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Luxembourg, 17 September 2013

EU funds for diversifying the rural economy are delivering only limited value for money, say EU Auditors

Member States were often driven by a need to spend the allocated budget rather than by an assessment of the appropriateness of the diversification projects themselves. In some Member States, all eligible projects were funded where sufficient budget was available regardless of how the project was assessed in terms of its effectiveness and efficiency. Only later in the period when funding was tight, better projects were rejected.

EU rural development spending for diversifying the rural economy is intended to address identified problems in rural areas such as depopulation, scarcity of economic opportunities and unemployment. It provides funding to people and rural businesses for projects to help support growth, employment and sustainable development. Planned EU expenditure for these measures was € 5 billion for the 2007-2013 period and € 2 billion was also earmarked from the Member States’ national funds. The audit covered the Commission responsibilities and six Member States (the Czech Republic, France − Aquitaine, Italy − Campania, Poland, Sweden (Västra Gotland) and the United Kingdom − England (Yorkshire and Humber).

The overarching priority of job creation was not properly targeted. The methods of monitoring and evaluation in place did not allow the true picture of jobs created and maintained by these measures to be ascertained. The sample of projects audited showed that they were only moderately successful in generating the employment they intended to.

In many cases, the EU auditors found that the projects would have gone ahead even without EU funding, thus resulting in an inefficient use of limited EU funds. Member States’ checks on reasonableness of projects costs did not sufficiently reduce the risk of overspending. Further, examples of excessive administrative burden and payment delays were identified.

“The fact that audited Member States and regions have not specified clearly what they wish to achieve indicates a strategy that is demand led rather than objective driven. In practical terms, this led to situations where almost any kind of project could be accommodated under the objectives set,” said Jan Kinšt, the ECA Member responsible for the report.

Notes to the editors:

European Court of Auditors (ECA) special reports are published throughout the year, presenting the results of selected audits of specific EU budgetary areas or management topics.

This special report (SR 06/2013) is entitled ““Have the Member States and the Commission achieved value for money with the measures for diversifying the rural economy?” The ECA assessed whether the measures were designed and implemented in such a way as to make an effective contribution to growth and jobs and whether the most effective and efficient projects were chosen for financing. Furthermore, the Court assessed whether the available monitoring and evaluation information provided reliable, complete and timely information on the outcomes of the measures.

The audit found that that overall the Commission and the Member States have, only to a limited extent, achieved value for money through the measures for diversifying the rural economy, as the aid was not systematically directed to the projects that were most likely to achieve the purpose of the measures.

This was due to a lack of clear needs for intervention or specific objectives set in the rural development programmes (RDPs), broad eligibility criteria adopted that did not limit the projects to those most likely to achieve diversification and selection criteria that did not choose the most effective projects or were not applied at all. Too often, and particularly at the start of the programming period, the selection of projects was driven more by a need to spend the allocated budget than by the quality of the projects themselves. In some Member States, all eligible projects were funded where sufficient budget was available regardless of how the project was assessed.

The ECA therefore recommended that:

In their rural development programmes, Member States should clearly identify how and why public intervention for investments in non-agricultural activities will help to redress for example market failures related to barriers to employment and growth. The Member States should then set specific and measurable objectives in relation to these needs. The Commission should approve only those RDPs that present substantiated and comprehensive strategies with a clear rationale that show how policy intervention will contribute to strategic aims of creating growth conditions and employment opportunities.

Member States should establish and consistently apply criteria to ensure the selection of the most effective, sustainable projects with respect to the Member States’ specific objectives. The Commission should ensure that these criteria are correctly and continuously applied, not only in cases of budgetary shortage.

The Commission and Member States should promote the adoption of best practices in respect of mitigating the risks of deadweight and displacement. The Commission should encourage Member States to adopt the practice whereby expenditure for investments would be eligible only as of the date of grant approval.

The Commission should ensure that Member States have effective systems to carry out checks on reasonableness of costs.

The Commission and Member States should ensure that for the forthcoming programming period, relevant and reliable information is obtained to facilitate management and monitoring of the measure and to demonstrate the extent to which the aid given is contributing to the achievement of EU priorities. The targets for job creation should be realistic and the numbers of jobs created accurately monitored, the measures should be better managed throughout the programming period and particularly if it becomes apparent that targets set will not be achieved.

The Commission and Member States should increase their efforts in reducing the administrative burden and ensuring that payments are made in a reasonable timeframe.


Aidas Palubinskas

Press Officer European Court of Auditors

Desk: +352 4398 45410 Mobile: +352 621 552224 Twitter: @EUAuditorsECA

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