ACF: We have reported violations involving BGN 294 million to the PFIA — in most cases the Agency does not react or classifies the information

From 2017 to date, the Anti-Corruption Fund (ACF) has submitted 15 reports for mismanagement of public funds to the Public Financial Inspection Agency (PFIA). The alleged violations have resulted in financial losses of BGN 294 million. In five years, the Agency has managed to commission investigations in connection with only 8 of the reports, and 4 of these investigations are classified. In the remaining 7 cases, where the limitation periods have already exceeded 3 years, the PFIA has not commissioned investigations yet due to “lack of administrative capacity.” Thus, even in cases where violations have caused losses worth millions, the perpetrators have remained unpunished.

These are some of the substantial problems surrounding the work of the PFIA — the institution entrusted with protecting the financial interests of the public — which ACF reveals in the new video clip “On the Trail of the Missing Capacity.”

Абонирайте се за бюлетина на АКФ, за да научавате за най-новите ни разследвания и анализи:

С натискане на бутона потвърждавате, че сте запознати с Политиката ни за поверителност

The PFIA is an agency under the Minister of Finance responsible for the management and expenditure of public funds. The PFIA conducts financial investigations, detects fraud and other violations, identifies incurred losses, and brings perpetrators to justice.

“We from ACF submit reports to the PFIA each time when we identify red flags for violations and malfeasance surrounding the conduct and execution of public procurement orders and other public expenditures. From 2017 to date, we have submitted 15 extremely detailed reports to the PFIA, in which we have identified violations or serious indicators of violations. In five years, the PFIA has only examined 8 of the reports, and the information on 4 of those is classified. In the remaining 7 cases the PFIA has not even commissioned an investigation in all these years,” states Sofiya Zheleva, legal advisor at the Anti-Corruption Fund.

What are the main problems encountered by the ACF experts?

Problem 1: “Lack of administrative capacity”:

The PFIA takes on average two years to commission and conduct an investigation on an ACF report. The justification is always the same: “A financial investigation will be commissioned once we have the necessary administrative capacity.”

In accordance with the law, the PFIA gives priority to cases referred by the Minister of Finance and other ministers. Next are the cases referred by the Prosecutor’s Office, and only at the very end, if there is any “administrative capacity” left, come the cases referred by other individuals and legal entities, including non-governmental organizations.

Investigations on the last category of cases begin with a huge delay — 2 or 3 years — and even if violations are identified, the applicable limitation period has usually expired.

Thus, even in cases where violations have caused losses worth millions, the perpetrators remain unpunished.

Examples of such cases are ACF’s reports related to a number of irregular procurement orders, including: an order for animal waste disposal with a value of BGN 90 million; an order for road construction in the Dospat and Pernik municipalities; and an order for insurance policies in the Silistra Municipality, among others.

Another example is the contract concluded between the Pazardzhik Municipality and the company Real States EOOD for the construction of the biggest photovoltaic power station in Southeast Europe. For the purposes of the project, the municipality sold 2,000 decares of agricultural land to Real States for the price of BGN 500,000. However, this large-scale project was never realized, and Real States was released of its contractual obligations. The municipality did not invoke the penalty clause worth BGN 1 million, and it did not even claim back the practically gifted 2,000 decares of agricultural land. At the beginning of 2018, Real States sold part of the municipal land plots and generated a profit 10 times higher than the acquisition price.

“The Golden Puddle” is yet another case that has fallen victim to the PFIA’s lack of administrative capacity. In 2013, the Bulgarian Food Safety Agency commissioned the company P.F.C. EOOD to perform vehicle disinfection at the border and to collect the relevant state fees. According to official data, P.F.C. — which has neither the experience, nor the legal right to conduct the said activities — made BGN 33 million in profits over a period of 8 years. In the summer of 2021, the NRA audited the company and identified multiple violations, as a results of which it imposed precautionary measures in the amount of millions. Every day since then, the NRA has been collecting the daily cash turnover in an armored vehicle. And the company keeps operating.

The PFIA’s missing capacity has remained a constant in these cases, to the detriment of the State and the people.

“As long as the PFIA inspectors continue to only examine the cases referred by ministers and the Prosecutor’s Office, the lack of ‘administrative capacity’ will not be remedied. ACF is of the opinion that the PFIA should not prioritize cases based on their source, but rather with reference to their public importance and to the financial losses resulting from the respective violations. In addition, it is necessary to conduct internal reviews into the work and efficiency of the inspectors,” adds Sofiya Zheleva.

Problem 2: the PFIA classifies the results of its investigations

There are several cases where the PFIA has launched investigations in connection with ACF reports, but refuses to share the results. The justification for the refusals is that the Agency has found evidence of committed crimes that has been remitted to the Prosecutor’s Office. The officials incorrectly invoke Art. 198, par. 1 of the Criminal Procedure Code (CPC), according to which case files and materials included in pre-trial investigative proceedings can only be made public upon permission granted by the responsible prosecutor. However, the Prosecutor’s Office does not initiate investigative proceedings in respect of

many of the cases referred by the PFIA, and in those cases there is no reason to request a prosecutor’s permission for their disclosure.

“Informing the Prosecutor’s Office about a potential crime does not qualify as ‘investigation’ within the meaning of the CPC,” argues Sofiya Zheleva. “Invoking Art. 198 of the CPC in these cases is unlawful and leads to unjustified restrictions on the legal right of access to information. The PFIA and other institutions are increasingly misinterpreting the CPC, which poses a threat to free access to information of high public importance.”

As of July 2021, the Public Financial Inspection Agency has a new Director. One of the reasons behind the change in leadership was precisely the fact that financial inspections were not being commissioned on the vast majority of cases referred by individuals and legal entities.

“The Anti-Corruption Fund has communicated these issues to the new leadership of the PFIA. We expect a swift response in addressing the issues and reorganizing the work of the Agency, so that this key regulatory body would be able to perform its main function, which is to protect the financial interests of the public,” states Boyko Stankushev, Director of the Anti-Corruption Fund.