GLOSSARY

Added value : In the context of this audit, the benefits resulting from the Leader approach such as better identification of local needs and local solutions, more engagement on the part of local stakeholders and greater scope for innovation.

Axis 4 : Rural development in the 2007–13 programming period is implemented under four axes, which are coherent groups of measures. Axis 4 is the Leader approach.

Deadweight : A situation where a subsidised project would have been wholly or partly undertaken without the grant aid.

LAG : Local action group, which is a local public–private partnership, responsible for proposing a local development strategy and selecting projects.

Leader approach : A method to achieve the objectives of the EU’s rural development policy through bottom-up implementation rather than the traditional top-down approach. "Leader" is a French acronym for "links between rural development actions".

Leader programme : A document prepared by a Member State and approved by the Commission to plan and implement the Leader approach. The first Leader programmes ran from 1991 to 1993 and were followed by Leader II (1994–99). This audit concerns Leader+ (2000–06) and Leader Axis 4 (2007–13), which was within the rural development programmes.

Measure : An aid scheme for implementing a policy. A measure defines the rules for the projects that can be financed.

Member State : In the context of this audit, the authorities in charge of the management of the Leader programmes. Member States designate a managing authority for this. Each region of Member States such as Germany, Spain and Italy has a separate programme and a separate managing authority.

Programming period : Multiannual framework to plan and implement EU policies such as rural development; the current period is 2007–13.

Rural development programme : A document prepared by a Member State and approved by the Commission to plan and implement the EU’s rural development policy.

Sound financial management : Fair and transparent management of the EU budget in accordance with the financial regulation and, in particular, the principles of economy, efficiency and effectiveness.

EXECUTIVE SUMMARY

I. Leader is a method to achieve the objectives of the EU’s rural development policy through bottom-up implementation rather than the traditional top-down approach. Compared with traditional methods of funding, the Leader approach involves higher costs and risks, owing to an additional layer of implementation, and giving the control of the EU budget to a multitude of local partnerships (LAGs: local action groups).

II. The justification for Leader’s additional costs and risks is the added value that should flow from the bottom-up and partnership approach — such as better identification of local needs and local solutions, more engagement on the part of local stakeholders and greater scope for innovation.

III. The Court examined whether the Leader approach has been implemented in ways that add value, while minimising the risks to sound financial management. The Court assessed the LAGs’ performance in implementing the 2000–06 Leader+ programmes, for which the final expenditure was in 2009. The Court also assessed the LAGs’ Axis 4 strategies, which set out their plans for implementing the Leader approach in the 2007–13 period.

IV. LAGs implemented the Leader approach in ways that limited the potential for added value in terms of the "Leader features" although the Court found some examples of good practice. The bottom-up approach was limited in the LAGs that gave the majority of the grants to their own member organisations; the potential added value of a partnership was not achieved in LAGs where the decision-making was dominated by the local authorities; few LAGs could demonstrate innovation or interaction between different sectors in their strategies or projects. LAGs did not focus on achieving the objectives of their local strategies.

V. The Court also found weaknesses in the soundness of the financial management by the LAGs. In particular, LAGs gave grants to projects without regard to efficiency. Procedures were not always transparent and did not sufficiently demonstrate that the LAGs took decisions on an objective basis, free from conflicts of interest. These weaknesses echo those observed by the Court in the Annual Report of 2000.

VI. The Commission and Member States have not been sufficiently demanding and share some responsibility with the LAGs for limiting the potential added value of the Leader approach. They have not taken sufficient action to limit the costs and risks. Ten years on from the Court’s previous audit of Leader, the same weaknesses persist.

VII. The Commission has not yet demonstrated the effectiveness or efficiency of the expenditure, the added value achieved through following the Leader approach, the extent to which the known risks have materialised or the real costs of implementation.

VIII. In view of the persistent weaknesses, the Court recommends that the Commission and Member States clarify and enforce requirements to reduce the risk of deadweight, ensure objective and properly documented project selection procedures, and that the partnership principle operates in practice. Robust procedures to avoid all risk of conflicts of interest are needed to comply with the financial regulation. This requires declarations of interest, non-participation in project assessment and selection, and referral of cases of potential conflict of interest to the managing authority.

IX. For the remainder of the 2007–13 period, the Commission should ensure that Member States require the LAGs to set measurable objectives, specific to their local area, that can be achieved by the Leader programme. The Member States should require LAGs to account for achieving their local strategy objectives, for achieving added value through the Leader approach, and for the efficiency of the grant expenditure and the operating costs.

X. Monitoring should be refocused on the added value of the Leader approach, efficiency and effectiveness, and be complemented by data from supervisory and control systems such that the Commission has sufficient, reliable and relevant data to account for the added value and sound financial management of the Leader programmes.

INTRODUCTION

1. Leader is the EU’s "bottom-up" method for implementing rural development policy. It is characterised by seven features (see Figure 1). Financial support is given to "local action groups" (commonly known as LAGs), to implement local development strategies, principally through giving grants to local projects [1] (see Annex for examples of the projects financed). LAGs are partnerships of public and private (or non-profit) sector members of small rural communities [2].

FIGURE 1

THE SEVEN KEY FEATURES OF THE LEADER APPROACH

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2. EU regulations set the policy objectives and legal framework. Member States determine national or regional programmes for implementing the Leader approach, which are approved by the Commission. The potential LAGs develop local strategies according to the national or regional requirements and apply to those authorities for funding. Member States are responsible for selecting the LAGs, paying the EU aid and national co-financing; and for the monitoring and control of implementation. LAGs are responsible for selecting the projects to be financed. In some Member States, LAGs select projects up to an annual financial allocation, with the processing of the grant applications and payment of the grants being performed by the national or regional authorities. Other Member States give LAGs responsibility for the entire process, with annual or multiannual budgets from which to pay the grants.

3. The first Leader period started in 1991 as a "Community initiative" and was followed by Leader II (1994–99) and Leader+ (2000–06) [3]. Although the Leader+ period nominally ended in 2006, project implementation and expenditure could continue until mid-2009. There were 893 Leader+ LAGs in EU-15 and 281 in the new Member States. The final EU contribution to the Leader+ programme will be around 2,1 billion euro.

4. From 2007 onwards, Leader has been integrated into the rural development regulation [4] as an alternative approach to achieve the objectives of the three "mainstream" axes of the policy (see Box 1).

BOX 1

THE FOUR AXES OF THE 2007–13 RURAL DEVELOPMENT POLICY

Axis 1 : measures with the objective of improving the competitiveness of agriculture and forestry by supporting restructuring, development and innovation.

Axis 2 : measures with the objective of improving the environment and the countryside by supporting land management.

Axis 3 : measures with the objective of improving the quality of life in rural areas and encouraging diversification of economic activity.

Axis 4 : use of the Leader approach to achieve the objectives of Axes 1–3.

5. The Commission approved most of the national and regional 2007–13 rural development programmes in 2007 and early 2008. By the end of 2009, Member States had selected over 2000 Axis 4 LAGs. The planned EU spending on the Leader axis during this programming period is around 5,5 billion euro (see Figure 2) [5], with national public co-financing an additional 3,4 billion euro.

6. The assumption behind the Leader approach is that there is an added value compared with traditional top-down implementation [6]. Bottom-up approaches and interaction between different sectors at local level should mobilise local potential. Local groups should be best placed to identify integrated and innovative local solutions to local problems and can be more responsive. Participation in local decision-making should generate enthusiasm and increased commitment and can thereby result in better, more sustainable, local rural development [7]. The community involvement achieved through the bottom-up approach can also lead to less tangible impacts, such as "capacity-building" and "empowering the local population" [8] (see Figure 3).

FIGURE 2

EU FUNDS PROGRAMMED FOR LEADER AXIS 4 (2007–13) BY MEMBER STATE

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7. LAGs represent an additional implementation layer, which entails certain costs. Delegating decision-making to the local partnerships also carries risks to the sound financial management of the EU funds in terms of fairness, transparency and accountability, as well as economy, efficiency and effectiveness. When the Court last audited the Leader programme, for the Annual Report 2000 [9], some serious weaknesses in financial management by the LAGs were identified: LAGs backdating grants resulting in a risk of deadweight; lack of transparency in project selection; potential conflicts of interest; high operating costs and lengthy procedures. The Commission replied that it was aware of the risks. Its principal response was to encourage good practice and sound financial management through guidance and the exchange of information [10].

FIGURE 3

ROLE OF LAGS IN THE IMPLEMENTATION OF THE LEADER APPROACH

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AUDIT SCOPE AND APPROACH

8. As indicated above, the Leader approach entails additional costs and risks in relation to more traditional, centralised methods of implementing the rural development policy but it also has the potential to deliver an added value through the seven Leader features. This leads to the audit question set by the Court: Has Leader been implemented in ways that add value, while minimising the risks to sound financial management?

9. The Court based the audit on:

audit questionnaires completed by a random sample of 202 LAGs in 23 Member States;

a review of documentation for 27 of these LAGs;

on the spot audit and case-study examples from 13 of these LAGs and over 60 projects that were typical of the range of projects funded by the LAGs concerned (see list of projects in Annex);

audit of the managing authorities of the 11 Leader programmes concerned, which together represent over 40 % of the EU funds programmed for the 2007–13 period;

audit of the Commission’s activities in relation to Leader.

At the time of the audit fieldwork in the first half of 2009, the LAGs had recently completed implementation of their 2000–06 Leader+ local development strategies [11] and had been selected by the Member States on the basis of their Axis 4 strategies, which set out their plans for implementing the Leader approach in the 2007–13 period. Except in Germany and Aragón (Spain), the LAGs had not yet started to implement their Axis 4 strategies.

10. The Court developed "good practice" criteria from the legislation and from Commission documents and publications [12]. The Court examined the selected LAGs’ performance against these criteria during the Leader+ period and in terms of their Axis 4 strategies. The audit was conducted on the premises of the LAGs to allow a review of all relevant documentation and discussions with LAG staff and members on the context and strategy followed. The selected projects were also checked on the spot and the project promoters interviewed.

Where weaknesses or good practices were identified, the related national or regional monitoring and evaluation information, procedures and control systems were assessed to determine whether the practices were typical. The Court assessed the Commission and Member States’ performance in the management, monitoring, evaluation and supervision of Leader on the basis of the national and regional programmes and operating rules as well as inspection results, implementation reports and evaluations. The audit included the Commission’s assessment of Axis 4 of the 11 rural development programmes concerned and the Member States’ selection of Axis 4 LAGs.

11. The observations are structured according to the main responsibilities as follows:

the LAGs’ implementation of the Leader features;

soundness of the LAGs’ financial management;

the Commission and Member States’ management of Leader programmes;

the Commission and Member States’ monitoring and evaluation.

TABLE 1

SELECTED LAGS AND BUDGETS FOR IMPLEMENTING THEIR AXIS 4 STRATEGIES

(million euro) |

LAG reference | Member State (region) | Axis 4 budget 2007–13 [1001] |

DE-BY | Germany (Bavaria) [1002] | 2,6 |

DE-MV | Germany (Mecklenburg-Vorpommern) [1002] | 5,4 |

IE | Ireland | 14,6 |

EL | Greece | 6,5 |

ES-A | Spain (Aragón) | 7,1 |

ES-CM | Spain (Castilla-La Mancha) | 3,9 |

FR (PL) | France (Pays de la Loire) | 1,5 |

FR (LR) | France (Languedoc-Roussillon) | 3,2 |

IT-TOS | Italy (Tuscany) | 7,6 |

HU | Hungary | 5,9 |

PL (WP) | Poland (Pomorskie) | 4,3 |

PL (WŚ) | Poland (Świętokrzyskie) | 2,1 |

PT | Portugal | 6,0 |

OBSERVATIONS

THE LAGS’ IMPLEMENTATION OF THE LEADER FEATURES TO ACHIEVE ADDED VALUE

LAGS HAVE IMPLEMENTED THE LEADER APPROACH IN WAYS THAT LIMIT THE POTENTIAL FOR ADDED VALUE IN TERMS OF THE "LEADER FEATURES", ALTHOUGH THE COURT FOUND EXAMPLES OF GOOD PRACTICE

BOTTOM-UP APPROACH

12. The bottom-up approach aims to encourage participation in the local rural development by involving the local community, economic and social interest groups and representatives of public and private institutions. The local community should be involved in identifying the most relevant local strategy and implementing the activities (projects) needed to achieve the local strategy objectives.

All LAGs obtained a degree of local community involvement but some LAGs gave most of the Leader+ grants to their own members’ organisations

13. LAGs informed the local community on the possibilities for project grants by various means: at public meetings and events, by leaflets and publications, the LAGs’ Internet sites, and through the LAGs’ members. In this way, the LAGs not only responded to existing demand for grants but also potentially encouraged other local actors to consider new investments or other projects. The LAG in Tuscany (Italy), for example, had an information point in the local chamber of commerce. The Leader programmes were also publicised through local press coverage and by plaques displayed at the site of projects. In Hungary, the LAG heightened the awareness of Leader by signs at the entrance to each village.

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Picture 1: Hungary — Signs announcing that the village participated in the Leader programme

14. All LAGs also had local offices, where staff assisted project promoters in preparing their grant applications [13]. This "free consultancy service" was an important factor in encouraging grant applications as inexperienced promoters of small projects, in particular, may otherwise have been dissuaded by the lengthy and complex procedures (see paragraph 70).

15. While many projects were straightforward grants for investments, studies or events, some LAGs were also proactive in working with local actors to discuss and develop more strategic projects from the first ideas. In Mecklenburg-Vorpommern (Germany), for example, the LAG established working groups, called "innovation teams" to guide and support promoters of the more complex projects. The LAG in Ireland employed "development officers", whose job was to actively search for and develop project ideas that would help achieve the strategy objectives (see Box 2).

BOX 2

ROLE OF PROJECT DEVELOPMENT OFFICERS IN THE LAG IN IRELAND

Development officers were responsible for analysing, identifying and developing, stimulating and promoting activities and initiatives. The "food sector" officer, for example, was responsible for developing and marketing the regional brand for local food products; development of alternative agriculture initiatives, etc. The officer maintained an active blog; organised and attended meetings and events; and encouraged and assisted the development of projects by food-sector professionals.

16. All of the audited LAGs awarded grants to projects promoted by their own member organisations. The Leader+ programme implemented by the LAG in Bavaria (Germany) involved just 12 different project promoters, of which six were directly connected with the LAG. In six of the 11 Leader+ LAGs, such grants represented from 50 % to over 90 % of the total (see Figure 4). This reduced the grants available for the wider community, limiting their possibilities to become involved through running projects.

FIGURE 4

GRANTS AWARDED TO LAGS AND THEIR MEMBER ORGANISATIONS [14]

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17. All LAGs involved the local community in developing the Axis 4 strategies, to varying degrees. The LAGs in France (Languedoc-Roussillon) and Bavaria organised thematic workshops in a participatory process to identify the local area’s strengths, weaknesses, opportunities and threats (SWOT) and to debate the strategy. All LAGs held public meetings to explain the Leader programme and receive ideas for projects but in Tuscany, Ireland, Portugal and Castilla-La Mancha (Spain), it was not evident how, or if, the consultation had influenced the LAGs’ SWOT analysis or the determination of local strategy objectives. The consultation served primarily to stimulate and assess the level of demand for the different measures and to collect project proposals.

LOCAL PUBLIC–PRIVATE PARTNERSHIPS

18. One of the key features of the Leader approach is that decisions should be made not by public authorities but by a wider local partnership, where the local government is included but does not have a majority vote [15]. Involvement of the community can be enhanced by allowing all interested local parties to participate in the LAG and by ensuring that all the key local actors are represented.

LAGs did not always achieve an effective public–private partnership

19. The LAGs in Poland and Aragón were associations with open membership policies whereby any interested local resident or organisation was encouraged to join. The LAG in Aragón, for example, had around 500 members (see Table 2). By contrast, the LAG in Greece had a smaller, invited membership, potentially excluding other local organisations and residents that could have brought additional input to the partnership (see Box 3).

TABLE 2

MEMBERSHIP OF THE LEADER+ LAGS

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BOX 3

COMPOSITION OF THE LAG IN GREECE

The Leader+ LAG had an invited membership with a small number of local actors represented and a structure that may allow the public sector to influence the decision-making. It was organised as a company with 15 shareholders and the local municipalities held 97 % of the share capital. The Board, which consisted of nine representatives of the main municipalities (in most cases the mayors), selected a committee to decide on project applications. This committee consisted of representatives of three of the municipalities and four other organisations: the chamber of commerce, an association of organic farmers, a women’s association and a research organisation.

20. Membership of all the audited LAGs included different sectors and groups, commonly representatives of the local authorities, tourism and farming sectors and small business. All LAGs included female members in the decision-making committees. Young people are a key target group of the EU’s rural development policy and their involvement in the decision-making process can ensure that their needs and opportunities are properly considered and that appropriate solutions are implemented. Only seven of the 13 Axis 4 LAGs had youth representation in their membership (and on the decision-making committee only in the LAGs in Spain and Hungary). Other LAGs stated that there were no youth organisations in their area, but had not taken any specific action to involve young people in the LAG.

21. In all the LAGs, the decision-making committee had no more than 50 % public-sector members, as required by the regulation. Only the LAGs in France had internal rules requiring a "double quorum" whereby the "private" sector members should represent at least 50 % of the votes in each decision-making meeting (although this rule was not always followed).

22. The Court identified a number of other cases where the Leader principles were not strictly followed. In France (Languedoc–Roussillon), the chair of the Leader+ decision-making committee held the casting vote, effectively giving the public sector a majority. The "private" membership of the committee of the LAG in France (Pays de la Loire) was largely composed of associations created by the local public authorities (see Box 4). This committee proposed projects to the Syndicat of local authorities, which took the final decision on project grants.

BOX 4

MEMBERSHIP OF THE LAG IN FRANCE (PAYS DE LA LOIRE)

The LAG undertook an internal evaluation, which reported that "the composition of the decision-making committee raises the problem of the representivity of the ensemble of local actors. The private partners are almost all from the associations of the "Pays" (a grouping of local communes). Each of these associations is presided by an elected member (of the communes). Even though these associations have a deep knowledge of the problems facing the local area, ... it would have been useful to integrate local business managers or associations that were not connected to the Pays. Moreover, neither the Chamber of Commerce and Industry or the Chamber of Trade was represented; only the Chamber of Agriculture had a representative on the decision-making committee."

23. On occasions, the LAG in Portugal took decisions on just a few votes from the local councils alone (see Box 5) [16]. In such cases, the potential added value of a partnership in decision-making was not being achieved.

AREA-BASED LOCAL DEVELOPMENT STRATEGIES

24. In the area-based approach, LAGs should define and implement a development strategy on the basis of their area’s own particular situation, strengths and weaknesses. To achieve the full potential of this, LAGs should translate their specific needs and opportunities into local objectives and implement their strategies with a focus on achieving those objectives.

25. The LAGs’ objectives should define precisely the local outcomes that they plan to achieve with their strategies, thus providing a clear framework and guidance for the day-to-day management of the programmes and a basis for performance management and accountability.

BOX 5

LAG IN PORTUGAL: PARTICIPATION IN VOTING

The LAG’s decision-making committee consisted of representatives of the three municipalities (who rotated the functions of President, Vice-President and Treasurer), a cultural association, an association of small businesses, an association of local industry and an agricultural association.

The Court’s auditors examined the minutes of the eight meetings at which the selected projects were approved. In three of the meetings, there were equal numbers of members from the municipalities and from other backgrounds. At the other five meetings, the three municipalities were in the majority. On two occasions, the LAG selected projects on the votes of the three municipalities alone.

LAGs did not have a strong focus on achieving local (area-based) strategy objectives

26. The LAGs’ Leader+ local strategy objectives were not specific, measurable and achievable within a set time frame. Most were so general that they could apply to any rural area (see example in Box 6). Objectives such as "to combat the rural exodus and the abandonment of traditional agriculture" (LAG in Portugal) could have been measurable, but were not so in practice as there were no baselines establishing the initial situation or targets showing the situation to be achieved. Objectives were expressed in open-ended terms. An example is "to promote the identity of the area by improving and promoting local services and products" (LAG in Greece), which describes what the LAG intends to do, not a situation it aims to achieve.

27. The LAGs did not show a strong focus on achieving objectives. In France (Languedoc-Roussillon), for example, the Leader+ strategy’s central objective was to use new technologies to improve the competitiveness of the rural area. When the possibility of obtaining co-financing from a national programme for tourism projects arose, the LAG added a new expenditure measure to finance facilities such as a mountain-biking centre.

BOX 6

LAG IN MECKLENBURG-VORPOMMERN: EXAMPLE OF LOCAL STRATEGY OBJECTIVES

Four objectives were set:

(1) improving the attractiveness of the area;

(2) networking of the tourism regions;

(3) new services and employment activities;

(4) improvement of the regional economic structure through being open and encouraging new opportunities to create jobs.

Each of these was followed by a section headed "objective/strategy", which described the situation and what the LAG intended to do, in general terms, such as "to support initiatives to qualify and train women and young people". There were no specific statements about what was expected to be achieved through implementing the strategy. No baselines or targets were set for the strategy objectives.

28. Local strategy objectives were not a determining factor in project selection (see Box 7). As an example, the LAG in Portugal planned to finance tourism facilities "linked to the strong territorial themes" of the strategy: the confluence of the local culture and the rivers. The LAG awarded a grant to a go-kart centre for the purchase of additional karts and timing equipment, with no obvious territorial theme.

BOX 7

LAG IN PORTUGAL: PROJECT TO PURCHASE ROAD SIGNS

One of the LAG’s objectives was the study, development and promotion of themed tourist routes. The LAG used the budget for the corresponding measure to award a grant to the municipality to purchase road signs, including traffic instructions such as "Stop!" signs, and to mark out white lines in the centre of local roads and in car parks. Some of the road signs indicated the directions to individual tourist attractions, but the project did not create any themed tourist routes as such.

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29. The LAGs in Greece, Tuscany, and Spain [17] implemented their strategies in terms of "measures" defined by the Member State to classify similar projects for budgetary management and reporting purposes. For example, the LAG in Greece had measures such as "investment support for entrepreneurs". This was subdivided into "rural tourism projects", "modern technology projects", etc. Each of these was further classified into "actions" such as "provision of tourist accommodation". This facilitates monitoring and control of the LAGs’ activities, but also carries a risk that LAGs implement the expenditure measures (by assessing and selecting projects according to their eligibility) without regard to the local strategy objectives.

30. The LAGs advertised for project proposals that met the eligibility conditions for a given measure, rather than advertising for projects that would achieve a specific objective of the local strategy. The LAGs assessed the "compliance" or "coherence" of the project proposal with the strategy but, as the objectives were so broad, it was practically impossible to eliminate an eligible project unless the measure was oversubscribed. Even when output targets had been met, LAGs continued to award grants [18].

31. Monitoring and reporting further reinforced the measure-focus: LAGs monitored, analysed and reported the projects implemented in relation to each expenditure measure, but did not collect data on or assess whether the local strategy objectives were met.

32. The LAG in Ireland, for example, published a review of its achievements at the end of the Leader+ programme. This review contained a section entitled "what we promised", which listed the strategy objectives. The following section was "what we delivered", which described the projects implemented. These were grouped by measure, such as "training projects". There was no identification of what was done — or what was achieved — in relation to the strategy objectives. The LAGs in France and Germany, which were not required to follow national or regional measures, also reported in terms of the projects implemented but not the objectives achieved [19].

33. At the time of the audit, most LAGs had not yet established their project selection criteria or monitoring and evaluation systems for the 2007–13 programming period but from the information available, LAGs have not planned significant changes. The LAGs’ Axis 4 strategies also lack specific local objectives and all but one of the Member States impose the use of common measures (see paragraph 84).

INNOVATIVE AND MULTISECTORAL APPROACHES

34. Leader is intended to be an innovative approach. LAGs should design and implement their strategies in a way to mobilise and deliver local rural development through innovative responses to old and new rural problems. LAGs can add value by doing something different to other programmes or the activities of the local authorities. Projects that are within the normal activities of local authorities, or are eligible for other programmes should therefore only be financed by Leader programmes in exceptional circumstances, duly justified in terms of a specific strategic need.

35. Another distinguishing feature is that the Leader approach should include the multisectoral design and implementation of the strategy, based on interaction between actors and projects of different sectors of the local economy.

LAGs could provide little evidence of innovation or interaction between sectors in their strategies or projects. LAGs financed projects that were little different to those of other EU programmes or that corresponded to the normal activities of local authorities

36. Interaction between actors of different sectors occurred within the LAG partnership, as described in paragraphs 18 to 23, but not to a significant extent in the LAGs’ strategies or projects. Some LAGs could demonstrate examples of interaction, such as in Ireland where the strategy brought together producers, retailers and the tourism sector in the marketing of local products. However, most LAGs awarded grants to independent projects supporting promoters in their normal activities (see Annex).

37. In Leader+, most LAGs had explicit criteria to assess project proposals for innovation or pilot character (see Table 3) [20]. Despite these criteria, LAGs approved projects that did not show strongly innovative characteristics. In Greece, for example, the grant application forms described innovative or pilot characteristics of the planned investments in restaurants, guesthouses, metal works, wineries, etc. but these characteristics did not exist in practice (see Box 8).

38. In Tuscany, the LAG called for project proposals for the measure "support to enterprises for process and product innovation". The LAG received a proposal by an apple producer for a project that consisted mainly of purchasing standard fruit crates, which the LAG classified as an "innovative investment for reducing production costs and facilitating harvesting and packaging" on the basis that it was "innovative for the company itself". This classification gave the project 7 out of a maximum 10 points for innovation. The LAG in Hungary assessed project proposals for "innovation and novelty" and awarded the maximum points to all six of the projects examined. One project was for a guesthouse to upgrade its facilities — including purchasing bicycles for the guests to use, which represented a new facility in the local area. This was not the case for the project to prepare plans for paving a dirt road to the promoter’s vineyards; or for the project to reinforce the walls of a parsonage because of subsidence.

TABLE 3

SELECTION OF INNOVATIVE PROJECTS

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1 The LAGs in France and Germany did not document any assessment of projects against selection criteria. The LAG in Ireland did so but did not allocate points.

39. The Court observed in the 2000 Annual Report that LAGs gave grants to projects that could have been financed under other programmes. The Commission replied "… it may be appropriate to finance under Leader certain individual projects that when viewed in isolation should be eligible under the mainstream programmes, where these projects are an essential element for the realisation of a particular local action group’s innovative development programme".

40. Most grants were for small projects, thereby distinguishing Leader from other EU funding programmes. The LAG in Ireland, for example gave grants ranging from under 1000 to a maximum of 65000 euro. However, eight of the 11 Leader+ LAGs financed projects with a total cost of 200000 euro or more (see list of projects in Annex). Investments in wineries, olive oil mills, village renewal projects, etc. would have been eligible for other EU funding programmes. In these cases, the LAGs could show that the projects were coherent with their strategy, but given the lack of specific local objectives (see paragraph 26), LAGs could not show that the projects were essential.

BOX 8

"PILOT CHARACTER" OF PROJECTS APPROVED BY THE LAG IN GREECE

In all of the six private-sector projects audited, the application forms justified the pilot nature of the proposal in terms of networking activities. The forms were all completed by consultants. However, the project promoters interviewed had not participated in any such activities. The promoter of the metal workshop project, for example, did not know of the local small enterprises network and was unaware that his project proposal involved participation.

Furthermore, the grant application described the project as being consistent with the LAG’s local strategy as it concerned traditional wrought iron products that helped preserve the traditions and character of local buildings. In practice, the applicant’s business almost entirely consisted of modern designs in aluminium.

41. Furthermore, the potential for added value of the Leader approach is reduced if it merely acts as an additional funding source for normal local government activities. While mandatory tasks, such as education, were, in principle, excluded, all of the LAGs awarded grants for projects promoted by the local authorities, with the exception of the LAG in Ireland (see Box 9 and the list of projects in Annex). Some of these projects had already been completed before the application for a Leader grant (see Box 10, for example), in which case the grants served only to supplement the local authorities’ budgets.

BOX 9

EXAMPLES OF LEADER+ GRANTS TO LOCAL AUTHORITIES

LAG in Castilla-La Mancha : One of the municipalities that was a member of the LAG promoted a project for enclosing a children’s playground. The project consisted of constructing a rustic-style brick wall topped with a metal fence at a cost of 36 000 euro (of which 26 500 Leader grant from the EU, and 500 euro from the national and regional authorities).

LAG in Greece : One of the municipalities that was a member of the LAG promoted a project for renewing the drainage and resurfacing of the town-centre streets and pavements. The Leader+ funding (211 000 euro) covered the costs for a small area. The municipality obtained national financing for a total amount of 1,4 million euro to complete the project for the remaining streets.

BOX 10

EXAMPLES OF GRANTS TO COMPLETED PROJECTS

LAG in Tuscany : Project "services to the citizen and the local territory". The LAG published a call for project proposals in May 2004 and decided at its meeting of 12 July 2004 to award a grant of 121 470 euro to a consortium of municipalities (which was a member of the LAG’s decision-making committee). The grant agreement was dated 20 September 2004. The project, which concerned a 24-hour public veterinary service and information and licensing for hunting, fishing and mushroom picking, had started in February 2001, with the final invoice dated 5 July 2004.

LAG in France (Pays de la Loire) : A group of communes (of which the president was a member of the LAG), undertook a project for the computerisation and networking of library records. The paying agency’s inspection report states "at the date the project application was made … the IT equipment was almost complete, the cataloguing had been done and the staff were being trained in using the software. … At the date the LAG selected the project, there remained an invoice of 91,20 euro to be paid".

42. At the time of the audit, implementation of Axis 4 had not started in most of the audited LAGs. However, the strategies contain few specific commitments to innovation or to obtaining interaction between the sectors.

NETWORKING AND COOPERATION PROJECTS

43. Networking involves the exchange of experience and aims to transfer good practice, disseminate innovation and build on lessons learned. Cooperation projects — where two or more LAGs participate — can further add value through critical mass and complementarity, making it possible to achieve outcomes that a LAG could not achieve alone.

LAGs did not all fully participate in networking and cooperation projects

44. All LAGs at least participated in meetings with other LAGs in the regional or national networks, although these meetings largely concerned organisational issues. The LAG in Ireland was particularly active in attending seminars, visiting and receiving LAGs from other Member States. The LAGs in Mecklenburg-Vorpommern, Ireland and Portugal contributed good-practice examples of projects to EU publications and databases.

45. All LAGs participated in cooperation projects, with the exception of the LAG in Hungary. LAGs in France, Tuscany and Greece encountered organisational difficulties, particularly regarding different procedures applied under different regional or national Leader programmes. Some of the activities financed related to visits, exchanges and conferences rather than the joint implementation of a project. The LAG in Castilla-La Mancha used the cooperation projects' budget to pay its subscription to the regional network of LAGs and to develop a document management system in preparation for the 2007–13 period. Such expenses should have been financed from the LAGs’ running costs’ budgets.

46. Except in Castilla-La Mancha, Hungary and Portugal, the LAGs’ Axis 4 strategies gave details of planned cooperation projects. There were few specific details for planned networking activities.

SOUNDNESS OF THE LAGS’ FINANCIAL MANAGEMENT

LAGS DID NOT HAVE DUE REGARD TO THE NEED FOR EFFICIENCY OR FAIR AND TRANSPARENT PROCEDURES

EFFICIENCY OF THE GRANT EXPENDITURE

47. LAGs spend the EU budget by awarding grants to projects. Consequently, they should ensure that the grants represent the most efficient use of the public funding [21].

LAGs did not seek to maximise the efficiency of the grant expenditure

48. One of the risks to the efficiency of any grant programme is that the promoter may have undertaken the project anyway, without the grant, which results in "deadweight": the grant does not achieve an additional effect. LAGs should be better placed than "top-down" programme managers to assess the risk of deadweight because of their local knowledge and contacts with the promoter in preparing the grant application.

49. A strong indication of deadweight is if the promoter has already started a project before the LAG decides whether to award a grant or not. Except in Germany, all LAGs awarded grants to such projects. Either the project promoters concerned were prepared to undertake the project without the grant aid (which indicates deadweight), or they had been promised a grant in advance of the project assessment and decision procedures.

50. Only the LAG in Ireland had procedures to assess project proposals for the risk of deadweight (although even there, documentation of the checks made was inadequate). Other LAGs treated the start date of the project as a simple question of eligibility.

51. Each Member State applied different eligibility rules. In Greece, Ireland, Spain and Hungary, projects were eligible from the date of grant application. In Portugal, projects could commence 90 days before the application. In France and Tuscany, the rules only required that the project should not be finished at the date of grant application [22]. The LAGs considered that this condition was met as long as the project promoter had not paid the final invoice of the project costs, even if the project was physically complete (see Box 10).

52. Furthermore, the LAGs in France and Tuscany openly favoured projects that were already completed, as the grants could be approved and paid within a short period, without the risk of delays (see Box 11). In this way, the LAGs could avoid "decommitments": the procedure in which some Member States cancelled the unspent balance of LAGs’ budgets at the year-end.

BOX 11

EXAMPLES OF LAGS FAVOURING COMPLETED PROJECTS

LAG in Tuscany : The LAG’s call for proposals for the "renovation and improvement of villages" set the project selection criteria, with a maximum of 30 points available. One criterion was for the "readiness" of the project, with a maximum of 12 points to be awarded if the promoter could complete the final project payments within 30 days of submitting the project proposal.

LAG in France (Languedoc-Roussillon) : A university association (which was a member of the LAG) undertook a project to renovate and open to the public an old arboretum, for which the final expenses were incurred in August 2008. The LAG selected the project on 16 September 2008 and signed the grant agreement on 1 October. The minutes of the LAG meeting explain that, in order to use up the remaining Leader+ budget, it was necessary to select already-completed projects so that the grants could be paid out before the end of October.

53. A further risk to efficiency is that promoters may not seek to implement the projects at the lowest costs consistent with the necessary quality. This risk is increased when the grant represents a high proportion of the project costs (some LAGs awarded grants at 80 % or even 100 % of project costs [23]). A risk also exists that invoices may be artificially inflated. Only the LAGs in Ireland, Greece and Tuscany had satisfactory procedures to assess the reasonableness of project costs for public- and private-sector projects.

54. The most efficient grant would be the minimum amount necessary to make a project viable and ensure that the desired outcomes are achieved. However, many LAGs gave all projects the same percentage grant (up to the maximum amount eligible) regardless of the likely profitability of the project or availability of other financing [24].

55. The LAG in France (Pays de la Loire) increased the grant rates at the end of the Leader+ period to ensure that it fully spent its budget. This resulted, for example, in a local authority that had applied for a grant of 12000 euro for the computerisation and networking of library records being awarded a grant of over 25000 euro for the same project.

FAIR AND TRANSPARENT PROCEDURES

56. LAGs commit public funds when selecting projects, but are not democratically accountable. Consequently, there is a need for a high degree of transparency and for LAGs to be able to demonstrate that they have consistently followed proper procedures.

Procedures did not sufficiently mitigate the specific risks that stem from the delegation of decision-making to the LAGs

57. Only the LAGs in Mecklenburg-Vorpommern and France (Pays de la Loire) published minutes of project selection meetings on their websites. However, most LAGs published lists or details of some or all projects implemented by the end of the programme.

58. The LAGs in Germany and France did not have any formal documented project assessment procedures. Minutes of the decision-making committees gave brief résumés of what was discussed in some cases, but did not consistently show the factors that were taken into account. The LAGs in Greece, Portugal, Spain, Hungary and Tuscany assessed projects in a comparative way by scoring project proposals against standard project selection criteria, which represents good practice, but the basis for the scores was not documented in most cases, and there were apparent inconsistencies (see Box 12). No LAGs documented the project assessments and selection process sufficiently to allow the soundness of the decisions to be reviewed.

59. Given the local nature of LAGs, one of the greatest risks for efficiency, the added value of the Leader programmes and for the reputation of the EU is that of a conflict of interests, whereby a project promoter may influence the project selection decision in their favour. The risk is heightened in LAGs that do not have transparent, objective and well-documented procedures, as illustrated above.

BOX 12

ASSESSMENT OF THE EMPLOYMENT EFFECT OF PROJECTS BY THE LAG IN PORTUGAL

The LAG gave a score to each project proposal but had no documentation of its assessment of selection criteria such as "maintenance and creation of employment". Consequently, it was unable to explain the apparent inconsistencies. For example, the project proposal "investments in a honey packaging plant" involved creating two new jobs. The LAG awarded the proposal five points for the employment criterion.

Two further proposals (both promoted by LAG member organisations) were also awarded five points: "purchase of camcorder and projector for a cultural association", which claimed to contribute to maintaining one existing job; and the municipal road signs project (see Box 7), which did not involve the creation or maintenance of employment.

60. The risk occurs most directly when the project promoter is a member of the LAG’s decision-making body. Also in small LAGs, a LAG member has the opportunity to influence the decision even without participating in the voting. The Greek authorities prohibited LAGs awarding grants to LAG staff or members, to surrogate natural or legal entities or to spouses and first degree relatives. None of the other LAGs had such rules. The rule in Greece did not apply to LAG members in their capacity as representatives of public or non-profit organisations, although grants awarded in such cases were limited to 25 % of the LAGs’ budget.

61. All of the audited LAGs gave grants to their own member organisations (see paragraphs 24 to 33). These grants were not treated as exceptions. LAGs had different internal rules for their decision-making committees (see Box 13). These fall short of the requirements of the EU financial regulation [25]. In particular, the rules in some LAGs concerned only members directly promoting a project and required only abstention from the vote.

BOX 13

ASSESSMENT OF LAGS’ PROCEDURES TO AVOID CONFLICTS OF INTEREST (LEADER+)

Background

Members of the decision-making committee should not award grants in situations where they have a "shared interest" with the project promoter in the terms of Article 52(2) of the financial regulation.

A shared interest is likely to exist in particular with projects promoted by members of the LAG management structure or decision-making committee, as the LAG’s assessment of the project proposal may be influenced (even unconsciously) by the relationship with the project promoter. This applies whether the LAG member is promoting the project in a personal capacity or representing a public or private organisation.

Criteria

1. If a member of the LAG’s assessment or selection decision-making committee has any professional or personal relation with the project promoter, or any professional or personal interest in the project, they should make a written declaration explaining the nature of the relationship/interest, which should form part of the project file. Any shared interest should be declared, including family, emotional, political and economic interests, as per the financial regulation.

2. The member concerned should not participate in any way in the assessment or selection process, and should not be present during discussion of the project proposal. This should be documented in the minutes.

3. Where there is a shared interest, LAGs should refer the matter to the managing authority in accordance with the financial regulation.

+++++ TIFF +++++

62. Documentation of the voting was inadequate in five of the 11 Leader+ LAGs, as the minutes of the decision-making committees did not always show who was present and who voted (see Box 13). In Bavaria, Tuscany and the LAGs in France, the minutes show occasions on which the project promoter participated in the discussion of the project and in the voting (see Box 14).

63. The examples described in this report show projects that were only loosely related to the strategy objectives, projects that had already been completed and projects that subsidised normal local government activities. Most of these projects were promoted by the LAGs’ own member organisations (see Boxes 7, 9, 10, 11, 12 and 14). The weaknesses observed highlight the risk that the LAG members may have directly or indirectly influenced the decisions in a way that resulted in an ineffective or inefficient use of the EU budget.

BOX 14

LAG IN BAVARIA: NON-RESPECT OF VOTING RULES

The project to construct a swimming lake was included in the LAG’s strategy with a Leader contribution of 150000 euro.

+++++ TIFF +++++

The actual Leader contribution was 1,03 million euro: almost 50 % of the LAG’s total budget. Although the LAG’s rules of procedure required a quorum of six members to take decisions, documentation showed that only four voted when approving the project. The names of the people present were not recorded except for the chairman of the LAG, who was the mayor of the town promoting the project. According to the Bavarian Leader+ operating rules, LAG members were not allowed to discuss and vote on projects in which they had an interest and this abstention had to be documented. In response to the Court’s observation, the Bavarian authorities replied that they consider the mayor’s participation acceptable as he did not have a personal interest in the project.

OPERATIONAL EFFICIENCY

64. LAGs incur running costs: staff salaries, offices, travel, publicity, etc. In the interests of efficiency, these should be limited and kept within the budgets approved by the managing authorities. Having local staff in local offices dealing with a small number of projects should also permit LAGs to be more responsive than would be possible in a nationally or regionally-managed programme. This should result in more rapid processing of grant applications and payments and less need for bureaucratic procedures.

The administrative requirements at local level have resulted in significant operating costs, voluminous paperwork and delays

65. The non-project costs incurred by the audited LAGs vary from 12 % to 32 % of the publicly-funded expenditure in Leader+. The costs budgeted by the LAGs for the 2007–13 programming period range from 6 % to 28 % (see Figures 5 and 6).

66. The data above includes LAG costs for "animating the territory" (stimulating local interest) [26]. LAGs generally classed the work done by their staff in encouraging project proposals as animation. Some LAGs also considered the time spent assisting project promoters to make their grant applications, and time spent monitoring and reporting on project implementation as animation. Several LAGs did not distinguish animation costs from administrative and management costs and the others made an arbitrary apportionment of staff time.

67. Most LAGs nominally remained within their Leader+ running costs’ budgets although, due to low levels of implementation in LAGs such as Hungary, this represented a higher percentage of total expenditure than originally planned. The LAG in Ireland exhausted its running costs’ budget and used its animation budget and additional funding from the managing authority to cover the costs. The LAG in Castilla-La Mancha used the cooperation budget for running costs (see paragraphs 43 to 46). Other LAGs had to use their own funds.

FIGURE 5

NON-PROJECT COSTS AS A PERCENTAGE OF LEADER+ PUBLIC EXPENDITURE (INCLUDING ANIMATION)

+++++ TIFF +++++

+++++ TIFF +++++

+++++ TIFF +++++

+++++ TIFF +++++

| Animation costs | | Running costs | | Total |

FIGURE 6

NON-PROJECT COSTS (INCLUDING ANIMATION) AS A PERCENTAGE OF LAGS’ AXIS 4 BUDGETS

+++++ TIFF +++++

+++++ TIFF +++++

+++++ TIFF +++++

+++++ TIFF +++++

| Animation costs | | Running costs | | Total |

68. Operating costs do not necessarily represent ineffective expenditure. For example, the LAG in Ireland had high costs for animation because it employed 2,5 full-time equivalent project development staff, who were very active in stimulating the local rural development (see paragraph 15).

69. In addition to the above issues, the data cannot be used to compare efficiency between different programmes due to the different responsibilities of the LAGs in processing project grant applications and payments. In Hungary, the LAG had no formal role in the process once it forwarded the list of proposed projects to the managing authority, which was responsible for the checks on eligibility, the grant decision, grant agreement and all stages of monitoring project implementation, reporting and payment. By contrast, the LAG in Ireland was responsible for the whole process from developing the project to checking implementation and making the grant payments.

70. In practice, implementation of Leader+ was overly bureaucratic: most LAGs required long and detailed grant application forms with multiple annexes and supporting documents even for the smallest projects (see Box 15), although it should be noted that the procedures were almost all defined by the Member State authorities, not the LAGs. LAG staff assisted promoters with the administrative process, but even with this help, a survey of project promoters by the LAG in France (Languedoc-Roussillon) found that 47 % considered the process of applying for a grant to be "relatively difficult".

71. Data available on the time taken for approval of grant applications and payments was not complete or consistent, but shows that most LAGs took several months to process the files [27]. In contrast, on occasions the LAG in Ireland received and processed the payment request and made a payment to the promoter on the same day. Delays in Hungary were caused by incomplete or inaccurate applications for project approval and for payments, indicating that the procedures may have been overly complex for an aid scheme targeted at small-scale local projects.

BOX 15

EXAMPLES OF OVERLY BUREAUCRATIC PROCEDURES

LAG in Greece : Potential promoters had to complete an application of around 22 pages and submit 15 supporting documents including proof of age, proof that military service had been completed, proof that he was not a civil servant, proof that he was not retired on ill-health grounds, etc. Incomplete applications were rejected. The guide for promoters for the payment request amounted to 32 pages.

LAG in Hungary : The application for the parsonage project amounted to 60 pages for a grant of around 4 500 euro. Another project application contained 126 pages for a grant of around 5 400 euro.

+++++ TIFF +++++

The LAG took seven months to process and submit the project applications to the regional paying agency for checking and approval. The total period from application to signature of the contract for the six project files examined was between 11 and 16 months.

THE COMMISSION AND MEMBER STATES’ MANAGEMENT OF THE LEADER PROGRAMMES

THE COMMISSION AND MEMBER STATES WERE NOT SUFFICIENTLY DEMANDING AND SHARE SOME RESPONSIBILITY WITH THE LAGS FOR LIMITING THE POTENTIAL ADDED VALUE OF THE LEADER APPROACH. THEY HAVE NOT TAKEN SUFFICIENT ACTION TO LIMIT THE COSTS AND RISKS

COMMISSION AND MEMBER STATES’ REQUIREMENTS FOR LEADER+

72. The added value of the Leader approach is not obtained by the Commission or the Member States — but through the activities of the LAGs. Similarly, the primary responsibility for sound financial management lies with the LAGs, as they take the decisions on spending the EU budget. The Commission and Member States can give guidance to the LAGs and should ensure that the legislation, operating rules and management systems set the minimum standards required; create the right incentives for the LAGs to add value and achieve sound financial management; and avoid obstacles and disincentives.

Member States did not set or enforce effective minimum requirements for sound financial management and the Leader approach, despite the Commission’s encouragement

73. The risks to sound financial management described in this report are well known — not least from the Court’s Annual Report 2000, which noted similar weaknesses: LAGs backdating grants resulting in a risk of deadweight; lack of transparency in project selection; potential conflicts of interest; high operating costs and lengthy procedures.

74. At the time, the Commission replied to the Court’s observations that it "encouraged the use of open and transparent procedures"; "encouraged LAGs to grant a level of aid appropriate to the circumstances of each project"; had "raised the question of payment delays with the Member States"; "invited" Member States to limit Leader+ operating costs to 15 % of the LAGs’ total budget; and that the Structural Funds’ implementing regulation introduced limits that should avoid grants being awarded to projects that were completed before the grant application was made.

75. The Commission established a Leader+ Observatory with a contact point, which organised and promoted seminars, produced publications and maintained databases. These activities aimed at sharing best practice between the LAGs and supporting the managing authorities and the national or regional networks.

76. The legislation set few requirements at EU level for Leader+ other than the general eligibility conditions, reporting and control systems that applied to all Structural Fund expenditure. Member States (or regions) developed their own arrangements and operating rules, which the Commission approved at the start of the Leader+ period.

77. Each Member State set different requirements for the LAGs to follow (see Box 16). For example, the Irish authorities required LAGs to assess project proposals for deadweight and displacement, but other managing authorities did not. Where the Member State did not set requirements, or where they did not properly supervise and enforce them, the LAGs’ performance was lax, as shown in paragraphs 12 to 71. With few exceptions, the LAGs did little more than follow the procedures established by the Member States: LAGs did not achieve the full advantages of the Leader approach or self-regulate to achieve sound financial management of their own accord.

78. Member State rules effectively condoned poor financial management in allowing grants to be made to projects that commenced before the LAG had decided on the grant application. The rules did not oblige LAGs to give grants retrospectively, but they gave the message that it was acceptable to do so.

79. A particular weakness in all Member States’ implementation of Leader was that they did not hold LAGs accountable for achieving the objectives of their local strategies. They approved the LAG’s Leader+ strategies with general, open-ended objectives and did not require LAGs to monitor, assess or report on the achievement of their strategy objectives, or did not enforce such requirements.

BOX 16

EXAMPLES OF DIFFERENT IMPLEMENTATION REQUIREMENTS

Tuscany introduced requirements for the key local actors to be represented in the LAG.

Ireland set rules to ensure a fair and transparent process to nominate and decide on the LAG membership.

The French rules required LAGs to have a "double quorum" in the decision-making committee to ensure that there was an active partnership.

Managing authorities in Greece, Hungary and Tuscany required LAGs to score each project against a common set of objective criteria.

In Greece, the managing authority imposed a limit of 25 % of the grants awarded to LAGs’ own member organisations, thereby requiring the LAG to involve the wider local community in implementing the strategy.

In Ireland, the operating rules specified that "if projects qualify for aid under other schemes and programmes, they should as a general rule be regarded as ineligible for aid under Leader".

COMMISSION AND MEMBER STATES’ REQUIREMENTS FOR AXIS 4

80. The Commission and Member States should have learned the lessons from previous Leader programming periods to ensure that the appropriate guidance and requirements were in place for the 2007–13 period.

The major change for the 2007–13 period is that Member States mostly require LAGs to implement mainstream rural development programme measures

81. For the 2007–13 programming period, the legal framework is established by the rural development regulations. As in Leader+, there are few legal requirements specific to Leader. The regulations limit LAG running costs, but at 20 % this is higher than in Leader+ and can be circumvented by classifying costs as animation, which is not limited. The change from the Structural Fund to the rural development regulations introduces a requirement to check the reasonableness of project costs.

82. The Commission issued guidance to the Member States for the preparation of Axis 4 and effectively approved the national or regional Leader programmes in approving the rural development programmes. Since then, the Commission has continued to give support, in particular through the European Rural Development Network.

83. Member States had not finalised their operating rules at the time of the audit [28], so these could not be assessed. From the information available, the weaknesses identified in this report are likely to persist.

84. The lack of focus on achieving local strategy objectives is likely to be exacerbated in the 2007–13 programming period as, contrary to the Commission’s guidance [29], all the managing authorities audited (with the exception of Bavaria) now require LAGs to follow a common set of measures defined in the rural development programmes.

85. Some Member States further restricted the scope of Leader programmes to specific measures, most commonly those of Axis 3 [30]. This severely limited the LAGs’ ability to propose local strategies for the key objectives of Axes 1 and 2 of the rural development programmes related to the competitiveness and the environmental impacts of agriculture and forestry (see Box 17).

86. As each measure defines the types of projects and beneficiaries eligible, the possibilities for LAGs to develop innovative and multisectoral solutions specific to the local area are reduced. The nature of the projects to be implemented is similar for all LAGs in each Member State and is also similar to the mainstream, as in most cases, the rural development programme measures are primarily implemented by traditional top-down approaches.

BOX 17

LAG IN PORTUGAL: THE MEASURES LIMITED THE LAG’S ABILITY TO ADDRESS THE NEEDS OF THE LOCAL AGRICULTURAL SECTORS

The LAG’s strategy set the objective of combating the rural exodus and the abandonment of traditional farming but could only use the measures of Axis 3 of the rural development programme to achieve this. This restricted the possibilities to develop local solutions to improve the competitiveness of the olive and wine sectors, despite their importance for the local rural economy. Environmental measures to tackle biodiversity and climate change issues in the local agricultural sector were excluded from the scope of Leader programmes, as were forestry measures.

SELECTION OF LAGS TO IMPLEMENT LEADER IN THE 2007–13 PERIOD

87. To ensure that Leader is likely to be effective and achieve added value, Member States should only select LAGs that are competent and have high-quality strategies.

Member States selected LAGs with weak strategies

88. In all the Member States audited, the process of selecting LAGs was only weakly, or not at all competitive, despite the requirement of the regulation that it should be so.

89. Most managing authorities assessed and scored the proposed LAG strategies against relevant criteria and selected all LAGs that achieved a minimum score (typically of 50 %) [31]. All managing authorities in the sample accepted every LAG that submitted a valid application (with a handful of exceptions where there were two applications for the same area). By definition, the LAGs with low scores were well below what the managing authorities considered to be the possible level of competence and quality of strategy that LAGs could achieve. In one of the French regions, for example, the managing authority selected LAGs even though their application was assessed as being of insufficient quality (see Box 18).

BOX 18

SELECTION OF LAGS BY THE MANAGING AUTHORITY IN FRANCE

According to the terms of the call for applications, the selection committee would select between 10 and 12 LAGs, each with an average financial allocation of 1,5 million euro. Eighteen applications were received, of which the managing authority classed two as good quality, eight as intermediate quality and eight as insufficient quality. All 18 LAGs were selected and the average financial allocation reduced in consequence to 1,1 million euro.

90. In particular, the audit found that LAGs had poorly developed Axis 4 strategies, with non-specific objectives, a lack of clear intervention logic, and poor or non-existent provision for monitoring and evaluation. Following the assessment of the LAG strategies, few Member States required improvements to the weaknesses identified. As a consequence, LAGs have been awarded substantial sums from the EU budget to implement weak strategies for a seven-year period.

COMMISSION APPROVAL OF THE 2007–13 RURAL DEVELOPMENT PROGRAMMES

91. The key point at which the Commission could determine how Member States implemented Axis 4 was with the approval of the national and regional rural development programmes. The Commission should ensure that programmes establish the conditions necessary and safeguard against the known risks to the added value of the Leader approach.

The Commission was undemanding in approving the rural development programmes

92. Rural development programmes are high-level documents, of which Axis 4 is a small part. Most contained few concrete details about how the Leader approach would be implemented. Member States developed many of the arrangements for Leader only after the programmes had been approved.

93. The Commission was undemanding in approving the rural development programmes, which led to the situation described in paragraphs 80 to 90. The Commission accepted programmes that did not provide for competitive selection of LAGs (despite the requirement in the regulation); that restricted LAGs to implementing nationally-defined measures (despite the Commission’s guidance that LAGs should not follow a fixed set of measures); that had no specific plans for achieving innovation or interaction between sectors (despite instructions for the Commission assessments that innovation should be a priority); nor for monitoring and evaluation (despite the Leader+ mid-term evaluation conclusions that these have to be built into programmes from the outset). The Commission did not assess key elements for the added value of the Leader approach, such as Member State requirements for the composition and openness of LAGs.

THE COMMISSION AND MEMBER STATES’ MONITORING AND EVALUATION

THE COMMISSION AND MEMBER STATES CANNOT DEMONSTRATE THE ADDED VALUE ACHIEVED FROM IMPLEMENTING THE LEADER APPROACH AND HAVE NOT YET EVALUATED THE ADDITIONAL COSTS AND RISKS INVOLVED

MONITORING AND EVALUATION OF THE EFFECTIVENESS OF THE LEADER APPROACH

94. The Commission and Member States should use the management systems, the checks on LAGs, monitoring indicators and annual reports to monitor the implementation, results and impacts of the Leader programmes. This should be done not only to be able to take timely corrective action, but also to provide sufficient, reliable and relevant evidence for evaluations and to give assurance on the effectiveness and added value of the Leader approach.

The LAGs, Member States and Commission monitored the implementation of Leader programmes

95. There was extensive activity in monitoring the implementation of Leader+ programmes. LAGs and managing authorities recorded details of the grants awarded and payments made project by project. Managing authorities required the LAGs to prepare annual implementation reports describing the LAGs’ activities and compiled data for monitoring indicators. These mainly concerned the numbers of projects and amounts of grants classified according to type of beneficiary and field of expenditure. Managing authorities submitted annual implementation reports to the Commission.

96. All managing authorities produced a "mid-term" evaluation of Leader+ in 2003 with an update in 2005. The Commission engaged a contractor to make a synthesis report.

…but there is little evidence on the effectiveness of Leader programmes in achieving rural development objectives or the added value of the Leader approach

97. Despite all this activity, as LAGs did not assess or report on achievement of the local strategy objectives, there is an absence of evidence on the results and rural development impacts of the Leader expenditure. No information is available on whether (or to what extent) the Leader programmes have reduced the rural exodus from the areas concerned; increased opportunities for young people; diversified the rural economies, etc.

98. One partial exception concerned the jobs created or safeguarded by the Leader projects, which the Commission encouraged Member States to monitor for all Structural Fund programmes. However, the Court found the definitions used to be inconsistent and the data — which in most cases was not checked by the managing authorities — was not reliable or credible.

99. The 2003 evaluations were before most LAGs had started implementing the Leader programmes and the updates were made before significant expenditure had been incurred. Many evaluation questions were not answered, or relied on the opinions of those who benefited from the programme.

100. The absence (or unreliability) of data makes it difficult to establish the effectiveness of the Leader programmes in delivering rural development outcomes, either in absolute terms, or in relation to the effectiveness of other delivery methods (notably, the mainstream programmes).

101. The potential added value of the Leader approach is not solely in the results and impacts of the physical outputs (the projects implemented with the Leader grants). The community involvement achieved through the bottom-up approach can also lead to less tangible impacts, such as "capacity-building" and "empowering the local population". The strategic guidelines for Axis 4 consider that Leader should "play an important role in the horizontal priority of improving governance".

102. The potential for the Leader approach to achieve such impacts is indicated by examples in the contact point’s best-practice publications, the evaluations and various studies. However, there has been no systematic monitoring or reporting of the LAGs’ achievements in these areas, so the examples remain isolated cases. In the absence of reliable and relevant evidence, evaluations have not been able to demonstrate the frequency and extent of such impacts.

MONITORING AND EVALUATION OF THE COSTS AND RISKS

103. The monitoring and evaluation should also provide reliable evidence and assessments of the costs and risks of the Leader approach.

The Commission and Member States have not monitored or evaluated the additional costs and risks involved

104. In respect to the weaknesses identified in the Court’s 2000 Annual Report, the Commission replied that most corresponded to risks that are inherent in a decentralised programme such as Leader and that "the Commission and Member States are aware of these risks when monitoring the programmes and checking that their implementation follows the principle of sound financial management".

105. The Commission checks compliance with the regulations and can propose financial corrections. Checks made during the Leader+ period included the programmes of Portugal and France in 2005. The Commission services found that there were no formal project selection criteria; that conflict of interest procedures were inadequate and LAGs took decisions without a "double quorum"; and that LAGs did not have procedures to check the reasonableness of proposed project costs. The Commission services made recommendations to the Member States concerned but did not consider it appropriate to propose financial corrections [32]. The Commission services also checked the compliance of retrospective grants and grant rates with the regulations, but did not raise the questions of deadweight or efficiency.

106. While the Commission’s checks confirmed the risks identified in the Annual Report 2000 (and in this audit), they do not form a basis for establishing the extent and impact of those risks in the Member States concerned or EU-wide [33].

107. Member States’ inspections of the LAG operations (which covered at least 5 % of the expenditure in Leader+) provided an opportunity to check and report on the incidence of the risks to sound financial management. However, with a few exceptions in certain Member States, they have not covered the fairness and transparency of the LAGs’ project selection procedures, soundness and documentation of the assessment of project proposals, voting records, or the correct operation of conflict of interest policies.

108. Member States have not used their management systems or the LAGs’ annual implementation reports to monitor the fairness and transparency of the LAGs’ decision-making process, the proportion of grants awarded to LAGs’ members, the efficiency of the grants awarded or the efficiency of the LAGs’ processes and operating costs. In France, the managing authority monitored LAGs’ activities through observing LAG meetings but apparently condoned practices such as LAG members presenting their own projects, making retrospective grants to projects and raising grant rates to spend up the budget (see paragraph 55, for example).

109. Where individual LAGs have questioned project promoters, the information available indicates that deadweight is an important risk [34]. The EU-level evaluations gave no information on deadweight or the extent of retrospective grants [35].

110. Similarly, for the fairness and transparency of LAG procedures, the evaluations indicate that problems exist with the objectivity of project selection, for example, but provide no information on the extent or impact of such weaknesses (see Box 19).

BOX 19

EXTRACT FROM THE SYNTHESIS OF THE LEADER+ MID-TERM EVALUATION REPORTS

"Unbalanced partnership or unbalanced power relations in the LAG can lead to an inappropriate set of projects selected, often at the advantage of the institution belonging to the public sector. The composition of LAGs is often unbalanced and the institutional sector dominates."

"The information in the [evaluation] reports and in the case studies has tended to concentrate on issues such as bureaucracy, relationships between managing authorities and LAGs, financing, and insufficient autonomy at LAG level. More fundamental management issues such as structures, management systems, planning and control at LAG level were not highlighted in the reports. Responses to the question also do not refer at all to the role of the [decision-making committees] in programme management."

111. As already indicated in paragraphs 64 to 71, information on Leader operating costs was not comparable, not reliable and above all not complete as many functions were performed by the managing authorities in some Member States. The evaluations reported on the "excessive bureaucracy" of Leader+ [36] but have not assessed the costs. Consequently, the efficiency of the Leader approach cannot be determined.

MONITORING AND EVALUATION IN THE 2007–13 PERIOD

112. The Commission and Member States should learn the lessons from the three previous Leader programming periods to ensure that efficient and effective monitoring and evaluation of the Leader approach is in place for the 2007–13 period.

Implementation of Axis 4 has started without key elements of the monitoring and evaluation systems being in place

113. The Leader+ mid-term evaluation synthesis report strongly recommended that monitoring and evaluation systems should be improved and needed to be in place from the start of the 2007–13 programming period [37]. The Commission established a Common Monitoring and Evaluation Framework (CMEF) for the rural development programmes. This set some specific evaluation questions on Leader added value, improvement in governance and effectiveness, but reduced the monitoring indicators specific to Leader to the number of LAGs and the population in Leader areas, which the Commission considers as the baseline indicator for measuring the governance objective. The CMEF allowed the managing authorities to develop additional indicators, but none of the audited managing authorities did so for Leader. Moreover, none of the audited LAGs or managing authorities had made arrangements for collecting and reporting information relative to the costs, risks, effectiveness and added value of the Leader approach.

114. At the end of 2009, the Commission, through the European Evaluation Network for Rural Development, established a thematic working group on Leader to consider the difficulties encountered by the Member States, including concern that CMEF indicators and economic measurement will not adequately capture Leader effects; considerable methodological challenges owing to the local scale of Leader; major methodological challenges in evaluating governance, participation and capacity in rural communities and problems to provide hard statistics for evaluating the Leader benefits. In mid-2010 the group issued a draft working paper on capturing the impacts of Leader. However, the work of this group comes too late for the mid-term evaluations (which have to be completed in 2010) and the possibilities for evaluation of Axis 4 will be limited as the relevant information is not being collected or reported at LAG level (see paragraph 113).

CONCLUSIONS AND RECOMMENDATIONS

LAGS HAVE IMPLEMENTED THE LEADER APPROACH IN WAYS THAT LIMIT THE POTENTIAL FOR ADDED VALUE IN TERMS OF THE "LEADER FEATURES", ALTHOUGH THE COURT FOUND EXAMPLES OF GOOD PRACTICE

115. The LAGs audited implemented around 1000 projects in the Leader+ period that were of benefit to the local businesses and communities concerned. But Leader is about more than this: it should achieve added value compared with traditional programmes through following a specific approach. To the extent that the key features of the Leader approach are not fully followed, the potential added value of the approach cannot be achieved.

116. The bottom-up approach was limited in the LAGs that gave the majority of the grants to their own member organisations; the potential added value of a partnership was not achieved in LAGs where the decision-making was dominated by the local authorities; few LAGs could demonstrate innovation or interaction between different sectors in their strategies or projects. Yet there were some examples of LAGs that really involved the local community and of initiating successful local projects through their "animation" activities.

117. Local strategies should be at the heart of the Leader approach, giving the partnerships their raison d’être and promising an added value through local solutions tailored to achieve the local rural development objectives. In practice, the strategies were almost irrelevant and served as little more than an application to the managing authority for funding. None of the LAGs monitored or reported on their performance in achieving their strategy objectives.

LAGS DID NOT HAVE DUE REGARD TO THE NEED FOR FAIR AND TRANSPARENT PROCEDURES OR EFFICIENCY

118. LAGs have not taken sufficiently seriously the need for transparency, for documentation of the project assessment and selection decisions and for procedures to avoid all risks of direct or indirect conflict of interest. This not only increases the risks that grant decisions will be made without due regard to efficiency, it also creates a reputational risk for the EU. The practices observed in some LAGs, such as grant decisions being made by a handful of people and to their own organisations, are likely to be to the detriment of local governance rather than enhance it.

119. LAGs have not taken account of efficiency, particularly in awarding grants for projects that were already under way, or even completed, before the grant decision was made. In some cases, their objective appears to have been to spend the maximum amount possible, rather than to achieve the maximum results possible.

120. The costs of implementing Leader are substantial, due to the additional implementation layer: up to a third of the LAG’s budget in addition to the managing authorities and paying agencies’ costs of processing, monitoring and control. Inflexible procedures — even for very small projects — and delays limited efficiency, although, to a large degree, these resulted from the Member States’ requirements.

THE COMMISSION AND MEMBER STATES WERE NOT SUFFICIENTLY DEMANDING AND SHARE SOME RESPONSIBILITY WITH THE LAGS FOR LIMITING THE POTENTIAL ADDED VALUE OF THE LEADER APPROACH. THEY HAVE NOT TAKEN SUFFICIENT ACTION TO LIMIT THE COSTS AND RISKS

121. The LAGs bear the main responsibility for achieving the Leader added value and sound financial management, but the risks are well known. The Commission and Member States share responsibility for supervising the LAGs’ performance and ensuring that they follow the Leader approach and consistently achieve the highest standards of sound financial management. Poor performance in these respects should not be tolerated, even in the Member States implementing Leader for the first time, as the lessons of the previous programming periods should have been learned.

122. However, 10 years after the Court’s previous audit of Leader, the same serious weaknesses persist. The Commission responded to the observations in the Court’s 2000 Annual Report with "encouragement", guidance and recommendations to the Member States. This has not proved effective.

RECOMMENDATION 1

In view of the persistent weaknesses, the Commission should ensure that the legislation provides sufficient clarity on the standards required in the specific case of Leader. A few simple requirements at EU level may replace the need for divergent operating rules at programme level, simplify procedures, improve consistency and provide clear control standards in the following areas:

(a) exclusion of projects started before a grant decision has been made, to eliminate a major risk of inefficiency (deadweight);

(b) LAGs’ selection of projects to be based on documented assessments that demonstrate the soundness and fairness of the decision in terms of consistent and relevant criteria;

(c) rules to ensure that the partnerships are not dominated by the local authorities at project selection meetings.

En outre, les États membres devraient s’assurer que des procédures efficaces sont en place pour remédier aux insuffisances mises en évidence dans le présent rapport, et que le bon fonctionnement de ces procédures fait l’objet d’un contrôle.

123. In particular, the Commission and Member States have tolerated the situation where LAGs do not have effective procedures to avoid conflicts of interest. The weaknesses observed highlight the risk that the LAG members may have directly or indirectly influenced the decisions in a way that resulted in an ineffective or inefficient use of the EU budget.

RECOMMENDATION 2

The financial regulation prohibits any action that may result in a conflict of interests. In view of this, the Commission and Member States should ensure that effective safeguards are in place, and check that they operate correctly. Members of the LAG’s project assessment or decision-making committees with any personal, political, professional or business interest in a project proposal should make a written declaration of the interest. They should be absent from any discussion, assessment or decision on the project and the matter should be referred to the managing authority in accordance with the financial regulation.

124. Fundamental to Leader is the bottom-up identification of local solutions to local problems, yet all but one of the managing authorities audited have imposed a de facto top-down system for the 2007–13 period. These managing authorities require LAGs to implement the common rural development programme measures, contrary to the Commission’s guidance. This may make Leader easier to control, but limits the scope for innovative local strategies and hence limits the potential added value that justifies the Leader approach [38].

RECOMMENDATION 3

The Commission should review with the Member States whether the existing measures constrain the LAGs’ ability to design and implement innovative, multisectoral, local strategies to achieve the objectives of Axes 1–3 of the rural development policy. Member States should amend their rules as necessary to allow LAGs to develop local solutions that do not correspond to the rural development programme measures.

125. In shared management it is not the Commission’s role to approve all details of national and regional implementing arrangements, but before having approved the 2007–13 programmes the Commission should have ensured that key elements to the success of Leader (see below) were in place. Member States selected LAGs with weak strategies. As a result, the EU budget is being implemented in the 2007–13 period in a way that is less efficient, less effective and with less potential added value than could have been achieved.

RECOMMENDATION 4

The Commission should ensure that Member States review the LAGs’ 2007–13 strategies and require the LAGs to set measurable objectives, specific to their local area, that can be achieved by the Leader programme in the remainder of the period. The Member States should then require LAGs to account for achieving their local strategy objectives, for achieving added value through the Leader approach, and for the efficiency of the grant expenditure and the operating costs.

Member States should further consider whether this increased accountability for sound financial management would allow the existing management, supervision and control systems to be streamlined, with less need for checking compliance with eligibility conditions for measures.

RECOMMENDATION 5

In view of its responsibility to ensure the sound financial management of the EU budget, the Commission should check future programmes in sufficient detail for the specific elements that are fundamental to the added value, effectiveness and efficiency of Leader.

Member States should ensure in future that LAGs correct any weaknesses identified in the selection process such that LAGs have strategies and implementation plans of the highest standard.

THE COMMISSION AND MEMBER STATES CANNOT DEMONSTRATE THE ADDED VALUE ACHIEVED FROM IMPLEMENTING THE LEADER APPROACH AND HAVE NOT EVALUATED THE ADDITIONAL COSTS AND RISKS INVOLVED

126. The EU budget contributed over 2 billion euro to Leader+ and has programmed over 5 billion for the 2007–13 period. The Commission has not yet demonstrated the effectiveness or efficiency of the expenditure, the added value achieved through following the Leader approach, the extent to which the known risks have materialised or the real costs of implementation. Member States have not collected and validated the necessary information, so there is an insufficient evidence-base for evaluation. This audit has shown that the added value and sound financial management of Leader cannot be taken for granted.

RECOMMENDATION 6

The Commission should take urgent steps to ensure that it can account for the added value and sound financial management of Leader.

Monitoring should be directed towards indicators of the added value of the Leader approach, efficiency and effectiveness, rather than implementation. The data should be verified at source, at least on a sample basis. Given the scale and nature of Leader and the difficulties encountered thus far in obtaining relevant, comparable and reliable data, the Commission should consider more efficient and effective approaches, such as monitoring statistically-valid samples of LAGs in detail, through indicators, inspections and structured case studies with proper data verification by an independent evaluator.

The Commission should coordinate the Member States to ensure that the supervisory and control systems provide assurance on the fairness and transparency of procedures; comparable data on the costs; and complement the monitoring of effectiveness and efficiency.

This Report was adopted by Chamber I, headed by Mr Michel CRETIN, Member of the Court of Auditors, in Luxembourg at its meeting of 21 July 2010.

For the Court of Auditors

+++++ TIFF +++++

Vítor Manuel da SILVA CALDEIRA

President

[1] The grants are co-financed by the EU and by the public authorities of the Member State concerned. In most cases, the grant is only for a proportion of the total project costs: the beneficiary also has to contribute. The LAGs’ running costs are also co-financed by the EU and the national or regional authorities.

[2] Rural communities with up to 150000 inhabitants.

[3] New Member States could implement a similar measure in their rural development operational programmes from 2004–06.

[4] Council Regulation (EC) No 1698/2005 of 20 September 2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) (OJ L 277, 21.10.2005, p. 1).

[5] Axis 4 (Leader) represents from 5 % to 11 % of planned expenditure of the rural development programmes in the EU-15 Member States, and a minimum of 2,5 % in the new Member States’ programmes.

[6] In "top-down" methods, national or regional authorities define expenditure measures and project selection criteria and their staff assess project proposals and decide on the grants to award. Certain tasks of the national or regional aid schemes may be performed by the staff of local offices.

[7] "The main concept behind the Leader approach is that … development strategies are more effective and efficient if decided and implemented at local level by local actors." European Commission fact sheet "The Leader approach".

[8] "The capacity-building and empowerment of the local population achieved under Leader should be seen as generating additional value added for the rural community." Commission reply to the 2000 Annual Report.

[9] Annual Report concerning the financial year 2000, paragraphs 3.96 to 3.112 (OJ C 359, 15.12.2001).

[10] This point is developed further in paragraphs 72 to 77 and 104 to 106.

[11] The LAGs in Poland implemented transitional Leader+ programmes, which were not comparable with the other Member States.

[12] In particular, the Commission notice to the Member States of 14 April 2000 laying down guidelines for the Community initiative for rural development (Leader+) (OJ C 139, 18.5.2000, p. 5) and Articles 61–65 of Regulation (EC) No 1698/2005.

[1001] Including national or regional co-financing.

[1002] Indicative allocations.

[13] In Greece, the national rules prevented such assistance from the moment that a formal call for project proposals was published. The project promoters interviewed each paid consultants between 1200 and 3500 euro to prepare their grant applications.

[14] Including organisations in which LAG members had a direct interest. The data for Aragón exclude grants to individual small businesses where the promoter was a member of the LAG. The LAG’s membership policy encourages community involvement, so does not limit possibilities for participation (see paragraph 19).

[15] Article 62 of Regulation (EC) No 1698/2005: LAGs should represent partners from the various locally based socioeconomic sectors in the territory concerned. At the decision-making level the economic and social partners, as well as representatives of the civil society, such as farmers, rural women, young people and their associations, must make up at least 50 % of the local partnership.

[16] The LAG in Bavaria also approved project proposals with few members present (see Box 14).

[17] This also applies, to a lesser extent, in Ireland.

[18] For example, following a call for proposals for tourist accommodation projects, the LAG in Greece approved grants for projects that exceeded the target number of new tourist rooms by 20 %. The LAG made a further call for tourist accommodation project proposals in view of the high demand.

[19] A partial exception is the LAG in Bavaria, which organised a workshop to consider whether the Leader+ strategy objectives were met.

[20] The LAGs’ assessment of project proposals is considered in paragraph 58.

[21] It is a requirement of the financial regulation that the EU budget is used in accordance with the principle of efficiency, defined as the best relationship between resources employed and results achieved.

[22] Except for grants to businesses, which are governed by the EU’s state aid rules.

[23] Including the national co- financing.

[24] This has the benefit of simplicity and transparency, but will not necessarily lead to the most efficient use of the EU budget.

[25] Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the financial regulation applicable to the general budget of the European Communities (OJ L 248, 16.9.2002, p. 1), Article 52:1.All financial actors and any other person involved in budget implementation, management, audit or control shall be prohibited from taking any action which may bring their own interests into conflict with those of the Communities. Should such a case arise, the person in question must refrain from such actions and refer the matter to the competent authority.2.There is a conflict of interests where the impartial and objective exercise of the functions of a financial actor or other person, as referred to in paragraph 1, is compromised for reasons involving family, emotional life, political or national affinity, economic interest or any other shared interest with the beneficiary.

[26] Defined in the regulation as studies of the local area, information and promotional events, etc.

[27] In some Member States the national and regional authorities are responsible for these processes, which also contributes to the time taken.

[28] With the exception of the managing authorities in Germany and Aragón.

[29] The Axis 4 implementation guidelines issued by the Commission state that it is important that operations not corresponding to the rural development programme measures can be supported in order to maintain the innovative nature of Leader.

[30] The LAGs in Ireland, Portugal and Poland were limited to implementing the measures of Axis 3 (plus a "small projects" measure in Poland). The LAGs in Greece could additionally implement one measure from Axis 1. The LAGs in Aragón and Tuscany could implement two Axis 1 measures. LAGs in Castilla-La Mancha and Hungary could implement all RDP measures.

[31] The exception was Tuscany, which did not allocate scores.

[32] The effectiveness of such recommendations is brought into question by the results of the Court’s observations in these Member States, which show that the weaknesses continued to exist in 2009.

[33] It should be noted that this is not an objective of the Commission’s checks.

[34] For example, a survey of project promoters by the LAG in France (Pays de la Loire) found that 71 % would have undertaken the project without the Leader grant.

[35] The Commission has asked the contractor for the Leader+ final evaluation to assess the incidence of deadweight, but there was no monitoring or data collection during the Leader+ period for this.

[36] Leader+ evaluation synthesis: "the mid-term evaluation reports repeatedly list: (i) excessive bureaucracy; (ii) difficult relationships between managing and other involved authorities on one side and LAGs and project promoters on the other; (iii) problems with raising co-funding; (iv) delays in financing; and (v) insufficient autonomy of the LAG. The consequence of these deficiencies has been a loss of management efficiency. Excessive bureaucracy leading to delays in financing projects is viewed as the main management issue that hinders impact and in fact detracts from some of the other attractive design features of Leader+".

[37] "[In Leader+,] programme evaluation was not integrated at the design stage and essential evaluation features e.g. baseline data, were not sufficiently considered". Recommendation: "The accompaniment of local action groups with a mix of external evaluation and assisted self-evaluation should be designed and put down in the programme".

[38] The importance of this is underlined by the definition of the Leader approach given in the Commission’s fact sheet as "a method of mobilising and delivering rural development in local communities, rather than a fixed set of measures to be implemented".

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ANNEX

LIST OF PROJECTS REVIEWED [1]

(euro) |

Project description | Type of pro