Brussels, 09/07/2007 (Agence Europe) - On Monday 9 July, the European Commission presented its annual report on combating fraud and protecting the financial interests of the Communities. In 2006, EU member states reported more than 12,000 cases of fraud or other irregularities, with a total estimated financial impact of €1.15 billion, particularly in the fields of structural and cohesion funds (3,216 cases totalling €703 million). The total financial harm in 2006 remained at roughly the same level as in the previous year, but there was a slight increase in the field of cohesion policy (see details in EUROPE 9233).
Traditional own resources. Member states reported 5,243 cases of fraud or other irregularities in 2006, down 12% on 2005, but the amount affected rose by 7% (from €328 million in 2005 to €353 million in 2006). As in previous years, the goods most affected by fraud and irregularities were tobacco products and TVs. Compared with 2005, member states detected fewer cases of fraud in the sugar, fisheries, glass and glassware, and optical instruments sectors, but more in meat, engines and parts, inorganic products, and oils and fats.
Agricultural expenditure. In 2006, the number of reported irregularities rose by 3% on the previous year (3,249 cases in 2006). The total amount involved in 2006 (€87 million) was down by 15%. Most of the irregularities reported related to rural development, the bovine sector, and fruit and vegetables. Together these three groups accounted for almost 60% of the total number of reported irregularities and almost 70% of the total amount affected. A regulation adopted by the Commission in 2006 simplifies the procedures for reporting irregularities from 2007. The threshold above which member states are required to report irregularities to the Commission has now been brought into line with the threshold for the structural funds (€10,000).
Structural measures. The number of irregularities reported in 2006 (3,216, including the cohesion fund) was down 10% on the previous year (3,750 cases), but their financial impact increased by 17% to €703 million. The estimated financial impact of the reported irregularities accounts for around 1.83% of the structural and cohesion fund appropriations (€38.430 million) for 2006. As in previous years, the ERDF and ESF account for most of these irregularities (around 75%). The number of irregularities reported for the Guidance Section of the EAGGF increased by 38%, while irregularities reported for the Cohesion Fund and the FIFG remained stable.
Pre-accession funds. The total number of irregularities concerning the PHARE, SAPARD and ISPA funds for 2006 increased by 13.6% (384 in 2006). The presumed financial impact of the irregularities increased for PHARE and SAPARD, but fell for ISPA. The most frequently reported types of irregularity for each of the pre-accession funds was non-eligible and unjustified expenditure.
OLAF activities. The number of investigations opened by OLAF following evaluation of the information received fell (195 in 2006, compared with 214 in 2005). In 2006, the total amount recovered following investigation by OLAF was close to €114 million.
The Commission points out that in the areas where member states implement the budget (Agricultural Policy, Structural Funds and Pre-accession Funds) and for the collection of the Community's own resources, Community legislation requires member states to report suspicions of fraud and other irregularities affecting Community financial interests. Expenditure managed by the member states accounts for some 801% of the Community budget.
Mr Kallas wants “zero tolerance” on fraud and irregularities
The Commission report shows that of the €1.14 billion losses sustained by the Community budget, €318 million involved cases of fraud or irregularities in Italy (with €228 millions from structural initiatives). Then came Spain (€183.6 million), Greece (€132 million), the United Kingdom (€125 million), the Netherlands (€84.3 million) and Germany (€80 million). For the first time, the report contained an estimate of the financial impact of suspected fraud only - €323.3 million, €134.4 million of which was in the area of own resources (customs fraud, smuggling etc.).
“All these cases of fraud and irregularities are unacceptable, and we have adopted a zero tolerance approach,” said the European Commission vice-president with responsibility for administrative affairs, audit and anti-fraud. He said that most counterfeit and smuggled goods came from China, Japan, Brazil and South Korea.
“These irregularities are not necessarily fraud, but what matters is that there is excellent cooperation between member states,” the commissioner stressed. Information must be submitted to the Commission within two months of the discovery of a problem. Many member states do so without hesitation, but not all, Mr Kallas effectively said, mentioning Germany, which had failed to submit information on some irregularities within the set deadline. Another problem was the way in which the seriousness of an irregularity “varies from one member state to another”. The United Kingdom instanced several irregularities which were not considered to be alleged fraud, while in the Netherlands very often fraud was suspected in the irregularities uncovered, the commissioner said.
OLAF wants to deal with most complex cases as a priority
Education centres in Bolivia that were billed but never built, an accountant siphoning off fictitious rental payments in a Commission delegation, farmers claiming subsidies for citrus fruits never harvested, Chinese bicycle importers evading millions of euro in anti-dumping duties: the cases dealt with in 2006 by the European anti-fraud office OLAF are very varied and sometimes complex. According to its annual report, published the same day as the Commission report on combating fraud and protecting the Communities' financial interests, in 2006, OLAF investigated 431 cases of fraud or irregularities. OLAF Director General Franz-Hermann Brüner noted that it was increasingly concentrating on the most complex fraud cases. “Procurement in all possible contexts and external aid remain particularly sensitive areas for the EU budget,” he said. The report says that OLAF opened 195 investigations in 2006, 149 of which were on its own initiative. The 46 others consisted of coordination and assistance of investigations being carried out by member states. Mr Brüner said that OLAF concentrated on cases which allowed it to bring real added value, and that the other cases were dealt with by member states. In 2006, OLAF closed 216 cases (compared with 233 in 2005) and helped recover over €450 million of Community funding. The total financial impact of all the cases investigated by OLAF since it was set up in 1999 is estimated at over €7.3 billion. The report also indicates that the volume of information received by OLAF continues to rise.
Mr Brüner said, too, that 60% of cases were settled within a year, although some took much longer. “For the most complex cases, time is needed to investigate,” he said. The report said that at the end of 2006, OLAF was investigating 69 internal cases, within the Community institutions and agencies. The report highlights the importance of enhancing cooperation between OLAF and its national and international partners, such as Eurojust, Europol, the United Nations and the World Bank. (lc)