BRUSSELS (Reuters) – The European Commission is moving closer to stripping new member Bulgaria of some European Union funds over its failure to tackle corruption and organized crime, an EU source involved in the case said. Sofia stands to lose hundreds of millions of euros in funds already frozen due to graft investigations and to face stricter auditing conditions on nearly 11 billion euros in EU money it is due to receive between now and 2013. The EU executive is due to report in July on judicial reform and the fight against corruption in Bulgaria and its Black Sea neighbor Romania, which also joined the now 27-nation bloc in January 2007. The source spoke on condition of anonymity because of the sensitivity of the investigations, which are continuing, and because Brussels has not yet drafted the reports. Both poor, former communist countries are subject to special monitoring because they did not fully satisfy EU standards on justice, crime and payment systems upon accession. But while Bulgaria looks set to lose money due to evidence that corruption has directly affected its agencies handling EU payments, Romania may get a warning to step up the fight against graft, but no financial penalty, the source said. The Commission has so far frozen some 400 million euros earmarked for Bulgaria under its pre-accession technical assistance program known as PHARE and between 50 and 100 million euros in pre-accession funds to promote agricultural marketing known as SAPARD. «They would lose that 400 million and 50-100 million,» the source said. «We are not going to announce that billions of new money will be cut but we could ask for extensive audits.» Brussels’s biggest concern is the suspected nexus of a political «Old Guard» rooted in the pre-1989 communist era, Russian business interests and organized crime, the source said. A spokeswoman for the Bulgarian EU mission, Betina Joteva, said Prime Minister Sergei Stanishev and his coalition had a strong political will to deal with the problems and Sofia was working closely with the Commission. «In the last month, we have done a lot in managing EU money better,» she said. «We took serious measures to build a system of operations for SAPARD and PHARE which practically reach even higher standards than demanded for managing EU money.» She noted the appointment of a deputy prime minister, Meglana Plugchieva, to coordinate the distribution of EU funds, in a reshuffle in which former Justice Minister Rumen Petkov, seen by critics as an obstacle to prosecutions, was ousted.