EUROPEAN COMMISSION Brussels, 2.10.2017 SWD(2017) 332 final COMMISSION STAFF WORKING DOCUMENT EVALUATION

of the application of Regulation (EU, EURATOM) No 883/2013 of the European Parliament and of the Council of 11 September 2013 concerning investigations conducted by the European Anti-Fraud Office (OLAF) and repealing Regulation (EC) No 1073/1999 of the European Parliament and of the Council and Council Regulation (Euratom) No 1074/1999 Accompanying the document Commission report to the European Parliament and the Council {COM(2017) 589 final}



FPDNet Fraud Protection and Detection Network GIPs Guidelines on Investigation Procedures IBOAs Institutions, Bodies, Offices and Agencies of the European Union IDOC Investigation and Disciplinary Office, DG for Human Resources IPP Investigation Policy Priority ISRU Investigation Selection and Review Unit ISSG Inter-Service Steering Group OLAF European Anti-Fraud Office PIF Protection of the EU Financial Interests SC Supervisory Committee SPE Single Point of Entry TFEU Treaty on the Functioning of the European Union VAT Value Added Tax 1. INTRODUCTION 1.1.Purpose of the evaluation This Commission Staff Working document (SWD) accompanies the Commission report on the Evaluation of the application of Regulation (EU, EURATOM) No 883/2013 (the ‘report'). The SWD was supported by an external study. The evaluation is required by Article 19 of Regulation 883/2013 ('the Regulation'), which provides that "by 2 October 2017, the Commission shall submit to the European Parliament and the Council an evaluation report on the application of this Regulation. That report shall be accompanied by an opinion of the Supervisory Committee and shall state whether there is a need to amend this Regulation". 1.2.Scope of the evaluation The scope of the evaluation, as set out in the evaluation roadmap, is the assessment of the operation of the key elements of the Regulation, their impact on the general and specific objectives pursued by the Regulation, and the extent to which these objectives have been met and remain relevant. Although the evaluation covers the Regulation as a whole, it focuses in particular on the changes introduced in 2013 compared to the 1999 legal framework. The evaluation addresses four key areas – effectiveness and efficiency in the application of key elements of the Regulation, as well as coherence and relevance of the Regulation to accomplish its objectives and in the context of evolving anti-fraud policies and fraud trends. The future outlook regarding in particular the establishment of the European Public Prosecutor’s Office (EPPO), requested by the evaluation roadmap, is addressed in the report as it is not a subject to retrospective evaluation. The further criterion required by the Better Regulation Guidelines, the EU added value, is considered as addressed and is not covered by the evaluation as the European Anti-Fraud Office (OLAF) ensures the protection of the EU financial interests, in the framework of Articles 317 and 325 TFEU, by performing specific tasks at EU level which cannot be performed at national level.

The time period covered by the evaluation is 1 October 2013 (when the Regulation entered into force) to December 2016. The Regulation requires that the results of the evaluation are used to assess the need to amend it. The evaluation findings, in section 5 below, identify certain shortcomings in the application of the Regulation that could result in a legislative change to address them. In addition, the evaluation has considered the possible need to amend the Regulation in the context of a changing anti-fraud landscape at EU level. Without preempting the Better Regulation principles, the possible need to amend the Regulation and the intended follow-up by the Commission to the evaluation results is outlined in the report. 2.BACKGROUND TO THE INITIATIVE 2.1.Objectives of the Regulation in historical context In 1999, the Commission set up OLAF to carry out administrative investigations concerning fraud, corruption and any other illegal activity affecting the EU financial interests, and to help Member States fight fraud. OLAF investigates matters concerning all areas of EU expenditure (the main spending categories are structural funds, agricultural policy and rural development funds, direct expenditure and external aid); some areas of EU revenue (mainly customs duties); and suspicions of serious misconduct by EU staff and members of the EU institutions. Section 5 provides illustrative examples of the scope of the work carried out by OLAF and amount of EU funding (recommended to be) recovered. OLAF’s investigative mandate for the protection of the EU financial interests was initially regulated by Regulations 1073/1999 and 1074/1999. The 2013 Regulation replaces them, and is the result of lengthy inter-institutional negotiations based on proposals by the Commission in 2004 , 2006 and 2011. To achieve the ultimate objective of stepping up the fight against fraud, corruption and any other illegal activity affecting the EU financial interests, Regulation 883/2013 was adopted with the objectives to (see also Figure 1): ·improve the effectiveness, efficiency and accountability of OLAF while safeguarding its independence; ·strengthen the procedural guarantees and fundamental rights of persons subject to investigation; ·strengthen cooperation with Member States, EU institutions, bodies, offices and agencies (IBOAs), third countries and international organisations; and to ·reinforce the governance of OLAF. 2.2.Intervention logic Regulation 883/2013 governs the conduct of OLAF's investigations for the purpose of fighting fraud, corruption and any other illegal activity affecting the EU financial interests. The following types of investigations are regulated separately: ·External administrative investigations in Member States and in third countries and on the premises of international organisations; ·Internal administrative investigations within the Union IBOAs; In addition, OLAF opens coordination cases to assist the Member States in organising close and regular cooperation between their competent authorities aimed at protecting the EU financial interests against fraud. The intervention logic developed in the context of the evaluation (Figure 1) aims to retrace the cause and effects chains through which the provisions of the Regulation generate intended outputs, results and impacts (which correspond to the objectives of the Regulation spelled out in the section above). Provisions that should allow achievement of the objectives are: ·Investigative function (Articles 3, 4, 5, 7, 11); ·Safeguards (Articles 8, 9, 10 and 17); ·Cooperation and coordination (Articles 1, 3, 4, 5, 7, 11, 12, 13, 14);

·Governance and control mechanisms (Articles 15, 16, 17). The provisions surrounding the investigative function allow OLAF to fulfil its mandate and use its powers to obtain results in its investigations; they cover the selection phase for the opening of investigations, the investigative tools and powers, the procedure to be respected, as well as the follow-up to investigations. They are complemented by the provisions concerning safeguards, which are intended to protect the persons involved in the investigations, by defining the rules on procedural guarantees, confidentiality and data protection. Throughout the investigations, OLAF cooperates with its sources of incoming information, including whistle-blowers, IBOAs, Member States or third countries authorities and international organisations. The relevant provisions regulate this cooperation depending on the specificities of each of those categories. The governance and control mechanisms ensure OLAF’s independence and the monitoring of its investigative function. The key elements of the Regulation and related implementing rules are further detailed in Annex 5. Figure 1 - Intervention logic for the Regulation 883/2013 Source: ICF report, section 2.2.1 2.3.Baseline The legal baseline is provided by Regulations 1073/1999 and 1074/1999. Their evaluation in 2003 pointed to a number of shortcomings which were in turn reflected in the objectives for the revision of the legislative framework. Among these were: the need for OLAF to establish internal rules for the conduct of the investigations; the necessity to conclude memoranda of understanding with the IBOAs and with third countries authorities; the need to develop standardised practices in relation to national authorities and institutions and bodies, as well as in relation to the persons involved in the investigations; and the need to develop detailed rules to ensure respect of fundamental rights. The evaluation also pointed to other issues impacting on the effectiveness and efficiency of OLAF, which were not addressed in the revised Regulation, for example certain challenges posed by the references to national law in the provisions on OLAF powers in external investigations, or the possible need to include an obligation of the Member States to inform OLAF of the actions taken in the follow up to its investigations. The evaluation was accompanied by an opinion of the OLAF Supervisory Committee which emphasised the need for internal rules of procedure, in particular for the protection of the fundamental rights of persons under investigation. As a follow-up to the evaluation, the European Parliament adopted a report in November 2003. The European Court of Auditors made a number of recommendations for improving the organisation and working methods of OLAF, the governance framework, the rights of the persons concerned by an investigation, relations between OLAF and the Member States’ competent authorities and cooperation with Eurojust and Europol. An impact assessment that would provide for a comprehensive picture of the baseline situation at the time of the adoption of Regulation 883/2013 is not available. However, the yearly OLAF reports give a good idea how the situation evolved since the 2003 evaluation both in terms of activities carried out by OLAF and operational changes introduced to improve the effectiveness and efficiency of OLAF operations. In section 5, a number of figures and tables provide a comparison for pre- and post-Regulation periods. The organisational structure of OLAF changed in 2012 with the arrival of the new DirectorGeneral and in anticipation of the Regulation, to enable it to focus on core activities and to improve the management and supervision of its operational work. In order to enhance efficiency, OLAF refined performance indicators and improved operational statistical data and final reporting. Actions were also taken to reduce the average duration of investigations. 2.4.Current policy and legislative developments On 26 October 2016, the Regulation was amended as regards the secretariat of the Supervisory Committee, previously provided by OLAF. This amendment responded to calls for a strengthened independent functioning of the Committee's secretariat, and aims at avoiding any appearance that the Committee's independence might be impaired. From 1 January 2017, the Committee's secretariat is provided by the Commission, and its budgetary appropriations have been moved from the budget line and the establishment plan of OLAF to that of the Commission. The Commission proposed in 2014 to amend the Regulation to establish a Controller of procedural guarantees. The Controller would review complaints lodged by persons subject to OLAF investigations as regards the respect of procedural guarantees, and authorise certain investigative measures related to members of the EU institutions. In the legislative discussions, the Council raised doubts about the need for such an initiative, as well as about its timing in view of the negotiations on the EPPO and the need to evaluate the Regulation. The European Parliament has so far not adopted a report on the proposal. The establishment of the EPPO is one of the Commission's key priorities in the area of criminal justice and part of the overall strategy to combat fraud against the EU budget. The EPPO, once established as an enhanced cooperation, will be the first EU body equipped with the power to conduct criminal investigations and prosecute crimes affecting the EU budget, such as fraud, corruption or serious cross-border VAT fraud in the participating Member States. It is expected to bring a more consistent and effective prosecution policy for crimes affecting the EU budget, leading to a greater number of prosecutions, convictions and a higher level of recovery of fraudulently lost Union funds. A number of additional changes to the legal framework and on-going policy developments have been considered in this evaluation, primarily from the perspective of the future coherence and relevance of OLAF’s mandate and investigative function. These cover, in particular, the Directive on the fight against fraud to the EU financial interests by means of criminal law (the 'PIF Directive'), which provides for minimum rules on the definition of criminal offences, sanctions and limitation periods, and replaces the previous legal framework based on the 1995 Convention and its protocols; the Early Detection and Exclusion System ('EDES') introduced by the Financial Regulation; and the Commission's Action Plan on VAT. 3.IMPLEMENTATION, STATE OF PLAY AND RESULTS Regulation 883/2013 entered into force on 1 October 2013 and was directly applicable. Certain provisions have been subject to concrete implementation measures, as described below. The effects of their implementation and relevant data are discussed in section 5. Further (monitoring) information is available in the annual OLAF Reports, annual Reports on the protection of the EU's financial interest, OLAF's Strategic and Management Plans and Annual Activity Reports. Opening and conduct of investigations

•The Director-General adopted Guidelines on Investigation Procedures (GIPs) for OLAF Staff, as required by the Regulation. They entered into force on 1 October 2013. •As part of a reorganisation of OLAF in 2012 anticipating the Regulation, a new Investigation Selection and Review Unit (ISRU) was created. It reports directly to OLAF’s Director-General, and advises on whether to open or dismiss an investigation or coordination case on the basis of the Regulation’s selection criteria. As part of this unit a single point of entry (SPE) was established to centralise incoming information of investigative interest and filter input relating to other activities of the Office. •Investigation policy priorities (IPPs), required by the Regulation, are determined each year by the Director-General and included in the Annual Management Plan since 2014. Procedural guarantees •The ISRU performs the legality check mandated by the Regulation prior to certain investigation activities, and the overall review of final reports, draft decisions and draft recommendations. Complementary internal controls are carried out by the Advisers to the investigative Directorates, by OLAF’s Legal Advice Unit and by the Director-General. •The GIPs implement the procedural guarantees as well as the internal control procedures. They are complemented by other instructions to staff. •OLAF's Data Protection Officer is in charge of monitoring compliance of OLAF with data protection requirements. In April 2013, the OLAF Director-General adopted Instructions to staff on data protection for investigative activities. •Beyond the explicit requirements of the Regulation, OLAF has followed the recommendation of its Supervisory Committee to better formalise its internal complaints procedure. In January 2014, OLAF made public on its internet site modalities for persons involved in OLAF investigations to complain to the Director-General of OLAF about the respect of the procedural guarantees applicable in OLAF investigations . Cooperation and information exchange with Member States •Anti-fraud coordination services (AFCOS) are established in all Member States as required by the Regulation. In addition to bilateral cooperation with OLAF, OLAF and the AFCOS also meet in the context of the Advisory Committee for the Coordination of Fraud Prevention (COCOLAF). •OLAF has signed 14 administrative cooperation arrangements (ACAs) with national authorities in 8 Member States (situation on 1 September 2017). •In the area of fraud prevention policy, OLAF works with Member States in the framework of the COCOLAF and its sub-groups. Cooperation with EU IBOAs •Administrative arrangements for the conduct of investigations have been agreed with several IBOAs. •Administrative arrangements for operational cooperation have been agreed with Europol and Eurojust. Revised arrangements are under discussion with Europol, based on Regulation 883/2013 and the recently adopted Europol Regulation. •OLAF cooperates with the Commission services to facilitate the exchange of best practices and to provide guidance and assistance, in the framework of the Fraud Prevention and Detection Network (FPDNet), established pursuant to the Commission Anti-Fraud Strategy (CAFS). Cooperation with third countries and international organisations •OLAF has signed ACAs with 27 third country authorities and with 12 international/regional organisations. Governance of OLAF •Working arrangements between the Supervisory Committee and OLAF, implementing the Regulation, were adopted on 14 January 2014, replacing earlier arrangements of September 2012. At the end of March 2017, these working arrangements were discontinued at the Supervisory Committee's request. The new Committee has expressed willingness to restart discussions to adopt new working arrangements.

4.METHOD/PROCESS FOLLOWED 4.1.Procedural aspects of the evaluation Work on the evaluation started in mid-2015. An Inter-Service Steering Group (ISSG) of Commission services was set up to follow the evaluation process at every step. It reviewed the roadmap, the terms of reference for the external contract, and all external deliverables. The ISSG was also closely involved in the preparation of the report and this SWD. An OLAF internal working group was set up to support the evaluation with expertise and experience on the conduct of investigations and knowledge of the investigative processes. An external contract for a study to support the Commission evaluation was signed with ICF International ltd (ICF). ICF's report is a crucial contribution to this staff working document, although other sources have been also used (and are referenced as appropriate in the relevant sections). ICF also carried out consultation of stakeholders as discussed and agreed with the ISSG. ICF's final evaluation report expresses the views of ICF and, unless stated otherwise in this SWD, the Commission neither endorses these findings nor can it be held responsible for its content. On 1-2 March 2017 OLAF organised a conference on the evaluation of Regulation 883/2013 involving close to 250 participants from various groups of stakeholders. Annex 1 provides more detail related to the procedural aspects of the evaluation. Annex 2 provides a synopsis of the stakeholder consultation. 4.2.Evaluation methodology This staff working document answers questions (Annex 4) identified in the evaluation roadmap. These questions were further detailed in the terms of reference for the external contract and operationalised by the contractor using judgement criteria, indicators and means of verification. The evaluation framework is presented in detail in Annex 3. The evaluation built on a number of research tools to generate the intended evidence. Desk research was used to collect, structure and analyse relevant documentation related to the implementation of the Regulation. A comprehensive legal analysis of the Regulation and other relevant legal instruments assessed the clarity of provisions, the internal and external coherence and their impact on the functioning of the Regulation. The stakeholder consultation was organised by way of a survey to around 170 respondents and 160 interviews with key stakeholders. Five case studies were used to develop the key findings using evidence from the stakeholder interviews and the online survey. In addition to the OLAF conference on the evaluation, the external contractor’s team attended two other conferences and expert meetings, and organised two internal validation workshops of evaluation findings. 4.3.Evaluation challenges and limitations The evaluation work was based on about three years of application of the Regulation, which means that very limited evidence was available on the impacts of its application. Certain provisions of the Regulation may not have yielded their full results yet. While this limitation could not be addressed, given the requirement of the Regulation to complete the evaluation by a certain date, the research and consultation tools were designed so as to capture comprehensive information on the application of the Regulation on the three years after entry into force. A number of challenges arose throughout the evaluation by the external contractor, which impacted the nature and extent of the analysis and the strength of the conclusions drawn. First, as it was not possible for reasons of confidentiality of investigations to give the contractor access to the files of individual cases, they worked on aggregated data provided by OLAF on a set of agreed indicators. The lack of disaggregated case-level data prevented the benchmarking and advanced quantitative analysis originally planned by the contractor, and led to a greater emphasis on qualitative data and analysis. The lack of disaggregated/granular data meant, for example, that it was not possible to link outcomes to specific investigations or specific provision under the Regulation. However, the findings from the contribution analysis provided some evidence of the links between provisions of the Regulation and outcomes, while data on recoveries, prosecution, etc. provide some additional contextual evidence that allowed the contractor to build conclusions. Second, it proved challenging to limit the length/detail of the stakeholder consultation tools (interview topic guides and survey questionnaire) which lengthened the duration of the stakeholder consultation activities. Despite this, all planned interviews were completed and the response rate to the online survey was positive. Third, the results of the survey analysis may suffer from a slight positive bias given that around one-third of respondents were OLAF staff or divergent opinions were expressed per type of stakeholders. To take this circumstance into account, the external contractor reported the results by stakeholder type throughout their final report, although this has not been done systematically. In summary, a combination of the mitigating actions taken, and the diversity of the evidence gathered and the types of analysis undertaken (not overly reliant on one approach over another), helped to ensure overall sound evaluation conclusions. 5.ANSWERS TO THE EVALUATION QUESTIONS 5.1.Relevance

This section focuses on the relevance of the Regulation for the overarching objective of protecting the EU financial interests. To what extent have the specific objectives of Regulation 883/2013 proven to be relevant for the overarching objective of protection of the EU financial interests? The specific objectives of the Regulation (section 2.1.) aim at improving the effectiveness, efficiency and accountability of OLAF and at strengthening procedural guarantees, governance and cooperation with partners. The evaluation has shown that these objectives have proven to be, and remain, relevant for the overarching objective of protection of the EU financial interests. Improving the effectiveness and efficiency of investigations The relevance of OLAF's investigative mandate and role in the protection of the EU financial interests was confirmed already by the evaluation in 2003. The revision of the previous legislative framework targeted issues linked to the conduct of investigations, but its relevance has never been put in question. This is also closely linked to the fact that OLAF ensures the protection of the EU financial interests through specific tasks performed at EU level which could not be carried out at the national level alone. The specific role that OLAF plays was confirmed during the consultation process of national stakeholders and IBOAs. Some AFCOS representatives highlighted the scope of the Regulation as particularly relevant, given OLAF’s mandate covering all illegal activity affecting the EU financial interests compared to the more limited competence of certain national authorities. AFCOS, as well as judicial and managing authorities, also highlighted the relevance and added value of the investigations governed by the Regulation in the detection of, and fight against, transnational fraud. National authorities referred to the relevance and positive impact of the Regulation on national awareness and activities for the protection of the EU financial interests. At the same time, the evaluation revealed that the relevance of OLAF investigative actions varies across Member States. Interviews with national stakeholders and OLAF staff suggest that the main limitation to the relevance of OLAF’s investigations in the Member States is linked to the limited follow-up to judicial recommendations (see section 5.2, effectiveness). Finally, the evaluation showed that certain investigation tools should be further adapted to the changing landscape of cross-border crime and technical progress to remain relevant. Strengthening procedural guarantees and control mechanisms Procedural rights and controls are central to any robust system of law enforcement. Their relevance has not been questioned by any stakeholder consulted. The inclusion of Article 9 of the Regulation on procedural guarantees was generally recognised as a positive development (see section 5.2 on effectiveness). The specific issue of the balance between the procedural guarantees and controls and the powers of OLAF to investigate is discussed in section 5.4 on coherence. Strengthening cooperation and information exchange with partners The implementation of the EU budget by multiple actors at EU and national level, as well as the nature of OLAF investigations – conducted in the territory of the Member States or third countries or in EU IBOAs, and relying on the subsequent follow-up to recommendations – makes cooperation with partners indispensable. It is therefore not surprising that the Regulation’s specific objective to strengthen cooperation mechanisms was not questioned during the evaluation. Several provisions in the Regulation have been highlighted by consulted stakeholders as particularly relevant to promote cooperation with partners. This concerns in particular the creation of the "anti-fraud coordination services" (AFCOS) to facilitate the cooperation between OLAF and the Member States, and the basis provided by the Regulation to enter into ACAs with different partners to establish concrete modalities for cooperation. Strengthening the governance of OLAF The hybrid model of OLAF - independent in its investigative function and a Commission service responsible for anti-fraud policy - motivated the creation of external controls to guarantee its independence in the performance of the investigative function. This has not been disputed by any consulted stakeholders, which agreed that the role performed by the Supervisory Committee to ensure OLAF’s independence is relevant and necessary. The Regulation also reinforced aspects of accountability by introducing the annual inter-institutional exchange of views. Relevance of the Regulation’s specific objectives in the context of the EPPO The future EPPO will be competent for criminal investigations and prosecutions in the participating Member States as regards the offences harmonised by the PIF Directive. The mandate of OLAF under Regulation 883/2013 encompasses administrative investigations into both fraudulent and non-fraudulent irregularities in all Member States. There is no need here to consider the impact of the establishment of the EPPO on areas of OLAF's investigative mandate outside the remit of the EPPO. In the area of investigations into suspected fraudulent irregularities, where OLAF will maintain its mandate for the conduct of administrative investigations, the draft EPPO Regulation governs the future relationship between the EPPO and OLAF on the basis of the assumption that both bodies will act in a complementary way, and avoid undue duplication. The creation of the EPPO therefore does not put into question the continued relevance of the objectives of Regulation 883/2013. The EPPO and OLAF will deal with distinct aspects of the fight against fraud affecting the EU financial interests (criminal and administrative, respectively) and their activities will be largely complementary. 5.2.Effectiveness This section presents the evaluation findings regarding the effectiveness of the Regulation: the extent to which it has achieved its objectives and any significant factors that have contributed to or inhibited progress towards those objectives. The objectives are reflected in the sub-headings of this section.

The three questions below guided the research carried out by the external contractor. Given that their answers considerably overlap, to avoid repetitions the answer is provided jointly in the sections below. In particular concerning the second question, the external factors are identified as such in the different sub-sections of this section. How have the Regulation and, more specifically, its different elements contributed to the specific objectives of Regulation 883/2013 (in particular, reinforced procedural guarantees of persons concerned and better information and cooperation between OLAF and Institutions, bodies, agencies and other competent authorities) and to an improved protection of the EU financial interests (recovery, prosecution, indictment and deterrence)? Which are the external factors (in particular the follow-up responsibilities – once OLAF concludes an investigation - of Member States and other Commission services and EU institutions, bodies, offices and agencies) that have contributed to or influenced the achievement of the objectives of Regulation 883/2013, and how? Can shortcomings be identified in the different elements of Regulation 883/2013 which negatively affect the achievements of its objectives? 5.2.1.Improve the effectiveness and efficiency of OLAF’s investigative activity The effectiveness of OLAF investigations is linked to various provisions in the Regulation, concerning the selection and opening of cases, the procedure and tools for the conduct of investigations, and the duration, output of and follow-up to investigations, as discussed below. Efficiency aspects of this objective are dealt with in section 5.3. The Regulation should allow OLAF to conduct administrative investigations into corruption, fraud and any other illegal activity affecting the EU financial interests that lead to the successful recovery of EU funds, or to disciplinary or judicial action. Over time, OLAF has adapted to the changing nature and increasing complexity of fraud with EU funds. In this context, the evaluation has also looked at the adequacy and sufficiency of OLAF’s tools and powers to deal with fraud in the context of current challenges and fraud trends. 5.2.1.1.Opening of investigations The case selection criteria for the opening of investigations are one of the innovations of the Regulation. Once a sufficient suspicion of fraud, corruption or any other illegal activity affecting the Union's financial interests is established, the following criteria are taken into account: the investigation policy priorities (IPPs) and the annual management plan of the Office, the efficient use of the Office's resources and the proportionality of the means employed, and – for internal investigations - whether another IBOA is best placed to act. The Regulation does not establish a hierarchy of these other criteria. An analysis of the effectiveness of the application of each of the criteria individually was not possible since there is no available quantifiable data. The contractor looked in particular into the application of the IPPs, which were introduced by the Regulation to allow OLAF to concentrate on priority actions. Evidence collected shows that they play a certain role in case selection, but have only partially served to concentrate OLAF's activity around a set of priority areas (e.g. in 2016, 30% of opened cases fell under the IPPs). This can be explained by a number of factors. Habitually OLAF performs its case selection on incoming information from public and private sources, rather than opening cases on its own initiative on the basis of a pro-active data analysis. Moreover, the rate of dismissal based on the absence of a sufficient suspicion of fraud is on average 50% of the cases dismissed by OLAF, which results in the fact that OLAF performs its case selection on a relatively limited number of cases. As regards precisely the IPPs, this shows that OLAF manages to handle all cases where the application of all selection criteria points towards the opening of an investigation and does not need to discard cases only because they do not fall under the IPPs. Therefore, even though the IPPs only partially lead to concentrating on selected priority areas, this does not appear as a shortcoming of the Regulation or its application. Various stakeholders shared a common view that the application of the criteria and impact on the selection of cases was unclear. The contractor concluded that the perceived lack of clarity of the case selection criteria by stakeholders may be caused by the fact that the Regulation is not specific about how they should apply and/or by the limited level of the information provided by OLAF on the reasons for opening or dismissing a case. However, it should also be noted that, while the selection criteria must be taken into account, they leave a margin of discretion for the Director-General to decide on the opening of cases. It is also often the case that the criteria (in particular efficiency, proportionality and – in internal investigations – which IBOA is best placed to act) are considered in conjunction. 5.2.1.2.Conduct of investigations The range of powers and tools available to OLAF under the 1999 Regulations, and further developed in Regulation 883/2013, have allowed OLAF to deliver concrete results in the protection of the EU financial interests and to significantly increase the number of opened and concluded investigations (Table 1). At the same time, the evaluation has shown some limitations in the available powers and tools or in their application. These limitations are outlined below, and some were already identified in the 2003 evaluation of the previous legislative framework. Table 1: OLAF's investigative activities 2009 2010 2011 2012 2013 2014 2015 2016 Investigations opened 160 152 146 431 253 234 219 219 Investigations concluded 140 136 154 266 293 250 304 272 Recommendations issued 194 172 175 199 353 397 364 346 Source: OLAF 2016 report On-the-spot checks and inspections Among OLAF's most important investigative tools and powers are the on-the-spot checks and inspections, as set out in Article 3 of Regulation 883/2013 and in Regulation 2185/96. These Regulations provide OLAF with its own autonomous power to conduct controls “subject to the Union law applicable”and “in compliance with […] the procedural guarantees of Regulation 883/2013”. At the same time, both Regulations refer to compliance with applicable national law ("and practices", in Regulation 883/2013). In this context, the evaluation has shown that different interpretations of the extent to which national law applies, as well as differences in national law, result in fragmentation in the conduct of on-the-spot-checks in the Member States.

The external contractor reports that the application of the reference to national laws in the Regulation has been identified by both OLAF staff and stakeholders as the major challenge influencing the effectiveness of the conduct of on-the-spot checks and, in the end, potentially delaying investigations and compromising their completeness and/or quality. The evaluation findings show that this can hinder OLAF’s ability to use on-the-spot checks as an investigative tool consistently across Member States. This can limit OLAF’s ability to ensure an equivalent protection of the EU financial interests across Member States, as required by Article 325 TFEU. This issue has also been raised by other independent reports, such as an Ecorys 2013 report and a recent Utrecht University study comparing OLAF’s powers to those of three other EU authorities exercising competences of administrative investigation under Union law. The authorities compared to OLAF were DG Competition in the European Commission, the European Central Bank and the European Securities and Markets Authority. This study considers the application of Regulation 883/2013 suffers from a "variable geometry" concerning the exact extent of OLAF’s investigative powers, and that these divergences in the application of EU law powers is greater than for the other authorities considered. Furthermore, the Regulation does not provide OLAF with tools to enforce its powers in the case of refusal or obstruction by persons concerned by investigations. When an economic operator subject to investigation resists an on-the-spot-check or inspection, OLAF inspectors have to rely on the assistance of national authorities for coercive measures. In this regard, the competent authorities of the Member States are required by the Regulation to, in conformity with national rules, give the necessary assistance to enable OLAF staff to fulfil their tasks effectively. There are substantial divergences in the way this is applied, as a result of different national rules. In comparison, other EU authorities that rely on assistance by national authorities for coercive measures, benefit from a more specific legal framework. In this regard, the Utrecht University study noted that other EU bodies with administrative investigative competencies have themselves the power to impose penalties for lack of cooperation. To illustrate the above, information collected by OLAF through a questionnaire among Member States on the conduct of on-the-spots-checks, in 2015, reveals the variety of scenarios that OLAF is confronted with when applying its power to conduct on-the-spot checks. The possibility to use coercive powers to assist OLAF in the conduct of a check was possible, at the time of the questionnaire, in around half of the Member States as regards both revenue and expenditure. In the remaining Member States, coercive powers to support OLAF were available only in revenue cases, or only in expenditure cases, or not at all. Digital forensic operations The issues arising from the references to national law in Regulations 883/2013 and 2185/96, are specifically relevant to the use of digital forensic operations in the framework of on-the-spot checks. While the Regulation specifically provides for access by OLAF to computer data, the impact of the general reference, for on-the-spot checks, to “the same conditions as national administrative inspectors and in compliance with national legislation” is particularly felt in this area. A questionnaire among Member States on the conduct of on-the-spots-checks carried out by OLAF in 2015 collected information on the access to electronic communications by national administrative inspectors. In around one third of Member States, access was not possible in administrative investigations; in another third, access could only be granted by a court or authority different from the administrative inspector; in the remaining Member States, access was possible by the administrative authority, or only with the agreement of the economic operator. This illustrates not only the divergences that OLAF may face, but also that, in some instances, OLAF’s equivalent access to that of national inspectors does not ensure the effective application of the power to collect computer data granted by EU law. A number of consulted stakeholders have also raised questions surrounding aspects of the interpretation, and the possible need to clarify, the provisions allowing OLAF to carry out digital forensic operations in both internal and external investigations. The evaluation showed that the ambiguity surrounding digital forensic operations under different scenarios involving a mix of private devices can hinder OLAF’s ability to gather digital forensic evidence as part of its investigations. Internal investigations In internal investigations, OLAF conducts inspections of premises and digital forensic operations within the IBOAs. The conduct of internal investigations is not based solely on the Regulation, but depends also on the terms of individual internal decisions adopted by the IBOAs pursuant to the Interinstitutional Agreement concerning internal investigations by OLAF. These decisions can (and do) deviate from the model decision attached to the Agreement, based on the institutional autonomy and the specificities of each IBOA. The resulting differences mainly concern the duty to cooperate with OLAF and the duty to supply information. Moreover, OLAF has entered administrative arrangements on cooperation and exchange of information with a number of IBOAs, further specifying the modalities of cooperation on investigations. To ensure that the system established by the Interinstitutional Agreement, at a time where the number of individual decisions has gone from the three original signatories to above 60, allows the conduct of internal investigations in equivalent conditions in all IBOAs, it has been suggested during the evaluation (in particular by OLAF investigative staff consulted) that the main rules concerning internal investigations should be laid down and further clarified in the Regulation itself so as to apply uniformly in all IBOAs. There are, in particular, divergent interpretations between institutions with regard to the possibility of OLAF to access the offices of Members of an institution. To address this, OLAF investigative staff have suggested that the right to inspect premises should be more clearly spelled out in the Regulation, which refers to the “right of immediate and announced access to any relevant information” held by IBOAs, together with clearer conditions for the immediate and announced access. Access to bank account information In the framework of its investigations, OLAF can inspect the accounts of the IBOAs. Such power does not exist in Regulation 883/2013 as regards the private bank accounts of EU staff or economic operators and their staff who are under investigation. In the framework of on-the-spot checks, OLAF can have access to the bank statements held by economic operators (limited to what is in their possession). In order to have full access to bank information, OLAF is dependent on its national counterparts (administrative or judicial bodies) and their own powers under national law to provide bank data to OLAF, which naturally creates inconsistencies across Member States. Some OLAF staff consulted during the evaluation have stressed that access to bank data, with at least the ability to identify the accounts of persons investigated, is necessary to identify the money flow in various types of fraud in both internal and external investigations. They have also indicated that access to bank data appears necessary in order to enable OLAF to fulfil its mandate in the fight against VAT fraud as well (see section 5.4.5). 5.2.1.3.Final reports and follow-up to recommendations OLAF provides financial, disciplinary, judicial and administrative recommendations to IBOAs and Member States. The extent of the follow-up by their recipients determines the impact of OLAF’s investigations in the protection of the EU financial interests. Table 1 above indicates increasing numbers of OLAF investigations concluded and recommendations issued every year. Table 2 below provides a break-down of the issued recommendations by type. Table 2: OLAF recommendations Type of recommendation 2009 2010 2011 2012 2013 2014 2015 2016 Financial 76 62 63 116 233 253 220 209 Judicial 61 67 73 54 85 101 98 87 Disciplinary 18 10 16 25 24 15 16 18 Administrative 39 33 23 4 11 28 30 32 Total 194 172 175 199 353 397 364 346

Source: 2016 OLAF report OLAF monitors the follow-up to its judicial, financial and disciplinary recommendations on the basis of information submitted to it by Member States and IBOAs. The monitoring is done at OLAF's initiative and concerns all the judicial, financial and disciplinary recommendations issued. OLAF systematically requests information on the implementation of its recommendations from the competent authorities of the Member States (for judicial recommendations and financial recommendations in the area of revenue) and from IBOAs (for disciplinary recommendations and financial recommendations in the area of expenditure). There are some limitations to the monitoring of recommendations, and consequently to the analysis below. There is not an obligation to provide reasons for a decision not to follow-up, and the information transmitted to OLAF greatly varies in its level of detail. There is not always information available to assess the explanations behind the different rates of followup. Moreover, there is a time lag between the issuing of OLAF recommendations and their implementation by the recipients, which can take several years. Given the timeframe for the evaluation, which considers only the first three years after entry into force of the Regulation, the data currently available on follow-up by recipients of recommendations relate to investigations for the most part concluded before the entry into force of the Regulation. The evaluation timeframe does not, therefore, allow to assess the possible impacts of new provisions in the Regulation on the follow-up to recommendations in terms of rate of indictments, amounts recovered and for disciplinary measures taken. The evaluation has identified, as a factor impacting on the rate of follow-up to recommendations, the quality and timeliness of OLAF final reports, with some reported instances of lack of clarity, inconsistency between conclusions and evidence, and factual mistakes. On the other hand, the survey results were more optimistic with around 60% of the respondents (including OLAF respondents) agreeing or strongly agreeing that the OLAF reports are overall clear and comprehensive and clearly formulated. In addition, OLAF interviewees suggested that the Regulation has led to the improvement of the quality of OLAF’s reports (due to higher standards linked, for instance, to the internal controls and legality checks and reviews which contribute to the respect of procedures and to the quality and comprehensibility of the final reports). Further improvement of the quality of OLAF's reports could be achieved by internal measures in OLAF and is not directly depending on the effectiveness of the relevant provisions in Regulation 883/2013. Furthermore, the differences between the extent of the discretion enjoyed by the recipients on whether or not to take appropriate action following OLAF's recommendations leads to wide differences in the responses and to frequent lack of follow-up to recommendations (as illustrated by the subsections below). While maintaining the nonbinding nature of OLAF recommendations, it has been suggested by OLAF staff consulted that the effectiveness of the recommendations could be strengthened by extending the obligation to report on all cases (Member States and IBOAs in both external and internal investigations) and introducing the duty to state reasons should there be no follow-up, as well as by codifying existing case-law by clarifying the duty to take the recommendations into account when deciding whether to take action in a certain matter or not. oFollow-up to judicial recommendations On average, only around half of the cases submitted by OLAF to national judicial authorities lead to indictments, and the situation varies considerably across Member States. The low rate of follow-up to OLAF's judicial recommendations has been repeatedly highlighted as a key problem by the European Parliament. An OLAF internal analysis of the reasons behind this, points to a number of issues. OLAF identified as the main factor hindering the follow-up to judicial recommendations the fact that the Regulation does not sufficiently ensure the use of OLAF reports as evidence in trial in the Member States (see next subsection). Other possible factors were also considered. Despite OLAF's investigative efforts, its investigation powers and tools are not sufficient in all cases to collect strong evidence of a criminal offence. For internal investigations, the OLAF analysis considers that, whereas for OLAF any infringement committed by EU staff is generally regarded as a serious matter, the priorities of the national judiciaries - in Member States where the principle of opportunity applies - may be different. The external contractor pointed out how early transmission of the information and evidence collected is also essential for the judicial follow-up. oAdmissibility of OLAF reports as evidence in trial OLAF final reports constitute admissible evidence in administrative or judicial proceedings in the same way and under the same conditions as administrative reports drawn up by national administrative inspectors. This rule ensures the equivalence with national reports of a similar nature, but not the effectiveness of OLAF reports accompanied by judicial recommendations. In Member States not having rules providing for the admissibility of evidence, in judicial proceedings, of similar administrative reports drawn up by national administrative inspectors, evidence collected by OLAF will be inadmissible. In various Member States, after receiving the OLAF final report, prosecutors carry out all the investigation activities once again in order to acquire admissible evidence. This raises also efficiency issues, and may also lead to offences becoming time barred. This assessment was confirmed by stakeholders consulted by the external contractor for this evaluation, in particular by AFCOS and judicial authorities. A study commissioned by the Budgetary Control (CONT) Committee of the European Parliament underlined how the asymmetries in the prerogatives and powers of OLAF jeopardise the future use of its findings. In addition, the rule that leaves the admissibility of OLAF final reports to the variable geometry of the national criminal procedural law creates uncertainties and a duplication of efforts that is detrimental to both procedural economy and the rights of the persons under investigation. oFollow-up to financial recommendations Financial recommendations are addressed to the IBOAs or national authorities providing or managing EU funds. They seek to recover the defrauded EU funds to the EU budget. The evolution of amounts recommended for recovery, and the amounts recovered according to monitoring information collected by OLAF, are captured in tables 3 and 4. However no correlation can be established between the amounts recommended and the amounts recovered in the same financial year, as the amounts recovered in one given year relate also to cases closed in previous years. Table 3: Amounts recommended by OLAF for financial recovery (million Euro) Year of recommendation 2012 2013 2014 2015 2016 Amounts recommended 284.0 402.8 901.0 888.1 631.1 Source: 2016 OLAF Report The evidence collected for the evaluation identified as a key factor influencing the follow-up to OLAF’s financial recommendations, the amounts recommended for recovery, which several stakeholders (IBOAs, Member States' judicial and managing authorities) considered to be often unduly overestimated. The decision on the final amount recovered is the responsibility of the IBOAs, which have underlined that the calculations done follow the applicable legal framework and internal rules. From the IBOAs experience, it results that other factors could also influence the recovery, as bankruptcy of the economic operators concerned which often arises in direct expenditure cases. In addition, the use of OLAF's reports for financial follow-up purposes can be problematic in practice, for confidentiality reasons, when at the same time a judicial followup has been recommended. Some consulted stakeholders called for a better collaboration between OLAF and the responsible IBOA prior to issuing the recommendations, and also in the follow-up phase.

Table 4: Amounts recovered (million Euro) Year of recovery 2012 2013 2014 2015 2016 Amounts recovered 94.5 117 206.4 186.3 196.2 Source: 2013-2016 OLAF Annual Activity Reports The European Parliament has underlined in the past the uneven level of financial recovery object of OLAF recommendations. OLAF’s monitoring data does not allow a more comprehensive analysis of the factors behind this discrepancy, as OLAF is not provided with detailed reasons to explain the follow-up or dismissal of recommendations. OLAF has undertaken an internal assessment in order to clarify terminology, improve the quality of its financial recommendations and to promote as far possible (taking into account the different areas of EU expenditures and revenues, and the fact that the typology of cases can widely vary within a specific area) a harmonised approach throughout OLAF. Following the internal assessment, in October 2016, OLAF issued internal instructions on financial recommendations. They provide guidance to staff notably on the determination of relevant estimated amounts and on the content of OLAF financial recommendations and relevant sections of the final report. The new instructions distinguish between the different fields of expenditure and revenues, and take into account the relevant financial principles and specific rules per each of these fields. They also address the usefulness for OLAF to hold bilateral contacts with the relevant services of the Commission or other IBOAs for the determination of the relevant amounts, without jeopardising OLAF's independence. These instructions already respond to some extent to the recommendations formulated by the contractor in its report. As the instructions have been adopted only in October 2016 it is too early to evaluate their practical impact. oFollow-up to disciplinary recommendations Disciplinary recommendations concern misconduct of EU staff or members of the EU institutions and are directed at the authority having disciplinary powers in the IBOA concerned. In the last three years 2014-2016, OLAF has issued 48 disciplinary recommendations. IBOAs have taken measures in 22 cases, in 11 cases no measures were taken, and in 15 cases no decision has been taken yet. Stakeholders consulted indicated that for a better follow-up, discrepancies in the recommendations could be avoided by a better interplay between OLAF and their service during the investigations, and mentioned also a particular difficulty in the cases where an OLAF final report is accompanied by recommendations for both judicial and disciplinary actions; this resides in the obligation, provided for in the EU Staff Regulation, to suspend the disciplinary proceedings until the judicial proceedings are finalised . 5.2.2.Improving cooperation and information exchange with partners 5.2.2.1.Improving cooperation and information exchange with IBOAs The IBOAs are a key partner of OLAF in its investigative function. They share the responsibility for the protection of the EU financial interests and their role is essential in both internal and external investigations. The extent of the cooperation between OLAF and IBOAs, however, differs from internal to external investigations. Some provisions in Regulation 883/2013 establish more explicit duties for IBOAs and their staff in internal investigations. The majority of stakeholders consulted in the evaluation process expressed a positive view about the cooperation between OLAF and IBOAs. Cooperation with the European Commission is particularly relevant given the important role played by the so-called ‘spending DGs’ in the management of EU funds. Stakeholders from these DGs highlighted positive cooperation with OLAF. Overall, the consulted Commission stakeholders considered that ACAs contributed to an even better exchange of information. An important aspect of cooperation during the investigations concerns the adoption of administrative precautionary measures by the IBOAs. There are no statistics available on the extent of use of precautionary measures, but results of the consultation of stakeholders suggest that their use is not very frequent. The external contractor points out to the lack of clarity of the interplay between precautionary measures and procedural guarantees that might explain in part the reluctance of some stakeholders to adopt on precautionary measures. IBOAs have mentioned in particular the difficulty to assess the need of precautionary measures given the inconclusive nature of evidence at the early stage of an investigation, and resulting risk to the legality of the precautionary measures. OLAF staff raised concerns regarding the confidentiality of the investigations and the amount of information that can be communicated early. There were suggestions that a closer cooperation between OLAF and the Commission DGs concerned could help develop clearer procedures surrounding precautionary measures. During the assessed period, and on the basis of the specific provision newly introduced by the Regulation, OLAF and Europol cooperated effectively, in particular regarding counterfeit goods. The future working arrangements should allow enhancing cooperation between the two bodies (as the current legal framework for OLAF and Europol allows for the exchange of operational, strategic and technical information, including personal data, between the two bodies, not foreseen in the current administrative arrangements). Eurojust and OLAF collaborate effectively through the exchange of information of investigative interest and mutual involvement in common cases. Since 2005, OLAF and Eurojust exchanged information in relation to 66 cases. Also, since 2015 OLAF participates in joint investigation teams coordinated by Eurojust. 5.2.2.2.Improving cooperation and information exchange with Member States The effectiveness of OLAF investigations (in particular external) relies heavily on its partnership with the Member States at all stages of the investigative cycle, in particular as various provisions of the Regulation make OLAF's investigative work subject to national law, and that OLAF has to request the assistance of national authorities for the conduct of certain investigative measures. Improving cooperation with Member States was thus among the main objectives of Regulation 883/2013, which introduced new rules on the AFCOS, administrative arrangements, information exchange, and follow-up after an investigation. The data collected for the evaluation shows a clear improvement in the cooperation and exchange of information between OLAF and the Member States after the creation of the AFCOS. However, although the Regulation requires the Member States to designate AFCOS, it leaves at their discretion what competences and powers to grant them. This results in a considerable diversity in the role, profile and effectiveness of cooperation with the AFCOS. An OLAF survey of AFCOS showed that over 80% of the AFCOS are of limited size with only one central office, with the remaining operating with both a central office and local units. More than half of AFCOS cooperates with a wide range of national authorities (notably anti-corruption, anti-fraud, customs, EU fund managing authorities and tax administrations), offering OLAF an indirect access to these. Almost a third has criminal or administrative investigative powers. More than half are either already cooperating with other Member States' AFCOS or would be open to do so in future. This diversity was the main factor identified by the external contractor as inhibiting the effectiveness of the AFCOS. However, there were diverging views as regards further alignment of their role and powers: OLAF staff and certain AFCOS tended to agree, while other AFCOS supported the legal provisions as they currently stand. The positive role of the AFCOS has also been underlined by the European Parliament, although it has also raised concerns regarding discrepancies between the functions, tasks and powers that Member States have entrusted to AFCOS.

Several AFCOS referred to the lack of ‘horizontal’ administrative cooperation possibilities between AFCOS as a limitation to the current framework. In this regard, a recent cooperation project in the area of structural funds, designed and coordinated by the Italian AFCOS and involving AFCOS from other Member States (hereinafter, the Italian cooperation project), concluded that improving the flow of information between Member States would be conducive to better prevention and combatting of transnational fraud in structural funds, and that the naturally identifiable channel for this could be the AFCOS. OLAF respondents highlighted that the role of the AFCOS was relevant both in external and internal investigations, and that this should be further clarified in the Regulation. OLAF can also cooperate directly with administrative, police and judicial authorities. The Regulation contains a general obligation for all relevant Member States' authorities to cooperate with OLAF within the limits permitted by national law. Administrative arrangements may also be established. In turn, OLAF investigators cooperate with national authorities during the follow-up to recommendations; they may, for instance, be called to testify in national judicial proceedings as witnesses or experts. According to OLAF staff consulted in the evaluation, the cooperation and exchange of information with national authorities is overall effective, and is assessed as more effective with Member States' authorities with whom ACAs are signed. However, the references to national law in the Regulation result in considerable differences across the Member States, in particular as regards cooperation with judicial authorities, and it can lead to one way exchanges from OLAF to the judicial authorities which do not share information in return. 5.2.2.3.Improving cooperation and information exchange with third countries and international organisations The Regulation bases OLAF’s powers to investigate in third countries and international organisations on the cooperation and mutual assistance agreements concluded by the Union with these partners, such as association agreements. The power of OLAF to investigate is also frequently laid down in financing programmes and conventions. OLAF may also enter into administrative arrangements with these partners. Based on information provided by OLAF investigators and by representatives of national authorities in third countries, the external contractor concluded that the cooperation with third countries is more effective when ACAs are signed. ACAs are not, however, a prerequisite for cooperation. OLAF investigators consulted during the evaluation have indicated that the Regulation should be clarified as it is sometimes interpreted by partners as not allowing the exchange of information with third countries authorities or international organisations in the absence of an administrative arrangement. 5.2.3.Strengthening the procedural guarantees of individuals subject to investigation Article 9 of the Regulation codified and clarified procedural safeguards of persons under OLAF investigations. It is generally recognised as an improvement for protecting the rights of individuals subject to an OLAF investigation. The evaluation has not shown a need to substantially revise existing provisions, although the following specific elements were highlighted during the evaluation as potentially affecting effectiveness of OLAF investigations: -It has been suggested that the scope of Article 9, which focuses particularly on the conduct of interviews, could be clarified to apply also to other powers of OLAF that could raise procedural rights concerns, such as collection of statements, on-the-spot checks and digital forensic operations. -The opportunity to comment, that has to be provided once the investigation has been completed and before conclusions referring by name to a person concerned are drawn up, was questioned by OLAF investigators and a number of national judicial authorities. They considered it may represent a risk to the confidentiality of the investigation where judicial action may follow, given in particular that the Regulation allows for it to be deferred but not waived. Further legal uncertainty exists in relation to internal investigations, where the right to comment is provided for by the Regulation even in situations where the investigation has not yet been completed. -Some of the consulted stakeholders pointed out that the Regulation does not address the right of access to the file. It must be noted that, based on existing legislation, the case law of the CJEU has systematically refused the right to access the OLAF case file as OLAF final reports have been considered preparatory acts. In accordance with the same case-law, access to documents in OLAF's files takes place in the context of the possible follow-up procedure. OLAF’s final recommendations are submitted to the competent Union and/or national authorities. If those authorities intend to adopt measures or penalties against a person concerned by an OLAF investigation, they must give that person the opportunity to exercise his or her rights of defence in accordance with the applicable procedural rules. The procedural guarantees are underpinned by OLAF internal and external controls. Internally, OLAF conducts legality checks of investigative activities and has in place an internal complaint procedure. The review function introduced by the Regulation and the internal controls were mentioned by OLAF staff as strengthening procedural guarantees of individuals subject to investigation. Despite the large number of investigations carried out every year, their sensitive nature and the fact that OLAF deals with cases involving the integrity and reputation of natural persons, relatively few complaints based on procedural guarantees have been submitted to OLAF. During the three years of application of the Regulation, 15 complaints were filed against OLAF; of these, 4 were declared inadmissible and 9 deemed unfounded. As regards the external controls, the Supervisory Committee monitors developments concerning the application of procedural guarantees in OLAF investigations. It has recommended the establishment of an internal complaint mechanism (implemented by OLAF), and its recent evaluation of the legality check and review in OLAF was overall positive. Other external controls include the European Data Protection Supervisor (concerning data processing by OLAF), the European Ombudsman (complaints about maladministration) and the European Court of Auditors (external audits). Those concerned may also raise issues related to OLAF investigations before the European Court of Justice, usually in the context of litigation against measures taken as a follow-up to OLAF recommendations, or in the context of an action for damages allegedly caused by OLAF. The Commission’s proposal concerning the Controller of procedural guarantees, currently pending, aims at tasking an external and independent structure with reviewing OLAF’s compliance with the procedural guarantees of the persons concerned by OLAF investigations; it also takes into account the special status of members of EU institutions by submitting certain investigative activities concerning them to prior authorisation by the Controller. During the consultation of stakeholders, there were different views on the Commission proposal. A number of EU control bodies and several AFCOS were of the view that there is indeed a need to strengthen the current mechanisms by appointing a Controller of Procedural Guarantees, as proposed by the Commission. In contrast, a number of other EU control bodies and certain OLAF staff suggested that the existing control mechanisms are sufficient to ensure compliance with procedural rights given the administrative nature of OLAF investigations. The study on procedural guarantees commissioned by the CONT Committee concluded that, whilst an effective and independent control of OLAF investigations is undoubtedly needed, the added value of an additional layer of non-binding control appears questionable both in terms of coherence and effectiveness. 5.2.4.Reinforcing the governance of OLAF Ensuring the appropriate governance of OLAF as well as its accountability, guaranteeing its independence while providing for adequate controls, was among the objectives that the legislative proposals to amend OLAF's former legal framework tried to address. Regulation 883/2013 introduced in particular new provisions aimed at clarifying the role and mandate of the Supervisory Committee, responsible for monitoring the implementation by OLAF of its investigative function, in order to reinforce its independence. In addition, it monitors developments concerning the application of procedural guarantees and the duration of investigations . The relevant provisions were amended in 2016 to ensure a strengthened independent functioning of the Committee's secretariat from OLAF; the Committee's secretariat is now provided by the Commission. A contribution analysis performed by the external contractor on the available outputs of the Supervisory Committee concluded that the new provisions of the Regulation related to the Supervisory Committee did not reinforce the governance of OLAF by the regular monitoring of the implementation by OLAF of its investigative function. The external contractor considered that the definition of the Supervisory Committee's role and mandate as contained in Article 15 of the Regulation is not clear enough and open to interpretation. Among those consulted in OLAF, the Supervisory Committee and external stakeholders, many expressed the view that divergent interpretations on the Regulation’s provisions on the Supervisory Committee's impacted the effectiveness and efficiency of the work of the Committee and its cooperation with OLAF. Two issues were typically identified as problematic: the exact nature of the Supervisory Committee’s role, and the Committee’s access to case-related information.

However, it is sufficiently clear from the terms of the Regulation that the Supervisory Committee carries out a role of general and systemic supervision of the investigative activity of OLAF with the purpose of reinforcing its independence. The Regulation does not empower the Supervisory Committee to review individual investigations or to interfere with on-going investigations. In this context, some of the outstanding issues of interpretation between OLAF and its Supervisory Committee as regards access to case-related information were addressed by a common interpretation of the legal services of the Commission, the Parliament and the Council in September 2016. The Supervisory Committee’s role as regards procedural rights and the duration of investigations are also part of its general and systemic supervision role, and do not entail the control of individual investigations. However, these additional functions, introduced in 2013, seem to have contributed to the different interpretations on the nature of the Committee’s mandate. The consultation by the external contractor showed that OLAF staff regarded the Supervisory Committee primarily as a control body rather than a guardian of OLAF's independence. As regards the inter-institutional exchange of views, the external contractor's report considered that the evidence gathered was too limited to derive robust findings on its effectiveness, but pointed to the fact that it contributes to the transparency of the work of OLAF. 5.3.Efficiency To what extent has the implementation of Regulation 883/2013 impacted on OLAF's resources and the use of those resources? Did OLAF use the possibility to open an investigation taking into account the need for efficient use of its resources or the subsidiarity principle? This section considers the extent to which the implementation of the Regulation had an impact on OLAF resources and the use of those resources, as well as whether the provisions in the Regulation for the conduct of investigations are efficient for the achievement of the Regulation’s overarching objective. To provide general background to the efficiency assessment, it starts by describing the general evolution of financial and human resources in OLAF before and during the evaluation period. Due to the limited data availability, the majority of the assessment is of a qualitative character. 5.3.1.Resources The efficiency considerations discussed below should be read in the context of decreasing human resources and a relatively stable budget over the analysed period. The number of posts in OLAF's establishment plan declined by 5.5 % between 2009 (384) and 2016 (363) mainly in the context of general reductions in staff and budgets in the EU public service; the total workforce including service providers remained however stable over the same period. This decrease concerned mainly staff in policy functions. The challenges which OLAF faces in maintaining its current level of professional expertise are also linked to the ageing workforce, as investigative staff recruited from national services in the early days of OLAF retire. Since 2009, the OLAF budget has been stable in absolute numbers ranging between EUR 57 million to EUR 59 million a year. The proportion of the budget spent on staff has also been relatively stable, ranging from 65.8% in 2011 to 68.7% in 2016, with an additional 4.5% spent on external agents (contract staff, seconded national experts and interims). Table 5: OLAF administrative budget (in EUR million) 2009 2010 2011 2012 2013 2014 2015 2016 Staff costs 38.3 65,8 % 67.1 % 67 % 38.5 67,3 % 39 67,5 % 40,5 68,7 % External agents 2.5 4,3 % 4,5 % 4,5 % 2.6 4,5 % 2.6 4,5 % 2.6 4,4 % Total budget 57.8 57.1 58.2 57.4 57.7 57.2 57.7 58.9 Source: The 2009-20016 OLAF reports 5.3.2.Application of the Regulation Single point of entry, case selection and opening of investigations The evaluation has shown that the operational efficiency of the selection phase has increased under the Regulation, due to several factors. A single point of entry (SPE) filters incoming information in OLAF. As a result, only information of potential investigative interest reaches the selection stage, allowing a better use of staff resources in the ISRU to assess information of true potential investigative interest and contributing to the expeditious case selection process. The external contractor concluded that the SPE made the selection process more efficient. The table below illustrates that the case selection criteria introduced by the Regulation, alongside the reorganisation after the arrival of the new Director-General in 2012 anticipating the Regulation, contributed to shaping a coherent policy on openings and dismissals across OLAF and allowed to effectively track all information coming in and its treatment, has become more efficient after the entry into force of the Regulation in processing a higher number of incoming information; opening a higher proportion of incoming cases; and selecting or dismissing incoming cases much faster than in the previous period. Interviews with OLAF investigators carried out for the evaluation confirmed that the new case selection process had a positive impact on investigators' work as they were now spending more time on investigations, rather than on the evaluation of incoming information and case selection.

Table 6: Number of incoming information and investigations opened 2009 2010 2011 2012 2013 2014 2015 2016 Incoming information 959 975 1041 1264 1294 1417 1372 1136 - from public sources 436 381 274 375 405 458 439 380 - from private sources 523 584 767 889 889 959 933 756 Investigations opened 160 152 146 431 253 234 219 219 Selections completed 1007 886 926 1770 1247 1353 1442 1157 Average duration (in months) of selection phase 5.8 6.3 6.8 1.4 1.8 2.0 1.7 1.7 Source: The OLAF 2016 report Note: OLAF reorganisation took place in 2012 in anticipation of Regulation 883/2013 However, the table also shows a high and stable rate of dismissal at the selection stage since 2013, of around 80-85% of the incoming information. In particular, the sufficient suspicion of fraud test led to the dismissal of an average of 50% of the cases. OLAF staff have raised in this context the fact that the Regulation does not contain a duty of national competent authorities to cooperate with OLAF at the selection stage. Thus, in many cases where the incoming information on its own may be insufficient to open a case, OLAF lacks tools to collect further information. Investigative process In terms of human resources, the average number of OLAF investigative staff declined from 163 in 2009 to 148 in 2011 to rise again to 168 in 2016 (see figure 5). The number of investigative staff from 2013 to 2016 increased by 7% compared to the period 2009 to 2012. In comparison, the total number of cases opened increased by 32% between the two periods (see table 1 above). The figures below illustrate the evolution between 2009 and 2016. They all show a substantial increase in investigation work from 2013 to 2016 compared to the previous three-year period. When compared to the period before 2013, the number of closed investigation cases has almost doubled in the period from 2013 to 2016. The same can be said about the number of cases closed with recommendations. Figure 5: Allocation of OLAF investigative staff by role, 2009-2016 Source: ICF report, section 5.2, based on calculations on OLAF unpublished data Figure 6: Number of closed investigations, 2008-2016 Source: combined figures from ICF report, section 5.3.1, based on ICF calculations and OLAF Annual Reports Table 7 presents the main indicators for measuring the efficiency of the investigative function in producing its outputs. All indicators confirmed that investigative staff conducted more investigations in the period of implementation of the Regulation than before. The overall duration of investigations has tended to remain stable and or slightly decrease, depending on whether only cases closed or cases closed and on-going cases are considered, respectively. Table 7: Indicators for assessing the efficiency of OLAF investigative function before and after the entry into force of Regulation 883/2013 Period 2008-2011 2013-2016 Average number of selection cases opened per investigative staff 1.3 1.6 Average number of ongoing cases per investigative staff 2.2 3.4 Average number of closed cases per investigative staff 0.9 1.7 Average number of closed cases with recommendations per investigative staff 0.5 0.9 Average duration (months) of closed case vs. closed and ongoing cases Period from 2008 to 2011 Closed cases only Max = 27 Median =24.4 Min = 22.2 Closed & ongoing cases Max = 22.4 Median = 20.5 Min = 18.9 Period from 2013 to 2016 Closed cases only Max = 25.1 Median = 23.3 Min = 22.3 Closed & ongoing cases Max = 18.7 Median = 17.8 Min = 17.2 Source: ICF report, section 5.3.1 - Note: ICF calculations based on OLAF unpublished data and OLAF Annual Reports. The number of investigative staff for 2008 has been estimated on the basis of the year 2009 to enable comparisons between the two periods. The number of cases per investigative staff reflects the number of cases per 'lead investigator', which provides a skewed picture as in a majority of cases there is a lead investigator and an associated investigator(s). Investigative tools and powers The external study supporting this evaluation concludes that efficiency challenges mainly stem – similarly as for effectiveness – from the divergences resulting from the reference to national rules in the case of external investigations, in particular as regards on-the-spot checks. OLAF limited access to forensic data and bank accounts were also cited as factors limiting the efficiency of the investigation process.

Cooperation and information exchange Overall, the external contractor considered the cooperation and information exchange between OLAF and its partners as efficient, in particular as regards IBOAs. Enhanced cooperation with IBOAs, in particular Commission services through FPDNet meetings, led to a clarification of OLAF’s expectations and has contributed to an improvement in investigative practices and cooperation. The IBOAs' readiness and ability to provide OLAF with high quality information, and sectorial specific anti-fraud provisions, were identified by the contractor as additional factors positively affecting the efficiency of the cooperation. The evaluator concluded that the level of efficiency related to cooperation and information exchange with AFCOS depends on the ability to establish structured cooperation and communication channels, and that this is based on a clear role and tasks of AFCOS at national level, an appropriate scale and nature of the powers of the AFCOS and, to a lesser extent, the presence of administrative arrangements. As AFCOS’ competences and powers differ from one country to another so does their efficiency in cooperating and exchanging information with OLAF. The external evaluation concludes, based on interviews, that cooperation and level of information exchange between OLAF and third countries and international organisations is more efficient when ACAs are in place. Supervisory Committee The differences in interpretation of the provisions of the Regulation governing the Committee (see section 5.2.4) hindered the efficiency of the Committee and its cooperation with OLAF. Doubts have been expressed by OLAF staff consulted as regards the efficiency of the provision in the Regulation providing that, if an investigation cannot be closed within 12 months after it has been opened, the OLAF Director-General must report to the Committee and indicate the reasons and any remedial measures envisaged. The Regulation does not prescribe a maximum duration of 12 months for OLAF investigations, and remedial measures may actually not be necessary. For this reason, the Supervisory Committee itself has considered that this provision does not necessarily correspond to the reality of OLAF’s investigations. 5.4.Coherence This section focuses on the extent to which the Regulation provides OLAF with a coherent legal framework to accomplish its tasks and achieves an appropriate balance between its specific objectives (internal coherence). It also explores the extent to which the Regulation is coherent with other EU anti-fraud instruments (external coherence). It will further examine the extent to which the Regulation has achieved a balance between investigative powers and procedural rights, as well as between independence, on the one hand, and supervision and control, on the other. Lastly, it will examine the coherence of the Regulation in relation to wider EU policies for the protection of the EU financial interests. 5.4.1.Internal coherence The evaluation has identified several factors affecting the internal coherence in the application of the Regulation. The Regulation provides a legal basis for OLAF to provide the Member States with assistance in organising close and regular cooperation between their competent authorities in order to coordinate their action aimed at protecting the EU financial interests against fraud (‘coordination cases’) . However, the Regulation does not contain any concrete provisions on the modalities of coordination or the procedures applicable. The legal analysis conducted in the context of the evaluation identified the absence of specific provisions in the Regulation as a source of legal uncertainly, and this was also confirmed in interviews with OLAF staff and in the survey. Conversely, the evaluation has shown that the provisions of the Regulation concerning the adoption of the GIPs and the creation of an internal legality check have positively contributed to the internal coherence in the application of the Regulation. The evaluation (interviews with OLAF investigative staff and legal analysis) has identified a few inconsistencies between the Regulation and the GIPs that could impact on the coherent application of the Regulation. In view of these findings, OLAF is already taking steps to address any inconsistencies. 5.4.2.External coherence Relationship between Regulations 883/2013, 2988/95 and 2185/96 Regulation 883/2013 has to be read in conjunction with Regulations 2988/95 on the protection of the European Communities' financial interests and 2185/96 concerning on-the-spot checks and inspections, to which the Regulation makes a number of references. OLAF investigative staff and AFCOS, as well as the legal analysis conducted in the context of the evaluation, revealed certain inconsistencies between Regulation 883/2013 and the other two regulations. For instance, Regulation 883/2013 governs OLAF’s investigations concerning any illegal activity affecting the EU financial interests, whereas Regulations 2185/96 and 2988/95 do not apply to all sources of Union revenue (but only to revenue collected directly on behalf of the European Union, which is interpreted to exclude revenue based on VAT). These differences can lead to legal uncertainty and divergent interpretations. The Utrecht University study has shown that this situation differs from that of the other European authorities analysed by that study, which benefit from a more coherent framework for their investigations. Coordination cases and mutual administrative assistance As explained above, Regulation 883/2013 tasks OLAF with providing Member States with assistance in organising close and regular cooperation, without further regulating these tasks. In addition, in the areas of customs and intellectual property rights, OLAF has specific competence to engage in mutual administrative assistance activities, including by coordinating Member States' competent authorities, on the basis of Regulations 515/97 on mutual administrative assistance in customs and agricultural matters and 608/2013 on the customs enforcement of intellectual property rights. Contrary to Regulation 883/2013, this framework governs in detail the tasks performed to support administrative cooperation. There are no references in Regulation 883/2013 to Regulations 515/97 and 608/2013 or vice versa. The unclear relationship between the different legal acts on the basis of which OLAF coordinates the activities of national authorities in the areas of customs and intellectual property creates uncertainty and can lead to practical difficulties, also highlighted by the Utrecht study.

From a broader perspective, the detailed provisions on mutual administrative assistance in specific areas (customs, intellectual property), coupled with the absence of specific provisions on coordination cases in Regulation 883/2013, lead to varying levels of available tools for transnational cooperation in the fight against fraud. The Italian cooperation project referred to in section 5.2.2.2 concludes that a common denominator of many of the problems relating to the prevention and combatting of transnational fraud in the area of structural funds - the largest item of expenditure within European funding, and particularly exposed to certain risks of fraud - is the absence of legal provisions on mutual administrative assistance. This position has also been expressed by the European Parliament, which has on several occasions invited the Commission to create mechanisms for the exchange of information between national competent authorities with regard to structural and investments funds. 5.4.3.Has the Regulation achieved a proper balance between investigative powers and procedural rights? Conflicting views have been collected during the evaluation concerning the relationship between OLAF’s investigative powers and the procedural safeguards in the Regulation. -OLAF investigative staff in general considered that the guarantees were disproportionate, in the light of OLAF's current powers, the absence of a means to enforce them, the fact that OLAF investigations end in recommendations and do not as such affect the position of persons concerned, and that the cooperation of the person concerned with OLAF investigators remains voluntary in external investigations. A common perception shared among OLAF staff and a number of consulted stakeholders in IBOAs was that, while OLAF’s powers are designed for the conduct of administrative investigations, the procedural guarantees and safeguards introduced by the Regulation are commensurate with those guaranteed in national criminal procedures or set a higher standard than those prescribed in similar administrative investigations in Member States. -A number of consulted stakeholders in EU IBOAs, EU control bodies and national judicial authorities suggested that the Regulation achieves an appropriate and coherent balance between the level of procedural guarantees and OLAF’s investigative powers. -A number of stakeholders in EU control bodies, Commission services, and former Supervisory Committee members expressed the view that the procedural guarantees as provided for in the Regulation are not sufficient in the light of the alleged intrusive investigation powers of OLAF. The question of balance between investigative powers and procedural rights was also addressed by the Utrecht University study and by the study on procedural guarantees commissioned by the CONT Committee in the European Parliament, mentioned above. The Utrecht study considered that, in order to assess the full scope and competences of OLAF’s investigatory powers and procedural safeguards, an analysis of the interaction between EU and national law is essential. The study commissioned by the CONT Committee underlined the close connection of OLAF investigations with criminal law and criminal law follow-up, which requires the existence of adequate safeguards in the context of OLAF investigations; it concluded that the safeguards in the Regulation do not seem excessive or disproportionate and that clarifying and strengthening procedural safeguards in OLAF investigations fosters the further use of OLAF final reports in national judicial proceedings. The view was also expressed that, since the procedural guarantees applicable to OLAF investigations stem from the general principles of EU law and the Charter of Fundamental Rights, their codification in Article 9 of the Regulation actually clarifies their application in the context of OLAF investigations. On the basis of the above, the evaluation does not provide conclusive evidence that the procedural guarantees in the Regulation are disproportionate to the available investigative powers, nor does it suggest that the guarantees are insufficient in the light of those powers. Certain concrete suggestions to further clarify or complement the relevant provision in the Regulation have been discussed in section 5.2.3. on effectiveness. 5.4.4.To what extent has Regulation 883/2013 achieved a proper balance between independence, on the one hand, and cooperation, supervision and control, on the other? As discussed in section 5.1 on relevance, the existence of external controls to guarantee OLAF's independence in the performance of its investigative function has not been disputed by the consulted stakeholders. The evaluation has not identified conclusive evidence suggesting a lack of balance between the Regulation’s provisions on independence and control. OLAF is also subject to other mechanisms of external controls as regards the rights of individuals, in particular by the European Data Protection Supervisor and the European Ombudsman (within their respective fields of competence). Several OLAF staff as well as EU control bodies mentioned that the various external controls, provided for in the Regulation and in other acts of EU law, may lead to overlaps as an individual can bring cases through these different channels simultaneously. This would not only impact on coherence, but also on efficiency and effectiveness of these controls. 5.4.5.To what extent does Regulation 883/2013 fit into the wider EU policies (and the various elements of these policies) for the protection of the EU financial interests? 5.4.5.1.Early Detection and Exclusion System The Early Detection and Exclusion System (EDES) aims at reinforcing the protection of the EU's financial interests. It was introduced by the 2015 revision of the Financial Regulation and entered into force on 1 January 2016. EDES ensures the early detection of economic operators representing risks to the EU’s financial interests; the exclusion of unreliable economic operators from obtaining EU funds and/or the imposition of a financial penalty; and the publication, in the most severe cases, on the Commission’s website of information related to the exclusion and/or the financial penalty, in order to reinforce the deterrent effect. This new system represents a significant improvement in the application of rules on administrative sanctions with respect to fundamental rights, independence and transparency. EU IBOAs can now only decide to impose sanctions on unreliable economic operators after obtaining a recommendation from a new centralised Panel. The Panel assesses cases where there is no final judgment or final administrative decision. It has no investigative powers. In principle, the panel bases its assessment on facts and findings resulting from audits performed under the responsibility of the competent Commission service and/or investigations conducted by OLAF. According to the external contractor, OLAF staff reported successful cooperation with the EDES panel since it was set up. Commission services involved in early detection and exclusion procedures have indicated that most of the elements for use in EDES are communicated by OLAF only once the investigation is closed. They consider that this may lead to delays in identifying and taking appropriate measures against economic operators concerned and called for more sharing of information during investigations. This would, however, need to be balanced with the need to preserve the confidentiality of the investigation. The latter may come into conflict with the requirement that the economic operator concerned is heard before certain of the measures available under the EDES procedures are taken, where it can prejudice on-going investigations. While the Financial Regulation provides for the possibility to defer notification to the person or entity concerned in exceptional cases, the short period of experience with the EDES procedures does not yet permit a robust assessment of the effectiveness of the possibility to defer. Experience drawn in the first year of the functioning of this new procedure shows the importance of OLAF -informing the Panel and authorising officers, as far as possible, of the state of play of national judicial proceedings, the reasons of the closure of national proceedings without further actions, or all other ongoing investigations concerning the economic operator subject to an administrative sanction procedure;

-helping identify which parts of a final report may not be suitable for disclosure to the economic operator concerned so as to preserve the confidentiality of on-going investigations or judicial proceedings. Finally, where there is a financial impact, OLAF plays an important role in assisting the responsible authorising officer in the accurate calculation of the financial damage, since the financial impact on the EU financial interests is key for the application of the principle of proportionality in deciding on the extent of administrative sanctions. 5.4.5.2.OLAF role and powers in relation to VAT According to the Regulation, OLAF's mandate extends to fraud, corruption and any other illegal activity affecting the EU's financial interests. The Court of Justice has confirmed on several occasions that VAT is a financial interest of the Union. However, OLAF very rarely carries out investigations into irregularities concerning VAT. This is the result of several factors. OLAF lacks the instruments available to national administrations which operate in this field, such as access to Eurofisc, VIES or bank account information. The on-the-spot checks of Regulations 2185/96 and 2988/95 do not apply only to revenue collected directly on behalf of the European Union, interpreted to exclude VAT. This lack of tools has been noted by the European Court of Auditors, that has called for granting to OLAF clear competences and tools to investigate intra-Community VAT fraud. The policy and legal framework as regards VAT has evolved since the adoption of Regulation 883/2013, with an increased emphasis on the fight against VAT fraud. The Commission adopted an Action Plan on VAT "Towards a single EU VAT area" on 7 April 2016 . The Action Plan sets out, inter alia, immediate and urgent actions to tackle the VAT gap, including actions to enhance cooperation between different authorities, and invites to explore possible cooperation and a partnership between Member States, Europol and OLAF on exchange of information. The European Parliament has also recently stressed the need to tackle the VAT gap, taking note of the Commission's Action Plan and inviting Member States, in this respect, to improve information exchange also with OLAF. The PIF Directive has clarified that VAT is part of the EU financial interests. Until its adoption some Member States have questioned this and, as a result, shown reluctance to cooperate with OLAF on the matter. The future EPPO will be competent for VAT fraud connected with the territory of two or more Member States that involves a total damage of at least EUR 10 000 000. Against this background, the current legal framework appears insufficient to enable OLAF to fulfil its mandate in the area of VAT, and its duty to cooperate with and support the future EPPO. Customs duty fraud is in fact intrinsically linked with VAT and excise duty fraud at importation into the EU. In the experience of OLAF investigations, investigating one type of fraud involves investigating also the other. OLAF staff consulted have highlighted the need to give OLAF the necessary capabilities to investigate in the field of VAT, to coordinate activities in complex investigations of a transnational nature, and to perform intelligence and strategic analysis activities. This would allow it to provide elaborated information to other actors involved in countering VAT fraud including national authorities and, within its competence, the EPPO. To achieve this, Regulation 883/2013 would need to be clarified and supported by new provisions awarding OLAF the means to act in the area of VAT fraud. The Commission is currently considering providing access to VAT data to EU bodies, such as OLAF and Europol, in its on-going revision of Regulation (EC) No 904/2010 on administrative cooperation between Member States in the field of VAT. The effective use of the