Special Report No 8/2012 ‘Targeting of aid for the modernisation of agricultural holdings’
Date: 2012-06-01
Institutions: European Court of Auditors
Subjects: EU financing, aid to agriculture, co-financing, farm development plan, farm modernisation, modernisation aid, rural development

EUROPEAN
COURT OF AUDITORS

TARGETING OF AID FOR THE 
MODERNISATION OF  
AGRICULTURAL HOLDINGS

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Special Report No 8 

 2012

TARGETING OF AID FOR THE 
MODERNISATION OF  
AGRICULTURAL HOLDINGS

(pursuant to Article 287(4), second subparagraph, TFEU)

EUROPEAN COURT OF AUDITORS

EUROPEAN COURT OF AUDITORS
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Special Report No 8 

 2012

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Luxembourg: Publications Office of the European Union, 2012

ISBN 978-92-9237-647-5
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© European Union, 2012
Reproduction is authorised provided the source is acknowledged.

Printed in Luxembourg

3

CONTENTS

Paragraph

GLOSSARY

I–VI	

EXECUTIVE	SUMMARY

1–16	

INTRODUCTION

1–7	

8–9	

RURAL	DEVELOPMENT	—	THE	FRAMEWORK	OF	MEASURE	121

WHAT	IS	‘MEASURE	121’?

10–16	

TARGETING	THE	AID

10–16	

MEASURE	121	SHOULD	ADDRESS	EU	PRIORITIES	AND	IDENTIFIED	NEEDS

17–22	

AUDIT	SCOPE	AND	APPROACH

23–65	

OBSERVATIONS

23–43	

TARGETING	THE	MEASURE	121	FUNDING	TO	MEET	EU	PRIORITIES	AND	IDENTIFIED	NEEDS

23–24	

A	CERTAIN	DEGREE	OF	MODERNISATION	RESULTS	FROM	THE	PURCHASE	OF	NEW	EQUIPMENT	OR	FACILITIES

25–28	

	CERTAIN	MEMBER	STATES	TARGET	THE	AID	TO	PROJECTS	THAT	ADDRESS	IDENTIFIED	NEEDS	AND	EU	PRIORITIES	…

29–32	

…	BUT	IN	PRACTICE	LITTLE	PRIORITISATION	TAKES	PLACE

33–37	

	THE	COMMISSION	APPROVED	SOME	RDPS	THAT	DID	NOT	TARGET	THE	AID	TO	IDENTIFIED	NEEDS	
AND PRIORITIES

38	

	THE	DESCRIPTION	OF	TARGETING	ELEMENTS	INCLUDED	IN	THE	RDP	DOES	NOT	ALWAYS	CORRESPOND	TO	THE	
TARGETING	APPLIED	IN	PRACTICE

39–40	

	THE	CMEF	DOES	NOT	ALLOW	THE	EXTENT	TO	WHICH	THE	MEASURE	ADDRESSES	ALL	THE	EU	PRIORITIES	TO	
BE MONITORED

41–43	

CMEF	DATA	ON	RESULTS	ARE	OF	LOW	RELIABILITY

44–55	

TARGETING	ADDITIONAL	FUNDS	THROUGH	THE	‘HEALTH	CHECK’

44–45	

THE	‘HEALTH	CHECK’	AIMED	AT	TARGETING	ADDITIONAL	FUNDS	TO	‘NEW	CHALLENGES’

46–55	

SOME	MEMBER	STATES	DID	NOT	USE	THE	ADDITIONAL	FUNDING	TO	‘FURTHER	STRENGTHEN’	MEASURE	121

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56–65	

TARGETING	THE	AID	TO	AVOID	RISKS	TO	SUSTAINABILITY	AND	DEADWEIGHT

56–59	

60–65	

	INSUFFICIENT	VERIFICATION	OF	THE	ECONOMIC	VIABILITY	OF	HOLDINGS	AND	INVESTMENT	PROJECTS	
SUBMITTED

	MEMBER	STATES	SELECTED	PROJECTS	THAT	HAD	ALREADY	STARTED,	THEREBY	ENTAILING	THE	RISK	OF	
DEADWEIGHT

66–73	

CONCLUSIONS	AND	RECOMMENDATIONS

ANNEX	 —		SELECTED	RURAL	DEVELOPMENT	PROGRAMMES	(RDP)	AND	CORRESPONDING	
MEMBER	STATES	OR	THEIR	REGIONS	COVERED	BY	THE	AUDIT,	TOGETHER	WITH	
THE RESPECTIVE	BUDGET	FOR	MEASURE	121,	FOR	2007–13

REPLY	OF	THE	COMMISSION

Special Report No 8/2012 — Targeting of aid for the modernisation of agricultural holdings

	
GLOSSARY

5

Axes: Rural development in the 2007–13 programming period is implemented under four thematic axes, which 
represent coherent groups of rural development measures. 

CAP: Common agricultural policy: the set of legislation and practices adopted by the European Union to pro-
vide a common, unified policy on agriculture.

CMEF: Common Monitoring and Evaluation Framework.

Community	strategic	guidelines: With these strategic guidelines the Council identifies the European Union's 
priorities under the European Agricultural Fund for Rural Development (EAFRD). It establishes a link with the 
objectives established by the Lisbon	and Göteborg	European Councils and translates them into rural develop-
ment policy. The idea is to ensure the consistency of rural development with other EU policies, in particular in 
the field of cohesion and environment, and accompany the implementation of the new common agricultural 
policy (CAP) and the restructuring involved.

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

EAFRD: European Agricultural Fund for Rural Development.

EERP: European Economic Recovery Plan.

GVA: Gross value added.

Göteborg	strategy: The Göteborg strategy was launched in 2001 as the first EU sustainable development 
strategy.

‘Health	Check’: The common agricultural policy was adjusted in 2009 so that farmers would be better placed 
to respond to market signals, the administration of direct payments would be simplified and farmers would 
be helped to meet the new challenges of the future, in particular that of climate change. This adjustment is 
known as the ‘Health Check’.

Lisbon	strategy: The EU strategy for growth and jobs launched in 2000, which aims at generating growth and 
more and better jobs by investing in skills, the greening of the economy and innovation.

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

M121: ‘Measure 121’ — Modernisation of agricultural holdings.

Operation: A project, contract or other individual arrangement, co-financed by the EAFRD.

Programming	period: Multiannual framework to plan and implement EU policies such as rural development 
policy; the rural development period runs from 2007 to 2013.

RDP: Rural development programme, a programming document prepared by a Member State and approved 
by the Commission to plan and implement the EU’s rural development policy. An RDP may be prepared on 
regional or national level.

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EXECUTIVE SUMMARY

I.
The  European  Union  (EU)  co-finances  investment 
projects  on  agricultural  holdings  through  its  rural 
development policy. Under the current programming 
period for 2007–13, 11,1 billion1 euro is budgeted for 
a specific investment measure called ‘modernisation 
of agricultural holdings’. EU funding is further comple-
mented by national public expenditure to cover part 
of the total investment cost. 

II.
The Council has defined in its Community strategic 
guidelines for rural development specific EU priorities 
to be addressed through the rural development policy 
and Member States are requested to target funding on 
clearly defined objectives reflecting identified needs 
in the Member States’ rural areas. 

III.
In 2009, to further strengthen operations related to the 
EU’s priorities of climate change, renewable energy, 
water management, biodiversity and the restructur-
ing of the dairy sector, an extra 4,95 billion euro was 
allocated to rural development measures including 
modernisation  through  the ‘Health  Check’  and  the 
European Economic Recovery Plan (EERP).

IV.
The audit examined whether	EU	aid	for	the	mod-
ernisation	of	agricultural	holdings	was	directed	to	
EU	priorities	and	specific	needs	in	Member	States.

V.
The Court found that: 

(a)  Whilst the measure 121 ‘modernisation of agricul-
tural holdings’ was achieving its nominal objective 
of modernisation, this was almost inevitable as any 
investment or purchase of new equipment results 
in some degree of modernisation. The  measure 
has  the  potential  to  provide  greater  value  for 
money if the funds available were better targeted.

(b)  The  extent  of  targeting  varies  significantly  be-
tween the Member States reviewed. Some target 
effectively whereas others did not apply the good 
selection  criteria  they  had  established  or  have 
weak targeting systems.

1  Financial data as at January 2012.

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EXECUTIVE SUMMARY

(c)  Where  it  is  the  intention  to  earmark  par ticular 
measures and budgetary allocations to target spe-
cific  priorities,  as  was  the  case  with  the ‘Health 
Check’, to ensure that the funding has an addi-
tional effect the Commission should propose leg-
islation to make this requirement specific in the 
underlying EU regulations. 

(d)  Member States should put effective procedures 
in place, proportionate to the risks, to ensure that 
grants are not given to projects where the finan-
cial viability of the investment or the sustainability 
of the holding is in doubt.

(e)  The Commission should encourage Member States 
to follow good practice whereby project expendi-
ture is eligible only from the date the grant is ap-
proved.

(c)  Member States’ rural development programmes 
(RDPs) often contain insufficient information to 
demonstrate  that  investment  aid  has  been  ad-
equately targeted. Information is likewise lacking 
on the project selection process. Consequently, 
the Member States’ project selection procedures 
are often not known by the Commission when it 
approves the RDP.

(d)  The Common Monitoring and Evaluation Frame-
work does not generate the type of data neces-
sary to allow progress in the achievement of EU 
priorities to be monitored; the data was found not 
to be reliable and it does not allow comparisons 
between Member States (and/or regions) to be 
drawn.

(e)  Further strengthening of operations related to the 
EU priorities was not achieved by some Member 
States due to the substitution of the extra funding 
with funds already programmed for the measures 
concerned prior to the ‘Health Check’. 

(f )  The procedures for establishing the viability and 
sustainability  of  a  holding  or  the  investment 
project were not effective in all Member States.

(g)  The Court found that the deadweight risk linked 
to the retroactive approval of investments which 
had already started persists. 

VI.
On the basis of its findings the Court makes the fol-
lowing recommendations:

(a)  The Commission should not approve RDPs unless 
they demonstrate that the aid is targeted and in-
clude clear and relevant selection criteria address-
ing EU priorities and national or regional needs.

(b)  The Commission should ensure that for the forth-
coming programming period relevant and reliable 
information is obtained to facilitate management 
and monitoring of the results of the measure and 
to demonstrate the extent to which the aid given 
is contributing to the achievement of EU priorities.

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In 2007, the European 
Commission proposed a 
‘Health Check’ on the CAP 
which was subsequently 
adopted by the Council 
in 2008. Subsequent to 
the ‘Health Check’, and 
as a response to the 
2008 economic crisis, 
the Commission drew 
up the EERP which was 
agreed by the Council in 
December 2008.

3  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).

INTRODUCTION

8

RURAL	DEVELOPMENT	—	THE	FRAMEWORK	OF	
MEASURE	121	

1.	

The EU has set up a common rural development policy, also known as 
the ‘second pillar ’ of the common agricultural policy (the ‘CAP’). The 
policy is implemented through multiannual programming periods. The 
current period runs from 2007 to 2013 and payments must be completed 
by 2015. The policy is based on the co-financing principle: EU funds are 
complemented by national funding, and also by private funding. The EU 
co-finances operations through the European Agricultural Fund for Rural 
Development (EAFRD), for which 96 billion euro was budgeted for the 
programming period 2007 to 2013. This includes almost 5 billion euro 
supplementary funding made available following the ‘Health Check’ and 
the European Economic Recovery Plan (EERP)2.

2.	

The policy is based on three themes (‘axes’), plus a horizontal axis known 
as Leader. The three axes are:

 ʱ

 ʱ

 ʱ

Axis 1: Improving the competitiveness of the agricultural and for-
estry sector; 

Axis 2: Improving the environment and the countryside; and

Axis 3: Improving the quality of life in rural areas. 

3.	

4.	

5.	

The Community strategic guidelines set at Community level the strategic 
priorities for rural development, while the main rules governing rural 
development policy for the period 2007 to 2013, as well as the policy 
measures available to Member States and regions, are set out in Council 
Regulation (EC) No 1698/20053.

Within each axis, legislation has defined a set of ‘rural development meas-
ures’ which are specific instruments to implement the axis.

The Member States draw up their own rural development programmes 
(RDP), at national or regional level, in which they define a strategy and 
propose the measures they wish to use to address their identified needs. 
These RDPs are the chief programming instrument through which the EU 
funding is channelled. These programmes are approved by the European 
Commission. A total of 97 RDPs were approved for the current program-
ming period.

Special Report No 8/2012 — Targeting of aid for the modernisation of agricultural holdings

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6.	

7.	

8.	

In order to monitor and evaluate the implementation of rural develop-
ment policy, the European Commission and the Member States have 
defined the Common Monitoring and Evaluation Framework (CMEF). The 
CMEF provides a set of indicators which are intended to assess, at out-
put, result and impact level, how far the expected objectives have been 
achieved.

4  Financial figures as at 
January 2012, including 
630 million euro from the 
‘Health Check’ and the EERP.

This report addresses the specific measure 121 under axis 1, which sub-
sidises investment projects aimed at modernising agricultural holdings.

WHAT	IS	‘MEASURE	121’?

Measure 121 finances investments in agricultural holdings. These invest-
ments may range from simple items such as farm tools and wooden fruit 
boxes up to complex projects such as biogas installations. Its specific 
EU budget totals 11,1 billion euro (financed through the EAFRD) 4, which 
represents, over the whole 2007–2013 programming period, around 11 % 
of all the EU’s planned spending on rural development in the EU. All 
Member States have chosen to use measure 121.

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BOX	1

EXAMPLES	OF	THE	RANGE	AND	TYPE	OF	INVESTMENTS	FINANCED	BY	MEASURE	121

Photos taken during the audit illustrate how investment items financed through measure 121 range from forklifts … 

… to more complex machinery such as tractors and precision planters …

… to animal housing equipped with mobile straw-spreading devices.

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9.	

The main rural development regulation sets the standard aid rate for 
total public aid (that is from the EAFRD and national or regional public  
budgets) at 40 % of the eligible investment. Member States may set 
lower  rates  or  maximum  eligible  costs,  thereby  limiting  the  aid. The 
standard aid rate may, however, be increased in particular circumstances. 
Thus, a young farmer may receive up to 50 % of the eligible investment. 
Farmers in mountainous areas, in other disadvantaged areas or in Natura 
20005 areas may also receive an additional 10 %. In exceptional cases (i.e. 
in outermost regions and the smaller Aegean islands), the aid rate may 
reach up to 75 %. No minimum aid rate is defined by the EU regulations. 

5 

‘Natura 2000’ areas are 
specific protected areas of 
conservation.

6  Recital 21 of 
Regulation (EC) No 1698/2005.

7  Article 26 of Regulation 
(EC) No 1698/2005.

TARGETING	THE	AID	

MEASURE	121	SHOULD	ADDRESS	EU	PRIORITIES	AND		
IDENTIFIED	NEEDS	

10. 

The Community strategic guidelines establish the EU priorities for im-
proving  the  competitiveness  of  agriculture,  which  include  moderni-
sation, innovation and quality. The preamble to the main regulation, 
Regulation (EC) No 1698/2005, states the purpose of investment aid for 
modernisation under measure 121 thus6:

‘the  purpose  of  Community  farm  investment  aid  is  to  modernise  
agricultural holdings to improve their economic performance through 
better use of the production factors including the introduction of new 
technologies and innovation, targeting quality, organic products and 
on/off-farm diversification, including non-food sectors and energy 
crops, as well as improving the environmental, occupational safety, 
hygiene and animal welfare status of agricultural holdings.’

11. 

The body of the regulation sets out the eligibility criteria, which define 
that support should be granted only to investments which7:

 ʱ

 ʱ

improve the overall performance of the agricultural holding; and

respect the Community standards applicable to the investment 
concerned.

Special Report No 8/2012 — Targeting of aid for the modernisation of agricultural holdings

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12. 

13. 

14. 

15. 

The Member States must ensure that investment measures included in 
their RDPs are targeted on clearly defined objectives reflecting identified 
structural and territorial needs and structural disadvantages 8, having 
regard to the Community strategic guidelines.

Member States can take different approaches to achieve this. A first level 
of targeting may be achieved by setting restrictive eligibility criteria and 
differentiated aid rates for different types of investment projects, which 
should  be  detailed  in  the  RDP. Thus,  the  Member  State  may  declare 
certain types of farmers and of agricultural holdings eligible (eligibility 
of beneficiaries), and set out eligibility criteria for investment projects,  
either by setting out a ‘positive’ list of eligible investment types, or defin-
ing a ‘negative’ list of investment items that are not eligible. This can re-
sult in regional and sectoral differentiation (by excluding certain sectors 
from the scope) and setting aid ceilings (linked to the size of projects).

8  Article 43 of Commission 
Regulation (EC) No 1974/2006 
of 15 December 2006 
laying down detailed 
rules for the application 
of Council Regulation (EC) 
No 1698/2005 on support 
for rural development by 
the European Agricultural 
Fund for Rural Development 
(EAFRD) (OJ L 368, 23.12.2006, 
p. 15).

9  Article 71 of Regulation 
(EC) 1698/2005 requires 
that projects are selected 
on the basis of selection 
criteria to be established by 
the Member State or region 
concerned. 

The use of basic eligibility criteria, as described in the previous para-
graph, may filter out projects that are unrelated to the identified needs 
and priorities.The regulation, however, requires further targeting: Mem-
ber States should make a selection from within the population of eligible 
investment projects submitted, using specific selection criteria9.

One way of doing this — although not required in the underlying leg-
islation — is to rank project applications by attributing points for each 
selection criterion addressed. Such scoring systems aim at setting up 
a list of ‘best’ projects — those that make the greatest contribution to 
achieving the objectives set for the measure.

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16. 

A diagram of how Member States can target measure 121 is presented 
in the Figure.

FIGURE

s
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n
e
m
e
r
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q
e
r

l
a
g
e
L

s
e
c
i
t
c
a
r
p
d
o
o
G

Investment projects improve the overall  
performance of the holding

Eligible investment
projects

Measure 121 investment projects should 
address the EU priorities and target  
identiﬁed needs and structural disadvantages

Measure 121 investment projects 
should be selected in accordance with 
selection criteria deﬁned by the Member State

Selection procedures to mitigate 
the risks to sustainability and deadweight

Scoring systems to 
compare projects on objective basis

Funding allocated  to the projects that make 
the greatest contribution to achieving 
the objectives of measure 121

Projects addressing EU
priorities and
identiﬁed needs

Economically viable 
projects where there is a clear
need for EU funding

Projects that best meet
the EU priorities and
identiﬁed needs

Special Report No 8/2012 — Targeting of aid for the modernisation of agricultural holdings

 
 
10  The audit covered the 
following national or 
regional RDPs: Belgium 
(Wallonia), Germany 
(Baden-Württemberg), Spain 
(Catalonia), France (mainland), 
Italy (Veneto), Luxembourg, 
Hungary, Poland, Portugal 
(mainland) and Romania. 

11  Regulation 
(EC) No 1698/2005 
and Regulation 
(EC) No 1974/2006.

12  For Italy (Veneto), 
the sample comprised 
also projects approved 
during 2008. 

AUDIT SCOPE AND APPROACH

14

17. 

The audit examined how the measure ‘modernisation of agricultural hold-
ings’ (measure 121) was being managed by the European Commission 
and implemented by the Member States. The overall audit question was:

Is EU aid for the modernisation of agricultural holdings directed to EU 
priorities and specific needs in Member States?

Through  this  the  audit  sought  to  establish  if  the  11,1  billion  euro  
budgeted for the measure was directed to the projects that best achieve 
the EU’s priority of modernisation, in particular in the specific respects 
identified in Regulation (EC) No 1698/2005 (see paragraph 10).

The audit also assessed the implementation of the extra funding made 
available under the ‘Health Check’ and the EERP through measure 121.

Finally, the audit assessed whether Member States had introduced effec-
tive systems to reduce the risk of financing investments on farms that 
were not economically viable and to reduce the risk of deadweight.

The audit focused on the main stages at which investment aid can be 
channelled to priorities and identified needs through different aspects 
of the policy’s framework, namely the EU regulatory framework, the RDP, 
the Commission’s approval of the RDP and Member States’ implementa-
tion of the measure. 

The audit work covered both the Commission and 10 Member States10. 
At the level of the Commission the design of the measure through the 
underlying applicable EU legislation 11 and the European Commission’s 
activities when approving the RDPs submitted by the Member States, 
and any subsequent follow-up was examined. Seven of the 10 select-
ed Member States (and/or regions in these States) were visited by the  
audit teams and a further three were subject to a desk review. The audit 
comprised a documentary review of the underlying RDPs and the rele 
vant national/regional legislation and the procedures put in place for 
selecting investment projects to be financed by measure 121. To assess 
the CMEF as a monitoring tool for measure 121, the Court examined the 
data collected and reported yearly by Member States.

The Court reviewed a sample of 100 investment projects approved during 
200912 by the competent national or regional authorities (10 investment 
projects for each Member State or region audited) in order to analyse the 
process by which these projects had been selected. The Court’s auditors 
visited 21 of the projects in the sample on the spot and interviewed the 
final beneficiaries.

18. 

19. 

20. 

21. 

22. 

Special Report No 8/2012 — Targeting of aid for the modernisation of agricultural holdings

 
OBSERVATIONS

15

23. 

24. 

TARGETING	THE	MEASURE	121	FUNDING	TO	MEET	
EU PRIORITIES	AND	IDENTIFIED	NEEDS

A	CERTAIN	DEGREE	OF	MODERNISATION	RESULTS	FROM	THE	
PURCHASE	OF	NEW	EQUIPMENT	OR	FACILITIES	

The Court found that all 100 projects in the sample reviewed had already 
achieved, or were likely to achieve, the modernisation of the holding 
and/or the farming sector concerned. This was, however, almost inevita-
ble as investments usually finance new machinery, new equipment, new 
buildings or the renovation of buildings and a degree of modernisation 
results from any purchase of new equipment or facilities.

Similarly, new investments are likely to automatically address to some 
extent the EU priorities (see paragraph 10), such as introducing new 
technologies and improving the environmental, occupational safety, 
hygiene and animal welfare status of agricultural holdings. Constant 
advances in technology and environmental standards mean that any new 
equipment is likely to represent some improvement in energy efficiency 
and emissions in relation to older equipment. As an example, new ani-
mal housing has to meet standards established in EU directives, so will 
represent some improvement over older facilities in terms of hygiene, 
animal welfare, occupational safety and environmental protection. How-
ever, other EU priorities, such as innovation, quality and diversification, 
are not necessarily addressed automatically by simply investing in new 
equipment or facilities. 

CERTAIN	MEMBER	STATES	TARGET	THE	AID	TO	PROJECTS	THAT	
ADDRESS	IDENTIFIED	NEEDS	AND	EU	PRIORITIES	…	

25. 

Where aid is targeted to specific needs in line with the EU priorities, 
a more effective use of the aid can be achieved. Projects that specifically 
address agreed priorities and the identified needs should represent bet-
ter value for money for the EU and national taxpayers who provide the 
funding.

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26. 

Most Member States applied restrictive eligibility conditions to achieve 
a basic targeting of the aid. For example:

 ʱ

 ʱ

in Hungary, the authorities issued calls for project proposals for 
specific sectors or types of projects such as the modernisation of 
livestock farms, horticultural equipment, irrigation projects, etc.; 

in Germany (Baden-Württemberg), field machinery such as tractors 
was excluded. However, in some Member States such as Poland 
and Luxembourg, almost any type of farm investment was eligible.

27. 

Targeting of the aid by giving an incentive to projects that correspond 
to the needs and priorities identified in the RDP was found in several 
Member States. For example:

 ʱ

 ʱ

Luxembourg offered higher rates of aid (an additional 10 % of the 
project cost) for investments addressing environmental concerns 
or animal welfare; 

in Belgium, a 40 % aid rate was applied for projects that improved 
manure storage and spreading facilities — double the standard 
rate of 20 %.

28. 

Two Member States targeted further by selecting the best projects from 
within those projects they had deemed eligible. Italy ( Veneto) and Ro-
mania used such selection criteria with other targeting methods in order 
to address the RDP needs, in line with the EU’s priorities.

BOX	2

AN	EXAMPLE	OF	GOOD	PRACTICE:	ITALY	(VENETO	REGION)	MAXIMISED		
THE	PROBABILITY	OF	SELECTING	INVESTMENT	PROJECTS	THAT	BEST	ADDRESS	
IDENTIFIED	NEEDS	AND	ALSO	EU	PRIORITIES	

Veneto sets out its selection criteria to choose projects from the eligible applications through a scoring 
system that takes into account the priorities defined in the regional RDP and defines lists of ‘priority 
investment’ types per sector. 

These priorities were: environmental benefits; enhancing the value of products; enterprise integration; 
structural modernisation; access to information and communication technology; reconversion and 
restructuring of particular agricultural sectors and projects located in mountain areas.

As an example, a project to construct a warehouse and cold storage for apples was selected as it cor-
responded to the priorities of organic production (which enhances the value); it used photovoltaic 
panels to reduce energy consumption (environmental benefits) and it was located in a mountain area.

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29. 

30. 

31. 

…	BUT	IN	PRACTICE	LITTLE	PRIORITISATION	TAKES	PLACE

In Germany (Baden-Württemberg), Spain (Catalonia), France, Hungary and 
Portugal (mainland), national procedures established selection criteria 
against which all projects were assessed. However, regardless of the 
result of this assessment, all eligible project applications were awarded 
a grant as the budget for the measure was sufficient.

For  example,  in  France,  the  author ities  considered  a  projec t  for 
76 000 euro to construct stables for horses as eligible but it received 
a score of zero points in the assessment as it did not address any of the 
priorities established for the measure. Nevertheless, as there was more 
budget available than total demand from the eligible project applica-
tions received at that time, the project was awarded a grant. 

In Belgium, Luxembourg and Poland, no selection criteria had been es-
tablished: this was despite the Commission advising Member States that 
it is a legal obligation to define such selection criteria.

BOX	3

THE	POLISH	RDP,	AN	EXAMPLE	OF	A	LACK	OF	TARGETING	

An independent ex ante evaluation of the Polish RDP showed that the targeting system was weak and 
recommended the preparation and implementation of selection criteria. However, the RDP does not 
set out any selection criteria or other means addressing specific needs or objectives. As the criteria 
adopted only excluded farms below a certain size, almost all holdings in all agricultural sectors were 
eligible to apply. This led to a level of demand far exceeding the number of projects that it was pos-
sible to finance.

As a result, during the first call for project proposals in 2007, the Polish managing authority applied the 
‘first-come, first-served’ principle. Eligible applications were received in order of their submission until 
the budget ceiling for the region concerned was reached. This led in some regional offices to queues 
of applicants waiting in front of the administrative office. During the second call for projects in 2009, 
the selection of projects was carried out on a random basis. All admissible applications meeting the 
basic eligibility criteria were selected in random order until the available budget for the region was 
exhausted. With these selection methods there is no mechanism to target the funding to projects that 
address identified structural or territorial needs.

From October 2010 onwards the Polish authorities introduced selection criteria for investment projects.

Special Report No 8/2012 — Targeting of aid for the modernisation of agricultural holdings

18

OVERVIEW	OF	THE	DIFFERENT	METHODS	OF	TARGETING	USED	BY	THE	MEMBER	STATES	
(REGIONS)	AUDITED

32. 

An overview of the different methods of targeting implemented across 
the  10  Member  States  is  given  in  Table 1,  together  with  the  Court’s 
analysis of the degree of targeting achieved through RDP provisions, 
the national legislation and implementing procedures.

TABLE	1

THE	DIFFERENT	METHODS	AND	DEGREES	OF	TARGETING	IN	THE	10	MEMBER	STATES	
(REGIONS)	AUDITED

Member State

Belgium (Wallonia)

Germany 
(Baden-Württemberg)

Spain (Catalonia)

France (mainland)

Italy (Veneto)

Luxembourg

Hungary

Poland

Portugal 
(mainland)

Romania

Restrictive eligibility 
criteria linked to 
priorities developed 
and/or incentives given

Selection criteria 
defined to target aid

Selection criteria 
effectively applied

Overall assessment 
of targeting

√

√

√

√

√

limited

√

X

√

√

X

√

√

√

√

X

√

X

√

√

X

X

X

X

√

X

X

X

X 

√

weak

limited

limited

limited

strong

weak

limited

weak

limited

strong

Special Report No 8/2012 — Targeting of aid for the modernisation of agricultural holdings

19

33. 

34. 

35. 

36. 

THE	COMMISSION	APPROVED	SOME	RDPS	THAT	DID	NOT	TARGET	THE	
AID	TO	IDENTIFIED	NEEDS	AND	PRIORITIES

The lack of effective targeting observed in paragraphs 29 to 32 above 
should not arise as the RDPs established by Member States are submitted 
to the Commission for approval and the legislation requires that they 
contain sufficient evidence that the investment measures are targeted 
on clearly defined objectives reflecting identified structural and territo-
rial needs and structural disadvantages 13. The current legislation does 
not oblige Member States to disclose in the RDP the selection criteria 
to be used. These may be adopted by the Member State after the Com-
mission has approved the RDP. However, including in the RDP the key 
elements the Member State intends to use for the selection of invest-
ment projects is essential for the purpose of identifying if and to what 
extent the required targeting will be achieved.

13  Article 43 of Regulation 
(EC) No 1974/2006.

14  Although the Romanian 
RDP contained little evidence 
of good targeting at the 
time of its approval by the 
Commission, investments 
under measure 121 were 
strongly targeted in practice 
due to the implementation 
of restrictive eligibility criteria 
and the effective application 
of relevant selection criteria 
(see Table 1).

Two of the 10 RDPs examined contained clear evidence of good targeting 
of measure 121 (Italy ( Veneto) and Hungary). Six other RDPs contained 
little evidence of such targeting (Belgium ( Wallonia), Germany (Baden-
Württemberg), Spain (Catalonia), France, Romania 14 and Portugal). Two 
RDPs (Luxembourg and Poland) did not contain sufficient evidence that 
measure 121 was targeted. All 10 of the RDPs were, however, approved 
by the Commission.

The Commission’s services questioned the lack of targeting of measure 
121 during their assessment of the proposed Polish RDP in July 2007. In 
this context, the Commission raised the issue of the proposed ‘first-come, 
first-served’ approach. The Polish RDP was not subsequently modified yet 
the Commission approved it in September 2007 despite the insufficient 
targeting.

Luxembourg’s RDP sets out eligibility criteria and differentiated aid rates 
but it fails to specify the way in which the aid will be targeted to the 
objectives it has defined to address its particular needs. The Commission 
has reminded the Luxembourg authorities several times of their obliga-
tion to set selection criteria.

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20

37. 

38. 

The cases of Luxembourg and Poland underline the need for the Com-
mission to ensure a sufficient level of targeting evidenced within the 
RDP submitted for its approval. Once an RDP is approved by the Com-
mission and EAFRD funds are made available to the Member State, it is 
more difficult for the Commission to retroactively ensure targeting. 

THE	DESCRIPTION	OF	TARGETING	ELEMENTS	INCLUDED		
IN	THE	RDP	DOES	NOT	ALWAYS	CORRESPOND	TO	THE		
TARGETING	APPLIED	IN	PRACTICE	

The Court found that the selection process implemented and the tar-
geting achieved in practice sometimes differed significantly from the 
description in the RDP, the chief document on which the Commission 
bases its decision to approve the overall spending programme. Some 
Member States described detailed selection systems in their RDP but in 
practice financed all eligible projects rendering their selection proce-
dures meaningless (France, Hungary). Conversely, other Member States, 
notably Portugal, developed more detailed targeting systems than were 
described in the RDP approved by the Commission.

THE	CMEF	DOES	NOT	ALLOW	THE	EXTENT	TO	WHICH	THE	MEASURE	
ADDRESSES	ALL	THE	EU	PRIORITIES	TO	BE	MONITORED

39. 

The CMEF provides information on progress in programme implementa-
tion with respect to indicators of financial inputs, outputs and results. It 
should, therefore, help identify the results of the targeting of the measure.

Special Report No 8/2012 — Targeting of aid for the modernisation of agricultural holdings

21

15  CMEF handbook: 
‘Changes in land use or 
in agricultural practices 
that lead to a change in 
the composition of the 
basic agricultural products’. 
(The Handbook on Common 
Monitoring and Evaluation 
Framework,Guidance 
document, Directorate-
General for Agriculture 
and Rural Development, 
September 2006.) 

16  Romania, Annual Progress 
Report 2009.

40. 

41. 

The CMEF indicators defined for measure 121 (see Table 2) are not rel-
evant for monitoring the extent to which certain EU priorities, or the 
specific actions of the measure, such as quality, on/off-farm diversifi-
cation and improving the environmental, occupational safety, hygiene 
and animal welfare status of agricultural holdings, are addressed by the 
projects financed as no such data is collected.

CMEF	DATA	ON	RESULTS	ARE	OF	LOW	RELIABILITY

The ‘New products and/or techniques’ result indicator is important for an 
investment measure the main objective of which is the modernisation 
of holdings. The audit revealed that it was difficult for Member States to 
collect data that corresponds to the CMEF definition of this specific indi-
cator15. Some Member States decided not to report on it at all (France) or 
to measure it only partially (Belgium ( Wallonia), which refers only to ‘new 
products’). Further, the mid-term evaluation reports identified, for five of 
the 10 Member States audited, the difficulty of defining ‘new techniques’ 
(Belgium (Wallonia), Germany (Baden-Württemberg), France, Luxembourg, 
Romania). Other Member States applied a definition the scope of which 
is broader than that of the definition proposed by the CMEF. In Romania, 
the definition includes any product or technique that is new to the hold-
ing. The definition thus includes almost all investment projects supported 
through the measure (98 % of finalised investments16).

TABLE	2

CMEF	INDICATORS	FOR	MEASURE	121

Type of 
indicator

Baseline

Input

Output1

Result

Impact

Indicator

Labour productivity in agriculture

Gross fixed capital formation in agriculture

Amount of public expenditure realised (total versus EAFRD)

Number of farm holdings that received investment support (division according to sex, legal status, age category, 
type of investments — FADN2 — and type of agricultural branch)

Total volume of investment (division according to the type of investment — FADN — and type of agricultural branch)

Number of holdings introducing new products and/or techniques (division according to type of redeployment of 
production)

Increase in gross value added in supported holdings

Economic growth

Labour productivity

1  According to the CMEF, the number of applications approved will also be provided.
2  Farm Accountancy Data Network.

Special Report No 8/2012 — Targeting of aid for the modernisation of agricultural holdings

22

17  ‘Working paper on the 
CMEF gross value added 
indicators’, European 
Commission, March 2010. 

18  COM(2007) 722 final of 
20 November 2007.

19  Council Regulation 
(EC) No 74/2009 of 
19 January 2009 amending 
Regulation (EC) No 1698/2005 
on support for rural 
development by the EAFRD 
(OJ L 30, 31.1.2009, p. 100).

20  Recital 6 of Regulation 
(EC) No 74/2009 states: ‘It is 
important that operations 
related to these Community 
priorities are further 
strengthened in the rural 
development programmes 
approved in accordance 
with Regulation (EC) 
No 1698/2005.’

42. 

According to a guidance document issued by the Commission, the ‘In-
crease in gross value added (GVA)’ result indicator is intended to measure 
the  improvement  of  economic  performance  at  the  level  of  holdings 
supported17. Two of the seven Member States visited did not report on 
the increase in GVA in the period 2007–10 due to difficulties in collect-
ing the necessary data (Luxembourg and France). For the other Member 
States visited the audit found widely varying definitions and methods for 
collecting the data. The mid-term evaluation report for Spain (Catalonia) 
pointed out that the reliability of the ‘increase in GVA’ indicator is very 
low, as the necessary accounting information was available only for a 
very limited sample of beneficiary holdings. 

43. 

A consequence of the low reliability and lack of common definitions is 
that the data that is collected is not comparable between Member States 
and cannot meaningfully be aggregated at EU level.

TARGETING	ADDITIONAL	FUNDS	THROUGH	THE	
‘HEALTH	CHECK’	

THE	‘HEALTH	CHECK’	AIMED	AT	TARGETING	ADDITIONAL	FUNDS	TO	
‘NEW	CHALLENGES’	

44. 

With its 2007 ‘Health Check’ proposal18, the Commission identified several 
‘new challenges’ for European agriculture, in the areas of climate change, 
renewable energy, water management and biodiversity. The Council 
added the restructuring of the dairy sector as a further challenge. The 
Council made an additional 4,95 billion euro available 19 through the 
‘Health Check’ and the EERP and underlined the importance of target-
ing these funds by ‘further strengthening’20 operations related to the 
EU’s new challenges in the Member States’ RDPs. Member States which 
intended to address the new challenges within their RDPs and thus ac-
tivate the supplementary funding available through the ‘Health Check’ 
and EERP from January 2010 onwards had to submit revised RDPs to the 
Commission for its approval by June 2009. Following this, an estimated 
additional 630 million euro was programmed for measure 121. 

45. 

The Court’s services reviewed the use of measure 121 to address the 
new challenges by assessing the revised ‘Health Check’ RDPs approved 
by the Commission and the national implementation procedures in the 
10 Member States reviewed for this audit.

Special Report No 8/2012 — Targeting of aid for the modernisation of agricultural holdings

23

46. 

47. 

48. 

SOME	MEMBER	STATES	DID	NOT	USE	THE	ADDITIONAL	FUNDING	TO	
‘FURTHER	STRENGTHEN’	MEASURE	121	

Member States may make use of the additional funding to increase aid 
rates for relevant projects, for example, or by introducing specific sub-
measures to address the new challenges. They may also revise their pro-
cedures and criteria in order to favour, during the selection process, 
investments addressing the new challenges. 

21  Three Member States 
covered by the audit did not 
allocate additional resources 
to measure 121 following 
the ‘Health Check’ (these are 
Belgium (Wallonia), Spain 
(Catalonia) and Hungary).

For seven of the 10 Member States covered by the audit 21, the adop-
tion of the ‘Health Check’ and the EERP increased the budget allocated 
to measure 121. In all of these cases, the RDPs had already addressed 
objectives linked to the new priorities before the ‘Health Check’. 

The seven Member States that increased the budget for measure 121 
responded to the new priorities in different ways. Three Member States 
(Italy ( Veneto), Romania and Portugal) revised their selection procedures 
in order to give greater preference to investment projects under meas-
ure 121 addressing the new priorities:

 ʱ

 ʱ

 ʱ

In Italy, the aid rates and the maximum amount of grant were in-
creased for projects in the dairy sector. The ‘new challenge’ priorities 
were added to the priority selection criteria, increasing the likeli-
hood of selecting projects that addressed the new challenges. 

Romania changed its procedures by attributing additional points 
for project proposals that invested in renewable energy. 

The Portuguese authorities opened a specific call for project pro-
posals for the dairy sector in which the aid rates were 10 % higher 
than the rates for non-priority sectors. 

49. 

Three Member States (Germany (Baden-Württemberg), France and Lux-
embourg) did not change their procedures. Poland was revising its pro-
cedures at the time of the audit.

Special Report No 8/2012 — Targeting of aid for the modernisation of agricultural holdings

24

Beyond this, the observations presented in paragraphs 29 to 32 above 
show  that  many  of  the  Member  States  did  not  implement  eligibility 
rules, selection procedures or criteria that would allow them to target 
the additional resources to the priorities of climate change, renewable 
energy, water management and biodiversity. 

22  Article 69(5a) of Regulation 
(EC) No 1698/2005, 
introduced by Regulation 
(EC) No 74/2009.

Member States are obliged to ensure that ‘an amount equal’ to the sup-
plementary funding resulting from the ‘Health Check’ and the EERP is 
spent on operations addressing the new challenges 22. Member States 
have to ensure that a separate financial reporting for operations ad-
dressing the new challenges allows the Commission to verify that this 
condition has been respected. Member States are also required to moni-
tor,  under  the  CMEF,  to  what  extent  the  new  challenges  were  being 
addressed by operations financed by the EAFRD, from 2010 onwards. 
However, prior to the ‘Health Check’, operations already addressing the 
new challenges were not specifically reported upon, under either the 
financial reporting to the Commission or the CMEF. This makes a com-
parison between the situation before and after the ‘Health Check’ almost 
impossible. 

The  Court’s  audit  identified  the  risk  that  Member  States,  which  had 
planned to finance operations that addressed the new challenges prior 
to the ‘Health Check’, might use the extra funding for purposes other 
than further strengthening of the new priorities. This may happen where 
Member States had planned to address similar priorities such as the dairy 
sector prior to the new funding being made available. The previously 
planned spending is then considered as fulfilling the requirements of 
the ‘Health Check’ and the ‘extra’ ‘Health Check’ monies are used for other 
purposes.

50. 

51. 

52. 

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25

53. 

54. 

55. 

This risk materialised, as in one case examined such a substitution was 
explicitly described in a ‘Health Check’ RDP submitted to and approved 
by the Commission (see Box 4).

The Commission considers the type of budgetary substitution illustrated 
in Box 4 to be in conformity with the provisions of the regulation, as 
59,8 million euro will be shown to cover  operations  addressing  new 
priorities. But, as exactly the same amount will be spent on new priori-
ties as was planned prior to the ‘Health Check’, it does not result in any 
‘further strengthening’. 

The Court therefore highlights the fact that not all the monies made 
available under the ‘Health Check’/EERP will be used to further strength-
en the identified priorities and that the actual amount that does indeed 
strengthen those priorities will be impossible to identify, as compared 
to the situation prior to the ‘Health Check’.

BOX	4

GERMANY	(BADEN	WÜRTTEMBERG):	EXTRA	‘HEALTH	CHECK’	FUNDING	REPLACES	
BUDGETED	EXPENDITURE	ALREADY	ADDRESSING	THE	NEW	CHALLENGES

Within the revised ‘Health Check’ RDP submitted to the Commission, following the ‘Health Check’/EERP, 
an additional amount of 59,8 million euro was allocated to the RDP budget for Baden-Württemberg in 
order to address three new challenges: restructuring the dairy sector, climate change and biodiversity. 
The funds were exclusively channelled to the existing measures 121 and 214 (agri-environment meas-
ure). The restructuring of the dairy sector was to be addressed by measure 121.

The Baden-Württemberg authorities asserted that within the existing measures 121 and 214, as defined 
in the initial RDP adopted in November 2007, an amount greater than 59,8 million euro had already 
been committed for operations addressing the new challenges prior to the ‘Health Check’. The Baden-
Württemberg authorities consequently subtracted an amount of 59,8 million euro from the existing 
budgets for measures 121 and 214, and reallocated this amount to several existing measures, of which 
some 18 million euro to measure 121 in order to address specific regional needs.

Within the budget of measure 121, the authorities ring-fenced 26 million euro for the new challenge 
of restructuring the dairy sector. Pre ‘Health Check’ expenditure data however indicates that the likely 
amount of the original budget to be spent on the dairy sector was already some 35 million euro.

Special Report No 8/2012 — Targeting of aid for the modernisation of agricultural holdings

26

TARGETING	THE	AID	TO	AVOID	RISKS	TO	
SUSTAINABILITY	AND	DEADWEIGHT

INSUFFICIENT	VERIFICATION	OF	THE	ECONOMIC	VIABILITY	OF	
HOLDINGS	AND	INVESTMENT	PROJECTS	SUBMITTED

Member States should ensure that the economic viability of the pro-
posed investments on the agricultural holdings can be demonstrated 
before awarding the grant to avoid giving aid to holdings that are likely 
to fail and to ensure the sustainability of the investment aided. Despite 
there being no legal obligation to do so, all Member States (regions)  
audited  required  applicants  to  submit  some  level  of  proof  of  the 
economic  viability  of  their  holding  and/or  of  the  project  proposal23. 
Nevertheless, the audit found that the level and the extensiveness of 
such proof varies significantly between Member States.

23  The regulations require 
only that the proposed 
investment improves the 
overall performance of the 
holding. 

In Luxembourg, an attestation is required for investments above a certain 
threshold, certifying that the farmer has received economic counselling 
regarding his investment project — this attestation contains a summary 
of the holding’s gross profit and the project’s costs, but not the result of 
the economic analysis. 

In Hungary, the quality and soundness of the financial plan to be submit-
ted with the project application are evaluated through a project scoring 
system based on a computerised comparison with reference data. More 
than a quarter of the projects selected in a 2008 call for proposals scored 
zero in one or more criteria in the assessment of the ‘realism of the finan-
cial plan’. The Court identified that there was no minimum score set for 
the evaluation of the financial plan and that all projects were accepted 
regardless of the score obtained.

In Poland, the financial soundness of a project has to be demonstrated 
by the applicant only in cases where the project’s objective is specifi-
cally aimed at increasing the gross added value of the holding. It is, 
however, up to the farmer to tick, in his application, if this is the aim of 
his project, which would automatically initiate a further analysis of his 
claim by the administration. None of the 10 projects reviewed by the 
Court had indicated this as an objective, and so no viability check was 
performed for them. 

56. 

57. 

58. 

59. 

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27

24  Special Report No 5/2010 
on implementation of the 
Leader approach for rural 
development  
(http://eca.europa.eu). 

25  Similar rules applied in 
Germany, France, Hungary 
and Poland, although 
exceptions were allowed.

60. 

61. 

MEMBER	STATES	SELECTED	PROJECTS	THAT	HAD	ALREADY	STARTED,	
THEREBY	ENTAILING	THE	RISK	OF	DEADWEIGHT

The  Court  has  identified  in  previous  reports  (e.g.  on  the  Leader  ap-
proach)24 that a risk to the efficiency of any grant-based programme is 
that the investment would have been carried out anyway without the 
public aid. Such investments constitute ‘deadweight’.

A strong indication of a possible deadweight effect is where projects had 
already started or even been completed before the aid was granted. If 
aid is granted retroactively, the farmer demonstrated, by his initial invest-
ment decision, that he was willing to carry out the investment even in 
the absence of an agreement for public support. 

62. 

For measure 121, there are different approaches regarding the approval 
of a project for which work has started:

 ʱ

 ʱ

 ʱ

In Luxembourg, agricultural holdings may apply for investment aid 
after they have already carried out the investment if the amount 
is under 100 000 euro, or the project started between the begin-
ning of the programming period and the date of publication of the 
national implementing law. 

In other Member States, including Spain (Catalonia), Italy ( Veneto) 
and Portugal, holdings may start the potentially eligible investment 
on the date they submit their application for aid, without having 
the certainty that the project will be approved for financing. 

In Belgium ( Wallonia) and Romania, investment project costs are 
eligible only from the date that the grant was approved, which 
represents good practice25.

63. 

The  audit  found  that  for  four  of  the  Member  States/regions  audited 
(Spain (Catalonia), Italy ( Veneto), Luxembourg and Portugal (mainland)), 
half of the projects in the sample had started (or had even been com-
pleted) before the grant was awarded. In these cases, the deadweight 
risk, i.e. that the farmer would have carried out the investment even in 
the absence of public support, is significant.

Special Report No 8/2012 — Targeting of aid for the modernisation of agricultural holdings

28

Legislative proposals from the Commission to amend the current rural 
development regulation26 specify that expenditure will be eligible only 
after a grant application has been submitted. This will prevent retrospec-
tive approval of the sort permitted in Luxembourg, but does not suf-
ficiently address the risk of deadweight as the investment project could 
still start before the approval of the application (and even before the 
application has been submitted, with the provision that costs incurred 
up to the application date will not be eligible for support). 

26  COM(2010) 537 final 
of 30 September 2010 — 
Commission's proposal 
for a regulation 
amending Regulation 
(EC) No 1698/2005; legislative 
codecision procedure 
COD/2010/0266.

The Commission proposal for the 2014–20 rural development period 
reiterates this requirement. However, it also foresees good practice in 
this respect, with the explicit provision that Member States may provide 
that expenditure is eligible only from the date of grant approval (see 
Box 5).

64. 

65. 

BOX	5

COMMISSION	PROPOSAL	FOR	THE	2014–2027	RURAL	DEVELOPMENT	PERIOD

With the exception of general costs [preparatory costs]…, in respect of investment operations…, only 
expenditure  which  has  been  incurred  after  an  application  has  been  submitted  to  the  competent  
authority shall be considered eligible.

Member States may provide in their programmes that only expenditure which has been incurred after 
the application for support has been approved by the competent authority shall be eligible.

27  COM(2011) 627 final/2 — Commission's proposal for a regulation of the European Parliament and of the Council on support 
for rural development by the European Agricultural Fund for Rural Development (EAFRD); presented by the Commission in the 
legislative framework for the CAP in the period 2014–20.

Special Report No 8/2012 — Targeting of aid for the modernisation of agricultural holdings

CONCLUSIONS AND RECOMMENDATIONS

29

66. 

67. 

68. 

69. 

The Court’s audit found that rural development investment measure 121, 
‘Modernisation of agricultural holdings’, achieved its nominal objective in 
that it resulted in the modernisation of holdings. However it concludes 
that this was almost inevitable given the fact that almost any investment 
or purchase of new equipment can be considered to modernise to some 
extent and fulfil the very broad criteria of eligibility (paragraphs 23 to 24). 

Though Member States are required to target investment aid on clearly 
identified needs in their rural areas, the extent of targeting varies signifi-
cantly between the Member States reviewed. Some target the aid very 
strongly on specific needs and have established selection procedures 
to choose the best-suited projects from those eligible applicants (para-
graphs 25 to 28). 

Other Member States have awarded grants to all the project proposals 
received that meet basic eligibility conditions, regardless of the projects’ 
contribution to achieving the objectives set for the measure. Such prac-
tices lead to a less effective and efficient use of the public funds, both 
EU and national. The 11,1 billion euro allocated to this measure by the 
EAFRD has the potential to provide greater value for money if it were bet-
ter targeted to EU priorities and identified national and regional needs 
(paragraphs 29 to 32).

The Commission approved rural development programmes (RDP) that 
did not adequately target the aid and, in particular, that did not specify 
the process or criteria to be applied for selecting projects (paragraphs 33 
to 38).

RECOMMENDATION	1

(a) 

The Commission should propose legislation with clear require-
ments for Member States to give details in their RDPs of how the 
measure  will  be  targeted  to  the  identified  needs,  and  overall 
priorities, including details of the project selection process and 
criteria to be implemented, and should ensure that these require-
ments are met when approving the RDPs. 

(b)  When implementing their RDPs for the forthcoming program-
ming period, Member States should target the aid through clear 
and relevant selection criteria, addressing the EU priorities and 
national or regional needs.

Special Report No 8/2012 — Targeting of aid for the modernisation of agricultural holdings

30

70. 

The CMEF has been set up as a tool for the Member States and the Com-
mission. The Court found that it does not generate relevant data which 
can be used for monitoring the results obtained with the funds spent 
on measure 121. The indicators defined do not allow progress in the 
achievement of the EU’s priorities to be monitored, and the data were 
found to be of low reliability and do not allow comparisons between 
Member States (and/or regions) to be drawn (paragraphs 39 to 43).

RECOMMENDATION	2

The  Commission  should  ensure  that  for  the  for thcoming  program-
ming period, relevant and reliable information is obtained to facilitate 
management and monitoring of the measure and to demonstrate the 
extent to which the aid given is contributing to the achievement of 
EU priorities.

71. 

The 2009 ‘Health Check’ provided some 5 billion euro of extra funding 
to further strengthen specific EU priorities that were defined as being 
the EU’s new challenges including climate change and biodiversity. The 
absence of effective targeting mechanisms weakens the potential effec-
tiveness of the additional funds in meeting these challenges. Moreover, 
the Court’s audit revealed instances where a ‘further strengthening’ will 
not be achieved due to the substitution of the extra ‘Health Check’/EERP 
funding with funds already programmed for the measures concerned 
prior to the ‘Health Check’ (paragraphs 44 to 55).

RECOMMENDATION	3

Where it is the intention to earmark particular measures and budgetary 
allocations to target specific priorities, as was the case with the ‘Health 
Check’, to ensure that the funding has an additional effect the Com-
mission should propose legislation to make this requirement specific 
in the underlying EU regulations.

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31

72. 

All Member States (regions) audited require applicants to submit some 
level of proof of the economic viability of their holding and/or of the 
project proposal. However, some Member States did not take the evi-
dence obtained into account when evaluating the project application 
(paragraphs 56 to 59).

RECOMMENDATION	4

Member States should put effective procedures in place, proportionate 
to the risk, to ensure that grants are not given to projects where the 
financial viability of the investment or the sustainability of the holding 
is in doubt.

73. 

The Court found that the deadweight risk linked to the retroactive ap-
proval of investments which had already started persists (paragraphs 60 
to 65). 

RECOMMENDATION	5

The Commission should encourage Member States to follow good prac-
tice whereby expenditure for investments would be eligible only from 
the date of grant approval.

This Report was adopted by Chamber I, headed by Mr Ioannis SARMAS, 
Member  of  the  Cour t  of  Auditors,  in  Luxembourg  at  its  meeting  of 
14 March 2012.

For the Court of Auditors

Vítor Manuel da SILVA CALDEIRA
President

Special Report No 8/2012 — Targeting of aid for the modernisation of agricultural holdings

32

ANNEX

SELECTED	RURAL	DEVELOPMENT	PROGRAMMES	(RDP)	AND	CORRESPONDING	
MEMBER STATES	OR	THEIR	REGIONS	COVERED	BY	THE	AUDIT,	TOGETHER	WITH	
THE RESPECTIVE	BUDGET	FOR	MEASURE	121,	FOR	2007–13

RDP

EU’s contribution (via EAFRD)
2007–13  
(euro)

Total public M121 budget
2007–131 
(euro)

Belgium (Wallonia)

Germany (Baden-Württemberg)

Spain (Catalonia)

France (mainland)

Italy (Veneto)

Luxembourg

Hungary

Poland

Portugal (mainland)

Romania

28 800 000

84 196 000

27 628 000

687 062 000

87 816 000

24 574 000

1 175 175 000

1 449 672 000

259 874 000

816 404 000

1 

Including national or regional public co-financing.

96 000 000

168 393 000

119 082 000

1 374 125 000

190 381 000

122 871 000

1 652 571 000

1 919 068 000

344 923 000

1 020 506 000

Special Report No 8/2012 — Targeting of aid for the modernisation of agricultural holdings

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REPLY OF THE 
COMMISSION

EXECUTIVE	SUMMARY

V.	(a)
According to Regulation (EC) No 1698/2005, the purpose 
of the measure is to modernise agricultural holdings by 
improving  their  economic  per formance  through  better 
use of production factors as well as improving the environ-
mental, occupational safety, hygiene and animal welfare 
status of agricultural holdings.

The  Commission  considers  that  when  an  investment 
improves  the  economic  per formance  of  the  holding  or 
improves the environmental, occupational safety, hygiene 
or  animal  welfare  status,  it  fulfils  the  objective  of  the 
measure.

V.	(c)
Regulation (EC) No 1698/2005 stipulates that, in accord-
ance with the principles of subsidiarity and shared man-
agement,  selection  criteria  may  be  defined  after  pro -
gramme  approval  in  consultation  with  the  Monitoring 
Committee and they are not subject to rural development 
programme (RDP) approval by the Commission. 

Selection criteria are not the only way to target the meas-
ure to objectives reflecting the structural and territorial 
needs  and  structural  disadvantages  as  identified  in  the 
SWOT 1  analysis  of  the  RDP. Targeting  can  also  take  the 
form of detailed eligibility rules, regional and sectoral dif-
ferentiation, differentiation of aid intensities as well as aid 
ceilings by which Member State can make a preselection 
among potential beneficiaries.

V.	(d)
The Commission considers that the Common Monitoring 
and  Evaluation  Framework  (CMEF)  is  a  valid  instrument 
to monitor and evaluate progress towards achieving the 
EU's rural development policy objectives and turned out 
to have many strengths, although some difficulties were 
encountered.

The Commission, Member States and various stakeholders 
devote much effort to continuously improving the system. 
This experience is being used for the development of an 
improved monitoring and evaluation system for the next 
programming period.

1  Strengths, weaknesses, opportunities and threats.

Special Report No 8/2012 — Targeting of aid for the modernisation of agricultural holdings

V.	(e)
The legislator formulated Article 69(5a) of Regulation (EC) 
No 1698/2005 so that an amount equal to the additional 
‘Health  Check ’  and  EERP 2  resources  shall  be  exclusively 
spent in the period from 1 January 2010 to 31 December 
2015 for operations of the types referred to in Article 16a 
of the regulation (‘new challenges’).

At  the  same  time,  additionality  was  not  required  in  the 
aforementioned article. Where the amounts in relation to 
new challenges were deemed already appropriate by the 
Member States, they were given the possibility to transfer 
funds programmed before the ‘Health Check’/EERP period 
for the period 2010–15 to other measures or operations. 

V.	(f )	
A comprehensive assessment of the viability was deemed 
to  be  dispropor tionate  for  many  types  of  investment 
projects and to create an unnecessary administrative bur-
den and costs.

For  the  next  programming  period,  the  Commission  has 
proposed  to  require  a  business  plan  for  some  measures 
that  provide  support  for  new  economic  activities  (busi-
ness start-up aid, including young farmers, non-agricul-
tural  activities  in  rural  areas  and  development  of  small 
farms and support to producer groups) in order to ensure 
viability.

V.	(g)
According to the Commission's proposals of September 2010 
for the amendment of Regulation (EC) No 1698/2005 and 
according to the proposal for the next programming period, 
in respect of investment operations under measures falling 
within the scope of Article 42 of the Treaty, the Commission 
has proposed that only expenditure which has been incurred 
after an application has been submitted to the competent 
authority shall be considered eligible.

2  European Economic Recovery Plan.

34

REPLY OF THE  
COMMISSION

VI.	(a)
According to the Commission's proposal for the next pro-
gramming period3, strategic programming will be further 
reinforced, with the result of an improved strategic target-
ing through the Union priorities for rural development and 
their focus areas. 

The  definition  and  application  of  selection  criteria  will 
be  reinforced  to  ensure  equal  treatment  of  applicants, 
better use of financial resources and targeting of meas-
ures  in  accordance  with  the  Union  priorities  for  rural 
development.

The proposal provides for improved targeting to invest-
ment support to farm restructuring. 

VI.	(b)
The monitoring and evaluation system is subject to review 
by the Commission and Member States in order to improve 
its efficiency and effectiveness and foster ownership by 
sharing good practices and building capacity. According 
to the Commission proposal for future rural development 
policy, quantified result indicators will be used to assess 
progress towards targets established ex ante at programme 
level. 

VI.	(c)
The Commission has proposed that Member States should 
have  the  possibility  in  the  nex t  programming  period 
to  design  thematic  subprogrammes,  aimed  to  address 
specific  needs,  by  earmarking  par ticular  measures  and  
budgetary allocations and setting specific financial and 
indicator plans. 

VI.	(d)
For  the  next  programming  period,  the  Commission  has 
proposed to require a business plan for certain measures 
that  provide  support  for  new  economic  activities  (busi-
ness start-up aid, including young farmers, non-agricul-
tural  activities  in  rural  areas  and  development  of  small 
farms and support to producer groups) in order to ensure 
viability. 

3  Proposal for a regulation of the European Parliament and of the Council 
on support for rural development by the European Agricultural Fund for 
Rural Development (EAFRD), COM(2011) 627 final/2 of 19 October 2011.

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35

REPLY OF THE  
COMMISSION

VI.	(e)
In its proposal of September 2010 for the amendment of 
Regulation  (EC)  No  1698/2005  and  in  respect  of  invest-
ment operations under measures falling within the scope 
of Article 42 of the Treaty, the Commission has proposed 
that  only  expenditure  which  has  been  incurred  after  an 
application has been submitted to the competent author-
ity shall be considered eligible.

A similar requirement has been introduced in Article 67(2) 
of  the  Commission  proposal  for  the  next  programming 
period. In this context, Member States may also provide 
in  their  programmes  that  only  expenditure  which  has 
been incurred after the application for support has been 
approved by the competent authority shall be eligible.

OBSERVATIONS

23.
According to Regulation (EC) No 1698/2005, the purpose 
of the measure is to modernise agricultural holdings by 
improving  their  economic  per formance  through  better 
use of production factors as well as improving the environ-
mental, occupational safety, hygiene and animal welfare 
status of agricultural holdings. The Commission considers 
that when a project improves the economic performance 
of  the  holding  or  improves  the  environmental,  occupa-
tional safety, hygiene or animal welfare status, it fulfils the 
objective of the measure.

24.
Innovation, quality and diversification, are general EU pri-
orities for the competitiveness objective, which is imple-
mented through axis 1 as a whole. The modernisation of 
agricultural holdings measure contributes to this objec-
tive by improving the competitiveness and environmental 
sustainability of the agricultural production. Not all invest-
ments should improve the farm's performance through all 
means to achieve the main objective of modernisation — 
each operation will be specific.

26.	Second	indent
In the Luxembourg rural development programme, meas-
ure 121 clearly identifies objectives to be achieved based 
on  the  SWOT  analysis  included  in  the  RDPs 4.  Neverthe-
less, the Commission has insisted on the need for greater 
selectivity on the occasion of the annual meetings with 
the Luxembourg authorities. Despite the fact that the RDP 
identifies clear objectives/needs/disadvantages, selection 
criteria and targeting could be further strengthened.

29–38.	Joint	reply
According to the principles of subsidiarity and shared man-
agement, project selection lies within the responsibility of 
Member States.

The Commission considers that while it is necessary for the 
Member States to establish selection criteria, they are not 
the only way to target the measure to objectives reflect-
ing the structural and territorial needs and structural dis-
advantages as identified in the SWOT analysis of the rural 
development programme. Targeting can also take the form 
of detailed eligibility rules, regional and sectoral differen-
tiation and differentiation of aid intensities as well as aid 
ceilings by which the Member State can make a preselec-
tion among the potential beneficiaries.

Nonetheless, the Commission has insisted on several occa-
sions on the need for greater selectivity, for example, dur-
ing annual meetings. Notably, at the beginning of the pro-
gramming period a letter was sent from the Commission 
to  the  Managing  Authorities  of  all  programmes  inviting 
them to take into account the importance of well-defined 
selection criteria for an effective implementation through-
out the whole period. Furthermore, in 2009, another letter 
asked Member States to make sure that adequate selection 
criteria are specified and used for the allocation of funds.

In cases where the selection criteria were already specified 
in the programme on a voluntary basis, the Commission 
has invited the national authorities to consult the Monitor-
ing Committee.

4  See Chapters 3 and 5 of the Luxembourg RDP.

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COMMISSION

Box	3	
In  the  specific  case  of  Poland,  the  documents  provided 
to the Court show that the initial preference of the Polish 
authorities  was  to  rely  on  eligibility  criteria  that  they 
regarded as being stringent enough to ensure targeting. 
Subsequent experience proved otherwise and selection 
criteria were adopted following consultation of the pro-
gramme Monitoring Committee in June 2009.

32.	
See reply to Box 3.

34.
While individual RDPs may not all contain all elements of 
targeting, the possibility exists for Member States to subse-
quently adopt selection criteria in line with the objectives 
of the RDPs.

As  for  the  Romanian  rural  development  programme,  it 
explicitly  identifies  the  needs  in  its  measure  121  form. 
Those needs are also presented in the third chapter of the 
Romanian RDP. Selection criteria were also included in the 
RDP, e.g. investments in LFA and fostering semi-subsistence 
farms.

40.
Since the purpose of measure 121 is to contribute to the 
objective of improving competitiveness, the Commission 
and Member States have agreed during the preparation of 
the Common Monitoring and Evaluation Framework that 
the  two  result  indicators ‘Gross  value  added  (GVA)’  and 
‘New products and/or techniques’ are relevant and suitable 
to capture the competitiveness dimension and respond to 
the measure's intended outcome. 

Where needed, Member States could complement com-
mon indicators with additional indicators to describe the 
programme's achievements on the basis of specific meas-
ure interventions. 

41.
Given that what constitutes modernisation or innovation 
differs widely across Member States , a common definition 
of what is actually ‘new’ would be neither meaningful nor 
desirable. Member States develop their own definition and 
assess projects accordingly. 

In  relation  to  the  findings  of  the  mid-term  evaluation 
reports, further exchanges with Member States as regards 
measurement of this indicator are envisaged.

42.
Although GVA is considered a valid indicator to capture 
economic performance at the level of holdings, experience 
has showed some difficulties in the collection of data in 
Member States. Therefore, the Commission has taken steps 
to address the problem and in a working paper of March 
2010 provided guidance on the definition and the method-
ology to be used for measurement of this indicator. 

43.
For  the  next  programming  period,  the  monitoring  and 
evaluation  system  is  being  reviewed  and  improved  to 
ensure relevance, usability and comparability at EU level of 
common indicators.

49.
The  Commission  considers  that  it  was  not  necessary  to 
change the modalities of support (aid rates, eligibility con-
ditions, etc.) where measure 121 had already addressed 
these new challenges in the previous versions of the rural 
development programmes in question.

50.
The ring-fenced amount of the ‘Health Check’/EERP was 
entirely programmed for related operations as identified 
under Annex II of Regulation (EC) No 1698/2005.

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REPLY OF THE  
COMMISSION

51.
Prior to the ‘Health Check’, reporting on operations already 
addressing  the  new  challenges  was  not  a  legal  require -
ment. This is why no comparison is possible.

However, with the ‘Health Check’, the amounts ring-fenced 
for  new  challenges  for  the  period  2010–15  are  clearly 
tracked.  Only  projects  addressing  the  new  challenges 
and declared to the Commission after the approval of the 
revised version of the programmes can qualify for ‘Health 
Check’/European Economic Recovery Plan funding. A sepa-
rate financial table for ‘new challenges’ was introduced in 
the financial plan accompanying the Commission decision 
approving the programme revision and against which the 
reimbursements are followed. 

52.
The legislator formulated Article 69(5a) of Regulation (EC) 
No 1698/2005 so that an amount equal to the additional 
‘Health  Check ’  and  European  Economic  Recover y  Plan 
resources  shall  be  exclusively  spent  in  the  period  from 
1  Januar y  2010  to  31  December  2015  for  operations  of 
the types referred to in Article 16a of the regulation (‘new 
challenges’).

At  the  same  time,  as  additionality  was  not  required  in 
the  aforementioned  article,  it  was  decided  to  take  into 
account the previous programming choices of the Member 
States where resources had already been allocated to sup-
port operations in relation to new challenges. Where the 
amounts were deemed already appropriate by the Mem-
ber States, they were given the possibility to transfer funds 
programmed in the pre-‘Health Check’/EERP funds period 
for the period 2010–15 to other measures or operations.

I t  is  not  possible  to  compare  amounts  pre -  and  post- 
‘Health Check’/EERP amendment, as the amounts already 
allocated  for  similar  operations  were  not  ring-fenced 
before the programme revision. 

53–54.	and	Box	4	—	Joint	reply
The  modification  following  the  implementation  of  the 
new priorities of the ‘Health Check’. and the European Eco-
nomic Recovery Plan was indeed considered in line with 
Article  69(5a)  of  Council  Regulation  (EC)  No  1698/2005, 
as a considerable amount of the EAFRD funds was already 
committed  to  addressing  the  new  priorities  within  the 
existing measures 121 and 214 defined in the initial RDP.

The Commission considers that further strengthening has 
taken place as the post-‘Health Check’ financial allocation 
to measure 121 has increased by 29 %

The most important effect of the ‘Health Check’/EERP mod-
ification is that 26.1 million euro is now earmarked and has 
to be spent for this specific priority within measure 121 
for the years 2010–15, regardless of what has already been 
spent before 2010.

55.	
See reply to paragraph 52.

57.
The rural development programme indicates that the eco-
nomic counsellor is responsible for establishing the devel-
opment plan. This is an eligibility criterion for projects of 
more than 100 000 euro.

58.	
I n  Hungar y,  eligible  projects  are  ranked  according  to 
a scoring system. The quality and soundness of the finan-
cial plan is one of the elements of this system. Other ele-
ments include, for instance, the establishment of a busi-
ness  plan,  which  should  demonstrate  that  the  project 
would  improve  the  overall  per formance  of  the  holding 
through, for instance, the enhancement of the competi-
tiveness of the farm, impact on biodiversity and positive 
energetic balance. As the purpose of these elements is to 
rank eligible projects, a zero point for the financial plan 
does not, as such, predetermine the viability of the project 
itself which, in fact, remains eligible.

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COMMISSION

CONCLUSIONS	AND	RECOMMENDATIONS

66.
According to Regulation (EC) No 1698/2005, the purpose 
of the measure is to modernise agricultural holdings by 
improving  their  economic  per formance  through  better 
use of production factors as well as improving the environ-
mental, occupational safety, hygiene and animal welfare 
status of agricultural holdings.

The  Commission  considers  that  when  an  investment 
improves  the  economic  per formance  of  the  holding  or 
improves the environmental, occupational safety, hygiene 
or  animal  welfare  status,  it  fulfils  the  objective  of  the 
measure.

67.	
Targeting  of  the  aid  can  be  achieved  in  many  ways: 
through selection criteria, detailed eligibility criteria, sec-
toral or regional differentiation and differentiation of aid 
intensities by type of beneficiary or by type of investment 
or by setting aid ceilings.

69.
I n  accordance  with  the  principles  of  subsidiarity  and 
shared management, Article 71(2) of Council Regulation 
(EC) No 1698/2005 stipulates that selection criteria may be 
defined after programme approval in consultation with the 
Monitoring Committee and they are not subject to a Com-
mission decision.

See also joint reply for paragrahs 29 to 38.

62.
In its proposal of September 2010 for the amendment of 
Regulation  (EC)  No  1698/2005  and  in  respect  of  invest-
ment operations under measures falling within the scope 
of Article 42 of the Treaty, the Commission has proposed 
that  only  expenditure  which  has  been  incurred  after  an 
application has been submitted to the competent author-
ity shall be considered eligible.

63.	
See reply to paragraph 62.

64.
The legislative proposal for the next programming period 5 
foresees that only expenditure which has been incurred 
after an application has been submitted to the competent 
authority shall be considered eligible. This mitigates the 
risk of deadweight, in the Commission's view. 

Box	5
The  first  provision  of  the  Commission  proposal  for  the 
2014–20 rural development period 6 has been introduced 
to align the agricultural measures to general state aid rules.

5  Proposal for a regulation of the European Parliament and of the Council 
on support for rural development by the European Agricultural Fund for 
Rural Development (EAFRD), COM(2011) 627 final/2 of 19 October 2011

6  COM(2011) 627 final/2 —- Commission’s proposal for a regulation of the 
European Parliament and of the Council on support for rural development 
by  the  European  Agricultural  Fund  for  Rural  Development  (EAFRD), 
presented by the Commission in the legislative framework for the CAP in 
the period 2014–20.

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REPLY OF THE  
COMMISSION

Recommendation	1
According to the Commission's proposal for the next pro-
gramming period, strategic programming will be further 
reinforced, with the result of an improved strategic target-
ing through the Union priorities for rural development and 
their focus areas. 

Besides  carr ying  out  a  SWOT  analysis,  Member  States/
regions  will  have  to  establish  ex ante quantified  targets 
(close  to  result-type  indicators)  for  the  RDP.  The  con -
tent of the programme shall contain a description of the 
strategy which includes the target setting for each of the 
focus areas of the Union priorities for rural development 
included  in  the  programme.  Specific  needs,  linked  with 
specific conditions at regional or subregional level, have to 
be demonstrated. The programme shall also demonstrate, 
inter alia, that the allocation of financial resources is bal-
anced and adequate and that an appropriate approach has 
been defined laying down principles with regard to the 
setting of selection criteria for projects, which takes into 
account relevant targets.

The definition and application of selection criteria shall 
aim to ensure equal treatment of applicants, better use of 
financial resources and targeting of measures in accord-
ance with the Union priorities for rural development.

Moreover, in order to further improve targeting, Member 
States shall ensure that the ex ante evaluator is engaged 
from an early stage in the process of development of the 
rural development programme, including the development 
of the SWOT analysis, the design of the programme’s inter-
vention logic and the establishment of the programme’s 
targets.

70.
The Commission considers that the Common Monitoring 
and Evaluation Framework constitutes a relevant and inte-
grated set of indicators that was jointly prepared by the 
Commission  and  Member  States  to  capture  the  policy's 
objectives. It marks the first time that a comprehensive, 
yet very demanding, monitoring and evaluation system for 
rural development has been implemented at EU level. It 
is the combination of all the measures which should be 
considered when assessing whether the EU's priorities are 
well addressed. 

Measure 121 should be assessed against the objective of 
improving competitiveness. The current 'learning by doing' 
experience shows that the definition of result indicators 
in this field is challenging and the Commission, Member 
States and various stakeholders have devoted much effort 
to continuously improve methodology, reliability and com-
parability. This experience will also be used for the future 
monitoring and evaluation system. 

Recommendation	2
The monitoring and evaluation system is subject to review 
by the Commission and Member States in order to improve 
its efficiency and effectiveness, especially in terms of reli-
ability and comparability, and foster ownership by sharing 
good  practices  and  building  capacity.  According  to  the 
Commission  proposal  for  the  future  rural  development 
policy, quantified result indicators will be used to assess 
progress towards targets established ex ante at programme 
level. 

Furthermore,  managing  authorities  will  have  to  ensure 
that there is an appropriate secure electronic system to 
record, maintain, manage and report statistical information 
on programme implementation, particularly as progress 
towards the defined objectives and priorities.

71.	
The legislator formulated Article 69(5a) of Regulation (EC) 
No 1698/2005 so that an amount equal to the additional 
‘Health  Check ’  and  European  Economic  Recover y  Plan 
resources  shall  be  exclusively  spent  in  the  period  from 
1  Januar y  2010  to  31  December  2015  for  operations  of 
the types referred to in Article 16a of the regulation (‘new 
challenges’).

Additionality  was  not  required  in  the  aforementioned  
ar ticle,  hence  it  was  decided  to  take  into  account  the 
previous programming choices of Member States where 
resources had already been allocated to support opera-
tions in relation to new challenges. In these cases, in order 
to  avoid  problems  of  imbalances  and/or  inconsisten-
cies across the whole programme, as well as to prevent 
overfunding to exhaust the measure's limited absorption 
capacity,  Member  States  were  given  the  possibility  to 
transfer funds programmed in the pre-'Health Check'/EERP 
period to other measures or operations. 

Special Report No 8/2012 — Targeting of aid for the modernisation of agricultural holdings

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REPLY OF THE  
COMMISSION

Recommendation	3
The Commission has proposed that Member States should 
have  the  possibility  in  the  next  programming  period  to 
design thematic subprogrammes within their rural devel-
opment programmes, contributing to the Union priorities 
for  rural  development,  aimed  to  address  specific  needs 
identified by earmarking particular measures and budget-
ary allocations and setting specific financial and indicator 
plans. 

Recommendation	4
A comprehensive assessment of the viability was deemed 
to  be  dispropor tionate  for  many  types  of  investment 
projects and to create an unnecessary administrative bur-
den and costs.

For  the  next  programming  period,  the  Commission  has 
proposed  to  require  a  business  plan  for  some  measures 
that  provide  support  for  new  economic  activities  (busi-
ness start-up aid, including young farmers, non-agricul-
tural  activities  in  rural  areas  and  development  of  small 
farms and support to producer groups) in order to ensure 
viability.

73.
See reply to Recommendation 5.

Recommendation	5
According to the Commission's proposals of September 
2010 for the amendment of Regulation (EC) No 1698/2005 
and according to the proposal for the next programming 
period, in respect of investment operations under meas-
ures falling within the scope of Article 42 of the Treaty, the 
Commission has proposed that only expenditure which has 
been incurred after an application has been submitted to 
the competent authority shall be considered eligible.

The  Commission  has  also  proposed  for  the  nex t  pro -
gramming  period  that  the  Member  States  may  provide 
in  their  programmes  that  only  expenditure  which  has 
been incurred after the application for support has been 
approved by the competent authority shall be eligible.

Special Report No 8/2012 — Targeting of aid for the modernisation of agricultural holdings

European Court of Auditors

Special	Report	No	8/2012
Targeting	of	aid	for	the	modernisation	of	agricultural	holdings

Luxembourg: Publications Office of the European Union

2012 — 46 pp. — 21 × 29.7 cm

ISBN 978-92-9237-647-5
doi:10.2865/34343

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THE  EUROPEAN  UNION  CO-FINANCES  INVESTMENTS  THAT  AIM  AT  MODERNISING 

FARMS.  SUBSIDISED  INVESTMENTS  RANGE  FROM  SIMPLE  FARM  MACHINERY  TO 

COMPLEX BUILDING PROJECTS.

IN THIS  REPORT, THE  COURT  IDENTIFIES THE  IMPORTANCE  OF TARGETING  AID TO 

PROJECTS THAT ADDRESS CLEARLY IDENTIFIED STRUCTURAL NEEDS IN THE MEM-

BER STATES AND THE PRIORITIES SET OUT AT THE EU LEVEL.

EFFECTIVE TARGETING SHOULD DIRECT THE FUNDING TO VIABLE PROJECTS THAT 

HAVE A GREATER CHANCE OF ACHIEVING THE OBJECTIVES SET, THEREBY PROVID-

ING BET TER VALUE FOR MONEY FOR THE EUROPEAN AND NATIONAL TAXPAYERS.

THE COURT FOUND THAT THE TARGETING OF THE FUNDING VARIES SIGNIFICANT-

LY; WHILST SOME MEMBER STATES HAVE DEVELOPED SYSTEMS FOR SELECTING THE 

BEST PROJECTS, OTHERS FAIL TO TARGET THE AID EFFECTIVELY.

THE COURT ALSO UNDERLINES THE IMPORTANT ROLE OF THE COMMISSION IN EN-

SURING THAT  MEMBER  STATES  HAVE  PROVIDED  FOR THE TARGETING  OF THE  AID 

WHEN IT APPROVES THE MEMBER STATES’ RURAL DEVELOPMENT PROGRAMMES.

EUROPEAN COURT OF AUDITORS