Special Report No 1/2005 concerning the management of the European Anti-Fraud Office (OLAF), together with the Commission’s replies
Date: 2005-06-09
Institutions: European Court of Auditors
Subjects: European Anti-fraud Office, European Court of Auditors, budgetary control, management, report

18.8.2005

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Official Journal of the European Union

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I

(Information)

COURT OF AUDITORS

SPECIAL REPORT No 1/2005

concerning the management of the European Anti-Fraud Office (OLAF),
together with the Commission’s replies

(pursuant to the second subparagraph of Article 248(4) of the EC Treaty)

(2005/C 202/01)

CONTENTS

Paragraphs

Page

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

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The mission of the Anti-Fraud Office (OLAF) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Organisation of OLAF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Court’s audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

OLAF INVESTIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Investigative procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Setting of priorities for OLAF’s investigative function . . . . . . . . . . . . . . . . . . . . . . . . . . .

The assessment stage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The investigation stage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The follow-up stage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Quality control procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The OLAF manual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Supervision of the management of investigations . . . . . . . . . . . . . . . . . . . . . . . . . . .

Internal audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The OLAF Executive Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Activity reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

THE CONTRIBUTION MADE BY OLAF DEPARTMENTS TO ITS INVESTIGATIVE FUNCTION

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Intelligence, operational strategy and information services . . . . . . . . . . . . . . . . . . . . . . . .

Policy, legislation and legal affairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

I-XI

1-11

1-5

6-7

8-11

12-43

12-17

18-19

20-22

23-29

30-32

33-43

34

35-37

38-39

40-41

42-43

44-65

44

45-50

51-55

2

3

4

4

5

5

6

6

7

7

8

9

9

9

10

10

10

11

11

11

11

12

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Paragraphs

Page

Units reporting directly to the Director of OLAF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Magistrates Unit

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Training and support for candidate countries unit . . . . . . . . . . . . . . . . . . . . . . . . . .

Human Resources and Budget Unit

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Human resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

THE SUPERVISORY COMMITTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CONCLUSIONS AND RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Efficiency and effectiveness of investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deployment of resources in support of investigations . . . . . . . . . . . . . . . . . . . . . . . . . . .

Relations between the Office and the Supervisory Committee . . . . . . . . . . . . . . . . . . . . .

Refocusing the Office on its investigative function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

56-61

57-58

59-60

61

62-65

66-72

73-94

74-88

89-92

93

94

ANNEX I: OLAF organisation chart

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ANNEX II: Main weaknesses found during the audit

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Commission’s replies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12

12

13

13

13

14

15

15

17

17

18

19

20

21

LIST OF ABBREVIATIONS

AFIS

Anti-fraud information system

CMS

Case management system

DG

ECR

EIB

Directorate-General

Electronic case register

European Investment Bank

END

Seconded national experts

EU

European Union

IDOC

Investigation and Discipline Office of the Commission

OLAF

European Anti-Fraud Office

UCLAF

Unit for the Coordination of Fraud Prevention

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SUMMARY

I.
The European Anti-Fraud Office (OLAF) succeeded the Unit for the Coordination of Fraud Prevention
(UCLAF) in April 1999 with enhanced status and a mandate extended to cover all the institutions and bodies
of the European Union. Setting up the Office was a laborious process, in particular because of the disorganised
nature of the files that it inherited. It was only towards the end of 2003 that the effects of its restructuring
began to make themselves felt. As at mid-2004, however, improvements were still necessary in many areas of
the management of investigations.

II.
The hybrid status of the Office, which has investigative autonomy but reports to the Commission for
its other duties, has not adversely affected the independence of its investigative function. Being part of the Com-
mission, the Office has been able not only to benefit from substantial administrative and logistical support,
but also to take advantage of the anti-fraud legislation that is available to Commission departments. Conse-
quently, it does not appear appropriate to consider amending the Office’s status (1).

The Office has sufficient resources to deal with all justified denunciations that it receives. This being

III.
so, the priorities that it establishes as part of its investigation policy continue to be theoretical ones.

IV.
OLAF makes too little distinction between investigations (internal or external) on the one hand, and
assistance and coordination operations on the other. As the nature of the work in each case is markedly dif-
ferent, lumping them together hinders the management of resources.

V.
While the introduction of a registry and a computerised system for managing investigation files have
improved record keeping for operations and clarified responsibilities, managerial supervision has remained
inadequate and results in serious delays in the processing of files, the lodging of inconclusive reports and results
that are difficult to identify. In order to eliminate unnecessary delays, imperative deadlines should be set when
investigations are opened.

All too frequently, the preparation and follow-up of investigations is rudimentary. The objectives pur-
VI.
sued by investigators have remained vague in terms of the evidence that is to be supplied and the use of
resources. The customs sector apart, there is a need for more effective cooperation with the Member States,
both in areas of direct management and in areas where management is shared with Member States.

VII.
Although the procedures for reporting on the Office’s work have recently been improved, the infor-
mation relates to the volume of operations undertaken rather than to the results actually achieved, either in
terms of the actual recovery of misappropriated funds or in terms of the disciplinary or criminal sanctions
imposed on persons convicted of fraud. The system for assessing results, which is based on relevant indica-
tors, needs to be further strengthened.

The measures adopted in 2001 to provide the Office with staff competent to perform the duties of
VIII.
investigators have achieved all they can. The large number of staff on contracts that cannot be renewed beyond
a certain duration (between six and eight years) is now hindering any further consolidation of expertise. In these
circumstances, the training measures introduced by the Office remain insufficient.

IX.
There is no independent guarantee of the legality of investigative procedures in progress or that the
fundamental rights of persons under investigation are safeguarded. For want of a clear codification of inves-
tigative procedures, the situation is prone to litigation. The relevant regulatory provisions have proved
unsatisfactory.

(1) See the evaluation report on OLAF’s activities (Article 15), COM(2003) 154 final of 2 April 2003.

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Relations between the Office and its Supervisory Committee are difficult. There is a need for a serious

X.
re-examination of the regulatory provisions concerning the governance of the Office.

XI.
To avoid dissipating the Office’s work on activities which, although related to fraud prevention, are
not directly concerned with investigations, and in order to guarantee that all resources are directed towards
effectively combating fraud detrimental to the European Union’s financial interests, the tasks assigned to the
Office ought to be re-examined in detail. Refocusing its activities on its investigative function would make it
possible to mobilise its resources more effectively, particularly as regards the launching of targeted investiga-
tions in areas where the risks of fraud are considered the most serious.

INTRODUCTION

(c)

the preparation of the Commission’s legislative and regula-
tory anti-fraud initiatives;

The mission of the Anti-Fraud Office (OLAF)

(d)

the development of the necessary means to tackle fraud;

1.
By setting up the European Anti-Fraud Office (OLAF) (1),
the European institutions aimed to increase the effectiveness of
the fight against illegal activities detrimental to the Union’s finan-
cial interests. The Office was thus given new powers as compared
with those of its predecessors (2). In particular, it was given the
task of carrying out administrative investigations within all the
institutions and bodies of the European Union. The investigative
function was strengthened by a guarantee of independence in the
performance of this activity. That independence was, in turn, to
be strengthened by the establishment of a Supervisory Commit-
tee made up of important figures from outside the Community
institutions. The Director of the Office, who took up his post in
March 2000, was invested with the power to appoint OLAF staff,
which should enable him to respond more effectively to the
Office’s specific investigative needs.

(e)

the collection and analysis of information;

(f)

technical assistance, especially in the field of training, to the
other Community bodies and institutions and to the national
authorities concerned with the protection of the Communi-
ty’s financial interests.

The legislation does not prioritise these tasks.

While emphasising the importance of OLAF’s investigative
2.
function (see paragraph 12), the Commission also entrusted the
Office with a wide range of activities related to the protection of
the European Union’s financial
interests (3). These activities,
which are partly grouped into what the Office calls a ‘service plat-
form’, cover:

3.
The Office operates within a complex institutional frame-
work and is at the centre of a group of bodies concerned either
directly or indirectly with fraud prevention. It is not always clear
how responsibilities are divided among these bodies, which
results in risks of both duplication of effort and omissions. These
bodies fall into three subgroups:

(a)

the assistance that the Commission gives the Member States
in the fight against fraud;

(a)

those located in the Member States or third countries, such
as police forces, judicial authorities and administrative anti-
fraud authorities;

(b)

the development of a strategy for fighting fraud within the
framework of its policy on the protection of financial inter-
ests (Article 280 of the Treaty);

(1) Commission Decision 1999/352/EC, ECSC, Euratom of 28 April
1999 (OJ L 136, 31.5.1999, p. 20); Regulation (EC) No 1073/1999
of the European Parliament and of the Council of 25 May 1999
(OJ L 136, 31.5.1999, p. 1).

(2) Task force for the Coordination of Fraud Prevention (until 1987), Unit
for the Coordination of Fraud Prevention (UCLAF — 1987-1999). In
this connection, see the Court’s Special Report No 8/98 (OJ C 230,
22.7.1998) the conclusions of which contributed to the debate that
led to the creation of OLAF.

(3) Decision 1999/352/EC, ECSC, Euratom, Article 2(3) to (7). In the con-
text of activities related to the protection of the financial interests of
the European Union, the Commission has appointed OLAF to the
position of lead manager for 31 of the 37 actions set out in its 2004-
2005 action plan.

(b) Community bodies, such as the Investigation and Discipline
Office of the Commission (IDOC) (4), each institution’s inter-
nal audit service, the European Ombudsman, the audit capa-
bilities of the Commission’s operational departments and
OLAF’s own Supervisory Committee;

(c) other intergovernmental crime prevention bodies, such as

Eurojust and Europol.

(4) Set up in February 2002 to conduct investigations and organise the
Commission’s disciplinary proceedings. Relations between the Office
and IDOC were to be the subject of an agreement that has still not
been finalised.

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As the Member States are responsible for managing around
4.
80 % of European Union expenditure, it is necessary, for obvious
reasons of effectiveness, for the Office to work closely with
national authorities (police, customs, the courts, etc.). This
requirement adds to the complexity of its task. Furthermore, it is
the Member States that are responsible for bringing criminal pro-
ceedings where appropriate, and the diversity of their judicial sys-
tems renders the Office’s task still more complex.

5.
Although OLAF is a new body, it has been obliged to con-
tinue the operations begun by its predecessor, UCLAF. It thus
took on around 1 400 active files (1), a very burdensome legacy
owing to the disorganised way in which many of these investiga-
tions had been managed (2). At the same time, UCLAF’s staff were
reassigned en bloc to the Office, which, until the 2001 overhaul
of the establishment plan, limited the new Director’s room for
manoeuvre (3).

Organisation of OLAF

6.
The Office enjoys an ambivalent status, according to which
it has investigative autonomy but is answerable to the Commis-
sion as regards its other duties. This hybrid structure has not
adversely affected the independence of its investigative function
and brings certain advantages. From the legal point of view, for
example, as a part of the Commission the Office has been able to
make use of powers conferred on that institution, in particular the
power to carry out on-the-spot checks in the Member States pur-
suant to a variety of general and sectoral regulations (4). The
Commission connection has also been useful for OLAF’s day-to-
day operations, enabling it to draw on the administrative support
of the Commission’s general services.

The Office’s organisation chart as at May 2004 is pre-
7.
sented in Annex I. Since 2001, the Office’s establishment plan has
been made up of around 300 posts, twice as many as were avail-
able to UCLAF (5). In 2004, the Investigations Directorate (Direc-
torate B) comprised 126 investigators (6) and 13 administrative
staff. The remaining 193 posts were divided among the Office’s
other departments (Directorate A ‘Policy, legislation and legal
affairs’ and Directorate C ‘Intelligence, operational strategy
and information services’).

(1) See Table 3 in the Complementary Evaluation Report on the Activi-
ties of OLAF, SEC(2004) 1370 of 26 October 2004. Nine cases were
still open on 30 June 2004 and 280 cases were in the follow-up phase.

(2) See Special Report No 8/98, paragraph 1.6 (OJ C 230, 22.7.1998).
(3) See paragraph 7.42 of the Court’s Annual Report concerning the

financial year 2000 (OJ C 359, 15.12.2001).

(4) For example, Council Regulation (EC, Euratom) No 2988/95 concern-
ing administrative penalties in the case of irregularities (OJ L 312,
23.12.1995, p. 1), Council Regulation (Euratom, EC) No 2185/96
(OJ L 292,
concerning on-the-spot
15.11.1996, p. 2), or specific regulations on own resources, the Struc-
tural Funds, the European Development Fund, etc.

checks and inspections

(5) At the beginning of 1999, the UCLAF establishment plan contained

149 posts.

The Court’s audit

The aim of the audit was to appraise the quality of OLAF’s

8.
investigations management. This was done by assessing:

(a) how the Office had discharged its investigative duties;

(b)

the contribution made by each OLAF department to the
investigative function.

The final effectiveness of the Office’s work could not be evaluated
due to the insufficient reliability of the data on the follow-up of
investigations.

9.
The Court’s report complements the evaluation produced
by the Commission in April 2003, which essentially focused on
the legal framework of the Office’s activities (7), as well as a sec-
ond more quantitative evaluation submitted by the Commission
in October 2004 (8).

10.
As far as investigations are concerned, the audit carried
out between April and October 2004 had as its starting point pre-
vious observations made by the Court (9). It focused on systems,
structures and staff measures. There was also a review of the activ-
ity of the OLAF departments that are not directly responsible for
investigations. Although the Office’s recent organisation was
analysed, along with a sample of 117 operations conducted
or closed towards the end of 2003, it became clear that, at that
time, the Office was still engaged on clearing numerous opera-
tions begun by its predecessor, and that the reorganisation mea-
sures introduced during the 2002-2003 period were just starting
to have an effect. The deficiencies found in the audit are sum-
marised in Annex II.

11.
This report was produced at the same time as the Com-
mission proposed an amendment to the Regulation concerning
investigations conducted by OLAF (10). The Court has submitted
an opinion on this proposal in which it takes account of the con-
clusions and recommendations of the audit.

(7) Evaluation submitted pursuant to the provisions of Article 15 of

Regulation (EC) No 1073/1999 of 25 May 1999.

(8) Complementary Evaluation Report of
SEC(2004) 1370 of 26 October 2004.
In particular Special Report No 8/98 (OJ C 230, 22.7.1998) and
observations in Chapter 7 of the Court’s Annual Report concerning
the financial year 2000 (OJ C 359, 15.12.2001).

the Activities of OLAF,

(9)

(6) Including 13 seconded national experts (END).

(10) COM(2004) 103 final of 10 February 2004.

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OLAF INVESTIGATIONS

Investigative procedures

Apart from coordination operations, Regulation (EC)
12.
No 1073/1999 distinguishes between external
investigations
(Article 3) and internal investigations (Article 4). The Office itself
divides its cases into five categories:

(a)

internal investigations (investigations of corruption within
the institutions and assimilated bodies);

(b) external investigations (direct investigations of third parties
related to Community budget

involved in activities
transactions);

(c)

judicial support (support for national authorities in the con-
text of criminal proceedings);

(d) coordination (support for the Member States in the context
of investigations concerning more than one country);

(e) monitoring cases (the aim is to allow the Office, where
important cases are concerned, to check whether the Mem-
ber States are fulfilling their obligations under Article 280 of
the Treaty).

Cases at the active investigation stage (475 as at 30 Sep-
13.
tember 2004) include actual investigations (252) and coordina-
tion and assistance operations (223). Coordination operations are
particularly common in the field of revenue and shared-
management expenditure. Consequently, out of the 23 cases
examined during the audit of the customs and trade sectors, four
were investigations led by the Office.

This lumping-together of investigations with coordina-
14.
tion and assistance operations within the same units of the Inves-
tigations Directorate hinders the management of resources. In
fact, the Office plays a substantially different role in each of these
two fields. For investigations, each step must be formally
recorded, filed and justified so that the dossier can be used by a
prosecutor. For coordination and assistance cases, OLAF needs to
be able to provide the national authorities with quick and effec-
tive support without being subject to severe procedural con-
straints. In these cases the use of investigation procedures is not
always appropriate. It uses up resources which could have been
assigned to investigations and leads to the risk of overlap with
some of the responsibilities of the follow-up units.

15.
The Office is only authorised to conduct administrative
investigations. It cannot therefore undertake all of the tasks for
which police powers are required. Although it can, for example,
make copies of documents it finds on the premises of economic
operators, it is not authorised to search the homes of their

owners or staff, even if important evidence may be found there.
Neither is it authorised to demand access to the bank accounts of
economic operators or private citizens, even where the latter are
employed by a Community institution. There are therefore clear
limits to the investigative acts that the Office can perform, and
these affect the scope of its conclusions. Moreover, the practical
effectiveness of the investigation stage may be reduced if the
Member States do not respond to the Office’s requests for support.

16.
The Office generally launches its investigations in
response to information received from third parties. This takes
the form of denunciations forwarded by the Commission services,
other EU institutions, authorities in the Member States as well as
private citizens or commercial undertakings. When information
of this kind is received, a new file is opened in the Office
records (1). The work of investigation then falls into three main
stages:

(a) an assessment stage leading to a summary report (2) by the
Investigations Directorate proposing, if there is sufficient
substance to the allegations received (3), that an investigation
be launched. The assessment report is submitted for the
opinion of an Executive Board composed of representatives
of the units that are associated with the Office’s investiga-
tions. The Director of the Office then decides whether to
open an investigation. As at 30 September 2004, 194 cases
were in assessment (see Table 1);

(b) an investigative stage during which the case is prepared. In
principle, as required by the procedures laid down in the
OLAF manual, evidence is gathered both for and against the
allegations. The investigators conclude their work by submit-
ting a draft report to the Executive Board, which assesses
whether the file should be forwarded to the courts or disci-
plinary authorities, whether follow-up should be initiated
with a view to recovery or whether the case should be
shelved. The Director rules on the basis of the Executive
Board’s opinion. As at 30 September 2004, 475 cases were
in active investigation;

(c) a third stage, conducted outside the Investigation Director-
ate, is dedicated to the follow-up of cases transmitted to the
judicial authorities and those requiring recovery of funds.
Many cases are closed without follow-up. As at 30 Septem-
ber 2004, 649 cases were at the follow-up stage.

(1) Case management system (CMS).
(2) The model headings for assessment reports are as follows: 1. Back-
ground; 2. Allegations; 3. Reliability, source and credibility of the
information; 4. Competence of OLAF; 5. Approach to be considered;
6. Financial impact and prospects of recovery; 7. Degree of priority;
8. Proposed work plan; 9. Allocation of resources.

(3) When an allegation is so poorly substantiated that it is not worth even
going on to the assessment stage, the case is immediately dropped and
no further action is taken (prima facie non-case).

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Number of cases at each stage at the end of September 2004

Table 1

Sector

Stages of processing

Number of cases being
assessed

Number of cases being
investigated

Number of cases being
followed up

Anti-corruption

Direct expenditure

External aid

Agriculture

Structural Funds

Customs

28

33

53

21

41

18

Total

194

Source: OLAF case management system, data as at 30.9.2004.

57

42

81

86

48

161

475

48

78

84

59

202

178

649

17.
The introduction of the case management system (CMS)
by the Office in 2002 made it easier for it to log investigations (1).
Although improvements were made in 2003, information from
this system must be approached very cautiously, as the audit
revealed that there are often delays in the processing or updating
of files and that the financial data in the system are neither con-
sistent nor always verified. There have in fact been cases categor-
ised as ongoing investigations although, in the absence of further
investigative acts, the cases concerned should have been closed
either with or without follow-up. Other cases have been closed,
without calculation of the sums involved. In other cases the inves-
tigators had deferred closure so that they themselves could fol-
low the cases up, although in principle this is not
their
responsibility.

Setting of priorities for OLAF’s investigative function

18.
The policy announced by OLAF is to give priority
to internal investigations and direct expenditure investigations,
especially in the context of enlargement.

19.
In reality, OLAF has sufficient resources to deal with all
the reliable denunciations that it receives so the question of mak-
ing choices between possible investigations does not arise. The
frequency of denunciations for each sector is indicated in Table 2.

Table 2

Denunciations received by the Office between
August 2003 and September 2004

Sector

Anti-corruption

Direct expenditure

External aid

Agriculture

Structural Funds

Customs

Total

Average number
of denunciations
per month

Proportion of
denunciations per month

5

8

12

12

7

9

53

9 %

15 %

23 %

23 %

13 %

17 %

100 %

Source: OLAF case management system, data as at 30.9.2004.

The assessment stage

20.
Broadly speaking, the Office has substantially reduced the
time spent on assessment by applying a standard deadline of
15 days counting from the assessor’s appointment. Although
between October 2002 and September 2004 the proportion of
assessments already in progress for more than four months fell
significantly, from 62 % to 35 %, they still numbered 68. Where
the documentation necessary for the assessment report has to be
obtained outside the Community institutions,
the standard
15-day deadline is clearly too short (2). For most of the assess-
ments examined, the decision to open an investigation appeared

(1) See paragraphs 1.5 and 1.6 of the Court of Auditors’ Special Report

No 8/98 (OJ C 230, 22.7.1998).

(2) The Structural Funds are particularly problematic because documen-
tation and detailed financial data are only available regionally, and not
at Community or national level.

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to be justified in the light of the criteria adopted by the Office.
Nonetheless, the audit revealed certain practices (see Annex II) that
could be improved. For example:

(a)

in one third of the assessments examined, the objectives
selected for the investigation remained vague;

(b)

in one third of the assessments examined, supervision by the
management proved to have been deficient;

(c) half of the assessments examined had experienced significant

unexplained delays.

Although the Office is supposed to focus primarily on
21.
financial fraud, preference has in practice often been given to the
criminal aspect. The likely financial impact, that would have made
it possible to establish the direction in which the investigation
should go, such as the calculation of the sums misappropriated,
has been given secondary status.

22.
While it is true that, by their very nature, OLAF investi-
gations make it impossible to foresee all aspects of every stage, it
is nonetheless instructive to attempt to outline how investigations
are organised and planned so as to eliminate the risk of waste of
resources. In this regard, assessment reports often contained
nothing more than the rudiments of planning, and this was not
compensated for by more detailed work plans at a later stage of
the investigation. It also became clear that certain assessments
could have benefited from consultation with follow-up units and
the Magistrates Unit from the outset about the objectives, the
options to be chosen and the resources that would be needed for
the investigation. In some cases, consultation with Directorate C
(Analysis and intelligence) would also have enabled the assessors
to make better use of the available information tools (see Annex II).

The investigation stage

23.
In October 2002 some 51 % of investigations had been
ongoing for more than 12 months. By September 2004, how-
ever, this figure had risen to 62 %, even though the average dura-
tion of investigations had been reduced following the clearance of
old cases from the time of UCLAF. As with assessments, the time
needed by the Member States to respond to the Office’s requests
for documentation often led to delays (1) (see Annex II). Other
delays were caused by the fact that, in common with other Com-
mission services, OLAF has adopted an approach to communica-
tion that is often bureaucratic, with the result that there are exten-
sive lulls in activity which would have been avoided by visits to
the authorities concerned. The audit showed that some delays
could be attributed to a certain dilatoriness on the part of the
investigators, despite the fact that Regulation (EC) No 1073/1999
requires, in Article 6(5), that the Office’s investigations be con-
ducted ‘continuously’.

(1) The forwarding of information by the Member States is an explicit

provision of Article 7 of Regulation (EC) No 1073/1999.

The Office’s management exercised little control over the
24.
duration of investigations. One would have expected the various
investigation files to explain and justify delays, but this was not
the case. Although the reports that the Office is obliged to send
to the Supervisory Committee on investigations open for more
than nine months contain some information, there is no further
obligation after that time to explain delays, of whatever duration,
or even to report regularly to the Executive Board. In many cases
the delays cannot be explained.

25.
In principle, the assessment reports classify the investi-
gations by degree of priority. It is not clear whether this classifi-
cation has an impact on subsequent work. There are in fact
no criteria concerning the resources to be assigned to an investi-
gation or the deadlines for concluding work of a given degree of
priority.

26.
The keeping of records of investigators’ time is an essen-
tial management tool for monitoring the progress of investiga-
tions. Although the Court has already recommended such a sys-
tem (2), the Office has still not set one up. Furthermore, there is
no general tool for analysing the workload of investigators at the
level of Directorate B.

27.
The Office’s investigations have suffered from the
absence of a system for codifying investigative procedures,
although such a system is essential both for the investigators and
for those being investigated (3), especially in the case of internal
investigations. The lack of codification brings a twofold risk: that
procedural conflicts will arise in the course of an investigation
with the subjects of the investigation, and that court proceedings
brought after an investigation will collapse owing to non-
compliance with the formalities introduced to guarantee the
application of the principles of transparency and the adversarial
procedure (4).

28.
More generally, as with the assessments, the sample of
investigations examined showed that OLAF’s actual investigative
activity was often rather limited. The use by the Office of its pow-
ers to carry out on-the-spot investigations, examine witnesses and
question suspects is the exception rather than the rule. These spe-
cific investigative acts were most common in the customs sector.
On the other hand, the Office often requests information from
the investigative agencies of certain Member States, notably Italy.
For example, when investigating shared-management expenditure
the documentation it needs
the Office usually asks

for

(2) Annual Report concerning the financial year 2000, paragraph 7.49

(OJ C 359, 15.12.2001).

(3) The provisions governing investigative procedure are scattered among
a number of texts and could usefully be consolidated (Regulation (EC)
No 1073/1999, Regulation (Euratom, EC) No 2185/96, Regulation
(EC, Euratom) No 2988/95, interinstitutional agreements, the IDOC
Memorandum and the Staff Regulations).

(4) The second recommendation in the Commission’s October 2003
evaluation report concerns the establishment of a corpus of adminis-
trative rules for the implementation of investigative measures.

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to be submitted for it to study and analyse before, if appropriate,
carrying out an on-the-spot visit (1). Even when investigating
direct-management expenditure, a field in which the Office has
the lead role,
it often limits itself to examining documents
obtained from the managing departments at the Commission,
the independent auditors
and in particular the reports of
appointed in the context of financing agreements. In such cases
the Office assembles and comments on the evidence to be sub-
mitted to the judicial authorities in the Member States, but it does
not provide any evidence beyond that which was already avail-
able to the managing departments. The work of preparing files is
most usually carried out with the help of the Magistrates Unit.

29.
While the Office must be able to produce its final reports
on investigations in the context of judicial proceedings, in the
case of shared-management operations these are addressed to the
managing authorities in the Member States (customs services,
paying agencies, etc.). For that reason they need to be clearly
argued and must contain relevant, precise and balanced conclu-
sions. The final reports on many of the cases examined as part of
the sample were clearly of insufficient quality. The most common
inadequacy was failure to quantify the fraud, even though inves-
tigations usually related to the misappropriation of funds.

The follow-up stage

30.

OLAF distinguishes between five kinds of follow-up:

(d) disciplinary follow-up, which takes the form of determining
what action the institutions intend to take in response to the
Office’s recommendations (2);

(e)

legislative follow-up, the purpose of which is to amend Com-
munity legislation in order to render it less susceptible to
fraud.

31.
It was difficult to determine how much time is really
spent on follow-up. However, the information obtained shows
that it is not the main activity of the units concerned. In general,
the Office’s follow-up activity has provided little added value,
especially where coordination and assistance were concerned (see
Annex II). The Office’s role in financial follow-up should be lim-
ited to calculating the amounts of the sums to be recovered. Once
they are known, it is for the authorising officers in the operational
Directorates-General and the authorities in the Member States
to issue recovery orders and to ensure that payment is received on
the due date. For its part, DG Budget must ensure that recovery
orders are registered as soon as they are issued and that the autho-
rising officers observe the timetable for recoveries. Cases of neg-
ligence on the part of the authorising officers are to be referred
to IDOC by DG Budget. Mobilising OLAF staff after the stage of
calculating the amounts of the sums to be recovered is thus a
duplication of effort already undertaken by the authorising
officers.

32.
In the special case of the mutual assistance procedure in
the customs and agriculture sectors there is no systematic
follow-up by the Office (3). The Office has established no rules for
the continuous and consistent monitoring of progress within the
framework of the procedures for requesting mutual assistance
from the Member States, and the results of such requests are not
clearly recorded.

Quality control procedures

(a)

financial follow-up, which is intended to ensure the recovery
of funds misappropriated from the Community budget;

33.
The weaknesses identified in the preceding paragraphs
raise the question of the effectiveness of the Office’s quality con-
trol systems.

(b) administrative follow-up, which aims to improve the proce-
dures for the management of budgetary revenue and
expenditure;

(c)

judicial follow-up, which aims to provide information on the
progress of criminal proceedings and the presentation, where
appropriate, of claims for damages by the institutions
concerned;

(1) Article 7 of Regulation (EC) No 1073/1999 explicitly provides for the
communication of the information necessary for OLAF investigations.

The OLAF manual

34.
The OLAF manual describes the work of every OLAF
department and most of the current administrative procedures.
Investigative activities are only dealt with in a small section giv-
ing details of existing practices, by reference in particular to the
stages of the CMS. There is a disproportionate emphasis on the
purely legal aspects of operations, to the detriment of the practi-
cal aspects of organising and conducting investigations and the

(2) Article 9(4) of Regulation No (EC) 1073/1999 on the Office’s inves-
tigations requires the Community institutions and bodies to inform
the Office of disciplinary action taken in response to the Office’s rec-
ommendations.

(3) Council Regulation (EC) No 515/97 of 13 March 1997 (OJ L 82,

22.3.1997, p. 1).

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contribution expected from the different parties concerned, in
particular the authorities in the Member States and especially the
Office’s management. The role of the Executive Board, which is a
crucial element in the management of investigations, should be
explained in greater detail.

these cases to their own courts or because they do not assign to
them the priority desired by the Office (3). In Brussels and Lux-
embourg, the principal workplaces of the institutions, the Office
should clarify once again with the judicial authorities concerned
the practical steps to be taken so that cases transferred to them
no longer disappear from view. Moreover, the Office’s recom-
mendations regarding disciplinary action are not always taken up
by the institutions or bodies concerned.

Supervision of the management of investigations

Internal audit

35.
OLAF inherited the organisational culture of UCLAF,
under which the investigators conducted most of their investiga-
tions in isolation and without real supervision. While it is true
that investigative confidentiality is necessary to avoid pressures
that may impede the process of investigation, it is nonetheless
essential that the management of an investigation office should
check not only that the investigators do not stray from their
objectives, but also that they carry out their duties with due dili-
gence. This was not always the case. Management supervision of
this sort is also indispensable for guaranteeing the sound use of
resources.

38.
The Internal Audit Unit, which comprises two temporary
members of staff, reports directly to the Director of the Office. Its
main task is to keep the Director informed of the effectiveness of
the internal control procedures. Since it was set up in 2001, its
work has essentially concerned the Office’s administrative man-
agement and non-investigative activities. It has also been required
to perform a variety of tasks in support of the management and
to back up the task force that was created in July 2003 to handle
the Eurostat case files.

36.
While the CMS and the establishment of a registry have
now brought the necessary order to the record-keeping, physical
location and structure of investigation files, this system has yet to
be transformed into a real management tool to enable the respon-
sible officers in the Investigations Directorate to be better
informed of the progress of the operations for which they are
responsible, to prepare the necessary actions and to ensure that
they are carried out within the stipulated deadlines. In this con-
nection, the practice of monthly progress reports that certain
units have set up on an experimental basis to monitor not only
the investigators’ workload but also the real financial impact of
closed investigations should be extended to all the units of the
Investigations Directorate.

37.
Investigation results are still poorly interpreted. Just
because follow-up is initiated, it does not follow that there will be
a concrete result (1) (recovery or criminal/disciplinary penalty). In
other words, initiating follow-up is not a relevant indicator of suc-
cess. Nor is the fact that files have been forwarded to the judicial
authorities significant. This is because the evidence presented by
the Office may not be deemed sufficient by the national authori-
ties, while the acts constituting an offence may be time-barred. As
regards internal investigations, when the Office has managed to
assemble evidence concerning offences committed by staff of the
Community institutions, it has often been very difficult to get
cases taken up by the judicial authorities in the countries where
the institutions concerned by the offences are located (2), either
because those authorities lack clear procedures for transferring

39.
The Internal Audit Unit has submitted no reports on the
work of investigation. In particular, it has not assessed the cor-
rect functioning of the CMS or the reliability and relevance of the
results indicators. As at the end of 2004, despite its own risk
analyses, the Internal Audit Unit had still not contributed in any
significant way to improving the systems
for managing
investigations.

The OLAF Executive Board

40.
An Executive Board comprising most of the heads of
units directly or indirectly responsible for investigations was set
up in 2002 under the chairmanship of the Director of Investiga-
tions. It meets once a week to examine the reports that are filed
at each stage of an investigation (evaluation, closure, and post-
follow-up). It was established to meet two major objectives:

(a)

to improve the quality of reports by drawing on the experi-
ence of the various services;

(b)

to ensure the consistency of the decisions proposed to the
Director of the Office by the various investigation teams.

(1) See the Judgment of the Court of Justice of the European Communi-

ties of 10 July 2003, Commission v EIB, paragraph 164.

(2) Specifically, Belgium and Luxembourg.

(3) In this connection, see the Office’s analysis in Section 1.3.2 of its
Complementary Evaluation Report, SEC(2004) 1370 of 26 October
2004.

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While this new feature undeniably constitutes an advance
41.
in the way cases are handled, its success as a means of controlling
the management of investigations is still limited, in particular
because of the limited time the Board Members have to examine
all the files. Thus, despite the intervention of the Board, investi-
gations have been started on the basis of inadequate assessment,
delays in carrying them out have not been monitored beyond the
stage of informing the Supervisory Committee, and investigations
may be passed on to follow-up units before the work of finding
evidence has been completed.

the competent authorities in the Member States. It is still difficult
to determine what the effective results of investigations have
been.

THE CONTRIBUTION MADE BY OLAF DEPARTMENTS TO ITS
INVESTIGATIVE FUNCTION

Activity reports

Introduction

42.
Anti-fraud operations are the subject of various reports,
all of which are part of OLAF’s external supervision since they are
addressed to the Council and the European Parliament. The Office
submits an annual activity report, the Commission presents an
annual report on the implementation of its policy for the protec-
tion of its financial interests, OLAF’s Supervisory Committee
draws up an annual report and Article 15 of Regulation (EC)
No 1073/1999 requires an evaluation of the Office’s activities
after three years of existence.

43.
The presentation of the Office’s activity reports has
improved over the years. Reporting has gained in clarity now that
it is supported by CMS statistical data and the analyses are less
focused on questions of law and investigation policy and more on
case studies. The reliability of the statistical data must be enhanced
still further by recording operations in greater detail and updat-
ing files more quickly. Similarly, the most recent reports could be
improved upon, in the sense that activity is analysed in terms of
its volume rather than by results obtained. In this connection, the
second paragraph of Article 12(3) of Regulation (EC)
No 1073/1999 asks the Director to ‘report … on the findings of
investigations carried out by the Office’. With regard to amounts
recovered, the information is not very reliable because the data
coming from the Member States lack consistency and are not cor-
roborated (1). With regard to judicial consequences, the time
available is not enough to allow any assessment of the effective-
ness of the Office’s work, while the number of disciplinary pro-
ceedings relating to internal investigations is still very small. In
order to account for its activities in a way that is both transparent
and relevant, the Office should identify and regularly update indi-
cators which focus not just on the volume of its activity but also
on the results (success or failure) of its investigations (2) (see para-
including those conducted in collaboration with
graph 39),

44.
The aim of this second section is to assess the effective-
ness of the contribution made by the Office’s services to its inves-
tigative function. In this connection, it is worth remembering that
in November 2003 the President of the Commission spoke of
refocusing OLAF’s activities on its investigative role (3).

Intelligence, operational strategy and information services

45.
Directorate C is made up of three units (see Annex I). The
first deals with anti-fraud strategy issues, analysis of trends and
long-term risks and the databases of irregularities reported by
Member States. The second is responsible for information
and case-recording technology. In particular, this unit has set up
and kept the case management system (CMS) running (see para-
graph 17). The third unit supplies software and technical tools to
support investigations carried out by Investigations Directorate
staff. It can also provide operational assistance (4) to enquiry ser-
vices in the Member States.

The unit responsible for strategic analysis ought to enable
46.
the Office not just to follow up denunciations, but to initiate
enquiries based on targeted risk analyses carried out by the Office
itself, in collaboration, where appropriate, with its counterparts in
the Member States. Although this unit has been in existence for
two years, its interventions to date have had no direct impact on
investigation activity (5).

Areas examined by the unit which could have resulted in
47.
new investigations included information given by Member States
and (EC)
pursuant
No 1681/94 on irregularities found in the fields of agriculture and
the Structural Funds. The unit concluded that the quality of the
data was generally inadequate for them to be used.

(EEC) No 595/91 (6)

to Regulations

(1) In its Annual Report concerning the financial year 2000, the Court
indicated (paragraph 7.49) that there was no system for the overall
recording of the results of the various enquiries and amounts recov-
ered.

(2) In this respect, a distinction should be drawn between the recommen-
dations in investigation reports and the disciplinary or legal conse-
quences which are actually attributable to them. Similarly a distinc-
tion should be made between recoveries requested and funds
eventually recovered.

(3) President Prodi’s speech to the European Parliament’s Committee on

Budgetary Control on 18 November 2003.

(4) Assistance delivered through managing the systems for recording
and communicating instances of fraud detected by the Member States
(AFIS, ECR, etc.).

(5) Fifth report of the Anti-Fraud Office (July 2003-June 2004) para-

graph 3.1.1.

(6) See Special Report No 3/2004 of 10 June 2004 (OJ C 269, 4.11.2004).

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As regards strategic analyses, the unit faces problems of
48.
access to various databases belonging to Community institutions.
The fact is that their departments say they are concerned about
the use which the Office might make of general access to data-
bases to which provisions relating to the security of personal data
apply (Regulation (EC) No 45/2001). There has been no in-depth
discussion of this sensitive issue with the Supervisory Commit-
tee, whereas discussion is crucial if the Office is to adopt a more
systematic
approach to opening internal
investigations.

and proactive

49.
Though this is a recent development, there has been a
regular increase in requests for assistance from the investigative
services with regard to operational intelligence, consisting in par-
ticular of interrogation of databases. In mid-2004 the Operational
Intelligence Unit was chiefly working on investigations concern-
ing agriculture and customs, which are not among OLAF’s inves-
tigative priorities as established by the Director.

50.
Within what the Office calls its service platform, the
Operational Intelligence Unit devotes a significant share of its
resources to supporting Member States in the fields of customs
and agriculture. The following two activities would be better
placed in other Commission services:

(a) operation of the anti-fraud information system (AFIS), which
allows Member States as well as OLAF to receive and dis-
seminate information about fraud (1);

(b) management of programmes financed by the general budget
of the European Union and aimed at reinforcing the infra-
structure of customs services in the Member States.

Policy, legislation and legal affairs

51.
Directorate A comprises six units (see Annex I). Three of
these units deal with follow-up operations (see paragraphs 30-32)
and support to the investigators on issues concerning sectoral leg-
islation. Although the precise role of these three units varies
according to the sectors for which they are responsible, they have
two functions, one linked to investigations and the other support-
ing the Commission’s operational Directorates-General in the
context of the policy on the protection of financial interests.

As regards supporting the Commission’s operational
53.
Directorates-General, they participate in the scrutiny of legislation
from a ‘fraud-proofing’ perspective. Their role consists of propos-
ing preventive measures, making use of the experience that the
Office has accumulated during its investigations.

54.
In paragraph 53 of its Special Report on the recovery of
irregular payments under the common agricultural policy (2), the
Court concluded that there was still confusion over OLAF’s role
in following up irregularities notified by Member States, because
the division of responsibilities between the Office and DG Agri-
culture is not very clear. This has diminished the effectiveness of
the mechanisms for recovering amounts wrongly charged to the
Community budget. Although the Court’s audit only briefly
looked at the follow-up of irregularities notified in respect of cus-
toms and the Structural Funds, the same questions about the divi-
sion of responsibilities also arise in those areas. In general,
follow-up operations tend to divert the Office’s resources, to the
detriment of its investigative role, and to the benefit of the Com-
mission’s operational Directorates-General.

Of the three other units in Directorate A, about one third
55.
of the resources in the Legal Affairs Unit (12 staff) are employed
in providing general (non-sectoral) legal opinions to the Investi-
gations Directorate. This is a useful function since it complements
the sectoral opinions which the follow-up units provide. Never-
theless, it is less clear whether the other tasks carried out by this
unit, particularly those devoted to the strategy for the protection
of financial
interests, are part of the Office’s core mission
and indeed whether OLAF is best placed to deal with them. The
same applies to the two other units (Protection of the euro and
Support for consultative committees on the protection of finan-
cial interests).

Units reporting directly to the Director of OLAF

In addition to the internal audit service, four units report

56.
directly to the Director of the Office (see Annex I).

Magistrates Unit

Although reporting to the Director of the Office, this unit
57.
is supposed to play two roles closely linked to the investigative
function:

52.
As regards investigations, these three units provide analy-
ses relating to sectoral rules and regulations. They also follow up
irregularities notified to the Commission by the Member States.
The opinions given by these units on legal or financial matters, in
particular those given on cases at the assessment stage, have con-
tributed to an improvement in the quality of the investigations,
particularly in the areas of direct expenditure and external activity.

(1) Unit C.2 is involved in the technical management of the AFIS system,
to which the Office would need access even if it was managed by
another Commission service.

(a)

to support investigations in matters relating to specific fea-
tures of the judicial systems in Member States;

(b)

to ensure, when cases are transferred to national judicial
authorities, a smooth transfer of the Office’s files to public
prosecutors in the countries concerned.

(2) See Special Report No 3/2004.

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The Magistrates Unit has had little involvement in evalu-
58.
ation and investigation work. The unit’s action has often been
late, which has not always allowed full advantage to be taken of
the powers available to it, and this has affected the quality of
some investigation reports. In the field of direct expenditure,
magistrates have been involved from the start with the investiga-
tors’ work on investigations from the second half of 2003
onwards. If this practice were extended to all the areas in which
the Office is involved, it would be easier to determine whether the
evidence available is adequate or what additional evidence is
needed to allow an investigation to be concluded by the transfer
of the file to the appropriate disciplinary or judicial authorities
with good prospects of success.

Training and support for candidate countries unit

59.
As part of the enlargement of the Union, a special unit
was given responsibility for implementing a 15 million euro pro-
gramme financed by the PHARE programme. This activity is
scheduled to continue in principle until 2006. In 2004, it was
given responsibility for a further support programme for new
Member States (the Hercules programme, with funding of
11,7 million euro). As with anti-counterfeiting initiatives, it is not
role to become a manager of expenditure
the Office’s
programmes.

60.
The unit also has in principle responsibility for lifelong
training within the Office. It seems however that this activity has
been neglected. The mission of this unit should therefore be
reassessed.

Human Resources and Budget Unit

61.
The size of this unit, and OLAF’s administrative expen-
diture in general, is less than it would be if the Office were not
attached administratively to the Commission. As a result, OLAF
derives significant economies by using the services of a large
number of departments in the Administration Directorate-
General of the Commission, without prejudicing the indepen-
dence of its investigative function.

Human resources

62.
The sharp increase in the number of posts since 1999
reflects the budgetary authority’s determination to strengthen the
Office’s investigative function. Nevertheless, the number of new
posts is not based on any targeted study to determine the Office’s
staffing needs in relation to its adopted strategy and its workload.

A large proportion of the increase in staff numbers has
63.
been by way of temporary posts. As a result, the number of tem-
porary posts in categories A and B rose from 12 in 1999 to 127
in 2001. In the list of posts for 2004, these posts accounted for
55 % of the total for categories A and B. The large number of
temporary posts was a consequence of the budgetary procedure
for the financial year 2001, when the aim at the time was to
replace senior investigations staff coming from UCLAF (1). Now
that this objective has been achieved, the present situation poses
more problems than it offers advantages:

(a) as many investigators had been recruited from surveillance
services in the Member States, a large proportion of them
had to familiarise themselves with the judicial and institu-
tional framework, as well as the implementation procedures,
applicable to the Community budget. This exercise was all
the more difficult as, unlike the practice at DG Competition
and DG Trade (2), the Office provides only limited initial
training to the investigators it recruits;

(b) most of the temporary contracts now in progress will come
to the end of their second and final three-year term between
2007 and 2009 (3). Since the staff members concerned will
then have to leave the Office, there is a high risk that all this
accumulated knowledge and experience will disappear within
a short period.

Because of the complexity of the Community context,
64.
investigators are required to show versatility and adaptability.
Since it is not easy to find this combination of qualities, this is a
serious reason for giving greater priority to stability in recruit-
ment and training programmes. This being so, it would be appro-
priate to look again at the list of posts so as to provide investiga-
tors with less precarious employment situations and real career
possibilities. That can be achieved gradually by converting some
posts as future budgetary procedures permit.

65.
At the same time, the administrations most exposed to
the problems of fraud and the protection of the European Union’s
financial interests should be encouraged to make available to the
Office’s analytical (intelligence) services a greater number of sec-
onded national experts. A particular effort in this direction may
be made as regards the services of Member States called on to col-
laborate with the Office.

(1) The number of permanent posts in categories A and B moreover
increased from 107 in 1999 to 143 in 2000 and then was cut back
to 109 in 2001.

(2) These Commission Directorates-General make considerable use of

high-level investigative teams.

(3) In Special Report No 8/98 the Court had already indicated that the
high proportion of temporary staff was leading to a lack of continuity
in the organisation.

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THE SUPERVISORY COMMITTEE

The Supervisory Committee was established by OLAF’s
66.
founding acts (1). ‘Through its regular control of the implemen-
tation of
investigations it strengthens the Office’s indepen-
dence’ (2). It was also supposed, in response to requests from the
Director or on its own initiative, ‘to deliver opinions to the Direc-
tor concerning the activities of the Office without, however, inter-
fering with the conduct of investigations in progress’ (2). In prac-
tice, using recital 10 of Regulation (EC) No 1073/1999 as a basis,
the Committee has concentrated its attention on one of its own
rules of procedure, under which it states that it will ensure that
the Office respects the principles of individual rights and funda-
mental
to internal
investigations (3).

freedoms, particularly with regard

67.
The discharge of the mandate of the Supervisory Com-
mittee is delicate on several counts. The Committee is required to
be the guarantor of both the Office’s independence and the rights
of persons under investigation. The legislation gives it no
decision-taking power to do this. By restricting its pronounce-
ments to issues of principle, it is laying down a doctrine which
has no real effects on investigations. Finally, as the Committee
cannot intervene during the course of investigations, it in no way
constitutes a mechanism to monitor the legality of investigations
while they are in progress.

68.
With regard to monitoring the procedure followed in
investigations, several recent cases demonstrate the existence of
overlaps between the roles of the Supervisory Committee and the
European Ombudsman. For example, between September 2003
and May 2004, the Committee debated the Ombudsman’s inter-
ventions in connection with individual
investigations by the
Office during seven of its meetings. Moreover, the Committee
does not deal with complaints which persons under investigation
address to the Director of the Office, who remains free to deal
with them as he sees fit.

69.
Whilst the Committee may not interfere in the manage-
ment of the Office, that is, it may intervene neither in the Office’s
non-investigative activities nor in the conduct of investigations:

(a)

it must be informed of any investigations not completed
within nine months of their start; in practice, when such
information is communicated to the Committee it usually
has no practical consequences;

(1) Decision 1999/352/EC, ECSC, Euratom, Article 4.
(2) Regulation (EC) No 1073/1999, Article 11(1).
(3) Rules of Procedure of 17 November 1999, Article 2 (OJ L 41,

15.2.2000).

(b) each year it has to examine the Office’s draft budget in
detail (4), although this budget also covers activities other
than investigations. In practice this examination is largely a
formality since the Committee, which is not an arm of the
budgetary authority, has no responsibility in this regard;

(c)

(d)

it has asked to be informed in advance of cases for referral to
national judicial authorities (5). Nevertheless, since informing
the judicial authorities is often a stage in an investigation
which continues with these authorities’ support, and since
informing them is a sovereign act by the Director of the
Office, prior communication to the Committee may be a
source of interference;

in its Rules of Procedure the Committee asks the Director to
grant it rights which go beyond those provided for in its legal
constitution (communication of complaints received by the
Director (6), communication of the Office’s legislative initia-
tives concerning the fight against fraud and the protection of
financial interests (7), access to all OLAF’s documents and
files (8), its own budgetary resources (9), appointment of sec-
retariat staff (10), determining the secretariat’s place of
work (11), etc.).

70.
Since the Director of the Office was appointed, his inde-
pendence has never been under any real threat (12). In practice,
the Committee has largely focused its attention on questions
relating to the Office’s observance of individual rights in internal
investigations and has deplored the absence of a code of proce-
dure to give a firm framework for investigative actions. The Com-
mittee’s focus of attention on internal investigations and indi-
vidual rights has affected the relationship between the Director of
the Office and the Committee.

71.
Following the policy adopted by the Office, the Supervi-
sory Committee has given priority to the criminal destination of
internal investigations, to the detriment of external investigations,
in spite of the fact that fighting fraud against the Communities’
financial interests goes well beyond the confines of the institu-
tions, and that numerous frauds are committed without any

(4) Consultation of the Committee by the Director under Article 6(2) of
Decision 1999/352/EC, ECSC, Euratom, which does not require a
formal opinion.

(5) Whilst Regulation (EC) No 1073/1999 says that the Committee must
be informed of cases which the Director of the Office transfers to the
judicial authorities but does not specify when this information is to
be given, the Committee’s Rules of Procedure (Article 22(5)) estab-
lish the principle of information in advance.

(6) Article 22(6).
(7) Article 22(7).
(8) Article 3(b).
(9) Articles 4(5), 19(7) and 25.
(10) Articles 19(1) and 19(2).
(11) Article 19(4).
(12) Even at the height of the Eurostat crisis in 2003, the Commission was

careful not to interfere in the conduct of investigations.

18.8.2005

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Official Journal of the European Union

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collusion with staff from the institutions or its related bodies.
Though Articles 7(1) and 7(3) of Regulation (EC) No 1073/1999
require that ‘the institutions, bodies, offices and agencies shall for-
ward to the Office without delay any information relating to pos-
sible cases of fraud or corruption’ and that ‘Member States shall
also send … any other document or information considered per-
tinent … relating to the fight against fraud … and any other ille-
gal activity affecting the Communities’ financial interests’, the
Supervisory Committee has never studied the conditions in which
the agencies or Member States have discharged this duty, although
it is essential to the Office’s investigative activities (1).

72.
To allow it to discuss questions relating to the conduct of
enquiries in full knowledge of the facts, the Committee secretariat
examines closed investigation files which it selects on the basis of
criteria determined in consultation with the Chairman. The num-
ber of files examined recently was 17 (2) in 2003 and seven in the
first six months of 2004. These examinations are the subject of
detailed evaluation records which often include pertinent recom-
mendations or important matters of principle. These records are
not communicated to the Office. An attitude of greater open-
ness would not only benefit relations between services but would
also allow all parties to benefit from best practice, which would
thus contribute to strengthening the investigative function.

CONCLUSIONS AND RECOMMENDATIONS

73.
The Office undertook substantial reorganisation mea-
sures in November 2003. At the time of the audit, it was evident
that at the beginning of 2004 it was still engaged in clearing the
burden of the past inherited from UCLAF, its predecessor, and
that the new measures were just beginning to have an effect (see
paragraph 10).

Efficiency and effectiveness of investigations

74.
The Office’s investigations policy is still uncertain,
whether with regard to the question of acting on its own initia-
tive, the management of priorities, procedures for collaboration
with the authorities of Member States or checking deadlines.
Similarly, guidelines on the results to be achieved are still vague
because the disciplinary or financial aspects may be overlooked in
favour of judicial processes, the outcome of which is often remote
and uncertain (see paragraphs 19, 20 and 25).

(1) See also the provisions of Article 9 of Council Regulation (EC, Eura-
tom) No 2988/95 which obliges Member States to give the Commis-
sion every assistance necessary, as part of the protection of financial
interests.

(2) Including 14 internal investigations.

Once the guiding principles of its investigations have been specified
in terms of results to be achieved instead of simply the areas on which
it wishes to concentrate its activities, the introduction of performance
indicators (rather than mere activity indicators) should make it pos-
sible to assess the extent to which the Office’s choices are justified.

75.
The decision-making system governing the various stages
of the investigations has become more transparent (see para-
graph 16). This is largely due to the intervention of the Executive
Board and the introduction of
(see
paragraph 41).

standardised reports

The fact that coordination and assistance operations are
76.
treated as equivalent to investigations makes control of resources
difficult and results in time-consuming use of the CMS system,
even though the Office has no obligation, in coordination and
assistance cases, to collect and produce evidence itself (see para-
graphs 13 and 14).

It would be worth reconsidering the organisation of the Office with
regard to coordination and assistance operations and investigating
the possibility of creating a special unit dedicated to these operations,
as part of the service platform.

77.
With regard to preliminary work (assessments), analyses
are still rudimentary. The support units (magistrates, follow-up
and operational analysis) have taken little part in defining objec-
tives and planning the strategy to be adopted in each investiga-
tion. The Executive Board has not insisted strongly enough on the
need for clear formulation of the objectives and expected results
of investigations (see paragraphs 20 and 22).

Some investigation acts still need to be justified more convincingly,
the objectives set for the investigators in each case need to be clari-
fied and there must be more insistence on work programmes to sup-
port proposed decisions. Regarding the Executive Board, it would be
worth considering smaller groupings each of which would bring
together managers working on files that have common features (3) .
This kind of approach would reduce the participants’ burden of work
on examining files and would encourage more rational and more
thorough analysis of draft decisions. It would also allow coordinated
follow-up of the portfolio of current cases and the introduction of a
system of prioritisation. Nothing would prevent all the subgroups of
the Executive Board from coming together, if the need arose, to deal
with matters of principle in which all the services have an interest.

(3) For example revenue and shared-management expenditure, direct-

management expenditure, internal investigations, etc.

C 202/16

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Official Journal of the European Union

18.8.2005

Supervision of investigations by the Office’s management
78.
has generally proved inadequate (see paragraphs 28, 35 and 36).
The duration of investigations has not been brought under con-
trol (see paragraph 24).

There is no independent control of the legality of inves-
83.
tigative actions (1). The procedural measures concerning investi-
gations are still imperfectly codified (see paragraph 27).

Heads of unit must ensure that priorities are as far as possible
respected and must both be aware of and control investigators’ actual
workload. In the course of an investigation, the search for evidence
must take precedence over mere collation of information already
available. From this point of view, the Office must make better use
of the means it has available (witness hearings, on-the-spot visits
to collect documents, operational analyses, etc.).

Codifying the procedures should guarantee that investigative acts fol-
low a predictable course, that there is certainty about the timing of
hearings and that, at each key stage of the enquiry, the rights to a
fair hearing of the person under investigation are protected along
with his right of access to the file. The code should also reinforce the
principle of investigative secrecy and provide controls on the legality
of investigative acts still in progress. Such a code should have legal
force, be published and allow the fundamental principles governing
OLAF’s investigations, in particular transparency and the adver-
sarial principle, to be applied transparently.

79.
There is no system in place to measure investigators’
actual workload or the time they spend on investigations (see
paragraph 26).

A time-recording system, linked to work plans which include esti-
mates of time to be spent on investigations, would supply a basis for
better alignment of the workload with the resources available in the
various units of the Investigations Directorate, and would allow
delays to be avoided.

84.
In the field of direct expenditure, OLAF is dependent on
cooperation with national departments. Some Member States give
their support to the Office more willingly than others, even
though the Office does not have all the means at its disposal
to identify certain facts (see paragraphs 15 and 37).

80.
The obligation to report investigations that are more
than nine months old to the Supervisory Committee has had no
notable effect (see paragraph 24).

85.
In the areas of own resources and shared-management
expenditure, cooperation with Member States under ad hoc rules
and mutual assistance procedures (Regulation (Euratom, EC)
No 2185/96) is often mediocre (see paragraphs 15 and 32).

Taking into account the time-barring periods laid down in national
(criminal) and Community legislation (e.g. Article 3 of Regulation
(EC, Euratom) No 2988/95), establishing a maximum duration for
enquiries would be likely to increase their effectiveness.

In order to clarify arrangements for cooperation with the authorities
of Member States, it would be useful to consider either the adoption
of a specific Council Regulation setting out detailed arrangements for
such cooperation (see proposed amendments to Regulation (EC)
No 1073/1999), or the conclusion of agreements with national
investigation services best placed to assist the Office (2).

81.
It is still difficult to determine the actual results of inves-
tigations. In the area of internal investigations, little progress has
been achieved since 1988 with regard to sanctions imposed. Judi-
cial and legal routes have in the main proved ineffective (see
paragraph 37).

82.
The Office’s financial follow-up operations use up a lot
of its resources (see paragraphs 31 and 54). Judicial follow-up
adds little value to the conclusions submitted (see paragraph 43).

Financial follow-up should not be part of the Office’s remit. It is up
to authorising departments in the Commission and Member States
to organise the recovery of amounts identified as a result of investi-
gations. Authorising officers and Member States should notify
OLAF promptly of any sums recovered or amounts written off. Judi-
cial follow-up should be limited solely to cases where, after criminal
proceedings, the officer who authorised the original expenditure is
required to start civil proceedings for recovery. Legislative follow-up
ought to remain the responsibility of the operational Directorates-
General on the basis of summaries addressed to them by the Office.

The case management system (CMS and registry) estab-
86.
lished by the Office represents distinct progress in the control of
documentation and investigation files (see paragraph 17).

87.
The CMS databases are not used to their best advantage
to create a genuine system of investigation management and a
decision-making aid, although such an instrument is needed to
manage and direct investigations (see paragraphs 34 and 36).

(1) See Article 14 of Regulation (EC) No 1073/1999. Article 90a of the
new Staff Regulations does not resolve the matter of the independence
of pre-litigation appeals concerning the Office’s investigative acts.
(2) An agreement of this nature has already been concluded with the Ital-

ian Guardia di finanza.

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The CMS databases should be used to convert the documentation
system into a true system of investigation management and a
decision-making aid. If combined with a clarification of the role of
management responsibility for investigators, this would reinforce the
effectiveness of investigations and prevent delays. These points should
be added to the OLAF manual and details of management respon-
sibilities included. To make the manual more operationally useful, all
instructions relating to the organisation, conduct and supervision of
investigations should be collated in a single volume. A special effort
must also be made with regard to the training of investigators (in
investigation techniques; sectoral, national and Community legisla-
tion, report-writing skills, etc.).

The mission of the strategic analysis services must be redefined so
that they can contribute effectively to the identification of situations
which would lead to external investigations being initiated in sectors
at greatest risk. In this regard, they should seek improvement in the
presentation, the nature and the accuracy of data forwarded by the
Member States allowing the creation of databases which could be
used to look for anomalies and launch investigations.

88.
Considerable resources are invested in producing reports
which do not always result in sufficiently clear information to
judge the Office’s effectiveness in the absence of relevant perfor-
mance indicators (see paragraphs 37, 39 and 43).

The number of reports should be cut and greater attention should be
paid to their information value. Statistical data should be made more
reliable and relevant so that comparisons can be established over
time. In this regard, the introduction of performance indicators based
on real rather than potential results should bring greater clarity.

Deployment of resources in support of investigations

The Office’s reactive investigation policy does not allow
89.
it to form an overview of its future workload and to organise its
investigative teams accordingly (see paragraphs 26 and 62). The
process of allocating staff between units in the Investigations
Directorate is not transparent. Staff management is compli-
cated by the disproportionate number of temporary posts, which
results in instability (see paragraphs 63 and 64).

The workload of the various services should be monitored and a
genuine master plan for personnel management implemented so as
to resolve structural problems in staff management. Sound manage-
ment of the investigation teams would moreover militate in favour
of more balanced units in terms of staff numbers, allowing heads of
unit to supervise investigations more closely.

90.
The impact of the strategic analysis services on the Inves-
tigations Directorate is still insignificant. With regard to risk
their contributions have remained limited (see
analyses,
paragraph 46).

91.
Judicial support is useful in view of the difficulties posed
by some Community legislation. In this sector, support to the
investigation services is regular. It is legitimate on the other hand
to question the contribution which work related to the strategy
for the protection of financial interests makes to the Office’s
investigations (see paragraphs 53 and 55).

Since work in relation to the strategy for the protection of financial
interests has had no direct impact on the conduct of investigations,
other Commission services could be better placed to undertake such
work.

92.
Assistance activities are useful when concrete support to
Member States with coordination or analysis in the field of cross-
border investigations is required. The Office’s peripheral activi-
ties, particularly those associated with the policy on the protec-
tion of financial interests in the broad sense, distract management
from its role of surveillance and support for the investigative
function. When such activities involve taking on responsibilities
which are normally carried out by the operational services of the
Commission (programme management, for example) mobilisa-
tion of the Office’s resources does not constitute the best solu-
tion (see paragraphs 55 and 59).

Programme management work should be the responsibility of the
operational services of the Commission, which are better equipped
than the Office to deal with them.

Relations between OLAF and the Supervisory Committee

93.
A body like the Office needs clear lines of management
responsibility and clear arrangements for supervision. The terms
of reference of the Supervisory Committee have become unclear.
Moreover, the Supervisory Committee does not provide the
Office’s Director with all necessary support (see paragraph 70).

The role of the Supervisory Committee should be re-examined in
order to avoid all risks of interference in ongoing investigations.

C 202/18

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Official Journal of the European Union

18.8.2005

Refocusing the Office on its investigative function

94.
The fact that OLAF is attached to the Commission has
not endangered the independence of the Office’s investigative
function, even if some difficulties in communication were noted.
It does not appear, therefore, that the status of the Office should
be called into question. On the other hand, executive manage-
ment of the investigative function should have received more sus-
tained attention, in order to guarantee the quality of its results and
avoid duplicating the work of other Commission services. The
experience of the first five years of the Office’s existence thus
tends to show that more reflection is needed, to ensure with

greater certainty that investigations are effective in achieving con-
crete results, whether these be the recovery of misappropriated
amounts or the effective application of disciplinary or criminal
sanctions.

From the foregoing, it is clear that a refocusing of the Office’s activi-
ties on its investigative function, as the President of the Commission
indicated in November 2003, would tend to reinforce the effective-
ness of investigations while leaving other organisations with the
responsibility for preventive or legislative acts. Such refocusing
should, for its part, be accompanied by modifications to the gover-
nance of the Office, necessitating changes in the regulations (1).

This Report was adopted by the Court of Auditors in Luxembourg at its meeting of 9 June
2005.

For the Court of Auditors
Hubert WEBER
President

(1) Regulation (EC) No 1073/1999 concerning investigations by the
Office; Decision 1999/352/EC, ECSC, Euratom establishing the Office;
Decision 1999/396/EC, ECSC, Euratom (OJ L 149, 16.6.1999, p. 57)
concerning the terms and conditions for internal investigations.

18.8.2005

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Official Journal of the European Union

C 202/19

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C 202/20

EN

Official Journal of the European Union

18.8.2005

ANNEX II

MAIN WEAKNESSES NOTED IN THE INVESTIGATIONS SAMPLE EXAMINED

Assessments (30 items examined)

Delays in execution of work

Inadequate supervision

Imprecise investigation objectives

Incomplete CMS files

Investigations (62 items examined)

Delays in execution of work

Inadequate supervision

Limited investigation work

Poor-quality reports

Imprecise investigation objectives

Incomplete CMS files

Follow-up (25 items examined)

Delays in execution of work

Limited usefulness of the follow-up work

Inadequate supervision

Incomplete CMS files

Limited follow-up work

16 cases

13 cases

12 cases

15 cases

34 cases

24 cases

10 cases

15 cases

28 cases

13 cases

22 cases

8 cases

7 cases

6 cases

5 cases

MAIN WEAKNESSES NOTED

Assessments
(30 items examined)

Investigations
(62 items examined)

Follow-up
(25 items examined)

s
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s
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c

f
o
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b
m
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N

35

30

25

20

15

10

5

0

Delays in 
execution of 
work

Inadequate 
supervision

Limited 
investigation 
work

Poor-quality 
reports

Imprecise 
investigation 
objectives

Incomplete 
CMS ﬁ les

Limited follow-
up work

Weaknesses found

 
 
18.8.2005

EN

Official Journal of the European Union

C 202/21

THE COMMISSION’S REPLIES

In Annex to its replies, the Commission transmits the replies from the Supervisory Committee of OLAF to paragraphs 66
to 72 and 93. The Commission and OLAF point out that they do not share certain of the views expressed by the
Committee.

SUMMARY

III.
At present, by sifting its information (1), OLAF has the capacity to follow up any serious report it
receives. In future the Office intends to increase its effectiveness and the following-up of investigations by
developing a more sophisticated strategic analysis that could adapt to take account of new priorities.

Investigations and assistance and coordination operations share the same objective: the protection of
IV.
financial interests. The distinction between the two is clear, based as it is on Regulation (EC) No 1073/1999.
It is reflected in the Office’s role (which is a function of its possibilities, its powers and its independence). Should
decisions taken by the Institutions lead to a structural reform of the Office (2), thought could be given to clari-
fying the distinction between these different categories at organisational level.

V.
The findings regarding managerial supervision relate to the sample of cases examined by the Court, the
management of which does not take account of the progress made since 2003. Consequently, the Court’s
observation regarding the inadequacy of the supervision should be qualified (between July 2000 and June 2003
957 cases inherited from UCLAF were closed and in three years the average length of investigations dropped
from 33 months to 22 months in 2004). It should also be borne in mind that the Commission’s proposal
would set imperative deadlines for investigations. (See the proposed amendments to Regulations (EC)
No 1073/1999 and (Euratom) No 1074/1999 (3)).

VI.
After the first stage, which is carried out by the Greffe, OLAF is now able to ensure that the quality and
legality of its operations are controlled by its line managers, its Executive Board and its Magistrates and
Follow-up Units. Furthermore, the Office now devotes greater attention to planning its investigative activities
using work plans.

Cooperation with Member States requires continuous and sustained efforts on both sides. OLAF has defined
this issue as a priority area for improvement. This cooperation is also a concern for the Commission and has
been described as a platform of multidisciplinary services in recommendation 14 of the Commission report
on the evaluation of the activities of OLAF (4).

Activities following-up investigations, such as recovery or prosecutions, provide only a partial picture
VII.
of OLAF’s effectiveness. It is usually up to national authorities and, in some cases, to Community institutions,
to take decisions on further steps that are beyond OLAF’s control.

As developing and introducing performance indicators is a complex process, OLAF has set about studying the
question in depth, looking to draw on the experience of national investigation agencies. OLAF is exploring the
possibility of seeking feedback from Member States authorities on the usefulness of its reports.

(1) On the basis of criteria that reflect the priorities set out in OLAF’s Programme of Activities.
(2) Proposal to amend Regulation (EC) No 1073/1999 — COM(2004) 103 final, 10 February 2004.
(3) Article 6(7) of the proposed amendment of Regulation (EC) No 1073/1999, which concerns the length of investigations;

COM(2004) 103 final, 10 February 2004.

(4) OLAF activities evaluation report, COM(2003) 154 final.

C 202/22

EN

Official Journal of the European Union

18.8.2005

The fact that OLAF’s establishment plan contains a large number of temporary staff enabled the Office
VIII.
to take on experienced investigators fairly quickly when it was setting up its organisation. While aware of the
risk flagged up by the Court, the Office intends, with the agreement of the budgetary authorities, to gradually
make a significant percentage of its temporary posts permanent, which should consolidate expertise. The Office
also intends to focus on staff training, especially for investigators and new arrivals.

IX.
OLAF’s current legal framework already contains substantial provisions to protect human rights. The
proposed amendments to Regulation (EC) No 1073/1999 codify defence rights (1). Internal monitoring of qual-
ity and legality is currently a matter for line managers and the Executive Board; however, the question of inter-
nal controls is to be examined.

Moreover, to further ensure the legality of investigations in practice and make the Office’s procedures more
transparent, the new version of the OLAF manual of procedures includes a body of administrative rules (which
could be developed further separately from the current manual).

The Commission shares the Court’s view on the need to review the governance of the Office and has

X.
set out possible solutions in its proposal to amend Regulation (EC) No 1073/1999.

OLAF’s activities concentrate on the overall protection of financial interests. With this objective in
XI.
mind, the mobilisation of resources for operations is the top priority. The Court itself points out in para-
graph III that the Office currently has the resources it needs to meet the operational challenges it faces.

The Commission welcomes the Court’s observations, although this is without prejudice to any future
re-assessment the Commission may make concerning the division of responsibilities between its services, par-
ticularly in the framework of the evaluation of the tasks/competencies of OLAF.

INTRODUCTION

4.
The Office has taken account of the fact that it needs to
work together with the various authorities in the Member States
if it is to accomplish its mission. To this end it has attached suit-
able importance to coordination and support and set about
recruiting specialists from the national administrations.

(see the Complementary Assessment of the European Anti-Fraud
Office (3)). However, the time taken by national procedures makes
it impossible to establish quickly what concrete follow-up mea-
sures have been taken in response to OLAF investigations. This is
why OLAF is looking to identify the most appropriate perfor-
mance indicators, drawing on the experience of national bodies,
to refine the evaluation of its work. It is difficult, however, to
assess preventive measures and deterrence, both of which are sig-
nificant outcomes of OLAF’s work.

7.
OLAF refers to the Complementary Assessment of the
European Anti-Fraud Office (2004) (2), which points out that
operational tasks account for some 60 % of its resources. This can
be explained by the fact that a significant proportion of resources
allocated to units outside the Investigations and Operations Direc-
torate (B) is closely linked to investigative activities.

10.
The Commission has already set out the impact of the
need to clear operations launched previously and the delays in
setting up the Office, for which there were a variety of reasons
(see paragraph 7.41 in the Court’s annual report for 2000). It is
therefore unsurprising that the consequences were still being felt
in 2004 (see paragraph 73). The deficiencies summarised in
Annex II must therefore be relativised, as they primarily concern
investigations opened prior to the reorganisation of the Office in
November 2003.

8.
The Commission accepts that it may be difficult at present
to assess the effectiveness of OLAF’s work. Initially the Office
lacked the tools needed to make such an assessment, but the
introduction of the case management system (CMS) has made it
possible to make an inventory of OLAF’s actions. This in turn has
made it possible to undertake an initial description of results in
terms of financial
impact and cooperation with the judicial
authorities

The Office has also taken account of the Court’s previous obser-
vations, and the introduction of the case management system is
an example of the progress made by OLAF in response to the
Court’s Special Report No 8/98.

(1) COM(2004) 103, 10 February 2004.
(2) Complementary Assessment of the activities of the European Anti-

Fraud Office (OLAF), SEC(2004) 1370, 26 October 2004.

(3) Complementary Assessment of the activities of the European Anti-
Fraud Office (OLAF), paragraph 1.3.2, SEC(2004) 1370, 26 October
2004.

18.8.2005

EN

Official Journal of the European Union

C 202/23

OLAF INVESTIGATIONS

The difference between investigations and operations is
13.
reflected in the role OLAF has to play (depending on its
possibilities/powers). Within the legal framework for OLAF’s
activities, direct intervention in the form of an investigation con-
ducted by the Office may be less common in the fields of customs
and trade (see reply to paragraphs IV, 4 and 12).

Coordination and assistance are provided with a view to
14.
achieving the objective of protecting financial interests, as laid
down by the legislator. The Office aims to identify the appropri-
ate procedure for each specific case. There is no preferred form of
intervention and there should be no question of mobilising
resources to the detriment of the investigations. Furthermore, as
these operations are often complex and involve several Member
States, it is imperative to follow strict procedures. Subjecting all
OLAF’s operational activities to the same internal reporting pro-
cedures also ensures greater transparency (see the reply to para-
graph 76). A simplified procedure could, however, be envisaged
for cases of mutual assistance.

15.
Collaboration with national authorities requires mutual
trust that is based on and develops through the support (coordi-
nation and assistance) that the Office can give the Member States.
The Office is pursuing a policy of improving its operational con-
tacts and has made this one of its priorities for 2005.

16.

(a) When the information is evaluated the Office makes
sure that the suspicions raised (i) concern offences
within OLAF field of activities; (ii) are sufficiently seri-
ous (1), (iii) concern events covered by pre-established
operational priorities (2). Priorities for investigations are
set following a detailed study by the Office and consul-
tation with the Supervisory Committee.

(c) A decision by the Office to close a case without
follow-up is in itself a significant conclusion for both the
persons and the Institution concerned, as it means that
the initial allegations may be dismissed.

OLAF introduced a number of important modifications
17.
in the CMS in early 2003, which have resulted in a considerable
improvement in its functioning and in the reliability of the infor-
mation. The ex ante estimation of financial impact is difficult,
therefore OLAF plans to establish a working group with experts
to review guidelines for the estimation of the ‘prejudice to the

financial interest of the European Union’ at the beginning of an
investigation. The amounts shown in the CMS represent the best
estimate at the end of the investigation; it is up to the relevant
authorising officer to determine the exact amount and issue the
recovery note.

19.
The proportion of cases that the Office closed without
follow-up has increased significantly since 2002, following the
introduction of a prioritisation system applying from the moment
the reports are received (see replies to paragraphs 16(a) and III).

The true challenge is to feed OLAF quality information from the
outset (concerning facts of substance that are likely to generate
investigations that produce real results).

OLAF plans the development of more proactive, intelligence led
investigations and operations, in accordance with the new Regu-
lation (EC) No 1073/1999 (see reply to paragraph 74).

20.
The new OLAF manual, which was adopted on 25 Feb-
ruary 2005, has taken account of the fact that it may be impos-
sible to produce an effective initial assessment of information in
15 days in areas where cooperation is needed with Member States.
This is why the time allowed for the assessment has been set at
two months (3), with the possibility of obtaining an extension
with the approval of the Head of Unit.

(b) The Court’s observations regarding management supervision
must be considered in the light of the conditions in which
the OLAF management has had to operate. Only after the
workload from the past had been dealt with was it possible
for the Office to embark on a phase of management training.

(c) Similarly, with regard to the delays cited, it must be borne in
mind that significant resources were absorbed in the process
of clearing up past cases (between July 2000 and June 2003
957 ‘UCLAF cases’ were closed).

From the moment a case is assessed, the Office takes
21.
account of its financial impact, which is one of the criteria men-
tioned in the reply to paragraph 16(a). OLAF’s objectives are
entirely complementary,
involving an approach that is both
financial (geared to recovery) and concerns administrative, disci-
plinary or criminal penalties (geared to enforcing the law). Fur-
thermore, on the basis of the mechanism for cooperation between
the Commission and OLAF implemented in 2003 the Office sup-
plies the information necessary for precautionary measures to be
taken in the course of investigations with a view to protecting the
Union’s financial interests (4).

The aim of extending the deadline for evaluation, as laid
22.
down in the new version of the manual (see reply to para-
graph 20) is to improve planning of the work.

(1) See paragraph 164 of Case C-15/00 Commission v EIB [2003] ECR

I-7281.

(2) See paragraph 3.2 of the OLAF manual.

(3) See paragraph 3.3.3 of the OLAF manual, 25.2.2005.
(4) EWS (Early Warning System) (SEC(2005) 310).

C 202/24

EN

Official Journal of the European Union

18.8.2005

Since 2005 it has been the rule from the evaluation stage to con-
sult the Magistrates and Follow-up Units, and the Analysis
and Intelligence Units have increasingly been called on for
assistance.

23.
As stated in the Complementary Evaluation, the average
duration of OLAF investigations has decreased from 33 months
in 2002 to 22 months in 2004 (see reply to paragraph 78) (1).

For 2005, OLAF has organised specialised training for
29.
investigators to improve the quality of investigation reports. The
new format of the final report set out in the manual adopted in
February 2005 includes a quantification of the financial impact
(even if it is difficult to produce an accurate evaluation, as was
pointed out in the reply to paragraph 17) and the classification of
unlawful conduct in terms of its criminal, administrative or dis-
ciplinary consequences.

24.
In Article 6(7) of the proposal for an amendment to
Regulations (EC) No 1073/1999 and (Euratom) No 1074/1999
the Commission suggests consolidating the management of inves-
tigations by imposing maximum time limits for conducting inves-
tigations. Moreover, in its plan of activities for 2005, OLAF plans
to introduce a system for monitoring the use of its investigators’
time that will reduce the time spent on investigations (see replies
to paragraphs 26 and 80).

31.
With regard to the financial follow-up, the Commission
believes that the division of responsibilities between OLAF and
the other Commission services concerned (authorising officers,
Budget Directorate-General and Legal Service) is clear and there
is no overlap (see rules on recovery (2)). This is without prejudice
to any future re-assessment the Commission may make concern-
ing the division of responsibilities between its services, particu-
larly in the framework of the evaluation of the tasks/competencies
of OLAF.

This monitoring of the use of staff time will also help to

25.
focus more on the urgency of the investigations.

To introduce a suitable system for an investigative ser-
26.
vice for monitoring the use of staff time, OLAF is studying the
experience of national bodies in this area. At the same time
follow-up units are testing a system for registering time spent
working. It should, however, be pointed out that the CMS makes
it possible to establish the number of cases being dealt with by an
investigator.

The proposed

27.
to Regulation (EC)
amendments
No 1073/1999 codify defence rights. Furthermore, the new OLAF
manual includes the existing internal rules in its administrative
rules governing the exercise of its faculties/powers and taking
account of fundamental rights in the course of its investigations.
In January 2005 the Office also commissioned a comparative
study involving eight Member States to determine an adequate
level of guarantees to be applied to investigations.

28.
With regard to the Office’s powers, it is important to dis-
tinguish between powers relating to internal investigations and
those relating to external investigations. In cases involving agri-
culture and customs, Regulation (Euratom, EC) No 2185/96 does
not allow OLAF to report discussions with economic operators.
For this reason, OLAF tries to draw on support from the Member
States and other services that have the appropriate instruments at
their disposal.

Finally, OLAF’s role in arranging files prior to forwarding them to
the national judicial authorities is very important as it ensures
optimal handling by the authorities concerned.

(1) Complementary Evaluation of the activities of OLAF report —

SEC(2004) 1370, 26 October 2004.

As far as agricultural spending is concerned, a mechanism already
exists according to which the follow-up of recovery of funds
found to have been paid illegally is undertaken by the Directorate-
General
for Agriculture through the clearance of accounts
process.

The follow-up units of OLAF have had other specific anti-fraud
tasks assigned to them (these are related to Customs Information
System, Mutual Administrative Assistance, protocols with third
countries; Task Force Recovery in the agricultural sector; closure
of programmes in the structural actions sector which have links
to certain operational OLAF cases; debtor searches on behalf of
the authorising officers).

Concerning Mutual Assistance, OLAF is currently devel-
32.
oping an electronic message module which is expected to greatly
improve processing and follow-up.

33.
OLAF made quality control one of its priorities for 2005
and has organised training on the subject (see reply to para-
graph 29). The Executive Board is increasingly controlling qual-
ity and in the future the Internal Audit Unit will be more involved
in monitoring its application (see reply to paragraph 39).

34.
Legal aspects of investigations are voluntarily highlighted
in the manual, as failure to comply with OLAF’s legal obligations
would undermine any subsequent result.

(2) For direct expenditure sector, see documents COM(2002) 671 final,
SEC(2000) 2204/3 and the internal rules of the Commission on recov-
ery related to direct expenditure C(2002)5048/4. — See paragraph 54
of this report on the agricultural, structural measures and customs sec-
tors.

18.8.2005

EN

Official Journal of the European Union

C 202/25

The OLAF manual is continually being updated and improved.
The new OLAF manual of 25 February 2005 provides further
clarification on most of the issues mentioned by the Court, includ-
ing the role of the Board. A new CMS manual is currently under-
way, which will provide an in-depth description of the CMS sepa-
rate from the OLAF manual. In the same way, OLAF will also
consider putting all material related to the conduct of investiga-
tions in a separate manual.

35.
Line managers are responsible for continuous case man-
agement. In 2004 the documentation of this supervision had not
been standardised, but mechanisms have been developed, most
notably in connection with the case management system (CMS),
to homogenise and facilitate supervision using scoreboards.

36.
The Office recognises that in the past, the CMS focused
on proper filing and recording of information. This was OLAF’s
first priority due to the weaknesses identified by the Court in this
respect (see Report No 8/98). Meanwhile considerable progress
has been achieved. The description of the CMS in the new OLAF
manual shows that many of the concerns of the Court have
already been addressed. Line managers receive monthly reports
which indicate cases that might require their intervention. New
modules have also been developed which allow the management
of requests for intelligence support. A system has been put in
place for the AM Communications, and a similar module is cur-
rently under test for all requests for legal and judicial advice. The
CMS system is therefore evolving from a simple file management
system (as described by the Court) to a real case management
system.

37.
The decision that the investigation warrants further
follow-up by the appropriate authorities should be taken into
account when evaluating OLAF activities as the Office considers
a fraud/irregularity has taken place. However, the success of
follow-up depends on variables beyond OLAF’s control. OLAF
has already established a regular and close contact with the Bel-
gian and Luxembourg judicial authorities, while fully respecting
their decision-making autonomy. Further initiatives have been
implemented with the Belgian authorities (designation of the Bel-
gian Federal Prosecutor as contact point for OLAF cases, and
adoption of a circular with the Belgian College of General Pros-
ecutors on 22 May 2003) and training has been organised in
2005 for prosecutors specialising in economic crime who work
with OLAF.

The zero tolerance policy must be applied in the light of the prin-
ciple of proportionality and defence rights, with a response from
the appointing authority and penalties fitting for each individual
case.

39.
The Internal Audit Capability of OLAF will in future audit
the implementation of procedures and controls for investigations
and will perform a quality review of cases (procedural aspects) on
a sample basis.

41.
To enable the Executive Board to monitor the quality of
reports more effectively and make operational decision-taking
more transparent, an electronic CMS form was introduced in
January 2005. However, OLAF does exclude the possibility of
reorganising the Board to make the consultation procedure more
effective (see replies to paragraphs 77 and 58).

42.
The Commission believes that account needs to be taken
of the differing aims of the Office’s activity reports as defined by
their respective legal bases. The system could be rationalised, and
a first step has already been taken, with the proposed alignment
of dates and times of some of these reports. The Commission and
the Office are willing to continue discussions on these matters
with the Institutions concerned.

43.
To improve its activity reports OLAF is conducting a
detailed study to establish which performance indicators would
be most appropriate, taking account of the experience of national
investigation agencies. In the case of internal investigations, for
example, one indicator of success could be based on the measures
taken by the Institutions to follow up OLAF’s activities (precau-
tionary measures or measures to improve control). This would
complete the indications provided by the number of disciplinary
measures and their outcomes.

To provide a clearer picture of the judicial follow-up to OLAF rec-
ommendations, relevant information regarding judicial and dis-
ciplinary follow-up and their results have been reported in a
coherent way at the end of the follow-up procedure in the CMS
since 2004 (see also the reply to paragraph 37 regarding OLAF’s
absence of control on national procedures or disciplinary
procedures).

The Complementary Evaluation of OLAF’s activities provides an
initial indication of OLAF’s results in terms of operations, finan-
cial impact and cooperation with the judicial authorities (1) (see
reply to paragraph 8).

In terms of criminal investigations and penalties, the Institutions
have at their disposal a wide range of decision-making options
based on the new Annex IX to the Staff Regulations.

(1) See paragraph 1.3. Complementary Evaluation of the activities of

OLAF report - SEC(2004) 1370, 26 October 2004.

C 202/26

EN

Official Journal of the European Union

18.8.2005

THE CONTRIBUTION MADE BY OLAF DEPARTMENTS TO ITS
INVESTIGATIVE FUNCTION

The main purpose of the Strategic Intelligence Unit is
46.
to increase the level of understanding of the phenomenon of
fraud, particularly through risk analysis. This improves OLAF’s
contribution to policy-making and the legislative process. Some
identification of possible new investigations is a by-product of
this process. The proposal for modification of Regulations (EC)
No 1073/1999 and (Euratom) No 1074/1999, would clarify
OLAF’s scope to prioritise investigations based on such analysis
(see reply to paragraph 90).

47.
As a result of an improvement in the quality of the com-
munication system, data related to irregularities communicated
by Member States, have been exploited since 2004 for risk analy-
sis purposes. It is to be stressed that, where Member States have
identified the possibility of fraud (as opposed to the majority of
irregularities which involve mistakes rather than fraud) their
national services should take the necessary action.

50.

(a) OLAF uses the AFIS system as a secure means of com-
municating with its external partners (customs or other
enforcement agencies) when coordinating investigation
missions in third countries under Regulation (EC)
No 515/97.

(b) OLAF believes it needs to be involved in reinforcing the
infrastructure of Member States customs services, as it
has the necessary specialised technical expertise tech-
nique and secure environment.

Responsibilities are also distributed clearly between departments
in the fields of structural measures and customs matters. For the
structural measures sector, OLAF is also responsible for the man-
agement of all irregularity notifications by the Member States in
application of Regulations (EC) Nos 1681/94 and 1831/94 and
OLAF works in cooperation with the authorising Directorates-
General (Agriculture and Rural Development; Regional Policy;
Employment, Social Affairs and Equal Opportunities; and Fisher-
ies and Maritime Affairs). In the customs sector, Commission
Decisions in 1995 and 1999 have clearly defined the responsi-
bilities of UCLAF/OLAF and Taxation and Customs Union
Directorate-General.

The functions performed by the follow-up units enable the inves-
tigators to concentrate solely on their tasks without having to
deal with the administrative tasks necessary for financial, admin-
istrative or legislative follow-up (see reply to paragraph 82).

The Commission has entrusted OLAF with the task of
55.
developing its anti-fraud strategy. Its investigative function, which
is its principal mission, makes a clear contribution to the prepa-
ration of the anti-fraud strategy. It is useful to maintain close links
on the ground with the authorities responsible for combating the
various forms of crime, as OLAF’s activities benefits from a sound
understanding of national practices. Two examples illustrate the
synergy benefits of the development/investigation functions:
(i) the design of Regulation (Euratom, EC) No 2185/96 concern-
ing on-the-spot checks and inspections was followed by the
development of a strategy; (ii) the reflection on the European Pub-
lic Prosecutor was informed by OLAF’s current practice and the
need to take account of the principles underlying criminal inves-
tigations (e.g. the safeguarding of defence rights) (see reply to
paragraph 91).

The Commission considers the breakdown of responsi-
54.
bilities between Directorates-General and OLAF regarding recov-
ery and following-up irregularities is sufficiently clear.

58.
The Magistrates Unit is now involved upstream in the
process of evaluating cases in all sectors where there is a likeli-
hood of criminal proceedings ensuing (see reply to paragraph 77).

This is without prejudice to any future re-assessment the Com-
mission may make concerning the division of responsibilities
between its services, particularly in the framework of the evalua-
tion of the tasks/competencies of OLAF.

In the agricultural sector (regarding CAP), responsibilities between
OLAF and the Directorate-General for Agriculture are defined
according to Annex 2 to the Communication of the Commission
SEC(1995)249 of 10 February 1995 (see also the reply of the
Commission to the Court of Auditors’ Special Report No 3/2004).
OLAF is presently responsible for matters of recovery related to
all agricultural irregularities notified by the Member States in
application of Regulation (EEC) No 595/91. Any decision to write
off irrecoverable amounts has to be taken by the Commission via
the EAGGF clearance of accounts procedure that is conducted by
the Directorate-General for Agriculture, with assistance of OLAF
throughout the various stages.

59.
OLAF assists the Directorate-General for Enlargement,
the administrator of the PHARE programme, by setting up anti-
fraud structures and developing training programmes to assist
them.

OLAF’s experience is useful in assisting candidate countries to
adopt in an effective way the acquis communautaire in the field of
the protection of the Communities’ financial interests, which
arises from Article 280 of the EC Treaty. The Hercule and Pericles
programmes, for which OLAF is responsible, do not require vast
financial and human resources. Transferring them to other depart-
ments could do the Office more harm than good. While reflect-
ing on OLAF’s activities, however, the Commission could devote
some thought to this matter.

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In 2005, particular attention has been given to the train-
60.
ing of new staff (see reply to paragraph 63(a)), but OLAF intends
to place greater priority on internal training and is planning to
give training a higher profile in its structure.

63.
The Commission is aware of the significance of the num-
ber of temporary staff working for OLAF and has proposed mak-
ing significant changes to the Office’s establishment plan in its
preparations of the 2006 PDB along the lines recommended by
the Court.

(a)

In 2005 OLAF provided initial training for new investigators
and continuous training. It consisted mainly of training on
public procurement, specialised language and legal training,
workshops on investigative techniques and continuous train-
ing to improve the drafting of reports. In 2005 the Heads of
Unit also attended management courses organised by the
Commission.

(b) OLAF is aware of the potential damage that could be caused
by temporary staff leaving at the end of their contracts and
has therefore envisaged contracts with an overall maximum
duration of eight years for its staff, which will give it time to
organise specific competitions and alter its establishment
plan (see replies to paragraphs 63 and 64).

The Commission is open to dialogue aimed at finding a balance
between OLAF’s specific needs and the Staff Regulations.

64.
The Office is expecting to organise special internal anti-
fraud competitions that will give the most highly qualified staff
the chance to become officials and thereby to preserve their accu-
mulated knowledge and experience.

The Office currently employs 25 national experts on sec-
65.
ondment. While the idea of increasing this number has not been
discounted, it should be pointed out that, owing to their status,
there are certain sensitive functions national experts on second-
ment may not perform.

Moreover, OLAF’s experience is that it is more appropriate to
employ specialist temporary agents for intelligence purposes, as
Member States are not sufficiently prepared to make staff avail-
able as seconded national experts, and the necessary expertise on
direct expenditure programmes cannot be found within those
Members States authorities which customarily agree to second
experts. There would also be a problem of geographical balance.

THE SUPERVISORY COMMITTEE

66.
Regarding the Supervisory Committee, the Commission
has stated in its report on evaluation of the activities of OLAF,
that ‘a number of problems have emerged on the organisational
front’, including the implementation of administrative appropria-
tions and the workplace of the Committee’s secretariat (1). The
Commission will take a constructive and pragmatic attitude when
discussing solutions to these problems that fully comply with the
legislation with the [new] Supervisory Committee.

CONCLUSIONS AND RECOMMENDATIONS

74.
The legal framework of OLAF’s work and the nature of
the work itself make it difficult to manage priorities and produce
guidelines on results. Nevertheless, the Commission has called on
the bodies concerned to consider the Office’s strategic priorities
(see recommendation 11 of the report on the evaluation of the
activities of the European Anti-fraud Office) (2). This question will
also be tackled by the Commission during the discussions on the
reform of the Office’s workings. With regard to guidelines on
results, OLAF aims to encourage existing synergies between the
various procedures (judicial, recovery and disciplinary proce-
dures), while taking all the precautionary measures necessary and
endeavouring to pursue the most effective policies to protect
financial interests.

The Commission stresses that the subject of performance indicators to
measure the Office’s results is a complex question that needs detailed
study, particularly as the Office does not have control over all the factors
influencing success where following-up cases is a matter for the national
authorities or Community Institutions concerned. OLAF has conducted
an initial analysis of its results in the Complementary Evaluation of the
activities of OLAF (2004). The Office intends to develop this study
and consider which performance indicators would be most suitable in the
light of best practice in national agencies (see replies to paragraphs VII
and 8).

76.
The Office believes it is necessary to subject the manage-
ment of all OLAF’s operational activities to the same internal pro-
cedures to ensure transparent reporting and to establish a com-
mon culture and shared practices. This will make it flexibility
when it comes to switching resources from one sector to another
and will avoid the compartmentalisation of the various opera-
tional sectors. Moreover, assistance and coordination operations,
which are often complex, need rigorous internal procedures (see
replies to paragraphs 13 and 14).

As part of the work being undertaken with a view to reforming OLAF’s
workings and organisation, OLAF could examine methods of develop-
ing an administrative structure that better reflects the distinction between
assistance and coordination operations, on the one hand, and investiga-
tions, on the other.

(1) COM(2003) 154 final.
(2) Report on the evaluation of the activities of the European Anti-fraud

Office (OLAF), COM(2003) 154 final.

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Since the end of 2003 OLAF has been encouraging the
77.
involvement of the Follow-up and Magistrates Units in the open-
ing, execution and finalisation of investigations, as this has a posi-
tive impact on the effectiveness of the investigations and their
subsequent follow-up. The CMS Board module implemented in
2005 facilitates this involvement.

OLAF has already taken account of Court’s observations concerning the
justification of investigation activities, and since 2005 each case assess-
ment report has set out a work plan. With regard to the reorganisation
of the Executive Board, OLAF is willing to consider smaller groupings
that could target their activities more effectively (see replies to para-
graphs 41 and 58).

See also the reply to paragraph 29.

82.
The value added by judicial follow-up is not confined to
the contribution made by the magistrates when forwarding the
files to the judicial authorities; it arises in connection with all
complementary matters related to the various disciplinary or judi-
cial procedures (such as requests for waivers of immunities or the
duty to exercise discretion of officials and requests for legal aid).

With regard to recovery, the Commission has chosen to add OLAF’s
expertise to that of the authorising officers (see replies to paragraphs 31
and 54).

78.
Since 2004 the case management information system
has made it easier for management to supervise and manage cases.
investigations has fallen steadily,
The average duration of
to 22 months in 2004 (see replies to paragraphs V, 20(b), 23, 33,
35, 36 and 87).

This is without prejudice to any future re-assessment the Commission
may make concerning the division of responsibilities between its services,
particularly in the framework of the evaluation of the tasks/competencies
of OLAF.

To enable Heads of Unit to manage investigation priorities more effec-
tively OLAF is studying the possibility of setting up a system for moni-
toring of the use of investigators’ time (see replies to paragraphs 25
and 79). The Office has also launched initial training programmes for
new arrivals and specialised continuous training to help investigators fur-
ther improve the quality of their work by raising their awareness of tools
available to them that can increase the effectiveness of their work (see
replies to paragraphs 29 and 63(a))

79.
In 2004 the CMS already made it possible to establish the
number of cases being dealt with by an investigator (see replies to
paragraphs 26 and 14).

As far as agricultural spending is concerned, a mechanism already exists
according to which the follow-up of recovery of funds found to have been
paid illegally is undertaken by the Directorate-General for Agriculture
through the clearance of accounts process.

Judicial follow-up cannot be limited solely to cases where, after criminal
proceedings, the officer who authorised the original expenditure is
required to start civil proceedings for recovery. The various authorities to
whom the cases are forwarded ask the Office to help them communicate
with the Institutions. It is also true that to evaluate and improve its work
the Office needs to monitor cases forwarded to the various authorities to
discover the outcome.

In 2005 OLAF will examine the experiences of national investigative
services in connection with monitoring the use of investigators’ time
before instituting a system that will take account of the expected dura-
tion of investigations as laid down in the work plan. Moreover, a system
for monitoring the use of time staff in the follow-up units is currently
being tested (see replies to paragraphs 24 to 26).

In the case of legislative follow-up, it is definitely up to the operational
Directorates-General to take the necessary measures in their fields in
response to recommendations made following OLAF investigations. The
Office points out that it is involved in fraud-proofing upstream of the
legislative process (see reply to paragraph 91).

The Commission has addressed the question of a maximum
80.
period for investigations in its proposal to amend Regulations (EC)
No 1073/1999 and (Euratom) No 1074/1999 which calls for a dura-
tion of 12 months with the possibility of extending investigations by up
to six months at a time on the basis of a decision taken by the Director
after consulting the Supervisory Committee (1).

81.

See replies to paragraphs 37 and 43.

The Office cannot be held responsible for follow-up by judicial
and disciplinary authorities but OLAF is striving to improve
cooperation (the creation of IDOC in 2002, with which OLAF has
concluded a Memorandum of Understanding). The Commission
and OLAF consider cooperation with IDOC to be satisfactory.

The Office points out that it is standard practice for a
83.
complaint regarding an administrative decision to be referred to
the department in question before judicial redress is sought.

The proposed amendment of Regulation (EC) No 1073/1999 codifies
defence rights, including the right to a hearing and other important clari-
fications regarding the procedures governing OLAF’s investigations (2).

84.
The OLAF believes that it would be possible to consoli-
date operational relations with the Member States and third coun-
tries. Recommendation No 6 of the Commission’s Article 15
report suggests guidelines on cooperation to increase the effec-
tiveness of the advisory function and of judicial follow-up. The
Office has made the improvement of operational contacts one of
its priorities for 2005 (see replies to paragraphs 15 and 37).

(1) See Article 6(7) of the proposal. COM(2004) 103 final, 10 February

2004.

(2) COM(2004) 103, 10.2.2004.

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The proposal presented by the Commission in July 2004
85.
on mutual administrative assistance for the protection of the
Community’s financial interests against fraud and any other ille-
gal activities aims to standardise relations between the Commis-
sion (OLAF) and national authorities. Regulation (Euratom, EC)
No 2185/96 is of vital importance for the conduct of investiga-
tions and enables significant sums to be recovered. However, the
powers granted to the Commission are not automatically the
same as those conferred on comparable bodies under national
law, which complicates the question of implementation.

To stabilise its staffing levels the Office intends to organise spe-
cial internal competitions in an attempt to preserve the know-
how and expertise of its most highly qualified staff and to alter the
Office’s establishment plan along the lines set out by the Court
(see replies to paragraphs 63 and 64).

The Office has established its work plan for 2005, allocating resources
to units on the basis of their expected workload. Depending on the size
of their units, Heads of Unit are assisted by Head of Operations to
ensure that investigations are monitored closely.

It is OLAF’s intention to improve cooperation with Member States; this
requires continuous and sustained efforts on both sides. Article 3 of the
proposal to amend Regulations (EC) No 1073/1999 and (Euratom)
No 1074/1999, which were presented in February 2004, and recom-
mendation No 5 of the Commission’s Article 15 report (extending
memoranda of understanding concluded between OLAF and the national
authorities) are steps in this direction.

Today, the Intelligence Unit enables OLAF to identify
90.
areas at risk and make it easier in the long term to allocate
resources to the various sectors (see reply to paragraph 19). The
unit could contribute more directly to investigations in the future
by supporting the management of the Office’s priorities (see reply
to paragraph 46).

87.
The CMS allows ongoing management of investigations
and the CMS scoreboards have been operational since 2003.
Although in the past the main thrust of the CMS was to record
and classify information relating to cases, the system is evolving
all the time and it is now becoming a valuable case management
tool (see reply to paragraph 36).

of Regulations

The Commission’s proposed amendment
(EC)
No 1073/1999 and (Euratom) No 1074/1999, which clarifies ques-
tions regarding whether the Office should launch investigations, will
enable OLAF to give priority to areas considered high-risk by the stra-
tegic analysis departments. The Court’s recommendation on this subject
is in line with recommendation No 5 of the report on the evaluation of
the activities of the European Anti-fraud Office (1).

The CMS has the attributes necessary to become a valuable instrument
for continuous case management but improvements need to be made in
the way it is used (see reply to paragraph 17).

Regarding irregularities communicated by Member States, following a
clear improvement in the quality of their communication and evaluation,
this data is now being exploited for risk analysis purposes (see reply to
paragraph 47).

The version of the OLAF manual adopted in February 2005 already
contains some improvements. OLAF will also consider putting all mate-
rial related to the conduct of investigations in a separate document (see
reply to paragraph 34).

91.
On the subject of fraud-proofing the Community legis-
lator has recognised synergies between OLAF’s operational activi-
ties and its role in devising methods to combat fraud (see Regu-
lation (EC) No 1073/1999).

Finally, a special effort has been made with regard to training (see reply
to paragraph 63(a)).

88.
To improve the quality of its activity reports and the
evaluation of its effectiveness, OLAF has embarked on a study of
performance indicators, drawing on the experience of national
investigation agencies (see replies to paragraphs 8 and 37).

As mentioned in the reply to paragraph 42, the Office and the Com-
mission are willing to continue discussions with the Institutions con-
cerned on the content and a degree of rationalisation of OLAF’s various
reports.

89.
The Office’s operations are largely reactive in that, like
most national investigative services, they basically respond to
requests from outside they cannot always be foreseen.

The Commission Communication on fraud-proofing (SEC(2001)
2029) assigns OLAF a specific coordinating and consultative role (see
reply to paragraph 55). The question of the duality of OLAF’s functions
will be addressed at the European Parliament public hearing on the
reform of OLAF.

92.
The human resources deployed to manage programmes run by
OLAF are minimal and the financial resources involved are insignifi-
cant. OLAF gives the programmes real advantages and the Office derives
real benefit from them, particularly in terms of cooperation. However, the
Commission could undertake a general reflection on the definition of
OLAF’s responsibilities with regard to these programmes.

93.
With regard to the Supervisory Committee, the Commis-
sion shares the Court’s view that there is a need to review the gov-
ernance of the Office.

(1) COM(2003) 154 final.

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In the Commission’s proposal for the amendment of Regulation (EC)
No 1073/1999, which it has submitted to the Institutions for discus-
sion, it has set out possible ways of defining the Supervisory Commit-
tee’s role more clearly and it will devote sustained attention to this matter.

The implementation of the Court’s recommendations
94.
will require detailed study and may result in OLAF being organ-
ised in a way that identifies its various functions more clearly and
safeguards synergies between them, thereby ensuring that its prin-
cipal activity,
is conducted with the necessary
effectiveness.

investigation,

Anti-fraud strategy must be global in concept, embracing analysis and
policy formulation, legislative proposals, and the development of inter-
agency and international cooperation around the central core of the
investigative and operational function. This is without prejudice to any
future re-assessment the Commission may make concerning the division
of responsibilities between its services, particularly in the framework of
the evaluation of the tasks/competencies of OLAF.

ANNEX

REPLIES BY THE OLAF SUPERVISORY COMMITTEE

The role of the Supervisory Committee (paragraph 66)

The Supervisory Committee controls the method of conducting
investigations ‘with full respect for human rights and fundamen-
tal freedoms, in particular the principle of fairness, for the right
of persons involved to express their views on the facts concern-
ing them and for the principle that the conclusions of an inves-
tigation may be based solely on elements which have evidential
value’ (see recital 10 of the basic Regulation). These clear guide-
lines reveal some principles underlying the rules on investigation
procedures. It should also be pointed out that the Committee has
the task of monitoring the application of rules on confidentiality
and data protection.

A. The Supervisory Committee and the independence of the
Office (paragraphs 67 and 70)

The Ombudsman’s work, although extremely important, is not
enough on its own and is not a control on legality in the legal
sense of the term. The Committee believes that this activity, which
is intended to bring to light any ‘dysfunctions’, should be comple-
mented by action on the part of the legislator. With this in mind
and after exchanging views with CoCoBu, in its annual reports the
Supervisory Committee has never failed to set out its proposals
on the subject with a view to the creation of a European Public
Prosecutor. In its 2004 report the Supervisory Committee also
proposed the appointment of an individual rights lawyer (avocat
des libertés).

The Supervisory Committee is aware that respect for fundamen-
tal rights is both a guarantee for persons under investigation and
a condition for the effectiveness of OLAF’s investigations.

The independence enjoyed by the Office, and its Director, when
performing its investigative duties is one of the most significant
new developments brought in by Regulation (EC) No 1073/1999.
To strengthen this independence, which can be undermined far
more by informal pressure and influences than by direct instruc-
tions from an institutional body, the Committee must remain
vigilant, which is incidentally also the only way to prevent any
attempt to undermine this independence.

To avoid interfering in OLAF’s investigations, ever since it began
its work the Supervisory Committee has refused to become
involved in individual cases, and has never accepted any of the
requests submitted to the Committee from persons under inves-
tigation, some of whom asked to be heard by the Committee in
the presence of a lawyer. This approach has made it possible from
the outset
the
Ombudsman.

to avoid any overlaps with the work of

B. The Supervisory Committee and the rights of persons under
investigation (paragraphs 67, 68 and 70)

It is not the Committee’s role to monitor the legality of the
investigations.

Nevertheless, the Supervisory Committee has made use of the
individual requests to identify some general problems. The Com-
mittee has examined these problems in detail at its meetings
(when it also examined the Ombudsman’s decisions) and in
exchanges of views with OLAF.

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Numerous meetings have been held with the Director of the
Office and the Director responsible for investigations on the sub-
ject of rules of procedure. Positive results were quickly achieved
in certain areas, such as the introduction of records of hearings
of witnesses. The question of developing a code of internal pro-
cedures for the Office remains open; the Supervisory Committee
has underscored the need for such a code on several occasions. To
date the Director of the Office has not expressed any desire to
adopt such a code, even on a purely internal basis.

C. The Supervisory Committee and the regular monitoring of
investigations (paragraph 69)

Initially — and there can be no doubt that this took too long —
the Committee had to devote an inordinate amount of its time to
developing new structures and working methods for OLAF. Only
then was it able to look at operational questions and exercise its
powers to monitor the investigative function (see Chapter 1 of the
latest annual report).

1.

The setting up of new structures (paragraph 69(b))

In response to a recommendation made by the Court of Auditors,
a comprehensive file registration system, a ‘case management sys-
tem’, which is constantly being improved, and a registry (greffe)
have been in place since the first half of 2001.

Information on investigation not completed within nine months

2.
(paragraph 69(a))

Information from the Director of OLAF concerning investigations
not completed within nine months, as required by Article 11(7)
of the Regulation, has proved an extremely useful source of infor-
mation for the Committee and a valuable monitoring tool. In
practice, the provision of the information has given rise to
exchanges of views regarding investigative activity and general
matters with the Director responsible for investigations of the
situation.

Prior notification of cases to be referred to a Member State’s judi-

3.
cial authorities (paragraph 69(c) and (d))

The final sentence of Article 11(7) of the Regulation states that
‘[t]he Director shall inform the committee of cases requiring
information to be forwarded to the judicial authorities of a Mem-
ber State’. In Article 22(5) of its Rules of Procedure (published in
OJ L 41 on 15 February 2000 and adopted on the basis of a text
drafted by Mr Da Cunha Rodrigues, who was a member of the
Committee at the time and was subsequently appointed as judge
at the European Court of Justice) the Supervisory Committee
interpreted the word ‘requiring’ as implying prior notification.

This interpretation has been consistently employed and has never
given rise to disputes or problems.

In one sensitive case, without referring to the dossier concerned,
the Director responsible for investigations asked the Supervisory
Committee if OLAF could notify the Committee after the infor-
mation had been forwarded to the national judicial authorities.
The Committee gave its consent.

4.

Internal and external investigations (paragraph 71)

At the time of the events that led to the resignation of the Santer
Commission the Institutions focused particularly on internal
investigations. Recitals 1 and 7 and Article 1(3) of the basic Regu-
lation reflect this concern. It should also be pointed out that exter-
nal investigations are in the hands of the Member States, as they
actually conduct the investigations while the Office confines itself
to providing material support and organising coordination
meetings.

However, having examined all the files and the CMS, it is certainly
not the case that in practice the Office or the Supervisory Com-
mittee, which bases its work on the investigations conducted by
the Office, have given priority to the criminal aspect of internal
investigations, to the detriment of external investigations. The fact
that the Office, the Supervisory Committee (as can be seen from
the minutes of its meetings) and even the press have often focused
on internal investigations, which are by their very nature sensi-
tive, in no way means that external investigations have been put
on the backburner. It should indeed be noted that, apart from the
external investigations, the Office has provided important assis-
tance to the Member States, support much appreciated by the
Committee (see Chapter II of the annual report).

5.
The
(paragraph 72)

examination of

closed files and evaluation records

The Supervisory Committee devoted particular attention to the
question of closed files, instructing its secretariat to examine as
many files as possible and, in significant cases, to prepare evalu-
ation records. The decision to deal solely with closed cases
avoided any risk of interfering with ongoing investigations. As the
records drawn up by the Committee secretariat are purely for
internal use, it was possible to use them to point up any prob-
lems encountered and they were studied at length by the Com-
mittee. The Supervisory Committee and the Director of the Office
or the director responsible for investigations held very fruitful dis-
cussions on any underlying problems detected, such as proce-
dural problems and problems relating to the examination of the
outcomes of criminal proceedings in the Member States. The
Supervisory Committee minutes do not always reflect the full
range of observations made during the Committee’s meetings, as
some cases closed by OLAF were under investigation in the Mem-
ber States.

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D. Conclusions (paragraph 93)

It can be concluded the Supervisory Committee has adopted a
totally supportive attitude towards the Office, encouraging where
necessary the introduction of new structures or methods. This
approach has produced real results with regard to the greffe, the
file registration system and the CMS, although so far the Director
of the Office has not followed up the urgent and repeated recom-
mendation made by the Supervisory Committee regarding the
adoption of a proper code of procedure.

There are no cases where the Supervisory Committee might have
interfered with an ongoing investigation. The monthly meetings
with the Director of the Office and the Directors of the various
Directorates have provided the perfect occasion for examining
underlying general matters that could be brought to the attention
of the Supervisory Committee.