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European Court of Auditors

European Court of Auditors. Internet : “http://www.eca.eu.int”. Integrated Administration and Control System IACS. The audit of IACS Internal Control System. Content. PART 1 : IACS Audit Subject Audit objectives and criteria Audit field and risks

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European Court of Auditors

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  1. European Court of Auditors Internet : “http://www.eca.eu.int”

  2. Integrated Administration and Control System IACS The audit of IACS Internal Control System

  3. Content PART 1 : IACS • Audit Subject • Audit objectives and criteria • Audit field and risks • Audit approach • Implementation • Main audit findings PART 2 : Reliability of IACS Inspections • Audit Objectives • Audit scope • Sampling • Implementation • Audit resources • Main audit findings

  4. The audit subject • What does IACS do ? • Why was IACS introduced ? • How does IACS work ? • What are the main features ?

  5. IACSWhat does it do ? • IACS is the main control system over payments to farmers • Over 6 million aid applications are processed at Member state level under IACS throughout the EU, for over €25 billion in 2000, representing about 64% of CAP payments • By 2004, over 80% of CAP payments will be covered, as more schemes are included under IACS and as direct payments increase after the Agenda 2000 reform • Arable crops is the biggest scheme (€16 billion) followed by premiums for beef (€4 billion) • EAGGF payments to farmers • Over 6 million aid applications are processed at Member state level under IACS throughout the EU, for over €25 billion in 2000, representing about 64% of CAP payments • By 2004, over 80% of CAP payments will be covered, as more schemes are included under IACS and as direct payments increase after the Agenda 2000 reform • Arable crops is the biggest scheme (€16 billion) followed by premiums for beef (€4 billion)

  6. EAGGF expenditure covered by IACS in %

  7. IACSMember States’ Shares

  8. Measures fully included in IACS: billion € Area aid for arable crops: 16.9 Premiums for beef and veal 3.7 Aid for sheep meat and goat meat 1.4 Extensification 0.9 Other 0.3 Total 23.2 Measures covered by IACS in 2001 (1/2)

  9. Measures covered by IACS in 1999 (2/2) • Measures for which agricultural parcels have to be cross checked with other measures in IACS: billion € • Production aid for olive oil 2.5 • Agri-environmental measures 2.0 • Premiums for tabacco 1.0 • Less favoured areas 0.9 • Aid for cotton 0.7 • Other 1.8 Total 8.9

  10. Measures covered by IACSin the future • Wine • Tomatoes • Processed citrus fruits

  11. IACSWhy and when was it introduced ? • The 1992 reform of the Common Agricultural Policy shifted emphasis away from price support mechanisms, and significantly increased the level of direct payments to farmers. This multiplied the number of payments and schemes to be administered, and was the reason why IACS was created. • IACS was established by Council Regulation 3508/92. • The implementing rules were provided for by Commission Regulation 3887/92(revised by Commission regulation 2419/2001)

  12. IACSHow does it work ? There are 5 elements of IACS to be established by Member States • a computerised database; • a land parcel identification system; • an animal identification and registration system; • aid applications; • an integrated control system.

  13. IACS Main Features: The computerised database (1 of 5) • The database should record data from aid applications for each agricultural holding for at least three years. • The database may be decentralised, as long as the systems are compatible. • In practice, there are often several systems and organisations involved, depending on the Member State’s administrative structure. • The database is essential for: payment processing, cross checking, application of sanctions (including retroactive sanctions), management information...

  14. IACS Main Features: The land parcel identification system (2 of 5) • This system identifies the location and area of agricultural land parcels and traces their ownership. • It may be based on the “cadastre” (Germany, Spain, France), or aerial / satellite photography (Ireland, Portugal, Scotland) i.e. “Geographical Information System”, or official maps (rest of UK). • It often includes information about land use (though this is not essential) • New requirement: Geographical Information Systems required in all Member States from 2005. • The identification system is essential for: payment processing, checking claimed areas, checking duplicate claims for the same parcel, checking claims for ineligible areas, carrying out on the spot inspections...

  15. IACS Main Features: The animal identification and registration system (3 of 5) • Rules initially provided by Directive 92/102: herd registers and ear tagging. • Following BSE, Regulation 820/97: adds requirements for computerised database (Directive 97/12) and animal passports. • On the spot inspections of 10%. • The system is essential for: checking the apparent eligibility of animals claimed (sex, race, age, identification), checking for duplicate claims, checking ownership...

  16. IACS Main Features: Aid application (4 of 5) • One area aid application per farmer. • Several animal premium applications possible. • Basic information on the area / animal claimed, the claimant, relevant supporting information. • Aid applications are essential for: providing the basic information on aids claimed...

  17. IACS Main Features: The integratedcontrol system (5 of 5) • An integrated system of administrative checks and on the spot inspections; • Administrative checks: • cross checks between farmers claims and parcel / animal identification databases; • cross checks between individual farmers claims; • checks on eligibility of claimed areas / animals (e.g. eligible for area aid, surface area, eligible age of animal, validity of tag number…); • checks to avoid overpayment in case of quota / base area overshoots. • On the spot inspections: • Risk based; • Minimum 5 % for areas; 10% for animals (5% with fully operational database); • May use aerial / satellite photography. • Sanctions: • Complicated sliding scale, depending on rate of over-declaration found; • Serious negligence: zero aid; • Fraud: zero aid next year too.

  18. IACS Overview of principal IACS controls

  19. Content PART 1 : IACS • Audit Subject • Audit objectives and criteria • Audit field and risks • Audit approach • Implementation • Main audit findings PART 2 : Reliability of IACS Inspections • Audit Objectives • Audit scope • Sampling • Implementation • Audit resources • Main audit findings

  20. General Audit Objective: • The audit should check that the five elements of IACS are in place in the Member States and that they enable adequate control of aid applications and effective on the spot controls

  21. Specific Audit Objectives(1/2) EU level • Has the Commission independently supervised the timely implementation of IACS by the Member States? • Has the Commission assessed the extent to which the objectives of IACS have been attained in an economic and efficient manner and eventually recommended corrective action?

  22. Specific Audit Objectives(2/2) Member States level • Have the five elements of IACS been implemented and are the data in the databases complete, valid and updated on time? • Are effective administrative controls operating, more specifically using the cross check aiming at avoiding payment for ineligible areas and animals or in case of overshoot of base areas or premium ceilings? • Do on the spot controls meet the regulatory requirements and is their impact assured by the appropriate application of risk analysis techniques and of regulatory sanctions?

  23. Content PART 1 : IACS • Audit Subject • Audit objectives and criteria • Audit field and risks • Audit approach • Implementation • Main audit findings PART 2 : Reliability of IACS Inspections • Audit Objectives • Audit scope • Sampling • Implementation • Audit resources • Main audit findings

  24. Audit field and risks Audit field • Basic information on the audited system( Measures included, organisation in the Member States, budgetary significance) • Audit scope Risks • Inherent risks • Control risks)

  25. Content PART 1 : IACS • Audit Subject • Audit objectives and criteria • Audit field and risks • Audit approach • Implementation • Main audit findings PART 2 : Reliability of IACS Inspections • Audit Objectives • Audit scope • Sampling • Implementation • Audit resources • Main audit findings

  26. Audit approach • Information available • General importance in relation with other audits

  27. Content PART 1 : IACS • Audit Subject • Audit objectives and criteria • Audit field and risks • Audit approach • Implementation • Main audit findings PART 2 : Reliability of IACS Inspections • Audit Objectives • Audit scope • Sampling • Implementation • Audit resources • Main audit findings

  28. Implementation Member States to be visited Work to be completed • in office • EU level • Member State level (first and second phase) • Audit evidence • Resources • Planning

  29. Content PART 1 : IACS • Audit Subject • Audit objectives and criteria • Audit field and risks • Audit approach • Implementation • Main audit findings PART 2 : Reliability of IACS Inspections • Audit Objectives • Audit scope • Sampling • Implementation • Audit resources • Main audit findings

  30. Weaknesses found at Member State Level Area Aid

  31. Weaknesses found at Member State Level Bovine Premiums

  32. Suckler Cow premium error rates

  33. IACS Audit Background to theReliability of IACS inspections • Conclusion in 1996 Annual Report (see PE request in the discharge procedure); • Conclusion in Special Report n° 19/1998 on BSE; • Timeliness: 2nd year after transition period • Main control tool for EAGGF expenditure and complicated system; • Frequent SOA findings ; • Special Report n° 4/2001 • Audit of Bovine identification and registration system

  34. Content PART 1 : IACS • Audit Subject • Audit objectives and criteria • Audit field and risks • Audit approach • Implementation • Main audit findings PART 2 : Reliability of IACS Inspections • Audit Objectives • Audit scope • Sampling • Implementation • Audit resources • Main audit findings

  35. Reliability of IACS InspectionsGeneral Audit Objective: • The audit should assess the reliability of inspections or on the spot controls and the use made by the Commission of the information on these controls made available by the Member States.

  36. Reliability of IACS InspectionsSpecific Audit Objectives (1/2) EU level • Do IACS inspections provide to the Commission the necessary reliable information on legality and regularity of EU expenditure covered by IACS and on the adequate implementation of IACS management procedures? • Does EU legislation provide for efficient IACS inspections and uniform application of sanctions provided for under EU legislation?

  37. Reliability of IACS InspectionsSpecific Audit Objectives (2/2) PA level • Do PAs , when selecting holdings, comply with EU legislation and Commission instructions? • Are risk analyses efficient? • Are the statistics on area aids or animal premiums forwarded to the Commission reliable? • Do national control instructions comply with EU legislation? • Do national administrative procedures, before payment of EU aid, integrate inspection findings and sanctions as applicable? • Do 2001 IACS inspection findings comply with EU legislation and are they reliable?

  38. Content PART 1 : IACS • Audit Subject • Audit objectives and criteria • Audit field and risks • Audit approach • Implementation • Main audit findings PART 2 : Reliability of IACS Inspections • Audit Objectives • Audit scope • Sampling • Implementation • Audit resources • Main audit findings

  39. Reliability of IACS InspectionsAudit scope • Commission : legislation, reports (clearance of accounts, certifying bodies, aerial photography or satellite imaging, specific IACS, internal evaluation...), consolidated statistics • 15 Paying Agencies in 10 Member States (Belgium, Denmark, Germany, Spain, France, Ireland, Italy, The Netherlands, Portugal, Sweden): systems analysis, internal audit reports, sampling, national instructions, administrative procedures before payment • 90 inspection re-performances : 45 for area aid and 45 for animal premiums:

  40. Content PART 1 : IACS • Audit Subject • Audit objectives and criteria • Audit field and risks • Audit approach • Implementation • Main audit findings PART 2 : Reliability of IACS Inspections • Audit Objectives • Audit scope • Sampling • Implementation • Audit resources • Main audit findings

  41. Reliability of IACS InspectionsSampling • Sampling requirements : random and risk based • area aid : 5 % (min 4 % risk based & min 1 % random) • animal premiums : • if 10 % (min 8 % risk based & min 2 % random) • if 5 % (min 4 % risk based & min 1 % random) • Reference population : • aid applications - random sample in 16 Paying Agencies in 10 Member States as selected by MUS for SOA EAGGF excluding Greece (reliability of administrative controls) and United Kingdom (foot and mouth disease) • 45 inspections on area aid and 45 inspections on animal premiums MUS sampled

  42. Content PART 1 : IACS • Audit Subject • Audit objectives and criteria • Audit field and risks • Audit approach • Implementation • Main audit findings PART 2 : Reliability of IACS Inspections • Audit Objectives • Audit scope • Sampling • Implementation • Audit resources • Main audit findings

  43. Reliability of IACS Inspections Implementation • Timing • APM adopted on 19septembre 2002 • audit missions to Member States : November 2002 to April 2003 • SOA Specific appraisal timing for Annual report 2002 • Internal delegation between EAGGF Sectors

  44. Content PART 1 : IACS • Audit Subject • Audit objectives and criteria • Audit field and risks • Audit approach • Implementation • Main audit findings PART 2 : Reliability of IACS Inspections • Audit Objectives • Audit scope • Sampling • Implementation • Audit resources • Main audit findings

  45. Reliability of IACS InspectionsAudit resources • 15 auditors • 300 man x weeks (110 in 2002 and 152 in 2003) • 80 man x weeks on mission in the Member States (30 in 2002 and 50 in 2003)

  46. Content PART 1 : IACS • Audit Subject • Audit objectives and criteria • Audit field and risks • Audit approach • Implementation • Main audit findings PART 2 : Reliability of IACS Inspections • Audit Objectives • Audit scope • Sampling • Implementation • Audit resources • Main audit findings

  47. Reliability of IACS InspectionsMain findings • Reliability of on the spot inspections • Adequacy of reporting of findings (for SOA or clearance of accounts) • Systems weaknesses • Interpretation guidelines • Commission use of findings

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