Multiple interactions between agriculture and the quality of our lives make the new CAP — and auditing it — more relevant than ever
Interview with Samo Jereb, ECA Member and chair of the ECA audit chamber Sustainable Use of Natural Resources
With expenditure amounting to €59.5 billion, the EU’s budget for ‘natural resources’ represents 37.4 % of the total EU budget, and the Common Agricultural Policy (CAP) accounts for 98 % of this. It may come as no surprise that the ECA’s audit work on this budget chapter makes up a substantial part of the ECA’s overall publications, both regarding compliance and performance issues. As for the latter, the ECA has published 20 special reports relating to the CAP since 2017. ECA Member Samo Jereb has been responsible for several of these reports and since June 2020 has been chairing the ECA’s audit chamber producing them — Chamber I, ‘Sustainable Use of Natural Resources’. We interviewed him, before the closure of the negotiations on the post-2020 CAP, on the ECA’s work on the CAP, his perspective on the new CAP proposals, and the horizontal dimensions of this policy area, in particular regarding climate and biodiversity issues.
By Derek Meijers and Gaston Moonen.
An interest in things green which is not just out of the blue
Soon after he started work as an ECA Member in 2016, Samo Jereb became a Member of the audit chamber for the Sustainable Use of Natural Resources. His interest in ‘natural resources’ and all that relates to the topic goes back years. ‘I like the topics that we are covering in our audit chamber. But not just our audits relating to agriculture. In our chamber we are also responsible for environmental audits, including auditing mitigation and adaptation to climate change’. He explains that somehow the topics he deals with in the audit chamber are a continuation of the work that he was doing at the Court of Auditors of the Republic of Slovenia. ‘As Supreme State Auditor I was also responsible for environmental audits, among other topics.’
Also in his personal life, nature belongs to his natural habitat. ‘Personally, I enjoy nature, having quite a large, mostly ornamental, garden of my own. I also grow some organic vegetables, fruits and herbs, which I use when cooking. I was also a beekeeper before coming to Luxembourg and, generally, I try to create different types of habitats and conditions for biodiversity around my living space. If you pay attention to nature, you can see wonders happening around you!’ His hobby has culminated not only in spending a lot of free time in nature, but also writing about it. Before he came to Luxembourg, Samo Jereb (co)authored two books about gardening, both in Slovenian: one published in 2010 entitled Beautiful gardens of Slovenia: 26 private ornamental gardens, and one published in 2009 called Perennials for all seasons — Successful planting in Slovene gardens. ‘When you dive into nature you start seeing it with different eyes and appreciation.’
This appreciation also comes out in his assessment of agriculture and its overall importance. ‘We should always keep in mind that humanity needs enough food that is also of sufficient quality. All other issues — financial, economic, social, etc. — are very important, but if we would experience food or water shortages this can and will initiate migrations and wars. Even with sufficient food but of poor quality, we will suffer consequences in the form of illnesses.’ He therefore believes that all of us, perhaps more than ever before, should be concerned about having an agricultural industry that can support our society with good quality food. ‘Consequently, we need to make sure that the conditions for farmers will attract enough young people to replace those farmers who are currently approaching retirement, and that they will be ready to embrace new farming technologies.’
At the same time Samo Jereb underlines that agriculture cannot be treated as a disconnected part of our lives that only guarantees food. ‘There are many interactions between agriculture and quality of our lives. Farming and forestry can provide us with important eco-systemic services that we need for relaxation. Pesticides and nitrates, if not used properly, can pollute drinking water. Residues of pesticides on the fields can be carried by the wind into the air and reduce air quality. Not to mention that Greenhouse Gas Emissions from EU agriculture contribute around 10 % to overall GHG emissions and global warming, etc.’. He points out that these are just a few examples of the very interesting topics which can affect our lives directly and indirectly and are dealt with by his audit chamber. ‘Auditing how the European Commission and Member States tackle these issues and how the ECA can contribute through its recommendations is very interesting for me.’
The audit work preceding the drafting of these recommendations has not become easier, due to the COVID-19 pandemic constraints. Traditionally, auditing agricultural programmes included audits on the spot, verifying the condition of fields, of a project’s progress, eligibility conditions, etc. But Samo Jereb explains that things were already changing well before the pandemic hit Europe. ‘For several years we have been making more use of satellite photos and other sources of evidence and less use of visits on the spot. So we were actually well prepared for the COVID-19 crisis from that point of view’. He points to some further changes made this year. ‘For direct payments in agriculture we selected the sample we audited from the transactions that had been examined by the paying agencies — maximising the use we make of their work. But of course, we were still able to use satellite photos and other sources of information.’
Samo Jereb explains that monitoring the development of digital tools is part of the ECA’s audit work. ‘We have done a performance audit, published as ECA special report 4/2020, on using new imaging technologies to monitor the CAP. We found that the development of this approach is relatively slow and therefore we might only be able to use this approach in our audits in a few years.’ He adds that in 2021 the ECA will start an audit on using big data in agriculture, expected to be helpful when assessing agricultural performance in Member States. As for auditing expenditure from the European Agricultural Fund for Rural Development, Samo Jereb has bigger concerns: ‘Here digital tools are less well developed and the Commission does not yet collect information in a way that would allow us to use digital audit tools for auditing this part of expenditure.’ But, overall, he believes that the ECA is aware of the possible changes in audit that digital tools can bring about and his audit chamber is monitoring the progress the Commission is making in this respect. ‘This ties into the work the ECA’s Digital Steering Committee is doing, analysing the state of play regarding access to data in the Commission and Member States for all EU budget headings, and preparing proposals for organisational changes and an action plan for implementing a digital audit approach in our audits.’
Aggregating CAP audit lessons into opinions on the post-2020 CAP
Over the last five years, the ECA has published about 20 special reports relating to agriculture, with a wide variety of topics, ranging from a topic such as the protection of wild pollinators in the EU to ensuring stabilisation of farmers’ income. When asked which audits stand out in relation to the current CAP, Samo Jereb explains it is hard to select one or two topics. ‘We always try to look ahead, what legislation will be amended and when, so that we can achieve greatest impact with our reports. This is why we have done quite a few audits on funding instruments under the CAP and control mechanisms — such as greening the CAP, basic payment scheme, certification bodies, or the simplified cost option in rural development — before the Commission presented its proposals for next CAP in 2018. We have also done some performance-related audits — such as animal welfare, CAP income stabilisation, food safety, organic food, or renewable energy in rural development. All this allowed us to gain enough understanding of the implementation of CAP 2014–2020 in the sense of what does (not) work as intended and what needs to be improved.’
All this work enabled his audit chamber, even before the proposals on the new CAP were issued, to prepare a briefing paper — now known as ECA review 2/2018 — to explain what the ECA would expect from the proposals regarding the performance framework of the new CAP. ‘And when the proposal was drawn up, together with the basic legislation, we were already able to issue a clear and in-depth opinion — ECA opinion 7/2018 — on the proposal for the new CAP in 2018. I think that the legislators were grateful that we were able to provide them with our assessment of the proposal in time, when the discussion on the CAP started, with comments that could be linked to the audit reports we had issued.’ He points out that this was one of the big achievements of his audit chamber, potentially making the biggest impact on agricultural policy making. Then, sighing: ‘If the Commission’s DG AGRI had made more use of our findings when preparing the proposals… At least the European Parliament paid more attention to our recommendations. And the proposals that did not take our recommendations into account sufficiently were still the subject of extensive discussion in the trialogue negotiations three years later!’
Auditing agricultural policies or environmental policies…?
When looking in detail at the topics of the audits on agriculture covered during the last five years, more than half of them relate to environmental measures. Samo Jereb explains that this has more to do with his audit chamber finishing a cycle of audits on agricultural instruments than a structural shift in audit focus. ‘In the previous years we focused on instruments under the ongoing CAP, which also allowed us to prepare our opinions in time for the next CAP proposal. Since the new CAP will only start in 2023, with a focus on national plans, there is not much new that we can say about this topic. We covered the majority of CAP instruments. And until there are new ones there is no added value, from a performance point of view, in auditing the same instruments again. The conclusions will be the same. Now is the time for legislators at EU and Member State level to decide whether and how to integrate our recommendations in the new CAP.’
He expects that the ECA’s activities will zoom in again on the agricultural instruments when the national plans for the new CAP have been adopted. ‘Then we will see how the CAP will look in reality and whether other documents that influence the CAP — think about the European Green deal, Farm to Fork strategy, Biodiversity strategy, etc. — were fully taken into account. So the shift of our focus is not so much connected with the result of changes in agriculture in past years. It is more linked to the fact that the effects on the environment — water quality, air quality, biodiversity — of the intensification of farming, on the one hand, and, on the other, of the abandonment of farming in less favourable areas, are more visible to the public.’ He underlines that, as in other policy areas, there were more and more warnings from experts that agriculture needed to change. ‘Consequently, the focus of the UN, governments, legislators, and also of the ECA, shifted more to questions of how to ensure sustainable agriculture and follow a ‘no harm’ approach, and of what kind of impact this would have in other policy areas. For us this was perfect timing, to audit the new schemes coming, in between the various schemes of the past’. In this context, he refers to an audit already proposed for 2022 to look at the support scheme for wine producers.
Speaking of the audits regarding agriculture and sustainability, the ECA Member explains that the ECA focus was first on climate change adaptation and mitigation, such as climate-related spending, desertification, floods. ‘Issues indirectly linked to conditions for agricultural activities. Lately we have focused on environmental topics, such as pesticides and forestry. In recent years we have published several audits on biodiversity on land and in the sea — think about topics such as biodiversity on farmland, pollinators and marine environment’. In this connection, he refers to the Joint Biodiversity Conference the ECA organised in October 2019 under the umbrella of the Working Group on Environmental Auditing of the European Organisation of Supreme Audit Institutions. ‘There we brought together experts from several universities and other bodies and auditors from European national audit institutions and the ECA.’ (1)
Samo Jereb found the feedback received on the ECA audits relating to biodiversity very encouraging. ‘The response of journalists, experts and social media on all our reports on biodiversity showed a huge interest of the public in these topics. The Council and the Commission supported findings of our report on pollinators, including the recommendations regarding the CAP and pesticides.’ This makes him hopeful on some movements into a positive direction. ‘Also in our discussions with the responsible committees in the European Parliament, we get the positive feedback that our audits are relevant and help them to discuss possible changes of the CAP based on evidence provided through our audit reports.’
In the European Parliament, the main interlocutors are the Committee on Agriculture and Rural Development (AGRI) and the Committee on Environment (ENVI). ‘This is because many of our reports, particularly during the second half of the previous MFF period, related to environmental issues, which makes the ENVI Committee, besides the AGRI Committee, a natural interlocutor. For our reports relating to concrete agricultural issues, such as farmers’ income stabilisation, animal welfare, or the basic payment scheme for farmers, our main discussions take place in the AGRI Committee.
Concrete potential of the new CAP cannot be identified yet
While the new CAP proposal continues the use of direct payments based on the hectares of land owned or used, it leaves quite a lot of discretion to the Member States, also by means of a pre-established financial allocation to specific interventions based on their own needs assessment. When discussing possible effects on the single market, with a view to a level playing field for agriculture in the EU, Samo Jereb thinks it is not possible yet to evaluate whether such a playing field can be ensured or not. ‘In general, we can say that a level playing field can be more easily achieved with a single CAP. However, we should not forget that conditions for farming are not the same all over Europe and the differences will become even greater with the effects of climate change. The same goes for farm structures that differ from Member State to Member State.’ He can therefore understand the desire to allow Member States to define their own CAP national plans to improve conditions for farmers that are more connected with their situation. ‘To what extent this will provide a level playing field has yet to be seen. Since the Member States would provide their own assessments of their needs for financing and there will not be an EU level assessment of the needs, it is not clear yet how the allocation of funds between Member States will be made.’
Samo Jereb explains that, for the ECA, one major concern is the performance framework of the new CAP proposals. ‘Since the proper objectives — results and impacts — of the CAP are not defined and a majority of indicators only provide information on outputs, it will be hard to change from a compliance model to a performance model. This will be the case as long as a fully developed performance framework has not been defined. If payments are to be based on a performance model, taxpayers will expect to be informed about the results and impacts of the policy, not only about outputs such as the number of farmers receiving subsidies or the agricultural area that is covered by CAP measures.’
He underlines that Member States and the Commission need to define not only outputs but also results and impacts and ensure proper evaluation of their achievements. ‘For us this is a precondition for an effective performance model. It will get harder and harder to justify subsidies for farmers just by providing generalised arguments that such subsidies are good for society as they ensure that farmers can provide eco-systemic services and food, and therefore farmers deserve direct payments’. He indicates that even though these generalised statements are true, in principle, the public would still want to know how much the EU is paying farmers and for what exactly. ‘They would want to know not only if sufficient and good quality food is produced, but also if the ‘no harm’ principle is respected by farmers and whether farming is using natural resources in a sustainable way. So this performance framework needs to tackle not only the impacts of farming on society, but also on the environment and climate change.’
In relation to this aspect, he remarks that, regarding eligibility criteria, the Commission followed the ECA’s recommendation to merge instruments with the same purpose (e.g. cross-compliance and greening) and make the CAP simpler. ‘Transforming this instrument into ‘conditionality’ would follow our recommendation even further, if it became a real condition for receiving payments. But the conditionality proposed in the new CAP legislation is not really a condition for receiving EU funds, but — as is the case now with cross-compliance — only subject to limited penalties in case of non-compliance.’
Speaking about eligibility criteria, Samo Jereb is more positive about compliance results in the current CAP when it comes to error rates, which for several years now, as identified in the ECA’s annual reports, have shown decreasing trends for agriculture: from 2.9 % in 2015 to 1.9 % for 2019 payments. ‘The Commission and Member States were successful in reducing the error rate in direct payments. This was possible through simplification of payments and digitalisation of supervisory instruments. Our concerns remain, nevertheless, in connection with expenditure under the European Agricultural Fund for Rural Development.’ He explains that in that area the error rate remains well above 2 % and is where the ECA still finds ineligible beneficiaries, projects or expenditure as the main source of errors. ‘Including, every year, cases with suspicion of fraud, which we report to the EU’s anti-fraud office, OLAF. During the last two years, there has also been a lot of discussion about land grabbing and fraud when claiming direct payments under the CAP. We are currently performing an audit on fraud in the CAP and another on conflict of interest in the CAP and Cohesion to see what the reasons for these cases really are.’
In this connection, and aware of the discussions on this topic in the European Parliament, he gives an example: ‘If we talk about land grabbing, we need to do an audit to find out how certain actors in agriculture, whether in France or the Czech Republic, got the rights to use this land to apply for subsidies. Just note that if you know that the biggest land owners are the Queen of England and some other big actors in some Member States, then you should not be surprised if some actors, sometimes big companies in Eastern Europe, want to copy them.’ The question he thinks might come up is: why is there no capping in the subsidy scheme of the CAP? ‘What do you really want to finance, is that big agri-companies or do we want to ensure that small farmers will survive and not abandon their farms? What do we want to finance, that is an important issue.’
Addressing gaps between ambitions and achievements
An important issue that has emerged from ECA audits on agriculture in relation to climate change, the environment and biodiversity, is that the EU’s expenditure on greening the CAP has not yet had the effects that were intended, as the ECA recently pointed out in its special report 16/2021 regarding the CAP and climate. This concern was also reflected in ECA opinion 7/2018 on the new CAP, which said that the proposal did not reflect a clear increase in environmental and climate ambitions. For Samo Jereb, as the ECA Member responsible for the ECA’s audit on greening the CAP, published in 2017 (special report 21/2017), this was not a surprise. ‘The pressure on agriculture, that agriculture needs to change, to become greener, was there well before. And greening was somehow a reply to this pressure. It needs to be greener but whether this really happened in practice remains rather questionable. This 2017 report on greening the CAP was my first audit as ECA Member. Regarding greening, the farmers did what they were already doing before, so you cannot expect exceptional results if you basically ask them to do the same thing but with a different label.
He continues by explaining that in the CAP 2014–2020 greening was announced as a game changer which would make a difference to agricultural practices. ‘Our report was important in the sense that it showed that in reality farmers, already before the 2014–2020 CAP policy was adopted, were applying practices that were required by greening and therefore no major change occurred. We assessed that farming practices had induced change on no more than 5 % of agricultural land. And that penalties for not respecting greening were not really dissuasive.’ As an example, he cites the Integrated Pest Management (IPM) instrument, an instrument that should reduce the use of pesticides. ‘Applying the IPM principles is mandatory for users, but Member State compliance checks are rare and we found no good examples of such checks. One reason for the lack of enforcement is that there are no clear criteria as to how users should apply the general principles of IPM, no obligation to keep records of IPM application or how the authorities should assess compliance. CAP rules also require Member States to establish farm advisory systems and provide advice on IPM to all farmers. However, while the IPM principles are mandatory for farmers, they are not included as a condition for CAP payments.’
He points out that the majority of our 2017 recommendations should be implemented under the new CAP, which makes them still very pertinent. ‘We assess whether recommendations have been implemented three years after issuing the report, and such an assessment will be published in our 2020 annual report later this year, so I cannot prejudge on that. However, what is clear is that for the final assessment on implementation we would need to wait for the audits of the national strategy plans of the Member States.’ He thinks that recommendations from national audit institutions (SAIs) and the ECA will be important for the post 2020 CAP, in respect of the proper design of the performance framework and the role of the national strategies. ‘Helping to identify gaps in the frameworks that need to define results and impacts to be achieved, and based on that, the outputs, inputs and appropriate actions that would allow Member States to achieve set results and impacts. Therefore the role of all SAIs including the ECA is very important.’
Having been the Member responsible for several reports the ECA published on biodiversity in 2020, Samo Jereb can be considered as an expert on biodiversity issues in the EU. He believes that the Commission has missed some opportunities in the new CAP to address biodiversity concerns. ‘The Commission published its pollinators initiative in June 2018 — and the new CAP legislative proposal at the same time without taking into account actions envisaged in the pollinators initiative. The actions proposed in this initiative to tackle the main threats to wild pollinators focus on the conservation of habitats, including agricultural and urban habitats, and the reduction of the impact of pesticides and of invasive alien species. Some of the actions were later included in the EU Green Deal or Farm to Fork strategy.
He sees this as an example of a key concern regarding the CAP. ‘In principle, the CAP includes several beneficial instruments, but their implementation is weak, due to weak incentives — checks are rare and penalties not dissuasive — or lack of management requirements, such as for the Ecological Focus Areas with catch, cover or nitrogen-fixing crops to provide food for pollinators. But they won’t if the crops are cut before they flower, and land lying fallow is beneficial only when sown with wildflowers.’ He observes that some standards on Good Agri-Environmental Conditions have great potential in terms of supporting agricultural biodiversity, such as the establishment of buffer strips along watercourses, or minimum soil cover, or the retention of landscape features. ‘But the legislative framework gives Member States a high degree of flexibility to define their content. The new CAP will introduce eco-schemes, but again it is a voluntary instrument for which Member States will define the substance by themselves. So only after Member States adopt their National Strategic Plans for the CAP will it be clear if the new CAP provides some benefits for pollinators and biodiversity on farmland.
However, overall, the ECA Member acknowledges that the European Green Deal and Farm to Fork proposals are steps in the right direction. ‘Whether the ambitious goals from both documents will become part of the new CAP, it will only be possible to assess — sorry to be repetitive — after the national strategy plans have been adopted.’
He observes that the CAP proposal from the Commission as such is rather limited on this aspect and allows plenty of room for Member States to decide on the targets at national level and actions that would enable those targets to be reached.’ As I said before, this is exactly our main concern, since it is not clear how the Commission will assess whether the ambitions in the national plans are sufficient to reach overall targets at EU level. For this reason, we will focus our future agricultural audits on auditing whether Member States have defined pertinent targets, indicators and actions that can lead to achievement of the targets. Compliance will probably have a less visible role, especially since efforts to reduce the error rate in the direct payments have been successful.
Horizontal perspective remains crucial for the ECA’s future work on the new CAP
For the near future, Samo Jereb explains that the palette of audit topics from his audit chamber will be very diverse. ‘We have just published our report on CAP and climate and in the short term we will publish reports on CAP and water projects, the polluter pays principle, forestry and one on the LEADER programme. We are starting audits on sustainable soils, sustainable fishing and climate mainstreaming. And, as I indicated before, we are also auditing fraud in CAP expenditure and conflict of interest in CAP and Cohesion. So you can see that besides questions of compliance we are doing several audits where we intend to audit the impacts of the CAP on the environment and biodiversity, and whether farming and fishing practices follow sustainable principles designed to avoid depletion of resources for future generations.’
Here he refers to the increasing importance of Sustainable Development Goals as aspects to consider when preparing the ECA’s annual work programme and selecting audit ideas. ‘Sometimes we can hear opinions that all these issues are just obstructing farmers and we should mainly focus on the economic situation and viability of farmers. But as is the case regarding climate change — by which farmers are the first to be negatively affected due to extreme weather — water quality and soil depletion will also affect farmers first, with lack of water for irrigation or calls for more fertilisers and pesticides to produce food, leading to more costs to produce food. But also leading to more pollution and potentially lower quality food. Fortunately, more and more farmers are aware of the need to farm more sustainably.’
These concerns will undoubtedly have an impact on the audits related to agriculture which the ECA will select. ‘It is too early to predict the concrete topics we are going to audit in 2022, since our 2022 work programme is still under preparation. However, climate change, the environment and natural resources are explicit elements of our strategic goal 2 in the 2021–2025 ECA Strategy. With the European Green deal and the requirement that the Recovery and Resilience Plans include 37 % of spending related to green transition, these topics will remain high on our agenda.’ Another aspect that, according to Samo Jereb, will certainly be on the ECA’s work programme relates to the National Strategic Plans for the CAP. ‘These plans will show how the CAP will look after 2022. One of the important audit questions that cannot be avoided will be the comprehensiveness of the performance framework, with an assessment of defined outputs, results and impacts with SMART criteria and alignment with the Farm to Fork strategy, the Green Deal and climate mainstreaming of expenditure. I am looking forward to seeing how they can all be reconciled!
(1) For more details on the ECA’s activities in public audit platforms regarding environmental auditing, see: Jereb, Samo; ‘The ECA — contributing through different public audit platforms to cooperation on environmental auditing’, ECA Journal No 2/2020 on Climate Change & Audit, June 2020.
This article was first published on the 2/2021 issue of the ECA Journal. The contents of the interviews and the articles are the sole responsibility of the interviewees and authors and do not necessarily reflect the opinion of the European Court of Auditors.
