Danish Agrifish Agency Centre for Payments Presentation by Mikael Jonsson

1. Danish Agrifish AgencyCentre for PaymentsPresentation byMikael Jonsson

2. Revision av landsbygdsfonderna i Danmark SEFI-rådsdag 16 oktober 2014

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4. Centre for Payments • 30 employees, 3 managers and 1 head of office • Main tasks: • Accreditation, EU-funds committee for agriculture and Irregularities • Payments, debt administration • Guarantees, transfer of payments and central registration of customers • Cooperation agreements with delegated bodies • Minimize the risk of financial corrections through quality assurance New! • Coordination of audit visits • Annual accounts • Mikael Jonsson, academic staff: Control Statistics and reporting to the Commission, attend meetings in the Agricultural Funds Committee in Brussels; Director’s Statement of Assurance, Annual Accounts. Titel

5. In Financial Year 2013 the Danish AgriFish Agency disbursed a total of 1.09 billion EUR paid to 55,000 beneficiaries (FY 2013) from three EU funds: • Direct area based support: 0.93 billion EUR from the EAGF • Rural development support: 0.13 billion EUR including both EAFRD and national co-financing • Support for the fishery sector: 0.03 billion EUR from EFF Approx. 120 active subsidy schemes Titel

6. Landdistriktsprogrammet (LDP) • Arealstödet gäller här i huvudsak stöd till miljövenligt jordbruk (MVJ), som i Danmark handlar särskilt om att hålla betesmarker öppna (grasslands på engelska) men arealdelen innehåller också stöd till våtområden, omläggningsstöd till ekologiskt jordbruk osv. • Projektstödet innehåller initiativer för att stödja allt från Local Action Groups (LAG), investeringsprojekt, kursverksamhet, innovation, demonstrationsprojekt etc. för att skapa liv på landet. Titel

7. Audit authorities • National Audit • Internal audit • National audit • Certifying audit • EU Audit • European Court of Auditors • Commission Titel

8. Increased Error rates in the context of the Danish Rural Development Programme • Error rates reported by the Danish authorities through the official control statistics • The residual error rate calculated for the Annual Activity Report of DG AGRI* *an extrapolation of the error rate found in the random part of the OTSC sample towards the overall population/expenditure. (The residual error rate includes errors commited both at the level of the beneficiary and at the level of the paying agency). Titel

9. Commission Annual Activity Report (AAR): Comparison between residual ER for Rural Development Programmes for FY 2013 Titel

10. History of audits regarding rural development in Denmark: • Audit from the European Court of Auditors in May 2011: Audit of control and monitoring systems regarding work of managing authorities regarding Rural Development project support (EAFRD) . • Beginning of 2012 the European Court of Auditors conducts an audit on the annual auditing work of our Certifying Body (Deloitte) regarding Rural Development Project Support. Found major weaknesses. • Therefore, in connection to the annual audit of financial year 2012 our Certifying Body (Deloitte) conducts and in depth audit of the rural development support, i.e. a critical approach which means that they go through each and every invoice of a large sample (110 samples) with a level of detail that we have not been used to before. Found major weaknesses.

11. History of audits regarding rural development in Denmark (continued): • Our Certifying Body (Deloitte) reports a very high error rate (8 %) in their random sample for financial year 2012 and make a reservation regarding the accounts for rural development. • Our Certifying Body (Deloitte) again reports an error rate above the allowed limit (2,1 %) in their random sample for financial year 2013 and they again make a reservation regarding the accounts for rural development. Titel

12. History of audits regarding rural development in Denmark (continued): • Based on findings of ourCertifying Body, presently the Commission has suspendedouraccounts for Rural Development for bothfinancialyear 2012 and 2013. In conclusion: • Too weak administrative controls and on-the-spot controls for rural developmentprojectbased support at the level of the Danish Paying Agency. • Too manyerrors at the level of the beneficiariesfor the rural developmentareabased support. Titel

13. Audit findings regarding rural development in Denmark • Rural developmentprojectbased support: Weaknessesregardingdocumentation of reasonablecosts (price lists), EU tenderingrules (quotations), documentation of costs (invoices). • Rural developmentareabased support: Grasslands – in the borderzonebetween nature and agriculture. Weaknessesrelating to control of nationally set rulesregarding management parameters (eligibilitycriteria) for grasslands Titel

14. Corrective Actions regarding project based Rural Development support (2007-2013) • In general: Improved internal guidelines, extensive check-lists, staff training, anti-fraud strategy developed in 2013 • Admin control of costs: Moved away from auditors statements regarding compilations of project costs to 100% admin controls of all invoices etc. • Physical controls: 4 eyes principle 30% budget increase for check of documentation of costs!!! Titel

15. Corrective Actions regarding project based Rural Development support (2014-2020) • Simplified support schemes which are easier to understand. • Reduced number of support schemes. Titel

16. Corrective Actions regarding area based Rural Development support (2007-2013) • Improved more detailed IT-validations in new IT system. • Clearly focussed information to beneficiaries regarding managment options for grass lands: Beneficiaries are thus promted to actively choose between different management options regarding grass lands (e.g. low dense grass cover or a defined stocking rate of minimum 1,5 animals) which will later be checked for during the on-the-spot controls. Titel

17. Corrective Actions regarding area based Rural Development support (2014-2020) • Simplified design of support schemes, especiallyregardinggrass lands, with fewerconditions to fulfill and new more proportionate system for sanctionsthatwillbe more differentiateddepending on the type of infringement. Titel

18. Observations/Perspectives - In the light of suspended annual accounts for rural development for 2 consecutive years: • There is MUCH general focus from Ministerial to Director’s level and throughout organisation of importance of reducing ER both at the the beneficiary’s level as well as at administrative level at the paying agency* • Increasing controls regarding rural development project based support translates into increased costs of controls. This raises some serious concerns. Referring to our own investigations of costs/benefits of controls: • Administrative costs of 18 Euro Cents per disbursed Euro (EU and national co-financing) for area based support schemes under rural development • Administrative costs of 10 Euro Cents per disbursed Euro for project based support schemes under rural development Titel

19. Observations/Perspectives - Scope for simplification? • We are following discussions on standard costs with great interest. However, in general, in Denmark we are not convinced that this will be the ”silver bullet/panacea” put forward by the Commission which will achieve the combined goals of simplification and reduced costs of controls and decreased error rates for the Rural Development Project based support. Titel