| EUROPEAN UNION ISSUES
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| (i) Reporting of irregularities
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| C&AG's Report, para 1.8
| 3. Member states are required to report to the European Commission all irregularities on Common Agricultural Policy Schemes involving overpayments in excess of 4,000 ECU (about £3,000). For these purposes, an irregularity is defined as any infringement of a European Union or national rule by a producer whether deliberate or not, the outcome or aim of which was to enable the producer to receive undue payment from European Union funds or to avoid making payments due. Irregularities may range from simple errors to fraud and include deliberate overclaims and acts of negligence.
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| C&AG's Report, paras 1.9-1.10 and Figures 3 and 4
| 4. In 1995 the United Kingdom reported 80 irregularities in direct payments to farmers worth £0.5 million, 18 per cent of the European total by number and 9 per cent by value. Of the United Kingdom total, 70 cases worth £0.4 million related to schemes run by the Ministry. Other Member States reported varying numbers of cases from zero to over 150 and amounts from nil to over 2.5 million ECU.
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| Qs 11 and 12
| 5. Our predecessors put it to the Ministry that fraud against European Union funds should be treated as seriously as that against United Kingdom expenditure. The Ministry's view was that this should be the position in all Member States. Our predecessors asked the Ministry what opportunities it had to explain to other Member States how it deals with fraud and irregularity and to learn from their methods. The Ministry said that there were extensive contacts both in Brussels on a whole range of committees, exchanging information on controls, and through separate bilateral exchanges.
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| Q 35
| 6. Our predecessors asked the Ministry to comment on the differences in the reported level of irregularities between Member States. The Ministry believed that several factors had to be taken into account. For example, as only irregularities over 4,000 ECU needed to be reported, farm size had a significant impact. The average farm size in the United Kingdom was 67.3 hectares, the largest average in the Community. But in Greece the average size was only 4.3 hectares. The likelihood of an error over 4,000 ECU (about £3,000) in claims from such small units was very much less.
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| Qs 35-36
| 7. Another contributory factor was that the irregularities reported to the Euro-pean Commission did not include administrative penalties which would be vastly more. In addition the figures excluded those discovered before payment. In the UK most irregularities fell into the latter category, which was probably the case in other member states. Nevertheless the Ministry thought that some of the figures were surprising and had said so to the European Commission.
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| (ii) Clearance of accounts
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| C&AG's Report, paras 3.11-3.12
| 8. Failure to comply with European Union regulations governing on-farm checks of farmers' claims can result in the European Commission disallowing earlier years' expenditure. In 1996 the Ministry were in discussion with the Commission on the clearance of the accounts for 1993 and 1994.
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| Qs 8-10
| 9. The Ministry told our predecessors that the accounts for 1993 and 1994 had still not been cleared with the European Commission. The Commission had now put more staff into the process and adopted new procedures so that clearance would be expected much more rapidly in future. For 1993 and 1994, there was the possibility that some expenditure on Sheep Annual Premium could be disallowed. In discussion with the Commission, the Ministry was seeking to persuade them that its controls were sufficiently rigorous. We now understand that the European Commission have cleared the 1993 accounts and have disallowed expenditure by the Ministry of some £6.6 million.
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| (iii) Conclusions
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| 10. We are concerned to note that the United Kingdom reported to the Euro-pean Commission 80 irregularities in direct payments to farmers, and that this represented 18 per cent of the European total by number and 9 per cent by value. We share the previous Committee's view that fraud against European Union funds should be treated as seriously as fraud against the United Kingdom.
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| 11. We recognise that it is difficult to draw comparisons between Member States of the European Union, since individual irregularities below some £3,000 are not reported to the European Commission and the likelihood of irregular payments above this threshold is lower in countries with smaller farms than those in the United Kingdom.
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| 12. We look to the Ministry to discuss with the Commission and with other Member States ways in which reports of irregularities could be supplemented to enable comparisons to be made between the level of irregularities discovered and ways in which States can learn from each other's procedures and results.
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| 13. We are concerned that, at the time of our predecessors' examination of the Department in March 1997, the UK's accounts for 1993 and 1994 had not been cleared by the European Commission; and that expenditure amounting to some £6.6 million was subsequently disallowed for 1993. Such delays make for uncertainty in the management and financing of European Commission- funded schemes, and we are pleased to learn that the Commission are now employing more staff on these activities and that clearance is expected to be more rapid in future.
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