CAP paying agencies

The role of paying agencies

Paying agencies are departments or bodies of the EU countries and, where applicable, of their regions responsible for the management and control of expenditure from the two funds of the common agricultural policy (CAP) – the European agricultural guarantee fund (EAGF) and the European agricultural fund for rural development (EAFRD).

Paying agencies must execute payments to beneficiaries and provide sufficient guarantees that:

a claim is authorized for payment only after sufficient checks have been carried out to ensure compliance with EU rules¹;
payments are correctly and fully recorded in the accounts;
requested documentation is submitted within deadlines and in accordance with EU rules.

Under the principle of shared management, paying agencies execute payments under the supervision of the Commission. All elements of the paying agencies’ management and control systems are subject to checks and audits by the Commission and certification bodies under the assurance process.

¹_{Including the rules set in the CAP Strategic Plan, where relevant.}

Execution of payments

Although a paying agency may assign aspects of its work to delegated bodies, the execution of payments must be undertaken directly by the paying agency itself.

In brief, payments are executed in the following manner:

farmers and other prospective beneficiaries apply for support from the CAP budget using relevant information and online platforms provided by national administrations;
after carrying out checks, a paying agency pays the amounts due to the beneficiaries and declares those amounts to the Commission;
the Commission then reimburses the appropriate amounts to the EU countries, on a monthly basis for the EAGF and on a quarterly basis in the case of the EAFRD;
all expenditure is recorded in the paying agencies’ annual accounts and is subject to further levels of control, checks and audit under the financial clearance process.

Accreditation of paying agencies

EU countries, through a ministerial authority, grant accreditation to a paying agency if they comply with certain minimum criteria established at Union level. Although the EU countries are free to lay down additional accreditation criteria, they must comply with the criteria set out by the Commission, which are based on the COSO framework, as follows:

internal environment
control activities
information and communication
monitoring activities.

National authorities, through the audit opinions and reports drawn up by the Certification Body and other bodies, should constantly supervise the activities of a paying agency. If an agency is found to be deficient in respect of the accreditation criteria, EU countries must take action to remedy the deficiencies. This may involve placing the agency under probation or withdrawing accreditation. If an EU country does not take appropriate action, the Commission may impose financial corrections.

An EU country may accredit a single national paying agency or a number of regional paying agencies. If more than one paying agency is accredited, a coordinating body must be put in place to ensure EU rules are applied in a harmonised way and to act as a point of liaison with the Commission in particular for the transmission of the annual performance report.

Management declaration

In accordance with the accreditation criteria, the organisational structure, and the internal control systems of paying agencies must comply with a set of internal control principles, put in place by the Commission.

Paying agencies maintain thorough and accurate records of their activities during the financial year and present them to the Commission by 15 February of the following year. The director of the paying agency must present:

annual accounts: complete, accurate and true accounts for the expenditure incurred in carrying out the tasks entrusted to the paying agency, accompanied by the requisite information for their clearance by the Commission;
the annual performance report setting out key qualitative and quantitative information on the implementation of the CAP Strategic Plan and showing that the expenditure was affected in accordance with Article 37 of Regulation (EU) 2021/2116;
an annual summary of the final audit reports and of controls carried out;
a management declaration covering the completeness, accuracy and veracity of the accounts and information, as well as the proper functioning of the governance systems put in place.

When more than one paying agency is accredited in an EU country, the annual performance report will be supplied by a Coordination Body, and it shall be submitted together with a management declaration covering the compilation of the entire report

The accuracy of these records is then verified by the certification body and later by the Commission in the framework of the clearance of accounts procedure.

Protection of the Union financial interests

Protection of the Union financial interests is fundamental, and it is an obligation for the EU countries pursuant to Article 59 of Regulation (EU) 2021/2116.

EU countries are bound to adopt all laws, regulations and administrative provisions and take any other measures that are necessary to ensure the effective protection.

This objective is to be achieved through:

checks on the legality and regularity of operations financed by the EAGF and EAFRD;
effective prevention against fraud, by preventing, detecting and correcting irregularities and fraud;
penalties which are effective, proportionate and dissuasive in accordance with Union or national law, and;
the recovery of undue payments.

The protection of the financial interests must be also ensured through the set up of efficient management and control systems by EU countries that functions properly.

Checks

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

The management and control systems for each support scheme share some common features, as well as 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.

Paying agencies manage the majority of payments and checks through the integrated administration and control system (IACS), an interconnected set of databases used to assess claims and track payments. In the financial year 2022, IACS covered 79.7% of the total CAP expenditure. For IACS interventions, EU countries must set up a control and penalty system and must annually carry out administrative checks on the aid applications and payment claims to verify their legality and regularity. Those checks must be supplemented by on-the-spot checks, which may be executed remotely with the use of technology.

Moreover, for IACS expenditure, the information contained in IT databases is used for automatic crosschecks.

Both remote and on-the-spot checks verify that the beneficiaries comply with all applicable rules. The natural cycle of agricultural activities often shapes how and when the checks are carried out. For example, many on-the-spot checks to verify eligibility conditions can only take place in certain periods of the year. Measures outside the IACS may be also subject to checks after payment (ex-post controls), which are carried out by a specific control body (in the case of the EAGF) or by the paying agency itself (in the case of the EAFRD).

If a serious non-compliance is discovered on the part of a beneficiary, dissuasive penalties must be applied.

Area Monitoring System (AMS)

The Area Monitoring System (AMS) is a mandatory part of the Integrated Administration and Control System. It is a procedure of regular and systematic observation, tracking and assessment of agricultural activities and practices on agricultural areas by satellite.

As of 1 January 2023, EU countries need to operate the mandatory Area Monitoring System (AMS), which will cover area-related interventions with a view to prevent errors and assess policy performance focusing on agricultural activities. EU countries need to assess annually the quality of the AMS and where deficiencies are found, adopt appropriate remedial actions.

Legal bases

Regulation (EU) 2021/2116 – on the financing, management and monitoring of the common agricultural policy. [Article 9]

Commission Implementing Regulation (EU) 2022/128 – 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.

Commission Delegated Regulation (EU) 2022/127 - 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.