Auditors flag farm subsidy fraud in new EU members
The European Court of Auditors has identified many cases of fraudulent agricultural payments for unutilised land among the new EU members of Central and Eastern Europe, and made recommendations to address the problem in an unprecedented report, published today (27 November).
In its first special report on income support paid to farmers in the new member countries, the European Court of Auditors called for reform to ensure funds were directed to active farmers who conducted regular agricultural activities.
In particular, public entities managing state land and not otherwise involved in farming should be excluded from EU farm aid. Equally, no payments should be made in relation to unutilised land, or land which is mainly devoted to non-agricultural activities, the Court of Auditors state.
The 58-page report is available in all the EU’s 22 languages. Its overall conclusion is that implementation of the Single Area Payment Scheme or SAPS (see background) resulted in a number of questionable features:
- The definition of the scheme's beneficiaries is inadequate, as it permits payments to be made to those not engaged in agricultural activity, or only marginally so. Cases in point include real estate companies, airports, hunting associations, fishing and ski clubs.
- In addition, in some of the countries concerned, aid was legally paid to (and supported the income of) public entities managing state land but not otherwise involved in farming. The state is the largest beneficiary of SAPS payments in Hungary (€14 million in 2010 for 82000 ha of land).
- The total agricultural area in relation to which SAPS should be paid was not reliably determined by the member countries, but accepted by the Commission. This influenced the amount of aid per hectare paid to farmers. Some countries revised the total agricultural areas without proper justification. This allowed them to fully use their respective financial envelopes.
- In spite of efforts made by the various countries, aid was paid for parcels where no agricultural activity was carried out.
- There is an inherent contradiction in the design of SAPS aid: It is, on the one hand, intended to support the individual income of farmers, but the aid is also distributed to farms based on the total area of parcels of land at their disposal. SAPS primarily benefits large farms: overall, 0.2% of the beneficiaries receive more than €100.000 representing 24% of the total value of payments.
- Finally, even though SAPS was designed as a transitional scheme, most member countries have not prepared for the introduction (foreseen in 2014) of the system (based on payment entitlements) which is already in place in EU-15 Member States. This may result in significant delays in payments in the future.
The report is illustrated with photos depicting abandoned land which received agricultural subsidies in Bulgaria, Romania, Poland, and Hungary.
Despite the countries concerned not having been required under their accession treaties to physically identify their eligible agricultural areas, most of those visited by the Court of Auditors reportedly had difficulties in reliably identifying this area. In the absence of a definition of the “good agricultural condition” (GAC) and because the systems for land parcel identification (LPIS) were either not available or insufficiently developed, new members used different methods to establish their respective agricultural areas.
The court found that, while in Bulgaria the revision of its agricultural area partly resulted from the identification of ineligible land, in Hungary, Poland and Slovakia the revision was not based on verifiable criteria other than the authorities having received aid applications for more or less agricultural land than expected.
As early as 2005, the Commission had already informed the Slovakian authorities that the number of aid applications received in a year and any anticipated increase were not sufficiently objective criteria for the modification of the agricultural area under SAPS. However, for Hungary, Poland and Slovakia the Commission eventually accepted the requests for revision without further analysis
A lax Commission?
As a result, the land benefiting from payments has been “sometimes significantly higher than the agricultural area determined and accepted by the Commission at the time of accession,” the report says.
The Court of Auditors further says that the Commission has not requested that the member countries analyse such discrepancies. “The court cannot therefore confirm whether the areas recorded as eligible for SAPS payments were actually determined in agreement with the provisions of the Acts of Accession and subsequent EU legislation,” the report states.
In conclusion, the court recommends a better targeted and more results-oriented policy in which support to farmers’ incomes should be directed to active farmers who conduct concrete and regular agricultural activities, and not to public entities. At the same time, the eligibility of land for aid should be clearly defined and limited to parcels on which concrete and regular agricultural activities are required.
The Single Area Payment Scheme (SAPS) was designed to enable the new member states who joined the EU in 2004 and 2007, to support farmers’ income.
It is currently applied in 10 EU states (Poland, Czech Republic, Slovakia, Hungary, Estonia, Latvia, Lithuania, Slovenia, Bulgaria and Romania) and the related expenditure amounted to €5 billion in 2011. The court’s report focuses on the beneficiaries of the policy, on eligible land and on the contribution of the scheme to the objective of supporting farmers’ income.