EU funds fraud: Bulgaria must return more than 30M euro

The European Union’s anti-fraud office OLAF last year recommended the recovery of more than 30 million euro because of schemes abusing EU funding, according to the office’s report for 2021.

One case concerned alleged irregularities and fraud regarding the implementation of a project to restructure and convert vineyards in Bulgaria, the report said.

OLAF found that some of the local workers on the project did not have an employment contract.

OLAF further uncovered that the main contractor had artificially inflated the costs of the works, part of which had actually been implemented by local workers employed by subcontractors at lower costs.

The office subsequently discovered that an economic operator from another EU country had reverted part of the amounts invoiced to the main contractor, which possibly constituted money laundering activity.

OLAF recommended to the European Commission (Directorate-General for Agriculture and Rural Development) the recovery of nearly half a million euro.

The report said that OLAF had concluded an investigation into the construction of 377 guesthouses in Bulgaria, which had been co-financed by the European Agricultural Fund for Rural Development (EAFRD), by recommending the recovery of 23 million euro to the European Commission (Directorate-General for Agriculture and Rural Development).

The fraud scheme in this case consisted in the use of EU funds for the construction of “guesthouses”.

In reality these guesthouses were constructed but were not used in accordance with the objectives based on which this activity had been financed by the EAFRD (e.g. to improve the economic sustainability of the areas in question, generate employment and diversify economic activities).

“These objectives would have been achieved if the guesthouses had actually been used to host paying customers, such as tourists, and not for private use,” the report said.

OLAF’s investigation revealed that the project did not meet the objectives of the financing from the EAFRD, based on parameters such as numbers of overnight stays and existing and new employment contracts; financial revenues and overall rates of implementation were very low.

“Furthermore, a high level of irregularities affected almost all of the projects,” the report said.

OLAF said that it had uncovered multiple irregularities and inflation of prices in a scheme funded under the European Agricultural Guarantee Fund in Bulgaria, which was meant to promote agricultural products such as wines, spirits, cherries and dairy products in the EU and in non-EU countries.

The contracts for the implementation of all 11 programmes were awarded to the same economic operator, which was based in Greece.

The procurement procedures for the selection of the implementing bodies for the 11 programmes deviated substantially from the requirements for a competitive procedure.

Other irregularities uncovered included the non-repayment of amounts borrowed in the form of loans by the implementing body to the beneficiaries in order to finance their own contributions to the project.

OLAF investigators also discovered that prices for the implementation of the programmes had been inflated, with substantial differences between the amounts invoiced by the service providers and the subcontractors. In some instances, no payments were made to the service providers.

OLAF recommended the recovery of the entire European Agricultural Guarantee Fund share in the financing for the 11 projects, which amounted to around seven million euro, the report said.

(Photo: Clive Leviev-Sawyer)

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