THE EU has been warned about the risk of fraud related to the recovery fund, after it emerged that public authorities in the member states rarely reported allegations of corruption and abuse.
The European Court of Auditors (ECA) is on high alert about the risk of fraud and abuse associated with the EU‘s recovery fund, worth around €750billion (£668bn). The President of the court, Klaus-Heiner Lehne, said: “It is crucial to have an effective inspection system. “The faster the money flows, the higher the risks. This is inevitable.”
The huge pandemic recovery fund, which will be paid off as loans and grants, should help the 27 EU member states boost their economies hit hard by the pandemic.
The European Commission expects the financial mechanism to start working in July.
According to Mr Lehne, since the size of the budget is almost doubled, the need for monitoring is greater.
In 2022, the ECA, which inspects how wisely and fairly EU funds are spent, will have to add 40 new posts to its staff of around 900.
He insisted: “I can assure you, however, that we will be able to follow it closely.“It’s our duty and we will do it.”
Previous ECA revelations show that billions of euros of EU funds are distributed through the wrong channels every year.
However, most of these incidents are due to errors rather than fraud, according to European auditors.
In 2012, though, it emerged that public authorities in member states were sealing their lips when it came to passing on allegations of fraud, corruption, and criminal activities to the EU anti-fraud office, OLAF.
OLAF’s former director-general Giovanni Kessler said at the time: “The decrease of information from public authorities is something which is worrying us.”
Of the 1,046 reported leaks from both public and private sources in 2011, only 54 came from member state authorities. More than half came from companies, lawyers, and anonymous individuals.
Mr Kessler noted public sources were becoming more reluctant to denounce fraud because of fear of being labelled corrupt at the EU-level.
OLAF’s investigations led in 2011 to the recovery of €691million (£600million) – over a ten-fold increase compared to 2010.
Over €520million (£451million) of the money came directly from EU structural funds alone.
The single biggest haul came when the investigators uncovered a scheme on a EU-funded motorway construction project, near Salerno, in southern Italy.
OLAF, along with the Italian investigators, found evidence of transport authorities who had written off €388million (£336m) in EU funds.
The investigators uncovered conflicts of interests where Italian officials were awarding contracts to companies they also worked for.