Finance

Financial Audit of EC Projects FAQs

EU audit FAQs

Will my EC project be audited?

All EC projects are subject to audit.

If your EC award is worth €375,000 (FP7) or €325,000 (H2020 direct costs) or more your project will be automatically audited by UoE’s external auditors at the end of the project.

In addition, all EC projects are liable for financial and/or scientific audits for up to 5 years after the end date by auditors appointed by the EC regardless of the value of the award.

How many times can my project be audited?

For FP7 – as UoE has a Certificate on the Methodology for FP7, we do not have to carry out interim audits, therefore only one will be carried out at the end of the project if the threshold is reached.

For H2020 – One audit will be carried out at the end of the project if the threshold is reached.

What does the financial audit entail?

Terms of reference will be agreed between the University and the external auditor.

The auditor will select random samples and request auditable back-up for staff and non-staff costs charged to the project account. The volume of sampling is dictated by the EC and is 20% (minimum 20) for FP7 and 10% (minimum 10) for H2020 for each budget heading. This means for staff costs that usually all staff are sampled.

Once the auditor has reviewed all of these documents, and is satisfied that any adjustments that may be necessary have been made, a Certificate on the Financial Statements (or ‘audit certificate’) is issued and is then submitted to the EC along with the Form C financial statement (periodic financial report).

What constitutes ‘back-up’ for non-staff costs?

‘Back-up’ refers to the audit trail of a cost item detailing the description of the item, its cost, VAT and any additional charges, the date of purchase, a unique reference number, and the names of the supplier and customer.

The most desirable forms of back-up are invoices and receipts.

Evidence of the procurement procedures followed is now required for H2020 purchases and also the selection of the supplier for any subcontracting.

Travel costs backup - new for H2020 – we must show how the travel was connected to the action in the project and provide supporting documents for attendance and participation in events.

It is mandatory to keep ‘back-up’ for all items charged to the project account including goods, services, and expenses, as well as internally supplied goods and services.

What kind of back-up is required for goods and services supplied internally in UoE?

Anything which provides the same information as an external invoice is acceptable back-up for costs incurred internally in UOE provided that it also shows that the goods/services were provided at cost.

Beneficiaries of EC grants are not permitted to generate a profit from EC funding. Goods and services charged to the project account via EIT require back-up such as this in addition to the EIT request form. The EIT request form does not in itself constitute back-up.

Who should keep back-up for goods and services charged to EC grants?

Invoices for externally supplied goods and services, as well as receipts for staff expense claims are archived by UoE Accounts Payable and are therefore available for audit.

Back-up for internal charges should be kept by both departments/units involved in the transaction.

However, it is good practice to keep copies of all invoices/receipts charged to EC grants for up to 5 years after the end of the project as all EC projects are subject to audit (see above).

Do I need to keep original paper copies of the back-up?

A scanned version of the original document will suffice provided that the scan is of good quality and the document is fully legible.

What happens if the auditor deems a cost to be ‘ineligible’?

VAT is an ineligible cost for EC FP7 grants and this cost is covered by a central UoE fund.

Costs associated with any items charged to an EC grant which are ineligible under the terms of the EC Grant Agreement, charged in duplicate, or a contravention of UoE procedures for reimbursing expenses must be removed from the EC account and borne by a School/departmental account.

What constitutes ‘back-up’ for personnel costs?

An individual staff timesheet and UoE Contract of Employment is required for every staff member funded by an EC grant, whether in full or in part. In addition all payroll records must be provided for the auditor.

For H2020 we must show how we calculated the hourly rates for every month for each member of staff.