The common agricultural policy (CAP) is financed by two funds drawn from the EU budget:
- the European agricultural guarantee fund (EAGF),
- the European agricultural fund for rural development (EAFRD).
Financial allocations for agriculture and rural development are included under the second heading of the multiannual financial framework (MFF) 2014-20, which covers the areas of sustainable growth and natural resources. In May 2020, the European Commission proposed a reinforced EU budget due to the 2020 coronavirus crisis. The latest proposals are based on an emergency next generation EU instrument for 2020-24 and an enhanced MFF for the period 2021-27, topping up the core of the initial proposal of May 2018. The Commission is also proposing to revise its current long-term budget in order to allow for higher spending in 2020.
Additionally, the Commission intends to strengthen a number of programmes, including the common agricultural policy. Through an injection of €4 billion, the Commission aims to bolster the resilience of the agri-food and fisheries sectors and provide the necessary scope for crisis management.
European agricultural guarantee fund
It also finances the information measures relating to the CAP.
European agricultural fund for rural development
The EAFRD finances the EU's contribution to rural development programmes, projects and measures.
Management and checking systems
It is of paramount importance that management and checking systems are in place to give reasonable assurance that funds are spent properly and any irregular payment is 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 normally does not make payments to beneficiaries. According to the principle of shared management, EU countries execute payments to farmers through national or regional paying agencies.
The paying agencies must be accredited on the basis of a set of criteria laid down by the Commission before they can claim any expenditure from the EU budget.
The paying agencies and their delegated bodies must ensure the eligibility of the fund applications. The checks to be carried out are laid down in the sectoral regulations of the CAP and vary from one sector to another.
The payments made by the paying agencies are then reimbursed by the Commission to the EU countries, in the case of the EAGF on a monthly basis and in the case of EAFRD on a quarterly basis. The reimbursements are subject to subsequent corrections which the Commission may make under the clearance of accounts procedures.
The department for agriculture and rural development concludes public procurement contracts for the provision of services through calls for tender.
EU regulation 1306/2013 – on the financing, management and monitoring of the common agricultural policy
EU regulation 1307/2013 – on income support for farmers under schemes within the framework of the CAP
EU regulation 1308/2013 – on establishing a common organisation of the markets in agricultural products and repealing Council Regulations (EEC) No 922/72, (EEC) No 234/79, (EC) No 1037/2001 and (EC) No 1234/2007
EU regulation 1305/2013 – support for rural development by the European agricultural fund for rural development (EAFRD)