I. EU legislation defines fraud as a deliberate infringement that is, or could be , prejudicial to the EU budget. It is the joint responsibility of the EU and the Member States to counter fraud and any other illegal activities , such as corruption, affecting the EU’s financial interests. Between 2013 and 2017, the Commission and t he Member States identified more than 4 000 potentially fraudulent irregularities. The EU support affected by these irregularities amounted to almost €1.5 billion, 72 % of which concer ned EU cohesion policy. In this field, the managing authorities in the Member States are responsible for setting up proportionate and effective anti -fraud measures that take account of the identified risks. Such measures should cover the full anti -fraud management process (fraud prevention, detection and response, up to and including reporting on detected cases and recovery of funds unduly paid). The rate of detected fraud in relation to EU cohesion funding for the 2007 -2013 period range d from 0 % to 2.1 %, depending on the Member State.
II. Through this audit, we assessed whether managing authorities have properly met their responsibilities at each stage of the anti -fraud management process. To this end, we assessed whether managing authorities have : (a) developed anti -fraud policies, performed a thorough risk assessment and implemented adequate preventive and detective measures; and (b) properly responded to detected fraud in coordination with other anti -fraud bodies.
III. We found that managing authorities assessed the risk of fraud in the use of Cohesion funding better for the 2014 -2020 programming period, using in most cases the “ready -to-use” tool included in the Commission guidance. However, some of these analys es were not sufficiently thorough . Although the y have im proved fraud prevention measures, they have made no significant progress towards p roactive fraud detection. Additionally, they have not often developed procedures for monitoring and evaluating the impact of their prevention and detection measures.
IV. In the area of fraud response , managing authorities , in coordination with other anti -fraud bodies, have not been sufficiently reactive to all detected cases of fraud . In particular, reporting arrangements are unsatisfactory , several managing authorities fail to systematically communicate suspicions of fraud to the competent bodies , corrective measures have a limited deterrent effect and the coordination of anti -fraud activities is insufficient . We also found that the fraud detection rate for the 2007 -2013 5 programming period in the Commission’s 2017 report on the protection of the EU’s financial interests is not a true representation of the level of fraud actually detected in the Member States visited, but rather show an indication of the fraud cases that they decided to report to the Commission .
V. As a result of our audit, we recommend that: (i) Member States that do not have a national anti -fraud strategy should formulate one ; unless a sufficiently detailed strategy exists at national level, the Commission shou ld require managing authorities to develop formal strategies and policies to combat fraud against EU funds ; (ii) managing authorities make fraud risk assessment more robust by involving relevant external actors in the process ; (iii) Member States improve fraud detec tion measures by generalising the use of data analytics tools and the Commission by promoting actively the use of other ‘proactive’ and other new fraud detection methods ; (iv) the Commission monitor s fraud response mechanisms to ensure they are consistently applied ; and (v) the Commission encourages Member States to expand the AFCOSs’ functions to improve coordination .
VI. During the negotiations and approval process of the CPR for the period 2021- 2027, the co -legislators could consider: o making compulsory the adoption of national strategies or anti- fraud policies and the use of proper data analytics tools (e.g. Arachne) ; o introducing sanctions and penalties for those responsible for fraud against EU’s financial interests .
VII. While respecting the Member States’ right to fl exibility in defining and organising their own work against fraud in line with the principle of subsidiarity, the EU co - legislators could consider determining minimum functions for the Anti -Fraud Coordination Service (AFCOS) in the Member States in order t o ensure an effective coordination role.