Ukraine establishes a Paying Agency

Vitaliy Koval, Minister of Agrarian Policy and Food
 

In times of war, support for Ukrainian farmers is critical not only for food security but also for the country's economic stability. At the same time, the European integration process requires the introduction of new approaches to managing the agricultural sector. One of these steps is the creation of a Paying Agency in Ukraine. This institution is necessary for Ukrainian farmers to participate in financial support programs in line with EU standards.

What is a Paying Agency and why is it needed?

A Paying Agency is a specialized state body responsible for administering and controlling the expenditure of state and donor funds aimed at supporting agriculture and rural development in accordance with EU standards. All EU candidate countries must establish such an institution in accordance with the requirements of the European Commission.

We need a Paying Agency to prepare for participation in the EU Common Agricultural Policy (CAP) and to access pre-accession assistance instruments.

That is, even without being a member of the EU, Ukraine will potentially be able to receive funding to support our farmers. As long as Ukraine is not a member of the EU, the Paying Agency will allow the use of European support mechanisms, subject to the relevant EU decision, and will prepare farmers to participate in programs similar to those already in place in the EU. At the same time, assistance from the state budget for farmers will also come exclusively through the Paying Agency.

How will the Paying Agency work?

The Paying Agency in Ukraine will perform the following key functions:

      inform farmers about the conditions and procedures for obtaining financial support;

      accept and professionally review applications for available financial support;

      calculate the amount of support, conclude contracts and make payments to farmers after conducting the necessary detailed checks;

      ensure the correctness, completeness of accounting for payments made and reporting;

      carry out multi-level monitoring and control over the use of the financial support received, and will check the targeted use of funds;

    protect the financial interests of the state and, in the future, the financial interests of the EU when working with European funds;

    inform the public on each area of financial support for farmers, etc.

In other words, it will be a competence center for managing financial assistance to the agricultural sector, which will operate on the principles of transparency, accountability and professionalism.

In Ukraine, the creation of the Paying Agency is planned through the transformation of the Ukrainian State Fund for Farmers Support.

The legislative framework is already being laid

The process of creating a legislative framework is currently underway. Recently, the Parliament Committee on Agrarian and Land Policy adopted as a basis (in the first reading) a draft law providing for the establishment of a Paying Agency in Ukraine and recommended that the Verkhovna Rada (Parliament) of Ukraine include it in its agenda. The draft law provides for the implementation of certain provisions of the EU Regulations, which are critical for ensuring the adaptation of the Ukrainian agricultural sector to EU standards. This will allow Ukraine to gain expanded access to EU financing instruments.

We look forward to the speedy adoption, signing and promulgation of this European integration draft law, as it is the legislative foundation for the establishment and functioning of the Pa Agency in Ukraine.

International experience

All EU Member States have their Paying agencies. These agencies are one of the key instruments of the Common Agricultural Policy (CAP). These agencies manage the funds of the two main CAP funds:

●      European Agricultural Guarantee Fund (EAGF);

●      European Fund for Rural Development (EAFRD).

Within the framework of the principle of joint management, the Paying agencies make payments under the supervision of the European Commission. All elements of the agencies' management and control systems are reviewed by the European Commission and certification bodies as part of the assurance process.

The Paying Agency ensures that payment authorization can only be granted after sufficient checks in accordance with EU rules; payments are correctly and fully recorded; and the necessary documentation is submitted on time and in accordance with EU requirements.

Paying Agencies in EU Member States and candidate countries, while operating under EU standards, also have their own regional peculiarities. For example, the Italian Paying Agency − AGEA directs payments and support not only to farmers, but also to enterprises engaged in the preservation of rural landscapes and biodiversity. AFSARD (Paying Agency of North Macedonia) focuses on environmental and innovative projects. Croatia's Paying Agency focuses on infrastructure development in rural areas. Turkey's Paying Agency focuses on supporting small and medium-sized farms.  APIA (Romania's Paying Agency) pays considerable attention to environmental aspects in its support programs.  

How can non-EU countries receive financial assistance?

First, establish a Paying Agency. Paying Agencies established in candidate countries must be accredited by the European Commission to use pre-accession assistance funds. This also applies to Ukraine. The European Commission applies separate accreditation criteria that differ from those for EU Member States.

In order to protect the financial interests of the European Union, the Paying Agency is subject to serious requirements. In particular, it must establish an effective system of internal control capable of detecting, preventing, reporting and correcting irregularities and fraud; and use an accounting system that provides accurate, complete, reliable and timely financial information.

At the same time, an effective system of management of the entire process of financial support for farmers should be created, in particular, the National IPA Coordinator (NIPAC) should be appointed; the structures of the Ministry of Agrarian Policy and Food of Ukraine (MAPF) and the Ministry of Finance (MoF) should identify responsible structural units for the process of financial support for farmers, a monitoring committee should be established, and other equally important organizational measures should be taken.

The country must also have a multi-year program of support for agricultural and rural development prepared for further implementation, which is approved by the European Commission. Such a program consists of a number of measures, each of which has annual budget funding. Each measure is accredited separately. The efficiency indicator is the level of utilization of the program budget.

At present, our MAPF specialists, together with the experts of the IRRSA EU project and the staff of the State Fund for Farmers Support, are already working on preparing the necessary groundwork for the establishment and launch of the Paying Agency in Ukraine. In particular, work has already begun on the preparation of a multi-year rural development program and other procedural issues.

The main goal of this program is to support farmers and agricultural enterprises in modernizing their production, increasing their efficiency and competitiveness in the market, and gradually bringing the agricultural sector in line with EU standards.

To the point, the most common measures of multi-year programs implemented by EU candidate countries are:

   - investments in tangible assets of agricultural enterprises;

   - investments in tangible assets related to the processing and marketing of agricultural and fishery products;

   - farm diversification and business development;

   - investments in rural public infrastructure.

In addition, a series of trainings have already been conducted by European colleagues for employees of the State Fund for Farmers Support and MAPF employees on how the Paying Agency should work in Ukraine. In particular, attention was focused on the introduction of mechanisms that will prevent corruption and various types of fraud, verification of all processes of providing financial support, delineation of responsibilities, transparency of activities, etc.

Thus, the creation of the Paying Agency is an investment in the agricultural future of Ukraine. This is a real mechanism that will allow farmers to receive stable, transparent and targeted support in accordance with European rules. At the same time, it is one of the key elements of integration into EU policy. That is why the launch of the Paying Agency is not just a technical task, but a strategic step towards Ukraine's membership in the European Union.