Francesco Аlbore fraud prevention, sofia conf 2016, olaf presentation

1. CONFERENCE
Simplification in Cohesion Policy - Challenges, Expectations and Priorities
Sofia, Bulgaria, 17. May 2016
PREVENTION OF INFRINGEMENTS AND
FRAUDULENT IRREGULARITIES
Francesco Albore, OLAF Directorate B Investigatins II, Unit B.5 Agricultural & Structural Funds III

2. Contents
1. Introduction
2. OLAF - Mandate, Means and Activity
3. Cohesion policy - Figures, Procedures and Problems
4. Investigation and Prevention of fraud and irregularities
5. Conclusion

3. Introduction
 OLAF Directorate B is an Investigation Directorate
 Focus on the investigative side of the matter
 The exposé will therefore be:
− lighter on statistics and legislative references;
− heavier on practical stuff (pertinent to any Member State).
 A short introduction of OLAF is appropriate

4. OLAF - Mandate, Means and Activity
 Expenditure side. EU budget principles.
 OLAF carries out administrative investigations.
 OLAF coordinates between national authorities - administrative, judicial.
 Case selection - on complaints, ex officio.
 OLAF is not an audit service.
 OLAF is not in charge each time an irregularity is suspected.
 Engaging OLAF - principles of subsidiarity and proportionality.
 OLAF's best added value.
 Results of the OLAF investigation - Final Report and Recommendation.
Who implements Recommendations.

5. Cohesion policy - Figures, Procedures and Problems
 ERDF, ESF and CohF
 Bulgaria as beneficiary of EU cohesion policy - amounts, ratios.
€ 1.1 billion received under the EU cohesion policy in 2014.
Positio
n
Member State
Cohesion policy funds
as % of GNI
1 Hungary 4.4%
2 Latvia 3.4%
3 Lithuania 3.3%
4 Bulgaria 2.7%
5 Romania 2.5%
6 Greece 2.3%
7 Czech Republic 2.1%
... ... ...
28 ... ...
€ 7.4 billion overall allocated for 2014-2020.

6. Cohesion policy - Figures, Procedures and Problems
 Fraudulent irregularities
 Fraud detection rate
Period
Detection
Rate
Bulgaria
Detection
Rate
EU
Note
2007-2013 0.22% 0.35% Several MS over 0.75%
2014 0.08% 0.50% Double number of MS over 0.35%

7. 7
Irregularities reported (until March 2016)
EU 27
Programming
Period
N° of
irregularities
Irregular
amounts
% of
commitments
% of payments
2000-06 28 193 5 237 041 432 2.4% 2.4%
Of which fraudulent 1 972 627 982 932 0.3% 0.3%
2007-13 26 478 7 043 773 577 2.0% 3.4%
Of which fraudulent 1 271 1 235 913 850 0.4% 0.6%
Total 54 667 12 280 628 374 2.2% 2.9%
Bulgaria
Programming
Period
N° of
irregularities
Irregular
amounts
% of
commitments
% of payments
2007-13 254 89 303 708 1.3% 2.8%
Of which fraudulent 34 7 303 890 0.11% 0.23%

8. Programming period 2007-13
Reported irregularities – main patterns
8
 Bulgaria
 ERDF related cases 57% in
N and 50% in amounts)
 CF: 25% - 41%
 Fraudulent irregularities:
• ERDF 35% - 11%
• ESF 62% - 20%
• CF 3% - 69%
 Between detection and
reporting: 2.3 months
 Between irregularity and
detection: 36.8 months

9. Distribution of irregularities according to
localisation of project affected

10. Distribution of fraudulent irregularities according
to localisation of project affected
10

11. Cohesion policy - Figures, Procedures and Problems
 Follow up on OLAF recommendations for judicial action
Position
Member
State
Judicial
Recommendations
Indictments
Rate of
Indictment
1 Malta 5 4 80%
2 Poland 14 9 64%
3 Italy 61 32 52%
4 France 24 12 50%
5 Sweden 4 2 50%
6 Greece 23 11 48%
7 Germany 29 13 45%
8 Austria 7 3 43%
9 Bulgaria 30 12 40%
10 Belgium 45 17 38%
11 Netherlands 16 6 38%
12 Spain 28 9 32%
13 UK 23 5 22%
14 Romania 89 16 18%
... ... ... ... ...
Total 479 161 34%

12. Cohesion policy - Figures, Procedures and Problems
 Cohesion policy associated with the other EU policies:
− common ground to evaluate, check, control;
− common rules on eligibility, financial management, professional conduct.
 Vulnerability to irregularities of projects under the ERDF and CohF
 Large infrastructure projects
 Open public procurement procedure. Advantages:
− attended by all eligible interested parties;
− transparency of criteria for selection, scoring and ranking;
− appeal of decisions of the contracting authority;
− preliminary control of public procurement procedures.

13. Investigation and Prevention of fraud and irregularities
 Manipulated procurements
 Conflict of interest
 Meaning of the fraudster profile:
o Clues to fraud will not be obvious.
o Traces will be masked or obliterated.
o Implicating documents may be denied authorship by the signing party.
o Methods of perpetration will be disguised as necessary operations.
o Technical assessment will be assigned to a competent but friendly party.
o Influence over administrative decision not along line of official subordination.
o Wrong benefit may not be immediately accomplished or collected.
o Inadequate construction designed to last long enough to pass approvals.

14. Investigation and Prevention of fraud and irregularities
 Indispensable features of fraud:
− Engenders of a wrong benefit
− Accomplishes the wrong benefit
− Collects the wrong benefit
 Investigation of fraud and Prevention of fraud
 Ideas from investigative observations:
(1) Physical specifications
(2) Division into Lots. Sequential (within reason) implementation
(3) Designated fraud investigation body - central or decentralised units
(4) Recruitment of expert fund managers

15. Investigation and Prevention of fraud and irregularities
 Recommendations of the EC in the recent Commission Report on the fight
against fraud. Highlights:
Recommendation 1
Use AFCOS to full potential. Develop the cooperation between national bodies.
Recommendation 2
Transpose definition of conflict of interest into national legislation. Put effective and
proportionate measures in place to tackle conflicts of interest. The role of Managing
Authorities and Paying Agencies in detecting fraud should be enhanced, pursuant to the
regulatory framework 2014-2020.
Recommendation 3
Strengthen the work on detecting and reporting fraud. A combination of different control
strategies is required. Use "red flags". Carry out risk assessment. Exhaust the IT intelligence
tools. Use the experience collected in the Guidance Notes issued by the EC.
Recommendation 4
All transactions, and all economic operators to be included in the population for controls. MS to
exchange experiences in successful detection of fraud or irregularities.

16. Conclusion
 Questions - in the common panel discussion.
 Wishes for Bulgaria's best success in the regular and full implementation
of the allocated EU funds!
 Thank You for Your kind attention!
Francesco Albore (Francesco.albore@ec.europa.eu)
OLAF Directorate B Investigatins II, Unit B.5 Agricultural & Structural Funds III