Communication from the Commission to the European Parliament, the Council and the Court of Auditors - Report on the implementation of the action plan to strengthen the Commission's supervisory role under shared management of structural actions
Date: 2009-02-03
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, 3.2.2009 
COM(2009) 42 final 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL AND THE COURT OF AUDITORS 

Report on the implementation of the action plan to strengthen the Commission's 
supervisory role under shared management of structural actions 

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COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL AND THE COURT OF AUDITORS 

Report on the implementation of the action plan to strengthen the Commission's 
supervisory role under shared management of structural actions 

1. 

EXECUTIVE SUMMARY 

The  Commission  adopted  an  action  plan  on  19  February  2008  to  strengthen  its 
supervision of Member States in relation to shared management of structural actions 
("the  Action  Plan")1.  The  object  of  the  Action  Plan  is  to  reinforce  actions  by  the 
Commission  to  address  the  high  level  of  errors  in  reimbursements  for  structural 
actions  and  weaknesses  in  the  Member  States  management  and  control  systems. 
Taking  account  in  particular  of  the  conclusions  and  recommendations  of  the 
European Court of Auditors in its Annual Report for 2006, 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  on  the  one  hand  by  applying  measures  to  improve 
supervisory  and  control  systems  to  reduce  the  occurrence  of  error  and  on  the  other 
hand by taking actions 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. The Commission 
has  also  separately  reported  on  a  quarterly  basis  to  the  European  Parliament  the 
financial  corrections  resulting  from  the  Commission's  actions.  An  interim  progress 
report on the results of the first three quarters was sent to the European Parliament, 
the Council and the European Court of Auditors in November 20082. 

This Report sets out in detail in section 2 the outputs of each action achieved up to 31 
December 2008. As financial corrections and suspensions of payments to operational 
programmes  are  one  of  the  important  impact  indicators  as  regards  the  supervisory 
role  of  the  Commission,  detailed  information  on  corrections  and  payment 
suspensions applied in 2008 is set out in Annexes 1a and 1b. In addition, a summary 
of the ongoing financial correction procedures is set out in Annex 2. 

28 out of the 37 actions in the Action Plan have been completed. These include all 
actions  relating  to  improved  reporting,  guidance  notes,  training  seminars,  and 
streamlined  internal  procedures  for  financial  corrections.  One  partially  completed 
action, concerning the internal closure guidelines (Action 3.2), will be finalised in the 

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COM(2008) 97. 
SEC(2008) 2756. 

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first quarter of 2009. Six remaining actions are by their nature ongoing and relate to 
the  audits  of  high  risk  management  bodies,  the  follow  up  of  remedial  action  plans, 
the  suspension  and  financial  correction  procedures,  the  follow  up  of  individual 
substantive  error  cases  from  the  DAS  2006  and  the  review  of  the  work  of  the 
winding  up  bodies  (2000-06).  The  targeted  outputs  have  to  a  large  extent  been 
achieved  by  the  end  of  2008,  and  the  remaining  steps  will  be  completed  in  2009. 
Two  further  ongoing  actions  include  the  key  preventive  actions  for  the  2007-2013 
programmes,  namely  the  compliance  assessment  procedure  and  the  audit  strategy 
approval  process,  where  action  by  the  Commission  depends  on  the  timing  of 
submission  of  documents  by  Member  States.  Updated  outputs,  indicators  and 
deadlines  are  set  out  in  annex  3  for  all  the  eight  ongoing  actions  to  be  continued 
throughout the course of 2009.  

Through  the  effective  implementation  of  the  Action  Plan,  the  Commission  has 
made substantial progress toward its objective of strengthening its supervision 
of the management of structural actions in the Member States.  

The main achievements which provide evidence of this are: 

•  The European Court of Auditors has recognised in its Annual Report on 2007 the 
positive  evolution  in  the  quality  of  the  Annual  Activity  Reports  of  DG  REGIO 
and  DG  EMPL  and  the  usefulness  of  the  evidence  they  provide  (Table  2.1  and 
paragraph 2.12 of the Annual Report for 2007) (Action 9); 

•  The European Court of Auditors has also indicated in its Annual Report that the 
Commission  has  adequately  supervised 
the  procedure  concerning  annual 
summaries by issuing clear guidance and by dealing with cases of non compliance 
(paragraph 2.20 of the Annual Report for 2007) (Action 10); 

•  The  Commission  has  demonstrated  a  more  rigorous  response  to  the  detection  of 
systems  deficiencies  by  the  adoption  of  10  formal  decisions  to  suspend  interim 
payments (in 2007 only one such decision was adopted) (Action 8.1); 

•  The  Commission  has  demonstrated  its  capacity  to  report  accurately  and  in  a 
timely  way  on  the  corrections  resulting  from  its  own  control  and  audit  activity 
through the transmission of quarterly reports on financial corrections (Action 7.2); 

•  The  Commission  has  increased  the  impact  of  its  audit  work  through  the 
conclusion  of  procedures  for  financial  corrections  where  deficiencies  and 
irregularities  have  been  identified.  The  intensity  of  this  activity  is  shown  by  the 
increased volume of financial corrections relating to 2000-2006 programmes and 
projects  applied  in  2008  for  ERDF,  ESF  and  Cohesion  Fund.  The  overall  figure 
for  financial  corrections  for  2008  for  ERDF,  ESF  and  Cohesion  Fund  resulting 
from  the  Commission's  activity  is  EUR  1.53  billion,  compared  with  EUR  288 
million  for  the  whole  of  2007  (see  annex  1a).  The  current  estimate  of  potential 
financial  corrections  likely  to  result  from  the  suspension  and  correction 

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The figure is provisional and subject to adjustment in the Commission's Annual Accounts for the year 
2008. 

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procedures  underway  at  the  end  of  2008  is  approximately  EUR 2.8 billion  (see 
annex 2) (Actions 1.2, 1.3, 8.2);  

•  The  revised  internal  procedures  of  DG  REGIO  and  DG  EMPL  provide  a  sound 
basis  for  speeding  up  the  adoption  of  suspension  and  correction  decisions  and 
meeting  the  benchmarks  referred  to  in  the  Action  Plan  (6  months  from  the  final 
position  on  audit  findings  until  the  adoption  of  a  suspension  decision  and  24 
months between the audit and a Commission financial correction decision). Whilst 
there will be a period of transition for past audits, there is evidence of the impact 
of  the  new  procedures  in  relation  to  the  time  for  adoption  of  a  number  of  the 
suspension decisions in 2008 (Action 8.2); 

•  The  Commission  made  progress  in  its  efforts  to  obtain  improved  data  on 
withdrawals  and  recoveries  from  Member  States  for  the  2000-2006  period 
reported  for  the  year  2007.  The  Commission  has  analysed  the  transmitted  data, 
has  requested  further  clarifications  where  necessary  and  has  carried  out  on  the 
spot  verifications  in  10  Member  States  to  verify  the  submitted  data.  The 
preliminary results indicate that the responsible authorities are generally fulfilling 
their  responsibilities,  although  there  remain  some  misunderstandings  on  the 
requirements which the Commission has taken steps to clarify (Actions 6.1, 6.2); 

•  The  Commission  has  implemented  strictly  the  preventive  actions  for  the  2007-
2013  programmes  in  order  to  ensure  that  reliable  systems  are  in  place  in  the 
Member  States  before  interim  payments  are  reimbursed.  It  has  received 
compliance  assessment  reports  covering  281  programmes,  out  of  a  total  of  433, 
with  those  accepted  covering  88  programmes,  those  rejected  (and  which  will 
therefore have to be re-submitted) covering 90 programmes and the remainder still 
under examination (Actions 4.1, 4.2); 

•  The  Commission  has  carried  out  all  the  planned  actions  designed  to  make  first 
level management checks  more effective for both the 2000-2006 and 2007-2013 
periods,  including  the  targeted  audits  of  high  risk  management  bodies,  the 
issuance of guidance notes, the provision of a self-assessment tool for managing 
authorities,  and  the  organisation  of  a  seminar  in  June  2008  for  managing  and 
certifying  authorities  with  over  500  national  participants  (Actions  1.1,  5.1,  5.2, 
5.3); 

•  The  Commission  has  carried  out  all  the  preventive  actions  intended  to  ensure  a 
rigorous and effective process for closure of the 2000-2006 programmes including 
the  audits  of  winding  up  bodies,  the  organisation  of  a  seminar  for  all  Member 
States  in  September  2008  with  over  700  national  participants,  the  creation  of  a 
'Register of Questions and Answers' to be used as guidance by the Member States 
and  the  participation  in  bilateral  workshops  in  different  Member  States  (Actions 
3.1, 3.2, 3.3). 

In  addition  to  the  actions  concerning  simplification  set  out  in  the  Action  Plan,  the 
Commission has taken substantial further steps to simplify rules for structural actions 
through its adoption of proposals to amend the relevant Council regulations, and will 
consider  further  measures  in  2009  on  the  basis  of  recommendations  of  a  joint 
Commission/Member  State  working  group.  These  measures,  which  include  an 
expansion  of  the  use  of  flat  rates,  lump  sums  and  unit  costs  to  all  types  of 

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expenditure  for  both  ERDF  and  ESF,  should  also  contribute  to  a  reduction  in  the 
level of error for 2007-2013 programmes, although necessarily they will not produce 
their effects before 2010/2011. 

The Action Plan addresses both the causes and effects of the high rate of error found 
by  the  European  Court  of  Auditors  in  structural  actions  expenditure.  However,  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 expenditure declared by the Member States 
and  payments  which  will  be  made  by  the  Commission  up  to  2010  and,  for  the 
Cohesion  Fund,  up  to  2012,  for  2000-06  programmes.  The  Commission's  focus  is 
therefore on increasing the effectiveness of the controls undertaken by the Member 
States and the audits of the Commission, in order to ensure that by the time the 2000-
2006  programmes  and  projects  are  closed,  the  residual  risk  of  error  is  low.  For  the 
2007-2013 period, the preventive actions will 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. 

DGs REGIO and DG EMPL will in their joint audit strategy for 2009-2011 plan and 
execute audit work to enable them to carry out a first evaluation of the impact of the 
Action Plan in relation to the error rate in reimbursements to the Funds at the end of 
2009  for  expenditure  for  the  new  programmes  of  the  2007-2013  period,  and  at  the 
end of 2011 for the closure of programmes of the 2000-2006 period. 

In  conclusion,  the Commission has substantially implemented the Action Plan, 
and will focus its efforts in 2009 on maintaining progress through the following 
activities: 

•  Completion of the 8 remaining ongoing actions from the Action Plan set out 

in Annex 3; 

•  execution of the 2009-2011 joint audit strategy of DGs REGIO and EMPL for 
structural actions which will set out the planned audit work to continue the 
rigorous supervision of systems in Member States for both the 2000-2006 and 
2007-2013 periods; 

•  the timely follow up of any reservations made by DGs REGIO and EMPL in 

their Annual Activity Reports for 2008; and 

•  continued actions to maximise the value of the annual summaries. 

The Commission will draw up and transmit to the European Parliament, the Council 
and  the  European  Court  of  Auditors  in  early  2010  a  report  on  the  further  actions 
carried out in 2009 and on the first impact of all the actions. 

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2. 

PROGRESS ON IMPLEMENTATION 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 ongoing 

DG  REGIO  and  DG  EMPL  have  carried  out  47  of  the  55  planned  audits  and  have 
sent  out  reports  on  30  of  the  audits.  The  effective  results  on  the  audits  already 
reported  are  that  in  7  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 21 
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.  The  follow-up  of  the  audits  through  to  possible  suspensions  of  payments 
and financial corrections will continue into 2009. Four planned audits were cancelled 
following  a  re-assessment  of  the  risk  or  because  the  programme  was  selected  for 
audit by the European Court of Auditors. Four planned audits were postponed to the 
first half of 2009 in order to be able to verify the implementation of remedial actions 
by the Member State. 

The DGs have performed 4 additional audits on high-risk management bodies which 
were  not  foreseen  in  the  Action  Plan  but  were  included  in  their  2008  audit 
programmes following further risk analysis. 

1.2.  Follow up of 27 remedial action plans 

Action ongoing 

The  27  action  plans  cover  32%  of  the  total  committed  amounts  for  2000-06 
programmes. DG REGIO and DG EMPL have completed the follow up on 14 of the 
27  action  plans,  the  majority  of  which  relate  to  reservations  from  the  DGs  Annual 
Activity Reports for 2007. The effective results of the action plans completed are as 
follows:  

– 

– 

in  13  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.  

In  the  remaining  13  cases  follow  up  is  ongoing.  For  4  action  plans  where  the 
Commission has concluded that the Member State has not satisfactorily implemented 
remedial actions: 

– 

– 

the Commission has adopted a decision to suspend payments in 3 cases;  

it has launched a procedure to suspend payments in 1 case; 

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– 

For 6 action plans where the Member State has reported that it has completed 
the required measures, the Commission will review Member States reports or 
carry  out  audits  at  the  beginning  of  2009  to  check  implementation  and  the 
adequacy of corrections applied. 

In 3 cases the Commission extended the deadline for completing the remedial action 
plans to the beginning of 2009 and the follow up will be completed in 2009.  

The  DGs  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 

Actions ongoing 

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 13 of the procedures and 4 procedures 
have been partially concluded. The results in terms of programmes and projects for 
these 17 procedures are as follows: 

– 

Commission  decisions 
to 
approximately EUR 58 million have been adopted for 44 programmes/projects; 

financial  corrections  amounting 

to  apply 

–  Member  States  accepted  financial  corrections  amounting  to  approximately 

EUR 309 million for 16 programmes/projects; and 

– 

the  procedure  was  closed  with  no  correction  for  10  programmes/projects 
because  the  Commission  was  able  to  accept  the  arguments  presented  by  the 
Member State. 

Under  the  procedures  not  yet  concluded  covering  34  programmes/projects,  the 
Commission  has  adopted  7  suspension  decisions  covering  29  programmes/projects. 
In these cases, if the Member State does not carry out the required action, financial 
corrections  will  be  applied  in  2009.  For  4  Cohesion  Fund  projects,  Commission 
decisions to suspend or correct will be taken following the outcome of the hearing in 
February 2009. For the remaining4 projects a suspension or correction decision is in 
preparation. 

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 17 of these procedures with 
financial corrections amounting in total to EUR 239 million. In 11 cases the decision 
is under preparation and will be adopted by end of first quarter 2009. In 6 cases the 

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The  sum  of  programmes/projects  is  greater  than  originally  reported  in  the  Action  Plan  as  additional 
Cohesion Fund projects have been included.  

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formal hearing with the national authorities will be held in the first quarter 2009 so 
that the decision will be adopted by end June 2009. Delays have occurred because of 
the  voluminous  documentation  that  had  to  be  analysed,  the  complex  legal  issues 
raised  in  certain  cases,  and  difficulties  in  fixing  the  date  of  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 can be applied. 

1.4.  Follow up of DAS error cases for 2006 

Action ongoing 

DG  REGIO  and  DG  EMPL  have  taken  a  final  position  on  60  of  the  74  cases.  Of 
these 25 cases, the Member State has itself made or has agreed to make the required 
correction. In 20 cases the DGs have launched a financial correction procedure. In 15 
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 14 cases, the 
Commission  has  been  delayed  in  reaching  a  final  position  because  of  the  need  to 
carry  out  a  follow  up  audit  and/or  obtain  further  information  from  the  responsible 
authorities. 

Action  2  –  Actions  under  Action  Plan  towards  an  Integrated  Internal  Control 
Framework5 

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

Action completed 

DG REGIO and DG EMPL have established procedures to ensure good coordination 
through a joint audit strategy and to guarantee that all audit results are shared so that 
there is effective reliance on each other's work. 

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

Action completed 

DG  REGIO  sent  the  provisional  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,  and  the  final  revised  report  on  31  October  2008. 
The Communication "Towards a common understanding of the concept of tolerable 
risk of error" was adopted by the Commission on 16 December 20086. 

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

Action completed 

See Action 6.2 below. 

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The Commission has adopted a Communication on the Commission Action Plan towards an Integrated 
Internal Control Framework on 3 February 2009. 
COM(2008) 866. 

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

Action completed 

See Action 5.2 below. 

2.5.  Action 15 – Promote “Contracts of Confidence”  

Action completed 

One new contract of confidence has been signed by the Commission with Cyprus for 
ERDF and Cohesion Fund in December 2008. The formalities were concluded by the 
end of 2008 to sign two other contracts with UK/England and Denmark for the ESF 
in February 2009. This will mean that there are 9 contracts of confidence signed with 
7 Member States (UK, AT, DK, PT, EE, SI, CY). 

2.6.  Action 16 – Co-ordination of audit standards 

Action completed 

The  Commission  has  finalised  the  guidance  documents  on  sampling  and  systems 
assessment methodology, and presented further sections of the Structural Funds audit 
reference  manual  relating  to  the  annual  control  report  and  opinion,  reliance  on  the 
work of other auditors and fraud indicators to national audit authorities at a technical 
meeting in December 2008.  

Following the further presentation to the Committee for the Coordination of Funds in 
January 2009 final versions of these documents have been distributed to the Member 
States. 

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

3.1.  Audit enquiry on 36 winding up bodies 

Action ongoing 

DG  REGIO  and  DG  EMPL  carried  out  30  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. Four audits 
have been cancelled in order to avoid duplication and 2 audits have been postponed 
until  the  first  quarter  of  2009  as  a  result  of  other  audit  work  carried  out  in  these 
Member States. The DGs have performed 2 additional audits on winding up bodies 
which were not foreseen in the action plan but were subsequently included in their 
audit programmes following further analysis. The conclusions 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. 

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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  for  managing  and  certifying 
authorities 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 
speakers from the Commission, OLAF and Member States presented key issues for 
the preparation of closure of Structural Funds programmes. 

DG REGIO and DG EMPL organised a second seminar entirely dedicated to closure 
issues 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  70  annual  bilateral 
meetings with managing authorities and control bodies of Structural Funds since the 
beginning  of  2008,  and  has  been  the  subject  of  specific  bilateral  seminars  in  19 
Member States (HU, FR, DK, LT, IT, CY, SK, GR, BE, PL, LV, EE, DE, NL, UK, 
MT,  CZ,  IE,  ES)  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.  In  response  to  the 
many  questions  raised  by  Member  States  at  and  following  these  events,  the 
Commission  has  created  a  "Register  of  Questions  and  Answers".  This  document  is 
now available to Member States on the seminar website. 

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

4.1.  Review of compliance assessment reports and opinions 

Action ongoing 

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  2008  the  Commission  had  received  compliance  assessment  reports 
from Member States covering 281 of the 433 approved programmes. Of these it has 

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accepted the assessments for 88 programmes and rejected those for 90 programmes 
(which will be re-submitted after correction). The remainder have been interrupted or 
are still subject to examination. 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 ongoing 

Audit authorities are required to submit their audit strategies within nine months of 
programme  approval  for  approval  by  the  Commission.  As  at  end  of  2008,  the 
Commission  had  received  the  audit  strategies  covering  366  of  the  433  approved 
programmes. It had accepted the strategies of 206 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  wide-ranging 
weaknesses in the strategies but particular points to be completed or improved. 

4.3.  Actions on simplification 

Action completed 

a) DG REGIO and DG EMPL presented the guidance note on partial closure under 
Article  88  of  Council  Regulation  (EC)  No  1083/2006  to  the  Fund  Coordination 
Committee (COCOF) in December 2008. Following a second presentation in January 
2009 a final version has been distributed to Member States. 

b) DG EMPL has taken steps to raise awareness on its 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  which  was  finalised  by  DG  EMPL  in  September  2007,  after 
discussions  with  the  Member  States  and  agreement  with  the  European  Court  of 
Auditors. As at 31 December 2008, 25 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.  

In  addition  to  the  actions  set  out  in  the  Action  Plan  concerning  simplification,  the 
Commission has taken further steps to simplify rules for structural actions through its 
adoption  of  proposals  to  amend  the  relevant  Council  regulations,  with  a  view  to 
expand the use of flat rates, lump sums and unit costs to all types of expenditure for 
both ERDF and ESF, and will consider proposing  further measures in 2009 on the 
basis of recommendations of a joint Commission/Member State working group to be 
presented in the first half of 2009.  Provided support from the European Parliament 
and the Council on such measures is achieved, the impact of further simplification on 
the error rate should become apparent from 2010/2011. 

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4.4.  Review and clarification on eligibility issues 

Action completed 

a)  The  Commission  presented  the  draft  brochure  making  a  compilation  of  all  the 
Community eligibility rules related to structural actions to the COCOF in December 
2008 and the final version has been made available on the Commission website. 

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  which  was  adopted  by 
the Council on 18 December 2008. 

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 
Hungary  (4/4/08),  in  Bulgaria  (26/6/08)  and  in  Poland  (2/12/2008),  Cyprus 
(18/12/2008)  and  Malta  (9/12/2008),  whilst  the  target  was  two  Member  States. 
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.  The  Commission  has  also  issued  to 
audit  authorities  an  information  note  on  fraud  indicators  focusing  on  the  area  of 
public procurement. 

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 
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 presented to COCOF  in December  a  plan 
for improving training and 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 

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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 has been adapted and was presented to Member States at the COCOF 
meeting in January 2009. 

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  and  also  presented  them  in an  annex  to  the  2007  Annual  Report  on  the 
Implementation  of  the  Structural  Funds7  published  in  October  2008.  DG  REGIO 
subsequently  wrote  to  all  concerned  Member  States  to  ask  them  to  fill  gaps  and 
clarify  apparent  anomalies.  On  the  basis  of  the  revised  data  received,  the 
Commission  can  present  the  corrected  figures  as  follows:  the  total  amounts  of 
corrections (withdrawals and recoveries) reported for the year 2007 is approximately 
EUR  900  million.  The  revised  cumulative  total  for  the  whole  of  the  2000-2006 
period comes to approximately EUR 2.2 billion (EUR 1.3 billion withdrawals, EUR 
0.9 billion recoveries).  

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

Action completed 

DG  REGIO  as  lead  DG  has  carried  out,  with  assistance  from  external  contractors, 
on-the-spot verifications of data for all Funds in 10 Member States. The preliminary 
results  indicate  that  the  responsible  authorities  are  generally  fulfilling  their 
responsibilities, although there remain some misunderstandings on the requirements 
which  the  Commission  has  taken  steps  to  clarify.  Recommendations  to  improve 
procedures in the future are being made and will be closely monitored.  

7 

SEC (2008) 2649 

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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 completed 

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. 

Improvements  to  the  IT  application  SYSAUDIT  used  by  DG  REGIO  and  A-REP 
used  by  DG  EMPL  for  the  follow  up  of  financial  correction  procedures  have  been 
put  in  production  in  both  DGs  to  provide  enhanced  facilities  for  monitoring  of  the 
process in line with the new procedures. Moreover DG EMPL incorporated into A-
REP  a  specific  module  on  audits  so  as  to  follow  the  audit  process  from  the  start 
through to financial corrections, where necessary. 

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 
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 completed 

DG  REGIO  and  DG  EMPL  have  put  in  place  new  internal  procedures  for  the 
application  of  suspensions  and  financial  corrections  by  the  Commission  and  have 

EN 

14 

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updated  their  operational  manuals.  These  provide  for  a  streamlining  of  internal 
procedures  to  reduce  unnecessary  delays  in  the  application  of  suspension  and 
financial corrections. The revised internal procedures of DG REGIO and DG EMPL 
provide  a  sound  basis  for  speeding  up  the  adoption  of  suspension  and  correction 
decisions and meeting the benchmarks referred to in the Action Plan (6 months from 
the final position on audit findings until the adoption of a suspension decision and 24 
months  between  the  audit  and  a  Commission  financial  correction  decision).  Whilst 
there will be a period of transition for past audits, there is evidence of the impact of 
the new procedures in relation to the time for adoption of a number of the decisions 
in 2008. 

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.  The  European  Court  of 
Auditors  has recognised  in  its Annual Report on 2007 the positive evolution in the 
quality of the Annual Activity Reports of DG REGIO and EMPL and the usefulness 
of  the  evidence  they  provide  (Table  2.1  and  paragraph  2.12  of  the  Annual  Report 
2007). 

Action 10 – Maximise value of annual summaries 

Action completed for annual summaries for 2007 

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  European  court  of  Auditors  has  indicated  in  its  Annual  Report  that  the 
Commission has adequately supervised the procedure concerning annual summaries 
by issuing clear guidance and by pursuing the reasons for non compliance (paragraph 
2.20 of the Annual Report 2007). 

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  and  the  Commission  is 
currently  examining  information  which  has  since  been  provided  by  the  Member 
State.  It  finalised  and  made  available  on  12  November  the  revised  guidance  to 
Member States 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 contribution made to building up assurance on 
the Funds. 

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The Director General of DG REGIO sent a letter to the Member States in December 
2008  reminding  them  of  the  importance  of  the  value  added  elements  of  the  annual 
summaries. 

The  Commission  will  continue  in  2009  and  subsequent  years  to  analyse  annual 
summaries  received  from  Member  States  and  to  maximise  their  value  to  obtain  an 
increased assurance on management and control systems in the Member States. 

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Annex 1a – Summary of financial corrections in 2008 

Fund/period 

Financial corrections 
accepted by Member 
State (in EUR 
million) 

Financial 
corrections by 
Commission 
decision (in 
EUR million) 

Total financial 
corrections for the 
period 1/1 – 
15/12/2008 (in 
EUR million) 

Financial 
corrections for the 
period 15/12 – 
31/12/2008 (in 
EUR million) 

Total financial 
corrections in 
2008 (in EUR 
million) 

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 

573 

9 

487

10

7

0

1.086

25

35

0

151

31

26

268

598 

44 

487 

161 

38 

26 

5 

168 

1.354 

173 

598 

44 

492 

329 

38 

26 

1.527 

288 

This table sets out all the corrections made for ERDF, ESF and CF, and not only those resulting from Action 1.3. 

The figures are provisional and subject to adjustment in the Commission's Annual Accounts for the year 2008. 

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Annex 1b – Details of financial correction decisions and suspension decisions adopted in 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 

Netherlands 

1994-1999 

United Kingdom 

1994-1999 

United Kingdom 

1994-1999 

Germany 

1994-1999 

Greece 

Finland 

1994-1999 

1994-1999 

ERDF 

ERDF 

ERDF 

ERDF 

ERDF 

ERDF 

ERDF 

ERDF 

ERDF 

ERDF 

Thüringen 

West Midlands Obj 2 

Alentejo 

Iniciativa para a Modernização 
da Indútria Têxtil (IC IMIT) 

Groningen-Drenthe  

Industrial South Wales 

Highlands and Islands 

Saxony 

Road Axes 

Objective 6 1995-1999 

Sub-total 

81.43

0.33

0.35

5.58

4.62

14.94

10.42

158.08

30.10

0.44

319.19

1.3b 

1.3b 

1.3b 

1.3b 

1.3b 

1.3b 

1.3b 

1.3b 

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* Spain 

* Spain 

1994-1999 

1994-1999 

* Greece 

1994-1999 

CF 

CF 

CF 

– 

– 

– 

Sub-total 

3.11

23.20

5.15

31.46

United Kingdom 

2000-2006 

ERDF 

North  West  +  URBAN/Sub-
total 

24.8

1.2, 1.3a 

* Portugal 

2000-2006 

Spain 

Spain 

Spain 

Spain 

Greece 

2000-2006 

2000-2006 

2000-2006 

2000-2006 

2000-2006 

CF 

CF 

CF 

CF 

CF 

CF 

* France 

* Ireland 

1994-1999 

1994-1999 

ESF 

ESF 

– 

– 

– 

– 

– 

– 

Sub-total 

Guadeloupe 

Employment Community 
Initiative 

* United Kingdom 

1994-1999 

ESF 

Resider Obj2 

1.3a 

1.3a 

1.3a 

1.3a 

1.3a 

1.55

1.52

6.38

0.77

1.24

23.26

34.69

9.19

12.72

0.57

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* United Kingdom 

1994-1999 

* Finland 

1994-1999 

*Germany 

1994-1999 

Suspensions 

Italy 

Interreg 

Interreg 

2000-2006 

2000-2006 

2000-2006 

*Interreg 

2000-2006 

Spain 

2000-2006 

* Bulgaria 

2000-2006 

Italy 

2000-2006 

Luxembourg 

2000-2006 

UK-Scotland 

2000-2006 

Luxembourg 

2000-2006 

* Not under Action Plan. 

ESF 

ESF 

ESF 

ERDF 

ERDF 

ERDF 

ERDF 

ERDF 

CF 

ESF 

ESF 

ESF 

ESF 

Northern Uplands Obj 5 

Objective 6 1995-1999 

Land Bremen Obj 3 

Sub-total 

Grand total for 2008 

Puglia 

France/UK 

Medocc 

Italy/Albania 

9 intermediate bodies 

Two projects in road sector 

Calabria Obj 1 

Obj 3 

Obj 2 and Obj 3 

Equal 

1.19

0.09

1,93

25,69

433.90

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

1.2, 1.3a 

1.3a 

1.3a 

1.3a 

1.3a 

1.3a 

1.2, 1.3a 

1.3a 

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Annex 2 – Summary of financial correction and suspension procedures underway at the end of 2008 

Fund/period 

Financial correction and suspension 
procedures underway 

Number of 
procedures 

Number of 
programmes/projects 

Source (number of procedures) 

Commission 
audit  

Programme/
project 
closure 

OLAF  

ECA 

Estimated 
amount (in 
EUR 
million)  

783 

167 

257 

1.233 

5 

387 

39

31

12

17

2

0

0

20

0

9

4

14

47

10

0

0

20

0

0

30

2

1

1

2

1

0

7

ERDF 2000-06 

CF 2000-06 

ESF 2000-06 

ERDF 1994-99 

CF 1993-99 

ESF 1994-99 

Grand total 
for 2008 

51 

52 

13 

48 

7 

14 

71 

74 

13 

50 

8 

14 

185 

230 

2.832 

101

The figures are provisional and subject to adjustment in the Commission's Annual Accounts for the year 2008. 

The "Estimated amounts (in EUR million)" of potential corrections are best estimates, taking into account the state-of-play of the follow up of 
audits, implementation of remedial action plans and final position letters issued to Member States. 

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Annex 3 - Remaining ongoing actions from Action Plan (to be incorporated in joint audit strategy 2009-2011) 

.  

Original action in 2008 

Remaining  action 
2009 

in 

Revised indicator 

Deadline 

1. Actions under the Structural Actions joint audit strategy for 2000-2006 

1.1.  Carry out targeted audits on high-risk management 

bodies (2000-06)  

1.2.  Complete  the  follow-up  of  the  Member  States' 
implementation of 27 current remedial action plans 
to  remedy  serious  deficiencies  in  those  Member 
States' management and control systems 

1.3a 
and 
1.3b 

Bring to conclusion the 20 suspension and financial 
correction  procedures  currently  underway  for 
2000-2006  and 
financial  correction 
the  34 
procedures from closure audits for 1994-1999 

Follow  up  the  results  of 
the  47  audits  carried  out 
4 
and 
postponed audits 

carry 

out 

Audits  carried  out  and 
follow-up 
completed  with  effective 
result  – 
is 
reasonable  assurance 
functioning  effectively  on  application  of 
corrective measures 

that  system 

31.12.2009 

Complete  the  follow  up 
of  13  remedial  action 
plans 

Remedial  action  plans  (ERDF  7/ESF  6) 
in  Member  States  concluded  with 
effective result 

31.12.2009 

Suspension/financial 
correction 
procedures  concluded  by  corrections 
agreed  by 
the  Member  State  or  a 
Commission  decision  within  24-month 
deadline  

the 
7 
Conclude 
remaining 
suspension 
and  financial  correction 
for  2000-
procedures 
the 
2006 
17 
financial 
remaining 
procedures 
correction 
from  closure  audits  for 
1994-1999 

and 

31.12.2009 

the 

(30.06.2009 
for 
procedures 
for 
1999) 

1994-

1.4.  Follow up the individual substantive error cases for 
DAS 2006 together with any systemic implications 

14 

Take  a  final  position  on 
the 
remaining 
individual  error  cases 
the  20 
and  conclude 
correction 
financial 

procedures 
correction 
Financial 
concluded  by  corrections  agreed  by  the 
Member  State  (or  with  a  Commission 
decision)  or  closed  without  corrections 
(if  MS's  arguments  accepted  by  the 

30.12.2009 

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

procedures launched. 

Commission).  

3.1.  Complete  the  audit  enquiry  on  the  review  of  the 

work of the winding-up bodies (2000-06) 

Complete  the  follow  up 
of  30  audits  of  winding 
up  bodies  and  carry  out 
the 2 audits postponed 

follow  up 
Audits  carried  out  and 
completed  with  effective 
result  – 
reasonable  assurance  that  winding  up 
body is functioning satisfactorily in view 
of 
for  closure  or 
application of corrective measures 

the  preparation 

31.12.2009 

4. Preventive actions for the 2007-2013 programming period 

4.1.  Review  of  compliance  assessment  reports  and 

opinions  

4.2.  Review of national audit strategies  

review 

Complete 
of 
compliance  assessment 
reports  and  opinion  for 
152 programmes 

review 

of 
Complete 
national  audit  strategies 
for 67 programmes 

Desk 
programmes 

review 

of 

all 

remaining 

30.9.2009 

Desk  review  of  all  remaining  audit 
strategies 

30.9.2009 

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