Agriculture in the EU – financing, managing and monitoring rules

SUMMARY OF:

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

WHAT IS THE AIM OF THE REGULATION?

One of the basic acts of the European Union’s (EU) common agricultural policy (CAP), this regulation lays down rules for financing, management and monitoring under the two main CAP funds.

KEY POINTS

Scope

This regulation sets out rules covering:

the financing of expenditure under the CAP;
the management and control systems to be put in place by the EU Member States;
clearance and conformity procedures.

Funds financing the common agricultural policy

€387 billion in funding has been allocated to the CAP for the 2021–2027 period. This will come from two different funds:

the European Agricultural Guarantee Fund (EAGF), which has been set at €291.1 billion (in current prices) and mainly finances:
- direct payments to farmers and sectoral interventions (Regulation (EU) 2021/2115), and
- agricultural market support measures (Regulations (EU) Nos 1308/2013 – see summary, 228/2013 – see summary and 229/2013 – see summary);
the European Agricultural Fund for Rural Development (EAFRD), which amounts to €95.5 billion (including €8.1 billion from the NextGenerationEU recovery instrument to help address the challenges posed by the COVID-19 pandemic) and co-finances national rural development programmes set up by Member States under Regulation (EU) No 1305/2013 (see summary).

In addition, the funds finance other support activities, such as:

information and promotion measures for agricultural products;
preparatory, monitoring, administrative and technical assistance activities.

Governance structure

Member States designate the governance bodies for the CAP, namely the following.

Competent authority. At ministerial level, responsible for:
- issuing, reviewing and withdrawing accreditation of paying agencies;
- designating and then issuing, reviewing and withdrawing the accreditation of the coordinating body.
Paying agency. Member States’ departments or bodies that:
- are responsible for the management and control of expenditure;
- must comply with rules set out by the European Commission.
Coordinating body. To be set up when a Member State has more than one paying agency. It is charged with a number of tasks, including:
- collecting and sending information to the Commission;
- providing the Commission with an annual performance report;
- promoting the common application of EU rules.
Certification body. A public or private audit body that provides an opinion, drawn up under internationally accepted audit standards, establishing whether:
- the paying agency’s accounts 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 this regulation and the performance reporting on result indicators for the multiannual performance monitoring referred to in Article 128 of Regulation (EU) 2021/2115, demonstrating that Article 37 of this regulation is complied with, are correct;
- the expenditure for the measures laid down in Regulations (EU) Nos 228/2013, 229/2013, 1308/2013 and 1144/2014 (see summary) for which reimbursement has been requested from the Commission is legal and regular.

Financial management

The regulation sets out rules for the financial management of both funds, including:

for the EAGF:
- budgetary discipline, including the budget ceiling, agricultural reserve, financial discipline, budgetary discipline procedure and a monthly early warning and monitoring system,
- financing of expenditure, including the procedure for monthly payments;
for the EAFRD:
- financing rural development programmes under the CAP strategic plan,
- financial contribution to interventions for rural development, including pre-financing arrangements, interim payments, payments of the balance and automatic decommitment.

Clearance of accounts

Checks. The Commission will carry out checks in Member States, including checking whether:
- administrative practices comply with EU rules;
- the expenditure falling within the scope of Article 5(2) and Article 6 of this regulation and corresponding to the interventions referred to in Regulation (EU) 2021/2115 has a corresponding output as reported in the annual performance report;
- the expenditure corresponding to the measures laid down in Regulations (EU) No 228/2013, (EU) No 229/2013, (EU) No 1308/2013 and (EU) No 1144/2014 has been effected and checked in accordance with applicable EU rules;
- the work of the certification body is carried out in accordance with Article 12 and for the purposes of Section 2 of Chapter II, Title II;
- the paying agency complies with the minimum conditions for the accreditation laid down in Article 9(2) and the Member State correctly applies Article 9(4);
- the CAP strategic plan is implemented properly;
- the action plans are correctly implemented.
Access to information and documents. Member States should make all necessary information and documents available to the Commission.
Annual financial clearance. The Commission adopts implementing acts containing its decision on the completeness, accuracy and veracity of the annual accounts submitted by accredited paying agencies.
Annual performance clearance. The Commission adopts implementing acts determining the amounts to be reduced from EU financing in case expenditure under the CAP strategic plans does not have a corresponding output as reported in the annual performance report.
Conformity procedure. Where expenditure has not been effected in conformity with EU law, the Commission will determine the amount to be excluded from EU financing.

Controls

To ensure that support is correctly allocated to beneficiaries, Member States are required to set up efficient management and control systems.
Controls by national authorities include systematic checks of areas where the risk of error is highest.
For certain payments, Member States must operate a system for the management and control of payments to farmers, the integrated administration and control system.
There are specific rules on scrutinising the commercial documents of paying agencies or beneficiaries (or their representatives) relating directly or indirectly to the EAGF financing system to check whether transactions in the system have actually been carried out and have been executed correctly. These do not apply to measures covered by the integrated administration and control system.

Penalties

In addition to the non-payment of or withdrawal of payment from beneficiaries who do not meet eligibility requirements, commitments or other obligations, the regulation requires Member States to impose administrative penalties on them, if relevant.
The regulation requires Member States to set up a system to apply administrative penalties for those failing to comply with social conditionality rules linked to health, safety and employment conditions.

Common rules

The regulation also sets out a number of common rules covering issues such as:

the information submitted to the Commission by Member States and how it is used;
the use of the euro and the exchange rate used;
the transparency requirement to publish the names of the beneficiaries, except those receiving very small amounts (€1,250 or less, depending on the Member State);
means for the Commission to ensure expenditure has been carried out according to EU rules – including the power to reduce and suspend payments.

FROM WHEN DOES THE REGULATION APPLY?

This regulation will apply from 1 January 2023.
It repeals Regulation (EU) No 1306/2013. However, certain aspects of that regulation will continue to apply.
Amending Regulation (EU) 2020/2220 allows for the continued application of the rules under the 2014–2020 CAP framework and ensures the continuity of payments to farmers and other beneficiaries of support from the EAGF and EAFRD in the years 2021 and 2022 until the date of application of the new legal framework starting on 1 January 2023.
- For each of the years 2021 and 2022, the reserve is set at €400 million (at 2011 prices) and falls under Heading 3 of the multiannual financial framework as set out in annex to Regulation (EU, Euratom) 2020/2093 (see summary).

BACKGROUND

For further information, see:

Common agricultural policy (European Commission).

MAIN DOCUMENT

Regulation (EU) 2021/2116 of the European Parliament and of the Council of 2 December 2021 on the financing, management and monitoring of the common agricultural policy and repealing Regulation (EU) No 1306/2013 (OJ L 435, 6.12.2021, pp. 187–261).

Successive corrections to regulation (EU) 2021/2116 have been incorporated in the original text. This consolidated version is of documentary value only.