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EXPLANATORY MEMORANDUM

1.	CONTEXT OF THE PROPOSAL

The Commission proposal for the Multiannual Financial Framework (MFF)
for 2014-2020 (the MFF proposal) sets the budgetary framework and main
orientations for the Common Agricultural Policy (CAP). On this basis,
the Commission presents a set of regulations laying down the legislative
framework for the CAP in the period 2014-2020, together with an impact
assessment of alternative scenarios for the evolution of the policy. 

The current reform proposals are based on the Communication on the CAP
towards 2020 that outlined broad policy options in order to respond to
the future challenges for agriculture and rural areas and to meet the
objectives set for the CAP, namely 1) viable food production; 2)
sustainable management of natural resources and climate action; and 3)
balanced territorial development. The reform orientations in the
Communication have since been broadly supported both in the
inter-institutional debate and in the stakeholder consultation that took
place in the framework of the impact assessment. 

A common theme that has emerged throughout this process is the need to
promote resource efficiency with a view to smart, sustainable and
inclusive growth for EU agriculture and rural areas in line with the
Europe 2020 strategy, keeping the structure of the CAP around two
pillars that use complementary instruments in pursuit of the same
objectives. Pillar I covers direct payments and market measures
providing a basic annual income support to EU farmers and support in
case of specific market disturbances, while Pillar II covers rural
development where Member States draw up and co-finance multiannual
programmes under a common framework.

Through successive reforms the CAP has increased market orientation for
agriculture while providing income support to producers, improved the
integration of environmental requirements and reinforced support for
rural development as an integrated policy for the development of rural
areas across the EU. However, the same reform process has raised demands
for a better distribution of support among and within Member States, as
well as calls for a better targeting of measures aiming at addressing
environmental challenges and better addressing increased market
volatility. 

In the past, reforms mainly responded to endogenous challenges, from
huge surpluses to food safety crises; they have served the EU well both
on the domestic and the international front. However, most of today's
challenges are driven by factors that are external to agriculture and
would thus require a broader policy response.

The pressure on agricultural income is expected to continue as farmers
are facing more risks, a slowdown in productivity and a margin squeeze
due to rising input prices; there is therefore a need to maintain income
support and to reinforce instruments to better manage risks and respond
to crisis situations. A strong agriculture is vital for the EU food
industry and global food security.

At the same time, agriculture and rural areas are being called upon to
step up their efforts to meet the ambitious climate and energy targets
and biodiversity strategy that are part of the Europe 2020 agenda.
Farmers, who are together with foresters the main land managers, will
need to be supported in adopting and maintaining farming systems and
practices that are particularly favourable to environmental and climate
objectives because market prices do not reflect the provision of such
public goods. It will also be essential to best harness the diverse
potential of rural areas and thus contribute to inclusive growth and
cohesion. 

The future CAP will not, therefore, be a policy that caters only for a
small, albeit essential, part of the EU economy, but also a policy of
strategic importance for food security, the environment and territorial
balance. Therein lies the EU added value of a truly common policy that
makes the most efficient use of limited budgetary resources in
maintaining a sustainable agriculture throughout the EU, addressing
important cross-border issues such as climate change and reinforcing
solidarity among Member States, while also allowing flexibility in
implementation to cater for local needs. 

The framework set out in the MFF proposal foresees that the CAP should
maintain its two-pillar structure with the budget for each pillar
maintained in nominal terms at its 2013 level and with a clear focus on
delivering results on the key EU priorities. Direct payments should
promote sustainable production by assigning 30 % of their budgetary
envelope to mandatory measures that are beneficial to climate and the
environment. Payment levels should progressively converge and payments
to large beneficiaries be subject to progressive capping. Rural
development should be included in a Common Strategic Framework with
other EU shared management funds with a reinforced outcome-orientated
approach and subject to clearer, improved ex-ante conditionalities.
Finally, on market measures the financing of the CAP should be
reinforced with two instruments outside the MFF: 1) an emergency reserve
to react to crisis situations; and 2) the extension of the scope of the
European Globalization Adjustment Fund. 

On this basis, the main elements of the legislative framework for the
CAP during the period 2014-2020 are set out in the following
regulations: 

Proposal for a Regulation of the European Parliament and of the Council
establishing rules for direct payments to farmers under support schemes
within the framework of the common agricultural policy ('the direct
payments regulation');

Proposal for a Regulation of the European Parliament and of the Council
establishing a common organisation of the markets in agricultural
products (Single CMO Regulation) ('the Single CMO regulation');

Proposal for a Regulation of the European Parliament and of the Council
on support for rural development by the European Agricultural Fund for
Rural Development (EAFRD) ('the rural development regulation');

Proposal for a Regulation of the European Parliament and of the Council
on the financing, management and monitoring of the common agricultural
policy ('the horizontal regulation');

Proposal for a Council regulation determining measures on fixing certain
aids and refunds related to the common organisation of the markets in
agricultural products;

Proposal for a Regulation of the European Parliament and of the Council
amending Council Regulation (EC) No 73/2009 as regards the application
of direct payments to farmers in respect of the year 2013;

Proposal for a Regulation of the European Parliament and of the Council
amending Council Regulation (EC) No 1234/2007 as regards the regime of
the single payment scheme and support to vine-growers.

The rural development regulation builds on the proposal presented by the
Commission on 6 October 2011 that sets out common rules for all funds
operating under a Common Strategic Framework. A regulation will follow
on the scheme for most deprived persons, for which funding is now placed
under a different heading of the MFF.

In addition, new rules on the publication of information on
beneficiaries taking account of the objections expressed by the Court of
Justice of the European Union are also under preparation with a view to
finding the most appropriate way to reconcile beneficiaries' right to
protection of personal data with the principle of transparency.

2.	RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND IMPACT
ASSESSMENT

On the basis of the evaluation of the current policy framework and an
analysis of future challenges and needs, the impact assessment assesses
and compares the impact of three alternative scenarios. This is the
result of a long process started in April 2010 and steered by an
inter-service group that brought together extensive quantitative and
qualitative analysis, including setting a baseline in the form of
medium-term projections for agricultural markets and income up to 2020
and modelling the impact of the different policy scenarios on the
economics of the sector.

The three scenarios elaborated in the impact assessment are: 1) an
adjustment scenario that continues with the current policy framework
while addressing its most important shortcomings, such as the
distribution of direct payments; 2) an integration scenario that entails
major policy changes in the form of enhanced targeting and greening of
direct payments and reinforced strategic targeting for rural development
policy in better coordination with other EU policies, as well as
extending the legal base for a broader scope of producer cooperation;
and 3) a refocus scenario that reorients the policy exclusively towards
the environment with a progressive phasing out of direct payments,
assuming that productive capacity can be maintained without support and
that the socio-economic needs of rural areas can be served by other
policies.

Against the background of the economic crisis and the pressure on public
finances, to which the EU has responded with the Europe 2020 strategy
and the MFF proposal, all three scenarios attach different weight to
each of the three policy objectives of the future CAP which aims at a
more competitive and sustainable agriculture in vibrant rural areas.
With a view to a better alignment with the Europe 2020 strategy, notably
in terms of resource efficiency, it will be increasingly essential to
improve agricultural productivity through research, knowledge transfer
and promoting cooperation and innovation (including through the European
Innovation Partnership on agricultural productivity and sustainability).
Whereas EU agricultural policy does not any more operate within a trade
distorting policy environment, additional pressure on the sector is
expected from further liberalization, notably in the framework of the
DDA or the FTA with Mercosur. 

The three policy scenarios were drawn up taking into account the
preferences expressed in the consultation which was conducted in the
context of the impact assessment. Interested parties were invited to
submit contributions between 23.11.2010 and 25.1.2011 and an advisory
committee was organised on 12.1.2011. The main points are summarized
below: 

There is broad agreement among stakeholders on the need for a strong CAP
based on a two-pillar-structure in order to address the challenges of
food security, sustainable management of natural resources and
territorial development.

Most respondents find that the CAP should play a role in stabilizing
markets and prices. 

Stakeholders have diverse opinions concerning the targeting of support
(especially redistribution of direct aid and capping payments). 

There is agreement that both pillars can play an important role in
stepping up climate action and increasing environmental performance for
the benefit of EU society. Whereas many farmers believe that this
already takes place today, the wider public argues that Pillar I
payments can be more efficiently used.

The respondents want all parts of the EU, including less favoured areas,
to be part of future growth and development. 

The integration of the CAP with other policies, such as environmental,
health, trade, development, was emphasised by many respondents.

Innovation, development of competitive businesses and provision of
public goods to EU citizens are seen as ways to align the CAP with the
Europe 2020 strategy.

The impact assessment thus compared the three alternative policy
scenarios:

The refocus scenario would accelerate structural adjustment in the
agricultural sector, shifting production to the most cost efficient
areas and profitable sectors. While significantly increasing funding for
the environment, it would also expose the sector to greater risks due to
limited scope for market intervention. Furthermore, it would come at a
significant social and environmental cost as the less competitive areas
would face a considerable income loss and environmental degradation,
since the policy would lose the leverage of direct payments coupled with
the cross compliance requirements. 

At the other end of the spectrum, the adjustment scenario would best
allow for policy continuity with limited but tangible improvements both
in agricultural competitiveness and environmental performance. There are
however serious doubts as to whether this scenario could adequately
address the important climate and environmental challenges of the
future, which also underpin the long-term sustainability of agriculture.

The integration scenario breaks new ground with enhanced targeting and
greening of direct payments. The analysis shows that greening is
possible at a reasonable cost to farmers although some administrative
burden cannot be avoided. Similarly, a new impetus in rural development
is possible provided that the new possibilities are efficiently used by
Member States and regions and that the common strategic framework with
the other EU funds does not remove synergies with Pillar I or weaken
rural development's distinctive strengths. If the right balance is
struck, this scenario would best address the long term sustainability of
agriculture and rural areas. 

On this basis the impact assessment concludes that the integration
scenario is the most balanced in progressively aligning the CAP with the
EU's strategic objectives and this balance is also found in the
implementation of the different elements in the legislative proposals.
It will also be essential to develop an evaluation framework to measure
the performance of the CAP with a common set of indicators linked to
policy objectives.

Simplification has been an important consideration throughout the
process and should be enhanced in a variety of ways, for instance in the
streamlining of cross compliance and market instruments, or the design
of the small farmers scheme. In addition, the greening of direct
payments should be designed in such a way as to minimize administrative
burden including the costs of controls. 

3.	LEGAL ELEMENTS OF THE PROPOSAL

It is proposed to maintain the current structure of the CAP in two
pillars with annual mandatory measures of general application in Pillar
I complemented by voluntary measures better tailored to national and
regional specificities under a multi-annual programming approach in
Pillar II. However, the new design of direct payments seeks to better
exploit synergies with Pillar II, which is in turn placed under a Common
Strategic Framework to better coordinate with other EU shared management
funds. 

On this basis, the current structure of four basic legal instruments is
also maintained, albeit with the scope of the financing regulation
enlarged to bring together common provisions into what is now called the
horizontal regulation. 

The proposals comply with the principle of subsidiarity. The CAP is a
truly common policy: it is an area of shared competence between the EU
and the Member States that is being handled at EU level with a view to
maintaining a sustainable and diverse agriculture throughout the EU,
addressing important cross-border issues such as climate change and
reinforcing solidarity among Member States. In the light of the
importance of future challenges for food security, the environment and
territorial balance, the CAP remains a policy of strategic importance to
ensure the most effective response to the policy challenges and the most
efficient use of budgetary resources. In addition, it is proposed to
maintain the current structure of instruments in two pillars where
Member States have more leeway to tailor solutions to their local
specificities and also co-finance Pillar II. The new European Innovation
Partnership and risk management toolkit are also placed within Pillar
II. At the same time the policy will be better aligned with the Europe
2020 strategy (including a common framework with other EU funds) and a
number of improvements and simplification elements introduced. Finally,
the analysis carried out in the framework of the impact assessment
clearly shows the cost of no action in terms of negative economic,
environmental and social consequences.

In addition to financing provisions, the horizontal regulation brings
together relevant rules for all instruments, such as provisions on cross
compliance, checks and penalties. As a result, the regulation now lays
down rules on financing, the farm advisory system, management and
control systems, cross compliance and clearance of accounts.

The aim is to adjust financing rules on the basis of experience to date,
to streamline and enhance cross compliance and to strengthen the farm
advisory system. 

In relation to cross compliance in particular, the current rules were
reviewed with a view to simplification, strengthening the climate change
dimension within GAEC and ensuring consistency with the provisions of
greening and of relevant environmental measures offered under rural
development.

Finally, the regulation provides the basis for a common monitoring and
evaluation framework to measure the performance of the CAP during the
next period.

This regulation includes various simplification elements. First of all,
it regroups all cross-compliance rules in one single legislative act,
thereby improving their readability. 

Furthermore, it foresees reducing the number of paying agencies and
reinforcing the role of the coordinating body. This will render the
system more transparent and less burdensome for both national
administrations and the Commission services. There will be fewer
accreditations and declarations of assurance required at Member State
level and the number of Commission audits can be reduced.

The rules on management and controls will be aligned, as far as
possible, for the two pillars of the CAP so as to bring legal clarity
and harmonised procedures. Moreover, the regulation foresees empowering
the Commission to allow for a reduction of the number of on-the-spot
checks for Member States with properly functioning control systems and
low error rates. This could reduce the administrative burdens for both
farmers and national administrations. 

4.	BUDGETARY IMPLICATION 

The MFF proposal provides that a significant part of the EU budget
should continue to be dedicated to agriculture, which is a common policy
of strategic importance. Thus, in current prices, it is proposed that
the CAP should focus on its core activities with EUR 317.2 billion
allocated to Pillar I and EUR 101.2 billion to Pillar II over the
2014-2020 period. 

The Pillar I and Pillar II funding is complemented by additional funding
of EUR 17.1 billion consisting of EUR 5.1 billion for research and
innovation, EUR 2.5 billion for food safety and EUR 2.8 billion for food
support for the most deprived persons in other headings of the MFF, as
well as of EUR 3.9 billion in a new reserve for crises in the
agricultural sector and up to EUR 2.8 billion in the European
Globalization Adjustment Fund outside the MFF, thus bringing the total
budget to EUR 435.6 billion over the 2014-2020 period. 

As regards distribution of support among Member States, it is proposed
that all Member States with direct payments below 90% of the EU average
will see one third of this gap closed. The national ceilings in the
direct payments regulation are calculated on this basis. 

The distribution of rural development support is based on objective
criteria linked to the policy objectives taking into account the current
distribution. As is the case today, less developed regions should
continue to benefit from higher co-financing rates, which will also
apply to certain measures such as knowledge transfer, producer groups,
cooperation and Leader. 

Some flexibility for transfers between pillars is introduced (up to 5%
of direct payments): from Pillar I to Pillar II to allow Member States
to reinforce their rural development policy, and from Pillar II to
Pillar I for those Member States where the level of direct payments
remains below 90% of the EU average. 

Details on the financial impact of the CAP reform proposals are set out
in the financial statement accompanying the proposals.

2011/0288 (COD)

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on the financing, management and monitoring of the common agricultural
policy

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union,
and in particular Article 43(2) thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national
parliaments,

Having regard to the opinion of the European Economic and Social
Committee,

Having consulted the European Data Protection Supervisor,

Acting in accordance with the ordinary legislative procedure,

Whereas:

The Communication from the Commission to the European Parliament, the
Council, the European Economic and Social Committee and the Committee of
the Regions on "The CAP towards 2020: Meeting the food, natural
resources and territorial challenges of the future" set out potential
challenges, objectives and orientations for the Common Agricultural
Policy (CAP) after 2013. In the light of the debate on that
Communication, the CAP should be reformed with effect from 1 January
2014. That reform should cover all the main instruments of the CAP,
including Council Regulation (EC) No 1290/2005 of 21 June 2005 on the
financing of the common agricultural policy as amended by Regulation of
the European Parliament and Council [COM(2010)…(Lisbon alignement)].
Experience drawn from the implementation of that Regulation shows that
certain elements of the financing and monitoring mechanism need to be
adjusted. In view of the scope of the reform, it is appropriate to
repeal Regulation (EC) No 1290/2005 and to replace it with a new text.
The reform should also, as far as possible, harmonise, streamline and
simplify provisions.

Since the objectives of this Regulation cannot be achieved sufficiently
by Member States given the links between it and the other instruments of
the CAP, the limits on the financial resources of the Member States in
an enlarged Union, and can therefore be better achieved at Union level
through the multiannual guarantee of Union finance and by concentrating
on its priorities, the Union may adopt measures, in accordance with the
principle of subsidiarity as set out in Article 5(3) of the Treaty on
European Union. In accordance with the principle of proportionality as
set out in Article 5(4) of that Treaty, this Regulation does not go
beyond what is necessary in order to achieve that objective.

In order to supplement or amend certain non-essential elements of this
Regulation, the power to adopt delegated acts in accordance with Article
290 of the Treaty should be delegated to the Commission in respect of
the accreditation of the paying agencies and coordinating bodies, the
content of the Farm Advisory System, the measures to be financed by
Union budget under public intervention and the valuation of the
operations in connection with public intervention, the reductions and
suspension of the reimbursements to the Member States, the compensation
between expenditure and revenues under the Funds, the recovery of debts,
the penalties applied to beneficiaries in case of non-compliance with
the eligibility conditions, in respect of rules on securities, on the
functioning of the integrated administration and control system, of the
measures excluded from the scrutiny of transactions, the penalties
applied under cross compliance, the rules on maintenance of permanent
grassland, the rules on the operative event and the exchange rate to be
used by the Member States not using the euro and in respect of the
content of the common evaluation framework of the measures adopted under
the CAP. It is of particular importance that the Commission carry out
appropriate consultations during its preparatory work, including at
expert level. The Commission, when preparing and drawing-up delegated
acts, should ensure a simultaneous, timely and appropriate transmission
of relevant documents to the European Parliament and Council.

The CAP consists of a series of measures, some of which relate to rural
development. It is important that financing be provided for those
measures in order to contribute to the achievement of the objectives of
the CAP. Since the measures have certain elements in common but do also
differ in a number of respects, their financing should be combined in
the same set of provisions which allows for different treatment where
necessary. Regulation (EC) No 1290/2005 created two European
agricultural funds, namely the European Agricultural Guarantee Fund
(hereinafter ‘EAGF’), and the European Agricultural Fund for Rural
Development (hereinafter ‘EAFRD’). Those two Funds should be
maintained.

Regulation (EU) No [FR]/xxx of the European Parliament and of the
Council of […] on the financial rules applicable to the annual budget
of the Union and the provisions adopted pursuant to it should apply to
the measures set out in this Regulation. In particular the Regulation
lays down provisions related to the shared management with Member States
based on the principles of sound financial management, transparency and
non-discrimination, as well as provisions on the function of accredited
bodies, the budgetary principles, provisions which should be respected
in the framework of this Regulation.

The Union budget should finance CAP expenditure, including that on rural
development, through both Funds either directly or in the context of
shared management with the Member States. The types of measures that can
be financed using those Funds should be specified.

Provision should be made for the accreditation of paying agencies by
Member States, for the establishment of procedures for obtaining the
requisite management declarations of assurance, and the certification of
management and monitoring systems, as well as the certification of
annual accounts by independent bodies. Moreover, in order to ensure the
transparency of national checks, in particular as regards authorisation,
validation and payment procedures, to reduce the administrative and
audit burden for the Commission services as well as for the Member
States where accreditation of each individual paying agency is required,
the number of authorities and bodies to which those responsibilities are
delegated should be restricted taking account of the constitutional
arrangements of each Member State. 

Where a Member State accredits more than one paying agency, it is
important that it designates a single coordinating body to ensure
consistency in the management of the funds, to provide liaison between
the Commission and the various accredited paying agencies and to ensure
that the information requested by the Commission concerning the
operations of several paying agencies is made rapidly available. The
coordinating body should also be responsible for ensuring that remedial
action is taken and that the Commission is kept informed of the
follow-up and it should ensure homogeneous application of common rules
and standards. 

Only paying agencies accredited by the Member States offer reasonable
assurance that the necessary checks have been carried out before
granting Union aid to beneficiaries. It should therefore be explicitly
laid down that only expenditure effected by accredited paying agencies
can be reimbursed from the Union budget.

In order to help beneficiaries to become more aware of the relationship
between agricultural practices and management of farms on the one hand,
and standards relating to the environment, climate change, good
agricultural condition of land, food safety, public health, animal
health, plant health and animal welfare on the other, it is necessary
that Member States establish a comprehensive farm advisory system
offering advice to beneficiaries. That farm advisory system should in
any way not affect the obligation and responsibility of beneficiaries to
respect those standards. Also a clear separation between advice and
checks should be ensured by the Member States.

The farm advisory system should cover at least the requirements and
standards forming the scope of cross compliance. That system should also
cover the requirements to be respected in relation to the agricultural
practices beneficial for the climate and the environment for direct
payments, as well as the maintenance of the agricultural area under
Regulation (EU) No DP/xxx of the European Parliament and of the Council
of xxx establishing rules for direct payment to farmers under support
schemes within the framework of the common agricultural policy. That
system should finally cover certain elements related to climate change
mitigation and adaptation, biodiversity, protection of water, animal and
plant disease notification and innovation as well as the sustainable
development of the economical activity of the small farms.

Entry into the farm advisory system should be on a voluntary basis for
beneficiaries. All beneficiaries, even if not receiving support under
the CAP, should be allowed to participate in the system. However
priority criteria may be set by the Member States. Due to the nature of
the system, it is appropriate for the information obtained in the course
of the advisory activity to be treated as confidential, except in case
of serious infringements of Union or national law. In order to ensure
the efficiency of the system, advisors should be suitably qualified and
regularly trained.

The financial resources required to cover the expenditure effected by
the accredited paying agencies in respect of the EAGF, are to be made
available to the Member States by the Commission in the form of
reimbursements against the booking of the expenditure effected by those
agencies. Until such reimbursements, in the form of monthly payments,
have been paid, financial resources are to be mobilised by the Member
States in accordance with the needs of their accredited paying agencies.
The personnel costs and the administrative costs of the Member States
and the beneficiaries involved in the execution of the CAP should be
borne by themselves. 

The use of the agro-meteorological system and the acquisition and
improvement of satellite images should provide the Commission with the
means to manage the agricultural markets and to facilitate the
monitoring of agricultural expenditure.

In the context of respecting budget discipline, it is necessary to
define the annual ceiling for the expenditure financed by the EAGF by
taking into account the maximum amounts laid down for that Fund under
the multiannual financial framework provided for in the Council
Regulation (EU) No xxx/xxx of […] laying down the multiannual
financial framework for the years 2014-2020 [MFF].

Budget discipline also requires that the annual ceiling for expenditure
financed by the EAGF to be respected under all circumstances and at all
stages of the budget procedure and the execution of the budget. This
requires that the national ceiling for the direct payments per Member
State set out in Regulation (EU) No xxx/xxx[DP] be regarded as a
financial ceiling for such direct payments for the Member State
concerned and that the reimbursement of those payments remain within
this financial ceiling. Furthermore, budget discipline requires that all
acts proposed by the Commission or adopted by the legislator or by the
Commission under the CAP and financed by the EAGF comply with the annual
ceiling for the expenditure financed by that Fund.

With a view to ensuring that the amounts for the financing of the CAP
comply with the annual ceilings, the financial mechanism referred to in
Council Regulation (EC) No 73/2009 of 19 January 2009 establishing
common rules for direct support schemes for farmers under the common
agricultural policy and establishing certain support schemes for
farmers, amending Regulations (EC) No 1290/2005, (EC) No 247/2006, (EC)
No 378/2007 and repealing Regulation (EC) No 1782/2003 whereby the level
of direct support is adjusted, should be maintained. In the same
context, it is necessary to authorise the Commission to set those
adjustments where the Council do not fix them before 30 June of the
calendar year in respect of which they apply.

The measures taken to determine the financial contribution from the EAGF
and the EAFRD in respect of the calculation of financial ceilings do not
affect the powers of the budgetary authority designated by the Treaty.
Those measures should therefore be based on the reference amounts fixed
in accordance with the Interinstitutional Agreement of […] between the
European Parliament, the Council and the Commission on cooperation in
budgetary matters and on sound financial management and Regulation (EU)
No xxx/xxx [MFF].

Budget discipline also demands a continuous examination of the
medium-term budget situation. The Commission, when submitting the draft
budget for a given year, should therefore present its forecasts and
analyses to the European Parliament and the Council and propose, if
necessary, appropriate measures to the legislator. Furthermore, the
Commission should make full use of its management powers at all times to
ensure compliance with the annual ceiling and, if necessary, propose
appropriate measures to the European Parliament and to the Council or to
the Council to redress the budget situation. If, at the end of a budget
year, the annual ceiling cannot be complied with as a result of the
reimbursements requested by the Member States, the Commission should be
able to take measures allowing provisional distribution of the available
budget among the Member States in proportion to their requests for
reimbursement not yet paid, as well as compliance with the ceiling fixed
for the year concerned. Payments for that year should be charged to the
following budget year and the total amount of Union financing per Member
State should be definitively established, as should compensation between
Member States in order to comply with the established amount.

When implementing the budget, the Commission should operate a monthly
early-warning and monitoring system for agricultural expenditure, so
that, if there is a risk of the annual ceiling being exceeded, the
Commission may at the earliest opportunity take the appropriate measures
under the management powers at its disposal and propose other measures
if those measures appear to be insufficient. A periodic report by the
Commission to the European Parliament and the Council should compare the
evolution of the expenditure effected in relation to the profiles so far
and give an assessment of the foreseeable implementation for the
remainder of the budget year.

The exchange rate used by the Commission in drawing up the budget
documents should, while making allowances for the time lag between
drafting and submission reflect the most recent information available.

Regulation (EU) No CR/xxx of the European Parliament and of the Council
of […] laying down common provisions common provisions on the European
Regional Development Fund, the European Social Fund, the Cohesion Fund,
the European Agricultural Fund for Rural Development and the European
Maritime and Fisheries Fund covered by the Common Strategic Framework
and laying down general provisions on the European Regional Development
Fund, the European Social Fund and the Cohesion Fund and repealing
Regulation (EC) No 1083/2006 provides rules applying to the financial
support from the Funds covered by that Regulation, including the EAFRD.
Those provisions also include certain rules on the eligibility of
expenditure, on financial management as well as the management and
control systems. As regards the financial management of the EAFRD, for
sake of legal clarity and coherence between the agricultural Funds,
reference should be made to the relevant provisions on the budget
commitments, payment deadlines and decommitment of Regulation (EU) No
CR/xxx.

The rural development programmes are financed from the Union budget on
the basis of commitments in annual instalments. Member States should be
able to draw on the Union funds provided for as soon as they begin the
programmes. A suitably restricted prefinancing system ensuring a steady
flow of funds so that payments to beneficiaries under the programmes are
made at the appropriate time is therefore needed.

Prefinancing apart, a distinction should be drawn between payments by
the Commission to the accredited paying agencies. Interim payments and
payment of balances, and rules on their payment should be set. The
automatic decommitment rule should help speed up execution of programmes
and contribute to sound financial management.

Union aid should be paid to beneficiaries in good time so that they may
use it efficiently. A failure by the Member States to comply with the
payment deadlines laid down in Union legislation could create serious
difficulties for the beneficiaries and could jeopardise the Union's
yearly budgeting. Therefore, expenditure made without respecting
deadlines for payments should be excluded from Union financing. In order
to respect the principle of proportionality, the Commission should be
able to provide for exceptions to this general rule. This principle,
laid down in Regulation (EC) No 1290/2005 should be maintained and apply
to both the EAGF and the EAFRD. If Member States pay late, they should
add interests on the principal amount at their own cost to compensate
the beneficiaries. Such a provision could create an incentive to Member
States to better respect payment deadlines, and could give more
assurance to beneficiaries to be paid in time, or at least to be
compensated in case of late payment. 

Regulation (EC) No 1290/2005 provides for reductions and suspensions of
monthly or interim payments for the EAGF and the EAFRD. Despite the
rather broad wording of those provisions, it is noticed that in practice
those provisions are used essentially to reduce payments for non-respect
of payment deadlines, ceilings and similar "accounting issues" which can
readily be detected in the declarations of expenditure. Those provisions
also allow reductions and suspensions in case of serious and persistent
deficiencies in national control systems, but including rather
restrictive substantive conditions for doing so and providing for a
special, two-step procedure to be followed. The budgetary authority has
repeatedly asked the Commission to suspend payments to non-compliant
Member States. Against this background, it is necessary to clarify the
system provided for in Regulation (EC) No 1290/2005 and to merge the
rules on reductions and suspensions for both the EAGF and the EAFRD into
one single Article. The system of reductions for "accounting issues"
should be maintained with a clearer wording in line with the existing
administrative practice. The possibility for reducing or suspending
payments in case of significant and persistent deficiencies in national
control systems should be extended by including negligence in the
recovery of irregular payments, while maintaining the two-step procedure
for such reductions or suspensions.

Sectoral agricultural legislation requires Member States to send
information on the numbers of checks carried out and their outcome
within specified deadlines. Those control statistics are used to
determine the level of error at Member State level and, more generally,
for the purposes of checking the management of the EAGF and the EAFRD.
They are an important source for the Commission to satisfy itself as to
the correct management of funds and are an essential element for the
annual declaration of assurance. Given the vital nature of this
statistical information and in order to ensure that Member States
respect their obligation to send it in time, it is necessary to provide
a deterrent to late provision of the data required in a manner
proportionate to the extent of the data deficit. Therefore, provisions
should be put in place whereby the Commission can suspend part of the
monthly or interim payments for which the relevant statistical
information has not been sent in time. 

In order to allow reuse of EAGF and EAFRD funds, rules are needed on the
assignment of specific sums. The list contained in Regulation (EC) No
1290/2005 should be completed with the sums relating to late payments
and to the clearance of accounts as regards expenditure under the EAGF.
Also Council Regulation (EEC) No 352/78 of 20 February 1978 on the
crediting of securities, deposits and guarantees furnished under the
common agricultural policy and subsequently forfeited laid down rules on
the destinations of the sums resulting from forfeited securities. Those
provisions should be harmonised and merged with the existing provisions
on assigned revenue. Regulation (EEC) No 352/78 should therefore be
repealed. 

Council Regulation (EC) No 814/2000 of 17 April 2000 on information
measures relating to the common agricultural policy and its implementing
rules define the information measures relating to the CAP which may be
financed under point (c) of Article 5 of Regulation (EC) No 1290/2005.
Regulation (EC) No 814/2000 contains a list of those measures and their
objectives and fixes the rules of their financing and the implementation
of the corresponding projects. Since the adoption of that Regulation,
rules have been adopted by Regulation (EU) No xxx/xxx[FR] as regards
grants and procurement. Those rules should apply also to the information
measures under the CAP. For reasons of simplification and coherence,
Regulation (EC) No 814/2000 should be repealed while maintaining the
specific provisions relating to the objectives and types of measures to
be financed. Those measures should also take into account the need to
ensure more efficiency in communication to the public at large and
stronger synergies between the communication activities undertaken at
the initiative of the Commission and to ensure that the Union's
political priorities are communicated effectively. Therefore they should
also cover information measures relevant to CAP in the framework of the
corporate communication as referred to in the Communication from the
Commission to the European Parliament, the Council, the European
Economic and Social Committee and the Committee of the Regions: A Budget
for Europe 2020 - Part II: Policy fiches.

The financing of measures and operations under the CAP will in part
involve shared management. To ensure that Union funds are soundly
managed, the Commission should perform checks on the management of the
Funds by the Member State authorities responsible for making payments.
It is appropriate to define the nature of the checks to be made by the
Commission, to specify the terms of its responsibilities for
implementing the budget and to clarify the Member States' cooperation
obligations.

In order to allow the Commission to fulfil its obligation to check the
existence and proper functioning of management and inspection systems
for Union expenditure in the Member States, provision should be made,
irrespective of the inspection carried out by Member States themselves,
for checks by persons delegated by the Commission who should be able to
request assistance from the Member States in their work.

Information technology needs to be used as fully as possible for
producing the information to be sent to the Commission. When carrying
out checks, the Commission should have full and immediate access to
expenditure information recorded both in paper form and in electronic
files.

In order to establish the financial relationship between the accredited
paying agencies and the Union budget, the Commission should clear the
accounts of these paying agencies annually. The clearance of accounts
decision should cover the completeness, accuracy and veracity of the
accounts but not the conformity of the expenditure with Union
legislation.

The Commission, which is responsible for the proper application of Union
law under Article 17 of the Treaty on European Union, should decide
whether the expenditure incurred by the Member States complies with
Union legislation. Member States should be given the right to justify
their decisions to make payments and should have recourse to
conciliation where there is no common agreement between them and the
Commission. In order to give Member States legal and financial
assurances as to expenditure effected in the past, a maximum period
should be set for the Commission to decide which financial consequences
should follow from non-compliance. The conformity clearance procedure
should be , as regards EAFRD, in line with the provisions on the
financial corrections by the Commission as laid down in Part 2 of
Regulation (EU) No CR/xxx .

As regards the EAGF, sums recovered should be paid back to that Fund
where the expenditure is not in conformity with Union legislation and no
entitlement existed. Provision should be made for a system of financial
responsibility for irregularities in the absence of total recovery. In
this respect a procedure should be established permitting the Commission
to safeguard the interests of the Union budget by deciding on the
charging to the Member State concerned of the sums lost as a result of
irregularities and not recovered within reasonable deadlines. The rules
should apply to all sums not yet recovered by the time of the entry into
force of this Regulation. In certain cases of negligence on the part of
the Member State, it is also justified to charge the full sum to the
Member State concerned. Same rules should apply to the EAFRD, keeping
however the specificity that sums recovered or cancelled following
irregularities should remain available to the approved rural development
programmes of the Member State concerned as those sums have been
allocated to that Member State. Provisions on the reporting obligation
for Member States should be set also.

The recovery procedures used by the Member States may have the effect of
delaying recovery for a number of years, with no guarantee that the
outcome will actually be successful. The cost of implementing those
procedures may also be out of proportion to the amounts which are or may
be collected. Consequently, Member States should be permitted to halt
recovery procedures in certain cases.

In order to protect the financial interests of the Union budget,
measures should be taken by Member States to satisfy themselves that
transactions financed by the EAGF and the EAFRD are actually carried out
and are executed correctly. Member States should also prevent, detect
and deal effectively with any irregularities or non-compliance with
obligations committed by beneficiaries. To this end, Council Regulation
(EC, Euratom) No 2988/95 of 18 December 1995 on the protection of the
European Communities financial interests should apply.

Provisions relating to general principles on checks, withdrawals,
reductions or exclusions from payments and to the imposition of
penalties are contained in various sectoral agricultural regulations.
Those rules should be gathered in the same legal framework at a
horizontal level. They should cover the obligations of the Member States
as regards administrative and on-the-spot checks, the rules on the
recovery, reduction and exclusions of aid. Rules on checks of
obligations not necessarily linked to the payment of an aid should be
laid down as well.

Various provisions of the sectoral agricultural legislation require that
a security be lodged to ensure the payment of a sum due if an obligation
is not met. To all those provisions a single horizontal rule should
apply so as to strengthen the framework for securities.

Member State should operate an integrated administration and control
system for certain payments provided for in Regulation (EU) No xxx/xxx
[DP] and in Regulation (EU) No RD/xxx of the European Parliament and of
the Council of Xxx on support for rural development by the European
Agricultural Fund for Rural Development (EAFRD). In order to improve the
effectiveness and monitoring of Union support, Member States should be
authorised to make use of that integrated system also for other Union
support schemes.

The main elements of that integrated system and, in particular, the
provisions concerning a computerised database, an identification system
for agricultural parcels, aid applications or payment claims and a
system for the identification and recording of payment entitlements
should be maintained.

Payments provided for in Union support schemes covered by the integrated
system should be made by the competent national authorities to
beneficiaries in full, subject to any reductions provided for in this
Regulation, and within prescribed periods. In order to render the
management of direct payments more flexible, Member States should be
allowed to pay payments covered by the integrated system in up to two
instalments per year.

Scrutiny of the commercial documents of undertakings receiving or making
payments can be a very effective means of surveillance of transactions
forming part of the system of financing by the EAGF. The provisions on
the scrutiny of the commercial documents are laid down in Council
Regulation (EC) No 485/2008 of 26 May 2008 on scrutiny by Member States
of transactions forming part of the system of financing by the European
Agricultural Guarantee Fund. That scrutiny supplements other checks
already carried out by the Member States. Furthermore, national
provisions relating to scrutiny which are more extensive than those
provided for in that Regulation are not affected by it. 

Under Regulation (EC) No 485/2008, Member States are to take the
measures necessary to ensure effective protection of the financial
interests of the Union budget, and particularly in order to check the
genuineness and compliance of operations financed by the EAGF. In the
interests of clarity and rationality, the relevant provisions should be
integrated into the same act. Regulation (EC) No 485/2008 should
therefore be repealed.

The documents used as a basis for such scrutiny should be determined in
such a way as to enable a full scrutiny to be carried out. The
undertakings to be scrutinised should be selected on the basis of the
nature of the transactions carried out on their responsibility and the
breakdown per sector of the undertakings receiving or making payments
according to their financial importance in the system of financing by
the EAGF.

The powers of the officials responsible for scrutiny and the obligations
on undertakings to make commercial documents available to such officials
for a specified period and to supply such information as may be
requested by them should be defined. Provision should be made allowing
commercial documents to be seized in certain cases.

Having regard to the international structure of agricultural trade and
in the interest of the functioning of the internal market, it is
necessary to organise cooperation among the Member States. It is also
necessary to set up a centralised documentation system at Union level
concerning undertakings receiving or making payments established in
third countries.

While it is the responsibility of the Member States to adopt their
scrutiny programmes, it is necessary that those programmes be
communicated to the Commission so that it can assume its supervisory and
coordinating role, in order to ensure that the programmes are adopted on
the basis of appropriate criteria and to guarantee that the scrutiny is
concentrated on sectors or undertakings where the risk of fraud is high.


It is essential that each Member State has a special department
responsible for monitoring the scrutiny of commercial documents provided
for in this Regulation or for coordinating that scrutiny. Those special
departments should be organised independently of the departments
carrying out scrutiny prior to payment. Information collected during
that scrutiny should be protected by professional secrecy.

Council Regulation (EC) No 1782/2003 of 29 September 2003 establishing
common rules for direct support schemes under the common agricultural
policy and establishing certain support schemes for farmers and amending
Regulations (EEC) No 2019/93, (EC) No 1452/2001, (EC) No 1453/2001, (EC)
No 1454/2001, (EC) 1868/94, (EC) No 1251/1999, (EC) No 1254/1999, (EC)
No 1673/2000, (EEC) No 2358/71 and (EC) No 2529/2001, which was replaced
by Regulation (EC) No 73/2009, established the principle that the full
payment to beneficiaries of some supports under the CAP should be linked
to compliance with rules relating to land management, agricultural
production and agricultural activity. That principle was subsequently
reflected in Council Regulation (EC) No 1698/2005 of 20 September 2005
on support for rural development by the European Agricultural Fund for
Rural Development (EAFRD) and Council Regulation (EC) No 1234/2007 of 22
October 2007 establishing a common organisation of agricultural markets
and on specific provisions for certain agricultural products (Single CMO
Regulation). Under this so-called 'cross compliance' system Member
States are to impose penalties in the form of reduction or exclusion of
support received under the CAP in whole or in part.

The cross compliance system incorporates in the CAP basic standards for
the environment, climate change, good agricultural and environmental
condition of land, public health, animal health, plant health and animal
welfare. This link aims at contributing to the development of a
sustainable agriculture through a better awareness of beneficiaries of
the need to respect those basic standards. It aims also at contributing
to make the CAP more compatible with the expectation of the society
through a better consistency of that policy with the environment, public
health, animal health, plant health and animal welfare policies.

The cross compliance system forms an integral part of the CAP and should
therefore be maintained. However, its scope, which consists so far in
separate lists of statutory management requirements and standards of
good agricultural and environmental condition of land should be
streamlined so that its consistency is ensured and made more visible.
For this purpose the requirements and standards should be organised in a
single list and grouped by areas and issues. Experience has also shown
that a number of the requirements within the scope of cross compliance
are not sufficiently relevant to farming activity or the area of the
holding or concern national authorities rather than beneficiaries. It is
therefore appropriate to adjust this scope in this respect. Provision
should furthermore be made for the maintenance of permanent grassland in
2014 and 2015.

Statutory management requirements need to be fully implemented by Member
States in order to become operational at farm level and ensure the
necessary equal treatment between farmers. 

As regards Directive 2000/60/EC of the European Parliament and of the
Council of 23 October 2000 establishing a framework for Community action
in the field of water policy the provisions will only be operational
under cross compliance when all Member States will have fully
implemented them in particular with clear obligations for farmers.
According to the Directive the requirements at farm level will be
applied at the latest by 1 January 2013.

As regards Directive 2009/128/EC of the European Parliament and of the
Council of 21 October 2009 establishing a framework for Community action
to achieve the sustainable use of pesticides the provisions will only be
operational under cross compliance when all Member States will have
fully implemented them in particular with clear obligations for farmers.
According to the Directive the requirements at farm level will be
progressively applied following a time schedule and in particular the
general principles of integrated pest management will be applied at the
latest by 1 January 2014.

According to Article 22 of Directive 2000/60/EC, Council Directive
80/68/EEC of 17 December 1979 on the protection of groundwater against
pollution caused by certain dangerous substances shall be repealed on 23
December 2013. In order to maintain the rules under cross compliance
related to protection of groundwater, it is appropriate, while awaiting
the inclusion of Directive 2000/60/EC in cross compliance, to adjust the
scope of cross-compliance and to define a standard of good agricultural
and environnemental condition encompassing the requirements of Articles
4 and 5 of the Directive 80/68/EEC.

The cross compliance system implies certain administrative constraints
for both beneficiaries and national administrations since record keeping
must be ensured, checks must be carried out and penalties have to be
applied where necessary. Those penalties should be proportionate,
effective and dissuasive. Such penalties should be without prejudice to
other penalties laid down under other provisions of Union or national
law. For the sake of consistency, it is appropriate to merge the
relevant Union provisions into one single legal instrument. For farmers
participating in the small farmers scheme referred to in Title V of
Regulation (EU) No xxx/xxx[DP], the efforts to be made under the cross
compliance system may be considered as exceeding the benefit of keeping
those farmers under that system. For reasons of simplification, those
farmers should therefore be exempted from cross compliance and in
particular from its control system and from the risk of cross compliance
penalties. However, that exemption should be without prejudice to the
obligation to respect the applicable provisions of the sectoral
legislation and to the possibility to be checked and to be imposed
penalties under that legislation.

Regulation (EC) No 1782/2003 established a framework of standards of
good agricultural and environmental condition of the land within which
Member States are to adopt national standards taking account of the
specific characteristics of the areas concerned, including soil and
climatic conditions and existing farming systems (land use, crop
rotation, farming practices) and farm structures. Those standards of
good agricultural and environmental condition of the land aim at
contributing to prevent soil erosion, maintain soil organic matter and
soil structure, ensure a minimum level of maintenance, avoid the
deterioration of habitats and protect and manage water. The wider scope
of the cross compliance system as laid down in this Regulation should
therefore include a framework within which Member States should adopt
national standards of good agricultural and environmental condition. The
Union framework should also include rules to better address water, soil,
carbon stock, biodiversity and landscape issues as well as minimum level
of maintenance of the land.

Beneficiaries should know clearly what they have to comply with in
relation to the rules on cross compliance. For that purpose, all
requirements and standards forming part of those rules should be
communicated by Member States in an exhaustive, understandable and
explanatory way, including, where possible, by electronic means.

An effective implementation of cross compliance requires verification at
beneficiaries' level that obligations are respected. Where a Member
State decides to make use of the option not to apply a reduction or
exclusion where the amount concerned is less than EUR 100, the competent
control authority should, for a sample of beneficiaries in the following
year, verify that the findings of the non-compliance concerned have been
remedied.

To ensure harmonious cooperation between the Commission and the Member
States regarding the financing of CAP expenditure and, more
particularly, to allow the Commission to monitor the financial
management by the Member States and clear the accounts of the accredited
paying agencies, certain information has to be communicated by the
Member States or to be kept available to the Commission.

For the purposes of compiling the data to be sent to the Commission, and
to allow the Commission to have full immediate access to expenditure
data in both paper and electronic form, suitable rules on the
presentation and transmission of data, including rules on time limits,
need to be laid down.

As personal data or business secrets might be involved in the
application of the national control systems and the conformity
clearance, the Member States and the Commission should guarantee the
confidentiality of the information received in that context.

In the interests of sound financial management of the Union budget and
impartiality of treatment at both Member State and beneficiary level,
rules on the use of the euro should be laid down.

The rate of exchange of the euro into national currency may vary in the
course of the period during which an operation is carried out. Therefore
the rate applicable to the amounts concerned should be determined taking
into account the event through which the economic objective of the
operation is achieved. The rate of exchange applied should be that of
the date on which this event occurs. It is necessary to specify this
operative event or to waive its application, observing certain criteria
and in particular the rapidity with which currency movements are passed
on. Those rules are laid down in Council Regulation (EC) No 2799/98 of
15 December 1998 establishing agrimonetary arrangements for the euro and
they complete similar provisions of Regulation (EC) No 1290/2005. In the
interests of clarity and rationality the relevant provisions should be
integrated into the same act. Regulation (EC) No 2799/98 should
therefore be repealed.

Special rules should be laid down for dealing with exceptional monetary
situations arising either within the Union or on the world market and
requiring immediate action to ensure that the arrangements established
under the CAP operate effectively.

Member States not having adopted the euro should have the option of
making payments for expenditure resulting from the CAP legislation in
euro rather than in national currency. Specific rules are needed to
ensure that this option does not lead to any unjustified advantage for
parties making or receiving payment.

Each measure under the CAP should be subject to monitoring and
evaluation in order to improve its quality and demonstrate its
achievements. In this context a list of indicators should be determined
and the impact of the CAP policy assessed by the Commission in relation
to policy objectives. The Commission should set up a framework for a
common monitoring and evaluation ensuring among others that relevant
data, including information from Member States is available on a timely
manner. In so doing it should take into account the data needs and
synergies between potential data sources. Moreover, the Communication
from the Commission to the European Parliament, the Council, the
European Economic and Social Committee and the Committee of the Regions:
A Budget for Europe 2020 - Part II stated that the climate related
expenditure in the overall Union budget should increase to at least 20%,
with contribution from different policies. The Commission should
therefore be able to assess the impact of the Union's support in the
framework of the CAP to climate objectives.

Union legislation concerning the protection of individuals with regard
to the processing of personal data and on the free movement of such
data, in particular Directive 95/46/EC of the European Parliament and of
the Council of 24 October 1995 on the protection of individuals with
regard to the processing of personal data and on the free movement of
such data and Regulation (EC) No 45/2001 of the European Parliament and
of the Council of 18 December 2000 on the protection of individuals with
regard to the processing of personal data by the Community institutions
and bodies and on the free movement of such data are applicable.

In its judgment in Joined Cases C-92/09 and 93/09 the Court of Justice
of the European Union declared the relevant provisions in Regulation
(EC) No 1290/2005 concerning the obligation of Member States to publish
information on natural persons benefiting from the European agricultural
funds invalid. Since it is in the interest of natural persons that their
personal data are protected, and with a view to reconciling the
different objectives underlying the obligation to publish information on
the beneficiaries of funds, as provided for in Commission Regulation
(EC) No 259/2008 laying down detailed rules for the application of
Council Regulation (EC) No 1290/2005 as regards the publication of
information on the beneficiaries of funds deriving from the European
Agricultural Guarantee Fund (EAGF) and the European Agricultural Fund
for Rural Development (EAFRD), that Regulation was amended in order to
lay down explicitly that this obligation does not apply to natural
persons. The adoption by the European Parliament and the Council of new
rules taking account of the objections expressed by the Court should be
preceded by in depth analysis and assessment in order to find the most
appropriate way to reconcile the right to protection of personal data of
the beneficiaries with the need for transparency. Pending that analysis
and assessment, the current provisions on the publication of information
on beneficiaries of the European agricultural funds should be
maintained.

In order to ensure uniform conditions for the implementation of this
Regulation, implementing powers should be conferred on the Commission.
Those powers should be exercised in accordance with Regulation (EU) No
182/2011 of the European Parliament and of the Council of 16 February
2011 laying down the rules and general principles concerning mechanisms
for control by Member States of the Commission's exercise of
implementing powers.

The advisory procedure should be used for the adoption of certain
implementing acts. With regard to the implementing acts involving the
calculations of amounts by the Commission the advisory procedure enables
the Commission to fully assume its responsibility of managing the budget
and aims at increased efficiency, predictability and rapidity, taking
into account the time limits and the budgetary procedures. With regard
to the implementing acts within the framework of the payments made to
the Member States and the operation of the clearance of accounts
procedure, the advisory procedure enables the Commission to fully assume
its responsibility of managing the budget and verifying the annual
accounts of the national paying agencies with a view to accepting such
accounts or, in the case of expenditure not effected in compliance with
Union rules, to excluding such expenditure from Union financing. In
other cases, the examination procedure should be used for the adoption
of implementing acts.

The Commission should further be empowered to carry out certain
administrative or management tasks, in particular concerning the setting
of the net balance available for EAGF expenditure. To those empowerments
Regulation (EU) No 182/2011 should not apply. 

The transition from the provisions of the Regulations repealed by this
Regulation to those in this Regulation could give rise to practical and
specific difficulties. In order to deal with those possible
difficulties, provision should be made for the Commission to adopt the
necessary and duly justified measures. 

As the programming period for the rural development programmes financed
on the basis of this Regulation runs from 1 January 2014, this
Regulation should be applicable as from that date. However, certain
provisions related in particular to the financial management of the
funds should apply as from an earlier date corresponding to the
beginning of the financial year,

HAVE ADOPTED THIS REGULATION:

TABLE OF CONTENTS

EXPLANATORY MEMORANDUM	  PAGEREF \h _Toc304996196 \* MERGEFORMAT  2 

1.	CONTEXT OF THE PROPOSAL	  PAGEREF \h _Toc304996197 \* MERGEFORMAT  2 

2.	RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND IMPACT
ASSESSMENT	  PAGEREF \h _Toc304996198 \* MERGEFORMAT  4 

3.	LEGAL ELEMENTS OF THE PROPOSAL	  PAGEREF \h _Toc304996199 \*
MERGEFORMAT  6 

4.	BUDGETARY IMPLICATION	  PAGEREF \h _Toc304996200 \* MERGEFORMAT  7 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the
financing, management and monitoring of the common agricultural policy	 
PAGEREF \h _Toc304996202 \* MERGEFORMAT  Error! Bookmark not defined. 

TITLE I SCOPE AND DEFINITIONS	  PAGEREF \h _Toc304996203 \* MERGEFORMAT 
11 

TITLE II GENERAL PROVISIONS ON AGRICULTURAL FUNDS	  PAGEREF \h
_Toc304996204 \* MERGEFORMAT  11 

Chapter I Agricultural Funds	  PAGEREF \h _Toc304996205 \* MERGEFORMAT 
11 

Chapter II Paying agencies and other bodies	  PAGEREF \h _Toc304996206
\* MERGEFORMAT  11 

TITLE III FARM ADVISORY SYSTEM	  PAGEREF \h _Toc304996207 \* MERGEFORMAT
 11 

TITLE IV FINANCIAL MANAGEMENT OF THE FUNDS	  PAGEREF \h _Toc304996208 \*
MERGEFORMAT  11 

Chapter I EAGF	  PAGEREF \h _Toc304996209 \* MERGEFORMAT  11 

Section 1 Financing of Expenditure	  PAGEREF \h _Toc304996210 \*
MERGEFORMAT  11 

Section 2 Budget discipline	  PAGEREF \h _Toc304996211 \* MERGEFORMAT 
11 

Chapter II EAFRD	  PAGEREF \h _Toc304996212 \* MERGEFORMAT  11 

Section 1 General provisions for EAFRD	  PAGEREF \h _Toc304996213 \*
MERGEFORMAT  11 

Section 2 Financing of rural development programmes	  PAGEREF \h
_Toc304996214 \* MERGEFORMAT  11 

Section 3 Financial Contribution to rural development programmes	 
PAGEREF \h _Toc304996215 \* MERGEFORMAT  11 

Section 4 Financing of the Prize for innovative, local cooperation	 
PAGEREF \h _Toc304996216 \* MERGEFORMAT  11 

Chapter III Common Provisions	  PAGEREF \h _Toc304996217 \* MERGEFORMAT 
11 

Chapter IV Clearance of accounts	  PAGEREF \h _Toc304996218 \*
MERGEFORMAT  11 

Section I General provisions	  PAGEREF \h _Toc304996219 \* MERGEFORMAT 
11 

Section II Clearance	  PAGEREF \h _Toc304996220 \* MERGEFORMAT  11 

Section III Irregularities	  PAGEREF \h _Toc304996221 \* MERGEFORMAT  11


TITLE V CONTROL SYSTEMS AND PENALTIES	  PAGEREF \h _Toc304996222 \*
MERGEFORMAT  11 

Chapter I General rules	  PAGEREF \h _Toc304996223 \* MERGEFORMAT  11 

Chapter II Integrated Administration and Control System	  PAGEREF \h
_Toc304996224 \* MERGEFORMAT  11 

Chapter III Scrutiny of transactions	  PAGEREF \h _Toc304996225 \*
MERGEFORMAT  11 

Chapter IV Other provisions on checks	  PAGEREF \h _Toc304996226 \*
MERGEFORMAT  11 

TITLE VI CROSS COMPLIANCE	  PAGEREF \h _Toc304996227 \* MERGEFORMAT  11 

Chapter I Scope	  PAGEREF \h _Toc304996228 \* MERGEFORMAT  11 

Chapter II Control system and penalties in relation to cross compliance	
 PAGEREF \h _Toc304996229 \* MERGEFORMAT  11 

TITLE VII COMMON PROVISIONS	  PAGEREF \h _Toc304996230 \* MERGEFORMAT 
11 

Chapter I Communication	  PAGEREF \h _Toc304996231 \* MERGEFORMAT  11 

CHAPTER II Use of the euro	  PAGEREF \h _Toc304996232 \* MERGEFORMAT  11


CHAPTER III  Report and evaluation	  PAGEREF \h _Toc304996233 \*
MERGEFORMAT  11 

TITLE VIII FINAL PROVISIONS	  PAGEREF \h _Toc304996234 \* MERGEFORMAT 
11 

ANNEX I	  PAGEREF \h _Toc304996235 \* MERGEFORMAT  11 

ANNEX II	  PAGEREF \h _Toc304996236 \* MERGEFORMAT  11 

ANNEX III	  PAGEREF \h _Toc304996237 \* MERGEFORMAT  11 

LEGISLATIVE FINANCIAL STATEMENT	  PAGEREF \h _Toc304996238 \*
MERGEFORMAT  11 

TITLE I

SCOPE AND DEFINITIONS

Article 1

Scope

This Regulation lays down the rules on:

(a)	the financing of expenditure under the common agricultural policy,
including expenditure on rural development;

(b)	the farm advisory system;

(c)	the management and control systems to be put in place by the Member
States;

(d)	the cross-compliance system;

(e)	clearance of accounts.

Article 2

Terms used in this Regulation

1.	The definitions of "farmer", "agricultural activity", "agricultural
area", "holding" laid down in Article 4 of Regulation (EU) xxx/xxx[DP]
shall apply for the purposes of this Regulation, save as otherwise
provided for in this Regulation.

The terms "direct payments" referred to in Article 1 of Regulation (EU)
xxx/xxx[DP] shall apply for the purposes of this Regulation.

2.	Force majeure and exceptional circumstances as used in this
Regulation in relation to Regulation (EU) xxx/xxx[DP], Regulation (EU)
xxx/xxx[sCMO] and Regulation (EU) xxx/xxx[RD] may in particular be
recognised in cases such as:

(a)	the death of the beneficiary;

(b)	long-term professional incapacity of beneficiary;

(c)	a severe natural disaster gravely affecting the holding;

(d)	the accidental destruction of livestock buildings on the holding;

(e)	an epizootic affecting part or all of the beneficiary's livestock;

(f)	expropriation of a large part of the holding if that could not have
been anticipated on the day of lodging the application.

TITLE II

GENERAL PROVISIONS ON AGRICULTURAL FUNDS

Chapter I

Agricultural Funds

Article 3

Funds financing agricultural expenditure

1.	In order to achieve the objectives of the common agricultural policy
defined by the Treaty, the financing of the various measures falling
under it, including rural development shall be made by:

(a)	the European Agricultural Guarantee Fund, hereinafter referred to as
the ‘EAGF’;

(b)	the European Agricultural Fund for Rural Development, hereinafter
referred to as the ‘EAFRD’.

2.	The EAGF and the EAFRD shall come under the general budget of the
European Union.

Article 4

EAGF expenditure

1.	The EAGF shall be implemented in shared management between the Member
States and the Union and shall finance the following expenditure, which
shall be effected in accordance with Union legislation:

(a)	measures regulating or supporting agricultural markets;

(b)	direct payments to farmers under the common agricultural policy;

(c)	the Union's financial contribution to information and promotion
measures for agricultural products on the internal market of the Union
and in third countries, undertaken by Member States on the basis of
programmes other than those referred to in Article 5 and selected by the
Commission;

(d)	the Union’s financial contribution to the Union School Fruit
Scheme and to the measures in relation to animal diseases and loss of
consumer confidence referred to in Articles 21 and 155 of Regulation
(EU) No xxx/xxx [sCMO] respectively.

2.	The EAGF shall finance the following expenditure in a direct manner
and in accordance with Union legislation:

(a)	promotion of agricultural products, undertaken either directly by
the Commission or via international organisations;

(b)	measures, undertaken in accordance with Union legislation, to ensure
the conservation, characterisation, collection and utilisation of
genetic resources in agriculture;

(c)	establishment and maintenance of agricultural accounting information
systems;

(d)	agricultural survey systems, including surveys on the structure of
agricultural holdings.

Article 5

EAFRD expenditure

The EAFRD shall be implemented in shared management between the Member
States and the Union and shall finance the Union's financial
contribution to rural development programmes implemented in accordance
with the Union legislation on support for rural development, as well as
the expenditure related to the Prize for innovative, local cooperation
referred to in Chapter IV of Title III of Regulation (EU) No RD/xxx..

Article 6

Other expenditure, including technical assistance

The EAGF and the EAFRD may each respectively finance on a direct manner,
on the initiative of the Commission and/or on its behalf, the
preparatory, monitoring, administrative and technical support, as well
as evaluation, audit and inspection measures required to implement the
common agricultural policy. Those measures shall include in particular:

measures required for the analysis, management, monitoring, information
exchange and implementation of the common agricultural policy, as well
as measures relating to the implementation of control systems and
technical and administrative assistance;

the acquisition by the Commission of the satellite images required for
the checks in accordance with Article 21;

the measures taken by the Commission via remote-sensing applications
used for the monitoring of agricultural resources in accordance with
Article 22;

measures required to maintain and develop methods and technical means
for information, interconnection, monitoring and control of the
financial management of the funds used to finance the common
agricultural policy;

provision of information on the common agricultural policy in accordance
with Article 47;

studies on the common agricultural policy and evaluation of measures
financed by the EAGF and the EAFRD, including improvement of evaluation
methods and exchange of information on practices;

where relevant, executive agencies set up in accordance with Council
Regulation (EC) No 58/2003, acting in connection with the common
agricultural policy;

measures relating to dissemination of information, raising awareness,
promoting cooperation and exchanging experience at Union level,
undertaken in the context of rural development, including networking of
the parties concerned;

measures required for the development, registration and protection of
logos within the framework of the Union quality policies and for the
protection of intellectual property rights linked to it, as well as the
necessary information technology (IT) developments.

Chapter II

Paying agencies and other bodies

Article 7

Accreditation and withdrawal of accreditation of paying agencies

and coordinating bodies

1.	Paying agencies shall be dedicated departments or bodies of the
Member States responsible for the management and control of expenditure
referred to in Article 4(1) and Article 5.

With the exception of payment, the execution of those tasks may be
delegated.

2.	Member States shall accredit as paying agencies departments or bodies
which fulfil the accreditation criteria to be laid down by the
Commission pursuant to Article 8(a).

Each Member State shall, taking into account its constitutional
provisions, restrict the number of its accredited paying agencies to one
per Member State or one per region, where applicable. However, where
paying agencies are established at regional level, Member States shall,
in addition, accredit a paying agency at national level for aid schemes
which, by their nature, have to be managed at national level.

3.	By [1 February] of the year following the financial year concerned,
the person in charge of the accredited paying agency shall draw up:

(a)	the annual accounts for the expenditure made in the execution of the
tasks entrusted to their accredited paying agencies, accompanied by the
requisite information for their clearance in accordance with Article 53;

(b)	a management declaration of assurance as to the completeness,
accuracy and veracity of the accounts, the proper functioning of the
internal control systems as well as to the legality and regularity of
the underlying transactions and the respect of the principle of sound
financial management;

(c)	a summary of the results of all available audits and checks carried
out, including an analysis of systematic or recurrent weaknesses as well
as corrective actions taken or planned.

4.	Where more than one paying agency is accredited, the Member State
shall designate a body, hereinafter referred to as the "coordinating
body", to which it assigns the following tasks:

(a)	to collect the information to be made available to the Commission
and to send that information to the Commission;

(b)	to establish a synthesis report providing an overview at national
level of all management declarations of assurance referred to in point
(b) of paragraph 3 and the audit opinions thereon referred to in Article
9;

(c)	to ensure that remedial action is taken as regards any deficiencies
of a common nature and that the Commission is kept informed of the
follow-up;

(d)	to promote and ensure harmonised application of the Union rules.

The coordinating body shall be subject to specific accreditation by the
Member States as regards the processing of the financial information
referred to in point (a) of the first subparagraph.

5.	Where an accredited paying agency does not meet or no longer meets
one or more of the accreditation criteria referred to in paragraph 2,
the Member State shall withdraw its accreditation unless the paying
agency makes the necessary changes within a period to be determined
according to the severity of the problem.

6.	The paying agencies shall manage and ensure control of the operations
linked to public intervention for which they are responsible and they
shall retain overall responsibility in that field. 

Article 8

Commission powers

1.	To ensure the sound operation of the system provided for in Article
7, the Commission shall be empowered to adopt delegated acts in
accordance with Article 111 concerning:

(a)	minimum conditions for the accreditation of paying agencies with
regard to the internal environment, control activities, information and
communication, and monitoring, as well as rules on the procedure for
issuing and withdrawing accreditation; 

(b)	rules relating to supervision and the procedure for reviewing
accreditation of paying agencies;

(c)	minimum conditions for the accreditation of coordination bodies as
well as rules on the procedure for issuing and withdrawing
accreditation.

2	The Commission shall lay down, by means of implementing acts, rules
on:

(a)	the obligations of the paying agencies as regards public
intervention, as well as on the content of their management and control
responsibilities. 

(b)	the functioning of the coordinating body and the notification of
information to the Commission as referred to in Article 7(4).

The implementing acts provided for in the first subparagraph shall be
adopted in accordance with the examination procedure referred to in
Article 112(3).

Article 9

Certification bodies

1.	The certification body shall be a public or private audit body
designated by the Member State which shall provide an opinion on the
management declaration of assurance covering the completeness, accuracy
and veracity of the annual accounts of the paying agency, the proper
functioning of its internal control system, the legality and regularity
of the underlying transactions, as well as the respect of the principle
of sound financial management.

It shall be operationally independent from both the paying agency
concerned and the authority which has accredited that agency.

2.	The Commission shall, by means of implementing acts, lay down rules
concerning the status of the certification bodies, the specific tasks,
including the checks, which they have to carry out as well as the
certificates and the reports, together with the documents accompanying
them, to be drawn up by those bodies. Those implementing acts shall be
adopted in accordance with the examination procedure referred to in
Article 112(3).

Article 10

Admissibility of payments made by the paying agencies

The expenditure referred to in Article 4(1) and in Article 5 may be
covered by Union financing only if it has been effected by accredited
paying agencies.

Article 11

Payment in full to beneficiaries

Save explicitly provided otherwise in the Union legislation, payments
relating to the financing provided for in this Regulation shall be
disbursed in full to the beneficiaries.

TITLE III

FARM ADVISORY SYSTEM

Article 12

Principle and scope

1.	Member States shall establish a system of advising beneficiaries on
land and farm management (hereinafter referred to as the ‘farm
advisory system’) operated by one or more designated bodies. The
designated bodies may be public or private.

2.	The farm advisory system shall cover at least:

(a)	the statutory management requirements and the standards for good
agricultural and environmental condition of land as laid down in Chapter
I of Title VI; 

(b)	the agricultural practices beneficial for the climate and the
environment as laid down in Chapter 2 of Title III of Regulation (EU) No
xxx/xxx [DP] and the maintenance of the agricultural area as referred to
in Article 4(1)(c) of Regulation (EU) No xxx/xxx [DP];

(c)	the requirements or actions related to climate change mitigation and
adaptation, biodiversity, protection of water, animal and plant disease
notification and innovation at minimum as laid down in Annex I to this
Regulation;

(d)	the sustainable development of the economical activity of the small
farms as defined by the Member States and at least of the farms
participating in the small farmers scheme referred to in Title V of
Regulation (EU) No xxx/xxx[DP].

3.	The farm advisory system may also cover in particular:

(a)	the sustainable development of the economical activity of holdings
other than those referred to in paragraph (2)(d);

(b)	the minimum requirements established by national legislation, as
referred to in Article 29(3) and 30(2) of Regulation (EU) No xxx/xxx
[RD]

Article 13

Specific requirements relating to the farm advisory system

1.	Member States shall ensure that the advisors within the farm advisory
system are suitably qualified and regularly trained.

2.	Member States shall ensure the separation between advice and control.
In this respect and without prejudice to national legislation concerning
public access to documents, Member States shall ensure that the
designated bodies referred to in Article 12 do not disclose personal or
individual information and data they obtain in their advisory activity
to persons other than the beneficiary managing the holding concerned,
with the exception of any irregularity or infringement found during
their activity which is covered by an obligation laid down in Union or
national law to inform a public authority, in particular in the case of
criminal offences.

3.	The competent national authority shall provide the beneficiary, where
appropriate by the use of electronic means, with the appropriate list of
designated bodies.

Article 14

Access to the farm advisory system

Beneficiaries, whether or not they receive support under the common
agricultural policy, including rural development, may use the farm
advisory system on a voluntary basis.

However Member States may determine, in accordance with objective
criteria, the categories of beneficiaries that have priority access to
the farm advisory system. Member States shall nevertheless ensure that
priority is given to farmers whose access to an advisory service other
than the farm advisory system is most limited.

The farm advisory system shall ensure that beneficiaries have access to
advice reflecting the specific situation of their holding.

Article 15

Commission powers

1.	In order to guarantee the proper functioning of the farm advisory
system, the Commission shall be empowered to adopt delegated acts in
accordance with Article 111 concerning provisions aiming at rendering
that system fully operational. Those provisions may relate, amongst
others, to the accessibility criteria for farmers.

2.	The Commission may, by means of implementing acts, adopt rules for
the uniform implementation of the farm advisory system. Those
implementing acts shall be adopted in accordance with the examination
procedure referred to in Article 112(3).

TITLE IV

FINANCIAL MANAGEMENT OF THE FUNDS

Chapter I

EAGF

Section 1

Financing of Expenditure

Article 16

Budget ceiling

1.	The annual ceiling for EAGF expenditure shall be constituted by the
maximum amounts set for it under Regulation (EU) No xxx/xxx [MFF].

2.	In the event that the Union legislation provides for sums to be
reduced from the amount referred to in paragraph 1, the Commission
shall, by means of implementing acts, set the net balance available for
EAGF expenditure on the basis of the data referred to in that
legislation.

Article 17

Monthly payments

1.	The appropriations necessary to finance the expenditure referred to
in Article 4(1) shall be made available to Member States by the
Commission in the form of monthly payments, on the basis of the
expenditure effected by the accredited paying agencies during a
reference period.

2.	Until transfer of the monthly payments by the Commission, the
resources required to undertake expenditure shall be mobilised by the
Member States according to the needs of their accredited paying
agencies.

Article 18

Procedure for monthly payments

1.	Monthly payments shall be made by the Commission, without prejudice
to the implementing acts referred to in Articles 53 and 54, for
expenditure effected by accredited paying agencies during the reference
month.

2.	Monthly payments shall be made to each Member State at the latest on
the third working day of the second month following that in which the
expenditure is effected.

Expenditure effected by Member States between 1 and 15 October shall
count as being made in the month of October. Expenditure effected
between 16 and 31 October shall count as being made in the month of
November.

3.	The Commission shall, by means of implementing acts, determine the
monthly payments which it makes, on the basis of a declaration of
expenditure from the Member States and the information supplied in
accordance with Article 102(1), taking account reductions or suspensions
applied under Article 43 or any other corrections. Those implementing
acts shall be adopted in accordance with the advisory procedure referred
to in Article 112(2).

4.	The Commission may, by means of implementing acts, decide to make
supplementary payments or deductions. In such cases, the Committee
referred to in Article 112(1) shall be informed at its next meeting.

Article 19

Administrative and personnel costs

Expenditure relating to administrative and personnel costs incurred by
Member States and by beneficiaries of aid from the EAGF shall not be
borne by the Fund.

Article 20

Public intervention expenditure

1.	Where, within the framework of the common organisation of the
markets, a sum per unit is not determined in respect of a public
intervention, the EAGF shall finance the measure concerned on the basis
of standard amounts uniform throughout the Union, in particular for
funds originating in the Member States used for buying-in products, for
material operations arising from storage and, where appropriate, for
processing of intervention products.

2.	In order to ensure the funding by the EAGF of the public intervention
expenditure the Commission shall be empowered to adopt delegated act in
accordance with Article 111 concerning:

(a)	the type of measures eligible for Union financing and the
reimbursement conditions;

(b)	the eligibility conditions and calculation methods on the basis of
the information actually observed by the paying agencies or on the basis
of flat-rates determined by the Commission, or on the basis of flat-rate
or non-flat-rate amounts provided for by the sectoral agricultural
legislation.

3.	The amounts referred to in the paragraph 1 shall be set by the
Commission by means of implementing acts. Those implementing acts shall
be adopted in accordance with the advisory procedure referred to in
Article 112(2).

Article 21

Acquisition of satellite images

The list of the satellite images required for checks shall be agreed by
the Commission and the Member States in accordance with the
specification prepared by each Member State.

The Commission shall supply those satellite images free of charge to the
control bodies or to suppliers of services authorised by those bodies to
represent them.

The Commission shall remain the owner of the images and shall recover
them on completion of the work. It may also provide that work is carried
out on enhancing techniques and working methods in connection with the
inspection of agricultural areas by remote sensing.

Article 22

Monitoring of agricultural resources

The measures financed pursuant to point (c) of Article 6 shall aim to
give the Commission the means to manage Union agricultural markets in a
global context, to ensure agri-economic monitoring of agricultural land
and of the condition of crops so as to enable estimates to be made, in
particular as regards yields and agricultural production, to share the
access to such estimates in an international context, such as
initiatives coordinated by United Nations organisations or other
international agencies, to contribute to transparency of world markets,
and to ensure technological follow-up of the agri-meteorological system.


The measures financed pursuant to point (c) of Article 6 concern the
collection or purchase of data needed to implement and monitor the
common agricultural policy, including satellite data and meteorological
data, the creation of a spatial data infrastructure and a website, the
carrying out of specific studies on climatic conditions and the updating
of agri-meteorological and econometric models. Where necessary, those
measures shall be carried out in collaboration with national
laboratories and bodies.

Article 23

Implementing powers

The Commission may, by means of implementing acts, adopt rules relating
to the financing pursuant to points (b) and (c) of Article 6, the
procedure under which the measures referred to in Articles 21 and 22
shall be carried out in order to meet the objectives assigned, the
framework governing the acquisition, enhancing and utilisation of
satellite images and meteorological data, and the applicable deadlines.
Those implementing acts shall be adopted in accordance with the
examination procedure referred to in Article 112(3).

Section 2

Budget discipline

Article 24

Compliance with the ceiling

1.	Throughout the budget procedure and the implementation of the budget,
appropriations relating to EAGF expenditure shall not exceed the amount
referred to in Article 16.

All legislative instruments proposed by the Commission and adopted by
the European Parliament and the Council, the Council or the Commission
and having an influence on the EAGF budget shall comply with the amount
referred to in Article 16.

2.	Where Union legislation provides for a financial ceiling in euro for
agricultural expenditure in respect of a Member State, such expenditure
shall be reimbursed subject to that limit set in euro, with any
necessary adjustments being made if Article 43 applies.

3.	National ceilings for direct payments referred to in Article 7 of
Regulation (EU) No xxx/xxx[DP], corrected by the adjustments laid down
in Article 25 of this Regulation, shall be deemed to be financial
ceilings in euro.

Article 25

Financial discipline

1.	With a view to ensuring that the annual ceilings set out in the
Regulation (EU) No xxx/xxx [MFF] for the financing of the market related
expenditure and direct payments are respected, an adjustment rate of the
direct payments shall be determined when the forecasts for the financing
of the measures financed under that subceiling for a given financial
year indicate that the applicable annual ceilings will be exceeded.

2.	The Council, acting on a proposal from the Commission presented no
later than 31 March of the calendar year in respect of which the
adjustment referred to in paragraph 1 applies, shall determine the
adjustment no later than 30 June of the same calendar year.

3.	If by 30 June in any year the adjustment rate has not been set, the
Commission shall set it by means of an implementing act and shall inform
the Council immediately. Such implementing act shall be adopted in
accordance with the advisory procedure referred to in Article 112(2).

4.	Until 1 December, on a proposal by the Commission, on the basis of
new information in its possession, the Council may adapt the adjustment
rate for direct payments set in accordance with paragraphs 2 or 3.

5.	The Commission may by means of implementing act  adopt the terms and
conditions applicable to appropriations carried over in accordance with
Article [149(3)] of Regulation (EU) No FR/xxx in order to finance the
expenditure referred to in Article 4(1)(b) of this Regulation. Those
implementing acts shall be adopted in accordance with the advisory
procedure referred to in Article 112(2).

6.	Before applying this Article, account shall first be taken of the
amount authorised by the budget authority for the Reserve for crises in
the agricultural sector referred to in point 14 of the
Interinstitutional Agreement between the European Parliament, the
Council and the Commission on cooperation in budgetary matters and on
sound financial management.

Article 26

Budget discipline procedure

1.	The Commission shall present to the European Parliament and to the
Council, at the same time as the draft budget for financial year N, its
forecasts for financial years N - 1, N and N + 1.

2.	If, on drawing up the draft budget for financial year N, there
appears to be a risk that the amount referred to in Article 16 for
financial year N will be exceeded, the Commission shall propose to the
European Parliament and the Council or to the Council the measures
necessary to ensure compliance with that amount.

3.	At any time, if the Commission considers that there is a risk of the
amount referred to in Article 16 being exceeded and that it cannot take
adequate measures to remedy the situation under its powers, it shall
propose other measures to ensure compliance with that amount. These
measures shall be adopted by the Council on the basis of Article 43(3)
of the Treaty or by the European Parliament and the Council on the basis
of Article 43(2) of the Treaty.

4.	If, at the end of financial year N, reimbursement requests from the
Member States exceed or are likely to exceed the amount referred to in
Article 16, the Commission shall:

(a)	consider the requests presented by Member States pro rata and within
the limit of the available budget, and shall, by means of implementing
acts, set provisionally the amount of the payments for the month
concerned;

(b)	determine, for all Member States, at the latest by 28 February of
the following year, their situation with regard to Union financing for
the previous financial year;

(c)	set, by means of implementing act the total amount of Union
financing broken down by Member State, on the basis of a single rate of
Union financing, within the limit of the budget which was available for
the monthly payments;

(d)	effect, at the latest when the monthly payments are made for March
of year N+1, any compensations to be carried out with respect to Member
States.

The implementing acts provided for in points (a) and (c) of the first
subparagraph shall be adopted in accordance with the advisory procedure
referred to in Article 112(2).

Article 27

Early-warning system

In order to ensure that the budget ceiling referred to in Article 16
will not be exceeded, the Commission shall implement a monthly
early-warning and monitoring system in respect of EAGF expenditure.

Before the beginning of each financial year, the Commission shall
determine for that purpose monthly expenditure profiles based, where
appropriate, on average monthly expenditure during the previous three
years.

The Commission shall present periodically to the European Parliament and
to the Council a report examining the development of expenditure
effected in relation to the profiles and containing an assessment of the
foreseeable implementation for the current financial year.

Article 28

Reference exchange rates

1.	When adopting the draft budget, or a letter of amendment to the draft
budget which concerns agricultural expenditure, the Commission shall use
for EAGF budget estimates the average euro/US dollar exchange rate
recorded on the market during the latest quarter ending at least 20 days
before adoption of the budget document by the Commission.

2.	When adopting a draft amending and supplementary budget or a letter
of amendment thereto, in so far as those documents concern
appropriations relating to the measures referred to in Article 4(1)(a),
the Commission shall use:

(a)	firstly, the average euro/US dollar exchange rate actually recorded
on the market from 1 August of the previous financial year until the end
of the latest quarter ending at least 20 days before adoption of the
budget document by the Commission and at the latest on 31 July of the
current financial year, and

(b)	secondly, as a forecast for the remainder of the financial year, the
average exchange rate actually recorded during the latest quarter ending
at least 20 days before adoption of the budget document by the
Commission.

Chapter II

EAFRD

Section 1

General provisions for EAFRD

Article 29

No double funding

Without prejudice to the eligibility for support under Article 30(2) of
Regulation (EU) No RD/xxx, expenditure financed under the EAFRD shall
not be subject of any other financing under the EU budget.

Article 30

Provisions applying to all payments

1.	In accordance with Article 67(1) of Regulation (EU) No CR/xxx
payments by the Commission of the EAFRD contribution as referred to in
Article 5 shall not exceed the budget commitments.

They shall be assigned to the earliest open budget commitment.

2.	Article [81] of Regulation (EU) No FR/xxx shall apply.

Section 2

Financing of rural development programmes

Article 31

Financial contribution from the EAFRD

The financial contribution from the EAFRD towards expenditure under
rural development programmes shall be determined for each programme,
within the ceilings established by Union legislation concerning support
for rural development by the EAFRD.

Article 32

Budget commitments

As regards the Union's budget commitments for rural development
programmes, Article 66 of Regulation (EU) No CR/xxx shall apply. 

Section 3

Financial Contribution to rural development programmes

Article 33

Provisions applying to payments for rural development programmes

1.	The appropriations necessary to finance the expenditure referred to
in Article 5 shall be made available to Member States in the form of
prefinancing, interim payments and the payment of a balance, as
described in this Section.

2.	The combined total of prefinancing and interim payments shall not
exceed 95 % of the EAFRD's contribution to each rural development
programme.

In accordance with Article 70(2) of Regulation (EU) No CR/xxx, when the
ceiling of 95 % is reached, the Member States shall continue
transmitting request for payments to the Commission.

Article 34

Prefinancing arrangements

1.	Following the Commission decision approving the programme, an initial
prefinancing amount for the whole programming period shall be paid by
the Commission. This initial pre-financing amount shall represent 4% of
the EAFRD contribution to the programme concerned. It may be split into
a maximum of three instalments depending on budget availability. The
first instalment shall represent 2% of the EAFRD contribution to the
programme concerned.

2.	The total amount paid as prefinancing shall be reimbursed to the
Commission if no expenditure is incurred and no declaration of
expenditure for the rural development programme is sent within 24 months
of the date on which the Commission pays the first instalment of the
prefinancing amount.

3.	Interest generated on the prefinancing shall be posted to the rural
development programme concerned and deducted from the amount of public
expenditure indicated on the final declaration of expenditure.

4.	The total prefinancing amount shall be cleared in accordance with the
procedure referred to in Article 53 before the rural development
programme is closed.

Article 35

Interim payments

1.	Interim payments shall be made for each rural development programme.
They shall be calculated by applying the co-financing rate for each
measure to the incurred public expenditure pertaining to it.

2.	Subject to resource availability, the Commission shall make interim
payments in order to reimburse the expenditure incurred by accredited
paying agencies in implementing the programmes.

3.	Each interim payment shall be made subject to compliance with the
following requirements:

(a)	transmission to the Commission of a declaration of expenditure
signed by the accredited paying agency, in accordance with Article
102(1)(c);

(b)	no overrun of the total EAFRD contribution to each measure for the
entire period covered by the programme concerned;

(c)	transmission to the Commission of the last annual progress report on
the implementation of the rural development programme.

4.	If one of the requirements laid down in paragraph 3 is not met, the
Commission shall forthwith inform the accredited paying agency or the
coordinating body, where one has been appointed. If one of the
requirements laid down in point (a) or (c) of paragraph 3 is not
respected, the declaration of expenditure shall be inadmissible.

5.	The Commission shall make interim payments within 45 days of
registering a declaration of expenditure for which the requirements set
out in paragraph 3 of this Article are met, without prejudice to the
Article 39 and to the implementing acts referred to in Articles 53 and
54.

6.	Accredited paying agencies shall establish and forward, either
directly or via the intermediary of the coordinating body, where one has
been appointed, intermediate declarations of expenditure relating to
rural development programmes to the Commission, within periods set by
the Commission by means of implementing acts adopted in accordance with
the examination procedure referred to in Article 112(3).

Declarations of expenditure shall cover expenditure that the paying
agencies have incurred during each of the periods concerned. However, in
cases where expenditure referred to in Article 55(7) of Regulation (EU)
No CR/xxx cannot be declared to the Commission in the period concerned
due to pending approval of the program modification by the Commission,
it may be declared in subsequent periods.

Intermediate declarations of expenditure in respect of expenditure
incurred from 16 October onwards shall be booked to the following year's
budget.

7.	Article 74 of Regulation (EU) No CR/xxx shall apply.

Article 36

Payment of the balance and closure of the programme

1.	After receiving the last annual progress report on the implementation
of a rural development programme, the Commission shall pay the balance,
subject to resource availability, on the basis of the financial plan in
force, the annual accounts for the last execution year for the relevant
rural development programme and of the corresponding clearance decision.
Those accounts shall be presented to the Commission no later than 6
months after the final eligibility date of expenditure as referred to in
Article 55(2) of Regulation (EU) No xxx/xxx[CR] and shall cover the
expenditure incurred by the paying agency up to the last eligibility
date of expenditure.

2.	The balance shall be paid not later than six months after the
information and documents referred to in paragraph 1 of this Article are
considered receivable by the Commission and the last annual account have
been cleared. The amounts still committed after the balance is paid
shall be decommitted by the Commission within a period of six months,
without prejudice to Article 37(5).

3.	If by the time limit set out in paragraph 1 the Commission has not
been sent the last annual progress report and the documents needed for
clearance of the accounts of the last execution year for the programme
the balance shall be automatically decommitted in accordance with
Article 37.

Article 37

Automatic decommitment for rural development programmes

1.	The Commission shall automatically decommit any portion of a budget
commitment for a rural development programme that has not been used for
the purpose of prefinancing or making interim payments or for which no
declaration of expenditure fulfilling the requirements laid down in
Article 35(3) has been presented to it in relation to expenditure
incurred by 31 December of the second year following that of the budget
commitment.

2.	That part of budget commitments still open on the last eligibility
date of expenditure as referred to in Article 55(2) of Regulation (EU)
No xxx/xxx[CR] for which a declaration of expenditure has not been made
by within 6 months after that date shall be automatically decommitted.

3.	In the event of any legal proceedings or an administrative appeal
having suspensory effect, the period for automatic decommitment referred
to in paragraph 1 or paragraph 2 shall be interrupted, in respect of the
amount relating to the operations concerned, for the duration of those
proceedings or that administrative appeal, provided that the Commission
receives substantiated notification from the Member State by 31 December
of year N + 2.

4.	The following shall be disregarded in calculating the automatic
decommitment:

(a)	that part of the budget commitments for which a declaration of
expenditure has been made but reimbursement of which has been reduced or
suspended by the Commission at 31 December of year N + 2;

(b)	that part of the budget commitments which a paying agency has been
unable to disburse for reasons of force majeure seriously affecting
implementation of the rural development programme. National authorities
claiming force majeure must demonstrate the direct consequences on the
implementation of all or part of the programme.

The Member State shall send the Commission information on the exceptions
referred to in the first subparagraph by 31 January for the amount to be
declared by the end of the preceding year.

5.	The Commission shall inform Member States in good time if there is a
risk of automatic decommitment. It shall inform them of the amount
involved as indicated by the information in its possession. The Member
States shall have two months from receiving this information to agree to
the amount in question or present observations. The Commission shall
carry out the automatic decommitment not later than nine months after
the last time-limit resulting from the application of paragraphs 1 to 3.

6.	In the event of automatic decommitment, the EAFRD contribution to the
rural development programme concerned shall be reduced, for the year in
question, by the amount automatically decommitted. The Member State
shall produce a revised financing plan splitting the reduction of the
aid between the measures for approval by the Commission. If it does not
do so, the Commission shall reduce the amounts allocated to each measure
pro rata.

Section 4

Financing of the Prize for innovative, local cooperation

Article 38

Budget commitments

The Commission Decision adopting the list of the projects to which the
Prize for innovative, local cooperation is awarded, as referred to in
Article 58(4) of Regulation (EU) No RD/xxx shall constitute a financing
decision within the meaning of Article [75(2)] of Regulation (EU) No
FR/xxx.

Following the adoption of the Decision referred to in the first
paragraph, the Commission shall made a budget commitment by Member State
for the total amount of the prizes granted to projects in that Member
State within the limit referred to in Article 51(2) of Regulation (EU)
No RD/xxx.

Article 39

Payments to the Member States

1.	Within the framework of the interim payments referred to in Article
35, the Commission shall make payments in order to reimburse the
expenditure incurred by accredited paying agencies in awarding the
Prizes referred to in this Section in the limits of the available budget
commitments for the Member States concerned.

2.	Each payment shall be subject to the transmission to the Commission
of a declaration of expenditure signed by the accredited paying agency,
in accordance with Article 102(1)(c). 

3.	Accredited paying agencies shall establish and forward, either
directly or via the intermediary of the coordinating body, where one has
been appointed, declarations of expenditure relating to the Prize for
innovative, local cooperation to the Commission, within periods set by
the Commission by means of implementing acts adopted in accordance with
the examination procedure referred to in Article 112(3).

Declarations of expenditure shall cover expenditure that the paying
agencies have incurred during each of the periods concerned. 

Article 40

Automatic decommitment for the Prize for innovative, local cooperation

The Commission shall automatically decommit the amounts referred to in
the second subparagraph of Article 38 that have not been used for
reimbursing the Member States as laid down in Article 39 or for which no
declaration of expenditure meeting the conditions laid down in that
Article has been presented to it in relation to expenditure incurred by
31 December of the second year following that of the budget commitment.

Article 37(3), (4) and (5) shall apply mutatis mutandis.

Chapter III

Common Provisions

Article 41

Agricultural financial year

Without prejudice to the special provisions on declarations of
expenditure and revenue relating to public intervention laid down by the
Commission pursuant to Article 48(7)(a), the agricultural financial year
shall cover expenditure paid and revenue received and entered in the
accounts of the EAGF and EAFRD budget by the paying agencies in respect
of financial year «N» beginning on 16 October of year «N-1» and
ending on 15 October of year «N».

Article 42

Compliance with payment deadlines

1.	Where payment deadlines are laid down by Union legislation, any
payment made by the paying agencies to the beneficiaries before the
earliest possible date of payment and after the latest possible date of
payment shall make the payments ineligible for Union financing, except
in the cases, conditions and limits to be determined taking into account
the principle of proportionality.

In order to make the financial impact proportional to the payment delay
observed, the Commission shall be empowered to adopt delegated acts in
accordance with Article 111 concerning rules on the reduction of
payments in relation to the non-respect of the payment period.

2.	Where the latest possible date of payment is not respected by the
Member States, they shall pay the beneficiaries default interests,
supported from the national budget. 

Article 43

Reduction and suspension of monthly and interim payments

1.	Where the declarations of expenditure or the information referred to
in Article 102 enable the Commission to establish that expenditure has
been effected by bodies which are not accredited paying agencies, that
payment periods or financial ceilings set by Union legislation have not
been respected or that expenditure has otherwise not been effected in
accordance with Union rules, the Commission may reduce or suspend the
monthly or interim payments to the Member State concerned under the
decision on monthly payments referred to in Article 18(3) or in the
framework of the interim payments referred to in Article 35, after
giving the Member State an opportunity to submit its comments.

Where the declarations of expenditure or the information referred to in
Article 102 do not enable the Commission to establish that the
expenditure has been effected in accordance with Union rules, the
Commission shall ask the Member State concerned to supply further
information and submit its comments within a period which may not be
less than 30 days. If the Member State fails to respond to the
Commission request within the period determined or if the response is
considered unsatisfactory or demonstrates that the expenditure has not
been effected in accordance with Union rules, the Commission may reduce
or suspend the monthly or interim payments to the Member State concerned
under the decision on monthly payments referred to in Article 18(3) or
in the framework of the interim payments referred to in Article 35.

2.	The Commission may, by way of implementing acts, reduce or suspend
the monthly or interim payments to a Member State if all of the
following conditions are met:

(a)	one or more of the key components of the national control system in
question do not exist or are not effective due to the gravity or
persistence of the deficiencies found, or irregular payments are not
being recovered with the necessary diligence;

(b)	the deficiencies referred to in point (a) are of a continuous nature
and have been the reason for at least two implementing acts pursuant to
Article 54, excluding from Union financing expenditure from the Member
State concerned; and

(c)	the Commission concludes that the Member State concerned is not in a
position to implement the necessary measures to remedy the situation in
the immediate future.

The implementing acts provided for in the first subparagraph shall be
adopted in accordance with the advisory procedure referred to in Article
112(2).

The reduction or suspension shall be applied to the relevant expenditure
effected by the paying agency where the deficiencies exist for a period
to be determined in the implementing acts referred to in the first
subparagraph, which shall not exceed twelve months but which may be
prolonged for further periods not exceeding twelve months if the
conditions for the reduction or suspension continue to be met. It shall
not be continued if those conditions are no longer met.

Before adopting the implementing acts referred to in the first
subparagraph, the Commission shall inform the Member State concerned of
its intention and shall ask it to react within a period which may not be
less than 30 days.

The decisions on the monthly payments referred to in Article 18(3) or on
the interim payments referred to in Article 35 shall take account of the
implementing acts adopted under this paragraph.

3.	Reductions and suspensions under this Article shall be applied in
accordance with the principle of proportionality and are without
prejudice to the implementing acts referred to in Articles 53 and 54.

4.	Reductions and suspensions under this Article shall be without
prejudice to Articles 17,  20 and 21 of Regulation (EU) No CR/xxx.

The suspensions referred to in Articles 17 and 20 of Regulation (EU) No
CR/xxx shall be applied following the procedure laid down in paragraph 2
of this Article.

Article 44

Suspension of payments in case of late submission

When sectoral agricultural legislation requires Member States to submit,
within a specific period of time, information on the numbers of checks
carried out and their outcome and the Member States overrun that period,
the Commission may suspend the monthly payments referred to in Article
18 or the interim payments referred to in Article 35 for which the
relevant statistical information has not been sent in time.

Article 45

Assignment of revenue

1.	The following shall be regarded as assigned revenue within the
meaning of Article [18] of Regulation (EU) No FR/xxx:

(a)	sums which, under Articles 42, Article 53 as regards expenditure
under EAGF, 54 and 56, must be paid to the Union budget, including
interest thereon;

(b)	sums which are collected or recovered under Chapter III of Title I
of Part II of Regulation (EU) No sCMO align/xxx of European parliament
and of the Council;

(c)	sums which have been collected as a consequence of penalties in
accordance with the specific rules laid down in sectoral agricultural
legislation, save if that legislation explicitly provides that those
amounts may be retained by the Member States;

(d)	amounts corresponding to penalties applied in accordance with the
rules on cross-compliance laid down in Chapter II of Title VI, as
regards expenditure under EAGF;

(e)	any security, deposit or guarantee furnished pursuant to Union
legislation adopted within the framework of Common Agricultural Policy,
excluding rural development, which is forfeited. However, forfeited
securities lodged when issuing export or import licences or under a
tendering procedure for the sole purpose of ensuring the submission by
tenderers of genuine tenders shall be retained by the Member States.

2.	The sums referred to in paragraph 1 shall be paid to the Union budget
and, in the event of reuse, shall be used exclusively to finance EAGF or
EAFRD expenditure.

3.	This Regulation shall apply mutatis mutandis to assigned revenue
referred to in paragraph 1.

4.	As regards the EAGF, Articles [150 and 151] of Regulation (EU)
No FR/xxx shall apply mutatis mutandis to the keeping of accounts on
assigned revenue referred to in this Regulation.

Article 46

Keeping of separate accounts

Each paying agency shall keep a set of separate accounts for the
appropriations entered in the budget of the Union for the EAGF and the
EAFRD.

Article 47

Financing of information measures

1.	The provision of information financed pursuant to point (e) of
Article 6 shall aim, in particular, at helping to explain, implement and
develop the common agricultural policy and raising public awareness of
the content and objectives of that policy, at reinstating consumer
confidence following crises through information campaigns, at informing
farmers and other parties active in rural areas and promoting the
European model of agriculture and helping people understand it.

It shall supply coherent, objective and comprehensive information, both
inside and outside the Union, in order to give an overall picture of
that policy.

2.	The measures referred to in paragraph 1 may be:

(a)	annual work programmes or other specific measures presented by third
parties;

(b)	activities implemented at the Commission's initiative.

The measures which are required by law or the measures already receiving
financing under another Union action shall be excluded.

In order to implement activities as referred to in point (b) the
Commission may be assisted by external experts.

The measures referred to in the first subparagraph shall also contribute
to covering the corporate communication of the Union's political
priorities provided that  they are related to the general objectives of
this Regulation.

3.	The Commission shall publish by 31 October of each year a call of
proposal respecting the conditions laid down in Regulation (EU) No
FR/xxx.

4.	The Committee referred to in Article 112(1) shall be notified of
measures envisaged and taken pursuant to this Article.

5.	The Commission shall present a report on the implementation of this
Article to the European Parliament and the Council every two years.

Article 48

Commission powers

1.	In order to take account of revenue collected by paying agencies for
the Union's budget when making payments on the basis of the expenditure
declarations submitted by Member States, the Commission shall be
empowered to adopt delegated act in accordance with Article 111
concerning the conditions under which certain types of expenditure and
revenue under the EAGF and the EAFRD are to be compensated.

2.	In order to ensure the proper management of the appropriations
entered in the budget of the Union for the EAGF and the EAFRD, the
Commission shall be empowered to adopt delegated acts in accordance with
Article 111 containing rules pertaining to the valuation of operations
in connection with public intervention and the measures to be taken in
case of loss or deterioration of products under the public intervention
and the determination of amounts to be financed.

3.	In order to enable the equitable distribution of the appropriations
available between the Member States, if the Union's budget has not been
adopted by the beginning of the financial year or if the total amount of
the commitments scheduled exceeds the threshold laid down in Article
[150(3)] of Regulation (EU) No FR/xxx, the Commission shall be empowered
to adopt delegated act in accordance with Article 111 of this Regulation
on the provisions for the method applicable to the commitments and the
payment of the amounts.

4.	In order to verify the consistency of the data notified by the Member
States in relation to the expenditure or other information provided for
in this Regulation, and to ensure compliance with the obligation to
notify pursuant to Article 102, the Commission shall be empowered to
adopt delegated acts in accordance with Article 111 on the conditions
governing the reduction and suspension of payment to Member States, with
regard to expenditure under the EAGF and the EAFRD respectively.

5.	In order to ensure the respect of the proportionality principle when
applying Article 44, the Commission shall be empowered to adopt
delegated acts in accordance with Article 111 pertaining to rules on:

(a)	the list of measures which fall under Article 44;

(b)	the rate and period of suspension of payments referred to in that
Article;

(c)	the conditions for lifting the suspension.

6.	The Commission may lay down, by means of implementing acts, further
details on the obligation laid down in Article 46 as well as the
specific conditions applying to the information to be booked in the
accounts kept by the paying agencies. Those implementing acts shall be
adopted in accordance with the examination procedure referred to in
Article 112(3).

7.	The Commission may, by means of implementing acts, adopt rules
pertaining to:

(a)	rules on the financing and accounting of intervention measures in
the form of public storage, and other expenditure financed by the EAGF
and the EAFRD;

(b)	the terms and conditions governing the implementation of the
automatic decommitment procedure;

(c)	rules on the payment by the Member States of default interests to
the beneficiaries as referred to in Article 42(2).

The implementing acts provided for in the first subparagraph shall be
adopted in accordance with the examination procedure referred to in
Article 112(3).

Chapter IV

Clearance of accounts

Section I

General provisions

Article 49

On-the-spot checks by the Commission

1.	Without prejudice to the checks carried out by Member States under
national laws, regulations and administrative provisions or Article 287
of the Treaty or any check organised under Article 322 of the Treaty or
based on Council Regulation (EC) No 2185/96, the Commission may organise
on-the-spot checks in Member States with a view to verifying in
particular:

(a)	compliance of administrative practices with Union rules;

(b)	the existence of the requisite supporting documents and their
correlation with the operations financed by the EAGF or the EAFRD;

(c)	the terms on which the operations financed by the EAGF or the EAFRD
have been undertaken and checked.

Persons delegated by the Commission to carry out on-the-spot checks or
Commission agents acting within the scope of the powers conferred upon
them shall have access to the books and all other documents, including
documents and metadata drawn up or received and recorded on an
electronic medium, relating to expenditure financed by the EAGF or the
EAFRD.

The powers to carry out on-the-spot checks shall not affect the
application of national provisions which reserve certain acts for agents
specifically designated by national legislation. Without prejudice to
the specific provisions of Regulations (EC) No 1073/1999 and (EC) No
2185/96, persons delegated by the Commission shall not take part, inter
alia, in home visits or the formal questioning of persons on the basis
of legislation of the Member State concerned. However, they shall have
access to information thus obtained.

2.	The Commission shall give sufficient prior notice of an on-the-spot
check to the Member State concerned or the Member State within whose
territory the check is to take place. Agents from the Member State
concerned may take part in such checks.

At the request of the Commission and with the agreement of the Member
State, additional checks or inquiries into the operations covered by
this Regulation shall be undertaken by the competent bodies of that
Member State. Commission agents or persons delegated by the Commission
may take part in such checks. 

In order to improve checks, the Commission may, with the agreement of
the Member States concerned, request the assistance of the authorities
of those Member States for certain checks or inquiries.

Article 50

Access to information

1.	Member States shall make available to the Commission all information
necessary for the smooth operation of the EAGF and the EAFRD and shall
take all appropriate measures to facilitate the checks which the
Commission deems appropriate in connection with the management of Union
financing, including on-the-spot checks.

2.	Member States shall communicate to the Commission on request the
laws, regulations and administrative provisions which they have adopted
for implementing the Union acts relating to the common agricultural
policy, where those acts have a financial impact on the EAGF or the
EAFRD.

3.	Member States shall make available to the Commission all information
about irregularities and suspected fraud cases detected, and about the
steps taken to recover undue payments in connection with those
irregularities and frauds pursuant to Section III of this Chapter.

Article 51

Access to documents

The accredited paying agencies shall keep supporting documents relating
to payments made and documents relating to the performance of the
administrative and physical checks required by Union legislation, and
shall make the documents and information available to the Commission.

Where those documents are kept by an authority acting under delegation
from a paying agency and responsible for authorising expenditure, that
authority shall send reports to the accredited paying agency on the
number of checks made, their content and the measures taken in the light
of their results.

Article 52

Implementing powers

The Commission may, by means of implementing acts, lay down rules
regarding: 

(a)	the specific obligations which the Member States have to comply with
in relation to the checks provided for in this Chapter;

(b)	the cooperation obligations to be complied with by the Member States
for the implementation of Articles 49 and 50;

(c)	the modalities for the reporting obligation referred to in Article
50(3).

The implementing acts provided for in the first paragraph shall be
adopted in accordance with the examination procedure referred to in
Article 112(3).

Section II

Clearance

Article 53

Clearance of accounts

1.	Prior to 30 April of the year following the budget year in question
and on the basis of the information transmitted in accordance with
Article 102(1)(c), the Commission shall, by means of implementing acts,
decide on the clearance of the accounts of the accredited paying
agencies. Those implementing acts shall be adopted in accordance with
the advisory procedure referred to in Article 112(2).

2.	The clearance decision referred to in paragraph 1 shall cover the
completeness, accuracy and veracity of the annual accounts submitted.
The decision shall be adopted without prejudice to decisions adopted
subsequently pursuant to Article 54.

Article 54

Conformity clearance

1.	The Commission shall, by means of implementing acts, decide on the
amounts to be excluded from Union financing when it finds that
expenditure as indicated in Article 4(1) and Article 5 has not been
incurred in conformity with Union legislation and, for EAFRD, with the
applicable Union and national law referred to in Article 77 of
Regulation (EU) No CR/xxx. Those implementing acts shall be adopted in
accordance with the advisory procedure referred to in Article 112(2).

2.	The Commission shall assess the amounts to be excluded on the basis
of the gravity of the non-conformity recorded. It shall take due account
of the nature and gravity of the infringement and of the financial
damage caused to the Union.

3.	Before the adoption of any decision to refuse financing, the findings
from the Commission's inspection and the Member State's replies shall be
notified in writing, following which the two parties shall attempt to
reach agreement on the action to be taken.

If agreement is not reached, the Member State may request opening of a
procedure aimed at reconciling each party's position within four months.
A report of the outcome of the procedure shall be given to the
Commission, which shall examine it before deciding on any refusal of
financing.

4.	Financing may not be refused for:

(a)	expenditure as indicated in Article 4(1) which is incurred more than
24 months before the Commission notifies the Member State in writing of
its inspection findings;

(b)	expenditure on multiannual measures falling within the scope of
Article 4(1) or within the scope of the programmes as indicated in
Article 5, where the final obligation on the recipient occurs more than
24 months before the Commission notifies the Member State in writing of
its inspection findings;

(c)	expenditure on measures in programmes, as indicated in Article 5,
other than those referred to in point (b) of this paragraph, for which
the payment or, as the case may be, the final payment, by the paying
agency, is made more than 24 months before the Commission notifies the
Member State in writing of its inspection findings.

5.	Paragraph 4 shall not apply in the case of:

(a)	irregularities covered by Section III of this Chapter;

(b)	national aids or infringements for which the procedure laid down in
Article 108 or Article 258 of the Treaty respectively has begun;

(c)	infringements by Member States of their obligations under Chapter
III of Title V of this Regulation, provided that the Commission notifies
the Member State in writing of its inspection findings within 12 months
following receipt of the Member State’s report on the results of its
checks of the expenditure concerned.

Article 55

Implementing powers

The Commission shall, by means of implementing acts, lay down rules for
the implementation of:

(a)	the clearance of accounts provided for in Article 53 with regard to
the measures to be taken in connection with the adoption of the decision
and its implementation, including the information exchange betweeen the
Commission and the Member States and the deadlines to be respected;

(b)	the conformity clearance provided for in Article 54 with regard to
the measures to be taken in connection with the adoption of the decision
and its implementation, including the information exchange between the
Commission and the Member States and the deadlines to be respected as
well as the conciliation procedure provided for in that Article,
including the establishment, tasks, composition and working arrangements
of the conciliation body.

The implementing acts provided for in the first paragraph shall be
adopted in accordance with the examination procedure referred to in
Article 112(3).

Section III

Irregularities

Article 56

Common Provisions 

1.	For any undue payment following the occurrence of irregularity or
negligence, Member States shall request recovery from the beneficiary
within one year of the first indication that such an irregular has taken
place and shall record the corresponding amounts in the debtors' ledger
of the paying agency.

2.	If recovery has not taken place within four years of the date of the
recovery request, or within eight years where recovery is taken in the
national courts, the financial consequences of non-recovery shall be
borne by the Member State concerned, without prejudice to the
requirement that the Member State concerned must pursue recovery
procedures in compliance with Article 60.

Where, in the context of the recovery procedure, the absence of any
irregularity is recorded by an administrative or legal instrument of a
definitive nature, the Member State concerned shall declare as
expenditure to the EAGF and EAFRD the financial burden borne by it under
the first subparagraph.

3.	On duly justified grounds, Member States may decide not to pursue
recovery. A decision to this effect may be taken only in the following
cases:

(a)	if the costs already and likely to be incurred total more than the
amount to be recovered, or

(b)	if recovery proves impossible owing to the insolvency, recorded and
recognised under national law, of the debtor or the persons legally
responsible for the irregularity.

Where the decision referred to in the first subparagraph of this
paragraph is taken before the outstanding amount has been subject to the
rules referred to in paragraph 2, the financial consequence of
non-recovery is borne by the Union budget.

4.	Member States shall enter in the annual accounts to be sent to the
Commission under Article 102(1)(c)(iv) the amounts to be borne by them
under paragraph 2 of this Article. The Commission shall check that this
has been done and make any adjustments needed as part of the
implementing act specified in Article 53(1).

5.	The Commission may, by means of implementing acts, decide to exclude
from Union financing sums charged to the Union budget in the following
cases:

(a)	if the Member State has not respected the time limits referred to in
paragraph 1;

(b)	if it considers that the decision not to pursue recovery taken by a
Member State pursuant to paragraph 3 is not justified;

(c)	if it considers that the irregularity or lack of recovery is the
outcome of irregularity or negligence attributable to the administrative
authorities or another official body of the Member State.

The implementing acts provided for in the first subparagraph shall be
adopted in accordance with the advisory procedure referred to in Article
112(2). Before the adoption of such implementing acts, the procedure
laid down in Article 54(3) shall apply.

Article 57

Provisions specific to the EAGF 

Sums recovered following the occurrence of irregularity or negligence
and the interest threon shall be made over to the paying agency and
booked by it as revenue assigned to the EAGF in the month in which the
money is actually received.

When the Union budget is credited as referred in the first paragraph,
the Member State may retain 10 % of the corresponding amounts as flat
rate recovery costs, except in cases of irregularity or negligence
attributable to its administrative authorities or other official bodies.

Article 58

Provisions specific to the EAFRD

Member States shall make financial adjustments where irregularities or
negligence are detected in rural development operations or programmes by
totally or partially cancelling the Union financing concerned. Member
States shall take into consideration the nature and gravity of the
irregularities detected and the level of the financial loss to the
EAFRD.

Amounts of the Union financing under the EAFRD which are cancelled and
amounts recovered, as well as the interest thereon, shall be reallocated
to the programme concerned. However, the cancelled or recovered Union
funds may be reused by Member States only for an operation under the
same rural development programme and provided the funds are not
reallocated to operations which have been the subject of a financial
adjustment. After the closure of a rural development programme, the
Member State shall refund the sums recovered to the Union budget.

Article 59

Delegated powers

In order to ensure correct and efficient application of the provisions
relating to recovery set out in this Section, the Commission shall be
empowered to adopt delegated act in accordance with Article 111
concerning specific obligations to be complied with by the Member
States.

TITLE V

CONTROL SYSTEMS AND PENALTIES

Chapter I

General rules

Article 60

Protection of the financial interests of the Union

1.	Member States shall within the framework of the common agricultural
policy, adopt all legislative, regulatory and administrative provisions
and take any other measures necessary to ensure effective protection of
the financial interests of the Union and particularly to:

(a)	check the legality and regularity of operations financed by the EAGF
and the EAFRD;

(b)	offer effective prevention against fraud, especially as regards the
areas with a higher level of risk, and which shall act as a deterrent,
having regard to the costs and benefits as well as the proportionality
of the measures;

(c)	prevent, detect and correct irregularities and fraud;

(d)	impose penalties which are effective, dissuasive and proportionate
in accordance with Union legislation, or failing this, national law, and
bring legal proceedings to that effect, as necessary;

(e)	recover undue payments plus interest, and bring legal proceedings to
that effect as necessary.

2.	Member States shall set up efficient management and control systems
in order to ensure compliance with the legislation governing Union
support schemes.

3.	Member States shall inform the Commission of the provisions adopted
and measures taken under paragraphs 1 and 2.

Any conditions which the Member States establish to supplement the
conditions laid down by Union rules for receiving support financed by
the EAGF or the EAFRD shall be verifiable.

4.	The Commission may, by means of implementing acts, adopt rules aiming
at reaching a uniform application of paragraphs 1 and 2 of this Article.

Those implementing acts shall be adopted in accordance with the
examination procedure referred to in Article 112(3).

Article 61

General principles of checks

1.	The system set up by the Member States in accordance with Article
60(2) shall include, except where otherwise provided, systematic
administrative checking of all aid applications and shall be
supplemented by on-the-spot checks.

2.	As regards the on-the-spot checks, the authority responsible shall
draw its check sample from the entire population of applicants
comprising, where appropriate, a random part and a risk-based part in
order to obtain a representative error rate, while targeting also
highest errors.

3.	The authority responsible shall draw up a report on each on-the-spot
check.

4.	Where appropriate, all on-the-spot checks provided for in Union rules
regarding agricultural subsidies and rural development support shall be
carried out at the same time.

Article 62

Circumvention clause

Without prejudice to specific provisions, no advantage provided for
under the sectoral agricultural legislation shall be granted in favour
of a natural or legal person in respect of whom it is established that
the conditions required for obtaining such advantages were created
artificially, contrary to the objectives of that legislation. 

Article 63

Compatibility of support schemes for the purposes of checks

For the purposes of applying the support schemes in the wine sector as
referred to in Regulation (EU) No xxx/xxx[sCMO], Member States shall
ensure that the administration and control procedures applied to those
schemes are compatible with the integrated system referred to in Chapter
II of this Title as regards the following elements:

(a)	the computerised database;

(b)	the identification systems for agricultural parcels;

(c)	the administrative checks.

The procedures shall allow a common functioning or the exchange of data
with the integrated system.

Article 64

Commission powers as regards checks

1.	In order to ensure correct and efficient application of the checks
and that the verification of the eligibility conditions is carried out
in an efficient, coherent and non-discriminatory way which protects the
financial interest of the Union, the Commission shall be empowered to
adopt delegated acts in accordance with Article 111 concerning the
situations where beneficiaries or their representatives prevent checks
from being carried out.

2.	The Commission shall, by means of implementing acts, adopt the
necessary rules aiming at reaching a uniform application of this Chapter
in the Union. Those rules may, in particular, relate to the following:

(a)	the rules concerning administrative and on-the-spot checks to be
conducted by the Member States with regard to the respect of
obligations, commitments and eligibility criteria resulting from the
application of Union legislation;

(b)	the rules on the minimum level of on-the-spot checks necessary for
an effective management of the risks, as well as the conditions under
which Member States have to increase such checks, or may reduce them
where the management and control systems function properly and the error
rates are at an acceptable level;

(c)	the rules and methods on the reporting of the checks and
verification carried out and their results;

(d)	the authorities responsible for performing the checks for compliance
as well as to the content, the frequency and the marketing stage to
which those checks shall apply;

(e)	where the specific needs for proper management of the system so
require, rules introducing additional requirements with respect to
customs procedures, in particular as laid down in Regulation (EC) No
450/2008 of the European Parliament and of the Council;

(f)	with regard to hemp as referred to in Article 38 of Regulation (EU)
No xxx/xxx [DP], rules on the specific control measures and methods for
determining tetrahydrocannabinol levels ;

(g)	with regard to cotton as referred to in Article 42 of Regulation
(EU) No xxx/xxx [DP], a system for checks on the approved interbranch
organisations;

(h)	with regard to wine as referred to in Regulation (EU) No sCMO/xxx,
rules on the measurement of areas, as well as relating to checks and
rules governing the specific financial procedures for the improvement of
checks;

(i)	the tests and methods to be applied for establishing the eligibility
of products for public intervention and private storage, as well as the
use of tendering procedures, both for public intervention and for
private storage.

The implementing acts provided for in the first subparagraph shall be
adopted in accordance with the examination procedure referred to in
Article 112(3) or in the corresponding Article of Regulation (EU) No
xxx/xxx[DP], Regulation (EU) No xxx/xxx[RD] or Regulation (EU) No
xxx/xxx[sCMO] respectively.

Article 65

Withdrawals, reductions and exclusions of aid

1.	Where it is found that a beneficiary does not comply with the
eligibility criteria or the commitments relating to the conditions for
granting the aid as provided for in the sectoral agricultural
legislation the aid shall be withdrawn in full or in part.

2.	Where Union law so provides, Member States shall also impose
penalties by way of reductions or exclusions of the payment or part of
the payment granted or to be granted in respect of which the eligibility
criteria or the commitments have been met.

The amount of the reduction of aid shall be graduated according to the
severity, extent, duration and reoccurrence of the non compliance found
and may go as far as total exclusion from one or several aid schemes or
support measures for one or more calendar years. 

3.	The amounts concerned by the withdrawal referred to in paragraph 1
and by the penalties referred to in paragraph 2 shall be recovered in
full.

Article 66

Commission powers as regards penalties

1.	In order to strike a balance between a deterrent effect of charges
and penalties to be imposed for non-compliance with any of the
obligations resulting from the application of the sectoral agricultural
legislation on the one hand, and a flexible application of the system on
the other hand, the Commission shall be empowered to adopt delegated
acts in accordance with Article 111 concerning the rules and conditions
relating to the following:

(a)	the suspension of the right to participate in an aid scheme, the
exclusion and suspension of payment or a reduction rate of aids,
payments or refunds or any other penalty, in particular in case time
limits have not been respected, the product, size or quantity is not in
conformity with the application, the evaluation of a scheme or the
notification of information did not take place, is incorrect or is not
notified on time;

(b)	the reduction of the payment to the Member States concerning their
agricultural expenditure in case the time limits established for the
recovery of the contribution to payment of surplus levy have not been
met, or suspension of monthly payments in case Member States fail to
send or to send on time, or send incorrect information to the
Commission;

(c)	the extra amount, additional charges or interest rate to be applied
in case of fraud, irregularity, absence of proof that an obligation has
been fulfilled or over-time declarations;

(d)	the conditions for lodging, releasing and forfeiting of securities,
as well as the rate of reduction to be applied on release of securities
for refunds, licences, offers, tenders or specific applications when an
obligation covered by that security has partially or totally not been
met;

(e)	the retention by Member States of the amounts recovered as
penalties;

(f)	the exclusion of an operator or an applicant from public
intervention and private storage, from the licence application system or
from the tariff quota systems in case of fraud or submission of
incorrect information;

(g)	the withdrawal or suspension of an approval or a recognition, in
particular when an operator, producer organisation, association of
producer organisations, producer group or inter-branch organisation
fails to respect or no longer meets the conditions required, including
failure to make notifications;

(h)	the application of appropriate national penalties on operators
involved in the production in excess of quotas;

(i)	obvious errors, force majeure and exceptional circumstances.

2.	The Commission shall, by means of implementing acts, adopt the
following:

(a)	the procedures and technical criteria related to the measures and
penalties referred to in paragraph 1 where non-compliance with any of
the obligations resulting from the application of the relevant
legislation is found;

(b)	the rules and procedures regarding the recovery of undue payments
resulting from the application of the relevant legislation.

The implementing acts provided for in the first subparagraph shall be
adopted in accordance with the examination procedure referred to in
Article 112(3) or in the corresponding Article of Regulation (EU) No
xxx/xxx[DP], Regulation (EU) No xxx/xxx[RD] or Regulation (EU) No
xxx/xxx[sCMO] respectively.

Article 67

Securities

1.	The Member States shall, when the sectoral agricultural legislation
so provides, request the lodging of a security guaranteeing that an
obligation under sectoral agricultural legislation is fulfilled.

2.	Except in cases of force majeure, the security shall be forfeited in
whole or in part where the execution of a particular obligation is not
carried out, or is carried out only partially.

3.	In order to ensure a non discriminatory treatment, equity and the
respect of proportionality when lodging a security, the Commission shall
be empowered to adopt delegated acts in accordance with Article 111
concerning rules on:

(a)	the meaning of terms for the application of the first and second
paragraphs;

(b)	the responsible party in the event that an obligation is not met;

(c)	specific situations when the competent authority may waive the
requirement of a security;

(d)	the conditions applying to the security to be lodged and the
guarantor;

(e)	specific conditions related to the security lodged in the framework
of advance payments;

(f)	the primary, secondary or subordinate requirements in relation to
securities, as well as the consequences of breaching those requirements;

4.	The Commission may adopt, by means of implementing acts, rules on:

(a)	the form of the security to be lodged and the procedure for lodging
the security, for accepting it, and for replacing the original security;

(b)	the procedures for the release of a security;

(c)	the notifications to be made by Member States and by the Commission.

The implementing acts referred to in the first subparagraph shall be
adopted in accordance with the examination procedure referred to in
Article 112(3) or in the corresponding Article of Regulation (EU) No
xxx/xxx[DP], Regulation (EU) No xxx/xxx[RD] or Regulation (EU) No
xxx/xxx[sCMO] respectively.

Chapter II

Integrated Administration and Control System

Article 68

Scope

1.	Each Member State shall set up and operate an integrated
administration and control system (hereinafter referred to as the
‘integrated system’).

2.	The integrated system shall apply to the support schemes listed in
Annex I of Regulation (EU) No xxx/xxx [DP] and to the support granted in
accordance with Articles 22(1)(a) and (b), 29 to 32, 34 and 35 of
Regulation xxx/xxx [RD] and where applicable Article 28(1)(b) of
regulation (EU) CR/xxx..

However, this Chapter shall not apply to measures referred to in Article
29(9) of Regulation (EU) No xxx/xxx[RD], as well as to measures under
Article 22(1)(a) and (b) of that Regulation as far as the establishment
cost is concerned.

3.	To the extent necessary, the integrated system shall also apply to
the control of cross-compliance as laid down in Title VI.

Article 69

Elements of the integrated system

1.	The integrated system shall comprise the following elements:

(a)	a computerised database;

(b)	an identification system for agricultural parcels;

(c)	a system for the identification and registration of payment
entitlements;

(d)	aid applications;

(e)	an integrated control system;

(f)	a single system to record the identity of each beneficiary of the
support referred to in Article 68(2) who submits an aid application or a
payment claim. 

2.	Where applicable, the integrated system shall incorporate a system
for the identification and registration of animals set up in accordance
with Regulations (EC) No 1760/2000 of the European Parliament and of the
Council and Council Regulation (EC) No 21/2004.

3.	Without prejudice to the responsibilities of the Member States for
the implementation and application of the integrated system, the
Commission may seek the assistance of specialised bodies or persons in
order to facilitate the establishment, monitoring and utilisation of the
integrated system, in particular with a view to providing the competent
authorities of the Member States with technical advice, should they
request it.

Article 70

Computerised database

1.	The computerised database shall record, for each beneficiary of the
support referred to in Article 68(2), the data obtained from aid
applications and payment claims. 

This database shall in particular allow consultation through the
competent authority of the Member State, of the data relating to the
calendar and/or marketing years, starting from 2000. It shall also allow
direct and immediate consultation of the data relating to at least the
previous five consecutive calendar years.

2.	Member States may set up decentralised databases on condition that
these, and the administrative procedures for recording and accessing
data, are designed homogeneously throughout the territory of the Member
State and are compatible with one another in order to allow for
cross-checks.

Article 71

Identification system for agricultural parcels

The identification system for agricultural parcels shall be established
on the basis of maps or land registry documents or other cartographic
references. Use shall be made of computerised geographical information
system techniques, including aerial or spatial orthoimagery, with a
homogenous standard guaranteeing accuracy at least equivalent to
cartography at a scale of 1:5000.

Article 72

System for the identification and registration of payment entitlements

1.	The system for the identification and registration of payment
entitlements shall allow for verification of the entitlements and for
cross-checks with the aid applications and the identification system for
agricultural parcels.

2.	The system referred to in paragraph 1 shall allow direct and
immediate consultation, through the competent authority of the Member
State, of the data relating to at least the previous four consecutive
calendar years.

Article 73

Aid applications and payment claims

1.	Each year, a beneficiary of the support referred to in Article 68(2)
shall submit an application for direct payments or a payment claim
respectively for the relevant area and animal-related rural development
measures indicating, where applicable:

(a)	all the agricultural parcels on the holding, as well as the
non-agricultural area for which support referred to in Article 68(2) is
claimed;

(b)	the payment entitlements declared for activation;

(c)	any other information provided for in this Regulation or required
with a view to the implementation of the relevant sectoral agricultural
legislation or by the Member State concerned.

As regards the area-related payment, each Member State shall determine
the minimum size of agricultural parcels in respect of which an
application may be made. However, the minimum size may not exceed 0,3
ha.

By way of derogation from point (a) of the first subparagraph, Member
States may decide that a farmer who does not apply for any area-based
direct payment does not have to declare his agricultural parcels in the
case where the total area does not exceed one hectare. That farmer shall
however indicate in his application that he has agricultural parcels at
his disposal and shall, at the request of the competent authorities,
indicate their location.

2.	Member States shall provide, inter alia by the use of electronic
means, pre-established forms based on the areas determined in the
previous year as well as graphic material indicating the location of
those areas. A Member State may decide that the aid application needs to
contain only changes with respect to the aid application submitted the
previous year. However, as concerns the small farmers scheme as provided
for in Title V of Regulation (EU) No DP/xxx this possibility shall be
given to all farmers concerned.

3.	A Member State may decide that a single application shall cover
several or all support schemes and measures referred to in Article 68 or
other support schemes and measures.

Article 74

System for the identification of beneficiaries

The single system to record the identity of each beneficiary of support
referred to in Article 68(2) shall guarantee that all aid applications
and payment claims submitted by the same beneficiary can be identified
as such.

Article 75

Verification of eligibility conditions and reductions

1.	In accordance with Article 61, Member States, through the paying
agencies or the bodies delegated by them, shall carry out administrative
checks on the aid application to verify the eligibility conditions for
the aid. Those checks shall be supplemented by on-the-spot checks. 

2.	For the purpose of on the spot checks Member States shall draw up a
sampling plan of agricultural holdings and/or beneficiaries.

3.	Member States may use remote sensing and Global Navigation Satellite
System (GNSS) techniques as a means of carrying out on-the-spot checks
on agricultural parcels. 

4.	In case of non compliance with the eligibility conditions Article 65
shall apply.

Article 76

Payment to beneficiaries

1.	The payments under the support schemes and measures referred to in
Article 68(2) shall be made within the period from 1 December to 30 June
of the following calendar year. 

Payments shall be made in up to two instalments within that period.

However Member States may pay advances up to 50 % as regards direct
payments and 75% for the support granted under rural development as
referred to in Article 68(2) prior to 1 December and not before 16
October.

2.	Payments referred to in the paragraph 1 shall not be made before the
verification of eligibility conditions, to be carried out by the Member
States pursuant to Article 75, has been finalised. 

Article 77

Delegated powers

1.	In order to ensure that the integrated system provided for in this
Chapter is implemented in an efficient, coherent and non-discriminatory
way which protects the financial interests of the Union, the Commission
shall be empowered to adopt delegated acts in accordance with Article
111 concerning: 

(a)	specific definitions needed to ensure a harmonised implementation of
the integrated system;

(b)	rules on any further measures to be taken by the Member States for
the proper application of this Chapter as well as arrangements for any
mutual assistance needed between Member States.

2.	In order to ensure a correct distribution of the funds resulting from
the aid applications provided for in Article 73 to the entitled
beneficiaries and to allow for verification of the fulfilment by them of
the obligations related thereto, the Commission shall, by means of
delegated acts in accordance with Article 111, lay down the following:

(a)	rules on the minimum size of agricultural parcels to be declared in
order to reduce the administrative burden for the beneficiaries and
authorities;

(b)	provisions required for a harmonised definition of the basis for
calculation of aid, including rules on how to deal with certain cases
where eligible areas contain landscape features or trees;

(c)	a derogation from Regulation (EEC, Euratom) No 1182/71 of the
Council [of 3 June 1971 determining the rules applicable to periods,
dates and time limits] in order to safeguard the beneficiaries' rights
to payments where the final date for submission of applications or
amendments is a public holiday, Saturday or Sunday;

(d)	in the case of late application for payment or for allocation of
entitlements, the maximum delay and reductions in case of such delay.

3.	In order to ensure that the calculation and application of refusal,
reductions, exclusions and recoveries are carried out in accordance with
the principle laid down in Article 65 and in an efficient, coherent and
non-discriminatory way which protects the financial interests of the
Union, the Commission shall be empowered to adopt delegated acts in
accordance with Article 111 concerning: 

provisions on refusal, reductions, exclusions in relation to the
correctness and completeness of the information in the application such
as over-declarations of areas or animals or lacking declaration of
areas, as well as in relation to the non respect of the eligibility
criteria or the commitments relating to the conditions for granting of
the aid;

provisions to ensure a harmonised and proportionate treatment of
intentional irregularities, situations of minor errors, accumulation of
reductions and simultaneous application of different reductions;

rules providing for the non-application of refusal, reductions,
exclusions in certain cases, ensuring proportionality when applying
reductions;

rules on the recovery of unduly paid amounts of aid and unduly allocated
payment entitlements.

Article 78

Implementing powers

The Commission shall, by means of implementing acts, lay down the
following: 

(a)	the basic features, definitions and quality requirements for the
computerised database provided for in Article 70;

(b)	the basic features, definitions and quality requirements for the
identification system for agricultural parcels provided for in Article
71 and for the identification of the beneficiaries as provided for in
Article 74;

(c)	the basic features, definitions and quality requirements for the
system for the identification and registration of payment entitlements
provided for in Article 72;

(d)	rules on the aid application and payments claims provided for in
Article 73, and the application for payment entitlements, including the
final date for submission of applications, the requirements as to the
minimum amount of information to be included in the application,
provisions for amendments to or the withdrawal of aid applications,
exemption from the requirement to submit an aid application and
provisions which allow Member States to apply simplified procedures or
to correct obvious errors;

(e)	rules on the carrying out of checks in order to verify compliance
with obligations, and the correctness and completeness of the
information provided in the aid application or payment claim;

(f)	technical definitions needed for the purpose of the uniform
implementation of this Chapter;

(g)	rules on situations of transfer of holdings accompanied by the
transfer of any obligation concerning eligibility in respect of the aid
in question which still needs to be fulfilled;

(h)	rules on the payment of the advances referred to in Article 76.

The implementing acts provided for in the first paragraph shall be
adopted in accordance with the examination procedure referred to in
Article 112(3) or in the corresponding Article of Regulation (EU) No
xxx/xxx[DP] or Regulation (EU) No xxx/xxx[RD] respectively.

Chapter III

Scrutiny of transactions

Article 79

Scope and definitions

1.	This Chapter sets specific rules on the scrutiny of the commercial
documents of those entities receiving or making payments relating
directly or indirectly to the system of financing by the EAGF, or their
representatives, hereinafter ‘undertakings’, in order to ascertain
whether transactions forming part of the system of financing by the EAGF
have actually been carried out and have been executed correctly.

2.	This Chapter shall not apply to measures covered by the integrated
system referred to in Chapter II of this Title.

3.	For the purposes of this Chapter the following definitions shall
apply:

(a)	'commercial documents’ means all books, registers, vouchers and
supporting documents, accounts, production and quality records, and
correspondence relating to the undertaking’s business activity, as
well as commercial data, in whatever form they may take, including
electronically stored data, in so far as these documents or data relate
directly or indirectly to the transactions referred to in paragraph 1;

(b)	'third party’ means any natural or legal person directly or
indirectly connected with transactions carried out within the financing
system by the EAGF.

Article 80

Scrutiny by Member States

1.	Member States shall carry out systematic scrutiny of the commercial
documents of undertakings taking account of the nature of the
transactions to be scrutinised. Member States shall ensure that the
selection of undertakings for scrutiny gives the best possible assurance
of the effectiveness of the measures for preventing and detecting
irregularities. The selection shall take account inter alia of the
financial importance of the undertakings in that system and other risk
factors.

2.	In appropriate cases, the scrutiny provided for in paragraph 1 shall
be extended to natural and legal persons with whom undertakings are
associated and to such other natural or legal persons as may be relevant
for the pursuit of the objectives set out in Article 81.

3.	The scrutiny carried out pursuant to this Chapter shall not prejudice
the checks undertaken pursuant to Articles 49 and 50.

Article 81

Objectives of the scrutiny

1.	The accuracy of primary data under scrutiny shall be verified by a
number of cross-checks, including, where necessary, the commercial
documents of third parties, appropriate to the degree of risk presented,
including:

(a)	comparisons with the commercial documents of suppliers, customers,
carriers and other third parties;

(b)	physical checks, where appropriate, upon the quantity and nature of
stocks;

(c)	comparison with the records of financial flows leading to or
consequent upon the transactions carried out within the financing system
by the EAGF; and

(d)	checks, in relation to bookkeeping, or records of financial
movements showing, at the time of the scrutiny, that the documents held
by the paying agency as justification for the payment of aid to the
beneficiary are accurate.

2.	In particular, where undertakings are required to keep particular
book records of stock in accordance with Union or national provisions,
scrutiny of those records shall in appropriate cases include a
comparison with the commercial documents and, where appropriate, with
the actual quantities in stock.

3.	In the selection of transactions to be checked, full account shall be
taken of the degree of risk presented.

Article 82

Access to commercial documents

1.	The persons responsible for the undertaking, or a third party, shall
ensure that all commercial documents and additional information are
supplied to the officials responsible for the scrutiny or to the persons
empowered for that purpose. Electronically stored data shall be provided
on an appropriate data support medium.

2.	The officials responsible for the scrutiny or the persons empowered
for that purpose may require that extracts or copies of the documents
referred to in paragraph 1 be supplied to them.

3.	Where, during scrutiny carried out pursuant to this Chapter, the
commercial documents maintained by the undertaking are considered
inadequate for scrutiny purposes, the undertaking shall be directed to
maintain in future such records as are required by the Member State
responsible for the scrutiny, without prejudice to obligations laid down
in other Regulations relating to the sector concerned.

Member States shall determine the date as of which such records are to
be established.

Where all or part of the commercial documents required to be scrutinised
pursuant to this Chapter are located with an undertaking in the same
commercial group, partnership or association of undertakings managed on
a unified basis as the undertaking scrutinised, whether located inside
or outside Union territory, the undertaking shall make those commercial
documents available to officials responsible for the scrutiny, at a
place and time to be determined by the Member States responsible for
carrying out the scrutiny.

4.	Member States shall ensure that officials responsible for scrutiny
are entitled to seize commercial documents, or have them seized. This
right shall be exercised with due regard to the relevant national
provisions and shall not affect the application of rules governing
proceedings in criminal matters concerning the seizure of documents.

Article 83

Mutual assistance

1.	Member States shall assist each other for the purposes of carrying
out the scrutiny provided for in this Chapter in the following cases:

(a)	where an undertaking or third party is established in a Member State
other than that in which payment of the amount in question has or should
have been made or received;

(b)	where an undertaking or third party is established in a Member State
other than that in which the documents and information required for
scrutiny are to be found.

The Commission may coordinate joint actions involving mutual assistance
between two or more Member States.

2.	During the first three months following the EAGF financial year of
payment, Member States shall send the Commission a list of undertakings
established in a third country for which payment of the amount in
question has or should have been made or received in that Member State.

4.	If additional information is required in another Member State as part
of the scrutiny of an undertaking in accordance with Article 80, and in
particular cross-checks in accordance with Article 81, specific scrutiny
requests may be made indicating the reasons for the request. An overview
of such specific requests shall be sent to the Commission on a quarterly
basis within one month after the end of each quarter. The Commission may
demand that a copy of individual requests be provided.

The scrutiny request shall be met not later than six months after its
receipt; the results of the scrutiny shall be communicated without delay
to the requesting Member State and to the Commission. The communication
to the Commission shall be on a quarterly basis within one month after
the end of each quarter.

Article 84

Programming 

1.	Member States shall draw up programmes for scrutinies to be carried
out pursuant to Article 80 during the subsequent scrutiny period.

2.	Each year, before 15 April, the Member States shall send the
Commission their programme as referred to in paragraph 1 and shall
specify:

(a)	the number of undertakings to be scrutinised and their breakdown by
sector on the basis of the amounts relating to them;

(b)	the criteria adopted for drawing up the programme.

3.	The programmes established by the Member States and forwarded to the
Commission shall be implemented by the Member States, if, within eight
weeks, the Commission has not made known its comments.

4.	Paragraph 3 shall aplly mutatis mutandis to the amendments to the
programme made by the Member States.

5.	At any stage, the Commission may request the inclusion of a
particular category of undertaking in the programme of a Member States.

6.	Undertakings for which the sum of the receipts or payments amounted
to less than EUR 40000 shall be scrutinised in accordance with this
Chapter only for specific reasons to be indicated by the Member States
in their annual programme referred to in paragraph 1 or by the
Commission in any proposed amendment to that programme.

Article 85

Special departments

1.	In each Member State a special department shall be responsible for
monitoring the application of this Chapter. Those departments shall in
particular be responsible for:

(a)	the performance of the scrutiny provided for in this Chapter by
officials employed directly by that special department; or

(b)	the coordination and general surveillance of the scrutiny carried
out by officials belonging to other departments.

Member States may also provide that scrutiny to be carried out pursuant
to this Chapter is allocated between the special departments and other
national departments, provided that the former is responsible for their
coordination.

2.	The department or departments responsible for the application of this
Chapter shall be organised in such a way as to be independent of the
departments or branches of departments responsible for the payments and
the scrutiny carried out prior to payment.

3.	In order to ensure that this Chapter is properly applied, the special
department referred to in paragraph 1 shall take all the measures
necessary and it shall be entrusted by the Member State concerned with
all the powers necessary to perform the tasks referred to in this
Chapter.

4.	Member States shall adopt appropriate measures to penalise natural or
legal persons who fail to fulfil their obligations under this Chapter.

Article 86

Reports

1.	Before 1 January following the scrutiny period Member States shall
send the Commission a detailed report on the application of this
Chapter.

2.	The Member States and the Commission shall have regular exchanges of
views on the application of this Chapter.

Article 87

Access to information and on-the-spot checks by the Commission

1.	In accordance with the relevant national laws, Commission officials
shall have access to all documents prepared either with a view to or
following the scrutiny organised under this Chapter and to the data
held, including those stored in the data-processing systems. Those data
shall be provided upon request on an appropriate data support medium.

2.	The scrutinies referred to in Article 80 shall be carried out by the
officials of the Member States. Officials of the Commission may
participate in those scrutinies. They may not themselves exercise the
powers of scrutiny accorded to national officials. However, they shall
have access to the same premises and to the same documents as the
officials of the Member States.

3.	In the case of scrutinies taking place under Article 83, officials of
the requesting Member State may be present, with the agreement of the
requested Member State, at the scrutiny in the requested Member State
and have access to the same premises and the same documents as the
officials of that Member State.

Officials of the requesting Member State present at scrutinies in the
requested Member State shall at all time be able to furnish proof of
their official capacity. The scrutinies shall at all times be carried
out by officials of the requested Member State.

4.	Without prejudice to the provisions of Regulations (EC) No 1073/99
and (EC) No 2185/96, where national provisions concerning criminal
procedure reserve certain acts for officials specifically designated by
the national law, neither the officials of the Commission, nor the
officials of the Member State referred to in paragraph 3, shall take
part in these acts. In any event, they shall not take part in, in
particular, visits to the home or the formal interrogation of persons in
the context of the criminal law of the Member State. They shall,
however, have access to information thus obtained.

Article 88

Commission powers

1.	In order to exclude from the application of this Chapter those
measures which are by their nature unsuited for ex-post checks by way of
scrutiny of commercial documents, the Commission shall be empowered to
adopt delegated acts in accordance with Article 111 establishing a list
of other measures to which this Chapter does not apply, and modifying
the threshold of 40000 euros referred to in Article 84(6).

2.	The Commission shall, where necessary, by means of implementing acts
adopt the provisions aiming at reaching a uniform application of this
Regulation in the Union, in particular relating to the following:

(a)	the performance of the scrutiny referred to in Article 80 as regards
the selection of undertakings, rate and calendar of scrutiny; 

(b)	conservation of commercial documents and the types of documents to
maintain or data to record;

(c)	the performance and coordination of joint actions referred to in
Article 83(1);

(d)	details and specifications regarding the content, form and way of
submission of requests, the content, form and way of notification,
submission and exchange of information required in the framework of this
Chapter;

(e)	conditions and means of publication or specific rules and conditions
for the diffusion or making available by the Commission to the competent
authorities of the Member States of the information needed in the
framework of this Regulation;

(f)	responsabilities of the special department referred to in Article
85;

(g)	the content of reports referred to in Article 86.

The implementing acts provided for in the first subparagraph shall be
adopted in accordance with the examination procedure referred to in
Article 112(3).

Chapter IV

Other provisions on checks

Article 89

Other checks related to market measures

1.	Member States shall take measures to ensure that the products
referred to in Annex I to Regulation (EU) xxx/xxx [sCMO] which are not
labelled in conformity with the provisions of that Regulation are not
placed on, or is withdrawn from, the market.

2.	Without prejudice to any specific provisions which may be adopted by
the Commission, imports into the Union of the products specified in
paragraph 1(a) and (b) of Article 129 of Regulation (EU) No xxx/xxx
[sCMO] shall be subject to checks to determine whether the conditions
provided for in paragraph 1 of that Article are met.

3.	Member States shall carry out checks, based on a risk analysis, in
order to verify whether products referred to in Annex I to Regulation
(EU) xxx/xxx [sCMO] conform to the rules laid down in Section I of
Chapter I of Title II of Part II of Regulation (EU) No xxx/xxx[sCMO] and
shall apply administrative penalties as appropriate.

4.	In order to protect Union funds and the identity, provenance and
quality of Union wine, the Commission shall be empowered to adopt
delegated acts in accordance with Article 111 pertaining to:

(a)	the establishment of an analytical databank of isotopic data that
will help detect fraud to be constructed on the basis of samples
collected by Member States; and for rules on the Member States' own
databanks;

(b)	rules on control bodies and the mutual assistance between them;

(c)	rules on the common use of Member States' findings;

(d)	rules on the application of penalties in the case of exceptional
circumstances.

Article 90

Checks related to designation of origin and geographical indications 

1.	Member States shall take the necessary steps to stop unlawful use of
protected designations of origin and protected geographical indication
referred to in Regulation (EU) No xxx/xxx[sCMO].

2.	Member State shall designate the competent authority responsible for
checks in respect of the obligations laid down in Section II of Chapter
I of Title II of Part 2 of Regulation (EU) No xxx/xxx[sCMO] in
accordance with the criteria laid down in Article 4 of Regulation (EC)
No 882/2004 of the European parliament and of the Council and shall
ensure that any operator complying with those obligations is entitled to
be covered by a system of checks.

3.	Within the Union, annual verification of compliance with the product
specification, during the production and during or after conditioning of
the wine shall be ensured by the competent authority referred to in
paragraph 2 or by one or more control bodies within the meaning of point
5 of the second subparagraph of Article 2 of Regulation (EC) No 882/2004
operating as a product certification body in accordance with the
criteria laid down in Article 5 of that Regulation.

4.	The Commission shall, by means of implementing acts, adopt the
following:

(a)	the communications to be made by the Member States to the
Commission;

(b)	rules on the authority responsible for the verification of
compliance with the product specification, including where the
geographical area is in a third country;

(c)	the actions to be implemented by the Member States to prevent the
unlawful use of protected designations of origin and protected
geographical indications;

(d)	checks and verification to be carried out by the Member States,
including testing.

The implementing acts provided for in the first subparagraph shall be
adopted in accordance with the examination procedure referred to in
Article 112(3) or in the corresponding Article of Regulation (EU) No
xxx/xxx[sCMO].

TITLE VI

CROSS COMPLIANCE

Chapter I

Scope

Article 91

General principle

1.	When a beneficiary referred to in Article 92 does not comply, on the
holding, with the rules on cross compliance as laid down in Article 93 a
penalty shall be applied to that beneficiary.

2.	The penalty referred to in paragraph 1 shall apply only in so far as 

(a)	the non-compliance is the result of an act or omission directly
attributable to the beneficiary concerned; 

(b)	the non-compliance is related to the agricultural activity of the
beneficiary; and

(c)	the area of the holding of the beneficiary is concerned.

However, for forest areas this penalty shall not apply in so far as no
support is claimed for the concerned area in accordance with Articles
22(1)(a), 31 and 35 of Regulation (EU) No xxx/xxx[RD].

3.	For the purpose of this Title 'holding' means all the production
units and areas managed by the beneficiary referred to in Article 92
situated within the territory of the same Member State.

Article 92

Beneficiaries concerned

Article 91 shall apply to beneficiaries receiving direct payments under
Regulation (EU) No xxx/xxx[DP], payments under Articles 44 and 45 of
Regulation (EU) No xxx/xxx[sCMO] and the annual premia under Articles
22(1)(a) and (b), 29 to 32, 34 and 35 of Regulation (EU) No xxx/xxx[RD].

However, Article 91 shall not apply to beneficiaries participating in
the small farmers scheme referred to in Title V of Regulation (EU) No
xxx/xxx[DP] and to the beneficiaries receiving aid under Article 29(9)
of Regulation (EU) No RD/xxx.

Article 93

Rules on cross compliance

The rules on cross compliance shall be the statutory management
requirements under Union legislation and the standards for good
agricultural and environmental condition of land established at national
level as listed in Annex II, relating to the following areas:

(a)	environment, climate change and good agricultural condition of land;

(b)	public, animal and plant health;

(c)	animal welfare.

The acts referred to in Annex II in relation to the statutory management
requirements shall apply as in force and, in case of Directives, as
implemented by the Member States.

Directive 2000/60/EC of 23 October 2000 establishing a framework for
Community action in the field of water policy will be considered as
being part of Annex II once this Directive is implemented by all Member
States and the obligations directly applicable to farmers have been
identified. In order to take account of those elements the Commission
shall be empowered to adopt delegated acts in accordance with Article
111 for the purpose of amending the Annex II within 12 months starting
at the moment the last Member State has notified the implementation of
the Directive to the Commission.

Directive 2009/128/EC of the European Parliament and of the Council of
21 October 2009 establishing a framework for Community action to achieve
the sustainable use of pesticides will be considered as being part of
Annex II once this Directive is implemented by all Member States and the
obligations directly applicable to farmers have been identified. In
order to take account of those elements the Commission shall be
empowered to adopt delegated acts in accordance with Article 111 for the
purpose of amending the Annex II within 12 months starting at the moment
the last Member State has notified the implementation of the Directive
to the Commission, including the obligations relating to integrated pest
management.

In addition, as regards the years 2014 and 2015, the rules on cross
compliance shall also comprise the maintenance of permanent grassland.
The Member States which were Member of the Union at 1 January 2004 shall
ensure that land which was under permanent grassland at the date
provided for the area aid applications for 2003 is maintained under
permanent grassland within defined limits. The Member States which
became Member of the Union in 2004 shall ensure that land which was
under permanent grassland on 1 May 2004 is maintained under permanent
grassland within defined limits. Bulgaria and Romania shall ensure that
land which was under permanent grassland on 1 January 2007 is maintained
under permanent grassland within defined limits. 

The preceding subparagraph shall not apply to land under permanent
grassland to be afforested, if such afforestation is compatible with the
environment and with the exclusion of plantations of Christmas trees and
fast growing species cultivated in the short term.

In order to take account of the elements in the two preceding paragraphs
the Commission shall be empowered to adopt delegated acts in accordance
with Article 111 containing the rules on maintenance of permanent
grassland, in particular to ensure that measures are taken to maintain
the land under permanent grassland at the level of farmers, including
individual obligations to be respected such as obligation to reconvert
areas into permanent grassland where it is established that the ratio of
land under permanent grassland is decreasing. 

Furthermore, the Commission shall, by means of implementing acts, adopt
the methods for the determination of the ratio of permanent grassland
and agricultural land that has to be maintained. Those implementing acts
shall be adopted in accordance with the examination procedure referred
to in Article 112(3).

Article 94

Obligations of Member States relating to good agricultural and
environmental condition

Member States shall ensure that all agricultural area, including land
which is no longer used for production purposes, is maintained in good
agricultural and environmental condition. Member States shall define, at
national or regional level, minimum standards for beneficiaries for good
agricultural and environmental condition of land on the basis of Annex
II, taking into account the specific characteristics of the areas
concerned, including soil and climatic condition, existing farming
systems, land use, crop rotation, farming practices, and farm
structures. Member States shall not define minimum requirements which
are not established in Annex II. 

Article 95

Information to beneficiaries

Member States shall provide the beneficiaries concerned, where
appropriate by the use of electronic means, with the list of and
information on the rules on cross compliance to be respected.

Chapter II

Control system and penalties in relation to cross compliance

Article 96

Checks of cross compliance

1.	Member States shall make use, where appropriate, of the integrated
system laid down in Chapter II of Title V and in particular of elements
referred to in Article 69(1) points (a), (b), (d), (e) and (f).

Member States may make use of their existing administration and control
systems to ensure compliance with the rules on cross compliance.

Those systems, and notably the system for the identification and
registration of animals set up in accordance with Council Directive
2008/71/EC of 15 July 2008 on the identification and registration of
pigs and Regulations (EC) No 1760/2000 and (EC) No 21/2004, shall be
compatible with the integrated system referred to in Chapter II of Title
V of this Regulation.

 

2.	Depending on the requirements, standards, acts or areas of cross
compliance in question, Member States may decide to carry out
administrative checks, in particular those already provided for under
the control systems applicable to the respective requirement, standard,
act or area of cross compliance.

3.	Member States shall carry out on-the-spot checks to verify whether a
beneficiary complies with the obligations laid down in this Title.

4.	The Commission shall, by means of implementing acts, adopt rules on
the carrying out of checks in order to verify compliance with the
obligations referred to in this Title.

Those implementing acts shall be adopted in accordance with the
examination procedure referred to in Article 112(3).

Article 97

Application of the penalty

1.	The penalty provided for in Article 91 shall be applied when the
rules on cross compliance are not complied with at any time in a given
calendar year (hereinafter referred to as ‘the calendar year
concerned’), and the non-compliance in question is attributable to the
beneficiary who submitted the aid application or the payment claim in
the calendar year concerned.

The first subparagraph shall apply mutatis mutandis to beneficiaries
which are found not to have complied with the rules on cross compliance,
at any time during three years from 1 January of the year following the
calendar year in which the first payment was granted under the support
programmes for restructuring and conversion or at any time during one
year from 1 January of the year following the calendar year in which the
payment was granted under the support programmes for green harvesting
referred to in Regulation (EU) No [sCMO] (hereinafter referred to as
‘the years concerned’).

2.	In case where the land is transferred during the calendar year
concerned or the years concerned, paragraph 1 shall also apply where the
non-compliance in question is the result of an act or omission directly
attributable to the person to whom or from whom the agricultural land
was transferred. By way of derogation, where the person to whom the act
or omission is directly attributable has submitted an aid application or
a payment claim in the calendar year concerned or the years concerned,
the penalty shall be applied on the basis of the total amounts of the
payments referred to in Article 92 granted or to be granted to that
person. 

For the purpose of this paragraph, ‘transfer’ shall mean any type of
transaction whereby the agricultural land ceases to be at the disposal
of the transferor.

3.	Notwithstanding paragraph 1, Member States may decide not to apply a
penalty per beneficiary and per calendar year when the amount of the
penalty is  EUR 100 or less subject to the rules to be adopted pursuant
to Article 101.

Where a Member State decides to make use of the option provided for in
the first subparagraph, the competent authority shall, for a sample of
beneficiaries, take in the following year the actions necessary to
verify that the beneficiary has remedied the findings of non-compliance
concerned. The finding and the obligation to take remedial action shall
be notified to the beneficiary.

4.	The penalty does not affect the legality and regularity of the
payments on which the reduction or exclusion applies. 

Article 98

Application of the penalty in Bulgaria and Romania

For Bulgaria and Romania, the penalties referred to in Article 91 shall
be applied at the latest from 1 January 2016 as regards the statutory
management requirements in the area of animal welfare referred to in
Annex II.

Article 99

Calculation of the penalty

1.	The penalty provided for in Article 91 shall be applied by means of
reduction or exclusion of the total amount of the payments listed in
Article 92 granted or to be granted to that beneficiary related to the
calendar year concerned or the years concerned.

For the calculation of those reductions and exclusions account shall be
taken of the severity, extent, permanence and reoccurrence of the
non-compliance found as well as of the criteria set out in paragraphs 2,
3 and 4.

2.	In the case of non compliance due to negligence, the percentage of
reduction shall not exceed 5 % and, in the case of repeated
non-compliance, 15 %.

In duly justified cases Member States may decide that no reduction shall
be applied where, given its severity, extent and duration, a case of
non-compliance is to be considered as minor. However, cases of
non-compliance which constitute a direct risk to public or animal health
shall not be considered as minor. The finding and the obligation to take
remedial action shall be notified to the beneficiary.

3.	In the case of intentional non-compliance, the percentage of
reduction shall  in principle not be less than 20 % and may go as far as
total exclusion from one or several aid schemes and apply for one or
more calendar years.

4.	In any case, the total amount of reductions and exclusions for one
calendar year shall not be more than the total amount referred to in the
first subparagraph of paragraph 1.

Article 100

Amounts resulting from cross compliance

Member States may retain 10% of the amounts resulting from the
application of the reductions and exclusions referred to in Article 99.

Article 101

Delegated powers

1.	In order to ensure a correct distribution of the funds to the
entitled beneficiaries, the Commission shall be empowered to adopt
delegated acts in accordance with Article 111 to establish a harmonised
basis for calculation of penalties due to cross compliance,  taking into
account reductions due to financial discipline.

2.	In order to ensure that cross compliance is carried out in an
efficient, coherent and non discriminatory way, the Commission shall be
empowered to adopt delegated acts in accordance with Article 111
concerning the calculation and application of penalties.

TITLE VII

COMMON PROVISIONS

Chapter I

Communication

Article 102

Communication of information

1.	In addition to the provisions laid down in the sectoral Regulations,
Member States shall send to the Commission the following information,
declarations and documents:

(a)	for accredited paying agencies and accredited coordinating bodies:

(i)	their accreditation document;

(ii)	their function (accredited paying agency or accredited coordinating
body);

(iii)	where relevant, the withdrawal of their accreditation,

(b)	for certification bodies:

(i)	their name;

(ii)	their address details,

(c)	for measures relating to operations financed by the EAGF and the
EAFRD:

(i)	declarations of expenditure, which also act as payment requests,
signed by the accredited paying agency or the accredited coordinating
body and accompanied by the requisite information;

(ii)	estimates of their financial requirements, with regard to the EAGF
and, with regard to the EAFRD, an update of estimated declarations of
expenditure which will be submitted during the year and estimated
declarations of expenditure in respect of the following financial year;

(iii)	by 15 February of the year following the financial year concerned,
when a Member State has accredited more than one paying agency, a
synthesis report consisting of an overview at national level of all
management declarations of assurances and the audit opinions thereon
from the certification bodies; 

(iv)	the management declaration of assurance and the annual accounts of
the accredited paying agencies;

(v)	a summary of the results of all available audits and checks carried
out in accordance with the schedule and detailed provisions laid down in
the sector specific rules.

The annual accounts of accredited paying agencies relating to EAFRD
expenditure shall be submitted at the level of each programme.

2.	Member States shall inform the Commission in detail of the measures
taken to implement the good agricultural and environmental condition
referred to in Article 94 and the details of the farm advisory system
referred to in Title III.

3.	Member State shall inform the Commission regularly of the application
of the integrated system referred to in Chapter II of Title V. The
Commission shall organise exchanges of views on this subject with the
Member States.

Article 103

Confidentiality

1.	Member States and the Commission shall take all necessary steps to
ensure the confidentiality of the information communicated or obtained
under inspection and clearance of accounts measures implemented under
this Regulation.

The rules laid down in Article 8 of Council Regulation (Euratom, EC) No
2185/96shall apply to that information.

2.	Without prejudice to national provisions relating to legal
proceedings, information collected in the course of scrutiny as provided
for in Chapter III of Title V shall be protected by professional
secrecy. It may not be communicated to any persons other than those who,
by reason of their duties in the Member States or in the institutions of
the Union, are required to have knowledge thereof for the purposes of
performing those duties.

Article 104

Commission powers

The Commission may, by means of implementing acts, adopt rules
pertaining to:

(a)	the form, content, intervals, deadlines and arrangements for
transmitting or making available to the Commission:

(i)	declarations of expenditure and estimates of expenditure and their
updates, including assigned revenue;

(ii)	management declaration of assurance and annual accounts of the
paying agencies, as well as the results of all available audits and
controls carried out;

(iii)	the account certification reports;

(iv)	the names and particulars of accredited paying agencies, accredited
coordinating bodies and certification bodies;

(v)	arrangements for taking account of and paying expenditure financed
by the EAGF and the EAFRD;

(vi)	notifications of financial adjustments made by Member States in
connection with rural development operations or programmes, and summary
reports on the recovery procedures undertaken by the Member States in
response to irregularities;

(vii)	information on the measures taken pursuant to Article 60.

(b)	the arrangements governing exchanges of information and documents
between the Commission and the Member States, and the implementation of
information systems, including the type, format and content of data to
be processed by these systems and the corresponding data storage rules;

(c)	the notification to the Commission by Member States of information,
documents, statistics and reports, as well as the deadlines and methods
for their notification.

The implementing acts provided for in the first subparagraph shall be
adopted in accordance with the examination procedure referred to in
Article 112(3).

CHAPTER II

Use of the euro

Article 105

General principles

1.	The amounts given in the Commission decisions adopting rural
development programmes, the amounts of commitments and payments by the
Commission and the amounts of expenditure attested or certified and
amounts in declarations of expenditure by the Member States shall be
expressed and paid in euro. 

2.	The prices and amounts fixed in the sectoral agricultural legislation
shall be expressed in euro.

They shall be granted or collected in euro in the Member States which
have adopted the euro and in the national currency in the Member States
which have not.

Article 106

Exchange rate and operative event

1.	The prices and amounts referred to in Article 105(2) shall be
converted in the Member States which have not adopted the euro into the
national currency by means of an exchange rate.

2.	The operative event for the exchange rate shall be:

(a)	the completion of customs import or export formalities in the case
of amounts collected or granted in trade with third countries;

(b)	the event whereby the economic objective of the operation is
attained in all other cases.

3.	Where a direct payment as provided for in Regulation (EU) No DP/xxx
is made to a beneficiary in a currency other than the euro, Member
States shall convert the amount of aid expressed in euro into the
national currency on the basis of the most recent exchange rate set by
the European Central Bank prior to 1 October of the year for which the
aid is granted.

4.	As regards EAGF, when drawing up their declarations of expenditure,
Member States which have not adopted the euro shall apply the same
exchange rate as that which they used to make payments to beneficiaries
or receive revenue, in accordance with the provisions of this Chapter.

5.	In order to specify the operative event referred to in paragraph 2 or
to fix it for reasons peculiar to the market organisation or the amount
in question, the Commission shall be empowered to adopt delegated acts
in accordance with Article 111 containing rules on those operative
events and the exchange rate to be used. The specific operative event
shall be determined taking account of the following criteria: 

(a)	actual applicability as soon as possible of adjustments to the
exchange rate;

(b)	similarity of the operative events for analogous operations carried
out under the market organisation;

(c)	coherence in the operative events for the various prices and amounts
relating to the market organisation.

(d)	practicability and effectiveness of checks on the application of
suitable exchange rates.

6.	In order to avoid the application by the Member States which have not
adopted the euro of different exchange rates in accounts of revenue
received or aid paid to beneficiaries in a currency other than the euro,
on the one hand, and in the establishment of the declaration of
expenditure drawn up by the paying agency, on the other, the Commission
shall be empowered to adopt delegated acts in accordance with Article
111 containing rules on the exchange rate applicable when declarations
of expenditure are drawn up and public storage operations recorded in
the accounts of the paying agency.

Article 107

Safeguard measures and derogations

1.	The Commission may, by means of implementing acts, adopt measures in
order to safeguard the application of Union legislation if exceptional
monetary practices related to national currency are likely to jeopardise
it. Those measures may, where necessary, derogate from the existing
rules.

Those implementing acts shall be adopted in accordance with the
examination procedure referred to in Article 112(3).

The European Parliament and the Council and the Member States shall be
notified forthwith of the measures referred to in the first
subparagraph.

2.	Where exceptional monetary practices concerning a national currency
are liable to jeopardise the application of Union legislation, the
Commission shall be empowered to adopt delegated acts in accordance with
Article 111 derogating from this Section, in particular in the following
cases:

(a)	where a country uses abnormal exchange techniques such as multiple
exchange rates or operates barter agreements;

(b)	where countries have currencies which are not quoted on official
foreign exchange markets or where the trend in such currencies is likely
to create distortion in trade.

Article 108

Use of the euro by non-euro Member States

1.	If a Member State which has not adopted the euro decides to pay the
expenditure resulting from sectoral agricultural legislation in euro
rather than in its national currency, the Member State shall take
measures to ensure that the use of the euro does not provide a
systematic advantage compared with the use of national currency.

2.	The Member State shall notify the Commission of the measures planned
before they come into effect. The measures may not take effect until the
Commission has notified its agreement thereto.

CHAPTER III 

Report and evaluation 

Article 109

Annual financial report

By end September of each year following the budget year, the Commission
shall draw up a financial report on the administration of the EAGF and
the EAFRD during the previous financial year and shall submit it to the
European Parliament and the Council.

Article 110

Monitoring and evaluation of common agricultural policy

1.	A common monitoring and evaluation framework shall be established
with a view to measuring the performance of the common agricultural
policy. It shall include all instruments related to the monitoring and
evaluation of common agricultural policy measures and in particular of
the direct payments provided for in Regulation (EU) No DP/xxx, the
market measures provided for in Regulation (EU) No CMO/xxx, the rural
development measures provided for in Regulation (EU) No RD/xxx and of
the application of the cross compliance provided for in this Regulation.

In order to ensure an effective performance measurement the Commission
shall be empowered to adopt delegated acts in accordance with Article
111 regarding the content and construction of that framework.

2.	The impact of the common agricultural policy measures referred to in
paragraph 1 shall be measured in relation to the following objectives:

(a)	viable food production, with a focus on agricultural income,
agricultural productivity and price stability;

(b)	sustainable management of natural resources and climate action, with
a focus on greenhouse gas emissions, biodiversity, soil and water;

(c)	balanced territorial development, with a focus on rural employment,
growth and poverty in rural areas.

The Commission shall define, by means of implementing acts, the set of
indicators specific to the objectives referred to in the first
subparagraph. Those implementing acts shall be adopted in accordance
with the examination procedure referred to in Article 112(3).

3.	Member States shall provide the Commission with all the information
necessary to permit the monitoring and evaluation of the measures
concerned. 

The Commission shall take into account the data needs and synergies
between potential data sources, in particular their use for statistical
purposes when appropriate.

The Commission shall adopt, by means of implementing acts, rules on the
information to be sent by the Member States, as well as on the data
needs and synergies between potential data sources. Those implementing
acts shall be adopted in accordance with the examination procedure
referred to in Article 112(3).

4.	The Commission shall present a report on the implementation of this
Article to the European Parliament and the Council every four years. The
first report shall be presented not later than 31 December 2017.

TITLE VIII

FINAL PROVISIONS

Article 111

Exercise of the delegation

1.	The power to adopt delegated acts is conferred on the Commission
subject to the conditions laid down in this Article.

2.	The delegation of power referred to in this Regulation shall be
conferred on the Commission for an indeterminate period of time from the
entry into force of this Regulation.

3.	The delegation of powers referred to in this Regulation may be
revoked at any time by the European Parliament or by the Council. A
decision of revocation shall put an end to the delegation of the power
specified in that decision. It shall take effect the day following the
publication of the decision in the Official Journal of the European
Union or at a later date specified therein. It shall not affect the
validity of any delegated acts already in force.

4.	As soon as it adopts a delegated act, the Commission shall notify it
simultaneously to the European Parliament and to the Council.

5.	A delegated act adopted pursuant to this Regulation shall enter into
force only if no objection has been expressed either by the European
Parliament or the Council within a period of two months of notification
of that act to the European Parliament and the Council or if, before the
expiry of that period, the European Parliament and the Council have both
informed the Commission that they will not object. That period shall be
extended by two months at the initiative of the European Parliament or
the Council.

Article 112

Committee procedure

1.	The Commission shall be assisted by a Committee called "Committee on
the Agricultural Funds". That committee shall be a committee within the
meaning of Regulation (EU) No 182/2011.

2.	Where reference is made to this paragraph, Article 4 of Regulation
(EU) No 182/2011 shall apply.

3.	Where reference is made to this paragraph, Article 5 of Regulation
(EU) No 182/2011 shall apply.

Article 113

Repeal

1.	Regulations (EEC) No 352/78, (EC) No 2799/98, (EC) No 814/2000, (EC)
No 1290/2005 and (EC) No 485/2008 are repealed. 

However, Article 44a of Regulation (EC) No 1290/2005 shall continue to
apply.

2.	References to the repealed Regulations shall be construed as
references to this Regulation and shall be read in accordance with the
correlation table set out in Annex III.

Article 114

Transitional measures

In order to ensure the smooth transition from the arrangements provided
for in the repealed Regulations referred to in Article 113 to those laid
down in this Regulation, the Commission shall be empowered to adopt
delegated acts in accordance with Article 111.

Article 115

Entry into force and application

This Regulation shall enter into force on the seventh day following that
of its publication in the Official Journal of the European Union.

It shall apply from 1 January 2014.

However, the following provisions shall apply from 16 October 2013:

(a)	Articles 7, 8 and 9;

(b)	Articles 18, 42, 43 and 45 as regards expenditure incurred from 16
October 2013.

This Regulation shall be binding in its entirety and directly applicable
in all Member States.

Done at Brussels,

For the European Parliament	For the Council

The President	The President

ANNEX I

Minimum scope of the farm advisory system in the field of climate change
mitigation and adaptation, biodiversity, the protection of water, animal
and plant disease notification and innovation, as laid down in Article
12(2)(c)

Requirements or actions and advices at the level of beneficiaries as
defined by Member States where appropriate under:

Climate change mitigation and adaptation: 

Information on prospective impacts of climate change in the relevant
regions, of the green house gas emissions of the relevant farming
practices and on the contribution of the agricultural sector to
mitigation through improved farming and agroforestry practices and
through the development of renewable energy projects on farm and energy
efficiency improvement on farm..

Investments in physical assets as provided for under Article 18(1) (c)
of Regulation (EU) N° xx/xxx [RD].

Restoration of agricultural production potential and introduction of
appropriate prevention action as provided for under Article 19 of
Regulation (EU) N° xx/xxx [RD].

Afforestation and creation of woodland as provided for under Article
22(1)(a) of Regulation (EU) N° xx/xxx [RD].

Establishment of agro-forestry systems as provide for under Article
22(1)(b) of Regulation (EU) N° xx/xxx [RD].

Prevention and restoration of damages to forest from forest fires and
natural disasters as provided for under Article 22(1)(c) of Regulation
(EU) N° xx/xxx [RD].

Investments improving the resilience and environmental value of forest
ecosystems as provided for under Article 22(1)(d) of Regulation (EU) N°
xx/xxx [RD].

Investments in new forestry technologies and in processing and marketing
of forest products as provided for under Article 22(1)(e) of Regulation
(EU) N° xx/xxx [RD].

Agri-environment operations addressing climate change mitigation and
adaptation as provided for under Article 29 of Regulation (EU) N°
xx/xxx [RD].

Organic farming addressing climate change mitigation and adaptation as
provided for under Article 30 of Regulation (EU) N° xx/xxx [RD].

Environmental services from forests and forest conservation addressing
climate change mitigation and adaptation as provided for under Article
35 of Regulation (EU) N° xx/xxx [RD].

Biodiversity:

Directive 2009/147/EC of the European Parliament and of the Council on
the conservation of wild birds.

Council Directive 92/43/EEC on the conservation of natural habitats and
of wild fauna and flora.

Investments in physical assets as provided for under Article 18(1) (d)
of Regulation (EU) N° xx/xxx [RD].

Establishment of agro-forestry systems as provided for under Article
22(1)(b) of Regulation (EU) N° xx/xxx [RD].

Investments improving the resilience and environmental value of forest
ecosystems as provided for under Article 22(1)(d) of Regulation (EU) N°
xx/xxx [RD].

Agri-environment operations addressing biodiversity as provided for
under Article 29 of Regulation (EU) N° xx/xxx [RD].

Organic farming addressing biodiversity as provided for under Article 30
of Regulation (EU) N° xx/xxx [RD].

Environmental services from forests and forest conservation addressing
biodiversity as provided for under Article 35 of Regulation (EU) N°
xx/xxx [RD].

Protection of water:

Article 11 (3) of Directive 2000/60/EC establishing a framework for
Community action in the field of water policy. 

Proper use of plant protection product as laid down in Article 55 of
Regulation (EC) No 1107/2009, in particular the compliance with the
general principles of integrated pest management as referred to in
Article 14 of Directive 2009/128/EC establishing a framework for
Community action to achieve the sustainable use of pesticide. 

Investments in physical assets for water management as provided for
under Article 18(1)(c) of Regulation (EU) N° xx/xxx [RD].

Agri-environment operations addressing water management as provided for
under Article 29 of Regulation (EU) N° xx/xxx [RD].

Organic farming addressing water management as provided for under
Article 30 of Regulation (EU) N° xx/xxx [RD].

Notification of animal and plant diseases:

Council Directive 2003/85/EC of 29 September 2003 on Community measures
for the control of foot-and-mouth disease.

Council Directive 92/119/EEC of 17 December 1992 introducing general
Community measures for the control of certain animal diseases and
specific measures relating to swine vesicular disease.

Council Directive 2000/75/EC of 20 November 2000 laying down specific
provisions for the control and eradication of bluetongue.

Council Directive 2000/29/EC of 8 May 2000 on protective measures
against the introduction into the Community of organisms harmful to
plants or plant products and against their spread within the Community.

Innovation:

Information on actions targeted towards innovation.

Dissemination of the activities in the framework of the [European
Innovation Partnership] Network provided for in Article 53 of Regulation
(EU) N° xx/xxx [RD].

Cooperation as provided for under Article 36 of Regulation (EU) N°
xx/xxx [RD].

ANNEX II

Rules on cross compliance pursuant to Article 93

SMR:	Statutory management requirement

GAEC:	Standards for good agricultural and environmental condition of
land

Area	Main Issue	Requirements and standards

Environment, climate change, good agricultural condition of land	Water
SMR 1	Council Directive 91/676/EEC of 12 December 1991 concerning the
protection of waters against pollution caused by nitrates from
agricultural sources (OJ L 375, 31.12.1991, p. 1)	Articles 4 and 5



GAEC 1	Establishment of buffer strips along water courses 



	GAEC 2	Where use of water for irrigation is subject to authorisation,
compliance with authorisation procedures



	GAEC 3	Protection of ground water against pollution: prohibition of
direct discharge into groundwater and measures to prevent indirect
pollution of groundwater through discharge on the ground and percolation
through the soil of dangerous substances, as listed in the Annex to the
Directive 80/68/EEC



Soil and carbon stock	GAEC 4	Minimum soil cover 



	GAEC 5	Minimum land management reflecting site specific conditions to
limit erosion 



	GAEC 6	Maintenance of soil organic matter level including ban on
burning arable stubble



	GAEC 7	Protection of wetland and carbon rich soils including a ban of
first ploughing



Biodiversity	SMR 2	Directive 2009/147/EC of the European Parliament and
of the Council of 30 November 2009 on the conservation of wild birds (OJ
L 20, 26.1.2010, p. 7) 	Article 3(1), Article 3(2)(b), Article 4 (1),
(2) and (4)



SMR 3	Council Directive 92/43/EEC of 21 May 1992 on the conservation of
natural habitats and of wild flora and fauna (OJ L 206, 22.7.1992, p. 7)
Article 6 (1) and (2)

	Landscape, minimum level of maintenance, 	GAEC 8	Retention of landscape
features, including where appropriate, hedges, ponds, ditches, trees in
line, in group or isolated, field margins and terraces, and including a
ban on cutting hedges and trees during the bird breeding and rearing
season and possible measures for avoiding invasive species and pests

	Public health, animal health and plant health	Food safety	SMR 4
Regulation (EC) No 178/2002 of the European Parliament and of the
Council of 28 January 2002 laying down the general principles and
requirements of food law, establishing the European Food Safety
Authority and laying down procedures in matters of food safety (OJ L 31,
1.2.2002, p. 1)	Articles 14 and 15, Article 17(1)  and Articles 18, 19
and 20



SMR 5	Council Directive 96/22/EC of 29 April 1996 concerning the
prohibition on the use in stockfarming of certain substances having a
hormonal or thyrostatic action and beta-agonists (OJ L125, 23.5.1996,
p.3)	Article 3(a), (b), (d) and (e) and Articles 4, 5 and 7

	Identification and registration of animals	SMR 6	Council Directive
2008/71/EC of 15 July 2008 on identification and registration of pigs
(OJ L 213, 8.8.2005, p. 31)	Articles 3, 4 and 5



SMR 7	Regulation (EC) No 1760/2000 of the European Parliament and of the
Council of 17 July 2000 establishing a system for the identification and
registration of bovine animals and regarding the labelling of beef and
beef products (OJ L 204, 11.8.2000, p. 1) 	Articles 4 and 7



SMR 8	Council Regulation (EC) No 21/2004 of 17 December 2003
establishing a system for the identification and registration of ovine
and caprine animals (OJ L 5, 9.1.2004, p. 8) 	Articles 3, 4 and 5

	Animal diseases	SMR 9	Regulation (EC) No 999/2001 of the European
Parliament and of the Council of 22 May 2001 laying down rules for the
prevention, control and eradication of certain transmissible spongiform
encephalopathies (OJ L 147, 31.5.2001, p. 1) 	Articles 7, 11, 12, 13 and
15

	Plant protection products	SMR 10	Regulation (EC) No 1107/2009 of the
European Parliament and of the Council of 21 October 2009 concerning the
placing of plant protection products on the market and repealing Council
Directives 79/117/EEC and 91/414/EEC (OJ L 309, 24.11.2009, p.1)	Article
55, first and second sentence

Animal welfare	Animal welfare	SMR 11	Council Directive 2008/119/EC of 18
December 2008 laying down minimum standards for the protection of calves
(OJ L 10, 15.1.2009, p. 7)	Articles 3 and 4



SMR 12	Council Directive 2008/120/EC of 18 December 2008 laying down
minimum standards for the protection of pigs (OJ L 47, 18.2.2009, p. 5) 
Article 3 and Article 4



SMR 13	Council Directive 98/58/EC of 20 July 1998 concerning the
protection of animals kept for farming purposes (OJ L 221, 8.8.1998, p.
23) 	Article 4

ANNEX III

CORRELATION TABLE

1. Regulation (EEC) No 352/78

Regulation (EEC) No 352/78	This Regulation

Article 1	Article 45(1)(e)

Article 2	Article 45(2)

Article 3	Article 48(1)

Article 4	- 

Article 5	- 

Article 6	- 

2. Regulation (EC) No 2799/98

Regulation (EC) No 2799/98	This Regulation

Article 1	-

Article 2	Article 105(2) and 106

Article 3	Article 106

Article 4	- 

Article 5	-

Article 6	-

Article 7	Article 107

Article 8	Article 108

Article 9	- 

Article 10	- 

Article 11	- 

3. Regulation (EC) 814/2000

Regulation (EC) 814/2000	This Regulation

Article 1	Article 47(1)

Article 2	Article 47(2)

Article 3	-

Article 4	-

Article 5	-

Article 6	-

Article 7	-

Article 8	Article 47(5)

Article 9	-

Article 10	Articles 47(4) and 112

Article 11	-

4. Regulation (EC) No 1290/2005

Regulation (EC) No 1290/2005	This Regulation

Article 1	Article 1

Article 2	Article 3

Article 3	Article 4

Article 4	Article 5

Article 5	Article 6

Article 6	Article 7

Article 7	Article 9

Article 8	Article 102

Article 9	Article 60

Article 10	Article 10

Article 11	Article 11

Article 12	Article 16

Article 13	Article 19

Article 14	Article 17

Article 15	Article 18

Article 16	Article 42

Article 17	Article 43(1)

Article 17a	Article 43(2)

Article 18	Article 24

Article 19	Article 26

Article 20	Article 27

Article 21	Article 28

Article 22	Article 31

Article 23	Article 32

Article 24	Article 33

Article 25	Article 34

Article 26	Article 35

Article 27	Article 43(1)

Article 27a	Article 43(2)

Article 28	Article 36

Article 29	Article 37

Article 30	Article 53

Article 31	Article 54

Article 32	Article 56 and 57

Article 33	Article 56 and 58

Article 34	Article 45

Article 35	-

Article 36	Article 50

Article 37	Article 49

Article 38	-

Article 39	-

Article 40	-

Article 41	Article 112

Article 42	-

Article 43	Article 109

Article 44	Article 103

Article 44a	Article 113(1)

Article 45	Article 105(1) and 106(3) and (4)

Article 46	-

Article 47	Article 113

Article 48	Article 114

Article 49	Article 115

5. Regulation (EC) No 485/2008

Regulation (EC) No 485/2008	This Regulation

Article 1	Article 79

Article 2	Article 80

Article 3	Article 81

Article 4	-

Article 5	Article 82(1), (2) and (3)

Article 6	Article 82(4)

Article 7	Article 83

Article 8	Article 103(2)

Article 9	Article 86

Article 10	Article 84

Article 11	Article 85

Article 12	Article 106(3)

Article 13	- 

Article 14	- 

Article 15	Article 87

Article 16	- 

Article 17	- 

LEGISLATIVE FINANCIAL STATEMENT

FRAMEWORK OF THE PROPOSAL/INITIATIVE 

Title of the proposal/initiative 

-	Proposal for a Regulation of the European Parliament and of the
Council establishing rules for direct payments to farmers under support
schemes within the framework of the common agricultural policy;

-	Proposal for a Regulation of the European Parliament and of the
Council establishing a common organisation of the markets in
agricultural products (Single CMO Regulation);

-	Proposal for a Regulation of the European Parliament and of the
Council on support for rural development by the European Agricultural
Fund for Rural Development (EAFRD);

-	Proposal for a Regulation of the European Parliament and of the
Council on the financing, management and monitoring of the common
agricultural policy; 

-	Proposal for a Regulation of the European Parliament and of the
Council amending Council Regulation (EC) No 73/2009 as regards the
application of direct payments to farmers in respect of the year 2013;

-	Proposal for a Council Regulation determining measures on fixing
certain aids and refunds related to the common organisation of the
markets in agricultural products;

-	Proposal for a Regulation of the European Parliament and of the
Council amending Council Regulation (EC) No 1234/2007 as regards the
regime of the single payment scheme and support to vine-growers.

Policy area(s) concerned in the ABM/ABB structure 

Policy Area Title 05 of Heading 2

Nature of the proposal/initiative (Legislative framework for the CAP
post 2013)

x The proposal/initiative relates to a new action 

( The proposal/initiative relates to a new action following a pilot
project/preparatory action 

x The proposal/initiative relates to the extension of an existing action


x The proposal/initiative relates to an action redirected towards a new
action 

Objectives

The Commission's multiannual strategic objective(s) targeted by the
proposal/initiative 

In order to promote resource efficiency with a view to smart,
sustainable and inclusive growth for EU agriculture and rural
development in line with the Europe 2020 Strategy, the objectives of the
CAP are:

- Viable food production;

- Sustainable management of natural resources and climate action;

- Balanced territorial development.

Specific objective(s) and ABM/ABB activity(ies) concerned

Specific objectives for Policy area 05:

Specific objective No 1: 

To provide environmental public goods

Specific objective No 2: 

To compensate for production difficulties in areas with specific natural
constraints

Specific objective No 3: 

To pursue climate change mitigation and adaptation actions

Specific objective No 4: 

To manage the EU budget (CAP) in accordance with high standards of
financial management

Specific objective for ABB 05 02 - Interventions in agricultural
markets: 

Specific objective No 5: 

To improve the competitiveness of the agricultural sector and enhance
its value share in the food chain

Specific objective for ABB 05 03 - Direct aids:

Specific objective No 6:

To contribute to farm incomes and limit farm income variability

Specific objectives for ABB 05 04 – Rural development:

Specific objective No 7 

To foster green growth through innovation

Specific objective No 8: 

To support rural employment and maintain the social fabric of rural
areas

Specific objective No 9 

To improve the rural economy and promote diversification

Specific objective No 10 

To allow for structural diversity in farming systems

Expected result(s) and impact

It is not possible to set quantitative targets for impact indicators at
this stage. Although the policy can steer in a certain direction, the
broad economic, environmental and social outcomes measured by such
indicators would ultimately also depend on the impact from a range of
external factors, which recent experience indicates have become
significant and unpredictable. Further analysis is on-going, to be ready
for the period post-2013.

As regards the direct payments, Member States will have the possibility
to decide, to a limited degree, on the implementation of certain
components of the direct payment schemes.

For rural development, the expected results and impact will depend on
the rural development programmes that Member States will submit to the
Commission. Member States will be asked to set targets in their
programmes. 

Indicators of results and impact 

The proposals provide for the establishment of a common monitoring and
evaluation framework with a view to measuring the performance of the
Common Agricultural Policy. That framework shall include all instruments
related to the monitoring and evaluation of CAP measures and in
particular of the direct payments, market measures, rural development
measures and of the application of cross compliance.

The impact of these CAP measures shall be measured in relation to the
following objectives:

(a)	viable food production, with a focus on agricultural income,
agricultural productivity and price stability;

(b)	sustainable management of natural resources and climate action, with
a focus on greenhouse gas emissions, biodiversity, soil and water;

(c)	balanced territorial development, with a focus on rural employment,
growth and poverty in rural areas.

By means of implementing acts, the Commission shall define the set of
indicators specific to these objectives and areas.

Moreover, as regards rural development, a reinforced common monitoring
and evaluation system is proposed. That system aims (a) to demonstrate
the progress and achievements of rural development policy and assess the
impact, effectiveness, efficiency and relevance of rural development
policy interventions, (b)	to contribute to better targeted support for
rural development, and (c) to support a common learning process related
to monitoring and evaluation. The Commission will establish, by means of
implementing act, a list of common indicators linked to the policy
priorities.

Grounds for the proposal/initiative 

Requirement(s) to be met in the short or long term 

In order to meet the multi-annual strategic objectives of the CAP which
are a direct translation of the Europe 2020 strategy for European rural
areas and to fulfil the relevant requirements of the Treaty, the
proposals aim to lay down the legislative framework for the Common
Agricultural Policy for the period after 2013.

Added value of EU involvement

The future CAP will not only be a policy that caters for a small, albeit
essential, part of the EU economy, but also a policy of strategic
importance for food security, the environment and territorial balance.
Thus, the CAP, as a truly common policy, makes the most efficient use of
limited budgetary resources in maintaining a sustainable agriculture
throughout the EU, addressing important cross-border issues such as
climate change and reinforcing solidarity among Member States.

As mentioned in the Commission communication "A Budget for Europe 2020",
the CAP is a genuinely European policy. Instead of operating 27 separate
agricultural policies and budgets, Member States pool resources to
operate a single European policy with a single European budget. This
naturally means that the CAP accounts for a significant proportion of
the EU budget. However, this approach is both more efficient and
economical than an uncoordinated national approach.

Lessons learned from similar experiences in the past

On the basis of the evaluation of the current policy framework, an
extensive consultation with stakeholders as well as an analysis of
future challenges and needs, a comprehensive impact assessment has been
carried out. More details can be found in the impact assessment and the
explanatory memorandum that are accompanying the legal proposals.

Coherence and possible synergy with other relevant instruments

The legislative proposals concerned by this financial statement should
be seen in the broader context of the proposal for a single framework
regulation with common rules for the common strategic framework funds
(EAFRD, ERDF, ESF, Cohesion Fund and EMFF). That framework regulation
will make an important contribution to reducing administrative burden,
to spending EU funds in an effective way, and to put simplification into
practice. This also underpins the new concepts of the common strategic
framework for all these funds and the upcoming Partnership Contracts
which will also cover these funds.

The common strategic framework, which will be established, will
translate the objectives and priorities of the Europe 2020 Strategy into
priorities for the EAFRD together with the ERDF, ESF, Cohesion Fund and
EMFF, which will ensure an integrated use of the funds to deliver common
objectives. 

The common strategic framework will also set out coordination mechanisms
with other relevant Union policies and instruments.

Moreover, as regards the CAP, significant synergies and simplification
effects will be obtained by harmonising and aligning the management and
control rules for the first (EAGF) and second (EAFRD) pillar of the CAP.
The strong link between the EAGF and the EAFRD should be maintained and
the structures already in place in the Member States be sustained.

Duration and financial impact 

x Proposal/initiative of limited duration (for the draft regulations on
direct payment schemes, rural development and transitional regulations)

x	Proposal/initiative in effect from 01/01/2014 to 31/12/2020 

x	Financial impact for the period of the next multi-annual financial
framework. For rural development, impact on payments to 2023.

x Proposal/initiative of unlimited duration (for the draft regulation on
the single CMO and the horizontal regulation)

Implementation from 2014.

Management mode(s) envisaged 

x Centralised direct management by the Commission 

( Centralised indirect management with the delegation of implementation
tasks to:

(	executive agencies 

(	bodies set up by the Communities 

(	national public-sector bodies/bodies with public-service mission 

(	persons entrusted with the implementation of specific actions pursuant
to Title V of the Treaty on European Union and identified in the
relevant basic act within the meaning of Article 49 of the Financial
Regulation 

x Shared management with the Member States 

( Decentralised management with third countries 

( Joint management with international organisations (to be specified)

Comments 

No substantive change compared to the present situation, i.e. the bulk
of expenditure concerned by the legislative proposals on the CAP reform
will be managed by shared management with the Member States. However, a
very minor part will continue to fall under centralised direct
management by the Commission.

MANAGEMENT MEASURES 

Monitoring and reporting rules 

In terms of monitoring and evaluation of the CAP, the Commission will
present a report to the European Parliament and the Council every 4
years, with the first report to be presented not later than end 2017.

This is complemented by specific provisions in all areas of the CAP,
with various comprehensive reporting and notifications requirements to
be specified in the implementing rules. 

As regards rural development, rules are also provided for monitoring at
programme level, which will be aligned with the other funds, and which
will be coupled with ex ante, on-going and ex post evaluations.

Management and control system 

Risk(s) identified 

There are more than seven million beneficiaries of the CAP, receiving
support under a large variety of different aid schemes, each of which
having detailed and sometimes complex eligibility criteria.

The reduction in the error rate in the domain of the common agricultural
policy can already be considered as a trend. Thus, most recently an
error rate close to 2% confirms the overall positive assessment of
previous years. It is the intention to continue the efforts in order to
achieve an error rate below 2%.

Control method(s) envisaged 

The legislative package, in particular the proposal for the regulation
on the financing, management and monitoring of the common agricultural
policy, envisages maintaining and reinforcing the current system
established by Regulation (EC) No 1290/2005. It provides for a
compulsory administrative structure at Member State level, centred
around accredited paying agencies, which are responsible for carrying
out controls at final beneficiary level in accordance with the
principles set out under point 2.3. Every year, the head of each paying
agency is required to provide a management declaration of assurance
which covers the completeness, accuracy and veracity of the accounts,
the proper functioning of the internal control systems and the legality
and regularity of the underlying transactions. An independent audit body
is required to provide an opinion on all these three elements.

The Commission will continue to audit agricultural expenditure, using a
risk-based approach in order to ensure that its audits are targeted to
the areas of highest risk. Where these audits reveal that expenditure
has been incurred in breach of Union rules, it will exclude the amounts
concerned from Union financing under the conformity clearance system.

As regards the cost of controls, a detailed analysis is provided in
annex 8 to the impact assessment accompanying the legislative proposals.

Measures to prevent fraud and irregularities 

The legislative package, in particular the proposal for the regulation
on the financing, management and monitoring of the common agricultural
policy, envisages maintaining and reinforcing the current detailed
systems for controls and penalties to be applied by the paying agencies,
with common basis features and special rules tailored to the
specificities of each aid regime. The systems generally provide for
exhaustive administrative controls of 100% of the aid applications,
cross-checks with other databases where this is considered appropriate
as well as pre-payment on-the-spot checks of a minimum number of
transactions, depending on the risk associated with the regime in
question. If these on-the-spot checks reveal a high number of
irregularities, additional checks must be carried out. In this context,
the by far most important system is the Integrated Administration and
Control System (IACS), which in financial year 2010 covered around 80%
of total expenditure under the EAGF and the EAFRD. For Member States
with properly functioning control systems and low error rates, the
Commission will be empowered to allow for a reduction of the number of
on-the-spot checks.

The package further envisages that Member States shall prevent, detect
and correct irregularities and fraud, impose effective, dissuasive and
proportionate penalties as laid down in Union legislation or national
law, and recover any irregular payments plus interests. It includes an
automatic clearance mechanism for irregularity cases, which provides
that if recovery has not taken place within four years of the date of
the recovery request, or within eight years in the case of legal
proceedings, the amounts not recovered shall be borne by the Member
State concerned. This mechanism will be a strong incentive for Member
States to recover irregular payments as quickly as possible. 

ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE 

The amounts indicated in this financial statement are expressed in
current prices and in commitments.

In addition to the changes resulting from the legislative proposals as
listed in the accompanying tables below, the legislative proposals imply
further changes which have no financial impact.

For any of the years in the period 2014-2020, the application of
financial discipline cannot be excluded at this stage. However, this
will not depend on the reform proposals as such, but on other factors,
such as the execution of direct aids or future developments in the
agricultural markets.

As concerns direct aids, the extended net ceilings for 2014 (calendar
year 2013) included in the proposal regarding transition are higher than
the amounts allocated to direct aids indicated in the accompanying
tables. The purpose of this extension is to ensure a continuation of the
existing legislation in a scenario in which all the other elements would
remain unchanged, without prejudice to the possible need for applying
the financial discipline mechanism. 

The reform proposals contain provisions giving Member States a set
degree of flexibility in relation to their allocation of direct aids
respectively rural development. In case Member States decide to use that
flexibility, this will have financial consequences within the given
financial amounts, which cannot be quantified at this stage. 

This financial statement does not take into account the possible use of
the crises reserve. It should be underlined that the amounts taken into
account for market-related expenditure are based on no public
intervention buying-in and other measures related to a crisis situation
in any sectors.

Heading(s) of the multiannual financial framework and expenditure budget
line(s) affected 

Table 1: Amounts for the CAP including complementary amounts foreseen
in the MFF proposals and the CAP reform proposals

In million EUR (current prices)

Budget year	2013	2013 adjusted (1)	2014	2015	2016	2017	2018	2019	2020
TOTAL 2014-2020













Inside MFF











Heading 2











Direct aids and market-related expenditure (2) (3) (4)	44 939	45 304	44
830	45 054	45 299	45 519	45 508	45 497	45 485	317 193

Estimated assigned revenue	672	672	672	672	672	672	672	672	672	4 704

P1 Direct aids and market-related expenditure (with assigned revenue)	45
611	45 976	45 502	45 726	45 971	46 191	46 180	46 169	46 157	321 897

P2 Rural development (4)	14 817	14 451	14 451	14 451	14 451	14 451	14
451	14 451	14 451	101 157

Total	60 428	60 428	59 953	60 177	60 423	60 642	60 631	60 620	60 608	423
054

   Heading 1











CSF Agricultural research and innovation	N.A.	N.A.	682	696	710	724	738
753	768	5 072

Most deprived persons	N.A.	N.A.	379	387	394	402	410	418	427	2 818

Total	N.A.	N.A.	1 061	1 082	1 104	1 126	1 149	1 172	1 195	7 889

   Heading 3











Food safety	N.A.	N.A.	350	350	350	350	350	350	350	2 450













Outside MFF











   Reserve for agricultural crises	N.A.	N.A.	531	541	552	563	574	586	598
3 945

   European Globalisation Fund (EGF)











Of which maximum available for agriculture: (5)	N.A.	N.A.	379	387	394
402	410	418	427	2 818













TOTAL











TOTAL Commission proposals (MFF + outside MFF) + assigned revenue	60 428
60 428	62 274	62 537	62  823	63 084	63 114	63 146	63 177	440 156

TOTAL MFF proposals (i.e. excluding Reserve and EGF) + assigned revenue
60 428	60 428	61 364	61 609	61 877	62 119	62 130	62 141	62 153	433 393



Notes:

(1)	Taking into account legislative changes already agreed, i.e.
voluntary modulation for the UK and Article 136 "unspent amounts" will
cease to apply by the end of 2013.

(2)	The amounts relate to the proposed annual ceiling for the first
pillar. However, it should also be noted that it is proposed to move
negative expenditure from accounting clearance (currently under budget
item 05 07 01 06) to assigned revenue (under item 67 03). For details,
see estimated revenue table on the page below. 

(3)	The 2013 figures include the amounts for veterinary and
phytosanitary measures as well as market measures for the fisheries
sector.

(4)	The amounts in the table above are in line with those in the
Commission communication "A Budget for Europe 2020" (COM(2011)500 final
of 29 June 2011). However, it remains to be decided if the MFF will
reflect the transfer that is proposed for the envelope of one Member
State of the cotton national restructuring programme to rural
development as from 2014, implying an adjustment (4 million EUR per
year) of the amounts for respectively the EAGF sub-ceiling and for
pillar 2. In the tables in the sections below, the amounts have been
transferred, irrespective of them being reflected in the MFF.

(5)	In accordance with the Commission communication "A Budget for Europe
2020" (COM(2011)500 final), a total amount of up to 2.5 billion EUR in
2011 prices will be available under the European Globalisation Fund for
providing additional support to farmers suffering from effects of
globalisation. In the table above, the breakdown by year in current
prices is only indicative. The proposal for the inter-institutional
agreement between the European Parliament, the Council and the
Commission on cooperation in budgetary matters and on sound financial
management (COM(2011)403 final of 29 June 2011) sets out, for the EGF,
an overall maximum annual amount of 429 million EUR in 2011 prices.
Estimated impact on expenditure 

Summary of estimated impact on expenditure 

Table 2: Estimated revenue as well as expenditure for Policy Area 05
within Heading 2

In million EUR (current prices)

Budget year	2013	2013 adjusted	2014	2015	2016	2017	2018	2019	2020	TOTAL
2014-2020

REVENUE











123 – Sugar production charge (own resources)	123	123	123	123





246













67 03 - Assigned revenue	672	672	741	741	741	741	741	741	741	5 187

  of which: ex 05 07 01 06 - Accounting clearance	0	0	69	69	69	69	69	69
69	483

Total	795	795	864	864	741	741	741	741	741	5 433

EXPENDITURE











05 02 - Markets (1)	3 311	3 311	2 622	2 641	2 670	2 699	2 722	2 710	2
699	18 764

05 03 - Direct aids (before capping) (2) 	42 170	42 535	42 876	43 081	43
297	43 488	43 454	43 454	43 454	303 105

05 03 – Direct aids (after capping)	42 170	42 535	42 876	42 917	43 125
43 303	43 269	43 269	43 269	302 027













05 04 - Rural development (before capping)	14 817	14 451	14 455	14 455
14 455	14 455	14 455	14 455	14 455	101 185

05 04 - Rural development (after capping)	14 817	14 451	14 455	14 619	14
627	14 640	14 641	14 641	14 641	102 263













05 07 01 06 - Accounting clearance	-69	-69	0	0	0	0	0	0	0	0

Total	60 229	60 229	59 953	60 177	60 423	60 642	60 631	60 620	60 608	423
054

NET BUDGET after assigned revenue 

	59 212	59 436	59 682	59 901	59 890	59 879	59 867	417 867



Notes:

(1)	For 2013, preliminary estimate based on Draft Budget 2012 taking
into account legal adjustments already agreed for 2013 (e.g. wine
ceiling, abolition of potato starch premium, dried fodder) as well as
some foreseen developments. For all years, the estimates assume that
there will be no additional financing need for support measures due to
market disturbances or crises.

(2)	The 2013 amount includes an estimate of wine grubbing-up 2012.

Table 3: Calculation of the financial impact by budget chapter of the
CAP reform proposals as regards revenue and CAP expenditure

In million EUR (current prices)

Budget year	2013	2013 adjusted

TOTAL 2014-2020



	2014	2015	2016	2017	2018	2019	2020

	REVENUE











123 – Sugar production charge (own resources)	123	123	0	0	0	0	0	0	0	0













67 03 - Assigned revenue	672	672	69	69	69	69	69	69	69	483

  of which: ex 05 07 01 06 - Accounting clearance	0	0	69	69	69	69	69	69
69	483

Total	795	795	69	69	69	69	69	69	69	483

EXPENDITURE











05 02 - Markets (1)	3 311	3 311	-689	-670	-641	-612	-589	-601	-612	-4
413

05 03 - Direct aids (before capping) (2)	42 170	42 535	-460	-492	-534
-577	-617	-617	-617	-3 913

05 03 - Direct aids – Estimated product of capping to be transferred
to rural development

	0	-164	-172	-185	-186	-186	-186	-1 078

05 04 - Rural development (before capping)	14 817	14 451	4	4	4	4	4	4	4
28

05 04 - Rural development – Estimated product of capping to be
transferred from direct aids

	0	164	172	185	186	186	186	1 078

05 07 01 06 - Accounting clearance	-69	-69	69	69	69	69	69	69	69	483

Total	60 229	60 229	-1 076	-1 089	-1 102	-1 115	-1 133	-1 144	-1 156	-7
815

NET BUDGET after assigned revenue 

	-1 145	-1 158	-1 171	-1 184	-1 202	-1 213	-1 225	-8 298



Notes:

(1)	For 2013, preliminary estimate based on Draft Budget 2012 taking
into account legal adjustments already agreed for 2013 (e.g. wine
ceiling, abolition of potato starch premium, dried fodder) as well as
some foreseen developments. For all years, the estimates assume that
there will be no additional financing need for support measures due to
market disturbances or crises.

(2)	The 2013 amount includes an estimate of wine grubbing-up 2012.

Table 4: Calculation of the financial impact of the CAP reform
proposals as regards CAP market-related expenditure

In million EUR (current prices)

BUDGET YEAR

Legal base	Estimated needs	Changes to 2013





2013 

(1)	2014	2015	2016	2017	2018	2019	2020	TOTAL 2014-2020

Exceptional measures: streamlined and extended scope of legal base

Art. 154, 155, 156	pm	pm	pm	pm	pm	pm	pm	pm	pm

Removal of intervention for durum wheat and sorghum

ex Art.10	pm	-	-	-	-	-	-	-	-

Food programmes for most deprived	(2)	Ex-Art. 27 of Reg 1234/2007	500.0
-500.0	-500.0	-500.0	-500.0	-500.0	-500.0	-500.0	-3 500.0

Private storage (Flax fibre)

Art. 16	N.A.	pm	pm	pm	pm	pm	pm	pm	Pm

Aid for cotton - Restructuring	(3)	ex Art. 5 of Reg. 637/2008	10.0	-4.0
-4.0	-4.0	-4.0	-4.0	-4.0	-4.0	-28.0

Setting-up aid for F&V producer groups

ex Art. 117	30.0	0.0	0.0	0.0	-15.0	-15.0	-30.0	-30.0	-90.0

School fruit scheme

Art. 21	90.0	60.0	60.0	60.0	60.0	60.0	60.0	60.0	420.0

Abolition hops PO

ex Art. 111	2.3	-2.3	-2.3	-2.3	-2.3	-2.3	-2.3	-2.3	-15.9

Optional private storage for skimmed-milk powder

Art. 16	N.A.	pm	pm	pm	pm	pm	pm	pm	pm

Abolition aid for use of skimmed milk/SMP as feedingstuff/casein and use
of casein

ex Art. 101, 102	pm	-	-	-	-	-	-	-	-

Optional private storage for butter	(4)	Art. 16	14.0	[-1.0]	[-14.0]
[-14.0]	[-14.0]	[-14.0]	[-14.0]	[-14.0]	[-85.0]

Abolition milk promotional levy

ex Art. 309	pm	-	-	-	-	-	-	-	-

TOTAL 05 02











	Net effect of reform proposals (5)



-446.3	-446.3	-446.3	-461.3	-461.3	-476.3	-476.3	-3 213.9



Notes:

(1)	The 2013 needs are estimated based on the Commission's Draft Budget
2012, except for (a) the fruit & vegetables sectors where the needs are
based on the financial statement of the respective reforms and (b) any
legal changes already agreed.

(2)	The 2013 amount corresponds to Commission proposal COM(2010)486. As
from 2014, the measure will be financed within Heading 1.

(3)	The envelope for the cotton restructuring programme for Greece (4
million EUR/year) will be transferred to rural development as from 2014.
The envelope for Spain (6.1 million EUR/year) will go to the Single
Payment Scheme as from 2018 (already decided).

(4)	Estimated effect in case of non-application of the measure.

(5)	In addition to expenditure within chapters 05 02 and 05 03, it is
anticipated that direct expenditure within chapters 05 01, 05 07 and 05
08 will be financed by revenue that will be assigned to the EAGF.

Table 5: Calculation of the financial impact of the CAP reform
proposals as regards direct aids

In million EUR (current prices)

BUDGET YEAR

Legal base	Estimated needs	Changes to 2013





2013 (1)	2013 adjusted (2)	2014	2015	2016	2017	2018	2019	2020	TOTAL
2014-2020















Direct aids

	42 169.9	42 535.4	341.0	381.1	589.6	768.0	733.2	733.2	733.2	4 279.3

- Changes already decided:













Phasing-in EU 12



	875.0	1 133.9	1 392.8	1 651.6	1 651.6	1 651.6	1 651.6	10 008.1

Cotton restructuring



	0.0	0.0	0.0	0.0	6.1	6.1	6.1	18.4

Health Check 



	-64.3	-64.3	-64.3	-90.0	-90.0	-90.0	-90.0	-552.8

Previous reforms 



	-9.9	-32.4	-32.4	-32.4	-32.4	-32.4	-32.4	-204.2















- Changes due to new CAP reform proposals

	-459.8	-656.1	-706.5	-761.3	-802.2	-802.2	-802.2	-4 990.3

Of which: capping



	0.0	-164.1	-172.1	-184.7	-185.6	-185.6	-185.6	-1 077.7















TOTAL 05 03













Net effect of reform proposals



	-459.8	-656.1	-706.5	-761.3	-802.2	-802.2	-802.2	-4 990.3

TOTAL EXPENDITURE

	42 169.9	42 535.4	42 876.4	42 916.5	43 125.0	43 303.4	43 268.7	43 268.7
43 268.7	302 027.3

Notes:

(1)	The 2013 amount includes an estimate of wine grubbing-up 2012.

(2)	Taking into account legislative changes already agreed, i.e.
voluntary modulation for the UK and Article 136 "unspent amounts" will
cease to apply by the end of 2013.

Table 6: Components of direct aids

In million EUR (current prices)

BUDGET YEAR



	2015	2016	2017	2018	2019	2020	TOTAL 2014-2020

Annex II



	42 407.2	42 623.4	42 814.2	42 780.3	42 780.3	42 780.3	256 185.7

Payment for agricultural practices beneficial for the climate and
environment (30%)



	12 866.5	12 855.3	12 844.3	12 834.1	12 834.1	12 834.1	77 068.4

Maximum that can be allocated to the Payment for young farmers (2%)





	857.8	857.0	856.3	855.6	855.6	855.6	5 137.9

Basic Payment Scheme, Payment for areas with Natural Constraints,
Voluntary Coupled Support



	28 682.9	28 911.1	29 113.6	29 090.6	29 090.6	29 090.6	173 979.4

Maximum that can be taken from the above lines to finance the Small
Farmer Scheme (10%)



	4 288.8	4 285.1	4 281.4	4 278.0	4 278.0	4 278.0	25 689.3

Wine transfers included in Annex II



	159.9	159.9	159.9	159.9	159.9	159.9	959.1

Capping



	-164.1	-172.1	-184.7	-185.6	-185.6	-185.6	-1 077.7

Cotton



	256.0	256.3	256.5	256.6	256.6	256.6	1 538.6

POSEI/Small Aegean Islands



	417.4	417.4	417.4	417.4	417.4	417.4	2 504.4

Table 7: Calculation of the financial impact of the CAP reform
proposals as regards transitional measures for granting direct aids in
2014

In million EUR (current prices)

BUDGET YEAR

Legal base	Estimated needs	Changes to 2013



	2013 

(1)	2013 adjusted	2014 

(2)

Annex IV to Council Regulation (EC) No 73/2009

	40 165.0	40 530.5	541.9

Phasing-in EU 10



	616.1

Health Check 



	-64.3

Previous reforms 



	-9.9



TOTAL 05 03





	TOTAL EXPENDITURE

	40 165.0	40 530.5	41 072.4



Notes:

(1)	The 2013 amount includes an estimate of wine grubbing-up 2012.

(2)	The extended net ceilings include an estimate of the wine transfers
to SPS based on the decisions taken by the Member States for 2013.

Table 8: Calculation of the financial impact of the CAP reform
proposals as regards rural development

In million EUR (current prices)

BUDGET YEAR

Legal base	Rural development allocation	Changes to 2013





2013	2013 adjusted (1)	2014	2015	2016	2017	2018	2019	2020	TOTAL
2014-2020

Rural development programmes

	14 788.9	14 423.4









Aid for cotton - Restructuring	(2)



4.0	4.0	4.0	4.0	4.0	4.0	4.0	28.0

Product of capping of direct aids





164.1	172.1	184.7	185.6	185.6	185.6	1 077.7

RD envelope excluding technical assistance	(3)



-8.5	-8.5	-8.5	-8.5	-8.5	-8.5	-8.5	-59.4

Technical assistance	(3)

27.6	27.6	8.5	3.5	3.5	3.5	3.5	3.5	3.5	29.4

Prize for local innovative co-operation projects	(4)

N.A.	N.A.	0.0	5.0	5.0	5.0	5.0	5.0	5.0	30.0



TOTAL 05 04













Net effect of reform proposals



	4.0	168.1	176.1	188.7	189.6	189.6	189.6	1 105.7

TOTAL EXPENDITURE (before capping)

	14 816.6	14 451.1	14 455.1	14 455.1	14 455.1	14 455.1	14 455.1	14 455.1
14 455.1	101 185.5

TOTAL EXPENDITURE (after capping)

	14 816.6	14 451.1	14 455.1	14 619.2	14 627.2	14 639.8	14 640.7	14 640.7
14 640.7	102 263.2



Notes:

(1)	Adjustments in line with the existing legislation only applicable
until the end of financial year 2013.

(2)	The amounts in table 1 (section 3.1) are in line with those in the
Commission communication "A Budget for Europe 2020" (COM(2011)500
final). However, it remains to be decided if the MFF will reflect the
transfer that is proposed for the envelope of one Member State of the
cotton national restructuring programme to rural development as from
2014, implying an adjustment (4 million EUR per year) of the amounts for
respectively the EAGF sub-ceiling and for pillar 2. In table 8 above,
the amounts have been transferred, irrespective of them being reflected
in the MFF.

(3)	The 2013 amount for technical assistance was fixed based on the
initial rural development envelope (transfers from pillar 1 not
included). 

Technical assistance for 2014-2020 is fixed at 0.25% of the total rural
development envelope.

(4)	Covered by the amount available for technical assistance.

Heading of multiannual financial framework: 	5	" Administrative
expenditure "

EUR million (to 3 decimal places)

Note:	It is estimated that the legislative proposals will have no impact
on appropriations of an administrative nature, i.e. it is the intention
that the legislative framework can be implemented with the present level
of human resources and administrative expenditure.



	Year

2014	Year

2015	Year

2016	Year

2017	Year

2018	Year

2019	Year

2020	TOTAL

DG: AGRI

( Human resources 	136.998	136.998	136.998	136.998	136.998	136.998
136.998	958.986

( Other administrative expenditure 	9.704	9.704	9.704	9.704	9.704	9.704
9.704	67.928

TOTAL DG AGRI	Appropriations 	146.702	146.702	146.702	146.702	146.702
146.702	146.702	1 026.914



TOTAL appropriations

under HEADING 5

of the multiannual financial framework 	(Total commitments 

= Total payments)	146.702	146.702	146.702	146.702	146.702	146.702
146.702	1 026.914

EUR million (to 3 decimal places)



	Year

N	Year

N+1	Year

N+2	Year

N+3	… enter as many years as necessary to show the duration of the
impact (see point 1.6)	TOTAL

TOTAL appropriations 

under HEADINGS 1 to 5

of the multiannual financial framework 	Commitments









	Payments









Estimated impact on operational appropriations 

(	The proposal/initiative does not require the use of operational
appropriations 

x	The proposal/initiative requires the use of operational
appropriations, as explained below:

Commitment appropriations in EUR million (to 3 decimal places)

Indicate objectives and outputs 

(

	Year

2014	Year

2015	Year

2016	Year

2017	Year

2018	Year

2019	Year

2020	TOTAL

	OUTPUTS

	Type of output

	Average cost 

of the output	Number

of outputs	Cost	Number

of outputs	Cost	Number

of outputs	Cost	Number

of outputs	Cost	Number

of outputs	Cost	Number

of outputs	Cost	Number

of outputs	Cost	Total number of outputs	Total 

cost

SPECIFIC OBJECTIVE No 5: 

To improve the competitiveness of the agricultural sector and enhance
its value share in the food chain

















- Fruit & vegetables: Marketing through producer organisations (POs)
Propor-tion of the value of produc-tion marke-ted through POs in value
of the total produc-tion

	830.0

830.0

830.0

830.0

830.0

830.0

830.0

5 810.0

- Wine: National envelope – Restructuring  NOTEREF _Ref304807718 \h 
\* MERGEFORMAT  58  	Number of hectares

54 326	475.1	54 326	475.1	54 326	475.1	54 326	475.1	54 326	475.1	54 326
475.1	54 326	475.1

3 326.0

- Wine: National envelope – Investments  NOTEREF _Ref304807718 \h  \*
MERGEFORMAT  58 

	1 147	178.9	1 147	178.9	1 147	178.9	1 147	178.9	1 147	178.9	1 147	178.9
1 147	178.9

1 252.6

- Wine: National envelope – By-product distillation  NOTEREF
_Ref304807718 \h  \* MERGEFORMAT  58 	Hecto-litres

700 000	98.1	700 000	98.1	700 000	98.1	700 000	98.1	700 000	98.1	700 000
98.1	700 000	98.1

686.4

- Wine: National envelope – Potable alcohol  NOTEREF _Ref304807718 \h 
\* MERGEFORMAT  58 	Number of hectares

32 754	14.2	32 754	14.2	32 754	14.2	32 754	14.2	32 754	14.2	32 754	14.2
32 754	14.2

14.2

- Wine: National envelope – Use of concentrated must  NOTEREF
_Ref304807718 \h  \* MERGEFORMAT  58 	Hecto-litres

9	37.4	9	37.4	9	37.4	9	37.4	9	37.4	9	37.4	9	37.4

261.8

- Wine: National envelope – promotion  NOTEREF _Ref304807718 \h  58 



267.9

267.9

267.9

267.9

267.9

267.9

267.9

1 875.3

- Other 



720.2

739.6

768.7

797.7

820.3

808.8

797.1

5 452.3

Sub-total for specific objective N°5

2 621.8

2 641.2

2 670.3

2 699.3

2 721.9

2 710.4

2 698.7

18 763.5

SPECIFIC OBJECTIVE No 6:

To contribute to farm incomes and limit farm income variability

















- Direct income support	Number of hectares paid

(in million)

161.014	42 876.4	161.014	43 080.6	161.014	43 297.1	161.014	43 488.1
161.014	43 454.3	161.014	43 454.3	161.014	43 454.3	161.014	303 105.0

Sub-total for specific objective N°6

42 876.4

43 080.6

43 297.1

43 488.1

43 454.3

43 454.3

43 454.3

303 105.0

TOTAL COST



















Note: For specific objectives 1 to 4 and 7 to 10, the outputs are still
to be determined (see section 1.4.2 above).

Estimated impact on appropriations of an administrative nature

Summary 

(	The proposal/initiative does not require the use of administrative
appropriations 

x	The proposal/initiative requires the use of administrative
appropriations, as explained below: 

EUR million (to 3 decimal places)

	Year

2014	Year

2015	Year

2016	Year

2017	Year

2018	Year

2019	Year

2020	TOTAL



HEADING 5

of the multiannual financial framework









Human resources 	136.998	136.998	136.998	136.998	136.998	136.998	136.998
958.986

Other administrative expenditure 	9.704	9.704	9.704	9.704	9.704	9.704
9.704	67.928

Subtotal HEADING 5

of the multiannual financial framework 











Outside HEADING 5

of the multiannual financial framework 









Human resources 









Other expenditure 

of an administrative nature









Subtotal 

outside HEADING 5

of the multiannual financial framework 











TOTAL	146.702	146.702	146.702	146.702	146.702	146.702	146.702	1 026.914

 Estimated requirements of human resources 

(	The proposal/initiative does not require the use of human resources 

x	The proposal/initiative requires the use of human resources, as
explained below:

Note: It is estimated that the legislative proposals will have no impact
on appropriations of an administrative nature, i.e. it is the intention
that the legislative framework can be implemented with the present level
of human resources and administrative expenditure. The figures for the
period 2014-2020 are based on the situation for 2011.

Estimate to be expressed in full amounts (or at most to one decimal
place)

	Year

2014	Year

2015	Year 2016	Year 2017	Year 2018	Year 2019	Year 2020

( Establishment plan posts (officials and temporary agents)

XX 01 01 01 (Headquarters and Commission’s Representation Offices)	1
034	1 034	1 034	1 034	1 034	1 034	1 034

XX 01 01 02 (Delegations)	3	3	3	3	3	3	3

XX 01 05 01 (Indirect research)







	10 01 05 01 (Direct research)







	( External personnel (in Full Time Equivalent unit: FTE)

XX 01 02 01 (CA, INT, SNE from the "global envelope")	78	78	78	78	78	78
78

XX 01 02 02 (CA, INT, JED, LA and SNE in the delegations)







	XX 01 04 yy 	- at Headquarters









- in delegations 







	XX 01 05 02 (CA, INT, SNE - Indirect research)







	10 01 05 02 (CA, INT, SNE - Direct research)







	Other budget lines (specify)







	TOTAL	1 115	1 115	1 115	1 115	1 115	1 115	1 115



XX is the policy area or budget title concerned.

The human resources required will be met by staff from the DG who are
already assigned to management of the action and/or have been redeployed
within the DG, together if necessary with any additional allocation
which may be granted to the managing DG under the annual allocation
procedure and in the light of budgetary constraints.

Description of tasks to be carried out:

Officials and temporary agents

	External personnel

	Compatibility with the current multiannual financial framework 

x	Proposal/initiative is compatible with the PROPOSALS FOR THE 2014-2020
multiannual financial framework.

(	Proposal/initiative will entail reprogramming of the relevant heading
in the multiannual financial framework.

(	Proposal/initiative requires application of the flexibility instrument
or revision of the multiannual financial framework.

Third-party contributions 

The proposal/initiative does not provide for co-financing by third
parties 

X	The proposal regarding rural development (EAFRD) provides for the
co-financing estimated below:

Appropriations in EUR million (to 3 decimal places)

	Year

2014	Year

2015	Year

2016	Year

2017	Year

2018	Year

2019	Year

2020	Total

Specify the co-financing body 	MS	MS	MS	MS	MS	MS	MS	MS

TOTAL appropriations cofinanced 	To be determined	To be determined	To be
determined	To be determined	To be determined	To be determined	To be
determined	To be determined



Estimated impact on revenue 

x	Proposal/initiative has no financial impact on revenue.

(	Proposal/initiative has the following financial impact:

x	on own resources 

x	on miscellaneous revenue 

EUR million (to 3 decimal places)

Budget revenue line:	Appropriations available for the ongoing budget
year	Impact of the proposal/initiative



Year

N	Year

N+1	Year

N+2	Year

N+3	… insert as many columns as necessary in order to reflect the
duration of the impact (see point 1.6)











For miscellaneous assigned revenue, specify the budget expenditure
line(s) affected.

See tables 2 and 3 in section 3.2.1. 

	Communication from the Commission to the European Parliament, the
Council, the European Economic and Social Committee and the Committee of
the Regions A budget for Europe 2020, COM(2011)500 final, 29.6.2011. 

	Communication from the Commission to the European Parliament, the
Council, the European Economic and Social Committee and the Committee of
the Regions The CAP towards 2020: meeting the food, natural resources
and territorial challenges of the future, COM(2010)672 final,
18.11.2010.

	See in particular the European Parliament resolution of 23 June 2011,
2011/2015(INI), and the Presidency conclusions of 18.3.2011.

	The current legislative framework comprises Council Regulation (EC) No
73/2009 (direct payments), Council Regulation (EC) No 1234/2007 (market
instruments), Council Regulation (EC) No 1698/2005 (rural development)
and Council Regulation (EC) No 1290/2005 (financing). 

	Proposal for a Regulation of the European Parliament and of the Council
laying down common provisions on the European Regional Development Fund,
the European Social Fund, the Cohesion Fund, the European Agricultural
Fund for Rural Development and the European Maritime and Fisheries Fund
covered by the Common Strategic Framework and laying down general
provisions on the European Regional Development Fund, the European
Social Fund and the Cohesion Fund and repealing Regulation (EC) No
1083/2006, COM(2011)615 of 6.10.2011.

	See Annex 9 of the impact assessment for an overview of the 517
contributions received.

	OJ C , , p. .

	OJ C , , p. .

	OJ C , , p. .

	COM(2010) 672 final, 18.11.2010.

	OJ L 209, 11.8.2005, p. 1.

	OJ L , , p .

	OJ L , P. .

	OJ L , , p. .

	OJ L , , p. .

	OJ L 30, 31.1.2009, p. 16

	OJ L , , p. .

	OJ L,  , p. .

	OJ L 50, 22.2.1978, p. 1.

	OJ L 100, 20.04.2000, p. 7.

	COM(2011) 500 final, p. 7.

	OJ L 312, 23.12.1995, p.1.

	OJ L , , p. .

	OJ L 143, 3.6.2008, p. 1.

	OJ L 270, 21.10.2003, p. 1.

	OJ L 277, 21.10.2005, p. 1.

	OJ L 299, 16.11.2007, p. 1.

	OJ L 327, 22.12.2000, p. 1.

	OJ L 309, 24.11.2009, p. 71.

	OJ L 20, 26.1.1980, p. 43.

	OJ L 349, 24.12.1998, p. 1.

	OJ L 281, 23.11.1995, p. 31.

	OJ L 8, 12.1.2001, p. 1.

	Judgement in joined cases C-92/09 and C-93/09, Volker und Markus
Schecke GbR and Hartmut Eifert/Land Hessen, [2010] ECR I-0000

	OJ L 76, 19.3.2008, p. 28.

	OJ L 55, 28.2.2011, p. 13.

	OJ L 11, 16.1.2003, p. 1.

	OJ L […], […], p. […].

	OJ L 292, 15.11.1996, p. 2.

	OJ L 136, 31.5.1999, p. 1.

	OJ L 145, 4.6.2008, p. 1.

	OJ L 204, 11.8.2000, p. 1.

	OJ L 5, 9.1.2004, p. 8.

	OJ L 124, 8.6.1971, p. 1.

	OJ L 165, 30.4.2004, p.1.

	OJ L 213, 8.8.2008, p. 31.

	OJ L 292, 15.11.1996, p. 2.

	The GAEC buffer strips must respect, both within and outside vulnerable
zones designated pursuant to Article 3(2) of Directive 91/676/EEC, at
least the requirements relating to the conditions for land application
of fertiliser near water courses, referred to in point A.4 of Annex II
to Directive 91/676/EEC to be applied in accordance with the action
programmes of Member States established under Article 5(4) of Directive
91/676/EEC.

	Ploughing of wetland and carbon rich land which has been defined in
2011 at the latest as arable land in accordance with Article 2 point (a)
of Regulation (EC) No 1120/2009 and which complies with the definition
of arable land as laid down in Article 4 point (f) of the Regulation
(EU) No DP/xxx shall not be considered as first ploughing.

	As implemented in particular by:

— Regulation (EEC) No 2377/90: Articles 2, 4 and 5,

— Regulation (EC) No 852/2004: Article 4(1) and Annex I part A (II 4
(g, h, j), 5 (f, h), 6; III 8 (a, b, d, e), 9 (a, c)),

— Regulation (EC) No 853/2004: Article 3(1) and Annex III Section IX
Chapter 1 (I-1 b, c, d, e; I-2 a (i, ii, iii), b (i, ii), c; I-3; I-4;
I-5; II-A 1, 2, 3, 4; II-B 1(a, d), 2, 4 (a, b)), Annex III Section X
Chapter 1(1),

— Regulation (EC) No 183/2005: Article 5(1) and Annex I, part A (I-4
e, g; II-2 a, b, e), Article 5(5) and Annex III (1, 2), Article 5(6),
and

— Regulation (EC) No 396/2005: Article 18.

	ABM: Activity-Based Management – ABB: Activity-Based Budgeting.

	As referred to in Article 49(6)(a) or (b) of the Financial Regulation.

	COM(2011)500 final of 29 June 2011.

	Details of management modes and references to the Financial Regulation
may be found on the BudgWeb site:   HYPERLINK
"http://www.cc.cec/budg/man/budgmanag/budgmanag_en.html" 
http://www.cc.cec/budg/man/budgmanag/budgmanag_en.html 

	As referred to in Article 185 of the Financial Regulation.

	Direct aids for the period 2014-2020 include an estimate of the wine
transfers to SPS based on the decisions taken by the Member States for
2013.

	Year N is the year in which implementation of the proposal/initiative
starts.

	Based on past execution and estimates in the 2012 Draft Budget. For the
producer organisations in the fruit & vegetables sector, the amounts are
in line with the reform of that sector and, as already indicated in the
activity statements of the 2012 Draft Budget, outputs will only be known
in late 2011.

	Based on potentially eligible areas for 2009.

	Based on an average cost of 127 000 EUR for establishment plan post of
officials and temporary agents.

	CA= Contract Agent; INT= agency staff ("Intérimaire"); JED= "Jeune
Expert en Délégation" (Young Experts in Delegations); LA= Local Agent;
SNE= Seconded National Expert; 

	This does not include the sub-ceiling on budget line 05.010404.

	This will be set out in the rural development programmes to be
submitted by the Member States.

	As regards traditional own resources (customs duties, sugar levies),
the amounts indicated must be net amounts, i.e. gross amounts after
deduction of 25% for collection costs.

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