Italy's Loss of $109M in EU Aid Upheld by Court

3/28/2014 8:45:00 AM, Barbara Leonard
     (CN) - EU financial aid to the Italian region of Apulia faces a $109 million reduction after a court on Friday slammed "serious" management failings by Italian authorities.
     The EU uses structural funds such as the European Regional Development Fund to strengthen "the economic, social and territorial cohesion and reduce the disparities in the development of various regions and the backwardness of the least favored regions," according to a statement from the EU General Court.
     A copy of the Thursday decision is not available in English. The court refers to Apulia as "POR Puglia" in its proceedings.
     Based on Italy's representations about the region of Apulia, the European Commission in 2000 made 1.72 billion euros, worth about $1.5 billion by contemporary exchange rates, available to the Italian authorities.
     But a 20007 audit of the management and monitoring systems that the Italian authorities put in place "concluded that they had not established a system ensuring the sound financial management of the funds," the court found.
     When the commission found that Italian authorities failed to remedy those deficiencies, it suspended the intermediate payments of the fund and gave Italy a deadline "to conduct the necessary controls and to make the necessary corrections," the statement continues.
     Italian authorities still failed to meet the requirements by 2009, and the commission decided that year to reduce "the financial aid granted to Italy by applying a flat-rate correction of 10% to the certified expenditure, that is, a reduction of €127.17 million."
     Since Italian authorities had already applied the correction to the fund's contribution, the commission later reduced the financial aid by 79.33 million euros, or $110 million today.
     Italy had challenged the reduction, but the General Court sided with the commission and dismissed Italy's action Friday.
     A statement on the decision notes that Italy "did not adduce any evidence which could call into question the commission's findings."
     Here, "the EU auditors noted a number of irregularities giving rise to serious doubts as regards the controls and whether the expenditure was admissible," the court said.
     "In addition to the lack of staff in the bodies comprising the payment authority, those irregularities concern delays in carrying out first and second-level controls, in the transmission of reports, in the follow-up to controls, in keeping the monitoring table and in the checks which the payment authority was supposed to make," it added. "A number of irregularities were not pointed out by those performing the national controls, while other controls were considered to have been terminated without examination of the necessary documents. The commission also disputed the reliability of the percentage of the expenditure monitored and the corrections suggested by the Italian authorities and held that the payment authority was not functioning properly."
     Since such failings "call into question the effectiveness of the entire system for the management and monitoring of POR Puglia and therefore represent a significant risk of loss for the EU budget," the commission was entitled to impose a 10 percent reduction, the court found.
     Negotiations with the Italian authorities remain ongoing, it added.