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Yesterday the European Commission published its Annual Report on the Protection of the EU's Financial Interests and the Fight against Fraud in 2010. The purpose of the report is to measure the risk of EU expenditure and revenues being misused through irregularities and suspected fraud. Thanks to the implementation of modernised and improved reporting systems in most Member States, the Commission has access to more and better quality data on irregularities. As a result, the number of irregularities reported increased for almost all budget sectors. This allows the Commission to aim at better and more reliable reporting, which in turn helps to better protect taxpayers' money. With EU money more effectively monitored, the Member States and the Commission can react more quickly to changing fraud patterns and implement appropriate fraud preventive actions. This is important since the best way to fight fraud is to prevent it happening in the first place.

Algirdas Šemeta, Commissioner for Taxation, Customs, Audit and Anti-Fraud, said: “The report gives us a reassuring picture. More irregularities are detected by Member States so more misused money can be returned to the EU budget. This doesn't mean, however, that the fight against fraud is over. The Commission invites those Member States that have not yet implemented the new reporting system to do so urgently. We also urge Member States that report exceptionally low levels of suspected fraud to explain how they control the spending of EU funds. EU citizens have the right to know how every last penny of their money is spent."

The internet-based reporting system (IMS) has significantly improved the overall conditions for reporting irregularities. The Commission urges Spain, France and Ireland to complete the implementation of the system by the end of 2011 to further improve the protection of EU taxpayers' money. The Commission also intends to analyse the irregularity and anti-fraud control systems put in place by the Member States in the area of Cohesion Policy in order to evaluate if and how  the control systems are adapted to target areas where there is a high-risk of fraud and irregularities. Since 2010 the Commission has adopted a number of policy initiatives to fight fraud (IP/11/783, MEMO/11/454, IP/11/644) which will have a positive impact on the protection of EU's financial interests. The first results of these policy initiatives will be presented in the next report covering the year 2011.

Background

This Annual Report on the Protection of the EU’s Financial Interest gives details about irregularities and suspected fraud reported by the Member States as well as recovery of EU funds. It is important to distinguish between irregularities and fraud. Irregularities are often the result of genuine errors when beneficiaries fulfil their reporting obligations. This could for instance include a person not correctly reporting on hours worked in a project or not respecting rules regarding a tender procedure such as requesting too few offers or accepting offers from unqualified bidders. Fraud is a deliberately committed irregularity, and constitutes a criminal offence. The real financial impact of fraud can only be measured when legal proceedings have been completed.

EU law requires Member States to notify the Commission of cases of fraud and other irregularities detrimental to financial interests in all areas of EU activity. However, the picture provided by the statistics is not necessarily complete since the Commission depends on the Member States to communicate irregularities. The figures given in the report are therefore approximate and preliminary. As a precaution, where the precise amount affected by the irregularity has not yet been determined, the figure given often relates to the scheme as a whole.

Irregularities notified per sector in 2010

Total Expenditure: The number of cases of irregularities reported increased to
10 332 in 2010 compared with 7 769 in 2009. The estimated financial impact of irregularities rose to 1.27% of total allocations in 2010 compared with 1.13% in 2009.

Agriculture: The number of cases of irregularities reported increased to 1 825 in 2010 compared with 1 621 in 2009. The estimated financial impact of irregularities fell slightly to 0.23% of total allocations in this sector in 2010 compared with 0.24% in 2009. In 2010, €175 million was recovered and the recovery rate rose to 42% from 39%.

Cohesion Policy: The number of cases of irregularities reported increased to
7 062 in 2010 compared with 4 737 in 2009. The estimated financial impact of irregularities rose to 3.15% of total allocations in this sector in 2010 compared with 2.44% in 2009. In 2010, €611 million was recovered and the recovery rate rose to 67% from 53%.

Pre-accession funds: The number of cases of irregularities reported decreased to 424 in 2010 compared with 706 in 2009. The estimated financial impact of irregularities rose to 5.26% of total allocations in this sector in 2010 compared with 3.80%) in 2009. In 2010, €14 million was recovered and the recovery rate rose to 30% from 27%.

Direct Expenditure: The number of cases of irregularities reported increased to
1 021 in 2010 compared with 705 in 2009. The estimated financial impact of irregularities rose to 0.27% of total allocations in this sector in 2010 compared with 0.17% in 2009. In 2010, €25 million was recovered and the recovery rate rose to 59% from 56%.

Own Resources: The number of cases of irregularities reported decreased to
4 744 in 2010 compared with 5 204 in 2009. The estimated financial impact of irregularities rose to 1.88% of total amount of collected traditional own resources in 2010 compared with 1.84% in 2009. The money recovered as a percentage of the total amount affected by irregularities is at the time of publication 46% for the year 2010 and expected to rise, as recovery is an ongoing process..

For more information:

MEMO/11/649

Homepage of Commissioner Algirdas Šemeta, EU Taxation and Customs Union, Audit and Anti-fraud Commissioner:

http://ec.europa.eu/commission_2010-2014/semeta/index_en.htm

Link to page where the report will be published:

http://ec.europa.eu/anti_fraud/reports/index_en.html

See table in Annex for detailed breakdown of cases in each area

Number of reported irregularities and estimated financial impact in 2010