Special Report No 23 // 2014#Errors in rural development spending: what are the causes, and how are they being addressed? #(pursuant to Article 287(4), second subparagraph, TFEU)
Date: 2015-02-18
Institutions: European Court of Auditors
Subjects: agri-environmental plan, aid to agriculture, cost-effectiveness analysis, farming project, project evaluation, rural development

EN 

2014 

NO 23

Special Report  Errors in rural 

development spending: 
what are the causes,  
and how are they being 
addressed?

EUROPEAN
COURT
OF AUDITORS

 
EUROPEAN COURT OF AUDITORS 
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1615 Luxembourg 
LUXEMBOURG

Tel. +352 4398-1

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More information on the European Union is available on the Internet (http://europa.eu).

Luxembourg: Publications Office of the European Union, 2015

ISBN 978-92-872-1654-0
doi:10.2865/92113

© European Union, 2015
Reproduction is authorised provided the source is acknowledged.

Printed in Luxembourg

EN 

2014 

NO 23

Special Report

Errors in rural 
development spending: 
what are the causes, 
and how are they being 
addressed?

(pursuant to Article 287(4), second subparagraph, TFEU)

Contents

02

Paragraph

Glossary

I–XI 

Executive summary

1–5 

Introduction

6–11 

Audit scope and approach

12–21 

Types and prevalence of errors found

12–14 

Overall

15–16 

Investment measures

17 

Area‑related aid

18–21 

Differences in the financial implementation rate and the error rate between groups of Member 
States

22–92  Observations

22–54 

PART I — What are the main causes of the error rate in investment measures?

23–29 

Public bodies are a significant source of error because of non‑compliance with public procurement rules

30–38 

Beneficiaries’ non‑compliance with eligibility criteria had a significant impact on the error rate

39–45 

Indications that private beneficiaries may have committed intentional irregularities

46–54  Member State authorities could have detected and corrected errors affecting investment measures

55–69 

PART II — What are the main causes of the error rate in area‑related aid?

56–65 

Agri‑environment aid is the most error prone area‑related measure

66–69 

Payments for less‑favoured areas are less affected by error

 
Contents

03

70–92 

PART III — Do the Member States’ action plans and the new EU legal framework have the potential 
to address these causes effectively?

71–81 

The action plan exercise initiated by the Commission is a step in the right direction in addressing the causes 
of error

82–92 

The new EU legal framework may have a positive effect in addressing the causes of errors

93–100  Conclusions and recommendations

Annex  —  List of rural development measures

Reply of the Commission

 
 
Glossary

04

1  Article 1(2) of Council 

Regulation (EC, Euratom) 
No 2988/95 of 
18 December 1995 on the 
protection of the European 
Communities financial 
interests (OJ L 312, 23.12.1995, 
p. 1).

Administrative checks: Formalised, automated checks carried out by the paying 
agencies on all applications in order to verify that they comply with the terms 
under which aid is granted. All elements that it is possible and appropriate to 
control by administrative means should be verified.

Agricultural activity: Production, rearing or growing of agricultural products 
including harvesting, milking, breeding animals and keeping animals for farming 
purposes, or maintaining the land in good agricultural and environmental 
condition.

Area‑related aid: Support granted for the sustainable use of agricultural land. 
The aid is paid per each eligible hectare declared.

Deadweight: A situation where a subsidised operation would have been wholly 
or partly undertaken even without public aid.

Eligibility criteria: Rules that need to be respected otherwise the support 
claimed shall not be paid or shall be withdrawn. These rules should target limited 
financial resources in order to achieve the objectives of the programme.

Error rate: The error rate for each irregular transaction is the ratio of the error 
amount to the total amount paid. The calculation of the overall error rate is 
explained in Box 1.

Farming commitment: Farming practices that the applicant undertakes to 
respect.

Gold‑plating: Unnecessary and/or disproportionate rules, such as excessive 
eligibility conditions.

Investment measure: Support granted for tangible or intangible investments.

Irregularity: Any infringement of a provision of Community law resulting from 
an act or omission by an economic operator, which has, or would have, the effect 
of prejudicing the general budget of the Communities or budgets managed 
by them, either by reducing or losing revenue accruing from own resources 
collected directly on behalf of the Communities, or by an unjustified item of 
expenditure1.

Managing authority: A national or regional body designated by the Member 
State to manage a Rural Development Programme (RDP).

Glossary

05

Measure: An aid scheme for implementing a policy. Each measure sets out 
specific rules to be complied with by the projects or actions that can be financed. 
There are two main types of measures: investment measures and area‑related aid.

On‑the‑spot checks: Verifications carried out by the paying agency’s inspectors 
in order to check compliance with the applicable rules, including a visit to 
the applicant’s premises (e.g. on‑farm inspections to measure and assess the 
eligibility of the parcels declared). Certain elements, such as the existence of 
animals, can only be checked on the spot.

Paying agency: The body responsible within a Member State for the proper 
assessment, calculation, inspection and payment of agricultural subsidies. Part of 
the work of the paying agency may be done by delegated bodies.

2  Article 59 of Regulation (EU, 
Euratom) No 966/2012 of the 
European Parliament and of 
the Council of 25 October 2012 
on the financial rules 
applicable to the general 
budget of the Union and 
repealing Council Regulation 
(EC, Euratom) No 1605/2002 
(OJ L 298, 26.10.2012, p. 1).

3  Commission 

Recommendation 2003/361/
EC of 6 May 2003 concerning 
the definition of micro, small 
and medium‑sized enterprises 
(OJ L 124, 20.5.2003, p. 36).

Public procurement: Tender process to be followed by public bodies when 
purchasing goods, works and services above a certain threshold. The aim is to 
obtain the best value offer by creating sufficient competition between suppliers 
and to ensure that contracts are awarded fairly, transparently and without 
discrimination. Directive 2004/18/EC and Directive 2004/17/EC set out the legal 
framework for public procurement which needs to be implemented by the 
national authorities.

Rural development programme: A document prepared by a Member 
State or region, and approved by the Commission, to plan and monitor 
the implementation of the rural development policy. It may contain up to 
46 different measures and additional sub measures.

Shared management: Method of implementation of the EU budget where 
implementation tasks are delegated to the Member States2. To that end, Member 
States authorities designate bodies responsible for the management and control 
of EU funds. Such bodies report to the Commission. In the context of the present 
report, these bodies are the ‘paying agencies’.

Small and medium‑sized enterprises (SMEs): Enterprises employing less than 
250 people and having an annual turnover not exceeding 50 million euro, and/or 
an annual balance sheet total not exceeding 43 million euro3.

Executive  
summary

I
The European Union (EU) and Member States allo‑
cated more than 150 billion euro to rural develop ‑
ment policy during the 2007–13 programming period. 
Implemented under shared management, the total 
budget was almost equally divided between invest‑
ment measures (mainly supporting investments in 
tangible and intangible assets) and area‑related aid 
(compensating farmers for their efforts in carrying out 
certain farming activities).

II
The Court estimates that the average error rate 
for rural development expenditure incurred dur‑
ing the past 3 years was 8,2 %4. Investment meas‑
ures accounted for two thirds of this error rate, and 
area‑related aid accounted for one third. In this 
context, this special report aims to describe the main 
causes of this high error rate and to assess whether the 
steps taken by the Member States and the Commission 
will address the identified causes effectively in future.

III
The Court concludes that the Commission and the 
Member States are partially effective in addressing the 
main causes of the high error rate for rural develop‑
ment. This overall conclusion is mainly based on the 
assessment that, despite the Commission’s initiatives, 
Member States’ action plans did not systematically 
address the weaknesses identified.

06

IV
The causes of errors were identified by analysing the 
sample of 461 payments selected randomly dur‑
ing the audits of legality and regularity for 2011, 
2012 and 2013. Knowledge stemming from the Court’s 
assessment of the control systems operating in the 
Member States complemented this first step of the 
work. In a second step, the Court reviewed the action 
plans for 10 out of the 27 Member States, and exam‑
ined whether they effectively identified the causes 
of errors and included remedial action. This work was 
completed by assessing the potential impact of the EU 
legal framework for the 2014–20 programming period 
on the causes of errors.

V
Non‑compliance with public procurement rules 
contributed to one eighth of the error rate. The main 
infringements were unjustified direct award without 
a competitive procedure, misapplication of selection 
and award criteria or lack of equal treatment of tender‑
ers. Lack of knowledge in applying procurement rules 
and the preference for working with certain suppliers 
are the main explanations for these situations.

VI
Unintentional breaches of eligibility criteria by public 
and private beneficiaries accounted for a quarter of 
the error rate. Suspected intentional infringements by 
private beneficiaries contributed to another eighth 
of the error rate. The Court found that the measure 
supporting the processing of agricultural products 
was the most prone to error, while the measure sup‑
porting the initial setting up of young farmers was not 
affected by eligibility errors.

4 

The most likely error rate reported for the entire policy group (rural 
development, environment, fisheries and health) was 7,7 % for the 
2011 financial year, 7,9 % for 2012 and 6,7 % for 2013. The error rate for 
rural development alone is higher than for the other components of 
the group (for the corresponding figures relating to Rural 
Development only see also footnote 5 of paragraph 4).

Executive summary 

07

VII
Member States’ control authorities could and should 
have detected and corrected most of the errors affect‑
ing investment measures (those made both by private 
and public beneficiaries). Control systems are deficient 
because checks are not exhaustive and are based on 
insufficient information.

VIII
Area‑related aid generated almost a third of the error 
rate, the main cause being non‑compliance with farm‑
ing commitments. There are three explanations for 
this situation: low incentives for farmers to comply, 
a low control rate for commitments and a low sanc‑
tion rate for non‑compliance. On the other hand, 
compensatory payments for less‑favoured areas, with 
similar characteristics as the measure supporting the 
setting‑up of young farmers, are less affected by error.

IX
The action plan exercise initiated by the Commission is 
a step in the right direction in addressing the causes of 
error. However, action plans implemented by Member 
States mainly have a reactive role, and do not system‑
atically address the problems that caused the errors 
in all the Member States. Moreover, there is a lack of 
preventive action against widespread weaknesses 
at EU level. The EU legal framework for the 2014–20 
programming period is a potential means of address‑
ing the causes of error. However, two stages in the 
regulatory set‑up which are currently ongoing provide 
the main potential for reducing errors: the Commis‑
sion’s review and approval of rural development 
programmes, and the Member States’ implementation 
of national regulatory frameworks.

X
In the context of addressing the causes of error, 
a recurring finding in this report has been the need to 
maintain an appropriate balance between the number 
and complexity of rules, as a transposition of the need 
to achieve pre‑defined objectives, and the need to 
guarantee the legality and regularity of spending. In 
the Court’s opinion, finding the right balance between 
these two counterweights is the key to the successful 
implementation of the rural development policy.

XI
The Court makes the following recommendations:

(a)  The Commission should complete its corrective 

actions to date by continuing to focus on the root 
causes of error for rural development spending. 
In this regard, preventive and corrective actions 
should be taken by the Member States where rel‑
evant concerning: public procurement, intentional 
circumvention of rules and agri‑environment 
payments.

(b)  The Commission should closely monitor the im‑

plementation of RDPs and in its conformity audits 
take account of the applicable rules including 
those adopted at national level where relevant, in 
order to reduce the risk of repeating weaknesses 
and errors encountered during the 2007–13 pro‑
gramming period.

(c)  The Commission and the Member States should 

analyse:

(i) 

to what extent the characteristics of a more 
focused scope, limited eligibility criteria and 
the use of simplified cost options can be 
replicated into the design and implementation 
of an increased number of support measures, 
without jeopardising the overall objectives of 
those measures;

Executive summary 

08

(ii)  how to improve the scheme for supporting 

investments in the processing of agricultural 
products, taking into consideration the follow‑
ing elements:

—  the actual need for public aid for this sec‑

tor and the risk of deadweight;

—  the categories of beneficiaries targeted: 

farmers looking to achieve vertical integra‑
tion of their business, or companies which 
have no agricultural activity;

—  the high public aid ceiling, which consti‑
tutes an incentive for large corporations, 
as only they have access to the required 
co‑financing;

—  the entire set of eligibility conditions and 
the potential for circumventing them;

—  greater efforts to improve the design 

and performance of administrative and 
on‑the‑spot controls.

(iii)  the agri‑environment payments measure so 
that, as far as possible, commitments can be 
controlled via Member States’ administrative 
checks.

Introduction

09

01 
The European Union (EU) allocated 
almost 100 billion euro to achieving ru‑
ral development objectives during the 
2007–13 programming period. Mem‑
ber States also allocated 55 billion euro 
of their own resources to co‑finance 
the EU’s rural development policy. This 
public support is implemented under 
‘shared management’ arrangements 
(see Figure 1).

04 
For rural development alone, the Court 
estimates the average error rate for 
expenditure incurred during the past 
3 years was 8,2 % based on a repre‑
sentative sample of transactions (see 
also paragraph 8)5. Box 1 shows how 
the cases of non‑compliance identi‑
fied for the individual transactions are 
quantified for the purposes of calculat‑
ing the error rate.

5 

6 

The 8,2 % is an average for the 
3 years with a lower limit of 
6,1 % and an upper limit of 
10,3 %. The average is 
composed of 8,4 % for 2011, 
8,3 % for 2012 and 7,9 % for 
2013.

The Court’s materiality 
threshold is 2 % of audited 
expenditure. This means that, 
in the auditors’ judgement, 
total errors below this 
threshold are unlikely to be 
material; in other words, they 
are not likely to influence users 
of the financial information.

05 
The significant level of non‑compli‑
ance with applicable rules, as reflected 
by the high error rate6, means that the 
money concerned is not spent accord‑
ing to the rules. This may negatively 
affect the attainment of rural develop‑
ment policy objectives (improving the 
competitiveness of agriculture and 
forestry; improving the environment 
and the countryside; improving the 
quality of life in rural areas and encour‑
aging the diversification of economic 
activity).

02 
Member States allocated around half 
of the rural development budget to 
support investment measures. Exam‑
ples of such measures are the modern‑
isation of agricultural holdings, setting 
up of young farmers or improving 
basic services for the rural population. 
Area‑related aid received the other half 
of the funding. The largest measures 
under this type of aid are agri‑envi‑
ronment payments and compensatory 
payments to farmers in areas with 
natural handicaps, such as mountain 
areas. The Annex of this report lists all 
measures and their financial execution.

03 
The Court’s Annual Reports published 
since 2011 have included specific as‑
sessments of the ‘rural development, 
environment, fisheries and health’ pol‑
icy group, of which rural development 
spending represents around 90 %. This 
assessment is based on the results of 
the Court’s testing of the legality and 
regularity of transactions and the ef‑
fectiveness of control systems.

Introduction

10

1 Implementation of the EU’s rural development policy under shared management
e
r
u
g
i
F

Rural development policy deﬁned at EU level
(Community Strategic Guidelines, Council regulation)

Proposed by the 
Commission and 
approved by the Council

Strategic programming at Member State level
(National Strategic Plans, Rural Development Programmes)

Proposed by Member 
States and approved 
by the Commission

Detailed rules and procedures at Member State level
(national or regional legislation, procedures, guides)

Member States 
organise call for 
projects

Application stage (funding allocated to beneﬁciaries)
(contracts signed between beneﬁciaries and Member States)

Beneficiaries put in 
practice the 
approved project

Implementation stage (beneﬁciaries carry out the project/commitment)
(contracts with third parties/farming practices)

Beneficiaries submit 
payment claims

Payment claim stage (Member States disburse public aid to beneﬁciar-
ies, after performing checks)
(payment claims)

Member States reclaim 
the EU co-financing 
from the Commission

Commission disburses  EU co-ﬁnancing to Member States

(declarations of expenditure)

Regulatory framework:

Based on the regulations set at EU level, 
Member States draw up Rural Develop-
ment Programmes at national or regional 
level, in which they deﬁne a strategy and 
propose the measures they wish to use to 
address their identiﬁed needs.

Funds are to be channelled by using 
eligibility and/or selection criteria deﬁned 
in the Member States implementing 
provisions.

Budget execution:

Based on ﬁnancing contracts signed with 
Member States, beneﬁciaries implement 
the projects and submit payment claims 
to receive public aid corresponding to a 
certain percentage of eligible costs 
incurred.

Member States perform veriﬁcations on 
the appropriate implementation of the 
project and on the correctness of the 
payment claim and transfer the public aid 
to beneﬁciaries (including the EU 
co-ﬁnancing).

On a quarterly basis, Member States 
submit declarations of expenditure to the 
Commission, to reclaim the EU portion of 
the public aid. Upon veriﬁcation, the 
Commission reimburses the Member 
State for the EU co-ﬁnancing paid.

 
Introduction

11

1
x
o
B

Calculation of the error rate

The Court defines as errors those transactions (or parts thereof) which were not in accordance with the pur‑
poses approved by the budget and the legal basis, not correctly calculated and/or not in compliance with the 
relevant rules and regulations.

To assess whether an error has occurred, the Court aims to answer the following question: ‘Would the 
amount paid, or the contractor selected, have been different if the applicable procedures had been followed 
correctly?’.

If the reply to the question above is ‘yes’, and if it is possible to measure how much of the amount audited was 
affected by error, then the monetary value of the error is calculated as follows.

 ο For investment measures, the error amount represents the value of the cost item that is deemed ineligible.

 ο For public procurement, failures to observe the procedural requirements of procurement law, that obstruct 
the objectives of fair competition and award of the contract to the best qualified bidder, are considered to 
affect the entire value of the payment related to the contract.

 ο For area‑related aid, the reduction system applied by the Member State is used to quantify the breaches of 
specific commitments applicable to the farmer7. The error amount also includes discrepancies in the areas 
of agricultural parcels, revealed by measurements carried out with GPS devices.

The error rate for each irregular transaction is the ratio of the error amount to the total amount paid. These 
error rates are then extrapolated to the amount of the entire population audited.

7 

EU legislation requires Member States to apply reductions where beneficiaries over‑claim the actual area or number of animals, or do not respect 
commitments.

 
12

8  Of the 482 transactions 

referred to in the Annual 
Reports for 2011, 
2012 and 2013, 21 transactions 
were excluded because they 
represented payments for the 
closure of previous 
programming periods, or 
payments under the 
pre‑accession assistance 
programme.

9  Bulgaria, Denmark, 
Germany — 
Berlin‑Brandenburg, Spain, 
France, Italy — Lombardy, 
Latvia, Hungary, Portugal and 
Romania.

Audit scope  
and approach

06 
This report describes the main causes 
of the high error rate for rural devel‑
opment. It also assesses whether the 
steps taken by the Member States and 
the Commission are likely to address 
the identified causes effectively in 
future. The report includes information 
made available to the auditors up to 
the end of September 2014, when the 
audit work was completed.

07 
The overall audit question was:

To what extent are the main causes 
of the high error rate for rural devel‑
opment being effectively addressed 
by the Commission and the Member 
States?

The detailed questions which the audit 
aimed to answer were:

 — What are the main causes of the er‑
ror rate in investment measures?

 — What are the main causes of the 
error rate in area‑related aid?

 — Do the Member States’ action 

plans and the new EU legal frame‑
work have the potential to address 
these causes effectively?

08 
To reply to the first two sub‑ques‑
tions, the Court analysed the results 
reported for the sample of transac‑
tions selected randomly during the 
audits of legality and regularity for 
2011, 2012 and 2013. Taking the results 
of 3 years instead of one allows for 
a more detailed analysis of the types of 
error. The analysis included reviewing 
4618 transactions, of which 160 had an 
impact on the error rate. This identifi‑
cation of the causes of errors was com‑
plemented by knowledge stemming 
from the Court’s examination of the 
control systems operating in the Mem‑
ber States between 2011 and 2013.

09 
In its reply to the 2012 Annual Report, 
the Commission indicated that ex‑
tensive action plans had been imple‑
mented for each of the 27 Member 
States to identify the causes of errors 
and to develop appropriate remedial 
action. The Court selected 10 of these 
action plans9 and investigated whether 
they targeted the weaknesses identi‑
fied by the Court, the Commission and 
the Member States themselves. This 
exercise, which built partially on the 
work performed for the annual report, 
also involved interviews with the Com‑
mission’s desk officers for the Member 
States concerned.

Audit scope and approach 

13

10 
At the date of adoption of this report, 
the EU regulations for the new 2014–20 
rural development programming pe‑
riod had already been approved. This 
allowed the auditors to consider the 
extent to which the changes intro‑
duced by the new legal framework 
were likely to have a significant impact 
on the causes of errors. The Member 
States’ regulatory frameworks for the 
new programming period were still in 
the drafting stage and therefore did 
not fall under the scope of this report.

11 
This report focuses on the compliance 
of rural development implementa‑
tion with the applicable laws and 
regulations, and only makes marginal 
references to performance aspects — 
economy, effectiveness and efficiency. 
These elements of sound financial 
management are extensively covered 
by other special reports of the Court.

Types and prevalence  
of errors found

14

Overall

12 
This section contains an analysis of the 
sample of 461 payments examined, 
and of the 160 on which the average 
error rate of 8,2 % is based.

13 
Figure 2 shows that the sample was 
almost equally split between the two 
main types of measures. It also shows 
that investment measures accounted 
for a greater proportion of the error 
rate (around two thirds) than area‑re‑
lated aid (around one third).

14 
As Figure 1 shows, the regulatory 
framework comprises two layers: the 
EU level, which sets general require‑
ments and conditions, and the 
Member State level. Member States 
implement the requirements of EU 
regulations and establish additional 
conditions according to their own pol‑
icy objectives. Regarding the type of 
legislation breached, the Court found 
that only 1,3 percentage points of the 
error rate were due to non‑compliance 
with direct provisions of EU regula‑
tions. Most of the error rate (6,9 per‑
centage points) was due to breaches of 
conditions set at Member State level.

sample and the error rate

2 Share of area‑related aid and investment measures in the 
e
r
u
g
i
F

2,5 %

214

247

Area-related aid

5,7 %

Investment measures

sample

error rate

 
Types and prevalence of errors found 

15

Investment measures

15 
Figure 3 presents a breakdown of the 
different types of beneficiaries for 
investment measures. It shows that 
public bodies caused a quarter of the 
8,2 % error rate. There are two main 
categories of private beneficiary: 
farmers and those without agricultural 
activity. The latter represented a fifth 
of the sample, but contributed to 
a third of the error rate for investment 
projects.

16 
For investment measures, the most 
common errors found were breaches 
of eligibility conditions, indications 
that private beneficiaries may have 
committed intentional irregularities, 
and failures to comply with public and 
private procurement rules (see Fig-
ure 4). Investment projects typically 
consist of a small number of individual 
high‑value cost items. This means 
that when individual cost items are 
deemed to be ineligible, they result in 
a relatively high error rate as a pro‑
portion of the total payment. Also, if 
projects or beneficiaries are ineligible, 
this results in a 100 % error rate being 
applied to the audited payment.

sample and the error rate

3 Share of different types of investment beneficiaries in the 
e
r
u
g
i
F

95

46

106

2,3 %

1,8 %

1,6 %

sample

error rate

Public bodies

Private beneﬁciaries excluding farmers

Farmers

 
Types and prevalence of errors found 

16

4
e
r
u
g
i
F

Breakdown of the 5,7 % contribution to the error rate by investment measures

Other - 0,5 %

Aid ceiling exceeded - 0,5 %

Private procurement - 0,6 %

Suspected intentional
irregularities - 1,1 %

Public procurement - 1,1 %

Eligibility criteria, 
public beneﬁciaries - 0,9 %

Eligibility criteria, 
private beneﬁciaries - 1 %

Area‑related aid

17 
For area payments, most of the irregu‑
larities found involved non‑compliance 
with agri‑environment commitments 
(obligations concerning land or farm 
management), ineligible agricultural 

parcels and over declarations (see 
Figure 5). Errors generally concern 
a limited area of the farm, resulting 
in a smaller error rate per payment, 
as opposed to investment measures, 
where eligibility breaches affect 
a higher portion of the payment.

5
e
r
u
g
i
F

Breakdown of the 2,5 % contribution to the error rate by area‑related aid

Other - 0,4 %

Farming commitments - 0,9 %

Area diﬀerences - 0,3 %

Eligibility criteria - 0,9 %

 
 
Types and prevalence of errors found 

17

10  Article 29 of Council 

Regulation (EC) No 1290/2005 
of 21 June 2005 on the 
financing of the common 
agricultural policy (OJ L 209, 
11.08.2005, p. 1).

11  Member States declare their 

rural development 
expenditure paid out in the 
period 1 July–15 October to 
the Commission by 
10 November. Once accepted, 
the EU contribution is paid in 
December. As such, 
15 October 2013 represents 
the last expenditure subject to 
this audit.

Differences in the 
financial implementation 
rate and the error rate 
between groups of 
Member States

 — Medium financial execution rate: 

Germany, France, Lithuania, the 
Netherlands, Poland, Portugal, 
Slovenia, Sweden and the United 
Kingdom.

18 
The rural development budget for the 
period 2007–13 (see paragraph 1) is 
broken down by Member States on an 
annual basis. Council Regulation (EC) 
No 1290/200510 requires the Commis‑
sion to decommit any portion of an 
annual commitment which has not 
been used within a period of 2 years 
after the year of the commitment 
(known as the ‘n+2 rule’). This rule aims 
to speed up the implementation of 
programmes.

19 
The Court has compared the Member 
States’ financial implementation rates 
(i.e. the ratio of cumulative actual pay‑
ments to plan) with their error rates. In 
order to obtain statistically representa‑
tive information, the 27 Member States 
which had 2007–13 rural development 
programmes were divided into three 
groups of nine Member States in de‑
scending order of their financial execu‑
tion rates as at 15 October 2013. The 
information available does not enable 
showing results on individual Member 
States. The following Member States 
are represented in the three groups.

 — Highest financial execution rate: 

Belgium, Czech Republic, Estonia, 
Ireland, Latvia, Luxembourg, Aus‑
tria, Slovakia and Finland.

 — Lowest financial execution rate: 

Bulgaria, Denmark, Greece, Spain, 
Italy, Cyprus, Hungary, Malta and 
Romania.

20 
Figure 6 presents aggregated figures 
since the beginning of the program‑
ming period (2007) until the end of 
the 2013 financial year11; they show 
a strong negative correlation between 
financial implementation rates and 
error rates for the three groups of 
Member States. The same analysis was 
carried out for different dates, and sep‑
arately for investment measures and 
area‑related aid, with similar results. 
However, area‑related aid is mostly 
based on multiannual contracts, result‑
ing in relatively stable implementation 
and error rates. The correlation is more 
pronounced for investment measures, 
for which implementation rates are 
lower and error rates are higher.

21 
A detailed analysis of the correlation 
between the financial execution rate 
and the error rate was not part of the 
scope of this audit.

Types and prevalence of errors found 

18

nine Member States

6 Comparison of financial implementation rates with error rates for three groups of 
e
r
u
g
i
F

12 %

83,0 %

90 %
80 %
70 %
60 %
50 %
40 %
30 %
20 %
10 %
0 %

72,3 %

8,6 %

3,6 %

10,0 %

10 %

57,5 %

error rate

8 %

6 %

4 %

2 %

0 %

9 Member States with
highest ﬁnancial
implementation rate

9 Member States with
medium ﬁnancial
implementation rate

9 Member States with
lowest ﬁnancial
implementation rate

 
Observations

19

12  Directive 2004/18/EC of the 
European Parliament and of 
the Council of 31 March 2004 
on the coordination of 
procedures for the award of 
public works contracts, public 
supply contracts and public 
service contracts (OJ L 134, 
30.4.2004, p. 114).

13  Commission Regulation (EU) 

No 65/2011 of 27 January 2011 
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 (OJ L 25, 28.1.2011, 
p. 8).

24 
Most of the audited public bodies 
were municipalities or associations 
thereof. The Court also audited cen‑
tral, regional and local governments 
(including paying agencies), as well 
as other public organisations such as 
irrigation consortia.

25 
Directive 2004/18/EC12 requires Mem‑
ber States to oblige public bodies to 
conduct competitive public procure‑
ment procedures when awarding con‑
tracts. It states that exceptions are only 
permitted in justified circumstances 
(e.g. for reasons of extreme urgency 
brought about by unforeseeable 
events). Commission Regulation (EU) 
No 65/201113 stipulates that investment 
projects must comply with applicable 
national public procurement rules.

26 
Errors in public procurement proce‑
dures account for one eighth of the av‑
erage error rate for rural development. 
This figure only includes instances 
where serious breaches of the public 
procurement rules influenced the se‑
lection of the successful tenderer.

PART I  
What are the main causes 
of the error rate in 
investment measures?

22 
This section examines the causes of 
errors in investment measures, which 
contributed to two thirds of the error 
rate (see Figure 2). The Court found 
the main drivers of the error rate to be 
the type of beneficiary and the type of 
measure. Some measures were more 
prone to error, whereas others were 
hardly affected by error.

Public bodies are a signifi‑
cant source of error because 
of non‑compliance with  
public procurement rules

23 
The main objectives of aid provided to 
public bodies for rural development 
measures are to improve the quality 
of life in rural areas, to improve and 
develop agricultural infrastructure, 
and to restore forestry potential. 
Measures supporting these objectives 
represented around a quarter of total 
investment expenditure. In addition, 
up to 4 % of the total rural develop‑
ment budget may be used by manag‑
ing authorities as ‘technical assistance’ 
to finance preparation, management, 
monitoring, evaluation, information 
and control activities carried out under 
rural development programmes.

Observations

20

27 
Of the many applicable rules, only 
three categories of the serious breach‑
es of procurement rules led to this 
significant impact on the error rate 
(see Table 1).

28 
The Court found two main reasons 
that could explain the breaches in 
public procurement rules. Firstly, rural 
infrastructure projects are commonly 
implemented by small municipalities 
which often have limited experience 
of conducting public procurement 
procedures, and do not have trained 
and experienced staff at their disposal. 
During the tendering procedure, the 
national authorities do not provide 
detailed guidance.

1 Breach of public procurement rule
e
l
b
a
T

Unjustified direct award without a competitive procedure

Misapplication of selection and award criteria

Lack of equal treatment of tenderers

Example

The beneficiary of an investment project, a municipality in the Netherlands, agreed 
to conduct a tendering procedure and delegated implementation of the project to 
a foundation. The agreement with the foundation set out the procurement proce‑
dure, specifying that a competitive procedure should be applied which should be 
published on a dedicated website.
However, 3 weeks after signing the agreement, the board of the foundation decided 
to apply a direct award procedure, without publishing this on the dedicated website.

In Germany (Brandenburg‑Berlin), a municipality organised a competitive procedure 
to select a broadband Internet supplier.
During the evaluation of the offers, the municipality used award criteria other than 
those published in the tender notice, followed by a negotiated procedure in which 
only two of the bidders were allowed to participate. At the end of the procedure, the 
municipality did not choose the most economical offer.

In Romania, a rural municipality obtained support for an investment project which 
included a water supply network, a sewage system, improvement of local roads and 
a community centre.
Seven tenderers submitted offers for the public works contract; the beneficiary 
rejected five of these on the grounds that they did not fulfil the requirements. The 
Court found that the winning tenderer had also failed to fulfil two requirements 
which had been used as grounds for rejecting other bids.

 
Observations

21

29 
Secondly, errors are also caused by 
certain beneficiaries preferring to 
work with specific contractors, and 
therefore awarding contracts directly 
without publishing a contract notice or 
asking for offers from any other poten‑
tial bidders. In 80 % of these cases, the 
successful bidder was one which had 
previously provided similar goods or 
services to the beneficiary (see Box 2). 
The paying agencies did not object 
to this on any occasion, even though 
the basic procurement principles of 
transparency, objectivity, non‑discrim‑
ination and appropriate disclosure had 
not been fulfilled.

2
x
o
B

Contracts awarded directly to existing suppliers

In Sweden, a regional government body implemented a project under the measure ‘Infrastructure related to 
the development and adaptation of agriculture and forestry‘. The audited project was a continuation of a pre‑
vious project.

Swedish public procurement law allows contracts to be directly awarded only in exceptional circumstances, or 
if the value of the contract is below a certain threshold, in which case the contracting authority must obtain at 
least three bids.

The beneficiary did not respect these rules and awarded three contracts directly, after having obtained only 
one offer in each case, namely from the companies which had provided the same services for the previous 
project.

31 
Eligibility breaches accounted for 
a quarter of the error rate for rural 
development, equally distributed 
between private and public benefi‑
ciaries. The Court found a wide range 
of eligibility breaches, reflecting the 
multitude of investment measures and 
the large number of implementing 
rules and criteria applicable to them in 
Member States.

14  Article 71 of Council 

Regulation (EC) No 1698/2005 
of 20 September 2005 on 
support for rural development 
by the European Agricultural 
Fund for Rural Development 
(EAFRD) (OJ L 277, 21.10.2005, 
p. 1).

Beneficiaries’ non‑compli‑
ance with eligibility criteria 
had a significant impact on 
the error rate

30 
The Council regulation on support 
for rural development14 stipulates 
that expenditure is eligible only if it 
has been incurred in accordance with 
the rules on eligibility and selection 
criteria established at national level. 
Member States must establish these 
rules and criteria in order to target 
limited financial resources towards 
areas, projects and beneficiaries which 
contribute most to the objectives of 
the programme.

 
Observations

22

32 
Eligibility breaches can occur at the 
levels of the beneficiary, of the project 
and of individual cost items. Table 2 
illustrates examples of such cases.

2 Level of breach
e
l
b
a
T

Beneficiary

Project

Individual cost items

Example

In Spain, to benefit from aid for investments in processing facilities for agricultural products, 
enterprises must have fewer than 750 employees and a turnover of less than 200 million euro. 
Figures for controlling enterprises (up to the ultimate beneficial owner) also have to be taken 
into account when assessing compliance with these thresholds.
A beneficiary submitted a project to expand its production facilities. In the application, he 
included the data for only half of the companies which formed part of the group. Based on this 
incomplete information, the beneficiary declared that it complied with the ceilings regarding 
number of employees and total turnover.
The Court recalculated the indicators by including the data for all companies in the group and 
found that both ceilings had been breached. The beneficiary was thus ineligible.

In Poland, several farmers obtained aid for creating a producer group which would acquire ag‑
ricultural products from its members and then sell these to third parties (with the intention of 
obtaining better prices than each separate farmer would otherwise have been able to obtain).
One of the conditions for receiving the aid was that the producer group must sell the products 
to third parties.
The Court found that the only client of the producer group was another company which was 
owned by the same farmers. The audited project was therefore not eligible.

In Portugal, a beneficiary submitted a project involving planting olive trees. Among other 
conditions, expenditure was eligible only if it was incurred after the project application had 
been submitted (as a means of avoiding deadweight and ensuring that only farmers who really 
needed the aid received it).
When reviewing the payment claim, the Court found cost items, representing more than 10 % 
of the amount claimed, that had been incurred before the date of the application for support. 
These items of expenditure were therefore ineligible.

33 
Member States implemented both EU 
requirements and their own policy ob‑
jectives through national and regional 
legislation; this typically included 
rural development programmes, 
implementing regulations, procedure 
manuals and applicant guides. This has 

resulted in a considerable number of 
rules and requirements being appli‑
cable. However, in the opinion of the 
Court, such rules are often needed to 
ensure that public funds are used to 
reach policy objectives and respect 
the principles of sound financial 
management.

 
Observations

23

No eligibility errors found in the 
measure ‘setting up of young 
farmers’

36 
The sample of 461 projects audited 
included 20 under the measure ‘Set‑
ting up of young farmers’. This sup‑
port is granted to people aged below 
40 who become owners of a farm for 
the first time. The support is provided 
in the form of a maximum lump sum 
payment of 70 000 euro, the aim of 
which is to help these farmers to set 
up and develop their farms. Beneficiar‑
ies can use the support to purchase 
land, buildings, equipment, and 
animals, and to cover working capital 
requirements.

34 
The Court considers that, for the 
projects audited, the rules were not 
unnecessarily complex and did not 
impose unjustified requirements 
on beneficiaries and Member State 
authorities. While limited examples of 
gold‑plating were found, these had 
only a marginal impact on the error 
rate.

35 
There is a risk that Member States 
may withdraw effective rules in order 
to prevent errors. Effective rules are 
important for achieving the objectives 
of the policy. The Court considers that 
simplification should not hamper the 
principles of sound financial manage‑
ment. For example (see Box 3), the 
original Portuguese rule described in 
the case below is an effective way of 
excluding investments which would 
have been made anyway, without 
public aid. When investments would 
have been carried out anyway, public 
support was not necessary. In fact, in 
several special reports, the Court has 
criticised the fact that expenditure 
is eligible before the application is 
submitted, and recommended that 
expenditure should only be eligible 
from grant approval. Thus, in the case 
concerned, the solution for preventing 
errors would not be that the Member 
State would withdraw an effective rule 
but would prevent errors by better 
checking the payment claims.

3
x
o
B

Example of withdrawing an effective eligibility criterion

In Portugal, investments made before submitting an application for support were considered ineligible at the 
start of the programming period in 2007. The sample of audited cases included two where for certain cost 
items this rule had not been respected, rendering the expenditure concerned ineligible.

The national rules were amended in 2011. Expenditure incurred before the application for support is submit‑
ted is now eligible.

 
24

15  Article 22 of Council 

Regulation (EC) No 1698/2005.

16  Articles 4.8 and 30.2 of 

Commission Regulation (EU) 
No 65/2011.

17  Fraud, as applied in 

Community law, is defined in 
Article 1 of Council Act of 
26 July 1995 drawing up the 
Convention on the protection 
of the European Communities’ 
financial interests.

Observations

37 
In addition to the basic eligibility re‑
quirements (less than 40 years old and 
setting up a farm for the first time), 
the Council regulation15 stipulates two 
further conditions. Beneficiaries must 
possess adequate occupational skills 
and competence, and must submit 
a business plan. For the 20 projects 
audited, Member States set a small 
number of detailed requirements. For 
example, farmers were required to 
gain adequate skills and competences 
within 3 years through training, and to 
prepare and follow a simplified busi‑
ness plan describing the initial situ‑
ation of the agricultural holding and 
specific milestones and targets for the 
development of the activities.

38 
While certain procedural weaknesses 
and concerns regarding sound finan‑
cial management were identified, 
the Court did not find any errors of 
legality and regularity in relation to 
the manner in which young farmers 
had prepared and carried out their 
projects. In the Court’s view, this is due 
to the small number of detailed re‑
quirements, the focused scope of the 
measure and the use of lump sum pay‑
ments. Of course, schemes such as this 
one must also deliver value for money 
and demonstrate sound financial man‑
agement — and these are beyond the 
scope of this report. But the example 
does show that the relative simplicity 
of a scheme does impact on the level 
of irregularities.

Indications that private  
beneficiaries may have 
committed intentional 
irregularities

39 
Commission Regulation (EU) 
No 65/2011 states that where a ben‑
eficiary is found to have intentionally 
made a false declaration, the operation 
in question must be excluded from 
support and any amounts already paid 
for that operation must be recovered16.

40 
Fraud may consist of one or more of 
the following17:

 — The use or presentation of incor‑
rect or incomplete statements or 
documents leading to wrongful 
payment of funds from the EU 
budget or budgets managed by, or 
on behalf of, the EU;

 — The non‑disclosure of required 

information with the same effect;

 — The misuse of funds for purposes 

other than those for which they 
were originally granted.

41 
In 4 % of the private investment pro‑
jects audited (6 out of 152), the Court 
found indications that beneficiaries 
may have committed intentional ir‑
regularities. These cases account for 
one eighth of the average error rate for 
rural development.

Observations

25

44 
Of the 19 projects audited for this 
measure, 10 were affected by error 
(three of these were reported to OLAF). 
The main shortcomings noted were 
non‑compliance with the SME criterion 
and non‑respect of appropriate private 
procurement procedures. Public aid for 
this measure is typically in the range of 
several million euro per project. In this 
context, there is a strong incentive for 
applicants to circumvent the rules with 
the aim of receiving aid.

42 
The Court reports all cases where there 
are indications of intentional irregulari‑
ties to OLAF for further analysis and 
appropriate follow‑up. Box 4 contains 
an example.

The measure supporting 
investments in food processing 
facilities raises the most 
concerns

43 
The rural development measure ‘add‑
ing value to agricultural and forestry 
products’ made the most significant 
contribution to the error rate for pri‑
vate investments. This measure targets 
small and medium‑sized enterprises 
(SMEs) and finances investment in 
facilities for processing primary prod‑
ucts. These facilities include wineries, 
grain mills, fruit and vegetable pro‑
cessing and packaging lines.

4
x
o
B

Example of indications of intentional irregularity

A beneficiary applied for aid under an investment measure whereby the rules stipulated that equipment 
bought second‑hand was not eligible. When presenting the payment claim, the beneficiary declared that the 
equipment part of the project had been purchased new from a dealer.

During the on‑the‑spot visit, the Court’s auditors found evidence to suggest that the machine had not, in fact, 
been purchased new. The auditors subsequently obtained third party documentation confirming that the 
equipment had been bought second‑hand.

The expenditure was assessed as ineligible and the case was forwarded to OLAF.

 
Observations

26

45 
In addition to the above, the Court has 
recently reported numerous short‑
comings in the implementation of 
this measure, which seriously affected 
the efficiency and effectiveness of 
the measure in reaching its policy 
objectives18.

48 
In the Court’s view, Member States 
could and should have prevented 
most errors for investment measures 
from occurring for the following two 
reasons.

18  Special Report No 1/2013  ‘Has 

the EU support to the 
food‑processing industry been 
effective and efficient in adding 
value to agricultural products?’ 
(http://eca.europa.eu).

Member State authorities 
could have detected and 
corrected errors affecting 
investment measures

46 
Commission Regulation (EU) 
No 65/2011 stipulates that Member 
States must establish a control system 
ensuring that all necessary checks 
are carried out to verify compliance 
with the terms under which support 
is granted. The regulation specifies 
how such checks must be carried out, 
including what should be verified, how 
the samples should be selected and 
the minimum coverage for each type 
of support.

47 
Administrative checks must be carried 
out on all applications for support and 
payment claims and must include at 
least one visit to the operation sup‑
ported or the investment site to verify 
its realisation. In addition, on‑the‑spot 
checks must be performed annually on 
a sample of projects representing at 
least 5 % of the expenditure incurred.

49 
Firstly, the information necessary to 
detect and correct the error was avail‑
able to the Member State authorities, 
but was either not used or not request‑
ed in many instances. The following 
typical situations were noted:

 — the information was available in 
the supporting documentation 
submitted by the beneficiary 
(e.g. dates of invoices), but was not 
used by the paying agency;

 — the information was available 
at the beneficiary level (e.g. ac‑
counting records), but the paying 
agency did not ask for it;

 — the information was available at 

third party level (e.g. shareholder 
structure of beneficiary compa‑
nies), but was not sought by the 
paying agency.

50 
Secondly, checks performed by Mem‑
ber State authorities were not exhaus‑
tive. Examples of this are included in 
Box 5.

Observations

27

5
x
o
B

Examples of insufficient quality of Member State authorities’ checks

In Poland, a contract co‑financed under the technical assistance measure (see paragraph 23) was awarded 
directly, without the required competitive procedure being conducted. The Court found that the required 
checks were not performed, as the paying agency did not verify that technical assistance projects complied 
with public procurement rules.

In Romania, the paying agency performed verifications on the payment claim submitted by the beneficiary 
for a project providing farm advisory services. The paying agency’s control report showed that the difference 
between the amount claimed by the beneficiary and the amount approved by the paying agency was more 
than 3 %. The paying agency did not apply the penalty required in cases such as this, because such a check 
was not carried out for this measure.

In Spain, the cost of the construction works carried out was justified by means of copies of the invoices from 
the contractor and copies of proofs of payment. These invoices showed that the contractor offered a 5 % 
discount on the total value of the invoices. Payment records also showed that the beneficiary did not pay the 
invoices in full, but deducted the 5 % discount. Although the paying agency had verified the invoices and 
payment records, the expenses were approved in full without deducting the 5 % discount, which represented 
expenditure which had not been incurred by the beneficiary.

In Sweden, a regional government body did not respect the applicable procurement rules (see Box 2). The 
Court found that the paying agency had delegated the tasks of approving aid applications and payment 
claims for the project audited to the regional government body concerned. At the same time, the body re‑
ceived the aid as the beneficiary. The regional government body had not checked compliance with national 
public procurement rules as part of the administrative checks.

52 
For investment measures, most errors 
occur at the initial stage of applica‑
tion for support and the procurement 
stage which follows. Verifying appli‑
cations for support is a complex and 
often time‑consuming procedure.

19  See Annex 4.2 of the Court’s 
Annual Reports for 2011, 
2012 and 2013.

51 
The Court’s system examinations 
confirm that the quality of the checks 
performed by Member States is insuffi‑
cient. The Court has assessed the qual‑
ity of key aspects of supervisory and 
control systems for investment meas‑
ures for 14 paying agencies in 13 Mem‑
ber States19 over the past 3 years. No 
paying agencies were assessed as 
having effective systems with regard 
to administrative checks and only five 
were assessed as being effective with 
regard to their systems for on‑the‑spot 
checks.

 
Observations

28

53 
The Court notes that difficulties 
encountered at this stage may be 
partly caused by inefficiencies in 
paying agencies’ procedures. Paying 
agencies typically perform the full 
set of verifications on applications for 
support even if, at a certain point in 
the verification process, it becomes 
clear that the application is not eligi‑
ble. Thus, any time spent continuing 
verifications after the ineligibility has 
been established represents a source 
of inefficiency.

54 
In the context of limited financial 
resources, especially at the end of the 
programming period, it may be that 
only a small fraction of the applica‑
tions for support can be co‑financed 
(the applications which receive the 
highest numbers of selection points). 
However, some paying agencies per‑
form the full set of verifications on all 
applications submitted, even if many 
of the eligible projects will not receive 
aid because they will not have enough 
selection points. In this context, the 
paying agency for the Italy‑Sicily 
region uses an efficient procedure, 
which is described in Box 6.

6
x
o
B

Example of best practice in evaluating applications for support

In Italy‑Sicily, applications for support are evaluated in two stages.

In the first stage, a limited number of checks are performed on all applications; these are then published in 
a preliminary selection report. Projects are selected in descending order of the number of selection points 
awarded to them, until the total value of projects selected reaches the allocated budget.

In the second stage, full verifications are only performed for those projects which passed the preliminary 
selection procedure. If, among these, ineligible projects are found, these are replaced by the highest scoring 
projects which were not selected initially.

 
Observations

29

57 
Infringements of agri‑environment 
commitments accounted for one 
eighth of the total error rate. Errors 
were primarily the result of non‑re‑
spect of simple commitments (see 
Box 7), which, however, significantly 
hampered the achievement of the 
desired environmental benefits.

PART II 
What are the main causes 
of the error rate in 
area‑related aid?

55 
This section examines the causes of 
errors in area‑related aid. While the 
total budget is equally split between 
investment measures and area‑related 
aid, the latter contributed to only 
a third of the error rate (see Figure 2). 
The main impact on the error rate was 
due to non‑compliance with agri‑envi‑
ronment commitments, as opposed to 
aid for less‑favoured areas.

Agri‑environment aid 
is the most error prone 
area‑related measure

56 
Agri‑environment payments are 
granted to farmers who undertake 
to comply on a voluntary basis with 
certain commitments to fulfil envi‑
ronmental objectives. Payments are 
intended to cover additional costs and 
income foregone as a result of envi‑
ronmentally friendly farming prac‑
tices undertaken for a period of 5 to 
7 years. Agri‑environment is the most 
financially significant rural develop‑
ment measure, to which approximately 
20 billion euro has been allocated (a 
fifth of the total rural development 
budget for the 2007–13 programming 
period).

Observations

30

Examples of non‑respect of simple agri‑environment commitments 

7
x
o
B

In the Netherlands, a farmer entered into a contract for 
the ‘Botanical grassland edges’ measure.

Of the three commitments, one was related to dredging 
(in order to protect biodiversity, it was prohibited to cover 
the edge of the meadow with the mud dredged out of 
the water channels).

During the on‑the‑spot visit, the Court found that instead 
of being evenly spread, the mud excavated had been 
deposited on a 2 metre strip of land along more than 
4 000 metres of channels.

In the United Kingdom (England), a farmer received aid 
for permanent grassland with very low inputs (e.g. fertilis‑
ers). One of the requirements was to avoid overgrazing, so 
that the growth, quality or diversity of the vegetation is 
not adversely affected.

The Court found that part of the parcel was damaged due 
to overgrazing.

In Malta, a farmer undertook to refrain from cultivating 
crops on a strip measuring a minimum of one metre along 
fences, and to leave this area uncultivated, unploughed, 
unfertilised and unsprayed. This commitment aimed at 
conserving the biodiversity.

The Court found that the beneficiary did not comply with 
this obligation on any of the parcels of land subject to this 
commitment.

.
s
r
o
t
i
d
u
A

f
o
t
r
u
o
C
n
a
e
p
o
r
u
E

:

e
c
r
u
o
S

.
s
r
o
t
i
d
u
A

f
o
t
r
u
o
C
n
a
e
p
o
r
u
E

:

e
c
r
u
o
S

.
s
r
o
t
i
d
u
A

f
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o
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n
a
e
p
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r
u
E

:

e
c
r
u
o
S

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Observations

31

there is no direct immediate rela‑
tionship between the commitments 
undertaken and the results on their 
farming activity.

60 
This was the case in 13 out of the 
17 errors identified, where the benefits 
brought about by the measures were 
far‑reaching, long‑term environmental 
benefits (such as for example, protect‑
ing biodiversity).

58 
The Court considers that there are 
three reasons which, combined, 
explain the error rate for agri‑environ‑
ment measures. They are presented 
graphically in Figure 7 and described 
in further detail in the following 
paragraphs.

Compliance with commitments 
does not produce an immediate 
positive effect for the farmer

59 
Farmers are directly impacted by the 
costs of complying with commitments 
and/or the loss of revenue because 
of the lower yields obtained by using 
more environmentally friendly tech‑
niques. In most cases, however, these 
efforts are not rewarded by immedi‑
ate positive effects on the farm. Thus, 
farmers are less likely to comply when 

7 Reasons for the error rate for agri‑environmental payments
e
r
u
g
i
F

Low incentive to
comply

Low control
rate

Low sanction
rate

 
Observations

32

63 
Among the 17 cases of errors found, 
the Court identified eight instances 
where the verification of commitments 
could have been shifted from the 
on‑the‑spot controls to administrative 
controls (see example in Box 8). Such 
a change in procedure would have 
enabled the Member State authorities 
to correct and detect the errors during 
administrative checks, as such checks 
are performed on 100 % of all benefi‑
ciaries. This would be especially appro‑
priate for checks based on documenta‑
ry evidence, such as: activity registers 
kept by the farmer (fertilisation, animal 
grazing, grass mowing) and certificates 
issued by third parties.

61 
The Court did not find that a lack of 
knowledge regarding the commit‑
ments was a valid explanation for the 
majority of infringements made by 
farmers. Before signing the commit‑
ment, farmers are presented with the 
detailed list of conditions they must 
respect. Furthermore, in 13 out of the 
17 cases, the error applied to large 
farmers with extensive knowledge and 
resources. In fact these farmers had 
over 50 hectares in area, deriving their 
main income from agriculture.

Low control rate for 
agri‑environment commitments

62 
Member States verify the respect 
of most agri‑environment commit‑
ments only during on‑the‑spot checks, 
which are performed on a sample of 
5 % of all beneficiaries receiving aid. 
This means that, on average, there is 
a probability that a farmer is checked 
once every 20 years. In addition, not all 
commitments can be checked at any 
point of time during the year, thereby 
reducing the scope of controls and the 
potential of detecting non‑complianc‑
es. This low control rate for commit‑
ments is another reason for the error 
rate found.

8
x
o
B

Example of agri‑environment commitment which could have been verified by 
administrative checks

In Estonia, one of the commitments of the measure was that the farmer should take at least one soil sample 
for every 5 hectares of land held and send it to an accredited laboratory for analysis of the acidity of the soil 
and its phosphorus and potassium content. The rules stipulated that the laboratory results were to be kept on 
the farm and made available to inspectors during on‑the‑spot visits.

During the Court‘s auditors on‑the‑spot visit, the farmer presented the laboratory results of the nine soil 
samples taken. Upon recalculation, it was determined that, based on the area of the parcels, the farmer should 
have taken 13 samples, rather than just nine. This non‑compliance with the commitments could have been 
detected through administrative checks.

 
Observations

33

The system of reductions 
and sanctions does not have 
a strong deterrent effect

64 
Member States apply a proportional 
system of reductions and sanctions 
which, based on the severity, extent 
and permanence of the infringement, 
normally results in a partial reduction 
of the payment made. For example, 
in the case described in Box 8, a 5 % 
reduction for non‑compliance with the 
commitment was applied. Farmers do 
not risk losing any of their own money 
because of non‑compliance, but only 
risk having to return what has already 
been paid to them. In extreme cases, 
where farmers have not performed 
any of the commitments made and 
the paying agency decides to recover 
the entire payment made, the farmers 
could find themselves in the same situ‑
ation as if they had not entered into 
any commitment.

65 
In this context, the frequency of errors 
(17 out of the 121 payments audited) 
also points to the fact that the sys‑
tem of reducing payments in cases 
of non‑compliance has only a limited 
deterrent effect on farmers (see an 
example in Box 9).

Payments for less‑favoured 
areas are less affected by 
error

66 
Payments to farmers in mountain areas 
and in other areas with natural handi‑
caps (together commonly referred 
to as ‘less‑favoured areas’ or ‘LFA’) 
compensate farmers for continuing to 
farm in these areas. These rural devel‑
opment measures target the sustain‑
able use of agricultural land and thus 
contribute to improving the environ‑
ment and the countryside.

9
x
o
B

Limited financial consequences of an infringement

In the United Kingdom, a farmer entered into a commitment related to establishing heathland vegetation on 
acid grassland. There were only two commitments under the measure: reduction of the stocking density (the 
number of animals grazing per hectare) and the prohibition of grazing between October and March.

The Court visited the farmer in October and found that animals were still grazing on the parcels. The financial 
consequence for the farmer was a 3 % reduction of the payment.

 
Observations

34

 — lump sum payments per hectare, 
which are degressive. This means 
that bigger farms will receive lower 
payments for areas which exceed 
a certain threshold, and that for 
such farms potential area differ‑
ences only have a small impact.

69 
The Court notes that the low error rate 
for the investment measure ‘setting up 
of young farmers’ was also explained 
by these characteristics, i.e. a limited 
number of detailed requirements, 
a focused scope and the use of lump 
sum payments.

67 
The impact of the 78 LFA payments 
audited on the overall error rate would 
have been negligible, were it not for 
two cases where errors were found for 
non‑respect of additional eligibility 
conditions imposed by the Member 
States concerned (see Box 10). This 
illustrates the dilemma that eligibility 
conditions are required to ensure that 
the funds are well spent, which may 
at the same time increase the risk of 
error.

68 
This relatively low error rate is due to 
the main characteristics of the meas‑
ures concerned:

 — a small number of detailed eligi‑
bility conditions: the land must 
be located in a designated area, 
defined by the Member State and 
approved by the Commission, 
and must be maintained in good 
agricultural and environmental 
condition;

0
1
x
o
B

Additional eligibility conditions imposed by Member States for LFA payments

In Italy and Portugal, the eligibility of pastures in mountain areas was conditional upon the beneficiary own‑
ing a minimum number of animals. During on‑the‑spot visits, the Court found that the farmers concerned did 
not have the required number of animals and that the pastures were therefore not eligible for support.

These two cases made up the majority of the error rate affecting LFA payments.

 
35

20  Council Regulation (EC) 

No 1290/2005.

21  Regulation (EU, Euratom) 

No 966/2012.

Observations

PART III 
Do the Member States’ 
action plans and the new 
EU legal framework have 
the potential to address 
these causes effectively?

70 
The Commission and the Member 
States have taken steps to address the 
causes of error in rural development. 
This section examines whether the two 
main steps — the action plans and the 
EU legal framework — are likely to be 
effective.

The action plan exercise initi‑
ated by the Commission is 
a step in the right direction 
in addressing the causes of 
error

71 
Rural development expenditure is 
implemented by shared management 
between the Member States and the 
Commission20. In line with the sub‑
sidiarity principle, Member States are 
responsible for implementing the rural 
development programmes at the ap‑
propriate territorial level, according to 
their own institutional arrangements. 
The Commission is responsible for 
supervising Member States to ensure 
that they fulfil their responsibilities.

72 
If, during implementation, the level of 
error is persistently high, the Commis‑
sion21 has to identify the weaknesses 
in the control systems, analyse the 
costs and benefits of possible correc‑
tive measures and take or propose 

appropriate action. When weaknesses 
lead to a reservation in the Direc‑
tor‑General’s Declaration of Assurance, 
the Commission is required to analyse 
the information in the annual activity 
report and present an action plan. This 
has been the case for rural develop‑
ment expenditure since 2011.

73 
In this context, in an effort to reduce 
the error rate in rural development 
spending, the Commission invited all 
Member States to develop a three‑fold 
action plan in order to identify the 
causes of error, to implement targeted 
corrective action aimed at reducing 
the errors observed and to reinforce 
the preventive measures to reduce the 
risk of occurrence of errors.

The action plans are not yet 
a fully developed tool to 
address the causes of error

74 
The scope and quality of the action 
plans varied significantly from one 
Member State to another. The Court 
found that two action plans (Germa‑
ny — Berlin‑Brandenburg and Hun‑
gary) were relatively poor, with few 
actions and low potential of success 
in addressing the causes of error, and 
two (Italy‑Lombardy and Romania) 
were relatively good, with numerous 
actions and high potential of success 
in addressing the causes of error. There 
are three main weaknesses at the root 
of this variability in the action plans’ 
potential effectiveness, as explained in 
the subsequent paragraphs.

Observations

36

75 
Firstly, Member States did not assume 
their responsibility for the identifica‑
tion of errors and the proposal of 
corrective actions. Action plans are 
subject to a formal monitoring and 
follow‑up procedure. When Member 
States do not implement proposed 
actions, they may be subject to inter‑
ruption, suspension or reduction of 
payments and financial corrections. 
Action plans were developed under 

an iterative process, with a fourth up‑
date being in progress when the audit 
work was completed. The Commission 
initially communicated a non‑exhaus‑
tive list of causes of errors. However, 
not all these causes were addressed by 
Member States and, out of those which 
were, some have a limited potential 
to address the causes of error (see 
Box 11). Subsequently, the action plans 
were gradually improved in response 
to the Commission’s requests.

1
1
x
o
B

Example of a proposed action to reduce the error rate

The system of reductions and sanctions was one of the potential causes of error in area‑related aid, identified 
by the Commission and addressed by Member States. The system was not considered to be proportionate 
(in some cases, Member States applied a 100 % reduction in payment even if only one out of several commit‑
ments had been breached).

The Court agrees that adjustments made to the reduction and sanction system should ensure that any such 
system appropriately reflects the level of non‑fulfilment of the environmental objective pursued.

However, while a decrease in the sanctions applied will reduce the error rate, this will not address the underly‑
ing infringements and their potentially detrimental impact on the environment. As such, sanctions must act 
as an effective deterrent to farmers from breaching their obligations. This was not accomplished in the case 
shown in Box 9.

76 
Secondly, four out of the 10 action 
plans examined did not systematically 
address the audit findings from the 
Commission and the Court. Member 
States did not take into account all the 
weaknesses reported by Commission 
auditors by the closure of the conform‑
ity audit procedures, meaning that 
causes of errors are likely to remain 
unaddressed for a further period22.

22  The Commission carries out 
conformity audits in the 
Member States to check that 
the expenditure has been paid 
in compliance with the 
applicable rules. The audit is 
closed with or without 
financial corrections 
depending on the errors 
found. The average length of 
the conformity procedure of 
the audits closed in 2013 was 
36 months.

 
Observations

37

Insufficient focus on preventing 
widespread weaknesses at EU 
level

79 
Action plans address the weaknesses 
specifically identified in each Member 
State, without including preventive ac‑
tions for weaknesses detected in other 
countries. The Commission did not 
request Member States to systemati‑
cally address the most serious wide‑
spread deficiencies encountered at 
EU level, such as non‑compliance with 
public procurement rules, intentional 
irregularities and insufficient admin‑
istrative checks of agri‑environmental 
commitments.

77 
Thirdly, a majority of the actions pro‑
posed were designed along general 
lines. Most Member States propose 
general solutions such as updating 
procedure manuals or organising train‑
ing courses. For example, in relation to 
public procurement, a recurrent solu‑
tion was to train inspectors and ben‑
eficiaries in relation to the applicable 
public procurement rules. However, 
the action plans do not analyse which 
aspects of the rules were most likely to 
be breached and why. In this context, 
there is a risk that the effectiveness of 
the proposed measures is undermined.

78 
The Court also found examples of best 
practices in the design of appropriate 
responses to the problems identi‑
fied (see Box 12). The Commission 
organises twice‑yearly seminars with 
representatives from all Member States 
as an opportunity to discuss the status 
of implementation of the action plans, 
to share experience and to disseminate 
best practices.

2
1
x
o
B

Best practices in designing concrete targeted actions

In Bulgaria, farmers receive SMS messages from the paying agency, to inform them of time‑bound commit‑
ments (periods when certain practices are prohibited).

In Italy‑Lombardy, farmers are notified in writing about area differences between the area claimed in the pre‑
vious campaign and the area resulting from the refresh of the land parcel identification system (the IT system 
identifying the location and area of the agricultural parcels).

In Romania, the paying agency obtained full and free access to the register of commerce which provides the 
information to verify SME status.

 
38

23  http://ec.europa.eu/

agriculture/cap‑post‑2013/
legislation/index_en.htm

24  http://ec.europa.eu/

agriculture/cap‑post‑2013/
implementation/
index_en.htm

25  http://www.eca.europa.eu/
Lists/ECADocuments/
OP12_01/OP12_01_EN.PDF

26  Article 2(33) of Regulation (EU) 
No 1303/2013 of the European 
Parliament and of the Council 
of 17 December 2013 laying 
down common provisions on 
the European Regional 
Development Fund, the 
European Social Fund, the 
Cohesion Fund, the European 
Agricultural Fund for Rural 
Development and the 
European Maritime and 
Fisheries Fund and laying 
down general provisions on 
the European Regional 
Development Fund, the 
European Social Fund, the 
Cohesion Fund and the 
European Maritime and 
Fisheries Fund and repealing 
Council Regulation (EC) 
No 1083/2006 (OJ L 347, 
20.12.2013, p. 320).

Observations

80 
The Court examined 10 action plans 
to check whether they include actions 
to remedy widespread deficiencies. 
This was not the case. Three Member 
States did not include any actions in 
the field of public procurement, five 
did so in a general manner, while only 
two (Latvia and Romania) designed 
detailed checklists. The Court found 
that infringements of agri‑environ‑
ment commitments could be detected 
through administrative checks (see 
paragraph 63), but only one Member 
State (Spain) addressed this issue in its 
action plan, and then only for 7 of the 
17 regions. The detection of inten‑
tional irregularities was only included 
in one action plan (Romania).

81 
In this context, action plans are a step 
in the right direction, but mainly have 
a reactive role. The fact that Mem‑
ber States did not address EU‑wide 
problems which they did not consider 
applicable to them reduces the future 
effectiveness of these plans.

The new EU legal framework 
may have a positive effect 
in addressing the causes of 
errors

82 
The 2014–20 rural development pro‑
gramming period will be implemented 
as part of the reformed common 
agricultural policy, which was enacted 
through a set of four basic regula‑
tions23 and the related delegated and 
implementing acts24.

83 
As part of its statutory role, in 2012 the 
Court issued Opinion No 1/2012 on 
certain proposals for regulations relat‑
ing to the common agricultural policy 
for the period 2014–2025. Whereas 
Opinion No 1/2012 expressed views on 
all aspects of the common agricultural 
policy, mainly from the perspective 
of sound financial management, this 
special report addresses only the likely 
impact of the new legislation on the 
causes of errors of legality and regular‑
ity in rural development.

The new legislative package 
contains factors which may 
address causes of errors

84 
The new legal framework introduces 
the concept of ex ante conditional‑
ity, meaning a concrete and precisely 
pre‑defined critical factor, which is 
a prerequisite for and has a direct and 
genuine link to, and direct impact on, 
the effective and efficient achieve‑
ment of a specific objective26. Public 
procurement is one of the general ex 
ante conditionalities in the legislation, 
which stipulates that appropriate ar‑
rangements must be in place for the 
effective application of EU public pro‑
curement rules, to ensure that contract 
award procedures are transparent, that 
the staff involved are trained and that 
relevant information is disseminated 
to them. The Court welcomes this 
focus on compliance with applicable 
public procurement rules, which were 
identified as one of the critical sources 
of error in the 2007–13 programming 
period.

39

27  Article 62 of Regulation (EU) 

No 1305/2013 of the European 
Parliament and of the Council 
of 17 December 2013 on 
support for rural development 
by the European Agricultural 
Fund for Rural Development 
(EAFRD) and repealing Council 
Regulation (EC) No 1698/2005 
(OJ L 347, 20.12.2013, p. 487).

28  Article 38(1) of Regulation (EU) 
No 1306/2013 of the European 
Parliament and of the Council 
of 17 December 2013 on the 
financing, management and 
monitoring of the common 
agricultural policy and 
repealing Council Regulations 
(EEC) No 352/78, (EC) 
No 165/94, (EC) No 2799/98, 
(EC) No 814/2000, (EC) 
No 1290/2005 and (EC) 
No 485/2008 (OJ L 347, 
20.12.2013, p. 549).

Observations

85 
Although it was already covered in 
the general principles of control for 
the 2007–13 programming period, 
the verifiability and controllability of 
measures27 is highlighted in the new 
legislation. Under the new rules, Mem‑
ber States must ensure that all rural 
development measures are verifiable 
and controllable, both ex ante, before 
they are actually implemented, and 
subsequently, during implementation. 
The Court considers that this approach 
is likely to help reduce the error rate in 
two ways; on the one hand, by mak‑
ing it possible to define eligibility 
criteria and other commitments more 
precisely so that they can be better un‑
derstood and complied with by benefi‑
ciaries, and on the other hand, it will 
allow control procedures to be better 
designed to ensure that such criteria 
can be verified effectively.

86 
The methods for establishing and 
reimbursing costs incurred by benefi‑
ciaries are also improved in the new 
legislation. Thus, in addition to the 
usual method of reimbursement based 
on the eligible costs actually incurred 
and paid by beneficiaries, the new 
legal framework places alternative 
methods such as standard costs, lump 
sum payments and flat rate financing 
on an equal footing with reimburse‑
ment. The Court considers that the 
use of these simplified cost methods 
is likely to be beneficial for all parties, 
because it may reduce the adminis‑
trative formalities and may limit the 
scope of errors related to preparing 
and verifying payment claims based 
on invoices and payment documents.

87 
Accredited paying agencies will have 
to comply with additional criteria with 
regard to fraud. While the requirement 
that checks should include those ele‑
ments to prevent and detect fraud has 
been carried forward, two new provi‑
sions underline the role of the paying 
agencies in this respect: staff training 
should include fraud awareness and 
monitoring activities should include 
also the procedures to prevent and 
detect fraud. These developments are 
likely to help paying agencies increase 
their effectiveness in the prevention 
and detection of fraudulent actions.

88 
The ‘n+2 rule’ as it existed in the 
2007–13 programming period (see 
paragraph 18) has been relaxed and 
transformed into a ‘n+3 rule’28, giving 
Member States an additional year to 
spend the allocated budget. This could 
reduce the imbalance between the 
pressure on Member States to spend 
the budget, and the need to ensure 
that it is spent correctly and in ac‑
cordance with the principles of sound 
financial management.

89 
As a general rule, the beneficiaries of 
investment in food processing activi‑
ties had to be small and medium‑sized 
enterprises (see paragraph 43). The 
new legal framework removes this eli‑
gibility criterion, which was one of the 
main causes of error for this type of in‑
vestment. The impact of this proposal 
may have a positive effect on reducing 
the error rate, but a negative effect 
on the effectiveness of the policy (see 
paragraph 35).

40

29  Article 30(1) of Commission 
Regulation (EU) No 65/2011.

30  Article 63(1) of Commission 

Implementing Regulation (EU) 
No 809/2014 of 17 July 2014 
laying down rules for the 
application of Regulation (EU) 
No 1306/2013 of the European 
Parliament and of the Council 
with regard to the integrated 
administration and control 
system, rural development 
measures and cross 
compliance (OJ L 227, 
31.7.2014, p. 69).

Observations

90 
In the 2007–13 programming period29, 
in case of a difference of more than 
3 % between the payment claimed 
by the beneficiary and the amount 
declared eligible by the paying agency, 
a penalty equal to the amount of that 
difference was applied. This system 
was in place in order to deter ben‑
eficiaries from claiming expenditure 
which was not eligible. Under the 
new legal framework30, the threshold 
for the application of the penalty has 
been raised to 10 %. This change is 
likely to reduce the dissuasive effect 
of the provision, which may lead to 
an increase in ineligible expenditure 
included in the payment claims.

Direct provisions from the EU 
regulations were not the main 
source of error

91 
As shown above, the new EU legal 
framework is likely to help reduce the 
error rate. Additional attention needs 
to be given during the subsequent 
steps of the regulatory process at 
Member State level, as most errors oc‑
cur in the implementation of specific 
provisions in Member State legislation 
(see paragraph 14).

92 
Since the Member States’ legislation 
has not yet been approved (see para‑
graph 10), no further insights could be 
obtained into the potential effect of 
regulatory changes on the error rate.

Conclusions and 
recommendations

41

 — from the paying agency perspec‑

tive, the Court concludes that most 
errors could and should have been 
prevented during administrative 
and on‑the‑spot checks.

96 
For area‑related aid, three factors ex‑
plain the error rate: limited incentives 
for beneficiaries to comply with farm‑
ing commitments, a low control rate 
for farming commitments and weak 
deterrence by the sanction system 
(paragraphs 55 to 69).

97 
As a response to the high error rate in 
rural development, the Commission 
asked Member States to develop ac‑
tion plans to prevent and correct the 
causes of errors. While this is a posi‑
tive development, the action plans 
mainly have a reactive role, and do not 
systematically address the problems 
that caused the errors in all Member 
States. In particular, there is a lack of 
preventive action against widespread 
weaknesses at EU level (paragraphs 70 
to 81).

93 
The Court concludes that the Commis‑
sion and the Member States are par‑
tially effective in addressing the main 
causes of the high error rate for rural 
development. This overall conclusion is 
mainly based on the assessment that, 
despite the Commission’s initiatives, 
Member States’ action plans did not 
systematically address the weaknesses 
identified.

94 
In order to identify the causes of errors 
in rural development spending, the 
Court analysed a sample of transac‑
tions selected randomly during the 
legality and regularity audits for 2011, 
2012 and 2013. The results showed 
that, despite an equal share of expend‑
iture, investment measures account 
for two thirds of the error rate and 
area‑related aid for the remaining third 
(paragraphs 12 to 21).

95 
For investment measures, the causes 
of errors can be identified in two ways 
(paragraphs 22 to 54):

 — from the beneficiary perspective, 

the main sources of non‑compli‑
ance related to public procure‑
ment, eligibility criteria for private 
and public beneficiaries and 
suspected fraudulent actions by 
private beneficiaries;

Conclusions and recommendations

42

Recommendation 1

Agri‑environment payments

The Commission should complete its 
corrective actions to date by continu‑
ing to focus on the root causes of error 
for rural development spending. In this 
regard the following preventive and 
corrective actions should be taken by 
the Member States where relevant:

Public procurement

• 

In the application of the concept of 
ex ante conditionality (see para‑
graph 84) Member States should 
develop and provide detailed 
guidance to beneficiaries on how 
to apply public procurement rules. 
The national authorities specialis‑
ing in monitoring compliance with 
public procurement rules should 
be involved in this process. Focus 
should be put on the three main 
breaches of rules: unjustified direct 
award without proper competi‑
tive procedure; misapplication of 
selection and award criteria; lack of 
equal treatment of tenderers.

Intentional circumvention of rules

• 

Based on the specific eligibility 
and selection criteria from their 
rural development programmes, 
Member States should establish 
guidelines to help their inspectors 
to identify indicators of suspected 
fraudulent actions.

•  Member States should increase 

the scope of their administrative 
controls, to include commitments 
which can be checked based on 
documentary evidence and which 
are currently verified only during 
the 5 % on‑the‑spot checks. In 
addition, the system of reductions 
and sanctions should be designed 
to have an effective dissuasive ef‑
fect on potential rule‑breakers.

98 
The EU legal framework for the 
2014–20 period has been adopted, and 
this is a potential means of addressing 
causes of error. However, two stages 
which are currently ongoing provide 
the main potential for reducing errors: 
the Commission’s review and approval 
of rural development programmes, 
and the Member States’ implementa‑
tion of national regulatory frameworks 
(paragraphs 82 to 92).

Recommendation 2

The Commission should closely moni‑
tor the implementation of the RDPs 
and in its conformity audits take ac‑
count of the applicable rules including 
those adopted at national level where 
relevant, in order to reduce the risk 
of repeating weaknesses and errors 
encountered during the 2007–13 pro‑
gramming period.

Conclusions and recommendations

43

99 
The Court identified one investment 
measure (setting up of young farm‑
ers, see paragraphs 36 to 38), and two 
area‑related measures (‘payments for 
less‑favoured areas’, see paragraphs 66 
to 69) which had low error rates. These 
measures have three main characteris‑
tics: a focused scope, a limited number 
of requirements and the use of lump 
sum payments. The Court found that 
another investment measure, which 
supports investment in the processing 
of agricultural products, was the most 
prone to error. More than half of the 
projects audited had errors, a third of 
which were due to suspected fraudu‑
lent actions. The Court criticised the 
effectiveness of this measure in a pre‑
vious special report.

Recommendation 3

The Commission and the Member 
States should analyse:

• 

to what extent the characteristics 
of a more focused scope, limited 
eligibility criteria and the use of 
simplified cost options can be rep‑
licated into the design and imple‑
mentation of an increased number 
of support measures, without 
jeopardising the overall objectives 
of those measures;

• 

how to improve the scheme for 
supporting investments in the 
processing of agricultural prod‑
ucts, taking into consideration the 
following elements:

—  the actual need for public aid 
for this sector and the risk of 
deadweight;

—  the categories of beneficiaries 
targeted: farmers looking to 
achieve vertical integration of 
their businesses, or companies 
which have no agricultural 
activity;

—  the high public aid ceiling, 
which constitutes an incen‑
tive for large corporations, as 
only they have access to the 
required co‑financing;

—  the entire set of eligibility con‑
ditions and the potential for 
circumventing them;

—  greater efforts to improve the 
design and performance of 
administrative and on‑the‑spot 
controls.

• 

the agri‑environment payments 
measure so that, as far as possible, 
commitments can be controlled 
via Member States’ administrative 
checks.

Conclusions and recommendations

44

100 
In the context of reducing the causes 
of error, a recurring finding in this 
report (see paragraphs 33 to 35, 38, 67, 
88 to 90, Box 3 and Box 11) has been 
the need to maintain an appropriate 
balance between the number and 
complexity of rules, as a transposition 
of the need to achieve pre‑defined 
objectives, and the need to guarantee 

the legality and regularity of spend‑
ing. In the Court’s opinion, finding 
the right balance between these two 
counterweights is the key to the suc‑
cessful implementation of the rural 
development policy.

This report was adopted by Chamber I, headed by Mrs Rasa BUDBERGYTĖ, 
Member of the Court of Auditors, in Luxembourg at its meeting of 
17 December 2014.

For the Court of Auditors

Vítor Manuel da SILVA CALDEIRA
President

 
 
 
Annex

45

List of rural development measures

x
e
n
n
A

Investment measures

Measure

Expenditure1 (euro)

Transactions audited

Modernisation of agricultural holdings

Basic services for the economy and rural population

Setting up of young farmers

Village renewal and development

Adding value to agricultural and forestry products

Implementing local development strategies. Quality of life/diversification

Infrastructure related to the development and adaptation of agriculture and forestry

Early retirement

Business creation and development

Conservation and upgrading of the rural heritage

Restoring forestry potential and introducing prevention actions

Technical assistance

Diversification into non‑agricultural activities

Vocational training and information actions

Encouragement of tourism activities

Restoring agricultural production potential damaged by natural disasters and introducing  
appropriate prevention actions

Cooperation for development of new products, processes and technologies in the agriculture and 
food sector and the forestry sector

Running the local action group, acquiring skills and animating the territory

Holdings undergoing restructuring due to a reform of a common market organisation

Implementing local development strategies. Competitiveness

First afforestation of agricultural land (establishment costs)

Non‑productive investments linked to forests

Semi‑subsistence farming

Non‑productive investments linked to agri‑environmental commitments or Natura 2000

Producer groups

Use of advisory services

Participation of farmers in food quality schemes

Setting up of management, relief and advisory services

8 204 333 653

1 965 164 204

2 096 198 537

2 300 229 913

2 990 722 693

1 707 595 920

2 355 539 793

2 051 938 167

881 435 718

682 545 431

963 189 776

763 706 346

714 070 708

518 543 051

482 748 900

348 644 877

113 588 163

545 795 172

146 941 744

145 665 094

1 226 065 5452

379 677 940

609 703 070

315 192 539

152 989 100

89 316 108

65 390 549

24 853 320

53

24

20

20

19

17

15

13

9

8

5

4

4

4

4

4

4

3

3

3

2

2

1

1

1

1

1

1

1  Cumulative amounts paid to the Member States since the beginning of the programming period (2007) until the end of the 2013 financial year 

(15 October 2013), as registered in the Commission’s SFC database.

2 

First afforestation for agricultural land supports establishment costs (investments made for the preparation of the land and planting) and 
area‑related aid (maintenance and compensation). No distinction is made in the declaration of expenditure to the Commission.

Annex

x
e
n
n
A

46

Investment measures

Measure

Expenditure1 (euro)

Transactions audited

Provision of farm advisory and extension services in Bulgaria and Romania

Improvement of the economic value of forests

First afforestation of non‑agricultural land (establishment costs)

Skills acquisition, animation and implementation of local development strategies

Information and promotion activities

Meeting standards based on Community legislation

Training and information

Implementing cooperation projects

Implementing local development strategies. Environment/land management

First establishment of agroforestry systems on agricultural land

7 136 945

211 138 607

111 889 830

73 558 357

66 792 678

59 547 670

58 573 586

46 980 838

21 311 569

536 880

1

0

0

0

0

0

0

0

0

0

Total

33 499 252 991

247

Area‑related aid

Measure

Expenditure (euro)

Transactions audited

Agri‑environment payments

Natural handicap payments to farmers in mountain areas

Natural handicap payments to farmers in areas other than mountain areas

Animal welfare payments

First afforestation of agricultural land (annual payment during 5 years for maintenance costs or 
compensation for the loss of income during 15 years)

Natura 2000 payments and payments linked to the Directive 2000/60/EC

Forest‑environment payments

Natura 2000 payments

Complements to Direct Payments for Bulgaria and Romania

Total

18 616 040 063

6 267 068 345

6 357 074 251

409 206 501

1 226 065 5452

165 985 883

40 496 635

33 193 755

436 997 683

121

43

35

8

6

1

0

0

0

33 552 128 661

214

1  Cumulative amounts paid to the Member States since the beginning of the programming period (2007) until the end of the 2013 financial year 

(15 October 2013), as registered in the Commission’s SFC database.

2 

First afforestation for agricultural land supports establishment costs (investments made for the preparation of the land and planting) and 
area‑related aid (maintenance and compensation). No distinction is made in the declaration of expenditure to the Commission.

Reply of the  
Commission

47

Executive summary

II
The Commission welcomes the Court’s report on 
the analysis of the root causes of errors which sum‑
marises the results of the last 3 years of Statement 
of Assurance exercise and largely confirms the main 
conclusions already drawn by the Commission in 
its Staff Working Document on the assessment of 
root causes of errors in the implementation of rural 
development policy and corrective actions pre‑
sented to the European Parliament and Council in 
June 20131. 

The Court reports an average error rate 2011–13 for 
rural development of 8,2 %. Nevertheless, the Com‑
mission notes the slight downward development 
in the error rate for EAFRD (8,4 % in 2011 to 7,9 % in 
2013).

This error rate is higher than the individual rates 
published annually by the ECA in Chapter 4 of the 
annual report. The reason is that the present analy‑
sis covers 461 transactions out of 532 in total for 
the 3 years (which include health, environment and 
fishery policies). The 71 transactions not concerned 
by this report have a lower average error rate. The 
Commission also notes that the Court defines the 
sample and calculates on a yearly basis the error 
rate at policy level (rural development, environ‑
ment, fisheries and health).

The rural development represents 90 % of the 
policy expenditure and it is generally more prone 
to errors than other areas in the policy group. The 
complexity of some eligibility requirements in the 
rural development measures played an important 
role in the high level of error rates.

1  SWD(2013) 244 of 27.06.2013.

III
Since 2012, the Commission has been addressing 
the issue of high error rate by requesting national 
action plans from the Member States (MS) and 
monitoring their implementation. Based on experi‑
ence gained and on recommendations from the 
Court of Auditors, these action plans have been 
improved over time. 

The expected results of all the actions will not 
always be evident in the short‑term, especially for 
measures implemented through multiannual com‑
mitments. Nevertheless, the first results of the joint 
efforts to reduce error rates through the implemen‑
tation of the action plans can already be seen in 
a lower error rate for rural development in 2013.

The Commission will keep on monitoring the 
implementation of the action plans, both from the 
audit and operational perspectives, through bilat‑
eral meetings, monitoring committees and annual 
review meetings.

V
The Commission has also found weaknesses regard‑
ing the public procurement in its own audits. 
Substantial financial corrections have already been 
made in this respect. 

Public procurement is one of the central elements 
in the action plans for rural development.

Nevertheless, it should be noted that the non‑com‑
pliance with procurement rules does not necessar‑
ily mean that 100 % of the expenses involved are 
ineligible. The project as such may well achieve its 
goal and provide real added value.

Reply of the Commission 

48

For the period 2014–20, the Commission has already 
presented guidance for practitioners on the avoid‑
ance of common errors in European Structural and 
Investment Funds projects. These guidelines were 
presented to the managing authorities and pay‑
ing agencies at the Seminar on Error Rate that took 
place in October 2014.

VI
Substantial shortcomings regarding the measure 
supporting the processing of agricultural products 
are followed up in the audit conformity procedures.

As regards intentional infringements, the Commis‑
sion is implementing an anti‑fraud strategy, organ‑
ising dedicated seminars in several Member States.

The Commission shares this conclusion.

The Commission will continue providing the Mem‑
ber States with the recommendations and guide‑
lines, as well as disseminating best practices to 
improve the control system in order to avoid errors.

Furthermore, the paying agencies must com‑
ply with the accreditation criteria laid down in 
Annex I of Regulation 907/2014 (programme 
2014–20) before any payments are made. Commis‑
sion services reviews the accreditation through ex 
post audits.

VIII
As regards limited incentives for beneficiaries to 
comply with farming commitments, agri‑environ‑
mental schemes reflect voluntary commitments 
by farmers to provide environmental benefits and 
public goods which go beyond the mandatory 
requirements. The compensatory nature of agri‑
environment payments (covering costs incurred 
and income foregone) does not imply immediate 
economic benefits for the farmers, although these 
are not excluded in the longer run.

As regards the ‘low’ control rate for commitments, 
according to the legislation in force, where on‑the‑
spot checks reveal a significant non‑compliance, 
the Member State is obliged to increase the per‑
centage of beneficiaries to be checked on the spot. 
The correct application of this is verified during the 
Commission conformity audits.

The control rate for farming commitments is estab‑
lished at 100 % for the administrative checks and 
5 % for the on‑the‑spot checks. The costs of man‑
agement and controls published in the 2013 AAR 
amount to EUR 4 billion for the whole CAP. There ‑
fore, the emphasis should be put on the improve‑
ment of effectiveness of the controls and not on 
their increase.

As regards the sanctions, the Commission considers 
that while sanctions for non‑compliance have to be 
proportionate they shall remain a dissuasive tool.

Reply of the Commission 

49

IX
The establishment of the action plans was con‑
ceived as a preventive process based on the Staff 
Working Document (2013) 244, built on the self‑
assessment of the Member States of the root causes 
that had an impact on the error rates. This process 
has progressively incorporated the reactive per‑
spective, systematically taking into account the 
audit findings and proposing specific corrective 
actions. The double perspective (preventive and 
reactive) is still part of the exercise. The last update 
of the action plans shows that almost 50 % of the 
actions were triggered by concrete audit findings 
of the Court or the Commission, whilst the other 
half were based on self‑assessment of the Member 
States. 

Furthermore, the ex ante assessment on the verifi‑
ability and controllability of all measures included 
in the RDPs 2014–20 also address the risk of error 
rate from a preventive perspective.

X
The Commission shares the view that it is impor‑
tant to strike an appropriate balance between the 
number and complexity of rules on the one hand, 
while guaranteeing the legality and regularity of 
expenditure.

XI (a)
The Commission accepts the recommendation. The 
specific issues raised by the Court should only be 
dealt with in the action plans if shortcomings have 
been identified. The Commission recognises the 
importance of guidance related to the three root 
causes of errors and dissemination of best practices. 
This will be dealt with through the European Net‑
work for Rural Development and the seminars.

Furthermore, the Commission has already pre‑
sented to Member States specific guidance on 
public procurement and Agro‑Environment‑Climate 
measure, including double financing.

Intentional circumvention of rules is part of the 
Anti‑fraud strategy and the seminars organised 
thereof in several Member States. 

XI (b)
The Commission accepts this recommendation. The 
Commission is currently assessing the controllabil‑
ity and verifiability of the new programmes and 
will raise any shortcoming in the framework of the 
monitoring committees and annual review meet‑
ings with the managing authorities.

Moreover, audit findings will be closely followed 
in order to detect and correct any source of error 
attributable to the national implementing rules, 
requesting immediate modifications if needed. 

Lessons drawn from the implementation of the pro‑
grammes and national rules thereof, will be shared 
through the ENRD and dedicated seminars on error 
rates. 

XI (c)
The Commission partially accepts the recommenda‑
tion as it cannot prejudge the scope and the result 
of such analysis or future policy choices by the 
legislators for the next programming period. 

Reply of the Commission 

50

In 2017 the Commission will prepare a strategic 
report of the Fund, summarising the annual pro‑
gress reports submitted by Member States (Arti‑
cle 53 Regulation 1303/2013). Furthermore, the 
Commission and the Member States will assess the 
performance of the RDPs during the review process 
foreseen under Article 21 Regulation 1303/2013. In 
the light of these and other evidences (e.g. audit 
findings), the Commission will assess the policy 
conception and the eventual need to make propos‑
als for the following programming period.

At the end of the programming period, the Com‑
mission will make a thorough analysis of the contin‑
ued need for each support measure before making 
a proposal for the following programming period as 
has been done for the present period.

The Commission agrees that administrative checks 
should be used when possible, although it notes 
that in most cases this is not feasible for agro‑envi‑
ronment operations.

Introduction

01
The EU allocated 96 billion and contribution of the 
Member States is expected at 55 billion.

04
The Court reports an average error rate 2011–13 for 
rural development of 8,2 %. Nevertheless, the Com‑
mission notes the slight downward development 
in the error rate for EAFRD (8,4 % in 2011 to 7,9 % in 
2013).

This error rate is higher than the individual rates 
published annually by the ECA in Chapter 4 of the 
annual report. The reason is that the present analy‑
sis covers 461 transactions out of 532 in total for 
the 3 years (which include health, environment and 
fishery policies). The 71 transactions not concerned 
by this report have a lower average error rate. The 
Commission also notes that the Court defines the 
sample and calculates on a yearly basis the error 
rate at policy level (rural development, environ‑
ment, fisheries and health).

The rural development represents 90 % of the 
policy expenditure and it is generally more prone 
to errors than other areas in the policy group. The 
complexity of some eligibility requirements in the 
rural development measures played an important 
role in the high level of error rates.

05
Error rates do not necessarily imply that policy 
objectives are not attained, which could only be 
stated by assessing the performance of the opera‑
tions supported. To achieve the policy goals of 
the rural development policy a certain degree of 
complexity in the implementation of the policy 
is unavoidable taking into account the ambitious 
objectives of rural development (RD). In view of this, 
it has to be recognised that it will be very difficult 
to reach a 2 % or lower error rate without deploy‑
ing unreasonable control resources at a prohibitive 
cost.

Reply of the Commission 

51

Types and prevalence of errors 
found

Public procurement is one of the central elements 
in the action plans for rural development.

12
As regards the types of errors indicated by the 
Court, it should be noted that during its own audits 
of investment measures and area‑related schemes 
the Commission found shortcomings similar to 
those detected by the Court of Auditors. Financial 
corrections have been imposed on the Member 
States concerned (or conformity clearance proce‑
dures are underway with a view to making such 
corrections) in order to protect the EU budget. 
Furthermore, where the shortcomings were found, 
Member States concerned were required to take 
remedial actions.

14
The rural development policy is implemented 
through a national or regional rural development 
programme. The majority of errors relates to the 
specific conditions laid down in the programmes 
and other national rules. These are necessary for the 
implementation of the policy, but the challenge for 
the Member States is to limit these national rules to 
the strict necessary for achieving the policy goals. 

For the programming period 2014–20 all rural 
development programmes are required to include 
an ex ante assessment on the verifiability and con‑
trollability of the measures, conducted jointly by 
the managing authority and the paying agency.

Observations

26
During its own audits the Commission also found 
shortcomings regarding the public procurement 
procedures. Financial corrections have already been 
made in this respect. 

Nevertheless, it should be noted that the non‑com‑
pliance of procurement does not necessarily mean 
that 100 % of the expenses involved are ineligible. 
The project as such may well achieve its goal and 
provide real added value. 

Moreover, on 19.12.2013, the Commission adopted 
new guidelines for determining financial correc‑
tions to be made to expenditure financed under 
the shared management, for non‑compliance with 
the rules on public procurement2. According to 
these guidelines, the non‑respect of procurement 
rules is to be judged based on the principle of 
proportionality.

A guidance document on most common irregulari‑
ties in the management of European Structural and 
Investment Funds has already been presented to 
Member States (4th Seminar Error Rate, Oct 2014).

27
As regards Table 1: 

Romania: the reported error was detected by ECA 
in the DAS 2012. The RO Error Rate Action Plan 
includes measures to address weaknesses in public 
procurement procedures. 

The Netherlands: procurement rules were retroac‑
tively withdrawn by the province in 2012 with effect 
from 1 January 2010. However, this should not have 
been applied in this case. The Commission is follow‑
ing it up with the Member State.

Germany (Brandenburg-Berlin): As the last com‑
mitments for broadband could be made in 2012, no 
further preventive and corrective actions could be 
implemented. Support for broadband is no longer 
foreseen for the period 2014–20.

2  Commission Decision C(2013) 9527.

Reply of the Commission 

52

Box 2
Sweden has included ‘public procurement’ as 
root cause of errors and corrective and preventive 
actions in its error rate action plan.

32
The weaknesses listed in Table 2 are covered in the 
respective action plans aiming at improving the 
administrative control system.

35
The Commission shares the view that simplification 
should not hamper the principles of sound financial 
management. 

The new legal framework for CAP 2014–20 con‑
tains simplification factors which do not adversely 
impact the sound financial management (e.g. 
lump sum payments, standard costs). Article 60 of 
R1305/2013 establishes that only expenditure for 
investments that has been incurred after the appli‑
cation for support shall be eligible.

Box 3
These weaknesses are covered in the respective 
action plans aiming at improving the administrative 
control system.

This is no longer possible under the new legal 
framework. See reply to point 35.

38
The lump sum payment, as in the case of young 
farmers support, may not respond to other meas‑
ures’ policy objectives. Therefore, simplification in 
the implementation must ensure an adequate bal‑
ance with the achievement of the policy objectives 
and sound financial balance. The benefit on the 
reduction of the error rate should not be the only 
factor to be taken into account.

40
The Commission would like to point out that the 
fraudulent expenditure for rural development 
detected and reported by Member States amounts 
to 0,11 %3. 

43
During its own audits the Commission also found 
weaknesses in the verification of small and medium 
enterprises (SME) criterion and non‑respect of 
appropriate private procurement procedures. 
Where shortcomings were found, net financial cor‑
rections have been imposed on the Member States 
concerned (or conformity clearance procedures are 
underway with a view to making such corrections) 
in order to protect the EU budget. Furthermore, 
Member States concerned were required to take 
remedial actions.

In the current legal framework 2014–20, there are 
no limits for the size of the company in order to 
become beneficiary of support under investment 
for physical assets. Member States can target the 
support to specific beneficiaries following conclu‑
sions of the SWOT and needs assessment. These 
further requirements will have to be controllable 
and verifiable. 

46
Similar provisions will be applicable during the 
period 2014–20.

48
The Commission shares the view that the national 
authorities could potentially have detected many 
of the errors found by the Court. The CAP rules pro‑
vide the Member States with all necessary instru‑
ments to mitigate most of the risks of errors. 

The Commission will continue providing the Mem‑
ber States with the recommendations and guide‑
lines, as well as disseminating best practices to 
improve the control system in order to avoid errors.

3   Report from the Commission to the European Parliament 

and the Council: Protection of the European Union’s financial 
interests — Fight against fraud 2013 Annual Report COM(2014) 
474 final.

Reply of the Commission 

53

Box 5
These weaknesses are covered in the respective 
action plans aiming at improving the administrative 
control system.

51
During its own audits the Commission also found 
weaknesses on the conduct of administrative 
checks. Member States concerned were required to 
take remedial actions and financial corrections have 
been imposed, when appropriate. 

57
During its own audits the Commission also found 
weaknesses in the verification of agri‑environment 
commitments and Member States concerned were 
required to take remedial actions. In addition finan‑
cial corrections have been imposed on the Member 
States concerned, when appropriate. 

Box 7
The deficiencies in Malta are largely due to the fact 
that beneficiaries of agri‑environment measure sup‑
port do not respect the commitments. The Maltese 
administration has undertaken many targeted 
information actions and has provided one‑on‑one 
trainings for certain beneficiaries.

59
Agri‑environmental schemes reflect voluntary 
commitments by farmers to provide environmental 
benefits and environmental public goods which go 
beyond the mandatory requirements. The compen‑
satory nature of agri‑environment payments (cover‑
ing costs incurred and income foregone) does not 
imply immediate economic benefits for the farmers, 
although these are not excluded in the longer run.

62
As regards the ‘low’ control rate for agri‑environ‑
ment commitments, according to the applicable 
legal acts, when on‑the‑spot checks reveal a signifi‑
cant non‑compliance in the context of a given aid 
scheme or support measure or in a region or part 
of a region, the Member State is obliged to increase 
the percentage of beneficiaries to be checked on 
the spot.

Depending on the Member State and the individual 
measure, the actual on‑the‑spot check rate could 
be higher than 5 %. The correct application of this is 
verified during the conformity audits carried out by 
the Commission. 

All eligibility criteria, commitments and other 
obligations must be checked during the on‑the‑
spot check. If any of these can’t be checked at the 
moment of the on‑the‑spot check, a second visit 
shall be organised. 

63
According to the applicable legal acts, administra‑
tive checks shall cover all elements that are pos‑
sible and appropriate to control by administrative 
means (including the respect of agri‑environment 
commitments). 

During its conformity audits the Commission also 
verifies whether the checks could be done in an 
administrative way in addition to the on‑the‑spot. 
Where appropriate, recommendations to the Mem‑
ber States are issued and financial corrections are 
applied.

Moreover, a new legal framework for CAP 2014–20 
contains provisions requiring the Member States to 
ensure that all the rural development measures that 
they intend to implement are verifiable and control‑
lable. An ex ante assessment of the verifiability and 
controllability of the measures has to be included in 
the rural development programme.

Reply of the Commission 

54

64
The Commission considers that while sanctions for 
non‑compliance have to be proportionate, they 
shall remain a dissuasive tool.

Under the new legal framework, the reoccurrence 
must be also taken into account when calculat‑
ing the reduction. It is up to the Member States to 
define the actual application of the criteria included 
in the legal texts, as well as the concrete rates and 
amounts thereof. 

65
In case of serious non compliances with the com‑
mitments, the beneficiary shall be excluded from 
support during the year of the finding and the next 
one. 

Box 10
These weaknesses are covered in the respective 
action plans aiming at improving the administrative 
control system.

74
Since 2012, the Commission has been address‑
ing the issue of the high error rate by requesting 
national action plans from the Member States and 
monitoring their implementation. Based on the 
experiences gained and recommendations from 
the Court of Auditors, these action plans have been 
improved over time. 

The expected results of all the actions will not 
always be evident in the short‑term, especially for 
measures implemented through multiannual com‑
mitments. Nevertheless, the first results of the joint 
efforts of the Commission and the Member States 
to reduce error rates through the implementation of 
the action plans can already be seen in a lower error 
rate for rural development in 2013.

The Commission will keep on monitoring the 
implementation of the action plans, both from the 
audit and operational perspective, through bilat‑
eral meetings, monitoring committees and annual 
review meetings.

75
Commission’s powers have been strengthened 
with the new CAP Regulation (EU) No 1306/2013. 
Article 41(2) provides that interim payments to the 
Member State may be suspended or reduced when 
it is found that key components of the national con‑
trol system are not effective or when the necessary 
remedial measures have not been implemented. 
Article 36(7) provides for the interruption of interim 
payments as a first quick and reactive tool in case of 
concerns on the legality and regularity of payments.

Furthermore, in order to avoid financial corrections, 
each paying agency for which reservations have 
been made in DG Agriculture and Rural Develop‑
ment’s annual activity report, will have to act 
promptly.

The Commission considers that while sanctions for 
non‑compliance have to be proportionate, they 
shall remain a dissuasive tool. 

76
Audit findings were more systematically followed 
up in the latest updates of action plans (September 
2014). The Member States had to take into account 
the Court’s and the Commission’s audit findings to 
a much larger extent. Indeed, 46 % of the actions 
presented by Member States addressed concrete 
audit findings, 50 % of which came from the Court’s 
reports. 

It should also be noted that all material cases 
reported by the Court are followed up by the Com‑
mission, including through conformity procedure, if 
appropriate.

Reply of the Commission 

55

77
In the framework of the third update of the action 
plans in September 2014, the Member States were 
requested to provide monitoring indicators and lat‑
est known results in order to improve the efficiency 
of the actions.

78
The four joint Committee meetings for Rural Devel‑
opment and Agricultural Funds dedicated exclu‑
sively to the Error Rates (the Seminars) organised 
so far, have been a systematic process by which the 
sharing of good and innovative practices has taken 
place. In addition, it should be noted that outside 
the framework of the seminars and the ENDR activi‑
ties, an exchange of best practices also takes place 
in the formal meetings of the Rural Development 
Committee and during the three annual meetings 
of the directors of the paying agencies of all the 
Member States.

As from 2015, the European Network for Rural 
Development (ENRD) will be another means by 
which best practices will be disseminated during 
the 2014–20 period. The ENRD will organise specific 
events, share relevant information and involve the 
stakeholders in aware raising initiatives. 

79
The Commission ensures regular exchanges with 
the Member States on error‑rate‑related issues and 
has provided a comprehensive set of guidance 
documents on rural development measures and 
other relevant horizontal topics (e.g. simplified cost 
options, public procurement rules). 

In particular, the SWD (2013) 244 on error rates in 
rural development included a common set of root 
causes that could eventually be relevant in all Mem‑
ber States, who ultimately should define by which 
ones they are affected, establishing the adequate 
mitigating actions.

80
Deficiencies evidenced through audit findings 
are being followed up by the Commission and the 
Member States are systematically requested to 
address them in the action plans. 

81
The fact that Member States have carried out an 
ex ante assessment on the verifiability and control‑
lability of the measures (preventive), together with 
a closer follow‑up of the audit findings, will allow 
to improve the effectiveness of the action plans, as 
shown in the October 2014 update.

90
The change referred to by the Court was introduced 
because the cost of application of administrative 
penalties for small amounts could be disproportion‑
ate compared to the benefits, jeopardising there‑
fore the sound financial management.

91
The Commission is fully aware of the importance 
of the subsequent steps of the regulatory process. 
In this respect the responsibilities of the Member 
States have been enhanced by requiring an ex ante 
assessment by both managing authorities and 
paying agencies of the verifiability and controllabil‑
ity of the measures programmed. Moreover, the 
Commission disposes now of reinforced preventive 
tools such as suspensions and interruptions, which 
should have a deterrent effect on errors.

As confirmed by the Court in this Special Report, 
gold‑plating (additional and unjustified national/
regional rules) has only a marginal impact to the 
error rate. 

Reply of the Commission 

56

Conclusions and recommendations

95 — Second indent
The Commission shares this conclusion.

93
Since 2012, the Commission has been address‑
ing the issue of the high error rate by requesting 
national action plans from the Member States and 
monitoring their implementation. Based on the 
experiences gained and recommendations from 
the Court of Auditors, these action plans have been 
improved over time. 

The expected results of all the actions will not 
always be evident in the short‑term, especially for 
measures implemented through multiannual com‑
mitments. Nevertheless, the first results of the joint 
efforts of the Commission and the Member States 
to reduce error rates through the implementation of 
the action plans can already be seen in a lower error 
rate for rural development in 2013.

The Commission will keep on monitoring the 
implementation of the action plans, both from the 
audit and operational perspectives, through bilat‑
eral meetings, monitoring committees and annual 
review meetings.

95 — First indent
The Commission has also found weaknesses regard‑
ing these issues in its own audits. Substantial finan‑
cial corrections have already been made in this 
respect. 

Public procurement and non‑respect of commit‑
ments are central elements in the action plans for 
rural development.

Nevertheless, it should be noted that the non‑com‑
pliance with procurement rules does not necessar‑
ily mean that 100 % of the expenses involved are 
ineligible. The project as such may well achieve its 
goal and provide real added value.

The Commission will continue providing the Mem‑
ber States with the recommendations and guide‑
lines, as well as disseminating best practices to 
improve the control system in order to avoid errors.

Furthermore, the Paying Agencies must com‑
ply with the accreditation criteria laid down in 
Annex I of Regulation 907/2014 (programme 
2014–20) before any payments are made. Commis‑
sion services reviews the accreditation through ex 
post audits.

96
As regards limited incentives for beneficiaries to 
comply with farming commitments, agri‑environ‑
mental schemes reflect voluntary commitments 
by farmers to provide environmental benefits and 
public goods which go beyond the mandatory 
requirements. The compensatory nature of agri‑
environment payments (covering costs incurred 
and income foregone) does not imply immediate 
economic benefits for the farmers, although these 
are not excluded in the longer run.

As regards the ‘low’ control rate for commitments, 
according to the legislation in force, where on‑the‑
spot checks reveal a significant non‑compliance, 
the Member State is obliged to increase the per‑
centage of beneficiaries to be checked on the spot. 
The correct application of this is verified during the 
Commission conformity audits.

The control rate for farming commitments is estab‑
lished at 100 % for the administrative checks and 
5 % for the on‑the‑spot checks. The costs of man‑
agement and controls published in the 2013 AAR 
amount to EUR 4 billion for the whole CAP. There ‑
fore, the emphasis should be put on the improve‑
ment of effectiveness of the controls and not on 
their increase.

Reply of the Commission 

57

As regards the sanctions, the Commission considers 
that while sanctions for non‑compliance have to be 
proportionate they shall remain a dissuasive tool.

Recommendation 1 — Public procurement
The recommendation is addressed to the Member 
States. 

97
The establishment of the action plans was con‑
ceived as a preventive process based on SWD (2013) 
244, built on the self‑assessment of the Member 
States of the root causes that had an impact on the 
error rates. This process has progressively incorpo‑
rated the reactive perspective, systematically taking 
into account the audit findings and proposing 
specific corrective actions. The double perspective 
(preventive and reactive) is still part of the exer‑
cise. The last update of the action plans shows that 
almost 50 % of the actions were triggered by con‑
crete audit findings of the Court or the Commission, 
whilst the other half were based on self‑assessment 
of the Member States. 

Furthermore, the ex ante assessment on the verifi‑
ability and controllability of all measures included 
in the RDPs 2014–20 also address the risk of error 
rate from a preventive perspective.

Recommendation 1
The Commission accepts the recommendation. The 
specific issues raised by the Court should only be 
dealt with in the action plans if shortcomings have 
been identified. 

The Commission recognises the importance of 
guidance related to the three root causes of errors 
and dissemination of best practices. This will be 
dealt with through the European Network for Rural 
Development and the seminars.

Furthermore, the Commission has already pre‑
sented to Member States specific guidance on 
public procurement and Agro‑Environment‑Climate 
measure, including double financing. Intentional 
circumvention of rules is part of the Anti‑fraud strat‑
egy and the seminars organised thereof in several 
Member States. 

Nevertheless the Commission would like to under‑
line that for the 2014–20 period, it has already 
presented guidance for practitioners on the avoid‑
ance of common errors in European Structural and 
Investment Funds projects. These guidelines were 
presented to managing authorities and paying 
agencies in the Seminar on Error Rate that took 
place in October 2014.

Recommendation 1 — Intentional 
circumvention of rules
The Commission agrees with the recommendation 
which is addressed to the Member States.

Recommendation 1 — Agri‑environment 
payments
The Commission agrees with the recommendation 
which is addressed to the Member States and would 
like to underline that during its conformity audits 
it systematically verifies whether administrative 
checks could be carried out in addition to the on‑
the‑spot ones. If that is the case, recommendations 
to the Member States are issued to increase the 
scope of administrative checks and financial correc‑
tions are applied.

Moreover, the legal framework for 2014–20 CAP 
contains provisions requiring the Member States to 
ensure that all the rural development measures to 
be implemented are verifiable and controllable.

All RDPs must include an ex ante assessment on 
the verifiability and controllability of the measures, 
including Agro‑Environment‑Climate measures, 
operations and concrete commitments. If these 
controls are not satisfactory, the RDP must be modi‑
fied accordingly (Article 62 R1305/2013). Further‑
more, full reduction of support is foreseen in case 
of serious non‑compliance with commitments or 
breach of eligibility criteria as well as exclusion of 
the beneficiary from receiving support during the 
year of the finding and the following one.

Reply of the Commission 

58

As regards the sanctions, the Commission shares 
the view that while sanctions for non‑compliance 
have to be proportionate they shall remain a dis‑
suasive tool.

Recommendation 2
The Commission accepts this recommendation. The 
Commission is currently assessing the controllabil‑
ity and verifiability of the new programmes and 
will raise any shortcoming in the framework of the 
monitoring committees and annual review meet‑
ings with the managing authorities.

Moreover, audit findings will be closely followed 
in order to detect and correct any source of error 
attributable to the national implementing rules, 
requesting immediate modifications if needed. 

Lessons drawn from the implementation of the pro‑
grammes and national rules thereof, will be shared 
through the ENRD and dedicated seminars on error 
rates. 

Recommendation 3
The Commission partially accepts the recommenda‑
tion as it cannot prejudge the scope and the result 
of such analysis or future policy choices by the 
legislators for the next programming period. 

In 2017 the Commission will prepare a strategic 
report of the Fund, summarising the annual pro‑
gress reports submitted by Member States (Arti‑
cle 53 Regulation 1303/2013). Furthermore, the 
Commission and the Member States will assess the 
performance of the RDPs during the review process 
foreseen under Article 21 Regulation 1303/2013. In 
the light of these and other evidences (e.g. audit 
findings), the Commission will assess the policy 
conception and the eventual need to make propos‑
als for the following programming period.

At the end of the programming period, the Com‑
mission will make a thorough analysis of the contin‑
ued need for each support measure before making 
a proposal for the following programming period as 
has been done for the present period.

Recommendation 3 — Last bullet
The Commission agrees that administrative checks 
should be used when possible, although it notes 
that in most cases this is not feasible for agro‑envi‑
ronment operations.

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The Court estimates that the average error rate 
for rural development expenditure in the past 
3 years was 8,2 %. Member States’ control 
authorities did not detect the errors as checks 
are not exhaustive and are based on insufficient 
information. Some of the main causes of the 
errors are non-compliance with public 
procurement rules, suspected intentional 
infringements by private beneficiaries and 
non-compliance with farming commitments for 
area-related aid. The Commission and the 
Member States are only partially effective in 
addressing the main causes of the high error rate 
for rural development. The Court makes a 
number of specific recommendations for taking 
corrective and preventive action to address the 
widespread weaknesses at EU level.

EUROPEAN
COURT
OF AUDITORS