Communication from the Commission to the European Parliament and the Council. Application of net financial corrections on Member States for agriculture and cohesion policy

As a reaction to the increase of the error rate reported by the European Court of Auditors (ECA) in its annual report on the financial year 2012, the Discharge Rapporteur and the Co-ordinators of the main Political Groups in the European Parliament's Budgetary Control Committee addressed a letter to President Barroso asking the Commission to submit a Communication clearly establishing how it will introduce for the financing period 2014-2020 a more effective form of net financial corrections for Member States where weaknesses are observed as regards programmes under shared management. Net financial corrections mean that there is a definitive reduction of funds to the Member State concerned.

The present Communication addresses this request by explaining how the Commission intends to apply new instruments and requirements linked to net financial corrections which are provided for in the legal framework for the financing period 2014-2020 and how this will impact on Member States.

In the area of Agriculture net financial corrections leading to a loss of EU funds for the Member State concerned were already the standard. The new rules for the financing period 2014-2020 maintain that situation while focusing on the consolidation of existing mechanisms.

For Cohesion Policy, net financial corrections leading to the return of previously paid amounts to the EU budget were the exception. For the new programming period 2014-2020 there is a major change in the new legislation to be adopted which will extend the Commission's powers to impose net financial corrections on Member States where serious deficiencies in management and control systems have been identified. The framework for net financial corrections envisaged for the period 2014-2020 leaves no discretion to the Commission in the adoption of a correction decision. Net financial corrections will become the standard reaction in case of serious deficiencies and will be applied according to a clear set of transparent criteria and conditions.

When applying net financial corrections for the measures and programmes under the 2014-2020 financing period, the services involved will, through application of best practice, ensure for these two areas of shared management a convergence of effective use of this important corrective instrument to protect the Union budget. Such a convergence of best practices will also be applied with regards to the instruments of interruptions and suspensions of payments. The model which is successfully applied in the area of Cohesion has been introduced mutatis mutandis also in the area of Agriculture for 2014-2020.

The Commission considers that all financial corrections, including those where Member States are allowed to bring in new projects and new expenditure to re-use the corrected amounts, protect the EU Budget. Nevertheless, the deterrent effect of net financial corrections, whereby Member States cannot re-use the corrected and recovered amounts and therefore lose the funds, is certainly higher. It incentivises Member States to detect and correct errors themselves and therefore contributes to the improvement of management and control systems.

EUR-Lex: COM(2013)934: Follow the progress of this communication through the decision-making procedure http://eur-lex.europa.eu/legal-content/EN/HIS/?uri=COM:2013:934:FIN

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