COMMISSION STAFF WORKING DOCUMENT Methodology regarding the statistical evaluation of reported irregularities for 2014 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 2014
Date: 2015-07-31
Institutions: European Anti-Fraud Office, European Commission
Subjects: EU statistics, budgetary expenditure, fight against crime, financial control, fraud against the EU, own resources, statistical method

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 31.7.2015  SWD(2015) 155 final   COMMISSION STAFF WORKING DOCUMENT Methodology regarding the statistical evaluation of reported irregularities for 2014 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 2014 {COM(2015) 386 final} {SWD(2015) 151 final} {SWD(2015) 152 final} {SWD(2015) 153 final} {SWD(2015) 154 final} {SWD(2015) 156 final}  
 
 
TABLE OF CONTENTS 

COMMISSION  STAFF  WORKING  DOCUMENT  Methodology  regarding  the  statistical 
evaluation of reported irregularities for 2014 

1. 

1.1. 

1.2. 

INTRODUCTION........................................................................................................ 3 

The legal framework for irregularities reporting ......................................................... 4 

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 .............................................................. 8 

1.3.6.  Recovery ...................................................................................................................... 9 

2. 

DEFINITIONS ........................................................................................................... 10 

2.1. 

Legal definitions......................................................................................................... 10 

2.1.1. 

Irregularity.................................................................................................................. 10 

2.1.2.  Fraud .......................................................................................................................... 10 

2.1.3.  Suspected fraud .......................................................................................................... 11 

2.2. 

2.3. 

Definitions applied in the analysis ............................................................................. 11 

Indicators .................................................................................................................... 11 

2.3.1.  Fraud Detection Rate and Irregularity Detection Rate ............................................... 11 

2.3.2.  Fraud Frequency and Fraud Amounts Levels ............................................................ 12 

2.3.3.  Detection Efficiency ................................................................................................... 12 

2.3.4.  Reporting Efficiency .................................................................................................. 13 

2.3.5.  Ratio of Established Fraud ......................................................................................... 13 

2.3.6.  Error Rate ................................................................................................................... 14 

2.4. 

Assumptions and hypothesis ...................................................................................... 14 

2 

 
1. 

INTRODUCTION 

This 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 Commission 
and  the  methodology  followed  regarding  the  statistical  evaluation  of  irregularities 
reported  as  fraudulent  and  other  irregularities,  in  the  areas  where  Member  States 
implement  the  EU  budget  (expenditures  for  natural  resources,  cohesion  policy  and 
pre-accession funds), regarding 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 Resources1. 

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  fraud2)  and  must  update  the  reported  information  in 
relation to the completion of the relevant proceedings for the imposition of sanctions. 

Regarding  expenditure  managed  directly  by  the  Commission,  it  is  the  Commission 
services  that  have  to  qualify3  the  recoveries  and  whether  they  encountered  errors, 
irregularities or suspected fraud. 

In relation to recoveries, preventive and corrective measures for the protection of the 
EU's  financial  interests,  the  analysis  presented  in  the  Report  is  limited  to  the 
information published in the EU's 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 data sources used for the analyses 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  IT  tool  known  as  the 
Irregularity  Management  System  (IMS),  managed  and  maintained  by  OLAF. 
Irregularities concerning Traditional Own Resources (TOR) are reported via an 
IT system known as OWNRES and managed and maintained by DG BUDG.4 

1 
2 

3 

4 

Provided they do not fall under the derogations specifically set out in the relevant provisions 
Commission  Regulation  (EC)  No 1848/2006  of  14  December  2006  concerning  irregularities  and  the 
recovery  of  sums  unduly  paid  in  relation  to  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 
According to the relevant budgetary and financial rules, an irregularity constitutes any infringement of 
regulatory and/or contractual provisions; where an irregularity gives rise to suspicion of fraud, OLAF 
must be notified. 
For  a  detailed  description  of  the  reporting  systems,  please  refer  to  the  Commission  Staff  Working 
Document  'Methodology  regarding  the  statistical  evaluation  of  reported  irregularities  for  2014' 

3 

 
                                                 
(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 case of 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 irregularity reporting 

European legislation provides for the protection of the Union’s financial interests in 
all  areas  of  activity5.  The  Financial  Regulation  sets  the  principles  and  rules  for  the 
correct  implementation  of  the  budget.  Member  States  are  required  to  report  to  the 
European Commission (EC) 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 field 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  about  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  specifies  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  1681/946  and  1831/947  for  the 
programming periods until the 2000-2006 and by Regulation No 1828/20068 for the 

5 

6 

7 

8 

link: 

internet 

accompanying the Annual Report 2014 on the Protection of the EU financial interests, available at the 
following 
http://ec.europa.eu/anti_fraud/documents/reports-
commission/2014/methodology_en.pdf , and in particular, paragraph 3. 
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). 
Regulation  1681/94  applies  to  the  Structural  Funds;  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 was amended by Regulation No. 
2035/2005 of 12 December 2005 
Regulation 1831/94 applies to the Cohesion Fund. It was amended by Regulation No. 2168/2005 of 23 
December 2005. 
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 

4 

 
                                                                                                                                                         
period  2007-20139.  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)  1681/199410  and 
1828/200611.  This  obligation  is  enhanced  by  the  Commission  decision  granting 
conferral of management on extended decentralised basis (EDIS). 

1.2. 

Expenditure – 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 of the end of February of the following year12.  

The first communication of an irregularity is also known as ‘Initial Communication’ 

The information to be submitted constitutes, among others: 

(1) 

(2) 

(3) 

(4) 

The identification of the operation or budget line (for agriculture) affected by 
the irregularity; 

The detection method and the modus operandi; 

The financial impact of the irregularity; 

The natural and legal persons having committed the irregularity. 

Member  States  may  give  further  information  when  updating  the  communication, 
which they do not dispose at the moment of the initial communication. 

Updating  communications  provides  relevant  information  about  the  administrative 
and  judicial  follow-up  of  the  irregularities.  In  the  areas  of  Cohesion  and  Pre-
Accession  information  about  the  financial  follow-up  has  to  be  provided  for 
irregularities of previous programming periods (until 2000-2006 included)13. 

The  reporting  of  irregularities  happens  by  electronic  means,  using  the  modules 
provided  by  the  EC  (see  chapter  4  of  this  document  about  the  electronic  reporting 
systems). 

9 

10 
11 
12 

13 

rules  for  the  implementation  of  Council  Regulation  (EC)  No  1198/2006  on  the  European  Fisheries 
Fund.  
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. 
As amended by Regulation (EC) No 2035/2005 
As amended by Regulation (EC) No 846/2009 
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. 
Regulation (EC) No 846/2009 has simplified the reporting obligation specified in Regulation (EC) No 
1828/2006. 

5 

 
                                                                                                                                                         
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  irregularities  concern  amounts  less  than  EUR  10 000 
chargeable  to  the  general  budget  of  the  EU,  Member  States  shall  not  send  the 
irregularity communication to the EC, unless the Commission expressly requests it. 

Further  specific  derogations  to  the  reporting  obligation  exist  for  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 already been 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 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 %  a  portion  of  the  collected 
amounts as collection costs14. However, if TOR have been established by a Member 
State but not yet been 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. 

Regarding  Member  States’  TOR  recovery  activity,  it  is  important  to  keep  in  mind 
that most of established TOR are recovered without any particular difficulties. 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 
provides valuable information for 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 
irregularities, and their development. Member States have a special responsibility to 

14  

For  the  2014-2020  period,  this  share  will  amount  to  20%  (see  Council  Decision  No.  2014/335  of  26 
May 2014 on the system of own resources off the European Union). 

6 

 
                                                 
ensure that appropriate statistical information on fraud and irregularities is provided 
to the Commission.  

1.3.1.  Monitoring of the establishment and recovery of TOR 

In  its  capacity  as  Authorising  Officer  responsible  for  executing  the  EU  budget,  the 
Commission  (DG  Budget  as  delegated  Authorising  Officer)  monitors 
the 
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: 

(1) Overall  monitoring  of  recovery  of  TOR  via  the  write-off  procedure,  as 

provided for in Article 17(2) of Regulation No 1150/2000 

(2) 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 

(3) 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: 

(1) for reasons of force majeure;  

(2) or 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 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 five years at the latest 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 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 WOMIS15  

15 

WOMIS: Write-Off Management and Information System. 

7 

 
                                                 
 
1.3.2.  Commission’s inspection 

The  Commission  regularly  carries  out  inspections  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  the  traditional  own 
resources  system  is  produced  every  three  years  and  sent  to  the  Budgetary 
Authority16. Also, the Commission services annually draft 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 liability17. The main objective of these 
procedures is to encourage individual Member States to improve their administrative 
performance  and  to  address  weaknesses  leading  to  the  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  GNI  resources,  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  or  the  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 
States  must  indicate  the  year  and  the  quarter  when  the  OWNRES  case  was  first 
discovered or when 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 8 April 2015. 

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 
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  fraud  or  an  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 the OWNRES system does it obtain 
its final classification as case of fraud or irregularity.  

fraud  or 

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 

16 
17 

See COM(2013)829 final of 27.11.2013. 
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. 

8 

 
                                                 
processed. In this way, all 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  

In  the  field  of  TOR,  a  picture  of  the  Member  States’  activities  regarding 
establishment  and  recovery  actions  can  be  given  by  separating  cases  of  fraud  and 
irregularities  into  categories  based  on  the  established  amounts.  Two  categories  of 
amounts — amounts below EUR 50 .000 and amounts above 50 000  — serve as a 
basis  for  the  analysis  hereafter  and  gives  a  deeper  insight  into  Member  States’ 
activities regarding the detection of cases of fraud and irregularities. 

1.3.7.  Recovery 

The recovery rate (RR) represents the percentage of the total amount recovered from 
debtors in relation to 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. The HRR rate expresses the recovery 
result  in  both  complex  and  simple  cases.  Therefore,  established  and  closed  cases 
from 2010 onwards are excluded, because these are predominantly simple cases, as 
complex cases generally cannot be closed within 3 years. 

9 

 
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 expenditure18. 

2.1.2.  Fraud 

Fraud: affecting the European Communities' financial interests shall consist of19: 

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  legislation  contains  several  provisions  that  describe  the  conduct  and  the 
related  penalties  and  sanctions.  Some  of  these  provisions  are  the  result  of  the 
implementation of the PIF Convention into national legal systems. 

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). 

18 
19 

Article 2 of Regulation (EC) No 2988/95. 
Article  1(1),  point  (a),  of  the  "Convention  on  the  Protection  of  the  European  Communities'  Financial 
Interests" (PIF Convention). 

10 

 
                                                 
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 is 
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  fraud20:  means  an 
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. 

irregularity  giving  rise 

the 

to 

In their communications of irregularity to the Commission, Member States have been 
asked to indicate whether a reported irregularity can be regarded as 'suspected fraud'. 
This  was  introduced  in  order  to  provide  some  data  for  statistical  purposes  and  to 
avoid the need to wait 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  greater  clarity,  only  two  broad  categories  of 
irregularity are applied in the analysis and in the indicators: 

'Irregularities  reported  as  fraudulent'  are  those  irregularities  for  which  the 
fraudulent  nature  is  suspected  or  established,  it  also  includes  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  area  of  shared  management,  where  the  same  threshold  is 
applied  for  the  reporting.  For  centralised  management,  where  there  is  no  threshold 
for  the  reporting  of  irregularities,  total  expenditure  is  used.  With  the  latter,  the 
calculation of the Fraud Detection Rate becomes more accurate. 

20 

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. 

11 

 
 
 
                                                 
Equation 2: Irregularity Detection Rate (IDR) 

In  the  same  way,  the Irregularity  Rate  can  also  be  calculated  on  the  basis  of  either 
total expenditure or relative expenditure. 

Both  the  FDR  and  IDR  can  be  calculated  by  financial  year  (as  in  the  case  of  the 
Agriculture sector and Direct 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 irregularities reported as fraudulent 21. 

2.3.2.  Fraud Frequency Level and Fraud Amounts Level 

The  Fraud  Frequency  Level  (FFL)  represents  the  percentage  of  cases  qualified  as 
suspected  fraud  and  established  fraud  in  relation  to  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 in realtion to 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 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 upon which the irregularity was initiated (as communicated by 

21 

These  rates  were  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 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.  

12 

 
 
 
 
 
                                                 
the  competent  authority)  and  the  date  of  the  primary  administrative  or  judicial 
finding (PACA)22 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  between  the  date  of  the  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)23 and the date of the initial communication of the 
irregularity to the Commission, divided by 30 as showed in Equation 7 below. 

Equation 7: Reporting 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 by dividing the number of cases for which Member States indicated 
that fraud was establised by the total number of irregularities reported as fraudulent, 
as showed in Equation 9 below. 

Equation 9: Ratio of Established Fraud 

22 

23 

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. 
See footnote 23.  

13 

Date of PACA - Date of initiation of irregularity (in days)30=Detection Efficiency (DetE)Date of initial communication - Date of PACA (in days)30Reporting Efficiency (RepE)=number of established fraud casestotal number of irregularities reported as fraudulentRatio of Established Fraud (REF)= 
 
              
     
 
   
 
 
 
              
     
 
   
 
 
 
                                                 
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  error  which  remains  after  the 
responsible  authority  has  performed  all  of  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, in relation to the 
entire  population.  However,  the  precise  methodology  may  differ  from  sector  to 
sector. 

This  extrapolation  is  estimated  by  the  Audit  Authorities  and  is  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 affirmed that the IMS system is now fully deployed and the data quality 
is  sufficient.  The  irregularity  reporting  of  countries  has  been  improving  over  the 
years,  therefore,  it  can  be  said  that  reporting  (both  technically  and  in  substance) 
cannot  be  the  reason  for  non-communication  of  irregularities,  or  the  relatively  low 
number of irregularities, compared with the EU funding recieved. As a consequence, 
a renewed methodology regarding the analysis of the irregularities was developed in 
relation  to  the  expenditure  part  of  the  'Statistical  evaluation  of  irregularities'  staff 
working  document.  The  renewed  methodology  is  based  on  the  assumption  that  the 
reporting  effort  equals  the  detection  effort  of  a  country.  This  suggests  that  the 
number  of  irregular  cases  reported  by  a  country  (especially  irregularities  of 
fraudulent nature), will be interpreted as the level 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) 

H2) 

H3) 

There is zero fraud happening in the country 

The country is unable to detect fraud 

The country is unwilling to detect fraud 

H4)  A 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.  

14 

 
 
 
3. 

READING GUIDE 

3.1. 

A reading guide to the Country Factsheet 

The  Commission  Staff  Commission  Document  “Statistical  evaluation  of 
irregularities  reported  for  2014  –  Own  Resources,  Natural  Resources,  Cohesion 
Policy,  Pre-accession  and  Direct  expenditure”  contains  28  factsheets  summarising 
for each Member State some of the elements highlighted in the analyses developed in 
the various chapters of the document.  

This  reading  guide  is  meant  to  help  you  understanding  the  data  and  indicators 
captured in the factsheet. 

3.2. 

The factsheet 

Each  factsheet  is  divided  in  four  sections  clearly  identified  by  different  colours, 
which  correspond  to  a  specific  subject  (red  for  own  resources,  green  for  natural 
resources,  blue  for  Cohesion  policy  and  purple  for  the  financial  corrections 
implemented  by  the  Commission  vis-à-vis  the  Member  States  in  relation  to  share 
management areas. 

3.2.1.  Traditional own resources 

The table above lists for each Member State: 

A.  The number of cases of irregularities reported as fraudulent in 2014; 

B.  The established and estimated amounts related to cases under A; 

C.  The number of cases of irregularities not reported as fraudulent in 2014; 

D.  The established and estimated amounts related to cases under C; 

E.  The  percentage  that  B+D  represent  on  the  total  TOR  collected  by  the 

Member State 

3.2.2.  Natural resources 

3.2.2.1.  Financial and audit information 

The table above indicates: 

A.  Detailed by Fund, and in the case of EAGF also by intervention measures, the 
total  amount  of  expenditure  expressed  in  EUR  for  2014  as  showed  in  the 
Annual  Activity  Reports  of  the  competent  Commission  services  (DG  AGRI 
and DG MARE); 

15 

OWNRES / gross TORNEURNEUR%Established and estimatedABCDE1. Traditional Own ResourcesReporting Year 2014Irregularities reported as fraudulentIrregularities not reported as fraudulentPaymentsAdjusted error rateEUR%EAGFagricultural marketsABEAGFdirect aidsABEAFRDrural developmentABEFFfisheriesABABCCCCTOTALCFundArea(Residual) amount at riskEUR 
 
 
B.  Detailed by Fund, and in the case of EAGF also by intervention measures, the 
‘adjusted  error  rate’24  (expressed  as  %  of  the  expenditure)  for  2014 
expenditure  as  showed  in  the  Annual  Activity  Reports  of  the  competent 
Commission services (DG AGRI and DG MARE); 

C.  Detailed by Fund, and in the case of EAGF also by intervention measures, the 
‘residual  amount  at  risk’  (expressed  in  EUR)  for  2014  as  showed  in  the 
Annual  Activity  Reports  of  the  competent  Commission  services  (DG  AGRI 
and DG MARE). The term ‘Residual’ is indicated in brackets as it is specific 
to  DG  AGRI  methodology  to  calculate  the  amount  at  risk, which  takes  into 
account the corrective capacity of the systems. 

3.2.2.2.  Data about reported irregularities 

The table above contains the following information: 

D.  The number of cases of irregularities reported as fraudulent in 2014; 

E.  The financial amounts related to cases under D; 

F.  The number of cases of irregularities not reported as fraudulent in 2014; 

G.  The financial amounts related to cases under F; 

H.  The Fraud Detection Rate (FDR), as defined in paragraph 2.3.1; 

I.  The Irregularity Detection Rate (IDR), as defined in paragraph 2.3.1. 

3.2.2.3.  Anti-fraud activities indicators 

The data used to calculate the values showed in the table come from the irregularities 
reported  as  fraudulent  between  2010  and  2014.  The  table  above  contains  the 
following information: 

J.  Detection  efficiency,  as  defined  in  paragraph  2.3.3,  expressed  in  average 

months; 

K.  Reporting  efficiency,  as  defined  in  paragraph  2.3.4,  expressed  in  average 

months; 

L.  Detection + Reporting efficiency is the sum of the values indicated under J. 

and K. 

24  

In order to compensate for reliability and completeness issues with the statistics, DG AGRI carries out a 
thorough validation and evaluation of the data and takes into account all available relevant information 
notably the results of its own audit findings. This allows DG AGRI to make adjustments on a case-by-
case basis at the appropriate level in order to arrive at its best estimate, using its profession judgement, 
of the "real" level of error in each case – the adjusted error rate. 

16 

FDRIDRNEURNEUR%%EAGFDEFGHIEAFRDDEFGHIEFFDEFGHITOTALDEFGHIFundIrregularities reported as fraudulentIrregularities not reported as DetERepEDetE + RepEmonths/averagemonths/averagemonths/averageJKLDetection - Reporting EfficiencyReporting period 2010-14Suspected fraudEstablished fraudTOTALREFNNN%MNOPRatio of established fraudIrregularities reported as fraudulent 2010-14 
 
 
 
                                                 
 
The data used to calculate the values showed in the table come from the irregularities 
reported  as  fraudulent  between  2010  and  2014.  The  table  above  contains  the 
following information: 

M. Number of cases of suspected fraud reported in the reference period; 

N.  Number of cases of established fraud reported in the reference period; 

O.  Sum of values of M and N. 

P.  Ratio of established fraud (REF) calculated as indicated in paragraph 2.3.5. 

3.2.3.  Cohesion policy 

Data and information presented in this section refer exclusively to the programming 
period 2007-13. 

3.2.3.1.  Financial and audit data 

The table above indicates: 

A.  Detailed  by  Fund  (the  table  also  includes  data  for  the  Cohesion  Fund, 

whenever relevant), the total amount committed for 2014; 

B.  Detailed  by  Fund  (the  table  also  includes  data  for  the  Cohesion  Fund, 

whenever relevant), the total amount paid in 2014; 

C.  Detailed  by  Fund  (the  table  also  includes  data  for  the  Cohesion  Fund, 
whenever  relevant),  the  total  amount  committed  until  the  end  of  2014  in 
relation to the programming period 2007-14; 

D.  Detailed  by  Fund  (the  table  also  includes  data  for  the  Cohesion  Fund, 
whenever relevant), the total amount paid until the end of 2014 in relation to 
the programming period 2007-14; 

E.  The  ‘average  risk  rate’  for  the  2014  expenditure  as  showed  in  the  Annual 

Activity Reports 2014 of DG REGIO and DG MARE; 

F.  The ‘cumulative residual risk’ for the 2007-13 related expenditure as showed 

in the Annual Activity Reports 2014 of DG REGIO and DG MARE. 

3.2.3.2.  Data about reported irregularities 

G.  The  number  of  cases  of  irregularities  reported  as  fraudulent  in  2014  and 

cumulatively for the whole period 2007-13; 

H.  The financial amounts related to cases under D; 

17 

CommitmentsPaymentsCommitmentsPaymentsEUREUREUREUR%%ERDFABCDEFESFABCDEFTOTALABCD3. Cohesion PolicyProgramming period 2007-13FundAppropriations 2014Cumulative PP2007-20132014 average risk ratecumulative residual riskFDRIDRNEURNEUR%%Programming Period 2007-13 - reporting year 2013GHIJKLERDFGHIJKLESFGHIJKLProgramming Period 2007-13 - cumulativeGHIJKLERDFGHIJKLESFGHIJKLPeriod / FundIrregularities reported as fraudulentIrregularities not reported as fraudulent 
 
 
I.  The number of cases of irregularities not reported as fraudulent in 2014 and 

cumulatively for the whole period 2007-13; 

J.  The financial amounts related to cases under F; 

K.  The Fraud Detection Rate (FDR), as defined in paragraph 2.3.1; 

L.  The Irregularity Detection Rate (IDR), as defined in paragraph 2.3.1. 

3.2.3.3.  Anti-fraud activities indicators 

The data used to calculate the values showed in the table come from the irregularities 
reported  as  fraudulent  between  2010  and  2014.  The  table  above  contains  the 
following information: 

M. Detection  efficiency,  as  defined  in  paragraph  2.3.3,  expressed  in  average 

months; 

N.  Reporting  efficiency,  as  defined  in  paragraph  2.3.4,  expressed  in  average 

months; 

O.  Detection + Reporting efficiency is the sum of the values indicated under M 

and N. 

The data used to calculate the values showed in the table come from the irregularities 
reported  as  fraudulent  between  2010  and  2014.  The  table  above  contains  the 
following information: 

P.  Number of cases of suspected fraud reported in the reference period; 

Q.  Number of cases of established fraud reported in the reference period; 

R.  Sum of values of P and Q; 

S.  Ratio of established fraud (REF) calculated as indicated in paragraph 2.3.5. 

3.2.4.  Financial corrections and recoveries for shared management 

The  table  above  shows  for  each  fund  the  total  amount  of  financial  corrections  and 
recoveries implemented vis-à-vis the Member State in the reference year. 

Amounts are expressed in million euro. 

18 

DetERepEDetE + RepEmonths/averagemonths/averagemonths/averageMNODetection - Reporting EfficiencyReporting period 2010-14Suspected fraudEstablished fraudTOTALREFNNN%PQRSIrregularities reported as fraudulent 2008-13Ratio of established fraudEAGFRural developmentERDFCohesion FundESFFIFG/EFFEAGGFOtherTOTALAAAAAAAAA4. Financial Corrections and recoveriesBreakdown-down of 2014 financial corrections implemented under shared management