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Food-processing subsidies: “no proof of added value” say EU Auditors

Cour des comptes - ECA/13/9   10/04/2013

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EUROPEAN COURT OF AUDITORS

PRESS RELEASE

ECA/13/9

Luxembourg, 10 April 2013

Food-processing subsidies: “no proof of added value” say EU Auditors

Under the Common Agricultural Policy, EU rural development policy grants are made available to enterprises that process and market agricultural products through a measure called ‘Adding value to agricultural and forestry products’ that aims to improve the competitiveness of agriculture and forestry. The EU budget has earmarked € 5.6 billion in aid for 2007-2013. This financing is complemented by national spending, which brings the total public funding to € 9.0 billion.

Member States must draw up Rural Development Programmes, tailoring the aid to their needs through national or regional objectives and setting the scope of the measure to ensure that efficient use is made of the funding. However, the auditors found that only general objectives were set, which did not demonstrate how the funding was intended to add value to agricultural products or improve the competitiveness of agriculture. Despite this lack of targeting, the Commission approved the programmes. The audit covered six national and regional rural development programmes, selected mainly for their size: Spain (Castilla y León), France, Italy (Lazio), Lithuania, Poland and Romania.

EU auditors found that Member States do not direct the funding to projects for which there is a demonstrable need for public support. Without this, the measure becomes a general subsidy to enterprises investing in food-processing – with the attendant risks of distortion of competition and waste of scarce public money.

Almost 20% of the EU money set aside for improving the competitiveness of agriculture is paid to food-processing companies, but the monitoring and evaluation arrangements do not collect information on the added value achieved or on the indirect effects on the competitiveness of agriculture. The current arrangements are unlikely to provide the necessary information to demonstrate the success of the funding or to improve its effectiveness and efficiency for the 2014-20 period.

Member States are not clearly identifying the need for funding or setting meaningful objectives”, said Jan Kinšt (CZ), the ECA member responsible for the report, “the Commission should only approve programmes that do so, otherwise this measure just becomes a handout to the food-processing companies”.

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 01/2013) is entitled “Has the EU support to the food-processing industry been effective and efficient in adding value to agricultural products?”. The ECA examined whether the measure was designed and implemented in a way that provided for the efficient funding of projects addressing clearly identified needs and whether the measure was monitored and evaluated in a way that allowed its results to be demonstrated.

In the context of this audit, projects were considered as effective if they were sustainable and contributed to specific Rural Development Programmes objectives for the measure as well as adding value to agricultural products. The funding was considered to be efficient if deadweight was limited and any displacement was justified.

The audit work comprised a review of the Rural Development Programmes, an examination of the Member States’ management systems and separate audit visits to 24 completed food-processing projects in these Member States, including four projects nominated by the Member States as best practice examples. The remainder were selected by the Court to give a range of projects typical of those financed in the Member States concerned.

The Court found that the projects mostly improved the financial performance of the companies concerned and a number of the projects audited may result in some added value. This, however, could not be attributed to the design of the measure or the selection procedures used by the Member States. There was a lack of evidence to demonstrate that the companies aided needed a subsidy, or the specific policy objectives that the subsidy was expected to achieve. The Court concluded that the support had not been systematically directed to projects that effectively and efficiently added value to agricultural products.

The ECA recommended that:

        • Member States’ programmes clearly identify the need for funding and set objectives that are meaningful and measurable; the Commission should only approve programmes that do so.

        • Selection criteria should be defined that enable the most effective projects to be identified. To ensure that the EU funds are used efficiently, these criteria should be rigorously applied, even when there is sufficient budget available to finance all eligible projects.

        • The Commission and Member States should promote the adoption of best practices in respect of the mitigation of deadweight and displacement risks.

        • The monitoring and evaluation framework applicable to the projects financed should be improved for the forthcoming programming period to ensure that the effectiveness of the funds spent can be properly measured.

Contact:

Aidas Palubinskas

Press Officer European Court of Auditors

Desk: +352 4398 45410 Mobile: +352 621 552224

press@eca.europa.eu www.eca.europa.eu Twitter: @EUAuditorsECA


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