Select Committee on Agriculture Appendices to the Minutes of Evidence


Memorandum submitted by the Department of Agriculture and Rural Development for Northern Ireland (H 11)


  The administration of IACS varies only slightly within the four UK Agriculture Departments thus for consistency of presentation and ease of presentation and understanding this Memorandum has been produced along similar lines to that already produced by MAFF. Where appropriate, differences have been duly explained.


  1.  This Memorandum describes:

    —  the EU legislative framework underpinning the implementation in member states of the Integrated Administration and Control System (IACS);

    —  the financial control requirements on "Paying Agencies" which disburse CAP payments from the EU Budget; and

    —  the implementation of IACS in Northern Ireland by the Department of Agriculture and Rural Development (application procedures and claim processing).


  2.  The Integrated Administration and Control System (IACS) was established by Council Regulation (EEC) No 3508/92 as a key element of the MacSharry CAP reform. The Integrated System, which was conceived as an anti-fraud and expenditure control-mechanism, originally comprised:

    —  a computerised data base;

    —  an alpha-numeric identification system for individual fields or parcels;

    —  a system for identifying and recording animals; and

    —  an integrated control system for claims.

  It made provision for:

    —  an area aid application to be submitted by farmers each year;

    —  on-the-spot inspections to be carried out on a specified sample of claims;

    —  the optional use of remote sensing to check area aid claims;

    —  protection of the data submitted by claimants; and

    —  co-financing (joint Commission and Member State funding) for the establishment of IACS and for remote sensing.

  3.  Subsequent amendments to Regulation (EEC) No 3508/92—most recently by Council Regulation (EC) No 1593/2000—have included the following:

    —  a requirement that, from 1 January 2005, the parcel identification system must be spatial in form (rather than alphanumeric), with the obligatory use of geographical information system (GIS) techniques and the optional use of aerial photoimagery;

    —  provision for the administration and control systems applying to non-IACS farm based aid schemes (such as agri-environment schemes) to be fully compatible with IACS by 1 January 2003; and

    —  removal of the co-financing provisions for the establishment of IACS and for remote sensing.

  4.  IACS currently covers the following schemes:

    —  Arable Area Payments Scheme (AAPS), which from 2001 will include flax and hemp;

    —  Beef Special Premium Scheme (BSPS);

    —  Deseasonalisation Premium (where triggered);

    —  Suckler Cow Premium Scheme (SCPS);

    —  Extensification Payments (EPS);

    —  The Less Favoured Area (LFA) Supplement of the Sheep Annual Premium Scheme (SAPS);

    —  Slaughter Premium Scheme and/or Veal Calf Slaughter Premium (SPS);

    —  Aid for Grain Legumes (GLS);

    —  LFA Compensatory Allowance (HLCAs) (until 2000); and

    —  LFA Compensatory Allowances.

  5.  Detailed rules for the implementation of IACS are set out in Commission Regulation (EEC) No 3887/92. These rules include detailed prescriptions for such matters as:

    —  the proportions of claims that are subject to on-the-spot-controls (5 per cent of area aid claims and 10 per cent of livestock claims);

    —  the sanctions to be imposed for over-declarations of land or of animal numbers, and for late applications;

    —  reimbursement of any over-payments made; and

    —  the extent to which producers may be exempted from sanctions for reasons of force majeure.

  The Regulation has been amended several times, most recently by Commission Regulation (EC) No 2801/1999. Some of the most important changes have been, firstly, a degree of moderation in the penalty provisions (including the removal of sanctions for farmer-reported errors in some circumstances) and, secondly, amendment of the livestock control and inspection provisions to take account of the introduction of computerised cattle databases.

  6.  The EC Regulations accordingly provide the principal legislative basis for IACS and are directly applicable in Member States. However, certain aspects of the operation of the Integrated System can only be specified by national law. These include provisions which the EU Regulations leave to Member States to specify, such as the minimum size of an agricultural parcel; powers of entry in connection with controls; and criminal offences. The provisions applicable in the United Kingdom were specified by the Integrated Administration and Control System Regulations 1993 (SI 1993/1317), as last amended by The Integrated Administration and Control System (Amendment) Regulations 2000 (SI 2000/2573), and by Statutory Instruments or Rules making provisions for individual Schemes.


  7.  The framework for control of expenditure under the Common Agricultural Policy (CAP) is set out in Council Regulation 1258/99 (which has replaced Regulation 720/70), and can be summarised as follows:

    —  the initial responsibility for checking expenditure lies with the Member States, which designate "Paying Agencies" ie the authorities and bodies empowered to effect CAP expenditure. Member States must carry out this task fully and effectively;

    —  the Commission, which is responsible for managing the EU budget, must verify the conditions under which payments and checks have been made. Expenditure by Member States can only be reimbursed where those conditions ensure compliance with EU rules;

    —  under this decentralised system of management of EU expenditure, the Commission, as the institution responsible for funding, must be able to carry out all necessary checks on the management of expenditure;

    —  during the "clearance of accounts" ie the annual process of checking Member States' expenditure, the Commission cannot determine the total expenditure to be financed from the EU budget unless it is satisfied that national controls are adequate and transparent and that paying agencies verify the legality and regularity of the payments they make. In order to provide this assurance, conditions have been set for the "accreditation" of paying agencies by Member States; and

    —  to ensure that the standards required for accreditation in Member States are consistent, the Commission provides guidance on the criteria to be applied. Payments by Member States under the CAP schemes can only be made by accredited paying agencies.

  8.  Detailed rules for accredited paying agencies (and for a "co-ordinating body" where there is more than one paying agency in a Member State) are set out in Commission Regulation 1663/95. This lays down the required structure for a paying agency, which comprises three principal functions and two services:

    —  the authorisation of claims (determining how much should be paid to a claimant);

    —  the execution of payments (paying the authorised amount to the claimant);

    —  accounting (recording payments and recoveries in the agency's accounts and preparing monthly and annual declarations for the Commission);

    —  the internal audit service (independent evaluation of the paying agency's internal control systems); and

    —  the technical service (verifying the physical and documentary facts supporting claims, eg through in-office checks and on-the-spot inspections).

  9.  The paying agency may allow other bodies to perform all or part of the authorisation function and/or the technical service so long as certain stringent conditions are met. However, the execution of payments and accounting function cannot normally be delegated to another body. Regulation 1663/95 also requires the paying agency to put in place a series of controls covering: written procedures for staff; adequate division of duties; defined responsibilities and financial limits of authority for each official; staff training; checklists and senior management review; and computer security and system development.

  10.  Paying agencies are subject to annual audit by the "certifying body" (currently the Northern Ireland Audit Office for DARD). The Commission uses the certifying body's report as supporting evidence for its annual clearance of accounts decision. The Commission also conducts a rolling programme of audits in respect of particular schemes or sectors. The results of both kinds of audit form the basis of financial corrections (ie disallowance of EU reimbursement to Member States).

  11.  The European Court of Auditors (ECA) visits paying agencies as part of its own audit of the Commission's management of the CAP. The ECA's work takes the form of an annual "Statement of Assurance" audit coupled with audits of individual sectors. The ECA has recently conducted an audit of the application of IACS in the UK as part of a wider audit of the operation of IACS across the EU.

  12.  Expenditure on CAP schemes is subject to the general anti-fraud provisions of Article 280 of the Treaty and Council Regulation 2988/95 on the protection of the EU's financial interests. In addition, Article 8(1) of Regulation 1258/1999 requires Member States to:

    —  satisfy themselves that transactions financed by the EU budget are actually carried out and executed correctly;

    —  prevent and deal with "irregularities" ie payments which are not in compliance with EU rules; and

    —  recover sums lost as a result of irregularities or negligence.

  This provision, together with Council Regulation 3508/92 and Commission Regulation 3887/92, is the legal basis for the IACS regime as well as for a system of irregularity reporting to OLAF (the Commission's anti-fraud unit) under Council Regulation 595/91.

  13.  Taken together, the provisions of Regulations 595/91, 2988/95, 1663/95 and 1258/99 set up a stringent system of financial control on paying agencies. In particular, they provide for four separate levels of audit of an agency's operations: by the internal audit service, by the certifying body, by the Commission's Clearance of Accounts Unit and by the European Court of Auditors. Details are given in Annex C [not printed] of the levels of disallowance that were applied for all Member States in the years 1993-99 for deficiencies in implementation of EU Regulations or failures in financial control.


  14.  The Department of Agriculture and Rural Development's Grants and Subsidies Organisation is responsible for administering the CAP schemes making direct payments to farmers, and the associated control regimes such as IACS, within Northern Ireland. As Northern Ireland is a relatively small area the organisation established to deal with CAP schemes operates on somewhat different lines and is more compact than that needed in GB. Northern Ireland's Grants and Subsidies Organisation comprises three Divisions under a single Grade 5 manager with responsibilities as follows:

    —  Policy work and co-ordination of activities within grants and subsidies is undertaken by Grants and Subsidies Policy Division based in Dundonald House, Belfast.

    —  The day-to-day scheme administration, including data entry, claim processing, dealings with customers is undertaken by Grants and Subsidies (Payments) Division based in Orchard House, Londonderry. This Division has also responsibility for the following:

    —  Preparation of scheme literature, scheme implementation plans and budgets and management information and reporting.

    —  Development of IT systems, including risk analysis for the selection of inspections.

    —  Interpretation of scheme rules and guidance to Inspection Division staff.

    —  Also liaison with auditors and dealing with PQs and Minister's correspondence.

    —  Technical input and field inspections, are the responsibility of Grants and Subsidies (Inspection) Division with its headquarters at Kilpatrick House, Ballymena. Inspection teams operate from the County Agriculture Offices, one based in each of the six counties of Northern Ireland.

    —  overall some 220 staff are employed in the Grants and Subsidies Organisation. (Organisation Chart at Annex C [not printed]);

    —  the execution of and accounting for payments is performed by DARD's Finance Division at Dundonald House;

    —  internal audit is carried out by DARD's Internal Audit Division, based within the Stormont Estate, Belfast.

  15.  The Department is the accredited paying agency in EU terms. This places an onus—in this case on our organisation—to comply with all the financial regulations governing the making of payments on behalf of the EU. In the administration of the various payment schemes the Department endeavours to meet the aims and objectives contained in the Grants and Subsidies Business Plan which include "to be fully accountable for the proper administration of the schemes". This objective sets the following targets:

    —  maintain a high quality inspection service and likewise claim to payment processing service;

    —  operate a CAP Scheme Manager Control Plan system to identify the performance control requirements to ensure that Community funds are protected and the risk of disallowance of funding for the Department is minimised;

    —  fully implement Internal Audit recommendations; and

    —  continue the process of integrating operational activities and processing work to deliver efficiency savings and increased staff flexibility.

  16.  MAFF is the lead Department and its policy divisions represent the UK in EU negotiations and co-ordinate the preparation of domestic legislation, in co-operation with SERAD, NAWAD and DARD. Regular meetings take place between the Departments to ensure that everyone is kept fully informed of developments etc. These meetings aim to ensure there is a harmonisation of views throughout the UK and that there is consistency of policy where appropriate.

  17.  The Intervention Board, as well as operating schemes making payments to traders throughout the UK, acts as the UK Co-ordinating Body, promoting the harmonised application of scheme administration among the paying agencies. The Board also performs the role of funding body, transferring funds to the paying agencies to allow them to make payments to applicants and then claims reimbursement of scheme expenditure from the EU. MAFF policy divisions represent the UK in EU negotiations and co-ordinate the preparation of domestic legislation, in co-operation with the devolved administrations. Various regular meetings take place between UK Departments to ensure that everyone is kept fully informed and updated on all aspects of IACS.

  18.  Annex A shows for all the schemes:

    —  the application periods;

    —  for the livestock schemes, the "retention periods" ie the periods of time that farmers are required to keep the numbers of animals for which they have claimed subsidy on their holding; and

    —  the "payment windows" ie the periods during which payments should be made.

  It should be noted that no claim can be paid until it has been validated by the processing system and, if selected for inspection, until after the results of the inspection have been taken into account. Payment cannot take place until the payment window opens. More details about individual schemes are given in Annex B.

  19.  All farmers claiming AAPS, BSPS, SCPS and/or the LFA supplement to SAPS are required to submit an annual aid declaration. The IACS form contains details of the land used for arable crops, which thus constitutes the claim for AAPS, and that used for forage, which underpins claims for the livestock premia. In 1999, 26,943 farmers submitted IACS declarations to DARD. The table below shows the total number of claims made in 1999 and the amounts paid out.

Claims paid by DARD to farmers in 1999

Number of Claims Total Cost
Average Claim
IACS and Arable
Payments (AAPS)
3,933 9.22,339
Sheep Annual Premium10,743 22.52,094
Beef Special Premium65,000 49.5762
Suckler Cow Premium14,916 52.73,533

  20.  Northern Ireland is further advanced than the rest of the UK with regard to its computerised system for identifying and recording animals. This system which replaced the Animal Health System (AHS) is known as the Animal and Public Health Information System (APHIS) and is now accepted by the Commission as being "fully operational". This means DARD can make use of this database for:

    —  cross checking cattle scheme claims received; and

    —  facilitating the claims application process (where the EU regulations permit this).

  For those years when the Deseasonalisation Premium has operated in Northern Ireland, DARD has used the APHIS database (previously AHS) to generate lists of eligible animals so farmers simply had to check, sign and return these.

  In 2000 with the introduction of the new Slaughter Premium Scheme and the new method of establishing eligibility for Extensification Premium, DARD has again drawn on APHIS data to simplify the work for farmers as much as possible (see descriptions in Annex B).

  21.  As a result of the various checks, a number of claims are reduced or rejected and, where appropriate, the penalties in the IACS legislation and/or domestic legislation are applied. Farmers who wish to query a decision on a claim can take it up with Grants and Subsidies (Payments) Division. It is then looked at again by a senior staff member, who will consult Grants & Subsidies (Inspection) Division, Policy Division and lawyers as necessary on difficult cases. If the decision is maintained and the farmer is still not satisfied, he can refer it to a Member of Parliament or Member of the Legislative Assembly or raise it with the Minister. The Minister's decision can be challenged through the judicial review process, which may involve a reference to the European Court of Justice to determine points of EU law. Or the Northern Ireland Ombudsman may decide to review cases where maladministration appears to have occurred.

  As is the case with other Agriculture Departments DARD is considering the introduction of a formal Appeals Procedure. It is hoped to proceed with the first stage of this, a consultation process within the coming months.

  22.  The Grants and Subsidies organisation is in the process of developing an European Foundation for Quality Management (EQFM) Excellence Model. This work is being co-ordinated by a quality manager, who has experience using the model. He will identify where improvements require to be made.

  23.  DARD has regular contact with the Department of Agriculture, Food and Rural Development (DAFRD) in the Republic of Ireland and exchanges views on a range of issues related to scheme administration. Other than that we benefit from any information emanating from MAFF's efforts to compare scheme administration in the UK with that of Paying Agencies in other Member States.

  DARD and the other UK Departments meet regularly with MAFF and are kept informed of developments in these areas.


  24.  DARD is currently taking forward plans for a number of developments designed both to improve its scheme administration and to provide a better service to farmers. These include:

    —  a Geographic Information System (GIS);

    —  combined cattle inspections;

    —  simplification of the IACS rules;

    —  e.Government.

  25.  The Department is planning the introduction of a Geographic Information System (GIS) which is an EU requirement. A pilot scheme covering an electoral district in Co Armagh will precede the introduction of this system throughout the Province. GIS will be based on the digitised maps provided by the Ordnance Survey's Landline product and will replace the alphanumeric database currently in use. A map showing the GIS data held will be sent to each applicant on completion of the digitisation process. This mapping system should make the completion of Area Aid Applications more efficient and reduce the number of errors made. It will also improve the inspection process. When fully operational, it should be possible to streamline validation processes, provide effective cross checking and reduce validation times.

  26.  Work being done to reduce the inspection burden on farms is two-fold. In 1998 DARD introduced the Animal and Public Health Information System (APHIS). A link between this system and the Grants and Subsidies/IACS system database facilitates the verification of claims and assists in the prevention and detection of fraud. DARD is also looking at options for rationalising and co-ordinating on-farm inspections to minimise the number of farm visits, eg an inspector could undertake both BSPS and SCP inspections on the occasion of a single farm visit. This should also benefit the farming public since it will reduce the number of inspections to be done.

  27.  All these developments should make it easier for farmers to submit valid claims and for DARD to improve its efficiency. But more progress could be made if the IACS rules were simplified. MAFF is taking the lead on initiatives to bring about the simplification of IACS rules.

  28.   Conclusion

  Since its introduction in 1993, the Department's implementation of the Integrated Administration and Control systems has evolved continually to take account of changes to the EU legislation underpinning the agricultural support schemes, most recently the changes introduced under the Agenda 2000 reform. In that time, DARD has striven to balance the requirements for tight control over the disbursement of public funds with the needs of the farming industry through effective and efficient scheme administration.

31 October 2000

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