2016 annual activity report2016 annual activity report annexes directorate general for agriculture...

2016

Annual Activity

Report

Annexes

Directorate General

for Agriculture and

Rural Development

Ref. Ares(2017)2290989 - 04/05/2017

agri_aar_2016_annexes of 273

Table of Contents

ANNEX 1: STATEMENT OF THE INTERNAL CONTROL COORDINATOR .............................................................................. 3 ANNEX 2: REPORTING – HUMAN RESOURCES, BETTER REGULATION, INFORMATION MANAGEMENT AND EXTERNAL

COMMUNICATION ........................................................................................................................................................ 4 2.2.1 HUMAN RESOURCE MANAGEMENT ....................................................................................................................... 4 2.2.2 BETTER REGULATION .......................................................................................................................................... 6 2.2.3 INFORMATION MANAGEMENT ASPECTS ................................................................................................................ 13 2.2.4 EXTERNAL COMMUNICATION ACTIVITIES ............................................................................................................... 14 ANNEX 3: DRAFT ANNUAL ACCOUNTS AND FINANCIAL REPORTS ................................................................................ 16 ANNEX 4: MATERIALITY CRITERIA ........................................................................................................................ 40 ANNEX 5: INTERNAL CONTROL TEMPLATE FOR BUDGET IMPLEMENTATION (ICT) .......................................................... 48 ANNEX 6: IMPLEMENTATION THROUGH NATIONAL OR INTERNATIONAL PUBLIC-SECTOR BODIES AND BODIES GOVERNED BY

PRIVATE LAW WITH A PUBLIC SECTOR MISSION (NOT APPLICABLE) ........................................................................................ 53 ANNEX 7: EAMR OF THE UNION DELEGATIONS (NOT APPLICABLE) ............................................................................ 53 ANNEX 8: DECENTRALISED AGENCIES (NOT APPLICABLE) .......................................................................................... 53 ANNEX 9: EVALUATIONS AND OTHER STUDIES FINALISED OR CANCELLED DURING THE YEAR ............................................ 54 ANNEX 10: SPECIFIC ANNEXES RELATED TO "FINANCIAL MANAGEMENT" ..................................................................... 62 ANNEX 11: SPECIFIC ANNEXES RELATED TO "ASSESSMENT OF THE EFFECTIVENESS OF THE INTERNAL CONTROL SYSTEMS" (NOT

APPLICABLE) ...................................................................................................................................................... 200 ANNEX 12: PERFORMANCE TABLES ...................................................................................................................... 201 ANNEX 13: INTERRUPTIONS, REDUCTIONS AND SUSPENSIONS ................................................................................... 259 ANNEX 14: COURT OF AUDITORS' SPECIAL REPORTS ................................................................................................ 263 ANNEX 15: ABBREVIATIONS ............................................................................................................................... 270


ANNEX 1: Statement of the Internal Control Coordinator

I declare that in accordance with the Commission’s communication on clarification of the

responsibilities of the key actors in the domain of internal audit and internal control in the

Commission1, I have reported my advice and recommendations to the Director-General on the

overall state of internal control in the DG.

I hereby certify that the information provided in Section 2 of the present AAR and in its

annexes is, to the best of my knowledge, accurate and complete.”

28 April 2017

Rudolf MÖGELE Internal Control coordinator

1 Communication to the Commission: Clarification of the responsibilities of the key actors in the domain of

internal audit and internal control in the Commission; SEC(2003)59 of 21.01.2003.


ANNEX 2: Reporting – Human Resources, Better Regulation, Information Management and External

Communication

2.2.1 Human Resource Management

Objective (mandatory): The DG deploys effectively its resources in support of the delivery of the Commission's priorities and core business, has a

competent and engaged workforce, which is driven by an effective and

gender-balanced management and which can deploy its full potential within supportive and healthy working conditions.

Indicator 1 (mandatory): Percentage of female representation in middle

management Source of data: HR Dashboard

Baseline (01/01/2016)

Target (2019) Latest known results (31/12/2016)

26.5% 35% Targets for each

Directorate-General adopted

by the Commission on 15 July 2015 – SEC(2015)336

30%

Indicator 2 (mandatory): Percentage of staff who feel that the Commission

cares about their well-being2 Source of data: Commission staff survey

Baseline (2014) Target Latest known results (2016)

31% Reach a result above

Commission average (35% in

2014) Target agreed at level of

resource director

Staff survey 2016: 32%

(COM 2016: 35%)

Indicator 3 (mandatory): Staff engagement index Source of data: Commission staff survey


67.6% Maintain a result above

Commission average (65% in

2014) Target agreed at level of

resource director

Staff survey 2016: 65%

(COM 2016: 64%)

Indicator: Average vacancy rate of available permanent posts Source: HR Dashboard

Baseline (2015) Target Latest known results (Feb 2016-Jan 2017)

5.6 % Vacancy rate < or =

Commission average (Jan 15-

Dec 15: 5.3 %) Target agreed at level of

resource director

6.4%

(COM: 3.9%)

2 This indicator may be replaced by a fit@work index on which DG HR is currently working.


Indicator: HR capacity utilisation Definition: Staff time available for allocation to activities after deducting absences

(except annual leaves and flexitime Recuperation) and use of flexible working arrangements from the total number of available working days.

Source: HR Dashboard

Baseline (Dec. 2014-Nov. 2015)

Target Latest known results (May 2015-Aug 2016)

90.3 % Utilisation > or = Commission average

(Dec.14-Nov 15: 90.1 %) Target agreed at level of

resource director

98.8% (COM: 90.1%)

Indicator: Staff satisfaction with:

- job - private/ professional life balance

Source: DG HR staff survey 2013

Baseline

(31/12/2015)

Target Latest known results

(2016)

Job satisfaction: 70.5 %

Life balance: 53.3 %

Equal or better results than Commission average

(target agreed at level of resource director)

COM average: Job

satisfaction: 68.5 %, Life balance: 53.7 %

Job satisfaction: 74% (COM 2016: 76%)

Life balance: 58%

(COM 2016: 57%)

Indicator: Local Overheads

Source: HR Dashboard

Baseline

(23/01/2015)

Target (2016) Latest known results

(2016)

7.8 % Commission average: 7.7 %

(target agreed at level of

resource director)

AGRI: 7.2% Family DGs : 8;1%

COM: 6.4%

Main outputs in 2016:

Description Indicator Target Latest known results

Efficient and effective staff

allocation

vacancy rate = or < to Commission average

just after posts were returned to central

services

June 2016 AGRI: 4.7%

COM: 3.2%

Strategic, forward

planning HR management

posts returned to DG

HR (i.e. staff reduction and staff

redeployment)

within deadlines all payments

according to schedule

Women in

management positions

female representation

rate in middle management

3 appointments in

2016

1 appointment (first

nomination to MM)

A functioning job

market

% of vacant posts

which are published

(excluding posts foreseen for

compulsory mobility)

AD=60% on

31/12/2016

AST=65% on 31/12/2016

SC=60% on 31/12/2016

1st half of 20163:

AD: 52.1%

AST: 69.2% SC: 33.3%

Staff allocation overall job = or < Commission Job satisfaction

3 Due to the limited number of vacancies it was decided to put on hold the monitoring of these targets for

the remaining of the year.


according to interest and

competences

satisfaction average results in next HR survey

2016: 74% (COM 2016: 76%)

Staff health sick leave rate = or < Commission average for the year

2016

2016 Q1-3: 4.9% (COM: 4.2%)

Implementation of

AGRI's well-being programme

number of events and

initiatives

Maintain or increase

compared to 2015

Increase of

activities: regular lunchtime activities

maintained in addition to the

organisation of Health Days in

May/June and

Career Weeks in October

Management of

administrative budget

Budget execution

(commitments)

> 95% by end of the

year

99.4%

2.2.2 Better Regulation

Objective (mandatory): Prepare new policy initiatives and manage the EU's acquis in line with better regulation practices to ensure that EU policy

objectives are achieved effectively and efficiently.

Indicator 1 (mandatory – monitored by the DGs concerned): Percentage of Impact assessments submitted by DG AGRI to the Regulatory Scrutiny Board

that received a favourable opinion on first submission.

Explanation: The opinion of the RSB will take into account the better regulation

practices followed for new policy initiatives. Gradual improvement of the percentage of positive opinions on first submission is an indicator of progress made by the DG in

applying better regulation practices. Source of data: -

Baseline 2015 Interim Milestone 2016

Target 2020 Latest known results

68% = Commission

average in 2014 NA for DG AGRI (no

Impact assessment

in 2015)

Positive trend

compared to DG's 2014

situation.

Positive trend

compared to DG's 2016

situation.

NA

Indicator 2 (mandatory – monitored by the DGs concerned): Percentage of the DG's primary regulatory acquis covered by retrospective evaluation

findings and Fitness Checks not older than five years.

Explanation: Better Regulation principles foresee that regulatory acquis is evaluated

at regular intervals. As evaluations help to identify any burdens, implementation problems, and the extent to which objectives have been achieved, the availability of

performance feedback is a prerequisite to introduce corrective measures allowing the acquis to stay fit for purpose.

Relevance of Indicator 2: The application of better regulation practices would progressively lead to the stock of legislative acquis covered by regular evaluations to

increase. Source of data: -

Baseline 2015 Interim Milestone 2016

Target 2020 Latest known results

Percentage of the

DG's primary

Positive trend

compared to

Positive trend

compared to

NA


regulatory acquis covered by

retrospective evaluations and

Fitness Checks not older than five years.

- NA for DG AGRI

baseline interim milestone

Indicator: Common monitoring and evaluation framework for the CAP

towards 2020 Source: DG AGRI task Force on Monitoring and Evaluation

Baseline (2015) Target (2015) Latest known results

(2016)

Common Monitoring and

evaluation Framework in

place. Meetings of the expert group on M&E

(17.3.2015-25.6.2015-12.11.2015) CMEF

discussed in agri management meeting+2

meetings task force M&E Documentation for MS

available.

Comprehensive framework

for the monitoring and

evaluation of the whole CAP in place

- 4 meetings with the expert group on M&E;

- 2 meetings of DG AGRI task force on M&E;

-Starting the compilation of data

2 meetings of the expert

group on Monitoring and

Evaluation (24.05.2016 and 18.11.2016)

Datasets are already

available on the internet.

Indicator: Degree of implementation of the annual evaluation plan Source: Data collected by DG AGRI

Baseline (2015) Target (mid-term) Latest known results (2016)

100 % complete4 100 % of evaluations

completed/launched according to the initially set timetable

The evaluations to be

conducted in a given year are decided at senior management

level, based on the legal and policy requirements and

introduced in a rolling evaluation and studies plan

which is updated yearly.

100 % of evaluations

scheduled for launch were launched; staff working

document for POSEI

evaluation still to be completed.

Indicator: Degree of implementation of the annual studies plan set in the evaluation and studies plan

Source: Data collected by DG AGRI

Baseline (2015) Target (mid-term) Latest known results (2016)

100 %5 100 % of studies

completed/launched according to the initially set timetable

- Number of new studies launched: 6

- Number of studies

completed: 5 The studies to be conducted in

a given year are decided at senior management level,

based on the legal and policy

All planned studies

completed, studies launched6.

4 Following the better regulation guidelines, two evaluations have afterwards been relabelled as studies 5 While all procedures for new studies were launched, for one no contract was attributed 6 See annex 3 for information on studies that were dropped from the studies and evaluation plan.


requirements and introduced in

a rolling evaluation and studies plan which is updated yearly.

Indicator: Contribution to the Commission Regulatory Fitness initiative

(REFIT) Source: DG AGRI files on simplification

Baseline (2015) Target Latest known results

(year)

Contribution and

exchanges with SecGen on REFIT initiatives. Timely

contribution to the REFIT platform screening

exercise: periodical

contribution to the "assessment fiches"

prepared by SecGen following requests received

by the REFIT Platform

Timely contribution to the

REFIT initiative upon request of the Secretariat

General7

100%



COORDINATION OF

MONITORING AND EVALUATION OF

THE CAP • Coordination

of a common

monitoring and evaluation

framework for the CAP 2014-2020

• Analysis of results for use in

policy development (indicators, studies,

evaluations)

Coordination of the

internal Task Force on Monitoring and

Evaluation of the CAP

Organisation of 1

meeting per year8

1 meeting held

(11.05.2016) Additional discussions

in regular senior management meeting

Organisation of the meetings of the

expert group on "M&E of the CAP"

Organisation of 2 meetings per year

2 meetings organised. (24.05.2016;

18.11.2016)

EVALUATIONS

Assess the effectiveness,

efficiency and coherence of CAP

(1st and 2nd pillar)

instruments

Establishment of the

DG AGRI pluri-annual evaluation and

studies plan

DG AGRI

evaluation plan established/updat

ed on time for inclusion (as

annex) in the

management plan of year N+1

Evaluation plan

established on time

Evaluation reports,

analytical notes and quality assessments

Ongoing Done

Pilot projects Degree of implementation of EP

Pilot projects and preparatory actions

Number of new pilot projects /

preparatory actions launched:

4 (target for 2016).

4 pilot projects being prepared: call for

tenders will be published first quarter

2017. Planned pilot project

7 Target updated: REFIT has replaced the ABR + programme. 8 Target updated: there is no need anymore for 2 meetings per year.


Number of new pilot projects /

preparatory actions

completed: 1 (target for 2016).

completed.

Reviewing the

potential for further

simplification in the CAP

Number of

Commission texts

(Commission proposals to the

legislators; Commission acts,

guidelines) adopted with a view to

simplify.

More than 5

December 2016

7 acts have been

adopted in view of

simplification in 2016: 1 RD (669/2016)

1 DP (141/2016) 5 CMO (3 DA/2 IA)

(public intervention/private

storage, wine, sugar, trade)

Contribution to the Commission

Regulatory Fitness initiative (REFIT)

Timely contribution to the REFIT initiative

including reaction to simplification

requests under the REFIT platform.

90% replies within deadlines

100%

Relations with EU institutions,

national parliaments, other

institutional stakeholders and

civil society,

including the participation in

meetings of the Council, the SCA

and working parties, European

Parliament, COMAGRI and

other committees,

as well as attendance to

trilogues (accompany &

follow-up on the ordinary legislative

procedure).

Questions/requests from other

Institutions, including Parliamentary

Questions, replied to within the deadline

Maintain the present high rate

of replies within deadline.

99% (Totals: Parliamentary

Questions AGRI CF: 483, Parliamentary

Questions AGRI ASOC: 741, Petitions

37, MEP letters to the

Commissioner: 72, Opinions from

National Parliaments: 7)

Participation of the

Commissioner and

DG AGRI's officials in high level meetings

with other EU institutions and

advisory groups (civil dialogue groups)

The Commissioner

represents the

Commission in the most important

meetings

Commissioner’s

participation in 2016:

6 times in EP plenary and 6 in COMAGRI.

DG AGRI's participation in all

plenaries and in all meetings of COMAGRI

EESC: in 2016 the Commissioner did not

attend an EESC

meeting Participation of DG

AGRI in: Section meetings

NAT: 6 Plenary: 3

COR: in 2016 the Commissioner did not

attended a COR

meeting Participation of DG

AGRI in: Section meeting NAT:

5 Plenary: 4


DG AGRI's

participation in 2016: - Council: 12 times

- SCA: 25 times - WPs: 17 times

- trilogue meetings: 12 (for organics)

DG AGRI participation in pre-GRI: 31

DG AGRI participation

in Civil Dialogue Groups /working

groups/: 61 - FWG 13

- CDG 48

Relations with the

Court of Auditors

Number of overdue

recommendations in RAD9 addressed to

AGRI as chef de file

0 2

(February 2017)

Objective: To provide sound legal services and to ensure correct application and enforcement of the CAP law

Indicator: Proportion of positive opinions from the Legal service in Inter-

service consultations launched by DG AGRI

Source of data: Decide

Baseline (2015)

Target Latest known results (2016)

100% >90 % of consultations Target was fixed taking into account

a minimal margin of manoeuvre for legal disagreements/need to pursuit

proposal for policy issues.

100%

Indicator: Timeliness of treatment of notifications of state aid cases

Source of data:


100% 100% Legal requirement

100%

Indicator: Proportion of agreements from the Legal service to proposals

launched by DG AGRI in the context of the infringement procedure Source of data: NIF data base


100% 90% of consultation

Procedural requirement

Guidelines on the monthly cycle (04/2013)

100%



DG AGRI proposals for

Proportion of positive opinions from the LS in

>90 % of consultations

100%

9 RAD ("Recommendations/Actions/Discharge") is a DG BUDG database to monitor the implementation of

European Court of Auditors, Council and European Parliament recommendations.


legal acts need to comply with

EU legal framework

inter-service consultations launched

by DG AGRI

December 2016

Legal soundness

of DG AGRI positions needs

to be ensured,

and this, in a timely manner

Rapidity of response on

signataires submitted for paraphe on legal

issues and on notes

submitted asking for legal advice

>85 % dealt with

within deadlines laid down in the

vademecum fixing

the rules for legal consultation

December 2016

90.51%

Examination of notified and

alleged State

aids in the agricultural and

forestry sectors

Examination of notified State aid cases within

the statutory deadlines

and timely examination of all other State aid

cases (NN, CP …)

100% of cases to be handled within

the statutory

deadlines if any or foreseen within

the best Practice Code.

100% Legal requirement

Support DG

AGRI by

providing sound legal services

giving advice on the drafting of

legal texts in relation to

antitrust issues in the

agricultural

sector.

Rapidity of response to

consultations of the unit

(by way of e-mails or formally by signataires)

concerning legal questions on antitrust

law in the agricultural sector

90% within the

deadline of 2

working days for signataires

submitted in ARES and 10 working

days for notes and e-mail-

consultations.

100%

Management of complaints and

infringement proceedings

Appropriate administrative

treatment of all new complaint cases notified

No more than 5% of non-registered

files

100%

Management of notifications

made under Directive (EU)

2015/1535 on technical

standards

Timeliness of treatment of all new draft

technical received

100% of deadlines to be met

100%

Coordination DG

AGRI's replies to the European

Ombudsman (EO)

Timeliness of delivery of

replies to the EO

100% of SG

accepted deadlines to be

met

100%

Objective: To ensure an effective and efficient planning and programming process and to support the preparation and adoption of agricultural legislation

Indicator: Implementation of the performance culture in DG AGRI Source of data:


(2016)

Active involvement in

Budget Focused On Results initiative, including

the participation of Commissioner Hogan at

the BFOR conference

Continuous improvement The work on the

performance culture in DG AGRI is now producing

tangible results. Thanks to the work of the

working group on


Development of an more focused performance

reporting in the AAR Creation of a network of

performance correspondents

performance reporting, the presentation of section 1 of

2015 Annual Activity Report has been improved and

clarifies the links between the DG/policy and the

results on the ground. DG AGRI contributed

actively to the "Budget focused on results"

initiative: preparation of the

regular meetings of the BFOR interservice working

group and the group of Commissioners,

participation of Commissioner Hogan in the

BFOR conference, ongoing contacts with central

services and other DGs to

share information.

Indicator: Timeliness of DG AGRI replies to Inter-service consultations Source of data: Decide

Baseline (2015) Target Latest known results (year)

101 out of 2055 (4.91%)

delayed

Steady reduction

The target is a permanent goal of DG

AGRI

91 out of 2157 (4,22%)



Implementation of the

Commission

planning and programming

process

Percentage of elements of the Strategic Planning and

Programming (SPP) cycle

delivered on time

100 % 60%10

Delivery rate (adoption by the College):

- CWP - Other Agenda Planning (AP)

proposals

100 % CWP: 0% ( 0 out of 2)

Delegated and implementing act on

greening

(2016/AGRI/016 and 2016/AGRI/017)

scheduled for adoption early 2017.

Agenda Planning: 100%

Number of delays in DG AGRI replies to Interservice

Consultations (ISC)

Steady reduction

4,22%

10 The delivery of 2016-2020 Strategic Plan and 2016 Management Plan was delayed following the late

reception of instructions (choice of the corporate objectives and indicators orienting DGs strategic

planning).


2.2.3 Information management aspects

Objective (mandatory): Information and knowledge in your DG is shared and reusable by other DGs. Important documents are registered, filed and

retrievable

Indicator (mandatory): Percentage of registered documents that are not filed11 (ratio)

Source of data: Hermes-Ares-Nomcom (HAN)12 statistics

Baseline Target Latest known results

(31/12/2016)

2014: 482 docs = 0.150%

2015: 924 docs = 0.24%

0% 0.20%

Indicator (mandatory): Percentage of HAN files readable/accessible by all units in the DG

Source of data: HAN statistics

Baseline Target Latest known results

(31/12/2016)

2015: 82.58% 75% 58.61%*

Indicator (mandatory): Percentage of HAN files shared with other DGs

Source of data: HAN statistics

Baseline Target Latest known results (31/12/2016)

2015: 0.5% 50% 0.21%**

* This is a decrease from the current situation (in 2015: 82.58% of files were accessible). This decrease reflects the share of audit directorate files of all DG AGRI

files.The upcoming decision of the audit directorate to limit their files visibility was

taken into account when we provided the target on this indicator. ** In line with the principle of sharing information within the Commission, we set a

long-term target of 50% to be achieved in the coming 5 years with a view to improve transparency and avoid duplications in filing at Commission level. As a first

step we will start proposing units to share visibility at the moment of creation of their new files. The analysis of the existing files that could be shared with other

DGs/Commission will be carried out after the expected major reorganisation of DG AGRI as all files will potentially be reattributed.



Document

management

% of files in NOMCOM

where no documents are filed within the last 12

months from the total number of active files in

AGRI (including

subfiles)13

0% files in NOMCOM

where no documents are filed within the

last 12 months

7.9%

Access to documents

Respect of deadlines in answering requests for

documents

100 % of request for documents answered

within established deadlines

100% (197 requests in Gestdem + ca. 20

from national authorities)

Personal data protection

Notification of identified personal data

processings in DG AGRI

100 % of identified processings included

in the register of the

2016: 100% (34 identified personal

data processings, all

11 Each registered document must be filed in at least one official file of the Chef de file, as required by the

e-Domec policy rules (and by ICS 11 requirements). The indicator is to be measured via reporting tools

available in Ares. 12 Suite of tools designed to implement the e-Domec policy rules. 13 Indicator proposed further to the recommendation included in the IAC Audit report on document

management.

https://myintracomm.ec.europa.eu/corp/sg/en/edomec/doc_management/Documents/recueil_dec_mda_en.pdf

https://myintracomm.ec.europa.eu/corp/sg/en/edomec/doc_management/Documents/recueil_dec_mda_en.pdf


DPO of which are in the register)

IT

infrastructure, tools and

services

Implementation of the

relevant parts of the Schéma Directeur (ICT

Investment Plan of DG AGRI)

95 % 98%

Servers' availability (averaged over one year)

≥ 99 % >99%

Information Systems

User Satisfaction

(positive assessment)

> 80 % 98%

Number of security breaches

No major security breaches

10, no major ones

2.2.4 External communication activities

Objective (mandatory): Citizens perceive that the EU is working to improve

their lives and engage with the EU. They feel that their concerns are taken

into consideration in European decision making and they know about their rights in the EU.

Indicator: Percentage of EU citizens having a positive image of the EU

Definition: Eurobarometer measures the state of public opinion in the EU Member

States. This global indicator is influenced by many factors, including the work of

other EU institutions and national governments, as well as political and economic factors, not just the communication actions of the Commission. It is relevant as a

proxy for the overall perception of the EU citizens. Positive visibility for the EU is the desirable corporate outcome of Commission communication, even if individual DGs’

actions may only make a small contribution. Source of data: Standard Eurobarometer (DG COMM budget) [monitored by DG

COMM here].

Baseline: November 2014 Target: 2020 Latest known results

(December 2016)

Total "Positive": 39% Neutral: 37 %

Total "Negative": 22%

Positive image of the EU ≥ 50%

Positive: 35% Neutral: 38%

Negative: 25%

(Don't know: 2%)

Specific objective: To build trust within the EU and among all citizens,

farmers and non-farmers, alike. The key issues of food security, climate change and environment protection as well as the maintenance of

sustainable rural areas are consistent features of the messaging and with the Commission's legal requirement to carry out information measures on

the CAP. For the general public, the objective is to raise awareness on the relevance

of EU support to agriculture and rural development through the CAP. For the stakeholders, the objective is to engage with stakeholders (mainly

farmers and other parties in rural areas) in order to further communicate

about the CAP to their constituencies and to the wider public.

Indicator: Public awareness of CAP Source: Eurobarometer

Baseline (2015) Target

The Latest Eurobarometer survey (field research October 2015,

results published on 6 January 2016) shows that 94% of

Europeans believe that agriculture and rural areas play an important role for their future (+ 2 percentage points since the

Maintain and if

possible increase

awareness of the CAP

http://ec.europa.eu/COMMFrontOffice/PublicOpinion/index.cfm/General/index


last survey in 2013) and that 69% have heard about the support that the EU gives farmers through its CAP (+ 5 percentage

points since the last survey in 2013). There is a broad consensus on the key priorities of the CAP and its contribution to the

strategic priorities of the Commission. The next Eurobarometer survey will be conducted in the last

quarter of 2017. The results will be published in first quarter of 2018.



Main

communication actions:

Media and Web

6 study trips (positive

evaluation feedback), Ag.press e-platform

(maintain members as active users), Europa web

digital transformation

2016 All 6 study trips

organised as scheduled.

Ag.press members maintained at around

800 in 2016.

Europa web digital transformation

ongoing and will continue in 2017

Conferences,

fairs and events

Conference "Cork II" and

Conference "agricultural

markets outlook" (satisfaction feedback from

participants)

September and

December

2016

Both Conferences

successfully

organised. Full reports

Participation at Ag fairs in Berlin, Paris and Torino, EC

Open Days in Brussels

(number of visitors and degree of satisfaction with

the activities proposed)

2016 Participation at the Ag fairs in Berlin and

Paris, EC Open Days

in Brussels but not in Torino as DG SANTE

decided to step down.

Grants Co-financing 15 to 20 "information measures on

the CAP" following the last

call for proposals

May 2016 – April 2017

18 information measures on the CAP

have been co-

financed in 2016 (Grants)

Corporate

communication

Campaign to be conducted

by DG COMM

2016 Conducted by DG

COMM and ongoing

Annual communication spending (based on estimated commitments):

Baseline (2015): Target

(2016):

Total amount spent Total of FTEs working on

external communication

€ 8 000 000 € 4 000 000 € 4.000.000 Of which

€ 2.500.000 for "grants"

and € 1.500.000 for all other

(Direct) actions

21


ANNEX 3: Draft annual accounts and financial reports

1. Financial reports

1.1 Commitments and payments (tables 1 and 2)

Overall, in 2016, the execution rate of commitment appropriations of DG AGRI remained at the same high level as last year reaching 96.35% in 2016 (97,39% in

2015). The execution rate of payment appropriations has also globally remained

unchanged (96,61% in 2016 compared to 97,59% in 2015). The total amount committed in 2016 amounts to EUR 65.447,2 million and the total amount paid in

2016 amounts to EUR 56.793,9 million.

– With regard to « shared management expenditure » for rural development,

the amount committed in 2016 was EUR 18.650,81 million (EUR 20.121,53 million in 2015), representing 96,80% of the available appropriations. The

amount paid in 2016 was EUR 12.346,05 million (EUR 11.780,7 million in 2015), representing 99,90% of the available appropriations. Both

commitments and payments remain at high levels since the 2007-2013

programming period has reached the end (augmented payments) and the implementation of the 2014-2020 programs is increasing speed.

– For pre-accession aid related to rural development, EUR 112 million was committed in 2016 (118 in 2015) representing 98,51% of the available

appropriations. EUR 339,24 million was paid in 2016 (compared to 201,9 in 2015), representing 99,50 % of the available appropriations.

– With regard to « shared management expenditure » for EAGF, the amount committed in 2016 was EUR 44.221,2 million (44.883,5 in 2015)

representing 96,17% of the available appropriations. The amount paid in

2016 was EUR 44.036,44 million, representing 95,77 % of the available appropriations (compared to 44.883,5 in 2015).

– With regard to « direct management expenditure », the amount committed in 2016 was EUR 73,7 million (89.6 in 2015) representing 88.55% of the

available appropriations. The amount paid was 72,22 million EUR (80,3 in 2015), i.e. 69.39% of the available appropriations.

Expenditure

Commitments Payments

Crédits Exécution Crédits Exécution

Direct expenses 83,280,001.83 73,741,427.96 88.55% 104,078,949.07 72,221,278.42 69.39%

FEAGA 45,982,018,698.06 44,221,202,321.60 96.17% 45,982,018,698.06 44,036,442,654.43 95.77%

shared Mgt

Rural Development 19,268,278,927.14 18,650,817,761.73 96.80% 12,358,725,432.19 12,346,055,292.13 99.90%

shared Mgt

Preadhesion 113,688,652.59 112,000,000.00 98.51% 340,931,451.43 339,242,762.15 99.50%

shared / decentr Mgt

TOTAL 65,447,266,279.62 63,057,761,511.29 96.35% 58,785,754,530.75 56,793,961,987.13 96.61%


1.2 Unused balance of Commitments (table 3)

Circuits RAL

Direct expenses 60,068,243.26

FEAGA 184,759,667.17

shared Mgt

Rural Development 29,622,475,347.17

shared Mgt

Preadhesion 337,693,932.86

shared / decentralised Mgt

TOTAL 30,204,997,190.46

The unused balance on commitments, commonly known as budgetary RAL (Reste A Liquider), was EUR 30.205 million at the end of 2016 (25.281 million in 2015), of

which EUR 29.622,4 million relates to rural development, EUR 337,6 million to pre-accession aid, EUR 184,7 million to EAGF and EUR 60 million to direct management

expenditure.

1.3 Payment time limits (table 6a/b)

As far as payment time limits are concerned, the progress made during last years

remained stable:

For «direct management expenditure » (see table 6a), the average delay remains

stable at 13 days in 2016 (same as in 2015). 45 payments were made beyond the allowed payment time limit (28 payments in 2015), which represents 4,4% of the

total number of payments (2,9% in 2015).

For « rural development » (see table 6b), the level of payment delays remains at a

high level in 2016. 82 payments were made beyond the allowed payment time limit

(against 123 in 2015) which represents 9,6% of the total number of payments. The average delay has decreased at 33 days (38 days in 2015).


1.4 Revenue and income

The total income/revenu recognised for DG AGRI corresponds to EUR 2.913,23

million in 2016, while the amount cashed is EUR 2.871,57 million. At the end of 2016, EUR 41,6 million is therefore still owed to DG AGRI (EUR 110,9 million in

2015).

The income/revenue in 2016 concerning the EAGF and EAFRD funds amounts to EUR 2.853,89 million, of which EUR 2.530,2 million for EAGF and EUR 323,6 million for

EAFRD and EAAGF-O. The additional amount carried-over from previous year is EUR 14,6 ( EUR 1,1 million in 2015).

The budgetary regularised income for EAGF corresponds to a total amount of EUR 2.527,1 million in 2016 (EUR 1.631,6 million in 2015) of assigned revenue under

EAGF linked to milk levies, irregularities, conformity clearance14. An additional amount of EUR 3 million still has to be recovered at year-end.(total income/revenue

related to EAGF amounts to EUR 2.530,2 million)

With regard to the « ageing balance of recovery orders » at 31.12.2016, no significant movement was registered for old recovery orders issued between 1998

and 2004 (-3,8% in 2016; -1,2% in 2014, -0,2% in 2013; -3% in 2012; -5% in 2011).

Annexes :

Table 1 : Commitments

Table 2 : Payments Table 3 : Commitments to be settled

Table 4 : Balance Sheet

Table 5 : Statement of Financial Performance Table 5 Bis: Off Balance Sheet

Table 6 : Average Payment Times Table 7 : Income

Table 8 : Recovery of undue Payments Table 9 : Ageing Balance of Recovery Orders

Table 10 : Waivers of Recovery Orders Table 11 : Negotiated Procedures (excluding Building Contracts)

Table 12 : Summary of Procedures (excluding Building Contracts)

Table 13 : Building Contracts Table 14 : Contracts declared Secret

14 This amount includes EUR 1.593,64 million for income line 6701 (clearance), EUR 118,3 million

for income line 6702 (irregularities), EUR 815 million for income line 6703 (milk).

Outstanding

Chapter Current year RO Carried over RO Total Current Year RO Carried over RO Total balance

1 2 3=1+2 4 5 6=4+5 7=3-6

61 REPAYMENT OF MISCELLANEOUS EXPENDITURE 0.00 4,659,319.52 4,659,319.52 0.00 0.00 0.00 4,659,319.52

65 FINANCIAL CORRECTIONS 7,510,368.55 14,228,992.77 21,739,361.32 2,433,175.15 4,099,537.93 6,532,713.08 15,206,648.24

67

REVENUE CONCERNING THE EUROPEAN

AGRICULTURE GUARANTEE FUND AND THE

EUROPEAN AGRICULTURAL FUND FOR RURAL

DEVELOPMENT

2,853,896,730.39 14,616,889.29 2,868,513,619.68 2,850,361,799.02 14,616,889.29 2,864,978,688.31 21,794,654.25

90 MISCELLANEOUS REVENUE 67,102.12 0.00 67,102.12 67,102.12 0.00 67,102.12 0.00

2,879,733,923.94 33,505,201.58 2,913,239,125.52 2,852,862,076.29 18,716,427.22 2,871,578,503.51 41,660,622.01

TABLE 7 : SITUATION ON REVENUE AND INCOME IN 2016

Revenue and income recognized Revenue and income cashed from

Total DG AGRI


2. Draft annual accounts

2.1 Accounting principles and methods

The annual accounts of DG AGRI have been prepared in accordance with the

generally accepted accounting principles. Estimates have been made, where necessary, in accordance with the methodology agreed upon with the services of the

Accountant of the European Commission.

It should be noted that the balance sheet and economic outturn account of

Directorate General, presented in Annex 3 to this Annual Activity Report, represent only the assets, liabilities, expenses and revenues that are under the control of this

Directorate General. Significant amounts such as own resource revenues and cash held in Commission bank accounts are not included in this Directorate General's

accounts since they are managed centrally by DG Budget, on whose balance sheet and economic outturn account they appear.

Other items not included are:

- the intangible assets (IT software bought externally) or the tangible fixed assets (hardware, technical equipment, office furniture, buildings)

declared/recorded by DG DIGIT and by OIB respectively;

- personnel and management expenses which are managed centrally;

- the appropriation of the net result of the year and of prior years, except for the opening balance in 2005. As the accumulated result of the Commission is

not split amongst the various Directorates-General, the balance sheet presented here is not in equilibrium.

Additionally, the figures included in tables 4 and 5 are, at this date, still subject to

audit by the Court of Auditors. Thus, it is possible that amounts included in these tables may have to be adjusted following this audit.

2.2 Acronyms

EAGF: European Agricultural Guarantee Fund

EAFRD: European Agriculture Fund for Rural Development

EAGGF : European Agricultural Guarantee and Guidance Fund


2.3 Balance Sheet

TABLE 4 : BALANCE SHEET AGRI

BALANCE SHEET 2016 2015

A.I. NON CURRENT ASSETS 4,199,977,973.56 4,744,734,690.82

A.I.1. Intangible Assets 8,726,583.86 6,630,602.17

A.I.5. Non-Current Pre-

Financing 3,491,336,147.23 3,881,631,309.30

A.I.6. Non-Cur Exch Receiv &

Non-Ex Recoverab 699,915,242.47 856,472,779.35

A.II. CURRENT ASSETS 3,465,866,013.22 4,188,751,142.18

A.II.2. Current Pre-Financing 1,458,534,907.86 1,311,961,079.37

A.II.3. Curr Exch Receiv

&Non-Ex Recoverables 2,007,331,105.36 2,876,790,062.81

ASSETS 7,665,843,986.78 8,933,485,833.00

P.I. NON CURRENT LIABILITIES (148,550,431.58) (129,180,308.55)

P.I.2. Non-Current Provisions (148,550,431.58) (129,180,308.55)

P.II. CURRENT LIABILITIES (62,887,820,568.85) (62,533,823,852.65)

P.II.4. Current Payables (12,657,676,460.23) (9,273,761,512.33)

P.II.5. Current Accrued

Charges &Defrd Income (50,230,144,108.62) (53,260,062,340.32)

LIABILITIES (63,036,371,000.43) (62,663,004,161.20)

NET ASSETS (ASSETS less

LIABILITIES) (55,370,527,013.65) (53,729,518,328.20)

P.III.2. Accumulated Surplus / Deficit 173,232,065,358.66 113,738,292,917.78

Non-allocated central (surplus)/deficit* (117,861,538,345.01) (60,008,774,589.58)

TOTAL

Assets

Non-current assets

Non-Current pre-financing: it concerns mainly shared management expenditure but

also indirect management. For shared management it includes 3.170.830.343,44€

which corresponds to the total pre-financing paid in 2014, 2015 and 2016 to Member States for the programming period 2014-2020 (EAFRD) for which the period of

settlement exceeds one year and 4.506.999,91€ from one IPA I program that will be to be recovered from the Member State only after 2017 (since the eligibility period

for this program ends at 31/12/2017). It also includes 306.361.068,41€ advances paid by Member States to beneficiaries and reimbursed from EAFRD and EAGF funds

and 9.637.735,47 € pre-financing paid to third countries for the pre-adhesion instrument for rural development.


Non-Current exchange receivables and non-exchange recoverable: it concerns not yet executed clearance decisions under shared management (632.832.496€ for

EAGF and 67.082.746€ for EAFRD). The period of settlement exceeds one year.

Current assets

Current pre-financing: the amounts have remained at the same level during 2016

and 2015. This is due to the clearing of most of the open pre-financing for the majority of the programs of the 2007-2013 period (EAFRD) –the clearing was

presented as "estimated" in 2015 and it actually took place in 2016. An amount of 794.992.987,23€ from this item relates to shared management (pre-financing that

should be recuperated from the Member-States related to the 2007-2013 programs) and indirect management expenditure. The amount of 658,289,583.47€ concerns

FEI and advances paid by Member States to beneficiaries and reimbursed from EAFRD and EAGF funds that should be used by the final beneficiaries within 2017.

The remaining 5,252,337.16€ concerns open pre-financing from direct management

contracts.

Non-Exchange receivables: EUR 2.007,33 million are owed to DG AGRI by Member

States (99%) and third countries (1%). The amount owed by Member States concerns non-exchange transactions; it includes mostly amounts to be recovered

under EAGF, EAFRD and EAGGF Guidance section, TRDI and Sapard (financing period 2000-2006) for irregularities committed by final beneficiaries and detected by

the Member States (for EUR 1.972,05 million); a value reduction of EUR 959,02 million has been applied to these receivables. It also includes the short term amount

of the not yet executed clearance decisions under EAGF and EAFRD of EUR 967.2

million and various amounts receivables/adjustments of EUR 270,7 million.

Liabilities

Non-current liabilities

Long-term provisions: this amount mainly relates to the estimate of potential future

expenses resulting from court cases awaiting judgement.

Current liabilities

Accounts payable: this item concerns amounts payable to private firms and to Members States. 99% of accounts payable relates to amounts payable to Member

States under EAGF, EAGGF Guidance section (2000-2006) and EAFRD. It includes

amounts already requested by Member States but not yet paid.

Accrued charges: this item includes an estimate of the amounts which Member

States and other beneficiaries are entitled to claim (accrued charges).

The total short-term liabilities remain roughly the same as in 2015.


2.4 Economic Outturn Account

TABLE 5 : STATEMENT OF FINANCIAL PERFORMANCE AGRI

STATEMENT OF FINANCIAL PERFORMANCE 2016 2015

II.1 REVENUES -€1,923,198,107 -€2,263,635,779

II.1.1. NON-EXCHANGE REVENUES -€1,925,659,159 -€2,264,173,040

II.1.1.5. RECOVERY OF EXPENSES -€1,758,705,086 -€1,399,221,822

II.1.1.6. OTHER NON-EXCHANGE REVENUES -€166,954,073 -€864,951,217

II.1.2. EXCHANGE REVENUES €2,461,052 €537,260

II.1.2.1. FINANCIAL INCOME -€58,931 -€2,061,802

II.1.2.2. OTHER EXCHANGE REVENUE €2,519,982 €2,599,063

II.2. EXPENSES €57,394,698,801 €61,757,408,220

II.2. EXPENSES €57,394,698,801 €61,757,408,220

II.2.10.OTHER EXPENSES €51,416,752 €133,772,680

II.2.1. EXP IMPLEM BY MEMBER STATES (SHARED) €57,137,834,449 €61,435,265,052

II.2.2. EXP IMPLEM BY COMMISS&EX.AGENC. (DM) €32,301,048 €33,302,818

II.2.4. EXP IMPL BY 3RD CNTR & INT ORG (IM) €165,281,630 €92,970,097

II.2.6. STAFF AND PENSION COSTS -€416,396 -€1,054,713

II.2.8. FINANCE COSTS €8,281,319 €63,152,286

STATEMENT OF FINANCIAL PERFORMANCE €55,471,500,694 €59,493,772,441

Surplus/Deficit from activities

Exchange and Non-Exchange Revenue

Almost all of the revenue result from non-exchange transactions, which amounts to

EUR 1.925,66 million; it corresponds to recovery of expenses due to - irregularities (EUR 97,92 million) or - financial and conformity clearance decisions (EUR 1.660,34

million) and some other corrections for previous financial years of EUR 0,43 million. The revenue from other non-exchange transactions amounts up to EUR 166,95

million and corresponds mainly to restoring to profit old provisions for bad or doubtful debts that have been previously made but are no longer required. The

decrease compared to last year is due to the withdrawal of the milk quotas and consequently the agricultural milk levies.

Expenses:

99,5% of the expenses relate to shared management expenditure comprising EAGF, EAFRD, EAGGF Guidance section, SAPARD and IPARD:

Under the heading "II.2.1 "Expenses implemented by MS" the EAGF amount corresponds to EUR 44.147.7 million;

The amount for SAPARD-EAGGF Guidance section 2000-2006 and EAFRD under shared management corresponds to EUR 12.990,08 million.


Annex 3 Financial Reports - DG AGRI - Financial Year 2016

Table 1 : Commitments

Table 2 : Payments

Table 3 : Commitments to be settled

Table 4 : Balance Sheet

Table 5 : Statement of Financial Performance

Table 5 Bis: Off Balance Sheet

Table 6 : Average Payment Times

Table 7 : Income

Table 8 : Recovery of undue Payments

Table 9 : Ageing Balance of Recovery Orders

Table 10 : Waivers of Recovery Orders

Table 11 : Negotiated Procedures (excluding Building Contracts)

Table 12 : Summary of Procedures (excluding Building Contracts)

Table 13 : Building Contracts

Table 14 : Contracts declared Secret


TABLE 1: OUTTURN ON COMMITMENT APPROPRIATIONS IN 2016 (in Mio €)

Commitment appropriations

authorised

Commitments made

%

1 2 3=2/1

Title 05 Agriculture and rural development

05 05 01 Administrative expenditure of the 'Agriculture and rural development' policy area

22,65678419 18,721376 82,63 %

05 02 Improving the competitiveness of the agricultural sector through interventions in agricultural markets

3254,519775 3135,7958 96,35 %

05 03 Direct payments aimed at contributing to farm incomes, limiting farm income variability and meeting environment and climate objectives

42626,22344 40984,1314 96,15 %

05 04 Rural development 19293,81999 18675,9392 96,80 %

05 05 Instrument for Pre-accession Assistance - Agriculture and rural development

113,6886526 112 98,51 %

05 06 International aspects of the 'Agriculture and rural development' policy area

4,404518 4,40354171 99,98 %

05 07 Audit of agricultural expenditure financed by the European Agricultural Guarantee Fund (EAGF)

102,329 102,323671 99,99 %

05 08 Policy strategy and coordination of the 'Agriculture and rural development' policy area

27,40350282 24,4464491 89,21 %

05 09 Horizon 2020 - Research and innovation related to agriculture

2,22061955 0 0,00 %

Total Title 05 65447,26628 63057,7615 96,35%

Total DG AGRI 65447,26628 63057,7615 96,35 %

* Commitment appropriations authorised include, in addition to the budget voted by the legislative authority, appropriations carried over from the previous exercise, budget amendments as well as miscellaneous commitment appropriations for the period (e.g. internal and external assigned revenue).

0, %

20, %

40, %

60, %

80, %

100, %

120, %

% Outturn on commitment appropriations


TABLE 2: OUTTURN ON PAYMENT APPROPRIATIONS IN 2016 (in Mio €)

Chapter Payment

appropriations authorised *

Payments made

%

1 2 3=2/1

Title 05 Agriculture and rural development


32,6769346 20,73815554 63,46 %

05 02 Improving the competitiveness of the agricultural sector through interventions in agricultural markets

3258,57992 3127,902558 95,99 %

05 03 Direct payments aimed at contributing to farm incomes, limiting farm income variability and meeting environment and climate objectives

42626,22344 40808,72809 95,74 %

05 04 Rural development 12381,59477 12364,99864 99,87 %


340,9314514 339,2427622 99,50 %


4,404518 4,40354171 99,98 %

05 07 Audit of agricultural expenditure financed by the European Agricultural Guarantee Fund (EAGF)

102,329 102,323671 99,99 %


36,79388008 25,62456823 69,64 %

05 09 Horizon 2020 - Research and innovation related to agriculture

2,22061955 0 0,00 %

Total Title 05 58785,75453 56793,96199 96,61%

Total DG AGRI 58785,75453 56793,96199 96,61 %

* Payment appropriations authorised include, in addition to the budget voted by the legislative authority, appropriations carried over from the previous exercise, budget amendments as well as miscellaneous payment appropriations for the period (e.g. internal and external assigned revenue).

0, %

20, %

40, %

60, %

80, %

100, %

120, %

="% Outturn on payment appropriations"


Table 1-2: Execution 2016

Expenditure

Commitments

Payments

Circuits RAL

Crédits Exécution Crédits Exécution

Direct expenses 83.280.001,83 73.741.427,96 88,55% 104.078.949,07 72.221.278,42 68,04% Direct expenses 60.068.243,26

FEAGA 45.982.018.698,06 44.221.202.321,60 96,17% 45.982.018.698,06 44.036.442.654,43 95,77% FEAGA 184.759.667,17

shared Mgt shared Mgt

Rural Development 19.268.278.927,14 18.650.817.761,73 96,80% 12.358.725.432,19 12.346.055.292,13 99,90% Rural Development 29.622.475.347,17

shared Mgt shared Mgt

Preadhésion 113.688.652,59 112.000.000,00 98,51% 340.931.451,43 339.242.762,15 99,50% Preadhesion 337.693.932,86



TOTAL 65.447.266.279,62 63.057.761.511,29 96,35% 58.785.754.230,75 56.793.961.987,13 96,61% TOTAL 30.204.997.190,46


TABLE 3 : BREAKDOWN OF COMMITMENTS TO BE SETTLED AT 31/12/2016 (in Mio €)

2016 Commitments to be settled Commitments to be

settled from

Total of commitments to be settled at end

Total of commitments to be settled at end

Chapter Commitments 2016 Payments 2016 RAL 2016

% to be settled

financial years previous to 2016

of financial year 2016(incl corrections)

of financial year 2015 (incl. corrections)

1 2 3=1-2 4=1-2/1 5 6=3+5 7

Title 05 : Agriculture and rural development


18,64455231 11,56 7,08207117 37,98 % 0,00 7,08 10,02

05 02

Improving the competitiveness of the agricultural sector through interventions in agricultural markets

3265,717758 3256,36 9,35631209 0,29 % 0,00 9,36 1,63

05 03

Direct payments aimed at contributing to farm incomes, limiting farm income variability and meeting environment and climate objectives

42741,37755 42565,97 175,4033551 0,41 % 0,00 175,40 0,00

05 04 Rural development 18676,98828 513,57 18163,42294 97,25 % 11.472,90 29.636,32 24641,10


112 0,00 112 100,00 % 225,69 337,69 584,06


4,40354171 4,40 0 0,00 % 0,00 0,00 0,00

05 07

Audit of agricultural expenditure financed by the European Agricultural Guarantee Fund (EAGF)

102,4269274 102,43 0 0,00 % 0,00 0,00 0,00


24,44644911 9,02 15,42872725 63,11 % 23,73 39,16 43,85

Total Title 05 64946,00506 46463,31 18482,69341 28,46% 11722,32077 30205,01418 25280,657

Total DG AGRI 64946,00506 46463,31 18482,69341 28,46 % 11722,32077 30205,01418 25280,657


0,00

5.000,00

10.000,00

15.000,00

20.000,00

25.000,00

30.000,00

35.000,00

="Breakdown of Commitments remaining to be settled (in Mio EUR)"


TABLE 4 : BALANCE SHEET AGRI

BALANCE SHEET 2016 2015

A.I. NON CURRENT ASSETS 4,199,977,973.56 4,744,734,690.82

A.I.1. Intangible Assets 8,726,583.86 6,630,602.17

A.I.5. Non-Current Pre-

Financing 3,491,336,147.23 3,881,631,309.30

A.I.6. Non-Cur Exch Receiv &

Non-Ex Recoverab 699,915,242.47 856,472,779.35

A.II. CURRENT ASSETS 3,465,866,013.22 4,188,751,142.18

A.II.2. Current Pre-Financing 1,458,534,907.86 1,311,961,079.37

A.II.3. Curr Exch Receiv

&Non-Ex Recoverables 2,007,331,105.36 2,876,790,062.81

ASSETS 7,665,843,986.78 8,933,485,833.00

P.I. NON CURRENT LIABILITIES (148,550,431.58) (129,180,308.55)

P.I.2. Non-Current Provisions (148,550,431.58) (129,180,308.55)

P.II. CURRENT LIABILITIES (62,887,820,568.85) (62,533,823,852.65)

P.II.4. Current Payables (12,657,676,460.23) (9,273,761,512.33)

P.II.5. Current Accrued

Charges &Defrd Income (50,230,144,108.62) (53,260,062,340.32)

LIABILITIES (63,036,371,000.43) (62,663,004,161.20)

NET ASSETS (ASSETS less

LIABILITIES) (55,370,527,013.65) (53,729,518,328.20)

P.III.2. Accumulated Surplus / Deficit 173,232,065,358.66 113,738,292,917.78

Non-allocated central (surplus)/deficit* (117,861,538,345.01) (60,008,774,589.58)

TOTAL


TABLE 5 : STATEMENT OF FINANCIAL PERFORMANCE AGRI

STATEMENT OF FINANCIAL PERFORMANCE 2016 2015

II.1 REVENUES -€1.923.198.107 -€2.263.635.779

II.1.1. NON-EXCHANGE REVENUES -€1.925.659.159 -€2.264.173.040

II.1.1.5. RECOVERY OF EXPENSES -€1.758.705.086 -€1.399.221.822

II.1.1.6. OTHER NON-EXCHANGE REVENUES -€166.954.073 -€864.951.217

II.1.2. EXCHANGE REVENUES €2.461.052 €537.260

II.1.2.1. FINANCIAL INCOME -€58.931 -€2.061.802

II.1.2.2. OTHER EXCHANGE REVENUE €2.519.982 €2.599.063

II.2. EXPENSES €57.394.698.801 €61.757.408.220

II.2. EXPENSES €57.394.698.801 €61.757.408.220

II.2.10.OTHER EXPENSES €51.416.752 €133.772.680

II.2.1. EXP IMPLEM BY MEMBER STATES (SHARED) €57.137.834.449 €61.435.265.052

II.2.2. EXP IMPLEM BY COMMISS&EX.AGENC. (DM) €32.301.048 €33.302.818

II.2.4. EXP IMPL BY 3RD CNTR & INT ORG (IM) €165.281.630 €92.970.097

II.2.6. STAFF AND PENSION COSTS -€416.396 -€1.054.713

II.2.8. FINANCE COSTS €8.281.319 €63.152.286

STATEMENT OF FINANCIAL PERFORMANCE €55.471.500.694 €59.493.772.441

Explanatory Notes (facultative):

It should be noted that the balance sheet and statement of financial performance presented in Annex 3 to this Annual Activity Report, represent only the assets, liabilities, expenses and revenues that are under the control of this Directorate General. Significant amounts such as own resource revenues and cash held in Commission bank accounts are not included in this Directorate General's accounts since they are managed centrally by DG Budget, on whose balance sheet and statement of financial performance they appear. Furthermore, since the accumulated result of the Commission is not split amongst the various Directorates General, it can be seen that the balance sheet presented here is not in equilibrium. Additionally, the figures included in tables 4 and 5 are provisional since they are, at this date, still subject to audit by the Court of Auditors. It is thus possible that amounts included in these tables may have to be adjusted following this audit.


TABLE 5bis : OFF BALANCE SHEET AGRI

OFF BALANCE 2016 2015

OB.1. Contingent Assets 226.694,50 56.623,37

GR for performance 0,00 0,00

GR for pre-financing 226.694,50 56.623,37

OB.2. Contingent Liabilities -1.711.244.940,47 -1.377.033.549,91

OB.2.3. CL EAGGF Guarantee -1.711.244.940,47 -1.377.033.549,91

OB.3. Other Significant Disclosures -69.818.997.920,14 -84.500.667.279,33

OB.3.2. Comm against app. not yet consumed -12.535.347.780,14 -8.567.417.644,33

OB.3.3.1 Structural operations -57.283.650.140,00 -75.933.249.635,00

OB.4. Balancing Accounts 76.447.940.928,65 90.795.568.968,41

OB.4. Balancing Accounts 76.447.940.928,65 90.795.568.968,41

OFF BALANCE 4.917.924.762,54 4.917.924.762,54

Explanatory Notes (facultative):

It should be noted that the balance sheet and statement of financial performance presented in Annex 3 to this Annual Activity Report, represent only the assets, liabilities, expenses and revenues that are under the control of this Directorate General. Significant amounts such as own resource revenues and cash held in Commission bank accounts are not included in this Directorate General's accounts since they are managed centrally by DG Budget, on whose balance sheet and statement of financial performance they appear. Furthermore, since the accumulated result of the Commission is not split amongst the various Directorates General, it can be seen that the balance sheet presented here is not in equilibrium. Additionally, the figures included in tables 4 and 5 are provisional since they are, at this date, still subject to audit by the Court of Auditors. It is thus possible that amounts included in these tables may have to be adjusted following this audit.


TABLE 6: AVERAGE PAYMENT TIMES FOR 2016 - DG AGRI

Legal Times

Maximum Payment

Time (Days)

Total Number of Payments

Nbr of Payments

within Time Limit

Percentage

Average Payment Times

(Days)

Nbr of Late Payments

Percentage

Average Payment

Times (Days)

30 939 904 96,27 % 9,672566372 35 3,73 % 41,68571429

45 838 756 90,21 % 22,25 82 9,79 % 106,3170732

60 24 24 100,00 % 35,66666667

90 50 41 82,00 % 48,07317073 9 18,00 % 97,22222222


1851 1725 93,19 % 126 6,81 %

Average Net Payment Time

21,3095624

16,45913043 87,71428571

Average Gross Payment Time

72,48946515

63,46144928 196,0873016

Target Times

Target Payment

Time (Days)


Nbr of Payments

within Target Time

Percentage

Average Payment Times

(Days)

Nbr of Late Payments

Percentage

Average Payment

Times (Days)

20 31 28 90,32 % 11,64285714 3 9,68 % 22,66666667

30 298 158 53,02 % 15,79746835 140 46,98 % 76,60714286


329 186 56,53 % 143 43,47 %

Average Net Payment Time

41,38297872

15,17204301 75,47552448

Average Gross Payment Time

311,9513678

354,3064516 256,8601399

Suspensions

Average Report

Approval Suspen-

sion Days

Average Payment Suspen-

sion Days

Number of

Suspen-ded Pay-

ments

% of Total

Number


Amount of Suspended Payments

% of Total

Amount

Total Paid Amount

0 255 372 20,10 % 1851 4.490.230.147,66 38,24 % 11.741.425.532,40


TABLE 7 : SITUATION ON REVENUE AND INCOME IN 2016

Revenue and income recognized Revenue and income cashed from Outstanding

Chapter Current year RO Carried over RO Total Current Year RO Carried over RO Total balance

1 2 3=1+2 4 5 6=4+5 7=3-6

61 REPAYMENT OF MISCELLANEOUS EXPENDITURE

0,00 4.659.319,52 4.659.319,52 0,00 0,00 0,00 4.659.319,52

65 FINANCIAL CORRECTIONS 7.510.368,55 14.228.992,77 21.739.361,32 2.433.175,15 4.099.537,93 6.532.713,08 15.206.648,24

67

REVENUE CONCERNING THE EUROPEAN AGRICULTURE GUARANTEE FUND AND THE EUROPEAN AGRICULTURAL FUND FOR RURAL DEVELOPMENT

2.853.896.730,39 14.616.889,29 2.868.513.619,68 2.850.361.799,02 14.616.889,29 2.864.978.688,31 21.794.654,25

90 MISCELLANEOUS REVENUE 67.102,12 0,00 67.102,12 67.102,12 0,00 67.102,12 0,00

Total DG AGRI 2.879.733.923,94 33.505.201,58 2.913.239.125,52 2.852.862.076,29 18.716.427,22 2.871.578.503,51 41.660.622,01

NB : Les montants du tableau Income de la DG BUDG ont été modifiés pour y inclure la balance des receivables ouverts pour le FEAGA (3.094.271,22€ sur la ligne 67): cette table n'inclut jamais la situation réelle du FEAGA, mais montre uniquement les montants régularisés qui sont, par définition, toujours recouvrés à la fin de l'exercice.


TABLE 8 : RECOVERY OF PAYMENTS (Number of Recovery Contexts and corresponding Transaction Amount)

INCOME BUDGET RECOVERY ORDERS ISSUED IN 2016

Irregularity Total undue

payments recovered Total transactions in recovery

context(incl. non-qualified) % Qualified/Total

RC

Year of Origin (commitment) Nbr RO Amount Nbr RO Amount Nbr RO Amount Nbr RO

Amount

2008 7,00 21.353.994,10

No Link 27 47.554.086,57 27 47.554.086,57 176,00 331.171.055,77 15,34% 14,36%

Sub-Total 27 47.554.086,57 27 47.554.086,57 183,00 352.525.049,87 14,75% 13,49%

EXPENSES BUDGET Error Irregularity OLAF Notified Total undue payments recovered Total transactions in

recovery context(incl. non-qualified)

% Qualified/Total RC

Nbr Amount Nbr Amount Nbr Amount Nbr Amount Nbr Amount Nbr Amount

INCOME LINES IN INVOICES 250 47.504.009,35

NON ELIGIBLE IN COST CLAIMS 1 86.842,69 23 473.665,54 24 560.508,23 105 314.188.750,56 22,86% 0,18%

CREDIT NOTES 34 258.013,55 10 1.106.451,43 44 1.364.464,98 74 1.698.338,58 59,46% 80,34%

Sub-Total 35 344.856,24 33 1.580.116,97 68 1.924.973,21 429 363.391.098,49 15,85% 0,53%

GRAND TOTAL 35 344.856,24 60 49.134.203,54 95 49.479.059,78 612 715.916.148,36 15,52% 0,31%


TABLE 8 : RECOVERY OF PAYMENTS (Number of Recovery Contexts and corresponding Transaction Amount)

(DG AGRI DIRECT PAYMENT CIRCUIT ONLY)

INCOME BUDGET RECOVERY ORDERS ISSUED IN 2016

Irregularity Total undue payments

recovered Total transactions in recovery

context(incl. non-qualified) % Qualified/Total

RC

Year of Origin (commitment) Nbr RO Amount Nbr RO Amount Nbr RO Amount Nbr RO

Amount

2013 1 47.102,12 0,00% 0,00%

2016 2 20.000,00 0,00% 0,00%

Sub-Total 3 67.102,12 0,00% 0,00%

(Internal Commission Revenue; Debtor = other Commission Service)





INCOME LINES IN INVOICES 0 0 0 0 4 295.616,00 0,00% 0,00%

NON ELIGIBLE IN COST CLAIMS 1 86.842,69 23 473.665,54 25 628.957,57 96,00% 89,12%

CREDIT NOTES 25 258.013,55 11 1.355.688,51 45 1.947.575,66 80,00% 82,86%

Sub-Total 26 344.856,24 34 1.829.354,05 74 2.872.149,23 81,08% 75,70%

GRAND TOTAL 26 344.856,24 34 1.829.354,05 77 2.939.251,35 77,92% 73,97%


Tableau tenant compte d'une correction effectuée le 04/01/2017 (modification note de crédit SI2.173291, donc n'est plus reprise en 2016) :





INCOME LINES IN INVOICES 0 0 0 0 4 295.616,00 0,00% 0,00%

NON ELIGIBLE IN COST CLAIMS 1 86.842,69 23 473.665,54 25 628.957,57 96,00% 89,12%

CREDIT NOTES 25 258.013,55 10 1.106.451,43 44 1.698.338,58 79,55% 80,34%

Sub-Total 26 344.856,24 33 1.580.116,97 73 2.622.912,15 80,82% 73,39%

GRAND TOTAL 26 344.856,24 33 1.580.116,97 76 2.690.014,27 77,63% 71,56%


TABLE 9 : AGEING BALANCE OF RECOVERY ORDERS AT 31/12/2016 FOR AGRI

Number at 01/01/2016


Evolution Open Amount

(EUR) at 01/01/2016

Open Amount (EUR) at

31/12/2016 Evolution

1998 1 1 0,00 % 83.708,07 80.255,49 -4,12 %

1999 10 10 0,00 % 7.244.527,00 7.236.856,35 -0,11 %

2000 1 1 0,00 % 1.850.432,59 1.678.232,59 -9,31 %

2001 2 2 0,00 % 1.725.160,75 1.134.110,41 -34,26 %

2003 1 1 0,00 % 3.674.865,52 3.674.865,52 0,00 %

2004 1 1 0,00 % 984.454,00 984.454,00 0,00 %

2015 44

-100,00 % 95.345.450,06 -100,00 %

2016 8 24 200,00 % 375.523.683,09 29.966.118,87 -92,02 %

68 40 -41,18 % 486.432.281,08 44.754.893,23 -90,80 %

TABLE 9 : AGEING BALANCE OF RECOVERY ORDERS AT 31/12/2016 FOR AGRI

(DG AGRI DIRECT PAYMENT CIRCUIT ONLY)



Evolution Open Amount

(EUR) at 01/01/2016

Open Amount (EUR) at

31/12/2016 Evolution

1998 1 1 0,00 % 83.708,07 80.255,49 -4,12 %

1999 10 10 0,00 % 7.244.527,00 7.236.856,35 -0,11 %

2000 1 1 0,00 % 1.850.432,59 1.678.232,59 -9,31 %

2001 2 2 0,00 % 1.725.160,75 1.134.110,41 -34,26 %

2003 1 1 0,00 % 3.674.865,52 3.674.865,52 0,00 %

2004 1 1 0,00 % 984.454,00 984.454,00 0,00 %

16 16 15.563.147,93 14.788.774,36


TABLE 10 : RECOVERY ORDER WAIVERS IN 2016 >= EUR 100.000

Waiver Central

Key Linked RO

Central Key

RO Accepte

d Amount (EUR)

LE Account Group

Commission Decision

Comments

Total DG

Number of RO waivers

Justifications:

TABLE 11 : CENSUS OF NEGOTIATED PROCEDURES - DG AGRI - 2016

Negotiated Procedure Legal base

Number of Procedures Amount (€)

Total

No data to be reported

TABLE 12 : SUMMARY OF PROCEDURES OF DG AGRI EXCLUDING BUILDING CONTRACTS

Internal Procedures > € 60,000

Procedure Type Count Amount (€)

Internal Procedures > € 60,000 Open Procedure (Art. 104(1) (a) FR)

4 7.056.896,38

TOTAL 4 7.056.896,38


TABLE 13 : BUILDING CONTRACTS

Total number of contracts :

Total amount :

Legal base Contract Number

Contractor Name Description Amount (€)


TABLE 14 : CONTRACTS DECLARED SECRET

Total Number of Contracts :

Total amount :

Legal base

Contract Number

Contractor Name Type of contract

Description Amount (€)



ANNEX 4: Materiality criteria

General Principle

Reasonable assurance is the judgement of the Authorising Officer by Delegation (hereafter referred to as the Director General). For this purpose, he/she is required

to assess all relevant information at his/her disposal available to support the declaration of assurance. Under shared management, implementation tasks

including controls and payments are delegated to the Member States in accordance with the criteria and procedures laid down in the Financial Regulation and in sector-

specific rules. For EAGF and EAFRD the provision of assurance has therefore to be based on the assessment of the information and indicators resulting from the

management reporting and supervision arrangements in place and of the functioning

of the internal control systems operated by the Member States' implementing bodies. This assessment allows the Director General to form an opinion as to the

effectiveness of the management and control systems operated at the level of the Member States' implementing bodies.

Assurance model for expenditure implemented under shared management

The EAGF and EAFRD are implemented through a management and control system based on four levels. Taken together, these four levels and the results they produce

are the basis for the Director General to obtain reasonable assurance as to the

effectiveness of management and control systems and the legality and regularity of the expenditure.


Levels

of assura

nce

from

the

Mem

ber

Sta

tes' contr

ol syste

ms

Administrative structure set up at Member States level: management, control and payment of the expenditure are entrusted to

accredited Paying Agencies. Compliance with strict accreditation criteria (which are laid down in Commission Implementing Regulation

(EU) No 908/2014 and in Commission Delegated Regulation (EU) No 907/2014) is subject to constant supervision by the competent national

authority (at Ministerial level). The Paying Agencies are required to provide an annual Management Declaration which includes a

declaration that the system in place provides reasonable assurance on the legality and regularity of the underlying transactions.

Administrative controls and on-the-spot checks (prior to

payment): for each support scheme financed by the EAGF or EAFRD,

the Paying Agencies apply a system of exhaustive administrative controls (100% of aid applications must be checked) and on-the-

spot checks (at least 5% in the case of most schemes) prior to any payment. These controls are made in accordance with precise rules set

out in the sector specific legislation (e.g., the Integrated Administration and Control System – IACS, including a Land Parcel Identification

System – LPIS). Member States are required to send detailed information on the checks carried out and their results on a yearly

basis to the Commission (control data and statistics).

Audits by Certification Bodies and controls after payment by the Paying Agencies: The Certification Bodies deliver each year an

opinion on the completeness, accuracy and veracity of the Paying

Agencies' annual accounts, on the proper functioning of their internal control systems and on the legality and regularity of the expenditure

for which reimbursement has been requested from the Commission. They also verify compliance of the Paying Agencies with accreditation

criteria and the Management Declarations. In addition all aid measures other than direct payments covered by the IACS are also

subject to ex-post controls, either by a specific control body (in the case of the EAGF) or by the Paying Agency itself (in the case of the

EAFRD)

Assura

nce fro

m t

he C

om

mis

sio

n's

checks

DG AGRI audits: The audits carried out by DG AGRI serve a number of purposes.

In the first place, they protect the EU budget from irregular payment

by recovering amounts unduly spent by the Member State as a result of deficiencies detected in their management and control systems.

This is done via a clearance procedure consisting of both an annual financial clearance (limited to the Paying Agencies' annual accounts)

and a multi-annual conformity clearance, whose aim is to exclude the expenditure not compliant through net financial corrections which

return to the EU budget as assigned revenue.

Secondly, by revealing deficiencies to be remedied and by leading to

financial corrections up to the moment those deficiencies have been

corrected, they have a remedial and preventive role.

Thirdly, DG AGRI's audits are also used to provide assurance to the

Director General on the Member States' management and control systems.


Assessment of management and control systems in the Member States

The Director General carries out an assessment on the extent to which he/she can

draw assurance from the four levels of the management and control systems

described. This assessment is based on three elements as follows: The first element is the assessment of the functioning of management and

control systems in the Paying Agencies. This is carried out by DG AGRI’s audit directorate and includes:

Checking compliance of the Paying Agencies with the accreditation criteria. This is carried out by the Certification Bodies with, where appropriate, the

placing under probation of those Paying Agencies with serious deficiencies in their application of the accreditation criteria by the Competent Authority.

The performance by DG AGRI, on the basis of a detailed risk analysis, of accreditation audits in order to check by itself the respect by Paying Agencies

of accreditation criteria as well as audits on the proper functioning and

operation of the Certification Bodies.

The qualitative analysis of the Management Declarations issued by the

directors of the Paying Agencies whereby they are required to declare whether they have put in place systems which provide reasonable assurance

on the legality and regularity of the underlying transactions.

The qualitative analysis of the opinions from the Certification Bodies on these

Management Declarations.

An annual financial clearance exercise carried out by DG AGRI examining the

completeness, accuracy and veracity of the accounts declared by the Paying

Agencies and resulting in the adoption of a clearance of accounts decision without prejudice to the conformity procedure with regard to the legality and

regularity of the expenditure.

The second element assessed is the result of the controls carried out by the

Member States on the final beneficiaries and their certification.

For most of the agriculture budget, each year Member States are required to

send detailed information to the Commission in relation to the more than 900 000 on-the-spot checks carried out. For the large part15, these results

relate to the financial year covered by the AAR in question. These data

provide detailed information on the errors discovered in the course of administrative and/or on-the-spot checks and enable DG AGRI to determine

the reported error rate per Paying Agency or aid scheme.

The Certification Bodies are required to give an opinion on the legality and

regularity of the expenditure for which reimbursement has been requested from the Commission.

The third assurance element is comprised of the Commission's own conformity audits on Member States management and control systems. DG AGRI's conformity

clearance procedure can exclude from EU financing expenditure made in the 24

months prior to the notification to the Member States of a deficiency and up to the moment the identified deficiencies are remedied. Around 150 such audits are opened

each year on the basis of a detailed risk analysis and enable the Commission to obtain direct assurance as to the effectiveness of the Paying Agencies' management

and control systems.

15 This is presently not always the case for statistics for certain measures under Rural Development where

there is a limited overlap between reporting period and financial year.


Materiality criteria

DG AGRI estimates the error rate on the basis of control statistics for each Paying

Agency (or measure for market measures, ABB 02) and for each ABB activity and also takes into account all available information and audit results (Certification

Bodies, Commission and Court of Auditors), including on-the-spot missions; this information is used as the best estimate of the possible risk for expenditure in the

reporting year. In the event that the error rates reported by Member States are not accurate or found not to be reliable or are not available, the audit directorate either

re-calculates them when it has sufficient information to do so or, alternatively, adjusts them upwards by flat rates in line with the results of the assessment of the

functioning of the management and control systems. This results in an error rate at

Paying Agency level validated and adjusted by the management of DG AGRI (adjusted error rate).

Further steps in the process determine when a reservation shall be made by the Director General, what elements are included in the amount at risk and how he/she

can demonstrate the overall remaining financial risk to the EU budget when all corrective measures have been taken into account.

As regards "corrective measures", the net financial corrections imposed by the Commission and the recoveries operated by the Member States themselves are ex-

post exercises and multi-annual in nature. It is extremely rare that financial

corrections and recoveries are executed in the same financial year as that of the expenditure concerned. However, the performance of the ex-post corrective system

can be estimated from its results in the most recent years. Consequently, DG AGRI reports on a corrective capacity that is estimated as the annual average of the

implemented net financial corrections imposed by the Commission and recoveries of undue payments declared by the Member States for the last three years.

Comparing the corrective capacity with the amount at risk gives a solid indication of the remaining financial risk to the EU budget when all corrective actions are taken

into account ("error rate at closure", see last section of this Annex, as well as key

performance indicator 5 and Part 2.2 of the body of the AAR).

Step 1: Estimation of an error rate at Paying Agency level = REPORTED

ERROR RATE

In the first place, for each ABB, the statistical data sent by the Paying Agencies on

the results of the administrative and on-the-spot checks carried out is collected,

compiled and checked for consistency and completeness. The error rate per Paying Agency used as the basis for the subsequent assessment is the error rate found in

the random on-the-spot check sample, and after deduction of the errors found as a result of administrative controls. On that basis, a "reported error rate" is

calculated, which represents the error rate that remains in the non-controlled population (= the aid applications/payment claims which have not been controlled

on-the-spot by the Paying Agencies). This reported error rate is used for calculating a first estimate of the amount at risk. It is noted that the vast majority of

this statistical data relates to checks carried out in respect of the financial year which

is the subject of the report.


Step 2: Validation and adjustment of the reported error rate by DG AGRI at

Paying Agency/Member State and ABB level = ADJUSTED ERROR RATE

All available information is considered in determining to what extent the reported

error rate is reliable for each Paying Agency for each ABB activity. Where ex-post audits (by the Commission, Certification Bodies or the European Court of Auditors

(ECA)) have revealed management and control systems' deficiencies, these are not reflected in the Member States' control statistics and, therefore, those statistics do

not reflect the risk resulting from those deficiencies. In order to estimate the level of unreported errors, the auditors make adjustments to the reported error rates taking

into account the following evidence:

DG AGRI's own audits over the previous three years (including conformity

audits and accreditation audits); older reports in cases where available information indicates that no or insufficient remedial actions have been

implemented. This includes the auditors' professional judgement on the

evolution of the control environment in the Paying Agency.

The opinion which the Certification Bodies have delivered on the legality and

regularity of the expenditure for which reimbursement has been requested from the Commission, including the reliability of the control statistics reported

by the Paying Agencies and the quality of the underlying controls, is also examined.

ECA's previous three annual reports are also taken into account; older reports in cases where available information indicates that no or insufficient

remedial actions have been implemented. In the event that a DG AGRI audit

has taken place more recently than the ECA' saudit, it is possible that the assessment arising from the latter is replaced by the DG AGRI more recent

appreciation of the situation.

Information furnished by the operational units within the DG regarding the

reliability of Member States' statistics or other information obtained pertaining to deficiencies in their management and control systems, or

remedial action taken by Member States.

Other relevant evidence including elements signalled by

o the Anti-Fraud Correspondent of DG AGRI;

o the director of the Paying Agency in his/her Management Declaration;

In determining the extent of the adjustment to make to the reported error rate,

DG AGRI applies the professional judgement of its auditors and in particular the criteria for estimating the seriousness and extent of the identified deficiencies

established in its "Guidelines on the calculation of the financial corrections in the framework of the conformity and financial clearance of accounts procedures "16.

When using these criteria, the auditors take into account that the methodology for preparing financial corrections aims at covering the risk to the EU budget whereas

the top-up to be applied should represent the audit assessment of the extent to

which the Paying Agency's reported error rate is understated; for instance, insufficient sanctions represent a risk to the EU budget but shall not be considered

as errors to be included in the error rate for the expenditure of the year in question.

For ABB 03 and ABB 04, the decision making process for the assessment is

carried out by the auditors concerned, on a case by case basis, for each Paying Agency. All available information, including the input of the operational units, is

integrated to complete the assessment process.The professional judgement of the audit services of the DG is applied particularly when weighing contradictory

information or considering abnormal statistical results. This results in an

16 See C(2015) 3675 final; previously Document VI/5330/97, AGRI/60637/2006, AGRI-2005-64043,

COM(2010) 2498 final and D(2012)1338812 were considered.


additional error rate top-up to the reported error rate and the calculation of an adjusted error rate and the corresponding amount at risk.

For ABB 02, the same approach is followed but per measure instead of per

Paying Agency.

Coordination is carried out at the level of DG AGRI's audit directorate to ensure

that there is a consistency of approach taken as regards the adjustments made to the Member States' error rates.

For measures about which there is no information on the risk (no reporting required by the legislation), the average adjusted error rate (for that part of the

ABB for which statistics are available) is extrapolated to the expenditure concerned.

The additional amount at risk resulting from an adjustment or "top-up" is added to the initial amount at risk calculated in Step 1, resulting in an adjusted amount

at risk for each Paying Agency.

The adjusted error rate per Paying Agency is obtained by dividing the adjusted amount at risk by the expenditure declared to the Commission for the financial

year. Adjusted error rates are aggregated at Member State and ABB levels by aggregating the adjusted amounts at risk.

Step 3: DG AGRI materiality criteria

Article 66(9) of the Financial Regulation provides that

"The authorising officer by delegation shall report to his or her institution on the

performance of his or her duties in the form of an annual activity report containing

financial and management information, including the results of controls, declaring that, except as otherwise specified in any reservation related to defined

areas of revenue and expenditure, he or she has reasonable assurance …"

The Director General for DG AGRI shall make financial reservations at Paying

Agency level (and/ or aid scheme level as regards market measures within ABB02).

Paying Agencies with an adjusted error rate above 5% shall in general be

subject to a reservation.

For Paying Agencies with an adjusted error rate between 2% and 5%,

professional judgement shall be applied in assessing whether the risk is

sufficiently covered by mitigating factors and thus whether a financial reservation is necessary. The operational units of DG AGRI are integrated into

the decision making process for determining the existence of mitigating factors. The mitigating factors are disclosed in all cases where a reservation is

deemed to be not necessary. They shall include notably whether the necessary remedial actions have been implemented by the Member

State/Paying Agency concerned and whether there is an on-going conformity clearance procedure covering the expenditure for the financial year of the

AAR.

A de minimis approach for deciding on reservations shall be applied. Given the amounts at stake for the CAP with expenditure of ± 55 billion EUR, a

de minimis threshold of 1 million EUR is applied. All cases for which the amount at risk is below that threshold are not subject to a reservation (unless

on reputational grounds). Reservations made for the preceding year shall not be issued for the financial year concerned by the AAR if the amount at risk for

that financial year is below the 1 million EUR threshold.

For market measures a flexible approach may also be taken when deciding on

reservations, notably where the adjusted error rate is calculated on a


purely risk based sample. For most market schemes, the legislation does not require that a random sample is selected for on-the-spot checks. The latter

are, rather, risk based. Extrapolating the result of the risk sample therefore

to the uncontrolled population would result in overstating the error rate and amount at risk. In such cases it shall be evaluated if there are elements

which mitigate against applying a reservation even where the adjusted error rate is above 5%.

If the adjusted error rate is below 2%, generally no reservation is made.

Coordination is carried out between all relevant parts of DG AGRI to ensure that

there is a consistency of approach as regards the mitigating factors examined when deciding whether a reservation is necessary.

In the framework of shared management, as set out in the Financial Regulation and the rules on the financing of the CAP, it is the Member State, which has to assume

the overall responsibility for ensuring that actions financed by the budget are

implemented correctly in accordance with the rules. Therefore, while the action plans, accompanying reservations where necessary, should identify the deficiencies

and Paying Agencies concerned, it is the Member State which must ensure that the corresponding remedial actions are precisely defined and actually implemented.

Step 4: Quantification of the reservation

The amount under reservation is the amount at risk for each Paying Agency (or Member State in respect of ABB02) for which a reservation has been made. It is

aggregated at Member State level.

Step 5: Calculation of the amount at risk at ABB level

The amount at risk aggregated at ABB level is the amount of EU expenditure

which risks to have been misspent on the basis of the adjusted error rates; it covers all Paying Agencies irrespective of whether they are subject to a reservation.


Paying Agency

control statistics

DG AGRI Validation

Process = PA control

statistics + DG AGRI

adjustment

adjusted

Error Rate

(aER)/PA

Reservation

Amount

subject to

reservation

aER >5%

Yes Yes

Yes

No

aER < 2%

Step 1 Step 2 Step 3 Step 4 Step 5

DG

AG

RI'S D

ECISIO

N P

RO

CESS FO

R M

AK

ING

RESER

VA

TION

S

Action Plan

Paying agency level MS level ABB Level

Amount at

risk

estimation of a

reported error rate at

Paying Agency level

validation and adjustment

by DG AGRI; calculation of

an adjusted Error Rate (aER)

DG AGRI materiality criteria

aER 2-5%

Risk

mitigation

factors

No

de minimis

quantification of

the reservation

calculation of the

amount at risk at

ABB level

Insufficient

risk

mitigation

factors


ANNEX 5: Internal Control Template for budget implementation (ICT)

EXPENDITURE IN SHARED MANAGEMENT17

Stage 1 – (Negotiation and) assessment/approval of spending proposals:

Main control objectives: Ensuring that the Commission (COM) adopts the actions that contribute the most towards the achievement of

the policy objectives (effectiveness);

Main risks Mitigating controls How to determine coverage frequency

and depth

How to estimate the costs and benefits of

controls

Control indicators

The actions financed18 do not adequately reflect

the policy objectives or priorities.

Internal consultation, hierarchical validation at

DG-level of each action. Inter-service

consultation (including all relevant DGs)

Adoption by Commission Decision,

where foreseen by EU

law.

Coverage / Frequency: 100%.

Depth: checklist, guidelines and lists of

requirements in the relevant regulatory

provisions.

Costs: estimation of cost of staff involved in the

validation of the spending proposals put

forward by the Member States (for 2014-2020).

Benefits: adopted actions have a clear

intervention logic,

allowing the Commission to evaluate their impact

[non-quantifiable individually]

Effectiveness: - % of actions adopted/

approved19 - % of financial allocation

approved20 Efficiency:

- average time to adopt/ approve an action21

17 DG AGRI uses the Internal Control Template for shared management covering 99.6 % of its total expenditure and other management modes fall under the 'de minimis'

threshold. 18 For CAP: the programmes, measures and schemes supported under the Market measures, Direct Aids and Rural Development pillars (EAGF and EAFRD). 19 For the 1st pillar, the indicator refers to legal acts adopted; for the 2nd pillar to legal acts adopted, to the modification of RDP 2007-2013 and to the approval of RDP 2014-

2020. 20 For the 1st pillar the indicator refers to the execution of financial ceilings, for the 2nd pillar to budget allocation of RDP 2014-2020 approved in 2014. 21 For the 1st pillar, the indicator refers to legal acts adopted, for the second pillar to legal acts adopted and to the approval of RDP 2014-2020.


Stage 2 – Implementation of operations (Member States):

A. Setting up of the systems

Main control objectives: ensuring that the management and control systems are adequately designed

Main risks It may happen (again)

that…

Mitigating controls How to determine coverage, frequency

and depth


controls

Control indicators

The process of designation (and

accreditation) of national authorities in

the Member States (MS)

is not effective and, as a result, the management

and control systems are not compliant with the

applicable rules.

Supervision by Commission (for 2014-2020):

- Commission review (and audits) of a sample

of national

designations/ accreditations

- submission of MS Audit Strategies to the

Commission (on request)* * [For Cohesion policy]

Coverage / Frequency: fixed in

sector-specific rules Depth: verification

(desk review + audit

missions where necessary) of

description of management and

control systems communicated by MS.

Accreditation audits are generally done on-the-

spot.

Costs: estimation of cost of COM staff involved in

the audits of samples of national designations/

accreditations (for 2014-

2020) Benefits:(part of) the

amounts associated with unreliable systems for

which the Commission audit work revealed

substantial compliance problems (for 2014-2020

) [not quantifiable]

For 2014-2020: Effectiveness:

- % of authorities designated/accredited

- number of authorities

for which serious system weaknesses were found

following accreditation reviews/audits

Efficiency: - number of authorities for

which serious weaknesses found by accreditation

reviews/audits (% of total

checked)


B. Member states' controls to prevent, detect and correct errors within the declared certified expenditure

Main control objectives: ensuring that the periodic expenditure declarations submitted to the Commission for each action are legal and

regular

Main risks

It may happen (again) that…

Mitigating controls

How to determine coverage, frequency and

depth


controls Control indicators

Periodic expenditure

declarations submitted to the Commission

include expenditure

which is irregular or non-compliant with EU and/or

national eligibility rules and legislation.

Management

verifications: first level checks by

designated/accredited

programme authorities or bodies.22

Certification, audit opinion and annual

report by the relevant authorities or bodies

designated/accredited.23

MS recoveries from

final beneficiaries (CAP)

Coverage: fixed in sector-

specific rules Depth:

- management verifications:

performance of first-level checks (administrative and

on the spot controls). - certification: [limited]

additional verification (desk checks and on-the-spot),

with where appropriate additional checks.

- audit opinion: system

audits on the checks already carried out, where necessary

with re-performance of on-the-spot checks; where

applicable, audits of operations (on a statistical

basis) and additional substantive testing on

expenditure.

Costs: real costs for the

management and control activities of

paying agency

Benefits:

- Amounts of corrected undue payments (prior

to reimbursement from the control statistics)

- MS recoveries

Effectiveness:

- Amount and % of corrected undue

payments (prior to

reimbursement from the control statistics) as

reported by MS. - annual certificate

opinions of the Member States.

- MS recoveries Efficiency:

Ratio = (amount of

corrected undue payments plus MS

recoveries) divided by costs of management and

controls - time to lift interruption

of payments24

22 For CAP: Paying Agency (PA) 23 For CAP: Certification Body (CB) 24 For EAFRD: average time of interruption/suspension.


Stage 3 – Monitoring and supervision of the execution, including ex-post control

Main control objectives: ensuring that the expenditure reimbursed from the EU budget is eligible and regular

Main risks


Mitigating controls

How to determine

coverage, frequency and depth

How to estimate the

costs and benefits of controls

Control indicators

The management

verifications and subsequent

audits/controls by the

Member States have failed to detect and

correct ineligible costs or calculation

errors.

The audit work carried out by the

audit/certification

authorities is not sufficient to obtain

adequate assurance on the submitted

declarations.

The Commission services have failed to

take appropriate

measures to safeguard EU funds, based on the

information it received.

Commission checks of

periodic MS expenditure declarations.

Commission assessment of

management and control systems in the

Member States, in

particular of work done and/or reported by the

AA25/PA/CB, namely:

- assessment of annual

control/audit/certification report

- calculation of projected error rate

(where applicable)

- estimation of a residual error rate

(RER)

- assessment of

systems audits reports from AA/CB

- assessment of annual summaries (where

applicable)

Coverage: verification

of information provided in the annual

(audit/control /certification) report

and annual audit

opinions. Depth: desk checks

and/or on-the-spot audits based on risk

assessment; verification of the

quality and reliability of the information

based on

Commission’s own audit work; ‘validation’

and where necessary adjusting of error rates

reported by MS to calculate a cumulative

residual error risk (RER);

[at closure: where applicable scrutiny of

closure report and closure opinion, if

needed with audits on

Costs:

- cost of Commission financial officers

checking MS expenditure (financial

circuits)

- estimation of cost of Commission staff

involved in the assessment of

management and control systems in MS,

including analysis of AA/CB report, own

audit work26,and

drafting of interruption letters

Benefits: errors prevented

[unquantifiable], errors detected or corrected

(amount of financial corrections).

Effectiveness:

- best estimate of residual risk of error per MS

- number of programmes/MS/PA with a

reported error rate assessed as

reliable (and not subject to an adjustment)

- Number, amount and % (of expenditure declared in 2014)

of interruptions/suspensions of payments

- net financial corrections made resulting from Commission

audit work

Efficiency: - cost of control/financial

management of the Commission checks and

assessment (% of total appropriations)

- Ratio = cost of Commission

staff involved in the assessment of management and control

systems in MS divided by total amount of net financial

corrections adopted by the

25 Audit Authority (AA) 26 Systems audit, re-performance of annual control reports (ACR), follow-up of audit authorities, closure audits, fact finding audits, conformity audits of PA (CAP), etc.


Main risks


Mitigating controls

How to determine

coverage, frequency and depth

How to estimate the

costs and benefits of controls

Control indicators

- own Commission

audits

- technical and bilateral

meetings with MS

Interruptions and suspensions of

payments

Financial corrections (implemented by

Commission) Annual financial

clearance procedure and multi-annual

conformity clearance procedure (CAP)

sample of OPS] Commission

- Time-to-payment / % of

Commission payments within delays


ANNEX 6: Implementation through national or international public-sector bodies and bodies governed

by private law with a public sector mission (not applicable)

ANNEX 7: EAMR of the Union Delegations (not

applicable)

ANNEX 8: Decentralised agencies (not applicable)


ANNEX 9: Evaluations and other studies finalised or cancelled during the year


Title Rea-son1

Scope 2 Type3

Associated

DGs

Costs

(EUR)

Comments4 Reference5

I. Evaluations finalised or cancelled in 2016

a. Evaluations finalised in 2016

No evaluations finalised in 2016, POSEI still ongoing (SWD), others were relabelled as study (see below)

b. Evaluations cancelled in 2016

Evaluation of the impact of

the CAP on new marketing strategies (2017)

L elements of

R1305/2013; R1306/2013;

R1307/2013; R1308/2013

influencing marketing

strategies

Restructuration of

evaluations: will be covered in 2018

evaluation under FC 1

Evaluation of EU quality schemes (2017)

L (R1151/2012; relevant elements of

R1308/2013)

Restructuration of evaluations: will be

covered in 2018 evaluation under FC 1

and a study in 2020

Evaluation of the application of Art. 29 of R. 1308/2013

(2017)

FR R1308/2013, art 29 Content will be covered in 2018 evaluations under

FC1 and FC2


Title Rea-son1

Scope 2 Type3

Associated

DGs

Costs

(EUR)


II. Other studies finalised or cancelled in 2016

a. Other studies finalised in 2016

Impact of free trade

agreements

impacts of concluded

FTAs on the EU agricultural sector and

agricultural trade; factors influencing EU

agricultural trade

R SG, TRADE,

GROW, MARE, ENV,

TAXUD, REGIO,

JUST, SANTE,

CLIMA

285000 https://bookshop.e

uropa.eu/en/impacts-of-eu-trade-

agreements-on-the-agricultural-sector-

pbKF0116070

Distribution of the added value of the organic food

chain

identify and analyse the distribution of

added value in the organic supply chain in

the European Union

E SG, TRADE, AGRI,

GROW, DEVCO

222850 publication ongoing. Will be available via

https://ec.europa.eu/agriculture/extern

al-studies_en

State of play of the inter-branch organisations in the

EU

state of IBOs in the context of the CAP,

focussing on

agricultural income, productivity, price

stability

E JRC, COMP, GROW, SJ

176380 https://ec.europa.eu/agriculture/extern

al-studies/2016-

interbranch-organisations_en

Influence of water intake on water/protein ratios from

scalding to chilling

examine the water uptake in the different

processing stages of poultry and its

influence on the calculation of

Water/Protein ratio (W/P ratio)

R SANTE, RTD, JRC

286694 https://ec.europa.eu/agriculture/extern

al-studies/2016-water-in-

poultrymeat_en

https://bookshop.europa.eu/en/impacts-of-eu-trade-agreements-on-the-agricultural-sector-pbKF0116070/?CatalogCategoryID=1uwKABstHaoAAAEjB5EY4e5L






https://ec.europa.eu/agriculture/external-studies_en



https://ec.europa.eu/agriculture/external-studies/2016-interbranch-organisations_en





https://ec.europa.eu/agriculture/external-studies/2016-water-in-poultrymeat_en






Title Rea-son1

Scope 2 Type3

Associated

DGs

Costs

(EUR)


Mapping and analysis of the implementation of the CAP

R1305/2013; R1307/2013

E ENV, TRADE,SG

410511 initially labelled as evaluation, reformulated

as study following the introdution of the better

regulation guidelines

https://bookshop.europa.eu/en/mappi

ng-and-analysis-of-the-

implementation-of-

the-cap-pbKF0416021/

EIP agricultural productivity

and sustainability

R1305/2013, Art.53 E ENV, SG,

JRC, RTD, EAC, COMP,

GROW

369720 initially labelled as

evaluation, reformulated as study following the

introdution of the better regulation guidelines

https://bookshop.e

uropa.eu/en/evaluation-study-of-the-

implementation-of-the-european-

innovation-partnership-for-

agricultural-productivity-and-

sustainability-

pbKF0216023/?CatalogCategoryID=1uw

KABstHaoAAAEjB5EY4e5L

EU plant and animal genetic

resources I (open call)

to deliver input on how

to imporve communication,

knowledge exchange, networking among all

stakeholders in area of conservation of

agricultural relevant

genetic resources

O RTD, SANTE,

ENV, SG, DEVCO

1488460 preparatory action publication ongoing.

Will be available via https://ec.europa.e

u/agriculture/external-studies_en

https://bookshop.europa.eu/en/mapping-and-analysis-of-the-implementation-of-the-cap-pbKF0416021/







https://bookshop.europa.eu/en/evaluation-study-of-the-implementation-of-the-european-innovation-partnership-for-agricultural-productivity-and-sustainability-pbKF0216023/?CatalogCategoryID=1uwKABstHaoAAAEjB5EY4e5L















Title Rea-son1

Scope 2 Type3

Associated

DGs

Costs

(EUR)


b. Other studies cancelled in 2016

Farming and forestry: engines for employment and

growth in the upstream and downstream sectors (open

call)

extent to which farming and forestry

create growth and jobs upstream and

downstream, including diversification

R 400000 content will be covered in the 2018 evaluation

"evaluation of the impact of the CAP on

developments and jobs in rural areas"

CLLD study (budget transfer

to DG REGIO)

AGRI concerned by

R1305/2013 and R1303/2013

E 200000 DG

1 Reason why the evaluation/other study was carried out, please align with Annex 3 of the MP 2016. The individual symbols used have the

following meaning: L - legal act, LMFF - legal base of MFF instrument, FR - financial regulation, REFIT, REFIT/L, CWP - 'evaluate first', O - other (please specify in Comments) 2 specify what programme/regulatory measure/initiative/policy area etc. has been covered 3 FC – fitness check, E – expenditure programme/measure, R – regulatory measure (not recognised as a FC), C – communication activity, I – internal Commission activity, O – other – please specify in the Comments 4 Allows to provide any comments related to the item (in particular changes compared to the planning). When relevant, the reasons for

cancelling evaluations/ other studies also needs to be explained in this column. 5 For evaluations the references should be 1) number of its Evaluation Staff Working Document and number of the SWD's executive summary; 2) link to the supportive study of the SWD in EU bookshop. For other studies the references should be the link to EU bookshop or other

reference where the ‘other study’ is published via different point.


No evaluations were finalised in 2016, yet, several studies27 were finalised:

The study Mapping and analysis of the implementation of the CAP provides a

review of the choices that have been made by the 28 Member States in the two Pillars as well as a qualitative analysis of the potential impact of these choices. The study confirms

that the CAP became more complex: the new flexibilities resulted in a more diversified implementation, with measures being used in many different ways and in wide array of

combinations. The study states that the Member States’ strategy to reach the 3 CAP objectives is not sufficiently documented: the implementation choices are more

influenced by the consideration to “maintain the status quo” than by a long-term strategy

that takes into account the general CAP objectives. The study also raises concerns about the potential impact of the CAP: the degree to which funds have been targeted to certain

needs might not be sufficient to have a significant impact. In the short term, it is recommended to encourage the exchange of good practices between countries to

promote smart simplification and reduce administrative burden. For the CAP post 2020, Member States should be encouraged to establish a long term strategy that takes into

account the CAP objectives.

The study of the implementation of the European Innovation Partnership (EIP)

for agricultural productivity and sustainability shows that EIP’s bottom-up and

farmer-led approach is truly distinctive and highly appreciated by stakeholders. The EIP is being implemented in 26 Member States, in 96 out of a possible 111 RDPs, which

testifies to the perceived need for its distinctive approach to innovation. The study found that the EIP’s premise on incentivising innovative farming practices to foster a

competitive and sustainable agriculture and forestry sector is seen as valid and important. Innovation actors, especially farmers and forest managers, emphasised a

need for projects linking research and practice. The EIP is found to be a flexible tool that is addressing this in in a way that can be adapted to divergent circumstances and policy

contexts. Farmers are more likely to become involved in the innovation process under

the EIP as compared with other funding streams for innovation in the agricultural sector.

The study states that EIP's effectiveness could be increased by: making better use of

multiplication actors; by simplifying national and regional administrative implementation and by adapting rules at European level to incentivise participation (e.g. enabling

advance payments). By reducing fragmentation and improving knowledge flows, the EIP provides a crucial opportunity to build coherent national / regional agricultural knowledge

and innovation systems (AKISs). These should be interlinked into an integrated EU-wide AKIS.

The study on the impacts of EU trade agreements on the agricultural sector aims,

on the basis of the example of three trade agreements with different characteristics – i.e. the trade agreements of the EU with South Korea, Mexico and Switzerland – to better

understand the impacts of trade agreements on the EU agricultural sector and to identify the factors supporting or impeding EU agricultural external trade..

The study finds that the trade agreements with Mexico, South Korea and Switzerland have increased EU agri-food exports to these countries by more than 1 bn. EUR and

raised value added in the agri-food sector by 600 mn. EUR. The increased exports have supported almost 20,000 jobs in the agri-food sector, of which 13,700 jobs are in

primary agriculture. The export increase has also benefited other actors in the agri-food

supply chain. The trade agreements have also increased EU imports and given EU consumers access to agri-food products at lower prices.

With respect to the potential to further increase the benefits from trade agreements, the study finds that, while the EU-South Korea FTA is the most comprehensive FTA ever

27 The studies "mapping and analysis of the implementation of the CAP" and "implementation of the European

Innovation Partnership (EIP) for agricultural productivity and sustainability were initially scheduled as

"evaluation", yet following the adoption of the better regulation guidelines rescheduled as study.


negotiated by the EU, there is a potential to expand both the scope and depth of the trade agreements with Mexico and Switzerland. Furthermore, the findings stress the

importance of activities that allow to EU exporters expand trade within the existing agreements, such as promotion and information actions and resolving SPS barriers.

The study on the distribution of the added value of the organic food chain points out that over the last decade the organic market in the EU has grown faster than the

organic agricultural area, which raises the question to what extent organic supply chains function effectively. Therefore, it investigated the creation and distribution of added value

in a number of organic supply chains in different EU countries.

The results of the case studies suggest that higher added value is created in organic compared to conventional supply chains. However, no evidence was found that the

relative share of organic farmers in the total added value differs substantially from that of conventional farmers. Also in organic food supply chains farmers capture a relative

small proportion of added value. This can partly be explained by similarities of organic with conventional supply chains. It appears that the distribution of added value strongly

depends on the structure and characteristics of the specific supply chain, such as level of chain integration and power relations between market players. No common patterns were

identified regarding the impact of different types of retails and markets on the creation

and distribution of added value. Investments in quality aspects, increased consumer interest in organic food, differentiation of products as well as efficiency in supply chain

management are all relevant factors that contribute to higher added value.

The study on agricultural interbranch organisations in the EU provides a

comprehensive inventory of existing recognised interbranch organisations (IBOs) across all 28 Member States and the rules applicable to them under EU and national law. The

study further examines the impact of IBOs on the markets where they operate with respect to its objectives and the benefits for producers stemming from the participation

in the IBO. It also illustrates the conditions which enable a good functioning of the IBO.

The study is based on evidence gathered from existing literature, interviews with senior policy officials within the European Commission and national competent authorities,

interviews with IBOs representatives, a survey of all recognised IBOs, and five case studies.

The analysis shows that 19 Member States have adopted national rules on the recognition and functioning of IBOs. In June 2016, 123 recognised IBOs, four of them

solely recognised only under national rules, are active in eight different Member States but their total number is growing. Of all factors considered, internal organisation of the

IBO appears less important for its proper functioning. The working principles (such as

dialogue and consensus) within the IBO and the relations between the IBOs and other actors of the supply chain (private stakeholders or public authorities) are the main pillars

underpinning a good governance of such organisations.

The study on state of play of processing technologies and the absorption of water

in poultrymeat has provided a comprehensive account of the current technologies used in the processing of poultry in the European Union and the amount of technologically

unavoidable water added to broiler chickens by different chilling methods.

The results obtained showed that the largest observed effect on the water/protein ratio

was for portion type, with Breast behaving very differently to Leg and Carcase.

Chilling method did not have a significant effect on Breast and provides evidence for retention of a single legal limit for Breast fillet.

Immersion chilling adds significantly more water to Leg and Carcase than any other chilling method. This provides evidence for retention of a separate legal limit for

immersion chilled carcases but there is no strong evidence to require different limits for


the other four chilling methods. Leg also behaved very similarly to Carcase in this study. Thus it would be prudent to retain a separate legal limit for immersion chilled leg.

Although this study has provided valuable information, data sets for some of the variables studied were small due to the unavailability of some of the required samples, so

the results from this study should be treated with caution.

The preparatory action on EU plant and animal genetic resources was carried over

a period of two years (2014-2016).

Evidence was gathered through a variety of means in the context of the study. These

included a mapping exercise of current activities and the stakeholders involved, a review

of existing literature, over three hundred interviews with stakeholders and competent authorities, twenty-one case studies of good practices, and seven thematic workshops

covering methodological issues. The findings of the study were shared with stakeholders and competent authorities across the EU28 during a conference which took place at the

end of the preparatory action.

The analysis highlighted the need to develop an agro-biodiversity strategy towards the

conservation and sustainable use of genetic diversity in the EU, while considering issues specific to each of the four domains of the study: plant genetic resources, animal genetic

resources, forestry genetic resources; and microbial and invertebrate genetic resources.

Significant efforts have to be made by all stakeholders to secure an optimal conservation of genetic resources in the EU, and use these resources in a sustainable way in

agriculture and forestry. This can be achieved through e.g. supporting partnerships and cooperation between stakeholders at all levels in the supply chain.


ANNEX 10: Specific annexes related to "Financial Management"

This annex explains in detail the complex relationship between the Directorate General for Agriculture and Rural Development and the 28 Member States (comprising 80 Paying

Agencies).

The two principal funds under the Common Agricultural Policy (the European Agricultural Guarantee Fund - EAGF and the European Agricultural Fund for Rural Development –

EAFRD) are implemented under shared management through a comprehensive

management and control system based on four levels. This system includes, on the one hand, all the necessary building blocks to guarantee a sound administration at Member

States’ level and, on the other hand, allows the Commission to audit the proper functioning of their management and control systems and, if need be, to counter the risk

of financial losses as a result of any deficiencies in the set-up and operation of those systems through the conformity clearance mechanism. Taken together, these levels and

the results that they produce are the basis for DG AGRI to gain reasonable assurance as to the effective management of the risk of error in the legality and regularity of the

underlying transactions.

An explanation of these four levels as well as the findings and the indicators which result

from them are set out in detail in this annex which is organised as follows:

Part 1: Description of the system for shared management and the

various levels of control in place

Level 1: Compulsory administrative structure at the level of Member States

Level 2: Detailed systems for controls before payments and dissuasive penalties Level 3: Audits by Certification Bodies and controls after payment

Level 4: Commission audits and Clearance of accounts

Part 2: Functioning of the Paying Agencies

2. Financial clearance exercise for financial year 2016 2.1: Compliance with the accreditation criteria

2.2: Management Declaration from the Directors of the Paying Agencies and related opinions from the Certification Bodies

2.3: Legality and regularity of expenditure

2.4: National Declarations 2.5: Overall conclusions of the Certification Bodies' work

Part 3: Control results at the level of the final beneficiaries, the assessment thereon by the Certification Bodies and the overall

appreciation of the Commission on their reliability taking into

account all available information

3.1: ABB02: Market Measures 3.2: ABB03: Direct Payments

3.3: ABB04: Rural Development

Part 4: Conformity Clearance Procedure and Net Financial corrections

Part 5: Debt management by the Member States

Part 6: Cross compliance


Part 1: Description of the system for shared management and the various levels of control in place

Level 1: Compulsory administrative structure at the level of Member States

Management and control of the expenditure is entrusted to dedicated Paying Agencies, which prior to their operation must be accredited by the Member States on the basis of a

comprehensive set of accreditation criteria laid down in EU law. The Paying Agencies' compliance with these criteria is subject to a constant supervision by the competent

national authority, and clear procedures exist as to how to address and remedy any problems.

Moreover, the directors of the Paying Agencies are required to provide an annual

management declaration which covers the completeness, accuracy and veracity of the

accounts as well as a declaration that a system is in place which provides reasonable assurance on the legality and regularity of the underlying transactions. For those Member

States with only one Paying Agency, this management declaration from the director of the Paying Agency, together with the certificate and opinion of the Certification Body (see

Part 3), constitutes by definition the annual summary referred to in point (b) of Article 59(5) of the Financial Regulation28. The Member States which have more than one Paying

Agency are further required to produce a synthesis report of all management declarations.

Level 2: Detailed systems for controls before payments and dissuasive penalties For each aid support scheme financed by the EAGF or EAFRD, there is a system of

administrative and on-the-spot checks to be performed before payments to beneficiaries, completed with dissuasive penalties in case of serious non-compliance by the beneficiary.

These systems are to be applied by the Paying Agencies and contain some common features and special rules tailored to the specificities of each aid regime. The systems

generally provide for exhaustive administrative controls of 100% of the aid applications, cross-checks with other databases where this is considered appropriate as well as on-

the-spot checks of a sample of transactions ranging between 1% and 100%, depending

on the risk associated with the regime in question. If the on-the-spot checks reveal a high number of irregularities, additional controls must be carried out.

In this context, the by far most important system is the Integrated Administration and Control System (IACS), which in financial year 2016 covered 93.9% of EAGF expenditure

(93.8% in 2015). To the extent possible, the IACS is also used to manage and control rural development measures relating to parcels or livestock, which in 2016 accounted for

50.1% of payments under the EAFRD (54.1% in 2015). For both Funds together, the IACS covered 84.2% of total expenditure.

A detailed reporting from the Member States to the Commission on the individual results

of the checks they carried out is provided for in the legislation. The reporting system enables a calculation, for the main aid schemes, of the extent of error found by the

Member States at the level of the final beneficiaries. The reliability of the control data reported by the Paying Agencies and the quality of the underlying controls are also to be

verified and validated by the Certification Bodies.

Level 3: Audits by Certification Bodies and controls after payment

The Paying Agencies' annual accounts, the functioning of their internal control procedures and the legality and regularity of the expenditure for which reimbursement has been

requested from the Commission are to be verified and certified by the Certification

Bodies. The report of the Certification Bodies shall also include a detailed review of the Paying Agencies' compliance with the accreditation criteria and a verification of the

Management Declarations. In addition, all aid measures under EAGF other than direct

28 Regulation (EU, Euratom) No. 966/2012 of the European Parliament and of the Council on the financial rules

applicable to the general budget of the Union


payments covered by the IACS are subject to ex-post controls under Articles 79 to 88 of Regulation (EU) No 1306/201329. As regards EAFRD, ex-post checks are carried out for

investment operations according to Article 52 of Commission Implementing Regulation (EU) No 809/201430.

Level 4: Commission audits and clearance of accounts

Finally, the clearance system applied by the Commission consists of both an annual financial clearance of accounts and a multi-annual conformity clearance

procedure.

The financial clearance of accounts covers the completeness, accuracy and veracity of

the Paying Agencies' accounts, and is without prejudice to decisions subsequently adopted pursuant to the conformity clearance procedure.

Moreover, it includes a mechanism under which 50% of any undue payments which the

Member States have not recovered from the beneficiaries within 4 or, in the case of legal proceedings, 8 years will be charged to their respective national budgets (50/50 rule). If

the undue payments are the result of administrative errors committed by the national

authorities, the entire amount involved is deducted from the annual accounts and, thus, excluded from EU financing. Even after the application of the 50/50 rule, Member States

are, however, obliged to pursue their recovery procedures and, if they fail to do so with the necessary diligence, the Commission may decide to charge the entire outstanding

amounts to the Member State concerned.

The conformity clearance audits, for their part, relate to the legality and regularity of the expenditure. The conformity clearance is designed to exclude expenditure as regards

EAGF from EU financing which has not been executed in conformity with EU rules, or as

regards the EAFRD has not been spent in conformity with the applicable EU and national rules, thus shielding the EU budget from expenditure that should not be charged to it

(net financial corrections). In contrast, it is not a mechanism by which irregular payments to beneficiaries are recovered from beneficiaries, which according to the

principle of shared management is the sole responsibility of Member States.

Financial corrections are determined on the basis of the nature and gravity of the infringement and the financial damage caused to the EU. Where possible, the amount is

calculated on the basis of the loss actually caused or on the basis of an extrapolation

(usually such calculations are based on work carried out by or information supplied by the Member States). Where this is not possible, flat-rates are used which take account of

the severity of the deficiencies in the national control systems in order to reflect the financial risk for the EU. Where undue payments are or can be identified as a result of

the conformity clearance procedures, Member States are required to follow them up by recovery actions against the final beneficiaries. However, even where this is not possible

because the financial corrections only relate to deficiencies in the Member States' management and control systems, financial corrections are an important means to

improve these systems and, thus, to prevent or detect and recover irregular payments to

final beneficiaries. The conformity clearance procedure thereby contributes to the legality and regularity of the transactions at the level of the final beneficiaries.

29 Regulation (EU) No 1306/2013 of the European Parliament and of the Council on the financing, management

and monitoring of the common agricultural policy 30 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


In order to determine which measures and/or Paying Agencies to visit each year, DG AGRI carries out, in accordance with the audit strategy, a comprehensive risk

assessment, which includes both quantitative and qualitative analysis of risks. In the preparation of the audit work programme, the paying agencies, Member States,

certification bodies and the specific part of the control system to be audited in a 3-year time period are selected on the basis of risk mapping using all available information and

the following main elements:

Central Risk Analysis (CRA)

Sector-specific risk analysis

Risk mapping based on the annual activity report and Certification Bodies opinion on legality and regularity

Risk mapping based on the CAP reform and other external factors.

What is the Central Risk Analysis?

DG AGRI's Central Risk Analysis (CRA) serves the purpose to apply a common and

unique approach for planning its conformity audits. It is based on the latest certified expenditure under the clearance of accounts exercise. It aims to ensure that the work of

the entire directorate is orientated and focussed on the main risks.

For the CRA the following indicators are taken into account: 1) materiality (amounts of declared expenditure), 2) latest audit year (period elapsed since the latest audit of the

measure in question), 3) inherent risk to the measure in question, 4) control system risks (risk associated with the control system), 5) Paying Agency risk (risk related to the

Paying Agency) and finally 6) the OLAF risk (related to OLAF denunciations and irregularities) and 7) the European Court of Auditors (ECA) risk (related to the findings

from the ECA).

The CRA is established at Paying Agency / audit field level (audit field = aid measures

with a similar control system) as the audits are addressed to a specific Paying Agency for

auditing expenditure spent for aid schemes under one or more specific audit fields.

From mid-2014, DG AGRI introduced a rolling three-year audit work programme. The

CRA is now carried out after the financial clearance exercise in order to use information resulting from the analysis of the opinions of the Certification Bodies and also to include

in the audit work programme any audit missions necessary in the context of following up

reservations or as a result of findings notified by the Certification Bodies.

Explanatory Box: Annex 10-1.1


With a view to taking a more multi-annual perspective for the new programming period, in 2014 the DG AGRI audit directorate adopted an audit strategy for the period 2014-

2020.

DG AGRI audit strategy for 2014-2020

The DG AGRI audit strategy aims to formalise the main elements of the clearance of accounts system in terms of background, context, objectives, risks assessment, audit

approach and indicators for the audit activities. In particular, it aims to identify the main inherent risks and control risks that will have to be addressed in the coming years, not

only taking into account the changes introduced by policy developments and the

implementation of the CAP 2014-2020 but also considering previous years' experience and audit findings.

This audit strategy recalls the principle that DG AGRI audits are first and foremost system-based with risk-based audits checking specific components of the Paying

Agencies' or Member States' internal control systems. Notwithstanding, it opens the door to defining other ways of addressing specific risks or situations in particular Paying

Agencies or Member States.

In addition, it anticipated the impact of the extended role given by the Horizontal

Regulation on the financing, management and monitoring of the Common Agricultural

Policy (Regulation No 1306/2013) to the Certification Bodies. From the beginning of 2016 (in respect of financial year 2015), Certification Bodies give an opinion on the legality and

regularity of the expenditure for which reimbursement was requested from the Commission to a much greater extent and detail than has been the case under the

previous regulatory frameworks. Not only the information thus gathered have to be evaluated and input to DG AGRI's own risk analysis, but its impact on the focus and

scopes of DG AGRI audit activities are to be fully taken into account. When done in accordance with applicable rules and guidelines, the audit work of the Certification Bodies

becomes the key element for assurance on the legality and regularity of the CAP

expenditure. Therefore DG AGRI is progressively rebalancing its audit activities towards checking the reliability of the opinion of the Certification Bodies. Conformity clearance

procedures continue to be used in cases where insufficient assurance, for instance because the work of the Certification Body is not in accordance with guidelines, creates a

risk to the EU budget.

Explanatory Box: Annex 10-1.2


Part 2: Functioning of the Paying Agencies

2. Financial clearance exercise for financial year 2016

The rules on the financing of the CAP provide for an annual financial clearance exercise

covering the completeness, accuracy and veracity of the Paying Agencies' accounts. By 15 February (with possible extension to 1 March) following the end of the financial year

in question, Member States are required to send the annual accounts of their Paying

Agencies to the Commission, together with an audit opinion from the Certification Body of each Paying Agency stating whether it has gained reasonable assurance that these

accounts are complete, accurate and true, that the agency's internal control procedures have operated satisfactorily and, since 2015, that the expenditure for which

reimbursement was requested from the Commission is legal and regular. The Commission has until 30 April to review this information and communicate its findings to

the Member States. Where the information received is considered acceptable, the Commission has, until 31 May, to adopt a decision clearing the accounts of the Paying

Agencies concerned.

The financial year 2016 for the EAGF and EAFRD Funds runs from 16 October 2015 to 15 October 2016. By 1 March 2017, the 2016 accounts of 78 out of 80 Paying Agencies were

submitted. Of these, only 77 had submitted the related audit reports and opinions from the Certification Bodies. The Certification Body report for GB06 - SGRPID was received on

2 March 2017. By 31 March, the Certification Body reports for BG01 - State Fund Agriculture and DK02 - Danish AgriFish Agency had not yet been received, consequently

the accounts for these two Paying Agencies will be disjoined.

As in previous financial clearance exercises, the accounts of a limited number of Paying

Agencies will probably not be cleared by the 31 May deadline. This is either because the

annual accounts and audit opinion were submitted after the 1st of March (see above), or the opinions from the Certification Bodies are qualified, thus requiring further work from

the Paying Agencies and/or from the Certification Bodies, or the level of error exceeds the materiality threshold for the fund. The accounts of these Paying Agencies will be

disjoined from the financial clearance decision due by 31 May 2017 and cleared at a later stage. In such cases, DG AGRI takes into account the qualifications and/or the levels of

detected error when making adjustments to the error rate of the population concerned (for details on the specific cases considered for financial year 2016, please see sections 3

to 5 of Annex 10).

2.1 Compliance with the accreditation criteria

2.1.1 Status of the Paying Agencies' accreditation

At 15 October 2016, the 28 Member States had 80 operating accredited Paying Agencies. This is the same number of Paying Agencies as at 15 October 2015.

The status of accreditation of the 80 Paying Agencies was as follows on 15 October 2016:

79 fully accredited Paying Agencies

1 Paying Agency (OPEKEPE in Greece) continued to be under limited accreditation; accreditation continues to be limited to those EAFRD

measures for which a proper control system and procedures have been

put in place (no further measures have been accredited since April 2011).


Status of Paying Agencies' accreditation

At the beginning

of financial year 2016

At the end of

financial year 2016

Fully accredited

Limited accreditation Accreditation under probation or provisional

accreditation

79

131 0

79

11 -

Total Member States: 28 80 80

Table: Annex 10 – 2.1

2.1.2 Certification of the functioning of the Paying Agencies' internal control systems and the accounts

In the context of the financial clearance exercise for financial year 2016, the Certification Bodies are required – besides certifying the accounts of the Paying Agencies - to report

on and certify whether the Paying Agencies' internal control systems operated satisfactorily.

Taking into consideration the EAGF / EAFRD split, 150 opinions (70 Paying Agencies

dealing with both Funds and 10 Paying Agencies dealing only with one Fund – 8 dealing exclusively with EAGF and 2 exclusively with EAFRD) covering the internal control

systems, should be received.

19 Paying Agencies requested permission32 to submit the accounts or audit opinions and

related reports after the deadline of 15 February 201733. 17 requests were accepted. With the exception of BG01 - State Fund Agriculture; DK02 – Danish AgriFish Agency and

GB06 - SGRPID, all audit opinions and reports had been received by the ultimate deadline 1 March 2017. The Certification Body report for GB06 - SGRPID was received on

2 March 2017. By 31 March, the Certification Body reports concerning paying agencies

BG01 - State Fund Agriculture and DK02 - Danish AgriFish Agency have not been received. The accounts for these two Paying Agencies will consequently be disjoined.

By 31 March, 146 audit opinions had been received and assessed. In all cases, the Certification Body concluded that the internal control system of the Paying Agencies

operated at least satisfactorily34. Despite this assessment, in 4 cases, the Certification Body qualified its opinion on the EAFRD accounts. In 3 cases (ES14 – Navarra, FR18 –

ODARC and SK01 - APA) the qualification was due to the presence of material error, either at fund level or at population (EAFRD IACS or EAFRD Non-IACS) level in the EAFRD

accounts. In case of IT26 – ARCEA, the reservation was linked to issues in public

procurement. See Annex 10, part 3.3, for more information on these 4 cases.

For EAGF a qualified opinion was issued for CY01 - CAPO regarding information and

control activities of third parties and RO02 – PIAA for the detected differences and suspicion of fraud. In addition for MT01 – MRRA a disclaimer of opinion has been issued

for the EAGF accounts with regard to the livestock payments for Voluntary Couple Support. See Annex 10, part 3.2, for information on these 3 cases.

31 OPEKEPE (Greece) 32 According to the provisions of Article 59(5) of the Financial Regulation (EU, Euratom) No 966/2012 and

Article 7(3) of Regulation (EU) No 1306/2013 of the European Parliament and of the Council, the deadline of 15

February may exceptionally be extended by the Commission to 1 March. 33 BG01 - State Fund Agriculture; CY01 – CAPO, DE17 - Rhineland Pfalz; DE23 - Thüringen; DK02 - Danish

AgriFish Agency; ES07 - Castilla La Mancha; ES08 - Castilla y Leon; ES10 - Extremadura; ES11 – Galicia; ES13

– Murcia; ES14 - Navarra; GB05 - DARD; GB06 - SGRPID; GB07 - WAG; GB09 - RPA; GR01 - OPEKEPE; PT03-

IFAP, RO01 - RIFA; RO02 - APIA 34 ratings of “works well”, “works” or “works partially”


2.1.3 The Commission's accreditation audits and summary of findings

The Commission regularly performs accreditation audits. The selection of these audits is

based on a detailed risk assessment, to check whether the Paying Agencies (continue to) respect the accreditation criteria. As the unit's resources were primarily focused on the

Certification Bodies' work on legality and regularity, on conducting two financial clearance exercises as in 2016 the rural development programmes for 2007-2013 had to be cleared

for closure, and on addressing the accumulated backlog of ongoing enquiries from previous years, only one accreditation mission took place during the year. This was to the

Italian Paying Agency IT01 – AGEA. This mission was a follow-up on the implementation

of an action plan developed by the Paying Agency which was aimed at mitigating the risks identified by the competent authority in 2014.

2.1.4 The Certification Bodies' main findings on accreditation for financial year 2016

By 31 March, the Certification Body report for BG01 - State Fund Agriculture and DK02 - Danish AgriFish Agency were still outstanding.

In the opinion of the Certification Bodies, none of the Paying Agencies have deficiencies that are serious enough to conclude that they no longer comply with the accreditation

criteria.

Concerning the Italian Paying Agency IT01 – AGEA, it is recalled that the Competent Authority placed the Paying Agency under probation on 25 April 2014. Full accreditation

was reinstated on 25 April 2015 after a remedial plan required by the Competent Authority had been implemented. However, the reinstatement of accreditation was

accompanied by a recommendation that the Paying Agency successfully implemented a separate action plan, that was more detailed than the remedial plan of the Competent

Authority and which covered various accreditation criteria. The deadline for full implementation of the action plan was 15 October 2015. After several delays in its

implementation, the deadline was subsequently extended to 15 October 2016. A mission

carried out by DG AGRI in November 2016 found that the Action Plan had not yet been fully implemented by the extended deadline. DG AGRI has been following the

developments since then also with a view to assessing the financial risk for the EU funds. The Certification Body, in its audit report concerning FY2016, reported on some

deficiencies of intermediate level in the accreditation criteria, but did not identify major deficiencies. However, in its comments on the Action Plan, the Certification Body

concluded that, despite the clear progress made by the Paying Agency AGEA in the implementation of the Action Plan, various problems remain.

Concerning the Paying Agency in the Czech Republic CZ01, there is an ongoing

conformity procedure by DG AGRI in relation to a conflict of interest situation and possible breach of the accreditation criteria, as members of the supervisory board of the

Paying Agency were at the same time connected to beneficiaries of agricultural funds.

2.1.5 Conclusion on the opinion on the Internal Control System

The opinions of the Certification Bodies' reports received, and with the exception of the delayed submission for BG01 and DK02, is that the Internal Control Systems of all the

Paying Agencies function adequately.


2.2 Management Declaration from the Directors of the Paying Agencies and related opinions from the Certification Bodies

2.2.1 Management Declaration from the Directors of the Paying Agencies

In respect of financial year 2016, the Directors of all Paying Agencies, except BG01- State Fund Agriculture and DK02 - Danish AgriFish, submitted to the Commission their

management declarations on the completeness, accuracy and veracity of the accounts, on the proper functioning of the internal control systems and on the legality and

regularity of the underlying transactions. All declarations were without reservations (see table 1 below).

According to the Guideline on the Management Declaration, in the event that any

deficiency is identified in the context of establishing the Management Declaration which

does not fulfil the criteria for justifying a reservation but which, in the opinion of the Director of the Paying Agency nonetheless constitutes an issue which should be brought

to the attention of the Commission services, this should be disclosed in a document attached to the Management Declaration.

The declaration of the Paying Agencies BE03 – Region Wallonia, GB05- DAERA, GB06 –

SGRPID, GB07- WAG, GB09 – RPA, RO01 – PARDF and SE01 – SJV included such a document.

For BE03 – Region Wallonia, it concerned challenges related to the implementation of the CAP reform.

For GB05- DAERA it concerned management and control issues related to debts under

EAFRD Less Favoured Areas. For GB06 – SGRPID it covered delays and possible inaccuracy in the production of control statistics due to problems with the IT system;

ongoing monitoring of the action plan related to EAFRD; and issues related to the Internal Audit Function. In the case of GB07- WAG, it concerned issues related to the

administrative processing of EAFRD IACS claims. For GB09 – RPA it concerned a number

of EAFRD IACS transactions that had been paid from EAFRD funds without all the necessary checks to prove the eligibility of the associated payments having been

completed.

For SE01 – SJV the specific document concerned the challenges related to the implementation of the CAP reform, including the delays in the production of control

statistics for EAGF and EAFRD IACS.

For RO01 – PARDF the document concerned the action plan put in place to remedy the

deficiencies in measure 215-Animal welfare. The action plan is reported as finalised.


EAGF IACS EAGF NIACS EAFRD IACS EAFRD NIACS

1 AT01 AMA Y Y Y Y

2 AT03 Zollamt Salzburg N/A Y N/A N/A

3 BE02 ALV Y Y Y Y

4 BE03 Rég. Wallonne Y Y Y Y

5 BG01 State Fund Agriculture Not received Not received Not received Not received

6 CY01 CAPO Y Y Y Y

7 CZ01 SAIF Y Y Y Y

8 DE01 BLE N/A Y N/A Y

9 DE02 Hamburg-Jonas N/A Y N/A N/A

10 DE03Baden-Württemberg

MLRY Y Y Y

11 DE04 Bayern StMLF Y Y Y Y

12 DE07 Brandenburg MLUV Y Y Y Y

13 DE09 Hamburg Y Y Y Y

14 DE11Mecklenburg-

Vorpommern MELFFY Y Y Y

15 DE12 Niedersachsen Y Y Y Y

16 DE15 Nordrhein-Westfalen Y Y Y Y

17 DE17 Rheinland-Pfalz Y Y Y Y

18 DE18 Saarland AAL Y Y Y Y

19 DE19 Sachsen Y Y Y Y

20 DE20 Sachsen-Anhalt Y Y Y Y

21 DE21 Schleswig-Holstein Y Y Y Y

22 DE23 Thüringen Y Y Y Y

23 DE26 Hessen Y Y Y Y

24 DK02 DAFA Not received Not received Not received Not received

25 EE01 PRIA Y Y Y Y

26 ES01 Andalucia Y Y Y Y

27 ES02 Aragón Y Y Y Y

28 ES03 Asturias Y Y Y Y

29 ES04 Islas Baleares Y Y Y Y

30 ES05 Islas Canarias y y Y Y

31 ES06 Cantabria Y Y Y Y

32 ES07 Castilla La Mancha Y Y Y Y

33 ES08 Castilla y Léon Y Y Y Y

34 ES09 Cataluña Y Y Y Y

35 ES10 Extremadura Y Y Y Y

36 ES11 Galicia Y Y Y Y

37 ES12 Madrid Y Y Y Y

38 ES13 Murcia Y Y Y Y

39 ES14 Navarra Y Y Y Y

40 ES15 País Vasco Y Y Y Y

41 ES16 La Rioja Y Y Y Y

42 ES17 C. Valenciana Y Y Y Y

43 ES18 FEGA N/A Y N/A Y

44 FI01 MAVI Y Y Y Y

45 FR05 ODEADOM Y Y N/A N/A

46 FR18 ODARC N/A N/A N/A Y

47 FR19 ASP Y N/A Y Y

48 FR20 France Agrimer N/A Y N/A N/A

49 GB05 DAERA Y Y Y Y

Is the Management Declaration free of reservations?

PAYING AGENCY DIRECTOR'S MANAGEMENT DECLARATION

Paying Agency

2.5/ TABLE 1

Reservation/Additional remark

Additional remark: material error rate in the

EAFRD IACS population; explanations

provided



provided

Additional remark: material error rates in

the EAGF and the EAFRD IACS populations;

explanations provided


the EAGF IACS and Non-IACS populations;



the EAFRD IACS and EAGF Non-IACS

populations, explanation of corrective

actions


the EAGF Non-IACS and EAFRD IACS

populations; explanations provided

Additional remark: explanation of issues

related to management and control of

debts under EAFRD Less Favoured Area

Compensatory Allowances scheme.


50 GB06 SGRPID Y Y Y Y

51 GB07 WAG Y Y Y Y

52 GB09 RPA Y Y Y Y

53 GR01 OPEKEPE Y Y Y Y

54 HR01 PAAFRD Y Y Y Y

55 HU01 ARDA Y Y Y Y

56 IE01 DAFM Y Y Y Y

57 IT01 AGEA Y Y Y Y

58 IT02 SAISA N/A Y N/A N/A

59 IT03 ENR Y N/A N/A N/A

60 IT05 Veneto (AVEPA) Y Y Y Y

61 IT07 Toscana (ARTEA) Y Y Y Y

62 IT08Emilia-Romagna

(AGREA)Y Y Y Y

63 IT10 ARPEA Y Y Y Y

64 IT23 OPR Lombardia Y Y Y Y

65 IT24 OPPAB Y N/A Y Y

66 IT25 APPAG Y N/A Y Y

67 IT26 ARCEA Y N/A Y Y

68 LT01 NMA Y Y Y Y

69 LU01 Min. Agric. Y Y Y Y

70 LV01 RSS Y Y Y Y

71 MT01 MRRA PA Y Y Y Y

72 NL04 RVO Y Y Y Y

73 PL01 ARMA Y Y Y Y

74 PL02 AMA N/A Y N/A N/A

75 PT03 IFAP Y Y Y Y

76 RO01 PARDF N/A N/A Y Y

77 RO02 PIAA Y Y N/A N/A

78 SE01 SJV Y Y Y Y

79 SI01 AAMRD Y Y Y Y

80 SK01 APA Y Y Y Y


EAFRD IACS population and explanations of

the actions taken

Additional remark: delays and possible

inaccuracy in the production of control

statistics due to problems with the IT

system; issues related to the Internal Audit

Function.

Additional remark: control issues with one

delegated body


the EAGF and the EAFRD IACS populations,

and in EAGF Non-IACS; explanations

provided



provided


EAGF IACS and EAFRD IACS populations;


Additional remark: the anti-fraud strategy is

still not fully implemented


the EAGF and the EAFRD IACS populations;



EAGF IACS and Non-IACS populations;


Additional remark: control statistics for

EAFRD IACS are still not produced


EAFRD Non-IACS population; explanations

providedAdditional remark: material error rate in the


provided


the EAGF and EAFRD IACS, as well as

EAFRD Non-IACS populations; explanations

provided


the EAGF and EAFRD IACS, as well as

EAFRD Non-IACS populations; explanations

provided


EAFRD IACS population and explanations

provided


2.2.2 Opinion of the Certification Bodies on the Management Declaration

Table 2 lists the individual opinions of Certification Bodies on the Paying Agencies'

Management Declarations. Please also see section 2.3.3.

EAGF IACS EAGF NIACS EAFRD IACS EAFRD NIACS

1 AT01 AMA Y Y Y Y

2 AT03 Zollamt Salzburg N/A Y N/A N/A

3 BE02 ALV Y Y Y Y

4 BE03 Rég. Wallonne Y Y Y Y

5 BG01 State Fund Agriculture Not received Not received Not received Not received

6 CY01 CAPO N N Y Y

7 CZ01 SAIF Y Y Y Y

8 DE01 BLE N/A Y N/A Y

9 DE02 Hamburg-Jonas N/A Y N/A N/A

10 DE03 Baden-Württemberg MLR Y Y Y Y

11 DE04 Bayern StMLF Y Y Y Y

12 DE07 Brandenburg MLUV Y Y Y Y

13 DE09 Hamburg Y Y Y Y

14 DE11Mecklenburg-Vorpommern

MELFFY Y Y Y

15 DE12 Niedersachsen Y Y Y Y

16 DE15 Nordrhein-Westfalen Y Y Y Y

17 DE17 Rheinland-Pfalz Y Y Y Y

18 DE18 Saarland AAL Y Y Y Y

19 DE19 Sachsen Y Y Y Y

20 DE20 Sachsen-Anhalt Y Y Y Y

21 DE21 Schleswig-Holstein Y Y Y Y

22 DE23 Thüringen Y Y Y Y

23 DE26 Hessen Y Y Y Y

24 DK02 DAFA Not received Not received Not received Not received

25 EE01 PRIA Y Y Y Y

26 ES01 Andalucia Y Y Y Y

27 ES02 Aragón Y Y Y Y

28 ES03 Asturias Y Y Y Y

29 ES04 Islas Baleares Y Y Y Y

30 ES05 Islas Canarias Y Y Y Y

31 ES06 Cantabria Y Y Y Y

32 ES07 Castilla La Mancha Y Y Y Y

33 ES08 Castilla y Léon Y Y Y Y34 ES09 Cataluña Y Y Y Y

35 ES10 Extremadura Y Y Y Y

36 ES11 Galicia Y Y Y Y

37 ES12 Madrid Y Y Y Y

38 ES13 Murcia Y Y Y Y

39 ES14 Navarra Y Y Y Y

40 ES15 País Vasco Y Y Y Y

41 ES16 La Rioja Y Y Y Y

42 ES17 C. Valenciana Y Y Y Y

43 ES18 FEGA N/A Y N/A Y

44 FI01 MAVI Y Y Y Y

45 FR05 ODEADOM Y Y N/A N/A

46 FR18 ODARC N/A N/A N/A Y

47 FR19 ASP Y N/A Y Y

48 FR20 France Agrimer N/A Y N/A N/A

49 GB05 DAERA Y Y Y Y

Emphasis of matter for EAGF Non-IACS and

EAFRD IACS

Emphasis of matter for both EAGF and EAFRD

Emphasis of matter

Emphasis of matter related to the error rates

reported for certains schemes

Emphasis of matter for EAFRD Non-IACS

Qualified for EAGF

Reservation/Remarks

CERTIFICATION BODIES' OPINION ON THE PAs' MANAGEMENT DECLARATION

Is the Management Declaration confirmed by the Audit

Opinion?

2.5/TABLE 2


50 GB06 SGRPID N Y N Y

51 GB07 WAG Y Y Y Y

52 GB09 RPA Y Y Y Y

53 GR01 OPEKEPE Y Y Y Y

54 HR01 PAAFRD Y Y Y Y

55 HU01 ARDA Y Y N/A N/A

56 IE01 DAFM Y Y Y Y

57 IT01 AGEA Y Y Y Y

58 IT02 SAISA N/A Y N/A N/A

59 IT03 ENR Y N/A N/A N/A

60 IT05 Veneto (AVEPA) Y Y Y Y

61 IT07 Toscana (ARTEA) Y Y Y Y

62 IT08 Emilia-Romagna (AGREA) Y Y Y Y

63 IT10 ARPEA Y Y Y Y

64 IT23 OPR Lombardia Y Y Y Y

65 IT24 OPPAB Y N/A Y Y

66 IT25 APPAG Y N/A Y Y

67 IT26 ARCEA Y N/A Y N

68 LT01 NMA Y Y Y Y

69 LU01 Min. Agric. N N N N

70 LV01 RSS Y Y Y Y

71 MT01 MRRA PA N N N N

72 NL04 RVO Y Y Y Y

73 PL01 ARMA Y Y Y Y74 PL02 AMA Y Y Y Y

75 PT03 IFAP Y Y Y Y

76 RO01 PARDF N/A N/A Y Y

77 RO02 PIAA Y Y N/A N/A

78 SE01 SJV Y Y N Y

79 SI01 AAMRD Y Y Y Y

80 SK01 APA Y Y N N Qualified opinion for EAFRD

Emphasis of matter for EAFRD Non-IACS

Emphasis of matter for EAGF IACS

Disclaimer of opinion for EAFRD IACS

Qualified for EAFRD Non-IACS

Anti-fraud strategy not fully implemented

Disclaimer of opinion for EAGF and EAFRD

Qualified for EAGF and EAFRD IACS

Emphasis of matter for EAFRD IACS

EAFRD : The CB did not finalize the work on the

MD for EAFRD


2.2.3 Follow-up of reservations included in the Paying Agency Directors' Management Declarations

There was no reservation included in the Management Declarations in the previous financial year that would have required a follow up.

2.2.4 Conclusion on the opinion on the Management Declarations of the Paying

Agencies

As mentioned in section 2, the Certification Bodies have to provide an opinion on the

Paying Agencies' Management Declarations based on their assessment of the residual risk

for the given population. A detailed assessment is included in section 2.3.3.

In several cases the Certification Bodies did not consider the Paying Agencies' control

statistics' error rate reported in the Management Declaration when drawing conclusions on the residual risk. Most of the Certification Bodies took into account their own results

(the incompliance rate calculated), which did not indicate a breach of materiality in the majority of cases. However, if the Certification Body confirms, with its own result, an

error rate reported by the Paying Agency in the control statistics which exceeds the level of materiality for the given population, that material error rate should be considered by

the Certification Body in the conclusion on the residual risk. As summarized in section

2.3.3 per population there was a number of Certification Bodies which concluded that the residual risk was not material based on their own incompliance rates without considering

the high error rate reported by the Paying Agency.

A few Certification Bodies, while they gave a qualified opinion on the accounts, gave an

unqualified opinion on the Paying Agency's Management Declaration even though the issues and errors identified are linked to legality and regularity of the expenditure

declared and so should have had an impact on the opinion on the Management Declaration. For HU01, the Certification Body has not finalized its audit work on the

Management Declaration for EAFRD to date, thus, no opinion on the Management

declaration for EAFRD was issued.

In such cases DG AGRI cannot use directly the conclusion on the Management

Declaration.


2.3 Legality and regularity of the expenditure

2.3.1 Opinion of the Certification Bodies' work on legality and regularity of

expenditure

In accordance with Article 9 of Regulation (EU) 1306/2013, the Certification Bodies are

requested to give an opinion on the legality and regularity of expenditure for which

reimbursement has been requested. The Certification Bodies shall also provide an opinion on the completeness, accuracy and veracity of the accounts and the functioning of the

internal control system.

The opinion on legality and regularity should certify whether the expenditure effected in

the Member States during the financial year is legal and regular. Moreover, through their audit work on legality and regularity, the Certification Bodies should confirm the level of

errors in the management and control systems of the Paying Agencies in their opinion on the Management Declaration. This is done through a review of the control results which

include the results of the eligibility checks (administrative and on-the-spot controls)

carried out by the Paying Agency and the Management Declaration of the Paying Agency

The opinion is given at the level of each Paying Agency, covering both Funds (EAGF and

EAFRD) and the following four populations, organised as per the main internal control systems of the Paying Agency:

- EAGF IACS (schemes covered by the Integrated Administrative and Control System) - EAGF Non-IACS (schemes not covered by the IACS)

- EAFRD IACS (schemes covered by the Integrated Administrative and Control System) - EAFRD Non-IACS (schemes not covered by the IACS)

Integrated sampling approach: According to Article 9 (2)(b) of Regulation (EU)

1306/2013 the Certification Bodies can use a single integrated sample for each population where appropriate. The integrated sampling approach means that the

Certification Bodies can use one statistical sample to test the legality and regularity of expenditure declared (including the administrative and on-the-spot eligibility checks) and

the annual accounts.

The method starts with the review and assessment of the internal control system of the

Paying Agency, including compliance testing, i.e. testing the systems and procedures of the Paying Agency for compliance with the applicable regulations (see section 2.1). The

second and key part of the audit work is the substantive testing: through testing of

transactions (based on a statistical sample), the Certification Body auditors are requested to confirm the level of errors found in the initial eligibility checks performed by the Paying

Agency and, if not confirmed, to give a qualified opinion. The purpose of the Certification Body's substantive testing is twofold:

- to confirm the level of error in the checks of the Paying Agency in order to give an opinion on the legality and regularity of the expenditure and on the assertions

made in the Management Declaration and the control results of the Paying Agencies;

- to confirm the level of error in the payments and to give an opinion on the

accounts.

The Certification Body must provide two rates to assess the level of error in the checks of

the Paying Agency:

- An error rate related to the errors found in the payments made to the beneficiaries

based on comparing their results to the accounts of the Paying Agency. This will support the basis for the Certification Body’s' opinion on the annual accounts of the

Paying Agencies (see section 2.1.2).

- An incompliance rate related to the errors found based on the re-verified eligibility

checks (including administrative and on-the-spot controls), namely verification of legality and regularity. The maximum level of risk needs to be assessed taking

account of this incompliance rate. The Certification Body's opinion on the Paying


Agency's Management Declaration (see section 2.2) is based on this result (see section 2.3).

For the purpose of assessing the reliability of the Paying Agencies' reported error rates stemming from their control results and for estimating an adjusted error rate, DG

AGRI takes into account the incompliance rate established by the Certification Bodies. In this assessment the following three scenarios may occur:

- The Certification Body calculated the incompliance rate, it validated the control results expressed in the control statistics (unqualified opinion on the Paying

Agency's Management Declaration) and it performed its work to standard: in this

case the Paying Agency's error rate should be retained as the final error rate unless DG AGRI auditors are aware of any systemic weaknesses not detected or not

quantified by the Certification Body.

- The Certification Body calculated the incompliance rate but it did not validate the control results (qualified opinion on the Paying Agency's Management Declaration)

and it performed its work to standard; In this case the Paying Agency's initial error rate shall be topped up by the incompliance rate where material in order to

establish the “adjusted error rate”;

- The Certification Body did not perform its task to standard; In this case the Paying

Agency's reported error rate shall be topped up as proposed by DG AGRI auditors. DG AGRI auditors also use the error rate (most likely error) established by the

Certification Body when determining the extent of the adjustment (top-up) to be made to

the error rate reported by the Paying Agency.

Explanatory box: Annex 10 – 2.2

The method is based on the audit method used for auditing financial statements in

accordance with internationally accepted audit standards. The focus is on compliance with applicable eligibility rules. Thus, through a statistical sample the auditors verify at

final beneficiary level if all eligibility criteria are met. Therefore, the Certification Bodies also need to perform re-verification of the on-the-spot controls done by the Paying

Agencies.

The reliability of the Certification Bodies' work has been assessed through dedicated audit missions and in the framework of the 2016 financial clearance exercise. The results are

outlined in the subsequent sections.

2.3.2 DG AGRI's audits of Certification Bodies' work on legality and regularity

In this second year of the Certification Body work on legality and regularity, DG AGRI in its audit programme gave priority to those Certification Bodies covering the Paying

Agencies with the highest expenditure which had not been audited in 2015. Moreover, the results and conclusions from the first year of the Certification Bodies' work on legality

and regularity were also taken into account.

Mission programme implemented in 2016

In 2016, the 16 missions listed in Table 2.3 below were carried out. The missions covered

the audit strategy of the Certification Bodies and the re-verifications of on-the-spot and administrative controls depending on the state of play of the Certification Body's work at

the time of the mission.



Summary of the main findings of these audits and monitoring activities

Due to the late appointment of some Certification Bodies, but not solely for this reason, some of the Certification Bodies did not plan a timely re-verification of controls, which is

in particular important for the IACS measures where controls and their re-verification shall be done in the summer/autumn of the claim year. In some cases the Certification

Bodies were not yet sufficiently familiar with the on-the-spot controls and therefore relied to a too large extent on the experience of the Paying Agency's own inspectors, without

ensuring an independent re-verification. The above instances were noted to various

degrees in 8 of the missions carried out in 2016 with scope on the IACS populations.

Previous conformity audit findings are not always taken into account in the Certification

Bodies' review.

Based on the observations from the missions, the majority of the Certification Bodies'

established the audit strategy in line with the approach outlined in the guidelines. However, there were some Certification Bodies for which this was not the case. In most

of the cases the error evaluation and the review of the control statistics could not be reviewed at the time of carrying out the missions as the Certification Bodies' audit had

not reached that stage yet.

In 10 of the 16 missions it was observed that the Certification Bodies' check on the eligibility criteria was not always sufficient (i.e. it did not cover all eligibility

requirements) or the conclusion was incorrect.

Nonetheless, it was concluded that reliance could be placed on 5 Certification Bodies for

their work on the audited population in scope of the Legality and Regularity mission.

Certification Body

ES04 Islas Baleares

Intervención General de la Comunidad

Autónoma de las Islas Baleares

ES13 Murcia

Intervención General de la Comunidad

Autónoma de la Región de Murcia

LT01 NMA KPMG Baltics

DE11 Mecklenburg-Vorpommern Deloitte & Touche GmBH

ES09 Cataluña

Intervención General de la Generalidad de

Cataluña

GB07 WAG National Audit Office

DE21 Schleswig-Holstein

Finanzministerium des Landes Schleswig-

Holstein

DE12 Niedersachsen/Bremen Niedersächsisches Finanzministerium

IT25 APPAG Deloitte & Touche SpA

EE01 PRIA KPMG Baltics OÜ

LU01 Ministère de l'Agriculture KPMG Luxembourg

FR20 France Agrimer

CCCOP (Commission de Certification des

Comptes des Organismes Payeurs)

GR OPEKEPE

SOL - Collaborating Chartered

Accountants S.A.

NL RVO Auditdienst Rijk

FI MAVI BDO Oy

BG01 SFA

Executive agency -Certification audit of

Agricultural Funds

List of Paying Agencies and related Certification Bodies audited on

legality and regularity in 2016

Paying Agency


2.3.3 Summary of the opinions of the Certification Bodies' work on legality and

regularity of the expenditure

A complete review of the results of the Certification Bodies’ work and assessment of the

work on legality and regularity took place in the financial year 2016 financial clearance assessment which started in February 2017.

The results of the work on legality and regularity are expressed through assessment of the residual risk by the Certification Bodies. The conclusion of the assessment is reflected

in the Certification Body's opinion on the Paying Agency's Management Declaration.

EAGF IACS population

72 out of the 80 Paying Agencies declared expenditure under EAGF IACS schemes

Opinion on the Paying Agency's

Management Declaration

Number

of Paying Agencies

Related Paying Agencies

Unqualified

Qualified/Disclaimer of opinion

Opinion with an emphasis of matter Not received by 31 March 2017

64

4

2 2

-

LU01; CY01;GB06;MT01

FR19; RO02 BG01; DK02

Total Member States: 28 72


For LU01 – Ministère de l’Agriculture, the reservation concerns the delay in the implementation of the anti-fraud strategy.

For CY01-CAPO and MT01- MRRA PA, the Certification Body issued a disclaimer of opinion.

For GB06- SGRPID, the Certification Body qualified the opinion because of potentially

incomplete and inaccurate control statistics.

The Certification Body of the Paying Agency FR19 – ASP, without qualifying its opinion,

emphasized that the control statistics for this population have not been transmitted to the Commission and that the Management Declaration does not include error rates.

Similarly, the Certification Body of RO02-PIAA included an emphasis of matter paragraph on the compilation of the control statistics and on the deteriorated error rates.

The residual risk was assessed as not material for all Paying Agencies except for Paying Agencies CY01; MT01 and RO02.

There was no material incompliance rate established.

EAGF Non-IACS population

73 out of the 80 Paying Agencies declared expenditure under EAGF Non-IACS schemes,

however, BG01 have not been received by 31 March 2017.

The only qualified opinion was for LU01 – Ministère de l’Agriculture, for the same reason

as mentioned above under the EAGF-IACS population.

For CY01-CAPO and MT01- MRRA PA, the Certification Body had a disclaimer of opinion.

For FR20-FranceAgrimer and ES16-La Rioja, the respective Certification Bodies made an emphasis of matter due to material error rates reported on some of the market

measures.

The Certification Bodies of the Paying Agencies ES16- La Rioja, HU01 – ARDA and RO02

– PIAA found material error (Most Likely Error exceeding the materiality) in this


population, which should have been reflected upon in their assessment of the residual risk and/or in the opinion on the Management Declaration.

In 7 cases35 no separate opinion on the residual risk for the EAGF Non-IACS population has been provided as the Certification Body treated this population as a de-minimis

population.

EAFRD IACS population

69 Paying Agencies declared expenditure under EAFRD IACS measures.

Opinion on the Paying Agency's Management

Declaration

Number

of Paying

Agencies


Unqualified Qualified/Disclaimer of opinion

Opinion with an emphasis of matter

Not received by 31 March 2017

59 5

3

2

N/A GB06; LU01; MT01;SE01;

SK01 ES16; FR19; GB09

BG01; DK02


Table: Annex 10 -2.5

For GB06- SGRPID, the Certification Body qualified the opinion because of potentially incomplete and inaccurate control statistics.

For LU01 – Ministère de l’Agriculture, the qualification concerned the delay in the implementation of the anti-fraud strategy.

For SK01- APA, the Certification Body, on the basis of its testing, assessed the residual risk as significant for both EAFRD IACS and Non-IACS and thus did not confirm the

control statistics and issued a qualified opinion.

For MT01- MRRA PA, the Certification Body did not issue an opinion for EAFRD IACS and Non-IACS, as it did not receive in a timely manner the Paying Agency's control results

and error rates in order to evaluate them.

For SE01-SJV, since the Paying Agency has not produced control statistics for EAFRD

IACS, the Certification Body issued a disclaimer of opinion.

For 4 Paying Agencies, the residual risk was assessed as material: GB-06 SGRPID, LT01-

NMA; RO01-PARDF and SK01-APA for the rest of the Paying Agencies the risk was not material.

For the Paying Agencies, for which there is a disclaimer of opinion by the Certification

Body (MT01-MRRA PA and SE01-SJV), the residual risk has not been evaluated. In 1 case: SK01-APA, the Certification Bodies found material error (Most Likely Error

exceeding the materiality) for this population.

35 DE04 – Bayern, DE21 - Schleswig-Holstein, DE23- Thüringen; GB05 – DARD, GB06 – SGRPID, GB07 – WAG,

GB09 – RPA


EAFRD Non-IACS

72 Paying Agencies have expenditure declared under EAFRD Non-IACS measures.

Opinion on the Paying Agency's

Management Declaration

Number

of Paying Agencies


Unqualified

Qualified/Disclaimer of opinion

Opinion with an emphasis of matter

Not received by 31 March 2017

62

4

4

2

N/A

IT26; LU01; MT01;

SK01 ES10; FR18; FR19;

RO01 BG01; DK02



As regards the Certification Body's opinion on the Paying Agency's Management Declaration, qualifications were included for the same 2 Paying Agencies (LU01 and

SK01) as mentioned above for the EAFRD IACS population and for the same reasons.

The Certification Body for IT26-ARCEA issued a qualified opinion because of material differences encountered for some files, which led to an Upper Error Limit exceeding the

materiality threshold.

The Certification Body for MT01- MRRA PA did not issue an opinion as explained above for

EAFRD IACS.

Without qualifying its opinion, the Certification Body for ES10-Extremadura, FR18-

ODARC, FR19-ASP and RO01-PARDF issued an emphasis of matter on the error rates reported by the respective Paying Agencies in the control statistics/Management

Declarations.

For 5 Paying Agencies (ES03 – Asturias, FR18-ODARC, IT26-ARCEA, PL01-ARMA and SK01-APA), the Certification Body found material error (Most Likely Error exceeding the

materiality) for this population.

General assessment

In most of the cases it was confirmed by the Certification Bodies that the Paying Agencies had established the necessary action plans to remedy the weaknesses leading

to reservations in the 2015 Annual Activity Report of DG AGRI. The state of play and potential delays in the implementation were indicated by the Certification Bodies, but the

deficiencies leading to the implementation of the Action Plan were not always reflected in

the incompliance rate established by the Certification Bodies.

In the second year of delivering an opinion on the Paying Agency's Management

Declaration based on the substantive testing, the Certification Bodies encountered some difficulties in drawing conclusions on the Management declaration and the control

statistics, especially when a material incompliance rate was determined. In some cases, the Certification Bodies' own results are not correctly reflected in their assessment of the

residual risk and the opinion on the Management Declaration. In addition, as mentioned in section 2.2.4, in some cases the Certification Bodies' conclusions on the residual risk

are inconsistent with the error rates reported by the Paying Agencies in the control

statistics.

However, as summarised above, the reports from the Certification Bodies contain

numerous and valuable information on legality and regularity of the expenditure that has been examined in details by DG AGRI auditors and taken into account for their

assessment of the adjustments to be made to the error rates reported by the Paying Agencies. Annexe 10.3 contains detailed information on the use of the audit work of the

Certification Bodies to top-up error rates.


2.3.4 Assessment of the Certification Bodies' work on legality and regularity The Certification Body's work on legality and regularity was assessed through several

components:

Timing of the re-verification of the on-the-spot controls, in particular whether the on-

the-spot controls carried out by the Paying Agency in claim year 2015 were verified by the Certification body in the same year, to minimise the risk that the situation of the

land parcels or animals concerned might have changed in the meantime.

Quality of Certification Body's re-verification of eligibility checks (administrative and

on-the-spot controls) through the DG AGRI audit missions and assessment of the

Certification Body's results, and in particular the technical skills and expertise that are necessary to be able, for instance, to very precisely assess the eligibility of land or to

check in details that a given procurement procedure respects all applicable rules.

Adequacy of the Certification Body's audit strategy, in particular adequacy of the risk

assessment especially in the first year of the CAP reform, evaluation of the representativeness of the Paying Agency random on-the-spot check sample and

sufficient testing for one or both audit objectives

and reported results (see previous sections).

Main observations per population:

EAGF IACS

This is the population for which the Certification Bodies could provide results on legality

and regularity to the greatest extent after the implementation of the new audit approach (under the reformed legal framework). Nevertheless, a number of Certification Bodies

could not start the re-verification of on-the-spot controls on time and as a result, re-verifications were done even in the autumn of 2016. In some cases, this was due to

delays from the respective Paying Agency in launching the control campaign after the CAP reform. A few Certification Bodies applied an inappropriate audit strategy which was

based on previous years' audits, failing to factor in the CAP reform and the new schemes

and new eligibility criteria. In addition, the new on-the-spot control sampling for Paying Agencies as defined in the legal framework (i.e. the cascade sampling) proved to be

challenging for the Certification Bodies in terms of auditing it and assessing its representativeness. In some cases, this resulted in the Certification Body not assessing

the representativeness of the Paying Agency's initial random sample for on-the-spot controls.

EAGF Non-IACS

In a number of cases no assessment of the residual risk was provided for the EAGF Non-

IACS population as it was treated as a de-minimis population. If the expenditure of the

given population is below 2% of the total expenditure declared to the Fund and if no specific risk is linked to the schemes or measures of that population the Certification

Bodies can decide to test the whole expenditure of the Fund under one single population. However, these conditions were not assessed correctly in all cases when this approach

was used, and an opinion on the residual risk should have been provided for this population as well. In several cases the Certification Bodies did not conclude on the

residual risk as no incompliance rate was calculated although conclusions could have been provided considering the error rate established for the certification of the accounts

and considering the internal control system testing. It was also found through the DG

AGRI audits carried out in 2016 and the assessment of the Certification Bodies' results in the financial clearance exercise that eligibility conditions are not always verified to their

full extent by the Certification Bodies.


EAFRD IACS

For this population, like EAGF IACS, the Certification Bodies could provide results on

legality and regularity. Nevertheless, the Certification Bodies' work on legality and regularity can be relied upon to lesser extent than in the case of the EAGF IACS

population. Apart from the reasons mentioned under the EAGF IACS population, especially the timing issue, it was observed during the DG AGRI audits that for several

cases the re-verification of the on-the-spot controls were not performed correctly, i.e. commitments linked to respective measures are not appropriately re-verified by the

Certification Bodies, or not at all.

EAFRD Non-IACS

Due to the mismatch between payment claims, control statistics and payments, the

Certification Bodies could not always establish an incompliance rate and conclude on the control statistics. Moreover, in many cases, the Certification Bodies have used a stratified

approach for EAFRD (i.e. testing IACS and Non-IACS together), thus due to insufficient testing not being able to conclude on the control statistics and residual risk for Non-IACS.

Nonetheless, some Certification Bodies managed to test appropriately EAFRD Non-IACS and to provide conclusive results on the control statistics and the residual risk. For this

population, it was also found through the DG AGRI audits carried out in 2016 and the

assessment of the Certification Bodies' results in the financial clearance exercise that eligibility conditions are not always verified to their full extent by the Certification Bodies.

Overall conclusion on the Certification Bodies' work as regards DG AGRI's adjusted error rate calculation

In the second year of application of the new approach, the Certification Bodies delivered more results on auditing the legality and regularity of the expenditure compared to the

first year. The overall reliance on the results of the Certification Bodies' work on legality and regularity has increased compared to FY2015. Therefore, the Certification Bodies'

results could be taken into account to a greater extent in the calculation of DG AGRI's

adjusted error rate for FY2016.

However, for a number of Certification Bodies, reliability of the results of their work is

limited as a result of shortcomings detailed above.

One major issue is that most of the Certification Bodies limited the size of the samples to

the minimum, without, as set out in the Commission guidelines, assessing properly the Paying Agency's internal control system or the limitations in the effectiveness of their

own checks resulting for example from the late timing. As a result of insufficient testing, major conformity issues identified by other auditors (Commission and/or Court of

Auditors) were not found.

2.4 Overall conclusion on the Certification Bodies' work

Although in the second year of implementation, in some cases the Certification Bodies' work on legality and regularity was affected by weaknesses as described above,

assurance can be obtained from the Certification Bodies' opinions on legality and regularity.

In FY2016, in most cases, the Certification Bodies' work on legality and regularity was delivered to higher standard compared to FY2015. In general, the Certification Bodies

identified higher number of conformity issues and took into consideration findings coming

from DG AGRI/ECA's audits. However, this is not the case for all Certification Bodies. For some, the Certification Bodies' work on legality and regularity, and thus, its reliability,

was affected by inadequate audit risk response, late on-the-spot re-verifications, insufficient sample sizes and incorrect conclusions on eligibility.

DG AGRI considers the Certification Bodies' work on legality and regularity of expenditure, when done in accordance with applicable regulations and guidelines, the key

element in DG AGRI's assurance building model (cf. the pyramid of controls) where each upper layer builds its work upon the results of the previous layer, and where each layer


may use the results of the upper layer to improve its own controls. It is also significant progress towards full implementation of the single audit approach.

Taking into account of the experience from the first 2015 and 2016 exercises, DG AGRI has presented Member States and finalised on 19 January 2017 new guidelines for

voluntary application from FY2018. DG AGRI will continue to work closely with the Certification Bodies, in order to continue to update where necessary the audit

methodology on legality and regularity and to assist them in the implementation thereof so as to ensure that a greater assurance can be drawn from their work in the future.

However, the timing of substantive testing will remain the same due to the inherent

nature of the CAP measures to be audited.


Part 3: Control results at the level of the final beneficiaries, the assessment thereon by the Certification Bodies and the overall appreciation of the

Commission on their reliability taking into account all available information

Annex 10 - part 3 presents DG AGRI's process to calculate an adjusted error rate and the

amounts at risk to the EU budget from the starting point of the control data sent by the Member States and taking into account all other available relevant information.

This part of the Annex is split into three separate sections to deal with the three distinct AAB activities:

Part 3.1: ABB02: Market Measures

Part 3.2: ABB03: Direct Payments

Part 3.3: ABB04: Rural Development

Part 3.4 Error rate and corrective capacity


Part 3.1 ABB02 – Market Measures

Index for part 3.1 – ABB02: Market Measures

3.1.1 Introduction

3.1.2 ABB02 Expenditure

3.1.3 What assurance does the Director General have regarding

the expenditure under ABB02 – Market Measures?

3.1.4 Fruit & Vegetable Sector

3.1.5 Wine sector

3.1.6 Posei & Aegean Islands

3.1.7 Export Refunds

3.1.8 School Milk Scheme

3.1.9 Conclusions for ABB02

3.1.10 Root causes of the error rate in market measures – is DG

AGRI doing anything?

3.1.1 Introduction

This ABB activity deals with measures many of which were put in place to provide a safety net for producers and support markets. Since the beginning of the CAP, price

support was the main instrument for ensuring market stability and a reasonable income to farmers. Price support or "intervention" was based on institutional prices set for

agricultural products which guaranteed a fixed price to farmers for their products. In today's CAP, market instruments are instead used to provide targeted, market safety

nets. Intervention prices are set at levels that ensure they are used only in times of real

price crisis and when there is a risk of market disruption.


Before 1992, more than 90% of all EU agricultural expenditure went to market support including export subsidies; in 2009, that figure was down to 10% of the CAP budget and

by the end of 2015 it stood at 4.5% of the CAP budget (5.5% in 2013 and 4.5% in 2014). In the last two years, due to the allocation of additional funds for temporary

exceptional measures in the livestock sector, expenditure for ABB02 increased by around 1 000 million EUR and stood at 5.51% of the CAP budget in 2016.

The following chapter sets out the elements which DG AGRI uses in order to give

assurance on expenditure reimbursed to Member States in 2016.

The overall expenditure in shared management with the Member States is 3 135 795 805

EUR while a further 1 463 065 EUR relates to indirect expenditure by DG AGRI for promotion measures.

The total expenditure in 2016 amounts to 3 127 902 558 EUR.

The following table sets out the shared management expenditure reimbursed by DG AGRI

in 2016 for the various market sectors:


Table Annex 10 – 3.1.1

3.1.3 What assurance does the Director General have regarding the

expenditure under ABB02 – Market Measures?

The assurance of the Director General is drawn from the various levels of management

and control that are in place and the results which can be obtained from them. ABB02 is characterised by a number of very diverse measures some of which incur very limited

expenditure and some of which are applicable in a limited number of Member States

only. The various market measures are completely different from each other with their own distinct control systems. In particular, control statistics only exist for around 63% of

expenditure. There is not enough data of a sufficiently broad, comprehensive and representative nature to allow the calculation of an adjusted error rate at individual

Paying Agency level. DG AGRI therefore deviates from the methodology used for ABB03 and ABB04 as set out in its Materiality Criteria at Annex 4 of this report. Where statistics

exist, an adjusted error rate has been calculated for the measure concerned. It does intend however to adhere as closely as possible to the principles set out in that Annex

and to diverge only where technically necessary.

The approach taken by DG AGRI, therefore, was to examine the situation for the largest spending measures in particular and for any measure for which it had statistical data. A

qualitative approach was taken on a measure by measure basis for the main expenditure items (annual spending above 100 m EUR). This approach was differentiated depending

on the information available for each scheme.

(i) Where statistics existed, along with a meaningful extent of other audit opinions (from

Certification Bodies, DG AGRI audits, ECA assessment) an adjusted error rate was estimated at scheme level.

(ii) Where this was not possible the approach taken examined the control environment

for each scheme, reported on DG AGRI's audit response over the preceding years as well as any other audit evidence, notably from ECA and from the Certification Bodies.

The professional audit judgement of the DG AGRI auditors was sought, on a measure by measure basis, as to the assurance that could be given to the Director General as

well as to give an assessment of the maximum amount of the expenditure which might be at risk.

(iii) For those measures for which there was neither statistical nor audit information

Chapter Article Sector/measure Expenditure (EUR)

050201 Cereals 0

050202 Rice 0

050203 Refunds on non-Annex 1 products 0

050204 Food programmes -968

050205 Sugar 0

050206 Olive oil 45 989 114

050207 Textile plants 6 134 000

050208 Fruit and vegetables 1 163 368 107

050209 Products of the wine-growing sector 1 027 130 938

050210 Promotion 62 587 884

050211 Other plant products/measures 242 007 764

050212 Milk and milk products 406 577 659

050213 Beef and veal 30 206 396

050214 Sheepmeat and goatmeat 1 836 787

050215 Pigmeat, eggs and poultry, bee-keeping and other animal products 140 601 812

3 126 439 493

ABB 02 direct management 05 02 10 02 Promotion measures - Direct payments by the Union 1 463 065

3 127 902 558ABB 02 total

Expenditure reimbursed by DG AGRI to the Member States in 2016

0502

ABB 02 shared management


available, the average adjusted error rate resulting from the examination at points (i) and (ii) was extrapolated in order to assess the risk. For 2016, this was necessary

in respect of around 18% of expenditure for the ABB.

This approach has resulted in a clear conclusion being drawn for each of the measures

concerned on the effectiveness of each system in preventing, detecting and correcting errors as well as on the amount of expenditure considered to be at risk at measure level

and at ABB level.

For the 1.463 m EUR under direct management (promotion measures), DG AGRI

assesses the amount at risk as 1%. This is taken into account in the overall assessment

for ABB in paragraph 3.1.9 (Conclusions for ABB02).

3.1.4 Fruit and Vegetable Sector

The EU funding for the fruit and vegetable sector is targeted at measures to structure the

market. Growers are encouraged to join producer organisations (POs) in order to

strengthen the position of producers in the market. POs receive support for implementing operational programmes, based on a national strategy. They are the

principle operators in the fruit and vegetables regime.

The EU fruit and vegetable regime supports operational programmes implemented by

recognised producer organisations (POs), by making a funding contribution to the

programmes' operational funds. National authorities "recognise" groups of producers that meet the requirements of PO status. A recognised PO may set up an operational fund to

finance its operational programme (the latter must be approved by the national authorities). This fund is financed by the financial contribution of members (or the

producer organisation itself) and the EU financial assistance.

In certain regions, transitional support is also given to encourage producers, who wish to acquire the status of recognised POs, to form producer groups (PGs), to cover

administration costs and the investments needed to attain recognition as producer organisations. This funding may be partially reimbursed by the EU and it ceases once the

PG is recognised as a PO.

The school fruit scheme is an EU-wide voluntary scheme which provides school children with fruit and vegetables, aiming thus to encourage good eating habits in young

people. Besides providing fruit and vegetables to the children the scheme requires

participating Member States to set up strategies including educational and awareness-raising initiatives.

Temporary exceptional support measures for producers of certain fruit and vegetables were introduced by the Commission in August 2014 in order to provide relief to European

producers as a result of the market disturbances caused by the Russian ban on certain food imports. .



3.1.4.1 Operational programmes of producer organisations

In 2016, the expenditure under this measure amounted to 862.5 m EUR.

Article 97(b) of Commission Regulation (EU) No 543/2011 obliges Member States to submit to the Commission by 15 November of each year an annual report on the

implementation of financial accounting controls and other checks on producer organisations' operational programmes.

DG AGRI audits on operational programmes of producer organisations carried out between 2014 and 2016 identified both recognition criteria issues and control deficiencies

for a number of Member States. The auditors consider that the error rates reported by some of these Member States do not fully reflect the irregular spending. In order,

therefore, to compensate for uncertainties with regard to the assurance that can be

taken from the Member States’ reported data, DG AGRI auditors reviewed all available data in order to come to a conclusion based on their professional audit judgment on what

was the likely extent of understatement in the error reported and (in line with the principles set out in step 3 of DG AGRI's materiality criteria – see Annex 4 to this AAR),

have adjusted the error rates concerned (BE, DK, ES, FR, GR, IT, NL, PT, SE).

The statistical reports received concern operational programme expenditure incurred in

financial year 2016 in respect of operational year 2015. The level of error detected by the Member States was 3.1% with rates above 2% reported by a number of Member States.

Is should be noted that this measure is subject to a very high degree of scrutiny by the

national authorities. Every producer organisation has to be checked on-the-spot at least once every three years in order to verify respect of recognition criteria as well as the

correct implementation of the operational programme. Due therefore, to the 100% (or close to 100%) control coverage in several of these Member States, there is little or no

Member

State

Operational

programmes for

producer organisations

Pre-recognition of

producer groups

School Fruit

Scheme

Temporary

exceptional

measures

Total Fruit &

Vegetables

AT 7 818 682 - 2 567 994 - 10 386 677

BE 56 861 325 - 2 815 024 - 59 676 349

CY 2 071 241 - 201 309 452 511 2 725 062

CZ 3 039 000 86 244 4 800 247 20 197 7 945 689

DE 40 627 683 - 23 982 725 - 64 610 408

DK 4 379 082 - 2 003 939 - 6 383 021

ES 252 667 017 - 7 820 929 1 113 337 261 601 284

FI 2 631 276 - - - 2 631 276

FR 100 807 023 2 551 2 127 845 16 773 102 954 193

GB 41 034 965 - - - 41 034 965

GR 28 913 896 - - 1 081 091 29 994 987

HU 4 158 099 3 225 845 4 748 138 - 12 132 083

IE 4 163 331 - 1 129 498 - 5 292 829

IT 241 698 099 - 20 480 135 298 208 262 476 442

LV 728 767 559 350 774 614 1 612 2 064 342

NL 39 682 278 - 4 753 632 270 937 44 706 847

PL 10 323 192 63 296 480 17 312 218 120 996 503 211 928 393

PT 13 748 326 - 408 520 20 005 14 176 851

RO 1 215 965 1 162 990 3 079 319 161 329 5 619 603

SE 4 717 997 - - - 4 717 997

SK 1 196 017 - 2 882 825 - 4 078 842

Grand Total 862 483 264 71 373 085 109 915 856 128 952 215 1 172 724 419

Expenditure by Measure in 2016 - Fruit and Vegetables


error remaining in the uncontrolled population for those Member States on the basis of their "reported" error rates. For ES and FR, errors found by the Certification Bodies have

also been added to the amount at risk (0.584m and 0.437m EUR respectively).

DG AGRI's adjustments or "top-ups" to the reported error rates and their impact on the

amounts at risk are summarised in the following table:


The following summary sets out for all cases for the Operational Programmes for

Producer Organisations where the adjusted error rate is above 2%, the reasons which led to DG AGRI making top-ups to the reported error rates. In each case it is assessed

whether it is necessary to make a reservation and if so, an indication is given of the follow-up action required. It is noted that the error rates reported by all MS are inflated

to an unknown extent by the results of the administrative checks which are carried out on all files. DG AGRI will endeavour to clarify this with the MS for the next reporting

period.

Member

State

Aid paid for OPs

in 2015

% of claims

checked OTS

reported

error rateadjustment

amount at risk if

no top-up

amount at risk if

top-up

adjusted

error rate

Total amount

at risk

EUR EUR EUR EUR

(a) (b) (c) (d) (e) (f) = b*(1-c)*d (g)= (b)*(e) (h) = (f+g)/b (i) = (f) +((g)

AT 7 818 682 60.9% 0.8% - 24 262 - 0.31% 24 262

BE 56 861 325 33.6% 0.5% 5.0% 176 828 2 843 066 5.31% 3 019 894

CY 2 071 241 100.0% 1.7% - - - - -

CZ 3 039 000 100.0% 0.1% - - - - -

DE 40 627 683 88.1% 2.3% - 113 325 - 0.28% 113 325

DK 4 379 082 28.7% 0.4% 7.0% 12 823 306 536 7.29% 319 359

ES 252 667 017 50.8% 5.2% 1.0% 6 416 039 2 605 780 3.57% 9 021 819

FI 2 631 276 40.8% 0.0% - 267 - 0.01% 267

FR 100 807 023 33.4% 0.5% 5.4% 350 094 5 478 055 5.78% 5 828 149

GB 41 034 965 100.0% 0.0% - - - - -

GR 28 913 896 100.0% 2.0% 5.0% - 1 445 695 5.00% 1 445 695

HU 4 158 099 99.8% 7.0% - 446 - 0.01% 446

IE 4 163 331 88.4% 1.8% - 8 774 - 0.21% 8 774

IT 241 698 099 79.9% 0.5% 2.7% 257 196 6 525 849 2.81% 6 783 045

LV 728 767 100.0% 0.5% - - - - -

NL 39 682 278 61.1% 22.7% - 3 498 811 - 8.82% 3 498 811

PL 10 323 192 100.0% 0.0% - - - - -

PT 13 748 326 42.9% 5.8% - 455 583 - 3.31% 455 583

RO 1 215 965 100.0% - - - - - -

SE 4 717 997 31.4% 0.8% 10.0% 24 856 471 800 10.53% 496 656

SK 1 196 017 100.0% 0.4% - - - - -

Grand Total 862 483 264 63.2% 3.1% 11 339 304 19 676 780 3.60% 31 016 085

Fruit and Vegetables - Operational Programmes for Producer Organisations

Calculation of adjusted Error Rate and Amount at Risk


Member

State Adjusted

error

rate

Amount at

Risk

Reason for top-up Reser-

vation

Mitigating factors/ reservation

follow-up

BE 5.31% 3.02 m EUR A DG AGRI audit in 2016

detected deficiencies in the

checks on Operational

Programmes (OPs) concerning

the system of approval and

modification of operational

programmes and the checks to

establish the eligibility of the

aid which leads to a top-up of

5%.

Yes A reservation is entered in

respect of 2016 expenditure.

The deficiencies found have

already been remedied by the BE

authorities (the control

instructions regarding the checks

on OPs approval and the

verifications to establish the

eligibility of the aid were

updated).

The ongoing conformity clearance

procedure will ensure that the

financial risk to the EU budget is

covered. No formal action plan is

necessary.

DK 7.29% 0.319 m

EUR

A DG AGRI audit in 2016

identified deficiencies as

regards the checks carried out

before the approval of the OP

i.e. verification of the

soundness of estimates and in

the controls carried out on

measures of operational

programmes as well as the

absence of an ancillary control.

These deficiencies lead to a

top-up of 7%.

No As the amount at risk is below

the de minimis threshold

established in DG AGRI's

materiality threshold (see Annex

4) no reservation is required.

It is also noted that the Danish

authorities have taken corrective

action which will take effect from

OP 2017.

The conformity clearance


financial risk to EU budget is

covered.

ES 3.57

%

9.022 m

EUR

A DG AGRI audit in 2016 found

weaknesses as regards the

control of personnel costs and

the use of selective carry over

in the Autonomous Community

of Valencia. These deficiencies

lead to a top-up of 5% for a

limited population.

The follow up of the

environmental actions in Spain

revealed that there were still

some shortcomings for limiting

the expenditure to the

additional costs. These

deficiencies lead to a top-up of

5% for a limited population.

The ES authorities have

reported an error rate of 5.2%

in their control statistics

(2.57% in the uncontrolled

population) to which is added

a top-up of 1% representing

the risk detected by DG AGRI

for limited populations as

described in the previous

paragraphs.

It is noted that the error rate

declared (incorrectly) includes

the results of the

administrative checks which

therefore inflates the error

rate.



The Valencia authorities took

remedial measures from OP

2016.

The Spanish authorities amended

the Framework for Environmental

Actions and are finishing the

studies for calculating the specific

cost of certain environmental

actions.

Therefore, no further specific

corrective action is necessary.




covered

FR 5.78

%

5.828 m

EUR

The deficiencies have been

detected in previous DG AGRI

audits and a reservation was

made in the 2015 AAR. The DG

Yes The reservation is carried forward

from 2015.

Some correctives measures were


Member

State Adjusted

error

rate

Amount at

Risk


vation


follow-up

AGRI audit found deficiencies

in the controls carried out on

the eligibility of operational

programmes and the aid

claimed, checks on value of

marketed production and

checks on delivery of the full

production. This leads to a

top-up of 5%.

In addition, the CB found a

number of errors amounting to

0.438 m EUR which is added to

the amount at risk.

already implemented in 2016 by

FR. The FR authorities have

initiated the process of revising

the guidelines and check-lists and

these corrective actions will be

followed up via the conformity

clearance procedure which will

also ensure that the financial risk

to the EU budget is covered.




covered.

GR 5% 1.446 m

EUR



regards the verification of the

soundness of estimates,

actions implemented before

approval of the amendments

to OP, compliance with

minimum number of

environmental actions,

assessment of recognition

criteria in the context of the

main activity and technical

means. These deficiencies

lead to a top-up of 5%.






covered.

An action plan is necessary.

IT 2.81

%

6.783 m

EUR


several deficiencies in the

controls carried out on

eligibility of operational


claimed, checks on outsourcing

of the PO' main activity,

checks on democratic

accountability and checks on

delivery of the full production.

These deficiencies lead to a

top-up of 5% for a limited

population.



Following the exchanges with the

Member State in the framework

of the ongoing conformity

clearance procedure, the

necessary remedial actions will be

agreed with the Member State.




covered.

NL 8.82

%

3.499 m

EUR


identified deficiencies related

to the verifications of the

soundness of estimates and

the inclusion in the Operational

Programmes of non-eligible

actions. However, since the

error rate reported by the NL

authorities is 22.7%, it is

considered that this is

sufficient to cover the risks

identified by DG AGRI .



The reservation is carried forward

from 2015. NL is currently

implementing an action plan to

review recognition and to recover

undue expenditure. The

authorities plan to have

completed all remedial actions for

OP 2017.




covered.

PT 3.31

%

0.456 m

EUR

PT detected a high error rate

of 5.8% in the control carried

out. No further top-up was

added by DG AGRI.







Member

State Adjusted

error

rate

Amount at

Risk


vation


follow-up

SE 10.53

%

0.497 m

EUR


identified an absence in the

checks performed before the

approval of the OP i.e. the

consistency, technical quality

and soundness of estimates

and deficiencies in : the

controls of the eligibility of the

actions and expenditures

proposed and the compliance

of the operations with the

national regulations and in the

controls on carried out on

measures of OP. These


10%.









covered.


3.1.4.2 Pre-recognition of producer groups In 2015 the expenditure under this measure amounted to 120.3 million EUR. In 2016,

expenditure had fallen to 71.4 million EUR.

Article 97(b) of Commission Regulation (EU) No 543/2011 obliges Member States to

submit to the Commission, by 15 November of each year an annual report on the implementation of financial accounting controls and other checks on producer groups’

recognition plans in the preceding year.

The overall error rate calculated on the basis of the Member States' statistics was 1%,

with RO the only Member State reporting a material error rate (6.6%). However, due to

the 100% control rate in RO there is no residual error for this Member State and therefore no need to consider a reservation.

DG AGRI audits on operational programmes of producer groups carried out between 2014 and 2016 identified serious control deficiencies for HU, PL and RO. Enquiries for HU

and RO have been closed with financial correction and there are currently no open audit findings for those two Member States.

Poland is by far the highest spending Member State under this measure and represents 88.6% of expenditure in 2016. Spending under the measure rose in previous years as

producers in Poland applied for and went through the process of being recognised as

producer organisations but is now decreasing as Poland completes the recognition process. Hungary is the second highest spending MS with 4.5%, followed by Bulgaria, at

3.6% of the expenditure.

Serious deficiencies have been detected with regard to the recognition of producer

groups in Poland and a reservation has been in place since 2013 AAR. The completion of the remedial action plan has been delayed on a number of occasions and in April 2016

the Commission suspended payments (at a rate of 25%) in order to protect the EU budget. In April 2017, since the action plan had still not been completed, the

Commission prolonged the suspension of payments for a further 12 months.

In order to compensate for uncertainties with regard to the assurance that can be taken from the Member States’ reported data, DG AGRI auditors reviewed all available

information in order to come to a conclusion based on their professional audit judgment on what was the likely extent of understatement in the error reported. This resulted in

adjustments being made to the error rates reported as summarised in the following table:



The following summary sets out for the cases for Pre-recognition of Producer Groups

where the adjusted error rate is above the 2% materiality threshold, the reasons which led to DG AGRI making top-ups to the reported error rates. In each case it is assessed

whether it is necessary to make a reservation and if so, an indication is given of the follow-up action required.

Membe

r State

Adjusted

error

rate

Amount

at Risk


vation


follow-up

BG 2.0% 0.052

m EUR

A 2% top up has been applied on the

expenditure, as the package of final

accounts, audit reports and audit

certificates has not been submitted by

the Member State within the deadlines

and at the time of drafting and

therefore there is insufficient assurance.




materiality threshold (see

Annex 4) no reservation is

required.

PL 10.2

%

6.500

m EUR

Grave deficiencies have been found with

regard to the granting of recognition to

producer groups. In 2016 the

Commission suspended payments at a

rate of 25% from March 2016 to

February 2017. A top-up is, therefore,

only necessary in respect of expenditure

from October 2015 to February 2016 as

the 25% suspension covers the risk for

the remaining period.

Yes The reservation is carried

forward from 2015.

An Action Plan is under

implementation.




covered.

RO 10% 0.116

m EUR

A DG AGRI audit in 2014 revealed

structural deficiencies in Romania in the

approval procedure for recognition

plans. When plans were approved the

groups received preliminary recognition

which created the entitlement to aid.

However as there were problems with

the approval procedure the entitlement

to aid is called into question. An action

plan is being implemented but is not yet

completed. The previously applied top-

up of 10% is therefore repeated for

2016.



established in DG AGRI’s

materiality criteria (see Annex


A remedial Action Plan is

under implementation.




covered.


Member

StateAid Paid

% of claim

checked

OTS

reported error

rate

DG AGRI

top-up

amount at risk

where no top-

up

amount at risk

for top-up

adjusted

error rate

Total amount

at risk

EUR EUR EUR EUR


BG 2 592 374 100.0% 0.7% 2% - 51 847 2.00% 51 847

CZ 86 244 100.0% - - - - - -

FR 2 551 100.0% 0.8% - - - - -

HU 3 225 845 100.0% 1.2% - - - - -

LT 447 250 100.0% - - - - - -

LV 559 350 100.0% 0.0% - - - - -

PL 63 296 480 92.4% 0.9% 10% 44 079 6 456 241 10.27% 6 500 320

RO 1 162 990 100.0% 6.6% 10% - 116 299 10.00% 116 299

Grand Total 71 373 085 93.2% 1.0% 44 079 6 624 387 9.34% 6 668 466

Fruit and Vegetables -Prerecognition of Producer Groups

Calculation of Adjusted Error Rate and Amount at Risk


Aid for Pre-recognition of Producer Groups in Poland – what is the problem and what is the Commission doing to protect the financial interests of the EU?

For the past several years, Poland has been the principal beneficiary of this measure. The huge Polish fruit and vegetables sector was characterised by a multitude of small and medium sized producers which were in competition with each other and had little bargaining power. The lack of coordination in the sector led to particular fruits or vegetables being overproduced at one time or another which impacted negatively on other European markets. The sector in Poland was a good candidate for this measure which aims to enable producers to organise themselves and set up the necessary structures for the formal creation of producer organisations.

However, several audits carried out by both DG AGRI (2010, 2013 and 2014) and the European Court of Auditors (2013) revealed widespread deficiencies in the Polish control system of aid to producer groups in the fruit and vegetables sector.

The main deficiencies concerned insufficient controls of the recognition status of the producer groups and of the quality of initial and modified recognition plans as well as of the implementation of producer groups' recognition plans. The deficiencies in the controls when approving the plans concerned, in particular, insufficient checks on commercial consistency of the plans, the necessity of investment and reasonableness of costs. For the implementation of the plans the main deficiencies were in the controls of the soundness of investments, the controls of production potential in this respect and the check on the plans' completion. Consequently producer groups have been unduly recognised and this has resulted in EU aid being paid to ineligible producer groups.

Moreover, the direct involvement of third bodies (Marshall's offices) in the recognition of producer groups in Poland creates an administrative uncertainty, not least with regard to the authority and responsibility of the paying agency, but also as concerns the protection of the financial interests of the Fund.

A reservation was made in the AAR for 2013 and it was carried forward to 2014 as well as to the present AAR. In November 2014, Poland established an action plan with a view to remedying the deficiencies by end of 2015.

Two monitoring missions carried out by the Commission in 2015 found serious problems in the implementation of the action plan, mainly due to the lack of supervision and monitoring of the quality of the control work carried out and the lack of appropriate follow-up regarding the producer groups. Insufficient controls remained in respect of the recognition status of the producer groups, of the quality of recognition plans and of their implementation. The actions undertaken by the Polish authorities demonstrated that the objectives of Poland's action plan had not been met, ineligible producer groups had not been derecognised and aid continued to be paid. Furthermore, Poland has notified that the implementation of the action plan will be delayed.

However, in spite of both Commission findings regarding the eligibility of producer groups, the Polish authorities continue to pay aid to all beneficiaries and the amounts recovered so far are very low.

As the Polish authorities failed to take the necessary action to protect the EU's financial interests and, since they were not in a position to remedy the deficiencies in the immediate future, the Commission adopted implementing decision C(2016/2050) suspending payments to Poland. The suspension was in respect of 25% of expenditure for the measure from March 2016 until February 2017.

In April 2017, since Poland had still not completed its action plan, the Commission concluded that the conditions for the suspension continued to be met and therefore, by implementing decision C(2017)2104, extended the suspension of payments until February 2018.

Financial corrections have been implemented in respect of financial years 2009 to 2013 and have been proposed in respect of financial years 2014-2015. Conformity clearance procedures are underway in respect of subsequent financial years .


3.1.4.3 School Fruit scheme

In 2016, the expenditure under this scheme (i.e. for school year 2016/2017) amounted to 110 m EUR.

Article 15(1) of Regulation (EC) No 288/2009 requires Member States to report on the School Fruit Scheme. Member States' statistical data show that on-the-spot checks were

conducted on 45.6% of aid distributed for the 2015/2016 school year resulting in errors

of 0.91 %. FR and IT have reported material error rates of 7.49% and 3.96% respectively. As the control rate for Italy is very high the remaining risk to the EU

budget for the uncontrolled population is low at 0.47%. For France, while the error rate in the uncontrolled population remains material at 6.83%, the amount at risk is below DG

AGRI's de minimis threshold at 0.145 million EUR. DG AGRI has neither audit findings nor


any other information which would lead to the application of an adjustment of any of the reported error rates.


Member

State Adjusted

error

rate

Amount at

Risk


vation


follow-up

BG 2.01

%

0.067 m

EUR

A 2% top up has been applied

on the expenditure, as the

package of final accounts,

audit reports and audit

certificates has not been

submitted by the Member

State within the deadlines and

at the time of drafting and

therefore there is insufficient

assurance.






FR 6.83

%

0.145 m

EUR

FR detected a high error rate

of 7.49% in the control

carried out. No further top-up

was added by DG AGRI.






3.1.4.4 Exceptional Support Measures

Following market disturbances in summer 2014 caused by the Russian ban on various products, which impacted heavily on fruit exports, temporary exceptional support

measures were introduced for producers of certain fruit and vegetables. Expenditure for

Member

StateAid Paid

% of claim

checked OTS

reported

error rate

DG AGRI

top-up

amount at risk

where no top-up

amount at risk

for top-up

adjusted

error rate

Total

amount at

risk

EUR EUR EUR EUR


AT 2 567 994 32.4% - - - - - -

BE 2 815 024 10.6% 0.10% - 2 620 - 0.09% 2 620

BG 3 314 543 9.2% 0.01% 2% 383 66 291 2.01% 66 674

CY 201 309 11.9% - - - - - -

CZ 4 800 247 88.2% 0.00% - 3 - 0.00% 3

DE 23 982 725 17.6% 0.02% - 3 121 - 0.01% 3 121

DK 2 003 939 54.9% - 2% - 40 079 - 40 079

EE 675 606 17.5% 0.05% - 283 - 0.04% 283

ES 7 820 929 74.7% 0.00% - 70 - 0.00% 70

FR 2 127 845 8.8% 7.49% - 145 406 - 6.83% 145 406

HR 1 294 057 49.5% - - - - - -

HU 4 748 138 12.9% - - - - - -

IE 1 129 498 22.2% - - - - - -

IT 20 480 135 88.1% 3.96% - 96 969 - 0.47% 96 969

LT 1 207 220 40.9% - - - - - -

LU 395 161 100.0% - - - - - -

LV 774 614 16.7% - - - - - -

MT 344 550 100.0% - - - - - -

NL 4 753 632 100.0% - - - - - -

PL 17 312 218 16.9% 0.02% - 2 914 - 0.02% 2 914

PT 408 520 21.8% - - - - - -

RO 3 079 319 96.3% 0.64% - 744 - 0.02% 744

SI 795 807 13.2% - - - - - -

SK 2 882 825 43.9% - - - - - -

Grand Total 109 915 856 45.6% 0.91% 252 513 106 370 0.23% 358 883

Fruit and Vegetables -School Fruit Scheme



exceptional support measures in 2016 was 128.95 m EUR (see Table: Annex 10-3.1.6). The biggest spender for the measure was Poland with 121 m EUR (93.8% of the

expenditure).

No control statistics are required for these temporary support measures. A DG AGRI

audit mission in 2016 detected deficiencies leading it to propose a "top-up" of 10% to the expenditure for the measure. This results in an amount at risk of 12.1 m EUR.


Member

State

Adjuste

d error

rate

Amount

at Risk


vation


follow-up

FR 9.90

%

0.002

m EUR

The Certification Body identified the top-

up amount. No further amounts were

added by DG AGRI.






required.

PL 10% 12.1 m

EUR

A DG AGRI audit in 2016 detected

deficiencies in the checks on withdrawal

operations for free distribution in respect

of the minimum rate of the 1st level

controls as well as in the extent and

depth required for the 1st level controls

on producers and the 2nd level controls

on the recipients of withdrawn products.

Further weaknesses were identified on

the checks on eligibility of operations.

These deficiencies lead to a top-up of

10%.

Yes The reservation is carried over

from 2015.

The measures are temporary

one-off measures so no action

plan is necessary.




covered.


Member

State

Aid paid for OPs

in 2016

% of claims

checked OTS

reported

error rateadjustment

amount at risk if

no top-up

amount at risk if

top-up

adjusted

error rate

Total amount

at risk

EUR EUR EUR EUR


BG 248 886 N/D - - - - - -

CY 452 511 N/D - - - - - -

CZ 20 197 N/D - - - - - -

EE 22 484 N/D - - - - - -

ES 1 113 337 N/D - - - - - -

FR 16 773 N/D - 10% - 1 661 9.90% 1 661

GR 1 081 091 N/D - - - - - -

HR 3 312 861 N/D - - - - - -

IT 298 208 N/D - - - - - -

LT 75 003 N/D - - - - - -

LV 1 612 N/D - - - - - -

NL 270 937 N/D - - - - - -

PL 120 996 503 N/D - 10% - 12 099 650 10.00% 12 099 650

PT 20 005 N/D - - - - - -

RO 161 329 N/D - - - - - -

SI 860 479 N/D - - - - - -

Grand Total 128 952 215 - - 12 101 311 9.38% 12 101 311

Fruit and Vegetables - Temporary Exceptional Measures



3.1.4.5 Conclusion for the Fruit and Vegetable sector

For the fruit and vegetables sector there are a number of Member States for which

serious problems have been detected by the DG AGRI auditors in recent years. The errors which such deficiencies would produce were not indicated in the data on the

results of control carried out and reported by those Member States. The DG AGRI

auditors have therefore, used their professional audit judgment to propose adjustments to the error rates reported and thus enable a more realistic calculation of the amount at

risk for the sector.

The table below summarises the data which is set out in detail above and indicates that 8

reservations are required in respect of 7 Member States for a total amount of 48.197 million EUR. The total amount at risk in the 2016 expenditure is estimated at 50.145 m

EUR.


The 2015 reservations for operational programmes for producer organisations for ES, FR, and NL are carried over as the remedial action plans are still on-going. For AT

and GB, as the amount at risk is below the de minimis threshold, there is no reservation; however the remedial action plans shall be completed. New reservations are introduced

for BE, GR and IT.

The 2013/2014/2015 reservation for pre-recognition of producer groups is carried over for PL. For RO as the amount at risk is below the threshold there is no reservation;

however the action plan launched in 2015 shall be continued.

For the school fruit scheme, no new reservations are considered necessary.

For temporary exceptional support measures for the fruit and vegetables sector, the 2015 reservation is carried over for expenditure incurred by Poland. No action plan is

however required since the measure is temporary in nature.

It is emphasised furthermore, that in the case of all of the amounts under reservation,

the conformity clearance procedure shall ensure that undue expenditure will be

Measure Expenditure

Adjusted

error rate

MS with

reservation

Amount under

reservation

Total amount

at risk

EUR EUR EUR

BE 3 019 894

ES 9 021 819

FR 5 828 149

GR 1 445 695

IT 6 783 045

NL 3 498 811

Total OPPO 29 597 413

PL 6 500 320

Total PRPG 6 500 320

PL 12 099 650

Total TEM 12 099 650

Grand Total 1 172 724 419 4.28% 48 197 383 50 144 744

Operational programmes for

Producer Organisation

School Fruit 109 915 856 0.23% - 358 883

Temporary Exceptional Measures 128 952 215 9.38% 12 101 311

Summary of reservations and amounts at risk for Fruit & Vegetable Sector

862 483 264 0.02%

31 016 085

Pre-Recognition of Producer

Groups71 373 085 9.34%

6 668 466


recovered from the Member States concerned.

3.1.5 Wine sector

In 2008, the Council introduced a reform of the common organisation of the market in wine aimed essentially at improving the competitiveness of EU wine producers and

balancing supply and demand in the wine sector. The main financial instruments of this reform included a temporary grubbing-up scheme and the setting up of national support

programmes: a specific budget made available for each Member State, which can choose

the breakdown best adapted to its particular situation. The most significant measures, in financial terms, have been restructuring and conversion of vineyards; investments;

promotion on third country markets and information within EU; by-product distillation and harvest insurance.

A review of the EU legislation concerning the wine market also took place in 2013-2014,

with Regulation (EC) No 1308/2013, which added new support measures to the existing ones. The existing measures now are: promotion; restructuring and conversion of

vineyards; green harvesting; mutual funds; harvest insurance; investments; innovation

in the wine sector and by-product distillation. Besides, the regulatory framework has been completed with the review of Regulation (EC) No 555/2008 through Regulations

(EU) No 1149/2016, and (EU) No 1150/2016, which entered into force on 18 July 2016. They have also extended the obligation for the MS of reporting the controls carried out,

for all the wine measures.


For the 2016 AAR, statistics are available, for the first time for all wine measures (with the exception of the very small amounts under innovation and "other".

Restructuring and conversion of vineyards

Aid applications for restructuring and conversion in the wine sector are subject to 100 %

on-the-spot checks before and after operations, and in all cases before the final payment. The controls, which aim at assessing the eligibility of parcels and operations, and at

measuring the areas, are performed by means of both remote sensing and classical (on-the-spot) checks both prior and subsequent to restructuring operations.

Member

State

Restructuring

and

Conversion of

Vineyards

Investment

Promotion in

Third

Countries and

Information in

By-product

distillation

Harvest

Insurance

Green

harvestingInnovation Others Total Wine

AT 5 907 730 4 631 580 2 827 265 - - - - - 13 366 575

BG 21 358 594 - 224 336 - - - - - 21 582 930

CY 2 402 650 1 981 637 22 106 - 239 607 - - - 4 646 000

CZ 4 113 677 1 031 647 - - - - - - 5 145 324

DE 19 300 096 16 202 976 940 029 - 176 220 - - - 36 619 320

ES 74 952 204 55 289 465 49 654 145 30 385 398 - - 9 867 64 171 210 355 251

FR 105 473 360 100 822 399 41 052 467 33 196 760 - - - - 280 544 985

GR 12 066 013 - 5 059 405 - - - - - 17 125 417

HR 679 606 2 363 130 160 761 - - - - - 3 203 497

HU 26 994 323 179 082 425 000 1 504 595 - - - - 29 103 000

IT 155 127 202 43 439 185 84 540 513 16 518 869 19 885 966 1 381 141 - 72 226 320 965 103

PT 53 612 117 - 7 011 633 1 513 977 2 996 504 - - 1 885 65 136 116

RO 10 923 549 70 474 479 328 - 186 734 - - - 11 660 085

SI 4 671 058 - 367 821 - - - - - 5 038 879

SK 1 748 491 698 169 29 800 - 161 995 - - - 2 638 455

Grand Total 499 330 670 226 709 744 192 794 608 83 119 599 23 647 026 1 381 141 9 867 138 282 1 027 130 938

Expenditure by Measure in 2016 - Wine


DG AGRI has carried out 8 audits on the measure in 2014, 2015 and 2016 in AT, BG, FR, IT (x 3), PT and DE. The most significant issues detected (both by DG AGRI and the ECA)

were that in some cases the paying agency did not systematically and/or completely perform the on-the-spot checks before the operations (ex-ante), and in other cases the

producers have been overcompensated with the use of flat rates.

Investment measures

The investment measure provides for the possibility to invest in tangible and non-

tangible "goods" in order to improve the quality of wine (such as expertise). The aid is a maximum of 40 to 75% of the investment depending on the region. Investment

measures require a 100% control on the spot prior to payment.

For investment measures, between 2014 and 2016, DG AGRI carried out audits in FR and

HU.

Promotion on third country markets

A 100% administrative check is carried out by the Member States in order to detect

ineligible costs. Between 2014 and 2016, the MS audited by DG AGRI were ES, IT and PT. These audits, which checked that the expenditure was effected in accordance with

the existing rules, did not find any serious non-compliance requiring significant financial corrections.

Green harvesting

The green harvesting measure provides for the possibility of total destruction or removal of grape bunches while still in their immature stage, in order to contribute to restoring

the balance of supply and demand in the Union wine market. The aid can reach a maximum of 50% of the related direct costs. This measure requires a 100% control on

the spot prior to payment.

In 2016, IT was the only MS where this measure was used. Italy's control statistics show

a 100% control rate on final payments as required by Regulation (EC) No 555/2008 and,

while the reported error rate was 14.8% there was, therefore, no residual risk to the EU Budget.

By-product distillation

By-product distillation is a simple measure. Member States can decide that the wine

producer should bring the by-products ("must" and "lies") to a distillery. By–products

should be removed from the market in order to avoid that (low quality) wine can be produced from it.

DG AGRI carried out an audit mission in October 2013 in Spain (the second largest beneficiary) and did not detect any deficiencies. DG AGRI considers that distillation

measures are low risk as the interest of the MS, to keep every drop of alcohol produced under control, is very high.

Harvest Insurance

Harvest insurance is another simple measure. Wine producers can claim up to 80% of the cost of their insurance policy. This requires a straightforward administrative control. On

top of that, the aid amount is capped by maximum insurance premium and maximum insured value of the harvest. DG AGRI audit missions took place between 2012 and

2015 to IT and RO. Based on both the evaluation on the spot as well as the structure of

the control system, the auditors conclude that there is no or very low risk in this


measure.

Other (innovation measure)

These amounts are extremely marginal and the risk is considered to be zero. No audit has yet been performed for this expenditure.

3.1.5.3 Conclusion for the wine sector

For the wine sector, based on the audits carried out, DG AGRI found that there was some risk with regard to restructuring and conversion measures due to ex-ante on-the-spot

checks in AT as well as for investment measures for wine in FR. The errors which such deficiencies would produce were not indicated in the data on the results of control carried

out and reported by those Member States. The DG AGRI auditors have therefore, used their professional audit judgment to propose adjustments to the error rates reported and

thus enable a more realistic calculation of the amount at risk for the sector. The CBs for FR and HU have also found errors with regard to restructuring of vineyards.


The above table indicates that 2 reservations are required in respect of FR and HU for a

total amount of 7.97 million EUR. The adjusted error rate for the wine sector is 1.07% which represents a total amount at risk in the 2016 expenditure of 11.033 million EUR.

Member

State Adjusted

error

rate

Amount

at Risk


vation


follow-up

AT 6.85

%

0.916

m EUR

A DG AGRI audit in 2016 detected an

absence of ex-ante controls and poor ex-

post controls for vineyard restructuring

leading to a top-up of 10%.

The findings were confirmed by the

Certification Body.






required.




covered.

BG 2.0% 0.432

m EUR

A 2% top up has been applied on the




Member

StateAid paid in 2016

% of claims

checked OTS

Reported

error rateAdjustment

Amount at risk if

no top-up

Amount at risk if

top-up

Adjusted

error rate

Total amount

at risk

EUR EUR EUR EUR


AT 13 366 575 100.0% 2.4% 6.85% - 915 761 6.85% 915 761

BG 21 582 930 - - 2.00% - 431 659 2.00% 431 659

CY 4 646 000 - - - - - - -

CZ 5 145 324 100.0% 5.3% - - - - -

DE 36 619 320 98.2% 1.0% 0.87% 6 819 319 180 0.89% 325 999

ES 210 281 212 100.0% 0.9% 0.02% - 49 637 0.02% 49 637

FR 280 544 985 98.9% 5.9% 2.23% 177 132 6 250 757 2.29% 6 427 890

GR 17 125 417 100.0% 0.0% - - - - -

HR 3 203 497 100.0% 0.1% - - - - -

HU 29 103 000 100.0% 22.4% 5.32% - 1 547 102 5.32% 1 547 102

IT 320 892 877 96.6% 2.7% 0.14% 290 645 465 277 0.24% 755 922

PT 65 134 231 9.2% 0.9% - 504 433 - 0.77% 504 433

RO 11 660 085 100.0% 1.1% 0.64% - 74 712 0.64% 74 712

SI 5 038 879 - - - - - - -

SK 2 638 455 - - - - - - -

Grand Total 1 026 982 789 89.5% 3.4% 979 029 10 054 084 1.07% 11 033 114

Wine - 2016 Expenditure :



Member

State Adjusted

error

rate

Amount

at Risk


vation


follow-up





therefore there is insufficient assurance.




required.

FR 2.29

%

6.428

m EUR

For investment measures for wine, a DG

AGRI audit in 2016 detected weaknesses

in the performance of the administrative

checks of the procedure concerning

cases of partial implementation of the

projects and the assessment of the

reasonableness of the costs. This leads

to a top-up of 2% for expenditure under

investment measures.

The CB also found errors amounting to

4.234 m EUR for restructuring and

conversion of vineyards, which are

added to the amount at risk.



A corrective action plan is not

considered necessary for

investment measures. The

partial implementation is

allowed according to the new

regulation that entered in

force in June 2016 therefore

this weakness will not exist

anymore in 2017. The

contradictory procedure is on-

going and MS provided

information with mitigating

factors concerning the

reasonableness of the costs.

The MS should follow the

recommendations for remedial

actions of the Certification

Body and the latter will be

requested to follow up and

report in its 2017 report.



financial risk to the EU budget

is covered.

HU 5.32

%

1.547

m EUR

The HU Certification Body has reported

an extrapolated error of 1.557 m EUR for

wine restructuring.



The MS will be requested to

follow the recommendations

of the CB and the latter will be






is covered.

3.1.6 POSEI

The EU´s outermost regions benefit from the POSEI arrangements ("Programme

d'Options Spécifiques à l'Éloignement et l'Insularité") in the agricultural sector. These programmes are designed to take account of their geographical and economic handicaps

such as remoteness, insularity, small size, difficult topography and climate, and economic dependence on a few products.

The outermost regions, as identified in Art 349 of the Treaty for the Functioning of the European Union (TFEU) are:

France: Guadeloupe, French Guyana, Martinique, Réunion, Saint-Barthélemy and

Saint-Martin

Portugal: the Azores and Madeira

Spain: the Canary Islands


For Greece, the smaller Aegean islands also benefit from specific supply arrangements for certain agricultural products and adapted support measures for local agricultural

production (even if under a different legal basis than the "real" POSEI regions).

The POSEI measures are funded both under ABB02 and ABB03. This sub-chapter only

deals with ABB02 expenditure.

ABB02 measures fall into two categories:

specific supply arrangements, aimed at mitigating the additional costs for the supply of essential products for human consumption, for processing

and as agricultural inputs, and

measures to assist local agricultural products.

The measures to assist local agricultural products concern a multitude of products and

include measures aimed at supporting production, marketing or processing. Each Member State concerned defines the products and the eligible actions.


Article 32(2) of Regulation (EU) No 228/2013, Article 39(1)(k) of Regulation (EU) No 180/2014 Article 20(2) of Regulation (EU) No 229/2013) and Article 31(1)(k) of

Regulation (EU) No 181/2014 oblige Member States to submit statistics on the checks carried out by the competent authorities.

The measures financed by POSEI are extremely differentiated in terms of scope and

financial importance. The analysis of the statistics indicates that the error rates for the individual actions fluctuate considerably. Several conformity clearance procedures are

ongoing in different Member States.


The table above indicates that one reservation is required in respect of FR for an amount of 3.051 million EUR. The adjusted error rate for the market measures under POSEI is

1.29% which represents a total amount at risk in the 2016 expenditure of 3.086 million

Member

State

Supply

Arrangements

EUR

Local support

measures

EUR

Total

ES 66 087 382 19 761 203 85 848 585

FR 26 874 955 98 547 757 125 422 712

GR 5 668 186 - 5 668 186

PT 15 167 841 7 460 270 22 628 111

Grand Total 113 798 363 125 769 230 239 567 593

Expenditure for POSEI and Aegean Islands in 2016

Member


% of claims

checked OTS

Reported


Amount at risk if

no top-up

Amount at risk if

top-up

Adjusted

error rate

Total amount

at risk

EUR EUR EUR EUR


ES 85 848 585 18.0% 0.0% - 23 585 - 0.03% 23 585

FR 125 422 712 44.9% 0.2% 2.3% 109 382 2 941 537 2.43% 3 050 919

GR 5 668 186 - - - - - - -

PT 22 628 111 66.5% 0.2% - 11 570 - 0.05% 11 570

Grand Total 239 567 593 36.3% 0.1% - 144 537 2 941 537 1.29% 3 086 074

POSEI Market measures



EUR. The table above also shows the error rates detected by the Member States. No top-ups are proposed by DG AGRI. The extrapolated error reported by the Certification Body

in FR has been taken into account in the calculation of adjusted error rate. POSEI – ABB02

Member

State/PA

Adjusted

error

rate

Amount

at risk

from

top-up

Reasons for top-up Reservation

2016

Mitigating factors/reservation

follow up.

FR05

ODEADOM

2.43% 3.051

m EUR

An extrapolated error of

EUR 2.941.537 has been

reported by the

Certification Body in its

report for 2016, in

respect of local support

measures. When added

as an amount at risk, it

results in a material

adjusted error rate for

Posei- ABB02.

The Certification Body's

findings concern:

- transformation de la

canne en rhum

-structuration de

l'élevage

-diversification végetale



The Paying agency should

follow the recommendations for

remedial actions of the

Certification Body, which is to

follow-up and report in 2017.

The ongoing clearance



is covered.


3.1.8 School Milk Scheme

In 2016, expenditure in respect of this measure amounted to 80.3 m EUR. There is a

very high level of control generally for the scheme with over 27% of aid claimed being subject to on-the-spot checks.

Material error rate of 4.2% and 2.7% are reported by FR and UK respectively but the amounts at risk are below DG AGRI's de minimis threshold. Further to audits carried out

in 2016, top-ups are applied for RO and SE and while these result in material adjusted error rates, the amounts at risk are below DG AGRI's de minimis threshold.



The adjusted error rate for the school milk scheme is 2.41% which represents a total amount at risk in the 2016 expenditure of 1.555 million EUR. The adjusted error rate is

above 5% threshold in RO, but as the amount at risk is below the de minimis threshold, no reservation is required. In the same way, no reservation is made in 5 other Member

States, where the adjusted error rate is between 2% and 5%.

Paying Agen-

cy

Adjusted

error

rate

Amount at

Risk


vation

Mitigating factors/

reservation follow-up

BG 2.0% 0.008 m

EUR

A 2% top up has been applied on the expenditure,

as the package of final accounts, audit reports

and audit certificates has not been submitted by

the Member State within the deadlines and at the

time of drafting and therefore there is insufficient

assurance.

No As the amount at risk is

below the de minimis

threshold established in

DG AGRI's materiality

threshold (see Annex 4)

no reservation is required.

DK 2.0% 0.012 m

EUR

A 2% top up has been applied on the expenditure,

as the package of final accounts, audit reports

and audit certificates has not been submitted by

the Member State within the deadlines and at the

time of drafting and therefore there is insufficient

assurance.







FR 4.38

%

0.384 m

EUR

FR reported a high error rate of 4.2% in the

controls carried out which mainly led to the

adjusted error rate of 4.38%.

The FR Certification Body has reported an error

which was also taken into account in the






Member


% of claims

checked

Reported


Amount at risk if

no top-up

Amount at risk if

top-up

Adjusted

error rate

Total amount

at risk

EUR EUR EUR EUR


AT 562 745 42.5% - - - - -

BE 443 182 - - - - - -

BG 391 958 64.4% - 2.0% - 7 839 2.00% 7 839

CY 189 726 12.7% - - - - -

CZ 416 555 100.0% - - - - -

DE 4 460 603 39.2% 0.7% 18 160 - 0.41% 18 160

DK 612 699 65.0% - 2.0% - 12 254 2.00% 12 254

EE 710 993 10.0% 0.2% 1 023 - 0.14% 1 023

ES 300 625 41.8% - - - - -

FI 3 968 692 29.9% 0.1% 2 782 - 0.07% 2 782

FR 8 780 051 5.6% 4.2% 0.4% 349 867 34 395 4.38% 384 262

GB 4 382 787 10.8% 2.7% 103 987 - 2.37% 103 987

GR 50 672 - - - - - -

HR 42 304 - - - - - -

HU 2 047 897 6.1% - - - - -

IE 405 589 14.8% - - - - -

IT 2 856 276 11.3% - - - - -

LT 445 768 20.0% - - - - -

LU 28 133 100.0% - - - - -

LV 859 573 9.4% - - - - -

MT 21 754 13.5% - - - - -

NL 391 215 100.0% 0.4% - - - -

PL 9 508 788 19.4% - - - - -

PT 1 873 539 5.9% - - - - -

RO 11 220 468 99.6% - 5.6% - 632 918 5.64% 632 918

SE 8 776 465 11.4% 1.7% 10.0% 128 334 263 294 4.46% 391 628

SI 3 629 97.3% - - - - -

SK 683 739 53.4% - - - - -

Grand Total 64 436 427 27.4% 0.3% 604 154 950 700 2.41% 1 554 854

School Milk Scheme - 2016 expenditure and calculation of amount at risk



Paying Agen-

cy

Adjusted

error

rate

Amount at

Risk


vation

Mitigating factors/


calculation of the adjusted error rate. no reservation is required.

GB 2.37

%

0.104 m

EUR

GB detected an error rate of 2.7% in the control

carried out. No further top-up was added by DG

AGRI.







RO 5.64

%

0.633 m

EUR

A DG AGRI audit in 2016 detected an absence of

checks on numbers of pupils in regular attendance

in some municipalities. This leads to a top-up of

10% on a limited population.

The RO Certification Body has reported an error

which was also taken into account in the

calculation of the adjusted error rate.








procedure will ensure that

the financial risk to EU

budget is covered.

SE 4.46

%

0.392 m

EUR

A DG AGRI audit in 2016 detected deficiencies in

verification of the eligibility for support, in the

performance of administrative and on-the-spot

checks and with regard to application of

reductions and penalties. This leads to a top-up of

10% on a limited population of c. 30% of the

expenditure.









the financial risk to EU

budget is covered.


3.1.9 Temporary exceptional measures – livestock sectors

In October 2015, the Commission adopted Regulation (EU) No 2015/1853 providing for temporary exceptional aid to farmers in the livestock sectors. This was in order to

address market disturbances since 2014 in the milk products and pigmeat sectors. The measure provided for a one-time financial grant to Member States. Most of the aid was

paid on the basis of milk production using 2014/2015 national milk quotas as a reference while aid was also paid for structural measures designed by the Member States.

Expenditure under the measure in financial year 2016 amounted to 311.7 m EUR

Given the temporary nature of the measure, there are no control statistics available and

no top-ups have been considered necessary by the DG AGRI auditors. However,

adjustments has been made as indicated in the tables below for France as a result of errors detected by the Certification Body.


Paying Agen-

cy

Adjusted

error

rate

Amount at

Risk


vation

Mitigating factors/


FR 11.23

%

3.851 m

EUR

An extrapolated error of 3.851 m EUR has been

reported by the Certification Body in its report for

2016, in respect of this measure. When added as

an amount at risk, it results in a material adjusted

error rate.


respect of 2016

expenditure.


follow the

recommendations for

remedial actions of the

Certification Body, which is

to follow-up and report in

2017.



the financial risk to the EU

budget is covered.

Member

State

Aid paid in 2016 % of claims

checked OTS

Reported

error rate

Adjustment Amount at risk if

no top-up

Amount at risk if

top-up

Adjusted

error rate

Total amount

at risk

EUR EUR EUR EUR


AT 4 003 030 N/D - - - - -

BE 2 676 968 N/D - - - - -

BG 6 019 605 N/D - - - - -

CZ 8 143 508 N/D - - - - -

DE 52 240 190 N/D - - - - -

DK 11 100 520 N/D - - - - -

EE 5 670 884 N/D - - - - -

ES 24 828 543 N/D - - - - -

FI 4 997 440 N/D - - - - -

FR 34 291 339 N/D - 11.2% - 3 850 563 11.23% 3 850 563

GB 36 633 865 N/D - - - - -

GR 62 089 N/D - - - - -

HR 1 803 097 N/D - - - - -

HU 9 463 585 N/D - - - - -

IE 12 868 102 N/D - - - - -

IT 26 347 320 N/D - - - - -

LT 12 315 452 N/D - - - - -

LV 7 141 256 N/D - - - - -

NL 11 565 344 N/D - - - - -

PL 14 453 732 N/D - - - - -

PT 4 764 179 N/D - - - - -

RO 8 769 595 N/D - - - - -

SE 8 313 862 N/D - - - - -

SI 1 094 746 N/D - - - - -

SK 2 164 245 N/D - - - - -

Grand Total 311 732 496 - - - 3 850 563 1.2% 3 850 563

Temporary and Exceptional measures: Milk and milk products



3.1.10 Promotion Measures


Control statistics are not available in respect of promotion measures but are being

required under the current review of the promotion legislation.

Expenditure reimbursed by DG AGRI in 2016 amounted to 62.6 m EUR. However, the

risk has also to be considered bearing in mind that the programmes are multiannual and that risks identified in respect of 2016 may impact also on expenditure for 2017 and

2018 and 2019.

Audits carried out in 2015 have raised doubts with regard to the application of

procurement rules for the selection of the implementing bodies in Greece and Italy. The preliminary assessment of error for these two MS is 10% and 25% respectively. This

would lead to amounts at risk of 1.196 m EUR for Greece and 1.891 m EUR for Italy.

Reservations must therefore be considered for both MS. However, the usefulness of action plans is questionable as the necessary remedial action has been taken by

Greece while for both the promotion regime has been reformed and new guidance is being established with regard to selection procedures for implementing bodies.

Member

StateExpenditure

% of

claims

checked

Reported


Amount at risk

if no top-up

Amount at risk

if top-up

Adjusted

error rate

Total amount

at risk

EUR OTS EUR EUR EUR


AT 2 255 603 N/D N/D - - - - -

BE 1 351 500 N/D N/D - - - - -

BG 2 509 401 N/D N/D - - - - -

CY 83 717 N/D N/D - - - - -

CZ 1 804 018 N/D N/D - - - - -

DE 1 563 302 N/D N/D - - - - -

DK 1 185 912 N/D N/D - - - - -

EE 257 767 N/D N/D - - - - -

ES 3 612 833 N/D N/D - - - - -

FI 177 087 N/D N/D - - - - -

FR 10 431 620 N/D N/D 0.1% - 12 404 0.12% 12 404

GB 2 857 897 N/D N/D - - - - -

GR 11 964 976 N/D N/D 10.0% - 1 196 498 10.00% 1 196 498

IE 885 393 N/D N/D - - - - -

IT 7 563 416 N/D N/D 25.0% - 1 890 854 25.00% 1 890 854

LT 2 037 480 N/D N/D - - - - -

LV 146 013 N/D N/D - - - - -

NL 3 371 166 N/D N/D - - - - -

PL 6 841 393 N/D N/D - - - - -

PT 890 164 N/D N/D - - - - -

RO 490 582 N/D N/D - - - - -

SI 306 645 N/D N/D - - - - -

Grand Total 62 587 884 - - - 3 099 755 4.95% 3 099 755

Promotion Measures - Expenditure in 2016

Calculation of amount at risk


Paying

Agency/measur

e

Adjusted

error

rate

Amount at

Risk


vation


follow-up

GR 10% 1.197 m

EUR



controls on selection

procedures of implementing

bodies. This leads to a top-up

of 10%.



Remedial action has been

taken by GR. An action plan is

not considered necessary as,

in the context of the reform of

the promotion regime, a new

control set-up will in any

event be established.




is covered.

IT 25% 1.891 m

EUR


found serious non-compliance

with procurement procedures

leading to a top-up of 25%.



An action plan is not

considered necessary as in,

the context of the reform of







is covered.


3.1.11 Conclusions as regards assurance for ABB02

As a result of the "tops-ups" made by DG AGRI to the error rates reported by the

Member States, an adjusted error rate of 2.77% has been calculated for shared management. For ABB02 as a whole, the adjusted error rate is also 2.77%.

Following is a summary of all cases where a reservation is applied in respect of the various measures within ABB02. In the section dealing with each aid measure there is an

explanation for those cases where a reservation was considered unnecessary (error rate

between 2 and 5% or de minimis amount at risk) and details are also given for reservations made in the 2015 AAR which are not carried over in respect of 2016.

1 reservation from 2015 and earlier can be lifted

UK for Operational Programmes for Producer Organisations (the remedial action has been taken)

7 reservations from 2015 are carried over as the remedial action plans are still

underway:

ES, FR and NL for operational programmes for producer organisations PL for pre-recognition of producer groups

PL for temporary exceptional support measures in the fruit and vegetables sector GR and IT for promotion measures

7 new reservations are introduced: BE, GR and IT for operational programmes for producer organisations

FR and HU for wine measures – restructuring of vineyards FR for POSEI measures

FR for temporary exceptional measures – milk and milk products

The following table details all cases where a reservation was considered necessary in

respect of 2016 expenditure:


Paying Agency

/measure

Adjusted

error

rate

Amount

at Risk


vation


follow-up

BE

F and Veg

Producer

organisations

5.31

%

3.02 m

EUR



checks on Operational

Programmes (OPs) concerning

the system of approval and

modification of operational

programmes and the checks to

establish the eligibility of the

aid which leads to a top-up of

5%.



The deficiencies found have

already been remedied by the

BE authorities (the control

instructions regarding the

checks on OPs approval and

the verifications to establish

the eligibility of the aid were

updated).

The ongoing conformity

clearance procedure will

ensure that the financial risk


No formal action plan is

necessary.

ES

F and Veg

Producer

organisations

3.57

%

9.022 m

EUR


weaknesses as regards the

control of personnel costs and

the use of selective carry over

in the Autonomous Community

of Valencia. These deficiencies

lead to a top-up of 5% for a

limited population.

The follow up of the

environmental actions in Spain

revealed that there were still

some shortcomings for limiting

the expenditure to the

additional costs. These


5% for a limited population.

The ES authorities have

reported an error rate of 5.2%

in their control statistics (2.57%

in the uncontrolled population)

to which is added a top-up of

1% representing the risk

detected by DG AGRI for limited

populations as described in the

previous paragraphs.

It is noted that the error rate

declared (incorrectly) includes

the results of the administrative

checks which therefore inflates

the error rate.



The Valencia authorities took

remedial measures from OP

2016.

The Spanish authorities

amended the Framework for

Environmental Actions and are

finishing the studies for

calculating the specific cost of

certain environmental actions.

Therefore, no further specific

corrective action is necessary.




to the EU budget is covered

FR

F and Veg

Producer

organisations

5.78

%

5.828 m

EUR

The deficiencies have been

detected in previous DG AGRI

audits and a reservation was

made in the 2015 AAR. The DG

AGRI audit found deficiencies in

the controls carried out on the

eligibility of operational


claimed, checks on value of

marketed production and

checks on delivery of the full

production. This leads to a top-

up of 5%.

In addition, the CB found a

number of errors amounting to

0.438 m EUR which is added to

the amount at risk.


forward from 2015.

Some correctives measures

were already implemented in

2016 by FR. The FR

authorities have initiated the

process of revising the

guidelines and check-lists and

these corrective actions will

be followed up via the

conformity clearance

procedure which will also








Paying Agency

/measure

Adjusted

error

rate

Amount

at Risk


vation


follow-up

GR

F and Veg

Producer

organisations

5% 1.446 m

EUR



regards the verification of the

soundness of estimates, actions

implemented before approval of

the amendments to OP,

compliance with minimum

number of environmental

actions, assessment of

recognition criteria in the

context of the main activity and

technical means. These


5%.







An action plan is necessary.

IT

F and Veg

Producer

organisations

2.81

%

6.783 m

EUR


several deficiencies in the

controls carried out on eligibility

of operational programmes and

the aid claimed, checks on

outsourcing of the PO' main

activity, checks on democratic

accountability and checks on

delivery of the full production.

These deficiencies lead to a top-

up of 5% for a limited

population.



Following the exchanges with

the Member State in the

framework of the ongoing

conformity clearance

procedure, the necessary

remedial actions will be

agreed with the Member

State.




covered.

NL

F and Veg

Producer

organisations

8.82

%

3.499 m

EUR


identified deficiencies related to

the verifications of the

soundness of estimates and the

inclusion in the Operational

Programmes of non-eligible

actions. However, since the

error rate reported by the NL

authorities is 22.7%, it is

considered that this is sufficient

to cover the risks identified by

DG AGRI .



The reservation is carried

forward from 2015. NL is

currently implementing an

action plan to review

recognition and to recover

undue expenditure. The

authorities plan to have

completed all remedial actions

for OP 2017.





PL

F and Veg

Producer

groups

10.27

%

6.500 m

EUR

Grave deficiencies have been

found with regard to the

granting of recognition to

producer groups. In 2016 the

Commission suspended

payments at a rate of 25% from

March 2016 to February 2017.

A top-up is, therefore, only

necessary in respect of

expenditure from October 2015

to February 2016 as the 25%

suspension covers the risk for

the remaining period.


forward from 2015.

An Action Plan is under

implementation.




covered.


Paying Agency

/measure

Adjusted

error

rate

Amount

at Risk


vation


follow-up

PL

F and Veg

exceptional

support

measure

10% 12.1 m

EUR



checks on withdrawal

operations for free distribution

in respect of the minimum rate

of the 1st level controls as well

as in the extent and depth

required for the 1st level

controls on producers and the

2nd level controls on the

recipients of withdrawn

products. Further weaknesses

were identified on the checks on

eligibility of operations. These

deficiencies led to a top-up of

10%.

Yes The reservation is carried over

from 2015.

The measures are temporary

one-off measures so no action

plan is necessary.




covered.

FR

Wine

2.29

%

6.428 m

EUR

For investment measures for

wine, a DG AGRI audit in 2016

detected weaknesses in the

performance of the

administrative checks of the

procedure concerning cases of

partial implementation of the

projects and the assessment of

the reasonableness of the costs.

This leads to a top-up of 2% for

expenditure under investment

measures.

The CB also found errors

amounting to 4.234 m EUR for

wine, which are added to the

amount at risk.



A corrective action plan is not

considered necessary for

investment measures. The

partial implementation is

allowed according to the new

regulation that entered in

force in June 2016 therefore

this weakness will not exist

anymore in 2017. The

contradictory procedure is on-

going and MS provided

information with mitigating

factors concerning the

reasonableness of the costs.

The MS should follow the

recommendations for remedial

actions of the Certification

Body and the latter will be






is covered.

HU

Wine

5.32

%

1.547 m

EUR

The HU Certification Body has

reported an extrapolated error

of 1.557 m EUR for wine

restructuring.



The MS will be requested to


of the CB and the latter will be






is covered.

FR

Temporary

exceptional

measure –

milk and milk

products

11.23

%

3.851 m

EUR

An extrapolated error of 3.851

m EUR has been reported by

the Certification Body in its

report for 2016, in respect of

this measure. When added as

an amount at risk, it results in a

material adjusted error rate.





for remedial actions of the






is covered.


Paying Agency

/measure

Adjusted

error

rate

Amount

at Risk


vation


follow-up

GR

Promotion

measure

10% 1.197 m

EUR



controls on selection procedures

of implementing bodies. This

leads to a top-up of 10%.



Remedial action has been

taken by GR. An action plan is

not considered necessary as,

in the context of the reform of







is covered.

IT

Promotion

measure

25% 1.891 m

EUR


serious non-compliance with

procurement procedures leading

to a top-up of 25%.



An action plan is not

considered necessary as in,

the context of the reform of







is covered.

FR

POSEI

2.43

%

3.051 m

EUR

An extrapolated error of EUR

2.941.537 has been reported by

the Certification Body in its

report for 2016, in respect of

local support measures. When

added as an amount at risk, it

results in a material adjusted

error rate for Posei- ABB02.

The Certification Body's findings

concern:

- transformation de la canne en

rhum

- structuration de l'élevage

- diversification végetale





for remedial actions of the






is covered.

Table: Annex 10 – 3.1.22

The following table gives details of cases where a reservation made in the 2015 AAR was

not carried over in the 2016 AAR:

MS Adjusted

error

rate

Justification

GB F&V

Producer

organisation

0% UK has taken corrective action with regard to deficiencies detected in the past

and which were the subject of reservations in previous years.


The following table shows the portion of ABB02 expenditure covered by Member States'

control statistics and the amounts at risk which results from DG AGRI's validation and adjustment process. Control statistics are available in respect of 75.7% of the

expenditure covering m 2.375 EUR. While for 2016, additional statistical coverage was obtained for a further 0.5 billion EUR for wine, the 0.420 billion EUR granted for

temporary exceptional measures in the milk and liverstock sectors was not subject to statistical reporting requirements.

For a further 185 m EUR for which no statistics were available, DG AGRI auditors have used their judgement to estimate the maximum amount at risk in that expenditure. For

the remaining 575 m EUR the aggregate error rate for the other measures (2.85%) was

extrapolated to the expenditure concerned. For an additional 1.463 m EUR (DG AGRI direct expenditure on promotion measures), an error rate of 1% is applied.



Overall, the adjustments made resulted in the reported error rate of 0.52% increasing to

2.85% for ABB02.

The total amount at risk for ABB02 is 89.145 m EUR with an error rate of

2.85%.

It is noted that the average amount of net financial corrections per year for the

five-year period 2012-2016 (excluding corrections made for cross-compliance)

is 168.759 m EUR for ABB02.

3.1.12 Root causes of the error rate in market measures – progress report

In May 2014, the Commission Staff Working Document SWD (2014)176 was published. It

identifies the root causes for payment errors in non-IACS EAGF spending (Market Measures and POSEI) and lists 15 actions to be taken to address these causes. In 2016,

progress was made on the actions as follows:

Action Description Progress

1 (a) DG AGRI will propose introducing a list of eligible

measures either in Commission Regulation (EU) No 543/2011 (Fruit

and Vegetables) or in guidelines.

(b) DG AGRI will also propose

(a) Adoption of delegated and implementing act replacing

Commission Regulation (EU) No 543/2011 scheduled for first half of

2017.

Expenditure(1) Risk Expenditure(1) Risk

050204 Food Aid -968 -968 -968 -28

050205 Sugar - - - -

050206 Olive Oil 45 989 114 45 989 114 45 989 114 1 307 173

050207 Textile Plants 6 134 000 6 134 000 6 134 000 174 350

050208 Fruit and Vegetables 1 172 724 419 1 043 772 204 38 043 433 128 952 215 121 013 276 12 101 311 7 938 939 225 653

050209 Wine 1 027 130 938 1 026 982 789 11 033 114 148 150 148 150 - - -

050210 Promotion (shared management only) 62 587 884 62 587 884 29 960 012 3 099 755 32 627 872 927 399

050211 Other plant products and POSEI 242 007 764 239 567 593 3 086 074 2 440 170 2 440 170 69 358

050212 Milk and Milk Products 406 577 659 64 436 427 1 554 854 342 141 232 34 291 339 3 850 563 307 849 893 8 750 179

050213 Beef and Veal 30 206 396 30 206 396 30 206 396 858 572

050214 Sheepmeat and goatmeat 1 836 787 1 836 787 1 836 787 52 208

050215 Pigmeat, eggs, poultry & apiculture 140 601 812 140 601 812 140 601 812 3 996 399

Total 3 135 795 805 2 374 759 013 53 717 474 761 036 792 185 412 777 19 051 629 575 624 015 16 361 263

ExpenditureAmount at

risk% coverage Error rate

2 374 759 013 53 717 474 75.73%

185 412 777 19 051 629 5.91%

2 560 171 789 72 769 103 81.64%

2.84%

575 624 015 16 361 263

3 135 795 805 89 130 366

-9 356 312 -

3 126 439 492 89 130 366 2.85%

1 463 065 14 631 1.00%

3 127 902 558 89 144 997 2.85%

Footnote:

Measure risk assessed by

auditors

No statistics

available

EUR

Risk

EURExpenditure(1)

EUR

Overall assessment of risk for ABB02 - Market Measures

Expenditure for which no control statistics are availableExpenditure covered by

statisticsExpenditure (1)

EURSector

Budget

itemABB02 error rate applied*

2.85%

(2) Suspension of payments made in respect of financial year 2016 for Poland. The amounts corresponding to payments suspended have been declared by the

Paying Agency to the Commission in its monthly declarations (i.e. no recovery order issued for the amounts concerned) but the the amounts are suspended and

not reimbursed to the Member State by the Commission.

Total ABB 02 - payments made

Expenditure covered by control statistics

Expenditure for which there are no statistics but for which risk assessment carried out

Risk for expenditure covered by statistics and by risk assessment

*Error rate used on expenditure covered by statisitcs and risk assessed

Extrapolated risk for non-risk assessed expenditure

ABB02 - direct management - payments made on Promotion measures - direct payments by the Union

ABB02 - shared management - monthly declaration

Suspension of payments (2)

ABB02 - shared management - payments made

(1) Monthly declaration of expenditure affected by Paying Agencies.


laying down eligible costs and ceilings for the accompanying

measures under the School Fruit

Scheme.

(b) - Commission Delegated Regulation (EU) No 500/2014

introducing accompanying measures.

- Commission Delegated Regulation (EU) 2016/247 and Commission

Implementing Regulation (EU) 2016/248, include provisions on

eligibility and controls of the accompanying measures.

2 DG AGRI will request Member

States – where appropriate by introducing legal provisions to this

effect - to demonstrate the verifiability and controllability of

requirements and eligibility

conditions of measures proposed in their national support programmes.

Adoption of delegated and

implementing acts in Fruit and Vegetables scheduled for first half of

2017.

Wine sector - Delegated Regulation

(EU) 2016/1149 and Implementing

Regulation (EU) 2016/1150 (IR) on the wine support programmes

entered into force on 18 July 2016 and include such provision.

3 DG AGRI will propose amendments to

the relevant Commission Regulation (EU) No 543/2011 with a view to

rendering sanctions in reaction to the non-observance of non-

substantial recognition criteria more proportionate as measured

against the policy objective of the

support. Accordingly, such non-respect will give rise to a reduction in

payments but will not entail the withdrawal of the recognition. A

progressive approach to the non-respect of substantial criteria is

introduced, ultimately leading to withdrawal of the recognition.

Commission Delegated Regulation

(EU) No 499/2014 was published on 16 May 2014.

The new Implementing and Delegated Regulations on the wine

support programmes entered into force on 18/7/2016 (see progress

under Action 2).

4 In the area of support for

promotion measures for agricultural products, DG AGRI will propose

incorporating further

clarifications as to the requirements for an appropriate

procurement procedure in the relevant implementing rules

(concerning for instance information about the legal status

of the proposing body and the corresponding analysis by Member

States).

Regulation (EU) No 1829/2015:

Recital No 5 and Article 2 lay down the legal framework as regards inter

alia procurement carried out by

public bodies.

On 7 June 2016, the Commission

services shared with national authorities guidance on competitive

procedures to be used for the selection of (non-public procurement)

programmes to be managed by the MS.

As regards the old regime, in 2013,

the Commission services adapted their standard documentation

(evaluation form and letter to the competent authorities) in order to


ensure that the MS has checked adherence to public procurement

rules. The MS must clearly declare

whether a proposing organisation is public or private. As regards private

bodies, rules are different between MS, therefore a homogenous

approach is difficult. In the last adaptation of the guidelines

(handbook presented in the management Committee of 4 April

2014), the Commission advises

private bodies to follow the procurement thresholds of the

Financial Regulation.

Member States are requested to

confirm that an appropriate procedure for the selection of the

implementing body was followed in all cases: both in the cases where the

implementing body is selected before

and after the application.

DG AGRI will make continuous

reminders of the importance of respecting procurement rules in

management committees, advisory groups and monitoring committees in

the Member States. Most recently a presentation was made on this

specific point at the Conference of

Directors of Paying Agencies in Brussels on 19 December 2016. In

addition, letters are sent to those MS where information is not complete or

not presented in a timely manner.

5. The Commission will, where appropriate, work with Member

States to clarify and simplify support measures and encourage

them to take verifiability and controllability of measures into

account at the early stages of

drawing up their support programmes.

POSEI, clarification of Article 40 of Implementing Regulation (EU) No

180/2014 has been given during the meeting of the Committee for Direct

Payments (CDP) on 30 September 2014. At the meetings of the CDP,

and during bilateral meetings with

ES, PT and FR, DG AGRI asked Member States to pay special

attention to the implementation of this action plan, in particular

concerning the verifiability and controllability of new measures or

actions to be presented in the next modifications of programmes.

As regards Fruit and Vegetables

and Wine, the Commission proposes a specific provision on verifiability

and controllability in the


implementing acts (see Action 2).

As regards Fruit and Vegetables,

the current work on the Commission

regulations foresees simplified indicators and hence information

requirements applying to the annual reports of producer groups, producer

organisations and associations of Producer Organisation.

6. DG AGRI will, where appropriate:

(a) request Member States to submit updated information on

management and controls required under Article 31 of

Regulation (EU) 228/2013 along with

their annual modifications of the national support

(b) improve the coordination of the analysis of the annual control

statistics submitted by Member States.

a) As regards POSEI, DG AGRI

wrote letters to FR, ES, PT and GR authorities in 2014 and 2015. The

replies were considered satisfactory by the DG AGRI services.

(b) - Standard reporting forms for

POSEI control statistics sere introduced.

The new Implementing and Delegated Regulations on the wine

support programmes entered into force on 18/7/2016 extending control

statistics to whole sector.

7. DG AGRI will, together with Member States, look into the possibility of

using simplified cost reimbursement approaches

wherever this is appropriate to

facilitate the implementation and checking of measures and

expenditure.

Wine national support programmes: the Guidelines

prepared by DG AGRI at the beginning of 2013 dealt among

others with the use of flat-rate

amounts for promotion and restructuring.

The new draft Implementing and Delegated acts foresee clear rules on

the simplified cost reimbursement (standard scales of unit costs) for

promotions of information in the Member States, promotion in third

countries, restructuring and

conversion of vineyards and green harvesting as well of contributions

in kind for restructuring and green harvesting operations, personnel

and administrative costs for information, promotion and

innovation operations. New guidelines have been issued in 2016

(containing further explanations on

simplified cost reimbursement options (standard scales of unit costs

and flat-rate) and how to deal with contributions in kind, personnel and

administrative costs).

The future Commission regulations

covering the modalities applying to


the MS support programmes in the Fruit and Vegetables sectors will

contain clarified rules on Simplified

Cost Options.

Promotion: Simplified cost

reimbursement approaches already in place. Several cost categories were

already presented using the flat rate approach in the budgets of promotion

programmes and this was recently extended.

This approach has simplified

application procedures to a great extent and has facilitated controls.

8. A specialists' group made up of

Commission and Member State representatives will be established

to exchange views and discuss horizontal issues related to

eligibility and recognition criteria as well as any other issue discussion

of which is appropriate in regard of the occurrence of irregular

expenditure. As appropriate,

external actors like the European Court of Auditors could be invited

to give presentations.

See Annex B for a list of the error

rate and simplification workshops that have taken place so far for the

different sectors where Commission-level regulations (implementing and

delegated acts are planned).

POSEI: to continue to be dealt with

in bilateral meetings with the MS concerned in the context of the

approval of annual programme

modifications.

9. DG AGRI will make use of monitoring wherever this is

appropriate in view of the experience gained so far to work with Member

States to improve programmes at an early stage of planning as well as to

discuss possible deficiencies in the Member States' management and

controls of measures.

For detailed information on such monitoring in the relevant sectors,

see Annex A.

Promotion: Commission services

continue the efforts for improvement of programmes by discussing

important issues in committees and monitoring groups. Also continued:

the practice of workshops in the

Member States.

Fruit and Vegetables, DG AGRI

carries out monitoring missions to check the level of implementation of

Action Plans that are to redress deficiencies, see Annex A.

Assessment reports have already been sent to the Netherlands and

Austria. For UK and RO reports will

be delivered after respective follow-up missions.

In POSEI, guidelines for applicants contain detailed advice

on how to avoid common errors in applications.


This practice has proven to be efficient as the errors in the

applications have been reduced

significantly during the last 3 years. Discussions also take place in the

context of the bilateral meetings to discuss annual programme

modifications.

Wine support programmes:

Commission services continue to discuss issues with Member States'

delegates in the CMO Management

Committee meetings.

10. DG AGRI will streamline the

presentation of replies to Member

States implementation questions in the IT system it shares with

Member States so as to create a reference library for all Member

States.

DG AGRI uploads its replies to MS

questions on implementation to the

CIRCA platform where they are available to other MS.

11. DG AGRI will provide up-dated lists of key and ancillary controls for the

main support schemes in the CMO.

Key and ancillary control documents for market measures were presented

to the Agricultural Funds Committee on 21 April 2015.

They are available for Member States on CIRCABC.

12 (a) Encourage Paying Agencies to

organise work-shops focused on best practices in the area of

management and control procedures

and participate actively in them. (b) Look into feasibility of pluri-

annual activities including peer-review missions in Member States

which result in benchmarking.

(a)

- Presentation of Staff Working Document at conference with

directors of the paying agencies on

18 September 2014.

- A dedicated workshop on the

"error rate" theme was held at the conference of paying agencies (10-12

November 2014). See Summary Report to be put in Ares.

(b)

- A workshop was held on 30 May

2016 with representatives of the

responsible Ministries and Paying Agencies to discuss the updated

guidelines on the implementation of the Wine support programmes,

including exchanges on good management and control practices.

13 (a) Encourage Member States to

provide adequate training for management and control officers.

(b) Look into the possibility of

(a)

Questionnaire distributed to Member States re training measures


developing (e-) training modules. and their accessibility at Management Committee of 21 May 2014.

DG AGRI organizes an exchange of

views on the F&V scheme controls in the framework of the Expert Group

(for Delegated Acts)

(b)

Presentations concerning the key and ancillary controls were made in the

agricultural funds committee and are made available to Member States on

CIRCA.

Questions & answer documents have been prepared in this context and are

also available on CIRCA.

14. Member States should: (a) Ensure that beneficiaries can

efficiently obtain adequate information about the applicable

support conditions; (b) Include in their support

programmes information on measures taken to enhance

beneficiaries' understanding of

the applicable support conditions.

(a)

As regards POSEI, during bilateral

meetings with ES, PT and FR, DG AGRI services asked the Member

States to pay special attention to the implementation of this action plan, in

particular concerning the information given to the beneficiaries.

(b)

As regards Fruit and Vegetables, the main tool for Member States to

ensure that beneficiaries obtain the adequate information about the

applicable support conditions are the National Strategy and the National

Framework for environmental actions which describe and list the eligible

actions with their requirements based

on the EU Regulations (regulations 1308/13 and 543/11). These

instruments are publicly available for potential beneficiaries in Member

States.

15. The errors found are taken into account in the design of the audit

programme in the framework of Clearance of Accounts by DG

AGRI.

For list of cases, see Annex C.


ANNEX A

List of monitoring actions with Member States (Action 9)

Promotion

Monitoring Committees in the Member States (art.12 of Reg (EC) 3/2008 and art

24 of Reg. (EC) 501/2008):

o 2015: DK, CZ, FR (twice), IE, NL, UK and upcoming in BE, CY, DE, EL, PL,

PT. In addition up to November 2015, 16 workshops on the new rules of

the promotion policy: AT, BG, EE, ES (twice), FI, FR, HR, HU, IT, LT

(twice), LV, PL, SE, UK. Planned by the end of 2015: CZ, DE, BE, FR

(twice), PL (twice), PT.

o 2014: AT, BG, EL, ES, FR (X3), IT, PT, RO, UK

o 2013: AT, BG, DE, DK, ES, FR, PT

o 2012: AT, CZ, DE, DK, ES, FR, IE, IT, PT

Workshops held in different MS during the last 4 years:

o BG: 16/1/2013, 19/10/2010

o CZ: 24/5/2012

o EL: 24/1/2012, 30/1/2010

o FI: 23/10/2011

o HU: 27/4/2011

o IE: 4/10/2013, 18/10/2012, 15/11/2011

o MT: 28/7/2011

o NL: 5/9/2012

o PL: 24/5/2011, 6/6/2012

o PT: 27/5/2013

o RO: 19/10/2011

o UK: 22/1/2013

Action plans after reservations in AAR 2015

In the case of two reservations for promotion measures, DG AGRI services identified deficiencies pertaining to controls on the selection procedure of

implementing bodies (Greece) and non-compliance with procurement

procedures (Italy).


Fruits and vegetables & wine

a) Reservations from AAR 2013

o NL: Action plan dates from November 2014. Assessment report has been

sent.

o AT: Action plan dates from December 2014. Assessment report has been

sent.

o UK: Action plan dates from December 2014. Assessment report will be

delivered after a follow-up mission during 1st semester 2017.

o The Action Plan for Polish producer groups in the fruits and vegetables sector,

after a number of extensions, was due to have been completed by 31 October

2016. The plan has not been completed and the Polish authorities have

informed (orally) that it will be completed by the end of 2017. Due to the

delays in completing the action plan, the Commission took a decision

suspending payments to the aid measure (at a rate of 25%) from March 2016

– February 2017.

b) Reservations from AAR 2014

o RO: action plan dates from November 2015; it will be assessed by way of

bilaterals/workshops on the spot with representatives from the Ministries and

Paying Agencies.

c) Reservations from AAR 2015

o FR: request of the action plan dates from September 2016; Second request

will be launched after conclusions of ongoing clearance of accounts procedure

is at a more advanced stage; it will be assessed by way of

bilaterals/workshops on the spot with representatives from the Ministries and

Paying Agencies.

d) Wine

Management Committee on 15 July 2014: first part of discussion on Issues Paper

for the recast of Commission Regulation (EC) No 555/2008. The new Commission

Delegated Regulation (EU) 2016/1149 and Commission Implementing Regulation

(EU) 2016/1150 entered into force on 18 July 2016.

The Workshop of management and control experts on the new Guidelines for the

implementation of the national support programmes was held on 30 May 2016

POSEI

Bilateral meetings with MS (FR, ES, PT) held, when necessary, in the context of

the annual POSEI programme modifications. For 2014, D2 didn’t receive any new

measure.

Bilateral meetings in 2014 in the context of the draft guidelines on control

statistics data, in the margins of the Management Committee Meetings for direct

payments.


ANNEX B

List of error rate and simplification workshops

Fruit and Vegetables

Workshop on simplification and reduction of error rate for Fruit and Vegetables

operational programmes - 25 March 2014

Wine

Workshop on simplification and reduction of error rate for Wine national support

programmes – 14 May 2014

Workshop on simplification as regards labelling rules and requited language in the

Wine sector – 16 July 2014

Workshop with representatives of the responsible Ministries and Paying Agencies

to discuss the updated guidelines on the implementation of the Wine support

programmes, including exchanges on good management and control practices -

30 May 2016.

Hops

Workshop planned for 5 March 2015

Apiculture

Workshop on simplification and reduction of error rate - 19 June 2014

Carcass classification

Workshop on simplification and reduction of administration burden – 18

September 2014

Poultry meat marketing standard

Workshop on simplification and reduction of administrative burden – 23 October

2014

Seminar on public intervention - 25 June 2014

Workshop on simplification of trade mechanisms – 1 July 2014

Workshop on marketing standards – 5 February 2015


ANNEX C

List of DAS cases taken up under clearance of accounts

2012

5244PT POSEI in eligible TA costs included36 in enquiry VT/2013/004/PT

5244PT POSEI stocking density individual case recovery by MS indicated.

5372ES POSEI animal register included in enquiry VT/2012/009/ES

5374IT Wine promotion included in enquiry INT/2015/006/IT

5375PL Producer Groups included in enquiry FV/2013/001/PL

5511DE Public Procurement included in enquiry LA/2013/008/DE

2013

6072 PL and 5822 PL Producer Groups included in enquiry FV/2014/101 PL

6074 IT Promotion; promotion included in enquiry INT/2015/006/IT

36 Identified DAS error is taken into account during the on-the-spot audit.


Part 3.2: ABB03 – Direct Payments

Index for part 3.2 – ABB03: Direct Payments

3.2.1 Introduction



expenditure under ABB03 – Direct Payments?

3.2.4 How is all this information used in order to "validate" and adjust the

error rate reported in the Member States control statistics?

3.2.5 What mitigating factors exist in order to render a reservation

unnecessary?


3.2.7 Root causes of the error rate in direct payments – what is DG AGRI

doing about it?

3.2.1 Introduction

With a yearly budget of more than 40 billion EUR, Direct Payments (also called direct

aids, direct support, area aids) represent the most significant part of the CAP budget and a substantial part of the EU budget.

Direct payments benefited nearly 7 million farms throughout the European Union in financial year 2016. They often represent an important share of their agricultural income

(on average, nearly half of farmers' income in the last ten years came from this direct support).

The new direct payment system (applied as from 2015 and paid-out as from 2016) is a move towards a fairer, greener and more targeted distribution of support. As from 2015,

active farmers in the EU have access to compulsory schemes applicable in all EU

countries, as well as to voluntary schemes if established at the national level.

Direct payments are granted to farmers in the form of a basic income support based on

the number of hectares farmed. This so-called 'basic payment' is complemented by a series of other support schemes targeting specific objectives or types of farmers:

a 'green' direct payment for agricultural practices beneficial for the climate and the environment, which conditions the payment of 30%

Member States’ annual allocation to meeting three categories of generalised, non-contractual and annual obligations beneficial for the

environment and climate: crop diversification, maintenance of permanent

grassland, and the dedication of five per cent of arable land to ecologically beneficial areas ("ecological focus areas"). 72% of the total

EU agricultural area is subject to at least one "greening" obligation. a payment to young farmers, a top-up payment added to the basic

payment – which is also obligatory in every member state. It is granted for a maximum of five years from the moment a young farmer takes over

as the head of a farm holding. This payment can account for up to 2% of total direct payment national allocations.


(where applied) a redistributive payment to provide improved support to small and middle-size farms. Under this scheme, member states may

allocate up to 30% of their national budget to a top-up payment for the first eligible hectares. The number of hectares for which this payment can

be allocated is limited to a threshold set by national authorities (30 hectares or the average farm size in member states if the latter is more

than 30 hectares). The amount per hectare is the same for all farmers in the country where it is applied, and cannot exceed 65% of the average

payment per hectare.

(where applied) payments for areas with natural constraints, where farming conditions are particularly difficult, such as mountain areas.

Under this scheme, up to 5% of the national allocation for direct payments can be used for top-up payments to farmers in areas with

natural constrains ('ANC') – an option applied at present only by Denmark as from 2015, and Slovenia as from 2017

(where applied) a small farmers scheme, a simplified scheme for small farmers replacing the other schemes. It is a simplified direct payment

scheme granting a one-off payment to farmers who choose to participate.

The maximum level of the payment is decided at the national level, but in any case may not exceed €1,250. The small farmers scheme includes

simplified administrative procedures, and participating farmers are exempt from greening and cross-compliance sanctions and controls.

and (where applied) voluntary support coupled to production to help certain sectors undergoing difficulties. Under this scheme, Member States

may continue to link (or couple) a limited amount of direct payments to certain products. The aim of this type of support is to maintain the level

of production in regions or in sectors undergoing difficulties and that are

particularly important for economic, social or environmental reasons. This option is presently applied by 27 Member States (not Germany).

In addition, a crop specific payment to cotton is also available to cotton producing

countries.

Active farmer

In order to be eligible to receive direct payments, applicants have to be active farmers.

In the context of the latest CAP reform, the co-legislators adopted the active farmer provision which aims at preventing individuals and companies from receiving support

from the CAP when their business is not agricultural or is only marginally so.

The key element of the active farmer provision is a negative list of businesses/activities5,

which includes airports, waterworks, real estate services, railway services and permanent sport and recreational grounds. Generally speaking, entities with activities on the

negative list are not usually farms. They just happen to have some farmland. Entities operating an activity on the "negative list" are not considered "active farmers" unless

they can prove that their farming activity is not marginal, using one of the 3 possibilities

to rebut the negative presumption.

If Member States want to, they can apply a stricter definition of active farmer:

• they can enlarge this negative list to include other similar activities,

• they can apply a test on all claimants, so that claimants with a marginal

agricultural activity are excluded (even if they do not perform an activity of the negative list).

However, those who received less than a certain amount of direct payments in the previous year are considered de facto active farmer. This amount is set by Member

States but may not be higher than € 5000.

Finally, those farmers who have mainly areas which do not need any intervention to


remain in a state suitable for grazing or cultivation and who do not perform a minimum activity on those areas, whatever the level of direct payments they were granted in the

previous year, are considered non-active and may not receive support.

Explanatory box: Annex 10 – 3.2.1

Member States can combine different direct payment schemes to ensure efficient support

to farmers, adapted to their national context. Some are compulsory and some are optional. For example, all eligible farmers receive the basic payment and greening

payments (subject to respect of the greening requirements), while some farmers may

also qualify for a further payment under the compulsory young farmers scheme, and, depending on member states' choices, a possible additional payment under one or more

of the voluntary schemes.

The relevance of the new flexibility in the system is also illustrated by the range of

implementation decisions made by Member States, e.g. the modalities for implementation of the young farmers' scheme, the application of the small farmers'

scheme, or the range of measures implementing voluntary coupled support.

As a result of the new system:

The distribution of payments is more balanced due to external and internal

convergence: first data show that the average direct payments per hectare are converging (at Member State and farmer levels) (see point 1.1 of the report).

The payments are better targeted, addressing the particular needs of the young farmers, smaller farmers and specific sectors or regions with certain difficulties.

Payment entitlements

The basic payment is applied either as the basic payment scheme (BPS) or as a

transitional simplified scheme, the single area payment scheme (SAPS).

The BPS works on the basis of payment entitlements distributed to farmers.

In the first year of implementation of the BPS (2015) eligible farmers were allocated

payment entitlements. The general rule was that each eligible hectare gave right to one entitlement (although some member states applied limitations on the number of

entitlements that could be allocated). All entitlements allocated to a farmer have the same value, but differences in the value of entitlements may exist between farmers, if a

Member State opted for such an approach. In that case, the past level of direct payments to individual farmers was taken into account (or the value of the entitlements they

possessed under the previous direct payments regime) in order to avoid too abrupt disruptions in their level of support. However, since one of the objectives of the new

system is to move away from these historical references, the Member States that take

this approach have agreed to progressively reduce the differences in the values of entitlements and bring these values to (or closer to) the average by 2019.

The actual payment is made to active farmers based on the activation of the payment

entitlements they hold and calculated in relation to the eligible land they declare.




ABB03 expenditure in financial year 2016 was as follows:



expenditure under ABB03 – Direct Payments?

The assurance of the Director General is drawn from the various levels of management and control that are in place and the results which can be obtained from them. In the

first place, the Member States, with 69 accredited Paying Agencies, are responsible for managing and checking the aid applications received from nearly 7 million beneficiaries

and for paying them.

All direct aid payments to farmers are dealt with within the framework of the Integrated Administration and Control System (IACS). This system enables the processing of

the aid claims received by the Paying Agencies and also provides for several eligibility checks including cross-checks between databases and on-the-spot checks.

Budget item Measure Expenditure (EUR) Totals (EUR)

050301 Decoupled direct payments 35 028 687 928

05030101 SPS (single payment scheme) 43 415 840

05030102 SAPS (single area payment scheme) 4 032 384 138

05030103 Separate sugar payment 165 092

05030104 Separate fruit and vegetables payment 94 542

05030105 Specific support (Article 68 of Regulation (EU) No 73/2009) — Decoupled direct payments -2 271 052

05030106 Separate soft fruit payment 47

05030107 Redistributive payment 1 226 573 728

05030110 Basic payment scheme (BPS) 17 755 821 525

05030111 Payment for agricultural practices beneficial for the climate and the environment 11 654 564 922

05030112 Payment for farmers in areas with natural constraints 2 794 447

05030113 Payment for young farmers 315 723 994

05030199 Other (decoupled direct payments) -579 295

050302 Other direct payments 5 384 677 863

05030206 Suckler-cow premium 605 296

05030207 Additional suckler-cow premium 15 538

05030213 Sheep and goat premium 326 097

05030214 Sheep and goat supplementary premium 51 527

05030228 Aid for silkworms 0

05030240 Crop-specific payment for cotton 243 860 904

05030244 Specific support (Article 68 of Regulation (EU) No 73/2009) — Coupled direct payments 5 439 736

05030250 POSEI — European Union support programmes 410 729 110

05030252 POSEI — Aegean islands 16 059 012

05030260 Voluntary coupled support scheme 3 800 556 915

05030261 Small farmers scheme 907 708 038

05030299 Other (direct payments) -674 308

050303 Additional amounts of aid 5 539

050303 Additional amounts of aid 5 539

050309 Reimbursement of direct payments to farmers from appropriations carried-over in relation to financial discipline 395 356 763 395 356 763

40 808 728 092 ABB 03 total

Expenditure reimbursed by DG AGRI to the Member States in 2016


3.2.3.1. Control results reported by the Member States.

Member States are required to perform administrative checks on all aid applications

received as well as on-the-spot checks for at least 5% of applications, unless derogations apply. By 15 July of year N+1, the Member States are obliged to send to the

Commission, data on the outcome of the controls carried out in respect of claim year N. These control statistics contain information on amounts claimed, errors detected as a

result of administrative, risk based and random on-the-spot checks. The latter result in particular is considered to be the one which is most representative of the error which the

Member State would have detected if it had carried out on-the-spot checks on all farms,

and thus is the one which is used as the basis for the calculation of the reported error rate.

3.2.3.2 DG AGRI validation and adjustment process

The reliability of the statistics communicated by the Member States depends on the

effectiveness of their control and reporting systems. DG AGRI carries out an extensive review and validation process (explained in detail in its Annex 4 to this report setting out

its materiality criteria) in order to adjust this error rate upwards to a level which it considers better reflects the actual level of error. In so doing, it uses its professional

judgement on the basis of all available information. The main elements assessed are the

following

A. Assessment of the Certification Bodies' opinions on the control

statistics

As described in Annex 10 – part 2, the Certification Bodies are required to give an opinion on the completeness, accuracy and veracity of the annual accounts of the Paying

Agency, on the proper functioning of its internal control system and on the legality and regularity of the expenditure for which reimbursement has been requested from the

Commission. That opinion shall also state whether the examination puts in doubt the

assertions made in the management declaration. This opinion is received with the annual declarations of the Member State on 15 February of N+1.

Depending on whether a qualified or unqualified opinion was received and any other information available in the opinion, an adjustment was made to the error rate reported

by the Member State.

For ABB03 these findings had an impact for several Paying Agencies:

For Scotland, a 2% top up has been added due to the fact that the Certification Body did not confirm the control statistics submitted by the Member State. For Belgium and

Romania, a top-up is based on the amount at risk on the basis of which the accounts

are qualified. For Spain a top up is based on an amount assessed by the certification bodies as unduly paid in relation to entitlement calculations. In two further cases (Italy

01 AGEA and Italy 26 ARCEA), the level of incompliances detected by the Certification Bodies closely matches the top ups applied by DG AGRI auditors.

B. Assessment of findings from the European Court of Auditors (ECA)

The annual reports of the European Court of Auditors (ECA) and the available DAS cases 2016 indicating an error rate above 5% were analysed, possibly leading to adjustment

depending on the severity and extent of the identified deficiencies.


C Assessment of findings from DG AGRI audit missions carried out in 2014-2016

(i) Direct Decoupled Aids

In 2016, 22 Paying Agencies in 12 Member States were audited. The Paying Agencies audited were selected on the basis of a risk analysis. Over the period 2015-2017, the

multi-annual work programme of DG AGRI has scheduled audits in order to ensure that Member States are visited with respect to covering a certain % of expenditure declared

in financial year 2016.

The general objective of the audits performed was to review if Member States carry out the administration and control of the decoupled direct payments to farmers in accordance

with EU legislation. In these audits particular attention is paid to the existence and functioning of the following key elements of the IACS: the implementation of the LPIS-

GIS (Land Parcel Identification System – Geographical information system) and the entitlements database (for area based aids) and the related functioning of the cross-

checks, the quality of the on-the-spot checks, the correct payment and application of administrative penalties.

An overview of the findings is provided here below and in the table under point 3.2.5.

The audit missions in 2015 and 2016 focused on the first year of implementation of the reform. They revealed conformity issues in respect of the following:

The correct interpretation of permanent grassland following the new definition

The correct distinction of permanent versus temporary grassland The identification of Ecological Focus Areas (EFA)

The inappropriate timing of on-the-spot checks in relation to greening and area based voluntary coupled support measures

The control of active / young farmer eligibility conditions

As regards UK – England (GB 09) and France – ASP (FR 19) the following is to be noted:

As regards UK – England (GB 09) for claim year 2014, the adjusted error

rate, including the top-up did not exceed the materiality threshold of 2%. Hence, no reservation was made in the AAR for financial year 2015. For

claim year 2015 a similar situation arises. It is noted as well that the underlying system's conformity issues (weaknesses in the LPIS and the

performance of on-the-spot checks affecting the legality and regularity of area based payments) were covered under an action plan which

continued to be closely monitored throughout 2016 and was finally duly

implemented. For France (FR19), on the decoupled payments, no further adjustment of

the error rate was made, as the risk to the EU budget is covered by the ongoing payment suspension procedure for 3% of expenditure relating to

claim year 2015 in view of the delayed and inadequate implementation of the action plan. A top up was applied for control deficiencies for some

VCS measures. The adjusted error rate, including the top-up does not exceed the materiality threshold of 2%.

(ii) Voluntary Coupled Support measures

27 Member States have decided to make use of the new voluntary coupled support (VCS), and farmers could apply for this aid for the first time in claim year 2015 (financial

year 2016). The Member States' decisions on VCS measures were not subject to prior approval by the Commission. However, DG AGRI ensured an extensive review of the

notifications.


An essential point of this review is the compliance with Article 52(3) of Regulation (EU) No 1307/2013, which provides for the legal condition that such coupled support can only

be granted to sectors or regions undergoing certain difficulties and to the extent necessary to create an incentive to maintain current level of production. Following

assessments of the Member States' notifications and further correspondence with Member States concerned DG AGRI has opened conformity audits on the risk of non-

compliance with this condition in 8 Member States. The purpose of these audits is to collect additional information that will allow the Commission to get assurance that the

concerned measures comply with the legal condition and, where it is not the case, to

request Member states to amend the concerned measures as well as to apply net financial corrections to protect the EU budget from ineligible expenditure.

The outcome of these 8 conformity audits is subject to a significant degree of uncertainty. The precise population (hence the precise amount at risk) of farmers'

claims affected by the non-compliance of one or more VCS measures cannot be established by the Commission without further information from Member States on the

justification that the measures comply with the legal condition. Currently, these 8 audits are still at the early stage of the conformity audit procedure, and only two audits have

reached the second stage of the bilateral meeting. The final outcome of the 8 audits

remains extremely uncertain.

This is a very specific situation linked to the implementation of a new measure and

the specific risk is not at all linked to the legality and regularity of the farmers' claims or the effectiveness of the management and control system applied by the Paying Agencies.

It merely derives from the lack at this stage of due justification of policy decisions made by Member States, putting into question the legality of newly established measures

and thus, their eligibility for EU funding.

This also means that assurance obtained from the control results of the Member States

and from DG AGRI and/or Certification Body audits on the functioning of the

management and control system in relation to the implementation of VCS would still be considered in accordance with annex 4 on materiality criteria.

An unquantified reservation covering the 8 Member States concerned (FR, GR, IE, IT, LT, MT, PL and RO) is therefore necessary to transparently disclose this specific issue and

clearly distinguish it from the overall assurance established on the effectiveness of the control framework in the Paying Agencies. See also Parts 2.1.2 and 2.1.1.2.2 of the

report.


Voluntary coupled support

Chapter 1 of Title IV of Regulation of the European Parliament and the Council (EU) No

1307/2013 provides for the possibility for Member States to use up to a maximum percentage of their annual national ceiling for direct payments to finance voluntary

coupled support (VCS).

That support can only be granted to a list of sectors and productions (cereals, oilseeds,

protein crops, grain legumes, flax, hemp, rice, nuts, starch potato, milk and milk products, seeds, sheepmeat and goatmeat, beef and veal, olive oil, silkworms, dried

fodder, hops, sugar beet, cane and chicory, fruit and vegetables and short rotation

coppice), to the extent necessary to create an incentive to maintain current levels of production in sectors or regions where specific types of farming or specific agricultural

sectors particularly important for economic, social or environmental reasons undergo certain difficulties.

Coupled support is granted as an annual payment per hectare or head. It must be granted within defined quantitative limits. In this context, for each measure, a

quantitative limit (QL) has been determined by Member States. Such limit reflects the production levels in the targeted region or sector in at least one year in the period of 5

years that precedes the year of the decision about VCS (for the 27 Member States that

decided to apply the VCS from 2015, this is 2009-2013).

In 2014, 27 Member States decided to apply VCS between 2015 and 2020. From the EUR

41-42 billion per year available to direct payments (EU-28), they earmarked EUR 4.1-4.2 billion per year to this purpose. Overall, this represented more than 250 different

measures.

Member States had the unique possibility to revise their VCS decisions by 1 August 2016

so that the intended changes could apply as from 2017. 19 Member States reviewed their

decisions impacting more than 150 measures.


3.2.4 How is all this information used in order to "validate" and adjust

the error rate reported in the Member States control statistics?

Adjustments have been made by DG AGRI to the reported error rates calculated on the basis of the Member States' control data. These adjustments or top-ups have been

established in line with the criteria set out in Annex 4 to this AAR and have been made where there were indications of error arising notably from the findings of the Certification

Bodies, the Court of Auditors and DG AGRI's own audits. Where possible the amount at

risk was quantified and where this was not the case a % flat rate was used to express the risk for the budget arising from error in the expenditure which is not reflected in the

Member States' control statistics.


The table below summarises this information for all Paying Agencies:

Paying

Agency

Paying Agency

Name

Expenditure (1)

in FY 2016

EUR

Reported

(residual)

Error Rate

%

Adjusted Error

Rate

%

Amount at

Risk

EUR

AT01 AMA 686 377 880 0.48% 0.53% 3 613 238

BE02 ALV 237 643 914 1.49% 1.49% 3 538 086

BE03 SPW-DGARNE 284 985 447 0.18% 0.77% 2 192 620

BG01 DFZ [SFA] 705 306 488 1.25% 4.42% 31 162 984

CY01 ΚΟΑΠ [CAPO] 49 788 828 3.44% 4.14% 2 059 857

CZ01 SZiF [SAIF] 834 008 540 0.36% 0.36% 2 970 187

DE03 Baden-Württemberg

MLR 400 875 357 0.25% 0.86% 3 460 479

DE04 Bayern StMLF 998 085 309 0.22% 0.77% 7 706 827

DE07 Brandenburg MLUV 331 638 431 0.27% 0.96% 3 182 237

DE11 Mecklenburg-

Vorpommern MELFF 360 481 290 0.13% 0.78% 2 804 382

DE12 Niedersachsen 796 264 914 0.64% 1.20% 9 579 636

DE15 LWK Nordrhein-

Westfalen 468 679 497 0.23% 0.80% 3 729 102

DE17 Rheinland- Pfalz 188 837 930 1.15% 1.78% 3 361 745

DE18 Saarland 20 598 679 0.50% 1.16% 239 765

DE19 Sachsen 254 245 698 0.30% 0.91% 2 319 339

DE20 Sachsen-Anhalt 322 723 350 0.17% 0.79% 2 563 077

DE21 Schleswig-Holstein 306 935 183 0.63% 1.22% 3 750 443

DE23 Thüringen 210 539 029 0.73% 1.37% 2 891 623

DE26 Helaba 215 196 122 0.91% 1.54% 3 310 848

DK02 DAFA 852 260 873 0.76% 2.97% 25 338 972

EE01 PRIA 112 835 661 2.02% 2.02% 2 281 596

ES01 Andalucía 1 442 106 121 1.43% 2.01% 29 008 997

ES02 Aragón 419 124 688 0.78% 1.17% 4 906 712

ES03 Asturias 63 920 188 0.40% 0.52% 333 517

ES04 FOGAIBA 27 832 410 1.88% 2.50% 696 989

ES05 Islas Canarias 182 833 416 1.28% 1.28% 2 339 784

ES06 Cantabria 42 629 194 0.37% 0.37% 157 233

ES07 Castilla La Mancha 649 955 187 1.53% 1.73% 11 217 742

ES08 Castilla y Léon 896 126 481 0.47% 1.12% 10 021 596

ES09 Cataluña 264 148 707 0.79% 0.81% 2 143 362

ES10 Extremadura 510 676 689 0.30% 0.52% 2 660 978

ES11 FOGGA 168 739 872 2.35% 2.64% 4 455 859

ES12 Madrid 37 631 018 1.18% 1.54% 578 997

ES13 Murcia 57 724 574 1.47% 1.47% 845 966

ES14 Navarra 100 594 879 0.41% 0.41% 411 203

ES15 País Vasco 45 000 430 1.04% 1.23% 554 472

ES16 La Rioja 27 986 938 1.00% 1.04% 290 573

ES17 AVFGA 108 561 360 9.28% 9.28% 10 075 857

FI01 MAVI 522 194 621 0.67% 0.67% 3 488 434

FR05 ODEADOM 138 841 478 0.05% 2.08% 2 894 717


FR19 ASP 6 954 355 659 0.32% 0.40% 27 375 628

GB05 DARD 320 601 292 0.28% 0.58% 1 861 794

GB06 SGRPID 523 259 993 0.19% 2.97% 15 547 294

GB07 WG 259 463 993 0.05% 0.05% 138 564

GB09 RPA 1 932 940 897 0.41% 1.33% 25 623 732

GR01 Ο.Π.Ε.Κ.Ε.Π.Ε.

[O.P.E.K.E.P.E.] 2 072 079 443 2.48% 2.63% 54 400 662

HR01 PAAFRD 179 801 123 0.75% 0.75% 1 349 105

HU01 MVH [ARDA] 1 267 308 687 2.33% 3.24% 41 099 691

IE01 DAFM 1 208 736 460 0.06% 0.24% 2 868 250

IT01 AGEA 1 810 633 857 0.40% 2.41% 43 616 741

IT05 AVEPA 366 704 758 0.80% 2.70% 9 905 831

IT07 ARTEA 159 635 080 1.46% 3.52% 5 616 522

IT08 AGREA 343 482 279 0.08% 2.11% 7 255 510

IT10 ARPEA 366 573 553 0.13% 2.00% 7 331 771

IT23 OPR Lombardia 496 397 252 0.22% 2.13% 10 581 667

IT24 OPPAB 23 020 608 0.25% 1.66% 383 123

IT25 APPAG 12 415 535 0.72% 2.41% 298 842

IT26 ARCEA 254 956 939 0.76% 2.63% 6 692 701

LT01 NMA [NPA] 409 894 533 0.81% 0.81% 3 301 588

LU01 Ministère de

l'Agriculture 33 245 345 0.48% 0.48% 159 453

LV01 RSS 177 864 441 1.80% 1.80% 3 204 895

MT01 MRRA PA 5 037 777 1.87% 1.87% 94 232

NL04 RVO 725 516 364 0.72% 1.38% 9 980 051

PL01 ARiMR [ARMA] 3 339 889 763 2.67% 4.30% 143 680 889

PT03 IFAP 646 509 144 1.90% 2.66% 17 229 300

RO02 PIAA 1 521 315 445 3.46% 9.24% 140 575 256

SE01 SJV 666 608 665 1.08% 3.08% 20 527 150

SI01 ARSKTRP 137 618 722 0.78% 0.78% 1 066 659

SK01 APA 425 429 925 0.82% 0.82% 3 488 121

Grand

Total ABB 03 40 986 234 205

Amounts reimbursed to DG AGRI

by Coordinating Bodies -2 102 757 0.00%

Suspension of payment (2) -175 403 355

ABB03 - Payments made 40 808 728 092 1.04% 1.996% 814 395 052

Footnote: (1) Monthly declaration of expenditure effected by Paying Agencies.

(2) Suspension of payments made in respect of financial year 2016 for France. The

amounts corresponding to payments suspended have been declared by the Paying

Agency to the Commission in its monthly declarations (i.e. no recovery order issued for

the amounts concerned) but the amounts are suspended and not reimbursed to the

Member State by the Commission.

Table: Annex 10 - 3.2.5

In a limited number of cases – Germany (all PAs for greening), Spain (ES07 and ES08),

England and Nord Ireland, Italy (IT24) and The Netherlands top-ups were made to the

reported error rate but the resulting adjusted error rate was not above the materiality threshold of 2% and therefore a reservation was not considered. All these cases are of


course followed up by a conformity clearance procedure and financial corrections shall be applied as appropriate in order to protect the EU budget.


unnecessary?

The following table sets out the situation for all cases where the adjusted error rate is above 2%. A brief explanation is given for the top-up applied and any mitigating factors

which exist are examined in order to determine if a reservation is required. Both the

DG AGRI auditors and the operational unit concerned are involved in this process.

PA Adjusted

error rate

Amount

at risk Reasons for top-up

Res

2016 Mitigating factors/reservation follow up.

BG01 4.42% 31. 163

m EUR

A 2016 audit of DG AGRI identified

weaknesses in the greening aid

scheme (incorrect definition of the

fallow land/ temporary grassland/

permanent grassland, deficiencies in

the definition of the Ecological Focus

Area and issues with the organic

status). Finally, a 2% top up has been

applied on all expenditure, as the

package of final accounts, audit

reports and audit certificates has not

been submitted by the Member State

within the deadlines and at the time of

drafting and therefore there is

insufficient assurance.

Yes A reservation is entered in respect of

2016 expenditure.


Member State in the framework of the

ongoing conformity clearance procedure,

the necessary remedial actions will be

agreed with the Member State.

DG AGRI will closely monitor the

situation. The reports and the accounts

will be analysed at a later stage.

The conformity clearance procedure

already on-going in respect of financial

year 2016 and onwards will ensure that

the financial risk to the EU budget is

covered.

CY01 4.14% 2.0599

m EUR

Several deficiencies identified in a

2015 DG AGRI audit of the specific

support granted under Article 68 of

Reg. 73/2009 for the ovine and caprine

sectors have not yet been remedied:

administrative checks to establish the

eligibility of the aid and the calculation

of the aid (including the application of

administrative penalties), sufficient

quality of on-the-spot checks.


2016 expenditure.

For claim year 2015, the on the spot

checks have been performed to the

required extent. The other weaknesses

identified by the audit are addressed via

an on-going Action Plan. A mission to

Cyprus to verify the implementation of

the Action Plan is scheduled for the end

of April 2016.

The conformity clearance procedure on-

going in respect of financial year 2016

will ensure that the financial risk to the

EU budget is covered.

DK02 2.97% 25.339

m EUR

A 2% top up has been applied on all






therefore there is insufficient

assurance.


2016 expenditure.


situation. The reports and the accounts

will be analysed at a later stage.

EE01 2.02% 2.282 m

EUR

The adjusted error rate is only based

on the control data reported by the

Member State.

No A reservation is not considered

necessary.

The Member State should address where

necessary the causes underlying the

error rate reported in the control

statistics.

ES01 2.01% 29.009

m EUR

The adjusted error rate is based on the

known error amount related to the

payment entitlements reported by the

Certification Body.


necessary.

The Paying agency should follow the

recommendations for remedial actions of

the Certification Body.


PA Adjusted

error rate

Amount


Res


ES04 2.50% 0.697 m

EUR

A 2016 audit of DG AGRI identified

deficiencies in the performance of on

the spot checks, which are affecting

greening and the area related VCS

measures. Further, a known error

amount related to the payment

entitlements was reported by the

Certification Body.

No As the amount at risk is below the de

minimis threshold established in DG

AGRI's materiality threshold (see Annex


ES11 2.64% 4.456 m

EUR

The adjusted error rate is based on the

control data reported by the Member

State and the known error amount

related to the payment entitlements

reported by the Certification Body.


necessary.




statistics.

ES17 9.28% 10.075 m

EUR

The adjusted error rate is only based

on the control data reported by the

Member State.


2016 expenditure.




statistics.


situation.

GB06 2.97% 15.548 m

EUR

A 2016 audit by DG AGRI found

weaknesses in the management of the

national reserve in Scotland, as top

ups on payment entitlements were

granted circumventing the 1st

allocation. Furthermore, a top up was

added as the Certification Body did not

confirm the control statistics.


2016 expenditure.

The Paying agency should follow the

recommendations for remedial actions of


GR01 2.63% 54.401 m

EUR

A 2016 audit in Greece detected

deficiencies in the verification of the

eligibility conditions to be fulfilled by

applicants when claiming payment

entitlements from the national reserve

and/or payment for the Young Farmer.


necessary.

Remedial actions are being taken by the

Member State following the audit. The

conformity clearance procedure already

on-going in respect of financial year

2016 and onwards will ensure that the


covered.

HU01 3.24% 41.100 m

EUR

A 2016 DG AGRI audit identified

weaknesses in the control of the

greening payment (incorrect definition

of the fallow land/temporary and

permanent grassland, deficiencies in

the definition of the Ecological Focus

Area).


2016 expenditure.



ongoing conformity clearance procedure


agreed with the Member State. DG AGRI

will closely monitor the situation.





covered.

IT01 2.41% 43.617 m

EUR In 2016, DG AGRI audits identified

weaknesses that affect all the Italian

PAs. It concerns deficiencies in the

correct establishing of the eligibility of

land (Permanent Grassland with trees).

This affects all area based premia.

Furthermore, weaknesses in the

verification of the Active Farmer status

were detected. The related top ups are

applied for all the Italian Paying

Agencies.

Yes

A reservation is entered in respect of

2016 expenditure.




the necessary remedial actions in the

form of an action plan will be assessed

and agreed with the Member State. DG

AGRI will closely monitor the situation.


IT05 2.70% 9.906 m

EUR

IT07 3.52% 5.616 m

EUR

IT08 2.11% 7.255 m

EUR

IT10 2.00% 7.332 m

EUR

IT23 2.13% 10.582 m

EUR


PA Adjusted

error rate

Amount


Res


IT26 2.63% 6.693 m

EUR




covered.

In the case of IT 26, The Action Plan

proposed by IT-Calabria did not

satisfactorily identify the deficiencies

leading to the high error rate. IT-

Calabria has been invited to submit a

reworked version, which would more

effectively target the reasons for errors.

IT25 2.41% 0.299 m

EUR

Idem as above for other IT Paying

Agencies No

As the amount at risk is below the de

minimis threshold established in DG

AGRI's materiality threshold (see Annex


PL01 4.30% 143.681

m EUR


weaknesses in the control of the

greening payments. Furthermore, a

top up was applied on the expenditure

for the Small Farmers Scheme, as the

control statistics have not been

submitted.


2016 expenditure.





agreed with the Member State. DG AGRI

will closely monitor the situation.





covered.

PT03 2.66% 17.229

m EUR


weaknesses in the correct establishing

of the eligibility of the land. The issue

affects mainly the Permanent

Grassland with trees.


2016 expenditure.

The Member State should implement an

action plan to address the weaknesses

detected.





covered.

RO02 9.24% 140.575

m EUR

A 2016 DG AGRI audit found that the

two estimated amounts per hectare to

be granted to the farmers and

consequently also the ceiling for the

redistributive payment were not

properly justified. A top up was added

based on the error amount reported by



2016 expenditure.

The Action Plan proposed by the

Romanian authorities did not

satisfactorily identify the deficiencies

leading to the high error rate. The

Member State has been invited to

reinforced and submit a reworked

version, which would more effectively

target the reasons for errors.

SE01 3.08% 20.527 m

EUR


weaknesses in the correct establishing

of the eligibility of the land (Permanent

Grassland). Furthermore, weaknesses

were established in the control of the

greening payment. A further DG AGRI

audit identified weakness in the

performance of the administrative and

on the spot controls for the support

granted in the bovine sector under the

VCS schemes.


2016 expenditure.




the necessary remedial actions in the

form of an action plan will be assessed

and agreed with the Member State. DG






PA Adjusted

error rate

Amount


Res



covered.

FR05

ODEAD

OM

2.08% 2.895 m

EUR

A DG AGRI audit in 2014 detected an

absence of consignment checks in

respect of banana shipments.

Yes The reservation is carried forward from

2015.

The FR authorities have been requested

to implement an action plan. The

conformity clearance procedure will

ensure that the financial risk to the EU

budget is covered.


In addition, as indicated in point 3.2.3 above, an unquantified reservation covering 8

Member States (FR, GR, IE, IT, LT, MT, PL and RO) is necessary.

PA

Adjusted

error rate

Amount


Res

2016

Mitigating

factors/reservation follow up.

8 MS

(FR, GR,

IE, IT

LT, MT,

PL and

RO)

Unquantified 2016 DG AGRI audits identified

a risk of non-compliance of certain measures under the

Voluntary coupled support with

the conditions provided for in the EU legislation. Lack of due

justification of policy decisions made by some Member States

put into question the legality of newly established measures

and thus their eligibility for EU funding.

Yes An unquantified reservation is

entered in respect of 2016. DG AGRI will closely monitor

the situation.

The conformity clearance procedure already on-going in

respect of financial year 2016 and onwards will ensure that

the financial risk to the EU budget is covered.


The following table gives details of cases for Direct Payments where a reservation made in the 2015 AAR was not carried forward in the 2016 AAR:

Paying Agency Adjusted

error

rate

Amount at risk Justification

ES06 Cantabria

ES10

(Extremadura)

ES13 (Murcia)

0.37%

0.52%

1.47%

0.157 EUR

2.661 m EUR

0.846 m EUR

2013 DG AGRI audits found weaknesses in the controls

regarding the eligibility of permanent pasture and its

recording in the LPIS. A DG AGRI audit mission to ES in

March 2016 showed that the Action Plan was implemented

according to agreed milestones. No top ups were applied for

FY2016 and the reported error rates are below the materiality

threshold of 2%.

FR19 0.40% 28.084 m EUR For the decoupled payments, no further top up was applied,

as the risk to the EU budget is covered by the ongoing

suspension procedure.

A top up was applied for the VCS measures.

ES05 (Canary

Islands) - POSEI

1.28% 2.340 m EUR The Spanish authorities have reported an error rate of

31.57% in respect of aid for animal premia (c. 5m EUR). Put

in the context of the overall Posei aid for ABB03 (206 m

EUR), this results in an overall error rate of 1.28%. The ES

authorities took measures to improve the animal

identification and registration system and in particular to

ensure an update and correction of existing records in the

system. This has resulted in the discovery and correction of

a high number of errors which explains the high error rate.

DG AGRI's audit mission in 2016 verified that the correction

measures were underway. DG AGRI will continue to monitor

the situation. The conformity clearance procedure will ensure

that the financial risk to the EU budget is covered.



As a result of the "top-ups" made, an adjusted error rate has been calculated of

1.996% with 24 out of 69 Paying Agencies having an adjusted error rate above 2% and 2 above 5% – see Table: Annex 10 - 3.2.6 above. Overall, the reported error rate for

ABB03 increased from 1.04% to 1.996% as a result of adjustments made by DG AGRI.

For the Paying Agencies with an error rate between 2 and 5%, an examination was

carried out of any risk mitigating factors which indicated that the EU budget was protected for the past (conformity clearance procedure, culminating in an ongoing

financial correction) and that it is protected for the future (the deficiencies have been

addressed by the Paying Agency). In 4 out of the 22 cases (Estonia, Spain for 2 Paying Agencies and Greece), it was considered that, given the mitigating factors present (see

summary under point 3.2.3), it would not be necessary to make reservations. Table: Annex 10 – 3.2.7 sets out the reasoning in respect of each case.

The overall outcome of this exercise is that 18 reservations are necessary at Paying

Agency level:

Italy (7 Paying Agencies)

Bulgaria Cyprus

Denmark France

Hungary Poland

Portugal Romania


Spain Sweden

United Kingdom (Scotland)

5 Reservations from 2015 (4 for Spain, France) are not carried forward in the 2016 AAR

due to error rates in 2016 below 2%, and moreover in the case of France where a substantial part of the amount potentially at risk was subject to a suspension in financial

year 2016 with a conformity clearance procedure covering the residual financial risk (see Table: Annex 10 – 3.2.7).

For direct payments, the increase compared to last year in the adjusted error rate (from

1.37% to 1.996%) and the number of Paying Agencies under reservation (from 10 to 18) results from some difficulties experienced by Member States with the first year of

implementation of the new direct payments, including greening. However, the overall result confirms that, even in such challenging circumstances with higher inherent risks,

the Integrated Administration and Control System (IACS), when implemented in accordance with applicable rules and guidelines, limits effectively the risk of irregular

expenditure.

The error rate for ABB03 is 1.996% with an amount at risk of 814.4 million EUR.

It is noted that the average amount of net financial corrections per year for the five-year period 2012-2016 (excluding corrections made for cross-compliance)

is 626.5 million EUR for ABB0337.

3.2.7 Root causes of the error rate in direct payments – what is DG AGRI doing about it?

In 2013 DG AGRI carried out an assessment of the root causes of errors in the

implementation of direct payments and of possible preventive and corrective actions. This assessment was further formalised with the adoption and publication on 26 May

2014 of a Commission staff working document (SWD(2014) 175 final). The main root causes of error identified therein were the following:

Errors/non-compliances by national administration arising when national

administrations do not adapt their system as to ensure compliance with the rules or do not follow their own instructions,

Insufficient quality and update of the Land Parcel Identification System (LPIS),

Low quality of the on-the-spot checks,

Mistakes in the aid applications.

While these root causes are still valid, some additional risks linked to the implementation

of the reformed Direct Payments of the new CAP have been identified. Bearing in mind that the recent reform aims at an improved targeting of support measures and ultimately

a more effective and efficient CAP, such better targeting often implies additional eligibility

conditions and thus greater complexity of support schemes where Member States are given more flexibility. Moreover, compromise solutions incorporated in the basic acts in

the inter-institutional decision-making process sometimes give rise to diverging interpretations when implemented by Member States.

37 See section 2.4.1.5.1 of the main body of the report on "corrective capacity". No information is given on the

corrective capacity which derives from recoveries as this is not split by ABB activity and is available only at

Fund level.


For Direct Payments the additional main areas of risk in the context of the reformed system are likely to relate to issues regarding the first allocation of payment entitlements

and the calculation of their initial unit value due to the sometimes complex options chosen by Member States, risks relating to establishing correct eligible area, especially

regarding areas of permanent grassland, challenges relating to the new and unprecedented set of greening requirements, including controls of beneficiaries exempted

from those requirements, and risks related to implementation of the new Voluntary Coupled Support schemes, where a high flexibility for Member States to shape the

schemes renders the control of compliance complex.

DG AGRI addresses the main risks for the Funds of the existing root causes by means of audit enquiries and action plans already underway in certain Member States. On top of

that, and at a more upstream stage, a series of actions covering improvements in monitoring, communication and remedial action have been taken to mitigate the situation

further and prevent issues from arising in the future:

1. The quality assessment (QA) which Member States must carry out of their

LPIS is actively followed-up by a new unit in DG AGRI ("Implementation support, monitoring, IACS and LPIS") to ensure that Member States take the remedial actions

required to meet the quality standards DG AGRI considers appropriate. Moreover, the

conformity clearance procedure will still include in its process the assessment of the correct application of the LPIS QA method.

2. DG AGRI has reinforced its actions to inform in meetings (e.g. meeting with Paying Agencies; or ad hoc expert groups) the responsible bodies in the Member States

(Paying Agencies, Ministries) and has also developed guidance documents addressing problematic issues in particular in the following areas:

principles for the LPIS under the renewed direct payments schemes,

on-the-spot checks and area measurement,

aid applications by farmers,

the "active farmer" provision and

the definition and implementation of permanent grassland.

Other technical guidance, established in collaboration with the Commission’s Joint Research Centre have followed, on e.g. the implementation of a pro-rata system for

permanent grassland or more technical features of on-the-spot controls for greening (e.g. on measurement of EFA or on the control of crop diversification), the LPIS upkeep

and the LPIS QA methodology execution.

DG AGRI has reinforced its actions to inform Member States about implementation issues

in committees and expert groups. DG AGRI has also carried out implementation

support activities through a series of visits to most Member States in the course of 2014, 2015 and 2016, through bilateral meetings and via replies to written questions on

the implementation of the Direct Payment schemes and of the Greening, as well as with regard to the Integrated Administration and Control System (IACS).

Finally, a set of targeted workshops/expert groups allowing Member States to exchange experience and good practices for the administration and control of Direct Payments were

organised in 2015 and 2016 in the following areas: greening, Young Farmers' payment, Voluntary Coupled Support for animals, the provisions related to active farmer, specific

area-related aspects and the system of geo-spatial aid application (GSAA) including the

implementation of preliminary checks, and circumvention, force majeure and exceptional circumstances.

3. Following conformity clearance audits that detected major deficiencies, or reservations in previous AARs, specific actions have been taken to address deficiencies in


certain Member States. They have proven effective in triggering changes. Based on an analysis of the DAS exercises, of Member States' statistics and of audit results, new

specific action plans may need to be implemented by some Member States.

4. DG AGRI provides guidance to the Member States and monitors the effectiveness

of the control systems on an on-going basis, in particular through compliance audit missions (including also audits of Paying Agencies' compliance with the accreditation

criteria and audits of the Certification Bodies) as well as conformity clearance procedures. Whenever weaknesses are found, the Commission protects the Union's

financial interests by means of financial corrections imposed on the Member States. The

error rate for Direct Payments is also being addressed through DG AGRI’s audit activity.

5. The previous legislation provided for the possibility to reduce or suspend

payments but only in the case of repeated deficiencies having been the reason for at least two financial correction Decisions by the Commission. The Horizontal Regulation

now enables the Commission to reduce or suspend payments when a Member State has not addressed the deficiencies via an action plan. This will provide Member States with a

stronger incentive to improve their systems where necessary. As an example, this new procedure was implemented in July 2016 through a Commission Implementing decision

to suspend monthly payments to France under EAGF for 3% of expenditure relating to

claim year 2015 in view of the delayed and inadequate implementation of the action plan.

6. DG AGRI has also proposed a series of rules in the secondary legislation (delegated acts and implementing acts) aiming at mitigating the risks identified above,

e.g. by introducing the possibility for Member States to carry out preliminary checks to identify non-compliances and the possibility for farmers to correct them for a certain

period of time after the submission of the aid application. . These mainly concern control provisions. As is already the case, the need to amend secondary legislation in view of

specific difficulties encountered in the process of implementation of the reform has been

and will be constantly assessed and acted upon.

7. In the framework of the reform, an exhaustive inventory of information regarding

the options taken by Member States to implement the new system of Direct Payments has been obtained by the services of DG AGRI in charge of the management of the policy

and has been processed for diffusion to the concerned services in charge of monitoring of the implementation and audit. Based on an enhanced co-operation with Member States,

the quality and reliability of the information gathered will allow the monitoring of the implementation of Direct Payment rules and control systems. The information to hand

will be used to feed the risk analysis established for planning the usual audits and in the

decisional process on the relevance of launching actions plans.

The actions listed above draw upon the Commission services and Member States in equal

measure.


Part 3.3: ABB04 – Rural Development

Index for part 3.3 – ABB04: Rural Development

3.3.1 Introduction

3.3.2 ABB04 expenditure

3.3.3 What assurance does the Director General have regarding the expenditure under ABB04 – Rural Development?

3.3.4 How is this information used in order to assess the error rate reported in Member States' control data?


unnecessary?


3.3.7 Root causes of the error rate in Rural Development expenditure – what is

DG AGRI doing about it?

3.3.1 Introduction

One of DG AGRI's key objectives is to contribute to the sustainable development of rural areas. It does this through its rural development policy which is funded under the

European Agricultural Fund for Rural Development (EAFRD). In 2015, DG AGRI finalised

the process for assessing and approving the Rural Development programmes for the 2014-2020 programming period. In total, 118 national and regional programmes co-

funded by the EAFRD were adopted. With the entry into force of Regulation (EU) No 1305/201338, the structure of the programmes has changed (see 2.4.1.1.4 ABB04

expenditure). There are some 3.36 million beneficiaries of Rural Development programmes in the Member States where their aid claims are processed, checked and

monitored.

While the EAFRD bears many similarities to the European Structural and Investment

Funds (ESIF) of DGs REGIO, EMPL and MARE, there are also a number of differences. In

particular, the EAFRD has been increasingly aligned with the EAGF management system which deals with direct payments to farmers. Many of the EAFRD measures are 'area and

animal-based' and are managed under the IACS. The new CAP reform, which entered into force in 2014 as regards the support for rural development, strengthens that

alignment in particular with regard to application, payment dates, penalties and the maximum eligible area for area-based measures.

Maximum eligible area

Since 2015, Member States have had to define a maximum eligible area for all rural

development area-based measures, in line with IACS and the land parcel identification

system (LPIS). Practically, this means that a specific layer for rural development

measures has had to be implemented in the LPIS.

Explanatory Box: Annex 10 – 3.3.1

38 Regulation (EU) No 1305/2013 of the European Parliament and of the Council 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 of 20.12.2013).


One of the main differences between the reporting styles for the EAFRD and the ESIF

used to be that, in the case of the EAFRD, greater emphasis was placed on the annual review of expenditure, as under Article 51 of Regulation (EU) No 1306/201339,

expenditure managed under the EAFRD is subject to the annual financial clearance procedure. However, since the Common Provisions Regulation entered into force40, also

the other ESI Funds must, from 2015 onwards, examine the accounts and determine whether to accept them on an annual basis (Article 139) in respect of expenditure

managed under all the ESIF.

Another difference is that, to protect the EU budget, the other ESIF have to date used interruption and reduction/suspension (of interim payments) mechanisms, as well as

recycled recovery procedures (i.e. the recovered amounts are retained by the Member States to re-use for other projects). However, the main instrument used by DG AGRI is

the conformity clearance procedure, which results in net financial corrections being clawed back to the EU budget. Since the Common Provisions Regulation as well as the

Regulation (EU) No 1306/2013 entered into force, DG AGRI has, in addition to the effective mechanism under the conformity clearance procedure, tightened up the use of

its interruption and reduction/suspension mechanisms. For further information on the use

of these mechanisms in 2016, see Chapter 2.4.2.2 of this report.

3.3.2 ABB04 expenditure

A. 2007-2013 programming period In the 2007-2013 programming period, the rural development measures were organised

into 'Title I' (generally IACS) measures and 'Title II' (generally non-IACS) measures, the former being area- and animal-based measures and the latter being investment, flat rate

types of measure, Leader and Technical Assistance as provided for in Council Regulation (EC) No 1698/200541.

What are flat-rate measures?

Flat-rate measures are those with a fixed amount of support for particular actions with

a view to simplifying the application and payment procedures.


The Rural Development legislation for the 2007-2013 programming period also

distinguished between five thematic priority areas or 'axes':

axis 1: competitiveness of the agricultural and forestry sector;

axis 2: environment and land management; axis 3: economic diversity and quality of life;

axis 4: Leader;

axis 5: Technical Assistance.

Axes 1, 3 and 4 fell mainly within Title II while Axis 2 measures fell across Title I and II.

Some were purely Title I or Title II but measures 214, 221 and 223 had both an area-based and an investment-based dimension and were thus funded under both Titles.


and monitoring of the common agricultural policy (OJ L 347 of 20.12.2013). 40 Regulation (EU) No 1303/2013 of the European Parliament and of the Council 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 of 17.12.2013). 41 Council Regulation (EC) No 1698/2005 on support for rural development by the European Agricultural Fund

for Rural Development (EAFRD) (OJ L 277 of 21.10.2005).


B. 2014-2020 programming period For the 2014-2020 programming period implemented under the new EU rules, Member

States base their Rural Development programmes on at least four of the six common EU priorities:

1. fostering knowledge transfer and innovation in agriculture, forestry and rural areas;

2. enhancing the viability/competitiveness of all types of agriculture, and promoting innovative farm technologies and sustainable forest management;

3. promoting food chain organisation, animal welfare and risk management in

agriculture; 4. restoring, preserving and enhancing ecosystems related to agriculture and

forestry; 5. promoting resource efficiency and supporting the shift toward a low-carbon and

climate-resilient economy in the agriculture, food and forestry sectors; 6. promoting social inclusion, poverty reduction and economic development in

rural areas.

These priorities were based on 20 proposed measures which are either area- and animal-

related measures or non-area- and non-animal-related measures (see Table: Annex 10 –

3.3.3). The list of measures and sub-measures is described in Annex I, Part 5 of Commission Implementing Regulation (EU) No 808/201442.

Rural Development measures – 2014-2020 programming period

01 Knowledge transfer and information actions

02 Advisory services, farm management and farm relief services

03 Quality schemes for agricultural products and food stuffs

04 Investments in physical assets

05 Restoring agricultural production potential damaged by natural disasters and introducing

appropriate prevention

06 Farm and business development

07 Basic services and village renewal in rural areas

08 Investments in forest area development and improvement of the viability of forests

09 Setting up producer groups and organisations

10 Agri-environment climate

11 Organic farming

12 Natura 2000 and Water Framework Directive payments

13 Payments to areas facing natural or other specific constraints

14 Animal welfare

15 Forest-environmental and climate services and forest conservation

16 Cooperation

17 Risk management

18 Financing of complementary national direct payments for Croatia

19 Support for Leader local development (CLLD)

20 Technical assistance


In 2016, Member States could, under certain conditions, implement measures from both

programming periods in line with the transitional provisions of Regulation (EU) No 1310/2013. This means that expenditure was claimed under the new 2014-2020

programming period for projects to which the commitments for the 2007-2013

42 Commission Implementing Regulation (EU) No 808/2014 of 17 July 2014 laying down rules for the application

of Regulation (EU) No 1305/2013 of the European Parliament and of the Council on support for rural

development by the European Agricultural Fund for Rural Development (EAFRD) (OJ L 227 of 31.7.2014).


programming period applied.

Why implementing a simplified cost option ('SCO') for investment measures?

In the 2014-2020 programming period, Member States have the opportunity to implement simplified cost options for investment measures of their rural development

programme. Using simplified costs means that the human resources and administrative effort

involved in management of the Funds can be focused on achieving of policy objectives rather than being concentrated on collecting and verifying financial documents. It also

gives small beneficiaries easier access to the funds thanks to the simplified

management process.


C. Expenditure reimbursed

Expenditure reimbursed by DG AGRI to Member States in 2016 amounted to EUR 12 364 998 639.

Expenditure paid and financed under the 2007-2013 programming period, amounted to EUR 4 495 770 025. Expenditure paid and financed under the 2014-2020 programming

period, amounted to EUR 7 809 874 920, of which EUR 1 000 590 984 was paid as pre-

financing and EUR 6 809 283 936 paid as intermediate payments.


Management

typeChapter

Budget

itemDescription

Payments

(EUR)

05040114 Completion of rural development financed by the EAGGF

Guarantee Section - Programming period 2000 to 2006

-1 048 601

05040201 Completion of the European Agricultural Guidance and

Guarantee Fund, Guidance Section - Objective 1 regions (2000

to 2006)40 410 348

Rural development programmes 2007-20134 495 770 025

Interim payments 2007-2013

1 833 639 985

Final balance2 662 130 040

Promoting sustainable rural development, a more

territorially and environmentally balanced, climate-

friendly and innovative Union agricultural sector7 809 874 920

Interim payments for promoting sustainable rural development,

a more territorially and environmentally balanced, climate-

friendly and innovative Union agricultural sector 2014-2020

6 809 283 936

Pre-financing for promoting sustainable rural development, a

more territorially and environmentally balanced, climate-friendly

and innovative Union agricultural sector 2014-20201 000 590 984

05040206 Completion of Leader (2000 to 2006)7 437 218

05046002 Operational technical assistance 2014-202012 554 730

12 364 998 639

Direct

Management

Shared

Management

Total

Payments reimbursed by DG AGRI to the Member States in 2016

0504

05040501

05046001


3.3.3 What assurance does the Director General have regarding expenditure under ABB04 – Rural Development?

The assurance of the Director General derives from the various levels of management and controls that are in place, and the results that can be obtained from them. In the

first place, the Member States, through 72 accredited Paying Agencies for Rural Development, are responsible for managing and checking the aid applications received

from some 3.36 million beneficiaries and for paying them.

3.3.3.1 Control results reported by the Member States

In order to provide information on controls and error rates in the area of rural development, Commission Implementing Regulation (EU) No 809/201443 provides for

detailed and systematic reporting of the results of the controls and reductions applied by the Member States.

By 15 July of year N+1, the Paying Agencies are required to send to the Commission data on the outcome of the controls carried out for year N. These control data contain

information on amounts claimed, errors corrected as a result of administrative checks, risk and random on-the-spot checks and the resulting reductions applied. The result of

the random on-the-spot checks is considered to be the most representative of the likely

error that the Paying Agency would have detected if it had carried out on-the-spot checks on all holdings. This result is the reported error rate that is used as the basis for

calculating the adjusted error rate.

The control statistics (aggregated figures at Paying Agency level) and control data (at

claimant level) received in 2016 by DG AGRI correspond to the payment claims made by the claimant in the year 2015 (i.e. claim year).

Checks to be carried out by each Member State

The checks are composed of three separate sets:

– administrative checks on all applications that must cover all elements that can

be checked by administrative means, including: - cross-checks with the IACS database for the IACS-related measures, and

- one visit to the operation to verify the realisation of the investment for the non-IACS-related measures;

– on-the-spot checks that were tightened up in 2015 by the Commission Implementing Regulation (EU) No 809/2014, where:

– for the IACS-related measures, a minimum of 5% of all claimants have to be assessed on the spot, including 5% of claimants for measures 10 and 11;

– for the non-IACS-related measures, a minimum of 5% of the whole expenditure

has to be assessed on the spot, including 5% of the expenditure under Leader measures.

- ex-post checks on investment operations that must, in each calendar year, cover at least 1% of EAFRD expenditure for investment operations that are still

subject to commitment.


43 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 of 31.7.2014).


3.3.3.2 DG AGRI validation and adjustment process

The reliability of the control data from the Paying Agencies depends on the efficiency of

their control systems. DG AGRI carries out an extensive review and validation process (explained in detail in Annex 4 setting out its materiality criteria) in order to adjust, if

appropriate, the reported error rate upwards to a level which it considers better reflects the actual level of error. In so doing, it uses its professional judgement on the basis of all

the information available. The main elements assessed are described in the following paragraphs.

In 2016, according to the transitional provisions in Regulation (EU) No 1310/2013,

measures from the 2007-2013 programming period are, under certain conditions, eligible for EAFRD co-financing under the 2014-2020 budget. As DG AGRI considers that the risk

to the Fund is the same for both programming periods, DG AGRI assessed the control data for both programming periods together.

3.3.3.3 Assessment of the opinions of the Certification Bodies on the control

data

As described in Annex 10 – part 2, the Certification Bodies are required to give an

opinion on the completeness, accuracy and veracity of the annual accounts of the Paying

Agency, on the proper functioning of its internal control system and on the legality and regularity of the expenditure for which reimbursement from the Commission has been

requested. That opinion must also specify whether the examination puts in doubt the assertions made in the management declaration. This opinion is received with the annual

declaration of the Member State on 15 February of N+1.

Based on whether a qualified or unqualified opinion was received and on any other

information provided in the opinion, an adjustment (positive) is made to the error rate reported by the Member State. Below is a summary of the impact of the Certification

Body findings on the reported error rates of 15 Paying Agencies:

– BG01 – Bulgaria: a 2% top-up was applied to all expenditure as the Certification Body failed to

submit the clearance documents by the agreed deadlines.

– CY01 – Cyprus:

Based on the extrapolated financial errors detected on IACS expenditure, the calculated most likely error was taken into account.

– DE07 – Germany - Brandenburg and Berlin: Based on the extrapolated financial errors detected on IACS expenditure, the

calculated most likely error was taken into account.

– DK02 – Denmark: a 2% top-up was applied to all expenditure as the Certification Body failed to

submit the clearance documents by the agreed deadlines.

– ES03 – Spain – Asturias:

Based on the extrapolated financial errors detected on non-IACS expenditure, the calculated most likely and known errors were taken into account.

– ES07 – Spain - Castilla La Mancha: Based on the extrapolated financial errors detected on IACS expenditure, the



– ES14 – Spain – Navarra: Based on the extrapolated financial errors detected on non-IACS expenditure, the

calculated most likely and known errors were taken into account.

– ES17 – Spain – Valencia:

Based on the extrapolated financial errors detected on non-IACS expenditure, the calculated known error was taken into account.

– FR18 – France – Corsica: Based on the extrapolated financial errors detected on non-IACS expenditure, the

calculated most likely and known errors were taken into account.

– FR19 – France (ASP): Based on the extrapolated financial errors detected on IACS and non-IACS

expenditure, the calculated most likely and known errors were taken into account.

– GB06 – United Kingdom – Scotland: Following the qualified opinion expressed on IACS expenditure, the calculated

incompliance rate was taken into account.

– IE01 – Ireland:

Based on the extrapolated financial errors detected on IACS expenditure, the


– IT26 – Italy – Calabria:

Based on the extrapolated financial errors, the most likely error is taken into account.

– LT01 – Lithuania: Based on the extrapolated financial errors detected on IACS expenditure, the

most likely and known errors were taken into account.

– PL01 – Poland:

Based on the extrapolated financial errors detected on IACS and non-IACS

expenditure, the most likely errors were taken into account.

– RO01 – Romania:

Based on the extrapolated financial errors detected on IACS and non-IACS expenditure, the most likely error was taken into account.

– SK01 – Slovakia: Following the qualified opinion expressed on both IACS and non-IACS

expenditure, the most likely error was taken into account.

3.3.3.4 Assessment of findings from the European Court of Auditors (ECA)

The ECA's annual reports and the available Statements of Assurance (DAS cases 2016)

indicating an error rate above 5% were analysed, and may result in adjustments being made depending on the severity and extent of the deficiencies identified.

3.3.3.5 Assessment of findings from DG AGRI audits carried out in 2014-2016

A. Audits carried out

In 2016, 55 on-the-spot audits were carried out; these audits were selected mainly on the basis of DG AGRI's central risk analysis. In addition, three desk audits were

performed, to follow up ECA findings, a citizens' complaint, or a deficiency identified in a previous audit.


What is a desk audit?

A desk audit is an enquiry launched without an on-the-spot audit being carried out, and

based on a specific subject. It follows all steps of the conformity clearance procedure in

the same way as on-the-spot audits.


Note that, in 2016, audits mainly focused on the 2007-2013 programming period for

non-IACS related measures due to late implementation of these measures of the new 2014-2020 programming period.

B. Audit fields

DG AGRI has decided to carry out audits on measures with similar control systems or targets, and has then grouped measures within so-called audit fields. Since 2016, all on-

the-spot audits have been based on all measures within a specific audit field. These groupings are the following:

Audit field Measures of the programming period 2014-2020

Name Code Name Code

Investment -

private

beneficiaries

RD-Invest-

private

Investments in physical assets 04

131 — Meeting standards based on Union legislation 98

Investment - public

beneficiaries

RD-Invest-

public

Basic services and village renewal in rural areas 07

Technical assistance 20

Measures with flat

rate support

RD-Flat-

rate

Farm and business development 06

Setting up of producer groups and organisations 09

113 — Early retirement 97

Leader RD-Leader Support for Leader local development (CLLD) 19

Knowledge and

innovation

RD-Know-

Innov

Knowledge transfer and information actions 01

Advisory services, farm management and farm relief services 02

Quality schemes for agricultural products and food stuffs 03

Cooperation 16

341 — Skills acquisition, animation and implementation of local

development strategies 99

Risk management RD-Risk-

manage

Restoring agricultural production potential damaged by natural

disasters and introduction of appropriate prevention 05

Risk management 17


Audit field Measures of the programming period 2014-2020

Name Code Name Code

IACS RD-IACS

Agri-environment climate 10

Organic farming 11

Natura 2000 and Water Framework Directive payments 12

Payments to areas facing natural or other specific constraints 13

Animal welfare 14

Financing of complementary national direct payments for Croatia 18

Forestry RD-Forestry

Investments in forest area development and improvement of the

viability of forests 08

Forest-environmental and climate services and forest

conservation 15


3.3.3.5.1 Audits carried out on audit fields IACS and Forestry

a) Audit plan and coverage

In 2016, based on the results of the central risk analysis and on reservations made in the

2015 annual activity report (AAR), 18 audits of IACS-related measures and of Forestry

measures were carried out:

1. 14 on-the-spot audits concerned IACS-related measures, based on agri-

environmental measures and/or agri-environment climate, organic farming, natural handicaps measures or payments to areas facing natural constraints,

animal welfare payments and Natura 2000 payments;

2. 3 on-the-spot audits of IACS-related measures were carried out jointly with

auditors dealing with the area-based measures of the 1st pillar to focus more on the identification of agricultural parcels under rural development in the LPIS

database, in line with the new EU rules, and particularly with Article 5 of

Regulation (EU) No 640/201444;

3. 2 on-the-spot audits were carried out on Forestry measures (including one carried

out jointly with an audit on IACS-related measures);

4. 2 desk audits were opened: the first one on the basis of a complaint about the

rare breeds measure and the second on the basis of an ECA enquiry into animal welfare.

The audits assessed the management and control systems set up by Member States to ensure that they complied with EU and national rules, that the eligibility criteria had been

met and that the commitments were controllable, verifiable, and respected by the

beneficiaries. They covered the assessment of the new obligation for IACS related measures to have specific layers defined in the LPIS for each specific measures as stated

in Article 5(2)(b) of Regulation (EU) No 640/2014. Moreover, these enquiries assessed whether the controls were effectively applied, if appropriate reductions and penalties had

been imposed for non-compliance and if the control data sent by the Member States

44 Commission Delegated Regulation (EU) No 640/2014 of 11 March 2014 supplementing Regulation (EU)

No 1306/2013 of the European Parliament and of the Council with regard to the integrated administration and

control system and conditions for refusal or withdrawal of payments and administrative penalties applicable to

direct payments, rural development support and cross compliance (OJ L 181 of 20.6.2014).


were consistent and reliable. In addition, these enquiries also helped to partly evaluate the work carried out by the Certification Body on legality and regularity, as well as to

detect the root causes for the high error rate and possible actions to remedy the deficiencies. Finally, these audits enabled the implementation of the recommendations

made by DG AGRI during the previous audits to be assessed.

b) Results and possible improvements

The control systems in the Paying Agencies visited in 2016 were not always found to be effective, and there was scope for significant improvement in a number of cases. The

auditors found improvements in some Paying Agencies where the visit was a follow-up to

a previous audit still linked to the previous programming period. In the case of some Paying Agencies already visited in connection with the new programming period,

significant delays in implementing the control systems were found. The scope of the audit was not achieved in one case. DG AGRI auditors recommended actions to increase the

robustness of the control system for some specific issues and registered these weaknesses in an internal database to ensure timely follow-up.

The audits carried out in 2016 found scope for improving the following issues in relation to audits on IACS-related measures:

for organic farming, there were significant inconsistencies in the system which

required additional work from the Paying Agency. In addition, cross-notification between the different bodies involved was not sufficiently developed or formalised;

additional improvements are required to better assess respect for the maximum eligible area per measure, in some cases the system was found not to be fully in line

with the EU rules;

continued efforts are required to reduce the high error rate found in some Member

States on the basis of simple and clear eligibility criteria and commitments that must be respected by the farmers;

additional improvements are required to extend the administrative checks of certain

agri-environmental commitments that are easy to check administratively (training certificate, organic certificate, state of the crops, etc.), and to better target risk

analysis to the 5% sample of beneficiaries to be checked on the spot;

continued improvements in the on-the-spot check systems are necessary to better

assess farmers' compliance with the commitments made, mainly concerning respect for the maximum livestock density, to perform checks at the best time of the season

for assessing compliance, and to integrate visual checks with other control tools wherever is possible;

more targeted and proportionate penalty systems need to be developed in respect of

the commitments and obligations, as poor targeting may also be one of the causes of a high error rate;

better traceability and clear conclusions as to the quality of the controls carried out must be achieved by indicating how the checks were performed and how the

inspectors came to their conclusions. The control methods used during the on-the-spot check, to verify compliance with the farmer's commitments, must be indicated in the

control report together with measurements, verification of fertilisers and animal counting, to assess whether the livestock density is correct, wherever appropriate;

control data provided under Article 9 of Regulation (EU) No 809/2014 must be

improved in terms of quality and deadline compliance.

From a general point of view, when serious deficiencies are found, follow-up audits are

carried out to assess the implementation of the recommendations made by DG AGRI. The conformity clearance procedure leads to net financial corrections so as to protect the EU

budget from irregular spending resulting from the deficiencies found.


3.3.3.5.2 Audits carried out on non-IACS-related measures

a) Audit plan and coverage

In 2016, 36 on-the-spot audits were carried out on non-IACS-related measures,

comprising 18 audits of investments measures, 8 audits of Leader, 5 audits of the audit field RD-flat-rate, 4 audits of Technical Assistance, one audit on knowledge and

innovation measures; and 3 audits of non-IACS-related measures of Axis II (see previous chapter). The 2016 audits were selected mainly on the basis of DG AGRI's central risk

analysis.

A desk enquiry was opened to ensure the appropriate follow-up of a deficiency identified in a previous audit on measure 112 'Setting up of young farmers'.

The audits covered the procedures implemented by Member States to ensure that administrative checks, on-the-spot checks and ex-post checks had been carried out in

line with EU legislation, paying special attention to the correct application of selection criteria and compliance with the eligibility criteria. They also checked that the costs had

been correctly evaluated as reasonable, that there was compliance with procurement rules, that coverage of the risk of double funding was adequate and that reductions and

sanctions imposed for non-compliance were adequate.

Verification of SME status (small and medium-sized enterprises)

Article 48(2)(a) of Regulation (EU) No 809/2014 states that administrative checks should

be made to check the eligibility of the applicant following applicable obligations established by Union law or by the Rural Development Programme. Member States have,

in their rural development programme, opted for several measures to restrict the eligibility to SMEs or to give more priority points to SMEs in the project selection process

or to give higher aid intensity to SMEs. The way in which the Member States check compliance with the SME criteria (in

particular the existence of linked and partner enterprises) differs significantly. For

example, some Member States rely on a self-declaration by the applicant; others check the companies' shareholdings on the basis of extracts from chambers of commerce,

consolidated accounts, etc. (non-exhaustive list). Commission Recommendation 2003/361/EC of 06.05.2003 concerning the definition of

micro, small and medium sized enterprises highlights that linked and partner enterprises should be taken into account when determining the size of the applicant. Therefore,

Member States should include the linked and partner enterprises (in their country and abroad) in their checks, also in cases where shareholders are natural persons. Member

States should therefore set up a system allowing them to assess these obligations and to

keep an audit trail of these checks.


b) Results and possible improvements

The control systems in the Paying Agencies visited in 2016 were generally found to be effective, albeit with scope for improvement in several cases. The DG AGRI auditors

recommended actions to increase the robustness of the control system for some specific issues and registered these weaknesses in an internal database to ensure a timely follow-

up.


Reasonableness of the costs: key control element

Article 48(2)(e) of Regulation (EU) No 809/2014 states that for the costs referred to in

Article 67(1)(a) of Regulation (EU) No 1303/2013, excluding contribution in kind and depreciation, and administrative checks on applications for support must include

verification of the reasonableness of the costs submitted. The costs must be evaluated using a suitable evaluation system, such as reference costs, a comparison of different

offers or an evaluation committee. The administrative checks on the verification of the reasonableness of costs are considered to be a key element of the controls to be carried

out by the Paying Agencies.

Several audits carried out in 2016 on investment and flat-rate measures as well as on Leader measures, detected shortcomings in relation to the assessment of the

reasonableness of the costs. Examples include the use of insufficiently detailed or outdated list of unit prices, the absence of checks on the independence and authenticity

of the offers received, the absence of checks below a certain threshold, etc. Member States should therefore set up control systems allowing them to effectively assess the

reasonableness of costs and to keep an audit trail of these checks.


With regard to investment and flat-rate measures, in eight cases the audits revealed management and control deficiencies which would suggest that the systems are

ineffective in determining whether claims are eligible and preventing irregularities. The weaknesses found may lead to a financial correction of 10% for the measures audited45.

In most of these cases, the detected shortcomings related to elements of the management and control system:

checks on the eligibility of the applicant (SME status);

checks on the eligibility of the application/project/investment;

selection and appraisal of applications;

assessment of cost reasonableness;

quality of the on-the-spot checks;

quality of ex-post checks;

checks of the payment claims.

In some cases, the deficiencies were related to:

quality of in-situ visits;

quality of the sanction system;

checks on double funding;

public procurement verifications;

With regard to Leader, two audits revealed management and control deficiencies which may lead to a financial correction of 10%20. The shortcomings were related to the

selection and appraisal of projects or applications, the verifications related to the reasonableness of costs, the public procurement procedures, the payment claims and the

quality of on-the-spot checks and in-situ visits.

Regarding Technical Assistance two audits carried out in 2016 revealed management

and control deficiencies which may lead to a financial correction of 10%45. The shortcomings were related to the verification of the eligibility of the investment/project,

45 The clearance of accounts procedure is still on-going; the level of financial correction is only decided once the

conformity clearance procedure has been finalised.


the reasonableness of costs, the double financing, public procurement procedures and payment claim verifications.

With regard to knowledge and innovation, an audit on measure 331 'Training and information', revealed shortcomings as regards the eligibility of the applicant (SME

criteria), selection criteria and verification of payment claim checks. The detected shortcomings may lead to a financial correction of 10%45.

What is the "N+3 decommitment" rule as provided for in Regulation (EU)

No 1306/2013?

Article 38 of Regulation (EU) No 1306/2013 provides that the Commission must automatically decommit any portion of a budget commitment for a rural development

programme that has not been used for the purpose of pre-financing or making intermediate payments. The Funds must be used by 31 December of the third year46 (in

accordance with Regulation (EU) No 1306/2013) following that of the budget commitment (so called N+3 rule). However, according to Article 41(4)(a) of Regulation

(EU) No 907/2014, the references to N+3 in Regulation (EU) No 1306/2013 must be regarded as references to N+2, as regards the 2007-2013 programmes. The purpose of

the N+2/N+3 rule is to speed up execution of programmes and contribute to sound

financial management.


3.3.3.5.3 Audits of Financial Instruments

One audit was carried out in respect of Financial Instruments in 2016. It concerned an audit in Romania. The preliminary findings point to some weaknesses regarding the total

eligible expenditure at the time of the closure of the Guarantee Fund (Article 52 of Regulation (EU) No 1974/200647). The findings also indicate that the aid intensity was

exceeded for some Rural Development beneficiaries that benefitted from both the aid in

capital from the investment measure and the (subsidy equivalent of the) advantage offered by the Guarantee Fund.

What are financial instruments?

Financial instruments are measures of financial support provided on a complementary

basis from the EU budget in order to address one or more policy objectives. Such instruments may take the form of loans, guarantees, equity or quasi-equity investments,

or other risk-sharing instruments and may, where appropriate, be combined with grants.


3.3.4 How is this information used to assess the error rate reported in Member States' control data?

As described in Annex 4 on DG AGRI's materiality criteria, DG AGRI's Assurance and Audit Directorate analysed the audit evidence arising from, in particular, the findings of

the Certification Bodies, the ECA and its own audit findings. This was with a view to assessing the risk that errors are not detected by the Paying Agency before payments are

46 For the rural development programmes under the 2007-2013 programming period, the Funds must be used

by 31 December of the second year following that of the budget commitment (so called N+2 rule). 47 Commission Regulation (EC) No 1974/2006 of 15 December 2006 laying down detailed rules for the

application of Council Regulation (EC) No 1698/2005 on support for rural development by the European

Agricultural Fund for Rural Development (EAFRD) (OJ L 368 of 23.12.2006).


made to beneficiaries. Where possible, the amount at risk was precisely quantified. Where this was not the case, a % flat rate was used to express the risk to the budget

arising from error in the expenditure that is not reflected in the Member States' control data.

The following table summarises this information for all Paying Agencies for interim payments made in financial year 2016:

Paying Agency

Paying Agency Name

Interim payments FY 2016

EUR

Reported (residual) error

rate

Adjusted error rate

Amount at risk EUR

AT01 AMA 394 576 581 1.42% 1.44% 5 679 430

BE02 ALV 14 837 399 0.81% 0.81% 119 644

BE03 SPW-DGARNE 24 665 652 0.77% 5.41% 1 333 721

BG01 DFZ [SFA] 234 181 393 0.92% 10.58% 24 785 072

CY01 ΚΟΑΠ [CAPO] 7 177 699 0.20% 0.37% 26 816

CZ01 SZiF [SAIF] 182 467 119 6.92% 11.05% 20 156 600

DE01 BLE 729 267 1.50% 1.50% 10 974

DE03 Baden-Württemberg MLR

62 647 550 1.40% 1.40% 875 725

DE04 Bayern StMLF 177 752 294 0.78% 1.15% 2 038 851

DE07 Brandenburg MLUV

57 190 535 0.60% 0.84% 478 188

DE09 Hamburg 1 354 150 0.15% 0.15% 2 046

DE11 Mecklenburg-Vorpommern MELFF

32 907 654 0.16% 0.16% 51 521


DE15 LWK Nordrhein-Westfalen

29 222 343 1.88% 1.88% 548 529

DE17 Rheinland- Pfalz 15 188 966 1.11% 1.38% 209 056

DE18 Saarland 1 122 059 0.03% 0.03% 371

DE19 Sachsen 50 792 902 2.12% 2.12% 1 077 220

DE20 Sachsen-Anhalt 33 202 658 0.28% 0.28% 93 928

DE21 Schleswig-Holstein 36 468 148 2.09% 2.09% 761 713

DE23 Thüringen 59 467 752 1.07% 1.07% 635 887

DE26 Helaba 24 929 408 0.92% 0.92% 230 088

DK02 DAFA 82 172 079 0.73% 3.49% 2 869 136

EE01 PRIA 87 901 431 0.77% 2.13% 1 869 904

ES01 Andalucía 208 951 505 1.26% 3.94% 8 228 027

ES02 Aragón 39 102 234 0.42% 0.42% 162 677

ES03 Asturias 22 732 456 0.48% 1.47% 334 446

ES04 FOGAIBA 3 341 372 1.44% 1.44% 48 254

ES05 Islas Canarias 6 199 904 0.00% 0.00% 0

ES06 Cantabria 15 949 788 0.17% 0.17% 27 087



ES09 Cataluña 18 298 439 1.66% 1.66% 303 280

ES10 Extremadura 73 155 769 0.63% 1.40% 1 024 936

ES11 FOGGA 66 691 655 0.44% 0.44% 293 288

ES12 Madrid 5 310 485 0.96% 1.03% 54 747

ES13 Murcia 7 723 175 0.25% 0.25% 18 939

ES14 Navarra 10 158 590 0.10% 0.83% 83 866


Paying Agency

Paying Agency Name

Interim payments FY 2016

EUR


rate

Adjusted error rate

Amount at risk EUR

ES15 País Vasco 4 205 614 0.00% 1.45% 61 028

ES16 La Rioja 12 130 189 0.25% 0.25% 30 668

ES17 AVFGA 572 743 0.79% 0.97% 5 529

ES18 FEGA 1 679 171 0.00% 0.00% 0

FI01 MAVI 328 110 757 1.64% 1.80% 5 909 231

FR18 ODARC 7 230 536 0.00% 4.95% 357 986

FR19 ASP 581 501 578 5.80% 10.80% 62 826 560

GB05 DARD 49 794 728 2.08% 2.08% 1 036 818

GB06 SGRPID 31 931 436 0.30% 7.58% 2 420 881

GB07 WG 43 766 525 1.05% 1.05% 458 029

GB09 RPA 530 155 888 0.04% 0.56% 2 989 389

GR01 Ο.Π.Ε.Κ.Ε.Π.Ε. [O.P.E.K.E.P.E.]

684 280 003 0.64% 3.87% 26 515 634

HR01 PAAFRD 131 044 159 1.66% 1.66% 2 174 281

HU01 MVH [ARDA] 208 468 125 0.95% 3.32% 6 928 987

IE01 DAFM 253 822 792 2.02% 3.84% 9 748 225

IT01 AGEA 538 282 248 1.17% 4.00% 21 534 192

IT05 AVEPA 47 207 073 0.11% 1.00% 470 252

IT07 ARTEA 15 699 885 0.08% 0.08% 13 206

IT08 AGREA 24 394 577 0.81% 0.81% 198 161

IT10 ARPEA 13 785 881 1.15% 1.15% 158 367

IT23 OPR Lombardia 21 173 759 0.20% 0.52% 110 604

IT24 OPPAB 23 598 306 0.11% 0.11% 27 046

IT25 APPAG 9 042 992 3.08% 7.43% 671 776

IT26 ARCEA 65 658 654 2.38% 4.28% 2 811 186

LT01 NMA [NPA] 173 957 330 2.65% 5.84% 10 154 746

LU01 Ministère de l'Agriculture

6 355 840 0.67% 0.67% 42 564

LV01 RSS 109 136 225 0.88% 0.88% 958 603

MT01 MRRA PA 2 460 019 1.55% 1.55% 38 111

NL04 ELFPO 34 449 926 3.70% 4.16% 1 432 489

PL01 ARiMR [ARMA] 362 852 034 1.17% 2.04% 7 411 740

PT03 IFAP 540 867 570 5.75% 6.24% 33 745 074

RO01 PARDF 1 059 493 147 1.53% 3.74% 39 601 555

SE01 SJV 191 405 372 4.83% 13.94% 26 679 043

SI01 ARSKTRP 77 260 537 1.26% 1.26% 974 949

SK01 APA 105 682 050 1.89% 6.72% 7 101 508

ABB04 Rural Development Programmes

8 642 923 921 1.78% 4.11% 355 493 479



When taking into account the interim payments and the amounts of prefinancing cleared in 2016, the information for all Paying agencies is summarised in the table below:

Paying Agency

Paying Agency Name

Relevant expenditure

FY 2016 (Interim

payments and cleared

amounts)


rate

Adjusted error rate

Amount at risk at payment for

the relevant expenditure

EUR

AT01 AMA 394 576 581 1.42% 1.44% 5 679 430

BE02 ALV 14 837 399 0.81% 0.81% 119 644

BE03 SPW-DGARNE 24 665 652 0.77% 5.41% 1 333 721

BG01 DFZ [SFA] 416 818 294 0.92% 10.58% 44 114 826

CY01 ΚΟΑΠ [CAPO] 16 833 157 0.20% 0.37% 62 889

CZ01 SZiF [SAIF] 215 022 967 6.92% 11.05% 23 752 948

DE01 BLE 729 267 1.50% 1.50% 10 974


62 647 550 1.40% 1.40% 875 725

DE04 Bayern StMLF 177 752 294 0.78% 1.15% 2 038 851

DE07 Brandenburg MLUV 57 190 535 0.60% 0.84% 478 188

DE09 Hamburg 2 738 843 0.15% 0.15% 4 139


61 211 105 0.16% 0.16% 95 834


DE15 LWK Nordrhein-Westfalen

29 222 343 1.88% 1.88% 548 529

DE17 Rheinland- Pfalz 17 105 868 1.11% 1.38% 235 439

DE18 Saarland 1 122 059 0.03% 0.03% 371

DE19 Sachsen 50 792 902 2.12% 2.12% 1 077 220

DE20 Sachsen-Anhalt 67 260 645 0.28% 0.28% 190 275

DE21 Schleswig-Holstein 36 468 148 2.09% 2.09% 761 713

DE23 Thüringen 59 467 752 1.07% 1.07% 635 887

DE26 Helaba 24 929 408 0.92% 0.92% 230 088

DK02 DAFA 113 298 334 0.73% 3.49% 3 955 946

EE01 PRIA 87 901 431 0.77% 2.13% 1 869 904

ES01 Andalucía 328 483 098 1.26% 3.94% 12 934 905

ES02 Aragón 47 821 145 0.42% 0.42% 198 950

ES03 Asturias 22 732 456 0.48% 1.47% 334 446

ES04 FOGAIBA 6 482 572 1.44% 1.44% 93 617

ES05 Islas Canarias 16 929 586 0.00% 0.00% 0

ES06 Cantabria 15 949 788 0.17% 0.17% 27 087



ES09 Cataluña 18 298 439 1.66% 1.66% 303 280

ES10 Extremadura 127 744 565 0.63% 1.40% 1 789 743

ES11 FOGGA 126 645 683 0.44% 0.44% 556 946

ES12 Madrid 10 180 397 0.96% 1.03% 104 951

ES13 Murcia 22 141 390 0.25% 0.25% 54 296

ES14 Navarra 10 158 590 0.10% 0.83% 83 866

ES15 País Vasco 9 675 284 0.00% 1.45% 140 398


Paying Agency

Paying Agency Name

Relevant expenditure

FY 2016 (Interim

payments and cleared

amounts)


rate

Adjusted error rate

Amount at risk at payment for

the relevant expenditure

EUR

ES16 La Rioja 12 130 189 0.25% 0.25% 30 668

ES17 AVFGA 8 950 187 0.79% 0.97% 86 405

ES18 FEGA 1 679 171 0.00% 0.00% 0

FI01 MAVI 328 110 757 1.64% 1.80% 5 909 231

FR18 ODARC 9 521 129 0.00% 4.95% 471 394

FR19 ASP 701 356 166 5.80% 10.80% 75 775 882

GB05 DARD 49 794 728 2.08% 2.08% 1 036 818

GB06 SGRPID 31 931 436 0.30% 7.58% 2 420 881

GB07 WG 60 824 041 1.05% 1.05% 636 540

GB09 RPA 530 155 888 0.04% 0.56% 2 989 389


830 011 977 0.64% 3.87% 28 817 081

HR01 PAAFRD 131 044 159 1.66% 1.66% 2 174 281

HU01 MVH [ARDA] 260 105 791 0.95% 3.32% 8 645 300

IE01 DAFM 253 822 792 2.02% 3.84% 9 748 225

IT01 AGEA 916 092 613 1.17% 4.00% 36 648 643

IT05 AVEPA 47 207 073 0.11% 1.00% 470 252

IT07 ARTEA 41 544 585 0.08% 0.08% 34 946

IT08 AGREA 53 182 147 0.81% 0.81% 432 008

IT10 ARPEA 41 400 881 1.15% 1.15% 475 597

IT23 OPR Lombardia 23 814 660 0.20% 0.52% 124 399

IT24 OPPAB 23 598 306 0.11% 0.11% 27 046

IT25 APPAG 9 042 992 3.08% 7.43% 671 776

IT26 ARCEA 109 292 524 2.38% 4.28% 4 679 377

LT01 NMA [NPA] 215 589 413 2.65% 5.84% 12 585 016

LU01 Ministère de l'Agriculture

6 355 840 0.67% 0.67% 42 564

LV01 RSS 109 136 225 0.88% 0.88% 958 603

MT01 MRRA PA 7 824 354 1.55% 1.55% 121 215

NL04 ELFPO 34 449 926 3.70% 4.16% 1 432 489

PL01 ARiMR [ARMA] 515 801 516 1.17% 2.04% 10 535 939

PT03 IFAP 553 117 570 5.75% 6.24% 34 509 359

RO01 PARDF 1 072 507 066 1.53% 3.74% 40 087 987

SE01 SJV 191 405 372 4.83% 13.94% 26 679 043

SI01 ARSKTRP 77 260 537 1.26% 1.26% 974 949

SK01 APA 187 277 143 1.89% 6.72% 12 584 447


10 489 282 923 1.78% 4.14% 434 305 128



A closure balance was also paid in financial year 2016 for majority of 2007-2013 programmes which were closed in 2016. For these closure balances the adjusted error

rate assessed for financial year 2015 in the 2015 AAR where used for each individual paying agency. The following table summarises this information for all concerned Paying

Agencies as regards the closure balance:

Paying Agency

Paying Agency Name

Payments FY 2016

EUR

Adjusted error rate

Amount at risk EUR

AT01 AMA 201 048 843 2.26% 4 539 504

BE02 ALV 11 915 307 1.81% 215 372

BE03 SPW-DGARNE

BG01 DFZ [SFA]

CY01 ΚΟΑΠ [CAPO] 8 138 265 0.20% 16 108

CZ01 SZiF [SAIF] 138 417 270 2.31% 3 195 431

DE01 BLE 6 965 0.00% 0

DE03 Baden-Württemberg MLR 33 079 775 0.81% 269 483

DE04 Bayern StMLF 70 357 110 1.36% 958 136

DE07 Brandenburg MLUV 48 036 736 2.89% 1 389 759

DE09 Hamburg


31 329 671 4.73% 1 482 481

DE12 Niedersachsen 35 725 133 2.09% 745 707

DE15 LWK Nordrhein-Westfalen 17 233 960 1.58% 272 138

DE17 Rheinland- Pfalz 12 727 510 3.22% 410 191

DE18 Saarland 1 076 915 0.05% 542

DE19 Sachsen 49 441 490 4.40% 2 174 856

DE20 Sachsen-Anhalt 30 994 065 1.99% 616 914

DE21 Schleswig-Holstein 13 350 534 0.33% 43 517

DE23 Thüringen 33 053 720 1.05% 347 152

DE26 Helaba 12 195 402 1.75% 213 073

DK02 DAFA 20 963 291 6.86% 1 439 006

EE01 PRIA 35 481 510 1.17% 413 655

ES01 Andalucía

ES02 Aragón 19 105 468 0.91% 174 262

ES03 Asturias

ES04 FOGAIBA

ES05 Islas Canarias 1 375 448 0.07% 1 031

ES06 Cantabria 3 982 140 1.34% 53 547

ES07 Castilla La Mancha 9 728 211 1.03% 99 988

ES08 Castilla y Léon 42 163 089 4.02% 1 694 159

ES09 Cataluña 15 649 113 1.53% 240 099

ES10 Extremadura 27 166 580 4.62% 1 255 564

ES11 FOGGA

ES12 Madrid

ES13 Murcia 5 712 499 0.31% 17 958

ES14 Navarra 4 898 851 0.48% 23 652

ES15 País Vasco 3 703 059 0.29% 10 839


Paying Agency

Paying Agency Name

Payments FY 2016

EUR

Adjusted error rate

Amount at risk EUR

ES16 La Rioja 2 888 364 3.03% 87 496

ES17 AVFGA

ES18 FEGA 2 384 920 0.00% 0

FI01 MAVI 73 189 520 1.36% 991 855

FR18 ODARC

FR19 ASP

GB05 DARD 15 989 737 1.91% 304 641

GB06 SGRPID 33 256 486 5.54% 1 842 480

GB07 WG

GB09 RPA 92 304 670 5.60% 5 171 208


HR01 PAAFRD

HU01 MVH [ARDA] 100 146 037 6.98% 6 990 692

IE01 DAFM 123 238 683 2.77% 3 410 702

IT01 AGEA

IT05 AVEPA 23 854 689 0.20% 47 508

IT07 ARTEA 19 437 090 4.13% 803 218

IT08 AGREA 26 354 360 5.97% 1 572 521

IT10 ARPEA 14 047 618 1.18% 165 398

IT23 OPR Lombardia 22 526 681 0.67% 151 604

IT24 OPPAB 6 402 389 0.06% 4 000

IT25 APPAG 4 794 115 1.00% 47 718

IT26 ARCEA

LT01 NMA [NPA] 86 077 487 1.78% 1 534 257

LU01 Ministère de l'Agriculture 4 310 828 2.97% 128 126

LV01 RSS 52 512 931 4.05% 2 126 191

MT01 MRRA PA 2 656 238 1.16% 30 739

NL04 ELFPO 27 849 916 3.96% 1 102 793

PL01 ARiMR [ARMA] 654 646 405 1.79% 11 724 831

PT03 IFAP 166 884 840 10.49% 17 501 139

RO01 PARDF

SE01 SJV 39 280 927 3.88% 1 522 522

SI01 ARSKTRP 42 697 633 0.94% 402 691

SK01 APA 86 339 546 1.39% 1 203 130


2 662 130 040 3.05% 81 181 581



3.3.5 What mitigating factors exist in order to render a reservation unnecessary?

The following table sets out the situation for all Paying Agencies where the adjusted error rate is above 2%. It indicates if reservations are required and details mitigating factors.

The amount at risk is calculated based on the relevant expenditure.

Paying

Agency

Adjusted

error rate

Relevant

amount at

risk

Reasons for top-up Reservation Mitigating factors/reservation follow up

BE03 -

Belgium

5.41% EUR

1 334 m

DG AGRI audits performed in

2016, also supported by the

ECA findings and Certification

Body opinion, revealed serious

deficiencies in the

management and control

system of the Paying Agency

for investment and start-up

support.

Yes A reservation is entered in respect of 2016

expenditure.

The action plan implemented by the Member

State addresses the shortcomings identified

for IACS measures by the Certification Body

for the financial year 2015. DG AGRI will

monitor the effectiveness of such actions.

Furthermore, the action plan should be

reinforced to address effectively the

identified deficiencies under investment and

start-up support.

The ongoing conformity clearance procedure

will ensure that the financial risk to the EU

budget is covered.

BG01 -

Bulgaria

10.58% EUR

44 115 m

The DG AGRI audit and FVO

detected serious deficiencies

in the management and

control system for area-

related measures, mainly

organic farming. Serious

deficiencies were also

identified in basic services and

village renewal operations as

regards both public

procurement and private

investments.

Finally, a 2% top up was

applied to all expenditure, as

the package of final accounts,

audit reports and audit

certificates was not submitted

by the Member State within

the deadlines and at the time

of drafting and therefore there

is insufficient assurance.


expenditure.

The Member State has reported the

implementation of corrective actions

addressing most of the deficiencies

identified. For IACS measures, the action

plan should be reinforced in order to

address the rest of deficiencies identified in

2016. On public procurement, the Member

State has reported that new mechanisms

and a legal framework have been put in

place for the 2014-2020 programming

period. DG AGRI will closely monitor the

situation. The reports and the accounts will

be analysed at a later stage.



budget is covered.

CZ01 -

Czech

Republic

11.05% EUR

23 753 m

The Member State has

reported high error rates for

IACS payments.

DG AGRI audits revealed

deficiencies in the

coordination of checks which

led to pre-notifications of on-

the-spot checks to

beneficiaries under area-

related payments that

partially affect financial year

2016. DG AGRI audits also

identified deficiencies in the


system for investments and

farm and business

development support.


expenditure.

Previously identified deficiencies related to

the supervision of delegated bodies under

area-related payments have been duly

corrected. On the pre-notification of on-the-

spot checks, the situation has been

remedied, although expenditure is still

partially affected. The Member State should

implement an action plan correcting the

deficiencies in farm and business

development support and the underlying

causes of high error rates in IACS

payments.



budget is covered.


Paying

Agency

Adjusted

error rate

Relevant

amount at

risk


DE12 -

Germany

3.50% EUR

2 691 m

The Member State reported

high error rates for agri-

environment-climate

payments and organic farming

payments.


expenditure.


action plan addressing the persistent

deficiencies identified in IACS measures. DG

AGRI will monitor the situation.

Germany

- DE19

2.12% EUR

1 077 m

The adjusted error rate is

based only on the control data

reported by the Member

State, in particular on the

agri-environment-climate

measure.

No A reservation is not considered necessary.

The Member State has informed that the

high reported error rate is mainly due to

outliers and that, nevertheless, additional

trainings and information sessions for

beneficiaries have been set up. DG AGRI will

monitor the situation.

Germany

- DE21

2.09% EUR

0.762 m




State, in particular for IACS,

which is mainly due to the

livestock density requirement

for the organic farming

measure and support for

areas with natural constraints

(ANC).

No As the amount at risk is below the de-

minimis threshold established in DG AGRI's

materiality threshold (see Annex 4); no

reservation is required.

The Member State has informed that the

commitments will be revised and if

necessary, the RDP modified accordingly.

Denmark

- DK02

3.49% EUR

3 956 m

A 2% top up was applied to all

expenditure, as the package

of final accounts, audit reports

and audit certificates was not

submitted by the Member

State within the deadlines and

at the time of drafting. As a

result, there is insufficient

assurance.

DG AGRI audits also detected

serious deficiencies in the


system for Leader.


expenditure.

The Member State has effectively addressed

previously identified deficiencies in

investment measures. It is currently

implementing an action plan that addresses

most of the recent audit findings under

Leader. However, the Member State should

reinforce the action plan to address the

remaining deficiencies. DG AGRI will closely

monitor the situation. The reports and the

accounts will be analysed at a later stage.



budget is covered.

Estonia -

EE01

2.13% EUR

1 870 m

DG AGRI audits identified

limited deficiencies in the

quality of on-the-spot checks

of farm and business



Following the DG AGRI audit findings in

2016, the Estonian authorities have

mitigated the risk to the Fund by carrying

out additional retro-active on-the-spot

checks for beneficiaries who received

support under Measure 6 prior to the audit.

For new applications, Estonia has improved

the on-the-spot checks and the associated

check-list.



budget is covered.

Spain -

ES01

3.94% EUR

12 935 m

The paying agency reported a

high error rate for agri-

environment-climate support

and ANC support.

DG AGRI audits detected

deficiencies in the verification

of the priority status in


expenditure.

Based on the last action plan update, the

Member State has addressed the root

causes identified in previous audit findings

on IACS measures.

In relation to 2016, the Member State


Paying

Agency

Adjusted

error rate

Relevant

amount at

risk


relation to support for young

farmers in the 2007-2013

period, which still affects

financial year 2016. A 2016

DG AGRI audit also uncovered

deficiencies in the verifiability

of certain eligibility conditions

for investment support.

informed that it had introduced a new

control plan from February 2016 for

administrative checks and on-the-spot

checks performed on the register of the

priority holdings, which should correct the

deficiency in the system. However, the

deficiency still affects at least part of the

expenditure for FY 2016. The Member State

should reinforce the action plan addressing

the deficiencies found under non-IACS

measures in 2016.



budget is covered.

FR18 -

France

4.95% EUR

0.471 m

The reliability of control data

on IACS measures cannot be

assessed as the reports were

not submitted to the

Commission on time.

Based on the Certification

Body's assessment, an

adjustment was made to the

error rate reported by the

Member State.





FR19 -

France

10.80% EUR

75 776 m



assessed as the reports were

not submitted to the

Commission on time.

DG AGRI audits found that

previously identified

deficiencies in the checks

performed on livestock

density had been partially

addressed from claim year

2015. However, expenditure

relating to financial year 2016

is still partially affected. DG

AGRI audits also detected


performed on reasonableness

of costs and on payment

claims under investment

measures. In the particular

case of the RDP of La

Réunion, weaknesses were

also detected in the checks

performed on public

procurement and in-situ visits.

According to the Member

State action plan, deficiencies

identified for in-situ visits of

non-productive investments

were only amended from

September 2016. Some

deficiencies were also found in

the timing of on-the-spot

checks on the setting up of

young farmers. In 2016, DG

AGRI detected serious

deficiencies in the system of

checks performed on Leader

and Technical Assistance,

which affected several key


expenditure.

The action plan implemented by the Member

State addresses the checks performed on

livestock density. Deficiencies in the in-situ

visits of non-productive investments have

been addressed. The Member State reported

that the timing of the on-the-spot checks

performed on young farmers has been

corrected for the 2014-2020 RDP.

Nonetheless, the action plan should be

reinforced to address effectively the

identified weaknesses in Leader, investment

operations and Technical assistance.



budget is covered.


Paying

Agency

Adjusted

error rate

Relevant

amount at

risk


and ancillary controls.





Member State.

GB05 -

The

United

Kingdom

2.08% EUR

1 037 m




State, with a high error rate

coming from ANC support.


The Member State is implementing

corrective actions to reduce the errors

linked to declared land.

GB06 -

The

United

Kingdom

7.58% EUR

2 421 m


high error rates for public

investments and knowledge

and information support.

Recent DG AGRI audits have

found that previously

identified deficiencies in cross-

checks with the animal

database and livestock

assessment remain. Other

serious deficiencies in animal

welfare were also identified.

DG AGRI audits also identified

recurring deficiencies in first

afforestation of agricultural

land support, which still

impact payments made to

beneficiaries in 2016. Several

deficiencies were also found in

key controls of forestry

measures as well as some

deficiencies in the quality of

on-the-spot checks and the

audit trail under Leader.





Member State.


expenditure.

The action plan covers most of the areas

where previous deficiencies were detected,

although closer monitoring is required for

actions involving examination and review of

procedures and tools. However, the action

plan should be reinforced to address

deficiencies in Forestry and Leader.



budget is covered.

GR01 -

Greece

3.87% EUR

28 817 m


on IACS cannot be assessed

given the absence of timely

reporting to the Commission.

DG AGRI audit on First

afforestation support detected

possible deficiencies in the

cross-checks performed on

IACS payments and the order

of application of penalties. In

addition, DG AGRI audits


assessment of reasonableness

of costs for private

beneficiaries. DG AGRI audits

also identified deficiencies in

the selection of infrastructure

projects. Finally, the ECA

identified a systematic

deficiency relating to amounts

paid under the discontinued

measure 'Early Retirement',

which affects financial year


expenditure.

The Member State has duly addressed the

previous deficiencies linked to permanent

pasture recording in LPIS. It is currently

improving IT tools to address the

deficiencies identified in cross-checks, and

updating the reference price list for

equipment and building infrastructure costs.

Corrective actions have also been

implemented for first afforestation support.

DG AGRI will closely monitor the situation.

However, the Member State should

reinforce the action plan to address the

deficiencies under early retirement

payments.



budget is covered.


Paying

Agency

Adjusted

error rate

Relevant

amount at

risk


2016.

HU01 -

Hungary

3.32% EUR

8 645 m



IACS payments.

DG AGRI audits in 2016

identified serious deficiencies


control system for area-

related payments, affecting

several key controls. DG AGRI

audits also detected several

deficiencies in investments,

infrastructure and technical

assistance, concerning public

procurement and

reasonableness of costs.

Serious deficiencies were also

found in support to producer

groups relating to the checks

performed on the eligibility of

beneficiaries and expenditure.

Finally, deficiencies were also

detected in the selection of

Leader projects.


expenditure.

For the 2014-2020 period, the procedure for

selecting producer groups and Leader

projects has been amended. The Member

State has also introduced revised

procedures to assess the reasonableness of

costs and public procurement procedures.

DG AGRI will closely monitor the situation.

Furthermore, the Member State should

implement an action plan addressing the

rest of the identified deficiencies mainly for

IACS measures and payments under certain

producer groups.



budget is covered.

IE01 -

Ireland

3.84% EUR

9 748 m

DG AGRI audit detected


performed on the agri-

environment-climate

measure. Deficiencies were

also identified in on-the-spot

checks performed on

investment operations and in

the administrative checks to

verify the eligibility of the

applicant and in the audit trail

for Leader.





Member State.


expenditure.


implementation of corrective actions for

Leader, which will be closely monitored by

DG AGRI. The action plan should be

reinforced to address deficiencies identified

in investments by private beneficiaries and

agri-environment-climate support.



budget is covered.

IT01 -

Italy

4.00% EUR

36 649 m



assessed given the absence of

timely reporting to the

Commission.

DG AGRI audits identified

deficiencies in the assessment

of reasonableness of costs,

namely the three-offer

method, public procurement

and some eligibility checks

performed on investment

measures. In addition,

deficiencies linked to setting-

up support for young farmers

still have an impact on

financial year 2016. On

technical assistance

expenditure, DG AGRI



system, namely the

assessment of reasonableness


expenditure.


implementation of corrective actions to

address deficiencies under technical

assistance and reasonableness of costs. For

measure 112 'Setting-up of young farmers',

corrective actions have been taken for the

future, although deficiencies still affect 2016

expenditure.The Member State should

reinforce the action plan to address the rest

of deficiencies identified, notably as regards

public procurement and Leader.



budget is covered.


Paying

Agency

Adjusted

error rate

Relevant

amount at

risk


of costs that still affect

financial year 2016. Finally,

DG AGRI audits observed

deficiencies in the assessment

of the reasonableness of costs

and eligibility checks

performed on SME status

under Leader support.

IT25 -

Italy

7.43% EUR

0.672 m


high error rates for the agri-

environment-climate

measure.

A 2016 DG AGRI audit also

identified deficiencies in IACS

measures.





The Member State should address the

deficiencies in IACS measures detected by

both regional controls and the DG AGRI

audit in 2016. DG AGRI will closely monitor

the situation.



budget is covered.

IT26 -

Italy

4.28% EUR

4 679 m


high error rates for IACS.

DG AGRI audits, following up

on deficiencies observed in

previous years, detected

shortcomings in investment

measures in terms of the

verification of project

eligibility and reasonableness

of costs.





Member State.


expenditure.

The deficiencies identified in IACS measures

during previous audits, namely

administrative checks performed on crop

rotation and double financing, have been

addressed. The Member State has informed

that an updated reference price list for the

assessment of the reasonableness of costs

was adopted in July 2016. DG AGRI will




budget is covered.

LT01 -

Lithuania

5.84% EUR

12 585 m


reported high error rates in

EAFRD payments.

DG AGRI audits in 2014

identified serious deficiencies


control system for investment

measures by private

beneficiaries. Deficiencies

were also identified in Leader.





Member State.


expenditure.

The Member State has reported corrective

actions for the deficiencies identified in DG

AGRI audits. However, it should identify the

reasons for the high number of errors

detected as a result of administrative and

on-the-spot checks and introduce

appropriate corrective measures.

On the deficiencies identified during DG

AGRI audits, the ongoing conformity

clearance procedure will ensure that the

financial risk to the EU budget is covered.

NL04 -

The

Netherla

nds

4.16% EUR

1 432 m



EAFRD payments.

Deficiencies were also

identified in the checks

performed on public

procurement for non-

productive investments.

Finally, shortcomings in the

system of checks under


expenditure.


implementation of corrective actions

addressing the deficiencies identified.

However, it should continue to implement

the action plan and identify the underlying

reasons for the high reported errors in non-

IACS, implementing corrective actions

where necessary. DG AGRI will closely


Paying

Agency

Adjusted

error rate

Relevant

amount at

risk


Leader identified in 2014 have

not yet been corrected.




budget is covered.

PL01 -

Poland

2.04% EUR

10 536 m

DG AGRI audit detected

deficiencies in the


system for agri-environment

payments and organic farming

payments. Deficiencies were

also identified in support for

producer groups. Finally,

some deficiencies were also

found by DG AGRI and ECA

audits in technical assistance.

The Certification Body also



system.

Yes

A reservation is entered in respect of 2016

expenditure.

For IACS measures, the Member State has

implemented corrective actions addressing

the deficiencies identified.

The action plan should be reinforced in the

light of the findings of the Certification

Body.



budget is covered.

PT03 -

Portugal

6.24% EUR

34 509 m



IACS.

DG AGRI audits, following ECA

findings, detected deficiencies

in the checks performed on

the SME verification of private

investments, which affect

financial year 2016. DG AGRI

audits also identified

deficiencies in the


system for Leader operations,

namely checks performed on

the eligibility criteria and the

reasonableness of costs.

Finally, deficiencies were

identified in technical

assistance expenditure.


expenditure.

The Member State has corrected previous

deficiencies identified in IACS measures and

has reported the implementation of some

corrective actions on SME verification and

reasonableness of costs. It should reinforce

the action plan to address deficiencies under

technical assistance and high error rates

under IACS. DG AGRI will closely monitor

the situation.



budget is covered.

RO01 -

Romania

3.74% EUR

40 088 m


high error rates for IACS

payments.

A DG AGRI audit also detected

some deficiencies in these

measures. The ECA audits

identified systematic

irregularities in the amounts

paid to beneficiaries under the

animal welfare measure,

triggering further audit

assessment by DG AGRI.

DG AGRI audits also detected

deficiencies in the

management of investment

measures by private

beneficiaries, and deficient

checks performed on semi-

subsistence farming support;

although they were partially

corrected by the national

authorities, they still affect

2016 expenditure. In addition,

breaches in public

procurement for infrastructure


expenditure.

The Member State has partially corrected

the calculations of animal welfare payments

from January 2016. Following the audit

findings, the Member State also amended

the RDP in 2016 to improve the verifiability

and controllability of IACS measures.

The Member State is currently implementing

an action plan to reduce the error rate in

rural development spending and addressing

the deficiencies identified in the

management and control system. DG AGRI

will continue to monitor the situation.

The financial risk to the EU budget for

financial year 2016 is covered by ongoing

conformity clearance procedures and, in the

case of animal welfare payments, by

interruptions and reductions of part of

quarterly payments (see specific section).


Paying

Agency

Adjusted

error rate

Relevant

amount at

risk


support were also identified.





Member State.

SE01 -

Sweden

13.94% EUR

26 679 m


under IACS measures cannot

be fully assessed given the

absence of timely reporting to

the Commission.

DG AGRI audits in 2016 also

identified several deficiencies


control system for both IACS

and non-IACS measures.


expenditure.

The Member State has duly corrected

previously identified deficiencies in non-

productive investments in financial year

2016. Nonetheless, given the serious

deficiencies identified in both IACS and non-

IACS management and control systems

during recent DG AGRI audits, an action

plan should be implemented to correct the

situation.



budget is covered.

SK01 -

Slovakia

6.72% EUR

12 584 m


high error rate for IACS

measures.

A DG AGRI audit also detected

minor deficiencies in the

timing of on-the-spot checks

of organic farming. Moreover,

serious deficiencies were

detected in the management

and control systems for

agricultural private

investments and business





error rate reported by the MS.


expenditure.


action plan to correct the situation under

investments and business development

support and eventually, the timing of checks

performed on organic farming. The Member

State should also address the underlying

causes of the high errors rate reported in

IACS.



budget is covered.

Table: Annex 10-3.3.16

Note that the calculation of the top-up is based on the results of the audit and the financial correction proposed for the audited single population at the level of the Paying

Agencies concerned.


For the closure balance:

PA/MS

Adjusted

error

rate

Amount at

risk

Calculation of the amount at

risk Reservation Mitigating factors

Closure

EAFRD

3.05% EUR

81.181 m

A total amount of

EUR 2 662 130 m was paid as

closure balance for EAFRD

2007-2013 programming

period for 55 Paying Agencies

(AT01, BE02, CY01, CZ01,

DE01, DE03, DE04, DE07,

DE11, DE12, DE15, DE17,

DE18, DE19, DE20, DE21,

DE23, DE26, DK02, EE01,

ES02, ES05, ES06, ES07,

ES08, ES09, ES10, ES13,

ES14, ES15, ES16, ES18,

FI01, GB05, GB06, GB09,

HU01, IE01, IT05, IT07, IT8,

IT10, IT23, IT24, IT25, LT01,

LU01, LV01, MT01, NL04,

PL01, PT03, SE01, SI01,

SK01) and corresponding to

64 out of 92 rural

development programmes.

The closure was done in the

framework of the financial

clearance of the accounts for

the last year of execution

(expenditure incurred before

31 December 2015). The

adjusted error rate for those

Paying agencies for FY2015

(in AAR 2015) was used for

the calculation of the error

rate of the closure balance.

No The accounts of the Paying agencies listed

in

Table: Annex 10 – 3.3.15 concerning the

last execution year of EAFRD 2007-2013

programming period were cleared in

November 2016. The final balances for

these programmes for which the annual

accounts have been cleared were paid in

2016.

The bulk of the final balance corresponds to

payments declared by Member States in

2015. Therefore the adjusted error rates

reported in DG AGRI's AAR 2015 for the

paying agencies concerned have been used

to estimate the adjusted error rate and

amount at risk for the overall payment at

closure.

Where necessary, deficiencies identified in

the control systems already triggered in

2015 requests to the Member States to

take remedial actions and opening of

conformity procedures.

No specific reservation is considered

necessary for the balance payments paid in

2016. Concerning two Paying agencies,

IT08 (Italie) and GB09 (The United

Kingdom) for which the error rate for

closure balance is significantly above the

materiality threshold and no reservation is

entered in respect of 2016 expenditure, no

further specific reservation is considered

necessary. DG AGRI is monitoring the

situation and conformity clearance

procedures are ensuring that the financial

risk to the EU budget is covered.

The final accounts of the paying agencies

not listed will be subject to future clearance

of accounts decisions and the balance

payments will then be treated as those

done in 2016.

Table: Annex 10-3.3.17


2015 Reservations not carried forward in the 2016 AAR (10 paying agencies):

Paying

Agency

Adjusted

error rate Justification

Austria 1.44% The Member State has taken the necessary actions to remedy the deficiencies

found in investment support that aims to restore forestry potential. DG AGRI will

closely monitor the situation.

On organic farming, the Member State has taken corrective actions, although part

of the expenditure in financial year 2016 is still affected. The financial risk to the

EU budget for financial year 2016 is covered by ongoing conformity clearance

procedures.

Germany N/A DG AGRI audits detected deficiencies in the checks performed on public

procurement procedures. The contradictory procedure concluded that only

individual errors were concerned. The Member State accepted the errors and

implemented several corrective actions in relation to public procurement. The

financial risk for the individual errors where recovery has not yet been made by

the Member State is covered by ongoing conformity clearance procedures.

Germany

Mecklenburg-

Vorpommern

0.16% DG AGRI audits detected deficiencies in the checks performed on public

procurement procedures. The contradictory procedure concluded that the

individual errors did not affect this Paying Agency.

Spain N/A DG AGRI audits detected deficiencies in the checks performed on public

procurement procedures. The contradictory procedure concluded that only

individual errors were concerned. The Member State accepted the errors and

implemented several corrective actions in relation to public procurement. The

financial risk for the individual errors where recovery has not yet been made by

the Member State is covered by ongoing conformity clearance procedures.

Spain

Madrid

1.03% The Paying Agency has implemented an action plan covering all beneficiaries of

the measure concerned. Corrective actions are being implemented to correct

deficiencies identified, although certain IACS deficiencies still need to be

addressed. DG AGRI will closely monitor the situation.

The financial risk to the EU budget for financial year 2016 is covered by ongoing

conformity clearance procedure.

Spain

Valencia

0.79% The Paying Agency has implemented an action plan correcting previous

deficiencies.


conformity clearance procedures.

United

Kingdom -

England

0.56% The Member State has taken the necessary actions to remedy the deficiencies

found. The Action Plan established by the Paying Agencies was also reviewed by

the Certification Body. DG AGRI will monitor the situation.

Italy

Toscana

0.08% The high error rate reported by the Member State in 2015 has been addressed in

the concerned measure through corrective actions.

Italy

Emilia-

Romagna

0.81% The deficiencies identified in IACS measures during previous audits, namely

cross-checks with the animal database, have been corrected from claim year

2015.

The Paying Agency has informed that an updated reference price list for assessing

the reasonableness of costs will be fully operational in 2017. In the meantime, an

external reference price list is used to compare offers and for building works. DG



conformity clearance procedures.

Latvia 0.88% Previously identified deficiencies in investment operations have been duly

addressed and corrected in financial year 2016.



3.3.6 Conclusions for ABB04

3.3.6.1 Expenditure under the Rural Development Programmes

Total expenditure for the Rural Development Programmes in 2016 amounted to EUR 11 305 053 961 of which EUR 4 495 770 025 were financed by the budget for the 2007-

2013 programming period (budget item 05040501), and EUR 6 809 283 936 were financed by the budget for the 2014-2020 programming period (budget item 05046001).

DG AGRI's assessment results in an adjusted error rate for the total expenditure (without prefinancing) of 3.86%48.

25 out of the 72 Paying Agencies have an adjusted error rate above 2% (10 of which

were above 5%: Belgium (Wallonie), Bulgaria, the Czech Republic, France (ASP), the United Kingdom (Scotland), Italy (Trento), Lithuania, Portugal, Slovakia and Sweden.

In line with its materiality criteria in Annex 4, 9 cases where the error rate is above 5% were automatically subject to a reservation (Belgium (Wallonie), Bulgaria,

Czech Republic, France (ASP), United Kingdom (Scotland), Lithuania, Portugal, Slovakia and Sweden). In all of these cases, the high adjusted error rate was determined further

to assessment and adjustment of the error rate by DG AGRI, based on its own audits and on the assessment of the Certification Bodies, or due to the system assessment given by

the ECA. In one case (Trento (IT)), the amount at risk is below DG AGRI's de minimis

threshold of EUR 1 million as established in Annex 4 (materiality criteria) therefore no reservation was necessary.

For 16 Paying Agencies with an error rate between 2% and 5%, DG AGRI examined the situation for each Paying Agency concerned to determine if risk mitigation

conditions existed rendering it unnecessary to make a reservation. In 3 cases (Germany, United Kingdom – North Ireland and Estonia) it was considered that, given the mitigating

factors present it would not be necessary to make reservations. For 2 Paying Agencies (Germany 21 and France 18) the amount at risk is below DG AGRI's de minimis threshold

of EUR 1 million as established in Annex 4 (materiality criteria) therefore no reservation

was necessary. For the remaining 11 Paying Agencies a reservation was deemed necessary.

As regards reservations from 2015, in 10 cases (Austria, Germany (MS, Mecklenburg-Vorpommern), Spain (MS, Madrid, Valencia) Italy (Toscana, Emilia-Romagna), United

Kingdom - England and Latvia it was not considered necessary to carry over reservations from the 2015 AAR with regard to 2016 expenditure.

In total 16 reservations from 2015 are repeated in 2016 as the remedial action plans are still underway while 4 new reservations are introduced (Germany-Niedersachsen,

Lithuania, Poland and Slovakia).

The overall outcome of this exercise is that 20 reservations are necessary at Paying Agency level:

Belgium

Bulgaria

Czech Republic

Germany (Niedersachsen)

Denmark

Spain (Andalucía)

48 The adjusted error rates (based on the control data following a validation and adjustment process) do

not apply to the pre-financing. The assessment of the risk for the entire chapter 05 04 is assessed in the

following section.


France (ASP)

The United Kingdom (Scotland)

Greece

Hungary

Ireland

Italy (AGEA, Calabria)

Lithuania

The Netherlands

Poland

Portugal

Romania

Sweden

Slovakia

3.3.6.2 Risk assessment for other budget items within ABB04

While budget item 05040501 and 05046001 concern the Rural Development programmes

for 2007-2013 and 2014-2020 and thus accounts for most of the expenditure for ABB04,

it is also necessary to assess the risk for the entire expenditure under chapter 0504. The following table sets out the budget items in question and the error rates which have been

used to assess the amounts at risk.

Management

typeChapter

Budget

itemDescription

Payments

(EUR)

Error rate

(%)

Amount at risk

(EUR)

05040114 Completion of rural development financed by the EAGGF

Guarantee Section - Programming period 2000 to 2006

-1 048 601 0.00% -

05040201 Completion of the European Agricultural Guidance and

Guarantee Fund, Guidance Section - Objective 1 regions (2000

to 2006)40 410 348 0.00% -

Rural development programmes 2007-20134 495 770 025 3.48% 156 601 319

Interim payments 2007-2013

1 833 639 985 4.11% 75 419 738

Final balance2 662 130 040 3.05% 81 181 581

Promoting sustainable rural development, a more

territorially and environmentally balanced, climate-

friendly and innovative Union agricultural sector7 809 874 920 3.59% 280 073 741

Interim payments for promoting sustainable rural development,

a more territorially and environmentally balanced, climate-

friendly and innovative Union agricultural sector 2014-2020

6 809 283 936 4.11% 280 073 741

Pre-financing for promoting sustainable rural development, a

more territorially and environmentally balanced, climate-friendly

and innovative Union agricultural sector 2014-20201 000 590 984 0.00% -

05040206 Completion of Leader (2000 to 2006)7 437 218 1.00% 74 372

05046002 Operational technical assistance 2014-202012 554 730 1.00% 125 547

12 364 998 639 3.53% 436 874 979

Direct

Management

Shared

Management

Total

Payments reimbursed by DG AGRI to the Member States in 2016

0504

05040501

05046001


The adjusted error rate for ABB04 is 3.53% and the total amount at risk is EUR 436.9 million.

The assessment of the risk for the entire chapter 0504 covers all payments to Member States in 2016 including pre-financing. Note that the adjusted error

rate for amounts reimbursed to Member States for payments to beneficiaries and the closure balance is 3.86%.

The average amount of net financial corrections per year for the five year period 2012-2016 (excluding corrections made for cross-compliance) is

EUR 162.2 million for ABB0449 while recoveries from Member States from

beneficiaries amounted to EUR 109.3 million.

3.3.7 Root causes of the error rate in Rural Development – what is DG AGRI doing about it?

Since its AAR for 2007 and apart from 2010, DG AGRI has made a reservation on all or part of the expenditure covering Rural Development.

Because of the specific nature of the Rural Development measures, in particular the conditions and eligibility criteria that have to be met, as well as the high number of

beneficiaries of the policy, it has proven very difficult to keep the level of error below a

materiality threshold of 2%. However, since 2011, when it first began reporting separately on the error rate for Rural Development, the level of error found by the

European Court of Auditors (ECA) has regularly decreased: from 7% in year 2013, to 6% in 2014 and 5.3% in 2015.

As a result of a then considerable divergence between the levels of errors estimated by the ECA and by DG AGRI as well as growing concerns within the Commission as to the

reliability of Member States' control statistics, in the 2012 AAR a general reservation was placed on rural development expenditure as a whole. For the 2013 and 2014 AARs, DG

AGRI adjusted Member States' control statistics to reflect undetected and thus

unreported error and estimated an adjusted error rate of 5.19%. As this work was carried out at Paying Agency level, a targeted approach was possible with regard to

reservations and this resulted in the Director General being able to issue specific reservations for 31 Paying Agencies in the 2013 AAR and for 28 Paying Agencies in the

2014 AAR, instead of for the whole of Rural Development expenditure. DG AGRI estimated that the adjusted error rate for the year 2015 further decreased to 4.16%,

with 24 Paying Agencies placed under reservation for that year and 2 reservations at Member State level for public procurement deficiencies.

The positive trends reported above reflect a number of initiatives. First, a specific process

to address the high error rate in rural development has been undergoing since the year 2012, when DG AGRI and the Member States undertook a joint screening of the root

causes for errors. As a result of this screening, as from 2013 Member States are reporting regularly on relevant actions carried out to reduce the level of errors ("action

plans"). As from the year 2016 those action plans have been requested only to Paying Agencies subject to serious audit findings (from DG AGRI, ECA and/or

national/Certification Body audits), and/or where a reservation has been placed in the AAR, provided that the reservation has ongoing effects.

Furthermore, as from 2015, DG AGRI has further improved the system of reporting by

Member States concerned, including a reinforced focus on audit findings as well as improved indicators and milestones for monitoring purposes. The action plans are

expected to address the identified deficiencies by describing, for each of them, the

49 See section 2.4.1.5.1 of the main body of the report on 'corrective capacity'.


corrective actions to be taken and the established benchmarks and timetable for implementing their actions. As from 2016 the request for regular reporting on action

plans is made once a year, but could be increased depending on the gravity of the audit findings.

Since 2013, six seminars on error rate have been organised, of the latest took place in March 2016. The seminars aim at presenting the state of play in the implementation of

the action plans, share good practices, and provide guidance. These seminars are organised jointly in the framework of the Rural Development Committee and the

Agricultural Funds Committee in order to ensure the involvement of both Managing

Authorities and Paying Agencies. In the meantime, the geographical desks ensure regular monitoring of the action plans and carry out follow up activities in annual and ad-hoc

meetings with Member States, monitoring committees and if relevant in the context of programme amendments.

In parallel, the audit capacity of DG AGRI has been reinforced. The number of audit missions has been increasing from the level in 2013 and the audits target specific issues

related to error rates.

Furthermore, the legal framework provides for interruption and reduction/suspension of

payments in case of serious deficiencies in the management and control systems for the

expenditure committed under EAFRD during the 2007-2013 and the 2014-2020 programming periods. In 2016, 9 quarterly declarations of expenditure by Member States

had been subject to interruption and/or reduction/suspension (see section on interruptions, reductions and suspensions). In addition, the new requirements introduced

by the legal framework for Rural Development in terms of verifiability and controllability have likely contributed to the observed reduction in the level of errors.

Finally, many activities have been going on in terms of capacity building:

The European Network for Rural Development is playing an enhanced role in

disseminating good practices and guidance related to the reduction of errors, and

improving overall RDP implementation. In 2016, workshops and other events for Managing Authorities and Paying Agencies have been carried out in relation to the

following topics: simplified cost options in LEADER/CLLD, definition and use of selection criteria, the design and implementation of result-based agri-environment climate

measures, and more general events aiming to unlock the potential and improve overall implementation of RDPs.

DG AGRI is encouraging cross-regional cooperation and promoting training on specific topics related to better implementation of programmes and the reduction of errors. In

2016, workshops have been carried out in London for British and Irish Managing

Authorities and Paying Agencies, and in Paris, for French regional and national administrations. Those workshops have touched issues related to audits and error rates

and involved representatives of the Commission, including audit units, policy and operational units, and the European Court of Auditors The overall goal of such events is

to facilitate a constructive and open dialogue between relevant actors, in view of exchanging good practices and establishing clear guidelines.

Part 3.4: Error Rate and corrective capacity

In order to preserve comparability with the reports from previous years, the table below

presents the error rates, amounts at risks and corrective capacity calculated using the same methodology as in the annual activity report of DG AGRI for 2015.



financial corrections recoveries total

m EUR m EUR m EUR m EUR m EUR

0501 Administrative expenditure 20.74 0.04% 1.000% 0.207 -

0502 Interventions in Agricultural Markets 3 127.90 5.51% 2.850% 89.145 168.759

0503 Direct Aids 40 808.73 71.85% 1.996% 814.395 626.497

EAGF 43 936.63 77.36% 2.056% 903.540 795.255 106.564 901.819 2.05%

0504 Rural Development 12 365.00 21.77% 3.533% 436.875 162.226 109.334 271.560 2.20%

0505 Pre-accession Measures 339.24 0.60% 0.069% 0.234 -

0506 International Aspects 4.40 0.01% 1.000% 0.044 -

0507 Audit 102.32 0.18% 0.000% 0.000 -

0508 Policy Strategy and Coordination 25.62 0.05% 1.000% 0.256 -

0509 Horizon 2020 - Research & Innovation 0.00 0.00% 0.000% 0.000 -

CAP Total 56 793.96 100.00% 2.361% 1 341.156 957.481 215.898 1 173.38 2.07%

Corrective capacity

as % of 2016

expenditure

Title 05 Agriculture and Rural DevelopmentDG AGRI annual

accounts (Annex 3)

% of CAP

budgetAmount at riskAdjusted error rate


4. The Conformity Clearance Procedure and net

financial corrections

4.1 What is "Clearance "?

While it is the Member States which have the responsibility for managing and controlling

the various aid schemes provided for by the CAP legislation, there must be a mechanism in place which enables the Commission to ensure that they carry out their work properly

and, if they fail to do so, draw the necessary financial consequences. This mechanism consists of the clearance procedures operated by the Commission, which include an

annual financial clearance of the accounts of each Paying Agency and a multi-annual

conformity clearance covering the conformity of the expenditure with EU rules, and as regards the EAFRD in conformity with the applicable EU and national rules.

The legal basis for the Clearance of Accounts procedures in place is provided by Regulation (EU) No 1306/201350, Commission Delegated Regulation (EU) No 907/201451

and Commission Implementing Regulation (EU) No 908/201452.

4.1.1 Financial clearance of accounts – Completeness, accuracy and

veracity of the annual accounts

The financial clearance is based on an examination by the Certification Body, an audit

body which is independent from the Paying Agency. This body draws up a certificate stating whether it has reasonable assurance that the accounts of the Paying Agency are

true, complete and accurate, that the internal control procedures have operated satisfactorily and whether the expenditure for which reimbursement has been requested

from the Commission have been in conformity with the applicable rules (see above Part

2). They also give an opinion on the management declaration signed by the head of the Paying Agency, i.e. stating whether the examination puts in doubt the assertions made in

the management declaration.

The financial clearance covers the annual accounts of each Paying Agency and the control systems set up by these. Within this framework, particular attention is paid to the

Certification Bodies’ conclusions and recommendations (where weaknesses are found),

following their reviews of the Paying Agencies’ management and control systems. This review also covers aspects relating to the accreditation criteria for the Paying Agencies.

Commission's audits under the annual financial clearance procedure may lead to opening a conformity clearance procedure when errors are found in the annual accounts and

and/or findings from certification/accreditation missions require that a financial correction is proposed.

The Commission adopts an annual clearance of accounts decision, by which it conveys that it accepts the Paying Agencies annual accounts on the basis of the certificates and

reports from the Certification Bodies, but without prejudicing any subsequent decisions to

recover expenditure which proves not to have been effected in conformity with the applicable rules (this is reserved for the conformity clearance). The Commission must

adopt this decision by 31 May of the year following the financial year in question (for agricultural expenditure a financial year starts on 16 October of one year and ends on 15

October of the next year).


and monitoring of the common agricultural policy (OJ L 347 of 20.12.2013) 51 Commission Delegated Regulation (EU) No. 907/2014 of 11 March 2014 supplementing Regulation (EU) No.

1306/2013 with regard to paying agencies and other bodies, financial management, clearance of accounts,

securities and use of euro (OJ L 255 of 28.08.2014). 52 Commission Implementing Regulation (EU) No 908/2014 of 6 August 2014 laying down rules for the

application of Regulation (EU) No 1306/2013 with regard to paying agencies and other bodies, financial

management, clearance of accounts, rules on checks, securities and transparency (OJ L 255 of 28.08.2014).


4.1.2 Conformity clearance – checking the system

In contrast to the financial clearance, the conformity clearance is designed to exclude

expenditure from EU financing which has not been paid in conformity with EU rules, thus shielding the EU budget from expenditure that should not be charged to it. These "net

financial corrections" are recovered from the Member States. The conformity clearance is, therefore, not a mechanism by which irregular payments are recovered from the final

beneficiaries, which according to the principle of shared management is the sole responsibility of the Member States.

However, net financial corrections are a strong incentive for the Member States to improve their management and control systems and thus to prevent or detect and

recover irregular payments to final beneficiaries. The conformity clearance thereby

contributes to the legality and regularity of the transactions at the level of the final beneficiaries.

Financial corrections

Financial corrections relate to expenditure which as regards the EAGF has not been spent by the Member States in conformity with EU rules or as regards the EAFRD has not been

spent in conformity with the applicable EU and national rules, and which are therefore recovered to the EU budget. Please note that financial corrections cannot be qualified as

"penalties" or "fines". A penalty or fine implies a sanction over and above the undue

expenditure which is not the case for DG AGRI's financial corrections.

Explanatory Box: Annex 10 - 4.1

While the financial clearance is an annual exercise, conformity clearance does not follow

an annual cycle. It covers expenditure incurred in more than one financial year, with the

exception of expenditure made more than 24 months before the Commission officially notifies the Member State of its audit findings.

Every year, the Commission‘s Directorate General for Agriculture and Rural Development carries out over 250 audits, more than half of which include on-the-spot missions to the

Paying Agencies in the Member States. The Paying Agencies to be visited are selected on the basis of a detailed risk analysis, and the audit work normally concentrates on the

functioning of the Paying Agencies‘ management and control systems (see explanatory box 1.1 in Annex 10 – part 1 for more information on the Central Risk Analysis (CRA)).


Diagram: Annex 10-4.2

4.1.3 How does the conformity procedure work in practice?

If an audit reveals deficiencies in the functioning of the national systems, the Commission initiates a conformity clearance procedure with a view to determining

whether to impose a net financial correction on the Member State in question and, if so, what the amount of that correction that needs to be excluded from Union financing

should be. Such a procedure comprises the following steps (see diagram Annex 10 –

4.4):

The Commission officially notifies the Member State of its audit findings and

indicates the corrective measures which the Member State should take to remedy the deficiencies found. The Member State then has two months to reply to the

Commission‘s findings.

The Commission arranges a bilateral meeting with the Member State where

both parties shall endeavour to reach an agreement on the corrective measures to be taken as well as on the gravity of the infringement and the financial damage caused

to the EU budget. The Member State has fifteen working days after having received

the minutes of the meeting to react and provide further information (if requested, two more months).

CLEARANCE OF ACCOUNTS

Two independent procedures

Financial Clearance Conformity Clearance

Completeness, accuracy and veracity of the annual accounts of the Paying Agency

Annual exerciseafter the end of the financial year N

Starting on 16 October N-1 and ending on 15 October N

Compliance with Union law and, in respect of the EAFRD, with the applicable Union and national law

Ad hoc compliance decisions cover up to 24 months prior to Commission's notification of audit findings to the Member

States

Audit to check:Whether the Paying Agency's annual accounts are kept as

requiredWhether the internal control procedures have operated

satisfactorilyOn legality and regularity of the expenditure for which

reimbursement has been requested from the Commission

System-based and risk based auditscheck:

Whether the expenditure is effected in compliance with Union law and, in respect of the EAFRD, with the applicable

Union and national lawWhether the Paying Agency has carried out the checks

required to a satisfactory standard

Financial clearance decision by the Commission covering expenditure of financial year N

Without prejudice to conformity clearance decisions

Annually, by 31 May of the year following the financial year

Conformity clearance decisions by the Commission covering expenditure effected over several financial years

2-4 times per year


The Commission formally communicates its conclusions to the Member State, including the financial correction which it envisages to impose on the Member

State.

Within 30 working days following receipt of these conclusions, the Member State

may submit the case for conciliation to the "Conciliation Body"(see Explanatory Box below). The Conciliation Body has four months to try to reconcile the positions of

the Commission and the Member State and, at the end of this period, to draw up a report on the results of its efforts and any recommendations it may wish to make to

the parties.

After having examined the Conciliation Body‘s report, the Commission notifies the Member State of its final conclusions.

What is the role of the Conciliation Body?

The conciliation procedure was set up in order to reconcile the divergent positions of the

Commission and the Member State, occurring during the conformity clearance procedure.

The Conciliation Body is composed of five members, who are highly qualified in matters regarding the financing of the CAP or in the practice of financial audit and originate from

different Member States. The chairman and the four other members are nominated by the Commission, after having consulted the Committee on the Agricultural Funds. They

are appointed for three years (renewable for a year at a time only). The secretariat of the Body is provided by the Commission.

Only reasoned requests from the Member States are accepted by the Conciliation Body. A request for conciliation is only admissible when the correction proposed by the

Commission services either exceeds 1 million EUR or accounts for more than 25 % of the

Member State‘s total annual expenditure under the budget headings concerned or, if these thresholds are not reached, if the request concerns a matter of principle relating to

the application of EU rules.

The Conciliation Body has four months to reconcile the positions of the Commission and

the Member State. At the end of its work – which takes place as informal and rapid as possible – the results are to be reported to the Member State concerned, to the

Commission and to the other Member States through the Committee on the Agricultural Funds.

The Conciliation Body is completely independent; it carries out its duties neither seeking

nor accepting any instructions from Member States or other body.


Once this procedure has been completed, any resulting financial correction is included in a formal decision adopted by the Commission (referred to as ad-hoc decision) after

having consulted the Member States through the Committee on the Agricultural Funds. Such a conformity decision can then be challenged by the Member States before the

Court of Justice of the European Union. Throughout the procedure Member States have the right to a fair contradictory procedure. Also because Member States have the right

(which they regularly exercise) to challenge conformity decisions in the Court of Justice

of the European Union, the Commission is very vigilant that it fully respects the Member States' rights under the conformity procedure. Failure to do so would expose the EU

budget to the risk that financial corrections would have to be reimbursed to the Member States.


4.1.4 Shortening the conformity clearance procedure

Carrying out a contradictory procedure is legally indispensable before making financial

corrections. Prior to implementing any net financial correction, the Commission must therefore offer the Member States the opportunity to provide evidence and arguments

that may contradict its initial findings. Indeed both Regulation (EC) No 1290/2005 (in

application up to end of 2014) and the new CAP Horizontal Regulation, Regulation (EU) No 1306/2013, provide that "Member States shall be given the opportunity to

demonstrate that the actual extent of the non-compliance is less than the Commission's assessment". The principle of a contradictory process between the auditor and the

auditee is also an essential element of audit quality standards.

In addition to the contradictory procedure, the legislation (Article 52(3) of the CAP

Horizontal Regulation) provides for a "procedure aimed at reconciling each party's position" if an agreement is not reached at the end of the contradictory procedure. The

duration of the conciliation as such is limited to four months. But the whole process from

the request of the Member State concerned to the final result of the analysis by the Commission of the recommendations of the Conciliation Body takes at least six months53.

The Commission has streamed the procedure to the extent possible. Firstly, the Horizontal Regulation describes precisely the nature, scope and sequence of the

successive steps, as well as the different types of financial corrections. Secondly, provisions in the delegated act (method and criteria for calculating the financial

correction) and implementing act (details of the conformity procedure, with deadlines for each step of the procedure) are intended to further streamline the legal framework and

limit the risk of unnecessary delays. Thirdly, on that stronger basis, DG AGRI intensified

its monitoring of the progress of the conformity procedures to ensure a strict respect of the deadlines. Furthermore, for conformity procedures dating from earlier years,

particular action was taken with regard to the procedures open from before 2013 to ensure a close follow-up with clear indicators with a view to clearing all such files by end

of 2016. 285 audits that were carried out before 1 January 2013 were identified as "backlog" and DG AGRI set the objective of their complete closure by the end of 2016. In

addition, 73 audits carried out in 2013, which were still ongoing in June 2015 had as closure target also end of 2016. These 358 audits have been all closed by the end of

2016.

The following diagram describes the successive steps of a conformity clearance procedure leading to a net financial correction carried out under the new implementing act.

53 It can take even longer if the whole case has to be re-examined.


Diagram: Annex 10 – 4.4

Year Month Procedural steps Procedural PhaseCoverage of the

financial correction

Preparatory Phase

2014 S Audit MissionO

N

D

2015 J Notification of audit finding to MSF

M MS reply to the Letter of FindingsA

M

J

JBilateral meeting with MS to discuss the deficiencies

identified, action to be taken and the risk to the EU Budget

A Minutes of Bilateral Meeting

S Member State's reply to the minutes of bilateral meeting

O

N

D

2016 J

F Notification of financial correction to MS

MMS submission of reasoned request for conciliation

- optional to MS -

A

M

J

J

A

S

O

N

D

2017J

Final Letter to MS with definitive financial correction

F

M

A Commission decision on financial corrections

M

J

J Actual reimbursement to EU Budget by MS

Co

ntr

adic

tory

ph

ase

wit

h M

S

START OF CONFORMITY PROCEDURE

Fin

anci

al c

orr

ecti

on

may

co

ver

exp

end

itu

re in

curr

ed f

or

24

mo

nth

s

pri

or

to n

oti

fica

tio

n

Co

mit

olo

gy &

CO

M

dec

isio

n p

roce

du

re

END OF PROCEDURE

Fin

anci

al c

orr

ecti

on

may

co

ver

exp

end

itu

re in

curr

ed f

or

the

per

iod

afte

r n

oti

fica

tio

n o

f fi

nd

ing

un

til

MS

can

sh

ow

th

at r

emed

ial a

ctio

n

has

bee

n t

aken

.

Co

nci

liati

on

ph

ase

for

MS

Conciliation procedure (if requested by MS)

The Conciliation Body is independent from the COM and the MS.

Its role is to conciliate the positions of both parties.

Its conclusions are not binding on the COM.

Preparation of the Final Letter

Conformity Clearance Procedure

DG AGRI Conformity Clearance Procedure for Net Financial Corrections

Example of the timing of the procedure for an audit mission carried out on-the-spot at the end of September 2014 (standard procedure)

Mission report & preparation of the Letter of Findings


4.2 Net financial corrections

4.2.1 How does the Commission calculate net financial corrections?

Financial corrections are determined on the basis of the nature and gravity of the infringement and the financial damage caused to the EU budget. Where possible, the

amount is calculated on the basis of the loss actually caused (Article 12(2) of

Commission Delegated Regulation (EU) No 907/2014) or on the basis of an extrapolation (Article 12(3) of Commission Delegated Regulation (EU) No 907/2014).

Where this is not possible, flat-rates (Article 12(6) of Commission Delegated Regulation (EU) No 907/2014) are used which take account of the severity of the deficiencies in the

national management and control systems in order to reflect the financial risk for the EU budget. In order to ensure equal treatment of all cases of this kind, the Commission has

adopted guidelines54 which provide for standard correction rates of 2%, 3%, 5%, 7%, 10% or 25% of the expenditure at risk, depending on whether the deficiencies concern

key or ancillary control requirements which are determined for each aid schemes.

What are key and ancillary controls?

- Key controls are the administrative and on-the-spot checks necessary to determine the

eligibility of the aid and the relevant application of reductions and penalties. It concerns those physical and administrative checks required to verify substantive elements, in

particular the existence of the subject of the claim, identification of duplicate claims for

the same subject, the quantity, the qualitative conditions including the respect of time limits, harvesting requirements, retention periods, etc. in order to ensure the accurate

calculation of the amount due to the beneficiary. They are performed on-the-spot, and by administrative cross-checks with independent data (such as a land parcel identification

system).

- Ancillary controls involve all other administrative operations required to correctly

process claims, such as a risk analysis and appropriate supervision of the procedures.

- When assessing the administrative and on-the-spot (OTS) process (the authorisation of

claims) for a given population, the Certification Body's assessment should be based on the key and ancillary controls. The Certification Bodies are also using the key and

ancillary controls when they assess the legality and regularity of the expenditure (under

their compliance and substantive testing).


On this basis, the guidelines provide that:

• When a Member State has adequately performed the key controls, but completely failed to operate one or two ancillary controls then a correction of 2% is justified in

view of the lower risk of financial damage to the Union's budget, and in view of the

lesser gravity of the infringement;

• When one or two key controls are not applied, in the number, frequency, or depth

required by the regulations, then a correction of 5% is justified, as it can reasonably be concluded they do not provide sufficient level of assurance of the regularity of

claims, and that the risk to the Funds was significant;

• When one or more key controls are not applied or applied so poorly or so

infrequently that they are completely ineffective in determining the eligibility of the claim or preventing irregularities, then a correction of 10% is justified, as it can

reasonably be concluded that there was a high risk of wide-spread financial damage

to the Union's budget;

54 Guidelines on the calculation of the financial corrections in the framework of the conformity and financial

clearance of accounts procedures C(2015) 3675 final


• When three or more deficiencies are detected with respect to the same control system, a financial correction of 3% is justified if the deficiencies concern only

ancillary controls which have completely failed;

• When three or more deficiencies are detected with respect to the same control

system, a financial correction of 7% is justified if these deficiencies include maximum two key controls not being carried out in the number, frequency, or depth required

by the regulations;

• When a Member State’s application of a control system is found to be absent or

gravely deficient, and there is evidence of wide-spread irregularity and negligence in

countering irregular or fraudulent practices", then a correction of 25% is justified as it can reasonably be assumed that the freedom to submit irregular claims with

impunity will occasion exceptionally high financial damages to the Union's budget.

The rate of correction may be fixed at an even higher rate to exclude all expenditure

when weaknesses are so serious that they constitute a complete failure to comply with EU rules.

4.2.2 Net financial corrections in 2016

Table Annex 10 – 4.6 below sets out the net financial corrections (excluding cross-

compliance corrections) reimbursed to the EU budget for ABB02, ABB03 and ABB04 over the past five years and its average (i.e. corrective capacity from net financial

corrections):


In its calculation of corrective capacity for net financial corrections, DG AGRI excludes corrections in respect of cross-compliance infringements as these are not considered to

be “errors” as regards eligibility and therefore are not included in the estimates of the

error rates. These amounts are, however significant, and are therefore disclosed separately in the table below:


4.2.3 Instalments and Deferrals

Net financial corrections do put a real strain on the national budgets of Member States.

Therefore, an option was introduced according to which corrections of a certain volume can be executed in three annual instalments on request of the Member State

concerned. Execution in instalments was so far accepted for Bulgaria, Czech Republic,

France, Greece, Hungary, Lithuania, Poland, Portugal, Romania, Spain and Slovenia.

million EUR

ABB02 ABB03 ABB04 Total

2012 222.595 352.851 50.766 626.212

2013 100.425 297.861 227.639 625.925

2014 102.245 533.356 62.342 697.943

2015 205.255 756.932 243.985 1 206.172

2016 213.272 1 191.485 226.396 1 631.153

Total 843.793 3 132.484 811.128 4 787.405

5-year average 168.759 626.497 162.226 957.481

DG AGRI corrective capacity from financial corrections executed 2012- 2016

million EUR

ABB02 ABB03 ABB04 Total

2016 0.591 156.700 10.415 167.706

5-year average 0.134 103.842 6.313 110.289

Cross-compliance executed in 2016 and 5-year average


The following table (Annex 10- 4.8) sets out the financial impact of the instalment decisions, showing when they were adopted and when the various instalments are

actually reimbursed by the Member States.

Corrections adopted for which payment was posposed via instalment decision

(in million EUR)

Note: The amounts highlighted above were included in the deferral decision for the Member States in question.

These amount can be found below in the deferral summary tables for Greece and Portugal.


In addition, Member States under EU financial assistance could request the Commission to defer the execution of financial corrections for a period of up to 18 months subject to

the implementation of targeted remedial action plans. After the expiry of the deferral period the corrections were required to be executed in three annual instalments.

Deferrals were granted to Portugal and Greece. The deferrals granted expired on 31 December 2013 for Greece and on 31 May 2014 for Portugal.

The following tables (Annex 10 – 4.9 and 4.10) set out respectively for Greece and

Portugal financial corrections by conformity clearance decisions which were included in the deferral decision and, the schedule for reimbursement by instalment at the expiry of

the deferral period.


Ad-hoc

decision

Decision

adoption

year

Amount

paid in

instalments

2011 2012 2013 2014 2015 2016 2017 2018 2019

AD-HOC 34 2010 446.623 148.874 148.874 148.874

deferral -129.561

AD-HOC 35 2011 358.836 119.612 119.612 119.612

deferral -86.465 -86.465

AD-HOC 38 2012 131.300 43.766 43.767 43.767

AD-HOC 40 2013 19.955 6.651 6.652 6.652

AD-HOC 41 2013 3.449 1.149 1.150 1.150

AD-HOC 43 2013 92.489 30.829 30.830 30.830

AD-HOC 44 2014 16.560 5.520 5.520 5.520

AD-HOC 46 2014 96.829 32.276 32.277 32.277

AD-HOC 47 2015 1,279.173 426.391 426.391 426.391

AD-HOC 48 2015 177.366 59.122 59.122 59.122

AD-HOC 49 2015 7.099 2.366 2.366 2.366

AD-HOC 50 2016 103.476 34.492 34.492 34.492

AD-HOC 51 2016 340.069 113.356 113.356 113.356

AD-HOC 52 2016 219.177 73.059 73.059 73.059

Total 3,292.398 268.486 225.787 104.027 87.918 561.940 704.354 741.063 223.273 73.059

Year of reimbursement

Greece m EUR

2014 2015 2016

2010 114,564

ad hoc 35 2nd instalment 2011 86,465

ad hoc 35 3rd instalment 2011 86,465

ad hoc 38 2012 104,935

ad hoc 39 2012 0,016

ad hoc 40 2013 8,936

ad hoc 41 2013 122,571

ad hoc 42 2013 5,191

Total Deferred 529,143

25,151

Deferred amount to be reimbursed 503,992 167,997 167,997 167,998

ad hoc 34 3rd instalment

Less amounts for which deferral was

revoked

Reimbursement scheduleAd hoc decision Year adopted Amount deferred



In 2015 a new deferral decision under Reg. 908/2014 Art. 34(8a) was adopted for

Greece. This decision allows deferring the execution date for financial corrections for a period of 24 months from the date of the adoption. After the expiry of the deferral period

the corrections are required to be executed in five annual instalments. The deferral granted to Greece will expire on 22 of June 2017. So far the following amounts were

deferred:

Ad-hoc 48 Ad-hoc 49 Ad-hoc 50 Ad-hoc 53

Decision number 2015/1119/EU 2015/2098/EU 2016/418/EU 2017/264/EU

Adoption

date 22/06/2015 13/11/2015 17/03/2016 14/02/2017

EAGF -321,119,141.03 -12,647,843.53 -167,956,763.16 -143,228.19

EAFRD -1,028,485.21 0.00 -3,880,460.50 -23,037,389.65

TOTAL -322,147,626.24 -12,647,843.53 -171,837,223.66 -23,180,617.84


4.2.4 Amounts of financial corrections decided each year

Section 2.1.1.3 of this report provides further information on financial impact of financial

corrections and how they protect the EU budget. Three conformity clearance decisions were adopted by the Commission in 2016:

Commission Conformity Clearance

Decisions EAGF EAFRD Total

ad-hoc 50 2016/417/EU 506.337 203.541 709.878

ad-hoc 51 2016/1059/EU 553.546 8.093 561.639

ad-hoc 52 2016/2018/EU 248.711 68.701 317.412

Total (mil. EUR) 1,308.59 280.33 1,588.93

Table: Annex 10 -4.12

Impact of net financial corrections on Member States

In all Member States the national and regional authorities responsible for implementing

the CAP are directly affected by EU net financial corrections. Such corrections which relate to expenditure made by Member States in previous budget years lead to a

reduction of EU financing in the current budget year. This requires Member States in many cases to find the financial means necessary to fill the gap by making budget

transfers or amending budgets.


Portugal m EUR

2014 2015 2016

ad hoc 34 3rd instalment 2010 14,997

ad hoc 39 2012 93,528

ad hoc 41 2013 0,031

Deferred amount to be reimbursed 108,556 36,185 36,185 36,186

Reimbursement scheduleAd hoc decision Year adopted Amount deferred


4.2.5 Legal Mechanisms for net financial corrections were strengthened from 2015

4.2.5.1 Focus on more risky expenditure

DG AGRI audit activities are driven by risk analysis, i.e. more audits focus on Member States, measures and programmes affected by higher risks. Formerly, DG AGRI

conducted an annual Central Risk Analysis (CRA) covering all CAP expenditure in all Member States in order to produce an annual audit work programme. In mid-2014, in

line with its audit strategy, DG AGRI developed a rolling three-year audit programme.

(Explanatory boxes 1.1 and 1.2 in Annex 10 - part 1 set out the elements which comprise the risk analysis.) The risk assessment for this multi-annual plan has been conplimented

by risk mapping ( see Part 1 of this Annex) and it was decided to carry it out mid-year in order to exploit the opinions of the Certification Bodies (which are available in March) and

to take into account any follow up work resulting from the AAR (in particular action plans which have to be followed up with the Member States). This new approach will ensure

sufficient audit coverage of the overall expenditure while taking into account DG AGRI's audit capacity. Where the risk is considered to be high, the Paying Agency concerned will

continue to be subject to intense audit supervision by DG AGRI in order to ensure that

remedial actions are undertaken in line with an agreed schedule of work.

4.2.5.2 The Commission is legally bound to correct

Any identified risk to the EU budget systematically triggers a net financial correction. The Commission has no discretion to not correct as it is legally bound to exclude any

identified illegal expenditure from EU financing. For both EAGF and EAFRD financial corrections for audit enquiries launched up from 2015 onwards are governed by the

legislation referred to in section 4.1 above55.

This new legislation frames the procedure even more tightly with the method and the

criteria for fixing the amount of financial corrections now set out in the delegated act. In

the case of flat-rate corrections, it is specified how the severity of deficiency shall be assessed, taking into account its nature (key or ancillary control) but also its recurrence

(repetition from a previous year without improvement) and the accumulation with other deficiencies (the risk of errors is likely to be higher when there are several deficiencies).

The Commission guidelines56 on how it determines financial corrections fully reflect the changes.The implementing act sets out mandatory legal deadlines for both Member State

and Commission for the various steps of the conformity clearance procedure.

4.2.5.3 Less recourse to flat-rate corrections

Both the Financial Regulation and the new CAP Horizontal Regulation provide for a

ranking of types of financial corrections where flat-rate corrections may only be used if calculated or extrapolated corrections cannot be established with proportionate efforts.

55 Up until the end of 2014, the clearance of accounts procedures were governed by Council Regulation (EC) No

1290/2005 and Commission Regulation (EC) No 885/2006. 56 Guidelines on the calculation of the financial corrections in the framework of the conformity and financial

clearance of accounts procedures C(2015) 3675 final.


5. Debt management by the Member States

5.1 Legal Framework

Regulation (EU) No 1306/2013 on the financing of the CAP requires the Member States to recover sums lost as a result of irregular payments detected. However, the recovery

procedures, in accordance with the principle of subsidiarity, are the whole responsibility of the Member States concerned and, thus, subject to their individual administrative and

judicial procedures. Therefore, while some procedures deliver rapid results, others take more time.

In order to address delays by some Member States in recovering undue payments, the

legislator introduced an automatic clearing mechanism under which 50% of any undue payments which the Member States have not recovered from the beneficiaries within 4

years or, in the case of legal proceedings, 8 years, would be charged to their national budgets (50/50 rule).

Even after the application of this mechanism, Member States are still obliged to pursue their recovery procedures and, if they fail to do so with the necessary diligence, the

Commission may decide to charge the entire outstanding amounts to the Member States concerned. Moreover, pursuant to Article 28 of Regulation (EU) No 908/2014, Member

States are required to off-set any outstanding debts against future payments to the

debtor (compulsory compensation).

From financial year 2014, the 50/50 rule is applied to EAFRD in the financial year when it

occurs and not at the closure of the programme. Consequently, the Member States are required to indicate amounts to be charged under the 50/50 rule also for EAFRD 2007-

2013 as well as for EAFRD 2014-2020 programmes57.

Undue payments that are the result of administrative errors committed by the national

authorities also have to be deducted from the annual accounts of the Paying Agencies concerned and, thus, excluded from EU financing.

57 Article 54(2) of Regulation (EU) No 1306/2013.


5.2 Amounts recovered by the Member States in financial year

2016 for the EAGF

Table Annex 10 – 5.1 below sets out the amounts recovered in 2016 from the

beneficiaries by the Member States as reported in their debtors' ledger for the EAGF58.

Table Annex 10 – 5.1

For the purpose of calculating corrective capacity (see Table Annex 10 – 5.2 below and section 2.4.2.1 of the main body of the report), amounts recovered from the beneficiaries

by the Member States and reimbursed to the Commission as assigned revenue (67 02) for the EAGF in 2016 are taken into account. These amounts slightly differ from the

debtors' ledgers as reported by the Member State as it accounts for recovered amounts

58 Since the entry into force of Regulation 908/2014 (implementing Regulation for Regulation 1306/2013),

Paying Agencies are required to record the budget code of the amounts recovered. However, this requirement

is only applicable to new debt cases (as per Article 41 (5) of regulation (EU) No 907/2014). Consequently, since

Paying Agencies are still presently reporting old debts cases, it is still not possible to provide a breakdown of

recovered amounts at ABB level and this is why the corrective capacity is still reported at Fund level.

MS EAGF recoveriesEAGF recoveries

cross-compliance

EAGF recoveries

Total

AT 1 635 271 462 660 2 097 931

BE 9 194 114 19 701 239 28 895 353

BG 420 367 2 065 501 2 485 869

CY 37 218 1 701 132 1 738 350

CZ 181 153 435 891 617 044

DE 4 015 271 3 434 453 7 449 724

DK 470 528 707 230 1 177 758

EE 34 709 1 927 912 1 962 621

ES 12 758 653 2 991 283 15 749 936

FI 401 759 388 705 790 464

FR 13 168 796 7 051 818 20 220 615

GB 1 809 444 386 866 2 196 309

GR 12 516 159 6 255 847 18 772 006

HR 150 047 836 830 986 877

HU 1 082 816 5 549 372 6 632 188

IE 587 702 1 100 367 1 688 069

IT 18 627 613 34 983 629 53 611 242

LT 334 698 100 842 435 539

LU 11 845 87 036 98 882

LV 140 802 297 029 437 831

MT 7 777 6 453 14 229

NL 1 105 436 2 160 786 3 266 222

PL 1 640 890 379 958 2 020 848

PT 2 808 839 1 132 850 3 941 689

RO 4 929 132 14 602 389 19 531 521

SE 486 152 163 432 649 584

SI 151 966 168 929 320 895

SK 429 991 1 187 745 1 617 737

Total 89 139 147 110 268 186 199 407 333


subject to the retention of a 20% flat rate recovery cost, as well as recovered amounts of recovery cases that were subject to the 50/50 rule in the financial clearance of accounts

for financial year 2016 and assigned revenue from (disjoined) financial clearance decisions of previous financial years.

The total amount recovered and reimbursed to the EU budget is 118.4million EUR. This corresponds to the amount declared by DG AGRI in the consolidated accounts for 2016.

Amounts recovered in respect of cross-compliance infringements (i.e. 35.8 million EUR) are indicated separately and deducted to show the amount of recoveries for 2016 which

DG AGRI considers to be relevant for its corrective capacity, i.e. 82.6 million EUR for

2016.

Table Annex 10 – 5.2

MS EAGF recoveries

EAGF recoveries

cross-

compliance

EAGF recoveries

Total

AT 1 735 414 380 244 2 115 658

BE 8 022 815 1 235 595 9 258 410

BG 2 277 142 126 230 2 403 372

CY 152 047 124 314 276 361

CZ 300 471 261 497 561 967

DE 3 510 849 6 391 231 9 902 080

DK 486 196 395 609 881 805

EE 114 194 399 789 513 984

ES 11 332 756 1 799 751 13 132 507

FI 487 650 267 707 755 357

FR 10 172 082 994 669 11 166 751

GB 1 683 389 2 811 551 4 494 940

GR 3 926 337 1 051 017 4 977 354

HR 837 068 139 293 976 361

HU 2 554 868 448 820 3 003 688

IE 1 346 990 3 108 908 4 455 898

IT 16 223 047 1 539 067 17 762 114

LT 299 392 940 380 1 239 772

LU 11 845 126 027 137 873

LV 330 083 71 033 401 116

MT 209 055 4 153 213 207

NL 1 562 858 842 064 2 404 922

PL 2 407 195 1 641 609 4 048 804

PT 4 596 428 413 151 5 009 579

RO 6 729 161 9 320 778 16 049 939

SE 430 508 114 154 544 663

SI -146 384 151 407 5 023

SK 1 010 510 667 431 1 677 941

Total 82 603 967 35 767 480 118 371 447


5.3 Amounts recovered by the Member States in financial year

2016 for the EAFRD

Table Annex 10 – 5.3 below sets out the amounts recovered in 2016 from the beneficiaries by the Member States as reported in their debtors' ledger for the EAFRD.


For the purpose of calculating the corrective capacity, (see section 2.4.2.1 of the main body of the report), recoveries in respect of SAPARD and TRDI are excluded as they are

not relevant to EAFRD. Recovered amounts in respect of cross-compliance infringements

are also deducted. The resulting amount of recoveries for 2016 which DG AGRI considers relevant for its corrective capacity is 135.6 million EUR.

MS EAFRD recoveriesEAFRD recoveries

cross-complianceEAFRD recoveries Total

AT 4 127 665 50 732 4 178 397

BE 614 952 91 533 706 484

BG 1 806 811 2 081 838 3 888 649

CY 30 650 71 330 101 980

CZ 1 111 117 190 889 1 302 007

DE 6 114 761 477 909 6 592 670

DK 2 018 645 42 198 2 060 843

EE 677 965 345 504 1 023 468

ES 26 123 735 289 681 26 413 416

FI 755 415 123 614 879 029

FR 4 399 872 277 418 4 677 290

GB 5 073 900 160 802 5 234 702

GR 3 107 510 11 849 614 14 957 124

HR 0 122 216 122 216

HU 3 781 331 1 149 075 4 930 406

IE 2 175 556 149 942 2 325 498

IT 5 134 121 49 004 869 54 138 990

LT 812 432 501 466 1 313 898

LU 12 168 65 115 77 283

LV 655 799 182 631 838 430

MT 3 056 892 16 429 3 073 321

NL 798 366 235 604 1 033 970

PL 18 383 894 340 226 18 724 120

PT 14 953 268 355 450 15 308 718

RO 24 837 360 3 359 242 28 196 602

SE 885 125 8 134 893 260

SI 374 096 103 495 477 591

SK 3 790 013 383 336 4 173 349

Total 135 613 417 72 030 293 207 643 710


5.4 Application of the 50/50 Rule

The financial consequences of non-recovery for cases dating from 2012 (4 year deadline for recovery) or 2008 (8 year deadline in case of legal proceedings) will be determined

for 2016 in accordance with the 50/50 rule mentioned above by charging approximately 33.6 million EUR to the Member States concerned59. Moreover, around 25.9 million EUR

will be borne by the EU budget for cases reported irrecoverable during financial year 201660. The final figures will be established in May 2017 when the financial clearance

decision for financial year 2016 will be adopted. Due to the application of the 50/50 rule,

important non-recovered sums have already been charged to the Member States for EAGF, EAFRD and TRDI expenditure.

The overall outstanding amount still to be recovered from the beneficiaries at the end of that financial year was 1 369.2 million EUR (1 044.9 million EUR of old cases and 324.3

million EUR for new cases). Of this amount, 1 222.6 million EUR is outstanding to the EU budget (the difference, 146.6 million EUR, having already been charged to the Member

States via the 50/50 mechanism).

The clearance mechanism (50/50 rule), referred to above, provides a strong incentive for

Member States to recover undue payments from the beneficiaries as quickly as possible.

As a result, the recovery rate of the new EAGF debts from 2007 and thereafter is still increasing over the time and by the end of financial year 2016, 50% of these new debts

had already been recovered, which is a significant improvement compared to the past. The detailed breakdown of this recovery rate has developed as follows:

59 Please note that these amounts relate to EAGF, EAFRD and TRDI. 60 For EAFRD, based on the new legal regime, from financial year 2014 the Member States have to report as

well the irrecoverable cases established during financial year in question.


Rate of recovery from beneficiaries of irregularities detected since 2007 - EAGF:


Recovery rate until

end

of

2007

until

end of

2008

until

end of

2009

until

end of

2010

until

end of

2011

until

end of

2012

until

end of

2013

until

end of

2014

until

end of

2015

until

end of

2016

year o

f d

isco

very o

f th

e i

rreg

ula

rit

y

2007 33% 47% 50% 53% 60% 68% 69% 69% 69% 69%

2008 - 24% 40% 47% 49% 58% 59% 60% 61% 61%

2009 - - 24% 33% 42% 44% 46% 48% 50% 59%

2010 - - - 29% 39% 44% 45% 47% 47% 48%

2011 - - - - 23% 37% 39% 43% 49% 50%

2012 - - - - - 34% 60% 64% 67% 69%

2013 - - - - - - 23% 30% 34% 37%

2014 - - - - - - - 14% 28% 32%

2015 - - - - - - - - 44% 58%

2016 - - - - - - - - 39%

2007-

2015 - - - - - - - - 50%


It is worth noting that some of these new debt amounts were already written off by Member States in the period 2007-2016 (153.7 million EUR) and therefore they will most

likely not be recovered. For more details on the recovery rates at Member State level, see Table Annex 10 – 5.6 below.

Recoveries (EUR) from beneficiaries for cases detected since 2007 – EAGF

MS New cases since 2007 Adjustments Recoveries Recovery rate

AT 50.062.890,97 -1.166.163,39 -60.212.535,87 123%

BE 80.970.352,22 -29.391.790,83 -28.385.222,16 55%

BG 2.097.427,27 388.099,42 -78.246,49 3%

CY 3.050.086,94 -82.253,22 -2.214.326,51 75%

CZ 2.977.281,46 -128.682,69 -2.583.766,27 91%

DE 84.820.214,58 -3.080.751,55 -72.891.802,18 89%

DK 34.221.443,75 8.561.539,74 -26.789.498,37 63%

EE 2.514.240,00 -1.022.542,20 -1.344.446,82 90%

ES 267.859.111,78 -38.894.984,19 -157.923.623,10 69%

FI 10.936.399,41 222.467,02 -10.652.121,02 95%

FR 409.952.699,60 -79.557.741,05 -87.472.902,64 26%

GB 55.899.410,33 -9.457.630,30 -43.487.140,45 94%

GR 143.651.112,81 -38.193.987,22 -33.138.953,80 31%

HR 427.180,57 6.117,85 -200.689,58 46%

HU 89.614.153,77 -62.171.411,56 -17.636.739,91 64%

IE 29.356.005,13 -2.762.091,18 -25.925.944,56 97%

IT 311.241.362,51 50.579.890,91 -140.162.379,97 39%

LT 7.157.707,84 -2.633.249,10 -4.216.014,33 93%

LU 1.099.152,45 -496.946,54 -351.675,11 58%

LV 2.128.424,29 -29.364,85 -1.688.458,56 80%

MT 1.116.933,10 94.318,76 -649.956,02 54%

NL 73.868.287,93 2.615.991,87 -25.785.238,86 34%

PL 88.812.147,50 -80.552.713,58 -25.008.235,01 303%

PT 77.985.864,93 -18.663.764,94 -36.396.288,92 61%

RO 57.077.152,74 -231.065,79 -21.892.057,37 39%

SE 27.895.959,38 -4.206.419,43 -20.230.026,87 85%

SI 17.444.760,13 -2.368.431,42 -5.648.013,17 37%

SK 3.887.835,13 -736.774,49 -1.343.945,23 43%

Totals 1.938.125.598,53 -313.360.333,96 -854.310.249,14 52,6%



5.5 DG AGRI Audits

Materiality: In general, based on the annual accounts of FY 2016, the global amount at risk in the area of debt management is approximately 1.7 billion EUR.

During the period 2008-2016, DG AGRI audited the correct application of the new clearance mechanism through 34 audit missions in 21 Member States. These audits were

performed in the context of conformity clearance procedures (Article 52 of Regulation (EU) No 1306/2013).

Based on the results of the whole audit work carried out by DG AGRI and on those ones

coming from the work of external audit bodies (Certification Bodies, European Court of Auditors, OLAF), the consolidated assessment that DG AGRI has at the end of 2016 as

regarding the effectiveness of irregularities and debt management and control systems (IDMCS) per Paying Agency is as follows:

Effectiveness of the Irregularities and Debt Management and Control Systems

Key parts of the IDMCS

Code Paying agency Recognition

and registration Recovery

Annexes II and III

Overall assessment

AT01 AMA

AT03 Zollamt Salzburg

BE02 ALV

BE03 Rég. Wallonne

BG01 State Fund Agriculture

CY01 CAPO

CZ01 SZIF

DE01 BLE

DE02 Hamburg-Jonas


DE04 Bayern StMLF

DE07 Brandenburg MLUV

DE09 Hamburg


DE12 Niedersachsen

DE15 Nordrhein-Westfalen

DE17 Rheinland-Pfalz

DE18 Saarland AAL

DE19 Sachsen

DE20 Sachsen-Anhalt

DE21 Schleswig-Holstein

DE23 Thüringen

DE26 Helaba

DK02 DFE

EE01 PRIA

ES01 Andalucia FAGA

ES02 Aragón

ES03 Asturias

ES04 FOGAIBA

ES05 Islas Canarias

ES06 Cantabria

ES07 Castilla La Mancha

ES08 Castilla y Léon


Key parts of the IDMCS

Code Paying agency Recognition

and registration Recovery

Annexes II and III

Overall assessment

ES09 Cataluña

ES10 Extremadura

ES11 Galicia

ES12 Madrid

ES13 Murcia

ES14 Navarra

ES15 País Vasco

ES16 La Rioja

ES17 Comunidad Valenciana

ES18 FEGA

FI01 MAVI

FR05 ODEADOM

FR18 ODARC

FR19 ASP

FR20 France Agrimer

GB05 DARD

GB06 SGRPID

GB07 WAG

GB09 RPA

GR01 OPEKEPE

HR01 APPRRR

HU01 ARDA

IE01 DAF

IT01 AGEA

IT02 SAISA

IT03 ENR

IT05 Veneto (AVEPA)

IT07 Toscana (ARTEA)

IT08 Emilia-Romagna (AGREA)

IT10 ARPEA

IT23 OPR Lombardia

IT24 OPPAB

IT25 APPAG

IT26 ARCEA

LT01 NMA

LU01 Min. Agric.

LV01 RSS

MT01 MRRA

NL04 RVO

PL01 ARMA

PL02 AMA

PT03 IFAP

RO01 PARDF

RO02 PIAA

SE01 SJV

SI01 AAMRD

SK01 APA



Colour code Conclusion

Green

Effective functioning and, where applicable, minor improvements are necessary

Yellow

Effective functioning but some improvements are necessary

Orange

Partly effective functioning, substantial improvements are necessary

Red Ineffective functioning

Explanatory Table: Annex 10 – 5.8

It was found that the IDMCS implemented in the following Paying Agencies is partially

effective and some substantial improvements are necessary: BG01 , DE17 , ES05 , ES16

, FR19 , FR20 , IT01 , PL01 , RO01 , RO02.

Concerning the Italian Paying Agency AGEA (IT01), DG AGRI audit carried out in 2014

confirmed the serious concerns regarding the management of irregularities and other debts for financial year 2010 and earlier, and more generally all irregularities and debts

for which the payment of origin was made in financial year 2007 or before. A number of weaknesses concerning the accreditation criteria for debts were noted (improper internal

environment; insufficient control activities and monitoring mechanisms). Based on its findings, DG AGRI considered that the non-recovery of the debts in financial year 2010

and earlier was attributable to the negligence of the Italian authorities in the recovery

procedure and therefore proposed financial corrections for the debt cases relating to these financial years.

As regarding the other risky paying agencies mentioned above, DG AGRI, taking into consideration its audit capacity and its priorities, has focused during the period 2016-

2019 its audit activities on debt management on the following paying agencies which represent 36 % of the total amount at risk: FR19, FR20, RO01, RO02, BG01 and PL01.


6. Cross Compliance Cross-compliance is a mechanism by which farmers are penalised when they do not respect a series of rules which stem in general from policies other than the CAP and

apply to EU citizens independently of the CAP.

The respect of cross-compliance obligations does not constitute an eligibility criterion for

CAP payments and, therefore, the checks of these requirements do not pertain to the legality and regularity of the underlying transactions. Thus, penalties imposed for non-

compliance with cross-compliance requirements are not taken into account for the

calculation of the error rates for the CAP.

The control statistics referred to below do not therefore correspond to errors in

underlying transactions. See also part 2.3.3 European Court of Auditors reports, under "2014 Annual Report".

The results of the checks on cross-compliance are shown in Table: Annex 10 – 6.1 for claim year 2015 (financial year 2016). It shows that 2.79% of all claimants were checked

as regards their compliance with cross-compliance requirements in claim year 2015, and thereby the minimum control rate of 1% was globally respected. The rate of farmers

checked on-the-spot and subject to a subsequent sanction for cross-compliance was

23.7% of all farmers checked in claim year 2015.

According to the control statistics, total cross-compliance sanctions in respect of claim

year 2015 amounted to 72.9 million EUR. Sanctions following regulatory on-the-spot-checks amounted to 60.0 million EUR in total.

A further analysis allows identifying the sanctions applied in case of negligence of the farmer, i.e. excluding the sanctions for repetition and intentional non-compliance. Those

sanctions amount to 53.7 million EUR (2.81% of the aid covered by OTSC). An additional 18.9 million EUR was applied as sanctions following repetition and intentional non-

compliance.

It should be noted that at the time of the drafting of the report neither France nor Sweden had submitted their statistics.


Financial/claim year: 2016/2015

Member State

Population Subject to on-the-spot

checks Results of on-the-spot

checks

Total number of

beneficiaries

Number of beneficiaries

As share of total number of

beneficiaries

Beneficiaries sanctioned for

non-compliances

As share of total number

of on-the-spot-checks

Number number % number %

A B C=B/A D E=D/B

AT 88,145 2,119 2.40% 432 20.39%

BE 36,708 3,490 9.51% 696 19.94%

DE 297,593 9,312 3.13% 3,431 36.84%

DK 41,229 406 0.98% 97 23.89%

EL 392,638 4,000 1.02% 1,271 31.78%

ES 548,466 8,369 1.53% 2,092 25.00%

FI 53,063 2,183 4.11% 338 15.48%

FR

IE 126,056 1,382 1.10% 755 54.63%

IT 450,401 35,400 7.86% 2,313 6.53%

LU 1,853 247 13.33% 95 38.46%

NL 51,293 812 1.58% 224 27.59%

PT 111,156 2,625 2.36% 808 30.78%

SE

UK 154,670 5,837 3.77% 1,029 17.63%

EU-15 2015 2,353,271 76,182 3.24% 13,581 17.83%

EU-15 2014 4,347,753 116,872 2.69% 21,928 18.76%

CY 32,692 328 1.00% 153 46.65%

CZ 30,067 2,287 7.61% 89 3.89%

EE 20,972 737 3.51% 75 10.18%

HU 127,141 6,253 4.92% 987 15.78%

LV 46,677 1,167 2.50% 1,198 102.66%

LT 138,679 3,429 2.47% 1,666 48.59%

MT 652 90 13.80% 133 147.78%

PL 600,512 17,637 2.94% 4,013 22.75%

SK 18,395 612 3.33% 240 39.22%

SI 57,126 914 1.60% 325 35.56%

EU-10 2015 1,072,913 33,454 3.12% 8,879 26.54%

EU-10 2014 1,905,854 37,430 1.96% 14,943 39.92%

BG 75,877 1,156 1.52% 343 29.67%

RO 944,071 14,507 1.54% 5,703 39.31%

EU-2 2015 1,019,948 15,663 1.54% 6,046 38.60%

EU-2 2014 1,156,882 17,292 1.49% 12,213 70.63%

HR 99,295 1,682 1.69% 1,300 77.29%

EU-1 2015 99,295 1,682 2% 1,300 77.29%

EU-1 2014 95,862 1,450 1.51% 1,200 82.76%

EU-28 2015 4,545,427 126,981 2.79% 29,806 23.47%

EU-28 2014 7,506,351 173,044 2.31% 50,284 29.06%



ANNEX 11: Specific annexes related to "Assessment of the effectiveness of the internal control

systems" (not applicable)


ANNEX 12: Performance tables

Commission general objective 1: A New Boost for Jobs, Growth and Investment

Commission Impact indicator: Percentage of EU GDP invested in R&D (combined public and private investment)

Source of the data: Eurostat

Baseline (2012)

Target (2020)

Europe 2020 target

Latest known value (2014 - provisional)

2.01% 3% 2.03%

Commission Impact indicator: Employment rate population aged 20-64

Source of the data: Eurostat

Baseline (2014)

Target (2020)

Europe 2020 target

Latest known value (2015)

69.2% At least 75% 70.1%

Commission general objective 2: A Connected Digital Single Market

Impact indicator: Aggregate score in Digital Economy and Society Index (DESI) EU-28 Explanation: DESI is a composite index that summarises relevant indicators on Europe's digital

performance and tracks the evolution of EU Member States in digital competitiveness. The closer the value is to 1, the better. The DESI index is calculated as the weighted average of the

five main DESI dimensions: 1 Connectivity (25%), 2 Human Capital (25%), 3 Use of Internet (15%), 4 Integration of Digital Technology (20%) and 5 Digital Public Services (15%).

Source of the data: DESI

Baseline

(DESI 2015)

Target

(2020)

Latest known value

(DESI 2016)

0.50 Increase 0.52

Commission general objective 3: A Resilient Energy Union with a Forward-Looking

Climate Change Policy

Commission Impact indicator: Greenhouse gas emissions

Index 1990=100 Source of the data: European Environmental Agency

Baseline (2013) Target (2020)

Europe 2020 target Latest known value

(2014)

80.2 At least 20% reduction (index

≤80)

77.1

Commission general objective 6: A Reasonable and Balanced Free Trade Agreement

with the U.S.

Impact indicator: Share US in total EU FDI stocks (US trade / extra trade) Source of the data: Eurostat

Baseline (2014)

Target (2020)

Latest known value (2015)

Inwards 35.0% Outwards 32.4%

Total 33.3%

The figures were calculated

subtracting "Special Purpose

Entities" FDI from "Total" FDI in

order to have "non-SPE" FDI

figures that can be comparable with

other international data.

Increase Inwards 43.5% Outwards 35.0%

Total 38.4%

http://appsso.eurostat.ec.europa.eu/nui/show.do?query=BOOKMARK_DS-053382_QID_-5B5460E7_UID_-3F171EB0&layout=TIME,C,X,0;GEO,L,Y,0;SECTPERF,L,Z,0;UNIT,L,Z,1;INDICATORS,C,Z,2;&zSelection=DS-053382SECTPERF,TOTAL;DS-053382INDICATORS,OBS_FLAG;DS-053382UNIT,PC_GDP;&rankName1=UNIT_1_2_-1_2&rankName2=INDICATORS_1_2_-1_2&rankName3=SECTPERF_1_2_-1_2&rankName4=TIME_1_0_0_0&rankName5=GEO_1_2_0_1&sortC=ASC_-1_FIRST&rStp=&cStp=&rDCh=&cDCh=&rDM=true&cDM=true&footnes=false&empty=false&wai=false&time_mode=ROLLING&time_most_recent=false&lang=EN&cfo=%23%23%23%2C%23%23%23.%23%23%23

http://appsso.eurostat.ec.europa.eu/nui/show.do?query=BOOKMARK_DS-053312_QID_-4B4BDA1F_UID_-3F171EB0&layout=TIME,C,X,0;GEO,L,Y,0;AGE,L,Z,0;UNIT,L,Z,1;SEX,L,Z,2;INDIC_EM,L,Z,3;INDICATORS,C,Z,4;&zSelection=DS-053312INDIC_EM,EMP_LFS;DS-053312UNIT,PC_POP;DS-053312SEX,T;DS-053312INDICATORS,OBS_FLAG;DS-053312AGE,Y20-64;&rankName1=UNIT_1_2_-1_2&rankName2=AGE_1_2_-1_2&rankName3=INDICATORS_1_2_-1_2&rankName4=SEX_1_2_-1_2&rankName5=INDIC-EM_1_2_-1_2&rankName6=TIME_1_0_0_0&rankName7=GEO_1_2_0_1&sortC=ASC_-1_FIRST&rStp=&cStp=&rDCh=&cDCh=&rDM=true&cDM=true&footnes=false&empty=false&wai=false&time_mode=ROLLING&time_most_recent=false&lang=EN&cfo=%23%23%23%2C%23%23%23.%23%23%23

https://ec.europa.eu/digital-single-market/en/desi

http://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&language=en&pcode=tsdcc100&plugin=1

http://appsso.eurostat.ec.europa.eu/nui/show.do?query=BOOKMARK_DS-758692_QID_-7158D73D_UID_-3F171EB0&layout=TIME,C,X,0;PARTNER,L,Y,0;ENTITY,L,Z,0;INDIC_BP,L,Z,1;FDI_ITEM,L,Z,2;GEO,L,Z,3;INDICATORS,C,Z,4;&zSelection=DS-758692INDICATORS,OBS_FLAG;DS-758692INDIC_BP,PCPOS;DS-758692ENTITY,TOTAL;DS-758692GEO,EU28;DS-758692FDI_ITEM,DO__D__F;&rankName1=PARTNER_1_2_0_1&rankName2=TIME_1_0_0_0&rankName3=GEO_1_2_-1_2&rankName4=INDICATORS_1_2_-1_2&rankName5=FDI-ITEM_1_2_-1_2&rankName6=INDIC-BP_1_2_-1_2&rankName7=ENTITY_1_2_-1_2&ppcRK=FIRST&ppcSO=ASC&sortC=ASC_-1_FIRST&rStp=&cStp=&rDCh=&cDCh=&rDM=true&cDM=true&footnes=false&empty=false&wai=false&time_mode=ROLLING&time_most_recent=false&lang=EN&cfo=%23%23%23%2C%23%23%23.%23%23%23


Common CAP objective 1: Viable food production

Common CAP objective 1: Viable food production

CAP Impact indicator: Agricultural factor income61 Definition: Agricultural factor income (net value added at factor costs) per annual work unit

(in real terms)62 Source of the data: Eurostat – Economic Accounts for Agriculture

Baseline (2012 - EU-28)

Target Latest known results (2015 – EU-28)

14 585 €/AWU

(in real prices)

To increase

Article 39 (1)(b) TFEU

14 803 €/AWU

Provisional data for 2016

CAP Impact indicator: Total factor productivity in agriculture

Definition: Total factor productivity (TFP) compares total outputs relative to the total inputs used in production of the output (both output and inputs are expressed in term of volumes)

Source of the data: DG AGRI calculation based on Eurostat data

Baseline

(2012-2014, average)


(2015)

106.2 (index 2005 = 100)

To increase Article 39 (1)(a) TFEU

108.7 (average 2013-2015)

61 Values have changed for the previous years because Eurostat has updated figures. 62 Agricultural factor income is defined as the net value added at factor costs, calculated according to the

following equation:

Value of agricultural production

- variable input costs (fertilisers, pesticides, feed, etc.)

- depreciation

- total taxes (on products and production)

+ total subsidies (on products and production)

= factor income (net value added at factor costs)

An annual work unit is the work performed by one person who is occupied on an agricultural holding on a full-

time basis.

11.087 11.486

12.705 12.374 11.199

13.485

14.856 14.579 15.407 15.151 14.803 14.503

0

2.000

4.000

6.000

8.000

10.000

12.000

14.000

16.000

18.000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

EU

R/A

WU


Total Factor Productivity and partial productivity growth in the EU-28 (3-year moving average)

Source: DG AGRI, https://ec.europa.eu/agriculture/sites/agriculture/files/mp-mb-010_en.pdf

Specific objective: To improve the competitiveness of the agricultural sector and enhance its value share in the

food chain

Related to spending programme: EAGF

Result indicator: Share of EU agricultural exports in total value of production

Definition: Agricultural primary products: value of annual exports in agricultural primary products

(source Eurostat, Comext) as a percentage share of total value of production in agricultural products

Source of data: Eurostat, agricultural accounts

Processed food products: value of annual exports in processed food products as a percentage of total value of production by the food industry

Source of data: Eurostat, Prodcom

Baseline (2011)

Target (2020)

Latest known results (2015)

Primary products: 9.8%

Processed food products 8.9%

Agricultural Primary products: 14%

Processed food products: 11.5%

Agricultural Primary products: 11.9%

Processed food products: 10.1%

80

85

90

95

100

105

110

115

120

125

130

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

TFP Labour Land Capital Int. cons.

https://ec.europa.eu/agriculture/sites/agriculture/files/mp-mb-010_en.pdf


Result indicator: Share of value added for primary products in the food chain

Definition: The indicator looks at the value added of the primary production in comparison to other stages of the food chain (mainly food manufacturing, food distribution and food service

activities). Source of data: Eurostat – National Accounts, Structural Business Statistics

Baseline

(2010)63


(2014)

EU-28

Value

added (in billion €)

%

Primary 196 23%

Processing 211 24%

Retail 382 44%

Higher share of value

added for primary products in the food

chain Regulation n°

1308/2013

EU-28

Value

added (in billion €)

%

Primary 215 25%

Processing 224 26%

Retail 425 49%

Result indicator: Ratio between EU and World agricultural commodity prices

See below under the specific objective "To better reflect consumer expectations"


Policy–related outputs

Description Indicator Target date Latest known results

(situation on 31/12/2016)

Alignment of the

market measures

(leading to reduction of Commission

Adoption of delegated and

implementing acts

Example: Delegated and Implementing acts on

2016

Adoption planned 2nd Q 2017

63 Baseline updated with EU 28 figures (instead of EU 27 data).


regulations from more than 200 to no

more than 40)

notifications resulting to simplification of nil

notifications, reduction of number of notifications

and incorporation of notification obligations in

one regulation instead of 18 regulations today

(2015/AGRI/067 and

2015/AGRI/068)

Delegated and Implementing Acts

for market measures

Adoption Ongoing

Examples: 2016/AGRI/048 on the new School

Milk, Fruit and Vegetables scheme

Adopted in January 2017:

Commission Implementing Regulation (EU) 2017/39 and

Commission Delegated Regulation (EU) 2017/40

2015/AGRI/061 and 2015/AGRI/062 Review of TRQs managed by DG

AGRI with licences

Adoption planned 2nd Q 2017

2015/AGRI/060 Public intervention and aid for private storage

Adoption on 18 May 2016: Delegated Regulation (EU)

2016/1938 and Implementing

Regulation (EU) 2016/1940

2015/AGRI/063 and 2015/AGRI/064 System of import and export

licences

Adoption on 18 May 2016: Delegated Regulation (EU)

2016/1937 and Implementing Regulation (EU) 2016/1939

2015/AGRI/100 Opening and implementing an autonomous import

TRQ for olive oil originated in Tunisia

Adopted on 19 April 2016: Commission Implementing


2016/AGRI/35 Amendment of Annex

IX to CMO Regulation (EU) 1308/2013 in relation to reserved

terms in olive oil

Adopted on 4 May 2016:


2016/AGRI/27 Amending olive oil marketing standard methods to

adapt terms used in the sensory

analysis

Adopted on 27 July 2016: Commission Implementing


2016/AGRI/79 Delegated Regulation amending olive oil standard as

regards some fatty acid limits, ethyl esters and K270 ultraviolet

absorption coefficient

Adopted on 26 September 2016: Commission Delegated


2016/AGRI/80 Amending Olive oil

marketing standard in relation to peroxide determination method

Adopted on 30 September

2016: Commission Implementing Regulation (EU)

2016/1784

2016/AGRI/068 Fixing the limit for

out-of-quota sugar exports

Adopted on 20 September

2016: Commission Implementing Regulation (EU)

2016/1713

2016/AGRI/024 Rules on purchase

terms for beet in the sugar sector as from October 2017

Adopted on 17 May 2016:


2016/AGRI/039 Extension of

deadline for surplus stocks disposal

Adopted on 23 March:

Commission Implementing


in Croatia in the sugar sector Regulation (EU) 2016/442

2015/AGRI/097 and 2015/AGRI/098

Proposals of Council Decisions on the

signature and the conclusion of the

International Olive Agreement 2015

COM adoption Planned 2nd quarter 2016

Council Decision (EU) 2016/1892 of

10 October 2016 (signature,

2015/AGRI/097)

The second Decision

(conclusion,

2015/AGRI/098) should be adopted

during 1st semester 2017

2016/AGRI/034

Report on the

development of the market situation in

the milk and milk products sector and

the operation of the Milk Package

Adoption 2016 Report adopted

by the

Commission on 24/11/2016

(reference COM(2016)724)

2016/AGRI/044 Report to the

European Parliament and the Council on

the implementation of the market

measures concerning the apiculture sector

Adoption 2016 Report adopted by the

Commission on 07/12/2016

(reference COM(2016)776)

Apiculture sector Approval of national programmes 2017-2019

2016 Done: Commission

Implementing Decision (EU)

2016/1102 of 5 July 2016

approving the

national programmes to

improve the production and

marketing of apiculture

products submitted by the

Member States

under Regulation (EU) No

1308/2013 of the European

Parliament and of the Council

Main expenditure outputs



Fruit and vegetables Several indicators mainly concentration of % of production


about EUR 900 million

Total % of production marketed by Fruit &

vegetables producer organisations and

associations of producer organisations: 48.1%

supply and joint marketing

therefore making stronger the

bargaining position of

farmers, increasing their

income and

incentivising investments

marketed by Fruit & vegetables

producer organisations and

associations of producer

organisations:

54,3% in 2015

Wine sector

EUR 1105 million

Several indicators like

Number of promotion projects in the wine sector

(1.089 projects), Number

of projects of investment and innovation measures

(5 183 projects) , Number of hectares of restructured

vineyards (85 266 Ha) or share of vineyard area

restructured (e.g. 2.6% in 2014)

strengthen

competitive structures,

promotion and

marketing of Union wines,

support investments and

innovation geared towards improving

the economic performance of

the enterprises

which increases the marketability

and competitiveness of

Union grapevine products.

Restructuring and conversion

activities continue

to be covered on account of their

positive structural effects on the

wine sector. Support for by-

product distillation is used as an

instrument to

ensure the quality of wine, while

protecting the environment.

Preventive instruments such

as harvest insurance, mutual

funds and green

harvesting encourage a

responsible approach to crisis

situations.

Number of

promotion projects in the wine sector

(1.725 projects)

Number of projects of investment and

innovation measures (5.654

projects) Number of hectares

of restructured vineyards: 79.220

Ha

Share of vineyard area restructured:

2.5% in 2014

School Scheme

EUR 150 million annually

School Fruit Scheme

Several indicators like Number of final

encourage

healthier eating habits amongst

More recent figures

not yet available


beneficiaries (schools and children)

10,2 million children annually

68 000 schools (figures for school year

2014/2015)

school children as they are more

likely to become lifelong habits if

developed at an early age.

Improved nutrition plays an important

role in combating

health problems related to poor

nutrition, such as child obesity

Olive oil and table

olives working

programmes EUR 48 million

Several quantitative and

qualitative efficiency

indicators are set by Member States for each

work programme in function of the nature of

concrete actions included there in.

improve market

orientation

through market knowledge,

improve environmental

impact and competitiveness of

the olive cultivation, and

quality and

traceability improvements

For the financial

year 2016, eligible

amount was EUR 46 026 264,14

Specific objective: To maintain market stability Related to spending

programme: EAGF

Result indicator: Public intervention Definition: Ratio of volume of the products bought in the intervention storage and the total EU

production of those respective products

Source of data: DG AGRI

Baseline 2012


0% Used only in case of need

(seen against market

developments) Regulation n° 1308/2013

23.4% for Skimmed Milk Powder

Result indicator: Private storage

Definition: Ratio of volume of the products placed into the publicly aided private storage and the total EU production of those respective products

Source of data: Market monitoring data DG AGRI

Baseline

2013


Butter: 4% Olive oil: 0%

Used only in case of need (seen against market

developments)

Regulation n° 1308/2013

6.2% for Skimmed Milk Powder 7.2% for butter

0.6% for cheese

0.4% for pigmeat 0% for Olive oil




Description Indicator Target date Latest known

results (situation on

31/12/2016)

Temporary exceptional

support measures for producers of certain

fruit and vegetables (2016/AGRI/051)

Adoption Mid-2016 Adopted on 10 June

2016: Commission Delegated


Adoption of Delegated and Implementing

Acts in different sectors according to

the market situation (notably Milk and Pig

meat sectors)

adoption 2016 A whole series of exceptional

measures were taken over the year

to stabilise the difficult market

situation of the milk and other livestock

sectors.

.

Examples: Extension of the safety net for dairy products

Regulations 2016/1619 and 2016/1614 of 8 September

2016

Exceptional adjustment aid Regulation 2016/1613 of 8

September 2016

Possibility for producers to plan jointly production

Regulation 2016/558 and Regulation 2016/559 of 11

April 2016

Regulation 2016/1615 of 8 September 2016

Aid for the voluntary reduction of

milk production

Regulation 2016/1612 of 8

September 2016

For pigmeat, the private storage

aid was operated during January 2016.

Regulation 2015/2334 of 14

december 2015

To maintain a robust

system of control and

monitoring to ensure the sound and efficient

shared financial management and the

monthly reimbursement of

Member States' eligible expenditure of

the European

Agricultural Guarantee Fund (EAGF) and to

account for it.

Correct and timely

monthly payments

(12 payments + 1 complementary)

3rd working day of

every month

All payments made

in time.

Correct and timely

regularisation in ABAC

2 months after the

monthly declaration of expenditure

(Article 171(1) of

the Financial Regulation.

Correct and timely

regularisation in ABAC.

Control of clear-cut

eligibility criteria, ceilings and

deadlines.

Monthly and bi-

annual (deadlines) controls

respectively

Correct and timely

controls of eligibility, ceilings

and deadlines.

Public Storage

expenditure management (12

monthly declarations + 1 annual

declaration from

Member states

Declarations

received by the 12th each month.

Continuous follow up required.

Public Storage

expenditure declarations timely

received and reimbursed.


holding stocks)




31/12/2016)

Exceptional support

measures for producers of certain

fruit and vegetables

Share of volume

withdrawn in support of market (0.91%)

Maintain market

stability

Share of volume

withdrawn in support of market:

0.50%

Specific objective: To sustain farmers' income stability by providing direct income support


Result indicator: Share of direct support in agricultural entrepreneurial income (family farm income)

Definition: The indicator gives the share of direct support (coupled and de-coupled payments) in entrepreneurial income.

Source of data: EAGF Financial Report and EEA - EUROSTAT

Baseline

2013


41% To maintain the ratio Regulation n° 1307/2013

46% (2015)





Follow-up of the implementation of

Direct Payments in the different MS

(update of notifications and

new notifications on 2015

implementation /

exchanges with MS, including by

the organisation of workshops on

policy issues / legal

interpretations and guidance),

including the

revision of Voluntary Coupled

Support mid-2016 Reporting and

communication activities, as

regards the different schemes

Organisation of Expert groups and Committees

All along the year 20 meetings organised in 2016

Reports on 2015

implementation

5 draft reports

ready end of 2016

Preparation of

AGRI internal notes on the 2015

implementation of

DP schemes, based on notifications

and control data combined in "BO"

reports. + Analytical work

based on these findings.

Delegated Acts and Implementing Acts

Financial ceilings: second quarter

Simplification: depending on

needs

- First wave of simplification of

the Delegated act (adoption in

February 2016, Reg. 141/2016)

and preparation of

a second wave (adoption foreseen

in February 2017) - Financial ceiling:

adopted on 10 May


and their

implementation Preparation of

legal acts (financial ceilings

for 2016), and

possible further simplifications

Contribution to policy analysis /

provision of an expertise on Direct

Payments in various exercises

(DG AGRI level or

other)

2016: Regulation

(EU) 2016/699

Assessment notes for

each concerned MS of the revision of Voluntary

Coupled Support - VCS (potentially 27 MS)

December 2016 19 assessment

notes for each concerned MS of

the revision of VCS (19 MS actually

concerned)

About 8 thematic

reports / informative notes posted on Europa

Along the year 7 new thematic

informative notes posted on Europa,

and update of the overview of MS

decisions for direct payments 2015-

2020

Preparation of

legal acts and guidelines to

review, amend and simplify the IACS

legislative framework

Providing

interpretation to Member States

with regard to the implementation of

direct payments, in particular from

an IACS perspective

Follow-up and

support of the implementation of

Direct Payments in particular as

regards IACS, including the

dissemination of good practices and

exchange of

experience Monitoring the

implementation of direct payments

and ensuring that action is taken

when implementation is

lacking/failing

Analysing and reporting on MS

Quality Assessment of

their LPIS (LPIS QA)

Delegated/Implementing acts for IACS and

guidelines to be amended

(2015/AGRI/090, 2016/AGRI/036)

All along the year

Delegated

Regulation (EU) No 2016/1393 of

04/05/16 (yellow card/administrative

penalties), Implementing

Regulation (EU) No

2016/1394 (yellow card) of 16/08/16.

Delegated Regulation on the

softening of the greening

reductions passed the feedback-

mechanism-stage.

LPIS and OTSC guidelines updated

Replies to

MS/stakeholders questions in a timely

manner

All along the year

80 bilateral replies

to MS + 30 replies to MEPs and

citizens

Organisation of

workshops/expert groups facilitating MS

exchange of experience

and of good practices [number undetermined

yet]

All along the year

3 workshops ( 2 on

GSAA (Geo-spatial Aid Application), 1

on force majeure and circumvention)

+ 1 workshop on

eligibility of agricultural areas

used for non-agricultural

activities

Organisation of

missions/visits to MS and bilateral meetings

with MS in Brussels, mostly upon MS request

[number undetermined yet]

All along the year

6 missions and24

bilateral meetings

Contribution to DG AGRI By 15.04.2016 for 3 action plans


Annual Activity Report

and assessing whether reservations, and

subsequently action plans are necessary –

preparation of

reduction/suspension decisions whenever

necessary

the AAR

All along the year

initiated

Assessing the MS reports/scoreboards and

reporting through the

direct payments committee / LPIS

workshops. Giving feedback to MS in

writing as to potential weaknesses identified in

the exercise

By 31 March 2016

43 ETS reports analysed. Results

presented in LPIS

workshop in Baveno (05/16),

13 e-mails and 12 follow-up letters to

MS

To maintain a robust

system of control and monitoring to ensure

the sound and efficient shared

financial management and the monthly

reimbursement of

Member States' eligible expenditure

of the European Agricultural

Guarantee Fund (EAGF) and to

account for it.

Correct and timely

monthly payments (12 payments + 1

complementary)

3rd working day of

every month

All payments made

in time.

Correct and timely

regularisation in ABAC (accounting)

2 months after the

monthly declaration of

expenditure (Article 171(1) of

the Financial Regulation.

Correct and timely

regularisation in ABAC.

Control of clear-cut eligibility criteria,

ceilings and deadlines.

Monthly and bi-annual (deadlines)

controls respectively

Correct and timely controls of

eligibility, ceilings and deadlines.

Specific objective: To promote a more market oriented

agriculture by ensuring a significant level of decoupled

income support64

Related to spending

programme: EAGF

Result indicator: % of total direct payments which is decoupled Source of data: Budget

Baseline (Calendar year 2013 /

Budget year 2014)


93.54% To maintain


Calendar year 2014/budget year

2015: 92.7% Calendar year 2015/budget year

2016: 88.9%65

Calendar year 2016/budget year 2017: 88.7%66

64 The wording of this objective was adapted to take into account the provisions of the Regulation (EU) No

1307/2013 of the European Parliament and of the Council of 17 December 2013 establishing rules for direct

payments to farmers under support schemes within the framework of the common agricultural policy and

repealing Council Regulation (EC) No 637/2008 and Council Regulation (EC) No 73/2009, as regards their

application as of 2015. 65 Execution of the Budget 2016 provisional figures. 66 Based on the Budget 2017 estimated needs, excluding the crisis reserve. The figure takes into account that in

accordance with the methodology for implementation of the small farmers scheme, as chosen by the Member


Specific objective: Enhancing farm viability and

competitiveness of all types of agriculture in all regions and promoting innovative farm technologies and

sustainable management of forest (Priority 2)

Related to spending

programme: EAFRD

Result indicator: % of agricultural holdings with RDP support for investment in

restructuring or modernisation (Focus area 2A: improving the economic performance of all farms and facilitating farm restructuring and modernisation notably with a view to increase

market participation and orientation, as well as agricultural diversification) Source: Rural development programmes

Baseline67

Target (2023)

Latest known results

0 2.7%68

Aggregated value from the RDP which have programmed

the relevant Focus Area.

0.1%

Result indicator: % of agricultural holdings with RDP supported business

development plan/investments for young farmers (Focus area 2B: facilitating entry of adequately skilled farmers into the agricultural sector and in particular generational renewal)

Source: Rural development programmes

Baseline Target

(2023)


0 1.5% Aggregated value from the

RDP which have programmed the relevant Focus Area.

0.06%




(situation on

31/12/2016)

Events of the European Network for

Rural Development (Number of events)

1 EU rural networks' Assembly meeting

3 EU rural networks' Steering Group

meetings

2 Thematic work themes completed

10 Workshops

2016 1 EU rural networks' Assembly

meeting 3 EU rural

networks' Steering

Group meetings 1 LEADER/CLLD

meeting 2 Thematic work

themes completed 11 Workshops

Publications and communication of the

European Network for Rural Development

(Number)

2 EU Rural Reviews 2 Rural Connections

magazines 2 Project Brochures

12 ENRD newsletters ENRD website (page

views per month) 60

2016 2 EU Rural Reviews 2 Rural Connections

magazines 2 Project Brochures

12 ENRD Newsletters

1 Photo exhibition

States, part of the expenditure under that scheme is "decoupled". 67 Baseline is 0 at the start of the programming period and all the targets are cumulated over the period. 68 Target level has been updated to reflect relevant changes introduced by programmes modifications.


000

Social media presence:

Twitter followers: 1

500

Facebook page likes:

2 500 LinkedIn Group

members: 400

Special publications:

ENRD presentation Cork Declaration

ENRD website (page views per

month) 46 000

Social media presence:

•Twitter followers: 1 678

•Facebook N° of

fans: 3 229 LinkedIn Group

members: 456

Assessment of Annual Implementation

Reports

118 reports 2016 118

Assessment of

proposals for programmes

amendments

120 modifications

(estimate)

2016 143

Meetings with Member

States (Monitoring Committees, Annual

Review Meetings, etc.)

280 meetings

(estimate)

2016 389

Specific objective: Promoting food chain organisation, including processing and marketing of agricultural

products, animal welfare and risk management in agriculture (Priority 3)

Related to spending programme: EAFRD

Result indicator: % of agricultural holdings receiving support for participating in quality schemes, local markets and short supply circuits, and producer

groups/organisations (Focus area 3A: improving competitiveness of primary producers by better integrating them into the food chain through quality schemes, promotion in local

markets and short supply circuits, producer groups and inter-branch organisations) Source: Rural development programmes

Baseline69

Target (2023)


2.6%



0.01%

Result indicator: % of agricultural holdings participating in risk management

schemes (Focus area 3B: supporting farm risk management) Source: Rural development programmes

Baseline Target (2023)


0 7.6%

Aggregated value from the

0.04%

69 Baseline is 0 at the start of the programming period and all the targets are cumulated over the period.


RDP which have programmed






31/12/2016)

Registration of names

as PDO/PGI/TSG/GI following scrutiny of

applications from EU Member States and

from third countries.

Number of

applications examined

(dependent on submissions made to

the Commission)

Within 6 months for

agricultural products and

foodstuffs; within 12 months for wine,

spirit drinks, aromatised wine

Commission

services scrutinised:

73 agricultural products and

foodstuffs, 46 wines,

94 spirit drinks’

applications.

Management of the Community registers

and lists of PDO/PGI/TSG/GI.

Registers kept updated

Ongoing Registers updated on regular basis.

2016/AGRI/001 and 2016/AGRI/002

Delegated and implementing act for

wine GI

Adoption By end 2016 Postponed to 2017 due to a decision to

have delegated and implementing acts

for wine GIs merged with rules

on labelling and

presentation of wines, and

traditional terms for wines.

2011/AGRI/039

Alignment proposal for

spirit drinks

Adoption of

Commission proposal

By end 2016 Commission

Proposal adopted

on 1 December 2016

(COM(2016)750)

Monitor supervision of the control systems

put in place by the

Member States for registered

PDO/PGI/TSG/GI and exchange best practice

Participation in FVO audits

Verification of annual

reports on controls by MS

Completion of seminars

Ongoing By end 2016

By end 2016

Participations in all audits ensured.

Control seminar organised on 10

November 2016.

Contribute to the

protection of EU GIs in

third countries.

Third country GI

examined

Ongoing task

All contributions

provided on time.

See also the outputs related to the Rural Development programme management and ENRD under the previous Specific objective: Enhancing farm viability and

competitiveness of all types of agriculture in all regions and promoting innovative farm technologies and sustainable management of forest (Priority 2).


Common CAP objective 2: To promote a sustainable management of natural resources and climate action

Common CAP objective 2: To promote a sustainable management of natural resources

and climate action

CAP Impact indicator: Net greenhouse gas emissions from agriculture

Definition: The indicator measures net GHG emissions from agriculture including agricultural soils.

Source of the data: Annual European Union GHG inventory. The inventory is based on national submissions to the UNFCCC and to the EU Monitoring Mechanism of CO2 and other

GHG emissions. It is compiled and held by the European Environment Agency (EEA) and the

European Topic Centre on Air and Climate Change (ETC/ACC)

Baseline (2012)

Target Latest known results (2014)

521 799

(in 1000 t of

CO2 equivalent)

To decrease

EU2020

516 184

(in 1000 t of CO2 equivalent)

400.000

450.000

500.000

550.000

600.000

650.000

700.000

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

kt C

O2

eq

uiv

ale

nt

Average annual rate of decline (1990-2014): -1.13%


CAP Impact indicator: Nitrate levels in freshwater

Definition: Nitrates in freshwater (Context indicator.40 – Water quality) consists of: 2.a) Groundwater quality: % of monitoring sites in 3 water quality classes (high, moderate and

poor); 2.b) Surface water quality: % of monitoring sites in 3 water quality classes (high, moderate

and poor).

The three water quality classes are defined as follows: - High quality: concentration close to natural values or within the threshold

indicated in the legislation for low-polluted water. - Moderate quality: concentration above natural standard but still below

hazardous level. - Poor quality: concentration above hazardous level.

The actual concentration classes are the following: Groundwater

- High ("<10 mg/l NO3 " + ">=10 mg/l NO3 and <25 mg/l NO3 ")[1]

- Moderate (">=25 mg/l NO3 and <50 mg/l NO3 ") - Poor (">=50 mg/l NO3 ").

Surface water - High ("<0.8 mg/l N " + ">=0.8 mg/l N and <2.0 mg/l N ")[2]

- Moderate (">=2.0 mg/l N and <3.6 mg/l N " + ">=3.6 mg/l N and >5.6 mg/l N ")

- Poor (">=5.6 mg/l N and <11.3 mg/l N " + ">=11.3 mg/l N ") Source of the data: European Environmental Agency (EEA) – Nutrients in freshwater: Data

voluntary reported by MSs via the WISE/SOE data flow annually.

Baseline

EU-28, 2012


Freshwater: - High: 56.9 %

- Moderate: 31.7%

- Poor: 11.4% Groundwater:

- High: 74.1% - Moderate: 14.2%

- Poor: 11.7%

To decrease Regulations n° 1305, 1306 and

1307/2013

No more recent data available

80

85

90

95

100

105

110

115

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Rivers - EU (17 countries) Groundwaters - EU (13 countries)


Impact indicator: Farmland bird index

Definition: The indicator is a composite index that measures the rate of change in the relative abundance of common bird species at selected sites: trends of index of population of farmland

birds (base year 2000 = 100). Source: EBCC/RSPB/BirdLife/Statistics Netherlands: the European Bird Census Council (EBCC)

and its Pan-European Common Bird Monitoring Scheme (PECBMS); data are published on

Eurostat database

Baseline (year & value) Target Latest known results

2012: 88.4 (index 2000=100)

To increase 2013: 84.4

0

20

40

60

80

100

120

140

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

Ind

ex

valu

e

Farmland Bird Index (2000=100; EU aggregate changing according to the context)


Specific objective: To better reflect consumer

expectations

Related to spending

programme: EAGF-EAFRD

Result indicator: Ratio between EU and World agricultural commodity prices

Definition: Weighted average, covering beef, pig meat, poultry, soft wheat, maize, barley, sugar, butter, cheddar, WMP and SMP. World price references are mainly based on US prices

for meat and crops and Oceania for dairy products, except for beef (Australia), Barley (Black Sea) and Sugar (London white sugar 05)70.

Source of data: DG Agriculture and Rural Development, based on European Commission, USDA, World Bank, IGC, London International Financial Futures and Options Exchange, National

sources.

Baseline Target

(annual)

In 2013, the EU prices were on average 19% above world prices. Prices brought closer to the

world prices

Regulation n° 1308/ 2013

Latest known results:

2016, EU prices were on average 5% above world prices. With the successive CAP reforms, EU prices were brought closer to world prices especially in the

cereal and dairy sectors. In addition, in the last 2 years, the EUR/USD exchange rate favoured EU competitiveness on world markets. In the meat sector, there are several world reference

markets, namely the Atlantic (e.g. Brazil) and Pacific (USA, Australia) markets. For beef, the gap between the EU and the world market prices is closing as illustrated below with Australia,

in addition the US lost competitiveness because of a the surge in beef prices in 2014-15. By contrast, Brazil remained much more competitive. In the poultry sector, the EU gained

competitiveness over the US but lost compared to Brazil (recession). By contrast, after the drop

in 2014-15, the EU pigmeat price increased relatively more compared to the US and Brazil because of Chinese demand (the US and Brazilian pigmeat exports to China are limited because

they use ractopamine).

Note: World price references used for the weighted averages are mainly based on US prices for meat and crops and Oceania for dairy products, except for beef (Brazil is more competitive), Barley (Black Sea) and Sugar (London white sugar 05). Compared to Pacific prices (US and Australia), EU prices were very competitive in 2015 and 2016 because of the exchange rate effect but also because US demand drove price increases. When comparing EU beef prices with Brazil, the increase in EU competitiveness is less pronounced, but visible when comparing with Australia. For pigmeat, the aggregate is calculated using the US price as a longer time series is available, anyhow the difference in prices between Brazil and the US is small.

70 Compared to Pacific prices (US and Australia), EU prices were very competitive in 2015 because of the

exchange rate effect but also because US demand drove significant price increases. If the comparison would be

made with Brazil for meat especially, the increase in EU competitiveness would be less pronounced.

2008 2009 2010 2011 2012 2013 2014 2015 2016

Beef (Australia) 1.50 1.69 1.26 1.21 1.19 1.24 0.98 0.95 1.03

Beef (Brazil) 1.59 1.79 1.36 1.33 1.61 1.72 1.45 1.50 1.49

Pigmeat (US) 1.59 1.59 1.16 1.12 1.19 1.21 0.94 1.02 1.15

Pigmeat (Brazil) 1.22 1.45 1.00 1.13 1.37 1.25 1.02 1.10 1.20

Poultry 1.41 1.25 1.18 1.35 1.18 1.13 1.04 0.82 0.80

Soft wheat 1.11 1.00 0.99 1.07 1.04 1.04 1.02 0.94 0.99

Maize 1.16 1.10 1.19 1.04 0.98 1.04 1.13 1.03 1.11

Barley 1.01 1.04 1.11 1.01 1.00 1.00 0.98 0.99 0.95

Sugar 2.48 1.58 1.04 1.10 1.55 1.90 1.62 1.24 0.98

Butter 1.08 1.47 1.09 1.17 1.19 1.27 1.23 1.06 1.09

Cheddar 1.08 1.17 0.95 1.03 1.14 1.10 1.12 1.03 1.02

WMP 1.04 1.18 1.02 1.07 1.09 0.98 1.11 1.10 1.06

SMP 0.98 1.10 0.93 0.90 0.95 0.90 0.97 0.96 0.99

Weighted average 1.29 1.33 1.11 1.13 1.18 1.19 1.10 1.03 1.05

EU/World price (in EUR)


Note: Weighted average, covering beef, pig meat, poultry, soft wheat, maize, barley, sugar, butter, cheddar, WMP and SMP. World price references used for the weighted averages are mainly based on US prices for meat and crops and Oceania for dairy products, except for beef (Brazil is more competitive), Barley (Black Sea) and Sugar (London white sugar 05). Compared to Pacific prices (US and Australia), EU prices were very competitive in 2015 and 2016 because of the exchange rate effect but also because US demand drove price increases. When comparing EU beef prices with Brazil, the increase in EU competitiveness is less pronounced, but visible when comparing with Australia. For pigmeat, the aggregate is calculated using the US price as a longer time series is available; anyhow the difference in prices between Brazil and the US is small.





Management of running promotion

programmes

Number of running, partially running or

accepted programmes

December 2016: 250

170

Communication on the

new scheme

Organisation of an

Info Day

Lively Europa website (updated

Q/A section…) Provide legal

interpretation on the new regime

26/02/2016

Done

Call for proposals Publication of 2 annual call for

proposals (1 for Simple + 1 for Multi

promotion programmes)

February 2016 Published on 4 February 2016

Annual Work Programme for 2017

Adoption of an implementing

decision

4th quarter 2016 C(2016)7100 of 9.11.2016

To ensure an appropriate follow-up

of simple programmes

under shared management with the

Member States.

Committee for the Common

Organisation of the

Agricultural Markets established by Article

229 of Regulation

March 2016 and November 2016

9 June 2016 19 October 2016

0,80

0,90

1,00

1,10

1,20

1,30

1,40

1,50

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Ratio between EU and World agricultural commodity prices


(EU) No 1308/2013

Commission

Adoption of simple programmes

November 2016

C(2016)7319 of

18.11.2016

Organisation of high level promotional

events in third countries in 2016

2 high level missions with business

delegation to be assumed by Unit.B.5

First half 2016 - February 2016:

Business delegation in Mexico/Colombia

- April 2016: Business delegation

in China/Japan

30 participants in

Colombia, 33 in Mexico

44 participants in

China, 40 in Japan

1 or 2 high level

missions with business delegation

to be assumed by the executive agency

CHAFEA

Second half 2016

Vietnam, Singapore

and Indonesia in November 2016

Number of

participating stakeholders

35/45 or 60 EU

producer organisations

and/or SMEs involved in

campaigns

42 participants in

Vietnam, 36 in Singapore and 38 in

Indonesia

Statistics Development of a

common tool to be able to follow

simple/multi programmes

managed under the promotion regime

Delivery of statistics

Mid 2016

On request

Done

(Ares(2016)5479083 - 21/09/2016)

Work ongoing

Budget Coordination and

attribution of funds according to political

priorities

1st quarter 2016 Draft budget 2017

(adopted on 18.7.2016)

Coordination with

Agency

Preparation and

decisions of Steering Committees

Continuous task

over the course of 2016

Done

Supervision Call documents,

grant agreement,

procedures' manuals, information to

stakeholder

Continuous task

over the course of

2016

Done

Political coordination with the Cabinet

Priorities to insert in the Annual Work

programme

Determination of the Number of

campaigns and high level missions

Continuous task over the course of

2016

Done



(situation on

31/12/2016)

Expenditure of running programmes

Closure of budget sub-

Execution on 05 02 10 01 budget line

Use budget appropriations

foreseen for 2016

EUR 62.6 million


items for finished

programmes

Number of active

budget sub-items under 05 02 10 01

Closure of programs in good time

December 2016: 86

active budget sub-items

118 active

73 programmes

closed

To ensure sound financial management

Info Day 160 participants 176 participants

Implementing Decision for Simple

programmes selected

97 million EUR foreseen for 2016

EUR 94.232.114

Expenditure Attribution of funds

according to political priorities

According to

priorities agreed by using fully budget

foreseen

Done

To ensure sound financial management

of the 2007-2013

Rural Development Programmes and

timely settlement of the final balances of

these 92 programmes

Number of final balances of the 92

2007-2013 Rural

Development Programmes

communicated to MS

To communicate to MS final balances

for programmes for

which last annual accounts were

cleared and final balances

estimations for the other programmes.

100% of programmes:: 64

final balances

communicated to MS and

28 final balances estimations

communicated to MS

Number of final balances established

in the annual clearance of

accounts decision that have been

executed during the year

To execute payments for

programmes whose annual accounts

were cleared

100% of programmes whose

accounts were cleared (70% of all

programmes)

To ensure sound and efficient shared

financial management and timely processing

of the of the quarterly declarations of

expenditure for the

European Agricultural Fund for Rural

Development 2014-2020

Percentage of commitments,

payments of pre-financing and

reimbursement of quarterly

declarations

processed during the year for the 115

Rural Development programmes

100 % of 115 commitments, 115

pre-financing payments and 460

quarterly payments

100%

Average no of days

from receipt of declaration to the

payment

25 Average time in

2016: 24,69

Providing guidance to MS on financial

management of Rural

Development programmes, if

necessary

Guidance documents issued compared to

the number of

guidance documents requested

Issue a guidance document when

needed

No guidance documents

requested in 2016


Specific objective: Contribute to the enhancement of the

environmental performance of the CAP through the greening component of the direct payments. Contribute

to the development of sustainable agriculture and to making the CAP more compatible with the expectations

of the society through the cross compliance system.

Contribute to preventing soil erosion, maintaining soil organic matter and soil structure, ensuring a minimum

level of maintenance and avoiding the deterioration of habitats, protecting and managing water through the

standards of good agricultural and environmental condition of land

Related to spending

programme: EAGF

Result indicator: Share of area under greening practices71 Source of data: Draft Budget 2015

Baseline

(Calendar year 2015)

Target


75%72 To maintain


77%

Result indicator: % of CAP payments covered by cross compliance Source of data: DG AGRI


82.36% Maintain the ratio73


2014 = 83.5%

2015 = 85.7% 2016 = 81.6%74

Result indicator: Opinion expressed by the public on cross compliance Definition: Aggregate figures on the opinion by the public on cross compliance

Source of data: Eurobarometer


87% support the reduction of direct payments to

farmers not complying with environmental rules

87% support the reduction for non-compliance of

animal welfare rules 87% support the reduction

for non-compliance of food

safety rules

Maintain the positive opinion With the cross compliance the

CAP is more sustainable and more compatible with the

society's expectations. Therefore if cross compliance

shows an important support by the public opinion, its

impact will be significant.

No new data available

71 Indicator contributing to the KPI Minimum share of agricultural land with specific environmental

practices/commitment. 72 For year 2015, DG AGRI has received so far the notification from 27 MS (all excluding France) while for year

2016 the notification was received by 19 MS, so the indicated share is provisional. The share is calculated as

total agricultural area for farms with at least one greening obligation on total agricultural area from Farm

Statistics Survey 2013. 73 In view of the payment profile for rural development, the percentage of payments covered by cross

compliance was higher in the earlier part of the programming period 2007-2013. This reflects the fact that the

rural development measures that are not falling under cross compliance have a different payment profile than

the ones falling under cross compliance: measures not under cross compliance tend to have an increasing

execution over the period and thus the % covered by cross-compliance will decrease over the programming

period. 74 Execution of the 2016 budget (provisional figures)


Result indicator: Control rate for GAEC (Standards of Good Agricultural and Environmental Condition)

Definition: GAECs form part of the requirements under Cross Compliance and apply to anyone

who receives payments under Single Payment Scheme and certain rural development schemes Source of data: IACS statistics


100% implementation of the minimum regulatory

control rate in all Member

States

100% implementation of the minimum regulatory control

rate


100% implementation of the minimum regulatory control rate

in all Member States (notifications

from Sweden and France still pending)

Result indicator: The ratio of permanent pasture within a Member State in relation to

the total agricultural area Definition: The maintenance of the ratio of permanent pasture means that there should not

be, at national or regional level, a decrease by more than 5 % of the current ratio of permanent pasture in relation to the total agricultural area by comparison with a reference ratio reflecting

this ratio at a reference period. Source of data: MS annual notification (ISAMM – Information System for Agricultural Market

Management and Monitoring)


Ratio has not decreased beyond the limit of 5% in

any Member State75

Maintain the ratio within the limit of 5 % in relation to a

reference ratio


In 2015: 2 MS, a UK region and a French region communicated a

ratio of permanent grassland above the threshold of 5% even

if no MS communicated to have triggered a reconversion

obligation

In 2016: 3 MS and a French region communicated a ratio of

permanent grassland above the threshold of 5%. 2 of these MS

communicated to have also triggered a reconversion

obligation76.





31/12/2016)


Greening and Cross-

compliance: update of notifications ,

exchanges with MS including expert

groups, legal interpretations and

guidance

Organisation of experts groups and

Committees

All along the year Organised as planned

Assessment on the

MS notifications on greening: EFA,

equivalence and Permanent Grassland

All along the year Delivered in due

time

Assessment on the MS notifications on

All along the year Delivered in due time

75 The deadline for this notification was 15 December 2015. DG AGRI has received so far the notification from

25 MS and three UK regions and is also assessing the data received which has to be checked with the ratio

2007-2014. For the moment no MS communicated to have triggered a reconversion obligation. 76 Provisional information based on 2015 communications from all MS as the notifications are still under

assessment (MS reactions to comments sent from the Commission). 2016 notifications sent by 19 MS.


cross-compliance:

GAEC notifications

Organisation of

bilateral meetings with MS in Brussels

All along the year Organised on needs

Replies to MS and

stakeholders

All along the year Delivered in due

time

Greening review Staff working

document

Adoption by May

2016

Adopted in June

2016

2016/AGRI/016 Commission Delegated

Regulation amending

delegated regulation 639/2014 on rules for

direct payments to farmers including

greening

Adoption Planned 2nd quarter 2016

Adoption foreseen for February 2017

2016/AGRI/017

Commission Implementing

Regulation amending implementing

regulation 641/2014 laying down on rules

of application of regulation EU n°

1307/2013

Adoption Planned 2nd quarter

2016

Adoption foreseen

for February 2017

Specific objective: Restoring, preserving and enhancing

ecosystems related to agriculture and forestry (Priority 4)

Related to spending

programme: EAFRD

Result indicator77:

a) % of agricultural land under management contracts supporting biodiversity and/or landscapes

b) % of forest area/other wooded land under management contracts supporting

biodiversity (Focus area 4A: Restoring and preserving and enhancing biodiversity, including in Natura 2000

area, areas facing natural constraints and high nature value farming and the state of European landscapes)

Source of data: Rural development programmes

Baseline78

Target

(2023)


0 a) 17.7% b) 3.5%



a) 6.3% b) 0.2%

Result indicator79:

a) % of agricultural land under management contracts to improve water management


practices/commitment. 78 Baseline is 0 at the start of the programming period and all the targets are cumulated over the period. 79 Indicator contributing to the KPI Minimum share of agricultural land with specific environmental

practices/commitment.


b) % of forestry land under management contracts to improve water management

(Focus area 4B: improving water management including fertiliser and pesticide management) Source of data: Rural development programmes



0 a) 15.1%

b) 4.3% Aggregated value from the


a) 5.0%

b) 0.4%

Result indicator80: a) % of agricultural land under management contracts to prevent soil erosion and to

improve soil management b) % of forestry land under management contracts to prevent soil erosion and to

improve soil management (Focus area 4C: preventing soil erosion and improving soil management)


Baseline Target

(2023)


0 a) 14.3% b) 3.6%



a) 5.1% b) 0.2%




Result indicator: Share of area under organic farming81

Definition: The number of hectares under organic farming and the share of area under organic farming in the total utilised agricultural area (UAA).

The area under organic farming is the sum of the fully converted area and the area in conversion.

Source of data: Eurostat


10 104 699 ha

5.6% of total UAA

To increase 11 139 595 ha (2015)

6.2% of total UAA

Area under organic cultivation in the EU

Evolution of the share of the organic area in the UAA in the EU

Source: Data on the basis of Council Regulation (EC) No 834/2007 on organic production (FAOSTAT data until 2011, and Eurostat data org_cropar from 2012 onwards) *Data from DE from Agrarmarkt Informations-Gesellschaft mbH and data from AT from Ministerium für ein Lebenswertes Österreich

In Facts and figures on organic agriculture in the European Union, DG AGRI, December 2016 (https://ec.europa.eu/agriculture/sites/agriculture/files/rural-area-economics/briefs/pdf/014_en.pdf)



0%

1%

2%

3%

4%

5%

6%

7%

8%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

EU-15

EU-28

EU-N13

https://ec.europa.eu/agriculture/sites/agriculture/files/rural-area-economics/briefs/pdf/014_en.pdf






New legislative and political framework on

organic production

Adoption by the European Parliament

and the Council Implementation of

Action Plan for the future of Organic

Production in the European Union

2016

Ongoing

Ongoing discussion with the two co-legislators.

Twelve trilogues(and dozens of preparatory

meetings) took place under the Dutch and the

Slovak Presidency in 2016 (plus additional

two in 2015).

Effective supervision of

the set up and functioning of the

control system for organic production in

Member States,

recognised third countries and

recognised control bodies for import of

organic products

Contribution to FVO

audits in Member States, recognised

third countries and recognised control

bodies for import of

organic products Assessment of

annual reports Follow-up to

irregularities

Continuous Audits in Member

States, Third Countries and

recognised control bodies carried out in

201682.

Irregularities have been continuously followed

and discussed with MS at the COP meetings.

Effective supervision of

MS handling of irregularities and fraud

allegations related to EU organic production

-Timely notification

of irregularities -Timely reply to

notified irregularities' -Timely transmission

of information on circulation of alleged

fraudulent products and on remedial

action

Continuous In 2016, more than 700

notifications of irregularities were

received in the notification system.

These were followed by an analysis to assess

the kind of irregularity and to request further

information to MS and a

discussion in the COP. A couple of cases revealed

to be a manifest fraud to the system.

Fostering organics by

promoting equivalence

with third countries.

Number of

negotiation on

mutual recognition Number of on the

spot mission to check the progress of the

country Concluded

negotiations

Ongoing

Ongoing

Ongoing

Initialling of the trade

agreement with Chile,

preparation of the Council decision on

signature and conclusion of the

agreement scope extension with Canada

and launch of negotiations with

Mexico and Colombia.

For this specific objective, please see also the policy-related outputs provided under Specific objective: Enhancing farm viability and competitiveness of all types of agriculture

82 Latvia, Ireland, and Hungary, Bulgaria moreover 6 audits were also carried out in equivalent Third countries

and on recognised control bodies in third countries.


in all regions and promoting innovative farm technologies and sustainable management of forest (Priority 2).

Specific objective: Promoting resource efficiency and

supporting the shift towards a low carbon and climate

resilient economy in agriculture, food and forestry sectors (Priority 5)

Related to spending

programme: EAFRD

Result indicator: % of irrigated land switching to more efficient irrigation systems

(Focus area 5A: increasing efficiency in water use by agriculture) Source of data: Rural development programmes

Baseline83

Target (2023)


0 15.3%



0.2%

Result indicator: Total investment for energy efficiency (Focus area 5B: increasing

efficiency in energy use in agriculture and food processing) Source of data: Rural development programmes



0 2 893 660 214 EUR84



66 653 500

Result indicator: Total investment in renewable energy production (Focus area 5C:

Facilitating the supply and use of renewable sources of energy, of by products, wastes, residues and other non food raw material for purposes of the bio-economy)


Baseline Target

(2023)


0 2 667 704 017 EUR85 Aggregated value from the


2 173 000

Result indicator86: a) % of LU concerned by investments in livestock management in view of reducing greenhouse gas and/or ammonia emissions b) % of agricultural

land under management contracts targeting reduction of greenhouse gas and/or ammonia emissions (Focus area 5D: Reducing greenhouse gas and ammonia emissions from

agriculture) Source of data: Rural development programmes



0 a) 2.04%87

b) 7.7% Aggregated value from the


a) 0.2

b) 2.4

83 Baseline is 0 at the start of the programming period and all the targets are cumulated over the period. 84 Target level has been updated to reflect relevant changes introduced by programmes modifications. 85 Target level has been updated to reflect relevant changes introduced by programmes modifications 86 Indicator contributing to the KPI Minimum share of agricultural land with specific environmental

practices/commitment. 87 Target level has been updated to reflect relevant changes introduced by programmes modifications


Result indicator: % of agricultural and forest area under management contracts contributing to carbon sequestration and conservation (Focus area 5E: Fostering carbon

sequestration in agriculture and forestry) Source of data: Rural development programmes



0 1.8%



0.5%

For this specific objective, please see the policy-related outputs provided under Specific objective: Enhancing farm viability and competitiveness of all types of agriculture in all

regions and promoting innovative farm technologies and sustainable management of forest (Priority 2).


Common CAP objective 3: To promote a balanced territorial development

Common CAP objective 3: To promote a balanced territorial development

CAP Impact indicator: Rural employment rate Definition: Employment rate for the population aged 15-64 in rural areas

Source of the data: Eurostat – Labour Force Survey

Baseline

(2012 – EU-28)


63.4% To increase Article 110 (2)(c) of Regulation

n° 1306/2013

65.0% (2015)

Specific objective: Promoting social inclusion, poverty

reduction and economic development in rural areas (Priority 6)

Related to spending

programme: EAFRD

Result indicator: Number of jobs created through supported projects (not LEADER) (Focus area 6A: Facilitating diversification, creation of new small enterprises and job creation)


Baseline88

Target (2023)


0 79 37089 Aggregated value from the


17

88 Baseline is 0 at the start of the programming period and all the targets are cumulated over the period. 89 Target level has been updated to reflect relevant changes introduced by programmes modifications

64,8

62,8 62,7 62,5

63,4 63,5

64,3

65,0

61,0

61,5

62,0

62,5

63,0

63,5

64,0

64,5

65,0

65,5

2008 2009 2010 2011 2012 2013 2014 2015

% Employment rates in rural areas, EU-28


Result indicator: a) % of rural population covered by local development strategies

b) Number of jobs created through supported projects (LEADER) c) % of rural population benefiting from improved services / infrastructures

(Focus area 6B: Fostering local development in rural areas) Source of data: Rural development programmes



0 a) 54.4%90

b) 44 057 c) 22.6%



a) 21

b) 8 c) 1

CAP Indicator: % of rural population benefiting from improved IT

infrastructures/services (Focus area 6C: Enhancing accessibility to use and quality of information and communication technologies (ICT) in rural areas)


Baseline Target

(2023)


0 13.8%91 Aggregated value from the



0%





31/12/2016)

Broadband Competence Office

Brussels-based Broadband

Competence Office is

operational

2016 100% (Brussels-based Support

Facility for the

network of Broadband

Competence Offices (BCOs) is

operational)

For this specific objective, please see also the policy-related outputs on ENRD provided

under Specific objective: Enhancing farm viability and competitiveness of all types of agriculture in all regions and promoting innovative farm technologies and sustainable

management of forest (Priority 2).

90 Target level for a) and b) has been updated to reflect relevant changes introduced by programmes

modifications 91 Target level has been updated to reflect relevant changes introduced by programmes modifications


Specific objective: To promote local agricultural production and to ensure a fair level of prices for

commodities for direct consumption and for processing by local industries in the Outermost Regions of the EU

and in the Aegean Islands


Result indicator: Support to the Local Production to maintain/develop the agricultural

production Definition: Utilised agricultural area (variation with respect to the previous year)

Source: MS Annual Reports

Baseline (Calendar year

2013 / Budget year 2014)92


POSEIDOM: Mainland France: 26 888

215 ha

Guadeloupe: 31 401 ha Martinique: 24 445 ha

Guyane: 28 626 ha Réunion: 43 833 ha

POSEICAN:

Mainland Spain: 23 523 000 Canaries: 84 950 ha

POSEIMA:

Mainland Portugal 3 641 592 Madeira: 5 262 ha

Azores: 118 589 ha

Smaller AEGEAN ISLANDS:

333 107 ha

To at least maintain local agricultural production

Objective of the regulation 228/2013, Article 2 (1c)

POSEIDOM: Mainland France: 26 807 867 ha

(-0.2%)

Guadeloupe: 30 965 ha (0%) Martinique: 23 472 ha (-1.5%)

Guyane: 31 268 ha (+6.3%) Réunion: 43 061 ha (-0.8%)

POSEICAN93:

Mainland Spain: 23 404 800 ha (-0.5%)

Canaries: 85 736 ha (+2.9%)

POSEIMA94:

Mainland Portugal 3 641 592 ha Madeira: 5 262 ha (-3.1% with

respect to 2009) Azores: 118 589 ha (-1.5% with

respect to 2009)

Smaller AEGEAN ISLANDS: 299

135 ha (-7.5%)

For this specific objective, please see the outputs provided under the following Specific objective: Specific Supply Arrangements (SSA) to ensure the supply of essential

products: SSA coverage rate (relation between quantities of products benefiting from SSA support and total quantities of the same products introduced in the respective

outermost region).

92 Baseline updated from 2012 to 2013 as it provides consolidated data for all outermost regions for that year,

given that Portugal data collection is done every five years, 2013 being the latest survey.

93 Data from 2014. Data from 2015 not yet available. Variation is calculated with respect to 2013.

94 Portugal's farm structure data are collected every five years (data are available for 2009 and 2013), thus

the latest known data refer to year 2013. Nevertheless, the variation is calculated with respect to the previous

available data, i.e. 2009.


Specific objective: Specific Supply Arrangements (SSA)

to ensure the supply of essential products: SSA coverage rate (relation between quantities of products benefiting

from SSA support and total quantities of the same products introduced in the respective outermost region)

Related to spending

programme: EAGF

Result indicator: Percentage of SSA products coverage of local needs Source: MS Annual Reports

Baseline (2013 – variations

with respect to 2012)95


POSEIDOM96 (all products):

39% (-4%) POSEICAN: (cereals only):

99.64% (+0.6%)

POSEIMA: Madeira (cereals only):

98.6% (+3,6%)

Azores (cereals only): 85.3% (EU) (-3.3%)

Smaller Aegean Islands

(animal feed): 100.8% (+1.2%)

100%

The objective included in Article 2 (1a) of regulation

228/2013 and 229/2013 is the "guaranteed supply to the

outermost regions of products essential for human

consumption (…)". This target

contributes to achieving this objective.

POSEIDOM (all products): 37%97

POSEICAN: (cereals only):

97.3%

POSEIMA: Madeira (cereals only): 99.2%

Azores (cereals only): 85.7%98 (EU)

Smaller Aegean Islands (animal

feed): 99.4%





2016/AGRI/005 General report to be

presented to the European Parliament

and to the Council showing the impact of

the action taken under

Regulation (EU) No 228/2013 (art.32 of

this Regulation). This report will be partially

based on the results of the external evaluation

launched in 2015.

Transmission from the Commission to

EP and Council of the Report

4th quarter 2016 Report approved on 15/12/2016

(COM(2016)797). Possibly subject to

discussion at the EP and Council.

2016/AGRI/006

General report to be presented to the

European Parliament and to the Council

showing the impact of

Transmission from

the Commission to EP and Council of the

Report

31st December 2016 Report approved on

15/12/2016 (COM(2016)796).

Possibly subject to discussion at the EP

and Council.

95 Baseline is set to 2013 in coherence with baseline of previous indicator. 96 The French authorities used in their annual report for 2013, 2014 and 2015 a different methodology and data

source to calculate this indicator (calculation based on value and not quantities, data taken from customs

sources and not from SSA operators).

97 This result refers to all French outermost regions, including Mayotte since 2014.

98 Data for 2014. Data for 2015 not available yet.


the action taken under

Regulation (EU) No 229/2013 (art.20 of

this Regulation). This report will be partially

based on the results of

the external evaluation launched in 2015.

2016/AGRI/007

Modification of Commission

Implementing

Regulation (EU) No 180/2014.

Adoption by the

College and published in EUOJ

2016 Adoption foreseen

in 2017

2016/AGRI/008

Modification of Commission

Implementing

Regulation (EU) No 181/2014.

Adoption by the

College and published in EUOJ

2016 Adoption foreseen

in 2017

Commission decisions

and DG letters for amendments

approvals (according

to kind of modifications)

Date of notification to

the MS

2016 Foreseen in 2017


Description Indicator Target99 Latest known


15/10/2016)

Measures to Support

Local Agricultural Products

Executed budget by

MS

FR: 251.9 MEUR

ES: 202.5 MEUR PT: 89.1 MEUR

EL: 18.460 MEUR

FR: 248.11 MEUR


EL: 16.06 MEUR

Specific Supply

Arrangements

Executed budget by

MS

FR: 26.51 MEUR


EL: 5.47 MEUR

FR: 26.87 MEUR


EL: 5.67 MEUR

99 The target figures for these expenditure outputs correspond to the financial allocation stated by each Member

State in their 2016 programme, which shall be confirmed by the Member State in February 2016, according to

Article 32(1) of Regulation 228/2013 (POSEI) and Article 20(1) of Regulation 229/2013 (Smaller Aegean

islands). In addition, Member States have the possibility to notify adjustments of financial allocations and

quantities of products concerning both measures to Support Local Products and Specific Supply Arrangements

within the 2016 programme, in conformity with Article 40(3) of Commission Implementing Regulation 180/2014

(POSEI) and Article 32(3) of Commission Implementing Regulation 181/2014 (Smaller Aegean islands).


The following objectives contribute to all 3 common CAP objectives

Specific objective: Fostering knowledge transfer and

innovation in agriculture, forestry and rural areas (Priority 1)

Related to spending

programme: EAFRD

Result indicator: % of expenditure for the three measures Knowledge transfer &

information action, advisory services and cooperation in relation to the total

expenditure for the RDP (Focus area 1A: Fostering innovation and the knowledge base in rural areas)


Baseline100

Target (2023)


3.9% Aggregated value from the


0%

Result indicator: Number of cooperation operations planned under the cooperation

measure (groups, networks/clusters, pilot projects) (Focus area 1B: strengthening the

links between agriculture and forestry and research and innovation) Source of data: Rural development programmes

Baseline Target

(2023)


15 260101



105

Result indicator: Total number of participants trained (across all focus areas) (Focus area 1C: fostering lifelong learning and vocational training in agriculture and forestry sectors)


Baseline Target

(2023)


3 848 363 Aggregated value from the



12 333





31/12/2016)

EIP-AGRI events

5 New Focus Groups

launched 10 Focus Group

meetings 4 workshops

1 Seminar

3 meetings of the Innovation Subgroup

2016

5 New Focus Groups launched

10 Focus Group

meetings 4 workshops

1 Seminar 3 meetings of the

Innovation Subgroup

100 Baseline is 0 at the start of the programming period and all the targets are cumulated over the period. 101 Target level has been updated to reflect relevant changes introduced by programmes modifications.


EIP-AGRI publications 1 magazine

(Agrinnovation) 10 factsheets

4 brochures 12 newsletters

24 press articles

2016 1 magazine

(Agrinnovation) 12 factsheets

5 brochures 12 newsletters

18 press articles

Specific objective: Societal challenges - to secure

sufficient supplies of safe and high quality food and other bio-based products, by developing productive and

resource-efficient primary production systems, fostering related ecosystem services and the recovery of

biological diversity, alongside competitive and low carbon supply, processing and marketing chains

Related to spending

programme: Horizon 2020

Result indicator: Publications in peer-reviewed high impact journals in the area of food security

Definition: This indicator measures the number of publications in peer-reviewed high impact journals in a specific societal challenge per 10M€ of EC-funding102. High impact journals are

defined to be the top 10% (in terms of Scimago Journal Ranking (SJR) index) of all journals within a given scientific category.

Source of data: Horizon 2020 common IT system, i.e. CORDA (Common Research Datawarehouse) and RESPIR (SESAM Research Performance and Impact Reports)

Baseline103 (2013)

Milestone 2019 Target (2020)


22.7 publications per 10

million € funding (baseline FP7, January

2015)

On average, 20 On average, 20

publications per 10 million € funding

No known result at this

stage

Result indicator: Patent applications in the area of food security104

Definition: This indicator measures the number of patent applications in a specific societal challenge per EUR 10 M€ funding105.

Source of data: Horizon 2020 common IT system, i.e. CORDA (Common Research Datawarehouse) and RESPIR (SESAM Research Performance and Impact Reports)

Baseline (2013)

Milestone 2019 Target (2020)


For FP7 Cooperation

projects finished by January 2015: 1.2

patent applications per

10 million € funding

On average, 2 On average, 2

patent applications per 10 million €

funding

No known result at this

stage

102 From the launch of the programme and until a critical mass of finished projects (ca. 10 % of all funded

projects) has been reached, information about the two indicators below will be provided in the form of absolute

number by the funded projects. On the basis of FP7 data it is considered that this critical mass of finished

projects should be reached by 2019. 103 The reference for all the targets is the year when the last actions financed under Horizon 2020 will be

finished, i.e. several years after the formal end of the programming period. 104 The result indicator was aligned with the respective indicator provided for in the Management Plan 2014 of

DG RTD, i.e. reporting on patent applications only but not on patents awarded (as stated in the Programme

Statement DB2014) since no meaningful information (or none at all) can be expected before 2019-2020. 105 See footnote in the previous indicator.






31/12/2016)

Proposal submission

for 2016 calls

Number of proposals

submitted (first and second stage)*

September 2016 292 proposals

submitted

Proposals selected for

funding from 2016

calls

Number of proposals

selected for funding*

December 2016 38 proposals

selected

2017 Call publication Number of topics published

July 2016 27 topics published

Strategic analysis for 2018-2020

programming

Adopted scoping paper

November 2016 adopted in November



(situation on

31/12/2016)

Grants Budget committed to grants (€)

218.665.454 221.510.795

* Numbers do not include instruments to which DG AGRI contributed through a central taxation (SME-instrument and Fast Track to Innovation) and thus are implemented

centrally across Horizon 2020.


IPARD The following 3 objectives also contribute to IPA objective "support

candidate countries and potential candidates (‘beneficiary countries’) in

implementing the political, institutional, legal, administrative, social and

economic reforms required by those beneficiaries in order to comply

with the Union's values and to progressively align to Union rules, standards, policies and practices with a view to Union membership."

Specific objective: To contribute to the sustainable

adaptation of the agricultural sector and rural areas and

to the new Member State Croatia's and Candidate Countries' preparation for the implementation of the

acquis communautaire concerning the CAP and related policies under IPARD 2007-2013 (IPARD I) by:

1. improving market efficiency and implementation of Union standards,

2. preparatory actions for the implementation of the agri-environmental measures and local rural development

strategies,

3. development of the rural economy.

Related to spending

programme: IPARD 2007-

2013 (IPARD I)

1. Improving market efficiency and implementation of Union standards (AXIS 1)

Result indicator: Number of applications received

Source: IPARD programmes 2007-2013, annual106 and bi-monthly107 reports


HR: 656 applications fYRoM: 1557 applications

TR: 3394 applications

833 in HR 2890 in fYRoM

4818 in TR108

HR: 398 fYRoM: 1351

TR: 2942

Result indicator: Number of applications approved

Source: IPARD programmes 2007 – 2013, annual and bi-monthly reports


HR: 234 applications fYRoM: 559 applications

TR: 2023 applications


3084 in TR109

HR: 398 fYRoM: 1351

TR: 2942

Result indicator: Number of farms/enterprises supported (paid by the IPARD Agency) Source: IPARD programmes 2007 – 2013, annual and bi-monthly reports


177 projects in HR 248 projects in fYRoM

1479 projects in TR


n/a in TR110

HR: 336 fYRoM: 730

TR: 2141

Result indicator: Total volume of investment (paid) Source: IPARD programmes 2007 – 2013, annual and bi-monthly reports


€96.8m in HR

€3.4m in fYRoM

€72.6m in TR

€220m in HR

€75.7m in fYRoM

Target in TR111 - n/a

€71m in HR

€7.7m in fYRoM

€721m in TR

106 Throughout this specific objective: baseline – end of 2014 – based on the respective annual reports. 107 Throughout this specific objective: current – end of 2015 – based on the bi-monthly reports, data still

provisional. 108 Updated target based on the latest programme modifications. 109 Updated target based on the latest programme modifications. 110 Updated target based on the latest programme modifications. 111 No target agreed at the time when programme was set up.


Result indicator: Increase on gross value added (GVA) in supported holdings

Source: IPARD programmes 2007 – 2013 and annual reports


For the time being information not available in

HR, fYRoM and TR

5% in HR 5-8% in fYRoM

Target in TR by €152m112

For the time being information not available in HR, fYRoM and

TR

Result indicator: Number of farms/enterprises introducing Union standards

Source: IPARD programs 2007-2013 and annual reports


For the time being information not available in

HR and fYRoM TR: 1479

290 in HR Target in fYRoM (100%)

Target in TR: 2776113

HR: n/a fYRoM: 120

TR: n/a

Result indicator: Economic growth in agriculture – net additional added value in PPS (Purchase Power Standards = purchasing power of the same goods with different currencies)

Source: IPARD programmes 2007 – 2013 and annual reports


For the time being information not available for

any of the countries

5% in HR For the time being information not available for any of the

countries

Result indicator: Labour productivity in agriculture – change in gross value added

(GVA) Source: IPARD programmes 2007 – 2013 and annual reports


For the time being

information not available in HR, fYRoM and TR

To increase For the time being information

not available in HR, fYRoM and TR

2. Preparatory actions for the implementation of the agri-environmental measures and local rural development strategies (AXIS 2)

Result indicator: Local rural development strategies

A) Number of applications received

B) Number of applications approved C) Number of recognised LAGs

D) Total population of LAGs Source: IPARD programmes 2007 – 2013 and annual and bi-monthly reports


In HR

A) 71 applications received B) 42 LAGs contracted

C) 41 LAGs D) 1 321 155

Leader measure has not been

accredited in TR and fYRoM under IPARD I.

In HR

A) 40 B) 25

C) 25 D) 1 055 000

In HR

A) 71 B) 42

C) 41 D) 1 321 155

3. Development of the rural economy (AXIS 3)

Result indicator: Improvement of rural infrastructure A) Number of applications received

B) Number of applications approved C) Number of beneficiaries

D) Total volume of investment Source: IPARD programmes 2007-2013 and annual and bi-monthly reports


A) HR: 210 A) 205 in HR A) HR: 199

112 Updated target based on the latest programme modifications. 113 Updated target based on the latest programme modifications.


B) HR: 106

C) HR: 33 D) HR: €10m

This measure has not been accredited in TR and fYRoM

under IPARD I.

B) 174 in HR

C) 148 in HR D) €59m in HR

B) HR: 106

C) HR: 66 D) HR: €21.6m (EU

contribution only)

Result indicator: Diversification of rural economy

E) Number of applications received F) Number of applications approved

G) Number of beneficiaries supported and paid H) Total volume of investment (data from Monitoring Tables)

Source: IPARD programmes 2007-2013 and annual and bi-monthly reports


E) HR: 329

fYRoM: 276 TR: 8322

F) HR: 171

fYRoM: 17 TR: 5991

G) HR: 41

fYRoM: 1

TR: 5618

H) HR: €5.3m fYRoM: €0.01m

E) 380 in HR

229 in fYRoM 5697 in TR

F) 350 in HR


G) 329 in HR

95 in fYRoM

n/a in TR114

H) €39m in HR €7.2m in fYRoM

€395m in TR115

E) 326 in HR


F) 167 in HR


G) 101 in HR

8 in fYRoM

7817 in TR

H) €5.7m in HR €275 240 in fYRoM

€128m in TR





31/12/2016)

Management of the

implementation of three IPARD

programmes 2007-2013.

Percentage of the

relevant IPARD allocation116

contracted and paid

2016 HR: 71%

fYRoM: 40% TR: 81%




Improving market

efficiency and

implementation of Union standards (AXIS

1)

Number of

applications received

833 in HR

2890 in fYRoM

4818 in TR117

HR: 640

fYRoM: 2727

TR: 4764

Improving market efficiency and

Number of applications


HR: 398 fYRoM: 1351

114 Updated target based on the latest programme modifications. 115 Updated target based on the latest programme modifications. 116 Based on adjusted commitment figures. 117 Updated target based on the latest programme modifications.


implementation of

Union standards (AXIS 1)

approved 3084 in TR118 TR: 2942

Preparatory actions for the implementation of

the agri-environmental measures and local

rural development strategies (AXIS 2)

Local rural development

strategies A) Number of

applications received B) Number of

applications approved

C) Number of

recognised LAGs D) Total population

of LAGs

In HR A) 40

B) 25 C) 25

D) 1.055.000 Leader measure has

not been accredited in TR and fYRoM

under IPARD

In HR A) 71

B) 42 C) 41

D) 1 321 155

Development of the rural economy (AXIS

3)

Development119 of rural economy

A) Number of

applications received B) Number of

applications approved

A) 380 in HR 229 in fYRoM

5697 in TR

B) 350 in HR 95 in fYRoM

5127in TR

A) 326 in HR 362 in fYRoM

11810 in TR

B) 167 in HR


Specific objective: Supporting the development of management and control systems which are compliant

with good governance standards of a modern public administration and where the relevant country structures

apply standards equivalent to those in similar

organisations in the Member States of the European Union.

Related to spending programme: IPARD 2014-

2020 (IPARD II)

Result indicator: Number of measures for which entrustment of budget

implementation tasks granted to the IPA II Beneficiaries under rural development programmes

Source: Estimate, based on experience gained under Sapard and IPARD I

Baseline (2014) Target 2020 Latest known results

0 32 Entrustment procedure for

fYRoM (4 measures) and Turkey (5 measures) in last

stages is in final stages.

Result indicator120: Financing Agreements (FA) concluded Source: DG AGRI


No FA signed. Financing Agreements are to be concluded once and will be

updated in order to reflect new budgetary allocations

and entrustments of budget implementation tasks for new

measures

Procedure for signature/conclusion of the

Financing Agreements with fYRoM and Turkey launched.

118 Updated target based on the latest programme modifications. 119 Wording adapted: the indicator is per axis and not just per measure. 120 New indicator; new types of Financing Agreements must be prepared and concluded reflecting the new IPA

2014-2020 legal base.






31/12/2016)

Smooth transition

between IPARD I and IPARD II programmes

in Turkey and former Yugoslav Republic of

Macedonia

Contracting under

IPARD I continues and TK and the

former Yugoslav Republic of

Macedonia ready to start contracting

under IPARD II.

2016 Respective countries

will be able to start contracting under

IPARD II early in 2017.


Description Indicator Target Latest known


31/12/2016)

Legal framework for

implementation of IPARD 2014-2020

finalised

Entering into force of

the Sectoral Agreements between

the Commission and the beneficiary

countries (except for Bosnia and

Herzegovina and

Kosovo)

Sectoral

Agreements with Turkey, the former

Yugoslav Republic of Macedonia,

Serbia, Albania and Montenegro

concluded and

enter into force in 2016

Expected output

achieved

Management and

control systems ready to start

implementation of the

programmes

Entrustment of

budget implementation tasks

granted on a number

of measures under individual country

IPARD programmes

Entrustment at

least for some measure under the

four programmes

(except for Albania). Expected

total by 2020 – 32 entrustments

Entrustment

procedure for fYRoM (4 measures) and

Turkey (5

measures) in final stages. Respective

countries will be able to start

contracting under IPARD II early in

2017

All legal and

institutional arrangements in place

to start implementation of

IPARD 2014-2020

Conclusion of the

Financing Agreements with

IPARD Beneficiary countries

Financing

Agreements concluded each

year with all IPA II Beneficiary

countries having received

entrustment of

budget implementation

tasks under indirect management

Procedures for

signature/conclusion of the Financing

Agreements with fYRoM and Turkey

launched


Specific objective: To increase the food-safety of the IPA

II beneficiary and the ability of their agri-food sector to cope with competitive pressure as well as to

progressively align the sector with Union standards, in particular those concerning hygiene and environment,

while pursuing balanced territorial development of rural

areas.

Related to spending

programme: IPARD 2014-2020 (IPARD II)

Result indicator: Number of economic entities performing modernisation projects in agri-food sector



0 6450 Contracting under IPARD II has not yet started

Result indicator: Number of economic entities developing additional or diversified sources of income in rural areas



0 3300 Implementation of programmes has not yet

started

Result indicator: Overall investment in physical capital in agri-food and rural

development (EUR) Definition: Overall investment in machines, equipment, production facilities made by

farmers, food processing and marketing enterprises as well as micro and small enterprises in rural areas



0 2.29 billion €

Implementation of

programmes has not yet started

Result indicator: Number of economic entities progressively upgrading towards EU

standards Definition: Number of farmers and food processing and marketing enterprises

progressively upgrading to EU environmental, food safety and hygiene, occupational

standards Source: IPARD programmes 2014-2020 and annual and bi-monthly reports


0 4440 Implementation of






Start of implementation of

IPARD II programmes

First calls for applications carried

out under the four programmes

(Albanian

2016 Implementation of programmes has

not yet started; in fYRoM and Turkey

expected to start

121 All targets under this specific objective have been updated. The old targets were based on the extrapolations

of the IPARD I programmes. Now, that all programmes have been adopted, more reliable estimates stemming

from the programmes can be provided.


programme most

likely will commence in 2017)

early in 2017, in

Albania, Montenegro and

Serbia – by the end of the year


Description Indicator Target122 Latest known results


Start of contracting Number of economic entities performing

modernisation projects in agri-food

sector

6450 Implementation of programmes has

not yet started

Start of contracting Number of economic

entities developing additional or

diversified sources of income in rural areas

3300 Implementation of


Start of contracting Overall investment in

physical capital in

agri-food and rural development (EUR)

(investment in machines,

equipment, production facilities

made by farmers, food processing and

marketing

enterprises as well as micro and small

enterprises in rural areas)

2.29 billion € Implementation of

programmes has

not yet started

Start of contracting Number of economic

entities progressively

upgrading towards EU standards

Definition: Number of farmers and food

processing and marketing

enterprises progressively

upgrading to EU

environmental, food safety and hygiene,

occupational standards

4440 Implementation of

programmes has

not yet started

122 All targets for these main expenditure outputs have been updated. The old targets were based on the

extrapolations of the IPARD I programmes. Now, that all programmes have been adopted, more reliable

estimates stemming from the programmes can be provided.


Commission general objective 6: A Reasonable and Balanced Free Trade Agreement

with the U.S.

CAP Impact indicator: Share of agri-food trade with the US in total EU agri-food trade

Source of the data: Comext

Baseline (2011)123

Target (2020)

Latest known results (2016)

10,8% Increase 13.1%

Specific objective: To promote the EU agricultural sector by contributing to successful negotiation and cooperation

within the World Trade Organisation (WTO) and other multilateral organisations such as the Organisation for

Economic Co-operation and Development (OECD) and the Food and Agriculture Organisation (FAO).

Related to spending programme: NA

Result indicator: Timely contribution to negotiations and other ongoing processes in multilateral fora

Source: DG AGRI


100% of contributions in time.

Examples:

Provision of negotiating lines to take in the context of WTO

DDA negotiations following the 9th Ministerial Conference

(Bali, December 2013). Relevant input to agriculture-

related FAO activities.

100% of contributions in time

This target was agreed within

DG AGRI and is reflected by relevant procedures for

conducting negotiations.

100% of contributions on time

123 Baseline modified to 2011 instead of 2015. It is less relevant to have the current year as the baseline and

the value was based on incomplete results of only Jan-Nov 2015 as available in 2016.






WTO Agricultural negotiations

Contributions made to the negotiations

on the post-Nairobi agenda (10th

Ministerial Conference,

December 2015)

running up to the 11th Ministerial

Conference (Buenos Aires, December

2017)

Throughout 2016, notably for each

Special Session of the WTO Committee

on Agriculture

Contributions provided as

appropriate and on time (4 meetings of

the Special Session in 2016)

Negotiations in the WTO on compensatory

adjustments for other WTO Members in

respect of Croatia's accession to the EU

(Article XXIV:6 GATT)

Contributions made to negotiations, and

their conclusion and implementation

End 2016

Contributions provided as

appropriate and on time. Draft

agreement initialled with Brazil in 2016;

agreements with Uruguay and China

concluded and

implemented in 2016.

OECD activities related

to agriculture, food and rural development

Attend all relevant

meetings (minimum, n=8)

Review all OECD

papers and provide comments according

to EU policy objectives

Throughout 2016,

notably for the OECD Agricultural

Ministerial meeting

(7/8 April) and each session of the OECD

Committee for Agriculture and its

working parties

Contributions

provided as appropriate and on

time. Draft

agreement initialled with Brazil in 2016;

agreements with Uruguay and China

concluded and implemented in

2016.

Influence of

agriculture policy in UN (notably FAO),

GFFA (Global Forum for Food and

Agriculture), G-20 (agriculture) and G-7

(agriculture).

a. Number of

committees in which AGRI

participates and speaks in main

FAO and IFAD (International

Fund for

Agricultural Development)

bodies, esp. ERC (European

Regional Conference),

CoAg (Committee on Agriculture),

a. As dates of each

committee.

a. FAO-ERC (May

2016) FAO-COFO (July

2016) FAO-COAG (Sep

2016) FAO-CCP (October

2016)

CFS (October 2016) In all of these DFAO

events AGRI has prepared and

discussed EU interventions)


COFO (Committee

on Forestry), CCP (Committee on

Commodity problems), and

CFS (Committee

on World Food Security)

b. Number of SDG-

indicators for Agenda 2030

affecting

agriculture policy that are adopted.

b. 30/12/2016 b. SDG target on

export subsidies completed by WTO

Nairobi conclusions

c. Extent to which

conclusions of GFFA, G-20, G-7

and other

agricultural ministerials are

compatible with EU policy.

c. As dates of each

ministerial

c. G20 meeting of

agricultural ministers in Xi'an

GFFA conclusions

and recommendations

are compatible with EU policy

Specific objective: To improve market access for

agricultural products by contributing to negotiating, revising bilateral agreements, by resolving trade

irritants, ensuring protection for EU geographical indications in third countries by negotiating relevant

provisions within Free Trade or Associations Agreements

or stand-alone agreements, carrying out dialogues in agriculture and cooperation activities and contributing to

sustainable economic development in particular in developing countries.

Related to spending

programme: NA

Result indicator: Timely preparation of and contribution to bilateral negotiations

leading to the objectives given.

Source: DG AGRI


100% of timely contributions. Examples:

Contributing to negotiations with WTO partners in the framework of Art XXIV.6

GATT; Contributing to negotiations with Mercosur and the United States (Trans-

Atlantic Trade and Investment Partnership); contributing to the scoping

exercises preceding the modernisation of

existing agreements with Mexico and Chile;

Contributing to ratification and implementation of Economic Partnership

Agreements including built-in agendas on GIs and wines and spirits; facilitating

responsible private sector agri-business investments in ACP;

Contributing to negotiations with Viet Nam

and Japan on the agricultural aspects of

100% of contributions in time

This target was agreed

within DG AGRI and is reflected by relevant

procedures for conducting negotiations.

All contributions prepared in time and

to the required quality.


the respective Free Trade Agreements;

Negotiating a stand-alone agreement with China on cooperation on, and protection

of, geographical indications Steering the process leading to the

protection of EU geographical indications

in Central America, in the framework of the agreement with these countries

Carrying out dialogues on agricultural issues with some third countries (China,

Brazil, India, EPAs) and cooperation activities in the agricultural field





Canada: CETA Signing by Council and

consent by EP

2016 Council signed. EP consent and entry into force expected in 2017

US: TTIP Continuation of

negotiations

2016 Joint statement issued.

Continuation of the process depends on the stance of the

incoming US administration

Mexico:

modernisation of existing global

agreement

Opening of

negotiations

2016 Two rounds took place

Central America: Free Trade

Agreement

implementation

Continuation of monitoring of

implementation

2016 Committee meetings held

Peru-Colombia-Ecuador: Free Trade

Agreement implementation and

accession of Ecuador

Signing by Council and

consent by EP for Ecuador

accession to the

existing agreement with

Peru-Colombia

2016 Committee meetings held. Ecuador Protocol of accession

approved; provisional entry into force in January 2017

Mercosur Continuation of negotiations

2016 Exchange of new tariffs offers. A full negotiating round and 2 Chief

Negotiators' meetings were held

Chile: modernisation

of existing association

agreement

Opening of

negotiations

2017 Two working groups on the

modernisation and discussion on the Joint Scoping Paper (to be

finalised in 2017). Process to continue with request for

negotiation directives

Monitoring of EU

agri-food trade

Monthly analysis

and publication of latest

developments in EU agri-food

trade

Monthly

publication

12 monthly reports published on

Europa

China: agreement on

protection of

Continuation and

possible

Second

semester

New target for the conclusion of

the negotiations set for first half


geographical

indications

conclusion of

negotiations

2016? of 2017 as expressed during last

meeting in November 2016

Japan: Free Trade Agreement

negotiations

Continuation and possible

conclusion of negotiations

In the course of

2016

Continuation of the negotiations throughout 2016, with

expectations to conclude during first half of 2017

Philippines: Free

Trade Agreement

negotiations

Opening of

negotiations

2016 Negotiations opened in May 2016.

Continuation of the negotiations

throughout 2017

Australia/New Zealand: preparation

in view of Free Trade Agreement

negotiations

Preparatory work in cooperation

with DG TRADE, notably to

produce a robust

impact assessment and

scoping papers to reflect EU

priorities.

2016 Continuation throughout 2016 of the preparatory work in order to

finalise scoping papers in the first half of 2017

India, Thailand,

Malaysia: Free Trade Agreements

Talks towards

possible resumption of

negotiations

2016? Participation to exploratory talks

with Malaysia and India. No decision on resumption of talks.

Korea: Free Trade Agreement

implementation

Continuation of monitoring of

implementation

2016 Follow-up of the GI addition process and of GI infringements

in the GI Working Group.

Monitoring of agri-food trade issues.

China: cooperation

activities in the field of agriculture and

rural development

Continuation of

cooperation resulting in

avoidance of new

trade barriers.

2016 Commissioner high-level visit in

April with some SPS success, GI negotiations resumed with a

round in November, good

cooperation in R&I (JP visit)

Indonesia: Free Trade Agreement

negotiations124

Opening of negotiations

- Negotiations opened in September 2016. Continuation of

the negotiations throughout 2017

Implementation of

full EPAs in: East African Community;

Southern African Development

Community (SADC)-EPA Group; West

Africa; CARIFORUM

(Caribbean Forum of ACP States)

a. Implementa-

tion (or preparation for

implementation) of agricultural

sub-committees/dialo

gues, with

engagement of civil society

30.12.2016

for all

CARIFORUM: Special committee

on Agriculture and Fisheries adopted. 1st meeting in 1st half

2017. Civil dialog committee in place since 2015.

SADC EPA: in force since 10.10.2016. First meeting of the

Trade and Development

Committee to establish subcommittees and dialogues:

February 2017.

b. Value of development

projects that

support EPA implementation

in agricultural and agri-

SADEC EPA: 0 (zero) as the agreement has just entered into

force;

West Africa EPA: 0 (zero) as signature of the agreement has

not been yet finalised; Cariforum: 46,5 Mio € (EDF

124 Target date not foreseen at the time of drafting.


business sector 10) Pacific and other EPA

regions: n/a for 2016 due to multi annual financial approach

c. Monitoring of agreements

CARIFORUM: monitoring system in preparation.

d. Finalisation of

CARIFORUM GI protection.

Postponed to 31.12.2017

Implementation of interim EPAs in

Eastern and Southern Africa; West Africa;

Central Africa; Pacific

Monitoring of agreements and

possible development of

informal agricultural

dialogues.

30.12.2016 Pacific: Fiji still has to ratify the IEPA. Informal dialog foreseen for

2017.

WEST AFRICA: IEPA Ivory Coast 1st Committee 4-5 April 2017.

IEPA Ghana 1st Committee June-

July 2017

CENTRAL AFRICA: IEPA Committee December 2017

Agribusiness

encouragement (Valletta Action Plan,

4th priority)

a. Identification

of success stories of agribusiness

investment; b. Identification

of TBTs (Technical

Barriers to Trade).

30.12.2016 The 1st Australia-EU Agriculture

Ministerial Conference was organised in July 2016. Focus on

the agricultural policy environment for responsible

investments.

Building partnerships with International

Organisations, the AUC (African Union

Commission), ACP Group of States,

funding bodies.

a. Number of formal

understandings with international

organisations b. Number of

projects

supporting AGRI objectives

30.12.2016 EU-Australia Ministerial Conference July 2017

Tunisia: emergency

Autonomous Trade Measures on olive oil

TRQ

Adoption by

Council and Parliament

2016 Measure was implemented in

2016

Tunisia :

contribution to DCFTA (on market

access and GIs)

Continuation of

bilateral negotiations

2018 A first technical discussion took

place in April 2016

Morocco :

conclusion of a GI agreement

Adoption by

Council and Parliament and

implementation of the Agreement

2016-2017 Procedure was suspended in 2016

whilst the ruling of the ECJ was pending

Georgia, Moldova, Ukraine: Association

Agreement including DCFTA

Implementation, approximation

monitoring

2016 Subcommittee meetings on agriculture with the three

countries in 2016. Two special meetings on GIs with Moldova

and Georgia

Ukraine :

contribution to

Adoption by

Council and

2017 Adoption by the Commission of

the ATMs proposal in September


Autonomous Trade

Measures (ATM)

Parliament 2016

Armenia:

negotiation of a new agreement including

a GI agreement

Negotiations to

start in 2016

2017 Continuation of the negotiations

throughout 2016, with expectations to conclude during

first half of 2017

Azerbaijan : negotiations of a new

agreement including

GIs

Opening of negotiations

2017 Council adopted on 14 November 2016 the negotiating mandate

Kirgizstan negotiations of a new

agreement including cooperation on

agriculture and a GIs

TRIPs+ chapter

Adoption by COM of negotiations

directives

2017 Preliminary internal Commission work in 2016

Russia, Turkey : resolving trade

irritants

Contribute to the resolution of

ongoing trade bans

2016 Last meeting with Turkey on the issue of beef ban in December

2016. For Russia, WTO panel by the EU on pigmeat embargo;

results in August 2016

Analysis of

cumulative economic impact of various

Free Trade Agreements

Provide analysis

of economic impact for

publication

September

2016

Study "Cumulative economic

impact of future trade agreements on EU agriculture"

(prepared by Joint Research Centre working together with DG

AGRI) published 15 November

2016125

2015/AGRI/030 and 2015/AGRI/031:

Proposal for a Council Decision on the

conclusion and the

signature of an EU-Iceland agreement

on protection of geographical

indications

COM adoption Planned 1st quarter

2016

Adopted on 25/08/2016 (COM(2016)523 and

COM(2016)524)

2015/AGRI/035 and

2015/AGRI/036: Proposal for a Council

Decision on the conclusion and the

signature of an EU-Iceland Article 19

agreement on further trade liberalisation

COM adoption Planned 1st

quarter 2016

Adopted on 03/10/2016

(COM(2016)563 and COM(2016)564)

2015/AGRI/080 and 2015/AGRI/081

Proposal for a Council Decision on the

conclusion and the signature of an

agreement between

the European Union

COM adoption Planned 1st quarter

2016

Proposal for a Council decision on the signature of the EU-Chile

Agreement was sent on 10/10/2016 (COM(2016)648) and

on the conclusion on 05/12/2016 (COM(2016)771)

125 http://publications.jrc.ec.europa.eu/repository/bitstream/JRC103602/lb-na-28206-en-n_full_report_final.pdf

http://publications.jrc.ec.europa.eu/repository/bitstream/JRC103602/lb-na-28206-en-n_full_report_final.pdf


and Chile on trade in

organic products

2011/AGRI/008 and

2015/AGRI/058 Proposal for a Council

Decision as regards the conclusion and

the signature of an agreement with

China on Geographical

Indications

COM adoption 4th quarter

2016

Postponed to 2017.

2015/AGRI/037 and

2015/AGRI/038 Proposal for a Council

Decision on the conclusion and the

signature of an EU-

Norway Article 19 agreement on further

trade liberalisation

COM adoption 4th quarter

2016

Last round of negotiations held in

November 2016

Specific objective: To promote the EU interests and positions on agriculture and rural development in the

relations with enlargement countries and to assist the enlargement countries in their alignment to the CAP

Related to spending programme: EAGF and

EAFRD

Result indicator: Timely contribution to the Commission's work in the area of enlargement

Source: DG AGRI


100% of timely contributions Example:

Preparation of screening report for Montenegro.

100% of contributions in time This target was agreed within

DG AGRI and is reflected by relevant procedures for

conducting negotiations.

Screening Report for Montenegro prepared in time

and to the required quality





Turkey : revision of agricultural agreement

Adoption of negotiation directives

by Council

2016 21 Dec 2016 :-Adoption by COM of

negotiating mandate

Montenegro :

negotiations on

agriculture chapter in accession negotiations

Opening of

negotiations on

chapter agriculture

2016 Chapter agriculture

was opened on 13

December 2016

Serbia : negotiations

on agriculture chapter in accession

negotiations

Examination of action

plan prepared by Serbia and

contribution to

opening benchmark's assessment

2016 A draft action plan

was submitted informally by SB in

May 2016 and

commented by COM


preceding opening of

negotiations

Bosnia and

Herzegovina: negotiations the

adaptation of the Stabilisation and

Association Agreement (SAA), in view of the

accession of Croatia

Agreement on the

adaptation of the SAA

First half of 2016 Protocol on

adaptation of the SAA was signed on

15.12.16

Bosnia and

Herzegovina: accession negotiations

Opinion of the COM

of BIH application for membership

2017 Feb 2016 : BIH

submitted its application

Sept 2016 : Council invited COM to

prepare Opinion on BIH application

Specific objective: To facilitate decision-making on

strategic choices for the CAP and to support other activities of the DG by means of economic and policy

analyses and studies

Related to spending

programme: NA

Result indicator: Timely contribution to the decision-making process for the CAP towards

2020 Source: DG AGRI


100 % 100 % timely deliveries:

- supporting policy and economic analysis

- publication of key

documents on the CAP

100%

Result indicator: Representativeness of information about the EU farm economic situation collected by the Farm Accountancy Data Network (FADN)

Source: EU FADN


Observed coverage of EU agricultural production in the

accounting year 2013:

- 96 % coverage of the Standard Output

- 94 % coverage of the Utilised Agricultural Area

- Farm returns collected: 86 840

Observed coverage of EU agricultural production in the


- 99 % coverage of the EU agricultural production as

expressed in Standard Output - 93 % coverage of the

Utilised Agricultural Area - Farm returns to be

delivered (Reg. 1291/2009 and successive

amendments): 86 755

Targetted coverage of EU agricultural production for


1. 90% coverage of the Standard Output;

2. 90% coverage of the Utilized Agricultural Area

Result indicator: Adequate knowledge of Farm structure

Source: Eurostat – Farm Structure Survey


Data from the 2013 Farm Structure Survey are

extensively used in internal

analyses, publications and indicators of the common

Use of the 2013 Farm Structure Survey data in

internal analyses, publications

and indicators of the common monitoring and evaluation

No more recent results available – the 2016 survey

has been conducted, data will

become available in 2018.


monitoring and evaluation

framework for the CAP 2014-2020

framework for the CAP 2014-

2020 New survey in 2016.



Description Indicator Target Latest known


31/12/2016)

AGRICULTURAL POLICY ANALYSIS AND

DEVELOPMENT

• Follow-up of the implementation of

the CAP 2014-2020; • Follow-up of

policy developments in fields relevant for

agriculture and rural development

(environmental and

climate policies, trade negotiations,

employment policies, etc.), both at global

and EU level; • Cross-cutting

policy analyses of support mechanisms,

including with respect

to the long-term perspective of

agriculture and the CAP.


the CAP post 2014-

2020

Updated mapping of MS policy choices

100%

Support to other policy initiatives

(sustainable food, etc.)

On time contributions to

other policy initiatives

100%

Analysis for long-term perspective of

agriculture and the CAP

On time analytical policy documents

100%

COUNTRY

INTELLIGENCE

• Monitoring of agricultural policy

developments in Member States and

policy positions in the field of agriculture;

• Analysis of documents on the

evolution of agriculture

and rural areas from Member States

• Other data collection and analysis

Monitoring of policy

development in MS

Ongoing 100%

Data, analysis, fact

sheets and briefings on MS

Coordination of an

AGRI internal network on country

intelligence

100%

OUTLOOK

To provide short- and

medium-term outlook for EU agricultural

markets and income, to assess the likely

developments in the

Report on medium-

term prospects for

agricultural commodity markets

published paper/electronic

versions

Publish new Report

before end of the

year 2016

Report published on

6 December the

first day of the EU agricultural outlook

conference.


current policy

framework and under alternative scenarios

Timely publication of

3 reports on short-term outlook for

agricultural commodity markets

Reports to be

published in March, July, October 2016

3 Reports published

timely and regular contribution to the

MMO.

Monthly updates of grains balance

sheets, for management

committee and G20-AMIS

Monthly reporting. Grain balance sheets were

produced every month on time to

be presented at the committee and sent

to AMIS.

Set of internal and

public reports and notes (specific sector

and market/policy developments)

On request One brief on

'Productivity in EU agriculture'

published in December 2016.

Specific internal

reports on dairy were produced.

MODELLING

Development, maintenance and use

of quantitative analysis

tools like partial equilibrium models

both at macro- and micro-economic level,

biophysical models and other forward looking

methods.

Operational platform

of economic and biophysical models

and related

databases

Operational tools

for timely results

Tools were used by

DG AGRI and/or JRC to produce

among others: the

medium-term prospects, the

ECAMPA II report126 for Unit D4 and DG

CLIMA IA and contributions to

trade negotiations as well as a

published study on

'The cumulative effects of trade

agreements on the EU agricultural

sector'

FOOD CHAIN

Analysis of the food supply chain including

price formation, monitoring and

analysis of world agricultural commodity

markets

Monthly dashboard of

EU and world commodity prices

Monthly updates. The dashboard was

published every month on time.

Up-dating and

maintenance of AgriView

Ongoing Agriview was

updated on time with price data.

Reports are now

available with CATS control data for

Claim year 2015 and can be used by

several Units. For the CAP

indicators in Agriview, the work

is ongoing.

126 An economic assessment of GHG mitigation policy options for EU agriculture, JRC report.

http://ec.europa.eu/agriculture/trade-analysis/impact-assessment_en





http://publications.jrc.ec.europa.eu/repository/bitstream/JRC101396/jrc101396_ecampa2_final_report.pdf


MANAGEMENT AND

DEVELOPMENT OF FADN LEGISLATION

AND INFRASTRUCTURE

• Implementation

of the new typology and Farm Return

regulation (Regulations

1291/2009; 1198/2014; 2015-220)

• Monitoring and development of the IT

system

• Adaptation of the FADN data to the

CAP evolution and requirements/demands

for the analyses • Improve the

efficiency and the performance of the

FADN reporting

Maintenance and

support of the RICA Information Systems

Continuous 100 % availability

of the system to users (outside

maintenance periods)

Enhancement of RICA2 functionality

Continuous All business requirements

implemented as scheduled

ECONOMIC ANALYSES

High quality economic analyses based in

particular on FADN data in line with the

needs of DG AGRI for

the assessment of policy proposals (ex-

ante) and CAP measures (ex-post).

Delivery of relevant

and high quality data for specific analyses

supporting policy development of CAP

after 2020

Ongoing Various analyses

and simulations provided

Delivery of relevant

ad-hoc analysis and special FADN reports

Ongoing

Finalisation of FADN annual reports

Before 30 September 2016

All planned reports have been finalised

and published.

STATISTICAL COORDINATION AND

ANALYSES

Coordinate the information needs of

DG AGRI within DG AGRI and with ESTAT

and ensure their dissemination

Contribute to Commission proposals

on legislation for

agricultural statistics (e.g., Commission

Regulation on land prices and rents; FSS

2020) and to Eurostat's strategy for

agricultural statistics towards 2020 and

beyond

Provide updates of

Contribute to the development of

Eurostat's framework

regulations on integrated farm

surveys and statistics on agricultural inputs

and outputs

Ongoing Proposal for regulation on

integrated farm

statistics has been adopted in

December 2016.

Contribution to the

development and implementation of

Eurostat's work programme in

agricultural statistics, in line with DG

AGRI's data needs

Ongoing Continuous

engagement with Eurostat through

formal and informal channels.

2016 update of

statistical country factsheets

March 2016 Update published in

April 2016

2016 update of CAP

context indicators

December 2016 Update finalised in

December 2016

(publication


statistical factsheets

and CAP context indicators

Analyse the evolution of farm structures and

agricultural income

based on statistics

pending)

2016 update of

agricultural income developments

December 2016 First estimates for

agricultural income 2016 analysed and

communicated to Commissioner

Hogan

Contribute to the

December Outlook conference with

analyses on farm structural change

November 2016 Poster on farm

structures prepared;

presentation on EU farm structures

given during the

Outlook Conference

Geographic Information System

(GIS) support to statistics and

economic/policy

analysis

Increase the number of DG AGRI units

using the service. Maintain or increase

the number of maps

and data analyses produced.

Ongoing Number of maps produced: 280

(generated by 82 requests); number

of data

management and spatial analyses

requests: 9; clients: 10 occasional + 1

regular. Additional background work

was carried out to maintain and

improve the GIS

service and to raise awareness about it.


ANNEX 13: Interruptions, reductions and suspensions

EAGF


ANNEX 14: Court of Auditors' special reports

1) Special Report 1/2016: Is the Commission's system for performance measurement in relation to farmers' incomes well designed and based on

sound data?

The Court points out to the limitations of the performance system and the quantity and

quality of statistical data. The main criticism is that direct payments are paid out to farmers independently of their overall household income.

In order to address the shortcomings, the Court recommended to the Commission and

the Member States to:

develop a more comprehensive framework for providing information on disposable

income and for comparing farmers’ incomes with incomes in other sectors of the economy;

further develop the main farm income measurement tools so their potential can be better achieved;

ensure that the analysis of farmers’ incomes is based on indicators, taking account of the current situation of agriculture, and on sufficient and consistent

data for all CAP beneficiaries. This could be done by developing synergies between

existing administrative data or by developing other suitable statistical tools;

enhance the present quality assurance arrangements for the farm income

statistics established by the Member States.

From the outset of the next programming period, the Commission should:

define appropriate operational objectives and baselines against which the performance of the CAP measures can be compared;

complement its current framework of performance indicators for evaluations with other relevant and

good-quality data in order to measure the results achieved;

assess the effectiveness and efficiency of the measures designed to support farmers’ incomes.

In its response to the Court's findings and recommendations, the Commission made the following observations:

Farmers' incomes and a fair standard of living are set in the Treaty on the Functioning of the EU and the 2013 reform of the Common Agriculture Policy

(CAP). However, income is not the only CAP objective. In fact, the 2013 reform of the CAP specifies three policy objectives: 1) viable food production, 2) sustainable

management of natural resources and climate action, 3) balanced territorial

development. Farmers' incomes and a fair standard of living belong to the first of these objectives (viable food production).

The Commission is of the opinion that it has representative data on the income derived from agricultural activities. These data can be used to assess the

performance of CAP measures in support of farmers' incomes. What has been identified in the Special Report as limitations of the statistical data is in fact the

representation of the main features of the data sources.


In the Treaty, there is a link between increasing agricultural productivity and ensuring a fair standard of living for the agricultural community, in particular by

increasing the individual earnings of persons engaged in agriculture. It is thus appropriate that the Commission's data focus on the income derived from

agricultural activities, as this income is of primary importance for the CAP.

As regards the direct payments, although financially the most important, they are

not the only instrument that affects farmers’ incomes. At EU level, they are accompanied by rural development measures and a set of market and promotion

measures which aim at specific agricultural sectors. Together with other CAP

instruments, direct payments contribute not just to income support for farmers, but also to other objectives related to land use such as soil protection, biodiversity

enhancement, and climate mitigation.

The Commission places great importance on performance measurement. The new

monitoring and evaluation framework of the CAP aims to capture the combined effects of the different measures as regards different CAP objectives. Each of

these objectives is monitored and assessed using a comprehensive set of common indicators, some specific to measures and some broader ones to reflect combined

effects.

2) Special Report 18/2016: The EU system for the certification of sustainable

biofuels

The Court criticizes that the impact of indirect land-use changes on the sustainability of

biofuels is not covered by a sufficient assessment and that the Commission granted recognition decisions to voluntary schemes with insufficient verification to ensure that the

origin of biofuels produced from waste was indeed waste, or that biofuel feed stocks fulfil the EU environmental requirements for agriculture.

In their recommendations, the Court called on the Commission to ensure that the

certification schemes:

assess how much biofuel production entails significant socioeconomic risks and

indirect land‐use change;

verify that feedstock producers comply with environmental requirements for

agriculture;

provide sufficient evidence of the origin of waste and residues used for biofuels.

The auditors recommended that the Commission itself should:

assess whether the schemes’ governance reduces the risk of conflict of interest

and are sufficiently transparent;

check that the operations of the certified schemes comply with the standards presented at the time of recognition and that the schemes set up transparent

complaints systems;

seek evidence from Member States on the reliability of their biofuels statistics and

harmonise the definition of waste substances.

In its response to the Court's findings and recommendations, the Commission made the

following observations:

The Commission has conducted thorough assessments of all voluntary schemes


that have been recognised fulfilling all the legal requirements of the Directive. The Commission considers that the voluntary schemes provide assurance that the

certified biofuels comply with the mandatory criteria for which the schemes have been recognised on the basis of thorough assessments of all voluntary schemes

certified. Nonetheless the Commission is always open to promote the further development of standards to improve the system even further, to address

challenges that are encountered during the operation of the system and take into account changes of the legal base.

The Commission considers that the voluntary schemes provide assurance that the

certified biofuels comply with the mandatory criteria for which the schemes have been recognised on the basis of thorough assessments of all voluntary schemes

certified. Nonetheless, the Commission is always open to promote the further development of standards to improve the system even further, to address

challenges that are encountered during the operation of the system and take into account changes of the legal base.

In the view of the Commission it would not be appropriate to oblige voluntary schemes to include non-mandatory sustainability criteria. If inclusion of those

criteria should be obligatory, the legislator would have decided to include them in

the set of mandatory criteria.

The Commission will continue to assess whether the recognition of voluntary

schemes should be extended to non-mandatory sustainability aspects. It is noted, however, that the assessment of schemes with regard to non-mandatory criteria

is complex because those are spelled out in much less detail in the legislative text than the mandatory criteria. Further, the recognition would not have direct legal

consequences.

The Commission is obliged to work within the framework set by legislator. As a

consequence, it has to accept that the Renewable Energy Directive (RED) does not

oblige the Member States to verify compliance with Article 17(6) RED (which is linked to the CAP GAEC standards and other relevant Directives and Regulations)

although they are part of the criteria. The Commission is required to recognise voluntary schemes on other grounds than those included in Article 17(6) RED.

Therefore, it would not have been appropriate to include this element in the assessment of the voluntary schemes

3) Special Report 25/2016: The Land Parcel Identification System: A useful tool

to determine the eligibility of agricultural land – but its management could

be further improved

The Court criticizes Member States' photo-interpretation as not entirely reliable and the

system not being completely adapted for greening.

In order to address the shortcomings, the auditors recommend that the Member States:

increase data reliability by enhancing the update process and, whenever feasible, checking whether land is at the farmer’s disposal;

with the support of the Commission, set up a framework for assessing the cost of running and updating their LPISs to measure performance and the cost-

effectiveness of improvements;

ensure their LPISs reliably identify, register and monitor ecological focus areas, permanent grassland and new categories of land.


The Commission should:

re-examine the current legal framework to simplify and streamline some of the

rules for the next CAP period;

carry out a cost-benefit analysis to determine whether quality assessment could

be improved to achieve better coverage of parcels;

improve its monitoring of quality assessment results by analysing inconsistencies

in reporting, following them up, providing feedback and ensuring that remedial action is taken.



The LPIS is a key control mechanism under the CAP designed to verify eligibility

for area-based subsidies. The system also increasingly plays a role in checking compliance with various environmental obligations. Currently, the LPIS which is

operated by 28 MS contains over 135 million reference parcels.

The LPIS is a tool which makes a significant contribution in preventing and

reducing the levels of errors in the aid schemes to which it applies.

The Commission shares the ECA's opinion that the LPIS is a useful tool for

determining the eligibility of agricultural land and that over the recent years many

LPIS-related shortcomings have been effectively addressed.

In particular, the Commission would like to draw attention to the progress made

in upgrading LPISs to meet the 2014-2020 CAP requirements and improvements in guidance, audits, financial corrections and follow-up of Member States’ action

plans, as well as the overall Commission’s performance of its monitoring role acknowledged by the ECA.

The weaknesses set out in the report mainly concern the Member States' management of the LPIS. In particular, it is the Member States’ responsibility to

keep their LPISs up-to-date, ensure data reliability and the cost-effectiveness of

the systems.

For its part, given the importance of the tool in preventing and rectifying errors in

the aid schemes, the Commission has taken further steps in guiding and supervising the Member States. For instance, the Commission will review all LPIS-

related rules in the context of the post 2020 CAP and it has improved its monitoring of the annual quality assessment of the LPIS by the Member States by

providing feedback on the remedial actions or identifying Member States which may have issues with the correct application of the LPIS quality assessment

methodology.

4) Special Report 26/2016: Making cross-compliance more effective and

achieving simplification remains challenging

The Court criticizes the Commission for not disposing of adequate information to assess

the effectiveness of cross-compliance or the costs of its implementation, for having two sets of complementary agricultural practices (cross-compliance and greening) which

target the same objectives and for not harmonising penalties for farmers who do not comply with greening.

In order to address the shortcomings, the Court recommended that the Commission


should:

further develop its indicators for performance and compliance;

improve information-sharing on infringements amongst its departments and take appropriate measures to address breaches;

propose adapting the rules for on-the-spot checks to allow more effective targeting;

promote synergies between the two systems operating with similar environmental objectives;

develop a methodology by the end of 2018 to measure the costs of cross-

compliance;

encourage more harmonised penalties at EU level after 2020.

In its response to the Court's findings and recommendations, the Commission made the following observations:

Cross-compliance links most CAP payments to farmers’ compliance with rules for protecting the environment, food safety, animal health and welfare, and for

maintaining land in good agricultural and environmental conditions. It currently applies to 7.5 million farmers across the EU.

Cross-compliance is based on two main sets of rules:

1. The statutory management requirements (SMRs) are requirements selected from existing legislation on environment, food safety, plant health, animal

health and welfare.

2. The standards for good agricultural and environmental conditions (GAECs) are

additional rules applicable only to beneficiaries of CAP payments. They impose sustainable practices related to agricultural land and deal with the protection

of water, soil and carbon stock and the maintenance of land and landscape features.

CAP beneficiaries must respect all the cross-compliance rules. Otherwise, they risk

having their CAP payments reduced.

However, cross-compliance is not the implementing tool for other policies, which

have their own objectives. The aim of cross-compliance is to contribute to the development of sustainable agriculture through awareness-raising among farmers

and making the CAP more compatible with the expectations of society.

Cross-compliance is implemented through shared management: the Commission

is responsible for monitoring its implementation, while the MS are responsible for adopting legislative, regulatory and administrative provisions to set-up a national

framework compliant with the EU framework and verifying whether the cross-

compliance obligations are respected.

The Commission considers that the performance indicators used for measuring the

effectiveness of cross-compliance in meeting its objectives are the most appropriate on the basis of the available information.

The Commission shares the ECA's opinion that the cross-compliance rules have been simplified for the 2014–2020. For instance, the number of SMRs has been

reduced from 18 to 13, the number of GAEC standards was reduced from 15 to 7,


the link between the controllability and agricultural activities has been reviewed and the requirements which were not sufficiently relevant to the farming activity

have been removed.

The Commission considers that the scale of the effort already put into

simplification makes it most unlikely that any further simplification can be achieved without undermining the environmental goals of cross-compliance.

Loosening the rules on on-the-spot checks, as recommended by the Court, would in Commission's opinion ultimately undermine the effectiveness of cross-

compliance. Moreover, MS have a wide margin of maneuver to take into account

the risks and optimize their control systems.

Further efforts will be made in order to improve the sharing of information to

ensure the consistency and a more harmonized application of cross-compliance.

5) Special Report 31/2016: Spending at least one euro in every five from the EU budget on climate action: ambitious work underway, but a serious risk of

falling short

The Court found that ambitious work was underway and that, overall, progress had been

made towards reaching the target of spending 20% of the EU budget on climate action.

However, there is a serious risk that the 20 % target will not be met without more effort to tackle climate change. In particular, in the areas of agriculture and rural development

there has been no significant shift towards climate action and not all potential opportunities for financing climate related action have been fully explored.

In order to address the shortcomings, the Court's recommendations to the Commission concern the need for a robust, multi-annual, consolidation exercise to progress towards

the 20 % target, the need for comprehensive reporting and monitoring of results, and for there to be a realistic and robust assessment of climate change needs. They also

recommend that overestimates in rural development spending be corrected, and that

action plans be drawn up for areas that have fallen behind. Finally, they recommend that all potential opportunities to ensure a further, real shift towards climate action should be

explored.



The Commission is fully committed to fighting climate change. The EU approach to

transitioning to low carbon and climate resilient economy is driven through policy measures, which seek to also shift investment patterns. Public spending from the

EU and Member States’ national budgets complements and seeks to speed up this

transition.

With the proposal to mainstream climate across the EU budget and to increase

climate spending to 20% of the budget, the Commission aimed to make the EU budget a pioneer in fostering mainstreaming. The European Council and the

European Parliament supported the mainstreaming approach, and confirmed that the 20% is an appropriate level of support.

The European Council explicitly confirmed the Commission’s approach to mainstream climate across the budget as the main objective, supported by the

political objective of making at least 20% of EU spending in the current MFF

climate relevant. In addition to mainstreaming, the Multiannual Financial Framework (MFF) also set out a dedicated programme for addressing climate

action.


The Commission welcomes the Court’s recognition of the ambitious work undertaken and the need to continue the efforts to further improve

mainstreaming. At the same time, the Commission considers that significant progress has been made both in including climate considerations in programme

development and in developing the unique quantified mainstreaming approach, which now provides a transparent baseline.

The Commission notes, however, that the potential individual contribution of each of the funds varies according to its primary missions, and therefore, it is inevitable

that the systems used to programme and to monitor the contribution differ from

one fund to another. Also, the reform of the Common Agricultural Policy (CAP) has led to a significant increase in the financing of climate action as compared to the

2007-2013 period. The Commission considers that there is a significant shift towards more climate action.

The Commission assessed progress towards the 20% target in the MFF Mid Term Review (MTR), published on 14 September 2016. The latest data, presented in the

Staff Working Document (2016) 299 accompanying the Midterm Review of the Multiannual Financial Framework (COM(2016) 603) show that over the 2014-2020

period, a total of slightly above EUR 200 billion of climate-related spending will be

reached. This is equivalent to around 18,9% for the whole financial programming period.

The Commission has established an innovative and detailed tracking methodology built on the OECD’s Rio markers. The method used by the Commission has been

prepared in a transparent and coordinated manner. The EU approach to assessing levels of climate finance in agriculture and rural development is sound. Likewise,

for green direct payments, the calculation fairly reflects the climate-relatedness of the three farming practices. Also, for nongreening direct payments, the climate

impact of 8% of non-greening direct payments is not overestimated if we look at

the benefits for the climate of cross compliance and direct payments.

The Commission recognises that the innovative approach to tracking climate

spending and its implementation in the EU budget could be further improved, including in respect of increasing granularity with regard to mitigation and

adaptation. At the same time, in light of the unclear administrative impact and the complexity of avoiding double counting while reflecting the frequent associated

co-benefits, the Commission does not currently foresee further disaggregation in its tracking system.


ANNEX 15: Abbreviations

Abbreviation Full text

A

AAR Annual Activity Report ABB Activity-Based Budgeting

ACP African, Caribbean, and Pacific Group of States DG AGRI Directorate-General Agriculture and rural development

AMIS Agricultural Market Information System

ARES Advanced Records System AT Austria

AWBM Activity Without Budgetary Measure AWU Annual Work Unit

B

BE Belgium BG Bulgaria

BiH Bosnia-Herzegovina

C

CAP Common Agricultural Policy CB Certification Body

CETA EU-Canada Free Trade Agreement CHAFEA Consumers, Health, Agriculture and Food Executive Agency

DG CLIMA Directorate-General Climate Action CMO Common Market Organisation

COMAGRI Committee on Agriculture and Rural Development in the

European Parliament DG COMP Directorate-General Competition

CWP Commission Work Programme CY Cyprus

CZ Czech Republic

D DCFTA Deep and Comprehensive Free Trade Areas

DDA Doha Development Agenda

DE Germany DG Directorate-General

DG DEVCO Directorate-General International Cooperation and Development DK Denmark

E

DG EAC Directorate-General Education and Culture EAFRD European Agricultural Fund for Rural Development

EAGF European Agricultural Guarantee Fund

ECA European Court of Auditors EE Estonia

EFA Environtmental Focus Area EIP European Innovation Partnership

EL Greece DG EMPL Directorate-General Employment, Social Affairs and Inclusion

ENRD European Network for Rural Development DG ENV Directorate-General Environment

EP European Parliament

EPA Economic Partnership Agreement ES Spain

ESIF European Structural and Investment Funds DG ESTAT Eurostat


Abbreviation Full text EU European Union

EUR (€) Euro

F FADN Farm Accountancy Data Network

FAO Food and Agriculture Organization of the United Nations FI Finland

FI Financial instruments

FTA Free Trade Agreement FR France

FVO Food and Veterinary Office fYRoM Former Yugoslav Republic of Macedonia

G

GAEC Good Agricultural and Environmental Conditions GI Geographical Indications

GR Greece

DG GROW Directorate-General Internal Market, Industry, Entrepreneurship and SMEs

GVA Gross Value Added

H HR Croatia

HR Human Resources HU Hungary

I IACS Integrated Administration and Control System

IAC Internal Audit Capability IAS Internal Audit Service

ICT Information and Communication Technology IE Ireland

IEPA Interim Economic Partnership Agreement IPA Instrument for Pre-accession Assistance

IPARD Instrument for Pre-Accession Assistance Rural Development

IT Italy IT Information Technology

J

JRC Joint Research Centre DG JUST Directorate-General Justice and Consumers

L

LAG Local Action Group

LEADER Liaison Entre Actions de Développement de l'Économie Rurale LPIS Land Parcel Identification System

LT Lithuania LU Luxemburg

LV Latvia

M MAFA Multi Annual Financing Agreement (SAPARD)

DG MARE Directorate-General Maritime Affairs and Fisheries

ME Montenegro MEP Member of the European Parliament

MFA Multi Annual Financing Agreement (IPARD) MFF Multi-annual Financial Framework

MoU Memorandum of Understanding


Abbreviation Full text MS Member State

MT Malta

N NAO National Authorizing Officer

NIPAC National 'Instrument for Pre-accession Assistance' Coordinator NL Netherlands

NRN National Rural Networks

O

OECD Organisation for Economic Co-operation and Development OJ Official Journal

OLAF Office de Lutte Antifraude OTSC On-the-spot checks

P

PA Paying Agency

PDO Protected Designations of Origin PGI Protected Geographical Indications

PL Poland PMO Office for Administration and Payment of Individual Entitlements

POSEI Programme d'Options Spécifiques à l'Éloignement et l'Insularité PT Portugal

R

RD Rural Development

RDP Rural Development Programme REA Research Executive Agency

DG REGIO Directorate-General Regional and Urban Policy RO Romania

DG RTD Directorate-General Research and Innovation

S DG SANTE Directorate-General Health and Food Safety

SAPARD Special Accession Programme for Agriculture and Rural

Development SAPS Single Area Payment Scheme

SC Societal Challenge (Horizon 2020) SDGs Sustainable Development Goals

SE Sweden SG Secretariat-General of the European Commisison

SI Slovenia SJ Legal Service of the European Commission

SK Slovakia

SPS Single Payment Scheme SR Special Report

T

DG TAXUD Directorate-General Taxation and Customs Union TFEU Treaty on the Functioning of the European Union

ToR Terms of Reference TR Turkey

DG TRADE Directorate-General for Trade

TRIPs Agreement on Trade-Related Aspects of Intellectual Property Rights

TRQ Tariff-Rate Quota TSG Traditional Specialities Guaranteed

TTIP Transatlantic Trade and Investment Partnership


Abbreviation Full text

U UK United Kingdom

V

VCS Voluntary Coupled Support

W

WTO World Trade Organization