Agriculture in the EU — financing, managing and monitoring rules

SUMMARY OF:

Regulation (EU) No 1306/2013 on the financing, management and monitoring of the common agricultural policy

WHAT IS THE AIM OF THE REGULATION?

One of the basic acts of the EU’s common agricultural policy (CAP), this regulation lays down rules for financing, management and monitoring under the two main CAP funds.

The regulation has been amended several times, most recently by Regulation (EU) 2020/2220.

KEY POINTS

Scope

This regulation sets out rules covering:

the financing of expenditure under the CAP, including expenditure on rural development;
the farm advisory system;
the management and control systems to be put in place by EU countries;
the cross-compliance system;
clearance of accounts.

Funds financing the CAP

European Agricultural Guarantee Fund (EAGF) — which mainly finances:
- direct payments to farmers (Regulation (EU) No 1307/2013); and
- agricultural market support measures (Regulation (EU) No 1308/2013).
European Agricultural Fund for Rural Development (EAFRD) — which co-finances national rural development programmes set up by EU countries under Regulation (EU) No 1305/2013 (see summary).
In addition, the funds finance other support activities, such as:
- information and promotion measures for agricultural products; or
- preparatory, monitoring, administrative and technical support activities.

Governance structure

Both funds are operated in shared management between the EU and EU countries.
Paying agencies:
- departments or bodies of EU countries;
- they are responsible for the management and control of expenditure;
- they must comply with rules set out by the European Commission.
Certification bodies:
- public or private bodies designated by EU countries;
- they provide an opinion, drawn up under internationally accepted audit standards, on:
  - the completeness, accuracy and veracity of the annual accounts of the paying agency;
  - the functioning of the paying agency’s internal control system;
  - the legality and regularity of expenditure for which reimbursement has been requested from the Commission.

Farm advisory system

To advise beneficiaries on land management and farm management, EU countries must establish a farm advisory system.

The system covers a number of elements, including:

the requirements and standards of cross-compliance;
agricultural practices beneficial for the climate, the environment and the maintenance of the agricultural area;
measures at farm level required in rural development programmes for farm modernisation, competitiveness building, sectoral integration, innovation and market orientation, and for promoting entrepreneurship;
ensuring that advisors are suitably qualified and trained.

Financial management

The regulation sets out rules for the financial management of both funds, including:

for the EAGF
- financing of expenditure — including the budget ceiling and procedure for monthly payments;
- budget management — including financial discipline procedure, budget discipline procedure and a monthly early-warning and monitoring system;
for the EAFRD
- financing of rural development programmes — including financial contributions to and from EAFRD and budgetary commitments;
- financial contribution to rural development programmes — including prefinancing arrangements, interim payments and payments of the balance;
means for the Commission to ensure expenditure has been carried out according to EU rules — including the power to reduce and suspend payments.

Clearance of accounts

Checks by the Commission in EU countries, including checking:
- that administrative practices respect EU law;
- that the required supporting documents exist and correspond to the operations financed by the funds;
- that the conditions for financing by the EAGF or the EAFRD were fulfilled and checked;
- the accreditation of paying agencies.
Access to information and documents — EU countries should make available to the Commission all information and documents necessary.
Clearance of accounts procedure — the Commission adopts implementing acts containing its decision on the completeness, accuracy and veracity of the annual accounts submitted by accredited paying agencies.
Conformity clearance — where expenditure does not conform to applicable EU (and, in respect of the EAFRD, also national) law, the Commission will determine the amount to be excluded from EU financing.
Irregularities — where an undue payment has been made following irregularity or negligence, EU countries must request recovery of the payment from the beneficiary within 18 months of the identification of the irregularity.

Controls

To ensure that support is correctly allocated to beneficiaries, EU countries are required to set up efficient management and control systems. For certain payments, EU countries must operate a system for the management and control of payments to farmers, the Integrated Administration and Control System.
Control requirements will be lowered in regions where previous checks have shown good results, and increased in regions where there are problems.
Scrutiny of transactions. The regulation sets out specific rules on the scrutiny of the commercial documents of paying agencies or beneficiaries (or their representatives) relating directly or indirectly to the EAGF financing system to check whether transactions in the system have actually been carried out and have been executed correctly. Scrutiny of transactions shall not apply to measures covered by the Integrated Administration and Control System.

Penalties

The regulation provides that, in addition to the non-payment or withdrawal of payment to beneficiaries who do not meet eligibility requirements, commitments or other obligations, EU countries must, if relevant, impose administrative penalties on them.

Cross-compliance

All direct payments, certain rural development payments and certain vine payments are linked to compliance with a number of minimum legal requirements relating to:

the environment;
climate change;
agricultural conditions of land;
human, animal and plant health standards; and
animal welfare.

Common rules

The regulation also sets a number of common rules covering issues such as:

the information submitted to the Commission by EU countries and how it is used;
the use of the euro and the exchange rate used;
setting up a monitoring and evaluation framework to measure the CAP’s performance;
the transparency requirement to publish the beneficiaries, except those receiving very small amounts (EUR 1,250 or less, depending on the EU country).

COVID-19 pandemic

Following the outbreak of the COVID-19 pandemic, Regulation (EU) 2020/531 allows EU countries to pay a higher level of advances to beneficiaries for the year 2020. This is to compensate for potential delays in aid payments due to the resulting exceptional administrative difficulties delaying the performance of checks.

Transitional rules for the years 2021 and 2022

Amending Regulation (EU) 2020/2220, adopted in December 2020, allows for the continued application of the rules under the 2014-2020 CAP framework and ensures the continuity of payments to farmers and other beneficiaries of support from the EAGF and EAFRD in the years 2021 and 2022 until the date of application of the new legal framework covering the period starting on 1 January 2023.

For each of the years 2021 and 2022, the amount of the reserve is set at €400 million (at 2011 prices) and falls under Heading 3 of the multiannual financial framework as set out in the Annex to Council Regulation (EU) 2020/2093 (see summary).

FROM WHEN DOES THE REGULATION APPLY?

Regulation (EU) No 1306/2013 has applied since 1 January 2014.
Amending Regulation (EU) 2020/2220 has applied since 1 January 2021.

BACKGROUND

For more information, see:

Common agricultural policy (European Commission).

MAIN DOCUMENT

Regulation (EU) No 1306/2013 of the European Parliament and of the Council of 17 December 2013 on the financing, management and monitoring of the common agricultural policy and repealing Council Regulations (EEC) No 352/78, (EC) No 165/94, (EC) No 2799/98, (EC) No 814/2000, (EC) No 1290/2005 and (EC) No 485/2008 (OJ L 347, 20.12.2013, pp. 549-607)

Successive amendments to Regulation (EU) No 1306/2013 have been incorporated into the original document. This consolidated version is of documentary value only.