1. Errors in rural development spending 7 May 2015 Presentation by Robert MARKUS Head of Unit European Court of Auditors

2. Page 2 Our “DAS” audits showed the same - error levels (avg. 8,2 %) and - the same error types Specific audit with as questions: - what are the main causes of errors? - how can they be addressed? Errors in rural development spending

3. Page 3 Our audit: - analysed the results of the last 3 years of the “DAS” (a random EU wide sample of 461 EAFRD payments) - reviewed action plans and the legal basis - was published as Special Report 23/2014 Errors in rural development spending

4. Page 4 Types of errors the main drivers of the error rate were the type of beneficiary and the type of measure (and not: the MS) Errors in rural development spending

5. Page 5 Types of errors main drivers: the type of beneficiary and the type of measure Errors in rural development spending

6. Page 6 Types of errors main drivers: the type of beneficiary and the type of measure Errors in rural development spending

7. Page 7 Types of errors Errors in rural development spending

8. Page 8 Types of errors Errors in rural development spending

9. Page 9 Types of errors Errors in rural development spending

10. Page 10 Causes of error -1- -public bodies are a significant source of error because of non-compliance with public procurement rules -of the many rules, only three categories of serious breaches of procurement rules caused a significant impact on the error rate e.g. unjustified direct award without a competitive procedure -two root causes: limited experience and lack of guidance for small municipalities; beneficiaries preferring to work with specific contractors Errors in rural development spending

11. Page 11 Causes of error -2- -Non-respect of eligibility criteria for investments, in 4% (6/152) indications of intention -the measure supporting investments in food- processing facilities raises the most concerns -root cause: Member State authorities could have detected and corrected most errors affecting investment measures Errors in rural development spending

12. Page 12 Causes of error -3- -area-related aid generated almost a third of the error rate, the main cause being non-compliance with farming commitments for AE -primarily the result of non-respect of basic commitments Errors in rural development spending

13. Page 13 Causes of error -3- -root cause: low incentives for farmers to comply, a low control rate for commitments and a low sanction rate for non-compliance -in around half of the errors, the verification of commitments could have been shifted from the on-the- spot checks to administrative checks (from 5% -> 100%) Errors in rural development spending

14. Page 14 Not causes of error -1- -some measures were more prone to error, whereas others were hardly affected by error -few errors were found in “young farmers” and “LFA” which are characterised by a focused scope, lump sum payments and a small number of detailed requirements Errors in rural development spending

15. Page 15 Not causes of error -2- -for the projects audited, the rules were not unnecessarily complex and did not impose unjustified requirements on beneficiaries and Member State authorities -only limited examples of gold-plating were found, with a marginal impact on the error rate Errors in rural development spending

16. Page 16 Not causes of error -2- -on the contrary, the audit did find examples where effective rules were withdrawn -in the context of reducing the causes of error, it is important to maintain an appropriate balance between the number and complexity of rules, and the need to guarantee the legality and regularity of spending Errors in rural development spending

17. Page 17 How are the causes of error being addressed -action plan exercise by the Commission and the Member States is a step in the right direction -however: insufficient focus on preventing widespread weaknesses at EU level Errors in rural development spending

18. Page 18 How are the causes of error being addressed -the new EU legal framework may have a positive effect in addressing the causes of errors -attention needs to be given during the on- going steps of the regulatory process at Member State level, as most errors occur in the implementation of specific provisions in Member State legislation Errors in rural development spending

19. Page 19 Recommendation Analyse to what extent the characteristics of a more focused scope, limited eligibility criteria and simplified cost options can be used more widely This would fit very well with simplification and performance based controls! Errors in rural development spending

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21. Thank you for your attention. Paldies par uzmanību. Any questions? Page 21

22. Contact Details Robert MARKUS Head of Unit +352 4398 45371 robert.markus@eca.europa.eu European Court of Auditors 12, Rue Alcide De Gasperi L-1615 Luxembourg Page 22 Robert MARKUS Head of Unit