Countering Fraud For Competitive Advantage: The Case Of EU Essay

Length: 6 pages Sources: 10 Subject: Accounting Type: Essay Paper: #55023841 Related Topics: Organisational Culture, Internal Auditing, Central Bank, White Collar Crimes
Excerpt from Essay :

EU's Current Anti-Fraud Strategy

For some time now, the issue of fraud and corruption in public service has been an issue of concern. This has forced many organizations to establish strategies aimed at detecting and minimizing the occurrence of such fraudulent activities in areas under their jurisdiction. This paper discusses the strategic management concepts in the risk-based policing strategy coupled with the principles and importance involved in the enhancement of organisational performance. Complementary factors and organisational culture are components that facilitate and militate against strategic fraud and corruption. The paper established alternative and successful strategies dependent on the factors of willingness of groups and individuals and ways of accepting them. In turn, this is dependent on the people seeking change and an understanding of the organisation's culture. The following study identifies the strengths and weaknesses of the European Anti-fraud Office (OLAF) as a strategy used by the European Union in countering fraudulent activities among its member states.

For purposes of balancing risk probability as it occurs in the anticipated losses and measures from the occurrence, the strategy calculates the levels of economic benefits linked to interventions and outweighed by the costs within the intervention. The concept also controls risks based on directed intervention and the consideration of inappropriate, displaced and transferred risks. The composite elements include transfer to alternate public and private organizations and the public among other insurance companies (Morgan & Boardman, 2012). The integral remittance of the working party includes identifying a broad scope of cost-effective control informing best practice guides the concept also promotes anti-fraud cultures through making recommendations for purposes of representing significant deterrent effects.

One of the strengths of OLAF is that it allows for preventative measures. Prevention is one of the most critical elements of the anti-fraud strategy used by the EU. Corruption and fraud are categorised as difficult undertaking that have extensive likelihood of detection. Therefore, there is a reduced scope of the occurrence. Achieving this component requires exercising of effective Controls in the systems. The EU constitution outlines the Contract and Financial Procedures and Rules through Delegation of Powers to provide a framework for extensive controls (Brooks, Aleem & Button, 2013). The enhancement of individual departmental and corporate instructions is an extension of procedure guides that emphasise on controls required and the relevance of separation of information and duties in security measures. The policy instils thorough monitoring systems. By extension, the major responsibility involved in ensuring sustainable sound systems includes variation of the department's managers who call on the assistance for the departmental finance officers. Internal Audits give opinions to the systems considered to include higher potential risks. External Audits have the responsibility of reviewing the adequacy of the agreements realised through audited bodies and hence prevent corruption and fraud.

OLAF insists on following codes of professional obligations and conduct. Employees, as well as members, are subject to the codes of conduct together with various elements of professional obligations. Failure of abiding by the outcomes for formal action leads to disciplinary action. The strategy is keen on managing tokens and gifts legitimately accepted and issued to departments from Head of Human Resources and other senior members like the Chief Executive (Sousa, Hindess & Larmour, 2012). Subordinates are issued approaches to be taken when considering items such as gifts and development of departmental registers. Chief Executives are expected to keep registers of the personal interests realised from the elected members. This applies to all EU member countries.

Employees should inform the manager about their interests in writing. The manager later notifies relevant chief officers for formal registration. When the involvement cascades down to contracting, there is a need to declare to the manager all personal interests from theirs, their family or friends in regards to potential contractors that conflict with the organisational interests. The component includes valuation in contracting for a partner those other organisations that the firm is a member of (Morgan & Boardman, 2012).

OLAF promotes training and selection of employees as an important dimension of prevention. All selection procedures such as taking up of references and criminal record checks, where appropriate, are followed through training availed to people undertaking financial-related duties. The departmental finance representatives give advice to the employees while assisting them undertakes their duties. Employee and system change periods are particularly critical in preventing fraud. Extensive management and supervision require consideration of employee changes and vacancies. The relevance of controls against fraud within new systems needs consideration from the managers who undertake...


Internal Audits are informed on any changes made to the important systems. The components are either financial or operate on information that is fed to financial systems.

OLAF also promotes information sharing through strategic reporting. Financial reporting is done to the Corporate Governance Committee. The progress report from Head of Internal Audit is presented to Corporate Governance Committee, and content includes investigations on all suspected corruption or fraud cases. Copies of the financial report are sent to standards committee (Ryder, 2014). The chief solicitor reports cases that relate to the Standards Committee members. Financial reports are also shared with leaders. Chief Executives advise Leaders in areas that serious fraud or corruption case result in arrests. Information is also shared with external audit teams. Head of Internal Audit teams advises external auditor on all serious fraud or corruption cases. The leaders provide information within the annual returns report regarding fraud and corruption. The Internal Audit team includes cases that are prosecuted in the annual reports and Internal Audit works.

Furthermore, OLAF allows the EU to detect crime easily in terms of fraud and corruption (Comer, 2003). Detection arises in various sources and hence the importance of the serious recognition and instant action to be taken. Internal controls allow for well-devised and properly operated controls that are the fundamental method in detection. Budgetary control provides the useful backup at secondary for managers in the identification of fraud through unusual spending patterns and overall budget overspends. Complaints follow-up and recording by the users are advanced with this approach. The services provided help in uncovering possible corruption and other fraudulent activities within the union members. Whistleblowing platforms are provided as concerns and Interest Disclosure rights for stakeholders are properly investigated and recorded. Information within the concerned third parties is critical in the detection and management of corruption in cases where formal controls are ineffective through collusion.

Information shared by other bodies may take the specific forms of all individual referrals while taking part in the development of schemes and anti-fraud initiatives in the Audit Commission. Participation within the schemes is co-ordinated based on Internal Audit. The internal Audit Reviews are part of the assurance function for financial systems. Even though the responsibility of detecting all frauds and corruption are not based on audit suspicions, there are situations arising from follow-up.

Members require service where public interests and improper conferment lead to disadvantage or advantage on all parties. Members need to continue making decisions on merit such as awarding contracts, making appointments, or recommending benefits or rewards for individuals. Members are required to be accountable to members of the public for all actions and ways in which they conduct their responsibilities. The concept requires extensive co-operation in fullness and honesty based on appropriate scrutiny of the particular offices.

Members should take into consideration the views of others such as the political groups while seeking to reach individual conclusions for issues prior acting according to the conclusions. Members promote equality through avoiding unlawful discrimination against all persons and through treating people based on respect despite their race, disability, age, sexual orientation, religion or gender. The individuals should observe respect throughout integrity and impartiality of the statutory officers and other employees.

However, the strategy presents a number of shortcomings. First, the approach makes it difficult for the EU to identify and analyze underlying reasons in crime reduction strategies. Further, a complex matrix of actions intensifies the understanding of why organizations within private and public sectors develop anti-fraud strategies. The strategy also fails to evaluate and identify the differing concept in application with the goal of reducing the fraud levels (Ryder, 2011).

The strategy also shows little information of strengths and ways of addressing weaknesses of subsequent fraud reduction strategies in government organizations and departments. The strategy poses high bureaucracies in identification of international approaches and countering fraud components (Barr, 2010). An alternative to the approach includes providing viable mechanisms of strengthening revenue administration and enhancing financial accountability among state enterprises. The system should advance the monitoring role in the engagement of public resources based on poverty reduction initiative (Collier, 2005). The approach also fails to consolidate extra-budgetary funds within the budget through enhancing tariff and tax systems' transparency. The concept should also reinforce central bank independence through strengthening prudential supervision among financial institutions.

The systems lack a clear path of improving the timeliness and quality of financial and economic statistics. Further controls are necessary for the Commission to put in place and achieve efficient, cost-effective and proportional elements. Fraud…

Sources Used in Documents:


Barr, D., (2010). Fraud and error: The Future. Department for Work and Pensions

Brooks, G., Aleem, A., & Button, M., (2013). Fraud, Corruption and Sport. New York: Palgrave Macmillan.

Button, M., & Gee, J. (2013). Countering Fraud for Competitive Advantage: The Professional Approach to Reducing the Last Great Hidden Cost. New York: John Wiley & Sons.

Collier, P. (2005). Management Accounting-Risk and Control Strategy. New York: Elsevier.

Cite this Document:

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