Horizon 2020: Being well-prepared for checks, reviews and audits (3/3)

With its framework programmes for research, Horizon 2020 and its successor Horizon Europe, the EU provides public-sector funding

With its framework programmes for research, Horizon 2020 and its successor Horizon Europe, the EU provides public-sector funding of €70Bn and from 2021 of €95Bn under numerous actions and calls. To ensure proper use of these funds, the European Commission and its agencies use a number of controls. Read what monitoring mechanisms are used to verify that obligations under the grant agreements have been met. Find out how to avoid cost rejections, grant reductions or even grant recovery due to problems with the Commission’s checks, reviews and audits.


Monitoring the proper implementation and correct financial management of H2020 projects

Horizon 2020 grants on actual cost-basis will be subject to controls by the Commission or its agencies to ensure that projects have been properly implemented and comply with the relevant grant agreement. This is done through a number of mechanisms, i.e. checks, reviews, audits and investigations. Each of them has a slightly different focus and could lead to cost rejection, grant reduction or even grant recovery if errors, irregularities and deviations are discovered. When there is suspicion of fraud, this could even result in a full OLAF investigation:

  • Checks are used to verify the proper implementation of a project, including deliverables and reports set out in the grant agreement. This involves checking submitted documents for consistency, double funding and plagiarism.
  • Reviews are carried out to confirm that a project complies with beneficiaries’ obligations under the grant agreement and involve the assessment of deliverables and reports. The emphasis of reviews is on the scientific and technical implementation.
  • Audits focus mainly on the financial and budgetary implementation of a project, but may also cover technical or other compliance aspects.
  • Investigations by the European Anti-fraud Office (OLAF) are launched when fraud is suspected.


Avoiding grant reduction or recovery resulting from Horizon 2020 checks and reviews

Checks are usually carried out up to 5 years after the payment of the balance. After receiving the periodic – or final – technical and financial reports in accordance with Article 20 of the annotated model grant agreement, (H2020 AMGA) the Commission verifies that the reports describe the work carried out, the progress achieved or the use of resources in line with the work plan of the action. The Commission will also routinely check for plagiarism and double funding. If checks show that ineligible costs have been claimed or if obligations under the grant agreement have been breached, this might result in a grant reduction or recovery. To avoid this, reports need to reflect the initial workplan and commitments under the grant agreement and beneficiaries need to ensure that all information is correct.


Reviews may be carried out up to 2 years after payment of balance. Reviews are announced by a letter via the Funding & Tenders Portal. This letter lists the independent experts appointed to carry out the review and whether the review consists of on-the-spot visits and/or review meetings. It also indicates what contractual description of an action will be assessed against the periodic/final technical and financial reports or the deliverables. To avoid cost rejection, grant reduction or even grant recovery as a result of a review, coordinators and beneficiaries need to ensure that the technical and financial implementation reflects the work programme and that they meet their obligations under the grant agreement. In case of a negative review report, they should consult seek advice from financial management consultants before embarking on the contradicting the review report.


Passing audits thanks to good financial management

While the Commission takes a risk-based approach to audits, focusing on new beneficiaries or large projects, a certain share of beneficiaries is randomly selected for an audit. H2020 audits may be carried out up to 2 years after the final payment and may extend to third parties as well as to contractors and subcontractors. In addition to a desk review of the documents submitted to auditors on request, most audits also involve on-the-spot visits. H2020 audits may be carried out by auditors from the European Court of Auditors or by external professionals. The audit process is formally initiated by a letter. Auditors usually request a wide range of records and documents such as employment contracts, payslips, the general ledger and supporting documents. After the audit, beneficiaries are given 30 days to comment on (and if need be contest) the auditors’ report.

Beneficiaries are well advised to establish the right processes for record keeping, accounting and financial management from the start. If you are new to Horizon projects or if your project involves complex financial management, you will benefit from financial management consultancy or training. Good financial management not only minimizes the risk of objections by auditors, but helps to avoid cost rejections or grant reductions. In case you have already received a letter from the auditors, it is high time to seek specialist advice, as audits may result in cost adjustments in favour of the EU budget (never in favour of beneficiaries!) and potentially in grant repayments. There are also specialized consultancies that offer audit simulation and audit stress testing. And what’s more – they also know exactly what auditors are looking for. Their advice is therefore vital in preparing for or contesting an audit.


Fraud investigations by OLAF

In case fraud is suspected, the European Anti-fraud Office (OLAF) will conduct a full investigation. If a coordinator, beneficiary or one of their staff members suspects fraud or irregularities involving EU public funds, this might be reported to the Commission or to OLAF. OLAF is entitled to carry out investigations at any time during or after the implementation of the action. The aim of the investigation will be to find out whether fraud, corruption or other illegal activities against EU interests have occurred. If OLAF finds that ineligible costs have been claimed, substantial errors or fraud been committed or obligations been breached, the consequences can be dire: from termination of a project and grant reduction to financial penalties and criminal prosecution at national level. Financial management training and consultancy will give you peace of mind that there won’t be any unintended errors or irregularities that might prompt an OLAF investigation.


How to pass Horizon 2020 checks, reviews and audits with flying colours

While the likelihood of a full audit may be slim, irregularities identified during checks or reviews could lead to cost rejection, grant reduction or worse. Substantial errors or serious breaches of obligations should therefore be avoided at all cost. This means that declarations on the grant proposal form need to be truthful. Beneficiaries are required to apply the eligibility rules and avoiding common sources of errors such as incorrect calculation of personnel cost. To avoid any risks, applicants should seek support in the proposal writing phase or have a proposal review conducted by consultants with an eye for financial details. If you are new to Horizon 2020 or if the financial management of your grant is complex, you should get financial management training and thus minimize the risk of repayments.


Professional advice on H2020 and other EU grants

Reach out to European Fund Management Consulting – EFMC, one of the leading financial management consultants for EU grant management in Europe, EC audit preparation, audit simulation and audit stress testing. EFMC has an excellent track record in helping clients during audits, including contestations. We also offer bespoke financial management training courses and tailor our consultancy to your specific needs before, during and after an EC audit or review. Contact us on info@efmc.eu or by phone on +372 604 1400.