Clearance of accounts procedure
The clearance of accounts procedure allows the Commission to verify, primarily through on-the-spot inspections, whether EU countries:
- made correct use of the available funds;
- paid in conformity with EU rules;
- have well functioning management and control systems ensuring that payments to beneficiaries are regular.
The audits undertaken by the Commission as part of the clearance of accounts procedure serve a number of purposes:
- the audits protect the EU budget from irregular payments by recovering amounts unduly spent by EU countries as a result of deficiencies detected in their management and control systems;
- the audits have a remedial and preventive role by revealing deficiencies to be remedied, leading to financial corrections;
- the audits are also used to provide assurance to the Director-General for Agriculture and Rural Development about the quality of EU countries' management and control systems.
The results of the clearance procedures are published in the annual activity report of the Commission’s Directorate-General for Agriculture and Rural Development.
Financial clearance of accounts
The rules on the financing of the CAP provide for an annual financial clearance exercise covering the completeness, accuracy and veracity of the paying agencies' accounts.
By 15 February (with possible justified extension to 1 March), following the end of the financial year, EU countries are required to send the annual accounts of their paying agencies to the Commission. The annual accounts must be accompanied by an audit opinion from the certification body of each paying agency, stating whether it has obtained reasonable assurance that:
- the paying agencies’ accounts are complete, accurate and true;
- the agency's internal control procedures have operated satisfactorily;
- the expenditure for which reimbursement was requested from the Commission is legal and regular.
The Commission has until 30 April to review this information and communicate its findings to the EU countries. Where the information provided by EU countries is considered acceptable, the Commission has until 31 May to adopt a decision clearing the accounts of the paying agencies.
Conformity clearance procedure
The Commission also carries out conformity clearance audits, which check the management and control systems in individual paying agencies and provide valuable information on how effectively those systems protect EU funds.
Under the single audit approach, the conformity audits take as a starting point the work of the certification bodies when assessing EU countries’ compliance with CAP rules.
The Commission carries out over 100 audits each year, primarily in the form of on-the-spot inspections. In 2020, the Commission carried out 58 audits and opened 49 conformity procedures after desk audits in order to check that paying agencies complied with the applicable rules when making payments to beneficiaries.
In parallel with the single audit conformity missions, the Commission also carries out several missions to different certification bodies to check their audit strategies and sampling.
Recovery of funds
Where non-compliances or systemic deficiencies are found, the Commission recovers the amount misspent from the country concerned (financial corrections). The financial corrections may include payments affected within a period of 24 months before the start of the procedure.
Financial corrections are determined on the basis of the nature and gravity of the infringement and the financial damage caused to the EU.
Where possible, the amount is calculated on the basis of the loss actually caused, or on the basis of an extrapolation (usually such calculations are based on information supplied by EU countries).
If the losses to the EU budget cannot be calculated precisely, flat rates are used, which take account of the severity of the deficiencies in the national control systems to reflect the financial risk for the EU. The correction may be set at 2%, 5%, 10%, or 25% of the payment in question, or even more. There is, therefore, a strong incentive for EU countries to improve the quality of their control systems.
Where undue payments are or can be identified as a result of the conformity procedures, EU countries are required to follow up with recovery actions against the final beneficiaries.
Since 1996, when the system was modified to take its present form, a total of 68 decisions have been adopted, excluding from EU financing a sum of close to €16 billion. The average correction rate per financial year has been 1.4%.
Right of reply
The Commission addresses its observations to the concerned EU country. There is an exchange of information between the EU country and the Commission, followed by a bilateral meeting.
Before the conformity clearance decision is taken, the procedure allows the EU country to have all the significant corrections examined by a panel of independent experts (conciliation body) to reconcile the two positions.
The Commission can accept or reject the proposals formulated by the conciliation body. The procedure is closed by a formal Commission decision which can be appealed by the EU country. Currently, it is the General Court of the EU that is competent in these matters.
EU Implementing Regulation 908/2014 – laying down rules for the application of EU Regulation 1306/2013 regarding paying agencies and other bodies, financial management, clearance of accounts, rules on checks, securities and transparency [Articles 52-62]
EU Delegated Regulation 907/2014 - supplementing EU Regulation 1306/2013 with regard to paying agencies and other bodies, financial management, clearance of accounts, securities and use of euro.