18.8.2005   

EN

Official Journal of the European Union

C 202/1

I-XI

1-11

1-5

6-7

8-11

12-43

12-17

18-19

20-22

23-29

30-32

33-43

34

35-37

38-39

40-41

42-43

44-65

44

45-50

51-55

56-61

57-58

59-60

61

62-65

66-72

73-94

74-88

89-92

93

94

AFIS

Anti-fraud information system

CMS

Case management system

DG

Directorate-General

ECR

Electronic case register

EIB

European Investment Bank

END

Seconded national experts

EU

European Union

IDOC

Investigation and Discipline Office of the Commission

OLAF

European Anti-Fraud Office

UCLAF

Unit for the Coordination of Fraud Prevention

I.

The European Anti-Fraud Office (OLAF) succeeded the Unit for the Coordination of Fraud Prevention (UCLAF) in April 1999 with enhanced status and a mandate extended to cover all the institutions and bodies of the European Union. Setting up the Office was a laborious process, in particular because of the disorganised nature of the files that it inherited. It was only towards the end of 2003 that the effects of its restructuring began to make themselves felt. As at mid-2004, however, improvements were still necessary in many areas of the management of investigations.

II.

The hybrid status of the Office, which has investigative autonomy but reports to the Commission for its other duties, has not adversely affected the independence of its investigative function. Being part of the Commission, the Office has been able not only to benefit from substantial administrative and logistical support, but also to take advantage of the anti-fraud legislation that is available to Commission departments. Consequently, it does not appear appropriate to consider amending the Office’s status (1).

III.

The Office has sufficient resources to deal with all justified denunciations that it receives. This being so, the priorities that it establishes as part of its investigation policy continue to be theoretical ones.

IV.

OLAF makes too little distinction between investigations (internal or external) on the one hand, and assistance and coordination operations on the other. As the nature of the work in each case is markedly different, lumping them together hinders the management of resources.

V.

While the introduction of a registry and a computerised system for managing investigation files have improved record keeping for operations and clarified responsibilities, managerial supervision has remained inadequate and results in serious delays in the processing of files, the lodging of inconclusive reports and results that are difficult to identify. In order to eliminate unnecessary delays, imperative deadlines should be set when investigations are opened.

VI.

All too frequently, the preparation and follow-up of investigations is rudimentary. The objectives pursued by investigators have remained vague in terms of the evidence that is to be supplied and the use of resources. The customs sector apart, there is a need for more effective cooperation with the Member States, both in areas of direct management and in areas where management is shared with Member States.

VII.

Although the procedures for reporting on the Office’s work have recently been improved, the information relates to the volume of operations undertaken rather than to the results actually achieved, either in terms of the actual recovery of misappropriated funds or in terms of the disciplinary or criminal sanctions imposed on persons convicted of fraud. The system for assessing results, which is based on relevant indicators, needs to be further strengthened.

VIII.

The measures adopted in 2001 to provide the Office with staff competent to perform the duties of investigators have achieved all they can. The large number of staff on contracts that cannot be renewed beyond a certain duration (between six and eight years) is now hindering any further consolidation of expertise. In these circumstances, the training measures introduced by the Office remain insufficient.

IX.

There is no independent guarantee of the legality of investigative procedures in progress or that the fundamental rights of persons under investigation are safeguarded. For want of a clear codification of investigative procedures, the situation is prone to litigation. The relevant regulatory provisions have proved unsatisfactory.

X.

Relations between the Office and its Supervisory Committee are difficult. There is a need for a serious re-examination of the regulatory provisions concerning the governance of the Office.

XI.

To avoid dissipating the Office’s work on activities which, although related to fraud prevention, are not directly concerned with investigations, and in order to guarantee that all resources are directed towards effectively combating fraud detrimental to the European Union’s financial interests, the tasks assigned to the Office ought to be re-examined in detail. Refocusing its activities on its investigative function would make it possible to mobilise its resources more effectively, particularly as regards the launching of targeted investigations in areas where the risks of fraud are considered the most serious.

1.

By setting up the European Anti-Fraud Office (OLAF) (2), the European institutions aimed to increase the effectiveness of the fight against illegal activities detrimental to the Union’s financial interests. The Office was thus given new powers as compared with those of its predecessors (3). In particular, it was given the task of carrying out administrative investigations within all the institutions and bodies of the European Union. The investigative function was strengthened by a guarantee of independence in the performance of this activity. That independence was, in turn, to be strengthened by the establishment of a Supervisory Committee made up of important figures from outside the Community institutions. The Director of the Office, who took up his post in March 2000, was invested with the power to appoint OLAF staff, which should enable him to respond more effectively to the Office’s specific investigative needs.

2.

While emphasising the importance of OLAF’s investigative function (see paragraph 12), the Commission also entrusted the Office with a wide range of activities related to the protection of the European Union’s financial interests (4). These activities, which are partly grouped into what the Office calls a ‘service platform’, cover:

The legislation does not prioritise these tasks.

3.

The Office operates within a complex institutional framework and is at the centre of a group of bodies concerned either directly or indirectly with fraud prevention. It is not always clear how responsibilities are divided among these bodies, which results in risks of both duplication of effort and omissions. These bodies fall into three subgroups:

4.

As the Member States are responsible for managing around 80 % of European Union expenditure, it is necessary, for obvious reasons of effectiveness, for the Office to work closely with national authorities (police, customs, the courts, etc.). This requirement adds to the complexity of its task. Furthermore, it is the Member States that are responsible for bringing criminal proceedings where appropriate, and the diversity of their judicial systems renders the Office’s task still more complex.

5.

Although OLAF is a new body, it has been obliged to continue the operations begun by its predecessor, UCLAF. It thus took on around 1 400 active files (6), a very burdensome legacy owing to the disorganised way in which many of these investigations had been managed (7). At the same time, UCLAF’s staff were reassigned en bloc to the Office, which, until the 2001 overhaul of the establishment plan, limited the new Director’s room for manoeuvre (8).

6.

The Office enjoys an ambivalent status, according to which it has investigative autonomy but is answerable to the Commission as regards its other duties. This hybrid structure has not adversely affected the independence of its investigative function and brings certain advantages. From the legal point of view, for example, as a part of the Commission the Office has been able to make use of powers conferred on that institution, in particular the power to carry out on-the-spot checks in the Member States pursuant to a variety of general and sectoral regulations (9). The Commission connection has also been useful for OLAF’s day-to-day operations, enabling it to draw on the administrative support of the Commission’s general services.

7.

The Office’s organisation chart as at May 2004 is presented in Annex I. Since 2001, the Office’s establishment plan has been made up of around 300 posts, twice as many as were available to UCLAF (10). In 2004, the Investigations Directorate (Directorate B) comprised 126 investigators (11) and 13 administrative staff. The remaining 193 posts were divided among the Office’s other departments (Directorate A ‘Policy, legislation and legal affairs’ and Directorate C ‘Intelligence, operational strategy and information services’).

8.

The aim of the audit was to appraise the quality of OLAF’s investigations management. This was done by assessing:

The final effectiveness of the Office’s work could not be evaluated due to the insufficient reliability of the data on the follow-up of investigations.

9.

The Court’s report complements the evaluation produced by the Commission in April 2003, which essentially focused on the legal framework of the Office’s activities (12), as well as a second more quantitative evaluation submitted by the Commission in October 2004 (13).

10.

As far as investigations are concerned, the audit carried out between April and October 2004 had as its starting point previous observations made by the Court (14). It focused on systems, structures and staff measures. There was also a review of the activity of the OLAF departments that are not directly responsible for investigations. Although the Office’s recent organisation was analysed, along with a sample of 117 operations conducted or closed towards the end of 2003, it became clear that, at that time, the Office was still engaged on clearing numerous operations begun by its predecessor, and that the reorganisation measures introduced during the 2002-2003 period were just starting to have an effect. The deficiencies found in the audit are summarised in Annex II.

11.

This report was produced at the same time as the Commission proposed an amendment to the Regulation concerning investigations conducted by OLAF (15). The Court has submitted an opinion on this proposal in which it takes account of the conclusions and recommendations of the audit.

12.

Apart from coordination operations, Regulation (EC) No 1073/1999 distinguishes between external investigations (Article 3) and internal investigations (Article 4). The Office itself divides its cases into five categories:

13.

Cases at the active investigation stage (475 as at 30 September 2004) include actual investigations (252) and coordination and assistance operations (223). Coordination operations are particularly common in the field of revenue and shared-management expenditure. Consequently, out of the 23 cases examined during the audit of the customs and trade sectors, four were investigations led by the Office.

14.

This lumping-together of investigations with coordination and assistance operations within the same units of the Investigations Directorate hinders the management of resources. In fact, the Office plays a substantially different role in each of these two fields. For investigations, each step must be formally recorded, filed and justified so that the dossier can be used by a prosecutor. For coordination and assistance cases, OLAF needs to be able to provide the national authorities with quick and effective support without being subject to severe procedural constraints. In these cases the use of investigation procedures is not always appropriate. It uses up resources which could have been assigned to investigations and leads to the risk of overlap with some of the responsibilities of the follow-up units.

15.

The Office is only authorised to conduct administrative investigations. It cannot therefore undertake all of the tasks for which police powers are required. Although it can, for example, make copies of documents it finds on the premises of economic operators, it is not authorised to search the homes of their owners or staff, even if important evidence may be found there. Neither is it authorised to demand access to the bank accounts of economic operators or private citizens, even where the latter are employed by a Community institution. There are therefore clear limits to the investigative acts that the Office can perform, and these affect the scope of its conclusions. Moreover, the practical effectiveness of the investigation stage may be reduced if the Member States do not respond to the Office’s requests for support.

16.

The Office generally launches its investigations in response to information received from third parties. This takes the form of denunciations forwarded by the Commission services, other EU institutions, authorities in the Member States as well as private citizens or commercial undertakings. When information of this kind is received, a new file is opened in the Office records (16). The work of investigation then falls into three main stages:

Table 1

Number of cases at each stage at the end of September 2004

17.

The introduction of the case management system (CMS) by the Office in 2002 made it easier for it to log investigations (19). Although improvements were made in 2003, information from this system must be approached very cautiously, as the audit revealed that there are often delays in the processing or updating of files and that the financial data in the system are neither consistent nor always verified. There have in fact been cases categorised as ongoing investigations although, in the absence of further investigative acts, the cases concerned should have been closed either with or without follow-up. Other cases have been closed, without calculation of the sums involved. In other cases the investigators had deferred closure so that they themselves could follow the cases up, although in principle this is not their responsibility.

18.

The policy announced by OLAF is to give priority to internal investigations and direct expenditure investigations, especially in the context of enlargement.

19.

In reality, OLAF has sufficient resources to deal with all the reliable denunciations that it receives so the question of making choices between possible investigations does not arise. The frequency of denunciations for each sector is indicated in Table 2.

Table 2

Denunciations received by the Office between August 2003 and September 2004

20.

Broadly speaking, the Office has substantially reduced the time spent on assessment by applying a standard deadline of 15 days counting from the assessor’s appointment. Although between October 2002 and September 2004 the proportion of assessments already in progress for more than four months fell significantly, from 62 % to 35 %, they still numbered 68. Where the documentation necessary for the assessment report has to be obtained outside the Community institutions, the standard 15-day deadline is clearly too short (20). For most of the assessments examined, the decision to open an investigation appeared to be justified in the light of the criteria adopted by the Office. Nonetheless, the audit revealed certain practices (see Annex II) that could be improved. For example:

21.

Although the Office is supposed to focus primarily on financial fraud, preference has in practice often been given to the criminal aspect. The likely financial impact, that would have made it possible to establish the direction in which the investigation should go, such as the calculation of the sums misappropriated, has been given secondary status.

22.

While it is true that, by their very nature, OLAF investigations make it impossible to foresee all aspects of every stage, it is nonetheless instructive to attempt to outline how investigations are organised and planned so as to eliminate the risk of waste of resources. In this regard, assessment reports often contained nothing more than the rudiments of planning, and this was not compensated for by more detailed work plans at a later stage of the investigation. It also became clear that certain assessments could have benefited from consultation with follow-up units and the Magistrates Unit from the outset about the objectives, the options to be chosen and the resources that would be needed for the investigation. In some cases, consultation with Directorate C (Analysis and intelligence) would also have enabled the assessors to make better use of the available information tools (see Annex II).

23.

In October 2002 some 51 % of investigations had been ongoing for more than 12 months. By September 2004, however, this figure had risen to 62 %, even though the average duration of investigations had been reduced following the clearance of old cases from the time of UCLAF. As with assessments, the time needed by the Member States to respond to the Office’s requests for documentation often led to delays (21) (see Annex II). Other delays were caused by the fact that, in common with other Commission services, OLAF has adopted an approach to communication that is often bureaucratic, with the result that there are extensive lulls in activity which would have been avoided by visits to the authorities concerned. The audit showed that some delays could be attributed to a certain dilatoriness on the part of the investigators, despite the fact that Regulation (EC) No 1073/1999 requires, in Article 6(5), that the Office’s investigations be conducted ‘continuously’.

24.

The Office’s management exercised little control over the duration of investigations. One would have expected the various investigation files to explain and justify delays, but this was not the case. Although the reports that the Office is obliged to send to the Supervisory Committee on investigations open for more than nine months contain some information, there is no further obligation after that time to explain delays, of whatever duration, or even to report regularly to the Executive Board. In many cases the delays cannot be explained.

25.

In principle, the assessment reports classify the investigations by degree of priority. It is not clear whether this classification has an impact on subsequent work. There are in fact no criteria concerning the resources to be assigned to an investigation or the deadlines for concluding work of a given degree of priority.

26.

The keeping of records of investigators’ time is an essential management tool for monitoring the progress of investigations. Although the Court has already recommended such a system (22), the Office has still not set one up. Furthermore, there is no general tool for analysing the workload of investigators at the level of Directorate B.

27.

The Office’s investigations have suffered from the absence of a system for codifying investigative procedures, although such a system is essential both for the investigators and for those being investigated (23), especially in the case of internal investigations. The lack of codification brings a twofold risk: that procedural conflicts will arise in the course of an investigation with the subjects of the investigation, and that court proceedings brought after an investigation will collapse owing to non-compliance with the formalities introduced to guarantee the application of the principles of transparency and the adversarial procedure (24).

28.

More generally, as with the assessments, the sample of investigations examined showed that OLAF’s actual investigative activity was often rather limited. The use by the Office of its powers to carry out on-the-spot investigations, examine witnesses and question suspects is the exception rather than the rule. These specific investigative acts were most common in the customs sector. On the other hand, the Office often requests information from the investigative agencies of certain Member States, notably Italy. For example, when investigating shared-management expenditure the Office usually asks for the documentation it needs to be submitted for it to study and analyse before, if appropriate, carrying out an on-the-spot visit (25). Even when investigating direct-management expenditure, a field in which the Office has the lead role, it often limits itself to examining documents obtained from the managing departments at the Commission, and in particular the reports of the independent auditors appointed in the context of financing agreements. In such cases the Office assembles and comments on the evidence to be submitted to the judicial authorities in the Member States, but it does not provide any evidence beyond that which was already available to the managing departments. The work of preparing files is most usually carried out with the help of the Magistrates Unit.

29.

While the Office must be able to produce its final reports on investigations in the context of judicial proceedings, in the case of shared-management operations these are addressed to the managing authorities in the Member States (customs services, paying agencies, etc.). For that reason they need to be clearly argued and must contain relevant, precise and balanced conclusions. The final reports on many of the cases examined as part of the sample were clearly of insufficient quality. The most common inadequacy was failure to quantify the fraud, even though investigations usually related to the misappropriation of funds.

30.

OLAF distinguishes between five kinds of follow-up:

31.

It was difficult to determine how much time is really spent on follow-up. However, the information obtained shows that it is not the main activity of the units concerned. In general, the Office’s follow-up activity has provided little added value, especially where coordination and assistance were concerned (see Annex II). The Office’s role in financial follow-up should be limited to calculating the amounts of the sums to be recovered. Once they are known, it is for the authorising officers in the operational Directorates-General and the authorities in the Member States to issue recovery orders and to ensure that payment is received on the due date. For its part, DG Budget must ensure that recovery orders are registered as soon as they are issued and that the authorising officers observe the timetable for recoveries. Cases of negligence on the part of the authorising officers are to be referred to IDOC by DG Budget. Mobilising OLAF staff after the stage of calculating the amounts of the sums to be recovered is thus a duplication of effort already undertaken by the authorising officers.

32.

In the special case of the mutual assistance procedure in the customs and agriculture sectors there is no systematic follow-up by the Office (27). The Office has established no rules for the continuous and consistent monitoring of progress within the framework of the procedures for requesting mutual assistance from the Member States, and the results of such requests are not clearly recorded.

33.

The weaknesses identified in the preceding paragraphs raise the question of the effectiveness of the Office’s quality control systems.

34.

The OLAF manual describes the work of every OLAF department and most of the current administrative procedures. Investigative activities are only dealt with in a small section giving details of existing practices, by reference in particular to the stages of the CMS. There is a disproportionate emphasis on the purely legal aspects of operations, to the detriment of the practical aspects of organising and conducting investigations and the contribution expected from the different parties concerned, in particular the authorities in the Member States and especially the Office’s management. The role of the Executive Board, which is a crucial element in the management of investigations, should be explained in greater detail.

35.

OLAF inherited the organisational culture of UCLAF, under which the investigators conducted most of their investigations in isolation and without real supervision. While it is true that investigative confidentiality is necessary to avoid pressures that may impede the process of investigation, it is nonetheless essential that the management of an investigation office should check not only that the investigators do not stray from their objectives, but also that they carry out their duties with due diligence. This was not always the case. Management supervision of this sort is also indispensable for guaranteeing the sound use of resources.

36.

While the CMS and the establishment of a registry have now brought the necessary order to the record-keeping, physical location and structure of investigation files, this system has yet to be transformed into a real management tool to enable the responsible officers in the Investigations Directorate to be better informed of the progress of the operations for which they are responsible, to prepare the necessary actions and to ensure that they are carried out within the stipulated deadlines. In this connection, the practice of monthly progress reports that certain units have set up on an experimental basis to monitor not only the investigators’ workload but also the real financial impact of closed investigations should be extended to all the units of the Investigations Directorate.

37.

Investigation results are still poorly interpreted. Just because follow-up is initiated, it does not follow that there will be a concrete result (28) (recovery or criminal/disciplinary penalty). In other words, initiating follow-up is not a relevant indicator of success. Nor is the fact that files have been forwarded to the judicial authorities significant. This is because the evidence presented by the Office may not be deemed sufficient by the national authorities, while the acts constituting an offence may be time-barred. As regards internal investigations, when the Office has managed to assemble evidence concerning offences committed by staff of the Community institutions, it has often been very difficult to get cases taken up by the judicial authorities in the countries where the institutions concerned by the offences are located (29), either because those authorities lack clear procedures for transferring these cases to their own courts or because they do not assign to them the priority desired by the Office (30). In Brussels and Luxembourg, the principal workplaces of the institutions, the Office should clarify once again with the judicial authorities concerned the practical steps to be taken so that cases transferred to them no longer disappear from view. Moreover, the Office’s recommendations regarding disciplinary action are not always taken up by the institutions or bodies concerned.

38.

The Internal Audit Unit, which comprises two temporary members of staff, reports directly to the Director of the Office. Its main task is to keep the Director informed of the effectiveness of the internal control procedures. Since it was set up in 2001, its work has essentially concerned the Office’s administrative management and non-investigative activities. It has also been required to perform a variety of tasks in support of the management and to back up the task force that was created in July 2003 to handle the Eurostat case files.

39.

The Internal Audit Unit has submitted no reports on the work of investigation. In particular, it has not assessed the correct functioning of the CMS or the reliability and relevance of the results indicators. As at the end of 2004, despite its own risk analyses, the Internal Audit Unit had still not contributed in any significant way to improving the systems for managing investigations.

40.

An Executive Board comprising most of the heads of units directly or indirectly responsible for investigations was set up in 2002 under the chairmanship of the Director of Investigations. It meets once a week to examine the reports that are filed at each stage of an investigation (evaluation, closure, and post-follow-up). It was established to meet two major objectives:

41.

While this new feature undeniably constitutes an advance in the way cases are handled, its success as a means of controlling the management of investigations is still limited, in particular because of the limited time the Board Members have to examine all the files. Thus, despite the intervention of the Board, investigations have been started on the basis of inadequate assessment, delays in carrying them out have not been monitored beyond the stage of informing the Supervisory Committee, and investigations may be passed on to follow-up units before the work of finding evidence has been completed.

42.

Anti-fraud operations are the subject of various reports, all of which are part of OLAF’s external supervision since they are addressed to the Council and the European Parliament. The Office submits an annual activity report, the Commission presents an annual report on the implementation of its policy for the protection of its financial interests, OLAF’s Supervisory Committee draws up an annual report and Article 15 of Regulation (EC) No 1073/1999 requires an evaluation of the Office’s activities after three years of existence.

43.

The presentation of the Office’s activity reports has improved over the years. Reporting has gained in clarity now that it is supported by CMS statistical data and the analyses are less focused on questions of law and investigation policy and more on case studies. The reliability of the statistical data must be enhanced still further by recording operations in greater detail and updating files more quickly. Similarly, the most recent reports could be improved upon, in the sense that activity is analysed in terms of its volume rather than by results obtained. In this connection, the second paragraph of Article 12(3) of Regulation (EC) No 1073/1999 asks the Director to ‘report … on the findings of investigations carried out by the Office’. With regard to amounts recovered, the information is not very reliable because the data coming from the Member States lack consistency and are not corroborated (31). With regard to judicial consequences, the time available is not enough to allow any assessment of the effectiveness of the Office’s work, while the number of disciplinary proceedings relating to internal investigations is still very small. In order to account for its activities in a way that is both transparent and relevant, the Office should identify and regularly update indicators which focus not just on the volume of its activity but also on the results (success or failure) of its investigations (32) (see paragraph 39), including those conducted in collaboration with the competent authorities in the Member States. It is still difficult to determine what the effective results of investigations have been.

44.

The aim of this second section is to assess the effectiveness of the contribution made by the Office’s services to its investigative function. In this connection, it is worth remembering that in November 2003 the President of the Commission spoke of refocusing OLAF’s activities on its investigative role (33).

45.

Directorate C is made up of three units (see Annex I). The first deals with anti-fraud strategy issues, analysis of trends and long-term risks and the databases of irregularities reported by Member States. The second is responsible for information and case-recording technology. In particular, this unit has set up and kept the case management system (CMS) running (see paragraph 17). The third unit supplies software and technical tools to support investigations carried out by Investigations Directorate staff. It can also provide operational assistance (34) to enquiry services in the Member States.

46.

The unit responsible for strategic analysis ought to enable the Office not just to follow up denunciations, but to initiate enquiries based on targeted risk analyses carried out by the Office itself, in collaboration, where appropriate, with its counterparts in the Member States. Although this unit has been in existence for two years, its interventions to date have had no direct impact on investigation activity (35).

47.

Areas examined by the unit which could have resulted in new investigations included information given by Member States pursuant to Regulations (EEC) No 595/91 (36) and (EC) No 1681/94 on irregularities found in the fields of agriculture and the Structural Funds. The unit concluded that the quality of the data was generally inadequate for them to be used.

48.

As regards strategic analyses, the unit faces problems of access to various databases belonging to Community institutions. The fact is that their departments say they are concerned about the use which the Office might make of general access to databases to which provisions relating to the security of personal data apply (Regulation (EC) No 45/2001). There has been no in-depth discussion of this sensitive issue with the Supervisory Committee, whereas discussion is crucial if the Office is to adopt a more systematic and proactive approach to opening internal investigations.

49.

Though this is a recent development, there has been a regular increase in requests for assistance from the investigative services with regard to operational intelligence, consisting in particular of interrogation of databases. In mid-2004 the Operational Intelligence Unit was chiefly working on investigations concerning agriculture and customs, which are not among OLAF’s investigative priorities as established by the Director.

50.

Within what the Office calls its service platform, the Operational Intelligence Unit devotes a significant share of its resources to supporting Member States in the fields of customs and agriculture. The following two activities would be better placed in other Commission services:

51.

Directorate A comprises six units (see Annex I). Three of these units deal with follow-up operations (see paragraphs 30-32) and support to the investigators on issues concerning sectoral legislation. Although the precise role of these three units varies according to the sectors for which they are responsible, they have two functions, one linked to investigations and the other supporting the Commission’s operational Directorates-General in the context of the policy on the protection of financial interests.

52.

As regards investigations, these three units provide analyses relating to sectoral rules and regulations. They also follow up irregularities notified to the Commission by the Member States. The opinions given by these units on legal or financial matters, in particular those given on cases at the assessment stage, have contributed to an improvement in the quality of the investigations, particularly in the areas of direct expenditure and external activity.

53.

As regards supporting the Commission’s operational Directorates-General, they participate in the scrutiny of legislation from a ‘fraud-proofing’ perspective. Their role consists of proposing preventive measures, making use of the experience that the Office has accumulated during its investigations.

54.

In paragraph 53 of its Special Report on the recovery of irregular payments under the common agricultural policy (38), the Court concluded that there was still confusion over OLAF’s role in following up irregularities notified by Member States, because the division of responsibilities between the Office and DG Agriculture is not very clear. This has diminished the effectiveness of the mechanisms for recovering amounts wrongly charged to the Community budget. Although the Court’s audit only briefly looked at the follow-up of irregularities notified in respect of customs and the Structural Funds, the same questions about the division of responsibilities also arise in those areas. In general, follow-up operations tend to divert the Office’s resources, to the detriment of its investigative role, and to the benefit of the Commission’s operational Directorates-General.

55.

Of the three other units in Directorate A, about one third of the resources in the Legal Affairs Unit (12 staff) are employed in providing general (non-sectoral) legal opinions to the Investigations Directorate. This is a useful function since it complements the sectoral opinions which the follow-up units provide. Nevertheless, it is less clear whether the other tasks carried out by this unit, particularly those devoted to the strategy for the protection of financial interests, are part of the Office’s core mission and indeed whether OLAF is best placed to deal with them. The same applies to the two other units (Protection of the euro and Support for consultative committees on the protection of financial interests).

56.

In addition to the internal audit service, four units report directly to the Director of the Office (see Annex I).

57.

Although reporting to the Director of the Office, this unit is supposed to play two roles closely linked to the investigative function:

58.

The Magistrates Unit has had little involvement in evaluation and investigation work. The unit’s action has often been late, which has not always allowed full advantage to be taken of the powers available to it, and this has affected the quality of some investigation reports. In the field of direct expenditure, magistrates have been involved from the start with the investigators’ work on investigations from the second half of 2003 onwards. If this practice were extended to all the areas in which the Office is involved, it would be easier to determine whether the evidence available is adequate or what additional evidence is needed to allow an investigation to be concluded by the transfer of the file to the appropriate disciplinary or judicial authorities with good prospects of success.

59.

As part of the enlargement of the Union, a special unit was given responsibility for implementing a 15 million euro programme financed by the PHARE programme. This activity is scheduled to continue in principle until 2006. In 2004, it was given responsibility for a further support programme for new Member States (the Hercules programme, with funding of 11,7 million euro). As with anti-counterfeiting initiatives, it is not the Office’s role to become a manager of expenditure programmes.

60.

The unit also has in principle responsibility for lifelong training within the Office. It seems however that this activity has been neglected. The mission of this unit should therefore be reassessed.

61.

The size of this unit, and OLAF’s administrative expenditure in general, is less than it would be if the Office were not attached administratively to the Commission. As a result, OLAF derives significant economies by using the services of a large number of departments in the Administration Directorate-General of the Commission, without prejudicing the independence of its investigative function.

62.

The sharp increase in the number of posts since 1999 reflects the budgetary authority’s determination to strengthen the Office’s investigative function. Nevertheless, the number of new posts is not based on any targeted study to determine the Office’s staffing needs in relation to its adopted strategy and its workload.

63.

A large proportion of the increase in staff numbers has been by way of temporary posts. As a result, the number of temporary posts in categories A and B rose from 12 in 1999 to 127 in 2001. In the list of posts for 2004, these posts accounted for 55 % of the total for categories A and B. The large number of temporary posts was a consequence of the budgetary procedure for the financial year 2001, when the aim at the time was to replace senior investigations staff coming from UCLAF (39). Now that this objective has been achieved, the present situation poses more problems than it offers advantages:

64.

Because of the complexity of the Community context, investigators are required to show versatility and adaptability. Since it is not easy to find this combination of qualities, this is a serious reason for giving greater priority to stability in recruitment and training programmes. This being so, it would be appropriate to look again at the list of posts so as to provide investigators with less precarious employment situations and real career possibilities. That can be achieved gradually by converting some posts as future budgetary procedures permit.

65.

At the same time, the administrations most exposed to the problems of fraud and the protection of the European Union’s financial interests should be encouraged to make available to the Office’s analytical (intelligence) services a greater number of seconded national experts. A particular effort in this direction may be made as regards the services of Member States called on to collaborate with the Office.

66.

The Supervisory Committee was established by OLAF’s founding acts (42). ‘Through its regular control of the implementation of investigations it strengthens the Office’s independence’ (43). It was also supposed, in response to requests from the Director or on its own initiative, ‘to deliver opinions to the Director concerning the activities of the Office without, however, interfering with the conduct of investigations in progress’ (). In practice, using recital 10 of Regulation (EC) No 1073/1999 as a basis, the Committee has concentrated its attention on one of its own rules of procedure, under which it states that it will ensure that the Office respects the principles of individual rights and fundamental freedoms, particularly with regard to internal investigations (44).

67.

The discharge of the mandate of the Supervisory Committee is delicate on several counts. The Committee is required to be the guarantor of both the Office’s independence and the rights of persons under investigation. The legislation gives it no decision-taking power to do this. By restricting its pronouncements to issues of principle, it is laying down a doctrine which has no real effects on investigations. Finally, as the Committee cannot intervene during the course of investigations, it in no way constitutes a mechanism to monitor the legality of investigations while they are in progress.

68.

With regard to monitoring the procedure followed in investigations, several recent cases demonstrate the existence of overlaps between the roles of the Supervisory Committee and the European Ombudsman. For example, between September 2003 and May 2004, the Committee debated the Ombudsman’s interventions in connection with individual investigations by the Office during seven of its meetings. Moreover, the Committee does not deal with complaints which persons under investigation address to the Director of the Office, who remains free to deal with them as he sees fit.

69.

Whilst the Committee may not interfere in the management of the Office, that is, it may intervene neither in the Office’s non-investigative activities nor in the conduct of investigations:

70.

Since the Director of the Office was appointed, his independence has never been under any real threat (53). In practice, the Committee has largely focused its attention on questions relating to the Office’s observance of individual rights in internal investigations and has deplored the absence of a code of procedure to give a firm framework for investigative actions. The Committee’s focus of attention on internal investigations and individual rights has affected the relationship between the Director of the Office and the Committee.

71.

Following the policy adopted by the Office, the Supervisory Committee has given priority to the criminal destination of internal investigations, to the detriment of external investigations, in spite of the fact that fighting fraud against the Communities’ financial interests goes well beyond the confines of the institutions, and that numerous frauds are committed without any collusion with staff from the institutions or its related bodies. Though Articles 7(1) and 7(3) of Regulation (EC) No 1073/1999 require that ‘the institutions, bodies, offices and agencies shall forward to the Office without delay any information relating to possible cases of fraud or corruption’ and that ‘Member States shall also send … any other document or information considered pertinent … relating to the fight against fraud … and any other illegal activity affecting the Communities’ financial interests’, the Supervisory Committee has never studied the conditions in which the agencies or Member States have discharged this duty, although it is essential to the Office’s investigative activities (54).

72.

To allow it to discuss questions relating to the conduct of enquiries in full knowledge of the facts, the Committee secretariat examines closed investigation files which it selects on the basis of criteria determined in consultation with the Chairman. The number of files examined recently was 17 (55) in 2003 and seven in the first six months of 2004. These examinations are the subject of detailed evaluation records which often include pertinent recommendations or important matters of principle. These records are not communicated to the Office. An attitude of greater openness would not only benefit relations between services but would also allow all parties to benefit from best practice, which would thus contribute to strengthening the investigative function.

73.

The Office undertook substantial reorganisation measures in November 2003. At the time of the audit, it was evident that at the beginning of 2004 it was still engaged in clearing the burden of the past inherited from UCLAF, its predecessor, and that the new measures were just beginning to have an effect (see paragraph 10).

74.

The Office’s investigations policy is still uncertain, whether with regard to the question of acting on its own initiative, the management of priorities, procedures for collaboration with the authorities of Member States or checking deadlines. Similarly, guidelines on the results to be achieved are still vague because the disciplinary or financial aspects may be overlooked in favour of judicial processes, the outcome of which is often remote and uncertain (see paragraphs 19, 20 and 25).

Once the guiding principles of its investigations have been specified in terms of results to be achieved instead of simply the areas on which it wishes to concentrate its activities, the introduction of performance indicators (rather than mere activity indicators) should make it possible to assess the extent to which the Office’s choices are justified.

75.

The decision-making system governing the various stages of the investigations has become more transparent (see paragraph 16). This is largely due to the intervention of the Executive Board and the introduction of standardised reports (see paragraph 41).

76.

The fact that coordination and assistance operations are treated as equivalent to investigations makes control of resources difficult and results in time-consuming use of the CMS system, even though the Office has no obligation, in coordination and assistance cases, to collect and produce evidence itself (see paragraphs 13 and 14).

It would be worth reconsidering the organisation of the Office with regard to coordination and assistance operations and investigating the possibility of creating a special unit dedicated to these operations, as part of the service platform.

77.

With regard to preliminary work (assessments), analyses are still rudimentary. The support units (magistrates, follow-up and operational analysis) have taken little part in defining objectives and planning the strategy to be adopted in each investigation. The Executive Board has not insisted strongly enough on the need for clear formulation of the objectives and expected results of investigations (see paragraphs 20 and 22).

Some investigation acts still need to be justified more convincingly, the objectives set for the investigators in each case need to be clarified and there must be more insistence on work programmes to support proposed decisions. Regarding the Executive Board, it would be worth considering smaller groupings each of which would bring together managers working on files that have common features (56). This kind of approach would reduce the participants’ burden of work on examining files and would encourage more rational and more thorough analysis of draft decisions. It would also allow coordinated follow-up of the portfolio of current cases and the introduction of a system of prioritisation. Nothing would prevent all the subgroups of the Executive Board from coming together, if the need arose, to deal with matters of principle in which all the services have an interest.

78.

Supervision of investigations by the Office’s management has generally proved inadequate (see paragraphs 28, 35 and 36). The duration of investigations has not been brought under control (see paragraph 24).

Heads of unit must ensure that priorities are as far as possible respected and must both be aware of and control investigators’ actual workload. In the course of an investigation, the search for evidence must take precedence over mere collation of information already available. From this point of view, the Office must make better use of the means it has available (witness hearings, on-the-spot visits to collect documents, operational analyses, etc.).

79.

There is no system in place to measure investigators’ actual workload or the time they spend on investigations (see paragraph 26).

A time-recording system, linked to work plans which include estimates of time to be spent on investigations, would supply a basis for better alignment of the workload with the resources available in the various units of the Investigations Directorate, and would allow delays to be avoided.

80.

The obligation to report investigations that are more than nine months old to the Supervisory Committee has had no notable effect (see paragraph 24).

Taking into account the time-barring periods laid down in national (criminal) and Community legislation (e.g. Article 3 of Regulation (EC, Euratom) No 2988/95), establishing a maximum duration for enquiries would be likely to increase their effectiveness.

81.

It is still difficult to determine the actual results of investigations. In the area of internal investigations, little progress has been achieved since 1988 with regard to sanctions imposed. Judicial and legal routes have in the main proved ineffective (see paragraph 37).

82.

The Office’s financial follow-up operations use up a lot of its resources (see paragraphs 31 and 54). Judicial follow-up adds little value to the conclusions submitted (see paragraph 43).

Financial follow-up should not be part of the Office’s remit. It is up to authorising departments in the Commission and Member States to organise the recovery of amounts identified as a result of investigations. Authorising officers and Member States should notify OLAF promptly of any sums recovered or amounts written off. Judicial follow-up should be limited solely to cases where, after criminal proceedings, the officer who authorised the original expenditure is required to start civil proceedings for recovery. Legislative follow-up ought to remain the responsibility of the operational Directorates-General on the basis of summaries addressed to them by the Office.

83.

There is no independent control of the legality of investigative actions (57). The procedural measures concerning investigations are still imperfectly codified (see paragraph 27).

Codifying the procedures should guarantee that investigative acts follow a predictable course, that there is certainty about the timing of hearings and that, at each key stage of the enquiry, the rights to a fair hearing of the person under investigation are protected along with his right of access to the file. The code should also reinforce the principle of investigative secrecy and provide controls on the legality of investigative acts still in progress. Such a code should have legal force, be published and allow the fundamental principles governing OLAF’s investigations, in particular transparency and the adversarial principle, to be applied transparently.

84.

In the field of direct expenditure, OLAF is dependent on cooperation with national departments. Some Member States give their support to the Office more willingly than others, even though the Office does not have all the means at its disposal to identify certain facts (see paragraphs 15 and 37).

85.

In the areas of own resources and shared-management expenditure, cooperation with Member States under ad hoc rules and mutual assistance procedures (Regulation (Euratom, EC) No 2185/96) is often mediocre (see paragraphs 15 and 32).

In order to clarify arrangements for cooperation with the authorities of Member States, it would be useful to consider either the adoption of a specific Council Regulation setting out detailed arrangements for such cooperation (see proposed amendments to Regulation (EC) No 1073/1999), or the conclusion of agreements with national investigation services best placed to assist the Office (58).

86.

The case management system (CMS and registry) established by the Office represents distinct progress in the control of documentation and investigation files (see paragraph 17).

87.

The CMS databases are not used to their best advantage to create a genuine system of investigation management and a decision-making aid, although such an instrument is needed to manage and direct investigations (see paragraphs 34 and 36).

The CMS databases should be used to convert the documentation system into a true system of investigation management and a decision-making aid. If combined with a clarification of the role of management responsibility for investigators, this would reinforce the effectiveness of investigations and prevent delays. These points should be added to the OLAF manual and details of management responsibilities included. To make the manual more operationally useful, all instructions relating to the organisation, conduct and supervision of investigations should be collated in a single volume. A special effort must also be made with regard to the training of investigators (in investigation techniques; sectoral, national and Community legislation, report-writing skills, etc.).

88.

Considerable resources are invested in producing reports which do not always result in sufficiently clear information to judge the Office’s effectiveness in the absence of relevant performance indicators (see paragraphs 37, 39 and 43).

The number of reports should be cut and greater attention should be paid to their information value. Statistical data should be made more reliable and relevant so that comparisons can be established over time. In this regard, the introduction of performance indicators based on real rather than potential results should bring greater clarity.

89.

The Office’s reactive investigation policy does not allow it to form an overview of its future workload and to organise its investigative teams accordingly (see paragraphs 26 and 62). The process of allocating staff between units in the Investigations Directorate is not transparent. Staff management is complicated by the disproportionate number of temporary posts, which results in instability (see paragraphs 63 and 64).

The workload of the various services should be monitored and a genuine master plan for personnel management implemented so as to resolve structural problems in staff management. Sound management of the investigation teams would moreover militate in favour of more balanced units in terms of staff numbers, allowing heads of unit to supervise investigations more closely.

90.

The impact of the strategic analysis services on the Investigations Directorate is still insignificant. With regard to risk analyses, their contributions have remained limited (see paragraph 46).

The mission of the strategic analysis services must be redefined so that they can contribute effectively to the identification of situations which would lead to external investigations being initiated in sectors at greatest risk. In this regard, they should seek improvement in the presentation, the nature and the accuracy of data forwarded by the Member States allowing the creation of databases which could be used to look for anomalies and launch investigations.

91.

Judicial support is useful in view of the difficulties posed by some Community legislation. In this sector, support to the investigation services is regular. It is legitimate on the other hand to question the contribution which work related to the strategy for the protection of financial interests makes to the Office’s investigations (see paragraphs 53 and 55).

Since work in relation to the strategy for the protection of financial interests has had no direct impact on the conduct of investigations, other Commission services could be better placed to undertake such work.

92.

Assistance activities are useful when concrete support to Member States with coordination or analysis in the field of cross-border investigations is required. The Office’s peripheral activities, particularly those associated with the policy on the protection of financial interests in the broad sense, distract management from its role of surveillance and support for the investigative function. When such activities involve taking on responsibilities which are normally carried out by the operational services of the Commission (programme management, for example) mobilisation of the Office’s resources does not constitute the best solution (see paragraphs 55 and 59).

Programme management work should be the responsibility of the operational services of the Commission, which are better equipped than the Office to deal with them.

93.

A body like the Office needs clear lines of management responsibility and clear arrangements for supervision. The terms of reference of the Supervisory Committee have become unclear. Moreover, the Supervisory Committee does not provide the Office’s Director with all necessary support (see paragraph 70).

The role of the Supervisory Committee should be re-examined in order to avoid all risks of interference in ongoing investigations.

94.

The fact that OLAF is attached to the Commission has not endangered the independence of the Office’s investigative function, even if some difficulties in communication were noted. It does not appear, therefore, that the status of the Office should be called into question. On the other hand, executive management of the investigative function should have received more sustained attention, in order to guarantee the quality of its results and avoid duplicating the work of other Commission services. The experience of the first five years of the Office’s existence thus tends to show that more reflection is needed, to ensure with greater certainty that investigations are effective in achieving concrete results, whether these be the recovery of misappropriated amounts or the effective application of disciplinary or criminal sanctions.

From the foregoing, it is clear that a refocusing of the Office’s activities on its investigative function, as the President of the Commission indicated in November 2003, would tend to reinforce the effectiveness of investigations while leaving other organisations with the responsibility for preventive or legislative acts. Such refocusing should, for its part, be accompanied by modifications to the governance of the Office, necessitating changes in the regulations (59).

18.8.2005   

EN

Official Journal of the European Union

C 202/33

1.

The proposal is based on the progress report submitted by the Commission in April 2003 under the terms of Article 15 of Regulation (EC) No 1073/1999 of the European Parliament and the Council concerning investigations conducted by OLAF (1). It is also a follow-up to the undertaking given by the President of the Commission to the Committee on Budgetary Control on 18 November 2003 during the presentation of the Commission’s legislative and work programme for 2004. The Commission proposal seeks to strengthen OLAF’s operational efficiency by allowing it to concentrate on its priorities and to speed up its investigations by clarifying certain procedures. However, the President’s statement went further than the proposal put forward by the Commission in that, apart from adjustments to the investigation procedures, it held out the prospect of a reorganisation of the Office itself.

2.

The President of the Commission had, in fact, stated that refocusing OLAF’s activities meant that ‘there might be a case for reassigning to Commission departments certain horizontal tasks that are unrelated to investigations’, and that the governance of OLAF needed to be reconsidered (2). Finally, he proposed ‘to increase the effectiveness of OLAF — as it faces a growing workload in an enlarged Union — by increasing its staff resources, refocusing its tasks on its investigative function and adapting the Regulation …’. Of the proposals made by the President of the Commission, only the last one (adaptation of the Regulation) is concerned by the proposal to amend Regulation (EC) No 1073/1999. A refocusing of the Office’s actual tasks would have necessitated an amendment to the Commission Decision of 28 April 1999 establishing the European Anti-Fraud Office (3).

3.

The preamble shows that the aim of the proposal is to amend the Regulation in five main areas, without in any way calling into question the powers and responsibilities of the Member States, whilst respecting the principles of subsidiarity and proportionality. These five areas are as follows:

4.

The comments which follow take into account the findings of the audit of the Office, as set out in Special Report No 1/2005 of the Court of Auditors.

5.

The application of the principle of discretion in the opening of investigations can be looked upon as a matter of efficiency, and the Court welcomes the change. However, the immediate practical effect will be limited. As is shown in the Special Report, the number of well-founded denunciations that the Office receives is not so large that it is obliged to make a choice between investigations to undertake.

6.

Setting priorities and time-tabling are related matters. Experience has shown that many of the investigations undertaken by the Office take longer than a reasonable period (12 to 18 months). That being so, it would be useful to fix deadlines for the investigations.

7.

The Court supports the proposal to reinforce the Office’s duty to inform the institutions or bodies concerned about the opening of an investigation. The deletion in the present Article 4(5) of the right to defer such information makes, however, for a certain ambiguity. The lack of a provision on this point means that the possibility of withholding information is not excluded. The Commission’s proposal ought to be modified in order to ensure that the requirement to notify is not set aside without justification on the pretext that secrecy is necessary to guarantee the efficiency of the investigation.

8.

Regulation (Euratom, EC) No 2185/96 provides for ‘on-the-spot checks and inspections carried out by the Commission in order to protect the European Communities’ financial interests’ concerning agricultural support, Structural Funds and own resources.

9.

The proposal provides for the application of this regulation to be extended to direct expenditure (internal policies, external aid, etc.). This ought to strengthen the range of intervention measures available to the Office, in particular as regards cooperation with the national authorities. The Court’s audits have confirmed that a weakness in this respect exists. On this point, therefore, the Commission’s proposal is to be welcomed.

10.

The Commission considers it appropriate for the fundamental principles that should govern investigations to be stated in the regulation. The Court endorses that view.

11.

Compliance with the legal procedures for investigations must be ensured. According to Regulation (EC) No 1073/1999 (Article 14), complaints during the course of an investigation regarding enquiries by OLAF investigators are to be made to the Director of the Office. This is not a satisfactory solution as it does not grant the complainant an independent review of the demand. As an alternative, individuals under investigation have turned to the Ombudsman when they considered that their fundamental rights had been infringed. This procedure has proved to be unsatisfactory and it has on occasions led to situations where the Ombudsman has been perceived of as intervening in the course of investigations. The Commission’s proposal entrusts the Supervisory Committee with the task of controlling the conduct of the investigators. This is not a better solution, since it runs counter to the principle that the Committee should not intervene in investigations in progress.

12.

The review of the legality of investigative actions ought to be entrusted to a body which is impartial and cannot become involved in the conduct of investigations because of other aspects of its mandate.

13.

The Commission’s proposal does not clarify the role of the Supervisory Committee as regards the incompatibility between the principle of non-intervention in investigations and the duty to obtain an opinion from the Committee during an investigation, which arises either where the 12-month period has been exceeded or where the Committee has to be informed before a case is forwarded to the judicial authorities. It therefore appears necessary to state even more clearly the principle that the Supervisory Committee shall not intervene in ongoing investigations.

14.

The Commission proposes to increase the number of members of the Supervisory Committee from five to seven. This is not based on any objective analysis of the Committee’s tasks and operating procedures. The members’ duties are sporadic and do not enable them to study the files in depth. In order for them to be able to work more effectively, it would be preferable for at least some of them to have earlier experience in Community affairs, especially in the investigative field.

15.

According to Regulation (EC) No 1073/1999 (Article 11(6)), the Supervisory Committee is obliged to hold at least 10 meetings per year. However, if the Committee is to concentrate on safeguarding the independence of OLAF’s investigative function, it must not be put under an obligation to meet almost monthly. Furthermore, a review of the Supervisory Committee’s role and operational procedures should lead to a reduction in the number of posts in its secretariat.