion is that the Commission guidance issued in 
2007  has  generally  been  followed.  The  reasons  for  rejection  and  interruption  are 
related  in  particular  to  the  failure  to  provide  adequate  information  on  certain 
mandatory  elements,  and  inconsistencies  between  the  findings  in  the  report  of  the 
compliance  assessment  body  and  the  final  opinion.  Few  cases  have  raised 
fundamental structural or capacity problems. 

4.2.  Review of national audit strategies 

Action in progress 

Audit authorities are required to submit their audit strategies within nine months of 
programme approval for approval by the Commission. As at end of September 2008, 
the Commission had received the audit strategies covering 296 of the 431 approved 
programmes, representing the majority due at that date. It had accepted the strategies 
of 50 programmes and rejected those of 89 programmes (which will be re-submitted 
after  correction).  The  remainder  are  interrupted  or  still  under  examination.  The 
reasons for rejection and interruption include insufficient information to establish the 
independence of the audit authority, missing or unclear sampling method, incomplete 
risk  analysis,  and  insufficient  information  on  audit  resources.  In  general  the  issues 
raised  are  not  fundamental  weaknesses  in  the  strategies  but  particular  points  to  be 
completed or improved. 

4.3.  Actions on simplification 

Action partially completed 

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a) DG REGIO and DG EMPL will present the guidance note on partial closure under 
Article  88  of  Council  Regulation  (EC)  No  1083/2006  to  the  Fund  Coordination 
Committee (COCOF) before the end of 2008. 

b) The guidance note on the use of flat rate for indirect costs for ESF under Article 
11(3)(b) of  Council Regulation (EC) No 1081/2006  was  finalised by DG EMPL in 
September  2007,  after  discussions  with  the  Member  States  and  agreement  with  the 
European  Court  of  Auditors.  As  at  30  September  2008,  23  Member  States  had 
declared  their  intention  to  implement  this  ESF  rule  for  all  or  part  of  their 
programmes. The use of flat rates was also discussed in late 2007 and in 2008 in 3 
meetings of the technical working group of the ESF Committee, in 4 annual meetings 
with  Member  States  and  in  specific  bilateral  meetings  with  the  Czech  Republic, 
Portugal,  Lithuania  and  Wales.  DG EMPL  committed  itself  to  provide  feedback  to 
all interested Member States on their draft national implementing rules on the use of 
flat rates in order to avoid retroactive problems in the implementation of the rule. 

4.4.  Review and clarification on eligibility issues 

Action partially completed 

a) The Commission has prepared a draft of the brochure making a compilation of the 
Community eligibility rules which will be published before the end of 2008. 

b)  and  c)  The  Commission  services  have  finalised  the  guidance  notes  on  revenue-
generating projects and State Aid rules. In September 2008 the Commission adopted 
a proposal to amend Article 55 of Council Regulation (EC) No 1083/2006 in order to 
simplify the rules concerning revenue generating operations. 

4.5.  Public procurement rules – raise awareness by organising workshops 

Action completed 

The Commission organised special workshops on this topic, which continues to be a 
common  source  of  irregularity  in  the  use  of  EU  funds  for  structural  actions,  in 
Budapest, Hungary (4/4/08) and in Sofia, Bulgaria (26/6/08). Following a workshop 
dedicated to the use of public procurement in the field of ESF activities in 2006, DG 
EMPL organised a follow-up discussion and exchange of national good practices in 
this field during the meeting of the technical working group of the ESF Committee 
on 6 May 2008. 

Action 5 – Improvement of primary controls 

5.1.  Seminar for managing and certifying authorities 

Action completed 

DG  REGIO  and  DG  EMPL  organised  a  seminar  entitled  "Control  of  structural 
actions – meeting the challenge" in Brussels on 10 June 2008. Over 500 participants 
from  managing  and  certifying  authorities  of  all  Member  States  and  regions 
participated,  as  well  as  representatives  from  the  European  Parliament  and  the 
European  Court  of  Auditors.  At  the  seminar  the  Commission  presented  good 
practices concerning the role of managing and certifying authorities in the 2007-2013 

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period  based  on  the  revised  guidance  notes  described  under  action  5.2  and  on  the 
experience of the implementation of the 2000-2006 programmes. The importance of 
effective  communication  of  the  applicable  rules  to  beneficiaries  in  order  to  prevent 
errors was emphasised. The Commission will present to COCOF in November a plan 
for improving communication on management and control issues based on feedback 
provided by Member States following the seminar. 

5.2.  Guidance on good practice for primary controls and the certification function 

Action completed 

The  Commission  issued  in  May  and  June  2008  new  guidance  documents  for 
managing  authorities  and  certifying  authorities  after  detailed  discussion  with 
Member  States.  These  formed  the  basis  for  presentations  and  discussions  in  the 
seminar of 10 June (see action 5.1). 

5.3.  Self-assessment tool for managing authorities on compliance 

Action completed 

The Commission presented a self-assessment tool to Member States at the seminar of 
10  June,  with  the  aim  of  making  it  easier  for  managing  authorities  to  assess 
themselves  directly  against  regulatory  benchmarks  on  key  elements  of  internal 
control.  Two  pilot  studies  have  subsequently  been  carried  out.  In  the  light  of  the 
results,  the  tool  is  being  modified  and  will  be  distributed  to  Member  States  by  the 
end of the year. 

Action 6 – Improve reporting on financial corrections by Member States 

6.1.  Follow  up  on  data  reported  by  Member  States  to  complete  gaps  and  correct 
inaccuracies 

Action completed 

DG  REGIO,  as  lead  DG,  aggregated  the  data  on  financial  corrections  in  all  Funds 
reported  by  Member  States  in  March/April  2008  and  the  Commission  reported  the 
results  to  the  European  Parliament  with  the  second  quarterly  report  on  financial 
corrections. The total amounts of corrections (withdrawals  and recoveries) reported 
for  the  year  2007  were  EUR  407  million  and  EUR  136  million  respectively.  The 
cumulative  total  for  the  whole  of  the  2000-2006  period  comes  to  nearly 
EUR 1.6 billion (EUR 1.1 billion withdrawals, nearly EUR 500 million recoveries). 
The results will be presented in detail in an annex to the 2007 Annual Report on the 
Implementation of the Structural Funds to be published in October. DG REGIO has 
written to all concerned Member States to ask them to fill gaps and clarify apparent 
anomalies. 

6.2.  Verification of reported data on corrections in 10 Member States  

Action in progress 

DG  REGIO  as  lead  DG  has  carried  out,  with  assistance  from  external  contractors, 
on-the-spot  verifications  of  data  for  all  Funds  in  3  Member  States.  The  overall 

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11 

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conclusion from the review of the recording and reporting systems and the random 
samples  of  supporting  documents  is  that  the  data  on  withdrawals,  recoveries  and 
pending recoveries submitted by the relevant authorities in these Member States can 
be  considered  generally  reliable  and  complete.  Recommendations  to  improve 
procedures in the future are being made and will be closely monitored. Verifications 
in a further 7 Member States will take place in October-November for all Funds. 

Action 7 – Improve reporting by Commission on impact of audit activity 

7.1.  Modification  of  IT  applications  and  procedures  –  SYSAUDIT  in  DG  REGIO, 
full implementation of A-REP in DG EMPL 

Action completed 

In DG REGIO the reports obtained from SYSAUDIT have been improved in order to 
strengthen the follow up of audits carried out. 

In DG EMPL the A-REP application has been fully implemented since April 2008, 
in  order  to  provide  better  follow  up  and  monitoring  of  all  Community  audit 
recommendations and to document such follow-up activities. 

7.2.  Modification  of  IT  applications  and  procedures  –  quarterly  reporting  on 
financial corrections to DG BUDG 

Action partially completed 

Improvements to the IT application SYSAUDIT used by DG REGIO for the follow 
up  of  financial  correction  procedures  have  been  put  in  production  to  provide 
enhanced facilities for monitoring of the process. For the purpose of better and more 
automatic  reporting  specific  modules  on  audits  and  on  suspension  and  financial 
corrections  have  been  put  in  production  in  A-REP  and  will  be  available  before  the 
end of the year. 

DG  REGIO  and  DG  EMPL,  in  consultation  with  DG  BUDG,  DG  AGRI  and  DG 
MARE, have put in place procedures to improve the completeness and accuracy of 
reporting on financial corrections resulting from the Commission activity. Quarterly 
reports have been provided to DG BUDG, which has prepared and transmitted global 
reports to the Budgetary Control Committee of the European Parliament. 

The  Commission  Internal  Audit  Service  is  currently  undertaking  a  review  of  these 
procedures and the DGs will take any further actions required to implement agreed 
recommendations. 

Action 8 – Increase impact of Commission audit activity 

8.1.  Establish  and  implement  policy  of  suspending  payments  by  Commission  as 
soon as possible following detection of serious weaknesses in national systems 

Action completed 

The  Director  Generals  of  DG  REGIO  and  DG  EMPL  have  respectively  issued 
coordinated  instructions  to  their  services  to  implement  a  policy  of  launching  the 

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procedure for suspension of payments immediately following the detection of serious 
deficiencies in a national system. Monitoring of the timeliness of the application of 
suspensions is carried out using the monitoring tools referred to in Action 7.  

8.2.  Modify  internal  procedures  for  suspension  and  financial  corrections  to  speed 
up application 

Action partially completed 

DG REGIO and DG EMPL put in place new internal procedures for the application 
of  suspensions  and  financial  corrections  by  the  Commission  in  April  2008.  These 
provide for a streamlining of internal procedures to reduce unnecessary delays in the 
application  of  suspension  and  financial  corrections.  In  the  case  of  DG  EMPL  the 
existing manual will be updated to incorporate the new procedures by the end of the 
year. The procedures provide DG REGIO and DG EMPL with the means to respect 
the deadlines fixed for suspensions and financial corrections in the Action Plan for 
audits  carried  out  from  2007.  These  are  6  months  from  the  final  position  on  audit 
findings until the adoption of a formal payments suspension decision and 24 months 
between the audit and a formal Commission financial correction decision. The new 
procedures are already having an impact2. 

The  Commission  Internal  Audit  Service  is  currently  undertaking  a  review  of  these 
procedures and the DGs will take any further actions required to implement agreed 
recommendations. 

Action 9 – Improve assurance from AAR 

Action completed 

DG REGIO and DG EMPL fully implemented in the drafting of their 2007 Annual 
Activity  Reports  all  the  actions  listed  in  the  Action  Plan,  which  took  account  of 
recommendations by the European Court of Auditors.   

Action 10 – Maximise value of annual summaries 

Action completed 

The  Commission  carried  out  a  detailed  and  timely  assessment  of  the  annual 
summaries received, and reported on the results to the Budgetary Control Committee 
of the European Parliament by letters of 22 February, 25 March and 21 April 2008. 

The Commission analysed the summaries in relation to the respect for the minimum 
regulatory requirements as well as for the added value provided and took measures to 
follow up any shortcomings in quality as well as non-respect of the minimum legal 
requirements.  DG  REGIO  and  DG  EMPL  took  the  results  into  account  when 
finalising  their  assessments  of  national  systems  for  their  Annual  Activity  Reports. 
The  Commission  has  launched  an  infringement  procedure  against  the  one  Member 
State  which  failed  to  submit  a  compliant  annual  summary.  It  presented  on  26 

2 

For the 3 suspensions affected by the revised procedures, the average time from final audit position to 
decision  was  7  months,  and  for  the  one  financial  correction  procedure  affected  by  the  revised 
procedures the time between the audit and the correction decision was 18 months. 

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September  2008  revised  guidance  to  Member  States  in  the  COCOF  for  the  2008 
exercise,  with  the  aim  both  of  streamlining  the  process  for  Member  States  and  of 
reinforcing the value added elements of the annual summaries in order to maximise 
the  Funds.
the 

contribution  made 

assurance 

building 

up 

on 

to 

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Annex 1 – Summary of financial correction and suspension procedures in 2008 

Fund/period 

ERDF 2000-06 

CF 2000-06 

ESF 2000-06 

ERDF 1994-99 

CF 1994-99 

ESF 1994-99 

Grand total for 
2008 

Total for 2007 

Financial 
corrections 
accepted by 
Member 
State (in 
EUR 
million) 

Financial 
corrections by 
Commission 
decision (in 
EUR million) 

Number of 
Commission 
suspension 
decisions  

Suspension 
procedures 
underway 

Number of 
programmes/ 
projects 

Financial corrections 
underway 

Number of 
programmes/projects 

379 

11 

229

7

1

0

627

223

25

36

0

100

31

24

216

64

3 

1 

3 

n/a 

n/a 

n/a 

7 

1 

47 

8 

15 

n/a 

n/a 

n/a 

70 

2 

27 

8 

25 

1 

7 

70 

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Annex 2 – Details of financial correction and suspension decisions in 2008 (to 30.9.2008) 

Member State 

Programme 
period 

Fund 

Programme 

Amount 
(M EURO) 

Cross reference 
to the action in 
the Action Plan 

Financial 
corrections 

Germany 

1994-1999 

ERDF 

Berlin 

12.90

1.3b 

* Germany 

1994-1999 

* United Kingdom 

1994-1999 

Portugal 

Portugal 

1994-1999 

1994-1999 

ERDF 

ERDF 

ERDF 

ERDF 

Thüringen 

West Midlands Obj 2 

Alentejo 

Iniciativa para a 
Modernização da Indútria 
Têxtil (IC IMIT) 

Sub-total 

* Spain 

* Spain 

1994-1999 

1994-1999 

* Greece 

1994-1999 

CF 

CF 

CF 

– 

– 

– 

United Kingdom 

2000-2006 

ERDF 

Sub-total 

North West + URBAN/Sub-
total 

81.43

0.33

0.35

5.58

100.42

3.11

23.20

5.15

31.46

24.8

1.3b 

1.3b 

1.2 
1.3a 

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* Portugal 

2000-2006 

Spain 

Spain 

Spain 

Spain 

Spain 

Spain 

Greece 

* France 

* Ireland 

2000-2006 

2000-2006 

2000-2006 

2000-2006 

2000-2006 

2000-2006 

2000-2006 

1994-1999 

1994-1999 

* United Kingdom 

1994-1999 

* United Kingdom 

1994-1999 

CF 

CF 

CF 

CF 

CF 

CF 

CF 

CF 

ESF 

ESF 

ESF 

ESF 

– 

– 

– 

– 

– 

– 

– 

– 

Sub-total 

Guadeloupe 

Employment Community 
Initiative 

Resider Obj2 

Northern Uplands Obj 5 

Sub-total 

Grand total for 2008 

1.3a 

1.3a 

1.3a 

1.3a 

1.3a 

1.3a 

1.3a 

1.55

1.52

6.38

0.19

0.77

1.07

1.24

23.26

35.95

9.19

12.72

0.57

1.19

23.67

216.3

Suspensions 

Italy 

2000-2006 

ERDF 

Puglia 

-

1.2 

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Interreg 

Interreg 

2000-2006 

2000-2006 

* Bulgaria 

2000-2006 

Italy 

2000-2006 

Luxembourg 

2000-2006 

UK-Scotland 

2000-2006 

ERDF 

ERDF 

CF 

ESF 

ESF 

ESF 

France/UK 

Medocc 

Projects in road sector 

Calabria Obj 1 

Obj 3 

Obj 2 and Obj 3 

* Not under Action Plan. 

-

-

-

-

-

-

1.3a 

1.3a 

1.3a 

1.3a 

1.3a 

1.2 
1.3a 

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