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March 23, 2023

Report: Private sector tops the list in cases of fraud related to European funds

The fact that the number of fraud cases has tripled in 2012 can be explained by the increase in the European fund absorption rate during this interval, Leonard Orban, former European Commissioner, stated.
Private companies have exceeded local authorities in the number of fraud cases related to European funds, and the number of fraud cases has tripled in 2012 compared to 2010, according to an analysis by SAR (the Romanian Academic Society) presented yesterday by Razvan Orasanu, research manager at SAR, Agerpres notes.
The SAR analysis, conducted based on data provided by DNA and DLAF and on final conviction sentences in files regarding the use of European funds, shows that 57.20 percent of all cases stem from the private sector (associates, administrators, shareholders, directors, managers or employees of private companies), 26.52 percent are related to public local authorities (mayors, deputy mayors, local councilor and public workers), 8.71 percent are related to NGOs, and the remaining 7.58 percent concern natural persons, mostly farmers.
Simplification of procedures to decrease number of fraud cases
The considerable simplification of procedures and the reduction of structures will lead to fewer cases of fraud in connection with European funds, Eugen Teodorovici, Minister of European Funds, stated in turn after the report was released. According to the Minister, the significantly simplified procedure for purchases made by private companies with financing contracts with the state will be published in the Official Gazette in the coming days. ‘Frauds probably happen due to several reasons, be it the system, legislation, what is in the system – documents, structures. We try, as a ministry, to act on all these levels, to remove from the system the structures that do not justify their presence there ‘, Teodorovici said. He also said the clear procedures and documents and a flexible system with a minimum number of structures, required by the European provisions, would lead to a reduction of SAR statistics related to fraud cases.
‘The intermediary bodies, today , are many. When their number was set it was not argued thoroughly the number of structures and the number of staff. Every person or structure that fails to justify the presence in this system has no place there, creates additional costs, delays and such situations’ , Teodorovici added. He also mentioned the procedure only stipulates the obligation to announce the intention to purchase on the MFE website. Since the savings will be kept in the company, purchasers will be discouraged from not choosing the best offer, but they will not be obligated to do so.
Leonard Orban, former European Commissioner, stated that the debate initiated by SAR is useful and welcome, but a clear line must be drawn between fraud attempts, fraud and irregularities, which are unintentional mistakes. He added that there were many instances when management authorities on European projects advised beneficiaries to act in a certain manner, although it was not in compliance with European regulations. Orban also commented on the triple number of fraud cases in 2012 compared to 2010, explaining that it was perfectly justified by the increase in European fund absorption rate during this interval, from an insignificant 1 percent to approximately 12 percent.
At the top of SAR’s list of fraud methods are abuse of office and instigation to abuse of office, to the detriment of public/persons’ interests, taking bribe and instigation to taking bribe, use of consultancy services during the project to cover up embezzlement (method called ‘bribe 2.0’ by SAR experts), spending European funds for other purposes, investing European money as personal money, false technical offers, deducting money by use of nonexistent companies, delaying the conclusion of a contract after it was awarded, running off with advanced payments, and money laundering. The most severely affected European fund was the pre-accession PHARE fund, being mentioned in approximately 46.59 percent of the documents, followed by the SAPARD fund for agriculture and rural development (17.42 percent). Third place is occupied by two funds aimed at agriculture, both mentioned in criminal investigation decisions: the European Agricultural Guarantee Fund (EAGF) and the European Agricultural Fund for Rural Development (EAFRD), amounting to 12.12 percent of the total.
Among the famous cases mentioned by Razvan Orasanu is the public swimming pool in Marghita, as part of a European fund project to build a spa park. The public swimming pool was open for one day only – the day it was inaugurated – and work was not completed because authorities received documents with photoshopped pictures displaying tourists swimming.
Lack of technical skills and decision-making abilities, obstacles for EU funds
The lack of technical skills and decision-making abilities are the two main obstacles in ensuring the eligibility of major projects in Romania and Bulgaria for European fund co-financing, according to a report by international financial institutions, Mediafax informs.
Preparing projects for EU co-financing is also made difficult by repeated administrative delays and postponements in the approval process, a report issued by the European Investment Bank (EIB), the World Bank (WB) and the European Bank for Reconstruction and Development (EBRD). The problems were identified in Romania and Bulgaria following the expansion of the JASPERS project into the two countries.
Romania, along with Slovakia, could be granted an additional year to spend the funds available for 2007-2013, according to a proposal by the European Commission that offers greater freedom to spend and request money from the EU and ensures a decrease in the risk of losing the amounts. The proposal has been approved by the Committee on Regional Development in the European Parliament, and is to be followed by a plenum vote.

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