Financing the Common Agricultural Policy
For the last 50 years the Common Agricultural Policy (CAP) has been the European Union's (EU) most important common policy. This explains why traditionally it has taken a large part of the EU's budget, although the percentage has steadily declined over recent years.
The CAP is financed by two funds, which form part of the EU's general budget:
- the European Agricultural Guarantee Fund (EAGF) finances direct payments to farmers and measures to respond to market disturbances, such as private or publiuc storage and export refunds, while
- the European Agricultural Fund for Rural Development (EAFRD) finances the rural development programmes of the Member States.
These two funds were created by Council Regulation (EC) No 1290/2005 of 21 June 2005 on the financing of the common agricultural policy which established a single legal framework for financing CAP spending.
Under Title 05 of the EU General Budget you find details on the budget for Agriculture and Rural development.
The European taxpayer rightly expects that these sums are correctly spent. It is therefore of paramount importance that management and checking systems are in place which give reasonable assurance that the sums are spent properly and that any irregular payments are detected and recovered.
Under the basic rules for the financial management of the CAP, the Commission is responsible for the management of the EAGF and the EAFRD. However, the Commission itself normally does not make payments to beneficiaries. According to the principle of shared management, this task is delegated to the Member States, who themselves work through national or regional paying agencies. Before these paying agencies can claim any expenditure from the EU-budget, they must be accredited on the basis of a set of criteria laid down by the Commission.
The paying agencies are, however, not only responsible for making payments to the beneficiaries. Prior to doing so, they must, either themselves or through delegated bodies, satisfy themselves of the eligibility of the aid applications. The exact checks to be carried out are laid down in the different sectoral regulations of the CAP and vary from one sector to another.
The expenditure made by the paying agencies is then reimbursed by the Commission to the Member States, in the case of the EAGF on a monthly basis and in the case of EAFRD on a quarterly basis. Those reimbursements are, however, subject to any subsequent corrections which the Commission may make under the clearance of accounts procedures.