In his own county of Galway, Deputy Ó Cuív claimed available funds were being skewed away from rural Connemara to the more urbanised area east of the Corrib.
"The rural-ality which is essential to rural funding principles is gone. And it's a ministerial decision.
"I don't know where Minister Kelly got his funding distribution ideas from but they are wrong and the distribution model has to be changed," the Fianna Fáil deputy maintained.
However, a spokesman for Minister Kelly totally rejected Deputy Ó Cuív's remarks, describing them as "scurrilous".
"Deputy Ó Cuív's assertion of a mis-appropriation of EU money by the Government is a scurrilous allegation which we hope he has the good sense to withdraw," he told the Farming Independent this week.
The spokesman also dismissed the "outrageous" statement that rural-ality did not play a prominent part in the way the funding is being allocated.
"Two elements within the methodology are weighted heavily towards counties with rural populations as described by the CSO census. The population density element was adjusted based on lower population densities and fully weighted towards rural populations," the spokesman said.
Meanwhile, the reaction from those involved in the rural development sector to the new funding round has been generally negative - especially as the latest reduction in rural supports came so soon after the imposition of county council managers into the operation of the rural LEADER company projects, according to Maura Walshe of Cork-based IRD Duhallow.
The influence of the county managers and local government officials on the development of these rural development projects - which was introduced by the previous Environment Minister and current EU Agricultural Commissioner, Phil Hogan - was a core concern for the LEADER companies at the moment, she told the Farming Independent.
The relevance of the LEADER companies had been deliberately diminished since this FG-Labour coalition came to power, she said.
"LEADER was supposed to be run on a bottom-up basis but now with the introduction of the county managers and local authorities into the sector it has become top -down," Ms Walshe said.
"Nothing can be carried out by the LEADER companies at the moment without it being pre-approved by the relevant county manager.
You can't even buy a computer without the permission of the county manager. Even then you have to give an undertaking that the computer belongs to the local authority.
"Nothing can be initiated without the county manager's say so and the voluntary LEADER directors who have worked painstakingly over the years on various rural regeneration projects cannot do anything without local authority approval," she said.
"Sometimes I wonder if the plan for rural Ireland is to abolish the LEADER companies or to downgrade the county councils to the status of LEADER companies," added.
Ms Walshe agreed with Deputy Ó Cuív's assertion that the 'real' rural Ireland was being pushed out of the latest funding round.
However, she is not surprised with this development.
Minister Kelly and his Cabinet colleagues think Howth is part of rural Ireland," she added.
'The Empire is gone but Kiskeam is still here'
In the Dail exchanges during the debate on funding for rural development Environment Minister Alan Kelly suggested that companies should give up the idea of backing every local parish history project.
Most LEADER companies will give a grant to a history project and these grants usually come out at little more than €1,000.
“These history projects develop community involvement in community matters,” Maura Walshe explained this week.
The people organising them invariably are usually involved in the bigger projects when they come on stream, she added.
Ms Walshe was particularly incensed by what she called Minister Kelly’s “snobbery” about these small community investments by LEADER companies.
She recalled a famous exchange between noted local historian Fr JJ O’Riordain, a Redemptorist priest, and a radio interviewer on a book he published entitled The Empire and the Men from Kiskeam — a history of Duhallow’s freedom fighters.
“And who won?” asked the radio interviewer rather smugly, to which Fr JJ replied: “Well Kiskeam is still here.”
This exchange, Ms Walshe said, neatly sums up her view on Minister Kelly’s views about parish histories.