Ministry of Finance of the Republic of Croatia

Independent Service for Combating Irregularities and Fraud (ISCIF)

Programme: IPA 2009 FPPRAC

Partner Country: Croatia

Area of Cooperation: Financial control - Protection of European Union financial interests

TWINNING LIGHT PROJECT FICHE

Further enhancing the functioning of Croatian AFCOS system with the aim of efficient protection of EU financial interests

Project budget: 230.000,000 EUR

STANDARD TWINNING LIGHT PROJECT FICHE

1. Basic Information

1.1 Programme: IPA 2009 FPPRAC

1.2 Twinning Number:

1.3 Title: Further enhancing the functioning of Croatian AFCOS system with the aim of efficient protection of EU financial interests

1.4 Sector: Financial control - Protection of European Union financial interests

1.5 Beneficiary country: Republic of Croatia

2. Objectives

2.1 Overall Objective:

To ensure the efficient and appropriate protection of EU financial interests in the Republic of Croatia within the process of preparation for EU Structural Instruments environment through supporting the improvement of competences and roles of the bodies in the AFCOS system.

2.2 Project purpose:

To upgrade the Croatian AFCOS system through the adjustment and alignment of its structure and functioning to the framework of EU Structural Instruments and accordingly, update and improve the procedures and provisions on prevention, detection, treatment, reporting and follow-up of irregularities and frauds in order to ensure sound protection of EU financial interests.

2.3.  Contribution to Accession Partnership/ Stabilisation and Association Agreement/ Program of the Government of the Republic of Croatia for the Adoption and Implementation of the Acquis Communautaire:

Accession Partnership

Accession Partnership (Council Decision on the principles, priorities and conditions contained in the Accession Partnership with Croatia and repealing Council Decision 2006/145/EC Brussels, February 05, 2008, 5122/2008) states, with regard to the ability to assume the obligations of membership, that it is needed to set up an effective and efficient coordination service to guarantee fulfilment of the obligations arising from Article 280 (3) of the EC Treaty (now Article 325 (3) Treaty on the Functioning of the European Union,TFEU) and application of the acquis concerning on-the-spot checks and inspections carried out by the Commission, in particular the obligation of assistance to Commission inspectors.

Stabilization and Association Agreement

This Twinning light project is in line with the overall goals stated in the Stabilization and Association Agreement.

Programme of the Government of the Republic of Croatia for the Adoption and Implementation of the Acquis Communautaire

Programme of the Government of the Republic of Croatia for the Adoption and Implementation of the Acquis Communautaire for 2012 indicates that Independent Service for Combating Irregularities and Fraud implemented the IPA 2007 TAF Twinning light project - Strengthening Croatian AFCOS System with the aim of protection of EU financial interests. New and improved IRS Irregularities Management procedures were developed and approved by the National Authorizing Officer (NAO). Furthermore, educational seminars on protection of EU financial interests were held for representatives from the AFCOS system bodies. In addition, promotional materials and campaigns were conducted with the aim of raising public awareness. In May 2011 Conference on Achievements and Challenges regarding the protection of EU financial interests was held as well. In 2012, further strengthening of administrative capacity is envisaged particularly through educational seminars within the FMC (Financial Management and Control) module 11 “Irregualrities and Fraud” which is carried out by employees of the Independent Service for Combating Irregularities and Fraud as well as through other FMC modules attended by the Independent Service for Combating Irregularities and Fraud employees.

Croatia 2011 Progress Report

Within Croatia 2011 Progress Report, Chapter 4.32, regarding Chapter 32 - Financial Control, it is indicated that “To ensure sustainability of reforms, the Department for Combating Irregularities and Fraud at the Ministry of Finance needs to improve its ability to play a leading role in the co-ordination of the overall process of fraud prevention, detection, reporting and follow-up. Further efforts are required in enhancing the quality of reporting of irregularities and providing continuous training on anti-fraud issues at all levels of the public administration.”

European Anti-Fraud Office (OLAF) Report “Assessment of Croatian Anti-Fraud Coordination System”

European Anti-Fraud Office (OLAF) Report “Assessment of Croatian Anti-Fraud Coordination System” which was made on July 30, 2007 consists of recommendations with the aim to raise fraud and irregularity awareness, assess the risks for irregularities in EU funds management and clarify the AFCOS role so that it has a legal mandate which guarantees its operational independence and the support of a horizontal network of relevant bodies in fighting fraud on EU funds through prevention, detection and follow-up actions.

Implementation of the activities envisaged within this Twinning light project and achievement of the set results will contribute to attain the relevant objectives of above mentioned documents. Moreover, this Twinning light project will be important instrument for enhancing the performance of the Independent Service for Combating Irregularities and Fraud in the Ministry of Finance regarding its key role in coordinating the bodies within AFCOS Network and Irregularity reporting system, as well as strengthening of the AFCOS system in general. Also, fulfillment of goals set in this project will contribute to efficient functioning of the AFCOS system in protection of European Union’s financial interests in the EU Structural Instruments environment, after Croatian accession to European Union.


3. Description

3.1 Background and justification:

Protection of EU financial interests implies the ability of a candidate country to apply the relevant acquis communautaire before its EU accession. With regard to that, a candidate country is expected to set up an operationally independent service for co-ordination with OLAF (so-called AFCOS, Anti Fraud Coordinating Service) and to ensure development of administrative capacities necessary for application of the acquis communautaire, including the capacity of legislative and judicial bodies to respond to cases where EU financial interests are jeopardized.

On 30 June 2011, at the 13th ministerial level EU-Croatia accession conference, EU Member States officially concluded accession negotiations with Croatia, which allowed for the signature of the Accession Treaty by the end of the year. Following the ratification procedure by all Member States and Croatia, the accession date is foreseen for 1 July 2013. After the accession, Croatia will also have on disposal new financial instruments: Structural Funds and the Cohesion Fund.

Once Republic of Croatia becomes an EU Member State, it will be obliged to comply with the obligations of Article 325 of the Treaty on the Functioning of the European Union (TFEU).

Until then, Republic of Croatia had to set up an effective and efficient coordination service to guarantee fulfilment of the obligations arising from Article 325 of the TFEU. This Article requires Member States to protect the EU financial interests in the same way as national financial interests.

According to the Budget Law adopted in July 2008 (OG 87/2008), the Republic of Croatia as a country user of the European Union funds shall ensure the protection of financial interests of the European Union by establishing the system for combating of irregularities and fraud (AFCOS). In line with Article 3 of the Budget Law, AFCOS is defined as a system through which the coordination of legislative, administrative and operative activities are implemented with the purpose of protecting financial interest of the European Union and direct cooperation with the European Anti-Fraud Office (OLAF).

In Croatia the AFCOS system includes:

1)  Network of bodies that are managing and using EU funds (Irregularity Reporting System);

2)  Network of bodies that are involved in combating fraud, corruption and other types of irregularities (AFCOS Network);

3)  Ministry of Finance – Independent Service for Combating Irregularities and Fraud (ISCIF) which is a coordinating service and a contact point to the European Anti-Fraud Office (OLAF).

Irregularity Reporting System is represented in the AFCOS system by Irregularity Officers, which are appointed in all bodies that are using and managing EU assistance funds.

AFCOS Network was established in July 2008 by Government Decision (OG 92/2008), through which responsibilities of bodies in AFCOS Network were stipulated and representatives of bodies in AFCOS Network were appointed.

The competent service, responsible for coordination of legislative, administrative and operational activities between bodies in the AFCOS system with the aim of protection of EU financial interests and immediate cooperation with OLAF, is the Independent Service for Combating Irregularities and Fraud. It has been established within the Ministry of Finance and is operationally independent from any single body within the AFCOS system.

The Government of Republic of Croatia brought the Conclusion in July 2008 by which it adopts the “Action Plan for enhancing the AFCOS system with the Aim of Protection of EU Financial Interests”. One of the measures set by the “Action Plan for enhancing the AFCOS system with the aim of protection of EU financial interests” (2008) is drafting of a National Anti-fraud Strategy and its Action Plan, for the period of 2010 - 2012.[1]

On January 14, 2010 the Government of the Republic of Croatia adopted the “National Anti-fraud Strategy for the Protection of the European Union Financial Interest for the period 2010 – 2012” and its Action Plan (hereinafter: Strategy). In these documents, the scope of work and responsibilities of bodies in AFCOS system have been defined. Also, the measures and activities for strengthening the protection of EU financial interests in Croatia have been set. Most of those measures and activities were fulfilled by the implementation of IPA 2007 Twinning light project “Strengthening Croatian AFCOS System with the aim of protection of EU financial interests” (more information on this project can be found under the point 3.2. Linked activities).

The Independent Service for Combating Irregularities and Fraud (ISCIF) is continuously following the implementation of measures set within the Strategy and its Action Plan. The measures and objectives are implemented timely and properly according to the implementation timeline set within the Strategy by all the bodies within the AFCOS system and other responsible bodies. Most of the measures have been already implemented, and the relevant bodies are regularly reporting to ISCIF on the implementation of the remaining measures. One of the measures still to be implemented is to adopt the legal base for the functioning of the AFCOS system, which will be implemented through adoption of the legal base for managing and using of EU Structural Instruments.

In the interest of strengthening the protection of EU financial interests in Republic of Croatia, the National Anti-Corruption Strategy and its Action Plan were adopted by the Government of the Republic of Croatia (OG 75/2008). The National Anti-Corruption Strategy, under the jurisdiction of the Ministry of Justice, highlights protection of EU financial interests, aiming to strengthen the AFCOS system in the area of ensuring integrity in procedures of using EU funds and effective combat of irregularities and fraud as well as affirming a zero-tolerance approach to corruption. Moreover, by fulfilling the measures from the National Anti-fraud Strategy for protection of EU financial interests, measures from the National Anti-Corruption Strategy shall also be fulfilled.

The aim of the current Twinning light project is to upgrade the Croatian AFCOS system through the adjustment and alignment of the structure and functioning of AFCOS system to the framework of EU Structural Instruments. The foreseen activities will ensure efficient functioning of all bodies in AFCOS system according to the competences and roles of:

-  Irregularity Reporting System - efficient irregularity reporting on EU Structural Instruments, adequate methods and procedures on prevention, detection, and follow up on irregularities and suspected fraud within the EU Structural Instruments, efficient inter-institutional cooperation, efficient fraud risk detection;

-  AFCOS Network – efficient inter-institutional cooperation, adequate methods on fighting fraud, corruption and other types of irregularities with regard to protection of EU financial interests;

-  Ministry of Finance – Independent Service for Combating Irregularities and Fraud – efficient coordination of bodies in AFCOS system, providing clear instructions for proceedings of bodies in AFCOS system, regular and proper communication with media representatives and public on raising public awareness on anti-fraud issues, development of fraud risk analysis and training programmes.

The results of this Twinning light project will lead to raising the level of knowledge of representatives in the AFCOS System bodies. This will have an impact on the quality of managing irregularities and fraud (in the field of prevention, detection, treatment, reporting and follow up of irregularities and fraud with regard to protection of EU financial interests) what will finally lead to the effective and efficient functioning of the AFCOS System as well as efficient protection of EU financial interests in Croatia.

3.2 Linked activities:

The measures and objectives from the “National Anti-fraud Strategy for the Protection of the European Union Financial Interest for the period 2010 - 2012” and its Action Plan have been fulfilled in certain areas through the IPA 2007 Twinning light project “Strengthening Croatian AFCOS System with the aim of protection of EU financial interests” (HR/2007/IB/FI/04TL), which was implemented in the period from October 2010 till June 2011. The main beneficiary was Ministry of Finance – Independent Service for Combating Irregularities and Fraud (ISCIF) and the Member State Twinning partner was Fight against Fraud Department – DLAF within the Secretariat General of the Romanian Government. Achieved results within the project are the following: procedures within the AFCOS system in the case of the occurrence of irregularities and fraud improved; mutual communication, collaboration and exchange of information strengthened; public awareness about combating irregularities and fraud strengthened; workshops and seminars on managing irregularities and fraud carried out.

The above mentioned IPA 2007 Twinning light project will be further extended through this IPA 2009 Twinning light project, which objective is to upgrade the Croatian AFCOS system through the adjustment and alignment of the structure and functioning of AFCOS system to the framework of EU Structural Instruments, particularly in the light of developing new National Anti-fraud Strategy and its Action Plan for the period 2013-2015 and amending Decision on establishing AFCOS Network.

Additional linked activities refer to the trainings, organized in cooperation with European Anti Fraud Office (OLAF) and SIGMA-OECD throughout the 2010 and 2011 for the representatives of the AFCOS system bodies. For the representatives of AFCOS Network bodies trainings were organized in the field of how to perform investigations and for the representatives of Irregularity Reporting System in the field of integrity and ethics. Additionally, in order to strengthen administrative capacities of the ISCIF, in February 2012, the ISCIF employees visited AFCOS Malta with the aim of familiarizing with the functioning of AFCOS department in Member States. The visit was financed by DG – ENALRG – TAIEX instrument. Moreover, with the aim to further strengthen the good partnership between the ISCIF and Romanian DLAF regarding the protection of financial interest of the EU in the Republic of Croatia, DLAF in cooperation with the ISCIF organized HERCULE II project on „Sharing the Romanian experience in fighting against irregularities and frauds affecting EU’s budget with the Croatian authorities. The project was held in March 2012 when a series of training activities (two 2,5-days seminars in Bucharest and two 2,5-days seminars in Zagreb) were held, bringing together the Romanian and Croatian authorities.