Communication: Protection of the EU budget to end 2015

This Communication describes the functioning of the preventive and corrective mechanisms foreseen in the European Union legislation and the actions taken by the Commission services to protect the EU budget from illegal or irregular expenditure. It also provides a best estimate of the figures resulting from their use and indicates how Member States are involved and impacted. It complements the information included in the 2015 Financial Statement Discussion and Analysis (FSDA), the 2015 Annual Management and Performance Report for the EU Budget, and the relevant parts of the Annual Activity Reports of the Directorates General concerned.

About 80% of the EU budget is implemented by Member States which need to comply with the commonly agreed rules on budget implementation. The Member States are partners of the Commission in respect of ensuring the compliance with the EU legislation and the protection of the EU budget. The Commission protects the EU budget, i.e. EU spending, from undue or irregular expenditure via two main mechanisms:
(1) Preventive mechanisms (e.g. ex-ante controls, interruptions and suspension of payments); and
(2) Corrective mechanisms (primarily financial corrections imposed on Member States but also recoveries from recipients of EU payments): in case preventive mechanisms were not effective the Commission, in the framework of its supervisory role, is required to apply corrective mechanisms as a last resort.

The primary objective of financial corrections and recoveries is to ensure that only expenditure in accordance with the legal framework is financed by the EU budget. Under shared management the Member States are primarily responsible for identifying and recovering from beneficiaries amounts unduly paid. In order to ensure the cost-effectiveness of control systems, one of the main work streams on which the services of the Commission will further work during the current mandate of the College is to rationalise and streamline controls and allocate resources to controls deemed most appropriate for managing legality and regularity risks within the regulatory framework. For shared management, the main objective is to improve the effectiveness of Member States' control systems.

For Agriculture and Rural Development, financial corrections always have a net impact on the EU budget by recovering amounts unduly spent which leads to a reimbursement to the EU budget. Under Cohesion Policy, the Member States have the option to replace the ineligible expenditure with new eligible expenditure, thus not losing the EU funding. Under other management types financial corrections are used to effect corrections before an EU reimbursement has been made.

This Communication focuses primarily on the results of the Commission's supervisory role, but also provides information on the results of Member States' controls.