Lately, many companies that have accessed European funds through the EAFDR programme (European Agricultural Fund for Rural Development) have had difficulties in maintaining the eligibility criteria regarding the financing of companies with non-reimbursable funds.

Basically, any company that accesses European funds through the EAFDR programme is subjected to a period of monitoring; during this period the company is required to maintain all the eligibility standards of the project. At the end of the monitoring period, an evaluation (known as an "ex-post evaluation") is carried out by the representatives of AFIR (the Agency for Rural Investment Financing); its conclusions may lead to the reimbursement of the funds or may allow the company to keep the European funds that have already been accessed and used by the beneficiary.

What are the main reasons for requesting the reimbursement of European funds?

The inspection bodies will check whether the company that has accessed the non-reimbursable European funds is the real beneficiary of these funds or it was artificially created (like a "base company”) in order to avoid certain restrictions regarding the eligibility of a EU-funded project.

In order words, inspection bodies will check whether there are any “red flags” (indicators of fraud or of any irregularities, as they are called in specialised European terminology).

It is considered that two companies have carried out actions for the purpose of accessing non-reimbursable funds when:

  1. there are degrees of kinship between the representatives of the inspection bodies that carry out the evaluation and the management of the companies;
  2. the two companies have the same object of activity or have complementary objects of activity and operate in the same relevant market area (for example, one of the companies' object of activity is the growing of cereals, whereas the other deals with auxiliary activities to vegetable production) or on an adjacent market.
  3. The majority of the commercial exchanges (service agreements) have been carried out between the two companies;
  4. The two companies have shared employees. 

An EU-funded project can be deemed and declared as ineligible in more serious situations, such as the following:

  1. the loss of property over elements of infrastructure or over production equipment;
  2. the change of the activity that was specified in the contract and in the financing application;
  3. the change of the premises of the business (location);
  4. the breach of the implementation conditions that were stipulated in the financing contract (whether the legal representative and the technical expert are the one that are mentioned in the financing contract or in the addenda; the observance of EU standards regarding sanitation and the environment). 

In conclusion, the evaluation carried out at the end of the monitoring period takes into account both subjective and objective criteria when it comes to appreciating the eligibility of the project; however, the margin of error is extremely broad. Therefore, it is recommended to consult a professional from the field of EU funding in order to avoid any implementation errors and to prevent any abuse that might be carried out by the Financial Regulator.

Dehelean Marius - Attorney-at-law

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