annual activity report - european commission · 60.053,164 million (by 1,1% compared to 2012) and...

2013

Annual Activity Report

Directorate General for Agriculture and Rural Development

Annexes

Model template

2013

ANNEXES

ANNEX 1: Statement of the Internal Control Coordinator

agri_aar_2013_final of 213

Table of Contents

ANNEXES 3

ANNEX 1: STATEMENT OF THE INTERNAL CONTROL COORDINATOR ......................................................................................... 3

ANNEX 2: HUMAN AND FINANCIAL RESOURCES ................................................................................................................... 4

ANNEX 3: DRAFT ANNUAL ACCOUNTS AND FINANCIAL REPORTS .............................................................................................. 9

ANNEX 4: MATERIALITY CRITERIA ................................................................................................................................... 45

ANNEX 5: INTERNAL CONTROL TEMPLATE FOR BUDGET IMPLEMENTATION (ICT) ..................................................................... 53

ANNEX 6: IMPLEMENTATION THROUGH NATIONAL OR INTERNATIONAL PUBLIC-SECTOR BODIES AND BODIES GOVERNED BY PRIVATE LAW WITH

A PUBLIC SECTOR MISSION (NOT APPLICABLE) ......................................................................................................................... 59

ANNEX 7: AARS OF EXECUTIVE AGENCIES (NOT APPLICABLE) .............................................................................................. 59

ANNEX 8: DECENTRALISED AGENCIES (NOT APPLICABLE) ..................................................................................................... 59

ANNEX 9: PERFORMANCE INFORMATION INCLUDED IN EVALUATIONS .................................................................................... 60

ANNEX 10: SPECIFIC ANNEXES RELATED TO "MANAGEMENT OF RESOURCES" (PART 2) ............................................................. 68

ANNEX 11: SPECIFIC ANNEXES RELATED TO "ASSESSMENT OF THE EFFECTIVENESS OF THE INTERNAL CONTROL SYSTEMS" (PART 3) ... 193

ANNEX 12: 2014 MANAGEMENT PLAN: KEY PERFORMANCE INDICATORS ............................................................................ 195

ANNEX 13: AWBM 01 ADMINISTRATIVE SUPPORT .......................................................................................................... 199

1.1.37 AWBM 01 ADMINISTRATIVE SUPPORT – SPECIFIC OBJECTIVE 1........................................................................... 199





ANNEX 14: ABBREVIATIONS ......................................................................................................................................... 209

ANNEXES



ANNEXES


I declare that in accordance with the Commission’s communication on clarification of the

responsibilities of the key actors in the domain of internal audit and internal control in the

Commission1, I have reported my advice and recommendations to the Director-General on the

overall state of internal control in the DG.

I hereby certify that the information provided in Parts 2 and 3 of the present AAR and in its

annexes is, to the best of my knowledge, accurate and exhaustive.

[Signed]

Rudolf MÖGELE

Internal Control Coordinator

1 SEC(2003)59 of 21.01.2003.

ANNEXES

ANNEX 2: Human and Financial resources



Human Resources by ABB activity

Code ABB Activity ABB Activity Establishment

Plan posts External

Personnel2

Total

05 02 Interventions in agricultural

markets 159 9 168

05 03 Direct aids 56 8 64

05 04 Rural development 211 37 248

05 05 Pre-accession measures in the field of agriculture and

rural development 9 1 10

05 06 International aspects of the

‘Agriculture and rural development’ policy area

73 7 80

05 07 Audit of agricultural

expenditure 109 14 123

05 08

Policy strategy and coordination of the

‘Agriculture and rural development’ policy area

278 20 298

05 AWBL-01

Administrative support for the Directorate-General for

Agriculture and Rural development

114 16 130

Total 1009 112 1121

General remark: the above data rely on the snapshot of Commission personnel actually employed in each DG/ service as of 31 December of the reporting year. These data do not constitute full-time-equivalents throughout the year.

2 The total figure for external staff is down to 93,5 if expressed in full-time equivalent. The breakdown is the following: ABB 02: 7,58; ABB 03: 4,99; ABB 04: 30,66; ABB 05: 1; ABB 06: 7; ABB 07: 10,40; ABB 08: 16,46; AWBM 01: 15,41.

ANNEXES



Financial Resources by ABB activity (EUR Million) Implementation of Commitment Appropriations (CA)

Code ABB Activity

ABB Activity Operational expenditure Administrative expenditure Total

05 02 Interventions in agricultural markets 3 193 228 900

05 03 Direct aids 41 658 276 626

05 04 Rural development 14 798 454 674

05 05 Pre-accession measures in the field of

agriculture and rural development 234 042 533

05 06 International aspects of the ‘Agriculture and

rural development’ policy area 3 062 749

05 07 Audit of agricultural expenditure 119 577 848

05 08 Policy strategy and coordination of the

‘Agriculture and rural development’ policy area 26 729 939

Total 60 033 373 269 7 840 542,82 (1) 11 875 314 (2) 60 053 089 125,82

(1) Heading 5 appropriations managed by the DG (global envelope) 05 01 02 (2) BA lines 05 01 04 (11 605 448 €), 05 01 05 (not applicable for DG AGRI in 2013) and 05 01 06 (269 866 €).

ANNEXES



IMPLEMENTATION OF THE GLOBAL ENVELOPE

BUDGET LINES CONCERNED: 05 01 02 11 00 01 TO 05 01 02 11 00 06

(based on information received from BUDG services following the Budget circular)

(IN EUROS) APPROPRIATIONS 2013 (C1) APPROPRIATIONS carried over (C8)

BUDGET LINE* BUDGET LINE DESCRIPTION

Available Appropriations

COMMITMENTS PAYMENTS

2013

Amounts of appropriations

carried over

% Implementation on appropriations carried over from

2011 2013 2013

05.010211.00 1.080,00

05.010211.00.01.10 Mission expenses 2.550.000,00 2.550.000,00 2.285.916,57 306.701,22 55,03

05.010211.00.01.30 Representation expenses 25.000,00 25.000,00 19.152,35 6.587,25 100,00

05.010211.00.02.20 Meeting costs 2.091.527,07 2.091.527,07 1.385.824,25 789.944,49 77,98

05.010211.00.02.40 Conference costs 182.443,34 182.443,34 64.157,13 76.740,00 100,00

05.010211.00.03 Meetings of committees 2.000.000,00 2.000.000,00 1.255.745,89 966.585,71 60,72

05.010211.00.04 Studies and consultations 534.088,80 534.088,80 4.220,00 415.959,55 100,00

05.010211.00.05 Development of management and information systems 128.723,51 128.723,51 35.878,94 321.503,67 100,00

05.010211.00.06

Further training and management training 328.760 328.760,10 195.693,96 112.660,08 100,00

TOTAL 7.841.622,82 7.840.542,82 5.246.589,09 2.996.681,97 76,92

ANNEXES



(IN EUROS) APPROPRIATIONS 2013 C4 APPROPRIATIONS 2013 C5

BUDGET LINE* BUDGET LINE DESCRIPTION

Available Appropriations

COMMITMENTS PAYMENTS 2013

Amounts of appropriations

carried over COMMITMENTS PAYMENTS

2013

2013 2013 2013

05.010211.00

05.010211.00.01.10 Mission expenses

05.010211.00.01.30 Representation expenses

05.010211.00.02.20 Meeting costs

05.010211.00.02.40 Conference costs

05.010211.00.03 Meetings of committees

05.010211.00.04 Studies and consultations

05.010211.00.05 Development of management and information systems

05.010211.00.06 Further training and management training 1.637,51 1.637,51 1.637,51 960,89 960,89 960,89

TOTAL 1.637,51 1.637,51 1.637,51 960,89 960,89 960,89

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Cross delegations

In 2013, DG AGRI has cross-delegated activities to six other DGs (JRC, ESTAT, EMPL, SANCO, PMO and ENTR). In addition, a sub delegation was given to DEVCO only to allow recoveries in a specific file (no credits involved so not included in the table).

Crossed

Subdeleg.

To:

JRC EMPL PMO ENTR

Budget Line05.080300

(CD) *

05.080200 (CD)

05.080300 (CD)

05.040502 (CD)

05.040502 (CD)

05.040502 (CP)

Transfered

Credit

(CE) ***

1.550.687,00 450.000,00 0,00 356.277,66 346.500,00

Transfered

Credit

(CP) ****

1.570.736,52 5.881.094,00 0,00 245.637,68 0,00 260.000,00

Consumed

Credit (CE)1.539.658,38 226,41 0,00 350.479,92 346.500,00

Consumed

Credit (CP)1.548.203,44 5.790.809,21 0,00 245.637,23 0,00 225.123,83

Budget Line05.070102

(CND) **

05.010404 (CND)

05.010201 (CND)

05.010401 (CND)

05.010401 (CND)

Transfered

Credit6.800.000,00 0,00 0,00 160.000,00 453,00

Consumed

Credit6.799.762,44 0,00 0,00 160.000,00 0,00

ESTAT SANCO

*CD – Differentiated Credit ** CND – Non-Differentiated Credit *** CE – Commitment Credit **** CP – Payment Credit

ANNEXES

ANNEX 3: Draft annual accounts and financial reports



1. Financial reports

1.1 Commitments and payments (tables 1 and 2) Expenditure

Commitments Payments

Crédits Exécution Crédits Exécution

Direct expenses 73.815.930,39 68.290.929,14 92,52% 94.970.492,85 71.258.663,27 75,03%

FEAGA 45.684.826.496,88 44.961.909.263,95 98,42% 45.684.826.496,88 44.961.909.263,95 98,42%

shared Mgt

Rural Development 15.081.062.688,73 14.788.920.797,00 98,06% 13.251.262.175,54 13.146.291.520,46 99,21%

shared Mgt

Preadhesion 266.113.363,19 234.042.533,00 87,95% 79.707.692,19 47.636.861,88 59,76%

shared / decentr Mgt

TOTAL 61.105.818.479,19 60.053.163.523,09 98,28% 59.110.766.857,46 58.227.096.309,56 98,51%

Overall, in 2013, global execution rates of commitments and payments appropriations of DG AGRI have both remained unchanged in relation to 2012 (In 2012, 98% of both commitment and payment appropriations have been executed (98% for both commitments and payments in 2011; 97% for commitments and 95% payments in 2010). Both increased: the total amount committed of EUR 60.053,164 million (by 1,1% compared to 2012) and the total amount paid of EUR 58.227,10 million (by 0,7% compared to 2012).

With regard to « direct management expenditure », the amount committed was EUR 68,3 miilion (85,7 million in 2012; 69,2 million in 2011; 81,1 million in 2010), i.e. 92,5% of the available appropriations. The amount paid was 71,3 million EUR (79 million in 2012; 61,3 million in 2011; 71,1 million in 2010), i.e. 75% of the available appropriations.

With regard to « shared management expenditure » for rural development, the amount committed was EUR 14.788,9 (14.589,1 million in 2012; 14.408,2 million in 2011; 14.587,6 million in 2010), i.e. 98,1% of the available appropriations and the amount paid was EUR 13.146,3 million (13.254,1 million in 2012; 12.293,8 million in 2011; 11.483,8 million in 2010), i.e 99,2% of the available appropriations. For pre-accession aid, the amount committed was EUR 234 million (231,2 million in 2012; 215,0 million in 2011; 169,8 million in 2010), i.e. 88% of the available appropriations, and the amount paid was EUR 47,6 million (6,5 million in 2012; 101,8 million in 2011; only 14,4 million in 2010; 254,1 million in 2009), i.e. 59,8% of the available appropriations.

With regard to « shared management expenditure » for EAGF, the amount committed and paid was EUR 44.961,9 million (44.495,5 million in 2012; 45.082,6 million in 2011; 43.932,4 million in 2010; 46.024,8 million in 2009), i.e. 98,4% of the available appropriations.

ANNEXES



The unused balance on commitments, commonly known as budgetary RAL (Reste à liquider), was EUR 25.348,5 million at the end of 2013 (23.842,8 million in 2012; 22.352,6 million in 2011; 20.193,0 million in 2010, 17.151,0 million in 2009), of which EUR 24.469,7 million relates to rural development, EUR 823,9 million to pre-accession aid and EUR 55 million to direct management expenditure. The increase in recent years is manly linked to EAFRD programmes3.

1.2 Payment time limits (table 6a/b)

As far as payment time limits are concerned, there was a consolidation of the progress of last years:

For «direct management expenditure » (see table 6a), the average delay decreased to 12 days (13 days in 2012). 16 payments were made beyond the allowed payment time limit (16 payments in 2012, 13 payments in 2011 and only 7 payments in 2010), which represents 1,6% of the total number of payments (1,5% in 2012, 1,3% in 2011; 0,7% in 2010). (see table 6a). The number of suspensions and the duration strongly decreased by 32% and by 42% (in 2012 and 2011 duration increased respectively by 34% and 30%).

For « rural development » (see table 6b), there was a substantial increase of delayed payments. 234 payments were made beyond the allowed payment time limit (104 in 2012 vs. only 4 in 2011; none in 2010). The average delay increased further to 43 days (31 days in 2012 after 3 successive years of reduction (from 24 days in 2009 to 20,5 days in 2011). There is no information available on suspensions.

1.3 Revenue and income

3 For which the RAL at the end of 2013 includes the RAL of previous years since 2007

ANNEXES



Total income for DG AGRI in 2013 corresponds to EUR -986,1 million (-979,9 million in 2012; -763,8 million in 2011)

For EAGF, a total amount of EUR -269,9 million was recovered off-budget on a monthly basis in 2013 (-168,0 million in 2012; -218,8 million in 2011; -540,1 million in 2010). Of this amount, EUR -111,9 million was still to be cashed on 31.12.2013 (-2,4 million in 2012; -20,6 million on 31.12.2011; -198,5 million on 31.12.2010). The amounts indicated in this table are regularised recoveries (income)4.

The negative tendency in recent years of budgetary regularised income for EAGF has not stopped in 2013 and corresponds to a total amount of EUR -829 million (-907.4 million in 2012; -666,8 million in 2011; -1.617,3 million in 2010, -2.827,4 million in 2009) of assigned revenue under EAGF linked to milk levies, irregularities, conformity clearance5. Income from 'clearance' also decreased compared to last year.

At the end of 2013, EUR 131 million is still owed to DG AGRI (-2 million end 2012; -41 million end 2011; -220 million at the end 2010)6.

With regard to the « ageing balance of recovery orders » at 31.12.2013, no significant movement was registered for old recovery orders issued between 1998 and 2005 (-0,2% in 2013; -3% in 2012; -5% in 2011).

4 Also EAGF expenses in this 'Annex 3' are regularised.

5 This amount includes EUR -593,6 million for income line 6701 (clearance), EUR -155,1 million for income line 6702 (irregularities), EUR -80,2 million for income line 6703 (milk). Income from clearance and irregularities decreases.

6 Instead of -19,1 million as reported in 'AAR_2013 annex3' of DG BUDG.

TABLE 7 : SITUATION ON REVENUE AND INCOME IN 2013

Revenue and income recognized Revenue and income cashed from Outstanding

Chapter Current year RO Carried over RO Total Current Year RO Carried over RO Total balance

1 2 3=1+2 4 5 6=4+5 7=3-6

52REVENUE FROM INVESTMENTS OR LOANS GRANTED,

BANK AND OTHER INTEREST123.916,20 1.079.967,42 1.203.883,62 108.273,82 1.079.967,42 1.188.241,24 15.642,38

61 REPAYMENT OF MISCELLANEOUS EXPENDITURE 2.586.502,36 39.040.126,82 41.626.629,18 2.586.502,36 34.380.807,30 36.967.309,66 4.659.319,52

65 FINANCIAL CORRECTIONS 21.543.481,39 11.527.492,80 33.070.974,19 20.038.905,82 36.611,71 20.075.517,53 12.995.456,66

67

REVENUE CONCERNING THE EUROPEAN

AGRICULTURE GUARANTEE FUND AND THE

EUROPEAN AGRICULTURAL FUND FOR RURAL

DEVELOPMENT

1.041.145.447,85 0,00 1.041.145.447,85 927.802.268,16 0,00 927.802.268,16 113.343.179,69

90 MISCELLANEOUS REVENUE 58.407,10 27.000,00 85.407,10 58.407,10 27.000,00 85.407,10 0,00

Total DG AGRI 1.065.457.754,90 51.674.587,04 1.117.132.341,94 950.594.357,26 35.524.386,43 986.118.743,69 131.013.598,25

ANNEXES



Finally, with regard to the 'Recovery context' (table 8), it is useful to mention that the monthly amounts recovered under EAGF for a total amount of --269,9 million € are not 'qualified'.

2. Draft annual accounts

2.1 Accounting principles and methods

The annual accounts of DG AGRI have been prepared in accordance with the generally accepted accounting principles. Estimates have been made, where necessary, in accordance with the methodology agreed upon with the services of the Accountant of the European Commission.

It should be noted that the balance sheet and economic outturn account of Directorate General, presented in Annex 3 to this Annual Activity Report, represent only the assets, liabilities, expenses and revenues that are under the control of this Directorate General. Significant amounts such as own resource revenues and cash held in Commission bank accounts are not included in this Directorate General's accounts since they are managed centrally by DG Budget, on whose balance sheet and economic outturn account they appear.

Other items not included are:

the intangible assets (IT software bought externally) or the tangible fixed assets (hardware, technical equipment, office furniture, buildings) declared/recorded by DG DIGIT and by OIB respectively;

personnel and management expenses which are managed centrally;

the appropriation of the net result of the year and of prior years, except for the opening balance in 2005. As the accumulated result of the Commission is not split amongst the various Directorates-General, the balance sheet presented here is not in equilibrium.

Additionally, the figures included in table 4 are, at this date, still subject to audit by the Court of Auditors. It is thus possible that amounts included in these tables may have to be adjusted following this audit.

2.2 Acronyms

EAGF: European Agricultural Guarantee Fund;

EAFRD: European Agriculture Fund for Rural Development;

EAGGF : European Agricultural Guarantee and Guidance Fund;

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2.3 Balance Sheet

TABLE 4 : BALANCE SHEET

BALANCE SHEET 2013 2012

A.I. NON CURRENT ASSETS 6.433.885.794,36 7.455.762.904,77

A.I.1. Intangible Assets 3.602.848,81 2.151.833,45

A.I.5. LT Pre-Financing 5.952.456.469,55 6.908.873.625,40

A.I.6. LT Receivables 477.826.476,00 544.737.445,92

A.II. CURRENT ASSETS 3.472.238.786,07 2.809.988.357,87

A.II.2. Short-term Pre-Financing 2.164.584.180,52 1.976.365.451,88

A.II.3.2. Current Receivables and Recove 1.307.654.605,55

833.622.905,99

ASSETS 9.906.124.580,43 10.265.751.262,64

P.II. NON CURRENT LIABILITIES -156.506.859,52 -126.966.941,58

P.II.2. Long-term provisions -156.506.859,52 -126.966.941,58

P.III. CURRENT LIABILITIES -57.230.680.889,97 -57.300.561.111,56

P.III.4. Accounts Payable -57.230.680.889,97 -57.300.561.111,56

LIABILITIES -57.387.187.749,49 -57.427.528.053,14

NET ASSETS (ASSETS less LIABILITIES) -47.481.063.169,06 -47.161.776.790,50

Assets

Non current assets

Long term pre-financing: it concerns shared management expenditure exclusively and it relates mainly to the pre-financing paid between 2007 and 2010 to Member States for the financing period 2007-2013 (EAFRD and IPARD) that will not be cleared in 2014. For IPARD, all pre-financing is considered long term due to the low execution rate of programmes. The decrease of -14% vs 2012 is mainly due to expected clearing of prefinancing in a few EAFRD programmes. The period of settlement exceeds one year.

Long-term receivables: it concerns not yet executed clearance decisions under shared management (EAGF and EAFRD). The period of settlement exceeds one year.

ANNEXES



Current assets

Short-term pre-financing: the increase (+9% vs. 2012; +51% vs 2011) is mainly due to the expected clearing in 2014 of prefinancing due to the high execution rate of a few programmes in EAFRD. More than 99 % of the amount in this item relates to shared management and decentralised management expenditure. Concerning the closure of the rural development and pre-accession programmes under the EAGGF Guidance section (2000-2006 programming period), the period of settlement does, in principle, not exceed one year. The not yet cleared stock of pre-financing paid to Member States corresponds to EUR 265 mio .

Short-term receivables: EUR 2.126,8 million are owed to DG AGRI by Member States (99%) and by private organisations (1%). The amount owed by Member States mostly concerns the amounts to be recovered under EAGF, EAFRD and EAGGF Guidance section, TRDI and Sapard (financing period 2000-2006) of which an important part concerns receivables established further to irregularities committed by final beneficiaries and detected by the Member States under EAGF. A value reduction of EUR -819,1 million has been applied to these receivables, equivalent to 63%. The amount of short term not yet executed clearance decisions under EAGF and EAFRD strongly increased by 81% to EUR 505 million.

Liabilities

Non current liabilities

Long-term provisions: this amount mainly relates to the estimate of potential future expenses resulting from court cases awaiting judgement. The increase (+23% in 2013 vs 2012) in 2013 was due for EAGF clearance cases and for Rural Development.

Current liabilities

Accounts payable: this item concerns amounts payable to private firms and to Members States. 99% of accounts payable relates to amounts payable to Member States under EAGF, EAGGF Guidance section (2000-2006) and EAFRD. It includes amounts already requested by Member States but not yet paid as well as an estimate of the amounts which Member States and beneficiaries are entitled to claim (accrued charges). The total liabilities remain almost unchanged vs. 2012 but the accrued charges share decreased due to the modified accounting entry for the EAGF November expenses (vendor adjustment).

ANNEXES



2.4 Economic Outturn Account

TABLE 5 : ECONOMIC OUTTURN ACCOUNT

ECONOMIC OUTTURN ACCOUNT 2013 2012

II.1 SURPLUS/ DEF. FROM OPERATING ACTIVITY 57.527.962.921,41 55.485.410.904,43

II.1.1. OPERATING REVENUES -1.544.942.897,01 -1.350.905.888,85

II.1.1.2. Other operating revenue -1.544.942.897,01 -1.350.905.888,85

II.1.2. OPERATING EXPENSES 59.072.905.818,42 56.836.316.793,28

II.1.2.1. Administrative Expenses 10.854.462,47 12.169.001,10

II.1.2.2. Operating Expenses 59.062.051.355,95 56.824.147.792,18

II.2. SURPLUS/DEF. NON OPERATING ACTIVIT -1.993.844,07 -2.293.140,47

II.2.1. FINANCIAL OPERATIONS -1.993.844,07 -2.293.140,47

II.2.1.1. Financial revenue -1.994.385,92 -2.293.499,00

II.2.1.2. Financial expenses 541,85 358,53

ECONOMIC OUTTURN ACCOUNT 57.525.969.077,34 55.483.117.763,96

Surplus/Deficit from operating activities

Operating Revenue

Other operating revenue: this amount corresponds to the revenue generated mainly by agricultural levies (milk and sugar levies), and amounts recovered due to irregularities, conformity clearance and financial corrections, representing 3% and 70% of the total operating revenue respectively. 4,5% of recovery of expenses under shared management is due to financial corrections under EAGF-Guidance and EAFRD. Finally, 3% is caused by positive reversal of non used provisions for legal cases and 6% due to decrease of value reduction.

Operating expenses

Administrative expenses: these expenses represent only 0,02% of all operating expenses and they mainly relate to amounts concerning the purchase of IT (63%) and non IT services (34%).

Operating expenses: 99% of the operating expenses relates to shared management expenditure comprising EAGF, EAFRD, EAGGF Guidance section, Sapard and Ipard. The EAGF amount corresponds to EUR 44.962

ANNEXES



million (43.690 million in 2012) and the amount for Sapard-EAGGF Guidance section 2000-2006 and EAFRD under shared management corresponds to EUR 13.540 million and Sapard-Ipard under decentralised management to EUR 187 million.

0.05%% of the operating expenses relate to direct management expenditure (Farm Accountancy Data Network, action grants awarded to NGOs, contribution to international organisations, purchase of services…).

Surplus/Deficit from non-operating activities

Financial Operations

Financial Revenue: financial revenue mainly concerns revenue resulting from interest on pre-financing paid to beneficiaries of the SAPARD programmes, which will have to be reimbursed to DG AGRI.

3. Tables

Table 1a: Commitments

Table 1b: Payments

Table 2: Financial circuits (commitments – payments)

Table 3a : Commitments to be settled (RAL)

Table 3b: RAL AGRI

Table 4: Balance sheet

Table 5: Economic Outturn Account

Table 6a: Average Payment Time Limits (Direct expenditure)

Table 6b: Average Payment Time Limits (Rural development)

Table 7: Income

Table 8: Recovery context

Table 9: Ageing balance of Recovery Orders

Table 10: Waivers of Recovery Orders

Tableau 11: Negotiated Procedures

Tableau 12: Summary of Contracts

ANNEXES



TABLE 1a: OUTTURN ON COMMITMENT APPROPRIATIONS IN 2013 (in Mio €)

Commitment appropriations

authorised

Commitments made

%

1 2 3=2/1

Title 05 Agriculture and rural development

05 05 01 Administrative expenditure of the Àgriculture and rural development- policy area

22,0955214 19,7902546 89,57 %

05 02 Interventions in agricultural markets 3466,554435 3193,2289 92,12 %

05 03 Direct aids 42107,56206 41658,2766 98,93 %

05 04 Rural development 15093,19769 14798,4547 98,05 %

05 05 Pre-accession measures in the field of agriculture and rural development

266,1133632 234,042533 87,95 %

05 06 International aspects of the Àgriculture and rural development- policy area

3,129 3,06274884 97,88 %

05 07 Audit of agricultural expenditure 119,8 119,577848 99,81 %

05 08 Policy strategy and coordination of the Àgriculture and rural development- policy area

27,36640899 26,7299391 97,67 %

Total Title 05 61105,81848 60053,1635 98,28%

Total DG AGRI 61105,81848 60053,1635 98,28 %

* Commitment appropriations authorised include, in addition to the budget voted by the legislative authority, appropriations carried over from the previous exercise, budget amendments as well as miscellaneous commitment appropriations for the period (e.g. internal and external assigned revenue).

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TABLE 1b: OUTTURN ON PAYMENT APPROPRIATIONS IN 2013 (in Mio €)

Chapter Payment

appropriations authorised *

Payments made %

1 2 3=2/1

Title 05 Agriculture and rural development

05 05 01 Administrative expenditure of the Àgriculture and rural development- policy area

33,56962122 20,08238673 59,82 %

05 02 Interventions in agricultural markets 3466,466233 3193,183831 92,12 %

05 03 Direct aids 42107,56206 41658,27663 98,93 %

05 04 Rural development 13256,9721 13151,81972 99,21 %

05 05 Pre-accession measures in the field of agriculture and rural development

79,70769219 47,63686188 59,76 %

05 06 International aspects of the Àgriculture and rural development- policy area

3,062749 3,06274884 100,00 %

05 07 Audit of agricultural expenditure 120,8369276 119,7816011 99,13 %

05 08 Policy strategy and coordination of the Àgriculture and rural development- policy area

44,04426695 33,25253012 75,50 %

Total Title 05 59112,22165 58227,09631 98,50%

Total DG AGRI 59112,22165 58227,09631 98,50 %

* Payment appropriations authorised include, in addition to the budget voted by the legislative authority, appropriations carried over from the previous exercise, budget amendments as well as miscellaneous payment appropriations for the period (e.g. internal and external assigned revenue).

ANNEXES



ANNEXES



TABLE 2

DG AGRI

Execution 2013

Expenditure

Commitments Payments

Crédits Exécution Crédits Exécution

Direct expenses 73.815.930,39 68.290.929,14 92,52% 94.970.492,85 71.258.663,27 75,03%

FEAGA 45.684.826.496,88 44.961.909.263,95 98,42% 45.684.826.496,88 44.961.909.263,95 98,42%

shared Mgt

Rural Development 15.081.062.688,73 14.788.920.797,00 98,06% 13.251.262.175,54 13.146.291.520,46 99,21%

shared Mgt

Preadhesion 266.113.363,19 234.042.533,00 87,95% 79.707.692,19 47.636.861,88 59,76%

shared / decentr Mgt

TOTAL 61.105.818.479,19 60.053.163.523,09 98,28% 59.110.766.857,46 58.227.096.309,56 98,51%

PS: Dans le tableau Payments / credits de la DG BUDG (table 1.b payments), le montant des crédits correspond à 59.112.221.652,07 au lieu de 59.110.766.857,46. La différence de 1.454.794,61 correspond au montant decommitted C8 des crédits non-dissociés.

ANNEXES



ANNEXES



Table 3a : Commitments to be settled (RAL)

DG AGRI

RAL on 31.12.2013- Financial Year 2013

C

Budget Item

Commitments contracted during financial year 2013 (incl C2,C3,C4,C5)

Payments made during financial

year 2013 (C1,C2,C3,C4,C5)

Automatic Cancellati

on of unreporta

ble commitments (non

dissociated credits)

Commitments from financial

year 2013 still to be settled

Commitments to be settled from financial years

previous to 2013 (C8 commitments)

Decommitments/ exchange

rate adjustments (decomm C8)

Payments made (C8)

Cancellation of unsettled commitment

s (non dissociated

credits)

Final Situation of commitments to be settled from

previous financial years

Rate of commitments

settled

Total of Commitments to be settled at end of financial year

2013

1 2 3 4=1-2-3 5 6 7 8 9=5-6-7-8 10=-(9-5)/5 11=4+9

Title 05

Chapter 05 01

05 01 02 01 External staff 71.800,00 0,00 0,00 71.800,00 154.478,36 -6.837,16 147.641,20 0,00 0,00 -100,00% 71.800,00

05 01 02 11 Other management expenditure

7.843.141,22 5.249.187,49 0,00 2.593.953,73 3.077.228,07 -80.546,10 2.305.104,54 691.577,43 0,00 -100,00% 2.593.953,73

05 01 04 01

European Agriculture Guarantee Fund (EAGF) ¿ Non-operational technical assistance

7.207.630,76 1.789.842,75 0,00 5.417.788,01 5.981.941,60 -10.813,38 5.971.094,93 33,29 0,00 -100,00% 5.417.788,01

05 01 04 03

Pre-accession assistance in the field of agriculture and rural development (IPARD) ¿ Expenditure on administrative management

0,00 0,00 0,00 0,00 58.400,00 0,00 58.400,00 0,00 0,00 -100,00% 0,00

05 01 04 04

European Agricultural Fund for Rural Development (EAFRD) ¿ Non-operational technical assistance

4.397.816,75 2.375.899,86 0,00 2.021.916,89 2.024.399,38 -43.126,69 1.937.227,16 44.045,53 0,00 -100,00% 2.021.916,89

05 01 06

Expenditure on agricultural analysis, inspection, communication and the Conciliation Body in connection with the

269.865,85 89.578,92 0,00 180.286,93 177.652,41 -19.242,53 158.409,88 0,00 0,00 -100,00% 180.286,93

ANNEXES



clearance of accounts of the EAGGF Guarantee Section, the EAGF and the EAFRD

Total Chapter 05 01 19.790.254,58 9.504.509,02 0,00 10.285.745,56 11.474.099,82 -160.565,86 10.577.877,71 735.656,25 0,00 -100,00% 10.285.745,56

Chapter 05 02

05 02 01 01 Export refunds for cereals 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 01 02 Intervention storage of cereals

88.853,98 88.853,98 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 01 03 Intervention for starch -774,63 -774,63 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 01 99 Other measures (cereals) 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 02 01 Export refunds for rice 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 02 02 Intervention storage of rice 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 02 99 Other measures (rice) 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 03 Refunds on non-Annex 1 products

4.879.804,92 4.879.804,92 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 04 01 Programmes for deprived persons

491.527.533,61 491.527.533,61 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 04 99 Other measures (food programmes)

1.195,41 1.195,41 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 05 01 Export refunds for sugar and isoglucose

45.046,27 45.046,27 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 05 03 Production refunds for sugar used in the chemical industry

-9.166,13 -9.166,13 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 05 08 Storage measures for sugar

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

ANNEXES



05 02 05 99 Other measures (sugar) -182.648,61 -182.648,61 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 06 03 Storage measures for olive oil

17.204.146,15 17.204.146,15 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 06 05 Quality improvement measures

43.169.172,74 43.169.172,74 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 06 99 Other measures (olive oil) 565.210,07 565.210,07 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 07 01 Aid for fibre flax and hemp 7.037.678,43 7.037.678,43 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 07 03 Cotton ¿ National restructuring programmes

10.102.598,83 10.102.598,83 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 07 99 Other measures (textile plants)

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 08 01 Export refunds for fruit and vegetables

1.192.399,31 1.192.399,31 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 08 03 Operational funds for producer organisations

726.755.567,69 726.755.567,69 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 08 09 Compensation to encourage processing of citrus fruit

-5.645,59 -5.645,59 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 08 11 Aid to producer groups for preliminary recognition

343.373.666,75 343.373.666,75 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 08 12 School fruit scheme 66.736.818,29 66.736.818,29 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 08 99 Other measures (fruit and vegetables)

33.521,73 33.521,73 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 09 04 Storage measures for alcohol

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 09 08 National support programmes for the wine sector

1.046.416.618,18 1.046.416.618,18 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

ANNEXES



05 02 09 09 Grubbing-up scheme 368.029,30 368.029,30 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 09 99 Other measures (wine-growing sector)

-2.552.579,27 -2.552.579,27 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 10 01 Promotion measures ¿ Payments by Member States

50.129.077,60 50.129.077,60 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 10 02 Promotion measures ¿ Direct payments by the Union

1.346.726,99 1.301.657,90 0,00 45.069,09 1.372.724,89 -274.106,63 0,00 0,00 1.098.618,26 -77,87% 1.143.687,35

05 02 10 99 Other measures (promotion)

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 11 01 Dried fodder -25.616,67 -25.616,67 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 11 03 Hops ¿ Aid to producer organisations

2.277.000,00 2.277.000,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 11 04 POSEI (excluding direct aids and Article 11 02 03)

225.393.907,76 225.393.907,76 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 11 05 Community Tobacco Fund (excluding Article 17 03 02)

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 11 99 Other measures (other plant products/measures)

-0,05 -0,05 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 12 01 Refunds for milk and milk products

62.670,33 62.670,33 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 12 02 Intervention storage of skimmed-milk powder

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 12 03 Aid for disposal of skimmed milk

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 12 04 Intervention storage of butter and cream

7.102.012,02 7.102.012,02 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 12 08 School milk 63.177.530,31 63.177.530,31 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

ANNEXES



05 02 12 99 Other measures (milk and milk products)

7.285,00 7.285,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 13 01 Refunds for beef and veal 4.578.186,47 4.578.186,47 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 13 02 Intervention storage of beef and veal

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 13 03 Exceptional support measures

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 13 04 Refunds for live animals 1.911.057,57 1.911.057,57 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 13 99 Other measures (beef and veal)

-56,49 -56,49 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 14 01 Intervention storage of sheepmeat and goatmeat

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 14 99 Other measures (sheepmeat and goatmeat)

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 15 01 Refunds for pigmeat 3.474.173,74 3.474.173,74 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 15 02 Intervention storage of pigmeat

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 15 03 Exceptional market-support measures for pigmeat

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 15 04 Refunds for eggs 84.375,60 84.375,60 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 15 05 Refunds for poultrymeat 46.111.351,89 46.111.351,89 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 15 06 Specific aid for bee-keeping 29.759.580,19 29.759.580,19 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 15 07

Exceptional market-support measures for the poultrymeat and eggs sector

1.092.590,12 1.092.590,12 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

ANNEXES



05 02 15 99 Other measures (pigmeat, poultry, eggs, bee-keeping, other animal products)

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 17 01 Pilot project ¿ Support for farmers¿ cooperatives

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 17 02 Pilot project ¿ European farm prices and margins observatory

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 17 03

Pilot project ¿ Support for farmers¿ and consumers¿ initiatives for low carbon emission, low energy consumption and locally marketed food production

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 02 17 07 Pilot project ¿ Measures to combat speculation in agricultural commodities

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

Total Chapter 05 02 3.193.228.899,81 3.193.183.830,72 0,00 45.069,09 1.372.724,89 -274.106,63 0,00 0,00 1.098.618,26 -77,87% 1.143.687,35

Chapter 05 03

05 03 01 01 SPS (single payment scheme)

31.393.933.497,55 31.393.933.497,55 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 01 02 SAPS (single area payment scheme)

6.681.196.780,24 6.681.196.780,24 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 01 03 Separate sugar payment 280.141.810,28 280.141.810,28 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 01 04 Separate fruit and vegetables payment

12.289.530,13 12.289.530,13 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 01 05 Specific support (Article 68) ¿ Decoupled direct aids

463.236.884,51 463.236.884,51 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 01 06 Separate soft fruit payment 11.479.812,77 11.479.812,77 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 01 99 Other (decoupled direct aids)

-169.227,89 -169.227,89 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 02 01 Crops area payments 3.617.771,39 3.617.771,39 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

ANNEXES



05 03 02 04 Supplementary aid for durum wheat: traditional production zones

191.340,90 191.340,90 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 02 05 Production aid for seeds 188.628,70 188.628,70 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 02 06 Suckler-cow premium 921.054.366,05 921.054.366,05 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 02 07 Additional suckler-cow premium

48.977.729,92 48.977.729,92 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 02 08 Beef special premium 149.045,07 149.045,07 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 02 09 Beef slaughter premium ¿ Calves

3.813,52 3.813,52 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 02 10 Beef slaughter premium ¿ Adults

409.766,92 409.766,92 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 02 13 Sheep and goat premium 21.138.823,17 21.138.823,17 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 02 14 Sheep and goat supplementary premium

6.821.053,06 6.821.053,06 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 02 18 Payments to starch potato producers

135.331,94 135.331,94 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 02 19 Area aid for rice 264.743,76 264.743,76 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 02 21 Aid for olive groves 283.774,74 283.774,74 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 02 22 Tobacco aid 37.941,79 37.941,79 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 02 23 Hops area aid 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 02 24 Specific quality premium for durum wheat

347.083,40 347.083,40 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

ANNEXES



05 03 02 25 Protein crop premium 719.386,55 719.386,55 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 02 26 Area payments for nuts 785.928,53 785.928,53 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 02 28 Aid for silkworms 415.374,72 415.374,72 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 02 36 Payments for specific types of farming and quality production

1.307.278,09 1.307.278,09 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 02 39 Additional amount for sugar beet and cane producers

20.939.786,08 20.939.786,08 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 02 40 Area aid for cotton 242.262.404,19 242.262.404,19 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 02 41 Transitional fruit and vegetables payment ¿ Tomatoes

740.208,62 740.208,62 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 02 42

Transitional fruit and vegetables payment ¿ Other products than tomatoes

34.293.109,02 34.293.109,02 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 02 43 Transitional soft fruit payment

6.833,06 6.833,06 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 02 44 Specific support (Article 68) ¿ Coupled direct aids

1.046.505.693,22 1.046.505.693,22 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 02 50 POSEI ¿ European Union support programmes

457.955.403,92 457.955.403,92 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 02 51 POSEI ¿ Other direct aids and earlier regimes

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 02 52 POSEI ¿ Aegean islands 16.156.023,15 16.156.023,15 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 02 99 Other (direct aids) -9.714.041,57 -9.714.041,57 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 03 03 Additional amounts of aid 172.936,19 172.936,19 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

ANNEXES



Total Chapter 05 03 41.658.276.625,69 41.658.276.625,69 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

Chapter 05 04

05 04 01 14

Rural development financed by the EAGGF Guarantee Section - Programming period 2000 to 2006

-1.027.620,31 -1.027.620,31 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 04 02 01

Completion of the European Agricultural Guidance and Guarantee Fund, Guidance Section - Objective 1 regions (2000 to 2006)

0,00 0,00 0,00 0,00 441.637.769,28 -64.100.995,93 183.905.223,93 0,00 193.631.549,42 -56,16% 193.631.549,42

05 04 02 02

Completion of the special programme for peace and reconciliation in Northern Ireland and the border counties of Ireland (2000 to 2006)

0,00 0,00 0,00 0,00 2.189.102,00 0,00 2.189.102,00 0,00 0,00 -100,00% 0,00

05 04 02 03

Completion of earlier programmes in Objectives 1 and 6 regions (prior to 2000)

0,00 0,00 0,00 0,00 1.267.311,30 0,00 1.233.296,21 0,00 34.015,09 -97,32% 34.015,09

05 04 02 04 Completion of earlier programmes in Objective 5b regions (prior to 2000)

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 04 02 05

Completion of earlier programmes outside Objective 1 regions (prior to 2000)

0,00 0,00 0,00 0,00 209.371,63 0,00 0,00 0,00 209.371,63 0,00% 209.371,63

05 04 02 06 Completion of Leader (2000 to 2006)

0,00 0,00 0,00 0,00 14.704.275,24 -4.949.280,28 8.230.357,84 0,00 1.524.637,12 -89,63% 1.524.637,12

05 04 02 07 Completion of earlier Community initiatives (prior to 2000)

0,00 0,00 0,00 0,00 2.382.590,28 -1.368.171,75 741.093,24 0,00 273.325,29 -88,53% 273.325,29

05 04 02 08 Completion of earlier innovative measures (prior to 2000)

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 04 02 09

Completion of the European Agricultural Guidance and Guarantee Fund, Guidance Section ¿ Operational technical assistance (2000 to 2006)

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 04 03 01 Preparatory action ¿ Union plant and animal genetic resources

1.500.000,00 0,00 0,00 1.500.000,00 0,00 0,00 0,00 0,00 0,00 0,00% 1.500.000,00

ANNEXES



05 04 03 02 Plant and animal genetic resources ¿ Completion of earlier measures

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 04 04

Transitional instrument for the financing of rural development by the EAGGF Guarantee Section for the new Member States ¿ Completion of programmes (2004 to 2006)

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 04 05 01 Rural development programmes

14.788.920.797,00 858.884.341,82 0,00 13.930.036.455,18 22.592.274.561,16 -157.199.562,41 12.091.108.105,42 0,00 10.343.966.893,33 -54,21% 24.274.003.348,51

05 04 05 02 Operational technical assistance

7.561.497,15 2.763.063,06 0,00 4.798.434,09 6.938.783,22 -1.179.908,58 3.792.761,26 0,00 1.966.113,38 -71,66% 6.764.547,47

05 04 05 03 Pilot project ¿ Exchange programme for young farmers

1.500.000,00 0,00 0,00 1.500.000,00 0,00 0,00 0,00 0,00 0,00 0,00% 1.500.000,00

Total Chapter 05 04 14.798.454.673,84 860.619.784,57 0,00 13.937.834.889,27 23.061.603.764,11 -228.797.918,95 12.291.199.939,90 0,00 10.541.605.905,26 -54,29% 24.479.440.794,53

Chapter 05 05

05 05 01 01

The Sapard pre-accession instrument ¿ Completion of the programme (2000 to 2006)

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 05 01 02

The Sapard pre-accession instrument ¿ Completion of the pre-accession assistance related to eight applicant countries

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 05 02

Instrument for Pre-accession Assistance for Rural Development (IPARD)

234.042.533,00 0,00 0,00 234.042.533,00 723.111.142,07 -85.646.201,00 47.636.861,88 0,00 589.828.079,19 -18,43% 823.870.612,19

Total Chapter 05 05 234.042.533,00 0,00 0,00 234.042.533,00 723.111.142,07 -85.646.201,00 47.636.861,88 0,00 589.828.079,19 -18,43% 823.870.612,19

Chapter 05 06

05 06 01 International agricultural agreements

3.062.748,84 3.062.748,84 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

Total Chapter 05 06 3.062.748,84 3.062.748,84 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

Chapter 05 07

ANNEXES



05 07 01 02 Monitoring and preventive measures ¿ Direct payments by the Union

6.799.762,44 6.080.912,72 0,00 718.849,72 1.036.927,59 0,00 922.602,64 114.324,95 0,00 -100,00% 718.849,72

05 07 01 06

Accounting clearance of previous years¿ accounts with regard to shared management expenditure under the EAGGF Guarantee Section (previous measures) and under the EAGF

3.382.276,15 3.382.276,15 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 07 01 07

Conformity clearance of previous years¿ accounts with regard to shared management expenditure under the EAGGF Guarantee Section (previous measures) and under the EAGF

109.070.845,82 109.070.845,82 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 07 01 10

Accounting clearance of previous years¿ accounts with regard to rural development under the EAFRD

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 07 01 11

Conformity clearance of previous years¿ accounts with regard to rural development under the EAFRD

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

05 07 02 Settlement of disputes 324.963,78 324.963,78 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

Total Chapter 05 07 119.577.848,19 118.858.998,47 0,00 718.849,72 1.036.927,59 0,00 922.602,64 114.324,95 0,00 -100,00% 718.849,72

Chapter 05 08

05 08 01 Farm Accountancy Data Network (FADN)

14.521.070,69 6.957.670,00 0,00 7.563.400,69 15.269.288,18 -1.300.751,40 7.061.046,31 0,00 6.907.490,47 -54,76% 14.470.891,16

05 08 02 Surveys on the structure of agricultural holdings

226,41 226,41 0,00 0,00 18.758.513,58 -1.270.202,21 7.527.712,08 0,00 9.960.599,29 -46,90% 9.960.599,29

05 08 03 Restructuring of systems for agricultural surveys

1.539.658,38 588.542,12 0,00 951.116,26 1.704.975,70 -744.464,33 959.661,32 0,00 850,05 -99,95% 951.966,31

05 08 06 Enhancing public awareness of the common agricultural policy

7.956.814,54 1.974.603,57 0,00 5.982.210,97 6.242.377,03 -1.294.228,75 4.895.442,70 52.705,58 0,00 -100,00% 5.982.210,97

ANNEXES



05 08 09

European Agricultural Guarantee Fund (EAGF) ¿ Operational technical assistance

2.712.169,12 1.709.524,00 0,00 1.002.645,12 1.049.559,69 0,00 1.049.559,69 0,00 0,00 -100,00% 1.002.645,12

05 08 10

Pilot project ¿ Assessing end-user costs of compliance with Union legislation in the fields of environment, animal welfare and food safety

0,00 0,00 0,00 0,00 1.203.901,04 0,00 528.541,92 0,00 675.359,12 -43,90% 675.359,12

05 08 11 Pilot project ¿ Exchanging best practice for cross compliance simplification

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00% 0,00

Total Chapter 05 08 26.729.939,14 11.230.566,10 0,00 15.499.373,04 44.228.615,22 -4.609.646,69 22.021.964,02 52.705,58 17.544.298,93 -60,33% 33.043.671,97

Total DG AGRI 60.053.163.523,09 45.854.737.063,41 0,00 14.198.426.459,68 23.842.827.273,70 -319.488.439,13 12.372.359.246,15 902.686,78 11.150.076.901,64 -53,24% 25.348.503.361,32

PS: Le résultat net du table 3a. RAL de la DG BUDG est cohérent avec celui de la DG AGRI (table 3b. RAL AGRI).

Par contre, les composantes du table 3a. RAL de la BUDG (par exemple payments) sont erronnées (par exemple par l'oubli des montants négatifs)

ANNEXES



TABLE 4 : BALANCE SHEET

BALANCE SHEET 2013 2012

A.I. NON CURRENT ASSETS 6.433.885.794,36 7.455.762.904,77

A.I.1. Intangible Assets 3.602.848,81 2.151.833,45

A.I.5. LT Pre-Financing 5.952.456.469,55 6.908.873.625,40

A.I.6. LT Receivables 477.826.476,00 544.737.445,92

A.II. CURRENT ASSETS 3.472.238.786,07 2.809.988.357,87

A.II.2. Short-term Pre-Financing 2.164.584.180,52 1.976.365.451,88

A.II.3.2. Current Receivables and Recove 1.307.654.605,55 833.622.905,99

ASSETS 9.906.124.580,43 10.265.751.262,64

P.II. NON CURRENT LIABILITIES -156.506.859,52 -126.966.941,58

P.II.2. Long-term provisions -156.506.859,52 -126.966.941,58

P.III. CURRENT LIABILITIES -57.230.680.889,97 -57.300.561.111,56

P.III.4. Accounts Payable -57.230.680.889,97 -57.300.561.111,56

LIABILITIES -57.387.187.749,49 -57.427.528.053,14

NET ASSETS (ASSETS less LIABILITIES)

-47.481.063.169,06 -47.161.776.790,50

P.I.2. Accumulated Surplus / Deficit 11.529.696,52 0,00

Non-allocated central (surplus)/deficit* 47.469.533.472,54 47.161.776.790,50

TOTAL 0,00 0,00

ANNEXES



TABLE 5 : ECONOMIC OUTTURN ACCOUNT

ECONOMIC OUTTURN ACCOUNT 2013 2012

II.1 SURPLUS/ DEF. FROM OPERATING ACTIVT 57.527.962.921,41 55.485.410.904,43

II.1.1. OPERATING REVENUES -1.544.942.897,01 -1.350.905.888,85

II.1.1.2. Other operating revenue -1.544.942.897,01 -1.350.905.888,85

II.1.2. OPERATING EXPENSES 59.072.905.818,42 56.836.316.793,28

II.1.2.1. Administrative Expenses 10.854.462,47 12.169.001,10

II.1.2.2. Operating Expenses 59.062.051.355,95 56.824.147.792,18

II.2. SURPLUS/DEF. NON OPERATING ACTIVIT -1.993.844,07 -2.293.140,47

II.2.1. FINANCIAL OPERATIONS -1.993.844,07 -2.293.140,47

II.2.1.1. Financial revenue -1.994.385,92 -2.293.499,00

II.2.1.2. Financial expenses 541,85 358,53

ECONOMIC OUTTURN ACCOUNT 57.525.969.077,34 55.483.117.763,96

ANNEXES



Table 6a / Direct payments

Délais de paiement et suspensions au 31/12/2012

Ligne budgétaire Libellé NB

paiements

Délai moyen

Trans. clôtur. > délai autorisé

Suspensions délai de paiement

Nombre trans. > délai autor.

% sur total trans.

Nombre trans. suspendues

Total jours suspendus

05.010201 External staff

05.010211.00.01.30 Frais de mission et de réception 37 10 0 0,00% 1 5

05.010201.00.02.20 Pers. interimaire & assist. techn. et administrative 6 22 0 0,00%

05.010211.00.02.40 Frais de conférences 16 11 0 0,00%

05.010211.00.04 Etudes et consultations 7 13 0 0,00%

05.010211.00.05 Développement systèmes d'info 27 9 0 0,00%

05.010211.00.06 Perfectionnement professionnel 126 9 0 0,00% 5 181

05.010401 Actions de contrôle 281 10 2 0,71% 13 1712

05.010403 IPARD administrative expense 3 13 0 0,00%

05.010404 Feoga: ass. techn. non opération. 49 13 0 0,00%

05.010407 Proj. pil. Fond de sécur.dép.adm.

05.010408 Dép. adm. Agricult. durable, conserv. sols

05.010600 Dépenses analyse et inspection 59 10 0 0,00%

05.021002 Fonds comm. rech. et inform. 19 16 2 0,00% 1 21

05.021701 Support farmers cooperatives

ANNEXES



05.040206.11 FEOGA orient. Leader - AT

05.040208 Completion innovative measures

05.040209 FEOGA Orient. AT (non opérat.)

05.040301 Sylviculture

05.040302 Ress. génétiques vég. & anim.

05.040502 Assist. techn. opérationnell 90 13 0 0,00% 4 831

05.040503 Pilot exchange young farmers

05.060100 Accords Int. en mat. Agric. 7 20 1

05.070102 Actions contr. et prév. - CE

05.070105 Contrôles application Rég.

Agric.

05.080100 RICA 76 9 0

05.0803 Restructuring surveys

05.080300 Restruct. systèmes enquêtes

05.080600 Actions information PAC 117 25 10 8,55% 25 781

05.0809 EAGF operat technical assistance 64 10

05.0810 Pilot EU legislation 2 14 0

26.030101.00 Réseau échange données (IDABC)

26.030101.01 Réseau échange données (IDABC)

16.010304 Other working expenditure 7 20 1 14,29%

DG AGRI 993 12 16 1,61% 49 3531

ANNEXES



Table 6b / Rural Development

Exercice 2013

Délais de paiement et suspensions au 31/12/2013

Trans.clôtur.>délai autorisé Suspensions délai de

Ligne budgétaire Libellé NB Délai

moyen (60 jours) paiement

paiements Nombre trans. % sut total Nombre trans. Total jours

>délai autor. trans. suspensdues suspendus

05.040201 FEOGA-Orientation: Objectif 1 2000-2006 0 #DIV/0!

05.040202 FEOGA-Orientation: Peace 2000-2006 n/a n/a

05.040206 (10) FEOGA-Orientation: Leader+ 2000-2006 0 #DIV/0!

05.0404 IFDR: Programmes 2004-2006 n/a n/a

05.050101 / 02 SAPARD: Programmes 2000-2006 n/a n/a

Total système local GFO (1) 0 0 0 #DIV/0!

05.040501 FEADER: Programmes 2007-2013 614 43,6 234 (avec plus de 45) 38,1%

05.0502 IPARD: Programmes 2007-2013 12 27,1 0 (avec plus de 45) 0,0%

Total système local RDS (2) 626 43,3 234 (avec plus de 45) 37,4%

05.04 / 05.05 Total Développement rural 626 43,3 234 37,4%

ANNEXES



(1) Système local GFO: concerne la clôture des programmes FEOGA - Orientation 2000-2006. En 2013, 22 programmes ont été clôturés , dont 15 par paiement d'un

solde final positif et 4 par ordre de recouvrement pour récupérer un solde final négatif; auxquels s'ajoutent 3 paiements complémentaires pour des programmes

clôturés en 2011.

(2 Système local FEADER: concerne la programmation FEADER 2007-2013. En 2013 ils ont été payés 406 "Cost claim", dont 364 concernaient aux demandes de

paiement présentées par les EM et 38 à des "Cost claim techniques" crées par le système pour régler les apurements positifs de FY 2012,

ainsi que à des montants correspondant à 4 cost claims de l'année 2012.

A noter que le les 614 paiements FEADER corresponds à des cost claim 2013 payés en plusieurs tranches, en fonction des fonds disponibles.

ANNEXES



TABLE 7 : SITUATION ON REVENUE AND INCOME IN 2013

Revenue and income

recognized

Revenue and income cashed

from Outstanding

Chapter Current year RO Carried over RO Total Current Year RO Carried over RO Total balance

1 2 3=1+2 4 5 6=4+5 7=3-6

52 REVENUE FROM INVESTMENTS OR LOANS GRANTED, BANK AND OTHER INTEREST

123.916,20 1.079.967,42 1.203.883,62 108.273,82 1.079.967,42 1.188.241,24 15.642,38

61 REPAYMENT OF MISCELLANEOUS EXPENDITURE

2.586.502,36 39.040.126,82 41.626.629,18 2.586.502,36 34.380.807,30 36.967.309,66 4.659.319,52

65 FINANCIAL CORRECTIONS 21.543.481,39 11.527.492,80 33.070.974,19 20.038.905,82 36.611,71 20.075.517,53 12.995.456,66

67

REVENUE CONCERNING THE EUROPEAN AGRICULTURE GUARANTEE FUND AND THE EUROPEAN AGRICULTURAL FUND FOR RURAL DEVELOPMENT

1.041.145.447,85 0,00 1.041.145.447,85 927.802.268,16 0,00 927.802.268,16 113.343.179,69

90 MISCELLANEOUS REVENUE 58.407,10 27.000,00 85.407,10 58.407,10 27.000,00 85.407,10 0,00

Total DG AGRI

1.065.457.754,90 51.674.587,04 1.117.132.341,94 950.594.357,26 35.524.386,43 986.118.743,69 131.013.598,25

PS: Les montants du tableau Income de la DG BUDG ont été modifiés (montants en gras). Le tableau de la BUDG ne tient pas compte de la situation réelle du FEAGA en termes de recouvrement effectif à la fin de l'exercice, mais uniquement des montants régularisés qui sont par définition recouvrés à la fin de l'exercice.

ANNEXES



TABLE 8 : RECOVERY OF UNDUE PAYMENTS (Number of Recovery Contexts and corresponding Transaction Amount)

Rural Development

EXPENSES BUDGET

Error Irregularity OLAF Notified TOTAL Qualified TOTAL RC(incl. non-

qualified) % Qualified/Total RC

Nbr Amount Nbr Amount Nbr Amount Nbr Amount Nbr Amount Nbr Amount

INCOME LINES IN INVOICES

3 137.092,40

NON ELIGIBLE IN COST CLAIMS

12 726974,62 12 726974,62 89 117.426.976,99 13,48% 0,62%

CREDIT NOTES 12 105709,01 30 294488,1 42 400197,11 50 596.048,64 84,00% 67,14%

Sub-Total 12 105709,01 42 1021462,72 54 1127171,73 142 118160118 38,03% 0,95%

GRAND TOTAL 12 105709,01 142 236203433,1 154 236309142,1 249 355986997,9 61,85% 0,32%

INCOME BUDGET

RECOVERY ORDERS ISSUED

IN 2013

Irregularity TOTAL Qualified TOTAL RC(incl. non-


Year of Origin (commitment)

Nbr RO Amount Nbr RO Amount Nbr RO Amount Nbr RO

Amount

No Link 98 233.768.889,61 106 233.768.889,61 107 236.445.155,28 91,59% 98,87%

Sub-Total * 98 233.768.889,61 106 233.768.889,61 107 236.445.155,28 91,59% 98,87%

* L'OR RDS.B2013.REC.0002 (1.413.080,78 €; programme FEADER 2007IT06RPO013 - Valle d'Aosta) n'est pas présenté dans le tableau ci dessus car le montant correspond à une déclaration de dépenses négative, qui a été récupérée par erreur avec cet OR. Après l'accord de la DG BUDG, nous estimons qu'il y aura un cancellation du OR en question en 2014 et aussi une correction par écriture manuelle pour debiter le compte classe 7 de 2013.

ANNEXES



Direct expenditure

EXPENSES BUDGET

Error Irregularity OLAF Notified TOTAL Qualified TOTAL RC(incl. non-


Nbr Amount Nbr Amount Nbr Amount Nbr Amount Nbr Amount Nbr Amount

INCOME LINES IN INVOICES

3 137.092,40

NON ELIGIBLE IN COST CLAIMS

13 727.032,91 13 727.032,91 13 727.032,91

CREDIT NOTES 13 267.658,33 30 294.488,10 43 562.146,43 50 596.048,64

SUB-TOTAL 13 267.658,33 43 1.021.521,01 56 1.289.179,34 66 1.460.173,95

GRAND TOTAL 13 267.658,33 43 1.021.521,01 56 1.289.179,34 68 1.518.581,05

INCOME BUDGET RECOVERY

ORDERS ISSUED IN 2013

Irregularity TOTAL Qualified TOTAL RC(incl. non-


Year of Origin (commitment)

Nbr RO Amount Nbr RO Amount Nbr RO Amount Nbr RO

Amount

2010-2011 2 58.407,10

Sub-Total 2 58.407,10

ANNEXES



TABLE 9: AGEING BALANCE OF RECOVERY ORDERS AT 31/12/2013 FOR AGRI

Number at 01/01/2013

Number at 31/12/2013

Evolution Open Amount

(Eur) at 01/01/2013

Open Amount (Eur) at

31/12/2013 Evolution

1992 1 -100,00

% 34.152,89 -100,00 %

1998 1 1 0,00 % 90.577,13 88.118,31 -2,71 %

1999 10 10 0,00 % 7.244.527,00 7.244.527,00 0,00 %

2000 1 1 0,00 % 2.367.032,59 2.367.032,59 0,00 %

2001 2 2 0,00 % 1.791.203,19 1.791.203,19 0,00 %

2003 1 1 0,00 % 3.674.865,52 3.674.865,52 0,00 %

2004 1 1 0,00 % 984.454,00 984.454,00 0,00 %

2010 1 -100,00

% 27.000,00 -100,00 %

2012 28 -100,00

% 37.872.008,86 -100,00 %

2013 24 114.863.397,64

46 40 -13,04 % 54.085.821,18 131.013.598,25 142,23 %

TABLE 10 : RECOVERY ORDER WAIVERS IN 2013 >= EUR 100.000

Waiver Central Key Linked RO Central

Key

RO Accepted Amount

(Eur)

LE Account Group

Commission Decision

Comments

Total DG

Number of RO waivers

No Recovery order higher than EUR 100,000 was waived by DG AGRI in 2013.

Only 1 recovery order was waived for an amount of 34.152,89.

ANNEXES



TABLE 11 : CENSUS OF NEGOTIATED PROCEDURES - DG AGRI - 2013

Procurement > EUR 60,000

Negotiated Procedure Legal base

Number of Procedures Amount (€)

(FR2012) Exceptional Negociated Procedure after publication of a contract notice (Art. 135 RAP)

1 1.499.841,00

(FR2012) Exceptional Negociated Procedure without publication of a contract notice (Art. 134 RAP)

1 99.000,00

Total 2 1.598.841,00

TABLE 12 : SUMMARY OF PROCEDURES OF DG AGRI EXCLUDING BUILDING CONTRACTS

Internal Procedures > € 60,000

Procedure Type Count Amount (€)

Open Procedure (Art. 127.2 RAP) 7 4.737.970,00

TOTAL 7 4.737.970,00

ANNEXES

ANNEX 4: Materiality criteria



General Principle Reasonable assurance is the judgement of the Authorising Officer by Delegation (hereafter referred to as the Director General). For this purpose, he/she is required to assess all relevant information at his/her disposal available to support the declaration of assurance. Where the Director General entrusts budget implementation tasks to entities distinct from the Commission or relies on controls carried out by other services, the provision of assurance has to be based on the assessment of the information and indicators resulting from the management reporting and supervision arrangements in place, on the functioning of the internal control systems operated by these services or entities, which allow the Director General to form an opinion as to their effectiveness. For EAGF and EAFRD implemented under shared management, this requires an assessment of the management and control systems operated at the level of the Member States' implementing bodies.

Assurance model for CAP expenditure The EAGF and EAFRD are implemented through a management and control system based on four levels. Taken together, these four levels and the results they produce are the basis for the Director General to obtain reasonable assurance as to the effectiveness of management and control systems and the legality and regularity of the expenditure.

ANNEXES



Leve

ls o

f as

sura

nce

fro

m t

he

Mem

ber

Sta

te'

con

tro

l sys

tem

s

Administrative structure set up at Member States level: management, control and payment of the expenditure is entrusted to accredited Paying Agencies. Compliance with strict accreditation criteria (which are laid down in Commission Regulation (EU) No. 885/2006) is subject to a detailed review by an independent external audit body designated at national level (Certification Body) as well as to constant supervision by the competent national authority (at Ministerial level). The Paying Agencies are required to provide an annual statement of assurance which includes a declaration that the system in place provides reasonable assurance on the legality and regularity of the underlying transactions. These statements of assurance are verified by the above-mentioned Certification Bodies, which are required to provide an annual opinion thereon.

Ex-ante administrative controls and on-the-spot checks (prior to payment): for each aid support scheme financed by the EAGF or EAFRD, the Paying Agencies apply a system of exhaustive ex-ante administrative controls (100% of aid applications must be checked) and on-the-spot checks (at least 5% in the case of most schemes) prior to any payment. These controls are made in accordance with precise rules set out in the sector specific legislation (e.g., the Integrated Administration and Control System – IACS, including a Land Parcel Identification System – LPIS). For the majority of these aid schemes Member States are required to send statistical information on the checks carried out and their results on a yearly basis to the Commission (control statistics).

Ex-post controls carried out by the MS/PA/CB (after payment): all aid measures other than direct payments covered by the IACS are subject to ex-post controls, either by a specific control body (in the case of the EAGF) or by the Paying Agency itself (in the case of the EAFRD). In addition the Certification Bodies verify and certify, on an ex-post basis, the Paying Agencies' annual accounts and the functioning of their internal control procedures. They also give an opinion on the accuracy of the control statistics and on the quality of the on-the-spot checks.

Ass

ura

nce

fro

m t

he

Co

mm

issi

on

' s

chec

ks

DG AGRI audits: The audits carried out by DG AGRI serve a number of purposes: In the first place, they protect the EU budget from irregular payment by recovering amounts unduly spent by the MS as a result of deficiencies detected in their management and control systems. This is done via a clearance of accounts procedure consisting of both an annual financial clearance (limited to the Paying Agencies' annual accounts) and a multi-annual conformity clearance, whose aim is to exclude the expenditure not compliant through net financial corrections which return to the EU budget as assigned revenue. Secondly, by revealing deficiencies and by leading to financial corrections up to the moment those deficiencies have been corrected, they have a remedial and preventive role. Thirdly, DG AGRI's audits are also used to provide assurance to the Director General on the Member States' management and control systems.

ANNEXES



Assessment of management and control systems in the Member States

The Director General carries out an assessment on the extent to which he/she can draw assurance from the four levels of the management and control systems described. This assessment is based on three elements as follows: The first element is the assessment of the functioning of management and control systems in the paying agencies. This is carried out by the audit directorate and includes

Checking compliance of the paying agencies with the accreditation criteria. This is carried out by the certification bodies with, where appropriate, the placing under probation of those Paying Agencies with serious deficiencies in their application of the accreditation criteria.

The performance by the Commission, on the basis of a detailed risk analysis, of accreditation audits in order to check by itself the respect by Paying Agencies of accreditation criteria as well as audits on the proper functioning and operation of the Certification Bodies.

The qualitative analysis of the statements of assurance issued by the directors of the Paying Agencies whereby they are required to declare whether they have put in place systems which provide reasonable assurance on the legality and regularity of the underlying transactions.

The qualitative analysis of the opinions from the Certification Bodies on these statements of assurance.

An annual financial clearance exercise carried out by the Commission whereby it examines the completeness, accuracy and veracity of the accounts declared by the Paying Agencies and adopts a clearance of accounts decision without prejudice to the conformity procedure with regard to the legality and regularity of the expenditure.

The second element assessed is the result of the controls carried out by the Member States on the final beneficiaries.

For most of the agriculture budget, each year Member States are required to send statistical information to the Commission in relation to the more than 900 000 checks carried out. For the large part7, these results relate to the financial year covered by the AAR in question. These statistics provides data on the errors discovered in the course of administrative and/or on-the-spot checks and enable DG AGRI to determine the error rate per aid scheme and at ABB level.

The certification bodies are required to give an opinion on the quality both of the on-the-spot checks carried out by the PAs as well as on the accuracy of the control statistics.

The third assurance element is comprised of the Commission's own conformity audits on Member States management and control systems. DG AGRI's conformity clearance procedure can exclude from EU financing expenditure made in the 24 months prior to the notification to the Member States of a deficiency. Around 100 such audits are opened each year on the basis of a detailed risk analysis and enable the Commission to obtain direct assurance as to the effectiveness of the paying agencies' management and control systems.

7 This is presently not the case for statistics for Rural Development Axis 1, 3 and 4 for which there is a limited overlap between reporting period and financial year.

ANNEXES



Materiality criteria The Director General assesses the reliability of the error rate estimated on the basis of control statistics for each Paying Agency (or measure for market measures, ABB 02) and for each ABB activity and also takes into account all available information and audit results, including on-the-spot missions; he uses this information as the best estimate of the possible risk for expenditure in the reporting year. In the event that the error rates reported by Member States are not accurate or found not to be reliable or are not available, the audit directorate either re-calculates them when it has sufficient information to do so or, alternatively, adjusts them upwards by flat rates in line with the results of the assessment of the functioning of the management and control systems. This results in an error rate at Paying Agency level validated and adjusted by the management of DG AGRI ("adjusted error rate"). Further steps in the process determine when a reservation shall be made by the Director General, what elements are included in the amount at risk and how he can demonstrate the overall residual risk to the EU budget when all corrective measures have been taken into account.

Step 1: Estimation of an error rate at Paying Agency level

In the first place, for each ABB, the statistical data sent by the Paying Agencies on the results of the administrative and on-the-spot checks carried out is collected, compiled and checked for consistency and completeness. The particular error rate per PA used as the basis for the subsequent assessment is the error rate found in the random on-the-spot check sample, and after deduction of the errors found as a result of administrative controls. On that basis, an initial residual error rate is calculated, which represents the error rate that remains in the non-controlled population (= the aid applications which have not been controlled on-the-spot by the paying agencies). This initial residual error rate is used for calculating a first estimate of the amount at risk. It is noted that the vast majority of this statistical data relates to checks carried out in respect of the financial year which is the subject of the report.

Step 2: Validation and adjustment of the error rate by DG AGRI management and estimation of a residual error rate at Paying Agency/Member State and ABB level

All available information is considered in determining to what extent the error rate is reliable for each Paying Agency for each ABB activity. Where ex-post audits (by the Commission, Certification Bodies or the ECA) have revealed management and control systems' deficiencies, these are not reflected in the Member States' control statistics and, therefore, those statistics do not reflect the risk resulting from those deficiencies. In order to estimate the level of undetected errors, the following evidence is considered:

DG AGRI's own audits over the previous three years (including conformity audits and accreditation audits) – this includes the auditors' professional judgement on the evolution of the control environment in the paying agency.

The opinion which the certification bodies have delivered on the reliability of the control statistics and on the quality of the underlying on-the-spot controls is also examined.

ECA systems audit assessments in the previous 3 annual reports are also taken into account.

Other relevant information from the ECA (DAS hits or letters of preliminary findings addressed to Member States which have identified systemic deficiencies).

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The "control risk" for each paying agency deriving from DG AGRI's annual central risk analysis.

Additional elements signalled by the Anti-Fraud Correspondent of DG AGRI.

The operational units are consulted on any additional information which may be available.

In determining the extent of the adjustment to make, DG AGRI applies the professional judgement of its auditors and in particular the criteria for estimating the seriousness and extent of the identified deficiencies established in its "Guidelines for the calculation of financial consequences when preparing the decision regarding the clearance of the accounts"8. When using these criteria, the auditors shall take into account that the methodology for preparing financial corrections aims at covering the risk to the EU budget; for instance, insufficient sanctions represent a risk to the EU budget but shall not be considered as errors.

For ABB 03 and ABB 04, the decision making process for the assessment is carried out by the auditors concerned, on a case by case basis, for each paying agency and is formalised via minutes and registered notes. Where available, the input of the operational units is integrated to complete the assessment process and enable the calculation of a residual error rate. The professional judgement of the audit services of the DG is applied particularly when weighing contradictory information or considering abnormal statistical results. This results in an additional error rate (top-up) and a corresponding amount at risk. For ABB 02, the same approach is followed but per measure instead of per paying agency.

The additional amount at risk is added to the initial amount at risk calculated in Step 1, resulting in an adjusted amount at risk for each paying agency.

For ABB 02, the same approach is followed but per measure instead of per paying agency. For some important measures (e.g. POSEI, most deprived), control statistics are not available, therefore the estimation of the residual error rate is based on all other available information.

The adjusted residual error rate per paying agency is obtained by dividing the adjusted amount at risk by the total expenditure declared to the Commission for the financial year. Adjusted residual error rates are aggregated at MS and ABB levels.

Step 3: DG AGRI materiality criteria

Article 66(9) of the Financial Regulation provides that "The authorising officer by delegation shall report to his or her institution on the performance of his or her duties in the form of an annual activity report containing financial and management information, including the results of controls, declaring that, except as otherwise specified in any reservation related to defined areas of revenue and expenditure, he or she has reasonable assurance …"

8 Document VI/5330/97

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The Director General for DG AGRI shall make financial reservations at paying agency level (and/ or aid scheme level as regards Market measures within ABB02).

Paying agencies with an adjusted residual error rate above 5% shall be subject to a reservation.

For paying agencies with an adjusted residual error rate between 2% and 5%, professional judgement shall play a role in assessing whether the risk is sufficiently covered by mitigating factors and thus whether a financial reservation is necessary. These mitigating factors shall be clearly disclosed in all such cases. They shall include notably whether there is an on-going conformity clearance procedure covering the expenditure concerned and whether the necessary remedial actions have been implemented by the Member State concerned.

If the adjusted residual error rate is below 2%, generally no reservation is made, except on reputational grounds.

In the framework of shared management, as set out in the Financial Regulation and the rules on the financing of the CAP, it is the Member State, which has to assume the overall responsibility for ensuring that actions financed by the budget are implemented correctly in accordance with the rules. Therefore, while the action plans that accompany reservations shall identify the deficiencies and paying agencies concerned, it is the Member State which must ensure that the corresponding remedial actions are precisely defined and actually implemented.

Step 4: Quantification of the reservation

The amount under reservation shall be calculated at paying agency level in respect of all paying agencies for which a reservation has been made. It shall be aggregated at ABB level.

Step 5: Calculation of the amount at risk at ABB level

The amount at risk is the amount of EU expenditure which risks to have been misspent on the basis of the adjusted residual error rates; it covers all paying agencies and is aggregated at ABB level.

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Estimating the effect of DG AGRI's corrective capacity on the assessment of the Residual Risk at ABB level

In order to consider that he has sufficient assurance to sign his AAR, in spite of an overall amount at risk which may be above a materiality threshold of 2%, the Director General has to consider what financial risk to the Budget remains when all corrective elements have been taken into account.

DG AGRI's conformity clearance procedure can exclude from EU financing expenditure made in the 24 months prior to the notification to the Member States of a deficiency. This procedure for net financial corrections by the Commission is an essential tool to shield the budget from undue expenditure by Member States. It is also the mechanism through which the Commission and the Member States enter into a dialogue on the deficiencies present in the management and control system and as to how and when they shall be remedied. The procedure provides that a net financial correction shall continue up to the time at which the Member State can demonstrate that the remedial action has taken place. Thus it acts not only as a tool to correct the financial impact of the deficiency in the past but also to bring it rapidly to the attention of the Member State and ensure that the appropriate corrective actions are taken for the future.

Net financial corrections executed in the year concerned and in previous years allow the Director General to assess the "corrective capacity" of the DG AGRI conformity clearance procedure. At ABB level, this corrective capacity is estimated on the basis of the last 3 year average of actual assigned revenue for the EU budget and is compared with the amount at risk calculated on the basis of the methodology set out in Step 5 in order to assess the residual financial risk to the EU budget.

At Member State level, information is available on the amount of net financial corrections adopted by the Commission in the calendar year, as well as the amounts already notified by DG AGRI to the Member States concerned but not yet adopted by the Commission, also give qualitative information on the corrective capacity of the conformity clearance procedure. Furthermore, the Member States are required to recover undue expenditure from the final beneficiaries and report to the Commission on the outcome of this exercise. This information is also an important indicator of how the EU budget is protected.

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Paying Agency

control

statistics

DG AGRI

Validation

Process = PA

control statistics +

DG AGRI

adjustment

Adjusted

Residual

Error

Rate/PA

Reservation

Amount

subject to

reservation

adjRER >5%

Yes Yes

adjRER 2-5%Risk

mitigation

factors

Not sufficient Yes

Yes No

adjRER < 2% No No

Step 1: estimation of an

error rate at Paying

Agency level

Step 2: validation and

adjustment by DG AGRI;

calculation of an adjusted

Residual Error Rate

Step 3: DG AGRI materiality criteriaStep 4 : quantification

of the reservation

Step 5: Calculation of

the amount at risk at

ABB level

DG

AG

RI'S D

ECISIO

N P

RO

CESS FO

R M

AK

ING

RESER

VA

TION

S

Action Plan

at PA level

but

managed by

MS

Paying agency level MS level ABB Level

Amount at

risk

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ANNEX 5: Internal Control Template for budget implementation (ICT)



EXPENDITURE IN SHARED MANAGEMENT9

Stage 1 – (Negotiation and) assessment/approval of spending proposals:

Main control objectives: Ensuring that the Commission (COM) adopts the actions that contribute the most towards the achievement of the policy objectives (effectiveness);

Main risks Mitigating controls How to determine coverage frequency and depth

How to estimate the costs and benefits of controls

Control indicators

The actions financed10 do not adequately reflect the policy objectives or priorities.

Internal consultation, hierarchical validation at DG-level of each action. Inter-service consultation (including all relevant DGs) Adoption by Commission Decision, where foreseen by EU law.

Coverage / Frequency: 100%. Depth: checklist, guidelines and lists of requirements in the relevant regulatory provisions.

Costs: estimation of cost of staff involved in the validation of the spending proposals put forward by the Member States (for 2014-2020). Benefits: adopted actions have a clear intervention logic, allowing the Commission to evaluate their impact [non-quantifiable individually]

Effectiveness: - % of actions adopted/ approved: n/a11 - % of financial allocation approved: n/a213 Efficiency: - average cost of analysis and adoption/approval of an action: n/a213 - average time to adopt/ approve an action : n/a213

9 DG AGRI uses the Internal Control Template for shared management only as over 99 % of its total expenditure is covered by this management mode.

10 For CAP: the programmes, measures and schemes supported under the Market measures, Direct Aids and Rural Development pillars (EAGF and EARDF).

11 While 2013 was an important year with the adoption of a major CAP reform by the Council and the European Parliament, there was no significant negotiation activities on spending proposals for Rural development programmes, direct payments and market measures. The figures available for 2013 concern a very limited part of the expenditure (POSEI and promotion of agricultural products) and are therefore not representative

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Stage 2 – Implementation of operations (Member States):

A. Setting up of the systems

Main control objectives: ensuring that the management and control systems are adequately designed

Main risks It may happen (again) that…

Mitigating controls How to determine coverage, frequency and depth


Control indicators

The process of designation (and accreditation) of national authorities in the Member States (MS) is not effective and, as a result, the management and control systems are not compliant with the applicable rules.

Supervision by Commission (for 2014-2020): - Commission review (and audits) of a sample of national designations/ accreditations - submission of MS Audit Strategies to the Commission (on request)* * [For Cohesion policy]

Coverage / Frequency: fixed in sector-specific rules Depth: verification (desk review + audit missions where necessary) of description of management and control systems communicated by MS. Accreditation audits are generally done on-the-spot.

Costs: estimation of cost of COM staff involved in the audits of samples of national designations/ accreditations (for 2014-2020) Benefits:(part of) the amounts associated with unreliable systems for which the Commission audit work revealed substantial compliance problems (for 2014-2020 ) [not quantifiable]

For 2014-2020: Effectiveness: - % of authorities designated/accredited - number of authorities for which serious system weaknesses were found following accreditation reviews/audits Efficiency: - number of authorities for which serious weaknesses found by accreditation reviews/audits (% of total checked)

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B. MS controls to prevent, detect and correct errors within the declared certified expenditure

Main control objectives: ensuring that the periodic expenditure declarations submitted to the Commission for each action are legal and regular


Mitigating controls

How to determine coverage, frequency and depth


Control indicators

Periodic expenditure declarations submitted to the Commission include expenditure which is irregular or non-compliant with EU and/or national eligibility rules and legislation.

Management verifications: first level checks by designated/accredited programme authorities or bodies.12 Certification, audit opinion and annual report by the relevant authorities or bodies designated/accredited.13 MS recoveries from final beneficiaries (CAP)

Coverage: fixed in sector-specific rules Depth: - management verifications: performance of first-level checks (administrative and on the spot controls). - certification: [limited] additional verification (desk checks and on-the-spot), with where appropriate additional checks. - audit opinion: system audits on the checks already carried out, where necessary with re-

Costs: real costs for the management and control activities of paying agency Benefits: - Amounts of corrected undue payments (prior to reimbursement from the control statistics) - MS recoveries

Effectiveness: - Amount and % of corrected undue payments (prior to reimbursement from the control statistics) as reported by MS. - annual certificate opinions of the Member States. - MS recoveries Efficiency: Ratio = (amount of corrected undue payments plus MS recoveries) divided by costs of management and controls

12 For CAP: Paying Agencies (PA)

13 For CAP: Certifying Bodies (CB)

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performance of on-the-spot checks; where applicable, audits of operations (on a statistical basis) and additional substantive testing on expenditure.

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Stage 3 – Monitoring and supervision of the execution, including ex-post control

Main control objectives: ensuring that the expenditure reimbursed from the EU budget is eligible and regular




Control indicators

The management verifications and subsequent audits/controls by the Member States have failed to detect and correct ineligible costs or calculation errors. The audit work carried out by the audit/certifying authorities is not sufficient to obtain adequate assurance on the submitted declarations. The Commission services have failed to take

Commission checks of periodic MS expenditure declarations. Commission assessment of management and control systems in the Member States, in particular of work done and/or reported by the AA/PA/CB, namely: - assessment of annual control/audit/certification report - calculation of projected error rate (where applicable) - estimation of a residual error rate (RER) - assessment of

Coverage: verification of information provided in the annual (audit/control /certification) report and annual audit opinions. Depth: desk checks and/or on-the-spot audits based on risk assessment; verification of the quality and reliability of the information based on Commission’s own audit work; ‘validation’ and where necessary adjusting of error rates reported by MS to calculate a cumulative residual error risk (RER); [at closure: where

Costs: - cost of Commission financial officers checking MS expenditure (financial circuits) - estimation of cost of Commission staff involved in the assessment of management and control systems in MS, including analysis of AA/CB report, own audit work14,and drafting of interruption letters Benefits: errors prevented [unquantifiable], errors detected or corrected (amount of financial corrections).

Effectiveness: - best estimate of residual risk of error per MS - number of programmes/MS/PA with a reported error rate assessed as reliable (and not subject to an adjustment) - Number, amount and % (with respect to total commitment) of interruptions/suspensions of payments15 - net financial corrections made resulting from Commission audit work Efficiency: - cost of control/financial management of the Commission checks and assessment (% of total appropriations) - Ratio = cost of Commission staff

14 Systems audit, re-performance of annual control reports (ACR), follow-up of audit authorities, closure audits, fact finding audits, conformity audits of PA (CAP), etc.

15 See part 2.1.1.7

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Control indicators

appropriate measures to safeguard EU funds, based on the information it received.

systems audits reports from AA/CB - assessment of annual summaries (where applicable) - own Commission audits - technical and bilateral meetings with MS Interruptions and suspensions of payments Financial corrections (implemented by Commission) Annual financial clearance procedure and multi-annual conformity clearance procedure (CAP)

applicable scrutiny of closure report and closure opinion, if needed with audits on sample of OPS]

involved in the assessment of management and control systems in MS divided by total amount of net financial corrections adopted by the Commission

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ANNEX 6:Implementation through national or international public-sector bodies and bodies governed by private law with a public sector mission (not applicable)


ANNEX 6: Implementation through national or international public-sector bodies and bodies governed by private law with a public sector mission (not applicable)

ANNEX 7: AARs of Executive Agencies (not applicable)

ANNEX 8: Decentralised agencies (not applicable)

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ANNEX 9: Performance information included in evaluations



Evaluations serve as an important information source to judge on the performance of a policy and where necessary, this information feeds into an impact assessment. DG AGRI carries out its evaluations according to a rolling multiannual studies and evaluation plan (2013-2015)16. All DG AGRI evaluations are carried out by independent external evaluators (selected after an open call for tenders) under responsibility of the Commission. For the European Agricultural Guarantee Fund (EAGF), the Financial Regulation17 Article 30 (Rules of application18 Article 18 3(b)) provides for the annual activities to be evaluated on a six-year basis. For the European Agricultural Fund for Rural Development (EAFRD), external contractors draft a synthesis on the basis of the evaluations carried out by the Member States, e.g. 2010 Mid-Term Evaluations.

As DG AGRI evaluations are carried out by external contractors, note that conclusions of evaluations are not necessary always fully shared by the Commission. Similarly, the possibility to follow up the recommendations from evaluations has to be judged against the socio-political context and information from other sources.

EVALUATION OF MEASURES FOR THE APICULTURE SECTOR

ABB activity: 02 Interventions on the agricultural markets

Type of evaluation

19:

Expenditure programme

Summary of performance related findings and recommendations:

The evaluation provided a description of the apiculture sector in the EU, based on a large ad hoc data set. It examined for the period 2008-2011 the effectiveness

20, efficiency

21, coherence

22

and relevance23

of the six EU support measures in order to improve the production and marketing of honey and other apiculture products. They also address the need to fight bee population decline, to foster ecological balance and pollination as well to contribute to rural development. The most frequently used measures during the evaluation period 2008-2011 were varroasis prevention and technical assistance.

The EU is the second largest honey producer in the world and has an estimated 500 000 beekeepers with around 14 million hives. The number of hives has shown a long-term decline whereas the honey production quantity has remained rather stable. However bee mortality and

16 Please refer to DG AGRI 2013 Management Plan.

17 Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council of 25 October 2012 on the financial rules applicable to the general budget of the Union and repealing Council Regulation (EC, Euratom) No 1605/2002, OJ L298 of 26.10.2012.

18 Commission Delegated Regulation (EU) No 1268/2012 of 29 October 2012 on the rules of application of Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council on the financial rules applicable to the general budget of the Union.

19 Expenditure programme (E), Regulatory instrument (R), Communication activity (C), Internal Commission activity (I), Other (O).

20 Effectiveness: Were the specific objectives attained and were the intended results achieved?

21 Efficiency: How well have the inputs (resources) been converted into outputs, results and impacts? Were the (expected) effects obtained at a reasonable cost? The EU Financial Regulation (article 27(2) defines efficiency as the best relationship between resources employed and results achieved in pursuing a given objective through an intervention.

22 Coherence: The extent to which the intervention does not contradict other interventions with similar objectives.

23 Relevance: To what extent are the objectives of an intervention (programme, regulatory instrument or policy) appropriate regarding the needs and the problems the intervention is meant to solve?

http://ec.europa.eu/atwork/synthesis/amp/doc/agri_2013_mp_en.pdf

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maintaining the production of high quality honey in the EU remain among the main challenges faced by the sector.

The main effect of the apiculture measures has been a contribution to the stabilisation of the production of honey in the EU through gains in productivity and quality. Nevertheless the measures have generally not had a substantial impact on the national marketing channels for honey. There has been a strong rise in beekeepers’ production costs in recent years. This has been caused by increased bee mortality rates of 30-50% and by rising fuel costs which affect the cost of transhumance, particularly in drought-prone countries. In addition, there has been an increase in the price of treating varroasis and an increase in the use and cost of non-natural feeding costs, such as sugar. However by fostering productivity and diversification of beekeepers' sources of income, the measures have limited the impact of these higher costs. With regard to prices, market conditions are the main driver of producer prices. By contributing to stability of production the measures have made a contribution to price stability, since 60% of EU consumption is domestic.

The evaluation concluded that the apiculture measures have had a positive impact on the production and marketing of honey, addressing the needs of the EU apiculture sector, and should therefore be maintained. Moreover the measures have contributed to the stabilisation of the production of honey in the EU through maintenance of the bees' population, gains in productivity and quality. The technical assistance measure has made a particular contribution to productivity and quality gains through training, by enabling the dissemination of technical information among beekeepers and facilitating the acquisition of new, more efficient equipment for the production of honey and other apiculture products. Although the measures, through their support of honey production, contributed to maintaining direct and induced jobs in rural areas, their most substantial contribution to local employment lies in the externalities created through pollination. Beekeeping therefore plays a crucial role in EU agriculture and development in rural areas.

The evaluation judged that formulation of policy objectives at EU level should be clearer, the promotion of cooperation among beekeepers through the apiculture measures strengthened and that greater synergies should be realised between bee-related research initiatives funded by the EU. With a view to providing reliable evidence for decision making on the Apiculture Programmes, further efforts should be made to monitor bee colonies in the EU. As well as marketing efforts promoting honey sales in those Member States where local honey quality is insufficiently valued should be scaled up in the Apiculture Programmes.

Availability of the report on Europa:

http://ec.europa.eu/agriculture/evaluation/market-and-income-reports/apiculture-2013_en.htm

EVALUATION OF THE EUROPEAN SCHOOL MILK SCHEME

ABB activity: 02 Interventions on the agricultural markets

Type of evaluation: Expenditure programme


The evaluation examined the implementation of EU School Milk Scheme (hereafter: SMS) in the Member States. It covered the scheme as provided for in Council Regulation (EC) No 1234/2007 and its implementation in Commission Regulation (EC) No 657/2008 and (EC) 996/2011 for the period since 1 August 2008. This scheme has following objectives:

(1) Increasing EU milk consumption and milk demand to fight the declining trend and stabilising the market price for milk and milk products.

(2) Increasing consumption of milk and milk products of children and young people by providing them with healthy dairy products

The evaluation found that the SMS is an adequate, relevant tool for increasing milk consumption of children and thus improving their eating habits.

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Distribution in educational establishments is a step leading to a long-term impact on consumption of milk products under the condition that the provision of products is accompanied by measures fostering good eating habits. Five important operational and educational success factors for school milk programmes were identified: high frequency in offering milk and milk products, accurate delivery and reliable logistics, integration into the daily routine, collective consumption and voluntary educational measures.

Milk consumption declines with increasing age and older children and adolescents often remain below intake recommendations. The low milk consumption among older children remains challenging, yet Member States focus the use of the scheme on kindergarten and primary schools.

The milk prices that have to be paid by the parents influence the participation rate in the SMS and therefore its effectiveness. However, prices have only a limited impact if the parents have a high income. The evaluation has found that only a free distribution of milk in the SMS could result in a sharp increase in participation and effectiveness of the SMS. Programme inefficiency may occur when the part of the subsidy in the price of the school milk is too low to influence the school milk consumption substantially.

The administrative and especially organisational burdens of the scheme are substantial, and especially the organisational burdens (collecting the financial contribution of the parents) have had an impact on the participation by schools in the system.

Member States indicate that the EU framework of the SMS was the main driver for launching and implementing a school milk scheme in their countries. The potential for higher EU value added has been identified in this evaluation e.g. through a stronger knowledge transfer between MS and with experts, a periodical review of the scheme and through better promotion and more active communication of the achievements of the SMS.

The evaluation recommended that in order to increase the effectiveness off the scheme, educational and communication measures eligible for the EU aid should be introduced as part of the SMS. When targeting the SMS, adequate attention should be paid to children’s age since milk consumption declines with increasing age and adolescents show higher needs to meet the recommended intake.

Also the alignment between the SMS and the School Fruit Scheme should be improved; this could also help to reduce the administrative burden.


http://ec.europa.eu/agriculture/evaluation/market-and-income-reports/school-milk-scheme-2013_en.htm

EVALUATION OF THE STRUCTURAL EFFECTS OF DIRECT SUPPORT

ABB activity: 03 Direct aid



The evaluation examined the effects on farm structural changes of all direct support schemes governed by Council Regulation (EC) 1782/2003

24: decoupled and coupled payments and all

implementation Single Farm Payment (SFP) models: Single Payment Scheme (SPS) with historical, regional and hybrid models and Single Area Payment Scheme (SAPS). The analysis also distinguished between farm types and different farm size classes.

While none of the key objectives of the CAP is related to farm structures, the changes

24 Later replaced by Council Regulation 73/2009



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introduced by the 2003 reform (decoupling of support from production), may have affected farmers' behaviour, in particular the use of production factors – land, labour and capital – with subsequent effects on structural features of European farms. The period from 2005, when Council Regulation 1782/2003 came into force, until the last years for which statistics were available was covered. In order to identify the effects of policy change on the evolution of farm structures, the pre-reform period served as a reference.

While the decline in the number of farms has been a long-term trend, the 2003 reform has contributed either to speeding up the exit of smaller-sized farms from the agricultural sector or to the growth in size of part of these farms. Farm concentration increased slightly in the EU-15 Member States (applying the SPS historical and hybrid models) and in a more pronounced way in the EU-12 (applying SAPS and regional models). However, greater concentration in the Member States applying the SAPS model may have been influenced also by other factors, such as the end of the centrally planned economy and subsequent land reforms.

The evaluation concluded that direct payments did not have an impact on land use changes after 2005 nor they affected the legal status of agricultural holdings

25. On the other hand,

holdings' organisational form26

seems to be indirectly affected by the policy change.

The reform and in particular decoupling of support may have contributed, together with other factors, to accelerate reduction of labour use intensity in the farm sector. However, in the Member States applying SAPS model, this decrease appears to be related more to the reduction of excess labour force from former large cooperatives and state farms, existing in the pre-reform years.

Both coupled and decoupled payments have had a rather limited effect on increasing farm capital. Nevertheless, direct payments have induced some incentives to substitute capital for labour.

Decoupling of support from production has contributed to an increase in the number of specialised farms. This is caused by the greater freedom of production decisions brought about by decoupling which has stimulated part of the holdings to focus more on production activities from which market conditions allowed higher profitability.

The policy change has had a differentiated effect on farm investment in the regions implementing SPS historical and hybrid models (the EU-15) and those implementing the SAPS (the EU-10): decreasing farm investments in the former and increasing farm investments in the latter. This suggests that investment decisions could have been facilitated by the additional financial resources from direct payments, especially in the regions where direct support was introduced following EU accession.

The direct payments have not played a role in influencing marketing strategies at farm level such as membership in producer organisations, direct relationship with processing industry/retailers or direct sale of farm products from farm.

Finally, the analysis showed that farm diversification activities concerned a limited number of holdings (generally below 10%). There was only a limited increase in the number of farms with diversified activities after the reform. The only marked increase was observed in the regions of EU-10 in the case of 'contract work for others' in the regions applying SAPS and 'processing of farm products' in the regions applying regional model. However, these diversification choices may have been supported also by other factors, such as rural development aids and other national policies.


http://ec.europa.eu/agriculture/evaluation/market-and-income-reports/structural-effects-direct-support-2013_en.htm

25 Eurostat data classify holdings into two legal status categories: (i) single holder holding and (ii) legal entity or group holding.

26 Eurostat classification distinguishes the following organisational forms: (i) farming by owner; (ii) farming by tenant and (iii) shared farming or other modes.



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EVALUATION OF THE EU LEGISLATION ON ORGANIC FARMING

ABB activity: 04 Rural development

Type of evaluation: Regulatory instrument


The evaluation examined the relevance, effectiveness and European added value of Council Regulation (EC) No 834/2007

27 (hereunder 'the Regulation') and its implementing rules. The

period from 1 January 2009 (date of entry into force of the Regulation) was covered with the period since 2000 used as a reference to cover the situation governed by the previous legislation on organic farming. The following measures covered by the Regulation were analysed: a) organic production rules, b) control rules, c) import rules, and d) rules on labelling of organic products.

The scope of the Regulation includes unprocessed and processed agricultural products used for food and feed, vegetative propagating material and seeds, yeast (for food and feed) as well as products from aquaculture. Mass catering is explicitly excluded as are the non-food products, such as cosmetics and textiles. The evaluation concluded that the scope of the Regulation is mostly adequate to match the current needs of the organic supply chain but not fully adequate to meet the need of consumers of organic products.

The underlying principles of organic production are made operational in the Regulation by a number of production rules. The evaluation concluded that the production rules are generally adequate to achieve the global objectives of the Regulation and the objectives of organic production. Sound scientific evidence exists that the Regulation has established a framework which guides farmers to adopt practices supporting the objectives of organic farming of higher levels of biodiversity, increase soil fertility and minimising water and air pollution. The system of exceptional rules was considered not fully adequate. For the sectors examined, covering the use of non-organic young poultry, feed and seeds, the evaluation noted that the current system of exceptional rules appears rather to hinder than support the development of organic supplies.

The overall control system of organic farming was considered largely adequate in terms of achieving the global objectives of the Regulation but with some shortcomings in implementation. Some elements of the control system were not consistently implemented across the Member States, such as the evaluation of organic products with respect to residues or the application of different sanctions for the same infringement. As regards the national systems of supervision over control bodies, in some Member States competent authorities may not fulfil their supervisory role fully due to inappropriate procedures for supervision and limited resources.

Currently, three import procedures are operational for assessing equivalence of production and control rules of third countries. The evaluation concluded that the import rules are largely adequate in terms of achieving the global objectives of the Regulation but with some shortcomings in implementation. The import procedure based on the recognition of third countries led in general to an adequate assessment of equivalence but following up on the equivalence assessment of third countries entails a heavy workload for the Commission services. As regards the expiring procedure based on import authorization, there is a clear risk of different interpretations of equivalence by control bodies and various approaches adopted for issuing import authorizations by Member States. The import procedure based on the recognition of control bodies addressed those risks by shifting the responsibilities from the Member States authorities to the Commission and to control bodies. This shift however

27 Council Regulation (EC) No 834/2007 of 28 June 2007 on organic production and labelling of or organic products and repealing Regulation (EEC) No 2092/91

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requires significant administrative input from the Commission services as well as from the control bodies which in turn need strict instructions to assess the equivalence in a more uniform manner.

In order to improve the recognition of organic products in all EU countries and to ensure consumer confidence in organic food, a common EU organic logo has been introduced. In July 2012, after a two-year transition period, the new logo for organic food became mandatory on all pre-packaged organic products. The evaluation concluded that while the concept of organic farming is largely understood by most consumers in the EU, the new EU organic logo and other compulsory indications are so far not very well recognised by consumers.

The evaluation proposed a number of recommendations which can be grouped into three broad areas: a) adaptation of legislation, b) guidance and clarification, c) information, research and training.


http://ec.europa.eu/agriculture/evaluation/market-and-income-reports/organic-farming-2013_en.htm

Title of the Evaluation: Synthesis of Mid-Term Evaluations of Rural Development Programmes 2007-2013

ABB activity: 04 Rural development



The synthesis of Mid-Term Evaluations (MTEs) was based on the MTE reports of the 92 national, regional and network Rural Development Programmes (RDPs) 2007-2013. The focus of the evaluation was to assess and summarise the results and impacts achieved so far by the RDPs and to evaluate the monitoring and evaluation framework’s relevance, coherence, effectiveness and efficiency including its strengths and weaknesses for future policy design.

Overall, uptake of the RDP measures was observed to have been slower than expected; measures with less technical requirements and most continuity from the last period were the quickest to be implemented. Economic, Environmental and Social/Quality-of-life impacts were assessed, however a large proportion of MTE conclude that it is too early to judge overall impact. In terms of economic impacts, roughly two thirds of the reports state a net positive impact on growth and employment creation. However, calculation methods were not always found to be sound. While some promising examples for assessment of Quality-of-life and environmental impacts could be extracted, these impacts were generally not convincingly assessed. The synthesis therefore recommends that the future monitoring and evaluation framework could invest more into methods to gain more effective information on these topics.

The MTEs assessed the monitoring and evaluation system as good overall and as ensuring a relevant set of data. However, the system was often regarded as too complex. In terms of the indicators analysed, output indicators displayed a high level of availability and quality of quantitative information. On average 38% of the target values were achieved with differences between the axes (axis 1 on average 30%, axis 2 on average 40%, axis 3 divergent and LEADER below anticipated numbers at 20%). However, only about 30% of the reports report on both target and achieved values for result indicators. Achievements vary greatly between indicators and axes (axis 1: 24%, axis 2: 90% and axis 3: 48%). Overachievement of targets occurred mainly in axis 2.

Recommendations on the future monitoring and evaluation system address mainly the need for further guidance for the calculation and aggregation of indicators and the need for simplification (e.g. a reduction in the number of evaluation questions). In particular for the impact indicators, more flexibility in the use of common indicators is suggested.

Concerning the menu of RDP measures, the evaluation concludes that a more limited number of measures seems to be desirable, and the cost effectiveness ratio of some measures should



ANNEXES



be examined for return on investment. However, it is underlined that it will be necessary to observe the full programming period in order to judge whether measures should be dropped altogether. It is pointed out that LEADER principles were not well incorporated in RDPs and LEADER lags behind in implementation.


http://ec.europa.eu/agriculture/evaluation/rural-development-reports/synthesis-mte-2007-2013_en.htm

SYNTHESIS OF SAPARD EX-POST EVALUATIONS – UPDATE: BULGARIA, CROATIA, ROMANIA

ABB activity: 05 SAPARD/IPARD



The evaluation assessed the impacts of the SAPARD programme and the extent to which it has been successful in reaching its general objectives as defined in article 1 of Regulation (EC) No 1268/1999 in the three countries concerned :

• contributing to the implementation of the acquis communautaire concerning the common agricultural policy and related policies;

• solving priority and specific problems for the sustainable adaptation of the agricultural sector and rural areas in the applicant countries.

The synthesis evaluation also aimed to identify lessons learnt and good practice examples useful for the implementation of the current Community support to candidate countries (IPARD²) and of Community support programmes for pre-accession in general.

The main findings of the evaluation are:

SAPARD made a clear contribution to the implementation of the acquis communautaire concerning CAP and related policies, by requiring the set-up of structures and procedures, which simulated the RDP implementation framework, and by promoting compliance to EU standards and by fostering participation, subsidiarity and communication. The effect has been stronger within the SAPARD Agencies, but also enabled a level of awareness among the stakeholders, final beneficiaries and the general public.

In BG and RO it was less successful in solving priority issues and specific problems for the sustainable adaptation of the agricultural sector and rural areas at a large scale; in HR this result was similar but much more limited given the programme’s limited dimension and extremely short implementation time.

As the needs of the rural areas are vast in these countries, by its dimension SAPARD interventions had to remain limited. Moreover, the already limed budgets were further reduced due to the payment interruption and funds recovery in BG and RO following audit findings.

The situation of final beneficiaries improved, but they were few in number and usually larger and more dynamic enterprises, i.e. not characteristic for the holdings structure.

The administrative procedures designed by the national SAPARD Agencies and authorities rendered participation in the programme difficult. They were driven by the urge of the authorities to achieve absorption, but also to avoid complications during controls and to manage workload by keeping the number of applications within the range of available administrative resources Eligibility requirements changed often, thus creating confusion among applicants, became increasingly demanding, hence excluding potential final beneficiaries. These problems were accentuated by the lack of consulting services, financing opportunities and overall poor level of documentation at the holding level. In addition, the need to ensure high absorption of funds led to the reallocation among measures on an “absorption capacity” rather than a “need” base.



ANNEXES



SAPARD Agencies and authorities were quick in setting up the administrative and delivery systems according to the EU requirements, but these systems were hampered by the lack of experience of the personnel and by the need to develop all the detailed operating rules, procedures and manuals in a step by step, “learning by doing” manner. While this situation influenced negatively the implementation of SAPARD, the performance of the system in the delivery of the RDP 2007-2013 improved through SAPARD.


Will be published under: http://ec.europa.eu/agriculture/evaluation/rural-development-reports/index_en.htm

http://ec.europa.eu/agriculture/evaluation/rural-development-reports/index_en.htm

http://ec.europa.eu/agriculture/evaluation/rural-development-reports/index_en.htm

Annex 10

Management of Resources


ANNEX 10: Specific annexes related to "Management of Resources" (Part 2) This annex explains in detail the complex relationship between the Directorate General for Agriculture and Rural Development and the 28 Member States (comprising 82 Paying Agencies). The two principal funds under the Common Agricultural Policy (the European Agricultural Guarantee Fund - EAGF and the European Agricultural Fund for Rural Development – EAFRD) are implemented under shared management through a comprehensive management and control system based on four levels. This system includes, on the one hand, all the necessary building blocks to guarantee a sound administration at Member States’ level and, on the other hand, allows the Commission to audit the proper functioning of their management and control systems and, if need be, to counter the risk of financial losses as a result of any deficiencies in the set-up and operation of those systems through the conformity clearance mechanism. Taken together, these levels and the results that they produce are the basis for DG AGRI to gain reasonable assurance as to the effective management of the risk of error in the legality and regularity of the underlying transactions. An explanation of these four levels as well as the findings and the indicators which result from them are set out in detail in this annex which is organised as follows: Part 1: Description of the system for shared management and the various levels of control in place

Level 1: Compulsory administrative structure at the level of Member States Level 2: Detailed systems for ex-ante controls and dissuasive sanctions Level 3: Ex-post controls Level 4: Clearance of accounts

Part 2: Functioning of the Paying Agencies

1.1 Compliance with the accreditation criteria 1.2 Statement of assurance from the Directors of the Paying Agencies and opinions of the

Certification Bodies 1.3 Financial clearance exercise

Part 3: Control results at the level of the final beneficiaries, the assessment thereon by the Certification Bodies and the overall appreciation of the Commission on their reliability taking into account all available information.

Part 3.1: ABB02: Market Measures Part 3.2: ABB03: Direct Payments Part 3.3: ABB04: Rural Development

Part 4: Conformity Clearance Procedure and Net Financial corrections

Part 5: Recovery cases

Part 6: Cross compliance

Annex 10- Part 1

Description of the system for shared management


Part 1: Description of the system for shared management and the various levels of control in place Level 1: Compulsory administrative structure at the level of Member States Management and control of the expenditure is entrusted to dedicated paying agencies, which prior to their operation must be accredited by the Member States on the basis of a comprehensive set of accreditation criteria laid down in EU law. The paying agencies' compliance with these criteria is subject to a detailed review by an external audit body as well as to constant supervision by the competent national authority, and clear procedures exist as to how to address and remedy any problems. Moreover, the heads of the paying agencies are required to provide an annual statement of assurance which covers the completeness, accuracy and veracity of the accounts as well as a declaration that a system is in place which provides reasonable assurance on the legality and regularity of the underlying transactions. These statements of assurance are verified by independent certification bodies, which are required to provide an opinion thereon. For those Member States with only one paying agency, this statement of assurance from the director of the paying agency, together with the certificate and opinion of the certification body, constitutes by definition the annual summary referred to in Article 53b of the Financial Regulation. The Member States which have more than one paying agency are further required to produce a synthesis report of all statements of assurance and of all certificates from the certification bodies. Level 2: Detailed systems for ex-ante controls and dissuasive sanctions For each aid support scheme financed by the EAGF or EAFRD, there is a system of ex-ante administrative and on-the-spot checks and dissuasive sanctions in case of non-compliance by the beneficiary. These systems are to be applied by the paying agencies and contain some common features and special rules tailored to the specificities of each aid regime. The systems generally provide for exhaustive ex-ante administrative controls of 100 % of the aid applications, cross-checks with other databases where this is considered appropriate as well as pre-payment on-the-spot checks of a sample of transactions ranging between 1 % and 100 %, depending on the risk associated with the regime in question. If the on-the-spot checks reveal a high number of irregularities, additional controls must be carried out.

In this context, the by far most important system is the IACS (Integrated Administration and Control System), which in financial year 2013 covered 92 % of EAGF expenditure (91.4 % in 2012). To the extent possible, the IACS is also used to manage and control rural development measures relating to parcels or livestock, which in 2013 accounted for 44.7 % of payments under the EAFRD (43 % in 2011, the difference being essentially due to the fact that the share of expenditure under Axis 1 – "investments in infrastructure" and Axis 3 – "basic services for the rural economy" has increased as compared to last year). For both Funds together, the IACS covered 81.4 % of total expenditure.

A detailed reporting from the Member States to the Commission on the checks carried out by them and on the sanctions applied is foreseen in the legislation. The reporting system enables a calculation, for the main aid schemes, of the extent of error found by the Member States at the level of the final beneficiaries. The accuracy of the statistical information reported and the quality of the underlying on-the-spot checks is also verified and validated by the certification bodies for direct aids and rural development measures.

Level 3: Ex-post controls

Annex 10- Part 1



In addition to the ex-ante controls, all aid measures other than direct payments covered by the IACS are subject to ex-post controls under either Regulation (EC) No 485/2008 or, for rural development measures, Regulation (EU) No 65/2011. Moreover, the paying agencies' annual accounts and the functioning of their internal control procedures are verified and certified on an ex-post basis by the certification bodies. Both types of ex-post controls are carried out in accordance with an annual audit plan established on the basis of a pre-determined audit strategy. Level 4: Clearance of accounts Finally, the clearance of accounts system through the Commission consists of both an annual financial clearance and a multi-annual conformity clearance.

The financial clearance covers the completeness, accuracy and veracity of the paying agencies' accounts. Moreover, it includes a mechanism under which 50 % of any undue payments which the Member States have not recovered from the beneficiaries within 4 or, in the case of legal proceedings, 8 years will be charged to their respective national budgets (50/50 rule). If the undue payments are the result of administrative errors committed by the national authorities, the entire amount involved is deducted from the annual accounts and, thus, excluded from EU financing. Even after the application of the 50/50 rule, Member States are, however, obliged to pursue their recovery procedures and, if they fail to do so with the necessary diligence, the Commission may decide to charge the entire outstanding amounts to the Member State concerned. The conformity clearance, for its part, relates to the legality and regularity of the underlying transactions. It is designed to exclude expenditure from EU financing which has not been executed in conformity with EU rules, thus shielding the EU budget from expenditure that should not be charged to it (financial corrections). In contrast, it is not a mechanism by which irregular payments to beneficiaries are recovered, which according to the principle of shared management is the sole responsibility of Member States. Financial corrections are determined on the basis of the nature and gravity of the infringement and the financial damage caused to the EU. Where possible, the amount is calculated on the basis of the loss actually caused or on the basis of an extrapolation (usually such calculations are based on additional work carried out by or information supplied by the Member States). Where this is not possible, flat-rates are used which take account of the severity of the deficiencies in the national control systems in order to reflect the financial risk for the EU. Where undue payments are or can be identified as a result of the conformity clearance procedures, Member States are required to follow them up by recovery actions against the final beneficiaries. However, even where this is not possible because the financial corrections only relate to deficiencies in the Member States' management and control systems, financial corrections are an important means to improve these systems and, thus, to prevent or detect and recover irregular payments to final beneficiaries. The conformity clearance thereby contributes to the legality and regularity of the transactions at the level of the final beneficiaries. In order to determine which measures and/or Paying Agencies to visit each year, DG AGRI carries out a detailed annual central risk analysis.

Annex 10- Part 1



What is the Central Risk Analysis?

DG AGRI's Central Risk Analysis (CRA) serves the purpose to apply a common and unique approach for planning its conformity audits. It is based on the latest certified expenditure under the clearance of accounts exercise. It aims at ensuring that the work of the entire Directorate is orientated and focussed on the main risks.

For the CRA the following indicators are taken into account: 1) materiality (amounts of declared expenditure), 2) last audit year (period elapsed since the last audit of the measure in question), 3) risk inherent of the measure in question, 4) control system risks (risk associated with the control system), 5) paying agency risk (risk related to the paying agency) and finally taking into account 6) the OLAF risk (related with OLAF denunciations and irregularities) and 7) the Court of Auditors risk (related with the findings from the ECA).

The CRA is established at paying agency / audit field level (audit field = aid measures with a similar control system) as the audits are addressed to a specific paying agency for auditing expenditure spent for aid schemes under one or more specific audit fields.

Explanatory Box: Annex 10-1.1 With a view to taking a more multi-annual perspective for the new programming period, the DG AGRI Audit directorate started work in 2013 in order to establish its audit strategy for the period 2014-2020. This audit strategy was adopted by the Directorate General in March 2014.

DG AGRI Audit strategy for 2014-2020

The DG AGRI audit strategy aims at formalising the main elements of the clearance of accounts system in terms of background, context, objectives, risks assessment, audit approach and indicators for the audit activities. In particular, it aims at identifying the main inherent risks and control risks that will have to be addressed in the coming years, not only taking into account the changes introduced by policy developments and the implementation of the CAP 2014-2020 but also considering previous years' experience and audit findings.

This audit strategy recalls the principle that DG AGRI audits are first and foremost system-based with risk-based audits checking specific components of the paying agencies or Member States' internal control systems. Notwithstanding, it opens the door to defining other ways of addressing specific risks or situations in particular paying agencies or Member States.

In addition, it anticipates the impact of the extended role given by the horizontal regulation on the financing, management and monitoring of the CAP (Regulation 1306/2013) to the Certification Bodies. From the beginning of 2016 (in respect of financial year 2015), Certification Bodies will report on the legality and regularity of the expenditure for which reimbursement was requested from the Commission to a much greater extent and detail than has been the case under the previous and current regulatory frameworks. Not only will the information thus gathered have to be evaluated and input to DG AGRI's own risk analysis, but its impact on the focus and scopes of DG AGRI audit activities and, more generally, on assurance building, has to be duly considered.

One direct consequence of finding more synergies between DG AGRI and Certification Bodies' audit activities is the change from 2014 onwards in the time path for DG AGRI audit programmes, designed to allow DG AGRI's risk analysis to fully take into account the latest available information reported by certification bodies. This is combined with a strengthening of the multiannual perspective which will lead DG AGRI to establish 3 years rolling audit programmes, with yearly up-dates.

Explanatory Box: Annex 10-1.2

Annex 10 – Part 2

Functioning of the Paying Agencies


Part 2: Functioning of the Paying Agencies

Index to part 2

2.1 Compliance with the accreditation criteria

2.1.1. Status of the paying agencies' accreditation

2.1.2 Certification of the functioning of the paying agencies' internal control systems

2.1.3 The Commission's accreditation audits and summary of findings

2.1.4 The certification bodies' reports for financial year 2013 and summary of findings

2.2 Statement of assurance from the Directors of the Paying Agencies and opinions of the Certification Bodies

2.2.2 Statement of assurance from the Directors of the Paying Agencies

2.2.2 Opinion from the certification bodies on the statement of assurance

2.2.3 Follow-up of reservations included in the paying agency Directors' statements of assurance

2.2.4 Annual summaries (synthesis reports) drawn up by the co-ordination bodies

2.2.5 National Declarations

2.3 Financial clearance exercise

2.4 Assessment of the Paying Agencies' control statistics by the Certification Bodies

2.4.1 Opinion on the quality of the on-the-spot checks

2.4.2 Opinion on the accuracy of the control statistics

2.4.3 Conclusions on the opinions of the certification bodies as regards the control statistics

2.5 Overview of statements of assurance, opinions and summaries

2.6 Background to accreditation under EAGF/EARFD - summary of finding regarding Paying Agencies under probation or limited accreditation or for which serious deficiencies have been revealed

Annex 10 – Part 2



2.1 Compliance with the accreditation criteria

2.1.1 Status of the paying agencies' accreditation At 31 December 2013, the 28 Member states had 82 operating accredited paying agencies.

The status of accreditation of the 82 paying agencies was as follows in 2013:

1 paying agency (OPEKEPE in Greece) continued to be under limited accreditation; accreditation continues to be limited to those EAFRD measures for which a proper control system and procedures have been put into place (no further measures have been accredited since April 2011).

The Corsican paying agency ODARC (France), was put under probation by the competent national authorities as from 1 June 2012. This was due to accreditation deficiencies identified by the certifying body during financial year 2011 with regard to the management of EAFRD IACS measures, and pursuant to the request of DG AGRI. The French authorities have put in place an action plan to address these deficiencies. A review was performed by the French authorities who concluded that the necessary actions had been implemented to allow the lifting of the probation. ODARC is, therefore, "fully" accredited at the end of financial year 2013.

PAAFRD in the Republic of Croatia, was granted provisional accreditation, for a period of 12 months) for EAGF direct payments on 27 December 2012 and for certain CMO measures on 1 July 2013. Full accreditation for EAGF was granted on 20 December 2013. No accreditation has been requested as yet for EAFRD as Croatia will only commence operation under that Fund as from the new programming period.

Status of Paying Agencies' accreditation

At the beginning of financial year 2013

At the end of financial year 2013

Fully accredited Limited accreditation Accreditation under probation or provisional accreditation

79 1

28

129

80 1

1

130

Total Member States 27 81 81

Republic of Croatia provisional accreditation NA 1

Table: Annex 10 -2.1 – status of PA accreditation Section 2.6 of this annex provides further information on the development of accreditation status of the PAs which were not fully accredited during 2013.

28 OPEKEPE (Greece)

29 ODARC (Corsica, France)

30 PAAFRD (Croatia)

Annex 10 – Part 2



2.1.2 Certification of the functioning of the paying agencies' internal control systems In the context of the financial clearance exercise for financial year 2013, the certification bodies are required – besides certifying the accounts of the paying agencies - to report on and certify whether the paying agencies' internal control systems operated satisfactorily.

Taking into consideration the EAGF / EAFRD split, 149 certificates (68 paying agencies dealing with both Funds and 13 paying agencies dealing only with one Fund – 3 dealing exclusively with EAGF and 10 exclusively with EAFRD) covering these internal control systems, should be received. In addition, for PAAFRD (Croatia) the certificate would only cover EAGF as the paying agency did not have accreditation of any sort for EAFRD. In total 150 certificates were to be received.

Eight paying agencies requested permission to submit the certificates and related reports after the deadline of 1 February 201431. All certificates were received by end February. 142 of the 150 certificates received indicate that the internal control system of the paying agency operated satisfactorily (ratings of very good, good or adequate). In the remaining eight cases the certification bodies qualified their opinion as follows:

Austria AT01 AMA (EAGF) the CB qualified the EAGF certificate with a scope limitation related to DG ARGI Enquiry No. FV/2013/003/AT and the weaknesses identified in the work of the responsible unit in the Ministry (thus, it is not linked to the work of the PA). The expenditure concerned (7.765.987 EUR) equals 1,12% of the EAGF budget, which is below materiality.

Bulgaria BG01 (State Fund for Agriculture) the CB qualified the opinion on EAFRD due to an accumulation of errors, namely material error in EAFRD Non-IACS, a known error in EAFRD IACS expenditure, possible ineligible expenditure of EUR 25,966,284 for measure 123 and further possible ineligible expenditure (unquantified) related to Public Procurement in measure 223, measure 226, measure 313, measure 321 and measure 322.

Spain ES03 Asturias (EAFRD): due to the material error and the deficiencies identified in the EAFRD Non-IACS population;

Spain ES10 Extremadura (EAFRD) The CB has detected systemic errors in measures 122, 125, 226 and 322 related to operations of entrusted management in which the object was not in line with the purpose of the measure of the Rural Development Programme. The CB has analysed all the transactions subject to this type of operations in order to determine the known error,

Spain ES16 (La Rioja) – the CB Qualified the opinion due to material financial errors for EAFRD non-IACS;

France FR19 (ASP) due to the material error in the EAFRD population;

Portugal PT03 (IFAP) - due to the material error in the EAFRD population;

Romania RO01 PARDF (EAFRD) and RO03 (PIAA) due to material misstatements.

31 Mecklenberg Vorpommern, Thuringen, Baden Württemberg (Germany), DAFM (Ireland), AGEA (Italy), Extremadura, Castilla y León (Spain), Jordbruksverket (Sweden)

Annex 10 – Part 2



2.1.3 The Commission's accreditation audits and summary of findings

The Commission regularly performs accreditation audits, based on a detailed risk assessment, to check whether the paying agencies (continue to) respect the accreditation criteria. The 2013/14 work plan (which runs from mid-2013 to mid-2014) scheduled four full accreditation audit missions32 and seven combined certification/accreditation missions33

Accreditation missions:

ODARC (France) – was selected following the restoration of full accreditation after a period of probation.

PAAFRD (Croatia) – was selected as it only received provisional accreditation in December 2012, and given the fact that Croatia joined the EU as from 1 July 2013, it is necessary to assess the state of play as regards the setting up of the administrative structures of that PA (including the development of the IACS) as well as the status of the accreditation process.

Andalucia (Spain) was selected in order to assess the rate of implementation of the recommendations made following the accreditation audit mission made in 2012.

SJV (Sweden) has not been reviewed for accreditation issues for a number of years, and the combination of factors considered during the risk analysis flagged this paying agency as potentially risky from the accreditation point of view.

Combined certification/accreditation missions

The paying agencies selected for combined certification /accreditation missions were the result of the risk analysis on certification related matters, but where there had been accreditation related issues identified in the past. The focus was essentially to follow-up on the implementation of recommendations made in previous accreditation missions.

2.1.4 The Certification Bodies' reports for financial year 2013 and summary of findings

What are the Certification Bodies and what do they do?

The Certification Bodies are public or private legal entities which are designated by the Member State to deliver an opinion on the truthfulness, completeness and accuracy of the accounts of the accredited paying agency as well as on the functioning of its internal control procedures. They are required to be independent of the paying agency. Additional work is also carried out on the done on the legality and regularity of underlying transactions (checking of the quality of on-the-spot checks by testing a limited number of transactions and checking the accuracy of the control statistics).

The horizontal Regulation on the Financing, Management and Monitoring of the CAP (Regulation 1306/2013) expands the role of the certification body with regard to the opinion on legality and regularity which shall, in the future, be based on substantive testing of a representative sample of transactions in order to be able to validate the control statistics of the paying agency. This work will commence in the summer of 2014 for claim year 2014.

Explanatory Box: Annex 10 -2.2

32 Andalucia (Spain), ODARC (France), PAAFRD (Croatia) and SJV (Sweden)

33 Hessen (Germany), DAFA (Denmark), MAVI (Finland), ASP (France), OPEKEPE (Greee), NMA (Lithuania) and IFAP (Portugal)

Annex 10 – Part 2



None of the certificates/reports received indicates clear non-respect of any of the accreditation criteria.

Consequently, in the opinion of the certification bodies, none of the paying agencies has deficiencies that are serious enough to conclude that they no longer comply with the accreditation criteria.

Nonetheless, for certain paying agencies, the certification bodies indicated important deficiencies which need to be followed up by the competent authorities of the given paying agencies as set out in Article 6(1) of Regulation (EC) No 1290/2005.

2.2 Statement of assurance from the directors of the Paying Agencies and related opinion from the Certification Bodies as well as synthesis reports drawn up by the Coordinating Bodies and national declarations

2.2.1 Statement of assurance from the Directors of the Paying Agencies

In respect of financial year 2013, all the directors of the paying agencies (82) have submitted to the Commission their statements of assurance thereby declaring that they have put in place a system which provides reasonable assurance on the legality and regularity of the underlying transactions.

80 statements were without reservations.

In the case of ES03 Asturias (Spain), the director of the paying agency made a reservation for EAFRD expenditure based on the material error and the deficiencies identified by the CB in the EAFRD NON-IACS population, in particular affecting measures 122, 223 and 226. In this context, the paying agency initiated an action plan to identify all the errors in the population covering these three measures and to quantify the actual error. The paying agency expects to conclude the review by 30/06/2014. In the case of DK02 DAFA (Denmark), the director of the paying agency included a reservation regarding EAFRD non-IACS, with an explanation on additional controls applied to tackle the issues. In this context it is worth noting that the certification body also included a reservation in its opinion regarding EAFRD non-IACS owing to the material errors resulting from substantive testing. The identified errors were due to missing documentation, inadequate case administration, missing corrections of aid amounts, ineligible expenses and missing and incomplete payment documentation. The situation is summarised at paragraph 2.5.

2.2.2 Opinion from the Certification Bodies on the statement of assurance All the 82 statements of assurance referred to above were subject to an opinion from the certification bodies.

79 of the 82 opinions are favourable (unqualified) thus confirming the accuracy of the statements of assurance presented by the directors of the paying agencies. In three cases, the certification body's opinion on the Statement of Assurance is qualified for the following reasons:

BG01 State Fund for Agriculture (Bulgaria) the certification body considers that the director of the paying agency should have made reservations due to the high rate of error resulting from the certification body's substantive testing and the existence of potentially ineligible expenditure resulting from the absence of documented procedures to justify the eligibility of expenditure and weaknesses in public procurement procedures.

Annex 10 – Part 2



ES01 Andalucia (Spain) the certification body considered that there should be reservations due to the serious deficiencies found in various audited measures.

Reservations included in previous years' statements of assurance have been properly followed-up through remedial actions taken by the paying agencies and/or financial corrections resulting from conformity clearance enquiries. All the issues can now be considered as closed. In the case of the paying agency Andalucía (Spain), based on the Director's Statement of Assurance, the necessary actions have been taken to counter the reservation made in the previous year. However, at the time of signing of the audit report, the certification body had not obtained sufficient evidence that the necessary measures have been implemented to mitigate all the risks that led to the reservation for financial year 2012, with the result that it qualified its opinion on the Statement of Assurance. In addition the paying agency extended the suspension of payments to three other measures (measures 411, 412 and 413). At 15/10/2013, the required action plan to remedy the detected weaknesses had yet to be prepared.

2.2.4 Annual summaries (synthesis report) drawn up by the coordinating bodies

For financial year 2013, the 10 Member States with more than one Paying Agency (Austria, Belgium, Germany, Spain, France, Italy, the Netherlands, Poland, Romania and the United Kingdom) were required to draw up an annual summary. All of these Member States complied with this obligation and submitted an annual summary to the Commission.

All the annual summaries received report on both the statements of assurance from the directors of the paying agencies and the certificates from the certification bodies. For Austria, Belgium, Germany (taking into account that for this country not all the certificates were issued at the time of drafting the Annual summary), Italy, the Netherlands, Poland and the United Kingdom, they confirm that neither the statements of assurance nor the certificates are subject to any reservations or qualifications. In the absence of any such reservations or qualifications, no further detailed analysis of problems of a more general nature is required. For the remaining Member States (France, Spain and Romania), the summaries indicate reservations or qualification(s) in either the statements of assurance (ES) or the certificates (FR, ES, RO) and these Member States have disclosed a further analysis of the problems identified, albeit sometimes in a very succinct way (ES, FR).

All annual summaries received include elements addressing both control statistics and recoveries.

In conclusion, the Member States concerned, have complied with their legal obligations and largely followed the guideline established by the Commission services. However, the quality of the analysis included in all annual summaries could still be further improved in terms of consistency and, in some cases, completeness. Also, in some cases the required explanation of error rates above 2 % was not provided. The Commission will raise these points with the Member States concerned with a view to improving the situation. Although the overall statistics for the Member States in question may be incomplete in the synthesis reports, it is important to note that this does not pose any risk to the Funds, as the Commission receives information from each individual paying agency allowing it to undertake the appropriate follow-up actions.

Annex 10 – Part 2



2.2.5 National Declarations Although there is no legal requirement in EU law for a national declaration by a Member State on the management and control of the funds it receives from the EU, some Member States draw up such a declaration on a voluntary basis.

For financial year 2013 (16 October 2012 – 15 October 2013), the Netherlands provided such a declaration which was made available to the Commission by the Dutch Minister of Finance on 18 March 2014. The declaration states, in respect of the EAGF and the EAFRD, that the Dutch management and control systems provide reasonable assurance on the legality and regularity of expenditure and revenue and the eligibility of the aid applications concerned; that the expenditure and revenue declared and included in the consolidation statement are legal, regular, correct and complete up to the level of the final beneficiaries and that pending claims on behalf of these Funds as included in the consolidation statement are legal, regular, correct and complete.

2.3 Financial clearance exercise for 2013 expenditure The rules on the financing of the CAP provide for an annual financial clearance exercise covering the completeness, accuracy and veracity of the paying agencies' accounts. By 1 February following the end of the financial year in question, Member States are required to send the annual accounts of their paying agencies to the Commission, together with a certificate from the certification body of each paying agency stating whether it has gained reasonable assurance that these accounts are complete, accurate and true and that the agency's internal control procedures have operated satisfactorily. The Commission then has until 30 April to review this information and, if the information is considered acceptable, to adopt a decision clearing the accounts of the paying agencies concerned.

By 28 February 2014, the 2013 accounts of all paying agencies and the related certification documents from the certification bodies had been received.

As in the previous financial clearance exercises, the accounts of a limited number of paying agencies will probably not be cleared by the 30 April deadline either because the certificates from the certification bodies are qualified, thus requiring further work from the paying agencies and/or from the certification bodies or the level of error exceeds the materiality threshold for the fund. The accounts of these paying agencies will be disjoined from the financial clearance decision due by 30 April 2014 and cleared at a later stage.

2.4 Assessment of the Paying Agencies' control statistics by the Certification Bodies

2.4.1 Opinion on the quality of the on-the-spot checks

The certification bodies are required to give an opinion on the quality of the on-the-spot checks carried out by the paying agencies by assessing them against a scale of 1 to 5 for the following 4 populations: EAGF-IACS, EAGF-non-IACS, EAFRD-IACS and EAFRD-non-IACS. In this context, for each population, they should review the plans for the on-the-spot checks, instructions and manuals, human resources, the competencies and training of controllers, the methodology and equipment used, the agreements with delegated bodies, the monitoring and supervision system put in place by

Annex 10 – Part 2



the paying agency, the adequacy of the inspection reports and the application of reductions and sanctions. Furthermore, for a sample of at least 10 inspections for each population the quality of the on-the-spot checks has to be checked either through re-performance or by accompanied inspections.

An analysis of the certification reports received shows that in all these cases, the certification bodies carried out the system review. Regarding the substantive work and evaluation of the quality of the on-the-spot checks as such, the situation is as follows:

Opinion of certification bodies on the quality of on-the-spot checks

Financial year 2013 Financial year 2012

Population EAGF-IACS EAGF-Non-IACS EAFRD-IACS EAFRD-Non-IACS

Work done *

100% 84% 97%

96%

Positive conclusion**

100% 97% 98% 97%

Work done *

100 % 91 % 98 %

96 %

Positive conclusion**

97 % 98 % 93 %

97 %

Table: Annex 10 -2.3 * includes only paying agencies for which the certification body performed the required level of check. It also

excludes the paying agencies that performed the work in the context of the reinforcement of assurance. – see point 2.4.3.

** this year the positive opinion was correlated to the error rates reported by the certification body as a result of their accompanied or re-performed on-the-spot checks; in case of discrepancies, the score attributed by the certifying bodies was rectified.

2.4.2 Opinion on the accuracy of the control statistics

The certification bodies are requested to verify and validate the Member States' control statistics for EAGF expenditure covered by the IACS and for EAFRD expenditure. In particular, they should reconcile the information provided by the paying agencies to the underlying information in the databases and records as regards the number of aid applications and the total area declared, the number of applications and the total area covered by checks and the results of the checks carried out, including the reductions and exclusions applied. Moreover, in order to test the databases and records, they should reconcile on a sample basis 20 field inspection reports to the information entered into the databases and records. An analysis of the certification reports received shows that:

Opinion of certification bodies on the accuracy of control statistics

Financial year 2013 Financial year 2012

Population EAGF-IACS-areas EAFRD

Work done*

97% 95%

Positive conclusions**

98% 91%

Work done

95 % 91 %

Positive conclusions

97 % 95 %

Table: Annex 10 -2.4

* includes only paying agencies for which the certification body performed the required level of check. It also excludes the paying agencies that performed the work in the context of the reinforcement of assurance. – cf. point B.2.3.

** includes only paying agencies that reconciled on a sample basis 20 field inspection reports to the information entered into the databases and records.

Annex 10 – Part 2



There are 9 PAs that account for more than 50 % of EAGF expenditure as a whole (IACS/Non IACS), i.e.: FR19 (ASP), PL01 (ARMA), IT01 (AGEA), GR01 (OPEKEPE), GB09 (RPA), ES01 (Andalucía), IE01 (DAF), HU01 (ARDA), DE04 (Bayern SMLF). Of these 9 paying agencies, on the basis of the reports received, it appears that only in the case of France (ASP) did the certification body not confirm the control statistics either for EAGF area aids or for EAGF animal premia. In addition, in the case of Ireland (DAFM), although the certification body confirmed that the statistics are correctly complied and reconciled, it was unable to reconcile the submitted statistics to the underlying databases.

2.4.3 Conclusion on the opinions of the Certification Bodies as regards the control statistics

For the statistical information to be used effectively DG AGRI is dependent on the certification bodies reporting the results in a timely manner. In this respect it is recalled that for financial year 2012, the EAFRD control statistics of 2 paying agencies were missing (see point 2.3 above).

From the above tables it can be seen that there is an increased number of cases where the certification body concludes positively on the statistics compared to previous year.

In addition it is emphasized that for claim year 2012 (financial year 2013) 4 Paying Agencies (Bulgaria, Luxembourg, Greece and Northern Ireland) did extra work on a voluntary basis under the Reinforcement of Assurance exercise. Romania participated in this program in claim year 2011 (financial year 2012) but decided to cease participation in the program as from claim year 2012 (financial year 2013). Based on a substantive review including the re-performance of both administrative and on-the-spot checks, and the recalculation of the aid and sanctions of files subject to on-the-spot checks, the certification body provides an opinion on the material correctness of the level of error found in the random selection of files subject to on-the-spot checks. The results, which have not been considered in the reporting under 2.4.1 and 2.4.2, are as follows:

Annex 10 – Part 2



Opinion of certification bodies on the material correctness of the level of error found in the random selection of files subject to on-the-spot checks

Member States

Certification Body's opinion on EAGF IACS, for:

Certification Body's opinion on EAFRD IACS, for:

Eligibility of expenditure

established by the Paying Agency, recorded in its

databases

Control statistics correctly compiled and reconciled in

the databases

Eligibility of expenditure

established by the Paying Agency, recorded in its

databases

Control statistics correctly compiled and reconciled in

the databases

Bulgaria Qualified – material errors

Unqualified with emphasis of matter

Qualified – material errors

Qualified – material errors

Greece Qualified – material errors

Unqualified Qualified – material errors

Unqualified

Luxembourg Unqualified Unqualified Unqualified Unqualified

Northern Ireland Unqualified Unqualified N/A N/A

Table: Annex 10 - 2.5

Therefore, it can be concluded that for:

Bulgaria: the certification body did not confirm the error rate for EAGF-IACS nor for EAFRD-IACS.

Greece: the certification body confirmed the error rate for EAGF-IACS, but it did not confirm the

error rate for EAFRD-IACS.

Luxembourg: the certification body confirmed the error rate for both EAGF-IACS and EAFRD-IACS.

Northern Ireland: the certification body confirmed the error rate for both EAGF-IACS.

The results of this second year of application are being examined with a view to further improvements.

As already noted, DG AGRI took account of the opinion of the certification bodies on the paying agencies' control statistics within an integrated assessment which it carried out into the quality of the control statistics for SPS and SAPS expenditure within ABB03 (See Annex 10 – Part 3.2 – ABB03)

While the opinions of the certification bodies provide a valuable additional source for establishing a clearer assessment, there are limitations as regards the extent of assurance that can be taken from their work. The Court of Auditors has for a number of years expressed concern that the Member States' statistics were understated and that the work requested of the certification bodies was not sufficient to deliver a valid audit opinion on the legality and regularity of the underlying transactions. In this context, it is important to highlight the changes brought about by the new Horizontal Regulation, No 1306/2013 insofar as the work of the certification bodies is concerned, and which amongst other things, are aimed at addressing the Court of Auditors concerns. As from claim year 2014 (financial year 2015), certification bodies are required to test the legality and regularity of the transactions that result in payments. In practice, this means that certification bodies are required to verify the results of on-the-spot checks carried out by the Paying Agencies, including the transposition of the control results into the databases used to provide the control statistics. It is intended that this requirement will lead to more reliable control statistics.

Annex 10 – Part 2



2.5 Overview of statements of assurance, opinions and summaries

Paying Agency Statement of Assurance

Opinion of Certification Body

MS Paying Agency Unqualified? Number of reservations

Unqualified? Reasons for qualification(s) Summary received

AT AMA Unqualified N/A Unqualified N/A YES

AT Zollamt Salzburg Unqualified NA Unqualified N/A

BE BIRB Unqualified N/A Unqualified N/A

YES BE ALV Unqualified N/A Unqualified N/A

BE Rég. Wallonne Unqualified N/A Unqualified N/A

BG State Fund Agriculture

Unqualified N/A Qualified

High error rate found in EAFRD Non-IACS testing and also potentially ineligible expenditure found by the CB

YES

CY CAPO Unqualified NA Unqualified N/A

CZ SAIF Unqualified N/A Unqualified N/A

DE BLE Unqualified N/A Unqualified N/A

YES

DE Hamburg-Jonas Unqualified N/A Unqualified N/A

DE Baden-Württemberg Unqualified N/A Unqualified N/A

DE Bayern StMLF Unqualified N/A Unqualified N/A

DE Brandenburg MLUV Unqualified N/A Unqualified N/A

DE Hamburg Unqualified N/A Unqualified N/A

DE Mecklenburg-Vorpom. Unqualified NA Unqualified N/A

DE Niedersachsen Unqualified N/A Unqualified N/A

DE Nordrhein-Westfalen Unqualified N/A Unqualified N/A

DE Rheinland-Pfalz Unqualified N/A Unqualified N/A

DE Saarland AAL Unqualified N/A Unqualified N/A

DE Sachsen Unqualified N/A Unqualified N/A

DE Sachsen-Anhalt Unqualified N/A Unqualified N/A

DE Schleswig-Holstein Unqualified N/A Unqualified N/A

DE Thüringen Unqualified N/A Unqualified N/A

DE Hessen Unqualified N/A Unqualified N/A

DK DAFA Unqualified EAFRD

non-IACS Unqualified N/A

EE PRIA Unqualified N/A Unqualified N/A

ES Andalucia Unqualified N/A Qualified Deficiencies identified in some measures

YES

ES Aragón Unqualified N/A Unqualified N/A

ES Asturias Qualified

EAFRD non-IACS measures 123, 223, 226

Qualified qualificatoin of SoA due to EAFRD non-IACS measures 123, 223, 226

ES Islas Baleares Unqualified N/A Unqualified N/A

ES Islas Canarias Unqualified N/A Unqualified N/A

ES Cantabria Unqualified N/A Unqualified N/A

ES Castilla La Mancha Unqualified N/A Unqualified N/A

ES Castilla y Léon Unqualified N/A Unqualified N/A

ES Cataluña Unqualified N/A Unqualified N/A

Annex 10 – Part 2



Paying Agency Statement of Assurance

Opinion of Certification Body

MS Paying Agency Unqualified? Number of reservations

Unqualified? Reasons for qualification(s) Summary received

ES Extremadura Unqualified N/A Unqualified N/A

ES Galicia Unqualified N/A Unqualified N/A

ES Madrid Unqualified N/A Unqualified N/A

ES Murcia Unqualified N/A Unqualified N/A

ES Navarra Unqualified N/A Unqualified N/A

ES País Vasco Unqualified N/A Unqualified N/A

ES La Rioja Unqualified N/A Unqualified N/A

ES C. Valenciana Unqualified N/A Unqualified N/A

ES FEGA Unqualified N/A Unqualified N/A

FI MAVI Unqualified N/A Unqualified N/A

FR ODEADOM Unqualified N/A Unqualified N/A

YES FR ODARC Unqualified N/A Unqualified N/A

FR ASP Unqualified N/A Unqualified N/A

FR FR20 - FranceAgriMer Unqualified N/A Unqualified N/A

GB DARD Unqualified N/A Unqualified N/A

YES GB SGRPID Unqualified N/A Unqualified N/A

GB WAG Unqualified N/A Unqualified N/A

GB RPA Unqualified N/A Unqualified N/A

GR OPEKEPE Unqualified N/A Unqualified N/A

HR PAAFRD Unqualified N/A Unqualified N/A

HU ARDA Unqualified N/A Unqualified N/A

IE DAFM Unqualified N/A Unqualified N/A

IT AGEA Unqualified N/A Unqualified N/A

YES

IT SAISA Unqualified N/A Unqualified N/A

IT ENR Unqualified N/A Unqualified N/A

IT Veneto (AVEPA) Unqualified N/A Unqualified N/A

IT Toscana (ARTEA) Unqualified N/A Unqualified N/A

IT Emilia-Rom. (AGREA) Unqualified N/A Unqualified N/A

IT ARPEA Unqualified N/A Unqualified N/A

IT OPR Lombardia Unqualified N/A Unqualified N/A

IT OPPAB Unqualified N/A Unqualified N/A

IT APPAG Unqualified N/A Unqualified N/A

IT ARCEA Unqualified N/A Unqualified N/A

LT NMA Unqualified NA Unqualified N/A

LU Min. Agric. Unqualified N/A Unqualified N/A

LV RSS Unqualified N/A Unqualified N/A

MT MRRA PA Unqualified N/A Unqualified N/A

NL DLG Unqualified N/A Unqualified N/A YES

NL Dienst Regelingen Unqualified N/A Unqualified N/A

PL ARMA Unqualified N/A Unqualified N/A YES

PL AMA Unqualified NA Unqualified N/A

PT IFAP Unqualified N/A Unqualified N/A

RO PARDF Unqualified N/A Unqualified N/A YES

RO PIAA Unqualified N/A Unqualified N/A

SE SJV Unqualified N/A Unqualified N/A

SI AAMRD Unqualified N/A Unqualified N/A

SK APA Unqualified NA Unqualified N/A

Table: Annex 10 - 2.6

Annex 10 – Part 2



2.6 Background to accreditation under EAGF/EARFD - summary of finding regarding Paying Agencies under probation or limited accreditation or for which serious deficiencies have been revealed

2.6.1 OPEKEPE (Greece) – limited accreditation

Problems identified:

Following the audit mission carried out in November 2009, the accreditation was limited to the rural development measures for which a proper structure, control system and procedures had been put in place on 30 November 2009.

State of play of actions taken:

The decisions by the Greek Competent Authorities dated 3/5/2010, 12/10/2010 and 19/4/2011 added further accredited measures, which still did not cover all measures in the Rural Development Plan. No further measures have been accredited since April 2011.

The accreditation audit mission carried out in November 2011 did not reveal any serious weaknesses as regards already accredited measures. The Greek authorities indicated that they would revise their Rural Development Programme and that they would not accredit/activate further measures.

Areas of concern (serious delays or outstanding deficiencies):

Accreditation of a significant number of measures not yet granted.

An audit mission to the Paying Agency is planned for May 2014 to review the extent of compliance by OPEKEPE with the accreditation criteria.

2.6.2 ODARC (Corsica-France) - Probation


The certification report for financial year 2011 for the Corsican Paying Agency, ODARC, indicated significant weaknesses in its administrative controls and organization. A significant number of accreditation criteria were considered non-compliant.

One of the main concerns was the insufficient functionalities of the IT systems, OSIRIS and ISIS, the IT systems of ASP (France). As ODARC did not have sufficient access rights, it was unable to perform adequate administrative checks of aid claims. The problems with regard to dependence on external IT tools were already identified in the previous certification exercises and the situation had only worsened, as confirmed by the tests of the certification body. The latter therefore recommended that the Paying Agency be provided with the required tools to be able to fulfil its functions. This resulted in the preparation of an action plan by the Competent Authority in late October 2011.

Another issue related to the dependence of ODARC for its daily operational management on the managing authority and local authorities.

Having regard to the above, DG AGRI requested the Competent Authority to put the accreditation of the Paying Agency on probation.

Annex 10 – Part 2



State of play of actions taken:

The accreditation of the ODARC was put on probation for 12 months as from 1 June 2012 and a corresponding remedial action plan was drawn up.

This is the second time that ODARC has been placed under probation since its accreditation in 2007, (originally on 31 March 2009).

On the basis of the certification body report for Financial Year 2013, two points of the action plan remain to be fully implemented. This did not, however, prevent the French Competent Authority restoring full accreditation to the Paying Agency ODARC.

Planning of future actions:

An audit mission to the PA is scheduled for May 2014 to review the extent of compliance with the accreditation criteria by ODARC.

2.6.3 PAAFRD (Croatia) – Provisional accreditation


PAAFRD was granted provisional accreditation for a period of 12 months, covering EAGF direct payments on 27 December 2012. On 1 July 2013, accreditation was granted for certain market measures. At the end of the financial year (15/10/2013), PAAFRD still only had provisional accreditation.

Recent developments:

On 20 December 2013, the Republic of Croatia granted PAAFRD full accreditation for all EAGF measures.

Planning of future actions:

An audit mission is planned for early 2014 to PAAFRD to review compliance with the accreditation

criteria.

Annex 10 – Part 3

Control results and the DG AGRI assessment thereon


Part 3: Control results at the level of the final beneficiaries, the assessment thereon by the Certification Bodies and the overall appreciation of the Commission on their reliability taking into account all available information.

Annex 10 - part 3 presents DG AGRI's process to calculate a residual error rate and the amounts at risk to the EU budget from the starting point of the control data sent by the Member States and taking into account all other available relevant information. This part of the Annex is split into three separate sections to deal with the three distinct AAB activities: Part 3.1: ABB02: Market Measures

Part 3.2: ABB03: Direct Payments Part 3.3: ABB04: Rural Development

Annex 10 – Part 3.1 - ABB 02

Market Measures - Control results and the DG AGRI assessment thereon


Part 3.1 ABB02 – Market Measures

Index for part 3.1 – ABB02: Market Measures

3.1.1 Fruit & Vegetable Sector

3.1.1.1 Operational programmes for producer organisations

3.1.1.2 Pre-recognition of producer groups

3.1.1.3 School Fruit Scheme

3.1.1.4 Conclusions for fruit & vegetables sector

3.1.2 Wine sector

3.1.2.1 Restructuring and conversion

3.1.2.2 Investment Measures

3.1.2.3 Promotion on third country markets

3.1.2.4 By-product distillation

3.1.2.5 Harvest insurance

3.1.2.6 Conclusions for the wine sector

3.1.3 Most deprived scheme

3.1.4 Posei & Aegean Islands

3.1.4.1 Spain – Canary Islands

3.1.4.2 France – Départements d'outre mer

3.1.4.3 Portugal – Azores & Madeira

3.1.4.4 Greece – Aegean Islands

3.1.4.5 Conclusion for Posei & Aegean Islands

3.1.5 Export Refunds

3.1.6 School Milk Scheme

3.1.7 Intervention Storage

3.1.8 Conclusions for ABB02

3.1.9. Root causes of the error rate in market measures – is DG AGRI doing anything?

This ABB activity deals with the traditional CAP, with measures many of which were put in place to regulate markets and provide a safety net for producers. Since the beginning of the CAP, price support was the main instrument for ensuring market stability and a reasonable income to farmers. Price support or "intervention", was based on institutional prices set for agricultural products which guaranteed a fixed price to farmers for their products. In today's CAP, market instruments are instead used to provide targeted, market safety nets. Intervention prices are set at levels that ensure they are used only in times of real price crisis and when there is a risk of market disruption.




Before 1992, more than 90% of all EU agricultural expenditure went to market support including export subsidies; in 2009, that figure was down to 10% of the CAP budget and by the end of 2013 it stood at 5.5% of the CAP budget.

EUR

050201 Cereals 79.087

050202 Rice -

050203 Non Annex I refunds 4.879.804

050204 Most deprived 491.528.689

050205 Sugar 146.768-

050206 olive oil 60.938.529

050207 Textile plants 17.140.277

050208 Fruit & Vegetables 1.137.485.374

050209 Wine 1.043.706.392

050210 Promotion 50.150.693

050211 Other plant products (incl POSEI) 229.426.646

050212 Milk 70.349.054

050213 Beef & Veal 6.489.188

050214 Sheepmeat & goatmeat -

050215 Pigmeat, eggs & poultry , bee-keeping 80.611.431

050217 Pilot projects -

Totals 3.192.638.395

Budget

article

Heading

Expenditure

Table: Annex 10 – 3.1.1

What assurance does the Director General have regarding the expenditure under ABB02 – Market Measures?

The assurance of the Director General is drawn from the various levels of management and control that are in place and the results which can be obtained from them. ABB02 is characterised by a number of very diverse measures some of which incur very limited expenditure and some of which are applicable in a limited number of Member States only. The various market measures are completely different from each other with their own distinct control systems. In particular, control statistics only exist for a rather limited number of measures. There is not enough data of a sufficiently broad, comprehensive and representative nature to allow the calculation of a meaningful residual error rate measures at individual Paying Agency, Member State or even at ABB level. DG AGRI therefore deviates from the methodology used for ABB03 and ABB04 as set out in its Materiality Criteria at Annex 4. It does intend




however to adhere as closely as possible to the principles set out in that Annex and to diverge only where technically necessary.

The approach taken by DG AGRI, therefore, was to examine the situation for the largest spending measures in particular and for any other measure for which it had statistical data. A qualitative approach was taken on a measure by measure basis for the main expenditure items (annual spending above 100 million EUR). This approach was differentiated depending on the information available for each scheme. Where statistics existed, along with a meaningful extent of other audit opinions (from Certification Bodies, DG AGRI audits, ECA assessment) a residual error was estimated at scheme level. Where this was not possible the holistic approach taken examined the control environment for each scheme, reported on DG AGRI's audit response over the preceding years as well as any other audit evidence, notably from ECA and from the Certification Bodies. The professional audit judgement of the DG AGRI auditors was sought, on a measure by measure basis, as to the assurance that could be given to the Director General as well as to give an assessment of the maximum amount of the expenditure which might be at risk.

A co-ordination is carried out at the level of DG AGRI's audit directorate to ensure that there is a common approach taken to the adjustments made to the Member States' error rates and for the mitigating factors used to consider whether a reservation is necessary.

This approach has resulted in a clear conclusion being drawn for each of the measures concerned on the effectiveness of each system in preventing, detecting and correcting errors as well as on the amount of expenditure considered to be at risk at measure level and at ABB level.

3.1.1 Fruit and Vegetable Sector

The EU funding for the fruit and vegetable sector is targeted at measures to structure the market. Growers are encouraged to join producer organisations (POs) in order to strengthen the position of producers in the market. POs receive support for implementing operational programmes, based on a national strategy. They are the principle operators in the fruit and vegetables regime.

The EU fruit and vegetable regime supports operational programmes implemented by recognised producer organisations (POs), by making a funding contribution to the programmes' operational funds. National authorities "recognise" groups of producers that meet the requirements of PO status. A recognised PO may set up an operational fund to finance its operational programme (the latter must be approved by the national authorities). This fund is financed by the financial contribution of members (or the producer organisation itself) and the EU financial assistance.

In certain regions, transitional support is also given to encourage producers, who wish to acquire the status of recognised POs, to form producer groups (PGs), to cover administration costs and the investments needed to attain recognition as producer organisations. This funding may be partially reimbursed by the EU and it ceases once the PG is recognised as a PO.




Member StateOperational

Programmes

Pre-recognition

for Producer

Groups

School fruit Total

Austria 7,766 0,582 8,348

Belgium 60,297 0,000 0,523 60,819

Bulgaria 0,193 1,371 1,456 3,021

Cyprus 0,881 0,481 0,004 1,366

Czech Republic 2,017 0,453 3,848 6,317

Germany 38,885 0,000 9,178 48,064

Denmark 3,186 0,000 1,038 4,224

Estonia 0,000 0,000 0,387 0,387

Spain 180,177 0,010 3,204 183,392

Finland 1,961 0,000 0,000 1,961

France 88,733 0,104 1,242 90,078

Greece 9,418 2,198 1,611 13,227

Hungary 3,896 14,418 3,240 21,553

Ireland 0,181 0,000 0,430 0,611

Italy 206,662 0,000 19,801 226,463

Latvia 0,111 8,405 0,855 9,372

Lithuania 0,000 0,242 1,237 1,479

Luxembourg 0,000 0,000 0,177 0,177

Malta 0,000 0,000 0,262 0,262

Netherlands 73,020 0,000 2,959 75,979

Poland 0,812 307,264 8,973 317,050

Portugal 8,343 0,024 0,502 8,870

Romania 0,421 8,340 1,940 10,701

Slovakia 0,182 0,063 2,717 2,962

Slovenia 0,000 0,000 0,569 0,569

Sweden 5,066 0,000 0,000 5,066

UK 33,953 0,000 0,000 33,953

Total 726,160 343,374 66,737 1.136,271

Expenditure for Fruit & Vegetables in 2013 (million EUR)


Article 97(b) of Commission Regulation (EU) No 543/2011 obliges Member States to submit to the Commission by 15 November of each year an annual report on the implementation of financial accounting controls and other checks on producer organisations' operational programmes and on producer groups’ recognition plans in the preceding year. 3.1.1.1 Operational programmes of producer organisations In 2013, the expenditure under this measure amounted to 726.2 million EUR

Article 97(b) of Commission Regulation (EU) No 543/2011 obliges Member States to submit to the Commission by 15 November of each year an annual report on the implementation of financial accounting controls and other checks on producer organisations' operational programmes.

DG AGRI audits on operational programmes of producer organisations carried out between 2011 and 2013 identified both recognition criteria issues and control deficiencies for a number of MS (AT, DE, DK, NL, RO, SE and UK) and control deficiencies for one (ES). The auditors would consider that the error rates reported by these MS do not fully reflect the irregular spending




and thus it has (in line with the principles set out in step 3 of DG AGRI's materiality criteria – see Annex 4 to this AAR) adjusted the error rates concerned.

In the first place it must be noted that this measure is subject to a very high degree of scrutiny by the national authorities. Every producer organisation has to be checked on-the-spot at least once every three years in order to verify respect of recognition criteria as well as the correct implementation of the operational programme. The actual control rate is much higher at 67.9% for 2013 (63.7% in 2012 and 69.9% in 2011).

The reports received concern operational programme expenditure incurred in financial year 2013 in respect of operational year 2012. The level of error detected by the Member States was 3.6% with rates above 2% reported by GR (5.6%), HU (4.6%) and NL (25.5%). However, due to the very high control rates in these GR (100%) and HU (99.39%) the residual error rates which result are negligible (0% and 0.4% respectively). In order to compensate for uncertainties with regard to the assurance that can be garnered from the Member States’ reported data, DG AGRI auditors reviewed all available data in order to come to a conclusion based on their professional audit judgment on what was the likely extent of understatement in the error reported. This resulted in adjustments being made to the error rates reported as summarised in the following table:

Member State

Aid claimed for

the 2012

operational fund

Aid paid for

operational

programmes in FY

2013

% of "2012

claim" checked

OTS

error rateDG AGRI

top-up

amount at risk if

top-up

amount at risk

if no top-uperror rate

EUR EUR EUR EUR

(a) (b) (c) (d) (e) (f) = (d+e)*b (g) = a*(1-c)*d (h) = (f+g)/b

Austria 8.762.836,92 7.765.987,61 100,00% 1,24% 25% 1.941.496,90 25,00%

Belgium 57.828.299,72 60.296.743,26 42,92% 1,42% - 469.116,89 0,78%

Bulgaria - 193.403,10 0,00% 0,00% - - 0,00%

Cyprus 806.089,87 880.686,18 100,00% 0,26% - - 0,00%

Czech Republic 2.013.161,38 2.016.607,28 100,00% 1,90% - - 0,00%

Germany 41.652.352,72 38.885.254,59 89,64% 1,03% 2% 822.288,32 2,11%

Denmark 3.153.954,08 3.185.943,50 87,57% 0,02% 2% 63.808,66 2,00%

Estonia - - 0,00% 0,00% - 0,00%

Spain 190.860.646,11 180.177.396,18 50,05% 0,92% 2% 4.477.991,32 2,49%

Finland 1.970.965,18 1.960.646,24 37,52% 0,15% - 1.802,68 0,09%

France 90.234.767,05 88.732.574,21 42,34% 0,86% - 447.144,39 0,50%

Greece 11.178.648,93 9.417.806,12 100,00% 5,55% - 0,00%

Hungary 5.221.098,50 3.895.844,97 99,39% 4,34% 1.385,54 0,04%

Ireland 3.574.397,53 180.731,46 94,81% 0,00% - - 0,00%

Italy 218.408.344,47 206.661.995,71 90,38% 0,56% - 116.604,95 0,06%

Lithuania - 0,00% 0,00% - - 0,00%

Luxembourg - 0,00% 0,00% - - 0,00%

Latvia 111.972,15 111.126,28 100,00% 0,76% - - 0,00%

Malta - 0,00% 0,00% - - 0,00%

Netherlands 82.953.268,75 73.019.501,85 69,67% 25,50% 10% 13.718.126,07 18,79%

Poland 664.492,24 812.331,67 100,00% 0,00% - 0,00%

Portugal 9.005.125,61 8.343.401,05 34,14% 1,93% - 114.739,18 1,38%

Romania 2.636.091,28 420.820,34 100,00% 0,00% - - 0,00%

Sweden 4.832.607,49 5.066.282,89 0,29% 0,03% 2% 102.918,30 2,03%

Slovenia - 0,00% 0,00% - 0,00%

Slovakia 761.706,51 182.330,32 100,00% 0,00% - 0,00%

UK 22.319.414,25 33.952.649,48 100,00% 1,17% 25% 8.488.162,37 25,00%

TOTAL 750.187.403,79 726.160.064,29 67,90% 3,64% 29.614.791,94 1.150.793,63 4,24%

Total amount at risk=

Fruit and Vegetables - Operational Programmes for Producer Organisations

Calculation of Residual Error Rate and Amount at Risk

30.765.585,57 Table: Annex 10 – 3.1.3




The very high error rate in the Netherlands results from actions taken by that Member State to correct deficiencies detected via DG AGRI's audits in 2011. As a result, NL decided to review the whole scheme and this led to their suspending the recognition for a large percentage of producer organisations until remedial action had been taken to realign them with the recognition requirements. Having reinforced its control systems, the Netherlands have since de-recognised beneficiaries and identified additional irregular payments. The control systems concerned are subject to ongoing conformity clearance procedures in order to recover any undue expenditure. However, despite the very positive action being taken by the NL authorities, DG AGRI auditors consider that the 25.5% error rate is understated and would top this up by a further 10%.

MS RER Reservation Required

Action Plan Amount at Risk

NL 18.8% Yes NL to provide a schedule of POs to be/or being reviewed with a view to regularising the recognition and to continue recovering undue expenditure. The conformity clearance procedure will recover any additional undue amounts.

€ 13.7 m

For Austria, DG AGRI auditors have adjusted the declared error rate of 1.2% by a further 25% further to their 2013 audit which revealed that the control system was ineffective as regards the assessment of the eligibility (recognition) of the beneficiaries. This is being followed up by a conformity procedure in order to recover the ineligible expenditure which the auditors consider is of the magnitude of 25% of the expenditure effected. The opinion of DG AGRI auditors is corroborated by the certification body which was "unable to form an opinion" with regard to the expenditure for this measure.



AT 25% Yes AT is in the process of reviewing the recognition of all POs– this will be monitored by DG AGRI. All ineligible expenditure will be recovered via the conformity clearance procedure.

€ 1.9 m

In the case of the UK, the DG AGRI auditors have topped up the MS' 1.2% indication of error by a further 25%. In spite of several reviews by the UK of the POs' compliance with the recognition criteria, the corrective measures taken remain inadequate as revealed by the most recent (2011) audit. However, the UK is taking steps to improve the situation.



UK 25% Yes UK to provide a schedule of POs to be/or being reviewed with a view to regularising the recognition and to continue recovering undue expenditure. The conformity clearance procedure will recover any additional undue amounts.

€ 8.5 m

For Germany, a diverse number of control system weaknesses have been found during Commission audits and refer to specific paying agencies only. The overall level of error is estimated by the Commission as being around 2% greater than that indicated by Germany and thus an adjusted residual error rate of 2.11% has been calculated.





Justification

DE 2.11% NO This is sufficiently covered by the on-going conformity clearance procedures and the DE authorities are already taking the required action.

For Denmark, a 2% adjustment has been made to the error rate as a result of a 2012 audit which found that remedial action taken after a 2010 audit was insufficient.


Justification

DK 2% NO This is covered by an on-going conformity clearance procedure.

For Spain, a diverse number of control system weaknesses have been found during Commission audits and refer to specific paying agencies only. The overall level of error is estimated by the Commission as being around 2% greater than that indicated by Spain and thus an adjusted residual error rate of 2.5% has been calculated.


Justification

ES 2.49% NO This is sufficiently covered by the on-going conformity clearance procedures and the ES authorities are already taking the required action.

For Sweden, a 2% top-up to the declared 0.03% error rate is based on the auditors' findings during a 2011 audit which revealed some weaknesses which still appear be present in 2013.


Justification

SE 2.03% NO This is covered by an on-going conformity clearance procedure.

3.1.1.2 Pre-recognition of producer groups In 2013 the expenditure under this measure amounted to 343.4 million EUR The overall error rate indicated by the MS statistics was 0.3%. As indicated above for the operational programmes, in order to compensate for uncertainties with regard to the assurance that can be garnered from the Member States’ reported data, DG AGRI auditors reviewed all available data in order to come to a conclusion based on their professional audit judgment on what was the likely extent of understatement in the error reported. This resulted in adjustments being made to the error rates reported as summarised in the following table:




Member State

Aid claimed for

the 2012

operational fund

Aid paid for

operational

programmes in FY

2013

% of "2012

claim" checked

OTS

error rateDG AGRI

top-up

amount at risk if

top-uperror rate

EUR EUR EUR


Bulgaria 2.341.708,72 1.371.422,79 100,00% - - 0,00%

Cyprus 577.220,36 480.807,55 100,00% - - 0,00%

Czech Republic 641.807,38 452.684,20 100,00% - - 0,00%

Spain 16.476,08 10.363,26 100,00% - - 0,00%

France 191.187,40 103.974,19 100,00% 6,5% - 0,00%

Greece 3.088.785,27 2.198.021,29 100,00% 0,5% - 0,00%

Hungary 22.237.683,53 14.417.767,37 95,42% 0,5% 4.927,18 0,03%

Lithuania - 242.269,54 0,00% - - 0,00%

Latvia 12.589.740,21 8.405.254,37 100,00% 0,1% - 0,00%

Malta 24.413,55 - 100,00% 100,0% - 0,00%

Poland 472.209.651,23 307.264.392,45 86,27% 1,2% 25% 77.572.340,76 25,25%

Portugal 24.390,71 24.390,71 100,00% - - 0,00%

Romania 37.748.586,51 8.339.634,83 100,00% 0,1% 7.606,27 0,09%

Slovakia 83.578,94 62.684,20 100,00% - 0,00%

TOTAL 551.775.229,89 343.373.666,75 98,70% 0,3% 77.579.947,03 4.927,18 22,59%

Total amount at risk= 77.584.874,21

Fruit and Vegetables -Prerecognition of Producer Groups


amount at risk if

no top-up


FR and MT both declared high levels of error with 6.5% and 100% respectively. In the case of MT, the error relates to a deficiency detected and corrected by the Maltese authorities themselves and since no aid was finally paid, clearly there is no risk for the EU budget. In the FR case there is zero residual error as the entire population was subject to on-the-spot checks and all errors have been corrected. Furthermore the expenditure concerned is minimal in both cases (0.091 m EUR for FR and 0.024 m EUR for MT). There are no other elements which would indicate that the level of error for FR is greater than that reported and thus it is not considered necessary to make a reservation for that MS.

For Poland however, the situation is more serious. Poland is by far the highest spending Member State under this measure and represents 89.5% of expenditure in 2013. Spending under this measure has risen sharply in the last couple of years as producers in Poland apply for and go through the process of being recognized as producer organisations and is expected to shrink once Poland had completed the recognition process. In the case of Poland, a DG AGRI audit in 2013 revealed structural deficiencies in the approval procedure for recognition plans. When plans were approved the groups received preliminary recognition which created the entitlement to aid. However as there were problems with the approval procedure the entitlement to aid is called into question. DG AGRI's preliminary assessment is that 25% of the expenditure is at stake.



PL 25.5% Yes For the past, the financial risk to the fund is, in any event, covered via the the conformity clearance procedure which will claw back very substantial amounts of unduly spent EU monies in order to ensure that the EU budget is fully protected. For the future, Poland has been requested to make the necessary changes and this will be monitored by DG AGRI.

€ 77.6 m




3.1.1.3 School Fruit scheme

In 2013, the expenditure under this scheme amounted to 66.7 million EUR

This EU-wide voluntary scheme provides school children with fruit and vegetables, aiming thus to encourage good eating habits in young people. Besides providing fruit and vegetables to the children the scheme requires participating Member States to set up strategies including educational and awareness-raising initiatives.

Article 15(1) of Regulation (EC) No 288/2009 requires Member States to report on the School Fruit Scheme show that on-the-spot checks were conducted on 61 % of aid distributed for the 2012/2013 school year resulting in errors of 1.2 % of the aid controlled. However, the assessment process carried out within DG AGRI led to adjustments for Italy and Netherlands.

Member State

Aid claimed for

the 2012/13 school

year

Aid paid for school

fruit in FY 2013

% of 2012/13

claim checked

OTS

error rate

DG

AGRI

top-up

amount at risk

if top-up

amount at risk

if no top-uperror rate

EUR EUR EUR EUR


Austria 528.758,00 582.314,91 3,62% 0,00% - 0,00%

Belgium 1.181.682,00 522.671,61 10,82% 0,24% 2.571,94 0,49%

Bulgaria 2.367.262,00 1.455.807,00 25,25% 0,03% 601,76 0,04%

Cyprus - 4.469,63 0,00% 0,00% - 0,00%

Czech Republic 5.367.281,00 3.847.767,96 24,11% 0,00% - 0,00%

Germany 8.771.449,00 9.178.465,21 44,09% 0,15% 7.260,70 0,08%

Denmark 1.126.532,00 1.038.091,18 9,43% 0,60% 6.076,51 0,59%

Estonia 395.289,00 387.467,53 12,26% 0,51% 1.777,64 0,46%

Spain 3.188.319,00 3.203.935,82 2,67% 0,00% 96,35 0,00%

Finland - - - -

France 1.262.622,00 1.241.752,92 16,29% 0,00% - 0,00%

Greece - 1.611.193,69 0,00% 0,00% - 0,00%

Hungary 4.753.203,00 3.239.868,97 6,65% 0,00% - 0,00%

Ireland 430.388,00 430.388,03 38,71% 0,00% - 0,00%

Italy 33.313.326,00 19.801.312,16 100,00% 1,46% 25% 4.950.328,04 - 25,00%

Lithuania 1.969.158,00 1.237.021,00 99,99% 0,00% - 0,00%

Luxembourg 178.774,00 176.692,07 98,84% 0,11% 2,39 0,00%

Latvia 856.330,00 855.359,01 28,14% 0,00% - 0,00%

Malta 347.494,00 261.984,67 100,00% 0,00% - 0,00%

Netherlands 2.944.897,00 2.959.375,60 96,47% 0,39% 90% 2.671.499,00 401,22 90,29%

Poland 8.958.040,00 8.972.821,44 18,97% 0,02% 1.751,91 0,02%

Portugal 819.426,00 502.071,91 6,05% 0,06% 444,40 0,09%

Romania 2.025.559,00 1.940.249,23 99,67% 3,72% 246,36 0,01%

Sweden - - 0,00% 0,00% -

Slovenia 778.574,00 568.966,34 100,00% 0,00% - 0,00%

Slovakia 2.392.922,00 2.716.770,31 37,38% 0,26% 3.841,95 0,14%

UK - - 0,00% 0,00% - -

TOTAL 82.775.603,00 66.736.818,20 61,24% 1,20% 7.621.827,04 25.073,12 11,46%

Total amount at risk=

Fruit and Vegetables - School Fruit Scheme - control results 2012/2013 school year


7.646.900,16


The above calculation of the residual error rate taking account of the findings of the DG AGRI auditors (for Italy) and the opinion of the certification body (Netherlands) results in the following reservations:






IT 25% Yes In the case of Italy, an error rate of 1.46% was reported. However a DG AGRI audit in 2013 revealed deficiencies in relation to the public procurement procedure and have applied a top-up of 25% to the error rate. Remedial action to be determined at horizontal level for public procurement issues. Italy has already taken remedial action so no further action plan is necessary. The financial risk to the fund is, in any event, covered via the the conformity clearance procedure.

€ 5 m

NL 90.3% Yes An error rate of 0.39% was calculated for Netherlands on the basis of their control statistics. However, the certification body has identified 2 671 499 EUR as being ineligible. This amount will be deducted in the financial clearance decision for 2013 which will be taken before 31 April 2014 and thus any risk to the Budget is eliminated. Netherlands will be requested to take remedial action and this will be monitored by DG AGRI.

€ 2.7 m

3.1.1.4 Conclusion for the Fruit and Vegetable Sector

For the fruit and vegetables sector there are a number of Member States for which serious problems have been detected by the DG AGRI auditors in recent years. The errors which such deficiencies would produce were not indicated in the data on the results of control carried out and reported by those Member States. The DG AGRI auditors have therefore, used their professional audit judgment to propose adjustments to the error rates indicated and thus enable a more realistic calculation of the amount at risk for the sector.

The table below summarises the data which is set out in detail above and indicates that reservations are required in respect of 5 Member States (with 2 reservations for Netherlands) for a total amount of 109 million EUR. The total amount at risk in the 2013 expenditure is estimated at 116 million EUR.

It is emphasised however, that in the case of all of the amounts under reservation, conformity clearance procedures are underway and all undue expenditure will be recovered from the Member States concerned.

Measure Expenditure

adjusted

RER

MS with

reservation

amount under

reservation

total amount at

risk

EUR EUR EUR

AT 1.941.496,90

NL 13.718.126,07

UK 8.488.162,37

Total 24.147.785,34

Producer Groups 343.373.666,75 22,59% PL 77.572.340,76 77.584.874,21

IT 4.950.328,04 -

NL 2.671.900,22 7.646.900,16

Total 7.622.228,26

Total 1.136.270.549,24 109.342.354,36 115.997.359,94

11,46%

4,24% 30.765.585,57

66.736.818,20

726.160.064,29 Operational Programmes

School Fruit





3.1.2 Wine sector

In 2008, the Council introduced a reform of the common organisation of the market in wine aimed essentially at improving the competitiveness of EU wine producers and balancing supply and demand in the wine sector. The main financial instruments of this reform included a tem-porary grubbing-up scheme and the setting up of national support programmes: a specific budget made available for each Member State, which can choose the best adapted to its particular situation, the most significant of which have been restructuring and conversion of vineyards; investments; promotion on third country markets; by-product distillation and harvest insurance.

Member

State

Restructuring

& conversion

of vineyards

Investment

Promotion on

third country

markets

By-product

distillation

Harvest

Insurance

Expenditure

2013

AT 2,234 7,580 1,165 0,000 0,000 10,979

BG 17,696 0,000 0,000 0,000 0,638 18,334

CY 3,687 0,769 0,000 0,000 0,187 4,643

CZ 3,185 2,019 0,000 0,000 0,000 5,204

DE 16,945 19,216 1,203 0,000 1,466 38,830

ES 163,575 -0,002 38,291 7,800 0,000 209,664

FR 108,483 118,197 17,098 34,651 0,000 278,430

GR 3,866 0,000 3,333 0,000 0,000 7,199

HU 22,592 5,739 0,000 0,750 0,000 29,081

IT 154,233 55,173 73,495 5,235 35,047 323,183

PT 50,922 0,000 9,225 0,675 4,322 65,145

RO 41,148 0,000 0,663 0,000 0,235 42,047

SI 4,220 0,000 0,815 0,000 0,000 5,035

SK 1,250 0,739 0,050 0,000 0,257 2,295

Total 594,036 209,430 145,339 49,112 42,152 1.040,069

Expenditure in the Wine Sector - 2013 (million EUR)


Annual reporting is based on the annexes to Regulation (EC) No 555/2008, whereby Member States are required to report annually to the Commission not later than 1 December the results of controls conducted in the framework of the restructuring and conversion and grubbing up schemes. Statistics are not presently required in respect of the other measures within the national support programmes although DG AGRI is taking steps to rectify this situation for the future. 3.1.2.1 Restructuring and conversion

In 2013 expenditure under this measure amounted to 594 million EUR.

Aid applications for restructuring and conversion in the wine sector are subject to 100 % on-the-spot inspections before and after operations, and in all cases before final payment. The controls, which aim at assessing the eligibility of parcels and operations and at measuring the areas, are performed by means of both remote sensing techniques and classical (on-the-spot)




checks both prior and subsequent to restructuring operations. Control and error reporting received from all concerned Member States shows that the regulatory control requirements have been respected, and that consequent to this control 4.66 % (compared to 5.05 % for 2012) of claimed areas have been refused as ineligible. It should be noted, though, that the percentage found in many cases is due to the difference between the area measured during the on-the-spot checks prior to payment and the area as declared by the applicant in his aid application (which is based on the wine register). DG AGRI has carried out 4 audits on the measure between 2011 and 2013 in ES, GR, IT and RO (which, for 2013, cover 61% of the expenditure between them). The only significant issue detected (both by DG AGRI and the ECA) was that producers have been overcompensated. DG AGRI estimates that overcompensation at 33% in Spain. This does not reflect control weaknesses per se but rather an incorrect use of maximum amounts as flat rate amounts by the national authorities. The full extent of any overpayment has been identified and is covered by on-going conformity clearance procedures so that the risk to the EU budget is fully covered.

The following table shows the results of the Member States' controls and the adjustments made by DG AGRI where the Member States' data was not considered to be completely reliable. It also quantifies the amounts at risk and calculates the residual error rate.

Expenditureamount at risk if

top-up

amount at risk if

no top-up

EUR EUR EUR

(a) (b) (c) (d) (e) (f) = (d+e)*b (g) =b*(1-c)*d (h) = (f+g)/b

AT 2.234.131,89 100,00% 6,00% - 0,0%

BG 17.695.640,58 15,44% 0,14% 20.816,19 0,1%

CY 3.687.177,00 85,05% 17,16% 94.594,41 2,6%

CZ 3.184.658,38 99,68% 7,57% 763,45 0,0%

DE 16.944.810,27 83,64% 3,60% 99.900,96 0,6%

ES 163.574.553,11 99,70% 5,50% 33,00% 54.006.597,31 - 33,0%

FR 108.483.401,35 41,06% 7,96% 5.092.245,03 4,7%

GR 3.866.201,60 78,10% 0,00% - 0,0%

HU 22.591.988,11 100,00% 5,10% - 0,0%

IT 154.233.368,21 29,07% 1,87% 2.049.935,63 1,3%

PT 50.922.038,72 100,00% 4,13% - 0,0%

RO 41.148.435,80 100,00% 0,62% 4,22 - 0,0%

SI 4.219.756,89 84,47% 2,94% 19.276,89 0,5%

SK 1.250.000,00 100,00% 1,05% - 0,0%

Total 594.036.161,91 72,56% 4,66% 54.006.597,31 7.377.528,34 10,3%

Total amount at risk= 61.384.125,65

Wine - Restructuring and Reconversion of Vineyards


Member

State

% of area

controllederror rate

DG AGRI

top-uperror rate


The expenditure reported is a mix of advance (covered by a guarantee) and final payments. The rate of regulatory controls must be 100% when the operation of restructuring is finalised (Article 9(1) of Regulation 555/08). A lower control rate appears to occur in cases of advance payments which can only be controlled once the project the project is finalised. The projects can be implemented over 3 years.






ES 33% Yes ES to review and recalculate the maximum amounts/flat rate amounts used in order to avoid over-compensation and to present a set of duly justified amounts. Recovery procedures to be launched by ES to recover aid paid as a result of the past over-compensation. The financial risk to the fund is, in any event, covered via the the conformity clearance procedure.

€ 54 m


Justification

CY 2.6% No The calculation of a residual error rate of 2.6% for Cyprus is considered by DG AGRI to be overstated as the amount paid includes advances (covered by guarantees). Reference is made to the above footnote to the control statistics for this measure. Based on a 100% control on balance payments as required, there would be zero residual error. It is therefore not considered necessary to make a reservation in this case.


Justification

FR 4.7% No The calculation of a residual error rate of 4.7% for France is considered by DG AGRI to be overstated as the amount paid includes advances (covered by guarantees). Reference is made to the above footnote to the control statistics for this measure. Based on a 100% control on balance payments as required, there would be zero residual error. A DG AGRI mission is scheduled for end of March 2014 in order to ascertain whether indeed the French authorities respect the regulatory control rate of 100% and to determine the extent (if any) of the risk to the EU budget.

For investment measures, promotions on third country markets, by-product distillation and harvest insurance, which account for 446 million EUR, there are no control statistics required by the EU wine legislation. The evaluation of the DG AGRI auditors on control and risk environment and or its audit findings is set out below. As there are no control statistics to use as a basis, the auditors have used the information available and their own knowledge of the measures concerned in order to estimate the maximum risk of error in each case. Table "Annex 10 – 3.1.9" sets out the quantification of the amount of risk which results from this estimate.




3.1.2.2 Investment measures

In 2013 expenditure under this measure amounted to 209.4 million EUR.

The investment measure foresees the possibility to invest in tangible and non-tangible "goods" in order to improve the quality of wine (such as expertise). The aid is a maximum of 50 to 75% of the investment depending on the region. Investment measures require a 100% control on the spot prior to payment.

For investment measures, between 2011 and 2013, DG AGRI carried out audits in DE, CZ, AT and RO (which, for 2013, cover 69.3% of the expenditure between them). Only in Czech Republic have the DG AGRI auditors detected an incorrect application of the control requirements (expenditure in 2013 for investment measures was 2.019 million EUR). This relates to retroactive approval of previous or existing investments and absence of control.

DG AGRI considers that the only amount potentially at risk for this measure is the expenditure for the Czech Republic (2.019 million EUR in 2013)



CZ 100% Yes CZ will be required to bring its incompliant application of this measure into line with the regulatory requirements and to ensure that the correct level of control is carried out. A conformity clearance procedure is underway to recover the amount at risk to the EU budget

€ 2 m

3.1.2.3 Promotion on third country markets


A 100% administrative check is carried out by the Member States in order to detect ineligible costs. Between 2011 and 2013, 7 Member States were audited by DG AGRI: ES, FR, AT, PT, GR, IT and RO - between them, these Member States accounted for 86% of the expenditure in 2013. These audits, which checked that the expenditure was effected in compliance with the rules in place, did not demonstrate any non-compliance requiring a financial correction. However, from March 2013, the control rules have been clarified and strengthened and compliance of the Member States with those rules will be audited in 2014. In the absence of a qualitative assessment of the potential amount at risk for the 2013 expenditure under the new rules, the average residual error rate for ABB02 (6.6%) is used in order to estimate the maximum amount at risk for this measure. 3.1.2.4 By-product distillation


By-product distillation is a simple measure. Member States can decide that the wine producer should bring the by-products ("must" and "lies") to a distillery. By–products should be removed




from the market in order to avoid that (bad quality) wine can be produced from it.

DG AGRI carried out an audit mission last year October in Spain (the second largest beneficiary) and did not detect any deficiencies. The DG AGRI audits consider that distillation measures are very low risk as the interest of the MS to keep every drop of alcohol produced under control is very high.

The amount at risk for this measure is considered to be zero.

3.1.2.5. Harvest Insurance


Harvest insurance is another simple measure. Wine producers can claim up to 80% of the cost of their insurance policy. This requires a straight-forward administrative control. On top of that, the aid amount is capped by maximum insurance premium and maximum insured value of the harvest. DG AGRI audit missions took place between 2011 and 2013 to IT and RO (which, for 2013, cover 66.7% of the expenditure for the measure). Based on both the evaluation on the spot as well as the structure of the control system, the auditors conclude that there is no or very low risk in this measure. They assess the amount at risk as zero.

3.1.2.6 Conclusion for the wine sector

Overall, based on the professional experience of its auditors, the principal risk in the wine sector arises from the overly-generous flat-rates amounts used in the restructuring measures. For measures for which no statistical data exists permitting the calculation of an amount at risk, DG AGRI has used the professional judgement of the auditors to estimate the amount at risk for the following schemes.

Member

StateInvestment

Amount at

risk

Promotion on

third country

markets

Amount at

risk

By-product

distillation

Amount at

risk

Harvest

Insurance

Amount at

risk

Expenditure

2013

Amount

at risk

AT 7,580 0,000 1,165 0,077 0,000 0,000 0,000 0,000 8,745 0,077

BG 0,000 0,000 0,000 0,000 0,000 0,000 0,638 0,000 0,638 0,000

CY 0,769 0,000 0,000 0,000 0,000 0,000 0,187 0,000 0,956 0,000

CZ 2,019 2,019 0,000 0,000 0,000 0,000 0,000 0,000 2,019 2,019

DE 19,216 0,000 1,203 0,079 0,000 0,000 1,466 0,000 21,885 0,079

ES -0,002 0,000 38,291 2,527 7,800 0,000 0,000 0,000 46,089 2,527

FR 118,197 0,000 17,098 1,128 34,651 0,000 0,000 0,000 169,947 1,128

GR 0,000 0,000 3,333 0,220 0,000 0,000 0,000 0,000 3,333 0,220

HU 5,739 0,000 0,000 0,000 0,750 0,000 0,000 0,000 6,489 0,000

IT 55,173 0,000 73,495 4,851 5,235 0,000 35,047 0,000 168,949 4,851

PT 0,000 0,000 9,225 0,609 0,675 0,000 4,322 0,000 14,223 0,609

RO 0,000 0,000 0,663 0,044 0,000 0,000 0,235 0,000 0,898 0,044

SI 0,000 0,000 0,815 0,054 0,000 0,000 0,000 0,000 0,815 0,054

SK 0,739 0,000 0,050 0,003 0,000 0,000 0,257 0,000 1,045 0,003

Total 209,430 2,019 145,339 9,592 49,112 0,000 42,152 446,032 11,612

Amount at risk as % of expenditure 2,60%

Wine Sector - assessement of maximum amount at risk for measures not covered by control statistics (million EUR)





3.1.3 Most Deprived Scheme

The most deprived scheme (MDP) has been in existence since 1987. It was originally structured around the provision of intervention products for processing into foodstuffs for distribution to the most deprived persons in the EU. As intervention stocks disappeared or consisted of products of an unsuitable nature for such distribution, the scheme evolved to allow a form of bartering whereby readily consumables food products (biscuits, pasta, cheese, etc.) could be swapped for the intervention commodities (cereals, skim milk powder, etc. following a tendering procedure). In recent years, such as in 2013, as there were no intervention stocks, all of the expenditure has been financed directly from the budget.

Member State Expenditure million EUR

Belgium 11,955

Bulgaria 18,627

Czech Republic 0,175

Estonia 2,299

Spain 85,613

Finland 3,532

France 71,278

Greece 16,919

Hungary 13,926

Ireland 2,598

Italy 97,193

Lithuania 7,810

Luxembourg 0,161

Latvia 5,011

Malta 0,518

Poland 76,924

Portugal 19,044

Romania 55,356

Slovenia 2,588

Total 491,529


Under the scheme, checks are required at each level of distribution of the products until the level of the final beneficiary.

The scheme is characterised by the fact that the main participants are charitable organisations at national, regional and local level. Thus, while many of those dealing with the products, are not professionally trained in stocktaking or book-keeping, in the experience of the DG AGRI auditors, the voluntary and philanthropic nature of those involved has led to a high standard of integrity in the distribution chain. The most deprived scheme has been regularly audited in Member States and has been found to be generally compliant. While an overview of the




outcome of the MS controls is not possible as the legislation did not provide for control statistics, irregularities have not often been detected by DG AGRI's auditors

DG AGRI has made eight audit missions concerning the free food scheme in the period 2011-2013 (EL, ES, HU, IT, LT, PL, PT, and RO). Between them these MS represent 75.8% of the expenditure for the measures in 2013.

For three member States no deficiencies were identified (ES, HU, and LT). For the other Member States the scheme was found to be running well in most cases, but some issues were found in relation to deadlines and public procurement. These issues are being pursued under the conformity clearance procedure.

In their 2013 report concerning the 2012 financial year the European Court of Auditors report that the overall assessment following audits in Spain and Italy is that the scheme is "effective" in these Member States as regards the operation of procurement procedures, plan implementation and supervision and control. These are the largest two spenders under the scheme and, between them, represented 37% of the expenditure.

The overall assessment is that there are some limited problems in relation to deadlines and public procurement but that the schemes are running rather well in most cases. It is considered therefore that there are no elements to indicate to the Director-General that he does not have assurance that this measure is free from material error and therefore the maximum amount at risk for the most deprived scheme is not considered to exceed 2% of the expenditure

It should be noted that the scheme of free food for the most deprived was managed by DG AGRI in 2013 for the last time. From 2014 onwards it will be managed by DG EMPL under the new Fund for European Aid to the Most Deprived (FEAD).

3.1.4 POSEI

The EU´s outermost regions benefit from the POSEI arrangements ("Programme d'Options Spécifiques à l'Éloignement et l'Insularité") in the agricultural sector. These programmes are designed to take account of their geographical and economic handicaps such as remoteness, insularity, small size, difficult topography and climate, economic dependence on a few products.

The outermost regions, as identified in Art 349 of the Treaty for the functioning of the European Union (TFEU) are:

France : Guadeloupe, French Guyana, Martinique, Réunion, Saint-Barthélemy and Saint-Martin

Portugal: the Azores and Madeira

Spain: the Canary Islands

For Greece, the smaller Aegean islands also benefit from specific supply arrangements for certain agricultural products and adapted support measures for local agricultural production.

The POSEI measures funded under ABB02, fall into two categories:

specific supply arrangements, aimed at mitigating the additional costs for the supply of

essential products for human consumption, for processing and as agricultural inputs,

and




measures to support the local agricultural production.

Supply measures

Local support

measures Total

m EUR m EUR m EUR

ES 59,977 17,223 77,200

FR 24,598 97,716 122,314

PT 15,647 6,824 22,471

GR 5,190 0,000 5,190

Total 105,412 121,763 227,175

POSEI expenditure under ABB02 for 2013


The four Member States applying the POSEI schemes submit annual reports on the implementation of the programmes. They States report on their controls in this context (5% of aid claims have to be checked on-the-spot), but there is no standardised format for reporting at the moment. Therefore, it is not possible to establish consolidated and comparable statistics for 2013. DG AGRI is however, providing that statistics shall be prepared for these schemes for 2014 AAR.

3.1.4.1 Spain – Canary Islands

The POSEICAN programme includes 3 main local support measures as well as the Specific Supply Arrangements (SSA).

Local Support Measures (17.2 million EUR in 2013)

The measures concerning local agricultural products are:

Support to vegetable production

Support to banana producers

Support to animal production

The POSEICAN Annual Report for 2012 indicates that in general the required number of controls has been carried out. However, the results of the controls are not coherently reported.

No conclusive overall error rate can be established for the measure supporting banana producers.

For the other local support measures, the available data indicate that the overall error rate is 1.98% meaning: 2.42% for support to vegetable production, 0.16% for support to banana producers and 1.5% for support to animal production. Both Commission and ECA audits have revealed problems with regard to the support for animal production due to problems concerning identification and registration of animals. These issues are being following up under the conformity clearance procedure and financial corrections will be imposed in order to recover any undue expenditure. An audit mission to the Canary Islands is scheduled in the 2014 audit work programme.




Specific Supply Arrangements (60 million EUR in 2013)

For the Specific Supply Arrangements the Spanish authorities have reported that irregularities were found in one payment but have not quantified this.

The maximum amount at risk for the Spanish POSEICAN measures is considered to be not more than 2% of the expenditure.

3.1.4.2 France – Départements d'outre Mer

Specific supply arrangements (24.6 million EUR in 2013)

In order of priority, under the specific supply arrangements, POSEIDOM supports raw materials for animal feed, local agribusiness and food.

The French authorities report that the required level of administrative and on-the-spot checks were carried out in all of the Départements d'outre-mer with no irregularity reported.

Local support measures (97.7 million EUR in 2013)

The local support measures consist of 9 measures for local agricultural production consisting of aid for production, structuring, marketing, processing and export:

Animal premia

Aid for the import of live animals

Structuring of animal production

Diversification of plant production

Cane-sugar-rum

Bananas

Cereals and oilseeds in Guyana

Reference network

Technical assistance programme

With regard to measures managed by the Office de développement de l'économie agricole d'Outre-mer – ODEADOM - (all measures except for animal premia and cereals and oilseeds in Guyana) anomalies were detected in respect of 10% of beneficiaries but with a low financial impact resulting in a level of error of 0.11%.

The European Court of Auditors audited 4 transactions during its 2012 DAS exercise without detecting any quantifiable errors.

For France the error rate reported of 0.11% is used, in the absence of any indications to the contrary, to establish the maximum amount at risk for POSEIDOM.

3.1.4.3 Portugal – Azores & Madeira

The POSEIMA programme operates in two separate regions, the Azores and Madeira. The 2012 annual implementation report includes data on the results of controls in the Azores (expenditure €78m) but not Madeira (€26m).




In 2012 POSEIMA has three main categories of aid: measures to aid local production, technical assistance and specific supply arrangements. Local support measures (6.8 million EUR in 2013) The measures to aid local production can be subdivided into aids for animal production (budget €57.3m), vegetable production (€10.7m), food processing (€1.2m) and food marketing (€1.1m). All 29,983 validated aid applications for animal production received an administrative check, of which 283 (0.9%) were the subject of either a full or partial sanction and claim reduction. 1,701 applications (5.6%) were subjected to an OSTC, 47 (2.8%) of which resulted in a sanction. The individual measures with the highest sanction rates were the sheep and goats premium (16.67%), and the dairy cows premium (10.14%). The total amount of the sanctions on aid applications for animal production which corresponds to 0.06% of the aid paid for these measures. 4,350, or 96%, of the 4,521 validated aid applications for vegetable production received an administrative check and 10 (0.2%) of them received a sanction. 474 applications (10.9%) received an OSTC, of which 197 (44%) were fully or partially sanctioned. The total amount penalised corresponds to 1.6% of the aid paid. There was one sanction for the food processing aids corresponding to 11.5% of the expenditure in this category. The sanction concerned the aid for processing sugar beet into sugar. Aid applications were lodged for €201,496.64 for the marketing of fruit and vegetables but only €26,680.39 was paid. According to the report the OSTCs for this measure were still in progress. No problems were reported for the other marketing aids. Specific Supply Arrangements (15.6 million EUR in 2013) For the Specific Supply Arrangements (SSA) the customs service in the Azores conducted 265 physical checks, covering about 40% of traffic under the special supply arrangements. They found one case of non-conformity. Technical Assistance ECA and Commission audits have concluded that 100% of the expenditure on technical assistance in 2012 (€200,000) was ineligible. Expenditure for this measure in 2013 was 220 580 EUR the eligibility of which is being examined in the context of an on-going conformity clearance procedure. The overall amount at risk for POSEIMA is assessed to be no more than 2% of the expenditure.




3.1.4.4 Greece – Smaller Aegean Islands

The Greek Authorities Annual Report 2012 indicates that:

For the measures to assist local agricultural products, the rural development directorates in cooperation with the competent OPEKEPE departments and IT Department conduct administrative and on-the-spot checks in accordance with the EC Regulation and their Joint Ministerial decisions.

There is no relevant information regarding the size of the sample subject to on the spot checks but according to DG AGRI calculations, the national authorities have indicated an overall refusal rate of around 10% in terms of beneficiaries and around 5% in terms of quantities (which means that these amounts were not paid). There is no indication of the financial impact as such.

For the Specific Supply Arrangements (SSA), the Greek authorities state that administrative checks have been made in respect of 100% of the files and furthermore that Regional authorities carry out random on-the-spot checks to verify that the impact of the aid is passed on to the end-user (consumer). Moreover, at ports, on-the-spot checks are carried out on the disembarkation of vehicles transporting products to be subsidised and on the existence and suitability of the beneficiaries' warehouses.

For the SSA there is no indication of irregularities reported.

For the last 3 years no weaknesses were reported by ECA audits. The last DG AGRI audit was carried out in 2010 with no findings leading to a financial correction. An audit is scheduled in the 2014 work programme.

In the absence of any indication of material risk in this very low expenditure measure (5.19 million EUR), the maximum amount at risk is considered to be no more than 2% of the expenditure.

3.1.4.5 Conclusion for Posei and Aegean Islands

The current legislation does not require the Member States to send data the results of controls carried out. DG AGRI auditors have analysed other data sent to the market unit concerned which, however, concerns 2012 expenditure in order to gather information on the control environment. DG AGRI has already started the work necessary to require the four MS to send control statistics for the future in order that it can better assess the situation and quantify any amount at risk.

In order to assess the maximum amount that could be at risk for the Posei measure, DG AGRI auditors have used their professional judgement and the available information and have estimated the amount at risk as follows:




Supply

measures

amount at

risk

Local

support

measures

amount at

risk Total

Total

amount at

risk

m EUR m EUR m EUR m EUR m EUR m EUR

ES 59,977 1,200 17,223 0,344 77,200 1,544

FR 24,598 0,001 97,716 0,001 122,314 0,002

PT 15,647 0,313 6,824 0,136 22,471 0,449

GR 5,190 0,104 0,000 0,000 5,190 0,104

Total 105,412 1,617 121,763 0,482 227,175 2,099

POSEI under ABB02 for 2013 : maximum amount at risk


3.1.5 Export Refunds Export refund applications are subject to administrative checks by customs as well as physical or substitution checks. Article 16 of Regulation (EC) No 1276/2008 obliges Member States to present, by 1 May of each year, an annual report to the Commission on the implementation of physical and substitution checks in the preceding year. The latest reports available relate to calendar year 2012 for which the expenditure for export refunds on which Member States reported decreased further from 169 million EUR to 147million EUR. 2013 expenditure for export refunds amounted to just over 62 million EUR. The vast majority concerned export refunds in the poultry sector.




Member

State

non

annex I

products

Sugarfruit &

VegetablesMilk

Beef & Veal

& live

animals

PigmeatEggs &

PoultryTotal

Austria 0,001 0,152 0,001 0,154

Belgium 0,180 0,007 0,001 0,188

Bulgaria 0,406 0,406

Czech 0,022 0,022

Germany 0,118 1,166 0,001 1,075 2,360

Denmark 0,119 0,043 0,343 0,505

Estonia 0,036 0,036

Spain 0,230 0,435 0,005 0,670

Finland 0,002 0,002

France 0,435 0,006 0,381 0,075 41,283 42,181

UK 0,004 0,042 0,007 0,001 0,158 0,010 0,222

Hungary 0,041 0,801 0,843

Ireland 0,087 0,087

Italy 2,274 0,010 0,020 0,154 2,289 0,744 5,491

Lithuania 0,347 0,002 0,350

Netherlands 1,649 0,003 0,185 0,004 0,138 1,980

Poland 3,638 0,031 0,067 3,736

Portugal 0,100 1,176 0,030 0,471 0,530 2,307

Romania 0,792 0,792

TOTAL 4,881 0,045 1,185 0,063 6,487 3,474 46,195 62,331

Export Refunds in 2013 (million EUR)


The reporting on the physical checks reveals that in EU-27 physical checks were carried out on 7.03 % of the total number of export declarations received, In terms of amounts, declarations examined correspond to 6.0 % of the total value of refunds claimed. In all, 3.12 % of physical checks detected irregularities amounting to a financial incidence of 2.7 % of the refund claims examined (2.12 % in 2011). This error rate is derived from a risk based sample. The majority of the irregularities (by value) were reported by France. This relates to the poultry sector and is being duly followed up by both customs authorities concerned, French and German, as the irregularity concerns both Member States. A clearance of accounts audit in 2013 revealed major deficiencies in France in relation to the control of the acceptable water content in poultry exported with refunds. DG AGRI auditors consider that around 2/3 of the expenditure concerned was ineligible and the matter is being pursued under the conformity clearance procedure in order to recover the unduly paid amounts and thus protect the EU budget. French expenditure for poultry exports amounted to 41.3 million EUR out of a total EU expenditure in 2013 of 46.2 million. DG AGRI has reduced the export refund for poultry to zero and thus there is no longer any expenditure.




Member

State

expenditure

2013

% by value of

physical

checks

error rateDG AGRI

top up

amount at risk

with top up

amount at risk

where no top-up

adjusted

residual error

rate

EUR EUR EUR

(a) (b) (c) (d) (e) (f) = (d+e)*b (g) = b*(1-c)*d (h) = (f+g)/b

AT 154.307,19 39,08% 0,00% - - - -

BE 187.741,56 3,14% 0,00% - - - -

BG 405.536,54 12,59% 0,00% - - - -

CY 21.808,53 - - - - - -

CZ 2.359.845,50 7,85% 0,00% - - - -

DE 505.450,30 4,07% 2,53% - - 12.277,35 2,43%

DK 36.346,54 0,75% 74,35% - - 26.823,52 73,80%

ES 670.440,57 4,30% 6,94% - - 44.518,86 6,64%

FI 2.446,32 113,56% 0,00% - - - -

FR 42.180.546,62 6,70% 3,83% 66% 29.348.162,76 - 69,58%

HU 842.567,33 10,26% 0,00% - - - -

IE 87.218,65 1,23% 0,00% - - - -

IT 5.490.747,92 1,97% 0,00% - - - -

LT 349.550,22 12,92% 0,00% - - - -

NL 1.979.848,17 5,15% 0,00% - - - -

PL 3.736.358,78 3,22% 0,00% - - - -

PT 2.306.677,34 3,91% 0,00% - - - -

RO 791.568,39 13,40% 0,00% - - - -

UK 221.642,39 0,74% 0,00% - - -

Total 62.330.648,86 6,00% 2,70% 29.348.162,76 83.619,73 47,22%

Total amount at risk: 29.431.782,49

Table: Annex 10 – 3.1.14 Reservations required:



FR 69.6% Yes There is no purpose in requiring an action plan for this reservation. This is sufficiently covered by the on-going conformity clearance procedures and the export refund for poultry has been set to zero which means that there is no longer any expenditure. FR authorities are already taking the required action.

€ 29.3 m


Justification

DE 2.43% No The error relates to 5 irregularities in the Poultry sector detected in the risk sample and mainly concern a French company also involved with the irregular payments in respect of France. The required actions are being taken with regard to the latter and it is not therefore necessary to take additional action towards the German authorities (this has been confirmed via a DG AGRI audit). There is no evidence of a systemic deficiency that would require a reservation and/or a conformity clearance procedure.

Additionally, since the export refund for poultry has been set to zero there is no longer any expenditure.

DK 73.8% No The error relates to two individual irregularities detected in the risk sample (and thus cannot be extrapolated to the whole population) and




there is no evidence of a systemic deficiency that would require a reservation and/or a conformity clearance procedure. The amount at error has already been corrected by the Danish authorities.

The very low rate of control referred to in table 3.1.13 (0.75%) refers to the value of the exports submitted to control while in fact 11.8% of export declarations were subject to physical checks (Art 6 of Reg. 1276/2008 requires 5% of export declarations to be checked).

ES 6.64% No The error relates to 7 individual irregularities detected in the risk sample (and thus cannot be extrapolated to the whole population) and there is no evidence of a systemic deficiency that would require a reservation and/or a conformity clearance procedure. The amount at error has already been corrected by the Spanish authorities.

3.1.6 School Milk Scheme In 2013, expenditure in respect of this measure amounted to 63.2 million EUR. For the School Milk Scheme, statistical reports are required by Article 17 of Regulation (EC) No 657/2008.

The statistics provided by Member States, show that on-the-spot checks were carried out on 12.5% of applicants, which is significantly above the minimum regulatory level of 5 %, and that aid recovered following these checks represented 1.77% of the total aid controlled (1.3 % last year). High error rates were detected by the French and Swedish authorities. However, it is noted that the on-the-spot checks are performed on the basis of a risk sample and it would be exaggerated to consider that h error found can be extrapolated to the whole population.




Member

State Aid claimed

expenditure

declared % checked error error rate

amount at

risk

Residual

Error Rate

EUR EUR EUR EUR

Austria 689.321 629.775 37,30% 2.490 0,97% 3.824 0,61%

Belgium 622.161 665.235 30,21% 1.009 0,54% 2.493 0,37%

Bularia 2.322 1.878 69,83% 0 0,00% 0 0,00%

Cyprus 209.395 151.785 5,56% 0 0,00% 0 0,00%

Czech 400.225 409.453 53,02% 0 0,00% 0 0,00%

Germany 5.486.100 5.340.605 46,82% 2.321 0,09% 2.566 0,05%

Denmark 1.547.127 709.931 83,97% 5.319 0,41% 466 0,07%

Estonia 692.325 670.954 7,20% 0 0,00% 0 0,00%

Spain 380.364 398.593 20,04% 363 0,48% 1.519 0,38%

Finland 3.863.067 3.966.616 30,28% 3.938 0,34% 9.309 0,23%

France 12.161.030 12.016.893 5,81% 191.802 27,15% 3.073.477 25,58%

UK 4.474.504 4.525.500 11,05% 351 0,07% 2.859 0,06%

Hungary 7.853.891 1.442.351 1,87% 0 0,00% 0 0,00%

Ireland 677.000 497.093 15,45% 0 0,00% 0 0,00%

Italy 2.899.141 2.878.109 4,61% 0 0,00% 0 0,00%

Lithuania 1.120.825 790.023 0,00% 0 0,00% 0 0,00%

Luxembourg 16.304 23.574 100,00% 0 0,00% 0 0,00%

Latvia 649.353 605.555 13,63% 0 0,00% 0 0,00%

Malta 24.433 24.396 10,03% 0 0,00% 0 0,00%

Netherlands 463.873 480.565 100,00% 0 0,00% 0 0,00%

Poland 9.739.463 9.858.832 11,74% 8 0,00% 64 0,00%

Portugal 1.152.312 639.515 6,92% 243 0,30% 1.814 0,28%

Romania 9.984.936 9.572.100 96,49% 39.358 0,41% 1.374 0,01%

Sweden 8.182.680 6.246.150 15,64% 121.298 9,48% 499.611 8,00%

Slovenia 5.638 4.794 76,01% 0 0,00% 0 0,00%

Slovakia 639.050 626.811 100,00% 105 0,02% 0 0,00%

Grand Total 73.936.841 63.177.086 28,09% 368.607 1,77% 3.599.375 5,70%

School Milk Scheme - 2013 expenditure and calculation of amount at risk




France 25.6% Yes As explained above the high error rate is based on a control selection based on a risk analysis and cannot therefore be considered to be representative of the error in the whole population. A conformity clearance procedure is underway to correct the risk to the EU budget and France is already taking remedial action. The latter will be checked during a DG AGRI audit which is planned for later this year.

€3.1 m

Sweden 8% Yes The high error rate is based on a control selection based on a risk analysis and cannot therefore be considered to be representative of the error in the whole population. A conformity clearance procedure is underway which will correct the risk to the EU budget.

€0.5 m




The residual error rate for this aid scheme is 5.7% and the corresponding amount at risk is 3.6 million EUR

3.1.7 Intervention storage In 2013, expenditure in respect of storage measures amounted to 25 million EUR. Regulation (EC) No 884/2006 requires Member States to submit data on the annual inventory carried out on intervention storage of all products in store. By end of 2013 there were no stocks remaining in intervention stores. Therefore there is no amount at risk for the 2013 expenditure for intervention storage.




3.1.8 Conclusions for ABB02 Following is a summary of all cases where a reservation is required in respect of ABB02. In the section dealing with each aid measure there is an explanation of those cases where the error rate is between 2 and 5% but a reservation is not considered necessary.

MS Measure Error rate

reported in MS

statistics

RER Action Plan Amount at Risk

NL Operational programmes for producer organisations

25.5% 18.8%34

NL to provide a schedule of POs to be/or being reviewed with a view to regularising the recognition and to continue recovering undue expenditure. The conformity clearance procedure will recover any additional undue amounts.

€ 13.7 m

AT Operational programmes for producer organisations

1.2% 25% AT is in the process of reviewing the recognition of all POs– this will be monitored by DG AGRI. All ineligible expenditure will be recovered via the conformity clearance procedure.

€ 1.9 m

UK Operational programmes for producer organisations

1.2% 25% UK to provide a schedule of POs to be/or being reviewed with a view to regularising the recognition and to continue recovering undue expenditure. The conformity clearance procedure will recover any additional undue amounts.

€ 8.5 m

PL Pre-recognition of producer groups

1.2% 25.2% For the past, the financial risk to the fund is, in any event, covered via the the conformity clearance procedure which will claw back very substantial amounts of unduly spent EU monies in order to ensure that the EU budget is fully protected. For the future, Poland has been requested to make the necessary changes and this will be monitored by DG AGRI.

€ 77.6 m

IT School fruit scheme

1.5% 25% Remedial action to be determined at horizontal level for public procurement issues. The financial risk to the fund is, in any event, covered via the the conformity clearance procedure.

€ 5 m

NL School fruit scheme

0.4% 90.3% The certification body has identified 2 671 499 EUR as being ineligible. This amount will be deducted in the financial clearance decision for 2013 which will be taken before 31 April 2014 and thus any risk to the Budget is eliminated. Netherlands will be requested to take remedial action and this will be monitored by DG AGRI.

€2.7 m

ES Vineyard restructuring

5.5% 33% ES to review and recalculate the flat rate amounts used and to present a set of duly

€54 m

34 DG AGRI added a 10% "top-up" to the error reported by NL. However, since NL had checked 70% of claims, the residual error in the unchecked population is limited and the residual error rate using just the NL error rate is only 8.8% to which is added the DG AGRI top-up.




MS Measure Error rate reported in

MS statistics

RER Action Plan Amount at Risk

and conversion

justified amounts. Recovery procedures to be launched by ES to recover aid paid as a result of the past over-compensation. The financial risk to the fund is, in any event, covered via the the conformity clearance procedure.

CZ Investment Measures for Wine

Not reported

100% CZ will be required to bring its incompliant application of this measure into line with the regulatory requirements and to ensure that the correct level of control is carried out. A conformity clearance procedure is underway to recover the amount at risk to the EU budget

€ 2m

FR Poultry export refunds

3.8% 69.6% There is no purpose in requiring an action plan for this reservation. This is sufficiently covered by the on-going conformity clearance procedures and the export refund for poultry has been set to zero which means there is no longer any expenditure. The French authorities are already taking the required action.

€ 29.3 m

FR School Milk Scheme

27.15% 25.6%

The high error rate is based on an on-the-spot control selection based on a risk analysis and cannot therefore be considered to be representative of the error in the whole population. A conformity clearance procedure is underway to correct the risk to the EU budget and France is already taking remedial action. The latter will be checked during a DG AGRI audit which is planned for later this year.

€3.1 m

SE School Milk Scheme

9.48% 8% The high error rate is based on an on-the-spot control selection based on a risk analysis and cannot therefore be considered to be representative of the error in the whole population. A conformity clearance procedure is underway to correct the risk to the EU budget

€0.5 m

The total amount under reservation is 198.3 million EUR.




The conformity clearance procedure excludes from EU financing expenditure which has been unduly paid by the Member States. Since DG AGRI's audits are carried out ex-post (in the two years after the expenditure has been effected), the net financial corrections which result from any deficiencies found by these audits are not adopted until some point in the future, thus after the Director General signs the AAR for the year in question. It is however useful to consider the corrective capacity of such net financial corrections which will ultimately reduce the financial risk to the EU Budget arising from the error present in the expenditure. In order to estimate this corrective capacity, i.e. the best estimate of which part of the 2013 expenditure will be recovered via net financial corrections, DG AGRI uses the average of the net financial corrections executed over the previous three years.

For ABB 02 net financial corrections executed over the past three financial years were:

2011 187.6 million EUR



It can thus be considered that, for ABB02, the corrective capacity of the net financial corrections is Eur 170 million EUR.

The following table shows the portion of ABB02 expenditure covered by statistics or where an analysis was carried out by DG AGRI of all available relevant information in order to allow its auditors to use their professional judgement in order to give assurance to the Director General of DG AGRI and to assess the maximum amount at risk in the expenditure

amount

EUR EUR EUR EUR EUR

050201 Cereals 79.087 - - - 79.087 1.582

050202 Rice - - - -

050203 Non Annex I refunds 4.879.804 4.879.804

050204 Most deprived 491.528.689 - - - 491.528.689 9.830.574

050205 Sugar 146.768- - - - 146.768- 2.935-

050206 olive oil 60.938.529 - - - 60.938.529 1.218.771

050207 Textile plants 17.140.277 - - 17.140.277 342.806

050208 Fruit & Vegetables 1.137.485.374 1.137.455.958 115.997.360 109.342.354 29.416 588

050209 Wine 1.043.706.392 594.036.162 61.384.126 56.025.934 449.670.230 11.684.477

050210 Promotion 50.150.693 - - - 50.150.693 1.003.014

050211 Other plant products (incl POSEI) 229.426.646 - - - 229.426.646 2.144.453

050212 Milk 70.349.054 63.177.086 3.599.375 3.573.087 7.171.968 143.439

050213 Beef & Veal 6.489.188 6.487.192 - - 1.995 40

050214 Sheepmeat & goatmeat - - - -

050215 Pigmeat, eggs & poultry , bee-keeping 80.611.431 49.669.709 29.431.782 29.348.163 30.941.722 618.834

050217 Pilot projects - - - -

Totals 3.192.638.395 1.855.705.912 210.412.643 198.289.538 1.336.932.483 26.985.642

% of expenditure covered by statistics 58,10%

% of expenditure covered by statistics or professional judgement 100,0%

% of expenditure at risk (error rate) 7,44%

total amount at risk 237.398.285

Amount

under

reservation

Expenditure for which no control

statistics are available

Estimate of

maximum amount at

risk

EUR

Budget

article

Heading

Expenditure for

which statistics

are available

Expenditure Amount at

Risk





Control statistics are available in respect of 58% of the expenditure covering 1 856 million EUR. For a further 1 337 million EUR, DG AGRI's auditors consider that they have assurance on the basis of an examination of all available information on the schemes concerned and have used their judgement to estimate the maximum amount at risk in that expenditure. It is however, recognised that assurance would be more readily elicited from the statistics resulting from the Member States controls and DG AGRI has already commenced the work necessary to ensure that a wider array of statistics are available for future AARs.

The following table sets out the overall assessment of the DG AGRI of the amounts at risk for ABB 02 which it estimates as 237.4 million EUR and the error rate is at 7.44%.




EUR EUR EUR EUR EUR EUR

Austria 23.598.968 Fruit & Veg(1)

8,57% 1.941.497 7.765.988 2.022.240 0

Belgium 77.868.020 0,92% 713.285 4.108.237 0

Bulgaria 43.095.001 0,91% 393.957 0 52.078

Cyprus 6.272.900 1,51% 94.594 0 0

Czech 13.971.945 Wine(5)

14,48% 2.019.336 2.019.336 2.023.603 26.676 13.983.341

Germany 100.918.262 1,01% 1.023.724 6.192.951 0

Denmark 6.632.323 1,47% 97.174 0 1.023.197

Estonia 3.457.961 1,38% 47.755 0 0

Spain 590.570.435 Wine(4)

10,89% 54.006.597 163.574.553 64.314.172 12.940.208 13.047.657

Finland 9.655.705 0,85% 81.752 715.273 0

France 635.575.730 Export Refunds(6)

6,37% 29.348.163 42.180.547 40.517.290 11.724.693 85.154.424

school milk(7)

3.073.477 12.016.893 0 0 0

Greece 63.071.405 1,05% 662.144 7.775.474 2.303.269

Hungary 68.702.430 0,41% 284.839 571.334 11.911.229

Ireland 5.797.881 0,90% 51.954 450.450 0

Italy 701.088.022 Fruit & Veg(3)

1,98% 4.950.328 19.801.312 13.911.382 32.687.971 97.775.033

Lithuania 11.410.840 1,37% 156.203 0 0

Luxembourg 378.553 0,85% 3.226 0 0

Latvia 15.482.468 0,65% 100.220 0 0

Malta 873.071 1,19% 10.366 0 0

Netherlands 84.486.399 Fruit & Veg(1)

19,40% 13.718.126 73.019.502 16.390.026 688.510 0

Fruit & Veg(3)

2.671.900 2.959.376 0 0 0

Poland 415.215.862 Fruit & Veg(2)

19,05% 77.572.341 307.264.392 79.112.639 715.488 0

Portugal 119.607.705 1,30% 1.556.170 30.984 623.406

Romania 122.392.655 0,95% 1.160.101 0 4.023

Sweden 12.608.110 school milk(7)

4,78% 499.611 6.246.150 602.529 0 0

Slovenia 8.659.875 1,44% 124.849 0 8.707.071

Slovakia 9.232.143 0,08% 7.142 0 0

UK 42.013.728 Fruit & Veg(1)

20,21% 8.488.162 33.952.649 8.491.021 -277.451 54.989.620

Other 3.443.927 **

Grand Total 3.192.638.396 7,44% 198.289.538 670.800.698 237.398.285 78.350.800 289.574.348

29,56%

* the scope of the reservation is the total amount of payment made during the reporting year affected by a reservation.

(1)Operational programmes for producer organisations

(2)Pre-recognition of producer groups

(3)School fruit scheme

(4)Vineyard restructuring & conversion

(5)Wine investment measures

(6)Poultry export refunds

(7)School milk scheme

** This amount refers to an amount at risk calculated at the level of the ABB in respect of a residual expenditure of 172 million EUR for

which no information was available.

Amount under reservation as a percentage of the scope

Commission Action

Net financial

corrections in

decisons

adopted in 2013

Net financial

corrections

proposed but

not yet adopted

Scope of

reservations *

Member State Expenditure

Amount

under

reservation

Amount at

risk

Adjusted

residual

error rate

Reservation (by

sector)





3.1.9. Root causes of the error rate in market measures – is DG AGRI doing anything?

The probable error rate affecting CAP expenditure is quantified through extrapolation resulting in a "most likely error" as established by the European Court of Auditors (ECA) and a "residual error rate" established by the DG Agriculture in the framework of the corresponding annual declarations of assurance (DAS). On both counts, the error rate for 2012 for EAGF expenditure was higher than 2%, is therefore considered material and affects the statement of assurance by the authorising officer.

In 2013 work has specifically been undertaken within DG AGRI to identify the main causes for errors occurring in the area of EAGF spending for measures which are, in principle, not covered by the Integrated Administration and Control System (IACS). This includes market measures under Regulation (EU) 1308/2013 ("CMO regulation"), all measures under POSEI and promotion measures. The analysis was based on the 40 non-IACS cases examined by the ECA in its report on 2012 as well as DG Agriculture and Rural Development's (DG Agriculture) own audit results and the experience of DG Agriculture's market units in the shared management of EAGF expenditure.

Beyond the analysis of the main sources for errors stock is taken of corrective actions already implemented and corrective actions are identified for future action.

In terms of the common causes for errors a few stand out. For example, it is the case that often the eligibility conditions of support measures are not met. There are two main reasons for this: complexity of the conditions due to enhanced targeting, often at the Member State level and insufficient points of reference for the competent authorities to verify and control compliance with the conditions. But there are also errors under this category which could have been avoided had more thorough administrative and on-the-spot controls been administered and had national authorities better followed internal procedures and applicable EU-law. There may also be considerations of proportionality concerning sanctions in the case of non-compliance with eligibility conditions, e.g. in the area of the recognition of Producer Organisations. Furthermore, the Commission services' sometimes inadequate powers to request changes of ongoing national support measures, non-respect of public procurement rules and the admissibility of certain types of expenditure for support are additional areas which give rise or relate to the occurrence of errors.

Corrective actions that have already been implemented can be found for instance in the wine sector where two sets of guidelines on the application of the national support programmes have been issued in February and April 2013. The guidelines use positive and negative lists to demarcate eligible measures (e.g. restructuring and investment) and they provide clarity on the eligibility of a variety of measures and costs that have been included in national support programmes in the period 2009-2013.

In Fruit and Vegetables, the 2007 reform of the Common Market Organisation introduced National Strategies and National Environmental Frameworks under which the efficiency and effectiveness of the operational programmes should be improved.

As regards support for promotion of agricultural products, scrutiny rules have been re-enforced in September 2013. The approach to overhead costs for proposing organisations has recently been changed to a real flat-rate system with maximum ceilings (3-6% of actual cost of implementing a measure) instead of system in which a flat rate had to be verified on the basis of the actual expenditure related to overheads.




In terms of corrective actions to be applied in the future, one set of measures would concern regulatory initiatives. Member States should for example demonstrate that requirements and eligibility conditions of support measures are verifiable and controllable and should include the relevant information, where applicable, in their national support programmes. The Commission services' powers of looking into existing support measures should be strengthened where it is lacking. A progressive response in terms of sanctioning of the non-respect of recognition criteria for Producer Organisations in accordance with the importance of the criteria could be pondered. In the area of support for promotion measures for agricultural products, further clarifications of the procurement requirements should be foreseen. Early information on Member States' management and control systems should be ensured where this is not yet the case, thus providing an opportunity to give informed feedback Member States can act on.

Cooperative actions to be applied in the future should for instance encourage Member States to use simplified cost reimbursement systems such as flat rates where this is appropriate. Better and more efficient coordination can constitute one important remedy in preventing the operation of programmes that are error-prone. A horizontal group of specialists attached to the CMO Management Committee could provide a useful forum for the exchange of ideas and best practices among the Commission and Member States concerning error rate issues. Further improvement can be made to the repository (IT tool) where DG Agriculture's replies to Member States' interpretative questions concerning the application of CAP provisions are kept available. The publication of key and ancillary control standards can improve the quality of controls carried out by Member States. Awareness raising activities concerning common causes for errors should be carried out in the framework of the bi-annual conferences of the directors of the paying agencies. Last but not least, Member States should be encouraged to adequately train management and control officers.

The corrective future actions will need to draw on the Commission services and Member States in equal measure, cognisant of the fact that containing the error rate will depend on the cooperation between all the stakeholders in the implementation chain, that is to say the Commission, Member States and paying agencies.


Direct Payments - Control results and the DG AGRI assessment thereon

3.2: ABB03 – Direct Payments

Index for part 3.2 – ABB03: Direct Payments

3.2.1 Background

3.2.2 What assurance does the Director General have regarding the expenditure

under ABB03 – Direct Payments?

3.2.2.1 Control results reported by the Member States

3.2.2.2 DG AGRI Management Assessment and Adjustment Process

3.2.2.3 Assessment of the certification bodies' opinions on the control statistics

3.2.2.4 Assessment of findings from the European Court of Auditors

3.2.2.5 DG AGRI audit findings

3.2.3. How is this information used in order to assess the error rate?

3.2.4 What mitigating factors exist in order to render a reservation unnecessary?

3.2.5 Financial corrections

3.2.6 Conclusions as regards assurance for ABB03

3.2.7 Root causes of the error rate in direct payments – what is DG AGRI doing about

it?

3.2.8 Overview of Member States' action plans with regard to Direct Payments

3.2.1 Background

This activity represents the backbone of the CAP. With a yearly budget of around EUR 40 billion, direct payments (also called direct aids, direct support, area aids, surface aids) represent the most significant part of the CAP budget and a substantial part of the EU budget. The direct support schemes mainly comprise the single payment scheme (SPS) to EU 15 + Malta and Slovenia and the single area payment scheme (SAPS). There is a number of other "decoupled" and "coupled" aids schemes as well as "specific support schemes".

There are over 7 million beneficiaries of direct aids in the Member States and their aid claims are processed, checked and controlled

The Single Payment Scheme (SPS) was introduced in the 2003 CAP reform in order to pay the direct subsidies to farmers. The system applies throughout the Member States of the EU at that time although there are variations in how it is implemented between countries and sometimes




between regions within a single Member State. The new scheme was intended to change the way the EU supported its farm sector by removing the link between subsidies and production of specific crops. This reform focused on consumers and taxpayers, while giving farmers the freedom to produce what the market wanted. The SPS was also intended to meet environmental, public, animal and plant health and animal welfare standards and the need to keep land in good agricultural and environmental condition.

The Single Area Payment System (SAPS) is a transitional, simplified income support scheme which was offered to the Member States who joined the EU in 2004 and 2007 (EU-12) as an option at the date of accession in order to facilitate the implementation of direct payments. With the exception of Slovenia and Malta all others have decided to apply SAPS. This scheme replaces (with some exceptions) all direct payments with a single area payment. The level of the payment is obtained by dividing the country's annual financial envelope with its respective utilized agricultural area. It is simpler than the Single Payment System (SPS) because there is no need to establish and administer payment entitlements.

Other decoupled direct aids: These are other direct aids which decoupled from production, they comprise, a separate sugar payment (which is unrelated to sugar production and is based on either quota or area) and specific support measures under Article 68 of Regulation 73/2009 (other measures under the latter article are also funded as "other direct aids).

Other direct aids: The CAP reform of 2003 while introducing a decoupled single payment scheme, allowed Member States to exclude in whole or in part certain payments from that scheme. This situation has evolved with further decoupling pursued, in particular after the "health check" in 2009, and all payments except for the suckler cow, sheep and goat and cotton schemes as well as the coupled "Article 68" measures, had to be decoupled at the latest as of 2012.

Expenditure in financial year 2013 was as follows

m EUR

Single Payment Scheme 31.392

Single Area Payment Scheme 6.680

Other decoupled direct aids 767

Other direct aids 2.822

Total 41.661





3.2.2 What assurance does the Director General have regarding the expenditure under ABB03 – Direct Payments?

The assurance of the Director General is drawn from the various levels of management and control that are in place and the results which can be obtained from them. In the first place, the Member States, with some 67 accredited paying agencies, are responsible for managing and checking the aid applications received from some 7.3 million applicants and for paying them.

All land-based aid payments to farmers are deal with within the framework of the Integrated Administration and Control System (IACS).

What is the IACS?

The IACS is the most important system for the management and control of payments to farmers made by the Member States in application of the Common Agricultural Policy. It provides a uniform basis for controls and among other requirements it covers the administrative and on-the-spot control of applications and the IT system which supports the national administration in carrying out its work.

IACS has been in place since 1992 and is operated in the Member States by accredited paying agencies. It covers all direct payment support schemes as well as certain rural development measures. Furthermore, it is also used to manage the controls put in place to ensure that the requirements and standards under the cross-compliance provisions are respected.

The legal rules as regards the IACS applicable for financial year 2013 are laid down in Council Regulation (EC) No 73/2009 establishing common rules for direct support schemes for farmers and in Commission Regulations (EC) No 1120/2009, 1121/2009 and 1122/2009 laying down the implementing rules.

IACS applies to 1st

pillar direct support schemes as well as to rural development measures which are granted based on the number of hectares or animals held by the farmer.

In physical terms, IACS consists of a number of computerized and interconnected databases which are used to receive and process aid applications. Thus it provides for:

• a unique identification system for farmers;

• an identification system covering all agricultural areas called Land Parcel Identification System (LPIS) – see box 3;

• an identification system for payment entitlements;

• a system for identification and registration of animals (in Member States where animal-based measures apply).

Explanatory box: Annex 10 - 3.2.2

The system enables the processing of some 7.3 million aid claims every year and also provides for several eligibility checks including cross-checks between databases and on-the-spot checks

What is a claim year and why is it different to the financial year?

A beneficiary has to apply for aid by 15 May of claim year N (with certain derogations allowed). Administrative and on-the-spot checks are carried out by the paying agency in the summer and autumn months and the beneficiaries can be paid between 1 December N to 30 June N+1. As the MS expenditure for the month of X is only reimbursed by the Commission from the beginning of year N+1… the payment is always made in the N+1.

Explanatory box: Annex 10 - 3.2.3




3.2.2.1. Control results reported by the Member States.

Member States are required to perform administrative checks on all aid applications received as well as on-the-spot checks for at least 5% of applications. By 15 July of year N+1, the Member States are obliged to send to the Commission, data on the outcome of the controls carried out in respect of claim year N. These control statistics contain information on amounts claimed, errors detected as a result of administrative, risk based checks and random checks. The latter result in particular, which is considered to be the one which is most representative of the error which the MS would have detected if it had carried out on-the-spot checks on all farms, is the one which is used as the basis for the calculation of the "error rate".

The area aids are managed by the Paying Agencies in some 67 paying agencies. As there are more than 1 paying agency dealing with area aids in some Member States (BE, DE, ES, IT and UK), but centrally managed LPIS in some of them, there are 43 different LPIS.

3.2.2.2 DG AGRI Management Validation and Adjustment Process

The reliability of the statistics communicated by the Member States depends on the effectiveness of their control and reporting systems. DG AGRI carries out an extensive review and validation process (explained in detail in its Annex 4 setting out its materiality criteria) in order to adjust this error rate upwards to a level which it considers better reflects the actual level of error. In so doing, it uses its professional judgement on the basis of all available information. The main elements assessed are the following

3.2.2.2.1 Assessment of the control statistics by the Certification Bodies.

As described in Annex 10 – part 2.2.2, the certification bodies are required to give an opinion on the quality of the on-the-spot checks carried out by the paying agencies the results of which are the basis of the control statistics as well as on the accuracy of the latter. This opinion is received with the annual declarations of the Member State on 1 February of N+1 (for claim year n-1).

Depending on whether an opinion was received, whether or not it was qualified, and any other information available in the opinion, an adjustment (positive) was made to the error rate reported by the Member State.

The certification bodies'findings were taken as an indication of the reliability of the paying agencies' control statistics. For ABB03 these findings had an impact in 1 case (Romania) which led to an adjustment of 2.75% and, thus, to an increase of the amount at risk.

3.2.2.2.2 Assessment of findings from the European Court of Auditors

There are three sources of information from the ECA which are examined in order to determine the extent to which adjustments need to be brought to the error rates reported by the Member States:

DAS hits: each year the Court tests some 180 transactions for the EAGF (the split between market measures and direct payment varies from year to year depending on the methodology of the Court. If a systemic error is detected by the Court, this is flagged in the validation process.

Special Reports of the ECA: each year the Court carries out an enquiry into particular policy areas. Letters of preliminary findings are addressed to the Member States and where these indicate systemic errors they are flagged in the validation process.




Systems audits by the ECA: In its Annual Report, the ECA informs on the outcome of the systems audits which it performs in a limited number of paying agencies each year. Inter alia it gives assessments of "effective", "partially effective" and not "effective" on elements of the supervisory and control systems. DG AGRI integrates these assessments into the appraisal exercise it carries out on the reliability of the MS control statistics.

For this years' AAR, the Court's assessments in its 2011, 2012 and 2013 reports are taken into consideration:

Annual Report

Paying Agency

Administrative procedures and

controls to ensure correct payment

including quality of databases

On-the-spot inspection

methodology, selection, execution, quality control and

reporting of individual results

Overall assessment

2010 DE12 Germany (Niedersachsen)

Effective Partially effective Effective

DE19 Germany (Sachsen) Effective Effective Effective

ES07 Spain (Castilla la Mancha)

Partially effective Partially effective Partially effective

ES10 Spain (Extremadura)


GB07 UK (Wales Effective Partially effective Effective

NL03 The Netherlands

Effective Partially effective Effective

2011 AT01 Austria Partially effective Effective Partially effective

DK02 Denmark Partially effective Partially effective Partially effective

FI01 Finland Partially effective Partially effective Partially effective

HU01 Hungary Partially effective Partially effective Partially effective

IT23 Italy (Lombardia) Partially effective Effective Partially effective

ES11 Spain (Galicia) Partially effective Partially effective Partially effective

2012 GB09 UK (England) Not effective Partially effective Not effective

GB05 UK (Northern Ireland)

Not effective Partially effective Not effective

LU01 Luxembourg Partially effective Effective Partially effective

Table - Annex 10-3.2.4

When taking into account the assessment of the Court, DG AGRI makes an adjustment of 2% for one or more "partially effective" ratings, a 5% adjustment for one "not effective" rating and a 10% adjustment if both categories assessed by the Court were rated as "not effective".




3.2.2.2.3 Assessment of findings from DG AGRI audit missions carried out in 2011-2013.

A. Direct Payments

In 2013, 12 paying agencies were audited, representing 10 Member States, while all but 5 Member States have been audited (CZ, EE, LU, MT and NL) between 2011 and 2013. The paying agencies audited have been selected on the basis of a risk analysis and those not yet visited, are paying agencies with a limited /regional/scope.

From 2011-2013, audits have been carried out with the general objective to review if Member States carry out the administration and control of the area based aid schemes in accordance with EU legislation. In these audits particular attention is paid to the existence and functioning of the following key elements of the IACS: the LPIS-GIS implementation and the functioning of the cross-checks, the quality of the risk-analysis and the on-the-spot checks, supervision and follow-up (including correct application of sanctions) of administrative and on-the-spot checks.

What is the LPIS-GIS? Farmers are paid on the basis of their eligible agricultural land or "surface area". Locating and measuring agricultural areas create wide-ranging difficulties for farmers who are not technically prepared for the task and of course checking that the areas claimed are correct becomes a mammoth control burden for the national authorities.

Since 1997, therefore, Member States have been required to have in place a Land Parcel Identification System (LPIS) in order to enable checks on land parcels under the Integrated Administration and Control System (IACS). In order to improve the quality of control and keep pace with technological developments, EU legislation required, from 2005, the use of computerized geographical information system (GIS) techniques (much more elaborate than the previous LPIS with ortho-imagery, vectorised polygons in a geospatial environment).

The Land Parcel Identification System is a database which contains a record of the entire agricultural area (reference parcels) of a Member State and the respective maximum eligible areas of every reference parcel. The eligible areas of reference parcels are assessed on the basis of the most recent ortho-images.

Establishing a LPIS requires acquiring a vast number of aerial photos and then digitising all reference parcels (excluding ineligible elements) based on this information in a uniform manner. This requires highly trained and experienced personnel.

Difficulties related to location of reference parcels become more pronounced when the available maps are old, or when the agricultural parcels to be declared no longer match the reference parcels used to locate them. This is often the case with parcels as defined in a fiscal land register (cadastre). It is therefore necessary to keep the LPIS up to date, and in order to do so, MS should consider a constant refresh of the ortho-imagery over a 3-5 year period depending on the evolution of the terrain (via human intervention or absence thereof). What is the LPIS quality self-assessment?

In order for Member States to be able to evaluate the quality of their LPIS a common methodology assessing the quality has been developed in coordination with the JRC. Member States are required to make an annual self-assessment in this respect and, where appropriate, to take action to remedy deficiencies. For this self-assessment by Member States, DG Joint Research Centre (JRC), on request by DG AGRI, developed a methodology for the evaluation of seven quality elements (QE) against benchmark criteria (thresholds).

After a first trial period the guidelines for performing the LPIS QA and the reporting thereon have been fine-tuned for the 2012 period. This fine-tuning was based on the revision of the completeness of the reports and the most common reporting errors found concerning the methodology. The results for 2012 have been reported back to the Member States with a view to improving their future LPIS quality assessment. In addition, a revision of the seven quality elements was performed (with the inputs provided by the Member States) and this analysis showed that in general, the level of the thresholds were accurate to reflect the quality of the LPIS and were at large, accepted by the Member States. Also, with technical support provided by the DG JRC, DG AGRI carried out three audits (in Sweden, Spain and Italy) to verify the validity of the LPIS-QA reporting.




With the experience gained in the last few years, a clear procedure to monitor the LPIS-QA has been established within DG AGRI with the support of the DG JRC. This procedure includes the different steps to follow and the relevant responsibilities to be carried out on a timely basis. As part of the monitoring of the validity of the LPIS-QA reporting, the results of the 2013 claim year have been included in DG AGRI's audit work programme for 2014.

Explanatory box Annex 10- 3.2.5

Audit findings which the auditors consider call into question the reliability or completeness of the Member States' control statistics result in the latter being flagged for an error rate adjustment.

For France several missions carried out in recent years have detected recurrent problems in the extent to which the LPIS is kept up-to-date and in the distribution of the entitlements. France did not take the necessary action to remedy the situation so as to ensure full compliance with the applicable legislation. Conformity clearance procedures are therefore underway and close to completion in respect of claim years 2008 to 2010 (while procedures have also been opened in respect of the subsequent claim years) and financial corrections have been proposed in order to protect the financial interests of the EU.

The audit findings and the potential materiality of the risk to the EU budget, led DG AGRI to introduce a reservation for the IACS in France in its 2012 AAR. Consequently, an action plan was developed together with the French authorities to identifying the remedial action to be taken and the implementation of which is now being closely monitored by DG AGRI. It is noted that the work to be carried out particularly in respect of the updating and completion of the LPIS is such that the French authorities have indicated that it will take until 2016 to complete and it will be necessary to keep the reservation in place until the plan is fully implemented. A mission carried out in February 2014 showed that while the plan is on track, some intermediate commitments have not been met. Consequently, France has been requested to tackle these issues and at the same time a more detailed reporting has been requested so as to enable a more hands-on follow-up by DG AGRI.

Audit missions carried out in Portugal in the past revealed serious deficiencies in the quality of its Land Parcel Identification System (LPIS-GIS). The initial action plans established by the Portuguese authorities, however, failed to fully remedy the situation. The Commission persisted in requiring further action from the Portuguese authorities and, by March 2013, the outstanding elements were completed and the LPIS was considered to be satisfactory. Audit missions carried out in 2013 confirmed that the action plan had been implemented and that the LPIS deficiencies had been addressed for claim year 2013. While the deficiencies identified in the Portuguese persevered for several years, the EU budget was protected via the conformity clearance procedures which ensured the claw back of over 100 million EUR in net financial corrections for the claim years 2006 to 2008. For the subsequent claim years conformity clearance procedures are on-going in order to ensure that any undue expenditure is recovered.

The audits which DG AGRI carried out in previous years to Bulgaria revealed serious deficiencies in the functioning of the Bulgarian IACS concerning the quality of the information in the LPIS and the lack of assistance given to farmers in completing their aid applications. The seriousness of these deficiencies was confirmed by the very high error rate for SAPS payments, which was far above the EU average. Bulgaria established an action plan to remedy the deficiencies which it completed by the end of November 2011. Commission audits confirmed that the action plan had been completed and that it is functioning satisfactorily. Financial corrections of over 37 million EUR have been recovered from Bulgaria in respect of claim years 2007 and 2008.

For claim years 2010 and 2011, a financial correction has been notified but may be subject to the conciliation appeal procedure, the 2012 claim year data received indicate that the system is now operational. This will be audited in a conformity clearance enquiry scheduled for the first




half of 2014.

An action plan to address the situation in Greece in respect of the cross-compliance and the incorrect registration of pasture in the LPIS has been established in order to meet the condition for application of the deferral for an 18-month period of the execution of financial corrections for Greece. Regular reporting received from Greece on progress showed that the plan was generally adhered to. A mission on cross compliance in February 2013 confirmed the situation as reported. For the permanent pasture issue mentioned above, audit missions revealed that Greece has not met its obligations and it has been requested to inform the Commission of its intentions to resolve the outstanding problems for claim year 2014.

For Hungary it has been established that the sketches provided by farmers, in the context of their aid applications, and accepted by the paying agency, are not in compliance with the legal provisions and jeopardise the quality and effectiveness of the administrative and on-the-spot controls. Furthermore, weaknesses were detected in the on-the-spot checks.

DEFICIENCIES IN THE LPIS IN GREECE SINCE 2005 - OVERVIEW OF THEIR DETECTION AND FOLLOW-UP

History

Since 1997, Member States have been required to have in place a Land Parcel Identification System (LPIS) in order to enable checks on land parcels under the Integrated Administration and Control System (IACS). Greece initially failed to put such a system in place and in the early 2000's came under increasingly heavy pressure from DG AGRI to regularise the situation. However by the time they had put in place a system, the technical requirements had moved forward and the Greek authorities found their LPIS was already lagging behind the new standard. From 20005 the situation of the LPIS was exacerbated by other important deficiencies in the functioning of the different elements constituting the IACS. Again, considerable pressure was brought to bear on the Greek authorities (monitoring and audit missions, significant financial corrections, visits from high level delegations including from CONT, reservations in the AAR and the initiation of a procedure to suspend payments). DG AGRI was able to conclude in 2009 that the Greek authorities had met the key requirements of the action plan and established an operational LPIS-GIS in in line with the requirements and that the new claim lodging procedure could be used for the claim year 2009.

Current situation

Audits carried out since 2009 have revealed remaining issues of non-compliance in relation to the Greek definition of permanent pasture. In the LPIS-GIS created in 2008, some parcels were recorded as fully eligible for payment even though they were partly covered with ineligible elements such as rocks, bushes, shrub, and forest. It was also established that with regard to the cross-compliance requirements, Greece had not implemented the necessary procedures to ensure compliance. In August 2012 the Greek authorities presented action plans to address these two issues. Their implementation, foreseen for the 2013 claim year, was closely followed by the Commission via monthly progress reports from Greece.

Financial corrections/Deferrals

in order to protect the financial interests of the EU, net financial corrections have already been adopted or are still subject to a clearance of accounts procedure For the current programming period the following is the situation with regard to financial corrections respect of area aids (including area related rural development):

- Claim year 2006: ±210.9 million EUR (adopted by the Commission - ad hoc 3435);

- Claim year 2007: ±122.4 million EUR (adopted by the Commission - ad hoc 3536);

- Claim years 2008-2011: clearance procedure on-going - finalisation by end-2014;

- Claim years 2012-2013: clearance procedure on-going - finalisation by end-2015.

35 Decision 2010/668/EU of 4/11/2010

36 Decision 2011/244/EU of 15/4/2011




Under the provisions of the decision taken in June 2012 to allow Greece to defer financial corrections, some of the corrections linked to the permanent pasture issue were deferred.

For ad hoc decisions ad hoc 34 and 35, Greece had already been granted the possibility of paying the financial corrections in 3 annual instalments and thus, certain of those instalments which were due for execution after the entry into force of the deferral decision were also included in the latter:

- Third instalment of ad hoc 34 (due on 1/2013) of 70.3 million EUR of which 12 million EUR related to permanent pasture;

- Second and Third instalments of ad hoc 35 (due on 6/2012 and 6/2013 respectively) of 81.6 million EUR of which 13.2 million EUR related to permanent pasture.

The deferral of these corrections was conditional upon Greece remedying the causes of the problems via established action plans. When it was established that the permanent pasture action plan had not been sufficiently implemented, the Commission proceeded in November 2013 to partially revoke the deferral – i.e. for the corrections linked to the permanent pasture deficiencies. Thus, some 25 million EUR had to be reimbursed immediately by Greece.

The remainder of the amounts deferred (which also includes corrections in respect of other CAP measures) will be reimbursed via a three year instalment plan with the first reimbursement at the beginning of 2014.

It is noted that, since 2006, 17 missions have been carried out in Greece with regard to area aids. The Commission has for a long time paid a particular attention to the situation in this Member State and will continue to do so for as long as the situation warrants.

Explanatory box Annex 10- 3.2.6

What's the "problem" with "Permanent Pasture"?

The CAP 2006-2013 definition of "Permanent Pasture" includes only “herbaceous” forage, basically grass - pastures of shrubs and trees are not included. However, several Member States have always counted non-herbaceous pastures as eligible for CAP support. This was particularly the case prior to 2006 when support was paid per head of livestock and not per hectare of pasture on which the animals were grazing. In these years this error did not have a direct linear effect on payments. However, with the move away from coupled payments per head of livestock to decoupled area payments, the delineation of eligible pasture land has becomes a far more significant issue. This is particularly the case in Member States or in some of their regions where there is extensive grazing of animals.

This problem was identified by DG AGRI in its first audits in 2006/2007 and MS were then requested to take remedial action in order to regularise the situation with regard to the correct recording in the LPIS. Furthermore, guidance was provided to the Member States on how to find a workable solution to record those areas in the LPIS for which a clean delineation of what is eligible land is not always straightforward. Follow-up financial corrections have been applied for the years in which this led to irregular payments. MS/regions mainly concerned were Austria, Sweden, Scotland, Northern Ireland, Portugal, Spain, Italy, Greece.

For most of these MS/regions, the situation has been remedied (though in AT and IR it has to be confirmed in audit missions). Problems persisted for Portugal but have been addressed via their now implemented action plan.

For Spain, the remedial actions instigated have already improved the situation though not yet to a fully satisfactory standard and this is being pursued by DG AGRI. The same applies to Greece which has implemented a plan which was found to be unsatisfactory and is now being tackled by further remedial action by Greece. For France, the issue is linked to certain regions and is to be addressed in the action plan.

In all these cases the risk for the fund has been and will continue to be via the conformity clearance procedure and resulting net financial corrections.

Within the framework of the CAP reform, the definition of permanent pasture/grassland has been broadened to allow for the presence of other species than grasses and herbaceous forage that can be grazed. This extends the possibility for Member States to include land which can be grazed and which forms part of established local practices where grasses and other herbaceous forage are traditionally not predominant in grazing areas. This will reduce the risk of incorrect declaration from farmers with regard to land eligibility but not totally eliminate it due to difficulties linked to the assessment of whether or not a plant species can be grazed or is "not pre-dominant".

In conclusion, DG AGRI believes what whilst there are some problems with "pocket areas" of permanent pasture, these are being addressed via appropriate action both at the level of DG AGRI (via financial corrections and monitoring) and the Member States concerned. It is recalled that the situation at EU level has improved significantly since it was first detected in in the first years of the post 2003 reform. At the same time it has to be put in perspective that while the surface areas concerned by permanent pasture may be vast, there is no linear correlation with the amount of aid paid in their respect. As to the length of time it has taken to resolve the problems in some MS, it must be considered that the updating of the LPIS to correctly take into account the pasture areas is a laborious exercise which takes time.




Explanatory box Annex 10 - 3.2.7

B. Animal Premia

5 Member States paid coupled bovine premia in claim year 2012 (paid in financial year 2013), of which 1 was audited in 2013 while 5 (of the 5) were audited between 2011 and 2013. 2 Member States paid coupled ovine premia in 2012, of which none were audited for that measure in 2013 and 1 was audited over the three year period 2011-2013. Audits cover the quality and level of the on-the-spot checks, the checks on compliance with retention periods and their correct calculation as well as the checks on the eligibility of claimed animals.

Regarding animal premiums, based on the audits, there are no indications that IACS systems were not generally operational in respect of claim year 2012 (financial year 2013).

C. Article 68 measures

The livestock related specific support measures under Article 68 of Regulation (EC) No 73/2009 were included in 3 conformity audits in 2013. In general the observations and recommendations made concerned the application of the relevant control measures rather than the nature of the specific support measures.

3.2.2 How is this information used in order to assess the error rate reported in the Member States' control statistics?

The Audit Directorate of DG AGRI recorded in a central database, the indications of error arising notably from the findings of the Certification Bodies, the Court of Auditors and its own audit findings. Where possible the amount at risk was quantified and where this was not the case a % flat rate was used to express the risk for the Budget arising from error in the expenditure which is not reflected in the Member States' control statistics. The process described it Annex 4 (Materiality Criteria) was carefully followed in order to determine the adjustment required in each case.

The table below summarises this information for all paying agencies:




Paying

Agency

Paying Agency

Name

Expenditure

Financial year

2013

ABB03

EUR

Error rate in

Member

States

Control

statistics(1)

Adjusted

Residual Error

Rate

(per Paying

Agency) (2)

Total expenditure

of Paying

Agencies under

reservation

Amount at

Risk

EUR

Adjusted

Residual Error

Rate

(per Member

State)

Member

State

AT01 AMA 706.438.546 1,69% 3,55% 0 25.090.412

25.090.412 3,55% AT

BE02 ALV 266.965.901 0,39% 0,25% 0 670.477

BE03 SPW-DGARNE 300.126.623 0,08% 0,03% 0 104.575

775.053 0,14% BE

BG01 DFZ [SFA] 494.424.796 1,83% 1,59% 7.867.310

7.867.310 1,59% BG

CY01 ΚΟΑΠ [CAPO] 43.842.946 1,17% 1,25% 0 549.057

549.057 1,25% CY

CZ01 SZiF [SAIF] 824.121.274 0,41% 0,39% 0 3.195.786

3.195.786 0,39% CZ

DE03 Baden-Württemberg 401.286.598 0,43% 0,40% 0 1.618.924

DE04 Bayern StMLF 1.068.585.962 0,15% 0,14% 0 1.531.733

DE07 Brandenburg MLUV 356.230.689 0,26% 0,24% 0 872.214

DE11 Mecklenburg- 397.530.272 0,17% 0,16% 0 625.612

DE12 Niedersachsen 880.993.010 0,47% 2,45% 0 21.548.505

DE15 LWK Nordrhein- 505.290.087 0,24% 0,23% 0 1.147.469

DE17 Rheinland- Pfalz 171.750.113 0,71% 0,64% 0 1.107.544

DE18 Saarland 20.809.515 0,09% 0,09% 0 17.900

DE19 Sachsen 288.080.576 0,21% 0,20% 0 590.204

DE20 Sachsen-Anhalt 367.990.258 0,34% 0,32% 0 1.176.151

DE21 Schleswig-Holstein 338.905.691 0,45% 0,44% 0 1.495.787

DE23 Thüringen 240.752.184 0,11% 0,10% 0 243.478

DE26 Helaba 215.733.659 0,63% 0,59% 0 1.270.794

33.246.316 0,63% DE

DK02 DAFA 939.223.263 0,40% 2,38% 0 22.334.739

22.334.739 2,38% DK

EE01 PRIA 91.924.140 1,02% 0,94% 0 864.717

864.717 0,94% EE

ES01 Andalucía 1.546.958.484 0,34% 3,08% 1.546.958.484 47.656.861

ES02 Aragón 429.608.280 0,20% 2,98% 429.608.280 12.811.328

ES03 Asturias 63.978.888 0,16% 1,95% 0 1.246.082

ES04 FOGAIBA 25.426.332 0,26% 3,03% 25.426.332 770.654

ES05 Islas Canarias 204.727.470 #N/A 2,00% 0 4.094.549

ES06 Cantabria 41.221.841 0,06% 2,02% 41.221.841 831.120

ES07 Castilla La Mancha 674.842.104 0,01% 2,83% 674.842.104 19.094.326

ES08 Castilla y Léon 902.162.597 0,02% 2,60% 902.162.597 23.441.737

ES09 Cataluña 269.186.554 0,20% 3,02% 269.186.554 8.129.930

ES10 Extremadura 505.102.498 0,39% 2,83% 505.102.498 14.284.098

ES11 FOGGA 171.524.598 2,35% 4,20% 171.524.598 7.206.764

ES12 Madrid 38.748.200 0,13% 2,63% 38.748.200 1.018.791

ES13 Murcia 62.942.582 0,03% 2,91% 62.942.582 1.830.163

ES14 Navarra 99.701.166 0,20% 2,95% 99.701.166 2.943.527

ES15 País Vasco 47.679.207 0,32% 2,50% 47.679.207 1.190.902

ES16 La Rioja 29.564.283 0,03% 2,60% 29.564.283 767.640

ES17 AVFGA 123.748.661 1,93% 4,71% 123.748.661 5.828.464

153.146.938 2,92% ES

FI01 MAVI 531.825.705 0,55% 2,52% 0 13.426.774

13.426.774 2,52% FI




Paying

Agency

Paying Agency

Name

Expenditure

Financial year

2013

ABB03

EUR

Error rate in

Member

States

Control

statistics(1)

Adjusted

Residual Error

Rate

(per Paying

Agency) (2)

Total expenditure

of Paying

Agencies under

reservation

Amount at

Risk

EUR

Adjusted

Residual Error

Rate

(per Member

State)

Member

State

FR05 ODEADOM 157.562.053 #N/A 0,11% 0 173.318

FR19 ASP 7.809.446.463 0,27% 2,60% 7.809.446.463 203.431.769

203.605.087 2,56% FR

GB05 DARD 308.291.020 0,29% 0,77% 0 2.363.568

GB06 SGRPID 583.095.085 0,05% 0,04% 0 254.739

GB07 WG 309.446.677 0,07% 2,07% 0 6.395.003

GB09 RPA 2.085.282.395 0,67% 5,66% 2.085.282.395 118.001.078

127.014.389 3,90% GB

GR01 Ο.Π.Ε.Κ.Ε.Π.Ε. 2.282.265.465 0,83% 5,17% 2.282.265.465 117.889.151

117.889.151 5,17% GR

HU01 MVH [ARDA] 1.203.377.855 1,12% 3,05% 1.203.377.855 36.676.810

36.676.810 3,05% HU

IE01 DAFM 1.250.917.232 1,04% 2,95% 0 36.936.730

36.936.730 2,95% IE

IT01 AGEA 1.919.673.683 0,76% 1,67% 0 32.119.832

IT05 AVEPA 388.037.350 0,18% 1,10% 0 4.260.013

IT07 ARTEA 171.935.776 0,10% 0,98% 0 1.679.190

IT08 AGREA 323.843.567 0,16% 1,06% 0 3.425.148

IT10 ARPEA 346.413.625 0,03% 0,94% 0 3.253.651

IT23 OPR Lombardia 498.095.055 0,11% 1,05% 0 5.225.240

IT24 OPPAB 22.202.057 1,75% 2,14% 0 474.418

IT25 APPAG 16.733.959 0,00% 0,47% 0 78.650

IT26 ARCEA 277.434.226 0,10% 1,10% 0 3.043.298

53.559.439 1,35% IT

LT01 NMA [NPA] 345.581.608 0,33% 2,23% 0 7.700.395

7.700.395 2,23% LT

LU01 Ministère de 33.743.329 0,64% 2,58% 0 870.967

870.967 2,58% LU

LV01 RSS 132.913.644 1,44% 1,35% 0 1.799.218

1.799.218 1,35% LV

MT01 MRRA PA 4.835.099 0,04% 0,03% 0 1.558

1.558 0,03% MT

NL03 DR 822.950.855 0,14% 2,14% 0 17.570.006

17.570.006 2,14% NL

PL01 ARiMR [ARMA] 2.769.307.172 1,03% 0,97% 0 26.976.163

26.976.163 0,97% PL

PT03 IFAP 648.684.551 0,82% 4,37% 648.684.551 28.347.490

28.347.490 4,37% PT

RO02 PIAA 1.086.101.417 1,77% 4,27% 0 46.380.704

46.380.704 4,27% RO

SE01 SJV 689.310.714 0,44% 0,41% 0 2.791.778

2.791.778 0,41% SE

SI01 ARSKTRP 130.183.963 0,93% 0,85% 0 1.110.399

1.110.399 0,85% SI

SK01 APA 354.310.844 0,88% 2,75% 0 4.198.031

4.198.031 2,75% SK

Total ABB 03 (CONTROL

STATISTICS)

41.661.932.292 18.997.474.116 973.925.419 2,35% EU-27


(1) Corresponds to step 1 as described in Annex 4.





How are the "adjustments" determined?

Following are examples of the process carried out within DG AGRI in order to assess the reliability of the control statistics and error rates derived therefrom and to determine what level of adjustment should be applied:

Case study 1: UK (RPA - England)

The Rural Paying Agency (RPA) reported via its control statistics an error rate of 0.67%. DG AGRI's auditors consider that these statistics are likely to be understated and proposed a top-up of 2%. The ECA carried out a systems audit of the RPA in 2012 and rated the system as "not effective" for "administrative and control procedures to ensure correct payment including quality of databases" as well as "partially effective" for on-the-spot methodology, selection, execution, quality control and reporting of individual results". DG AGRI had decided to give rating of 5% to a "not effective" assessment by ECA. Therefore a 5% adjustment was retained bringing the residual error rate of the RPA to 5.66%.

Case study 2: UK (DARD - Northern Ireland)

DARD reported an error rate of 0.29%. DG AGRI considers this to be understated and would propose a top-up of 1%. ECA (as was the case for RPA) rated the administrative and control procedures to be "not-effective" and normally this would lead to a top-up of 5%. However, the Certification Body for DARD performed a "reinforcement of assurance" exercise whereby they checked a representative sample of transactions and validated the paying agency's control statistics. A DG AGRI audit to check the work of the Certification Body confirmed that this work does not call for observations that would undermine the Certification Body's conclusions. DG AGRI considers that the latter element supersedes the finding of the ECA and that the error rate that should be retained is that declared by the Paying Agency.

Case Study 3: Romania

The error rate reported in the control statistics was 1.77%. However, the certification body's opinion indicated that the error rate was higher, by 2.75% resulting in an adjusted RER of 4.27%. This higher rate reflects the certification body finding, in a number of cases, of deficiencies in the checking by the Romanian authorities of the additional administrative requirements regarding "ownership of land" imposed by the RO authorities on the farmers in order to better protect the fund. It does not follow, per se, that the land itself is ineligible. The RO authorities will, therefore, be requested to strengthen their procedures for checking these elements at the time of application

Case study 4: Greece

Greece reported an error rate of 0.83% which DG AGRI considers to be understated and adjusted by 4.4% (on the basis of a calculated correction). The resulting adjusted RER of 5.17% requires a reservation.

Case study 5: France

France (ASP) reported an error rate of 0.27%. DG AGRI auditors consider that this is understated by 2% in respect of deficiencies in the LPIS and payment calculations and by 0.5% with regard to incorrect allocation of entitlements. A further 0.12% is added in respect of deficiencies for animal premia. The resulting adjusted residual error rate is 2.60%.

Case study 6: Portugal

The reported error rate was 0.82%. DG AGRI auditors made a 5% adjustment in respect of weaknesses in the LPIS and on-the-spot checks and incorrect consolidation of entitlements which when adjusted for affected population results in a 3.31% top-up. A further 0.33% is added for deficiencies with regard to animal premia. The resulting residual error rate is 4.37%.




3.2.3 What mitigation factors exist in order to render a reservation unnecessary?


The following Table: Annex 10 - 3.2.9 sets out the situation for all Paying agencies for which the error rate is above 2% detailing where reservations are required and the justification where it is considered that risk mitigation factors exist:

PA MS

error rate

Adjusted RER

Reservation Action plan/justification Amount at Risk under reservation

AT01 (Austria) 1.69% 3.55% NO A 2% adjustment results from the ECA system audit “partially effective” assessment in its AR 2011. DG AGRI however, considers that the deficiencies concerned have since been remedied. The financial risk to the EU budget is covered by the on-going conformity clearance procedure.

-

DE12 Niedersachsen (Germany)

0.47% 2.45% NO A 2% adjustment results from the ECA system audit “partially effective” assessment in its AR 2010. DG AGRI however, considers that the deficiencies found were of a very limited scope and that overall the ECA assessment was that the system was “effective”. No reservation is necessary.

-

Denmark 0.4% 2.38% NO The adjustment which brings the error rate above 2% derives from an ECA systems audit from 2011. DG AGRI auditors consider that the deficiencies have already been remedied and financial corrections are underway for the claim years affected by the deficiency.

-




PA MS error rate

Adjusted RER


Spain 15 out of 17 paying agencies (Asturias and the Canary Islands being the exceptions).

Andalucia Aragon Balearic Islands Cantabria Castilla-La Mancha Castilla y Leon Cataluna Extremadura Galicia Madrid Murcia Navarra Pais Vasco La Rioja Valencia

0.34% 0.20% 0.16% 0.06% 0.01% 0.02% 0.20% 0.39% 2.35% 0.13% 0.03% 0.20% 0.32% 0.03% 1.93%

Overall ES at 2.92%

3.08% 2.98% 3.03% 2.02% 2.83% 2.60% 3.02% 2.83% 4.20% 2.63% 2.91% 2.95% 2.50% 2.60% 4.71%

YES The deficiencies concern permanent pasture; this is a national problems but to a different extent in each autonomous community. An action plan already in place is being closely monitored by DG AGRI and the financial risk for the EU budget will be covered by the on-going conformity clearance procedure.

€ 153.147 m

€ 47.657 m € 12,811 m

€ 0.771 m

€ 0.831 m € 19.094 m

€ 23.442 m

€ 8.130 m € 14.284 m

€ 7.207 m € 1.019 m € 1.830 m € 2.944 m € 1.191 m € 0.768 m € 5.828 m

Finland 0.55% 2.52% NO The material error rate results from ECA findings which were to a large extent, formal with low financial consequences.

-

France 0.27% 2.60% YES An extensive action plan is already in place and will continue to be closely monitored by DG AGRI. The financial risk is fully covered by the on-going conformity clearance procedure.

€ 203.432 m

UK - Wales 0.07% 2.07% No A 2% adjustment was applied due to an ECA audit assessment of "partially effective" in its 2010 Annual Report. However, DG AGRI has visited the paying agency in the interim period and has found that any deficiencies did not have the impact indicated by the ECA findings.

-

UK:

PRA (England)

0.67% 5.66% Yes A 5% adjustment is applied due to ECA system's audit assessment of "not effective". The action plan will formalise the present updating of the LPIS presently underway by RPA and if

€ 118.001 m




PA MS error rate

Adjusted RER


this is done adequately it will address the deficiencies underlying the adjusted error rate. The financial risk is covered via a DG AGRI audit scheduled in 2014 which will allow the recovery of any undue amounts for the 2013 financial year.

Greece 0.83% 5.17% Yes Continued close monitoring of the Greek action plan which is scheduled to be completed in April 2014. Financial years 2013 and 2014 are covered via the conformity clearance procedure.

€ 117.889 m

Hungary 1.12% 3.05% Yes An action plan that will address the weaknesses in the farmers' application process and the on-the-spot checks.. The PA needs to review its risk analysis will have to be developed by the paying agency. The financial risk is covered by the conformity clearance procedure.

€ 36.677 m

Ireland 1.04% 2.95% NO The deficiencies identified are already being addressed by improvements which should impact on the 2013 claim year and continue for claim year 2014. DG AGRI monitors the improvements. Any financial risk is covered by an on-going conformity procedure.

-

Italy - Basilicata

1.75% 2.14% NO While no reservation and action plan is proposed for this PA, DG AGRI is following-up the permanent pasture issue at national level with Italy.

-

Lithuania 0.33% 2.23% NO The LPIS is being updated and will be monitored by DG AGRI in an audit planned for 2014. The financial risk is covered by an on-going conformity clearance procedure.

-

Luxembourg 0.64% 2.58% NO The adjustment made to the error rate of 2% results from a "partially effective" assessment given by the ECA in its 2010 Annual Report. However the certification body has validated the error rate reported by the Member State and thus it is not considered necessary to make a reservation.

-

Netherlands 0.14% 2.14% NO Following the situation encountered in respect of claim years prior to 2012, the updating of the LPIS requires monitoring, which will be done by DG AGRI in an audit planned for 2014

-




PA MS error rate

Adjusted RER


which will also ensure the financial risk is covered by a conformity clearance procedure.

Portugal 0.82% 4.37% YES An action plan was completed in 2013 and no additional plan is required. The work being carried out by PT in respect of the consolidation of entitlements is valid from 2014 onwards (but is not applicable retroactively). DG AGRI's auditors will carefully monitor how this is done by the PT authorities and whether they will take remedial action where the consolidation was not carried out correctly. The conformity clearance procedure already on-going in respect of financial year 2013 will ensure that the financial risk to the EU budget is covered.

€28.347 m

Romania 1.77% 4.27% NO The deficiency relates to insufficient checking by the RO authorities of the proof provided by farmers of ownership of land. This is an additional national administrative requirement. It will be followed up with the RO authorities who will be asked to improve procedures in this regard.

-

Slovakia 0.88% 2.75% NO There were weaknesses in the LPIS and on-the-spot checks for claim years pre-2012. Recent information indicates that the SK authorities are remedying deficient procedures for assessing ineligible features. The extent of the problem does not require a specific action plan and any financial risk is covered by the conformity clearance procedure. Progress will be monitored.

-

Table: Annex 10 - 3.2.9




3.2.4 Corrective capacity of financial corrections



For ABB 03, net financial corrections executed over the past three financial years were:

2011 269 million EUR



This gives an average of 352 million EUR.

The amount executed is different to the amount decided due to the dynamic of the execution process which occurs several months after the adoption of the clearance decision and also because of the various instalment and deferral decisions which have to be taken into account.

Financial corrections adopted in respect of ABB 03 were as follows




Average 472 million EUR

3.2.5 Conclusions for ABB03

As a result of the "top-ups" made, an adjusted residual error rate (RER) has been calculated of 2.34% with 31 out of 68 paying agencies having a RER above 2% (of which two were above 5% - Greece and the UK -RPA(England)).

For the 29 paying agencies with an error rate between 2 and 5%, an examination was carried out of any risk mitigating factors which indicated that the EU budget was protected for the past (conformity clearance procedure, culminating in a financial correction, underway) and that it is protected for the future (the deficiencies have been addressed by the paying agency). In 11 out of the 29 cases, it was considered that, given the mitigating factors present (see summary under point 3.2.3), it would not




be necessary to make reservations.

The overall outcome of this exercise is that 20 reservations are necessary at paying agency level:

Spain – for 15 out of 17 paying agencies

France -ASP

UK – RPA

Hungary

Greece

Portugal

The following table presents the situation at Member State level for ABB03:

Net financial

corrections in

decisions

adopted in 2013

Net financial

corrections

proposed but not

yet adopted

EUR EUR EUR EUR EUR EUR

Austria 706.438.546 1 0 3,55% 0 0 25.090.412 2.227.218 0

Belgium 567.092.524 2 0 0,14% 0 0 775.053 3.038.791 1.952.141

Bulgaria 494.424.796 1 0 1,59% 0 0 7.867.310 0 15.829.462

Cyprus 43.842.946 1 0 1,25% 0 0 549.057 0 0Czech 824.121.274 1 0 0,39% 0 0 3.195.786 5.255.897 0

Germany 5.253.938.613 13 0 0,63% 0 0 33.246.316 1.046.472 13.033.829

Denmark 939.223.263 1 0 2,38% 0 0 22.334.739 10.168.680 8.001.222

Estonia 91.924.140 1 0 0,94% 0 0 864.717 0 0

Spain 5.237.123.746 17 15 2,97% 147.806.306 4.968.417.388 153.146.938 75.131.648 45.233.351

Finland 531.825.705 1 0 2,52% 0 0 13.426.774 4.355.692 4.878.583

France 7.967.008.516 2 1 2,60% 203.431.769 7.809.446.463 203.605.087 143.215.076 1.612.062.372

UK 3.286.115.177 4 1 3,90% 118.001.078 2.085.282.395 127.014.389 178.442.038 9.930.202

Greece 2.282.265.465 1 1 5,17% 117.889.151 2.282.265.465 117.889.151 214.848.715 98.471.636

Hungary 1.203.377.855 1 1 3,05% 36.676.810 1.203.377.855 36.676.810 13.598.017 7.614.222

Ireland 1.250.917.232 1 0 2,95% 0 0 36.936.730 4.869.844 0

Italy 3.964.369.298 9 0 1,35% 0 0 53.559.439 48.470.925 11.351.022

Lithuania 345.581.608 1 0 2,23% 0 0 7.700.395 1.260.235 9.854.968

Luxembourg 33.743.329 1 0 2,58% 0 0 870.967 188.287 0

Latvia 132.913.644 1 0 1,35% 0 0 1.799.218 0 457.255

Malta 4.835.099 1 0 0,03% 0 0 1.558 129.651 0

Netherlands 822.950.855 1 0 2,14% 0 0 17.570.006 26.308.168 5.840.500

Poland 2.769.307.172 1 0 0,97% 0 0 26.976.163 23.368.807 6.788.843

Portugal 648.684.551 1 1 4,37% 28.347.490 648.684.551 28.347.490 0 23.929.088

Romania 1.086.101.417 1 0 4,27% 0 0 46.380.704 0 99.107.373

Sweden 689.310.714 1 0 0,41% 0 0 2.791.778 0 3.910.144

Slovenia 130.183.963 1 0 0,85% 0 0 1.110.399 4.247.568 1.199.079

Slovakia 354.310.844 1 0 2,75% 0 0 4.198.031 1.178.759 5.767.336

Grand Total 41.661.932.292 68 20 2,34% 652.152.605 18.997.474.116 973.925.419 761.350.487 1.985.212.626

Amount under reservation as a percentage of the scope 3,43%

1The scope of the reservation is the total amount of payments made during the reporting year by the paying agency affected by the reservation

2 For Member States with more than 1 Paying Agency the calculation is based on the individual Residual Error Rates

Member

States

Expenditure

ABB03 in 2013

Number

of Paying

Agencies

Number of

Paying

Agencies

under

reservation

Adjusted

Residual

Error Rate

Extrapolated

Amount at

Risk covered

by

Reservation

Scope of

Reservations1

Amount at Risk

for ABB032

Commission's Action


The amount subject to reservation is 652 million EUR while the total amount at risk for ABB03 is 974 million EUR.




3.2.6 Root causes of the error rate in direct payments – what is DG AGRI doing about it?

The probable error rate affecting CAP expenditure is quantified through extrapolation resulting in a "most likely error" as established by the European Court of Auditors or a "residual error rate" established by the Commission in the framework of the corresponding annual declarations of assurance (DAS). As part of the DAS 2012 exercise, 140 transactions spread over 16 Member States were audited for direct payments. Out of those, 48 transactions were found with quantifiable errors, resulting in the calculation of an error rate of 3.19% up from 2.5% in DAS 2011 and leading the ECA to issue adverse opinions on the legality and regularity of payments underlying the accounts of the "market and direct support" policy group. Overall, the error rate for direct payments, even if above the 2% materiality threshold, is relatively low and tends to confirm the effectiveness of IACS in reducing the risk of non-legal payments.

For 2012, using an integrated approach for the direct decoupled aid the Directorate General for Agriculture and Rural Development's (DG AGRI) adjusted the calculation of the residual error rate based on Member States' control statistics has indicated an error rate above materiality at 2.4 % (in comparison with around 0.5 % reported by the Member States).

The main root causes for the 2012 error rate are the following:

Errors/non-compliances by national administration arising when national administrations do

not adapt their system as to ensure compliance with the rules or do not follow their own

instructions: such errors account for 39.5% of the 2012 DAS error. However, they are isolated

by nature and cannot be "generalised". They are clustered in some Member States and

hence do not indicate a cross-cutting problem for direct payments as a whole,

Insufficient quality and update of the Land Parcel Identification System (LPIS)

Low quality of the on-the-spot checks

Mistakes in the aid applications

These last three root causes are the main causes for over and under declaration of area, and account for 54.5% of the overall error rate in 2012. They are also the most frequent as they were spread over 30 transactions in 13 Member States.

Looking forward to the implementation of the reformed system of direct payments, it is expected that some of the above-mentioned risks will persist while a few additional risks have been identified. In fact, it is notable that the choices in the recent reform of the CAP aim at an improved targeting of support measures and ultimately a more effective and efficient CAP. Better targeting often implies additional eligibility conditions and thus greater complexity of support schemes where Member States are given more flexibility. Moreover, compromise solutions incorporated in the basic acts in the inter-institutional decision-making process give sometimes rise to diverging interpretations when implemented by Member States.

For direct payments the main areas of risks in the context of the reformed system are the following:

Transitional period for the creation of the layer for Ecological Focus Areas (EFA) in the LPIS meaning the level of assurance given by the control system may in the meantime be lower, which is not from the start compensated by an increased level of on-the-spot checks.




The fact that the list of EFA Member States can chose from contain EFA that are difficult/costly to control

A possible risk of import of the high error rate from second pillar via the system of equivalence

The fact the certification schemes Member States will notify as equivalent and their functioning are so far unknown

The risk relating to the population of farmers exempted from Greening (i.e. complexity for farmers and administration, risk of errors for farmers close to thresholds)

The low level of the applicable penalties in case of non-compliance with the greening practices with the risk they do not achieve their deterrent effect

The risk of error when proceeding to the first allocation of payment entitlements due to the numerous and sometimes complex options for Member States

Continued risks of misinterpretation of what is the eligible area to the basic payment scheme

DG AGRI is already addressing the main risks created to the Funds by the existing root causes by means of audit enquiries and already initiated action plans. A series of actions covering improvements in monitoring, communication and remedial action are envisaged to mitigate the situation further and prevent issues from arising in the future:

1. The assessment of the quality (QA) of their LPIS Member States must perform will be actively followed-up by a new unit in DG AGRI ("Implementation support, monitoring, IACS and LPIS") to ensure that Member States take the remedial actions required to meet the quality standards DG AGRI considers appropriate. Moreover, the clearance of accounts will include in its process the assessment of the correct application of the LPIS QA method.

2. DG AGRI will reinforce its actions to inform in meetings (e.g. meeting with paying agencies; or ad hoc expert groups) the actors in charge (paying agencies, managing authorities) and, where relevant, will develop guidance documents addressing problematic issues (e.g. via Wikicap, Working docs, etc.). The new unit in DG AGRI is foreseen to support Member States in the implementation of the direct payment schemes, in particular as regards the integrated administration and control system (IACS), by providing guidance and ensuring exchange and dissemination of best practices.

3. Specific actions towards deficiencies in certain Member States have been taken following clearance of account enquiries that detected major deficiencies and they have proven effective in triggering changes. The current procedure is to ask the concerned Member States to draw up an action plan for each of the deficiencies identified. Based on an analysis of the DAS exercises, of Member States' statistics and of audit results, new specific action plans would need to be started towards specific Member States.

4. DG AGRI provides guidance to the Member States and monitor the effectiveness of the control systems on an on-going basis, in particular through compliance audit missions (including also audits of paying agencies' compliance with the accreditation criteria and audits of the certification bodies) as well as clearance of accounts. Whenever weaknesses are found, the Commission protects the Union's financial interests by means of financial corrections imposed on the Member States. The error rate for direct payments is also being addressed through DG AGRI’s audit activity.




5. The previous legislation provided for the possibility to suspend direct payments but only in the case of repeated deficiencies having been the reason for at least two financial correction Decisions by the Commission. The Horizontal Regulation now enables the Commission ot suspend payments when a Member State has not addressed the deficiencies via an action plan? This will provide Member States with a stronger incentive to improve their systems where necessary.

6. In the process of elaborating the secondary legislation, DG AGRI has proposed a series of rules aiming at mitigating the risks identified above. These mainly concern control provisions. As it is already common use, the need to amend the secondary legislation in view of specific difficulties encountered in the process of implementation of the reform will be constantly assessed and acted upon.

7. In the framework of the reform, exhaustive inventory of information regarding the options taken by Member States to implement the new system of direct payments will have to be obtained by the services of DG AGRI in charge of the management of the policy and processed for diffusion to the concerned services in charge of monitoring of the implementation and audit. Based on an enhanced co-operation with Member States, the quality and reliability of the information gathered will need to be improved to allow the monitoring of the implementation of Direct Payment rules and control systems. The information at hand will be used to feed the risk analysis established for planning the usual audits and in the decisional process on the relevance of launching actions plans.

The actions listed above draw upon the Commission services and Member States in equal measure. Most of them should be set in motion in the course of 2014.

3.2.7 Overview of Member States' action plans with regard to direct payments

Summary

If DG AGRI makes a reservation in its AAR with regard to serious and/or persistent weaknesses leading to a material level of error or to a reputational risk for the Commission, an action plan is required setting out how the deficiency will be remedied. Action plans were also demanded from Greece in respect of recurrent deficiencies which were subject to financial corrections for which that MS had requested to defer the payment.

The above two circumstances led to action plans being required from 5 Member States: Greece (3), Bulgaria, Romania, Portugal and France (a single action plan but with three fields of action with different milestone and completion dates).

Most of these action plans have been finalised and were generally successful. For those cases where the situation is not handled satisfactory or for new cases, further action plans have been required by the Commission and established by the Member States concerned.

The following tables sets out the situation of the action plans which have been required by the Commission indicating the reasons they were requested, the time scale involved, the actions to be completed, whether the plan has been finalised and the financial consequences in terms of financial corrections..




Independently of these specific action plans, as part of normal procedure, when audit findings show weaknesses, Member States are recommended to take actions as to address the situation. Therefore, in the period 2005-2011 several Member States established national plans to remedy the weaknesses, mainly in respect of the LPIS. The principle such cases are described in additional tables below (for Italy, the Netherlands, Sweden, Poland, the United Kingdom (Northern Ireland and Scotland) Lithuania, Austria, Ireland and Spain).

In all cases, for the claim years prior to the finalisation of the plan, the risk for the Fund was/is being covered via the application of financial corrections which, however, can only be finally imposed after completion of the sometimes time consuming conformity clearance procedure. Because of the magnitude of the financial corrections for direct payments, the "offending" Member States increasingly exercise their right to provide additional data in order to enable the Commission to more accurately calculate the financial risk to the EU Budget. This often means that they perform a representative sample of checks or request to await the completion of the LPIS updating exercise so that they can use the updated data for the calculation. Both such exercises take a considerable time and also have to be validated and checked on-the-spot by DG AGRI. Experience has shown that this additional work extends the life-cycle of an audit enquiry by 1-2 years.

In some cases the financial correction has been "achieved" by retro-active recovery from the farmer and crediting of these amounts by the paying agency to the EU budget.




ACTION PLANS REQUIRED BY DG AGRI FROM THE MEMBER STATES FOLLOWING A RESERVATION IN ITS AAR OR AS A CONDITION FOR A DEFERRAL DECISION MS Subject Start / end

date Assessment Financial corrections applied until finalisation

Greece

Reservation AAR2002- AAR2008

For several years GR did not have an adequate LPIS leading to reservations in DG AGRI's AAR from 2002. Therefore an action plan was necessary to develop a new LPIS.

Mid-2006 - 31.12.2008

FINALISED

This plan was closely monitored and actively guided by DG AGRI. The result was a satisfactory situation in most regards; errors by farmers in their claims decreased materially. However the issue of permanent pasture was not adequately addressed.

Claim year 2006: 194 m EUR


Claim years 2008: clearance procedure on-going - finalisation expected by end-2014.

Claim years 2009 and subsequent: clearance procedures are on-going in order to protect the EU Budget.

Bulgaria

Reservation AAR2009-AAR2012

Given deficiencies found during audit missions and considering the high error rate, an update of the LPIS information on the basis of new imagery was requested.

2009 - end 2011

FINALISED

This plan was guided and closely monitored by DG AGRI. The plan was finalised 1 year later than scheduled, but this was mainly due to conditions not fully attributable to the authorities. The result was a satisfactory situation in most regards and the level of error has fallen. However, considering the eligibility rules for BG/RO, the LPIS cannot be considered to be as reliable as in the rest

of the MS37 **

.

Claim year 2007: 16.6 m EUR


Claim year 2009–2012: clearance procedure on-going - finalisation expected by end-2014.

Romania


Given deficiencies found during audit missions and considering the high error rate, an update of the LPIS information on the basis of new

2009 - end 2010

This plan was guided and closely monitored by DG AGRI. The plan was finalised 1 year later than scheduled, but this was mainly due to conditions not fully attributable to the authorities. The result was a satisfactory situation in most regards and the level of error has fallen. However, considering the eligibility rules for BG/RO, the LPIS cannot be considered to be as reliable as in the rest



Claim year 2009–2012: clearance procedure on-going - finalisation expected by end-2014..

Unlike the situation in the EU-10 MS, in BG and RO the eligibility of the land is not fixed by a specific date i.e. 30.6.2003 and land is eligible if in Good Agricultural Condition in the year it is claimed. Combined with the fact that (conversion of) land is in "evolution" in these MS, their LPIS is more quickly "outdated" than in the other MS.




MS Subject Start / end date

Assessment Financial corrections applied until finalisation

imagery was requested. FINALISED of the MS **

.

Portugal


Following serious audit findings, Portugal was requested to address, via an action plan, the situation of late on-the-spot checks and to update and streamline its LPIS.

2010 - start 2013

FINALISED

This plan was closely monitored by DG AGRI. It was finalised in time and initial assessments are positive. The results in respect of the error rate will be measurable by mid-2014 i.e. final payments for claim year 2013.



Claim years 2009-11: clearance procedure on-going - finalisation expected by end by end-2014;

Claim year 2012: finalisation of clearance procedure expected by mid-2015.

Greece

Deferral Decision

C(2012)4293 of

28/06/2012

Cross-compliance. 2012-2013

FINALISED

Greece applied to defer the financial corrections in respect of, inter alia, cross compliance deficiencies detected for claim years 2006, 2007 and 2008. The deferral was granted on condition that Greece remedy the deficient situation for the controls in respect of cross-compliance which was the subject of the corrections. This was addressed satisfactorily.




For claim years 2009, 2010 and 2011 a conformity procedure is underway (for finalisation in early 2015) and any deficiencies will be subject to financial corrections. An up-coming audit will examine the situation for claim years 2012 and 2013.

Greece

Deferral Decision

C(2012)4293 of

28/06/2012

Adapt the LPIS maximum eligible area for permanent pasture.

2012- March 2013 ON-GOING

The LPIS created in 2008 included areas there are areas which are recorded as eligible for payment for their full area, but are not due to their inherent situation (e.g. forest, high presence of shrub, bushes etc.) The LPIS established in 2008 included areas which due to their inherent situation (e.g. forest, high presence of shrub, bushes) should not be eligible for CAP support. As a condition of the decision to defer financial corrections, Greece was required to address this situation via an action plan.

Claim years 2009 - 2011: clearance procedure on-going - finalisation for claim years 2009- 2012 by end-2014. Claim years 2008: clearance procedure on-going - finalisation expected by end-2014. Claim years 2012 and subsequent: clearance procedures are on-going in order to protect the EU Budget.






Missions in 2013 showed that work by Greece was not to the required standard. Consequently the deferral was partially revoked (i.e. the part linked to permanent pasture was "revoked").

France

Reservation AAR 2012-

2013

Following audit findings France was requested to address the situation of weaknesses in the LPIS.

2013 onwards ON-GOING

France's draft action plan has been discussed at multiple bilateral meetings before France submitted a "final" version of the action plan on 15.11.2013.

Claim year 2008 and onwards: clearance procedure on-going - finalisation for claim years 2008-2010 by mid-2014; claim years 2011-2012 by end-2014; claim year 2013 early 2016.

Following audit findings France was requested to address the situation of weaknesses in the controls of Cross-Compliance


France has stated it would address situation, but results will only be visible in 2014 or 2015.

Claim years 2010 and onwards: clearance procedure on-going - finalisation for claim years up to and including 2012 by mid-2015.

Following audit findings France was requested to address the situation of weaknesses in the controls of Non-Area Coupled Aids.


France has stated it would address situation, but results will only be visible in 2014 or 2015.

Claim years 2010 and onwards: clearance procedure on-going - finalisation for claim years up to and including 2012 by mid-2015.

ACTION PLANS FOR REMEDIAL ACTION INITIATED BY THE MEMBER STATES FOLLOWING DG AGRI AUDIT FINDINGS (NO RESERVATION)



Italy Weaknesses in the LPIS were established.

2007-2009

Following audits in 2006 and 2008, Italy instigated a plan to update the LPIS in 2007 over a period of 3 years. Since then Italy is in an "automated cycle of update".

Claim year 2006: 26 m EUR.

Claim year 2007: 43 m EUR.

Claim year 2008 and 2009: clearance procedure is underway - finalisation by end-2014. As a result of the






FINALISED

remedial action Italy started recovery from farmers which would reduce the amount of the correction for these 2 years.

NL Weaknesses in the LPIS were established.

2009-2010

FINALISED

Following audits in 2007 and 2009, The Netherlands instigated a plan to update the LPIS in 2009.




Claim year 2008: 20 m EUR (incl. also other findings)

Claim year 2009: 5 m EUR (some LPIS issues had already been addressed)

Claim year 2010: no correction required.

Sweden Weaknesses in the LPIS were established.

2009-2010

FINALISED

Following audits in 2007 Sweden established a plan to update the LPIS in 2009. The latest mission in 2013 showed that Sweden continuously updates its LPIS.




Claim year 2008: 18.4 m EUR (assessed using LPIS update information).

Claim years 2009-2010: corrections were proposed but as the undue amounts had already been recovered by Sweden there was no financial impact.

Poland Weaknesses were established in the LPIS from claim year 2005 onwards.

2009-2010

Following audits in 2006, 2008 and 2009 Poland established a plan to improve the performance of its LPIS in 2009 and further-on in 2010 and 2011. This continued progress was confirmed in an audit in 2011.

Claim year 2005: 100 Mio PLZ (incl. also other findings)

Claim year 2006: 25 m EUR (incl. also other findings)

Claim year 2007: 17.5 m EUR (financial impact is lower because of recoveries made by Poland) - clearance procedure in finalisation.

Claim year 2008: 14.5 Mio (financial impact is lower because recovery is instigated by Poland) - clearance

These corrections were also in respect of other deficiencies






FINALISED

procedure in finalisation.

For claim year 2009 onwards no corrections have been deemed appropriate as recoveries are being instigated by PL.

Northern Ireland

Weaknesses in the LPIS were established.

2010-2012

FINALISED

Following audits in 2006, 2008 and 2009 Northern Ireland established a plan to improve the performance of its LPIS in 2010. This was further developed in 2011 and 2012 and should yield full positive results for claim year 2013.






Claim year 2010 onwards: clearance procedure on-going; finalisation expected by end-2014.

Scotland Weaknesses in the LPIS were established.

2009-2010

FINALISED

Following audit in 2007 Scotland took remedial action to improve the performance of its LPIS in 2009. This was further developed in 2010.




Claim year 2010: clearance procedure on-going; finalisation expected in early 2014. .Amounts were "calculated" by Scotland using their LPIS review.

Lithuania Weaknesses were established in the LPIS

2009-2011

FINALISED

Following audits in 2006 and 2009 Lithuania took remedial action to improve the performance of its LPIS. First measures were taken in 2009 but a fully satisfactory situation was only achieved for 2011.





Claim year 2007: 4.3 Mio (incl. other findings) - clearance procedure finalised mid-2014.

Claim year 2008: 5.5 Mio (incl. other findings) -

These corrections were also in

respect of other deficiencies

These corrections were also in respect of other deficiencies

These corrections were also in

respect of other deficiencies






clearance procedure finalised mid-2014.

Claim year 2009 onwards: clearance procedure is on-going - finalisation by end-2014.

Austria Weaknesses were established in the LPIS particularly in respect of alpine parcels.

2009-2011

FINALISED

Following audits in 2008 and 2009 Austria took remedial action to improve the performance of its LPIS in 2010 and 2011.

The situation is to be confirmed in a future audit mission.

Claim year 2006: 2.6 m EUR (including other findings).

Claim years 2007-2009: following LPIS updates in 2011, Austria recovered undue amounts from farmers and credited them to the EAGF. Therefore no financial corrections were required for this issue.

Ireland Weaknesses were established in the LPIS and particularly in respect of the commonages.

2010-2013

ON-GOING

Following audits in 2006, 2009 and 2010, Ireland took remedial action to improve the performance of its LPIS in 2010. This will only be fully finalised for claim year 2014.

The situation is to be confirmed in a future audit mission.


Claim year 2006: 3.3 m EUR.

Claim year 2007: 3.4 m EUR.

Claim year 2009 and onwards: the clearance procedure is on-going; finalisation expected by mid-2014. Amounts will be re-calculated by Ireland using their LPIS review.

Spain Adapt the LPIS maximum eligible area for permanent pasture.

2011-2013

ON-GOING

This plan was established by Spain following DG AGRI audits having detected recurrent problems in this area.

The remedial actions were audited mid-2013 and found not to address the situation in full. As a consequence there will be increased monitoring and follow-up of the Spanish implementation of the plan and financial corrections will continue.

Claim year 2009 and onwards: clearance procedure on-going finalisation for claim years. 2009-2012 by end-2014 (early 2015 if ES goes to conciliation); claim year 2013 onwards by end-2015

Annex 10 – Part 3.3 – ABB04

Rural Development – Control results and the DG AGRI assessment thereon

3.3 ABB04 – Rural Development

Index for part 3.3 – ABB04: Rural Development

3.3.1 Background

3.3.2 What assurance does the Director General have regarding the expenditure under ABB04 – Rural Development?

3.3.2.1 Control results reported by the Member States

3.3.2.2 DG AGRI Management Assessment and Adjustment Process

3.3.2.3 Assessment of the certification bodies' opinions on the control statistics


3.3.2.5 DG AGRI audit findings

3.3.3. How is this information used in order to assess the error rate?

3.3.4 What mitigating factors exist in order to render a reservation unnecessary?

3.3.4 Financial corrections

3.3.5 Conclusions as regards assurance for ABB04


3.3.7 Overview of Member States' action plans with regard to Rural Development

3.3.1 Background

One of DG AGRI's key objectives is to contribute to the sustainable development of rural areas. This is managed via its rural development policy which is funded under the European Agricultural Fund for Rural Development (EAFRD). For the 2007-2013 programming period, the policy operates through 94 regional and national Rural Development programmes which establish a series of measures designed to target specific needs and challenges.

While the EAFRD bears a lot of similarities to the Structural Funds of DGs REGIO and EMPL, there are also a number of differences. In particular, it has been increasingly aligned with the management system for the EAGF which deals with direct payments to farmers. A large part of the EARFD measures are "area-based" and are dealt with under the IACS (see explanatory box 1 in Annex 10- ABB03). The new CAP reform, which enters into force from 2014, strengthens that alignment in particular with regard to application and payment dates. One of the main differences between the reporting styles for EAFRD and the Structural funds is the greater emphasis for the former on the annuality of expenditure and less so on the multi-annual aspect. Additionally, the Structural Funds have so far, used interruption and suspension of payment as well as recycled recovery procedures (i.e. the recovered amounts are retained by the MS for re-use for other projects) while in AGRI the main instrument used to protect the Budget is conformity clearance procedure which results in net financial corrections being clawed back to the EU budget.




With a view to greater harmonisation with other shared management DGs in the manner in which it reports, DG AGRI will, from its 2014 AAR, proceed to a cumulative reporting style with, in particular, calculation of a cumulative residual error rate. The latter is not possible for the 2013 AAR as the calculation methodology for previous years differs significantly from that which has been used for ABB04 for 2013. This is based on the "integrated approach" adopted by DG AGRI for decoupled direct aids in its 2012 AAR which it has further developed and extended to all of ABB03 and ABB04 for 2013. Furthermore, in tandem with the development of a cumulative approach, DG AGRI determines, with the Central Services of the Commission, how to take into account net financial corrections under its conformity clearance procedure. As such corrections are of a multi-annual nature, their use in the calculation of the residual error rate is more consistent with a multi-annual or cumulative approach to the latter.

Expenditure under the EAFRD

The EAFRD is organised into "Title I" and "Title II" measures, the former being area or animal based measures and the latter being investment type measure. The Rural Development legislation also distinguishes between five thematic priority areas or "Axes":

Axis 1: competitiveness of the agricultural and forestry sector Axis 2: environment and land management Axis 3: economic diversity and quality of life Axis 4: LEADER Axis 5: Technical Assistance

Axes 1, 3 and 4 fall mainly within Title II while Axis 2 measures fall within both Titles mixed. Some are purely Title I or Title II but measures 216, 221, 223 and 225 have both an area based and an investment based dimension and thus are funded under both Titles.

The distinction "Title" is important to note as in previous AARs DG AGRI's reporting was organised by Axis whereas in line with the new programming period, where the "Axis" concept has disappeared, the measures are organised by "Title". In order to ensure comparability with future AARs, given the new materiality criteria and calculation method set out for the residual error rate in Annex 4, the information for 2013 is established by Title.

"Table: Annex 10 – 3.3.10" at the end of part 3.3 of this annex details the measures and the title under which they fall.




Reference to the Titles of

Commission Regulation (EU)

No 65/2011

Measure / Axis Total expenditure Share between axis

Title I and some measures

under Title II

Axis 2 - Improving the environment and

the countryside6.216.297.394 48%

Axis 1 - Improving the competitiveness of

the agricultural and forestry sector3.865.827.435 30%

Axis 3 - The quality of life in rural areas

and diversification of the rural economy1.843.189.601 14%

Technical Assistance 191.333.879 1%

Title II with one measure under

Title IAxis 4 – Leader

862.396.247 7%

Total 12.979.044.555 Recoveries and advances 997.112- Top-up on Direct Aids 332.375-

12.977.715.069 100%

Title II

TOTAL Rural development


3.3.2 What assurance does the Director General have regarding the

expenditure under ABB04 – Rural Development?

The assurance of the Direct General is drawn from the various levels of management and control that are in place and the results which can be obtained from them. In the first place, the Member States, with some 69 accredited paying agencies, are responsible for managing and checking the aid applications received from some 3.3 million applicants and for paying them.

3.3.2.1 Control results reported by the Member States.

Member States are required to perform administrative checks on all aid applications received as well as on-the-spot checks for at least 5% of applications. In order to provide information on controls and error rates in the area of rural development, Regulation (EU) No 65/2011 provides for detailed and systematic reporting of the results of the Member States' controls and reductions applied. By 15 July of year N+1, the Member States are obliged to send to the Commission, data on the outcome of the controls carried out in respect of claim year N. These control statistics contain information on amounts claimed, errors corrected as a result of administrative, risk based checks and random checks and the resulting reductions applied. The result of the random checks, which is considered to be the one which is most representative of the error which the MS would have detected if it had carried out on-the-spot checks on all farms, is the one which is used as the basis for the calculation of the "error rate".

3.3.2.2 DG AGRI Management Validation and Adjustment Process

The reliability of the statistics communicated by the Member States depends on the efficiency of their control systems. DG AGRI carries out an extensive review and validation process (explained in detail in its Annex 4 setting out its materiality criteria) in order to adjust this error rate upwards to a level which it considers better reflects the actual level of error. In so doing, it uses its professional judgement on the basis of all available information. The main elements assessed are the following




3.3.2.2 Assessment of the control statistics by the Certification Bodies.

As described in Annex 10 – part 2, the certification bodies are required to give an opinion on the quality of the on-the-spot checks carried out by the paying agencies the results of which are the basis of the control statistics as well as on the accuracy of the latter. This opinion is received with the annual declarations of the Member State on 1 February of N+1.

Depending on whether an opinion was received, whether or not it was qualified, and any other information available in the opinion, an adjustment (positive) was made to the error rate reported by the Member State:

For ABB04 there were 7 cases in which the certification bodies indicated findings which

were considered to be of a serious nature: BG (BG01 – DZF), DK (DK02 – DAFA), ES (ES01

– Andalucia and ES03 – Asurias), FR (FR19 – ASP), PT (PT03 – IFAP) and RO (RO01 –

DARDF). With the exception of ES03 – Asturias, where an extrapolated error of 1.78

mEUR led to a residual error rate of 6.27% and, thus, triggered a reservation, in all other

cases it was considered that the related amount of risk was covered by the amount of

risk already taken into account.


There are three sources of information from the ECA which are examined in order to determine the extent to which adjustments need to be brought to the error rates reported by the Member States:

DAS hits: each year the Court tests some 160 transactions for the EAFRD. If a systemic

error is detected by the Court, this is flagged in the validation process.

Special Reports of the ECA: each year the Court carries out an enquiry into particular policy

areas. Letters of preliminary findings are addressed to the Member States and where

these indicate systemic errors they are flagged in the validation process.

Systems audits by the ECA: In its Annual Report, the ECA informs on the outcome of the

systems audits which it performs in a limited number of paying agencies each year. Inter

alia it gives assessments of "effective", "partially effective" and not "effective" on elements

of the supervisory and control systems. DG AGRI integrates these assessments into the

appraisal exercise it carries out on the reliability of the MS control statistics.



For this years' AAR, the Court's assessments in its 2011, 2012 and 2013 reports are taken into consideration

Annual Report

Paying Agency

Administrative and control procedures

On-the-spot inspection

methodology, selection, execution, quality control and reporting of results

Overall assessment

2010 FR19 France Not effective Partially effective Not effective

DE11 Germany (Mecklenburg-Vorpommern)

Effective Effective Effective

IT07 Italy (Tuscany) Partially effective Partially effective Partially effective

LV01 Latvia Not effective Effective Partially effective

PL01 Poland

Partially effective Effective

Partially Effective

PT03 Portugal Partially effective Partially effective Partially effective

RO

Romania Partially effective Partially effective Partially effective

GB06 UK (Scotland) Partially effective Partially effective Partially effective

CZ01 Czech Republic Partially effective Partially effective Partially effective

2011 DK02 Denmark Not effective Partially effective Not effective

ES11 Spain (Galicia) Partially effective Partially effective Partially effective

IT23 Italy (Lombardy) Partially effective Partially effective Partially effective

HU01 Hungary Partially effective Partially effective Partially effective

AT01 Austria Partially effective Effective Effective

FI01 Finland Partially effective Partially effective Partially effective

2012 FR19 France Partially effective Partially effective Partially effective

SE01 Sweden Partially effective Effective Partially effective

DE07 Germany (Brandenberg)


PL01 Poland

Partially effective Effective Partially effective

BG01 Bulgaria Partially effective Partially effective Partially effective

RO01 Romania Not effective Not effective Not effective


When taking into account the assessment of the Court, DG AGRI makes an adjustment of 2% for one or more "partially effective" ratings, a 5% adjustment for one "not effective" rating and a 10% adjustment if both categories assessed by the Court were rated as "not effective".



3.3.2.4 Assessment of findings from DG AGRI audit missions carried out in 2011-2013.

In 2013, 28 paying agencies were audited, representing 18 Member States, while all but 1 Member States has been audited (Malta) between 2011 and 2013 (an audit to Malta is scheduled in the 2014 planning). The paying agencies audited (47 over the past 3 years) have been selected on the basis of a risk analysis and those not yet visited, are paying agencies with a limited and/or regional scope.

3.3.2.4.1 Audit missions for Title I measures

a) Audit plan and coverage

In 2013, the audit missions concerned agri-environmental measures (which include organic farming), natural handicaps measures, animal welfare payments and first afforestation of agricultural land. Additionally, the specific support measures adopted under Article 68(1)(a)(v) of Council Regulation (EC) No 73/2009 were also checked as they may overlap with agri-environmental measures. The 14 enquiries carried out in 2013 were selected on the basis of the central risk analysis which also took into account the latest available control statistics provided by the Member States. For Member States or paying agencies for which agri-environment measures and natural handicaps had already been audited without major findings, and for which a follow-up on agri-environment and natural handicaps was not needed, priority was given to other measures under Title I. In particular, animal welfare payments and first afforestation of agricultural land measures were audited. In three Member States which have more than one paying agency (Italy, Spain and Germany), the paying agencies were selected following the Central Risk Analysis, and in order to visit those which had not yet been audited during the current programming period.

The audits assessed the management and control systems implemented by Member States in order to ensure that they complied with EU regulations, that the eligibility criteria had been met and that the commitments were controllable, verifiable, and respected by the beneficiaries. Moreover, these enquiries assessed whether the controls were effectively applied, if appropriate reductions and sanctions were imposed for non-compliance, and if the control statistics sent by the Member States were consistent and reliable. Finally, these enquiries also helped to detect the root causes for the error rate and identify possible remedial actions.

b) Results and possible improvements

The control systems in the paying agencies visited in 2013 were generally found to be effective, but with scope for improvement in a number of cases. The auditors found improvements in some paying agencies where the visit was a follow-up to a previous audit. DG AGRI auditors recommended actions to increase the robustness of the control system for some specific issues.

The audits detected scope for improvements for the following issues:



continued efforts are required to provide simple and clear eligibility criteria and commitments and to inform beneficiaries about their obligations in a clear manner so they have full understanding of the requirements to be met in order to reduce the high error rate discovered in the Member States;

additional improvements are required to extend administrative controls of certain agri-environmental commitments which are easy to check administratively (training certificate, organic certificate, state of the crops, etc.), and to better target risk analysis for the 5 % sample of beneficiaries to be checked on the spot;

continued improvements in the on-the-spot checks systems are necessary in order to better assess the farmer's compliance with the commitments made, to perform checks at the best time of the season for assessing compliance, and to integrate visual checks with other control tools;

developing more targeted and proportionate sanction systems, as poor targeting may also be one of the causes of high error rate;

for organic farming, a lack of control by some paying agencies has been observed, and cross-notification between different bodies involved was not sufficiently developed (see also paragraph 3.1.1.2).

In addition, a better traceability and clear conclusions about the quality of the controls carried out must be achieved by indicating how the checks were performed and how the inspectors came to their conclusions. The control methods used, during the on-the-spot check, to verify compliance with the farmer's commitments, must be indicated in the control report together with measurements, verification of fertilisers and animal counting in order to assess whether the livestock density is correct, whenever appropriate.

Statistics provided pursuant to Article 31 of Regulation (EU) No 65/2011 must be improved in terms of quality and deadline compliance.

From a general point of view, when serious deficiencies have been found, follow-up audits are carried out in order to assess the implementation of the recommendations made by DG AGRI. The conformity clearance procedure leads to net financial corrections in order to protect the EU budget from irregular spending as a result of the deficiencies found. In 2013, out of the 14 audits carried out, procedures are being followed with a view to making financial corrections in 11 cases while it was possible to close 3 cases without correction.

3.3.2.4.2 Audit missions for Title II measures

a) Audit plan and coverage

In 2013, 21 audits were carried out; these audits were selected mainly following the Central Risk Analysis.

The audits covered the procedures implemented by Member States to ensure that administrative checks, on-the-spot checks and ex-post checks were carried out in line with EU legislation, paying special attention to correct application of selection criteria and compliance with the eligibility criteria. They also checked that the costs had been correctly evaluated as reasonable, including compliance with procurement rules; that coverage of the risk of double funding was adequate and that reductions and sanctions imposed for non-compliance were adequate.




b) Results and possible improvements

With regards to "flat rate measures", an audit mission in 2013 to the region of Lazio (Italy) for the "Young farmers" scheme revealed a serious non-compliance of one eligibility condition which may lead to an important financial correction. The authorities did respect the 18 months deadline for approving applications (Article 13(4) of Commission Regulation (EC) No 1974/2006). Expenditure for this measure was interrupted during the 2013 financial year.

What are "flat rate measures?

Flat rate measures are those with a fixed amount of support for particular action with a view to simplifying the application and payment procedures.

Explanatory Box: Annex 10 – 3.3.3

With regard to investment measures, in three cases, the audits revealed management and control deficiencies which would suggest that the systems are ineffective in determining whether claims are eligible and preventing irregularities. The weaknesses found may merit a financial correction of 10 % or more for the measures audited38:

In 2013 two missions have been carried out in Romania which both covered expenditure on measure 312 'Support for the creation and development of microenterprises'. These two missions completed a first one carried out in autumn 2012 on that measure which gave cause for significant concern. The 2013 missions showed that the weaknesses did not only exist in the region visited in autumn 2012 but concern Romania as a whole. DG AGRI auditors found very serious weaknesses in the Member State's management and control system and elements of the findings have been reported to OLAF. Following DG AGRI's request, the Romanian authorities implemented an action plan in order to improve the situation; the reimbursements from the Commission to Romania for expenditure of this measure have been interrupted during the 2013 financial year. With regard to the three audit missions, the bilateral meeting for the 2012 audit in took place in 2013 and will take place in the coming months in respect of the two 2013 audits. The final treatment of the three audits will be merged into one procedure.

A mission to Bulgaria covered expenditure of the measures 321 "Basic services for the economy and rural population" and 322 "Village renewal and development". In addition, the creation and management of the guarantee fund (for measures 121, 122 and 123) was audited. The audit revealed serious shortcomings in the administrative checks and also deficiencies in the on-the-spot checks. Main weaknesses concerned the checks of the public procurement procedures, the existence of ineligible and/or unreasonable costs, the scope of the on-the-spot checks, the early and high payment of the advances and the early and high transfer of capital into the guarantee fund. With regard to the two last mentioned audit findings, they have to be seen in the light of the n+2 decommitment rule. The Bulgarian authorities have been invited to give any explanation why such early and high advance payments were necessary and why such an early and very high transfer into the guarantee fund was necessary. These explanations will be duly taken into consideration when concluding on the existence of a possible circumvention of the n+2 rule and when deciding on the need for a financial correction.

38 It is underlined that the clearance of accounts procedure is still ongoing and that the financial correction is only fixed at the last stage.




What is the "N+2 decommitment" rule? Article 29 of Regulation 1290/2005 provides that the Commission shall automatically decommit any portion of a budget commitment for a rural development programme that has not been used for the purpose of pre-financing or making intermediate payments. The funds must be used by 31 December of the second year following that of the budget commitment. The purpose of this rule is to speed up

execution of programmes and contribute to sound financial management.


A mission to Bavaria (Germany) detected weaknesses in the application of selection criteria for the measures 125 "Land reparcelling" and 322 "Village renewal and development". Similar weaknesses had already been found during an audit in 2009. The measures taken by the German authorities since then are not considered to have been sufficient.

3.3.2.4.3 Audits of Financial Instruments

Since the beginning of the 2007-2013 programming period, DG AGRI opened 5 conformity audits concerning interest rate subsidies schemes in France; revealing important weaknesses in management and control system. As a consequence, in addition to financial recoveries of the irregular payments, the French authorities took direct responsibilities for the management and the control of the scheme which were formerly delegated to financial institutions.

Concerning the other financial instruments, the initial implementation of Guarantee Funds had been partly audited within the scope of 4 audit missions (one in Italy, two in Romania and one in Bulgaria) in 2011, 2012 and 2013. The audits showed in general the possible risk of over financing ("front-loading") the Funds compared to the actual need in terms of guarantees to be given. This fact may only be confirmed in the coming years and it does not entail, except perhaps for Bulgaria, a financial risk of irregular payments for the EAFRD but a risk of lower use of the available budget.

What are financial instruments?

Financial instruments are measures of financial support provided on a complementary basis from the EU budget in order to address one or more policy objectives. Such instruments may take the form of loans, guarantees, equity or quasi-equity investments, or other risk-sharing instruments and may, where appropriate, be combined with grants.


3.3.3 How is all this information used in order to "validate" the error rate reported in the Member States" control statistics?

The Audit Directorate of DG AGRI recorded in a central database, the indications of error arising notably from the findings of the Certification Bodies, the Court of Auditors and its own audit findings. Where possible the amount at risk was quantified and where this was not the case a % flat rate was used to express the risk for the Budget arising from error in the expenditure which is not reflected in the Member States' control statistics.




Following are examples of the process carried out within DG AGRI in order to assess the reliability of the control statistics and error rates derived therefrom and to determine what level of adjustment should be applied:

Case study 1: Austria

The Austrian paying Agency " reported via its control statistics an error rate of 3.32% for area related rural development measures and an error rate of 0.82% for investment related rural development measures; aggregated statistics show an error rate of 2.40%. DG AGRI's auditors consider that for area related rural development measures these statistics are likely to be understated and proposed a top-up of 2%. The ECA carried out a systems audit of the AMA in 2011 and rated the system as "partially effective" for "administrative and control procedures to ensure correct payment including quality of databases" and "Shortcomings in the administrative organisation and internal control of the checks". In this respect DG AGRI decided to give rating of 2% to a "partially effective" assessment by ECA for the entire expenditure managed by this paying agency. An adjustment of 2% was retained bringing the overall residual error rate of the AMA to 4.26%.

Case study 2: Bulgaria

The Bulgarian paying agency reported an error rate of 6.92% for area related rural development measures and an error rate of 1.79% for investment related rural development measures; aggregated statistics show an error rate of 2.24%. DG AGRI considers this to be understated and propose a top-up of 5% for area related measures and 10% for measure 141 (Semi subsistence farming) and 312 (Business creation and development) and 25% for measure 321 (Basic services for economy and rural population) and 322 (Village renewal and development). Weighted by the expenditure effected under these measures, this lead to an top-up of 14.2%. In addition ECA rated the administrative and control procedures and the on-the-spot inspection methodology, selection, execution, quality controls and reporting of results to be "partially effective" leading to a top-up of 2% in its Annual Report 2012. On top denunciations were reported with respect to measure 112 (Setting-up of young farmers) and 511 (Technical assistance). Taking all this information into account the residual error rate was estimated to be 14.36%.

Case study 3: Spain - Asturias

The paying agency in Asturias reported an error rate of 0.78% for both area and investment related rural development measures; consequently aggregated statistics show an error rate of 0.78%. In the Certification Body's report an extrapolated error of 1.78 mEUR was reported which led to a residual error rate of 6.27%.

Case study 4: France - ASP

The French paying agency "Agence de services et de paiement (ASP)" reported an error rate of 2.48% for area related rural development measures and an error rate of 0.00% for investment related rural development measures; aggregated statistics show an error rate of 0.39%. DG AGRI auditors consider this to be understated and propose a top-up of 5% for area related measures plus a top-up of 2% for LPIS specific deficiencies and for investment related measures a top-up of 2% for measure 112 (Setting-up of young farmers) and a top-up of 5% for measure 121 (Modernisation of agricultural holdings) and 123 (Adding value to agricultural and forestry products). Weighted by the expenditure effected under these measures, this lead to an top-up of 1.6%. Moreover, in its Annual Report 2010 ECA rated the administrative and control procedures to be "not effective" due to "Payments before finalisation of compulsory controls", "Incorrect rules, calculations and payments (overpayments, tolerance rules, non-eligible expenditure, reductions" and "partially effective" because of "No evaluation of the on-the-spot control results and failure to increase the sample of beneficiaries to be checked", "Deficiencies in selection methodology and non-respect of the regulatory minimum rate for on-the-spot




controls" and "Weaknesses related to the quality of the on-the-spot controls carried out and of the ex-post checks". Similar findings were stated in ECA annual Report 2012, the administrative and control procedures and the on-the-spot inspection methodology, selection, execution, quality controls and reporting of results were rated to "partially effective". Altogether, a top-up of 5% was proposed which led to an estimated residual error rate of 7.28%

Case study 5: Greece

Reported error rates were for area related rural development measures 5.69% and for investment related rural development measures 0.88%; aggregated statistics show an error rate of 1.87%. For the area related measures DG AGRI auditors made a 15% adjustment including weaknesses in the LPIS and a 5% adjustment for measure 125 (Infrastructure related to the development and adaptation) in the context of investment related measures. Moreover, a 2% adjustment was made for LEADER. The overall adjusted residual error rate was estimated to be 12.37%

The table on the following pages summarises this information for all paying agencies:




Paying

Agency

Paying Agency Name Expenditure

Financial year

2013

ABB03

EUR

Error rate in

Member

States

Control

statistics(1)

Adjusted

Residual Error

Rate

(per Paying

Agency)(2)

Total

expenditure of

Paying

Agencies under

reservation

Amount at Risk

EUR

Adjusted

Residual

Error Rate

(per

Member

State)

Member

State

AT01 AMA 526.093.587 2,40% 4,26% 0 22.413.934

22.413.934 4,26% ATBE02 ALV 17.530.612 2,17% 4,39% 17.530.612 769.108BE03 SPW-DGARNE 23.996.794 0,91% 0,51% 0 122.581

891.689 2,15% BEBG01 DFZ [SFA] 396.123.873 2,24% 14,36% 396.123.873 56.883.045

56.883.045 14,36% BGCY01 ΚΟΑΠ [CAPO] 22.911.162 3,71% 4,96% 22.911.162 1.137.357

1.137.357 4,96% CYCZ01 SZiF [SAIF] 371.656.567 0,56% 3,76% 0 13.966.013

13.966.013 3,76% CZDE01 BLE 502.729 #N/A #N/A 0 0DE03 Baden-Württemberg 74.071.969 0,27% 0,42% 0 314.129DE04 Bayern StMLF 189.478.253 0,39% 2,09% 189.478.253 3.967.235DE07 Brandenburg MLUV 177.835.417 1,01% 3,45% 177.835.417 6.136.431DE09 Hamburg 3.098.847 0,00% 0,00% 0 0DE11 Mecklenburg- 120.203.444 0,33% 0,84% 0 1.009.297DE12 Niedersachsen 133.868.649 0,35% 0,72% 0 959.774DE15 LWK Nordrhein- 51.956.797 1,41% 3,53% 0 1.834.750DE17 Rheinland- Pfalz 35.523.380 0,17% 0,48% 0 168.877DE18 Saarland 4.834.754 0,19% 0,66% 0 31.779DE19 Sachsen 186.767.637 0,76% 1,27% 0 2.367.967DE20 Sachsen-Anhalt 126.784.017 0,08% 1,44% 0 1.829.791DE21 Schleswig-Holstein 46.018.980 0,37% 0,39% 0 180.667DE23 Thüringen 107.488.780 1,17% 1,42% 0 1.523.341DE26 Helaba 35.055.716 1,95% 1,73% 0 606.655

20.930.694 1,62% DEDK02 DAFA 61.930.976 3,28% 6,60% 61.930.976 4.089.910

4.089.910 6,60% DKEE01 PRIA 126.354.433 0,22% 1,12% 0 1.412.601

1.412.601 1,12% EEES01 Andalucía 305.853.852 1,69% 3,03% 305.853.852 9.275.757ES02 Aragón 39.287.288 0,61% 1,25% 0 489.807ES03 Asturias 32.282.238 0,78% 6,27% 32.282.238 2.025.490ES04 FOGAIBA 9.948.455 0,05% 0,11% 0 10.626ES05 Islas Canarias 30.429.329 0,90% 0,33% 0 101.743ES06 Cantabria 12.276.813 1,69% 1,86% 0 228.607ES07 Castilla La Mancha 133.356.957 0,29% 3,79% 133.356.957 5.052.620ES08 Castilla y Léon 120.063.594 1,08% 3,32% 120.063.594 3.980.778ES09 Cataluña 42.760.316 0,05% 0,80% 0 342.438ES10 Extremadura 93.302.082 0,43% 0,68% 0 638.651ES11 FOGGA 96.056.143 1,33% 3,24% 96.056.143 3.115.241ES12 Madrid 9.605.182 4,83% 2,66% 9.605.182 255.835ES13 Murcia 40.890.414 0,61% 0,62% 0 251.891ES14 Navarra 18.966.569 0,02% 0,03% 0 5.875ES15 País Vasco 17.440.397 1,03% 1,26% 0 219.972ES16 La Rioja 7.378.939 0,12% 0,20% 0 15.078ES17 AVFGA 22.316.250 0,60% 4,50% 0 1.004.307ES18 FEGA 2.699.506 #N/A #N/A 0 0

27.014.717 2,61% ESFI01 MAVI 334.135.810 1,28% 3,15% 334.135.810 10.532.051

10.532.051 3,15% FIFR18 ODARC 15.945.549 1,91% 6,16% 15.945.549 982.037FR19 ASP 966.475.200 0,39% 7,28% 966.475.200 70.349.821

71.331.857 7,26% FR




Paying

Agency

Paying Agency Name Expenditure

Financial year

2013

ABB03

EUR

Error rate in

Member

States

Control

statistics(1)

Adjusted

Residual Error

Rate

(per Paying

Agency)(2)

Total

expenditure of

Paying

Agencies under

reservation

Amount at Risk

EUR

Adjusted

Residual

Error Rate

(per

Member

State)

Member

State

GB05 DARD 58.821.223 0,76% 1,11% 0 653.481GB06 SGRPID 112.691.168 0,35% 2,47% 112.691.168 2.788.318GB07 WG 47.803.263 0,19% 0,29% 0 139.426GB09 RPA 531.265.444 0,38% 5,23% 531.265.444 27.782.123

31.363.348 4,19% GBGR01 Ο.Π.Ε.Κ.Ε.Π.Ε. 225.793.111 1,87% 12,37% 225.793.111 27.939.957

27.939.957 12,37% GRHU01 MVH [ARDA] 488.440.120 3,14% 4,89% 488.440.120 23.873.474

23.873.474 4,89% HUIE01 DAFM 321.596.195 0,41% 4,07% 321.596.195 13.073.660

13.073.660 4,07% IEIT01 AGEA 777.193.235 0,48% 6,77% 777.193.235 52.640.896IT05 AVEPA 77.784.957 0,33% 1,80% 0 1.402.029IT07 ARTEA 53.571.418 0,12% 0,25% 0 134.021IT08 AGREA 74.412.930 0,69% 2,13% 74.412.930 1.583.882IT10 ARPEA 60.445.272 0,28% 1,91% 0 1.153.364IT23 OPR Lombardia 92.277.509 0,14% 3,47% 92.277.509 3.203.961IT24 OPPAB 13.934.964 5,73% 3,69% 13.934.964 514.129IT25 APPAG 11.452.009 0,23% 0,48% 0 54.834IT26 ARCEA 104.574.777 0,15% 3,85% 104.574.777 4.021.189

64.708.307 5,10% ITLT01 NMA [NPA] 251.014.978 0,59% 2,29% 0 5.744.115

5.744.115 2,29% LTLU01 Ministère de 10.062.399 3,74% 6,31% 10.062.399 634.593

634.593 6,31% LULV01 RSS 182.447.017 0,52% 2,43% 0 4.442.309

4.442.309 2,43% LVMT01 MRRA PA 9.622.621 6,05% 1,22% 0 117.147

117.147 1,22% MTNL01 DLG 99.472.353 4,42% 5,77% 99.472.353 5.741.151

5.741.151 5,77% NLPL01 ARiMR [ARMA] 1.806.188.698 0,64% 3,14% 1.806.188.698 56.700.252

56.700.252 3,14% PLPT03 IFAP 657.324.513 5,76% 7,87% 657.324.513 51.733.551

51.733.551 7,87% PTRO01 PARDF 1.214.843.672 0,64% 11,43% 1.214.843.672 138.893.737

138.893.737 11,43% ROSE01 SJV 181.801.793 3,40% 5,04% 181.801.793 9.154.986

9.154.986 5,04% SESI01 ARSKTRP 125.941.694 1,65% 2,17% 0 2.733.419

2.733.419 2,17% SISK01 APA 195.379.481 1,10% 3,28% 0 6.404.230

6.404.230 3,28% SK

Total ABB04 12.977.715.069 9.591.457.698 673.862.105 5,19% EU-27







3.3.4 What mitigating factors exist in order to render a reservation

unnecessary?


The following table "Table: Annex 10 – 3.3.7" sets out the situation for all Paying agencies for which the error rate is above 2% detailing where reservations are required and the justification where it is considered that risk mitigation factors exist:

Paying Agency

MS error rate

Adjusted error rate

Reservation Action plan/ justification Amount at risk under

reservation

AT01 – Austria 2.40% 4.26% No

Although the adjusted error rate is higher than 2%: The action plan covers all the error root causes, including all the deficiencies indicated in DG AGRI audit observations. Furthermore, DG AGRI audits will lead to a financial correction. Therefore, no reservation is needed.

-

BE02 – Belgium – Flanders

2.17% 4.39% Yes

DG AGRI does not yet have assurance that the action plan adequately covers all the error root causes identified, and considers that the action plan should be reinforced. Therefore, a reservation is expressed.

€ 0.769 m

BG01 – Bulgaria

2.24% 14.36% Yes

The adjusted error rate above 5% results from the Court assessment in its AR 2012 (partially effective), and also from DG AGRI audits. Although actions have been taken to correct weaknesses, an additional action plan is envisaged to correct the remaining problems.

€ 56.883 m

CY01 – Cyprus 3.71% 4.96% Yes

DG AGRI does not yet have assurance that the action plan adequately covers all the shortcomings identified, and will affect the error rate. This action plan needs to be closely monitored. Consequently, a reservation is expressed.

€ 1.137 m

CZ01 – Czech Republic

0.56% 3.76% No

The adjusted error rate results from the Court assessment in its AR 2010 (partially effective). However, the error rate action plan addressed the

-




Paying Agency

MS error rate

Adjusted error rate


reservation

deficiencies identified. In addition, two DG AGRI audits will be closed without financial correction. Therefore, no reservation is needed.

DE04 – Germany – Bayern StMLF

0.39% 2.09% Yes

An action plan is in place, but it only tackles the rural development measures having shown an error rate higher than 2%; the other measures are not taken into account. Therefore, as the action needs to be reinforced, the error rate has been adjusted accordingly and a reservation is expressed.

€ 3.967 m

DE07 – Germany – Brandenburg MLUV

1.01% 3,45% Yes

The adjusted error rate results from the Court assessment in its AR 2012 (partially effective). The deficiencies are not yet fully addressed in the action plan that need to be reinforced. Therefore, the error rate has been adjusted and a reservation expressed.

€ 6.136 m

DE15 – Germany – LWK Nordrhein-Westfalen

1.41% 3.3% No

The adjusted error rate results from an audit carried out by DG AGRI. The identified shortcoming has been corrected by the Member State after the audit. There is therefore no need to express a reservation.

-

DK02 – Denmark

3.28% 6.60% Yes

The adjusted error rate above 5% results from the Court assessment in its AR 2011 (not effective and partially effective) and also from DG AGRI audits. An action plan has been set up in 2011, but it does not cover all the identified shortcomings and should then be reinforced.

€ 4.090 m

ES01 – Spain – Andalucia

1.69% 3.03% Yes

Not all the deficiencies detected by DG AGRI audits are included in the action plan. Hence, the action plan has to be reinforced. As a consequence, the error rate has been adjusted, and a reservation addressed.

€ 9.276 m

ES03 – Spain - Asturias

0.78% 6.27% Yes

The certification body identified serious systematic errors in three measures in the testing of the substantive sample. The paying agency has immediately initiated an action plan to assess and remedy the shortcomings found. The paying agency has indicated an action

€ 2.025 m




Paying Agency

MS error rate

Adjusted error rate


reservation

plan to be concluded by 30 June 2014. As these deficiencies lead to a residual error rate of more than 5%, a reservation has been expressed. The certification body will be requested to verify the implementation of the action plan.

ES07 – Spain – Castilla la Mancha

0.29% 3.79% Yes

Not all the deficiencies detected by a DG AGRI audit are included in the action plan. Hence, the action plan needs to be reinforced. The error rate has been adjusted, and a reservation is addressed.

€ 5.053 m

ES08 – Spain – Castilla y Léon

1.08% 3.32% Yes

The implemented action plan does address a number of identified deficiencies. Although an ongoing DG AGRI audit will lead to a financial correction, the findings are not accepted by the MS, and not addressed in the action plan. Therefore, the action plan needs to be reinforced, and a reservation is expressed.

€ 3.981 m

ES11 – Spain – FOGGA Galicia

1.33%- 3.24% Yes

The adjusted error rate results from the Court assessment in its AR 2011 (partially effective) and also from a DG AGRI audit. The action plan does not take into account all the deficiencies found by the audits. Consequently, the action plan needs to be reinforced, and a reservation is expressed.

€ 3.115 m

ES12 – Spain - Madrid

4.83% 2.66% Yes

The residual error rate results directly from the error rate detected in the on-the-spot checks carried out by the MS. Consequently, the action plan needs to be reinforced, and a reservation is expressed.

€ 0.256 m

ES17 – Spain – AVFGA Valencia

0.6% 4.50% No

Although the adjusted error rate is higher than 2%: The action plan covers all the error root causes, including all the deficiencies indicated in DG AGRI audit observations. Furthermore, DG AGRI audits will lead to a financial correction.

Therefore, no reservation is needed.

-

FI01 – Finland 1.28% 3.15% Yes The adjusted error rate results from the Court assessment in its AR 2011 (partially effective). Ongoing DG AGRI

€ 10.532 m




Paying Agency

MS error rate

Adjusted error rate


reservation

audits have identified shortcomings which the proposed action plan does not yet fully addressed. Therefore, the action plan needs reinforcement, and a reservation is expressed.

FR18 – France – ODARC Corse

1.91% 6.16% Yes

The adjusted error rate above 5% results from the different audits assessment (ECA and DG AGRI), and leads to a reservation. The action plan needs to be reinforced and closely monitored.

€ 0.982 m

FR19 – France – ASP

0.39% 7.28% Yes

The adjusted error rate above 5% results from the different audits assessment (ECA and DG AGRI), and leads to a reservation. The action plan needs to be reinforced and closely monitored.

€ 70.350 m

GB06 – United Kingdom – SGRPID Scotland

0.35% 2.47% Yes

The adjusted error rate results from the Court assessment in its AR 2010 (partially effective). The action plan does not adequately tackle all deficiencies identified and should be reinforced. Therefore, a reservation is expressed.

€ 2.788 m

GB09 – United Kingdom – RPA England

0.38% 5.23% Yes

There is no evidence that all the deficiencies found by DG AGRI audits are covered by the action plan to reduce the error rate. Therefore, the action plan needs to be scrutinised, amended and closely monitored. Consequently, the error rate has been adjusted.

€ 27.782 m

GR – Greece 1.87% 12.37% Yes

The adjusted error rate above 5% results from DG AGRI audits, and from the lack of assurance concerning the reported control statistics. The action plan needs close monitoring, and a reservation is therefore expressed.

€ 27.940 m

HU01 – Hungary

3.14% 4.89% Yes

The adjusted error rate results from the Court assessment in its AR 2011 (partially effective). Several deficiencies have been corrected, but others will only be corrected in the next programming period. Therefore, the action plan needs to be closely monitored, and a reservation is expressed.

€ 23.873 m




Paying Agency

MS error rate

Adjusted error rate


reservation

IE01 – Ireland 0.41% 4.07% Yes

The adjusted error rate results from DG AGRI audits. The action plan does not deal with all deficiencies identified, then it needs to be reinforced and closely monitored. A reservation is therefore expressed.

€ 13.074 m

IT01 – Italy – AGEA

0.48% 6.77% Yes

Depending on the regions, some corrective actions were implemented or not in order to reduce the error rate. Therefore, the error rate has been adjusted to highlight the weaknesses in some regions where the action plan needs to be reinforced.

€ 52.641 m

IT08 – Italy – AGREA Emilia-Romagna

0.69% 2.13% Yes

All the deficiencies found by a DG AGRI audit have not yet been addressed by the action plan. Therefore, the action plan needs to be reinforced, and the error rate has been adjusted.

€ 1.584 m

IT23 – Italy – OPR Lombardy

0.14% 3.47% Yes

The adjusted error rate results from the Court assessment in its AR 2011 (partially effective) and from DG AGRI audits. The deficiencies found by DG AGRI have not yet been fully addressed by the action plan that needs to be reinforced. Consequently, a reservation is expressed.

€ 3.204 m

IT24 – Italy – OPPAB Bolzano

5.73% 3.69% Yes

The Court of Auditors found weaknesses during the DAS exercise, and the MS itself reported a high error rate in its control statistics. Although an action plan has been implemented, it does not provide assurance that it adequately tackles the deficiencies. The action plan needs therefore a close monitoring. Consequently, the error rate has then been adjusted and a reservation expressed.

€ 0.514 m

IT26 – Italy – ARCEA Calabria

0.15% 3.85% Yes

Though the deficiencies have been addressed by an action plan, there is no assurance that all of them have been implemented. Therefore, the action plan will be closely monitored, the error rate has been adjusted and a reservation expressed.

€ 4.210 m

LT01 – Lithuania

0.59% 2.29% No Although the adjusted error rate is higher than 2%:

-




Paying Agency

MS error rate

Adjusted error rate


reservation

The action plan covers all the error root causes, including all the deficiencies indicated in DG AGRI audit observations. Furthermore, DG AGRI audits will lead to a financial correction.


LU01 – Luxembourg

3.74% 6.31% Yes

The adjusted error rate above 5% results from DG AGRI assessment following ongoing audits. The action plan does not adequately tackle the error rate and should be closely monitored.

€ 0.635 m

LV01 – Latvia 0.52% 2.43% No



-

NL01 – The Netherlands

4.42% 5.77% Yes

The adjusted error rate remains above 5%, in line with the MS' control statistics. The action plan is being implemented, but DG AGRI does not yet have full assurance on its effectiveness. Hence, the action plan will be closely monitored.

€ 5.741 m

PL01 – Poland 0.64% 3.14% Yes

The adjusted error rate results from the Court assessment in its AR 2010 and 2012 (partially effective). The action plan does not yet address all the shortcomings, and should be closely monitored. Therefore, a reservation is expressed.

€ 56.700 m

PT01 – Portugal

5.76% 7.87% Yes

The adjusted error rate above 5% results from the Court assessment in its AR 2010 (partially effective) and also from DG AGRI audits. A large part of the deficiencies has been addressed by the action plan, although some are contested by the MS.

€ 51.734 m

RO01 – Romania

0.64% 11.43% Yes

The adjusted error rate above 5% results from the Court assessment in its AR 2012 (not effective), but also from DG AGRI audits. Romania has put in place many actions to address the deficiencies, but they

€ 138.984 m




Paying Agency

MS error rate

Adjusted error rate


reservation

are still being implemented and will need close follow-up.

SE01 – Sweden

3.40% 5.04% Yes

The adjusted error rate above 5% results from the Court assessment in its AR 2012 (partially effective) and from DG AGRI audits. The MS revised the procedure in place which will need adequate follow-up.

€ 9.155 m

SI01 – Slovenia 1.65% 2.17% No

The adjusted error rate results from a still ongoing DG AGRI audit that could lead to a minor financial correction. However, the action plan is thorough and covers the issues raised. It is therefore deemed not necessary to express a reservation.

-

SK01 – Slovakia

1.10% 3.28% No


Therefore, no reservation is needed..

-





3.3.4 Conclusions for ABB04 As a result of the "top-ups" made, an adjusted residual error rate (RER) has been calculated of 5.19% with 39 out of 71 paying agencies having a RER above 2% (of which 13 were above 5% - Bulgaria, Denmark, Spain (Asturias), France (ODARC), France (ASP), UK (England), Greece, Italy (AGEA), Luxembourg, Netherlands, Portugal, Romania, and Sweden). For the 26 paying agencies with an error rate between 2 and 5%, an examination was carried out of any risk mitigating factors which indicated that the EU budget was protected for the past (conformity clearance procedure, culminating in a financial correction, underway) and that it is protected for the future (the deficiencies have been addressed by the paying agency). In 8 out of the 26 cases, it was considered that, given the mitigating factors present it would not be necessary to make reservations.

The overall outcome of this exercise is that 31 reservations are necessary at paying agency level:

Belgium (ALV)

Bulgaria

Cyprus

Germany – 2 paying agencies (Bayern and Brandenberg)

Denmark

Spain - 6 paying agencies (Andalucia, Asturias, Castilla-la-Mancha, Castilla y Leon, Galicia,

Madrid)

Finland

France – 2 paying agencies (Corsica, ASP – the national paying agency)

UK – 2 paying agencies (Scotland, England)

Hungary

Greece

Ireland

Italy – 5 paying agencies (AGEA, AGREA, Lombardy, OPPAB, ARCEA)

Luxembourg

Netherlands

Poland

Portugal

Romania

Sweden

The following table presents the situation at Member State level for ABB04.




Net financial

corrections in

decisions

adopted in 2013

Net financial

corrections

proposed but

not yet adopted

EUR EUR EUR EUR EUR

Austria 526.093.587 1 0 4,26% 0 0 22.413.934 1.398.524 0

Belgium 41.527.406 2 1 2,15% 769.108 17.530.612 891.689 33.263 46.835

Bulgaria 396.123.873 1 1 14,36% 56.883.045 396.123.873 56.883.045 22.972 27.535.756

Cyprus 22.911.162 1 1 4,96% 1.137.357 22.911.162 1.137.357 99.741 0

Czech 371.656.567 1 0 3,76% 0 0 13.966.013 5.877.574 2.569.827

Germany 1.293.489.370 15 2 1,62% 10.103.665 367.313.670 20.930.694 5.308.600 3.902.872

Denmark 61.930.976 1 1 6,60% 4.089.910 61.930.976 4.089.910 1.286.485 6.078.041

Estonia 126.354.433 1 0 1,12% 0 0 1.412.601 0 0

Spain 1.034.914.324 18 6 2,62% 23.705.721 697.217.966 27.014.717 2.097.179 5.337.802

Finland 334.135.810 1 1 3,15% 10.532.051 334.135.810 10.532.051 1.549.137 1.977.203

France 982.420.749 2 2 7,26% 71.331.857 982.420.749 71.331.857 39.310.543 58.860.168

UK 750.581.097 4 2 4,19% 30.570.441 643.956.611 31.363.348 11.883.722 1.838.093

Greece 225.793.111 1 1 12,37% 27.939.957 225.793.111 27.939.957 6.563.883 7.926.259

Hungary 488.440.120 1 1 4,89% 23.873.474 488.440.120 23.873.474 3.798.239 1.754.444

Ireland 321.596.195 1 1 4,07% 13.073.660 321.596.195 13.073.660 3.163.291 0

Italy 1.265.647.071 9 5 5,10% 61.964.059 1.062.393.415 64.708.307 6.845.151 2.755.593

Lithuania 251.014.978 1 0 2,29% 0 0 5.744.115 6.683.898 2.534.732

Luxembourg 10.062.399 1 1 6,31% 634.593 10.062.399 634.593 308.450 1.469.939

Latvia 182.447.017 1 0 2,43% 0 0 4.442.309 1.231.845 423.327

Malta 9.622.621 1 0 1,22% 0 0 117.147 30.845 0

Netherlands 99.472.353 1 1 5,77% 5.741.151 99.472.353 5.741.151 3.633.027 151.527

Poland 1.806.188.698 1 1 3,14% 56.700.252 1.806.188.698 56.700.252 124.002.113 7.606.678

Portugal 657.324.513 1 1 7,87% 51.733.551 657.324.513 51.733.551 0 3.568.203

Romania 1.214.843.672 1 1 11,43% 138.893.737 1.214.843.672 138.893.737 15.460.410 78.676.398

Sweden 181.801.793 1 1 5,04% 9.154.986 181.801.793 9.154.986 0 856.003

Slovenia 125.941.694 1 0 2,17% 0 0 2.733.419 4.682.664 935.731

Slovakia 195.379.481 1 0 3,28% 0 0 6.404.230 3.683.199 0

Grand Total 12.977.715.069 71 31 5,19% 598.832.576 9.591.457.698 673.862.105 248.954.754 216.805.432

Amount under reservation as a percentage of the scope 6,24%

1The scope of the reservation is the total amount of payments made during the reporting year by the paying agency affected by the reservation

2 For Member States with more than 1 Paying Agency the calculation is based on the individual Residual Error Rates

Scope of

Reservations1

Amount at

Risk for

ABB042

Commission's Action

Member

States

Expenditure

ABB04 in 2013

Number

of Paying

Agencies

Number of

Paying

Agencies

under

reservation

Adjusted

Residual

Error Rate

Extrapolated

Amount at

Risk covered

by

Reservation


The amount subject to reservation is 599 million EUR while the total amount at risk for ABB04 is 674 million EUR.




3.3.5 Corrective capacity of financial corrections


For ABB 04, net financial corrections executed over the past three financial years were:




This gives an average of 121.2 million EUR.


Since its AAR for 2007 and apart from 2010, DG AGRI has made a reservation in respect of part or all of Rural Development Expenditure.

Because of the inherently complex nature of the Rural Development measures, in particular the conditions and eligibility criteria that have to be met, it has proven very difficult to keep the level of error below a materiality threshold of 2%. Furthermore, in the past two to three years, the error rate estimated by the ECA has risen sharply. As a result of the considerable divergence between this and the rate calculated by DG AGRI on the basis of the Member States' control statistics, as well as growing concerns within the Commission, for the 2012 AAR, even though the residual error rate calculated was below materiality, the DG carried over the reservation and reinforced the existing action plan.

In 2013, the Action Plan carried out by DG AGRI to address the reservation included in the AAR 2012 is based on improved cooperation and analysis within Commission services and on an intensive dialogue with Member States. As many root causes for errors are related to the administrative practices of Member States there is the necessity to create ownership by the Member States i.e. for the corrective actions.

Following this approach, an ad-hoc Task Force created in 2012 continued to meet and develop analysis and strategy within DG AGRI and a Working Document was presented to the European Parliament and Council in June 2013, expressing the main conclusions of the analysis of root causes and further corrective actions related to the error rate in rural development policy.

Following a first letter sent by Director General to all Member States at the beginning of 2013, a process for the establishment and monitoring of national action plans for the reduction of error rates was put in place. On this occasion, contrary to what had happened in 2012, all Member States were included in the process and the scope was therefore extended to all rural development expenditure. Member States submitted their plans, in close collaboration with DG AGRI services, and 2 Seminars were organised to present the state of play and provide guidance. These Seminars are organised jointly in the framework of the Rural Development Committee and the Agricultural Funds




Committee, in order to ensure the involvement of both Managing Authorities and Paying Agencies. A third one took place on 19th of March 2014. Therefore, a stock taking of the closely monitored follow up process is conducted every Semester. In the meantime the geographical desks ensured the follow up of the issue with Member States in annual meetings, monitoring committees and if relevant in the context of programme amendments.

In parallel, the audit capacity of DG AGRI was reinforced. The number of audit missions has been increased and the audits target specific issues related to error rates.

Finally, the legal framework encompasses the interruption and suspension of payments in case of serious deficiencies in the management and control systems for the expenditure committed under EAFRD during the 2007-2013 or the 2014-2020 periods. As for the new legal framework (R1305/2013), Article 62 will ensure that both Managing Authorities and Paying Agency undertake an ex-ante assessment whether the measures programmed are verifiable and controllable. Commission services will analyse this assessment before the approval of programmes.

In summary, several initiatives have been developed simultaneously both from the side of the Commission and from the side of the Member States. Nevertheless, the expected results will not be evident in the short-run, especially for some measures that are implemented through multiannual commitments and which contracts with beneficiaries can't be modified. Some programmes have been amended, so new commitments and obligations can be established taking into consideration the need to be controlled and verified.

Please find below the supporting information of the above description of the process:

1. Working Document analysing the main root causes of errors and corrective and preventive actions

Report based on the contributions of the 27 national action plans for the reduction of error rates submitted by Member States in February 2013, as well as internal and external audit findings

Roots causes for errors have been identified in all type of expenditure (investments, area and animal related measures) and beneficiaries. Some errors are to be attributed to the administration and some other to beneficiaries.

A total of 14 root causes of errors were identified, classified under area/animal related measures and non-area/animal related measures, from the perspective of the administration and the perspective of the beneficiary

7 types of corrective and preventive actions of different nature were proposed in the report, in order to address the root causes identified

2. Outcome of Seminars 29/04/2013 and 17/10/2013

The Seminars are always organised right after a process of submission of action plans by Member States, with the main goal of taking stock of the overall situation, inform about new findings from audits, verify and validate the achieved results and propose reflection and good practices on certain topics

The first Seminar (29/04/2013) was focused on the validation of the root causes of errors submitted by the Member States and the comparison between these contributions and other sources of information (ECA and DG AGRI)

The second Seminar (17/10/2013) was more focused on good practices in corrective and preventive actions. 12 topics were selected and 12 Member States presented good practices related to them.




The third Seminar (19/03/2014) will be focused on relevant cross-cutting issues with a clear impact on error rates: public procurement, reasonableness of costs, simplified cost options and verifiability and controllability of measures.

3. Follow up on national action plans

Geographical desks follow up the root causes for errors in Monitoring Committees, annual meetings with the Managing Authorities and Paying Agencies, and programme amendments if relevant.

Audit findings are communicated to geographical desks on a regular basis in order to allow them to discuss with Member States view of improving the implementation of programmes.

Every 6 months there is a formal follow up process being launched from DG AGRI, which consists in a letter sent by Director General to all MS asking for a follow up of the national action plan, an individual assessment of the information submitted by the Geographical Units and an overall assessment by horizontal policy and audit units.

The result of the DG AGRI's assessment of the follow up is discussed with Member State's managing authorities and paying agencies in the framework of a seminar.

3.3.7 Overview of Member States' action plans with regard to Direct

Payments

The table on the following pages sets out overview of the reservations made by DG AGRI in respect

of Rural Development expenditure since it 2007 AAR, the motivation for the reservation and the

details of the accompanying action plans.




RESERVATIONS MADE BY DG AGRI IN RESPECT OF RURAL DEVELOPMENT EXPENDITURE AND THE ACCOMPANYING ACTION PLANS

AAR Title of Reservation Motivation Corrective Action

2007 "Expenditure under Rural

Development"

Uncertainty as regards the exact error rate

for RD expenditure. Not therefore possible

to conclude whether the error rate is below

a tolerable level of materiality.

Higher errors attributed to complex

eligibility criteria for Agri-Environmental

Measures. (AEM)

Actions already taken to

- improve the regulatory framework for the 2007-13 programming period.

- provide new and detailed guidance to MS regarding the controllability of AEM

Commission enhanced its own audit activities.

Requirement for certification bodies (CB) to verify and validate the control statistics.

2008 "Expenditure for RD

measures under Axis 2

(improving the environment

and the countryside) of the

2007-13 programming

period"

CBs had to verify the control statistics. The

statistics showed an error rate for Axis 2

measures of 3.8%. ECA findings suggest an

even higher error rate.

Error attributed to complex eligibility

criteria for Agri-Environmental Measures.

Commission Reg. 1975/06 established a comprehensive and transparent legal

control framework for RD: provide for a reinforced application of the IACS to Axis 2

measures. Payment claims submitted within same deadlines as for direct payments.

Measures taken to enhance the verifiability and controllability of the RD measure in

general and AEM in particular.

Guidance note provided to MS for implementation of AEM setting out how MS

should determine the most appropriate control methods.

Increase of Commission audit activities.

2009 "Expenditure for RD

measures under Axis 2

(improving the environment

and the countryside) of the

2007-13 programming

period"

Error rate remains material. Cost:benefit

analysis indicates that to reduce error rate

below the 2% materiality threshold would

mean increasing controls excessively.

As for 2008.

In addition, DG AGRI established a Task Force within the audit directorate to visit

the 7 MS most concerned by the high error rate in order to monitor the results of

the measures taken and how the MS report upon them.

2010 Reservation lifted (however,

continuing deficiencies in

Bulgaria, Romania and

Portugal are covered by the

DG AGRI Task Force work led to

improvement in quality and reliability of MS

control statistics enabling the calculation of

a residual error rate. The latter, at 1.84%





first pillar reservation on

IACS).

for AEM and 1.13% for RD in total, were

below the materiality threshold of 2%.

Previous years' actions plans were

completed

2011 Rural Development

Expenditure

MS control statistics showed a deterioration

of the situation in Axes I and 3 as well as in

Axis 2. As a result the residual error rate (at

2.36%) was material.

Due to excessively complex eligibility

criteria and commitments (particularly

"gold-plating" by the MS) leads to more

errors by beneficiaries and makes MS

controls more difficult and costly.

DG AGRI to address the issue of higher error rates with the MS at the RD

committees and discuss examples of best practice.

Managing Authorities (MA) required to assess compliance with eligibility conditions

Adaptation by DG AGRI of the audit programme for 2012 and 2013.

For the 2014-2020 programming period, the following elements to be taken into

account for the new legislation:

- Simplicity, controllability and verifiability

- MAs must ensure the controllability and verifiability of measures and the

commitments to be undertaken by the beneficiaries with close paying agency

involvement.

- MA will be required to assess compliance with eligibility criteria

- DG AGRI will provide enhanced guidance to the MS

More targeted measures to be taken for the 14 MS which most contributed to the

error rate:

- to examine their control statistics in order to identify more precisely the root

causes of the increasing error rate

- for each programme concerned, to assess the measures with high error rates in

order to identify possible remedial actions/review of measures which could be

implemented within the present programming period.

2012 Rural Development

Expenditure

Even though the MS control statistics

indicated a RER of 1.62%, there were

concerns about the quality and

completeness of those statistics as well as

the quality of the underlying controls. It

could not therefore be excluded that the

RER was higher that than indication and

Actions to be taken in 2013:

General comprehension of the error:

- further analysis of root causes

- analysis of differences between ECA/DG AGRI error rate

- further analysis of MS control statistics

- discussions in RD committee on causes of error and development of actions to

reduce error





above materiality.

Furthermore, the action plan established in

2011 was still on-going

-need for a clear definition of error rate to be provided to MS.

Possible actions for reducing the error rate:

- Amendments of RD programmes for current programming period where possible

- Development of guidance notes

- Action plans for each MS

- Joint action with the MS to improve quality of the statistics

- Increase audit capacity

- Bilateral meeting with MS to analysis errors, agree on error reduction action and

share best practices.

Training

-For PA staff, DG AGRI staff, greater participation of DG AGRI desk officers, bilateral

and group exchanges on error concept.

Other

-Modification of legislation on suspension and interruption of payments.

-Reinforced follow-up and reporting.





Code Measure Title Code Measure Title

111 Vocational training and information actions II 211Natural handicap payments to farmers in

mountain areas II

112 Setting up of young farmers II 212Payments to farmers in areas with

handicaps, other than mountain areas II

113 Early retirement II 213Natura 2000 payments and payments l inked

to Directive 2000/60/EC (WFD) II

114 Use of advisory services II 214 Agri-environment payments I & II

115Setting up of management, relief and advisory

services II 215 Animal welfare payments

I

121 Modernisation of agricultural holdings II 216 Non-productive investments I

122 Improvement of the economic value of forests II 221 First afforestation of agricultural land I & II

123Adding value to agricultural and forestry

productsII 222

First establishment of agroforestry systems

on agricultural land II

124

Cooperation for development of new products,

processes and technologies in the agriculture

and food sector and the forestry sector

II 223 First afforestation of non-agricultural landI & II

125Infrastructure related to the development and

adaptation of agriculture and forestryII 224 Natura 2000 payments

II

126

Restoring agricultural production potential

damaged by natural disasters and introducing

appropriate prevention actions

II 225 Forest-environment paymentsI & II

131Meeting standards based on Community

legislationII 226

Restoring forestry potential and introducing

prevention actions I

132Participation of farmers in food quality

schemesII 227 Non-productive investments

I

133 Information and promotion activities II

141 Semi-subsistence farming II

142 Producer groups II

143Provision of farm advisory and extension

services in Bulgaria and RomaniaII

144Holdings undergoing restructuring due to a

reform of a common market organisationII

Code Measure Title Code Measure Title

311 Diversification into non-agricultural activities II 411Implementing local development strategies.

Competitiveness II

312 Business creation and development II 412Implementing local development strategies.

Environment/land management I

313 Encouragement of tourism activities II 413Implementing local development strategies.

Quality of l ife/diversification II

321Basic services for the economy and rural

population II 421 Implementing cooperation projects

II

322 Village renewal and development II 431 Running the local action group II

323Conservation and upgrading of the rural

heritageII

331 Training and information II

341Skills acquisition, animation and

implementation of local development strategiesII

Rural Development Measures by Axis and by Title

AXIS 2 IMPROVING THE ENVIRONMENT AND THE COUNTRYSIDE

THROUGH LAND MANAGEMENT

AXIS 4 LEADER

AXIS 1 IMPROVING THE COMPETITIVENESS OF THE AGRICULTURAL

AND FORESTRY SECTOR

AXIS 3 IMPROVING THE QUALITY OF LIFE IN RURAL AREAS AND

ENCOURAGING DIVERSIFICATION OF ECONOMIC ACTIVITY


Annex 10 – Part 4

The conformity clearance procedure and net financial corrections


4. The Conformity Clearance Procedure and Net Financial Corrections

4.1 What is "Clearance of Accounts"?

While it is the Member States which have the responsibility for managing and controlling the various aid schemes provided for by the CAP legislation, there must be a mechanism in place which enables the Commission to ensure that they carry out their work properly and, if they fail to do so, draw the necessary financial consequences. This mechanism consists of the clearance of accounts procedures operated by the Commission, which include an annual financial clearance of the accounts of each paying agency and a multi-annual conformity clearance covering the conformity of the transactions with EU rules.

4.1.1 Financial clearance - true, complete and accurate accounts

The financial clearance is based on an examination by the certification body, a body which is independent from the paying agency. This body draws up a certificate stating whether it has reasonable assurance that the accounts of the paying agency are true, complete and accurate and that the internal control procedures have operated satisfactorily (see above point 3). They also give an opinion on the statement of assurance signed by the head of the paying agency. The financial clearance covers the annual accounts of each paying agency and the control systems set up by these. Within this framework, particular attention is paid to the certification bodies’ conclusions and recommendations (where weaknesses are found), following their reviews of the paying agencies’ management and control systems. This review also covers aspects relating to the accreditation criteria for the paying agencies. The Commission adopts an annual clearance of accounts decision, by which it conveys that it accepts the paying agencies annual accounts on the basis of the certificates and reports from the certification bodies, but without prejudicing any subsequent decisions to recover expenditure which proves not to have been effected in conformity with EU rules (this is reserved for the conformity clearance). The Commission must adopt this decision by 30 April of the year following the financial year in question (for agricultural expenditure a financial year starts on 16 October of one year and ends on 15 October of the next year).

4.1.2 Conformity clearance – checking the system

In contrast to the financial clearance, the conformity clearance is designed to exclude expenditure from EU financing which has not been paid in conformity with EU rules, thus shielding the EU budget from expenditure that should not be charged to it. These "net financial corrections" are recovered from the Member States. The conformity clearance is, therefore, not a mechanism by which irregular payments are recovered from the final beneficiaries, which according to the principle of shared management is the sole responsibility of the Member States. However, net financial corrections are a strong incentive for the Member States to improve their management and control systems and thus to prevent or detect and recover irregular payments to final beneficiaries. The conformity clearance thereby contributes to the legality and regularity of the transactions at the level of the final beneficiaries.

Annex 10 – Part 4



While the financial clearance is an annual exercise, conformity clearance does not follow an annual cycle. It covers expenditure incurred in more than one financial year, with the exception of expenditure made more than 24 months before the Commission officially notifies the Member State of its audit findings. Every year, the Commission‘s Directorate-General for Agriculture and Rural Development carries out over 250 audits, about half of which include on-the-spot missions to the paying agencies in the Member States. The paying agencies to be visited are selected on the basis of a detailed risk analysis, and the audit work normally concentrates on the functioning of the agencies‘ management and control systems (see explanatory box 1.1 in Annex 10 – part 1 for more information on the central risk analysis).

* The new Horizontal Regulation provides that the accounts are cleared by 31 May

CLEARANCE OF ACCOUNTS

Two independent procedures

Financial Clearance Conformity Clearance

Trueness, completeness and accuracy of the accounts of the paying agency

Annual exerciseafter the end of the EAGF financial year

(starting on 16 October of one year and ending on 15

October of the next year

Compliance with EU law

Ad hoc compliance decisions cover up to 24 months prior to Commission's notification of audit findings to

the Member States

Audit to check:

Whether the paying agency's annual accounts are kept as required

Whether the internal contorl procedures have operated satisfactorily.

Audits to check:

Whether the expenditure is effected in compliance with EU rules;

Whether the paying agency has carried out the checks required to a satisfactory standard

Financial clearance decision by the Commission

Annually, by 30 April * of the year following the financial year

Conformity clearance decisions by the Commission covering expenditure effected

over several financial years

2-4 times per year

Annex 10 – Part 4



Diagram: Annex 10-4.1

4.1.3 How does the conformity procedure work in practice? If an audit reveals deficiencies in the functioning of the national systems, the Commission initiates a conformity clearance procedure with a view to determining whether to impose a net financial correction on the Member State in question and, if so, what the amount of that correction should be. Such a procedure comprises the following steps:

• First, the Commission officially notifies the Member State of its audit findings and indicates

the corrective measures which the Member State should take to remedy the deficiencies

found. The Member State then has two months to reply to the Commission‘s findings.

• Second, the Commission arranges a bilateral meeting with the Member State where both

parties shall endeavour to reach an agreement on the corrective measures to be taken as

well as on the gravity of the infringement and the financial damage caused to the EU budget.

Again, the Member State has two months after having received the minutes of the meeting

to react and provide further information.

• Third, the Commission formally communicates its conclusions to the Member State, including

the financial correction which it envisages to impose on the Member State.

• Fourth, within 30 working days following receipt of these conclusions, the Member State

may submit the case for conciliation to the "Conciliation Body". The Conciliation Body has

four months to try to reconcile the positions of the Commission and the Member State and,

at the end of this period, to draw up a report on the results of its efforts and any

recommendations it may wish to make to the parties.

• Finally, after having examined the Conciliation Body‘s report, the Commission notifies the

Member State of its final conclusions.

What is the Role of the Conciliation Body? The Conciliation procedure was set up in order to reconcile the divergent positions of the Commission and the Member State, occurring during the conformity clearance procedure. The Conciliation Body is composed of five members, who are highly qualified in matters regarding the financing of the CAP or in the practice of financial audit and originate from different Member States. The chairman and the four other members are nominated by the Commission, after having consulted the Committee on the Agricultural Funds. They are appointed for three years (renewable for a year at a time only). The secretariat of the Body is provided by the Commission. Only reasoned requests from the Member States are accepted by the Conciliation Body. A request for conciliation is only admissible when the correction proposed by the Commission services either exceeds EUR 1 million or accounts for more than 25 % of the Member State‘s total annual expenditure under the budget headings concerned or, if these thresholds are not reached, if the request concerns a matter of principle relating to the application of EU rules. The Conciliation Body has four months to reconcile the positions of the Commission and the Member State. At the end of its work – which takes place as informal and rapid as possible – the results are to be reported to the

Annex 10 – Part 4



Member State concerned, to the Commission and to the other Member States through the Committee on the Agricultural Funds. The Conciliation Body is completely independent; it carries out its duties neither seeking nor accepting any instructions from Member States or other body.

Explanatory Box: Annex 10 - 4.2 Once this procedure has been completed, any resulting financial correction is included in a formal decision adopted by the Commission, after having consulted the Member States through the Committee on the Agricultural Funds. Such a conformity decision can then be challenged by the Member States before the Court of First Instance in Luxembourg.

4.2 Net Financial Corrections 4.2.1 How does the Commission calculate net financial corrections? Financial corrections are determined on the basis of the nature and gravity of the infringement and the financial damage caused to the EU budget. Where possible, the amount is calculated on the basis of the loss actually caused or on the basis of an extrapolation. Where this is not possible, flat-rates are used which take account of the severity of the deficiencies in the national management and control systems in order to reflect the financial risk for the EU. In order to ensure equal treatment of all cases of this kind, the Commission has adopted guidelines which provide for standard correction rates of 2 %, 5 %, 10 % or 25 % of the expenditure at risk, depending on whether the deficiencies concern key or ancillary control requirements which are determined for each aid schemes.

What are key and ancillary controls?

- Key controls are the physical and administrative checks which are required to verify substantive elements and in particular the existence of the subject of the claim, the quantity and the qualitative conditions including the respect of time limits, harvesting requirements, etc. They are performed on the spot and by cross-checks of independent databases such as land registers.

- Ancillary controls involve the administrative operations required to process claims correctly and include verifying the respect of time limits for the submission of claims, identifying duplicate claims, risk analysis, the application of sanctions and the appropriate supervision of the procedures.

Explanatory Box: Annex 10 - 4.3

On this basis, the guidelines provide that:

• A correction of 2 % is justified when a Member State has failed to take measures to improve the application of ancillary controls;

• When all key controls are applied, but not in the number, frequency or depth required, then a correction of 5 % is justified as it can reasonably be concluded that the checks do not provide a sufficient level of assurance of the regularity of claims and that, therefore, the risk of loss to the EU budget was significant;

• When one or more key controls are not applied or applied so poorly or so infrequently that they are completely ineffective in determining the eligibility of the claim or in preventing irregularity, then a correction of 10 % is justified as it can reasonably be concluded that there was a high risk of widespread loss to the EU budget;

Annex 10 – Part 4



• When a Member State‘s application of a control system is completely absent or gravely deficient and there is evidence of widespread irregularity and negligence in countering irregular or fraudulent practices, then a correction of 25 % is justified as it can reasonably be assumed that the freedom to submit irregular claims may lead to exceptionally high losses to the EU budget.

The rate of correction may be fixed at an even higher rate to exclude all expenditure when weaknesses are so serious that they constitute a complete failure to comply with EU rules.

Year Month Procedural step Procedural Phase

Coverage of the

financial correction

2014 J START OF PROCEDURE

F Audit Mission

M

A

M

J

J

A

S

O

Bilateral meeting with MS to discuss deficiencies identified,

action to be taken and the risk to the EU Budget

N

D

2015 J

F

M

A

Notification of financial correction to MS and opening of the

conciliation procedure

M

J

J

A

S

O

N

D Final letter to MS with definitive financial correction

2016 J END OF PROCEDURE

F

M Commission decision on financial corrections

A

M

J Actual reimbursement to EU Budget by MS

DG AGRI Conformity Clearance Procedure for Net Financial Corrections

com

ito

logy

& C

OM

dec

isio

n p

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du

re

con

trad

icto

ry p

has

e w

ith

MS

Co

nci

liati

on

ph

ase

for

MS

fina

ncia

l

corr

ecti

on m

ay

cove

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pen

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re

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for

24

mon

ths

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r to

noti

fica

tion

.

fina

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rect

ion

may

cov

er

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ture

incu

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for

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per

iod

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tion

of

find

ing

unti

l MS

can

show

that

rem

edia

l act

ion

has

been

tak

en

Example of the timing of the procedure for an audit carried out on-the-spot in February 2014

Mission reporting & notification of findings to MS

Conciliation procedure (if requested by MS)

The Conciliation Body is independent of the COM and the

MS. Its role is to conciliate the positions of both parties. Its

conclusions are not binding on the COM.

Diagram: Annex 10-4.4

Annex 10 – Part 4



4.2.2 Do financial corrections have a deterrent effect?

Net financial corrections do put a real strain on the national budgets of Member States. Therefore, an option was introduced according to which corrections of a certain volume can be executed in three annual instalments on request of the Member State concerned. Execution in instalments was so far accepted for Bulgaria, Greece, Portugal, Romania, Spain and Lithuania. In addition, Member States under EU financial assistance may once request the Commission to defer the execution of financial corrections for a period of up to 18 months subject to the implementation of targeted remedial action plans. After the expiry of the deferral period the corrections are executed in three annual instalments. Deferrals were so far granted to Portugal and Greece. The deferrals granted will expire on 31 December 2013 for Greece and on 31 May 2014 for Portugal.

Impact of net financial corrections on Member States

In all Member States the national and regional authorities responsible for implementing the CAP are directly affected by EU net financial corrections. Such corrections which relate to expenditure made by Member States in previous budget years lead to a reduction of EU financing in the current budget year. This requires Member States in many cases to find the financial means necessary to fill the gap by making budget transfers or amending budgets. Against this background net financial corrections have led to concrete budgetary and administrative reactions. For instance:

- in Germany the Constitution was amended in 2006 following repeated disputes between the federal level and the Länder to clarify the burden-sharing with regard to financial corrections;

- in Denmark following a significant financial correction in 2009 a specific burden-sharing mechanism between the Ministry of Finance and the Ministry of Agriculture was recently put in place.

Explanatory Box: Annex 10 - 4.5

4.2.3 Legal Mechanisms for net financial corrections will be further consolidated

4.2.3.1 Focus on more risky expenditure

DG AGRI audit activities are driven by risk analysis, i.e. more audits focus on Member States, measures and programmes affected by higher risks. Once a year, DG AGRI conducts a central risk analysis covering all CAP expenditure in all Member States: evidence from previous DG AGRI audits, from the ECA, from OLAF and from the national certification bodies are collected and computed with a view to identify the most risky areas where future audits shall focus (see explanatory box 1.1 in Annex 10 - part 1). For instance as a result of the higher error rate reported by the Court in its DAS 2011 and DAS 2012 the number of EAFRD audits were increased significantly in 2013 (35) and will further increase in 2014 (to 45), thus doubling compared to 2012 (23). Another consequence is that some Member States are audited every year, until all serious deficiencies are remedied, as illustrated below with the example.

Annex 10 – Part 4



Example of intense supervision

DG AGRI audits of the Integrated Administrative and Control System (IACS) in 2008 and 2009 revealed and confirmed serious deficiencies: on-the-spot-controls were late and the Land Parcel Identification System (LPIS) was outdated and not precise enough. An audit mission in March 2011 concluded that the initial action plan requested by the Commission to remedy these deficiencies by 2011 had been only partially implemented. The failure to timely implement the remedial actions triggered a reservation in DG AGRI's 2010 Annual Activity Report (AAR), accompanied by a new action plan to remedy the deficiencies by 2013. In its AAR 2012 DG AGRI reported that an audit mission in March 2013 had confirmed that the action plan could be considered as finalised; but DG AGRI maintained the reservation because solid evidence that the updated LPIS is correctly used would not be available before a first cycle of claims/controls/payments. In the meantime, a first financial correction was imposed in relation to 2008 related expenditure, a second one for 2009; the conformity clearance procedure for 2010, 2011 and 2012 will be finalised by end 2014 and another conformity clearance procedure for 2013 related expenditure should be finished by end 2015.

Explanatory box annex 10 – 4.6

The audit strategy for the period 2014-2020 will be based on a reinforced risk analysis and a rolling three years programme which will ensure a better coverage of the overall expenditure. However, more intensive audit activities will continue to cover the most risky areas. See also explanatory box 1.2 in Annex 10 – part 1.

4.2.3.2 The Commission is legally bound to correct

Any identified risk to the EU budget systematically triggers a net financial correction. The Commission has no discretion to not correct as it is legally bound to exclude any identified illegal expenditure from EU financing. For both EAGF and EAFRD financial corrections are governed by the new CAP Horizontal Regulation39 which frames the procedure even more tightly to the effect that the method and the criteria for fixing the amount of financial corrections will now be set out in a delegated act. The adoption of that delegated act is planned for the first quarter of 2014.

As provided for in the Horizontal Regulation, the delegated act will establish the criteria for estimating the risk to the EU budget. In the case of flat-rate corrections, it is intended to specify how the severity of the deficiency shall be assessed, taking into account its nature (key or ancillary control) but also its recurrence (repetition from a previous year without improvement) and the accumulation with other deficiencies (the risk of errors is likely to be higher when there are several deficiencies). The ECA findings in its 2012 Annual Report, paragraph 4.3040 will thus be addressed, notably for cases where several deficiencies are present for the same population. Once the delegated act is in force, Commission guidelines will further detail the more technical elements.

39 Regulation (EU) no 1306/2013 of the European Parliament and of the Council on the financing, management and monitoring of the common agricultural policy (OJ L347 of 20/12/2013)

40 ECA Annual report 2012 paragraph 4.30: ''The use of flat-rate corrections does not sufficiently take into account the nature and gravity of the infringement, as the same flat-rate correction of 5% is applied, regardless of whether weaknesses were found for a single key control or for many such controls.''

Annex 10 – Part 4



4.2.3.3 Less recourse to flat-rate corrections

Both the Financial Regulation and the new CAP Horizontal Regulation provide for a ranking of types of financial corrections where flat-rate corrections may only be used if calculated or extrapolated corrections cannot be established with proportionate efforts flat-rate

Calculated and extrapolated corrections are currently based on DG AGRI auditors' findings and information provided by Member States during the contradictory procedure. In the future, DG AGRI will have more information to feed into the process from the yearly opinions to be delivered as from early 2016 (in respect of expenditure made on financial year 2015) by the certifying bodies carrying out the new task assigned to them examining the legality and regularity of transactions on the basis of representative samples of transactions.

4.2.3.4 Shorter conformity procedure

Carrying out a contradictory procedure is legally indispensable before making financial corrections. Prior to implementing any net financial correction, the Commission must therefore offer the Member States the opportunity to provide evidence and arguments that may contradict its initial findings. Indeed the current CAP financing regulation and the new CAP Horizontal Regulation provide that "Member States shall be given the opportunity to demonstrate that the actual extent of the non-compliance is less than the Commission's assessment". The principle of a contradictory process between the auditor and the auditee is also an essential element of audit quality standards.

In addition to the contradictory procedure, Art 52(3) of the CAP Horizontal Regulation provides for a "procedure aimed at reconciling each party's position" if an agreement is not reached at the end of the contradictory procedure. The duration of the conciliation as such is limited to 4 months. But the whole process from the request of the Member State concerned to the final result of the analysis by the Commission of the recommendations of the conciliation body takes at least 6 months41.

The Commission has engaged in and will continue actions aiming at streamlining the whole procedure. Firstly, the new CAP Horizontal Regulation describes precisely the nature, scope and sequence of the successive steps, as well as the different types of financial corrections. Secondly, provisions in the delegated act (method and criteria for calculating the financial correction) and implementing acts (details of the conformity procedure, with deadlines for each step of the procedure) are intended to further streamline the legal framework and limit the risk of unnecessary delays. Thirdly, on that stronger basis, DG AGRI will intensify its monitoring of the progress of the conformity procedures to ensure a strict respect of the deadlines.

The following diagram describes the successive steps of a conformity clearance procedure leading to a net financial correction carried out under the proposals to implement the new CAP Horizontal Regulation. As indicated in the Commission's answer to paragraph 4.3142 of the ECA's 2012 Annual report on the excessive length of the conformity procedure, there is scope for significantly speeding up the conformity procedure so that in standard cases the financial corrections can be decided two years after the initial audit took place.

41 It can take even longer if the whole case has to be re-examined.

42 ECA Annual report 2012 paragraph 4.31 Commission reply: "Notably in the framework of the preparation for the implementation of the CAP reform, the Commission will continue in its efforts to improve and speed up the process, bearing in mind the need to maintain quality standards and the Member State's right of reply."

Annex 10 – Part 5

Recoveries by the Member States from the Final Beneficiaries of unduly paid amounts


5. Recoveries

5.1 Legal Framework

Regulation (EC) No 1290/2005 on the financing of the CAP requires the Member States to recover sums lost as a result of detected irregular payments. However, the recovery procedures, in accordance with the principle of subsidiarity, are wholly the responsibility of the Member States concerned and, thus, subject to their individual judicial procedures. Therefore, while some procedures delivery rapid results, other take a longer period of time.

In order to address delays by some Member States in recovering undue payments, the legislator introduced an automatic clearing mechanism under which 50 % of any undue payments which the Member States have not recovered from the beneficiaries within 4 years or, in the case of legal proceedings, 8 years, would be charged to their national budgets (50/50 rule).

Even after the application of this mechanism, Member States are, however, obliged to pursue their recovery procedures and, if they fail to do so with the necessary diligence, the Commission may decide to charge the entire outstanding amounts to the Member States concerned. Moreover, Member States are required to off-set any outstanding debts against future payments to the debtor (compulsory compensation).

Undue payments that are the result of administrative errors committed by the national authorities also have to be deducted from the annual accounts of the paying agencies concerned and, thus, excluded from EU financing.

5.2 Amounts Recovered in 2013

Table 5.1 on the following page sets out the amounts recovered in 2013 by the Member States for the EAGF (split between ABB02 and ABB03 is not provided in the data received) and the EAFRD. This shows that 197 million EUR was recovered in respect of the two funds.

Annex 10 – Part 5



EAGF EAFRD Total CAP

EUR EUR EUR

Austria 3.757.498 11.946.005 15.703.503

Belgium 1.572.238 1.303.368 2.875.606

Bulgaria 5.422 1.612.745 1.618.167

Cyprus 412.074 592.282 1.004.356

Czech Republic 63.541 2.020.177 2.083.719

Germany 6.524.918 7.968.624 14.493.541

Denmark 768.034 590.581 1.358.615

Estonia 47.477 1.665.600 1.713.077

Spain 11.740.228 2.748.129 14.488.357

Finland 2.639.599 1.065.849 3.705.447

France 13.724.720 2.076.281 15.801.001

Greece 1.983.989 669.713 2.653.703

Hungary 2.139.247 9.248.917 11.388.164

Ireland 2.711.880 1.542.227 4.254.107

Italy 9.163.732 3.548.017 12.711.749

Lithuania 453.051 617.509 1.070.560

Luxembourg 42.032 27.254 69.286

Latvia 269.603 563.191 832.794

Malta 2.415 106.165 108.580

Netherlands 5.893.214 850.003 6.743.217

Poland 10.261.630 11.303.061 21.564.691

Portugal 5.065.480 4.897.933 9.963.413

Romania 3.791.787 28.685.177 32.476.965

Sweden 5.152.778 1.125.117 6.277.895

Slovenia 610.088 510.025 1.120.112

Slovakia 89.529 826.905 916.434

UK 5.420.791 4.597.863 10.018.655

Total 94.306.996 98.110.854 192.417.850

Amounts recovered by Member States in 2013

Table: Annex 10 – 5.1

5.3 Application of the 50/50 Rule

The financial consequences of non-recovery for cases dating from 2009 (4 year deadline for recovery) or 2005 (8 year deadline if legal proceedings) will be determined for 2013 in accordance with the 50/50 rule mentioned above by charging approximately €17.1 million to the Member States concerned. Moreover, around € 18.7 million will be borne by the EU budget for cases reported irrecoverable during financial year 2013. The final figures will be established in April 2014 when the financial clearance decision for financial year 2013 will be adopted. Due to the application of the 50/50 rule, important non-recovered sums have

Annex 10 – Part 5



already been charged to the Member States for EAGF expenditure.

The overall outstanding amount still to be recovered from the beneficiaries at the end of that financial year was 1 318.3 million EUR. Of this amount, 1 097.1 million EUR is outstanding to the EU budget (the difference having already been charged to the Member States via the 50/50 mechanism).

As regards the recovery of undue payments financed by the EAFRD, it has to be noted that the 50/50 rule is applied only after the closure of the rural development programmes.

The clearance mechanism (50/50 rule) referred to above provides a strong incentive for Member States to recover undue payments from the beneficiaries as quickly as possible. As a result, by the end of financial year 2013, 49 % of the new EAGF debts from 2007 and thereafter had already been recovered, which is a significant improvement compared to the past. The detailed breakdown of this recovery rate has developed as follows:

Rate of recovery from beneficiaries of irregularities detected since 2007 - EAGF:

Recovery rate

until end of 2007

until end of 2008

until end of 2009

until end of 2010

until end of 2011

until end of 2012

until end of 2013

year o

f d

iscovery o

f th

e

irreg

ula

rit

y

2007 33% 47% 50% 53% 60% 68% 69%

2008 - 24% 40% 47% 49% 58% 59%

2009 - - 24% 33% 42% 44% 46%

2010 - - - 29% 39% 44% 45%

2011 - - - - 23% 37% 39%

2012 - - - - - 34% 60%

2013 - 23%

2007-2013

- - - - - - 49%

Table: Annex 10 – 5.2

It is worth noting that some of these new debt amounts were already written off by Member States in the period 2007-2013 (€ 74.6 million) and therefore they will most likely not be recovered. For more details on the recovery rates at Member State level, see Table 5.3 below.

Annex 10 – Part 5



Recoveries (EUR) from beneficiaries for cases detected since 2007 - EAGF

MS New cases since 2007 Adjustments Recoveries Recovery rate

AT 30,280,062.66 -1,946,845.24 -28,772,459.96 100%

BE 79,526,001.75 -29,596,346.15 -27,046,616.46 54%

BG 837,332.26 149,091.97 -40,303.17 4%

CY 2,832,629.95 -19,501.93 -1,844,488.65 66%

CZ 2,305,173.49 -111,396.44 -2,175,609.75 99%

DE 71,414,418.06 1,186,434.80 -59,671,779.81 82%

DK 31,138,346.76 9,084,609.35 -22,153,719.26 55%

EE 2,383,217.79 -1,022,114.52 -1,238,756.02 91%

ES 220,571,422.82 -26,555,646.03 -119,795,859.68 62%

FI 9,216,561.17 243,866.29 -8,738,418.80 92%

FR 177,825,573.47 85,747,021.88 -67,207,653.08 25%

GB 46,469,268.56 -8,673,262.92 -31,941,900.61 85%

GR 49,316,439.29 -14,197,610.95 -7,454,539.07 21%

HU 47,832,029.22 -13,054,845.09 -11,553,428.10 33%

IE 26,038,579.50 -2,744,365.91 -20,759,608.57 89%

IT 239,646,089.54 55,180,751.70 -112,222,627.49 38%

LT 5,960,856.12 -2,453,439.84 -3,216,287.84 92%

LU 1,052,204.18 -489,191.39 -307,928.14 55%

LV 1,753,582.20 -45,027.38 -1,299,338.45 76%

MT 1,063,440.27 76,849.13 -589,262.17 52%

NL 64,229,289.51 -7,736,523.07 -20,590,405.44 36%

PL 17,706,588.77 5,247,926.09 -18,638,328.90 81%

PT 68,705,367.81 -15,668,064.77 -30,804,829.81 58%

RO 19,422,115.88 858,855.92 -9,201,507.40 45%

SE 26,044,336.33 -3,618,021.75 -16,708,893.81 75%

SI 15,206,322.96 1,790,353.26 -4,317,226.23 25%

SK 2,638,156.89 -843,345.11 -487,586.03 27%

Totals 1,261,415,407.22 30,790,211.89 -628,779,362.69 49% Table: Annex 10 – 5.2

5.4 DG AGRI Audits

During the period 2008-2013, DG AGRI has audited the correct application of the new clearance mechanism through 29 audit missions in 19 Member States (including all EU-15 Member States with a low recovery rate for the cases detected since 2007). In general the Member States' authorities have adequate procedures in place to protect the financial interest of the European Union. Deficiencies found during these audits are being followed in the context of conformity clearance procedures. The ECA's systems audits for the last two years have not found any serious deficiencies in the Member States' debt management systems.

The diligence of the Member States' authorities in the recovery of the most significant individual irregularity cases is assessed in the context of a further 30 on-going conformity clearance procedures (desk audits).

Annex 10 – Part 6

Cross Compliance


6. Cross Compliance

The respect of cross-compliance obligations does not constitute an eligibility criterion for CAP payments and, therefore, the controls of these requirements do not pertain to the legality and regularity of the underlying transactions. Cross-compliance is a mechanism by which farmers are penalised when they do not respect a series of rules which stem in general from other policies than the CAP and apply to EU citizens independently of the CAP. Thus, penalties imposed for violations of cross-compliance requirements are not taken into account for the calculation of the error rates for the CAP.

The control statistics referred to below do not therefore correspond to errors in underlying transactions.

The results of the controls on cross-compliance are shown in Table 6.1 in respect of claim year 2012. It shows that 2.33 % of all claimants were controlled on cross-compliance requirements in claim year 2012, and thereby the minimum control rates of 1 % were globally respected. This corresponds to 8.48 % of the aid subject to cross-compliance. The rate of farmers controlled on-the-spot and subject to a subsequent sanction for cross-compliance was slightly higher than in 2011 (19.79 %) at 19.94 % of all farmers controlled in 2012, corresponding to 1.14 % of the aid claimed by the farmers controlled.

The cross-compliance sanctions due to the regulatory on-the-spot-checks amounted to 24.7 million EUR in total (20.6 million EUR for EAGF and 4.1 million EUR for EAFRD). According to the control statistics, total cross-compliance sanctions in respect of the 2012 claim year amounted to € 40.2 million for EAGF and € 8.0 million for EAFRD.

An analysis of the figures indicates that, as far as the EAGF is concerned, the sanctions applied in case of negligence of the farmer, i.e. excluding the sanctions for repetition and intentional non-compliance, amount to 21.1 million EUR (2.40 % of the aid granted ), and for the EAFRD, the sanctions amount to 4.3 million EUR (2.31 % of the aid granted). To these sanctions are to be added the total of sanctions following repetition and intentional non-compliance of 22.8 million EUR.

Annex 10 – Part 6

Cross Compliance


Control data on application and results of on-the-spot checks

Financial/calendar/claim year: 2013/2012/2012

Total number of

beneficiaries

Number of

beneficiaries

As share of total

number of

beneficiaries

Beneficiaries

sanctioned for non-

compliances

As share of total

number of on-the-

spot-checks

A B C=B/A D E=D/B

AT 128.527 3.008 2,34% 590 19,61%

BE 38.444 5.396 14,04% 459 8,51%

DE 320.371 9.081 2,83% 2.415 26,59%

DK 46.903 1.265 2,70% 221 17,47%

EL 761.048 8.024 1,05% 2.543 31,69%

ES 945.544 15.286 1,62% 3.226 21,10%

FI 58.688 1.951 3,32% 206 10,56%

FR 362.709 16.976 4,68% 4.090 24,09%

IE 129.025 1.311 1,02% 612 46,68%

IT 1.253.000 43.840 3,50% 2.781 6,34%

LU 2.048 247 12,06% 89 36,03%

NL 55.277 862 1,56% 179 20,77%

PT 206.395 3.357 1,63% 421 12,54%

SE 67.789 1.008 1,49% 320 31,75%

UK 182.105 7.017 3,85% 940 13,40%

EU-15 2012 4.557.873 118.629 2,60% 19.092 16,09%

EU-15 2011 4.683.440 117.017 2,50% 19.167 16,38%

CY 34.780 425 1,22% 115 27,06%

CZ 29.205 2.263 7,75% 72 3,18%

EE 20.848 672 3,22% 69 10,27%

HU 181.834 9.400 5,17% 1.353 14,39%

LV 63.828 1.694 2,65% 279 16,47%

LT 159.268 5.551 3,49% 3.136 56,49%

MT 17.903 101 0,56% 141 139,60%

PL 1.357.372 25.500 1,88% 7.517 29,48%

SK 16.606 245 1,48% 64 26,12%

SI 59.085 940 1,59% 175 18,62%

EU-10 2012 1.940.729 46.791 2,41% 12.921 27,61%

EU-10 2011 1.935.670 50.400 2,60% 13.059 25,91%

BG 87.215 2.152 2,47% 1.076 50,00%

RO 1.072.267 10.732 1,00% 2.456 22,88%

EU-2 2012 1.159.482 12.884 1,11% 3.532 27,41%

EU-2 2011 1.175.620 15.080 1,28% 3.885 25,76%

EU-27 2012 7.658.084 178.304 2,33% 35.545 19,94%

EU-27 2011 7.794.730 182.497 2,34% 36.111 19,79%

Population Subject to on-the-spot checks Results of on-the-spot checks

Table: Annex 10 - 6,1

Member

State

ANNEXES

ANNEX 11: Specific annexes related to "Assessment of the effectiveness of the internal control systems" (Part 3)



DG AGRI Internal Control Standards - summary table

Internal Control Standards Effectiveness

ICS

pri

ori

tised

in

2013 M

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y/n

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31/1

2/2

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2014 M

P (

y/n

)

Comments

ICS 1 Mission N

Y Y

Standard selected to take into account the re-organisation of DG AGRI and the new organisation chart entered into force on the 1.1.2014

ICS 2 Ethical and Organisational Values

Y

1. The DG has procedures in place - including updates and yearly reminders - to ensure that all staff are aware of relevant ethical and organisational values, in particular ethical conduct, avoidance of conflicts of interest, fraud prevention and reporting of irregularities.

Y N

ICS 3 Staff Allocation and Mobility

Y

1. Whenever necessary - at least once a year - management aligns the organisational structures and staff allocations with priorities and workload.

Y Y

This standard will continue to be prioritised with a view to focus on a more effective and efficient staff allocation, against the overall context of the staff reduction and the specific challenges of the CAP reform. Thiswork will also contribute addressing the recommendations issued by the Internal Audit Service

ICS 4 Staff Evaluation and Development

N

Y N

ICS 5 Objectives and performance Indicators

N Y N

ICS 6 Risk Management N Y N

ANNEXES



Internal Control Standards Effectiveness

ICS

pri

ori

tised

in

2013 M

P (

y/n

) ?

Rati

on

ale

fo

r p

rio

riti

sati

on

in

2013 M

P

ICS

eff

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vely

imp

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en

ted

on

31/1

2/2

013 (

y/n

)

ICS

pri

ori

tised

in

2014 M

P (

y/n

)

Comments

ICS 7 Operational Structure

N Y N

ICS 8 Processes and Procedures

N Y N

ICS 9 Management Supervision

Y

1. Management at all levels supervise the activities they are responsible for and keep track of main issues identified. Management supervision covers both legality and regularity aspects and operational performance (i.e. achievement of MP objectives).

Y N

3. Management monitors the implementation of accepted ECA/IAS/IAC audit recommendations and related action plans.

ICS 10 Business Continuity

N Y N

ICS 11 Document Management

N Y N

ICS 12 Information and Communication

N N N

The standard will be proritised in MP 2014 update to address the recommendations issued by the AGRI internal audit for the actions scheduled in 2014

ICS 13 Accounting and Financial Reporting

N Y N

ICS 14 Evaluation of Activities

N Y N

ICS 15 Assessment of Internal Control Systems

N Y N

ICS 16 Internal Audit Capability

N Y N

ANNEXES

ANNEX 12: 2014 Management Plan: Key Performance Indicators



Indicator Target Latest known results

1. Agricultural factor income

(Impact indicator)

To increase 2012 (EU28): 14 376.7 EUR/AWU (in current prices)

ANNEXES




2. EU commodity prices compared to world prices

(Result indicator)

EU prices brought closer to world prices

Baseline (December 2013):

1. Price indices

(Jan 2000 = 100)

World

Beef Chicken Pork Wheat US

SRW Wheat US

HRW Maize Barley Butter Cheddar SMP WMP

156.4 132.4 155.2 203.5 202.7 158.1 160.5 262.7 204.2 229.7 239.3

European Union

Beef Chicken Pork Soft

wheat Maize Barley Butter Cheddar SMP WMP

130.7 141.1 150.8 136.3 117.5 142.8 131.9 127.0 140.5 137.9

2. Absolute prices

World

Beef Chicken Pork Wheat US

SRW Wheat US

HRW Maize Barley Butter Cheddar SMP WMP

EUR/100 kg EUR/t EUR/t

300.0 167.7 127.5 195.8 221.5 144.5 178.1 3,174.3 3,575.6 3,484.4 3,749.3

European Union

Beef Chicken Pork Soft

wheat Maize Barley Butter Cheddar SMP WMP

EUR/100 kg EUR/t EUR/t

380.3 189.8 170.1 192.2 164.5 177.5 4,088.4 4,013.2 3,240.8 3,751.5

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EU commodity prices compared to world prices:

The relationship between EU and world prices can also be monitored through a ratio calculated between the EU and international price for a basket of 11 individual commodities whose quotations are considered comparable; the closer the ratio is to 1, the narrower the gap is between the two.

Ratio EU/world price

2009 2010 2011 2012 2013

BEEF 1.69 1.26 1.21 1.19 1.24

PIG MEAT 1.60 1.17 1.12 1.19 1.21

POULTRY 1.26 1.18 1.35 1.19 1.13

SOFT WHEAT 0.98 0.92 1.07 0.99 1.02

MAIZE 1.10 1.19 1.05 0.95 1.04

BARLEY 1.10 0.96 1.04 0.96 1.00

SUGAR 1.56 1.03 1.10 1.55 1.90

BUTTER 1.43 1.09 1.18 1.19 1.27

CHEDDAR 1.14 0.95 1.03 1.14 0.94

WMP 1.20 1.03 1.08 1.09 0.98

SMP 1.09 0.93 0.90 0.95 0.90

Weighted average 1.31 1.08 1.12 1.13 1.12

The gradual dismantling of product-specific support throughout consecutive CAP reforms since 1992 geared EU agriculture towards a market oriented approach regarding production decisions. The decoupling of direct payments, abolition of production limiting measures and the lowering of market intervention instruments all contributed to improve the market orientation of EU farmers, thereby improving their competitiveness. This has brought EU and world market prices to full convergence, save for certain products that remain subject to support (e.g. butter and beef import TRQs, sugar quotas). This convergence has been facilitated over the last decade by a marked increase in global commodity prices driven by a persistent global demand growth for agricultural products (demand pull), and an increase in energy prices (cost push) that have led to a reversal in the long term decline of commodity prices. Within this context, the EU faces strong competition from third country exporters for global markets, and has seen a decrease in market share for most commodities, while being able to maintain a net exporter position in recent years. In order to maintain - if not increase - its market share, the EU has to be able to compete on the global market through higher added value products or lower production costs (not fully reflected in this indicator which represents comparable products globally).

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3. Minimum share of agricultural land with specific environmental practices/commitment

43

(Result indicator)

Data not available

Data not available

4. Rural employment rate

(Impact indicator)

To increase 2012: 63.4 % (EU-28)

5. Residual Error Rate integrating financial corrections

(Result indicator)

To reduce Data not available

43 Combining the indicator "Share of eligible land under greening practices" for first pillar and "Share of agricultural land" indicators for second pillar specific objectives 4 and 5

ANNEXES

ANNEX 13: AWBM 01 Administrative support



Reporting on the performance achievements of AWBM 01 Administrative support has been moved from Part 1 Policy achievements to the Annexes.

1.1.37 AWBM 01 Administrative support – Specific objective 1

ABB activity: AWBM 01

Spending programme

Non-spending

Relevant general objectives: This specific objective contributes to achieving all three general objectives.

Specific objective 1

Result indicator Target

(mid-term)

Current situation

To establish, perform, monitor and report on the financing of the CAP and Rural Development so that sound and regular financial management of these policies is assured.

This activity contributes to achieving all three general objectives.

% of budget execution (commitments) with respect to budget appropriations

(Source: DG BUDG, budgetary execution reports)

99% 99.9%44

% of budget execution (payments) with respect to budget appropriations

(Source: DG BUDG, budgetary execution reports)

99% 99.8%

44 For EAGF and administrative expenditure for policy area 05 managed outside DG AGRI: provisional execution. Execution % on voted budget including Amending Budget n° 8)

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Spending programme

Non-spending




(mid-term)

Current situation

To define, plan, set-up, maintain and develop high quality Information Technology (IT) infrastructures, tools and services so that (i) the staff is adequately supported in their operation, with the appropriate levels of training and security, and so that (ii) a high quality information system life cycle is assured in support of DG AGRI's activities.

Implementation of the relevant parts of the IT Master Plan (Schema Directeur; ICT Investment Plan of DG AGRI)

(Source: Based on financial execution)

95% 100% (December 2013)

Servers' availability (averaged over one year)

(Source: DG AGRI)

≥99% >99 % (October 2012)

Maximum time to:

- resolve the problems related to standard IT applications/infrastructures:

- appropriately escalade the problem if its resolution depends on intervention of non-AGRI entities (ex. DIGIT)

- Critical: immediate

- Urgent: 1h30'

- Normal: 2h30'

- Low: 2 days

- Scheduled: on schedule

Target should be met for at least 92 % of calls

From 18/03/2013 onwards, the support has been transferred to DG DIGIT (ITIC project).

Information Systems User Satisfaction

(Source: DG AGRI Survey)

>/= 80%, to be progressively increased

83% (April 2013 )45

45 The survey focus is exclusively on several parameters related to user satisfaction on DG AGRI key Information Systems (friendliness, response time, availability, etc.). Results are discussed with the System Owners to identify actions for improvement. These actions require substantial effort and appropriate time for implementation, so the target has been revised and will be progressively increased in the future.

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Spending programme

Non-spending




(mid-term)

Current situation

To attract, deploy, develop and retain highly qualified staff and provide them with working conditions that support them in the accomplishment of their tasks.

Average vacancy rate of available permanent posts

(Source: HR Dashboard)

Vacancy rate < or = Commission average

(2013: 6.4%)

2013: 7.6 %46

2012: 6.7 %

2011: 4.4 %

HR capacity utilisation47


>= 90 %

(COM:89.6%)

Dec 2012-Nov2013: 89.3 %

Management positions held by women

48


MM AGRI target

2013: 29.6 %

SM Commission target

2013: 25.8 %

01.12.2013: 24.5 % MM, 21.4 % SM

31.12.2012: 25 % MM, 23.5 % SM

31.12.2011: 30.2 % MM, 16.7 % SM

Mobility rate


Keep target at 20 % +/- 2 %

31.12.2013: 20 %

2012: 23.5 %

2011: 20.9 %

Staff satisfaction with49

:

- job

- quality of HR management

- private/ professional life balance

(Source: HR Staff Survey)

Equal or better results than Commission average

HR survey 2013

75.6 % (Com: 72.2 %)

(not asked in 2013 survey)

66 % (Com: 66 %)

Budget execution global envelope (commitments)

50

(Source: ABAC)

95 % by year end

31.12.2013: 99.9 %

2012: 95 %

2011: 100 %

46 Vacancy rate at a relative high level due to number of posts in the reserve to prepare for post transformations and staff reductions

47 Staff time available for allocation to activities after deducting absences (except annual leaves and flexitime Recuperation) and use of flexible working arrangements from the total number of available working days.

48 Calculation of targets according to the Commission's Equal Opportunities Strategy 2010-2014: DG specific targets for middle management (MM) baseline is 2010 (in AGRI: 14 female MM=25.9 %; 8 MM retirements expected until end 2014 (2F+6M), target of 50/50 replacement => recruitment of 4 female MM; end value would be 16 female MM=29.6 %). Senior management (SM) targets are for the Commission as a whole. The targets have been adapted the Commission's Equal Opportunities Strategy 2010-2014.

49 The DG HR survey (516 AGRI respondents) is conducted every 2 years.

50 The global envelope is part of administrative credits used to finance external personnel, missions, meetings and representation costs, training and conferences, studies and the development of IT systems.

ANNEXES





Spending programme

Non-spending




(mid-term)

Current situation

To maintain effective document management system; ensure compliance with personal data protection rules in force, and ensure a high level of transparency and security in DG AGRI.

Percentage of filing of documents in DG AGRI

(Source: Statistics from ARES provided by SG and DIGIT for 2013)

100 % of documents ARES filed

99.85 % of AGRI documents were filed in Ares

Respect of deadlines in answering requests for documents and mails from citizens

(Source: Gestdem, application for managing access to documents requests)

100 % of request for documents and information answered within established deadlines

All requests were answered within the established deadline of 15 working days.

51

100 %

2011: 167 requests

2012: 208 (incl. 25 complicated)

2013: 199

Respect of deadlines in managing the complaints and requests for information on application of European law

(Source: CHAP)

100 % of deadlines for managing the complaints and requests for information on application of European law respected

100 %

2010: 76 files treated

2011: 126 files handled

2012: 72 files

2013: 105

Notification of identified personal data processings in DG AGRI

(Source: Data Protection Officer Register)

100 % of identified processings included in the register of the DPO

96 % (30 identified personal data processings, of which 29 are in the register)

Good functioning of the Business Continuity Plan (BCP), proven by updates and tests of the BCP; implementing the decisions of the Security Committee of DG AGRI

(Source: DG AGRI)

2013 BCP update finalized by October 2013

In view of DG AGRI reorganization the update of the

Business Continuity Exercise Programme for DG AGRI (April 2012 – December 2015)

DRP Test conducted successfully in June 2012

DG AGRI participation in

51 Prolongations based on art.6, § 2 and § 3 and Art 7, § 3 of Regulation 1049/2001 were needed for about 19 complicated requests.

ANNEXES



BCP to reflect the new organizational structure of DG AGRI and the Business Impact Analysis to determine the critical and essential tasks are rescheduled for 31 Mar 2014.

the Duty Officer Exercise in July 2012

NOAH exercise for Loi 130 staff conducted after the evacuation on 23 October 2012

Successful participation in the BCP Corporate exercise in November 2012

Lunchtime conference on RUE (the system for RESTREINT UE) on 23 May 2013

Successful participation of DG AGRI in the Corporate Duty Officer Exercise in July 2013

Token Exercise for DG AGRI Critical staff (29 Nov – 1 Dec 2013)

Update to the list of centrally-hosted IT critical, essential and necessary systems – response to ISC – Sep 2013

DRP Test conducted successfully in Sep 2013

Regular meetings of the Security Committee of DG AGRI on 14 Mar, 7 Jun, 13 Sep, and 15 Nov 2013

Regular updates of the BCP annexes and NOAH Business Continuity application

Rapid reaction to/confirmation of messages sent by the central ARGUS system

(Source: DG AGRI ARGUS mailbox)

Good functioning of the Duty Officer system put in place in DG AGRI

Update of the Duty Officer guidelines (Annex 8 of the BCP); regular contacts and awareness raising for the duty officers

Regular updates of the NOAH database

No ARGUS Phase II alerts during the reporting period

ANNEXES





Spending programme

Non-spending

Relevant general objectives: This activity contributes to achieving all three general objectives.



(mid-term)

Current situation

To implement, maintain and report on an effective and reliable internal control system so that:

- the control procedures put in place give the necessary guarantee concerning the legality and the regularity of the underlying operations;

- risk of errors in operations is minimised and;

- reasonable assurance can be given that resources assigned are used according to the principles

Internal Audit (Source: DG AGRI IAC)

Level of implementation of the audit plan and rationale for any changes to the plan

52

100 % implementation by 31/3/n+1

All draft reports published by the end of the planning year (31/12)

100 % of the 2012 Audit work programme (AWP), as modified in July 2012

53 and February

201354

had been implemented on 31.3.2013.

On 31.12.2013, for 88% of the audit assignments planned in 2013 (covering both new audits or follow-up assignments), either the final report or the draft report had been issued.

Level of acceptance by the auditees of audit recommendations issued by the IAC

>90 % 99 % (95 out of 96 recommendations) of which :

- Critical – n/a

- Very important – 100 %

% of accepted audit recommendations

- implemented,

- implemented within the deadlines

>90 %

>80 %

69% for 2013 (69 % for 2012)

69% for 2013 (67 % for 2012)

Assistance and Central Financial Control

Error rates relating to centralised direct management through assistance before payment

(Source: Files Ex-ante Controls, FEC)

Stabilisation compared to previous years

(3.02 % in 2009, 2.86 %in 2010, 3.20% in 2011, 3.60 % in 2012)

3,65 % (out of of which 0.73 % of substantial errors) composed of:

Financial files: 2,47%

Other files: 1,19 %

52 The indicator has been slightly precised to reflect better the activity.

53 Ares(2012)908497 of 26 July 2012.

54 On 14 February 2013, the Director-General adopted the 2013 audit work plan and decided that 3 audits originally foreseen for 2012 would be postponed until 2013 and integrated in the 2013 AWP. See Ares(2013)191858 of 14 February 2013.

ANNEXES



of sound financial management.

Respect of payment deadlines provided for in the Financial Regulation (FR)

(Source: Business object, see ABAC)

1) respect of the deadlines

2) No late payment interest paid

1) 98.2 %

2) Late interest paid for a total amount of 541.85 €

Awareness of financial rules and regulations among financial actors by assistance and training organised

(Source: Syslog and presence sheets of the trainings)

80 agents trained 229 agents trained

Internal Control

Formal compliance with internal control standards:

- Degree of compliance

(Source: Yearly assessment of ICS compliance, No 15)

100 % 100 %

Effective implementation of prioritised control standards:

- Degree of staff awareness of prioritised control standards

- Degree of implementation of planned actions on prioritised control standards

(Source: Yearly assessment of ICS compliance, No 15)

Maintain and if possible improve results

2013: increased positive results on ethics (control standard No 2), staff allocation (internal control standard No 3) and Management Supervision (control standard No 9).

Support and coordination of the risk management process:

- Establishment and maintenance of a DG Risk Register with the critical and significant risks

Keep up-to-date DG Risk Register

2014 Risk Register finalised (December 2013)

- Degree of implementation of the foreseen action plans to manage the significant and critical risks in the Register

(Source: Risk management exercise)

100 % implementation of planned actions for 2013

Degree of implementation is overall satisfactory; nevertheless some risks will need to be carried over with an update action plan; 1 risk has been reformulated and included aspects of previous risks.

Key indicators on legality and regularity

Reception of certificates and reports of certification bodies on functioning of paying agencies' internal control systems

(Source: AAR)

100 % received to be able to be taken into account for the AAR

100 % for financial year 2013


Reception of statements of assurance 100 % received to 100 % for financial year

ANNEXES



signed by the directors of paying agencies

(Source: AAR)

be able to be taken into account for the AAR

2013


Reception of opinions of certification bodies on statements of assurance

(Source: AAR)




Percentage of expenditure (EAGF+ EAFRD) with statistics or 100 % check

(Source: AAR)

95 % 91.7%

Reception of opinion of certification bodies on the quality of the on-the-spot controls

(Source: AAR)


For financial year 2013 (2012):

EAGF – IACS 100 % (100%)

EAGF – non IACS 84 % (91 %)

EAFRD – IACS 97 % (98 %)

EAFRD – non IACS 96% (96 %)

Reception of opinions of certification bodies on the accuracy of the control statistics

(Source: AAR)


For financial year 2013(2012):

EAGF – IACS 97 % (95 %)

EAFRD 95 % (91 %)

Reception of annual summaries by the coordinating bodies

(Source: AAR)



100 % (for financial year 2012)

Fraud prevention and detection

Development and implementation of DG AGRI's anti-fraud strategy

(Source: DG AGRI Anti-fraud strategy)

- Implementation in accordance with the schedule set out in the strategy:

55

- Appointment of an anti-fraud adviser reporting directly to the Director-General, (first quarter 2013)

The function of anti-fraud adviser was created early in 2013. The subsequent appointment of the adviser took effect as at 16 March 2013.

Internal rules for the handling of denunciations and OLAF cases have been approved by the

55 Target slightly modified in order to reduce redundancies with the following indicator.

ANNEXES



Director-General on 15 March 2013. An updated version of the internal rules has been approved by the Director-General on 4 February 2014.

All documents relating to the AFS are available to staff on the AGRI-intranet.

Prevention of fraud56


Design of a specific training to increase fraud awareness within the DG in first quarter 2013

3 Seminars to be organised in candidate countries by mid-2013.

Further fraud-prevention seminars in Turkey and Romania until end of 2013.

Presentation of the AFS to Managing Authorities of RDPs in MS by the geographical units.

Training actions ongoing.

Throughout the year 2013, the AFS has also been presented to all management authorities of the RDPs in the context of the annual or progress meetings with DG AGRI.

Anti-fraud seminars for the Romanian Paying Agency for Rural Development and for the Audit Directorate of the Romanian Ministry of Agriculture have been animated by the Anti-fraud Adviser in September and October 2013. Seminars of this kind have been held in Croatia (4 March 2013), Macedonia (20 March2013) and Turkey (15 May 2013). OLAF and DG AGRI have jointly organised and held a seminar on fraud in Rural Development in October 2013 for all MS in Croatia. Finally, the AFS has been presented to the RD-Committee on 23 January 2013.

Guidance notes on the detection of Red Flags for fraud on manipulated investment projects, on the artificial creation of funding

56 The target has been adapted to 2013 plan.

ANNEXES



conditions, and on second-hand equipment have been drafted and sent to the Paying Agencies mentioned above.

On 31 January and 11 December 2013, dedicated anti-fraud trainings have been held for staff of the DG. In addition, two lunch-time conferences have been held on fraud in the CAP on 28 February and 12 September 2013. Finally, a training course for auditors of the DG on fraud indicators in the areas most exposed to fraud has been held on 26 September 2013.

Timely referral of denunciations to OLAF for investigation


100 % 2013: 33 out of 33 cases referred

Sound financial management

Level of financial corrections

(Source: AAR)

€ 700 million N.B. While around €700 million is clawed back to the EU budget each year via conformity clearance decisions, the attainment of a certain level of financial correction is not an objective per se – rather, the aim is to ensure that management and control systems function correctly and that EU funds are thus spent correctly. €700 million is the best available estimate of financial correction based on historic averages.

In 2013 conformity clearance decisions adopted for €1116.8m. (2013/123/EU of 26/02/2013 for €397.4m, 2013/214/EU of 2.5.2013 for €227.3m, 2013/433/EU of 13.08.2013 for €177.8m and 2013/763/EU of 12.12/2013 for €314.3m)

ANNEXES

ANNEX 14: Abbreviations



Abbreviation Full text

A

AAR Annual Activity Report

ABB Activity-Based Budgeting

AR Annual Report

AMIS Agricultural Market Information System

AOSD Authorising Officer by Sub-Delegation

ARES Advanced Records System

AT Austria

AWBM Activity Without Budgetary Measure

B

BE Belgium

BG Bulgaria

BiH Bosnia-Herzegovina

C

CAP Common Agricultural Policy

CB Certification Body

CETA EU-Canada Free Trade Agreement

CMO Common Market Organisation

CNDPs Complementary National Direct Payments

COCOBU/CONT Commission du Contrôle Budgétaire – Committee on Budgetary Control in the European Parliament

COMAGRI Committee on Agriculture and Rural Development in the European Parliament

CWP Commission Work Programme

CY Cyprus

CZ Czech Republic

D

DAS Declaration of Assurance

DCFTA Deep and Comprehensive Free Trade Agreement

DDA Doha Development Agenda

DE Germany

DG Directorate-General

DG AGRI Directorate-General for Agriculture and rural development

ANNEXES




DG DEVCO Directorate-General for Development and cooperation – EuropeAid

DG ELARG Directorate-General for Enlargement

DG EMPL Directorate-General for Employment, Social Affairs and Inclusion

DG ENTR Directorate-General for Enterprise and Industry

DG ESTAT Eurostat

DG REGIO Directorate-General for Regional and Urban Policy

DG SANCO Directorate-General for Health and Consumers

DK Denmark

E

EAFRD European Agricultural Fund for Rural Development

EAGF European Agricultural Guarantee Fund

EAGGF European Agricultural Guarantee and Guidance Fund

ECA European Court of Auditors

ECJ European Court of Justice

EE Estonia

EIP European Innovation Partnership

EL Greece

ENP European Neighbourhood Policy

ENPARD European Neighbourhood Programme for Agriculture and Rural Development

ENRD European Network for Rural Development

EP European Parliament

EPA Economic Partnership Agreements

ES Spain

ESIF European Structural and Investment Funds

EU European Union

EUR Euro

F

FADN Farm Accountancy Data Network

FAO Food and Agriculture Organization of the United Nations

FI Finland

FI Financial instrument

FTA Free Trade Agreement

FR France

FVO Food and Veterinary Office

ANNEXES




G

GAEC Good Agricultural and Environmental Conditions

GB United Kingdom

GI Geographical Indications

GIS Geographical Information System

GR Greece

GVA Gross Value Added

H

HLG High Level Group

HNV High Nature Value

HR Croatia

HR Human Resources

HU Hungary

I

IACS Integrated Administration and Control System

IAC Internal Audit Capability

IAS Internal Audit Service

ICT Internal Control Template

IDOC Investigation and Disciplinary Office of the Commission

IE Ireland

IPA Instrument for Pre-accession Assistance

IPARD Instrument for Pre-Accession Assistance Rural Development

IT Italy

IT Information Technology

J

JRC Joint Research Centre

L

LAG Local Action Group

LFA Less Favoured Area

LEADER Liaison Entre Actions de Développement de l'Économie Rurale

LPIS Land Parcel Identification System

LT Lithuania

LU Luxemburg

ANNEXES




LV Latvia

M

MAFA Multi Annual Financing Agreement (SAPARD)

MEP Member of the European Parliament

MFA Multi Annual Financing Agreement (IPARD)

MFF Multi-annual Financial Framework

MLE Most Likely Error rate

MS Member State

MT Malta

MTE Mid-Term Evaluations

N

NAO National Authorizing Officer

NL Netherlands

NREAP National Renewable Energy Action Plan

NRN National Rural Networks

NSP National Strategy Plans

O

OLAF Office de Lutte Antifraude

P

PA Paying Agency

PDO Protected Designations of Origin

PGI Protected Geographical Indications

PL Poland

PMO Office for Administration and Payment of Individual Entitlements

POSEI Programme d'Options Spécifiques à l'Éloignement et l'Insularité

PT Portugal

R

RD Rural Development

RDP Rural Development Programme

RO Romania

S

SAPARD Special Accession Programme for Agriculture and Rural

ANNEXES




Development

SAPS Single Area Payment Scheme

SE Sweden

SI Slovenia

SK Slovakia

SPS Single Payment Scheme

SR Special Report

T

TFEU Treaty on the Functioning of the European Union

ToR Terms of Reference

TSG Traditional Specialities Guaranteed

U

UK United Kingdom

W

WTO World Trade Organization

annual activity report - european commission · 60.053,164 million (by 1,1% compared to 2012) and...

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