Prevention and fight against irregularities
and frauds aimed at protecting EU revenues:
profiles of harmonization and coordination
within the activity of the SAIs
Tuesday
September 30, 2014
Hall SS.RR. - Viale Giuseppe Mazzini, 105 - Rome, Italy
MARIA TERESA POLITO
THE AUDITING ACTIVITY. MEASURES TO PREVENT AND FIGHT
IRREGULARITIES AND FRAUD
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MARIA TERESA POLITO
THE MONITORING OF IRREGULARITIES BY MEANS OF A DATABASE:
THE EXPERIENCE OF THE CORTE DEI CONTI
A database of Community irregularities and frauds to meet specific needs.
Good afternoon, everyone. I will describe briefly the reasons which led the
Italian Court to create a database of Community irregularities and frauds.
The Court has, for years, invested a lot of energy in the idea of monitoring,
considering it important to have for its own activities a collection of data designed
to compare the phenomena in the country, and to provide an up-to-date view over
the years. We started by asking ourselves what was the country's most reliable
source of information.
The background is old and a summary of the history helps us better
understand the problems faced and the present.
In 2000/2001, some colleagues and I organised for the Council of the
Presidency of the Italian Court of Auditors an international conference on the
phenomenon of irregularities and fraud (using European funding - Grotius). This
event gave us the awareness of the potential of the Court in the field by virtue of its
two functions: audit and judiciary, creating a knowledge synergy that adds value
and that can be (in some subjects it already is) a concrete way of working, to not
waste information and knowledge. In this area, the experiment has been successful.
But, that conference also showed that the data on frauds were different and
contradictory depending on the information source of reference, and that the Court
of Auditors, which provides the numbers, but should provide those closest to
reality, had to gear up to identify the most reliable sources of national information.
It was the general commander of the Guardia di Finanza of the time that suggested
we contact the Corps of the Guardia di Finanza, present at the Prime Minister's
Office - Department of European Policies - which was the collector of
communications of the different national administrations and that sent data to the
European Commission - OLAF, by virtue of the obligations arising for each Member
State from the EC Regulation no.1681/1994. I am referring to the quarterly
obligation of communication to the Commission of detected irregularities, initially
for amounts greater than € 4,000, and after EC Regulation 35 of 2005, greater than €
10,000.
The Court did so, also stimulating the reconstitution of the Committee for the
fight against frauds, provided by national rules since 1992 and not operational for
several years. Finally in 2007, thanks to the Minister Emma Bonino and the Head of
Department of European Policies, the Committee resumed, and today it provides an
important contribution also on the European tables. For the irregularities on the
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Magistrate of the Audit Chamber for Community and International Affairs.
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Structural Funds, it constitutes the interlocutor for OLAF, as well as for the Court of
Auditors, with a constant collaborative exchange.
We started in a pioneering way with the transmission of excel sheets,
prepared by the Department of European Policies, since the forwarding to the
Commission-OLAF still took place in hardcopy. We then used the computer system
developed by the Commission, AFIS System. Since 2009, Olaf has adopted a new
system, the IMS (Irregularity Management System) to which the Italian Court has
direct access as observer. The relationship established with the European
institutions and especially the investigation collaboration that the Court has offered
to the national administrations, with a high level of detail, are elements that have
certainly influenced the granting of such access.
After some time, the Ministry of Agriculture and Forestry also provided the
Court with this access for frauds in agriculture and, more recently, with a request
processed within a few hours, such access was provided also in the context of
irregularities in fishing, for the EFF. This confirms the credibility enjoyed by the
Court in the area of national administrations and also with OLAF, seeing that the
access must be authorised by OLAF.
Currently the Court of Auditors is the only national institution that has
access to the OLAF IMS system for irregularities and fraud on all funds. The work
done and the expertise gained, has enabled us to demonstrate that the Court's audit
was not a duplication but rather an added value, since the data validation, carried
out by the Audit Chamber for European and International Affairs Community and
International Affairs, helping to eliminate some errors, can be a valuable aid. The
proven reliability has meant that the Court was asked, on an informal basis, to test
the changes to the Information System, a sort of consultancy on the changes that
were being made. This is a matter of satisfaction accompanied by a sense of great
responsibility for the careful conduct of monitoring activities. In several cases we
were able to intercept the errors, and when it came to misidentification of the fund
or inaccurate quantification, they were reported. For example, in one case there was
a duplication of the registration of the amount of the irregularity that had resulted
in a doubling of the amounts in relation to the fund, which for Italy would have had
particularly negative consequences. Following the report of the Court, the
administrations performed their checks, finding the error and notifying the
modification. In general, the reports of the Court are accurate because the
monitoring activity is carried out very carefully.
I highlight two examples of the important synergistic aid given by the Court
to the OLAF database, which is also important in the processing of the Court
System.
 We initially insisted that the IMS include in the master register of the
people involved the Tax ID number and the VAT number for the businesses,
essential elements to identify, under different names, the same individuals authors
of other types of fraud. These elements allow to uniquely and incontrovertibly trace
the subject, even if hidden behind a shell company. The processing on the
mentioned element have been developed within the system of the Court (SIDIF) and
allow to identify, through the Tax ID number, if a person has been previously
involved in other fraud and to analyse the various cases.
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The cross-checks can provide the relevant information, even in advance,
preventing individuals already identified for acts of fraud from being beneficiaries
of EU funds.
 When a modification of the IMS system seemed irreversible, we repeated
in all the forums (national and European) that the data on the amounts to be
recovered should always be shown, including in the quarterly updates. This allows
to perform that constant function of stimulus to the national administrations so they
may promptly set in motion the recovery actions, allowing the reduction of waste of
resources that involves both the EU and the Member State, and whose burden
therefore falls upon all citizens. This database is also an aid to the Regional
Prosecutor’s offices
of the Court to identify additional specific types of
responsibility.
It should not be forgotten that the OLAF System is a European system that is
directed to 28 countries, with different legal systems, and that the aim to
standardise can enhance or reduce the protection, losing fundamental elements, so
it is essential to harmonize the method of implementation between the different
Member States. In this context it is clear that the Supreme Audit Institutions play an
important role.
The construction of the SIDIF Database of the Court of Auditors.
After the first phase, the information needs have expanded, and it was
deemed useful to build an autonomous computing platform, a system that, using
data from OLAF, could perform the calculations specifically addressed to the audit
and jurisdictional functions. Despite the initial availability, it was difficult to make
OLAF understand the specific needs, because as mere observers, a role ensured in
all countries to the administrations that access this system, instead the Court needed
additional elements to try to strengthen the knowledge base. But, we wanted to
avoid making strategic mistakes that would have created problems and additional
costs.
A further relationship with Olaf was thus initiated, and the Act of
cooperation, signed in 2006 and renewed in 2013. Although the main object of this
Act is the mutual assistance in investigations, a part of it deals with monitoring, and
relying on the importance of databases, we have always had the utmost cooperation from OLAF. The personal relationships were nevertheless crucial, as
usually happens in co-operation.
The audit activities carried out by the Court on the irregularities had
highlighted several issues in which the mere acquisition of statistical data did not
give sufficient answers. It seemed inevitable to meet the specifc needs, creating an
independent database seemed inevitable, which dumps the data collected by OLAF,
giving them an order and a processing best suited to the needs posed by the
functions of the Court.
Thus was born the SIDIF (Community irregularities and fraud information
system) of the Court of Auditors. The database has many elements: the master data
of the subjects, the identification of the funds, the irregular amounts, the amounts
recovered, the litigation procedures in place, any precautionary measures
undertaken, and other important statistical data, plus other types of data such as the
adopted procedures. In this way, the database that began as a tool for statistical
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monitoring has become a means of informative analysis of the occurrence of the
phenomena, an indispensable exam to carry out the risk analysis that can allow
corrective actions to prevent the same actions in the future. But, for a Court that also
has jurisdiction it is also important to monitor the progress of litigation and other
proceedings and their outcomes, any occasional or structural connection with other
crimes such as forgery, bribery, extortion, and also to put under scrutiny the
progress of the recoveries crucial to avoiding the waste of resources of the EU and
national treasury, stimulating the administrations to reduce their inertia. These are
areas in which a close collaboration was initiated between the audit and the Public
Prosecutor’s office.
In the exchanges with the representatives of the SAIs of the various European
countries, the deepening of the audits carried out, the action conducted on the
judicial front and the variety of phenomena analysed makes the Italian Court a
particularly useful interlocutor for the understanding of this sector, also considering
the broad case studies highlighted in the country. In the audits with the European
Court of Auditors, but also in the autonomous ones conducted by the Court on
national administrations, as has been pointed out by the Regional Audit Chambers
that performed specific activities on EU funds, the elements on the irregularities
found in the database are used for a specific dialogue to request specific information
on the issues raised.
The slides provide an overview of the significance of the phenomenon and
the amounts involved, and the latter figure is particularly relevant for the
subsequent phase of recovery.
Again they show that in Italy, 50,6% of the irregularities reported to date are
linked to the 2000-2006 Planning, reported in 2010, because additional phenomena
emerge during the closures. A worrying aspect that emerges from the elements
present in the database and that may weigh heavily on the Member States are the
decertifications. This term refers to the phenomenon whereby expenditure reported
to the Commission, following the detection of irregularities or fraud for the misuse
of EU funds, are reallocated to national budgets, resulting in the exclusion of these
expenditures from the EU resources. For the 2007/2013 Planning, which is nearing
its closure (ending in 2015), the Commission has adopted on a massive scale the
system of decertification from the very first reports. This makes it essential to
increase the attention of the external auditor because the risks to the national
accounts are huge. For the administrations the risks of loss or waste double, and, in
the already troubled budgets of certain administrations, in particular the regions of
the convergence objective, with a deficit position in some sectors, the need to
replenish the funds not recognised as community resources can be a huge problem
for which the Supreme Audit Institutions should become more responsible.
The thorough knowledge that the Court holds because of its functions,
operates on several fronts. Towards the administrations carrying out the
management, it is a stimulus for the improvement of its actions and the convictions
for the discovered crimes constitute a deterrent; in other respects, then, the
connection with the other magistrates, especially the criminal ones, creates
investigative synergies by strengthening the protection of the Community and
national interests.
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Conclusions
In closing, I would like to draw attention to some profiles:
The SIDIF database presents peculiar characteristics for:
- the unity of the information on Community fraud and irregularities:
no Institution in ITALY collects information about irregularities of all the
funds.
- the structure (not only the identification of the case in static mode at
the time of the event, but as it unfolds)
- the diversity of its information (irregular amounts, the authors of the
irregularities, the funds concerned, the recovery situation, the progress of the
various litigation proceedings: accounting, criminal, civil, administrative, the
existence of precautionary measures, the recurring connection with other
offences);
- the identification of the authors of the irregularities even when they
hide behind a shell company;
- the attention to recoveries as an essential tool to prevent the waste of
resources.
Now, I will give the floor to Ms. Cusmai, who will explain in a more concrete
way the processing that can be done with the SIDIF database. Thank you for your
attention.
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VINCENZA CUSMAI
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Official of the Audit Chamber for Community and International Affairs - Rome
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