EUROPEAN COMMISSION Brussels, 11.12.2015 COM(2015) 651 final REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on EAGF expenditure



Early Warning System No 8-10/2015



TABLE OF CONTENTS 1.Introduction 2.Revenue assigned to EAGF 3.Comments on the provisional implementation of the 2015 EAGF budget 4.Implementation of revenue assigned to EAGF7 5.Conclusions annex 1: Provisional consumption of EAGF appropriations up to 31/08/2015 1.Introduction This report presents an update of the provisional 2015 budget execution for the European Agricultural Guarantee Fund (EAGF). In particular, Annex 1 presents the comparison between the actual level of the implementation of the EAGF budget for the period 16 October 2014 to 31 August 2015 and the forecasted expenditure profile. The latter results from the application of the indicator to the level of the budgetary appropriations. The indicator is established on the basis of the provisions of Article 28 of Regulation (EU) No 1306/2013 on the financing, management and monitoring of the common agricultural policy. 2.Revenue assigned to EAGF Under Article 43 of Regulation (EU) No 1306/2013, the revenue originating from financial corrections under accounting and conformity clearance decisions, from irregularities and from the milk levy is designated as revenue assigned to the financing of EAGF expenditure. The assigned revenue can be used to cover the financing of any EAGF expenditure. If part of this revenue is not used within the budget year, then, this part will be automatically carried forward to the following budget year. The 2015 EAGF budget, as adopted by the Budgetary Authority included both: –the Commission's estimates of the needs to finance the expected expenditure for market measures and direct aids, and –the estimates of the assigned revenue which was expected to be collected in budget year 2015 as well as the assigned revenue carried over from the budget year 2014.

At the time of establishing the 2015 budget, the Commission’s estimates of the assigned revenue amounted to EUR 1 768.6 million. This included: –The assigned revenue expected to be generated in the course of the 2015 budget year estimated at EUR 1 438.6 million, i.e.: EUR 868.6 million for conformity clearance corrections, EUR 165 million for irregularities and EUR 405 million for the receipts from the milk levy. –The amount of assigned revenue expected to be carried over from the budget year 2014 into 2015 estimated at EUR 330 million. In the 2015 budget, the Commission assigned this initially estimated revenue of EUR 1 768.6 million to the budget items in the following articles: –05 02 08 – Fruit and vegetables: EUR 469.3 million –05 02 12 – Milk and milk products: EUR 54.3 million –05 03 01 – Decoupled direct aids: EUR 1 245 million. For these schemes, the Budgetary Authority eventually voted appropriations in accordance with the Commission’s proposal. The sum of the voted appropriations and the assigned revenue mentioned above corresponds to a total estimate of needs. In annex 1, the figures of the budget appropriations at article level for fruit and vegetables, for milk and milk products and for the decoupled direct aids relate to the voted appropriations for these articles amounting to EUR 836.2 million, to EUR 77.1 million and to EUR 37 397 million respectively, without taking account of the aforementioned assigned revenue. Including the revenue assigned to these articles, the total appropriations foreseen in the 2015 budget amount to EUR 1 305.5 million for fruit and vegetables, EUR 131.4 million for milk and milk products and to EUR 38 642 million for decoupled direct aids. 3.Comments on the provisional implementation of the 2015 EAGF budget The budget’s provisional implementation for the period 16 October 2014 to 31 August 2015, as presented in Annex 1, is compared to the expenditure profile based on the indicator established in accordance with Article 28 of Regulation (EU) No 1306/2013. Below a brief commentary is presented for certain budget articles, showing the most significant differences between the actual and the expected level of implementation of the 2015 budget. 3.1.Market measures The uptake of appropriations for interventions in agricultural markets was higher compared to the level of the budget's voted appropriations, as determined by the level of the indicator on 31 August 2015, by EUR 107.7 million. This divergence is the net effect of the execution patterns primarily in the fruits and vegetables, milk and milk products and wine sectors. 3.1.1.Fruit and vegetables (+ EUR 147.1 million in comparison with voted appropriations) This implementation level is primarily due to the expenditure for the operational funds for producer organisations scheme and other measures in fruit and vegetables, which are funded both by the voted appropriations and by the assigned revenue (NB: For details please see point 2 above). In contrast, the indicator for the period to 31 August 2015 is applied only to the budget’s voted appropriations of EUR 836.2 million, thus not taking into account the assigned revenue. A footnote * in the provisional execution table in annex 1 shows what the situation would be, had the indicator been applied to the total appropriations for this article including the assigned revenue of EUR 469.3 million. Had the indicator been applied to the total funding expected to be available for this article (EUR 1 305.5 million), then an under-execution of - EUR 168.3 million would appear. This is the effect of a lower uptake of all the schemes funded by this article. In particular, the uptake of budgetary appropriations for the crisis measures, available under the operational funds for producer organisations and under other measures in fruit and vegetables, was lower than estimated at the moment of adopting the 2015 budget. As regards the traditional operational funds for producer organisations, a lower execution was also observed. Finally, for the School Fruit Scheme, the Member States did not execute fully the increased envelope. At this point in time, the Commission services expect that there will be an under-execution of this article’s appropriations by the end of the budget year. 3.1.2.Products of the wine-growing sector (- EUR 77.1 million) This under-execution is due to a slower rhythm of payments made by the Member States compared to the expenditure profile of the established indicator for the national wine programmes. Member States usually accelerate the rhythm of implementation of these programmes towards the end of the budget year. However, at this point in time, the Commission services expect that there could be an under-execution of this article’s appropriations by the end of the budget year.

3.1.3.Milk and milk products (+ EUR 36.5 million) This implementation level is primarily due to the expenditure for the storage and for the other measures in milk and milk products (budget item 05 02 12 99), which are funded both by the voted appropriations and by the assigned revenue (NB: For details please see point 2 above). In contrast, the indicator for the period to 31 August 2015 is applied only to the budget’s voted appropriations of EUR 77.1 million, thus not taking into account the assigned revenue. A footnote * in the provisional execution table in annex 1 shows what the situation would be, had the indicator been applied to the total appropriations for this article including the assigned revenue of EUR 54.3 million. Had the indicator been applied to the total funding expected to be available for this article (EUR 131.4 million), then an under-execution of - EUR 17.2 million would appear. The Commission expects a smaller uptake of the appropriations for the school milk scheme and for the crisis measures available for the storage and for the other measures in milk and milk products. At this point in time, the Commission services expect that there will be an under-execution of this article’s appropriations by the end of the budget year. 3.2.Direct aids The uptake of appropriations for direct aids compared to the level of the indicator on 31 August 2015 was higher by EUR 819.4 million. 3.2.1.Decoupled direct aids (+EUR 883.8 million in comparison with voted appropriations) This implementation level is primarily due to the expenditure for the single payment scheme, which is funded both by the voted appropriations and by the assigned revenue (NB: For details please see point 2 above). In contrast, the indicator for the period to 31 August 2015 is applied only to the budget’s voted appropriations of EUR 37 397 million, thus not taking into account the assigned revenue. A footnote * in the provisional execution table in annex 1 shows what the situation would be, had the indicator been applied to the total appropriations for this article including the assigned revenue of EUR 1 245 million. Had the indicator been applied to the total funding expected to be available for this article (EUR 38 642 million), then an under-execution of – EUR 360.2 million would appear. At this point in time, Member States have already paid 99% of the estimated 2015 budgetary needs for decoupled direct aids. The Commission expects that available appropriations and assigned revenue would be sufficient to cover the funding needs for this article and that a certain under-execution can be expected at the end of the budget year. 3.2.2.Other direct aids (- EUR 64.3 million) This under-implementation of voted appropriations for other direct aids as compared to the expenditure profile of the established indicator on 31 August 2015 is the effect of the slower payment rhythm for some schemes in this sector, in particular for the coupled specific support under article 68. At this point in time, the Commission considers that a certain under-execution can be expected at the end of the budget year. 3.3.Audit of agricultural expenditure (- EUR 21.2 million) In addition to direct expenditure for monitoring and preventive measures amounting to EUR 6.8 million, the 2015 budget included estimates of EUR 20 million for positive accounting clearance corrections and of EUR 60.5 million for payments concerning settlement of disputes. On the basis of the latest information, Member States will be paying compensatory interest for the settlement of disputes which will be lower than the one foreseen in the 2015 budget with the outstanding balance expected to be paid out of the 2016 budget. Furthermore, the Commission also expects to reimburse Member States with amounts of around EUR 20 million and EUR 29.2 million because of positive accounting and conformity clearance of accounts decisions in their favour. At this point in time, the Commission expects an under-execution of the 2015 budget’s appropriations for the audit of agricultural expenditure chapter. 4.Implementation of revenue assigned to EAGF The table in annex 1 shows that assigned revenue amounting to EUR 1 951.8 million was collected as of 31 August 2015. Specifically: –the revenue expected from corrections based on accounting and conformity clearance decisions has been largely collected and it amounts to EUR 1 062.8 million; –the revenue from irregularities amounts to EUR 138.3 million with additional amounts also expected by the end of the budget year, and –at this point in time, the entire revenue from the milk levy has been collected and it amounts to approximately EUR 409.4 million; Finally, the amount of assigned revenue eventually carried over from 2014 into 2015 amounted to EUR 341.3 million.