EU budget lost nearly billion dollars to fraud last year

[May 31, 2016]  By Francesco Guarascio

BRUSSELS (Reuters) - Nearly $1 billion of European Union funds were given out to fraudulent claimants last year, with the biggest concentrations of suspected false claims in Romania, Bulgaria and Hungary, data from EU investigators shows.

In an annual report published on Tuesday, the European Anti-Fraud Office (OLAF) concluded that 888 million euros ($989 million) were probably disbursed to dishonest claimants in 2015, a slight decline from 901 million the previous year.

It amounts to some 0.6 percent of a budget that concentrates spending on subsidies to farmers and poor regions.

Among examples of probes into nearly 1,400 fraud allegations was a 1.3-million euro payment to modernize a vegetable chilling plant in Bulgaria, the EU's poorest state. When investigators looked into it, they found the equipment supplier and the factory owner were the same person, who had inflated the price.

Romania, Bulgaria and Hungary saw the biggest concentrations of fraud on the EU in 2015.

In another type of scam, importers of solar panels from China cheated EU authorities of penal import duty by using fake documents changing their provenance.

Cheating and error is endemic in public spending programs. The British government estimates its welfare system, 50 percent bigger than the EU budget, also loses some 0.7 percent to fraud.

But fraud on the European Union's 141-billion euro budget is a sensitive issue for an EU under pressure from voters skeptical of Brussels. Britain, a major contributor to the budget, holds a referendum next month on quitting the 28-nation bloc altogether.

OLAF's director-general, Giovanni Kessler, said he did not believe there was widespread corruption, however, and that a sharp increase in fraud detected after 2013 showed his agency was making its mark in encouraging people to report concerns.

Giovanni Kessler, Director-General of the European Anti-Fraud Office (OLAF) presents the 2015 annual report during a news conference in Brussels, Belgium, May 31, 2016. REUTERS/Francois Lenoir

Last year, 187 million euros were recovered through judicial action in member states and returned to Brussels, a drop of 10 percent from 2014. Kessler backs the creation of a prosecutors office for the EU which could have greater powers than OLAF to investigate. Governments have resisted that idea, however.

Some EU officials complain that national authorities can lack zeal in pursuing those who defraud the EU budget and in general can be careless about handing out EU funds correctly.

Only about half of OLAF's recommendations for prosecutions have led to indictments by national prosecutors in recent years.

(Editing by Alastair Macdonald and Alison Williams)

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