EUROPEAN COMMISSION

Brussels, 14.7.2016

SWD(2016) 235 final

COMMISSION STAFF WORKING DOCUMENT

Statistical evaluation of irregularities reported for 2015
Own Resources, Natural Resources, Cohesion Policy, Pre-accession and Direct expenditure

Accompanying the document

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL

Protection of the European Union's financial interests - Fight against Fraud
2015 Annual Report

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TABLE OF CONTENTS

COMMISSION STAFF WORKING DOCUMENT Statistical evaluation of irregularities reported for 2015 Own Resources, Natural Resources, Cohesion Policy, Pre-accession and Direct expenditure    

LIST OF ABBREVIATIONS

1.Introduction

1.1.Scope of the document

1.2.Structure of the document

2.Traditional Own Resources

2.1.Introduction

2.2.General analysis – Trend analysis

2.2.1.Reporting Years 2011-2015

2.2.2.OWNRES data vs TOR collection

2.2.3.Recovery

2.3.Specific analysis

2.3.1.Irregularities reported as fraudulent

Case study: Cigarette smuggling

Case study: Solar panels from China

2.3.2.Irregularities not reported as fraudulent

2.4.Member States’ activities

2.4.1.Classification of cases as fraudulent and non-fraudulent and related rates

2.4.2.Recovery rates

2.4.3.Commission’s monitoring

3.Common Agricultural Policy (CAP)

3.1.Introduction

3.2.General analysis – Trend analysis

3.2.1.Irregularities reported 2011-2015

3.2.2.Irregularities reported as fraudulent

3.2.3.Irregularities not reported as fraudulent

3.3.Specific analysis

3.3.1.Irregularities reported as fraudulent

3.4.Anti-fraud activities of Member States

3.4.1.Duration of irregularities, Detection and Reporting Efficiency

3.4.2.Detection of irregularities reported as fraudulent by Member State

3.4.2.1.Reported in 2015

3.4.2.2.Reported in the period 2011-15

3.4.3.Fraud detection rate

3.4.4.Ratio of established fraud / Dismissal ratio

Case study: preventing fraud against EAFRD

3.5.Recovery cases

Case study: VIGNOBLE XO. Aid to promote wine on the market of third countries

4.Common Fisheries Policy (CFP)

4.1.General analysis

4.2.Specific analysis

4.2.1.Types of irregularity detected

4.2.2.Method of detection

4.3.Control activity by Member States

Case study: Attempted fraud against the European Fisheries Fund

LIST OF ABBREVIATIONS

Statistical evaluation of irregularities reported for 2015
Own Resources, Natural Resources, Cohesion Policy, Pre-accession and Direct expenditure

1.Introduction

1.1.Scope of the document

The present document 1 is based on the analysis of the notifications provided by national authorities of cases of irregularities and suspected or established fraud. The reporting is performed in fulfilment of a legal obligation enshrined in sectoral European legislation.

The document accompanies the Annual Report adopted on the basis of article 325 of the Treaty on the Functioning of the European Union (TFEU), according to which “The Commission, in cooperation with Member States, shall each year submit to the European Parliament and to the Council a report on the measures taken for the implementation of this article”.

For this reason, this document should be regarded as an analysis of the achievements of Member States.

The methodology (including the definition of terms and indicators), the data sources and the data capture systems are explained in detail in the Commission Staff Working Document – Methodology for the Statistical Evaluation of Irregularities.

1.2.Structure of the document

The present document is divided in two parts.

The first part is dedicated to the analysis of irregularities reported in the area of the Traditional Own Resources (Revenue).

The second part, concerning the expenditure part of the budget, is composed of three sections, dedicated, respectively, to shared, decentralised and centralised management modes.

The section dedicated to shared management, covers the natural resources (agriculture, rural development and fisheries) and the cohesion policy. Decentralised management refers to the pre-accession policy, while the centralised management section mainly deals with internal and external policies for which the Commission directly manages the implementation.

The document is completed by 28 country factsheets, which summarise, for each Member State, the main indicators and information that have been recorded throughout the analyses.

15 Annexes complement the information and data of this document, providing a global overview of the irregularities reported according to the relevant sector regulations. Annexes from 1 to 10 concern Traditional Own Resources, Annexes 11 and 12 Natural Resources and Annexes from 13 to 15 the Cohesion Policy.

Part I - REVENUE

2.Traditional Own Resources

2.1.Introduction

For the methodological explanations about data gathering and analysis, see the Commission Staff Working Document ‘Methodology regarding the statistical evaluation of irregularities reported in 2015’, paragraph 1.3.

The following analysis is based on the data available on the cut-off date (18 March 2016) and aims to provide an overview of the reported cases of fraud and irregularities reported for 2015 together with their financial impact.

2.2.General analysis – Trend analysis

2.2.1.Reporting Years 2011-2015

The number of cases reported via OWNRES for 2015 (5 104) is about 4 % lower than the average number of cases of irregular cases reported as fraudulent and as not fraudulent for the 2011-2015 period (5 338).

In 2015, 2 big cases for a total amount of nearly EUR31 million were reported compared to 2014, when 5 big cases with a total amount of about EUR 161 million affected the total estimated and established amount. Luxemburg did not communicate any case exceeding an amount of EUR 10 000.

CHART TOR1: Total number of OWNRES cases and the related estimated and established amount (2011-2015)

Annex 1 of the summary tables shows the situation on the cut-off date (18 March 2016) for the years 2011-2015.

2.2.1.1.Irregularities reported as fraudulent

The number of cases reported as fraudulent registered in OWNRES for 2015 (612) is currently 26 % lower than the average number of cases reported for the 2011-2015 period (822).

The total estimated and established amount of TOR involved (EUR 78 million) represents a decrease of 34 % of the average estimated and established amount for the years 2011-2015 (EUR 119 million).

For 2015, Luxemburg, Malta, the Netherlands and Sweden did not communicate any fraudulent case exceeding an amount of EUR 10 000.

CHART TOR2: OWNRES cases reported as fraudulent and the related estimated and established amount (2011-2015)

On the cut-off date, 12 % of all cases detected in 2015 were classified as fraudulent. The percentage remained quite stable in comparison to 2014.

Annex 2 of the summary tables shows the situation on the cut-off date for years 2011-2015.

2.2.1.2.Irregularities not reported as fraudulent

At the same time, the number of cases not reported as fraudulent communicated via OWNRES for 2015 (4 492) was 1 % lower than the average number reported for 2011-2015 (4 515).

The total estimated and established amount of TOR (EUR 349 million) was 1 % higher than the average estimated and established amount for the years 2011-2015 (EUR 347 million).

Only Luxemburg did not report any case of irregularity exceeding an amount of EUR 10 000 for 2015.

CHART TOR3: OWNRES cases not reported as fraudulent and the related estimated and established amount (2011-2015)

Annex 3 of the summary tables shows the situation on the cut-off date for years 2011-2015.

2.2.2.OWNRES data vs TOR collection

In 2015, the total established amount of TOR (gross) was EUR 25.4 billion and more than 98 % was recovered without any particular problem and made available to the Commission via the A-account. In comparison with the total estimated and established amount, according to the OWNRES data, around EUR 427 million has been established or estimated by the Member States in connection with cases reported as fraudulent/not fraudulent where the amount at stake exceeds EUR 10 000.

The total estimated and established amount reported in OWNRES represent 1.71 % of the total established and collected amount of TOR (gross) for 2015. 2 This proportion has decreased compared with 2014 when it was 2.79 % 3 . A percentage of 1.71 % indicates that of every EUR 100 of TOR (gross) established, an amount of EUR 1.71 is registered as irregular (fraudulent or non-fraudulent) in OWNRES. There are differences among the Member States. In 9 Member States 4 , the percentage is above the average of 1.71 %. The highest percentage for 2015 can be seen in Greece, Romania and Latvia with 8.95 %, 5.07 % and 5.04 % respectively. For Germany, the proportion of estimated and established OWNRES amounts to established TOR remained almost stable in 2015 compared to the previous year. For Denmark, Greece, Croatia, the Netherlands and Finland, the proportion of estimated and established OWNRES amounts to established TOR increased in 2015 compared to the previous year.

For the six 5 Member States which established and made available most of the TOR amounts, the percentage of the estimated and established OWNRES amounts to established TOR for 2015 was equal to 1.88 %. In comparison with the previous year, this represents a decrease of 0.43 percentage points.

TOR MAP1: Showing the percentage of established and estimated amounts in OWNRES of established TOR for 2015

2.2.3.Recovery

The fraud and irregularity cases detected in 2015 show an established amount of EUR 390 million. EUR 199 million of this was recovered in cases where an irregularity was at stake and EUR 19 million in fraudulent cases. In total EUR 218 million was recovered by all Member States for all cases which were detected in 2015. In absolute numbers, Germany recovered the highest amount in 2015 (EUR 95 million) followed by the United Kingdom (EUR 31 million). This is a starting point for the recovery. Analysis shows that lengthy recovery procedures spread over several years are usually required due to administrative and judicial procedures in complex cases or cases with huge financial impact.

In addition, Member States continued their recovery actions related to the detected cases of previous years. The EU-28 recovered EUR 94 million in 2015 which related to cases detected between 1990 and 2014.

2.2.3.1.Recovery rates 

Over the past, five years the annual RR has varied between 46 % and 73 % (see Chart TOR4). The recovery rate for 2015 is currently 56 % 6 . In other words, of every amount over EUR 10 000 of duties established and reported for 2015 in OWNRES, approximately EUR 5 600 has already been paid.

CHART TOR4: Annual recovery rates (2011-2015)

The overall recovery rate is a correlation between the detection rate, the established amount and the current recovery stage of individual cases (high additional duty claims undergo more frequently long lasting administrative and criminal procedures).

Recovery rates vary among the Member States. The highest recovery rates for 2015 are in Estonia (100%), Slovenia (100%), Sweden (99%), Austria (96 %) and Finland (94%). Differences in recovery results may arise from factors such as the type of fraud or irregularity, or the type of debtor involved. Because recovery is ongoing, it can be expected that the recovery rate for 2015 will also go up in the future.

On the cut-off date, the overall RR for all years 1989-2015 was 59 %.

2.3.Specific analysis

2.3.1.Irregularities reported as fraudulent

2.3.1.1.Modus operandi

A breakdown of frauds by mechanism type reveals that most fraudulent cases relate to smuggling of goods. Incorrect origin or country of dispatch, incorrect value or classification are frequently mentioned in 2015.

In 2015, the customs procedure ‘release for free circulation remained the procedure most vulnerable to fraud (76 % of the number of cases and 74 % of the estimated and established amount). A total of 14 % of all cases reported as fraudulent and 14 % 7 of all estimated and established amounts in OWNRES cases registered as fraudulent for 2015 fall under the category "Other". 8  A total of 6 % of all cases reported as fraudulent and 3 % of all estimated and established amounts in OWNRES cases registered as fraudulent for 2015 involve the transit procedure.

Of all cases reported as fraudulent about 75 % concern such goods as tobacco, electrical machinery and equipment, footwear and textiles, articles of iron and steel, and mineral oils. In monetary terms those groups of goods represent about 88 % of all amounts estimated and established for cases reported as fraudulent. China, the United Arab Emirates, the United States, Belarus, Russia and Ukraine are most frequently reported and are the most important countries of the origin of goods.

2.3.1.2.Method of detection of fraud cases

In 2015 9 , most fraudulent cases were revealed during a customs control at the time of clearance of goods (35 %) and during an inspection by anti-fraud services (34 %). Other method that featured frequently was post-clearance controls (22 %).

CHART TOR5: Method of detection 2015 – Cases reported as fraudulent – by number of cases

In monetary terms, of the EUR 78 million estimated or established in fraudulent cases registered for 2015, around 41 % were discovered during an inspection by anti-fraud services, 24 % during a post-clearance control, 23 % during a customs control at the time of clearance of goods.

CHART TOR6: Method of detection 2015 – Cases reported as fraudulent – by established amounts

In 13 Member States more than 50 % of all estimated and established amount in fraudulent cases were detected by anti-fraud services 10 . As regards amounts, controls at the time of clearance of goods were the most important method for detecting fraudulent instances in Croatia, Latvia, Slovenia, Finland and the United Kingdom. In Greece 47 % of all estimated and established amounts in fraudulent cases were detected by an inspection by services or bodies other than customs.

2.3.1.3.Smuggled cigarettes

In 2015, there were 241 cases of smuggled cigarettes registered (CN code 11 24 02 20 90) involving estimated TOR of around EUR 31 million. In 2014 the number of cases of smuggled cigarettes was 213, totalling around EUR 24 million.

The highest number of cases was reported by the UK (39). The highest amount was reported by Greece (EUR 12.9 million).

No cases were reported by the Czech Republic, Malta, Cyprus, Luxembourg, the Netherlands, Portugal and Sweden.

Table TOR1: Cases of smuggled cigarettes in 2014

Case study: Cigarette smuggling

2.3.1.4.Solar panels vulnerable to fraud – mutual assistance

In 2015, 23 cases reported as fraudulent concerned solar panels amounting to EUR 14.9 million. In all, 16 cases totalling EUR 11.8 million were detected following a Mutual Assistance notices issued by OLAF. This underlines the importance of investigations conducted by OLAF in this particular field.

Case study: Solar panels from China

2.3.1.5.Cases reported as fraudulent by amount

In 2015, the estimated and established amount was below EUR 50 000 in 468 cases reported as fraudulent (76 % of all fraud cases), whereas it was above EUR 50 000 in 144 cases (24 %).

The total estimated and established amount in cases reported as fraudulent where the amount at stake was above EUR 50 000 amounted to EUR 49 million (62 % of the total estimated and established amount for cases reported as fraudulent).

Table TOR2: Cases reported as fraudulent by amount category in 2015

2.3.2.Irregularities not reported as fraudulent

2.3.2.1.Modus operandi

A breakdown of irregularities by mechanism type shows that most cases of irregularity relate to incorrect declarations (incorrect value, classification, country of origin or use of preferential arrangements) and formal shortcomings (failure to fulfil obligations or commitments).

Not all customs procedures are equally susceptible to irregularities; their vulnerability may change in the course of time as certain economic sectors are briefly targeted. The customs procedure ‘release for free circulation’ is the customs procedure mostly affected by irregularities since at the time of release for free circulation the non-compliance in the customs declaration may relate to a large number of irregularities, e.g. to the tariff, CN code, (preferential) origin, incorrect value, etc. On the other hand, in customs suspension regimes (like warehousing, transit, etc. - where the payment of duties is suspended) the sole irregularity that might occur is the subtraction of the goods from customs supervision. Thus it is normal, and indeed to be expected, that most fraud and irregularities be reported in connection with the procedure ‘release for free circulation’.

In 2015 most of the estimated and established amounts in OWNRES in the EU-28 (86 %) for cases reported as non-fraudulent related to the customs procedure ‘release for free circulation’. 12 In all, 9 % of all amounts estimated or established in cases not reported as fraudulent in 2015 involved inward processing 13 , 3 % of all amounts estimated or established related to customs warehousing. Other customs procedures are only marginally affected in 2015.

Of all cases reported as non-fraudulent about 56 % concern such goods as electrical and mechanical machinery, vehicles, articles of iron, steel and aluminium, textiles and plastics. In monetary terms those groups of goods represent about 67 % of all amounts estimated or established for cases reported as non-fraudulent. China, USA, Japan, Cuba Russia, Brazil and India are most frequently reported and most important countries of origin of goods affected by irregularities.

2.3.2.2.Method of detection of non-fraudulent cases

In 2015, most non-fraudulent cases (54 %) were revealed during post-clearance customs controls. Other methods of detection for non-fraudulent cases that featured frequently were voluntary admission (16 %), clearance controls (13 %), tax audits (10 %) followed by anti-fraud services (5 %). 14

CHART TOR7: Method of detection 2015 – Cases not reported as fraudulent – by number of cases

Considering the estimated or established amounts, around 56 % of all irregularity cases registered for 2015 were discovered during a post-clearance control, 15 % were related to voluntary admission 12 % were found during a control at the time of clearance of goods, whereas 10 % related to a tax audit, and 7 % to an inspection by anti-fraud services.

CHART TOR8: Method of detection 2015 – Cases not reported as fraudulent – by established amounts

In 16 Member States, more than 50 % of all non-fraudulent cases — in amounts — were detected by post-clearance controls. 15 In France, Croatia and Romania more than 50 % of the amounts relating to non-fraudulent cases were detected by anti-fraud services. Significant amounts were reported as non-fraudulent following voluntary admission by Germany (EUR 30 million) and the UK (EUR 15 million). In 13 Member States voluntary admission was keyed in as a method of detection of cases reported as non-fraudulent.

2.3.2.3.Solar panels vulnerable to irregularities – mutual assistance

In 2015, solar panels originating in China were especially vulnerable to non-fraudulent irregularities in monetary terms. 27 % of the total amount (EUR 93 million) that was established or estimated in non-fraudulent irregularities was affected by this type of goods. Incorrect country of origin or dispatching country was the main pattern of the infringement reported. In particularly, the Netherlands was affected by this type of goods and infringement. Other 14 Member States reported also cases related to solar panels to a smaller extent 16 . Following Mutual Assistance notices issued by OLAF 72 cases totalling to EUR 82 million were detected. This underlines the importance of investigations conducted by OLAF in this particular field.

2.3.2.4.Vehicles – voluntary disclosure

In 2015, 331 cases reported as non-fraudulent concerned different types of vehicles amounting to EUR 32 million. Incorrect value, incorrect documents or incorrect classification were the main pattern of the infringement reported. Estonia, Ireland, Croatia, Cyprus 17 , Malta, Luxemburg, Portugal and Slovakia appeared not to be affected by irregularities related to this type of goods. In all, 59 cases totalling EUR 18 million were revealed following a voluntary admission by economic operators. In particular, Germany was affected by voluntary admission of cases of vehicles imported with an incorrect value 18 .

2.3.2.5.Cases not reported as fraudulent by amount

In 2015, the established amount was below EUR 50 000 in 3 481 non-fraudulent cases (77 % of all irregularity cases), whereas it was above EUR 50 000 in 1 011 cases (23 %).

The total estimated and established amount in non-fraudulent cases where the amount at stake was above EUR 50 000 amounted to EUR 278 million (80 % of the total estimated and established amount for non-fraudulent cases).

Table TOR3: Cases not reported as fraudulent by amount category in 2015

2.4.Member States’ activities 

2.4.1.Classification of cases as fraudulent and non-fraudulent and related rates

For 2015, Member States reported 612 cases as fraudulent out a total of 5 104 cases reported via OWNRES, which indicates a Fraud Frequency Level (FFL) of 12 %. The differences between Member States are relatively large. In 2015 most Member States categorised between 10-50 % of all cases reported as fraudulent. However, Malta, the Netherlands and Sweden did not categorise any cases reported as fraudulent. 19 Four Member States categorised less than 10 % of cases as fraudulent. 20 Four Member States registered more than 50 % 21 of cases as fraudulent.

In 2015, the total estimated and established amount affected by fraud in the EU was EUR 78 million and the overall fraud detection rate was 0.31 %. For 2015, the highest percentages can be seen in Greece 7.31 % and Latvia 4.08 %. 22

The total estimated and established amount affected by irregularities was more than EUR 349 million which indicates an irregularity detection rate of 1.40 %. The highest percentages can be seen in Romania (4.42 %), Malta (3.84 %) and the Netherlands (3.81 %). 23

There are large differences between Member States’ classifications, which may partly depend on their classification practices. This can influence the comparison of the amounts involved in cases reported as fraudulent and as non-fraudulent by Member States. Moreover, individual bigger cases detected in a specific year may affect annual rates significantly. Factors such as the type of traffic, type of trade, the level of compliance of the economic operators, the location of a Member State can influence the rates significantly. Bearing in mind these variable factors, the detection rates can also be affected by the way a Member State’s customs control strategy is set up to target risky imports and to detect TOR-related fraud and irregularities.

2.4.2.Recovery rates 

2.4.2.1.Cases reported as fraudulent

Over the 1989-2015 period, OWNRES shows that, on average, 15 % of the initially established amount was corrected (cancelled). The recovery rate (RR) for all years (1989-2015) is 34 %. 24 The RR for cases reported as fraudulent and detected in 2015 was 39 % 25 which is slightly above the average rate of 37% for fraudulent cases for the 2011-2015 period. 26 In general, the RR in cases reported as fraudulent is clearly much lower than that for cases not reported as fraudulent.

2.4.2.2.Cases not reported as fraudulent

OWNRES shows that on the cut-off date, on average 38 % (1989-2015) of the initially established amount in relation to cases not reported as fraudulent has been corrected (cancelled) since 1989. The RR for non-fraudulent cases reported for 2015 is 58%. 27 On the cut-off date, the annual RR for the last five years has varied between 51 % and 81 %. The overall RR for all years (1989-2015) for all cases not reported as fraudulent is 70 %. 28

2.4.2.3.Historical recovery rate

Also in the long term, the HRR reveals an equally strong relation as annual recovery rates, showing that recovery in cases reported as fraudulent is generally much less successful than in cases not reported as fraudulent (see table TOR4). Classification of a case as fraudulent is thus a strong indicator for forecasting short- and long-term recovery results.

Table TOR4: Historical recovery rate (HRR)

2.4.3.Commission’s monitoring 

2.4.3.1.Examination of the write off reports

In 2015, 19 Member States submitted 130 new write-off reports to the Commission. In 2015, the Commission assessed 255 cases in all totalling EUR 104 million. In 110 of these cases amounting to EUR 28 million, 29 the Commission's view was that the Member States did not demonstrate satisfactorily that the TOR was lost for reasons not imputable to them so they were considered financially responsible for the loss.

Examination of Member States’ diligence in write-off cases constitutes a very effective mechanism for gauging their activity in the field of recovery. It encourages national administrations to step up the regularity, efficiency and effectiveness of their recovery activity, since any lack of diligence leading to failure to recover results in individual Member States having to foot the bill.

2.4.3.2.Commission’s inspections 

In its TOR inspections, the Commission has put a special emphasis on Member States’ customs control strategies and closely monitors their actions in relation to the observations made during the inspections. Member States show their willingness to adapt their control strategies and to progressively implement systems that provide for efficient and effective risk analysis to protect the EU’s financial interests. However, budgetary constraints reduce customs agents in charge of control in many Member States and in some Member States trade facilitations and over-simplifications might undermine the control efficiency and thus the protection of the EU financial interest. Also adjustments of the procedures for detection and reporting of irregular cases are applied by Member States with the aim to improve the quality of the information on irregular cases. In 2015, "Tariff suspensions and quotas", "Preferential tariff measures" and "Entry of goods into the EU" were the main inspection themes of the on-the-spot customs inspections by the Commission services in Member States.

One general conclusion drawn by the Commission from its inspections in Member States in recent years is that their control strategies are increasingly shifting from customs controls at the time of clearance of goods to post-clearance customs controls. The customs controls before or at the time of clearance of goods remain however indispensable for detection of new types or patterns of fraud or irregularities. Therefore, the customs controls strategy should be frequently reviewed taking into account recent detections or new risks.

Considering the fraud diversion and spreading of specific fraud mechanism, EU-wide and international cooperation in detection of irregular cases is more and more required.

2.4.3.3.Particular cases of Member State failure to recover TOR 

If TOR are not established because of an administrative error by a Member State, the Commission applies the principle of financial liability. 30  Member States have been held financially liable in 2015 for over EUR 8 million, and new cases are being given appropriate follow-up.

Part II - EXPENDITURE

Section I - Shared Management

Sustainable Growth: Natural Resources

Success in previous decades in guaranteeing sufficient food production, has led to a shift in emphasis to, producing higher quality food for consumers, increasing farms' profitability, diversifying the rural economy and protecting the natural environment. There is a direct management component but the majority of expenditure is disbursed by Member States under the following shared management funds.

The European Agricultural Guarantee Fund (EAGF) which finances direct payments to farmers and measures to respond to market disturbances, such as private or public storage and export refunds.

The European Agricultural Fund for Rural Development (EAFRD) which finances the rural development programmes of the Member States.

The European Maritime and Fisheries Fund (EMFF) which provides funding and technical support for initiatives that can make the fishery industry more sustainable.

EAFRD and EMFF are among the five European Structural and Investment Funds (ESIF) which complement each other and seek to promote a growth and job based recovery in Europe.

The EMFF is the successor of the European Fisheries Fund (EFF), for which the full resources have been committed by the end of 2014, but about 25% of commitments still had to be paid out.

Table NR1 shows the financial resources available for this policy area.

Table NR1: Financial instruments and 2015 appropriations for the Natural Resources Policies

3.Common Agricultural Policy (CAP)

3.1.Introduction

For the last 50 years the Common Agricultural Policy (CAP) has been the European Union's (EU) most important common policy. This explains why traditionally it has taken a large part of the EU's budget, although the percentage has steadily declined over recent years.

The CAP is financed by two funds, EAGF and EAFRD, which form part of the EU's general budget.

Under the basic rules for the financial management of the CAP, the Commission is responsible for the management of the EAGF and the EAFRD. However, the Commission itself does not make payments to beneficiaries. According to the principle of shared management, this task is delegated to the Member States, who themselves work through national or regional paying agencies. Before these paying agencies can claim any expenditure from the EU-budget, they must be accredited on the basis of a set of criteria laid down by the Commission.

The paying agencies are, however, not only responsible for making payments to the beneficiaries. Prior to doing so, they must, either themselves or through delegated bodies, satisfy themselves of the eligibility of the aid applications. The exact checks to be carried out are laid down in the different sectorial regulations of the CAP and vary from one sector to another.

The expenditure made by the paying agencies is then reimbursed by the Commission to the Member States, in the case of the EAGF on a monthly basis and in the case of EAFRD on a quarterly basis. Those reimbursements are, however, subject to possible financial corrections which the Commission may make under the clearance of accounts procedures.

Table NR2 shows the financial resources available for the CAP.

Table NR2: Financial instruments and 2015 appropriations for the CAP

3.2.General analysis – Trend analysis

3.2.1.Irregularities reported 2011-2015

Table NR3 presents the trend of the irregularities (fraudulent and non-fraudulent) reported by Member States for the period 2011-15 in relation to the funds concerned.

This shows an overall increase between 2014 and 2015 by 26% and 134.1% between 2011 and 2015. However, while the irregularities affecting EAGF have remained stable over time (+6% in comparison with 2014 and 10% with 2011), those related to the EAFRD have been constantly increasing, as showed by the chart below (+35% in comparison with 2014 and +418% in comparison with 2011).

Table NR3: Irregularities reported by Fund –2011-15 for the CAP

It should be noted that the two funds function very differently, with the EAGF following an annual implementation, while programmes financed by the EAFRD have a multiannual logic, which resembles that of the Structural Funds. The trend of irregularities detected and reported further highlights those similarities and therefore appears physiological.

The irregularities notified by a minority of Member States (Romania, Italy, Spain, Poland, Hungary, Portugal and Lithuania) represent about 69% of the total number of reported irregularities.

Table NR4 provides in the same form of Table NR3 information about the trends linked to the financial amounts involved in cases of reported irregularities, which have increased by 53% in comparison with the previous year. For the monetary value, the largest share in 2015 is still represented by the EAFRD component, which becomes relatively predominant, if one bears in mind that it represents between 20% and 30% of the total resources for the CAP and the financial value of the irregularities reported count for 52% of the total amount in 2015 and 41% for the period 2011-2015.

The impact of the financial amounts involved in irregularities is very different between the two funds, as it is 0.39% for the EAGF and 1.93% for the EAFRD.

Table NR4: Financial amounts involved in reported irregularities by Fund –2011-15 for the CAP

The trend analysis about the financial amounts can be misleading as it can be greatly influenced by single observations of significant value. For instance, the 'distance' observed in 2011 between the two funds, finds entire explanation in very few cases involving high amounts linked to the EAGF, which determine the divergence from the trend highlighted in Table NR3. The continuous growth of the financial value of irregularities related to the EAFRD is, however, in line with the general trend of irregularities reported showed in Table NR3.

3.2.2.Irregularities reported as fraudulent

Table NR5 presents the trend of the irregularities reported as fraudulent by Member States for the period 2011-15 in relation to the fund concerned. This shows an overall decrease in comparison to 2014 by 16%. However, while the fraudulent irregularities related to the EAGF have increased by 11%, those linked to the EAFRD have decreased by 31% after three consecutive years of growth.

Despite these contrasting trends, for the second consecutive year in the analysed period, the irregularities reported as fraudulent related to the EAFRD have the highest share on the total (55%) and reaching 47% on the whole reference period 2011-15 (up from 42% in the previous analysis for 2010-14). The share of irregularities committed by beneficiaries of both funds decreases at 7% on the five years analysis (in comparison with 12% highlighted in relation to the period 2010-14).

Table NR5: Irregularities reported as fraudulent by Fund –2011-15 for the CAP

Similar to 2013 and 2014, the irregularities notified by four Member States (Romania, Poland, Hungary and Italy) represent about 74% of the total number of irregularities reported as fraudulent.

Poland, Ireland, Latvia, Lithuania, Portugal, United Kingdom have reported an increasing number of fraudulent cases.

The first ten countries taken together have reported 466 of potential fraudulent cases, which represents almost 92% of the total (in 2013 the first nine together had reported about 94% of the total fraudulent irregularities).

Table NR6 provides in the same form of Table NR5 information about the trends linked to the financial amounts involved in cases reported as fraudulent, which have increased by 7% in comparison with the previous year and decreased by 30% in comparison with 2011. For the monetary value, the largest share in 2015 is still represented by the EAGF component. The EAFRD becomes relatively predominant, if one bears in mind that it represents between 20% and 30% of the total resources for the CAP and the financial value of the irregularities reported as fraudulent represent 41% of the total amount in 2015. For the period 2011-2015, however, the distribution remains roughly in line with the share of the resources between the funds.

Table NR6: Financial amounts involved in irregularities reported as fraudulent by Fund –2011-15 for the CAP

The trend analysis about the financial amounts can be misleading as it can be greatly influenced by single observations of significant value. For instance, the 'distance' observed in 2011 between the two funds, finds entire explanation in very few cases involving high amounts linked to the EAGF, which determine the divergence from the trend highlighted in Table NR5. In the period 2011-15, the share of the EAFRD on the total is 20%, in line with the share of the resources allocated to the fund on the total of the CAP resources over the same period.

3.2.3.Irregularities not reported as fraudulent

Regarding irregularities not reported as fraudulent, the number of those reported relating to EAFRD has been constantly increasing (see Table NR7), while those related to EAGF has remained relatively stable or record minor variations. Consistently with this trend, also the irregular financial amounts linked to the rural development instrument have been constantly increasing (as highlighted in Table NR8).

Contrary to the irregularities reported as fraudulent, only 2% of those not reported as fraudulent relates to infringements reported as affecting both funds. This share shrinks to 1% in relation to the financial impact of these irregularities (see Table NR8).

Table NR7: Irregularities not reported as fraudulent by Fund – 2011-15 for the CAP

Unlike fraudulent irregularities the largest share, in terms of numbers, is for the EAFRD since 2013, and in the two last years of the period 2011-15 the number of irregularities linked to this fund have almost been the double of those affecting the EAGF.

The irregular financial amounts related to the EAFRD are also progressively increasing since 2011 and in 2015 they represented the highest share.

Table NR8 shows the information concerning the years 2011-15.

Table NR8: Financial amounts linked to irregularities not reported as fraudulent by Fund – 2011-15 for the CAP

3.3.Specific analysis

3.3.1.Irregularities reported as fraudulent

3.3.1.1.Modus operandi

EAGF

Table NR9 compares the types of irregularity / modi operandi linked to fraudulent cases detected in 2015 with those detected from 2011 to 2015 (included) in relation to the EAGF.

The most recurrent modus operandi is related to infringements linked to the documentary proofs requested, and in particular, to the use of 'false or falsified declarations', 'false or falsified documents' and 'false or falsified request for aid', ‘declaration of fictitious product, species and/or land’ in line with what reported in general for the whole period 2011-2015. ‘Quantities outside permitted limits, quotas or thresholds (related, respectively to products, species or land)’ remained a significant reported type of breach.

For 26 of the 180 cases reported (14%), irregularities related to ‘Ethics and Integrity’ were specified. This typology refers to cases of ‘corruption’ and ‘conflict of interest’ in particular. In the previous four years taken into account for the analysis, other 7 cases had been reported, although the amounts involved in such cases were particularly significant. 13% of the EUR 292 million affected by irregularities reported as fraudulent in the period 2011-15 for the EAGF are linked to breaches of ‘Ethics and Integrity’.

Table NR9: Types of irregularities in relation to EAGF

EAFRD

Table NR10 compares the types of irregularity / modi operandi linked to fraudulent cases detected in 2015 with those detected from 2011 to 2015 (included) in relation to the EAFRD.

In 2015, 44 irregularities reported as fraudulent indicated that breaches had occurred in relation to ‘Ethics and Integrity’. In the previous four years this category had been indicated in eleven cases. The remaining detected typologies more frequently are in line with those reported in previous years and relate to the ‘documentary proof (supporting documents provided), the ‘request for aid’, the ‘quality of the beneficiary’, the 'implementation' of the action.

Table NR10: Types of irregularities in relation to EAFRD

3.3.1.2.Type of control / method of detection of irregularities reported as fraudulent

For the first time, this section is presented similarly to the previous paragraph, i.e. making a distinction between detection of irregularities reported as fraudulent in relation to the EAGF and to the EAFRD.

This distinction would allow taking into consideration the different nature of actions and projects financed through the different funds, avoiding that the predominance of one or the other would “hide” specific situations.

EAGF

In recent years, the role of the administrative bodies has been constantly growing. Also in 2015, the ‘administrative controls’ have detected the majority of the irregularities reported as fraudulent. Table NR11 shows the types of control having identified the irregularities reported as fraudulent.

Over the period 2011-15, the administrative controls detected about 53% of potentially fraudulent infringements.

The impact in monetary terms of anti-fraud controls and criminal investigations remain significant and counts for 67% of the total detections for the period 2010-14.

Table NR11: EAGF - Control methods having identified the irregularities reported as fraudulent in 2015 and for the period 2011-15

EAFRD

In recent years, the role of the administrative bodies has been constantly growing. In 2015, the ‘administrative controls’ have detected the majority of the irregularities reported as fraudulent (52%), showing an increase in comparison to the overall 2011-15 period (44%). Table NR12 shows the types of control having identified the irregularities reported as fraudulent.

In relation to the EAFRD, over the period 2011-15, about 18% of the fraudulent irregularities has been detected by or following requests from EU-bodies (including OLAF).

The impact in monetary terms of anti-fraud controls and criminal investigations remain significant and counts for 51% of the total detections in 2015 and 49% for the period 2011-15.

Table NR12: EAFRD - Control methods having identified the irregularities reported as fraudulent in 2015 and for the period 2011-15

Of the 147 cases detected by or following a request from a EU-body, 141 were already reported about in 2014 as resulting from an OLAF investigation in Hungary.

It is likely that the number of OLAF’s investigations detecting potentially criminal infringements may be underestimated, if Member States did not provide the adequate information to identify them correctly.

3.4.Anti-fraud activities of Member States

Previous paragraphs have examined the trend and main features and characteristics of the irregularities reported as fraudulent.

The present paragraph aims at examining some aspects linked to the anti-fraud activities and results of Member States. Five elements are taken into account:

(1)the time that runs between the beginning of the fraudulent practice and its detection/establishment by the competent authority and reporting to the Commission (Detection / Reporting Efficiency);

(2)the number of irregularities reported as fraudulent by each Member State (over a five years’ time period);

(3)the fraud detection rate (the ratio between the amounts involved in cases reported as fraudulent and the payments occurred in the financial year 2015);

(4)the fraud prevention rate (the ratio between the amounts involved in cases reported as fraudulent which have been detected before payments were executed);

(5)the ratio of cases of established fraud on the total number of irregularities reported as fraudulent.

3.4.1.Duration of irregularities, Detection and Reporting Efficiency 

Of the 15 840 detected irregularities reported by Member States between 2011 and 2015, 60% involve infringements that have been protracted during a given span of time. For the irregularities reported as fraudulent this percentage is higher at 65%. The remaining part of the datasets refers to irregularities/breaches which consisted of a single act identifiable on a precise date or for which this information was not provided.

Taking into account only those irregularities which have been protracted in time, their average duration is of 24 months (i.e. 2 years).

The two subsets (irregularities reported as fraudulent and those not reported as fraudulent) have two different patterns.

The average duration of those reported as fraudulent is 33 months (i.e. almost 3 years) while that of those not reported as fraudulent is 22 months (i.e. almost 2 years).

Looking at the detection and reporting efficiencies of Member States, Table NR10 provides the average duration (in months) occurring between the time at which the irregularity began or was committed and when it was detected (detection efficiency), the average time gap (in months) between detection and reporting and their sum. The table also details, per Member State, the percentage of the data population which could be used for the calculations (‘usable sample’).

For the irregularities reported between 2011 and 2015, average detection efficiency is 30 months (2 years and 6 months), while reporting efficiency is at 8 months.

Table NR13: Detection and Reporting Efficiency of Member States

The data set used for Table NR13 includes the irregularities reported between 2011 and 2015.

3.4.2.Detection of irregularities reported as fraudulent by Member State

3.4.2.1.Reported in 2015

Map NR1 shows the number of irregularities reported as fraudulent in 2015 for both funds of the CAP by Member State.

Seven (7) Member States have notified no irregularity as fraudulent; fifteen (15) Member States reported between 1 and 15 fraudulent irregularities; two (2) countries reported between 16 and 30; and three (3) Member States more than 30 fraudulent irregularities.

Romania, Poland and Italy remain the three countries having reported the highest numbers.

Map NR1: Number of irregularities reported as fraudulent in 2015 by Member State - CAP

The detailed figures of Map NR1 are showed in Table NR14.

3.4.2.2.Reported in the period 2011-15

Map NR2 shows the number of irregularities reported as fraudulent between 2011-15 for both funds of the CAP by Member State.

During the period under consideration, only Finland did not report any fraudulent irregularity.

Map NR2: Number of irregularities reported as fraudulent between 2011-15 by Member State - CAP

3.4.3.Fraud detection rate

The fraud detection rate compares the results obtained by Member States in their fight against fraud with the payments received by them in a given financial year. This implies that a single case reported as fraudulent and involving a significant financial amount can produce a higher result than that achieved by the sum of the financial impact of several irregularities affecting lower amounts. For this reason, this indicator should be read in conjunction with the number of irregularities reported as fraudulent and for this reason they are presented together in Table NR14.

In 2015, the highest fraud detection rates are referred to Estonia, Lithuania, Slovenia (all above 0.50%), Hungary, Romania, Slovakia, Cyprus and France (above 0.25%).

Table NR14: number of irregularities reported as fraudulent in 2015, amounts involved and fraud detection rate by Member State

3.4.4.Ratio of established fraud / Dismissal ratio

Table NR15 shows the ratio between the cases of established fraud and the total number of irregularities reported as fraudulent (including suspected and established fraud) in the period 2009-13. Taking into account only cases reported in 2015 would be meaningless, as the criminal proceedings leading to a conviction for fraud may take several years, while using the period 2011-15 would be misleading as it will be impossible to make a sound comparison with figures published in the 2013 and 2014 Reports. However, considering that in the Commission staff working document ‘Statistical evaluation of irregularities reported in 2014’ information concerning the years 2010-14 was published (for reference for the next years) a new update also for that reference period is provided in Table NR16.

Table NR15 integrates also the ‘Dismissal ratio’, calculated by the differences between the total number of irregularities reported as fraudulent published in the corresponding table in the 2013 Report (TOTAL 2013) and the total calculated taking into account the updates received in 2014 and 2015. When the ratio is positive, it means that Member States have classified as ‘suspected’ or ‘established fraud’ irregularities appearing as non-fraudulent in 2013.

In this respect, the average ratio of established fraud at EU level is 10%, increasing from 7% of 2013. The dismissal ratio is 12%, increasing from the 4% indicated in the previous year’s analysis.

If one considers exclusively the “decisions” (established + dismissed), of the 287 decided cases (121 established fraud and 166 dismissals), 42% is the ‘conviction rate’ and 58% the ‘dismissal rate’.

Table NR15: number of cases of suspected and established fraud and ratio of established fraud – cases reported between 2009-13 in the CAP

Table NR16 provides the same information of table NR15 concerning the number of cases of suspected and established fraud and ratio of established fraud calculated for the years 2010-14. It will be used in the coming reports for comparability.

Table NR16: number of cases of suspected and established fraud and ratio of established fraud – cases reported between 2010-14 in the CAP

Case study: preventing fraud against EAFRD

3.5.Recovery cases

For an in-depth analysis of recovery and financial corrections in the CAP, see section 2.1.1.3.3 of the Annual Activity Report of DG AGRI and the Communication of the Commission to the Parliament on the protection of the EU budget 31 .

Case study: VIGNOBLE XO. Aid to promote wine on the market of third countries

4.Common Fisheries Policy (CFP)

As the activities of each fishing fleet affect the opportunities of other fleets, the EU countries have decided to manage their fisheries in collaboration, through the common fisheries policy (CFP). This policy brings together a range of measures designed to achieve a thriving and sustainable European fishing industry.

Among the most important areas of action of the CFP is the provision of funding and technical support for initiatives that can make the industry more sustainable. These actions are supported by the European Fisheries Fund (EFF).

4.1.General analysis

Table NR17 shows the overall number of irregularities (fraudulent and non-fraudulent reported by year and the related financial amounts.

The increase from one year to the other simply reflects the increased level of implementation of the programmes.

The share of irregularities reported as fraudulent on the total is 10% of the cases and 25% of the related amounts in the reference period 2011-2015.

Table NR17: EFF - Irregularities (fraudulent and non-fraudulent reported by year – 2010-2014

4.2.Specific analysis

Given the limited number of irregularities reported so far, the analysis covers the whole period 2011-15.

4.2.1.Types of irregularity detected

The number of irregularities reported in relation to the EFF is limited and to some extent incomplete in relation to the typologies of irregularities detected by national authorities.

This is reflected by the circumstance that of the 553 detected irregularities (fraudulent and non-fraudulent), 147 do not indicate the modus operandi (27% of the total).

The most detected typology is 'Not eligibility for aid of the action/project’, followed ‘control, audit, scrutiny etc. not carried out in accordance with regulations, rules, plan etc.’, ‘other irregularities’, 'Infringements of public procurement rules' and ‘Other infringements concerning the implementation of the project/action’ and 'Documents missing and/or not provided'. These types plus those for which no modus operandi has been indicated cover 79% of the reported irregularities.

In relation to the 55 irregularities reported as fraudulent, there is no real pattern emerging from the reported information, also taking into account that in 27 cases no information has been provided.

4.2.2.Method of detection

In relation to the methods of detection, the most frequently reported are 'Control of accounts', 'On-the-spot checks' and 'Initial inquiry/control of documents'. Specific information is missing in 134 cases (24%).

In relation to the irregularities reported as fraudulent, information is missing in 30 cases.

4.3.Control activity by Member States

Table NR18 shows the results of the control activities in the Member States in 2015.

18 Member States have detected and reported irregularities related to the EFF; 5 countries have reported some fraudulent cases. In terms of numbers of irregularities, the majority has been detected by the Netherlands, Portugal, Romania and the United Kingdom.

Portugal is the Member State having detected and reported the highest number of fraudulent irregularities. The 8 Bulgaria cases represent 42% of the total number of irregularities reported as fraudulent. However the two irregularities reported as fraudulent by Romania account for 39% of the related amounts.

Table NR18: EFF – Irregularities (fraudulent and non-fraudulent) reported by Member State – 2015

Table NR19 shows the overall results for the whole programming period 2007-13.

Irregularities have been detected and reported by 24 Member States; 11 Member States have reported fraudulent irregularities during this period. Spain, Portugal, Poland, the Netherlands and Romania are the countries having reported the highest number of irregularities (fraudulent and non-fraudulent). Italy is the Member State having detected and reported the highest number of fraudulent irregularities and related amounts.

The established fraud ratio in the Fishery sector is calculated at 12.5% with four Member States reporting the finalisation of the related procedures (United Kingdom, Italy, Germany and Estonia).

Table NR19: EFF – Irregularities (fraudulent and non-fraudulent) reported by Member State – 2010-15

Case study: Attempted fraud against the European Fisheries Fund

(1) This document does not represent an official position of the Commission.

(2)  See Annex 4.

(3)  On the cut-off date.

(4)  Denmark, Germany, Greece, Croatia, Latvia, Malta, the Netherlands, Austria and Romania.

(5)  Germany, the Netherlands, Belgium, Italy, France and Spain. The United Kingdom was not taken into account as the figures were extraordinary for year 2014 and would disturb the overview.

(6)  See Annex 5.

(7) This is mainly due to the cases of cigarette smuggling detected in free zones or free warehouses and reported by Greece.

(8)  The category "Other" combines, among others, the following procedures or treatments: Processing under customs control, temporary admission, outward processing and standard exchange system, exportation, free zone or free warehousing, reexportation, destruction and abandonment to the Exchequer.

(9)  See Annexes 7 and 8.

(10)  Belgium, Bulgaria, the Czech Republic, Germany, Ireland, Italy, Cyprus, Lithuania, Hungary, Austria, Portugal, Romania and Slovakia.

(11)  Combined nomenclature or CN –nomenclature of the Common Customs Tariff.

(12)  See Annex 6.

(13)  In relation to inward processing Germany and the United Kingdom reported cases amounting to EUR 15.9 and 12 million respectively.

(14)  See Annex 7 and 8.

(15)  Belgium, Bulgaria, Denmark, Estonia, Greece, Italy, Cyprus, Latvia, Lithuania, Hungary, the Netherlands, Austria, Poland, Portugal Sweden and the United Kingdom.

(16)  Belgium, the Czech Republic, Denmark, Germany, Greece, France, Italy, Malta, Austria,, Portugal, Romania, Finland, Sweden and the United Kingdom.

(17)  Cyprus reported however fraudulent cases related to this type of goods.

(18)  Customs value was corrected ex-post taking into account the amounts of licence fees.

(19)  Luxembourg did not report any irregular case in 2015.

(20)  The Czech Republic (3 %), Denmark (7%), Germany (5 %) and the UK (4 %).

(21)  Bulgaria (85 %), Greece (63 %), Cyprus (75 %) and Latvia (60 %).

(22)  See Annex 4.

(23) See Annex 4.

(24)  This calculation is based on 14 218 cases, an established amount of EUR 1.92 billion (after already processed corrections) and a recovered amount of EUR 0.64 billion.

(25)  See Annex 9.

(26)  On the cut-off date, for years 2011-2015, the annual RR for fraud cases varied between 28 % and 51 %.

(27)  See Annex 9.

(28)  This calculation is based on 73 438 cases, an established amount of EUR 4.7 billion (after already processed corrections) and a recovered amount of EUR 3.2 billion.

(29)  See Annex 10.

(30)  Case C-392/02 of 15/11/2005. These cases are typically identified on the basis of Articles 220(2)(b) (administrative errors which could not reasonably have been detected by the person liable for payment) and 221(3) (time-barring resulting from Customs’ inactivity) of the Customs Code, Articles 869 and 889 of the Provisions for application of the Code, or on the basis of non-observance by the customs administration of Articles of the Customs Code giving rise to legitimate expectations on the part of an operator.

(31) To be adopted by the month of July 2016.

EUROPEAN COMMISSION

Brussels, 14.7.2016

SWD(2016) 235 final

COMMISSION STAFF WORKING DOCUMENT

Statistical evaluation of irregularities reported for 2015
Own Resources, Natural Resources, Cohesion Policy, Pre-accession and Direct Expenditure

Accompanying the document

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL

Protection of the European Union's financial interests - Fight against Fraud
2015 Annual Report

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{SWD(2016) 234 final}
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TABLE OF CONTENTS

COMMISSION STAFF WORKING DOCUMENT Statistical evaluation of irregularities reported for 2015 Own Resources, Natural Resources, Cohesion Policy, Pre-accession and Direct expenditure    

5.Cohesion Policy

5.1.Trend analysis

5.1.1.Irregularities reported as fraudulent

5.1.2.Irregularities not reported as fraudulent

5.2.Specific Analysis – Irregularities reported in relation to the Programming Period 2007-13

5.2.1.Priorities concerned by the irregularities reported as fraudulent

5.2.2.Priorities concerned by the irregularities not reported as fraudulent

5.2.3.Types of irregularities / modus operandi detected - Irregularities reported as fraudulent

5.2.4.Type of control / method of detection – Irregularities reported as fraudulent

5.2.5.Type of irregularities not reported as fraudulent

5.3.Anti-fraud activities by Member States

5.3.1.Duration of irregularities, Detection and Reporting Efficiency

5.3.2.Detection of irregularities reported as fraudulent in 2015 by Member State

Case study: attempted fraud in an ERDF financed project in Estonia

5.3.3.Fraud detection rate

5.3.4.Ratio of established fraud 2008-2014

Case study: attempted fraud in an ESF financed project in Italy

6.Pre-Accession Policy (Pre-Accession Assistance and Instrument for Pre-Accession I and II)

6.1.The Pre-accession Assistance (PAA), 2000-06

6.2.The Instrument for Pre-accession 2007-13 – IPA I

6.3.The Instrument for Pre-accession 2014-20 – IPA II

6.4.General analysis – Trend analysis

6.4.1.Trend analysis – Pre-accession assistance (PAA)

6.4.2.Trend analysis Instrument for Pre-Accession (IPA I)

6.4.3.Reporting efforts

6.5.Specific analysis – Financial year 2015

6.5.1.Pre-Accession Assistance (PAA)

6.5.2.Instrument for Pre-Accession (IPA)

7.Direct Management

7.1.Introduction

7.2.General analysis

7.2.1.Five year analysis 2011-2015

7.3.Specific analysis

7.3.1.Recoveries according policy areas

7.3.2.Recoveries according to legal entity residence

7.3.3.Method of detection

7.3.4.Types of irregularity

7.3.5.Time delay

7.3.6.Recovery

Case study: EDF - International works contract in Côte d’Ivoire

COUNTRY FACTSHEETS

Belgium - Belgique/België

Bulgaria - България

Czech Republic - Česká republika

Denmark - Danmark

Germany - Deutschland

Estonia - Eesti

Ireland - Éire

Greece - Ελλάδα

Spain - España

France

Croatia - Hrvatska

Italy - Italia

Cyprus - Κύπρος

Latvia - Latvija

Lithuania - Lietuva

Luxembourg

Hungary - Magyarország

Malta

Netherlands - Nederland

Austria - Österreich

Poland - Polska

Portugal

Romania - România

Slovenia - Slovenija

Slovakia - Slovensko

Finland – Suomi-Finland

Sweden (Sverige)

United Kingdom

ANNEXES

Cohesion for growth and employment

Cohesion for growth and employment’ covers the Structural Funds, i.e. the European Regional Development Fund (ERDF) and the European Social Fund (ESF), as well as the Cohesion Fund (CF).

It relates essentially to the following policy areas:

–regional policy, for the ERDF and the CF, and

–employment and social affairs, for the ESF and the Youth Employment Initiative (YEI).

The principal objective of cohesion policy is to strengthen economic, social and territorial cohesion between regions and Member States of the EU by providing additional resources for those regions and countries whose economic development is lagging behind. The Structural Funds also aim at strengthening regions’ competitiveness and attractiveness, as well as employment, and at strengthening cross-border, transnational and interregional cooperation. The resources available are concentrated on promoting economic convergence, in particular on sustainable growth, competitiveness and employment in line with the Europe 2020 strategy. These resources are also essential tools to fight financial, economic and social crises.

Cohesion policy is promoted using three shared management instruments, with individual EU countries actually distributing funds and managing expenditure.

Sustainable growth is also promoted through centralised direct management by the Commission and centralised indirect management where the Commission distributes funds to EU and other agencies (see chapter 6).

5.Cohesion Policy

The resources for the Cohesion policy support two main objectives 1 :

Investment for Growth and Jobs goal: resources for this goal are allocated among the following three categories of NUTS level 2 regions:

a)less developed regions, whose GDP per capita is less than 75 % of the average GDP of the EU-27;

b)transition regions, whose GDP per capita is between 75 % and 90 % of the average GDP of the EU-27;

c)more developed regions, whose GDP per capita is above 90 % of the average GDP of the EU-27.

The European Territorial Cooperation objective: focuses on development of economic and social cross-border activities; transnational cooperation, and networking and exchange of experiences between regional and local authorities.

Four financial instruments are the vehicles to achieve the goals of this policy:

–The European Regional Development Fund (ERDF) is the largest fund and aims to support the development and structural adjustment of less developed regions in all Member States through investments in research, infrastructure, business support or direct financial support to SMEs.

–The European Social Fund (ESF) prevents and fights unemployment, by making Europe's workforce and companies better equipped to face new challenges and preventing people losing touch with the labour market. Training programs are the primary method; however advice, coordination and sometimes microfinance are also provided to entrepreneurs and SMEs.

–The Cohesion Fund promotes sustainable development in Member states with a GNI per capita below 90% of the EU average. The fund has two components: Transport and Environment.

–The Youth Employment Initiative (YEI).

Table CP1 shows the financial resources available for the Cohesion Policy under the different financial instruments. The table also shows that, even if there are virtually no more commitments related to the programming period 2000-06, payments linked to it, although limited, are still part of the picture.

Table CP1: Financial instruments and 2014 appropriations for the Cohesion Policy by programming period and financial instruments

5.1.Trend analysis

In comparison with the other budget sectors, the analysis of the Cohesion policy poses a higher level of complexity, given by the fact that the information received is related to different programming periods, which are regulated by different rules.

As only 2 irregularities have been reported (one fraudulent and one non-fraudulent) in relation to the programming period 2014-20, this will not be analysed in detail in the following paragraphs.

Table CP2 offers an overview of the irregularities (both fraudulent and non-fraudulent) reported from 2011 to 2015, by programming period. The table also details, for each programming period, the funds to which irregularities were related.

Table CP2: trend of the number of irregularities reported between 2011 and 2015 by programming period – Cohesion Policy

There is a sudden increase from 2014 to 2015 in the number of reported irregularities, which have almost doubled. Two elements can be pointed out in this respect:

1)The increase is mainly related to the programming period 2007-13.

a.This increase is for the greatest part linked to the reporting of irregularities from one Member State (Spain), which covers almost half of the total number of irregularities reported in 2015.

b.If the Spanish anomalous increase is excluded, the number of reported irregularities would still be higher than in 2014. However, this increase would follow the natural behaviour of the programming cycle of the funds. Table CP3 analyses the behaviour of the reporting in relation to programming period 2000-06 and, notably between n+3 and n+4 (where n is the last year of the corresponding multiannual financing cycle), it is possible to observe a comparable increase, which anticipates the closure of the programming period.

2)A minor, yet still striking increase of reporting is observed in relation to the irregularities related to the programming period 2000-06, whose numbers have also almost doubled between 2014 and 2015. In this respect, the explanation is much simpler, as the increase depends exclusively on the reporting from a single Member State (Ireland).

Table CP3: trend of the number of irregularities reported between 2004 and 2010 for the programming period 2000-06 – Cohesion Policy

5.1.1.Irregularities reported as fraudulent

5.1.1.1.Trend by programming period

Table CP4 analyses the trend linked to the communication of the irregularities reported as fraudulent in the last five years (2011-2015), making a distinction by Fund involved and the relevant programming period.

In the last five years, while the fraudulent irregularities linked to the PP2000-06 have been decreasing, those linked to the PP2007-13 have been constantly increasing with the only exception between 2013 and 2014. These trends are linked to the current implementation of the latter period and the closure of the previous. They also reflect the increasing attention and resources deployed to combat fraud in relation to the programming period 2007-13. One case has been so far notified in relation to the programming period 2014-20 whose implementation and spending on projects will effectively take off only in the coming years.

Table CP4: trend of the number of irregularities reported as fraudulent between 2011 and 2015 by programming period – Cohesion Policy

Table CP4 and its associated chart do not include irregularities reported as fraudulent related to previous programming periods, which have been communicated until 2011.

Table CP5 provides in the same form of Table CP4 information about the trends linked to the amounts involved in cases reported as fraudulent, confirming the continuous increase related to the PP2007-13, although, concerning involved amounts, fluctuations can be much more significant as individual cases involving high amounts can easily distort the overall picture. This is clearly the case concerning the years 2011 to 2013, with the intermediate (2012) showing the highest amounts.

Table CP5: trend of financial amounts linked to the irregularities reported as fraudulent between 2011 and 2015 by programming period – Cohesion Policy

5.1.1.2.Trend by Fund

The analysis of the same data presented in Table CP6 but focussed on the distribution of the irregularities reported as fraudulent by Fund (Table CP6), highlights the following situations:

(1)The continuous increase since 2010 of cases concerning the ERDF, after a stop in 2014, started again in 2015;

(2)Also cases related to the ESF have been constantly increasing throughout the analysed period;

(3)Potential frauds affecting the Cohesion fund are now reported regularly (since 2010), while only one case has been reported (in 2013) in relation to the whole programming period 2000-2006;

(4)Since 2013, no more cases concerning the FIFG have been reported (see chapter 4 on the EFF for the programming period 2007-2014).

Table CP6: trend of the number of irregularities reported as fraudulent between 2011 and 2015 by Fund – Cohesion Policy

Table CP7 analyses these trends examining the financial amounts linked to the irregularities reported as fraudulent in the reference period.

The analysis of the period under consideration shows an interesting distribution of the amounts involved between the ERDF, Cohesion Fund and ESF, which, to a certain extent resemble the distribution of the resources among the funds, with an underrepresentation of ESF and an overrepresentation of the Cohesion fund. As one could expect, similarly to the number of reported fraudulent irregularities, the EAGGF-Guidance is progressively shrinking, while in the last two years no reported cases concerned the FIFG.

Table CP7: trend of financial amounts linked to the irregularities reported as fraudulent between 2011 and 2015 by fund – Cohesion Policy

5.1.1.3.Trend by objective

Specific to the Cohesion Policy is that programmes and financial resources available to implement them are closely linked to the geographical dimension, that is to say that the objectives that they pursue depend on the region (and its level of economic development) in which they are implemented. For this reason, the analysis by objective is important.

From this point of view, the analysis of irregularities reported as fraudulent in the last five years does not change the trend already highlighted in past reports.

As showed in Table CP8, the fraudulent irregularities detected and reported by Member States mainly concern programmes implemented under the Convergence objective (previously Objective 1), linked to the less economically developed regions in Europe.

Their notifications have progressed in a linear way until 2013 and their increase has only slowed down in 2014.

Nonetheless, the distribution among the various objectives is remarkably similar to the distribution of the resources among the objectives, at least in relation to the overall situation 2011-2015.

This parallelism is however lost in relation to the distribution of the involved amounts as showed in Table CP9.

Table CP8: trend of irregularities reported as fraudulent between 2011-15 by Objective – programming period 2007-13

The analysis by objective presented above is exclusively referred to the programming period 2007-13.

Table CP9 analyses the trend in relation to the reported amounts linked to the irregularities showed in Table CP8.

The Convergence objective shows an absolute predominance in this respect, as it represents about 87% of the total amounts linked to fraudulent irregularities in the reference period.

After the decrease in the involved amounts in 2013, these have been increasing again.

Table CP9: trend of amounts related to irregularities reported as fraudulent between 2011 and 2015 by Objective

The analysis by objective presented above is exclusively referred to the programming period 2007-13.

5.1.2.Irregularities not reported as fraudulent

Table CP10 analyses the trend linked to the communication of the irregularities not reported as fraudulent in the last five years (2011-2015), making a distinction by Fund involved and the relevant programming period.

The reasons behind the increases related to both periods 2000-06 and 2007-13 have already been explained under paragraph 5.1.

Table CP10: trend of the number of irregularities not reported as fraudulent between 2011 and 2015 by programming period – Cohesion Policy

Table CP11 shows the trend related to the amounts linked to the reported non-fraudulent irregularities. Once more, as already mentioned several times in relation to the trends of the financial amounts, fluctuations can happen more often, as they are linked to individual irregularities or group of irregularities of significant value, which produce distortive effects from one year to the other.

Table CP11: trend of financial amounts linked to the irregularities not reported as fraudulent between 2011 and 2015 by programming period – Cohesion Policy

5.2.Specific Analysis – Irregularities reported in relation to the Programming Period 2007-13

5.1.3.Priorities concerned by the irregularities reported as fraudulent

The operational programmes financed by the Cohesion Policy are implemented in relation to the already mentioned objectives, but also along identified Priorities and Themes.

The information provided by Member States allows for an analysis of the priority areas in relation to which Member States have identified projects affected by potentially fraudulent practices.

Table CP12 shows the number of reported fraudulent irregularities by priority area per reporting year since the beginning of the programming period 2007-13.

In terms of numbers, the 'Priorities' most concerned were 'Research and Technological Development (RTD)', 'Improving access to employment and sustainability' and 'Improving human capital'.

Table CP12: PP2007-13 - Irregularities reported as fraudulent by Priority

On average, about one third of the irregularities used for this analysis did not provide information about the priority area concerned, decreasing from 44% of last year. However the table shows also how the level of completeness of the information improves over the years.

Table CP13 shows the amounts linked to the irregularities reported as fraudulent and their minimum, maximum and average value.

From the amounts point of view, the most significant results concern 'Transport', ‘RTD’ and 'Investment in Social Infrastructure'. ‘Transport’ retains also the highest maximum 2 and average values.

Table CP13: PP2007-13 – Amounts involved in irregularities reported as fraudulent by Priority

The fact that several minimum values show the value ‘0’, indicate that for a number of fraudulent cases the financial impact needs yet to be assessed.

5.1.4.Priorities concerned by the irregularities not reported as fraudulent

The same analysis showed in paragraph 1.2.1 for the irregularities reported as fraudulent is presented here for the irregularities not reported as fraudulent in relation to the programming period 2007-13.

Table CP14 shows the number of reported fraudulent irregularities per reporting year since the beginning of the programming period 2007-13.

Again, ‘Research and Technological Development (RTD)’ is the priority with the highest number of occurrences, followed by ‘Environmental protection and risk prevention’ and ‘Transport’ (all above 1 000 entries).

Table CP14: PP2007-13 - Irregularities not reported as fraudulent by Priority

Also in relation to the irregularities not reported as fraudulent the constant improvement in the completeness of data is confirmed, although to a lesser extent than for the fraudulent irregularities and with the significant exception of 2015 (probably due to the high number of irregularities reported by Spain).

Table CP15 shows the amounts linked to the irregularities not reported as fraudulent and their minimum, maximum and average value.

In this case, the category displaying the highest total amount involved and maximum value is that of the irregularities for which no indication has been given as to the priority affected. The highest average amount is linked to the priority ‘Transport’.

Table CP15: PP2007-13 – Amounts involved in irregularities not reported as fraudulent by Priority

The fact that several minimum values show the value ‘0’, indicate that for a number of fraudulent cases the financial impact needs yet to be assessed.

5.1.5.Types of irregularities / modus operandi detected - Irregularities reported as fraudulent

The analysis of the detected practices used in connection with the irregularities reported as fraudulent in 2015 (Table CP16) reveals a consolidation of existing trends. Detected fraudulent attempts mainly happen during the implementation of a project and are made through falsified documents or declarations (in about 25% of the cases), or by infringing the commitments entered into (through the signature of the financing contract), which implies that the project is not implemented according to what was initially agreed.

Violation of public procurement rules in connection with irregularities reported as fraudulent have been detected in 13% of the cases in 2015 and 9% of the total number of fraudulent irregularities reported in relation to the programming period 2007-13.

Irregularities concerning ethics and integrity (within which are included possible cases of corruption and conflict of interest) have recorded a significant increase with the 44 cases reported in 2015 and 2014 (22 per year), considering that, until 2013 included only 15 had been notified to the Commission. The related amounts for this category are particularly significant despite the low number of cases on the total, as showed by the fact that, associated to this category, there is the highest average irregular amount.

Table CP16: Programming Period 2007-13 - Types of irregularity/Modus operandi detected in relation to irregularities reported as fraudulent

The columns “% on total” (4th and 8th columns) in Table CP16 have been calculated with reference, respectively, to the ‘Total’ values referred to the year ‘2015’ and ‘TOTAL’ in Table CP12.

The data population used in this paragraph consists of all irregularities reported as fraudulent in relation to the programming period 2007-13 until the end of 2015.

The row for totals has been omitted in consideration of the fact that to the same irregularity reported may be associated several typologies of infringements and therefore the total sum of values in Table CP16 would result in multiple counting of the same irregularity notification.

The category “Infringement of contract provision / rules” includes all irregularities related to implementation of the contract, i.e. irregularities such as ‘action not implemented’, ‘action not completed’, ‘action not carried out in accordance with rules’, ‘Failure to respect other contract provisions/rules’.

The category “Eligibility / Legitimacy of expenditure / measure” refers to all irregularities concerning the eligibility of the project or of the claimed expenditure, such as ‘Not-eligible expenditure’, ‘Expenditure not-legitimate’, ‘Expenditure outside of eligibility period’,

The category “Infringements concerning the request” refers to all types of irregularities associated with the request of aid/financing, such as ‘Incorrect request for aid’, ‘Request for aid false or falsified’.

The category “Ethics and Integrity” refers to violations like ‘Conflict of interest’, ‘Bribery – active’, ‘Bribery – passive’, ‘Corruption’, ‘Other irregularities concerning integrity and ethics’.

The “other irregularities” category is a residual category to be used when all others do not provide an adequate description of the detected irregularity.

5.1.6.Type of control / method of detection – Irregularities reported as fraudulent

The analysis of the information concerning the Programming Period 2007-13 shows an important shift in relation to the previous programming period. The number of fraudulent irregularities detected by administrative controls is proportionally significantly higher than what was the case in the previous period, where the administrative verifications, on the spot checks and audit of operations would detect less than 20% of the cases, while in the current period they detect about 64%.

Table CP17: Programming Period 2007-13 - Type of checks having detected the irregularities reported as fraudulent

The results of this analysis may be influenced by the accuracy of the information reported by Member States, which may have highlighted the subsequent activity of bodies in charge of the management and control of the funds and neglected the detection activity of the anti-fraud bodies.

Another element to be kept into account is that for 41 cases reported until the end of 2015, it was not possible to determine the type of check.

The number of cases linked to investigations by EU bodies (including OLAF) is not accurate.

5.1.7.Type of irregularities not reported as fraudulent

Table CP18 provides an overview of the types of irregularities detected in relation to non-fraudulent irregularities.

It confirms some of the main trends highlighted in previous years, as the infringements most frequently detected (over 38% of the total) and those involving the highest amounts are those concerned with public procurement (over 49% of the total value of the irregularities).

Table CP18: Programming period 2007-13 - types of non-fraudulent irregularities

The columns “% on total” (4th and 8th columns) in Table CP18 have been calculated with reference, respectively, to the ‘Total’ values referred to the year ‘2015’ and ‘TOTAL’ in Table CP14.

The data population used in this paragraph consists of all irregularities not reported as fraudulent in relation to the programming period 2007-13 until the end of 2015.

The row for totals has been omitted in consideration of the fact that to the same irregularity reported may be associated several typologies of infringements and therefore the total sum of values in Table CP18 would result in multiple counting of the same irregularity notification.

5.3.Anti-fraud activities by Member States

Previous paragraphs have examined the trend and main features and characteristics of the irregularities reported as fraudulent.

The present paragraph aims at examining some aspects linked to the anti-fraud activities and results of Member States. Four elements are taken into account:

the time that runs between the beginning of the fraudulent practice and its detection/establishment by the competent authority and reporting to the Commission (Detection / Reporting Efficiency);

the number of irregularities reported as fraudulent by each Member State;

the fraud detection rate (the ratio between the amounts involved in cases reported as fraudulent and the payments occurred in the financial year 2015);

the ratio of cases of established fraud on the total number of irregularities reported as fraudulent.

5.1.8.Duration of irregularities, Detection and Reporting Efficiency

Of the 10 692 detected irregularities (fraudulent and non-fraudulent) reported by Member States in 2015, 30% involve infringements that have been protracted during a given span of time. For the 371 irregularities reported as fraudulent this percentage is slightly higher at 60%. The remaining part of the datasets refers to irregularities/breaches which consisted of a single act identifiable on a precise date (15% of the whole dataset and 32% of that represent exclusively by the fraudulent irregularities) or for which no information has been provided (55% of the whole dataset, but only 8% of the irregularities reported as fraudulent).

Taking into account only those irregularities which have been protracted in time, their average duration is of 24 months (i.e. almost two years).

The two subsets (irregularities reported as fraudulent and those not reported as fraudulent) have very similar patterns, the average duration of those reported as fraudulent being 21 months (i.e. almost 2 years) while that of those not reported as fraudulent is 24 months.

Table CP19 shows the average number of months between the moment in which the fraudulent practice begins and when it is detected/established (Detection Efficiency – DetE) and then the average number of months between its establishment and the reporting to the Commission (Reporting Efficiency – RepE).

The EU average is about three years and six months (42 months) between the first and the last of those events (DetE + RepE).

The duration of the DetE should not be seen as a sign of inefficiency per se. More relevant, in this respect, the RepE, which is about 10 months in average.

Table CP19: Cohesion Policy – Detection and Reporting Efficiency

Luxembourg has reported no sufficient information to calculate the DetE and the RepE.

Table CP20 shows the same information but limited to the irregularities reported in relation to the programming period 2007-13.

It shows a good improvement between the two periods on both the detection and reporting efficiency of about three months for each.

The overall time gap between the initial moment and reporting (DetE + RepE) is increasing in 2015 in comparison with previously reported information, but this is due to the DetE, as the RepE is mainly stable. This is normal as the programming period implementation goes forward and potential fraud is increasingly detected after payment.

Table CP20: Cohesion Policy – Detection and Reporting Efficiency – Irregularities reported between 2011 and 2015 related to the programming period 2007-2013

Luxembourg has reported no fraudulent irregularities during the period taken into consideration.

5.1.9.Detection of irregularities reported as fraudulent in 2015 by Member State

Map CP1 shows the number of irregularities reported as fraudulent in 2015 by Member State in the Cohesion policy area (all programming periods included).

Four (4) Member States have notified no irregularity as fraudulent; seventeen (17) Member States reported between 1 and 15 fraudulent irregularities; two (2) countries reported between 16 and 30; and five (5) Member States more than 30 fraudulent irregularities.

Poland, Germany and Slovakia are the three countries having reported the highest numbers.

Map CP1: Number of irregularities reported as fraudulent by Member State in 2015 – Cohesion Policy

Map CP2 shows the number of irregularities reported as fraudulent by Member State in relation to the programming period 2007-13 alone.

One (1) Member State has notified no irregularity as fraudulent; eighteen (18) Member States reported between 1 and 50 fraudulent irregularities; five (5) countries reported between 50 and 100; two (2) between 100 and 150; and two (2) Member States more than 150 fraudulent irregularities.

Poland, Germany and Romania are the three countries having reported the highest numbers.

Map CP2: Number of irregularities reported as fraudulent by Member State in relation to the programming period 2007-13 – Cohesion Policy

5.1.10.Fraud detection rate

The fraud detection rate compares the results obtained by Member States in their fight against fraud with the related commitment appropriations. Considering the multi-annual nature of the cohesion policy spending programmes, no annual analysis has been prepared, concentrating it for the whole programming period 2007-13, for which commitment appropriations have almost reached 100% and the number of fraudulent irregularities reported by Member States is significant.

The highest number of detected fraudulent irregularities for the period 2007-13 originates from Poland, Germany, Romania, the Czech Republic, Slovakia and Italy.

The fraud detection rate (2008-2014) is the highest (>0.3%) for Italy, Slovakia, Latvia, the Czech Republic, Slovenia, Poland and Romania.

Table CP21: number of irregularities reported as fraudulent, amounts involved and fraud detection rate by Member State – Programming Period 2007-13

5.1.11.Ratio of established fraud 2008-2014

Table CP22 shows the ratio between the cases of established fraud and the total number of irregularities reported as fraudulent (including suspected and established fraud) in the period 2009-13. Taking into account only cases reported in 2015 would be meaningless, as the criminal proceedings leading to a conviction for fraud may take several years, while using the period 2010-14 would be misleading as it will be impossible to make a sound comparison with figures published in the 2013 and 2014 Report. However information concerning the years 2008-14 is published (for reference for future years) in Table CP23.

Table CP22 is integrated with the ‘Dismissal ratio’, calculated by the differences between the total number of irregularities reported as fraudulent published in the corresponding table in the 2013 Report (TOTAL 2013) and the total calculated taking into account the updates received in 2014 and 2015. When the ratio is positive, it means that Member States have classified as ‘suspected’ or ‘established fraud’ an irregularity appearing as non-fraudulent in 2013.

In this respect, the average ratio of established fraud at EU level is 12%, increasing from 11% of 2013. The dismissal ratio is 4%.

If one considers exclusively the “decisions” (established + dismissed), of the 106 decided cases (77 established fraud and 29 dismissals), 73% is the ‘conviction rate’ and 23% the ‘dismissal rate’.

Table CP22: number of cases of suspected and established fraud, ratio of established fraud, dismissal ratio – cases reported until 2013

Table CP23 provides the information concerning the number of cases of suspected and established fraud and ratio of established fraud calculated including all the fraudulent irregularities reported until 2014 included. It will be used in the coming reports for comparability.

Table CP23: number of cases of suspected and established fraud and ratio of established fraud – cases reported between 2008-2014 in the Cohesion policy

Of the 87 cases of established fraud, 74 (82%) were reported by three Member States: Germany, Poland and Slovenia.

Section II - Decentralised Management

The EU as a global player / Pre-Accession Policy

The goal of the EU as a global player is also promoted through direct management. Pre-Accession Assistance (PAA) is provided through decentralised management where third countries distribute funds but account to the EU for how it is spent. In the last stages new member states manage pre-accession funds under shared management to help them complete the transition.

6.Pre-Accession Policy (Pre-Accession Assistance and Instrument for Pre-Accession I and II)

The assistance in pre-accession is provided on the basis of the European Partnerships of the potential candidates and the Accession Partnerships of the candidate countries. The current candidate countries are Albania, the Former Yugoslav Republic of FYROM, Montenegro, Serbia and Turkey. Potential candidate countries are Bosnia and Herzegovina and Kosovo 3 .

6.1.The Pre-accession Assistance (PAA), 2000-06 

The old Pre-accession Assistance (PAA), regarding the period 2000-06, was financed by series of European Union programmes and financial instruments for candidate countries or potential candidate countries, namely the programmes for candidate countries, PHARE , SAPARD and ISPA , Phare Cross-Border Cooperation (CBC) and Coordination, Pre-accession financial assistance for Turkey 4 , Assistance for reconstruction, development and stabilisation for potential candidate countries ( CARDS ) 5 and Transition facility 6 .This assistance has nearly been closed except for a few payments in CARDS.

6.2.The Instrument for Pre-accession 2007-13 – IPA I 

The Instrument for Pre-Accession Assistance (IPA), which covers the period 2007-2013, is delivered through five components. The policy and programming of IPA consists of Multi-Annual Indicative Financial Framework (MIFF) on a three year basis, established by country, component and a theme, and Multi-Annual Indicative Planning Documents (MIPDs) per country or per groups of countries (regional and horizontal programmes). The Candidate Countries submit also Strategic Coherence Frameworks (SCF) and Multi-annual Operational Programmes, both regarding IPA Components III and IV. Their principal aim is to prepare beneficiary countries for the future use of the Cohesion policy instruments by imitating closely its strategic documents, National Strategic Reference Framework (NSRF) and Operational Programmes (OP), and management modes.

The financing of IPA is provided by the five following different components and DG Enlargement leads in the coordination of the instrument:

(5)Component I, Transition Assistance and Institution Building (TAIB), is managed by the European Commission's Directorate General for Enlargement ;

(6)Component II, Cross-Border Cooperation, is managed by the European Commission's Directorate General for Enlargement and part is managed, under shared management with Member States, by European Commission's Directorate General for Regional Policy;

(7)Component III, Regional Development, is managed by the European Commission's Directorate General for Regional Policy;

(8)Component IV, Human Resources Development, is managed by the European Commission's Directorate General for Employment and Social Affairs ; and

(9)Component V - Rural Development is managed by the European Commission's Directorate General for Agriculture .

The pre- and post-accession assistance is implemented through a variety of management modes which take into account different levels of preparedness of the beneficiary countries. The assistance under IPA is designed also to prepare the beneficiary countries to assume full responsibility for the management of financial assistance granted by the EU.

The eligibility for IPA components differs depending on the state of preparedness. In the use of funds the IPA beneficiary countries are divided into two categories. Croatia and the EU candidate countries: the Former Yugoslav Republic of FYROM, Serbia and Turkey; are eligible for all five components of IPA. While the new candidate countries, Albania and Montenegro (candidate status awarded in 2010), currently remain outside the scope of intervention of IPA Component III, the regional development. The Potential candidate countries in the Western Balkans (Albania, Bosnia and Herzegovina, Montenegro and Kosovo under UN Security Council Resolution 1244/99) are eligible only for the first two components. 7

Implementation of Components I and II falls under the responsibility of DG Enlargement, which initiates the components under a centralised management mode, with a view to transferring implementation management powers to the beneficiary countries as soon as their administrative capacities are considered sufficiently developed to ensure sound financial management. The EU Delegations play a major role in the delivery of IPA, in particular under the de-concentrated and decentralised management modes. 8

The implementation can be handled:

directly by central management: funds are managed by DG Enlargement at headquarters;

directly de-concentrated: funds are managed by EU Delegations under the supervision;

directly centralised: cross-delegated when funds are managed by another service of the Commission through cross sub-delegation;

indirectly in a centralised indirect management: funds are managed by executive agencies, specialised Community bodies (such as the European Investment Bank or the European Investment Fund) and national or international public-sector bodies or bodies governed by private law with a public-service mission;

indirectly decentralised with ex ante control: funds are managed by accredited national authorities of the beneficiary country, but procurement is subject to ex ante control by the EC Delegation;

decentralised without ex ante control: funds are managed by accredited national authorities of the beneficiary country and are not subject to ex ante controls by an EC Delegation;

joint: funds are jointly managed with International Organisations (EBRD, EIB, Sigma, UN agencies, etc.)

6.3.The Instrument for Pre-accession 2014-20 – IPA II 

Prepared in partnership with the beneficiaries, IPA II sets a new framework for providing pre-accession assistance for the period 2014-2020.

The most important novelty of IPA II is its strategic focus. Country Strategy Papers are the specific strategic planning documents made for each beneficiary for the 7-year period. These will provide for a stronger ownership by the beneficiaries through integrating their own reform and development agendas. A Multi-Country Strategy Paper will address priorities for regional cooperation or territorial cooperation.

IPA II targets reforms within the framework of pre-defined sectors. These sectors cover areas closely linked to the enlargement strategy, such as democracy and governance, rule of law or growth and competitiveness. This sector approach promotes structural reform that will help transform a given sector and bring it up to EU standards. It allows a move towards a more targeted assistance, ensuring efficiency, sustainability and focus on results.

IPA II also allows for a more systematic use of sector budget support. Finally, it gives more weight to performance measurement: indicators agreed with the beneficiaries will help assess to what extent the expected results have been achieved.

The priorities outlined in the Strategy Papers are translated into detailed actions, which are included in annual or multi-annual Action Programmes. IPA II Action Programmes take the form of Financing Decisions adopted by the European Commission.

The bulk of the assistance is channelled through the Country Action Programmes for IPA II Beneficiaries, which are the main vehicles for addressing country-specific needs in priority sectors as identified in the indicative Strategy Papers.

Multi-Country Action Programmes aim at enhancing regional cooperation (in particular in the Western Balkans) and at adding value to the Country Action Programmes through other multi-beneficiary actions.

Cross-Border Cooperation Programmes represent the focus of assistance in the area of territorial cooperation between IPA II beneficiaries, another important form of financial assistance.

Assistance for agriculture and rural development is also addressed via Rural Development Programmes.

IPA II funded activities are implemented and managed in various ways, in accordance with the Financial Regulation:

Under direct management; i.e. the implementation of the budget is carried out directly by the Commission until the relevant national authorities are accredited to manage the funds.

Under indirect management; i.e. budget implementation tasks are delegated to and carried out by entities entrusted by the Commission; they can be:

the IPA II beneficiary or an entity designated by it (one of the main objectives of IPA II is to encourage beneficiaries to take ownership and responsibility for implementation; indirect management by the IPAII beneficiary is therefore expected to become the norm);

an agency of a Member State or, exceptionally, of a third donor country;

an international organisation; or

an EU specialised (but not executive) agency.

In other words, the Commission delegates the management of certain actions to external entities, while still retaining overall final responsibility for the general budget execution.

Shared management; i.e. implementation tasks are delegated to EU member states (only for cross–border cooperation programmes with EU countries).

In the context of direct management, Sector Budget Support is yet another tool for delivering pre-accession assistance and achieving sustainable results under IPA II. It consists of financial transfers to the national treasury account of an IPA II beneficiary and requires performance assessment and capacity development, based on partnership and mutual accountability. It is delivered through Sector Reform Contracts.

Implementation of IPA II will include a comprehensive monitoring mechanism. It will contain a review of overall performance of the progress in achieving resultsat the strategic, sector and action levels (i.e. results-based performance), in addition to monitoring of financial execution. Performance measurement will be based on indicators set out in the indicative Strategy Papers and the Programmes.

Joint monitoring committees (Commission and beneficiaries) will continue to monitor the implementation of financial assistance programmes, as was the case for the previous period of IPA.

The Commission publishes an annual report on pre-accession assistance. This report covers the previous budget year.

6.4.General analysis – Trend analysis

5.1.12.Trend analysis – Pre-accession assistance (PAA)

Regarding the Pre-Accession Assistance (PAA), the number of irregularities reported as fraudulent decreased in 2014 compared to the previous year. The downward trend since 2009 is confirmed as Table PA2 and Chart PA1 show.

Table PA1 – Reported irregularities (PAA), 2010-14

For the total number of irregularities (reported as fraudulent and not reported as fraudulent) for the PAA, there were 16 irregularities reported in 2015 and the amount affected EUR 7.3 million (down from 75 and EUR 13.4 million respectively).

In the past five years, most of the irregularities (reported as fraudulent and not reported as fraudulent) and the highest aggregate amount were reported by Romania and Bulgaria. In relation to the distribution of irregularities according to funds, the highest numbers relate to SAPARD, while the most amounts concerned relate to ISPA.

5.1.13.Trend analysis Instrument for Pre-Accession (IPA I)

Generally it can be said that the trend of IPA reporting (financial framework 2007-13) has begun to develop in a stable upward curve which means a continuous increase in the number of irregularities reported and involved amounts since 2010. The increasing trend can be considered within the norm as the reporting of irregularities of IPA has only begun in recent years.

Table PA2 details the underlining data, while Chart PA2 shows the evolution of reporting of all the irregularities (reported and not reported as fraudulent) since 2011.

Table PA2 – Reported irregularities (IPA), 2011-15

During the past few years, the highest number of irregularities reported as fraudulent was communicated by Turkey followed by FYROM. The highest number of irregularities was recorded in relation to Transition Assistance and Institution Building and Cross-Border Cooperation. However, Regional Development and Transition Assistance score the highest in monetary value.

5.1.14.Reporting efforts

In general the communications received regarding IPA via IMS are complete and in terms of timeliness the reporting behaviour is satisfactory. Reporting happens, in average, after 3 and half months following detection of an irregularity, which, in general, intervenes after 3 years it is committed.

The level of completeness of the reported information has been improving depending on experience with reporting, but Beneficiary Countries need to better specify and detail information concerning irregular practices, in particular in relation to irregularities reported as fraudulent.

Serbia and FYROM have reported irregular cases in the IMS system during 2013. The information provided by these countries is complete and detailed, moreover the classification of the irregularities is accurate.

Turkey and Croatia have continued the consistent reporting. Croatia increased significantly the number of reported irregularities since its connection to IMS in October 2012.

6.5.Specific analysis – Financial year 2015

5.1.15.Pre-Accession Assistance (PAA)

In 2015 a total number of 9 irregularities were reported as fraudulent with the amount affected of EUR 6.1 million as shown in Table PA3.

Table PA3 – Reported irregularities per country (PAA), 2014

These fraudulent irregularities were reported by Romania. Bulgaria reported 2 non-fraudulent irregularities.

Like in the previous years, in 2015 the majority of cases concern again SAPARD, the Special Accession Programme for Agriculture and Rural Development.

With 6 irregular fraudulent cases reported and almost EUR 4.2 million involved, the SAPARD fund remains the most affected by fraud among all the PAA funds.

Table PA4 – Reported irregularities per fund (PAA), 2015

5.1.16.Instrument for Pre-Accession (IPA)

In relation to IPA I (2007-13), there were 20 irregularities reported as fraudulent in 2015, for an overall financial impact of more than EUR 1.7 million. Tables PA5 and PA6 show, respectively, the breakdown per country and per component.

Table PA5 – Reported irregularities per country (IPA), 2015

In 2014 Turkey was the country reporting the highest number of irregularities and aggregate amounts involved in irregularities. Concerning the 20 irregularities reported as fraudulent, these were reported by three countries.

Cross-Border Cooperation programmes record the highest number of irregularities reported, while Rural Development programmes account for the highest amounts involved. Member States like Italy and Bulgaria are present in Table PA5 as the managing authorities of IPA Cross-Border Cooperation programmes are located in those countries.

Table PA6 – Reported irregularities per component (IPA), 2015

No real pattern emerges from the analysis of the reported modus operandi for the fraudulent irregularities.

When it comes to other irregularities not reported as fraudulent, the most frequent practice employed is ‘Infringement of rules concerning public procurement’ (concerns 22 % of the cases, but only 2 % of the irregular amounts).

Section III – Direct Management 

7.Direct Management

7.1.Introduction

This chapter contains a descriptive analysis of the data on recovery orders issued by Commission services in relation to expenditures managed under ‘direct management’ mode, which is one of the three implementation modes the Commission can use to implement the budget.

According to the Financial Regulation 9 , ‘direct management’ means that the Commission implements the budget by its departments, including its staff in the Union Delegations under the authority of their respective Head of Delegation, or through executive agencies.

For financial year 2015, a total of EUR 15.9 billion 10 has been effectively disbursed under the ‘direct management’ mode. Table DM1 presents the actual payments made in financial year 2015 for the eighteen policy areas corresponding to 98.2% of the overall operational payments made under ‘direct management’.

Table DM1 – Payments made in financial year 2015 per policy area

7.2.General analysis

In 2015, for the twenty policy areas, the Commission services registered 1611 recovery items 11 in ABAC that were qualified as irregularities for a total financial value EUR 111.06 million. Among these recovery items, 5 have been reported as fraudulent, involving EUR 0.23 million irregular amounts.

However, it has to be underlined that qualifications attributed to recovery items may change over the years: it may happen that cases of irregularities are turned to suspicions of fraud or the other way round, suspicions of fraud are reclassified as non-fraudulent irregularities upon the closure of the OLAF investigation. As a consequence, no direct conclusion can be drawn from the data with regard to the general trend of irregularities or fraud in this budget area.

5.1.17.Five year analysis 2011-2015

The below analysis gives an overview of recovery data recorded in the ABAC system in the last five years. From a purely statistical point of view, it can be said that between 2011 and 2014, the number of ‘irregularities reported as fraudulent’ 12 was between 22 and 59. The peak so far was reached in 2014 with the qualification of 59 recovery items as such irregularities. It is probable that the relatively high number recorded is due to the closure of significant number of OLAF investigations during that year. The related recovery amounts are between EUR 2.2 and 3.6 million each year. So far, in 2015 one can observe a sudden decrease in the number of the ‘irregularities reported as fraudulent’. However, it should be noted that the qualification of a recovery item may change over the time, so it is possible that in the next year, records for 2015 will be different. Therefore, it is not possible to conclude any trend from these figures. Over the five year period, the ratio between the amonts related to irregularities reported as fraudulent’ and relative expenditure 13 is very small, close to zero (0.02%). The figures are presented in Table DM2 below.

Table DM2 – Irregularities reported as fraudulent and related amounts, financial years 2011-2015

At the same time, we can experience a steady increase of the recorded number of ‘irregularities not reported as fraudulent’ and associated financial amounts over the same period.

Between 2011 and 2015, all together there were 6386 registered recovery items qualified as ‘irregularities not reported as fraudulent’ with the aggregate recovery amount of EUR 381.72 million. Alone in 2015, there were 1606 recovery items classified as ‘irregularities not reported as fraudulent’ with a corresponding total of EUR 100.83 million. 2015 has so far been the peak year in the past 5 years. Table DM3 summarises all these records.

Table DM3 – Irregularities not reported as fraudulent and related amounts, financial years 2011-2015

The ratio between the aggregate irregular amounts corresponding to the recovery items (classified as ‘irregularities not reported as fraudulent’ between 2011 and 2015) and the reference figure of the total operational payments effectively disbursed under the direct management mode is about half a percent (0.54%).

These figures demonstrate the efficiency of the irregularity detection and recovery mechanisms in place.

7.3.Specific analysis

5.1.18.Recoveries according policy areas

Table DM4 provides a picture of irregularity statistics with a breakdown of the policy areas for year 2015.

Table DM4 – Irregularities reported by policy areas and related amounts, 2015

In financial year 2015, the highest numbers of 'irregularities not reported as fraudulent' were recorded in the ‘Research and innovation’ budget area, followed by ‘Communications networks, content and technology’. However, in terms of irregular amounts related to these irregularities, the policy field ‘Mobility and transport’ scored with EUR 46.21 million, which is followed by budget areas ‘Research and innovation’ with EUR 21.63 million. Substantial irregular amounts have been recovered in areas of ‘Development and cooperation’ (EUR 9.47 million), ‘Communications networks, content and technology’ (EUR 8.71 million) and ‘Enlargement’ (EUR 6.10 million). These five policy areas account for 83% of irregular amounts recovered.

Regarding ‘irregularities reported as fraudulent’, there were only five recovery items registered touching two areas of the direct management budget: ‘Communications networks, content and technology’ and ‘Foreign policy instruments’. However, the amounts related to these account not more than EUR 0.23 million.

The five year perspective of irregularities regarding the twenty policy fields is presented hereunder by table DM5.

Table DM5 – Irregularities reported by policy areas and related amounts, financial years 2011-2015

The above table demonstrates that ‘Communications networks, content and technology’ policy field recorded the highest aggregate recovery amounts (EUR 3.29 million) in relation to ‘irregularities reported as fraudulent’. The second largest aggregate fraudulent amounts were recovered in the fields of ‘Foreign policy instruments’ (EUR 2.34 million), followed by ‘Development and cooperation’ (EUR 1.90 million). These three policy areas account for 65% of the total recovery amounts related to ‘irregularities reported as fraudulent’ over the past five years.

Regarding ‘irregularities not reported as fraudulent’, the highest aggregate recovery amounts (EUR 87.12 million) were recorded in the policy area of ‘Mobility and transport’ between 2011 and 2015. It is closely followed by ‘Communications networks, content and technology’ (EUR 73.05 million), and by ‘Research and innovation’ (EUR 68.49 million). These three policy areas account for 60% of the total recovery amounts related to ‘irregularities not reported as fraudulent’ over the past five years. A further 23% of the aggregate recovery amounts were recorded in relation to policy fields ‘Foreign policy instruments’ (EUR 29.97 million), ‘Development and cooperation’ (EUR 29.21 million) and ‘Energy’ (EUR 27.91 million).

5.1.19.Recoveries according to legal entity residence

The legal entity was resident in one of the 28 Member States of the European Union in 89.2% of the total number of irregular cases (reported as fraudulent and not reported as fraudulent together) between 2011 and 2015. It should be noted however, that the residence of the legal entity is not necessarily the same as that of the main beneficiary. Nevertheless, in 74.6% of the cases the main beneficiary was also an EU Member State.

Table DM6 – Recoveries per country of residence of the legal entity, 2011-2015

Table DM6 above summarises the total recoveries made in the past five years according to the legal entity country to which the payment was unduly disbursed. EU Member States are listed; other countries are grouped under the ‘non-EU’ category.

5.1.20.Method of detection

For each recovery item, the Commission service issuing the recovery order has to indicate how the irregularity has been detected. Six different categories have been pre-defined, two of which fall under the direct responsibility of the European Commission: ‘Ex-ante controls’ and ‘Ex-post controls’. Table DM7 gives a breakdown of the recoveries by source of detection and by qualification in the last five years.

Table DM7 – Irregularities reported by source of detection and by qualification, 2011-2015

Regarding the ‘irregularities reported as fraudulent’, ‘OLAF’ has been marked as the source of detection in relation to 52 recovery items corresponding to 38.7% of total recovery amounts. Meanwhile ‘Ex-post controls’ was the source of detection of 89 recovery items corresponding to also half of the recovery amounts.

The vast majority of the cases ‘irregularities not reported as fraudulent’ were detected through ‘Ex-post controls’ by Commission services. There is an increasing tendency over the past five years both in terms of number and of financial value of cases detected due to the effective ex-ante and ex-post controls. In 2015 alone, 77.3% of recoveries that were qualified as ‘irregularities not reported as fraudulent’ were detected by such controls involving 80.2% of total related irregular amounts.

5.1.21.Types of irregularity

The Commission services also have to indicate the type of irregularity in the recovery context for the respective irregularity in question. Several types can be attributed to one irregular case. It can be observed that irregularity ‘Amount ineligible’ appears the most frequently: 72.2% of cases of ‘irregularities not reported as fraudulent’ (corresponding to 52.2% of related recovery amounts) and 42.3% of cases of ‘irregularities reported as fraudulent’ (corresponding to 50.0% of related recovery amounts).

Secondly, the irregularity ‘Under-performance / non-performance’ appear most frequently in relation to cases of ‘irregularities not reported as fraudulent’, followed by ‘Documents missing’ during the past five years. These two irregularity types are quoted in relation to 18.3% of recovery items and 27.4% of recovery amounts. Besides, regarding ‘irregularities reported as fraudulent’, irregularity type ‘Documents missing’ appears also to be the second most frequent type associated to recoveries occurring in 45.2% of such cases representing 33.0% of recovery amounts.

Finally, the third most frequent types of irregularity are ‘Public procurement rules not respected’ and ‘Double funding’. Although the irregularity type ‘Public procurement rules not respected’ is marked in relation to only 2.8% of recovery items (both reported as fraudulent and not reported as fraudulent), in terms of financial value, it affects 9.6% of the total recovery amounts during the last five years. Similar situation can be perceived in relation to the irregularity ‘Double funding’ that has only been associated to 1.3% of the recovery items (reported as fraudulent and not reported as fraudulent) but it concerns 7.2% of the total recovery amounts.

5.1.22.Time delay

For the recoveries qualified as irregularities (both reported as fraudulent and not reported as fraudulent) issued between 2011 and 2015, the average delay between the occurrence of the irregularity and its detection is about 3 years. It should be noted however, that the average time delay is slightly lower for ‘irregularities reported as fraudulent’ than for ‘irregularities not reported as fraudulent’.

5.1.23.Recovery

This paragraph describes the payments made to the Commission further to the issuing of the recovery orders. Once a recovery order is issued, the beneficiary is requested to pay back the amount unduly received or the amount is offset from remaining payments for the beneficiary.

For the recovery orders issued in between 2011 and 2015, 63.3% of the total irregular amounts have already been recovered. This means that about EUR 250 million (out of EUR 393 million) has already been cashed. Yet there are differences between the recovery rates for irregularities reported as fraudulent and those not reported as fraudulent. The recovery rate for ‘irregularities reported as fraudulent’ remains well below the recovery rate for ‘irregularities not reported as fraudulent’. When looking at the five year period, the recovery rate for ‘irregularities reported as fraudulent’ is only 29.7%, meanwhile for ‘irregularities not reported as fraudulent’ it is higher, 64.4%.

When looking at year 2015 alone, the recovery rate for ‘irregularities not reported as fraudulent’ is in line with the five year average and stands at 68.3%; whereas the recovery amounts in relation to ‘irregularities reported as fraudulent’ have not yet been cashed.

COUNTRY FACTSHEETS

Belgium - Belgique/België

Bulgaria - България

Czech Republic - Česká republika

Denmark - Danmark

Germany - Deutschland

Estonia - Eesti

Ireland - Éire

Greece - Ελλάδα

Spain - España

France

Croatia - Hrvatska

Italy - Italia

Cyprus - Κύπρος

Latvia - Latvija

Lithuania - Lietuva

Luxembourg

Hungary - Magyarország

Malta

Netherlands - Nederland

Austria - Österreich

Poland - Polska

Portugal

Romania - România

Slovenia - Slovenija

Slovakia - Slovensko

Finland – Suomi-Finland

Sweden (Sverige)

United Kingdom

ANNEXES

ANNEX 1

ANNEX 2

(The number of irregularities reported as fraudulent measures the results of efforts by Member States to counter fraud and other illegal activities affecting EU financial interests; it should not be interpreted as the level of fraud in their territories)

ANNEX 3

ANNEX 4

ANNEX 5

ANNEX 6

ANNEX 7

ANNEX 8

ANNEX 9

ANNEX 10

ANNEX 11

Legenda

IRQ0: cancelled communication

IRQ2: Irregularities not reported as fraudulent

IRQ3: suspected fraud

IRQ5: established fraud

ANNEX 11

Expenditure - Irregularities reported in 2015 by Member State and beneficiary country

(The number of irregularities reported as fraudulent measures the results of efforts by Member States to counter fraud and other illegal activities affecting EU financial interests; it should not be interpreted as the level of fraud in their territories)

(1)  For a description of the objectives of the programming period 2007-13, see the Commission Staff Working Document ‘Statistical evaluation of irregularities reported for 2014 Own Resources, Natural Resources, Cohesion Policy, Pre-accession and Direct expenditure’, chapter 5, pages 48-49.

(2)  Unfortunately and to be precise, the specification for the single highest value was left blank.

(3)  This designation is without prejudice to positions on status, and is in line with UNSCR 1244 and the ICJ Opinion on the Kosovo Declaration of Independence.

(4) Turkey has been receiving pre-accession assistance since 2002.

(5) Albania, Croatia, FYROM, Serbia, Kosovo under United Nations Security Council Resolution 1244, and Bosnia Herzegovina, Council Regulation (EC) No 2666/2000 of 5 December 2000.

(6) The EU-10 that joined European Union in 2004 received a Transition facility during 2004-2006. However the EU-2 received a Transition facility in 2007 which is regarded as a post-accession assistance.

(7) Potential candidate countries were defined at the Santa Maria da Feira European Council of 20 June 2000.

(8) Following the entry into force of the Treaty of Lisbon, Delegations have become a part of the European External Action Service, with effect from 1 December 2010.

(9) The Financial Regulation provides for three types of management, one of them is the direct management mode. In accordance with the European Parliament and the Council Regulation (EU, Euratom) No 2015/1929 and Commission Delegated Regulation (EU) No 2015/2462.

(10) Own calculation based on ABAC data for the twenty policy areas representing 98.2% of operational payments under the direct management mode, excluding administrative expenditure.

(11) Recovery items mean 'recovery context' elements in ABAC. There can be more recovery context elements associated to one recovery order issued.

(12) ‘Irregularities reported as fraudulent’ are cases of recovery items qualified in the ABAC system as ‘OLAF notified’.

(13)  Relative expenditure means that for the calculation only the effective operational payments related to the twenty policy areas are taken into account.