One of the reasons that not all of the money due to Bulgaria’s coffers actually gets there is that there are people who believe themselves to be untouchable.

In established and organised groups, and to a lesser extent as small groups or individuals, they withhold or conceal money due in VAT or customs dues. They believe that whatever they cannot achieve by stealth, they will accomplish by bribery.

Faced with one set of untouchables, you need another to counter them: Untouchables in the sense that was applied to Elliot Ness and his cohorts, the nemesis of Al Capone. That Capone, the one who got a seaside residence at Alcatraz for tax evasion, which proved a charge easier for the feds to make stick rather than one for Capone’s routine resorting to murder as a business practice.

This is not to suggest that Crown Agents, the consultancy hired by the Bulgarian Government to assist in the campaign to get the coffers their due, are trench coat and tommy gun types. Nor that David Smith, manager of the consultancy’s current project for Bulgaria, is likely one day to be played by Kevin Costner. Among other things, Costner’s getting too old, and Smith is only 44.

Crown Agents are consultants, not enforcers, so do not expect to see a balaclava-clad burly bunch of them bundling out of an APC and wrestling wrongdoers to the tarmac.

First contracted by the previous government, the consultancy lent to Bulgaria the idea of mobile customs teams, among other methods of improved service. The benefit claimed from the consultants’ previous work includes substantially improved collection of customs revenue, and recommendations of best practices against corruption. Their involvement earned Crown Agents a hostile campaign against them in some sections of the Bulgarian-language press, with one organ routinely referring to them as “Agents of the Crown”; and then, a few years back, there was the bomb at the flat of one of the team, which left him uninjured but deeply shocked.

In June this year, after a six-month gap after the expiry of the previous contract, Bulgaria signed a new contract with Crown Agents, with a mandate different from before.

Smith explains: “The contractor is the Ministry of Finance and the programme that we are delivering under the contract is to assist in the modernisation of the financial administration; within that, the beneficiaries are the ministry itself, the National Revenue Administration, the National Customs Agency, the Financial Intelligence Agency and the State Agency for Receivables Collection.”

This is considerably broader than the previous contract, which was purely to assist in improving the customs services. “We’re now looking at basically all of the revenue areas under the responsibility of the ministry.”

Smith said that the mandate covers all of the agencies, to look at actual levels of revenue collection, to assist the agencies in maximising revenue collection, especially in areas affected by Bulgaria’s January 1 2007 accession to the European Union. The consultancy is being asked to look at any areas of concern linked to meeting the requirements of accession in terms of the ongoing European Commission monitoring of Bulgaria, particularly corruption in agencies, and to assist in applying international and European best practice in the ministry and the agencies. “We’ll be addressing all of those issues with all of the agencies, individually, and part of it also is trying to join up the work of the agencies more effectively, both in terms of exchange of information among the agencies and on the IT side, looking at how their computer systems can more effectively work with each other to share information.”

It is not true, Smith says, that individual agencies’ computers cannot speak to each other at all. “There are, as with any computer systems, baselines where at least in terms of data fields, information can be exchanged. Whether you can actually have interfaces between the different systems to have a continuous stream of data is another matter, and we’re looking at that. We have an expert out this week looking at data dictionaries between the different systems to see how we can extract specific data fields and where there is information in the data field of one system, we can flag that up and compare it with that in another system. What we’re not looking at is changes to the systems themselves. They all have their own owners and their own programmes of IT development. We’re simply looking to add a layer of commonality where we can, and at a non-technical level, introducing standards of the operations of the systems and, in the managerial sense, to reduce potential for corruption.”

Asked whether achieving this would require changes to legislation, Smith said that Bulgaria’s primary legislation was consistent with EU requirements. However, there could be some areas where legislation could be enhanced while remaining EU-compatible. At the secondary level, meaning directives, and the tertiary level, directives at agency level, “we shall be looking at all secondary and third-level legislation to see where improvements could be made”.

A key question is whether there are examples elsewhere in Europe or further afield internationally that could be of use when the time comes for Crown Agents to make its final recommendations at the end of the current project.

“In pre-accession countries, yes, very much so.” Crown Agents worked with pre-accession countries in 1995 to 2004 and with Bulgaria before 2007. “A big part of that was exchange of experience not just between existing states then but among accession countries themselves. The result in any one member state ultimately is a synthesis of relevant experience, and what is relevant to one country may not to be relevant to another.”

Crown Agents believes that it would helpful to bring in experts from Slovenia, which has been through the process of accession much more recently than most EU states, and successfully, to assist Bulgaria to address its post-accession issues.

Slovenia, he said, took a lot of advice in the run-up to accession. It was a Greenfield country in the 1990s, and so was able to create from zero structures based on international advice and best practice, and actively sought to do so.

“That can quite often make life much easier than trying to advise on a system which has been there for 100 or, in Bulgaria’s case, 125 years.”

He said that Slovenia had been successful also because it was a much smaller country with a much smaller population. Bordering back then on an external border of the EU, it received enormous help from Austria and Italy. “They (Slovenia) had a lot of advantages, and they certainly took those advantages with both hands.”

Slovenia now is a model for almost all countries in South Eastern Europe that are drawing on its experience and expertise to assist them.

Crown Agents’ current contract with Bulgaria runs up to the end of 2008. Are there performance indicators in terms of revenue earnings by which the consultants’ success will be judged?

“There is no specific indicator on revenue and indeed, there never was under the previous contract. There was an expectation that revenue would significantly increase, and obviously the word ‘significantly’ can mean what anybody wants. Based on expectations and our experience in Bulgaria from the beginning, and on other previous large projects on which we have worked, although some of those projects because of the geographic and economic environment you can’t compare – such as Angola and Mozambique – but if compared with the programme that we did with Latvia in the 1990s, where we saw revenue increase by 90 per cent in two and a half years, we were hopeful and optimistic that we would achieve something similar to that, and indeed we did. We not only achieved it, but we exceeded it, significantly. But to put a target for revenue increase on a particular programme or activity is fraught with problems because there are so many external factors that can impact on revenue, that are beyond our control, beyond the ministry’s control or indeed, beyond anybody’s control.”

It would be equally difficult, Smith said, to separate out the work done by Crown Agents from other work being done by the administration and by other projects.

“Over the six years that we have been here, we have delivered every year, revenue has gone up to the extent that at the end of the last project, it was 182 per cent higher than it had been when we started. This was extremely gratifying from our point of view.”

Under the new (June 2007) contract, Crown Agents hopes that results will mirror what was achieved in customs previously. “Having said that, this project is in relative terms smaller than the customs project. In that project, we had 15 people, peaking at 25 people in 2005. This is 10 fulltime, and we are covering a much wider area. So we won’t have the hands-on role that we had initially in 2002. We are very much advisers, consultants to the ministry, rather than operational at the borders, although we will still be doing a lot of work outside of Sofia. We won’t simply be sitting in our offices writing reports.”

In the team of 10, five are designated mobile advisers. This means going out to customs border points, to customs local offices, to VAT local offices, to customs warehouses, to any point in Bulgaria to follow up on recommendations or at the request of the agencies.

Asked about Crown Agents’ reception among Bulgarian officials, Smith said that co-operation among all the agencies had been good, including actively seeking the consultants’ input to their activities and strategies. When it was put to him that some within the services could have something to hide and may not be sincere fans of Crown Agents, he said that in some dealings at local level, “not everybody is delighted to see us” but the reasons for this could be numerous.

“If, as with any organisation, there is a built-in resistance to change, and what we are trying to bring is change, change to processes which may not necessarily be corrupt but processes that are not being applied properly or may need improvement; that may require changes to working habits that have developed over a lifetime, and also, we are still consultants and people in organisations generally are not very impressed when consultants come in and tell them how to do their job better than they have been doing it for the past 20 years. That is part of the change management process and that is something that we are addressing everyday, and I have to say, in terms of our counterparts in the senior management of the organisation, very much with their support.”

A crucial development recently has been Crown Agents’ inception report on the project, delivered to the ministry on July 27. The report is intended to take the technical proposal on the key areas and turn it into concrete proposals. The inception report identifies areas of concern regarding risks to revenue, and deals with issues related to how levels of integrity within the agencies could be improved, and issues related to the accession process. There are 72 proposals for action, some applying to all the agencies, others related specifically to individual agencies.

“These are not recommendations for what the agencies need to do, these are proposals about what Crown Agents proposes we will do to help the agencies.”

Approval of the report by Finance Minister Plamen Oresharski means that Crown Agents can go ahead with some of the more concrete measures that it has proposed. “This report will be our bible for the next 18 months.”

Smith underlined that Crown Agents had been active in some areas, refining the implementation plan and developing others ideas, even pending the report, and it was a measure of co-operation from the agencies that officials had been prepared to work with them, instead of trying to be obstructive by claiming that the consultants lacked formal authority to proceed.

Crown Agents will be reporting back monthly on progress to the programme management council, which is chaired at deputy ministerial level. Every month, the consultancy will produce recommendations on how the ministry and the agencies can improve their work.

The report identifies risk-to-revenue areas as including collection of VAT, especially because of EU accession which has opened up potential and actual areas of fraud through fictitious registration of companies and through VAT carousel fraud (where goods are fictitiously or unnecessarily moved from one country to another and VAT claimed fraudulently along the way).

Excise goods is another area of current, and potentially future, concern. Differentials in excise rates and cross-border smuggling are identified as areas of concern in the report. The introduction of a marked fuel system, where the fuel attracts lower tariffs because it is designated for specific uses, also present risk of large-scale fraud if not properly controlled. Crown Agents’ team has experience in how this was dealt with, including by measures such as road testing units to check for abuses of the system.

The National Revenue Agency’s capacity to identify fraud has to be strengthened. This means improving capability to do risk assessment.

The National Revenue Agency and National Customs Agency have to work together more closely, including in measures such as joint operation. “Fraud, if it exists, is likely to be both in revenue and customs fraud because fraudsters and criminals will undertake their fraud and criminality without making a difference between the customs service and the revenue service, to them it’s just fraud. We’re all dealing with the same criminals at the end of the day.”

Who are these criminals?

“Criminals come in all shapes and sizes,” Smith said. But given that the key focus was revenue fraud, “we’re looking at importers, smugglers essentially who may be bring in tobacco and calling it tomatoes; or where goods are brought in are described accurately but are declared at values substantially below their real value.

“Ultimately, we are working to promote compliance. Yes, we are helping to identify criminals, but the most effective way to increase revenue is to stop people becoming criminals.”

David Smith’s career has taken him a long way from his childhood home in Kent and his A levels in French, Spanish and mathematics.

After serving with Her Majesty’s Customs for about nine years up to April 1996, he has worked on consultancy projects, principally related to customs matters, in a wide range of countries. His involvement with Crown Agents dates back to 1998.

He came to Bulgaria in January 2002 to manage Crown Agents’ customs reform assistance programme and currently divides his time between working on the existing project in Bulgaria and other projects elsewhere.

Currently, the full-time team implementing the June 2007-end of 2008 contract includes eight UK nationals, a Swede and a Dane. Some have been here since the beginning of the customs project and have a lot of experience of Bulgaria, while others are serving officers from UK revenue and customs.

Asked about his approach to management, Smith said: “It’s a very interesting managerial job managing the two contracts we’ve had here.”

In 2005, the staff complement was at its peak, with an international full-time component, local full-time staff, along with experts brought on board to deal with specific issues and local support staff such as translators.

“My general approach, in the six years here and previously in my career, is to do your best to get the best possible people that you can and offer a competitive package. Then treat them as adults, let them do their job.”

As to the technical advisers, including international advisers on customs and tax, Smith said: “my aim is that they should be able to spend all of their time doing what they are supposed to do, not worrying about other things, and that we should do everything we can to make their life as straightforward as possible, in terms of minimising bureaucracy and providing support to them”.

Smith said that he believed in integrating the international experts and the local staff into a single team by encouraging them to adopt the same principles. This mean ensuring that the locally-employed staff felt “part of the same team, and that they are part of the success when we are successful, and also accept responsibility when things do not go perfectly”.

The very low level of staff turnover in the past six years, he said, was “very gratifying, and a benefit to the project because of the stability that it has brought with it”.