Proposal for a COUNCIL REGULATION (EC) amending Regulation (EEC) No 4045/89 of the Council on scrutiny by Member States of transactions forming part of the system of financing by the Guarantee Section of the European Agricultural Guidance and Guarantee Fund
Date: 1994-06-06
Institutions: European Commission
Subjects: EAGGF Guarantee Section, EU control, exchange of information, export refund, payment, redemption

COMMISSION OF THE EUROPEAN  COMMUNITIES 

C0MC94) 159 final 
Brussels, 06.06.1994 

94/0119 (CNS) 

!•?- 

<* 

Proposal for a 

COUNCIL REGULATION (EC) 

amending Regulation  (EEC) No 4045/89 of the Council on 
scrutiny by Member States of transactions forming part of the 
system of financing by the Guarantee Section of the European 
Agricultural Guidance and Guarantee Fund 

(presented by the Commission) 

IZPIASATORY MEMORANDUM 

Four  years  experience  of  the  application  of  council 
Regulation 4045/89 hac indicated a need allow the Member 
States to target their resources -mara. AffActively, in order 
to give greater assurance ol the correctness of transactions 
financed by the EAGGF, and to detect and combat fraud and 
irregularities. The existing Regulation 4045/89 prescribes 
a  rigid  manner  of  selection  of  undertakings  to  be 
controlled, and in order to ease thie rigidity and allow 
Member states greater discretion to base their selection on 
analysis of risk, Regulation 4045/89 must be modified. 

The proposal affects all Member states as, under Regulation 
4045/89, all Member statee arc responsible for implementing 
the system of post-payment controls. Thp. MArober States own 
control bodies alone possess the resources to scrutinize the 
number of transactions necessary to give adequate assurance 
of the correctness and reality of the payments or receipts. 

This proposal adds no cost to the existing system, and by 
allowing Member states to select undertakings for scrutiny 
using risk analysis the efficiency of the system will be 
improvp-d, with beneficial effects for the EAGGF. In its 
Speoial Report No. 7/93 (OJ C 53 or 19/02/94, p.l) the Court 
of Auditor© underlined the necessity of scrutiny based on 
a more homogeneous risk analysis. 

Other modifications designed to adapt the system of scrutiny 
to  perceived  needs  are  also  opportune  »t  this  time, 
including a redefinition of what constitutes a commercial 
document, a  strengthening  of  the  system  of  mutual 
assistance, and a  less rigid approach to thA  system  of 
Community contribution to additional expenditure. 

Furthermore,  the  introduction  of  the  integrated 
Administration and Control System during the course of 1992 
has begun to remove certain tneamrrAs from the logical scope 
of Regulation 4045/89, and it is therefore necessary to 
allow for the exclusion of these measures from the scope of 
the  Regulation.  Once  the  Council  has  adopted  the 
modifications to the Regulation, a Commission Regulation 
will establish a list of those measures to be excluded. 

An aim of this proposal is to give Lo Member states the 
d*«r.r*tion to  select both undertakings  and  transactions 
according to their own assessment of the risks involved. In 
this  regard  the  Commission  believes  that  considerable 
discretion should be lA-Ft to the Member States as to what 
constitutes risk and what weiqhting to give to each factor. 
With this in mind the proposal aims to relax the existing 
arithmetical  constraints m at  the Regulation  imposes on 
Member States. 

Proposal for a 

COUNCIL REGULATION (EC) 

amending Regulation  (EEC) No 4045/89 of the Council on 
scrutiny by Member States of transactions forming part of the 
system of financing by the Guarantee Section of the European 
Agricultural Guidance and Guarantee Fund 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, 
and  in particular Article 43 thereof, 

Having regard to the proposal from the Commission, 

Having regard  to the opinion of the European Parliament, 

Whereas Council Regulation  (EEC) No 4045/89 (')  provides for the 
scrutiny  by  Member  States  of  transactions  forming  part  of  the 
system  of  financing  by  the  Guarantee  Section  of  the  European 
Agricultural Guidance and Guarantee Fund; 

Whereas  the  rules  for  the  selection  of  undertakings  to  be 
scrutinized  laid down in Article 2 thereof should be modified to 
take  account  of  developments  in  the  use  of  risk  analysis 
techniques in other control measures, and in order to give Member 
States greater flexibility  in the selection of undertakings; 

Whereas  it  is  necessary  to  make  clear  that  the  commercial 
documents  subject  to  scrutiny  include  records  maintained  in 
electronic data storage systems; 

Whereas  the  powers  of  the  Member  States  to  take  action  in 
relation to inadequate commercial documents and documents located 
outside the territory of the Community should be specified; 

Whereas the procedures for mutual assistance provided in Article 
7 of the said Regulation should be strengthened; 

Whereas for the fifth year of application of Regulation  (EEC) No 
4045/89 there is a need for greater flexibility in the allocation 
of  the  contribution  by  the  Community  to  the  additional 
expenditure  foreseen  under  Articles  13,  14  and  15,  provision 
should be made for the aggregation of the amounts available under 
Articles  13 and  14 and their allocation to the different  types 
of expenditure without distinction; 

Whereas, in the event that officials carrying out scrutinies are 
accompanied  by  officials  of the  Commission  or  of  other  Member 

!0J No L 388, 30.12.1989, p.18 

•I 

States, it is necessary to make clear the status of the latter, 

HAS ADOPTED THIS REGULATION: 

Article 1 

Regulation  (EEC) No 4045/89 is hereby amended as follows: 

1.  Article 1 paragraph 2, is replaced by the following: 

'2.  For  the  purposes  of  this  Regulation  'commercial 
documents'  means  all  books,  registers,  vouchers  and 
supporting  documents,  accounts,  production  and  quality 
records, and correspondence relating to the undertaking's 
business activity, as well as commercial data, in whatever 
form they may take, including electronically stored data, 
insofar  as  these  documents  or  data  relate  directly  or 
indirectly to the transactions referred to in paragraph 1.' 

2.  In Article 1 the following paragraph is added: 

'3.  In  accordance  with  Article  19  the  Commission  shall 
establish a list of measures to which this Regulation shall 
not apply' 

3.  In Article 2 paragraph 2, first sub-paragraph, the sum of 
ECU 60 000 is replaced by ECU 100 000. 

4.  In Article 2 paragraph 2 the second and third subparagraphs 
are deleted. 

5.  In Article 2 paragraph 2 the following subparagraph  shall 
be inserted after the first subparagraph: 

In relation to each scrutiny period, commencing with the 
1994/95  scrutiny  period,  Member  States  shall,  without 
prejudice to their obligations under Article 2 paragraph 1, 
select the undertakings to be scrutinized on the basis of 
risk  analysis  in the export refunds sector, and  for all 
other measures where it is practicable to do so. The Member 
State shall submit to the Commission its proposal for the 
use  of  risk  analysis, which  shall  include  all  relevant 
information  concerning  the  approach  to  be  followed,  the 
techniques, the criteria and the method of implementation, 
not later than 1 December of the year prior to commencement 
of the scrutiny period for which it is to be applied. The 
Member  State  shall  take  account  of  the  comments  of  the 
Commission on the proposal which shall be given within eight 
weeks of its receipt. 
However  the  requirement  to  submit  the  above-mentioned 
proposal shall not apply to the 1994/95 scrutiny period. 

For  measures  where  the  use  of  risk  analysis  is  not 
practicable, it shall be compulsory for undertakings the sum 
of whose receipts or payments amounted to more than ECU 3 00 
000 and which were not scrutinized in accordance with this 

X 

Regulation  during  either  of  the  two  preceding  scrutiny 
periods, to be scrutinized, 

6. 
of ECU  10 000 is replaced  by ECU 30 000. 

In the fourth subparagraph of Article 2 paragraph 2 the sum 

In Article 2 paragraph 5 the phrase "Article 6 of Regulation 

7. 
(EEC)  No  283/72"  (2)  is  replaced  by  "Article  6  of  Regulation 
(EEC) No 595/91" (3) 

In Article 3 paragraph 1 the words preceding the indents are 

8. 
replaced  as follows: 

'The  accuracy  of  primary  data  under  scrutiny  shall  be 
verified  by  the  number  of  crosschecks  appropriate  to  the 
degree of risk presented, including, inter alia:' 

9.  In Article  3 paragraph  1 the second  indent  is replaced  as 
follows: 

'-  physical checks, where appropriate, upon the quantity 
and nature of stocks, and " 

10.  In Article 3 the following paragraph  is added: 

'3.  In the selection  of transactions to be checked,  full 
account shall be taken of the degree of risk presented' 

11.  In Article 5 paragraph  1 the following sentence  is added: 

'Electronically  stored  data  shall  be  provided  on  an 
appropriate data support medium.' 

12.  In Article 5 the following paragraph  is added: 

'3.  Where  the  commercial  documents  maintained  by  the 
undertaking are considered inadequate for scrutiny purposes, 
the undertaking shall be directed to maintain such records 
as required by the officials responsible for the scrutiny, 
without  prejudice  to  obligations  laid  down  in  other 
Regulations relating to the sector concerned. 
The  Member  States  shall  determine  the  delay  within  which 
such records shall be established. 

Where all or part of the commercial documents required  to 
be scrutinized under this Regulation are located outside the 
Community  territory, the undertaking  shall make  available 
within  a  reasonable  time  these  commercial  documents  to 
officials  responsible  for  the  scrutiny,  at  a place  to  be 
designated by the Member State responsible for carrying out 
the scrutiny.' 

2OJ No L 136, 10.2.1972, p.l 

3OJ No L 67, 14.3.1991, p.11 

M-

13.  In Article 7 paragraph 2 the first subparagraph is replaced 
as follows: 

'2.  During the first quarter of the year following the year 
of  payment,  Member  States  shall  send  a  list  of  the 
undertakings referred to in paragraph 1 to each Member State 
in which such an undertaking is established; the list shall 
contain all the details necessary to enable the Member State 
of destination to identify the undertakings and to undertake 
its scrutiny obligations. The Member State of destination 
shall be responsible for the scrutiny of such undertakings 
in accordance with Article 2. A copy of each list shall be 
sent to the Commission.' 

14.  In the  second  subparagraph  of Article  7 paragraph  2 the 
following sentence is added: 

'Such  requests  shall  be  acted  upon,  and  the  results 
communicated  to  the  requesting  Member  State  and  the 
Commission, within six months of the request being made.' 

and  in  the  English  language  version  the  word  'business'  is 
replaced by 'undertaking'. 

15.  In Article  9 paragraph  5 the year  '1991'  is replaced by 
'1996', and the second sentence is deleted. 

16.  In Article  10 paragraph  3 the word  'six' is replaced by 
'eight'. 

17.  Article 10 paragraph 6 is deleted. 

18.  In Article 16 a new paragraph 2 is inserted as follows: 

'2.  For the fifth year of application of this Regulation 
the  amounts of the overall Community contribution referred 
to in Articles 13 and 14 shall be aggregated for each Member 
State. Within the limits of this aggregation, the Community 
shall  contribute without distinction,  at  a rate of 25%, 
towards the expenditure  incurred by the Member States as 
foreseen in Articles 13, 14 and 15.' 

and the paragraphs shall be renumbered accordingly. 

19.  Article 21 is amended as follows: the existing paragraph is 
numbered paragraph 1, and the following sentence is added: 

'They shall be provided upon request on an appropriate data 
support medium.' 

The following paragraphs are added: 

'2.  Officials  of  the  Commission  may  be  present  at  the 
scrutinies referred to in Article 2. The scrutinies shall 
at all times be carried out by the officials of the national 
administration. The Commission officials may not, on their 
own  initiative,  exercise  powers  conferred  on  national 
officials. 

^ 

3.  In  the  case  of  scrutinies  taking  place  under  the 
provisions of Article 7, , officials of the Member State in 
which the payment has or should have been made or received 
may be present at the scrutiny in the Member State in which 
the undertaking is established, and have access to the same 
premises and the same documents as the officials of that 
Member State. 

Officials  of  the  requesting  Member  State  present  at 
scrutinies in another Member State must at all times be able 
to furnish proof of their official capacity. The scrutiny 
shall  at  all  times  be  carried  out  by  officials  of  the 
requested Member State. Officials of the applicant Member 
State  may  not,  on  their  own  initiative,  assume  powers 
conferred on the officials of the requested Member State.' 

Article 2 

This Regulation shall enter into force on the third day following 
its  publication  in  the  Official 
Communities. 

European 

Journal 

the 

of 

This Regulation  shall be binding  in its entirety and directly 
applicable in all Member States. 

Done at Brussels, 

For the Council 
The President 

FINANCIAL  STATEMENT 

1.  BUDGET HEADING  :  A-3531  APPROPRIATIONS ; 
2.  TITLE : 

4 145 000 

ECU  (B 1994) 

Draft Regulation modifying Council Regulation No. 4045/89 

3.  LEGAL  BASIS : 
4.  AIMS OF PROJECT : 

Council Regulation No. 4045/89 

To modify Council Regulation No. 4045/89 

5.  FINANCIAL  IMPLICATIONS 

5.0  EXPENDITURE 

- CHARGBD TO THE EU BUDGET 
(REFUNDS/INTERVENTIONS) 
- NATIONAL  ADMINISTRATION 
- OTHER 

5.1  RECEIPTS 

- OWN RESOURCES OF THE EU 
(LEVIES/CUSTOMS DUTIES) 

- NATIONAL 

5.0.1  ESTIMATED  EXPENDITURE 
5.1.1  ESTIMATED  RECEIPTS 

5.2  METHOD OF CALCULATION 

PERIOD OF 
12 MONTHS 

CURRENT 
FINANCIAL 
YEAR  (94) 

FOLLOWING 
FINANCIAL 
YEAR  (95) 

2.58 mio ECU 

1996 

1997 

1998 

1999 

6.0  CAN THE PROJECT BE FINANCED FROM APPROPRIATIONS ENTERED IN THE 

RELEVANT  CHAPTER OF THE CURRENT BUDGET 

6.1  CAN THE PROJECT BE FINANCED BY TRANSFER  BETWEEN 

CHAPTERS OF THE CURRENT BUDGET 

6.2  WILL A  SUPPLEMENTARY  BUDGET BE NECESSARY 
6.3  WILL FUTURE BUDGET APPROPRIATIONS  BE NECESSARY 

OBSERVATIONS 

NO 

The modification of the Regulation aims to make the system of 
Community  financial participation more flexible. 
It does not  involve any supplementary expenditure, and the ceiling of 
2.58 mio ECU for the 5th and last year of application  remains unaltered. 
However, the Commission will have the possibility within the limit for 
each Member State to finance measures of whatever nature, with the exception 
of expenditure on informatics equipment where the ceiling fixed for the 
whole period of application of Community financing  (1990-1994) 
remains unaltered. 

ISSN 0254-1475 

COM (94) 159 final 

DOCUMENTS 

EN 

03 

Catalogue number : CB-CO-94-170-EN-C 

ISBN 92-77-67823-2 

Office for Official Publications of the European Communities 

L-2985 Luxembourg 

%