Assurance and audit

Ensuring the correct payment of CAP funds

Financial support from the CAP stems from two principal funds – the European agricultural guarantee fund (EAGF) and the European agricultural fund for rural development (EAFRD). The European Commission ensures that a system is in place to provide reasonable assurance that these funds are spent properly, and that any irregular payments can be detected and recovered.

Declaration of assurance

All EU expenditure under the CAP is subject to a declaration of assurance from the European Commission’s Director-General for Agriculture and Rural Development. This declaration states that:

• CAP funds have been used for their intended purposes;
• expenditure has complied with the principles of sound financial management;
• the control procedures in place provide necessary guarantees on the legality and regularity of all transactions.

The declaration is published every year in the department’s annual activity report, along with a complete breakdown of spending activities under the CAP.

A comprehensive management and control system

By issuing a declaration of assurance, the Director-General confirms that a comprehensive management and control system is in place for CAP expenditure. This system is composed of four levels:

• sound financial management and internal controls in EU countries;
• detailed checks carried out in advance of payments or that basic union requirements are complied with;
• audits and reviews from independent certification bodies;
• audits and clearance of accounts from the European Commission.

Single audit approach

The management and control system for CAP funds operates under a single audit approach, in which each level draws upon the assurance provided by other levels. This approach allows the Commission to audit the work of the paying agencies and certification bodies in a dynamic and cost-effective manner, ensuring:

• effective detection of the sources of errors;
• governance systems that function properly;
• the implementation of remedial actions/action plans.

Taken together, these four levels and the results they produce allow the Commission to obtain reasonable assurance that taxpayers’ money is spent correctly, as laid out by EU law.

Sound management and internal control

Under shared management, EU countries are responsible for implementing and controlling the various schemes under CAP legislation, while the Commission ensures that they carry out their work properly.

EU countries execute payments to farmers and other beneficiaries through national or regional paying agencies. Assurance on the sound management of CAP funds is obtained through:

• paying agencies’ compliance with detailed accreditation criteria set at EU level;
• a management declaration from the director of the paying agency, accompanied by the complete accounts;
• in the context of the expenditure under the CAP Strategic Plans, correspondence between expenditure and realized outputs. 

Checks

For each support scheme financed by the EAGF and EAFRD, paying agencies undertake a rigorous system of checks.

The management and control systems for each support scheme share some common features and follow special rules tailored to the specificities of the scheme. The systems generally provide for systematic checks which target, inter alia, the areas where the risk of errors is the highest. EU countries must ensure that a level of checks needed for an effective management of the risks to the financial interest of the Union is carried out. The relevant authority must draw its check sample from the entire population of applicants comprising, where appropriate, a random part and a risk-based part.

For most payments and checks, paying agencies operate the integrated administration and control system (IACS), an interconnected set of databases that can be applied to a number of support schemes. For the expenditure under IACS, paying agencies must carry out administrative and on-the-spot checks.

For the expenditure outside the CAP Strategic Plans (e.g. expenditure under Regulation (EU) 2022/2117) and the EAFRD 2014-22 expenditure, paying agencies must carry out:

• exhaustive administrative controls of 100% of the aid applications;
• on-the-spot checks of a sample of transactions, ranging between 1% and 100%, depending on the risk associated with the scheme in question;
• cross-checks with other databases, where considered appropriate.

Certification bodies

Certification bodies are independent auditors, appointed at national level according to EU specifications. The role of these bodies is to verify and certify the activities of paying agencies.

Each year, the certification bodies deliver an opinion, drawn up in accordance with internationally accepted audit standards, covering whether:

• the accounts of the paying agencies give a true and fair view;
• the Member States' governance systems put in place function properly;
• the performance reporting on output indicators for the purposes of the annual performance clearance referred to in Article 54 of Regulation (EU) 2021/2116 and the performance reporting on result indicators for the multiannual performance monitoring referred to in Article 128 of Regulation (EU) 2021/2115, is correct;
• the expenditure for the measures laid down in Regulations (EU) No 228/2013, (EU) No 229/2013 and (EU) No 1308/2013 and in Regulation (EU) No 1144/2014 (i.e. expenditure outside the CAP Strategic Plans) for which reimbursement has been requested from the Commission is legal and regular.

Certification bodies also verify the paying agencies’ compliance with accreditation criteria and the management declarations.

The audit work of the certification bodies is a key element of assurance for CAP expenditure, providing the basis for the subsequent auditing work of the Commission.

Commission audits and clearance of accounts

Under the single audit approach, the Commission takes as a starting point the work of the certification bodies. In order to determine if the work is reliable, the Commission also audits the work of certification bodies.

As a final level of assurance, the Commission undertakes a clearance of accounts procedure, consisting of:

• an annual financial clearance of accounts, which covers the completeness, accuracy and veracity of the paying agencies' accounts;
• an annual performance clearance, which covers the correspondence of the expenditure under the CAP Strategic Plans and the realized outputs for the financial year in question;
• a multi-annual conformity procedure, involving conformity audits to check the governance systems of the EU countries and to assess how effectively those systems protect the EU budget..

Under the single audit approach, the Commission takes as a starting point the work of the certification bodies. The Commission also audits the work of certification bodies.

If risk of irregular expenditure is detected, the Commission covers the risk of financial losses to the EU budget by applying financial corrections. Financial corrections are determined on the basis of the gravity of the deficiency, also taking into account the nature of those deficiencies and the financial damage caused to the EU.

European Court of Auditors

The European Court of Auditors is tasked with checking spending made by the EU and EU countries. It conducts regular audits of EU funding mechanisms and spending, including legality and regularity, as well as performance audits to make sure that money is spent as it should be and that the EU’s internal systems of control are correctly designed.

Protecting against fraud

In order to better protect the budget of the CAP against fraud, the European Commission has put in place a specific anti-fraud policy.

The anti-fraud policy's main objectives are to:

• raise fraud awareness in EU countries and within the Commission;
• reinforce fraud prevention;
• reinforce fraud risk assessment;
• develop fraud detection capabilities;
• give guidance to EU countries for fraud prevention and detection;
• reinforce cooperation with the European Anti-Fraud Office (OLAF).

The anti-fraud strategy underpins the principles of sound financial management and good governance of the CAP budget by EU countries and the European Commission.

OLAF

OLAF is the EU’s anti-fraud body; it has the power to investigate any suspected instances of fraud, corruption or serious misconduct within either the EU institutions or beneficiaries of EU funds. Reports to OLAF can be made anonymously and in any of the EU’s official languages.

Legal basis

Regulation (EU) 2021/2116 – on the financing, management and monitoring of the common agricultural policy

Commission Implementing Regulation (EU) 2022/128 – laying down rules for the application of Regulation (EU) 2021/2116 on paying agencies and other bodies, financial management, clearance of accounts, checks, securities and transparency

Commission Delegated Regulation (EU) 2022/127 – supplementing Regulation (EU) 2021/2116 with rules on paying agencies and other bodies, financial management, clearance of accounts, securities and use of euro