LEADER Program (Rural Development Support)

LEADER Program (Rural Development Support) is sponsored by European Union (implemented in Ukraine). The LEADER program, a European initiative for rural development, has started in Ukraine, offering co-financing for projects that stimulate economic activity in rural areas. This includes modernization of farms, implementation of innovations, and product processing.

Special report: EU’s LEADER approach for rural development LEADER and community-led local development facilitates local engagement but additional benefits still not sufficiently demonstrated About the report: LEADER is the EU’s participatory and bottom-up approach to involve local communities in project development and decision-making processes. It involves extra costs and risks compared to mainstream (top-down) EU spending programmes.

We examined whether the LEADER approach delivered benefits that justified its additional costs and risks and followed up on our 2010 special report on this subject. We found that more than a decade later, improvements have taken place in some areas and that the LEADER approach facilitates local engagement. However, there is still little evidence that the benefits outweigh the costs and risks incurred.

We recommend that the Commission should comprehensively evaluate the costs and benefits of LEADER and assess the community-led local development approach. ECA special report pursuant to Article 287(4), second subparagraph, TFEU.

This publication is available in 24 languages and in the following format: Conclusions and recommendations Acronyms and abbreviations Replies of the Commission I The EU introduced the LEADER programme in 1991 as a bottom-up initiative to support the development of disadvantaged rural regions through projects addressing local needs.

Since 2014, the EU has used the LEADER approach (known as community-led local development) for several EU funding streams in rural, urban and coastal areas. II The main characteristic of the LEADER approach is the application of participatory and bottom-up methods to involve local communities in project development and decision-making processes.

Local action groups, made up of partners from the public, private and civil society manage activities. In the 2014-2020 period, the EU planned to provide funding of up to €9. 2 billion for LEADER and community-led local development.

III The LEADER approach involves extra costs and risks compared to mainstream (top-down) EU spending programmes. Additional costs arise from setting up and running local action groups’ administrative structures. Additional risks are created by the lengthy procedures, extra administrative requirements for project owners, and potential conflicts of interests.

IV Some of these extra costs and risks are justified if local action groups deliver additional benefits compared to mainstream (top-down) EU spending programmes. The Commission’s guidance suggests that these benefits manifest themselves in improved social capital, improved local governance and enhanced results from projects. V Our audit covers the 2014-2020 EU funding period.

We examined whether the LEADER approach delivered benefits that justified its additional costs and risks, in particular compared to mainstream (top-down) EU spending programmes. To assess that we examined whether it facilitated local engagement and resulted in projects with demonstrable benefits in terms of local governance, improved social capital and enhanced results.

We also checked whether the introduction of the new multi-fund approach resulted in better coordination of local development support. VI This audit also follows-up on our 2010 special report on LEADER assessing whether the Commission addressed the weaknesses identified. Through this report, we aim to provide insights and timely recommendations for the ongoing Commission’s evaluation of the LEADER approach.

VII More than a decade after our 2010 special report on LEADER, our audit shows that improvements have taken place in some areas and that the LEADER approach facilitates local engagement. However, there is little evidence that the benefits of the LEADER approach outweigh the costs and risks it incurs.

VIII While most Member States applied pertinent procedures to select and approve local action groups, some applied less demanding quality standards when selecting local development strategies. We found that one Member State did not include quality criteria in its selection process.

The project application and approval process was complicated (involving up to eight steps) and included extra administrative requirements for project owners compared to mainstream spending programmes. Public authorities no longer dominated project selection bodies (as we had found in 2010), but these were frequently not representative of the local community or gender-balanced.

IX We found that local action groups selected projects that were in line with the broad objectives set in their local development strategies. Some Member States and local action groups used LEADER to fund statutory tasks of national, regional or municipal authorities or other activities for which other specific EU and national funding programmes existed.

X While two out of six of our 2010 recommendations had been addressed, we found that the Commission’s monitoring and evaluation framework has still not provided evidence of LEADER’s additional benefits. In our 2018 opinion on Commission proposals for the new common agricultural policy, we stressed that the Commission should follow the ‘evaluate first’ principle when revising existing legislation.

The Commission is in the process of evaluating the benefits of LEADER. XI In view of the additional costs and risks compared to other funding models and the continued lack of demonstrable benefits, we recommend that the Commission should evaluate the costs and benefits of LEADER and assess the community-led local development.

The evolution of the LEADER approach 01 LEADER, introduced in 1991, is the EU’s participatory, bottom-up method for the rural development policy, later extended to coastal and urban areas. It centres around local action groups (LAGs) and fisheries local action groups (FLAGs) made up of private and public sector members of rural or coastal communities.

Local action groups motivate communities in contributing to the design of a local development strategy and are responsible for initiating and funding projects to meet local needs. 02 The expectation behind the LEADER approach is that there is an added value compared with traditional top-down management of EU funds. A 2006 Commission Fact Sheet on the LEADER approach describes it as being based on seven key features.

LEADER considers that local people are the best experts to drive the development of their territory (“bottom-up approach”), defined as a small cohesive area (10 000 – 150 000 inhabitants) with a local identity (“area-based approach”). In this area, local players gather in a local action group (“local partnership”), which promotes links between local actors (“networking”).

Furthermore, local action groups in different regions or Member States undertake joint projects to work on common solutions to similar local challenges (“cooperation”). Bottom-up approaches and interactions between different sectors at local level (“integrated and multi-sectoral strategy”) should mobilise local potential.

Local groups should be best placed to identify integrated local solutions to local problems and can be more responsive as well as bring new solutions to local development (“innovation”). Participation in local decision-making should generate enthusiasm and increased commitment and can thereby result in better, more sustainable, local rural development 1 .

03 As we noted in our 2010 report 2 , the LEADER approach seeks to facilitate local engagement and empowerment through local strategy development, delivery and resource allocation. It takes advantage of the expertise and experience of local communities to define their development needs. 04 Assigning these tasks to local action groups creates additional costs and risks.

Extra costs include local action group spending on preparing and managing the execution of their local development strategies and on supporting beneficiaries in project development. These costs also cover Member State spending on approving local action groups (for example, hiring consultants to support the approval process).

05 LEADER support for local action groups’ administrative and running costs is capped at 25 % of the total public funding (EU plus national, regional or local public financing). These costs include facilitating the implementation of the local development strategy and helping potential beneficiaries to develop projects.

06 Additional risks are created by the lengthy procedures, extra requirements for project owners and potential conflicts of interest. Other risks stem from decision-making bodies that are not representative of the local community or not gender-balanced 3 . 07 Local decision-making has the potential to deliver additional benefits.

The Commission’s guidance for evaluating the LEADER approach 4 suggest that these benefits manifest themselves in: improved local governance, enhanced results from projects. 08 The justification of the programme thus does not rest on economic criteria such as market failure or relative deprivation. Indeed it now applies in all rural areas, including those in which economic performance is markedly above the EU average.

A recent Commission study found that semi-urban rural areas benefitted more from recent economic and demographic developments than peripheral ones 5 . 09 In 2014-2020, LEADER was a mandatory part of all rural development programmes. From this point, EU legislation required Member States, except Croatia, to spend at least 5 % of their rural development funding on LEADER.

The minimum contribution of Croatia during the 2014-2020 programming period was set at half of the percentage of the other Member States, i.e. 2. 5 %. According to data provided by the Commission, the planned EU funding for LEADER is €7 billion in the 2014-2020 programming period (around 7 % of total rural development funding).

The total number of LEADER projects (for the 2014-2020 period) amounted to 143 487 by the end of 2020. The rural development programmes have been extended to cover 2021 and 2022. 10 EU fisheries policy has used the LEADER approach since 2007, and the 2014-2020 period saw the introduction of community-led local development (CLLD).

This updated concept applies the LEADER approach in all of the European Structural and Investment Funds (ESIFs) except the Cohesion Fund 6 . The evolution of the LEADER approach, as illustrated in Figure 1 , led to a significant increase in financial support and the number of local action groups, in particular at the beginning of the 2007-2013 programming period. 11 In the 2014-2020 period, the EU planned to provide funding of up to €9.

2 billion for LEADER and community-led local development (see Table 1 ). Total public funding (including national funding) was expected to reach €12. 5 billion.

Most of this (76 % of the planned amount and 84 % of the amount declared by 2020) related to rural development.

Table 1 – EU contribution by funding stream (in million euros; 2014-2020) Funding for approved projects* European Agricultural Fund for Rural Development European Maritime and Fisheries Fund European Regional Development Fund *Funding of approved project is the amount of EU funding that the Member States reserved (committed) for projects in their projects approval decisions.

**The total amount committed (EAFRD and national public) is EUR 7 439 million but a breakdown is not available Source: ECA, based on data provided by the European Commission. Figure 1 – Increase in funding for LEADER (Number of local action groups and planned EU funding) Note: 1991-2006: Rural development support (EAGGF and EAFRD); 2007-2013: EAFRD and EFF; 2014-2020: EAFRD, EMFF, ERDF and ESF.

* including FLAGs Source: ECA, based on data provided by the European Commission. 12 Member States’ national and (depending on their political structure) regional authorities produced programming documents such as partnership agreements and operational and rural development programmes. These documents set out national or regional funding priorities.

The Commission examined and approved these documents. The Commission retains overall responsibility for spending, but Member States approved local action groups and their local development strategies, processed project applications and payment requests, and monitored and evaluated results. Figure 2 shows the key responsibilities of the LEADER approach actors.

Figure 2 – Key responsibilities of the LEADER approach actors Source: ECA based on information from Commission documents. 13 The Commission set the following indicators 7 and targets 8 to monitor the LEADER programme for the 2014-2020 period: percentage of rural population covered by local development strategies (target of 53. 5 %), percentage of rural population benefiting from improved services / infrastructures (target of 16.

4 %), Jobs created in supported LEADER projects (target of 44 109 jobs). Annex I lists the specific indicators and targets related to LEADER and community led local development set out in the Regulations of the different EU funds. 14 Member States could choose between supporting local action groups from one EU fund (‘mono-fund approach’) or several (‘multi-fund approach’).

They could also designate one fund as the ‘lead fund’, which would cover all administrative costs of the local action groups. In 2014-2020, 17 of the 28 Member States applied the multi-fund approach with different combinations of funds, aiming to better coordinate local development support and to reinforce the links between rural, urban and fisheries areas (see Figure 3 ).

Figure 3 – Funding approaches used by the Member States Source: ECA, based on European Commission (2017): Guidelines. Evaluation of LEADER/CLLD, p. 10 and Kah, S.

(2021), Update: Implementing cohesion policy funds through multi-Fund CLLD (Data correct as of June 2021. 15 In 2021-2027, LEADER and community-led local development are governed by the Common Provisions Regulation (EU) No 2021/1060 . New rules on the common agricultural policy (CAP), which entered into force in December 2021 9 , apply to LEADER.

17 We observed weaknesses in relation to the management of LEADER in our 2000 annual report 11 . In a 2010 special report 12 , we found that local action groups had implemented many projects that were of benefit to local businesses and communities.

We also noted weaknesses concerning: project selection procedures where decision-making was dominated by public authorities and rules on potential conflicts of interest were unclear; application of the bottom-up approach where some local action groups failed to promote local engagement; local action groups’ ability to develop local solutions that were distinct from mainstream rural development measures e.g. by funding projects that could have been financed under other spending programmes; monitoring and evaluation , in particular concerning the benefits achieved through the LEADER approach.

18 In 2013, we published a follow-up assessment 13 showing certain improvements. These included clearer rules for local action group decision-making committees (see paragraph 17 bullet 1), but most weaknesses remained. We set out our updated assessment of these issues in Annex II .

19 The LEADER approach seeks to facilitate local engagement and empowerment (see paragraph 03 ), which entails extra costs and risks (see paragraphs 04 and 05 ). These extra costs and risks are justified if outweighed by additional benefits compared to mainstream (top-down) EU spending programmes (in particular the EU rural development programme).

The main audit question was “Has LEADER/community-led local development delivered benefits that justify its additional costs and risks?

” To assess that we examined whether: LEADER and community-led local development facilitated local engagement ; LEADER and community-led local development resulted in projects with demonstrable benefits in terms of local governance, improved social capital and enhanced results; the introduction of the new multi-fund approach resulted in better coordination of local development support.

20 This audit also follows-up on our previous audit (see paragraphs 17 and 18 ) assessing whether, more than a decade later, the Commission addressed the weaknesses identified. Through this report, we aim to provide insights and timely recommendations for the Commission’s ongoing evaluation of the LEADER approach. 21 We covered the 2014-2020 period.

We examined ten Member States for this audit, covering two local action groups in each Member State. In Germany, we focused on Saxony, and in Portugal on the mainland (i.e. excluding Madeira and the Azores). Our selection of Member States aimed at geographical balance and coverage of both the mono-fund and multi-fund approach and higher and lower rates of LEADER and community led local development spending (see Figure 4 ).

Figure 4 – Selected Member States and regions, and the selected LAG’s funding approach Source: ECA based on a map provided by Eurostat. 22 We selected the local action groups based on allocated funding, type of EU funds used, as well as area and population covered.

organisation and procedures in all selected Member States and local action groups, based on documentation and replies to audit questionnaires; information on 95 projects, selected on the basis of their costs (low, medium, high), the sectors concerned and the EU funds used. These projects have total costs of €7. 5 million, with EU funding of €4.

9 million (see Annex III ); Commission activities in relation to LEADER and community-led local development, through documentary reviews and video meetings with: the four responsible directorates-general (Agriculture and Rural Development (DG AGRI), Employment, Social Affairs and Inclusion (DG EMPL), Maritime Affairs and Fisheries (DG MARE) and Regional and Urban Policy (DG REGIO)), Member State authorities, representatives of local action groups, stakeholder organisations and international experts.

Local action groups facilitate local engagement, but involve additional costs and slow approval processes 24 In the following sections, we discuss how Member States and local action groups facilitated local engagement and at what cost. We start by analysing LEADER costs. We then examine how Member States approved local action groups and their strategies and then how local action groups selected LEADER projects.

Local action groups involve additional costs 25 As explained in the introduction, local action groups are at the heart of LEADER and community-led local development. They can receive EU funding for different purposes (see Figure 5 ). Member States, regions, local action groups and project owners must also provide a share of funding.

26 The Member States should create the right conditions for local action groups to fulfil their tasks, in particular to bring different local stakeholders together and to support them in developing projects that provide benefits for local development. In order to do so, they should give local action groups autonomy and keep their administrative burden to a minimum 14 .

Figure 5 – Planned EU funding for LEADER and community led local development (2014-2020; in billion euros) Source: ECA; based on data provided by the European Commission. 27 LEADER’s participative approach involves additional management structures and activities in support of the local development strategy, which bring extra costs. The Regulation caps these administrative and running costs at 25 % (see paragraph 05 ).

Some Member States lowered this cap further to 20 %. 28 Table 2 provides an overview of planned and paid LEADER funding (as at end of 2020) for the 2014-2020 programming period. It shows that the Member States planned to spend 17 % on local action groups’ administrative and running costs.

This falls well within the limits established in EU legislation. Table 2 – Total LEADER funding (as at end of 2020) Planned LEADER funding (2014–2020) Reported LEADER spending (by end of 2020) % of planned total LEADER funding Administrative and running costs Total (all MS plus United Kingdom) Source: ECA, based on data provided by the European Commission.

29 According to Commission reporting, as at the end of 2020 local community projects accounted for €3. 1 billion or 72 % of reported LEADER spending. Overall, the local action groups spent little on cooperation activities (2 %) as well as on preparatory costs (2 %).

Local action groups’ administrative and running costs amounted to €1. 04 billion (24 % of total spending at that stage). In several Member States where reported spending on LEADER projects was low the proportion of these costs was high.

For example, in Greece, Portugal and Slovakia, at the end of 2020, they were of the same order, or exceeded the amount spent on projects. Payments for the 2014-2020 period can be made up to the end of 2023 and the share of administrative spending compared to project spending tends to decrease over the programming period cycle. 30 Table 3 shows the breakdown of reported spending in ten selected Member States and regions.

Figure 6 compares it with total planned funding for LEADER. On average, Member States had reported 39 % of their planned LEADER project funding as paid. Estonia had paid 72 % of its planned project funding, Greece 13 %, and Slovakia had not yet paid for any project.

Table 3 – Reported LEADER spending per cost type (million euros; as at end of 2020) Selected Member States/regions All Member States (plus United Kingdom) * The above table includes no figure for Czechia’s administrative costs because these are covered by the regional development fund (Czechia’s lead fund) rather than the rural development fund. Source: ECA, based on data provided by the European Commission.

Figure 6 – Reported LEADER spending in rural development for the selected Member States and regions (as at end of 2020) Source: ECA, based on data provided by the European Commission.

Most Member States applied pertinent procedures to approve local action groups but some did not apply a minimum quality requirement when selecting local development strategies 31 Member States should support local action groups in setting up their local development strategies, both financially (preparatory support) and through clear quality requirements and guidance.

They should then assess local action groups in a fair and transparent manner, within the set timeframe, approving only those that provide strategies satisfying the quality standards. 32 Local action groups should involve their local communities in the process of developing their strategies through a combination of methods, such as training events, workshops or seminars, using their knowledge of the local area.

In our previous LEADER special report, we noted weaknesses in the way local action groups promoted local engagement. This time we found that all local action groups selected had undertaken such activities and developed their local development strategies through a bottom-up process. 33 Member States had to define criteria for approving local action groups, and assess proposed strategies against them.

The process involved an expression of interest or several calls for proposals; preparation of draft strategies; Member States’ assessment of the strategies, and, where necessary, revision. Member States had to select strategies and approve local action groups by the end of 2017 (two years after spending began in other areas of the common agricultural policy) 15 .

Most Member States achieved this in 2016, Ireland and Czechia took more time and Slovakia completed approval in March 2018 (see Figure 7 and Box 1 ). 34 Overall, we found that Member States had supported and supervised the approval process well through workshops, training events and capacity-building exercises for local action groups.

A number of managing authorities provided guidance for local communities in the form of information material, a handbook or set up contact points for questions. Figure 7 – Duration of process of approving local action groups in the ten Member States selected Source: ECA, based on information provided by the Member States.

‘Relative deadline’: the first round of strategy and LAG selection should be finished 2 years after approval of their partnership agreement; ‘Absolute deadline’ (red line): Local development strategy approval should be finished by 31/12/2017 (Article 33(4) of Regulation (EU) 1303/2013 .

Lengthy development of local strategies in Slovakia The development of local development strategies in Slovakia lasted two and a half years, and ended three months after the December 2017 deadline. At the time of our audit, three years later, no projects had been financed. The Commission was aware of the lengthy process and requested action in order to speed it up.

35 The Commission had recommended that Member States should have local development strategies assessed based on quality standards and compete against each other 16 . Through this approach, the Commission aimed to ensure that the local action groups selected were those presenting strategies which met minimum quality requirements. 36 Member States needed to define assessment criteria for selecting the local development strategies.

These included the definition of quality standards, which all strategies had to fulfil 17 . We found that nine Member States defined quality standards but in Czechia, Greece and Slovakia they were less demanding. Romania did not define these quality standards.

37 Table 4 provides an overview of the number of strategies submitted and selected for each Member State covered by our audit. Six Member States selected all local action groups that submitted their strategies. Romania doubled the number of initially planned local action groups (from 120 to 239).

Table 4 – Selection of local action groups / local development strategies N o of submitted strategies N o of selected strategies Source: ECA based on data provided by the selected Member States.

Local action groups have approved projects more slowly than anticipated 38 To select projects that provide benefits for local development, local action groups should establish criteria that are appropriate for their local area, and apply fair and transparent procedures.

LEADER and community-led local development support is available for: local community projects; cooperation activities between two or more local action groups from the same Member State or different countries (EU and non-EU). 39 Seven out of ten Member States used online applications, simplified cost options or other tools to ease the selection process.

In four Member States (Greece, Portugal, Czechia and Slovakia), the project application and approval process was particularly complicated and time-consuming. 40 The process involved up to eight steps and took on average about one year, with extreme cases exceeding two years. Applicants first needed to apply to the local action group, which checked eligibility and whether the project fitted with the local development strategy.

They then submitted their application to the responsible authorities. In Greece, applicants had to submit both an electronic and a paper application. These extra administrative requirements contributed to a situation where at the time of our audit, Member States had completed and paid for relatively few projects (39 % of planned LEADER project spending).

41 According to the Commission’s guidance, local development strategies should serve local purposes and the projects selected should contribute to the strategies’ objectives 18 . The local action groups set quite general objectives and project selection criteria in their local development strategies. This allowed the local action groups to select a broad range of projects.

The LEADER approach facilitates local engagement but women and young people are underrepresented on local action groups 42 Local action groups provide a forum for communication within local communities for designing and delivering the local development strategies, through initiating, developing and funding local projects. They play a role in bringing local communities together and engaging them in local development.

The LEADER approach takes advantage of the expertise and experience of local communities to define their development needs. In addition, this approach was created to provide a platform for communication between different layers of government, from local communities to regional and national government and to incentivize such closer cooperation.

43 Local action groups should be representative of their local communities and involve all relevant local stakeholders. According to the legislation, no specific stakeholder group should represent more than 49 % of a local action group’s voting rights and the proportion of votes from public authorities in the project selection process must be less than 50 % 19 .

According to the Commission’s guidance, decision-making bodies should also be gender-balanced and have a fair representation of specific target groups, such as young people, ethnic minorities and disadvantaged people 20 . 44 We found that local action groups we examined provided a forum for local communication, and complied with the legal requirements concerning the composition of the groups’ decision-making bodies.

This meant that public authorities no longer dominated the process (as we had found in 2010). Our analysis showed that men occupied 60 % or more of the positions in ten out of eighteen local action groups from which we received data. Young people were underrepresented.

Sixteen out of twenty local action groups we examined had no one under the age of thirty on their decision-making bodies 21 . This creates the risk of decision-making bodies not considering their views and interests in the decision-making process.

Additional benefits of LEADER and community-led local development still not demonstrated 45 In our previous LEADER special report, we concluded that there was insufficient evidence of the added value of the LEADER approach, and we recommended that the Commission take urgent steps to ensure that it could account for the added value and sound financial management of LEADER.

As mentioned in paragraph 07 , the Commission expects LEADER to manifest itself in enhanced project results, and improved social capital and local governance. 46 In the following sections, we consider each of these aspects in turn, first examining whether the Commission has, over the past decade, made progress in holding account for the benefits of LEADER.

We then examine whether the LEADER local development projects delivered enhanced results, and finally whether there is evidence that the LEADER approach leads to improved social capital and governance in local communities.

The Commission started evaluating the benefits of LEADER 47 Our review of the relevant monitoring and evaluation system showed that one of the key recommendations from the 2010 LEADER special report on accounting for LEADER benefits had not been fully implemented (see paragraph 17 and Annex II ).

48 As explained in paragraph 13 , the Commission monitors and reports on the achievements of the LEADER programme using three indicators set out in the Regulation.

Table 5 shows data reported on LEADER in the 2019 Annual Activity Report of the Directorate-General for Agriculture and Rural Development: Table 5 – LEADER indicators % of rural population covered by local development strategies % of rural population benefiting from improved services / infrastructures The number of jobs created through supported projects Source: ECA based on 2019 Annual Activity Report of the Directorate-General for Agriculture and Rural Development.

49 These indicators do not support meaningful assessment of the costs and benefits of the LEADER approach. Indeed, in our previous reports, including the 2019 Report on Performance 22 , we noted that the indicators used are mainly input and output indicators and do not measure results or added - value of the spending programmes.

In our 2010 report on LEADER, we recommended that the Commission should take urgent steps to ensure that it can account for benefits of the LEADER approach and that monitoring should be directed towards indicators of such benefits, efficiency and effectiveness, rather than implementation.

50 The legislation requires the Commission to provide guidance to the Member States on how to carry out evaluations of their rural development and operational programmes. The programme evaluations at the end of the period, the ex post evaluations, shall be carried out by the Commission, or by the Member States in close cooperation with the Commission 23 .

51 The Commission issued two guidance documents to support the Member States’ evaluation of LEADER and community-led local development