Community Research and Development Information Service - CORDIS

 

Audit and certification policy

Sixth Framework Programme (FP6) - © European UnionSeventh Framework Programme (FP7) - © European Union

The Commission's new audit strategy

The Commission's Research DGs (RDGs) have decided to adjust and reinforce their audit strategy substantially in order to detect and correct any errors in cost claims submitted for FP6 and FP7 projects. Given the Commission's target to clear approx. 40% of the FPs' budgets of such errors altogether, the number of audits and participants audited will increase significantly. Furthermore, any type of organisation is likely to become subject of such an audit on-the-spot:

  • the large organisations (participants receiving the largest amounts of grants),
  • other organisation (selected randomly, based on a representative sample),
  • and some potentially high-risk organisations (selected on a risk-based sample, based on indications and/or suspicions from the Commission's Project Officers).

In addition, the Commission's services will share and exchange any relevant information in order to fully coordinate any corrective actions to be taken in a consistent way. Moreover, also the European Court of Auditors has announced that it will increase its own audits of participants in EU research projects.

Therefore, it is important that participants in EU research projects pay the utmost attention to the eligibility criteria for partial reimbursement of costs incurred for their projects before submitting their cost claims. Furthermore, they should prepare themselves for the event of an audit by making sure that they have the required supporting data and documents available at all times. Obviously, the detection of any ineligible costs claimed and reimbursed will lead to recovery of the amount or compensation with the next payment. Moreover, any error of a systemic nature will give rise to an extrapolation of similar corrections in all cost claims related to all other projects of the organisation in question. Beyond these corrections, other measures/sanctions may be applicable as well.
First, the Commission will claim liquidated damages to a beneficiary found to have overstated any amount and received an unjustified EU contribution as a consequence. No intentionality is required. The liquidated damages to be applied will be proportionate to the overstated amounts/unjustified EU/Euratom contribution received. Second, a serious breach of contractual obligations may give rise also to financial penalties and to exclusion from future grants, administrative sanctions and even criminal court proceedings.

The Audit and Certification Communication is provided by CORDIS in order to better inform beneficiaries about the cost eligibility criteria, the supporting data and documents needed during an audit on-the-spot, the audit procedure and the potential consequences. Especially the information on how to avoid some frequently made errors in cost claims may add value. Furthermore, feedback regarding the audits carried out and related findings, conclusions and recommendations will be made available through this channel on a regular basis as well.

Please look at the awareness leaflet [PDF] on the new and reinforced RDGs' common audit strategy.

Certification policy for the FP7

The certification policy for the FP7 Grant Agreements has been designed with the aim to "fix the future" by focusing on the preventive ex-ante verification in order to detect and correct the most common errors identified throughout FP6 audits at the earliest possible stage.

In addition to the Certificates on Financial Statements, which have to be submitted after the costs are being incurred and claimed, the General Conditions of the FP7 Grant Agreement introduced two new types of ex-ante Certificates on the Methodology which may be submitted prior the costs being claimed : the Certificate on Average Personnel Costs, optional for any partner intending to charge average personnel calculations, and the Certificate on the Methodology for Personnel and Overheads, addressed to a limited number of recurring beneficiaries fulfilling the eligibility criteria set by the Commission. Both certificates are intended to provide a set of facts and findings enabling the Commission services to assess the correctness of the method applied by the beneficiary for fixing the costs of Personnel and Overheads (in the case of the Certificate on Methodology) to be charged to the EU/Euratom Research Grants.

When the Certificate on the Methodology for personnel and indirect costs is accepted by the Commission, the requirement to provide an intermediate Certificate on the Financial Statements for claims of interim payments shall be waived.

Certificate on the Financial Statements (CFS) - Form D of annex VII of the grant agreement

The Certificate on the Financial Statements (CFS) in FP7 replaces the FP6 "Audit Certificate".

The CFS shall be submitted after the costs are incurred and claimed.

A CFS shall be submitted for claims of interim and final payments when the amount of the EU/Euratom contribution claimed by a beneficiary under the form of reimbursement of costs is equal or superior to EUR 375 000, when cumulated with all previous payments for which a CFS has not been submitted.

However:

  • for projects of a duration of 2 years or less, the CFS shall be submitted only for claims on final payments when the amount of the EC contribution claimed by a beneficiary is equal to or superior to EUR 375 000 when cumulated with all previous payments. This CFS has to cover all eligible costs.  If a period/grant has been audited by the Commission, the audited costs shall not be taken into account for the calculation of the EUR 375 000 threshold.
  • the requirement to provide intermediate CFS for claims on interim payments is waived when a Certificate on the Methodology for personnel and indirect costs is accepted by the Commission

The CFS shall certify that the costs claimed and the receipts declared during the period for which they are provided, as well as the declaration of the interest yielded by the pre-financing meet the conditions required by the grant agreement.

Certificate on the Methodology

Experience with past framework programmes has evidenced that the main sources of errors in the costs claimed by beneficiaries relate to the personnel costs and indirect costs, often calculated according to a methodology which does not conform to the grant agreement provisions.

The framework for the ex-ante certification of costs methodologies for FP7 grant beneficiaries is based on "agreed upon procedures" which have been established on the basis of international audit and accounting standards and in close co-ordination with the relevant professional audit body (see document FEE discussion paper 'Compliance with Laws and Regulations: Audits and Assurance Engagements in the Public Sector' and in particular page 22).

The objective of the certification on the Methodology is to promote the use of correct methodologies by beneficiaries when calculating personnel costs and indirect costs, in particular in those cases when average costs for personnel are claimed. The Certification on the Methodology should therefore reassure the beneficiaries that the methodology they use conforms to the FP7 Grant Agreement requirements.

In this context, two new types of ex-ante certifications have been defined in the General Conditions of the FP7 Grant Agreement:

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Certificate on the Methodology for Personnel and Indirect costs - Form E of annex VII of the grant agreement

The Grant Agreement allows that some beneficiaries submit, prior the costs being claimed, a Certificate on the Methodology they will use for the calculation of personnel and indirect costs. This option is opened to beneficiaries who:

  • have participated in at least 8 contracts under FP6 with an EU/Euratom contribution for each of them equal or superior to EUR 375000;
  • have at least 4 participations in FP7 Grant Agreements signed before the 1st January 2010 with an EU/Euratom contribution for each grant agreement equal or above EUR 375,000;
  • or, have at least 8 participations in FP7 Grant Agreements with an EU/Euratom contribution for each grant agreement equal or above EUR 375,000 at anytime during the implementation of the FP7.

This Certificate on the Methodology will have to be approved by the Commission.

The approval of the methodology will be valid for all subsequent financial statements submitted by the same beneficiary under the 7FP unless the beneficiary's methodology changes or if an audit or other control performed by the Commission services or on its behalf demonstrates that the methodology certified can no longer be maintained in its present form.
Beneficiaries receiving approval for both personnel and indirect costs will not have to submit Certificates on Financial Statements for interim payments. In addition, the final certificate on financial statements will be prepared by the auditors by verifying, for personnel and indirect costs, only the compliance with the declared methodology, thus adding simplification to the audit work performed.

Beneficiaries who consider they meet the eligibility criteria and intend to opt for the certification on the Methodology may introduce a request only by electronic mail to RTD-FP7-Cost-Methodology-Certification@ec.europa.eu.

The certificate can be submitted at any time during the implementation of FP7 and at the earliest on the start date of the first Grant Agreement signed by the beneficiary under FP7.

Certificate on the Methodology for average personnel costs - Form E of annex VII of the grant agreement

On 24 January 2011, the Commission has adopted new criteria for the use of average personnel costs. Beneficiaries are no longer required to submit a Certificate on Average Personnel Costs (CoMAv) for approval as a prior condition for the eligibility of the personnel costs. Nevertheless, the CoMAv remains as an option offering beneficiaries the possibility to obtain prior assurance on the compatibility of the methodology in place with FP7 rules.

These new criteria are applicable to costs declared in all FP7 projects, including thosealready signed. All beneficiaries applying average personnel costs are entitled to submit a CoMAv.

This notwithstanding, those beneficiaries who use average personnel costs and consider that they fulfill the eligibility conditions to submit a Certificate on the Methodology for personnel and indirect costs should consider the possibility of submitting a request for the latter instead of a request for a Certificate on average personnel costs in order to benefit from the waiver of the interim certificates of financial statements

SME owners and other natural persons without a salary can no longer request a CoMAv since they have to use the flat-rate as adopted in the above mentioned Commission Decision.

The request for a Certificate on average personnel costs can be introduced only by electronic mail to RTD-FP7-Average-Personnel-Rate-Certification@ec.europa.eu.

The certificate can be submitted at any time during the implementation of FP7 and at the earliest on the start date of the first Grant Agreement signed by the beneficiary under FP7.

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Core documents

Audit-related organisations

Last updated on: 2012-04-27