An analysis of types of errors in Public procurement within the Structural Funds Programmes

The Auditor General presented to Hon. Speaker the Report entitled ‘An Analysis of Types of Errors in Public Procurement within the Structural Funds Programmes’. This was a parallel audit carried out in conjunction with the Supreme Audit Institutions (SAIs) of eight Member States. This audit focused on errors that were already detected and categorised by the Authorities, namely, the Planning and Priorities Coordination Division, in its role as the Managing Authority (MA); the EU Paying Authority within the Ministry for Finance, as the Certifying Authority; the Internal Audit and Investigations Department, as the Audit Authority (AA); as well as the European Commission (EC). For the purposes of this audit, the National Audit Office (NAO) reviewed and analysed errors in expenditure carried out through public procurement and declared to the EC during the period 2010-2013.

The errors reviewed addressed various aspects of public procurement, including breaches of the principle of equal treatment, failure to state selection and award criteria and the resort to incorrect methods of procurement. Other irregularities included non-compliance with advertising procedures, unapproved changes in contract scope and the unjustified resort to direct contracts.

Irregularities detected accounted for 1.64 per cent of the value of projects carried out through public procurement. In terms of actual amounts, out of the €425,756,293, which represents the total value of projects, €6,997,691 were classified as irregular expenditure. This irregularity resulted in a financial correction of €1,291,297, equivalent to 0.3 per cent of €425,756,293.

Errors relating to the incorrect application of certain ancillary elements and breaches of the principle of equal treatment were the most prevalent. The first error, detected by the AA, featured a broad array of irregularities ranging from the erroneous application of public procurement regulations to contract management-related shortcomings. Irregularities classified as breaches of the principle of equal treatment entailed the inappropriate or incorrect application of the procurement method adopted, a lack of clarity with respect to the tender award criteria and other administrative shortcomings.

The most significant irregularity in terms of materiality was that of non-compliance with the advertising procedures. Irregularities classified under this category resulted from failure on the part of the Contracting Authorities to adequately advertise the project.  In the case of an error detected by the EC, this was the result of the misclassification of the project as ‘research and development’ instead of ‘education and vocational education services’. This led to an erroneous procurement method, which resulted in the Contracting Authority failing to appropriately advertise. The financial correction applied was that of approximately €1 million, equivalent to 25 per cent of the declared project cost.

The MA registered the highest incidence of error detection, equivalent to 59 per cent of all irregularities. Possible explanations for this are the fact that the MA is the first line of verification, therefore increasing the probability of detection, and that its breadth of review is wider than that of the other Authorities. The value of the irregularities detected by the MA accounted for 33 per cent of all errors. Although only one error was detected by the EC, this accounted for 54 per cent of the value of all irregularities. With regard to the corresponding financial corrections, those imposed by the MA made up for 21 per cent of the value of all corrections while that by the EC represented 73 per cent. Other shortcomings are presented in the Report.