COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE COURT OF AUDITORS PROTECTION OF THE EU BUDGET TO END 2015
Date: 2016-07-18
Institutions: Directorate-General for Budget, European Commission
Subjects: EU expenditure, budgetary control, budgetary discharge, common agricultural policy, economic and social cohesion, financial year, general budget (EU)

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 18.7.2016  COM(2016) 486 final   COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE COURT OF AUDITORS PROTECTION OF THE EU BUDGET TO END 2015  
 
 
Table of Contents 

1. 

2. 

2.1. 

2.2. 

2.3. 

2.4. 

3. 

3.1. 

3.2. 

3.3. 

4. 

4.1. 

4.2. 

4.3. 

4.4. 

4.5. 

5. 

5.1. 

5.2. 

5.3. 

5.4. 

5.5. 

6. 

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

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

Preventive mechanisms ................................................................................................. 7 

Corrective mechanisms ................................................................................................. 7 

Cost-effectiveness of management and control systems ............................................ 10 

Public internal control and the management of EU Funds ......................................... 10 

FINANCIAL CORRECTIONS AND RECOVERIES AT END 2015 ...................... 11 

Financial corrections and recoveries 2015 .................................................................. 11 

Cumulative financial corrections and recoveries to end 2015 .................................... 15 

Impact of financial corrections ................................................................................... 18 

AGRICULTURE AND RURAL DEVELOPMENT ................................................. 19 

Preventive actions ....................................................................................................... 19 

Corrective actions ....................................................................................................... 20 

Deficiencies in Member States' management and control identified and measures 
undertaken ................................................................................................................... 21 

Cumulative figures ...................................................................................................... 22 

Member States corrections .......................................................................................... 23 

COHESION POLICY ................................................................................................. 24 

Preventive actions ....................................................................................................... 24 

Corrective actions ....................................................................................................... 27 

Deficiencies in Member States' management and control identified and measures 
undertaken ................................................................................................................... 28 

Cumulative figures ...................................................................................................... 29 

Member States corrections .......................................................................................... 33 

DIRECT AND INDIRECT MANAGEMENT ........................................................... 34 

ANNEXES: DETAILED FIGURES ........................................................................................ 35 

1. 

2. 

3. 

4. 

5. 

Financial corrections in 2015 compared to EU payments received; Breakdown by 
Member State .............................................................................................................. 35 

Breakdown of flat rate corrections in 2015 ................................................................ 36 

Breakdown of financial corrections at source in 2015 ............................................... 36 

Breakdown of net financial corrections in 2015 ......................................................... 37 

Agricultural amounts recovered from final beneficiaries by the Member States in 2015
 .................................................................................................................................... 38 

1 

 
 
 
6. 

7. 

Member States own corrections in 2015 applied before payments to beneficiaries are 
executed (in addition to Commission reporting) ........................................................ 39 

Cumulative corrections at end 2015 reported by Member States for Cohesion Policy 
period 2007-2013 ........................................................................................................ 40 

2 

 
 
 
 
 
1. 

EXECUTIVE SUMMARY AND CONCLUSIONS 

This Communication describes the functioning of the preventive and corrective mechanisms foreseen 
in the European Union (EU) 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.  It 
complements  the  information  included  in  the  2015  Financial  Statement  Discussion  and  Analysis 
(FSDA), the 2015 Annual Management and Performance Report for the EU Budget (AMPR), and the 
relevant parts of the Annual Activity Reports of the Directorates General concerned. 

About  80 %  of  the  EU  budget  is  implemented  by  Member  States  which  need  to  comply  with  the 
commonly  agreed  rules  on  budget  implementation.  The  Member  States  are  partners  of  the 
Commission in respect of ensuring the compliance with the EU legislation and the protection of the 
EU budget. 

The Commission protects the EU budget, i.e. EU spending, from undue or irregular expenditure via 
two main mechanisms: 

(1)  Preventive mechanisms (e.g. ex-ante controls, interruptions and suspension of payments); 

and  

(2)  Corrective mechanisms (primarily financial corrections imposed on Member States but also 
recoveries  from  recipients  of  EU  payments):  in  case  preventive  mechanisms  were  not 
effective  the  Commission,  in  the  framework  of  its  supervisory  role,  is  required  to  apply 
corrective mechanisms as a last resort. 

The  primary  objective  of  financial  corrections  and  recoveries  is  to  ensure  that  only  expenditure  in 
accordance  with the legal framework is financed by the EU  budget. Under shared management the 
Member  States  are  primarily  responsible  for  identifying  and  recovering  from  beneficiaries  amounts 
unduly  paid.  In  order  to  ensure  the  cost-effectiveness  of  control  systems,  one  of  the  main  work 
streams on which the services of the Commission will further work during the current mandate of the 
College  is  to  rationalise  and  streamline  controls  and  allocate  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. 

For  Agriculture  and  Rural  Development  financial  corrections  have  always  a  net  impact  on  the  EU 
budget  by  recovering  amounts  unduly  spent  which  leads  to  a  reimbursement  to  the  EU  budget. 
Under Cohesion Policy, the Member States have the option to replace the ineligible expenditure with 
new  eligible  expenditure,  thus  not  losing  the  EU  funding.  Under  other  management  types  financial 
corrections are used to effect corrections before an EU reimbursement has been made. 

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

Financial corrections & Recoveries: 2015 Results 

Regarding  the  impact  of  corrective  measures  taken  by  the  Commission,  the  key  figures  for  the 
financial year 2015 are as follows: 

Policy Areas 

Agriculture & Rural Development 

Cohesion Policy 

Internal policies 

External policies 

Administration 

TOTAL 

Total 
financial 
corrections 
and 
recoveries 
confirmed in 
2015 

1 292 

1 744 

 326 

 132 

 5 

3 499 

EUR millions 

Total 
financial 
corrections 
and 
recoveries 
implemented 
in 2015 

1 587 

1 808 

 317 

 136 

 5 

3 853 

% of budgetary payments 

2.4 % 

2.7 % 

3 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The  following  graph  provides  an  overview  per  policy  areas  of  the  different  types  of  corrections 
implemented in 2015 (EUR millions): 

2.000

1.500

1.000

500

0

-500

Net corrections
EUR 1 543 million

Replacement of expenditure
EUR 1 134 million

At source corrections
EUR 1 176 million

Cohesion Policy Agriculture Policy Internal Policies External Policies

For the definitions of the three types of corrections please see Section 2.2.2. 

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  multiannual  character  of  most  EU 
spending and neutralise the impact of one-off events. 

Financial corrections and recoveries confirmed 2009-2015 (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 & RD

2009

2010

2011

2012

2013

2014

2015

 

 

 

 

 

During the period 2009-2015 the average amount confirmed was EUR 3.3 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 3 billion or 2.2 % of payments - see graph 3.2.1; 

For  the  European  Agricultural  Guarantee  Fund  (EAGF),  the  average  correction  rate  for 
Commission  financial  corrections  for  the  period  1999  to  end  2015  was  1.7 %  of 
expenditure (all of which are net financial corrections) - see section 4.4; 

For the European Regional Development Fund (ERDF) and European Social Fund (ESF) 
2000-2006  funds  (where  the  closure  is  almost  complete),  at  the  end  of  2015  the  combined 
rate  of  financial  corrections,  based  on  Commission  supervision  work  only,  was  4.2 %  of  the 
allocations made - see section 5.4.1; 

The  average  amount  confirmed  under  direct  and  indirect  management  for  the  period  2009-
2015 was EUR 380 million or 1.2 % of the average amount of payments; 

The Commission analyses the origin of the errors detected in previous periods – see the Report 
on areas of consistently high errors and their root causes. 

4 

 
 
 
 
Protection of the EU budget: Main Conclusions 

One 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 cost-effectiveness. 

The  Commission  focuses  more  and  more  on  measures  which  prevent  irregular  expenditure  and 
help to avoid such irregularities recurring in the future. 

The  figures  above  confirm  the  positive  results  of  the  multiannual  preventive  and  corrective 
activities  undertaken  by  the  Commission  and  the  Member  States  by  demonstrating  that  these 
activities ensure that the EU budget is protected from expenditure in breach of law.  

Financial corrections and recoveries are also an incentive for the Member States to improve their 
systems and processes to prevent the occurrence of future errors. 

The  corrections  decided  during  the  year  are  the  result  of  the  errors  and  irregularities  detected  in 
previous years. 90 % of the financial corrections decided have been implemented by the end 
of 2015. 

Net  corrections  leading  to  a  reimbursement  to  the  EU  budget  are  characteristic  for 
Agriculture  &  Rural  Development  and  direct  &  indirect  management.  For  Cohesion  Policy, 
net  corrections  are  up to  now  the  exception,  due to the different legal  framework  and  budget 
management type (reinforced preventive mechanism). 

Flat  rate  corrections  are  imposed  where  the  financial  impact  of  errors  cannot  be  more  precisely 
quantified with proportionate effort. 

Specific control frameworks are put in place for spending under direct and indirect management 
covering primarily the grant management process, because this addresses existing risks. 

The  Commission  facilitates  and  participates  in  the  Public  Internal  Control  (PIC)  Network, 
allowing Member States to work together to improve Internal Control including the management of 
EU funds, to identify good practice especially where effective implementation is proving difficult (see 
report on areas of consistently high errors and their root causes).  

Improvements foreseen under the 2014-2020 Multiannual Financial Framework (MFF) 

Agriculture and Rural Development 

The  Commission  has  started  to  apply  a  number  of  newly  available  preventive  instruments  such  as 
the  interruption,  suspension  and  reduction  of  EU  financing  with  a  view  to  better  protecting  the  EU 
budget  and  further  incentivising  Member  States  to  reduce  irregular  payments.  In  that  context  the 
implementation  of  action  plans  by  Member  States  has  become  a  prominent  feature  in  the 
Commission's  budget  management  toolbox.  In  addition,  with  the  objective  to  further  develop  the 
single  audit  approach  also  in  CAP  management,  the  Commission  is  actively  promoting  and 
supervising  the  new  role  of  the  Certification  Bodies  with  regard  to  ensuring  the  Legality  and 
Regularity of payments.  

As  regards  the  EAGF,  the  Commission  constantly  requests  Member  States  to  maintain  their  Land 
Parcel Identification Systems (LPIS) in particular by regularly updating it. Member States where the 
system  does  not  reach  the  necessary  quality  level  are  required  to  put  in  place  appropriate  action 
plans  while  facing  the  risk  of  financing  suspensions  should  the  action  plan  not  be  properly 
implemented. 

For  the  European  Agricultural  Fund  for  Rural  Development  (EAFRD),  the  programming  phase 
included  specific  checks  as  to  the  controllability  and  verifiability  of  programmed  measures.  In 
addition  the  Commission  interrupts  payments  in  case  of  problems  and  has  also  recourse  to 
suspensions. In general, the Commission has launched an ambitious simplification process intended 
to  reduce  complexity  and  administrative  burden  which  will  also  contribute  to  bringing  the  risk  of 
error further down. 

5 

 
 
 
 
 
Cohesion 

The new legal framework foresees an increased accountability for programme managing authorities 
which  have  to  apply  sound  verifications  on  time  for  the  submission  of  programme  accounts  each 
year.  Annual  accounts  include  financial  corrections  applied  by  the  Member  State  in  relation  to  the 
accounting  year.  Accounts  and  financial  corrections  are  subject  to  an  audit  opinion  by  the 
programme  audit  authority  which  also  provides  an  audit  opinion  on  the  legality  and  regularity  of 
account  expenditure  based  on  the  level  of  identified  residual  risk  after  all  corrections  have  been 
applied.  

During  the  accounting  year  the  Commission;  retains  10 %  of  each  interim  payment  until  the 
finalisation of all control procedures, including audits at the time of submission of accounts, applies 
procedures  for  the  acceptance  of  accounts,  subsequently  pays  or  recovers  the  annual  balance  and 
carries out targeted, risk-based audits to ensure that no serious deficiency leading to a material level 
of  risk  in  reimbursed  expenditure  remained  undetected  or  uncorrected  by  the  Member  State. 
Otherwise the Commission must apply net financial corrections.  

The  Commission  will  also  continue  to  strictly  implement  the  interruption  /  suspension  mechanisms 
leading,  where  necessary,  to  financial  corrections  where  it  has  indications  of  serious  deficiencies  in 
management and control systems. It will also continue to ensure preventive capacity building actions 
with  programme  authorities  to  improve  the  quality  of  spending  and  to  cooperate  closely  with  audit 
authorities under the single audit principle to timely and effectively address risks. 

Direct and Indirect Management 

The  Commission  has  established  a  control  framework  in  direct  and  indirect  management  which 
focuses  on  ex-ante  checks  on  payments,  in-depth  ex-post  checks  carried  out  at  the  beneficiaries' 
premises  after  costs  have  been  incurred  and  declared,  and  verification  missions  to  international 
organisations. 

6 

 
 
 
 
2. 

PROCESSES  

2.1. 

Preventive mechanisms 

The  Commission  uses  a  number  of  preventive  mechanisms  to  protect  the  EU  budget.  The 
Commission  focuses  more  and  more  on  measures  which  prevent  irregular  expenditure  and  help  to 
avoid such irregularities recurring in the future. 

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 
irregular payments. 

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  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.  The  Early 
Detection  and  Exclusion  System  (EDES)  of  economic  operators  set  up  and  operated  by  the 
Commission also ensures the protection of the Union's financial interests. 

2.2. 

Corrective mechanisms 

2.2.1  Overview 

A significant portion of EU expenditure, e.g. Cohesion, Research and Rural Development policies, is 
of a multiannual nature. In line with Article 32(2)(e) of the Financial Regulation (FR)1, this is taken 
into account when designing and implementing corrective measures, as well as when assessing the 
results of these actions. Corrective actions can be distinguished between: a) financial corrections and 
b)  recoveries,  both  of  which  are  made  at  all  stages  of  a  programme's  life-cycle,  once  expenditure 
has  been  incurred  and  /  or  a  payment  has  been  made.  The  Commission  is  required  to  apply 
corrective mechanisms as a last resort in case preventive mechanisms were not effective. 

The workflow of corrective actions is as follows: 

Audit / Control 

In progress  

Confirmed 

Implemented  

Reported 

2.2.2. Financial corrections 

Financial corrections in progress are the preliminary stage where the process for making a financial 
correction has 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.  They  are  thus  proposed  but  not  yet  accepted  by  the  Member  States  nor  decided  by  the 
Commission. 

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

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. 

1  

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. 

7 

 
 
 
 
                                                            
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). 

All financial corrections, no matter what type, have a negative impact on national budgets – even if 
no  reimbursement  to  the  EU  budget  is  made,  because  funds  have  to  be  used  to  replace  ineligible 
expenditure.  

"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.  

Overview financial corrections over time: 

Replacement of expenditure refers to the possibility under cohesion legislation for Member States 
to replace ineligible expenditure with new eligible expenditure, thus not losing EU funding (i.e. not a 
net correction as there is no return of money to the EU Budget). 

A  net  financial  correction  is  a  correction  that  has  a  net  impact  on  the  EU  budget,  (i.e.  the 
corrected and recovered amounts are reimbursed to the EU budget).  

  Agriculture  and  Rural  Development  corrections  (EAGF,  EAFRD,  EAGGF)  lead  always 
to  a  reimbursement  to  the  EU  budget  whereas,  due  to  the  legal  framework,  for 
Cohesion  Policy,  the  return  of  previously  paid  amounts  to  the  EU  budget  were 
generally the exception during the implementation of the programmes. 

  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. 

- 

8 

 
 
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  in  the  effective  functioning  of  the  management  and  control  system  not 
previously detected, reported nor corrected at Member State level are discovered by 
EU  audits  after  the  submission  of  the  assurance  packages.  In  such  cases,  the 
possibility  of  previous  programming  periods  for  the  Member  State  to  accept  the 
correction and to re-use the EU funds in question is removed. 

Under  shared  management,  Member  States  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. 

2.2.3.  Recoveries 

AGRICULTURE AND RURAL DEVELOPMENT 

Regulation (EU) No 1306/20132 on the financing of the CAP requires the Member States to recover 
sums  lost  as  a  result  of  detected  irregular  payments.  However,  the  recovery  procedures,  in 
accordance  with  the  principle  of  subsidiarity,  are  wholly  the  responsibility  of  the  Member  States 
concerned  and,  thus,  subject  to  their  individual  administrative  and  judicial  procedures.  Therefore, 
while some procedures deliver rapid results, others take more time. 

In  order  to  address  delays  by  some  Member  States  in  recovering  undue  payments,  the  legislator 
introduced  an  automatic  clearing  mechanism  under  which  50 %  of  any  undue  payments  which  the 
Member  States  have  not  recovered  from  the  beneficiaries  within  4 years  or,  in  the  case  of  legal 
proceedings,  8 years,  would  be  charged  to  their  national  budgets  (so-called  "50 / 50  rule").  Even 
after  the  application  of  this  mechanism,  Member  States  are,  however,  obliged  to  pursue  their 
recovery  procedures  and,  if  they  fail  to  do  so  with  the  necessary  diligence,  the  Commission  may 
decide  to  charge  the  entire  outstanding  amounts  to  the  Member  States  concerned.  Moreover, 
pursuant  to  Article  28  of  Regulation  908/20143,  Member  States  are  required  to  off-set  any 
outstanding debts against future payments to the debtor (compulsory compensation). 

With the entry into force of the new legal framework, the 50 / 50 rule now has also to be applied to 
EAFRD in the financial year when it occurs and not at the closure of the programme. Consequently, 
as  from  financial  year  2014,  the  Member  States  are  required  to  indicate  amounts  to  be  charged 
under the 50 / 50 rule also for EAFRD 2007-2013 as well as for EAFRD 2014-2020 programmes4. 

Undue  payments  that  are  the  result  of  administrative  errors  committed  by  the  national  authorities 
also  have  to  be  deducted  from  the  annual  accounts  of  the  Paying  Agencies  concerned  and,  thus, 
excluded from EU financing. 

For the EAGF, amounts recovered from the beneficiaries are credited to the EU budget as assigned 
revenue,  after  deduction  of  a  20 %  flat  rate  recovery  cost5.  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 they 
are credited to the EU budget as assigned revenue. 

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)  and  for  the  first  time  in  2017, 
recoveries  will  also  occur  in  the  framework  of  the  annual  acceptance  of  the  accounts.  The 
Commission  will  calculate  the  balance  between  the  amount  accepted  in  the  accounts  and  the 
amounts  already  paid  to  the  Member  States  during  the  accounting  year  (annual  pre-financing  and 
90 % of the payment applications). Where this is an amount recoverable from the Member State, a 
recovery  order  will  be  issued.  This  recovery  order,  which  can  be  executed  when  possible  by 

2  

Regulation (EU) Nº 1306/2013 of the European Parliament and of the Council on the financing, management and monitoring 
of the common agricultural policy - OJ L 347, 20.12.2013, p. 549. 

3   OJ L 255, 28.8.2014, p. 59. 
4  
5  

Article 54(2) of Regulation (EU) No 1306/2013. 
Article 55 of Regulation (EU) No 1306/2013. 

9 

 
 
 
                                                            
offsetting against subsequent payment applications, is not a financial correction and is not reducing 
the overall allocation of the programme. This amount will accordingly be re-used for the programme. 

DIRECT AND INDIRECT MANAGEMENT 

Under  direct  and  indirect  management  and  in  accordance  with  the  FR,  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 constitute assigned 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 (identified in current cost claims) from payments made. 

2.3. 

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  cost-effectiveness.  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.  For  more  details,  please  see  the  Commission's  2015  Annual  Management 
and Performance Report6. 

2.4. 

Public internal control and the management of EU Funds 

The  protection  of  the  EU  Budget  is  a  shared  responsibility  of  the  Commission  and  the  Member 
States.  The  Commission  facilitates  and  participates  in  the  Public  Internal  Control  (PIC)  Network, 
which brings together Internal Control representatives from all EU Member States. The PIC Network 
examines  Internal  Control  issues,  relating  either  to  the  national  budget  or  the  management  of  EU 
funds,  with  a  view  to  identifying  good  practice  in  those  areas  where  effective  implementation  is 
proving difficult. The PIC Network comes together at regular intervals, allowing all Member States to 
work together to improve their Internal Control arrangements for better financial management and 
better performance. 

6  

Report  from  the  Commission  to  the  European  Parliament,  the  Council  and  the  European  Court  of  Auditors:  2015  Annual 
Management and Performance Report for the EU Budget, COM(2016) 446 final, 5.7.2016. 

10 

 
 
 
 
                                                            
3. 

FINANCIAL CORRECTIONS AND RECOVERIES AT END 2015 

3.1. 

Financial corrections and recoveries 2015 

Table 3.1: Financial corrections and recoveries overview for 20157  

Total EU 
budget 
payments in 
2015 

Total 
financial 
corrections 
confirmed 
in 2015 

Total 
recoveries 
confirmed 
in 2015 

Total 
financial 
corrections 
and 
recoveries 
confirmed 
in 2015 

% of 
payments 
of the EU 
budget 

Total 
financial 
corrections 
implemented 
in 2015 

Total 
recoveries 
implemented 
in 2015 

EUR millions 

Total 
financial 
corrections 
and 
recoveries 
implemented 
in 2015 

% of 
payments 
of the EU 
budget 

68 009 

1 637 

 254 

1 892 

2.8% 

1 766 

28 363 
12 098 
10 277 
17 271 

 826 
 462 
 348 
 - 

 - 
 - 
 1 
 254 

 826 
 462 
 349 
 254 

2.9% 
3.8% 
3.4% 
1.5% 

 774 
 585 
 407 
 - 

58 066 

1 072 

 348 

1 420 

2.4% 

1 314 

44 940 
11 793 
 791 
 64 
 478 

2 019 

 779 

1 239 

7 884 

7 884 

8 978 

8 978 

 922 
 46 
 6 
 97 
 - 

 23 

 23 

 - 

- 

 - 

- 

 - 

 117 
 206 
 2 
 2 
 21 

 28 

 - 

 28 

 132 

 132 

 5 

 5 

1 040 
 253 
 8 
 99 
 21 

2.3% 
2.1% 
1.0% 
154.0% 
4.4% 

 51 

 23 

 28 

 132 

 132 

 5 

 5 

2.5% 

3.0% 

2.2% 

1.7% 

1.7% 

0.1% 

0.1% 

1 017 
 263 
 10 
 24 
 - 

 23 

 23 

 - 

- 

 - 

- 

 - 

 246 

- 
 - 
 - 
 246 

 337 

 155 
 152 
 6 
 2 
 23 

 24 

 - 

 24 

 136 

 136 

 5 

 5 

2 013 

3.0% 

 774 
 585 
 407 
 246 

2.7% 
4.8% 
4.0% 
1.4% 

1 652 

2.8% 

1 173 
 414 
 16 
 26 
 23 

2.6% 
3.5% 
2.0% 
40.6% 
4.8% 

 48 

2.4% 

 23 

 24 

3.0% 

2.0% 

 136 

1.7% 

 136 

1.7% 

 5 

 5 

0.1% 

0.1% 

MFF Heading 

Smart & 
inclusive growth 

ERDF 
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 

TOTAL 

* 

144 955* 

2 732 

 767 

3 499 

2.4% 

3 104 

 749 

3 853 

2.7% 

Excludes EUR 288 million paid out under the Special Instruments heading. 
Please note that the figures above may slightly differ from the ones shown in the Annual Report on the Protection of the 
EU  financial  interests  and  the  fight  against  fraud  and  its  staff  working  documents  since  that  report  was  published 
earlier, at a stage where only provisional figures were available. 

3.1.1 Agriculture and Rural Development 

Financial corrections:  

The  high  level  of  financial  corrections confirmed  by  the  Commission in  2015  reflects  the  significant 
efforts  made  by  the  Directorate  General  for  Agriculture  and  Rural  Development  (DG  AGRI)  from 
2013  in  accelerating  the  conformity  clearance  procedures,  including  processing  long  outstanding 
procedures.  As  a  result,  a  large  number  of  corrections  covering  several  financial  years  were 
confirmed in 2015. In the future, at cruising speed, it is expected that the annual amount of financial 
corrections will be stable around the average of the last 3 years. 

In  addition,  the  increased  number  of  instalments  and  deferrals  granted  to  Member  States  explains 
why in the previous three years (2012 to 2014) the amounts implemented for Agriculture and Rural 
Development  were  lower  than  the  amounts  decided  by  the  Commission.  The  difference  should 
disappear once cruising speed is reached.8 

7  

It  should  be  noted  that  due  to  the  rounding  of  figures  into  millions  of  euros,  some  financial  data in  the  tables  below  may 
appear not to add-up. 

8   More  detailed  information  can  be  found  in  section  2.4.2.1  in  the  2015  annual  activity  report  of  DG  AGRI 

(http://ec.europa.eu/atwork/index_en.htm). 

11 

 
 
 
 
 
 
 
 
 
                                                            
Recoveries:  

In 2015, Member States have 
recovered EUR 155 million for 
EAGF and EUR 153 million for 
EAFRD from beneficiaries. 

As  regards  correcting 
irregularities  committed  by  the 
beneficiary,  Member  States  must  record  and  report  on  the 
recovery  of  the  irregular  spent  amounts  within  the  annual 
financial clearance exercise. 

Recovering  irregular  payments  directly  from  the  final  beneficiaries  is  the  sole  responsibility  of  the 
Member  States.  Annex  5  sets  out  the  amounts  recovered  in  2015  from  the  beneficiaries  by  the 
Member  States  (as  reported  by  Member  States  in  their  debtors'  ledger)  and  reimbursed  to  the 
Commission.  These  amounts  are  treated  as  assigned  revenue  for  EAGF,  while  the  amounts 
recovered for EAFRD can be reallocated to the programme concerned. 

3.1.2 Cohesion 2000-2006 programming period 

The advanced stage of the closure process of ERDF programmes and Cohesion Fund projects led 
to the following financial corrections being imposed and accepted by Member States in 2015: 

-   EUR 155 million  of  financial  corrections  for  the 
closure of ERDF programmes in 7 Member States, the 
most  significant  being  for  Italy  (EUR 108 million)  and 
Greece (EUR 34 million); 

Financial corrections confirmed: 

ERDF / CF - EUR 208 million 

ESF - EUR 179 million 

-   EUR 53 million  accepted  by  13  Member  States  for 
Cohesion  Fund  projects,  the  largest  being  for  Czech 
Republic (EUR 16 million). 

For ESF, in the context of the closure process, all 239 programmes have been closed (209 fully and 
30  partially).  The  Member  States  with  the  highest  level  of  financial  corrections  confirmed  and 
implemented  in  2015  were  respectively  France  (EUR 149 million)  and  Spain  (EUR 30 million).  In 
addition, for Sweden the closure process has been finalised as well. 

Significant  progress  was  made  in  2015  in  relation  to  the  closure  of  the  Financial  Instrument  for 
Fisheries Guidance (FIFG). At the end of 2015, 57 programmes out of 60 were closed. Most financial 
corrections concerned were implemented via recovery orders. 

3.1.3 Cohesion 2007-2013 programming period 

Financial corrections under  ERDF / CF in 2015 increased significantly compared to previous years, 
thus confirming the effectiveness of these multiannual controls of the policy. This is also the result of 
the  strict  policy  of  interruption  /  suspension  procedures  by  the  Commission  since  the  beginning  of 
the  programming  period  and  the  fact  that  in  2015  some  longstanding  cases,  for  which  payment 
applications  were  blocked  for  months  or  even  years,  came  to  an  end  after  the  implementation  of 
financial  corrections.  For  those  cases,  the  corrections  applied  by  Member  States  could  only  be 
reported  in  2015  after  the  lifting  of  the  interruption  /  suspension  procedures.  The  increase  of 
financial  corrections  in  2015  is  also  supported  by  the  higher  error  rates  reported  by  the  national 
audit authorities in the 2015 Annual Control Reports (ACR) compared to the error rates reported in 
the past. The Member States with the highest corrections (excluding at source corrections) in 2015 
were  Slovakia  (EUR 236 million),  Italy  (EUR 161 million),  Germany  (EUR 143 million),  Greece 
(EUR 120 million) and Spain (EUR 117 million). 

Financial corrections confirmed: 

ERDF / CF - EUR 1 532 million 

ESF - EUR 169 million 

As  a  result,  at  end  2015  the  cumulative  amount  of  financial 
corrections  for  the  2007-2013  period  confirmed  by  Member 
States as consequence of the Commission supervisory role is 
above EUR 2.3 billion. 

Under  ESF,  financial corrections of  EUR 169 million  have been  confirmed  and  EUR 227 million have 
been implemented, out of which EUR 142 million were confirmed in 2015 and EUR 85 million in the 
previous  years.  95 %  of  financial  corrections  confirmed  during  the  year  2015  and  previous  years 
have been implemented, leaving an amount of EUR 60 million (cumulative) as not yet implemented 

12 

 
 
 
at year end. Member States with the highest level of corrections implemented in 2015 are Romania 
(EUR 133 million) and Spain (EUR 29 million) corresponding to the lifting of suspension of payments. 

Financial corrections confirmed for European Fisheries Fund (EFF) decreased by about 70 % from 
2014. The withdrawal of ineligible expenditure from the subsequent  payment claim following audits 
and desk reviews from the Commission allows such financial corrections to be implemented rapidly. 

3.1.4 Cohesion 2014-2020 programming period 

The  second  accounting  year  was  ongoing  in  the  course  of  2015  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. Consequently, no financial corrections can 
be reported. 

3.1.5. Financial corrections & recoveries 2015: further details 

Different views of the financial corrections amounts in 2015 are provided in the annexes. Attention is 
drawn to the fact that the data presented below relates to one year only, 2015. 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  effectiveness  of  supervisory  and  control  systems 
has  to  be  based,  in  line  with  the  nature  of  this  expenditure,  on  a  multiannual  perspective  (see 
section 3.2). 

The information provided in the Annexes can be summarised as follows: 

1.  

Breakdown by Member State  

The most important Member States in terms of confirmed financial corrections compared to 
EU payments received are Greece (9.9 %), Romania (8 %) and Slovakia (7.3 %). 

2.  

Breakdown of flat-rate corrections  

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 a 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.  

For  ERDF  /  CF,  flat  rate  corrections  should  be  seen 
as an estimation of the financial corrections (flat rate 
and  /  or  extrapolated)  which  are  not  directly  linked 
to individual operations / projects.9 

Flat rate corrections in 2015: 

EUR 2.2 billion confirmed  

EUR 1.3 billion implemented 

3. 

Breakdown of financial corrections made at source  

At source financial corrections are applied by the Member State authorities at the same time 
the expenditure is declared to  the Commission resulting from  flat rate corrections following 
Commission audits.  

The main at source financial corrections for ERDF/CF concern Romania (EUR 345 million).10 

9  

It needs to be  underlined that in some  cases  the amounts communicated by the Member  States cover both individual and 
flat-rate  /  extrapolated  corrections;  for  reporting  purposes  these  amounts  are  included  under  the  category  (individual 
corrections of flat-rate) which is considered prevalent. These two limitations do not have an impact on the reliability of the 
global amounts reported. 

10   For  ERDF/CF,  since  there  is  no  legal  requirement  for  Member  States  to  report  on  at  source  financial  corrections,  nor  a 
structured  reporting  since  the  beginning  of  the  programming  period,  the  amounts  reported  represent  a  prudent  and  non-

13 

 
 
 
 
 
                                                            
At source corrections in 2015: 

EUR 0.5 billion confirmed  

EUR 0.8 billion implemented 

For ESF, the amount of financial corrections at source 
confirmed  in  2015  for  2007-2013  programming 
period  stands  at  EUR 81 million.  The  main  Member 
States  concerned  by  at  source  financial  corrections 
are:  Czech  Republic,  France,  Poland,  Slovakia  and 
Romania. 

Among  the  financial  corrections  implemented  for  the  2007-2013  programming  period, 
EUR 115 million are at source financial corrections out of which EUR 66 million confirmed in 
2015 and EUR 49 million confirmed in the previous year. 

4. 

Net financial corrections 2015  

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. 

Net financial corrections in 2015: 

EUR 0.8 billion confirmed  

EUR 1.2 billion implemented 

exhaustive estimation for cases for which the Commission could reconstitute a clear audit trail at the level of the certifying 
authority. 

14 

 
 
 
 
 
 
                                                                                                                                                                                             
3.2. 

Cumulative financial corrections and recoveries to end 2015  

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

3.2.1.  Period 2009-2015 

The  graphs  below  show  the  evolution  of  financial  corrections  and  recoveries  confirmed  and 
implemented during the last 7 years. 

Graphs 3.2.1: Financial corrections and recoveries 2009-2015 
Financial corrections and recoveries confirmed 2009-2015 (EUR billions) 

5,0

4,5

4,0

3,5

3,0

2,5

2,0

1,5

1,0

0,5

0,0

Cohesion Policy

Internal policy
areas

Agriculture

External policy
areas

Administration

Total decided

Linear (Total
decided)

2009

2010

2011

2012

2013

2014

2015

Average confirmed financial 
corrections 2009-2015: 

EUR 3.3 billion  

2.4 % of average budget payments 

The trend for confirmed amounts is slightly increasing, which 
demonstrates  that  the  multiannual  control  framework  is 
successfully protecting the EU budget over time. 

15 

 
 
 
 
 
 
 
 
 
Financial corrections and recoveries implemented 2009-2015 (EUR billions)

5,0

4,5

4,0

3,5

3,0

2,5

2,0

1,5

1,0

0,5

0,0

Cohesion
Policy

Internal policy
areas

Agriculture:

External policy
areas

Administration

Total
implemented

Linear (Total
implemented)

2009

2010

2011

2012

2013

2014

2015

The  average  amount  of  financial  corrections  and  recoveries  implemented  for  2009-2015  was 
EUR 3 billion,  which  represents  2.2 %  of  the  average  amount  of  payments  from  the  EU  budget  in 
that period. 

3.2.2.  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  (for  a  total  amount  of  EUR 457 million 
corrections  related  to  the  programming  period  1994-1999).  The  annulment  was  based  on  a  new 
legal  interpretation  of  the  rules  laid  down  in  Regulation  1083/2006  and  represents  a  change  in 
relation  to  previous  judgements  of  the  Court  of  Justice.  These  annulled  corrections  have  been 
deducted  from  both  the  confirmed  and  implemented  amounts  of  the  year  2015  and  from  the 
cumulative amounts in the table below. 

16 

 
 
 
 
 
 
3.2.3.  Financial corrections implementation percentage at end 2015 

Table  3.2.3:  Cumulative  financial  corrections  confirmed  &  implementation  percentage  to 
end 2015 

Programming Period 

1994-
1999 
Period 

2000-
2006 
Period 

2007-
2013 
Period 

- 
- 
- 
2 273 
1 799 

(457) 

1 342 
268 

139 
- 
139 
8 922 
5 794 

787 
- 
787 
4 748 
2 664 

 0 

 0 

5 794 
 842 

2 664 
 857 

0 

(9) 

 0 

268 
560 
100 
3 
- 

833 
1 990 
127 
178 
- 

857 
1 198 
29 
- 
- 

          EUR millions 

Cumulated 
EAGF 
decisions  

Total 
financial 
corrections 
confirmed 
at end 2015 

Implemen
-tation % 
end 2015 

Financial 
corrections 
confirmed 
at end 2014 

Implemen-
tation % 
end 2014 

11 766 
11 766 
N/A 

N/A 
N/A 

N/A 

N/A 
N/A 

N/A 

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

12 692 
11 766 
926 
15 943 
10 257 

(457) 

9 800 
1 968 

(9) 

1 958 
3 748 
256 
181 
32 

85.4% 
85.7% 
81.3% 
93.4% 
92.4% 

- 

92.1% 
99.9% 

- 

97.6% 
98.4% 
63.0% 
60.1% 
100.0% 

11 514 
10 808 
706 
14 203 
8 973 

- 

8 973 
1 496 

- 

1 496 
3 399 
250 
85 
9 

82.8% 
83.7% 
69.3% 
92.2% 
91.9% 

- 

91.9% 
88.7% 

- 

88.7% 
96.5% 
60.4% 
100.0% 
100.0% 

Agriculture 
EAGF 
Rural Development 
Cohesion Policy 
    ERDF  
    Court of Justice    
    judgements 
ERDF total 
    Cohesion Fund 
    Court of Justice 
    judgements 
Cohesion fund total 
ESF 
FIFG/EFF 
EAGGF Guidance 
Other 

Total 

2 273 

9 060 

5 535 

11 766 

28 666 

89.9% 

25 726 

88.0% 

The different programming periods in Cohesion policy clearly show the multiannual 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. 

3.2.4.  Cumulative recoveries 2009-2015 

The tables below provide the amounts of recoveries confirmed and implemented for the period 2009-
2015. See also section 3.3.1 below concerning the impact on the EU budget. 

Table 3.2.4: Recoveries confirmed 2009-2015 

Recoveries 

Agriculture: 

EAGF 
Rural Development 

Cohesion 

Internal policy areas 

External policy areas 

Administration 

Years 

2009 

2010 

2011 

2012 

2013 

2014 

2015 

EUR millions 

Total 

 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 

117 
206 
5 

302 

132 

5 

1 234 
956 
320 

1 798 

784 

45 

Total 

 480 

 646 

 770 

 695 

 941 

 838 

767 

5 137 

17 

 
 
 
 
 
  
 
  
  
  
  
  
  
  
  
  
 
 
 
Table 3.2.5: Recoveries implemented 2009-2015 

Recoveries 

Agriculture: 

EAGF 
Rural Development 

Cohesion 

Internal policy areas 

External policy areas 

Administration 

Years 

2009 

2010 

2011 

2012 

2013 

2014 

2015 

EUR millions 

Total 

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 

155 
152 
7 

293 

136 

5 

1 119 
914 
309 

1 724 

730 

41 

Total 

464 

614 

734 

678 

862 

736 

749 

4 837 

3.3. 

Impact of financial corrections 

3.3.1.  Impact on the EU budget in 2015 

Graph 3.3.1: Impact on the EU Budget 

Total impact on the EU budget of EUR 1 543 million: 

23% 

77% 

Net financial corrections implemented* EUR 1 181 million

Recoveries implemented** EUR 362 million

*  
** 

The main expenditure chapters concerned are 0502, 0503, 0504, 1303, 1304, 0402, 1106 and 1803. 
Excluding  "At  source"  recoveries.  The  main  expenditure  chapters  concerned  are  0502,  0503,  1303,  1304,  0402  and 
1106. For more information on recoveries see 3.2.4. 

As  explained  above,  revenue  arising  from  net  financial  corrections  and  recoveries  are  treated  as 
assigned revenue11, 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. 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. 

3.3.2.  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 

11   Article 21(3)(c) of the Financial Regulation. 

18 

 
 
  
 
  
  
  
  
  
  
  
  
  
 
 
 
 
 
                                                            
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. 

4. 

AGRICULTURE AND RURAL DEVELOPMENT 

4.1. 

Preventive actions 

Preventive actions by the Member States 

A  compulsory  administrative  structure  has  been  set  up  at  the  level  of  Member  States.  The 
management,  control  and  payment  of  the  expenditure  is  entrusted  to  accredited  paying  agencies 
(PA). Compliance with strict accreditation criteria (which are laid down in Commission Implementing 
Regulation  (EU)  No  908/2014  and  in  Commission  Delegated  Regulation  (EU)  No  907/201412)  is 
subject  to  a  detailed  review  by  an  independent  external  audit  body  designated  at  national  level 
(certification  body)  as  well  as  to  constant  supervision  by  the  competent  national  authority  (at 
ministerial level). The PAs are required to provide an annual management declaration which includes 
a declaration that the system in place provides reasonable assurance on the legality and regularity of 
the  underlying  transactions.  These  management  declarations  are  verified  by  the  above-mentioned 
certification bodies, which are required to provide an annual opinion. 

For each support scheme financed by the EAGF or EAFRD, the PAs apply a system of exhaustive ex-
ante administrative controls (100 % of aid applications must be checked) and on-the-spot checks (at 
least  5 %  in  the  case  of  most  schemes)  prior  to  any  payment.  These  controls  are  made  in 
accordance  with  precise  rules  set  out  in  the  sector  specific  legislation  (e.g.  the  Integrated 
Administration and Control System – IACS, including a Land Parcel Identification System – LPIS). For 
the majority of these aid schemes Member States are required to send statistical information on the 
checks carried out and their results on a yearly basis to the Commission (control statistics). 

Preventive actions by the Commission 

Under  the  new  Common  Agricultural  Policy  (CAP)  Horizontal 
Regulation13,  a  new 
reduction, 
interruptions and suspensions of CAP funds entered into force 
in  2014,  which  will  strengthen  the  Commission’s  powers  to 
reduce  /  suspend  EU  financing  in  cases  where  risks  of 
irregular payments have been identified. 

framework 

legal 

for 

EAGF: Reductions of 
EUR 27.2 million for 14 MS. 

EAFRD: 24 interruptions and 7 
suspensions / reductions. 

Accordingly, the Commission may reduce or suspend monthly (EAGF) or interim (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"14  (or  there  are  similar 
serious deficiencies in the system for the recovery of irregular payments) and: 

- 

or 
- 

either the deficiencies are of a continuous nature and have already been the reasons for 
at least two financial correction decisions,  

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.  

12   OJ L 255, 28.8.2014, p. 18 and 59. 
13   Regulation (EU) Nº 1306/2013 of the European Parliament and of the Council on the financing, management and monitoring 

of the common agricultural policy - OJ L 347, 20.12.2013, p. 549. 

14   Art. 41 of Reg. 1306/2013. 

19 

 
 
 
                                                            
For  EAFRD,  the  new  Common  Provisions  Regulation  (CPR)15  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.  For  EAGF,  there  were  no  suspensions  of  payment  in  2015.  Reductions  in  the  monthly 
payments due to deficiencies in the control system were made for the first time in 2015 for a total 
amount of EUR 16 million (Greece). The other reductions concern overruns of ceilings, deadlines and 
other eligibility issues. There were 87 operations in total related to the reductions. 

The  interruptions  and  reductions  /  suspensions  are  provisional.  Where  relevant  these  could  be 
accompanied  by  an  audit.  If  the  deficiency  is  confirmed,  the  relevant  expenditure  is  definitely 
excluded  from  EU  funding  by  application  of  a  financial  correction  under  the  conformity  clearance 
procedure. 

4.2. 

Corrective actions 

According to the CAP legal framework, financial corrections imposed by the Commission on Member 
States have always been net corrections16. 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.  The  actual 
execution of the reimbursement to the EU budget may be delayed via instalment (execution in three 
annual instalments) or deferral decisions.  

In  the  framework  of  shared  management,  the  detection  and  correction  of  errors  is  in  the  direct 
responsibility of the Member States. Each time deficiencies are found in the management and control 
system, conformity procedures are opened and, at the same time, Member States are requested to 
take  remedial  action.  The  latter  are  closely  monitored,  failures  to  implement  them  may  lead  to 
interruption, reduction or suspension of the EU payments for the measure concerned. Member States 
were requested to submit action plans to remedy the weaknesses underlying the reservations. Those 
action  plans  were  then  assessed  to  check  whether  they  would,  if  properly  implemented,  actually 
remedy the identified deficiencies in due time. The Commission assessed annually the effectiveness 
of the remedial actions that have already been taken by the Member State. It can be concluded that 
the risk for the EU budget is systematically covered by the conformity clearance procedure 
and net financial corrections. 

For  EAGF,  financial  corrections  are  executed  by  deducting  the 
amounts  concerned  from  the  monthly  payments  made  by  the 
Commission  in  the  second  month  following  the  Commission 
decision  on  a  financial  correction  to  the  Member  State 
concerned. 

Up to end 2015, instalment 
decisions for corrections of 
EUR 2.3 billion have been 
adopted. 

For EAFRD, the financial corrections are executed through a recovery order requesting the Member 
State  concerned  to  reimburse  these  amounts  to  the  EU  budget  mostly  executed  by  set-off  in  the 
reimbursement in the following quarter. It therefore occurs that decisions adopted in the end of year 
N are only executed at the beginning of year N+1. Furthermore, the execution of the decision may 
be delayed due to instalment and deferral decisions. 

This  is  particularly  the  case  since  2010  when,  due  to  the  financial  and  economic  crisis,  Member 
States  requested  more  frequently  the  benefit  of  an  existing  provision  in  the  legislation  allowing 
reimbursement of financial corrections via annual instalments (rather than a one-off payment): if the 
amount to be reimbursed by the Member State is more than 0.01 % of its GDP, it may request that 
the deductions are made in annual instalments (max. 3) instead of all at once.  

15   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 covered by the Common Strategic Framework and laying 
down  general  provisions  on  the  European  Regional  Funds,  the  European  Social  Fund  and  the  Cohesion  Fund  repealing 
Regulation (EC) Nº 1083/2006 – OJ L 347, 20.12.2013, p. 320. 

16   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. 

20 

 
 
                                                            
Deferral of reimbursement 
of financial corrections: 

  Greece  
  Portugal 

In  2012,  the  Commission  introduced  a  new  provision17  which 
permitted  deferral  of  reimbursement  of  financial  corrections  for 
Member States under EU financial assistance and under the condition 
that  the  deficiencies  at  the  origin  of  the financial  correction  are 
remedied. 

The Member States which were subject to financial assistance mechanisms could request to defer for 
a one-off 18 months period their financial corrections. All amounts which should be executed during 
that period were deferred until the end of the period at which time the total amount was scheduled 
to  be  repaid  via  3  annual  instalments.  Deferral  decisions  were  adopted  in  respect  of  Greece  for 
EUR 529 million while for Portugal EUR 109 million was deferred. The first two annual instalments for 
the  repayment  of  deferred  amounts  were  done  in  2014  and  2015,  the  third  and  final  annual 
instalments will be repaid in 2016. 

In 2015 a new deferral decision was adopted for Greece. After the expiry of the deferral period the 
corrections  are  required  to  be  executed  in  five  annual  instalments.  The  deferral  granted  to  Greece 
will expire on 22 of June 2017. So far EUR 335 million were deferred. 

4.3. 

Deficiencies in Member States' management and control identified and measures 
undertaken 

The Commission has produced in 2013 reports on the root causes of error in respect of each of the 
three  Activity  Based  Budget  (ABB)  activities  and  has  identified  the  principal  weaknesses  in  the 
Member States' management and control systems. As a follow-up, remedial actions are being taken 
by the Member States concerned and the Commission actively monitors their proper implementation. 
The  Commission  is  further  addressing  the  main  risks  created  for  the  Funds  by  the  existing  root 
causes by means of audit enquiries and action plans already underway in certain Member States. On 
top of that, and at a more upstream stage, a series of actions covering improvements in monitoring, 
communication  and  remedial  action  are  envisaged  to  mitigate  the  situation  further  and  prevent 
issues  from  arising  in  the  future.  Moreover,  the  CAP  Reform  of  2013  has  introduced  a  significant 
degree  of  simplification  in  a  number  of  areas  (e.g.  introduction  of  simplified  cost  option  in  rural 
development)  upon  which  the  European  Parliament  and  Council  of  Ministers  could  agree  as  well  as 
improved control systems. Further simplification will focus on a more equitable situation for farmers 
while maintaining the effectiveness of the system and taking into account the complexities of some 
schemes, e.g. for the administrative penalties. 

The main root causes of error for direct payments were related to: Errors / non-compliances by 
national administration arising when national administrations do not adapt their system as to ensure 
compliance with the rules or  do not follow their own instructions; insufficient quality and update of 
the Land Parcel Identification System (LPIS); low quality of the on-the-spot checks; mistakes in the 
aid  applications.  It  should  be  noted  that  the  IACS,  including  LPIS,  is  the  main  management  and 
control  system  to  ensure  the  regularity  of  direct  aid  payments.  It  covers  more  than  90 %  of  EAGF 
expenditure and makes a significant contribution in preventing and reducing the level of error in the 
aid schemes to which it applies. When weaknesses in its functioning are detected, remedial actions 
are requested and their implementation is closely monitored by the Commission. 

For  market  measures,  the  root  causes  of  errors  lie  with:  Eligibility  conditions  not  met  due  to 
complexity  of  conditions,  difficulties  with  the  verifiability  and  controllability  of  measures; 
procurement  rules;  different  interpretation  in  Member  States  on  the  admissibility  of  expenditure; 
insufficient information about Member States' management and control systems; weaknesses in the 
Member States' application of the management and control systems. 

Rural  development  remains  an  area  under  close  scrutiny.  In  order  to  address  the  causes  of  the 
errors,  in  2015,  DG  AGRI  further  reinforced  the  existing  action  plans  to  address  the  reservations 
included  in  the  2014  Annual  Activity  Report  (AAR),  on  the  basis  of  improved  cooperation  and 
analysis  within  Commission  services  and  intensive  dialogue  with  Member  States.  Following  this 
approach, an improved system of reporting by all Member States on their national or regional action 
plans  for  the  reduction  of  error  rates  was  put  in  place.  This  includes  a  reinforced  focus  on  regular 
follow-up on audit findings, as well as improved indicators and milestones for monitoring purposes. A 

17   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. 

21 

 
 
                                                            
specific IT tool was developed by the Commission in 2014, and became fully operational in 2015, to 
collect and handle the information extracted from the national or regional action plans in an efficient 
and consistent manner, providing an overview and facilitating appropriate follow-up. 

4.4. 

Cumulative figures 

Concerning EAGF, the amount of financial corrections decided by the Commission since 1999 totals 
EUR 11 766 million.  The  average  correction  rate  per  financial  year  for  the  period  1999-2015  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  4.4:  EAGF  Cumulative  financial  corrections  decided  under  conformity  clearance  of 
accounts from 1999 to end 2015; 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 2015 

% as 
compared to 
payments 
received from 
EU budget 

EUR millions 

% as compared 
to total amount 
of financial 
corrections 

12 755 
3 257 
6 533 
18 208 
92 771 
 743 
21 930 
42 621 
96 161 
149 034 
 253 
77 223 
 453 
1 065 
2 888 
 507 
9 947 
 37 
18 058 
11 884 
23 517 
11 749 
7 579 
 904 
2 898 
8 971 

11 935 
61 373 

1.8% 
0.5% 
0.9% 
2.6% 
13.3% 
0.1% 
3.2% 
6.1% 
13.8% 
21.4% 
0.0% 
11.1% 
0.1% 
0.2% 
0.4% 
0.1% 
1.4% 
0.0% 
2.6% 
1.7% 
3.4% 
1.7% 
1.1% 
0.1% 
0.4% 
1.3% 

1.7% 
8.8% 

 45 
 71 
 8 
 192 
 203 
 1 
 108 
2 723 
1 510 
2 588 
 0 
1 930 
 10 
 0 
 24 
 6 
 63 
 0 
 240 
 12 
 155 
 342 
 207 
 20 
 6 
 34 

 120 
1 146 

0.4% 
2.2% 
0.1% 
1.1% 
0.2% 
0.1% 
0.5% 
6.4% 
1.6% 
1.7% 
0.0% 
2.5% 
2.1% 
0.0% 
0.8% 
1.1% 
0.6% 
0.8% 
1.3% 
0.1% 
0.7% 
2.9% 
2.7% 
2.2% 
0.2% 
0.4% 

1.0% 
1.9% 

0.4% 
0.6% 
0.1% 
1.6% 
1.7% 
0.0% 
0.9% 
23.1% 
12.8% 
22.0% 
0.0% 
16.4% 
0.1% 
0.0% 
0.2% 
0.0% 
0.5% 
0.0% 
2.0% 
0.1% 
1.3% 
2.9% 
1.8% 
0.2% 
0.1% 
0.3% 

1.0% 
9.7% 

695 255 

100.0% 

11 766 

1.7% 

100.0% 

22 

 
 
 
 
 
 
Graph  4.4:  EAGF  Member  States’  cumulative  financial  corrections  under  conformity 
clearance of accounts from 1999 to end 2015 as compared to payments received from the 
EU Budget 

Cumulative EAGF clearance decisions 1999 - 2015 

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
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a
n
i
F

Total amount of financial corrections

% Financial corrections as compared to payments received from EU budget

4.5.  Member States corrections 

Member States are required to put in place systems for ex-ante controls and reductions or exclusions 
of financing: 

 

 

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  PAs  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  by  far  most  important  system  is  the  Integrated  Administration  and 
Control  System  (IACS),  which  in  financial  year  2015  covered  93.8 %  of  EAGF  expenditure. 
To  the  extent  possible,  the  IACS  is  also  used  to  manage  and  control  Rural  Development 
measures relating to parcels or livestock, which in 2015 accounted for 54.1 % of payments 
under the EAFRD. For both Funds together, the IACS covered 85.6 % of total expenditure. 

  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,  which  led  to  corrections  amounting  to 
EUR 353 million.  The  most 
important  corrections  related  to  Spain  (EUR 70 million),  Italy 
(EUR 39 million) and Poland (EUR 35 million). See Annex 6 for detailed figures reported in 2015. 

23 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5. 

COHESION POLICY 

5.1. 

Preventive actions 

In  2015,  the  Commission  continued  to  apply  the  strict  policy  on  interruption  and  suspension  of 
payments  decided  by  the  Commission  in  the  framework  of  the  2008  Action  plan  to  strengthen  the 
Commission's  supervisory  role  under  shared  management  of  structural  actions  in  order  to  protect 
the  EU  budget.  This  policy,  in  force  for  the  2007-2013  period,  operates  on  a  preventive  basis, 
triggering  the  interruption  of  interim  payments  -  or  the  sending  of  a  warning  letter  if  no  payment 
claim  is  outstanding  -  as  soon  as  there  is  evidence  to  suggest  a  significant  deficiency  in  the 
management  and  control  system  of  all  or  part  of  an  operational  programme,  thus  avoiding  the 
reimbursement by the EU budget of amounts which might be affected by serious irregularities. 

As regards ERDF / CF and ESF programmes, it is worth underlining that the remedial action plans 
agreed  by  the  Member  States  as  a  result  of  the  Commission's  supervisory  role  also  have  a 
preventive impact on expenditure already incurred by beneficiaries and registered at national level in 
the  certifying  authority's  accounts,  but  not  yet  declared  to  the  Commission.  For  such  expenditure, 
the  certifying  authority  applies  the  financial  correction  requested  by  the  Commission  prior  to 
declaring expenditure. 

Expenditure declared to 
the Commission already 
net of irregular amounts. 

Particularly in the case of extrapolated or flat rate corrections due to 
deficiencies  in  management  and  control  systems,  the  amounts 
preventively  corrected  by  certifying  authorities  prior  to  certification 
may be significant. 

This can be demonstrated in the case of at source financial corrections applied to Romania in 2015 
(EUR 345 million) or in 2014 by the Czech Republic (EUR 398 million) and Hungary (EUR 135 million) 
in the frame of remedial action plans for different programmes. For ESF, the main at source financial 
corrections confirmed were in 2015 applied to Romania (EUR 77 million). 

Similarly, warning letters sent out by the Commission when system deficiencies are identified before 
a payment claim is submitted to the Commission may also have the same preventive effect on the 
protection of the EU budget, but no amount is reported by the Commission / Member States in this 
case as this effect is more difficult to quantify. The preventive effect of the Commission's supervisory 
role  leads  to  an  increased  protection  of  the  EU  budget  (and  to  reduced  errors  detected  by  audit 
authorities when auditing amounts claimed from the Commission) and has therefore to be reflected 
as well in the reporting. 

Interruptions  and  suspensions  are  only  lifted  on  the  basis  of  reasonable  assurance  on  the 
implementation of corrective measures and / or after financial corrections have been implemented. 
Financial corrections need to be included in a payment claim submitted to the Commission or agreed 
with  the  Commission.  The  adequacy  of  the  corrective  measures,  including  financial  corrections  is 
assessed in particular on the basis of audit evidence provided by the national audit authority or by a 
Commission  (follow-up)  audit,  and  after  individual  examination  of  the  case  aiming  to  ensure 
consistency, transparency and equal treatment amongst Member States. 

24 

 
 
 
 
 
5.1.1. Interruptions and suspensions  

Table 5.1.1: Interruptions 

Cohesion policy: 2007-2013 programming period 

EUR millions 

Fund 

Total open cases 
at 31.12.2014 

New cases 2015 

Closed cases 
during 2015 

Total open cases 
at 31.12.2015 

ERDF & CF 

ESF 

EFF 

Total  

Number 
of cases 

Amount 

Number 
of cases 

Amount 

Number 
of cases 

Amount 

Number 
of cases 

Amount 

 99 

 32 

 7 

3 818 

 970 

 14 

87 

27 

25 

5 299 

1 392 

157 

135 

33 

30 

7 387 

1 599 

162 

 138 

4 802 

139 

6 848 

198 

9 148 

51 

26 

2 

79 

1 730 

762 

8 

2 501 

The  table  above  presents  for  the  ERDF  &  CF,  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  2014,  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 2015. The closed 
cases represent the cases for which the payment of cost claims resumed in 2015, irrespective of the year when the interruption 
started. The cases still open at end 2015 represent the interruptions that remain active at 31 December 2015, i.e. the payment 
deadline of cost claims is still interrupted pending corrective measures to be taken by the Member State concerned. 

Concerning ERDF and CF, the 51 payments that remained interrupted at the end of 2015 represent 
Spain  (39),  Hungary  (5),  Cross-border  programmes  (4)  and  the  Czech  Republic  (3).  Most  of  the 
cases stem from the analysis of the ACRs provided by the Member States and to some extent from 
other sources like media or Commission audit missions. 

Concerning ESF, the 26 payments that remained interrupted at end 2015 represent Spain (11), Italy 
(8),  France  (2),  Hungary  (2),  the  United  Kingdom  (2)  and  Germany  (1),  of  which  15  were  already 
interrupted at end 2014. 

For  the  EFF,  most  of  the  interruptions  relate  to  issues  stemming  from  the  analysis  of  the  ACRs 
provided by the Member States at the beginning of each year (reports not provided, not reliable or 
showing high error rates). 5 operational programmes were placed under reservation in the 2014 AAR 
(with  payments  interrupted):  for  all  5  cases,  the  Member  State  concerned  took  the  necessary 
remedial action and payments could resume. 

Suspensions 

Concerning  ERDF  and  CF,  6  operational  programs  were  suspended  at  end  2014,  of  which  3  were 
lifted  during  2015.  10  suspension  decisions  were  adopted  in  2015:  Spain  (3),  Cross-border  (3), 
Hungary  (2),  Italy  (1)  and  the  UK  (1).  6  of  these  new  decisions  were  still  in  force  at  year-end, 
leading to a total number of 9 suspension decisions active at the end of 2015. 

Concerning ESF, 18 operational programmes were  suspended at end 2014, of which 11 were lifted 
during 2015. 10 suspension decisions were adopted in 2015 (France (1), Germany (1), Hungary (1), 
Italy (2), Slovakia (1), Spain (1) and the UK (3)), of which 2 (Slovakia and 1 of the UK ones) were 
lifted  later  in  2015.  At  the  end  of  2015,  a  total  of  15  suspensions  are  still  in  force  (France  (1), 
Germany (1), Hungary (1), Italy (3), Spain (7) and UK (2)). 

Interim payments for the EFF operational programme for Estonia were suspended in May 2014 and 
resumed in April 2015. There is no other suspension in the pipeline. 

5.1.2.  Fraud-prevention measures  

The  first  and  strongest  preventive  measure  against  fraud  is  the  operation  of  a  robust  system  of 
internal  control,  designed  and  operated  as  a  proportionate  response  to  the  risks  identified.  Such  a 
system can reduce the risk that fraud occurs or remains undetected, but cannot completely eliminate 
the  likelihood  of  fraud  occurring.  As  at  end  2015,  DG  Regional  and  Urban  Policy's  operational 
directorates  are  responsible  for  follow-up  actions,  in  relation  to  7018  OLAF  investigation  cases  in 

18   As at end 2014, 50 cases were being followed up. For 8 cases the follow-up was finalised in 2015. 28 new final case reports 

which were received from OLAF in 2015 are being followed up. 
25 

 
 
                                                            
relation to the ERDF and the CF. According to OLAF's assessments, an amount of up to EUR 1 billion 
could  potentially  be  affected  by  the  alleged  suspected  fraud  or  irregularities.  This  is  a  maximum 
amount that needs to be evaluated by the Authorising Officer based on the reported findings. 

According to the Commission's Report  on  the fight against fraud of  31 July  201519,  Member States 
communicated  a  total  number  of  3 579  irregularity  cases  to  OLAF  for  the  ERDF  and  the  CF  for  a 
potentially  affected  amount  of  EUR 1.68 billion.  According  to  the  report,  in  2014  the  share  of 
suspected  fraud  cases  out  of  the  irregularities  notified  by  Member  States  to  OLAF  represented 
around  0.51 %  of  the  2014  payments  for  Cohesion  Policy.  The  Commission  verifies  the  work 
performed by Member States authorities on their combat against fraud, using a risk based approach. 
Nevertheless,  since fraud and corruption schemes are  very diverse and changing elements and the 
Commission cannot  be  a  substitute  to  Member  States  authorities  and  verify  100 %  of  expenditure, 
the scope of fraud and / or corruption in particular in public procurement procedures in the EU (part 
of  which  also  involve  EU  co-financed  projects)  may  be  higher  than  the  amounts  reported  from 
Member States seem to suggest. The Commission therefore continue to analyse the fraud risk levels 
and  suspicions  in  Member  States,  regions  and  programmes,  the  types  of  reported  fraud  (modus 
operandi) and the mitigating measures adopted by the Member States.  

The  Joint  Anti-Fraud  Strategy  (JAFS)  2015-202020  has  entered 
into  force,  covering  ERDF,  ESF,  CF  and  other  funds.  With  the 
JAFS  the  3  Directorates  General21  aim  at  intensifying  their  on-
going anti-fraud efforts through a series of new initiatives: 

In December 2015 the Joint 
Anti-Fraud Strategy (JAFS) 
of Structural Fund DGs 
successfully launched. 

1)   Analysis  of  the  results  of  the  fraud  risk  assessments  that  Member  States  have  to  carry  out 
under the 2014-2020 legislative provisions for the purpose of further underpinning and updating 
the action plan of the new strategy; 

2)   Increasing the effective use by Member States of the ARACHNE tool to detect potential fraud; 

3)   The  organisation  of  anti-corruption  and  anti-fraud  seminars  for  Member  States  with  a  view  to 

strengthening their capacity to better fight fraud and corruption; 

4)   Other  actions  with  the  objective  of  promoting  good  governance,  raising  awareness  and 
increasing  the  administrative  capacity  of  the  Member  States  to  protect  the  EU's  and  national 
financial interests. 

The  Joint  Anti-Fraud  Strategy  contains  an  action  plan  setting  out  the  anti-fraud  activities  to  be 
carried out by these DGs in close collaboration with OLAF in the period.  

During 2015, other main actions which were implemented in the framework of the fight against fraud 
were:  

- 

Internal training and awareness-raising actions to desk officers and auditors and 
programme authorities in the Member States. 

-  Reinforcement  of  the  internal  procedure  for  following-up  final  case  reports 

- 

(FCRs) issued by OLAF. 
Training and awareness-raising actions for Member States having to put in place 
effective  and  proportionate  anti-fraud  measures  to  mitigate  against  residual 
fraud risks. 

-  Collaboration with OLAF to fight fraud.  
- 
- 

Promotion of ARACHNE to support management verifications.  
Involvement of civil society through "Integrity pacts". 

As  a  result  of  its  policy  of  zero  tolerance  to  fraud,  the  Commission  has  issued  42  warning  letters 
linked to OLAF final case reports and other fraud suspicions in 2015. 

19   COM(2015)386 final http://ec.europa.eu/anti_fraud/documents/reports-commission/2014/pif_report_2015_en.pdf. 
20   See Ares(2015)6023058 of 23 December 2015. 
21   DG Employment, Social Affairs and Inclusion (EMPL), DG Maritime Affairs and Fisheries (MARE) and DG Regional and Urban 

Policy (REGIO). 

26 

 
 
 
 
                                                            
5.2. 

Corrective actions  

5.2.1.  Situation up to 2007-2013 programming period 

Financial  corrections  reported  in  2015  for  ERDF  /  CF  for  all  programming  periods  remained  stable 
compared to the last three years, with a significant increase in the amounts of corrections reported 
for the 2007-2013 programming period22.  

Financial corrections for 2015 
remained stable compared to 
previous years confirming the 
strict correction policy 
implemented including 
interruptions and suspensions. 

This  increase  for  2007-2013  is  due  to  the  fact  that  in  2015 
some longstanding cases, for which payment applications were 
blocked  for  several  months  or  even  years,  came  to  an  end 
after  the  implementation  of  financial  corrections,  contributed 
to  this  increase.  For  those  cases,  the  corrections  applied  by 
Member States could only be reported in 2015 after the lifting 
of the interruption / suspension procedures. 

As regards the ESF, the amount of financial corrections implemented reported in 2015 increased for 
all programming periods reflecting  mainly the acceptance of the financial corrections in the context 
of  closure  of  the  2000-2006  programmes  and  lifting  of  the  long  term  suspensions  for  2007-2013 
programmes. 

5.2.2.  Improvements made and to be made 

Concerning the Cohesion Policy Funds, in 2015, the Commission continued to exercise rigorously 
its  supervisory  role  by  interrupting  /  suspending  payments  as  soon  as  deficiencies  were  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. 

Furthermore,  the  Common  Provisions  Regulation  (CPR)  2014-
2020  contains  reinforced  control  provisions  compared  to  2007-
2013  and  requirements  that  improve  the  Member  States’ 
accountability  so  as  to  better  address  errors  and  ensure  legality 
and  regularity  of  co-financed  expenditure.  The  main  aspects  to 
be underlined: 

Significant improvements 
due to implementation of 
interruptions & suspensions 
and the use of simplified 
cost options. 

  A  new  financial  management  framework  with  a  programme  accounting  year  running  from 
1 July to 30 June. The certifying authority certifies to the Commission the expenditure in the 
programme  accounts  drawn  up  for  each  accounting  year,  containing  only  legal  and  regular 
expenditure  cumulatively  declared  during  the  accounting  year  and  cleared  from  all 
irregularities detected following national verifications and audits. 

  A  10 %  retention  mechanism  on  all  Commission  interim  payments  during  the  accounting 
year meaning that the Commission reimburses the entirety of claimed expenditure only once 
all  national  controls  including  the  audits  by  the  audit  authority  have  been  carried  out  and 
their  results  fully  analysed  and  taken  into  account  by  the  managing  and  certifying 
authorities. 

 

The  submission  by  the  programme  managing  authority  of  a  management  declaration 
confirming  the  information  contained  in  the  accounts  and  that  the  control  system  in  place 
gives the necessary guarantees concerning the legality and regularity of the operations and 
declared  expenditure.  This  declaration  will  be  accompanied  by  a  report  containing  a 
summary  of  all  control  and  audit  results  carried  out  up  to  certification  of  the  accounts,  an 
analysis of the nature and extent of errors and system weaknesses identified, as well as of 
corrective actions taken or planned. 

22   The amount reported for 2015 includes negative financial corrections regarding lost Court cases and thus compensates the 

trend described here – see section 3.2.2. 

27 

 
 
                                                            
 

 

Independent  audit  work  and  audit  opinion  on  the  accounts,  in  addition  to  audits  on  the 
proper functioning of systems and representative samples of operations and expenditure as 
in the current period, by the programme audit authority. This will include assurance that all 
detected irregular expenditure has been appropriately and correctly decertified and excluded 
from interim payment claims or from the annual accounts and that when serious deficiencies 
were detected, corrective actions were implemented. 

The  introduction  of  compulsory  net  financial  corrections  to  be  adopted  by  the  Commission 
when EU audits detect irregularities indicating a serious deficiency not detected / reported by 
the programme authorities in relation to the programme accounts submitted by 15 February 
each. Net financial corrections reducing the Member States’ allocations in case of undetected 
/  non  reported  serious  deficiencies  will  provide  increased  incentives  for  national  robust  and 
timely controls, including by the managing authorities, before certifying programme accounts 
to the Commission.  

  Simplification and harmonisation of rules for all 5 ESI funds. The increased use of simplified 

cost options and their positive results in bringing down the errors. 

In  the  area  of  the  ESF,  during  2015  the  Commission  continued  to  actively  promote  the  use  of  the 
Simplified  Cost  Options  (SCO)  through  seminars  and  the  launching  of  a  trans-national  network  in 
2015.    An  overview  report  on  SCOs  was  submitted  to  the  European  Parliament  in  November  2015 
and  highlighted  an  already  very  significant  increase  from  the  7 %  of  the  ESF  implemented  under 
SCOs for 2007-2013 to the 35 % planned by the national authorities for 2014-2020. In 2016, further 
actions have been identified which focus on 9 Member States with the lowest level of planned use of 
SCOs,  with  the  overall  objective  to  reach  50 %  of  ESF  implemented  through  SCOs.  Proposals  for 
amending the Regulation are being explored in the context of the mid-term review of the MFF. 

5.3. 

Deficiencies in Member States' management and control identified and measures 
undertaken 

As  mentioned  above,  under  shared  management  Member  States  are  primarily  responsible  for  the 
effective  and  efficient  functioning  of  the  management  and  control  systems  at  national  level. 
Nevertheless,  the  Commission  seeks  to  ensure  that  the  national  systems  better  prevent  errors 
before certification and takes a number of actions:  

 

 

 

 

co-operation  with  managing  authorities  on  achieving  sound  and  timely  management 
verifications  in  order  to  prevent  irregularities  occurring  in  the  first  place  or  being  included  in 
payment claims certified to the Commission; 

implementing  preventive  capacity  building  actions  including  advice,  support  and  training  with 
programme authorities to reinforce their administrative capacity where needed;  

further  co-operation  with  audit  authorities  under  the  single  audit  principle  to  timely  and 
effectively address risks  

carrying  out  complementary  risk-based  audits  on  risk  areas  and  managing  authorities  or 
intermediate bodies; and 

  exercising  a  strict  supervision  over  programme  management,  using  the  available  legal  tools 

such as interruptions, suspensions and, where necessary, financial corrections. 

In  the  2007-2013  period,  main  root  causes  of  errors  lie, 
among  others,  in  complex  management  structures  in 
some  Member  States,  high  staff  turnover  in  some 
authorities  leading  to  a  loss  of  expertise  or  insufficient 
staff allocation.  

ERDF / CF main causes of errors:  

a) Complex structures in MS 

b) Complex legislation 

c) Weak management controls in MS 

Errors  result  also  from  the  fact  that  national  or  regional  rules  applied  to  Cohesion  policy  may  be 
more  demanding  than  those  foreseen  in  the  national  legislation  for  similar  expenditure  nationally 
funded.  Management  verifications  conducted  by  Member  States  continue  to  be  a  key  issue.  In 
particular  the  formal  nature  of  management  verifications,  insufficient  verifications  of  public 
procurement  procedures,  State  aid  or  eligibility  rules,  insufficient  structure  /  organisation  of  the 
managing authority or intermediate body and lack of training and supervision in case of delegation of 

28 

 
 
 
responsibilities  are  the  main  issues.  The  results  of  the  audit  work  are  used  by  the  Commission  to 
assess  whether  it  can  rely  principally  on  the  opinion  of  the  Audit  Authority  with  regards  to  the 
effective functioning of the systems. 

ESF main causes of errors:  

a) Ineligible costs 

b) Ineligible projects or 
beneficiaries 

As  regards  ESF,  ineligible  costs  continues  to  be  the  main 
source of error, together with ineligible projects / beneficiaries 
and  then  public  procurement  issues.  The  Commission  has 
initiated targeted measures to address root causes of errors in 
these areas. Audit missions performed in 2015 focused on the 
following main topics: 

-  Following-up on the reception of the 2014 ACRs. 

-  The  thematic  audit  on  management  verifications,  already  applied  in  2013  and  2014,  has  been 
pursued  in  2015  with  9  additional  missions.  Recommendations  and,  where  applicable, 
interruption  and  suspension  procedures  have  been  initiated  for  those  programmes  showing 
areas of non-compliance or weak verifications. 

-  For 20 programmes in the 2014 AAR reservation, an audit mission was performed in 2015. 

-  In 2015, 6 ACR re-performance and 2 Article 73 audit missions took place.  

The  2015  AAR  of  MARE  contains  a  reservation  due  to  deficiencies  in  the  management  and  control 
systems of the following EFF operational programmes: the Czech Republic, Italy, Romania, Slovakia 
and Spain (Galicia only). Italy had not submitted its ACR; Galicia is the subject of a scope limitation. 
The remaining operational programmes were all affected by material error, as reported in the ACRs. 
The  Member  States  have  all  been  notified  of  the  results  of  the  Commission's  analysis  of  the  ACRs. 
Interruption letters have been sent to affected Member States where a claim is pending, specifying 
the necessary corrective action to be taken to allow payments to resume. 

5.4. 

Cumulative figures 

5.4.1  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 possible23.  

Cumulative corrections 
4.2 % of budget allocations 

For the ERDF and ESF funds at the end of 2015, the combined amount of financial corrections, based 
on Commission supervision work only, was EUR 7 784 million. 

23  

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 5.4.1:  Programming  period  2000-2006  -  ERDF &  ESF Financial  corrections 
confirmed and in progress at 31 December 2015; Breakdown by Member State 

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 

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 

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% 

 19 
 6 
 1 
 53 
 2 
 36 
1 212 
3 494 
 482 
1 588 
 - 
 4 
 3 
 2 
 13 
 - 
 44 
 4 
 180 
 190 
 2 
 45 
 0 
 12 
 324 
 69 

- 
 - 
 - 
 2 
 - 
 - 
 - 
 28 
 - 
 373 
 - 
 - 
 - 
 - 
 - 
 - 
 - 
 - 
 - 
 - 
 - 
 - 
 - 
 - 
 - 
 - 

403 

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% 
6.0% 
8.7% 
3.3% 
7.1% 
0.0% 
0.8% 
0.3% 
2.6% 
0.8% 
0.0% 
1.6% 
0.2% 
2.6% 
1.0% 
0.9% 
3.6% 
0.0% 
0.7% 
2.0% 
1.2% 

0.2% 
0.1% 
0.0% 
0.7% 
0.0% 
0.4% 
14.8% 
43.0% 
5.9% 
24.0% 
0.0% 
0.0% 
0.0% 
0.0% 
0.2% 
0.0% 
0.5% 
0.1% 
2.2% 
2.3% 
0.0% 
0.5% 
0.0% 
0.1% 
4.0% 
0.8% 

19 
6 
1 
54 
2 
36 
1 212 
3 522 
482 
1 961 
0 
4 
3 
2 
13 
0 
44 
4 
180 
190 
2 
45 
0 
12 
324 
69 

Total 

196 911 

100.0% 

7 784 

8 187 

4.2%  100.0% 

At  the  end  of  2015,  the  Commission  had  closed  361  ERDF  programmes  (compared  to  338  at  end 
2014) out of a total of 379 programmes. The remaining 18 programmes represent cases where the 
Member States contested the financial corrections proposed by the Commission, presented additional 
information to be considered or requested reimbursement of irrecoverable amounts. These cases are 
followed up by financial correction procedures (hearings) and decisions on irrecoverable amounts. 

For ERDF, financial corrections imposed by the Commission to all Member States cumulatively up to 
the end of 2015 are EUR 5.8 billion24, 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  had  already  been  finalised  at  the  end  of  2014.  At  end  2015  the  total 
amount  of  financial  corrections  for  2000-2006  programming  period  -  taking  into  account  financial 
corrections in progress - amounted to EUR 2.4 billion, representing 3.6 % of the ESF allocation. This 
process  can  be  broken  down  into  EUR 1.2 billion  of  financial  corrections  during  the  life  cycle  of  the 
programmes and another EUR 1.2 billion applied at closure.  

24   This  amount  does  not  include  the  at  source  financial  corrections  applied  by  the  Member  States  before  declaring  the 
expenditure  to  the  Commission,  since  there  was  no  legal  requirement  to  report  such  amounts.  Consequently,  the 
Commission does not have such information. 

30 

 
 
 
 
                                                            
Graph 5.4.1: Member States' cumulative financial corrections confirmed and in progress at 
31  December  2015  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%

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

average 4,2% 
4,0%

i
c
n
a
n
i
f

f
o
%

3,0%

2,0%

1,0%

0,0%

ERDF total FC

ESF total FC

Financial corrections to contributions %

5.4.2  Cohesion Policy: ERDF / CF & ESF 2007-2013 

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. 

Cumulative 
corrections 1.4 % of 
budget allocations 

The  lower  volume  of  financial  corrections  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. 

31 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table  5.4.2:  Programming  period  2007-2013  –  ERDF  /  CF  &  ESF  Financial  corrections 
confirmed and in progress at 31 December 2015; Breakdown by Member State 

EUR millions 

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 

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

2 062 
6 668 
26 425 
 510 
25 465 
3 403 
 751 
20 210 
34 527 
13 549 
 858 
27 943 
 612 
4 530 
6 775 
 50 
24 893 
 840 
1 660 
1 204 
67 186 
21 412 
19 058 
4 101 
11 483 
1 596 
1 626 
9 883 
7 987 

0.6% 
1.9% 
7.6% 
0.1% 
7.3% 
1.0% 
0.2% 
5.8% 
9.9% 
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% 

 24 
 144 
 810 
 0 
 179 
 12 
 22 
 338 
 488 
 64 
 - 
 293 
 - 
 47 
 0 
 0 
 432 
 0 
 - 
 16 
 334 
 22 
 961 
 33 
 425 
 0 
 1 
 71 
 3 

 2 
 - 
 - 
 - 
 1 
 - 
 - 
 - 
 2 
 1 
 - 
 - 
 - 
 - 
 - 
 - 
 - 
 - 
 - 
 - 
 - 
 - 
 - 
 - 
 - 
 - 
 - 
 2 
 - 

 24 
 144 
 810 
 0 
 179 
 12 
 22 
 338 
 488 
 64 
 - 
 293 
 - 
 47 
 0 
 0 
 432 
 0 
 - 
 16 
 334 
 22 
 961 
 33 
 425 
 0 
 1 
 71 
 3 

1.2% 
2.2% 
3.1% 
0.0% 
0.7% 
0.3% 
2.9% 
1.7% 
1.4% 
0.5% 
N/A 
1.0% 
N/A 
1.0% 
0.0% 
0.1% 
1.7% 
0.0% 
N/A 
1.3% 
0.5% 
0.1% 
5.0% 
0.8% 
3.7% 
0.0% 
0.1% 
0.7% 
0.0% 

Share of 
financial 
corrections 
imposed 
compared 
to total 
financial 
corrections 
0.5% 
3.0% 
17.2% 
0.0% 
3.8% 
0.2% 
0.5% 
7.2% 
10.4% 
1.4% 
N/A 
6.2% 
N/A 
1.0% 
0.0% 
0.0% 
9.1% 
0.0% 
N/A 
0.3% 
7.1% 
0.5% 
20.4% 
0.7% 
9.0% 
0.0% 
0.0% 
1.5% 
0.1% 

Total 

347 268 

100.0% 

4 719 

 8 

4 719 

1.4%  100.0% 

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

*These figures represent the number of financial corrections in progress for ESF; figures on financial corrections in progress for 
ERDF / CF are not available.  

32 

 
 
 
 
Graph 5.4.2: Member States' cumulative financial corrections confirmed and in progress at 
31  December  2015  for  ERDF  /  CF  &  ESF  programming  period  2007-2013  as  compared  to 
contributions received 

Programming period  2007-2013 

s
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5,0%

4,0%

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average 
1.4% 
1,0%

0,0%

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N

ERDF total FC

ESF total FC

Financial corrections to contributions %

For  ERDF  /  CF  programmes,  the  Commission  has  imposed  around  EUR 3.5 billion  of  financial 
corrections cumulatively since the beginning of the 2007-2013 programming period (which includes 
EUR 1.2 billion 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).  The  main 
Member  States  concerned  are  Czech  Republic  (EUR 748 million),  Romania  (EUR 506 million), 
Hungary 
(EUR 289 million),  Spain 
(EUR 273 million) and Italy (EUR 266 million). 

(EUR 405 million),  Slovakia 

(EUR 388 million),  Greece 

For  ESF,  the  Member  States  with  the  highest  level  of  cumulative  amount  of  financial  corrections 
confirmed are Romania (EUR 455 million), Spain (EUR 215 million) and Poland (EUR 157 million). At 
this stage of the implementation and almost at closure of the programmes the cumulative amount of 
financial corrections including financial corrections in progress stands at EUR 1.2 billion representing 
1.6 % of the ESF allocation. 

5.5.  Member States corrections 

Under  the  regulations  for  the  2007-2013  programming  period,  Member  States  have  to  report 
annually to the Commission the corrections25 stemming from all controls performed. The Commission 
is performing risk-based audits and desk reviews to test the reliability of these figures as part of its 
assurance process.  

See  Annex  7  for  details  of  the  figures.  It  is  highlighted  that  the  Commission  has  taken  a  prudent 
approach26,  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 

25   At source corrections are excluded from this annual reporting, in line with the legal framework applicable for 2007-2013. 
26  

In  order  to  eliminate  the  risk  of  double  counting,  the  amounts  reported  in  this  section  are  calculated  as  the  difference 
between  the  cumulative  amounts  reported by  the  Member  States  (Art.  20  reports  on withdrawals and  recoveries) and  the 
financial corrections reported by the Commission (table 3.2.3 above) 

33 

 
 
 
                                                            
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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. 

6. 

DIRECT AND INDIRECT MANAGEMENT 

For direct and indirect management expenditure, the Commission has control frameworks in place to 
prevent, detect, correct and thus 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  and  indirect  management  expenditure,  research  and  international 
aid, are given below. 

For  Research  expenditure,  the  control  framework  applicable  to  both  direct27  and  indirect28 
management modes 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  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 ex-post checks carried out on a sample of claims, 
at 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, correct and thus deter irregularities at the different stages of 
the  implementation  of  funding,  applicable  to  both  management  modes  (direct  and  indirect29)  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. 

Finally, the last partial revision of the Financial Regulation30 brought about a new Early Detection and 
Exclusion  System  (EDES)  which  ensures  the  detection  and  circulation  of  restricted  information 
concerning  economic  operators  which  represent  a  threat  to  the  Union  financial  interests.  This 
information is centralised in a new database from 2016. 

27  
28  
29  
30  

Research budget implemented by the Commission and Executive Agencies. 
Implementation of Research budget entrusted to joint undertakings. 
Budget implementation by international organisations. 
Regulation  (EU,  Euratom)  No2015/1929  of  the  European  Parliament  and  of  the  Council  of  28  October  2015  amending 
Regulation  (EU,  Euratom)  No  966/2012  on  the  financial  rules  applicable  to  the  general  budget  of  the  Union  (OLJ  L  286, 
30.10.2015, p.1). 

34 

 
 
 
 
                                                            
ANNEXES: DETAILED FIGURES 

1. 

Financial  corrections  in  2015  compared  to  EU  payments  received;  Breakdown  by 
Member State 

Member State 

Payments 
received from 
the EU budget 
in 2015 
(EUR million) 

Financial 
corrections 
confirmed in 
2015 (EUR 
million) 

Financial 
corrections 
confirmed in 
2015 % as 
compared to 
payments 
received from 
the EU budget 
in 2015 

Financial 
corrections 
implemented 
in 2015 (EUR 
million) 

Financial 
corrections 
implemented 
in 2015 as % 
of payments 
received from 
the EU budget 
in 2015 

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 
INTERREG 
TOTAL  

1 045 
2 524 
6 921 
1 139 
8 796 
 346 
1 724 
5 672 
11 975 
11 625 
 468 
10 578 
 149 
 900 
 739 
 70 
5 459 
 95 
1 129 
1 411 
12 957 
2 197 
6 263 
 816 
3 632 
1 065 
1 045 
5 526 
1 887 

 1 
 67 
 111 
 3 
 60 
 2 
(3) 
 562 
(181) 
 318 
 0 
 378 
 0 
 28 
 8 
 1 
 108 
 0 
 58 
(21) 
 176 
 148 
 502 
 18 
 264 
 4 
 14 
 102 
 1 

108 153 

2 732 

0.1% 
2.7% 
1.6% 
0.3% 
0.7% 
0.6% 
(0.2%) 
9.9% 
(1.5%) 
2.7% 
0.0% 
3.6% 
0.1% 
3.1% 
1.1% 
1.1% 
2.0% 
0.2% 
5.1% 
(1.5%) 
1.4% 
6.7% 
8.0% 
2.2% 
7.3% 
0.4% 
1.4% 
1.8% 
0.1% 

2.5% 

11 
143 
254 
2 
(57) 
1 
19 
403 
(157) 
661 
0 
373 
0 
28 
10 
1 
255 
1 
(23) 
10 
119 
85 
595 
20 
133 
4 
14 
195 
3 

3 104 

1.1% 
5.7% 
3.7% 
0.2% 
(0.6%) 
0.3% 
1.1% 
7.1% 
(1.3%) 
5.7% 
0.0% 
3.5% 
0.1% 
3.1% 
1.3% 
1.3% 
4.7% 
0.6% 
(2.0%) 
0.7% 
0.9% 
3.9% 
9.5% 
2.5% 
3.7% 
0.4% 
1.4% 
3.5% 
0.1% 

2.9% 

Negative amounts displayed in the above table may be due to Court of Justice judgements annulling 
financial correction decisions. 

It should be noted that due to the rounding of figures into millions of euros, some financial data in the tables may appear not to 
add-up. 

35 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2. 

Breakdown of flat rate corrections in 2015 

Total 
financial 
corrections 
confirmed 
(EUR 
million) 

Flat-rate 
financial 
corrections* 
confirmed in 
2015 (EUR 
million) 

Total financial 
corrections 
implemented 
(EUR million) 

Flat-rate 
financial 
corrections* 
implemented 
in 2015 (EUR 
million) 

 922 
 46 

1 289 
 348 
 97 
 6 
 23 
2 732 

709** 
179** 

 986 
 279 
 0 
 3 
 10 
2 165 

1 017 
263 

1 359 
 407 
 24 
 10 
 23 
3 104 

- 
- 

 970 
 312 
 0 
 3 
 10 
1 295 

Agriculture*** 

EAGF 
Rural Development 
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. 
***   Implemented flat-rate figures for Agriculture are not available. 
**** Breakdown of flat-rate corrections available only for MFF 2007-2013. 

3. 

Breakdown of financial corrections at source in 2015 

Member State 

Belgium 
Bulgaria 
Cyprus 
Czech Republic 
Spain 
Finland 
France 
United Kingdom 
Greece 
Hungary 
Ireland 
Italy 
Latvia 
Netherlands 
Poland 
Portugal 
Romania 
Sweden 
Slovakia 

TOTAL 

At source financial 
corrections 
confirmed in 2015 
(EUR million) 

At source financial 
corrections 
implemented in 2015 
(EUR million) 

0  
28  
0  
67  
7  
0  
3  
0  
30  
126  
0  
4  
2  
1  
4  
0  
507  
5  
5  
788  

0  
0  
0  
3  
7  
0  
3  
0  
2  
12  
0  
6  
2  
1  
56  
0  
423  
5  
5  
524  

36 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4. 

Breakdown of net financial corrections in 2015 

Confirmed  

MFF Heading 

Smart & inclusive growth 

ERDF 
Court of Justice judgements 

ERDF total 

Cohesion Fund 
Court of Justice judgements 

Cohesion Fund total 
ESF 

Sustainable growth: natural resources 

EAGF 
Rural Development 
FIFG/EFF 
EAGGF Guidance 

Security & citizenship  

Migration and home affairs 

TOTAL 

Net financial 
corrections 
confirmed in 
2015 

Financial 
corrections with 
replacement of 
expenditure and 
other corrections  
confirmed in 
2015 

EUR millions 

Total financial 
corrections 
confirmed in 2015 

(241) 

 127 
(457) 
(330) 
 26 
(9) 
 17 
 73 

1 063 

 918 
 46 
 2 
 97 
 9 

 9 

 831 

1 878 

1 157 
 0 
1 157 
 446 
 0 
 446 
 276 

9 

4 
- 
 4 
- 
15 

15 

1 637 

1 283 
(457) 
 826 
 472 
(9) 
 462 
 348 

1 072 

 922 
 46 
 6 
 97 
 23 

 23 

1 901 

2 732 

A total of EUR 549 million remain to be classified and is treated as non-net corrections in this table. 

Implemented 

MFF Heading 

Smart & inclusive growth 

ERDF 
Court of Justice judgements 

ERDF total 

Cohesion Fund 
Court of Justice judgements 

Cohesion Fund total 
ESF 

Sustainable growth: natural resources 

EAGF 
Rural Development 
FIFG/EFF 
EAGGF Guidance 

Security & citizenship  

Migration & home affairs 

TOTAL 

Net financial 
corrections 
implemented 
in 2015 

Financial 
corrections with 
replacement of 
expenditure and 
other corrections 
implemented in 
2015 

EUR millions 

Total financial 
corrections 
implemented in 2015 

(117) 

 259 
(457) 
(198) 
 63 
(54) 
 9 
 73 

1 289 

998 
 263 
 5 
 24 
 9 

 9 

1 883 

 973 
 0 
 973 
 576 
 0 
 576 
 334 

25 

20 
- 
 5 
- 
15 

15 

1 181 

1 923 

37 

1 766 

1 231 
(457) 
 774 
 639 
(54) 
 585 
 407 

1 314 

1 017 
 263 
 10 
 24 
 23 

 23 

3 104 

 
 
 
5. 

Agricultural amounts recovered from final beneficiaries by the Member States in 
2015 

Member State 

EAGF 

EAFRD 

Total 2015 

EUR millions 

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 

2.8 

1.6 

0.6 

2.4 

11.3 

0.5 

5.6 

2.8 

19.0 

22.9 

0.3 

20.0 

0.3 

1.5 

14.9 

0.3 

3.6 

0.0 

2.6 

5.7 

8.1 

4.9 

10.0 

0.6 

1.4 

1.1 

2.0 

9.0 

0.6 

3.1 

1.0 

3.3 

11.7 

1.3 

2.8 

3.0 

6.6 

3.9 

0.0 

21.1 

0.0 

1.0 

1.3 

0.2 

9.1 

0.1 

1.0 

8.2 

19.4 

11.7 

31.5 

0.9 

1.2 

1.5 

1.5 

6.9 

Total 

155.4 

153.8 

3.4 

4.7 

1.6 

5.6 

23.0 

1.7 

8.4 

5.7 

25.5 

26.8 

0.3 

41.1 

0.4 

2.5 

16.2 

0.5 

12.7 

0.2 

3.5 

13.9 

27.5 

16.7 

41.4 

1.5 

2.5 

2.6 

3.4 

15.9 

309.2 

38 

 
 
 
 
 
 
 
6. 

Member States own corrections in 2015 applied before payments to beneficiaries 
are executed (in addition to Commission reporting31)  

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 

EAGF Market 
Measures 
0.3 

EAGF Direct 
Payments 
1.2 

0.2 

0.0 

0.0 

4.7 

0.0 

3.0 

0.6 

27.0 

9.5 

0.1 

3.9 

0.1 

0.0 

0.0 

0.0 

2.6 

0.0 

6.5 

2.2 

12.8 

0.9 

2.1 

0.1 

0.2 

0.0 

4.6 

0.6 

13.5 

0.3 

1.1 

5.1 

0.6 

2.6 

11.6 

25.9 

5.2 

1.0 

26.9 

0.7 

1.2 

0.8 

0.0 

11.3 

0.0 

0.8 

2.4 

12.5 

2.6 

11.5 

0.2 

3.6 

2.1 

0.7 

2.7 

EUR millions 

EAFRD 

Total 2015 

0.9 

7.2 

0.8 

1.4 

7.5 

1.4 

0.7 

6.4 

17.2 

5.6 

0.0 

8.0 

0.2 

1.6 

2.9 

0.1 

15.3 

0.4 

1.8 

3.5 

9.9 

5.5 

13.3 

0.9 

1.2 

2.3 

2.3 

5.2 

2.4 

20.8 

1.1 

2.6 

17.3 

2.0 

6.2 

18.6 

70.1 

20.4 

1.1 

38.8 

0.9 

2.8 

3.7 

0.1 

29.1 

0.4 

9.1 

8.1 

35.2 

9.0 

26.9 

1.2 

4.9 

4.4 

7.6 

8.5 

Total 

81.9 

148.0 

123.3 

353.2 

31   Stemming from Member States' control statistics reported to the Commission. 

39 

 
 
 
 
 
 
                                                            
7. 

Cumulative  corrections  at  end  2015  reported  by  Member  States  for  Cohesion 
Policy period 2007-201332 

Member State 

ERDF/CF 

ESF 

EFF 

Total 

EUR millions 

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 

5.2 

62.8 

336.4 

0.7 

393.7 

19.0 

0.8 

672.7 

499.7 

164.9 

1.7 

23.4 

4.8 

2.8 

0.1 

99.2 

0.7 

18.2 

33.3 

240.7 

64.2 

0.3 

435.8 

111.6 

0.7 

4.1 

18.8 

- 

302.1 

1.6 

10.0 

10.8 

530.4 

223.1 

252.3 

73.8 

168.6 

2.0 

7.1 

137.3 

35.6 

0.6 

2.5 

0.6 

1.0 

2.7 

0.3 

5.5 

4.4 

- 

73.4 

- 

6.8 

8.9 

0.9 

1.4 

42.8 

- 

- 

- 

- 

0.2 

1.2 

0.5 

0.2 

0.1 

47.1 

2.4 

- 

4.2 

0.3 

1.2 

0.1 

- 

0.1 

0.0 

5.5 

0.0 

0.8 

2.5 

- 

0.0 

0.1 

1.0 

0.3 

2.7 

- 

28.6 

67.7 

339.1 

1.0 

494.1 

20.3 

19.1 

706.2 

787.5 

231.5 

2.0 

551.6 

1.7 

7.8 

19.5 

1.0 

304.9 

1.9 

21.0 

15.1 

531.1 

299.0 

252.3 

80.7 

177.5 

3.9 

8.8 

182.7 

35.6 

TOTAL IMPLEMENTED 

4 371.7 

751.3 

70.4 

5 193.5 

32  

In addition to Commission reporting – see section 5.5. 

40