1. European Structural Funds Saxony-Anhalt Anti-Fraud Activities in Saxony-Anhalt especially in Public Procurements involving ERDF 12.12.2014 Mechthild von Maydell

2. Introduction Anti-Fraud Activities in Saxony-Anhalt Typical Sources of Errors/Audit Findings in Saxony-Anhalt Conclusion 2 Anti-Fraud Activities in Saxony-Anhalt especially in Public Procurements involving ERDF 2

3. Introduction Public Procurement Rules The aim of any anti-fraud measures According to statistics from OLAF EU-wide recoveries from detected frauds in 2012 amounted to EUR 691 billion, of which EUR 525 billion came from Structural Funds financing Anti-Fraud Activities in Saxony-Anhalt especially in Public Procurements involving ERDF 3

4. Anti-Fraud Activities in Saxony-Anhalt In Germany Anti-Fraud or Anti-Corruption measures are implemented in various legal acts. With regard to Public Procurement the general legislation is regulated in the Restriction of Competition Act [Gesetz gegen Wettbewerbsbeschränkungen (“GWB”)]. Additionally, the Federal Ministry of Economics has published a list of recommended activities against Corruption, the Federal States are asked to observe. Anti-Fraud Activities in Saxony-Anhalt especially in Public Procurements involving ERDF 4

5. In Saxony-Anhalt the Ministry of the Interior in 2010 has published Anti-Corruption Rules for all employees of public entities. In the Preliminary Remarks of these rules Pubic Procurement, including -the justification for the type of the tendering procedure to be used, -the notification of the contract to be awarded, -the procedure of selection of the best offer, -the actual award, -the audit of the work or service rendered as well as -the audit of the individual invoices, is named first being at risk for corruption. Anti-Fraud Activities in Saxony-Anhalt especially in Public Procurements involving ERDF 5

6. The second risk identified in the cited rules is Personnel. Personnel considered particularly at risk to corruption are all employees whose professional activities might result in –a material or immaterial advantage of a third party or the prevention of disadvantages as well as –an unauthorized advantage for the respective employee. Anti-Fraud Activities in Saxony-Anhalt especially in Public Procurements involving ERDF 6

7. Activities with regard to the indentified risks in Public Procurement: Advice to observe the Principles In case of Third-party participation The responsibility for a public procurement procedure remains with the procuring authority even if third parties/experts have been involved. Foreclosure of Bidders If a bidder is foreclosed from the Procurement due to unreliability the procuring entity has to justify the decision in writing Involvement of investigating authorities If suspicion of price fixing in a Public Procurement Procedure arises the investigating authorities have to be involved. Anti-Fraud Activities in Saxony-Anhalt especially in Public Procurements involving ERDF 7

8. Activities with regard to personnel at risk to corruption: Awareness raising and training of personnel Selection of respective personnel and rotation of jobs Individuals for administrative jobs at risk for corruption have to be selected carefully; job rotation is strongly advised. Rules for additional or secondary employment Rules forbidding the acceptance of presents or rewards Anti-Fraud Activities in Saxony-Anhalt especially in Public Procurements involving ERDF 8

9. Typical Sources of Errors/Audit Findings in Saxony-Anhalt Estimation of the contract value Deadlines, missing preliminary notification Choice of the procedure applicable Faulty Selection of bidders Anti-Fraud Activities in Saxony-Anhalt especially in Public Procurements involving ERDF 9 9

10. Incorrect use of evaluation criteria Prolongation of Contracts Addenda of Contracts Documentation Complexity/Bureaucracy Anti-Fraud Activities in Saxony-Anhalt especially in Public Procurements involving ERDF 10

11. Conclusion Anti-Fraud Measures in Saxony-Anhalt are implemented by governmental acts from both the Federal Government as well as the Government of the Federal State of Saxony-Anhalt Public Procurement Rules as part of these measures should be followed by all public entities awarding contracts Public Procurement Rules in Germany are complicated and non- specialized personnel of public contracting entities often do not follow all aspects of a proper procedure correctly out of ignorance. Neither on the federal level nor on the regional level the purchasing of goods, worksor services is centralized, i.e. any public entity in its role as a contractor has to procure the respective contract by itself. Often, contractors seek out external legal advice, which is costly. Anti-Fraud Activities in Saxony-Anhalt especially in Public Procurements involving ERDF 11

12. Detection of deliberate mismanagement, bid rigging or kickbacks is nearly impossible for audit Authorities Within the Audit Authority we are specializing some auditors in certain fields, i.e. Public Procurement or State Aid. These “experts” will be called in whenever cases involve their specialized knowledge When audited operations are related to bigger work or service contracts the Public Procurement files often consist of a high figure of individual contracts Regarding the recommendation to rotate staff in critical positions I was informed that rotation of sensitive staff is rarely applied and that training on corruption risk management and public procurement could be improved considerably Anti-Fraud Activities in Saxony-Anhalt especially in Public Procurements involving ERDF 12

13. Thank you for your attention Mechthild von Maydell Researcher for ESADE Head of the Audit Authority for the ERDF and ESF Ministry of Finance Editharing 40 D-39108 Magdeburg Email: mechthild.maydellvon@sachsen-anhalt.de Anti-Fraud Activities in Saxony-Anhalt especially in Public Procurements involving ERDF 13