Europäischer Rechnungshof

Europäischer Rechnungshof

European Court of Auditors Internet : http://www.eca.eu.int European Court of Auditors Jump o first page Integrated Administration and Control System IACS The audit of IACS Internal Control System Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems European Court of Auditors Jump o first page Content PART 1 : IACS Audit Subject Audit objectives and criteria Audit field and risks Audit approach Implementation

Main audit findings PART 2 : Reliability of IACS Inspections Audit Objectives Audit scope Sampling Implementation Audit resources Main audit findings Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems European Court of Auditors Jump o first page The audit subject What does IACS do ? Why was IACS introduced ?

How does IACS work ? What are the main features ? Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems European Court of Auditors Jump o first page IACS What does it do ? IACS is the main control system over payments to farmers Over 6 million aid applications are processed at Member state level under

IACS throughout the EU, for over 25 billion in 2000, representing about 64% of CAP payments By 2004, over 80% of CAP payments will be covered, as more schemes are included under IACS and as direct payments increase after the Agenda 2000 reform Arable crops is the biggest scheme (16 billion) followed by premiums for beef (4 billion) EAGGF payments to farmers Over 6 million aid applications are processed at Member state level under IACS throughout the EU, for over 25 billion in 2000, representing about 64% of CAP payments By 2004, over 80% of CAP payments will be covered, as more schemes are included under IACS and as direct payments increase after the Agenda 2000 reform Arable crops is the biggest scheme (16 billion) followed by premiums for beef (4 billion) Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems European Court of Auditors Jump o first page EAGGF expenditure covered by IACS in % 80% 70% 60% 50% 57,7% 57,2% 1996

1997 60,6% 63,6% 62,9% 1999 2000 66,3% 51,7% 42,6% 40% 30% 20% 10% 0% 1994 1995 1998 2001 Source: Evolution of EAGGF expenditure, Commission DG AGRI (see Table 1). NB: The decrease in 2000 is due to a change in the timing of the payment of aid for oilseeds, rather than a decrease in the coverage of IACS. Third EUROSAI Training Event Prague -May 2003

Evaluation of Internal Control Systems European Court of Auditors Jump o first page IACS Member States Shares Member States' share of IACS related expenditure in 1999 35% Per hectare aid for arable crops 30% Premiums for bovine animals Total 25% 20% 15% 10% 5% 0% Bel gi um Denmar k Ger many

Gr eece Spai n Fr ance I r el and I tal y Luxembur g Nether l ands Austr i a Por tugal Fi nl and Sweden Source: Basic data obtainedf romCommissionDG AGRI expenditure reports. Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems European Court of Auditors Jump o first page Uni ted Ki ngdom Measures covered by IACS in 2001 (1/2)

Measures fully included in IACS: billion Area aid for arable crops: Premiums for beef and veal Aid for sheep meat and goat meat Extensification Other Total Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems European Court of Auditors 16.9 3.7 1.4 0.9 0.3 23.2 Jump o first page Measures covered by IACS in 1999 (2/2)

Measures for which agricultural parcels have to be cross checked with other measures in IACS: billion Production aid for olive oil Agri-environmental measures Premiums for tabacco Less favoured areas Aid for cotton Other Total Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems European Court of Auditors 2.5 2.0 1.0 0.9 0.7 1.8 8.9 Jump o first page

Measures covered by IACS in the future Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems Wine Tomatoes Processed citrus fruits European Court of Auditors Jump o first page IACS Why and when was it introduced ? The 1992 reform of the Common Agricultural Policy shifted emphasis away from price support mechanisms, and significantly increased the level of direct payments to farmers. This multiplied the number of payments and schemes to be administered, and was the reason why IACS was created.

IACS was established by Council Regulation 3508/92. The implementing rules were provided for by Commission Regulation 3887/92(revised by Commission regulation 2419/2001) Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems European Court of Auditors Jump o first page IACS How does it work ? There are 5 elements of IACS to be established by Member States a computerised database; a land parcel identification system; an animal identification and registration system; aid applications; an integrated control system. Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems European Court of Auditors

Jump o first page IACS Main Features: The computerised database (1 of 5) Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems The database should record data from aid applications for each agricultural holding for at least three years. The database may be decentralised, as long as the systems are compatible. In practice, there are often several systems and organisations involved, depending on the Member States administrative structure. The database is essential for: payment processing, cross checking, application of sanctions (including retroactive sanctions), management information... European Court of Auditors Jump o first page IACS Main Features: The land parcel identification system (2 of 5)

This system identifies the location and area of agricultural land parcels and traces their ownership. It may be based on the cadastre (Germany, Spain, France), or aerial / satellite photography (Ireland, Portugal, Scotland) i.e. Geographical Information System, or official maps (rest of UK). It often includes information about land use (though this is not essential) New requirement: Geographical Information Systems required in all Member States from 2005. The identification system is essential for: payment processing, checking claimed areas, checking duplicate claims for the same parcel, checking claims for ineligible areas, carrying out on the spot inspections... Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems European Court of Auditors Jump o first page IACS Main Features: The animal identification and registration

system (3 of 5) Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems Rules initially provided by Directive 92/102: herd registers and ear tagging. Following BSE, Regulation 820/97: adds requirements for computerised database (Directive 97/12) and animal passports. On the spot inspections of 10%. The system is essential for: checking the apparent eligibility of animals claimed (sex, race, age, identification), checking for duplicate claims, checking ownership... European Court of Auditors Jump o first page IACS Main Features: Aid application (4 of 5)

Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems One area aid application per farmer. Several animal premium applications possible. Basic information on the area / animal claimed, the claimant, relevant supporting information. Aid applications are essential for: providing the basic information on aids claimed... European Court of Auditors Jump o first page IACS Main Features: The integrated control system (5 of 5) An integrated system of administrative checks and on the spot inspections; Administrative checks: On the spot inspections:

cross checks between farmers claims and parcel / animal identification databases; cross checks between individual farmers claims; checks on eligibility of claimed areas / animals (e.g. eligible for area aid, surface area, eligible age of animal, validity of tag number); checks to avoid overpayment in case of quota / base area overshoots. Risk based; Minimum 5 % for areas; 10% for animals (5% with fully operational database); May use aerial / satellite photography. Sanctions: Complicated sliding scale, depending on rate of over-declaration found; Serious negligence: zero aid; Fraud: zero aid next year too. Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems European Court of Auditors Jump o first page A rea aid and forage area applic at ions IACS Overview of principal IACS controls

A nim al prem ium applic at ions Regis t ration of rec eipt Input of k ey c laim dat a Opt ional form alit y c hec k s on rec eipt : is t he c laim c om plet e, s igned et c . Cros s c hec k wit h s t anding dat a e.g. address / bank ac c ount Cros s c hec k wit h ot her c laim s t o avoid duplic at e applic at ions Dat abas e with s tanding dat a of holdings Res pec t of deadlines for c laim s Ris k analys is for on the s pot c ont rols S elec t ed for on the s pot c ont rol If not OK : furt her c hec k s or refusal or reduc tion of aid Input of k ey c laim data Cros s c hec k wit h s t anding dat a e.g. addres s / bank ac c ount Cros s c hec k wit h ot her c laim s t o avoid duplic at e applic at ions P roc es s ing of c laim (data input)

Depending on arc hit ec t ure of data bas e: direc t c ros s c hec k or s eparate c ros s c hec k s after input P roc es s ing of c laim (data input) Depending on arc hit ec ture of data bas e: direct c ros s c hec k or s eparate cros s c hec k s aft er input Cros s c hec k s Regis t ration of rec eipt Chec k of duplic ates Cros s c hec k s with: Data bas e on arable and forage area parc els (s iz e/utilis at ion); Data bas e on eligible parc els ; Regis t er of trans fers of eligible parc els ; Data bas e of parc els t hat are not eligible, e.g.fores t s , building land; Data bas e of anom alies identified in previous y ears (adm inis t rat ive c ont rols / ins pec tions ); S pec ific regis ters (s et as ide et c .). E ligibilit y for ex t ens ific at ion: Cros s c hec k s with area/ forage c laim S m all P roduc er and no ex tens ific ation

Cros s c hec k s A nim al regis t ration data bas e (wit h anim al ID num bers et c ) Countrol of duplic ates Ris k analy s is for on t he s pot c ont rols S elec ted for on t he s pot c ont rol Cros s c hec k s with data bas e on produc tion quotas and individual limit s /c eilings If not OK : further c hec k s or refus al or reduc tion of aid P art ic ular c ros s c hec k s : breed of anim als , approved s eeds etc . ) OK OK Cros s c hec k s with ot her aid s c hem es , e. g. s uc k ler c ows / male bovines , ex tens ific ation et c . Data bas e of valid c laims Chec k of bas e areas : If not res pec t ed, reduc tions t o be applied P roc es s ing of c laim for pay m ent

P re pay m ent c hec k s / V alidat ion P ay m ent of t he aid Chec k of overall c eilings : if ex c eeded reduc tions of aid t o be applied NB : In c ase of dec ent ralis ed databas es there mus t be c ros s c hec k s at c ent ral level, for ins tanc e c ros s c heck s of anim al num bers or s urfac es c laim ed in other regions . Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems European Court of Auditors Jump o first page Content PART 1 : IACS Audit Subject Audit objectives and criteria Audit field and risks Audit approach Implementation Main audit findings

PART 2 : Reliability of IACS Inspections Audit Objectives Audit scope Sampling Implementation Audit resources Main audit findings Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems European Court of Auditors Jump o first page General Audit Objective: Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems The audit should check that the five elements of IACS are in place in the Member States and that they enable

adequate control of aid applications and effective on the spot controls European Court of Auditors Jump o first page Specific Audit Objectives(1/2) EU level Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems Has the Commission independently supervised the timely implementation of IACS by the Member States? Has the Commission assessed the extent to which the objectives of IACS have been attained in an economic and efficient manner and eventually recommended corrective action? European Court of Auditors Jump o first page Specific Audit Objectives(2/2) Member States level Have the five elements of IACS been implemented and are the data in the databases

complete, valid and updated on time? Are effective administrative controls operating, more specifically using the cross check aiming at avoiding payment for ineligible areas and animals or in case of overshoot of base areas or premium ceilings? Do on the spot controls meet the regulatory requirements and is their impact assured by the appropriate application of risk analysis techniques and of regulatory sanctions? Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems European Court of Auditors Jump o first page Content PART 1 : IACS Audit Subject Audit objectives and criteria Audit field and risks Audit approach Implementation Main audit findings

PART 2 : Reliability of IACS Inspections Audit Objectives Audit scope Sampling Implementation Audit resources Main audit findings Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems European Court of Auditors Jump o first page Audit field and risks Audit field Basic information on the audited system( Measures included, organisation in the Member States, budgetary significance) Audit scope Risks Inherent risks Control risks) Third EUROSAI Training Event

Prague -May 2003 Evaluation of Internal Control Systems European Court of Auditors Jump o first page Content PART 1 : IACS Audit Subject Audit objectives and criteria Audit field and risks Audit approach Implementation Main audit findings PART 2 : Reliability of IACS Inspections Audit Objectives Audit scope Sampling Implementation

Audit resources Main audit findings Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems European Court of Auditors Jump o first page Audit approach Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems Information available General importance in relation with other audits European Court of Auditors Jump o first page Content PART 1 : IACS

Audit Subject Audit objectives and criteria Audit field and risks Audit approach Implementation Main audit findings PART 2 : Reliability of IACS Inspections Audit Objectives Audit scope Sampling Implementation Audit resources Main audit findings Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems European Court of Auditors Jump o first page Implementation Member States to be visited Work to be completed in office

EU level Member State level (first and second phase) Audit evidence Resources Planning Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems European Court of Auditors Jump o first page Content PART 1 : IACS Audit Subject Audit objectives and criteria Audit field and risks Audit approach Implementation Main audit findings PART 2 : Reliability of IACS Inspections

Audit Objectives Audit scope Sampling Implementation Audit resources Main audit findings Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems European Court of Auditors Jump o first page Weaknesses found at Member State Level Area Aid Weaknesses found for area aid (1998) Member States and regions Computerised databases Identification Aid Administrative and integrated system for applications controls control parcels

systeme On the spot controls Penalties Germany - Central level - Region of Bavaria - Region of Lower Saxony Spain - Central level - Region of Catalonia - Region of Navarra France Ireland Portugal United Kingdom - Central level - Region of Scotland - Region of Wales Not applicable at this level Good - functioning without problems Average - functioning with some problems Poor - not functioning at an acceptable level Source : Court of Auditors. Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems European Court of Auditors Jump o first page Weaknesses found at Member State Level Bovine Premiums

Weaknesses found for bovine premiums (1998) Member States and regions Computerised Identification databases and and integrated registration control system for systeme animals Aid applications Administrative controls On the spot controls Penalties Germany - Central level - Region of Baviera - Region of Lower Saxony Spain - Central level - Region of Catalonia - Region of Navarra France Ireland Portugal United Kingdom - Central level - Region of Scotland

- Region of Wales Not applicable at this level Good - functioning without problems Average - functioning with some problems Poor - not functioning at an acceptable level Source : Court of Auditors. Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems European Court of Auditors Jump o first page Suckler Cow premium error rates P ercentag e of anim als w ith discrepancies Suckler Cow premium - Evolution of discrepancies found during field inspections (% ) 160% 150% 140% 130% 1997 120% 1998 110% 1999 100%

90% 80% 70% 60% 50% 40% 30% 20% 10% 0% NB: Greece did not provide statistics for 1997 and Italy for 1999. Denmark did not provide complete statistics for 1998. Figures for Denmark in 1999 and for Finland in 1997 are inconsistent as they show a percentage of discrepancy higher than 100%. Source: Court of Auditors review of the . Commission's IACS statistics Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems European Court of Auditors Jump o first page IACS Audit Background to the Reliability of IACS inspections

Conclusion in 1996 Annual Report (see PE request in the discharge procedure); Conclusion in Special Report n 19/1998 on BSE; Timeliness: 2nd year after transition period Main control tool for EAGGF expenditure and complicated system; Frequent SOA findings ; Special Report n 4/2001 Audit of Bovine identification and registration system Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems European Court of Auditors Jump o first page Content PART 1 : IACS Audit Subject Audit objectives and criteria Audit field and risks Audit approach

Implementation Main audit findings PART 2 : Reliability of IACS Inspections Audit Objectives Audit scope Sampling Implementation Audit resources Main audit findings Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems European Court of Auditors Jump o first page Reliability of IACS Inspections General Audit Objective: Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems

The audit should assess the reliability of inspections or on the spot controls and the use made by the Commission of the information on these controls made available by the Member States. European Court of Auditors Jump o first page Reliability of IACS Inspections Specific Audit Objectives (1/2) EU level Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems Do IACS inspections provide to the Commission the necessary reliable information on legality and regularity of EU expenditure covered by IACS and on the adequate implementation of IACS management procedures? Does EU legislation provide for efficient IACS inspections and uniform application of sanctions provided for under EU legislation? European Court of Auditors

Jump o first page Reliability of IACS Inspections Specific Audit Objectives (2/2) PA level Do PAs , when selecting holdings, comply with EU legislation and Commission instructions? Are risk analyses efficient? Are the statistics on area aids or animal premiums forwarded to the Commission reliable? Do national control instructions comply with EU legislation? Do national administrative procedures, before payment of EU aid, integrate inspection findings and sanctions as applicable? Do 2001 IACS inspection findings comply with EU legislation and are they reliable? Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems European Court of Auditors

Jump o first page Content PART 1 : IACS Audit Subject Audit objectives and criteria Audit field and risks Audit approach Implementation Main audit findings PART 2 : Reliability of IACS Inspections Audit Objectives Audit scope Sampling Implementation Audit resources Main audit findings Third EUROSAI Training Event

Prague -May 2003 Evaluation of Internal Control Systems European Court of Auditors Jump o first page Reliability of IACS Inspections Audit scope Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems Commission : legislation, reports (clearance of accounts, certifying bodies, aerial photography or satellite imaging, specific IACS, internal evaluation...), consolidated statistics 15 Paying Agencies in 10 Member States (Belgium, Denmark, Germany, Spain, France, Ireland, Italy, The Netherlands, Portugal, Sweden): systems analysis, internal audit reports, sampling, national instructions, administrative procedures before payment 90 inspection re-performances : 45 for area aid and 45 for animal premiums: European Court of Auditors Jump o first page

Content PART 1 : IACS Audit Subject Audit objectives and criteria Audit field and risks Audit approach Implementation Main audit findings PART 2 : Reliability of IACS Inspections Audit Objectives Audit scope Sampling Implementation Audit resources Main audit findings Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems

European Court of Auditors Jump o first page Reliability of IACS Inspections Sampling Sampling requirements : random and risk based area aid : 5 % (min 4 % risk based & min 1 % random) animal premiums : if 10 % (min 8 % risk based & min 2 % random) if 5 % (min 4 % risk based & min 1 % random) Reference population : aid applications - random sample in 16 Paying Agencies in 10 Member States as selected by MUS for SOA EAGGF excluding Greece (reliability of administrative controls) and United Kingdom (foot and mouth disease) 45 inspections on area aid and 45 inspections on animal premiums MUS sampled Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems European Court of Auditors

Jump o first page Content PART 1 : IACS Audit Subject Audit objectives and criteria Audit field and risks Audit approach Implementation Main audit findings PART 2 : Reliability of IACS Inspections Audit Objectives Audit scope Sampling Implementation Audit resources Main audit findings Third EUROSAI Training Event

Prague -May 2003 Evaluation of Internal Control Systems European Court of Auditors Jump o first page Reliability of IACS Inspections Implementation Timing Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems APM adopted on 19septembre 2002 audit missions to Member States : November 2002 to April 2003 SOA Specific appraisal timing for Annual report 2002 Internal delegation between EAGGF Sectors European Court of Auditors Jump o first page

Content PART 1 : IACS Audit Subject Audit objectives and criteria Audit field and risks Audit approach Implementation Main audit findings PART 2 : Reliability of IACS Inspections Audit Objectives Audit scope Sampling Implementation Audit resources Main audit findings Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems

European Court of Auditors Jump o first page Reliability of IACS Inspections Audit resources Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems 15 auditors 300 man x weeks (110 in 2002 and 152 in 2003) 80 man x weeks on mission in the Member States (30 in 2002 and 50 in 2003) European Court of Auditors Jump o first page Content PART 1 : IACS Audit Subject Audit objectives and criteria

Audit field and risks Audit approach Implementation Main audit findings PART 2 : Reliability of IACS Inspections Audit Objectives Audit scope Sampling Implementation Audit resources Main audit findings Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems European Court of Auditors Jump o first page Reliability of IACS Inspections Main findings

Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems Reliability of on the spot inspections Adequacy of reporting of findings (for SOA or clearance of accounts) Systems weaknesses Interpretation guidelines Commission use of findings European Court of Auditors Jump o first page Third EUROSAI Training Event Prague -May 2003 Evaluation of Internal Control Systems European Court of Auditors Jump o first page

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