The EU Court of Auditors (ECA) found that the effectiveness and efficiency of financial instruments for SMEs co-financed by the European Regional Development Fund (ERDF) were hampered by the inappropriateness of the current regulatory framework of the Structural Funds. In its special report (2/2012), published on 27 March, the ECA makes a series of recommendations to compensate for various shortcomings, such as the frequent delays in the allocation of funds and insufficient deficit assessments. As part of the framework of the cohesion policy, the ERDF expressly provides for the possibility of helping SMEs access financing via grants, which are mostly one-time grants and which, by nature, cannot be reimbursed by the beneficiary. However, since the ERDF programming period 2000-2006 and, more obviously during the 2007-2013 period, the Commission and most of the member states also use financial engineering instruments (ie reimbursable instruments) as part of the EU’s cohesion policy. The ECA carried out a performance audit on the evolution of the ERDF’s financial instruments.

Based on a sample of projects in the UK, Germany, Slovakia, Hungary and Portugal, the ECA notes that before funds reached SMEs, delays were significant and, compared with other EU programmes for SMEs, the ERDF’s ability to leverage private investments was poor. The ECA also notes that the evaluations of the financing deficit of SMEs, when carried out, were affected by significant shortcomings. Moreover, some beneficiary SMEs were charged unfair fees by intermediaries. Consequently, the ECA asks the Commission to ensure that the member state proposals are supported by quality assessments of the SME funding deficit, which could be used to approve measures. The ECA also suggests that the Commission should look into the possibility of providing member states with simplified and tested instruments, and should define and set minimum requirements with regard to leverage and recycling funds. Lastly, the ECA calls on the Commission to establish a reliable monitoring and evaluation system, which would also be strong from the technical point of view. If these recommendations cannot be implemented under the cohesion policy framework, the court invites the legislator and the Commission to consider alternative - more effective - ways of providing support to SMEs through financial engineering instruments. In such a case, such instruments should either be supported by programmes centrally managed by the Commission, dedicated investment vehicles in cooperation with the Commission and the member states or by the member states directly,” says the ECA.