REGULATION (EU) 2021/2116 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

of 2 December 2021

on the financing, management and monitoring of the common agricultural policy and repealing Regulation (EU) No 1306/2013

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 43(2) and Article 322(1), point (a), thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the Court of Auditors (1),

Having regard to the opinion of the European Economic and Social Committee (2),

Having regard to the opinion of the Committee of the Regions (3),

Acting in accordance with the ordinary legislative procedure (4),

Whereas:

(1) The Commission communication of 29 November 2017 entitled ‘The Future of Food and Farming’ concludes that the common agricultural policy (CAP) should continue to step up its response to future challenges and opportunities by boosting employment, growth and investment, by fighting and adapting to climate change and by bringing research and innovation out of the laboratories and onto fields and markets. The CAP should furthermore address citizens’ concerns regarding sustainable agricultural production.

(2) In accordance with Article 208 of the Treaty on the Functioning of the European Union (TFEU), the implementation of the CAP should take account of the objectives of the United Nations 2030 Agenda for Sustainable Development, including the Union’s obligations on climate change mitigation and development cooperation.

(3) The current CAP’s compliance-driven delivery model should be adjusted to ensure a greater focus on results and performance. Accordingly, the Union should set the basic policy objectives, types of intervention and basic Union requirements while greater responsibility and accountability for meeting those objectives should be borne by the Member States. As a consequence, there is a need to ensure greater subsidiarity and flexibility in order to take better account of the local conditions and needs. Accordingly, under the new CAP delivery model, Member States should be responsible for tailoring their CAP interventions in line with their specific needs and basic Union requirements in order to maximise their contribution to Union’s CAP objectives. In order to continue to ensure a common approach and a level playing field, Member States should also establish and design the compliance and control framework for beneficiaries, including compliance with standards for good agricultural and environmental conditions and statutory management requirements.

(4) The CAP encompasses various interventions and measures, many of which are covered by the CAP Strategic Plans referred to in Title III of Regulation (EU) 2021/2115 of the European Parliament and of the Council (5). Others still follow the traditional compliance logic. It is important to provide financing for all interventions and measures in order to contribute to the achievement of the objectives of the CAP. Both of those interventions and measures have certain elements in common, therefore their financing should be dealt with in the same set of provisions. However, where necessary, those provisions should allow for different treatment. Regulation (EU) No 1306/2013 of the European Parliament and of the Council (6) governs two European agricultural funds, namely the European Agricultural Guarantee Fund (EAGF) and the European Agricultural Fund for Rural Development (EAFRD). Those two funds should be maintained in this Regulation. In view of the scope of the current CAP reform, it is appropriate to replace Regulation (EU) No 1306/2013.

(5) The provisions of Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council (7) (‘the Financial Regulation’), in particular those governing shared management with Member States, the function of accredited bodies and the budgetary principles, should apply to the interventions and measures set out in this Regulation.

(6) In order to harmonise practices among Member States as regards the application of the force majeure clause, this Regulation should, where appropriate, provide for exemptions from the CAP rules in cases of force majeure and exceptional circumstances, as well as for a non-exhaustive list of possible cases of force majeure and exceptional circumstances to be recognised by the national competent authorities. National competent authorities should take decisions on force majeure or exceptional circumstances on a case-by-case basis, on the basis of relevant evidence.

(7) Furthermore, this Regulation should provide for exemptions from the CAP rules in cases of force majeure and exceptional circumstances, such as in the case of a severe meteorological event gravely affecting the holding of the beneficiary on a level comparable to a severe natural disaster.

(8) The general budget of the Union (‘the Union budget’) should finance CAP expenditure, including expenditure on the CAP Strategic Plan interventions under Title III of Regulation (EU) 2021/2115, either directly through the EAGF and EAFRD or in the context of shared management with the Member States. The types of expenditure that can be financed using those two funds should be specified.

(9) In order to achieve the objectives of the CAP laid down in Article 39 TFEU, and to comply with the principle of shared management provided for in Article 63 of the Financial Regulation, Member States should ensure that the necessary governance systems are in place. Provision should therefore be made in this Regulation for designating governance bodies, namely the competent authority, paying agency, coordinating body and certification body.

(10) It is necessary to provide for the accreditation of paying agencies and for the designation and accreditation of coordinating bodies by Member States and for the establishment of the procedures for obtaining management declarations, the annual clearance documents, an annual summary of the final audit reports, and performance reports, and for obtaining the certification of management and monitoring systems, of reporting systems and the certification of annual accounts by independent bodies. Moreover, in order to ensure the transparency of the system of checks to be carried out at national level, in particular as regards procedures for authorisation, validation and payment, and to reduce the administrative and audit burden for the Commission and for the Member States where accreditation of each individual paying agency is required, the number of authorities and bodies to which those responsibilities are delegated should be restricted while respecting the constitutional provisions of each Member State. Where a Member State’s constitutional framework provides for regions, that Member State should have the possibility to accredit regional paying agencies, under certain conditions.

(11) Where a Member State accredits more than one paying agency, it should designate a single public coordinating body in order to ensure consistency in the management of the EAGF and EAFRD, to provide for a liaison between the Commission and the various accredited paying agencies, and to ensure that the information requested by the Commission concerning the operations of several paying agencies is provided promptly. That coordinating body should also take and coordinate actions with a view to resolving any deficiencies of a common nature encountered at national level, should keep the Commission informed of any follow-up, and should ensure the harmonised application of the Union rules, taking account of any limitation or restrictions due to the constitutional provisions in force.

(12) Involving paying agencies that have been accredited by the Member States is a crucial prerequisite under the new CAP delivery model for having reasonable assurance that the objectives and targets set out in the relevant CAP Strategic Plans will be achieved by the interventions financed by the Union budget. It should, therefore, be explicitly provided in this Regulation that only expenditure effected by accredited paying agencies can be reimbursed from the Union budget. In addition, the expenditure financed by the Union for the interventions referred to in Regulation (EU) 2021/2115 should have a corresponding output regarding, and should comply with, the basic Union requirements and the governance systems.

(13) In order to have an overview of public and private certification bodies and to have up-to-date information on those that are active, the Commission should receive information from the Member States and keep an up-to-date registry of those bodies. In order for the European Parliament to have accurate and up-to-date information as well, it is necessary for the Commission to communicate to it annually the list of the designated certification bodies.

(14) In the context of respecting budgetary discipline, it is necessary to define the annual ceiling for the expenditure financed by the EAGF by taking into account the maximum amounts laid down for the EAGF under the multiannual financial framework provided for in Council Regulation (EU, Euratom) 2020/2093 (8).

(15) Budgetary discipline also requires the annual ceiling for expenditure financed by the EAGF to be respected in all circumstances and at every stage of the budget procedure and of the implementation of the budget. Consequently, it is necessary for the national ceiling for the direct payments for each Member State set out in Regulation (EU) 2021/2115 to be regarded as a financial ceiling for such direct payments for the Member State concerned and for the reimbursement of those payments to remain within that financial ceiling.

(16) With a view to ensuring that the amounts for the financing of the CAP comply with the annual ceilings, the financial discipline mechanism by which the level of direct support is adjusted should be maintained. An agricultural reserve should be maintained to support the agricultural sector in the event of market developments or crises affecting agricultural production or distribution. Article 12(2), point (d), of the Financial Regulation provides that non-committed appropriations may be carried over only to the following financial year, within the meaning of Article 9 of the Financial Regulation (‘budgetary year’). In order to simplify significantly the implementation for beneficiaries and national administrations, a roll-over mechanism should be used, using any unused amounts of the reserve for crises in the agricultural sector established in the year 2022. For that purpose, a derogation from Article 12(2), point (d), of the Financial Regulation is necessary, allowing for non-committed appropriations of the agricultural reserve to be carried over to finance the agricultural reserve in the following budgetary years until the year 2027. Furthermore, as regards the budgetary year 2022, a derogation is necessary as the total unused amount of the reserve for crises in the agricultural sector available at the end of the budgetary year 2022 should be carried over to the budgetary year 2023 to the corresponding line of the new agricultural reserve established under this Regulation without being fully returned to the budgetary lines which cover direct payment interventions under the CAP Strategic Plan. However, in order to maximise the amounts to be reimbursed to farmers in the budgetary year 2023, all other availabilities under the EAGF sub-ceiling for the budgetary year 2023 set out in Regulation (EU, Euratom) 2020/2093 should be used first to set up the new agricultural reserve in the budgetary year 2023.

(17) In order to avoid an excessive administrative burden for national administrations and farmers, to simplify procedures as much as possible and to limit the complexity of aid application forms, reimbursement of the amounts carried over from the preceding agricultural financial year (‘financial year’) in relation to financial discipline applied should not take place either where financial discipline is applied for a second subsequent year (year N+1), or where the overall amount of non-committed appropriations represents less than 0,2 % of the EAGF annual ceiling.

(18) The measures taken to determine the financial contribution from the EAGF and EAFRD in respect of the calculation of financial ceilings do not affect the powers of the budgetary authority designated by the TFEU. Those measures should therefore be based on the financial envelopes fixed in accordance with the Interinstitutional Agreement of 16 December 2020 between the European Parliament, the Council of the European Union and the European Commission on budgetary discipline, on cooperation in budgetary matters and on sound financial management, as well as on new own resources, including a roadmap towards the introduction of new own resources (9).

(19) Budgetary discipline also requires a continuous examination of the medium-term budgetary position. The Commission should propose, if necessary, appropriate measures to the European Parliament and the Council in order to ensure that Member States comply with the ceilings provided for in Regulation (EU, Euratom) 2020/2093. Furthermore, the Commission should make full use of its management powers at all times to ensure compliance with the annual ceiling and, if necessary, should propose appropriate measures to the European Parliament and to the Council, or only to the Council, as appropriate, to redress the budgetary position. If, at the end of a budgetary year, the annual ceiling cannot be complied with as a result of the reimbursements requested by the Member States, the Commission should be able to take measures allowing the provisional distribution of the available amounts among the Member States in proportion to their as yet unpaid requests for reimbursement, as well as measures ensuring compliance with the ceiling fixed for the year concerned. Payments for that year should be charged to the following budgetary year and the total amount of Union financing per Member State as well as any compensation to be carried out with respect to Member States should be definitively established in order to ensure that the established amount is complied with.

(20) When implementing the budget, the Commission should operate a monthly early-warning and monitoring system for agricultural expenditure so that, if there is a risk of the annual ceiling being exceeded, it may at the earliest opportunity take the appropriate measures under the management powers at its disposal and propose other measures if the earlier measures appear to be insufficient. A periodic report by the Commission to the European Parliament and to the Council should compare the evolution of the expenditure effected to date in relation to the profiles and should give an assessment of the foreseeable implementation for the remainder of the budgetary year.

(21) In respect of the EAGF, the financial resources required to cover the expenditure effected by the accredited paying agencies should be provided to the Member States by the Commission in the form of reimbursements against the booking of the expenditure effected by those agencies. Until such reimbursements have been made, in the form of monthly payments, financial resources should be mobilised by the Member States depending on the needs of their accredited paying agencies. It should be explicitly laid down in this Regulation that the administrative and personnel costs of the Member States and the beneficiaries involved in the implementation of the CAP are to be borne by those Member States and beneficiaries.

(22) In order to provide the Commission with, in particular, the means to manage agricultural markets, to facilitate the monitoring of agricultural expenditure and to monitor agricultural resources in the medium and long term, including those relating to the environment and climate change resilience and progress towards relevant Union targets, the use of the agro-meteorological system and the acquisition and improvement of satellite data should be provided for.

(23) The Commission should be provided with the means to monitor markets, taking into account the Union’s objectives and commitments, including policy coherence for development, contributing to transparency of markets.

(24) As regards the financial management of the EAFRD, provision should be made with regard to budgetary commitments, payment deadlines, decommitment and interruptions. Interventions for rural development should be financed from the Union budget on the basis of commitments made in annual instalments. Member States should be able to draw on the Union funds provided for as soon as the CAP Strategic Plans are approved. A suitably restricted prefinancing system is therefore needed to ensure a steady flow of funds so that payments to beneficiaries under the interventions are made at the appropriate time.

(25) Apart from prefinancing, it is also necessary to make a distinction between interim payments and the payment of balances by the Commission to the accredited paying agencies. It is also necessary to lay down detailed rules governing those payments. The automatic decommitment rule should help to speed up execution of interventions and to contribute to sound financial management. The rules governing the national frameworks of Member States with regional interventions as set out in Regulation (EU) 2021/2115 also provide a tool for Member States to ensure execution and sound financial management.

(26) Member States should ensure that Union aid is paid to beneficiaries in good time so that beneficiaries can use it efficiently. A failure by the Member States to comply with the payment deadlines laid down in Union law might create serious difficulties for the beneficiaries and could jeopardise the Union’s yearly budgeting. Therefore, expenditure made without respecting deadlines for payments should be excluded from Union financing. However, in accordance with the principle of proportionality, the Commission should be able to provide for exceptions from that general rule with regard to the EAGF and EAFRD.

(27) When exercising its responsibilities relating to the implementation of the Union budget, the Commission should comply with the principle of proportionality, set out in Article 5 of the Treaty on European Union (TEU). Furthermore, it is necessary for the arrangements for the implementation and use of the EAGF and EAFRD to comply with that principle of proportionality and to take into account the overall aim of reducing the administrative burden on bodies involved in the management and control of the programmes.

(28) In accordance with the architecture and the key characteristics of the new CAP delivery model, the eligibility of payments made by Member States for Union financing should no longer depend on the legality and regularity of payments to individual beneficiaries. Instead, as regards types of intervention referred to in Regulation (EU) 2021/2115, and without prejudice to the specific eligibility rules for the crop-specific payment for cotton set out in that Regulation, Member States’ payments should be eligible if they are matched by corresponding output and the applicable basic Union requirements are complied with.

(29) Regulation (EU) No 1306/2013 provides for reductions and suspensions of monthly or interim payments for the purpose of supporting the control of legality and regularity. With the new CAP delivery model, those tools should be used to support performance-based delivery. The difference between reductions and suspensions should also be clarified.

(30) The procedure for reducing EAGF payments for non-compliance with financial ceilings set by Union law should be streamlined and aligned with the procedure used for EAFRD payments in this context.

(31) Member States should send the annual accounts, an annual performance report on the implementation of the CAP Strategic Plan, the annual summary of the final audit reports and the management declaration to the Commission by 15 February every year. Where those documents are not sent, thus preventing the Commission from clearing the accounts for the concerned paying agency or checking the eligibility of the expenditure against reported outputs, the Commission should be able to suspend the monthly payments and to interrupt the quarterly reimbursement until the outstanding documents are received.

(32) A new form of payment suspension should be introduced for situations of abnormally low outputs. Where the outputs reported are at an abnormally low level in comparison with the declared expenditure and where Member States cannot provide duly justified reasons for that situation, the Commission should be able, in addition to reducing the expenditure for the financial year N-1, to suspend future expenditure related to the intervention for which the output was abnormally low. Such suspensions should be subject to confirmation in the annual performance clearance decision.

(33) As regards the multi-annual performance monitoring, the Commission should also be able to suspend payments. Accordingly, in cases of delayed or insufficient progress towards targets set out in a Member State’s CAP Strategic Plan for which the Member State cannot provide duly justified reasons, the Commission should be able to request the Member State concerned to take the necessary remedial actions in accordance with an action plan to be established in consultation with the Commission and containing clear progress indicators together with the timeframe during which the progress is to be achieved. Where the Member State fails to submit or to implement the action plan, where the action plan is manifestly insufficient to remedy the situation or where it has not been modified in accordance with the written request of the Commission, the Commission should be able to suspend the monthly or interim payments. The Commission should reimburse the suspended amounts when, on the basis of the performance review or on the basis of the voluntary notification made during the budgetary year by the Member State on the advancement of the action plan and of the corrective action taken to remedy the shortfall, satisfactory progress towards targets is achieved.

(34) Given the necessary transition to a result-oriented performance model, the request for an action plan by the Commission for the financial year 2025 should not lead to a suspension of payments before the performance review for the financial year 2026.

(35) As has been the case under Regulation (EU) No 1306/2013, the Commission should be able to suspend payments where serious deficiencies exist in the proper functioning of governance systems, including non-compliance with Union basic requirements and unreliability of reporting. It is, however, necessary to review the conditions for suspending payments in order to make the mechanism more efficient. The financial consequences of such suspensions should be decided in an ad-hoc conformity procedure.

(36) Competent national authorities should make the CAP payments provided for by Union law to the beneficiaries in full.

(37) In order to allow reuse of certain types of CAP-related revenue for the CAP purposes, they should be qualified as assigned revenue. The list of sums contained in Article 43 of Regulation (EU) No 1306/2013 should be amended and those provisions should be harmonised and merged with the existing provisions on assigned revenue.

(38) Regulation (EU) No 1306/2013 contains a list of information measures related to the CAP and their objectives and fixes the rules on their financing and on the implementation of the corresponding projects. The specific provisions relating to the objectives and types of information measures to be financed should be carried over into this Regulation.

(39) The financing of measures and interventions under the CAP is largely subject to the principle of shared management. To ensure that Union funds are soundly managed, the Commission should perform checks on how the Member States’ authorities responsible for making payments manage the funds. It is appropriate to define the nature of the checks to be performed by the Commission, to specify the terms of its responsibilities for implementing the Union budget and to clarify the Member States’ cooperation obligations.

(40) In order to enable the Commission to fulfil its obligation to check the existence and proper functioning of management and inspection systems for Union expenditure in the Member States, provision should be made, irrespective of the inspections carried out by Member States themselves, for checks to be carried out by persons authorised by the Commission to act on its behalf who should be able to request assistance from the Member States in their work.

(41) Information technology needs to be used as extensively as possible in order to produce the information to be sent to the Commission. When carrying out checks, the Commission should have full and immediate access to expenditure information recorded in both paper and electronic form.

(42) In order to apply the requirements of the Financial Regulation in relation to the cross-reliance on audits, to reduce the risk of overlap between audits by various institutions, and to minimise the cost of controls and the administrative burden on the beneficiaries and the Member States, it is necessary to set out rules concerning the single audit approach and provide for the possibility for the Commission to take assurance from the work of reliable certification bodies, taking due account of the principles of single audit and proportionality in relation to the level of risk to the Union budget.

(43) As regards the implementation of the single audit approach, whereas generally the Commission should take assurance from the work of the certification bodies, taking account of its own risk assessment of the need for checks it should perform in the Member State concerned, the Commission should be able to carry out checks where it has informed the Member State concerned that it cannot rely on the work of the certification body. Furthermore, the Commission, in order to perform its responsibilities under Article 317 TFEU, should be able to carry out checks where serious deficiencies in the proper functioning of the governance systems may exist which are not followed up by that Member State.

(44) In order to establish the financial relationship between the accredited paying agencies and the Union budget, the Commission should clear the accounts of the paying agencies annually, in the framework of the annual financial clearance. The decision relating to the clearance of accounts should be limited to the completeness, accuracy and veracity of the accounts and should not cover the conformity of the expenditure with Union law.

(45) In line with the new CAP delivery model, an annual performance clearance should be established in order to check the eligibility of the expenditure in relation to the reported outputs. In order to tackle situations where the expenditure declared does not have corresponding reported outputs and the Member States cannot provide justifications for that deviation, a mechanism of reduction of payments should be put in place.

(46) The Commission is responsible for the implementation of the Union budget in cooperation with Member States in accordance with Article 317 TFEU. The Commission should thus be able to decide whether the expenditure effected by the Member States is in conformity with Union law. Member States should be given the opportunity to justify their decisions to make payments and should have recourse to conciliation where there is no agreement between them and the Commission. In order to give Member States legal and financial assurances as to expenditure effected in the past, a limitation period should be set for the Commission to decide what the financial consequences of non-conformity should be.

(47) Member States are obliged, under Article 9 of Regulation (EU) 2021/2115, to implement their CAP Strategic Plans as approved by the Commission in accordance with Articles 118 and 119 of that Regulation. Since that obligation constitutes a basic Union requirement, the Commission should, where serious deficiencies in a Member State’s implementation of its CAP Strategic Plan are detected, be able to decide to exclude from Union financing the expenditure at risk that is affected by such deficiencies.

(48) In order to safeguard the financial interests of the Union budget, Member States should put in place systems in order to ensure that interventions financed by the EAGF and EAFRD are actually carried out and are executed correctly, while maintaining the current robust framework for sound financial management. Those systems should include performing checks on beneficiaries by assessing their compliance with the eligibility criteria and other conditions, as well as obligations set out in the CAP Strategic Plans and applicable Union rules.

(49) In accordance with the Financial Regulation, Regulation (EU, Euratom) No 883/2013 of the European Parliament and of the Council (10) and Council Regulations (EC, Euratom) No 2988/95 (11), (Euratom, EC) No 2185/96 (12) and (EU) 2017/1939 (13), the financial interests of the Union are to be protected by means of proportionate measures, including measures relating to the prevention, detection, correction and investigation of irregularities, including fraud, to the recovery of funds lost, wrongly paid or incorrectly used and, where appropriate, to the imposition of administrative penalties. In particular, in accordance with Regulations (Euratom, EC) No 2185/96 and (EU, Euratom) No 883/2013, the European Anti-Fraud Office (OLAF) has the power to carry out administrative investigations, including on-the-spot checks and inspections, with a view to establishing whether there has been fraud, corruption or any other illegal activity affecting the financial interests of the Union. The European Public Prosecutor’s Office (EPPO) is empowered, in accordance with Regulation (EU) 2017/1939, to investigate and prosecute criminal offences affecting the financial interests of the Union as provided for in Directive (EU) 2017/1371 of the European Parliament and of the Council (14). In accordance with the Financial Regulation, any person or entity receiving Union funds is to fully cooperate in the protection of the financial interests of the Union, to grant the necessary rights and access to the Commission, OLAF, the Court of Auditors and, in respect of those Member States participating in enhanced cooperation pursuant to Regulation (EU) 2017/1939, the EPPO and to ensure that any third parties involved in the implementation of Union funds grant equivalent rights.

(50) Member States should have the systems in place allowing them to report to the Commission, for the purpose of enabling OLAF to exercise its powers and ensure an efficient analysis of cases of irregularity, on detected irregularities and other cases of non-compliance with the conditions established by Member States in the CAP Strategic Plans, including fraud, and on their follow-up, as well as on the follow-up of OLAF investigations. To ensure the effective examination of complaints concerning the EAGF and EAFRD, Member States should have in place the necessary arrangements.

(51) In accordance with the principle of subsidiarity, Member States should, upon the request of the Commission, examine complaints submitted to the Commission falling within the scope of their CAP Strategic Plans and should inform the Commission of the results of those examinations. The Commission should ensure that complaints directly lodged with it are adequately followed up, in accordance with the discretionary power the Commission enjoys in deciding which cases to pursue (15).

(52) In order to assist the Member States in ensuring effective protection of the financial interests of the Union, the Commission should make available to them a data-mining tool to assess risks. The Commission should present, by the year 2025, a report assessing the use of the single data-mining tool and its interoperability with a view to its generalised use by Member States,, accompanied, if necessary, by appropriate proposals.

(53) Horizontal financial rules adopted by the European Parliament and the Council on the basis of Article 322 TFEU apply to this Regulation. Those rules are laid down in the Financial Regulation and determine in particular the procedure for establishing and implementing the budget through grants, procurement, prizes and indirect implementation, and provide for checks on the responsibility of financial actors. Rules adopted on the basis of Article 322 TFEU also concern the protection of the Union budget in the case of generalised deficiencies as regards the rule of law in the Member States, as the respect for the rule of law is an essential precondition for sound financial management and effective Union funding.

(54) It is appropriate to ensure that the refusal or recovery of payments as a result of non-compliance with public procurement rules reflects the gravity of such non-compliance and respects the principle of proportionality, as expressed, for example, in the relevant guidelines established by the Commission for financial corrections to be made to expenditure financed by the Union under shared management for non-compliance with such rules. It is further appropriate to clarify that such non-compliance affects the legality and regularity of the transactions only up to the level of the part of the aid not to be paid or to be withdrawn.

(55) Various provisions of agricultural legislation require that security be lodged to ensure the payment of a sum due if an obligation is not met. In order to strengthen the framework for securities, a single horizontal rule should apply to all those provisions.

(56) Member States should set up and operate an integrated administration and control system (the ‘integrated system’) for certain interventions provided for in Regulation (EU) 2021/2115 and for the measures referred to in Chapter IV of Regulation (EU) No 228/2013 of the European Parliament and of the Council (16) and in Chapter IV of Regulation (EU) No 229/2013 of the European Parliament and of the Council (17). In order to improve the effectiveness and monitoring of Union support, Member States should be authorised to make use of the integrated system for other Union interventions.

(57) To ensure a level playing field between beneficiaries in different Member States, certain general rules should be introduced on controls and penalties at Union level.

(58) The existing main elements of the integrated system and, in particular, the provisions concerning a system for identifying agricultural parcels, a geo-spatial and an animal-based application system, a system for identifying and registering payment entitlements, a system for recording the identity of beneficiaries and a control and penalty system should be maintained. Member States should continue to use data or information products provided by the Copernicus programme, in addition to information technologies such as Galileo and EGNOS, in order to ensure that comprehensive and comparable data is available throughout the Union for the purposes of monitoring agri-environment-climate policy, including the CAP’s impact, environmental performance, and progress towards Union targets, and for the purposes of boosting the use of full, free and open data and information captured by Copernicus Sentinels satellites and services. To that end, the integrated system should include also an area monitoring system.

(59) The integrated system, as part of the governance systems which should be in place in order to implement the CAP, should ensure that the aggregate data provided in the annual performance reporting is reliable and verifiable. Given the importance of a properly functioning integrated system, it is necessary to set quality requirements. Member States should carry out an annual quality assessment of the identification system for agricultural parcels, of the geo-spatial application system and of the area monitoring system. Member States should also address any deficiencies and, if so requested by the Commission, set up an action plan.

(60) The Commission communications entitled ‘The Future of Food and Farming’, the ‘European Green Deal’, the ‘Farm to Fork Strategy – for a fair, healthy and environmentally friendly food system’ and ‘EU Biodiversity Strategy for 2030 – Bringing nature back into our lives’ set out the bolstering of environmental care and climate action and the contribution to the achievement of Union environmental and climate objectives and targets as a strategic orientation of the future CAP. Hence, sharing land-parcel identification system and other integrated administration and control system data has become necessary for environmental and climate purposes at national and Union level. Provision should therefore be made for sharing the data collected through the integrated system, which is relevant for environmental and climate purposes, between Member States’ public authorities and with the Union institutions and bodies. In order to increase efficiency in using data available to different public authorities for the production of European statistics, it should also be provided that data from the integrated system is to be made available for statistical purposes to bodies which are part of the European Statistical System.

(61) The scrutiny of commercial documents of undertakings that receive or make payments can be a highly effective means of surveillance of transactions forming part of the system of financing by the EAGF. That scrutiny supplements other checks already carried out by the Member States. Furthermore, national provisions relating to scrutiny should be allowed to go beyond what is required by Union law.

(62) The documents that should be used as a basis for such scrutiny should be selected in such a way as to enable a full scrutiny to be carried out. The undertakings to be scrutinised should be chosen on the basis of the nature of the transactions carried out under their responsibility, and the breakdown per sector of the undertakings receiving or making payments should be selected according to their financial importance in the system of financing by the EAGF.

(63) It is necessary to set out the mandate of the officials responsible for carrying out the scrutiny and to define the obligations of undertakings to make commercial documents available to such officials for a specified period, as well as to supply any information that may be requested of them by the officials. It should also be possible for commercial documents to be seized in certain cases.

(64) Having regard to the international structure of agricultural trade and in the interest of the proper functioning of the internal market, it is necessary to organise cooperation among the Member States. It is also necessary to set up a centralised documentation system at Union level concerning undertakings which are established in third countries and which receive or make payments.

(65) While the Member States are responsible for adopting their own scrutiny programmes, it is necessary for those programmes to be communicated to the Commission so that it can assume its supervisory and coordinating role, ensuring that the programmes are adopted on the basis of appropriate criteria and guaranteeing that the scrutiny is concentrated on sectors or undertakings where the risk of fraud is high. It is essential for each Member State to designate a body or bodies responsible for monitoring the scrutiny of commercial documents and for coordinating that scrutiny. Those designated bodies should be independent of the departments that carry out the scrutiny prior to payment. Information collected in the course of that scrutiny should be protected by professional secrecy.

(66) Conditionality is an important element of the CAP which ensures that payments promote a high degree of sustainability and ensure a level playing field for farmers within Member States and within the Union, in particular with regard to the social, environmental and climate elements of the CAP but also concerning public health and animal welfare. This implies that controls should be carried out and, where necessary, penalties should be applied to ensure the effectiveness of the conditionality system. To ensure such a level playing field between beneficiaries in different Member States, certain general rules on conditionality and on controls and penalties related to non-compliance should be introduced at Union level.

(67) To ensure that conditionality is enforced by Member States in a harmonised way, it is necessary to provide for a minimum control rate at Union level, while the organisation of competent control bodies and controls should be left to the discretion of Member States.

(68) While Member States should be allowed to set out the details on penalties, those penalties should be proportionate, effective and dissuasive and should be without prejudice to other penalties laid down under Union or national law. To ensure the proportionality, effectiveness and dissuasive effect of the penalties, it is appropriate to lay down the rules for the application and calculation of such penalties. Taking into account the judgment of the Court of Justice of the European Union (‘Court of Justice’) in case C-361/19 (18), to ensure the link between the farmer’s behaviour and the penalty, it should be laid down that, as a general rule, the penalty should be calculated on the basis of the payments granted or to be granted in the calendar year in which the non-compliance occurred. However, where the nature of the finding does not allow for the year in which the non-compliance occurred to be established, in order to ensure the effectiveness of the penalty system, it is necessary to establish that, for those cases, the penalty should be calculated on the basis of the payments granted or to be granted in the calendar year in which the non-compliance was detected. To ensure an effective and coherent approach by Member States, it is necessary to provide for a minimum penalty rate at Union level for non-compliance. Such minimum rates should be applied by Member States depending on the severity, extent, permanence or reoccurrence and intentionality of the non-compliance determined. To ensure proportionality of the penalties, Member States should provide that no penalties are to be applied where the non-compliance has no or only insignificant consequences for the achievement of the objective of the standard or requirement concerned, and set up an awareness mechanism to ensure that beneficiaries are informed about the non-compliance detected and possible remedial actions to be taken.

(69) The social conditionality mechanism should be based on the enforcement procedures that are carried out by the competent enforcement authorities or bodies responsible for controls on working and employment conditions and applicable labour standards. Such enforcement procedures may take various forms depending on the national system. The outcome of the controls and the enforcement procedure should be communicated to the paying agencies along with a ranked assessment of the gravity of the breach of the relevant legislation.

(70) When applying the social conditionality mechanism in the CAP Strategic Plans and in the respective agreements between the paying agencies and the authorities or bodies responsible for the enforcement of social and employment legislation and applicable labour standards, great care should be taken to respect the autonomy of those enforcement authorities or bodies and the specific manner in which social and employment legislation and applicable labour standards are implemented and enforced in each Member State. That mechanism should remain independent from, and should not affect, the functioning of the particular social model of each Member State, nor should it in any way affect the independence of the judiciary. To that end, a clear separation of responsibilities should be ensured between the authorities or bodies responsible for the enforcement of social and employment legislation and applicable labour standards on the one hand and the agricultural paying agencies on the other, the role of the latter being execution of payments and application of penalties. The autonomy of social partners, as well as their right to negotiate and conclude collective agreements, should be fully respected. Their autonomy should also be respected where social partners are responsible for carrying out controls on working conditions.

(71) To ensure harmonious cooperation between the Commission and the Member States regarding the financing of CAP expenditure, and in particular to allow the Commission to monitor the financial management by the Member States and to clear the accounts of the accredited paying agencies, it is necessary for the Member States to retain specific information and to communicate it to the Commission.

(72) For the purposes of compiling the data to be sent to the Commission, and to enable the Commission to have full immediate access to expenditure data in both paper and electronic form, suitable rules on the presentation and transmission of data, including rules on time limits, need to be laid down.

(73) As personal data or sensitive business information might be affected by the application of the national control systems and the conformity clearance, Member States and the Commission should ensure the confidentiality of the information received in that context.

(74) In the interests of sound financial management of the Union budget and impartiality of treatment at both Member State and beneficiary level, rules on the use of the euro should be laid down.

(75) The rate of exchange of the euro into national currencies may vary in the course of the period during which an operation is carried out. Therefore, the rate applicable to the amounts concerned should be determined taking into account the event through which the economic objective of the operation is achieved. The rate of exchange applied should be that applicable for the date on which that event occurs. It is necessary to specify that operative event or the waiver of its application, whilst complying with certain criteria and in particular those concerning the rapidity with which currency movements are passed on. Special rules should be laid down for dealing with exceptional monetary situations arising either within the Union or on the world market and requiring immediate action to ensure that the arrangements established under the CAP operate effectively.

(76) Member States that have not adopted the euro should have the option of making payments for expenditure resulting from the CAP legislation in euros rather than in national currency. Specific rules are needed to ensure that this option does not lead to any unjustified advantage for parties making or receiving payment.

(77) Union law concerning the protection of individuals with regard to the processing of personal data and on the free movement of such data, in particular Regulations (EU) 2016/679 (19) and (EU) 2018/1725 (20) of the European Parliament and of the Council, should be applicable to the collection of personal data by the Member States and the Commission for the purposes of carrying out their respective management, control, audit and monitoring and evaluation obligations under this Regulation.

(78) The publication of the name of the beneficiaries of the EAGF and EAFRD provides a means of reinforcing the public control of the use of those funds and is necessary to ensure an adequate level of protection of the Union’s financial interest. That is achieved partly by the preventive and deterrent effect of such publication, partly by discouraging individual beneficiaries from irregular behaviour and also partly by reinforcing the personal accountability of the farmers for use of public funds received. The publication of the relevant information is consistent with recent case-law of the Court of Justice and also with the approach set out in the Financial Regulation.

(79) In that context, the role played by civil society, including by the media and non-governmental organisations, and their contribution to reinforcing the administrations’ control framework against fraud and any misuse of public funds, should be properly recognised.

(80) Regulation (EU) 2021/1060 of the European Parliament and of the Council (21) lays down rules providing for transparency in implementing the European structural and investment funds and in the communication of programmes under those funds. To ensure coherence, it should be provided that those rules apply also to beneficiaries of EAGF and EAFRD interventions, where relevant.

(81) If the objective of the public control of the use of the money from the EAGF and EAFRD is to be achieved, a certain level of information about beneficiaries needs to be brought to the attention of the public. That information should include data on the identity of the beneficiary, the amount awarded, the fund from which it comes, and the purpose and the specific objective of the operation concerned. That information should be published in such a way as to cause the least interference with the beneficiaries’ right to respect for private life and their right to protection of their personal data. Both those rights are recognised in Articles 7 and 8 of the Charter of Fundamental Rights of the European Union.

(82) Taking into consideration the need for greater transparency regarding distribution of funds for the CAP from the EAGF and EAFRD, including as regards ownership structures linked to CAP beneficiaries, the list of beneficiaries of CAP funds, published ex-post by Member State, should also allow for the identification of groups of undertakings. This would significantly contribute to the monitoring of ownership structures and facilitate the investigation of potential misuse of Union funds, conflicts of interest and corruption.

(83) Publishing details about the operation entitling the farmer to receive aid and about the purpose and the specific objective of the aid provides the public with concrete information on the subsidised activity and the purpose for which the aid was granted. Providing such oversight to the public would have a preventive and deterrent effect and would help to protect the financial interest of the Union.

(84) Publishing such information together with the general information provided for in this Regulation enhances transparency regarding the use of Union funds in the CAP, thus contributing to the visibility and better understanding of that policy. It enables citizens to participate more closely in the decision-making process and ensures that the administration enjoys greater legitimacy and is more effective and more accountable to the citizen. It also brings concrete examples of the provision of public goods by farming to the attention of citizens, thereby underpinning the legitimacy of national and Union support for the agricultural sector.

(85) It follows, therefore, that providing for the general publication of the relevant information does not go beyond what is necessary in a democratic society in view of the need to protect the Union’s financial interests as well as the overriding objective of the public oversight of the use of the money from the EAGF and EAFRD.

(86) In order to comply with data protection requirements, beneficiaries of the EAGF and EAFRD should be informed of the publication of their data before that publication takes place. They should also be informed that that data may be processed by auditing and investigating bodies of the Union and Member States for the purposes of safeguarding the Union’s financial interests. Furthermore, the beneficiaries should be informed about their rights under Regulation (EU) 2016/679 and the procedures applicable for exercising those rights.

(87) In order to supplement or amend certain non-essential elements of this Regulation, the power to adopt acts in accordance with Article 290 TFEU should be delegated to the Commission. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Interinstitutional Agreement of 13 April 2016 on Better Law-Making (22). In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States’ experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts.

(88) With a view to ensuring the sound operation of the paying agencies and coordinating bodies, the funding by the EAGF of the public intervention expenditure and the proper management of the appropriations entered in the Union budget for the EAGF, that delegation of power should concern the minimum conditions for the accreditation of the paying agencies and the designation and accreditation of coordinating bodies, the obligations of the paying agencies as regards public intervention, the rules on the content of the management and control responsibilities of the paying agencies. Furthermore, in order to ensure the coherent application of the financial discipline in the Member States, that delegation of power should also cover the rules for the calculation of financial discipline to be applied by Member States to farmers. In order to ensure the proper management of the public intervention expenditure, that delegation of power should also cover the types of measure to be financed by the Union budget under public intervention and the reimbursement conditions, the eligibility conditions and calculation methods based on the information actually observed by the paying agencies, on flat-rates determined by the Commission, or on flat-rate or non-flat-rate amounts provided for by the agricultural legislation in specific sectors, the valuation of the operations in connection with public intervention, the measures to be taken in the case of loss or deterioration of products under the public intervention, and the determination of the amounts to be financed.

(89) In order to enable the Commission to make expenditure effected before the earliest possible date of payment or after the latest possible date of payment eligible for Union financing, while limiting the financial impact of doing so, that delegation of power should also cover derogations from the ineligibility of payments made by the paying agencies to the beneficiaries before the earliest or after the latest possible date of payment. In addition, in order to have clear rules and conditions for the Member States, that delegation of power should cover the rate of suspension of payments in relation to the annual clearances, as well as the rate and duration of suspension of payments and the condition for reimbursing or reducing those amounts with regard to the multi-annual performance monitoring. That delegation of power should also cover the interventions or measures for which the Member States may pay advances, with the aim of ensuring continuity with the rules set out in Regulation (EU) No 1306/2013 and the relevant implementing and delegated acts, while respecting the financial limits of Article 11(2), point (b), of the Financial Regulation. To take account of revenue collected by paying agencies for the Union budget when making payments on the basis of the expenditure declarations submitted by Member States, that delegation of power should also cover the conditions under which certain types of expenditure and revenue under the EAGF and EAFRD are to be compensated. Moreover, and with a view to enabling the equitable distribution of the appropriations available between the Member States, that delegation of power should cover the methods applicable to the commitments and the payment of the amounts if the Union budget has not been adopted by the beginning of the budgetary year or if the total amount of the commitments scheduled exceeds the threshold laid down in Article 11(2) of the Financial Regulation.

(90) Furthermore, that delegation of power should, in order to ensure the correct and efficient application of the provisions relating to on-the-spot checks and access to documents and information, cover the specific obligations to be complied with by Member States with regard to checks and access to documents and information, the criteria for justifications from the Member States and the methodology and criteria for applying reductions in relation to the annual performance clearance, as well as the criteria and methodology for applying financial corrections in the context of the conformity clearance procedure.

(91) Moreover, in order to ensure that the checks are carried out correctly and efficiently and that the eligibility conditions are verified in an efficient, coherent and non-discriminatory manner which protects the financial interest of the Union, that delegation of power should cover, where the proper management of the system so requires, rules on additional requirements with respect to customs procedures, and in particular to those laid down in Regulation (EU) No 952/2013 of the European Parliament and of the Council (23). In order to ensure non-discriminatory treatment, equity and the respect of proportionality when lodging a security, that delegation of power should cover rules on securities specifying the responsible party in the event that an obligation is not met, laying down the specific situations in which the competent authority may waive the requirement of a security, the conditions applicable to the security to be lodged and the guarantor, the conditions for lodging and releasing that security, the specific conditions related to the security lodged in connection with advance payments, and setting out the consequences of breaching the obligations for which a security has been lodged.

(92) In addition, regarding the integrated system, that delegation of power should cover rules on the quality assessment of the identification system for agricultural parcels, of the geo-spatial application system and of the area monitoring system and rules on the identification system for agricultural parcels, the system for the identification of beneficiaries and the system for the identification and registration of payment entitlements.

(93) Furthermore, in order to respond to changes in agricultural legislation concerning specific sectors and to ensure the efficiency of the system of ex-post controls, that delegation of power should cover the establishment of a list of interventions excluded from the scrutiny of transactions. In order to ensure a level playing field for Member States and the effectiveness, proportionality and dissuasive effect of the penalty systems under conditionality and social conditionality, that delegation of power should cover detailed rules on the application and calculation of such penalties.

(94) Moreover, in order to specify the operative event or to fix it for reasons peculiar to the market organisation or the amount in question and to avoid the application by the Member States which have not adopted the euro of different exchange rates in accounts of revenue received or aid paid to beneficiaries in a currency other than the euro, on the one hand, and in the establishment of the declaration of expenditure drawn up by the paying agency, on the other, that delegation of power should cover rules on the operative event and the exchange rate to be used by the Member States not using the euro, and on the exchange rate applicable when declarations of expenditure are drawn up by the paying agency and when public storage operations are recorded in the accounts of the paying agency. In order to prevent exceptional monetary practices concerning a national currency from jeopardising the application of Union law, that delegation of power should cover derogations from the rules on the use of the euro laid down in this Regulation.

(95) In order to enable a smooth transition between the rules laid down by Regulation (EU) No 1306/2013 and those laid down by this Regulation, that delegation of power should cover laying down transitional provisions.

(96) In order to ensure uniform conditions for the implementation of this Regulation, implementing powers should be conferred on the Commission. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council (24).

(97) The implementing powers of the Commission should relate to the rules on the procedures for issuing, withdrawing and reviewing accreditation of paying agencies and the designation and accreditation of coordinating bodies, as well as for the supervision of the accreditation of paying agencies; on the arrangements and procedures for the checks underlying the management declaration of the paying agencies, as well as its structure and format; on the functioning of the coordinating body and the notification of information to the Commission by that coordinating body; on the functioning of the certification bodies, including the checks to be carried out and the bodies subject to those checks, and on the certificates and the reports, together with the documents accompanying them, to be drawn up by those bodies.

(98) The implementing powers of the Commission should also cover the audit principles on which the opinions of the certification bodies are based, including an assessment of the risks, internal controls and the level of audit evidence required, the audit methods to be used by the certification bodies, having regard to international standards on auditing, to deliver their opinions.

(99) The implementing powers of the Commission should also cover, in the context of the financial discipline procedure, the fixing of the adjustment rate for interventions in the form of direct payments and its adaptation as well as the amounts of non-committed appropriations carried over in accordance with Article 12(2), point (d), of the Financial Regulation in order to finance those interventions; and in the context of the budgetary discipline procedure, the provisional setting of the amount of the payments and the provisional distribution of the available budget among the Member States and the setting of the total amount of Union financing broken down by Member State.

(100) The implementing powers of the Commission should also cover the fixing of the amounts for the financing of public intervention measures, rules relating to the financing of the acquisition by the Commission of the satellite data required for the area monitoring system and the actions taken by the Commission through remote-sensing applications used for the monitoring of agricultural resources, the procedure for the carrying out of the acquisition by the Commission of those satellite data and the monitoring of agricultural resources, the framework governing the acquisition, enhancing and use of satellite data and meteorological data, and the applicable deadlines.

(101) Furthermore, the implementing powers of the Commission should cover the laying down of the periods within which the accredited paying agencies are to establish and send to the Commission interim declarations of expenditure relating to interventions for rural development as well as rules on the procedure and other practical arrangements for the proper functioning of the payment deadlines mechanism; the suspension, as well as the lifting of suspension, and reduction of the monthly or interim payments to Member States as well as rules on the structure of the actions plans and the procedure for setting them up. The implementing powers should also cover further rules on the keeping of separate accounts by the paying agencies and specific conditions applicable to the information to be booked in the accounts kept by the paying agencies; rules which are necessary and justifiable in an emergency in order to resolve specific problems in relation to payment periods and the payment of advances; rules on the financing and accounting of intervention measures in the form of public storage, and other expenditure financed by the EAGF and EAFRD, and the terms and conditions governing the implementation of the automatic decommitment procedure.

(102) Moreover, the implementing powers of the Commission should cover the conditions under which the documents and information relating to payments made are to be kept; the procedures relating to the cooperation obligations to be complied with by the Member States as regards the checks carried out by the Commission and access to information; the annual financial clearance, including the rules on the actions necessary for the purposes of adoption and implementation of those implementing acts, the annual performance clearance, including the rules on the actions necessary for the purposes of adoption and implementation of those implementing acts, and the information exchange between the Commission and the Member States, the procedures and the deadlines to be respected; the conformity procedure, including the rules on the actions necessary for the purposes of adoption and implementation of those implementing acts, the information exchange between the Commission and the Member States, the deadlines to be respected and the conciliation procedure; rules on the possible offsetting of the amounts resulting from recovery of undue payments and the exclusion from Union financing of amounts charged to the Union budget and the forms of notification and communication to be made by the Member States to the Commission in relation to recoveries for non-compliance.

(103) The implementing powers of the Commission should also cover rules aimed at reaching a uniform application of Member States’ obligations regarding the protection of the financial interests of the Union and rules necessary for the uniform application of checks in the Union.

(104) Furthermore, the implementing powers of the Commission should cover the form of the securities to be lodged and the procedure for lodging the securities, for accepting them, and for replacing the original securities; the procedures for the release of securities; and the notification to be made by Member States or by the Commission in the context of securities.

(105) The implementing powers of the Commission should also cover rules on the form, content and arrangements for transmitting or making available to the Commission the assessment reports on the quality of the identification system for agricultural parcels, of the geo-spatial application system and of the area monitoring system, and on the remedial actions to be implemented by the Member States with regard to deficiencies revealed in those systems, as well as basic features of, and rules on, the aid application system and the area monitoring system, including its phasing-in.

(106) The implementing powers of the Commission should also cover rules necessary for the uniform application of the rules on the scrutiny of commercial documents. They should also cover rules pertaining to communication of information by Member States to the Commission and measures to safeguard the application of Union law if exceptional monetary practices related to national currency are likely to jeopardise it.

(107) Furthermore, the implementing powers of the Commission should cover rules on the form and the timescale of the publication of the beneficiaries of the EAGF and EAFRD, the uniform application of the obligation to inform the beneficiaries that data concerning them will be made public and the cooperation between the Commission and Member States in the context of the publication of the beneficiaries of the EAGF and EAFRD.

(108) The advisory procedure should be used for the adoption of certain implementing acts. With regard to implementing acts involving the calculation of amounts by the Commission, the advisory procedure enables the Commission to fully assume its responsibility of managing the budget and aims to increase efficiency, predictability and rapidity, when complying with the time limits and the budgetary procedures. With regard to implementing acts related to payments made to the Member States and the operation of the clearance of accounts procedure and annual performance clearance, the advisory procedure enables the Commission to fully assume its responsibility of managing the budget and verifying the annual accounts of the national paying agencies with a view to accepting such accounts or, in the case of expenditure not effected in compliance with Union rules, to excluding such expenditure from Union financing. The examination procedure should be used for the adoption of the other implementing acts.

(109) In order to ensure uniform conditions for the implementation of this Regulation, the implementing powers should be conferred on the Commission without applying Regulation (EU) No 182/2011 concerning the setting of the net balance available for EAGF expenditure, the determination of monthly payments it should make on the basis of the declaration of expenditure from the Member States and the determination of supplementary payments or deductions in the context of the procedure for monthly payments.

(110) Regulation (EU) No 1306/2013 should therefore be repealed.

(111) Since the objectives of this Regulation cannot be sufficiently achieved by the Member States given the links between this Regulation and the other instruments of the CAP and the limits on the financial resources of the Member States, but can rather, by reason of the multiannual guarantee of Union finance and by concentrating on the Union’s priorities, be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 TEU. In accordance with the principle of proportionality as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve those objectives.

(112) In order to ensure the smooth implementation of the measures envisaged and as a matter of urgency, this Regulation should enter into force on the day following that of its publication in the Official Journal of the European Union,

HAVE ADOPTED THIS REGULATION:

TITLE I

SCOPE AND DEFINITIONS

Article 1 Scope This Regulation lays down rules on the financing, management and monitoring of the common agricultural policy (CAP), and in particular on: (a) the financing of expenditure under the CAP; (b) the management and control systems to be put in place by the Member States; (c) clearance and conformity procedures.

Article 2 Definitions For the purposes of this Regulation, the following definitions apply: (a) ‘irregularity’ means an irregularity within the meaning of Article 1(2) of Regulation (EC, Euratom) No 2988/95; (b) ‘governance systems’ means the governance bodies referred to in Title II, Chapter II, of this Regulation and the basic Union requirements, including Member States’ obligations with regard to the effective protection of the financial interests of the Union referred to in Article 59 of this Regulation as well as the implementation, in accordance with Article 9 of Regulation (EU) 2021/2115, of their CAP Strategic Plans as approved by the Commission, and the reporting system put in place for the purposes of the annual performance report referred to in Article 134 of that Regulation; (c) ‘basic Union requirements’ means the requirements laid down in Regulation (EU) 2021/2115, in this Regulation, in the Financial Regulation and in Directive 2014/24/EU of the European Parliament and of the Council (25); (d) ‘serious deficiencies in the proper functioning of the governance systems’ means the existence of a systemic weakness, taking into account its recurrence, gravity and compromising effect on the correct declaration of expenditure, the reporting on performance, or the respect of Union law; (e) ‘output indicator’ means an output indicator as referred to in Article 7(1), point (a), of Regulation (EU) 2021/2115; (f) ‘result indicator’ means a result indicator as referred to in Article 7(1), point (b), of Regulation (EU) 2021/2115; (g) ‘action plan’ means, for the purposes of Articles 41 and 42 of this Regulation, a plan established by a Member State, on the request of, and in consultation with, the Commission, in the event that serious deficiencies in the proper functioning of the governance systems of that Member State are identified or in the circumstances referred to in Article 135 of Regulation (EU) 2021/2115, containing the necessary remedial actions and the relevant timeframe for its implementation in accordance with Articles 41 and 42 of this Regulation.

Article 3 Exemptions in cases of force majeure and exceptional circumstances 1. For the purposes of the financing, management and monitoring of the CAP, force majeure and exceptional circumstances may, in particular, be recognised in the following cases: (a) a severe natural disaster or severe meteorological event gravely affecting the holding; (b) the accidental destruction of livestock buildings on the holding; (c) an epizootic, a plant disease outbreak or the presence of a plant pest affecting part or all of the beneficiary’s livestock or crops; (d) expropriation of all or a large part of the holding if that expropriation could not have been anticipated on the day of lodging the application; (e) the death of the beneficiary; (f) long-term professional incapacity of the beneficiary. 2. Where a severe natural disaster or severe meteorological event as referred to in paragraph 1, point (a), gravely affects a well-determined area, the Member State concerned may consider that whole area to be gravely affected by that disaster or event.

TITLE II

GENERAL PROVISIONS ON AGRICULTURAL FUNDS

CHAPTER I

Agricultural funds

Article 4 Funds financing agricultural expenditure The financing of the various interventions and measures falling under the CAP from the general budget of the Union (‘the Union budget’) shall be made by: (a) the European Agricultural Guarantee Fund (EAGF); (b) the European Agricultural Fund for Rural Development (EAFRD).

Article 5 EAGF expenditure 1. The EAGF shall be implemented either under shared management between the Member States and the Union in accordance with paragraph 2, or under direct management in accordance with paragraph 3. 2. The EAGF shall finance the following expenditure under shared management: (a) measures regulating or supporting agricultural markets laid down in Regulation (EU) No 1308/2013 of the European Parliament and of the Council (26); (b) the Union’s financial contribution to interventions in certain sectors as referred to in Title III, Chapter III, of Regulation (EU) 2021/2115; (c) interventions in the form of direct payments to farmers under the CAP Strategic Plan referred to under Article 16 of Regulation (EU) 2021/2115; (d) the Union’s financial contribution to information and promotion measures for agricultural products on the internal market of the Union and in third countries which are undertaken by Member States and which are selected by the Commission; (e) the Union’s financial contribution to the specific measures for agriculture in the outermost regions of the Union laid down in Regulation (EU) No 228/2013 and to the specific measures for agriculture in favour of the smaller Aegean islands laid down in Regulation (EU) No 229/2013. 3. The EAGF shall finance the following expenditure under direct management: (a) the promotion of agricultural products either directly by the Commission or through international organisations; (b) measures taken in accordance with Union law to ensure the conservation, characterisation, collection and utilisation of genetic resources in agriculture; (c) the establishment and maintenance of agricultural accounting information systems; (d) agricultural survey systems, including surveys on the structure of agricultural holdings.

Article 6 EAFRD expenditure The EAFRD shall be implemented under shared management between the Member States and the Union. It shall finance the Union’s financial contribution to the interventions for rural development referred to in Title III, Chapter IV, of Regulation (EU) 2021/2115 as specified in the CAP Strategic Plans and to actions referred to in Article 125 of that Regulation.

Article 7 Other expenditure, including technical assistance The EAGF and EAFRD may, either on the initiative of the Commission or on its behalf, each directly finance the preparatory, monitoring, administrative and technical support activities, and the evaluation, audit and inspection, required to implement the CAP. That includes, in particular: (a) measures required for the analysis, management, monitoring, information exchange and implementation of the CAP, including assessing its impacts, environmental performance and progress towards Union targets, as well as measures relating to the implementation of control systems and technical and administrative assistance; (b) the acquisition by the Commission of satellite data required for the area monitoring system in accordance with Article 24; (c) the actions taken by the Commission through remote-sensing applications used for the monitoring of agricultural resources in accordance with Article 25; (d) measures required to maintain and develop methods and technical means for information, interconnection, monitoring and control of the financial management of the funds used to finance the CAP; (e) the provision of information on the CAP in accordance with Article 46; (f) studies on the CAP and evaluations of measures financed by the EAGF and EAFRD, including the improvement of evaluation methods and the exchange of information on best practices under the CAP and consultations with the relevant stakeholders, as well as studies carried out with the European Investment Bank (EIB); (g) where relevant, contribution to executive agencies that are set up in accordance with Council Regulation (EC) No 58/2003 (27) and act in connection with the CAP; (h) contribution to measures which relate to the dissemination of information, raising awareness, promoting cooperation and exchanging experiences with the relevant stakeholders at Union level, and which are taken in the context of interventions for rural development, including the networking of the parties concerned; (i) information technology networks focusing on information processing and exchange, including corporate information technology systems, needed in connection with the management of the CAP; (j) measures required for the development, registration and protection of logos within the framework of the Union quality schemes in accordance with Article 44(2) of Regulation (EU) No 1151/2012 of the European Parliament and of the Council (28) and for the protection of intellectual property rights linked to it, and the necessary developments in information technology.

CHAPTER II

Governance bodies

Article 8 Competent authority 1. Each Member State shall designate a competent authority at ministerial level responsible for: (a) the issuing, reviewing and withdrawing of accreditation of paying agencies referred to in Article 9(2); (b) the designation and the issuing, reviewing and withdrawing of the accreditation of the coordinating body referred to in Article 10; (c) designating and withdrawing the designation of a certification body as referred to in Article 12, and ensuring that there is always a certification body designated; (d) carrying out the tasks assigned to the competent authority under this Chapter. 2. On the basis of an examination of the minimum conditions to be adopted by the Commission in accordance with Article 11(1), point (a), the competent authority shall, by way of a formal act, decide on the issuing or, following a review, the withdrawal of the accreditation of the paying agency and on the designation and accreditation and the withdrawal of the accreditation of the coordinating body. 3. The competent authority shall, by way of a formal act, decide on the designation, and the withdrawal of the designation, of the certification body, while ensuring that there is always a certification body designated. 4. The competent authority shall inform the Commission without delay of all accreditations and withdrawals of accreditation of the paying agency and of the designation and accreditation and withdrawal of accreditation of the coordinating body, as well as of the designation, and the withdrawal of the designation, of the certification body.

Article 9 Paying agencies 1. Paying agencies shall be departments or bodies of the Member States and, where applicable, of their regions responsible for the management and control of expenditure referred to in Article 5(2) and Article 6. With the exception of making payment, paying agencies may delegate performance of the tasks referred to in the first subparagraph. 2. Member States shall accredit, as paying agencies, departments or bodies which have an administrative organisation and a system of internal control which provide sufficient guarantees that payments are legal, regular and properly accounted for. To that end, paying agencies shall comply with minimum conditions for the accreditation with regard to the internal environment, control activities, information and communication and monitoring laid down by the Commission pursuant to Article 11(1), point (a). Each Member State shall, taking into account its constitutional provisions, restrict the number of its accredited paying agencies: (a) to a single paying agency at national level or, where applicable, one per region; and (b) to a single paying agency for the management of both EAGF and EAFRD expenditure where paying agencies exist only at national level. Where paying agencies are established at regional level, Member States shall, in addition, either accredit a paying agency at national level for aid schemes which, by their nature, have to be managed at national level, or confer the management of those schemes on their regional paying agencies. By way of derogation from the second subparagraph of this paragraph, Member States may maintain the paying agencies which have been accredited before 15 October 2020, provided that the competent authority, by means of the decision referred to in Article 8(2), confirms that they comply with the minimum conditions for accreditation referred to in the first subparagraph of this paragraph. Paying agencies which have not managed EAGF or EAFRD expenditure for at least three years shall have their accreditation withdrawn. Member States shall not accredit any new additional paying agency after 7 December 2021, except for cases referred to in the second subparagraph, point (a), where, taking into account the constitutional provisions, additional regional paying agencies may be necessary. 3. For the purposes of Article 63(5) and (6) of the Financial Regulation, the person in charge of the accredited paying agency shall, by 15 February of the year following the agricultural financial year (‘financial year’) concerned, draw up and provide the Commission with the following: (a) the annual accounts on the expenditure incurred in the execution of the tasks entrusted to that accredited paying agency, as provided for in Article 63(5), point (a), of the Financial Regulation, accompanied by the requisite information for the clearance in accordance with Article 53 of this Regulation; (b) the annual performance report referred to in Article 54(1) of this Regulation and Article 134 of Regulation (EU) 2021/2115 showing that the expenditure was effected in accordance with Article 37 of this Regulation; (c) an annual summary of the final audit reports and of controls carried out, an analysis of the nature and extent of errors and weaknesses identified in governance systems, as well as corrective action taken or planned, as provided for in Article 63(5), point (b), of the Financial Regulation; (d) a management declaration as provided for in Article 63(6) of the Financial Regulation as to: (i) the fact that the information is properly presented, complete and accurate, as provided for in Article 63(6), point (a), of the Financial Regulation, (ii) the proper functioning of the governance systems put in place, with the exception of the competent authority referred to in Article 8, the coordinating body referred to in Article 10 and the certification body referred to in Article 12 of this Regulation, ensuring that the expenditure was effected in accordance with Article 37 of this Regulation, as provided for in Article 63(6), points (b) and (c), of the Financial Regulation. The deadline of 15 February referred to in the first subparagraph of this paragraph may be extended on an exceptional basis by the Commission to 1 March, upon communication by the Member State concerned, as provided for in Article 63(7), second subparagraph, of the Financial Regulation. 4. Where an accredited paying agency does not meet or no longer meets one or more of the minimum conditions for accreditation referred to in paragraph 2, first subparagraph, the Member State concerned, acting on its own initiative or at the request of the Commission, shall withdraw the accreditation of that paying agency unless the paying agency makes the necessary changes within a period to be determined by the competent authority of that Member State depending on the severity of the problem. 5. The paying agencies shall manage, and ensure the control of, the operations linked to public intervention for which they are responsible and they shall retain overall responsibility in that field. Where support is provided through a financial instrument which is implemented by the EIB or another international financial institution in which a Member State is a shareholder, the paying agency shall rely on a control report supporting the payment applications submitted. Those institutions shall provide the Member States with the control report. 6. For the purposes of Article 33, for EAFRD expenditure, an additional performance report shall be provided, by 30 June 2030, in accordance with paragraph 3 of this Article and with Article 10(3), covering the period until 31 December 2029.

Article 10 Coordinating bodies 1. Where more than one paying agency is accredited in a Member State, that Member State shall designate a public coordinating body, to which it shall assign the following tasks: (a) to collect the information to be provided to the Commission and to send that information to the Commission; (b) to supply to the Commission the annual performance report referred to in Article 54(1) of this Regulation and Article 134 of Regulation (EU) 2021/2115; (c) to take or coordinate actions with a view to resolving any deficiencies of a common nature and to inform the Commission of any follow-up; (d) to promote and, where possible, ensure the harmonised application of Union rules. 2. As regards the processing of the information of a financial nature referred to in paragraph 1, point (a), the coordinating body shall be subject to specific accreditation by the Member State. 3. The annual performance report referred to in paragraph 1, point (b), of this Article shall be covered by the scope of the opinion referred to in Article 12(2) and it shall be submitted to the Commission together with a management declaration covering the compilation of the entire report.

Article 11 Commission powers relating to paying agencies and coordinating bodies 1. The Commission is empowered to adopt delegated acts in accordance with Article 102 to ensure the sound operation of the paying agencies and coordinating bodies provided for in Articles 9 and 10, supplementing this Regulation with rules on: (a) the minimum conditions for the accreditation of the paying agencies referred to in Article 9(2), first subparagraph, and for the designation and accreditation of the coordinating bodies referred to in Article 10; (b) the obligations of the paying agencies as regards public intervention, as well as the rules on the content of their management and control responsibilities. 2. The Commission shall adopt implementing acts laying down rules on: (a) the procedures for issuing, withdrawing and reviewing accreditation of paying agencies and for designation and issuing, withdrawing and reviewing accreditation of coordinating bodies, as well as the procedures for the supervision of the accreditation of paying agencies; (b) the arrangements and procedures for the checks underlying the management declaration of the paying agencies referred to in Article 9(3), first subparagraph, point (d), as well as its structure and format; (c) the functioning of the coordinating body and the submission of information to the Commission in accordance with Article 10. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 103(3).

Article 12 Certification bodies 1. The certification body shall be a public or private audit body designated by the Member State for a period of at least three years, without prejudice to national law. Where it is a private audit body and where the applicable Union or national law so requires, it shall be selected by the Member State by means of a public tendering procedure. A Member State that designates more than one certification body may appoint a public certification body at national level to be responsible for coordination. 2. For the purposes of Article 63(7), first subparagraph, of the Financial Regulation, the certification body shall issue an opinion, drawn up in accordance with internationally accepted audit standards, which shall establish whether: (a) the accounts give a true and fair view; (b) the Member States’ governance systems put in place function properly, in particular: (i) the governance bodies referred to in Articles 9 and 10 of this Regulation and Article 123 of Regulation (EU) 2021/2115, (ii) the basic Union requirements, (iii) the reporting system put in place for the purposes of the annual performance report referred to in Article 134 of Regulation (EU) 2021/2115; (c) the performance reporting on output indicators for the purposes of the annual performance clearance referred to in Article 54 of this Regulation and the performance reporting on result indicators for the multiannual performance monitoring referred to in Article 128 of Regulation (EU) 2021/2115, demonstrating that Article 37 of this Regulation is complied with, is correct; (d) the expenditure for the measures laid down in Regulations (EU) No 228/2013, (EU) No 229/2013 and (EU) No 1308/2013 and in Regulation (EU) No 1144/2014 of the European Parliament and of the Council (29) for which reimbursement has been requested from the Commission is legal and regular. That opinion shall also state whether the examination calls into question the assertions made in the management declaration referred to in Article 9(3), first subparagraph, point (d). The examination shall also cover the analysis of the nature and extent of errors and weaknesses identified in governance systems by audit and controls, as well as corrective action taken or planned by the paying agency, referred to in Article 9(3), first subparagraph, point (c). Where support is provided through a financial instrument which is implemented by the EIB or another international financial institution in which a Member State is a shareholder, the certification body shall rely on the annual audit report drawn up by the external auditors of those institutions. Those institutions shall provide the Member States with the annual audit report. 3. The certification body shall have the necessary technical expertise, as well as knowledge of the CAP. It shall be operationally independent from the paying agency and the coordinating body concerned as well as from the competent authority which has accredited that paying agency and the bodies responsible for the implementation and the monitoring of the CAP. 4. The Commission shall adopt implementing acts laying down rules on the functioning of the certification bodies, including the checks to be carried out and the bodies subject to those checks, and on the certificates and the reports, together with the documents accompanying them, to be drawn up by those bodies. The implementing acts shall also set out: (a) the audit principles on which the opinions of the certification bodies are based, including an assessment of the risks, internal controls and the level of audit evidence required; (b) the audit methods to be used by the certification bodies, having regard to international standards on auditing, to deliver their opinions. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 103(3).

Article 13 Exchange of best practices The Commission shall promote the exchange of best practices between the Member States, in particular as regards the work of the governance bodies under this Chapter.

TITLE III

FINANCIAL MANAGEMENT OF THE EAGF AND EAFRD

CHAPTER I

EAGF

Section 1

Budgetary discipline

Article 14 Budget ceiling 1. The annual ceiling for EAGF expenditure shall be constituted by the maximum amounts set for it under Regulation (EU, Euratom) 2020/2093. 2. Where Union law provides for sums to be deducted from, or added to, the amounts referred to in paragraph 1, the Commission shall adopt implementing acts without applying the procedure referred to in Article 103 setting the net balance available for EAGF expenditure on the basis of the data referred to in Union law.

Article 15 Compliance with the ceiling 1. Where Union law provides for a financial ceiling in euros for agricultural expenditure in respect of a Member State, such expenditure shall be reimbursed subject to that ceiling, and, where Articles 39 to 42 apply, with any necessary adjustments. 2. Member States’ allocations for interventions in the form of direct payments referred to in Article 87 of Regulation (EU) 2021/2115, corrected by the adjustments laid down in Article 17 of this Regulation, are financial ceilings in euros for the purposes of paragraph 1 of this Article.

Article 16 Agricultural reserve 1. A Union agricultural reserve (‘the reserve’) shall be established at the beginning of each year in the EAGF to provide additional support for the agricultural sector for the purpose of market management or stabilisation and to respond promptly in the case of crises affecting the agricultural production or distribution. The appropriations for the reserve shall be entered directly in the Union budget. Funds from the reserve shall be made available, in the financial year or years for which additional support is required, for the following measures: (a) measures to stabilise agricultural markets under Articles 8 to 21 of Regulation (EU) No 1308/2013; (b) exceptional measures under Articles 219, 220 and 221 of Regulation (EU) No 1308/2013. 2. The amount of the reserve shall be EUR 450 million in current prices at the beginning of each year of the period 2023-2027, unless a higher amount is set in the Union budget. The Commission may adjust the amount of the reserve during the year, when appropriate, in view of market developments or perspectives in the current or following year and taking into account available appropriations under the EAGF sub-ceiling. If those available appropriations are not sufficient, financial discipline may be used in accordance with Article 17 of this Regulation, as a last resort, to fund the reserve up to the initial amount referred to in the first subparagraph of this paragraph. By way of derogation from Article 12(2), third subparagraph, of the Financial Regulation, non-committed appropriations of the reserve shall be carried over to finance the reserve in the following budgetary years until the year 2027. Moreover, by derogation from Article 12(2), third subparagraph, of the Financial Regulation, the total unused amount of the reserve for crises in the agricultural sector, established by Regulation (EU) No 1306/2013, available at the end of the year 2022 shall be carried over to the year 2023 without being fully returned to the budgetary lines which cover the actions referred to in Article 5(2), point (c), of this Regulation and made available to the extent necessary for the financing of the reserve established by this Article after taking into account appropriations available under the EAGF sub-ceiling. Any appropriations of the reserve for crises in the agricultural sector that remain available after financing the reserve established by this Article shall be returned to the budgetary lines which cover the actions referred to in Article 5(2), point (c), of this Regulation.

Article 17 Financial discipline 1. An adjustment rate for interventions in the form of direct payments referred to in Article 5(2), point (c), of this Regulation and for the Union financial contribution to direct payments under Chapter IV of Regulation (EU) No 228/2013 and Chapter IV of Regulation (EU) No 229/2013 for the specific measures referred to in Article 5(2), point (e), of this Regulation (‘the adjustment rate’) shall be determined by the Commission where the forecasts for the financing of the interventions and measures financed under the corresponding sub-ceiling for a given budgetary year indicate that the applicable annual ceilings will be exceeded. The adjustment rate shall apply to payments to be granted to farmers for the interventions and specific measures referred to in the first subparagraph of this paragraph exceeding EUR 2 000 for the corresponding calendar year. For the purposes of this subparagraph, Article 17(4) of Regulation (EU) 2021/2115 shall apply mutatis mutandis. The Commission shall, by 30 June of the calendar year in respect of which the adjustment rate applies, adopt implementing acts fixing the adjustment rate. Those implementing acts shall be adopted in accordance with the advisory procedure referred to in Article 103(2). 2. Until 1 December of the calendar year in respect of which the adjustment rate applies, the Commission may, on the basis of new information, adopt implementing acts adapting the adjustment rate set in accordance with paragraph 1 of this Article. Those implementing acts shall be adopted in accordance with the advisory procedure referred to in Article 103(2). 3. Where financial discipline has been applied, the appropriations carried over in accordance with Article 12(2), point (d), of the Financial Regulation shall be used to finance expenditure under Article 5(2), point (c), of this Regulation, to the extent necessary to avoid the repeated application of financial discipline. Where appropriations to be carried over in accordance with the first subparagraph remain available and the overall amount of non-committed appropriations available for reimbursement represents at least 0,2 % of the annual ceiling for EAGF expenditure, the Commission may adopt implementing acts setting out per Member State the amounts of non-committed appropriations to be reimbursed to final beneficiaries. Those implementing acts shall be adopted in accordance with the advisory