The auditors issued a disappointing report on how 7 billion euros ($8.6 billion) of EU assistance -- about 40 percent of which was allocated to Russia -- had been spent since 1991, Moscow News reported.
Unrealistic and vague objectives, poor implementation and lack of communication between Brussels and Russian officials were seen as the reasons for much the failure.
The auditors concluded that only five EU projects out of a sample of 29 completed by the end of 2003 could be considered "sustainable."
Hans-Peter Martin, an Austrian member of the European parliament and a long-standing crusader against the waste of EU funds, said a European Commission should suspend its assistance program until it carries out an investigation.
Brussels insists it has recently overhauled the assistance program, known as TACIS, and is now more efficient.