Making financial corrections

1) OBJECTIVE

To lay down the procedure for making financial corrections to assistance granted under the Structural Funds.

2) ACT

Commission Regulation (EC) No 448/2001 of 2 March 2001 laying down detailed rules for the implementation of Council Regulation (EC) No 1260/1999 as regards the procedure for making financial corrections to assistance granted under the Structural Funds [Official Journal L 64 of 06.03.2001].

3) SUMMARY

The general Regulation on the Structural Funds for the programming period 2000-06 requires the Member States to make the financial corrections required as a result of an individual or systemic irregularity by cancelling all or part of the Community contribution.

Applying this provision in uniform fashion throughout the Community requires rules to determine the financial corrections and the information to be sent to the Commission. These rules are without prejudice to those on the recovery of State aids.

There are two types of financial corrections:

• those made by the Member States,
• those made by the Commission.

Financial corrections made by the Member States

When cancelling all or part of the Community part-financing, the Member States must take account of the nature and seriousness of the irregularities and the financial loss to the Structural Funds.

In an annex to the last quarterly report for each year, the Member States are to notify the Commission of the list of procedures for the cancellation of assistance begun during the previous year and of any measures to adjust the systems of management and inspection.

The cancelled contribution from the Structural Funds may not be reallocated to the operation to which the correction related. However, the Member States must notify the Commission of their decisions or proposals to reallocate the amounts cancelled, indicating, where appropriate, any amendment to the financing plan for the assistance.

Financial corrections made by the Commission

The Commission may find that a Member State has not complied with its obligations, that all or part of the assistance does not justify a contribution from the Funds or that national systems of management and inspection result in irregularities which are systemic in nature. It may then decide to make financial corrections equal to the expenditure wrongly charged to the Funds.

If it is impossible to quantify the irregular expenditure, the Commission will base its financial corrections on an extrapolation (the use of a representative sample of transactions with similar characteristics) or adopt a flat-rate basis (assessment of the gravity of the infringement and the extent of the financial consequences).

The Member State has two months in which to respond to the Commission's requests; there are no exceptions to this time limit. The Member State may show that the actual size of the irregularity is less than that detected by the Commission. To do that, it has a further two months. From the date of the hearing at which the Member State explains its reasons, the Commission has three months to take a decision.

In accordance with the Financial Regulation applicable to the general budget of the European Communities, financial corrections must be repaid to the Commission within the time period specified in the recovery order. A delay in repayment results in the levying of interest.

Regulation (EEC) No 1685/90 has been repealed. It continues to apply to assistance granted for the period 1994-99.

Last updated: 18.07.2005