CLEARANCE OF ACCOUNTS IN RURAL DEVELOPMENT PROGRAMMES

1. CLEARANCE OF ACCOUNTS IN RURAL DEVELOPMENT PROGRAMMES RICHARD CROFT

2. 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

3. 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

4. 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

5. The new overall framework: the 7 Guidelines 10 “old” Guidelines have now been replaced by 7 new ones – compliance is expected Guidelines 1 (Recoveries), 2 (Accreditation) and 4 (Statement of Assurance) are of key interest to MS Guidelines 3 (Audit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 G2 – sets out the roles and responsibilities of each body, how the PA’s internal control system is to be evaluated (the matrices are also recommended for assessments by the Competent Authority and the pre-accreditation auditor, as well as the Certifying Bodies), and gives guidance to PAs in certain areas (delegation, debts, advances & securities).G2 – sets out the roles and responsibilities of each body, how the PA’s internal control system is to be evaluated (the matrices are also recommended for assessments by the Competent Authority and the pre-accreditation auditor, as well as the Certifying Bodies), and gives guidance to PAs in certain areas (delegation, debts, advances & securities).

6. 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

7. 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)

8. This overview divides into the MS on the left, and Commission on the right. MS section subdivided between PA and Cobody. Commission part divided between F2 (EAFRD), I4 (EAGF) and J.1 (CATS, reconciliations, audits). This overview divides into the MS on the left, and Commission on the right. MS section subdivided between PA and Cobody. Commission part divided between F2 (EAFRD), I4 (EAGF) and J.1 (CATS, reconciliations, audits).

9. 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

10. 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 1) Form and content of the annual declaration file and the way to communicate it is stated in Annex II of the very recent "X-Table Regulation" (EC) No 1042/2007 of 21/08/2007 (published in OJ, L239 of 12/09/2007, p. 3). The expenditure of the EAFRD (F106) should be summarised by programme and measure using F109. The structure of the EAFRD budget codes (F109) is stated in Annex IV. 2) The table of differences in respect of EAFRD should be communicated based on the same system as EAGF, but of course considering the structure as mentioned above (i.e. Commission Regulation No 1042/2007 of 12.9.2007, Annex IV, EAFRD budget codes (F109)). 1) Form and content of the annual declaration file and the way to communicate it is stated in Annex II of the very recent "X-Table Regulation" (EC) No 1042/2007 of 21/08/2007 (published in OJ, L239 of 12/09/2007, p. 3). The expenditure of the EAFRD (F106) should be summarised by programme and measure using F109. The structure of the EAFRD budget codes (F109) is stated in Annex IV. 2) The table of differences in respect of EAFRD should be communicated based on the same system as EAGF, but of course considering the structure as mentioned above (i.e. Commission Regulation No 1042/2007 of 12.9.2007, Annex IV, EAFRD budget codes (F109)).

11. 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

12. 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

13. 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

14. 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

15. 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))

16. 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

17. 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))

18. 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

19. 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

20. 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)

21. Thank you for your attention!