Olaf investigates misuse of development money

The EU’s anti-fraud office, Olaf, is investigating the suspected misuse of development aid by a Brussels-based organisation set up to promote industry in poorer nations.

The investigation began on 9 January following suspicions picked up during a European Commission audit of the organisation, the Centre for the Development of Enterprise (CDE). Two individuals are under investigation.

Olaf would not confirm the amount of money involved in the investigation but it is thought to be less than €1 million.

A Commission spokes-man confirmed it had suspended all but a "minimum budget" to CDE pending the outcome of the inquiry.

The CDE was set up under the Cotonou Agreement between the EU and the African Caribbean and Pacific (ACP) states, and most of its funding comes from the European Development Fund (EDF). In addition to the €90 million over a five-year period it received from the EDF in 2003, €5m per year comes from institutions in EU member states and from enterprises, business groups and chambers of commerce with which the CDE works, according to its 2006 annual report.

With a staff of 54, the CDE provides help to individual enterprises and funds projects in sectors such as leather and textiles or agro-industry, in specific ACP regions.

Audits are carried out on the CDE by external auditors contracted by the organisation, by the Commission and by the European Court of Auditors. The Commission is an observer on the CDE executive board.

The director, Hamed Sow, has resigned, with effect from 20 August, because he wants to pursue a career in his native country, Mali, the CDE chairman, Philippe Gautier, confirmed.

Gautier said he had no details about the investigation but said it touched on the director.

Given that the CDE’s annual budget is about €18m, which funds more than 100 projects, Gautier said he did not believe the amount of money involved in the suspected fraud was large. More than 40% of CDE’s budget goes on staff salaries and the cost of running its building in Brussels, according to the annual report. "I can’t imagine fraud in millions, our budget is too small. There are hundreds of beneficiaries," he said.

An Olaf spokesman said it was unclear how long the investigation would take but that the average inquiry took two years.

The EU’s anti-fraud office, Olaf, is investigating the suspected misuse of development aid by a Brussels-based organisation set up to promote industry in poorer nations.