Commission Regulation (EC) No 1975/2006 of 7 December 2006 laying down detailed rules for the implementation of Council Regulation (EC) No 1698/2005, as regards the implementation of control procedures as well as cross-compliance in respect of rural development support measures
Date: 2006-12-07
Institutions: European Commission
Subjects: EU aid, EU financing arrangements, administrative check, aid system, aid to agriculture, development aid, rural development

L 368/74

EN

Official Journal of the European Union

23.12.2006

COMMISSION REGULATION (EC) No 1975/2006

of 7 December 2006

laying down detailed rules for the implementation of Council Regulation (EC) No 1698/2005, as
regards the implementation of control procedures as well as cross-compliance in respect of rural
development support measures

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty
Community,

establishing the European

Having regard to Council Regulation (EC) No 1698/2005 of 20
for rural development by the
September 2005 on support
European
Rural Development
(EAFRD) (1), and in particular Articles 51(4), 74(4) and 91
thereof,

Agricultural

Fund

for

Whereas:

(1)

(2)

(EC) No 1868/94,

Experience shows that the integrated administration and
control system (hereinafter referred to as IACS), provided
for in Chapter 4 of Title II of Council Regulation (EC) No
1782/2003 of 29 September 2003 establishing common
rules for direct support schemes under the common
agricultural policy and establishing certain support
schemes for farmers and amending Regulations (EEC)
No 2019/93, (EC) No 1452/2001, (EC) No 1453/2001,
(EC) No 1454/2001,
(EC) No
1251/1999, (EC) No 1254/1999, (EC) No 1673/2000,
(EEC) No 2358/71 and (EC) No 2529/2001 (2), has
proven to be an effective and efficient means for the
implementation of direct payment schemes. Therefore,
as far as the area and animal-related measures under
Axis 2 in Section 2 of Chapter I of Title IV of Regulation
(EC) No 1698/2005 are concerned, the administration
and control rules, as well as the provisions concerning
reductions and exclusions in cases of false declarations,
related to such measures should follow the principles set
out in the IACS, and in particular in Commission Regu-
lation (EC) No 796/2004 of 21 April 2004 laying down
detailed
cross-
compliance, modulation and the integrated adminis-
tration and control system provided for in Council Regu-
lation (EC) No 1782/2003 establishing common rules for
direct support schemes under the common agricultural
policy and establishing certain support
for
farmers (3).

implementation

schemes

rules

the

for

of

for

certain

However,
out
under Axis 2, and equivalent support under Axis 4
provided for in Section 2 of Chapter I of Title IV of
Regulation (EC) No 1698/2005, the administration and

schemes

support

set

(1) OJ L 277, 21.10.2005, p. 1.
(2) OJ L 270, 21.10.2003, p. 1. Regulation as last amended by Regu-

lation (EC) No 1405/2006 (OJ L 265, 26.9.2006, p. 1).

(3) OJ L 141, 30.4.2004, p. 18. Regulation as last amended by Regu-

lation (EC) No 659/2006 (OJ L 116, 29.4.2006, p. 20).

(3)

(4)

(5)

(6)

(7)

control rules need to be adapted to their particular char-
acteristics. The same applies in the case of support
schemes set out in Axes 1 and 3 in Sections 1 and 3
respectively of that Regulation and equivalent support
under Axis 4. Special provisions therefore need to be
established for those support schemes.

In order to ensure that all national administrations are in
the position to organise an efficient integrated control of
all areas for which payment is claimed under Axis 2 on
the one hand and under the area-related aid schemes
covered by Regulation (EC) No 796/2004, on the other
hand, payment claims for area-related measures under
Axis 2 should be submitted within the same deadline
as the single application provided for in Chapter I of
Title II of Part II of that Regulation. Nevertheless, to
allow the necessary administrative arrangements to be
made, a transitional period should be granted.

In order
to ensure the deterrent effect of controls,
payments should, as a general rule, not be made before
checks on the aid applications have been finalised.
it is appropriate to allow payments up to a
However,
certain level after
the completion of administrative
checks. When fixing that level, account should be taken
of the risk of overpayment.

The control rules provided for in this Regulation should
the
take into account
rules
measures under Axis 2 concerned. Particular
should therefore be established.

the special characteristics of

In accordance with Article 51 of Regulation (EC) No
1698/2005, payments under certain of
the measures
provided for in that Regulation have been made subject
to the respect of cross-compliance as provided for in
Chapter 1 of Title
(EC) No
of Regulation
is therefore appropriate to align the
1782/2003.
rules related to cross-compliance with those contained
in
(EC)
No 796/2004.

1782/2003

Regulations

(EC) No

and

It

II

Ex post checks of
investment operations should be
undertaken to verify the respect of Article 72(1) of Regu-
lation (EC) No 1698/2005, to ensure that operations
have been properly carried out and that
the same
investment has not been financed in an irregular
manner from different national or Community sources.
The basis and contents of
should be
specified.

these checks

23.12.2006

EN

Official Journal of the European Union

L 368/75

(8)

(9)

Special rules are needed to set out the responsibilities for
control of local action groups referred to in Article 62 of
Regulation (EC) No 1698/2005 and approved by the
Member States.

To allow the Commission to carry out its obligations for
the management of the measures, Member States should
report to the Commission on the number of controls
undertaken and their results.

(10) All the eligibility criteria established by Community or
national
development
or
programmes should be able to be controlled according
to a set of verifiable indicators.

legislation

rural

the

(11) Member States may use evidence received from other
services or organisations to verify the respect of eligibility
criteria. However, they should have assurance that the
service or organisation is operating to a standard
sufficient
to control compliance with the eligibility
criteria.

(12)

Certain general control principles should be established,
covering the right of
the Commission to carry out
checks.

(13) Member States should ensure that the paying agencies
referred to in Article 6 of Council Regulation (EC) No
1290/2005 of 21 June 2005 on the financing of the
common agricultural policy (1) have sufficient
infor-
mation on controls carried out by other services or
bodies in order to fulfil their duties under that Regu-
lation.

Article 3

Definitions

For the purposes of this Regulation:

(a) ‘Application for support’ shall mean the application to be

accepted for support, or to enter into a scheme;

(b) ‘Payment claim’ shall mean an application presented by a

beneficiary for payment by the national authorities.

Article 4

Applications for support and payment claims

1. Without prejudice to specific provisions in this Regulation,
the Member States shall provide for appropriate procedures for
the submission of applications for support.

For measures with multiannual commitments, the bene-

2.
ficiary shall submit an annual payment claim.

However, Member States may dispense with annual physical
payment claims if they introduce effective alternative procedures
to carry out the administrative checks provided for in Article 11
or 26 as appropriate.

(14)

The measures provided for in this Regulation are in
accordance with the opinion of the Rural Development
Committee,

Applications for support and payment claims may be
submission in cases of
their

3.
adjusted at any time after
obvious errors recognised by the competent authority.

HAS ADOPTED THIS REGULATION:

PART I

Scope and general provisions

Article 1

Scope

This Regulation lays down the detailed rules for the implemen-
tation of the control procedures as well as cross-compliance in
respect of the co-financed rural development support measures
established pursuant to Regulation (EC) No 1698/2005.

Article 2

Application of Regulation (EC) No 796/2004

this Regulation,
Without prejudice to specific provisions of
Articles 5, 22, 23, 69 and 73 of Regulation (EC) No
796/2004 shall apply mutatis mutandis.

(1) OJ L 209, 11.8.2005, p. 1. Regulation as amended by Regulation

(EC) No 320/2006 (OJ L 58, 28.2.2006, p. 42).

Article 5

General principles of control

1. Without prejudice to specific provisions in this Regulation,
Member States shall ensure that all the eligibility criteria estab-
lished by Community or national
legislation or by the rural
development programmes can be controlled according to a
set of verifiable indicators to be established by the Member
States.

2. Where possible, on-the-spot checks provided for
in
Articles 12, 20 and 27 and other checks provided for in
Community rules
shall be
regarding agricultural
carried out at the same time.

subsidies

3. Without prejudice to specific provisions, no payment shall
be made in favour of beneficiaries for whom it is established
that
required for
obtaining such payments with a view to obtaining an
advantage contrary to the objectives of the support scheme.

they artificially created the

conditions

L 368/76

EN

Official Journal of the European Union

23.12.2006

PART II

Administration and control rules

TITLE I

Rural development support for certain measures under Axis 2 and
Axis 4

CHAPTER I

G e n e r a l p r o v i s i o n s

Article 6

Scope and definitions

Save as otherwise provided for in this Regulation, this

1.
Title shall apply to:

(a) support granted in accordance with Article 36 of Regulation

(EC) No 1698/2005;

(b) support granted in accordance with Article 63(a) of that
Regulation with regard to operations corresponding to
measures defined under Axis 2.

However, this Title shall not apply to measures referred to in
Article 36(a)(vi) and (b)(vi) and (vii) and in Article 39(5) of
Regulation (EC) No 1698/2005 as well as to measures under
Article 36(b)(i) and (iii) of that Regulation as far as the estab-
lishment cost is concerned.

For the purposes of this Title the following definitions

2.
shall apply:

(a) ‘area-related measure’ shall mean measures or sub-measures
for which support is based on the size of the area declared;

(b) ‘animal-related measure’

sub-
measures for which support is based on the number of
animals declared.

shall mean measures or

Article 7

Application of Regulation (EC) No 796/2004

Article 2(10), (22) and (23) and Articles 9, 18, 21 and 25(1) of
Regulation (EC) No 796/2004 shall apply mutatis mutandis for
the purpose of this Title.

Article 6(1) of Regulation (EC) No 796/2004 shall also apply
mutatis mutandis. However,
for the measures referred to in
Articles 36(b)(iii),
and (v) of Regulation (EC) No
1698/2005, the Member States may establish appropriate alter-
native systems to uniquely identify the land subject to support.

(iv)

Article 8

Payment claims

1.
For all contracts entering into force after 1 January 2007,
payment claims under area-related measures shall be submitted
in accordance with the deadline set out in Article 11 of Regu-
lation (EC) No 796/2004. However, Member States may decide
to apply this provision only as from the claim year 2008.

If a Member State applies the dispositions of Article 4(2),
2.
second sub paragraph, then the payment claim shall be deemed
to be delivered in accordance with Article 11 of Regulation (EC)
No 796/2004.

Articles 11(3), 12 and 15 of Regulation (EC) No
3.
796/2004 shall apply mutatis mutandis
to payment claims
under this Title. Further to the information referred to in
Article 12(1)(d) of that Regulation, the payment claim shall
also contain the information set out in that provision with
regard to non-agricultural
is being
claimed.

land for which support

Article 9

Payments

No payment for any measure or set of operations falling
1.
within the scope of this Title shall be made before the checks of
this measure or set of operations with regard to eligibility
criteria, as referred to in Section I of Chapter II, have been
finalised.

However, Member States may decide, taking into account the
risk of overpayment, to pay up to 70 % of the aid after finali-
sation of the administrative checks provided for in Article 11.
The percentage of payment shall be the same for all benefi-
ciaries of the measure or set of operations.

2. With regard to cross-compliance checks provided for in
Section II of Chapter II, where such checks cannot be finalised
before payment, any undue payments shall be recovered in
accordance with Article 73 of Regulation (EC) No 796/2004.

CHAPTER II

C o n t r o l s , r e d u c t i o n s a n d e x c l u s i o n s

Article 10

General principles

1.
Applications for support and subsequent payment claims
shall be checked in a manner which ensures effective verifi-
cation of compliance with the conditions for granting support.

2.
The Member States shall define suitable methods and
means for verifying the conditions for granting support for
each support measure.

3. Member States shall make use of the integrated adminis-
tration and control system provided for in Chapter 4 of Title II
of Regulation (EC) No 1782/2003 (hereinafter referred to as
‘IACS’).

Verification of the eligibility criteria shall consist of admin-

4.
istrative and on-the-spot checks.

5.
Respect of cross-compliance shall be verified through on-
the-spot checks and where appropriate through administrative
checks.

23.12.2006

EN

Official Journal of the European Union

L 368/77

During the period covered by a commitment, parcels for
6.
which support is being granted may not be exchanged except in
cases
rural development
programme.

specifically provided for

in the

SECTION I

Respect of the eligibility criteria

SUBSECTION I

C o n t r o l s

Article 11

Administrative checks

1.
Administrative checks shall be undertaken on all appli-
cations for support and payment claims, and shall cover all
is possible and appropriate to control by
elements that
administrative means. The procedures
the
recording of control work undertaken, the results of the verifi-
cation and the measures taken in respect of discrepancies.

ensure

shall

it

The

checks

cross-checks
2.
administrative
inter alia with data from
wherever possible and appropriate,
the IACS. These cross-checks shall relate at least to parcels
and livestock covered by a support measure in order to avoid
any undue payments of aid.

include

shall

Compliance with long-term commitments

3.
checked.

shall be

The control sample referred to in the first subparagraph of
3.
paragraph 1 shall be selected in accordance with the criteria set
out in Article 27 of Regulation (EC) No 796/2004.

For

any multiannual measures

4.
involving payments
exceeding five years, the Member States may decide to halve
the rate of control provided for in paragraph 1 after the fifth
year of payment for a beneficiary.

Beneficiaries in respect of which the Member State makes use of
the possibility set out in the first subparagraph of this paragraph
shall not
the overall number of beneficiaries
referred to in the first subparagraph of paragraph 1.

form part of

Article 13

Control report

On-the-spot checks under this Subsection shall be the subject of
a control report to be established in accordance with Article 28
of Regulation (EC) No 796/2004.

Article 14

General principles concerning on-the-spot checks

On-the-spot checks shall be spread over the year on the
the risks presented by the different

1.
basis of an analysis of
commitments under each rural development measure.

2.
On-the-spot checks shall cover all the commitments and
obligations of a beneficiary which can be checked at the time of
the visit.

Indications of

irregularities resulting from cross-checks
4.
shall be followed-up by any other appropriate administrative
procedure, and, where necessary, by an on-the-spot check.

Article 15

5. Where applicable, administrative checks on eligibility shall
take into account the results of verifications carried out by other
services, bodies or organisations involved in controls of agri-
cultural subsidies.

Article 12

On-the-spot checks

1.
The total number of on-the-spot checks carried out each
year shall cover at least 5 % of all beneficiaries subject to a
commitment under one or more of
falling
within the scope of this Title.

the measures

However, applicants found not to be eligible after administrative
checks shall not form part of the overall number of beneficiaries
referred to in the first subparagraph.

Elements of the on-the-spot checks and determination of
areas

1.
The Member States shall determine criteria and control
methods that allow the controls of the different commitments
and obligations of the beneficiary to satisfy the requirements of
Article 48(1) of Commission Regulation (EC) No 1974/2006 (1).

2. With regard to controls on area-related measures, the on-
the-spot checks shall be carried out in accordance with Articles
29, 30 and 32 of Regulation (EC) No 796/2004.

However, for the measures set out in Articles 36(b)(iii), (iv) and
(v) of Regulation (EC) No 1698/2005, the Member States may
define appropriate tolerances, which shall in no case be greater
than twice the tolerances set down in Article 30(1) of Regu-
lation (EC) No 796/2004.

3. With regard to controls on animal-related measures, the
on-the-spot checks shall be carried out
in accordance with
Article 35 of Regulation (EC) No 796/2004.

2.
Article 26(3) and (4) of Regulation (EC) No 796/2004
shall apply to on-the-spot checks provided for in this Article.

(1) See page 15 of this Official Journal.

L 368/78

EN

Official Journal of the European Union

23.12.2006

SUBSECTION II

R e d u c t i o n s a n d e x c l u s i o n s

Article 16

Area-related measures

1.
The basis for the calculation of the aid in respect of area-
related measures shall be established in accordance with Article
50(1), (3) and (7) of Regulation (EC) No 796/2004. For the
purpose of
the areas declared by a beneficiary
which receive the same rate of aid shall be considered as
forming one crop group.

this Article,

the beneficiary shall be excluded from the aid he would have
been entitled to pursuant to that Article for the EAFRD year in
question for the area-related measure concerned.

6.
The amount resulting from the exclusions provided for in
the second subparagraph of paragraph 3 and in paragraph 5
shall be off-set against aid payments under any of the support
measures under Regulation (EC) No 1698/2005 or Regulation
(EC) No 1782/2003 to which the beneficiary concerned is
entitled in the context of applications he lodges in the course
of the three calendar years following the calendar year of the
finding.
If the amount cannot be fully off-set against those
payments, the outstanding balance shall be cancelled.

If the area declared for payment under an area-related
2.
measure exceeds
the area determined in accordance with
Article 50(3) of Regulation (EC) No 796/2004, the aid shall
be calculated on the basis of the area determined reduced by
twice the difference found if that difference is more than either
3 % or two hectares, but no more than 20 % of
the area
determined.

Article 17

Animal-related measures

The basis for the calculation of

the aid in respect of
1.
animal-related measures
shall be established in accordance
with Article 57(2), (3) and (4) of Regulation (EC) No 796/2004.

If the difference is more than 20 % of the area determined, no
aid shall be granted for the area-related measure concerned.

2.
Any reductions or exclusions to be applied in the case of
overdeclaration of bovine animals or of ovine or caprine
animals respectively shall be calculated in accordance with
Article 59 of Regulation (EC) No 796/2004.

If

the area declared exceeds

the area determined in
3.
accordance with Article 50(3) of Regulation (EC) No
796/2004 by more than 30 %,
the beneficiary shall be
excluded from receiving the aid he would have been entitled
to pursuant to that Article for the calendar year in question for
the measures concerned.

If the difference is more than 50 %, the beneficiary shall be
additionally excluded from receiving aid up to an amount
to the amount which corresponds to the difference
equal
between the
area determined in
accordance with Article 50(3) of Regulation (EC) No 796/2004.

area declared and the

4.
By way of derogation from paragraphs 2 and the first
for beneficiaries in Member
subparagraph of paragraph 3,
States applying the single area payment scheme as provided
for in Article 143b of Regulation (EC) No 1782/2003, the
reductions and exclusions to be applied shall be calculated in
accordance with the first and second subparagraphs of Article
138(1) of Commission Regulation (EC) No 1973/2004 (1).

5. Where differences between the area declared and the area
determined in accordance with Article 50(3) of Regulation (EC)
No 796/2004 result from irregularities committed intentionally,

(1) OJ L 345, 20.11.2004, p. 1.

Support measures in relation to bovine animals and those
relating to ovine or caprine animals shall be treated separately.

3.
By way of derogation from the second subparagraph of
Article 59(2) and the second subparagraph of Article 59(4) of
Regulation (EC) No 796/2004, the amount resulting from the
exclusion shall be off-set against aid payments under any of the
support measures under Regulation (EC) No 1698/2005 to
which the beneficiary concerned is entitled in the context of
applications he lodges in the course of the three calendar years
following the calendar year of the finding. If the amount cannot
be fully off-set against those payments, the outstanding balance
shall be cancelled.

4.
In respect of overdeclarations concerning animals other
than those referred to in paragraph 2, the Member State shall
fix an appropriate system of reductions and exclusions.

Article 18

Reductions and exclusions in the case of non-respect of
eligibility criteria

1.
In case any of the commitments attached to the granting
of the aid, other than those related to the size of area or
number of animals declared, are not
the aid
claimed shall be reduced or refused.

respected,

23.12.2006

EN

Official Journal of the European Union

L 368/79

The Member State shall determine the amount of
2.
reduction of
in particular, on the basis of
severity, extent and permanence of the non-respect found.

the aid,

the
the

The second subparagraph of Article 44(1) and Article

2.
44(2) of Regulation (EC) No 796/2004 shall apply.

The severity of a non-respect shall depend, in particular, on the
importance of the consequences of the non-respect taking into
account the objectives pursued by the criteria which have not
been respected.

The extent of a non-respect shall depend, in particular, on the
effect of the non-respect on the operation as a whole.

Whether a non-compliance is of permanence shall depend, in
particular, on the length of time for which the effect lasts or the
potential for terminating those effects by reasonable means.

In case

the non-respect

from irregularities
3.
committed intentionally,
the beneficiary shall be excluded
from the measure in question for the EAFRD year concerned
as well as for the following EAFRD year.

results

4.
The reductions and exclusions provided for in this Article
shall apply without prejudice to any additional penalties
provided for under national rules.

SECTION II

Respect of cross-compliance

SUBSECTION I

C o n t r o l s

Article 19

General principles

‘Cross-compliance’

1. Without prejudice to Article 51(3) of Regulation (EC) No
1698/2005,
shall mean the mandatory
requirements referred to in the first subparagraph of Article
51(1) of that Regulation and the minimum requirements for
fertiliser and plant protection product use referred to in the
second subparagraph of Article 51(1) of that Regulation.

2.
Articles 3(2) and 25 of Regulation (EC) No 1782/2003
and Article 2(2), (2a) and (31) to (36) as well as Articles 9, 41,
42, 43, 46, 47 and 48 of Regulation (EC) No 796/2004 shall
apply with regard to controls on the respect of cross-
compliance.

Article 20

On-the-spot checks

1.
The competent control authority shall, with regard to the
requirements or standards for which it is responsible, carry out
on-the-spot checks on at least 1 % of all beneficiaries submitting
payment claims under Article 36(a)(i) to (v) and (b)(i), (iv) and
(v) of Regulation (EC) No 1698/2005.

Article 21

Selection of the control sample

1.
Article 45(1) of Regulation (EC) No 796/2004 shall apply
as regards the selection of the control sample referred to in
Article 20 of this Regulation.

The competent control authority shall, with regard to the
2.
requirements or standards for which it is responsible, select the
beneficiaries to be checked in accordance with Article 20 by
selecting the sample from the sample of beneficiaries which
were already selected pursuant to Article 12 and to whom
the relevant requirements or standards apply.

3.
By way of derogation from paragraph 2, the competent
control authority may, with regard to the requirements or
standards for which it is responsible, select a control sample
of 1 % of all beneficiaries submitting payment claims under
Article 36(a)(i) to (v) and (b)(i), (iv) and (v) of Regulation (EC)
No 1698/2005 and who are under the obligation to respect at
least one of the requirements or standards.

SUBSECTION II

R e d u c t i o n s a n d e x c l u s i o n s

Article 22

General

Article 25 of Regulation (EC) No 1782/2003 and Article
1.
2(2),
(2a) and (31) to (36), Article 41 and Article 65(2) of
Regulation (EC) No 796/2004 shall apply with regard to
reductions or exclusions to be applied following the determi-
nation of non-compliances.

2. Where more than one paying agency is responsible in the
context of the management of the different support measures
under Article 36(a)(i) to (v) and (b)(i), (iv) and (v) of Regulation
(EC) No 1698/2005, the Member States shall take the appro-
priate measures to ensure the appropriate application of the
provisions of this Subsection,
in particular that one rate of
reduction is applied to the entirety of those payments applied
for by the beneficiary.

Article 23

Calculation of reductions and exclusions

Without prejudice to Article 51(2) of Regulation (EC) No
a
a non-compliance
1698/2005, where
reduction shall be applied on the overall amount of aid under
Article 36(a)(i) to (v) and (b)(iv) and (v) of that Regulation that
has been, or has to be, granted to the beneficiary concerned
following payment claims he has submitted or will submit in
the course of the calendar year of the finding.

determined,

is

L 368/80

EN

Official Journal of the European Union

23.12.2006

Where the non-compliance is due to negligence of the bene-
ficiary, the reduction shall be calculated in accordance with the
rules set out in Article 66 of Regulation (EC) No 796/2004.

recording of control work undertaken, the results of the verifi-
cation and the measures taken in respect of discrepancies.

In the case of intentional non-compliance, the reduction shall
be calculated in accordance with Article 67 of Regulation (EC)
No 796/2004.

Administrative checks on applications for support shall in

2.
particular include a verification of:

(a) the eligibility of

the operation for which support

is

requested;

Article 24

Accumulation of reductions

development programme;

(b) the respect of the selection criteria set out in the rural

Where there is an accumulation of reductions, reductions shall
be applied firstly for late submission in accordance with Article
21 of Regulation (EC) No 796/2004, then in accordance with
Articles 16 or 17 of this Regulation, then in accordance with
Article 18 and finally in accordance with Articles 22 and 23.

TITLE II

Rural development support under Axis 1 and Axis 3 and certain
measures under Axis 2 and Axis 4

CHAPTER I

G e n e r a l p r o v i s i o n s

Article 25

Scope

This Title shall apply to:

(c) the compliance of

the operation for which support

is
requested with applicable national and Community rules
on, in particular, and where relevant, public procurement,
State aid and the other appropriate obligatory standards
established by national
legislation or established in the
rural development programme;

(d) the reasonableness of the costs proposed, which shall be
evaluated using a suitable evaluation system,
such as
reference costs, a comparison of different offers or an
evaluation committee;

(e) the reliability of

the applicant, with reference to any

previous co-financed operations undertaken since 2000.

3.
Administrative checks on payment claims shall include in
particular, and as far as this is appropriate for the claiming
question, a verification of:

(a) the support measures set out in Articles 20 and 52 of

Regulation (EC) No 1698/2005;

(a) the delivery of the products and services co-financed;

(b) the support measures set out in Articles 36(a)(vi),

(b)(vi),
(b)(vii) and 39(5) of that Regulation and in Articles 36(b)
(i) and (iii) of that Regulation as far as the establishment
costs are concerned;

(b) the reality of expenditure claimed;

(c) the completed operation compared with the operation for
submitted and

support was

which the application for
granted.

(c) support granted in accordance with Article 63(a) and (b) of
that Regulation with regard to operations corresponding to
measures provided for in points (a) and (b) of this Article.

4.
Administrative checks relating to investment operations
include at least one visit to the operation supported or
shall
the investment site to verify the realisation of the investment.

SECTION I

Controls

Article 26

Administrative checks

1.
Administrative checks shall be carried out on all appli-
cations for support or payment claims, and shall cover all
is possible and appropriate to control by
elements that
the
administrative means. The procedures

require

shall

it

However, Member States may decide not to carry out such visits
for smaller investments, or where they consider that the risk
that the conditions for receiving aid are not fulfilled, or that the
reality of the investment has not been respected, is low. That
decision and its justification shall be recorded.

5.
Payments by beneficiaries shall be supported by invoices
and documents proving payment. Where this cannot be done,
payments
shall be supported by documents of equivalent
probative value.

23.12.2006

EN

Official Journal of the European Union

L 368/81

Administrative checks shall

include procedures to avoid
6.
irregular double financing with other Community or national
schemes and with other programming periods. Where financing
from other sources exists these checks shall ensure that the total
aid received does not breach the maximum permissible aid
ceilings.

7.
For support relating to food quality schemes recognised
by Member States, as provided for in Article 32 of Regulation
(EC) No 1698/2005, paying agencies may, where appropriate,
make use of evidence received from other services, bodies or
organisations to verify the respect of eligibility criteria. However,
they must have assurance that the service, body or organisation
is operating to a standard sufficient to control compliance with
the eligibility criteria.

Article 27

On-the-spot checks

1. Member States
shall organise on-the-spot checks on
approved operations on an appropriate sampling basis. These
shall be, as far as is possible, carried out before the final
payment is made for a project.

expenditure

The expenditure controlled shall represent at least 4 % of
2.
the public
that has been declared to the
Commission each year, and at least 5 % of the public expen-
diture
the whole
the Commission
to
programming period.

declared

over

The sample of approved operations to be checked in
in

3.
accordance with paragraph 1 shall
particular:

take into account

(a) the need to check an appropriate mix of types and sizes of

operations;

(b) any risk factors which have been identified following

national or Community checks;

(c) the need to maintain a balance between the axes and

measures.

4.
The results of the on-the-spot checks shall be evaluated to
establish whether any problems encountered are of a systemic
character, entailing a risk for other similar operations, benefi-
ciaries or other bodies. The evaluation shall also identify the
causes of such situations, any further examination which may
be required and the necessary corrective and preventive action.

5.
Advance notice of on-the-spot checks may be given,
provided that the purpose of the control is not jeopardised. If
the advance notice exceeds 48 hours then it should be limited
to the minimum necessary, depending on the nature of the
measure and the operation being co-financed.

Article 28

Content of on-the-spot checks

Through the on-the-spot checks, the Member States shall

1.
endeavour to verify the following:

(a) that the payments made to the beneficiary can be supported
by accounting or other documents held by the bodies of
firms carrying out the operations supported;

(b) for an adequate number of expenditure items,

nature and timing of
with Community provisions
approved specifications of
actually executed or services delivered;

the
the relevant expenditure comply
and correspond to the
the operation and the works

that

(c) that the use or intended use of the operation is consistent
with the use described in the application for Community
support;

(d) that the publicly funded operations have been implemented
in accordance with Community rules and policies, especially
the rules on public tendering and relevant mandatory
legislation or established
standards established by national
in the rural development programme.

2.
The on-the-spot checks shall cover all the commitments
and obligations of a beneficiary which can be checked at the
time of the visit.

Except in exceptional circumstances, duly recorded and
3.
explained by the national authorities, the on-the-spot checks
shall
if the operation is
intangible, to the operation promoter.

include a visit to the operation or,

4.
Only checks meeting the full requirements of this Article
may be counted towards the achievement of the control rate set
out in Article 27(2).

Article 29

Control of Early retirement and semi-subsistence farming
measures

1.
For applications for support under Articles 23 and 34 of
Regulation (EC) No 1698/2005, the administrative checks shall
additionally include those referred to in Article 11(2) of this
Regulation.

2.
For the measure provided for in Article 23 of Regulation
(EC) No 1698/2005, Member States may dispense with on-the-
spot checks after the first payment of the support, provided that
including inter alia appropriate cross-
administrative checks,
checks,
in particular with the information contained in the
electronic database referred to in Article 19 of Regulation
(EC) No 1782/2003, provide the necessary assurance of
legality and regularity of payments.

L 368/82

EN

Official Journal of the European Union

23.12.2006

Article 30

Ex-post checks

checks

Ex-post

shall be

1.
carried out on investment
operations that are still subject to commitments pursuant to
Article 72(1) of Regulation (EC) No 1698/2005 or detailed in
the rural development programme.

2.

The objective of the ex-post checks shall be to:

(a) verify the respect of Article 72(1) of Regulation (EC)

No 1698/2005;

(b) verify the reality and finality of payments made by the
beneficiary, except in the case of contributions in kind or
standard costs;

(c) ensure that the same investment has not been financed in
an irregular manner from different national or Community
sources.

The ex-post checks shall cover each year at least 1 % of
3.
eligible expenditure for operations referred to in paragraph 1 for
which the final payment has been made. They shall be carried
out within 12 months of the end of the relevant EAFRD year.

The ex-post checks shall be based on an analysis of the
impact of different operations, groups of

4.
risks and financial
operations or measures.

The controllers for the ex-post checks shall not have been
involved in pre-payment checks of
the same investment
operation.

SECTION II

Reductions and exclusions

Article 31

Reductions and exclusions

If the amount established pursuant to point (a) exceeds the
amount established pursuant to point (b) by more than 3 %,
a reduction shall be applied to the amount established pursuant
to point (b). The amount of the reduction shall be difference
between those two amounts.

However, no reduction shall be applied if the beneficiary can
demonstrate that he/she is not at fault for the inclusion of the
shall be applied mutatis
ineligible amount. The reductions
mutandis
to ineligible expenditure identified during checks
under Article 28 and 30.

2.
If a beneficiary is found to have intentionally made a false
declaration the operation in question shall be excluded from
support of the EAFRD and any amounts already paid for that
operation shall be recovered. Moreover, the beneficiary shall be
excluded from receiving support under the same measure for
the EAFRD year in question and for the following EAFRD year.

3.
The penalties provided for in paragraphs 2 and 3 shall
apply without prejudice to additional penalties provided for
under national rules.

CHAPTER II

S p e c i f i c p r o v i s i o n s f o r A x i s 4 ( L e a d e r )

Article 32

Controls

In the case of expenditure incurred under Article 63(c) of Regu-
lation (EC) No 1698/2005, the Member State shall organise
controls in conformity with this Title. Those controls shall be
carried out by persons independent from the local action group
concerned.

Article 33

Responsibilities for control

Payments shall be calculated on the basis of what is found

1.
to be eligible.

The Member State shall examine the payment claim received
from the beneficiary, and establish the amounts that are eligible
for support. It shall establish:

In the case of expenditure incurred under Article 63(a)
1.
and (b) of Regulation (EC) No 1698/2005, the administrative
checks referred to in Article 26 of this Regulation may be
carried out by local action groups under a formal delegation.
However, the Member State remains responsible for verifying
that local action groups have the administrative and control
capacity to undertake that work.

(a) the amount that is payable to the beneficiary based solely on

the payment claim;

(b) the amount that is payable to the beneficiary after an exam-

ination of the eligibility of the payment claim.

The Member State shall implement an appropriate system
2.
of supervision of the local action groups. This shall
include
regular controls of the operations of the local action groups,
including bookkeeping checks and sample reperformance of
administrative checks.

23.12.2006

EN

Official Journal of the European Union

L 368/83

PART III

Final Provisions

Article 34

Notifications

Member States shall send to the Commission by 15 July each
year, and for the first time by 15 July 2008, a report covering
the previous EAFRD financial year relating, in particular, to the
following points:

(a) the number of payment claims for each rural development
measure, the total amount checked as well as, where appro-
priate, the total area and total number of animals covered by
on-the-spot checks under Articles 12, 20 and 27;

(b) for area-related support,
individual aid scheme;

the total area broken down by

(c) for animal-related measures, the total number of animals

broken down by individual aid scheme;

(d) the result of the checks carried out, indicating the reductions
and exclusions applied pursuant to Articles 16, 17, 18, 22
and 23;

(e) the number of ex-post checks undertaken under Article 30,
the amount of expenditure verified and the results of the
checks,
indicating the reduction and exclusions applied
pursuant to Article 31.

Article 35

Control by the Commission

Article 27(2) of Regulation (EC) No 1782/2003 shall apply to
support paid under Regulation (EC) No 1698/2005.

Article 36

Reporting of controls to the paying agency

1. Where controls are not carried out by the paying agency,
the Member State shall ensure that sufficient information on the
controls carried out is received by the paying agency. It is for
the paying agency to define its needs for information.

A sufficient audit
description of the requirements of a satisfactory audit trail
given in the Annex.

trail shall be maintained. An indicative
is

2.
The information referred to in the first subparagraph of
paragraph 1 may be a report on every control carried out or, if
appropriate, be in the form of a summary report.

3.
The paying agency shall have the right to verify the quality
of controls carried out by other bodies, and to receive all other
information it needs for the execution of its functions.

Article 37

Entry into force

This Regulation shall enter into force on the seventh day
following its publication in the Official Journal of the European
Union.

shall

It
programming period starting on 1 January 2007.

to Community

support

apply

concerning

the

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

Done at Brussels, 7 December 2006.

For the Commission

Mariann FISCHER BOEL
Member of the Commission

L 368/84

EN

Official Journal of the European Union

23.12.2006

ANNEX

INDICATIVE DESCRIPTION OF INFORMATION REQUIREMENTS FOR A SUFFICIENT AUDIT TRAIL

A sufficient audit trail, as referred to in Article 36(1), is present when, for a given assistance:

(a) it allows for a reconciliation between the global amounts declared to the Commission and the invoices, accounting
and other supporting documents held by the paying agency or other service for all the operations supported by the
EAFRD;

(b) it allows for a verification of the payment of the public expenditure to the beneficiary;

(c) it allows for the verification of the application of selection criteria to the operations financed by the EAFRD;

(d) it contains, as far as it is appropriate, the financial plan, reports of activities, documents relating to the granting of

support, documents relative to public tendering procedures and reports relating to any controls carried out.