Tackling Fraud and Corruption Risks in the Slovak Republic - A Strategy with Key Actions for the European Structural and Investment Funds

Country specific strategy

During an 18-month period, the OECD worked with the Central Co-ordinating Body (CCB) within the Government Office of the Slovak Republic, which included fact-finding missions and interviews with 4 representative MAs. A number of other Slovak authorities were also engaged in the co-operation, including: the Public Procurement Office, General Prosecutor’s Office, Anti-Monopoly Office, Procurement Unit of the Deputy Prime Minister’s Office, Anti-Corruption Unit of the Government Office, Ministry of Finance (certifying authority, audit authority), and the central contact point for OLAF.

The OECD assessed relevant legislation, policies, practices and tools for managing risks, and organized five workshops with project participants. Experts and practitioners from six EU Member States shared their experiences in the form of practical case studies. In addition, the OECD conducted a survey of approximately 80 practitioners from program authorities in other Member States to gain insights into the most prevalent fraud and corruption risks and schemes that other countries encounter. Last, the OECD team researched fraud and corruption schemes involving ESI Funds.

This allowed the OECD team to gain a deeper understanding of how the ESI Funds were managed through the nine national and regional programs in the Slovak Republic, and the fraud and corruption risk assessment framework in place. The insights gained were published in the Report “Tackling Fraud and Corruption Risks in the Slovak Republic: A Strategy with Key Actions for the European Structural and Investment Funds”. This Report is a unique resource tailored to the specific context of the Slovak Republic.

The strategy outlined in the Report identified two key areas for improvement for the country:

1. Enhancing fraud and corruption risk assessments, with a focus on data-driven approaches to risk management; and
2. Adopting a systematic approach for managing fraud and corruption risks involving ESI Funds.

For each area, various issues were identified and priorities with respective key action items defined, such as:

• Clarify and improve the criteria for scoring fraud and corruption risks;
• Ensure control activities are appropriate, sufficient and proportional for mitigating identified risks;
• Conduct periodic statistical analysis of irregularities, fraud cases and audit findings to help determine higher-risk areas in different sectors across the whole system;
• Further define objectives and expand the use of Arachne for assessing risks within MAs, with practical guidance from the CCB;
• Have managing authorities develop and approve a tailored anti-fraud policy and disseminate it widely
• Develop formalized, regular, and ongoing training programs on fraud risk management and assessments for personnel in managing authorities;
• Organize information-sharing forums between authorities responsible for managing ESI Funds and key national authorities, including law enforcement authorities and the Anti-Monopoly Office.

The Report also provides a template for a fraud risk management scorecard for MAs and a list of concrete actions with a suggested timeframe for implementation for the Government of the Slovak Republic. Programme authorities in other EU Member States can use this practical resource. 

General Guide

The OECD team also carried out research on specific risks relating to each stage of the project cycle, identified preventive and detective actions to take for each stage and identified exemplary case studies. This information was summarized in the Guide “Fraud and corruption in European Structural and Investment Funds: A spotlight on common schemes and preventive actions”.  The Guide relates to ESI funds management in general and can be applied to any EU Member State. Although the guide does not present a definitive list of risks and actions, it provides a snapshot of common challenges that EU Member States face regarding fraud and corruption in ESI Funds, and suggests ways to tackle them.

The Guide focuses on an individual risk perspective. Risks identified at each project stage include, for instance:

• Application and project selection stage:
  • Applicants may submit a false declaration to strengthen their application;
  • Applicant may seek to influence members of the evaluation committee/board to ensure their project is selected, e.g. through bribes;
  • Members of the evaluation committee/board may collude with the applicant.
• Implementation stage:
  • MA may tailor tender specifications or leak sensitive bid information to favor one particular company or individual;
  • Companies or contractors may also take part in collusive bidding in order to win tenders;
  • Beneficiaries may fabricate fictitious works, services or activities or inflate of labor costs;
  • Beneficiaries may bribe officials to conceal the fraud scheme.
• Project closure and evaluation stage:
  • Perpetrators may try to cover up earlier fraudulent or corrupt activities and e.g. bribe auditors or evaluators;
  • Conflicts of interest may arise if the same people involved in the selection are also involved in the evaluation of the project;
  • Beneficiaries or third parties may submit forged documents.

Concrete actions to take at each stage include, among others:

• Application and project selection stage:
  • Requiring staff and members of Evaluation Committees to disclose their family member’s private interests to avoid conflicts of interest;
  • Cross checking information and using data analytics to check the submitted information;
  • Making sure staff are aware of available channels to report suspected fraud.
• Implementation stage:
  • Ensuring that an audit trail is maintained;
  • Ensuring all actors have similar access to tender information;
  • Establishing an e-procurement system for the dissemination of public procurement information.
• Project closure and evaluation stage:
  • Ensuring that auditors are subject to specific code of conducts;
  • Putting in place conflict of interest provisions;
  • Cross-checking information across available databases.

Furthermore, based on interviews, research and survey responses, the Guide includes a collection of 9 case studies about actual fraud/corruption schemes at different project stages. Each case study includes a description of the case and perpetrators involved, their tactics and the actions taken. It also lists preventive and detective actions that can be taken by procurement, managing and certifying authorities as well as evaluation committees and beneficiaries.

Overall, the OECD identified key areas where countries could improve risk management in ESI Funds:

• Strengthening the effectiveness, coherence and co-ordination of existing strategies for managing fraud and corruption risks and implementing risk-based control activities in EU-funded projects;
• Improving the effectiveness of methodologies and tools for identifying and assessing fraud and corruption risks in Operational Programs, including the use of data for analytics, leveraging risk assessments to inform decision making, and monitoring and evaluation of fraud and corruption risk management; and
• Enhancing activities and mechanisms that promote a government-wide culture of risk management related to ESI Funds, such as working groups, awareness-raising initiatives and technical trainings.

Communication of the results

The Strategy was published in October 2019 in the series “OECD Governance Reviews” and is available for download in the OECD i-Library (login needed) or can be read online. The Guide can be directly downloaded on the OECD website. The publication was communicated through the OECD network to experts and practitioners in the field of ESI Funds management, and was promoted on social media. The Report and the Guide were officially launched the same month with an event held by the OECD, with the publications being launched by then-Deputy Prime Minister of the Slovak Republic, Mr. Richard Raši and Deputy Secretary General of the OECD, Mr. Jeffrey Schlagenhauf. Slovak media covered the launch event of the Report.

During the Integrity Week 2019, the OECD also organized a seminar with experts from Member States and EU-level institutions to gain their perspectives on different thematic areas relative to the strategy.