Regional Policy DRAFT GUIDANCE NOTE FOR MEMBER STATES ON FRAUD RISK ASSESSMENT 2014-2020 Leif Högnäs, DG Regional and Urban Policy Expert Group Meeting

Regional PolicyRegional Policy

DRAFT GUIDANCE NOTE FOR MEMBER STATES ON

FRAUD RISK ASSESSMENT 2014-2020

Leif Högnäs, DG Regional and Urban Policy Expert Group Meeting 16 July 2013


Requirement for anti-fraud measures in Requirement for anti-fraud measures in the 2014-2020 legislative proposalsthe 2014-2020 legislative proposals

Article 114.4 c) of COM(2011)615:

As regards the financial management and control of the operational programme, the managing authority shall put in place effective and proportionate anti-fraud measures taking into account the risks identified


Who is the guidance note intended for? Who is the guidance note intended for?

- the guidance note is mainly for the MA, which will be responsible for the fraud risk assessment and putting in place adequate anti-fraud measures- designation criteria: procedures for putting in place effective and proportionate anti-fraud measures - the Commission also provides guidance for the audit authority's verification of the compliance of the managing authority with article 114.4 c)


Structure of the guidance note Structure of the guidance note

The guidance note plus 4 annexes:

Annex 1: the tool, including detailed instructionsAnnex 2: list of recommended mitigating controlsAnnex 3: template for a voluntary anti-fraud policy statement Annex 4: suggested checklist for the audit authority


General anti-fraud guidance is also provided General anti-fraud guidance is also provided in section 5in section 5


Adequate internal coordination and Adequate internal coordination and response to fraud suspicionsresponse to fraud suspicions

- MAs should have clear reporting mechanisms ensuring sufficient coordination on anti-fraud matters with the audit authority and competent investigative authorities in the Member State, including anti-corruption authorities

- the MA and AA must transmit suspicious cases to the competent authority in the Member State for investigation and sanctions, including anti-corruption authorities, where relevant

-


The right tone from the top is keyThe right tone from the top is key

- voluntary template in Annex 3 for articulation of MA's official position on fraud, corruption and conflict of interest

- Managing authorities are also advised to take notice of Transparency International's Corruption Perception Index (CPI), when assessing to what extent its overall operating environment is perceived to be exposed to potential corruption and fraud


The guidance recommends that The guidance recommends that Managing Authorities for 2014-2020:Managing Authorities for 2014-2020:

1) MA must adopt a proactive, structured and targeted approach to managing the risk of fraud by assessing the degree of exposure to specific fraud risks2) when setting up the management and control systems for 2014-2020, MA must embed effective and proportionate anti-fraud measures in the management and control system, taking into the risks identified3) during the programming period, the fraud risk assessment must be carried out annually or bi-annuallyNB: the anti-fraud measures should be proportionate to the identified fraud risks


Practical tool provided for the Managing Practical tool provided for the Managing Authorities:Authorities:

- self-assessment team to carry out the assessment- the tool aims at adding value to sound financial management of funds - avoid as much as possible adding to administrative burden (embed anti-fraud measures in the (existing) management and control system) - end-user, on-the-spot consultation of the tool in 3 Member States: HU, PL and the UK


Focus on fraud risks in relation to three Focus on fraud risks in relation to three key processes key processes

- selection of applicants

- implementation and verification of the operations

- certification and payments


Basic steps in the methodologyBasic steps in the methodology

1) assess the ‘gross’ risk of specific pre-identified risks occurring under each of the three key processes (plus add any other identified risks) 2) identify and assess the effectiveness of controls already in place to mitigate against the identified specific fraud risks 3) assess the net risk4) as necessary, put in place any further mitigating controls


Structure of the tool, example Structure of the tool, example

Specific risk nr IR 7:

Contractors violate the contract conditions by non-delivery of agreed products or alterations and substitution with inferior quality:- Product substitution or- Non-existence of products or operation not carried out in line with grant agreement


Structure of the tool, example Structure of the tool, example

• RISK DESCRIPTION for IR 7:

• 1) Product substitution: third parties may substitute inferior quality items for those which are specified in the contract or otherwise fail to meet contract specifications and then knowingly misrepresent that they have. Beneficiaries may be complicit in this fraud or

2) Non-existence of products or operation not carried out in line with grant agreement: some or all products or services to be supplied as part of a contract may not be provided, or the contract was knowingly not carried out in line with the grant agreement.


Structure of the toolStructure of the tool

GROSS RISK- the total risk score will be automatically calculated by the tool by multiplying the score given by the assessment team to risk impact and risk likelihood

EXISTING CONTROLS- assess effect of existing controls on risk impact and risk likelihood (i e gross risk) by providing a score for each

NET RISK- the net risk score (i e the risk after current controls) is automatically calculated by the tool


Structure of the toolStructure of the toolACTION PLAN- when necessary, introduce a mitigating control against a specific net risk which is significant or critical (suggested mitigating controls are provided in Annex 2) - E g suggested control to mitigate against product substitution: requirement by MA for beneficiaries to request works certificates or other forms of verification certificates, awarded by an independent third party, on the completion of the contract.

TARGET RISK- target risk is automatically calculated by the tool


Thank you for your attention!

Questions?

Documents

Regional Policy DRAFT GUIDANCE NOTE FOR MEMBER STATES ON FRAUD RISK ASSESSMENT 2014-2020 Leif Högnäs, DG Regional and Urban Policy Expert Group Meeting