How to Steal from Bulgarian State Fund Agriculture Mind the horns!

An expert report that Bivol has examined exposes evidence of a criminal corruption scheme and colossal abuse of European Union (EU) money in the Bulgarian State Fund “Agriculture” (SFA) which is responsible for the diversion of millions of euros from the Program for Rural Development 2007-2013. The report is 16-page long; it is written in English and describes the technology of the draining of EU funds through overestimation of project costs in the amount of millions of euros and inefficient monitoring and control over the work of the expert personnel and the executive staff.

The full report can be seen here.

In the simplest corruption scheme, the beneficiary inflates the prices under the summary bill of quantities BoQ (KSF) and subsequent SFA Appraiser (evaluating) Commissions turn a blind eye and do not reduce them if they conduct successful “negotiations” with the beneficiary. The content of these negotiations is not public, but there are clear indications that the topic of discussion is “distribution” of overestimated costs. Ultimately, European taxpayers are the ones harmed.

Abuses in large public tenders such as roads and other infrastructure, where there a number of bids and evaluation is based on various technical criteria, are more complex. There, the company that offered a significantly lower price may be disqualified on grounds of lack of “thoroughness and clarity”. The financial loss to the EU budget reaches 40-50% of the price because someone has decided on the base of subjective criteria what was “clear” and what was not. And the order goes to the “right” company that has offered an inflated price.

All this is subsequently legitimized by the SFA work groups that review documentation for irregularities and prepare audits. The trick here is to obliterate without any trace the audit trail by not sealing their meetings with a protocol, nor signing a control sheet for the carried out checks. The members of the work group also do not have the right to make reservations or record a dissent. When a decision is made to impose a sanction, the Executive Director has the right to give a negative resolution on the report. According to the amended work regulations, in this case the report is not reconsidered and the public tender is directly approved without imposing any sanctions

In addition, the final report does not get signed by the expert who has checked the public procurement procedure and who has written the initial draft version of the report, which leads to loss of the connection between the final report and the carried out checks during the subsequent control over the procurement.

In order to prevent a subsequent discovery of documentary evidence of abuses, the archive of the Program for Rural Development in the SFA looks like this – as a warehouse. At least, the documentation is not filed under the common for an archive numbers. That means that in fact the archive is missing, as noted in the report.

"Архивът" на ДФЗ за проектите по "Селската програма" за стотици милиони евро

The SFA “archive” for projects under the Program for Rural Development

SFA Executive Director Rumen Porozhanov feels offended

Bivol sent to SFA specific questions related to the content of the report and the described corruption. In his reply, Rumen Porozhanov says he would not comment on an anonymous document.

Bulgarian EU Commissioner Kristalina Georgieva passed the ball to OLAF

Bivol also sent questions to the European Commissioner for Budget and Human Resources Kristalina Georgieva, whose portfolio, in addition to overseeing the EU budget, includes prevention of abuse.

Georgieva passed the ball to OLAF, whose answer is indeed worthy of a literary prize. If there were a prize for bureaucratic nonsense, this text can undoubtedly be among the favorites.

With a view to preventing fraud related to expenditure under the European Agricultural Fund for Rural Development, OLAF generally undertakes the following measures:

OLAF draws on its operational experience in fighting fraud, corruption and any other illegal activity affecting the financial interests of the European Union to advise the other Commission services, including the Directorate-General for Agriculture and Rural Development of the European Commission (DG ARGI), the lead service responsible for drafting new proposals for legislation in the field of the Common Agricultural Policy (CAP) on making that legislation more fraud-proof. This may include adjustments of the eligibility criteria as well as procedural safeguards and more efficient and effective audit capacities.
OLAF is the lead service for the Commission Anti-Fraud Strategy and supports the other Commission services in the design of their anti-fraud strategies. OLAF also provides Member States with its experience and shares good practices in the development and maintenance of their National Anti-Fraud Strategies. Bulgaria has had a National Anti-Fraud Strategy since 2005. The Bulgarian National Anti-Fraud Strategy has undergone a revision for the 2014-2020 spending period.
OLAF, based on its operational experience, provides trainings and guidance to Commission services, including DG AGRI, as well as Member States’ authorities, including investigative bodies, on the entire fraud cycle (prevention, detection, investigation, sanction) and related topics. OLAF cooperates and shares best practices in fraud prevention with correspondents from the other Commission services and from the Member States. In that regard, in 2015 OLAF coordinated the drafting of a practical guide for funds managers titled “Identifying conflicts of interests in the Agricultural Sector.” The Bulgarian authorities have actively contributed in the workshops on fraud prevention chaired by OLAF.
OLAF continuously analyses data received from the Member States, in particular under their reporting obligations with view to irregularities and suspected fraud, and from the other Commission services as well as from its own investigations and, where appropriate, makes recommendations. The results of this analysis are mainly published in the annual report on the Protection of the Financial Interests of the European Union.

If you failed to grasp what specifically has been done so far to stop the ongoing corruption schemes and whether anyone has been sanctioned, the answer is – nothing. And if you have any doubts, take another look at the photo with the storage of documents, labeled an archive.

The verbosity of OLAF’s response, however, is indicative in comparison with the laconic refusal of the SFA to pay attention to the evidence in the report. What lies ahead is difficult to predict with certainty. According to sources of Bivol, the report has already caused a stir in Brussels and auditors have disembarked at the SFA. Hopefully, nobody will be hurt by a collapse of files in the archive.

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