EU Funds: Fraud Risk Management

1. EU Funds: Fraud Risk Management Experience of the Managing Authority for the Operational Programme Infrastructure and Environment in the area of fraud prevention and detection.

2. Presentation layout: • Short introduction: Managing Authority and system of implementation of OP I&E 2014-2020 • Experience gained during 2007-2013 programming period: suspected fraud and counter-measures • Anti-fraud policy in OP I&E 2014-2020 • Managing Authority best practice

3. Part one – introduction • Infrastructure and Environment is the biggest national OP in the years 2014-2020 with 27.4 billion EUR to support (in Poland there are 22 programmes: 6 national and 16 regional). • The main objective of the Programme: Supporting resource efficient and sustainable economy conducive to social and territorial cohesion. • Its predecessor was OP I&E 2007-2013 with wide range of project from water treatment plant through road and rail infrastructure to soft project in the field of environmental education. • OP I&E 2014-2020 is implemented by Managing Authority (Ministry of Economic Development) with support of 5 Intermediate Bodies and 4 Implementing Authorities (called also Intermediate Bodies of the second level)

4. Part one – introduction Variety of beneficiaries: • small and medium-sized enterprises, • large enterprises, • public administration, • local government units, • entities performing public tasks, • healthcare institutions, • civil society organisations and religious associations, • cultural institutions.

5. Part one – introduction Diversity of support areas: • Shifting towards a low carbon economy • Environmental protection including adaptation to climate change • Development of the TEN-T road network and multimodal transport • Road infrastructure for the cities • Development of railway transport • Development of low-carbon public transport in cities • Improving energy security • Protection of cultural heritage and development of cultural resources • Strengthening the strategic healthcare infrastructure

6. Part one – introduction • MA is responsible for implementation of OP I&E 2014-2020 in accordance with the principle of sound financial management. • Who else at the national level safeguard OP I&E 2014-2020 compliance with 'applicable law’ Certifying Authority, Audit Authority, Public Procurement Office, Supreme Audit Office, Regional Chambers od Audit, Treasury Control Offices, the Office of Competition and Consumer Protection, the Police and other law enforcement authorities, Prosecutors… secret service

7. Part two – experience Lesson learned from 2007-2013 programming period • Allegedcollusions case in three road infrastructure projects secret service suspected collusions2010 judicial proceedings2012 indictment2015 acquittal • MA informed EC as soon as obtained information about initiation of judicial proceedings and then updated information • EC sent letter of interruption in payment for all road projects within OP after press information concerning indictment. • Trial ended in acquittal of the accused of collusion.

8. Alleged collusions case - action taken by MA: • enhancement of cooperation with the General Prosecutor in order to ensure an efficient flow of information, • development of Antifraud Strategy for OP I&E 2007-2013 in particular including prevention of collusions , • analysis of all General Directorate for National Roads and Highways‘ tender procedures in the OP I&E 2007-2013 projects: • in cooperation with The Centre for EU Transport Projects (IB), • with the use of a dedicated methodology following the guidelines contained in the COCOF Note – Information Note on Fraud Indicators for ERDF, ESF and CF (18.02.2009, COCOF 09/0003/00-EN) and the Guidelines for Fighting Bid Rigging in Public Procurement (July 2009, OECD), and drawing on the experience of the Office of Competition and Consumer Protection, • covered 89 tender procedures within 45 OP I&E 2007-2013 projects, • multistage process consisting of: indicator analysis, in-depth analysis of identified cases, • additionally in accordance with EC request tenders from in-depth analysis were sent to the Office of Competition and Consumer Protection, Minister of Internal Affairs and General Prosecutor’s Office, • General Prosecutor’s Office informed that there was no justification to take any action by the prosecution due to lack of grounds for reasonable suspicion of offence, • participation in the process of amendment of the Act on competition and consumer protection.

9. Part three – Anti-fraud policy System of prevention, detection, correction and prosecution of fraud in OP I&E 2014-2020 as an enhancement of the 2007-2013 one Antifraud Strategy for OP I&E 2014-2020: • basedon strategy for previous period and with reference to European Structural and Investment Funds Guidance for Member States and Programme Authorities Fraud Risk Assessment and Effective and Proportionate Anti-Fraud Measures, • containsguidelines for implementing institutions concerning four core stages: prevention measures; detection and reporting; investigation, correction and prosecution, • implementsGovernmental Anti - Corruption Programme2014 -2019 at OP level, • containsdeclaration of mission.

10. Part three – Anti-fraud policy In the field of prevention and detection Anti-Fraud Strategy points out: • how to counter conflict of interest, corruption and crime against the credibility of the documents, • what to do when red flags (risk factors) occur, • how to whistle blow via fraud notification mechanism, • an obligatory fraud risk self-assessment. Anti-Fraud Strategy indicates how to deal with fraud suspicion i. a. to whom report and what should be done to prevent recurring such a case. Detailed information about reporting and recoveries are included in Recommendations for the institutions involved in the implementation of the OP I&E 2014-2020.

11. Part four – MA best practice MA conducts active training policy in broad cooperation with the Central Anti-Corruption Bureau, Central Police Forensic Laboratory, the Office of Competition and Consumer Protection results in series of training sessions: • in the field of detection of collusion (141 participants), • anticorruption measures (118), • criminal offences concerning absorption of EU funds (140), • detection of forged documents (260), • and other planned i.a. how to make a fraud risk self-assessment. • Participation in international conferences in order to stay up to date.

12. Part four – MA best practice MA presents receptive attitude towards cooperation with NGOs • MA cooperates with Stefan BATORY FUNDATION: • Integrity Pacts, • Fraud Risks Barometer in Public Procurement, • in the field of whistleblowing (i.a fraud notification mechanism will be linked at one of BATORY website http://www.sygnalista.pl/)

13. Part four – MA best practice Analysis of the risk of collusion based on the methodology worked out in the cooperation with the Office of Competition and Consumer Protection: • workedout after the first alleged collusions case, • ongoingin the quarterly basis, • dividedinto market segments in the field of transport infrastructure: roads, railways, • Includes : collusion indicators, rules of quantifying of benchmarking of indicators and whether further action is required.

14. Part four – MA best practice Exchange of information within Anti-fraud Group: • e-mail network covering Managing Authorities, Prosecutors’ Offices, Police Headquarter, • plenary meetings, • working meetings , • trainings, • conferences.

15. Part four – MA best practice MA policy of conflict of interest prevention: • consulted with the Central Anti-Corruption Bureau, • as a part of procedure book, • consists both compulsory statements about absence of conflict of interest and awareness raising actions. • All Intermediate Bodies and Implementing Authorities are obliged by interinstitutional agreements to have it in written . • All Beneficiaries are obliged to have it (more details on Slide 17)

16. Part four – MA best practice The fraud notification mechanism: • Enable whistleblowers to send information by using: • web-based information system http://www.pois.gov.pl/nieprawidlowosci or • dedicated e-mail address naduzycia.POIS@mr.gov.pl • There is a written procedure how to proceed with alleged fraud notifications. • All web pages of Intermediate Bodies and Implementing Authorities have link to fraud notification mechanism. • Beneficiary is obliged to inform thereabout.

17. Part four – MA best practice Responsibilities of the beneficiary under the grant agreements: • Preventing, reporting taking remedies of conflicts of interest during project implementation and its durability time within the meaning of Article 57 of Financial Regulation (Regulation No 966/2012 Of The European Parliament And Of The Council), • application of high integrity and ethical standards, • making information about the fraud notification mechanism publicly available also amid project staff, • non-retaliation for whistle-blowers, • taking into account the fraud risks concerning project implementation, • putting in place effective and proportionate anti-fraud measures . MA rights on the grounds of the grant agreements: • interruptionof payments until clarification of suspicion of applicable law breaching has been undertaken, • expenditures incurred in connection with fraud are ineligible.

18. Conclusion • Till now there is no IRQ5 (proven fraud) report in OP I&E 2014-2020. • Most reported are suspicion of irregularities especially in the public procurement field. • Suspected fraud are rare cases but they led to review of related internal control systems to mitigate exposure to the potential or proven fraud. • Because of the difficulties in proving fraudulent behavior and repairing reputational damage it is better to prevent than to cope with fraud.

19. Thank you very much for your attention! Małgorzata Kaczanowska Irregularity Unit Department of Infrastructural ProgrammesMinistry of Economic Development Malgorzata.Kaczanowska@mr.gov.pl