Communication from the Commission to the European Parliament, the Council and the Court of Auditors - Impact of the action plan to strengthen the Commission's supervisory role under shared management of structural actions
Date: 2010-02-18
Institutions: European Commission
Subjects: EU action, EU control, EU financing, European Commission, audit, financial control, management audit, structural policy

EN 

EN 

   EN 

 
 
EUROPEAN COMMISSION 

Brussels, 18.2.2010 
COM(2010)52 final 

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

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

EN 

   EN 

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

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

EXECUTIVE SUMMARY 

In  2008,  following  the  European  Court  of  Auditors  ("Court")  Annual  Report  of 
20061,  the  Commission  adopted  an  action  plan  to  strengthen  its  supervision  of 
Member  States  in  relation  to  shared  management  of  structural  actions  ("Action 
Plan")2. The objective of the Action Plan was 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 ("systems"). The 
Action  Plan  set  out  37  actions,  under  10  main  headings  (see  Annex  4).  Further 
measures  and  programmes  were  added  during  2008  and  2009.  Therefore,  the 
supervisory activity by the Commission went beyond the scope initially stated in the 
Action Plan. 

The  main  results  were  presented  to  the  Budgetary  Control  Committee  of  the 
European  Parliament  by  Commissioners  Samecki  and  Špidla  on  2  December  2009. 
The reports of 5 November 20083, 3 February 20094 and 28 October 20095 provide 
further detail. 

This  Communication  gives  an  assessment  of  the  results  and  the  first  impact  on  the 
implementation of the Action Plan, as well as, on the implementation of additional 
actions  by  the  Commission  under  the  Joint  Audit  Strategy  for  Structural  Actions 
("Audit Strategy"). The assessment looks beyond simple quantitative indicators, such 
as  error  rates  or  amounts  recovered,  as  it  is  difficult  to  tie  such  measures  to 
individual  actions.  For  example,  guidance  and  training  help  to  understand  better 
legislative  requirements  but,  they  do  not  have  a  directly  quantifiable  impact  in  the 
short-term. Therefore, an appropriate mix of qualitative and quantitative indicators is 
used. 

A  major  group  of  actions  on  the  1994-1999  and  2000-2006  programming  periods 
involved targeting Commission audit activity and applying financial corrections in a 
more rigorous way. As a result, the value of financial corrections for both 1994-1999 
and 2000-2006 periods has increased, totalling EUR 3.801 billion for 2008 and 2009, 
compared to approximately EUR 3.567 billion in total for the period 2000-2007. In 
cases  where  Member  States  accept  the  corrections  proposed  by  the  Commission 
(70% of the cases in 2000-2009) they may re-allocate the Commission contribution 

1 
2 
3 
4 
5 

European Court of Auditors, Annual Report for 2006 (OJ 273, 15.11.2007). 
COM(2008) 97. 
SEC(2008) 2756. 
COM(2009) 42. 
SEC(2009) 1463. 

EN 

2 

   EN 

 
                                                 
to  additional  eligible  projects.  Where  corrections  are  decided  by  the  Commission 
they are recovered for the EU budget. 

The Action Plan covered three programming periods. 

Main results and impact for the 1994-1999 programming period: 

– 

The Action Plan focused, for this period, on concluding outstanding financial 
correction procedures. Overall, EUR 864 million of financial corrections were 
applied  in  2008-2009  for  ERDF,  ESF  and  CF,  in  addition  to  the  EUR  1.4 
billion  prior  to  the  Action  Plan.  The  results  for  2008  and  2009  mainly  arise 
from  the  1994-1999  closure  audit  enquiry  for  ERDF  concluded  in  January 
2010.  For  ESF,  1994-1999  financial  corrections  include  13  programmes  for 
which a Commission decision was adopted and another 17 procedures opened 
during 2008-2009. 

Main results and impact for the 2000-2006 programming period: 

– 

– 

– 

The  Commission  has  focused  its  audit  work  on  risk-prone  areas  and  has 
performed and  completed  its own audits on 50 high-risk  management bodies, 
continued  the  monitoring  and  conclusion  of  Member  States'  action  plans  and 
taken  action  on  all  errors  detected  by  the  Court  in  its  2006  Annual  Report 
(action on the errors detected by the Court for 2007 and 2008 is on-going). The 
objectives of these actions are to reinforce systems and to apply suspension and 
financial correction procedures where weaknesses were detected to reduce the 
risk  of  loss  to  the  EU  budget.  As  a  result  of  Commission  audit  work  for  the 
period  2000-2006,  total  financial  corrections  amount  to  EUR  2.9  billion  for 
2008  and  2009  (compared  to  EUR  2.1  billion  for  the  eight  years  prior  to  the 
Action Plan). A positive impact is expected at programme closure, as detected 
errors have been eliminated. There are indications that risks are now limited to 
only  a  few  Member  States6,  whereas  the  improvement  in  the  systems  in  the 
Member  States  is  further  supported  by  the  improved  assessment  of  these 
systems in the Directorates Generals 2008 Annual Activity Reports. 

The  Commission's  actions  on  withdrawals  and  recoveries  data  from  the 
Member  States  have  yielded  positive  results.  Analysis  indicates  that  the 
completeness  and  accuracy  of 
improved.  The 
improvements  make  it  possible  to  better  assess  the  effectiveness  of  national 
control  and  corrective  procedures.  Nonetheless,  there  is  still  a  margin  for 
further progress. 

the  data  received  has 

On  the  closure  of  2000-2006  programmes,  the  Commission  has  carried  out 
early  preparatory  work  by  setting  out  its  own  closure  strategy,  providing 
guidance  and  training  to  Member  States  and  performing  reviews  on  the 
preparations of winding-up bodies7. The impact of these preventive actions will 

6 
7 

European Court of Auditors, Annual Report for 2008, Commission reply to par. 6.35. 
Audit bodies responsible for the closure declarations of operational programmes. 

EN 

3 

   EN 

 
                                                 
be visible at programme closure and measured through the residual8 error rate 
after closure. 

– 

The  Commission  has  updated  its  guidance  on  the  annual  summaries  and 
reiterated  the  importance  of  their  added  value  to  the  Member  States.  In  its 
Annual  Report  2008,  the  Court  noted  the  follow-up  actions  taken  by  the 
Commission,  where  Member  States  were  found  to  be  non-compliant,  and  the 
improvements, whereby some Member States added value to their summaries 
through additional analysis or other elements. 

Main results and impact for the 2007-2013 programming period: 

– 

– 

– 

– 

The Commission has implemented strict preventive actions for the 2007-2013 
programming  period,  to  ensure  reliable  systems  are  set  up  in  Member  States 
from the start of the programming period, before any interim payment requests 
are  reimbursed.  The  first  instrument  is  the  compliance  assessment  of  the 
systems set up by the Member States. By the end of 2009 DG Regional Policy 
(DG  REGIO)  and  DG  Employment,  Social  Affairs  and  Equal  Opportunities 
(DG EMPL) had approved compliance assessment reports covering 91.6% and 
90.8%,  respectively,  of  the  total  decided  amounts.  The  second  preventive 
measure is  the  national audit strategies. By the end of 2009, DG REGIO and 
DG  EMPL  approved  strategies  covering  respectively  97.1%  and  100%  of 
programmes. 

The  Commission  has  carried  out  an  audit  of  a  random  sample  of  projects, 
following  a  similar  methodology  to  the  Court.  The  preliminary  error  rate  of 
around  5%  resulting  from  this  enquiry  provides  an  indication  that  the  actions 
taken by the Commission through the Action Plan, the Audit Strategy, and the 
enhanced regulatory control provisions for the period 2007-2013, are going in 
the right direction. However, the results of the enquiry should be interpreted in 
a prudent way since the population audited covers payments made at an early 
stage  of  the  programming  period  until  31  May  2009  from  15  Member  States 
which had declared expenditure by that time. 

The Regulations for the 2007-2013 period have been amended to simplify the 
rules and in particular to allow for the use of lump sums, standard scales of unit 
costs and indirect costs on a flat rate basis. The provisions on simplified costs 
are  intended  to  reduce  the  administrative  burden  on  Member  States  and 
contribute to a more efficient and correct use of the Funds and eventually lead 
to fewer errors. 

Finally,  the  actions  for  the  programming  period  2000-2006  have  also  had  a 
positive  spill  over  effect  on  the  set-up  and  functioning  of  the  2007-2013 
programmes, since all stakeholders are more aware of possible deficiencies in 
systems and the potential consequences, thanks to important efforts in the area 
of guidance and training. 

8 

The remaining risk after all expenditure has undergone all types of checks and financial corrections. 

EN 

4 

   EN 

 
                                                 
Overall, the Commission has enhanced its capacity to better supervise the structural 
actions under shared management. 

INTRODUCTION TO RESULTS AND IMPACT 

As stated in the Communication on an Action plan9, the Action Plan was designed to 
complement the current high level of audit activity under the Audit Strategy and to 
continue  relevant  actions  under  the  Commission  Action  Plan  towards  an  Integrated 
Internal  Control  Framework10.  Therefore,  it  has  not  been  operating  in  isolation,  as 
other  measures  are  also  being  taken  to  improve  control  of  EU  co-financing  in  the 
area of Cohesion policy. As a result, while the measures put in place by the Action 
Plan  are  intended  to  contribute  to  an  improvement  in  control  and  ultimately  a 
reduction in the error rate, it will not be possible to isolate the specific impact of this 
Action  Plan  nor  of  individual  actions  on  the  error  rate.  The  results  are  detailed  in 
section 1 and the impact and conclusions in section 2. 

1. 

RESULTS OF THE ACTION PLAN AS OF 31 DECEMBER 2009 

1.1. 

Heading 1 - Actions under the Structural Actions Joint Audit Strategy for 2000-
2006 

Action  1.1:  The  Commission  considers  that  this  action  has  improved  the 
effectiveness  of  the  selected  high-risk  management  bodies  and  thus  decreased 
significantly the risk of errors prior to closure. 

Key  supporting  information:  Outcome  of  the  50  completed  audits:  11  positive 
conclusions  on  the  functioning  of  the  system,  2  adverse  opinions,  where  the 
Commission  has  already  launched  procedures  to  apply  financial  corrections,  37 
qualified opinions, where services are following up or have followed up the findings. 
DG  REGIO  and  DG  EMPL  performed  a  further  11  and  6  additional  audits 
respectively in 2009. 

Action 1.2: DG REGIO and DG EMPL have completed the follow-up on 24 of the 
27  national  action  plans  for  improving  system  deficiencies11.  This  action  has 
addressed problems already identified in Member States' systems and contributed to 
the prevention of further errors. 

Key  supporting  information:  22  positive  conclusions  on  the  completion  of  the 
required actions by the Member States and 2 applications of financial corrections by 
Commission  decision.  For  the  remaining  3  action  plans,  the  Commission  has 
launched procedures to suspend payments. 

9 
10 
11 

COM(2008) 97. 
COM(2006) 9. 
DG REGIO has completed the follow-up of the 10th action plan in January 2010. 

EN 

5 

   EN 

 
 
                                                 
Action 1.3: For the 2000-2006 programming period, the Commission has brought to 
a  conclusion  financial  correction  procedures  concerning  32  ERDF  programmes,  11 
ESF programmes and 6012 Cohesion Fund projects.  

This  action  also  includes  the  completion  of  financial  correction  procedures  for  34 
ERDF programmes for the 1994-1999 period13, in the scope of a closure enquiry that 
involved  the  audit  of  54  programmes,  covering  31.55%  of  total  ERDF  decided 
amounts for the period, and a sample of 1500 projects within these programmes. The 
total financial corrections from this enquiry were EUR 77714 million, mainly applied 
in  2008  and  2009,  and  which  correspond  to  2.9%  of  the  total  eligible  expenditure 
audited. Although ESF 1994-1999 financial correction procedures were not included 
in  the  Action  Plan,  progress  was  made  during  2008-2009,  as  13  procedures  were 
closed through Commission decisions recovering a total amount of EUR 44.8 million 
and 17 new correction procedures were opened. 

Therefore,  the  action  has  ensured  that  corrected  amounts  are  re-directed  towards 
legal and regular projects or recovered for the EU budget. 

Key  supporting  information:  The  Commission  has  reported  quarterly  to  the 
European Parliament on financial corrections applied. Annexes 1, 2 and 3. 

Action 1.4: The Commission reinforced its follow-up of the DAS cases. DG REGIO 
and DG EMPL have taken a final position on all 74 cases of systemic and individual 
errors identified by  the  Court in audited projects for the 2006 DAS. The follow-up 
allowed  errors  to  be  corrected,  Member  States  systems  to  be  improved  and 
contributed to the prevention of further errors. 

Key supporting information: In 28 cases the Member State made corrections; in 30 
cases  the  Commission  launched  financial  correction  procedures  and  16  cases  were 
closed with no correction since the Member States were able to provide evidence of 
the regularity and legality of the payments. The follow-up by the Commission of the 
2006 DAS cases was assessed by the Court as being effective15. For DAS 2007 DG 
REGIO and DG EMPL have taken a final position for 84% of the cases and started 
the recovery process, where necessary. For DAS 2008, the Commission had already 
begun the follow-up in 2009. 

1.2. 

Heading 2: Main ongoing actions under the Action Plan towards an Integrated 
Internal Control Framework 

There  has  been  increased  coordination  between  the  Structural  Fund  audit  services 
and national audit authorities to standardise audit methods; collection of data on cost 
of  controls  for  the  Communication  on  the  tolerable  risk  of  error16;  guidance  and 
training  to  managing  and  certifying  authorities;  and  9  "Contracts  of  Confidence" 
have been signed. 

12 
13 

14 
15 
16 

For one project the formal Commission decision was adopted in January 2010. 
The  Action  Plan  did  not  include  closure  of  financial  correction  procedures  for  ESF  1994-1999 
programmes. 
Includes the remaining and last decision adopted in January 2010 for EUR116 million. 
Annual Report for 2008 -chapter 6, annex 6.2. 
COM(2008) 866. 

EN 

6 

   EN 

 
                                                 
Key supporting information: As reported in the Impact Report on the Commission 
Action Plan towards an Integrated Internal Control Framework17 adopted in February 
2009 these actions are completed.  

1.3. 

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

The  Commission  has  concluded  its  audit  enquiry  on  winding-up  bodies,  which  are 
now  in  a  better  position  to  deal  with  the  closure  process.  Deficiencies  noted  are 
actively followed-up by the Commission and the bodies concerned and will be taken 
into account for the Commission’s audit strategy for closure.  

In  addition  to  the  closure  seminars  in  Member  States,  the  Commission  organised  a 
closure  seminar  in  Brussels  for  all  Member  States  in  2008  and  a  technical  meeting 
for  winding-up  bodies  in  2009,  which  included  presentations  by  Member  States, 
promoting mutual learning from best practices.  

Key  supporting  information:  The  enquiry  was  performed  on  winding-up  bodies 
representing  76%  of  the  overall  expenditure.  A  register  of  Questions  and  Answers 
at 
closure 
and  other  material 
found 
http://ec.europa.eu/regional_policy/conferences/closure/qa_en.htm. 
Technical 
meeting material is on the CIRCA website, http://circa.europa.eu. 

conference 

can  be 

from 

the 

1.4. 

Heading 4: Preventive actions for the 2007-2013 programming period 

By end of 2009 DG REGIO and DG EMPL received compliance assessment reports 
from 428 programmes, representing 98.6% of the total. 379 of these were approved, 
20  rejected,  for  re-submission  by  the  Member  States,  and  the  remainder  were 
interrupted  or  are  still  under  examination.  The  general  conclusion  is  that  the 
Commission guidance has been largely followed and that the Commission could rely 
for  the  vast  majority  of  the  cases  on  the  positive  opinion  expressed  by  the 
independent  auditors  on  the  compliant  set-up  of  the  systems.  The  compliance 
assessment is a key element in bringing down the risk of error in structural actions, 
since  the  Commission  cannot  make  an  interim  payment  to  a  programme  until 
approval of the set-up of its systems. The Commission and the Member States made 
considerable investment in this new preventive mechanism, in order to have reliable 
and fully compliant systems from the very beginning of the programming period. 

The  Commission  received  425  national  audit  strategies,  representing  98.6%  of  the 
total programmes. It approved 420, rejected 2 and is examining 3. This ensures that 
Member  States  have  planned  sound  audit  strategies  to  quickly  detect  systems 
weaknesses and risks of error. 

In 2008 and 2009 the Commission proposed and the Council and Parliament adopted 
a  number  of  significant  simplification  measures  for  the  2007-2013  regulatory 
framework.  Some  of  the  most  important  measures  concern  financial  engineering 
instruments, revenue generating projects and allowing lump sums and standard scales 
of  unit  costs  for  both  the  ERDF  and  the  ESF,  and  extending  the  possibility  of 

17 

COM(2009) 43. 

EN 

7 

   EN 

 
                                                 
declaring indirect costs on a flat rate basis to ERDF expenditure, thereby simplifying 
significantly the management of projects implemented by small organisations. 

The Commission has issued detailed guidance with examples of good practice, held 
training  on  the  provisions  of  the  2007-2013  Regulations,  further  disseminated 
training material to Member States and has encouraged national authorities to use the 
new possibilities for simplified costs.  

Key  supporting  information:  Simplification  measures  have  been  incorporated  in 
Regulations  (EC)  No  396/2009  and  No  397/2009  of  6  May  2009;  Regulation  (EC) 
No  1341/2008  of  18  December  2008  and  No  846/2009  of  1  September  2009.  The 
eligibility 
at 
can 
The 
http://ec.europa.eu/regional_policy/sources/docgener/presenta/pres_en.htm. 
guidance  note  on  simplified  costs  was  thoroughly  discussed  with  Member  States' 
experts  and 
January  2010.  All  guidance  notes  are  on 
http://circa.europa.eu. 

brochure 

finalised 

found 

be 

in 

1.5. 

Heading 5: Actions to improve primary controls at national level 

The Commission has carried out all planned actions to increase the effectiveness of 
first-level  management  verifications,  which  are  the  primary  line  of  defence  against 
errors.  It  organised  seminars  for  managing  and  certifying  authorities,  including 
public procurement seminars, and issued all guidance notes mentioned in the Action 
Plan. 

authorities 

Key  supporting  information:  Information  on  the  seminars  held  for  managing  and 
at 
can 
certifying 
http://ec.europa.eu/regional_policy/conferences/manauth/programme_en.htm 
and 
http://ec.europa.eu/regional_policy/conferences/trainers/programme_en.htm.  Results 
of  a  questionnaire  from  the  train-the-trainers  seminar  show  that  all  the  respondents 
had  used  the  information  from  the  seminar  to  provide  further  training/material  to 
their national colleagues.  

found 

be 

1.6. 

Heading  6:  Actions  to  improve  reporting  on  financial  corrections  by  Member 
States 

The  Commission  made  significant  efforts  to  improve  Member  States'  systems  on 
financial  corrections.  The  amounts  reported  for  2008  are  much  higher  than  the 
previous  years,  due  to  the  fact  that  Member  States  provide  more  complete 
information18. The Commission has made on-the-spot verifications of the quality of 
the Member States' systems for recoveries (missions to 1019 Member States in 2008 
and  to  another  920  in  2009).  The  remaining  Member  States  will  be  visited  in  2010. 
The  results  so  far  show  that  Member  States'  authorities  generally  follow  the 
requirements, although as confirmed by the Court, some weaknesses exist in respect 
of the completeness of data and the systems for recording and reporting irregularities. 

18 

19 
20 

Based on data provided by Member States total withdrawals and recoveries, performed by the national 
authorities by the end of 2008, were EUR 3.556 billion – SEC(2009) 1495. 
Belgium, UK, Slovenia, Spain, France, Italy, Portugal, Greece, Ireland and the Slovak Republic. 
Germany, Cyprus, Latvia, Hungary, the Netherlands, Austria, Poland, Sweden and Finland. 

EN 

8 

   EN 

 
                                                 
Taking  into  account  the  findings,  the  Commission  revised  its  guidance  note  on 
withdrawals and recoveries, which was presented to Member States in January 2010, 
in time for the last annual report for 2000-2006 programmes and the first report for 
the 2007-2013 programmes.  

EN 

9 

   EN 

 
Key supporting information: The guidance note on withdrawals and recoveries was 
presented  to  Member  States  in  COCOF  (Coordination  Committee  of  the  Funds)  in 
January 2010. The Court in its 2008 Annual Report has assessed the Member State 
systems for recoveries as “partially effective”. 

1.7. 

Headings  7  and  8:  Actions  to  improve  reporting  and  increase  impact  of 
Commission audit activity 

The  more  rigorous  approach  has  increased  the  level  of  financial  corrections  and 
suspensions.  During  2009,  the  Commission  adopted  7  suspension  of  payment 
decisions,  in  addition  to  the  10  adopted  in  200821.  Following  Commission  audit 
activity,  financial  corrections  totalling  EUR  3.80  billion  have  made  in  2008  and 
2009,  compared  to  EUR  3.57  billion  made  in  the  years  2000  to  2007.  A  further 
estimated  EUR  942  million  of  financial  corrections  were  in  progress  at  the  end  of 
2009. 

Key supporting information: See Annexes 1, 2 and 3. Also, the Court in its 2008 
Annual  Report  stated  that the  Commission  is  reporting  reliable  figures  on  financial 
corrections resulting from its own audit activities (par. 1.16). 

1.8. 

Headings  9  and  10:  Actions  to  improve  assurance  provided  by  AAR  and  to 
maximise  value  of  annual  summaries  under  Article  53b  of  the  Financial 
Regulation 

DG REGIO and DG EMPL fully implemented in their 2007 Annual Activity reports 
all the actions listed in the Action Plan, taking account of recommendations by the 
Court.  

Concerning annual  summaries,  where  Member  States  had  provided  a  conclusion  or 
declaration of assurance, the Directorates General had used this to corroborate their 
own assessment of the national systems. 

the  Commission 

Also, 
into  account 
recommendations  of  the  study  commissioned  by  the  European  Parliament,  such  as 
emphasizing the value-added elements and reducing redundant information.  

its  guidance  note 

revised 

taking 

Key supporting information: The Court recognised in its Annual Reports of 2007 
and 2008 the positive evolution in the quality and usefulness of the Annual Activity 
Reports of DG REGIO and DG EMPL and on the adequate supervision of the annual 
summaries by the Commission by issuing clear guidance and by dealing with cases 
of  non-compliance.  The  revised  guidance  note  on  annual  summaries  was  discussed 
with Member States in COCOF meetings of October and December 2009. 

21 

All suspension decisions have been lifted in 2009 or are in the process of being lifted. 

EN 

10 

   EN 

 
                                                 
2. 

FIRST IMPACT OF THE ACTION PLAN AND CONCLUSIONS 

Due to the nature of the actions and the fact that reducing the error rate is a steady 
but  lengthy  process,  this  first  impact  assessment  can  only  be  preliminary.  Further 
indications,  which  will  essentially  be  measured  globally  for  the  Action  Plan 
according to the evolution of error rates, will be obtained following the forthcoming 
audit activity by national or EU authorities.  

There  are  at  least  three  areas  in  which  the  Commission  expects  to  see  a  tangible 
impact resulting from the actions implemented under the Action Plan:  

2.1. 

The first audits of the 2007-2013 programmes indicate positive results 

To assess whether the actions described above have had a first positive impact on 
the legality of operations for the newly implemented 2007-2013 programmes, the 
Commission decided to perform an audit inquiry following a methodology similar to 
that  of  the  Court  for  its  DAS  audits.  The  specific  objective  of  the  enquiry  was  to 
estimate, on the basis of a random statistical sample of 180 operations, the error rate 
in  the  expenditure  declared  to  the  Commission  by  the  Member  States  between  1 
January  2007  and  31  May  2009  in  relation  to  the  Structural  Funds  and  Cohesion 
Fund  for  the  2007-2013  period22.  On  the  basis  of  the  preliminary  results,  the  error 
rate  is  around  5%.  These  results  provide  an  indication  that  the  enhanced  control 
provisions  for  the  2007-2013  regulatory  framework  and  the  preventive  measures 
taken by the Commission, as described in this Communication, are going in the right 
direction. However, the error rate resulting from this enquiry needs to be interpreted 
in a prudent way, due to the fact that the enquiry was carried out at the beginning of 
the programming period and that the population from which the sample of payments 
was  selected  was  limited  to  15  Member  States23  which  had  submitted  interim 
payment claims by the end of May 2009. The results of the enquiry will be finalised 
in the first half of 2010, once the contradictory procedure with the Member States is 
complete. 

Further indications on the impact on the error rate will be obtained with the results of 
the forthcoming audit activity, either by national audit authorities that have to report 
annually  audit  results  based  on  statistical  samples  of  operations,  or  EU  authorities 
(Commission audits, DAS audits). 

2.2. 

The Commission has improved its supervisory role on the shared management 
of the Funds 

The  strengthened  supervisory  role  of  the  Commission  could  be  assessed  against 
the  background  of  the  increased  effectiveness  of  the  existing  multi-annual  control 
system.  As  regards  the  2000-2006  period,  the  Annual  Activity  Reports  for  2008  of 

22 

23 

The selection of projects was done in two stages: the first stage was the random selection of 18 payment 
claims received by end May 2009 and the second stage was the selection of 10 operations in each claim. 
The parameters used were a 95% confidence level and 2% materiality. 
EE, LT, HU, RO, DE, FR, LV, PL, IE, PT, SI, AT, SE, DK and IT, of which the first 10 Member States 
were included in the sample.  

EN 

11 

   EN 

 
                                                 
the two Directorates General show a marked improvement on the functioning of the 
systems in Member States between the years 2007 and 200824. 

The Commission also considers that the residual risk of error after closure of the 
programmes  could  provide  evidence  of  the  effectiveness  of  a  system.  It  is  not 
possible now to conclude  on the level of  residual  risk  at closure for the 2000-2006 
period, since the majority of the programmes will be closed in 2010, and the results 
may  be  auditable  only  in  2011  onwards.  However,  DG  REGIO's  non-statistical 
closure  audit  enquiry  on  a  sample  of  1994-1999  ERDF  programmes25  finalised  in 
January  2010  gives  an  indication  that  at  closure,  and  after  all  financial  corrections 
have been made, the overall risk of error was substantially reduced. 

In  addition,  the  numerous  preventive  actions  taken  for  closure  of  the  2000-2006 
programmes (see 1.3 above) provide expectations that the closure process for 2000-
2006 could produce equally positive results. 

2.3. 

The Commission has applied financial corrections in an effective way to reduce 
the risk of loss to the EU budget 

A  major  group  of  actions  on  the  1994-1999  and  2000-2006  programming  periods 
involved  targeting  Commission  audit  activity  and  applying  financial  correction 
procedures in a more rigorous way. As a result, the value of financial corrections for 
both periods has increased, totalling EUR 3.801 billion for 2008 and 2009, compared 
to  approximately  EUR  3.567  billion  in  total  for  the  period  2000-2007.  The 
Commission has aimed to ensure that corrected amounts are re-directed towards legal 
and  regular  projects  or  recovered  for  the  EU  budget.  In  total,  EUR  5.2  billion 
corrections  were  proposed  by  the  Commission  and  accepted  by  Member  States  (in 
which case the Member States may reallocate the said expenditure to other projects), 
and EUR 2.1 billion corrections were decided by the Commission (in which case the 
amounts are recovered for the EU budget).  

The  level  of  financial  corrections  shows  the  Commission's  resolute  response  to  the 
detection  of  significant  systems  deficiencies  in  Member  States.  They  provide  a 
deterrent  effect  on  Member  States  from  any  future  mismanagement  of  EU  funds  – 
even where the funds remain within the Member States, the Member State must find 
the money to co-finance projects which replace those subject to financial corrections 
– and assist in eliminating errors detected during the implementation period, thereby 
reducing the residual risk of error at closure. 

24 
25 

European Court of Auditors, Annual Report for 2008, Commission reply to par. 6.23. 
Given  that  the  selection  of  programmes  for  this  enquiry  was  risk-based,  the  higher  risk  programmes 
were covered by the audit. 

EN 

12 

   EN 

 
                                                 
2.4. 

Conclusions 

Overall, the Commission has strengthened its capacity to supervise structural actions 
under  shared  management  and  has  taken  vigorous  measures  to  address  the  Court's 
outstanding recommendations. 

•  The  Commission  has  produced  results  for  all  the  actions  and  has  laid  the 
foundations for continued improvements. It, therefore, considers the Action Plan 
completed and the objectives achieved. 

•  The Commission will seek to reap the full benefits of the legislative provisions for 
the  new  programming  period  2007-2013,  including  the  simplification  of  cost 
options, in terms of a reduction in the error rates and will keep up the momentum 
generated  by  the  Action  Plan  and  pursue  rigorous  supervisory  actions  in  the 
context  of  its  Audit  Strategy  and  report  on  the  situation  in  the  Annual  Activity 
Reports.  

•  The  goal  of  a  control  system  is  to  reduce  errors  as  far  as  possible:  in  structural 
actions, this control system aims to minimise the residual risk of error on a multi-
annual  basis.  However,  control  systems  must  not  impose  an  undue  level  of  cost 
and  must  be  based  on  a  clear  and  shared  understanding  of  the  cost-risk  balance 
taking into account the EU added value of investing in certain areas. Progress in 
this  area  will  be  ensured  through  the  Commission's  tolerable  risk  of  error 
initiative.  The  Commission  will  make  a  proposal  for  the  tolerable  risk  of  error 
level for Cohesion policy at latest in 2012, based on 2010 expenditure which will 
for  the  most  part  be  governed  by  the  2007-2013  legislation.  The  Commission 
invites  the  Council  and  the  European  Parliament  to  develop  a  shared  political 
appraisal of the costs of controls attached to EU interventions and consequently to 
consider the level of risk of error which can be tolerated for each such area.  

•  All  stakeholders  should  be  aware  that  changes  to  legislation  take  time  to  filter 
through to the error rates. The legislative framework for the 2007-2013 period was 
adopted  in  2006  but  will  only  govern  the  majority  of  structural  actions' 
expenditure from 2010. To ensure coherence with future legislative initiatives, it 
will be vital to consider the political objectives of Cohesion policy together with 
its delivery mode and management and control arrangements. 

•  Member  States  must  demonstrate  a  commitment  to  improved  accountability  by 
following the Commission guidance on annual summaries and transforming these 
into a valuable additional source of assurance. While the legal base for the annual 
summaries  does  not  at  present  provide  for  an  overall  assurance  statement,  the 
Commission encourages all Member States to follow the example of seven others 
which  in  2009  included  assurance  statements  and  to  take  other  appropriate 
measures  (including  voluntary  national  declarations)  to  demonstrate  their 
commitment to ensuring sound management of funds. 

•  As noted by the Court, there is still room for improvement “on the ground”. This 
improvement can only be generated by the full implication of the Member States, 
which  have  primary  responsibility  for  the  effective  functioning  of  their  systems. 

EN 

13 

   EN 

 
The  Lisbon  Treaty,  along  with  the  enhanced  control  provisions  for  2007-2013, 
reinforces this responsibility. 

EN 

14 

   EN 

 
Annex 1 – Summary of financial corrections26 proposed or decided by the Commission for the Structural Funds27 and the Cohesion Fund 
(as of 31 December 2009), on an accrual basis, in EUR million  

Fund/period 

Total 
Financial 
Corrections 
2000-200728 

Total Financial 
Corrections 
200829 

Financial 
Corrections 
accepted by 
Member States 
2009  

Financial 
Corrections by 
Commission 
decision 2009 
(Annex 3) 

Total Financial 
Corrections 
2009 

Total Financial 
Corrections 
2008/2009  

Grand total 
2000-2009  

ERDF 2000-06 

1 561 

CF 2000-06 

ESF 2000-06 

103 

475 

619

54

496

Sub-total 2000-06 

2 139 

1 169

ERDF 1994-99 

CF 1994-99 

ESF 1994-99 

Sub-total 1994-99 

Total  

858 

225 

345 

1 428 

3 567 

330

38

26

394

1 563

1 465

68

154

1 687

55

10

 0

65

1 752

79

2

 0

81

386

0

19

405

486

 1 544

2 163

 70

154

1 768

441

10

19

470

2 238

124

650

2 937

771

48

45

864

3 801

3 724 

227 

1 125 

5 076 

1 629 

273 

390 

2 292 

7 368 

26 
27 
28 

Amounts are provisional and subject to audit by the Court for the 2009 Annual Accounts. 
Figures for EAGGF and FIFG are not included. 
Source: Note 6 of the Commission Annual Accounts for 2007; figures may be rounded compared to previous reports. 

EN 

15 

EN 

 
  
                                                 
Annex 2 – Summary of suspension decisions in 2009 and financial corrections underway (as of 31 December 2009) 

Fund/period 

Number of adopted 
Commission 
suspension decisions 

Financial corrections underway30  

ERDF 2000-06 

CF 2000-06 

ESF 2000-06 

ERDF 1994-99 

CF 1994-99 

ESF 1994-99 

Total 

6 

1 

7 

Number of 
programmes/ projects 

Estimated 
amount in EUR 
million 

67 

99 

13 

131 

3 

17 

200 

325 

153 

141 

116 

3 

204 

942 

29 
30 

31 

EN 

Source: Note 6 of the Commission Annual Accounts for 2008; figures may be rounded compared to previous reports. 
The figures are provisional and are subject to adjustments or cancellation in respect of ongoing contradictory proceedings. The "Estimated amount in EUR million" of 
potential corrections are best estimates, taking into account the state of play of the follow-up of audits, implementation of national action plans, final position letters 
issued to Member States and the results of hearings.  
Relates to procedure under Action 1.3. 

16 

EN 

 
  
 
 
 
 
 
 
                                                                                                                                                                                                                                               
Annex 3 – Details of financial correction and suspension decisions adopted by the Commission in 2009 (as of 31 December 2009) 

Member State 

Programme 
period 

Fund 

Programme 

Amount 
(EUR million) 

Financial 
corrections 

Italy 

2000-2006 

ERDF 

Puglia 

Germany 

2000-2006 

ERDF 

Mecklenburg-Vorpommern 

Spain 

Spain 

Spain 

Spain 

Germany 

Germany 

Germany 

Germany 

Germany 

2000-2006 

2000-2006 

2000-2006 

2000-2006 

1994-1999 

1994-1999 

1994-1999 

1994-1999 

1994-1999 

Sub-total 

Asturias 

Cantabria 

Norte-Galicia 

Galicia 

Sub-total 

SMEs Sachsen-Anhalt 

Sachsen-Anhalt 

Schleswig-Holstein 

Saarland Obj.2 

Saarland 

CF 

CF 

CF 

CF 

ERDF 

ERDF 

ERDF 

ERDF 

ERDF 

17 

EN 

79.33

0.05

79.38

0.07

 0.69

 0.87

0.17

1.80

1.95

5.14

0.48

8.33

4.99

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Germany 

1994-1999 

ERDF 

Germany 

1994-1999 

Italy 

Italy 

Portugal 

Spain 

Spain 

UK 

UK 

Interreg 

Interreg 

1994-1999 

1994-1999 

1994-1999 

1994-1999 

1994-1999 

1994-1999 

ERDF 

ERDF 

ERDF 

ERDF 

ERDF 

ERDF 

ERDF 

1994-1999 

ERDF 

1994-1999 

1994-1999 

ERDF 

ERDF 

Nordrhein-Westfalen-
Leader 

Nordrhein-Westfalen 

Sardenia 

Energia 

MTE 

Andalucia 

Pais Vasco 

North East of England 
Objective 2 

Manchester,  Lancashire  and 
Cheshire 

Cadses IT, EL, DE 

Rhin-Meuse 

Sub-total 

Luxembourg 

1994-1999 

Luxembourg  

1994-1999 

Luxembourg  

1994-1999 

ESF 

ESF 

ESF 

Obj.3 (public promoters) 

Obj.3 (private promoters)  

Obj. 5b 

0.22

23.55

40.50

0.50

18.52

219.33

27.88

8.44

18.04

1.55

7.07

386.49

0.84

 0.64

0.13

EN 

18 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Luxembourg  

1994-1999 

Spain 

Belgium 

Finland 

1994-1999 

1994-1999 

1994-1999 

ESF 

ESF 

ESF 

ESF 

Obj. 4  

Andalucía  

Meetjesland Obj. 5 

Obj. 3 

Sub-total 

0.26

 16.84

 0.04

0.01

18.76

Grand Total 

486.43 

Suspensions 

Italy 

2000-2006 

ERDF 

Abruzzo 

Interreg 

2000-2006 

ERDF 

Greece/Italy 

Interreg 

Interreg 

2000-2006 

2000-2006 

ERDF 

ERDF 

Archimed 

Denmark/Sweden 

Date of adoption 
of decision

28 January 
200932

28 January 
200933

12 June 2009

2 September 
2009

Germany 

2000-2006 

ERDF 

Saarland 

5 October 2009

32 
33 

Commission decision was subsequently taken in 2009 to lift the suspension. 
Commission decision was subsequently taken in 2009 to lift the suspension. 

EN 

19 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
Germany 

2000-2006 

ERDF 

Baden-Württemberg 

18 November 
2009

Spain  

2000-2006 

ESF 

Iniciativa Empresarial  

21 August 2009

EN 

20 

EN 

 
  
 
 
 
Annex 4 - Action Plan  

. 

Action 

ECA recommendation addressed 

Objective 

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)  

Focus  on  improving  the  primary  controls  at 
management level in the Member States  

Focus  audit  resources  on  high-risk  bodies  so  as 
to reduce potential residual risk  

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

1.3. 

correction 

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

procedures 

effectiveness 

Improve 
of  Commission's 
supervisory  controls  to  mitigate  the  risk  of 
failure in Member States systems 

Focus  on  improving  the  primary  controls  at 
management level in the Member States  

effectiveness 

Improve 
of  Commission's 
supervisory  controls  to  mitigate  the  risk  of 
failure in Member States systems 

Increase the impact of Commission audit activity 
through  more  effective  use  of  suspension  and 
financial correction procedures  

assurance 

reasonable 

Obtain 
the 
management and control systems in the Member 
States function effectively and safeguard the EU 
budget 

that 

assurance 

reasonable 

Obtain 
the 
management and control systems in the Member 
States function effectively and safeguard the EU 
budget 

that 

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

effectiveness 

Improve 
of  Commission's 
supervisory  controls  to  mitigate  the  risk  of 
failure in Member States systems 

Obtain  assurance  that  required  corrections  have 
been made to protect the EU budget 

EN 

21 

EN 

 
  
 
 
 
2. Main ongoing actions under the Action Plan towards an Integrated Internal Control Framework 

2.1.  Action  9  –  Construct  effective  tools  for  sharing 
audit  and  control  results  and  promote  the  single 
audit approach 

2.2.  Action  10  -  Conduct  an  initial  estimation  and 

analysis of in the costs of controls for the ERDF 

Reinforce 
control systems in the Structural Funds 

the  feedback  mechanisms 

in 

the 

Coordinate  audit  and  control  work  in  order  to 
maximise its effectiveness 

Implement  the  Commission's  action  plan  on  the 
Integrated 
in 
accordance with Court Opinion No 2/2004 

Internal  Control  Framework 

Provide  a  basis  for  establishing  a  balance 
between the costs and benefits of controls 

2.3.  Action  11N  -  examine  the  reliability  of  national 
monitoring  and  reporting  systems  for  recoveries 
and financial corrections 

Ensure  provision  of  complete,  transparent  and 
reliable information on financial corrections and 
recoveries 

Improve  reporting  on  financial  corrections  (see 
action 6 below) 

2.4.  Action 14b - provide guidelines for beneficiaries 
levels  on  controls  and 

intermediate 

and/or 
responsibilities in the control chain 

the 
Encourage 
simplifications for the 2007-13 period 

facilitate 

and 

use 

of 

To  prevent  errors  and  reduce  the  risk  to  the  EU 
budget (see actions 4 and 5.2 below) 

the 

-  promote 
initiative 

‘Contracts  of 
2.5.  Action  15 
Confidence’ 
for  Structural  Funds 
(enabling  Commission  to  place  reliance  on 
national  audit  work  for  2000-06  period  and 
creating  basis  for  similar  cooperation  in  2007-
13)  

Improve  the  effectiveness  of  the  Commission's 
supervisory  controls  to  mitigate  the  risk  of 
failure in Member States' systems 

Improve the coordination of audit work so as to 
be  able  to  place  reliance  on  the  work  of  the 
national audit bodies  

2.6.  Action 16 - coordinate audit standards, error rate 

reporting, etc. for Structural Funds 

Improve  the  effectiveness  of  the  Commission's 
supervisory  controls  to  mitigate  the  risk  of 
failure in Member States' systems 

Improve 
framework by standardising audit methods 

integrated 

internal 

the 

control 

EN 

22 

EN 

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

3.1.  Complete the audit enquiry on the review of the 
work of the winding-up bodies (2000-06) 

Ensure sound closure procedures 

Preventive  control  to  ensure  the  closure  process 
will  be 
irregular 
expenditure 

in  detecting 

effective 

3.2.  Finalise 

the 

internal  procedures 

to  ensure 

Ensure sound closure procedures 

rigorous examination of closure documents 

3.3.  Raise awareness of Member States of the closure 

Ensure sound closure procedures 

guidelines issued by the Commission in 2006 

Ensure  proper  preparation  for  the  closure  of 
programmes within the Commission services 

Ensure  proper  preparation  for  the  closure  of 
programmes within the Member States 

4. Preventive actions for the 2007-13 programming period  

legal 
Ensure 
framework for the programming period 2007-13 

implementation  of 

full 

the 

Ensure 
legal 
framework for the programming period 2007-13 

implementation  of 

full 

the 

To ensure that effective management and control 
systems are in place early on in the period 

To  ensure  national  audit  strategies  compliant 
with the regulations 

and 

Encourage 
simplifications  for 
2007-13 

facilitate 
of 
the 
the  programming  period 

use 

To  prevent  errors  and  reduce  the  risk  to  the  EU 
budget 

4.1.  Review  of  compliance  assessment  reports  and 

opinions  

4.2.  Review of national audit strategies  

4.3.  Actions on simplification: 

a)  Note  on  partial  closure  under  Article  88  of 
Regulation  (EC)  No  1083/2006  followed  up  in 
annual meetings with managing authorities 

b)  Note  on  use  of  flat  rates  for  indirect  costs 
(ESF only) followed up in annual meetings with 
managing authorities 

EN 

23 

EN 

 
  
 
 
 
 
 
 
 
Ensure 
legal 
framework for the programming period 2007-13 

implementation  of 

full 

the 

Ensure  that  the  regulations  are  clear  to  the 
national  authorities  applying  them  and  to  the 
beneficiaries 

4.4.  Review  and  provide  clarification  on  eligibility 

issues for 2007-13:  

a)  Compilation  of  EU  eligibility  rules  for  2007-
13 period as single brochure 

b)  Note  on  application  of  Article  55  of 
Regulation  (EC)  No  1083/2006  –  revenue-
generating projects 

c) Note on application of State aid rules 

4.5.  Raise awareness of public procurement rules 

Focus  on  improving  the  primary  controls  at 
management level in the Member States 

To reduce the errors from this source in the use 
of the Structural and Cohesion Funds 

5. Actions to improve primary controls at national level 

5.1.  Organise  seminar  for  managing  authorities  and 
certifying  authorities  and  follow  up  in  annual 
meetings with managing authorities 

5.2.  Update  guidance  on  good  practice  for  primary 
controls  and  the  certification  function  for  2007-
2013 

Focus  on  improving  the  primary  controls  at 
management level in the Member States 

Address the risk of weak primary controls  

Focus  on  improving  the  primary  controls  at 
management level in the Member States 

Address  the  risk  of  weak  primary  controls  and 
certification function 

Reinforce  feedback  mechanisms  in  the  control 
system 

5.3.  Provide  self-assessment 
authorities on compliance 

tools  for  managing 

Focus  on  improving  the  primary  controls  at 
management level in the Member States 

Address the risk of weak primary controls  

EN 

24 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
6. Actions to improve reporting on financial corrections by Member States 

6.1.  Follow up on data reported to complete gaps and 

correct inaccuracies 

6.2.  Carry out on the spot verifications of a sample of 

Member States' data  

Improve  provision  of  complete,  transparent  and 
reliable information on financial corrections and 
recoveries 

Improve  provision  of  complete,  transparent  and 
reliable information on financial corrections and 
recoveries 

7. Actions to improve reporting by Commission on impact of audit activity 

Improve  reporting  on  financial  corrections  and 
recoveries 

Verify accuracy of data reported 

7.1. 

Improve  systems  for  recording  and  reporting  on 
follow up of audit recommendations 

effectiveness 

Improve 
of  Commission's 
supervisory  controls  to  mitigate  the  risk  of 
failure in Member States' systems 

Reinforce  feedback  mechanisms  in  the  control 
system 

Improve  monitoring  processes  and  facilitate 
sharing of audit results 

7.2. 

Improve  systems  for  recording  and  reporting  on 
corrections  resulting  from  Commission  control 
and audit activity 

Improve  provision  of  complete,  transparent  and 
reliable information on financial corrections and 
recoveries 

Improve information on recoveries and financial 
corrections as a partial indicator of the impact of 
the Commission's audit activity 

8. Actions to increase impact of Commission audit activity 

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

Increase  the  impact  of  the  Commission's  audit 
activity through more effective use of suspension 
and financial correction procedures 

assurance 

reasonable 

Obtain 
the 
management and control systems in the Member 
States function effectively and safeguard the EU 
budget 

that 

EN 

25 

EN 

 
  
 
assurance 

reasonable 

Obtain 
the 
management and control systems in the Member 
States function effectively and safeguard the EU 
budget 

that 

Improve  the  transparency  and  continuity  of 
reporting  on  the  assessment  of  Member  States' 
systems in order to better monitor progress 

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

Increase  the  impact  of  the  Commission's  audit 
activity through more effective use of suspension 
and financial correction procedures 

9. Actions to improve assurance provided by AAR 

9.1.  Carry  out  the  following  actions  in  relation  to 
preparation of Annual Activity Reports: 

Improve the quality of DGs' AAR 

a)  Provide  information  on  follow-up  of  all 
systems for which material systemic deficiencies 
were detected in 2006 

b)  Report  on  the  execution  of  action  plans 
implemented  by  Member  States 
to  correct 
deficiencies 

respect  of 

c)  Report  on  decisions  to  suspend  interim 
payments, other precautionary actions by AOSD 
in 
financial 
corrections made by Member States at request of 
Commission,  and  financial  correction  decisions 
adopted by the Commission 

interim  payments, 

d)  Provide  detailed  justification  for  absence  of 
reservation  where  material  systemic  weaknesses 
are identified 

e)  Report 
recommendations of Court 

on 

follow-up 

of 

previous 

EN 

26 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.  Actions to maximise value of annual summaries under Article 53b of the Financial Regulation 

Analyse  summaries  received,  include  results  in 
AAR,  and  take  action  in  respect  of  Member 
States not complying with obligations 

To undertake adequate supervision of the annual 
summaries  to  ensure  that  they  are  consistent, 
comparable and useful 

Improve 
Member States 

level  of  assurance  obtained  from 

EN 

27 

EN