# EUR-Lex - 52014SC0248 - EN

*|*

# 52014SC0248

**COMMISSION STAFF WORKING DOCUMENT Implementation of the Commission Anti-Fraud Strategy (CAFS) Accompanying the document REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Protection of the European Union's financial interests - Fight against Fraud Annual Report 2013 /* SWD/2014/0248 final */**

			*

			*

TABLE OF
CONTENTS

COMMISSION STAFF WORKING DOCUMENT Implementation
of the Commission Anti-Fraud Strategy (CAFS)..........................................................................................................................................

LIST OF ABBREVIATIONS .................................................................................................. 3

1........... Introduction.................................................................................................................. 5

2........... Priorities........................................................................................................................ 5

2.1........ Adequate anti-fraud provisions.................................................................................... 6

2.2........ Anti-fraud strategies for
Commission Services............................................................ 6

2.3........ Revision of the Procurement
Directives....................................................................... 7

2.4........ Reporting the anti-fraud
strategies in the Annual Activity Reports............................. 8

3........... Prevention and detection of
fraud................................................................................ 9

3.1........ Systematic controls and risk
analyses........................................................................... 9

3.2........ Awareness raising and training................................................................................... 10

4........... Investigations.............................................................................................................. 10

4.1........ OLAF investigations.................................................................................................. 10

4.2........ Whistleblowing........................................................................................................... 11

5........... Sanctions..................................................................................................................... 11

6........... Recovery..................................................................................................................... 12

7........... Other cross-cutting prevention
instruments................................................................ 12

8........... Conclusion.................................................................................................................. 13

LIST OF
ABBREVIATIONS

TFEU || Treaty on the Functioning of the European Union

EUR || Euro

DG || Directorate General

EAGF || European Agricultural Guarantee Fund

EAFRD || European Agricultural Fund for Rural Development

EFF || European Fishery Fund

CAP || Common Agricultural Policy

CAFS || Commission Anti-Fraud Strategy

AAR || Annual Activity Report

MoU || Memorandum of Understanding

CED || Central Exclusion Database

REGIO || Directorate-General for for Regional and Urban Policy

HOME || Directorate-General for Home affairs

CNECT || Directorate-General for Communication Networks, Content and Technology

ENV || Directorate-General Environment

COMP || Directorate-General Competition

NR || Natural Resources

EC || European Commission

CFP || Common Fishery Policy

ERDF || European Regional Development Fund

ESF || European Social Fund

CF || Cohesion Fund

SME || Small and Medium Sized Enterprise

CP || Cohesion Policy

OLAF || European Anti-Fraud Office (Office pour la Lutte Anti-Fraude)

1.           Introduction

On 24 June 2011 the Commission adopted the
Commission Anti-Fraud Strategy (CAFS)[1]
with the following objective:

To improve prevention, detection and the
conditions for investigations of fraud and to achieve adequate reparation and
deterrence, with proportionate and dissuasive sanctions, and respecting the due
process, especially by introducing anti-fraud strategies at Commission Service
level respecting and clarifying the different responsibilities of the various
stakeholders.

The Commission stated in its communication that
it will report on the implementation of this Anti-Fraud Strategy beginning with
the 2013 Commission report on the protection of the EU financial interests.
This report is the result of this obligation. It provides an overview of the
state of play with regard to the implementation of the CAFS up to 2013. Firstly
the implementation of the three priority actions will be described, followed by
a description of the implementation of the other activities proposed in the
CAFS.

By adopting the CAFS, the Commission envisaged
reaching the objective without creating additional layers of control and
administrative burden. That is also why this report is integrated as an annex
to the Article 325 report of the Commission on the Protection of the Financial
Interests of the EU.

2.           Priorities

The CAFS provides for anti-fraud measures in
the areas of prevention and detection, investigations, sanctions, recovery and
other horizontal fraud prevention policies. In these areas, the Commission
established three priority actions that had to be addressed as a matter of
priority by the end of 2013 and that were related to the prevention of fraud:

(1) 
Adequate anti-fraud provisions in Commission
Proposals on spending programmes under the new multi-annual financial
framework, in the light of impact analyses.

(2) 
The development of anti-fraud strategies at
Commission Service Level with the assistance of OLAF and of the central services,
and their implementation.

(3) 
The revision of the public procurement
directives with a view to addressing the need for simplification while limiting
the risks of procurement fraud in the Member States.

These priority actions were completed by the
end of 2013 as was proposed in the CAFS.

2.1.        Adequate
anti-fraud provisions

The first action has been completed in time. By
the end of 2011 most Commission proposals had been adopted by the College,
including provisions related to anti-fraud measures. These anti-fraud
provisions covered, as in the past, possibilities for OLAF to perform
investigations into suspicions of fraud related to EU-expenditure and also
fraud prevention measures, as is the case in the legislative proposals for the
European Structural and Investment Funds and for the funds related to the
Common Agricultural policy. By the end of 2013, the legislator had adopted most
legislative acts, respecting including the anti-fraud clauses.

Several Directorates-General have developed
guidance on the implementation of the anti-fraud provisions. A good example is
DG Regional and Urban Policy, in collaboration with DG Employment and Social
Inclusion and DG Maritime Affairs and Fisheries, which provided a guidance note
to implement the obligation for the Member States’ Managing Authorities to put
in place proportionate and effective anti-fraud measures, taking into account
the risks identified (Article 125.4(c) of Regulation (EU) No 1303/2013). This
guidance note provides the Managing Authorities with a methodology to perform a
fraud risk assessment. The outcome of this assessment can be used to mitigate
the identified risks with anti-fraud measures.

2.2.        Anti-fraud
strategies for Commission Services

All Commission Services (Directorates-General
and Executive Agencies), except one, have developed an anti-fraud strategy in
which they propose anti-fraud activities specific for their policy area. The
last Commission Service is close to completing their strategy.

The anti-fraud strategies are based on a
methodology that was prepared by OLAF in 2012. This methodology proposed to
follow a risk-based approach and the development of action plans focussing on
the fraud risks identified. Around 88% of the Commission Services have used
this methodology for the elaboration of their anti-fraud strategy. Not all
Services used the methodology because their strategy had already been adopted
before the methodology was presented.

The anti-fraud strategies are accompanied by
action plans that contain anti-fraud actions tailored to the needs of the
Commission Service. These actions are focused on several attention areas such
as fraud awareness, improved guidance to staff, and additional internal
controls.

Chart 1

Most strategies propose either actions aimed at
communication and fraud awareness or training. These take the form of dedicated
anti-fraud training on procedures to report fraud and red flags or ethics
seminars with the staff of Commission services.

Training and communication / fraud awareness
activities are the most frequently proposed actions in the anti-fraud
strategies. Commission Services also proposed to elaborate fraud indicators
specific to their field, based on either the casebooks provided by OLAF or
their own analysis of fraud cases or frequently observed irregularities.

Almost one third of the anti-fraud strategies
contain an IT-component in which IT tools are proposed that will be used as
anti-fraud measures. The most commonly mentioned IT-tool is the improved
security and monitoring of access to IT-systems. Other, more specific examples
of these IT-tools are the use of an instrument to detect plagiarism, a tool to
record meetings with stakeholders to increase transparency and e-training on
anti-fraud measures available for staff working in remote areas.

2.3.        Revision
of the Procurement Directives

The public procurement directives and the new
directive on the awarding of concessions were agreed by the co-legislators in
2013, and adopted by the European Parliament and the Council respectively in
January and February 2014. This reform delivers a radical simplification of
procurement processes to the benefit of EU public authorities and companies
including SMEs, and also provides for the spending of public money in a better
way, including in supporting innovation, social inclusion and green growth.

The new rules have three main objectives:
simplification, flexibility and legal certainty. The simplification of
procedures, greater flexibility and their adaptation to better serve other
public sector policies or the possibility of the  best quality-price ratio
(‘value for money’) will make public procurement more efficient and more
strategic, respecting the principles of transparency and competition to the
benefit of both public purchasers and economic  operators. The rules on
concessions will create a common framework for a major tool of public
management in Europe, thus contributing to the conditions set for stimulating
investment in major public services of the future.

The Directives clarify notably the notion of
“conflict of interests”. This shall at least cover “any situation where
staff members of the contracting authority who are involved in the conduct of
the procedure or may influence its outcome have, directly or indirectly, a
financial, economic, political or other personal interest which might be
perceived to compromise their impartiality and independence in the context of
the procurement procedure”.

Member States have to take measures to
effectively prevent, identify and remedy conflicts of interest arising in the
conduct of public procurement procedures. Exclusion grounds are strengthened
and extended e.g. to cases of undue influence on the decision process or
serious misrepresentation in providing information on the absence of grounds of
exclusion. The Directives will now provide for the compulsory exclusion in case
of abnormally low tenders when it is due to non-compliance of EU law in the
field of (international) social and labour law and (international)
environmental law.

The directive strikes a balance between
simplification and fraud prevention and detection efforts. For instance, the
new rules propose simpler procedures for bidding (e.g. standard
self-declarations; the division of contracts into lots is encouraged to
facilitate bidding by smaller firms) while introducing tougher rules and
provisions on subcontracting and 'abnormally low bids'; more emphasis on
quality, environmental considerations and social aspects and not only on the
cheapest price.

The legislation includes provisions on fraud
prevention and detection, such as monitoring and reporting on the award of
contracts and the follow-up of breaches of procurement rules and specific
violations such as fraud, corruption, conflicts of interests and other
irregularities.

2.4.        Reporting
the anti-fraud strategies in the Annual Activity Reports

In line with the revised Standing Instructions
for the Annual Activity Report (AAR) for the year 2013 following Article 66 (9)[2] and Article 32(2) point
d[3] of the financial
regulation that relates to the prevention, detection, correction and follow-up
of fraud and irregularities as one of the internal control objectives, the
authorising officers by delegation had to report on their anti-fraud
strategies.

All Commission Services but one have [up to now
or currently] developed an anti-fraud strategy in which they propose anti-fraud
activities specific for their policy area; the state of play in terms of
implementation and identified outstanding measures are made public, in so far
as it does not endanger their effectiveness. Quantified indicators reported
were essentially the number of fraud suspicions transferred to or being
investigated by the European Anti-Fraud Office (OLAF).

3.           Prevention
and detection of fraud

The CAFS dedicated much attention to the
prevention and detection of fraud. It underlined the importance of an
integrated approach by emphasising that the objectives of the CAFS should be
achieved through the internal control process of the Commission, applicable at
all management levels. The priority actions described in the previous paragraph
are an example of this approach. In addition, the Commission has performed
several other actions aimed at the improvement of prevention and detection of
fraud.

3.1.        Systematic
controls and risk analyses

One of the best practices mentioned in the
CAFS, was the so called ‘Pluto-approach’ which was a successful project of the
Commission that identified fraud risks by combining information from different
IT-databases.

Based on this successful experience the
Commission has set up guidelines for IT project owners in the EU institutions.
These guidelines enable them to enhance their IT-systems during the design
phase in order to facilitate anti-fraud actions when the IT-systems are put to
use.

This approach has been taken further by the
Commission with the introduction of several other IT-tools. In the research
area, CHARON and DAISY[4]
are used as tools to identify (fraud) risks in EU-funded projects. Based on the
information provided by these tools, risk-based audits can be performed in
addition to the regular sample-based audits.

In the field of shared management, the ARACHNE
tool is made available for Member States’ use by DG EMPL and DG REGIO. This
tool uses publicly available information to identify areas of higher risk that
deserve additional attention by Member States’ authorities. The tool has been
piloted successfully; it will be gradually rolled out in 2014 to MS that
voluntarily decide to implement it in order to further improve their fraud risk
management controls.

3.2.        Awareness
raising and training

The Commission revises its training on
anti-fraud issues and the material used during these trainings to take into
account the latest developments with regard to fraud prevention and detection.
In addition to these dedicated trainings, fraud prevention and detection
actions have also been integrated into trainings that are linked to areas in
which fraud could occur, such as trainings on procurement and financial
expenditure.

Apart from the above mentioned standardised
trainings, several commission services have organised tailor made trainings for
their particular policy area. These trainings have been developed by DG HOME,
CNECT, COMP, ENV, JUST and the external relations DGs with support from OLAF.
In addition, trainings have been given to several Member States, candidate
countries and potential candidate countries on specific subjects related to the
detection of fraud in several Funds (in particular the Instruments for
Pre-accession Assistance) or new anti-fraud measures.

4.           Investigations

4.1.        OLAF
investigations

At the time of adoption of the CAFS, the
Commission presented an amended proposal for reforming OLAF. On 1 October 2013,
Regulation No 883/20131 governing the work of OLAF entered into force. The new
Regulation provides a clear statutory basis that codifies past practice and
reinforces the effectiveness of OLAF's investigative activities. The Regulation
also sets the basis for a better exchange of information between OLAF and its
partners.

To better prioritise the opening of
investigations, the new OLAF regulation introduces criteria that the
Director-General should take into account when deciding to open an
investigation and strategic priorities (Art. 5.1). An inter-institutional
exchange between the European Commission, the Council, the European Parliament
and OLAF on these strategic priorities took place in April 2014 in a
constructive dialogue.

The Commission and OLAF are currently in the
process of revising their Administrative Arrangement (former MoU) in order to
streamline the flow of information concerning internal and external
investigations in the light of Regulation 883/2013. The Regulation, in its
articles 3.6, 4.8 and in particular 7.6, reinforces OLAF’s obligation to inform
the Institutions and bodies concerned and foresees the possibility to adopt
appropriate precautionary measures to protect the financial interests of the
Union without delay, even during an investigation in progress. The
Administrative Arrangements are expected to be adopted by mid-2014.

4.2.        Whistleblowing

The guidelines on whistleblowing, issued in
December 2012, provide ample guidance on how and when to report serious
irregularities. They highlight the protection afforded to whistleblowers[5] acting in good faith.
This protection includes confidentiality of the identity of the whistleblower.
The guidelines also include provisions on the consequences of malicious
denunciations.

OLAF is keeping statistical information on
cases with whistleblowers as source, as table 1 shows.

Table 1

Current Stage || 2011 || 2012 || 2013 || Total

Selection || || || 4 || 4

Dismissed || 8 || 11 || 8 || 27

On-going investigation/coordination case || 1 || 2 || 1 || 4

Closed without recommendations || 2 || 1 || || 3

Closed with recommendations || || 1 || || 1

Total || 11 || 15 || 13 || 39

In the last three years, 39 cases were reported
to OLAF by whistleblowers. At the end of 2013, four reported cases were still
in the selection phase, which means that OLAF has not yet decided to open an
investigation or dismiss the case. In the past three years, there are 8 cases
in which an investigation was opened based on information provided by a
whistleblower. Four of these cases have been closed, resulting in one case in
OLAF issuing recommendations.

5.           Sanctions

The impact analysis for the PIF Directive[6] showed that sanctions
on fraud committed against the EU budget vary widely throughout the EU. With
the proposal for a Directive of the European Parliament and of the Council on
the fight against fraud to the Union’s financial interests by means of criminal
law (COM(2012)363 final), adopted on 11 July 2012, the Commission aims at
defending taxpayers’ money in the most efficient way. It addresses the
diverging rules and often diverging levels of protection within the national
systems of the Member States that have caused measures against fraud not to
have reached the necessary level of deterrence.

The Commission has raised awareness among
Member States by providing a vademecum on the Central Exclusion Database
(CED) and by encouraging them to assign liaison officers for the CED. So far, 20
Member States have assigned liaison officers for the CED. The number of
entities registered in the CED (440 entities as of June 2014) is a matter of
attention and the Commission is working on a legislative proposal to address
this issue.

In the customs area, a proposal for a Directive
of the European Parliament and of the Council on the Union legal framework for
customs infringements and sanctions (COM(2013) 884 final) was adopted on 13
December 2013.

6.           Recovery

The CAFS underlined the responsibility of
Member States’ authorities and Commission Services in the recovery of sums
unduly paid.

The competent authorities of the Member States
and of European institutions have to provide information on the actions they
have taken following recommendations made by OLAF (Recital 32 of Regulation No
883/2013). Following this obligation, the Commission has set up a reporting
system to monitor the recovery of sums unduly paid that covers both shared
management and direct management. Based on the information provided by the competent
authorities, OLAF reports the amounts recovered following investigations in its
annual report.

7.           Other
cross-cutting prevention instruments

The Commission has set up an EU anti-corruption
reporting mechanism to periodically assess the Member States’ efforts to tackle
corruption (The EU anti-corruption report). A tangible result of this was the first
EU anti-corruption report published on 13 February 2014. The report showed that
no EU Member States is free of corruption.

With regard to professional ethics and
integrity, the Commission pursued and will pursue the highest standards. Under
the CAFS, training on ethics and integrity has been given to all new comers in
the Commission Services.

In addition, awareness has been raised of the
possible existence of conflicts of interests for staff and newly recruited
personnel. A specific module in the Commission’s electronic personnel system
regarding professional ethics obligations has been developed. This module
covers requests for authorisation of outside activities, requests to accept
gifts and declarations of spouse employment. The specific module concerning
declarations of conflicts of interest is under development.

At the time of adoption of the CAFS, the
European Transparency Initiative was just initiated and the Transparency
Register launched. Today the system is fully operational and contains more the
6 500 registrants. A review process conducted by the Commission resulted in a
series of recommendations for improvement which will be implemented through a
new Inter-institutional agreement on the Transparency Register. This
Inter-institutional agreement is expected to be adopted by the European
Parliament and will enter into force as from 1 January 2015.

8.           Conclusion

The priority actions of the CAFS were related
to the prevention of fraud. By completing the priority actions in time, the
Commission has improved the protection of the financial interests of the EU.
The adoption of anti-fraud clauses in the legal framework for the programming
period 2014-2020 has affirmed OLAF’s powers to investigate fraud in this
period. In addition, the responsibilities to prevent, detect, report and
correct fraud and irregularities has been properly addressed in the respective
legal instruments, at the level of implementation where this is most
appropriate.

The development of anti-fraud strategies at
Commission Service level has a long lasting positive effect on the anti-fraud
cycle in the Commission by the anti-fraud actions proposed in the action plans
of the services.

The revision of the Procurement directives in
particular can have a big impact on an improved system that goes even beyond
the Commission, and touches activities in the Member States funded by the EU budget
as well.

In 2014 implementation of the CAFS will continue,
in particular with regard to ongoing actions such as awareness-raising and
training. Future anti-fraud actions and priorities in the anti-fraud policy
will be proposed for the agenda of the new Commission.

[1]               COM(2011) 376 final

[2]               The Authorising Officer by delegation shall
report to his or her institution on the performance of his or her duties in the
 form of an annual activity report ...declaring that,... he or she has reasonable
assurance that: (a) the information contained in the report presents a true and
fair view; (b) the resources assigned to the activities described in the report
have been used for their intended purpose and in accordance with the principle
of sound financial management;(c) the control procedures put in
place give the necessary guarantees concerning the legality and regularity of
the underlying transactions...

[3]               “For the purposes of the
implementation of the budget, internal control is defined as a process
applicable at all levels of management and designed to provide reasonable assurance
of achieving the following objectives: [...] (d)  prevention, detection,
correction and follow-up of fraud and irregularities”.

[4]               CHARON and DAISY are IT-tools
developed on the basis of the experiences with PLUTO in the research sector.
They make use of data made available by beneficiaries of EU-funding to better
target risk-based audits.

[5]               A whistleblower is a member
of staff, acting in good faith, who reports facts discovered in the course of
or in connection with his or her duties which point to the existence of serious
irregularities. The reporting should be done in writing and without delay.

[6]               The proposal for a Directive
of the European Parliament and of the Council on the fight against fraud to the
 Union’s financial interests by means of criminal law (COM(2012)363 final)