Summary of Fifth Activity Report of OLAF

Year Ending June 2004

OLAF is the anti-fraud Office of the European Commission. It has just released its fifth annual report.

The Funding For Peace Coalition (FPC) has long believed that OLAF has needed to take a stronger role in regulating the level of aid given to the Palestinians, both directly and indirectly. In fact, it is now over 2 years since MEPs began to question the direction and level of this funding. It is almost 2 years since 169 MEPs petitioned the European Commission for a full inquiry. Only then did OLAF begin to react, and even then it appears that any discussion will be limited to transfers up to 2002.

The recent report of the FPC has clearly indicated that European taxpayers' money has not reached the intended target population. Instead, an elite Palestinian leadership, protected by nepotism, has thrived on the backs of its own people and violence against all rivals.

OLAF's annual statement reveals that European finances are open to various types of frauds. This was particularly noticeable in the fields of direct expenditure and external aid. It should also be recalled that last year, press reports exposed how the EU's auditors were reluctant to sign the financial statements of the institution.

The FPC has picked out the pertinent points from the 82-page report. They are presented without comment. It can only be hoped that our members, journalists and politicians will continue to press the OLAF offices for a full and open report on aid to the Palestinians, devoid of the ignominy, which contaminated the MEPs majority report from April 2004.

Particular attention should be paid to the findings from page 40 and the immediately preceding pages.

  • Page 3: Much of the balance of OLAF's work has shifted to "those areas of the Community budget where the Commission administers expenditure directly. Much of these are at hisk risk of fraud."

  • Page 8: New departments were formed to strengthen the investigation of direct expenditures, "both within the EU and in external aid".

  • Page 9: OLAF's objectives are: "…to protect the financial interests of the European Union, to fight fraud, corruption and other illegal activity, including misconduct within European Institutions that has financial consequences."

  • Pages 17/18: Over 5 years, OLAF has been involved with 3,992 cases. This includes: - 162 involving direct expenditure and 281 involving external aid.

  • Page 26: Of the 637 new cases in the past year (a 9% increase): 8 (4%) came from the Middle East
    90 (14%) - direct expenditure
    125 (20%) - external aid

  • Page 38: New cases relating to external aid in non-EU countries rose from 48 to 52. Of these, 2 are from the Middle East.

  • Page 39: "The combination of multiple sources of financing and other factors have increased the complexity of accounting and other reporting requirements and so made it easier to divert funds for personal or criminal benefit. The methods employed include declaring bogus costs and financial transfers, declaring projects as completed when that is not the case, and seeking and receiving double or multiple funding of projects from different donors."

  • Page 40: "Alleged financing of terrorism:
    In February 2003, following allegations that European funds were used to finance terrorism or other illegal activity, OLAF decided to open an external investigation into alleged irregularities relating to financial assistance provided by the European Commission to the Palestinian Authority since the end of 2000.

    OLAF investigators visited the region in October 2003, January and October 2004, and held information-gathering meetings with representatives of various national and international bodies from the IMF, the World Bank, Middle Eastern countries, the private sector and member states. Despite improvements to the financial control systems within the Palestinian Authority, these systems are not yet sufficiently consolidated to exclude all risk of misuse. OLAF will report its final conclusions by the end of 2004."

  • Pages 76/77: On June 1 2004, OLAF staff records showed 287 employees, an increase of 25 in the year. There are a further 100 external experts. OLAF's annual budget is around EU40m.

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