COMMISSION STAFF WORKING DOCUMENT Methodology regarding the statistical evaluation of reported irregularities for 2013 Accompanying the document REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Protection of the European Union's financial interests - Fight against Fraud Annual Report 2013
Date: 2014-07-17
Institutions: European Commission
Subjects: European Anti-fraud Office, customs fraud, fraud against the EU, general budget (EU), statistics, tax evasion













EUR-Lex - 52014SC0246 - EN











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52014SC0246

COMMISSION STAFF WORKING DOCUMENT Methodology regarding the statistical evaluation of reported irregularities for 2013 Accompanying the document REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Protection of the European Union's financial interests - Fight against Fraud Annual Report 2013 /* SWD/2014/0246 final */









TABLE OF
CONTENTS
COMMISSION STAFF WORKING DOCUMENT
Methodology regarding the statistical evaluation of reported irregularities for
2013
1........... INTRODUCTION....................................................................................................... 3
1.1........ The legal framework for
irregularities reporting........................................................... 4
1.2........ Expenditure – contents of the
reporting obligation and derogations........................... 5
1.2.1..... The reporting obligation................................................................................................ 5
1.2.2..... Derogations to the reporting
obligation........................................................................ 6
1.3........ Revenue – Traditional Own
Resources........................................................................ 6
1.3.1..... Monitoring of establishment and
recovery TOR.......................................................... 7
1.3.1.1.. Procedure for managing Member
States’ reports for write-off.................................... 7
1.3.2..... Commission’s inspection.............................................................................................. 8
1.3.3..... Particular cases of Member State failure to recover TOR............................................ 8
1.3.4..... Detection of fraud and
irregularities............................................................................ 8
1.3.5..... Categorisation of cases by amounts
involved............................................................... 9
1.3.6..... Recovery....................................................................................................................... 9
2........... DEFINITIONS.......................................................................................................... 11
2.1........ Legal definitions......................................................................................................... 11
2.1.1..... Irregularity.................................................................................................................. 11
2.1.2..... Fraud........................................................................................................................... 11
2.1.3..... Suspected fraud.......................................................................................................... 12
2.2........ Definitions applied in the
analysis.............................................................................. 12
2.3........ Indicators.................................................................................................................... 12
2.3.1..... Fraud Detection Rate and
Irregularity Detection Rate.............................................. 12
2.3.2..... Fraud Frequency and Fraud Amounts
Levels............................................................ 13
2.3.3..... Detection Efficiency................................................................................................... 14
2.3.4..... Reporting Efficiency.................................................................................................. 14
2.3.5..... Ratio of Established Fraud......................................................................................... 15
2.3.6..... Error Rate................................................................................................................... 15
2.4........ Assumptions and hypothesis...................................................................................... 15
1.           INTRODUCTION
The present commission staff working document
accompanies the Annual Report from the Commission to the Parliament and the
Council on the protection of the European Union’s
financial interests and the fight against fraud (further referred to it as
‘Report’) adopted on the basis of article 325 of the
Treaty on the Functioning of the European Union (TFEU).
This document describes the main information
sources on which the Report is based the legal framework which foresees the
obligation to submit them to the Commissione and the methodology followed
regarding the statistical evaluation of irregularities reported as fraud and other irregularities in the areas where Member States
implement the EU budget (expenditures for natural resources, cohesion policy
and pre-accession funds) and of the collection of the EU’s traditional own
resources, as well as in the area of expenditure managed directly by the
Commission.
EU legislation requires Member States to report
to the Commission, on a quarterly basis, irregularities that have been detected
in the areas of shared management and Traditional Own Resources[1].
Member States must inform the Commission whether
the reported irregularities constitute suspicions of fraud (if they give rise
to the initiation of administrative and/or judicial proceedings at national
level in order to establish the presence of intentional behaviour, such as
fraud[2])
and must update the reported information in relation to the completion of the
relevant proceeding for the imposition of sanctions.
In the area of expenditure managed directly by
the Commission it is the Commission services, which have to qualify[3] the recoveries, whether
they encountered errors, irregularities or suspected fraud.
Regarding recoveries, preventive and corrective
measures for the protection of the EU financial interests, the analysis presented
in the Report is limited to the information published in the EU annual
accounts. For this reason it mainly concerns interruptions, suspensions and
financial corrections by the Commission vis-à-vis Member States,
although it also presents information concerning recoveries made.
Data sources
There are three main types of data sources used
for the analyses developed in the Report:
(1)         
Irregularities reported by Member States under a
specific legal obligation. These are described in detail in paragraph 1.1 to
1.3. Irregularities related to expenditure areas of the budget are reported via
an electronic tool known as the Irregularity Management System (IMS) managed
and maintained by OLAF. Irregularities concerning Traditional Own Resources
(TOR) are reported via an electronic system known as OWNRES and managed and
maintained by DG BUDG.[4]
(2)         
Recovery orders recorded in the Commission's
Accrual Based Accounting System (ABAC). Authorising Officers by Delegation
specify whether a given recovery order is linked to an irregularity, a
potential fraud (defined as 'OLAF notified') or other.
(3)         
Annual Reports published by competent DGs in
relation to expenditure and the Provisional Accounts of the EU published by DG
BUDG, in particular in relation to preventive and corrective measures
(interruptions and suspensions of payments, financial corrections and
recoveries).
1.1.        The
legal framework for irregularities reporting
European legislation provides for the
protection of the Union’s financial interests in all areas of activity[5]. The FinR sets the
principles and rules for the correct implementation of the budget. Member
States are required to notify the European Commission (EC) of evidence of fraud
and other irregularities. This need is particularly evident in those sectors of
the EU budget where the main responsibility for management is with the Member
States, namely, in the fields of Agriculture and Cohesion Policy (on the
expenditure side) and Own Resources (on the revenue side). In these areas,
Member States must inform the Commission of all irregularities involving more
than EUR 10 000 of EU finances. This applies at all stages in the
procedure for recovering monies unduly paid or not received.
Regulation No 1150/2000 specifies the
requirement for own resources and Regulation No 1848/2006 for the agriculture
sector. For the Cohesion Policy, which runs over multi-annual programmes the
legal framework is more complex and is covered by Regulations Nos 1681/94[6] and 1831/94[7] for the programming
periods until the 2000-2006 and by Regulation No 1828/2006[8] for the period
2007-2013[9].
Regulation No 498/2007 covers the European Fishery Fund (EFF).
The obligation to report irregularities in the
area of pre-accession assistance is established in the Financing
Agreements/Memoranda signed between the acceding countries, Candidate countries
and the European Community/Union and is in accordance with the provisions of
Commission Regulation (EC) 1681/1994[10]
and 1828/2006[11].
This obligation is yet enhanced by the Commission decision granting conferral
of management on extended decentralised basis (EDIS).
1.2.        Expenditure
– contents of the reporting obligation and derogations
1.2.1.     The
reporting obligation
Member States shall report to the EC any
irregularities which have been the subject of a primary administrative or
judicial finding, within two months following the end of each quarter.
Therefore, the reporting period is divided in four quarters the last of which
has as deadline the end of February of the following year[12]. 
The first communication of a case of
irregularity is also known as ‘Initial Communication’
The information to be submitted concerns, among
others:
(1)              
The identification of the operation or budget
line (for agriculture) affected by the irregularity;
(2)              
The detection method and the modus operandi;
(3)              
The financial impact of the irregularity;
(4)              
The natural and legal persons having committed
the irregularity.
Member States can differ to a subsequent
updating communication the integration of the information of which they do not
dispose at the moment of the initial communication.
Updating communications provide relevant information
about the administrative and judicial follow-up of the irregularities. In the
areas of Cohesion and Pre-Accession information about financial follow-up has
to be provided for irregularities related to previous programming periods
(until 2000-2006 included)[13].
The reporting of irregularities shall happen by
electronic means, using the modules provided by the EC (see chapter 4 of this
document about the electronic reporting systems).
In certain sectors, namely Cohesion Policy and
Pre-accession, financial information has to be expressed in Euro by countries
which have not adopted it as their currency.
1.2.2.     Derogations
to the reporting obligation
As a general rule, where the irregularities
relate to amounts of less than EUR 10 000 chargeable to the general budget
of the EU, Member States shall not send the EC the irregularity communication,
unless the Commission expressly requests it.
Further specific derogations to the reporting
obligation are foreseen in the areas of Agriculture, Cohesion and Pre-accession
policies. More concretely, cases should not be reported:
–     
where the irregularity consists solely of the
failure to partially or totally execute a (co-)financed operation owing to the
bankruptcy of the final beneficiary or the final recipient; however,
irregularities preceding a bankruptcy and cases of suspected fraud must be
reported,
–     
if the case has been already brought to the
attention of the administrative authority by the final beneficiary or the final
recipient voluntarily and before detection by the relevant authority, whether
before or after the payment of the public contribution,
–     
where the administrative authority finds a
mistake regarding the eligibility of the financed expenditure and corrects the
mistake prior to payment of the public contribution.
1.3.        Revenue
– Traditional Own Resources
Traditional own resources (TOR) mainly consist
of customs duties that are charged on imports of products coming from a non-EU
state and of sugar levies. Member States are responsible for making traditional
own resources available to the Commission within the deadlines set by
Regulation No 1150/2000. Established amounts of TOR, that have been recovered
or that are guaranteed and not under appeal, are to be made available via the A-account.
Member States retain 25 % of these amounts by the way of collection costs.
However, if TOR have been established by a Member State but not yet recovered
and if no security has been provided or the secured amount has been disputed,
Member States may enter these TOR amounts in the B-account. These
amounts of TOR are not made available until they are actually recovered. Most
fraud and irregularity cases relate to B-account items.
In order to get the right picture of the Member
States’ TOR recovery activity, it is important to keep in mind that about
98 % of established TOR is subsequently recovered without any particular
problem. These amounts are entered in the A-account and made available to the
EU budget. This covers most of the ‘normal’ import flows where release for free
circulation gives rise to a customs debt. The remaining exceptional items are
entered in the B account. 
Under Article 6(5) of the Regulation No
1150/2000, Member States are required to communicate to the Commission, via the
OWNRES system, cases of fraud and irregularity, if the TOR amount exceeds EUR 10 000.
The OWNRES database is a key tool for obtaining data for global analyses of
fraud and irregularities, and presents valuable information to the Budgetary
Authority. 
Given the Budgetary Authority’s particular
interest in recovery, reliable information must be entered in OWNRES regarding
the number of cases of fraud and irregularity and their development. Member
States have a special responsibility to ensure that appropriate statistical
information on fraud and irregularities is provided to the Commission. 
1.3.1.     Monitoring
of establishment and recovery TOR
In its capacity as Authorising Officer
responsible for executing the EU budget, the Commission (DG Budget as delegated
Authorising Officer) monitors establishment
and recovery of TOR by Member States in various ways. The monitoring is carried
out in partnership with different Commission departments, including OLAF. The following
three methods are used:
(4)         
Overall monitoring of recovery of TOR via the
write-off procedure as provided for in Article 17(2) of Regulation No
1150/2000;
(5)         
Regular inspection in Member States of the
establishment and recovery of TOR and B-account entries as provided for in
Article 18 of Regulation No 1150/2000. 
(6)         
Specific monitoring (in close cooperation with
European Anti-Fraud Office (OLAF), the Directorate-General for Taxation and
Customs Union (TAXUD) and the Directorate-General for Agriculture and Rural
Development (AGRI)) of Member States’ follow-up of recovery in individual
cases, which have a significant financial impact and which may involve Mutual
Administrative Assistance. 
1.3.1.1.  Procedure
for managing Member States’ reports for write-off
Member States must take all requisite measures
to ensure that established amounts of TOR are made available to the Commission.
This requirement, mentioned in Article 17(1) of Regulation No 1150/2000, also
implies that a Member State is only released from its obligation to make
available TOR if it can prove that the debt is irrecoverable either:
(7)         
for reasons of force majeure; or 
(8)         
for other reasons, which cannot be attributed to
that Member State.
There are two ways to conclude that amounts of
TOR have become irrecoverable. The first is by a decision of a Member State declaring that they cannot be recovered — this declaration may be made at any
time. However, TOR must be deemed irrecoverable by a Member State at the latest five years from the date on which the debt was established, or in the event
of an administrative or judicial appeal, the final decision was given, or the
last part-payment to the debt was made, whichever is the later. If the amount
of the written-off debt is less than EUR 50 000, Member States do not have to communicate the case to the
Commission, unless the Commission makes a specific request. However, if the
irrecoverable amount of TOR exceeds EUR 50 000, the write-off must be reported to the Commission which has to
decide whether the necessary conditions are fulfilled in order to release the
Member State from the obligation to make the TOR available.
Member States submit their request to be
released from the obligation to make the TOR available directly via an
application called WOMIS[14]

1.3.2.     Commission’s
inspection
The Commission carries out regularly inspection
in Member States of the establishment and recovery of TOR and B-account entries
as provided for in Article 18 of Regulation No 1150/2000. 
A report on the operation of the inspection
arrangements for traditional own resources system is produced every three years
and sent to the Budgetary Authority[15].
Also, the Commission services draft annually a thematic report based on the
outcome of the Commissions’ inspections which is regularly discussed with
Member States.
1.3.3.     Particular
cases of Member State failure to recover TOR 
If TOR are not established because of an
administrative error by a Member State, the Commission applies the principle of
financial liability[16].
The main objective of these procedures is to encourage individual Member States
to improve their administrative performance and to address weaknesses leading
to a loss of TOR. Payments for these cases are made available via the A-account
and they reduce in effect the contribution of the Member States via the GNI
resource in proportion to their contribution to the EU budget. 
1.3.4.     Detection
of fraud and irregularities
Cases should be included in OWNRES upon the
initial discovery of the irregularity or fraud case or establishment of the
duties. As a result the year of the customs operation and the year of discovery
of the irregularity or fraud can diverge. Member State must indicate the year
and the quarter when the OWNRES case was first discovered or the duties were
established. Member States are constantly adding new cases and updating
existing cases related to previous years. So the information generated by
OWNRES represents the situation on the date of the query (cut-off date). For
this report the query was carried out on 7 April 2014.
The distinction in OWNRES between fraud and
irregularity might not be fully comparable between different Member States. In
their reports Member States make this distinction usually on subjective grounds
and before any court judgment is given. Such subjective grounds vary between
national administrations depending on their national practises and legislation.
The concepts of suspected/established fraud
or irregularity reported as fraudulent/non-fraudulent are not used in the
OWNRES system. It should also be noted that a classification of a cases as a
fraud or irregularity case is not static in OWNRES and can be changed by the Member State at any time in the course of the national process. Only when a case is closed
in OWNRES system, it obtains its final classification as a fraud case or an
irregularity case. 
1.3.5.     Established
and estimated amounts
In the report, two monetary values are used to
express the financial impact of cases of fraud and irregularities. The
established amount indicates the total amount that national authorities have
established after all subsequent corrections have been processed. In this way
all the changes to the established amounts are taken into account in this
report.
In order to give an accurate view of Member
States’ efforts to combat fraud and irregularities, the estimated amounts are
also used in the analysis to take into account the cases where no establishment
has yet been made, or, will not be made because of the seizure or confiscation
of the imported goods.
1.3.6.     Categorisation of cases by
amounts involved 
1.3.7.     In
the field of TOR, a refined picture on the Member State’ activities regarding
establishment and recovery actions can be given by splitting cases of fraud and
irregularities in categories based on the established amounts. Two categories
of amounts — amounts below EUR
50 .000 and amounts above 50 000 — can serve as a basis for the analysis hereafter and give a deeper
inside into the Member States’ activities in detecting cases of fraud and
irregularities. Recovery
The recovery rate (RR) represents the
percentage of the total amount recovered from debtor on the total established
amount. The amounts for which Member States have been considered financially
liable because of weaknesses observed in their recovery action are thus not
taken into account. This recovery rate is a snapshot of the recovery situation
at the moment of the query. 
The historical recovery rate (HRR) takes into
account cases which are registered in OWNRES as closed cases. Cases of seized
and confiscated goods (usually cigarettes) for which no recovery is required
are excluded. This HRR rate express the recovery result in both complex and
easy cases. Therefore, established and closed cases from 2010 onwards are
excluded, because these are predominantly easy (complex cases generally cannot
be closed within 3 years).
2.           DEFINITIONS
For the purposes of this document, two sets of
definitions are used. The first set refers to legal definitions, the second to
specific indicators used throughout the different chapters.
2.1.        Legal
definitions
2.1.1.     Irregularity
Irregularity:
means any infringement of a provision of European law resulting from an act or
omission by an economic operator which has, or would have, the effect of
prejudicing the general budget of the European Union or budgets managed by it,
either by reducing or losing revenue accruing from own resources collected
directly on behalf of the Union, or by an unjustified item of expenditure[17].
2.1.2.     Fraud
Fraud: affecting
the European Communities' financial interests shall consist of[18]:
a) in respect of expenditure, any intentional act
or omission relating to:
–     
the use or presentation of false, incorrect or
incomplete statements or documents, which has as its effect the
misappropriation or wrongful retention of funds from the general budget of the
European Communities or budgets managed by, or on behalf of, the European
Communities;
–     
non-disclosure of information in violation of a
specific obligation, with the same effect;
–     
the misapplication of such funds for purposes
other than those for which they were originally granted;
b) in respect of revenue, any intentional act
or omission relating to:
–     
the use or presentation of false, incorrect or
incomplete statements or documents, which has as its effect the illegal
diminution of the resources of the general budget of the European Communities or
budgets managed by, or on behalf of, the European Communities;
–     
non-disclosure of information in violation of a
specific obligation, with the same effect;
–     
misapplication of a legally obtained benefit,
with the same effect.”
National legislations contain several
provisions that describe the conducts and the related penalties and sanctions.
Some of these provisions are the result of the implementation of the PIF
Convention into the national legal system.
The two definitions indicated above seem similar as both
refer to “acts or omissions”. In fact, the concept of irregularity is much
wider than that of fraud. Fraud explicitly refers to “intentional” act or
omission. In this respect, the concept of irregularity includes that of fraud,
but refers also to a whole series of infringements of rules which do not imply
a deliberate intent to violate or for which such intent is not clear (for
instance a breach of rules due to the misinterpretation of certain provisions
because of their complexity).
Therefore, the distinction between irregularities and
fraud is that fraud is a criminal act that can only be determined by the
outcome of judicial proceedings. As such, it occurs only when the judicial
procedure has come to an end that the actual amount of fraud can be determined.
While awaiting these results, the Commission works on the basis of the
information supplied by Member States concerning cases of irregularities some
of which, in the opinion of the reporting Member States, give rise to
suspicions of fraud. The Commission's statistical assessment of and ability to
respond to, irregularities are influenced by the accuracy and timeliness of the
notifications made by the Member States.
2.1.3.     Suspected
fraud
Suspected fraud[19]: means an irregularity giving rise to the initiation of
administrative and/or judicial proceedings at national level in order to
establish the presence of intentional behaviour, in particular fraud, such as
is referred to in Article 1(1), point (a), of the PIF Convention.
In their communications of irregularity to the
Commission, Member States have been requested to indicate whether a reported
irregularity can be regarded as 'suspected fraud'. This notion was introduced
in order to provide some data for statistical purposes and to avoid the
necessity of waiting until the end of criminal procedures for a final
indictment.
2.2.        Definitions
applied in the analysis
However, it is to be noted that for the purpose
of greater clarity, in the analysis and in the indicatorts only two broad
categories of irregularity are applied:
'Irregularities reported as fraudulent'
are those irregularities for which the fraudulent nature is suspected or
established, also including those irregularities which Member States have not
reported as fraudulent, but for which they indicate that a criminal proceeding
has been initiated..
'Irregularities not reported as fraudulent'
are any other type of reported irregularities, for which the fraudulent nature
has not been ascertained.
2.3.        Indicators
2.3.1.     Fraud
Detection Rate and Irregularity Detection Rate
Equation 1: Fraud Detection Rate (FDR)
The Fraud Detection Rate (FDR) can be
calculated either on the basis of total expenditure or the relative
expenditure. Relative expenditure means that for the calculation, only payments
above EUR 10,000, if available, are taken into account. This is the case in the
shared management area, where the same threshold is applicable for the
reporting. For the centralised management area, where there is no threshold for
the reporting of irregularities, total expenditure is used. With the latter
differentiation, the calculation of the Fraud Detection Rate becomes more
accurate.
Equation 2: Irregularity Detection Rate (IDR)
In the same vein, Irregularity Rate can also be
calculated on the basis of either total expenditure or on the relative
expenditure.
Both the FDR and IDR can be calculated by
financial year (as in the case of the Agriculture sector and Centralised
management) or on the entire Programming Period (as in the case of Structural
Funds) and by Member State. The FDR is calculated using amounts linked to cases
of i[20].
2.3.2.     Fraud
Frequency and Fraud Amounts Levels
The Fraud Frequency Level (FFL) represents the
percentage of cases qualified as suspected fraud and established fraud on the
total number of reported irregularities and is calculated using Equation 4
below.
Equation 3: Fraud Frequency Level
The Fraud Amounts Level (FAL) represents the percentage
of financial amounts involved in cases qualified as suspected fraud and
established fraud on the total reported financial amounts affected by
irregularities and it is calculated using Equation 5 below.
Equation 4: Fraud Amounts Level
FFL and FAL can be calculated by financial year
(as in the case of the Agriculture sector) or on an entire Programming Period
(as in the case of Structural Funds) and by Member State.
2.3.3.     Detection
Efficiency
This is a new concept to measure how quickly an
irregularity is discovered. It calculates the time span between the date of
committing the irregularity and the date of its detection. 
The Detection Efficiency (DetE) is calculated
in months derived from the number of days between the date in which the
irregularity was initiated (as communicated by the competent authority) and the
date of the primary administrative or judicial finding (PACA)[21] divided by 30 as
showed in Equation 5 below.
Equation 5: Detection Efficiency
The average Detection Efficiency (DetE) can be
calculated per country and/or per sector according to Equation 6 below.
Equation 6: Average Detection Efficiency
Only irregularities containing the necessary
information are used to calculate the average.
2.3.4.     Reporting
Efficiency
This is a new concept to measure how quickly an
irregularity is reported after its discovery. It calculates the time span
between the date of PACA and the date of its reporting to the Commission. 
The Reporting Efficiency (RepE) is calculated
in months derived from the number of days between the date of (PACA)[22] and the date of the
initial communication of the irregularity to the Commission, divided by 30 as
showed in Equation 7 below.
Equation 7: Detection Efficiency
The average Reporting Efficiency (RepE) can be
calculated per country and/or per sector according to Equation 6 below.
Equation 8: Average Detection Efficiency
Only irregularities containing the necessary
information are used to calculate the average.
2.3.5.     Ratio
of Established Fraud
The Ratio of Established Fraud (REF) is a new
concept and allows to determine, on a given period of time (five years in the
present report: 2008-2012) the percentage of irregularities reported as
fraudulent for which fraud has been effectively established. It is calculated
dividing the number of cases for which Member States have been indicating that
fraud has been establised on the total number of irregularities reported as
fraudulent, as showed in Equation 9 below.
Equation 9: Ratio of Established Fraud
It can be calculated by Member State or at EU level and by sector.
2.3.6.     Error
Rate
The Residual Error Rate (RER) indicates the
risk of errors which remains after the responsible authority has performed all
its controls (administrative and on-the-spot) and has corrected the errors
detected. It is an extrapolation of the error rate resulting from the
population checked on-the-spot, where available, to the entire population.
However, the precise methodology may differ from sector to sector.
This extrapolation is estimated by the Audit
Authorities and revised by the competent Commission services.
Data published in the Commission Staff Working
Document "Statistical evaluation of irregularities" are extracted
from the Annual Activity Reports of the Directorates General of the Commisssion
responsible for the different areas of shared management.
2.4.        Assumptions
and hypothesis
It has been affimed that the IMS system is now
fully deployed and the data quality is quite sufficient. The irregularity
reporting of countries has been improving over the years, therefore it can be
said that reporting (technically and substantially) cannot be the source of no
communication of irregularities or the relatively low number of irregularities
compared to the EU funding recieved. As a consequence, a renewed methodology
regarding the analysis of the irregularities the has been developed in relation
to the expenditure part of the 'Statistical evaluation of irregularities' staff
document. The renewed methodology is based on the assumption that reporting
effort equals the detection effort of a country. This suggests the number
of irregular cases reported by a country (especially irregularities of
fraudulent nature), will be interpreted as the degree of its detection
capabilities. There are 4 hypothesis that derive from this basic assumption
especially when no irregular cases (or too few) are reported by a country:
–              
H1)      There is zero fraud happening in the
country;
–              
H2)      The country is unable to detect fraud
–              
H3)      The country is unwilling to detect
fraud
–              
H4)      The combination of H2) and H3)
Subsequently, the renewed methodology provides
for revised indicators to measure the reporting of irregularities from the
point of view of the detection effort. 
[1]               Provided that they do not fall in the derogations
specifically foreseen by the relevant provisions
[2]               Commission Regulation (EC) No 1848/2006 of 14
December 2006 concerning irregularities and the recovery of sums wrongly paid
in connection with the financing of the common agricultural policy and the
organisation of an information system in this field and repealing Council
Regulation (EEC) No 595/91, OJ
L 355, 15.12.2006, p. 56–62
[3]               According to the relevant budgetary and financial
rules, irregularity constitutes any infringement of regulatory and/or
contractual provisions; meanwhile in case the irregularity gives rise to
suspicion of fraud, OLAF must be notified.
[4]               For a detailed desciption of the reporting systems,
please refer to the Commission Staff Working Document 'Methodology regarding
the statistical evaluation of reported irregularities for 2011' accompanying
the Annual Report 2011 on the Protection of the EU financial interests,
available at the following internet link: http://ec.europa.eu/anti_fraud/documents/reports-commission/2011/methodology_en.pdf
, and in particular, paragraph 3.
[5]               See in particular for traditional own resources:
Article 6(5) of Council Regulation (EC, Euratom) No 1150/2000; for expenditure:
Articles 3 and 5 of Council Regulation (EC) No 1848/2006 of 14 December 2006
(OJ L 355, 15.12.2006) for Agriculture; articles 3 and 5 of Commission
Regulation (EC) No 1681/94 of 11 July 1994 (OJ L 178 of 12.7.1994), as amended
by Regulation (EC) No 2035/2005 of 12 December 2005 (OJ L 328 of 15.12.2005)
for the Structural Funds until the programming period 2000-2006 included;
articles 3 and 5 of Regulation No 1831/94 of 26 July 1994 (OJ L 191,
27.7.1994), as amended by Regulation (EC) No 2168/2005 of 23 December 2005 (OJ
L 345 of 28.12.2005) for the Cohesion Fund until the programming period 2000-2006
included; articles 28 and 30 of Commission Regulation (EC) No 1828/2006 of 8
December 2006 (OJ L 371, 27.12.2006) as amended by Commission Regulation (EC)
No 846/2009 of 1 September 2009 (OJ L 250, 23.9.2009) for the Cohesion Policy
2007-2013; Articles 55 and 57 of Commission Regulation (EC) No 498/2007 of 26
March 2007 (OJ L 120, 10.5.2007) as amended by Commission Regulation (EC) No
1249/2010 (OJ L 341, 23.12.2010) for the European Fishery Fund (EFF).
[6]               Regulation 1681/94 applies to the Structural Funds,
that is to say European Regional Development Fund (ERDF), European Social Fund
(ESF), European Agriculture Guidance and Guarantee Fund (EAGGF) – Section
Guidance and Financial Instrument for Fisheries Guidance (FIFG). It has been
amended by Regulation No. 2035/2005 of 12 December 2005
[7]               Regulation 1831/94 applies to the Cohesion Fund. It
has been amended by Regulation No. 2168/2005 of 23 December 2005.
[8]               Commission
Regulation (EC) No 1828/2006 of 8 December 2006 setting
out rules for the implementation of Council Regulation (EC) No 1083/2006 laying
down general provisions on the European Regional Development Fund, the European
Social Fund and the Cohesion Fund and of Regulation (EC) No 1080/2006 of the
European Parliament and of the Council on the European Regional Development
Fund, OJ L 371, 27.12.2006. This repeals Regulations (EC) No 1681/94 and (EC)
No 1831/94. Commission Regulation (EC) No 498/2007 of 26 March 2007 laying down
detailed rules for the implementation of Council Regulation (EC) No 1198/2006
on the European Fisheries Fund. 
[9]               Regulation (EC) No 1080/2006 of the European
Parliament and of the Council of 5 July 2006 on the European Regional
Development Fund and repealing Regulation (EC) No 1783/1999; Regulation (EC) No
1081/2006 of the European Parliament and of the Council of 5 July 2006 on the
European Social Fund and repealing Regulation (EC) No 1784/1999; Council
Regulation (EC) No 1083/2006 of 11 July 2006 laying down general provisions on
the European Regional Development Fund, the European Social Fund and the
Cohesion Fund and repealing Regulation (EC) No 1260/1999; Council Regulation
(EC) No 1084/2006 of 11 July 2006 establishing a Cohesion Fund and repealing
Regulation (EC) No 1164/94, OJ L 210, 31.7.2006.
[10]             As amended by Regulation (EC) No 2035/2005
[11]             As amended by Regulation (EC) No 846/2009
[12]             For the Agriculture sector, however, the financial
year, which is also taken as a reference for the analysis of reported
irregularities, runs from October 15 to October 14 of the following year.
[13]             Regulation (EC) No 846/2009 has simplified the
reporting obligation specified in Regulation (EC) No 1828/2006.
[14]             WOMIS: Write-Off
Management and Information System.
[15]             See COM(2013)829
final of 27.11.2013.
[16]             Case
C-392/02 of 15 November 2005. These cases are identified on the basis of
Articles 220(2)(b) (administrative errors which could not reasonably have been
detected by the person liable for payment) and 221(3) (time-barring resulting
from Customs’ inactivity) of the Customs Code, Articles 869 and 889 of the
Provisions for application of the Code, or on the basis of non-observance by
the customs administration of Articles of the Customs Code giving rise to
legitimate expectations on the part of an operator.
[17]             Article 2 of Regulation (EC) No 2988/95.
[18]             Article 1(1), point (a), of the "Convention on the
Protection of the European Communities' Financial Interests" (PIF
Convention).
[19]             This definition has been introduced in Commission
Regulation (EC) No 2035/2005. It has been "confirmed" in Regulation
(EC) No 1828/2006 for the Programming Period 2007-2013 and in Regulation (EC)
No 1848/2006 for the agriculture sector.
[20]             These rates had already been introduced in the 2008
Report and Commission Staff Working Paper “Statistical Evaluation of
Irregularities” with similar names. This year’s Commission Staff Working Paper
“Statistical Evaluation of Irregularities” defines precisely these concepts in
order to use them in the years to come and to emphasise that, more than the
level of fraud in a given country, they identify the level of detection /
performance of anti-fraud controls in a Member State. 
[21]             For the definition of PACA, see article 2§3 of
Regulation (EC) No 1848/2006 for the Agricultural policy; article 27(b) of
Regulation (EC) No 1828/2006 for the Cohesion Policy; and article 54(b) of
Regulation No 498/2007 for the Fishery Policy.
[22]             See footnote 23.