IP/99/71 Brussels, 3 February 1999 Commission to recover 493 million euro of CAP expenditure paid out by the Member States for 1995. The European Commission adopted a decision approving agricultural expenditure on the Common Agricultural Policy (CAP) as declared by Member States for the 1995 financial year. This decision approved expenditure of 33,907.7 million euro and rejected 403.5 million euro.. At the same time, it decided to recover 89.5 million euro declared in subsequent financial years concerning the same cases. Essentially the implication of this decision is that 493.3 million euro which has already been paid out on behalf of the European Union (EU) by Member states under the CAP will be clawed back. In the case of the CAP the Member States are responsible for paying out and controlling virtually 100% of expenditure in this area. Commenting on this clearance of accounts decision, Mr Franz FISCHLER, the commissioner of Agriculture and Rural Development, said that the highest rates of error, irregularity and fraud were found in that part of EU's budget which is managed by the Member States. The European Court of Auditors reports each year that these rates are unacceptably high. Furthermore approval or rejection of a further 196.8 million euro which has been paid out by the Member States under the CAP has been postponed pending the outcome of the conciliation procedure. This is a procedure which has been established by the Commission which allows Member States to seek the opinion of a Committee of independent experts as to whether penalties foreseen are justified. The Counciliation Committee's opinion is not binding on the Commission. In the agricultural guarantee sector, where the Member States are responsible for executing virtually all payments and for collecting all levies and recoveries, the Commission has taken firm steps to ensure that Member States reduce the rates of irregularity. Firstly it has worked with the Member States to guarantee that throughout the Union the responsible paying agencies ensure that there are very strict controls on all claims before they are paid, and that the paying agencies accounts and procedures are audited each year to internationally accepted standards. Secondly, it has actively assisted all Member States to put into place an integrated control system using the most advanced techniques to check fields by aerial and satellite photography, and to cross-check claims in computer databases. Finally, when in spite of these efforts the Commission finds that a Member State has weak control procedures, or does not respect the EU's rules, it recovers the amounts misspent from the Member State concerned.
These efforts, undertaken since 1993 for the integrated control system and from 1995 for the paying agencies, have borne their fruit: in its report on the 1997 year, the Court found error rates broadly consistent. with the 2.0 to 2.5% final corrections imposed by the Commission following its clearance of accounts audits 1, in other words the Commission is recovering most or all of EU monies paid out incorrectly by Member States through fraud or any other type or irregularity under the CAP. The clearance of accounts is thus an essential instrument of control of the application of the CAP in the Member States, commissioner FISCHLER said, and permits the recovery from the Member States of sums that they have paid out without sufficient guarantees as to the legitimacy of these payments or the reliability of that Member States' control and verification system. The size of the financial corrections, which are imposed upon them, constitute a strong incentive for them to make progress in this area. The Agriculture Directorate, which is responsible for verifying Member States' control systems, he concluded, does not have the resources to act as a police force regarding EU legislation. This is the Member States' responsibility and the Commission will not hesitate in penalising those who fail to fulfil this responsibility in particular if this failure jeopardises the legitimate use of EU taxpayers money. It should be remembered that the clearance of the accounts requires the Commission to assure itself, principally by way of on-the-spot investigations, that the Member States have correctly used the funds put at their disposal by the EAGGF (over 140 investigations relating to the 1995 expenditure were carried out by the Commission at Member State level). When the Commission considers that certain expenditure has not been made in conformity with EU regulations it recovers the sums in question from the Member State. Through the size of the sums in question, the clearance plays an effective preventative role in the fight against fraud committed to the detriment of the EU budget. Fraud, in fact, frequently has its origins in the weaknesses in the management and control systems set up by the Member States. Before the decision was taken, the Member States had the possibility of appealing to the conciliation procedure put in place by the reform of the clearance procedure. This procedure foresees that all significant corrections may be examined by a panel of independent experts ensuring that Member States arguments are heard. The cases affected by this decision represent a total amount of 493.3 million euro, and a later decision will deal with further cases, involving. 196.8 million euro, which are still subject to the conciliation procedure. 1 Official Journal C 349 of 17.11.1998, 8.45 2
Finally, commissioner FISCHLER acknowledged that for most of these cases, the deficiencies found in the management during the 1995 year have since been corrected by the Member States concerned. Where these improvements have not been made, the Commission uses all the means at its disposal to bring the Member States to comply with the EU's rules, and, in flagrant cases, is refusing to repay the full amounts declared monthly by the Member States, in particular concerning arable crops and bovine premiums in Greece, bovine premiums in Portugal and milk levies in Italy and Spain. In the 1997 financial year, 329 million euro was held back in this way, and 36 million euro in the 1998 financial year, Thus the financial consequences of failures to respect the EU's rules have an immediate impact, subject to final clearance decisions once the contradictory procedures are completed. 3
Annex - Main financial corrections: Under the milk quota regime, some Member States did not collect the supplementary levies due for 1994/95, and the following amounts were corrected, including the interest which became due on those outstanding.: Greece (4.3 million euro), United Kingdom (1.8 million euro) and Spain (26.9 million euro). A correction of 10.0 million euro was decided for France, concerning irregular distribution of repurchased milk quotas. A correction of 17.6 million euro was made for the Netherlands when an investigation into production aid for casein and caseinates showed that the product was produced using an additive which is not allowed. In one case a correction affecting prefinanced export refunds paid by Spain (23 million euro) was decided because that country had not demonstrated the due diligence required to prevent irregularities and recover the amount in question. In another case, Spain was charged a correction of 0.2 million euro, and, in the case of Germany, 0.2 million euro was recovered as interest collected under German national law was not paid over to the EAGGF. Neither Greece nor Spain put into place the two essential controls over olive oil production aid, the olive plantation register and the computerised data-base, and both failed to compensate for this absence by applying adequate administrative control systems. Following the receipt of information on the quantities of oil milled, the Commission now accepts that controls over oil mills, which are supervised by the Olive Oil Control Agencies, limit to some extent the risk of irregularity. However, the absence of registers and data-bases leaves the Fund open to risk, and so corrections of 5% were decided for 1994 and 1995 (Greece: 42.2 million euro -5%-, Spain 61.5 million euro -5%-). 1.7 million euro of Spain s expenditure on the olive tree register was considered ineligible. Greece failed to apply the penalties required when irregularities were found in olive oil consumption aid, in particular the exclusion of the beneficiaries concerned from the aid regime, and a correction of 9.4 million euro was decided. A correction for the same failure to apply sanctions when irregularities were established was decided for Italy (1.4 million euro). The controls undertaken in Portugal were found to be ineffective, as was their follow-up (1.1 million euro -5%- ), and a flat-rate correction of 2% (0.2 million euro) was decided for France as a result of shortcomings in the verification of checks. On the same basis the Commission applied a 2% flat rate correction in 1993 for Spain. A correction of 3 million euro decided in the cotton sector for Greece following a statement of assurance check by the Court of Auditors in 1994 which showed over-declaration of a quantity of raw cotton. All premiums for cereals and oilseeds (except the advances for oilseeds) under the CAP reform were paid in the 1995 financial year for the crops harvested in 1994. For France, the following corrections were decided: 85.8 million euro for inadequate checks on aid applications and a further 3.1 million euro which was the amount which France failed to deduct as penalties for insufficient set-aside and in respect of small producers. 4
Further corrections of 4.7 million euro in respect of the premium for retaining extensive farming and 200,000 euro (-2%-) in respect of agricultural income support were decided in view of the inadequacy of controls over claims in France. The corrections decided for Spain are 8.8 million euro (-5%-) for shortcomings in the application of the integrated control system in Aragon, 26.9 million euro for failure to take account of an over-run of the base area and 1.3 million euro (-5%-) for the inadequate yield of non-food products. A correction of 2.8 million euro was decided for an irregular non-food use of crops grown on set-aside land in Germany. A correction of 0.7 euro (-5%-) was decided for the Netherlands for shortcomings with regard to the integrated control system, which were also the reason for a correction of 7.7 million euro (-5%-) for Portugal. In the case of Italy, a correction of 1.5 million euro (-5%-) for ineligible land claimed for multi-annual set-aside has been decided. Animal premiums applied for in 1994 under the reformed CAP were paid in 1995. The Member States encountered difficulties in conducting on-farm inspections at the required level, did not carry out risk analyses and failed to set up reliable identification and registration systems, failings which even continued into 1996. Flat-rate corrections, fixed either regionally or nationally as appropriate, were decided in the bovine sector for Germany (1.2 million euro -2 and 5%-) 2, Spain (8.3 million euro -5 and 10%-), France (0.8 million euro -25%-), Ireland (1.6 million euro -2%-), Greece (0.6 million euro), and Italy (4.1 million euro -2%-). In the sheepmeat and goatmeat sector, control levels were found to be unsatisfactory and flat-rate corrections, fixed either regionally or nationally as appropriate, are proposed for Spain (9 million euro -2%,5%,10%-), France (0.9 euro -2%,5%,10%- ) 2, Italy (39.6 million euro -2%, 5%-), Portugal (1.1 million euro -5%-) and the United Kingdom (61.0 million euro -2%, 5%, 10%-) 2. Corrections as a result of inadequate accounting were decide for Ireland (0.3 million euro). Portugal and Ireland did not carry out an adequate number of checks on agrienvironmental aids and flat-rate corrections of 3.1 million euro (-10%-) and 400,000 euro (-2%-) respectively were decided. Serious deficiencies were found in the administrative and control system of the Greek authorities responsible for accrediting and monitoring producers organisations in the fruit and vegetable sector, in one region in particular, which placed the eligibility of claims for withdrawal of fruit into serious doubt. The correction decided was 19.1 million euro (-10%, 20%-) 2. A correction of 9.4 million euro (-2%-) with regard to inadequate control over the processing of citrus fruit, and ineligible payments for processed tomatoes was decided for Italy. In view of the rapid increase in the areas claimed to be eligible for aid for flax and hemp, the Commission undertook an enquiry in all Member States disbursing significant amounts under the two schemes. Controls were found to be inadequate, leading to flat-rate corrections for flax of 2% (France), 5% (Netherlands) or 10% (Spain and United Kingdom). 2 The percentage penalty applied varies by region within the member states 5
Corrections of 50% were decided for the Netherlands and France in respect of areas of hemp harvested before the formation of seeds which is in breach of the regulation. In absolute terms, the amount of all these corrections was minor. A flat-rate correction of 10% is proposed for deficient controls over public storage of cereals in Italy (1.5 million euro). A correction of 0.1 million euro was decided for France in respect of quality losses and over-running EU tolerances. The situation of cereals stocks resulted in corrections of 1.9 million euro for Greece and 1.5 million euro for Portugal. As a result of inadequate controls and seizure of securities amounting to some 2.1 million euro (-2%-), corrections are proposed for the United Kingdom but accounting adjustments to the stock situation resulted in a refund of 4.6 million euro. The lack of checks in Spain on illegal vineyards and the failure to apply Community penalties to vine-growers resulted in a correction of 4.4 million euro (- 2%-) to grubbing-up premiums. Inadequate checks in Germany over the delivery of tobacco for premium resulted in a correction of EUR 2.0 million (-5.6%-). Many Member States failed to respect the dead-lines for the payment of aids set in the Regulations, thus calling into question the eligibility of the payments for EU financing. However, it is not in the EU's interest to oblige Member States to pay beneficiaries in cases where additional verifications are still to be made and corrections were made only for late payments which could not be justified by the need for additional verifications, or for reasons of force majeure. The corrections were calculated in proportion to the number of months after the dead-line Greece (0.5 million euro), Spain (20 million euro), Italy (12.8 million euro), Germany (1.2 million euro), Ireland (3.9 million euro), Portugal (0.5 million euro) and the United Kingdom (0.8 million euro) are the main countries concerned. Financial corrections still under consideration Other corrections, totalling 196.8 million euro, are still under consideration, as they are still subject to, or eligible for, the conciliation procedure. The amounts of these corrections may be reduced as a result of this procedure. They concern the olive oil sector where further enquiries performed in Spain showed generalised deficiencies in the management, control and application of penalty procedures. In particular, some unilateral legal interpretations given by the national authorities permitted the systematic non-application of the penalties laid down in the Regulation. The Commission s enquiry is still under way, and the correction of 37.0 million euro (10%) is still subject to the conciliation procedure. A correction of 8.4 million euro is proposed for two German Länder for inadequate application of the integrated control system concerning cereals and oilseeds. A further correction was proposed for excessive differences between average food yields and the non-food yields (implying that some of the crop from set-aside was sold for food/feed production) on set-aside land for Germany (0.8 million euro - 2%-) and Italy (4.6 million euro). Corrections were proposed for Greece to recover the 2% of aids which it did not pay to the beneficiaries, but irregularly used to cover administrative expenditure (7.1 million euro), and a further 7 million euro for deficiencies in checks. 6
Corrections were proposed for inadequate controls over livestock premiums in Portugal (2.1 million euro), Italy (4.6 million euro) and Spain (8.7 million euro), and of 2.5 million euro(-10%-) for Greece with regard to the free distribution of fruit withdrawn from the market. As regards cereals storage in Italy, corrections of 45.6 million euro is proposed with regard to a large number of errors in the stocks and accounts, and 7.4. million euro for irregular release of guarantees concerning the storage of beef and veal. Under Regulation (EEC) No 4045/89, Member States are required to undertake a number of ex post scrutinies of the beneficiaries commercial records in order to confirm their entitlement to aids received in the previous year. Italy was the only Member State which failed by a wide margin to carry out the required number of controls. In view of the seriously diminished possibility of identifying and recovering irregularities, a 2% correction (25.6 million euro) was proposed regarding the budgetary sectors for which less than one third of the required number of controls was executed. SUMMARY OF CORRECTIONS 3 Corrections by Member State- EUR million 4 Member state Total amount of corrections %of declaration Total in conciliation Negative reserves (R) submitted for decision (C) by the Member State procedure (O) Belgium 0.7 - Denmark 0.2 - France 97.9 - Germany 4.7 9.1 1.2 Greece 38.1 35.7 Ireland 2.5-3.9 Italy 47.5 78.6 Luxembourg - - Netherlands 18.7 - Portugal 14.9 2.0 Spain 128.8 46.3 20.0 United Kingdom 49.5 - Total EAGGF 403.5 171.7 25.1 Corrections by sector verified (EUR million) 5 Milk products 53.8 3 Exchange rates valid on 10.07.98 4 It must be stressed that the total of corrections in these tables will not necessarily tally with the total of corrections seen in the tables attached to the decision as the decision tables also take into account corrections which have already been made in the monthly advances and the differences between the monthly declaration (i.e. the monthly advances paid) and the annual declaration made to the EAGGF. 5 Differences in totals for the two tables are due to roundings. 7
Export refunds 23.4 Arable crops 143.7 Cereals 10.7 Fruits and vegetables 3.3 Oils and fats 61.9 Meat and fish 103.5 Wine and tobacco 5.7 Non-respect of payment deadlines +5.9 Miscellaneous 0.5 DAS 3.2 Total 403.8 8