Ensuring the correct payment of CAP funds
All EU expenditure under the common agricultural policy (CAP) is subject to a declaration of assurance from the Director-General for Agriculture and Rural Development. This declaration states that:
- the expenditure has been used for its intended purpose;
- the expenditure has complied with the principles of sound financial management.
By issuing this declaration, the Director-General confirms the existence and functioning of control procedures to ensure that taxpayer’s money is spent in the ways laid out by law.
The Director-General draws assurance from a comprehensive management and control system and single audit approach, which is designed to ensure that funds are spent properly across all levels of implementation and that irregular payments can be detected and recovered.
Management and control systems
The expenditure of the European agricultural guarantee fund (EAGF) and European agricultural fund for rural development (EAFRD) is implemented under shared management between the European Commission and EU countries. Comprehensive management and control systems are in place to ensure the legality and regularity of the expenditure.
The Commission, in the majority of cases, does not make payments directly to beneficiaries of the CAP. 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.
A rigorous system of checks ensures that funds are delivered only to the intended beneficiaries and in the correct amounts. EU countries must have adequate systems in place to protect against incorrect payments or fraud. The EU also mandates the use of the single integrated administration and control system (IACS), including the land parcel identification system (LPIS), to check claims and track payments.
The paying agencies and their delegated bodies must ensure the eligibility of any expenditure claimed from the EU budget. The payments made by the paying agencies are declared to the Commission, who then reimburse the appropriate amounts to the EU countries. This is done on a monthly basis for the EAGF and on a quarterly basis in the case of the EAFRD. All declared expenditure is subject to further levels of financial control and audit.
Single audit approach
Under shared management, EU countries are responsible for managing and controlling the various schemes under CAP legislation, while the Commission ensures that they carry out their work properly.
The work of the paying agencies is checked by certification bodies, comprised of independent auditors appointed by EU countries. Certification bodies verify and certify the activities of the paying agencies, including:
- their annual accounts,
- the functioning of their internal control procedures,
- the legality and regularity of their expenditure.
The Commission works with the certification bodies to ensure that CAP expenditure is implemented in full accordance with the applicable EU and national rules. It audits their work to confirm that management and control systems in the respective EU countries are functioning properly. If potential irregularities in expenditure are detected, the Commission covers the risk of financial losses to the EU budget by applying financial corrections under the conformity clearance mechanism. Based on the certification of the annual accounts provided by the certification bodies, the Commission carries out an annual financial clearance of the accounts of each paying agency.
European Court of Auditors
The European Court of Auditors is tasked with checking spending made by the EU and its EU countries. It conducts regular audits of EU funding mechanisms and spending to make sure that money is spent as it should be and that the EU’s internal systems of control are correctly designed.
In order to better protect the budget of the CAP against fraud, the European Commission has put in place a specific anti-fraud policy.
The anti-fraud policy's main objectives are to:
- raise fraud awareness in EU countries and within the Commission;
- reinforce fraud prevention;
- reinforce fraud risk assessment;
- develop fraud detection capabilities;
- give guidance to EU countries for fraud prevention and detection;
- reinforce cooperation with the European Anti-fraud Office (OLAF).
The anti-fraud strategy underpins the principles of sound financial management and good governance of the CAP budget by the EU countries and the European Commission.
OLAF is the EU’s anti-fraud body; it has the power to investigate any suspected instances of fraud, corruption or serious misconduct within either the EU institutions or beneficiaries of EU funds. Reports to OLAF can be made anonymously and in any of the EU’s official languages.
EU implementing regulation 908/2014 lays down rules for the application of EU regulation 1306/2013 with regard to paying agencies and other bodies, financial management, clearance of accounts, rules on checks, securities and transparency.