COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE COURT OF AUDITORS PROTECTION OF THE EU BUDGET TO END 2014
Date: 2015-10-08
Institutions: Directorate-General for Budget, European Commission
Subjects: EU expenditure, EU programme, budgetary control, budgetary discharge, common agricultural policy, economic and social cohesion, general budget (EU)

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 8.10.2015  COM(2015) 503 final   COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE COURT OF AUDITORS PROTECTION OF THE EU BUDGET TO END 2014  
 
 
Table of Contents 

EXECUTIVE SUMMARY AND CONCLUSIONS .................................................................. 3 

2. 

2.1. 

2.2. 

2.3. 

2.4. 

2.5. 

2.6. 

3. 

3.1. 

3.2. 

3.3. 

3.4. 

3.5. 

3.6. 

4. 

4.1. 

4.2. 

4.3. 

5. 

5.1. 

5.2. 

5.3. 

6. 

6.1. 

6.2. 

7. 

7.1. 

7.2. 

8. 

PROCESSES ................................................................................................................ 7 

Preventive actions ......................................................................................................... 7 

Corrective actions ......................................................................................................... 8 

Agriculture .................................................................................................................. 10 

Cohesion ..................................................................................................................... 11 

Direct Management ..................................................................................................... 14 

Cost-effectiveness of management and control systems ............................................ 15 

FINANCIAL CORRECTIONS AND RECOVERIES IN 2014 ................................. 15 

Overview ..................................................................................................................... 15 

Financial corrections in progress at 31 December 2014 ............................................. 17 

Financial corrections confirmed in 2014 .................................................................... 17 

Financial corrections implemented in 2014 ................................................................ 20 

Recoveries ................................................................................................................... 22 

Deficiencies in Member States' management and control identified in 2014 and 
measures undertaken ................................................................................................... 23 

CUMULATIVE FINANCIAL CORRECTIONS & RECOVERIES TO END 2014 25 

Overview ..................................................................................................................... 25 

Financial corrections ................................................................................................... 27 

Recoveries ................................................................................................................... 35 

NET CORRECTIONS ................................................................................................ 36 

Net financial corrections 2014 .................................................................................... 36 

Impact on the EU budget ............................................................................................ 37 

Impact on national budgets ......................................................................................... 38 

PREVENTIVE MEASURES ..................................................................................... 38 

Agriculture .................................................................................................................. 38 

Cohesion ..................................................................................................................... 39 

CORRECTIVE ACTIONS MADE BY MEMBER STATES ON THEIR OWN 
INITIATIVE ............................................................................................................... 41 

Agriculture .................................................................................................................. 41 

Cohesion ..................................................................................................................... 42 

RECOVERY OF PRE-FINANCING AMOUNTS .................................................... 44 

2 

 
 
 
EXECUTIVE SUMMARY AND CONCLUSIONS 

President  Juncker  has  strongly  stressed  the  need  to  ensure  the  sound  financial 
management  of  European  Union  (EU)  programmes  and  insisted  that  all  necessary 
measures  be  put  in  place  to  protect  the  EU  budget.  This  Communication  describes  the 
functioning  of  the  preventive  and  corrective  mechanisms  foreseen  in  the  legislation  and 
the  actions  taken  by  the  Commission  services  to  protect  the  EU  budget  from  illegal  or 
irregular  expenditure.  It  also  provides  a  best  estimate  of  the  figures  resulting  from  their 
use and indicates how Member States are involved and impacted. 

This  Communication  is  prepared  annually  following  a  specific  request  by  the  European 
Parliament  in  the  context  of  the  2011  discharge  procedure  and  is  therefore  addressed  to 
this institution, as well as to the Council and to the European Court of Auditors (ECA). It 
complements  the  information  included  in  the  2014  EU  annual  accounts,  the  2014 
Commission’s  Synthesis  Report,  and  the  relevant  parts  of  the  Annual  Activity  Reports  of 
the Directorates General concerned. 

The  ECA  provides  in  its  annual  report  a  statement  of  assurance  on  the  legality  and 
regularity of transactions underlying the EU annual accounts, as well as observations and 
statistics  on  the  material  level  of  error  in  the  payments  underlying  the  accounts.  The 
importance  of  financial  corrections  and  recoveries  is  particularly  highlighted  when 
considering  their  multi-annual  character.  This  is  duly  reflected  in  the  Annual  Activity 
Reports  which  provide  detailed  information  on  both  error  rates  and  financial  corrections 
and  recoveries.  A  complementary  assessment  of  both  gives  an  indication  of  the  final 
impact  on  the  EU  financial  interests  as  regards  irregular  payments  to  beneficiaries  and 
represents a key indicator for assessing how supervisory and control systems manage the 
risks  relating  to  the  legality  and  regularity  of  operations  financed  by  the  EU  budget  (see 
the 2014 Commission’s Synthesis Report). 

The significant work of both the Commission and the Member States to manage the risks 
relating to the legality and regularity of operations financed by the EU budget is performed 
in  accordance  with  the  Treaty  on  the  Functioning  of  the  European  Union  (TFEU)1,  the 
Financial  Regulation2,  its  Rules  of  Application3  and  the  various  sector-specific  legal  texts. 
The  Commission  protects  the  EU  budget,  i.e.  EU  spending,  from  undue  or  irregular 
expenditure via two main methods: 

(1)  Preventive actions; and  
(2)  Corrective mechanisms (primarily financial corrections imposed on Member States 

but also recoveries from recipients of EU payments).  

The primary objective of financial corrections and recoveries is to ensure that EU funds are 
used  in  accordance  with  the  legal  framework  i.e.  they  exclude  from  Union  financing 
expenditure in breach of applicable law. Under shared management, Member States (and 
not  the  Commission)  are  primarily  responsible  for  identifying  and  recovering  from 
beneficiaries  amounts  unduly  paid.  Given  the  control  framework,  the  complexity  of  the 
corrective  mechanisms  and  procedures,  as  well  as  the  multi-annual  character  of 
programmes,  the  results  (i.e.  financial  corrections  and  recoveries)  are  generally 

1   OJ C 326, 26.10.2012, p. 47. 
2  

3  

Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council of 25 October 2012 on 
the  financial  rules  applicable  to  the  general  budget  of  the  Union  and  repealing  Council  Regulation  (EC, 
Euratom) No 1605/2002 (OJ L 298, 26.10.2012, p. 1). 
Commission  Delegated  Regulation  (EU)  No  1268/2012  of  29  October  2012  on  the  rules  of  application  of 
Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council on the financial rules 
applicable to the general budget of the Union (OJ L 362, 31.12.2012, p. 1). 

3 

 
 
 
                                                            
implemented after the related weaknesses or irregularities are identified and payments are 
made. 

In order to ensure the cost-effectiveness of control systems, one of the main work streams 
on which the services of the Commission will work during the mandate of the College is to 
rationalise  and  streamline  controls  and  reallocate  resources  to  controls  deemed  most 
appropriate for managing legality and regularity risks within the regulatory framework. For 
shared management, the main objective is to improve the effectiveness of Member States' 
control systems. 

This Communication focuses primarily on the results of the Commission's supervisory role, 
but also provides information on Member States' controls. 

Financial corrections & Recoveries: 2014 Results 

Regarding the impact of corrective measures taken by the Commission, the key figures for 
the financial year 2014 are as follows: 

Policy Areas 

Agriculture 

EAGF 

Rural development 

Cohesion Policy 

ERDF 

Cohesion Fund 

ESF 

FIFG/EFF 

EAGGF Guidance 

Total 
financial 
corrections 
and 
recoveries 
confirmed 
in 2014 

2 247 

1 862 

385 

2 050 

1 330 

292 

343 

67 

18 

EUR millions 

Total 
financial 
corrections 
and 
recoveries 
implemented 
in 2014 

1 198 

946 

252 

1 694 

1 083 

236 

290 

66 

19 

Shared management 

4 297 

2 892 

Internal policies 

External policies 

Administration 

TOTAL 

297 

127 

5 

279 

108 

5 

4 728 

3 285 

Financial  corrections  confirmed  and  implemented  represent  3.3 %  (confirmed)  and 
2.3 % (implemented) of budgetary payments in 2014. 

4 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial corrections & Recoveries: Cumulative Results 

Cumulative  figures  provide  more  useful  information  on  the  significance  of  corrective 
mechanisms  used  by  the  Commission  because  they  take  into  account  the  multi-annual 
character of most EU spending and neutralise the impact of one-off events. 

Financial corrections and recoveries confirmed 2009-2014 (EUR millions): 

5 000

4 500

4 000

3 500

3 000

2 500

2 000

1 500

1 000

 500

 0

Administration

External policy areas

Internal policy areas

Cohesion Policy

Agriculture

2009

2010

2011

2012

2013

2014

  During  the  period  2009-2014  the  amounts  confirmed  show  an  increasing  trend. 
The  average  amount  confirmed  was  EUR 3.2 billion  or  2.4 %  of  the  average 
amount  of  payments  made  from  the  EU  budget,  while  the  average  amount 
implemented in this period was EUR 2.8 billion or 2.1 % of payments - see graph 
4.1; 

 

 

 

For  EAGF,  the  average  correction  rate  for  Commission  financial  corrections  for  the 
period 1999 to end 2014 was 1.7 % of expenditure (all of which are net financial 
corrections) - see section 4.2.2; 

For ERDF and ESF 2000-2006 funds (where the closure is almost complete), at the 
end  of  2014  the  combined  rate  of  financial  corrections,  based  on  Commission 
supervision work only, was 4.1 % of the allocations made - see section 4.2.3; 

The  average  amount  confirmed  of  under  direct  and  indirect  management  for  the 
period  2009-2014  was  EUR 366 million  or  1.2 %  of  the  average  amount  of 
payments. 

  During  2015,  the  Court  of  Justice  ruled  against  the  Commission  for  a  number  of 
financial corrections relating to regional policy spending in 1994-1999, totalling almost 
EUR 500 million.  This  concerned  procedural  issues  and  the  Commission  is  currently 
analysing the impact – see section 4.1.2. 

Protection of the EU budget: Main Conclusions 

•  The  figures  demonstrate  the  positive  results  of  the  multiannual  preventive  and 

corrective activities undertaken by both the Commission and Member States; 

•  The significance of the amounts reported should be viewed as an affirmation of the 
commitment  of  the  Commission  and  the  Member  States  to  ensuring  that  European 
taxpayers' money is being used in accordance with legal requirements; 

5 

 
 
 
 
 
 
 
 

The  Commission  is  striving  to  further  improve  the  management  and  control 
systems  at  Member  States  level  by  proposing  appropriate  Member  States  specific 
action  plans,  by  organising  seminars  on  error  rates,  by  sharing  good  practices  and 
guidance,  by  organising  training  courses  for  Managing  Authorities  and  by  holding 
annual and ad-hoc meetings; 

  Corrective  measures  are  intended  to  correct  the  past,  preventive  measures  are 

intended to avoid that such irregularities reoccur in the future; 

 

Financial corrections can be net (e.g. under Agricultural Policy), which implies that the 
amounts concerned are actually reimbursed to the EU budget, or may be compensated 
against additional new eligible expenditure (in Cohesion Policy). In both cases, there is 
a real impact since, even in the case of compensation, the Member State concerned 
bears with its own resources (from the national budget) the financial consequences of 
ineligible expenditure;  

  When  precise  quantification  of  the  irregularities  is  either  not  possible  or  not  cost 
effective,  or  concern  serious  management  and  control  deficiencies,  the  Commission 
applies  the  so  called  flat  rate  corrections,  for  example  at  the  overall  operational 
programme level, as set out in the relevant regulations. Both project and programme 
level financial corrections have a deterrent effect for the future. 

Protection of the EU budget: ongoing improvements for the period 2014-2020 

  Agriculture:  this  includes  an  increased  focus  on  more  risky  expenditure,  a  shorter 
conformity  procedure,  better  definition  of  the  criteria  and  methodology  for  applying 
net  financial  corrections,  simplified  payment  schemes,  a  new  opinion  by  national 
Certification  Bodies  on  the  legality  and  regularity  of  declared  expenditure  and  a 
reinforcement of interruptions and suspensions in line with the successful practices in 
Cohesion. 

  Cohesion:  this  includes  the  application  of  net  financial  corrections,  which  introduces 
an additional  incentive for Member States to  improve their controls risk based  audits 
taking  into  consideration  strengthened  assurance  packages  encompassing  audit 
opinions on the functioning of systems and legality and regularity and Annual Control 
Reports  (ACRs)  reporting  residual  error  rates,  reinforced  legal  basis  for  flat  rate 
corrections and an increased level of correction for repeated deficiencies. 

6 

 
 
 
 
 
2. 

PROCESSES  

Audit / Control 

In progress  

Confirmed 

Implemented  

Reported 

2.1. 

Preventive actions 

The Commission uses a number of preventive mechanisms to protect the EU budget. 

Under  the  shared  management  mode  (i.e.  Agricultural  and  Cohesion  policy 
expenditure),  Member  States  are  primarily  responsible  throughout  the  expenditure  life 
cycle for ensuring that expenditure paid out from the EU budget is legal and regular. The 
Commission  provides  timely  and  close  supervision,  based  on  EU  audit  results,  national 
audit results received throughout the years, results of OLAF investigations, and any other 
information coming to the services knowledge that points to a system deficiency or serious 
uncorrected  irregularities.  Key  elements  pointing  to  the  effective  functioning  of  the 
monitoring and control system are re-assessed on a continuous basis to prevent payments 
in case of ineffective systems at programme/part of programme level. 

Agriculture:  Under  the  new  Common  Agricultural  Policy  (CAP)  Horizontal  Regulation,  a 
new legal framework for interruptions and suspensions of CAP funds entered into force in 
2014,  which  will  strengthen  the  Commission’s  powers  to  suspend  EU  financing  in  cases 
where risks of irregular payments have been identified. Accordingly, the Commission may 
reduce  or  suspend  monthly  (European  Agricultural  Guarantee  Fund  (EAGF))  or  interim 
(European Agricultural Fund for Rural Develoment (EAFRD)) payments where "one or more 
of the key components of the national control system in question do not exist or are not 
effective  due  the  gravity  or  persistence  of  the  deficiencies  found"  (or  there  are  similar 
serious deficiencies in the system for the recovery of irregular payments) and: 

-  either  the  deficiencies  are  of  a  continuous  nature  and  have  already  been  the 

reasons for at least two financial correction decisions,  

or 
- 

the Commission concludes that the Member State concerned is not in a position 
to  implement  the  necessary  remedial  measures  in  the  immediate  future,  in 
accordance with an action plan with clear progress indicators to be established 
in consultation with the Commission.  

For  EAFRD,  the  new  Common  Provisions  Regulation  (CPR)  also  provides  for  the 
interruption  of  interim  payments  by  the  Authorising  Officer  by  Delegation  (i.e.  the 
Director-General)  as  an  additional,  quick  and  reactive  tool  in  case  of  concerns  about  the 
legality and regularity of payments. For EAGF, the rhythm of the monthly payments would 
not allow for using such an interruption procedure. 

Cohesion:  Preventive  mechanisms  exist  at  the  level  of  the  Commission  in  its  role  of 
supervising body allowing it to: 

- interrupt the payment deadline for a maximum period of 6 months if: 

(a)  There  is  evidence  to  suggest  a  significant  deficiency  in  the  functioning  of  the 
management and control systems of the Member State concerned; or 

(b)  The  Commission  services  have  to  carry  out  additional  verifications  following 
information  that  expenditure  in  a  certified  statement  of  expenditure  is  linked  to  a 
serious irregularity which has not been corrected. 

Once  a  case  is  closed  (after  a  lifting  letter  is  sent),  the  interrupted  amount  can  be 
processed  and  paid  out  to  the  Member  State  authorities  under  the  condition  that 

7 

 
 
 
sufficient  credits  are  available  and  that  there  are  no  other  issues  affecting  the 
programme. 

- suspend all or part of an interim payment to a Member State in the following cases: 

(a)  Where  there  is  evidence  of  serious  deficiency  in  the  management  and  control 
system  of  the  programme  and  the  Member  State  has  not  taken  the  necessary 
corrective measures; or 

(b)  Where expenditure in  a certified  statement  of  expenditure  is  linked to  a serious 
irregularity which has not been corrected; or 

(c)  If  there  has  been  a  serious  breach  by  a  Member  State  of  its  management  and 
control obligations. 

Where  the  required  measures  are  not  taken  by  the  Member  State,  the  Commission  may 
decide to impose a financial correction. 

Both procedures provide a mechanism for rapid agreement with the Member State on the 
complementary  verifications  to  be  carried  out  and,  if  need  be,  implementation  of 
appropriate  remedial  actions.  Whenever  necessary,  in  case  of  serious  weaknesses  and 
where  the  Commission  services  consider  that  no  or  insufficient  action  has  been  taken  by 
the concerned authorities within the regulatory time frame of the interruption (maximum 
period of 6 months), the Commission also launches a formal suspension procedure starting 
with a pre-suspension letter addressed to the Member State. 

Under direct and indirect management, preventive actions include checks made by the 
responsible services on eligibility of expenditure being claimed by beneficiaries. These ex-
ante controls are embedded in the programmes’ management processes and are intended 
to provide reasonable assurance on the legality and regularity of expenditure being paid. 
The  Commission  services  can  also  provide  guidance,  particularly  on  contractual  issues, 
with  the  aim  of  ensuring  a  sound  and  efficient  management  of  funding  and  therefore  a 
lower risk of irregularities. 

2.2. 

Corrective actions 

It is important to underline that for a significant portion of EU expenditure, e.g. Cohesion, 
Research  and  Rural  Development  policies,  the  programmes  concerned  are  of  a  multi-
annual  nature.  In  line  with  Article  32(2)(e)  of  the  Financial  Regulation,  this  is  taken  into 
account when designing and implementing corrective measures, as well as when assessing 
the results of these actions. Financial corrections and recoveries are made at all stages of 
a programme's life-cycle, once expenditure has been incurred and/or a payment has been 
made.  

2.2.1. Financial corrections 

Financial corrections in progress are those proposed but not yet accepted by the Member 
States or not yet decided by the Commission.  

A  financial  correction  is  reported as  confirmed  as  soon  as  it  is  accepted  by  the  Member 
State or decided by a Commission Decision. 

A  financial  correction  is  considered  implemented  when  the  correction  has  been  applied 
and  recorded  in  the  Commission  accounts,  which  means  the  financial  transaction  was 
validated by the responsible Authorising Officer in the following cases: deduction from the 
interim or final payment claim, recovery order and/or a de-commitment transaction. 

8 

 
 
 
 
The  Commission  applies  the  following  types  of  financial  corrections  on  the  expenditure 
declared by the Member States ("ex-post" corrections): 

-  Financial  corrections  on  individual  cases,  based  on  a  precise  identification  of 

amounts unduly spent, and the financial implications for the budget; 

-  Extrapolated  financial  corrections  if  the  related  amount  can  be  quantified  on  the 
basis of a representative statistical sample with a sufficient level of confidence; 

-  Flat rate corrections, if the related amount cannot be quantified on the basis of a 
representative statistical sample or when the impact on expenditure of individual 
errors cannot be quantified precisely (e.g. financial corrections of individual public 
contracts based on agreed flat rates) – see tables 3.3.2 & 3.4.2. 

Under shared management, all financial corrections, no matter what type, have an impact 
on national budgets – even if no reimbursement to the EU budget is made, the impact of 
financial corrections is always negative at Member States' level. 

"At  source"  financial  corrections  are  used  to  effect  financial  corrections  before  an  EU 
reimbursement has been made. These occur when the correction is applied by the Member 
State when certifying new expenditure to the Commission following and as a result of the 
remedial  action  plan  agreed  with  the  Commission.  It  should  be  highlighted  that  the 
difference between "ex-post" and "at source" financial corrections is a timing one.  

2.2.2.  Recoveries 

For the EAGF, amounts recovered from the beneficiaries are credited to the EU budget as 
assigned  revenue,  after  deduction  applied  by  Member  States  of  20 %  to  cover 
administrative  costs.  In  order  to  address  delays  by  some  Member  States  in  recovering 
undue payments, a legal clearing mechanism provides that 50 % of any undue payments 
which the Member States have not recovered from the beneficiaries within 4 years or, for 
cases  involving  legal  proceedings,  8  years,  would  be  charged  to  their  national  budgets 
(50/50  rule).  Even  then,  Member  States  are  still  obliged  to  pursue  their  recovery 
procedures  and,  if  they  fail  to  do  so  with  the  necessary  diligence,  the  Commission  may 
decide,  following  the  conformity  clearance  procedure,  to  charge  the  entire  outstanding 
amounts to the  Member States concerned. Moreover, Member States are required to off-
set  any  outstanding  debts  against  future  payments  to  the  debtor  (compulsory 
compensation). This system encourages Member States in their efforts to actually recover 
irregular payments without unjustified delays. 

For  EAFRD  recoveries  are  taken  into  consideration  in  a  future  reimbursement  claim 
received  by  the  Commission  and  therefore  can  be  reused  for  the  programme  within  the 
programming period – after the end of the eligibility period it is credited to the EU budget 
as assigned revenue. 

Under  Cohesion  policy,  recoveries  are  mainly  issued  at  or  after  closure  of  the 
programmes  and  result  in  revenue  for  the  EU  budget.  Under  the  current  programming 
period (2014-2020), in the framework of the acceptance of the accounts recoveries can be 
off-set with future reimbursement claims (and re-used for the programme). 

Under  direct  and  indirect  management,  and  in  accordance  with  the  Financial 
Regulation,  recovery  orders  should  be  established  by  the  authorising  officer  for  amounts 
unduly  paid.  Recoveries  are  then  implemented  by  direct  bank  transfer  from  the  debtor 
(and constitutes revenue for the EU budget that can be re-used for the same programme) 
or by offsetting from other amounts that the Commission owes to the debtor. Commission 
services implement recoveries also "at source" by deducting ineligible expenditure (which 
has been identified in previous or current cost claims) from payments made. 

9 

 
 
2.3. 

Agriculture 

2.3.1.  How does the Commission protect the CAP expenditure ? 

According to the CAP legal framework, financial corrections imposed by the Commission on 
Member  States  have  always  been  net  corrections4.  The  amounts  are  actually  reimbursed 
by  the  Member  States  and  are  treated  as  assigned  revenue  in  the  EU  budget.  They  are 
used  to  finance  CAP  expenditure  as  a  whole  without  being  earmarked  for  any  particular 
Member State. 

Every  year  the  Commission  adopts  between  2  and  4  conformity  clearance  decisions 
covering  a  package  of  individual  financial  corrections.  The  actual  execution  of  the 
reimbursement  to  the  EU  budget  may  be  delayed  via  instalment  or  deferral  decisions. 
Implementation  by  instalments  was  so  far  accepted  for  Bulgaria,  France,  Greece, 
Lithuania, Portugal, Romania and Spain. Additionally, in 2012, the Commission introduced 
a  new  provision5  which  permitted  deferral  of  reimbursment  of  financial  corrections  for 
Member States under EU financial assistance and under the conditions that the deficiencies 
at the origin of the financial correction are remedied. After the expiry of the deferral period 
the  corrections  are  executed  in  annual  instalments.  To  date,  deferrals  were  granted  to 
Portugal and Greece. Up to end of 2014, instalment decisions had been adopted in respect 
of EUR 1.1 billion while such decisions were also adopted in January 2015 in respect of a 
further EUR 1.3 billion (EUR 2.4 billion in total). 

2.3.2.  Ongoing improvements for the period 2014-2020 

(A) Focus on more risky expenditure  

As a result of the higher error rates reported by the ECA in its recent audit exercise, the 
number of EAFRD audits were increased significantly in 2013 (to 35) and again in 2014 (to 
45), thus double the 2012 amount (23). Another consequence is that some Member States 
are  audited  every  year,  until  all  serious  deficiencies  are  remedied.  The  audit  strategy  for 
the period is based on a reinforced risk analysis and a rolling three-year programme which 
will ensure a better coverage of the overall expenditure, notably to achieve a better audit 
coverage,  and  targeting  mainly  the  serious  and/or  systemic  deficiencies  in  the  Member 
States’  management  and  control  systems.  More  intensive  audit  activities  will  continue  in 
the most risky areas with a system-based approach.  

(B) No discretion and a ranking of financial corrections 

Any  identified  risk  to  the  EU  budget  will  systematically  trigger  a  net  financial  correction 
since the Commission is legally bound to exclude any identified illegal expenditure from EU 
financing.  Both  EAGF  and  EAFRD  net  financial  corrections  are  governed  by  the  new  CAP 
Horizontal  Regulation  which  tightens  the  procedure  even  more,  to  the  extent  that  the 
method and the criteria for fixing the amount of financial corrections is now set out in the 
delegated  act.  Both  the  Financial  Regulation  and  the  new  CAP  Horizontal  Regulation 
provide for a ranking of types of net financial corrections where flat-rate corrections may 
only  be  used  if  calculated  or  extrapolated  corrections  cannot  be  established  with 
proportionate efforts. 

4  

The  procedure  by  which  the  Commission  accepts  the  accounts  of  the  Member  States  and  thereby  the 
expenditure  made  by  the  paying  agencies  to  farmers  and  beneficiaries.  Firstly  the  accounts  of  paying 
agencies  are  checked  for  accuracy  by  certification  bodies  in  the  Member  States  and  are  then  subject  to  an 
annual financial clearance decision by the Commission. Secondly, the Commission itself then carries out the 
conformity  clearance  procedure  based  on  audits  which  permit  it  to  identify  and  exclude  (in  later  years) 
payments not complying with the rules. 

5   Commission  Implementing  Regulation  (EU)  No  375/2012  of  2  May  2012  amending  Regulation  (EC) 
No 885/2006  laying  down  detailed  rules  for  the  application  of  Council  Regulation  (EC)  No  1290/2005  as 
regards the accreditation of paying agencies and other bodies and the clearance of the accounts of the EAGF 
and EAFRD (OJ L 118, 3.5.2012, p. 4–5). 

10 

 
 
                                                            
(C) Shorter conformity procedure 

The  Commission  will  continue  with  actions  aimed  at  streamlining  the  whole  procedure. 
Firstly,  the  new  CAP  Horizontal  Regulation  describes  precisely  the  nature,  scope  and 
sequence  of  the  successive  steps,  as  well  as  the  different  types  of  financial  corrections. 
Secondly, provisions in the delegated act (method and criteria for calculating the financial 
correction)  and  implementing  acts  (details  of  the  conformity  procedure,  with  mandatory 
deadlines)  are  intended  to  further  streamline  the  legal  framework  and  limit  the  risk  of 
unnecessary delays. Thirdly, the Commission will intensify its monitoring of the progress of 
the conformity procedures to ensure a strict respect of the deadlines.  

(D) Reinforcement of the Commission's supervisory role 

The CAP regulatory tools have been reinforced for the period 2014-2020, including: having 
a single system of monitoring and evaluation for both pillars, streamlining/speeding up of 
the  conformity  clearance  procedure,  better  definition  of  the  criteria  and  methodology  for 
applying  net  financial  corrections,  introducing  a  new  model  for  assurance  by  the 
Certification  Body  (CB)  on  the  legality  and  regularity  of  declared  expenditure  based  on 
representative samples.  

(E) Simplification 

Notably for EAFRD, the Commission will continue its efforts to identify the root causes of 
errors  (an  ad-hoc  task  force  was  set-up),  and  to  propose  and  encourage  the  widest 
possible  use  of  the  simplified  payment  schemes  that  are  less  prone  to  errors.  More 
globally,  the  Commission,  together  with  the  stakeholders,  is  engaged  in  a  simplification 
process where all legal acts and guidelines are assessed with a view to identify all possible 
simplifications and make the necessary changes as soon as possible: in the short term for 
delegated and implementing acts and guidelines, in the mid-term for the basic acts. 

(F)  Interruptions  and  suspension  for  CAP  as  prompt  and  effective  instruments  for  the 
Commission to protect the EU budget  

These  preventive  actions  (interruptions  for  EAFRD,  suspensions  or  reductions  for  both 
EAGF  and  EAFRD)  will  allow  the  Commission  to  act  promptly  and  effectively  and  protect 
the EU budget: no new payments will be made or they will be reduced up to the level of 
the estimated risk during the suspension. In addition, and as has always been the case in 
the previous programming periods, any identified irregular payments will be fully covered 
via net financial corrections. See section 2.1 above for more details. 

2.4. 

Cohesion 

2.4.1.  Situation up to 2007-2013 programming period 

Funds released following financial corrections in the Cohesion area were available for reuse 
and  replacement  by  regular  expenditure  during  the  life-cycle  of  the  programme.  Due  to 
the  legal  framework,  net  financial  corrections  leading  to  the  return  of  previously  paid 
the  exception  during  programme 
amounts 
implementation.  

the  EU  budget  were  generally 

to 

2.4.2.  Improvements planned for period 2014-2020 

(A) Net financial corrections 

A significant change was introduced for the 2014-2020 programming period: under certain 
conditions  laid  down  in  Article  145(7)  of  the  Common  Provisions  Regulation  (CPR),  the 
Commission  has  the  obligation  to  apply  a  net  financial  correction.  In  such  cases  the 
current  possibility  for  the  Member  State  to  accept  the  correction  and  to  re-use  the  EU 
funds in question is removed. 

11 

 
 
 
Net  financial  corrections  in  the  2014-2020  period  therefore  introduce  an  additional 
incentive  on  the  side  of  the  Member  States  to  further  improve  their  management  and 
control  systems  since  these  corrections  will  reduce  the  funds  earmarked  for  a  particular 
Member State when serious deficiencies not previously detected, reported nor corrected at 
Member State level are discovered by EU audits.  

(B) Incentives for Member States to improve their controls 

When  drawing  up  the  accounts,  the  management  declaration  and  the  audit  opinion,  the 
programme  authorities  should  obtain  reasonable  assurance  through  such  control 
procedures  that  all  material  irregularities  have  been  corrected  and  that  possible  serious 
deficiencies, at any level of the management and control system, have been addressed, or 
are  being  addressed.  Audit  authorities  will  play  a  reinforced  role  in  presenting  audit 
opinions  every  year  for  each  programme:  their  audit  opinions  will  be  based  on  annual 
residual  risks  of  error.  Residual  error  rates  reported  by  Member  States  will  be  assessed 
and  validated  by  the  Commission’s  DGs  when  preparing  their  Annual  Activity  Reports 
(AARs). 

Within the new financial management cycle, 15 February following each accounting year6 
is  the  cut-off  date.  By  that  date,  Member  States  must  submit  to  the  Commission  the 
programme’s accounts, management declaration, audit opinion and corresponding reports. 
Member  States  shall  certify  the  legality  and  regularity  of  expenditure  included  in  their 
annual accounts. 

(C)  Financial  corrections  for  irregularities/deficiencies  identified  before  15  February  each 
year  

The  rules  of  the  2014-2020  programming  period  concerning  financial  corrections  for 
irregularities identified before 15 February each year are similar to those of the 2007-2013 
programming  period.  The  objective  is  to  maintain  the  incentive  for  Member  States  to 
detect  and  correct  irregularities  themselves.  Irregular  expenditure  detected  through 
national  verifications  or  audits  has  to  be  deducted  from  the  accounts  to  be  submitted  to 
the Commission by 15 February each year. Having done so, the Member State will be able 
to  re-use  the  amounts  thus  corrected  for  new  eligible  operations  under  the  programme, 
just as in the 2007-2013 programming period. 

In  the  case  of  EU  audits  carried  out  on  expenditure  before  the  certified  accounts  are 
submitted to the Commission and which detect irregularities requiring financial corrections, 
two scenarios are possible, as in the 2007-2013 period: 

(1)  If  the  Member  State  agrees  on  the  financial  correction  to  be  made  and  takes 
action,  it  will  be  able  to  re-use  the  corrected  amounts  for  new  eligible  operations 
(Article 145(5) of the CPR);  

(2)  If  the  Member  State  does  not  agree,  the  Commission  will  adopt  a  financial 
correction decision, following the contradictory procedure provided for in Article 145 
of  the  CPR.  This  financial  correction  will  always  be  net  and  the  programme  and 
Member State allocation will be reduced proportionally.  

(D) Commission assessment of legality and regularity on the basis of the accounts, audit 
opinion and accompanying documents submitted by 15 February each year  

The  Commission  will  assess  and  review  the  audit  opinions  (elements  relating  to  the 
functioning  of  systems  and  legality  and  regularity)  and  Annual  Control  Reports  (ACRs), 
including  the  reported  residual  error  rates,  as  well  as  the  management  declarations  and 
annual  summaries,  within  three  months  of  reception  of  the  documents  provided  by  15 

 6  

This  date  can  be  extended  to  1st  March  in  exceptional  cases  at  the  request  of  the  Member  State,  (Art. 
59(5)). 

12 

 
 
                                                            
February.  The  Commission  will,  on  this  basis,  make  its  risk-assessment  and  establish  its 
audit  plan  determining  the  required  risk-based  audits  targeted  to  the  selected  high-risk 
programmes.  

The  Commission  will  carry  out  its  risk-based  audits  until  the  submission  of  the  next 
assurance  package.  It  will  examine,  through  desk  and  on-the-spot  audit  work  and  re-
performance  of  samples  of  national  audits  including  at  the  level  of  operations,  whether 
reported information is reliable and therefore constitutes an adequate basis for assurance 
on  legality  and  regularity.  Priority  will  be  given  to  auditing  programmes  that  have  a 
material  impact  on  the  Commission's  payments  for  the  corresponding  fund  in  the 
accounting year. The past performance of Member States authorities will also be taken into 
account in the risk-based criteria for the definition of audit priorities. 

(E)  Identification  by  EU  audits  of  irregularities  indicating  a  serious  deficiency  after  15 
February each year 

If EU (Commission including OLAF and ECA) audits carried out after 15 February each year 
detect  irregularities  demonstrating  a  serious  deficiency  affecting  the  corresponding 
accounting year,  the  Commission  has  the  obligation  to  apply  a net  financial  correction,  if 
the conditions defined in the regulation are fulfilled.  The resulting financial correction will 
always  be  net  because  the  allocation  to  the  programme  and  the  total  allocation  of  the 
Member State  in  question  will  be  automatically  reduced by  the  amount  of  the  correction, 
even if the Member State accepts the financial correction.  

(F) Reinforced legal basis 

Under  the  CPR,  the  Commission  is  empowered  to  lay  down  in  a  delegated  act  detailed 
rules  concerning  the  criteria  for  the  assessment  of  the  functioning  of  management  and 
control  systems,  including  the  main  types  of  serious  deficiencies,  the  criteria  for 
establishing the level of financial correction to be applied and the criteria for applying flat-
rates  or  extrapolated  financial  corrections.  The  delegated  act  was  adopted  on  3  March 
2014 (Commission Delegated Regulation (EU) 480/2014)7. The Commission therefore has 
a  stronger  legal  basis  compared  to  the  2007-2013  programming  period  which  included 
similar elements under a non-legally binding guidance note. Moreover, the criteria for the 
assessment  and  the  levels  of  flat-rate  corrections  will  be  well-known  in  advance  to  all 
programme stakeholders. 

(G) Flat rate correction rates maintained 

Flat-rate correction percentages already applied during previous programming periods are 
maintained,  i.e.  5 %,  10 %,  25 %  and  100 %.  This  approach  has  been  confirmed  by  the 
case  law  of  the  Court  of  Justice.  Nonetheless  the  decision  to  apply  any  level  of  financial 
correction must take account of proportionality and of the residual risk to the EU budget, 
as  required  in  the  CPR.  Therefore,  where  the  application  of  a  fixed  flat-rate  correction  in 
accordance with the delegated act would be disproportionate, the Commission shall apply 
a reduced level of flat-rate correction. 

(H) Increased level of correction for repeated deficiencies  

When the same deficiencies have been detected by EU audits despite a previous financial 
correction,  the  Commission  has  included  a  provision  in  the  delegated  act  allowing  for  a 
higher rate of correction than in the case of the first correction. This is a clear message to 

7   Commission  Delegated  Regulation  (EU)  No  480/2014  of  3  March  2014  supplementing  Regulation  (EU)  No 
1303/2013 of the European Parliament and of the Council laying down common provisions on the European 
Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund 
for Rural Development and the European Maritime and Fisheries Fund and laying down general provisions on 
the European Regional Development Fund, the European Social Fund, the Cohesion Fund and the European 
Maritime and Fisheries Fund (OJ L 138, 13.5.2014, p. 5–44). 

13 

 
 
                                                            
Member  States  that  they  need  to  ensure  a  rapid  and  permanent  adjustment  of  their 
management and control systems once a serious deficiency has been detected. 

(I) Other measures already in force will continue to be applied  

The  new  possibilities,  i.e.  the  possibility  to  impose  net  financial  corrections,  and  the 
introduction of the annual assurance package, will be coupled with the continuation of the 
existing  strict  policy  on  interruptions  and  suspensions,  and  the  strong  encouragement  of 
the  utilisation  of  all  simplification  opportunities.  This  should  result  in  a  further 
improvement  of  the  implementation  of  the  Cohesion  policy  in  the  new  programming 
period. 

2.5. 

Direct Management 

For  direct  management  expenditure,  the  Commission  has  control  frameworks  in  place  to 
prevent,  detect  and  deter  irregularities  at  the  different  stages  of  the  grant  management 
process  in  order  to  achieve  both  operational  and  financial  objectives.  An  overview  of  the 
controls  made  in  two  key  areas  of  direct  management  expenditure,  research  and 
international aid, are given below. 

For Research expenditure , the control framework starts with the development of a work 
programme, which goes through a wide-ranging consultation process to ensure that it best 
meets  the  expectations  of  all  stakeholders  and  will  maximise  the  research  outcome. 
Following the evaluation of proposals, further controls are then carried out as the selected 
proposals are translated into legally binding contracts. 

Project  implementation  is  monitored  throughout  the  lifetime  of  the  project.  Payments 
against  cost  claims  are  all  subject  to  ex-ante  checks  according  to  standard  procedures, 
which include (for payments above EUR 375 000) an audit certificate given by a qualified 
auditor. As well as standard controls, additional, targeted, controls can also be carried out 
according to the information received and the risk of the transaction.  

A  main  source  of  assurance  comes  from  in-depth  checks  carried  out  at  a  sample  of  the 
beneficiaries'  premises  after  costs  have  been  incurred  and  declared.  A  large  number  of 
these  in-depth  checks  are  carried  out  over  the  lifetime  of  the  programme.  Any  amounts 
paid  in  excess  of  what  is  due  are  recovered,  and  systemic  errors  are  extended  to  all 
ongoing participations of a beneficiary. 

In  the  field  of  International  Cooperation  and  Development,  the  Commission  has 
established a control framework to prevent, detect and deter irregularities at the different 
stages of the implementation of funding, applicable to the all management modes (direct 
and indirect) used for this implementation. This strategy starts from the choice of the most 
appropriate  tool  when  drafting  the  planning  documents  and  the  financial  decisions,  and 
translates into the actual checks carried out at all stages of the implementation. 

From  the  point  of  view  of  financial  control,  the  system  is  made  up  of  a  number  of 
instruments  systematically  applied  to  the  implementation  of  contracts  and  grants  for  all 
management modes: ex-ante checks on payments, audits carried out by the Commission 
and  foreseen  in  an  audit  plan,  expenditure  verifications  carried  out  prior  to  payments  by 
beneficiaries  of  grants,  verification  missions  to  international  organisations  and  an  overall 
ex-post control on the basis of the Residual Error Rate study carried out every year. 

The  EU  financial  interests  are  therefore  safeguarded,  in  addition  to  all  the  other  possible 
means  offered  by  the  Financial  Regulation,  by  the  Commission's  ex-ante  control  of 
individual  transactions  as  well  as  subsequent  controls  or  audits,  and  by  the  resulting 
recovery  of  any  unduly  disbursed  funds  where  the  agreed  procedures  have  not  been 
respected, or where the activities were not eligible for EU financing. 

14 

 
 
2.6. 

Cost-effectiveness of management and control systems 

In  line  with  the  requirement  of  the  Financial  Regulation,  an  important  objective  of  the 
Commission's  "budget  focused  on  results  strategy"  is  to  ensure  cost-effectiveness  when 
designing  and  implementing  management  and  control  systems  which  prevent  or  identify 
and  correct  errors.  Control  strategies  should  therefore  consider  a  higher  level  of  scrutiny 
and  frequency  in  riskier  areas  and  ensure  that  controls  add  value.  This  is  important 
because controls impose a significant administrative burden on beneficiaries and may even 
discourage  participation  in  programmes.  Furthermore,  inefficient  and  ineffective  controls 
absorb resources which could otherwise contribute to the achievement of results. 

Reporting on cost-effectiveness improved in 2014 annual activity reports. All Commission 
services  which  reached  a  conclusion  on  the  cost-effectiveness  of  their  management  and 
control  systems  stated  that  quantifiable  and/or  non-quantifiable  benefits  exceed  costs 
and/or show a stable or a positive trend of relevant indicators.  

The Commission instructed its services to develop a common methodology for calculating 
their  costs  and  benefits  of  control  so  as  to  improve  consistency  and  produce  reliable 
results  which  can  be  used  to  determine  the  relative  cost-effectiveness  of  the  control 
systems in place (see the Commission's Synthesis Report for 2014). For expenditure under 
shared management, the calculation of the costs and cost-effectiveness of controls needs 
to take into account in the management and control activities of the Member States. 

3. 

FINANCIAL CORRECTIONS AND RECOVERIES IN 2014  

3.1. 

OVERVIEW 

Table 3.1: Financial corrections and recoveries overview for 2014  

MFF Heading 

Total EU 
budget 
payments 
in 2014 

Total 
financial 
corrections 
in progress 
at end 2014 

Total 
financial 
corrections 
and 
recoveries 
confirmed 
in 2014 

% of 
payments 
of the EU 
budget 

Total 
financial 
corrections 
and 
recoveries 
implemented 
in 2014 

EUR millions 

% of 
payments 
of the EU 
budget 

Smart & inclusive growth 

67 683 

1 018 

2 198 

3.2 % 

1 828 

2.7% 

8

ERDF

8

Cohesion Fund
ESF 
Internal policies 

Sustainable growth: natural 
resources 
EAGF 
Rural Development 
FIFG/EFF 
EAGGF Guidance 
Internal policies 

Security & citizenship  

Migration and home affairs 
Internal policies 

Global Europe  

External policies 

Administration  

Administration 

29 841 

13 464 

10 623 
13 755 

360 

22 

636 
- 

1 330 

292 

343 
232 

4.5% 

2.2% 

3.2% 
1.7% 

1 084 

236 

290 
218 

3.6% 

1.8% 

2.7% 
1.6% 

56 584 

4 892 

2 355 

4.2% 

1 302 

2.3% 

44 287 
11 191 
689 
6 
411 

1 711 

400 
1 311 

7 206 

7 206 

8 819 

8 819 

3 789 
960 
47 
95 
- 

- 

- 
- 

N/A 

- 

N/A 

- 

1 862 
385 
67 
18 
23 

42 

5 
37 

127 

127 

5 

5 

4.2% 
3.4% 
9.8% 
294.2% 
5.6% 

2.5% 

1.3% 
2.8% 

1.8% 

1.8% 

0.1% 

0.1% 

946 
252 
66 
18 
19 

42 

5 
37 

108 

108 

5 

5 

2.1% 
2.3% 
9.6% 
294.2% 
4.6% 

2.5% 

1.3% 
2.8% 

1.5% 

1.5% 

0.1% 

0.1% 

TOTAL 

142 003* 

5 909 

4 728 

3.3% 

3 285 

2.3% 

* 

Excludes EUR 29 million paid to Croatia under the  Compensation heading and EUR 465 million paid  out 
under the Special Instruments heading. 
Please note that the figures above differ from the ones shown in the PIF report of OLAF since the OLAF 
report was published earlier, at a stage where only provisional figures were available. 

8  

ERDF and Cohesion Fund amounts include, for the first time in 2014, financial corrections “at source”. 

15 

 
 
 
 
 
 
 
                                                            
Agriculture: 

In 2014 the Commission adopted 3 conformity clearance decisions9, covering 56 individual 
net  financial  corrections  for  a  total  amount  of  EUR 443 million  (0.8 %  of  the  CAP 
expenditure  budgeted  for  2014).  A  further,  financially  significant,  conformity  clearance 
decision was prepared at the end of 2014 and the Member States were formally consulted 
in  the  Agricultural  Funds  Committee  before  year-end.  That  decision,  which  was  for  the 
amount  of  EUR 1.4 billion  (covering  56  individual  corrections),  was  adopted  by  the 
Commission in January 201510. Based on internationally accepted accounting standards for 
the public sector, this amount was included as "confirmed" in the financial year 2014. 

Cohesion: 

2000-2006 programming period:  

The  advanced  stage  of  the  closure  process  of  ERDF  programmes  and  Cohesion  Fund 
projects led to total additional financial corrections of an amount of EUR 543 million being 
imposed and accepted by Member States in 2014: 

-   EUR 451 million of financial corrections for the closure of  ERDF programmes in 
9  Member  States,  the  most  significant  being  for  Italy  (EUR 231 million)  and 
Spain (EUR 119 million); 

-   EUR 92 million accepted by 11 Member States for Cohesion Fund projects, the 

largest being for Slovakia (EUR 70 million). 

For ESF, in the context of the closure process, all 239 programmes have been closed (209 
fully  and  30  partially).  In  2014,  the  amount  of  financial  corrections  confirmed  and 
implemented  was  EUR 133 million.  The  Member  States  with  the  highest  level  of  financial 
corrections  confirmed  and  implemented  were,  respectively,  Spain  (EUR 99 million)  and 
Italy (EUR 20 million). The other countries for which the closure process has been finalised 
were Belgium, Germany, Greece, France, Austria, Slovakia and UK. Italy and Spain did not 
accept  yet  some  closure  proposals  and  the  pre-correction  procedure  has  been  initiated  – 
see section 4.2.3 for more details. 

Significant  progress  was  made  in  2014  in  relation  to  the  closure  of  the  Financial 
Instrument for Fisheries Guidance (FIFG). At the end of 2014, 53 programmes out of 60 
were closed. Most financial corrections concerned were implemented via recovery orders. 

2007-2013 programming period:  

financial  corrections 

Confirmed 
for  ERDF  and  Cohesion  Fund  were 
EUR 294 million11. This is the result of the strict supervision and interruption policy of the 
Commission and growing number of action plans including financial corrections decided by 
Member States and implemented as a result of interruption or pre-suspension letters sent 
by the Commission's Authorising Officers by Delegation. 

in  2014 

Under  ESF,  EUR 209 million  has  been  confirmed  and  EUR 156 million  has  been 
implemented,  out  of  which  EUR 95 million  were  confirmed  in  2014  and  EUR 61 million  in 
the  previous  years.  89 %  of  financial  corrections  confirmed  during  the  year  2014  and 
previous  years  have  been  implemented,  leaving  an  amount  of  EUR 118 million  still  to  be 
implemented.  Member  States  with  the  highest 
level  of  corrections  are  Spain 
(EUR 56 million),  Romania  (EUR 43 million);  Poland  (EUR 32 million)  and  France 

9   Decision 2014/191/EU of 4 April 2014, OJ L104 (ad hoc decision no. 44), 
    Decision 2014/458/EU of 9 April 2014, OJ L204 (ad hoc decision no. 45), 
    Decision 2014/950/EU of 24 December 2014, OJ L369 (ad hoc decision no. 46). 
10   Decision 2015/103/EU of 16 January 2015, OJ L16 (ad hoc decision no. 47). 
11  

In addition to this amount, EUR 782 million of financial correction “at source” have been reported for the first 
time in 2014 for ERDF/CF – see section 3.3.3.  

16 

 
 
                                                            
(EUR 20 million). Among the financial corrections implemented in 2014, EUR 64 million are 
at source financial corrections, meaning that these financial corrections are applied by the 
Member State authorities at the same time the expenditure is declared to the Commission 
by application of flat rate corrections following Commission audits. 

Financial corrections confirmed for European Fisheries Fund (EFF) increased by more than 
80 %  from  2013,  mainly  resulting  from  Commission  audits  and  desk  reviews.  The 
withdrawal  of  ineligible  expenditure  from  the  subsequent  payment  claim  allows  such 
financial corrections to be implemented rapidly. 

2014-2020 programming period: 

The  first  accounting  period  was  ongoing  in  the  course  of  2014  and  the  designation  of 
authorities  has  not  yet  taken  place  for  almost  all  the  operational  programmes,  therefore 
no audit activity related to the declaration of expenditure has yet been processed. 

3.2. 

FINANCIAL CORRECTIONS IN PROGRESS AT 31 DECEMBER 2014 

Financial corrections in progress are the preliminary stage where procedures for a financial 
correction  have  been  opened  but  the  contradictory  procedure  with  the  Member  State 
concerned  is  still  on-going.  The  indicated  amounts  are  only  initial  estimates  by  the 
Commission services, subject to change until the final decision by the Commission. 

3.3. 

FINANCIAL CORRECTIONS CONFIRMED IN 2014 

This  section  provides  different  views  of  the  financial  corrections  amounts  confirmed  in 
2014. Attention is drawn to the fact that the data and maps presented below relate to one 
year only, 2014. The level of both the global corrections amount and the split by Member 
State can change significantly depending on the year. Therefore, a meaningful assessment 
of the corrective capacity of supervisory and control systems has to be based, in line with 
the nature of this expenditure, on a multi-annual perspective (see section 4). 

17 

 
 
 
 
3.3.1. Breakdown by Member State 

Map and Table 3.3.1: Financial corrections confirmed in 2014 as compared to EU 
payments received; Breakdown by Member State 

Payments 
received from 
the EU budget 
in 2014 
(EUR million) 

Financial 
corrections 
confirmed 
in 2014 
(EUR 
million) 

1 028 
2 096 
4 152 
1 212 
9 712 
 610 
1 376 
6 829 
10 219 
11 159 
 407 
9 450 
 237 
1 005 
1 774 
 79 
6 342 
 221 
1 285 
1 301 
17 088 
4 772 
5 775 
1 078 
1 577 
 866 
1 338 
5 685 
1 866 

 25 
 148 
 441 
 9 
 39 
 2 
 18 
 187 
 379 
1 383 
-  
 401 
-  
 5 
 9 
 0 
 189 
 0 
(30)* 
 15 
 49 
 50 
 295 
 15 
 142 
 7 
 4 
 62 
 44 

110 537 

3 890 

Financial 
corrections 
confirmed 
in 2014 % 
as 
compared 
to 
payments 
received 
from the EU 
budget in 
2014 

2.4% 
7.1% 
10.6% 
0.7% 
0.4% 
0.3% 
1.3% 
2.7% 
3.7% 
12.4% 
N/A 
4.2% 
N/A 
0.5% 
0.5% 
0.0% 
3.0% 
0.2% 
(2.3%) 
1.2% 
0.3% 
1.0% 
5.1% 
1.4% 
9.0% 
0.8% 
0.3% 
1.1% 
2.4% 

3.5% 

Member State 

Belgium 
Bulgaria 
Czech Rep. 
Denmark 
Germany 
Estonia 
Ireland 
Greece 
Spain 
France 
Croatia 
Italy 
Cyprus 
Latvia 
Lithuania 
Luxembourg 
Hungary 
Malta 
Netherlands 
Austria 
Poland 
Portugal 
Romania 
Slovenia 
Slovakia 
Finland 
Sweden 
UK 
INTERREG 

TOTAL 

The  map  above  takes  into  account  the  relative  weight 
of the financial corrections confirmed for each Member 
State compared to the payments received from the EU 
budget in the year 2014. 

  Light  grey  shows  Member  States  that  are 

below the average percentage of 3.5 %. 

 Red highlights Member States that are above 

the average percentage of 3.5 %. 

* The negative amount for Netherlands above arises following a judgement of the Court of Justice where the 
Commission needs to reimburse the Netherlands. 

18 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3.3.2.  Breakdown of flat-rate corrections confirmed in 2014 

Table 3.3.2: Breakdown of flat-rate corrections confirmed in 2014 

Total financial 
corrections  
(EUR million) 

Flat-rate financial 
corrections* 
confirmed in 2014 
(EUR million) 

1 649 

220 

1 622 
342 
13 
39 
5 

3 890 

644** 
168** 

890 
223 
0 
3 
5 

1 933 

Agriculture 

EAGF 
EAFRD 

Cohesion 

ERDF & CF 
ESF 
EAGGF guidance 
EFF/FIFG 
Internal policies 

TOTAL 

*   Includes extrapolated corrections 
**  This represents a best estimate. The majority of financial corrections integrate amounts based 

on precise calculations and flat rates. 

Flat  rate  corrections  are  a  valuable  tool  that  is  used  when  the  related  amount  cannot  be 
quantified  on  the  basis  of  a  representative  statistical  sample  or  when  the  impact  on 
expenditure  of  individual  errors  cannot be  quantified  precisely.  However,  this means  that 
the  Member  State  subject  to  the  flat  correction  bears  the  financial  consequences  as  the 
corrections are not directly linked to individual irregularities at project level, i.e. there is no 
individual final beneficiary to recover monies from. 

3.3.3. Breakdown of financial corrections made at source 

Table 3.3.3: Breakdown of financial corrections at source confirmed in 2014 

Member State 

At source financial 
corrections 
confirmed in 2014 
(EUR million) 

Bulgaria 
Czech Rep. 
Ireland 
Greece 
Spain 
France 
Italy 
Lithuania 
Hungary 
Poland 
Portugal 
Romania 
Slovakia 
UK 

TOTAL 

28 
407 
0 
88 
0 
20 
4 
0 
152 
14 
0 
133 
56 
0 

903 

19 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At  source  corrections  for  2007-2013  ERDF/CF  programmes  have  been  reported  for  the 
first  time  in  2014.  They  relate  to  amounts  reported  by  the  Member  States12  in  2014, 
following a specific request from the Commission services (requests targeted on the main 
cases  in  which  flat  rates  corrections  have  been  applied  for  problems  linked  to  public 
procurement  procedures  or  deficiencies  in  the  Member  States’  management  and  control 
systems).  As  a  result  of  this  exercise,  EUR 782 million  of  financial  corrections  at  source 
have  been  identified  in  6  Member  States  cumulatively  since  2012  and  up  to  the  end  of 
2014.  Being  the  first  year  of  reporting  such  information,  the  full  amount  of  at  source 
corrections have been attributed to 2014, even though some of the amounts were included 
in payment claims sent to the Commission in 2012 and 2013.  

The  main  at  source  financial  corrections  for  ERDF/CF  concern  the  Czech  Republic 
(EUR 92 million),  Greece 
(EUR 398 million),  Hungary 
(EUR 72 million) and Slovakia (EUR 56 million). 

(EUR 136 million),  Romania 

For ESF, the main Member States concerned by flat rate corrections applied at the same 
time as the declaration of the expenditure to the Commission, and consequently correcting 
new  expenditure  are:  Romania  (EUR 41 million),  France  (EUR 20 million),  Hungary 
(EUR 16 million) and Poland (EUR 14 million), with a total of EUR 100 million of at source 
financial corrections confirmed in 2014. 

Concerning  Romania,  in  order  to  address  the  root  causes  of  the  recurring  problems 
identified  under  ESF,  the  Commission  is  working  with  national  authorities  in  order  to 
strengthen  their  management  and  control  systems  and  is  closely  following-up  on  the 
implementation  of  the  agreed  action  plan.  In  addition,  the  national  audit  authority  has 
checked procurement issues for a number of high risk projects and the errors detected are 
being  corrected  through  financial  corrections  at  the  level  of  the  projects  concerned 
(replacing the 25 % flat rate correction). The Commission is also supporting the Romanian 
authorities  in  improving  simplification  and  the  use  of  the  fraud  prevention  and  detection 
tool, Arachne. 

3.4. 

FINANCIAL CORRECTIONS IMPLEMENTED IN 2014 

This  section  provides  different  views  of  the  financial  corrections  amounts  implemented  in 
2014. Attention is drawn to the fact that the data and maps presented below relate to one 
year only, 2014. The level of the global corrections amount and the split by Member State 
change significantly depending on the year – see section 4 for the multi-annual picture. 

12   Since there is no legal requirement for Member States to report on such amounts, nor a structured reporting 
since the beginning of the programming period, this section presents a prudent and non-exhaustive amount 
of additional financial corrections for cases for which the Commission could reconstitute a clear audit trail at 
the level of the certifying authority. 

20 

 
 
 
 
 
                                                            
3.4.1. Breakdown by Member State 

Map and Table 3.4.1: Financial corrections implemented in 2014 as compared to 
EU payments received; Breakdown by Member State 

Payments 
received 
from the EU 
budget in 
2014 (EUR 
million) 

Financial 
correctio
ns 
implemen
ted in 
2014 
(EUR 
million) 

Financial 
corrections 
implemented 
in 2014 as % 
of payments 
received 
from the EU 
budget in 
2014 

1 028 
2 096 
4 152 
1 212 
9 712 
 610 
1 376 
6 829 
10 219 
11 159 
 407 
9 450 
 237 
1 005 
1 774 
 79 
6 342 
 221 
1 285 
1 301 
17 088 
4 772 
5 775 
1 078 
1 577 
 866 
1 338 
5 685 
1 866 

17 
31 
336 
9 
28 
1 
37 
321 
391 
462 
-  
324 
 - 
5 
0 
0 
25 
0 
34 
7 
65 
73 
93 
7 
137 
8 
4 
89 
43 

1.7% 
1.5% 
8.1% 
0.7% 
0.3% 
0.2% 
2.7% 
4.7% 
3.8% 
4.1% 
N/A 
3.4% 
N/A 
0.5% 
0.0% 
0.2% 
0.4% 
0,0% 
2.7% 
0.5% 
0.4% 
1.5% 
1.6% 
0.6% 
8.7% 
0.9% 
0.3% 
1.6% 
2.3% 

Member State 

Belgium 
Bulgaria 
Czech Rep. 
Denmark 
Germany 
Estonia 
Ireland 
Greece 
Spain 
France 
Croatia 
Italy 
Cyprus 
Latvia 
Lithuania 
Luxembourg 
Hungary 
Malta 
Netherlands 
Austria 
Poland 
Portugal 
Romania 
Slovenia 
Slovakia 
Finland 
Sweden 
UK 
INTERREG 

The  map  above  takes  into  account  the  relative  weight  of 
the  financial  corrections  implemented  for  each  Member 
State  compared  to  the  payments  received  from  the  EU 
budget in the year 2014.  

 Light grey shows Member States that are below 

the average percentage of 2.3 %. 

  Red  highlights  Member  States  that  are  above 

the average percentage of 2.3 %. 

3.4.2. Breakdown of flat-rate corrections implemented in 2014 

Table 3.4.2: Breakdown of flat-rate corrections implemented in 2014 

TOTAL 

110 537 

2 549 

2.3% 

Total financial 
corrections  
(EUR million) 

Flat-rate financial 
corrections* 
implemented in 
2014 (EUR million) 

1 319 
289 
41 
13 
5 
1 667 

520 
185 
4 
0 
5 

714 

Cohesion 

ERDF & CF 
ESF 
EFF/FIFG 
EAGGF 
Internal polices 

TOTAL 

* Includes extrapolated corrections 

Figures for Agriculture are not available. 
3.4.3. Breakdown of financial corrections made at source 

21 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table 3.4.3: Breakdown of Cohesion corrections at source implemented in 2014 

Member State 

Czech Republic 
Ireland 
Greece 
Spain 
France 
Italy 
Lithuania 
Hungary 
Poland 
Portugal 
Romania 
Slovakia 
United Kingdom 

TOTAL 

At source financial 
corrections 
implemented in 
2014 (EUR million) 
274 
0 
60 
0 
20 
4 
0 
21 
13 
0 
50 
56 
0 

499 

For  ERDF/CF,  out  of  EUR 782 million  of  financial  corrections  at  source  reported  in  2014 
EUR 430 million  (55 %)  can  be  considered  as  already  implemented.  The  main  Member 
States  concerned  are  Czech  Republic  (EUR 271 million),  Greece  (EUR 60 million)  and 
Slovakia  (EUR 56 million).  For  ESF,  in  the  context  of  at  source  corrections,  the  Member 
States concerned by flat rate corrections applied at the same time as the declaration of the 
expenditure to the Commission and consequently correcting new expenditure are: France 
(EUR 20 million),  Hungary  (EUR 16 million),  Poland  (EUR 13 million)  and  Romania 
(EUR 11 million). 

3.5. 

RECOVERIES  

Table 3.5: Recoveries confirmed and implemented in 2014 

MFF Heading 

Smart & inclusive growth 

ERDF 
Cohesion Fund 
ESF 
Internal policies 
Sustainable 
natural resources 
EAGF 
Rural Development 
FIFG/EFF 
EAGGF Guidance 
Internal policies 

growth: 

Security & citizenship  

Internal policies 

Global Europe  

External policies 

Administration  

TOTAL 

Agriculture: 

EUR millions 

Total 
recoveries 
confirmed in 
2014 

Total 
recoveries 
implemented 
in 2014 

220 

1 
0 
1 
218 

366 

150 
167 
25 
5 
19 

37 

37 

108 

108 

5 

736 

233 

0 
0 
1 
232 

435 

213 
165 
29 
5 
23 

37 

37 

127 

127 

5 

838 

22 

 
 
 
During the period 2008-2014, the Commission audited the correct application of the rules 
on recoveries through 32 audit missions in 19 Member States (including all EU-15 Member 
States  with  a  low  recovery  rate  for  the  cases  detected  since  2007).  Deficiencies  found 
during  these  audits  are  being  followed  up  in  the  context  of  conformity  clearance 
procedures.  Except  for  two  cases,  (Italy  and  Ireland),  in  general  the  Member  States' 
authorities have adequate procedures in place to protect the financial interest of the EU.  

The  diligence  of  the  Member  States'  authorities  in  the  recovery  of  the  most  significant 
individual irregularity cases is assessed in the context of a further 25 on-going conformity 
clearance procedures (desk audits). 

In 2012, an OLAF investigation revealed some serious issues for the Italian Paying Agency 
regarding  the  completeness  of  the  debtors'  ledger,  the  prescription  of  certain  debts,  and 
some  national  schemes  allegedly  funded  by  the  EU  budget.  In  addition,  the  ECA,  in  the 
framework  of  the  2013  audit  exercise,  also  raised  serious  concerns  regarding  the  debt 
management systems implemented in Italy (AGEA), and Ireland (DAFF). The Commission 
took  this  into  account  in  its  risk  analysis  and  carried  out  an  audit  mission  in  Italy  in 
September 2014, while an audit to Ireland will take place in the 2015-2016 audit year. 

3.6. 

DEFICIENCIES  IN  MEMBER  STATES'  MANAGEMENT  AND  CONTROL  IDENTIFIED  IN 
2014 AND MEASURES UNDERTAKEN  

3.6.1.   Agriculture and Rural Development 

Material  deficiencies  noted  in  Member  States’  management  and  control  systems,  as 
identified  by  them,  the  Commission,  the  ECA,  and/or  OLAF  (fraud  investigations)  are 
closely  followed  up  by  the  Commission  until  it  has  obtained  reliable  evidence  that  the 
weaknesses have been remedied through the implementation of appropriate actions by the 
Member State, the irregular expenditure declared in the past has been corrected, and the 
new system has proved its reliability in practice. 

For direct payments, DG AGRI in its 2013 AAR made reservations in respect of 15 Spanish 
Paying Agencies, France, UK (England), Hungary, Greece and Portugal. For France, Spain 
and England, remedial action plans established by the national authorities continue to be 
monitored  by  the  Commission.  For  Portugal,  the  action  plan  has  been  implemented.  For 
Greece, although the situation had significantly improved, the action plan was found not to 
have been fully implemented according to the set milestones and deadlines which led the 
Commission  to  adopt  an  implementing  decision  to  reduce  the  claim  year  2014  monthly 
payments  for  expenditure  concerned  by  the  deficiencies.  For  Hungary  it  was  not 
considered  necessary  to  establish  a  formal  action  plan  for  the  specific  problems  which 
existed for 2013 and 2014. These relate to the control set up which is to be overhauled in 
the  context  of  the  new  direct  payments  regime  as  of  claim  year  2015.  For  France,  the 
action  plan  finalised  on  15 November 2013  is  being  followed-up  by  quarterly  reporting 
and, where necessary, audit missions. 

For  the  2013  AAR,  DG  AGRI  adjusted  Member  States'  control  statistics  to  reflect 
undetected and thus unreported error and calculated an error rate of 5.2 %. As this work 
was  carried  out  at  Paying  Agency  level,  a  targeted  approach  was  possible  with  regard  to 
reservations and this resulted in the Director General being able to issue reservations for 
31 Paying Agencies instead of for the entire ABB activity. 

In 2014, the Commission further reinforced the existing action plans to address the above 
mentioned  reservations,  on  the  basis  of  improved  cooperation  and  analysis  within 
Commission services and intensive dialogue with Member States. Following this approach, 
the ad-hoc AGRI Task Force created in 2012 continued to meet and develop analysis and 
strategy  within  the  Commission,  while  an  improved  system  of  reporting  by  all  Member 
States on their national action plans for the reduction of error rates was put in place. This 
23 

 
 
includes  a  reinforced  focus  on  regular  follow-up  on  audit  findings,  as  well  as  improved 
indicators  and  milestones  for  monitoring  purposes.  In  2014,  the  Commission  also 
developed  a  new  IT  tool  which  enables  it  to  collect  and  handle  the  information  extracted 
from the national action plans in a more efficient and consistent manner. 

Since 2013, four seminars on error rates have been organised, two of which took place in 
2014,  to  present  the  state  of  play  regarding  the  implementation  of  the  action  plans,  to 
share  good  practices  and  to  provide  guidance.  These  biannual  seminars  are  organised 
jointly  in the framework of the Rural Development Committee and  the Agricultural Funds 
Committee,  in  order  to  ensure  the  involvement  of  both  Managing  Authorities  and  Paying 
Agencies. Therefore, a stock taking of the closely monitored follow up process is conducted 
every  semester.  In  the  meantime,  the  geographical  desks  ensured  the  follow  up  of  the 
issue  with  Member  States  in  annual  and  ad-hoc  meetings,  monitoring  committees  and  if 
relevant in the context of programme amendments.  

In  parallel,  the  relevant  audit  capacity  in  the  Commission  was  reinforced.  The  number of 
audit missions was increased and the audits target specific issues related to error rates.  

Furthermore,  the  legal  framework  allows  for  interruption  and  suspension  of  payments  in 
case  of  serious  deficiencies  in  the  management  and  control  systems  for  the  expenditure 
committed under EAFRD during the 2007-2013 or the 2014-2020 periods. As for the new 
legal  framework  (Regulation  1305/2013),  Article  62  ensures  that  both  Managing 
Authorities  and  Paying  Agency  undertake  an  ex-ante  assessment  of  each  programme 
proposal,  stating  that  the  measures  programmed  are  verifiable  and  controllable. 
Commission services thoroughly analyse this assessment before approving programmes.  

Finally,  the  European  Network  for  Rural  Development  will  play  an  enhanced  role  in 
disseminating good practices related to the reduction of error rates. In the first semester 
of 2015, training for Managing Authorities was arranged on the following topics: simplified 
cost  options,  reasonableness  or  costs,  public  procurement  and  result-oriented  agro-
environment payments: a collective approach. 

3.6.2.   Cohesion 

For ERDF and Cohesion Fund 2007-2013, the Commission's audit work focused in 2014 
on  five  audit  enquiries,  as  well  as  specific  fact  finding  missions  to  validate  selected  ACR 
error  rates.  In  order  to  be  able  to  validate  the  audit  results  of  the  audit  authorities,  on-
the-spot audits are carried out at the level of programmes authorities and/or intermediate 
bodies, and usually include verifications of audit evidence down to the source, on the spot, 
at the level of beneficiaries/projects. The result of this audit work is that the Commission 
can generally rely on the work of 42 out of the 47 audit authorities audited, in charge of 
auditing 91 % of ERDF/CF allocations for 2007-2013 programming period. 

The audit work carried out from 2010 to 2014 confirms that the management verifications 
(first level controls) conducted by Member States continue to be a key issue. In fact, the 
management  verification  audits  performed  in  2014  by  the  Commission  confirmed  that 
weaknesses in the execution of these controls have been identified in 66 % of the missions 
performed, in particular in the area of public procurement (issues identified in 58 % of the 
missions). 

Other issues were identified in areas such as eligibility of operations (audits carried out on 
selection  of  operations  in  Hungary,  Romania,  Greece,  Italy  and  Slovenia)  and  State  Aid 
(addressed  in  audits  on  competitiveness  programmes  in  Slovenia,  Hungary,  Greece, 
Romania, Italy and in the mission to Spain at the level of the two intermediate bodies). In 
these three areas (public procurement, eligibility, State Aid) problems are also reported in 
audits by the ECA.  

24 

 
 
A  detailed  analysis  of  the  reservations  issued  by  the  Director  General  and  the  related 
action plans at programme level is disclosed in the DG REGIO 2014 AAR. 

For  ESF,  the  main  findings  in  system audits  concern:  selection  of  operations,  inadequate 
management  verifications,  lack  of  audit  trail,  unreliable  IT  systems,  flaws  in  the 
certification  process,  insufficient  reliability  of  the  national  system  audit  reports,  breaches 
in public procurement and ineligibility of expenditure. 

Management  verifications  conducted  by  Member  States  continue  to  be  a  key  issue.  The 
management  verification  audits  performed  in  2014  by  the  Commission  confirmed  the 
following  main  weaknesses  in  the execution  of  these  controls,  already  identified  in  2013: 
the  formal  nature  of  management  verifications,  insufficient  verifications  of  public 
procurement  procedures,  insufficient  structure/organisation  of  the  managing  authority  or 
intermediate body, lack of training and supervision in case of delegation of responsibilities,  
management verifications carried out after the certification of expenditure and insufficient 
guidance and training for beneficiaries.  

In 2014, AAR reservations were made due to deficiencies in the management and control 
systems  of  the 
following  EFF  operational  programmes:  Germany  (Mecklenburg-
Vorpommern), Italy, the Netherlands, Poland and Romania. The 5 operational programmes 
concerned were all affected by material error, as reported in the ACRs. Letters with clear 
action plans were sent to all affected Member States, specifying the necessary corrective 
action to be taken to allow payments to resume. 

4. 

CUMULATIVE FINANCIAL CORRECTIONS & RECOVERIES TO END 2014 

4.1. 

Overview 

Cumulative  figures  provide  useful  information  on  the  significance  of  the  corrective 
mechanisms  used  by  the  Commission,  in  particular  as  they  take  into  account  the  multi-
annual character of programmes and projects and neutralise the impact of one-off events.  

25 

 
 
 
 
 
4.1.1.  Period 2009-2014 

The graphs below show the evolution of financial corrections and recoveries confirmed and 
implemented during the last 6 years: 

Graphs 4.1: Financial corrections and recoveries 2009-2014 (EUR billions) 

Financial corrections and recoveries confirmed 2009-2014 (EUR billions) 

5,0

4,5

4,0

3,5

3,0

2,5

2,0

1,5

1,0

0,5

0,0

2009

2010

2011

2012

2013

2014

Cohesion Policy
External policy areas
Linear (Total decided)

Internal policy areas
Administration

Agriculture
Total decided

Financial corrections and recoveries implemented 2009-2014 (EUR billions) 

5,0

4,5

4,0

3,5

3,0

2,5

2,0

1,5

1,0

0,5

0,0

2009

2010

2011

2012

2013

2014

Cohesion Policy:

Internal policy areas

Agriculture:

External policy areas

Administration

Total implemented

26 

 
 
 
 
The average amount of financial corrections and recoveries confirmed per year during the 
period  2009  to  2014  was  EUR 3.2 billion  or  2.4 %  of  the  average  amount  of  payments 
from  the  EU  budget  of  EUR 133 billion  (shared  management:  EUR 2.8 billion  or  2.8 %  of 
the  average  amount  of  payments  of  EUR 102 billion;  all  other  types  of  management: 
EUR 366 million  or  1.2 %  of  the  average  amount  of  payments  of  EUR 30.5 billion.)  The 
trend  for  confirmed  amounts  is  slightly  increasing,  which  demonstrates  that  the  multi-
annual control framework is successfully protecting the EU budget over time. 

The average amount of financial corrections and recoveries implemented for 2009-2014 
was EUR 2.8 billion, which represents 2.1 % of the average amount of payments from the 
EU  budget  in  that  period  (shared  management:  EUR 2.5 billion  or  2.4 %  of  the  average 
amount  of  payments;  all  other  types  of  management:  EUR  356 million  or  1.2 %  of  the 
average amount of payments). The increasing trend shown above can be explained by the 
closure  of  the  programming  period  2000-2006,  as  a  significant  number  of  financial 
corrections  and  recoveries  are  only  implemented  at  that  stage  (see  below).  For 
Agriculture,  the  impact  of  executing  some  net  financial  corrections  via  three  annual 
instalment payments is reflected in a lower increase of the amounts actually implemented 
compared to the amounts decided by the Commission. 

4.1.2.  Decisions of the Court of Justice concerning Regional policy financial corrections 

During  2015,  Court  of  Justice  judgements  were  issued  annulling  a  number  of  regional 
policy  financial  corrections'  decisions  taken  between  2008  and  2010.  These  corrections 
totalled  almost  EUR 0.5 billion  and  related  to  the  programming  period  1994-1999.  The 
judgements reflect procedural issues arising from Regulation 1083/2006. The Commission 
is analysing the impact. 

4.2. 

Financial corrections 

4.2.1.  Overview 

Table  4.2.1:  Cumulative  financial  corrections  confirmed  &  implementation 
percentage to end 2014 

Programming Period 

1994-
1999 
Period 

2000-
2006 
Period 

2007-
2013 
Period 

Cumulated 
EAGF 
decisions  

Total 
financial 
corrections 
confirmed 
at end 2014 

Implement
ation % 
end 2014 

Financial 
corrections 
confirmed 
at end 2013 

Implement
ation % 
end 2013 

          EUR millions 

Agriculture 
EAGF 
Rural Development 
Cohesion Policy 
ERDF 
Cohesion Fund 
ESF 
FIFG/EFF 
EAGGF Guidance 
Other 

- 
- 
-  
2 723 
1 794* 
 268 
 560 
 100 
 2 
- 

126 
- 
126 
8 437 
5 638 
780 
1 811 
125 
83 
- 

580 
- 
580 
3 043 
1 541 
448 
1 029 
25 
- 
- 

10 808 
10 808 
N/A 

N/A 
N/A 
N/A 
N/A 
N/A 
N/A 
N/A 

11 514 
10 808 
706 
14 203 
8 973 
1 496 
3 399 
 250 
 85 
 9 

82.8% 
83.7% 
69.3% 
92.2% 
91.9% 
88.7% 
96.5% 
60.4% 
100.0% 
100.0% 

Total 

2 723 

8 563 

3 623 

10 808 

25 726 

88.0% 

9 634 
9 148 
486 
12 189 
7 643 
1 204 
3 057 
211 
73 
4 

21 827 

89.6% 
90.0% 
83.2% 
93.8% 
93.8% 
90.7% 
97.9% 
51.8% 
100% 
100% 

91.9% 

*  In  2015  the  Court  of  Justice  decided  in  favour  of  the  beneficiary  Member  States  for  a  number  of  legal  cases 
(EUR 0.5 billion) relating to ERDF financial corrections implemented in 2008/10 (see section 4.1.2.). 

The different programming periods in Cohesion policy clearly show the multi-annual nature 
of the EU budget cycle. Since the 2000-2006 period is approaching the end of the closure 
process,  the  amount  of  financial  corrections  is  considerably  higher,  especially  when 
compared  to  the  2007-2013  period.  Financial  corrections  for  this  more  recent  period  are 

27 

 
 
 
 
expected  to  continue  to  increase  in  the  coming  years  as  its  programmes  start  to  close 
(some  are  reaching  the  95 %  payment  threshold)  but  should  be  of  a  lower  significance 
compared to the previous programming period due to the success of preventive measures.  

4.2.2.  Agriculture – EAGF: financial corrections under the conformity clearance procedure 

Concerning  EAGF,  the  amount  of  financial  corrections  decided  by  the  Commission  since 
1999  totals  EUR 10 808 million  (from  47 decisions  adopted).  The  average  correction  rate 
per financial year for the period 1999-2014 has been 1.7 % of expenditure. Once decided 
by the Commission, the corrections are automatically implemented unless a Member State 
has been granted the possibility of paying in three annual instalments. 

Table  4.2.2:  EAGF:  Cumulative  financial  corrections  decided  under  conformity 
clearance of accounts from 1999 to end 2014; Breakdown by Member State 

Member State 

Belgium 
Bulgaria 
Czech Republic 
Denmark 
Germany 
Estonia 
Ireland 
Greece 
Spain 
France 
Croatia 
Italy 
Cyprus 
Latvia 
Lithuania 
Luxembourg 
Hungary 
Malta 
Netherlands 
Austria 
Poland 
Portugal 
Romania 
Slovenia 
Slovakia 
Finland 

Sweden 
United Kingdom 

Total 

EAGF 
payments 
received from 
EU budget 

% of payments 
received as 
compared to 
total payments 

Cumulated 
EAGF financial 
corrections at 
end 2014 

% as 
compared to 
payments 
received from 
EU budget 

EUR millions 

% as compared 
to total amount 
of financial 
corrections 

12 243 
2 583 
5 636 
17 282 
87 523 
 624 
19 570 
39 372 
87 622 
138 554 
7 687 
73 157 
 395 
 897 
2 474 
 471 
8 614 
 32 
17 214 
11 173 
19 972 
11 013 
6 117 
 766 
2 458 
8 440 

11 235 
58 272 

1.9% 
0.4% 
0.9% 
2.7% 
13.4% 
0.1% 
3.0% 
6.0% 
13.5% 
21.3% 
1.2% 
11.2% 
0.1% 
0.1% 
0.4% 
0.1% 
1.3% 
0.0% 
2.6% 
1.7% 
3.1% 
1.7% 
0.9% 
0.1% 
0.4% 
1.3% 

1.7% 
8.9% 

 43 
 69 
 8 
 192 
 198 
 1 
 49 
2 389 
1 496 
2 519 
- 
1 874 
 10 
 0 
 18 
 5 
 57 
 0 
 183 
 12 
 92 
 207 
 196 
 20 
 2 
 31 
 117 
1 018 

0.4% 
2.7% 
0.1% 
1.1% 
0.2% 
0.1% 
0.3% 
6.1% 
1.7% 
1.8% 
N/A 
2.6% 
2.4% 
0.1% 
0.7% 
1.1% 
0.7% 
0.9% 
1.1% 
0.1% 
0.5% 
1.9% 
3.2% 
2.6% 
0.1% 
0.4% 
1.0% 
1.7% 

0.4% 
0.6% 
0.1% 
1.8% 
1.8% 
0.0% 
0.5% 
22.1% 
13.8% 
23.3% 
N/A 
17.3% 
0.1% 
0.0% 
0.2% 
0.0% 
0.5% 
0.0% 
1.7% 
0.1% 
0.9% 
1.9% 
1.8% 
0.2% 
0.0% 
0.3% 
1.1% 
9.4% 

651 394 

100.0% 

10 808 

1.7% 

100.0% 

28 

 
 
 
 
 
 
Graph  4.2.2:  EAGF:  Member  States’  cumulative  financial  corrections  under 
conformity  clearance  of  accounts  from  1999  to  end  2014  as  compared  to 
payments received from the EU Budget 

Cumulative EAGF clearance decisions 1999 - 2014 

3 000

2 500

2 000

1 500

1 000

 500

 0

7,0%

6,0%

5,0%

4,0%

3,0%

2,0%

 average 1.7% 

1,0%

0,0%

d
e
v
i
e
c
e
r

s
t
n
e
m
y
a
p
o
t

s
n
o
i
t
c
e
r
r
o
c
l

a

i
c
n
a
n
i
f

f
o
%

s
n
o

i
l
l
i

m
R
U
E
n

i

s
n
o
i
t
c
e
r
r
o
c

l

a
i
c
n
a
n
i
F

Total amount of financial corrections

% Financial corrections as compared to payments received from EU budget

4.2.3.  Cohesion Policy: ERDF & ESF 2000-2006 

As the closure of the 2000-2006 period is in the completion stage, a useful comparison of 
the overall results of the corrective actions with the total monies spent can be made and 
thus  a  more  complete  view  of  the  impact  of  corrective  mechanisms  is  possible13.  For  the 
ERDF  and  ESF  funds  at  the  end  of  2014,  the  combined  amount  of  financial  corrections, 
based  on  Commission  supervision  work  only,  was  EUR 8.2 billion.  This  corresponds  to 
about  4.1 %  of  the  allocations  (EUR 196.9 billion)  at  end  2014.  The  correction  rate 
increases to above 4.6 % when considering the additional financial corrections reported by 
Member States and related to their own control activities. 

13   For  a  more  exhaustive  explanation  of  the  corrective  mechanism  put  in  place  by  the  Commission  for  the 
closure  2000-2006,  see  the  Report  on  financial  corrections  carried  out  for  ERDF  and  ESF  on  2000-2006 
programmes (Ares(2013)689652 – 12 April 2013). 

29 

 
 
 
 
 
 
                                                            
 
 
 
 
 
 
 
 
 
 
 
 
Table 4.2.3:  Programming  period  2000-2006  -  ERDF &  ESF Financial  corrections 
confirmed and in progress at 31 December 2014; Breakdown by Member State 

Member State 

Belgium 
Czech Republic 
Denmark 
Germany 
Estonia 
Ireland 
Greece 
Spain 
France 
Italy 
Cyprus 
Latvia 
Lithuania 
Luxembourg 
Hungary 
Malta 
Netherlands 
Austria 
Poland 
Portugal 
Slovenia 
Slovakia 
Finland 
Sweden 
United Kingdom 
Interreg 

ERDF+ESF 
contribution 
amount 

% of 
contribution 
amount to 
total 
contributions 

Financial 
corrections 
confirmed 

Financial 
corrections 
in progress 
(closure 
letters 
sent) 

Total 
financial 
corrections 
imposed 
for 2000-
2006 

1 945 
1 456 
 570 
26 960 
 305 
3 067 
20 211 
40 686 
14 825 
27 501 
 53 
 518 
 773 
 71 
1 695 
 57 
2 702 
1 647 
7 032 
18 178 
 215 
1 245 
1 789 
1 634 
16 129 
5 645 

1.0% 
0.7% 
0.3% 
13.7% 
0.2% 
1.6% 
10.3% 
20.7% 
7.5% 
14.0% 
0.0% 
0.3% 
0.4% 
0.0% 
0.9% 
0.0% 
1.4% 
0.8% 
3.6% 
9.2% 
0.1% 
0.6% 
0.9% 
0.8% 
8.2% 
2.9% 

 20 
 6 
 1 
 53 
 2 
 36 
1 178 
3 464 
 333 
1 480 
- 
 4 
 3 
 2 
 12 
- 
 44 
 4 
 180 
 190 
 2 
 45 
 0 
 12 
 312 
 68 

- 
- 
- 
 2 
- 
- 
 13 
 58 
 149 
 479 
- 
- 
- 
- 
- 
- 
- 
 0 
- 
- 
- 
- 
- 
- 
- 
 2 

 20 
 6 
 1 
 54 
 2 
 36 
1 191 
3 522 
 482 
1 959 
- 
 4 
 3 
 2 
 12 
- 
 44 
 4 
 180 
 190 
 2 
 45 
 0 
 12 
 312 
 69 

EUR millions 

Percentage 
of financial 
corrections 
in relation to 
the 
ERDF+ESF 
contributions 

Share of 
financial 
corrections 
imposed 
compared 
to total 
financial 
corrections 

1.0% 
0.4% 
0.1% 
0.2% 
0.5% 
1.2% 
5.9% 
8.7% 
3.3% 
7.1% 
N/A 
0.8% 
0.3% 
2.6% 
0.7% 
N/A 
1.6% 
0.2% 
2.6% 
1.0% 
0.9% 
3.6% 
0.0% 
0.7% 
1.9% 
1.2% 

0.2% 
0.1% 
0.0% 
0.7% 
0.0% 
0.4% 
14.6% 
43.2% 
5.9% 
24.0% 
N/A 
0.0% 
0.0% 
0.0% 
0.2% 
N/A 
0.5% 
0.0% 
2.2% 
2.3% 
0.0% 
0.5% 
0.0% 
0.1% 
3.8% 
0.8% 

Total 

196 911 

100.0% 

7 449 

 702 

8 152 

4.1%  100.0% 

At the end of 2014, the Commission had closed 338 ERDF programmes (compared to 316 
at end 2013) out of a total of 379 programmes. The remaining 41 programmes represent 
cases  where  the  Member  States  contested  the  financial  corrections  proposed  by  the 
Commission,  presented  additional 
requested 
information 
reimbursement  of  irrecoverable  amounts.  These  cases  are  followed  up  by  financial 
correction procedures (hearings) and decisions on irrecoverable amounts. 

to  be  considered  or 

For  ERDF,  financial  corrections  imposed  by  the  Commission  to  all  Member  States 
cumulatively up to the end of 2014 are EUR 5.8 billion, representing around 4.5 % of the 
total  allocations  for  all  2000-2006  programmes.  This  process  can  be  broken  down  into 
EUR 4.1 billion of financial corrections during the life cycle of the programmes and another 
EUR 1.6 billion  of  financial  corrections  applied  at  closure  of  the  programmes.  The  main 
Member  States  concerned  are  Spain  (EUR 2.6 billion),  Italy  (EUR 1.2 billion)  and  Greece 
(EUR 1.2 billion). 

For  ESF,  the  closure  process  has  been  finalised  at  the  end  of  2014.  The  Commission 
services estimate at 30 June 2015 that the total amount of financial corrections for 2000-
2006  programming  period  -  taking  into  account  financial  corrections  in  progress  -  will 
amount  to  EUR 2.4 billion  for  the  ESF  programmes,  representing  3.6 %  of  the  ESF 
allocation.  This  process  can  be  broken  down  into  EUR 1.2 million  of  financial  corrections 
during the life cycle of the programmes and another EUR 1.2 million applied at closure.  

30 

 
 
 
 
In the context of the closure of the Spanish ESF programmes, for 3 programmes out of 38 
the closure proposal was rejected by the Spanish authorities despite a closure analysis of 
all the arguments and information presented by the Commission. At the end of 2014, the 
financial  corrections  in  progress  for Spain  amounted to  EUR 59 million  and  represented  a 
blocked  RAL  of  EUR 34 million.  In  the  course  of  2015,  1  closure  proposal  has  been 
accepted by the local authorities. The pre-correction procedure for other programmes has 
been initiated. 

Graph  4.2.3:  Member  States'  cumulative  financial  corrections  confirmed  and  in 
progress  at  31  December  2014  for  ERDF  &  ESF  programming  period  2000-2006 
as compared to contributions received 

Programming period  2000-2006 

  4 000

  3 500

  3 000

  2 500

  2 000

  1 500

  1 000

   500

   0

s
n
o

i
l
l
i

m
R
U
E
n

i

s
n
o
i
t
c
e
r
r
o
c

l

a
i
c
n
a
n
i
f

l

a
t
o
t
F
S
E
+
F
D
R
E

10,0%

9,0%

8,0%

7,0%

6,0%

5,0%

3,0%

2,0%

1,0%

0,0%

average 4,1% 
4,0%

d
e
v
i
e
c
e
r
s
n
o
i
t
u
b
i
r
t
n
o
c
o
t
n
s
o
i
t
c
e
r
r
o
c
l

a

i
c
n
a
n
i
f

f
o
%

ERDF total FC

ESF total FC

Financial corrections to contributions %

4.2.4.  Cohesion Policy: ERDF/CF & ESF 2007-2013 

At  this  stage  of  the  programming  period,  the  cumulative  amounts  corrected  to  date 
represent  0.9 %  of  the  budget  allocations.  While  financial  corrections  for  the  2007-2013 
period are expected to continue to increase in the coming years as its programmes start to 
close, figures so far indicate an overall lower volume of financial corrections compared to 
the previous programming period. This reflects the improved capacity of the management 
and  control  systems  to  detect  problems  and  to  correct  errors  before  expenditure  is 
declared to the Commission, as reflected in the lower error rates for cohesion policy in the 
period  2007-2013  compared  to  the  period  2000-2006.  Reference  is  also  made  to  the 
corrections made by Member States in this period – see section 7. 

31 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table  4.2.4:  Programming  period  2007-2013  –  ERDF/CF  &  ESF  Financial 
corrections confirmed and in progress at 31 December 2014; Breakdown by 
Member State 

Member State 

Belgium 
Bulgaria 
Czech 
Republic 
Denmark 
Germany 
Estonia 
Ireland 
Greece 
Spain 
France 
Croatia 
Italy 
Cyprus 
Latvia 
Lithuania 
Luxembourg 
Hungary 
Malta 
Netherlands 
Austria 
Poland 
Portugal 
Romania 
Slovenia 
Slovakia 
Finland 
Sweden 
United 
Kingdom 
Cross-border 

ERDF/CF+ESF 
contribution 
amount for 
2007-2013 

% of 
contribution 
amount to 
total 
contributions 

Financial 
corrections 
confirmed  

Financial 
corrections 
in progress 
(closure 
letters 
sent) 

Total 
financial 
corrections 
imposed 
for 2007-
2013 

2 063 
6 674 

26 540 

 510 
25 488 
3 403 
 751 
20 210 
34 649 
13 449 
 858 
27 923 
 612 
4 530 
6 775 
 50 
24 908 
 840 
1 660 
1 204 
67 186 
21 412 
19 058 
4 101 
11 496 
1 596 
1 626 

9 891 

7 987 

0.6% 
1.9% 

7.6% 

0.1% 
7.3% 
1.0% 
0.2% 
5.8% 
10.0% 
3.9% 
0.2% 
8.0% 
0.2% 
1.3% 
2.0% 
0.0% 
7.2% 
0.2% 
0.5% 
0.3% 
19.3% 
6.2% 
5.5% 
1.2% 
3.3% 
0.5% 
0.5% 

2.8% 

2.3% 

 22 
 87 

 715 

 0 
 26 
 10 
 21 
 219 
 368 
 48 
- 
 110 
- 
 23 
 0 
 0 
 340 
- 
- 
 12 
 238 
 22 
 501 
 19 
 169 
 0 
 1 

 64 

 3 

 1 
- 

 61 

- 
 9 
- 
- 
 88 
 82 
 2 
- 
 15 
- 
- 
- 
- 
- 
- 
- 
 6 
- 
- 
- 
- 
 0 
- 
- 

 7 

- 

 23 
 87 

 776 

 0 
 35 
 10 
 21 
 306 
 450 
 50 
- 
 124 
- 
 23 
 0 
 0 
 340 
- 
- 
 18 
 238 
 22 
 501 
 19 
 169 
 0 
 1 

 71 

 3 

EUR millions 

Percentage of 
financial 
corrections in 
relation to 
the 
ERDF/CF+ESF 
contributions 

1.1% 
1.3% 

Share of 
financial 
corrections 
imposed 
compared 
to total 
financial 
corrections 
0.7% 
2.7% 

2.9% 

23.6% 

0.0% 
0.1% 
0.3% 
2.8% 
1.5% 
1.3% 
0.4% 
0.0% 
0.4% 
N/A 
0.5% 
0.0% 
0.9% 
1.4% 
N/A 
N/A 
1.5% 
0.4% 
0.1% 
2.6% 
0.5% 
1.5% 
0.0% 
0.1% 

0.7% 

0.0% 

0.0% 
1.1% 
0.3% 
0.6% 
9.3% 
13.7% 
1.5% 
0.0% 
3.8% 
N/A 
0.7% 
0.0% 
0.0% 
10.3% 
N/A 
N/A 
0.5% 
7.2% 
0.7% 
15.2% 
0.6% 
5.1% 
0.0% 
0.0% 

2.2% 

0.1% 

Total 

347 450 

100.0% 

3 018 

 269 

3 287 

0.9%  100.0% 

As 2007-2013 programmes are multi-funds, no split is given between ERDF and CF in the above table. 

32 

 
 
 
 
 
Graph  4.2.4:  Member  States'  cumulative  financial  corrections  confirmed  and  in 
progress  at  31  December  2014  for  ERDF/CF  &  ESF  programming  period  2007-
2013 as compared to contributions received 

Programming period  2007-2013 

s
n
o

i
l
l
i

m
R
U
E
n

i

s
n
o
i
t
c
e
r
r
o
c

l

a

i
c
n
a
n
i
f

l

a
t
o
t
F
S
E
+
F
D
R
E

   900

   800

   700

   600

   500

   400

   300

   200

   100

   0

d
n
a
e
r
I

l

i

a
n
a
m
o
R

e
c
e
e
r
G

a
i
r
t
s
u
A

a
i
k
a
v
o
l
S

y
r
a
g
n
u
H

a
i
r
a
g
u
B

l

i

n
a
p
S

c
i
l

b
u
p
e
R
h
c
e
z
C

3,5%

3,0%

2,5%

2,0%

1,5%

d
e
v
i
e
c
e
r
s
n
o
i
t
u
b
i
r
t
n
o
c
o
t

s
n
o
i
t
c
e
r
r
o
c
l

a

1,0%
i
c
average 0,9 % 
n
a
n
i
f

0,5%

f
o
%

0,0%

a
i
v
t
a
L

i

a
n
e
v
o
l
S

y
l
a
t
I

e
c
n
a
r
F

d
n
a
o
P

l

i

a
n
o
t
s
E

y
n
a
m
r
e
G

l

a
g
u
t
r
o
P

n
e
d
e
w
S

r
e
d
r
o
b
-
s
s
o
r
C

k
r
a
m
n
e
D

i

a
n
a
u
h
t
i
L

d
n
a
n
i
F

l

a
i
t
a
o
r
C

s
u
r
p
y
C

a
t
l
a
M

s
d
n
a
l
r
e
h
t
e
N

g
r
u
o
b
m
e
x
u
L

i

m
o
d
g
n
K
d
e
t
i
n
U

i

m
u
g
e
B

l

ERDF total FC

ESF total FC

Financial corrections to contributions %

For ERDF/CF programmes, the Commission has imposed around EUR 2 billion of financial 
corrections cumulatively since the beginning of the 2007-2013 programming period (which 
includes EUR 782 million of financial corrections applied by the Member States before or at 
the  same  time  of  declaring  the  expenditure  to  the  Commission  as  a  result  of  requested 
remedial actions, see also corrections “at source” above) and EUR 237 million of financial 
corrections  are  in  progress.  The  main  Member  States  concerned  are  Czech  Republic 
(EUR 719 million),  Hungary 
(EUR 257 million),  Spain 
(EUR 237 million),  Slovakia  (EUR 152 million),  Romania  (EUR 146 million)  and  Italy 
(EUR 105 million). 

(EUR 298 million),  Greece 

Concerning  ERDF  and  the  Cohesion  Fund,  in  2014,  the  Commission  continued  to 
exercise  rigorously  its  supervisory  role  by  interrupting/suspending  payments  as  soon  as 
deficiencies  are  identified  and  ensuring  that  Member  States  address  the  identified 
weaknesses  in  their  management  and  control  systems.  The  objective  was  to  identify  and 
address any major outstanding material risk so as to ensure an appropriate protection of 
the EU budget, and to arrive at an acceptable residual risk by the closure of programmes. 
This  resulted  in  an  overall  improvement  for  the  2007-2013  period  compared  to  2000-
2006,  and  in  a  positive  trend  as  regards  the  incidence  of  errors  in  Cohesion  expenditure 
over the years thanks to a series of actions taken by the Commission in cooperation with 
Member States, as described below. 

For  ESF,  the  Member  States  with  the  highest  level  of  cumulative  financial  correction 
figures  are  Romania 
(EUR 213 million)  and  Poland 
(EUR 152 million). 

(EUR 355 million),  Spain 

33 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The  following  improvements  were  made  for  the  period  2007-2013  for  ERDF/CF  and  ESF 
programmes: 

(A) Strengthening national controls 

The capacity of national management and control systems to prevent, detect and correct 
errors  before  expenditure  is  declared  to  the  Commission  has  been  strengthened.  On  one 
hand,  the  Commission  services  invested  significant  management  and  audit  efforts  in 
improving  the  functioning  of  Member  States’  first  level  verifications.  On  the  other  hand, 
the 2007-2013 regulations include the obligation for audit authorities to use, as a general 
rule,  statistical  samples  for  audits  of  operations.  This,  associated  with  exhaustive  audit 
supervision  and  guidance  from  the  Commission  leading  to  considerable  capacity  building 
efforts,  very  much  helped  to  improve  the  reliability  of  error  rates  reported  on  a  yearly 
basis  to  the  Commission  in  the  Member  States'  ACRs  and  used  as  indicators  on  the 
effectiveness  of  management  and  control  systems  in  the  Commission  assurance  process. 
The  Commission  audit  work  could  thus  shift  towards  obtaining  assurance  on  the  work  of 
audit  authorities,  concentrating  on  the  weakest  ones  or  on  those  ensuring  the  highest 
coverage of EU Funds. In addition, the Commission is continuously following-up identified 
weaknesses  and  monitoring  that  the  work  quality  of  the  audit  authority  remains 
satisfactory  when  the  single  audit  status  has  been  granted  to  a  programme.  The  close 
cooperation  with  audit  authorities  ensures  a  timely  detection  and  solution  of  problems 
already at national level. It also contributes to the improvement of the assurance process 
at Commission level.  

(B) Commission on-the-spot audits 

The Commission also carries out its own on-the-spot risk-based audits, including audits at 
the  level  of  beneficiaries,  if  it  considers  that  certain  deficiencies  (concerning  in  particular 
complex issues such as public procurement or State aid issues for ERDF/CF) could remain 
either  undetected  or  not  detected  in  a  timely  manner.  This  includes  verifying 
implementation of remedial actions plans in case of interruptions and financial corrections. 
These  audits  contribute  to  improvements  in  the  management  and  control  systems  for 
programmes put under reservation ensuring that past and future expenditure declared to 
the Commission is legal and regular. It also provides an additional, more direct source of 
assurance to the Commission. 

(C) Better problem detection 

The  improved  capacity  to  detect  problems  has  been  pro-actively  used  to  improve  the 
functioning  of  Member  States'  management  systems,  while  implementing  the  necessary 
financial  corrections.  The  systematic  and  consistent  use  by  the  Commission  of 
to  programmes  with  significant 
interruptions  and/or  suspensions  of  payments 
management  weaknesses  since  2008,  or  the  decision  of  the  Directors  General  to  issue 
warning  letters  when  no  payments  are  pending,  has  avoided  EU  reimbursements  of 
expenditure  with  a  high  risk  of  error,  while  also  providing  strong  incentives  to  Member 
States  to  rapidly  improve  their  management  and  control  systems.  At  the  same  time,  the 
joint  work  of  the  EU  and  Member  States'  control  authorities  has  allowed  for  better 
agreement  on,  and  implementation  of,  the  necessary  financial  corrections  so  as  to  duly 
protect  the  EU  budget  against  irregular  expenditure,  including  through  flat-rate 
corrections.  Member  States  were,  in  turn,  able  to  re-use  the  EU  resources  affected  by 
these corrections for other projects. However, such corrections still have a major financial 
and political impact in the Member States concerned since irregular expenditure has to be 
funded by national resources unless it is recovered from beneficiaries. 

34 

 
 
 
 
(D) Capacity building actions 

implement  additional  capacity  building  actions 

In order to mitigate the remaining risks and weaknesses identified in Member States and 
programmes  at  the  level  of  managing  authorities,  the  Commission  has  also  taken 
for  the  2007-2013 
initiatives  to 
programmes.  A  new  Competence  Centre  on  administrative  capacity  building  was 
established at the beginning of 2013 in order to support public administrations managing 
ERDF  and  the  Cohesion  Fund.  For  public  procurement,  the  Competence  Centre  has 
established  a  Public  Procurement  Action  Plan.  Actions  are  also  taken  to  improve  the 
implementation  of  State  aid  rules,  while  an  exchange  platform  between  administrations 
managing the funds is being developed in order to capitalise on existing good practices. 

(E) Simplified Cost Options  

In 2014, the Commission continued to actively promote the use of Simplified Cost Options 
(SCOs).  Seminars  took  place  in  Italy,  France,  Ireland  and  Malta  to  promote  the  use  of 
SCOs,  as  a  way  to  further  reduce  the  risks  of  errors  in  the  legality  and  regularity  of  the 
transactions,  notably  in  the  context  of  the  preparation  of  the  next  2014-2020 
programming  period.  In  addition,  an  updated  guidance  note  for  the  Member  States  on 
SCOs was finalised in September 2014 and an Italian case study on the implementation of 
SCOs in the 2007-2013 programming period was published in 2014. 

4.3. 

Recoveries 

The  tables  below  provide  the  amounts  of  recoveries  confirmed  and  implemented  for  the 
period 2009-2014. See also table 5.2 below concerning the impact on the EU budget. 

Table 4.3.1: Recoveries confirmed 2009-2014 

EUR millions 

Recoveries 

Agriculture: 

EAGF 
Rural Development 

Cohesion 

Internal policy areas 

External policy areas 

Administration 

Years 

2009 

2010 

2011 

2012 

2013 

2014 

 163 
 25 
 102 

 100 

 81 

 9 

 178 
 114 
 24 

 188 

 137 

 5 

 174 
 161 
 50 

 270 

 107 

 8 

 162 
 145 
 22 

 252 

 107 

 7 

 227 
 139 
 83 

 393 

 93 

 6 

 213 
 165 
 35 

 293 

 127 

 5 

Total  

 1 117 
 750 
 315 

1 495 

 652 

 40 

Total 

 480 

 646 

 770 

 695 

 941 

 838 

4 368 

Table 4.3.2: Recoveries implemented 2009-2014 

Recoveries 

Agriculture: 

EAGF 
Rural Development 

Cohesion 

Internal policy areas 

External policy areas 

Administration 

Years 

EUR millions 

Total  

2009 

2010 

2011 

2012 

2013 

2014 

148 
25 
102 

100 

81 

9 

172 
114 
25 

162 

136 

5 

178 
161 
48 

268 

77 

2 

161 
166 
14 

229 

99 

9 

155 
129 
81 

398 

93 

6 

150 
167 
32 

274 

108 

5 

964 
763 
301 

1 432 

594 

36 

Total 

464 

614 

734 

678 

862 

736 

4 089 

35 

 
 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
5. 

NET CORRECTIONS 

The budget implementation type, the sectorial management and the financial rules of the 
policy  area  influence  how  the  EU  budget  is  impacted  by  the  different  correction 
mechanisms.  In  all  cases,  the  correction  mechanisms  result  in  the  EU  budget  being 
protected from expenditure incurred in breach of law. 

5.1. 

Net financial corrections 2014  

A  net  financial  correction  is  a  correction  that  impacts  the  EU  budget,  (i.e.  the  corrected 
and  recovered  amounts  are  reimbursed  to  the  EU  budget).  As  a  consequence,  the  EU 
funding is decreased for the Member State concerned. 

As  explained  above,  under  the  programming  periods  2000-2006  and  2007-2013  net 
corrections were primarily made under Agricultural policy. 

Table 5.1.1: Breakdown of net financial corrections confirmed in 2014 

MFF Heading 

Smart & inclusive growth 

ERDF 
Cohesion Fund 
ESF 

Sustainable growth: natural resources 

EAGF 
Rural Development 
FIFG/EFF 
EAGGF Guidance 

Security & citizenship  

Migration and home affairs 

TOTAL 

Net financial 
corrections 
confirmed in 
2014 

Financial 
corrections with 
replacement of 
expenditure 
confirmed in 
2014 

EUR millions 

Total financial 
corrections 
confirmed in 2014 

 315 

 185 
31 
99 

1 903 

1 649 
 220 
 21 
 13 

 5 

 5 

1 649 

 1 145 
 261 
 243 

 17 

- 
- 
 17 
- 

- 

- 

2 224 

1 666 

1 964 

1 330 
 292 
 342 

1 921 

1 649 
 220 
 39 
 13 

 5 

 5 

3 890 

A total of EUR 113 million remain to be classified and is treated as non-net corrections in this table. 

As shown above, Agriculture corrections (EAGF, EAFRD, EAGGF) are always net whereas, 
due to the legal framework, for Cohesion Policy, net financial corrections leading to the 
return  of  previously  paid  amounts  to  the  EU  budget  were  generally  the  exception  –  see 
section 3.1 for more explanation of the amounts. 

Under  the  legal  framework  applicable  for  Cohesion  Policy  up  to  the  2007-2013 
programming period, a real cash-flow back to the EU budget occurs only: 

If Member States are unable to present sufficient eligible expenditure; 

- 
-  After  the  closure  of  programmes  where  replacement  of  ineligible  by  eligible 

expenditure is no longer possible; 
In case of disagreement with the Commission (see section 2.4.1). 

- 

However, a significant change was introduced for the 2014-2020 period: The Commission 
has  the  obligation  to  apply  a  net  financial  correction  when  serious  deficiencies  not 
previously  detected,  reported  nor  corrected  at  Member  State  level  are  discovered  by  EU 
audits. In such cases, the current possibility for the Member State to accept the correction 
and to re-use the EU funds in question is removed (see section 2.4.2).  

36 

 
 
 
Table 5.1.2: Breakdown of net financial corrections implemented in 2014 

MFF Heading 

Smart & inclusive growth 

ERDF 
Cohesion Fund 
ESF 

Sustainable growth: natural resources 

EAGF 
Rural Development 
FIFG/EFF 
EAGGF Guidance 

Security & citizenship  

Migration & home affairs 

TOTAL 

Net financial 
corrections 
implemented 
in 2014 

Financial 
corrections with 
replacement of 
expenditure 
implemented in 
2014 

EUR millions 

Total financial 
corrections 
implemented in 2014 

 358 

 204 
 55 
99 

 918 

 796 
 86 
 23 
 13 

 5 

 5 

1 250 

 879 
 181 
 190 

 18 

- 
- 
 18 
- 

- 

- 

1 281 

1 268 

1 608 

 1 083 
 236 
 289 

 936 

 796 
 86 
 41 
 13 

 5 

 5 

2 549 

The  increased  application  of  implementation  by  instalment  and  deferrals  explains  why  in 
the last three years (2012 to 2014) the amounts implemented for Agriculture were lower 
than the amounts decided. The difference should disappear once cruising speed is reached.  

5.2. 

Impact on the EU budget 

Table 5.2: Impact on the EU Budget 

      EUR millions 
Total impact on the EU 
budget 

Net financial corrections implemented* 
Recoveries implemented** 
TOTAL 

1 281 
736 
2 017 

*  
** 

The main expenditure chapters concerned are 0502, 0503, 0504, 1303, 1304, 0402, 1106 and 1803. 
The  main  expenditure  chapters  concerned  are  0502,  0503,  1303,  1304,  0402  and  1106.  For  more  information  on 
recoveries see 4.3. 

As explained above, revenue arising from net  financial corrections (see section 5.1.) and 
recoveries  (see  sections  2.2.2.  and  4.3.)  are  treated  as  assigned  revenue14,  noting  that 
the Commission implements recoveries also "at source" by deducting ineligible expenditure 
(which has been identified in previous or current cost claims) from payments made. Apart 
from two exceptions, the Financial Regulation15 does not include specific provisions on how 
the  assigned  revenue  generated  by  a  net  financial  correction  or  recovery  can  be  used. 
However,  Article  7  of  the  Rules  of  Application  determines  that  the  budget  commentary 
shall  show  which  budget  lines  may  receive  the  appropriations  corresponding  to  the 
assigned revenue. In general, assigned revenue goes back to the budget line or fund from 
which the expenditure was originally paid and may be spent again but it is not earmarked 
for specific Member States. 

14   Article 21(3)(c) of the Financial Regulation. 
15   For  European  Agricultural  Guarantee  Fund  (EAGF)  the  appropriations  are  assigned  to  the  ''origin  of  the 

revenue'' (Art. 174(1)) and for financial instruments to the ''same financial instrument'' (Art.140(6)). 

37 

 
 
 
 
 
 
 
 
 
 
 
 
 
                                                            
5.3. 

Impact on national budgets  

Under  shared  management,  all  financial  corrections  and  recoveries  have  an  impact  on 
national  budgets  regardless  of  their  method  of  implementation.  It  has  to  be  underlined 
that  even  if  no  reimbursement  to  the  EU  budget  is  made,  the  impact  of  financial 
corrections is always negative at Member State’s level. This is because in order not to lose 
EU  funding,  the  Member  State  must  replace  ineligible  expenditure  by  eligible  operations. 
This  means  that  the  Member  State  bears,  with  its  own  resources  (from  the  national 
budget),  the  financial  consequences  of  the  loss  of  EU  co-financing  of  expenditure 
considered  ineligible  under  the  EU  programme  rules  (in  the  form  of  opportunity  cost) 
unless  it  recovers  the  amounts  from  individual  beneficiaries.  This  is  not  always  possible, 
for example in the case of flat-rate corrections at programme level (due to deficiencies in 
the  national  administration  managing  the  programme)  which  are  not  directly  linked  to 
individual irregularities at project level. 

6. 

PREVENTIVE MEASURES 

6.1. 

Agriculture 

6.1.1.  Interruptions, suspensions and reductions 

In  2014,  under  the  previous  legal  basis16,  there  were  17  interruptions  of  payments.  In 
addition, a reduction decision based on Article 41(1) for two quarters for Greece has been 
adopted  at  the  beginning  of  2015.  Those  interruptions  and  reductions  concerned  some 
investment  measures  not  managed  under  the  Integrated  Administration  and  Control 
System (IACS) in 6 out of 92 Rural Development Programmes. 

For  EAGF,  the  Commission  adopted a decision  to  reduce  from  claim  year 2014  the  direct 
payments  in  Greece.  This  decision  was  based  on  Article  41(1)  of  R.  1306/2013  and 
protects  the  EU  financial  interest  against  remaining,  limited  and  precisely  quantified 
problems  with  the  inclusion  of  ineligible  permanent  pasture  land  in  the  Land  Parcel 
Identification System (LPIS). 

6.1.2.   Other preventive measures 

A compulsory administrative structure has been set up at the level of Member States (see 
section 7.1): 

  The  management  and  control  of  the  expenditure  is  entrusted  to  dedicated  paying 
agencies,  which  must  be  accredited  by the Member State  prior  to  their operations 
on  the  basis  of  a  comprehensive  set  of  accreditation  criteria  laid  down  in  EU  law. 
The paying agencies' compliance with these criteria is subject to a detailed review 

16  Commission  Regulation  (EC)  No  883/2006 of  21  June  2006  laying  down  detailed  rules  for  the  application  of 
Council  Regulation  (EC)  No  1290/2005  as  regards  the  keeping  of  accounts  by  the  paying  agencies, 
declarations of expenditure and revenue and the conditions for reimbursing expenditure under the EAGF and 
the EAFRD (OJ L 171, 23.6.2006, p. 1–34). 
Regulation  (EU)  No  1303/2013  of  the  European  Parliament  and  of  the  Council  of  17  December  2013  laying 
down  common  provisions  on  the  European  Regional  Development  Fund,  the  European  Social  Fund,  the 
Cohesion  Fund,  the  European  Agricultural  Fund  for  Rural  Development  and  the  European  Maritime  and 
Fisheries  Fund  and  laying  down  general  provisions  on  the  European  Regional  Development  Fund,  the 
European  Social  Fund,  the  Cohesion  Fund  and  the  European  Maritime  and  Fisheries  Fund  and  repealing 
Council Regulation (EC) No 1083/2006 (OJ L 347, 20.12.2013, p. 320–469). 
Regulation  (EU)  No  1303/2013  of  the  European  Parliament  and  of  the  Council  of  17  December  2013  laying 
down  common  provisions  on  the  European  Regional  Development  Fund,  the  European  Social  Fund,  the 
Cohesion  Fund,  the  European  Agricultural  Fund  for  Rural  Development  and  the  European  Maritime  and 
Fisheries  Fund  and  laying  down  general  provisions  on  the  European  Regional  Development  Fund,  the 
European  Social  Fund,  the  Cohesion  Fund  and  the  European  Maritime  and  Fisheries  Fund  and  repealing 
Council Regulation (EC) No 1083/2006 (OJ L 347, 20.12.2013, p. 320–469). 

38 

 
 
 
 
                                                            
by  an  external  audit  body,  as  well  as  to  a  constant  supervision  by  the  competent 
national authority, and clear procedures exist as to how to address and remedy any 
problem.  

  Moreover,  the  heads  of  the  paying  agencies  are  required  to  provide  an  annual 
statement  of  assurance  which  covers  the  completeness,  accuracy  and  veracity  of 
the paying agency’s accounts, as well as a declaration of assurance on the legality 
and  regularity  of  the  underlying  transactions.  These  statements  of  assurance  are 
verified  by  independent  certification  bodies,  which  are  required  to  provide  an 
opinion  thereon.  For  those  Member  States  with  only  one  paying  agency,  this 
statement  of  assurance  received  from  the  director  of  the  paying  agency,  together 
with the certificate and opinion of the certification body, constitute by definition the 
“annual summary”.  

6.2. 

Cohesion 

6.2.1. Interruptions and suspensions  

Table 6.2.1: Interruptions 

Cohesion policy: 2007-2013 programming period 

EUR millions 

Fund 

Total open cases 
at 31.12.2013 

New cases 2014 

Closed cases 
during 2014 

Total open cases 
at 31.12.2014 

Number 
of cases 

Amount 

Number 
of cases 

Amount 

Number 
of cases 

Amount 

Number 
of cases 

Amount 

ERDF & Cohesion Fund 

ESF 

EFF 

Total  

 101 

1 608 

 134 

 20 

 10 

 272 

 97 

 31 

 13 

6 227 

1 323 

 103 

 137 

3 998 

 19 

 15 

 625 

 186 

 98 

 32 

 8 

3 837 

 970 

 14 

 131 

1 977 

 178 

7 653 

 171 

4 809 

 138 

4 821 

The table above presents for the ERDF, the Cohesion Fund, the ESF and the EFF, a view on the evolution of the interruption cases 
both in number and in amount. The opening balance includes all the cases still open at end 2013, irrespective of the year when 
the interruption was notified to the Member State. The new cases only refer to the interruptions notified in the year 2014. The 
closed  cases  represent  the  cases  for  which  the  payment  of  cost  claims  resumed  in  2014,  irrespective  of  the  year  when  the 
interruption started. The cases still open at end 2014 represent the interruptions that remain active at 31 December 2014, i.e. 
the payment deadline of cost claims is still interrupted pending corrective measures to be taken by the Member State concerned. 

In  2014,  the  number  of  warning  letters,  interruptions  and  pre-suspensions  for  ERDF/CF 
programmes were still at a very high level. 16 new warning letters were sent and 36 new 
interruptions  were  decided  and  communicated  to  Member  States  in  the  year.  The 
Commission  initiated  28  pre-suspension  procedures.  121  programmes  were  impacted  by 
either  a  warning  or  an  interruption.  Approximately  two  third  of  these  interruptions  and 
pre-suspensions  are  based  on  audit  results  reported  to  the  Commission  by  audit 
authorities during the year or at year end.  

Concerning  ESF,  at  end  2013,  20  interruptions  remained  open.  During  2014, 31 
interruptions were decided and 19 interruptions were lifted. This meant that 32 payments 
remained  interrupted  at  end  2014  (Czech  Republic  (1),  Spain  (18),  France  (3)  Italy  (8) 
and the United Kingdom (2)), of which 13 were already interrupted at end 2013. 

For EFF, most of the interruptions relate to issues stemming from the analysis of the ACRs 
provided  by  the  MS  at  the  beginning  of  each  year  (reports  not  provided,  not  reliable  or 
showing  high  error  rates).  The  significant  reduction  in  the  interrupted  amounts  between 
the two years resulted from the lifting of the interruption for Spain. 

39 

 
 
Suspensions 

Concerning  ERDF  and  the  Cohesion  Fund,  five17  suspension  decisions  were  still  in  force 
at the end of 2013. Decisions to lift the suspensions for the intermediate bodies AENA in 
Spain  and  Social  Affairs  in  Estonia  were  taken  during  2014.  The  other  three  suspension 
decisions  for Spain  and  Italy  remained  in  force  at  the  end  of  2014. Four new  suspension 
decisions  were  adopted  in  2014:  three  related  to  Spain,  and  one  related  to  an  IPA  CBC 
programme  (Adriatic  –Technical  assistance  priority).  Two  of  the  suspension  decisions 
related to Spain were still in force and one was lifted before the year-end. 

Concerning ESF, one suspension decision adopted in 2011 for France was still on-going at 
31 December 2014. Seven suspension decisions adopted during 2013 were still ongoing at 
31 December 2014:  Belgium,  Czech  Republic,  Spain  (3),  Italy  and  Slovakia.  During 
2014, eleven suspension decisions were adopted (Czech Republic, Spain (9) and Italy) and 
all of them were still ongoing at 31 December 2014.  

Interim payments for the EFF operational programme for Estonia were suspended in May 
2014. Following the suspension decision, a number of exchanges between Estonia and the 
Commission  services  took  place  to  analyse  and  address  the  measures  undertaken  by 
Estonia, which led to the lifting of the suspension in April 2015.  

6.2.2.  Fraud-prevention measures  

Fraud, when it occurs, raises significant attention and damages the reputation of the EU. 
In  this  respect,  an  important  initiative  taken  by  the  Commission  was  firstly  to  hold  in 
December 2013 a conference on anti-fraud measures for all Member States. Secondly, this 
was followed by a series of conferences in 2014-2015 in Greece, Slovakia, Czech Republic, 
Bulgaria, Croatia, Romania, Italy, Slovenia and Spain, Poland and Latvia (for the 3 Baltic 
States).  Furthermore  the  Commission  produced  specific  guidance  to  support  Member 
States’  fraud  risk  assessment  and  developed  tailor-made  IT  tools  in  order  to  help  them 
target  their  anti-fraud  efforts  on  high  risk  projects.  These  actions  are  in  line  with  the 
increased  responsibilities  at  Member  State  level  arising  from  the  new  Cohesion  Policy 
regulation (Article 125(4)(c)) which requires Member States to “put in place effective and 
proportionate anti-fraud measures taking into account the risks identified”. 

These  above-mentioned  awareness  raising  events  have  provided  positive  results;  for 
example,  the  region  of  Andalucía  (Spain)  has  decided  to  start  using  the  ARACHNE  fraud 
risk  scoring  tool  already  for  the  2007-2013  programming  period.  The  Commission  is 
providing the necessary support to set up the system and assisting the regional authorities 
in  creating  the  relevant  data  files  required.  The  Andalusian  authorities  also  committed 
(written  communication  of  December  2014)  to  have  a  dedicated  anti-fraud  agency 
carrying out detection and prevention activities.  

ARACHNE has been presented to 22 Member States. So far, sixteen have sent programme 
data  and  the  roll  out  of  the  system  is  continuing.  Eight  Member  States  already  use  the 
ARACHNE  tool  and  the  Commission  continues  to  monitor  its  use.  Eight  other  Member 
States have access since the first quarter of 2015. Further presentations to the remaining 
six  will  take  place  in  2015.  ARACHNE  aims  at  establishing  a  comprehensive  database  of 
financial  and  operational  data  on  projects  and  beneficiaries  in  order  to  carry  out,  on  the 
basis  of  objective  criteria,  a  risk  scoring  allowing  the  identification  of  the  most  risky 
projects and the most risky operational programmes. 

17   The decision for lifting the suspension related to Estonia was taken in 2013 but officially notified in 2014. 

40 

 
 
 
 
 
                                                            
7. 

CORRECTIVE  ACTIONS  MADE  BY  MEMBER  STATES  ON  THEIR  OWN 
INITIATIVE 

Under  shared  management,  Member  States  have  the  primary  obligation  to  prevent  and 
detect  irregularities,  and  thus  they  make  major  efforts  and  commit  resources  to  making 
financial  corrections  and  recovering  undue  amounts  from  beneficiaries.  Moreover,  they 
perform management verifications, controls and audits in the first instance, these being in 
addition  to  those  of  the  Commission  detailed  above.  The  figures  below  are  in  addition  to 
the corrections reported by the Commission above. 

7.1. 

Agriculture 

Member  States  are  required  to  put  in  place  systems  for  ex-ante  controls  and  dissuasive 
sanctions: 

  For  each  aid  support  scheme  financed  by  EAGF  or  EAFRD,  ex-ante  administrative 
and on-the-spot checks are performed and dissuasive sanctions are applied in case 
of  non-compliance  by  the  beneficiary.  These  control  systems  are  to  be  applied  by 
the paying agencies and encompass common features and special rules tailored to 
the  specificities  of  each  aid  regime.  They  are  designed  to  provide  exhaustive  ex-
ante  administrative  controls  of  100%  of  aid  applications,  cross-checks  with  other 
databases where appropriate, as well as on-the-spot checks of pre-payments on a 
sample  of  transactions  ranging  between  1 %  and  100 %  of  the  population, 
depending on the risk associated with the regime concerned. If on-the-spot checks 
reveal a high number of irregularities, additional controls must be carried out.  

 

In  this  context,  the  most  important  system  is  the  IACS,  which  covered  94 %  of 
EAGF  expenditure  in  financial  year  2014  (92 %  in  2013).  To  the  extent  possible, 
the IACS is also used to manage and control Rural Development measures relating 
to parcels or livestock, which accounted for 40 % of payments under the EAFRD in 
2014. For both Funds, the IACS covered 83 % of total expenditure in 2014. 

  A detailed reporting from Member States to the Commission on the checks carried 
out  by  them  and  on  the  sanctions  applied  is  foreseen  in  the  legislation.  The 
reporting  system  enables  a  calculation,  for  the  main  aid  schemes,  of  the  level  of 
error found by Member States at the level of the final beneficiaries. The accuracy of 
the  statistical  information  reported  and  the  quality  of  the  underlying  on-the-spot 
checks  is  also  verified  and  validated  by  the  certification  bodies  for  direct  aids  and 
Rural Development measures. 

The  latter  reports  from  the  Member  States  disclose  the  preventive  effect  of  the  ex-ante 
administrative and on-the-spot controls carried out. 

41 

 
 
 
 
 
Table  7.1:  Member  States’  own  corrections  applied  before  payments  to 
beneficiaries are executed in 2014 (in addition to Commission reporting) 

EAGF 
Market 
Measures 
1 
0 
0 
0 
1 
0 
1 
0 
12 
4 
0 
3 
0 
0 
0 
0 
1 
0 
3 
0 
9 
1 
2 
0 
0 
0 
0 
0 

EAGF 
Direct 
Payments 
1 
14 
0 
1 
6 
0 
5 
10 
24 
3 
1 
17 
1 
1 
1 
0 
14 
0 
1 
1 
11 
1 
9 
0 
2 
0 
1 
3 

EUR millions 

EAFRD 

Total 2014 

1 
9 
1 
1 
7 
1 
2 
5 
20 
4 
- 
9 
0 
1 
2 
0 
5 
0 
2 
5 
14 
4 
18 
1 
1 
2 
1 
4 

3 
24 
2 
2 
14 
2 
8 
14 
56 
11 
1 
30 
1 
3 
3 
0 
20 
0 
5 
6 
34 
6 
29 
2 
4 
2 
3 
7 

39 

128 

122 

289 

Member State 

Belgium 
Bulgaria 
Czech Republic 
Denmark 
Germany 
Estonia 
Ireland 
Greece 
Spain 
France 
Croatia 
Italy 
Cyprus 
Latvia 
Lithuania 
Luxembourg 
Hungary 
Malta 
Netherlands 
Austria 
Poland 
Portugal 
Romania 
Slovenia 
Slovakia 
Finland 
Sweden 
United Kingdom 

Total 

7.2. 

Cohesion 

Under  the  regulations  for  the  2007-2013  programming  period,  Member  States  have  to 
report annually to the Commission the corrections stemming from all controls performed. 
The  Commission  is  performing  risk-based  audits  to  test  the  reliability  of  these  figures  as 
part of its assurance process.  

It  is  highlighted  that  the  Commission  has  taken  a  prudent  approach,  due  to  certain 
weaknesses  in  the  Member  State  figures,  so  as  to  ensure  that  the  amounts  are  not 
overstated  –  as  a  result  some  of  them  may  in  reality  be  higher.  This,  however,  has  no 
impact  on  the  reliability  of  the  Commission's  own  figures.  The  amounts  in  question  are 
very significant and when added to the results of the Commission's work, give a very clear 
indication of the success of the controls put in place by both parties. 

42 

 
 
 
 
 
 
 
Table  7.2:  Cumulative  corrections  at  end  2014  reported  by  Member  States  for 
Cohesion Policy period 2007-2013 

EUR millions 

Member State 

ERDF/CF 

ESF 

EFF 

Total 

Belgium 

Bulgaria 

Czech Republic 

Denmark 

Germany 

Estonia 

Ireland 

Greece 

Spain 

France 

Croatia 

Italy 

Cyprus 

Latvia 

Lithuania 

Luxembourg 

Hungary 

Malta 

Netherlands 

Austria 

Poland 

Portugal 

Romania 

Slovenia 

Slovakia 

Finland 

Sweden 

United Kingdom 

Cross-border 

 4 

 14 

 364 

 1 

 266 

 2 

 0 

 301 

 466 

 140 

 0 

 280 

 1 

 46 

 18 

 0 

 255 

 2 

 7 

 14 

 444 

 169 

 136 

 45 

 34 

 2 

 8 

 95 

 31 

20 

3 

9 

0 

78 

1 

18 

25 

221 

71 

0 

46 

1 

3 

0 

1 

- 

0 

3 

2 

- 

46 

- 

6 

7 

1 

1 

8 

- 

- 

0 

1 

0 

1 

0 

0 

3 

38 

1 

- 

3 

0 

1 

0 

- 

0 

0 

- 

0 

1 

2 

- 

- 

0 

1 

0 

3 

- 

 24 

 17 

 374 

 1 

 345 

 3 

 19 

 329 

 725 

 212 

 0 

 329 

 2 

 50 

 18 

 1 

 255 

 2 

 10 

 16 

 444 

 216 

 136 

 51 

 41 

 3 

 9 

 105 

 31 

TOTAL IMPLEMENTED 

3 142 

570 

56 

3 769 

43 

 
 
 
8. 

RECOVERY OF PRE-FINANCING AMOUNTS 

So as to provide a complete picture of all the tools used by the Commission to protect the 
EU  budget,  it  is  also  necessary  to  consider  the  recoveries  made  in  the  areas  of  pre-
financing, that being the recovery of unused (i.e. unspent) pre-financing amounts.  

When  a  beneficiary  has  not  used  (spent)  the  advances  received  from  the  EU  on  eligible 
expenditure,  the  Commission  issues  a  recovery  order  to  return  the  monies  to  the  EU 
budget.  This  procedure  represents  an  important  step  in  the  control  system  of  the  EU  to 
ensure  that  no  excess  money  is  kept  by  the  beneficiary  without  proper  expense 
justification,  thus  contributing  to  the  protection  of  the  EU  budget.  The  amounts  are  the 
result  of  the  issuance  of  a  recovery  order  by  the  Commission,  and  are  recorded  in  the 
accounting  system  as  such.  The  below  recovery  of  unused  pre-financing  amounts  should 
not be confused with irregular expenditure recovered. Where Commission services identify 
and  recover  such  expenditure  in  relation  to  pre-financing  amounts  paid  out,  these  are 
included in the normal financial correction or recovery processes described above. 

Table 8: Recovery of pre-financing amounts 

Cohesion Policy: 

ESF 
FIFG/EFF 
EAGGF Guidance 
Internal policy areas 
External policy areas 

Administration 

Total recovered pre-Financing 

EUR millions 

2014 

9 
10 
6 
278 
95 
2 
400 

44