In a report published today, the European Court of Auditors said the European Commission’s Rural Development programme, which operated from 2007 to 2013, was not set up adequately and lacked the necessary legal framework.
The scheme offered three types of financial instrument: venture capital funds; guarantee funds; and loan funds. Member states then used these to modernise agricultural holdings, add value to agricultural and forestry products or encourage business creation and development.
However, the auditors highlighted funds channelled to Bulgaria, France, Italy, Romania and Greece, which were ‘unsuccessful’ in bringing about the planned improvements.
They said managing authorities in member states lacked ‘sufficient past experience’ of financial instruments in rural development on which to base the design of this programme. This resulted in guarantee funds being overcapitalised by €370m at the end of 2013.
The report also said neither the commission nor member states introduced monitoring systems that provided realisable data to show whether the instruments had achieved their objectives effectively.
It concluded: ‘The commission was not able to show that it had evaluated and addressed the specific characteristics of rural development when designing this framework.
‘In rural development, unlike cohesion, for example, most potential beneficiaries were small farms, which were accustomed to non-reimbursable grants and the projects were also very small. Furthermore, the member state managing authorities had not had sufficient experience with types of funding other than grants.’
The commission plans to double spending on the Rural Development Programme for the 2014 to 2020 period, but the auditors warned that risks remained.
Kersti Kaljulaid, ECA member responsible for the report, said: ‘Financial instruments have a potential to improve the use of scarce public resources by providing funding for more investments with the same budget, but our audit results suggest that it will be a considerable challenge to achieve the desired impact.’
The ECA called on the commission to increase incentives for member states to set up financial instruments for rural development and identify any barriers.
