REPORT FROM THE COMMISSION TO THE EUROPEAN COURT OF AUDITORS, THE COUNCIL AND THE EUROPEAN PARLIAMENT Member States' Replies to the European Court of Auditors' 2014 Annual Report
Date: 2016-02-26
Institutions: Directorate-General for Budget, European Commission
Subjects: EU Member State, European Court of Auditors, activity report, control of State aid, financial management, general budget (EU), implementation of the budget, management audit

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 26.2.2016  COM(2016) 112 final   REPORT FROM THE COMMISSION TO THE EUROPEAN COURT OF AUDITORS, THE COUNCIL AND THE EUROPEAN PARLIAMENT Member States' Replies to the European Court of Auditors' 2014 Annual Report {SWD(2016) 48 final}  
 
 
TABLE OF CONTENTS 

1.  Scope of the Report .......................................................................................................... 3 

2  Key features of the ECA 2014 report ............................................................................. 3 

3 

Summary of the Member States' replies ........................................................................ 5 

3.1       Measuring performance results .................................................................................. 5 

3.2      Types of quantifiable errors ......................................................................................... 7 

3.3       Sound financial management ...................................................................................... 9 

4.  Conclusion ....................................................................................................................... 11 

 
 
 
REPORT FROM THE COMMISSION 

MEMBER STATES' REPLIES TO THE COURT OF AUDITORS' 2014 ANNUAL REPORT 

1. 

Scope of the Report 
In  accordance  with  article  162(5)  of  the  Financial  Regulation1  following  the 
publication of the Court's annual report for the budgetary year 2014, the Commission 
duly informed Member States of details of the report.  

This  information  was  presented  in  the  form  of  a  letter  and  three  annexes  to  be 
completed  by  each  Member  State,  as  well  as  the  accompanying  guidelines  on  the 
preparation  and  presentation  of  replies  to  the  questionnaires.  Annex  I  was  a 
questionnaire on the paragraphs referring to the individual Member States; annex II 
was a questionnaire on audit findings which refer to each Member State and annex 
III  was  a  questionnaire  on  topical  findings  related  to  shared  management  for  DAS 
2014.  

For this year's report, three main themes have been identified. They are as follows: 
(1)  Measuring  performance  results  (2)  Types  of  quantifiable  errors  –  infringements 
of  state  aid  and  public  procurement  rules  (3)  Sound  financial  management.  The 
report is also accompanied by a Staff Working Document (SWD) which comprises 
Member States' replies to annexes I and III.  

2 

Key features of the ECA 2014 report 

For the 2014 annual report, the Court has updated its audit approach and the structure 
of  the  report.  The  main  change  to  its  approach  is  the  quantification  of  serious 
infringements of public procurement rules and the corresponding adjustment of 2013 
and  2012  figures  in  order  to  ensure  comparability  of  results.2  The  new  structure  of 
the report - chapters 5-9 - reflects the 2014-2020 Multiannual Financial Framework 
(MFF) headings.  

The results of the Court's audit for 2014 stated that the accounts were not affected by 
material misstatements and therefore it issued a clean opinion on the reliability of the 
accounts3, as it has done since 2007. For expenditure, the Court found an estimated 
level  of  error  for  2014  payments  of  4,4  %  close  to  the  2013  level  of  4,5%.4  Apart 
from  MFF  heading  5  (Administration),  expenditure  for  all  remaining  headings  was 
affected  by  material  error.  For  Competiveness,  Cohesion  and  Global  Europe  the 
estimated levels of error were 5,6%, 5,7% and 2,7% respectively, all representing an 
increase  on  equivalent  results  in  2013.5  However,  for  Natural  Resources  the 
estimated  level  of  error  was  3,6%  a  decrease  on  the  equivalent  results  for  2013. 
Cohesion  was  the  biggest  contributor  to  the  overall  error  rate  followed  by  Natural 

1 Article 162(5): As soon as the Court has transmitted its annual report, the Commission shall inform the 
Member States concerned immediately of the details of that report which relate to management of the funds for 
which they are responsible. Member States should reply within sixty days and the Commission then transmits a 
summary of the replies to the Court of Auditors, the European Parliament and the Council before 28 February of 
the following year. 

2 ECA AR 2014 pp 20-21 
3 ECA AR 2014 p15 
4 ECA AR 2014 p 17 
5 ECA AR 2014 pp 26-27 

3 

 
 
 
                                                 
 
Resources,  Competiveness  and  Global  Europe.  The  graph  below  shows  the 
contribution to the 2014 overall estimated level of error by MFF heading.6   

Cohesion

Natural Resources

Competitiveness

Global Europe

Other

Administration

0%

10%

20%

30%

40%

50%

60%

The  Court's  report  also  identified  two  types  of  expenditure  programmes  -  entitlement 
programmes  and  cost  reimbursement  schemes  -  which  involve  distinct  patterns  of  risk.7 
According to the report, eligibility errors in cost reimbursement schemes dominate the errors 
detected  for  2014.  Errors  in  the  cost  reimbursement  category  include  mostly  serious 
infringements of public procurement rules during tendering and contract implementation. For 
entitlement  programmes 
include  over  declarations  by  farmers  and 
administrative errors affecting payments to farmers.8 The graph below shows the contribution 
to overall estimated error by type. 

typical  errors 

6 ECA AR 2014 p 22 
7 ECA AR 2014 p 19 
8 ECA AR pp 22-23 

4 

 
 
 
 
 
 
                                                 
3 

Summary of the Member States' replies 

3.1 

MEASURING PERFORMANCE RESULTS 
In  Chapter  3  of  its  annual  report  "Getting  results  from  the  EU  budget",9  the  Court 
analyses performance from the perspective of the Europe 2020 strategy and examines 
the performance features introduced with the new MFF 2014-2020.  Member States 
were  asked  whether  they  were  already  using  or  planning  to  use  the  common 
indicators  introduced  for  the  five  EU  funds.  For  four  of  the  funds  (European 
Agricultural  Fund  for  Development  -  EAFRD,  European  Maritime  and  Fisheries 
Fund  -  EMFF,  European  Social  Fund  -  ESF,  and  the  European  Regional 
Development Fund - ERDF)  the replies indicated that nearly all Member States were 
already using or planning to use common indicators. For the Cohesion Fund 57% of 
the Member States indicated that common indicators were being used and 14% stated 
that use of common indicators was not applicable. The table below gives details of 
the Member States' replies. 

9 ECA AR p 83 

5 

 
 
 
 
                                                 
Usage (in %- 100%=28 MS) of the 'Common 
indicators' in respective EU funds 

CF

ERDF

ESF

EMFF

EAFRD

Yes

No

No response

n/a

57% 

7% 

22% 

96% 

82% 

93% 

86% 

14% 

4% 

4% 

14% 

7% 

14% 

With  regard  to  the  use  of  additional  or  complementary  indicators,  several  Member 
States  –  France,  Greece,  Lithuania,  Luxembourg,  Spain  and  the  UK  10-  responded 
that  they  used  programme  specific  or  additional  indicators  often  defined  by  the 
Managing Authorities and included in the performance framework of the operational 
programme.  In  some  cases,  common  indicators  are  complemented  by  indicators  at 
national level. For example, for the ERDF/CF/ESF Poland11 uses: 

 "a raft of indicators applied at project level derived from the Common List of Key 
Indicators  prepared  by  the  Minister  for  Regional  Development.  The  list  comprises 
the  common  indicators  at  European  level  set  in  the  fund  regulations  and  the  key 
indicators set at national level."  
Portugal12  underlined  the  fact  that  for  the  2014-2020  period  for  operational 
programmes with similar goals, indicators to be used have been harmonised, and "in 
addition  to  the  list  of  common  Community  indicators  there  is  a  list  of  harmonised 
national indicators". 

Member  States  also  provided  lists  or  more  detailed  information  on  various 
programme specific indicators used for the different funds. Sweden13 stated that for 
the  9  programmes  of  the  ERDF  there  are  some  thirty  five  output  indicators  and 
"some  thirty  performance  indicators  that  are  linked  to  investment  priorities  and 
specific objectives within the programmes". Denmark14 provided  its list of impact, 
output  andresult    indicators  for  the  EAFRD,  ESF,  and  EMFF.  Slovakia15  itemised 
indicators  drawn  up  by  the  Central  Coordination  Body  and  covering  various 
programmes  and  also  provided  a  list  of  indicators  for  European  Structural  and 
Investment Funds - ESI - funds. 

Finally,  Member  States  were  asked  whether  they  would  be  able  to  provide 
meaningful  data  on  indicators  available  for  use  in  the  MFF  mid-term  review 
scheduled for 2017. Some Members States including Denmark, France and Greece16 

10 SWD p 149, 159, 171, 175, 204, 207 
11 SWD p 180 
12 SWD p 186 
13 SWD p 206 
14 SWD p 144 
15 SWD p 196 
16 SWD p 144, 149, 159 

6 

 
 
 
                                                 
reported  that  it  would  not  be  possible  to  provide  meaningful  data  by  2017,  largely 
because  the implementation  level  for  certain  operational  programmes  would  be too 
low and data would be insignificant. Greece17 stated that: 

"Information on the achievement of the national targets of the ‘Europe 2020’ strategy 
will be available in the ESS18 Progress Report in 2017 (and in 2019). However, since 
the implementation of OPs will not have delivered before the report is submitted in 
2017,  no  material  data  are  expected  to  be  available  for  the  mid-term  review  of  the 
MFF".  
Portugal19  and  Poland20  both  highlighted  the  fact  that  a  comprehensive  reporting 
system  was  in  place  ensuring  quality  reporting  on  a  regular  basis.  Nonetheless,  as 
pointed out by Poland21:  

"it will not be possible to summarise the impact of EU funds in the 2014-20 financial 
perspective until sufficient progress has been made - 2017 will be too early a stage to 
produce summary conclusions." 

Several  other  Member  States,  for  example,  Austria,  Croatia,  the  Czech  Republic, 
Ireland and Slovenia22 were certain that meaningful data could be provided by 2017 
for programmes under some funds. The Czech Republic23 reported that:  

"it will be in a position to provide reliable data on the basis of the system established 
in the Czech Republic for reporting on stocktaking, progress and developments". 

Croatia also stated that it would provide comprehensive data and that in addition: 

"the  results  of  evaluations  can  be  used,  which  should  contribute  to  improved  and 
possible simplification of management and control systems". 

3.2  

TYPES  OF  QUANTIFIABLE  ERRORS  -  INFRINGEMENTS  OF  STATE  AID  AND  PUBLIC 
PROCUREMENT RULES 

In  the  2014  annual  report,  the  Court  stated  that  14  ERDF/CF  projects  in  eight 
Member  States  infringed  the  EU  State  Aid  rules.  According  to  the  Court,  the 
quantified errors for State Aid infringements make up approximately 1.5 percentage 
points  of  the  estimated  error  for  regional  and  urban  policy.24  Member  States  were 
requested to provide information on the infringements of State Aid rules and on any 
preventive measures undertaken. 

The replies of the Member States indicated that in some cases, for example France, 
Latvia and Slovenia 25, there were no systemic issues or deficiencies related to State 
Aid rules in the remit of the ESI funds, although there may have been isolated cases 
of  infringements.  Bulgaria26  highlighted  two  such  cases  of  non-compliance,  both 
identified  during  the  course  of  audits.  The  first  was  in  the  Operational  Programme 
‘Development  of  the  Competitiveness  of  the  Bulgarian  Economy  2007–2013’  and 
the  second  was  in  the  management  systems  set  up  under  the  initiative  ‘Joint 
European  Resources  for  Micro  to  Medium  Enterprises’  (JEREMIE).  In  both  cases 

17 SWD p 159 
18 ESS – European Statistical System 
19 SWD p 186 
20 SWD pp 180-181 
21 SWD p 181 
22 SWD p 107,122,130,164,201 
23 SWD p 130 
24 ECA AR 2014 p-182 
25 SWD p 152, 170, 203 
26 SWD pp120-121 

7 

 
 
                                                 
the Audit Authority advised the managing authority and the financial intermediaries 
respectively on the appropriate course of corrective action. 

Although  systemic  issues  or  deficiencies  were  seemingly  not  widespread,  some 
Member States did report on preventive measures taken.  
Hungary27 stated that: 

"in  the  case  of  calls  for  proposals  and  priority  projects,  the  State  Aid  Monitoring 
Office  operating  within 
the  Prime  Minister’s  Office  performs  preliminary 
examination  of  compliance  with  State  aid  rules  or,  in  the  framework  of  first-level 
checks, it is checked by the intermediate bodies / managing authorities on the basis 
of the statements by tenderers."  
France28 highlighted the fact that the CGET29 had undertaken a variety of actions in 
the  context  of  2014-2020  programming  period  including  a  national  training 
programme  and  the  creation  of  a  network  of  regional  experts  specialising  in  State 
Aid rules. 
Luxembourg  and  Slovenia30  referred  to  checklists  as  a  key  part  of  their  preventive 
measures,  while  Spain31  stated  that  in  addition  to  checklists,  a  "risk  assessment 
matrix" was also used. 

The  Court  has  updated  the  way  it  quantifies  serious  infringements  of  public 
procurement rules and procurement errors are a main source of error for Economic 
Social  and  Territorial  Cohesion32.  Member  States  were  requested  to  provide 
information  on  nationally  prescribed  measures  for  assessing  and  quantifying  non-
compliance  with  procurement  rules.  Some  Member  States  -  Ireland,  Latvia, 
Lithuania, The Netherlands, Poland and Slovenia 33 indicated that national legislation 
did  exist  and  very  often  EU  legislation  was  transposed  or  underpinned  national 
legislation. In Lithuania34, the Public Procurement Office takes overall responsibility 
for  helping  to  ensure  the  proper  implementation  of  the  Operational  Programme  in 
accordance with  the requirements of the EU regulations and prevents irregularities. 
Latvia35 stated that: 

"Procurements are conducted in accordance with national legislation which has been 
drawn up on the basis of/transposing the provisions of EU legislation."  
Finally Ireland36 stated that: 

"Further,  in  relation  to  the  question  of  oversights  in  the  awarding  of  Government 
contracts,  public  procurement  practices  are  subject  to  audit  and  scrutiny  under  the 
the  Local 
Comptroller  and  Auditor  General  (Amendment)  Act  1993,  and 
Government  Reform  Act  2014,  and  Accounting  Officers  are  accountable  for 
expenditure incurred". 

In its report, the Court highlighted cases in certain Member States of non-respect of 
procurement  rules.37  The  Member  States  concerned  were  requested  to  provide 

27 SWD p 169 
28 SWD p 153 
29 CGET -Commissariat général à l'égalité des territoires 
30 SWD p 170 and p 203 
31 SWD p 205 
32 ECA AR p 176 
33 SWD p 165, 169, 172, 179, 183, 202-3 
34 SWD p 172 
35 SWD p 169 
36 SWD pp 165-166 
37 ECA AR p 240 

8 

 
 
                                                 
information on the possible flaws and deficiencies in their respective internal control 
systems  which  could  have  led  to  these  irregularities  and  to  provide  information  on 
remedial measures  taken. Bulgaria and France38 pointed out  that irregularities were 
due to the complex public procurement procedures and a lack of trained staff dealing 
with these procurement issues. Romania39 reported that:  

"the internal control systems in place in the area of public procurement at beneficiary 
level  are  fragmented,  partly  redundant  and  focus  more  on  formal  aspects  related  to 
process regularity, without assessing quality aspects objectively." 

In order to remedy the situation it has put in place "the national strategy for public 
procurement  for  the  period  2014-2020"  which  "provides  for  actions  to  ensure  the 
regularity and quality of the public procurement process". 
France, Poland and Spain40 all mentioned that specific training programmes designed 
for  staff  dealing  with  procurement  matters  were  a  key  measure  for  ensuring  better 
management of procurement issues. 

3.3  

SOUND FINANCIAL MANAGEMENT 

Member  States  continue  their  efforts  to  promote  sound  financial  management 
through the extensive use of Simplified Cost Options (SCOs), improved management 
verifications and better reporting on financial instruments. 
In Chapter 641 the Court recommends that the Member States should make better use 
of the possibilities set out in the Common Provisions Regulation and ESF regulation 
for the 2014-2020 period concerning SCOs. 

The  majority  of  Member  States,  among  them,  Cyprus,  Finland,  France,  Germany, 
Hungary,  Latvia,  Lithuania,  Luxembourg,  and  the  UK42,  reported  that  SCOs  were 
being  used  in  the  2014-2020  programming  period  across  the  funds,  to  the  extent 
possible.  Lithuania43  stated  that  in  2015  the  managing  authority  organised  a 
conference  -“Possibilities  for  applying  a  simplified  procedure  for  paying 
expenditures in 2014-2020” to inform participants about:  

"possibilities  of  applying  a  simplified  procedure  for  paying  expenditures  and  its 
benefits in the process of administering the EU structural funds." 
Greece44  pointed  out  that  it  was  updating  and  training  all  operators  in  the  use  of 
SCOs while Poland45 asserted that although provision was made for the use of SCOs 
"their use is optional and the final decision on this matter is taken by each Managing 
Authority." 
Sweden46 highlighted the fact that it had a simplification model for the ESF in place 
and that "the government is actively promoting simplification." 
Finally Portugal47 has set up a Simplification Centre at the Agency for Development 
and Cohesion (AD&C). Its aim is "to inform the MAs on relevant aspects in this area 

38 SWD p 116, 150,  
39 SWD p 191 
40 SWD pp 150-151, 181-182, , 205 
41 ECA AR p 203 
42 SWD p 129, 148, 153, 158, 163, 170, 174, 176, 209 
43 SWD pp 174-175 
44 SWD p 161 
45 SWD p 184 
46 SWD p 207 
47 SWD p 188 

9 

 
 
                                                 
in  order  to  promote  the  extensive  use  of  simplified  cost  options  in  the  different 
Cohesion Funds (ERDF, ESF and Cohesion Fund)". 
As in previous years, for regional policy, employment and social affairs48, the ECA 
reported  that  for  a  large  part  of  the  transactions  affected  by  quantifiable  errors, 
sufficient  information  was  available  for  the  Member  State  authorities  to  have 
prevented, detected and corrected the errors, before certifying the expenditure to the 
Commission. Member States were asked to provide information on whether they had 
established  measures  to  improve  management  verifications  and  to  enhance 
effectiveness  of  the  checks  carried  out  before  certifying  expenditure  to  the 
Commission. 

Concerning  some  of  the  improvements  in  management  verifications  undertaken, 
Luxembourg49 provided a list of measures under the ERDF and ESF which includes 
a  new  ex-post  checklist,  a  guidance  note,  training  and  meetings  aimed  at  building 
awareness of simplified cost options.  
Portugal50 made reference to the implementation of action plan in certain cases and 
reported  further  that  the  Certifying  Authority,  prior  to  the  submission  of  payment 
requests  to  the  European  Commission  carries  out  a  series  of  checks.  If  there  are 
doubts concerning:  

"the  legality  and  regularity  of  expenditure  to  be  certified,  the  sums  in  question  are 
deducted as a precautionary measure until the issues are resolved." 
Spain51 too reported that action plans have been implemented and:  

"improvements  have  been  incorporated  in  procedures  for  selecting  and  validating 
reimbursement statements, improving checklists, reviewing procurement documents 
for various local entities and so on."   
Cyprus52 reported that most errors existed  

"mainly  in  construction  contracts  executed  by  local  authorities  and  software 
development  contracts  executed  by  public  universities  and  that  the  contracting 
authorities  are  referred  to  the  Central  Committee  for  Variations  and  Claims  for 
examination of the amendment requests for such contracts, provision of guidance and 
opinion, as well as for mediation with the contractors involved for the resolution of 
disputes." 

Concerning  the  quality  of  reporting  on  financial  instruments,  some  Member  States 
(for  example  Cyprus,  Slovenia,  and  Sweden53)  responded    that  they  had  followed 
Commission  guidelines,  used  the  new  templates  and  that  in  certain  cases  no 
improvements were required since the reporting quality was considered good.  
Other Member States cited improvements made. In November 2015 France54 set up a 
working group on financial instruments with the aim of following the progress of the 
instruments  and  ensuring  the  consolidation  of  information.  Bulgaria55  has  put  in 
place  an  extensive  half  yearly  and  annual  reporting  system  for  the  financial 
instrument, JESSICA.  

48 ECA AR p 185 & 202 
49 SWD p 176 
50 SWD p 188 
51 SWD p 203 
52 SWD p 128 
53 SWD p 128, 202, 206,  
54 SWD p 150 
55 SWD p 115 

10 

 
 
                                                 
4. 

CONCLUSION 

The Commission has already pledged to implement an EU budget focused on results 
and  this  is  in  line  with  the  "wholly new  approach"  to  EU  investment  and  spending 
which the Court has called for in its 2014 annual report.56 One of the key features of 
this  new  approach  is  performance  which  is  assessed  on  the  basis  of  the  sound 
financial management principles.57 

Member  States'  replies  to  the  annexes  demonstrated  a  continued  commitment  to 
sound  financial  management  by  actively  promoting  the  use  of  SCOs,  improving 
management verifications and reporting on financial instruments. According to many 
Member  States,  procurement  issues  are  also  being  tackled  by  aligning  national  and 
EU legislation. In cases where weaknesses are found training programmes, increases 
in on-the-spot checks and recoveries of amounts, are among the measures undertaken 
to  remedy  deficiencies  in  public  procurement  as  attested  by  the  Czech  Republic, 
Croatia, Belgium, Finland and Germany.58 

The  replies  from  Member  States  this  year  also  indicate  that  there  is  a  growing 
awareness  of  the  need  to  create  an  effective  performance  culture  and  to  focus  on 
results. Nearly all Member States reported using indicators  - common and specific- 
across the funds, at national and regional level to measure performance. Nevertheless 
low  implementation  levels  of  programmes  could  mean  that  meaningful  data  on 
performance may not be provided in term for the 2017 MFF mid-term review. More 
meaningful  data  is  likely  to  be  available  in  line  with  performance  frameworks  of 
many programmes scheduled for 2018 or 2019. Latvia59 sums up the situation in the 
following statement: 

"the quantity of data on the results achieved may vary among different priority axes, 
depending  on  the  fund  in  question,  the  fulfilment  of  ex  ante  conditions  and  the 
development of statutory legislation at national level." 

In  its  concluding  statement,  Demark  recapitulates  the  Member  States'  apparent 
overall  commitment  to  performance  and  an  EU  budget  focused  on  results  in  its 
closing statement60:   

 "A vital aspect of satisfactory implementation of the EU budget is generating results 
and  ensuring  that  these  results  support  the  overarching  political  objectives.  It  is 
therefore important to Denmark that focus remains on establishing the framework for 
a results-oriented system with greater focus on the results and impact of EU projects. 
We therefore take a positive view of the annual report’s increased focus on this."  

56 ECA speech by President Caldeira to the CONT, Brussels 10/11/2015 
57 ECA AR p 84 
58 SWD p 55, p122-126, p 64 
59 SWD p 168 
60 SWD pp 211-212 

11