The Managing Authority shall in the first instance be responsible for preventing and investigating irregularities and for making the financial corrections required and pursuing recoveries. In the case of a systemic irregularity, the Managing Authority shall extend its investigation to cover all operations potentially affected.

The Managing Authority shall make the financial corrections required in connection with individual or systemic irregularities detected in projects, technical assistance or in the programme. Financial corrections shall consist of cancelling all or part of the Union contribution to a project or to technical assistance. The Managing Authority shall take into account the nature and gravity of the irregularities and the financial loss and shall apply a proportionate financial correction. Financial corrections shall be recorded in the annual accounts by the Managing Authority for the accounting year in which the cancellation is decided.

The Union contribution cancelled in accordance with paragraph 1 may be reused within the concerned programme, subject to paragraph 3.

The contribution cancelled in accordance with paragraph 1 may not be reused for the project that was the subject of a financial correction or, where a financial correction is made for a systemic irregularity and for any project affected by the systemic irregularity.