The Commission/Agency may — at any moment and up until 2 years after the payment of the balance — carry out an audit.
22.1.3 Right to carry out audits
The Commission [or the Agency] may — during the implementation of the action or afterwards — carry out audits on the proper implementation of the action and compliance with the obligations under the Agreement.
Audits may be started up to two years after the payment of the balance. They will be formally notified to the coordinator or beneficiary concerned and will be considered to have started on the date of the formal notification.
If the audit is carried out on a third party (see Articles 10 to 16), the beneficiary concerned must inform the third party.
The Commission [or the Agency] may carry out audits directly (using its own staff) or indirectly (using external persons or bodies appointed to do so). It will inform the coordinator or beneficiary concerned of the identity of the external persons or bodies. They have the right to object to the appointment on grounds of commercial confidentiality.
The coordinator or beneficiary concerned must provide — within the deadline requested — any information (including complete accounts, individual salary statements or other personal data) to verify compliance with the Agreement. The Commission [or the Agency] may request beneficiaries to provide such information to it directly
For on-the-spot audits, the beneficiaries must allow access to their sites and premises, including to external persons or bodies, and must ensure that information requested is readily available.
Information provided must be accurate, precise and complete and in the format requested, including electronic format.
On the basis of the audit findings, a ‘draft audit report’ will be drawn up.
The Commission [or the Agency] will formally notify the draft audit report to the coordinator or beneficiary concerned, which has 30 days to formally notify observations (‘contradictory audit procedure’). This period may be extended by the Commission [or the Agency] in justified cases.
The ‘final audit report’ will take into account observations by the coordinator or beneficiary concerned.
The report will be formally notified to it.
Audits (including audit reports) are in the language of the Agreement.
The Commission [or the Agency] may also access the beneficiaries’ statutory records for the periodical assessment of unit costs or flat-rate amounts [or lump sums].
Audits normally concern mainly the financial implementation of the action by a beneficiary (i.e.
financial and budgetary implementation), but may also cover technical aspects or compliance with other obligations under the GA.
Specific case:
The Commission may audit the accounting records of beneficiaries, to obtain general information about actual costs for cost items that are reimbursed as unit costs, flat-rate or lump sums (for statistical purposes or to gather data to assess the adequacy of its unit cost, flat rate or lump sum). Such audits will however normally have no direct consequences for the beneficiaries that were audited; even if the actual costs turn out to be lower, this will not lead to a rejection of costs.
They consist in an in-depth examination (by professional auditors and according to the generally accepted audit standards) of the implementation of the action by the beneficiary.
They may also extend to third parties involved in the action and third parties receiving financial support or a prize (which is why beneficiaries must ensure that the Commission/Agency can exercise its rights towards contractors, subcontractors, linked third parties or third parties providing in-kind contributions, by including appropriate clauses in their contracts with them; see Articles 10-15).
Examples:
1. The Commission/Agency will audit linked third parties, as if they were beneficiaries. The audit will be carried out on the premises of the third party and all communication concerning the audit will be carried out directly with the linked third party (e.g. audit initiation letter, contradictory audit procedure). However, since the financial consequences would normally have to be borne by the linked third party’s beneficiary (see Article 44), the Commission/Agency will also notify the beneficiary about the launching the audit, as well as about a summary of its conclusions.
2. The Commission/Agency may audit third parties providing in-kind contributions (free-of-charge or against payment), in the context of an audit of a beneficiary, in order to see if the costs claimed for the in-kind contribution are eligible. The audit procedure will therefore be with the beneficiary. The beneficiary is responsible for ensuring that the auditors have access to all necessary documents and to the third party’s premises, if necessary.
3. The Commission/Agency may audit contractors or subcontractors, in the context of an audit of a beneficiary, in order to see if contracts/subcontracts were awarded in compliance with the requirements of the H2020 GA (ensuring best value for money or if appropriate the lowest price, absence of conflict of interest) and that the payments made under the contract/subcontract were in line with the GA (e.g. amounts paid to the contractor/subcontractor match those declared by the beneficiary). The audit procedure will therefore be with the beneficiary. The beneficiary is responsible for ensuring that the auditors have access to all necessary documents and to carry out checks on the contractor/subcontractor’s premises, if necessary. .
For this category of third parties, audits will not aim to assess the contractors’/subcontractors’ costs, because the remuneration they get is a set price, not a reimbursement of costs (except in cases of fraud).
4. The Commission/Agency may audit recipients of financial support or prizes, in the context of an audit of a beneficiary, in order to see whether the eligibility conditions for the costs declared by the beneficiary are met.
The audit procedure will therefore be with the beneficiary. The beneficiary is responsible for ensuring that the auditors have access to all necessary documents and to the recipient’s premises, if necessary.
For recipients of financial support or prizes, audits normally will not aim to assess the costs incurred by the recipients (since they are not relevant for the eligibility of the beneficiary’s costs), except if Annex 1 to the GA provides that the financial support must be given as reimbursement of the actual costs of the third parties. .
If the audit shows, ineligible costs, improper implementation of the action or the violation of other obligations under the GA, it may lead to suspension, termination, rejection of costs, reduction of the grant and, if necessary, recovery (see Articles 42-44, 47-50).
In some cases, findings may result in the acceptance of previously rejected costs (if the beneficiary declared them).
2. Procedure
The audit will be initiated by a letter sent to the beneficiary concerned.
The Commission/Agency will transmit this letter (and the other communications relating to an audit as formal notifications, through the electronic exchange system or by registered post with proof of delivery; see Article 52).
If the Commission/Agency uses an external audit firm, this letter will mention its name.
The beneficiary may object to an external auditor on grounds of commercial confidentiality (and explain the reasons for this). If justified the Commission/Agency may decide to appoint another external auditor (or, in exceptional circumstances, to carry out the audit with its own auditors).
The audit usually involves a desk review of the documents requested from the beneficiary and an on-the-spot visit (i.e. on the beneficiary’s premises or on the site on which the action is being implemented). (There may however also be audits that consist only in a desk review.)
The auditors will request access to a wide range of records and documentation (e.g. payslips, labour contracts, complete statutory accounts, etc) and will indicate how and when it must be provided (and in which format).
For more information on records and supporting documentation for the different cost forms, see Article 18.
The beneficiary must provide the auditors with all requested information, records and supporting documents (in the format and within the deadline specified).
Example: A hard copy list of records from the general ledger (accounting document) disclosing hundreds or thousands of transactions is impossible to process manually, therefore the auditors will normally require an electronic version.
Objections based on data protection or confidentiality will not be accepted.
Once an audit has started, the beneficiary must keep all the records and supporting documents until the audit procedure and its follow-up (including procedure of extension of findings, rejection of costs, reduction of the grant, recovery and litigation) is completed.
For on-the-spot audits, the beneficiary must allow access to its premises and ensure that all records and supporting documentation are readily available. This avoids any unnecessary delays in retrieving original documents from the archives (and thus minimises the risk of the rejection of costs).
Example: If the beneficiary archives the paper copies of the original supporting documentation not on its premises, the documentation must be retrieved and sent there in time for the audit fieldwork.
This includes granting access to research facilities and interviewing the researchers that worked on the action.
Failure to provide the requested information (in the requested format and within the specified deadline) will lead to the rejection of costs (and possibly other measures, such as recovery, suspension of payments, termination, administrative and financial penalties, etc).
Where the records and documentation contain personal data, the Commission/Agency will process it in compliance with Regulation No 45/2001 and the beneficiary must inform the persons concerned about this processing (see Article 39).
Moreover, all confidential data will be processed in accordance with Article 36.
The results of the audit will be recorded in an ‘audit report’.
The draft audit report will be sent to the beneficiary concerned for comments within 30 days (‘contradictory review procedure’).