1 Financial management
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COM(10) 382
(b)
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13075/10
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COM(10) 447
(c)
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Commission Report: Protection of the Communities' financial interests: Fight against fraud: Annual Report 2009
Commission Report: Annual Report to the discharge report on internal audits carried out in 2009 (Article 86(4) of the Financial Regulation)
European Anti-Fraud Office: Annual Report 2010: Tenth activity report, 1 January to 31 December 2009
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| Legal base | (a) - (c) —
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| Document originated | (a) 14 July 2010
(b) 31 August 2010
(c) —
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| Deposited in Parliament | (a) 22 July 2010
(b) 7 September 2010
(c) 21 September 2010
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| Department | HM Treasury
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| Basis of consideration | (a) EM of 22 October 2010
(b) EM of 6 October 2010
(c) EM of 22 October 2010
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| Previous Committee Report | None
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| To be discussed in Council | (a) Possibly
(b) and (c) None planned
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| Committee's assessment | Politically important
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| Committee's decision | For debate in European Committee B, together with the European Court of Auditors' Annual Report for 2009, once available
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Background
1.1 The Commission is required to report annually on protection
of the EU's financial interests and on the fight against fraud,
a shared responsibility between the Commission and Member States.
These reports are to cover measures taken by Member States as
well as by the Commission. Each year, the Commission, in cooperation
with Member States, reports latest statistics on, and recent measures
to reduce, irregularities and fraud. There is an important distinction
between irregularities and fraud. An irregularity occurs when
a beneficiary is not in compliance with the EU rules and requirements
linked to the spending of EU funds, and these are usually the
result of genuine errors. Fraud is a deliberately committed irregularity,
which constitutes a criminal offence.
1.2 The Commission's Internal Audit Service is required
to submit an annual report to the Discharge Authority (the European
Parliament and the Council). The Director of the European Anti-Fraud
Office (commonly referred to as OLAF, from its French title) is
required to make regular reports to the European Parliament, the
Council, the Commission and the European Court of Auditors (the
Court) "on the findings of investigations carried out",
as stipulated in the Regulations establishing the office in 1999.
OLAF's objectives are to reduce fraud, corruption, and other illegal
activities against the financial interests of the EU by conducting
investigations, strengthening anti-fraud measures and developing
strategies to prevent fraud through better intelligence, training
and cooperation with Member States.
The documents
1.3 Document (a) is the Commission's annual report
for 2009 on protection of the Communities' financial interests
and on the fight against fraud. This year's report includes two
special topics relevant to the EU institutions and national competent
authorities (contributed by Member States via a questionnaire):
- cooperation between the Commission
and the Member States concerning on-the-spot checks; and
- measures taken by the Member States to recover
irregular amounts.
1.4 The report is in five sections. The first has
statistics on fraud and other irregularities and covers results
of irregularities relating to:
- areas where Member States implement
the budget (agricultural policy, cohesion policy and pre-accession
funds) and collection of the EU's Traditional Own Resources;
- expenditure directly managed by the Commission;
and
- operational activities of OLAF.
EU legislation requires Member States to notify the
Commission of fraud and irregularities by fields of activity where
they implement the budget and receive the EU's Own Resources.
However, the statistics presented must be read and used with great
care, as they are approximate and preliminary only.
1.5 The headline message for 2009 in this section
is that:
- the overall number of irregularities
for expenditure increased to 7,963 in 2009 from 6,595 in 2008;
and
- the estimated financial impact of irregularities
increased from €783 million (£678 million) in 2008 to
€1,493 million (£1,293 million) in 2009.
For Traditional Own Resources, that is customs duties
and agricultural levies:
- reported irregularities were
23% down on 2008, falling from 6,075 to 4,684;
- the estimated financial impact was lower at 8.5%,
from €375 million (£325 million) to €343 million
(£297 million) in 2009;
- suspected fraud accounted for approximately 19%
of reported cases, with an estimated financial impact of €99
million (£86 million);
- fraud is therefore suspected for 0.68% of total
Traditional Own Resources collection; and
- the goods mostly affected by irregularity remain
the same — TVs, monitors, clothing and tobacco products.
1.6 On the expenditure side 2009 is a transition
year due to the introduction of an internet based reporting system,
the Irregularity Management System. The system experienced some
initial problems, but has improved the ease of irregularity reporting
for those Member States that used it. The overall irregularity
rate in the UK is 0.08%. This is an extremely low percentage especially
as the Commission uses a 2% materiality rate for Structural Funds
— some ten times higher than the reported fraud rate.
1.7 The section has analysis of four major headings
on the expenditure part of the EU budget:
Agriculture
- reported irregularities increased
43% (1,621 cases in 2009 compared to 1,133 in 2008) with an estimated
financial impact of €125 million (£108 million), an
increase of 23%;
- the sectors with rather high irregularity rates
were sugar, pig meat, eggs and poultry, cereals, rural development
and fruit and vegetables;
Cohesion Policy
- reported irregularities increased
23% (4,931 cases in 2009, compared with 4,007 in 2008) with an
estimated financial impact of €1,223 million (£1,059
million), an increase of about 20%;
- the increase mostly reflects: the result of three
different reporting programming periods (1994-99, 2000-6 and 2007-13),
growing influence of irregularities reported in Romania and Bulgaria
and increased checks and audits linked to the approaching closure
of the 2000-06 programming period — as this is being drawn
to a close and full review of the programmes is being carried
out, this housekeeping exercise will have contributed to the increase
in the irregularity rates;
- the highest irregularity rates were found in
the European Regional Development Fund and Objective 2 programmes
(aimed at revitalising areas facing structural difficulties);
Pre-accession funds
- 706 irregularity cases were
reported for this sector with a financial impact of €117
million (£101 million), an increase of 35% on last year;
- reported irregularities by Bulgaria and Romania
together accounted for 81% of cases and 9% of the irregular amounts
reported;
- five Member States (Bulgaria, Hungary, Poland,
Romania and Slovakia) and Turkey reported 262 suspected fraud
cases with a financial impact of €57 million (£49 million);
- the highest number of cases was reported by Bulgaria
for its Special Accession Programme for Agriculture and Rural
Development (SAPARD) fund (67% of its total allocation, reflecting
92% of all SAPARD suspected fraud cases in 2009);
Direct Expenditure (funds managed by the Commission)
- irregularities and suspected
fraud cases in this area came to 705 with a presumed financial
impact of €27.5 million (£24 million), €1.5 million
(£1.3 million) of which related to 15 cases of suspected
fraud; and
- irregularities in the external action sector
accounted for €4.4 million (£3.8 million) and €23.1
million (£20 million) was recorded for the internal policies
area.
1.8 The statistics on OLAF's activities show that
in 2009 it opened 220 cases, compared with 204 in 2008 and 201
in 2007. The number of its active cases increased to 455 at the
end of 2009, compared with 425 at the end of 2008.
1.9 The second section of the document concerns the
international dimension to protecting the EU's financial interests,
including an update on the state of ratification of the Protection
of Financial Interests[1]
instruments and international agreements and multilateral conventions.
The protection of the EU's financial interests and the fight against
fraud and corruption go beyond EU borders and needs to be reflected
in international agreements with third countries or in multilateral
conventions. Anti-fraud and corruption provisions are included
in many bilateral agreements which the EU has signed with third
countries. In 2009:
- the Commission negotiated the
conditions for the implementation of the United Nations Convention
against Corruption and was an active participant in the activities
of the European anti-corruption network, which was created by
the Council in 2008;
- the EU has been at the forefront internationally
in tackling tax havens and tax fraud — the Commission works
to promote the principles of good governance in tax matters worldwide
and has worked closely with the Organisation for Economic Cooperation
and Development in this field;
- an anti-fraud agreement with Liechtenstein, which
could serve as a model for similar agreements with other third
countries, has been negotiated and currently awaits agreement
by Member States in the Council;
- the Commission has asked the Council for a mandate
to negotiate similar agreements with Switzerland, Andorra, San
Marino and Monaco;
- the Commission is negotiating with Ukraine on
a new and comprehensive agreement, within the European Neighbourhood
Policy, to tackle fraud and to protect the EU's financial interests;
- the Commission continues to play a leading role
in the negotiations on a protocol to eliminate illicit trade in
tobacco products, based on the World Health Organisation Framework
Convention on Tobacco Control;
- the second Protocol to the Convention on the
Protection of the EU's Financial Interests, which contains provisions
on the liability of legal persons, confiscation and money laundering,
entered into force on 19 May 2009 after ratification by the Member
States concerned;[2]
- Hungary ratified the Convention and its protocols[3]
on 18 January 2010 with a single declaration concerning the protocol
on the interpretation of the Convention by the European Court
of Justice;
- Estonia has yet to ratify this latter protocol;
- the Czech Republic and Malta remain the only
Member States that have not yet ratified either the Convention
on the Protection of the EU's Financial Interests or its protocols;
and
- with regard to the follow-up of the second report
on implementation by the Member States of these instruments,[4]
the Commission has engaged in further analysis on the conformity
of national provisions in Austria, Belgium, France, Germany, Ireland,
Italy and Luxembourg — the Member States were urged to proceed
with the ratification of these legal instruments without delay.
1.10 The third section of the Commission Report concerns
recent administrative measures taken by the Commission to fight
fraud and irregularities in the customs area. Further progress
was achieved in a joint customs operation and with deployment
of a new improved customs database:
- the joint custom operation
DIABOLO II conducted in the framework of ASEM (Asia — Europe
meeting),[5] led to the
seizure of 65 million counterfeit cigarettes and 369,000 other
counterfeit items (shoes, bags, toys, cameras etc) of numerous
trademarks;
- the success of the operation
was due to the cooperation and effective work that involved customs
officials from thirteen Asian countries and the twenty seven Member
States; and
- the objective of FIDE (Customs
Files Identification Database), a new database used by Member
States' customs authorities, is to help in preventing operations
in breach of customs and agricultural legislation and to facilitate
and accelerate their detection and prosecution.
1.11 The content of the fourth section of the Report
is the results of a questionnaire on cooperation between OLAF
and the Member States regarding on-the-spot checks. Inspections
and on-the-spot checks are used by the Commission to conduct administrative
investigations outside the EU Institutions and bodies, as empowered
by Council Regulation (Euratom, E.C.) No 2185/96. Active participation
of national authorities and the assistance provided to OLAF inspectors
are therefore essential in guaranteeing the success of an operation.
In 2009, the Commission circulated a questionnaire to Member States
with regard to their cooperation with OLAF on inspections. Following
the exercise, the Commission concluded that Member States have
taken a number of measures to consolidate the implementation of
the Regulation:
- national legislation grants
inspectors full access to information and documentation concerning
operations;
- in cases where the operator
is the beneficiary of an EU grant, the obligation to provide access
to documentation and information is specified in the grant contract
and thus constitutes an important precautionary measure;
- national procedural requirements
for on-the-spot checks and for drawing up administrative inspection
reports are provided in form of manuals and instructions to the
national inspectors;
- in cases of opposition to checks
by an economic operator, certain Member States indicated that
the Commission inspectors may enter premises without prior consent;
- in those cases where checks
are hampered, Member States' competent authorities provide assistance
to the Commission inspectors by issuing a judicial or administrative
warrant or assist as necessary with reasonable force, to access
the premises of the economic operator.
However, the Commission believes that, in practice,
further improvements can still be made to enhance the cooperation
between OLAF and the Member States and outlines some recommendations
which it will monitor and comment on in future reports.
1.12 The fifth, and final, section of the Report
deals with recovery of funds. The Commission says that:
- Member States were asked in
the questionnaire on cooperation about measures for securing the
recovery of irregular amounts;
- responses showed that all Member
States had provisions in their national law for securing the recovery
of irregular amounts;
- in a Resolution of 24 April
2009,[6] the European Parliament
noted that recovery rates were still low and that more appropriate
and faster recovery procedures were needed together with binding
and precautionary elements in future legislation concerning shared
management; and
- the Commission recommends that
Member States' legislation prioritise enforceability of recovery
orders to help in speeding up recovery procedures and provide
for legal instruments such as the different types of guarantees,
promissory notes, security deposits, personal or joint sureties,
offsetting, bank bonds, mortgages or insurance to secure the recovery
of irregular payments included in contracts involving EU funds.
1.13 In this section the Commission notes, and comments
on, recoveries made in 2009 for each sector of the budget:
Own Resources
- only 44%, or €152 million
(£132 million), of the amount scheduled for recovery has
been recovered;
- when non-recovery of an established
debt is not attributable to a Member State, it may request that
the irrecoverable amount be written off — in 2009 the Commission
refused Member States' write-off requests in 61 cases totalling
€11.5 million (£10 million), because it deemed that
non-recovery was attributable to them;
- additionally, some Member States
were held financially responsible for a total of more than €9
million (£7 million), because they did not establish customs
debts where they should have done;
Agriculture
- Member States recovered €167.3
million (£145 million) and declared €64 million (£55
million) as irrecoverable;
- €1,136.2 million (£984
million) still remained outstanding at the end of 2009;
- to expedite clearance of outstanding
amounts, in 2009 the "50/50 mechanism"[7]
was applied to all pending non-recovered cases dating from
2004 or 2000 (cases that were four or eight years old respectively);
- as a result, €31.4 million
(£27 million) was charged to the Member States and €20.1
million (£17 million) was borne by the EU budget due to irrecoverability;
- a further €0.8 million
(£0.7 million) was charged to the Member States by a subsequent
decision that cleared the accounts for the financial year 2008
for those paying agencies that were excluded in April 2009;
- the financial consequences
of non-recovery for cases dating from 2005 or 2001 were determined
in accordance with the same mechanism by charging €22.8 million
(£20 million) to the Member States concerned;
- €20.3 million (£18
million) was borne by the EU budget for cases reported irrecoverable
during the financial year 2009;
- for those paying agencies for
which the 2009 accounts were excluded from the financial clearance
decision, a further €11.9 million (£10.3 million) will
be charged by subsequent Commission decisions;
Cohesion Policy
- because Structural Funds are
multi-annual in nature and based on interim payments, recovery
of unduly paid amounts can take place before or after the conclusion
of a programme and can also be deducted from future payment claims;
- for the 1994-99 programming
period 11,046 cases (21 in 2009) of irregularities were reported
with a financial impact estimated at €1.51 billion (£1.3
billion) (€1.84 million (£1.6 million) for 2009);
- of these cases 7,049 have been
closed definitively at Commission level and €742 million
(£643 million) was taken into account during the final payment
or decommitted after closure or reimbursed to the EU budget;
- administrative and judicial
procedures have been finalised at national level in a further
566 cases with a financial impact of €52 million (£45
million);
- for the 2000-06 programming
period 20,991 cases of irregularities were communicated (4,679
in 2009) with a financial impact of around €3.49 billion
(£3.02 billion) (€1.12 billion (£0.97 billion)
for 2009);
- administrative and/or judicial
procedures have been finalised at national level for 10,655 of
these cases with €1.73 billion (£1.5 billion) recovered;
- at the end of 2009 the total
amount of financial corrections concerning the 1994-99 and 2000-06
programming periods was €2,510 million (£2,174 million)
(€515 million (£446 million) in 2009) and €5,119
million (£4,433 million) (€1,806 million (£1,564
million) in 2009) respectively;
- these figures were the results
of audits by the Commission and the European Court of Auditors,
OLAF investigations and the closure procedures for the two programming
periods;
Pre-accession funds
- the amount scheduled to be
recovered increased by 135%, with the highest from SAPARD, €61.6
million (£53 million), out of which €41 million (£36
million) has to be recovered by Bulgaria, assistance for restructuring
economies (PHARE), almost €7 million (£6 million) from
Poland and Hungary, and the Instrument for Structural Policies
for Pre-Accession (ISPA), €4 million (£3 million);
- the recovery rate decreased
in comparison to 2008, reaching only 27.2% in 2009 as a result
of complex and lengthy nature of the recovery processes for which
the Commission believes further safeguard measures (in the form
of assets seizure, suspension of payments) should be implemented
to ensure recovery still takes place after the final court ruling;
Direct expenditure
- in the areas where funds are
managed directly by the EU institutions, amounts unduly paid are
recovered directly by them;
- during 2009, full or partial
recovery was announced in 478 reported cases with €15.5 million
(£13 million) recovered;
- a full amount was recovered
for 463 cases, but €12 million (£10 million) in respect
of 242 cases remains outstanding;
Recovery following OLAF cases
- in 2009 OLAF formally closed
the financial follow-up procedure for cases worth more than €249.2
million (£216 million); and
- in total, €137.2 million
(£119 million) was recovered in the agricultural sector and
€49.1 million (£43 million) in the field of structural
funds.
1.14 Two Commission working papers accompany the
Report: the first entitled "Implementation of Article 325
TFEU (5) in 2009 by the Member States" and the second "Statistical
Evaluation of Irregularities in 2009".
1.15 Document (b) is the Commission's annual report,
for 2009, to the Discharge Authority on internal audits carried
out that year. The document summarises the audits carried out
and the findings made by the Internal Audit Service. Details of
the objectives and scope of each audit and statistics showing
the number of recommendations accepted by those audited are in
the accompanying staff working document.
1.16 In 2009 the Internal Audit Service carried
out 67 audits and reviews. In all, 260 audit recommendations were
made, 257 (98.8%) were accepted and 3 (1.2%) rejected. Findings
were summarised under the following headings:
- business continuity;
- risk management;
- procurement and grant management;
- executive agencies;
- IT issues;
- shared management;
- asset management;
- external policies; and
- follow-up of earlier audits.
1.17 On the basis of this report, the Internal Auditor
of the Commission drew the following conclusions:
- continuous improvements in
the Commission's internal control environment, linked to the efforts
towards an unqualified declaration of assurance, were seen —
however, there was a need for improvements in certain areas of
financial management;
- progress made since the Commission's
adoption of a risk management framework in 2005 was noted, but
its implementation needed to be better embedded in the management
processes of each service and combined with an enhanced overview
of cross-cutting risks and improved central guidance;
- the Commission needed to keep
up the momentum in its efforts to ensure business continuity in
the event of serious disruptions (for example, through enhanced
steering, coordination and testing of the critical activities);
and
- the audits carried out in the
year demonstrated the need to further strengthen IT strategic
decision-making and IT project management processes, in order
to ensure that IT projects are properly aligned with the Commission's
objectives, provide value for money and are completed in a timely
manner.
1.18 Document (c) is OLAF's annual report which summarises
activities and progress in its tenth business year. In an introduction
OLAF notes that:
- it received 969 new items of
information but opened cases on only 220 of these in 2009;
- €249 million (£216
million) was recovered at the end of 2009; and
- the report puts a particular
focus on four areas — improving operational procedures,
fraud prevention and intelligence, EU Agencies and joint customs
operations.
1.19 The report itself has four sections. In the
first OLAF discusses its role and responsibilities, covering its
mission statement and oversight and corporate governance. It then
turns to the focus on improving operational procedures and fraud
prevention and intelligence. On the former OLAF says that a set
of measures were taken to make it more efficient, to further increase
the quality of its work and to ensure the optimal use of its limited
resources. This resulted in:
- a de minimis policy
was applied to OLAF's operational activities with the adoption
of more stringent criteria for opening follow up paths, restricting
follow-up to those cases where the financial risk is highest,
leaving other cases to other Commission authorities to deal with.
OLAF also maintained a "zero tolerance" policy, assessing
and, where appropriate, investigating all allegations of corruption
within the EU institutions;
- modified procedures were introduced
in 2009 to create clear distinction between active engagements
and concluded operational activities, in order to enable debts
to be established, notified or recovered, and to the way in which
financial recoveries are recorded and reported in order to provide
a clearer picture of the true financial impact of OLAF's activities;
- a new OLAF manual, which provides
guidance at every stage of an investigation and sets out the general
principles of the rule of law together with the fundamental freedom
of individuals under investigation, was issued in 2009; and
- a new training action plan
was implemented and various information and communication activities
were launched to raise awareness of the OLAF's role in the fight
against fraud and corruption.
1.20 In relation to the focus on fraud prevention
and intelligence OLAF says that:
- in 2009 further emphasis was
placed on increased fraud prevention as it continued to implement
the Commission's policy of ensuring that all relevant legislation
and measures are "fraud-proofed";
- the approach was aimed at improving
the prevention of future irregularities by drawing on the lessons
learnt from OLAF's operational experience and sharing such information
with those responsible for managing EU funds within and outside
the EU; and
- it provided the necessary support
and multi-disciplinary technical know-how to help stakeholders
in their anti-fraud activities and provided assistance with respect
to specific operations, strategic analysis and risk assessment
in order to target resources at the areas prone to risks.
1.21 The second section of the report covers OLAF's
key achievements in 2009 by area of activity, illustrated by 14
case studies. The areas of activity were:
- internal investigations within
the EU institutions and bodies;
- internal EU policies;
- external aid;
- structural actions;
- agricultural expenditure;
- revenue;
- cigarettes;
- focus on joint customs operations
— DIABOLLO II; and
- protection of the euro against
counterfeiting.
In relation to a focus on EU Agencies OLAF says that
over the past ten years a number of specialised and decentralised
EU agencies have been established to support Member States and
their citizens in carrying out specific EU missions that may require
technical expertise. Based on its operational experience, OLAF
identified a number of issues, particularly in the period immediately
after the creation of the new agencies, and has been working closely
with the Commission departments and with the agencies to ensure
adequate training and awareness to prevent further cases of fraud
and to detect irregularities. It reports a relevant case relating
to systemic weakness found in new agency — a Commission
department detected a number of serious irregularities in a newly
created EU agency, whereby the separation between professional
and private activities was not respected, resulting in EU money
being inappropriately used. As for its focus on joint customs
operations OLAF says that:
- illicit trade in contraband
and counterfeit tobacco products results in annual losses of approximately
€10 billion (£9 billion) to the budgets of the EU and
Member States and undermines public health initiatives aimed at
curbing smoking;
- the global nature of the illicit
trade means that operational activities are not confined to the
EU, but also involve working with authorities in many third countries;
- in 2009 OLAF coordinated some
35 cigarette-related fraud cases; and
- one such collaboration, Diabolo
II, led to the seizure of more than 65 million counterfeit cigarettes
and 369,000 other counterfeit items (shoes, toys, cameras, headphones,
hats, caps, gloves, handbags, etc.) representing over 20 different
trademarks.
1.22 The third section of the report deals with statistical
trends in operational activities in 2009. First discussing incoming
information OLAF says that each initial item of information received
is subject to a thorough evaluation leading to a recommendation
whether a case should be opened or not and, if opened, the type
of action required and the priority it should have. Highlights
from the evaluation of incoming information in 2009 include:
- the volume of information received
was 969 new items and 740 decisions were taken of these;
- three sources of information
account collectively for about 90% cent of the incoming information
— informants 46%, the Commission 30% and Member States 14%;
- a significant share of new
information, 65%, related to suspected fraud in six Member States
(Bulgaria, Romania, Germany, Italy, Poland and Spain);
- the average length of standard
evaluations was stable in 2009 at 6.5 months.
1.23 For a active cases OLAF, noting that the active
period of a case extends from the time a decision on the opening
of investigations or assistance by OLAF has been taken until the
time of closure of its operational activity and a final case report
is adopted, says that 220 cases were opened and at the end of
the year it had a total of 457 active investigations and 261 monitoring
cases, with a further 462 cases under evaluation. For cases closed,
that is investigations concluded by adopting a final case report,
OLAF reports that in 2009:
- 188 cases were closed, with
only 56% closed with follow-up compared with 66.8% in 2008;
- the average duration of the
'active stage' of cases decreased from 28 to 25 months; and
- about 60% of OLAF cases were
closed in less than two years.
1.24 On follow-up of investigations OLAF notes the
106 cases closed with follow-up in 2009 triggered 193 follow-up
proceedings — 75 financial, 62 judicial, 39 administrative
and 17 disciplinary actions. Finally in this section OLAF notes
that the sums it recovers are merely a fraction of the total amounts
recovered following a fraud or other irregularity, as most recoveries
are made by Member States with no direct link to OLAF's cases.
Of the €249.2 million (£216 million) reportedly recovered
as a result of follow-up actions closed in 2009 (a 69% increase
on 2008), the agricultural sector represented more than half of
this, followed by Structural Funds, at €49.1 million (£43
million), and VAT at €33.9 million (£29 million).
1.25 In the final section of the report, on resource
management, OLAF reports that:
- it had a total budget of €78
million (£68 million);
- €58 million (£50
million) was allocated to administration and the rest, €21
million (£18 million), was dedicated to operations which
fund anti-fraud activities; and
- the difficulties it encountered
in recruiting and retaining expert staff required to fulfil its
mission in the past was largely resolved in 2009 with 33 new appointments.
The Government's view
1.26 On the "Fight against fraud" report,
document (a), the Economic Secretary to the Treasury (Justine
Greening), in her first Explanatory Memorandum of 22 October 2010,
comments:
"The Commission's report is, as usual, comprehensive
and informative. The Government supports the efforts of the Commission
and OLAF, and the cooperation of Member States in the detection
of fraud, and welcomes the various measures introduced to protect
EU funds."
The Minister comments further that:
- although the Report shows that
much has been achieved, through various reforms, initiatives and
specific ongoing improvements, there is still significant progress
to be made;
- the Government is pressing
for a reduced EU budget over the coming years and will continue
to support further measures in the fight against fraud and the
resolve to reduce irregularities;
- it is extremely disappointed
and concerned that the total estimated financial impact of irregularities,
including suspected fraud, increased to €1,492.5 million
(£1,293 million) in 2009, which the Commission attributed
to greater vigilance on its part and those of the Member States
in detecting irregularities;
- it will continue to press hard
for higher standards of financial management and action to combat
fraud against the EU budget;
- it is particularly important
that Member States, which share responsibility with the Commission
for managing the largest spending programmes, act to improve their
own management controls and audit scrutiny;
- the Government is concerned
that large amounts of money are still being wrongly paid out and
urges all concerned to make further improvements to increase their
recovery levels;
- it believes that the best means
of protecting taxpayers' money is through the prevention of fraud;
- agreeing policies which are
less prone to fraud is a key element and the UK has been a strong
advocate of simplifying the various regulations which govern the
budget sectors and will continue to push for more focus in this
area; and
- the Government will support
the Commission's bid to include binding and precautionary elements
to future EU legislation concerning shared management in support
of speedy recovery procedures, particularly in the cohesion policy
area.
1.27 On the internal audits report, document (b),
the Minister says, in her Explanatory Memorandum of 6 October
2010, that the Government considers that this report provides
a useful summary of the work of the Commission's Internal Audit
Service and shows that the service has an important role to play
in improving the Commission's governance and internal control.
She comments further that:
- at a time of fiscal consolidation
it is critical that EU funds are spent effectively and that financial
management is sound;
- although it is encouraging
to note that nearly 99% of audit recommendations were accepted
and progress had been made towards reducing the number of outstanding
recommendations, there were still significant delays in implementing
some critical recommendations; and
- at the time of reporting 26%
of very important recommendations were overdue by more than six
months.
The Minister concludes that the Government will be
seeking assurances from the Commission that appropriate action
will be taken to speed up the implementation of recommendations
more quickly than in previous years.
1.28 On the OLAF annual report, document (c), the
Minister, in her second Explanatory Memorandum of 22 October 2010,
says that the Government welcomes this report and supports the
work carried out by OLAF to take action against fraud in the EU.
She comments further that:
- the statistical data and case
studies highlight the work of OLAF and the investigations undertaken
during 2009 and the Government is encouraged by all the positive
efforts to protect the EU's financial interests;
- the Government welcomes the
signs of progress in OLAF's operational output;
- but it urges OLAF to intensify
its efforts in reducing the average duration of investigations,
currently 25 months, as a lower turnaround time would give a better
indication of the level of fraud, and to improve the effectiveness
of its investigations, as presently only 56% of cases closed were
followed up by criminal or disciplinary procedures (down from
66.8% compared to 2008);
- while the €249.2 million
(£216 million) reportedly recovered by OLAF at the end of
2009 is welcomed, the Government believes its many partners, including
the Member States, must continue to cooperate fully with OLAF
to make real progress in speeding up the recovery procedures;
and
- reducing the level of money
wrongly paid out should be a priority for all within and outside
the EU.
Conclusion
1.29 The Commission's annual report on the fight
against fraud, document (a), is a useful basis for regular consideration
of how matters stand on improving management of the EU's financial
resources and, as is our custom, we recommend that it should be
debated in European Committee, together with the annual report
of the European Court of Auditors, once that is received.
1.30 As for the Commission Report to the Discharge
Authority, document (b), and the OLAF report, document (c), these
provide additional information relevant to better management of
the EU's financial resources and we recommend that they should
also be debated with the annual report of the European Court of
Auditors in European Committee B.
1.31 In the debate Members might wish to examine
especially the grounds for the Government's optimism, albeit moderately
expressed, about improvement in the EU's financial management.
1 See OJ No. C 316, 27.11.95, p 48. Back
2
See OJ No. C 219, 12.9.09, pp 1-10. Back
3
See OJ No. C 313, 23.10.96, p.1, OJ No. C 151, 20.5.97, pp 1-28,
and OJ No. C 221, 19.7.97. pp 1-22. Back
4
COM(08) 77, 14.2.2008. Back
5
ASEM members are Brunei, Cambodia, China, India Indonesia, Japan,
Korea, Laos, Malaysia, Mongolia, Myanmar, Pakistan, Philippines,
Singapore, Thailand, Vietnam, the ASEAN secretariat, the 27 EU
Member States and the Commission. Back
6
See OJ C 184E, 08.07.2010, p.63. Back
7
An automatic clearance mechanism for unsuccessful recoveries of
unduly paid amounts in which Member States' budgets are charged
50% of amounts they fail to recover from a beneficiary, after
four years of a finding to do so.
They are then required to conclude the
recovery procedure and to credit the amount recovered to the EU
budget. Failure to do this diligently may result in a Commission
decision of charging the whole amount to the Member State. Back
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