Audits in Horizon Europe

Types of audits

There are different types of audits, which serve different purposes and are carried out by different entities:
 

Certificate on the Financial Statements (CFS) – 1st level audit

Further information on the so-called “1st level audit” can be found on our dedicated page “Certificate on the Financial Statements (CFS)”.

Audit by the European Commission – 2nd level audit

This type of audit is carried out either by the European Commission itself or by external audit firms contracted by it. The focus is typically on the verification of the financial implementation, but may also include technical or administrative aspects.

Important:

• Third parties (i.e. non-project partners) may also be audited. Beneficiaries must therefore ensure that the European Commission can exercise its audit rights vis-à-vis such third parties.
• If ineligible costs are identified, they may be recovered or offset against future payments.
• In the case of systematic errors, audit findings may be extended to other reporting periods or even to other EU-funded projects of the beneficiary (“extension of findings”).
• Audits may also lead to additional financial or administrative consequences.

Costs incurred in connection with an audit during the project implementation are, in principle, eligible.
 

Procedure

An audit generally follows this process:

1. Notification by the European Commission (Letter of Announcement, LoA) via the Funding & Tenders Opportunities Portal
2. Document review (“desk review”) by the European Commission or the external audit firm
3. Where applicable, an on-the-spot visit
4. Transmission of a draft audit report including the findings to the beneficiary
5. Opportunity for the beneficiary to provide comments within 30 days (“contradictory audit procedure”)
6. Transmission of the final audit report and the “audit letter of conclusion (LoC)”
7. Where applicable, follow-up measures (e.g. cost corrections, grant reduction) - Cost adjustments resulting from an audit are implemented by the European Commission. The beneficiary does not need to submit any separate correction.

Audit by the European Court of Auditors – 3rd level audit

The European Court of Auditors examines the use of EU funds and, in doing so, also reviews the activities of the European Commission. Beneficiaries and third parties may also be subject to such audits.

Supporting documents and record-keeping

To ensure eligibility of costs and proper project implementation, beneficiaries must retain all relevant documents and supporting evidence and provide them upon request. The retention period refers to at least 5 years after the final payment (or longer in case of ongoing audits or based on national requirements). In principle, original documents must be kept. Electronic or digitised documents are acceptable if they comply with national legal requirements.

For personnel costs, additional time records (declarations and/or time sheets) are required.

Important:

• Costs that are not sufficiently supported may be rejected and recovered by the European Commission.
• Beneficiaries are responsible for ensuring that their affiliated entities also comply with these requirements.

Further information

• Annotated Grant Agreement (AGA), articles 20, 21, 24.2, 25 as well as Data Sheet 4.3
• Online Manual of the European Commission
• Indicative Audit Programme (IAP) of the European Commission