Council Regulation (EEC) No 4045/89 of 21 December 1989 on scrutiny by Member States of transactions forming part of the system of financing by the Guarantee Section of the European Agricultural Guidance and Guarantee Fund and repealing Directive 77/435/EEC2 has been substantially amended several times3. In the interests of clarity and rationality the said Regulation should be codified.

Under Article 9 of Council Regulation (EC) No 1290/2005 of 21 June 2005 on the financing of the common agricultural policy4, the Member States are to take the measures necessary to ensure effective protection of the financial interests of the Community, and particularly in order to check the genuineness and compliance of operations financed by the European Agricultural Guarantee Fund (EAGF) and by the European Agricultural Fund for Rural Development (EAFRD), to prevent and pursue irregularities and to recover sums lost as a result of irregularities or negligence.

Scrutiny of the commercial documents of undertakings receiving or making payments can be a very effective means of surveillance of transactions forming part of the system of financing by the EAGF. This scrutiny supplements other checks already carried out by the Member States. Furthermore, national provisions relating to scrutiny which are more extensive than those provided for in this Regulation are not affected by it.

The documents used as a basis for such scrutiny should be determined in such a way as to enable a full scrutiny to be carried out.

The undertakings to be scrutinised should be selected on the basis of the nature of the transactions carried out on their responsibility and the breakdown of the undertakings receiving or making payments according to their financial importance in the system of financing by the EAGF.

Furthermore, it is necessary to provide for a minimum number of inspections of commercial documents. This number should be determined by a method which precludes substantial differences between the Member States by virtue of differences in the structure of their expenditure under the EAGF. This method may be established by referring to the number of undertakings of a certain financial importance in the system of financing by the EAGF.

The powers of the officials responsible for scrutiny and the obligations on undertakings to make commercial documents available to such officials for a specified period and to supply such information as may be requested by them should be defined. It should also be stipulated that commercial documents may be seized in certain cases.

It is necessary to organise cooperation among the Member States on account of the international structure of agricultural trade and with a view to the functioning of the internal market. It is also necessary for a centralised documentation system concerning undertakings receiving or making payments established in third countries to be set up at Community level.

While it is the responsibility of the Member States in the first instance to adopt their scrutiny programmes, it is necessary that these programmes be communicated to the Commission so that it can assume its supervisory and coordinating role and to ensure that the programmes are adopted on the basis of appropriate criteria. Scrutiny can thus be concentrated on sectors or undertakings where the risk of fraud is high.

It is essential that each Member State have a special department responsible for monitoring the application of this Regulation and for coordinating the scrutiny carried out in accordance with this Regulation. The officials belonging to that department may make inspections of undertakings in accordance with this Regulation.

The departments carrying out scrutiny pursuant to this Regulation should be organised independently of the departments carrying out scrutiny prior to payment.

Information collected during the scrutiny of commercial documents should be protected by professional secrecy.

Arrangements should be made for an exchange of information at Community level so that the results of the application of this Regulation can be used to greater effect,