This article addresses the integrated fault estimation (FE) and accommodation problem for continuous-time dynamic systems. First, using a specific system decomposition, we propose a new multi-objective reduced-order FE observer (RFEO), whose application range is wider than the existing adaptive and sliding mode ones. FE performances are further enhanced by introducing slack variables to reduce the conservatism generated by the direct design method. Finally, with the help of both system decomposition and slack variable techniques, a static output feedback fault tolerant controller (SOFFTC) design, whose sufficient condition is given in terms of linear matrix inequalities, is proposed to guarantee the stability of the closed-loop system in the presence of faults. Moreover, the RFEO and the SOFFTC are designed separately, so that their design parameters can be calculated easily. Simulation results of an aircraft application are presented to illustrate our contributions.