Committee on Budgetary Control 22 January 2008 DAS 2006 European Court of Auditors

Specific assessments of the 2006 Annual Report Functioning of supervisory and control systems Error range Own Resources Common Agricultural Policy IACS Overall for CAP IACS non-IACS Structural operations Internal policies External actions Headquarters and Delegations Implementing organisations Pre-accession strategy Phare/ ISPA SAPARD Administrative expenditure DAS Specific assessments concerning legality and regularity of underlying transactions Satisfactory Functioning of supervisory and control systems Partially satisfactory Unsatisfactory Less than 2% (below materiality threshold ) Error range Between 2% and 5% Greater than 5%

Functioning of supervisory and control systems Satisfactory Partially satisfactory Unsatisfactory Error range Less than 2% (not material) Between 2% - 5% More than 5% Agriculture IACS Revenue Administration Pre-accessionPHARE/ISPA External Actions EC Agriculture non-IACS non-IACS External Actions Impl. org. Pre-accessionSAPARD StructuralActions Agriculture DAS 2006 – Legality and regularity of underlying transactions

What can the Commission do to improve the situation? ensure that supervisory and control systems address the risks effectively, both at the level of the Commission and of the Member States; strengthen in particular the Commission’s ability to mitigate the risk that the control systems in the Member States fail to prevent reimbursement of overstated or ineligible expenditure; improve mechanisms for recoveries; improve the quality of DGs’ Activity Reports and the Commission’s Synthesis Report; address the detected deficiencies adequately and ensure continuity in the way information is presented;

What can the Commission do to improve the situation? implement the Commission’s Action Plan; ensure suitable indicators assisting the management and helping to gauge improvements over time; ensure that rules and regulations are clear and sufficient enough to meet Community objectives, while avoiding unnecessary complexity.

”80% of EU-funds in shared management: what can Member States do to improve the situation?” Structural Funds Structural Funds: improvement of the day to day management and implementation of sound closure procedures for the programming period 2000 – 2006; implementation of the legal framework with respect to the new programming period 2007 – CAP expenditure CAP expenditure: specific attention to Cross Compliance requirements; due consideration to the pertinence of eligibility conditions with the objective of reducing the error rate in the field of Rural Development.

The Court’s revised DAS approach provides clear recognition of improvements in supervisory and control systems. As these improve, more of the assurance is derived from them. The new definition and treatment of errors updates the methodology so as to take into consideration the latest developments in the legal framework (cross compliance, financial corrections). The Court’s conclusions and audit results have become more robust and provide a clearer assessment of where weaknesses exist and what is contributing to any error found. The Court’s contribution

Conclusion: What will make the crucial difference is whether the management’s control mechanisms will be shown to have improved sufficiently and rules simplified enough to bring about a reduction in errors found.