Disclaimer: this document gives the Commission's view on the interpretation of the legal provisions for the calculation of financial corrections in the framework of the conformity and financial clearance of accounts procedures. It is intended for purposes of general guidance only and is not legally binding. It can in no way replace regulatory provisions, nor prejudge any ruling by the Court of Justice, which alone is competent to hand down legally binding rulings on interpretation of acts adopted by the Union institutions.

Furthermore, it is emphasised that Member States have a responsibility to properly apply agricultural legislation.

TABLE OF CONTENTS

Part A

Expenditure within the scope of the CAP Strategic Plan as referred to in Regulation (EU) 2021/2115

3

1.

Introduction

3

1.1.

Definition of the terms and relevant provisions

3

1.2.

Access to information

4

2.

Determination of financial corrections pursuant to Article 15 of Delegated Regulation (EU) 2022/127

4

2.1.

Serious deficiencies

4

2.1.1.

First category of serious deficiencies

5

2.1.2.

Second category of serious deficiencies

6

2.2.

Expenditure at risk

7

2.2.1.

CSP interventions

7

2.2.2.

Conditionality

7

2.2.3.

Social conditionality

7

2.3.

Quantification of the financial risk

8

2.3.1.

Estimation of the risk by the CB as part of its audit opinion

8

2.3.2.

Calculation by the Member State

9

2.3.3.

Extrapolation by the Member State

9

2.3.4.

Flat-rate correction

10

2.3.5.

Estimation by the Commission

10

2.3.6.

Other elements to be considered in the quantification

11

2.4.

Other considerations

12

2.4.1.

Difficulties in the interpretation of the Union legislation

12

2.4.2.

Initial communication of the level of the financial correction

12

2.4.3.

Period of the correction

12

2.4.4.

Amounts recovered and retained by the Member State

13

2.4.5.

Double correction

13

2.4.6.

Rates of the suspension in case of action plans

13

Part B

Expenditure outside the scope of the CAP Strategic Plan as referred to in Regulation (EU) 2021/2115 or for the crop-specific payment for cotton and support for early retirement

13

3.

Introduction

13

3.1.

Definition of the terms and relevant provisions

14

3.2.

Access to information

15

4.

Determination of Financial corrections pursuant to Article 14 of Delegated Regulation (EU) 2022/127

15

4.1.

Main principles

15

4.2.

Expenditure at risk

16

4.3.

Quantification of the financial risk

16

4.3.1.

Criteria and methodology concerning the calculated and the extrapolated financial corrections

16

4.3.2.

Flat-rate financial corrections

18

4.3.3.

Other elements to be considered in the quantification

18

5.

Determination of financial corrections for deficiencies in the scrutiny of transactions under Title IV, Chapter III, of Regulation (EU) 2021/2116

22

Part C

Expenditure within and outside the scope of the CAP Strategic Plan as referred to in Regulation (EU) 2021/2115

22

6.

Determination of financial corrections for deficiencies in paying agencies’ compliance with accreditation criteria

22

6.1.

Conditions to trigger financial corrections

23

6.2.

Expenditure at risk

24

6.3.

Corrections levels

24

7.

Determination of financial corrections for deficiencies in the irregularities and debt management

24

8.

Financial corrections arising from the financial clearance assessment

25

9.

Positive corrections in the conformity decision

25

9.1.

Principles

25

9.2.

After an annual financial clearance decision

25

9.3.

After a conformity decision

25

9.4.

With a conformity decision

26

Abbreviations used

BUR:	Basic Union requirement

CSP:	CAP Strategic Plan

CB:	Certification Body

GAEC:

Standard for good agricultural and environmental condition of land

MCS:	Management and control systems

PA:	Paying Agency

SMR:	Statutory management requirement

PART A

EXPENDITURE WITHIN THE SCOPE OF THE CAP STRATEGIC PLAN AS REFERRED TO IN REGULATION (EU) 2021/2115

1.   INTRODUCTION

This Part provides guidance on the calculation of financial corrections in the framework of the conformity procedure referred to in Article 55 of Regulation (EU) 2021/2116 of the European Parliament and of the Council (1) for expenditure within the scope of the CAP Strategic Plan (‘CSP’) as referred to in Article 1, point (c) of Regulation (EU) 2021/2115 of the European Parliament and of the Council (2)  (3) to be applied for serious deficiencies in the proper functioning of the governance systems of the Member States.

This Part applies to conformity procedures and suspensions of payments launched after the date of the adoption of these guidelines (i.e. procedures in which the related letter of findings is sent to the Member State concerned after that date).

Commission Delegated Regulation (EU) 2022/127 (4) and Commission Implementing Regulation (EU) 2022/128 (5) set out the rules for the determination of financial corrections and for the suspension of payments.

The ‘Guidelines for determining the financial corrections to be made to expenditure financed by the Union, for non-compliances with the applicable rules on public procurement’ are laid down in Commission Decision C(2019) 3452 of 14 May 2019.

Financial corrections made pursuant to Regulation (EU) 2021/2116 are without prejudice to other mechanisms that may be triggered to safeguard the Union's financial interests. Equally, they do not preclude the Commission from initiating proceedings under Articles 258, 259 and 260 of the Treaty.

1.1.   Definition of the terms and relevant provisions

Governance systems: Article 2, point (b), of Regulation (EU) 2021/2116 provides that: ‘governance systems means the governance bodies referred to in Title II, Chapter II, of this Regulation and the basic Union requirements, including Member States’ obligations with regard to the effective protection of the financial interests of the Union referred to in Article 59 of this Regulation as well as the implementation, in accordance with Article 9 of Regulation (EU) 2021/2115, of their CAP Strategic Plans as approved by the Commission, and the reporting system put in place for the purposes of the annual performance report referred to in Article 134 of that Regulation.’.

Basic Union requirements: Article 2, point (c), of Regulation (EU) 2021/2116 provides that: ‘ “basic Union requirements” means the requirements laid down in Regulation (EU) 2021/2115, in this Regulation, in the Financial Regulation and in Directive 2014/24/EU of the European Parliament and of the Council (on public procurement).’.

Intervention: in accordance with Article 3(3) of Regulation (EU) 2021/2115, and for the purposes of this Part of the guidelines, it means ‘a support instrument with a set of eligibility conditions specified by a Member State in its CAP Strategic Plan based on a type of intervention provided for in that Regulation.’

Serious deficiency in the proper functioning of the governance systems: Article 2, point (d), of Regulation (EU) 2021/2116 provides that: ‘ “serious deficiencies in the proper functioning of the governance systems” means the existence of a systemic weakness, taking into account its recurrence, gravity and compromising effect on the correct declaration of expenditure, the reporting on performance, or the respect of Union law.’.

Conformity procedure: Article 55 of Regulation (EU) 2021/2116 provides that:

Recurrence of deficiencies in different enquiries: Article 15(3), point (c), of Commission Delegated Regulation (EU) 2022/127 refers to circumstances where ‘similar deficiencies in the same sector are detected in a Member State in an enquiry that follows an enquiry in which they have been first detected and communicated to the Member State, account taken however of the corrective or compensating measures already taken by the Member State.’.

Compromising effect means that the serious deficiency compromises the correct declaration of expenditure, the correct reporting of outputs or the respect of mandatory requirements of Union law with a potential financial impact.

Management and control systems means all checks to be conducted by the Member States ‘in order to ensure compliance with the Union legislation governing Union interventions’ as provided for in Article 59 (1) and (2) of Regulation (EU) 2021/2116.

Gravely deficient control system means a system which exposes the European Agricultural Guarantee Fund (EAGF) and the European Agricultural Fund for Rural Development (EAFRD) to a significant risk of irregularities and other non-compliances prejudicing the Union budget and for which substantial improvements are required.

1.2.   Access to information

The Commission has the right under Article 50 of Regulation (EU) 2021/2116 to obtain all information required for the smooth operation of the EAGF and the EAFRD, and to examine all documents relating to expenditure financed by the EAGF and the EAFRD.

Article 5(4) of Commission Implementing Regulation (EU) 2022/128 requires the Certification Body (‘CB’) to draw up a report of its findings.

Failure to comply with the obligation to send the report of the CB, pursuant Article 33(1), point (c) of Implementing Regulation (EU) 2022/128, will be treated as an infringement of the aforementioned provisions, and as a failure to provide evidence that the audits concerned were properly conducted and with the required effectiveness. This failure affects the Commission services’ capacity to have assurance on the correctness of expenditure declared to the EAGF and the EAFRD, and, where applicable, of the corresponding outputs.

2.   DETERMINATION OF FINANCIAL CORRECTIONS PURSUANT TO ARTICLE 15 OF DELEGATED REGULATION (EU) 2022/127

2.1.   Serious deficiencies

Under the Common Agriculture Policy (‘CAP’) 2023-2027, the Member State’s governance systems are assessed and, where serious deficiencies in the proper functioning of the governance systems lead to a situation where it is found that the expenditure financed by the EAGF and the EAFRD ‘has not been effected in conformity with Union law’, the Commission will propose to exclude certain expenditure from Union financing in accordance with Article 55(1) of Regulation (EU) 2021/2116.

Although, pursuant to third subparagraph of Article 55(1) of Regulation (EU) 2021/2116, the Commission will not exclude from EU financing expenditure in cases of non-compliance with the eligibility conditions for individual beneficiaries laid down in the CAP Strategic Plans and national rules, it will have to obtain assurance that management and control systems are set-up in a way that all eligibility conditions are properly checked by the national authorities and that the Union’s financial interests are protected in accordance with Article 59(1) and (2) of that Regulation.

Whilst a deficiency starts from its occurrence and detection, the conclusion on its seriousness must amongst other factors take into consideration the actual compromising effect with a financial impact, as established following the entire contradictory procedure with the Member State. In view of the latter, it is not known upfront whether a deficiency is serious or not. The point of departure is the potentiality of a serious deficiency that could lead to a conformity procedure under Article 55(3) of Regulation (EU) 2021/2116. How to identify potential serious deficiencies has been explained in the document on ‘Identifying potential serious deficiencies for the purpose of Directorate H’s mission to provide assurance’  (6) shared with the Member States.

These guidelines cover the situation where the Commission concludes, following the contradictory procedure with the Member State, that there is a compromising effect with a financial impact and thus the deficiency is indeed considered serious (and not anymore only potentially).

It is recalled that a non-conformity by the Member State with Union legislation is a deficiency and could be considered as a serious deficiency. In so far that there would be no financial damage (no financial impact) to the EAGF or the EAFRD and thus no financial correction to be applied, this still could be a sufficient ground for initiating an EU Pilot procedure or an infringement procedure pursuant to Article 258 of the Treaty. Such procedures are not within the scope of these guidelines.

Almost every element of the governance systems is perfectible, and one responsibility of the Commission is to recommend improvements to give additional assurance on the proper functioning of the governance systems. The fact that the way in which an element of the governance systems operates is perfectible is not in itself a sufficient ground for a financial correction. There must be a serious deficiency in the proper functioning of governance systems set up by the Member State.

Deficiencies that may be serious are divided in two categories.

2.1.1.    First category of serious deficiencies

The first category (‘Category 1’) of serious deficiencies covers all non-compliances in the design or set-up of the governance systems, including the management and control systems (‘MCS’) both at the level of the Member State and at the level of the paying agency (‘PA’). A serious deficiency belonging to the first category would occur when:

a)

one or more provisions and requirements laid down in Regulation (EU) 2021/2115, in Regulation (EU) 2021/2116, in the Financial Regulation and in Directive 2014/24/EU of the European Parliament and of the Council (hereinafter, ‘basic Union requirements’ (BUR), as defined in Article 2, point (c), of Regulation 2021/2116) or one or more eligibility conditions set out in the approved CSP (7) have not been implemented by the Member State. In this case, there is a serious deficiency as the underlying systems have not been set up (8);

b)

the MCS is not designed to check compliance with all the provisions and requirements falling under the BURs (including all the conditionality requirements) and all the eligibility conditions set out in the CSP. It concerns in this case a deficiency in the set-up of a key element in the governance systems that should ensure that all the conditions as in the Union legislation and in the CSP are considered in the payments.

In the context of this first category of serious deficiencies, it should be made clear that:

a)	a non-compliance by the Member State with the rules established in its CSP that are stricter than but not incompatible with the rules set in the Union legal framework is also to be considered in principle as a serious deficiency;

b)	a non-compliance by the Member State consisting in the failure to enforce an eligibility condition that is not imposed by the Union legislation but required in the CSP is also to be considered as a serious deficiency.

2.1.2.    Second category of serious deficiencies

The second category (‘Category 2’) of serious deficiencies relates to the proper functioning of the governance systems, including the MCS both at the level of the Member State and at the level of the PA.

In accordance with Article 59(2) of Regulation (EU) 2021/2116, Member States must set up efficient MCS to ensure compliance with the Union legislation governing Union interventions. Moreover, Member States must take the actions necessary to ensure the proper functioning of their MCS and the legality and regularity of expenditure declared to the Commission.

Regulation (EU) 2021/2116 does not require a particular level of administrative and on-the-spot checks (except in the case of conditionality), but it requires efficient management and control systems. At the same time, it is also to be considered that MCS which include inter alia human interventions may not function correctly at 100 % all the time. This may be due to the beneficiary’s behaviour, human error by inspectors or other staff implementing management and control operations, or cases subject to interpretation. This does not mean that the absence of a control regime for certain beneficiaries or interventions would be acceptable.

A lower margin of misstatements (9)  (10) in terms of magnitude of the deviations (11)is deemed acceptable for the results of the controls testing for BURs since they are of such a crucial nature that the absence of compliance with those requirements has the potential to jeopardise the functioning of the whole system and thus can seriously compromise the Union’s financial interests and the achievement of the CAP objectives (creating also reputational risks). This applies, for instance, to controls regarding: land at disposal, conflict of interest, artificial creation of conditions to receive aid or double funding.

For interventions with a high degree of inherent complexity, when the margin of misstatements in terms of the magnitude of the deviations in the functioning of the MCS at intervention level is above the acceptable margin of misstatements as provided for in the ‘CB guidelines on the annual certification audit for EAFG/EAFRD expenditure’ (‘CB guidelines’) (12), the conformity procedure will determine the seriousness of the deficiency taking into account the following criteria:

i.	the MCS of the PA/Member State identified the misstatement;

ii.	the CB confirmed this misstatement;

iii.	the Member State instigated remedial actions after having detected the misstatement;

iv.

the misstatement does not concern BURs that are of such a crucial nature that the absence of compliance with those requirements has the potential to jeopardise the functioning of the whole system and thus can seriously compromise the EU financial interest and the achievement of the CAP objectives (creating also reputational risks).

2.2.   Expenditure at risk

2.2.1.    CSP interventions

It is recalled that the Member States still have an obligation to ensure the legality and regularity of the operations at beneficiary level in accordance with Article 59(1), point (a), of Regulation (EU) 2021/2116. Where the Member State’s MCS do not function properly to ensure the legality and regularity of operations at beneficiary level as required in Article 59(2) of Regulation (EU) 2021/2116, this finding will be considered a serious deficiency of the MCS in itself to the extent that the MCS cannot guarantee that the expenditure reimbursed by the Commission is in conformity with Article 37 of Regulation (EU) 2021/2116.

When assessing the functioning of the governance systems, possible errors in outputs and expenditure or exceptions in the operation of the controls should be assessed not only in respect of the population controlled by the PA but also in respect of any non-controlled population. This is justified, given that Member States, while having the flexibility to design their control and penalty systems, should ensure that their MCS function as a whole, and thus cover the total expenditure for each intervention as declared to the EAGF and the EAFRD.

2.2.2.    Conditionality

The non-implementation by the Member States of the administrative penalty mechanism provided for in the Union legislation for conditionality (13) entails a financial damage to the Union's budget in terms of loss of assigned revenue. Therefore, the non-collected administrative penalties should be included in the scope of the financial corrections.

Under the penalty system provided for in Regulation (EU) 2021/2116 the total amount of the expenditure at risk for a given year results from a mix of first non-compliances with Union law (in principle administrative penalties of 3 % of the amount of the expenditure) and of repeated non-compliances at various stages (administrative penalties of 10 %, 15 % or more of the amount of the expenditure). Where the control or penalty system implemented by a Member State is deficient, it is impossible to clearly establish the respective importance of these different rates in the eluded administrative penalties. Furthermore, it needs to be considered that, if a Member State fails to properly control the beneficiaries’ compliance with the Statutory management requirements (‘SMRs’) and Standards for good agricultural and environmental condition of land (‘GAECs’), or does not apply the regulatory administrative penalty appropriately, a minimal part of non-compliances will re-occur in a subsequent year or would have to be considered intentional, both leading to higher penalties. Therefore, the amount to which possible flat-rate corrections referred to in point 2.3.4 of the present guidelines would be applied is established at 5 % of the total amount of aid to the relevant beneficiaries subject to the respect of the specific SMRs and/or GAECs for claim year 2024 onwards. This percentage is established at 3 % for claim year 2023. This differentiation is justified given the first year of application of conditionality pursuant to Regulation (EU) 2021/2115 in claim year 2023.

2.2.3.    Social conditionality

Considering the provisions in Article 89 of Regulation (EU) 2021/2116, by analogy to point 2.2.2 of these guidelines, the amount to which possible flat-rate corrections as in point 2.3.4 of the present guidelines would be applied is established at 3 % of the total amount of aid to the relevant beneficiaries in the first year of implementation and 5 % from the second year onward of the total amount of aid to the relevant beneficiaries who are subject to the social conditionality mechanism.

2.3.   Quantification of the financial risk

Article 55(2) of Regulation (EU) 2021/2116 provides that the Commission ‘ shall assess the amounts to be excluded on the basis of the gravity of the deficiencies found. In that context, it shall take due account of the nature of those deficiencies and of the financial damage incurred by the Union ’.

Moreover, pursuant to Article 15(3) of Delegated Regulation (EU) 2022/127, the Commission ‘shall specifically take into account one or more of the following circumstances demonstrating a higher gravity of the deficiencies, revealing a greater risk of loss for the Union budget:

a)	serious deficiencies in one or more elements of the governance systems;

b)	the Member State’s application of an element of the governance system is found to be absent, and there is evidence of wide-spread irregularity and negligence in countering irregular or fraudulent practices;

c)	similar deficiencies in the same sector are detected in a Member State in an enquiry that follows an enquiry in which they have been first detected and communicated to the Member State, account taken however of the corrective or compensating measures already taken by the Member State.’.

In accordance with Article 15(1) of Delegated Regulation (EU) 2022/127, ‘the Commission shall use its own findings and shall take into account the information made available by the Member State during the conformity procedure. The amount to be excluded from Union financing shall as much as possible correspond to the actual financial loss or risk for the Union budget.’.

To this end, the following possibilities are provided by the legislation:

a)	estimation by the CB in accordance with Article 12 of Regulation (EU) 2021/2116;

b)	calculation by the Member State in accordance with Article 15(5) of Delegated Regulation (EU) 2022/127;

c)	extrapolation by the Member State in accordance with Article 15(5) of Delegated Regulation (EU) 2022/127;

d)	flat-rate corrections in accordance with Article 15(2) and (3) of Delegated Regulation (EU) 2022/127.

In order to comply with the provisions of Article 55(2) of Regulation (EU) 2021/2116 and Article 15(1) of Delegated Regulation (EU) 2022/127, in particular to assess the amounts to be excluded on the basis of the gravity of the deficiencies found and to ensure that those amounts as much as possible correspond to the actual financial loss or risk for the Union budget, the Commission can estimate the amount to be excluded where it considers that the methodologies listed above do not adequately cover the risk to the EAGF and EAFRD.

Considering the definition of a serious deficiency provided in Article 2, point (d), of Regulation (EU) 2021/2116 (also see point 2.1), except where there are weaknesses in the design or set-up of the systems (Category 1), no financial correction will be proposed when the functioning of the MCS can be reliably graded at 3 or 4 (14) in accordance with Audit Objectives 2 and 3 (and Annex 3) set out in the applicable ‘CB guidelines’  (15).

2.3.1.    Estimation of the risk by the CB as part of its audit opinion

For the CBs to be able to issue an audit opinion pursuant to Article 12(2), point (b), of Regulation (EU) 2021/2116, it needs to test the Member State’s governance systems in terms of design and functioning in accordance with Audit Objectives 2 and 3 set out in the applicable ‘ CB guidelines’ , developed by the Commission pursuant to Article 6(4) of Implementing Regulation (EU) 2022/128.

In order to enable a homogeneous assessment by all the CBs at Union level, the Commission has elaborated benchmarks in the ‘CB guidelines’  (16) to decide whether a system has functioned properly or not, and thus whether there are potential serious deficiencies. These benchmarks are based on the number of times a control has not operated properly (occurrences of deviations), and on the financial impact it has on the expenditure (magnitude of the deviations) and on the corresponding outputs declared.

Where the CB established the financial impact (the magnitude of the deviations) for the relevant intervention at a level which is above the level set in the applicable ‘CB guidelines’, the Commission will take into account this quantification when determining the level of the financial correction provided the following conditions are complied with:

a)	the work of the CB is considered reliable;

b)	the CB established the full financial impact of its findings as indicated in point 2.2 both in terms of the possible errors in outputs and the expenditure.

This assessment of the financial impact by the CB can take the form of a review of all cases that are affected by the deficiency (known error), or a reasonable assessment of the maximum risk as referred to in point 2.3.2, or an extrapolation as referred to in point 2.3.3.

2.3.2.    Calculation by the Member State

This is a possibility where the Member State, based on its work, can quantify the overpayments caused by the serious deficiency, as laid down in Article 15(5) of Delegated Regulation (EU) 2022/127. It is important to recall that this would have to be the result of an examination of all individual cases potentially affected by the deficiency and cover the entire expenditure for each of the interventions affected.

In order to comply with Article 55(2) of Regulation (EU) 2021/2116 and Article 15(1) of Delegated Regulation (EU) 2022/127, the Commission may determine the amount to be excluded from the Union financing taking into account the calculation made by the Member State that could take the form of a reasonable assessment of the maximum risk by using standard assumptions specified on the basis of the serious deficiency established.

The CB must confirm the Member State’s risk calculation in light of the methodology, underlying data and assumptions used.

2.3.3.    Extrapolation by the Member State

This possibility provided for in Article 15(5) of Delegated Regulation (EU) 2022/127 requires an assessment of the risk, based on a statistically valid and representative sample of the population affected by the deficiency. This possibility is only given when it is impossible for the Member State to calculate the amounts unduly spent (see point 2.3.2) with proportionate effort. The CB has to confirm the Member State’s risk calculation in light of the methodology, underlying data and assumptions used.

The Commission considers that proportionate effort is determined by the time needed to perform the calculation, without jeopardising the timely adoption of the implementing act referred to in Article 55(1) of Regulation (EU) 2021/2116, so as to protect the Union budget.

As regards the sample, as provided for in the applicable ‘ CB guidelines ’  (17), the Commission is of the view that to ensure the protection of the Union budget, as a general rule, a 95 % confidence level (18) and a 2 % materiality of the risk calculation is to be achieved. Where the assessment is made by using lower levels of confidence, the most likely (extrapolated) error cannot be applied; an upper error limit would then have to be determined in order to properly assess the maximum risk to the Fund concerned.

2.3.4.    Flat-rate correction

Where, in the context of the contradictory procedure, the quantification of the risk for the Fund is not possible by the means referred to in points 2.3.1, 2.3.2 or 2.3.3, the Commission will assess the risk for the Fund(s) and will determine the amounts to be excluded from Union financing by applying flat-rate corrections. Against this background, and on the basis of the categories of serious deficiencies referred to in point 2.1 at the level of the BUR or governance systems, the following flat-rate financial corrections will be applied at the level of the intervention or interventions affected.

When one or more serious deficiencies of Category 1 (see point 2.1.1) are identified, the assessment of the Member State’s affected governance systems corresponds to a grade 1 (19). In this case a correction of 10 % is justified, as it can reasonably be concluded that the Commission cannot draw a sufficient level of assurance from the governance systems of the PA or the Member State and that the risk is that the Fund concerned is affected by wide-spread financial damage.

The same applies where one element of the governance systems is not functioning properly (Category 2, see point 2.1.2), and the assessment of the functioning of this element at the intervention level corresponds to grade 1.

Where one element of the governance systems is not functioning properly (Category 2), and the assessment of the functioning of this element at the intervention level corresponds to grade 2 (20), then a correction of 5 % at the level of the intervention or interventions affected is justified, as it can reasonably be concluded that the Commission cannot draw a sufficient level of assurance from the governance systems of the PA or the Member State and that the risk to the Fund concerned is significant.

The level of flat-rate correction will be established by taking into consideration in particular the type of serious deficiency identified (21). To this effect, account will be taken of the elements of the governance systems affected by the serious deficiencies. Such elements of the governance systems would be inter alia: systems ensuring compliance with BURs in which weaknesses are found; the bodies or departments of the PA that are not appropriately functioning in the PA or the overall MCS set-up.

Pursuant to Article 15(2), third subparagraph, of Delegated Regulation (EU) 2022/127, the flat-rates of correction are not cumulated, as the most serious deficiency is taken as an indication of the risks presented by the MCS as a whole. However, considering that conditionality requirements are additional to eligibility requirements, any correction proposed for non-compliances with the rules set in the Union legislation for conditionality would be added to the corrections for eligibility.

2.3.5.    Estimation by the Commission

Where the CB or the Member State is unable to determine the full financial impact of the deficiency, the Commission will determine the amounts to be excluded from Union financing, using its own findings and taking into account the information made available by the Member States during the conformity procedure.

In that context, and as an alternative to the calculations reported under points 2.3.1 to 2.3.4, the Commission may perform its own assessment of the risk to the Fund concerned.

As regards the application of this possibility, it should be recalled that in accordance with Article 55(2) of Regulation (EU) 2021/2116 and Article 15(1) of Delegated Regulation (EU) 2022/127, the amount to be excluded from Union financing must correspond as much as possible to the actual financial loss or risk for the Union budget. Hence, where the Commission’s estimation shows a higher loss than the one determined under points 2.3.1 to 2.3.4 in respect of an intervention, the Commission’s assessment will prevail.

By contrast, if the Commission concludes that the elements presented by the Member State comply with the requirements laid down in Article 15(4) of Delegated Regulation (EU) 2022/127, demonstrating that the loss for the Fund is lower than the flat rate proposed, a lower flat-rate may be applied, provided the lower flat-rate is not below the maximum loss for the Fund.

Whenever the situation in other Member States is known, there should be a comparison between them, to ensure an equal treatment in the assessment of the rates of correction.

2.3.6.    Other elements to be considered in the quantification

2.3.6.1.   Expenditure to be excluded from Union financing

For serious deficiencies belonging to the Category 2, the expenditure to be excluded from Union financing will cover the amounts above the acceptable margin of misstatements as provided for in ‘ CB guidelines’  (22).

Irrespective of the first paragraph, it is recalled that Member States have in principle (23) the obligation to recover undue payments pursuant to Article 59(1), point (e), of Regulation (EU) 2021/2116.

2.3.6.2.   Recurrence of deficiencies in different enquiries

When similar potential serious deficiencies in the design or set-up or the functioning of one element of the governance systems in the same sector are detected in an enquiry, that follows an enquiry in which they have been first detected and communicated to the Member State in accordance with Article 37 of Implementing Regulation (EU) 2022/128, higher flat-rates are justified due to recurrence (see Article 15(3), point (c), of Delegated Regulation (EU) 2022/127). The Commission will apply the following rates where recurrence is found for the first time:

a)	for a recurrent serious deficiency of grade 1, a flat-rate of 15 % is justified;

b)	for a recurrent serious deficiency of grade 2, a flat-rate of 7 % is justified.

Where recurrence is found again, in the absence of a satisfactory quantification by the Member State, the Commission will increase these rates to 25 % and 10 % respectively. These rates will also be applied where a flat-rate correction was proposed in the previous enquiry period as indicated in point 2.3.4.

Where the correction proposed in the previous enquiry was not a flat-rate, in the absence of a satisfactory quantification by the Member State in the enquiry that established the recurrence, the flat-rate correction just above the previous enquiry’s correction will be considered justified as the basis for applying the rate of correction corresponding to the recurrence of the deficiency in accordance with Table 1.

This point applies only to new findings established as of 1 January 2023.

2.3.6.3.   Widespread irregularity

Where the Member State’s application of an element of the governance systems is found to be absent, and there is evidence of widespread irregularity and negligence in countering irregular or fraudulent practice, higher corrections are justified in accordance with Article 15(3), point (b), of Delegated Regulation (EU) 2022/127. In this case a 25 % correction is justified.

Widespread irregularity is to be considered to occur where, in the context of the contradictory procedure, it is demonstrated that the level of misstatements in monetary terms is above 20 % and is combined with a procedure that has not operated properly in more than 30 % of the cases. For example, negligence in countering irregular or fraudulent practices would be deemed to exist where these rates stem from the non-implementation of a required control and penalties regime for at least 2 years.

2.3.6.4.   Financial risk exceeding the flat-rates

Article 55(2) of Regulation (EU) 2021/2116 and Article 15(1) of Delegated Regulation (EU) 2022/127 require the Commission to assess the amounts to be excluded on the basis of the gravity of the deficiencies found and provide that those amounts are to correspond as much as possible to the actual financial loss or risk for the Union budget. Where the Commission has evidence that the financial risk is above the flat-rate that would apply in accordance with point 2.3.4, 2.3.6.2 or 2.3.6.3 of these guidelines, the Commission is therefore entitled to propose a higher level of flat-rate correction and, in flagrant cases of extreme gravity, to exclude all the expenditure concerned.

Table 1 gives an overview of the flat-rates. They are in line with those applied in the past period, which have been subject to scrutiny of the Court of Justice of the European Union (‘ECJ’) in recent years. They will be applied at the level of each intervention affected by the deficiency.

Table 1

	1st year	Recurrence		Widespread irregularity
		1st recurrence	2nd recurrence
Grade 1	10 %	15 %	25 %	25 %
Grade 2	5 %	7 %	10 %	NA
Grades 3/4	0 %	0 %	0 %	NA

2.4.   Other considerations

2.4.1.    Difficulties in the interpretation of the Union legislation

Where the deficiencies arose from difficulties in the interpretation of Union legislation, , and the national authorities took effective steps to remedy the deficiencies as soon as they were brought to light, this mitigating factor may be taken into account and a lower rate may be proposed or no correction be imposed.

However, this mitigating factor is not taken into account where it could reasonably be expected that the Member State would have brought those difficulties in the interpretation to the attention of the Commission.

2.4.2.    Initial communication of the level of the financial correction

Where the Commission considers that expenditure was not effected in compliance with Union legislation, it must, pursuant to Article 37(2) of Implementing Regulation (EU) 2022/128, ‘communicate its findings, […]indicating the provisional level of financial correction which at that stage of the procedure it considers corresponds to its findings’.

In the absence of figures being provided by the CB as part of its opinion in accordance with Article 12 of Regulation (EU) 2021/2116, or where this opinion is unavailable, and considering the ‘CB guidelines’  (24), the flat-rates indicated in point 2.3.4, 2.3.6.2 or 2.3.6.3 of these guidelines will be used to comply with the legal obligation set out in Article 37(2) of Implementing Regulation (EU) 2022/128.

2.4.3.    Period of the correction

The financial correction must apply to the expenditure effected during the period determined in accordance with Article 55(4) of Regulation (EU) 2021/2116 and Article 37(7) of Implementing Regulation (EU) 2022/128. The expenditure related to the period after the written communication under Article 37(2) of Implementing Regulation (EU) 2022/128 should also be corrected, until the serious deficiency ceases to have a negative impact on the correct declaration of the expenditure, the reporting on performance or the respect of Union law.

For the period determining the recurrence in point 2.3.6.2, the time interval will be N+2. This means that the higher level of flat-rate corrections will apply only for the second year following the year the potential serious deficiency was reported to the Member State (via the letter of findings referred to in Article 37 of Implementing Regulation (EU) 2022/128 in year N), and only if the potential serious deficiency has not been addressed by the Member State in the meantime. In the intermediate period, the quantification referred to in points 2.3.1 to 2.3.5 applies.

2.4.4.    Amounts recovered and retained by the Member State

Amounts effectively recovered from the beneficiaries and credited to the Fund concerned before a relevant date established in the course of the conformity procedure must be deducted from the amount that the Commission decides to exclude from Union financing pursuant to Article 55 of Regulation (EU) 2021/2116.

Amounts that Member State have retained in accordance with Article 86 of Regulation (EU) 2021/2116 will be deducted from the financial correction proposed.

Amounts corresponding to the retention referred to in Article 56(3) of Regulation (EU) 2021/2116 will not be deducted from the amount of the financial correction proposed, as any such financial correction is considered as attributable to the Member State’s administrative authorities or other official bodies.

2.4.5.    Double correction

Where the Commission proposes a financial correction, it will ensure that there is no double correction by applying an appropriate off-setting of the amounts proposed in an earlier conformity procedure, or with amounts proposed within the same conformity procedure. The Member State must supply the necessary information to enable the Commission to determine the financial correction within the legal deadlines (see proportionate effort in point 2.3.3).

2.4.6.    Rates of the suspension in case of action plans

Where the Commission has requested an action plan pursuant to Article 42 of Regulation (EU) 2021/2116 in the event of serious deficiencies in the proper functioning of the governance systems, this action plan should include the necessary remedial actions, a planned implementation deadline and clear progress indicators.

Where it is found that the Member State failed to submit the action plan, to implement it, or the action plan is manifestly insufficient to remedy the situation, the Commission may adopt implementing acts suspending the payments.

In order to ensure a coherent and proportionate treatment by the Commission, the amounts suspended for reasons of serious deficiencies should be comparable to the amounts of financial corrections imposed for reasons of serious deficiencies. Therefore, the rates of suspension will be in line with the flat-rates that would apply in accordance with point 2.3.4.

PART B

EXPENDITURE OUTSIDE THE SCOPE OF THE CAP STRATEG4IC PLAN AS REFERRED TO IN REGULATION (EU) 2021/2115 OR FOR THE CROP-SPECIFIC PAYMENT FOR COTTON AND SUPPORT FOR EARLY RETIREMENT

3.   INTRODUCTION

This Part provides guidance on the calculation of financial corrections in the framework of the conformity procedure referred to in Article 55 of Regulation (EU) 2021/2116 (25)  (26) where the following deficiencies are established:

a)	deficiencies in the management and control systems for the verification of the legality and regularity of the operations financed outside the scope of Regulation (EU) 2021/2115 or for the crop-specific payment for cotton and support for early retirement (27).

b)	deficiencies in the scrutiny of transactions (28).

Commission Delegated Regulation (EU) 2022/127 (29) and Commission Implementing Regulation (EU) 2022/128 (30) set out rules for the determination of financial corrections.

This Part applies to conformity procedures launched after the date of adoption of these guidelines (31) (i.e. procedures in which the related letter of findings is sent to the Member State concerned after that date).

For conformity procedures launched before the date of the adoption of these guidelines, the Guidelines on the calculation of the financial corrections in the framework of the conformity and financial clearance of accounts procedures - C(2015)3675 dated 8 June 2015  (32) (‘2015 guidelines’) apply.

The guidelines for determining the financial corrections to be made to expenditure financed by the Union, for non-compliances with the applicable rules on public procurement are laid down in Commission Decision C(2019) 3452 of 14 May 2019  (33).

Financial corrections made pursuant to Regulation (EU) 2021/2116 are without prejudice to other mechanisms that may be triggered to safeguard the Union's financial interests. Equally, they do not preclude the Commission from initiating infringement proceedings under Articles 258, 259 and 260 of the Treaty.

3.1.   Definition of the terms and relevant provisions

Conformity procedure: Article 55 of Regulation (EU) 2021/2116 lays down:

Recurrence of deficiencies in different enquiries: Article 14(7), point (d), of Delegated Regulation (EU) 2022/127 refers to circumstances where ‘similar deficiencies in the same sector are detected in a Member State in an enquiry that follows an enquiry in which they have been first detected and communicated to the Member State, account taken however of the corrective or compensating measures already taken by the Member State.’.

Management and Control Systems means all checks to be conducted by the Member States ‘in order to ensure compliance with the Union legislation governing Union interventions’ as provided for in Article 59(1) and (2) of Regulation (EU) 2021/2116.

Gravely deficient control system means a system which exposes the EAGF and the EAFRD to a significant risk of irregularities and other non-compliances prejudicing the Union budget and for which substantial improvements are required.

Key controls: Article 14(6) of Delegated Regulation (EU) 2022/127 defines them as ‘the administrative and on-the-spot checks necessary to determine the eligibility of the aid and the relevant application of reductions and penalties’. Key controls are on-the spot and administrative checks required to verify substantive elements, such as the existence of the subject of the claim/application, the identification of duplicate claims for the same subject, the quantity, the qualitative conditions including the respect of time limits etc. in order to ensure the accurate calculation of the amount due to the beneficiary.

Ancillary controls: Article 14(6) of Delegated Regulation (EU) 2022/127, defines them as ‘all other administrative operations required to correctly process claims’.

A non-exhaustive inventory of key and ancillary controls is made available by the Commission and updated as necessary (34). The management and control system's components for the for expenditure outside the scope of Regulation (EU) 2021/2115, as well as for the cotton payment and support for early retirement, are classified as key and ancillary controls.

Component of a key/ancillary control: each characteristic or individual mandatory requirement within a key/ancillary control.

Control deficiency: an ancillary control that has completely failed to operate or a key control that either was not carried out in the number, frequency, or depth required by Union legislation or is not applied or is applied so poorly or so unfrequently that it is deemed ineffective in determining the eligibility of the claim.

Compromising effect means that the deficiency compromises the correct declaration of expenditure or the respect of requirements of Union law with a potential financial impact.

3.2.   Access to information

The Commission has the right under Article 50 of Regulation (EU) 2021/2116 to obtain all information required for the smooth operation of the EAGF and the EAFRD, and to examine all documents relating to expenditure financed by the EAGF and the EAFRD.

Article 33(1) point (c) of Implementing Regulation (EU) 2022/128 requires Member States to send to the Commission the report established by the certification body (CB). Article 81 of Regulation (EU) 2021/2116 provides that Commission officials shall have access to all documents prepared either with a view to or following the scrutiny, including the scrutiny reports referred in Article 80(2), point (b), of Regulation (EU) 2021/2116.

Failure to comply with the obligation to send the report of the CB, pursuant Article 33(1), point (c) of Implementing Regulation (EU) 2022/128 and the scrutiny report pursuant to Article 80(2), point (b), of Regulation (EU) 2021/2116, will be treated as an infringement of the aforementioned provisions, and as a failure to provide evidence that the audits and scrutinies concerned were properly conducted and with the required effectiveness. This failure affects the Commission services’ capacity to have assurance on the correctness of expenditure declared to the EAGF and the EAFRD.

4.   DETERMINATION OF FINANCIAL CORRECTIONS PURSUANT TO ARTICLE 14 OF DELEGATED REGULATION (EU) 2022/127

4.1.   Main principles

Where it is found that expenditure ‘ has not been effected in conformity with Union law’, the Commission will propose to exclude certain expenditure from Union financing in a conformity procedure. In this case, financial corrections must be applied, in accordance with Article 55(1) of Regulation (EU) 2021/2116.

These guidelines cover the situation where the Commission concludes, following the contradictory procedure with the Member State that there is a compromising effect on the correct declaration of expenditure or on compliance with Union law. Hence, there is a financial impact.

4.2.   Expenditure at risk

The financial correction should be applied to the part of the expenditure at risk that is due to the weakness in the functioning of the management and control systems (MCS).

Where the deficiency results from a failure by the Member State to adopt an appropriate MCS, then the correction should relate to the entire expenditure for which that MCS was required. This includes the aid schemes or rural development measures which were not within the scope of the audit according to the Commission’s notification announcing the audit, if the same MCS applies to these schemes or measures and the deficient control was carried out by the same control body. The communication referred to in Article 37(2) of Implementing Regulation (EU) 2022/128 should indicate all the aid schemes or rural development measures considered to be affected by the deficiency found.

4.3.   Quantification of the financial risk

Article 55(2) of Regulation (EU) 2021/2116 provides that the Commission ‘shall assess the amounts to be excluded on the basis of the gravity of the deficiencies found. In that context, it shall take due account of the nature of those deficiencies and of the financial damage incurred by the Union’.

Where a Member State fails to comply with the requirements in Article 59(1) and (2) of Regulation (EU) 2021/2116 concerning the checking of the legality and regularity of operations, then this very failure means that the payments have not been effected in conformity with the Union law applicable to the measure concerned, including the general requirement under Article 59 of Regulation (EU) 2021/2116 for Member States to detect prevent and correct irregularities and fraud. It does not necessarily follow that all the claims paid were irregular, but it does mean that the risk of undue payments being charged to the Union budget exists.

Whilst in flagrant cases of extreme gravity, the Commission is entitled to refuse all the expenditure concerned if the controls required by the legal framework are not effected in conformity with Union law, in a number of cases such an amount would in all probability exceed the financial damage suffered by the Union. An assessment of the financial damage is therefore to be made by the Commission when evaluating financial corrections.

Where the amounts to be excluded from Union financing cannot be calculated or extrapolated, the Commission must apply the appropriate flat-rate corrections, taking into account the nature and gravity of the infringement and its own estimation of the risk of financial damage caused to the Union budget.

In accordance with Article 14(1) of Delegated Regulation (EU) 2022/127: ‘the Commission shall use its own findings and shall take into account the information made available by the Member State during the conformity procedure’. It follows that the Commission must refuse to finance expenditure where, on the basis of its own findings and/or other evidence (35) and all information supplied, within applicable deadlines, by the Member State - it has serious and reasonable doubts that the underlying measure has been executed in conformity with the applicable Union legislation.

If the Commission cannot identify the amounts unduly spent with proportionate effort, in particular where the Commission does not have at its disposal the information necessary to calculate the amounts unduly spent, the Member State is expected to provide the elements necessary either to identify these amounts or to make an extrapolation of the financial damage. The Commission will apply flat rates if the Member State does not provide these elements in due time or if the elements provided do not comply with the requirements set out in Article 14(2) to (5) of Delegated Regulation (EU) 2022/127.

4.3.1.    Criteria and methodology concerning the calculated and the extrapolated financial corrections

Where the Commission finds that a particular payment concerns a claim which fails to comply with Union legislation, there is a financial damage caused to the Union's budget and the Commission must refuse its financing.

Where the amounts unduly spent cannot be identified by the Commission with proportionate effort, the Member State may, within the time-periods set by the Commission during the conformity clearance procedure, submit data concerning the verification of those amounts on the basis of an examination of all individual cases potentially affected by the non-conformity. The verification must cover the entire expenditure incurred in breach of applicable law and charged to the Union budget. The Member State should prove that it exhaustively examined each member (i.e. file/transaction) of the population at risk and recalculated the unduly paid amounts, including the amount of penalties that should have been applied.

The Commission considers that proportionate effort is determined by the time needed to perform the calculation, without jeopardising the timely adoption of the implementing act referred to in Article 55(1) of Regulation (EU) 2021/2116, so as to protect the Union budget.

In accordance with Article 14(2) and (3) of Delegated Regulation (EU) 2022/127, where the amounts unduly spent cannot be identified with proportionate effort, the Commission may base the evaluation of the financial damage on the examination conducted by the Member State on a representative sample of files and on the extrapolation of the results to the entire population for which the identified non-conformity is expected to have occurred.

According to Article 14(4) of Delegated Regulation (EU) 2022/127, in order to take into account the results submitted by a Member State in view of applying a calculated or an extrapolated financial correction, the Commission must be in a position to:

a)	‘assess the methods retained for identifying or extrapolating which shall be clearly described by the Member State;

b)	check the representativeness of the sample referred to in paragraph 3;

c)	check the content and results of the identification or extrapolation submitted to it;

d)	obtain sufficient and relevant audit evidence regarding the underlying data.’

As regards the sample, as provided for in the applicable ‘CB guidelines on the annual certification audit for EAFG/EAFRD expenditure’ (‘CB guidelines’) (36), the Commission is of the view that to ensure the protection of the Union budget, as a general rule, a 95 % confidence level and a 2 % materiality of the risk calculation is to be achieved. Where the assessment is made by using lower levels of confidence, the most likely (extrapolated) error cannot be applied; an upper error limit would then have to be determined as to properly assess the maximum risk to the Fund concerned.

When applying extrapolated corrections, in accordance with Article 14(5) of Delegated Regulation (EU) 2022/127, the Member State also has the possibility to use:

—	‘the paying agency’s control statistics as confirmed by the certification body’; or

—	‘such body’s [CB] assessment of the level of error in the context of its audit referred to in Article 12 of Regulation (EU) 2021/2116’.

The CB's work will be taken into account when establishing the financial correction provided that the work of the CB is reliable and the CB established the full financial impact of the finding with regard to the measures or schemes affected by the weakness.

If the paying agency (PA), or any other body, establishes an error rate for the given measure/scheme, the CB may be requested to verify that result.

In accordance with Article 55(2) of Regulation (EU) 2021/2116 and Article 14(1) of Delegated Regulation (EU) 2022/127, the Commission may, in order to assess the amounts to be excluded on the basis of the gravity of the deficiencies found and of the financial damage incurred by the Union, determine the amount to be excluded from the Union financing taking into account the calculation made by the Member State. That calculation could take the form of a reasonable assessment of the maximum risk by using standard assumptions specified on the basis of the weakness established.

4.3.2.    Flat-rate financial corrections

4.3.2.1.   General principles

Flat-rate corrections must be envisaged where the information resulting from the enquiry does not allow the Commission to evaluate the financial damage caused to the Union budget by means of the calculation or extrapolation methods provided for in point 4.3.1 but allows it to conclude that the Member State failed to carry out adequate verification of the legality and regularity of claims paid.

In determining whether a financial correction should be made and, if so, at what rate, the Commission will assess the degree of risk of financial damage to the Union budget that has occurred as a consequence of the control deficiency. The specific elements to be taken into account include the following:

a)	whether the deficiency relates to the effectiveness of the MCS generally, or to the operation of a control or controls under the MCS;

b)	whether the control deficiency affects a key or an ancillary control;

c)	the number of deficiencies affecting the functioning of the same MCS;

d)	the vulnerability to fraud of the measures, having regard particularly to the economic incentive;

e)	the recurrence of the non-conformity in different enquires (see point 4.3.3.1).

Flat-rate corrections should be considered where the Commission finds a failure to adequately carry out any control which is explicitly required by Union legislation, or implicitly required in order to respect an explicit rule (the limiting of aid to a certain quality of product, for example). Where controls are carried out, but imperfectly, then the gravity of the deficiency must be evaluated. Almost every control procedure is perfectible, and one responsibility of the Commission is to recommend improvements to these procedures, and to recommend additional controls which, although not required by Union legislation, give the necessary additional assurance as to the legality and regularity of expenditure in the particular circumstances of the Member State concerned.

The fact that the way in which a control procedure operates is perfectible is however not in itself a sufficient ground for a financial correction. There must be a control deficiency resulting in a non-compliance with provisions of Union legislation, and that control deficiency must expose the EAGF and the EAFRD to a risk of financial damage or irregularity.

4.3.3.    Level of flat-rate correction

Against this background, the following flat-rate financial corrections apply:

1.	Where 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 budget, and in view of the lesser gravity of the infringement.

2.

When one or two key controls are not applied, in the number, frequency, or depth required by the legal framework, then a correction of 5 % is justified, as it can reasonably be concluded that management and control systems (MCS) of the Member States do not provide a sufficient level of assurance of the legality and regularity of claims, and that the risk to the EAGF and the EAFRD was significant.

In accordance with Article 14(7) of Delegated Regulation (EU) 2022/127, the Commission ‘shall specifically take into account one or more of the following circumstances demonstrating a higher gravity of the deficiencies revealing a greater risk of financial loss for the Union budget’:

(a)

‘One or more key controls are not applied or applied so poorly or so infrequently that they are deemed completely ineffective in determining the eligibility of the claim or in preventing irregularities’; in such a case, 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 budget;

(b)

‘Three or more deficiencies are detected with respect to the same control system’; in such a case, the following financial corrections are justified: i. 3 %, if the deficiencies concern only ancillary controls which have completely failed; ii. 7 %, if these deficiencies include maximum two key controls not being carried out in the number, frequency, or depth required by the Union legislation; iii. 10 %, in all the other situations where the deficiencies include three or more key controls (regardless of the number of ancillary controls that have completely failed) as it can reasonably be concluded that there was a high risk of wide-spread financial damage to the Union budget;

(c)

‘The 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’; in such a case, a correction of 25 % is justified as it can reasonably be assumed that the freedom to submit irregular claims without consequences will cause exceptionally high financial damage to the Union budget;

(d)

The rate of correction may be fixed at an even higher rate where appropriate to comply with Article 55(2) of Regulation (EU) 2021/2116 and Article 14(1) of Delegated Regulation (EU) 2022/127 and to ensure that the amount to be excluded corresponds to the actual risk for the Union budget. This could be the case where, as a result of information provided by the Member State, the population at risk has been (heavily) confined.

If the Commission concludes that the elements presented by the Member State comply with Article 14(8) of Delegated Regulation (EU) 2022/127, a lower flat-rate is to be selected among the following: 2 %, 3 %, 5 %, 7 %, 10 %, 15 % and 25 %, taking into account that the amount of the resulting flat-rate financial correction, although still above the maximum loss provided by the Member State, should be the closest possible to this amount.

According to Article 14(6), third subparagraph, of Delegated Regulation (EU) 2022/127, the flat-rates corrections are not cumulated, as the most serious deficiency in the key and ancillary controls is taken as an indication of the risks presented by the MCS as a whole and then only the highest flat-rate correction for each of the populations affected by the deficiency must apply.

Flat-rate corrections are applied to the expenditure remaining after deduction of the amounts already corrected by the Member States in individual cases.

Table 2 indicates the possible situations described in point 4.3.2.2 and the related flat-rate correction:

Table 2

Key controls Ancillary controls	None is deficient	One	Two	Three or more	One / more is absent or ineffective	Control system completely absent/gravely deficient
		Not in the number, frequency or depth required
None is deficient	N/A	5 %	5 %	10 %	10 %	25 % or more
One has completely failed	2 %	5 %	7 %	10 %	10 %
Two have completely failed	2 %	7 %	7 %	10 %	10 %
Three or more have completely failed	3 %	7 %	7 %	10 %	10 %

Where the deficiencies concern different components of the same ancillary/key control, in order to apply the appropriate flat-rate it is necessary to determine whether the deficiencies lead to:

a)	the complete failure of operation of the ancillary control;

b)	the key control not being carried out in the number, frequency or depth required by the applicable legal framework, or;

c)	the key control being ineffective in determining the eligibility of the claim or preventing irregularity.

4.3.4.    Other elements to be considered in the quantification

4.3.4.1.   Recurrence of deficiencies in different enquiries

According to Article 14(7), point (d), of Delegated Regulation (EU) 2022/127, in the circumstances where similar deficiencies in the same sector are detected in a Member State in an enquiry that follows an enquiry in which they have been first detected and communicated to the Member State in accordance with Article 37(2) of Implementing Regulation (EU) 2022/128, higher flat-rates are justified, account taken however of the corrective or compensating measures already taken by the Member State.

This point applies only to new findings established as of 1 January 2023.

The increase in the flat-rate will be calculated on the basis of the risk of financial damage.

In the absence of corrective or compensation measures, and where the actual level of undue payments, and thus the amount of financial damage suffered by the Union, cannot be determined, the following percentages will be applied when recurrence is found for the first time:

a)	in the event of a previous flat-rate of 2 %: a rate of at least 3 % over the new enquiry period concerned, this rate possibly rising to 5 % where it may reasonably be concluded that persistent shortcomings in ancillary controls will reduce the effectiveness of key controls;

b)	in the event of a previous flat-rate of 3 %: a rate of 5 % over the new enquiry period concerned;

c)	in the event of a previous flat-rate of 5 % or 7 %: a rate of 10 % over the new enquiry period concerned;

d)	in the event of a previous flat-rate of 10 %: a rate of at least 15 %, depending on the extent of the greater risk, over the new enquiry period concerned. Where there is a further recurrence subsequently, the rate will be increased to 25 %.

e)	in the event of a previous flat-rate of 25 % or more, the increase will be established on a case-by-case basis.

Where the correction proposed in the previous enquiry was not a flat-rate, in the absence of a satisfactory quantification by the Member State in the enquiry that established the recurrence, the flat-rate correction just above the previous enquiry’s correction will be considered the basis for applying the recurrence as referred to in point 4.3.2.2.

4.3.4.2.   Financial risk exceeding the flat-rates

In accordance with Article 14(1) and (6) of Delegated Regulation (EU) 2022/127 and Article 55(2) of Regulation (EU) 2021/2116, requiring the Commission to assess the amounts to be excluded on the basis of the gravity of the deficiencies found and of the financial damage incurred by the Union, where the Commission has evidence that the financial risk is above the flat-rate that would apply in accordance with point 4.3.2.2 or 4.3.3.1 of these guidelines, the Commission is entitled to propose a higher level of flat-rate correction and, in flagrant cases of extreme gravity, to exclude all the expenditure concerned.

4.3.4.3.   Border-line cases

Where the Member State failed by no more than 10 % to reach the number of controls required by Union legislation, or where the correction resulting from a strict application of these guidelines would be clearly disproportionate, the Commission may propose a lower rate of correction, or may not impose a correction, provided that the control procedure was otherwise sound.

4.3.4.4.   Difficulties in the interpretation of Union legislation

Where the deficiencies arose from difficulties in the interpretation of Union legislation, and the national authorities took effective steps to remedy the deficiencies as soon as they were brought to light, this mitigating factor may be taken into account and a lower rate may be proposed or no correction be imposed.

However, this mitigating factor is not taken into account where it could reasonably be expected that the Member State would have brought those difficulties in the interpretation to the attention of the Commission.

4.3.4.5.   Initial communication of the level of the financial correction

Where the Commission considers that expenditure was not effected in compliance with Union legislation, it must, pursuant to Article 37(2) of Implementing Regulation (EU) 2022/128, ‘communicate its findings, […]indicating the provisional level of financial correction which at that stage of the procedure it considers corresponds to its findings’.

Where the conditions for calculating or extrapolating the amounts to be excluded from Union financing are not met, the flat-rates defined in point 4.3.2.2 will be used to comply with the legal obligation in question.

4.3.4.6.   Period of the correction

The financial correction must apply to the expenditure effected during the period determined in accordance with Article 55(4) of Regulation (EU) 2021/2116 and Article 37(7) of Implementing Regulation (EU) 2022/128. The expenditure related to the period after the written communication under Article 37(2) of Implementing Regulation (EU) 2022/128 should also be corrected, until the deficiency ceases to have a negative impact on the correct declaration of the expenditure or the respect of Union law.

For the period determining the recurrence in point 4.3.3.1, the Commission will operate on the principle of N+2. This means that the higher level of flat-rate corrections will only be applied to the second year following the year the weakness was reported to the Member State (via the letter of findings referred to in Article 37(2) of Implementing Regulation (EU) 2022/128 in year N), and only if the findings have not been addressed in the meantime.

4.3.4.7.   Double correction

Where the Commission proposes a financial correction, it will ensure that there is no double correction by applying an appropriate off-setting of the amounts proposed in an earlier conformity procedure, or with amounts proposed within the same conformity procedure. The Member State must supply the necessary information to enable the Commission to determine the financial correction within the legal deadlines (see proportionate effort in point 4.3.1).

4.3.4.8.   Impact of administrative penalties on the financial corrections

The non-implementation by the Member States of the administrative penalty mechanism laid down in the Union legislation entails a financial damage to the Union budget, either in terms of overpayment or in terms of loss of assigned revenue. Therefore, the administrative penalties should be included in the scope of the financial corrections.

4.3.4.9.   Amounts recovered and retained by the Member State

Amounts effectively recovered from the beneficiaries and credited to the Fund concerned before a relevant date (37) established in the course of the conformity procedure must be deducted from the amount that the Commission decides to exclude from Union financing pursuant to Article 55 of Regulation (EU) 2021/2116.

The recoveries linked to the non-conformity identified by the Commission, which are made after the established relevant date must be recorded and kept for the national budgets. Amounts corresponding to the retention referred to in Article 56(3) of Regulation (EU) 2021/2116 will not be deducted from the financial correction proposed, as any such financial correction is considered as attributable to the Member State’ administrative authorities or other official bodies.

5.   DETERMINATION OF FINANCIAL CORRECTIONS FOR DEFICIENCIES IN THE SCRUTINY OF TRANSACTIONS UNDER TITLE IV, CHAPTER III, OF REGULATION (EU) 2021/2116

The scrutiny of transactions under Chapter III of Title IV of Regulation (EU) 2021/2116 are an extra layer of controls to the first level administrative and on-the-spot controls. As those ‘ex-post’ controls are part of the MCS, any deficiency related to them should be taken into account when determining the financial damage caused to the Union in accordance with Article 55 of Regulation (EU) 2021/2116. Therefore, the Commission will apply the following guiding principles when dealing with such deficiencies:

1.a)

Where financial corrections are imposed due to deficiencies in the first level controls, any deficiencies in the scrutiny of transactions in the sector concerned must be taken into account for the purpose of determining the financial corrections regarding key control deficiencies in the first level controls and key control deficiencies in the scrutiny, leading to the application of 10 % supplement to the flat-rate or extrapolated correction, i.e. 5,5 %, 11 % or 27,5 %. It is recalled that Article 14(6), third paragraph, of Delegated Regulation (EU) 2022/127 will not apply in this case, since deficiencies in the scrutiny controls are linked to the first level control deficiencies, and cannot be considered different non-conformities.

1.b)

Where a correction for deficiencies in the first level controls for the same period has already been made in an ad hoc conformity decision, any supplementary correction for deficiencies in the scrutiny of transactions must take account of the previous correction according to the principles set out in point 1.a).

2)	If the sector is not subject to any financial correction for deficiencies of the first level controls and, thus, financial corrections are contemplated solely for deficiencies in the scrutiny, the rate of correction must in principle be 10 % of the rates set out in the table in point 4.3.2.2.

As regards the scope of corrections, Article 55(5), point (c), of Regulation (EU) 2021/2116 provides that the financial corrections related to scrutiny of transactions can cover the expenditure related to the Member State’s scrutiny report provided that the Commission notifies the Member State in writing of its findings (Letter of findings) within 12 months following receipt of the scrutiny annual report as referred to Article 80(2), point (b), of Regulation (EU) 2021/2116. In general, the expenditure at risk is the expenditure related to undertakings selected for the scrutiny i.e. the total expenditure as reported in the Scrutiny report pursuant to Annex VII to Implementing Regulation (EU) 2022/128, point 2. ‘Overview of controls (per budget article or item No)’, column C ‘Total expenditure relating to undertakings selected for scrutiny’ of the table.

PART C

EXPENDITURE WITHIN AND OUTSIDE THE SCOPE OF THE CAP STRATEGIC PLAN AS REFERRED TO IN REGULATION (EU) 2021/2115

6.   DETERMINATION OF FINANCIAL CORRECTIONS FOR DEFICIENCIES IN PAYING AGENCIES’ COMPLIANCE WITH ACCREDITATION CRITERIA

This point establishes guidelines for the calculation of financial corrections proposed by the Commission in accordance with Article 55 of Regulation (EU) 2021/2116 (38) in conjunction with Article 2 of Implementing Regulation (EU) 2022/128 (39) for non-compliances with Union rules on the accreditation of paying agencies (PA), covering all EAGF and EAFRD expenditure as from 1 January 2023.

6.1.   Conditions to trigger financial corrections

Article 2(3) to (6) of Implementing Regulation (EU) 2022/128 read as follows:

In accordance with the document ‘Identifying potential serious deficiencies for the purpose of Directorate H’s mission to provide assurance’  (40), where the Member State does not comply with its obligations under Article 2(3) and (6) of Implementing Regulation (EU) 2022/128 regarding the probation period and the action plan to remedy the deficiencies found, such non-compliance will also be considered as a potential serious deficiency, and the financial risk will be examined in a conformity procedure pursuant to Article 55 of Regulation (EU) 2021/2116. The same applies for expenditure outside the CAP Strategic Plan (CSP) (see point 3.1 of these guidelines).

This means that the conformity procedure can be initiated when both of the following conditions are met:

a)	one or more of the accreditation criteria are no longer respected or are respected so insufficiently as to affect the agency’s ability to fulfil the tasks set out in Article 1(1) of Delegated Regulation (EU) 2022/127 (41).

b)

the competent authority has not complied with one of its obligations to: i. put the PA accreditation under probation without delay and draw up a plan including actions and deadlines to remedy the deficiencies found in due time, or; ii. withdraw, at the request of the Commission in accordance with Article 2(6) of Regulation (EU) 2022/128, the accreditation of a PA that did not fully implement such a plan within the determined period.

6.2.   Expenditure at risk

The financial correction will be applied to expenditure for the intervention that is affected by the non-compliance with accreditation criteria provided for in Annex I to Delegated Regulation (EU) 2022/127.

6.3.   Corrections levels

As regards the quantification of the financial risk, the options referred to in point 2.3 apply.

7.   DETERMINATION OF FINANCIAL CORRECTIONS FOR DEFICIENCIES IN THE IRREGULARITIES AND DEBT MANAGEMENT

The main principles related to the recovery of undue payments arising from irregularities remain unchanged in the CAP period 2023-2027. As explained in Guideline 5 (42) on debt management and reporting, Member States are expected to maintain the relevant debt management procedures and systems, while the reporting requirements have changed.

At the same time, Member States are still following up debts related to undue payments in the CAP periods before 2023-2027 in accordance with Article 54 of Regulation (EU) No 1306/2013 (43). For the deficiencies established according to Chapter 11 of the ‘Guidelines on the calculation of the financial corrections in the framework of the conformity and financial clearance of accounts procedures’ - C(2015)3675 dated 8 June 2015  (44), where reference is made to chapter 3 of those guidelines, points 2.3.1 to 2.3.4 of these guidelines will apply.

The systems for the management of irregularities and debts have to comply with the principles and requirements set out in Article 56, Article 57 and Article 59(1) of Regulation (EU) 2021/2116, Article 1 and Annex I to Delegated Regulation (EU) 2022/127, in particular point 2 (F), as well as Article 30 and 31 of Implementing Regulation (EU) 2022/128 which require the Member State to, in particular:

a)	prevent, detect and correct irregularities and fraud;

b)	impose penalties and recover undue payments plus interest;

c)	record the corresponding amounts in their books and report them in the annual accounts as set out in Article 32(1), point (f) and (g), of Implementing Regulation (EU) 2022/128;

d)	recover sums lost as a result of non-compliances with Union legislation or negligence attributable to the Member State authorities.

These guidelines apply to conformity procedures launched after the date of the adoption of these guidelines (i.e. procedures for which the related letter of findings is sent to the Member State concerned after this date).

For deficiencies established in the systems for the management of irregularities and debts, where the ways of calculation referred to in points 2.3.1, 2.3.2 and 2.3.3 have not been successful, a flat-rate correction is to be applied as referred to in point 2.3.4. Therefore, a correction will be applied coherently to the population at risk in case of deficiencies in the irregularities and in the debt management system of the Member State, as follows:

a)

where deficiencies concern the management of the debts (i.e. deficiencies in timely and appropriate recovery procedures and in their follow-up, cases corrected, cancelled or written-off), the flat-rate will be applied to the balance in the Annex II/Annex III to Regulation (EU) No 908/2014 concerning expenditure before the 2023-2027 CAP and in accordance with Annex V to Implementing Regulation 2022/128 concerning expenditure effected under the 2023-2027 CAP; or to part of the debtors’ ledger concerned (45); and

b)

where it concerns the completeness of the debtors’ ledger and/or the annexes to the accounts regarding debts and recoveries, implying failure to initiate recovery proceedings for detected irregularities, the flat-rate will be applied to the expenditure for the intervention/measure affected by the deficiency found in the MCS.

Where the Commission proposes a financial correction for deficiencies under this Chapter, it will ensure that there is no double correction by applying an appropriate off-setting against the amounts excluded in an earlier conformity procedure or against the amounts proposed to be excluded within the same conformity procedure. The Member State must supply the necessary information to enable the Commission to determine the financial correction with proportionate effort within the legal deadlines.

8.   FINANCIAL CORRECTIONS ARISING FROM THE FINANCIAL CLEARANCE ASSESSMENT

For the annual financial clearance of accounts decision, the certification body (CB) needs to provide assurance on the true and fair view of the annual accounts through the audit of these accounts and the control procedures respectively under audit objective 1 of the applicable ‘CB guidelines on the annual certification audit for EAFG/EAFRD expenditure’ (‘CB guidelines’).

In accordance with Article 55 of Regulation (EU) 2021/2116 and taking into consideration Chapter 10 of the applicable ‘CB guidelines’, the Commission may launch a conformity procedure for material financial misstatements. In addition, in this specific case, the accounts may not be proposed for clearance until the conformity procedure is closed.

The quantification of the financial risk is based on the quantification provided by the CB in accordance with Chapter 10 of the applicable ‘CB guidelines’, or based on the information to be submitted by the Member States by 15 February following the financial year concerned.

9.   POSITIVE CORRECTIONS IN THE CONFORMITY DECISION

9.1.   Principles

‘Positive correction’ means a reimbursement of an amount to the Member State that was subject of a previous Commission decision pursuant to Articles 53 or 55 of Regulation (EU) 2021/2116. A positive correction is to be effected as part of a conformity procedure.

The reimbursement of a certain amount to a Member State provided for in a conformity decision must not be used to circumvent the applicable rules regarding financial management and financial clearance and to circumvent the definitive nature of decisions taken previously.

A reimbursement must never exceed 100 % of the original amount concerned.

In case of ‘positive corrections’, the exchange rate used should be the same as the one applied in the original Decision to ensure that the financial effect is neutral.

9.2.   Positive correction after an annual financial clearance decision

A positive correction in the form of a reimbursement to the Member State through a conformity decision of an amount previously cleared in the annual financial clearance pursuant to Article 53 of Regulation (EU) 2021/2116 can only take place in exceptional and individual cases, and the following criteria must be fulfilled:

a)	proof supporting the Member State position should be available and, where necessary, verification on-the-spot by the Commission should take place;

b)	as the information for the financial clearance is certified, the new information provided by the Member State has to be certified as well;

c)	the error should not be the result of negligence; typing errors are not considered to fall under negligence;

d)	it should be established that the Member State acted with diligence in the recovery procedure.

9.3.   Positive correction after a conformity decision

Reimbursement to the Member State should not be considered on the basis of additional information from that Member State which should have been provided in the context of the conformity procedure within the applicable deadlines, but on the basis of the information which only becomes available after the Commission has adopted the conformity decision.

Reimbursement is allowed in the following cases:

a)	a ruling of the Court of Justice of the European Union that has annulled fully or partially a Commission decision;

b)	errors were made by the Commission;

c)	a double correction has been imposed because both the Commission and the Member State overlooked information that was available before the date of the conformity decision or on that date, without prejudice to Article 37(6) of Implementing Regulation (EU) 2022/128.

9.4.   Positive correction related to suspensions

A reimbursement to the Member State may be required in a conformity decision adopted pursuant to Article 55 of Regulation (EU) 2021/2116 where expenditure was previously suspended under Article 42 of that Regulation and that conformity decision imposes a financial correction due to serious deficiencies in the governance systems which triggered the suspension.

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(1)  Regulation (EU) 2021/2116 of the European Parliament and of the Council of 2 December 2021 on the financing, management and monitoring of the common agricultural policy and repealing Regulation (EU) No 1306/2013 (OJ L 435, 6.12.2021, p. 187, ELI: http://data.europa.eu/eli/reg/2021/2116/oj).

(2)  Regulation (EU) 2021/2115 of the European Parliament and of the Council of 2 December 2021 establishing rules on support for strategic plans to be drawn up by Member States under the common agricultural policy (CAP Strategic Plans) and financed by the European Agricultural Guarantee Fund (EAGF) and by the European Agricultural Fund for Rural Development (EAFRD) and repealing Regulations (EU) No 1305/2013 and (EU) No 1307/2013 (OJ L 435, 6.12.2021, p. 1, ELI: http://data.europa.eu/eli/reg/2021/2115/oj).

(3)  Excluding the crop-specific payment for cotton and support for early retirement, which are covered under Part B.

(4)  Commission Delegated Regulation (EU) 2022/127 of 7 December 2021 supplementing Regulation (EU) 2021/2116 of the European Parliament and of the Council with rules on paying agencies and other bodies, financial management, clearance of accounts, securities and use of euro (OJ L 20, 31.1.2022, p. 95 , ELI: http://data.europa.eu/eli/reg_del/2022/127/oj).

(5)  Commission Implementing Regulation (EU) 2022/128 of 21 December 2021 laying down rules for the application of Regulation (EU) 2021/2116 of the European Parliament and of the Council on paying agencies and other bodies, financial management, clearance of accounts, checks, securities and transparency (OJ L 20, 31.1.2022, p. 131, ELI: http://data.europa.eu/eli/reg_impl/2022/128/oj).

(6)  Circabc/European Commission/Agriculture/Audit of agricultural expenditure (ex-EAGGF)/Library/Audit of agriculture expenditure/FCGL reference documents - https://circabc.europa.eu/ui/group/d9d57ada-2d34-4c85-9e3c-7ce690099d5d/library/fbabf972-31d3-46ef-9460-806d76de4eea?p=1&n=10&sort=modified_DESC.

(7)  It is always the approved CSP in force that is taken into consideration.

(8)  It is to be emphasised that the approval by the Commission of the CSP does not create legitimate expectations in case the CSP does not comply with an unambiguous provision of Union legislation. (See judgment of 17 November 2022, Avicarvil, C-443/21, EU:C:2022:899, paragraph 41: ‘It is settled case-law that the principle of the protection of legitimate expectations cannot be relied upon against an unambiguous provision of EU law; nor can the conduct of a national authority responsible for applying EU law, which acts in breach of that law, give rise to a legitimate expectation on the part of a trader of beneficial treatment contrary to EU law.’).

(9)  ISA 450 on ‘Evaluation of Misstatements Identified During the Audit’ provides the following definition for ‘misstatements’: 'a difference between the amount, classification, presentation or disclosure of a reported financial statement item and the amount, classification, presentation or disclosure that is required for the item to be in accordance with the applicable financial reporting framework. Misstatements can arise from fraud or error'. In other words, a misstatement arises where there is a difference between the reported amounts, and what is expected to be reported.

(10)  A margin of misstatements is the amount of misstatements that could be accepted before it is considered that the expenditure is materially misstated. It is to be considered within the context of ISA320, Materiality in Planning and Performing Audit.

(11)  A deviation is a situation where the actual performance or outcome of a control does not match the expected or desired one, based on the control objectives and criteria. It can be an exception in the applied/designed procedures and controls, or an error/failure in the controls. When a control has not operated properly this is referred to as an occurrence of deviations. The financial impact all the occurrences have on the expenditure and the corresponding outputs declared is referred to as magnitude of the deviations.

(12)  Circabc/European Commission/Agriculture/Audit of agricultural expenditure (ex-EAGGF)/Library/Audit of agriculture expenditure/FCGL reference documents - https://circabc.europa.eu/ui/group/d9d57ada-2d34-4c85-9e3c-7ce690099d5d/library/fbabf972-31d3-46ef-9460-806d76de4eea?p=1&n=10&sort=modified_DESC.

(13)  Chapter IV, Title IV of Regulation (EU) 2021/2116.

(14)  Assessment of systems and grading: functions well: 4; functions: 3; functions partially: 2; not functioning or gravely deficient: 1.

(15)  Circabc/European Commission/Agriculture/Audit of agricultural expenditure (ex-EAGGF)/Library/Audit of agriculture expenditure/FCGL reference documents - https://circabc.europa.eu/ui/group/d9d57ada-2d34-4c85-9e3c-7ce690099d5d/library/fbabf972-31d3-46ef-9460-806d76de4eea?p=1&n=10&sort=modified_DESC.

(16)  As referred to in Guideline 2 on the annual certification audit EAGF/EAFRD expenditure.

(17)  Circabc/European Commission/Agriculture/Audit of agricultural expenditure (ex-EAGGF)/Library/Audit of agriculture expenditure/FCGL reference documents - https://circabc.europa.eu/ui/group/d9d57ada-2d34-4c85-9e3c-7ce690099d5d/library/fbabf972-31d3-46ef-9460-806d76de4eea?p=1&n=10&sort=modified_DESC.

(18)  In statistics, the confidence level indicates the probability with which an estimation based on a statistical sample is true for the population.

(19)  In line with Audit Objectives 2 and 3 of Guideline 2 on the Annual Certification audit for EAGF/EAFRD expenditure, as well as Annexes 1 and 6 thereto.

(20)  In terms of number of deviations occurring and their magnitude, in line with Audit Objectives 2 and 3 provided in Guideline 2 on the Annual Certification audit for EAGF/EAFRD expenditure, available under: Circabc/European Commission/Agriculture/Audit of agricultural expenditure (ex-EAGGF)/Library/Audit of agriculture expenditure/FCGL reference documents - https://circabc.europa.eu/ui/group/d9d57ada-2d34-4c85-9e3c-7ce690099d5d/library/fbabf972-31d3-46ef-9460-806d76de4eea?p=1&n=10&sort=modified_DESC.

(21)  Type of serious deficiency is to be understood as the category of serious deficiency as referred to in point 2.1.

(22)  Circabc/European Commission/Agriculture/Audit of agricultural expenditure (ex-EAGGF)/Library/Audit of agriculture expenditure/FCGL reference documents - https://circabc.europa.eu/ui/group/d9d57ada-2d34-4c85-9e3c-7ce690099d5d/library/fbabf972-31d3-46ef-9460-806d76de4eea?p=1&n=10&sort=modified_DESC.

(23)  Order of 12 October 2023, Schrom Farms, T-507/22, not yet published, in particular paragraph 22.

(24)  Circabc/European Commission/Agriculture/Audit of agricultural expenditure (ex-EAGGF)/Library/Audit of agriculture expenditure/FCGL reference documents - https://circabc.europa.eu/ui/group/d9d57ada-2d34-4c85-9e3c-7ce690099d5d/library/fbabf972-31d3-46ef-9460-806d76de4eea?p=1&n=10&sort=modified_DESC.

(25)  Regulation (EU) 2021/2116 of the European Parliament and of the Council of 2 December 2021 on the financing, management and monitoring of the common agricultural policy and repealing Regulation (EU) No 1306/2013 (OJ L 435, 6.12.2021, p. 187, ELI: http://data.europa.eu/eli/reg/2021/2116/oj).

(26)  Covering expenditure effected as from 1 January 2023 under CAP 2023-27. Guidelines on the calculation of the financial corrections in the framework of the conformity and financial clearance of accounts procedures - C(2015)3675 continue to apply to conformity procedures initiated under Article 52 of Regulation (EU) No 1306/2013.

(27)  Title III, Chapter II, Section 3, Subsection 2, and Article 155(2) of Regulation (EU) 2021/2115.

(28)  Chapter III of Title IV of Regulation (EU) 2021/2116.

(29)  Commission Delegated Regulation (EU) 2022/127 of 7 December 2021 supplementing Regulation (EU) 2021/2116 of the European Parliament and of the Council with rules on paying agencies and other bodies, financial management, clearance of accounts, securities and use of euro (OJ L 20, 31.1.2022, p. 95 , ELI: http://data.europa.eu/eli/reg_del/2022/127/oj).

(30)  Commission Implementing Regulation (EU) 2022/128 of 21 December 2021 laying down rules for the application of Regulation (EU) 2021/2116 of the European Parliament and of the Council on paying agencies and other bodies, financial management, clearance of accounts, checks, securities and transparency (OJ L 20, 31.1.2022, p. 131, ELI: http://data.europa.eu/eli/reg_impl/2022/128/oj).

(31)  For conformity procedures related to scrutiny of transactions, these guidelines will be used as from the scrutiny period 2025/2026.

(32)  Circabc/European Commission/Agriculture/Audit of agricultural expenditure (ex-EAGGF)/Library/Audit of agriculture expenditure/FCGL reference documents - https://circabc.europa.eu/ui/group/d9d57ada-2d34-4c85-9e3c-7ce690099d5d/library/fbabf972-31d3-46ef-9460-806d76de4eea?p=1&n=10&sort=modified_DESC.

(33)   https://ec.europa.eu/regional_policy/en/information/publications/decisions/2019/commission-decision-of-14-5-2019-laying-down-the-guidelines-for-determining-financial-corrections-to-be-made-to-expenditure-financed-by-the-union-for-non-compliance-with-the-applicable-rules-on-public-procurement.

(34)  Circabc/European Commission/Agriculture/Audit of agricultural expenditure (ex-EAGGF)/Library/Audit of agriculture expenditure/New guidelines on the calculation of financial corrections/ lists of key and ancillary controls/final lists https://circabc.europa.eu/ui/group/d9d57ada-2d34-4c85-9e3c-7ce690099d5d/library/1a04cfdd-a296-441d-8588-96008302a5e4?p=1&n=10&sort=modified_DESC.

(35)  Evidence resulting from the reports of other relevant bodies such as: the European Court of Auditors, OLAF, CB etc.

(36)  Circabc/European Commission/Agriculture/Audit of agricultural expenditure (ex-EAGGF)/Library/Audit of agriculture expenditure/FCGL reference documents - https://circabc.europa.eu/ui/group/d9d57ada-2d34-4c85-9e3c-7ce690099d5d/library/fbabf972-31d3-46ef-9460-806d76de4eea?p=1&n=10&sort=modified_DESC.

(37)  This date is communicated to the Member State with the conclusions of the respective conformity procedure in accordance with Article 37(3) or (4) of Implementing Regulation (EU) 2022/128.

(38)  Regulation (EU) 2021/2116 of the European Parliament and of the Council of 2 December 2021 on the financing, management and monitoring of the common agricultural policy and repealing Regulation (EU) No 1306/2013 (OJ L 435, 6.12.2021, p. 187, ELI: http://data.europa.eu/eli/reg/2021/2116/oj).

(39)  Commission Delegated Regulation (EU) 2022/127 of 7 December 2021 supplementing Regulation (EU) 2021/2116 of the European Parliament and of the Council with rules on paying agencies and other bodies, financial management, clearance of accounts, securities and use of euro (OJ L 20, 31.1.2022, p. 95, ELI: http://data.europa.eu/eli/reg_del/2022/127/oj).

(40)  Circabc/European Commission/Agriculture/Audit of agricultural expenditure (ex-EAGGF)/Library/Audit of agriculture expenditure/FCGL reference documents - https://circabc.europa.eu/ui/group/d9d57ada-2d34-4c85-9e3c-7ce690099d5d/library/fbabf972-31d3-46ef-9460-806d76de4eea?p=1&n=10&sort=modified_DESC.

(41)  Commission Delegated Regulation (EU) 2022/127 of 7 December 2021 supplementing Regulation (EU) 2021/2116 of the European Parliament and of the Council with rules on paying agencies and other bodies, financial management, clearance of accounts, securities and use of euro (OJ L 20, 31.1.2022, p. 95, ELI: http://data.europa.eu/eli/reg_del/2022/127/oj).

(42)  Guideline 5 on debt management and reporting clarifies the requirements in terms of previous and 2023-2027 CAP periods, available under: Circabc/European Commission/Agriculture/Audit of agricultural expenditure (ex-EAGGF)/Library/Audit of agriculture expenditure/FCGL reference documents - https://circabc.europa.eu/ui/group/d9d57ada-2d34-4c85-9e3c-7ce690099d5d/library/fbabf972-31d3-46ef-9460-806d76de4eea?p=1&n=10&sort=modified_DESC.

(43)  Those debts are to be reported pursuant to Article 32(1), point (f), second sentence, and point (g) of Implementing Regulation (EU) 2022/128.

(44)  Circabc/European Commission/Agriculture/Audit of agricultural expenditure (ex-EAGGF)/Library/Audit of agriculture expenditure/FCGL reference documents - https://circabc.europa.eu/ui/group/d9d57ada-2d34-4c85-9e3c-7ce690099d5d/library/fbabf972-31d3-46ef-9460-806d76de4eea?p=1&n=10&sort=modified_DESC.

(45)  Covering all CAP periods.