A HIGH-level investigation is under way into how thousands of euro of taxpayers' and EU money has been spent.
Payments from the Mayo North East Leader Partnership have been suspended since last March after complaints were made about how grant applications were processed and dealt with.
And the Irish Independent has learned that the findings of a preliminary report carried out by the Department of the Environment have been sent to the European Commission, Standards in Public Office Commission and Garda Bureau of Fraud Investigation.
It is understood the report details a number of governance issues surrounding the distribution of money earmarked for rural development, but is not believed to include incidences of fraud.
The Leader programme is a European Union project first introduced in 1991. The current programme runs from 2007 to 2013 and is funded by the State and European Commission.
The money is earmarked for projects that help promote rural development, for example establishing new businesses, funding community groups or cultural projects.
In Ireland, some €314m is available out to 2013. Some €2.7m has been paid out by the Mayo group since 2007.
Concerns were first raised about the spend last year after a complaint was made to the Department of the Environment, which oversees spending under the programme with the Department of Agriculture.
Approval of all new projects seeking funding has been suspended since last March after the complaints were made.
The Department of Environment's ongoing investigation, described as "complex" but at an "advanced stage", has been carried out over the past year.
It is understood that a report into the matter has been sent to the Mayo group in recent weeks for comment.
Leader projects are 85pc funded by the EU, and are required to go through strict checks before being approved.
Sources said that the problem stemmed from these "checks and balances" not being correctly followed.
"The complaint dealt with applications not going through proper procedures," one said.
The Department of the Environment said the process was "still ongoing", while the Department of Agriculture confirmed the European Commission was aware of developments.
The Standards in Public Office Commission said it was corresponding with the department in relation to the matter.
Local TD John O'Mahoney (FG), who raised the issue in the Dail last November, said he was concerned that unless funding was restored in the near future, community groups could lose out.
Projects totalling €2m were in the pipeline, which could not be processed, he said.
"Groups are saying to me they had applied for funding but nothing is happening," he said.
"No new applications have been processed since March. There lies the issue."
It is understood that officials in the department and the Mayo group are developing a plan, which will allow funding to be restored in the near future.
The Mayo North East Leader Partnership could not be reached for comment.
The European Commission said the matter was the responsibility of member states.
Designed to improve rural development
ESTABLISHED in 1991, the Leader (Liaisons entre actions de developpement de l'économie rurale) programme is designed to deliver rural development across EU member states.
Some 35 companies across the country decide if projects should be approved, and some €100m has been spent since 2007.
Among the projects open to consideration include establishing businesses, community projects, tourist activities, training, construction costs or marketing.
Maximum grants of €150,000 can be paid out.
The current programme runs until this year, but projects approved by this date can draw down funding up to 2015.