Financial Interests of European Scale

The research ("FIES Study Final Report") addresses a sensitive subject related to the protection from fraud on EU funds (co)funding national or local action implemented through PPP contracts and other financial instruments. In short, it outlines how preventive methodologies concerning the protection of European financial interests require a new approach. FIES Final Report analyses the protection of European financial interests and proposes a new antifraud system based on EU common standards in managing ESI funds through PPP contracts and other financial instruments. Indeed, the method outlined requires managing authorities to assess fraud risk related to their discretionary decision-making and to set out appropriate ex-ante measures to contrast it, along with a system of alert signals related to specific symptoms. The very final purpose of the research is to shed new light on the protection of financial interests related to ESI funds, aiming to stimulate a debate among academics and practitioners on such a strategic subject. FIES Study tackles some specific purposes related to each other. The first one is to extend the traditional budgetary meaning of "EU financial interest" to that one of "financial interests of European scale." The stepping point is a shared, yet differentiated, responsibility among the European Union and the Member States in safeguarding financial interests and fighting against fraud that should be integrated by a more shaped concept of public benefit directly held by the Union. To that extent, it is requested to point out the EU as the holder of interests related to the sound management of its funds, which cannot merely cover only the "regular" expenditure of those financial resources as it also refers to the sound performance and, then, the effectiveness of actions eventually financed by the Union. The scale of the interests pursued by the Union through it also includes those related to their actual implementation. However, under this view, national and local authorities implementing measures and actions funded by the EU make up a complex (multilevel) administrative and managing system that cannot be considered as being separated or controlled through mere ex-post audits and reviews. The relevant question is whether a more harmonized legal safeguard of the financial interests at stake would be possible. The second objective is to propose a new approach to fraud risk prevention in managing ESI funds by national authorities. For this purpose, the project aimed to elaborate a series of risk-assessment macro alert signals (bias, fair proceeding, impartiality, etc.) as a method to detect potential prejudices to the ESI funding system irrespectively of the specific aim of the intention, thus covering irregularities, fraud or corruption. Preparatory to this objective, the Study focuses on the role of European and National authorities in the prevention of illegal activities and cooperation mechanisms in force involving private financial initiatives such as public-private partnerships (PPP) and financial instruments. As for PPP operations, the Study points out that those contracts may vary in risk levels associated with fraud, corruption, and other illegal activities compared to traditional grant schemes based on a combination of two key factors. On the one hand, PPP operations may combine public finance (ESI funds and contracting authority's resources) and private finance, referred to as blending. On the other, differently from traditional grant schemes, the number of players involved may include, at the same time, a private economic operator and a financial intermediate, the interests of whom might, in principle, be aligned with those of the contracting authority since private partners have an expected return on their investments on condition that the project performs in line with what contractually agreed. For that reason, the Study also proposes a set of preventive measures based on symptoms of irregularities, fraud, or corruption among those already adopted by national legislations and/or managing authorities.