The Dutch European Social Fund ‘bubble’ of 2002
Economic historians often cite the Dutch Tulip Mania of the 17th Century as the first commodity, or financial, crash in modern history.
Yet to European Union Structural Funds aficionados, the Netherlands holds another historical fascination: that of being the first country to have had an entire Structural Funds programme decommited.
The trouble began in April 1999 when a routine visit from Commission officials to the offices of the Public Employment Service (‘Arbeidsvoorziening’) in the Netherlands found that seven out of eight European Social Fund financed projects sampled had clear errors.
Further investigation revealed that expenditure and training hours declared had been “substantially” increased compared to spending and hours actually incurred.
The agency also failed to keep the proper paperwork and that 45 job-creation projects paid for from the ESF in the mid-1990s were executed “carelessly”.
Although there were no accusations of fraud, the Arbeidsvoorziening was found to have been responsible for numerous irregularities between 1994-96 when it managed financial aid from the ESF.
In 2002, the European Commission's concluding report highlighted “serious and systematic” irregularities and ordered the Netherlands to repay €157m (£137m) of ESF monies it received.
Whilst not being the first time audit irregularities had been found in the Structural Funds of member states, the amount decommited remains the largest in the history of the Funds to date.
Although, as Arfon Consulting's Alun Williams highlighted in an post (Scotland facing £190M in penalties due to spending “irregularities” in EU funds) earlier this month, Scotland's European Social Fund programme is currently under suspension with the Scottish Government potentially exposed to financial penalties of up to €235M for failings not all that dissimilar to that of the Netherland's Arbeidsvoorziening.
Perhaps ESF decommitals follow cylical trends like tulips, dot com businesses, sub-prime mortgages or cryptocurrency in occuring on a regular basis in economic cycles?
