CLEARANCE OF ACCOUNTS IN RURAL DEVELOPMENT PROGRAMMES

RICHARD CROFT

Main messages

Financing of CAP brought under a common regulatory framework via Council Regulation 1290/2005

2 new Funds created: EAGF+EAFRD Annual financial clearance of accounts

procedure applies to both Many features are similar to those under “old”

EAGGF Guarantee rules

Key Areas

The new overall framework (2) Features common to “old” and new rules (2) Overview of information flows Key new features of financial clearance

applying specifically to EAFRD (7) A brief overview of the conformity clearance

process (4) Final general principles

The new overall framework: Legislation

Article 30 of Council Regulation (EC) No. 1290/2005 (replaces R.1258/99)

Article 10 of Commission Regulation (EC) No. 885/2006 (replaces R. 1663/95)

7 new Commission Guidelines

The new overall framework: the 7 Guidelines

10 “old” Guidelines have now been replaced by 7 new ones – compliance is expected

Guidelines 1 (Recoveries), 2 (Accreditation) and 4 (Statement of Assurance) are of key interest to MS

Guidelines 3 (Audit Strategy), 5 (Model Report), 6 (Certificate) and 7 (Certifying Body’s opinion on the Statement of Assurance) concern mainly the CBs

Financial clearance: features common to old EAGGF Guarantee rules – R. 1290/2005

Commission Decision by 30 April of FY n+1 covers the completeness, accuracy and veracity of the annual accounts submitted

Financial clearance: features common to old EAGGF Guarantee rules – R. 885/2006

Communication to MS of our findings (“31st March letters”) and the treatment of disjoined accounts

Certifying Bodies - the issue of their report and certificate (Art 5)

The PA’s annual accounts (Art 6) Transmission of documentation (by, where

applicable, Co-ordinating Bodies – Art 7)

Payment Data

CATSdatabase

Reconciliation

X-tabledata

Yearly

MonthlyDeclaration(table 104) AGREX

AnnualDeclaration

Yearly Summary

Totals MonthlyDeclarations

Yearly Summary

Monthly Summary(FEAGA)

COMMISSION DG-AGRIMEMBER STATE

Unit I4

Unit J1

Paying Agency

Coordinating BodyAnnual DeclarationMonthly DeclarationQuarterly DeclarationX-table data

COMBOdatabase

Financialcorrections

Financial andCompliance Audits

Clearance Procedure

Unit F2

RDISQuarterly

Declaration

Totals QuarterlyDeclarations

Yearly Summary

Quarterly Summary(FEADER)

Annual Declaration+ X-table aggregates

SFC2007

New features of financial clearance (1) - Accounting

Rural development expenditure covered under a separate fund (EAFRD) for clearance purposes

Each PA’s accounts must distinguish between EAGF and EAFRD expenditure (Art 2(1) of Commission Regulation (EC) No. 883/2006)

Expenditure paid to beneficiaries prior to approval of RDPs (even if not yet part of a quarterly declaration) must be accounted for in the PA’s books

New features of financial clearance (2) – Annual declarations

EAFRD expenditure should be summarised by programme and measure

Form and content of the annual declaration file – see Annex II of R. 1042/2007 and Annex IV

Table of differences between total annual expenditure and the sum of the quarterly declarations – see Annex IV

New features of financial clearance (3) - Debtors

Compilation of Tables 3 and 4 (EAFRD irregularities: administrative and judicial procedures respectively) and 6, as per Annex III of R.885/2006

Tables 3, 4 and 6 are the EAFRD counterparts to Tables 1, 2 and 5 under EAGF (provided as part of the FY2006 clearance exercise)

Reporting as per Guideline on recoveries (No.1) – modified for FY 2007

New features of financial clearance (4) – The Statement of Assurance

Requirement for PA directors to sign a statement of assurance (“SoA” - see Annex II of R. 885/2006)

Guideline no.4 gives details Certifying Bodies must give an opinion on

the SoA (Art 5(4)(b)): Guideline no.7 provides further information as to content/format

New features of financial clearance (5) – Certifying Bodies’ auditing and reporting

Guidelines 2, 3 and 5 are interconnected (assessment of internal control system, the audit strategy and reporting of results)

IACS and non-IACS expenditure to be evaluated/reported on separately (3 EAFRD populations including debts)

Materiality raised from 1% to 2% of T104/population value

The audit report has two main sections: EAGF and EAFRD

New features of financial clearance (6) – Certifying Bodies’ audit certificates

Separate audit opinions required for each Fund CBs’ certificates have been expanded to include a

statement on whether the PA’s internal control procedures have operated satisfactorily (Art 5(3) of 885/2006) – this must also be done separately for EAGF and EAFRD, unless both opinions are unqualified

Guideline no.6 provides options and formats

New features of financial clearance (7) – Submission of information

Submission date advanced from 10 February to 1 February (Art 7(2) of R.885/2006)

Co-ordinating Bodies must send a synthesis of all SoAs and certificates by 15 February (Art 7(5))

Conformity clearance (1) - overview

Rules for EAFRD are the same as for those relating to EAGF, i.e. Art 31 of R.1290/2005 and Art 11 of R.885/2006

The aim is to exclude from Community financing expenditure incurred in a way that has infringed Community rules

Conformity clearance (2) – the “24 months” rule

Under Article 31(4) of 1290/2005, financing may not be refused for:

- multi-annual expenditure where the final obligation on the recipient occurs more than 24 months before Art 11 letter- EAFRD payments (but not multi-annual) by the paying agency made more than 24 months before the Art 11 letter

Not applicable to irregularities, national aids and infringements (see Art 31(5))

Conformity clearance (3) – initial steps

Communication Art 11 by Commission (findings, corrective measures)

MS reply 2 months after receipt (possible extension)

Bilateral meeting MS communicates all the information within 2

months of the date of receipt of the bilateral minutes (possible extension)

Formal communication (COL); evaluation of expenditure to be excluded

Conformity clearance (4) – further steps

Conciliation Body Final letter from Commission Correction then feeds into Commission (ad-hoc)

Decision New information: only admissible if it helps a

better estimate of the financial damage, and provided that the late transmission is justified due to exceptional circumstances

Final general principles

Only expenditure declared by accredited PAs can be reimbursed (Art 10 of R.1290/2005)

Any activities not previously accredited under R.1663/95 (e.g. ex-EAGGF Guidance RD) must be formally accredited (new Act) by 16 October 2007 (Art 17(1) of R.885/2006)

Thank you for your attention!