by Martin Banks
They claim that while EU countries are required to recover any money that final recipients have used fraudulently, they do not have to return it to the EU budget. As a result, the EU’s finances are less well protected than they could be, it is alleged by the ECA.
The RRF was established in February 2021 as a one-off temporary programme to help EU countries recover from the pandemic and build resilient economies.
The Commission and member states are jointly responsible for tackling fraud against the EU’s financial interests. National authorities must provide the EU’s executive with guarantees on the effectiveness of fraud prevention, detection and correction systems.
“The EU and its countries should have set up more effective anti-fraud systems given the size of the recovery fund, its novel financing mechanism, and the reputational damage of fraud,” said Katarína Kaszasová, the ECA Member leading the audit. “The EU remains exposed to RRF fraud because of gaps in recovery rules, incomplete data on fraud, and reporting issues.”
The auditors found that the EU’s high-level specifications for member states’ anti-fraud systems, as set out in the RRF Regulation, were not sufficiently detailed.
An ECA spokesman said, "The Commission subsequently took steps to strengthen the requirements through bilateral financing agreements, but was still not clear enough regarding the nature of national anti-fraud verifications.
"Although its checks on national systems can help make improvements, in the case of the RRF the Commission was less than thorough. For instance, it did not fully cover the responsibilities of all national RRF authorities. Moreover, in ten countries the Commission did not complete its checks until after the first round of payments, when it still had insufficient evidence that the national anti-fraud systems were effective.
"EU countries did take measures to prevent fraud in RRF funding, but these were often delayed. The situation was compounded by weaknesses in fraud detection. For example, many countries underused the potential of data mining and analytics, which – alongside checks and whistleblowing – are key elements in fraud detection," added the ECA spokesman.
"Incomplete data on RRF fraud makes it difficult for the Commission to properly target its own anti-fraud action, such as corrective measures, and monitor what is being done by EU countries. There are no standard rules for reporting to the Commission on cases of suspected fraud that may affect the EU’s finances. Because of this, member states apply different criteria for determining what constitutes this kind of fraud, so do not all report in the same way. As a result, the extent of RRF fraud cannot be accurately estimated.
"Unlike in other EU programmes, EU countries are not obliged to return to the EU budget any amounts they claw back from fraudsters. The only exception arises when the Commission considers their recoveries insufficient so launches its own.
"However, the Commission may no longer be able to do this after the RRF is wound up later this year, because the current mechanism for EU countries’ reporting on RRF fraud and recoveries will also come to an end. This is concerning, as the biggest investments in EU countries are scheduled for the final months of the RRF, meaning that most corrections for fraud will only be possible after that date," concludes the ECA.
By: N. Peter Kramer