EU farm projects unreasonably costly, auditors say

The report assessed so-called non-productive investments (NPIs), which is funding that aims to have a positive environmental impact but is not necessarily profitable, such as repairing dry-stone walls, restoring wetlands and growing hedges.

Lack of monitoring

NPIs are a part of the EU's rural development policy. They are complemented by funding from member states. In the 2007-2013 budgetary period roughly €860 million was spent on NPIs, with €550 million coming from the EU budget.

According to the report, national governments have “reimbursed investment costs which were unreasonably high or insufficiently justified, making the NPI support not cost-effective”.

They funded costs “on the basis of unit costs which were much higher than the actual market costs, or did not appropriately verify the reality of the costs claimed, or accepted the most expensive offer for undertaking the investment without requiring justification from the beneficiaries or without comparing the proposed costs against benchmarks”.

Unlike many other EU grant schemes, beneficiaries of the NPI funds were able to have 100% of the costs reimbursed. This meant that “the beneficiaries of NPIs may have less incentive to contain their costs”.

The European Court of Auditors, which is not a court but the EU's auditory body, looked at a sample of 28 NPI projects in Denmark, Italy, Portugal, and the UK. Farmers in these four countries received 80% of the EU's contribution to the programme.

For 71% of the audited projects it found a clear achievement to protect landscape or biodiversity. But in 75% of the projects, the auditors found “clear indications of unreasonable costs”.

The researchers also found "several weaknesses in monitoring and evaluation that lead to an overall lack of relevant information showing the results achieved by NPIs”.

Weaknesses not corrected

Most of the money in Italy and Portugal, for example, went to the restoration of dry-stone walls. But because the authorities did not count the number of such walls, or the number that needed to be restored, before the projects were funded, there is not a clear picture of the programme's impact.

As is custom in Court of Auditors reports, the European Commission gave a rebuttal at the end of the report.

It said a balance needed to be found "between what can be done through monitoring and evaluation taking into account the risk of excessive administrative burden and the financial constraints. Collecting specific result indicators for NPIs can be burdensome."

The scheme has continued for another funding period (2014-2020), but according to the court: "Commission and the member states have not yet corrected most of the weaknesses identified by the court."

The commission noted that for the new funding period it had “strengthened the provisions and guidance regarding reasonableness of costs”.

However, it added that monitoring needs to be most applied to those parts of the EU budget where the risk of misuse is highest.

“Since the amount of funding for NPIs is relatively low, the priority is given to more financially important measures where weaknesses in management and control systems could have a bigger financial impact on the EU budget,” according to the commission.

But it also said it accepts many of the court's recommendations for improvement.

0.6 percent of agricultural budget

Following publication of the article, the European Commission contacted this website to say that the weaknesses highlighted by the Court of Auditors “concern mainly the management of the measures by member states”.

It said that for the new funding period, the new provisions and guidance will “ensure correct and efficient application of support for non-productive investments”.

But the commission also noted that “a balance needs to be found between what can be done through monitoring and evaluation taking into account the risk of excessive administrative burden and the financial constraints”.

“The particular investments audited by the Court account for roughly 0.6% (€614 million) of the Common Agricultural Policy (CAP) budget for Rural Development, for which 44,000 applications were submitted across the EU during the 2007-2013 period,” the spokesperson noted.

This article was updated on Friday 22 January 2016