COMMISSION REPORT TO THE EUROPEAN PARLIAMENT AND THE COUNCIL - Early warning system No 1/2002

TABLE OF CONTENTS

1. Appropriations

2. Overall out-turn in monthly expenditure

3. Provisional utilisation of appropriations

4. Comments

5. Conclusions

Annex 1: Document on the establishment of expenditure profiles for 2002

1. Introduction

2. Calculation method - Basic rule

3 Exceptions to the basic rule

Annex 2: Profile for 2002 - accumulated percentages

1. APPROPRIATIONS

1.1. Appropriations under Heading 1 (Agriculture) of the 2002 budget

1.1.1. The adopted budget

The appropriations adopted by Parliament's President in December 2001 for budget Heading 1 amount to EUR 44 255,08 million (including EUR 24,9 million in Chapter B0-40) [1].

[1] Not counting appropriations of EUR 250 million entered in the monetary reserve (B1-6).

Appropriations:

- under the subheading for "CAP" (subheading 1a covering Titles B1-1 to B1-3) amount to EUR 39 660,08 million, i.e. EUR 2 331,9 million below the ceiling fixed in the Interinstitutional Agreement of 6 May 1999 [2],

[2] Interinstitutional agreement of 6 May 1999 between the European Parliament, the Council and the Commission on budgetary discipline and improvement of the budgetary procedure (1999/C 172/01).

- under the subheading for "Rural Development" (subheading 1b covering Title B1-4) amount to EUR 4 595,0 million, equal to the ceiling fixed in the Interinstitutional Agreement.

The appropriations in chapter B0-40 (provisional appropriations) amount to EUR 24,9 million and they will be available only after a transfer has been made. These appropriations were allocated to specific items in the following chapters:

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1.1.2. The budget procedure

The preliminary draft budget (PDB)

The 2002 PDB was drawn up by the Commission and proposed to the Budget Authority in May 2001. Total appropriations proposed for the EAGGF Guarantee Section amounted to EUR 46 221,8 million, including EUR 41 626,8 million for subheading 1a (which left a margin of EUR 365,2 million under the ceiling of EUR 41 992 million) and EUR 4 595 million for subheading 1b (at the ceiling).

The draft budget (DB)

The Council adopted the 2002 DB in July 2001. It reduced the appropriations in subheading 1a by EUR 200 million across-the-board and eliminated the proposed special reserve of EUR 1 000 million intended for supplementary market and veterinary measures linked to BSE and FMD. Total EAGGF Guarantee Section appropriations, thus, amounted to EUR 45 021,8 million; this amount was comprised of EUR 40 426,8 million for subheading 1a and EUR 4 5950,0 million for subheading 1b.

The letter of amendment

At the end of October 2001, the Commission adopted the letter of amendment No 2/2002 to the PDB. It took account of the developments of the agricultural market situation, of the developments in relation to the beef market as well as to the eradication of BSE/FMD and also of recent agricultural legislation. These considerations generated a requirement for EUR 44 250,8 million, resulting in a reduction in requirements amounting to EUR 1 971 million by comparison to the PDB requirements, and involving an amount of EUR 39 655,8 million in subheading 1a which was below the ceiling, and of EUR 4 595,0 million in subheading 1b which was equal to the ceiling.

Adoption of the 2002 budget

Following conciliation between the three institutions, the 2002 budget is as follows:

- for subheading 1a, in relation to the requirements in the letter of amendment No 2/2002, an increase of EUR 4,5 million was decided comprised of EUR 2,5 million for specific aid for bee-keeping and of EUR 2 million for enhancing public awareness of the CAP. Appropriations amount to EUR 39 660,08 million, which is EUR 2 331,9 million beneath the sub-ceiling fixed in Berlin,

- for subheading 1b, the appropriations of EUR 4 595,00 million requested by the Commission were granted; these appropriations are equal to the ceiling.

2. Overall outturn in monthly expenditure

The following tables show the overall outturn in monthly expenditure in relation to the expenditure profile. This situation corresponds to expenditure incurred in the Member States from 16 October to 30 November 2001.

The annex to this report explains in detail how the expenditure profile is drawn up.

2.1. Subheading 1a: CAP

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2.2. Subheading 1b: Rural Development

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3. Provisional utilisation of appropriations

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4. COMMENTS

4.1. The uptake of appropriations for January 2002

The uptake of appropriations under heading 1 of the budget for January 2002 (Member States' expenditure from 16 October 2001 to 30 November 2001) is EUR 16 563,8 million, i.e. 37,4% of appropriations. Expenditure is

- EUR 15,5 million below the indicator for subheading 1a (traditional EAGGF Guarantee Section expenditure and veterinary expenditure),

- EUR 66,9 million below the indicator for subheading 1b (rural development).

4.2. Monetary factors

The dollar/euro rate

The expenditure indicated under the above point takes account of the movement in the dollar/euro rate. In the case of a large part of export refunds for agricultural products, particularly for cereals and sugar, and of some internal aids such as aid for cotton, expenditure depends on the trend in the dollar rate.

In accordance with the Council Regulation on budgetary discipline (Council Regulation No 2040/2000 of 26 September 2000), the letter of amendment to the 2001 agriculture budget was drawn up on the basis of the average dollar rate for July, August and September 2001, i.e. EUR 1 = $ 0,89.

4.3. Market factors

Subheading 1a

For subheading 1a, the rhythm of execution was at the overall level of the indicator. While the overall divergence is insignificant (EUR -15,5 million equal to -0,1% of the budget), the one for certain individual chapters is more important, thus, inviting the following explanations:

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At the start of the financial year, the majority of payments under this chapter relate to payments for direct aids; these payments have to be made in the period from 16 November 2001 to 31 January 2002. The over-execution observed by comparison to the indicator indicates the acceleration in the rhythm of payments for these aids in certain Member States (DK, D). This over-execution is temporary and it appears to be regularised on the following 2-month period on the basis of the communications forwarded by the Member States.

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The indicator was undershot because certain Member States (I, E) delayed the payment of advances for the production aid for olive oil. The situation is expected to be regularised over the coming months on the basis of the quantities to be subsidised under this measure.

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Appropriations were over-utilised in relation to the indicator because it appears that E accelerated the payment of advances for the aid for cotton.

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Appropriations were over-utilised in relation to the indicator because it appears that I accelerated the payment of advances for the tobacco premium.

5. CONCLUSIONS

Implementation of appropriations at 31 January 2002

The uptake of appropriations for January 2002 (Member States' expenditure from 16 October 2001 to 30 November 2001) is EUR 16 563,8 million, i.e. 37,4% of appropriations. Expenditure is

- EUR 15,5 million below the indicator for subheading 1a,

- EUR 66,9 million below the indicator for subheading 1b.

The overall discrepancy between actual expenditure and the indicator is insignificant. The discrepancies for individual chapters are more important but they are expected to be temporary, being mainly due to certain Member States' rhythm of payments which influence the implementation rate of the chapters in question.

ANNEX 1 Drawing up the expenditure profile for 2002

1. Introduction

Under Article 7 of Council Regulation (EC) No 2040/2000 of 26 September 2000 on budgetary discipline, the Commission is required to implement an 'early warning system' covering each chapter of EAGGF Guarantee Section expenditure. To that end, the Commission presents monthly reports to Parliament and the Council comparing actual expenditure with the forecast expenditure profiles.

The profiles are established by the Commission for each chapter of the budget as soon as budget data are available. They are based, where appropriate, on average monthly expenditure over the three preceding years.

2. Calculation method - Basic rule

The approach involves establishing profiles by chapter on the basis of data for each item, as follows (see Annex 1).

a) Expenditure over the three preceding years is adjusted as required to the budgetary nomenclature for the coming year.

b) For each closed financial year, a profile in terms of accumulated percentages is calculated at the lowest budgetary level (item or article).

c) The historical profile for each budget heading is the arithmetic mean of the percentage values for the corresponding months of each financial year.

d) Multiplying the percentage obtained by the appropriation amount for that heading for the year concerned gives, for each item, the amount of expenditure that can be considered normal at a given date.

e) The indicator at the next level up is obtained by adding together the amounts at the constituent levels (chapter = sum of amounts under each item).

The percentage these amounts represent in relation to the budget for each chapter gives the profile for that chapter. The profile therefore incorporates the distribution of expenditure at the lower levels (articles and items).

Profiles should also reflect any payment deadlines that are set under the rules.

3. Exceptions to the basic rule

As a rule, profiles are calculated as described under point 2. However, a different approach has to be adopted in certain cases, in particular the following:

a) Where historical data for a given budget heading include factors of a strictly one-off nature the appropriate adjustments are made.

b) Where, for a given budget heading, the data for a single year are felt to be more representative than the historical profile calculations are based on the single-year data.

c) Where special circumstances (such as a new heading, or changes in the rules or in payment deadlines) mean that historical data do not reflect the foreseeable pattern of expenditure under a budget heading, a theoretical profile is established on the basis of working hypotheses that take account of the new situation.

d) Since, for the items concerning expenditure on public storage, end-of-year depreciation has a significant impact on the pattern of expenditure and, moreover, this depreciation fluctuates widely from year to year, this factor should be omitted when calculating the historical profile. The forecast depreciation for the 2002 budget will then be incorporated into the forecast expenditure for the last month of the financial year, giving the final profile for these budget headings.

e) For the items dealing with recovery in the event of fraud or irregularity (which, by their nature, are unpredictable), the best method for calculating the profile is to distribute the total expenditure evenly over the whole financial year.

These exceptions are explained below, item by item.

Chapter 10 - Arable crops

B1-1040 - Aid for producers of maize (base area for maize)

B1-1041 - Aid for producers of cereals not subject to the base area for maize

B1-1042 - Aid for producers of soya beans, rape seed and sunflower seed

B1-1043 - Aid for producers of peas, field beans and sweet lupins

B1-1044 - Aid for producers of non-textile flax seed

B1-1045 - Supplementary aid for durum wheat: traditional production zones

B1-1047 - Aid for grass silage

B1-1049 - Voluntary set-aside

B1-1050 - Aid for producers of maize (base area for maize)

B1-1051 - Aid for producers of cereals not subject to the base area for maize

B1-1052 - Aid for producers of soya beans, rape seed and sunflower seed

B1-1053 - Aid for producers of peas, field beans and sweet lupins

B1-1054 - Aid for producers of non-textile flax seed

B1-1056 - Supplementary aid for durum wheat: traditional production zones

B1-1057 - Supplementary aid for durum wheat: zones other than traditional production zones

B1-1058 - Aid for grass silage

B1-1060 - Set-aside related to per hectare aid

Regulation (EC) No 1251/1999 changed the payment deadlines from the 2000/01 marketing year onwards, so the average for the previous three financial years is not representative of the new situation. The profile is therefore based on 2001.

Chapter 12 - Olive oil

B1-1210 - Production aid

As the rules were amended in 2000, the profile is based solely on data for 2000 and 2001.

B1-1239 - Other storage measures

2001 is not representative because there was no storage at the beginning of the year. The profile has therefore been set at the same level throughout the year.

B1-129 - Other intervention

The expenditure profile for 1999 differs so much from that for the other two years that it is not considered to be representative. The profile is therefore based on the years 2000 and 2001.

Chapter 15 - Fruit and vegetables

B1-1509 - Other

Since the breakdown of the expenditure under this item has been changed, the profile for 2002 is made up as follows:

5% in November, 5% in December and the rest spread evenly over January to October.

B1-1515 - Compensation to encourage processing of citrus fruits

Following a change to the schedule of payments, the profile should be based on data for 2000 and 2001.

Chapter 16 - Products of the vine-growing sector

B1-1611 - Distillation of wine

In view of the new rules which came into force in August 2000, the profile is based on data for 2001 only.

B1-1625 - Private storage aid

Since this measure was introduced in 2001, expenditure has been spread evenly throughout 2002.

B1-164: Permanent abandonment premiums in respect of areas under vines

The expenditure profile for 1999 differs so much from that for the other two years that it is not considered to be representative. The profile will therefore have to be based on the years 2000 and 2001.

B1-165 - Restructuring and conversion of vineyards

Since expenditure is expected to start in January following the decisions taken in October and the rules provide for a statement of expenditure no later than 30 June, the profile shows expenditure spread evenly over the period from January to June.

Chapter 17 - Tobacco

B1-175 - Community fund for research and information

The expenditure profile for 1999 differs so much from that for the other two years that it is not considered to be representative. The profile will therefore have to be based on the years 2000 and 2001.

Chapter 20: Milk and milk products

B1-2071 - Additional levy

The expenditure profile for 1999 differs so much from that for the other two years that it is not considered to be representative. The profile will therefore have to be based on the years 2000 and 2001.

B1-2099 - Other

As this heading concerns one-off payments, expenditure should be spread evenly.

Chapter 21 - Beef/veal

B1-2110 - Private storage

Since all expenditure is expected to be carried out before March 2002, the profile shows expenditure spread evenly over the period November to March.

B1-2111 - Technical costs of public storage

B1-2112 - Financial costs of public storage

B1-2113 - Other public storage costs

2001 cannot be considered representative because there was no storage at the beginning of the year. The profile for 2002 spreads expenditure evenly over the year because there are stocks at the beginning of the year and buying in and sales are expected to be limited during 2002.

B1- 2114 - Depreciation of stocks

Since all buying in is expected to be completed before 30 June 2002, the profile spreads 80% of budgeted expenditure evenly over the period from November to June, with 20% remaining for additional depreciation in October.

B1-2124 - Slaughter premiums

The profile is based on the 2001 financial year, the only year regarded as representative.

B1-2128 - Additional payments

As there was no expenditure before 2001, the profile is based on the year 2001.

B1-2129 - Other intervention

Since the measure is due to end in December 2002, 80% of the budgeted expenditure is spread evenly over the period November to March and the remaining 20% is spread evenly over the period April to October.

Chapter 22 - Sheepmeat and goatmeat

B1-2220 - Ewe and goat premiums

B1-2221 - Fixed flat-rate ewe and goat premium in less-favoured and mountain areas

Following the reform of the sector, the 2002 budget now contains only the second advance payment and the balance for the premium in 2001. Since expenditure in the 2001 financial year for sub-items B1-2220-011, B1-2220-012 and B1-2220-026 also corresponds to the second advance payment and the balance for 2000, the profile for B1-2220 is based on 2001, taking account of these sub-items only. The profile for item B1-2221 is also based on 2001, but taking account of sub-items B1-2221-010 and B1-2221-026 only, since expenditure for these sub-items corresponds to the second advance payment and the balance for 2000.

Chapter 23 - Pigmeat

B1-2300 - Refunds on pigmeat

The expenditure profile for 1999 differs so much from that for the other two years that it is not considered to be representative. The profile will therefore have to be based on the years 2000 and 2001.

B1-232 - Other animal product aid measures

1998 was the launch year and 1999 is not representative either because payments were made for new programmes and outstanding amounts settled on old ones. The profile will therefore be based on the years 2000 and 2001.

Chapter 30 - refunds on certain goods obtained by processing agricultural products

B1-3000: Refunds on cereals exported in the form of certain spirit drinks

Since the rules were amended in July 2000, the profile should be based on the year 2001 only.

Chapter 33 - Veterinary and plant health measures

B1-330 - Animal disease eradication and monitoring programmes

B1-331 - Other measures in the veterinary field

B1-332 - Emergency veterinary fund

B1-333 - Plant health measures

These being direct payments, the profile is based on estimated expenditure for the year 2002.

B1-333A - Plant health measures - Expenditure on administrative management

As this item concerns administrative expenditure, it was not taken into consideration for establishing a profile.

Chapter 36 -Monitoring and preventive measures concerning the EAGGF Guarantee Section

B1-3601 - Vineyard register

As there are no historical data, the profile spreads expenditure evenly over the year.

B1-3602 - Other measures

Since the decision on amounts to be granted for 2002 action programmes is likely to be taken in February, expenditure is expected to reach 100% from March.

B1-361A - Monitoring and prevention: direct payments by the European Community - Expenditure on administrative management

As this item concerns administrative expenditure, it was not taken into consideration for establishing a profile.

Chapter 38 - Promotion measures

B1-3801 - Measures in third countries

The new framework Regulation has not yet been adopted. A profile spreading expenditure evenly over the period July to October is therefore the most appropriate course to take.

B1-3820 - Enhancing public awareness of the common agricultural policy

The profile has been based on the year 2001 because there was no expenditure in 1999 and the rate of expenditure in 2000 differs very much from that for 2001.

Chapter 39 - Other measures

B1-3900 - Agrimonetary aids

The year 1999 is not representative, being the launching phase. The profile is therefore based on the years 2000 and 2001.

Chapter 40 - Rural development

B1-4000 - Investments in agricultural holdings

B1-4010 - Setting-up of young farmers

B1-4020 - Training

New measure: the profile is based on the pattern of expenditure in the year 2001.

B1-4030 - Early retirement (new system)

The profile of the former system, which is included in this item as of 2001, applies.

B1-4040 - Less-favoured areas

New measure: the profile is based on the pattern of expenditure in the year 2001.

B1-4050 - Agri-environment (new system)

The profile of the former system, which is included in this item as of 2001, applies.

B1-4060 - Improving the processing and marketing of agricultural products

New measure: the profile is based on the pattern of expenditure in the year 2001.

B1-4070 - Forestry

The profile of the former system, which is included in this item as of 2001, applies.

B1-4071 - Forestry (new system, other)

B1-4080 - Main agriculture-related measures

B1-4081 - Other measures

B1-4091 - Evaluation

B1-4092 - Transitional measures

New measure: the profile is based on the pattern of expenditure in the year 2001.

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