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Cohesion Policy is the EU’s largest investment policy aimed at reducing economic, social and territorial disparities across Member States and regions. The financial resources allocated to Cohesion Policy amount to above one third of the EU’s seven-year budget. However, due to constituting such a substantive area of the EU’s budgetary expenditure, Cohesion Policy is exposed to compliance problems, as evidenced by errors (incorrect calculation or non-compliance with legal and/or contractual obligations applicable to EU’s budget) and irregularities (infringements of the rules applicable to EU’s budget). Particularly, fraudulent irregularities may imply serious infringements putting the credibility of the EU’s Funds spending in question.
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“Zero tolerance policy” applies to fraud affecting the EU’s financial interests (i.e. EU’s budgetary resources). This stands for taking necessary measures by both the European Commission and Member States aimed at protecting the EU’s financial interests, including the European Structural and Investment (ESI) Funds, from fraud. Notably, prevention constitutes the first, fundamental step to mitigate the risk of fraud occurrence together with its damages to the EU’s budget. This blog post aims to provide three policy lessons on fraud prevention in Cohesion Policy. The following lessons are based upon the author’s Master’s thesis research.
Domestic system of Cohesion Policy differs across Member States, which is determined by numerous factors, for instance the number of regions, type of governance (centralization vs decentralization), national legislative framework, division of powers between relevant national authorities. These differences reflect on various impediments to fraud prevention domestically, encompassing weak administrative capacity of a Member State’s authorities, insufficient involvement of local authorities in the implementation of anti-fraud measures, complexity of national rules applicable to the ESI Funds, inefficient management and control systems. Therefore, anti-fraud measures should be adjusted to specific needs ‘on the ground’.
Moreover, one particular measure type, such as training activities, analytical data tools (e.g. Arachne), guidelines, increased auditing, is not solely sufficient to prevent fraud. This is because these types of anti-fraud measures have different ‘deliverables’ – for example training activities have administrative capacity-building objective whereas auditing help control how the money is spent. Therefore, these different measures need to be accompanied together to facilitate more effective fraud prevention.
Partnership and peer-to-peer networking
The partnership principle constitutes the key principle of Cohesion Policy. It implies engaging of local authorities, Funds beneficiaries, and socio-economic partners in Cohesion Policy ‘life cycle’. The partnership principle is, thus, essential to involve different domestic actors, including AFCOS’ partners as well as beneficiaries, in fraud combat, making it possible to share information and best anti-fraud practices among these actors. Next to the partnership principle, peer-to-peer networking is vital for exchanging knowledge and best practical approaches to fraud prevention among domestic authorities from different Member States. These exchanges can take place via the tool offered by the European Commission, TAIEX REGIO PEER 2 PEER or international projects.
Along these lines, it is relevant to emphasize the “Cooperation in the Anti-Fraud Sector”, the international project, under Italy’s initiative, associating 16 Member States. Notably, this project was acknowledged as the important step in fraud prevention facilitating effective exchange of information, anti-fraud methodologies, operational experience as well as disseminating joint actions across ‘peers’ (i.e. AFCOS’ partners across different Member States). Summing up, both the partnership principle and peer-to-peer networking are key to facilitate policy learning in fraud combat.
More integrated approach to Arachne
Generally speaking, Arachne is an analytical IT tool for data mining and data enrichment developed by the European Commission and offered to Member States free of charge. Its objective is to support Member States’ authorities in administrative controls, management verifications and checks of ESI Funds projects via the use of data on beneficiaries, contractors and sub-contractors. It must be stressed that Arachne is recognised as one of the key measures to prevent fraud. Despite the Commission’s support and recommendations to use Arachne, this tool has been divergently used across Member States. This ‘state of affairs’ may result from the ‘voluntary nature’ of Arachne. To ensure more efficient use of this tool domestically, it could be, thus, legally enforced by the European Commission.
Solid approach to fraud prevention necessary
To make cohesion policy work, it is essential to ensure proper Funds spending. Therefore, taking necessary measures aimed at mitigating the risk of fraud serves as a pre-condition for achieving added-value of ESI Funds investments. In this regard, sharing best anti-fraud practices, via permanent networking between Member States, and adjusting them to specific needs ‘on the ground’ is relevant to facilitating effective fraud prevention across the EU. This cooperation may enable Member States’ authorities to learn from one another not only how to improve fraud prevention but also how to avoid fraud-related mistakes.
Julia Walczyk (Twitter: @JuliaWalczyk) is a Master’s student of European Public Affairs and a student research assistant at the Political Science Department of Maastricht University. She obtained her Bachelor’s degree in European Studies at Maastricht University in 2020.
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