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Error or fraud?
The ECA does not attempt to quantify the extent to which fraud (deliberate deception) is responsible for the errors that it identifies, but in presenting its reports emphasises that MLE is an estimate of error – which can arise from genuine mistakes, both by claimants and by those managing payment schemes, in dealing with complex EU regulations – not necessarily of fraud or waste. The ECA each year reports ‘several’ suspected cases of fraud to OLAF, the Union’s antifraud office (see below) – whereas there were several hundred cases in which the ECA identified some sort of error in 2013.
The overview report concludes that a key challenge is to take action to make programmes easier to manage; and observes that the frequency with which the ECA finds errors illustrates among other things the complexity of EU spending programmes. [...]
Financial corrections and recoveries
The European Commission has extensive powers of audit and supervision over expenditure programmes, including in respect of agriculture and cohesion, where day-to-day management lies with Member States. The Commission has in the past claimed that the ECA’s estimates of error are not the end of the story, since the Commission makes ‘financial corrections’ and recoveries in respect of expenditure programmes whose management it finds to be inadequate. The amounts involved can be considerable: for example almost €3 billion in 2014 according to the Commission’s ‘Synthesis report’ on its management achievements for 2014.
However to relate corrections and recoveries on the one hand and the ECA’s findings on the other is complicated. Financial corrections and recoveries cannot simply be deducted from estimates of error.
Fraud against the EU Budget
The EU has invested considerable effort to combat fraud against the EU budget. Member States are under a Treaty obligation ‘to take the same measures to counter fraud affecting the financial interests of the Union as they take to counter fraud affecting their own financial interests’ and to co-operate with each other and the European Commission in combating fraud.
The European Commission reports annually on cases of potential fraud identified by Member States and EU institutions and on action taken under a wide range of initiatives to minimise fraud against the budget. In 2013, 976 cases of suspected fraud relating to EU budget expenditure were reported, with a total value of 248 million euros, equivalent to 0.19 per cent of EU expenditure the same year (together with 633 cases relating to the ‘traditional own resources’ – customs duties and levies – which finance part of the budget, equal to 0.29 per cent of total traditional own resources established in 2013). As in previous years, expenditure on ‘cohesion’/the structural funds accounted for the largest proportion of reported fraudulent irregularities. [...]
The European Anti-Fraud Office
The European Anti-Fraud Office or OLAF (derived from the French, Office européen de lutte antifraud) carries out independent investigations into fraud and corruption involving EU funds; and investigates cases of serious misconduct within EU institutions. Its 420 officials are EU employees, but their investigations are independent.
[...] In 2014 OLAF began 234 investigations into alleged fraud against the budget and a further 54 ‘coordination cases’, in which OLAF assists and contributes to investigations carried out by Member States; closed 307 such investigations; carried out 40 investigations into alleged serious misconduct within the EU institutions; and made 397 recommendations for further action by EU institutions and bodies or Member States, including the recovery of €901 million (more than twice the average in the preceding four years). Following the completion of significant inquiries into the structural funds, external aid and the customs and trade sectors (the structural funds accounted for just over half of the total), €206 million were recovered.
OLAF’s work in 2014 included:
Conclusion
Most debate about EU audit and fraud is polarised between gross exaggeration and complacent excuses. Neither is a sensible or justifiable approach. For example, the claim that the ECA ‘refuses to sign off the Commission’s accounts’ is 26 European Anti-Fraud Office, supra n. 25, pp. 11-24 27 Ibid., pp. 25-31 8 incorrect and misleading. As this paper states the problems are real ones – as they are in the Member States’, much larger, national spending programmes. But they are being addressed by the EU’s institutions.