European Court of Auditors

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European Court of Auditors
Internet http//www.eca.eu.int
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Integrated Administration and Control System
IACS
The audit of IACS Internal Control System
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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

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The audit subject

• What does IACS do ?
• Why was IACS introduced ?
• How does IACS work ?
• What are the main features ?

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IACSWhat 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)

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EAGGF expenditure covered by IACS in
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IACSMember States Shares
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Measures covered by IACS in 2001 (1/2)

• Measures fully included in IACS billion
• Area aid for arable crops 16.9
• Premiums for beef and veal 3.7
• Aid for sheep meat and goat meat 1.4
• Extensification 0.9
• Other 0.3
• Total 23.2

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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 2.5
• Agri-environmental measures 2.0
• Premiums for tabacco 1.0
• Less favoured areas 0.9
• Aid for cotton 0.7
• Other 1.8
• Total 8.9

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Measures covered by IACSin the future

• Wine
• Tomatoes
• Processed citrus fruits

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IACSWhy 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)

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IACSHow 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.

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IACS Main Features The computerised database (1
of 5)

• 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...

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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...

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IACS Main Features The animal identification
and registration system (3 of 5)

• 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...

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IACS Main Features Aid application (4 of 5)

• 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...

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IACS Main Features The integratedcontrol
system (5 of 5)

• An integrated system of administrative checks and
  on the spot inspections
• Administrative checks
• 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.
• On the spot inspections
• 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.

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IACS Overview of principal IACS
controls
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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

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General Audit Objective

• 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

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Specific Audit Objectives(1/2)

• EU level
• 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?

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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?

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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

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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)

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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

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Audit approach

• Information available
• General importance in relation with other audits

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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

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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

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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

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Weaknesses found at Member State Level Area Aid
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Weaknesses found at Member State Level Bovine
Premiums
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Suckler Cow premium error rates
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IACS Audit Background to theReliability 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

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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

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Reliability of IACS InspectionsGeneral Audit
Objective

• 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.

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Reliability of IACS InspectionsSpecific Audit
Objectives (1/2)

• EU level
• 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?

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Reliability of IACS InspectionsSpecific 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?

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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

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Reliability of IACS InspectionsAudit scope

• 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

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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

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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

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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

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Reliability of IACS Inspections Implementation

• Timing
• 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

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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

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Reliability of IACS InspectionsAudit resources

• 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)

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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

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Reliability of IACS Inspections Main findings

• 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

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