A highly critical report by the European Union's Court of Auditors has revealed serious administrative failures surrounding the funding of Ireland's so-called 'rural quangos'.

Senior officials have criticised the "significant system weaknesses" discovered during a review into the administering of tens of millions of euro of EU money through the country's LEADER programme.

The damning assessment of the programme, seen by the Irish Independent, has caused deep alarm among senior government figures.

And the discovery of a series of discrepancies surrounding funding to rural-based projects could leave the Irish taxpayer saddled with a multi-million euro bill.

The European Court of Auditors has no judicial function but is tasked with overseeing the use of the EU budget by member states. While the language used in the report is highly technical, the findings are seen as having potentially serious future consequences for the programme.

Its officials carried out a review earlier this year into the administering of funding to dozens of LEADER companies across the country and the subsequent checks carried out by government departments.

Among the issues discovered were:

* Whole projects that were approved funding were ineligible and did not meet EU rules

* Serious breaches of public procurement rules involving several LEADER companies

* A failure by LEADER companies to sufficiently monitor the awarding of funding for local projects

* Missing or incomplete documentation used to support projects

Investigations are ongoing and the Department of the Environment may be forced to pay back millions of euro as a result, according to one government source.

"This will put future LEADER funding in jeopardy because the EU authorities are concerned at the way the programme is operating," he said.

While the report by the EU Court of Auditors will come as a major concern, the majority of LEADER companies are not suspected of any wrongdoing.

A spokesperson for the Department said they had received the review and the matter is being examined. LEADER companies receive over €50m in taxpayers' money every year in order to assist small businesses and community groups.

Irish Independent