Smallness of Estonia creates corruption hazard

Photo: SCANPIX

As evidenced by fresh study on risks related to use of EU money, Estonian corruption is moving into territories hardest to detect.

In 2012-2013, European Anti-Fraud Office (OLAF) did a study on corruption risks related to use of EU aid in Estonia.

The study reveals that opportunities for corruption are most abundant at the very top of the system i.e. political level and at the bottom – amongst those in direct need of EU help.

In the middle, however, where experts and committees weigh projects forwarded for funds, it is much more difficult to do anything corrupt; among other things, this is due to the abundance of eyes watching one another.

Effect of overpolitization

According Kristiina Tõnnisson, co-author of the report and director of University of Tartu European College, there are two possible paths those desiring personal EU gain may take. First, attempts may be made to buy up a critical share of government ministers, thereby influencing political choices of where the money will be directed.

«Indeed, investments plan always are a political decision and a matter of interests,» she said. «We may always ask: how transparent are politics, what were the calculations behind the decisions. If allotment of money must be decided between various equal schoolhouses, will the state decide or will some other factors come into play?»

«Considering the overpolitization of many positions, a project favoured by party comrades may be considered, of a section of a highway in one’s own administrative region preferred,» she added.

According to Ms Tõnnisson, the other option for channelling EU money comes on the so-called grassroots level. There, it is possible, for instance, to present false invoices for payments, include costs in projects not meant to be covered by aid etc.

In implementing agencies, it is more complicated to influence decisions in a corrupt manner. «Sure, it is possible to try manipulating opinions of experts assessing projects, but the system includes numerous check mechanisms,» said she.

As an application for EU support is filed, is it usually first inspected by a person checking conformity to technical requirements. The next step will be expert committee assessment – as a rule, the applicant not knowing who the committee is made up of. Thereafter, the head committee reviews the case, followed by decisions on the ministry level.

Thus, as noted by Kristiina Tõnnisson, all four stages ought to be somehow manipulated – or one to be heavily concentrated upon, to somehow affect all four.

Even so, she says the implementing agencies are severely audited – one follows another, with some of them considering hiring special staff to answer auditors’ enquiries.

According to the study, Estonia as a small country has its own specific risks with use of EU funds money. The smallness of our state means that we lack people, time and money. Many public sector officials and other employees are required to fulfil several roles at once – which may lead to conflict of interests.

«In small states, people have to be multifunctional, which means merging of politics and bureaucracy to the degree of combining of functions,» states the summary of the study.

Even in interviews done this spring with representatives of EU funds implementing agencies, references were made to conflicts of interests caused by «multiple roles of persons; as well as the tendency of almost everybody knowing everybody, as it happens in a small country».

According to Kristiina Tõnnisson, people, one of whom is an applicant for support and the other an expert committee member, may not officially be linked at all. In reality, however, they may move and relate in a common network, for example being former classmates.

According to Ms Tõnnisson, the number of people involved in distributing EU money is rather limited, perhaps a thousand or so. The amount of experts involved in a single agency usually is about fifty.

The roles of those people may vary – after being an expert with one projects, the same person may be an applicant with another project of the same field.

«A lot depends on the conscience of these people, whether they are aware of conflicts of interests. Even if they do not sense a direct conflict, rather a potential one, it would still be better to step back – so that the decision would also appear just, for instance,» said she.

With certain subjects, we have situations where, even if experts are not officially aware who are applying for the money, it is still clear anyhow, as there only are a couple of players in all of Estonia.

At the same time, it is not possible to impose strict rules – people may not have worked together or attended joint trainings – as then all possible players would fall away and no one could do anything.

The study points out that, in Estonia, labour turnover is comparatively high. Meaning that, in a small system, where even a single person leaves work and takes his experience and knowhow with him, skills shortage is created and colleagues come under greater loads. That, in turn, may lead to mistakes – at that, 2007-2013 mid-term appraisal of EU structural funds has revealed that labour turnover has caused delays in carrying the projects out.

As compared to Latvia, for instance, it has been attempted in Estonia to give EU money in small measures and to everybody, says Ms Tõnnisson, possibly causing fragmentation. In Latvia, the money granted is mostly cantered around Riga.

Complicated public procurements

An Estonian problem, according to Ms Tõnnisson, is the extremely complicated Public Procurement Act. «On occasions, state structures may evaluate things differently. One says certain costs are eligible, another says they are not.»

According to Ms Tõnnisson, there is not final clarity on how many of infringements detected were intentional fraud attempts, and how many were slips due to ignorance or other reasons.

With projects managed by state agencies, there is less motivation for intentional fraud as in private sector, thinks Ms Tõnnisson.

«Building projects are especially complicated,» she stated. «For instance, it is difficult to evaluate is an object will need 10 or 13 cubic metres of concrete. In such hazier matters, corruption may be easier to do.»

The study finds that, overall, state civil servants are afraid to make mistakes or behave in ways that might be interpreted as fraudulent corruption. Should doubts arise with use of EU money, it is best, according to Ms Tõnnisson, to address internal auditors; with more serious cases – the police.

EU money corruption risks study reveals that...

•    In over half the cases, infringements are discovered on initial level of inspection.

•    Majority of infringements are related to ineligible costs.

•    The weakest link of engaging EU funds is public procurements – the law of which is considered complicated and the proceedings extremely bureaucratic.

•    Those interviewed said that the notion of «right» criterion may, at times, be subjective and depend on the person who does the assessing.

•    In case of serious doubts, agencies are advised to address the police. Even so, majority of agencies are not inclined to do that.

•    As revealed by numerous cases forwarded to police, it would have been next to impossible to detect the fraud without the latter’s help.

•    It might be prudent to cut the amount of small projects, to concentrate on big, vital projects – with hopefully a larger impact on society.

•    As a smaller number of persons are forced to fulfil multiple roles, risk of conflict of interests increases.

•    Insufficient attention is paid to avoidance of fraud and corruption, in Estonia.

•    Majority of those interviewed thinks there are too many audits in Estonia.