What we audited
This spending area covers the common agricultural policy (CAP), common fisheries policy (CFP) and environmental measures:
- The CAP aims to increase agricultural productivity, ensure a fair standard of living for the agricultural community, stabilise markets, assure the availability of supplies and ensure that supplies reach the consumers at reasonable prices. It is implemented through two funds: the European Agricultural Guarantee Fund (EAGF) which fully finances EU direct aid and market measures and the European Agricultural Fund for Rural Development (EAFRD) which co‑finances rural development programmes together with the Member States. Management of the CAP spending is shared with Member States. Expenditure under both funds is channelled through some 80 paying agencies that are responsible for checking the eligibility of aid applications and making payments to beneficiaries.
- The CFP pursues similar objectives to those of the CAP and the main tool for implementation is the European Fisheries Fund (EFF). The fund is managed by the Commission and the Member States under shared management.
- The EU’s policy on environment aims to contribute to protecting and improving environmental quality, the life of citizens, and the rational utilisation of natural resources. Expenditure in this area is managed centrally by the Commission. The programme for environment (LIFE) is the most important. It co‑finances projects related to nature, biodiversity, environmental policy and governance, information and communication.
What we found
| Affected by material error? |
Estimated level of error1: |
|
Agriculture — market and direct support:
Yes
Rural development, environment, climate action and fisheries:
Yes
|
Natural resources overall:
3.6% (2013: 4.4%)
|
Comprising
Agriculture — market and direct support: |
| 2.9 % (2013: 3.6 %) |
| Rural development, environment, climate action and fisheries: |
| 6.2 % (2013: 7.0 %) |
|
1 Equivalent estimated levels of error for 2013 to reflect the new MFF headings.
The nature and pattern of errors varies significantly between EAGF and the other spending areas under natural resources.
Agriculture — market and direct support (EAGF)
Many of the errors identified in our audits are the result of inaccurate or ineligible claims by beneficiaries, with the most frequent being the over‑declaration of agricultural land surface or ineligible parcels of land (see examples). Having a reliable and up‑to‑date Land Parcel Identification System database (LPIS) can help to reduce such errors.
Examples of overstated or ineligible claims
Aid for permanent pasture
In the Czech Republic, France, Greece, Poland, Slovakia and Spain, some land claimed and paid for as permanent grassland was in reality fully or partly covered with ineligible vegetation (dense shrubs, bushes, trees and rock).
Aid for arable land
In the Czech Republic, Denmark, Finland, France, Germany, Italy, Poland, Slovakia, Spain and the United Kingdom, we found cases of land claimed by beneficiary farmers as arable when this was not the case. In Spain, aid was paid for land claimed and recorded in the land parcel identification system as arable land which was, in reality, a motocross track.
In several cases of quantifiable errors made by final beneficiaries, national authorities had sufficient information to prevent, or detect and correct the errors before declaring the expenditure to the Commission. If all the information had been used to correct errors, the estimated level of error would have been 0.6 percentage points lower. In addition, we detected a considerable number of cases of errors made by the national authorities. These contributed 0.7 percentage points to the estimated level of error.
Beneficiaries of EAGF direct support and of EARDF area-related support have a legal obligation to fulfil cross-compliance requirements. These requirements relate to the protection of the environment, public health, animal and plant health, animal welfare and to the maintenance of agricultural land in good agricultural and environmental condition. If farmers do not comply with these obligations their aid is reduced. In our testing, we found infringements in 27 % of the transactions subject to cross‑compliance obligations. The cross‑compliance errors had an impact of 0.7 percentage points on the estimated level of error.
The integrated administration and control system (IACS) is the main management and control system for ensuring the regularity of EAGF payments. For 2014, we examined the operation of IACS in Croatia and identified only minor deficiencies that do not affect the reliability of the system. We additionally carried out desk reviews of 14 conformity audits carried out by the Commission on systems in Member States and found the work done to be satisfactory. Remedial action has also been taken on IACS weaknesses that we reported in previous years. However, this was not always done promptly and, in several instances, weaknesses continue to persist, although to a lesser degree.
The payments under market measures represent around 6 % of the EAGF. However, they contribute disproportionately to a larger share of the overall estimated level of error for the Fund.
We also completed our examination of the reinforcement of assurance procedure that is applicable on a voluntary basis in six Member States or regions. In these Member States or regions, an independent audit body provides an opinion on the proper functioning of systems and the regularity of expenditure declared to the EU. With the exception of one Member State, the weaknesses in the implementation of this procedure make the levels of error they report unreliable.
Rural development, environment, climate action and fisheries
We found errors in all 18 Member States which we audited. The main reasons for errors in this spending area were ineligibility of the beneficiary, activity, project and/or expenditure, or non‑compliance with agri‑environment commitments to use agricultural production methods compatible with protection of the environment, landscape and natural resources.
Examples of elegilibility errors
We found three cases of suspected intentional circumvention of the rules when claiming for aid. These cases were forwarded to the European Anti‑Fraud Office for analysis and possible investigation. For confidentiality reasons, we cannot disclose specific details of these cases but can describe the general nature of these errors:
- Well‑established companies, which would not qualify for financing, set up new entities to artificially meet the eligibility and selection criteria.
- Groups of persons set up several entities for the purpose of obtaining aid which exceed the ceiling allowed under the conditions of the investment measure. Although the beneficiaries declared that these entities operate independently, this was not the case in practice.
Examples of non‑compliance with agri‑environment commitments
We detected six such cases in Germany, Italy and United Kingdom. For example, in the United Kingdom, a beneficiary did not respect the commitment he made to close off a hay meadow for grazing before 15 May of each year.
In some cases of quantifiable errors made by final beneficiaries, national authorities had sufficient information to prevent, or detect and correct the errors before declaring the expenditure to the Commission. If all information had been used to correct errors, the estimated level of error for this spending area would have been 3.3 percentage points lower. In addition, we detected a few cases of errors made by the national authorities. These contributed 0.6 percentage points to the estimated level of error.
We found significant weaknesses in nine of the 12 reviewed systems of Member States. For the five paying agencies that we visited on the spot, the system weaknesses that we found were very similar to those identified and reported in previous years.
For 2014, based on a pilot exercise that we undertook on some project performance issues, we found that for 93% of the completed rural development projects we examined, the investment had been carried out as planned. However, the targeting of the support and the selection of the projects were not as rigorous as could be expected. We additionally observed that there was insufficient evidence that costs were reasonable.
In the case of fisheries, we assessed the effectiveness of the checks done by the audit authority in Italy and found that while the methodology for audits of operations and systems was effective, there were weaknesses in the management and documentation of audit tasks and in the verification of eligibility conditions.
What we recommend
We recommend that:
- for EAGF, Member States make further efforts to include reliable and updated information in their LPIS database and to use all the information available to avoid payments for ineligible land;
- for rural development, the Commission takes the appropriate measures to strengthen the Member States’ action plans addressing frequent causes of error, and to revise the strategy for its rural development conformity audits;
-
- for both the EAGF and rural development, the Commission ensures that the new assurance procedure which will become mandatory from 2015 is correctly applied and reliable; and
- in the area of fisheries, the Commission ensures that Member States carry out their tasks more thoroughly, notably through required on‑the‑spot controls, applying quality control procedures and improving audit documentation.
Want to know more? Full information on our audit of EU expenditure on natural resources can be found in Chapter 7 of the 2014 annual report on the EU budget.