Beter toezicht op structuurfondsen: vraag en antwoord (en) - Hoofdinhoud

MEMO/09/481

Brussels, 28 October 2009

Q&A: Progress report on Action Plan to strengthen the European Commission's supervisory role over shared management of structural actions

( IP/09/1594 )

What is the aim of the Action Plan and what progress has been achieved so far?

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  The Action Plan adopted by the Commission on 19 February 2008 represents a political commitment to reduce errors in payment claims by Member States in respect of the European Regional Development Fund, European Social Fund and Cohesion Fund. It implements recommendations by the European Parliament and European Court of Auditors, which highlighted weaknesses in the shared management of structural actions.
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  Today's report sets out the latest results of the Commission’s stringent approach.
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  The Action Plan is based on a two-pronged strategy:
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  helping Member States to do a better job of checking the eligibility of project expenditure before they submit payment claims to the Commission, and
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  tougher measures to suspend payments and make financial corrections where Member States fall below standards (losing money through financial corrections helps motivate improvements in controls).
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  The Action Plan set out 37 actions to be achieved. By the end of 2008, 28 of these had been completed. Today's report, the third since the launch of the Action Plan, outlines the progress made in 2009 towards achieving its objectives. A further impact report is scheduled in early 2010.
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  The overall objective of the Action Plan is to improve management and control systems and to recover funds where they have been wrongly claimed. The Action Plan is about protecting EU taxpayers’ money.

What were the main actions undertaken in 2009?

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  The nine outstanding actions have been incorporated in the Joint Audit Strategy of the two Commission Directorates General responsible for cohesion policy (Regional Policy and Employment, Social Affairs and Equal Opportunities). By the end of the third quarter of 2009, significant progress has been achieved in all the outstanding actions.
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  The Commission has targeted audits on high-risk programmes, ensured that Member States have carried out remedial actions to correct deficiencies, and applied many more suspensions and corrections than in the years before the adoption of the Action Plan.
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  Since the beginning of 2009, €629 million has been clawed back and the Commission estimates that a further half a billion euro will be recovered by the end of 2009.
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  For the 2007-2013 period, the Commission has set up a range of preventive actions to ensure that the Member States’ management and control systems function effectively from the start of programme implementation. It has analysed the systems descriptions presented by Member States to ensure that their set-ups comply with the rules and has organised several training seminars in 2009 to provide guidance to national managing and certifying authorities.

What is the difference between error and fraud, and how much of a problem is fraud in relation to structural spending?

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  Error is the general term used to cover any non-compliance with a condition for receiving EU funds. It does not mean fraud, which entails deliberate or criminal deception for the purpose of making an unjust gain. The stringent audit work carried out by the Commission and the European Court of Auditors each year has detected only isolated cases of fraud.
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  According to OLAF, the European Anti-Fraud Office, suspected frauds affected 0.19% of payments made by the Commission under the cohesion policy in 2000-2008 (equivalent to €383 million).
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  The funds which have been misused through error or fraud do not disappear down a black hole. Member States are required to take action to recover sums which have been misused, and the Commission checks that they do this. If the Member State fails to act, the Commission will apply a financial correction.

What are the most common errors?

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  Common examples of errors include contracts awarded without following the correct tender procedure; inadequate documentation to support expenditure (lack of audit trail); inaccurate calculation of overheads; application of incorrect co-financing rate; overestimated payment claims.
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  Errors mainly occur when beneficiaries claim for expenditure which does not meet funding conditions. The fact that a Member State submits ineligible expenditure to the Commission for reimbursement means that its management and control systems have not worked effectively, since they did not prevent and detect the errors. The Commission can only detect errors through audits carried out after reimbursement of payment claims. It then takes corrective action.
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  In most cases, even if there is an error, the project is completed and operational. Money has not been wasted - it just means that the project concerned is not entitled to receive the support originally envisaged from the EU budget.
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  Where a Member State agrees to make a correction itself for ineligible expenditure, the funds at stake can generally be re-used for other eligible projects. Where the Commission makes a correction decision, the money is recovered from the Member State for the EU budget.

Who decides when a financial suspension or correction is necessary – and how much should be clawed back? What happens to the money that is clawed back?

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  Member States are responsible, in first instance, for preventing, detecting and correcting errors.
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  The Commission has about 90 auditors for the Structural and Cohesion Funds. They carry out checks in all Member States to ensure that the national management and control systems are working properly.
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  The focus of the audits is the programmes through which Structural Funds money is delivered. Each programme establishes the financial allocation, priorities and objectives for the region or for the theme. For the current funding period (2007-2013), 417 programmes have been adopted. Each programme can include several hundred individual projects, from major infrastructure priorities like motorways or railways, to support for small firms, further training for workers, assistance for disadvantaged persons in joining the labour market and help for families such as new crèches. Member States and regions select individual projects after agreeing programmes priorities with the Commission.
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  For the 2007-2013 programming period, national audit authorities have been set up to ensure the audit coverage of all programmes, according to an audit strategy agreed with the Commission.
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  The Commission carries out its own audits and supervises the work performed by national authorities, but it does not check every programme every year. Its strategy is to audit programmes on a risk-based approach, taking account, especially, of the amounts of EU funds at stake, known weaknesses in the managing bodies, as well as the types of operations and beneficiaries involved. The objective is to ensure that by the time the programmes are closed any problems have been sorted out.
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  Where its auditors find serious problems, the Commission can suspend payments to a programme, and ultimately claw back money if it has been wrongly claimed or misspent.

How much has the Commission clawed back this year? Are more suspensions and corrections in the pipeline?

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  Today's interim report on the Action Plan clearly shows the impact of the Commission's tougher approach.
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  Financial correction actions have led to the claw back of €629 million in the first three quarters of 2009. The corrections cover the European Regional Development Fund, European Social Fund and the Cohesion Fund and the budgetary periods 1994-99 and 2000-06. The €629 million includes corrections imposed by the Commission and those proposed/accepted by the Member States, without the need for a Commission decision. Where a Member State has proposed/accepted a correction itself, it can re-inject the recovered amount by making payment claims for other eligible projects.
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  A further half a billion euro of financial corrections is expected to be finalised by end of this year.
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  Corrections are not fines: they are decisions to recover EU taxpayers' money, where it has been wrongly claimed and paid out to beneficiaries.
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  In 2009, five Commission decisions have been taken to suspend payments for 2000-2006 programmes (one in Italy, three for interregional programmes, and one for Spain), and there are suspension procedures in the pipeline covering 28 programmes.
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  In 2008, more than €1.5 billion was clawed back in financial corrections and the Commission adopted 10 suspension decisions.

What other indicators are there on the impact of the Action Plan?

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  The Commission is following up the implementation of remedial measures to combat weaknesses detected in 27 programmes or groups of programmes. By the end of September 2009, the Commission was satisfied that the national authorities had fulfilled their commitments in 17 cases.
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  Despite the implementation of these measures, the Commission does not expect to see a significant fall in the error rate when the European Court of Auditors publishes its report on 2008 expenditure, as this pre-dates most of the changes introduced by the Action Plan. (The Court's report is scheduled for publication on 10 November 2009). Errors already reported will continue to affect expenditure declared by Member States up to 2010 (up to 2012 for the Cohesion Fund) for 2000-2006 programmes. The programmes for 2007-2013 are only now starting to generate expenditure. This means that the full impact of the Action Plan and its preventive measures will only be seen after 2010.
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  For the new programmes in the 2007-2013 funding period, the Commission has introduced a more stringent preventive procedure to reduce the risk of errors arising once programme implementation is underway. For each programme, the responsible national audit authority has to provide a certificate of compliance for its management and control system before any payment claims can be made, and then to report at the end of each year on the results of its audits.
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  The Commission verifies if the certificate is complete and consistent with the Structural Funds regulations. So far, certificates have been sent for just over 90% of the 417 programmes across the EU. The Commission has accepted certificates for 72% of the programmes, while the remainder will require modifications by the Member States.

Who sets the rules for Member States' management and control systems for Structural Funds?

The rules are fixed in the Community legislation – the Financial Regulation which establishes general principles, Council Regulation (EC) No 1083/2006 which sets the regulatory framework for the Structural Funds and Cohesion Fund, and Commission Regulation (EC) No 1828/2006 which sets out more detailed rules. The Commission has also issued guidance notes to promote good control practices by national authorities.

What is the Commission doing to simplify the rules?

Control requirements for structural actions are stringent in order to ensure that EU taxpayers' money is used properly, but it the Commission also aims to strike the right balance between the cost of controls and the benefits obtained.

The rules for 2007-2013 programmes were simplified to allow the use of flat-rate payments for overheads for the European Social Fund (ESF) and to reduce the length of time beneficiaries have to keep supporting documents (audit trail). Additional simplifications adopted this year include the extension of flat rates for projects supported by the European Regional Development Fund (ERDF) and allowing the use of standard scales of unit costs and lump sums for both the ERDF and ESF. The Commission expects that these provisions will reduce the administrative burden and lead to a more efficient and correct use of the funds. In September 2009 the Commission modified its implementing regulation to allow for simpler eligibility and reporting procedures.

In parallel, the Commission continues to work with Member States to identify ways in which additional simplifications can be introduced.

How much is the Commission spending in the framework of its structural actions policy? Does the Commission audit every euro it spends in this area?

For the 2007-2013 period, the total budget for support from the European Regional Development Fund, European Social Fund and Cohesion Fund is €347 billion, or approximately 35% of the total EU budget.

The main control and audit responsibility is at Member State level. The designated audit authority for each programme delivers an audit opinion to the Commission each year on the functioning of the management and control systems and the legality and regularity of the expenditure certified.

The Commission exercises a supervisory role. Where possible, it relies on the results of the national auditors and does not duplicate their work. Where necessary, it carries out its own audits of management and control systems. It also audits a small number of projects to test the effectiveness of the control systems. In short, the Commission applies a strategy aimed at getting assurance on all the money spent in programmes through the work of both national auditors and its own auditors.

Why does the Commission fund questionable projects like clowns in Tampere or the Danish ski slopes where it never snows?

Cohesion policy is one of the most decentralised EU policies. National or regional authorities are responsible for defining selection criteria, for organising calls for projects and establishing monitoring committees composed of representatives of administrations and NGOs. The Commission is not responsible for the selection of projects, in line with the subsidiarity principle. Nonetheless, where the Commission identifies that there are errors in projects or that these projects do not contribute to the objectives of the programmes, it always takes action to recover incorrectly paid reimbursements.

The ski slope on the Danish island of Bornholm was selected for co-financing from the European Agricultural Fund for Rural Development by the Danish authorities, not the Commission. The project came to light thanks to the Commission’s transparency initiative, which requires details of beneficiaries of EU funds to be made available online (Click here for lists of beneficiaries of cohesion policy ). The EU has never financed clowns in Tampere!