The role of paying agencies

A paying agency is the dedicated department or body of an EU country 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:

• the admissibility of claims and compliance with EU rules are checked before payment is authorised;
• 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 financial assurance process.

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 detailed checks on beneficiaries, a paying agency pays the amounts due 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 assurance process.

Accreditation of paying agencies

EU countries grant accreditation to a paying agency based on detailed criteria set out by the Commission, which are based on the COSO framework. The criteria are used to determine the agency’s:

• internal environment and control activities
• provision of information and communications
• monitoring activities.

National authorities 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.

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:

• a management declaration covering the completeness, accuracy and veracity of the accounts, the proper functioning of the internal control systems based on objective criteria, and the legality and regularity of the underlying transactions;
• 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;
• control statistics: an annual summary of the final audit reports and of controls carried out, including an analysis of any errors or weaknesses identified in systems, and any corrective action to be taken.

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.

Checks and controls

Before making payments, paying agencies undertake a series of administrative and on-the-spot checks.

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 2020, IACS covered 82.9% of total CAP expenditure.

Measures outside the IACS are 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).

Countries provide detailed information on their control procedures and the control results to certification bodies and the Commission. If checks reveal a high number of irregularities, additional controls must be carried out. If serious non-compliance is discovered on the part of a beneficiary, dissuasive penalties must be applied.

Administrative checks

Each support scheme financed by the EAGF or EAFRD is subject to a system of exhaustive administrative controls. Paying agencies carry out formalised documentary checks on all applications to verify that they comply with the terms under which aid is granted. 100% of aid applications must be checked before payments are made.

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

On-the-spot checks

Paying agencies must also perform on-the-spot checks on a random and risk-based sample of beneficiaries - at least 5% in the case of most schemes (up to 100% for some measures). These checks are carried out by the paying agency’s inspectors and can take the form of:

• on-the-spot visits to agricultural holdings or investments in receipt of aid;
• checks carried out by remote sensing (such as a review of recent satellite images of parcels) or use of other technology, to be complemented by rapid field visits in cases of doubt.

The Commission has adopted a number of legal provisions and provided technical guidance that enables EU countries to take advantage of freely available satellite data from the Copernicus programme. Using this data, EU countries can monitor areas where support is claimed as an alternative to on-the-spot checks.

Both remote and on-the-spot checks verify that the final 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.

Legal bases

Regulation (EU) 1306/2013 – on the financing, management and monitoring of the common agricultural policy. [Articles 111-114]

Commission Implementing Regulation (EU) 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]

Commission Delegated Regulation (EU) 907/2014 - supplementing EU Regulation 1306/2013 regarding paying agencies and other bodies, financial management, clearance of accounts, rules on checks, securities and transparency.