IP/07/1474

Brussels, 10 October 2007

Commission gives Romania one month to improve farm aid systems; welcomes progress made in Bulgaria

The European Commission today wrote to Romania to inform it that it faces a provisional 25 percent cut in European Union farm payments unless it can reverse certain serious shortcomings in its administration and financial control system before payments to farmers take place (payment year begins 1 December 2007). The Commission will not be withholding farm payments to Bulgaria because its system has been set up and is operational. Commission Regulation 1423/2006, building on Art. 37 of the Accession Treaties for Romania and Bulgaria, provides for the reduction of payments by 25 percent if the systems set up to ensure the correct payment of farm aid are so seriously deficient that they affect the proper functioning of the overall system. Romania can prevent this happening by delivering on two points of the utmost importance: putting in place and properly testing two software modules which are indispensable elements in the Integrated Administration and Control System (IACS); avoiding payments to farmers before the required controls are completed. Additional on-the-spot checks are required to compensate for the insufficient quality of the Land Parcel Identification System. Mariann Fischer Boel, Commissioner for Agriculture and Rural Development, has written to the Romanian Agriculture Minister, Mr Decebal Traian Remes, and a reply is expected by 9 November.

"Romania has made progress in setting up its administration and control systems, but has not yet done everything required to ensure that the system works properly," Commissioner Fischer Boel said. "It still has time to rectify the situation, but it is a matter of urgency and swift actions are needed. That is why I urge the Romanian authorities to leave no stone unturned in their efforts to put the necessary systems into place before payments begin. We have a duty to ensure that the farm budget is properly spent and that irregularities don't occur."

Commenting on Bulgaria, the Commissioner said: "Bulgaria has made good progress and has set up its integrated administration and control system. Weaknesses remain but not of a significant nature. Furthermore, Bulgaria has assured us that remaining weaknesses will be rectified before the first payments are made. In any case, both countries will of course also be subject to the regular audit procedure which is applied in all EU Member States".

How the payments system works

From 1 December every year, Member States can pay farmers their direct aid from the national budget of their country via a Paying Agency. This money is then reimbursed to the national budget from the Community budget. In view of the shortcomings of the Integrated Administration and Control System and the Paying Agency at the time of accession and in order to avoid financial irregularities and distortions in the functioning of the internal market, the Regulation 14723/2006 allows for 25 percent of the Community aid to be withheld if serious shortcomings are found in the systems. This does not mean that farmers would lose out, but that the national budget would have to provide 25 percent of the money supposed to come from the Community until such time as the shortcomings were overcome. Both countries will of course also be subject to the regular audit procedure which is applied in all EU Member States. This could result in Clearance of Accounts decisions to ask Member States to pay back money to the Commission.

How much EU money is supposed to go to Romania and Bulgaria by budget year

Direct payments

Mio€, current prices

Rural development

Mio€, current prices

Problems found in Romania

Commission audits carried out in June and September confirmed that serious problems remain in Romania. These concern the computer software for the entry of the results of on-the-spot checks, and for the calculation of the sums to be paid. Deficiencies persist on the Land Parcel Identification System, and with administrative and on-the-spot controls. A warning letter will be sent to the Romanian authorities, who will have to reply by 9 November.

Remedial action needed

Commissioner Fischer Boel intends to propose withholding 25 percent of the aid to Romania:

Unless the Romanian reply confirms that the two computer software modules have been put in place and tested properly, and that this is confirmed by an independent expert body;

If large-scale payments are made to farmers before the completion of the administrative and on-the-spot controls, in which case the system would not be capable of preventing widespread irregularities.

If Romania does not succeed in making the improvements by 9 November, the Commission would take the decision to reduce payments as early as possible (November 2007). If Romania does succeed, a further audit mission would be sent in early 2008 to monitor progress.

Situation in Bulgaria

Audits in June and September showed that the IACS has been set up and is operational. Some deficiencies were noted in the working of the Land Parcel Identification System, and will be remedied before payments are made. There is a need to increase on-the-spot checks.