EU funding fraud on the rise

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The financial impact of irregularities and suspected fraud in the use of EU funds by the bloc’s member states continues to grow despite the decreasing number of cases documented, reveals a report published yesterday (22 July) by the European Commission.

The 2007 report on the ‘Protection of the Communities’ financial interests’ revealed that despite the number of reported irregularities “decreasing in every area apart from that of structural measures,” their financial impact “has increased in every sector”. 

The most significant example of the trend identified by the 2007 report relates to agriculture, where despite a decrease of over 50% in the number of irregularities reported (2007: 1,548; 2006: 3,149), their estimated financial impact almost doubled from €87m in 2006 to €155m in 2007. 

While the number of suspected intentional fraud cases “remains stable,” Commission spokesman Max Strotmann urged national governments to act decisively as fraud control “is about protecting taxpayers’ money”. Nevertheless, he warned that acting on the findings would take “a considerable amount of time”. 

What’s more, the report estimates that irregularities regarding pre-accession funding for the new EU members have “a heavy financial impact”. Last week, for example, a leaked report from EU anti-fraud watchdog OLAF revealed misuse in Bulgaria of up to €6.1m of such funding, originally earmarked for agriculture and rural development (EURACTIV 17/07/08). 

EU legislation requires member states to “promptly” notify the EU executive of their suspicions of fraud and other irregularities. “The rise in the number of notified irregularities may be a sign that that fraud control is improving,” said the Commission’s anti-fraud chief Siim Kallas. 

However, the report stresses that “there is room for improvement” in this respect, stating that “the average time lapse for notifications in the agricultural sector is 1.2 years, while in the area of structural measures it is 0.9 years”. Lamenting that “some member states often notify their irregularities well after the event,” it underlines that “speedy notification is essential if there is to be an effective follow-up”. 

The figures are preliminary and require further investigation, Strotmann stressed, explaining that the findings relate to “suspicion of fraud” rather than confirmed cases. Indeed, “the real impact of fraud can be measured only at the end of legal proceedings,” states the report itself. 

Strotmann further insisted that the report’s findings “put the emphasis on the member states” to conduct the follow-up, particularly as “80% of the EU budget is not implemented by the Commission in Brussels”. 

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