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Annex IX - Controls and Sanctions for Land-based Measures

Introduction

1. Section 12 describes in general terms the financial controls and sanctions that will be applied in order to meet the requirements of Articles 46 - 48 of Regulation 1750/1999. This Annex describes in more detail the controls that will apply to land based measures. It is written primarily from the perspective of the agri-environment schemes and the land-based forestry and energy crop measures, but for the most part is equally applicable to the new area-based Hill Farm Allowance Scheme. The specific controls to be applied for the LFA scheme are included in Section 9.3 of the Programme.

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Scheme Implementation Plan

2. Each land based measure under Regulation 1257/1999 will be subject to a Scheme Implementation Plan. Such a plan will specify the control measures in place designed to fulfil the requirements of the implementing Regulations 1750/1999 and Regulation No 1663/95 laying down the procedure for the clearance of EAGGF guarantee section accounts (and the IACS Regulations 3508/92 and 3887/92).

Responsibilities/Segregation of duties

3. The Scheme Implementation Plan will summarise the responsibilities for all the elements within MAFF with a role in administering the scheme.

4. The administrative structure of the paying agency separates the three functions of authorisation, execution and accounting for payments, each of which is the responsibility of a separate administrative sub-unit.

5. MAFF acts as paying agency for land based schemes, except for those land based forestry measures for which the Forestry Commission (FC) is the paying agency - see Sections 9.1 and 9.6 for measures implemented by MAFF and FC.

Delegation of functions to third parties

6. Technical services, such as providing technical advice on scheme applications and broader environmental issues may be delegated to services of the paying agencies or to external bodies. Any such delegation will be carried out in accordance with Guidelines for the Certification of EAGGF accounts, Guideline No 9 on delegation of tasks to other bodies or services (Doc V1/5331/98).

Payments

7. There will be procedures in place to ensure that payment is only made to the claimant, to his/her bank account or to his/her assignee.

8. There will be procedures in place to ensure that monthly and annual declarations are complete, accurate and timely and that any errors or omissions are detected and corrected in particular through checks and reconciliations performed at intervals not exceeding three months.

9. The paying agency will recognise amounts due to EAGGF and record these sums in a debtors ledger.

Computer controls

10. Where claims are processed using a computer, access to the computer system will be protected and controlled in such a way that:

  1. all information entered onto the system is properly validated to ensure that input errors are detected and corrected;
  2. no data will be entered, modified or validated except by authorised officials to whom individual passwords are given;
  3. the identity of each official entering or modifying data or programmes will be recorded in an operations log; (the FC, as a lesser paying agency, and by offering equivalent guarantees, have been granted exemption from the need to operate such a log);
  4. where documents relating to the claims authorised are retained by other bodies, procedures will apply so that access is provided for the paying agency staff who deal with the claim, the paying agency internal audit service, the body that attests the paying agency’s annual declaration and mandated officials of the European Union.
Checks

11. Each scheme will have its own detailed written procedures for the receipt of applications, the processing of applications and of claims. Each official responsible for authorisations will use a detailed check-list setting out the verifications that are required and will attest that these checks have been performed. Checks undertaken and the results of those checks will be evidenced on registered files together with details of the checking officer.

Pre-approval checks

12. All applications will be submitted on an approved form and contain all the information required to undertake an assessment and validity checks.

Integrated Administration and Control system (IACS)

13. Exhaustive checks will be completed, in accordance with prevailing requirements and the IACS Regulations (currently Regulations 3508/92 and 3887/92), between applications and claims under the land based schemes and IACS, both as an anti-fraud measure, and to ensure that expenditure under one scheme does not frustrate or duplicate expenditure under another. Forestry has been brought within the IACS Regulation for the first time.

Application processing

14. Each valid application for an agreement/undertaking will, unless the application is withdrawn or rejected (in which case the reason for rejection must be specified), be considered in accordance with prevailing instructions and UK/EC Legislation with regard to financial limits and targets where appropriate.

15. When applications are received, they will be subject to administrative desk checks by staff, following a formal checklist.

16. Applications will be subject to desk checks to ensure that the land subject to the application is eligible to be entered into the scheme and that the applicant(s) has sufficient security of tenure over it. Checks will also be made (using IACS) to ensure that all field details are IACS compliant or compatible, that the applicant has not been excluded from any schemes under the Programme, to identify potential conflicts of interest and ensure there is no potential dual funding associated with payments under other schemes.

17. Applications will be processed, and agreements offered or applications accepted within a published timetable. Where appropriate, professionally qualified officers of MAFF’s Farming and Rural Conservation Agency (FRCA) will provide advice on applications and provide an assessment to assist in decisions on which applications should be offered agreements/accepted. FRCA Project Officers may also assist with drawing up agreement offers.

18. Agreements will only be offered or applications approved when all checks have been undertaken and when the checks undertaken have demonstrated that the application is in compliance with the scheme rules and regulations. Agreements or approved applications will refer to the precise management prescription(s) and conditions with which the agreement holder/applicant needs to comply and the areas of land subject to the proposed undertaking. For an agreement or undertaking to come into force it must be signed by the agreement holder or applicant and authorised by a duly authorised MAFF/FC official. In deciding the levels and persons to whom this authority is delegated, due regard will be paid to the duration/nature of the agreement/undertaking, and the sums committed by the agreement/undertaking. Authorisation checks will be made according to an authorisation checklist and will be evidenced on registered files together with details of the checking officer.

19. Checks over the processing of applications within each processing unit will be undertaken by higher grade staff to ensure that work is being carried out to the appropriate standard. A record of both the checks and the selection method will be maintained. Checks undertaken and the results of those checks will be evidenced on registered files together with details of the checking officer.

Claim Processing

20. Claims received will be processed promptly so that payments to agreement holders/approved applicants can be made within published timescales. Payment will only be made in respect of land or items specified in an agreement/undertaking. Administrative desk checks will be made, following a formal checklist.

21. The databases used for processing claims record which items are co-financed and the relevant EU ceiling so a breach of a ceiling can be identified when a claim is entered on the database. (The FC system operates in a different way but automatically ensures the EU ceiling is not breached). For areas under agreement/undertaking which receive payment for more than one measure, the two payments will be added together to ensure they do not breach the area payment ceiling. Any excess over the ceiling will be paid as a state aid. Where linear features are included in an agreement/undertaking and are co-financed, these will be claimed on an area basis.

22. Individually named officials will be given authority to authorise claims for payment. Claims will not be authorised unless the desk checks undertaken demonstrate that the claim is in compliance with the scheme rules and regulations.

23. Checks on the processing of claims within each processing unit will be undertaken by higher grade staff. A record of both the checks and the selection method used will be maintained. Authorisation checks will be evidenced on file together with details of the person undertaking the check.

On-the-spot checks/risk analysis

24. On-the-spot checks will be carried out to ensure that the conditions of the scheme are being met by agreement/undertaking holders in accordance with Article 47 of Regulation 1750/1999. The risk analysis on which selection of beneficiaries to be checked on the spot is based will take into account the amount of aid involved, the number of parcels of land and area concerned, changes from the previous year, findings from previous checks and other relevant factors.

25. The inspectors (field officers) carrying out the inspections will be fully trained.

26. There will be detailed instructions for each type of on-the-spot control covering the approach and all details of the inspection. These will include details of how different type of management prescriptions are to be checked.

27. There will be a standard report for each type of on-the spot control /measure covering the reconciliation with beneficiaries records, the method of counting or measuring or weighing or analyses applied, the quantity or area that was checked, the respect of other conditions relevant to the scheme and the results compared to the details declared.

28. In addition to those inspections, further (targeted) inspections may be carried out for a specific purpose e.g. if a particular problem is identified. Whilst recorded separately, these inspections will be undertaken in the same manner as other inspections. They will not be taken into account in the analysis of inspections in relation to the on the spot checks requirement. The results will be recorded in the usual way.

29. Once an inspection has been selected, it cannot be de-selected and claims under the selected agreement/undertaking must not be authorised for payment until a satisfactory inspection has been completed.

30. Where schemes include a number of requirements or prescriptions with which an agreement/undertaking holder must comply, in order to be eligible for payment, the on-the-spot inspection will take place during the optimum period to provide evidence that these requirements are being met. All failures (non-compliance) found during an inspection must be reported by inspecting officers. The inspection will also involve an inspection of farm records where necessary.

31. There will be timely communication and data input of the inspection results before payment is made and a detailed record showing the results of the inspection process will be maintained on file. The results of inspection will be analysed centrally and on a regional basis and to show if there is a significant level of irregularities.

32. If the rate of significant irregularities exceeds a specified level, the inspection rate will be increased.

33. Each case of irregularity will be followed up as regards applying penalties, making reductions to the aid, making recoveries in respect of previous years or previous operations where necessary.

34. Irregularities will be reported to the EC in accordance with prevailing guidance.

35. An agreed percentage of inspections will be re-performed by an official senior to the inspecting officer. These will be treated in the same manner as random, risk and targeted inspections but will not be counted towards the compliance monitoring requirement.

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Breaches and Penalties

Breaches

36. A breach, within the schemes, is a failure to comply with the EU or relevant UK legislation, with the rules of the scheme, and/or to carry out the undertaking/agreement including any works described in it. Breaches will vary in degrees of seriousness and responses to breaches will be commensurate with the offence.

37. Where a breach has occurred, an assessment will be made following a formal checklist. Where appropriate, FRCA will be consulted for advice. Consideration will be given to the various factors listed at paragraphs 39 and an appropriate response determined. The reason why a particular option is chosen (and the reason why other options were not considered appropriate) will be fully recorded.

38. The response to a breach will be proportionate to its seriousness. Where a serious breach has occurred, the response should have an appropriate deterrent effect. The aims/objectives of the scheme (to provide specific environmental benefits) and the need to retain the environmental benefits already gained will also be considered.

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Factors to Consider

Seriousness of the Breach

39. A number of factors will be taken into account in assessing the seriousness of a breach: these will include the permanence of the breach, its extent, previous history of the agreement/undertaking holder and their intentions, as well as an assessment of the impact that the breach has on the objectives of the agreement/undertaking.

The Response to a Breach

40. There are numerous possible responses to a breach, which are set out in the agreement document. These range from a Warning Letter (appropriate only for very minor breaches) to the following type of action :

  • delaying payment until the breach is rectified;
  • repayment of money received;
  • repayment of money received with interest;
  • repayment of money received + 10%;
  • cessation of or reduction in further payments;
  • termination of agreement and the associated penalties/recovery action.

Investigation with a view to prosecution may also be appropriate.

41. Where it is found that a false declaration has been made as a result of serious negligence, the penalties will be governed by Article 48(3) of Regulation 1750/1999. This will involve the beneficiary being excluded from rural development measures for the calendar year in question or for a further year if the declaration was intentional and the agreement/undertaking being terminated. Where a false declaration is less serious, the agreement/undertaking will not be terminated and the exclusion from other measures will not apply but payments will be withheld for up to 2 years with the terms of the agreement/undertaking still having to be met in order to safeguard the environmental benefits deriving from the agreement.

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Recovery Procedures

Overclaims and Overpayments

42. Where an overpayment has occurred, recovery will be pursued except where an acceptable case has been made by the beneficiary for Force Majeure (as defined in Article 30 of Regulation 1750/1999) and for some types of change to the occupation of agreement/undertaking land or where there is a revision of agreement/undertaking areas following production of new agreement/undertaking maps.

43. In all cases where an overclaim or overpayment is identified the procedures for reporting irregularities will also be followed. Where there is a major breach any outstanding scheme payments will be suspended.

Penalties

44. The penalty regime involves a structured approach to dealing with breaches, the more serious the breach of agreement the more serious the sanction.

  1. In the least serious cases where a breach occurs which can be readily rectified without any environmental damage and only short term or minimal loss of environmental improvement, the agreement holder is advised to remedy the problem, the RSC writes explaining what work is needed and by when and payment is withheld until the work is done.
  2. If the work is not subsequently done, payment will not be made and payments already made would be reclaimed with interest.
  3. If the agreement holder fails to rectify the problem within the prescribed timetable, payments would be reduced to match the extent of the area/item to which damage has been caused or improvement not carried out for the remaining period of the agreement. Payments already made might also be recovered (with interest).
  4. Where a breach is not rectified and the environmental objectives of the agreement are undermined, an additional 10% penalty would be incorporated into amounts withheld/recovered. Termination of the agreement (in part or full) might also be appropriate in severe cases.

45. In addition, penalties will be applied in appropriate cases as a disincentive for agreement/undertaking holders to break scheme rules or breach the terms of their agreement/undertaking in the future. Such penalties may be appropriate where:

  • significant and permanent environmental damage has been caused;
  • the achievement of the agreement’s overall objectives has been prevented or;
  • economic benefit has been derived through not complying with the agreement/undertaking (including not costs required to be borne as a condition of the agreement/undertaking).

46. Penalties will be applied on this basis except where failure to comply with an agreement was beyond the agreement holder’s control e.g. bad weather prevented action or wild flower seed failed to germinate, could be remedied relatively quickly and there was no environmental damage. In deciding how to apply penalties, the need to deter deliberate non-compliance will be balanced against the needs of the scheme to secure long-term co-operation and the environmental benefits accrued under the agreement prior to the breach.

47. Penalties under land based schemes are currently set at a level of 10% of the appropriate sum.

Interest

48. Where the overpayment is the result of claimant error, interest will be charged on the repayment. Where the overpayment is the result of an error by MAFF, no interest or other additional penalty will be levied.

Irregularities

49. An irregularity is an infringement of EU or UK law which affects the EU budget. Reporting of irregularities and reimbursement of irregularities will be dealt with in accordance with agreed procedures.

Investigation Action

50. Some breach cases give rise to suspicions of deliberate fraud. This will usually be where the statements made were false or misleading, or where the actions taken led to payments that were clearly inappropriate. In such situations consideration will also be given to formal investigation procedures leading to possible prosecution.

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Page last modified: 17 August, 2005
Page published: 10 December, 2002

Department for Environment, Food and Rural Affairs