Approximately 38% of the EU budget goes towards financing the CAP [see section 3.4]. Given the size of the agricultural budget, it is essential for the credibility of the CAP that proper systems are in place to ensure that these funds are spent correctly and to prevent fraud. Indeed, European taxpayers have a right to expect that all public money is spent efficiently, whether this is under national or EU budgets. As seen above, most of this expenditure is managed by the Member States, who therefore have the main responsibility for administering payments and checks on payments.
However, it is clearly the Commission’s responsibility to make sure that efficient systems and procedures are set up at national level, that the accounts presented by the Member States are correct and complete and that expenditure complies with specific rules and regulations. In this task, the Commission is assisted by the Management Committee for Direct Payments, consisting of representatives of the Member States and chaired by a representative of the Commission [Regulation 73/2009, last amended by Regulation 994/2014]. Commission auditors verify that Member States’ payment and audit systems are reliable and that they meet European standards. If the systems put into place by a Member State prove to be unsatisfactory, the Commission must, under the clearance of accounts procedure, refuse to finance all or part of the expenditure concerned. Recovery can be made for individual cases where irregularities have been found or where systematic failures are revealed. The financial consequences of irregularities are, however, borne by the Union, unless government departments of the Member States are responsible for the irregularities or incorrect payment of sums [Regulation 1306/2013, last amended by Regulations 907/2014 and 908/2014].
Fraud concerning agricultural expenditure often hits the headlines in the Member States and fuels the criticism of the CAP's opponents. In order to protect the financial interests of the Union budget, Regulation 1306/2013 provides that measures should be taken by Member States to satisfy themselves that transactions financed by the Funds are actually carried out and are executed correctly. Member States should also prevent and deal effectively with any irregularities committed by beneficiaries. So that the Commission can fulfil its obligation to check on the existence and proper functioning of management and inspection systems for Union expenditure in the Member States, provision is made, irrespective of the inspection carried out by Member States themselves, for checks by persons delegated by the Commission who are able to request assistance from the Member States in their work.
As regards the EAGF, sums recovered after the detection of irregularities should be paid back to this Fund where the expenditure is not in conformity with European legislation and no entitlement existed. A procedure permits the Commission to safeguard the interests of the Union budget by deciding on a partial charging to the Member State concerned of sums lost as a result of irregularities and not recovered within reasonable deadlines. Subject to Member States complying with obligations under their internal procedures, the financial burden should be divided fairly between the Union and the Member State. In certain cases of negligence on the part of the Member State, the full sum may be charged to the Member State concerned.
As regards the EAFRD, sums recovered or cancelled following irregularities should remain available to the approved rural development programmes of the Member State concerned as these sums have been allocated to that Member State. In order to protect the financial interests of the Union budget, provision is made for cases where the required measures are not taken by Member States following the detection of irregularities.
A Commission Regulation lays down common detailed rules for verifying the use and/or destination of products from intervention [Regulation 1130/2009, last amended by Regulation 1333/2013, see section 21.4]. In the context of the integrated administration and control system (IACS) mentioned below [see section 21.4.2] each Member State must set up a computerised data base, which must record, for each agricultural holding, the data obtained from aid applications. Moreover each Member State must manage, on the basis of maps or land registry documents or other cartographic references, an identification system for agricultural parcels as well as a system for the identification and registration of payment entitlements, allowing verification of entitlements and cross-checks with the aid applications and the identification system for agricultural parcels [Regulations 73/2009 and 146/2010].
In the context of the integrated system, the Council has established a legal framework making it possible to identify unreliable economic operators in the field of export refunds and of sales at reduced prices of products held in public storage ("black list") and to make them known to the national authorities concerned [Regulation 1469/95 and Regulation 745/96]. The Member States, in co-operation with the Commission, have introduced advanced techniques to map land surfaces and verify land use. Once satellite images and aerial photographs are placed on computer file, advanced software can be used to identify and measure individual parcels, to verify the crops grown, and even to count olive trees. The Commission is making use of remote-sensing applications, in order notably to: manage agricultural markets and ensure agro-economic monitoring of agricultural land and agricultural production [Regulation 78/2008]. The knowledge that at any time a "spy in the sky" can check a claimant’s fields acts as a powerful disincentive to fraud and irregularity.
In the case of livestock, the identification and registration system also facilitates veterinary health surveillance. Bovine animals must be identified with a number shortly after birth or entry into the EU, using tamper-proof ear-tags. Electronic animal identification may contribute greatly to the efficient traceability of animals in the EU, facilitating both sanitary and veterinary checks with a view to protecting consumers and run checks on the correctness of payments made to farmers. It may also make available data which is important for the management of the meat market, the health of the livestock and hence the health of European consumers. After the disastrous experience of the mad cow disease, there is no need to stress the importance of this last point [see sections 5.1.3 and 21.4.3].