Special Report No 7/2010 ‘Audit of the clearance of accounts procedure’
Date: 2010-11-04
Institutions: European Court of Auditors
Subjects: EU financing arrangements, State aid, administrative procedure, common agricultural policy, control of State aid

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Special r eport No 7 

 2010

audIt of the clearaNce 
of accouNt S procedure

(pursuant to article 287(4), second subparagraph, tfeu)

europeaN  court of audItorS

europeaN  court of audItorS   
12, rue alcide d e Gasperi 
1615 luxembourg 
luXeMBour G

tel. +352 4398-1 
fax +352 4398-46410 
e-mail: euraud@eca.europa.eu 
Internet: http://www.eca.europa.eu

Special r eport No 7 

 2010

a great deal of additional information on the european union is available on the Internet. 

It can be accessed through the europa server (http://europa.eu).

cataloguing data can be found at the end of this publication 

luxembourg: publications office of the european union, 2010

ISBN 978-92-9207-751-8 

doi:10.2865/33601

© european union, 2010 

reproduction is authorised provided the source is acknowledged.

Printed in Luxembourg

Special r eport No 7/2010 — audit of the clearance of accounts procedure

coNteNt S

3

Paragraph

I–VI 

ExEcutIVE  summary

1–7 
1–2 
3–7 

8–15 
9–12 
13–14 
15 

16–52 
16–18 
19–52 
19–24 
25–52 

53–73 
53–54 
55–73 
55–61 
62–67 

68–73 

74–91 
74 
75–91 
75–82 

83–88 
89–91 

INtrODuctION
What Is clEaraNcE Of agrIcultural ExPENDIturE?
ImPOrtaNt chaNgEs OVEr thE last 25 yEars

scOPE aND OBJEctIVEs
thE fINaNcIal clEaraNcE Of accOuNts
thE cONfOrmIty clEaraNcE Of accOuNts
thE clEaraNcE Of accOuNts PrOcEDurE as a WhOlE

Part I — thE  fINaNcIal clEaraNcE  Of acc OuNts
INtrODuctION
OBsErVatIONs
aSSuraNce  IN reSpect of relIaBIlIty of the accouNt S of payING aGeNcIeS  
 INSuffIcIeNt work to  Support aSSuraNce  IN reSpect of leGalIty aNd reGularIty of 
uNderly ING traNSactIoNS

Part II  — thE c ONfOrmIty clEaraNcE Of acc OuNt s
INtr ODuctION
OBsEr VatIONs
the  coMMISSIoN ’S coNforMIty audIt S do Not adequately cover eXpeNdIture aNd rISkS
 the  coMMISSIoN ’S correctIoNS  are Not  BaSed oN  a precISe eStIM atIoN  of the fINaNcIal 
daMaGe cauSed to the  coMMuNIty
coNforMIty decISIoNS  are takeN  too late

Part III — thE  clEaraNcE  Of acc OuNts  Pr OcEDurE  as a WhOlE
INtrODuctION
OBsErVatIONs
 coMplIaNce of the curreNt clearaNce of accouNt S procedure wIth the  fINaNcIal 
reGulatIoN
the coNSequeNceS  of the curreNt  SItuatIoN
 the role of the clearaNce of accouNt S IN the protectIoN  of the coMMuNIty fINaNcIal 
INtereSt S

92–104 
92–103 
92–94 
95–98 
99–103 
104 

cONclusIONs aND  rEc OmmEND atIONs
cONclusIONs
the fINaNcIal clearaNce of accouNt S
the coNforMIty clearaNce of accouNt S
the clearaNce of accouNt S procedure aS  a whole
rEcOmmENDatIONs

rEPl y Of thE  cOmmIssION

Special r eport No 7/2010 — audit of the clearance of accounts procedure

 
 
 
 
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eXecutIve  
SuMM ary

III.
th e   f i n a n c i a l   c l e a ra n ce   p ro ce d u re,   w h i c h 
i s   b a s e d   o n   a u d i t s   c a r r i e d   o u t   b y   i n d e -
pendent cer tification bodies in the M em-
ber States, covers pr imar ily the reliabilit y 
o f   t h e   a c c o u n t s   o f   t h e   p a y i n g   a g e n c i e s . 
on   t h e   b a s i s   o f   t h i s   w o r k ,   t h e   c o m m i s-
s i o n   m a k e s   i t s   a n n u a l   f i n a n c i a l   c l e a ra n ce 
d e c i s i o n   a n d   d e c i d e s   w h e t h e r   t o   a c c e p t 
t h e   a c c o u n t s   o f   a   f i n a n c i a l   ye a r   o r   p o s t -
p o n e   t h e i r   a cce p t a n ce   u nt i l   f u r t h e r   wo r k 
is done. the cour t found that, overall, the 
procedure provided the commission with 
s u f f i c i e n t   i n fo r m a t i o n   t o   t a k e   i t s   a n n u a l 
f i n a n c i a l   d e c i s i o n .   ho w e v e r ,   r e c e n t 
c h a n g e s   h ave   ex p a n d e d   t h e   s co p e   o f   t h e 
w o r k   o f   t h e   c e r t i f i c a t i o n   b o d i e s   b e y o n d 
an audit of reliabilit y to include elements 
o f   l e g a l i t y   a n d   r e g u l a r i t y   o f   p a y m e n t s . 
t h e   u s e   o f   s u c h   e l e m e n t s   f o r   a s s u r a n c e 
p u r p o s e s   h a s ,   a s   y e t ,   p r o v e d   t o   b e   l i m -
i t e d .   c e r t i f i c a t i o n   b o d i e s   a n d   d i r e c t o r s 
o f   t h e   p a y i n g   a g e n c i e s   w e r e   n o t   a l w a y s 
c l e a r   w h a t   w a s   e x p e c t e d   o f   t h e m ,   t h i s 
a g a i n s t   a   b a c k gro u n d   o f   a n n u a l   c h a n g e s 
of th e g uideline s and requirement s.

I.
t h e   M e m b e r   S t a t e s’  p a y i n g   a g e n c i e s,   o n 
b e h a l f   o f   t h e   co m m i s s i o n ,   p ay   o u t   s o m e 
5 4   b i l l i o n   e u r o   o f   a g r i c u l t u r a l   e x p e n d i-
t u r e   a n n u a l l y.   t h e   f i n a l   r e c o g n i t i o n   o f 
t h i s   e x p e n d i t u r e   b y   t h e   c o m m i s s i o n   i s 
d e t e r m i n e d   t h r o u g h   a   p r o c e d u r e   c a l l e d 
t h e   c l e a r a n c e   o f   a c c o u n t s .   t h i s   p r o c e -
d u r e   h a s   e v o l v e d ,   a f t e r   i t s   r e f o r m   i n 
1 9 9 6 ,   f r o m   a n   o r i g i n a l   s i n g l e   c l e a r a n c e 
d e c i s i o n   re l at i n g   to   a   p a r t i c u l a r   f i n a n c i a l 
ye a r   to   t h e   c u r re nt   t wo - s t a g e   p ro ce d u re. 
fi r s t l y   t h e   a c c o u n t s   o f   p a y i n g   a g e n c i e s 
a re   c h e c k e d   fo r   a cc u ra c y   by   ce r t i f i c at i o n 
bodies in the M ember States and are then 
s u b j e c t   t o   a n   a n n u a l   f i n a n c i a l   c l e a r a n c e 
d e c i s i o n   b y   t h e   c o m m i s s i o n .   S e c o n d l y 
the commission itself then carries out the 
co n fo r m i t y   c l e a ra n ce   p ro ce d u re   t h ro u g h 
a u d i t s   d e s i g n e d   t o   i d e n t i f y   a n d   e xc l u d e 
( i n   l a t e r   ye a r s )   p a y m e n t s   n o t   c o m p l y i n g 
wit h t he ru les.

II.
t h e   c o u r t ’s   a u d i t   e x a m i n e d   b o t h   s t a g e s 
o f   t h e   p r o c e d u r e   t o   d e t e r m i n e   w h e t h e r 
t h e y   m e t   t h e   o b j e c t i ve s   s e t   a n d   a l l o we d 
t h e   c o m m i s s i o n   a n d   o t h e r   s t a k e h o l d-
e r s   t o   g a i n   t h e   n e c e s s a r y   i n fo r m a t i o n   a s 
t o   t h e   a c c u r a c y   o f   t h e   a c c o u n t s   a n d   t h e 
legalit y and regular it y of the agr icultural 
payments.

Special r eport No 7/2010 — audit of the clearance of accounts procedure

Special r eport No 7/2010 — audit of the clearance of accounts procedure

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eXecutIve  
SuMM ary

V.
t h e   c o m p l e t e   c l e a r a n c e   p r o c e d u r e ,   a n d 
i n   p a r t i c u l a r   t h e   c o n f o r m i t y   c l e a r a n c e , 
s t i l l   t a k e s   t o o   l o n g   a n d   h a s   b e c o m e 
d i v o r c e d   f r o m   a   p a r t i c u l a r   b u d g e t a r y 
e xe rc i s e.   fu r t h e r m o re,   a t   t h e   e n d   o f   t h e 
p ro ce d u re,   t h e   co m m i s s i o n   d o e s   n o t   fo r -
m a l l y   re co gn i s e,   at   a   gi ve n   p o i nt   i n   t i m e, 
t h e   ex p e n d i t u re   c h a rg e a b l e   to   a   p a r t i c u-
l a r   b u d g e t a r y   y e a r,   a s   s t i p u l a t e d   b y   t h e 
fin ancial regulation. 

VI.
t h e   m o r e   r e c e n t   c h a n g e s   h a v e   b l u r r e d 
t h e   d i s t i n c t i o n   b e t w e e n   w h a t   i s   t o   b e 
a c h i e v e d   i n   t e r m s   o f   r e l i a b i l i t y   a n d 
l e g a l i t y   a n d   r e g u l a r i t y.   I n   o r d e r   t o   b e t -
t e r   c o m p l y   w i t h   t h e   o v e r a l l   o b j e c t i v e   o f 
t h e   p r o c e d u r e   a n d   m o r e   f u l l y   m e e t   t h e 
n e e d s   a n d   e x p e c t a t i o n s   o f   t h e   v a r i o u s 
s t a k e h o l d e r s ,   t h e   c o u r t   r e c o m m e n d s   a 
c o m p r e h e n s i v e   r e v i e w   a n d   s u b s e q u e n t 
re fo r m   o f   t h e   c l e a ra n ce   o f   a cco u nt s   p ro -
cedure.

IV.
as   re g a rd s   t h e   co n fo r m i t y   c l e a ra n ce   p ro -
c e d u r e ,   w h i c h   c o v e r s   t h e   l e g a l i t y   a n d 
r e g u l a r i t y   o f   t h e   u n d e r l y i n g   p a y m e n t s , 
t h e   c o u r t   fo u n d   t h a t   i t   h a d   c o n t r i b u t e d 
t o   t h e   p r o t e c t i o n   o f   t h e   f i n a n c i a l   i n t e r -
ests of the eu, by excluding over 5 billion 
e u ro   o f   ex p e n d i t u re   i n   t h e   p a s t   1 0  ye a r s. 
a n a l y s i s   o f   re c e n t   c o n fo r m i t y   d e c i s i o n s, 
h a s   s h o w n   t h a t   ,   w h e r e   t h e   a m o u n t   o f 
f i n a n c i a l   c o r r e c t i o n   c o u l d   h a v e   b e e n 
c a l c u l a t e d   e i t h e r   o n   t h e   b a s i s   o f   a   s p e -
c i f i c   c o r r e c t i o n ,   a n   e x t r a p o l a t i o n   o f 
c o n t r o l   r e s u l t s   o r   a   f l a t - r a t e   c o r r e c t i o n , 
i n   t h e   v a s t   m a j o r i t y   o f   c a s e s   ( b y   v a l u e ) , 
t h e   a m o u n t s   e xc l u d e d   w e r e   d e t e r m i n e d 
o n   t h e   b a s i s   o f   f l a t - r a te   co r re c t i o n s.  th e 
d i f f i c u l t y   w i t h   t h i s   t y p e   o f   c o r r e c t i o n   i s 
t h a t   t h e y   d o   n o t   p r o v i d e   a n   a d e q u a t e 
b a s i s   t o   d e t e r m i n e   a c c u r a t e l y   t h e   t o t a l 
a m o u n t   o f   i r r e g u l a r   p a y m e n t s   t h a t   a r e 
d u e   to   we a k n e s s e s   fo u n d   i n   t h e   s ys te m s. 
t h e y   a re   t h e re fo re   p e rc e i ve d   a s   m o re   o f 
a   s a n c t i o n   o n   M e m b e r   S t a t e s ’  a u t h o r i-
t i e s   t h a n   a n   a c c o u n t i n g   c o r r e c t i o n .   t h e 
ex te n s i ve   u s e   o f   f l at- rate   co r re c t i o n s   i s   a 
consequence of the commission’s limited 
audit resources and of its audit approach 
a d a p t e d   t o   t h i s   s i t u a t i o n .   a  m o re   a c c u r -
a t e   a c c o u n t i n g   c o r r e c t i o n ,   b a s e d   o n   a 
p re c i s e   e s t i m a t i o n   o f   t h e   d a m a g e   t o   t h e 
co m m u n i t y,   re q u i re s   t h e   co m m i s s i o n   t o 
c o n s i d e r   t h e   u s e   o f   o t h e r   m e t h o d s   a n d 
s o u r c e s   o f   i n f o r m a t i o n   f o r   i t s   c a l c u l a-
t i o n ,   n o t a b l y   i n   c a s e s   w h e n   t h e   f i n a n c i a l 
c o n s e q u e n c e s   o f   s y s t e m   we a k n e s s e s   a re 
quanti fiab le  a nd  s ignific ant.

Special r eport No 7/2010 — audit of the clearance of accounts procedure

Special r eport No 7/2010 — audit of the clearance of accounts procedure

INtroductIoN

6

1. 

2. 

W h at   Is   c lEa r aNcE   Of   ag rIc u lt u r a l 
ExP E N D It u rE ?

 ag r i c u l t u r a l   e x p e n d i t u r e   i n   f i n a n c i a l   y e a r   2 0 0 8   a m o u n t e d   t o 
s o m e   5 4   b i l l i o n   e u r o,   r e p r e s e n t i n g   c l o s e   t o   5 0   %   o f   t h e   e u ’s 
p a y m e n t s   i n   t h a t   y e a r.  t h e   m a n a g e m e n t   o f   t h i s   e x p e n d i t u r e 
i s,   i n   t h e   m a i n ,   s h a re d   b e t we e n   M e m b e r   S t ate s   a n d   t h e   co m-
m i s s i o n :   a i d   i s   p a i d   b y   t h e   d e s i g n a t e d   n a t i o n a l   a u t h o r i t i e s , 
th e so - call ed p ay ing  agencies ( ‘pa ’) , who are th en reimbursed 
b y   t h e   c o m m i s s i o n .   t h e   f i n a l   r e c o g n i t i o n   o f   e x p e n d i t u r e   b y 
the commission is deter mined through a procedure called the 
clea rance o f acco unts.

 the purpose of this procedure is set out in the financial regu-
lat io n ap p licab l e to  t he general bu dge t  of  th e europe an com-
m u n i t i e s 1  a n d   i t s   I m p l e m e n t i n g   ru l e s 2.   a r t i c l e   5 3 b ( 4 )   o f   t h e 
financial regulation states that the objec tive of the procedure 
is to ‘ensure that the funds are used in accordance with the ap-
p l i c a b l e   r u l e s’  a n d   to  ‘e n a b l e   t h e   co m m i s s i o n   to   a s s u m e   f i n a l 
re s p o n s i b i l i t y   fo r   t h e   i m p l e m e n t a t i o n   o f   t h e   b u d g e t ’.   a r t i c l e 
4 2 ( 2 ) ( c )   o f   t h e   I m p l e m e n t i n g   ru l e s   d e a l i n g   w i t h   t h e   i m p l e -
m e n t a t i o n   o f   a r t i c l e   5 3 b   f u r t h e r   c l a r i f i e s   t h a t  ‘ t h e   c l e a r a n c e 
o f   a cco u nt s   p ro ce d u re   s h a l l   co n s i s t   i n   [ t h e ]   e s t a b l i s h m e nt   by 
t h e   co m m i s s i o n   o f   t h e   a m o u n t   o f   e x p e n d i t u re   re c o g n i s e d   a s 
charg eab le  to  t he b udg et …’ 3.

I mP Or taNt   c h aNgEs   O V Er  t hE   l a s t   
25 y Ea r s

3.  

 pr ior to  1 99 6 th e co mmis sio n took an ann ual s in gle  c le aran ce 
o f   a c c o u n t s   d e c i s i o n   t h a t   c o v e r e d   b o t h   t h e   r e l i a b i l i t y   o f   t h e 
pas’ accounts and the legalit y and regularit y of the underlying 
exp end it u re.

1  council regulation (ec, euratom) 
No 1605/2002 of 25 June 2002 on 

the financial regulation applicable 

to the general budget of the 

european communities (oJ l 248, 

16.9.2002, p. 1).

2  commission regulation 
(ec, euratom) No 2342/2002 

of 23 december 2002 laying 

down detailed rules for the 

implementation of council 

regulation (ec, euratom)  

No 1605/2002 on the financial 

regulation applicable to the 

general budget of the european 

communities (oJ l 357, 31.12.2002, 

p. 1).

3  Similarly, council regulation (ec) 
No 1290/2005 recalls, in recital 24 of 

its preamble, that ‘the commission 

which is responsible for the proper 

application of community law under 

article 211 of the treaty, should 

decide whether the expenditure 

incurred by the Member States 

complies with community 

legislation’ (oJ l 209, 11.8.2005, p. 1).

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4. 

5. 

7

 th i s   d e c i s i o n   wa s   b a s e d   o n   s p e c i f i c   a u d i t s   c a r r i e d   o u t   by   t h e 
com miss ion,   which   res ul ted   in  lon g  d el ays   for   th e  f i na l  cle ar-
ance   o f  t he  accou nts  in  sp ite  of  th e   t im e   li mit   prov i ded   for   in 
t h e   l e gi s l at i o n   ( 1 4 ½   m o nt h s   a f te r   t h e   c l o s u re   o f   t h e   f i n a n c i a l 
year). the cour t, in its Special repor t published in 1982, point-
ed out the fac t that the delay in completing the work was such 
t h a t   t h e   c l e a r a n c e   d e c i s i o n   h a d   l o s t   m o s t   o f   i t s   re l e v a n c e.   I t 
concluded that none of the financial years on which a decision 
had been made could be considered as finally cleared because 
such  decisio ns  were no t final, in com plete  or  di s pute d 4.

4  Special report No 25/82 
concerning clearance of the 

accounts of the eaGGf Guarantee 

section (oJ c 313, 29.11.1982).

 th e   co m m i s s i o n ,   i n   1 9 9 1 ,   s e t   u p   a   wo r k i n g   gro u p   i n   o rd e r   to 
address the increasing difficulties encountered in the clearance 
o f   a c c o u n t s   p r o c e d u r e   a n d   r e p o r t e d   b y   t h e   d i f fe r e n t   p a r t i e s 
concer ne d. the   wo r k ing   gro u p  con sidered  th at  th e  sin gle   an-
nual clearance of accounts decision created difficulties in that 
i t   h a d   t o   f u l f i l ,   s i m u l t a n e o u s l y,   a n   a c c o u n t i n g   o b j e c t i v e   a n d 
recognition that expenditure has been effec ted in accordance 
wi th   co mmu nit y  rule s.  Based  on   th e  refo r m  sug ge ste d,   i t  was 
therefore decided to split the procedure into t wo separate de -
cision s:

(a)  a n   a n n u a l   d e c i s i o n   c o ve r i n g   t h e   c o m p l e t e n e s s,   a c c u r a c y 
a n d   v e r a c i t y   ( h e r e i n a f t e r   r e f e r r e d   t o   a s   t h e  ‘r e l i a b i l i t y ’ ) 
o f   t h e   a n n u a l   a c c o u n t s   s u b m i t t e d   b y   t h e   a c c r e d i t e d   pa s 
(hereinafter called ‘the financial decision’); for the purpose 
o f   t h i s   d e c i s i o n ,   t h e   co m m i s s i o n   r e q u i r e s   a   c e r t i f i c a t i o n 
o f tho se  acco unts, to b e con duc ted  by  i n de pe nde nt audi t 
b o dies ( cer t ification b odies,  herei n af te r  ‘cBs’ ).

(b)  decisions on expenditure to be excluded from communit y 
fin ancing   be cau se  it   has   n ot   bee n   e ffec te d  i n   compl ian ce 
w i t h   co m m u n i t y   r u l e s.   S u c h   d e c i s i o n s   ( h e re i n a f te r   c a l l e d 
‘c o n f o r m i t y   d e c i s i o n s’ )   a r e   m a d e   a t   t h e   i n i t i a t i v e   o f   t h e 
co m m i s s i o n   a n d   a r e   n o   l o n g e r   l i n k e d   t o   e x p e n d i t u r e   i n-
curred in a specific financial year, rather they cover in most 
ca ses  exp enditu re of s everal  fin anc ia l year s.

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8

6. 

 I n   i t s   1 9 9 4   o p i n i o n   o n   t h i s   r e f o r m ,   t h e   c o u r t   m a i n t a i n e d   i t s 
preference for a single annual decision and, whilst recognising 
the problems associated with the extant system (long delays, in 
par ticular), considered that the new split- decision system was 
a compromise rather than a solution to the clearance problems. 
I n the  inter ve ning p er io d,  t he cour t h as cons is tently  noted in 
i t s   a n n u a l   r e p o r t s   t h a t   t h e   t i m e s c a l e   fo r   c l e a r i n g   o v e r a l l   e x -
pend itu re fo r a given year had n ot  be e n  acce le rate d.

B Ox   1

DEs c rI PtI O N   Of  t hE   c u r rE Nt   c lEa r aNcE   Of   acc OuNt s 
Pr OcE Du rE

the process of the current clearance of accounts procedure is as follows:

(a)  farmers present claims to an accredited pa in their Member States;

(b)  the pa checks these claims and pays the claimant. It then reports expenditure made to the commis-

sion, which reimburses the pa;

(c)  the accounts and payments of the pa are examined by an independent body (the cB) which reports 

to the commission in february of the following year;

(d)  by 30 april of that year, the commission must decide on whether to accept the accounts (financial 

clearance decision) or to ask for more work to be performed or for additional information;

(e)  the commission can then still examine the payments made by the pa. for this purpose, a specific 
directorate within the commission’s directorate-General for agriculture and rural development car-
ries out audits selected on the basis of an annual risk analysis which aim to verify that Member States 
have strictly applied community rules for checking the legality and regularity of the expenditure 
(conformity audits);

(f )  where these conformity audits reveal that expenditure has not been effected in compliance with 
community rules or that Member States have not satisfactorily checked the expenditure in question 
and that this has resulted in a financial loss to the eu budget, the commission can impose a correc-
tion, which in effect is a refusal to reimburse the Member State for payments it has made. any such 
correction proposed by the commission must be notified to the Member States, who have the right 
to invoke a conciliation procedure. only when this procedure has run its course is the commission 
in a position to include a correction in a conformity decision.

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7. 

 th e   m o s t   re ce nt   c h a n g e s   a f fe c t i n g   t h e   c l e a ra n ce   o f   a cco u nt s 
pro ced ure came into effec t in 2 0 0 7  by  me an s of  t he  i ntroduc -
tion of revised regulations 5. these changes refer to legality and 
re g u l a r i t y   i s s u e s   a n d   t h e   co m m i s s i o n   re ce i ve s   t h e   a d d i t i o n a l 
elem ent s   in   t he  contex t  of  the  f inan c ial  c le aran ce.  I n   par t icu-
l a r,   t h e   cB s   m u s t   n o w   c e r t i f y   n o t   o n l y   t h e   a c c o u n t s   b u t   a l s o 
t h e   f u n c t i o n i n g   o f   t h e   i n t e r n a l   c o n t ro l   s y s t e m   o f   t h e   pa  a n d 
i n c l u d e   i n   t h e i r   c e r t i f i c a t i o n   re p o r t   a n   o p i n i o n   o n   t h e   n e w l y 
introduced statement of assurance (‘S oa ’) issued by the direc-
tor of the pa. I n addition,  cBs must ver ify and validate control 
statistics communicated to the commission by M ember States 
a n d   a s s e s s   a   n u m b e r   o f   o n - t h e - s p o t   c h e c k s   o f   b e n e f i c i a r i e s 
car r ied  out  by pa s.

5  regulation (ec) No 1290/2005 
on the financing of the common 

agricultural policy and the 

implementing commission 

regulation (ec) No 885/2006 (oJ 

l 171, 23.6.2006, p. 90) laying 

down detailed rules as regards the 

accreditation of paying agencies and 

other bodies and the clearance of 

the accounts of the eaGf and of the 

eafrd.

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In those Member States where 

more than one paying agency is 

accredited, only one was covered 

by the audit, together with the 

corresponding certification 

body. this was the case for 

Germany (Sachsen-anhalt), Spain 

(extremadura), france (aup), Italy 

(aGea), poland (ariMr) and the 

united kingdom (rpa).

Scope aNd oBJectIveS

10

8. 

9. 

10.  

11.  

12.  

 the fac t that the current clearance of accounts procedure con-
s i s t s   o f   t wo   d i s t i n c t   s t a g e s   d e t e r m i n e d   t h e   co u r t ’s   a u d i t   a p -
proach. I ts scope and objec tives have been established tak ing 
i n t o   a c c o u n t   t h e   s p e c i f i c s   o f   e a c h   o f   t h e   t w o   s t a g e s   a n d   t h e 
p r o c e d u r e   a s   a   w h o l e .   t h i s   r e p o r t   i s   t h u s   d i v i d e d   i n t o   t h r e e 
par ts.

thE   fI NaNcIa l   c lEa r aNcE

  Of   acc OuNt s

 th e   a u d i t   a s s e s s e d   t h e   ro l e   o f   t h e   cB s   a n d   t h e   q u a l i t y   o f   t h e 
v a r i o u s   a s s u r a n ce   e l e m e n t s   ( s e e   B ox   2 )   p rov i d e d   by   n a t i o n a l 
e n t i t i e s   a s   w e l l   a s   t h e   u s e   m a d e   o f   t h e m .  t h e   q u e s t i o n s   a d-
dre sse d in t his contex t were:

(a)  d o e s   t h e   co m m i s s i o n   h ave   s u f f i c i e nt   i n fo r m at i o n   to   t a k e 
i t s   a n n u a l   f i n a n c i a l   c l e a r a n c e   d e c i s i o n ,   w h i c h   i t   m u s t   d o 
by  30 a p r il  ea ch yea r?

(b)   d o e s   t h e   f i n a n c i a l   c l e a r a n c e   p r o c e d u r e   w i t h   i t s   v a r i o u s 
co m p o n e n t s   p rov i d e   e l e m e n t s   o f   a s s u r a n c e   i n   re s p e c t   o f 
l eg al it y and re g ul ar it y  of  unde r ly in g  tran sac t io ns?

 th e   f i e l d   a u d i t   wo r k   w a s   c a r r i e d   o u t   a t   t h e   l e ve l   o f   t h e   co m-
mis sio n and  in s el ec ted p aying ag e n c ie s i n  1 0 M e mbe r  State s: 
d e n m a r k ,   G e r m a ny,   G r e e c e,   S p a i n ,   fr a n c e,   I t a l y,   t h e   N e t h e r -
l a n d s ,   po l a n d ,   po r t u g a l   a n d   t h e   un i t e d   k i n g d o m 6.   v i s i t s   t o 
th ese  M e mbe r States  took p l ace  bet we en  N ovembe r  20 0 8  an d 
M ay  2009.

 the scope of each of these audits covered the planning, testing 
a n d   re p o r t i n g   by   t h e   cB,   to g e t h e r   w i t h   t h e   re l e va n t   u n d e r l y -
i n g   d o c u m e n t a t i o n .  t h e   a u d i t   wo r k   i n c l u d e d   i n t e r v i e w s   w i t h 
o f f i c i a l s,   a n   ex a m i n at i o n   o f   t h e   a u d i t   m e t h o d o l o g y   a s   we l l   a s 
o f   t h e   w o r k i n g   p a p e r s   o f   t h e   cB,   a n d   t e s t s   o f   s e l e c t e d   o p e r -
ations. also, the audit covered the basis for the preparation of 
th e S oa  sign ed by  the direc to r of  t he  pa.

 the period under examination included the financial years 2007 
a n d   2 0 0 8 ,   a n d   t o o k   i n t o   a c c o u n t   t h e   i m p l e m e n t a t i o n   o f   t h e 
revisions that the commission had introduced in its guidelines 
dur ing  t he co u rs e of  2008. chan ge s made f rom  20 09  we re no t 
inclu de d in t he aud it.

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thE   cO NfOr mIt y   c lEa r aNcE

  Of   acc OuNt s

13.  

 thi s p ar t o f t he au dit was p l ann ed  wit h  a v ie w to de ter m in i ng 
how the commission takes its conformity decisions and the ex-
tent to which they exclude irregular payments from community 
f i n a n c i n g.   acco rd i n g l y,   t h e   q u e s t i o n s   t h e   a u d i t   wa s   d e s i gn e d 
to a nswer we re :

(a )  does the conformity procedure allow for a sufficient cover-

ag e o f  exp endit u re? 

(b)   I s   t h e   f i n a n c i a l   d a m a g e   c a u s e d   t o   t h e   b u d g e t   b y   t h e   i m-
p a c t   o f   i r r e g u l a r   p a y m e n t s   a d e q u a t e l y   c o m p e n s a t e d   b y 
co nfor mit y co r rec tio ns ?

(c)  a re co nfor mit y dec isions taken in   a tim e ly  m ann er ?

14.  

 the  a ud it covered  in gen eral  t he con for m it y  d eci si on s 1  to 2 9 
w h i c h   we re   t a k e n   f ro m   1 9 9 9   u n t i l   t h e   e n d   o f   2 0 0 8 .   ho we ve r, 
w h e re   c o n s i d e re d   n e c e s s a r y,   t h e   co u r t   fo c u s e d   o n   t h e   l a t e s t 
co n fo r m i t y   d e c i s i o n s.   ev i d e n ce   wa s   o b t a i n e d   t h ro u g h   f i l e   re -
view an d inter v iews  at the c ommiss ion .

thE   c lEa r aNcE   Of   acc OuNt s   Pr OcE Du rE   a s 
a  WhOlE

15.  

 having   re vie wed  in  det ail   each   of   t he   s ta g es   of   th e  c le arance 
of  a cco unts  p ro cedure,  t he  audit   t he n   s oug ht  to  evaluate  th e 
coverage and results of the procedure as a whole, to determine 
whether it fulfils its role, as defined in the financial regulation. 
accordingly  t he fo l l ow ing ques tio ns  we re  a ddre ss ed :

(a)  does the current clearance of accounts procedure allow for 
t h e   re co gn i t i o n   o f   ex p e n d i t u re   c h a rg e a b l e   to   t h e   b u d g e t 
and thus allow for the clearance of the accounts submitted 
to  t he b udg e tar y aut ho r ities?

(b)   does the current clearance of accounts procedure contrib -
ute to the protec tion of the financial interests of the com-
mu nit y b ud get ?

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part I — the fINaNcIal  
clearaNce of accouNt S

12

INt r O Du c tI O N  

16.  

 ar ticle 30 of regulation (ec ) No 1290/2005 states that the com-
mission’s financial ‘clearance decision shall cover the complete -
ness, accurac y and veracit y of the annual accounts submitted ’. 
this decision is based to a great extent on the audit cer tificates 
and  rep o r t s issued by cB s and  on th e statements of as suran ce 
(‘S oa ’ ) issu ed by direc tor s of pas. to th is en d, t he  commiss ion 
issue d g uide lines  th at b o th c B s an d th e direc tors of pas m us t 
ta ke  into accou nt.

B Ox   2

ch r O N Ol Og y   Of  t hE   l atEs t   c h aNgEs  t O  t hE   fI NaNcIa l 
c lEa r aNcE   Of  t hE   accOuNt s

the detailed implementation rules applicable from financial year 2007 onwards:

•	

•	

•	

require the cBs to include in their certificates not only that the accounts of the pas are true, complete 
and accurate, but also that ‘the internal control procedures have operated satisfactorily’;

revise the model report to be followed by the cBs and include specific sections on (i) the verification 
and validation of the IacS, rural development and  ex post7 control statistics; (ii) the respect of the 
financial ceilings in measures subject to quantitative limits; and (iii) the single payment scheme;

require the annual accounts, both in respect of  eaGf and  eafrd, to be accompanied by an Soa, 
signed by the person in charge of the accredited pa (normally the director of the pa), on the reliability 
of the pa’s accounts and on the system in place to provide reasonable assurance on the legality and 
regularity of underlying transactions. cBs are also required to issue an opinion on this Soa.

furthermore, important additions were to be applied from financial year 2008.

these additions:

•	

•	

•	

specify the minimum amount of testing expected from cBs in the area of debtors;

further develop the requirement for cBs to verify and validate the control statistics communicated 
by pas and to assess the quality of the underlying on-the-spot controls;

require the Soa to be accompanied by a paper listing concisely the documents and work performed 
which formed the basis of the Soa, as well as by an analysis of the control statistics. It also requires 
cBs to ‘assess whether the supporting information used in the establishment of the Soa provides 
a sufficient basis and justification for the Soa, and that it is consistent with the information it has 
obtained during the course of its audit’.

7  council regulation (ec) No 485/2008 of 26 May 2008 on scrutiny by Member States of transactions forming part of the system of 
financing by the european agricultural Guarantee fund (oJ l 143, 3.6.2008, p. 1).

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 the accounts, together with the accompanying statements and 
a u d i t   c e r t i f i c a t e s ,   a r e   t o   b e   s u b m i t t e d   b y   M e m b e r   S t a t e s   b y 
1 f ebruar y following the end of the financial year 8. By 30 a pril, 
t h e   c o m m i s s i o n   m u s t   i s s u e   a   fo r m a l   d e c i s i o n   i n   w h i c h   i t   a c -
c e p t s   ( ‘c l e a r s’ )   t h e   a n n u a l   a c c o u n t s   o f   t h e   pa s   o r   p o s t p o n e s 
(‘disjoins’) such acceptance to a later date. the decision is tak-
en after a review of the set of documents submitted by Member 
States and,  if  d eemed necess ar y,  a dd it ion al  bilate ral  quer i es.

8  the financial year as regards  
the eaGf and the eafrd runs  

from 16 october to 15 october of 

the following year.

 the following obser vations concerning the financial clearance 
o f   a c c o u n t s   a re   p re s e n t e d   u n d e r   t wo   s e c t i o n s   t h a t   c ove r,   re -
s p e c t i ve l y,   t h e   c e r t i f i c a t i o n   o f   t h e   re l i a b i l i t y   o f   t h e   a c c o u n t s 
( p a r a g r a p h s   1 9   to   2 4 )   a n d   t h e   a d d i t i o n a l   wo r k   re q u i re d   f ro m 
cBs since 2007 in respect of the legality and regularity of trans-
ac t io ns (p aragrap h s 25 to  52).

OBsEr VatI O Ns

as s u r aNcE   I N   rEsP Ec t   Of   rElIaB IlIt y   Of  t hE  
accOuNt s   Of   Pay I Ng   agE NcI Es

 a s   p r e s e n t e d   a b o v e,   t h e   a n n u a l   f i n a n c i a l   c l e a r a n c e   d e c i s i o n 
taken by the commission covers the reliability of the accounts, 
i . e.   t h e i r   c o m p l e t e n e s s,   a c c u r a c y   a n d   ve r a c i t y,   a n d   i s   l a r g e l y 
b a s e d   o n   c e r t i f i c a t e s   a n d   re p o r t s   i s s u e d   b y   cB s   o n   t h o s e   a c -
count s.

 t h e   co u r t ’s   a u d i t   o f   a   s a m p l e   o f   cB s   e x a m i n e d   t h e   e x t e n t   t o 
which their work provides sufficient assurance for the commis-
sion  to  t ake   it s  decis io n  and  wh et h er   we ak n e sse s   foun d  were 
cor re c tl y  ref lec ted  in   th at  decis ion .  th e  following   paragraph s 
summ ar ise  the main s ho r tcomin g s  d ete c ted by  t h e c our t.

17.  

18.  

19.  

20.  

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21.  

22.  

23.  

R e l i a n c e  o n  t h e  w o R k  o f  t h e  i n t e R n a l  a u d i t  u n i t 

 the audit found that cer tain cBs relied ex tensively on the work 
of the internal audit units of the pas without sufficient verifica-
tion  o f  t his  wo r k   as   req uire d  by  I nter n at ion al  auditin g  Stan d-
ards. they  e ithe r rel ie d p ar t l y on wor k pre v iously  don e by  t he 
internal audit unit of the pa (de , eS), or requested the internal 
aud it  unit  to car r y ou t p ar t of  t h e  tes ti ng  o n  th ei r  beh alf  (d k , 
pt, uk ) 9.

i n s u f f i c i e n t  s u b s t a n t i v e  t e s t i n g  o f  e x p e n d i t u R e   
( i. e.  c h e c k i n g  o f  i n d i v i d u a l  p a y m e n t s)

 I n s t a n c e s   o f   n o n - c o m p l i a n c e   w i t h   t h e   co m m i s s i o n’s   re q u i re -
m e n t s 1 0  f o r   s u b s t a n t i v e   t e s t i n g   —   a   k e y   fe a t u r e   o f   t h e   a u d i t 
procedures — included inadequate documentation to demon-
s t r a t e   t h a t   t h e   m i n i m u m   n u m b e r   o f   i n d i v i d u a l   p ay m e n t s   h a d 
been recalculated by the cBs (eS, It ), insufficient verification of 
single payment scheme (‘SpS’) entitlements 11 and the resulting 
p ay m e n t s   (d k ,   d e,   eS ,   It ,   u k )   a n d   we a k n e s s e s   i n   t h e   wo r k i n g 
papers prepared by cBs to suppor t their audit conclusions (de , 
el, eS,  It ,  p l,  p t ,  uk ).

i n s u f f i c i e n t  t e s t i n g  o f  d e b t o R s’  t a b l e s

 t h e   a c c o u n t s   t o   b e   p r e s e n t e d   b y   pa s   i n c l u d e   t a b l e s   l i s t i n g 
cases of undue payments, resulting from irregularities or cross-
compliance issues, which are pending recover y and subsequent 
re c re d i t i n g   t o   t h e   c o m m u n i t y   b u d g e t   ( ‘d e b t o r s’  t a b l e s’ ) .  t h e 
reliability of these figures is impor tant since they have a direc t 
f i n a n c i a l   i m p a c t   o n   t h e   a m o u n t s   t o   b e   r e c o ve re d   i n   a p p l i c a-
tion   o f  t he  recover y  mec hanis m  fore se e n  un d er   t he   cle aran ce 
of accounts procedure 12. cBs are therefore required to test the 
ta bl es  fo r accurac y and  comp lete ne s s.

14

9 

In the particular case of denmark, 

the use of the internal audit unit 

was substantial: the cB only worked 

directly on the substantive testing 

of expenditure and the verification 

of the information system security. 

for all other areas, including the 

assessment of the internal control 

system, the testing of debtors’ 

accounts and the validation of 

control statistics, the cB relied on 

the work and conclusions of the 

internal audit unit. In addition, the 

internal audit unit was involved 

in the selection process of the cB, 

which was finally contracted directly 

by the pa after proposal by the 

internal audit unit.

10  commission’s guideline No 3 
(‘audit strategy’) provides the main 

requirements of the work of the 

cBs, including details on sampling 

methodology and key items to be 

covered by testing.

11  as per article 43 of regulation 
(ec) No 1782/2003, ‘a farmer shall 

receive a payment entitlement 

per hectare which is calculated by 

dividing the reference amount by 

the three-year average number of 

all hectares which in the reference 

period gave right to direct payments’ 

(oJ l 270, 21.10.2003, p. 1).

12  the so-called ‘50–50 rule’,  
by which the commission establishes 

a mechanism for sharing the loss 

resulting from non-recovery of 

debts within reasonable deadlines, 

is foreseen by articles 32 and 33 of 

regulation (ec) No 1290/2005  

(oJ l 209, 11.8.2005, p. 1).

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13  article 5 of commission 
regulation (ec) No 885/2006 of  

21 June 2006 laying down detailed 

rules for the application of council 

regulation (ec) No 1290/2005 as 

regards the accreditation of paying 

agencies and other bodies and the 

clearance of the accounts of the 

eaGf and of the eafrd (oJ l 171, 

23.6.2006, p. 90).

24.  

 S u c h   t e s t i n g   w a s   fo u n d   t o   b e   i n s u f f i c i e n t   b o t h   i n   r e s p e c t   o f 
completeness and accurac y in most Member States visited. the 
main  findings rel ated  to the fac t th at cBs  had n ot ver ifie d th e 
t i m e l y   e n t r y   i n t o   t h e   t a b l e s   o f   c a s e s   o f   d e t e c t e d   i r r e g u l a r i-
ties and the existence of sufficient suppor t for correc tions and 
wr ite - o ffs  b oo k ed by  pa s re spe c tive ly.

INs u f fIcI E Nt   W Or k  t O   s uP P Or t   a s s u r aNcE  
I N   rEsP Ec t   Of   lEg a lIt y   aN D   rEg u l a rIt y   Of 
uN D Er ly I Ng  t r aNs ac tI O Ns

25.  

 as indicated earlier, the commission has significantly extended 
the work required from cBs, beyond the limits of the reliabilit y 
o f   t h e   a c c o u n t s ,   t o   c o v e r   c e r t a i n   a s p e c t s   r e l a t e d   t o   l e g a l i t y 
a n d   re g u l a r i t y.   cB s   n ow   h ave   to   ce r t i f y   t h e   s at i s f a c to r y   f u n c -
t i o n i n g   o f   t h e   i nte r n a l   co nt ro l   p ro ce d u re s,   to   ve r i f y   a n d   va l i-
date control statistics and to assess the qualit y of on-the -spot 
che ck s.

26.  

 the current procedure, however, does not require cBs to verify 
at the level of the final beneficiar y that transac tions are eligi -
ble and therefore cBs do not include such ver ification in their 
sub st ant ive testin g. 

l a c k  o f  i d e n t i f i c a t i o n  o f  k e y   a n d  a n c i l l a R y  c o n t R o l s   a n d 
l i m i t e d  t e s t i n g  o f  s y s t e m s  a s  t o  t h e i R   R e l i a b i l i t y 

27.  

 one   of   the   k ey  new   el ement s   introduce d  by   t he   rev ise d  re gu-
l ato r y   f ra m e wo r k   i s   t h e   re q u i re m e nt   fo r   cB s   to   s t ate   w h e t h e r 
they have obtained reasonable assurance that ‘[...] the internal 
cont ro l  pro cedu res have o p erated  s ati s fa c tor ily ’ 13.

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14  key controls are those physical 
and administrative checks required 

to verify substantive elements, 

in particular the existence of the 

subject of the claim, the quantity, 

and the qualitative conditions 

including the respect of time limits, 

harvesting requirements, retention 

periods, etc. they are performed 

on the spot and by cross-checks 

to independent data such as land 

registers. ancillary controls are 

those administrative operations 

required to correctly process claims, 

such as verification of the respect 

of time limits for their submission, 

identification of duplicate claims 

for the same subject, risk analysis, 

application of sanctions and 

appropriate supervision of the 

procedures.

28.  

29.  

30.  

31.  

 o n e   c B   f a i l e d   to   i d e n t i f y   t h e   m a i n   k e y   a n d   a n c i l l a r y   c o n t ro l s 
t h a t   s h o u l d   b e   i n   p l a c e   a t   t h e   pa s   a u d i t e d   (eS ) ,   d e s p i t e   t h e 
c o m m i s s i o n   h a v i n g   p r o v i d e d   a   l i s t   f o r   g u i d a n c e   f o r   s o m e 
s c h e m e s 1 4.   I n   o t h e r s   (d k ,   e l,   It ,   p t ) ,   t h i s   i d e n t i f i c a t i o n   w a s 
not comp l ete.

 I n those cases where key and ancillar y controls were identified 
by   t h e   cB s,   t h e   a u d i t   fo u n d   t h a t   t h e i r   t e s t i n g   w a s,   t o   a   l a rg e 
ex te nt ,   l i m i te d   to   a   ve r i f i c at i o n   o f   t h e   ex i s te n ce   o f   s u c h   co n-
t r o l s   r a t h e r   t h a n   a   v e r i f i c a t i o n   o f   t h e i r   a c t u a l   o p e r a t i o n   a n d 
e f fe c t i ve n e s s,   i . e.   t h a t   t h e y   we re   f u n c t i o n i n g   e f fe c t i ve l y   a n d 
t h a t   t h e i r   r e s u l t s   r e f l e c t e d   r e a l i t y   ( d k ,   d e ,   e l ,   e S ,   I t,   p l ,   p t, 
uk ) . 

 I n addition, in most of the cases where the pa has legitimately 
delegated specific functions to outside bodies (‘delegated bod-
ies’),  t he au dit fou nd  that  t he cBs limited their  audit s cop e to 
t h e   d o c u m e nt at i o n   ava i l a b l e   at   t h e   ce nt ra l   pa  (d k ,   e l,   It ,   Nl, 
p t )   o r   f a i l e d   to   i d e nt i f y   a n d   s u b s e q u e nt l y   te s t   s o m e   o f   t h o s e 
bod ies (d e ,  f r). 

l i m i t a t i o n s  o f  t h e  v a l i d a t i o n  o f  c o n t R o l   s t a t i s t i c s 

 a significant ex tension of the  cB ’s role as regards legalit y and 
reg u la r it y  is  th at,   since  f in ancia l   year   2 0 0 7 ,  th ey   are  re quire d 
t o   v e r i f y   a n d   v a l i d a t e   t h e   c o n t r o l   s t a t i s t i c s   w h i c h   a r e   t o   b e 
annually communicated by M ember States to the commission. 
these statistics present, in a table format, the results of admin-
istrative and on-the -spot checks carried out by pas. In Septem-
ber 2008, the commission published revised guidelines on the 
validat ion wo r k  to  b e car r ied out  by  cBs.

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32.  

 th e   re v i s e d   g u i d e l i n e s   s t i l l   d i d   n o t   f u l l y   s p e c i f y   t h e   s co p e   o f 
t h e   a u d i t   t a s k ;   i n   p a r t i c u l a r,   w h i c h   e l e m e n t s   o f   t h e   s t a t i s t i c s 
need to be ver ified and sampled by the cBs. this lack of preci -
sion contributed to the great variability in the scope and depth 
o f   t h e   wo r k   d o n e   by   cB s   fo u n d   by   t h e   co u r t ’s   a u d i t ,   a s   s o m e 
cBs   o p ted  to   limit   their  testing  to  o nly   a  par t   of   th e   s tatis t ics 
inclu de d in t he tab l es.

33.  

 t h e   d e p t h   o f   t e s t i n g   s t i p u l a t e d   b y   t h e   c o m m i s s i o n   w a s   n o t 
reac hed  in t he major it y of t he cBs  v isi ted.  I n  par ti cular :

(a)  a   c o m p l e t e   r e c o n c i l i a t i o n   b e t w e e n   t h e   c o n t r o l   s t a t i s t i c s 
communicated to the commission and the underlying data-
b a s e s   w a s   n o t   a c c o m p l i s h e d   ( d e ,   e l ,   e S   ( 2 0 0 7 ) ,   f r ,   a n d 
It );

(b)  some pas did not have complete databases to suppor t their 

co nt ro l  st at istic s in  resp ec t of s ome IacS  and r ural de ve l-
opment schemes (de , el,  fr); moreover in some cases (dk , 
de, fr) the reconciliation bet ween the statistics communi-
cated and the underlying databases revealed discrepancies 
w hich  were  n ot  p rop er l y an alyse d  by  th e  cBs ;

(c) 

i n   a d d i t i o n ,   s o m e   cB s   f a i l e d   t o   m e e t   t h e   t a r g e t   f o r   t h e 
minimum number of inspec tion repor ts to sample in order 
to test the databases underlying the control statistics (de , 
Nl)   o r   t e s t e d   o n l y   p a r t s   o f   t h o s e   d a t a b a s e s   (d e ,   e l,   f r, 
It ).

34.  

 the shor tcomings mentioned above together with the adverse 
o p i n i o n s   g i ve n   b y   s o m e   cB s   (d k ,   u k )   o n   t h e   re l i a b i l i t y   o f,   a t 
least a par t of, those statistics, place significant limitations on 
their use for assurance purposes by the commission. a fur ther 
inhe rent  limitat io n  to  t he  u s e  o f   cont rol  s tati st ic s  ar i se s  f ro m 
t h e   s a m p l i n g   m e t h o d o l o g i e s   u s e d   b y   pa s   i n   s e l e c t i n g   c l a i m s 
for o n-the - sp ot  check s. thes e  m ethodologies do n ot allow for 
a   s t a t i s t i c a l   e x t r a p o l a t i o n   w i t h   a   s p e c i f i e d   c o n f i d e n c e   l e v e l , 
w h i c h ,   i n   t u r n ,   i m p a c t s   o n   t h e   u s e   t h a t   c a n   b e   m a d e   o f   a n y 
er ror rate s bas ed  t hereo n.

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15  a re-performance of a check 
does not imply that the cB would 

have carry out such task on its own. 

the relevant pa departments and 

equipment would have to be also 

involved in the repetition of a on-

the-spot check previously carried 

out.

35.  

36.  

37.  

38.  

i n s u f f i c i e n t  v e R i f i c a t i o n   o f  o n- t h e - s p o t  c h e c k s

 as par t of the requirement to test the effec tive func tioning of 
the   inter nal  co ntrol   s ys tem  and   to  ver i f y  and   vali date  cont rol 
s t a t i s t i c s,   c B s   a re   re q u i re d   t o   c h e c k   a   s a m p l e   o f   o n - t h e - s p o t 
che ck s. the gu idel ines  re quire the cBs to chec k a min imum of 
10 controls per population audited, either by re -per forming or 
by accompanying the inspec tors, with the objec tive of assess-
ing the adequac y of such controls. only one of the  cBs audited 
(pl) accomplished the commission’s requirement. all other cBs 
v i s i t e d   w e r e   b e l o w   t h a t   t a r g e t   a n d   i n   s o m e   c a s e s   t h e i r   w o r k 
wa s   i n a d e q u a te   (e l,   f r,   It ) .   cB s   j u s t i f i e d   t h e s e   s h o r tco m i n g s 
by referring to the late introduc tion of the corresponding com-
m i s s i o n   g u i d e l i n e ,   a n d   h i g h l i g h t e d   t h e   d i f f i c u l t i e s   i n h e r e n t 
t o   s u c h   a u d i t   t a s k ,   n a m e l y   i t s   c o s t ,   t i m i n g   a n d   t h e   t e c h n i c a l 
expe r t ise requ ired.

 fur thermore, the cBs visited focused on ‘classical’ field inspec -
t i o n s   a n d   d i d   n o t   c o v e r   o n - t h e - s p o t   c h e c k s   c o n d u c t e d   b y 
‘remote sensing’, although these comprise a significant propor-
tion  of  th e tot al c hecks  (d e ,  e l, fr, p l, uk ) .

 the large major it y of the cBs visited, with the exception of dk 
a n d   It ,   c h o s e   to   a cco m p a ny   o n g o i n g   f i e l d   i n s p e c t i o n s,   rat h e r 
t h a n   s e l e c t i n g   a   s p e c i f i c   s a m p l e   o f   p re v i o u s l y   c a r r i e d   o u t   i n-
s p e c t i o n s   a n d   r e - p e r f o r m i n g   t h e m .   t h i s   a p p r o a c h   c o m p l i e s 
wi th   th e  co mm issio n’s  gu idel ines,  but  pre se nt s  t he   drawbac k 
o f   e l i m i n a t i n g   t h e  ‘s u r p r i s e   e f fe c t ’,   s i n c e   t h e   f i e l d   i n s p e c t o r s 
k now  t hey are to  b e eval u ated  and  th erefo re  such  in spe c ti on s 
m ay   n o t   b e   re p re s e n t a t i ve   o f   t h e   p o p u l a t i o n   b e i n g   a s s e s s e d. 
re -per formance 15 of a previous check provides a better assess-
ment   of   t he  o n- the - sp ot   ch ec ks  c ar r ie d  out  dur i n g  th e   per i od 
being  ver ified.

 these findings concer ning the cBs’ asessments of on-the -spot 
checks also impac t on the use that can be made of the control 
statistics transmitted to the commission by pas, which are es-
s e n t i a l l y   b u i l t   u p o n   t h e   re s u l t s   o f   s u c h   c h e c k s.  th i s   i s   re c o g-
n i s e d   i n   i t s   n e w   p ro p o s a l s   s e t   o u t   t o   t h e   M e m b e r   S t a te s   ( s e e 
the commission’s reply to paragraph 67), whereby the commis-
sion set out new conditions under which it is prepared to limit 
th e amo unt o f financ ial  cor rec t io ns to th e  er ro r  rate  found  by 
th e M emb er State and rep o r te d i n  it s control s t ati st ic s.

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16  the statement of assurance is 
required by article 8(1)(c)(iii) of 

regulation (ec) No 1290/2005.

17  Guideline No 4 on the Soa to 
be provided by the director of a 

pa pursuant to article 8(1)(c)(iii) of 

regulation (ec) No 1290/2005.

39.  

40.  

41.  

42.  

43.  

t h e  p a y i n g  a g e n c y  d i R e c t o R ’s  s t a t e m e n t  o f  a s s u R a n c e  —   
a  p o s i t i v e  s t e p,  b u t  a s  y e t   w i t h o u t  s u f f i c i e n t  b a s i s

 as from financial year 2007, the direc tor of each pa is required 
to submit to the commission an S oa 16, stating whether the ac -
co u n t s   p re s e n t e d   gi ve   a   t r u e,   co m p l e te   a n d   a c c u r a t e   v i e w   o f 
the expenditure and receipts for the financial year and whether 
a sys tem  w hic h p rovides reason a bl e as surance  on  th e le ga lit y 
and  reg ul ar it y of t he under l yin g  tran sac t io ns  is  in  pl ace. 

 I n  a ddit ion ,  s ince  financial   year   2 0 0 8 ,   t h e  d ire c tor s   of  pas  are 
required to disclose the basis on which the Soa has been estab -
lished by means of a list of documents used and a summar y of 
the wor k car r ied out. an analysis of the control statistics must 
for m  p ar t  o f t he b asis  of th e S oa.

 the cour t views the introduc tion of the S oa as a positive step 
in i ncre asing t he accountab il it y an d  own e r sh i p for  th e  prope r 
m a n a g e m e nt   o f   a gr i c u l t u ra l   ex p e n d i t u re.   howe ve r,   i t s   u s e   by 
t h e   co m m i s s i o n   fo r   a s s u r a n c e   p u r p o s e s   i s   d e p e n d e n t   o n   t h e 
meth od ol og y u sed for  p rep ar i ng  th at  s tate m ent.

 I n  f inancial   year  20 08 ,  t he  weak n es se s   foun d  by  th e   cour t  re -
g a r d i n g   t h e   p r e p a r a t i o n   o f   t h e   S oa s   l i m i t   t h e   a s s u r a n c e   t h e 
commission can take from them. these limitations are detailed 
in t he  fol l ow ing  p aragraphs.

 whilst the 2008 revision of guideline No 4 17 was first discussed 
at the meeting of the committee of agr icultural funds held in 
July 2008, it was only presented to pa direc tors at the meeting 
in d ece mb er of that  year, af ter  th e fi nan ci al yea r  e n d  a nd  l es s 
than t wo months before the deadline for the submission of the 
accou nt s.   I t  was   th erefore  mad e  ava ila ble  too  late   for   i t  to  be 
pro p er l y  t aken   into  acco unt  in   res pe c t   of   fi n an cial   ye ar   2 0 0 8 . 
M o re   s i g n i f i c a n t l y,   t h e   g u i d e l i n e   a l s o   s u f fe re d   f ro m   a   l a c k   o f 
d e t a i l   i n   r e s p e c t   o f   w h i c h   c o n t r o l   s t a t i s t i c s   w e r e   c o n s i d e r e d 
most  rel evant  and w h at t yp e of a na lysi s  was  to be  mad e.

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44.  

45.  

46.  

47.  

48.  

49.  

 fro m   a   fo r m a l   p o i n t   o f   v i e w,   t h e   co u r t   n o t e s   t h a t   m o s t   S o a s 
e x a m i n e d   w e r e   n o t   a c c o m p a n i e d   b y   a   s u m m a r y   o f   t h e   w o r k 
per formed to suppor t the statement (el,  pt ) nor by a quantita-
tive an alysis of  co nt rol s t atistic s  (d k , de , e l, fr, Nl,  p t ) .

 I n   s u b s t a n c e ,   t h e   c o u r t   f o u n d   t h a t   t h e   p r e p a r a t i o n   o f   m o s t 
S oa s ,   a l t h o u g h   m a k i n g   u s e   o f   s e v e r a l   e l e m e n t s   o f   t h e   i n t e r-
nal co nt rol  s ys te m,  was not  suppor ted  by  a n  a ssurance mod el 
e n s u r i n g   t h e   c o v e r a g e   o f   a l l   k e y   c o n t r o l s   a n d   a c c r e d i t a t i o n 
c r i t e r i a   i n   a   s y s t e m a t i c   w a y.   S u c h   a   m o d e l ,   i f   a p p l i e d   b y   pa 
direc to rs, wou l d stren gthen th e s uppor t for  t he i r  st ate me nt s.

 an   ex a m p l e   o f   t h e   co n s e q u e n ce s   a r i s i n g   f ro m   t h e   a b s e n ce   o f 
such assurance model is the case where the Soa is par tly based 
on  ‘su b -S oa s’ iss ue d by heads of different de pa r t ments  wit hi n 
the   pa  and  th ese  sub -S oa s  are   in   tur n   foun d  to  be  esse nt ial ly 
based on the judgment of the relevant head of depar tment and 
n o t   s u p p o r t e d   b y   a n y   e v i d e n c e   ( e . g.   a   c h e c k l i s t )   t h a t   w o u l d 
d e m o n s t r a t e   t h e   b a s i s   o n   w h i c h   t h e y   we re   p re p a re d   (e l,   eS ) . 
I n one M ember State ( eS), no sub -S o a was issued for key func -
tion s su c h as t he execu tio n o f pay ments.

 d espite being systematically mentioned by the pa direc tors in 
t h e   l i s t   o f   d o c u m e n t s   a c c o m p a ny i n g   t h e   S oa ,   t h e   a n a l y s i s   o f 
control statistics, and in par ticular of er ror rates, was found to 
be  non - existent   (el,   eS,  Nl,   p l) ,  in adequate   (d e ,  fr,  It )   or  in-
comp l ete  (pt ,  uk ) du r ing t he c our t ’s vis it s to M em ber  St ates.

 In addition, a limited recalculation of error rates was per formed 
by the  co ur t  and re ve aled  t hat in cer tain  cas e s t he y exce e de d  
2 %, which is defined by the commission as the threshold above 
w h i c h   a   re s e r vat i o n   n e e d e d   to   b e   co n s i d e re d   fo r   i n c l u s i o n   i n 
t h e   S oa  (e l,   eS   ex t re m a d u r a ,   It ,   p t ) .   N o   s u c h   a n a l y s i s   by   t h e 
direc to rs  of t he pa s co nce r ned was foun d.

 fi n a l l y,   c h e c k s   c a r r i e d   o u t   b y   t h e   c o u r t   o r   b y   t h e   cB s   t h e m-
s e l ve s   o n   t h e   c o n t ro l   s t a t i s t i c s   re ve a l e d   s h o r t c o m i n g s   i n   t h e 
co r re s p o n d i n g   t a b l e s   o f   t h re e   pas   t h a t   c a l l   i n to   q u e s t i o n   t h e 
reliab il it y o f t hos e stat is tics  (dk , e l, uk ) .

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50.  

51.  

l i m i t e d  a d d e d  v a l u e  f R o m   t h e  c e R t i f i c a t i o n  b o d i e s’  o p i n i o n 
o n  t h e  s t a t e m e n t  o f  a s s u R a n c e 

 S i n c e   f i n a n c i a l   y e a r   2 0 0 7 ,   t h e   cB s   a r e   a l s o   r e q u i r e d   t o   i s s u e 
a   s e p a rate   o p i n i o n   o n   w h e t h e r   t h e   S o a   co m p l i e s   w i t h   t h e   re -
quirement s se t out  by th e regu lator y  f ram ewor k .  G uid an ce on 
this work has been provided by the commission in its guideline 
No 7, which requires among others that cBs verify whether the 
sup p or ting  info r matio n acco mpany in g  th e S oa i s  ad equate. 

 even if some cBs developed specific work programmes to assess 
the Soa, in substance no additional audit work was carried out 
to suppor t that opinion, beyond that which was under taken in 
t h e   c o n t e x t   o f   t h e   c e r t i f i c a t i o n   o f   t h e   a c c o u n t s.   a s   s u c h ,   t h e 
v a l u e   a d d e d   b y   t h e   cB ’s   o p i n i o n   o n   t h e   S oa  i s   l i m i t e d,   s i n c e 
it  co mp r ise s  l itt l e  mo re  than  a  com par is on   bet we e n  th e  audi t 
cer tificate and the Soa (dk , de, el,  eS, It , uk ). I n one case (fr), 
the cB’s opinion did not follow the model required by guideline 
N o   7   a n d   i n   p a r t i c u l a r   d i d   n o t   re fe r   to   a ny   a s s e s s m e n t   o f   t h e 
basis  of  prep aratio n o f the S oa. 

52.  

 the   co ur t   fu r t her  no tes   that  the  limitat io ns   af fec t in g   th e   use 
of control statistics, highlighted earlier in this repor t (see para-
graphs 47 to 49), were not mentioned by the respec tive cBs in 
th eir o pinio ns o n th e S oa.

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clearaNce of accouNt S

22

INt r O Du c tI O N  

53.  

 c o n f o r m i t y   c l e a r a n c e   i n   i t s   p r e s e n t   f o r m   w a s   i n t r o d u c e d   a s 
a   p a r t   o f   t h e   re fo r m   t h a t   t o o k   e f fe c t   i n   1 9 9 6 .   a r t i c l e   3 1 ( 1 )   o f 
r e g u l at i o n   (e c )   N o   1 2 9 0 / 2 0 0 5   s t i p u l ate s   fo r   t h i s   s t a g e   o f   t h e 
procedure that ‘if the commission finds that expenditure … has 
been  inc ur red in a way  that has  i n f r i ng ed  commun it y r ules, it 
shall decide what amounts are to be excluded from community 
fina ncing  …’. 

18  these amounts pertain, however, 
to different preceding financial 

years.

54.  

 from 1999 to the end of 2008, the commission took 29 conform-
ity decisions and by means of them excluded a total amount of 
5 582 million euro from community financing. Graph 1 presents 
th e am ou nt s exc lud ed p er cale nda r  ye ar  in  t h i s pe r i od 18.

gr aPh   1

amOuNt s   Exc luD E D   P Er   c a lE N D a r  y Ea r

Total amount excluded from Community financing by conformity decisions

t
n
u
o
m
A

)
o
r
u
e
n
o

i
l
l
i

m
n

i
(

1 200

1 000

800

600

400

200

0

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Calendar year

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55.  

56.  

OBsEr VatI O Ns

thE   cOm mIs sI O N ’s   cO NfOr mIt y   auD It s   D O   N Ot 
aD Eq uatEly   c O V Er   ExP E N D It u rE   aN D   rIs k s

 t h e   co m m i s s i o n   d e t e r m i n e s   e a c h   ye a r   t h e   m e a s u re s   a n d   t h e 
Member States that will be audited for conformit y on the basis 
of a n annual  r isk anal ysis  c ar r ied o ut  ac ro ss th e rang e  of  agr i-
cultu ra l expe nditu re. 

19  the central risk analysis for 
the year 2008 (n) is based on the 

expenditure made in financial year 

2006 (n – 2).

 to   c a r r y   o u t   i t s   r i s k   a n a l y s i s   fo r   a   s p e c i f i c   ye a r   (n ) ,   t h e   co m-
m i s s i o n   s e gm e nt s   a gr i c u l t u ra l   ex p e n d i t u re   o f   t h e   ye a r   (n   –   2 ) 
i nto   s e p a rate  ‘a u d i t   f i e l d s’ 1 9.   I n   t h e   ce nt ra l   r i s k   a n a l ys i s   (c r a) 
2 0 0 8   t h e   co m m i s s i o n   d i s t i n g u i s h e d   8 3   a u d i t   f i e l d s   w h i c h   a re 
defined as being subjec t to a similar management and control 
s y s t e m .   a s   t h e   e x p e n d i t u r e   u n d e r   t h e s e   a u d i t   f i e l d s   w a s   e f-
fec te d  by   diffe rent  pas,   t hese  audit  f ields  are   assign ed  to   t he 
pas  co nce r ned  and  for m  a  so - c alled   audi t  fi el d /pa  pair   ( h e re -
i n a f t e r  ‘a u d i t   a r e a’ ) .   fo r   t h e   p u r p o s e   o f   i t s   2 0 0 8   c e n t r a l   r i s k 
analysis, the commission identified 1 807 audit areas which are 
c h a r a c t e r i s e d   b y   d i f fe re n t   r i s k   f a c t o r s.  t h e   r i s k   f a c t o r s   t a k e n 
into consideration are the impor tance in financial ter ms and a 
num b er o f o t he r r isk fac tors such  a s t he  qua li t y  of  t he  control 
s y s t e m s   a p p l y i n g   t o   t h a t   a u d i t   a r e a   o r   t h e   c h a r a c t e r i s t i c s   o f 
the pa. B y combining these r isk fac tors the  commission deter-
mines the exposure to r isk of each audit area and quantifies it 
by  mean s  of   a n  individual   fig ure  ( call ed   th e  ‘co mpo si te   r i s k ’) . 
the individual audit areas are ranked in decreasing order of the 
value of their composite risk . the commission then determines 
i t s   a u d i t   p r i o r i t i e s   o n   t h e   b a s i s   o f   t h i s   l i s t .   t h e   f a c t   t h a t   t h e 
f i n a n c i a l   i m p o r t a n c e   p l ay s   a   m a j o r   ro l e   i n   t h e   q u a n t i f i c a t i o n 
o f   t h e   e x p o s u r e   t o   r i s k   i m p l i e s   t h a t   a n   a u d i t   a r e a   w i t h   h i g h 
expenditure is mo re likel y to be  h ig h ly  ran ke d  and  aud ited.

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57.  

58.  

 t h i s   p r o c e d u r e   r e s u l t s   i n   a   l i m i t e d   n u m b e r   o f   m e a s u r e s   a n d 
pas,   w h i c h   t h e   co m m i s s i o n   h a s   i d e nt i f i e d   a s   p r i o r i t i e s,   b e i n g 
subjec t to its confor mit y audits. the ex tent of the coverage of 
th e  co mmis sio n’s  co nfo r mit y  audit s  ca r r ie d  o ut   in   20 06 ,   2 0 0 7 
and  2008 is p resented in  Tab le 1.

 t h e   t a b l e   s h o w s   t h a t   c o n fo r m i t y   a u d i t s   c o v e r e d   o n l y   p a r t   o f 
t h e   a gr i c u l t u r a l   e x p e n d i t u re :   4 4   %   i n   2 0 0 6 ,   2 5   %   i n   2 0 0 7   a n d 
4 7   %   i n   2 0 0 8 .   t h e   f a c t   t h a t   o v e r   t h e   t h r e e   y e a r s   t h e   s u m   o f 
the percentages are above 100 % does not mean that all audit 
a r e a s   h a d   b e e n   c o v e r e d   i n   t h i s   p e r i o d .  t h i s   i s   b e c a u s e   s o m e 
a u d i t   a re a s   h ave   b e e n   c o ve re d   m o re   t h a n   o n c e   i n   t h e   p e r i o d 
exa mined.

taBl E   1

 cO V Er agE   Of   ExP E N D It u rE   By   cO NfOr mIt y   auD It s

% of expenditure covered

Policy areas1

Main schemes

2006

2007

2008

Intervention on the agricultural markets

Export refunds, fruit and vegetables, milk, public 
storage, wine

48 %

32 %

47 % 2

Direct aid

Single payment scheme, SAPS, coupled premiums

50 %

24 %

47 %

Rural development

Agri-environment, mountain areas,  
farm modernisation, diversification

16 %

20 %

45 %

Average

44 %

25 %

47 %

1  the policy areas correspond to the different levels of the directorate-General for agriculture and rural development’s activity 
based budgeting (‘aBB’).
2  the percentage shown differs from the one published in the commission’s directorate-General for agriculture and rural 
development ‘annual activity report 2008’  (54 %). this because the court compared gross values for both amounts audited and  

paid whilst the commission compared the gross amounts audited to the net amounts paid.

S o urce: Table underlying the information published on page 92 of the Commission's Directorate-General for Agriculture and Rural Development  
‘Annual Activity Report 2008’.

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20  article 31(4)(a) of regulation (ec) 
No 1290/2005.

59.  

 th e   co m m i s s i o n’s   a b i l i t y   to   exc l u d e   ex p e n d i t u re   n o t   m a d e   i n 
c o n f o r m i t y   w i t h   c o m m u n i t y   r u l e s   t h r o u g h   i t s   c o n f o r m i t y 
a u d i t s   i s   f u r t h e r   l i m i te d   by   t h e   s o - c a l l e d  ‘ 2 4 - m o nt h   r u l e’  t h at 
is embodied in the regulation 20. the rule states that ‘financing 
m a y   n o t   b e   r e f u s e d   f o r   e x p e n d i t u r e   w h i c h   i s   i n c u r r e d   m o r e 
t h a n   2 4   m o n t h s   b e fo re   t h e   co m m i s s i o n   n o t i f i e s   t h e   M e m b e r 
State in wr iting  of its  ins p ec tion  f in d in g s’. th e pur pos e of th is 
r u l e   i s   t o   p r o v i d e   a   d e g r e e   o f   l e g a l   c e r t a i n t y   t o   t h e   M e m b e r 
St ate s.   I n   p ra c t i ce,   t h i s   m e a n s   t h at   a u d i t   f i n d i n g s   n o t i f i e d   o n 
15 o c to b er 2005 woul d al l ow  th e commiss ion  to exclude pay-
ments made as from 15 o c tober 2003 only. I f the same t ype of 
i r re g u l a r   p ay m e nt s,   re ve a l e d   i n   t h e   co u r s e   o f   t h e   s a m e   a u d i t, 
h a d   b e e n   m a d e   b e fo r e   1 5   o c t o b e r   2 0 0 3 ,   t h e n   t h e  ‘ 2 4 - m o n t h 
rule’ wo uld no t  al l ow  to excl u de t he m .

60.  

 whilst legal cer taint y is a legitimate objec tive, and while com-
plete audit  coverage w ith in a gi ve n pe r io d is  n ot fe as ible,  t he 
c o m b i n e d   e f fe c t   o f   t h e   co m m i s s i o n’s   c u r re n t   a u d i t   c o ve r a g e 
and the 24 month rule result in a situation where for some ex-
penditure areas, if ultimately audited, there is no possibility to 
impose correc tions. this can be best illustrated by the example 
in B ox   3. 

B Ox   3

I r rEg u l a r   PaymE Nt s   N Ot   cO V ErE D   By   cO NfOr mIt y   c lEa r aNcE

the court assessed a correction included in conformity decision No 22 of 27 July 2006 (2006/554/ec ). 
this correction amounted to some 77,1 million euro and addressed, inter alia, the risk that aid was paid 
for parcels of french wetlands which were not eligible for direct aid. the amount of the correction was 
established on expenditure incurred during the 24 months prior to the notification to france in october 
2001. even though, the commission considered payments for the same type of parcels made before 
october 1999 to also be irregular, such payments could not be included in the correction as a result 
of the application of the ‘24-month rule’. In this case, which is a further illustration of the long delays 
inherent in the system, the court estimated the payments that could not be corrected to amount to 
some 100 million euro.

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21  article 31(2) of regulation (ec)  
No 1290/2005. 

22  Guidelines for the calculation 
of financial consequences when 

preparing the decision regarding the 

clearance of the accounts of eaGGf 

Guarantee (document vI/5330/97 of 

23.12.1997).

23  the analysis is based on 
corrections that fall under annex II to 

document vI/5330/97, which allows 

to calculate the correction on the 

basis of a flat-rate or other methods.

24  commission decisions of 18 april 
2007 (2007/243/ec), of 3 october 

2007 (2007/647/ec), of 20 december 

2007 (2008/68/ec), of 19 april 

2008 (2008/321/ec), of 8 July 2008 

(2008/582/ec) and of 8 december 

2008 (2008/960/ec).

61.  

62.  

63.  

 the accurate deter mination of the total amount that the com-
m i s s i o n   m a y   b e   u n a b l e   t o   e xc l u d e   d u e   t o   t h e   a p p l i c a t i o n   o f 
t h i s   r u l e   i m p l i e s   s p e c i f i c   a n d   e x h a u s t i v e   i n f o r m a t i o n   t h a t   i s 
n o t   a v a i l a b l e   i n   t h e   c o m m i s s i o n .  t h e   c o u r t ’s   a n a l y s i s   s h o w s 
that the audit areas affec ted by this limitation are individually 
relatively small in financial terms, but due to their number, the 
total amount is not insignificant. I n this contex t the cour t fur-
th er  p o int s  o ut   th at  the  larg e   numbe r   of   au dit   areas   in clude d 
in the commission’s central risk analysis (1 807 in 2008) does not 
allow  th eir fu l l coverag e in a re aso nable   per i od  of  t ime.

thE   cOm mIs sI O N ’s   cOr rEc tI O Ns   a rE   N Ot   B a sE D  
O N   a   PrEcIsE   Es tIm atI O N   Of  t hE   fI NaNcIa l 
D a m agE   c au sE D  tO  t hE   cOm m uN It y

 r e g u l at i o n   (e c )   N o   1 2 9 0 / 2 0 0 5   s e t s   o u t   t h e   g e n e ra l   p r i n c i p l e s 
t o   b e   f o l l o w e d   t o   d e t e r m i n e   t h e   a m o u n t   o f   c o n f o r m i t y   c o r -
re c t i o n s   a n d   s t i p u l a te s   t h a t  ‘ t h e   co m m i s s i o n   s h a l l   a s s e s s   t h e 
amounts to be excluded on the basis of the gravit y of the non-
c o n fo r m i t y   re c o rd e d .   I t   s h a l l   t a k e   d u e   a c c o u n t   o f   t h e   n a t u re 
a n d   g r av i t y   o f   t h e   i n f r i n g e m e n t   a n d   o f   t h e   f i n a n c i a l   d a m a g e 
caused to the community ’ 21. under these rules the  commission 
has   t he  disc retio n  to  deter mine  th e   m e th od s   i t  us es   to   e st ab -
l i s h   t h e   a m o u nt   o f   t h e   f i n a n c i a l   co r re c t i o n s.  th e   co m m i s s i o n 
h a s   d e t a i l e d   t h e s e   m e t h o d s   fo r   t h e   c a l c u l at i o n   o f   co n fo r m i t y 
cor re c tio ns in a wo r k ing do cum e nt 22.

 th e   co m m i s s i o n’s   wo r k i n g   d o c u m e n t   p rov i d e s   t h a t   f l a t - r a te s 
are  to  be   u sed  when  it   is  not   po ssi ble  to  u se   o ne   o f  th e   ot he r 
t w o   m e t h o d s   ( s e e   B o x   4 ) .   t h e   c o u r t   t h e r e f o r e   a n a l y s e d   t h e 
n a t u re   o f   c o r re c t i o n s   a p p l i e d   w h e r e   t h e   co m m i s s i o n’s   wo r k -
ing  do cument all owed to  use f lat-rate   or   spe c if ic   c ase s  (ot h er 
m e t h o d s )   to   e s t a b l i s h   t h e   co r re c t i o n s 2 3.  th e   a n a l ys i s   cove re d 
the six conformity decisions taken in the period covered by the 
aud it  (2007 and 2008) 24.

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B Ox   4 

cOm mIs sI O N ' s   mE t hO Ds   fOr  t hE   c a lc u l atI O N   Of   fI NaNcIa l 
cOr rEc tI O Ns

the commission details three calculation methods:

(a)  when the error revealed by the audit is based on a specific case (or a few cases), the correction is 

equal to the value of the erroneous transactions.

(b)  when the errors are revealed by the examination of a representative sample of transactions, the 

correction is then based on the extrapolation of these results. 

(c)  when it is not possible to use one of the two methods mentioned above, flat-rate corrections are 

applied to the amount of expenditure placed at risk.

the level of the flat-rate correction applied (2 %, 5 %, 10 %, 25 % or higher) depends on the seriousness 
of the weaknesses found, whether they are related to key or ancillary controls and whether they are 
recurrent or not25.

use of a 2 % flat-rate 

key controls are satisfactory but one or more ancillary controls failed to 
operate.

use of a 5 % flat-rate 

Not all the key controls are executed in the number, frequency or depth 
required by the regulations. therefore, the risk of loss for the fund is signifi-
cant.

use of a 10 % flat-rate 

one or more key controls are not applied or applied so poorly or so infre -
quently that they are completely ineffective in determining the eligibility of 
the claim or preventing irregularity. therefore there is a high risk of wide-
spread loss to the fund.

use of a 25 % flat-rate 

when a control system is absent or gravely deficient and there is evidence of 
widespread irregularity and negligence in countering irregular or fraudulent 
practices. there is a risk of exceptionally high losses to the fund.

use of higher flat-rates 

deficiencies are so serious as to constitute a complete failure to comply with 
community rules, so rendering all payments irregular.

25  a definition of key and ancillary controls is provided under footnote 14.

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64.  

 Gra p h 2 shows t hat,  for each of  t he  con for mi t y  d eci sio ns ana-
l y s e d   ( 2 0 0 7   a n d   2 0 0 8 ) ,   t h e   v a s t   m a j o r i t y   o f   c o r r e c t i o n s   ( b y 
value) are flat-rate cor rec tions and that they cannot therefore 
be considered the exception. o verall, consider ing the six con-
fo r m i t y   d e c i s i o n s,   9 2   %   o f   t h e   co r re c t i o n s   ( by   va l u e )   a re   f l at-
rate  cor rec tio ns.

gr aPh   2

fl at - r atE   cOr rEc tI O Ns   a s   c OmP a rE D  tO   Ot hEr   mE t hO Ds

t
n
u
o
m
A

)
o
r
u
e
n
o

i
l
l
i

M

(

450
400
350
300
250
200
150
100
50
0

2,6 %

97,4 %

35,2 %

64,8 %

24

25

0,5 %

9,6 %

99,5 %

90,4 %

8,6 %

91,4 %

0,3 %

99,7 %

26

27
Decision number

28

29

Flat-rate method

Other method

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65.  

 t h e   o v e r r i d i n g   r e a s o n   f o r   t h i s   m e t h o d   m o s t l y   b e i n g   u s e d   i s 
th at  t he ke y el ement of  t he commiss ion’s confor mit y audits is 
the evaluation of systems operated by the Member States. this 
a p p ro a c h ,   h owe ve r,   d o e s   n o t   gi ve   s u f f i c i e n t   co n s i d e rat i o n   to 
the need to determine with greater precision the financial con -
sequences of the weak nesses detec ted in the systems. I n cases 
wh ere   s uch  co nseq uences  are   qua nt if iable   and  si gni f ica nt,  so 
th at  t he po tential  cor rec t ions  are l arge,  th e re  i s a ne ed  to un-
d e r t a k e   s u f f i c i e n t   s o - c a l l e d   s u b s t a n t i ve   t e s t i n g,   i . e.   d e t a i l e d 
testing of an aid payment including a check of its eligibilit y at 
beneficiar y level (on the spot), which would allow an accurate 
q u a n t i f i c a t i o n   o f   t h e   a m o u n t   t o   b e   c o r re c t e d   ( e. g.   b y   w a y   o f 
ex t rap ol at io n  o f  a  stat is tical l y  valid   sam ple ).  th e  commiss ion 
in its  op erat ion al  hand b oo k reco gn i se s t h i s li mi tat io n an d ex-
pla ins  it  by  stat ing  that ‘in  the   c le aran ce   o f  acco unts   proces s, 
th e  au dito r  is  requ ired  to  as se ss  no t  on ly   t he   we ak n es s  in   t h e 
sys tem  (w hich woul d im pl y t h e tes t of  contro ls) ,  but  als o take 
a cco u nt   o f   t h e   f i n a n c i a l   e f fe c t   o f   t h e   we a k n e s s   ( w h i c h   wo u l d 
imply substantive testing)’, but that, in practice, this is not pos-
sibl e b ec au se ‘s ub s tantive tes tin g to  a re ason able  le vel  would 
req uire  more  re s ources t han are  avai lable’.

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66.  

 the   d iffic ult y   w it h   th e   f l at- rate   method  is  that  weak nesses  in 
s y s t e m s   a re   i n d i c a t i ve   o f   a   r i s k   o f   i r re g u l a r   p a y m e n t s   b u t   d o 
n o t   p r o v i d e   e v i d e n c e   t h a t   i r r e g u l a r   p a y m e n t s   w e r e   a c t u a l l y 
m a d e,   s t i l l   l e s s   t h a t   t h e i r   to t a l   a m o u n t   w a s   e q u a l   to   t h e   f l a t -
rate correc tion imposed. therefore, flat-rate correc tions do not 
provide an adequate basis to accurately deter mine the ir regu-
la r p ayments  du e to  the s ystem’s we ak n e ss es  foun d 26. I nde ed, 
t h e   c o m m i s s i o n   i n   i t s  ‘op e r a t i o n a l   h a n d b o o k   fo r   c o n fo r m i t y 
audits’ recognises that the systems-based approach will usually 
make  it impo ssib l e to est imate a cc uratel y  t he  amount of n on -
c o m p l y i n g   p a y m e n t s   s i n c e   t h e r e   i s   g e n e r a l l y   n o   o b s e r v a b l e 
relationship between the weak nesses identified in systems and 
er rors  in p ayment 27.  this  sit uat ion  is illustrate d by  the  fol low-
ing  exa mp le in B ox  5.

26  the fact that this method has 
been accepted by the court of 

Justice as being in conformity with 

the underlying legal provisions 

does not put this observation 

into question. In fact the court of 

Justice has not so far questioned the 

flat-rate method as such, but only 

whether its use is in compliance with 

legal provisions.

27  See paragraph 28.2.1 of 
the commission’s ‘operational 

handbook for conformity audits.’ 

B Ox   5

thE   cOm mIs sI O N ’s   s cO P E   Of  tEs tI Ng

In its conformity decision No 28, the commission excluded an amount of 55 million GBp (68 million euro) 
from community financing which concerned payments made by the united  kingdom pa in financial 
years 2004 and 2005. this amount resulted from a flat-rate correction of 5 % due to system weaknesses 
identified by the commission auditors and concerned the inadequate quality of on-the-spot checks using 
remote sensing (the inappropriate timing of the follow-up field visits and the inaccurate determination 
of the area eligible for payment).

the commission checked a number of parcels for their size and eligibility, but it did not test a repre-
sentative sample of individual payments, which would have allowed it to calculate the precise amount 
of the damage to the eu budget.

In the absence of such an approach, it is not possible to establish whether the flat-rate correction was 
adequate, insufficient or excessive.

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67.  

68.  

69.  

 the   co ur t ’s  o bse r vatio n  was   under lin e d  by   t he   european  par-
l i a m e n t   i n   i t s   d i s c h a r g e   r e s o l u t i o n   f o r   f i n a n c i a l   y e a r   2 0 0 7 , 
wh ere by  it  de pl ored,   amo ng   oth e r   s h or tcom in g s  i n  t h e  clea r-
ance   system,   t he  fac t   t hat  no   vali d   lin k  ca n  be   m ade   be t we e n 
t h e   a m o u nt s   re cove re d   a n d   t h e   re a l   a m o u nt   o f   i r re g u l a r   p ay -
ments 28. already in 2003, the european par liament, in its reso -
l u t i o n   o n   t h e   re fo r m   o f   t h e   p ro ce d u re   o f   t h e   c l e a ra n ce   o f   a c -
count s,   ha d  n oted ‘ t hat  s ome  9 0  %   o f  all  co r re c ti ons   by   val ue 
a re   f l at- rate   co r re c t i o n s   a n d   n o t   ex a c t   co r re c t i o n s’  a n d   a s k e d 
‘ t h e   c o m m i s s i o n   t o   p r o p o s e   m e a s u r e s   i n   o r d e r   t o   r e d u c e   i t s 
reliance on flat-rate cor rec tions by the end of 2004’ 29. to date, 
no su ch  measu res have b een propos ed.

cO Nf Or mIt y   D EcIsI O Ns   a rE  ta kE N  tO O   l atE

 the cour t has pointed on several occasions to the long delays 
i n   t h e   c l e a r a n c e   o f   a c c o u n t s   p ro c e d u re   p r i o r   t o   i t s   re fo r m   i n 
1996. consequently, the cour t, in its opinion No 5/94 concern-
i n g   t h e   re fo r m   o f   co u n c i l   r e g u l a t i o n   ( e e c )   N o   7 2 9 / 7 0   o n   t h e 
f i n a n c i n g   o f   t h e   c o m m o n   a g r i c u l t u r a l   p o l i c y,   i n d i c a t e d   t h a t 
i t   wa s   n e ce s s a r y   to   s e t   p re c i s e   t i m e   l i m i t s   at   a l l   s t a g e s   o f   t h e 
c l e a r a n c e   p r o c e d u r e   i n   o r d e r   t o   a v o i d   u n a c c e p t a b l e   d e l a y s . 
thi s pro po sa l was no t final l y  ad opted i n  t h e am en de d ver s ion 
of t he  regu l atio n . 

 ho w e v e r,   t h e   c o m m i s s i o n   h a s   s e t   a n   i n d i c a t i v e   i n t e r n a l   t a r -
g e t   b y   w h i c h   i t   a i m s   t o   c o m p l e t e   t h e   c o n f o r m i t y   c l e a r a n c e 
procedure. I t provides for the entire procedure to be finalized 
w i t h i n   4 5 0   d ay s   a f t e r   t h e   a u d i t   t o o k   p l a c e   ( w i t h o u t   c o n c i l i a-
tion) and 645 days in the case that the M ember State requests 
concil iat io n. the  va r io us  s t ages in the proce dure  fores een  a re 
pre sented  in B ox  6.

28  See paragraphs 82 and 83 of the 
european parliament resolution of 

23 april 2009 on the discharge for 

implementation of the european 

union general budget for the 

financial year 2007, Section III — 

commission (p6_ta(2009)0289): 

‘82. deplores the fact that the 

same shortcomings inherent in the 

clearance system were again found 

by the eca in 2007, such as the 

retroactive and multiannual nature 

of conformity clearance and the 

fact that no valid link can be made 

between the amounts recovered 

and the real amount of irregular 

payments (paragraph 5.47 of the 

annual report for 2007);  

83. considers that, after a number of 

years of the same serious criticisms 

of the same problem by the eca, 

the commission must propose 

measures to reform the system to 

make it possible to establish clear 

and valid links between amounts 

recovered and the amount of 

irregular payments and ensure, 

as far as possible, that the cost 

of financial corrections is met by 

the final beneficiaries and not by 

the taxpayer and that flat-rate 

corrections are applied to those 

Member States which fail to meet 

their obligations.’

29  See paragraph 19 of the european 
parliament resolution on reform of 

the procedure of the clearance of 

accounts (oJ c 39 e, 13.2.2004, p. 51).

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B Ox   6

IN D Ic atI V E   I NtErNa l  ta r gE t   Of  t hE   cO NfOr mIt y   c lEa r aNcE
Pr OcE Du rE

Stage A

Stage B

Stage C

Stage D

Stage E

Stage F

Stage G

Stage H

Stage I

Audit in the Member State

Reporting on audit findings

Letter to Member States on findings

Reply of the Member States

Translation and examination of the reply

Bilateral meeting on issues disagreed

Conclusion letter of bilateral meeting

Member State's reply to the conclusions, its translation and examination on part  
of the Commission

Draft final conclusion

Days since the audit took place (without conciliation)

Stage J

Stage K

Stage L

Member States’ request for conciliation

Conciliation Body report

Draft final Commission position

Days since the audit took place (with conciliation)

A + 60 days

B + 30 days

C + 60 days

D + 90 days

E + 45 days

F + 15 days

G + 105 days

H + 45 days

450 days

I + 30 days

J + 120 days

K + 45 days

645 days

Proposed frequency of conformity decisions

two to three times/year

S o urce: Commission’s Directorate-General for Agriculture: ‘Fact sheet – The clearance of accounts procedure’ 
(http://ec.europa.eu/agriculture/publi/fact/clear/clear_en.pdf).

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70.  

71.  

 on the basis of the six confor mit y decisions taken in 2007 and 
2 0 0 8 ,   t h e   co u r t   a s s e s s e d   t h e   a c t u a l   t i m e   n e e d e d   fo r   a r r i v i n g 
at  a  draf t  final  conclusion  (stage  I  —  procedure  without  concili-
ation ) o r a draf t  final  p os it ion  (s tag e  l —  procedure wit h con-
ciliatio n). the  re su l ts  are  shown  in Gra ph  3.

 th i s   a n a l ys i s   s h ows   t h at,   i n   g e n e ra l,   t h e   t i m e   n e e d e d   fo r   co r -
rec t io ns, b ot h w it h an d w ithout a co nc il i ati on  proce dure, was 
s i g n i f i c a n t l y   i n   e x c e s s   o f   t h e   c o m m i s s i o n’s   i n d i c a t i v e   i n t e r -
n a l   t a r g e t .   I n   m a n y   i n s t a n c e s ,   t h i s   w a s   d u e   t o   t h e   f a c t   t h a t 
t h e   c o m m i s s i o n   w a s   o b l i g e d   t o   c a r r y   o u t   f u r t h e r   a u d i t s   i n   a 
M emb e r  State  in  order   to   b etter   e s tabli s h  th e  magni tude   an d 
sever it y  of  t heir cont rol  sys tems’ d ef i c ie nc ie s.

gr aPh   3

t ImE   N E E D E D   fOr  t hE   cO NfOr mIt y   Pr OcE Du rE

s
y
a
d
f
o
r
e
b
m
u
N

2 000

1 600

1 200

800

400

0

1 833

1 379

1 353

1 306

1 404

1 295

1 074

815

704

855

1 549

841

24

25

26

27

28

29

Decision number

Corrections without conciliation procedure

Corrections with conciliation procedure

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30  See paragraphs 10 to 12 of the 
european parliament resolution 

of 30 January 2003 on reform of 

the procedure of the clearance of 

accounts.

72.  

 t h e   p ro c e d u re   i s   o b v i o u s l y   l e n g t h e n e d   w h e n   M e m b e r   S t a t e s 
r e q u e s t   c o n c i l i a t i o n .   I n   2 0 0 3 ,   t h e   e u r o p e a n   p a r l i a m e n t ,   i n 
i t s   r e s o l u t i o n   o n   t h e   r e fo r m   o f   t h e   p r o c e d u r e ,   n o t e d   t h a t   i t : 
‘r e g r e t s   t h a t   t h e   c o n c i l i a t i o n   p r o c e d u r e   d o e s   n o t   r e s u l t   i n   a 
d e c l i n e   i n   t h e   n u m b e r   o f   c a s e s   b r o u g h t   b e f o r e   t h e   c o u r t   o f 
J u s t i ce.   I t   co n s i d e r s   t h at   t h e   co n c i l i at i o n   p ro ce d u re   d o e s   n o t 
in  prac t ice  aim  to  reco ncil e  p os i ti on s,   bu t  rath e r   se r ve s   as   an 
ex t ra  op p or tu nit y   fo r  M emb er  State s  to  a ppeal,  as  a  c h e ck   on 
t h e   c o m m i s s i o n’s   w o r k   a n d   a s   a n   i n c e n t i v e   f o r   t h e   c o m m i s-
sion to per form well. I t doubts whether this provides sufficient 
basis  to  just ify t he continu ation  of  t he  con c ili ati on  proce dure 
i n   t h e   l o n g   t e r m .   I t   a s k s   t h e   c o m m i s s i o n ,   t o g e t h e r   w i t h   t h e 
conciliation Body, to explore ways to filter and thereby reduce 
th e nu mb er o f cas es  refer red  to  th e  c onciliat ion  B ody ’ 30.

73.  

 o verall, the cour t obser ved that the conformit y clearance pro -
c e d u r e   i s   t o o   l o n g   ( t a k i n g   t w o   t o   f i v e   y e a r s ) .   a t   t h e   e n d   o f 
2008, the clearance of accounts was not complete for any year 
late r t han 20 01 .

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part III — the clearaNce   
of accouNt S procedure  
aS a  whole

INt r O Du c tI O N

74.  

 I n  pa r t s   I   a n d   I I   o f   t h i s   r e p o r t ,   t h e   t w o   s t a g e s   o f   t h e   c u r r e n t 
c l e a r a n c e   o f   a c c o u n t s   p ro c e d u re   h ave   b e e n   e x a m i n e d   s e p a r -
ate l y.   I n   t h i s   p a r t,   co n s i d e rat i o n   i s   gi ve n   a s   to   w h e t h e r   t h e s e 
p ro c e d u re s,   t a k e n   a s   a   w h o l e,   f u l f i l   t h e   ro l e   o f   t h e   c l e a r a n c e 
of acco u nt s.

OBsEr VatI O Ns

cOmPlIaNcE
accOuNt s   Pr OcE Du rE  W It h  t hE   f I NaNcIa l 
r Eg u l atI O N

  Of  t hE   c u r rE Nt   c lEa r aNcE   Of 

75.  

 as   wa s   re c a l l e d   i n   t h e   i nt ro d u c t i o n   to   t h i s   re p o r t,   t h e   ove ra l l 
o b j e c t i ve   o f   t h e   c l e a r a n c e   o f   a c c o u n t s   i s   t o   e n a b l e   t h e   co m-
mis sio n to  assu me f in al resp o ns i bilit y for  t h e im ple me nt ati on 
of  t he  b u dget   in  a  sit uat ion  wh ere   agr ic ultural   ex pen di ture   i s 
e xe c u t e d   b y   M e m b e r   S t a t e s   u n d e r  ‘s h a r e d   m a n a g e m e n t ’.   fo r 
this purpose it is incumbent upon the commission to recognise 
t h a t   p a r t   o f   e x p e n d i t u r e   t h a t   h a s   b e e n   m a d e   i n   a c c o r d a n c e 
w i t h   t h e   a p p l i c a b l e   r u l e s   a n d   i s   c h a rg e a b l e   to   t h e   e u  b u d g e t 
and to exclude from community financing that par t which does 
not comply with the rules. this is detailed in ar ticle 53b of the 
financial r egulation and ar ticle 42 of the I mplementing rules 
of t he f inanc ial  r eg u lat ion.

76.  

 th e   c l e a ra n ce   o f   a cco u nt s   p ro ce d u re   s h a l l   co n s i s t ,   t h e re fo re, 
in the establishment of the amount of expenditure recognised 
a s   c h a rg e a b l e   to   t h e   b u d g e t.  th i s   i m p l i e s   a   p o s i t i ve,   f i n a l   a c t 
of recognition, on the par t of the commission, of the expendi -
ture chargeable to a par ticular budgetar y exercise, in order to 
infor m  t he b u dgetar y aut hor itie s an d  ass ume  i ts  f in al res pon-
sibil it y.

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77.  

 t h e   c u r r e n t   t w o   s t a g e s   o f   t h e   c l e a r a n c e   p r o c e d u r e   p r o v i d e 
o n l y   fo r   a n   a n n u a l   f i n a n c i a l   d e c i s i o n   o n   t h e   re l i a b i l i t y   o f   t h e 
accounts (the financial decision). In the subsequent conformity 
d e c i s i o n s,   s p e c i f i e d   a m o u n t s   a re   e xc l u d e d.   h owe ve r,   t h e re   i s 
n o   fo r m a l   f i n a l   d e c i s i o n   e s t a b l i s h i n g   fo r   a   gi ve n   e xe rc i s e   t h e 
amount of expenditure recognised as chargeable to the bud get. 
I n   t h e   a b s e n c e   o f   s u c h   a   d e c i s i o n   o n   l e g a l i t y   a n d   r e g u l a r i t y, 
th e exp endit ure o f the year in que s ti on c an n ot  be co ns id ered 
as be ing fu l ly c leared.

78.  

 the   co n for mit y  dec isio ns   can  n ot  be   con si d ered  to  fully   com-
pen sate  fo r  th e  l imitation   o f  th e  an nual   f in an c ia l  d eci si on   for 
the  fo l l ow ing  reas on s:

31  See paragraph 5.58 of the 
court’s annual report concerning 

the financial year 2008 (oJ c 269, 

10.11.2009) and paragraph 5.47 

of the court’s annual report 

concerning the financial year 2007 

(oJ c 286, 10.11.2008).

32  See paragraph 5.63(a) of the 
court’s annual report concerning 

the financial year 2006 (oJ c 273, 

15.11.2007).

(a )  t h e   c o m m i s s i o n   m a k e s   c o n f o r m i t y   d e c i s i o n s   ( n o r m a l l y 
t hree  p er  year )  on  an  ad  hoc  basi s   wh en   i t  has   co mpl ete d 
a n   a u d i t   o r   a   gro u p   o f   a u d i t s.  th e s e   d e c i s i o n s   a re   n o t   re -
lated to a specific financial year, but concern various finan-
cial years. conformit y decision No 29 for instance, taken in 
2008, included correc tions which were related to financial 
ye ars g o ing  fro m 2 00 1 to 2 0 07;

(b)  t he confo r mit y decis ion s may  be  ta k e n up unt il  a point  in 
t i m e   w h e re   t h e y   a re   t i m e   b a r r e d.   I n   p r a c t i c a l   t e r m s,   t h i s 
me ans   t hat   co nfor mit y   audits  ong oin g  at  t he   en d   o f   2 00 8 
a l l o w e d   f o r   c o r r e c t i o n s   r e l a t i n g   a s   f a r   b a c k   a s   f i n a n c i a l 
ye a r   2 0 0 2 .  th i s   i m p l i e s   t h at   by   t h e   e n d   o f   2 0 0 8 ,   f i n a n c i a l 
ye a r   2 0 0 1   c a n   b e   co n s i d e re d   a s   b e i n g   c l o s e d.  th i s   s t a t u s 
i s,   h o we ve r,   ( i )   n o t   fo r m a l l y   n o t i f i e d   t o   a ny   o f   t h e   s t a k e -
h o l d e r s   i n   a   c o m m i s s i o n   d e c i s i o n ,   n o r   e v e n   a s   a   n o t e   t o 
t h e   f i n a n c i a l   s t ate m e nt s   a n d   ( i i )   a c h i e ve d   o n l y   l o n g   a f te r 
t he co r resp on ding  financ ial de c isi on  ha d be e n  tak e n.

79.  

 t h e   c o u r t   h a s   r e p e a t e d l y   p o i n t e d   t o   t h e s e   i s s u e s   i n   i t s   a n -
nua l  rep or t s  w here  it  identified   as  i nh erent  li mi tati on s  in   t h e 
c l e a r a n c e   s y s t e m   t h e   r e t r o a c t i v e   a n d   m u l t i a n n u a l   n a t u r e   o f 
t h e   c o n fo r m i t y   c l e a r a n c e 3 1.   I n   2 0 0 7 ,   t h e   c o u r t   r e p o r t e d   t h a t 
‘conformit y decisions did not relate to payments made to final 
bene ficiar ie s  in   t he  year  in  whic h   th e   d ec i s ion s  we re  t ake n   — 
th ey  u su all y  rel ated  to   several  year s   of   ex pen di ture  a nd  were 
t a k e n   s e v e r a l   y e a r s   i n   a r r e a r s .   B y   t h e   e n d   o f   2 0 0 6   c l e a r a n c e 
was not complete for any year later than 1998’ 32; by the end of 
2008  no t fo r any year later than  2 0 0 1.

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80.  

81.  

82.  

 the european parliament has raised the subject in its resolution 
on the procedure of the clearance of accounts for the 2003 ex-
ercise where it ‘invites the commission to inform the discharge 
authorit y when a specific financial year has been finalised and 
to present the financial cor rec tions per M ember State and per 
s e c t o r   fo r   t h a t   ye a r   i n   t h e   fo l l o w i n g   a n n u a l   fi n a n c i a l   r e p o r t 
on the eaGGf ’ 33. No progress in responding to that request had 
bee n m ade at  t he time of th e audi t.  howe ver, t he  commiss ion 
has under taken to provide additional information in the annual 
acco unt s 2009 to  be p ub l is hed  i n 2 0 10 .

33  See paragraph 8 of the european 
parliament resolution on reform of 

the procedure of the clearance of 

accounts.

 t h e   c o u r t   c o n s i d e r s   t h a t   t h e   c u r r e n t   c l e a r a n c e   o f   a c c o u n t s 
p ro ce d u re   d o e s   n o t   p rov i d e   fo r   a   fo r m a l,   f i n a l   re co gn i t i o n   o f 
the expenditure chargeable to a par ticular budgetar y exercise, 
eit her in t he fo r m of  a s p ecific  de c isi on  s tati n g th e a mount  fi-
nally accepted or in the form of specific infor mation disclosed 
i n   t h e   f i n a n c i a l   s t ate m e nt s,   a   p o s i t i o n   t h at   t h e   co u r t   re p e at -
e d l y   s t a t e d   i n   i t s   a n n u a l   r e p o r t s   a d d r e s s e d   t o   t h e   d i s c h a r g e 
authorit y. accordingly the procedure does not provide the ne -
cessar y clarit y regarding the amount recognised as chargeable 
t o   t h e   b u d g e t   fo r   a   g i v e n   f i n a n c i a l   y e a r   a s   s t i p u l a t e d   b y   t h e 
financ ial  r eg u lat ion (se e p aragraph  2 ).

 I n this regard, the cour t recalls that in its 1994 opinion on the 
re fo r m ,  ‘ t h e   co u r t   re i te rate s   i t s   a d h e re n ce   to   t h e   p r i n c i p l e   o f 
a  sing l e,   a nnu al   eaGGf- G uara ntee  clearance  decisi on,   as  pos-
tulate d  by  r eg u lat ion  (ee c )  N o  72 9/7 0  in   its  f irst  ver sion’  an d 
c o n s i d e r e d   t h a t  ‘i n   t h i s   c o n t e x t ,   t h e   c o m m i s s i o n’s   p r o p o s a l 
looks like a compromise solution, tak ing account of the weak -
nesses obser ved in the clearance procedure but not remedying 
th em  comp l ete ly ’.

thE   cO NsEq uE NcEs   Of  t hE   c u r rE Nt   sIt uatI O N

t h e  c o n s e q u e n c e s  o n  t h e  f i n a n c i a l  s t a t e m e n t s 

83.  

 t h e   f i n a n c i a l   s t a t e m e n t s   a re   p re s e n t e d   t o   t h e   e u ro p e a n   pa r -
l i a m e nt   a n d   co u n c i l   fo l l ow i n g   t h e   a n n u a l   f i n a n c i a l   c l e a ra n ce 
d e c i s i o n   b u t   p r i o r   t o   t h e   c o n f o r m i t y   d e c i s i o n s   b e i n g   t a k e n . 
t h e r e f o r e ,   t h e s e   f i n a n c i a l   s t a t e m e n t s   d o   n o t   y e t   r e f l e c t   t h e 
exclusion of the expenditure not made in compliance with the 
rule s.

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84.  

85.  

 the   co ur t,  in   t his   co ntex t,  h as  repeated ly   s tated   in   it s  a nn ual 
repor ts that ‘although the explanator y notes to the annual ac -
count s  contain   info r mat io n  abo ut   t h e  fac t  th at  so me  t ran s ac -
tion s are  lik el y to  b e cor rec ted at a late r  d ate by  th e commis-
s i o n’s   d e p a r t m e n t s   o r   t h e   M e m b e r   S t a t e s ,   t h e   a m o u n t s   a n d 
areas of expenditure which may be subjec t to fur ther ver ifica-
tion  and cl earance o f accou nt s pro ce dure s  are s ti ll n ot i de nti-
f i e d   i n   t h e   n o t e s’ 3 4.  ta k i n g   2 0 0 8   a s   a n   e x a m p l e,   t h e   n o t e s   t o 
the financial statements indicate that the commission decided 
t o   r e c o v e r   8 5 9   m i l l i o n   e u r o 3 5  f r o m   M e m b e r   S t a t e s   ( t h r o u g h 
c o n f o r m i t y   d e c i s i o n s ) .   t h i s   a m o u n t   r e l a t e s   t o   e x p e n d i t u r e 
b o o k e d   i n   e a r l i e r   ye a r s,   b u t   n o   i n fo r m a t i o n   i s   p rov i d e d   a s   t o 
which years, which M ember States or which measures are con -
cer ned.

34  See paragraph 1.28 of the court’s 
annual report concerning the 

financial year 2007.

35  See note 6.4.1.1 to the financial 
statements in the annual accounts 

of the european communities for 

financial year 2008.

36  See note 5.3 to the financial 
statements in the annual accounts 

of the european communities for 

financial year 2008.

 the commission has sought to mitigate this lack of cer tainty by 
including, in the notes to the accounts, an estimate of amounts 
i t   c o n s i d e r s   m a y   b e   e xc l u d e d   i n   f u t u re   ye a r s,   b a s e d   o n   a ve r - 
aging the total of exclusions in previous years. whilst the inclu-
sion of such estimates gives supplementar y information to the 
u s e r   o f   t h e   f i n a n c i a l   s t a t e m e n t s ,   t h e y   c a n n o t   b e   c o n s i d e r e d 
t o   b e   a   r e l i a b l e   i n d i c a t o r   o f   t h e   f u t u r e   c o r r e c t i o n s   i n   t e r m s 
o f   v a l u e   n o r   o f   w h i c h   a re a   o f   e x p e n d i t u r e   a ny   f u t u r e   c o r r e c -
t i o n   w i l l   a f fe c t .   ag a i n ,   t a k i n g   2 0 0 8   a s   a n   e x a m p l e,   t h e   f i n a n -
cial statements include a note disclosing that the commission 
e x p e c t s   to   re c ove r,   by   m e a n s   o f   f u t u re   c o n fo r m i t y   d e c i s i o n s, 
som e  1 ,7  bill io n  euro   rel ating  to   expe n di ture   in cur re d  du r ing 
th e p er io d 2001 –08 36.

c o n s e q u e n c e s  f o R   t h e  d i s c h a R g e   p R o c e d u R e

86.  

 th e   d i s c h a rg e   i s   t h e   d e c i s i o n   t a k e n   by   t h e   a u t h o r i t y   e m p ow -
e re d,   t h e   eu ro p e a n   pa r l i a m e nt,   w h i c h   re l e a s e s   t h e   exe c u t i ve, 
t h e   c o m m i s s i o n ,   f r o m   a n y   f u r t h e r   l i a b i l i t y   i n   r e s p e c t   o f   i t s 
man ag ement  of  t he  b u dget,   th us   ma r k i ng   fi nal  closu re   of   t he 
bud g et.

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37  See paragraph 4 of chapter 4 
of the council recommendation 

on the discharge to be given 

to the commission in respect 

of the implementation of the 

general budget of the european 

communities for the financial year 

2004.

38  See note 6.2.1 to the financial 
statements in the annual accounts 

of the european communities for 

financial year 2008.

87.  

88.  

 the  d ischarge  de cis ion  is  the c ulmin at ion  of a proced ure  t hat 
s t a r t s   i n   t h e   y e a r   f o l l o w i n g   t h e   e x e c u t i o n   o f   t h e   b u d g e t   i n 
question and is normally completed by 15 May of the year after 
that. after the council has drawn up a recommendation, parlia-
m e nt   ex a m i n e s   t h e   f i n a n c i a l   s t ate m e nt s   re fe r re d   to   i n   ar t i c l e 
275 ec ( ar ticle 318 tfeu), the annual repor t and relevant spe -
cial repor ts by the cour t of auditors and the cour t ’s statement 
of as su ra nce refer red to in a r ticle  24 8 ec ( ar t icle  28 7 tfe u).

 t h e   c u r re n t   c l e a r a n c e   o f   a c c o u n t s   p ro c e d u re   i m p a c t s   o n   t h e 
main  ac to rs  in   th e  disc harge  proced ure,  europe an  par liam ent 
a n d   co u n c i l,   i n   t h e   fo l l ow i n g   w ay s :  th e   eu ro p e a n   pa r l i a m e n t 
a n d   t h e   c o u n c i l   a r e   a s k e d   t o   e x a m i n e   f i n a n c i a l   s t a t e m e n t s 
w h i c h   p r e s e n t   i n c o m p l e t e   i n f o r m a t i o n   a n d   t o   d i s c h a r g e   t h e 
c o m m i s s i o n   f r o m   i t s   r e s p o n s i b i l i t y   f o r   m a n a g e m e n t   o f   t h e 
budget whilst the expenditure concer ned is not definitive and 
wi ll b e a mended, o r cor rec ted,  late r  by th e commiss ion’s con-
f o r m i t y   d e c i s i o n s .  t h e   e u r o p e a n   pa r l i a m e n t   h a s   c o m m e n t e d 
o n   t h i s   s i t u at i o n   i n   t h e   p a s t   ( s e e   p a ra gra p h   8 0 ) .   r e fe re n ce   to 
t h i s   q u e s t i o n   w a s   a l s o   m a d e   b y   t h e   co u n c i l   w h i c h   i n   i t s   re c -
ommendation on the discharge to be given to the commission 
for the financial year 2004 ‘calls on the commission to indicate 
s e p a r a t e l y   i n   t h e   di r e c t o r - G e n e r a l ’s   d e c l a r a t i o n   v e r i f i e d   e x -
pend itu re and exp en diture s ubjec t  to  fur t he r   c he c ks’ 37.

thE   r OlE   Of  t hE   c lEa r aNcE   Of   acc OuNt s   I N 
t hE   Pr OtEc tI O N   Of  t hE   cOm m uN It y   fI NaNcIa l 
I NtErEs t s

89.  

 even though the exclusion of irregular payments shields the eu 
budget from expenditure that should not be charged to it, the 
com mis sio n  its el f  p oints   ou t  th at   con for mi t y   c lea ran ce   i s  n ot 
a   m e c h a n i s m   to   m a k e  ‘re cove r i e s’  o f   i r re g u l a r   p ay m e nt s   f ro m 
beneficiaries, but it highlights that the corrections ‘are a strong 
incentive for the Member States to improve their management 
a n d   co nt ro l ’ 3 8.   howe ve r,   t h e   2 0 0 8   f i n a n c i a l   s t ate m e n t s   o f   t h e 
euro pe an co mmis sio n inc l ude  th e amo unt of 8 5 9  m illi on euro 
for conformity clearance under the heading ‘r ecover y of undue 
pay ment s’.

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90.  

 t h e   c o u r t   i n   t h i s   r e s p e c t   f u r t h e r   p o i n t s   o u t   t h a t   c o n fo r m i t y 
d e c i s i o n s   t a k e n   c a n   u n d o u b t e d l y   g o   s o m e   w ay   t o   p ro t e c t i n g 
t h e   f i n a n c i a l   i n t e r e s t s   o f   t h e   e u.   ho w e v e r,   t h e   f a c t   t h a t   t h e 
f i n a n c i a l   c o r r e c t i o n s   a r e   e xc l u d e d   f r o m   t h e   a m o u n t s   s u b s e -
q u e n t l y   r e i m b u r s e d   t o   t h e   M e m b e r   S t a t e s   h a s   t h e   fo l l o w i n g 
conse qu ence s:

(a)  f i n a n c i a l   c o r re c t i o n s   a re   n o t   c h a r g e d   t o   t h e   f a r m e r s   a n d 
traders who obtained irregular payments, but rather in the 
main  to  t he natio nal  taxp aye rs;

(b)   t h e y   d o   n o t ,   i n   t h e   v a s t   m a j o r i t y   o f   c a s e s ,   h a v e   a   d i r e c t 
p reve nt ive  or   dis su as ive  effec t  on  be ne f ic iar i es   wh o  have 
received paym ents made not in  a ccord an ce  wit h t h e r ule s 
a s   t h e   e x c l u s i o n s   m a d e   c a n n o t   b e   r e l a t e d   t o   i n d i v i d u a l 
ca ses  and su b sequ ent l y recove red.

91.  

 t h e   c o u r t   o b s e r v e s   t h a t   t h e   b u l k   o f   c o r r e c t i o n s   ( b y   v a l u e ) 
a re   f l a t - r a t e   b a s e d   ( s e e   p a r a g r a p h   6 4 )   a n d,   t h e re fo re,   d o   n o t 
e xc l u d e   i d e nt i f i e d   i te m s   o f   e x p e n d i t u re   ( t h at   d i d   n o t   co m p l y 
w i t h   t h e   r u l e s )   b u t   r a t h e r   s a n c t i o n   we a k n e s s e s   i n   t h e   c h e c k s 
and procedures introduced by M ember States. the mechanism 
b y   w h i c h   t h e   a m o u n t s   d e c i d e d   u p o n   a r e   e x c l u d e d   p r o v i d e s 
that the amounts are deduc ted from future payments made to 
t h e   M e m b e r   St ate s   by   t h e   co m m i s s i o n .   fo r   t h e s e   re a s o n s   t h e 
clearance decisions have come to be regarded as sanc tions on 
th e M emb er St ate’s adm in is tration  rath e r  t han  cor re c ti ons  for 
non- co mp liant p ayments.

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coNcluSIoNS aNd 
recoMMeNdatIoNS

41

92.  

93.  

94.  

cO Nc lu sI O Ns

thE   fI NaNcIa l   c lEa r aNcE

  Of   acc OuNt s

 the annual financial clearance procedure initially covered the 
reliab il it y o f t he accou nts b ut, re ce nt ly,  h as  be en  ex te n de d to 
cover cer tain aspec ts of the legalit y and regular it y of transac-
tion s. 

 regarding the reliabilit y of the accounts, the cour t found that 
t h e r e   w a s   a   h i g h   v a r i a b i l i t y   i n   t h e   s t a n d a r d   o f   t h e   c B s’  t e s t -
ing  whic h, in s o me c ases,  advers e ly af fe c ted  th e  basis  of  t he ir 
c e r t i f i c a t i o n   a s   o u t l i n e d   i n   p a r a g r a p h s   2 1   t o   2 4   a b o v e .   N o t -
w i t h s t a n d i n g   t h e   we a k n e s s e s   d e t e c t e d,   t h e   co u r t   c o n c l u d e d 
t h a t   t h e i r   i m p a c t   w o u l d   n o t   h a v e   c h a n g e d   t h e   co m m i s s i o n’s 
d e c i s i o n   o n   t h e   a c c o u n t s   o f   t h e   pa s   c o n c e r n e d   ( i . e .   t o   c l e a r 
o r   d i s j o i n   t h e m ) .   a c c o r d i n g l y,   t h e   c o u r t   c o n c l u d e s   t h a t   t h e 
c l e a ra n ce   o f   a cco u nt s   p ro ce d u re,   a s   re g a rd s   t h e   re l i a b i l i t y   o f 
t h e   a c c o u n t s ,   p r o v i d e s   r e a s o n a b l e   a s s u r a n c e   a n d   s u f f i c i e n t 
i n f o r m a t i o n   f o r   t h e   c o m m i s s i o n   t o   t a k e   i t s   a n n u a l   f i n a n c i a l 
clea ran ce  d ecision .

 r e g a rd i n g   t h e   n e w   e l e m e n t s   o f   a s s u r a n c e  r e l a t i n g   t o   t h e   l e -
g a l i t y   a n d   re g u l a r i t y   o f   u n d e r l y i n g   t ra n s a c t i o n s   t h at   a re   n ow 
re q u i re d   f ro m   cB s   a n d   pa  d i re c to r s,   t h e   co u r t   co n c l u d e d,   fo r 
t h e   r e a s o n s   o u t l i n e d   i n   p a r a g r a p h s   2 5   t o   5 2   a b o v e ,   t h a t   t h e 
u s e   t h a t   c o u l d   b e   m a d e   o f   s u c h   n e w   e l e m e n t s   f o r   a s s u r a n c e 
p u r p o s e s   w a s   a s   y e t   l i m i t e d .   I n   p a r t i c u l a r,   t h e   t e s t i n g   o f   t h e 
i n t e r n a l   c o n t ro l   p ro c e d u re s   v a r i e d   s i g n i f i c a n t l y   b e t we e n   t h e 
cBs  vis ited and ,  in gen eral,  the wor k d one  is n ot  s uf fi c ie nt to 
s u p p o r t   t h e i r   s t a te m e n t   t h a t   t h e   i n te r n a l   co n t ro l   p ro ce d u re s 
o f   t h e   pa s   h ave   o p e r a t e d   s a t i s f a c to r i l y.   a l s o,   t h e   S oa s   o f   t h e 
d i r e c t o r s   o f   pa s   c a n n o t   p r o v i d e   a s s u r a n c e   a s   t o   t h e   l e g a l i t y 
a n d   re g u l a r i t y   o f   t h e   u n d e r l y i n g   t r a n s a c t i o n s   u n l e s s   t h e re   i s 
r e a s o n a b l e   a s s u r a n c e   t h a t   t h e   c o n t r o l   s t a t i s t i c s   a r e   r e l i a b l e, 
w h i c h   i s   n o t   ye t   t h e   c a s e.  th e   va l u e   a d d e d   by   t h e   o p i n i o n   i s -
sued  by cBs  o n t he S oa is  not  as  ye t  clea r.

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95.  

96.  

97.  

98.  

thE   cO NfOr mIt y   c lEa r aNcE

  Of   acc OuNt s 

 Bet ween 1999 and the end of 2008, the commission has recov-
ere d, f ro m M e mb er States,  5 582  mi llio n e uro t hro ug h  i ts  con-
formity decisions. however, significant shor tcomings still af fect 
the implementation of the conformity clearance pro cedure and 
adversely impact on the achievement of its objective to exclude 
ir regular payments from c ommunit y financing.

 t h e   r e s o u r c e s   a v a i l a b l e   t o   t h e   c o m m i s s i o n   f o r   i t s   c o n f o r m -
i t y   a u d i t s   re s u l t   i n   l i m i t e d   a u d i t   c o ve r a g e   o f   a g r i c u l t u r a l   e x-
p e n d i t u re   w h i c h ,   w h e n   co m b i n e d   w i t h   t h e   a p p l i c at i o n   o f   t h e 
‘ 2 4 - m o n t h   r u l e’,   re s u l t s   i n   a   s i t u a t i o n   w h e re b y   i r re g u l a r   p ay -
m e n t s   m a y   b e   i d e n t i f i e d   b u t   c a n n o t   t h e n   b e   e x c l u d e d   f r o m 
com mu nit y financ ing.

 as the co ur t  has  p revio u sl y obs er ve d,  th e  aud it  of  s ys tem s by 
t h e   co m m i s s i o n   d o e s   n o t   p re c l u d e   t h e   u s e   o f   a n   a p p ro p r i ate 
sam p l ing  met hod to  d eter m ine th e  f i n anc i a l im pac t o f  ir re gu-
l a r   e x p e n d i t u r e .   a n y   a p p r o p r i a t e   m e t h o d   s h o u l d   i n c l u d e   a n 
exa minatio n  o f  the  l eg al it y   and   reg ul ar i t y   of   th e   pay me nts   at 
t h e   l e ve l   o f   t h e   f i n a l   b e n e f i c i a r i e s.  th e   f a c t   t h at   t h e   co m m i s -
sion  h as  ad apte d  its   aud it   ap proac h   to  it s  avai l able   re s ources 
results in a lack of sufficient such substantive testing and, con-
sequently, in the generalisation of flat-rate cor rec tions. these 
co r re c t i o n s   d o   n o t   a l l ow   fo r   t h e   e s t a b l i s h m e nt   o f   a   va l i d   l i n k 
bet we en t he  a mounts recovered  from  M e mbe r  States  th roug h 
co n fo r m i t y   d e c i s i o n s   a n d   t h e   a m o u n t s   o f   i r re g u l a r   p ay m e n t s 
th at  t he recove r ies  are s up p os ed  to  compe n s ate  for.

 the european par liament in its resolution on the refor m of the 
p ro ce d u re   o f   t h e   c l e a ra n ce   o f   a cco u n t s   p o i n te d   o u t   t h a t  ‘ t h e 
c l e a ra n ce   o f   a cco u n t s   w a s   re fo r m e d   i n   1 9 9 6   to   ove rco m e   t h e 
p ro b l e m   o f   l o n g   d e l a y s   i n   t h e   c l e a r a n c e   d e c i s i o n s’.   ho we ve r, 
the time needed to take the conformity decisions and complete 
th e p ro cedure  is  stil l  consid ere d to  be  too lo ng. as a re sult  of 
t h e   l e n g t h   o f   t h e   c o n fo r m i t y   p r o c e d u r e ,   a t   t h e   e n d   o f   2 0 0 8 , 
the clearance of accounts procedure was not complete for any 
yea r l ater t han 2001.

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thE   c lEa r aNcE   Of   acc OuNt s   Pr OcE Du rE   a s   a 
WhOlE

 t h e   1 9 9 6   r e f o r m   o f   t h e   c l e a r a n c e   o f   a c c o u n t s   p r o c e d u r e   i n-
t r o d u c e d   a   t w o - s t a g e   p r o c e d u r e   w h i c h   i m p l i e s   t h a t   t h e r e   i s 
n o w   o n l y   a n   a n n u a l   c o m m i s s i o n   f i n a n c i a l   d e c i s i o n   a n d   t h a t 
the conformit y decisions cover several years and are no longer 
lin ke d to a par t icul ar f in anc ial  ye ar.

39  the fact that ‘recurrent‘ 
weaknesses identified by the 

commission entail the application of 

a higher rate of flat-rate correction 

reinforces this perception.

 through the clearance of accounts procedure, the commission 
does   not   tak e  a  for m al   f inal   de ci sio n  es tabli sh i ng,  for   a  give n 
exercise, the amount of expenditure recognised as chargeable 
t o   t h e   b u d g e t   a s   s t i p u l a t e d   b y   t h e   fi n a n c i a l   r e g u l a t i o n .   I n 
th e  a bs ence  o f  su c h  a  decis ion   on   le gal i t y   and   re gular i t y,   th e 
e x p e n d i t u re   o f   t h e   ye a r   i n   q u e s t i o n   c a n n o t   b e   c o n s i d e re d   a s 
being  fu l ly c le ared  at the time  o f t he   dis ch arg e.

 the  finan cial  s t atement s   are  pre se nte d  to  th e  par liam ent  and 
c o u n c i l   f o l l o w i n g   t h e   f i n a n c i a l   c l e a r a n c e   d e c i s i o n   b u t   b e -
f o r e   t h e   e x c l u s i o n   o f   i r r e g u l a r   e x p e n d i t u r e .  t h e   pa r l i a m e n t , 
by   gra nt i n g   d i s c h a rg e   to   t h e   co m m i s s i o n ,   e xo n e rate s   i t   f ro m 
i t s   r e s p o n s i b i l i t y   f o r   i m p l e m e n t a t i o n .   B y   d o i n g   s o,   i t   i s s u e s 
a n   o p i n i o n   o n   i n fo r m at i o n   cove r i n g   o p e rat i o n s   fo r   w h i c h   t h e 
co m m i s s i o n   h a s   n o t   ye t   a s s u m e d   re s p o n s i b i l i t y   a n d   w h i c h   i s 
th erefo re l ike ly  to  b e amended  at a  late r  s tag e.

 t h e   co m m i s s i o n’s   i m p o s i t i o n   o f   c o r re c t i o n s   t h ro u g h   i t s   c o n-
fo r m i t y   d e c i s i o n s   w h i c h   a r e,   i n   t h e   m a i n   ( b y   v a l u e ) ,   f l a t - r a t e 
c o r re c t i o n s,   r u n s   t h e   r i s k   t h a t   t h e   a m o u n t s   e xc l u d e d   a re   n o t 
c o n s i d e r e d   b y   t h e   M e m b e r   S t a t e s   a s   b e i n g   c l e a r   a n d   u n d i s -
putable. consequently, although the 1996 refor m advocated a 
p re ve nt i ve   a n d   co r re c t i ve   m e c h a n i s m   p h i l o s o p hy   rat h e r   t h a n 
a   m e a n s   o f   i m p o s i n g   p e n a l t i e s ,   f i n a n c i a l   c o r r e c t i o n s   c a n   b e 
p e rce i ve d   a s   s a n c t i o n s 3 9  w h i c h   a re   n e g o t i a b l e   rat h e r   t h a n   re -
cover ies o f ir re gu lar p ay ment s.

99.  

100.  

101.  

102.  

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44

103.  

 th e   co n fo r m i t y   d e c i s i o n s   a re   n o t   re l ate d   d i re c t l y   to   i r re g u l a r 
paym ent s  made to b enefic iar ies a nd  d o n ot  t he re fore di re c t ly 
exclude this ir regular expenditure from communit y financing. 
I n  fac t,  t he  co st   o f  t he  financial  cor rec t io ns   in cl ude d  in  th e se 
d e c i s i o n s   i s   b o r n e   b y   t h e   M e m b e r   S t a t e s   r a t h e r   t h a n   b y   t h e 
bene ficiar ie s of  t he aid ir reg ular l y  pai d.

r Ec Om mE N D atI O Ns

104.  

 t h e   c o u r t   r e c o m m e n d s   t h a t   t h e   c l e a r a n c e   o f   a c c o u n t s   p r o -
ce du re,   as   a  who l e,   b e  reviewed  with   a  v i ew   to  ad d res si n g,   in 
par tic ul ar,  t he fo l l ow ing  p oints:

(a)  t he  o b jec t ive s set for t he var ious phas e s  of  th e  c le ara n ce 
o f   a cco u n t s   p ro ce d u re   a n d   fo r   t h e   p ro ce d u re   a s   a   w h o l e, 
a s   we l l   a s   t h e   re s p e c t i ve   ro l e s   a n d   re s p o n s i b i l i t i e s   o f   t h e 
dif fe rent  p ar t ie s  invol ved  sho uld  be  m ore  c lea r ly  d ef in e d 
i n   t h e   r e l e v a n t   r e g u l a t i o n s   r a t h e r   t h a n   b e i n g   f r e q u e n t l y 
m o d i f i e d   o v e r   t i m e   b y   m e a n s   o f   g u i d e l i n e s .  t h i s   s h o u l d 
he lp  in s t abilisin g the rol e of  t he  cB s.

(b)  a n impor tant element of the revision recommended in (a) 
a b ove   s h o u l d   b e   t o   e s t a b l i s h   t i m e   l i m i t s   fo r   a l l   s t a g e s   o f 
t he p ro ce dure  a nd, in p ar ticular, a  ti me  li mit  for  th e com-
m i s s i o n   t o   t a k e   i t s   f i n a l   d e c i s i o n   o n   a   s p e c i f i c   f i n a n c i a l 
yea r.

(c)  the commission should, at the end of the conformity clear-
a n c e   p r o c e d u r e ,   r e c o g n i s e   t h e   a m o u n t   o f   e x p e n d i t u r e 
c h a r g e a b l e   t o   t h e   a c c o u n t s   o f   a   g i ve n   f i n a n c i a l   ye a r   a n d 
infor m  the  d is charge au thor ities  accordi n gl y.

(d)  I n   o r d e r   t o   i m p r o v e   t h e   c u r r e n t   d i s c l o s u r e   p r o v i d e d   t o 
u s e r s   o f   t h e   f i n a n c i a l   s t a t e m e n t s,   t h e   s t a t e m e n t s   s h o u l d 
i d e n t i f y,   fo r   e a c h   M e m b e r   S t a t e,   t h e   a m o u n t s   b y   b u d g e t 
a re a   a n d   by   b u d g e t   ye a r   w h i c h   m ay   b e   s u b j e c t   to   f u r t h e r 
ve r ific at ion .

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Special r eport No 7/2010 — audit of the clearance of accounts procedure

 
 
45

(e)  lo n g s t a n d i n g   c r i t i c i s m s   t h a t   a re   s t i l l   re l e v a n t   i n   s p i t e   o f 
previous reforms should be addressed: they include the ex-
cessively long delays necessar y to complete the procedure, 
t h e   f a c t   t h a t   t h e   p r o c e d u r e   i s   d i v o r c e d   f r o m   t h e   a n n u a l 
f i n a n c i a l   s t a t e m e n t s   ( s e e   ( c )   a n d   ( d ) ,   a b o v e )   a n d   t h e   e x -
ces sive rel iance on fo r feitar y  co r re c ti on s.  as to th e latte r, 
t h e   co m m i s s i o n   s h o u l d   co n s i d e r   a   m o re   e x te n s i ve   u s e   o f 
statistically valid samples in cases where significant system 
weak nesses are found. Such an approach would constitute 
a n   u n d i s p u te d   m e a n s   o f   e s t a b l i s h i n g   a   we l l - fo u n d e d   a n d 
propor tionate relationship between the financial impac t of 
er rors on the accounts and the cor rec tion the commission 
imposes. the commission should therefore explore the vari -
o u s   w a y s   w h i c h   wo u l d   a l l o w   i t   t o   a c h i e ve   t h i s   o b j e c t i ve, 
b ear ing  in  m ind th e cos t–bene fi t of  such  controls.

(f )  t he p ower fo r t he co mmiss ion  to sa nc tion M em ber  States 
fo r   c o n t r o l   w e a k n e s s e s ,   c u r r e n t l y   e xe r c i s e d   t h r o u g h   t h e 
confor mit y decisions, should be separated from the clear -
a n c e   o f   a c c o u n t s   p r o c e d u r e   w h i c h   i s   o f   a   d i f f e r e n t   n a-
t ure.

(g)  finally, the cour t considers that the clearance of accounts 
procedure, as regards the reliability of the accounts, would 
b e   f u r t h e r   e n h a n ce d   by   t h e   co nt i n u e d   s u p e r v i s i o n   o f   t h e 
work of cer tification bodies by the commission, in par ticu-
l ar t hrou gh  s pe cific  audit  visits.

  this repor t was adopted by chamber I, headed by Mr  Michel cretIN,  
M ember of the cour t of auditors, in luxembourg at its meeting of 
21 Ju ly 2010.

Fo r  th e  Co u r t o f  Au dito r s

vítor Manuel da SIlva caldeIra 
Presi d e nt

Special r eport No 7/2010 — audit of the clearance of accounts procedure

Special r eport No 7/2010 — audit of the clearance of accounts procedure

 
 
46

reply of the 
coMMISSIoN

ExEcutIVE summary

III.
the commission considers that within the 
o v e r a l l   f r a m e w o r k   f o r   t h e   m a n a g e m e n t 
a n d   c o n t r o l   o f   a g r i c u l t u r a l   e x p e n d i t u r e, 
t h e   n e w   w o r k   r e q u i r e d   f r o m   t h e   c e r t i f i-
c at i o n   b o d i e s   i s   a n   i m p o r t a nt   a n d   u s e f u l 
e l e m e n t   fo r   t h e   p u r p o s e   o f   g a i n i n g   r e a-
s o n a b l e   a s s u r a n c e   o n   t h e   l e g a l i t y   a n d 
regular it y of the under lying transac tions. 
th e s e   n e w   re q u i re m e nt s   we re   f i r s t   i nt ro -
d u c e d   fo r   f i n a n c i a l   y e a r   2 0 0 7   a n d   w h i l e 
m o d i f i e d   a n d   e x p a n d e d   f o r   f i n a n c i a l 
ye a r   2 0 0 8   h ave,   s i n ce   t h e n ,   i n   s u b s t a n ce 
r e m a i n e d   u n c h a n g e d .   t h e   n e w   r e q u i r e -
ments were also discussed with the cer ti-
fic at ion  bodie s in an an nual  con feren ce.

as   a   re s u l t   t h e   s i t u at i o n   i n   f i n a n c i a l   ye a r 
2009 (af ter the end of the audited period) 
h a s   i m p r o v e d   s u b s t a n t i a l l y   f o r   a l l   t h e 
n e w   e l e m e n t s   o f   a s s u r a n c e   m e n t i o n e d 
( i . e.   t h o s e   co n ce r n i n g   l e g a l i t y   a n d   re g u-
lar it y  of paym ents).

IV. 
t h e   c o n f o r m i t y   c l e a r a n c e   p r o c e d u r e   i s 
designed to exclude expenditure from eu 
f i n a n c i n g   w h i c h   h a s   b e e n   i n c u r r e d   i n   a 
way that has infringed eu law. I n contrast, 
i t   i s   n o t   a   m e c h a n i s m   b y   w h i c h   i r r e g u-
l a r   p a y m e n t s   t o   b e n e f i c i a r i e s   a r e   r e c o v -
e re d   w h i c h ,   a cco rd i n g   to   t h e   p r i n c i p l e   o f 
shared management and the rules of ar t-
icle  9( 1) (a) (iii)  of  council  r eg ulation  (e c ) 
No 1290/2005 and ar ticle 53b(2)(c) of the 
fi n a n c i a l   r e g u l a t i o n ,   i s   t h e   s o l e   re s p o n-
s i b i l i t y   o f   M e m b e r   S t a t e s.  w h e re   i r re g u-
l a r   p a y m e n t s   t o   i n d i v i d u a l   b e n e f i c i a r i e s 
a re   o r   c a n   b e   i d e nt i f i e d   a s   a   re s u l t   o f   t h e 
c o n f o r m i t y   c l e a r a n c e   p r o c e d u r e s ,   M e m-
ber States are required to follow them up 
b y   re c o ve r y   a c t i o n s   a g a i n s t   t h e s e   b e n e -
fic iar ies.

Special r eport No 7/2010 — audit of the clearance of accounts procedure

Special r eport No 7/2010 — audit of the clearance of accounts procedure

a r t i c l e   3 1 ( 2 )   o f   r e g u l a t i o n   (e c )   N o 
1 2 9 0 / 2 0 0 5   p r o v i d e s   t h a t   f i n a n c i a l   c o r -
r e c t i o n s   s h a l l   b e   d e t e r m i n e d   o n   t h e 
b a s i s   o f   t h e   n a t u r e   a n d   g r a v i t y   o f   t h e 
i n f r i n g e m e n t   a n d   o f   t h e   f i n a n c i a l   d a m-
a g e   c a u s e d   t o   t h e   e u .   w h e r e   p o s s i b l e , 
t h e   a m o u n t   i s   c a l c u l a t e d   o n   t h e   b a s i s   o f 
t h e   l o s s   a c t u a l l y   c a u s e d   o r   o n   t h e   b a s i s 
o f   a n   e x t r a p o l a t i o n .   w h e r e   t h i s   i s   n o t 
p o s s i b l e ,   f l a t   r a t e s   a r e   u s e d   w h i c h ,   i n 
a cco rd a n ce   w i t h   t h e   l e g a l   re q u i re m e n t s, 
t a k e   a c c o u n t   o f   t h e   s e ve r i t y   o f   t h e   d e f i-
c i e n c i e s   i n   t h e   n a t i o n a l   c o n t r o l   s y s t e m 
i n   o r d e r   t o   r e f l e c t   t h e   f i n a n c i a l   r i s k   f o r 
the  eu.  the   co mm issio n’s  sys tem  the reby 
e s t a b l i s h e s   a   c l e a r   h i e ra rc hy   o f   m e t h o d s 
t o   b e   u s e d   a n d ,   t h e r e f o r e ,   t h e   c o m m i s-
s i o n   d o e s   n o t   a g re e   t h a t   i n   a   g i ve n   c a s e 
t h e r e   a r e  ‘o p t i o n s ’  o p e n   t o   i t   a s   t o   t h e 
t ype of financial correc tion to be applied. 
th e   co m m i s s i o n   co n s i d e r s   t h at   t h e re   i s   a 
valid link bet ween the amount of the cor-
re c t i o n   a n d   t h e   a m o u nt   o f   i r re g u l a r   p ay-
m e n t s   m a d e   a s   a   r e s u l t   o f   t h e   d e f i c i e n-
c i e s   i n   t h e   s ys te m .   co n fo r m i t y   c l e a ra n ce 
i n c l u d e s   c a s e s   w h e r e   t h e   d e f i c i e n c i e s 
found are limited to the control system in 
p l a ce   a n d   c a n n o t   b e   l i n k e d   to   i n d i v i d u a l 
i r r e g u l a r   p a y m e n t s   t o   b e n e f i c i a r i e s   b u t , 
b e c a u s e   o f   t h e   f l a t - r a t e   a p p r o a c h   t a k e n 
for control deficiencies, the r isk to the eu 
b u d g e t   i s   c o v e r e d ,   e . g .   w h e n   a   M e m b e r 
S t a te   d o e s   n o t   a cco m p l i s h   t h e   m i n i m u m 
number  of  co nt rol s.

4747

reply of the 
coMMISSIoN

M o re o ve r,   a s   a g r i c u l t u r a l   e x p e n d i t u re   i s 
implemented under shared management, 
t h e   M e m b e r   S t a t e s   a r e   b e t t e r   p l a c e d 
t h a n   t h e   co m m i s s i o n   t o   a s s e s s   a n d   p ro -
vide evidence of the real financial loss or 
r i s k   f o r   t h e   e u  b u d g e t .   t h e   o p e r a t i o n a l 
h a n d b o o k   e x p l i c i t l y   r e c o g n i s e s   t h i s   a n d 
r e q u i r e s   t h e   c o m m i s s i o n   t o   t a k e   s u c h 
evidence, if reliable, into account. a more 
p r e c i s e   c a l c u l a t i o n   o f   t h e   f i n a n c i a l   l o s s 
fo r   t h e   e u  b u d g e t   t h e re fo re   re q u i re s   t h e 
a c t i v e   c o o p e r a t i o n   o f   t h e   M e m b e r   S t a t e 
c o n c e r n e d   a t   a l l   l e v e l s   o f   t h e   c o n f o r m-
it y clearance procedure because only the 
M ember State has all the necessar y infor-
mation to make such a calculation. unfor -
t u n a t e l y,   h o w e v e r,   d e s p i t e   t h e   c o m m i s-
s i o n’s   re q u e s t s,   M e m b e r   S t a t e s   o f t e n   d o 
n o t   a v a i l   t h e m s e l v e s   o f   t h i s   p o s s i b i l i t y. 
S i n c e   t h e   r e f o r m   o f   t h e   s y s t e m   i n   1 9 9 6 , 
f l a t - r a t e   c o r re c t i o n s   a c c o u n t   fo r   s l i g h t l y 
less than 70  % of the amount of total cor-
re c t i o n s   by   va l u e.   h owe ve r,   t h e   co m m i s -
s i o n   c o n s i d e r s   i t   t o   b e   m o r e   a p p r o p r i-
a t e   t o   l o o k   a t   t h e   n u m b e r   o f   c a s e s   w i t h 
a   f i n a n c i a l   c o r r e c t i o n   w h e r e   a   f l a t   r a t e 
wa s   u s e d.   he re,   o n l y   4 5  %   o f   a l l   c a s e s   a re 
b a s e d   o n   a   f l at- rate   a p p ro a c h   a n d,   i f   t h e 
l a s t   1 0   c o n f o r m i t y   d e c i s i o n s   a r e   t a k e n , 
t h i s   p e r c e n t a g e   d r o p s   f u r t h e r   t o   3 7  % . 
this demonstrates the commission’s con-
tinuous effor t to limit the use of flat rates 
as m uc h as  poss ible.

Since the methodology used by the  com-
mission to calculate financial cor rec tions 
i s   b a s e d   o n   i t s   b e s t   e s t i m a t e   o f   t h e   r i s k 
to   t h e   e u  b u d g e t,   i t   c a n n o t   by   d e f i n i t i o n 
amount to a sa nc tion.

Special r eport No 7/2010 — audit of the clearance of accounts procedure

Special r eport No 7/2010 — audit of the clearance of accounts procedure

48

reply of the 
coMMISSIoN

V. 
th e   f i n a n c i a l   c l e a ra n ce   d e c i s i o n   i s   t a k e n 
a r o u n d   s i x   m o n t h s   a f t e r   t h e   e n d   o f   t h e 
f i n a n c i a l   y e a r   i n   q u e s t i o n .   t h r o u g h   t h i s 
d e c i s i o n ,   t h e   c o m m i s s i o n   e s t a b l i s h e s 
t h e   a m o u n t   o f   e x p e n d i t u r e   r e c o g n i s e d 
a s   c h a r g e a b l e   t o   t h e   e u   b u d g e t   fo r   t h a t 
y e a r.   t h e   f a c t   t h a t   t h e   d e c i s i o n   i s   w i t h-
o u t   p re j u d i c e   t o   s u b s e q u e n t   c o n fo r m i t y 
d e c i s i o n s   i m p o s i n g   f i n a n c i a l   co r re c t i o n s 
o n   M e m b e r   S t a t e s   i s   e x p l i c i t l y   p r o v i d e d 
f o r   i n   a r t i c l e   3 0   o f   r e g u l a t i o n   (e c )   N o 
1 2 9 0 / 2 0 0 5 ,   w h i c h   h a s   t h e   s a m e   l e g a l 
s t at u s   a s   t h e   fi n a n c i a l   r e g u l at i o n .   M o re -
o ve r,   i n   s u b s t a n c e,   i t   i s   f u l l y   c o m p a t i b l e 
w i t h   t h e   fi n a n c i a l   r e g u l a t i o n ,   w h i c h   fo r 
a ny   o t h e r   e x p e n d i t u re   p rov i d e s   t h a t   t h e 
co m m i s s i o n   c a n   m a k e   e x   p o s t   c h e c k s   u p 
to   f i ve   ye a r s   a f te r   t h e   d i s c h a rg e   d e c i s i o n  
o n   t h e   y e a r   i n   w h i c h   t h e   f i n a l   p a y m e n t 
was made. o ther wise, all budgetar y expen -
d i t u r e   w o u l d   b e   c o n s i d e r e d   p r o v i s i o n a l 
until an ex p ost check is made or the five -
year  per iod has  laps ed. 

t h e   a m o u n t   o f   e x p e n d i t u r e   w h i c h   i s 
l i k e l y   t o   b e   e x c l u d e d   f r o m   f i n a n c i n g   b y 
f u t u re   c o n fo r m i t y   d e c i s i o n s   i s   d i s c l o s e d 
as a contingent asset in the commission’s 
a c c o u n t i n g   s y s t e m   a n d   i n   a   n o t e   t o   t h e 
f i n a n c i a l   s t a t e m e n t s .   to g e t h e r   w i t h   t h e 
f i n a n c i a l   c l e a r a n c e   d e c i s i o n ,   t h i s   d i s c l o -
s u r e   p r o v i d e s   t h e   e u r o p e a n   pa r l i a m e n t 
and the council with the information they 
require for  t he disc harg e procedure.

a s   p a r t   o f   t h i s   e f f o r t ,   t h e   c o m m i s s i o n 
r e c e n t l y   s e t   o u t   t o   M e m b e r   S t a t e s   t h e 
co n d i t i o n s   u n d e r   w h i c h   i t   i s   p re p a re d   to 
l i m i t   t h e   a m o u nt   o f   a ny   f i n a n c i a l   co r re c -
t i o n   to   t h e   e r ro r   rate   fo u n d   by   t h e   M e m-
ber State in the transac tions at final bene-
f i c i a r y   l e v e l   a n d   r e p o r t e d   i n   i t s   c o n t r o l 
statist ic s for th e aid s ch eme con ce r n ed.

fi n a n c i a l   c o r r e c t i o n s   a r e   a n   a c c o u n t i n g 
cor rec tion and not a sanc tion on M ember 
S t a t e s ’  a u t h o r i t i e s .   t h e   f l a t - r a t e   m e t h-
o d o l o g y   h a s   b e e n   u p h e l d   b y   t h e   c o u r t 
o f   J u s t i c e   a s   b e i n g   i n   c o n f o r m i t y   w i t h 
t h e   l e g a l   r u l e s   g o v e r n i n g   t h e   c o n f o r m-
i t y   w o r k .   I n   p a r t i c u l a r,   t h e   c o u r t   o f   J u s-
t i c e   h a s   c o n f i r m e d   t h a t   i t   i s   n o t   u p   t o 
t h e   co m m i s s i o n   to   u n d e r t a k e   t h e   c h e c k s 
n e c e s s a r y   t o   p u t   a   p r e c i s e   f i g u r e   t o   t h e 
l o s s e s   i n c u r r e d ,   b u t   r a t h e r   i t   i s   f o r   t h e 
M e m b e r   S t a te   to   s h ow   t h a t   t h e   co m m i s-
sion’s est imate was  excess ive. 

t h e   u s e   o f   f l a t - r a t e   c o r re c t i o n s   w a s   a l s o 
e n d o r s e d   by   t h e   eu ro p e a n   pa r l i a m e n t   i n 
i t s   2 0 0 7   d i s c h a r g e   r e s o l u t i o n   ( §   8 3 )   f o r 
c a s e s   w h e re   M e m b e r   S t a te s   d o   n o t   co m-
ply wit h the ir l egal  ob l ig ation s. 

a l t e r n a t i v e   m e t h o d s   f o r   t h e   c a l c u l a t i o n 
o f   f i n a n c i a l   c o r r e c t i o n s   r e f e r r e d   t o   b y 
t h e   c o u r t   w o u l d   r e q u i r e   a   s u b s t a n t i a l 
i n c re a s e   i n   a u d i t   re s o u rc e s   w h i c h   wo u l d 
n o t   b e   i n   l i n e   w i t h   a ny   co s t– b e n e f i t   a n a-
lysis.

Special r eport No 7/2010 — audit of the clearance of accounts procedure

Special r eport No 7/2010 — audit of the clearance of accounts procedure

t h e   o b s e r v a t i o n   o f   t h e   c o u r t   r e l a t e s   t o 
a   f u n d a m e nt a l   p r i n c i p l e   o f   t h e   c l e a ra n ce 
o f   a c c o u n t s   s y s t e m s   a s   p r o v i d e d   f o r   i n 
i t s   c u r r e n t   l e g a l   b a s i s ,   w h i c h   t h e   c o m-
mission is bound to apply (since 1996). I t 
was not objec ted to by any of the par ties 
i nte r ve n i n g   i n   t h e   a d o p t i o n   o f   t h e   l e gi s-
l at i o n .   as   s u c h   t h e   o b s e r vat i o n   co u l d   b e 
b e s t   c o n s i d e re d   i n   t h e   c o n t e x t   o f   a   p o s-
sible review  o f the l egis l atio n.

V I. 
t h e   c o m m i s s i o n   c o n s i d e r s   t h e   c u r r e n t 
s y s t e m   t o   f u n c t i o n   w e l l   a n d   t o   a c h i e v e 
i t s   o v e r a l l   o b j e c t i v e s .   I t   w i l l ,   h o w e v e r, 
c o n t i n u e   t o   i m p r o v e   i t s   o p e r a t i o n s   i n 
p r a c t i c e   a n d ,   w h e r e   n e c e s s a r y ,   s u b -
m i t   a p p r o p r i a t e   p r o p o s a l s   f o r   f u r t h e r 
i m p r o v e m e n t s   t o   t h e   e u r o p e a n   p a r l i a-
m e n t   a n d   t h e   c o u n c i l   f o r   t h e   p o s t - 2 0 1 3 
per iod. 

4949

reply of the 
coMMISSIoN

INtrODuctION

2 . 
a r t i c l e   4 2 ( 1 )   o f   t h e   I m p l e m e n t i n g   r u l e s 
d e a l i n g   w i t h   t h e   i m p l e m e n t a t i o n   o f   a r t -
i c l e s   5 3 b   a n d   5 3 c   o f   t h e   fi n a n c i a l   r e g u-
l a t i o n   d e f i n e s   t h a t   t h e   p u r p o s e   o f   t h e 
c l e a r a n ce   o f   a c c o u n t s   s h a l l   b e   t o   e n s u re 
that expenditure by the M ember States in 
t h e   c o n t e x t   o f   s h a r e d   m a n a g e m e n t   [ … ] 
a n d   w h i c h   m a y   b e   c h a r g e a b l e   t o   t h e   e u 
b u d g e t   i s   i n   o r d e r   a n d   c o n s i s t e n t   w i t h 
th e applicable eu r ule s.

5 . 
t h e   B e l l e   w o r k i n g   g r o u p   s e t   u p   b y   t h e 
c o m m i s s i o n   i n   1 9 9 1   w a s   m a n d a t e d   t o 
s t u d y   t h e   o p e r a t i o n s   i n v o l v e d   i n   t h e 
clearance  of  accounts  procedure   i n   orde r 
b o t h   t o   a s s e s s   t h e i r   e f f e c t i v e n e s s   a n d 
e f f i c i e n c y   i n   a c h i e v i n g   t h e   g e n e r a l   a i m s 
o f   t h e   c a p  a n d   t h e   fi n a n c i a l   r e g u l a t i o n 
a n d ,   i f   n e c e s s a r y,   t o   p r o p o s e   l e g i s l a t i v e 
and/or administrative means of enforcing 
th ose operations. 

5 .  (b) 
ea c h   f i n a n c i a l   c o r r e c t i o n   i n c l u d e d   i n   a 
confor mit y decision is linked to a specific 
f i n a n c i a l   y e a r   w h i c h   i s   i d e n t i f i e d   i n   t h e 
an nex  to th is decis ion.

B ox 1   (b) 
t h e   c h e c k s   u n d e r t a k e n   b y   t h e   pa s   a r e 
b a s e d   o n   m a n a g e m e n t   a n d   c o n t r o l   s y s-
t e m s   f o r   w h i c h   t h e   m i n i m u m   r e q u i r e -
ments  are la id  down  by  th e c ommiss ion .

6 . 
un d e r   t h e   re fo r m e d   s ys te m ,   t h e   f i n a n c i a l 
clearance decision is adopted by 30 apr il 
o f   t h e   y e a r   f o l l o w i n g   t h e   f i n a n c i a l   y e a r 
c o n c e r n e d.  t h u s   t h e   re fo r m e d   c l e a r a n c e 
o f   a c c o u n t s   p r o c e d u r e   h a s   s i g n i f i c a n t l y 
accelerated the timescale for clear ing the 
pas’ accounts. 

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reply of the 
coMMISSIoN

Beyond the general requirements for sub -
s t a n t i v e   t e s t i n g   o f   e x p e n d i t u r e   a c c o r d -
i n g   t o   g u i d e l i n e   N o   3 ,   cB s   a r e   r e q u i r e d 
f o r   SpS   t o   c h e c k   t h a t   t h e   p a y m e n t s   c a n 
b e   d e r i v e d   f r o m   t h e   u n d e r l y i n g   e n t i t l e -
m e nt s.   howe ve r,   t h e re   i s   n o   re q u i re m e nt 
t o   v e r i f y   w i t h i n   t h e   s u b s t a n t i v e   t e s t i n g 
th e entit lements as s uc h. 

2 4. 
t h e   g u i d e l i n e s   h a v e   b e e n   r e v i s e d   f o r 
f i n a n c i a l   ye a r   2 0 0 9   to   f u r t h e r   c l a r i f y   h ow 
t h e   t e s t   o f   c o m p l e t e n e s s   a n d   a c c u r a c y 
o f   t h e   d e b t o r s’  l e d g e r   a n d   a n n e x   I I I / I I Ia  
t o   r e g u l a t i o n   (e c )   N o   8 8 5 / 2 0 0 6   s h o u l d 
b e   c a r r i e d   o u t   a n d   r e p o r t e d   u p o n .   a n 
a n a l ys i s   o f   t h e   ce r t i f i c a t i o n   re p o r t s   w i t h 
re g a rd   to   f i n a n c i a l   ye a r   2 0 0 9   s h ows   t h at, 
s i n c e   t h e   c o u r t ’s   a u d i t ,   i m p r o v e m e n t s 
h ave been  m ade  in this  respe c t. 

I n addition to the wor k car r ied out by the 
cB s ,   t h e   c o m m i s s i o n   h a s   o v e r   t h e   p a s t 
t h r e e   y e a r s   a u d i t e d   1 4   pa s   i n   1 1   M e m-
b e r   S t a t e s   a s   r e g a r d s   t h e i r   f o l l o w - u p   o f 
i r r e g u l a r i t y   c a s e s   a n d   t h e i r   r e p o r t i n g 
u n d e r   a n n e x   I I I   t o   r e g u l a t i o n   (e c )   N o 
8 8 5 / 2 0 0 6 .   I n   g e n e r a l ,   t h e   pa s   h a v e   a d e -
q u ate   p ro ce d u re s   i n   p l a ce   to   p ro te c t   t h e 
financial interests of the european union. 
d e f i c i e n c i e s   f o u n d   d u r i n g   t h e s e   a u d i t s 
are  bein g  followed   in  t he  contex t  of   co n-
for mit y  clearan ce procedures.

Part I — thE fINaNcIal  clEaraNcE 
Of accOuNts

21 . 
r e l i a n c e   o n   t h e   w o r k   o f   o t h e r   a u d i t o r s , 
w h e re   j u d g e d   a p p ro p r i ate,   i s   fo re s e e n   i n 
I nter national auditing Standards and the 
c o m m i s s i o n’s   g u i d e l i n e s .   t h e   c B s   m a y 
r e l y   o n   t h e   w o r k   o f   t h e   i n t e r n a l   a u d i t 
u n i t s   ( Iau)   i f   t h e y   h ave   s u f f i c i e n t l y   ve r i-
fied suc h wor k . 

a n   a u d i t   m i s s i o n   i n   N o v e m b e r   2 0 0 9   t o 
t h e   da n i s h   cB,   c o ve r i n g   p r i m a r i l y   f i n a n-
c i a l   y e a r   2 0 0 9 ,   d i d   n o t   r e v e a l   a ny   m a j o r 
deficiencies in either body with regard to 
wor k in g do cuments  an d chec k l i st s. 

with  reg ard to  the co ur t ’s ob se r vation  in 
fo o t n o t e   9   t h a t   i n   d e n m a r k   t h e   Iau  w a s 
i nv o l v e d   i n   t h e   s e l e c t i o n   p r o c e s s   o f   t h e 
c B,   w h i c h   wa s   f i n a l l y   co nt ra c te d   d i re c t l y 
b y   t h e   pa  a f t e r   p r o p o s a l   b y   t h e   Iau ,   i t 
s h o u l d   b e   n o t e d   t h a t   t h e   cB ’s   c o n t r a c t 
was renewed for financial years 2009 and 
2 0 1 0   w i t h   t h e   s i g n a t o r y   b e i n g   t h e   c o m -
petent  aut ho r it y.

22 . 
I n   t h e   m a j o r i t y   o f   c a s e s   t h e   co u r t ’s   f i n d-
ings relate to weak nesses in the cBs’ doc -
u m e n t a t i o n   o f   t h e i r   a u d i t   w o r k ,   r a t h e r 
tha n  the  wo r k it s el f.

cB s   s h o u l d   c o m p i l e   s u f f i c i e n t   a u d i t   e v i-
d e n c e   i n   s u p p o r t   o f   t h e i r   f i n d i n g s .   t h e 
co m m i s s i o n   c o n s i d e r s   t h i s   i s s u e   a s   p a r t 
o f   i t s   r i s k   a n a l y s i s ,   a l t h o u g h   i t   c a n   o n l y 
a s s e s s   t h i s   d i r e c t l y   d u r i n g   i t s   v i s i t s   t o 
t h e   cB s   s e l e c t e d   f o r   a u d i t .   a l t h o u g h 
t h e   e x a c t   l a y o u t   a n d   c o n t e n t   o f   w o r k -
i n g   p a p e r s   a n d   c h e c k l i s t s   s h o u l d   b e   l e f t 
to   t h e   p ro fe s s i o n a l   j u d gm e nt   o f   cB s,   t h e 
co m m i s s i o n   h a s   m a d e   ( a n d   w i l l   co nt i n u e 
t o   m a k e )   r e c o m m e n d a t i o n s   i n   t h i s   k e y 
area w here  it  finds  weak ness es.

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coMMISSIoN

however,  cBs would be required to assess 
t h e s e   a s p e c t s   u n d e r   t h e   n e w   s y s t e m 
d e s c r i b e d   i n   t h e   c o m m i s s i o n’s   r e p l y   t o 
paragraph  26 . 

3 0. 
w h e r e   n e c e s s a r y   t h e   c o m m i s s i o n   h a s 
p o i n t e d   o u t   i n   f o r m a l   c o m m u n i c a t i o n s 
to   M e m b e r   S t a te s   t h a t   d e l e g a te d   b o d i e s 
s h a l l   a l s o   b e   i d e nt i f i e d   a n d   te s te d.  th e re 
i s,   h o we ve r,   n o   re q u i re m e n t   t o   v i s i t   a n d 
test e ver y deleg ated body  ever y  year. 

3 1. 
the modification aimed at clar ifying obli-
gations which already existed before and 
at  improving  th e  repor tin g from t he  cB s. 

3 2. 
t h e   c o m m i s s i o n   c o n s i d e r s   t h a t   t h e 
r e v i s e d   g u i d e l i n e s   a d e q u a t e l y   s p e c i f y 
t h e   f u l l   s c o p e   o f   t h e   a u d i t   t a s k .   pa s   a r e 
e x p e c t e d   t o   r e c o n c i l e   a l l   i n fo r m a t i o n   i n 
t h e i r   s u b m i t t e d   a n n u a l   q u e s t i o n n a i r e s 
t o   t h e   u n d e r l y i n g   d a t a b a s e   i n fo r m a t i o n . 
c B s   a re   to   c h e c k   t h at   t h i s   h a s   b e e n   d o n e 
a n d   t o   i n d i c a t e   w h e t h e r   d i s c r e p a n c i e s 
h ave   b e e n   fo u n d.  th e y   s h o u l d   a l s o   c h e c k 
t h e   e x i s te n ce   a n d   a d e q u a c y   o f   t h e   a u d i t 
trail.

to   te s t   t h e   a cc u ra c y   o f   t h e   d at a b a s e,   cB s 
m u s t   t a k e   a   s a m p l e   o f   a t   l e a s t   2 0   f i e l d 
i n s p e c t i o n   r e p o r t s   p e r   s e t   o f   s t a t i s t i c s 
a n d   c h e c k   t h at   t h e   d at a   t h e y   co nt a i n   h a s 
b e e n   c o r r e c t l y   e n t e r e d   i n t o   t h e   d a t a-
base.

cB s   a r e   r e q u i r e d   t o   c l e a r l y   c o n c l u d e   o n 
t h e   a b o v e   e l e m e n t s .   N o t w i t h s t a n d i n g 
t h e   i m p r o v e m e n t s   i n   t h i s   a r e a   i n   f i n a n-
c i a l   ye a r   2 0 0 9 ,   t h e   co m m i s s i o n   w i l l   co n-
s i d e r   w h e t h e r   f u r t h e r   c l a r i f i c at i o n   i n   t h e 
guidelin es is nee ded.

26 . 
the commission has recently put for ward 
a   s y s t e m 1  b y   w h i c h   M e m b e r   S t a t e s   c a n , 
f r o m   2 0 1 0 ,   r e i n f o r c e   t h e   o v e r a l l   f r a m e -
w o r k   f o r   g a i n i n g   r e a s o n a b l e   a s s u r a n c e 
o n   l e g a l i t y   a n d   r e g u l a r i t y   o f   t r a n s a c -
t i o n s   a t   t h e   l e v e l   o f   f i n a l   b e n e f i c i a r i e s . 
to this end, cBs should ex tend their wor k 
b e y o n d   t h e   p r e s e n t   r e q u i r e m e n t s   b y 
f u l l y   r e p e r fo r m i n g,   fo r   a   g i v e n   e x p e n d i -
t u re   p o p u l at i o n ,   a   re p re s e nt at i ve   s a m p l e 
o f   t ra n s a c t i o n s   w h i c h   t h e   pa  i n   q u e s t i o n 
has checked on the spot. the wor k would 
cover the entire handling of the file, from 
re ce i p t   o f   t h e   a i d   a p p l i c a t i o n   to   t h e   c a l-
c u l a t i o n   a n d   e xe c u t i o n   o f   t h e   f i n a l   p a y -
ment.

28 . 
t h e   c o m m i s s i o n   a g r e e s   t h a t   f u r t h e r 
i m p r o v e m e n t s   c a n   a n d   s h o u l d   b e   m a d e 
a n d   i t   i s   re g u l a r l y   r a i s i n g   t h e   i s s u e   w i t h 
t h e   M e m b e r   S t ate s.   howe ve r,   t h e re   i s   n o 
re q u i re m e n t   t o   t e s t   a n d   a s s e s s   e a c h   k e y 
a n d   a n c i l l a r y   c o n t r o l   t h a t   s h o u l d   b e   i n 
place  at  t he  pa.

29 . 
I n   t h e   v i e w   o f   t h e   co m m i s s i o n ,   a n   o p i n-
i o n   o n   t h e   i n t e r n a l   c o n t r o l   p r o c e d u r e s 
w o u l d   n o t   r e q u i r e   s p e c i f i c   t e s t i n g   a n d 
a s s e s s m e n t   o f   t h e   re l i a b i l i t y   o f   e a c h   k e y 
a n d   a n c i l l a r y   co nt ro l.   r e g u l at i o n   (e c )   N o 
885/2006 does not require the  cB to con -
c l u d e   o n   w h e t h e r   a l l   p o s s i b l e   c o n t r o l s 
a re   o p e rat i o n a l,   b u t   o n l y   re q u i re s   t h e   cB 
to review the paying agenc y ’s compliance 
with the accreditation cr iter ia (annex I to 
r egu lat ion (ec ) No  8 85 /2006). 

1  document d/413722/2009.

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33 . (a) 
pa s   a r e   e x p e c t e d   t o   p e r fo r m   t h i s   r e c o n-
c i l i a t i o n .   cB s   a re   e x p e c te d   to   c h e c k   t h a t 
it has been done proper ly. this was made 
ve r y   c l e a r   t o   M e m b e r   S t a t e s   i n   t h e   s u m-
m a r y   r e p o r t   fo r   f i n a n c i a l   y e a r   2 0 0 8 2  a n d 
r e c o m m e n d a t i o n s   h a v e   b e e n   m a d e   i n 
t h i s   r e s p e c t   t o   M e m b e r   S t a t e s   (pa s   a n d 
cB s )   w h e r e   a p p r o p r i a t e.   a s   a   r e s u l t ,   t h e 
co m m i s s i o n   co n s i d e r s   t h a t   t h e   s i t u a t i o n 
improved for financial year 2009.  accord-
ing to the repor ts of the cBs for financial 
ye a r   2 0 0 9 ,   a   co m p l e te   re co n c i l i at i o n   wa s 
a c c o m p l i s h e d   fo r   t h e   m a j o r i t y   o f   p ay i n g 
agencie s.

33 . (b)– (c)
th e   co m m i s s i o n   a c k n ow l e d g e s   t h e   d e f i-
c i e n c i e s   i d e nt i f i e d   by   t h e   co u r t   co n ce r n-
i n g   f i n a n c i a l   y e a r   2 0 0 7   a n d   2 0 0 8   a n d 
h a s   ra i s e d   t h e s e   i s s u e s   w i t h   t h e   M e m b e r 
S t a t e s   c o n c e r n e d .   a s   a   r e s u l t ,   t h e   c o m-
m i s s i o n   c o n s i d e r s   t h a t   t h e   s i t u a t i o n   h a s 
i m p ro ve d   s i g n i f i c a n t l y   fo r   f i n a n c i a l   ye a r 
2 0 0 9 .   an   a n a l ys i s   o f   ce r t i f i c at i o n   re p o r t s 
s h o w s   t h a t   i n   a r o u n d   9 0  %   o f   c a s e s ,   t h e 
c B s   c a r r i e d   o u t   t h e   w o r k   a t   t h e   l e v e l s 
requ ired by  the  co mmis sio n’s g uidelin es, 
wi th a  few  exce p tions.

2  aGr/2009/80073-00-03/eN of 3 april 2009.

52

reply of the 
coMMISSIoN

3 4. 
fo r   t h e   re a s o n s   s e t   o u t   b e l o w,   t h e   co m-
mission takes the view that the shor tcom-
i n g s   i d e n t i f i e d   d o   n o t   p l a c e   s i g n i f i c a n t 
l i m i t a t i o n s   o n   t h e i r   u s e   f o r   a s s u r a n c e 
pur poses by  th e c ommiss ion :

—  t h e   e r r o r   r a t e s   e s t a b l i s h e d   b y   t h e 
c o m m i s s i o n   o n   t h e   b a s i s   o f   t h e   c o n-
t r o l   s t a t i s t i c s   p r o v i d e d   b y   t h e   M e m-
ber   St ates  are  consistent  ove r  se ve ral 
year s.

—  an analysis of the cer tification repor ts 
w i t h   r e g a r d   t o   f i n a n c i a l   y e a r   2 0 0 9 
s h o w s   t h a t   c l e a r   i m p r o v e m e n t s   h a v e 
been  made by  cBs.

—  the statistical information is the result 
of a ve r y larg e sample of applicati on s 
c h e c k e d 3  a n d   e v e n   i f   a   s a fe t y   m a r g i n 
o f   a   2 5   %   i n c r e a s e   i n   t h e   e r r o r   r a t e s 
we re   a p p l i e d,   t h e   re s i d u a l   e r ro r   rate s 
would st ill be below 2 %.

—  t h e   e r r o r   r a t e s   e s t a b l i s h e d   b y   t h e 
cour t in its daS 2008 exercise are con-
sistent with the residual error rates es-
t a b l i s h e d   b y   t h e   c o m m i s s i o n   o n   t h e 
basis of the control statistics provided 
by  th e M em ber  St ates.

3  SpS/SapS: 600 315 applications checked; animals:  
798 119 animals checked (suckler cow premium and special 

beef premium); export refunds: 13 023 declarations checked;  

275 491 checks carried out on beneficiaries for area-related rural 

development measures (cf. annual activity report 2009 of the 

agriculture and rural development dG, footnote 33, page 61).

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reply of the 
coMMISSIoN

3 6.
t h e   c o m m i s s i o n   a g r e e s   t h a t   f u r t h e r 
i m p r o v e m e n t s   c a n   a n d   s h o u l d   b e   m a d e 
and it is regular ly pursuing the issue with 
th e M em ber States.

3 7. 
even though the commission agrees that, 
i n   g e n e r a l ,   a   r e - p e r fo r m a n c e   o f   a   p r e v i-
o u s   c h e c k   p r o v i d e s   a   b e t t e r   a s s e s s m e n t 
o f   t h e   q u a l i t y   o f   t h e   o n - t h e - s p o t   c h e c k s, 
i t   i s   s t i l l   p o s s i b l e   t o   e v a l u a t e   t h e   c o n-
t r o l   e n v i r o n m e n t   t h r o u g h   i n s p e c t i o n s 
a c c o m p a n i e d   by   t h e   cB.   I n   c e r t a i n   c a s e s 
it m ay  als o n ot be pos sible to re -pe r fo r m 
a   c h e c k .   t h e s e   p r o b l e m s   a r e   i n h e r e n t 
i n   m a n y   e x   p o s t s  c o n t r o l s   p e r f o r m e d   b y 
ex ter na l audito rs.

M o re ove r,   a cco m p a n i e d   f i e l d   i n s p e c t i o n s 
wo u l d   re d u ce   t h e   a d m i n i s t r a t i ve   b u rd e n 
on  the  far mer.

3 8. 
for the reasons set out in its reply to para -
gra p h   3 4 ,   t h e   co m m i s s i o n   co n s i d e r s   t h at 
t h e   co u r t ’s   f i n d i n g s   d o   n o t   p l a ce   s i gn i f i-
c a n t   l i m i t a t i o n s   o n   t h e   u s e   t h a t   c a n   b e 
m a d e   o f   t h e   c o n t r o l   s t a t i s t i c s   fo r   a s s u r -
an ce pur pose s.

th e   n e w   s ys te m   fo r   t h e   re i n fo rce m e nt   o f 
a s s u ra n ce   re fe r re d   to   i s   n o t   a   re a c t i o n   to 
w e a k n e s s e s   i n   t h e   w o r k   o f   t h e   cB s   b u t , 
rat h e r,   a n   at te m p t   to   re i n fo rce   t h e   a s s u r-
a n c e   a l r e a d y   g i v e n   b y   t h e   c u r r e n t   s y s -
tem.

wi t h   re g a rd   to   t h e   s a m p l i n g   m e t h o d o l o -
g i e s   u s e d   b y   t h e   pa s   i n   s e l e c t i n g   c l a i m s 
f o r   o n - t h e - s p o t   c h e c k s ,   r a n d o m - b a s e d 
s a m p l e s   a re   n o r m a l l y   re q u i re d.   al t h o u g h 
t h e   ra n d o m - b a s e d   s a m p l e s   d o   n o t   fo l l ow 
a statistical methodology such as monet-
a r y   u n i t   s a m p l i n g   ( MuS ) ,   t h e   s a m p l e s   a re 
nor mally large enough to provide reason-
able assurance as to their representative -
ness.

35 . 
th e   co m m i s s i o n   a c k n ow l e d g e s   t h e   d e f i-
c i e n c i e s   i d e nt i f i e d   by   t h e   co u r t   co n ce r n-
i n g   f i n a n c i a l   y e a r s   2 0 0 7   a n d   2 0 0 8   a n d 
i t   h a s   a l re a d y   d i s c l o s e d   t h e   i n fo r m a t i o n 
i n   t h e   a a r  o f   t h o s e   y e a r s .   I t   h a s   r a i s e d 
these issues with the M ember States con-
c e r n e d   a n d   c o n s i d e r s   t h a t ,   a s   a   r e s u l t , 
t h e   s i t u a t i o n   h a s   i m p ro ve d   s i g n i f i c a n t l y 
for financial year 2009. an analysis of the 
c B s’  re p o r t s   s h o w s   t h a t   t h e y   c a r r i e d   o u t 
t h e   w o r k   a t   t h e   l e v e l s   r e q u i r e d   b y   t h e 
guidelines, with a few exceptions, in over 
9 0  %   o f   t h e   IacS   c a s e s   ( b o t h   f u n d s ) ,   co n -
c l u d i n g   i n   9 2  %   (e a Gf)   a n d   8 7  %   (e a f r d ) 
o f   t h e s e   c a s e s   t h at   t h e   q u a l i t y   o f   t h e   o n -
t h e - s p o t   c h e c k s   w a s   a t   l e a s t   a d e q u a t e . 
fo r   t h e   n o n - Ia cS   p o p u l a t i o n s ,   cB s   m e t 
the wor k requirements, with a few excep -
t i o n s ,   i n   o v e r   8 0  %   o f   c a s e s ,   a n d   c o n-
c l u d e d   s i m i l a r l y   i n   9 0  %   ( e aG f )   a n d   8 7  % 
(eaf rd ) o f a ll  c ases.

t h e   c o m m i s s i o n   c o n s i d e r s   t h a t   t h e s e 
m o d i f i c at i o n s   h ave   b e e n   i nt ro d u ce d   ( t h e 
en g l i s h   ve r s i o n   o f   t h e   re v i s e d   g u i d e l i n e s 
w a s   i n t r o d u c e d   a l r e a d y   i n   J u l y   2 0 0 8 ) 
s u f f i c i e n t l y   i n   a d v a n c e   t o   e n a b l e   cB s   t o 
comply w ith  t he n ew  guide lin es.

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Special r eport No 7/2010 — audit of the clearance of accounts procedure

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reply of the 
coMMISSIoN

4 4. 
t h e   re q u i re m e n t   t h a t   e a c h   s t a t e m e n t   o f 
a s s u r a n c e   s h o u l d   b e   a c c o m p a n i e d   b y   a 
l i s t   o f   t h e   d o c u m e n t s   e x a m i n e d   a n d   t h e 
w o r k   p e r f o r m e d   b y   t h e   d i r e c t o r   o f   t h e 
p a y i n g   a g e n c y   b e fo r e   s i g n i n g   h i s   s t a t e -
m e n t   w a s   f u l f i l l e d   i n   7 5   o u t   o f   8 2   c a s e s 
f o r   f i n a n c i a l   y e a r   2 0 0 8 .   t h e   a n a l y s i s   o f 
t h e   co n t ro l   s t a t i s t i c s   w a s   p rov i d e d   i n   3 2 
cases  an d  the   compar ison  with   th e   s i tua-
tion  in t he previous year in  24  ca se s.

th e   co m m i s s i o n   a n a l ys i s   s h ows   t h a t ,   fo r 
t h e   f i n a n c i a l   y e a r   2 0 0 9 ,   t h e   s i t u a t i o n 
improved: all 88 pas provided a list of the 
d o c u m e n t s   e x a m i n e d   a n d   a   s u m m a r y   o f 
t h e   wo r k   p e r fo r m e d   a n d   8 3  pas   p rov i d e d 
t h e   r e q u i r e d   a n a l y s i s   o f   t h e   c o n t r o l   s t a-
tist ic s.

4 5–4 6 . 
the assurance model under lying the S oa s 
follows from the commission’s guidelines 
a n d   w a s   d i s c u s s e d   a t   t h e   f i r s t   m e e t i n g 
with the direc tors of the pas in d ecember 
2 0 0 7 .   a t   t h a t   o c c a s i o n ,   t h e   c o m m i s s i o n 
a l s o   e x p l i c i t l y   s t a t e d   t h a t   t h e   s o - c a l l e d 
c a s c a d e   m o d e l   b a s e d   o n  ‘s u b - S oa s’  w a s 
insufficient and even discouraged its use, 
i n   p a r t i c u l a r   f o r   t h e   e x e c u t i o n   o f   p a y -
ments.

4 7. 
fo r   f i n a n c i a l   y e a r   2 0 0 8 ,   t h e   a n a l y s i s   o f 
t h e   co n t ro l   s t a t i s t i c s   w a s   p rov i d e d   i n   3 2 
cases  an d  the   compar ison  with   th e   s i tua-
t i o n   i n   t h e   p re v i o u s   ye a r   i n   2 4   c a s e s.   fo r 
f i n a n c i a l   y e a r   2 0 0 9 ,   g u i d e l i n e   N o   4   h a s 
b e e n   r e v i s e d   w i t h   a   v i e w   t o   i m p r o v i n g 
t h i s   s i t u a t i o n .   I n   c o n s e q u e n c e ,   f o r   t h i s 
f i n a n c i a l   y e a r,   t h e   r e q u i r e d   a n a l y s i s   o f 
t h e   c o n t r o l   s t a t i s t i c s   w a s   c a r r i e d   o u t   b y 
8 4 out of 88  pa s.

41 . 
B y   i s s u i n g   g u i d e l i n e   N o   4   o n   t h e   s t a t e -
m e n t   o f   a s s u r a n c e ,   a   c o m m o n   m e t h o d-
o l o g y   i s   p r o v i d e d   o n   h o w   t o   d r a w   u p 
t h e   S oa.   I t   s e t s   o u t   t h e   a p p l i c a b l e   l e g a l 
p r o v i s i o n s   a n d   p r o v i d e s   r e c o m m e n d a-
tions from the commission with a view to 
e n s u r i n g   t h a t   t h e   S oa s   a r e   d r a w n   u p   o n 
the  ba sis o f co mp arab l e c r iter ia.

43 . 
t h e   r e v i s e d   g u i d e l i n e   o n   t h e   S oa   w a s 
p r e s e n t e d   t o   t h e   M e m b e r   S t a t e s   f o r   t h e 
f i r s t   t i m e   i n   J u n e   2 0 0 8   a n d   f i n a l i s e d   i n 
July 2008. this was sufficiently in time for 
t h e   d i re c t o r s   o f   t h e   pa s   t o   p re p a re   t h e i r 
S oa  t o   b e   s i g n e d   b y   J a n u a r y   2 0 0 9 .   a n 
ear lier   revisio n  was   no t  p os sib l e  be c ause 
the results of the previous year ’s exercise 
first  ne eded to be evalu ate d.

t h e   c o m m i s s i o n   c o n s i d e r s   t h a t   t h e 
g u i d e l i n e s   a re   a d e q u a t e l y   d e t a i l e d.   fu r -
t h e r   t o   a n a l y s i n g   t h e   S oa s   r e c e i v e d   f o r 
f i n a n c i a l   y e a r   2 0 0 8 ,   t h e   g u i d e l i n e   w a s 
f u r t h e r   re v i s e d.  t h e   2 0 0 9   re v i s i o n   t re a t s 
i n   s e p a rate   a n n exe s   h ow   to   c a r r y   o u t   t h e 
analysis of the control statistics explicitly 
r e q u e s t i n g   d e t a i l e d   i n f o r m a t i o n   w h e r e 
t h e   e r r o r   r a t e   i n   a   p o p u l a t i o n   i s   a b o v e 
2  % ,   w h e re   t h e   co m p a r i s o n   w i t h   t h e   s i t u-
ation in the previous financial year shows 
a   s i g n i f i c a n t   d e t e r i o r a t i o n   o r   w h e r e   t h e 
e r ro r   r a t e   i n   a   p o p u l a t i o n   i s   i m p l a u s i b l y 
l o w,   a n d   h o w   t o   d e a l   w i t h   t h e   r e q u i r e -
m e n t   t o   d i s c l o s e   t h e   b a s i s   o n   w h i c h   t h e 
s t a t e m e n t   o f   a s s u r a n c e   i s   d r a w n .   te m-
p l a t e s   fo r   t r a n s m i s s i o n   o f   c o n t ro l   s t a t i s-
t i c s   we re   p rov i d e d   by   t h e   co m m i s s i o n   i n 
o r d e r   t o   e n s u r e   u n i f o r m i t y   o f   t h e   d a t a 
s u p p l i e d   b y   t h e   M e m b e r   S t a t e s   t o   t h e 
comm iss ion.

Special r eport No 7/2010 — audit of the clearance of accounts procedure

Special r eport No 7/2010 — audit of the clearance of accounts procedure

48 . 
t h e   a n a l y s i s   o f   t h e   c o n t r o l   s t a t i s t i c s   i s 
re q u i re d   to   b e   c a r r i e d   o u t   at   a i d   s c h e m e 
l e v e l ,   t h e   t h r e s h o l d   a b o v e   2  %   ( a t   t h e 
l e v e l   o f   a   p o p u l a t i o n )   g i v i n g   a n   i n d i c a-
t i o n   f o r   c o n s i d e r a t i o n   o f   a   r e s e r v a t i o n . 
ho w e v e r   a   r e s e r v a t i o n   i s   o n l y   r e q u i r e d 
i f   t h e   fo l l ow i n g   f a c t o r s   a re   c u m u l a t i ve l y 
fulfille d:

—  the  examinatio n o f t he qu al itative  as-
pec ts   le ads  to   a  finding   of   signi fi c ant 
defic ienc ie s  in   a  natio nal   co ntrol  s ys-
t e m   a s   d e f i n e d   i n   p o i n t   4 . 2   ( q u a l i t a-
tive as p ec t s) of  g uidel ine No 4 ;  and 

—  the amount of undue payments is esti-
mated  to  exceed 2 %  of th e total  pay-
m e n t s   m a d e   i n   t h e   f i n a n c i a l   y e a r   i n 
question under any of the populations 
re fe r re d   t o   i n   p o i n t   4 . 3   (q u a n t i t a t i ve 
aspe c t s) of g uidel ine N o 4; an d

— 

it has not been possible to counter the 
i m p a c t   o f   t h e   d e f i c i e n c i e s   b y   c o r re c -
tive m easu re s.

t h e   d i r e c t o r   o f   t h e   pa  i s   e x p e c t e d   t o 
m a k e   a   re s e r vat i o n   o n l y   i f   a l l   t h e s e   t h re e 
conditio ns are fu l fil l ed.

49 . 
f o r   t h e   r e a s o n s   s e t   o u t   i n   i t s   r e p l y   t o 
p a r a g r a p h   3 4 ,   t h e   co m m i s s i o n   d o e s   n o t 
question the reliabilit y of the control sta-
tistics.

5555

reply of the 
coMMISSIoN

5 1.
I t   i s   c o r r e c t   t h a t   t h e   w o r k   p e r f o r m e d   i n 
t h e   co nte x t   o f   t h e   ce r t i f i c at i o n   wo u l d   to 
a   l a rg e   ex te nt   p rov i d e   a n   a d e q u ate   b a s i s 
also for t he opinion on th e S oa. 

ho w e v e r ,   t h e   cB   s h o u l d   i n   a d d i t i o n 
c h e c k :   w h e t h e r   t h e   s u p p o r t i n g   i n f o r -
m a t i o n   a c c o m p a n y i n g   t h e   s t a t e m e n t   o f 
a s s u ra n ce   i s   a d e q u ate   a n d   i t   s h o u l d   p ro -
vide a n opinion:

—  ( i f   a p p l i c a b l e )   w h e t h e r   t h e   p a y i n g 
a g e n c y   d i r e c t o r ’s   r e s e r v a t i o n s   h a v e 
been  cor rec tly  disc lose d;

—  ( i f   a p p l i c a b l e )   w h i c h   a u d i t 
p o p u l a t i o n ( s )   s h o u l d ,   i n   i t s   o p i n i o n , 
h a v e   r e c e i v e d   a   r e s e r v a t i o n ,   b u t   d i d 
n ot ;

—  ( i f   a p p l i c a b l e )   w h i c h   a u d i t 
population(s) did receive a reser vation 
that was not required (i.e. the underly-
in g issue( s) was /we re  not  mater ial );

—  w h e t h e r,   i n   i t s   o p i n i o n ,   t h e   S oa  c o m-
p l i e s   i n   a l l   m a t e r i a l   r e s p e c t s   w i t h   a r -
ticle  3  of  r egulation  (ec )  No  885/2006 
( c o m m i s s i o n   g u i d e l i n e   N o   4 )   f o r   t h e 
financial year 16.10.xx to 15.10.xx + 1.

th u s,   t h e   co m m i s s i o n   i s   o f   t h e   v i e w   t h at 
th e opinion  provides  added  value.

I n   f i n a n c i a l   ye a r   2 0 0 9 ,   t h e   fre n c h   c B   d i d 
f o l l o w   t h e   m o d e l   r e q u i r e d   b y   g u i d e l i n e 
N o 7 . 

5 2. 
f r o m   f i n a n c i a l   y e a r   2 0 0 9   o n w a r d s ,   t h e 
cB s   h a v e   b e e n   b e t t e r   p l a c e d   t o   a s s e s s 
t h i s   i n f o r m a t i o n   b e c a u s e   t h e   r e v i s e d 
g u i d e l i n e   N o   4   i n c l u d e s   t e m p l a t e s   t o   b e 
completed by  the pa.

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reply of the 
coMMISSIoN

5 7–5 8 . 
fo r   f i n a n c i a l   y e a r   2 0 0 9 ,   t h e   p a r t   o f   t h e 
expenditure covered by the commission’s 
c o n f o r m i t y   a u d i t s   i n c r e a s e d   t o   6 1  % 4. 
t h e   c o m m i s s i o n   c o n s i d e r s   t h i s   t o   b e   a n 
i m p r e s s i v e   a n d   s u f f i c i e n t   c o v e r a g e   a n d , 
t h e r e f o r e ,   d o e s   n o t   c o n s i d e r   t h a t ,   a s   a 
re s u l t   o f   t h e   r i s k   a n a l y s i s,   o n l y   a   l i m i t e d 
n u m b e r   o f   m e a s u r e s   a n d   pa s   i d e n t i f i e d 
a s   p r i o r i t i e s   a r e   s u b j e c t   t o   c o n f o r m i t y 
a u d i t s .   M o r e o v e r,   f o r   d i r e c t   a i d s ,   w h i c h 
in  fina ncial year  2 0 09 accounted for  7 2 % 
o f   to t a l   a gr i c u l t u ra l   ex p e n d i t u re   a n d   a re 
c o v e r e d   b y   t h e   Ia cS ,   a l l   M e m b e r   S t a t e s 
w i t h   t h e   e xc e p t i o n   o f   lu xe m b o u r g   we re 
audited over th e past th ree year s.

Part II — thE cONfOrmIty  
clEaraNcE Of accOuNts

54 . 
t h e   c o u r t ’s   G r a p h   1   s h o w s   w h e n   t h e 
v a r i o u s   c o n f o r m i t y   c l e a r a n c e   d e c i s i o n s 
w e r e   a d o p t e d   r a t h e r   t h a n   t h e   a m o u n t s 
excluded in respec t of each financial year. 
th e   f i n a n c i a l   co r re c t i o n s   o n   ex p e n d i t u re 
f o r   e a c h   f i n a n c i a l   y e a r,   i n c l u d i n g   e s t i-
mates of future cor rec tions, are shown in 
comm iss ion Gra ph  1.

56 . 
the central r isk analysis ser ves as a plan-
n i n g   t o o l .   I n   f a c t   a g r i c u l t u r a l   e x p e n d i-
t u r e   o f   t h e   y e a r   n   –   2   w a s   a l l o c a t e d   t o 
7 6   d i f fe re nt   a u d i t   f i e l d s ;   e a c h   a u d i t   f i e l d 
i s   s u b j e c t   t o   a   s i m i l a r   m a n a g e m e n t   a n d 
control system. as the expenditure under 
t h e s e   a u d i t   f i e l d s   wa s   e f fe c te d   by   d i f fe r-
e n t   p a y i n g   a g e n c i e s ,   f o r   p l a n n i n g   p u r -
p o s e s ,   1 8 0 7   a u d i t   f i e l d / p a y i n g   a g e n c y 
p a i r s   w e r e   i d e n t i f i e d .   f o r   t h e s e   a u d i t 
f i e l d / p a y i n g   a g e n c y   p a i r s   t h e   f o l l o w i n g 
r isk fac tors are taken into account: mate -
rialit y (amounts of declared expenditure), 
l a s t   a u d i t   ye a r   ( p e r i o d   e l a p s e d   s i n ce   t h e 
l a s t   a u d i t   o f   t h e   m e a s u r e   i n   q u e s t i o n ) , 
i n h e re nt   r i s k   o f   t h e   m e a s u re   i n   q u e s t i o n , 
co nt ro l   s ys te m   r i s k s   ( r i s k   a s s o c i ate d   w i t h 
t h e   c o n t r o l   s y s t e m ) ,   p a y i n g   a g e n c y   r i s k 
( r i s k   r e l a t e d   t o   t h e   p a y i n g   a g e n c y )   a n d 
f i n a l l y   t a k i n g   i nto   a cco u nt   t h e   o l a f  r i s k 
( r e l a t e d   w i t h   o l a f  d e n u n c i a t i o n s   a n d 
i r re g u l a r i t i e s )   a n d   t h e   co u r t   o f   au d i t o r s 
r i s k   ( r e l a t e d   w i t h   t h e   f i n d i n g s   f r o m   t h e 
e c a) .  th e   co m p o s i te   r i s k   i s   c a l c u l ate d   by 
a u d i t   f i e l d / p a y i n g   a g e n c y   p a i r   b y   m u l-
t i p l y i n g   m a t e r i a l i t y   a n d   t h e   ‘ w e i g h e d 
r i s k ’  w h i c h   i s   a   w e i g h t e d   a v e r a g e   o f   t h e 
va r i o u s   r i s k   i n d i c ato r s   m e nt i o n e d   a b ove. 
B a s e d   o n   t h e   co m p o s i te   r i s k ,   t h e   ra n k i n g 
o f   t h e   a u d i t   f i e l d / p ay i n g   a g e n c y   p a i r s   i s 
est ablis hed fo r the w hol e d irec torate.

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Special r eport No 7/2010 — audit of the clearance of accounts procedure

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reply of the 
coMMISSIoN

59 .
th e   2 4   m o n t h   r u l e   i s   a   d e l i b e ra te   c h o i ce 
o f   t h e   e u   l e gi s l ato r   w i t h   a   v i e w   to   e n s u r -
i n g   l e g a l   c e r t a i n t y   f o r   M e m b e r   S t a t e s . 
I t   i s   i n h e r e n t   i n   t h e   a p p l i c a t i o n   o f   t h i s 
r u l e   t h a t   c e r t a i n   e x p e n d i t u r e   c a n n o t   b e 
s u b j e c t   to   f i n a n c i a l   co r re c t i o n s   a l t h o u g h 
i t   m a y   b e   a f f e c t e d   b y   d e f i c i e n c i e s .   t h e 
co m m i s s i o n   h a s   re p e ate d l y   p ro p o s e d   a n 
e x t e n s i o n   o f   t h i s   t i m e   l i m i t ,   b u t   t h e s e 
p ro p o s a l s   we re   t u r n e d   d ow n   by   b o t h   t h e 
cou ncil  a nd t he e u rop ea n p ar l ia me nt.

4  26,5 % for ‘Intervention on agricultural markets’, 70,9 % for 
‘direct aid’ and 43,6 % for ‘rural development’.

Graph 1 - Amounts excluded in respect of each financial year
(incl. estimates of future corrections)

)
o
r
u
e
n
o

i
l
l
i

m
n

i
(

800

700

600

500

400

300

200

100

0

1999

2000

2001

2002

2003

2004

2005

2006

2007

Financial year

Decisions 1-29

Decisions 30-32

Corrections under preparation

Estimated on basis of historic average

Special r eport No 7/2010 — audit of the clearance of accounts procedure

Special r eport No 7/2010 — audit of the clearance of accounts procedure

 
 
58

reply of the 
coMMISSIoN

6 1.
fo r   d i r e c t   a i d s ,   w h i c h   i n   f i n a n c i a l   y e a r 
2 0 0 9   a cco u nte d   fo r   7 2 %   o f   to t a l   a gr i c u l-
t u r a l   e x p e n d i t u re   a n d   a re   s u b j e c t   t o   t h e 
IacS ,   a l l   M e m b e r   S t a t e s   w i t h   t h e   e xc e p -
t i o n   o f   l u x e m b o u r g   w e r e   a u d i t e d   o v e r 
t h e   p a s t   t h r e e   y e a r s   2 0 0 7 – 0 9   a n d ,   t h u s , 
w i t h i n   a   t i m e   s p a n   w h i c h   p r e v e n t s   t h e 
exc lus ion ar y  effec t of  t he 24 - mo nt h  r ul e.

th e   n u m b e r   o f   a u d i t   f i e l d / p ay i n g   a g e n c y 
p a i r s   i s   t h e   c o n s e q u e n c e   o f   t h e   l a r g e 
n u m b e r   o f   d i f f e r e n t   c o n t r o l   s y s t e m s   f o r 
t h e   va r i o u s   a gr i c u l t u ra l   a i d   s c h e m e s   a n d 
t h e   n u m b e r   o f   pa s   e s t a b l i s h e d   b y   t h e 
M ember States. direc t aids, however, only 
r e p r e s e n t e d   1 2   a u d i t   f i e l d s   i n   t h e   2 0 0 8 
r isk an alysis. 

6 3. 
the commission considers that the use of 
flat rates is fully in line with the objec tive 
of the confor mit y clearance and the most 
e f fe c t i v e   a n d   e f f i c i e n t   w a y   o f   a c h i e v i n g 
t h i s   o b j e c t i ve,   n o t a b l y   i f   t h e   d e f i c i e n c i e s 
f o u n d   c o n c e r n   o n l y   t h e   M e m b e r   S t a t e’s 
management and control system. I t takes 
a cco u nt   o f   t h e   f a c t   t h at   i t   i s   n o t   p o s s i b l e 
to   t a k e   a   s t at i s t i c a l l y   va l i d   s a m p l e   i n   t h e 
c o n t e x t   o f   e a c h   o f   t h e   a r o u n d   1 5 0   c o n-
fo r m i t y   m i s s i o n s   c a r r i e d   o u t   by   t h e   agr i-
c u l t u ra l   a n d   r u ra l   d e ve l o p m e nt   d G   e a c h 
year. the commission estimates that such 
substantive testing would, in fac t, require 
o n   a v e r a g e   s o m e   1 0 0   i n d i v i d u a l   f i l e s   t o 
b e   a u d i te d   i n   e a c h   c a s e,   t h u s   a m o u nt i n g 
to m ore than  15  00 0  f iles  per  yea r. 

th e   u s e   o f   f l at- rate   co r re c t i o n s   h a s   b e e n 
upheld by the cour t of Justice as being in 
conformit y with the legal rules gover ning 
th e con for m it y  wor k .

60 . 
t h e   c o m m i s s i o n   c o n s i d e r s   t h a t   a   c o m-
p l e t e   c o v e r a g e   o f   a l l   a u d i t   a r e a s   o v e r, 
s a y,   a   t h r e e - y e a r   p e r i o d   w o u l d   n o t   b e 
possible even with significantly increased 
re s o u rce s,   a n d   wo u l d   g o   a g a i n s t   t h e   s i n-
gle audit concept 5. I t would be inefficient 
to   d e vo te   h u m a n   a n d   f i n a n c i a l   re s o u rce s 
to   t h e   a u d i t   o f   a u d i t   f i e l d / p ay i n g   a g e n c y 
p a i r s   w i t h   l i m i te d   ex p e n d i t u re   a n d   a   l ow 
r i s k .  t h e r e f o r e ,   t h e   c o m m i s s i o n   c a r r i e s 
out its conformit y audit work on the basis 
of a central r isk analysis, which incor por-
a t e s   a l l   t h e   n e c e s s a r y   r i s k   f a c t o r s   a n d 
i s   i n   l i n e   w i t h   i n t e r n a t i o n a l l y   a c c e p t e d 
auditing  sta ndards.

B ox  3
I n   t h e   c a s e   re fe r re d   t o   b y   t h e   co u r t ,   t h e 
c o m m i s s i o n   h a s   r e a c t e d   o n   t i m e   t o   t h e 
i n f o r m a t i o n   r e c e i v e d   a n d   t h e   r i s k   h a s 
b e e n   c o r r e c t l y   c o v e r e d .   t h e r e f o r e ,   t h e 
c o m m i s s i o n   d o e s   n o t   c o n s i d e r   t h a t   t h e 
e u r  1 0 0   m i l l i o n   re fe r re d   to   by   t h e   co u r t 
s h o u l d   h a v e   b e e n   s u b j e c t   t o   a   f i n a n c i a l 
cor rec t ion .

th e   2 4 - m o nt h   r u l e   i s   a   d e l i b e rate   c h o i ce 
o f   t h e   e u   l e gi s l ato r   w i t h   a   v i e w   to   e n s u r -
i n g   l e g a l   c e r t a i n t y   f o r   M e m b e r   S t a t e s . 
I t   i s   i n h e r e n t   i n   t h e   a p p l i c a t i o n   o f   t h i s 
r u l e   t h a t   c e r t a i n   e x p e n d i t u r e   c a n n o t   b e 
s u b j e c t   to   f i n a n c i a l   co r re c t i o n s   a l t h o u g h 
i t   m a y   b e   a f f e c t e d   b y   d e f i c i e n c i e s .   t h e 
co m m i s s i o n   h a s   re p e ate d l y   p ro p o s e d   a n 
e x t e n s i o n   o f   t h i s   t i m e   l i m i t ,   b u t   t h e s e 
p ro p o s a l s   we re   t u r n e d   d ow n   by   b o t h   t h e 
cou ncil  a nd t he e u rop ea n p ar l ia me nt.

5  this would require the audit of some 1 800 audit areas over 
this time span in order to avoid that certain parts thereof can no 

longer be corrected due to the 24-month rule.

Special r eport No 7/2010 — audit of the clearance of accounts procedure

Special r eport No 7/2010 — audit of the clearance of accounts procedure

64 . 
f o r   a l l   t h e   3 2   c o n f o r m i t y   d e c i s i o n s 
a d o p t e d   f r o m   1 9 9 6   t o   t h e   e n d   o f   2 0 0 9 , 
slightly less than 70 % of the total amount 
o f   f i n a n c i a l   co r re c t i o n s   we re   d e te r m i n e d 
by using flat rates. however, the  commis-
s i o n   c o n s i d e r s   i t   t o   b e   p e r t i n e n t   t o   l o o k 
a t   t h e   n u m b e r   o f   c a s e s   r a t h e r   t h a n   t h e 
amounts involved because each confor m-
i t y   a u d i t   i s   e q u a l l y   i m p o r t a n t   w i t h i n   t h e 
o v e r a l l   a n n u a l   a u d i t   p r o g r a m m e .   he r e , 
f l a t   r a t e s   w e r e   u s e d   i n   o n l y   4 5  %   o f   a l l 
c a s e s   a n d ,   i f   t h e   p a s t   1 0   d e c i s i o n s   a r e 
t a k e n ,   t h i s   p e rce nt a g e   d e c re a s e s   f u r t h e r 
t o   3 7 % .  t h i s   d e m o n s t r a t e s   t h e   c o m m i s-
s i o n’s   c o n t i n u o u s   e f fo r t s   t o   c a l c u l a t e   o r 
e x t r a p o l a t e   t h e   f i n a n c i a l   l o s s   fo r   t h e   e u 
budget  wh enever this is p o ssib l e.

a s   p a r t   o f   t h i s   e f f o r t ,   t h e   c o m m i s s i o n 
r e c e n t l y   s e t   o u t   t o   M e m b e r   S t a t e s   t h e 
co n d i t i o n s   u n d e r   w h i c h   i t   i s   p re p a re d   to 
l i m i t   t h e   a m o u nt   o f   a ny   f i n a n c i a l   co r re c -
t i o n   to   t h e   e r ro r   rate   fo u n d   by   t h e   M e m-
ber State in the transac tions at final bene-
f i c i a r y   l e v e l   a n d   r e p o r t e d   i n   i t s   c o n t r o l 
statist ic s for th e aid s ch eme con ce r n ed.

5959

reply of the 
coMMISSIoN

6 5.
th e   co m m i s s i o n   co n s i d e r s   t h at   by   fo c u s-
in g on the fun c tion ing  of M embe r  St ate s’ 
m a n a g e m e n t   a n d   c o n t r o l   s y s t e m s ,   t h e 
s ys te m - b a s e d   a u d i t   a p p ro a c h   i s   t h e   m o s t 
e f fe c t i v e   a n d   e f f i c i e n t   w a y   o f   a c h i e v i n g 
t h i s   o b j e c t i v e .   to   s u p p l e m e n t   t h i s   w o r k 
by   a   s u b s t a nt i ve   te s t i n g   o f   a   re p re s e nt a-
tive sample of individual payments in the 
c o n t e x t   o f   e a c h   o f   t h e   a r o u n d   1 5 0   o n -
the -spot confor mit y audits car r ied out by 
t h e   ag r i c u l t u r a l   a n d   r u r a l   d e ve l o p m e n t 
dG eac h  year  would require a subs ta nt ial 
( m o re   t h a n   t wo fo l d )   i n c re a s e   i n   t h e   c u r-
re nt   a u d i t   re s o u rce s,   w h i c h   wo u l d   n o t   b e 
in line with any cost–benefit ana lysis. the 
i n c re a s e   wo u l d   b e   e ve n   h i g h e r   ( f i ve fo l d ) 
i f   t h e   co m m i s s i o n   h a d   t o   c a r r y   o u t   s u c h 
s u b s t a n t i v e   t e s t i n g   o n   a l l   a u d i t   f i e l d s 
over, say,  a t hre e -year per iod. 

Nor would it take account of the fac t that 
i n d e p e n d e n t   a u d i t   b o d i e s   a re   c e r t i f y i n g 
t h e   pas’  a cco u nt s   a n d   t h e   f u n c t i o n i n g   o f 
t h e i r   i nte r n a l   co nt ro l   p ro ce d u re s   a n d   a re 
ver ifying and validating their control sta-
t i s t i c s,   a n   e l e m e n t   c o v e r i n g   t h e   l e g a l i t y 
a n d   r e g u l a r i t y   o f   t h e   u n d e r l y i n g   t r a n s-
a c t i o n s   w h i c h   i s   c u r r e n t l y   b e i n g   f u r t h e r 
rein forced.

N o r   w o u l d   i t   b e   p o s s i b l e   t o   l i m i t   s u c h 
s u b s t a n t i v e   t e s t i n g   t o   c a s e s   w h e r e   t h e 
‘c o n s e q u e n c e s   a r e   q u a n t i f i a b l e   a n d   s i g-
n i f i c a n t ’  a s   t h o s e   c o n c l u s i o n s   c a n n o t   b e 
d r a w n   a t   t h e   t i m e   o f   t h e   a u d i t   a n d ,   i f   i t 
were implemented towards the end of the 
p ro c e d u re   s u c h   s u b s t a n t i ve   t e s t i n g   m a y 
well be  ir relevant and/or imposs i ble. 

Special r eport No 7/2010 — audit of the clearance of accounts procedure

Special r eport No 7/2010 — audit of the clearance of accounts procedure

66 . 
f l a t - r a t e   c o r r e c t i o n s   r e f l e c t   t h e   d e g r e e 
o f   f i n a n c i a l   r i s k   fo r   t h e   e u  b u d g e t   w h i c h 
r e s u l t s   f r o m   t h e   d e f i c i e n c i e s   i n   t h e 
M e m b e r   S t a t e s ’  m a n a g e m e n t   a n d   c o n-
t r o l   s y s t e m s .   t h e r e f o r e ,   t h e   c o m m i s-
s i o n   co n s i d e r s   t h at   t h e re   i s   a   co r re l at i o n 
b e t we e n   t h e   f l a t   r a t e   u s e d   a n d   t h e   l e ve l 
o f   i r r e g u l a r   p a y m e n t s   t o   f i n a l   b e n e f i-
c i a r i e s.  t h e   g u i d e l i n e s   i n   wo r k i n g   d o c u -
ment vI/5330/97 have established a clear, 
objec tive and stable system for the appli-
c at i o n   o f   t h e   f l at- rate   co r re c t i o n s,   avo i d -
i n g   s u b j e c t i v i t y   a s   we l l   a s   u n e q u a l   t re at -
ment.

th e   co m m i s s i o n’s   o p e ra t i o n a l   h a n d b o o k 
e x p l i c i t l y   s t a t e s   t h a t   t h e   s y s t e m   o f   f l a t -
rate   co r re c t i o n s   i s   u s e d   to   l i n k   t h e   we a k-
n e s s e s   i d e n t i f i e d   t o   t h e   r i s k   f o r   t h e   e u 
budget and that this risk is the overriding 
element  in t he as s essment o f t h e l eve l of 
financial cor rec tions. therefore, the audi -
tors  are  requ ired  to   as s ess   w h eth e r   th e re 
a re   a ny   f a c t o r s   w h i c h   wo u l d   m i t i g a t e   o r 
amplify the risk . the conformit y decisions 
p rov i d e   a m p l e   ex a m p l e s   t h at   t h i s   a s s e s s-
ment is tak ing place and, where justified, 
l e a d s   t o   a   r e d u c t i o n   o r   i n c r e a s e   o f   t h e 
level o f financial  cor rec tions.

60

reply of the 
coMMISSIoN

M o re o ve r,   a s   a g r i c u l t u r a l   e x p e n d i t u re   i s 
implemented under shared management, 
t h e   M e m b e r   S t a t e s   a r e   b e t t e r   p l a c e d 
t h a n   t h e   co m m i s s i o n   t o   a s s e s s   a n d   p ro -
vide evidence of the real financial loss or 
r i s k   f o r   t h e   e u  b u d g e t .   t h e   o p e r a t i o n a l 
h a n d b o o k   e x p l i c i t l y   r e c o g n i s e s   t h i s   a n d 
r e q u i r e s   t h e   c o m m i s s i o n   t o   t a k e   s u c h 
evidence, if reliable, into account. a more 
p r e c i s e   c a l c u l a t i o n   o f   t h e   f i n a n c i a l   l o s s 
fo r   t h e   e u  b u d g e t   t h e re fo re   re q u i re s   t h e 
a c t i v e   c o o p e r a t i o n   o f   t h e   M e m b e r   S t a t e 
c o n c e r n e d   a t   a l l   l e v e l s   o f   t h e   c o n f o r m-
it y clearance procedure because only the 
M ember State has all the necessar y infor-
mation to make such a calculation. unfor -
t u n a t e l y,   h o w e v e r,   d e s p i t e   t h e   c o m m i s-
s i o n’s   re q u e s t s,   M e m b e r   S t a t e s   o f t e n   d o 
n o t   a v a i l   t h e m s e l v e s   o f   t h i s   p o s s i b i l i t y. 
the cour t of Justice has confir med that it 
is not up to the commission to under take 
the checks necessar y to put a precise fig-
u r e   t o   t h e   l o s s e s   i n c u r r e d ,   b u t   r a t h e r   i t 
i s   fo r   t h e   M e m b e r   St ate   to   s h ow   t h at   t h e 
commiss ion’s est imate was  exces sive.

I n   t h i s   c o n t e x t ,   t h e   c o m m i s s i o n   h a s 
r e c e n t l y   s e t   o u t   t o   M e m b e r   S t a t e s   t h e 
c o n d i t i o n s   u n d e r   w h i c h   i t   i s   p r e p a r e d 
to   l i m i t   t h e   a m o u n t   o f   a ny   f i n a n c i a l   co r -
r e c t i o n   t o   t h e   e r r o r   r a t e   f o u n d   b y   t h e 
M e m b e r   S t a t e s   i n   t h e   t r a n s a c t i o n s   a t 
fin al  benef iciar y   le vel  and  repor ted   i n   i ts 
co nt ro l   s t at i s t i c s   fo r   t h e   a i d   s c h e m e   co n-
cer ned.

Special r eport No 7/2010 — audit of the clearance of accounts procedure

Special r eport No 7/2010 — audit of the clearance of accounts procedure

6161

reply of the 
coMMISSIoN

to   d a t e   t h e   p e r c e n t a g e   o f   f i n a n c i a l   c o r-
r e c t i o n   ( b y   v a l u e )   d e t e r m i n e d   o n   t h e 
basis of flat rates amounts to slightly less 
th an  70  %. 

M o r e o v e r,   i n   d e c e m b e r   2 0 0 9 ,   t h e   c o m-
m i s s i o n   s e t   o u t   t o   M e m b e r   S t a t e s   t h e 
co n d i t i o n s   u n d e r   w h i c h   i t   i s   p re p a re d   to 
l i m i t   t h e   a m o u nt   o f   a ny   f i n a n c i a l   co r re c -
t i o n   to   t h e   e r ro r   ra te   fo u n d   by   t h e   M e m-
ber State, in the transac tions at final bene-
f i c i a r y   l e v e l   a n d   r e p o r t e d   i n   i t s   c o n t r o l 
statist ics for th e aid sc heme con ce r ne d.

6 8. 
t h e   1 9 9 6   r e f o r m   i n t r o d u c e d   a n   a n n u a l 
financial clearance to be completed by 30 
ap r i l   o f   t h e   ye a r   n   +   1   a n d   t h e   2 4 - m o nt h 
r u l e   f o r   c o n f o r m i t y   c l e a r a n c e .   B y   d o i n g 
s o ,   a   m a j o r   c o n t r i b u t i o n   w a s   m a d e   t o 
t h e   d i s c h a r g e   p r o c e d u r e   ( a n d   n o w   t h e 
a a r )   t a k i n g   i nto   a cco u nt   t h e i r   t i m i n g.  to 
c o n c l u d e   t h e   c o n fo r m i t y   c l e a r a n c e   wo r k 
within such a timetable would impair the 
confor m it y  c learance  process.

B ox  5 
I n   t h e   c a s e   i n   h a n d,   t h e   te s t i n g   o f   re p re -
sentative sample of files suggested by the 
co u r t   wo u l d   h ave   p o te nt i a l l y   t re ate d   t h e 
u k   d i f f e r e n t l y   t o   o t h e r   M e m b e r   S t a t e s . 
I n   o rd e r   t o   t re a t   M e m b e r   S t a t e s   e q u a l l y, 
s u c h   s u b s t a n t i v e   t e s t i n g   w o u l d   h a v e   t o 
b e   c a r r i e d   o u t   s y s t e m a t i c a l l y,   a t   l e a s t   i n 
all cases where there is a potential finan -
c i a l   co r re c t i o n .   S u c h   a n   a p p ro a c h   wo u l d 
r e q u i r e   a   s i g n i f i c a n t   i n c r e a s e   i n   a u d i t 
re s o u rc e s   a n d   i s   n o t   i n   l i n e   w i t h   a   c o s t –
b e n e f i t   a n a l y s i s .   t h i s   i s   w h y   t h e   c o m-
m i s s i o n   h a s   d e c i d e d   o n   a   s y s t e m - b a s e d 
a u d i t   a p p r o a c h   w i t h   a   h i e r a r c h y   o f   c o r -
re c t i o n s   o f   w h i c h   t h e   f l a t - r a t e   a p p ro a c h 
is  but   o ne   and  whic h  has   b een   u ph e ld  by 
t h e   co u r t   o f   J u s t i c e.   fu r t h e r m o re,   M e m-
b e r   S t a t e s   a re   i n   a l l   c a s e s   i nv i t e d   t o   c a l -
c u l a t e   m o r e   p r e c i s e l y   t h e   f i n a n c i a l   l o s s 
for the eu budget but they do not always 
av a i l   t h e m s e l ve s   o f   t h i s   p o s s i b i l i t y.   N e v-
e r t h e l e s s ,   t h e   c o m m i s s i o n   d e v e l o p e d 
a n   a l te r n a t i ve   m e t h o d   i n   o rd e r   to   b e t te r 
d e t e r m i n e   t h e   r e a l   r e s i d u a l   r i s k   a n d   h a s 
s e t   t h i s   o u t   t o   M e m b e r   S t a t e s   ( s e e   p a r a -
graph 104(e), fin al s ub p aragrap h) . 

S e e   a l s o   t h e   r e p l i e s   t o   p a r a g r a p h s   6 5 
a n d   6 6 . 

67 . 
I n   i t s   2 0 0 7   d i s c h a rg e   re s o l u t i o n ,   t h e   pa r-
liament explicitly requested that ‘flat-rate 
co r re c t i o n s   a re   a p p l i e d   to   t h o s e   M e m b e r 
S t a t e s   w h i c h   f a i l   t o   m e e t   t h e i r   o b l i g a-
tions’ 6.

6  See paragraph 83 of the european parliament resolution of  
23 april 2009 on the discharge for implementation of the 

european union general budget for the financial year 2007, 

Section III — commission (p6_ta(2009)0289).

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reply of the 
coMMISSIoN

7 2.
N on e of t he par ties involved in t he  l egis-
l a t i v e   p r o c e d u r e   p r o p o s e d   a n y   c h a n g e s 
t o   t h e   c o n c i l i a t i o n   p r o c e d u r e   i n   t h e i r 
o p i n i o n s   o n   t h e   c o m m i s s i o n’s   p r o p o s a l 
fo r   a   c o u n c i l   r e g u l a t i o n   o n   f i n a n c i n g   o f 
t h e   c o m m o n   a g r i c u l t u r a l   p o l i c y,   w h i c h 
wa s   s u b s e q u e nt l y   a d o p te d   a s   r e g u l at i o n 
(e c )  No 1 29 0/20 0 5.

I n   2 0 0 6 ,   t h e   co m m i s s i o n   a d o p t e d   m e a s -
ures to reduce the number of cases going 
to conciliation by doubling the threshold 
above which cases are considered admis-
s i b l e.  th e   co n c i l i at i o n   B o d y   h a s   n o t   s e e n 
t h e   i n c r e a s e   i n   c a s e s   w h i c h   w o u l d   b e 
c o m m e n s u r a t e   w i t h   t h e   i n c r e a s e   i n   s i z e 
of th e e u .

t h e   c o m m i s s i o n   c o n s i d e r s   t h e   c o n c i l i a-
t i o n   p ro ce d u re   to   b e   a   u s e f u l   e l e m e nt   i n 
the confor mit y procedure. this is demon-
strated by the conciliation B ody ’s impac t 
o n   t h e   f i n a n c i a l   co r re c t i o n s   p ro p o s e d.   I n 
2 8  %   o f   c a s e s   a   r e d u c t i o n   o f   m o r e   t h a n 
10 % in the amount of financial correc tion 
r e s u l t e d   f r o m   t h e   p r o c e d u r e ;   i n   1 3  %   o f 
c a s e s,   t h e re   wa s   a   re d u c t i o n   o f   l e s s   t h a n 
1 0  %   w h i l e   i n   3 , 5  %   o f   c a s e s   t h e   co m m i s-
sion  decid ed to with draw it s cor re c ti on .

69 . 
the tim e needed  for comp l eting t h e con-
fo r m i t y   p ro ce d u re   d e p e n d s   o n   a   n u m b e r 
o f   f a c to r s,   s o m e   o f   w h i c h   a re   o u t s i d e   t h e 
co m m i s s i o n’s   re s p o n s i b i l i t y   a n d   co nt ro l. 
S u c h   f a c t o r s   i n c l u d e ,   f o r   e x a m p l e ,   t h e 
c o m p l e x i t y   o f   t h e   c a s e ,   r e q u i r i n g   a d d i-
t i o n a l   wo r k   o r   e ve n   a d d i t i o n a l   m i s s i o n s, 
t h e   re s p e c t   o f   d e a d l i n e s   b y   t h e   M e m b e r 
S t ate s,   t ra n s l at i o n   re q u i re m e nt s   a n d   t h e 
follow-up of the recommendations of the 
c o n c i l i a t i o n   B o d y.   f u r t h e r m o r e ,   q u i t e 
o f t e n   t h e   t a r g e t   i s   e xc e e d e d   i n   o r d e r   t o 
f u l l y   re s p e c t   t h e   M e m b e r   S t ate’s   r i g ht   o f 
defence, which is a fundamental principle 
o f   t h e   c o n f o r m i t y   c l e a r a n c e   p r o c e d u r e 
and explicitly required by  ar ticle 42(2)(c) 
o f   t h e   I m p l e m e n t i n g   ru l e s   t o   t h e   fi n a n-
cial r eg u l at ion.

71 . 
M ember States are aware of any deficien-
c i e s   fo u n d   s h o r t l y   a f t e r   t h e   m i s s i o n   a n d 
c a n   i m m e d i a t e l y   t a k e   c o r r e c t i v e   a c t i o n . 
t h e   a u d i t   r e s u l t s   a r e   k n o w n   a n d   t a k e n 
into account for the aar for the year con-
c e r n e d.  th e   l e n g t h   o f   t i m e   t o   d e t e r m i n e 
t h e   a m o u nt   o f   t h e   f i n a n c i a l   co r re c t i o n   i s 
a secondar y issue if the deficiencies have 
alrea dy  bee n n ot ified an d cor rec te d. 

S h o r t e n i n g   t h e   d e a d l i n e s   f o r   t h e   c o n-
f o r m i t y   c l e a r a n c e   p r o c e d u r e   w o u l d 
i m p a c t   n e g a t i v e l y   o n   t h e   c o m m i s s i o n’s 
a b i l i t y   t o   c a r r y   o u t   t h e   n e c e s s a r y   a u d i t 
w o r k ,   w h i c h   w o u l d   b e   n e i t h e r   i n   t h e 
i n t e r e s t s   o f   t h e   e u   n o r   o f   t h e   M e m b e r 
St ate s.  th e   co m m i s s i o n   w i l l   n e ve r t h e l e s s 
c o n t i n u e   t o   w o r k   a t   r e d u c i n g   t h e   t i m e 
needed to complete conformit y clearance 
proced ures.

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reply of the 
coMMISSIoN

Part III — thE clEaraNcE Of   
accOuNts Pr OcEDurE as a WhOlE

7 6–7 7 . 
th e   f i n a n c i a l   c l e a ra n ce   d e c i s i o n   i s   t a k e n 
a r o u n d   s i x   m o n t h s   a f t e r   t h e   e n d   o f   t h e 
f i n a n c i a l   y e a r   i n   q u e s t i o n .   t h r o u g h   t h i s 
d e c i s i o n ,   t h e   c o m m i s s i o n   e s t a b l i s h e s 
t h e   a m o u n t   o f   e x p e n d i t u r e   r e c o g n i s e d 
a s   c h a r g e a b l e   t o   t h e   e u   b u d g e t   fo r   t h a t 
y e a r.   t h e   f a c t   t h a t   t h e   d e c i s i o n   i s   w i t h-
o u t   p re j u d i c e   t o   s u b s e q u e n t   c o n fo r m i t y 
d e c i s i o n s   i m p o s i n g   f i n a n c i a l   co r re c t i o n s 
o n   M e m b e r   S t a t e s   i s   e x p l i c i t l y   p r o v i d e d 
f o r   i n   a r t i c l e   3 0   o f   r e g u l a t i o n   (e c )   N o 
1 2 9 0 / 2 0 0 5 ,   w h i c h   h a s   t h e   s a m e   l e g a l 
s t at u s   a s   t h e   fi n a n c i a l   r e g u l at i o n .   M o re -
o ve r,   i n   s u b s t a n c e,   i t   i s   f u l l y   c o m p a t i b l e 
w i t h   t h e   fi n a n c i a l   r e g u l a t i o n ,   w h i c h   fo r 
a ny   o t h e r   e x p e n d i t u re   p rov i d e s   t h a t   t h e 
co m m i s s i o n   c a n   m a k e   e x   p o s t   c h e c k s   u p 
t o   f i v e   y e a r s   a f t e r   t h e   d i s c h a r g e   d e c i-
s i o n   o n   t h e   y e a r   i n   w h i c h   t h e   f i n a l   p a y -
ment was made. o ther wise, all budgetar y 
e x p e n d i t u re   wo u l d   b e   c o n s i d e re d   p rov i-
s i o n a l   u n t i l   a n   e x   p o s t   c h e c k   i s   m a d e   o r 
th e five -ye ar per iod has  lap sed. 

t h e   a m o u n t   o f   e x p e n d i t u r e   w h i c h   i s 
l i k e l y   t o   b e   e x c l u d e d   f r o m   f i n a n c i n g   b y 
f u t u re   c o n fo r m i t y   d e c i s i o n s   i s   d i s c l o s e d 
as a contingent asset in the commission’s 
a c c o u n t i n g   s y s t e m   a n d   i n   a   n o t e   t o   t h e 
f i n a n c i a l   s t a t e m e n t s .   to g e t h e r   w i t h   t h e 
f i n a n c i a l   c l e a r a n c e   d e c i s i o n ,   t h i s   d i s c l o -
s u r e   p r o v i d e s   t h e   e u r o p e a n   pa r l i a m e n t 
and the council with the information they 
require for  t he disc harg e procedure.

73 . 
w h e t h e r   t h e   t i m e   t a r g e t   c a n   b e   m e t   i n 
a   g i v e n   c a s e   d e p e n d s   o n   a   n u m b e r   o f 
f a c t o r s ,   s o m e   o f   w h i c h   a r e   o u t s i d e   t h e 
co m m i s s i o n’s   re s p o n s i b i l i t y   a n d   co nt ro l. 
S u c h   f a c t o r s   i n c l u d e ,   f o r   e x a m p l e ,   t h e 
c o m p l e x i t y   o f   t h e   c a s e ,   r e q u i r i n g   a d d i-
t i o n a l   wo r k   o r   e ve n   a d d i t i o n a l   m i s s i o n s, 
t h e   re s p e c t   o f   d e a d l i n e s   b y   t h e   M e m b e r 
S t a t e s   a n d   t h e   f o l l o w - u p   o f   t h e   r e c o m-
m e n d a t i o n s   o f   t h e   c o n c i l i a t i o n   B o d y . 
q u i t e   o f t e n ,   t h e   t a r g e t   i s   e x c e e d e d   i n 
o rd e r   to   f u l l y   re s p e c t   t h e   M e m b e r   St ate’s 
r i g h t   o f   d e f e n c e ,   w h i c h   i s   a   f u n d a m e n-
t a l   p r i n c i p l e   o f   t h e   co n fo r m i t y   c l e a ra n ce 
proced ure. 

at the end of 2009, only 10 audits car r ied 
o u t   i n   t h e   ye a r s   2 0 0 4   a n d   b e fo re,   a l l o w -
i n g   f i n a n c i a l   c o r r e c t i o n s   o f   e x p e n d i t u r e 
f r o m   t h e   p e r i o d   p r i o r   t o   2 0 0 3 ,   h a d   n o t 
b e e n   c l o s e d .   t h e   f i n a n c i a l   c o r r e c t i o n s 
related to these audits as regards expend-
i t u r e   f r o m   t h e   p e r i o d   p r i o r   t o   2 0 0 3   a r e 
e s t i m a t e d   t o   b e   a r o u n d   e u r  1 5   m i l l i o n . 
t h i s   m e a n s   t h a t   t h e   c o n fo r m i t y   wo r k   o n 
expenditure incur red in the years pr ior to 
20 03 h ad larg el y b een co mp l ete d.

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reply of the 
coMMISSIoN

8 0.
co n fo r m i t y   c l e a r a n c e   d e c i s i o n s   d i s c l o s e 
t h e   a m o u nt s   exc l u d e d   f ro m   e u  f i n a n c i n g 
p e r   ye a r   o f   ex p e n d i t u re   a n d   p e r   M e m b e r 
State. the amounts per M ember State are 
disclosed in note 6 to the financial state -
ments  20 09  of  t he c ommiss ion.

a n n e x   3 6   t o   t h e   co m m i s s i o n   s t a f f   wo r k-
i n g   d o c u m e n t   a c c o m p a n y i n g   t h e   f i n a n-
c i a l   r e p o r t   o n   t h e   e a Gf  2 0 0 8   f i n a n c i a l 
y e a r   p r o v i d e s   i n fo r m a t i o n   o n   t h e   f i n a n -
c i a l   c o r r e c t i o n s   m a d e   o n   e x p e n d i t u r e 
f r o m   e a c h   f i n a n c i a l   y e a r.   I n f o r m a t i o n 
o n   t h e   d i s t r i b u t i o n   o f   t h e s e   c o r r e c t i o n s 
b e t w e e n   M e m b e r   S t a t e s   a n d   b e t w e e n 
s e c t o r s   i s   p r o v i d e d   i n   t h e   c o m m i s s i o n’s 
f a c t   s h e e t   ‘ M a n a g i n g   t h e   a g r i c u l t u r a l 
b u d g e t   w i s e l y ’,   w h i c h   i s   p u b l i s h e d   at   t h e 
followin g  I nter ne t address :
h t t p : / / e c . e u r o p a . e u / a g r i c u l t u r e / p u b l i /
fac t /in dex_e n.htm.

th i s   ro l e   o f   t h e   f i n a n c i a l   c l e a r a n ce   d e c i-
s i o n   wa s   a l re a d y   s e t   o u t   e x p l i c i t l y   i n   t h e 
memorandum of March 1993 by which the 
co m m i s s i o n   a p p rove d   t h e   g u i d e l i n e s   fo r 
t h e   r e f o r m   o f   t h e   c l e a r a n c e   o f   a c c o u n t s 
s ys te m   w h i c h   b e c a m e   a p p l i c a b l e   i n   1 9 9 6 
( Se c( 9 3 )   3 0 6 )   a n d   w a s   n o t   c a l l e d   i n t o 
q u e s t i o n   b y   a n y   o f   t h e   p a r t i e s   i n v o l v e d 
i n   t h e   a d o p t i o n   o f   t h e   s u b s e q u e nt   l e gi s-
lation.

78 . (a) 
ea c h   f i n a n c i a l   c o r r e c t i o n   i n c l u d e d   i n   a 
confor mit y decision is linked to a specific 
f i n a n c i a l   y e a r   w h i c h   i s   i d e n t i f i e d   i n   t h e 
an nex  to  this de cis ion .

78 . (b) 
as   a l re a d y   i n d i c ate d   i n   t h e   re p l y   to   p a ra-
g r a p h   7 3 ,   b y   t h e   e n d   o f   2 0 0 9 ,   t h e   c o n -
f o r m i t y   w o r k   o n   e x p e n d i t u r e   i n c u r r e d 
p r i o r   t o   2 0 0 3   h a d   l a r g e l y   b e e n   c o m-
pleted.

the financial statements include the per-
t i n e nt   i n fo r m at i o n   co n ce r n i n g   t h e   f i n a n-
cial cor re c tio ns  of t he year.

S ee  also  t he  rep l y  to  p aragrap hs  7 6 – 7 7 .

79 . 
w h a t   t h e   c o u r t   d e s c r i b e s   a s   l i m i t a t i o n s 
a re,   r a t h e r,   p o s i t i ve   fe a t u re s   i n h e re n t   t o 
a   s y s t e m   w h i c h   h a s   p r o v e n   i t s   v a l u e   i n 
s a f e g u a r d i n g   t h e   f i n a n c i a l   i n t e r e s t s   o f 
the eu .

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reply of the 
coMMISSIoN

8 2.
un d e r   t h e   re fo r m e d   s ys te m ,   t h e   f i n a n c i a l 
clearance decision is adopted by 30 apr il 
o f   t h e   y e a r   f o l l o w i n g   t h e   f i n a n c i a l   y e a r 
c o n c e r n e d.  t h u s   t h e   re fo r m e d   c l e a r a n c e 
o f   a c c o u n t s   p r o c e d u r e   h a s   s i g n i f i c a n t l y 
accelerated the timescale for clear ing the 
pas’ accounts. 

8 3. 
w i t h   t h e   a d o p t i o n   o f   t h e   a n n u a l   f i n a n-
c i a l   c l e a r a n c e   d e c i s i o n ,   t h e   co m m i s s i o n 
a c c e p t s   t h e   a c c o u n t s   o f   t h e   a c c r e d i t e d 
p a y i n g   a g e n c i e s   a n d   t h e   c o r r e s p o n d -
i n g   e x p e n d i t u r e   t h e r e f o r e   b e c o m e s 
d e f i n i t i v e .  t h i s   a c c e p t a n c e   i s   n o t   c a l l e d 
i n t o   q u e s t i o n   b y   t h e   p o s s i b i l i t y   o f   s u b -
s e q u e n t   f i n a n c i a l   c o r r e c t i o n s   u n d e r 
t h e   c o n f o r m i t y   c l e a r a n c e   p r o c e s s .   t h e 
a m o u nt   o f   ex p e n d i t u re   w h i c h   i s   l i k e l y   to 
b e   e x c l u d e d   f r o m   e u  f i n a n c i n g   b y   s u c h 
f u t u re   c o n fo r m i t y   d e c i s i o n s   i s   d i s c l o s e d 
as a contingent asset in the commission’s 
a c c o u n t i n g   s y s t e m   a n d   d i s c l o s e d   i n   a 
n o t e   t o   t h e   f i n a n c i a l   s t a t e m e n t s   o f   t h e 
commiss ion. 

t h e   f i n a n c i a l   s t a t e m e n t s   g i v e   a l l   t h e 
i n f o r m a t i o n   r e q u i r e d   b y   t h e   f i n a n c i a l 
r e g u l a t i o n   a n d   t h e   a c c o u n t i n g   r u l e s .   I n 
p a r t i c u l a r   t h e y   i n c l u d e   a s   a   c o n t i n g e n t 
a s s e t   a n   e s t i m ate   o f   f u t u re   f i n a n c i a l   co r-
rec tion s. 

81 . 
th e   f i n a n c i a l   c l e a ra n ce   d e c i s i o n   i s   t a k e n 
a r o u n d   s i x   m o n t h s   a f t e r   t h e   e n d   o f   t h e 
f i n a n c i a l   y e a r   i n   q u e s t i o n .   t h r o u g h   t h i s 
d e c i s i o n ,   t h e   c o m m i s s i o n   e s t a b l i s h e s 
t h e   a m o u n t   o f   e x p e n d i t u r e   r e c o g n i s e d 
a s   c h a r g e a b l e   t o   t h e   e u   b u d g e t   fo r   t h a t 
y e a r.   t h e   f a c t   t h a t   t h e   d e c i s i o n   i s   w i t h-
o u t   p re j u d i c e   t o   s u b s e q u e n t   c o n fo r m i t y 
d e c i s i o n s   i m p o s i n g   f i n a n c i a l   co r re c t i o n s 
o n   M e m b e r   S t a t e s   i s   e x p l i c i t l y   p r o v i d e d 
f o r   i n   a r t i c l e   3 0   o f   r e g u l a t i o n   (e c )   N o 
1 2 9 0 / 2 0 0 5 ,   w h i c h   h a s   t h e   s a m e   l e g a l 
s t at u s   a s   t h e   fi n a n c i a l   r e g u l at i o n .   M o re -
o ve r,   i n   s u b s t a n c e,   i t   i s   f u l l y   c o m p a t i b l e 
w i t h   t h e   fi n a n c i a l   r e g u l a t i o n ,   w h i c h   fo r 
a ny   o t h e r   e x p e n d i t u re   p rov i d e s   t h a t   t h e 
co m m i s s i o n   c a n   m a k e   e x   p o s t   c h e c k s   u p 
t o   f i v e   y e a r s   a f t e r   t h e   d i s c h a r g e   d e c i-
s i o n   o n   t h e   y e a r   i n   w h i c h   t h e   f i n a l   p a y -
ment was made. o ther wise, all budgetar y 
e x p e n d i t u r e   w o u l d   b e   c o n s i d e r e d   p r o -
v i s i o n a l   u n t i l   a n   e x   p o s t  c h e c k   i s   m a d e 
o r   t h e   f i v e - y e a r   p e r i o d   h a s   l a p s e d .   t h e 
a m o u n t   o f   e x p e n d i t u r e   w h i c h   i s   l i k e l y 
t o   b e   e xc l u d e d   f ro m   f i n a n c i n g   b y   f u t u re 
c o n f o r m i t y   d e c i s i o n s   i s   d i s c l o s e d   a s   a 
c o n t i n g e n t   a s s e t   i n   t h e   c o m m i s s i o n ’s 
a c c o u n t i n g   s y s t e m   a n d   i n   a   n o t e   t o   t h e 
f i n a n c i a l   s t a t e m e n t s .   to g e t h e r   w i t h   t h e 
f i n a n c i a l   c l e a r a n c e   d e c i s i o n ,   t h i s   d i s c l o -
s u r e   p r o v i d e s   t h e   e u r o p e a n   pa r l i a m e n t 
and the council with the information they 
requ ire fo r t he disc harg e p ro cedure. 

th e   f i n a n c i a l   s t ate m e nt s   a l re a d y   i n c l u d e 
all the infor mation required by the finan-
c i a l   re g u l at i o n   a n d   t h e   a cco u nt i n g   r u l e s. 
S ee  also  t he  rep l y  to  p aragrap hs  7 6 – 7 7 .

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84 . 
t h e   f i n a n c i a l   r e g u l a t i o n   a n d   t h e   s e c -
t o r a l   r e g u l a t i o n s   r e g a r d i n g   a g r i c u l t u r e 
g i v e   t h e   c o m m i s s i o n   t h e   r i g h t   t o   m a k e 
c h e c k s   o n   a l l   ex p e n d i t u re   fo r   s o m e   ye a r s 
a f t e r   i t   i s   i n c u r re d.  t h e   a c c o u n t s   s h o u l d 
n o t   i m p l y   t h a t ,   b e c a u s e   o f   t h i s   r i g h t ,   a l l 
the expenditure concer ned remains to be 
a c c e p t e d .   w h e r e   t h e   a m o u n t s   o f   p o t e n-
t i a l   re c ove r i e s   a re   q u a n t i f i a b l e,   t h e y   a re 
disclosed in notes 5.3 and 5.4 to the con-
solidated accounts.

t h e s e   c o n f o r m i t y   c l e a r a n c e   d e c i s i o n s 
d i s c l o s e   t h e   a m o u n t s   e x c l u d e d   f r o m   e u 
financing per year of expenditure and per 
M e m b e r   S t ate.  th e   a m o u nt s   p e r   M e m b e r 
State are disclosed in note 6 to the finan -
cial st atements 2 00 9 o f the c o mmiss ion .

85. 
th e   p u r p o s e   o f   re co rd i n g   t h e   co nt i n g e nt 
a s s e t s   i n   t h e   c o m m i s s i o n’s   a c c o u n t s   i s 
t o   d i s c l o s e   t h e   ( p o t e n t i a l )   r e c e i v a b l e s , 
based on the results of its audits, and has 
n o t   b e e n   i n te n d e d   to   p rov i d e   a ny   a s s u r -
a n c e   a s   t o   t h e   l e g a l i t y   a n d   r e g u l a r i t y   o f 
the  und er l ying  t rans ac tions.

t h e   a m o u n t   i n c l u d e d   i n   t h e   c o n t i n g e n t 
a s s e t   c o r r e s p o n d s   t o   t h e   b e s t   e s t i m a-
t i o n   o f   t h e   ex p e n d i t u re   w h i c h   i s   l i k e l y   to 
b e   exc l u d e d   f ro m   e u  f i n a n c i n g   by   f u t u re 
co n fo r m i t y   d e c i s i o n s.  th i s   a m o u nt   i s   d i s-
c l o s e d   i n   a   n o t e   t o   t h e   f i n a n c i a l   s t a t e -
m e n t s   o f   t h e   c o m m i s s i o n ,   d i v i d e d   i n t o 
eaGf  a nd eaf r d .

66

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coMMISSIoN

8 8.
th e   a n n u a l   a cco u nt s   p re s e nt   a l l   i n fo r m a -
tion required by the accounting rules and 
f i n a n c i a l   r e g u l a t i o n .   I n   p a r t i c u l a r,   t h e 
a m o u n t   o f   e x p e n d i t u r e   w h i c h   i s   l i k e l y 
t o   b e   e x c l u d e d   f r o m   e u  f i n a n c i n g   b y 
f u t u re   c o n fo r m i t y   d e c i s i o n s   i s   d i s c l o s e d 
as a contingent asset in the commission’s 
a c c o u n t i n g   s y s t e m   a n d   i n   a   n o t e   t o   t h e 
f i n a n c i a l   s t a t e m e n t s   o f   t h e   c o m m i s s i o n 
th e   a cco u nt s   a re   n o t   a m e n d e d   by   s u b s e -
quent confor mit y decisions. the financial 
e f f e c t   o f   a   c o n f o r m i t y   d e c i s i o n   f a l l s   i n 
the financial year in which the decision is 
e xe c u t e d   a n d   d o e s,   t h u s,   n o t   a m e n d   t h e 
accounts of pre vious  f inanc ial year s.

8 9. 
t h e   c o n fo r m i t y   c l e a r a n c e   i s   d e s i g n e d   t o 
e x c l u d e   e x p e n d i t u r e   f r o m   e u   f i n a n c i n g 
w h i c h   h a s   n o t   b e e n   e xe c u t e d   i n   c o m p l i-
an ce  with  e u  r ules,  th us  sh ielding  th e  e u 
budget from expenditure that should not 
b e   c h a r g e d   t o   i t .   I n   c o n t r a s t ,   i t   i s   n o t   a 
m e c h a n i s m   by   w h i c h   i r re g u l a r   p ay m e n t s 
t o   b e n e f i c i a r i e s   a r e   r e c o v e r e d ,   w h i c h 
a c c o r d i n g   t o   t h e   p r i n c i p l e   o f   s h a r e d 
m a n a g e m e nt   i s   t h e   s o l e   re s p o n s i b i l i t y   o f 
M e m b e r   S t a t e s ,   a s   r e f e r r e d   t o   i n   a r t i c l e 
9 ( 1 ) ( a ) ( i i i )   o f   co u n c i l   r e g u l a t i o n   (e c )   N o 
1 2 9 0 / 2 0 0 5   a n d   a r t i c l e   5 3 b ( 2 ) ( c )   o f   t h e 
fin ancial r eg ulation.

t h e   co m m i s s i o n   c o n s i d e r s   t h a t   t h e   c o n-
f o r m i t y   c l e a r a n c e   h a s   o v e r   t h e   y e a r s 
proven to be a st ron g incentive for  M em-
b e r   St ate s   to   i m p rove   t h e i r   m a n a g e m e nt 
and control systems and, thus, to prevent 
or de tec t and recover ir reg ular  pay ments 
t o   f i n a l   b e n e f i c i a r i e s   a s   re f l e c t e d   b y   t h e 
decreasing er ror rates at the final benefi-
ciar y  leve l.

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90 . (a) 
the conformit y clearance is not a mechan -
ism by which ir regular payments to bene -
f i c i a r i e s   a r e   r e c o v e r e d ,   w h i c h   a c c o r d i n g 
t o   t h e   p r i n c i p l e   o f   s h a r e d   m a n a g e m e n t 
a n d   t h e   r u l e s   o f   a r t i c l e   9 ( 1 ) ( a ) ( i i i )   o f 
c o u n c i l   r e g u l a t i o n   (e c )   N o   1 2 9 0 / 2 0 0 5 
a n d   a r t i c l e   5 3 b ( 2 ) ( c )   o f   t h e   f i n a n c i a l 
r e g u l a t i o n   i s   t h e   s o l e   r e s p o n s i b i l i t y   o f 
M ember States. where irregular payments 
t o   i n d i v i d u a l   b e n e f i c i a r i e s   a re   o r   c a n   b e 
i d e n t i f i e d   a s   a   r e s u l t   o f   t h e   c o n f o r m i t y 
cleara nce  p roce dures,   M emb er  State s  are 
r e q u i r e d   t o   f o l l o w   t h e m   u p   b y   r e c o v e r y 
ac tions  again st th ese b enefic iar ie s. 

9 1.
f i n a n c i a l   c o r r e c t i o n s   a r e   n o t   s a n c -
t i o n s   o n   M e m b e r   S t a t e s   a s   t h e   c o m m i s-
s i o n   s a i d   a l r e a d y   i n   t h e   m e m o r a n d u m 
o f   M a rc h   1 9 9 3   b y   w h i c h   i t   a p p ro ve d   t h e 
g u i d e l i n e s   f o r   t h e   r e f o r m   o f   t h e   c l e a r -
a n c e   o f   a c c o u n t s   s y s t e m   w h i c h   b e c a m e 
applicable in 1996 (Sec(93) 306).  the cur-
r e n t   c o n f o r m i t y   c l e a r a n c e   m e c h a n i s m , 
including the use of flat-rate cor rec tions, 
h a s   b e e n   u p h e l d   b y   t h e   c o u r t   o f   J u s-
t i c e,   w h i c h   i m p l i e s   t h a t   i t   i s   n o t   a   s a n c -
t i o n   m e c h a n i s m   a s   s a n c t i o n s   o n   M e m b e r 
States are the prerogative of the cour t of 
Just ice.

90 . (b) 
e v e n   w h e r e   f i n a n c i a l   c o r r e c t i o n s   o n l y 
r e l a t e   t o   d e f i c i e n c i e s   i n   t h e   M e m b e r 
St ate s’  m a n a g e m e nt   a n d   co nt ro l   a n d   n o t 
to   i r re g u l a r   p ay m e n t s,   t h e s e   co r re c t i o n s 
a r e   a n   i m p o r t a n t   m e a n s   t o   i m p r o v e   t h e 
M e m b e r   St ate s’  m a n a g e m e nt   a n d   co nt ro l 
s y s t e m s   a n d ,   t h u s ,   t o   p r e v e n t   o r   d e t e c t 
a n d   r e c o v e r   i r r e g u l a r   p a y m e n t s   t o   f i n a l 
b e n e f i c i a r i e s .   t h e   c o n f o r m i t y   c l e a r a n c e 
t h e r e b y   c o n t r i b u t e s   t o   t h e   l e g a l i t y   a n d 
regular it y of the transac tions at the level 
o f   t h e   f i n a l   b e n e f i c i a r i e s.   M o re ove r,   a gr i-
cultural legislation provides for effec tive, 
d i s s u a s i ve   a n d   p ro p o r t i o n a l   s a n c t i o n s   to 
b e   i m p o s e d   o n   b e n e f i c i a r i e s   w h o   h a v e 
receive d ir regu l ar p ayments.

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cONclusIONs aND   
rEcOmmENDatIONs

93 . 
t h e   c o m m i s s i o n   w e l c o m e s   t h e   c o u r t ’s 
conclusion that the clearance of accounts 
p r o c e d u r e ,   a s   r e g a r d s   t h e   r e l i a b i l i t y   o f 
t h e   a cco u nt s,   p rov i d e s   re a s o n a b l e   a s s u r -
a n c e   a n d   s u f f i c i e n t   i n f o r m a t i o n   f o r   t h e 
c o m m i s s i o n   t o   t a k e   i t s   a n n u a l   f i n a n c i a l 
cleara nce dec ision

94 . 
the commission ack nowledges the shor t -
comings identified by the  cour t concer n -
ing financial years 2007 and 2008 and has 
r a i s e d   t h e s e   i s s u e s   w i t h   M e m b e r   S t a t e s. 
a s   a   r e s u l t ,   f o r   f i n a n c i a l   y e a r   2 0 0 9 ,   t h e 
s i t u a t i o n   h a s   i m p r o v e d   f o r   a l l   t h e   n e w 
element s of  as surance mentio ned.

I n the view of the commission, an opinion 
on the inter nal control procedures would 
n o t   r e q u i r e   s p e c i f i c   t e s t i n g   a n d   a s s e s s-
m e n t   o f   t h e   r e l i a b i l i t y   o f   e a c h   k e y   a n d 
a n c i l l a r y   c o n t r o l   ( c o n f o r m i t y   a s p e c t s ) . 
the cB is only to check that the  pa has an 
administrative organisation and a system 
o f   i n t e r n a l   c o n t r o l   c o m p l y i n g   w i t h   t h e 
c r i t e r i a   s e t   o u t   i n   a n n e x   I   t o   r e g u l a t i o n 
(ec ) N o 88 5/2006. 

for the reasons set out in its reply to para -
gra p h   3 4 ,   t h e   co m m i s s i o n   co n s i d e r s   t h at 
t h e   co nt ro l   s t at i s t i c s   a re   s u f f i c i e nt l y   re l i-
able to  be  u sed fo r ass urance p ur pose s.

f o r   t h e   r e a s o n s   s e t   o u t   u n d e r   p a r a-
graph 51 above, the commission is of the 
view that the cBs’ opinions on the S oa do 
provide a dded  val ue.

68

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9 5.
t h e   c o m m i s s i o n   d o e s   n o t   c o n s i d e r   t h a t 
s i g n i f i c a n t   s h o r t c o m i n g s   a f f e c t   t h e 
i m p l e m e n t a t i o n   o f   t h e   co n fo r m i t y   c l e a r -
a n c e   p r o c e d u r e .   t h e   c o u r t ’s   c r i t i c i s m 
e s s e n t i a l l y   r e l a t e s   t o   t h e   d e s i g n   o f   t h e 
p r o c e d u r e   a s   s u c h   a n d   n o t   t o   i t s   i m p l e -
m e nt at i o n   w h i c h ,   a s   t h e   co m m i s s i o n   h a s 
set out in its replies to paragraphs 76–77, 
7 8 ( b)   a n d   8 1 ,   i s   f u l l y   i n   l i n e   w i t h   t h e   c u r -
rent r ules, as ack nowledg ed by t he  cour t 
of J us tice, and h as  over  the  past  1 5  yea r s 
demonstrated its value in excluding non-
confor m  expe nditure from e u  fin anc i n g.

9 6. 
fo r   f i n a n c i a l   y e a r   2 0 0 9 ,   t h e   p a r t   o f   t h e 
expenditure covered by the commission’s 
c o n f o r m i t y   a u d i t s   i n c r e a s e d   t o   6 1  % 7. 
t h e   c o m m i s s i o n   c o n s i d e r s   t h i s   t o   b e   a 
s u f f i c i e n t   c o v e r a g e   a n d ,   t h e r e f o r e ,   t h a t 
t h e   r i s k   a n a l y s i s   r e s u l t s   i n   a n   a d e q u a t e 
n u m b e r   o f   m e a s u r e s   a n d   pa s   i d e n t i f i e d 
as pr ior ities for confor mit y  aud i ts.

t h e   c o m m i s s i o n   c o n s i d e r s   t h a t   a   c o m-
p l e t e   c o v e r a g e   o f   a l l   a u d i t   a r e a s   o v e r, 
s a y,   a   t h r e e - y e a r   p e r i o d   w o u l d   n o t   b e 
possible even with significantly increased 
re s o u rce s,   a n d   wo u l d   g o   a g a i n s t   t h e   s i n-
gle audit concept. I t would be dispropor -
t i o n a t e   t o   d e v o t e   h u m a n   a n d   f i n a n c i a l 
re s o u rce s   to   t h e   a u d i t   o f   a u d i t   f i e l d / p ay-
ing agenc y pairs with limited expenditure 
and a low r isk . therefore, the commission 
c a r r i e s   o u t   i t s   c o n fo r m i t y   a u d i t   wo r k   o n 
t h e   b a s i s   o f   a   ce nt ra l   r i s k   a n a l ys i s,   w h i c h 
i n c o r p o r a t e s   a l l   t h e   n e c e s s a r y   r i s k   f a c -
t o r s   a n d   i s   i n   l i n e   w i t h   i n t e r n a t i o n a l l y 
accepted auditing  stan dard s.

7  26,5 % for ‘Intervention on agricultural markets’, 70,9 % for 
‘direct aid’ and 43,6 % for ‘rural development’.

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N o r   w o u l d   i t   b e   p o s s i b l e   t o   l i m i t   s u c h 
s u b s t a n t i v e   t e s t i n g   t o   c a s e s   w h e r e   t h e 
c o n s e q u e n c e s   a r e   q u a n t i f i a b l e   a n d   s i g-
n i f i c a n t   a s   t h o s e   c o n c l u s i o n s   c a n n o t   b e 
d r a w n   a t   t h e   t i m e   o f   t h e   a u d i t   a n d ,   i f   i t 
w e r e   i m p l e m e n t e d   t o w a r d s   t h e   e n d   o f 
t h e   p r o c e d u r e,   s u c h   s u b s t a n t i v e   t e s t i n g 
may well be ir relevant and/or impossible. 
( S ee th e reply to paragraph 6 5) . 

f l a t - r a t e   c o r r e c t i o n s   r e f l e c t   t h e   d e g r e e 
o f   f i n a n c i a l   r i s k   fo r   t h e   e u  b u d g e t   w h i c h 
results from the deficiencies in the M em-
b e r   St ate s’  m a n a g e m e nt   a n d   co nt ro l   s ys-
te m s.  th e re fo re,   t h e   co m m i s s i o n   co n s i d-
e r s   t h a t   t h e r e   i s   a   c o r r e l a t i o n   b e t w e e n 
t h e   f l at   rate   u s e d   a n d   t h e   l e ve l   o f   i r re g u-
l a r   p ay m e n t s   t o   f i n a l   b e n e f i c i a r i e s.   co n -
f o r m i t y   c l e a r a n c e   i n c l u d e s   c a s e s   w h e r e 
t h e   d e f i c i e n c i e s   fo u n d   a re   l i m i te d   to   t h e 
c o n t r o l   s y s t e m   i n   p l a c e   a n d   c a n n o t   b e 
linked to individual irregular payments to 
beneficiar ies but, because of the flat-rate 
a p p ro a c h   t a k e n   fo r   c o n t ro l   d e f i c i e n c i e s, 
t h e   r i s k   to   t h e   e u  b u d g e t   i s   cove re d,   e. g. 
w h e n   a   M e m b e r   S t a t e   d o e s   n o t   a c c o m-
plish  th e minimum number of controls.

9 8. 
t h e   m a i n   o b j e c t i v e   o f   t h e   1 9 9 6   r e f o r m 
o f   t h e   c l e a r a n c e   o f   a c c o u n t s   p r o c e d u r e 
was to enforce the effec tiveness and effi-
c i e n c y   i n   a c h i e v i n g   t h e   g e n e r a l   a i m s   o f 
th e c ap an d th e f in ancial r eg ulation. 

at   t h e   e n d   o f   2 0 0 9 ,   t h e   c o n fo r m i t y   wo r k 
on expenditure incurred in the years prior 
to 2 0 03  had largely  bee n comple te d.

M o re ove r,   fo r   d i re c t   a i d s,   w h i c h   i n   f i n a n-
cial year 2009 accounted for 72  % of total 
a gr i c u l t u ra l   ex p e n d i t u re   a n d   a re   cove re d 
b y   t h e   IacS ,   a l l   M e m b e r   S t a t e s   w i t h   t h e 
e x c e p t i o n   o f   l u x e m b o u r g   w e r e   a u d i t e d 
over the p ast  t hree years.

th e   2 4 - m o nt h   r u l e   i s   a   d e l i b e rate   c h o i ce 
o f   t h e   e u   l e gi s l ato r   w i t h   a   v i e w   to   e n s u r -
i n g   l e g a l   c e r t a i n t y   f o r   M e m b e r   S t a t e s . 
I t   i s   i n h e r e n t   i n   t h e   a p p l i c a t i o n   o f   t h i s 
r u l e   t h a t   c e r t a i n   e x p e n d i t u r e   c a n n o t   b e 
s u b j e c t   to   f i n a n c i a l   co r re c t i o n s   a l t h o u g h 
i t   m a y   b e   a f f e c t e d   b y   d e f i c i e n c i e s .   t h e 
co m m i s s i o n   h a s   re p e ate d l y   p ro p o s e d   a n 
e x t e n s i o n   o f   t h i s   t i m e   l i m i t ,   b u t   t h e s e 
p ro p o s a l s   we re   t u r n e d   d ow n   by   b o t h   t h e 
cou ncil  a nd t he e u rop ea n p ar l ia me nt.

97. 
th e   co m m i s s i o n   co n s i d e r s   t h at   by   fo c u s-
ing on the fu nc t ion ing o f M emb er  St ates’ 
m a n a g e m e n t   a n d   c o n t r o l   s y s t e m s ,   t h e 
s ys te m - b a s e d   a u d i t   a p p ro a c h   i s   t h e   m o s t 
e f fe c t i v e   a n d   e f f i c i e n t   w a y   o f   a c h i e v i n g 
i t s   o b j e c t i ve   o f   s o u n d   f i n a n c i a l   m a n a g e -
m e nt.  to   s u p p l e m e nt   t h i s   wo r k   by   a   s u b -
s t a nt i ve   te s t i n g   o f   a   re p re s e nt at i ve   s a m-
ple of individual payments in the contex t 
o f   e a c h   o f   t h e   a r o u n d   1 5 0   o n - t h e - s p o t 
c o n f o r m i t y   a u d i t s   c a r r i e d   o u t   b y   t h e 
a g r i c u l t u r e   a n d   r u r a l   d e v e l o p m e n t   d G 
e a c h   y e a r   w o u l d   r e q u i r e   a   s u b s t a n t i a l 
( m o re   t h a n   t wo fo l d )   i n c re a s e   i n   t h e   c u r-
re nt   a u d i t   re s o u rce s   w h i c h   wo u l d   n o t   b e 
in line with any cost–benefit analysis. the 
i n c re a s e   wo u l d   b e   e ve n   h i g h e r   ( f i ve fo l d ) 
i f   t h e   co m m i s s i o n   h a d   t o   c a r r y   o u t   s u c h 
s u b s t a n t i v e   t e s t i n g   o n   a l l   a u d i t   f i e l d s 
over, say, a t hree -year p er io d.

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reply of the 
coMMISSIoN

1 01 .
w i t h   t h e   a d o p t i o n   o f   t h e   a n n u a l   f i n a n-
c i a l   c l e a r a n c e   d e c i s i o n ,   t h e   co m m i s s i o n 
a c c e p t s   t h e   a c c o u n t s   o f   t h e   a c c r e d i t e d 
p a y i n g   a g e n c i e s   a n d   t h e   c o r r e s p o n d -
i n g   e x p e n d i t u r e   t h e r e f o r e   b e c o m e s 
d e f i n i t i v e .  t h i s   a c c e p t a n c e   i s   n o t   c a l l e d 
i n t o   q u e s t i o n   b y   t h e   p o s s i b i l i t y   o f   s u b -
s e q u e n t   f i n a n c i a l   c o r r e c t i o n s   u n d e r 
t h e   c o n f o r m i t y   c l e a r a n c e   p r o c e s s .   t h e 
a m o u nt   o f   ex p e n d i t u re   w h i c h   i s   l i k e l y   to 
b e   e x c l u d e d   f r o m   e u  f i n a n c i n g   b y   s u c h 
f u t u re   c o n fo r m i t y   d e c i s i o n s   i s   d i s c l o s e d 
as a contingent asset in the commission’s 
a c c o u n t i n g   s y s t e m   a n d   d i s c l o s e d   i n   a 
n o t e   t o   t h e   f i n a n c i a l   s t a t e m e n t s   o f   t h e 
commiss ion.

1 02 . 
fi n a n c i a l   c o r r e c t i o n s   a r e   n o t   s a n c t i o n s 
b u t   a n   e x c l u s i o n   f r o m   e u  f i n a n c i n g   o f 
expen diture wh ich  h as n ot bee n e ffec ted 
i n   co n fo r m i t y   w i t h   e u  r u l e s.   th e s e   f i n a n-
c i a l   c o r re c t i o n s   a re   n o t  ‘n e g o t i a b l e’,   b u t 
a r e   d e t e r m i n e d   b y   t h e   c o m m i s s i o n   o n 
t h e   b a s i s   o f   t h e   p r i n c i p l e s   s e t   o u t   i n   i t s 
w o r k i n g   d o c u m e n t   vI / 5 3 3 0 / 9 7   a n d   t h e 
i n f o r m a t i o n   r e c e i v e d   i n   t h e   c o u r s e   o f 
t h e   a d m i n i s t r a t i v e   p r o c e d u r e   l e a d i n g 
t o   t h e   c o n fo r m i t y   d e c i s i o n .  t h e   M e m b e r 
S t a t e ’s   p a r t i c i p a t i o n   i n   t h i s   p r o c e d u r e 
i s   p a r t   o f   t h e   p r i n c i p l e   a u d i   e t   a l t e r a m 
p a r t e m ,  a l l o w i n g   t h e   M e m b e r   S t a t e   t o 
g i ve   i t s   o p i n i o n   a n d   t o   p re s e n t   i t s   p o i n t 
o f   v i e w ,   a n d   t h e   c o m m i s s i o n   i s   a n d 
should be willing to listen to the M ember 
S t ate’s   a rg u m e nt s   a n d   to   t a k e   t h e s e   i nto 
a cco u nt.  th e   n u m b e r   o f   f i n a n c i a l   co r re c -
tions upheld by the cour t of Justice dem-
onstrate that the amounts are, in general, 
c lear an d indis putable.

99 . 
ea c h   f i n a n c i a l   c o r r e c t i o n   i n c l u d e d   i n   a 
confor mit y decision is linked to a specific 
f i n a n c i a l   y e a r   w h i c h   i s   i d e n t i f i e d   i n   t h e 
an nex  to  this de cis ion .

10 0. 
th e   f i n a n c i a l   c l e a ra n ce   d e c i s i o n   i s   t a k e n 
a r o u n d   s i x   m o n t h s   a f t e r   t h e   e n d   o f   t h e 
f i n a n c i a l   y e a r   i n   q u e s t i o n .   t h r o u g h   t h i s 
d e c i s i o n ,   t h e   c o m m i s s i o n   e s t a b l i s h e s 
t h e   a m o u n t   o f   e x p e n d i t u r e   r e c o g n i s e d 
a s   c h a r g e a b l e   t o   t h e   e u   b u d g e t   fo r   t h a t 
y e a r.   t h e   f a c t   t h a t   t h e   d e c i s i o n   i s   w i t h-
o u t   p re j u d i c e   t o   s u b s e q u e n t   c o n fo r m i t y 
d e c i s i o n s   i m p o s i n g   f i n a n c i a l   co r re c t i o n s 
o n   M e m b e r   S t a t e s   i s   e x p l i c i t l y   p r o v i d e d 
f o r   i n   a r t i c l e   3 0   o f   r e g u l a t i o n   (e c )   N o 
1 2 9 0 / 2 0 0 5 ,   w h i c h   h a s   t h e   s a m e   l e g a l 
s t at u s   a s   t h e   fi n a n c i a l   r e g u l at i o n .   M o re -
o ve r,   i n   s u b s t a n c e,   i t   i s   f u l l y   c o m p a t i b l e 
w i t h   t h e   fi n a n c i a l   r e g u l a t i o n ,   w h i c h   fo r 
a ny   o t h e r   e x p e n d i t u re   p rov i d e s   t h a t   t h e 
co m m i s s i o n   c a n   m a k e   e x   p o s t   c h e c k s   u p 
t o   f i v e   y e a r s   a f t e r   t h e   d i s c h a r g e   d e c i-
s i o n   o n   t h e   y e a r   i n   w h i c h   t h e   f i n a l   p a y -
ment was made. o ther wise, all budgetar y 
e x p e n d i t u re   wo u l d   b e   c o n s i d e re d   p rov i-
s i o n a l   u n t i l   a n   e x   p o s t   c h e c k   i s   m a d e   o r 
the  five -ye ar p er io d has l ap sed. 

t h e   a m o u n t   o f   e x p e n d i t u r e   w h i c h   i s 
l i k e l y   t o   b e   e x c l u d e d   f r o m   f i n a n c i n g   b y 
f u t u re   c o n fo r m i t y   d e c i s i o n s   i s   d i s c l o s e d 
as a contingent asset in the commission’s 
a c c o u n t i n g   s y s t e m   a n d   i n   a   n o t e   t o   t h e 
f i n a n c i a l   s t a t e m e n t s .   to g e t h e r   w i t h   t h e 
f i n a n c i a l   c l e a r a n c e   d e c i s i o n ,   t h i s   d i s c l o -
s u r e   p r o v i d e s   t h e   e u r o p e a n   pa r l i a m e n t 
a n d   t h e   c o u n c i l   w i t h   t h e   i n f o r m a t i o n 
they require for the discharge procedure. 
S ee  th e repl y to  p aragrap h s 76 – 7 7 .

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coMMISSIoN

10 3. 
the conformit y clearance is not a mechan -
ism by which ir regular payments to bene -
f i c i a r i e s   a re   re c o ve re d   w h i c h ,   a c c o rd i n g 
t o   t h e   p r i n c i p l e   o f   s h a r e d   m a n a g e m e n t 
a n d   t h e   r u l e s   o f   a r t i c l e   9 ( 1 ) ( a ) ( i i i )   o f 
c o u n c i l   r e g u l a t i o n   (e c )   N o   1 2 9 0 / 2 0 0 5 
and ar ticle 53b(2)(c) of the financial reg-
ulat ion  is t he sole res p on sib il it y  of  M em-
ber States. however, where such ir regular 
p a y m e n t s   a r e ,   o r   c a n   b e ,   i d e n t i f i e d   a s   a 
r e s u l t   o f   t h e   c o n f o r m i t y   c l e a r a n c e   p r o - 
 c e d u r e ,   M e m b e r   S t a t e s   a r e   r e q u i r e d 
t o   f o l l o w   t h e m   u p   b y   r e c o v e r y   a c t i o n s 
again st  t he  ben eficiar ies.

10 4. 
t h e   c o m m i s s i o n   c o n s i d e r s   t h e   c u r r e n t 
s y s t e m   t o   f u n c t i o n   w e l l   a n d   t o   a c h i e v e 
i t s   o v e r a l l   o b j e c t i v e s .   I t   w i l l ,   h o w e v e r, 
c o n t i n u e   t o   i m p r o v e   i t s   o p e r a t i o n s   i n 
p r a c t i c e   a n d ,   w h e r e   n e c e s s a r y ,   s u b -
m i t   a p p r o p r i a t e   p r o p o s a l s   f o r   f u r t h e r 
i m p r o v e m e n t s   t o   t h e   e u r o p e a n   p a r l i a-
m e n t   a n d   t h e   c o u n c i l   f o r   t h e   p o s t - 2 0 1 3 
per iod.

10 4. (a )
t h e   c o m m i s s i o n   c o n s i d e r s   t h a t ,   i n   g e n-
e ra l,   t h e   r u l e s   a n d   re s p o n s i b i l i t i e s   o f   t h e 
d i f f e r e n t   p a r t i e s   a r e   s u f f i c i e n t l y   c l e a r l y 
d e f i n e d   i n   t h e   ex i s t i n g   re g u l at i o n s   w h i l e 
t a k i n g   a c c o u n t   o f   t h e   n e e d   t o   m a i n t a i n 
t h e   n e ce s s a r y   f l ex i b i l i t y.   I t   w i l l,   h owe ve r, 
consider whether to define in more detail 
t h e   r o l e   o f   t h e   cB s   i n   t h e   r u l e s   f o r   t h e 
post-2 013 pe r io d.

1 04 . (b)
t h e   e x i s t i n g   r u l e s   a l r e a d y   p r o v i d e   f o r   a 
t i m e   l i m i t   fo r   t h e   a d o p t i o n   o f   t h e   a n n u a l 
f i n a n c i a l   c l e a r a n c e   d e c i s i o n .  ti m e   l i m i t s 
f o r   t h e   c o n c l u s i o n   o f   c o n f o r m i t y   c l e a r -
a n c e   p r o c e d u r e s   w o u l d   g o   a g a i n s t   t h e 
o b j e c t i ve   o f   p ro te c t i n g   t h e   e u’s   f i n a n c i a l 
i n t e r e s t s   a s   t h e y   w o u l d   e x c l u d e   f i n a n -
c i a l   c o r r e c t i o n   a f t e r   t h e   d e a d l i n e   h a s 
e l a p s e d.  th e re fo re,   t h e   co m m i s s i o n   d o e s 
not intend to propose the introduc tion of 
suc h a dditional time limits.

1 04 . (c )
th e   f i n a n c i a l   c l e a ra n ce   d e c i s i o n   i s   t a k e n 
a r o u n d   s i x   m o n t h s   a f t e r   t h e   e n d   o f   t h e 
f i n a n c i a l   y e a r   i n   q u e s t i o n .   t h r o u g h   t h i s 
d e c i s i o n ,   t h e   c o m m i s s i o n   e s t a b l i s h e s 
t h e   a m o u n t   o f   e x p e n d i t u r e   r e c o g n i s e d 
a s   c h a r g e a b l e   t o   t h e   e u   b u d g e t   fo r   t h a t 
y e a r.   t h e   f a c t   t h a t   t h e   d e c i s i o n   i s   w i t h-
o u t   p re j u d i c e   t o   s u b s e q u e n t   c o n fo r m i t y 
d e c i s i o n s   i m p o s i n g   f i n a n c i a l   co r re c t i o n s 
o n   M e m b e r   S t a t e s   i s   e x p l i c i t l y   p r o v i d e d 
f o r   i n   a r t i c l e   3 0   o f   r e g u l a t i o n   (e c )   N o 
1 2 9 0 / 2 0 0 5 ,   w h i c h   h a s   t h e   s a m e   l e g a l 
s t at u s   a s   t h e   fi n a n c i a l   r e g u l at i o n .   M o re -
o ve r,   i n   s u b s t a n c e,   i t   i s   f u l l y   c o m p a t i b l e 
w i t h   t h e   fi n a n c i a l   r e g u l a t i o n ,   w h i c h   fo r 
a ny   o t h e r   e x p e n d i t u re   p rov i d e s   t h a t   t h e 
co m m i s s i o n   c a n   m a k e   e x   p o s t   c h e c k s   u p 
t o   f i v e   y e a r s   a f t e r   t h e   d i s c h a r g e   d e c i-
s i o n   o n   t h e   y e a r   i n   w h i c h   t h e   f i n a l   p a y -
ment was made. o ther wise, all budgetar y 
e x p e n d i t u re   wo u l d   b e   c o n s i d e re d   p rov i-
s i o n a l   u n t i l   a n   e x   p o s t   c h e c k   i s   m a d e   o r 
th e five -ye ar per iod has  lap sed. 

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coMMISSIoN

t h e   c o n f o r m i t y   c l e a r a n c e   d e c i s i o n s 
i d e n t i f y   t h e   a m o u n t s   e x c l u d e d   f r o m   e u 
financing per year of expenditure and per 
M e m b e r   S t ate.  th e   a m o u nt s   p e r   M e m b e r 
State are disclosed in note 6 to the finan -
cial statements  200 9  of th e c ommiss ion .

1 04 . (e) 
un d e r   t h e   re fo r m e d   s ys te m ,   t h e   f i n a n c i a l 
clearance decision is adopted by 30 apr il 
o f   t h e   y e a r   f o l l o w i n g   t h e   f i n a n c i a l   y e a r 
c o n c e r n e d.  t h u s   t h e   re fo r m e d   c l e a r a n c e 
o f   a c c o u n t s   p r o c e d u r e   h a s   s i g n i f i c a n t l y 
accelerated the timescale for clear ing the 
pas’ accounts. 

th e time  nee ded for completin g th e co n-
fo r m i t y   p ro ce d u re   d e p e n d s   o n   a   n u m b e r 
o f   f a c to r s,   s o m e   o f   w h i c h   a re   o u t s i d e   t h e 
co m m i s s i o n’s   re s p o n s i b i l i t y   a n d   co nt ro l. 
S u c h   f a c t o r s   i n c l u d e ,   f o r   e x a m p l e ,   t h e 
c o m p l e x i t y   o f   t h e   c a s e ,   r e q u i r i n g   a d d i-
t i o n a l   wo r k   o r   e ve n   a d d i t i o n a l   m i s s i o n s, 
t h e   re s p e c t   o f   d e a d l i n e s   b y   t h e   M e m b e r 
S t a t e s   a n d   t h e   f o l l o w - u p   o f   t h e   r e c o m-
m e n d a t i o n s   o f   t h e   c o n c i l i a t i o n   B o d y . 
fu r t h e r m o r e ,   q u i t e   o f t e n   t h e   t a r g e t   i s 
e x c e e d e d   i n   o r d e r   t o   f u l l y   r e s p e c t   t h e 
M ember State’s r ight of defence, which is 
a   f u n d a m e n t a l   p r i n c i p l e   o f   t h e   co n fo r m-
i t y   c l e a r a n c e   p r o c e d u r e   a n d   e x p l i c i t l y 
re q u i re d   by   ar t i c l e   4 2 ( 2 ) ( c )   o f   t h e   I m p l e -
m e n t i n g   r u l e s   t o   t h e   fi n a n c i a l   r e g u l a -
tion .

t h e   a m o u n t   o f   e x p e n d i t u r e   w h i c h   i s 
l i k e l y   t o   b e   e x c l u d e d   f r o m   f i n a n c i n g   b y 
f u t u re   c o n fo r m i t y   d e c i s i o n s   i s   d i s c l o s e d 
as a contingent asset in the commission’s 
a c c o u n t i n g   s y s t e m   a n d   i n   a   n o t e   t o   t h e 
f i n a n c i a l   s t a t e m e n t s .   to g e t h e r   w i t h   t h e 
f i n a n c i a l   c l e a r a n c e   d e c i s i o n ,   t h i s   d i s c l o -
s u r e   p r o v i d e s   t h e   e u r o p e a n   pa r l i a m e n t 
and the council with the information they 
requ ire fo r t he disc harg e p ro cedure.

th i s   ro l e   o f   t h e   f i n a n c i a l   c l e a r a n ce   d e c i-
s i o n   wa s   a l re a d y   s e t   o u t   e x p l i c i t l y   i n   t h e 
memorandum of March 1993 by which the 
co m m i s s i o n   a p p rove d   t h e   g u i d e l i n e s   fo r 
t h e   r e f o r m   o f   t h e   c l e a r a n c e   o f   a c c o u n t s 
s ys te m   w h i c h   b e c a m e   a p p l i c a b l e   i n   1 9 9 6 
( Se c( 9 3 )   3 0 6 )   a n d   w a s   n o t   c a l l e d   i n t o 
q u e s t i o n   b y   a n y   o f   t h e   p a r t i e s   i n v o l v e d 
i n   t h e   a d o p t i o n   o f   t h e   s u b s e q u e nt   l e gi s-
lation. 

S ee  also  t he  rep l y  to  p aragrap h  9 7 .

10 4. (d)
t h e   e s t i m a t e d   a m o u n t   o f   e x p e n d i t u r e 
w h i c h   i s   l i k e l y   t o   b e   e x c l u d e d   f r o m   e u 
f i n a n c i n g   by   f u t u re   co n fo r m i t y   d e c i s i o n s 
i s   d i s c l o s e d   a s   a   c o n t i n g e n t   a s s e t   i n   t h e 
commission’s accounting system and dis-
c l o s e d   i n   t h e   n o te   to   t h e   f i n a n c i a l   s t ate -
m e n t s   o f   t h e   c o m m i s s i o n .   I t   w o u l d   n o t 
be appropr iate to make an assessment by 
M e m b e r   St ate   o r   by   b u d g e t   a re a   o f   t h e s e 
amounts, which are at present a best esti-
m a te   a n d   m ay   c h a n g e   w h e n   a   f i n a l   d e c i-
sion is taken, nor to include such detailed 
infor m atio n in  t he financ ial  statem ent s.

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M o re ove r,   t h e   f l at- rate   m e t h o d o l o g y   h a s 
b e e n   a cce p te d   by   t h e   co u r t   o f   J u s t i ce   a s 
b e i n g   i n   c o n fo r m i t y   w i t h   t h e   l e g a l   r u l e s 
gover ning the confor mit y wor k . I n par tic -
u l a r,   t h e   c o u r t   o f   J u s t i c e   h a s   c o n f i r m e d 
t h a t   i t   i s   n o t   u p   t o   t h e   c o m m i s s i o n   t o 
u n d e r t a k e   t h e   c h e c k s   n e c e s s a r y   t o   p u t 
a   p r e c i s e   f i g u r e   t o   t h e   l o s s e s   i n c u r r e d , 
b u t   r a t h e r   i t   i s   f o r   t h e   M e m b e r   S t a t e   t o 
show that the commission’s estimate was 
excess ive. 

the commission has recently put for ward 
a   s y s t e m   b y   w h i c h   M e m b e r   S t a t e s   c a n , 
f r o m   2 0 1 0 ,   r e i n f o r c e   t h e   o v e r a l l   f r a m e -
w o r k   f o r   g a i n i n g   r e a s o n a b l e   a s s u r a n c e 
o n   l e g a l i t y   a n d   r e g u l a r i t y   o f   t r a n s a c -
t i o n s   a t   t h e   l e v e l   o f   f i n a l   b e n e f i c i a r i e s . 
to this end, cBs should ex tend their wor k 
beyond the present requirements by fully 
r e - p e r f o r m i n g ,   f o r   a   g i v e n   e x p e n d i t u r e 
p o p u l a t i o n ,   a   r e p r e s e n t a t i v e   s a m p l e   o f 
t r a n s a c t i o n s   w h i c h   t h e   pa  i n   q u e s t i o n 
has checked on the spot. the wor k would 
cover the entire handling of the file, from 
re ce i p t   o f   t h e   a i d   a p p l i c a t i o n   to   t h e   c a l-
c u l a t i o n   a n d   e xe c u t i o n   o f   t h e   f i n a l   p a y -
ment.

1 04 . (f  )
financial correc tions imposed on M ember 
States through conformit y clearance deci-
s i o n s   a re   n o t   s a n c t i o n s   b u t   a n   e xc l u s i o n 
f ro m   e u  f i n a n c i n g   o f   e x p e n d i t u re   w h i c h 
h a s   n o t   b e e n   e f fe c te d   i n   co n fo r m i t y   w i t h 
e u  r u l e s .   t h i s   i s   a l s o   c o n f i r m e d   b y   t h e 
j ur ispruden ce of the c our t of  Justice.

1 04 . (g)
t h e   c o m m i s s i o n   w i l l   c o n t i n u e   t o   s u p e r-
v i s e   t h e   wo r k   o f   t h e   c e r t i f i c a t i o n   b o d i e s 
th roug h specific  audit vis its.

t h e   u s e   o f   f l a t   r a t e s   i s   f u l l y   i n   l i n e   w i t h 
t h e   o b j e c t i v e   o f   t h e   c o n f o r m i t y   c l e a r -
an ce a nd t he mos t effec tive an d e f fi cie nt 
w a y   o f   a c h i e v i n g   t h i s   o b j e c t i v e.   I t   t a k e s 
a cco u nt   o f   t h e   f a c t   t h at   i t   i s   n o t   p o s s i b l e 
to   t a k e   a   s t at i s t i c a l l y   va l i d   s a m p l e   i n   t h e 
c o n t e x t   o f   e a c h   o f   t h e   a r o u n d   1 5 0   c o n-
fo r m i t y   m i s s i o n s   c a r r i e d   o u t   by   t h e   agr i-
c u l t u r e   a n d   ru r a l   d e v e l o p m e n t   D G e a c h 
y e a r.   N o r   w o u l d   i t   b e   p o s s i b l e   t o   l i m i t 
s u c h   s u b s t a n t i ve   t e s t i n g   t o   c a s e s   w h e re 
t h e  ‘c o n s e q u e n c e s   a r e   q u a n t i f i a b l e   a n d 
s i g n i f i c a n t ’  a s   t h o s e   c o n c l u s i o n s   c a n n o t 
b e   d r a w n   a t   t h e   t i m e   o f   t h e   a u d i t   a n d , 
i f   i t   w e r e   i m p l e m e n t e d   t o w a r d s   t h e   e n d 
o f   t h e   p r o c e d u r e   s u c h   s u b s t a n t i v e   t e s t -
i n g   m ay   we l l   b e   i r re l e va nt   a n d / o r   i m p o s-
sible. 

f u r t h e r m o r e ,   a s   a g r i c u l t u r a l   e x p e n d i-
t u r e   i s   i m p l e m e n t e d   u n d e r   s h a r e d   m a n-
a g e m e n t ,   t h e   M e m b e r   S t a t e s   a r e   b e t t e r 
p l a c e d   t h a n   t h e   c o m m i s s i o n   t o   a s s e s s 
and provide evidence of the real financial 
l o s s   o r   r i s k   fo r   t h e   e u  b u d g e t .   t h e   o p e r -
a t i o n a l   h a n d b o o k   e x p l i c i t l y   r e c o g n i s e s 
this   an d  req uires  the  co mmis sio n  to  tak e 
such evidence, if reliable, into account.  a 
m o re   p re c i s e   c a l c u l at i o n   o f   t h e   f i n a n c i a l 
l o s s   fo r   t h e   e u  b u d g e t   t h e re fo re   re q u i re s 
t h e   a c t i v e   c o o p e r a t i o n   o f   t h e   M e m b e r 
S t a t e   c o n c e r n e d   a t   a l l   l e ve l s   o f   t h e   c o n-
f o r m i t y   c l e a r a n c e   p r o c e d u r e   b e c a u s e 
o n l y   t h e   M e m b e r   St ate   h a s   a l l   t h e   n e ce s-
s a r y   i n fo r m at i o n   to   m a k e   s u c h   a   c a l c u l a-
tion. unfor tunately, however, despite the 
c o m m i s s i o n’s   r e q u e s t s ,   M e m b e r   S t a t e s 
of ten do not avail themselves of this pos-
sibilit y.

Special r eport No 7/2010 — audit of the clearance of accounts procedure

Special r eport No 7/2010 — audit of the clearance of accounts procedure

european court of auditors

special report No 7/2010

audit of the clearance of accounts procedure

luxembourg: publications office of the european union

2010 — 73 pp. — 21 × 29.7 cm

ISBN 978-92-9207-751-8

doi:10.2865/33601

how to obtain Eu publications

free publications:

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via	EU	Bookshop	(http://bookshop.europa.eu);

	at	the	European	Union’s	representations	or	delegations.	You	can	obtain	their	contact	details	 
on the Internet (http://ec.europa.eu) or by sending a fax to +352 2929-42758.

Priced publications:

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(http://publications.europa.eu/others/agents/index_en.htm).

q
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whIlSt the  MaNa GeMeNt  of  a GrIcultural  eXpeNdIture 

IS, 

IN  the  MaIN ,  Shared  Be t weeN   the  MeMBer  StateS   aNd  the 

coMMISSIoN , the  lat ter  IS  SuppoSed to  fINally  recoGNISe 

the eXpeNdIture coNcerNed to aSSuMe reSpoNSIBIlIt y for 

the IMpleMeNtatIoN  of the BudGet.  the procedure uSed for 

thIS  IS  called the clearaNce of accouNt S aNd coNSISt S of 

t wo Sta GeS . thIS  SpecIal report outlINeS  the reSult S of the 

court ’S  eX aMINatIoN   of  Both  Sta GeS   of the  clearaNce  of 

accouNt S procedure, whIch aIMed to deterMINe whether 

they Met the oBJec tIveS  Set aNd allowed the  coMMISSIoN  

aNd other  StakeholderS  to GaIN  the NeceSSary  INforM atIoN  

aS  to the accuracy of the accouNt S aNd the leGalIty aNd 

reGularIty of a GrIcultural eXpeNdIture.

europeaN  court of audItorS