# C_2005279EN.01000101.xml

| 11.11.2005 | EN | Official Journal of the European Union | C 279/1 |
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11.11.2005

EN

Official Journal of the European Union

C 279/1

---

SPECIAL REPORT No 3/2005

SPECIAL REPORT

concerning rural development: the verification of agri-environment expenditure, together with the Commission's replies

(pursuant to the second subparagraph of Article 248(4) of the EC Treaty)

(2005/C 279/01)

CONTENTS

GLOSSARY

| I-VI | EXECUTIVE SUMMARY |
| --- | --- |

I-VI

| 1-18 | INTRODUCTION |
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1-18

| 1-11 | Agri-environment policy |
| --- | --- |

1-11

| 12-18 | Audit scope and approach |
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12-18

| 19-27 | LEGISLATION |
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19-27

| 19-22 | The agri-environment measure |
| --- | --- |

19-22

| 23-27 | Checking agri-environment sub-measures |
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23-27

| 28-54 | AUDIT OBSERVATIONS AT COMMISSION LEVEL |
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28-54

| 28-35 | Verifiability of the agri-environment sub-measures |
| --- | --- |

28-35

| 29-31 | Implementation of agri-environment programmes in the period 1993 to 1999 |
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29-31

| 32-35 | Approval of RDPs by the Commission for the period 2000 to 2006 |
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32-35

| 36-39 | Verification of the functioning of the control systems |
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36-39

| 40-54 | Control of organic farming |
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40-54

| 41-44 | The regulatory control system for organic farming |
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41-44

| 45-54 | The implementation of the organic farming control system |
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45-54

| 55-106 | AUDIT OBSERVATIONS AT MEMBER STATE LEVEL |
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55-106

| 55 | The verifiability of agri-environment sub-measures in five Member States |
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55

| 56-59 | Administrative checks |
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56-59

| 60-106 | On-the-spot checks |
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60-106

| 60-61 | Particularity of agri-environment |
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60-61

| 62-69 | Checking the respect of usual good farming practice |
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62-69

| 70-106 | Checking the sub-measures |
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70-106

| 107-119 | CONCLUSIONS AND RECOMMENDATIONS |
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107-119

| 107 | Overall conclusion |
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107

| 108-112 | At Commission level |
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108-112

| 113-117 | At Member State level |
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113-117

| 118-119 | Recommendations |
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118-119

ANNEX: Examples where the contractual requirements of the Côte d'Or AE programme are not clear

The Commission's replies

The Commission's replies

AE

| AE | : | agri-environment, the rural development measure established by Articles 22 to 24 of Regulation (EC) No 1257/1999 |
| --- | --- | --- |
| Beneficiary | : | the recipient of an EU payment |
| CAP | : | common agricultural policy |
| EAGGF | : | European Agricultural Guidance and Guarantee Fund |
| GFP | : | usual good farming practice |
| IACS | : | integrated administration and control system |
| MEKA II | : | Marktentlastungs- und Kulturlandschaftsausgleich. The largest AE programme in Baden-Württemberg, Germany |
| RD | : | rural development |
| RDP | : | rural development plan (before Commission approval). Rural development programme (after Commission approval) |
| Undertaking | : | a condition which a beneficiary must comply with in order to be entitled to receive the AE payment |

:

agri-environment, the rural development measure established by Articles 22 to 24 of Regulation (EC) No 1257/1999

Beneficiary

Beneficiary

:

the recipient of an EU payment

CAP

CAP

:

common agricultural policy

EAGGF

EAGGF

:

European Agricultural Guidance and Guarantee Fund

GFP

GFP

:

usual good farming practice

IACS

IACS

:

integrated administration and control system

MEKA II

MEKA II

:

Marktentlastungs- und Kulturlandschaftsausgleich. The largest AE programme in Baden-Württemberg, Germany

RD

RD

:

rural development

RDP

RDP

:

rural development plan (before Commission approval). Rural development programme (after Commission approval)

Undertaking

Undertaking

:

a condition which a beneficiary must comply with in order to be entitled to receive the AE payment

EXECUTIVE SUMMARY

| I. | Agri-environment support (AE) is paid annually to farmers who enter into an undertaking to carry out their activities in a manner that goes beyond usual good farming practice and is deemed environmentally beneficial. It is the largest rural development measure with 13 480 million euro EU co-financing planned for the period 2000 to 2006 (see paragraphs 6, 7 and 19 to 22). |
| --- | --- |

I.

Agri-environment support (AE) is paid annually to farmers who enter into an undertaking to carry out their activities in a manner that goes beyond usual good farming practice and is deemed environmentally beneficial. It is the largest rural development measure with 13 480 million euro EU co-financing planned for the period 2000 to 2006 (see paragraphs 6, 7 and 19 to 22).

| II. | The objective of this audit was to assess whether the Commission has adequate assurance that the farming practices and techniques for which AE is paid are verifiable and properly verified, and thus that the recipients of AE payments comply with their obligation to farm in an evironmentally-friendly manner (see paragraphs 12 to 18). |
| --- | --- |

II.

The objective of this audit was to assess whether the Commission has adequate assurance that the farming practices and techniques for which AE is paid are verifiable and properly verified, and thus that the recipients of AE payments comply with their obligation to farm in an evironmentally-friendly manner (see paragraphs 12 to 18).

| III. | The audit found that the Commission:






  — | only partially ensured verifiability before approving RDPs (see paragraphs 32 to 35), |
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III.

The audit found that the Commission:

—

only partially ensured verifiability before approving RDPs (see paragraphs 32 to 35),

| — | has not sufficiently verified the correct functioning of AE control systems in the Member States (see paragraphs 36 to 39), |
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—

has not sufficiently verified the correct functioning of AE control systems in the Member States (see paragraphs 36 to 39),

| — | in the case of organic farming, has not fully assumed its responsibilities. This is an important sub-measure within AE (see paragraphs 46 to 54). |
| --- | --- |

—

in the case of organic farming, has not fully assumed its responsibilities. This is an important sub-measure within AE (see paragraphs 46 to 54).

The principal problems encountered in the case of organic farming are:

| — | the annual implementation reports, which should give assurance about the objectiveness and effectiveness of the inspection system, are incomplete and not reliable. Even if they were complete and accurate, the information requested would not give assurance about the objectiveness and effectiveness of the inspections carried out (see paragraphs 46 to 49), |
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—

the annual implementation reports, which should give assurance about the objectiveness and effectiveness of the inspection system, are incomplete and not reliable. Even if they were complete and accurate, the information requested would not give assurance about the objectiveness and effectiveness of the inspections carried out (see paragraphs 46 to 49),

| — | Commission checks in seven Member States in 1998 to 2001 detected important weaknesses in the supervision of inspection systems, but these findings were not properly followed up and no further checks have taken place in any Member States (see paragraphs 50 to 54). |
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—

Commission checks in seven Member States in 1998 to 2001 detected important weaknesses in the supervision of inspection systems, but these findings were not properly followed up and no further checks have taken place in any Member States (see paragraphs 50 to 54).

| IV. | The audit's findings in the Member States concern the timing of the on-the-spot checks and the verifiability of certain key sub-measures:






  — | sub-measures are checked outside of the period of undertaking or at inopportune moments (see paragraphs 74 to 85), |
| --- | --- | --- |

IV.

The audit's findings in the Member States concern the timing of the on-the-spot checks and the verifiability of certain key sub-measures:

—

sub-measures are checked outside of the period of undertaking or at inopportune moments (see paragraphs 74 to 85),

| — | for common sub-measures, such as reduction or limitation of inputs, checks are largely dependent on the self-declaration of beneficiaries which are difficult to corroborate (see paragraphs 86 to 96), |
| --- | --- |

—

for common sub-measures, such as reduction or limitation of inputs, checks are largely dependent on the self-declaration of beneficiaries which are difficult to corroborate (see paragraphs 86 to 96),

| — | reliance is placed on inconclusive visual checks (see paragraphs 97 to 101), |
| --- | --- |

—

reliance is placed on inconclusive visual checks (see paragraphs 97 to 101),

| — | detailed instructions are not always set out for inspectors, who often rely on their own knowledge or experience to form an opinion. There is no clear baseline with which to compare performance (see paragraphs 100 to 106). |
| --- | --- |

—

detailed instructions are not always set out for inspectors, who often rely on their own knowledge or experience to form an opinion. There is no clear baseline with which to compare performance (see paragraphs 100 to 106).

| V. | The Court's audit concludes that the verification of the agri-environment measure poses particular problems and is far more resource-intensive than verification of the first pillar measure and indeed than other rural development measures. Such verification can rarely lead to even reasonable assurance at a reasonable cost (see paragraph 107). |
| --- | --- |

V.

The Court's audit concludes that the verification of the agri-environment measure poses particular problems and is far more resource-intensive than verification of the first pillar measure and indeed than other rural development measures. Such verification can rarely lead to even reasonable assurance at a reasonable cost (see paragraph 107).

| VI. | The Commission, Council and Parliament should consider, for the new programming period commencing in 2007, how to take into account the principle that if a measure cannot be adequately checked, it should not be the subject of public payment (see paragraphs 118 and 119). |
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VI.

The Commission, Council and Parliament should consider, for the new programming period commencing in 2007, how to take into account the principle that if a measure cannot be adequately checked, it should not be the subject of public payment (see paragraphs 118 and 119).

INTRODUCTION

Agri-environment policy

| 1. | Support for agricultural production methods compatible with protection of the environment was established by Council Regulation (EEC) No 2078/92, which covered the period 1993 to 1999 (1). |
| --- | --- |

1.

Support for agricultural production methods compatible with protection of the environment was established by Council Regulation (EEC) No 2078/92, which covered the period 1993 to 1999 (1).

1

| 2. | In a decision of the European Parliament and the Council ‘Towards sustainability’, the integration of environmental concerns into the common agricultural policy (CAP) was identified as a priority (2). As a response to this, and to similar proposals in Agenda 2000, the Commission issued a statement declaring that its programme for the period 2000 to 2006 would include ‘strengthened agri-environment measures as compulsory elements’ of rural development programmes (RDP) (3). Agri-environment (AE) is the only rural development measure that Member States are obliged to include in their RDPs. |
| --- | --- |

2.

In a decision of the European Parliament and the Council ‘Towards sustainability’, the integration of environmental concerns into the common agricultural policy (CAP) was identified as a priority (2). As a response to this, and to similar proposals in Agenda 2000, the Commission issued a statement declaring that its programme for the period 2000 to 2006 would include ‘strengthened agri-environment measures as compulsory elements’ of rural development programmes (RDP) (3). Agri-environment (AE) is the only rural development measure that Member States are obliged to include in their RDPs.

2

3

| 3. | The sixth environment action programme of the European Community indicated that ‘increasing resources are needed and broader scope should be given for agri-environment measures’ as a means to attaining the Community's environmental objectives (4). Thus AE was accorded a high priority. |
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3.

The sixth environment action programme of the European Community indicated that ‘increasing resources are needed and broader scope should be given for agri-environment measures’ as a means to attaining the Community's environmental objectives (4). Thus AE was accorded a high priority.

4

| 4. | For the period 2000 to 2006, Regulation (EC) No 1257/1999 brought together various rural development (RD) measures (5). |
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4.

For the period 2000 to 2006, Regulation (EC) No 1257/1999 brought together various rural development (RD) measures (5).

5

| 5. | To implement the measures, rural development plans were approved by the Commission, thereby becoming rural development programmes. These cover a period of seven years from 1 January 2000 to 31 December 2006 and were prepared by the competent authorities designated by the Member States. In total 68 rural development programmes containing AE (and other measures) have been approved. |
| --- | --- |

5.

To implement the measures, rural development plans were approved by the Commission, thereby becoming rural development programmes. These cover a period of seven years from 1 January 2000 to 31 December 2006 and were prepared by the competent authorities designated by the Member States. In total 68 rural development programmes containing AE (and other measures) have been approved.

| 6. | AE is co-financed by EAGGF Guarantee throughout the Community, with a 75 % contribution in Objective 1 areas and 50 % in other areas (6). This was revised in 2003 to up to 85 % for Objective 1 areas and up to 60 % in other areas. Aid rates vary between different sub-measures and Member States but the average agri-environment premium in the EU in 2001 amounted to 89 euro per hectare (7). |
| --- | --- |

6.

AE is co-financed by EAGGF Guarantee throughout the Community, with a 75 % contribution in Objective 1 areas and 50 % in other areas (6). This was revised in 2003 to up to 85 % for Objective 1 areas and up to 60 % in other areas. Aid rates vary between different sub-measures and Member States but the average agri-environment premium in the EU in 2001 amounted to 89 euro per hectare (7).

6

7

| 7. | In 2004, 1 739 million euro out of 4 749 million euro rural development EAGGF Guarantee expenditure declared by Member States related to AE under Regulation (EC) No 1257/1999 (8). It is programmed to spend 13 480 million euro for the EU 15 in respect of the programming period 2000 to 2006. This represents over 27 % of all rural development expenditure and agri-environment is thus the largest rural development measure. At the end of 2004, 10 201 million euro of the total programmed had been spent. |
| --- | --- |

7.

In 2004, 1 739 million euro out of 4 749 million euro rural development EAGGF Guarantee expenditure declared by Member States related to AE under Regulation (EC) No 1257/1999 (8). It is programmed to spend 13 480 million euro for the EU 15 in respect of the programming period 2000 to 2006. This represents over 27 % of all rural development expenditure and agri-environment is thus the largest rural development measure. At the end of 2004, 10 201 million euro of the total programmed had been spent.

8

| 8. | As indicated in the graph, most expenditure paid during the period 2000 to 2003 relates to Austria, Germany and Finland. The relatively high level of expenditure for Austria and Finland can partly be explained by the individual Member states' policy decision to allocate significant expenditure to AE and partly by the fact that larger Member States such as Italy, France and Germany were still closing their programmes from the prior period. |
| --- | --- |

8.

As indicated in the graph, most expenditure paid during the period 2000 to 2003 relates to Austria, Germany and Finland. The relatively high level of expenditure for Austria and Finland can partly be explained by the individual Member states' policy decision to allocate significant expenditure to AE and partly by the fact that larger Member States such as Italy, France and Germany were still closing their programmes from the prior period.

graph

Image

| 9. | The links between agriculture and the environment are of great public and political interest, particularly now that the reform of the CAP has introduced compliance with environmental standards and practices, the non-respect of which could lead to partial or full reduction or recovery of the direct aid (9). |
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9.

The links between agriculture and the environment are of great public and political interest, particularly now that the reform of the CAP has introduced compliance with environmental standards and practices, the non-respect of which could lead to partial or full reduction or recovery of the direct aid (9).

9

| 10. | Agri-environment expenditure involves making payments to farmers in exchange for their undertaking to farm in ways which are environmentally friendly and which must go beyond usual good farming practice (GFP): in other words the Community purchases environmental services from farmers (see text box 1).

  Text box 1Farming is an activity whose significance goes beyond simple food production. Throughout the production chain processes occur that can have an impact on the natural environment. For example, heavy use of pesticides and fertilisers, incorrect drainage or irrigation practices, a high level of mechanisation or unsuitable land use can produce environmental degradation. However, abandonment of farming activities can also endanger the EU's environmental heritage through loss of semi-natural habitats and the biodiversity and landscape associated with them.In accordance with Regulation (EC) No 817/2004, Member States have to define codes of Good Farming Practice (GFP) at regional or national level. GFP should correspond to a type of farming that a reasonable farmer would follow in the region concerned, which entails compliance with existing statutory environmental requirements. It constitutes the baseline requirement for farmers wishing to join agri-environmental schemes.Agri-environment sub-measures have become the principal instrument for achieving environmental objectives within the CAP. The main sub-measures being conversion to organic farming, prevention of soil erosion, reduction of inputs and upkeep of landscape features.Source: European Commission's fact sheet Agriculture and the environment. |
| --- | --- |

10.

Agri-environment expenditure involves making payments to farmers in exchange for their undertaking to farm in ways which are environmentally friendly and which must go beyond usual good farming practice (GFP): in other words the Community purchases environmental services from farmers (see text box 1).

text box 1

Text box 1Farming is an activity whose significance goes beyond simple food production. Throughout the production chain processes occur that can have an impact on the natural environment. For example, heavy use of pesticides and fertilisers, incorrect drainage or irrigation practices, a high level of mechanisation or unsuitable land use can produce environmental degradation. However, abandonment of farming activities can also endanger the EU's environmental heritage through loss of semi-natural habitats and the biodiversity and landscape associated with them.In accordance with Regulation (EC) No 817/2004, Member States have to define codes of Good Farming Practice (GFP) at regional or national level. GFP should correspond to a type of farming that a reasonable farmer would follow in the region concerned, which entails compliance with existing statutory environmental requirements. It constitutes the baseline requirement for farmers wishing to join agri-environmental schemes.Agri-environment sub-measures have become the principal instrument for achieving environmental objectives within the CAP. The main sub-measures being conversion to organic farming, prevention of soil erosion, reduction of inputs and upkeep of landscape features.Source: European Commission's fact sheet Agriculture and the environment.

Text box 1Farming is an activity whose significance goes beyond simple food production. Throughout the production chain processes occur that can have an impact on the natural environment. For example, heavy use of pesticides and fertilisers, incorrect drainage or irrigation practices, a high level of mechanisation or unsuitable land use can produce environmental degradation. However, abandonment of farming activities can also endanger the EU's environmental heritage through loss of semi-natural habitats and the biodiversity and landscape associated with them.In accordance with Regulation (EC) No 817/2004, Member States have to define codes of Good Farming Practice (GFP) at regional or national level. GFP should correspond to a type of farming that a reasonable farmer would follow in the region concerned, which entails compliance with existing statutory environmental requirements. It constitutes the baseline requirement for farmers wishing to join agri-environmental schemes.Agri-environment sub-measures have become the principal instrument for achieving environmental objectives within the CAP. The main sub-measures being conversion to organic farming, prevention of soil erosion, reduction of inputs and upkeep of landscape features.Source: European Commission's fact sheet Agriculture and the environment.

| 11. | The Court's Special Report No 14/2000 ‘Greening the CAP’ included a review of the AE actions set up by Regulation (EEC) No 2078/92, covering the programming period 1993 to 1999 (10). The principal conclusion regarding the verifiability of AE in this Special Report was that it was not feasible to verify compliance with measures to reduce fertiliser usage, ‘The problem is known to the Commission's own checkers, but the Commission continues to approve such measures’ (paragraph 77 of that Report). |
| --- | --- |

11.

The Court's Special Report No 14/2000 ‘Greening the CAP’ included a review of the AE actions set up by Regulation (EEC) No 2078/92, covering the programming period 1993 to 1999 (10). The principal conclusion regarding the verifiability of AE in this Special Report was that it was not feasible to verify compliance with measures to reduce fertiliser usage, ‘The problem is known to the Commission's own checkers, but the Commission continues to approve such measures’ (paragraph 77 of that Report).

10

Audit scope and approach

| 12. | The objective of the audit was to assess whether the Commission has adequate assurance that the specific farming practices and techniques for which AE is paid:






  — | are verifiable, and |
| --- | --- | --- |

12.

The objective of the audit was to assess whether the Commission has adequate assurance that the specific farming practices and techniques for which AE is paid:

—

are verifiable, and

| — | are indeed properly verified. |
| --- | --- |

—

are indeed properly verified.

| 13. | The Commission needs such assurance in order to satisfy itself that the expenditure concerned is legal and regular, i.e. that Member States administer the scheme in a way which ensures that the recipients of AE compensatory payments comply with their obligations to farm in an environmentally-friendly manner. |
| --- | --- |

13.

The Commission needs such assurance in order to satisfy itself that the expenditure concerned is legal and regular, i.e. that Member States administer the scheme in a way which ensures that the recipients of AE compensatory payments comply with their obligations to farm in an environmentally-friendly manner.

| 14. | The audit did not attempt to assess the environmental benefits of the AE sub-measures. |
| --- | --- |

14.

The audit did not attempt to assess the environmental benefits of the AE sub-measures.

| 15. | Audit visits were carried out in the Commission and five Member States: Austria, France, Germany, Italy and Luxembourg over the period March to September 2004 (11). These Member States were selected on the basis of the amounts spent and the representativity of their AE sub-measures. |
| --- | --- |

15.

Audit visits were carried out in the Commission and five Member States: Austria, France, Germany, Italy and Luxembourg over the period March to September 2004 (11). These Member States were selected on the basis of the amounts spent and the representativity of their AE sub-measures.

11

| 16. | At the Commission, the audit included a detailed review of whether the Commission ensured the verifiability of the agri-environment sub-measures before approving Rural Development Plans and whether the Commission verified the correct functioning of the control systems in Member States. Particular attention was paid to the supervision system for organic farming. |
| --- | --- |

16.

At the Commission, the audit included a detailed review of whether the Commission ensured the verifiability of the agri-environment sub-measures before approving Rural Development Plans and whether the Commission verified the correct functioning of the control systems in Member States. Particular attention was paid to the supervision system for organic farming.

| 17. | The objective of the audit visits in the Member States was to assess whether:






  — | the co-financed agri-environment sub-measures are reliably measurable and verifiable, and that |
| --- | --- | --- |

17.

The objective of the audit visits in the Member States was to assess whether:

—

the co-financed agri-environment sub-measures are reliably measurable and verifiable, and that

| — | the checking procedures applied by Member States provide them and the Commission with adequate assurance as to the respect of agri-environment undertakings. |
| --- | --- |

—

the checking procedures applied by Member States provide them and the Commission with adequate assurance as to the respect of agri-environment undertakings.

| 18. | The auditors paid particular attention to the main sub-measures as indicated in text box 1
   (12). Projects examined were selected on the basis of EAGGF Guarantee payments in 2003. |
| --- | --- |

18.

The auditors paid particular attention to the main sub-measures as indicated in text box 1
   (12). Projects examined were selected on the basis of EAGGF Guarantee payments in 2003.

text box 1

12

LEGISLATION

The agri-environment measure (13)

13

| 19. | Support for agri-environment shall promote:






  — | ways of using agricultural land which are compatible with the protection and improvement of the environment, the landscape and its features, natural resources, the soil and genetic diversity, |
| --- | --- | --- |

19.

Support for agri-environment shall promote:

—

ways of using agricultural land which are compatible with the protection and improvement of the environment, the landscape and its features, natural resources, the soil and genetic diversity,

| — | an environmentally-favourable extensification of farming and management of low-intensity pasture systems, |
| --- | --- |

—

an environmentally-favourable extensification of farming and management of low-intensity pasture systems,

| — | the conservation of high nature-value farmed environments which are under threat, |
| --- | --- |

—

the conservation of high nature-value farmed environments which are under threat,

| — | the upkeep of the landscape and historical features on agricultural land, and |
| --- | --- |

—

the upkeep of the landscape and historical features on agricultural land, and

| — | the use of environmental planning in farming practice. |
| --- | --- |

—

the use of environmental planning in farming practice.

| 20. | A compensatory amount is granted to farmers who give AE undertakings for at least five years. As indicated before, such undertakings must involve more than GFP. |
| --- | --- |

20.

A compensatory amount is granted to farmers who give AE undertakings for at least five years. As indicated before, such undertakings must involve more than GFP.

| 21. | The compensatory amount is calculated on the basis of income foregone and additional costs incurred in respecting the undertakings, plus the need to provide an incentive. |
| --- | --- |

21.

The compensatory amount is calculated on the basis of income foregone and additional costs incurred in respecting the undertakings, plus the need to provide an incentive.

| 22. | The Regulation also sets out how the programming of the rural development measures should be performed (14). Member States design their RDP's according to specific needs and strategies. They should be drawn up at the geographical level deemed to be the most appropriate. Therefore the type of AE sub-measures and their weight in the RDPs can vary considerably. |
| --- | --- |

22.

The Regulation also sets out how the programming of the rural development measures should be performed (14). Member States design their RDP's according to specific needs and strategies. They should be drawn up at the geographical level deemed to be the most appropriate. Therefore the type of AE sub-measures and their weight in the RDPs can vary considerably.

14

Checking agri-environment sub-measures

| 23. | Rules concerning the checking by Member States of rural development measures, including AE, require that initial applications to join a scheme, and subsequent applications for payment, shall be checked in a manner which ensures effective verification of compliance with the conditions for granting support (15). Such verification shall consist of administrative and on-the-spot checks. |
| --- | --- |

23.

Rules concerning the checking by Member States of rural development measures, including AE, require that initial applications to join a scheme, and subsequent applications for payment, shall be checked in a manner which ensures effective verification of compliance with the conditions for granting support (15). Such verification shall consist of administrative and on-the-spot checks.

15

| 24. | The administrative checks must be exhaustive, that is they must be performed before payment to each beneficiary in respect of each measure. Where appropriate, these checks should include cross-checks with data from the integrated administration and control system (IACS). |
| --- | --- |

24.

The administrative checks must be exhaustive, that is they must be performed before payment to each beneficiary in respect of each measure. Where appropriate, these checks should include cross-checks with data from the integrated administration and control system (IACS).

| 25. | The on-the-spot checks shall cover at least 5 % of beneficiaries each year and all the different types of RD measures set out in the programming documents (16). These on-the-spot checks shall be spread over the year on the basis of an analysis of the risks presented by each RD measure. Each check shall cover all the undertakings and obligations of a beneficiary which can be checked at the time of the visit. |
| --- | --- |

25.

The on-the-spot checks shall cover at least 5 % of beneficiaries each year and all the different types of RD measures set out in the programming documents (16). These on-the-spot checks shall be spread over the year on the basis of an analysis of the risks presented by each RD measure. Each check shall cover all the undertakings and obligations of a beneficiary which can be checked at the time of the visit.

16

| 26. | An important provision relating exclusively to AE stipulates that payments may be based on limitations on the use of fertilisers, plant protection products or other inputs only if such limitations are technically and economically measurable (17). |
| --- | --- |

26.

An important provision relating exclusively to AE stipulates that payments may be based on limitations on the use of fertilisers, plant protection products or other inputs only if such limitations are technically and economically measurable (17).

17

| 27. | A farmer who gives an AE undertaking relating to one part of a farm is required to adhere to at least the standard of usual good farming practice throughout the farm. Member States are required to define verifiable standards of GFP in their RDPs (18). |
| --- | --- |

27.

A farmer who gives an AE undertaking relating to one part of a farm is required to adhere to at least the standard of usual good farming practice throughout the farm. Member States are required to define verifiable standards of GFP in their RDPs (18).

18

AUDIT OBSERVATIONS AT COMMISSION LEVEL

Verifiability of the agri-environment sub-measures

| 28. | The Court analysed whether the Commission has ensured the verifiability of the agri-environment sub-measures before approving RDPs. |
| --- | --- |

28.

The Court analysed whether the Commission has ensured the verifiability of the agri-environment sub-measures before approving RDPs.

Implementation of agri-environment programmes in the period 1993 to 1999

| 29. | The Commission carried out two detailed evaluations of the implementation of agri-environment programmes in the period 1993 to 1999 (19). The second of these was conducted in 1998, towards the end of the programming period, but well before many of the related undertakings had expired. The European Parliament called for evaluation before the adoption of the Agenda 2000 proposals which would reinforce AE as a key part of the CAP and was intended to identify remaining problems and weaknesses (20). |
| --- | --- |

29.

The Commission carried out two detailed evaluations of the implementation of agri-environment programmes in the period 1993 to 1999 (19). The second of these was conducted in 1998, towards the end of the programming period, but well before many of the related undertakings had expired. The European Parliament called for evaluation before the adoption of the Agenda 2000 proposals which would reinforce AE as a key part of the CAP and was intended to identify remaining problems and weaknesses (20).

19

20

| 30. | The evaluation found that there were problems intrinsic to the nature of the AE actions themselves and that ‘the challenge to audit authorities presented by the agri-environment undertakings should not be underestimated’. It also indicated that sub-measures which require the farmer to reduce inputs by a certain amount or not to exceed an amount of fertiliser per hectare were difficult to check because soil analyses could not reliably determine respect of the input limits. Furthermore the evaluation stated that book inspections, that is relying on farmer declaration and inspection of purchase records, are not sufficient to identify errors or irregularities. Also, in some actions where the farmer must follow a series of general undertakings such as the maintenance of hedgerows, the actual requirements were not clear enough for the beneficiary to understand what was required. |
| --- | --- |

30.

The evaluation found that there were problems intrinsic to the nature of the AE actions themselves and that ‘the challenge to audit authorities presented by the agri-environment undertakings should not be underestimated’. It also indicated that sub-measures which require the farmer to reduce inputs by a certain amount or not to exceed an amount of fertiliser per hectare were difficult to check because soil analyses could not reliably determine respect of the input limits. Furthermore the evaluation stated that book inspections, that is relying on farmer declaration and inspection of purchase records, are not sufficient to identify errors or irregularities. Also, in some actions where the farmer must follow a series of general undertakings such as the maintenance of hedgerows, the actual requirements were not clear enough for the beneficiary to understand what was required.

| 31. | The evaluation concluded that ‘if a measure cannot be adequately checked, it should not be the subject of public payment’ and that ‘premia justification must focus on sufficiently controllable measures’. This conclusion was reflected in the rural development legislation for the period 2000 to 2006, notably Regulation (EC) No 817/2004 (21). |
| --- | --- |

31.

The evaluation concluded that ‘if a measure cannot be adequately checked, it should not be the subject of public payment’ and that ‘premia justification must focus on sufficiently controllable measures’. This conclusion was reflected in the rural development legislation for the period 2000 to 2006, notably Regulation (EC) No 817/2004 (21).

21

Approval of RDPs by the Commission for the period 2000 to 2006

| 32. | In 2000 and 2001 the Commission carried out analyses of the RDP's submitted by the Member States for the period 2000 to 2006. However, the analysis only included to a limited extent ensuring that the AE sub-measures proposed could be effectively and efficiently verified. |
| --- | --- |

32.

In 2000 and 2001 the Commission carried out analyses of the RDP's submitted by the Member States for the period 2000 to 2006. However, the analysis only included to a limited extent ensuring that the AE sub-measures proposed could be effectively and efficiently verified.

| 33. | An internal risk assessment in 2004 confirmed that it had approved RDP's without verifying the controllability of the measures, due to the difficulty of assessing the controllability on paper of all the sub-measures and actions presented in the 68 RDP's. It concluded that in future its role in assessing controllability should be reviewed. |
| --- | --- |

33.

An internal risk assessment in 2004 confirmed that it had approved RDP's without verifying the controllability of the measures, due to the difficulty of assessing the controllability on paper of all the sub-measures and actions presented in the 68 RDP's. It concluded that in future its role in assessing controllability should be reviewed.

| 34. | The unit in the Commission's Agriculture Directorate-General responsible for checking RD expenditure argued that such an analysis of the controllability had not been carried out, because it believes it is not required under shared management (22). |
| --- | --- |

34.

The unit in the Commission's Agriculture Directorate-General responsible for checking RD expenditure argued that such an analysis of the controllability had not been carried out, because it believes it is not required under shared management (22).

22

| 35. | In order to fulfil its responsibilities, the Commission should evaluate the verifiability of the sub-measures when approving the RDP's. Unless the Commission does so, it has no assurance that Member States can administer the scheme correctly and ensure that those receiving AE compensatory payments farm in the ways they undertook to do. This evaluation would also identify those sub-measures with high control risks. |
| --- | --- |

35.

In order to fulfil its responsibilities, the Commission should evaluate the verifiability of the sub-measures when approving the RDP's. Unless the Commission does so, it has no assurance that Member States can administer the scheme correctly and ensure that those receiving AE compensatory payments farm in the ways they undertook to do. This evaluation would also identify those sub-measures with high control risks.

Verification of the functioning of the control systems

| 36. | The Court also analysed whether the Commission has verified the correct functioning of the control systems in respect of the period 2000 to 2006 (Regulation (EC) No 1257/1999), especially the administrative and on-the-spot checks. |
| --- | --- |

36.

The Court also analysed whether the Commission has verified the correct functioning of the control systems in respect of the period 2000 to 2006 (Regulation (EC) No 1257/1999), especially the administrative and on-the-spot checks.

| 37. | The Commission carried out a series of checks to 12 Member States over the period September 2000 to June 2001 to ensure that systems were in place to correctly administer and control RD expenditure for the period 2000 to 2006 (‘preventive’ enquiries). The Commission produced a synthesis of the results of these checks and this led to modifications in its Guidelines to Member States (23). |
| --- | --- |

37.

The Commission carried out a series of checks to 12 Member States over the period September 2000 to June 2001 to ensure that systems were in place to correctly administer and control RD expenditure for the period 2000 to 2006 (‘preventive’ enquiries). The Commission produced a synthesis of the results of these checks and this led to modifications in its Guidelines to Member States (23).

23

| 38. | The checks covered all RD measures not just AE but did not examine expenditure, nor examine the actual functioning of the systems, because such expenditure had not started by the time of the check. |
| --- | --- |

38.

The checks covered all RD measures not just AE but did not examine expenditure, nor examine the actual functioning of the systems, because such expenditure had not started by the time of the check.

| 39. | The clearance of accounts unit responsible for RD has since carried out a check of less-favoured area payments throughout the Community, but, as at the beginning of 2005, had not checked the systems for AE, even though this is the largest component of rural development expenditure and is considered as high risk (see paragraph 30 above) (24). |
| --- | --- |

39.

The clearance of accounts unit responsible for RD has since carried out a check of less-favoured area payments throughout the Community, but, as at the beginning of 2005, had not checked the systems for AE, even though this is the largest component of rural development expenditure and is considered as high risk (see paragraph 30 above) (24).

24

Control of organic farming

| 40. | Regarding control systems, conversion to organic farming, one of the most significant AE sub-measures, is a specific case (25). In order to benefit from AE aid, a certain number of conditions have to be met. The respect of these conditions is, in most Member States, not checked by the normal AE inspectors but by specialised inspection bodies (third parties). |
| --- | --- |

40.

Regarding control systems, conversion to organic farming, one of the most significant AE sub-measures, is a specific case (25). In order to benefit from AE aid, a certain number of conditions have to be met. The respect of these conditions is, in most Member States, not checked by the normal AE inspectors but by specialised inspection bodies (third parties).

25

The regulatory control system for organic farming

| 41. | Farmers who receive support under the sub-measure ‘organic farming’, must respect the detailed rules on organic production methods which are established in a specific Council Regulation (26). Organic farming has two distinguishing features which set it apart from other AE sub-measures. Firstly, there is a Community-wide minimum standard for labelling products as ‘organic’ and secondly, there is a requirement for an approved inspection body to certify annually each producers' compliance with the rules and standards. |
| --- | --- |

41.

Farmers who receive support under the sub-measure ‘organic farming’, must respect the detailed rules on organic production methods which are established in a specific Council Regulation (26). Organic farming has two distinguishing features which set it apart from other AE sub-measures. Firstly, there is a Community-wide minimum standard for labelling products as ‘organic’ and secondly, there is a requirement for an approved inspection body to certify annually each producers' compliance with the rules and standards.

26

| 42. | In order to gain assurance that the organic rules of production are indeed being respected by the beneficiary of the AE sub-measure, Member States place reliance on the inspection system set up specifically for organic farming. This system requires that each operator who produces organically and wishes to market the products as such must be inspected at least annually. This should be done by either a public inspection authority or (which is much more common, 12 out of 15 Member States) an approved private inspection body, which must comply with EN 45 011, the International standard for bodies operating product certification systems (27). Farmers are free to choose which inspection body will carry out these inspections. |
| --- | --- |

42.

In order to gain assurance that the organic rules of production are indeed being respected by the beneficiary of the AE sub-measure, Member States place reliance on the inspection system set up specifically for organic farming. This system requires that each operator who produces organically and wishes to market the products as such must be inspected at least annually. This should be done by either a public inspection authority or (which is much more common, 12 out of 15 Member States) an approved private inspection body, which must comply with EN 45 011, the International standard for bodies operating product certification systems (27). Farmers are free to choose which inspection body will carry out these inspections.

27

| 43. | Member States are obliged to carry out supervision of the inspection system (28). They shall designate an authority responsible for the approval and supervision of private inspection bodies (the competent authority). After an inspection body has been approved, the competent authority shall ensure that the inspections carried out by the inspection body are objective and verify the effectiveness of its inspections (29). |
| --- | --- |

43.

Member States are obliged to carry out supervision of the inspection system (28). They shall designate an authority responsible for the approval and supervision of private inspection bodies (the competent authority). After an inspection body has been approved, the competent authority shall ensure that the inspections carried out by the inspection body are objective and verify the effectiveness of its inspections (29).

28

29

| 44. | Each year (before 1 July) Member States are required to inform the Commission of measures taken in the preceding year for the implementation of the organic farming Regulation and shall communicate (in particular) a report on the supervision of private inspection bodies (30). The Commission published an action plan for organic food and farming in June 2004 in which it is stated that, ‘The current inspection system works very efficiently in most cases’ (31). |
| --- | --- |

44.

Each year (before 1 July) Member States are required to inform the Commission of measures taken in the preceding year for the implementation of the organic farming Regulation and shall communicate (in particular) a report on the supervision of private inspection bodies (30). The Commission published an action plan for organic food and farming in June 2004 in which it is stated that, ‘The current inspection system works very efficiently in most cases’ (31).

30

31

The implementation of the organic farming control system

| 45. | As most Member States place reliance on the organic farming control system when carrying out the minimum 5 % on-the-spot checks of the AE sub-measure conversion to organic farming, the Court set out to ascertain whether this system works as required. |
| --- | --- |

45.

As most Member States place reliance on the organic farming control system when carrying out the minimum 5 % on-the-spot checks of the AE sub-measure conversion to organic farming, the Court set out to ascertain whether this system works as required.

Annual implementation reports

| 46. | The annual implementation reports should set out the supervision, the key aspects of which are the requirement to ensure that the inspections carried out by the inspection body are objective and to verify the effectiveness of these inspections. |
| --- | --- |

46.

The annual implementation reports should set out the supervision, the key aspects of which are the requirement to ensure that the inspections carried out by the inspection body are objective and to verify the effectiveness of these inspections.

| 47. | The Court found that:






  (a) | not all Member States send these supervision reports. There were no reports from Austria, for example. At the end of the audit (November 2004), of the 48 reports due over the period 2000 to 2003 in respect of the 12 Member States obliged to file such reports, 15 had not been sent. The missing reports in respect of Austria, France, Ireland, Portugal, Spain and the United Kingdom have since been received (full details are set out in the table); |
| --- | --- | --- |

47.

The Court found that:

(a)

not all Member States send these supervision reports. There were no reports from Austria, for example. At the end of the audit (November 2004), of the 48 reports due over the period 2000 to 2003 in respect of the 12 Member States obliged to file such reports, 15 had not been sent. The missing reports in respect of Austria, France, Ireland, Portugal, Spain and the United Kingdom have since been received (full details are set out in the table);

table

| (b) | the reports are composed of a table with the number of visits carried out by the various private inspection bodies, the number of samples taken for analysis and the number of irregularities found and penalties applied. There is no conclusion on the functioning of the system. The Commission's guidance to Member States on how to prepare these reports requested a standardised table and stated that completion of this table fulfills the reporting requirement, as mentioned in paragraph 46 (32); |
| --- | --- |

(b)

the reports are composed of a table with the number of visits carried out by the various private inspection bodies, the number of samples taken for analysis and the number of irregularities found and penalties applied. There is no conclusion on the functioning of the system. The Commission's guidance to Member States on how to prepare these reports requested a standardised table and stated that completion of this table fulfills the reporting requirement, as mentioned in paragraph 46 (32);

32

| (c) | the Commission makes limited use of the reports; |
| --- | --- |

(c)

the Commission makes limited use of the reports;

| (d) | the quality is not always satisfactory and the reports include errors and inconsistencies. The Commission guidance states that ‘the reports submitted to the Commission so far have been a very mixed bag, making it difficult for the Commission to have an overall view of implementation’. This situation still remained at the time of the Court's audit; |
| --- | --- |

(d)

the quality is not always satisfactory and the reports include errors and inconsistencies. The Commission guidance states that ‘the reports submitted to the Commission so far have been a very mixed bag, making it difficult for the Commission to have an overall view of implementation’. This situation still remained at the time of the Court's audit;

| (e) | furthermore there are no clear guidelines to the Competent Authorities regarding how to carry out the supervision of inspection systems. |
| --- | --- |

(e)

furthermore there are no clear guidelines to the Competent Authorities regarding how to carry out the supervision of inspection systems.

Table

Submission of supervision reports 2000 to 2003, situation as at the closure of the Court audit: November 2004

| | 2000 | 2001 | 2002 | 2003 |
| --- | --- | --- | --- | --- |
| Austria | | | | |
| Belgium | | | | |
| Denmark | n/a | n/a | n/a | n/a |
| Finland | n/a | n/a | n/a | n/a |
| France | | | | |
| Germany | | | | |
| Greece | | | | |
| Ireland | | | | |
| Italy | | | | |
| Luxembourg | | | | |
| Netherlands | n/a | n/a | n/a | n/a |
| Portugal | | | | |
| Spain | n/a | * | | |
| Sweden | | | * | |
| UK | | | | |
| | = | supervision report sent |
| | = | supervision report not sent |
| * | = | partly sent |
| n/a | = | not applicable, because supervision is not required when inspections are carried out by a public authority. |

2000

2001

2002

2003

Austria

Image

Image

Image

Image

Belgium

Image

Image

Image

Image

Denmark

n/a

n/a

n/a

n/a

Finland

n/a

n/a

n/a

n/a

France

Image

Image

Image

Image

Germany

Image

Image

Image

Image

Greece

Image

Image

Image

Image

Ireland

Image

Image

Image

Image

Italy

Image

Image

Image

Image

Luxembourg

Image

Image

Image

Image

Netherlands

n/a

n/a

n/a

n/a

Portugal

Image

Image

Image

Image

Spain

n/a

Image

Image

Image

Sweden

Image

Image

Image

Image

UK

Image

Image

Image

Image

Image

=

supervision report sent

Image

=

supervision report not sent

*

=

partly sent

n/a

=

not applicable, because supervision is not required when inspections are carried out by a public authority.

Note that the missing reports in respect of Austria, France, Ireland, Portugal, Spain and the United Kingdom had been received by June 2005.

Source: Commission.

Source:

| 48. | A further requirement is that by 31 March each year Member States shall inform the Commission of the list of inspection bodies approved on 31 December of the previous year, their legal and operational structure, their standard inspection procedure and their penalty arrangements (...) (33). Although Member States communicate the list of inspection bodies, not all send details of their standard inspection procedure annually. |
| --- | --- |

48.

A further requirement is that by 31 March each year Member States shall inform the Commission of the list of inspection bodies approved on 31 December of the previous year, their legal and operational structure, their standard inspection procedure and their penalty arrangements (...) (33). Although Member States communicate the list of inspection bodies, not all send details of their standard inspection procedure annually.

33

| 49. | The Court concludes that, even if these reports were complete and accurate, they would not give assurance about the objectiveness and effectiveness of the inspections carried out. |
| --- | --- |

49.

The Court concludes that, even if these reports were complete and accurate, they would not give assurance about the objectiveness and effectiveness of the inspections carried out.

Checks made by the Commission to ensure that the system is working

| 50. | The Directorate-General for Health and Consumer Protection (DG SANCO) is responsible for food safety and in this context the Food and Veterinary Office, part of DG SANCO, visited seven Member States between 1998 and 2001 (34). One of the objectives of these visits was to check whether the supervision and inspection systems for organic farming were working correctly. |
| --- | --- |

50.

The Directorate-General for Health and Consumer Protection (DG SANCO) is responsible for food safety and in this context the Food and Veterinary Office, part of DG SANCO, visited seven Member States between 1998 and 2001 (34). One of the objectives of these visits was to check whether the supervision and inspection systems for organic farming were working correctly.

34

| 51. | The Court found that there is no consensus within the Commission regarding the priority of checking organic farming. Whereas the Directorate-General for Agriculture and Rural Development (DG AGRI) has stressed the value of these DG SANCO missions, DG SANCO has stated that the priority accorded to organic farming checks is low. There have been no further visits or assessments of the systems since the last visit in 2001. Thus the Commission is not ensuring that the key control of supervision of the inspection system is working adequately. |
| --- | --- |

51.

The Court found that there is no consensus within the Commission regarding the priority of checking organic farming. Whereas the Directorate-General for Agriculture and Rural Development (DG AGRI) has stressed the value of these DG SANCO missions, DG SANCO has stated that the priority accorded to organic farming checks is low. There have been no further visits or assessments of the systems since the last visit in 2001. Thus the Commission is not ensuring that the key control of supervision of the inspection system is working adequately.

Follow-up of DG SANCO reports

| 52. | DG SANCO's seven visits to Member States detected significant weaknesses in the supervision of inspection systems which resulted in recommendations to both the Member State and the Commission services concerned. |
| --- | --- |

52.

DG SANCO's seven visits to Member States detected significant weaknesses in the supervision of inspection systems which resulted in recommendations to both the Member State and the Commission services concerned.

| 53. | DG SANCO requested each Member State to submit an action plan setting out what it intended to do to address the observations made. Only Austria did so. The other six submitted comments on the draft reports addressed to them. DG SANCO concluded its follow-up by asking DG AGRI to ‘arrange for necessary action to be taken in response to outstanding issues’. |
| --- | --- |

53.

DG SANCO requested each Member State to submit an action plan setting out what it intended to do to address the observations made. Only Austria did so. The other six submitted comments on the draft reports addressed to them. DG SANCO concluded its follow-up by asking DG AGRI to ‘arrange for necessary action to be taken in response to outstanding issues’.

| 54. | The Court reviewed all seven DG SANCO reports, the underlying work, and the follow-up thereto carried out by DG AGRI. DG AGRI prepared a summary of the follow-up for each of the seven DG SANCO-visited Member States. It lists the DG SANCO recommendations and what has happened since. The Court found that the follow-up of the significant weaknesses identified by DG SANCO was insufficient (see examples in text box 2). It concludes that the Commission has limited assurance of the correct functioning of the supervision and inspection system in the Member States.

  Text box 2Organic farming: observations arising from DG SANCO checks in Member States and their subsequent follow-upAustria: DG SANCO and DG AGRI consider all questions resolved because Austria's action plan addressed all issues raised. However the Commission has taken no steps to ensure that the action plan has been put in place and responds adequately to the criticisms raised in the DG SANCO report:





  — | no technical assessment of inspection bodies' work by competent authority, |
| --- | --- | --- |

54.

The Court reviewed all seven DG SANCO reports, the underlying work, and the follow-up thereto carried out by DG AGRI. DG AGRI prepared a summary of the follow-up for each of the seven DG SANCO-visited Member States. It lists the DG SANCO recommendations and what has happened since. The Court found that the follow-up of the significant weaknesses identified by DG SANCO was insufficient (see examples in text box 2). It concludes that the Commission has limited assurance of the correct functioning of the supervision and inspection system in the Member States.

text box 2

Text box 2Organic farming: observations arising from DG SANCO checks in Member States and their subsequent follow-upAustria: DG SANCO and DG AGRI consider all questions resolved because Austria's action plan addressed all issues raised. However the Commission has taken no steps to ensure that the action plan has been put in place and responds adequately to the criticisms raised in the DG SANCO report:





  —

Text box 2Organic farming: observations arising from DG SANCO checks in Member States and their subsequent follow-upAustria:

no technical assessment of inspection bodies' work by competent authority,

| — | no record of work done, |
| --- | --- |

—

no record of work done,

| — | no witnessing of inspectors work on the spot, |
| --- | --- |

—

no witnessing of inspectors work on the spot,

| — | merely discussions with inspectors, |
| --- | --- |

—

merely discussions with inspectors,

| — | a general attitude of confidence in the performance of the inspection bodies in ensuring that operators comply with organic production rules on the part of the competent authority. |
| --- | --- |

—

a general attitude of confidence in the performance of the inspection bodies in ensuring that operators comply with organic production rules on the part of the competent authority.

United Kingdom:

Italy:

Spain:

| — | absence of a system in place ‘to evaluate whether the inspection systems in the autonomous communities work to satisfaction’, |
| --- | --- |

—

absence of a system in place ‘to evaluate whether the inspection systems in the autonomous communities work to satisfaction’,

| — | in the case of the only approved inspection body, whether it was supervised and whether that body fulfilled the mandatory international standards for inspection bodies, |
| --- | --- |

—

in the case of the only approved inspection body, whether it was supervised and whether that body fulfilled the mandatory international standards for inspection bodies,

| — | failure to inspect all operators annually, and |
| --- | --- |

—

failure to inspect all operators annually, and

| — | that the quality of the inspection reports was variable. |
| --- | --- |

—

that the quality of the inspection reports was variable.

AUDIT OBSERVATIONS AT MEMBER STATE LEVEL

The verifiability of agri-environment sub-measures in five Member States

| 55. | The audit in the Member States covered both the administrative and the on-the-spot checks, concentrating on the latter because it is the key level for ensuring eligibility. The Court selected as wide a range of sub-measures as possible and the auditors accompanied the national/regional checkers during their checks. These checks included verifying the respect of GFP. |
| --- | --- |

55.

The audit in the Member States covered both the administrative and the on-the-spot checks, concentrating on the latter because it is the key level for ensuring eligibility. The Court selected as wide a range of sub-measures as possible and the auditors accompanied the national/regional checkers during their checks. These checks included verifying the respect of GFP.

Administrative checks

| 56. | In the five Member States audited by the Court the administrative checks are generally well executed and the cross-checks under IACS are a useful means of helping to ensure that the surface area and number of animals declared are correct (35). |
| --- | --- |

56.

In the five Member States audited by the Court the administrative checks are generally well executed and the cross-checks under IACS are a useful means of helping to ensure that the surface area and number of animals declared are correct (35).

35

| 57. | In Luxembourg the basic AE sub-measure requires that 100 % of the agricultural holding be under the AE undertaking (36). This requirement makes administrative checks easier, since the aid is paid in respect of all surfaces in the IACS declaration. The farmer confirms that he has respected the conditions in the annual surface declaration and the cross-checks are performed as for the first pillar. |
| --- | --- |

57.

In Luxembourg the basic AE sub-measure requires that 100 % of the agricultural holding be under the AE undertaking (36). This requirement makes administrative checks easier, since the aid is paid in respect of all surfaces in the IACS declaration. The farmer confirms that he has respected the conditions in the annual surface declaration and the cross-checks are performed as for the first pillar.

36

| 58. | As in other countries, in France the beneficiary is not required to put the whole farm under AE undertaking and the areas included can change from year to year. The beneficiary must indicate the parcels of land actually committed for a given year by identifying them on the IACS surface area declaration. In order to do this, however, he only has two codes to choose from, even though there are more than 100 possible sub-measures. In the case of parcels of land potentially committed under a number of sub-measures, it is often impossible to ascertain under which sub-measure(s) it has in fact been committed. |
| --- | --- |

58.

As in other countries, in France the beneficiary is not required to put the whole farm under AE undertaking and the areas included can change from year to year. The beneficiary must indicate the parcels of land actually committed for a given year by identifying them on the IACS surface area declaration. In order to do this, however, he only has two codes to choose from, even though there are more than 100 possible sub-measures. In the case of parcels of land potentially committed under a number of sub-measures, it is often impossible to ascertain under which sub-measure(s) it has in fact been committed.

| 59. | These procedures make it impossible to apply automated consistency checks to compare the information contained in the annual declaration and the undertakings signed by the beneficiary. Thus administrative checks have limited value. |
| --- | --- |

59.

These procedures make it impossible to apply automated consistency checks to compare the information contained in the annual declaration and the undertakings signed by the beneficiary. Thus administrative checks have limited value.

On-the-spot checks

Particularity of agri-environment

| 60. | Under the applicable rules of the first pillar of the CAP significant reliance can be placed on teledetection to verify whether an aid claim reflects reality, ie checking surface areas of parcels of land (how much land is being farmed). Teledetection is, in most cases, not effective for checking compliance with environmental undertakings (what farming methods are being used) and thus there is a need to make a physical inspection on-the-spot. This makes the checking of AE sub-measures more labour-intensive and therefore more costly than checking other agricultural aid. |
| --- | --- |

60.

Under the applicable rules of the first pillar of the CAP significant reliance can be placed on teledetection to verify whether an aid claim reflects reality, ie checking surface areas of parcels of land (how much land is being farmed). Teledetection is, in most cases, not effective for checking compliance with environmental undertakings (what farming methods are being used) and thus there is a need to make a physical inspection on-the-spot. This makes the checking of AE sub-measures more labour-intensive and therefore more costly than checking other agricultural aid.

| 61. | The technical nature of many AE sub-measures means that specialised knowledge is required of the checkers. For example, a category of sub-measure common to all the Member States visited is the limitation of inputs such as fertilisers and pesticides. Assessing compliance with these undertakings is more difficult than simply confirming that a parcel contains a certain crop. Similarly, ensuring that GFP is adhered to also requires specialist skills. |
| --- | --- |

61.

The technical nature of many AE sub-measures means that specialised knowledge is required of the checkers. For example, a category of sub-measure common to all the Member States visited is the limitation of inputs such as fertilisers and pesticides. Assessing compliance with these undertakings is more difficult than simply confirming that a parcel contains a certain crop. Similarly, ensuring that GFP is adhered to also requires specialist skills.

Checking the respect of usual good farming practice

| 62. | Compliance with a defined code of GFP throughout the beneficiary holding is a precondition for receiving AE payments. Such codes were introduced in RDPs for the period 2000 to 2006. It is required that the RDPs include verifiable standards, which entail compliance with general mandatory environmental requirements (37). |
| --- | --- |

62.

Compliance with a defined code of GFP throughout the beneficiary holding is a precondition for receiving AE payments. Such codes were introduced in RDPs for the period 2000 to 2006. It is required that the RDPs include verifiable standards, which entail compliance with general mandatory environmental requirements (37).

37

| 63. | The requirement to check GFP is very demanding on checkers of AE, who are usually not plant protection or fertilisation specialists. The Commission's guidelines on this call on the Member States to ‘define at programme level a reasonable set of essential practices to be checked on the spot’ (38). |
| --- | --- |

63.

The requirement to check GFP is very demanding on checkers of AE, who are usually not plant protection or fertilisation specialists. The Commission's guidelines on this call on the Member States to ‘define at programme level a reasonable set of essential practices to be checked on the spot’ (38).

38

| 64. | The essential GFP practices selected nationwide for the 5 % on-the-spot checks in Germany focus on questions that are easily verifiable. A study by the German Federal Agricultural Research Centre (39) reports that the choice of GFP indicators to be verified in all German Bundesländer is determined by the qualifications of the inspectors and as these are not experts in plant protection or fertilisation but are the direct aid, first pillar inspectors, these indicators ‘can only cover aspects easily verifiable for a layperson’. These indicators must also be verifiable by the inspector at every season. Thus the practices checked concern the holding of specific documents, such as results of soil analyses and nutrient accounts which provide only limited evidence of the respect of GFP. This is also the case in Luxembourg. |
| --- | --- |

64.

The essential GFP practices selected nationwide for the 5 % on-the-spot checks in Germany focus on questions that are easily verifiable. A study by the German Federal Agricultural Research Centre (39) reports that the choice of GFP indicators to be verified in all German Bundesländer is determined by the qualifications of the inspectors and as these are not experts in plant protection or fertilisation but are the direct aid, first pillar inspectors, these indicators ‘can only cover aspects easily verifiable for a layperson’. These indicators must also be verifiable by the inspector at every season. Thus the practices checked concern the holding of specific documents, such as results of soil analyses and nutrient accounts which provide only limited evidence of the respect of GFP. This is also the case in Luxembourg.

39

| 65. | A good practice for verifying GFP was found in Germany where there is an additional, check for more detailed aspects of GFP carried out by specialist authorities on 1 % of farmers and any breaches of GFP are communicated to the paying agency and, where appropriate sanctions are imposed and AE payments reduced. |
| --- | --- |

65.

A good practice for verifying GFP was found in Germany where there is an additional, check for more detailed aspects of GFP carried out by specialist authorities on 1 % of farmers and any breaches of GFP are communicated to the paying agency and, where appropriate sanctions are imposed and AE payments reduced.

| 66. | The German Federal Agricultural Research Centre report notes that checks carried out by the specialist authorities follow an environment-oriented risk assessment for the selection of farms to be visited based on the probability of non-compliance (40). These specific checks detect more infringements and have a greater effect on correcting behaviour than the checks carried out in the context of the 5 % checks which are selected on criteria such as size of payment. |
| --- | --- |

66.

The German Federal Agricultural Research Centre report notes that checks carried out by the specialist authorities follow an environment-oriented risk assessment for the selection of farms to be visited based on the probability of non-compliance (40). These specific checks detect more infringements and have a greater effect on correcting behaviour than the checks carried out in the context of the 5 % checks which are selected on criteria such as size of payment.

40

| 67. | The French authorities have drawn up instructions at national level concerning the procedures to be applied, when carrying out the 5 % checks, to verify compliance with the seven GFP criteria set out in the national rural development plan; these instructions have been approved by the Commission. However, in reality, these seven criteria and the related checks are not demanding. |
| --- | --- |

67.

The French authorities have drawn up instructions at national level concerning the procedures to be applied, when carrying out the 5 % checks, to verify compliance with the seven GFP criteria set out in the national rural development plan; these instructions have been approved by the Commission. However, in reality, these seven criteria and the related checks are not demanding.

| 68. | For example, concerning the utilisation of fertilisers: the checker verifies that the use of fertilisers is documented, but only if the farm is in a nitrate vulnerable area or if one of the agri-environment sub-measures requires a logbook to be kept. The checker is expressly instructed not to check invoices or other documents. Another example concerns the checks on nitrate fertilisers: the instructions to the checker for this GFP are identical to those described above with one addition, namely ‘to verify, as far as possible and on a basis of the logbook, that these fertilisers have not been applied during “risk” periods (i.e. when the ground is frozen or waterlogged, etc.)’. |
| --- | --- |

68.

For example, concerning the utilisation of fertilisers: the checker verifies that the use of fertilisers is documented, but only if the farm is in a nitrate vulnerable area or if one of the agri-environment sub-measures requires a logbook to be kept. The checker is expressly instructed not to check invoices or other documents. Another example concerns the checks on nitrate fertilisers: the instructions to the checker for this GFP are identical to those described above with one addition, namely ‘to verify, as far as possible and on a basis of the logbook, that these fertilisers have not been applied during “risk” periods (i.e. when the ground is frozen or waterlogged, etc.)’.

| 69. | The Court's observations indicate that, as GFP are often unclearly defined, tests are, in practice, limited to a number of undemanding but easily verifiable criteria. As a consequence, the extent to which the AE sub-measures go beyond GFP is difficult to assess. The Court reiterates its observations and recommendations on GFP made in its special report on support for less-favoured areas and in particular those pointing to the impossibility of satisfactorily verifying their respect (41). The Court indicated that the Commission should ensure that Member States provide a definition of GFP which is clear and can be conveniently verified and, if this is not possible, the Commission should propose a system of support which relies on a more controllable concept than GFP. |
| --- | --- |

69.

The Court's observations indicate that, as GFP are often unclearly defined, tests are, in practice, limited to a number of undemanding but easily verifiable criteria. As a consequence, the extent to which the AE sub-measures go beyond GFP is difficult to assess. The Court reiterates its observations and recommendations on GFP made in its special report on support for less-favoured areas and in particular those pointing to the impossibility of satisfactorily verifying their respect (41). The Court indicated that the Commission should ensure that Member States provide a definition of GFP which is clear and can be conveniently verified and, if this is not possible, the Commission should propose a system of support which relies on a more controllable concept than GFP.

41

Checking the sub-measures

Selection of the on-the-spot inspections

| 70. | In France the procedure is in conformity, on the whole, with existing rules (42). However no technical agri-environment criterion had been determined for inclusion in the risk analyses. The Commission's guidelines in this respect stipulate that risk criteria specific to each measure should be taken into account (43). In addition, the on-the-spot checks should be spread over the year on the basis of an analysis of the risks presented by each rural development measure (44). |
| --- | --- |

70.

In France the procedure is in conformity, on the whole, with existing rules (42). However no technical agri-environment criterion had been determined for inclusion in the risk analyses. The Commission's guidelines in this respect stipulate that risk criteria specific to each measure should be taken into account (43). In addition, the on-the-spot checks should be spread over the year on the basis of an analysis of the risks presented by each rural development measure (44).

42

43

44

| 71. | In Italy, the findings of previous years' checks are not used to inform the risk analysis and have similarly not been taken into account in drawing up the following year's sample (45). |
| --- | --- |

71.

In Italy, the findings of previous years' checks are not used to inform the risk analysis and have similarly not been taken into account in drawing up the following year's sample (45).

45

| 72. | In Luxembourg the risk analysis, indeed the sampling procedure as a whole, is based on direct first-pillar aid because the AE measure is an integral part of the same administrative system. This being the case, no specific risk analysis is made for this agri-environment measure. |
| --- | --- |

72.

In Luxembourg the risk analysis, indeed the sampling procedure as a whole, is based on direct first-pillar aid because the AE measure is an integral part of the same administrative system. This being the case, no specific risk analysis is made for this agri-environment measure.

| 73. | Sample selection in Austria complies with Regulation (EC) No 2419/2001. Furthermore, a separate selection, respecting the 5 % requirement, is made for the sub-measure winter/autumn greening which has a commitment period outside the main inspection period. The sampling is done by a department independent of the on-the-spot checkers. |
| --- | --- |

73.

Sample selection in Austria complies with Regulation (EC) No 2419/2001. Furthermore, a separate selection, respecting the 5 % requirement, is made for the sub-measure winter/autumn greening which has a commitment period outside the main inspection period. The sampling is done by a department independent of the on-the-spot checkers.

Timing of the checks

| 74. | The Commission guidelines state that the best time of year for on-the-spot checks must be determined so as to cover the most representative undertakings and obligations of the measure to be checked and that the on-the-spot checks must be carried out during that period (46). This respects Article 69 of Regulation (EC) No 817/2004 (see paragraph 25). |
| --- | --- |

74.

The Commission guidelines state that the best time of year for on-the-spot checks must be determined so as to cover the most representative undertakings and obligations of the measure to be checked and that the on-the-spot checks must be carried out during that period (46). This respects Article 69 of Regulation (EC) No 817/2004 (see paragraph 25).

46

| 75. | In Luxembourg the on-the-spot checks are carried out between June and August, i.e. around the period when arable crops are harvested, and until September in the case of forage areas. This period is appropriate for on-the-spot checks on arable crops and forage areas but not necessarily for agri-environment sub-measures or GFP, for which certain conditions must be fulfilled and checked outside this period (47). The optimum periods for the checking of the various types of agri-environment undertakings have not been identified. |
| --- | --- |

75.

In Luxembourg the on-the-spot checks are carried out between June and August, i.e. around the period when arable crops are harvested, and until September in the case of forage areas. This period is appropriate for on-the-spot checks on arable crops and forage areas but not necessarily for agri-environment sub-measures or GFP, for which certain conditions must be fulfilled and checked outside this period (47). The optimum periods for the checking of the various types of agri-environment undertakings have not been identified.

47

| 76. | In Austria, although the checks in general take place at the appropriate time, the sub-measure ‘erosion protection of vineyards’, for which the period of commitment is between 1 November and 30 April, is checked between 15 May and the end of September. Thus, the erosion protection measure is checked outside of the commitment period. This was recognised by the Austrian authorities who have committed to complete the procedures. |
| --- | --- |

76.

In Austria, although the checks in general take place at the appropriate time, the sub-measure ‘erosion protection of vineyards’, for which the period of commitment is between 1 November and 30 April, is checked between 15 May and the end of September. Thus, the erosion protection measure is checked outside of the commitment period. This was recognised by the Austrian authorities who have committed to complete the procedures.

| 77. | In Baden-Württemberg the sample to be checked on the spot for the AE programme and other surface-based RD measures is divided into four checking periods covering May to mid-December, so that the various undertakings under the sub-measures can be checked. The checks are correctly spread over the year on the basis of an analysis of the risks to AE. However the nature of the AE sub-measures means that, although at least 5 % of beneficiaries are checked each year, the fact that each beneficiary in the sample is only visited once in the control year means many sub-measures and undertakings cannot be fully checked. |
| --- | --- |

77.

In Baden-Württemberg the sample to be checked on the spot for the AE programme and other surface-based RD measures is divided into four checking periods covering May to mid-December, so that the various undertakings under the sub-measures can be checked. The checks are correctly spread over the year on the basis of an analysis of the risks to AE. However the nature of the AE sub-measures means that, although at least 5 % of beneficiaries are checked each year, the fact that each beneficiary in the sample is only visited once in the control year means many sub-measures and undertakings cannot be fully checked.

| 78. | All 11 cases examined by the Court in Germany in June 2004 (the principal control period, during which at least half the checks should be carried out) contained sub-measures that could not be checked at the time of the visit. |
| --- | --- |

78.

All 11 cases examined by the Court in Germany in June 2004 (the principal control period, during which at least half the checks should be carried out) contained sub-measures that could not be checked at the time of the visit.

| 79. | Moreover there are sub-measures under this AE programme that have more than one undertaking, which can only be checked at different moments of the year. For example, for the very widespread sub-measure autumn/winter greening of arable areas, green cover must: (a) be sown by mid-September and (b) be maintained intact until end of November/February. In such cases, the application will only be verified at most once, that is one of the two undertakings will not be checked. |
| --- | --- |

79.

Moreover there are sub-measures under this AE programme that have more than one undertaking, which can only be checked at different moments of the year. For example, for the very widespread sub-measure autumn/winter greening of arable areas, green cover must: (a) be sown by mid-September and (b) be maintained intact until end of November/February. In such cases, the application will only be verified at most once, that is one of the two undertakings will not be checked.

| 80. | The combination of more than one undertaking per sub-measure means that in such cases a sub-measure cannot be fully checked. This is also the case for sub-measure ‘widening of distance between the rows of crops to 17 cm’, where the widened distance between the rows of cereals can be checked during the principal control period, but where the sub-measure's other undertaking (no spraying of fungicide before a certain stage in the development of the cereal, normally early May) can only be verified at an earlier point in time. |
| --- | --- |

80.

The combination of more than one undertaking per sub-measure means that in such cases a sub-measure cannot be fully checked. This is also the case for sub-measure ‘widening of distance between the rows of crops to 17 cm’, where the widened distance between the rows of cereals can be checked during the principal control period, but where the sub-measure's other undertaking (no spraying of fungicide before a certain stage in the development of the cereal, normally early May) can only be verified at an earlier point in time.

| 81. | In France the date of the on-the-spot check depends on notification of the sample. The on-the-spot checks are carried out as soon as possible after arrival of the file in order to avoid delays in payment (in practice, from July to October). The checks are therefore not necessarily carried out at the appropriate moment, on the basis of an analysis of the risks presented by the measure to be checked. Moreover, where the beneficiary, according to the contractual requirements, is obliged to implement or to refrain from a practice which involves more than one key date, there is no provision for a further visit. |
| --- | --- |

81.

In France the date of the on-the-spot check depends on notification of the sample. The on-the-spot checks are carried out as soon as possible after arrival of the file in order to avoid delays in payment (in practice, from July to October). The checks are therefore not necessarily carried out at the appropriate moment, on the basis of an analysis of the risks presented by the measure to be checked. Moreover, where the beneficiary, according to the contractual requirements, is obliged to implement or to refrain from a practice which involves more than one key date, there is no provision for a further visit.

| 82. | The problems caused by the need to carry out the check within a very limited period or the need to visit a project more than once was set out in the Commission Report to the budgetary authorities on the lessons from the prior period (48). |
| --- | --- |

82.

The problems caused by the need to carry out the check within a very limited period or the need to visit a project more than once was set out in the Commission Report to the budgetary authorities on the lessons from the prior period (48).

48

| 83. | The need to make more than one on-the-spot check visit was confirmed by Regulation (EC) No 746/96, article 19(4) of which required that, ‘as far as possible, all undertakings given by a beneficiary shall be the subject of checking (49). If necessary, checks on specific undertakings shall be made at different times of the year’. Thus the authorities had to return to check an AE project, if this was necessary to verify that all the undertakings made were being respected. |
| --- | --- |

83.

The need to make more than one on-the-spot check visit was confirmed by Regulation (EC) No 746/96, article 19(4) of which required that, ‘as far as possible, all undertakings given by a beneficiary shall be the subject of checking (49). If necessary, checks on specific undertakings shall be made at different times of the year’. Thus the authorities had to return to check an AE project, if this was necessary to verify that all the undertakings made were being respected.

49

| 84. | For the period 2000 to 2006 the equivalent requirements appear in Articles 67 to 69 of Regulation (EC) No 817/2004. There is no longer the requirement to check all the AE undertakings to which the beneficiary has subscribed, and nor is the need to return to the beneficiary at different times of the year. Moreover the Commission's guidelines to Member States for the current period only require the most representative undertakings and obligations to be checked and encourage Member States to organise the inspection system so as to reduce the number of visits to any individual beneficiary, in theory down to one visit (50). |
| --- | --- |

84.

For the period 2000 to 2006 the equivalent requirements appear in Articles 67 to 69 of Regulation (EC) No 817/2004. There is no longer the requirement to check all the AE undertakings to which the beneficiary has subscribed, and nor is the need to return to the beneficiary at different times of the year. Moreover the Commission's guidelines to Member States for the current period only require the most representative undertakings and obligations to be checked and encourage Member States to organise the inspection system so as to reduce the number of visits to any individual beneficiary, in theory down to one visit (50).

50

| 85. | Thus the current legislative system allows that many undertakings will not be checked even in the case of those beneficiaries selected as part of the 5 % sample to be inspected on the spot. |
| --- | --- |

85.

Thus the current legislative system allows that many undertakings will not be checked even in the case of those beneficiaries selected as part of the 5 % sample to be inspected on the spot.

Reliance on self-declaration by beneficiaries

| 86. | In all Member States visited, the Court noted that significant reliance was placed on self-declaration of beneficiaries. |
| --- | --- |

86.

In all Member States visited, the Court noted that significant reliance was placed on self-declaration of beneficiaries.

| 87. | Checks on sub-measures inspected in France for example, rely to a large extent on the veracity of the declarations made by the beneficiaries and, in particular, on the reliability of the parcel and grazing logbooks. In these documents, the farmer himself enters applications of fertilisers and phytosanitary products, planting, mowing and harvesting activities, and grazing periods. The checkers are not obliged to go beyond simply verifying that the data have been entered in these logbooks. |
| --- | --- |

87.

Checks on sub-measures inspected in France for example, rely to a large extent on the veracity of the declarations made by the beneficiaries and, in particular, on the reliability of the parcel and grazing logbooks. In these documents, the farmer himself enters applications of fertilisers and phytosanitary products, planting, mowing and harvesting activities, and grazing periods. The checkers are not obliged to go beyond simply verifying that the data have been entered in these logbooks.

| 88. | A Commission inspection report (see paragraph 37) concluded that this type of check could not be considered sufficient and had to be supplemented by other types of check (51). Indeed, the Commission's guidelines recommend complementing the checks on the information recorded by the beneficiary by other checks focusing, for example, on yield, invoices or soil and plant analyses (52). |
| --- | --- |

88.

A Commission inspection report (see paragraph 37) concluded that this type of check could not be considered sufficient and had to be supplemented by other types of check (51). Indeed, the Commission's guidelines recommend complementing the checks on the information recorded by the beneficiary by other checks focusing, for example, on yield, invoices or soil and plant analyses (52).

51

52

| 89. | The ‘Reduction of nitrate fertiliser by 20 %’ sub-measure provides an example:






  (i) | the reference value on the basis of which the 20 % reduction is calculated depends on the expected yield provided by the beneficiary; |
| --- | --- | --- |

89.

The ‘Reduction of nitrate fertiliser by 20 %’ sub-measure provides an example:

(i)

the reference value on the basis of which the 20 % reduction is calculated depends on the expected yield provided by the beneficiary;

| (ii) | actual compliance with the 20 % reduction is verified using the beneficiary's records. |
| --- | --- |

(ii)

actual compliance with the 20 % reduction is verified using the beneficiary's records.

| 90. | The Court observed no standard procedure for carrying out verifications of the documents used as evidence to prove compliance with the contractual requirements. One inspector may make mathematical calculations in order to verify that limits have been complied with, while another inspector will merely check that the relevant documents have been filled in. Similarly, a number of checkers carry out administrative checks on all the parcels under contract while others check no more than a sample. |
| --- | --- |

90.

The Court observed no standard procedure for carrying out verifications of the documents used as evidence to prove compliance with the contractual requirements. One inspector may make mathematical calculations in order to verify that limits have been complied with, while another inspector will merely check that the relevant documents have been filled in. Similarly, a number of checkers carry out administrative checks on all the parcels under contract while others check no more than a sample.

| 91. | This sub-measure whereby the beneficiary reduces the nitrate fertiliser to 20 % less than the recommended optimum is also one of the principal AE sub-measures in Baden-Württemberg, for example. The checklist for the on-the-spot checks for this sub-measure requires the checker to assess whether the records of fertiliser applied are plausible and complete. |
| --- | --- |

91.

This sub-measure whereby the beneficiary reduces the nitrate fertiliser to 20 % less than the recommended optimum is also one of the principal AE sub-measures in Baden-Württemberg, for example. The checklist for the on-the-spot checks for this sub-measure requires the checker to assess whether the records of fertiliser applied are plausible and complete.

| 92. | In addition, the checker must check the accuracy of the information used for calculating the optimum nitrate level. The basis for the calculation (and hence the 20 % reduction thereto) is the expected yield. This figure is provided by the beneficiary. There is no standard level for this, and a variation in the expected yield of +/– 15 % is considered plausible. The checker is only required to investigate when significant overstatements are evident. Thus the method of calculating the optimum level of nitrate fertiliser is sensitive to small changes in the expected yield. |
| --- | --- |

92.

In addition, the checker must check the accuracy of the information used for calculating the optimum nitrate level. The basis for the calculation (and hence the 20 % reduction thereto) is the expected yield. This figure is provided by the beneficiary. There is no standard level for this, and a variation in the expected yield of +/– 15 % is considered plausible. The checker is only required to investigate when significant overstatements are evident. Thus the method of calculating the optimum level of nitrate fertiliser is sensitive to small changes in the expected yield.

| 93. | The illustrative example in text box 3 shows that, by overstating his expected yield by a margin which is still ‘plausible’ (e.g. 14 %), a beneficiary could apply 100 % of the recommended level of nitrate fertiliser (64kg N/ha) and yet claim compensation under the sub-measure for reducing nitrate fertilisation by 20 %.

  Text box 3Baden-Württemberg: reduction of nitrate fertiliser by 20 %If the beneficiary were to increase the figure for his expected yield by 14 % (i.e. within the accepted variation +/– 15 %), the level of reduced nitrate fertilisation (N – 20 %) would be the same as the recommended level of nitrate fertiliser for GFP (64 kg/ha. in the example below). | Real situation | Hypothetical example, expected yield overstated by 14 % |
| --- | --- | --- | --- |
| Expected yield | 50 | | 57 | |
| × factor for the type of crop | 2,3 | | 2,3 | |
| | | 115 | | 131 |
| + N in non-harvestable parts | | 20 | | 20 |
| Total need for N | | 135 | | 151 |
| – N from soil, previous crops | | – 71 | | – 71 |
| N fertilisation for GFP | | 64 | | 80 |
| – 20 % | | – 12,8 | | – 16 |
| N – 20 % | | 51,2 | | 64 |

93.

The illustrative example in text box 3 shows that, by overstating his expected yield by a margin which is still ‘plausible’ (e.g. 14 %), a beneficiary could apply 100 % of the recommended level of nitrate fertiliser (64kg N/ha) and yet claim compensation under the sub-measure for reducing nitrate fertilisation by 20 %.

text box 3

Text box 3Baden-Württemberg: reduction of nitrate fertiliser by 20 %If the beneficiary were to increase the figure for his expected yield by 14 % (i.e. within the accepted variation +/– 15 %), the level of reduced nitrate fertilisation (N – 20 %) would be the same as the recommended level of nitrate fertiliser for GFP (64 kg/ha. in the example below).

Real situation

Hypothetical example, expected yield overstated by 14 %

Expected yield

50

57

× factor for the type of crop

2,3

2,3

115

131

- N in non-harvestable parts

20

20

Total need for N

135

151

– N from soil, previous crops

– 71

– 71

N fertilisation for GFP

64

80

– 20 %

– 12,8

– 16

N – 20 %

51,2

64

64

| 94. | The second key information provided by the beneficiary is the actual amount of mineral and organic fertiliser applied and recorded in the parcel register. This depends on the beneficiary accurately recording the fertiliser that he has applied. The Court found that ensuring that the amount of fertiliser actually applied is accurately recorded is difficult in practice and the checker merely ensures that the records are up to date and plausible. |
| --- | --- |

94.

The second key information provided by the beneficiary is the actual amount of mineral and organic fertiliser applied and recorded in the parcel register. This depends on the beneficiary accurately recording the fertiliser that he has applied. The Court found that ensuring that the amount of fertiliser actually applied is accurately recorded is difficult in practice and the checker merely ensures that the records are up to date and plausible.

| 95. | The effect of understating the amount applied on crops could have the effect of unjustifiably awarding compensation under this sub-measure. A combination of a lesser understatement and a moderate overstatement of expected yield would have the same effect and be even more difficult to detect. |
| --- | --- |

95.

The effect of understating the amount applied on crops could have the effect of unjustifiably awarding compensation under this sub-measure. A combination of a lesser understatement and a moderate overstatement of expected yield would have the same effect and be even more difficult to detect.

| 96. | The Court concludes that this type of sub-measure is verifiable only by relying on the information provided by the beneficiary. Thus, it does not satisfy the requirement of Regulation (EC) No 817/2004 that payments based on limitations on the use of inputs may only be made if such limitations are technically and economically measurable. |
| --- | --- |

96.

The Court concludes that this type of sub-measure is verifiable only by relying on the information provided by the beneficiary. Thus, it does not satisfy the requirement of Regulation (EC) No 817/2004 that payments based on limitations on the use of inputs may only be made if such limitations are technically and economically measurable.

Verification dependent on visual checks

| 97. | The on-the-spot checkers make visual inspections on the field in order to ensure respect of undertakings such as reduction in the use of inputs. Such inspections are important as they provide additionnal assurance. However, they have limitations, in particular when undertakings are difficult to verify. |
| --- | --- |

97.

The on-the-spot checkers make visual inspections on the field in order to ensure respect of undertakings such as reduction in the use of inputs. Such inspections are important as they provide additionnal assurance. However, they have limitations, in particular when undertakings are difficult to verify.

| 98. | The Baden-Württemberg AE programme includes a sub-measure where the farmer undertakes not to use growth regulators. The on-the-spot checks for this sub-measure are based on visual observation. Cereals at varying heights and an uneven impression of the field are considered as adequate evidence of non-usage of growth regulators. |
| --- | --- |

98.

The Baden-Württemberg AE programme includes a sub-measure where the farmer undertakes not to use growth regulators. The on-the-spot checks for this sub-measure are based on visual observation. Cereals at varying heights and an uneven impression of the field are considered as adequate evidence of non-usage of growth regulators.

| 99. | However, the situation is not always clear. Differences in height between use and non-use are rather small (for rye 20 cm but only 4 cm for wheat). Moreover, differences in height also depend on climate, date of sowing, quality of soil and the variety of the cereal concerned. See illustrative example in text box 4.

  Text box 4Two adjacent parcels with the same type of wheat were checked, one parcel with and one without growth regulators. It was not possible to see significant differences between the two fields. Any small differences observed in the height of the plants could also have been caused by the differences in the preparation of the soil, the previous crop and/or the date of sowing.The local instructions state that laboratory analysis should only be employed ‘if the effect of the growth regulators cannot be assessed visually’. Such analyses are considered too expensive to carry out, except in cases of flagrant non-respect. |
| --- | --- |

99.

However, the situation is not always clear. Differences in height between use and non-use are rather small (for rye 20 cm but only 4 cm for wheat). Moreover, differences in height also depend on climate, date of sowing, quality of soil and the variety of the cereal concerned. See illustrative example in text box 4.

text box 4

Text box 4Two adjacent parcels with the same type of wheat were checked, one parcel with and one without growth regulators. It was not possible to see significant differences between the two fields. Any small differences observed in the height of the plants could also have been caused by the differences in the preparation of the soil, the previous crop and/or the date of sowing.The local instructions state that laboratory analysis should only be employed ‘if the effect of the growth regulators cannot be assessed visually’. Such analyses are considered too expensive to carry out, except in cases of flagrant non-respect.

Text box 4Two adjacent parcels with the same type of wheat were checked, one parcel with and one without growth regulators. It was not possible to see significant differences between the two fields. Any small differences observed in the height of the plants could also have been caused by the differences in the preparation of the soil, the previous crop and/or the date of sowing.The local instructions state that laboratory analysis should only be employed ‘if the effect of the growth regulators cannot be assessed visually’. Such analyses are considered too expensive to carry out, except in cases of flagrant non-respect.

| 100. | The checks performed by inspectors, in the field, in all Member States audited by the Court are based on their individual knowledge and (for some undertakings), to a minor extent, detailed instructions for on-the-spot checks. Indicators to be checked are rarely given in the handbooks. However once in the field the inspectors refer to many indicators which are based on their technical knowledge and experience. The Court noted that many of these indicators are very useful and crucial for determining the outcome of the inspection of several important sub-measures, such as reduction of inputs. These include the colour and height of the crop, existence of weeds, etc. |
| --- | --- |

100.

The checks performed by inspectors, in the field, in all Member States audited by the Court are based on their individual knowledge and (for some undertakings), to a minor extent, detailed instructions for on-the-spot checks. Indicators to be checked are rarely given in the handbooks. However once in the field the inspectors refer to many indicators which are based on their technical knowledge and experience. The Court noted that many of these indicators are very useful and crucial for determining the outcome of the inspection of several important sub-measures, such as reduction of inputs. These include the colour and height of the crop, existence of weeds, etc.

| 101. | It might not be practical to include fully detailed descriptions of all criteria, indicators or parameters in the handbook of the inspectors. The Court considers however that a minimum of general provisions could usefully be included in the handbook on how undertakings should be checked on the field. It would ensure controllability of the undertakings and a homogenous treatment between inspections. A development of written instructions would provide the checkers with verifiable criteria against which to check. It would also improve the documentation of the checks carried out and the usefulness of inspection reports during subsequent visits. |
| --- | --- |

101.

It might not be practical to include fully detailed descriptions of all criteria, indicators or parameters in the handbook of the inspectors. The Court considers however that a minimum of general provisions could usefully be included in the handbook on how undertakings should be checked on the field. It would ensure controllability of the undertakings and a homogenous treatment between inspections. A development of written instructions would provide the checkers with verifiable criteria against which to check. It would also improve the documentation of the checks carried out and the usefulness of inspection reports during subsequent visits.

Lack of baseline data

| 102. | In France, the contracts signed by the prefect and the beneficiary contain the basic conditions which the latter is obliged to comply with in the context of his AE undertakings. The Court discovered numerous cases in which the precise meaning of the conditions was not clear and neither the checker nor the beneficiary understood what was required. In addition, in respect of some conditions there were differences of interpretation between the checkers. |
| --- | --- |

102.

In France, the contracts signed by the prefect and the beneficiary contain the basic conditions which the latter is obliged to comply with in the context of his AE undertakings. The Court discovered numerous cases in which the precise meaning of the conditions was not clear and neither the checker nor the beneficiary understood what was required. In addition, in respect of some conditions there were differences of interpretation between the checkers.

| 103. | The Annex to this report contains four examples of this phenomenon. This lack of clarity makes the on-the-spot work of the checkers difficult, particularly in view of the fact that they also carry out on-the-spot checks in seven other départements. As each département has its own requirements, the provisions governing any given action may differ from one to the other. |
| --- | --- |

103.

The Annex to this report contains four examples of this phenomenon. This lack of clarity makes the on-the-spot work of the checkers difficult, particularly in view of the fact that they also carry out on-the-spot checks in seven other départements. As each département has its own requirements, the provisions governing any given action may differ from one to the other.

Annex

départements

département

| 104. | The sub-measure ‘Preservation and care of landscape elements’ involves taking care of trees, ditches, etc. but the farmer must also ensure that the object in question is not removed. |
| --- | --- |

104.

The sub-measure ‘Preservation and care of landscape elements’ involves taking care of trees, ditches, etc. but the farmer must also ensure that the object in question is not removed.

| 105. | Given the nature of the undertakings, it is not always possible to verify the existence and respect of undertakings. Since the reference criteria which are being used during controls have a general character or are not always traceable. It is evident from the majority of beneficiaries visited and from the information obtained from the inspectors that there is a high level of flexibility in implementing the obligation and indeed also in verifying it. |
| --- | --- |

105.

Given the nature of the undertakings, it is not always possible to verify the existence and respect of undertakings. Since the reference criteria which are being used during controls have a general character or are not always traceable. It is evident from the majority of beneficiaries visited and from the information obtained from the inspectors that there is a high level of flexibility in implementing the obligation and indeed also in verifying it.

| 106. | The Court found that, concerning the control of landscape elements, for administrative and financial reasons it is scarcely possible to meet demands for documentation as they would have to be mapped all over the country. In Austria, the quality of the checks will potentially be enforced from 2005 onwards when aerial pictures will be used to check landscape elements and that these checks will include retrospective checks. |
| --- | --- |

106.

The Court found that, concerning the control of landscape elements, for administrative and financial reasons it is scarcely possible to meet demands for documentation as they would have to be mapped all over the country. In Austria, the quality of the checks will potentially be enforced from 2005 onwards when aerial pictures will be used to check landscape elements and that these checks will include retrospective checks.

CONCLUSIONS AND RECOMMENDATIONS

Overall conclusion

| 107. | Unlike for first pillar expenditure, it is not possible to obtain assurance at a reasonable cost in respect of all AE undertakings necessary to receive the aid. Even obtaining reasonable assurance on compliance with all obligations given in respect of a minimum sample of 5 % of beneficiaries per year, involves significant costs for Member States, either in terms of on-the-spot checks or costly laboratory analyses. Teledetection is of limited use in checking the respect of AE (and GFP) undertakings and thus AE checking is more labour-intensive than checking the first pillar. Moreover, the checks are more technically demanding (paragraphs 60 and 61). |
| --- | --- |

107.

Unlike for first pillar expenditure, it is not possible to obtain assurance at a reasonable cost in respect of all AE undertakings necessary to receive the aid. Even obtaining reasonable assurance on compliance with all obligations given in respect of a minimum sample of 5 % of beneficiaries per year, involves significant costs for Member States, either in terms of on-the-spot checks or costly laboratory analyses. Teledetection is of limited use in checking the respect of AE (and GFP) undertakings and thus AE checking is more labour-intensive than checking the first pillar. Moreover, the checks are more technically demanding (paragraphs 60 and 61).

At Commission level

| 108. | The Commission only ensured to a limited extent the verifiability of the AE sub-measures at the RDP approval stage and thus, has not identified those which have a high control risk (paragraphs 32 to 35). |
| --- | --- |

108.

The Commission only ensured to a limited extent the verifiability of the AE sub-measures at the RDP approval stage and thus, has not identified those which have a high control risk (paragraphs 32 to 35).

| 109. | It has not visited any Member States to test the AE control systems that have been in operation for the first five of the seven years on this, the largest RD measure, which is known to be high risk (paragraphs 36 to 39). |
| --- | --- |

109.

It has not visited any Member States to test the AE control systems that have been in operation for the first five of the seven years on this, the largest RD measure, which is known to be high risk (paragraphs 36 to 39).

| 110. | With respect to organic farming, the Member States' reports, which are supposed to give assurance about the objectiveness and effectiveness of the inspection system, are incomplete, late and inaccurate. This is relevant for AE because the inspection system is relied upon by the Member States to replace their own checks in this sub-measure(paragraphs 46 to 49). |
| --- | --- |

110.

With respect to organic farming, the Member States' reports, which are supposed to give assurance about the objectiveness and effectiveness of the inspection system, are incomplete, late and inaccurate. This is relevant for AE because the inspection system is relied upon by the Member States to replace their own checks in this sub-measure(paragraphs 46 to 49).

| 111. | Commission checks in seven Member States in 1998 to 2001 detected important weaknesses in the supervision of inspection systems, but these findings were not properly followed up. No further checks have taken place in any Member State, despite the Commission having identified the need to do so. Thus the Commission has not ensured that the key control of supervision of the inspection system is working adequately (paragraphs 50 to 54). |
| --- | --- |

111.

Commission checks in seven Member States in 1998 to 2001 detected important weaknesses in the supervision of inspection systems, but these findings were not properly followed up. No further checks have taken place in any Member State, despite the Commission having identified the need to do so. Thus the Commission has not ensured that the key control of supervision of the inspection system is working adequately (paragraphs 50 to 54).

| 112. | In the Commission's Action Plan for Organic Food and Farming it is stated that ‘The current inspection system works very efficiently in most cases’. The Court's audit did not find that the Commission had adequate assurance to make this assertion (paragraphs 44 and 46 to 54). |
| --- | --- |

112.

In the Commission's Action Plan for Organic Food and Farming it is stated that ‘The current inspection system works very efficiently in most cases’. The Court's audit did not find that the Commission had adequate assurance to make this assertion (paragraphs 44 and 46 to 54).

At Member State level

| 113. | Those elements of GFP tested in the course of the on-the-spot checks are limited to a number of undemanding, but easily verifiable, criteria (paragraphs 62 to 69). |
| --- | --- |

113.

Those elements of GFP tested in the course of the on-the-spot checks are limited to a number of undemanding, but easily verifiable, criteria (paragraphs 62 to 69).

| 114. | The risk analyses to determine the samples to be selected rarely include AE-specific considerations and little analysis is carried out of the results of checks to inform the following year's analysis (paragraphs 70 to 73). |
| --- | --- |

114.

The risk analyses to determine the samples to be selected rarely include AE-specific considerations and little analysis is carried out of the results of checks to inform the following year's analysis (paragraphs 70 to 73).

| 115. | The audited Member State administrations largely apply the on-the-spot checking provisions of Regulations (EC) No 817/2004 and (EC) No 2419/2001 and the Commission's guidelines, but the fact that the undertakings (and GFP) should be respected either at more than one point in time or continuously means that they are often unable to obtain even reasonable assurance on compliance. The administrative and on-the-spot checks procedures are closely associated with those of the first pillar and the latter often take place at the same time as the direct aids checks, around the harvest time, which is not always the appropriate moment to verify compliance with AE undertakings and GFP (paragraphs 74 to 85). |
| --- | --- |

115.

The audited Member State administrations largely apply the on-the-spot checking provisions of Regulations (EC) No 817/2004 and (EC) No 2419/2001 and the Commission's guidelines, but the fact that the undertakings (and GFP) should be respected either at more than one point in time or continuously means that they are often unable to obtain even reasonable assurance on compliance. The administrative and on-the-spot checks procedures are closely associated with those of the first pillar and the latter often take place at the same time as the direct aids checks, around the harvest time, which is not always the appropriate moment to verify compliance with AE undertakings and GFP (paragraphs 74 to 85).

| 116. | Control of the AE sub-measures in the Member States audited relies to a large extent on the self-declaration of the beneficiaries (paragraphs 86 to 96). |
| --- | --- |

116.

Control of the AE sub-measures in the Member States audited relies to a large extent on the self-declaration of the beneficiaries (paragraphs 86 to 96).

| 117. | Some undertakings in the sample to be checked on the spot are not checked reliably because of the absence of objective parameters for visual checks (paragraphs 97 to 106). |
| --- | --- |

117.

Some undertakings in the sample to be checked on the spot are not checked reliably because of the absence of objective parameters for visual checks (paragraphs 97 to 106).

Recommendations

| 118. | The Court has identified a number of detailed aspects in which the arrangements for verifying AE expenditure could be improved:






  — | the division of responsibilities between Commission and DGs AGRI and SANCO, in respect of organic farming, should be clarified, |
| --- | --- | --- |

118.

The Court has identified a number of detailed aspects in which the arrangements for verifying AE expenditure could be improved:

—

the division of responsibilities between Commission and DGs AGRI and SANCO, in respect of organic farming, should be clarified,

| — | the Commission should verify the functioning of the current AE control system. This would allow lessons learned to be applied for the following programming period. The Commission should also plan to review the operation of the AE control system of this next period at an appropriate stage, |
| --- | --- |

—

the Commission should verify the functioning of the current AE control system. This would allow lessons learned to be applied for the following programming period. The Commission should also plan to review the operation of the AE control system of this next period at an appropriate stage,

| — | the Commission should take steps to ensure that reports on supervision of inspection of organic farming provide the necessary information, are submitted on time and are followed up appropriately, |
| --- | --- |

—

the Commission should take steps to ensure that reports on supervision of inspection of organic farming provide the necessary information, are submitted on time and are followed up appropriately,

| — | Member States should plan and organise their checks of AE expenditure on an AE-specific risk basis, so that all material sub-measures can be checked during the appropriate period; and should ensure that inspectors have clear criteria against which to check. |
| --- | --- |

—

Member States should plan and organise their checks of AE expenditure on an AE-specific risk basis, so that all material sub-measures can be checked during the appropriate period; and should ensure that inspectors have clear criteria against which to check.

However, the Court's audit indicates that there are major difficulties in checking significant areas of agri-environment expenditure. Effective verification requires evidence to be obtained about detailed farming practices; obtaining such evidence is, in many cases:

| — | disproportionately costly, and/or |
| --- | --- |

—

disproportionately costly, and/or

| — | extremely demanding from a technical point of view. |
| --- | --- |

—

extremely demanding from a technical point of view.

| 119. | The Commission concluded in its evaluation that, ‘if a measure cannot be adequately checked, it should not be the subject of public payment’ (see paragraph 31). The Court's audit shows that this is respected to a limited extent. The Commission, Council and Parliament should consider how this principle should be put into practice in respect of proposals for AE expenditure in the 2007 to 2013 planning period, taking into account, on the one hand, the risk of non-compliance and, on the other hand, the potential benefits of this type of expenditure. |
| --- | --- |

119.

The Commission concluded in its evaluation that, ‘if a measure cannot be adequately checked, it should not be the subject of public payment’ (see paragraph 31). The Court's audit shows that this is respected to a limited extent. The Commission, Council and Parliament should consider how this principle should be put into practice in respect of proposals for AE expenditure in the 2007 to 2013 planning period, taking into account, on the one hand, the risk of non-compliance and, on the other hand, the potential benefits of this type of expenditure.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 14 July 2005.

For the Court of Auditors

Hubert WEBER

President

---

(1)  Council Regulation (EEC) No 2078/92 of 30 June 1992 on agricultural production methods compatible with the requirements of the protection of the environment and the maintenance of the countryside (OJ L 215, 30.7.1992, p. 85).

1

(2)  Article 2(1) of Decision No 2179/98/EC of the European Parliament and of the Council of 24 September 1998 on the review of the European Community programme of policy and action in relation to the environment and sustainable development (OJ L 275, 10.10.1998, p. 1).

2

(3)  Attached to Decision No 2179/98/EC, page 12.

3

(4)  Article 3(9), COM(2001) 31 final of 21 January 2001.

4

(5)  Council Regulation (EC) No 1257/1999 of 17 May 1999 on support for rural development from the European Agricultural Guidance and Guarantee Fund (EAGGF) and amending and repealing certain Regulations (OJ L 160, 26.6.1999, p. 80).

5

(6)  Objective 1 areas are regions whose development is lagging behind.

6

(7)  European Commission's fact sheet: Overview of the implementation of rural development policy 2000 to 2006.

7

(8)  A further 193 million euro was declared by Member States under the old agri-environment scheme (Regulation (EEC) No 2078/92). The ratio of ‘old’ expenditure (Regulation (EEC) No 2078/92) to current (Regulation (EC) No 1257/1999) expenditure will decline over the coming years as undertakings entered into in 1999 expire.

8

(9)  Council Regulation (EC) No 1782/2003 of 29 September 2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers, notably Articles 3 to 5 (OJ L 270, 21.10.2003, p. 1).

9

(10)  OJ C 353, 8.12.2000.

10

(11)  1. Austria RDP, region selected: Burgenland. 2. France RDP, Contrats territoriaux d'exploitation, département selected: Côte d'Or. 3. Germany: RDP of Baden-Württemberg: MEKA II. 4. Italy: RDP of Veneto and 5. Luxembourg.

11

(12)  Other categories of sub-measures also examined are crop rotation; extensification; breeds in danger of being lost to farming and plant varieties under threat of genetic erosion.

12

(13)  Articles 22 to 24 of Regulation (EC) No 1257/1999.

13

(14)  Title III, Chapter II of Regulation (EC) No 1257/1999.

14

(15)  Articles 67 to 69 of Commission Regulation (EC) No 817/2004 of 29 April 2004 laying down detailed rules for rural development from the European Agricultural Guidance and Guarantee Fund (EAGGF) (OJ L 153, 30.4.2004, p. 30). This Regulation replaces, but does not materially change in this respect, successively Commission Regulations (EC) No 1750/1999 of 23 July 1999 (OJ L 214, 13.8.1999, p. 31) and (EC) No 445/2002 of 26 February 2002 (OJ L 74, 15.3.2002, p. 1).

15

(16)  Commission Regulation (EC) No 2419/2001 of 11 December 2001 laying down detailed rules for applying the integrated administration and control system for certain Community aid schemes established by Council Regulation (EEC) 3508/92 (OJ L 327, 12.12.2001, p. 11). Regulation (EEC) 3508/92 has since been repealed and replaced by Regulation (EC) No 1782/2003.

16

(17)  Commission Regulation (EC) No 817/2004, Article 18(3).

17

(18)  Ibid, Articles 20 and 35.

18

(19)  Commission Report to the Council and European Parliament on the application of Council Regulation (EEC) No 2078/92, COM(97) 620 final of 4.12.1997, and DG VI Working Document VI/7655/98: State of application of Regulation (EEC) No 2078/92: Evaluation of agri-environment programmes.

19

(20)  Iversen report adopted by European Parliament, October 1998: see page 12 of Evaluation.

20

(21)  Article 18(3) of Regulation (EC) No 817/2004 relates exclusively to AE.

21

(22)  Under shared management implementation tasks are delegated to Member States. However, the Commission has final responsibility for the implementation of the Budget (Articles 53(3) and 53(5) of the Financial Regulation).

22

(23)  VI/10535/99 rev 7, Guidelines for the implementation of systems of management, checks and penalties concerning rural development measures under Regulation (EC) No 1257/1999.

23

(24)  Less-favoured area payment is a rural development measure established by Articles 13 to 20 of Regulation (EC) No 1257/1999.

24

(25)  According to the latest Commission figures available 338 million euro were committed to be spent in 2003 as the EAGGF Guarantee co-financing for the conversion to organic farming under Regulation (EC) No 1257/1999 and Regulation (EEC) No 2078/92. This represented 16 % of the EU contribution to AE in that year.

25

(26)  Council Regulation (EEC) No 2092/91 of 24 June 1991 on organic production of agricultural products and indications referring thereto on agricultural products and foodstuffs (OJ L 198, 22.7.1991, p. 1).

26

(27)  The European Action Plan for Organic Food and Farming reports that the obligation to satisfy this international standard has been implemented in different ways and Action 17 requires the development of a specific accreditation system for inspection bodies.

27

(28)  Regulation (EEC) No 2092/91, Article 9(4).

28

(29)  Ibid, Article 9(6).

29

(30)  Ibid, Article 15.

30

(31)  European Action Plan for Organic Food and Farming, annexed Commission staff working document, section 5.6.

31

(32)  Document 8856/VI/97-rev.3a.

32

(33)  Regulation (EEC) No 2092/91, Article 15.

33

(34)  France, Germany, Netherlands, United Kingdom, Austria, Italy and Spain.

34

(35)  The Court is reporting separately with a detailed analysis of the implementation of IACS.

35

(36)  The premium for conservation of the landscape and the natural environment (PEENP).

36

(37)  Articles 20 and 35 of Regulation (EC) No 817/2004.

37

(38)  Point 4.14 of the Commission Guidelines.

38

(39)  Bundesforschungsanstalt für Landwirtschaft, Braunschweig: Good farming practice definitions, implementation, experiences. Braunschweig, September 2003, pages 28 and 55 in respect of Germany.

39

(40)  Page 39 of main study.

40

(41)  Special Report No 4/2003 concerning rural development: support for less-favoured areas (OJ C 151, 27.6.2003).

41

(42)  In particular Article 19 of Regulation (EC) No 2419/2001.

42

(43)  Point 4.3. of the Commission Guidelines.

43

(44)  Article 69 of Regulation (EC) No 817/2004.

44

(45)  Article 19(1)(d) of Regulation (EC) No 2419/2001.

45

(46)  Point 4.4 of the Commission guidelines, VI/10535/99 Rev 7.

46

(47)  In the Annex to the Grand Duchy Regulation of 11 February 2002 on Good Farming Practice, paragraphs 4 — Application of fertiliser on frozen or waterlogged ground, 5 — Application of fertiliser in the proximity of water courses, 6 and 7.1 — Forgoing application of fertiliser at certain times in winter. With regard to the basic agri-environment measure, the PEENP, the obligation to plant ‘a new crop or a catch crop in case of application of organic fertilisers on arable land during the period following harvesting of the main crop and up to 15 November’ and the ban on spreading farmyard manure during the period from 15 November to 15 January following harvesting on those parcels used to grow maize also render checks necessary at other times of the year.

47

(48)  Section 3.7.3 of that Report.

48

(49)  Commission Regulation (EC) No 746/96 of 24 April 1996 laying down detailed rules for the application of Council Regulation (EEC) No 2078/92 on agricultural methods compatible with the requirements of the protection of the environment and the maintenance of the countryside (OJ L 102, 25.4.1996, p. 19).

49

(50)  Points 4.4 and 4.5 of Commission Guidelines.

50

(51)  Rapport de synthèse de l'enquête sur la mise en place des systèmes de gestion, contrôle et sanctions mis en place par les EM pour les mesures de DR 2000-2006, page 22, of 16.8.2001.

51

(52)  Point 4.12 of Commission Guidelines.

52

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ANNEX

Examples where the contractual requirements of the Côte d'Or AE programme are not clear

| 1. | ‘The analyses (one for every 5 to 10 ha) shall be interpreted and used as a basis for drawing up a fertility balance report in the first and fifth years and as an annual reference’. In one case, the fact that the beneficiary had failed to carry out one soil analysis per year and per 10 ha was entered as an anomaly (this anomaly had not been discovered in the course of an on-the-spot check the year before). Another checker responsible for another case (and informed by the beneficiary of the statements made by the technical expert) interpreted the obligation to carry out a soil analysis for every 10 ha as only having to be done once during the five years covered by the contract and did not consider it unusual that such an analysis had not yet been made in year two. According to the French authorities a third interpretation is in fact the correct one, i.e. that one soil analysis per 10 ha should be carried out both in year one and in year five. |
| --- | --- |

1.

‘The analyses (one for every 5 to 10 ha) shall be interpreted and used as a basis for drawing up a fertility balance report in the first and fifth years and as an annual reference’. In one case, the fact that the beneficiary had failed to carry out one soil analysis per year and per 10 ha was entered as an anomaly (this anomaly had not been discovered in the course of an on-the-spot check the year before). Another checker responsible for another case (and informed by the beneficiary of the statements made by the technical expert) interpreted the obligation to carry out a soil analysis for every 10 ha as only having to be done once during the five years covered by the contract and did not consider it unusual that such an analysis had not yet been made in year two. According to the French authorities a third interpretation is in fact the correct one, i.e. that one soil analysis per 10 ha should be carried out both in year one and in year five.

| 2. | ‘Application of organic fertiliser not exceeding approximately 65 units of nitrogen’. The word ‘approximately’ is inappropriate to qualify a limit. Would 66 units be acceptable, in spite of a limit of ‘approximately 65’? What about 70 units? |
| --- | --- |

2.

‘Application of organic fertiliser not exceeding approximately 65 units of nitrogen’. The word ‘approximately’ is inappropriate to qualify a limit. Would 66 units be acceptable, in spite of a limit of ‘approximately 65’? What about 70 units?

| 3. | It is difficult to ascertain whether the maximum number of large animal units per hectare is applicable to the entire holding or only to the hectares committed under the relevant sub-measure. The checkers had no information on this. |
| --- | --- |

3.

It is difficult to ascertain whether the maximum number of large animal units per hectare is applicable to the entire holding or only to the hectares committed under the relevant sub-measure. The checkers had no information on this.

| 4. | The meaning of the phrase ‘in the case of grazed areas, the amounts which are under the control of the farmer’ is not clear. Does this mean that the farmer can influence the amounts of manure produced by animals grazing the meadow? |
| --- | --- |

4.

The meaning of the phrase ‘in the case of grazed areas, the amounts which are under the control of the farmer’ is not clear. Does this mean that the farmer can influence the amounts of manure produced by animals grazing the meadow?

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THE COMMISSION'S REPLIES

EXECUTIVE SUMMARY

| I to III. | Agri-environment measures (AEM) are central elements of the common agricultural policy (CAP) responding to the concerns of society with respect to the protection and improvement of the environment in rural areas. The Commission welcomes the Court's report in this respect. In response to the Court's findings the Commission would like to emphasise:






  — | at the beginning of each programming period, the Commission analyses the rural development programmes as submitted by the Member States. The Commission issued useful guidelines for its desk officers which allowed them to assess most of the agri-environmental measures on their verifiability. Furthermore, the different responsibilities under shared management should be emphasised: the Commission sets out the legal framework and Member States are responsible for proposing verifiable measures (1). The fact that a programme is approved by the Commission does not relieve a Member State of its responsibilities (see paragraphs 32 to 35), |
| --- | --- | --- |

I to III.

Agri-environment measures (AEM) are central elements of the common agricultural policy (CAP) responding to the concerns of society with respect to the protection and improvement of the environment in rural areas. The Commission welcomes the Court's report in this respect. In response to the Court's findings the Commission would like to emphasise:

—

at the beginning of each programming period, the Commission analyses the rural development programmes as submitted by the Member States. The Commission issued useful guidelines for its desk officers which allowed them to assess most of the agri-environmental measures on their verifiability. Furthermore, the different responsibilities under shared management should be emphasised: the Commission sets out the legal framework and Member States are responsible for proposing verifiable measures (1). The fact that a programme is approved by the Commission does not relieve a Member State of its responsibilities (see paragraphs 32 to 35),

| — | the Clearance of Accounts Directorate organises its audit work on the basis of an instrument of central risk analysis covering all agricultural expenditure. It takes into account different risk elements, including the observations of the Court and the length of time since the last audit and, determines the audit priorities. On the basis of this risk assessment, it was determined in previous years that priority should be given to other audits. However, the following elements demonstrate that the Clearance of Accounts of DG AGRI has already in different ways assessed the systems in place for AEM:






  — | the agri-environmental measures were audited in all Member States in 1997 to 1999 and follow-up audits were carried out in 2000 to 2002 in those Member States for which financial corrections had been proposed. The Commission considers that this provided a reasonable level of assurance about the compliance of the systems in place and, in particular, about the implementation of appropriate control systems for the different sub-measures, including those considered of limited verifiability, |
| --- | --- | --- |

—

the Clearance of Accounts Directorate organises its audit work on the basis of an instrument of central risk analysis covering all agricultural expenditure. It takes into account different risk elements, including the observations of the Court and the length of time since the last audit and, determines the audit priorities. On the basis of this risk assessment, it was determined in previous years that priority should be given to other audits. However, the following elements demonstrate that the Clearance of Accounts of DG AGRI has already in different ways assessed the systems in place for AEM:

—

the agri-environmental measures were audited in all Member States in 1997 to 1999 and follow-up audits were carried out in 2000 to 2002 in those Member States for which financial corrections had been proposed. The Commission considers that this provided a reasonable level of assurance about the compliance of the systems in place and, in particular, about the implementation of appropriate control systems for the different sub-measures, including those considered of limited verifiability,

| — | moreover, the new basic requirement of controlling the respect of good farming practices, introduced by Regulation (EC) No 1257/1999, was subject of a thorough examination during the enquiry on less-favoured areas carried out in most of the Member States in 2003 and 2004 (see paragraph 39), |
| --- | --- |

—

moreover, the new basic requirement of controlling the respect of good farming practices, introduced by Regulation (EC) No 1257/1999, was subject of a thorough examination during the enquiry on less-favoured areas carried out in most of the Member States in 2003 and 2004 (see paragraph 39),

| — | the Commission was constrained by the fact that it did not have the legal base to carry out inspections in the Member States. Nevertheless, it has followed up the organic farming inspection system in the Member States by means of their supervision reports and other sources of information. |
| --- | --- |

—

the Commission was constrained by the fact that it did not have the legal base to carry out inspections in the Member States. Nevertheless, it has followed up the organic farming inspection system in the Member States by means of their supervision reports and other sources of information.

Most operators are inspected each year as evidenced by Member States’ reports.

In addition, to the extent that organic farming measures are co-financed by the EAGGF in the framework of rural development, the audit services of DG AGRI, as part of their ongoing enquiry on AEM (2005 to 2006), are carrying out a partial examination of the supervisory system in place in the regions and Member States audited.

| — | The annual supervision reports give a number of indications on the inspection system in place such as confirmation of the number of inspection visits carried out and the number of infringements notified. Nevertheless, the Commission identified in the European Action Plan on Organic Food and Farming the need to improve the quality of the supervision reports. The issue of supervision is part of ongoing work on a review of (EEC) No Regulation 2092/91. It is also to be linked with Regulation (EC) No 882/2004 (2) to be applicable from 2006, which reinforces the framework for the organisation of official controls and supervision at Member States’ level (see paragraphs 47 to 49). |
| --- | --- |

—

The annual supervision reports give a number of indications on the inspection system in place such as confirmation of the number of inspection visits carried out and the number of infringements notified. Nevertheless, the Commission identified in the European Action Plan on Organic Food and Farming the need to improve the quality of the supervision reports. The issue of supervision is part of ongoing work on a review of (EEC) No Regulation 2092/91. It is also to be linked with Regulation (EC) No 882/2004 (2) to be applicable from 2006, which reinforces the framework for the organisation of official controls and supervision at Member States’ level (see paragraphs 47 to 49).

| — | The Commission took note of the mission reports on all seven Member States concerned. It also considered other sources of information relating to the inspection system in the Member States (see paragraphs 50 to 54). |
| --- | --- |

—

The Commission took note of the mission reports on all seven Member States concerned. It also considered other sources of information relating to the inspection system in the Member States (see paragraphs 50 to 54).

| IV. | The Commission has taken note of the weaknesses identified by the Court and it will continue to undertake, to the extent possible, to remedy the individual cases in partnership with the Member States:






  — | in accordance with Regulation (EC) No 817/2004, checks shall be spread over the year on the basis of an analysis of risk of each rural development measure. This risk analysis is established by the Member State that shall adapt it year by year to the previous findings, in such a way as to privilege checks in times where elements more at risk can be controlled (see paragraphs 74 and 77), |
| --- | --- | --- |

IV.

The Commission has taken note of the weaknesses identified by the Court and it will continue to undertake, to the extent possible, to remedy the individual cases in partnership with the Member States:

—

in accordance with Regulation (EC) No 817/2004, checks shall be spread over the year on the basis of an analysis of risk of each rural development measure. This risk analysis is established by the Member State that shall adapt it year by year to the previous findings, in such a way as to privilege checks in times where elements more at risk can be controlled (see paragraphs 74 and 77),

| — | the reliance on declarations (record keeping e.g. plot-wise on date/quantities of fertilisers/pesticides applied) is useful, for example, if the undertaking spans the whole year and regular inspections within the year are not feasible. In case of doubt, the authorities should proceed to further examination and/or analysis (see paragraph 97), |
| --- | --- |

—

the reliance on declarations (record keeping e.g. plot-wise on date/quantities of fertilisers/pesticides applied) is useful, for example, if the undertaking spans the whole year and regular inspections within the year are not feasible. In case of doubt, the authorities should proceed to further examination and/or analysis (see paragraph 97),

| — | visual checks are normally applied in combination with other control instruments and form only a limited part of the control of agri-environment commitments, |
| --- | --- |

—

visual checks are normally applied in combination with other control instruments and form only a limited part of the control of agri-environment commitments,

| — | knowledge and experience of the inspectors play an important role in the on-the-spot checks. Member States have established a catalogue of good farming practice (GFP) which is very often supplemented by checklists, instructions, training, a quality assurance concept and the obligation to refer to the competent authorities in case of doubt. With regard to other commitments specific to each AE sub-measure, most Member States have established operating manuals, circulars and/or instructions for the use of the inspectors, ensuring thus a certain homogeneity in the controls carried out on the same measure throughout the national territory (see paragraphs 100 and 101). |
| --- | --- |

—

knowledge and experience of the inspectors play an important role in the on-the-spot checks. Member States have established a catalogue of good farming practice (GFP) which is very often supplemented by checklists, instructions, training, a quality assurance concept and the obligation to refer to the competent authorities in case of doubt. With regard to other commitments specific to each AE sub-measure, most Member States have established operating manuals, circulars and/or instructions for the use of the inspectors, ensuring thus a certain homogeneity in the controls carried out on the same measure throughout the national territory (see paragraphs 100 and 101).

| V. | The Commission agrees that the control of some agri-environment measures, due to the complexity, is resource intensive both in technical and financial terms. A comparison of resource requirements between agri-environment measures and those of first pillar measures should be seen in a wider context. The resource requirements for agri-environment measures have to be judged in relation to the objectives pursued. Agri-environment policy is a central and essential part of the strategy to integrate environmental concerns into other policy areas such as agriculture. |
| --- | --- |

V.

The Commission agrees that the control of some agri-environment measures, due to the complexity, is resource intensive both in technical and financial terms. A comparison of resource requirements between agri-environment measures and those of first pillar measures should be seen in a wider context. The resource requirements for agri-environment measures have to be judged in relation to the objectives pursued. Agri-environment policy is a central and essential part of the strategy to integrate environmental concerns into other policy areas such as agriculture.

| VI. | The Commission would like to place the issue of controllability of agri-environment measures within a broader context:






  — | many agri-environment measures/commitments can be in principle, and are, assessed on their verifiability when the programmes are examined by the Commission services; for some other commitments, by their nature, controllability can be more difficult, often requiring particularly costly analysis. Therefore, a complete exhaustive check is too costly and might bring about only limited value added as to the minimisation of the risk for the budget and/or the environment; |
| --- | --- | --- |

VI.

The Commission would like to place the issue of controllability of agri-environment measures within a broader context:

—

many agri-environment measures/commitments can be in principle, and are, assessed on their verifiability when the programmes are examined by the Commission services; for some other commitments, by their nature, controllability can be more difficult, often requiring particularly costly analysis. Therefore, a complete exhaustive check is too costly and might bring about only limited value added as to the minimisation of the risk for the budget and/or the environment;

| — | however, the risk of non-compliance has to be weighted against the potential benefits of this measure. A system which provides a sufficient level of control while remaining proportionate is what is needed for the agri-environment measure, which the Commission deems to be an essential element of the strategy for integration of environmental concerns into the CAP. As stated by the Court, controls should provide for reasonable assurance at reasonable cost; |
| --- | --- |

—

however, the risk of non-compliance has to be weighted against the potential benefits of this measure. A system which provides a sufficient level of control while remaining proportionate is what is needed for the agri-environment measure, which the Commission deems to be an essential element of the strategy for integration of environmental concerns into the CAP. As stated by the Court, controls should provide for reasonable assurance at reasonable cost;

| — | for the next programming period the Commission has proposed a control system which will be, to the extent possible, aligned with control systems related to cross-compliance that Member States have to set up for first pillar payments (cross-compliance); |
| --- | --- |

—

for the next programming period the Commission has proposed a control system which will be, to the extent possible, aligned with control systems related to cross-compliance that Member States have to set up for first pillar payments (cross-compliance);

| — | furthermore, the Commission has proposed a clearer allocation of responsibilities between Member States and Commission thus reinforcing the principle of shared management. |
| --- | --- |

—

furthermore, the Commission has proposed a clearer allocation of responsibilities between Member States and Commission thus reinforcing the principle of shared management.

INTRODUCTION

| 9 and 10. | The Commission agrees that the links between agriculture and environment are of great public and political interest. It points out that agri-environment and cross-compliance are both designed to ensure integration of environmental concerns into agricultural policy. These aspects are complementary: cross-compliance consists of environmental requirements with which farmers have to comply in order not to have a partial or full reduction of direct payments; whereas agri-environment payments are made to farmers willing to go significantly beyond this baseline and provide environmental services in return for payment. |
| --- | --- |

9 and 10.

The Commission agrees that the links between agriculture and environment are of great public and political interest. It points out that agri-environment and cross-compliance are both designed to ensure integration of environmental concerns into agricultural policy. These aspects are complementary: cross-compliance consists of environmental requirements with which farmers have to comply in order not to have a partial or full reduction of direct payments; whereas agri-environment payments are made to farmers willing to go significantly beyond this baseline and provide environmental services in return for payment.

AUDIT OBSERVATIONS AT COMMISSION LEVEL

| 32 to 35. | As part of the examination of the rural development programmes, the Commission verified that the agro-environmental measures defined by the Member State were acceptable and relevant. For this purpose, the Commission issued useful guidelines for its desk officers to help assess the proposed agri-environmental measures. However, the Commission considers that, in principle, most of the agri-environment measures can reasonably be assessed for verifiability (e.g. uncultivated field margins, conversion of arable to grassland, cutting dates, green cover in winter, preservation of rare breeds/crop varieties, crop rotations, irrigation reduction measures, stocking limits, etc.).
  Nevertheless, for some other commitments this assessment may seem more difficult. In this context, the Commission decided not to accept certain measures for reasons of low controllability (e.g. reduction of N-fertilisation by less than 5 % or reduction of other fertilisers by less than 20 %).
  It is correct that the Commission was not in a position to make an exhaustive ex ante examination of the controllability of all (sub-) measures proposed. In this context, the different responsibilities under shared management need to be taken into account: the Commission sets out the framework but Member States are responsible for proposing measures and ensuring that there are appropriate verifiable indicators for each measure. The fact that a programme is approved by the Commission does not relieve a Member State of its responsibilities. |
| --- | --- |

32 to 35.

As part of the examination of the rural development programmes, the Commission verified that the agro-environmental measures defined by the Member State were acceptable and relevant. For this purpose, the Commission issued useful guidelines for its desk officers to help assess the proposed agri-environmental measures. However, the Commission considers that, in principle, most of the agri-environment measures can reasonably be assessed for verifiability (e.g. uncultivated field margins, conversion of arable to grassland, cutting dates, green cover in winter, preservation of rare breeds/crop varieties, crop rotations, irrigation reduction measures, stocking limits, etc.).

Nevertheless, for some other commitments this assessment may seem more difficult. In this context, the Commission decided not to accept certain measures for reasons of low controllability (e.g. reduction of N-fertilisation by less than 5 % or reduction of other fertilisers by less than 20 %).

It is correct that the Commission was not in a position to make an exhaustive ex ante examination of the controllability of all (sub-) measures proposed. In this context, the different responsibilities under shared management need to be taken into account: the Commission sets out the framework but Member States are responsible for proposing measures and ensuring that there are appropriate verifiable indicators for each measure. The fact that a programme is approved by the Commission does not relieve a Member State of its responsibilities.

| 33. | Concerning the internal risk assessment, this was a global evaluation of the instruments of rural development and intended as a management tool to improve this policy after 2006. In this document, the unit responsible for the audit of rural development signalled the impossibility (given the short period for approval of the programmes and the lack of resources) to examine the controllability of all the eligibility criteria and to evaluate ex ante in detail the management and control systems established by the Member States for the implementation of the plans/programmes.
  For the next programming period, DG AGRI will consider appropriate steps based on the results of this global evaluation. |
| --- | --- |

33.

Concerning the internal risk assessment, this was a global evaluation of the instruments of rural development and intended as a management tool to improve this policy after 2006. In this document, the unit responsible for the audit of rural development signalled the impossibility (given the short period for approval of the programmes and the lack of resources) to examine the controllability of all the eligibility criteria and to evaluate ex ante in detail the management and control systems established by the Member States for the implementation of the plans/programmes.

For the next programming period, DG AGRI will consider appropriate steps based on the results of this global evaluation.

| 37 and 38. | The ‘preventive’ enquiry carried out by the Commission in 12 Member States, between 2000 and 2001, had as main objective the assessment of the control systems envisaged, by the bodies visited, to manage and control all rural development measures during the programming period 2000 to 2006.
  A separate ‘follow-up’ enquiry was carried out in 2000 to 2002 in all Member States already audited in 1997 to 1999 in respect of the ‘accompanying measures’ (programming period 1993 to 1999) in order to ensure that the detected shortcomings had been corrected. This enquiry included nine missions specifically on AEM to five Member States that had been subject of financial corrections for deficiencies in their management and control systems. |
| --- | --- |

37 and 38.

The ‘preventive’ enquiry carried out by the Commission in 12 Member States, between 2000 and 2001, had as main objective the assessment of the control systems envisaged, by the bodies visited, to manage and control all rural development measures during the programming period 2000 to 2006.

A separate ‘follow-up’ enquiry was carried out in 2000 to 2002 in all Member States already audited in 1997 to 1999 in respect of the ‘accompanying measures’ (programming period 1993 to 1999) in order to ensure that the detected shortcomings had been corrected. This enquiry included nine missions specifically on AEM to five Member States that had been subject of financial corrections for deficiencies in their management and control systems.

| 39. | The Clearance of Accounts Directorate organises its audit work on the basis of an instrument of central risk analysis covering all agricultural expenditure. It takes into account different risk elements, including the observations of the Court and the length of time since the last audit, and determines the audit priorities.
  On the basis of this risk assessment, it was determined in previous years that priority should be given to other audits. The 2005 central risk analysis indicated a relatively high risk value for agri-environmental measures, which were thus selected for audit in 2005/2006.
  However, the following elements demonstrate that the Clearance of Accounts of DG AGRI has already in different ways assessed the systems in place for AEM:






  — | the audits of 1997 to 1999 (see paragraph 37) covered AEM in almost all Member States and in 2000 to 2002 follow-up audits evaluated improvements in Member States where shortcomings were found. These audits provided a reasonable level of assurance about the systems in place for the management and control of AEM during the programming period 1993 to 1999, which mostly remained unchanged in the programming period 2000 to 2006. These audits also covered the implementation of appropriate control methods for sub-measures considered as being difficult to verify, |
| --- | --- | --- |

39.

The Clearance of Accounts Directorate organises its audit work on the basis of an instrument of central risk analysis covering all agricultural expenditure. It takes into account different risk elements, including the observations of the Court and the length of time since the last audit, and determines the audit priorities.

On the basis of this risk assessment, it was determined in previous years that priority should be given to other audits. The 2005 central risk analysis indicated a relatively high risk value for agri-environmental measures, which were thus selected for audit in 2005/2006.

However, the following elements demonstrate that the Clearance of Accounts of DG AGRI has already in different ways assessed the systems in place for AEM:

—

the audits of 1997 to 1999 (see paragraph 37) covered AEM in almost all Member States and in 2000 to 2002 follow-up audits evaluated improvements in Member States where shortcomings were found. These audits provided a reasonable level of assurance about the systems in place for the management and control of AEM during the programming period 1993 to 1999, which mostly remained unchanged in the programming period 2000 to 2006. These audits also covered the implementation of appropriate control methods for sub-measures considered as being difficult to verify,

| — | the enquiry carried out in most Member States in 2000 and 2001 (see paragraph 37), also included the compliance audit of the management and control systems related to AEM, |
| --- | --- |

—

the enquiry carried out in most Member States in 2000 and 2001 (see paragraph 37), also included the compliance audit of the management and control systems related to AEM,

| — | the only truly new element introduced by Regulation (EC) No 1257/99 for AEM, i.e. the good farming practices, was the subject of thorough system audits in the framework of the LFA enquiry performed in most Member States in 2003 and 2004. |
| --- | --- |

—

the only truly new element introduced by Regulation (EC) No 1257/99 for AEM, i.e. the good farming practices, was the subject of thorough system audits in the framework of the LFA enquiry performed in most Member States in 2003 and 2004.

| 47. | (b) | Completion of the standardised table is the minimum reporting requirement, though the ‘guidance document’ states that ‘further information may be submitted as Member States feel fit’. Some Member States also send a written report giving a description of their inspection system and drawing up conclusions on the inspections carried out. |
| --- | --- | --- |

47.

(b)

Completion of the standardised table is the minimum reporting requirement, though the ‘guidance document’ states that ‘further information may be submitted as Member States feel fit’. Some Member States also send a written report giving a description of their inspection system and drawing up conclusions on the inspections carried out.

| (c) | These reports were of limited use for the evaluation of supervision by Member States’ authorities, but were nevertheless helpful to show whether all operators were submitted to inspections (see also paragraph 49). |
| --- | --- |

(c)

These reports were of limited use for the evaluation of supervision by Member States’ authorities, but were nevertheless helpful to show whether all operators were submitted to inspections (see also paragraph 49).

| (d) | This document aimed at giving some guidance to the Member States on the type and format of information they have to submit. The reports have since then been written in a more uniform format. The Commission has now embarked on a process of improving the format and the content of the supervision report, in cooperation with the Member States. |
| --- | --- |

(d)

This document aimed at giving some guidance to the Member States on the type and format of information they have to submit. The reports have since then been written in a more uniform format. The Commission has now embarked on a process of improving the format and the content of the supervision report, in cooperation with the Member States.

| (e) | In the European Action Plan on Organic Food and Farming adopted on 10 June 2004 the Commission highlighted that further improvements have to be made. |
| --- | --- |

(e)

In the European Action Plan on Organic Food and Farming adopted on 10 June 2004 the Commission highlighted that further improvements have to be made.

The provisions of Regulation (EC) No 882/2004, applicable as from 2006, establish a whole set of requirements that will provide the Member States with clear criteria on, inter alia, the organisation of official controls (Article 3), the designation of competent authorities (Article 4) and delegation of control tasks (Article 5), on control and verification procedures (Article 8) and control activities and techniques (Article 10). Linked to it, the supervision requirements are being reviewed in the framework of the amendment of Regulation (EEC) No 2092/91.

| 49. | These reports give a number of indications on the inspection system in place such as confirmation of the number of inspection visits carried out, which is at the least very close to, and in most cases exceeds, the number of operators, and the number of infringements notified. The Commission identified in the European Action Plan on Organic Food and Farming the need to improve the quality of the supervision reports. |
| --- | --- |

49.

These reports give a number of indications on the inspection system in place such as confirmation of the number of inspection visits carried out, which is at the least very close to, and in most cases exceeds, the number of operators, and the number of infringements notified. The Commission identified in the European Action Plan on Organic Food and Farming the need to improve the quality of the supervision reports.

| 50. | Notwithstanding the fact that existing Community legislation does not provide a legal basis for Community inspections to be carried out with the aim of checking on compliance with the control requirements on organic farming laid down in Regulation (EEC) No 2092/91, a number of FVO visits took place between 1998 and 2001. This was in the context of concerns expressed by some Member States in the Standing Committee. These concerns stemmed from the increasing volumes of organic produce being imported into the EU from 75 third countries. |
| --- | --- |

50.

Notwithstanding the fact that existing Community legislation does not provide a legal basis for Community inspections to be carried out with the aim of checking on compliance with the control requirements on organic farming laid down in Regulation (EEC) No 2092/91, a number of FVO visits took place between 1998 and 2001. This was in the context of concerns expressed by some Member States in the Standing Committee. These concerns stemmed from the increasing volumes of organic produce being imported into the EU from 75 third countries.

| 51. | The Commission considers ‘on-the-spot’ checks by Community inspectors as additional means to verify the proper functioning of the Member State's organic farming inspection system.
  None the less, the issue of the official controls on organic farming, including the national supervisory systems, will be reassessed in the framework of the review of Regulation (EEC) No 2092/91 as initiated by the European Action Plan on Organic Food and Farming and in the light of the entry into force of Regulation (EC) No 882/2004.
  In addition, to the extent that organic farming measures are co-financed under rural development, the audit services of DG Agri, as part of their ongoing enquiry on AEM (2005 to 2006), are carrying out a partial examination of the supervisory system in place in the regions and Member States audited. This examination concerns the supervision work performed by the competent authorities on the approved inspection bodies for organic farming as well as the procedures implemented by the rural development control authorities with regards to the systematic verification of the annual certification of the organic farmers benefiting from EAGGF aid.
  Finally, the Commission did not have sufficient resources to carry out inspections by the FVO, other than those carried out in response to concerns raised by the Member States on imported organic products.
  Moreover, it was considered that this area is of low risk for food safety compared to the other challenges faced. The core activities of the FVO are food safety, animal health, animal welfare and plant health. The demands placed on the FVO for missions in these areas exceed considerably its capacity for missions. Accordingly choices have to be made, on the basis of risks to public health, animal health, animal welfare and plant health, in drawing up the FVO mission programme. In addition, the major priorities for the FVO were missions to the EU applicant countries in the pre-enlargement process. In fact, 36 % of all FVO inspections in 2003 were performed in the applicant countries. |
| --- | --- |

51.

The Commission considers ‘on-the-spot’ checks by Community inspectors as additional means to verify the proper functioning of the Member State's organic farming inspection system.

None the less, the issue of the official controls on organic farming, including the national supervisory systems, will be reassessed in the framework of the review of Regulation (EEC) No 2092/91 as initiated by the European Action Plan on Organic Food and Farming and in the light of the entry into force of Regulation (EC) No 882/2004.

In addition, to the extent that organic farming measures are co-financed under rural development, the audit services of DG Agri, as part of their ongoing enquiry on AEM (2005 to 2006), are carrying out a partial examination of the supervisory system in place in the regions and Member States audited. This examination concerns the supervision work performed by the competent authorities on the approved inspection bodies for organic farming as well as the procedures implemented by the rural development control authorities with regards to the systematic verification of the annual certification of the organic farmers benefiting from EAGGF aid.

Finally, the Commission did not have sufficient resources to carry out inspections by the FVO, other than those carried out in response to concerns raised by the Member States on imported organic products.

Moreover, it was considered that this area is of low risk for food safety compared to the other challenges faced. The core activities of the FVO are food safety, animal health, animal welfare and plant health. The demands placed on the FVO for missions in these areas exceed considerably its capacity for missions. Accordingly choices have to be made, on the basis of risks to public health, animal health, animal welfare and plant health, in drawing up the FVO mission programme. In addition, the major priorities for the FVO were missions to the EU applicant countries in the pre-enlargement process. In fact, 36 % of all FVO inspections in 2003 were performed in the applicant countries.

| 52. | Recommendations, designed to improve the systems, have been taken on board by most Member States. In its European Action Plan on Organic Food and Farming, as adopted by the Commission on 10 June 2004, the Commission has defined an overall policy including the further improvement and strengthening of the inspection systems. |
| --- | --- |

52.

Recommendations, designed to improve the systems, have been taken on board by most Member States. In its European Action Plan on Organic Food and Farming, as adopted by the Commission on 10 June 2004, the Commission has defined an overall policy including the further improvement and strengthening of the inspection systems.

| 53. | According to normal follow up procedures within FVO, reminders to submit action plans were sent to these six Member States. In the absence of response, a note was sent to DG AGRI which took action where appropriate.
  As mentioned in paragraph 47(e), another important action undertaken was the adoption of the European Action Plan on Organic Food and Farming. |
| --- | --- |

53.

According to normal follow up procedures within FVO, reminders to submit action plans were sent to these six Member States. In the absence of response, a note was sent to DG AGRI which took action where appropriate.

As mentioned in paragraph 47(e), another important action undertaken was the adoption of the European Action Plan on Organic Food and Farming.

| 54. | DG AGRI received and noted the DG SANCO reports on all seven Member States concerned. It also considered other sources of information relating to the supervision and inspection system in the Member States. The Commission made a follow-up when needed. Additionally, it is a specific feature of the organic farming sector that the control systems are reinforced by the market of certified and labelled organic products itself, both by the suppliers and by interested consumers. The competition on the market implies close scrutiny of the control systems by operators and frequent signalling of potential irregularities to the competent authorities. This results in an important self-correcting effect.
  Reply to text box 2:
  As examples, following up the adoption of Austria's action plan and the relevant complementary information given by the Austrian authorities, the Commission took the view that the shortcomings pointed out in the FVO report had been addressed properly and that there was no immediate need for verification on the spot.
  As for the United Kingdom, the FVO mission report made the suggestion to strengthen supervision in order to improve the UK control system. Since then the UK government has notified a number of structural changes to their inspection system. In their letter dated 21 July 2003 the Department of Environment, Food and Rural Affairs (DEFRA) announced the appointment of an Advisory Committee on Organic Standards which is to assist DEFRA in taking decisions on the performance of the UK inspection bodies and on their continued approval. The advice is based on an assessment carried out by the UK accreditation service and on-the-spot inspections carried out by independent consultants. The Commission considers it as a step in the right direction.
  Concerning Italy, the Commission followed up the recommendations included in the FVO report and looked into the relevant information. As the Italian authorities had taken the necessary measures to follow up the individual cases and had also regularly transmitted the annual supervision reports of the inspection bodies, the Commission decided that no further follow-up was needed.
  Spain had sent explanatory comments on the draft FVO report, of which some were included in the final report. The Commission took action on what it considered the main shortcoming, i.e. the labelling, by starting an infringement procedure. In addition, the latest annual reports from Spain refer to supervision of private inspection bodies. |
| --- | --- |

54.

DG AGRI received and noted the DG SANCO reports on all seven Member States concerned. It also considered other sources of information relating to the supervision and inspection system in the Member States. The Commission made a follow-up when needed. Additionally, it is a specific feature of the organic farming sector that the control systems are reinforced by the market of certified and labelled organic products itself, both by the suppliers and by interested consumers. The competition on the market implies close scrutiny of the control systems by operators and frequent signalling of potential irregularities to the competent authorities. This results in an important self-correcting effect.

Reply to text box 2:

As examples, following up the adoption of Austria's action plan and the relevant complementary information given by the Austrian authorities, the Commission took the view that the shortcomings pointed out in the FVO report had been addressed properly and that there was no immediate need for verification on the spot.

As for the United Kingdom, the FVO mission report made the suggestion to strengthen supervision in order to improve the UK control system. Since then the UK government has notified a number of structural changes to their inspection system. In their letter dated 21 July 2003 the Department of Environment, Food and Rural Affairs (DEFRA) announced the appointment of an Advisory Committee on Organic Standards which is to assist DEFRA in taking decisions on the performance of the UK inspection bodies and on their continued approval. The advice is based on an assessment carried out by the UK accreditation service and on-the-spot inspections carried out by independent consultants. The Commission considers it as a step in the right direction.

Concerning Italy, the Commission followed up the recommendations included in the FVO report and looked into the relevant information. As the Italian authorities had taken the necessary measures to follow up the individual cases and had also regularly transmitted the annual supervision reports of the inspection bodies, the Commission decided that no further follow-up was needed.

Spain had sent explanatory comments on the draft FVO report, of which some were included in the final report. The Commission took action on what it considered the main shortcoming, i.e. the labelling, by starting an infringement procedure. In addition, the latest annual reports from Spain refer to supervision of private inspection bodies.

AUDIT OBSERVATIONS AT MEMBER STATE LEVEL

| 58 and 59. | In the framework of the assessment of modifications proposed to the national development plan for 2004, the Commission has requested the French authorities to inform the Commission about the measures, which would be taken to tackle the weaknesses highlighted by the Court of Auditors. These modifications are on the agenda of the STAR Committee of September 2005. |
| --- | --- |

58 and 59.

In the framework of the assessment of modifications proposed to the national development plan for 2004, the Commission has requested the French authorities to inform the Commission about the measures, which would be taken to tackle the weaknesses highlighted by the Court of Auditors. These modifications are on the agenda of the STAR Committee of September 2005.

| 60 and 61. | A comparison of resource requirements should be treated with care. The resource requirements for agri-environment measures have to be judged in relation to the objectives pursued. Agri-environment policy is a central and essential part of the strategy to integrate environmental concerns into other policy areas such as agriculture. The Commission recognises that an efficient control of agri-environmental measures will often require a high level of specialised resources. The Commission services therefore provided guidelines giving indications as to how to assess compliance with complex undertakings (input ban or reduction) and the GFP. |
| --- | --- |

60 and 61.

A comparison of resource requirements should be treated with care. The resource requirements for agri-environment measures have to be judged in relation to the objectives pursued. Agri-environment policy is a central and essential part of the strategy to integrate environmental concerns into other policy areas such as agriculture. The Commission recognises that an efficient control of agri-environmental measures will often require a high level of specialised resources. The Commission services therefore provided guidelines giving indications as to how to assess compliance with complex undertakings (input ban or reduction) and the GFP.

| 64 and 65. | The good agricultural practice according to Regulation (EC) No 1257/1999 in Germany is based on the specific agricultural legislation which is binding for all utilised agricultural areas and husbandries in the whole of Germany, as well as for all farms regardless of their production sector or size. The two-step approach followed in Germany (firstly check of indicators, followed secondly by in-depth control in case of doubt) seems reasonable.
  In the case of Luxembourg, the mid-term review had already highlighted the lack of specific indicators for the evaluation of agri-environment and the inherent risk concerning the control of these measures. The Commission took up these issues with the Member State in the context of the discussions on the annual report 2003. The Commission will raise these elements again with the Member State in question in the context of the annual report of Luxembourg for 2004. |
| --- | --- |

64 and 65.

The good agricultural practice according to Regulation (EC) No 1257/1999 in Germany is based on the specific agricultural legislation which is binding for all utilised agricultural areas and husbandries in the whole of Germany, as well as for all farms regardless of their production sector or size. The two-step approach followed in Germany (firstly check of indicators, followed secondly by in-depth control in case of doubt) seems reasonable.

In the case of Luxembourg, the mid-term review had already highlighted the lack of specific indicators for the evaluation of agri-environment and the inherent risk concerning the control of these measures. The Commission took up these issues with the Member State in the context of the discussions on the annual report 2003. The Commission will raise these elements again with the Member State in question in the context of the annual report of Luxembourg for 2004.

| 67 and 68. | The seven criteria respond to the requirements of the guidelines for the implementation of systems of management, checks and penalties concerning rural development measures and they cover the important practices of a farm holding. Further elements of good farming practices are, in addition, defined for each action in the scope of agri-environment. The Commission has approved these seven criteria; but the related national instructions are the responsibility of the Member State. |
| --- | --- |

67 and 68.

The seven criteria respond to the requirements of the guidelines for the implementation of systems of management, checks and penalties concerning rural development measures and they cover the important practices of a farm holding. Further elements of good farming practices are, in addition, defined for each action in the scope of agri-environment. The Commission has approved these seven criteria; but the related national instructions are the responsibility of the Member State.

| 69. | The Commission is aware of this situation and has therefore proposed, in its regulation for the next programming period, that agri-environmental payments will only cover commitments going beyond the relevant mandatory standards established pursuant to Articles 4 and 5 of and Annexes III and IV to Council Regulation (EC) No 1782/2003 as well as minimum requirements for fertiliser and plant protection product use and other relevant mandatory requirements established by national legislation and identified in the programme.
  This will entail more efficient controls (jointly first and second pillars) and set free capacities for controlling the proposed new baseline for agri-environment (see Article 37 of the Commission's proposal). |
| --- | --- |

69.

The Commission is aware of this situation and has therefore proposed, in its regulation for the next programming period, that agri-environmental payments will only cover commitments going beyond the relevant mandatory standards established pursuant to Articles 4 and 5 of and Annexes III and IV to Council Regulation (EC) No 1782/2003 as well as minimum requirements for fertiliser and plant protection product use and other relevant mandatory requirements established by national legislation and identified in the programme.

This will entail more efficient controls (jointly first and second pillars) and set free capacities for controlling the proposed new baseline for agri-environment (see Article 37 of the Commission's proposal).

| 70. | See reply to paragraphs 58 and 59. |
| --- | --- |

70.

See reply to paragraphs 58 and 59.

| 72. | See reply to paragraph 64. |
| --- | --- |

72.

See reply to paragraph 64.

| 74. | This recommendation was formulated in the Commission guidelines to make clear to the Member States that on-the-spot checks shall not be performed during unsuitable seasons.
  However, in order to avoid that all on-the-spot checks are carried out during the same period of the year, and to prevent certain undertakings from being ever being checked at all, these checks shall be spread over the year on the basis of a risk analysis on each rural development measure, established by the Member State and adapted year by year to the previous findings, in order to favour checks in periods where more-at-risk elements can be checked. |
| --- | --- |

74.

This recommendation was formulated in the Commission guidelines to make clear to the Member States that on-the-spot checks shall not be performed during unsuitable seasons.

However, in order to avoid that all on-the-spot checks are carried out during the same period of the year, and to prevent certain undertakings from being ever being checked at all, these checks shall be spread over the year on the basis of a risk analysis on each rural development measure, established by the Member State and adapted year by year to the previous findings, in order to favour checks in periods where more-at-risk elements can be checked.

| 75. | See reply to paragraph 64. |
| --- | --- |

75.

See reply to paragraph 64.

| 77 and 78. | Imposing repeat checks on the same beneficiary is not considered to be acceptable and might bring about only very limited added value in relation to the means made available; however, where necessary, supplementary checks have to be performed. On the other hand, spreading the controls over different periods of the year ensures that all obligations are checked at least on some beneficiaries, allowing thus to determine the level of risk presented by each commitment and obligation and providing compliance with the provisions of Article 69(2) of Commission Regulation (EC) No 817/2004 (see above reply to paragraph 74). |
| --- | --- |

77 and 78.

Imposing repeat checks on the same beneficiary is not considered to be acceptable and might bring about only very limited added value in relation to the means made available; however, where necessary, supplementary checks have to be performed. On the other hand, spreading the controls over different periods of the year ensures that all obligations are checked at least on some beneficiaries, allowing thus to determine the level of risk presented by each commitment and obligation and providing compliance with the provisions of Article 69(2) of Commission Regulation (EC) No 817/2004 (see above reply to paragraph 74).

| 81. | See reply to paragraphs 58 and 59. |
| --- | --- |

81.

See reply to paragraphs 58 and 59.

| 84 and 85. | The reason for deleting this requirement was to reduce the administrative/financial burden (simplification) of the Member States whilst concentrating standard controls on essentials of the commitments which could serve as indicators for the overall compliance of the beneficiary. Irregularities and doubts should then lead to an exhaustive control. Simplification continues to be a major concern of Member States for the next programming period.
  (See also reply to paragraphs 74 and 77). |
| --- | --- |

84 and 85.

The reason for deleting this requirement was to reduce the administrative/financial burden (simplification) of the Member States whilst concentrating standard controls on essentials of the commitments which could serve as indicators for the overall compliance of the beneficiary. Irregularities and doubts should then lead to an exhaustive control. Simplification continues to be a major concern of Member States for the next programming period.

(See also reply to paragraphs 74 and 77).

| 86. | Self-declarations consist in most cases of records on certain production techniques applied (e.g. records on purchase, date and quantity of fertiliser/pesticide applications). If the undertaking spans over the whole year and regular inspections within the year are too costly, it is useful that the inspector can refer first to such records and book inspections. In case of doubt, the authorities should proceed with further in-depth controls. |
| --- | --- |

86.

Self-declarations consist in most cases of records on certain production techniques applied (e.g. records on purchase, date and quantity of fertiliser/pesticide applications). If the undertaking spans over the whole year and regular inspections within the year are too costly, it is useful that the inspector can refer first to such records and book inspections. In case of doubt, the authorities should proceed with further in-depth controls.

| 87. | See reply to paragraphs 58 and 59. |
| --- | --- |

87.

See reply to paragraphs 58 and 59.

| 89 and 90. | See reply to paragraphs 58 and 59. |
| --- | --- |

89 and 90.

See reply to paragraphs 58 and 59.

| 91 to 96. | Due to the complexity experienced in the implementation of this measure, it has been withdrawn by Baden-Württemberg in 2005. |
| --- | --- |

91 to 96.

Due to the complexity experienced in the implementation of this measure, it has been withdrawn by Baden-Württemberg in 2005.

| 97 and 98. | Since the visit of the Court of Auditors to Baden-Württemberg, it has been decided that in 50 % of the on-the-spot checks a sample has to be taken for examination in a laboratory.
  Another example is Austria, where checks also contain extensive leaf and soil analysis in addition to visual inspections. |
| --- | --- |

97 and 98.

Since the visit of the Court of Auditors to Baden-Württemberg, it has been decided that in 50 % of the on-the-spot checks a sample has to be taken for examination in a laboratory.

Another example is Austria, where checks also contain extensive leaf and soil analysis in addition to visual inspections.

| 100 and 101. | The knowledge and experience of the inspectors play an important role in the on-the-spot checks. All Member States have established a catalogue of GFP, which is very often supplemented by checklists, instructions, training, a quality assurance concept and the obligation to refer to the competent authorities in case of doubt. With regard to other commitments specific to each AE sub-measure, most Member States have established operating manuals, circulars and/or instructions for the use of the inspectors, ensuring thus a certain homogeneity in the controls carried out on the same measure throughout the national territory. |
| --- | --- |

100 and 101.

The knowledge and experience of the inspectors play an important role in the on-the-spot checks. All Member States have established a catalogue of GFP, which is very often supplemented by checklists, instructions, training, a quality assurance concept and the obligation to refer to the competent authorities in case of doubt. With regard to other commitments specific to each AE sub-measure, most Member States have established operating manuals, circulars and/or instructions for the use of the inspectors, ensuring thus a certain homogeneity in the controls carried out on the same measure throughout the national territory.

| 102 and 103. | The Commission will undertake, to the extent possible, to remedy the individual cases in partnership with the Member States; this necessitates clear information for beneficiaries and controllers about the content of the commitment and a review of the level of penalties in cases of non-compliance. |
| --- | --- |

102 and 103.

The Commission will undertake, to the extent possible, to remedy the individual cases in partnership with the Member States; this necessitates clear information for beneficiaries and controllers about the content of the commitment and a review of the level of penalties in cases of non-compliance.

| 104 to 106. | In cases where a register of landscape elements is not available, other ways of verifying respect of commitments must be implemented. Visual checks constitute the main instrument, which in many cases can ensure sufficient reliability, e.g. on the existence or non-existence of elements.
  Improvements in this respect should result from the implementation and control as laid out in Annex IV to Regulation (EC) No 1782/2003 from 2005 onwards (maintaining landscape features) and Member States’ progress in mapping landscape features. |
| --- | --- |

104 to 106.

In cases where a register of landscape elements is not available, other ways of verifying respect of commitments must be implemented. Visual checks constitute the main instrument, which in many cases can ensure sufficient reliability, e.g. on the existence or non-existence of elements.

Improvements in this respect should result from the implementation and control as laid out in Annex IV to Regulation (EC) No 1782/2003 from 2005 onwards (maintaining landscape features) and Member States’ progress in mapping landscape features.

CONCLUSIONS AND RECOMMENDATIONS

| 107. | A comparison of resource requirements between agri-environment measures and those of first pillar measures should be seen in a wider context. The resource requirements for agri-environment measures have to be judged in relation to the objectives pursued. Agri-environment measures are a central and essential part of the strategy to integrate environmental concerns into other policy areas such as agriculture.
  The Commission agrees that the control of AE measures is labour-intensive and costly due to the complexity of the agri-environment measures. These costs may be ‘significant’ but that is inevitable for a policy which addresses integration of environmental concerns into agriculture, where complexity is inherent in the relationship. Therefore, a complete exhaustive check is too costly and might bring only limited value added as to the minimisation of the risk to the budget. However, the Commission considers that ‘significant’ control costs are an acceptable price to pay for this policy. The Commission finds that the two-step approach, which is implemented in certain Member States, is a reasonable method. It considers that the systems put in place in the Member States give a reasonable assurance. |
| --- | --- |

107.

A comparison of resource requirements between agri-environment measures and those of first pillar measures should be seen in a wider context. The resource requirements for agri-environment measures have to be judged in relation to the objectives pursued. Agri-environment measures are a central and essential part of the strategy to integrate environmental concerns into other policy areas such as agriculture.

The Commission agrees that the control of AE measures is labour-intensive and costly due to the complexity of the agri-environment measures. These costs may be ‘significant’ but that is inevitable for a policy which addresses integration of environmental concerns into agriculture, where complexity is inherent in the relationship. Therefore, a complete exhaustive check is too costly and might bring only limited value added as to the minimisation of the risk to the budget. However, the Commission considers that ‘significant’ control costs are an acceptable price to pay for this policy. The Commission finds that the two-step approach, which is implemented in certain Member States, is a reasonable method. It considers that the systems put in place in the Member States give a reasonable assurance.

| 108. | As a part of the examination of the RDP's, the Commission verified that the agro-environmental measures defined by the Member State were acceptable and relevant. In addition the Commission refused to accept certain proposals because of their insufficient added value, and/or weakness of controllability (see paragraph 32).
  However, it is correct that the Commission was not in a position to make an exhaustive ex ante examination of the controllability of all measures proposed. In this context it is important to note the different responsibilities under shared management. |
| --- | --- |

108.

As a part of the examination of the RDP's, the Commission verified that the agro-environmental measures defined by the Member State were acceptable and relevant. In addition the Commission refused to accept certain proposals because of their insufficient added value, and/or weakness of controllability (see paragraph 32).

However, it is correct that the Commission was not in a position to make an exhaustive ex ante examination of the controllability of all measures proposed. In this context it is important to note the different responsibilities under shared management.

| 109. | The Clearance of Accounts Directorate organises its audit work on the basis of an instrument of Central Risk Analysis covering all agricultural expenditure that determines the audit priorities.
  However, it considers, for the reasons outlined above under paragraph 39, to have reasonably covered the AEM control systems since the beginning of the current programming period.
  Moreover, on the basis of the latest central risk assessment, the AEM were selected for audit in 2005/2006. |
| --- | --- |

109.

The Clearance of Accounts Directorate organises its audit work on the basis of an instrument of Central Risk Analysis covering all agricultural expenditure that determines the audit priorities.

However, it considers, for the reasons outlined above under paragraph 39, to have reasonably covered the AEM control systems since the beginning of the current programming period.

Moreover, on the basis of the latest central risk assessment, the AEM were selected for audit in 2005/2006.

| 110. | Concerning the more recent Member States’ supervision reports, the situation has improved as regards their completeness and timing. They indicate that the number of inspection visits to operators is at least of the same magnitude as the number of operators. By June 2005, all the supervision reports since 2000 have been received, with the exception of two reports from one Member State in 2000 and 2001. The European Action Plan on Organic Food and Farming has identified the need for improving the quality of the supervision reports. The Commission has committed itself to address the issue and the discussion on changing the format and publishing the supervision reports has already started in the Standing Committee on Organic Farming. |
| --- | --- |

110.

Concerning the more recent Member States’ supervision reports, the situation has improved as regards their completeness and timing. They indicate that the number of inspection visits to operators is at least of the same magnitude as the number of operators. By June 2005, all the supervision reports since 2000 have been received, with the exception of two reports from one Member State in 2000 and 2001. The European Action Plan on Organic Food and Farming has identified the need for improving the quality of the supervision reports. The Commission has committed itself to address the issue and the discussion on changing the format and publishing the supervision reports has already started in the Standing Committee on Organic Farming.

| 111. | The need for further checks must be considered in the light of the risks linked to all measures and directives that need to be controlled, and especially the risk relating to food safety. Based on other information sources and taking into account a correcting effect driven by competition in the market of organic products, the Commission has ensured a general follow-up of the supervision of the inspection system in all Member States given the resources available (see paragraph 54).
  The issue of supervision is part of the ongoing work on the review of Regulation (EEC) No 2092/91. It is also linked to Regulation (EC) No 882/2004 applicable from 2006, which reinforces the framework for the organisation of official controls and supervision at Member States’ level. |
| --- | --- |

111.

The need for further checks must be considered in the light of the risks linked to all measures and directives that need to be controlled, and especially the risk relating to food safety. Based on other information sources and taking into account a correcting effect driven by competition in the market of organic products, the Commission has ensured a general follow-up of the supervision of the inspection system in all Member States given the resources available (see paragraph 54).

The issue of supervision is part of the ongoing work on the review of Regulation (EEC) No 2092/91. It is also linked to Regulation (EC) No 882/2004 applicable from 2006, which reinforces the framework for the organisation of official controls and supervision at Member States’ level.

| 112. | The main weaknesses found were on supervision of the private inspection bodies, which lead to recommendations concerning this aspect. From the hearing and consultations held in the process of elaborating the European Action Plan for Organic Food and Farming, the Commission concluded that the inspection system was functioning well. |
| --- | --- |

112.

The main weaknesses found were on supervision of the private inspection bodies, which lead to recommendations concerning this aspect. From the hearing and consultations held in the process of elaborating the European Action Plan for Organic Food and Farming, the Commission concluded that the inspection system was functioning well.

| 113. | Easily verifiable control parameters are necessary to ensure that a first control visit provides for a reasonable impression about the overall compliance of the beneficiary. In case of doubt additional in-depth controls would follow. |
| --- | --- |

113.

Easily verifiable control parameters are necessary to ensure that a first control visit provides for a reasonable impression about the overall compliance of the beneficiary. In case of doubt additional in-depth controls would follow.

| 114. | Article 69 of Commission Regulation (EC) No 817/2004 is clear on this point ‘on-the-spot-checks shall be spread over the year on the basis of an analysis of the risks presented by each rural development measure’. When weaknesses are detected, they are taken up by the Commission together with the Member States. Furthermore the Commission can, following ex post clearance of accounts procedure, impose financial corrections. |
| --- | --- |

114.

Article 69 of Commission Regulation (EC) No 817/2004 is clear on this point ‘on-the-spot-checks shall be spread over the year on the basis of an analysis of the risks presented by each rural development measure’. When weaknesses are detected, they are taken up by the Commission together with the Member States. Furthermore the Commission can, following ex post clearance of accounts procedure, impose financial corrections.

| 115. | The Commission, in partnership with the Member States, will undertake to improve the situation to a feasible extent. |
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115.

The Commission, in partnership with the Member States, will undertake to improve the situation to a feasible extent.

| 116. | The Commission is of the opinion that self-declaration (e.g. record keeping on purchase, date and quantity of fertiliser/pesticides application) is a practical tool for the controllers as a first indicator (e.g. for commitments which span over the whole year). They should, if deemed necessary, be followed as much as possible by further examinations and/or analysis. |
| --- | --- |

116.

The Commission is of the opinion that self-declaration (e.g. record keeping on purchase, date and quantity of fertiliser/pesticides application) is a practical tool for the controllers as a first indicator (e.g. for commitments which span over the whole year). They should, if deemed necessary, be followed as much as possible by further examinations and/or analysis.

| 117. | Visual checks are applied in combination with other control instruments and form only a limited part of the control of agri-environment commitments. By nature, parameters for such checks are not always necessarily quantifiable. Further improvements, in particular to the control of landscape elements, can be expected in future (e.g. mapping). As to the detected weaknesses, the Commission will undertake steps in partnership with Member States to remedy the situation. |
| --- | --- |

117.

Visual checks are applied in combination with other control instruments and form only a limited part of the control of agri-environment commitments. By nature, parameters for such checks are not always necessarily quantifiable. Further improvements, in particular to the control of landscape elements, can be expected in future (e.g. mapping). As to the detected weaknesses, the Commission will undertake steps in partnership with Member States to remedy the situation.

| 118. | — | Regulation (EEC) No 2092/91 clearly confers on the Member States the burden of approving and supervising the control system for organic farming. None the less, the issue of the official controls on organic farming, including the national supervisory systems, will be reassessed in the framework of the review of Regulation (EEC) No 2092/91 as initiated by the European Action Plan on Organic Food and Farming and in the light of the entry into force of Regulation (EC) No 882/2004. However, the need for specific checks must take into consideration the risks implied by the measures of all regulations and directives that need to be controlled, not least the risk relating to food safety. |
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118.

—

Regulation (EEC) No 2092/91 clearly confers on the Member States the burden of approving and supervising the control system for organic farming. None the less, the issue of the official controls on organic farming, including the national supervisory systems, will be reassessed in the framework of the review of Regulation (EEC) No 2092/91 as initiated by the European Action Plan on Organic Food and Farming and in the light of the entry into force of Regulation (EC) No 882/2004. However, the need for specific checks must take into consideration the risks implied by the measures of all regulations and directives that need to be controlled, not least the risk relating to food safety.

| — | The audit services of DG AGRI are currently performing a thorough verification of the functioning of the control systems related to the AEM and will take appropriate measures if shortcomings are detected, including formulating recommendations to improve the control provisions in the next programming period. |
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—

The audit services of DG AGRI are currently performing a thorough verification of the functioning of the control systems related to the AEM and will take appropriate measures if shortcomings are detected, including formulating recommendations to improve the control provisions in the next programming period.

| — | During the meetings of the Standing Committee on Organic Farming, most recently in November 2004, February and March 2005, Member States were regularly reminded of their obligations. By March 2005, the 2003 supervision reports had all been received by the Commission. The Commission has already started a discussion with Member States in the Standing Committee on Organic Farming on how to improve the quality and the relevance of the supervision reports. Reporting requirements is also an item for revision in the framework of the review of the Regulation (EEC) No 2092/91 and application of Regulation (EC) No 882/2004. |
| --- | --- |

—

During the meetings of the Standing Committee on Organic Farming, most recently in November 2004, February and March 2005, Member States were regularly reminded of their obligations. By March 2005, the 2003 supervision reports had all been received by the Commission. The Commission has already started a discussion with Member States in the Standing Committee on Organic Farming on how to improve the quality and the relevance of the supervision reports. Reporting requirements is also an item for revision in the framework of the review of the Regulation (EEC) No 2092/91 and application of Regulation (EC) No 882/2004.

| — | The Commission agrees with the Court and has already put these requirements in Commission Regulation (EC) No 817/2004. |
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—

The Commission agrees with the Court and has already put these requirements in Commission Regulation (EC) No 817/2004.

| — | The Commission agrees that costs for controlling agri-environment are particularly high, owing to the inherent complexity of the subject matter and the need for particular expertise; the capacity of agri-environment measures to achieve integration effectively requires it to be complex, and its value as a policy for integration justifies such expenditure. |
| --- | --- |

—

The Commission agrees that costs for controlling agri-environment are particularly high, owing to the inherent complexity of the subject matter and the need for particular expertise; the capacity of agri-environment measures to achieve integration effectively requires it to be complex, and its value as a policy for integration justifies such expenditure.

| — | As outlined before, the integration of environmental concerns into agriculture is, by its nature, a complex, technical subject. Therefore, it is normal that a reasonable level of technical expertise is needed to control certain AE measures. That does not invalidate the measures: their value in integration justifies the need for this expertise. |
| --- | --- |

—

As outlined before, the integration of environmental concerns into agriculture is, by its nature, a complex, technical subject. Therefore, it is normal that a reasonable level of technical expertise is needed to control certain AE measures. That does not invalidate the measures: their value in integration justifies the need for this expertise.

| 119. | The Member States have systems in place to control agri-environment measures and the measures are checked in all Member States. Nevertheless, as indicated by the Court, weaknesses in the implementation of the control systems exist. The Commission's Clearance of Accounts service is, in 2005/2006, conducting an audit programme to verify the control of agri-environment measures in Member States. This may lead to financial corrections to be imposed, as has already been the case for the past programming period 1993 to 1999.
  For the next programming period the Commission has proposed a control system which will be, to the extent possible, aligned with control systems related to cross-compliance that Member States have to set up for first pillar payments (cross-compliance). In addition, the Commission has proposed a clearer allocation of responsibilities between Member States and Commission thus reinforcing the principle of shared management. |
| --- | --- |

119.

The Member States have systems in place to control agri-environment measures and the measures are checked in all Member States. Nevertheless, as indicated by the Court, weaknesses in the implementation of the control systems exist. The Commission's Clearance of Accounts service is, in 2005/2006, conducting an audit programme to verify the control of agri-environment measures in Member States. This may lead to financial corrections to be imposed, as has already been the case for the past programming period 1993 to 1999.

For the next programming period the Commission has proposed a control system which will be, to the extent possible, aligned with control systems related to cross-compliance that Member States have to set up for first pillar payments (cross-compliance). In addition, the Commission has proposed a clearer allocation of responsibilities between Member States and Commission thus reinforcing the principle of shared management.

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(1)  See Regulation (EC) No 817/2004, Article 67(1), second indent: ‘The Member States shall define suitable methods and means for verifying each support measure as well as the persons who shall be subject to checks.’

(2)  Regulation (EC) No 882/2004 of the European Parliament and of the Council of 29 April 2004 on official controls performed to ensure the verification of compliance with feed and food law, animal health and animal welfare rules.

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