Early Warning System and Central Exclusion Database
The Commission uses 2 tools to ensure the sound financial management of EU funds:
- Early Warning System – identifies bodies and individuals representing financial and other risks to the EU, so the Commission can take precautionary measures.
- Central Exclusion Database – database of all bodies and individuals excluded from EU funding for various reasons:insolvent entities, final court judgements for fraud, corruption, decisions of a contracting authority for grave professional misconduct, conflict of interest.
This system was introduced in 1997, at the request of the European Parliament.
- contracts and grants managed directly by the Commission
- contracts and grants managed by non-EU countries.
EWS does not cover:
- funds managed in partnership with EU member countries (mainly used for the common agricultural policy and the Structural Funds)
- funds managed by international organisations. These funds are monitored through the Central Exclusion Database
Early warning system in detail:
- EWS is an operational tool for Commission services, providing them with information on identified risks related to beneficiaries of centrally managed contracts and grants. The system is based on a system of “flags”, identifying the level of risk concerned, from “W1” (lowest level of flagging) to “W5” (highest level).
- A vast majority of EWS flags (W1 to W4) simply serve to stimulate operational and financial managers to reinforce monitoring of the contract or grant in question or the procurement or grant award procedure. These flags provide information on identified risks such as recovery of certain amounts significantly overdue by a beneficiary, judicial proceedings pending for serious administrative errors/fraud, findings of serious administrative errors/fraud. EWS also serves for recording specific situations that need a defined response from the Commission, like setting off reciprocal debts, suspending temporarily payments for the purpose of further verifications, or executing them to a third party following attachment orders binding for the Commission.
- W5 flags ensure that all operational and financial managers are aware of exclusion from EU funding , based on legal criteria listed in the Financial Regulation, and that new dealings with these beneficiaries are no longer possible. An EWS flagging as such is never the cause of the exclusion, it is merely an indication of the legal situation of the beneficiary, and of which the beneficiary is necessarily already aware of (for example in case of prior conviction for fraud, serious breach of contract already established after a contradictory procedure, etc.). This category also includes terrorist organisations listed under UN Security Council resolutions.
- To protect the legitimate interests of the entities concerned, EWS registrations are not publicly disclosed. Yet a natural person may request (under certain conditions) the Commission services to indicate whether he or she has been flagged up in the system under W1 to W4 flags. On such a request the party in question will be provided with the EWS data which concern them.
- Only W5 registrations relating to exclusion situations are communicated automatically to the party concerned. This information is also transferred to the Central Exclusion Database, thus ensuring the protection of all EU funds.
The EU funds humanitarian and development work all over the world.
These funds are managed by a number of bodies (EU institutions, national authorities in EU member countries, authorities in non-EU countries and international organisations), who distribute money to hundreds of thousands beneficiaries.
To protect the EU's financial interests (i.e. EU taxpayers' money), all these bodies have access to a central database of companies and organisations excluded from EU funding because they are insolvent or have been convicted of serious professional misconduct or a criminal offence detrimental to EU financial interests (see Article 95 of the Financial Regulation).
Central Exclusion Database (CED) in detail:
- The Central Exclusion Database (CED) serves to protect the EU's financial interests by gathering all the entities – companies, organisations or natural persons - which have been excluded from EU funding because they are insolvent or have been convicted of a serious professional misconduct or criminal offense detrimental to EU financial interests.
- The data in CED are available to all public authorities implementing EU funds, i.e. European institutions, national agencies or authorities in Member States, and, subject to conditions for personal data protection, to third countries and international organisations.
- CED lists legal or natural persons benefiting from EU funds and which are personally under an exclusion case strictly defined in the Financial Regulation:
- insolvent entities (bankruptcy, tax or social charges unpaid);
- final court judgements for fraud, corruption, money laundering and involvement in a criminal organisation detrimental to EU's financial interests; judgements for offence concerning professional conduct;
- decisions of a contracting authority for grave professional misconduct, conflict of interest, etc.