WRITTEN QUESTION E-2992/98

by Kirsi Piha (PPE) to the Commission

(8 October 1998)

Subject: Suspected fraud in connection with ECHO aid funds

This week it was reported that the Luxembourg police are investigating alleged frauds in connection with the use of funds by the Commission's unit responsible for disaster aid. At least ECU 500 000 have disappeared, in addition to which appropriations intended for projects on the ground were used, contrary to all the regulations, to cover administrative expenditure in Brussels.

Alleged cases of misappropriation of funds have disastrous effects on national perceptions of the EU administration's ability to control and monitor the use of taxpayers' money. It is incredible that, in the course of the Commission's internal monitoring of the use of funds, the misappropriation of amounts of this magnitude could have passed unnoticed and without intervention. Since the reports suggest that this was not an isolated incident, this may prove to have done really significant overall damage to the credibility of all the EU institutions.

In the light of the above, what explanation can there be for misappropriations of this nature happening without being spotted by internal checks? What concrete measures does the Commission propose to take in future to improve the efficiency of its own internal supervision, not only in this individual case but generally, in order to prevent the misappropriation of funds and to improve its public image as a responsible user of taxpayers' money?

Answer given by Mrs Gradin on behalf of the Commission

(11 December 1998)

Claims that the cases of misappropriation of funds referred to by the Honourable Member passed unnoticed and without intervention are untrue. In fact, it was the Commission itself which, thanks to the work of its Task Force for the Coordination of Fraud Prevention (UCLAF), uncovered the fraud, referred the matter to the judicial authorities and initiated disciplinary proceedings against three persons.

Furthermore, to reduce the risk of misappropriation in the future, the Commission will continue to intensify its inspection work at authorising officer level and will pursue investigations of cases of fraud involving Commission officials and other staff to their conclusion; this will include adopting whatever disciplinary measures are required.

The kind of misappropriation the Honourable Member mentions can mainly be detected through on-the-spot audits of projects, which in the Commission may be conducted both by the authorising service responsible for the expenditure and by the Directorate-General for Financial Control. In addition, UCLAF carries out enquiries.

In accordance with standard and accepted practice within the audit profession, in order to get assurance on the reliability of a financial system, the Commission carries out on-the-spot audit only on a sample of the financed projects, chosen on the basis of risk analysis.

Since 1995, the reinforcement of the internal audit of the Commission is one of the priorities of the SEM 2000 initiative. Within this context, several measures have already been taken, for instance the improvement of audit methodology, the refinement of risk analysis in order to focus resources on those areas judged to have the highest level of risk, the rationalisation of ex-ante controls, allowing more resources to be devoted to audit, and the acceleration of the audit cycle regarding directorates-general.

On the other hand, and in accordance with SEM 2000, the Commission has created units for the management of human and financial resources which are independent of the operational units and are particularly responsible for internal control, audits and on-the-spot checks.