EU’s agricultural policy includes some spending schemes that are particularly exposed to fraud risks, according to recent audit report published by the European Court of Auditors (ECA).
The Common Agricultural Policy (CAP) is the single largest area of expenditure under the EU budget. In 2018-2020, the EU-27 direct payments, which are financed fully by the EU budget, amounted to an average of €38.5 billion each year. Market measures and rural development spending averaged €2.7 and €13.1 billion respectively.
ECA distinguishes between intentional fraud and financial irregularities that may be the result of an incorrect interpretation of the rules. The overall level of irregularities in EU spending has remained stable and was estimated at 2.7 % in ECA’s annual report on the 2020 accounts. This is still above the 2% threshold for material level of error which is considered as an acceptable or inevitable error rate.
In its new audit, the auditors found that the fraud detection rate was 0.09 % of total CAP payments in 2016 – 2020. Markets measures and rural development where the rules are more complex were more vulnerable to fraud (0.68 % respectively 0.19 %). But the figures do not provide a complete picture of the fraud level and are probably higher according to ECA.
“Fraud harms the EU’s financial interests and prevents EU resources from achieving the policy objective,” said Nikolaos Milionis, the Greek ECA member responsible for the audit. “We think that the EU should do more to address the risk of fraud in agricultural spending.
He now expects that the report will help the Commission and the Member States to develop their anti-fraud capacity under the new common agricultural policy 2023-2027.
ECA examined patterns of fraud in CAP payment schemes by analysing measures financed by the CAP under shared management, using data from the 2007-2013 and 2014-2020 programme periods. The auditors carried out documentary reviews in three member states (France, Italy and Slovakia) and collected information via surveys from all member states.
The main risks the auditors identified are linked to beneficiaries concealing breaches of eligibility conditions, to the complexity of the financed measures, and to illegal forms of ‘land-grabbing’.
For the first time, ECA draws the attention to the risk of illegal ‘land-grabbing’ in countries with weak land registrations systems and unclear ownership. ‘Land-grabbing’ may involve fraudulent practices, such as the falsification of documents, coercion, use of political influence or insider information, manipulation of procedures, or payment of bribes.
In the EU context, ‘land grabbing’ has been associated with the concentration of agricultural land and CAP subsidies in the hands of large companies and investors, especially in Eastern European Member States.
20% of CAP beneficiaries concentrate around 80% of direct payments, mirroring the distribution of land ownership. In many member states, farmers do not own the land but rent it or are using common land. The latter is most common in Greece, where one third of the agricultural area is common land.
Fraudsters may also seek to acquire land – legally or otherwise – for the sole purpose of receiving direct payments, without performing any agricultural activities. The risk is higher for certain pastureland and mountainous areas, where it is more difficult for paying agencies to check that the required agricultural activity, such as grazing, is actually taking place, the auditors explain.
CAP legislation does not define the concept of ‘land at the farmer’s disposal’, nor require farmers to provide proof of their right to use the land when submitting an aid application. National rules regarding ownership, leases or other forms of legal tenure apply. Checks on farmers’ legal right to use the claimed land vary between member states.
ECA’s overall conclusion is that the Commission has responded to instances of fraud in CAP spending, but was not sufficiently proactive in addressing the impact of the risk of illegal land grabbing on CAP payments, in monitoring Member States’ antifraud measures, and in exploiting the potential of new technologies.
Since the Commission has most recently updated its CAP fraud risk analysis in 2016, one of the recommendations the auditors make is that the Commission should update its assessment of the fraud risk exposure of different spending schemes, and of the extent to which Member States’ anti-fraud measures are able to detect, prevent and correct fraud.
The auditors also recommend that the Commission should take the necessary measures to mitigate key fraud risks and to promote the opportunities offered by technology – for example, data mining, machine learning, satellite imaging and photointerpretation – in fighting fraud, encouraging Member States to take steps in this direction.
In its reply to the audit report, the Commission accepted all recommendations and claimed that it already has started to implement them.
The Commission noted that land grabbing does not represent an inherent problem in the CAP legislation but is rather due to shortcomings in the legal systems in the member states. But it admits that using land without any activity and pretending that the eligibility conditions for payments are met is an issue that the paying agencies might detect.
M. Apelblat
The Brussels Times
