The common agricultural policy consists of a series of measures, some of which relate to rural development. It is important that financing be provided for those measures in order to contribute to the attainment of the objectives of the common agricultural policy. Since the measures have certain elements in common but also differ in a number of respects, their financing should be combined under one regulatory framework which allows for different treatment where necessary. In order to take account of those differences, two European agricultural funds should be created, namely the European Agricultural Guarantee Fund (hereinafter ‘EAGF’), for the financing of market measures, and the European Agricultural Fund for Rural Development (hereinafter ‘EAFRD’), for the financing of rural development programmes.
(2)
The Community budget should finance common agricultural policy expenditure, including that on rural development, through the abovementioned Funds. In line with Article 53 of Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities (2), this is done either centrally or in the context of shared management with the Member States. All the types of measure that can be financed using the said Funds should be specified.
(3)
During the clearance of accounts, if the Commission does not have satisfactory assurance that the national controls are adequate and transparent and that the paying agencies verify the legality and correctness of the declarations of expenditure which they execute, it cannot determine within a reasonable period of time the total expenditure to be entered against the European Agricultural Funds. Provision should therefore be made for the accreditation of paying agencies by Member States, the establishment by them of procedures for obtaining the requisite declarations of assurance, and the certification of management and control systems, as well as the certification of annual accounts by independent bodies.
(4)
In order to ensure consistency in the standards required for accreditation in the Member States, the Commission should provide guidance on the criteria to be applied. Moreover, in order to ensure the transparency of national controls, in particular as regards authorisation, validation and payment procedures, the number of authorities and bodies to which these responsibilities are delegated should, where appropriate, be restricted taking account of the constitutional arrangements of each Member State.
(5)
Where a Member State accredits more than one paying agency, it is important that it designate a single coordinating body to ensure consistency in the management of the funds, to provide liaison between the Commission and the various accredited paying agencies and to ensure that the information requested by the Commission concerning the operations of several paying agencies is made rapidly available.
(6)
To ensure harmonious cooperation between the Commission and the Member States regarding the financing of common agricultural policy expenditure and, more particularly, to allow the Commission to monitor closely financial management by the Member States and clear the accounts of the accredited paying agencies, certain information has to be communicated by the Member States to the Commission or has to be kept available to the Commission. Information technology must be used as fully as possible to that end.
(7)
For the purposes of compiling the data to be sent to the Commission, and so that the Commission has full immediate access to expenditure data in both paper and electronic form, suitable rules on the presentation and transmission of data, and also on time limits to be observed, need to be laid down.
(8)
The financing of measures and operations under the common agricultural policy will in part involve shared management. To ensure that Community funds are soundly managed, the Commission should perform checks on the management of the Funds by the Member State authorities responsible for making payments. It is appropriate to define the nature of the checks to be made by the Commission, to specify the terms of its responsibilities for implementing the budget and to clarify the Member States' cooperation obligations.
(9)
Only paying agencies accredited by the Member States offer reasonable assurance that the necessary controls have been carried out before granting Community aid to beneficiaries. It should therefore be stipulated that only expenditure effected by accredited paying agencies should be liable for reimbursement by the Community budget.
(10)
The financial resources required to cover the expenditure effected by the accredited paying agencies, in respect of the EAGF, are to be made available to the Member States by the Commission in the form of reimbursements against the booking of the expenditure effected by these agencies. Until these reimbursements, in the form of monthly payments, have been paid, financial resources must be mobilised by the Member States in accordance with the needs of their accredited paying agencies. The personnel costs and the administrative costs of the Member States and the beneficiaries involved in the execution of the common agricultural policy should be borne by themselves.
(11)
Community aid should be paid to beneficiaries in good time so that they may use it efficiently. A failure by the Member States to comply with the payment deadlines laid down in Community legislation could create serious difficulties for the beneficiaries and could jeopardise the Community's yearly budgeting. Therefore, expenditure made without respecting deadlines for payments should be excluded from Community financing. In order to respect the principle of proportionality, the Commission should be able to provide for exceptions to this general rule.
(12)
Provision should be made for an administrative procedure allowing the Commission to take a decision to reduce or temporarily suspend monthly payments where the information communicated by the Member States does not enable it to confirm that the Community rules applicable have been observed and indicates a clear misuse of Community funds. In clearly defined cases, a reduction or a suspension should also be possible without such a procedure. In both cases, the Commission should inform the Member State, indicating that any decision to reduce or suspend the monthly payments will be without prejudice to the decisions taken in the context of the clearance of accounts.
(13)
In the context of respecting budget discipline, it is necessary to define the annual ceiling for the expenditure financed by the EAGF by taking into account the maximum amounts laid down for this Fund in the Financial Perspective and the sums fixed by the Commission under Article 10(2) of Council Regulation (EC) No 1782/2003 of 29 September 2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers (3) and the sums laid down in Articles 143d and 143e of that Regulation.
(14)
Budget discipline also requires that the annual ceiling for expenditure financed by the EAGF be respected under all circumstances and at all stages of the budget procedure and the execution of the budget. This requires that the national ceiling for the direct payments per Member State, after correction in accordance with Article 10 of Regulation (EC) No 1782/2003, be regarded as a financial ceiling for such direct payments for the Member State concerned and that the reimbursement of these payments remain within this financial ceiling. Furthermore, budget discipline demands that all the legislative measures proposed by the Commission or adopted by the Council or by the Commission under the common agricultural policy and financed by the EAGF comply with the annual ceiling for the expenditure financed by this Fund. In the same context, it is necessary to authorise the Commission to set the adjustments referred to in Article 11(1) of Regulation (EC) No 1782/2003 where the Council does not fix these before 30 June of the calendar year in respect of which the adjustments apply.
(15)
The measures taken to determine the financial contribution from the EAGF and the EAFRD in respect of the calculation of financial ceilings do not affect the powers of the budgetary authority designated by the Treaty. These measures must therefore be based on the reference amounts fixed in accordance with the Interinstitutional Agreement of 6 May 1999 between the European Parliament, the Council and the Commission on budgetary discipline and improvement of the budgetary procedure (4) (hereinafter referred to as ‘the Interinstitutional Agreement’) and the Financial Perspective set out in Annex I to that Agreement.
(16)
Budget discipline also demands a continuous examination of the medium-term budget situation. The Commission, when submitting the preliminary draft budget for a given year, must therefore present its forecasts and analyses to the European Parliament and the Council and propose, if necessary, appropriate measures to the Council. Furthermore, the Commission should make full use of its management powers at all times to ensure compliance with the annual ceiling and, if necessary, propose appropriate measures to the Council to redress the budget situation. If, at the end of a budget year, the annual ceiling cannot be complied with as a result of the reimbursements requested by the Member States, the Commission should be able to take measures allowing, on the one hand, provisional distribution of the available budget among the Member States in proportion to their requests for reimbursement not yet paid and, on the other hand, compliance with the ceiling fixed for the year concerned. Payments for that year should be charged to the following budget year and the total amount of Community financing per Member State should be definitively established, as should compensation between Member States in order to comply with the established amount.
(17)
When implementing the budget, the Commission should operate a monthly early-warning and monitoring system for agricultural expenditure, so that, if there is a risk of the annual ceiling being exceeded, the Commission may at the earliest opportunity take the appropriate measures under the management powers at its disposal, and then, if these measures prove insufficient, propose other measures to the Council, which should act as soon as possible. In order to have a smoothly functioning system, it should allow for the comparison of actual expenditure with profiles of expenditure established on the basis of expenditure in preceding years. A monthly report by the Commission to the European Parliament and the Council should compare the evolution of the expenditure effected so far with the profiles and give an assessment of the foreseeable implementation for the remainder of the budget year.
(18)
The exchange rate used by the Commission in drawing up the budget documents which it submits to the Council should, while making allowances for the time lag between drafting and submission, reflect the most recent information available.
(19)
The rural development programmes are financed from the Community budget on the basis of commitments in annual instalments. Member States must be able to draw on the Community funds provided for as soon as they begin the programmes. A suitably restricted prefinancing system ensuring a steady flow of funds so that payments to beneficiaries under the programmes are made at the appropriate time is therefore needed.
(20)
Prefinancing apart, a distinction should be drawn between payments by the Commission to the accredited paying agencies, intermediate payments and payment of balances, and rules on their payment should be set.
(21)
To protect the Community's financial interests the Commission must be able to suspend or reduce intermediate payments in cases where expenditure has been unduly incurred. A procedure for Member States to show that their expenditure has been correct should be set up.
(22)
The automatic decommitment rule should help speed up execution of programmes and contribute to sound financial management.
(23)
In order to establish the financial relationship between the accredited paying agencies and the Community budget, the Commission should clear the accounts of these paying agencies annually. The clearance of accounts decision should cover the completeness, accuracy and veracity of the accounts but not the conformity of the expenditure with Community legislation.
(24)
The Commission, which is responsible for the proper application of Community law under Article 211 of the Treaty, should decide whether the expenditure incurred by the Member States complies with Community legislation. Member States should be given the right to justify their decisions to make payments and should have recourse to conciliation where there is no common agreement between them and the Commission. In order to give Member States legal and financial assurances as to expenditure effected in the past, a maximum period should be set for the Commission to decide which financial consequences should follow from non-compliance.
(25)
In order to protect the financial interests of the Community budget, measures should be taken by Member States to satisfy themselves that transactions financed by the Funds are actually carried out and are executed correctly. Member States should also prevent and deal effectively with any irregularities committed by beneficiaries.
(26)
As regards the EAGF, sums recovered should be paid back to this Fund where the expenditure is not in conformity with Community legislation and no entitlement existed. Provision should be made for a system of financial responsibility for irregularities in the absence of total recovery. In this respect a procedure should be established permitting the Commission to safeguard the interests of the Community budget by deciding on a partial charging to the Member State concerned of sums lost as a result of irregularities and not recovered within reasonable deadlines. In certain cases of negligence on the part of the Member State, it is justified to charge the full sum to the Member State concerned. However, subject to Member States complying with obligations under their internal procedures, the financial burden should be divided fairly between the Community and the Member State.
(27)
The recovery procedures used by the Member States may have the effect of delaying recovery for a number of years, with no guarantee that the outcome will actually be successful. The cost of implementing these procedures may also be out of proportion to the amounts which are or may be collected. Consequently, Member States should be permitted to halt recovery procedures in certain cases.
(28)
As regards the EAFRD, sums recovered or cancelled following irregularities should remain available to the approved rural development programmes of the Member State concerned as these sums have been allocated to that Member State. In order to protect the financial interests of the Community budget, provision should be made for cases where the required measures are not taken by Member States following the detection of irregularities.
(29)
In order to permit reuse of EAGF and EAFRD funds, rules are needed on assignment of the sums recovered by Member States when conformity clearance is carried out or following proceedings in the event of discovery of irregularity or negligence and for additional levies in the milk and milk products sector.
(30)
So that the Commission can fulfil its obligation to check on the existence and proper functioning of management and inspection systems for Community expenditure in the Member States, provision should be made, irrespective of the inspection carried out by Member States themselves, for checks by persons delegated by the Commission who will be able to request assistance from the Member States in their work.
(31)
Information technology needs to be used as fully as possible for producing the information to be sent to the Commission. When carrying out checks, the Commission should have full and immediate access to expenditure information recorded both in paper form and in electronic files.
(32)
A date should be set for the last payments for the approved rural development programmes for the period 2000 to 2006 financed by the European Agricultural Guidance and Guarantee Fund (EAGGF) Guarantee Section. In order to allow Member States to receive reimbursements for payments made after this date, specific transitional measures should be envisaged. These measures should also include provisions for the recovery of the advances paid by the Commission on the basis of the second subparagraph of Article 5(1) of Council Regulation (EC) No 1258/1999 of 17 May 1999 on the financing of the common agricultural policy (5) and for the amounts subjected to the voluntary modulation arrangements referred to in Articles 4 and 5 of Council Regulation (EC) No 1259/1999 of 17 May 1999 establishing common rules for direct support schemes under the common agricultural policy (6) .
(33)
A date should be set at which the Commission can automatically decommit the sums committed but not spent under the approved rural development programmes financed by the EAGGF Guidance Section where the necessary documents relating to the closure of the operations have not reached the Commission by that date. The documents which are necessary for the Commission to establish whether the measures are closed should be defined.
(34)
The Commission is responsible for managing the Funds and close cooperation between it and the Member States is provided for through a Committee on the agricultural funds.
(35)
The extent of Community financing makes it necessary for the European Parliament and the Council to be kept regularly informed by means of financial reports.
(36)
As personal data or business secrets might be involved in the application of the national control systems and the conformity clearance, the Member States and the Commission should guarantee the confidentiality of the information received in the context of these operations.
(37)
In the interests of sound financial management of the Community budget and impartiality of treatment at both Member State and farmer level, rules on the use of the euro should be specified.
(38)
Council Regulation No 25 on the financing of the common agricultural policy (7) , Council Regulation (EC) No 723/97 of 22 April 1997 on the implementation of Member States' action programmes on control of EAGGF Guarantee Section expenditure (8) and Council Regulation (EC) No 1258/1999 should be repealed. Certain Articles in Council Regulation (EEC) No 595/91 of 4 March 1991 concerning irregularities and the recovery of sums wrongly paid in connection with the financing of the common agricultural policy and the organisation of an information system in this field and repealing Regulation (EEC) No 283/72 (9) should also be deleted as this Regulation provides for their arrangements.
(39)
The measures necessary for the implementation of this Regulation should be adopted in accordance with Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission (10), with a distinction being made between those measures which are subject to the management committee procedure and those which are subject to the advisory committee procedure, the advisory committee procedure being, in certain cases and with a view to increased efficiency, the most appropriate.
(40)
The switch-over from the arrangements in the Regulations repealed to those in this Regulation could give rise to practical and specific difficulties, particularly in connection with the transition to the new arrangements, which are not dealt with in this Regulation. In order to deal with that eventuality, provision should be made for the Commission to adopt the necessary and duly justified measures. Those measures should be able to derogate from the provisions of this Regulation but only to the extent necessary and for a limited period.
(41)
As the programming period for the rural development programmes financed on the basis of this Regulation runs from 1 January 2007, this Regulation should be applicable as from that date. However, certain provisions should apply as from an earlier date.
(42)
The Court of Auditors has delivered an Opinion (11).
(43)
The Economic and Social Committee has delivered an Opinion (12),
