CONFIDENTIAL
EUROPEAN COMMISSION
DIRECTORATE-GENERAL FOR RESEARCH & INNOVATION
Directorate M – Management Operational Support - Framework Programme
M.1 External audits M.2 Implementation of audit certification policy and outsourced audits
ANNUAL ACTIVITY REPORT ON EXTERNAL AUDITS
2011
Commission européenne, B-1049 Bruxelles / Europese Commissie, B-1049 Brussel - Belgium. Telephone: (32-2) 299 11 11
CONFIDENTIAL
Commission européenne, B-1049 Bruxelles / Europese Commissie, B-1049 Brussel - Belgium. Telephone: (32-2) 299 11 11
link to page 5 link to page 7 link to page 7 link to page 7 link to page 7 link to page 8 link to page 9 link to page 9 link to page 9 link to page 11 link to page 12 link to page 14 link to page 14 link to page 16 link to page 16 link to page 16 link to page 17 link to page 18 link to page 19 link to page 20 link to page 21 link to page 21 link to page 22 link to page 23 link to page 24 link to page 24 link to page 25 link to page 25 link to page 26 link to page 27 link to page 28 link to page 29 link to page 29 link to page 30 link to page 31 link to page 31 link to page 34 link to page 36 link to page 37 link to page 41 link to page 43
CONFIDENTIAL
Table of contents
Executive Summary ______________________________________________ 5
1. Background _________________________________________________ 7
1.1. Introduction ____________________________________________________________ 7
1.2. Legal background _______________________________________________________ 7
1.3. The mission of the External Audit Units _____________________________________ 7
1.4. Role within the control framework activities of DG Research & Innovation _______ 8
2. Activities ____________________________________________________ 9
2.1. The audit campaigns _____________________________________________________ 9
2.1.1. The FP6 audit campaign ____________________________________________ 9
2.1.2. The FP7 audit campaign ___________________________________________ 11
2.1.3. Additional auditing commitments ____________________________________ 12
2.2. Cross-RDG coordination _________________________________________________ 14
2.2.1. Coordination of audits in the Research family (CAR) ____________________ 14
2.2.2. Other coordination Committees _____________________________________ 16
2.3. Extrapolation __________________________________________________________ 16
2.3.1. Extrapolation policy and coordination ________________________________ 16
2.3.2. RTD extrapolation cases ___________________________________________ 17
2.3.3. Extrapolation implementation _______________________________________ 18
2.3.4. Extrapolation follow-up activities ____________________________________ 19
2.4. OLAF cases ____________________________________________________________ 20
2.5. Management and quality control tools ______________________________________ 21
2.5.1. Management and Quality Controls ___________________________________ 21
2.5.2. Keywords Working Group (KWG) ___________________________________ 22
2.5.3. The Audit Steering Committee (ASC) ________________________________ 23
2.5.4. The Audit Process Handbook (APH) and Audit Manual __________________ 24
2.6. Collaboration with the DG RTD administration and finance (UAF) network______ 24
2.7. IT developments ________________________________________________________ 25
2.8. FP7 methodology certification ____________________________________________ 25
2.8.1. State of play of certification files as of December 31st 2011 _______________ 26
2.8.2. Inter-service collaboration and communication activities (cf. 2.11) __________ 27
2.9. Coordination of outsourced audits _________________________________________ 28
2.10.
Other activities (Art. 185 Initiatives/JTIs/Executive Agencies) ______________ 29
2.10.1.
Art. 185 Initiatives _____________________________________________ 29
2.10.2.
Joint Technology Initiative (JTIs) _________________________________ 30
3. Results and Analysis _________________________________________ 31
3.1. Audit numbers _________________________________________________________ 31
3.2. Audit results ___________________________________________________________ 34
3.3. Analysis _______________________________________________________________ 36
3.3.1. Analysis of error rates _____________________________________________ 37
3.3.2. Analysis of adjustments at cost category level __________________________ 41
3.3.3. Assessment of the different steps of the control chain ____________________ 43
Page
3 of
51
link to page 44 link to page 45 link to page 46 link to page 49
CONFIDENTIAL
3.3.4. Qualitative analysis of error types ____________________________________ 44
3.3.5. Audit coverage __________________________________________________ 45
3.3.6. Lessons learnt so far from the audit campaigns: the most common errors ____ 46
ANNEX I: mission statements _____________________________________ 49
Page
4 of
51
CONFIDENTIAL
EXECUTIVE SUMMARY
In 2011, 337 audits were closed. The 2011 target was therefore achieved; the FP7 audit
campaign is on target. The proportion of audits closed in-house was noticeably higher in 2011
(39%) than in previous years. Cumulatively, in-house audits represent almost a third of all
audits closed.
The focus is now very much on the FP7 audit campaign (256 of the 337 audits closed were
FP7). The FP6 audit campaign is winding down (only 69 FP6 audits remain to be closed).
Although the proposed audit adjustments do not necessarily correspond to the actual financial
recovery made, it is worth noting that the cumulative amount of proposed adjustments at
funding level for FP6 is almost EUR 47 million in favour of the Commission.
The FP6 representative error rate stands at -3,4% with 20 representative results still pending.
The FP7 representative error rate stands at -4,2%; the fact that it is higher , according to the
data available, is explained by a focus on beneficiaries that had not been audited before;
because of the planning constraints agreed among the External Audit functions, some
representative audits on beneficiaries already audited could not be launched.
The analysis of the adjustments through either ex-ante or ex-post controls just shows how
many of the errors are identified through ex-post controls, and how insignificant the effect of
ex-ante controls is by comparison. For FP6, 91% of the net corrections are identified through
ex-post controls. Yet, most of the adjustments are errors of small or medium seriousness. 49%
of the FP6- and 63% of the FP7-errors fall in the category "small".
Therefore, it is believed that the vast majority of errors arise either from misunderstandings of
the rules or a lack of attention to the detail of the provisions of the grant agreements and
associated guidelines, despite further efforts for simplification. These efforts also concern the
FP7 rules and procedures, and reference can be made to the Commission Decision
C(2011)174.07 of 24 January 2011 introducing new criteria for the acceptance of average
personnel costs, for SME owner-managers, and establishing a Research Clearing Committee
to streamline procedures, working methods and interpretations within the Research family of
DGs towards the outside world.
In parallel, in order to reduce the audit burden on contractors, the Commission adapted its
sampling method to arrive at a representative error rate for the whole of the research
expenditure. On November 8th 2011, the ABM confirmed that the Research Commission
services could move to a common representative sample. Yet, this initiative alleviates only
partially our important efforts to streamline operations between the different External Audit
Units. The different fora of the CAR, the ESC, the FAIR, the MASR and the JAC (their roles
are described in this report) serve that purpose, but given the fact that DG RTD is chef-de-file
in these, the efforts of coordination are considerable.
Page
5 of
51
CONFIDENTIAL
In addition, the need for a minimum degree of co-ordination with the JTIs became apparent
over the year. They had already developed their own audit strategies "harmonised" with the
overall FP7 Audit Strategy, but this year they launched their first series of batches. The need
for access to a series of common IT tools became therewith apparent.
DG RTD intensified its collaboration with the Court of Auditors, with a total of 21 joint
audits done. The strengthening of the fraud detection capabilities also meant that there were
more audits done as a result of suspicions of irregularities (21 audits). In this context, more
intensive use was made of the advanced IT tool CHARON/DAISY facilitating investigation
and analysis. The Unit contributes to the fraud awareness trainings organised in DG RTD, and
initiatives are developed to identify plagiarism and/or double funding.
Internationally, RTD M.1 co-hosted with the US National Science Foundation, the 9th
International Workshop in Science and Research Funding in Brussels.
It is worthwhile noting as well that internal procedures have been further strengthened with
the formal integration of milestones of the audit workflow in AUDEX (the new audit
management information system introduced in 2011), and with further enhancements to
quality controls.
As concluding remarks, the External Audit Units can be proud of the fact that the European
Court of Auditors gave a positive opinion on the ex-post financial audits part of its assessment
of selected supervisory and control systems in Research. This positive assessment was further
confirmed by the IAS in its audit on "DG RTD's Control Strategy for on-the-spot controls and
fraud prevention and detection".
Page
6 of
51
CONFIDENTIAL
1.
BACKGROUND
1.1. Introduction
The purpose of this document is to report on the ex-post audit activities in DG RTD during
2011, using the numerical results of the verifications carried out and providing feedback on
relevant qualitative issues. This report also contributes to the assurance statement of the
Director General on the legality and regularity of financial transactions in DG RTD's Annual
Activity Report.
1.2. Legal background
For FP6, the legal basis for the External Audit activity is Annex III point 2, paragraph 7 of the
Decision n° 1513/2002/EC of the European Parliament and of the Council, and Article 18 of
Regulation (EC) n° 2321/2002 of the European Parliament and of the Council. For FP7,
reference must be made to Article 5 of the Decision n° 1982/2006/EC of the European
Parliament and of the Council, and Article 19 of Regulation (EC) n° 1906/2006 of the
European Parliament and of the Council.
The model contract for the 7th Framework Programme (Annex II, Article 22) states that: '
the
Commission may, at any time during the contract, and up to five years after the end of the
project, arrange for audits to be carried out, either by outside scientific or technological
reviewers or auditors, or by the Commission departments themselves including OLAF'.
Similar provisions are foreseen in the model grant agreement for the 6th Framework
Programme (Annex II, Article 29).
1.3. The mission of the External Audit Units
The External Audit Units provide a level of reasonable assurance to senior management and,
ultimately, to the Discharge Authority (European Parliament and Council) on whether DG
RTD contractors are in compliance with the terms of the DG RTD contract(s). This is done
through the execution of ex-post financial audits; ex-post audit results provide a
representative error rate and initiate the budgetary corrections managed by the operational
services. Thus, the External Audit function contributes to the protection of the European
Union’s financial interests.
Since 2008, the responsibilities related to External Auditing are attributed to two Units in DG
RTD: RTD M.1, which is responsible for strategy and planning coordination, in-house on-the-
spot audits and back-office work1; and RTD M.2, which is responsible for outsourced on-the-
spot audits and for the implementation of the audit certification policy. The mission
statements of both Units are in Annex I.
1 Back-office work refers to a number of tasks in support of the auditing function including audit information systems and data maintenance,
batch preparation, extrapolation, management reporting and a variety of administrative tasks.
Page
7 of
51
CONFIDENTIAL
1.4. Role within the control framework activities of DG Research & Innovation
Ex-post audit activities need to be seen as part of the overall integrated control framework put
in place by the Directorate General. Internal control activities include all ex-ante and ex-post
evaluations, controls, financial and scientific verifications and monitoring tools.
However, in the area of grant management for research expenditure, the focus remains very
much on controls after payment (ex-post), avoiding controls before payment (ex-ante) as
much as possible. This is a conscious decision with the aim of reducing the ex-ante
administrative burden as much as possible and therefore shortening the average time-to-pay
period.
Accounting transactions included in the cost statements are processed through the internal
control systems of beneficiaries and checked by their certifying auditors (where appropriate),
who then issue an audit certificate. The costs claimed by beneficiaries are thereafter checked
by means of desk reviews by the Commission's Project Officers (scientific and financial)
before payments are made. The use of certifying auditors has been adapted under the 7th
Framework Programme (FP7). Simulation exercises have shown that around 80% of the
transactions for which an audit certificate was needed under FP6 would no longer require an
audit certificate in FP7. As a counterweight, ex-ante certification procedures were introduced
for indirect costs' methodologies and for average personnel costs.
The control chain described above, which operates before any ex-post financial audits are
carried out, is considered in the overall evaluation of risk and of the External Audit results.
Close cooperation exists between auditors and Operational Units in the preparation phase of
an audit, as well as in the implementation phase of the audit findings (draft audit reports are
always sent for comments to the Operational Units). In a limited number of audits closed in
20112, RTD Project Officers did not agree with the findings of the draft report. However, final
audit reports always took – as much as possible – all their comments into account.
In the course of 2011, together with other RTD services, the External Audit Units were
actively involved in the preparation of some key documents which were part of the Inter-
Service Consultation on Horizon 2020. Our contributions were requested for the drafting of
the details of the management and control systems framework to be put in place for the
Horizon 2020 Rules for Participations. To that end, we were invited to share our expertise on
matters such as the eligibility of funding, the definition of scale of unit costs, productive
hours, flat rates, all types of certificates … and more generally on accounting, auditing, anti-
fraud and internal control matters.
2 An exact figure cannot be given, since this is not traced centrally.
Page
8 of
51
CONFIDENTIAL
2.
ACTIVITIES
2.1. The audit campaigns
Preliminary remark: Audits can be either done by the European Commission auditors (in-
house audits) or outsourced to an external audit firm (batch audits) under a framework
contract. The aim is to have at least 25% of the audits carried out in-house.
2.1.1.
The FP6 audit campaign
The FP6 Audit Strategy (FP6 AS), established after the critical Discharge procedure in 2006
and intended to cover the period 2007-10, focused on increasing the number of audits,
improving the consistency of approach and the coherence of conclusions, ensuring more
homogeneous audit policies among the research DGs of the Commission, calculating reliable
and representative error rates, and introducing the extrapolation procedure.
FP6 audits can be grouped under three strategic strands:
TOP: this was a selection of the beneficiaries which received the most money from
the Commission. The DG RTD list of top beneficiaries consists of 228 contractors
which received 50% of the FP6 budget managed by DG RTD. All beneficiaries in this
sample have been audited at least once (on at least three participations) and, where
necessary, further audits were carried out in order to confirm the presence or not of
systematic material errors for each beneficiary.
MUS: a selection of 161 beneficiaries was taken from the non-TOP DG RTD
population using the monetary unit sampling technique. One audit was carried out for
each of them.
RISK: the audits of this strand are intended to have a corrective effect on the amount
of errors present in the DG RTD population. Beneficiaries are selected on the basis of
different risk profiles, and the results of these audits are not taken into account for the
calculation of the representative error rate.
At the end of 2011, FP6 figures are as follows:
Table 2.1
EC share of the accumulated
Number
EC share of
adjustments in favour of the EC
of
Number of
the costs
Annual
Cumulative
Residual
audits
participations
accepted by
error
error rate
Representative
error
Year
closed
audited
the FO (€) Amount (€)
rate %
%
error rate %
rate %
Up to end of 2010
1082
2499
1,039,915,549
-39,558,926
-3.80%
2011
79
209
74,285,183
-7,394,929
-9.95%
-4.21%
Total
1161
2708
1,114,200,731
-46,953,855
of which, TOP + MUS
545
1374
566,943,257
-19,247,797
-3.40%
-2.48%
The FP6 AS assumed that most of the errors found while auditing would be of a systematic
nature, and that 750 audits would be sufficient to eliminate them from at least 40% of the DG
Page
9 of
51
CONFIDENTIAL
RTD FP6 budget and, in doing so, to achieve the control objective of a residual error rate of
2% or lower at the end of the multiannual FP6 audit campaign.
The mid-term review of the FP6 AS reported how this assumption was too optimistic after
finding that the proportion of systematic errors was much lower than anticipated (35.3% of all
errors in terms of amounts in DG RTD at the end of 2011). Increasing the total number of
audits was then considered necessary to keep alive the possibility of still correcting enough
errors to be below 2%.
At the end of 2011, 1161 FP6 audits have been closed in DG RTD, and when including the
audits still ongoing, the total will eventually be around 1230. Audit coverage3 from these
audits and those undertaken by other Commission services stands at 59.5% of the RTD FP6
budget, and the residual error rate is 2.48%, up from 2.16% at the end of 2010. This increase
in the residual error rate is the consequence of an increase in the representative error rate from
2.98% last year to 3.40%.
Last year we carried out an estimation of how many more FP6 audits would still have to be
launched in order to reach a residual error rate below the control objective of 2%, and whether
it would be cost efficient to do so. The conclusion was that it would not4, bearing also in mind
that the FP6 representative error rate will remain a moving target until all representative
audits have been closed (there are 20 still ongoing at the end of 2011), and that it was better to
devote more resources to the FP7 campaign. The fact that the residual error rate has increased
at the end of 2011 confirms that this was the right decision; otherwise a new lot of FP6 audits
would have had to be launched again now in order to bridge the bigger gap between the rate
and 2%. No further FP6 audits will be launched in future other than those related to fraud and
irregularities investigations, joint audits with ECA or audits requested by operational services.
Instead of launching more FP6 audits, and using their forecast cost inefficiency as an
argument, Commission services put their hopes on the adoption of a new tolerable risk of
error (=TRE), and on an acceptance by the budgetary authorities that, in the area of direct
research expenditure, an error rate higher than 2% ought to be tolerated. Had TRE been
already adopted, a residual error rate of 2.48% would be regarded as tolerable. Unfortunately,
this is not yet the case, although the Commission is considering using a different threshold for
internal management purposes.
Although it was originally foreseen that the FP6 audit campaign would finish at the end of
2010, there are two main reasons why there are still 69 ongoing FP6 audits: first, the mid-term
review made it necessary to extend that period because of the increased efforts in cleaning the
budget and in reducing error rates; and second, because some of the ongoing audits have
unearthed a number of complex legal issues which take a long time to resolve, extending
consequently the duration of the audits affected. The objective is to finalise all FP6 ongoing
audits in the course of 2012.
3 Audit coverage includes both the amounts directly audited and the non-audited amounts received by audited
beneficiaries from which systematic errors have been removed. See table 3.15.
4 For a full explanation, see last year's report Ares(2011)283720, p.9, and Ares(2011)824080
Description of the
analysis on the cost-effectiveness of controls included in DG RTD's 2010 Annual Activity Report.
Page
10 of
51
CONFIDENTIAL
2.1.2.
The FP7 audit campaign
In FP7, audits are categorised as:
Representative: using statistically representative sampling methods for selection, a
number of audits are undertaken for the purpose of accurately identifying the amount
of error present in the population (i.e. representative error rate).
Corrective: audits are selected using a variety of criteria, trying to maximise their
potential corrective effect.
Table 2.2
EC share of
EC share of the accumulated
Number
the costs
adjustments in favour of the EC
of
Number of
accepted
Annual
Cumulative
Residual
audits
participations
by the FO
Amount
error
error rate
Representative
error
Year
closed
audited
(€)
(€)
rate %
%
error rate %
rate %
Up to the end of 2010
185
260
48,394,236
-2,341,742
-4.84%
2011
256
582
147,262,681
-5,041,762
-3.42%
-3.77%
Total
441
842
195,656,917
-7,383,504
-4.19%
-3.65%
The FP7 audit campaign completed its second full year in 2011. 343 audits were launched,
and 256 were closed. In January, a second RTD-only representative sample was taken in an
attempt to increase the number of results available by year end, and to try to avoid the issue
we experienced at the end of 2010 of not having enough results to be able to provide the level
of assurance expected from ex-post audits.
Taking a second RTD-only sample by-passed, to a certain extent, the planning constraints
highlighted in last year's report which had been the main reason for not having enough results
by the time the 2010 AAR was written. However, planning constraints also affected how
many audits from the second sample could be launched straightaway, and these constraints
continued to be a serious hindrance to the implementation of the FP7 AS in RTD5.
As a response to this problem, the External Audit Units in RTD launched in February an
initiative to change the assurance system for research Commission services towards a unique
assurance model. After lengthy negotiations in the CAR, the Research Clearing Committee
and the ABM, an agreement was reached in November to use a single representative error rate
for all services from 2012 onwards, calculated on the basis of results from a common
representative sample. This common sample will render obsolete the planning clashes
inherent to a system based on multiple samples taken on a population of mostly common
beneficiaries, and the reputational risks of such approach.
For the moment, though, we still report on the basis of our own samples. A total of 108
representative results (the January 2010 and January 2011 samples combined) have been
collected by year end. It was interesting to follow the progression of the FP7 representative
error rate as more and more results came in during the year. A bigger body of results increases
the precision of the rates, and it became more and more clear that the result would turn around
4%.
5 See last year's report, section 1.5.3
Page
11 of
51
CONFIDENTIAL
Next year's representative rate will be based on the results of the common sample, half of
which will be results from other services.
2.1.3.
Additional auditing commitments
There are additional auditing commitments in the following areas:
Fusion: the current arrangement with RTDK is to audit all Fusion associations on a
cyclical basis. Each association is audited once every 3-4 years. In 2011, 7 audits were
launched, 3 of which were outsourced to an external audit company (Belgium, UK and
Switzerland), while 4 were executed with own resources (the Netherlands, Romania,
Ireland, Poland).
Coal and Steel (C&S): a small number of audits are launched every year on
beneficiaries who receive funds from the Research Fund for Coal and Steel (RFCS),
which is managed by RTD G. RFCS projects do not receive funding from the
Framework Programmes, and are therefore not considered as FP-related. For 2011 (in
line with the procedure started in 2010), a selection of contractors was made in the
following way: a list of all RFCS contract payments done in 2010 was obtained from
the responsible Unit (RTD G.5) by the RTD M.1 back-office. Then, all pre-financing
payments were removed from the list, leaving only midterm and final payments (i.e.
only the ones for which financial reports had been submitted). The sum of these
remaining payments was established for each contractor in the database; these totals
per contractor were ranked in descending order and the 5 biggest amounts,
representing the biggest contractors, were selected. The contractors previously covered
by Coal & Steel audits executed since 2008, were omitted from this selection. Each
audit covers a maximum of 3 randomly selected projects of each selected contractor.
From this selection, four audits were executed in 2011 and one was postponed to
2012.
Audits on Request (AoR): audits in this category are performed at the request of the
operational services, and they are normally quite specific in their scope. Following the
reception of such a request, RTD M.1 gathers detailed information from the
operational service, which is combined with information from other sources.
If needed, an ad-hoc meeting with the Audit Liaison Officer of the Directorate from
which the audit request originated is organised. The project officer as well as the
financial officer is welcome to participate in this meeting. The meeting allows getting
a clearer view of the issue and/or reaching a common position on the measures to be
taken.
The Audit on Request procedure has been adapted in 2011. Ad-hoc meetings have
replaced the previous quarterly meetings. The purpose of these ad-hoc meetings is to
get a broader feedback and a quicker decision as to whether or not to perform an audit.
If the audit-on-request relates to a potential risk of irregularity, the opinion of the RTD
M.1-OLAF Team is gathered before taking a final decision.
Audits on request are considered to be a risk-based audit under FP6 or a corrective
audit under FP7.
The full process is customer–oriented. For requests which are not accepted, RTD M.1
tries to provide the operational service with advice/recommendations concerning
Page
12 of
51
CONFIDENTIAL
alternative measures they may wish to implement in order for them to ensure that costs
are eligible.
In eight cases in 2011, the audit request was accepted and the related audit mission
was integrated into the usual audit planning. In three cases, the need to carry out a
financial or scientific audit was not recognised.
For the remaining six cases, following the preliminary analysis of RTD M.1 and
meetings with the operational services when needed, they have been requested to
provide additional information or to carry out supplementary steps to clarify the issue
or allow the operational service to get a better assurance without the (immediate) need
to perform an audit. These cases will be further followed up in 2012.
The Units that request the audits are always duly informed about the decision that has
been taken by RTD M.1, as well as of the underlying reasons.
Joint Audits with the European Court of Auditors (ECA):
Table 2.3: Joint audits with ECA
DAS
Audits by
campaign
ECA
Joint Audits
%
Disagreement on conclusions
2010
13
8
62%
3
2011
19
13
68%
1
Total
32
21
66%
4
2011 was characterised by an increased collaboration with the ECA. The Commission
auditors joined the ECA auditors in as many missions as possible. The experience
gathered in the last two years allows DG RTD to draw conclusions on the added value
of accompanying the ECA in the implementation of the DAS audit campaigns. We can
now conclude that this experience is positive as it enhances convergence of views and
results. It also helps to prepare DG RTD's comments in case of disagreement on
conclusions.
Taking into account the increase in the number of joint audits, a set of procedures has
been formalised in order to clearly define the duties of all stakeholders.
More generally, and within the institutional mandates of the Commission and the
Court, RTD M.1 and M.2 participated in joint meetings between the ECA, the DGs of
the Research family and Commission central services, which were organised to
discuss methodological issues and obtain mutual understanding of each other's
practices.
Finally, it is important to mention that, for the Declaration of Assurance for 2010, the
ECA gave a positive opinion on the ex-post financial audits part of its assessment of
selected supervisory and control systems in Research and other internal policies6. This
6 Chapter 6 'Research and other internal policies' of ECA's Annual Report 2010, Annex 6.2.
Page
13 of
51
CONFIDENTIAL
is an important achievement because it acknowledges the long way that DG RTD has
come from the disastrous Discharge in 2006 to this positive assessment in 2011.
Technical Audits: The Commission's Internal Audit Service recommended
implementing, where applicable, on-site technological and scientific audits as foreseen
by Art. II.23, Annex II of the FP7 Grant Agreement and Art. II.29, Annex II of the
FP6 Contract (cf. Recommendation No. 8 of the IAS audit on 'ex post control' of
2006). The objective of these technological and scientific audits is to look at research
projects implemented under the EC's FP funding from an independent scientific view,
and complementary to the usual project reviews that take place during the lifetime of a
project.
In 2010, RTD M.1 closed the 2 pilot projects, had 2 requests for joint financial and
scientific audits initiated and was asked for support on 2 scientific audits. In 2011, by
comparison, RTD M.1 only received one new request for a scientific audit, while
another technical audit is still ongoing. Despite the positive outcome of the pilot
exercise, these audits have not gained in importance.
Considering the slowdown in audit requests by the operational services and certain
reluctance from the operational Directorates to cooperate in scientific audits, RTD M.1
has developed a new procedure to launch technological and scientific audits on its own
initiative. This new procedure will be submitted for approval to our director in the first
semester of 2012
.
2.2. Cross-RDG coordination
The adoption of common corporate audit strategies requires close coordination between the
Research Commission services in a significant number of areas. DG RTD is the chair of
various committees for which it also provides the secretariat. This demands a significant
investment of resources, given the present RDG governance. Indeed, DG RTD has signalled
that the Commission is running serious cross-cutting risks in relation to (i) the co-ordination
of audit planning and (ii) a coherent and consistent presentation of audit results. Both these
cross-cutting risks were brought to the attention of the Commission central services in January
2010 (see section 2.1.2). In 2011 they led to the Common Representative Sample for the
Research family.
2.2.1. Coordination of audits in the Research family (CAR)
The main coordination forum is the 'Coordination group for external Audit in the Research
family' (CAR). The CAR tries to ensure a coherent approach towards contractors and
coordinates policy and operational matters related to the implementation of the Audit
Strategies. Chaired by RTD M.1, the CAR convened 14 times during 2011 (on average once
every three weeks outside the holiday periods). By the end of 2011, the audit services of the
three Joint Technology Initiatives (JTIs)7 linked to DG RTD joined the CAR. This is
7 Aeronautics and Air Transport (Clean Sky), Innovative Medicines Initiative (IMI) and Hydrogen and Fuell
Cells Initiative (FCH)
Page
14 of
51
CONFIDENTIAL
recognition of the importance of coordinated audit planning and of sharing audit tools and
results between research Commission services8 and their JTI counterparts.
The large majority of topics discussed by the CAR during 2011 were related to either the
steps required to finalise the FP6 audit campaign or to the implementation of the FP7 one:
Planning of audits:
until now, the Commission accountability scheme has been
based on providing representative error rates for each Research service for their part
of the FP expenditure. Each Research service has to perform a minimum number of
audits to obtain such a representative error rate, even if the budget of that service is
only a small fraction of the total research budget. This results in a high number of
audits with common beneficiaries frequently selected by two or more services,
leading to "planning clashes". As outlined above, this led to the proposal for a
common audit sample. In November 2011, the ABM9 agreed to this proposal. In the
run-up of the ABM Decision, this issue was discussed in depth in the CAR.
The CAR deals with numerous issues related to the
eligibility of costs. Given the
approval of the Commission Decision C(2011)174 of 24 January 2011 on
simplification of the rules for research financing10 , discussions took place on the
relationship of the various instruments in place for the assessment of eligible costs11.
In order to reduce the observations with limited impact it was decided to apply a
materiality threshold of 0.5% for errors to be reported, and to apply rules on how to
"net
off"
proposed
adjustments
(positive
vs.
negative,
see
2.3.1).
A series of other eligibility issues were also discussed (productive hours, bonuses,
interest on pre-financing, potentially overlapping subsidies [the Spanish research
support scheme "Torres Quevedo"], catering costs, fair allocation of indirect costs,
…).
The precise calculation of
error rates was discussed. In particular, it was examined
how the budgetary/financial effect of errors could be presented instead of reporting
only on errors that indicated a non-compliance with the legal and regulatory
framework.
Changes to the
audit tools12 were discussed and adopted following the
aforementioned Commission Decision. The adoption of a privacy statement by DG
RTD and INFSO led to the adjustment of the Letters of Announcement of these
research services.
Information on relations with
external parties (the European Court of Auditors, the
external audit firms, the Joint Undertakings) was also shared in the CAR. Specific
audit, planning and collaboration issues were discussed.
8 DG RTD, DG INFSO, DG MOVE, DG ENER, DG ENTR, DG EAC and the two Executive Agencies ERCEA
and REA.
9 ABM=Activity Based Management Committee in which there are also representatives of the central services
(SG, DG BUDG, etc.)
10 The Commission Decision covers the extended scope for the acceptance of average personnel costs; flat-rate
financing for SME owners; the establishment of a Research Clearing Committee (RCC).
11 The Key Words Group, the Research Clearing Committee, the FP7 Guide to Financial Issues.
12 For example the F7 Audit Handbook (for internal use by the RDG auditors) and the FP7 Audit Manual (for use
by the External Audit firms).
Page
15 of
51
CONFIDENTIAL
Information on planning, meetings, audit visits, audit reports and follow-up was
shared on
common beneficiaries. This concerned mostly beneficiaries participating
in a large number of contracts with various Research services for which extrapolation
was initiated but temporarily suspended ('centrally managed' cases, see section 2.3.3).
2.2.2.
Other coordination Committees
In addition to the CAR, DG RTD chairs a number of other coordination Committees:
Extrapolation Steering Committee (ESC, see section 2.3),
Frauds and Irregularities Committee (FAIR, see section 2.4),
Coordination of relations with the external audit firms, including the Monthly Audit
Status Meeting (MASR, see section 2.9),
Joint Assessment Committee (JAC, see section 2.8)
Working Group on Certification of Methodology (WGCM, see section 2.8).
Coordination is also supported by a number of IT tools known as SAR (Sharing Audit
Results) tools (see section 2.7).
2.3. Extrapolation
Extrapolation remains a key component of the common audit strategy because of its essential
role in cleaning the budget from systematic material errors.
2.3.1.
Extrapolation policy and coordination
The Extrapolation Steering Committee (ESC) has now been working for four years. It ensures
a common approach to decisions related to extrapolation. The ESC, in which all Research
Commission services13 are represented, is chaired by RTD M.1 and discusses and evaluates
potential extrapolation cases for beneficiaries put forward by an individual Commission
service. Its main aim and mandate is to confirm or deny the systematic nature of the errors
reported by the auditors.
The confirmation of the systematic nature of an error triggers a number of coordinated actions
both by the beneficiary in question and by the Commission services managing the projects in
which it participates.
The (2011)174 Commission Decision of 24/1/2011 sets out new criteria on
average
personnel costs which lead to
the broader acceptance of average personnel cost methods
used by beneficiaries as their usual cost accounting practice. As a result, the extrapolation
process was influenced, reflecting the fact that no extrapolation is launched when the correct
application of the decision is confirmed.
The extrapolation process is also affected by the decision of the 71st CAR (20/07/2011) to set
a common
reporting materiality threshold (in terms of cumulative net impact of all errors,
either positive or negative) of 0.5% of the total costs reported and audited for any given
participation. It is now apparent that each audit report needs to comply with this materiality
13 As of September 2009, representatives from the agencies (ERCEA and REA) have been participating in the
ESC. They play a full role in the extrapolation process under FP7.
Page
16 of
51
CONFIDENTIAL
threshold and consequently no extrapolation should be initiated for any
participation that
falls below the threshold.
A major improvement in the extrapolation decision-making process is the netting-off decision
of the 72nd CAR on 15/09/2011, which defines that all systematic errors (positive and
negative, irrespective of the cost category) are accumulated into one
global amount which is
then used for extrapolation provided that the offsetting balance remains negative. As a result,
no overall positive amounts are now extrapolated.
Finally, the ESC confirmed this year that extrapolation for potential fraud and irregularities is
not the appropriate procedure. Therefore it was decided to divert all the relevant cases to the
FAIR committee set up to discuss these sometimes delicate files (see minutes of 39th ESC,
10/11/2011).
In its 10 meetings in 2011, the ESC discussed a total of
151 extrapolation cases,
123 of which
were approved for extrapolation. Since 2008, a total
of
685 cases have been dealt with, 561 of
which have been agreed for extrapolation. The following table provides an overview of the
ESC decisions per Commission service.
Table 2.4 - ESC decisions taken in 2011
Agreed
6
9
2
34
6
9
57
123
561
No
Extrapolation
3
3
1
4
1
6
10
28
124
Total 2010
9
12
3
38
7
15
67
151
685
Experience gathered by the ESC allows for a continuous improvement of the underlying
extrapolation procedures and principles. Any new issues are often brought to the attention of
the CAR.
The necessity to establish a materiality threshold not only at the reporting level,
but also at
the level of extrapolation is an urgent requirement for the further streamlining of the ESC
process. Although the spirit of the decision to apply a materiality threshold at 0.5% of the
total costs is to prevent initiation of extrapolation triggered by very small amounts, it does not
necessarily prevent the launching of an extrapolation request on cases where the netted off
amount results in very low amounts (lower than 0.5%). The reason for this is that although the
materiality threshold is set at the participation level, the netting-off is calculated on a
global
audit level. A decision to set up a materiality threshold at the level of extrapolation would
definitely support the further streamline of the process.
Instructions were sought on these items from DG RTD management and relevant actions are
ongoing in the beginning of 2012 (draft note to DG on establishing a materiality threshold on
the level of extrapolation to mitigate any underlying risks). In the meantime, the ESC has tried
to minimise the potential risk of inconsistencies and of reputational damage to the
Commission as much as possible.
2.3.2.
RTD extrapolation cases
Over the last four years, DG RTD has put 330 extrapolation cases on file, of which
184 are
currently ongoing,
19 are under preparation,
12 have been suspended and are centrally
Page
17 of
51
CONFIDENTIAL
managed by the audit Units RTD M.1 and M.2,
28 have been closed, and for
87 cases
extrapolation appeared not to be due (no other cost periods to extrapolate to, etc.).
Table 2.5 - Current status of the DG RTD-led extrapolation cases (as of 31/12/11)
CLOSED
28
ONGOING
184
ON HOLD (centrally managed)
12
NOT APPLICABLE (no
extrapolation)
87
SUBMITTED (audit not yet
closed)
19
Grand Total
330
2.3.3.
Extrapolation implementation
Each individual extrapolation case can potentially affect numerous projects across the
Research Commission services. Within DG RTD, the experience acquired so far has
underlined the substantial challenges in this area, especially with regard to the follow-up of
the reception of revised cost statements and the coordination of the implementation. To
address this issue, RTD M.5 'Management of debts and guarantee funds' acts as a central
reception point dealing with all extrapolation cases launched from 13 March 2009 onwards.
In a number of extrapolation cases, beneficiaries wish to establish a dialogue and to provide
additional documentation and evidence. Currently,
12 of such cases, usually for larger
beneficiaries, are centrally managed by the audit Units: the extrapolation process is
suspended and all operational services in the Research Commission services are requested not
to act individually to avoid incoherent actions.
Table 2.6 – Centrally Managed Cases by DG
DG
DG
DG
DG
DG
REA
Total
ENER
ENTR
ERCEA
INFSO
MOVE
RTD
0
0
0
4
1
0
12
17
For all DG RTD-led extrapolation cases, (i.e. triggered by a DG RTD audit), so far 6008
participations have been identified as potentially affected by extrapolation. Among these,
1051 have been implemented (i.e. amount adjusted), 3222 are currently under implementation
and for 1735 recommendations the extrapolation turned out not to be applicable.
In addition,
144 cases resulting from audits of the other Research Commission services audits
have an impact on 1444 RTD participations, of which 175 have been implemented, 883 are
currently under implementation and for 386 recommendations the extrapolation turned out not
to be applicable.
Page
18 of
51
CONFIDENTIAL
Table 2.7 – DG RTD participations affected by extrapolation
Non-RTD-led Cases
Total
Implementation
RTD-lead
non-RTD-
Grand Total
Status
Cases
DG
DG
DG MOVE-
ERCEA
REA
led Cases
ENTR
INFSO
ENER
Not applicable
1735
0
12
351
20
3
386
2121
Closed
1051
1
39
101
34
175
1226
Ongoing
3222
82
110
511
117
63
883
4105
Total
6008
83
161
963
171
66
1444
7452
* ASUR data
Moreover, for
269 RTD-led cases,
1700 participations managed by other Research
Commission services are equally to be revised as part of the extrapolation process.
Table 2.8 – Cumulative overall adjusted amounts due to extrapolation
On December 31st
On December 31st
On December 31st
2009
2010
2011
(-) Adjustments in favour of the Commission
- 2.707.061,00
-10.409.202,58
-16.433.637,21
(+) Adjustments in favour of the beneficiaries
140.983,00
563.244,72
1.207.039,35
This table relates to the implementation of extrapolations managed by M.5. Therefore only
overall information is provided here.
2.3.4.
Extrapolation follow-up activities
Monitoring the actual implementation of extrapolation is carried out by RTD M.4 via the
ASUR-EXTRA tool, where the operational services encode information on the
implementation of extrapolation for each participation concerned. This information in turn
serves as the basis for reporting and as input for the follow-up audits to be carried out by the
audit Units.
As RTD M.5 was charged only with the management of extrapolation cases launched after
13th March 2009, RTD M.1 initiated a follow-up campaign on all DG RTD extrapolation
cases launched before that date to ensure that extrapolation had been correctly applied by the
beneficiaries. Each case has been analysed through either an audit on-the-spot or a global desk
review analysing a number of corrected cost statements received, amount of the adjustments,
etc. So far,
86 cases have been selected and analysed. Of these,
49 follow-up audits have been
decided, of which
30 were desk-audits,
1 joint
audit with DG INFSO and
18 on-the-spot
audits. Several of these follow-up actions are still ongoing.
Table 2.9 – Follow-up of extrapolation cases launched before 13th March 2009
CLOSED
OPEN
CANCELLED
Grand Total
DESK AUDIT
24
5
1
30
JOINT_AUDIT
1
1
FIELD AUDIT
14
4
18
Grand Total
39
9
1
49
Page
19 of
51
CONFIDENTIAL
Future follow-up campaigns will depend on requests from RTD M.5.
2.4. OLAF cases
Table 2.10 - Situation OLAF cases on 31/12/2011
New cases transmitted to OLAF by DG RTD in 2011
8
New cases concerning DG RTD initiated directly by
3
OLAF in 2011
OLAF "non case" decisions on DG RTD cases in 2011
11
OLAF investigations concerning DG RTD cases
5
closed with administrative/financial/judicial follow-up
in 2011
Total ongoing OLAF investigations (initial assessment
24
/external investigation opened), including cases of
(including 7 cases initiated by DG INFSO with
previous years
common beneficiaries)
Total closed cases in administrative/financial/judicial
18
follow-up, including cases of previous years
RTD M.1, in charge of relations with OLAF on external investigations14, transmitted 8 new
cases of suspected irregularities to OLAF in 2011. In 2 cases, the suspicion of irregularities
was reported by the operational services in charge of the projects; in 4 cases, the decision to
transfer the case to OLAF was taken following on-the-spot audits performed by RTD M.1
auditors. In 1 case, an external informant raised allegations of potential irregularities; in
another case, the information came from a press article. In addition, according to our
knowledge, OLAF received 3 complaints directly from individuals concerning potential
irregularities in EU-funded research projects managed by DG RTD.
In 2011, OLAF classified 11 DG RTD cases as "non cases"15; 5 further cases, for which the
allegations of irregularities were confirmed in the OLAF investigation, were closed and are
currently followed up at administrative, financial and/or judicial level.
Taking into account also the OLAF cases relevant to DG RTD from previous years, as of 31
December 2011, RTD M.1 manages in total 24 open cases (7 of them are cases initiated by
DG INFSO on common beneficiaries), as well as 18 cases which OLAF had closed with
administrative, financial and/or judicial follow-up, requiring follow-up and/or monitoring at
DG RTD level.
RTD M.1 has been actively involved in the implementation of the DG RTD Anti-Fraud
Strategy and Action Plan, in particular for the fraud detection part, and has contributed to the
current revision and re-prioritisation of the strategy in line with the Commission Anti-Fraud
Strategy adopted on 24 June 2011 and the recommendations of the IAS audit on DG RTD's
Control Strategy for on-the-spot controls and fraud prevention and detection of 29 September
2011.
14 Unit RTD.01 is in charge of internal investigations relating to staff.
15 A matter is classified as a "non case" where there is no need identified by OLAF to go further with a criminal
investigation. "Non cases" result from assessments that conclude that the EU interests appear not to be at risk
from irregular activity.
Page
20 of
51
CONFIDENTIAL
In this respect, the unit has further intensified its fraud detection activities, notably through
extensive use of CHARON/DAISY (see 2.7), an advanced IT tool facilitating investigation,
analysis and display of complex information and relationships in Framework programme data,
to select and prepare fraud risk-based audits. Several targeted data searches and inquiries were
performed with CHARON/DAISY on the basis of different risk criteria (e.g. dependency on
EU funding). In 2011, the Unit initiated 21
fraud risk-based audits.
As a priority, RTD M.1 is now focusing on the development of tools and procedures to detect
plagiarism and double funding in research projects, in close cooperation with other Research
DGs. Since October 2011, monthly training sessions are organised by RTD M.4 together with
RTD M.1 auditors to raise awareness of DG RTD staff, in particular project and financial
officers, to identify and mitigate fraud risks in RTD projects.
In 2011, two FAIR (Fraud and Irregularities in Research) Committee meetings were held with
representatives from the other Research DGs and Executive Agencies to coordinate activities,
exchange information, and share experiences and best practices on OLAF-related matters,
fraud prevention and detection, and on-going and potential irregularities and fraud cases.
As far as the relations with OLAF are concerned, RTD M.1 is closely cooperating with the
OLAF services. Regular contacts and meetings at operational level took place between DG
RTD staff and OLAF investigators to discuss and exchange information on specific cases.
Furthermore, RTD M.1 participated in two meetings of the Fraud Prevention and Detection
Network (FPDNet). Representatives of the various Commission services and Executive
Agencies participate in this forum chaired by OLAF.
From 22 to 24 June 2011, RTD M.1 and the US National Science Foundation – Office of
Inspector General – co-hosted the 9th International Workshop on Accountability in Science
and Research Funding. The workshop brought together representatives from international
research organisations responsible for the oversight of research to discuss and exchange
information and experiences on accountability challenges in science and research funding.
The workshop focused on three main topics: 1) striking the proper balance between
accountability, sound financial management, and the need for simplification; 2) identifying
and managing fraud risk from the perspective of a research funding organisation; and 3) using
technology for fraud prevention and detection.
2.5. Management and quality control tools
2.5.1. Management and Quality Controls
RTD M.1 and M.2 reinforced during 2011 the supervision of their day-to-day activities.
During the first semester of 2011, the External Audit Units have developed a new dashboard
which allows them not only to have an overview of progress towards audit closing targets but
also to follow-up on the status of the audit workflow of individual audits versus pre-defined
milestones.
When comparing with historical data either from previous framework programmes or the
beginning of the current one, - it emerges that almost at all stages of the workflow, average
times have decreased from FP5, to FP6 and to FP7. In other words, audits are being closed
quicker than in the past. Time between the Letter of Announcement and the Letter of
Conclusion was 341 days for FP5, 302 for FP6 and is 278 days for FP7 so far.
Page
21 of
51
CONFIDENTIAL
In addition to this essential set of key performance indicators (KPI), the Detailed Audit
Summary Sheets (DASS) which summarise the results of the audit were integrated into
AUDEX (see section 2.7).
Furthermore, since mid-2011, quality control on the audit reports of RTD M.1 has been
strengthened in order to ensure that (1) information between all documents is consistent (2)
compulsory steps/documents according to audit standards and procedures are filled in, (3)
specific internal instructions (e.g. materiality threshold, netting-off for reporting purpose, …)
are duly applied, (4) the Commission's document management policy (e-Domec) is properly
applied.
2.5.2. Keywords Working Group (KWG)
RTD M.1 and M.2 collaborate in the Keywords Working Group (KWG)16, consisting of 6
members and a chairperson from RTD M.1. The KWG assures harmonisation of the
interpretation of complex audit findings. These findings originate mainly from audits carried
out by DG RTD, but occasionally also from findings of other Research Commission services
when DG RTD is asked to determine its position. Over 60 individual requests have been
processed in 2011.
In 2011, most requests originated from DG RTD's legal Unit, and they concerned the
assessment or clarification of the application of the rules of the Framework programmes.
Most frequently discussed were:
Time recording and time-sheets (the layout of time sheets and the detail of tasks, hours
and time to be reported, time recording of SME owners/one person companies);
Personnel costs (implementation of the simplification measures adopted by the
Commission on average personnel costs, eligibility of permanent staff in FP6 contracts
with an additional cost model, eligibility of bonus payments, calculation of the hourly
rate, subcontracting between partners and coordinator);
Classification and eligibility of the costs charged for personnel in various forms (as
internal consultants, as personnel costs or as sub-contracting);
Indirect cost elements (the classification of costs as direct or indirect costs and their
eligibility, e.g. eligibility of JTI membership costs
, bank charges);
Internal invoicing (e.g.: although contractors declare additional costs, they
nevertheless tend to claim costs of central facilities, such as workshops or laboratories,
which are not directly involved in the project. However, such costs can only be
considered as eligible if beneficiaries apply the full cost model);
16 The most important KWG activities are:
Guidance notes preparation and administration: They provide specific instructions for auditors on issues
of contention. The KWG is responsible for their drafting, legal consultation, preparation of their formal
adoption and disclosure in the Wiki database, accessible to the RDGs and ECA. The CAR formally
adopts Guidance notes.
Development and maintenance of the keywords database. The 'keywords database' is a compilation of
all previous positions taken in the past on various interpretative issues, providing guidance to auditors
and helping to maintain a coherent approach towards external parties.
Page
22 of
51
CONFIDENTIAL
Eligibility of specific taxes ("taxe sur l'effort à la construction" (FR), "taxe sur la
formation professionnelle" (FR), "taxe sur les transports" (FR), WBSO (Dutch tax
benefit scheme for research),...);
Flat rates (Marie Curie flat rate, flat rate on accommodation and daily subsistence).
As in previous years, questions related to the correct accounting treatment of accruals and
timing (often related to travel costs and audit fees) were also replied to.
The KWG ensures that Commission services 'speak with one voice' to beneficiaries. This need
of having 'one voice' implies that first the DG RTD audit Units have to agree amongst
themselves, whereupon agreement from other Research Commission services is sought,
mostly via the CAR.
2.5.3.
The Audit Steering Committee (ASC)
The ASC is a peer review by fellow auditors. It assists in the assessment on substance of
proposals for large audit adjustments and on interpretative issues. This is done on request
from an auditor, or in view that the beneficiary is objecting or is likely to object to the audit
findings. . Adjustments are considered to be large when they are above EUR 100 000 and
represent 5% or more of the costs claimed, or when they are above EUR 30 000 and represent
30% or more of the costs claimed.
The ASC considers both in-house and outsourced DG RTD audits, and it contributes to
ensuring equal treatment of beneficiaries and coherence of audit work.
The number of cases submitted to the ASC decreased in 2011.
Table 2.11 - ASC cases
Year
Meetings
Cases
2005
3
3
2006
4
8
2007
3
5
2008
12
26
2009
14
20
2010
18
32
2011
15
22
The large adjustments discussed in the ASC meetings occur when 1) contractors claim costs
but there is no provision in the contract that such costs can be claimed, or 2) when the
contractors cannot provide sufficient supporting documentation.
An example of the first category in 2011 relates to the claiming of substantial subcontracting
costs. The underlying problems can be that there has been no tendering, or the Commission
had given no contractual agreement to subcontract the activities concerned. Other cases of
non-eligible costs are: the claiming of permanent staff under FP6 additional cost contracts; the
charging of costs of third parties without prior Commission approval; subcontracting
classified as personnel costs or other costs (so that unduly indirect costs are claimed on these
direct costs); costs not booked into the accounts; or costs which are incurred by another
company than the one with which the Commission had concluded the contract.
Page
23 of
51
CONFIDENTIAL
In 2011 an example of the second category was the claim of overstated personnel costs when
compared to the annual working time. In other cases the beneficiaries are not able to
demonstrate by any other means (e-mails, reports, travel expenditure, interviews) the time
spent on the project. Other examples concern missing invoices; VAT that was claimed;
average salaries which could not be reconciled with the actual individual salaries paid; too
few productive hours leading to inflated hourly rates; direct costs which cannot be linked to
the projects or are unnecessary for the projects; indirect costs with no relation to the direct
costs; bonuses for personnel (only eligible under certain conditions); the fair allocation of
indirect costs; charging of the full costs of acquisition instead of applying depreciation; etc…
2.5.4.
The Audit Process Handbook (APH) and Audit Manual
The APH provides the procedural framework for the audit process. It describes the complete
audit procedures from the planning of the audit until the audit closure. The APH is common
for all Research Commission services and it is used for all their in-house on-the-spot audits.
The final version of the APH was approved by the CAR in December 2010; therefore 2011
was the first audit year to be covered by a complete, comprehensive and inclusive edition of
procedures and templates. The APH complements the guidelines of the Audit Manual. The
latter mainly contains interpretational and explanatory guidance on the regulatory framework
and specific contractual provisions.
The APH is a "living" document, in the sense that it was frequently revised during 2011, in
order to reflect the different decisions taken. In particular, the (2011)174 Commission
Decision of 21/1/2011 on new acceptability criteria of average personnel costs led to a
modification of the standard report template together with a revised audit procedure on how to
audit average personnel costs.
In the same context, the decision to net off systematic errors resulted in the creation of a new
version of the Letter of Conclusion, applicable only for netting off purposes.
There were also further developments on the common audits with the Court of Auditors, for
which a new procedure was developed. .
2.6. Collaboration with the DG RTD administration and finance (UAF) network
The External Audit Units have continued throughout 2011 to uphold their close working
relationships with the administration and finance Units during the planning and preparation of
new audit campaigns, during the audits themselves (in order to obtain feedback on the draft
audit conclusions), and after the audits closure (for the implementation of the final audit
conclusions and results).
Moreover, ad-hoc bilateral meetings have been held whenever discussions on specific files
were needed.
The External Audit Units also participate in meetings between the UAFs and contractors for
those cases where the contractor continues to contest the audit findings after audit closure.
They also participate in the monthly UAF meetings to present and clarify matters linked to
audit and financial issues.
Page
24 of
51
CONFIDENTIAL
2.7. IT developments
During 2011, the External Audit Units focused on the following IT developments:
AUDEX (Audit Management System): AUDEX went into production in July,
replacing the former AMS as the main IT system for the External Audit Units.
AUDEX includes additional functionality to record audit results in detail, and to
review the work of external audit firms. The integration of two additional local
modules managing extrapolation and providing a results dashboard, as foreseen in the
2011 'Schéma Directeur', did not happen due to delays in the AUDEX Project Plan,
but it is expected in 2012
A much tighter integration of AUDEX with other corporate IT systems (ABAC,
ASUR, CPM/PCM/Force) has allowed for data generated by audits to be more widely
available, which in turn has improved business processes across DG RTD and beyond.
The usefulness of AUDEX has been widely recognised, and steps have been initiated
in order to deploy it in the agencies REA and ERCEA
.
CHARON project in DG RTD: A new database, called DAISY, has been added to
the CHARON project. DAISY combines FP6 information from CHARON with FP7,
experts, audit and extrapolation data. The DAISY database is also now available for
selected REA and ERCEA users.
Sharing Audit Results (SAR): Several new releases of SAR EAR (Extrapolation of
Audit Results) and SAR PAA (Planning of Audit Activities) was put in production in
2011.
CoMET: This project aims to provide a central web-based IT tool solely dedicated to
supporting the FP7 methodology certification, and it was launched in June 2008. In
September 2011 the production version COMET 1.3.2. became available for use. Data
from the MS access database was migrated to the new environment. The application
supports the certification activities by allowing a fully integrated and electronic
approach for the whole certification process, namely the filing of applications, check
for eligibility, generation of standard e-mails and letters, organisation of Joint
Assessment Committee Meetings and encoding of final decisions. The tool has also a
reporting function providing for statistical data on certificates.
2.8. FP7 methodology certification
The Certification policy for the FP7 Grant Agreements was designed with the aim to correct
the most common errors identified in the past, and in particular those related to personnel
costs and indirect costs. In this context, and in addition to
the Certificates on the Financial
Statements (CFS) known under FP6 as 'audit certificates', two new types of ex-ante
certificates on the methodology were introduced in FP7 which may be submitted prior to the
costs being claimed: the
Certificate on Average Personnel Costs (CoMAv) and the
Certificate
on the Methodology for Personnel and Indirect costs (COM). The acceptability of the methodology certificates is decided by an inter-service Joint
Assessment Committee (JAC), which involves DG RTD's External Audit Units and DG
INFSO. In 2011, 11 JAC meetings were held.
Page
25 of
51
CONFIDENTIAL
2.8.1.
State of play of certification files as of December 31st 2011
Table 2.12 - State of play of certification files as of December 31st 2011
Eligibility Requests
Certicates
Type of Certificate
Submitted
Accepted
Submitted
Accepted
Rejected
Withdrawn
Pending
CoM Average Personnel
23
6
9
2
6
Costs and Indirect Costs
117
72
CoM Real Personnel Cost
25
10
2
2
6
and Indirect Costs
Certificate Average
N/A
87
48
10
23
6
Personnel
TOTAL
135
69
21
27
18
The results of the pilot approach taken on average personnel costs following the Commission
Decision C(2009)4705 on 23 June 2009, revealed that the requirements of the Commission
were not in line with the usual accounting practices of a significant number of beneficiaries,
in particular industrial partners, due to the restrictive criteria set out in Decision C(2009)4705.
This led to a situation where the concerned beneficiaries established parallel accounting
systems solely for the participation in Seventh Framework Programmes projects, which
created additional administrative costs.
In its Conclusions of 12 October 2010 the Council asked the Commission to accept the use of
average personnel cost methodologies without delay, based on revised and more flexible
acceptability criteria.
The Communication from the Commission to the European Parliament, the Council, the
European Economic and Social Committee, the Committee of the Regions and the National
Parliaments of 19 October 2010 entitled "The EU Budget Review" identified the general
acceptance of the accounting practices of participants, including average personnel costs, as a
key measure for simplification.
These elements led to the Commission Decision C(2011)174 of 24 January 2011 on three
measures for simplifying the implementation of FP7 defined new criteria for average
personnel costs, whereby the usual accounting practices of beneficiaries would become
acceptable under certain general and less restrictive conditions.
Beneficiaries would no longer be required to submit a Certificate on Average Personnel Costs
(CoMAv) for approval as a prior condition for the eligibility of such 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 the FP7 eligibility requirements.
Although all beneficiaries applying average personnel costs are entitled to submit a CoMAv,
there was a marked decline in the number of applications for Certificates following the new
criteria.
Prior to the current decision on simplification measures, the value of the work of SME owners
and natural persons could be reimbursed only if they requested an ex-ante certificate of an
average cost methodology that had to be approved by the Commission. The certification of
the methodology was judged burdensome and costly both for the entities concerned and the
Page
26 of
51
CONFIDENTIAL
Commission. A very low number of certificates were issued, which lead to the situation where
SME owners or other natural persons, who did not obtain a certificate, could not be
reimbursed because the value of their work was not registered as a cost item in their accounts.
The same Commission Decision C(2011)174 of 24 January 2011 established rules allowing
for SME owners and natural persons who do not receive a salary to charge flat rates in
accordance with the Peoples Programme. The submission of a Certificate on Average
personnel costs is no longer possible for these cases.
The figures in the table above illustrate the trends in 2011. The main change is seen in the
CoMAv. The number of submissions decreased significantly when compared to previous
years. The requests received were mainly from applicants who could not meet the previous
stringent criterion for average personnel costs and following the Commission Decision
C(2011)174, they were able to pursue their request and eventually obtain a CoMAv based on
the broader eligibility criteria defined in the decision.
Furthermore, SME owner managers who do not receive a salary had a final possibility to
submit a CoMAv (deadline 24 February 2011) before the new decision became binding on
this group of beneficiaries. Some of these SME owners preferred to obtain a CoMAv for
economic reasons and filed applications to be treated under the old rules.
The pattern of CoM submission remained steady throughout 2011. However, increased
activity was noted from beneficiaries who previously submitted applications for CoM but had
not pursued their requests due to the stringent requirements that existed (essentially the
requirements related to average personnel costs). As already mentioned, Commission
Decision C(2011)174 made the application process easier for those beneficiaries who use
average personnel costs. As such, these beneficiaries became more active and were seeking to
obtain a CoM. This may be due to the fact that at this stage of the Framework Programme,
beneficiaries are reaching the threshold of EUR 375 000 of EU funding, where they would be
expected to submit CFS. In order to benefit from the waiver of submitting a CFS, they were
interested in obtaining a CoM.
In conclusion, it can be stated that following the adoption of Commission Decision
C(2011)174, the CoMAv lost it initial value intended in the definition of FP7 Grant
Agreement, since it became optional for entities using average personnel costs and is no
longer accessible to SME owners and natural persons who do not receive a salary. However
the CoM, being a certificate which offers a benefit of not submitting intermediate CFS has
become easier to obtain and more attractive for the eligible beneficiaries.
2.8.2.
Inter-service collaboration and communication activities (cf. 2.11)
A continuous inter-service collaboration has been established to provide guidance and support
for the Operational Units and, in particular, for the Financial Officers who handle the FP7
Certificates on the Financial Statements (CFS). By doing so, a coherent, harmonised and
consistent approach on CFS-related matters is ensured across the Research Commission
services.
Ex-ante certification also requires intensive communication efforts:
Page
27 of
51
CONFIDENTIAL
Handling questions submitted through the Research Enquiry Service on
Europe
Direct. Approximately 120 questions concerning the certification on the methodology
were answered in 2011.
Internal awareness-raising on FP7 certification issues leading to meetings with
operational and UAF Units.
Participation in seminars, conferences, bilateral meetings.
Posting of certification-related documents on
CORDIS (FAQ document, specific
certification-dedicated pages, 'Guidance notes for Beneficiaries and Auditors').
Following the Commission Decision C(2011)174 on three measures for simplifying
the implementation of FP7, Annex VII (Forms E and D) of the FP7 EC GA was
revised.
'Guidance notes for Beneficiaries and Auditors' were revised and will be published in
Cordis when the revised Guide to Financial Issues is published.
Internal trainings dedicated to FP7 certification on the methodology are given
quarterly.
Regular meetings with national contact points (NCPs) for legal and financial issues.
2.9. Coordination of outsourced audits
Six framework contracts for the provision of audit services are available to procure audit
services on FP6 and FP7 grants during the period 2009-2012, with a potential market value
amounting to EUR 16.5 million and EUR 42 million respectively. They are managed by RTD
M.2 on behalf of all Research Commission services. These framework contracts are used
under a 'cascade' principle, i.e. when the first contractor on the list cannot execute the audit,
the second or possibly the third company on the list is taken.
The Framework contract for FP6 was not used in 2011 due to the phasing-out of FP6 audits.
Any new FP6 audits will be done internally.
Throughout 2011, the batch audit campaigns outsourced to the different service providers
(KPMG, Ernst & Young, and Lubbock Fine) were closely monitored by RTD M.2 in terms of
timeliness and quality. There continues to be a strong dependence on the external audit firms,
as up to 70% of the DG RTD audit target is achieved through outsourced audits.
In addition to the daily follow-up of individual audits, this monitoring involves the following
business processes:
Monthly Audit Status Reporting (MASR) meetings chaired by RTD M.2, covering
the progress of all on-going batches, technical issues, invoicing and future audit
planning.
Occasionally accompanying external audit firms on on-the-spot missions.
Providing guidance and clarification on specific problems.
Page
28 of
51
CONFIDENTIAL
Using the Audit Review Assessment (ARA) to follow-up the quality of the services
provided.
A batch audit processing manual including checklists for the different deliverables.
Normal contract management issues, such as setting up contracts, amendments,
payments, penalties etc.
2.10. Other activities (Art. 185 Initiatives/JTIs/Executive Agencies17)
2.10.1. Art. 185 Initiatives
RTD M.1 carries out the ex-ante assessments and ex-post audits for the Art. 185 Initiatives for
which dedicated implementation structures have been set up. At present, there are three of
these:
1. EUROSTARS
Following the audit of the EUREKA Secretariat performed in 2010, which resulted in a set of
recommendations on their internal control systems and a request for re-submission of a
revised statement of expenditure 2008, RTD M.1 has requested a report on the
implementation of the recommendations and documentation supporting the revised statement
of expenditure. Analysis of the received documentation will take place during the first quarter
of 2012.
2. EMRP
In 2009, RTD M.1 conducted an ex-ante assessment of EURAMET e.V., the dedicated
implementation structure of the EMRP Initiative (Decision n° 912/2009/EC). The outcome
was a list of recommendations on the internal control system. The implementation of these
recommendations was set-up through a jointly-agreed action plan.
In 2010, RTD M.1 has reviewed EMRP's report on the implementation of the action plan.
RTD M.1 plans to conduct an audit of EURAMET e.V in 2012. The scope of the audit will be
twofold:
Ex post verification of the running expenditure in 2009 and 2010;
Assessment of the implementation, according to the action plan, of the
recommendation formulated in the ex-ante assessment performed in 2009.
3. BONUS
In 2011, RTD M.1 conducted an ex-ante assessment of BONUS EEIG, the dedicated
implementation structure of the BONUS Initiative (Decision n° 862/2010/EC). The outcome
17 The overall relationship between the Agencies and DG RTD has been defined in Memoranda of
Understanding. Although the Executive Agencies are part of the different Committees referred to above (see
section 2.2), the External Audit Units are consulted on the main audit related documents of the two 'DG RTD'
Executive Agencies. At operational level, regular contacts are maintained with the audit Units of the Agencies.
Page
29 of
51
CONFIDENTIAL
was a list of recommendations on their internal control system. The implementation of these
recommendations will be set-up through a jointly-agreed action plan in January 2012.
2.10.2. Joint Technology Initiative (JTIs)
In 2011, the RTD JTIs (Clean Sky, FCH and IMI) launched their first series of batch audits.
Taking into account the similarity of their legal frameworks to the 7th Framework Programme,
as well as the existence of common beneficiaries, RTD M.1 hosted two coordination meetings
with the aim to minimise the risk of planning clashes and to enhance the quality control of the
audits.
In the first meeting, preliminary measures agreed upon included the: provision of audit reports
carried out at beneficiaries selected by the RTD JTIs for audit, and the application of the rules
set out to avoid planning clashes.
While this allowed minimising the risks in the first batch audits launched by the RTD JTIs,
RTD M.1 considered the need to agree on definitive measures a priority.
A meeting was held to discuss and debate on further coordination with the participation of the
RTD JTIs plus SESAR JU (=a DG MOVE/ENER JTI). , The JTIs agreed to have access to
SAR WIKI (shared audit results database) and SAR PAA (planning tool), and to participate in
the Coordination Group for External Audit in the Research Family (CAR), thus allowing for a
more effective and efficient coordination. They also confirmed that they would not be
involved in our extrapolation process.
Following this meeting, DG ENTR took the initiative of inviting the European GNSS Agency
to also implement these coordination measures.
Page
30 of
51
CONFIDENTIAL
3.
RESULTS AND ANALYSIS
The External Audit Units are asked to report on the implementation of the audit strategies
throughout the year in quite a different number of formats and to a variety of audiences:
monthly reports to the Director-General, quarterly reports to the Commissioner, progress
reports for the ABM and the ECA…, plus a substantial number of ad-hoc requests for
information derived from the auditing activities, both quantitative and qualitative.
The quantitative results of the activities of the External Audit Units are presented in this part,
together with analysis and commentary where appropriate.
3.1. Audit numbers
This section presents results related to the number of audits and of participations audited in
2011 and cumulatively, with breakdowns by a number of categories. The most interesting
points are summarised below each table.
Table 3.1 - Audits closed and participations audited (2011 and cumulative, ALL
audits18)
FP6
TOP
20
44
392
1035
MUS
0
0
153
339
RISK
57
162
586
1290
FUSION
2
3
30
44
Total FP6
79
209
1161
2708
FP7
CORRECTIVE
184
434
336
641
REPRESENTATIVE
68
141
98
194
FUSION
4
7
4
7
OTHER
0
0
3
0
Total FP7
256
582
441
842
Coal & Steel
N/A
2
6
14
40
Grand totals
337
797
1616
3590
The target of 330 audits closed set for 2011 was achieved. The FP7 audit campaign is
also on target.
Although fewer audits were closed in 2011 than in 2010 (337 vs 363), the number of
participations audited was higher (797 vs 661). This is mostly explained by the fact
that the audit/participation ratio was low at the beginning of the FP7 audit campaign,
when the auditable population was much smaller and it was not possible to cover the
usual three participations per audit in many cases.
18 Throughout section 3, 'ALL audits' means all FP6, FP7 and Coal and Steel (C&S) audits aggregated.
Page
31 of
51
CONFIDENTIAL
In fact, the cumulative ratio of participations covered per audit has gone up to 1.9 for
FP7 from 1.4 at the end of last year, and it stays at 2.3 for FP6. At the end of the FP5
campaign it was just 1.2. The increase in the cost-effectiveness of audits in the last few
years is obvious from these figures, a result of improvements in planning and audit
preparation.
1161 FP6 audits have been closed in the period 2007-2011. There remain 69 FP6
ongoing audits so, at the end of the FP6 audit campaign the total number of audits will
be at least 60% higher than the original minimum multi-annual target of 750 set in the
ABM action plan drawn up in 2007. This increase was due to additional risk-related
audits aimed at further reducing the residual error rate for FP6, follow-up audits on
extrapolation cases, joint audits with the ECA, and the results of the mid-term review
which showed that the share of the systematic error "cleaned" through extrapolation
was not as large as originally assumed.
Table 3.2 - Audits closed of specific types19 (2011, ALL audits)
Audits on request
17
FUSION
6
Coal & Steel
2
Joint audits with ECA
17
Audits in non-EU countries
25
OLAF-related
15
Desk reviews
9
Our collaboration with the ECA intensified during 2011, resulting in 21 joint audits
launched and 17 closed (only 3 in 2010).
The decision to set up a dedicated fraud detection team explains the increase of
OLAF-related audits closed in 2011.
For more details on these audits, please see the relevant sections.
Table 3.3- Audits closed, outsourced and in-house (2011 and cumulative, ALL audits)
Total Outsourced
205
60.8%
1126
69.7%
In-house
132
39.2%
490
30.3%
Grand totals
337
100.00%
1616
100.00%
19 An individual audit might fall into more than one of these categories (e.g. an audit on request in a non-EU
country).
Page
32 of
51
CONFIDENTIAL
The proportion of audits closed in-house was noticeably higher in 2011 (39.2%) than
the historical average at the end of 2010 (27.3%). Cumulatively, in-house audits now
account for almost a third of all audits closed.
FP7 batches 129, 130, 132, 148, 149 and 150 were all launched during 2011, while
batches 50, 63, 64, 96 and 100 were completed during the year. Batches 38, 75, 117
and 122 are also very close to completion, with only one audit remaining in each case.
Table 3.4 - Audits launched and closed (2009-2010-2011, ALL audits)
FP6
276
306
81
179
27
79
384
564
FP7
160
4
239
180
239
256
638
440
C&S
6
6
5
4
4
2
15
12
Totals
442
316
325
363
270*
337
1037
1016
The number of audits launched in 2011 does not include the 104 audits in batches 162
and 163 which were prepared in 2011 but which have a launch date in January 2012.
There were 358 ongoing audits at the beginning of 2011. If we include the 104 in
batches 162 and 163, there are 402 ongoing audits at the beginning of 2012.
Table 3.5 - Audits closed by country (2011, ALL audits)
Over 81% of all the audits carried out in 2011 took place in the 12 countries listed
above. The percentage last year was 87%, and we are beginning to see more diversity
as the implementation of the FP7 AS progresses, which reflects a proportionally
Page
33 of
51
CONFIDENTIAL
higher participation of new member states in FP7: Poland, Romania, Hungary and the
Czech Republic were all in the top 20 countries last year.
3.2. Audit results
This section presents audit results in monetary terms. The most interesting points are
summarised below each table.
Please note that all figures related to adjustments in this part are estimates that might or
might not correspond with the eventual financial recovery or offset amount applied by
operational services. For FP6, the EC share of proposed adjustments is calculated on the
basis of cost model and instrument type, but there might be variations of the actual percentage
of EC contribution for specific contracts20. For FP7, this information is now available in
central DG RTD information systems, so the calculations are more accurate.
Table 3.6 - Audit results in monetary amounts (2011, ALL audits)
FP6
209
141,533,706
140,714,937
128,948,898
-12,092,796
622,678
FP7
582
266,533,640
266,549,118
263,413,664
-7,468,017
4,418,277
C&S
6
1,871,805
1,843,543
1,844,552
-1,831
2,840
Totals
797
409,939,151
409,107,598
394,207,114
-19,562,644
5,043,795
FP6
209
74,852,915
74,285,183
67,170,187
-7,394,929
427,893
FP7
582
147,223,153
147,262,681
145,097,179
-5,041,762
2,940,559
C&S
6
1,123,083
1,106,126
1,106,731
-1,098
1,704
Totals
797
223,199,151
222,653,990
213,374,097
-12,437,789
3,370,156
In 2011, a total of almost EUR 410 million in costs was audited by the External Audit
Units [EUR 422 million in 2010]. Of this amount, the EC contribution was over EUR
223 million [EUR 293 million in 2010].
The total amount of adjustments in favour of the Commission at funding level
proposed by the auditors was over EUR 12.4 million (EUR 16.3 million in 2010).
20 To minimise this issue, the method for calculating proposed adjustments was refined in 2008 to take into
consideration instrument types as well as cost models. In addition, we now seek more detailed percentages of EC
contribution from the operational services for FP6 audited participations where the proposed adjustment is over
EUR 100 000 in favour of the Commission.
Page
34 of
51
CONFIDENTIAL
Table 3.7 - Audit results in monetary amounts (cumulative, ALL audits)
FP6
2,708
2,291,514,388
2,285,326,255
2,230,831,703
-76,967,550
22,767,919
FP7
842
331,744,077
331,912,158
327,453,651
-10,616,283
6,243,511
C&S
40
25,389,662
25,317,659
24,789,062
-554,386
25,788
Totals
3590
2,648,648,127
2,642,556,072
2,583,074,416
-88,138,219
29,037,218
FP6
2,708
1,117,675,387
1,114,200,731
1,079,838,907
-46,953,855
12,738,991
FP7
842
195,502,856
195,656,916
192,454,345
-7,383,504
4,245,233
C&S
40
15,233,797
15,190,595
14,873,437
-332,631
15,473
Totals
3590
1,328,412,040
1,325,048,242
1,287,166,689
-54,669,990
16,999,697
Concerning cumulative results, the auditors have so far checked over EUR 2.6 billion
in costs claimed over the FP6, FP7 and C&S audit campaigns.
The cumulative amount of proposed adjustments at funding level for FP6 so far is
almost EUR 47 million in favour of the Commission.
Table 3.8 - Results by instrument type (cumulative, FP6 & FP7). All amounts are EC
share
FP6
CA
Coordination Action
1.0%
1.6%
II
Specific actions to promote research
9.9%
6.8%
infrastructures
IP
Integrated Project
46.7%
49.4%
MCA
Marie Curie Actions
6.0%
3.7%
NOE
Network of Excellence
7.6%
12.3%
SME
Specific actions for SMEs
1.0%
0.0%
SSA
Specific Support Action
4.0%
7.2%
STP
Specific Targeted Project
10.9%
13.9%
Other
0.1%
4.5%
FUSION
12.8%
0.6%
FP7
CP
COLLABORATIVE PROJECT
3.2%
1.3%
(GENERIC)
CP-CSA-Infra
INTEGRATING ACTIVITIES / E-
9.6%
15.8%
INFRASTRUCTURES /
PREPARATORY PHASE
CP-FP
SMALL OR MEDIUM-SCALE
31.3%
27.6%
FOCUSED RESEARCH PROJECT
CP-IP
LARGE-SCALE INTEGRATING
30.4%
35.9%
PROJECT
Page
35 of
51
CONFIDENTIAL
CP-SICA
SPECIFIC INTERNATIONAL
1.6%
1.7%
COOPERATION ACTIONS
CP-TP
COLLABORATIVE PROJECT
4.4%
6.9%
TARGETED TO A SPECIAL
GROUP (SUCH AS SMEs)
CSA-CA
COORDINATION (OR
2.8%
2.4%
NETWORKING) ACTIONS
CSA-ERA-Plus
ERANETPLUS
0.1%
0.0%
CSA-SA
SUPPORT ACTIONS
7.0%
7.0%
NoE
NETWORK OF EXCELLENCE
0.6%
0.4%
FUSION
FUSION
9.1%
1.0%
Even though we do not select representative samples per instrument, the volume of results to
date gives insights as to whether the incidence of errors is higher for some instruments than it
is for others.
The low incidence of error in audits of Fusion associations continues in FP7.
The instrument with the highest ratio of errors to amounts audited in FP7 is the
support for infrastructure and large-scale integration projects.
Table 3.9 - Results by cost model (cumulative, FP6 & FP7). All amounts are EC share.
AC
36.3%
35.5%
FC
48.0%
50.1%
FP6
FCF
10.9%
12.3%
N/A
4.8%
2.1%
FLAT_STD
7.0%
4.7%
FLAT_TRANS
58.7%
55.8%
FP7
REAL
31.8%
35.0%
SIMPLE
2.4%
4.5%
When the same analysis is performed on cost models, there is not enough variation in any of
the cases to consider any of the FP6 or FP7 cost models more prone to error.
3.3. Analysis
This section provides a more in-depth analysis of certain aspects and results of the work of the
External Audit Units, particularly in relation to error rates, error types, and most prevalent
errors at cost category level.
Page
36 of
51
CONFIDENTIAL
3.3.1.
Analysis of error rates
Table 3.10 - Error rates (2011, FP6 & FP7). All amounts are EC share
FP6
TOP
19,554,659
-1,067,575
-5.46%
MUS
N/A
N/A
N/A
RISK
47,549,982
-6,302,332
-13.25%
FUSION
7,180,506
-25,022
-0.35%
Total FP6
74,285,147
-7,394,929
-9.95%
Total FP7
147,262,681
-5,041,762
-3.42%
FP6 error rates in 2011 were higher than in previous years, apart from FUSION results.
Contributing factors to this result were:
The proportion of proposed adjustments over EUR -100 000 was higher in 2011
(7.6%) than in previous years (3.4%).
There was a single result in 2011 which was the biggest proposed adjustment at
funding level ever (over EUR 1.6 million, more than double the previous 'record').
On the other hand, the FP7 rate was lower than last year's by more than 1%. The evolution of
error rates year-on-year can be seen in the graphs below.
Table 3.11 - Error rates (cumulative, FP6 & FP7). All amounts are EC share
FP6
TOP
497,902,272
-16,457,573
-3.31%
-3.40%
MUS
69,040,985
-2,790,224
-4.04%
RISK
404,389,228
-27,410,260
-6.78%
FUSION
142,868,246
-295,798
-0.21%
Total FP6
1,114,200,731
-46,953,855
-4.21%
CORRECTIVE
173,692,850
-6,290,700
-3.62%
REPRESENTATIVE
-4.19%
Total FP7
195,656,917
-7,383,504
-3.77%
High FP6 error rates during 2011 have pushed up the cumulative overall FP6 error
rate, which has gone up from -3.80% at the end of 2010 to – 4.21%.
Page
37 of
51
CONFIDENTIAL
Figure 3.1 - Evolution of FP6 error rates up to the end of 2011
As can be seen in figure 3.1, FP6 cumulative overall error rates have seen a year-on-
year regular increase. This increase can be linked to the success of RISK audits: most
of the audits closed in the first year of the FP6 campaign were part of the initial TOP
and MUS selections, and audits from the first RISK assessment were not launched
until February 2008.
Although it is difficult to quantify, there is also an effect on error rates of audits which
have required long discussions with beneficiaries and which are typically closed
towards the end of the audit campaign. These audits usually result in above-average
rates of error.
The FP6 representative error rate has been quite stable around -3% since Q3 2009,
which was the first time it was calculated. It is -3.40% at the moment, with only 20
FP6 representative audits still ongoing.
Page
38 of
51
CONFIDENTIAL
Figure 3.2 - Evolution of FP7 error rates up to the end of 2011
In FP7, the progression has been downwards. There were a number of audits with
unusually high errors early on in the FP7 campaign, which meant that early rates were
higher than expected. However, as the body of results has grown and the effect of
outliers cancelled out, rates have gone down as can be seen in the figure above.
With the 108 representative results already collected, we have seen during 2011 that
FP7 representative rates have stabilised to values of around 4%.
This error rate reduction could also be due to our initiative to launch several batches of
preventive audits at the beginning of the campaign, to try to reduce the amount of
errors appearing in future cost statements.
The adoption of a common representative sample for the research Commission services
from 2012 onwards means that the representative error rate estimation will now be reset,
and a common FP7 rate will be reported from now on.
Page
39 of
51
CONFIDENTIAL
Figure 3.3 - Cumulative error rates by strategy strand (FP6 and FP7)
The fact that the overall FP6 RISK error rate stands at -6.78%, while the
representative rate is much lower, is an indication of the validity of the risk assessment
methods employed to date.
On the other hand, and although one could expect to see the same effect from the
audits of the FP7 corrective strand, corrective and representative rates are very similar.
The explanation for this is two-fold:
o The first selections of beneficiaries in the corrective strand have focused on
those which were known to participate in many projects but for which only a
few cost statements had been received to date. The idea was to prevent any
errors that might be discovered in these early cost statements from appearing in
future ones. Although this kind of preventive approach has been worthwhile,
selections on this basis cannot be considered strictly speaking as risk-based,
which is reflected in an error rate lower than if the approach had been purely
corrective instead of preventive.
Preventive efforts have a diminishing impact as the audit campaign progresses,
and the intention is to switch to more risk-based selections from 2012 onwards.
Once we switch from a preventive approach to a more risk-based one, it is
likely we will begin to see the same effect as in FP6 RISK rates.
o More importantly, although the representative samples were randomly
selected, the audit planning (i.e. the choice of the beneficiaries to be audited
first within the random sample) was not. Because of planning restrictions to try
to lessen the burden of controls on beneficiaries and avoid auditing
beneficiaries which have been recently audited either by RTD, other Research
Commission services or the Court of Auditors, priority was given to audits on
beneficiaries which had not been previously audited in FP6. Launching new
audits on beneficiaries for which the extrapolation of FP6 audit results was still
ongoing was also avoided. In consequence, the representative results available
Page
40 of
51
CONFIDENTIAL
to date are biased because the internal control systems of these beneficiaries
had not been previously audited and, therefore, their submitted cost statements
were more likely to be affected by more frequent and higher errors.
These planning constraints will not affect representative error rates in future
now that a common sample is in use.
Figure 3.4 – Split of adjustments by type of error (cumulative, FP7 & FP7)
A series of analyses during 2009 on the share of overall errors represented by those of a
systematic nature led to a realisation that they were not as prevalent as assumed when the FP6
Audit Strategy was prepared. This resulted in changes to the formula for the calculation of the
residual error rate in order to make it more accurate, and was also an important consideration
in preparing the FP7 Strategy.
As can be seen in figure 3.4, about one third of the errors found so far in monetary value have
been systematic. The proportion so far is roughly the same in FP6 and FP7.
3.3.2.
Analysis of adjustments at cost category level
This section provides analysis of the incidence of errors at cost category level. Costs claimed
by beneficiaries are ascribed to one of a number of defined cost categories. When audit results
are compiled, they are presented and implemented for an audited participation as a whole,
with results in different cost categories being netted off. However, it can be of value to
consider errors at cost category level, particularly in order to identify in which areas of
expenditure errors are found most often, both in terms of number and in monetary value.
Page
41 of
51
CONFIDENTIAL
Table 3.12 - Proportion of adjustments by cost category (cumulative, FP6 & FP7)
Adjustments to costs previously
4.8%
0.0%
19.9%
0.0%
8.8%
0.0%
3.2%
0.0%
reported
Consumables
5.9%
3.5%
1.8%
3.9%
3.3%
0.9%
0.8%
0.1%
Durable equipment
2.6%
1.8%
2.0%
1.2%
2.2%
1.4%
0.2%
2.9%
Interest on pre-financing
1.0%
4.2%
0.2%
1.6%
0.9%
1.8%
0.2%
0.2%
Other direct costs
20.9%
23.4%
13.4%
20.7%
10.4%
8.5%
31.4%
5.0%
Personnel
20.3%
23.3%
41.6%
32.9%
21.4%
37.2%
13.7%
30.5%
Receipts
0.5%
0.7%
0.2%
0.5%
0.3%
0.2%
0.5%
0.0%
Subcontracting
4.6%
3.5%
5.4%
6.2%
20.2%
7.0%
5.0%
8.6%
Total indirect costs
28.1%
31.3%
14.8%
32.1%
28.0%
39.6%
44.8%
52.0%
Travel and subsistence
11.3%
8.4%
0.6%
0.9%
4.5%
3.5%
0.2%
0.8%
Grand Total
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
As in previous years, the highest number of FP6 errors in terms of recurrence can be
found in the indirect costs, other direct costs, personnel and travel and subsistence cost
categories. The percentages have not varied significantly from previous years. This
trend, although with variations in the proportions, seems to continue in FP7.
Although we identify many errors in travel and subsistence costs, they represent less
than 1% of the overall amount, both in FP6 and FP7. This is not a new finding made
this year, but it remains significant and it could inform future audit efforts by, for
example, concentrating on auditing personnel costs across a higher number of projects
and ignoring other cost categories as they are not cost efficient to audit.
The impact of the Commission Decision on Simplification C(2011)174 from January
2011 is not yet obvious from these figures. This is because new provisions in that
document can only be taken into account in subsequent cost periods (average length of
FP7 cost periods is 18 months). There might also be a time lag between the cost
statements being received and being selected to audit, and the time of conducting the
audit has to be added also.
Page
42 of
51
CONFIDENTIAL
3.3.3.
Assessment of the different steps of the control chain
Table 3.13 - Net correction of ex-ante and ex-post controls (cumulative, FP5, FP6 &
FP7). All amounts are EC share21
Costs claimed and audited
(A)
216,647,644
1,117,675,387
195,502,856
Costs accepted by Financial Officers
(B)
212,579,288
1,114,200,731
195,656,916
Net correction from ex-ante controls (B-A)
-4,068,356
-3,474,656
154,060
Costs accepted by Auditor
(C)
209,979,355
1,079,838,907
192,454,345
Net correction from ex-post controls (C-B)
-2,599,933
-34,361,825
-3,202,571
Effect of ex-post controls as a % of all controls
39.0%
90.8%
N/A
The net effect of ex-ante and ex-post controls is shown above. By ex-ante, one refers to the
corrections made by financial officers to costs claimed when they are received, and by ex-
post, reference is made to the adjustments proposed by the auditors.
Ex-ante controls had a bigger cumulative effect for FP5 than ex-post controls.
However, for FP6, the opposite is true, and the difference is quite significant. The
most likely explanations for this is (i) more details in the FP5 cost statements so that
ex-ante controls in FP5 were more effective (ii) the introduction of audit certificates in
FP6, which might have led to the fact that many errors were detected and corrected
before sending the cost statement to the Commission (see the FP5 and FP6 cumulative
error rates table 3.12). However, this has to be qualified by the fact that, despite those
audit certificates in FP6, errors above the threshold of 2% tolerated by the Budgetary
Authorities continued to be detected by ex-post audits.
So far in FP7, the results are not significant enough but, to date, the net effect of ex-
ante corrections has actually been in favour of the beneficiaries.
21 Positive and negative adjustments, both in the ex-ante and ex-post stages, have been netted off for this table.
Page
43 of
51
CONFIDENTIAL
3.3.4.
Qualitative analysis of error types
Each time an audit is closed, it is given two ratings related to 'Seriousness' and 'Nature' of the
errors found by the auditors22, if any. By using a combination of these two ratings, a better
understanding of the incidence of errors and their importance can be obtained, as shown in the
table below.
Table 3.14 - Seriousness and nature of errors (cumulative, FP6 & FP7, aggregated at
audit level)
None
14.2%
0.2%
4.1%
0.0%
18.5%
Small
0.7%
1.0%
49.0%
0.2%
51.0%
FP6
Medium
0.1%
1.1%
20.3%
0.3%
21.8%
High
0.1%
0.4%
6.3%
2.0%
8.7%
Totals
15.1%
2.7%
79.7%
2.5%
100.0%
None
6.2%
0.5%
2.3%
0.0%
8.9%
Small
1.4%
1.6%
63.0%
0.3%
66.3%
FP7
Medium
0.5%
2.1%
18.0%
0.0%
20.5%
High
0.2%
0.2%
3.7%
0.2%
4.3%
Totals
8.2%
4.3%
87.0%
0.5%
100.0%
Most of the adjustments proposed by the External Audit Units are due to
straightforward errors of small or medium seriousness. Discoveries of fraud are rare.
This situation is reflected in this table by the 49% of participations showing SMALL
ERROR in FP6 (53.4% at the end of 2010). In FP7 the percentage is even higher
(63%).
The percentage of participations where potential irregularities and serious problems
are found remains fairly low in FP6, at 2.5%, although it is worth mentioning that it
was just 1.1% at the end of 2009 and 0.5% at the end of 2008. In FP7 it is only 0.5%.
The percentage of audits resulting in no findings at all is lower in FP7 (6.2%) than in
FP6 (14.2%).
22 'Seriousness' refers to the severity of problems found (NONE, SMALL, MEDIUM or HIGH), while 'Nature'
reflects the character of those errors (NONE, QUALITATIVE, ERROR or IRREGULARITIES). The criteria
used for these categorisations are described in section 6.2.1 of the Audit Process Handbook.
Page
44 of
51
CONFIDENTIAL
3.3.5.
Audit coverage
Table 3.15 - Audit coverage (cumulative, FP6 & FP7)
FP6
FP7
Total number
Audit coverage
of
55,879
38,770
by number of
participations
4.8%
2.2%
audited
participations
Audited
2,708
842
participations
Audit coverage by amounts
1,114,200,731
9.4%
195,656,917
4.9%
audited ('direct' coverage)
Audit coverage of non-audited
amounts received by audited
5,923,934,983
50.1% 1,211,754,798
30.6%
beneficiaries ('indirect'
coverage')
Total audit coverage ('direct'
7,038,135,714
59.5% 1,407,411,715
35.6%
and 'indirect')
Total RTD expected EC
11,827,435,215 100.0% 3,955,606,991 100.0%
contributions as of end 2011
Figure 3.5 – Comparison of audit coverage
During 2009, one of the main objectives of the FP6 Audit Strategy was achieved: to
'clean' from systematic material errors at least 50% of the budget. In 2011, the
'cleaning' effect has reached 59.5% and, with 69 FP6 audits still ongoing, the final
result will be significantly higher than the original target.
While the FP6 population stopped growing at the end of 2010, the FP7 population
continues to grow over time and therefore audit coverage is only relative to the size of
Page
45 of
51
CONFIDENTIAL
that population at a given point in time. With that in mind, audit coverage of RTD cost
statements is 35.6%, with 4.9% of the amounts audited directly.
3.3.6.
Lessons
learnt
so
far
from
the
audit
campaigns:
the most common errors
Throughout the audit campaigns, auditors regularly find similar errors in the cost claims
presented by beneficiaries.
At the same time, table 3.14 above shows that in FP7 63% of the errors found are small.
It is therefore likely that the vast majority of errors arise from misunderstandings of the
rules or a lack of attention to the detail of the provisions of the grant agreements and
associated guidelines. RTD has made various efforts to simplify these rules over time,
and these efforts are further enhanced with the Commission's proposals for the Horizon
2020 programme.
DG RTD has compiled below a list of areas where errors are regularly identified. This
list does not attempt to set out all the possible exceptions or unusual cases.
Although the list of errors has already been communicated to the outside world in order
to prevent them from happening in future, it seems useful to include it also in the 2011
External Audits' report.
Note: the text below is written as if addressed directly to beneficiaries.
THE MOST FREQUENT ERRORS IDENTIFIED
1. Costs claimed that are not substantiated or are not linked to the project (Guide to
Financial Issues pages 30-34)
All costs claimed, with the exception of applicable lump sums and flat rates, should be
based on the real costs incurred. They must be supported by evidence that they are real
(recorded in the accounts of the beneficiary and supported by invoices for example), paid
(supported by bank statements for example), and linked to the funded project. As a
general rule, neither estimated amounts, nor budgeted amounts are acceptable. Where
these conditions are not met the amounts will be deemed to be ineligible.
2. Third parties and sub-contracting (Guide page 43 to 50)
The use of third parties and/or sub-contractors should generally be identified during the
negotiations of the project, and be set out in Annex I ("Description of work") to the grant
agreement. Otherwise any amounts claimed will generally not be eligible.
If you wish to use Third Parties or Sub-Contractors that are not yet included in Annex I,
you should send an amendment request through the coordinator to the RTD service that
signed the grant agreement. This service will provide its approval through an amendment
to the grant agreement. The costs will then be eligible and you can include them in your
cost claims.
Page
46 of
51
CONFIDENTIAL
In addition, it is underlined that sub-contracting between partners of the consortium is
not permitted under any circumstances.
3. Depreciation (Guide page 61 to 63)
If you purchase equipment for your project then you are not entitled to claim the full cost
of the equipment at the moment that you buy it.
Rather, you are entitled to charge to the project the corresponding depreciation of the
equipment over the part of its useful economic life that falls within the project. The
amounts that you can claim annually should be based thus on the amount of depreciation
that is incurred annually for the equipment. You should use your usual depreciation
policy. Moreover, only the part of the equipment (percentage used and time of use)
dedicated to the project may be charged.
4. Indirect cost models (Guide page 64 to 74)
The FP7 indirect cost reporting methods are:
- actual indirect costs; either analytical or simplified, and
- flat rates based on the real direct costs; either 20 % or 60 % where applicable.
If you use the "actual costs" reporting method, then this must be based on the real costs
incurred, with evidence that they can be linked to the project.
If you have an analytical accounting system then you must charge the indirect costs that
are calculated by this system or chose the 20 % flat rate method.
If you can establish the "actual indirect costs", removing ineligible items and using
reliable cost drivers, but you do not have an analytical accounting system, then you may
choose the simplified method for reporting indirect costs or use instead the flat rate
system.
If you are unable to establish the actual costs then you should use a flat rate method,
either the 20 % flat rate - optional for any beneficiary - or the 60 % flat rate if you fulfil
the eligibility criteria23.
5. Indirect costs - Ineligible costs included in the pool of indirect costs (Guide page 64
to 74)
If you use the actual indirect costs model then the indirect costs must have a relationship
with the eligible direct costs attributed to the project.
There are a series of costs that do not meet the cost eligibility criteria or which cannot be
linked to the direct costs of the project. These should be removed from the calculation of
the actual indirect costs. The ineligible costs would include marketing and sales costs,
financing costs, exchange rate losses, goodwill, etc; as well as those costs with no
relationship to the project.
23 60 % flat rate is reserved for non-profit public bodies, secondary and higher education establishments, research
organisations and SMEs; without an analytical accounting system.
Page
47 of
51
CONFIDENTIAL
6. Personnel costs - Calculation of productive hours (Guide page 34 and 54)
The calculation of actual personnel costs requires the establishment of the productive
hours for personnel. Productive hours should include all the time that the employee is
available to undertake activities for the organisation (research and non-research
activities). It should exclude weekends and holidays, but should include for instance
teaching time, preparation of proposals, unsold time, etc.
As a guide, 1680 hours per year is considered to be a benchmark for productive hours. If
your productive hours deviate from this reference the difference has to be substantiated.
Please remember that productive hours may be very different from "billable" hours. The
use of billable hours to calculate the hourly rates to be charged to EU research projects is
not accepted by the Commission.
7. Personnel costs - charging of hours worked on the project (Guide page 52 to 55)
You must be able to produce evidence to support the number of hours that each person
has worked on the project. This can be by the use of a reliable time recording system or
adequate alternative evidence giving an equivalent level of assurance.
RTD has regularly identified time charged to the project while the staff member is on
leave or attending conferences unrelated to the project, which puts into question the
reliability of the time recoding system as a whole. If timesheets are used, please ensure
that they are completed in good time and are properly authorised.
8. Personnel costs - Use of average personnel costs (Guide page 34 to 38)
It is now permitted to use average personnel costs for the calculation of staff costs under
certain conditions24. If you are unable to meet the criteria for the use of average
personnel costs, you should declare real costs.
9. VAT
In the 7th Framework programme identifiable VAT, whether recoverable or not, is
totally ineligible. Please ensure that VAT is always excluded from your cost claims.
24 See the four criteria for using average personnel costs, adopted by Commission Decision C(2011)174 of 24
January 2011, in the FP7 Guide to Financial Issues.
Page
48 of
51
CONFIDENTIAL
ANNEX I: MISSION STATEMENTS
Mission Statement - RTD M.1 - External Audits
The Unit contributes to the assessment of the legality and regularity of the DG RTD payment
transactions by means of ex-post financial audits, thereby providing a basis of reasonable
assurance to the Management and other stakeholders (including the budget discharge
authorities) that research grant beneficiaries are in compliance with the financial rules. The
corrective actions and follow-up measures which result from the ex-post audit activity
contribute to the protection and safeguarding of the European Union’s financial interests in
the research area. The Unit manages the relations with OLAF on irregularities and fraud cases
of research grant beneficiaries.
RTD M.1 performs, mainly with own audit staff and occasionally through independent
professional audit firms, a number of audits ('on-the-spot-controls') each year, which
are selected from the 'auditable population' of DG RTD beneficiaries, and ensures that
these audits are carried out professionally and managed and supervised properly.
RTD M.1 evaluates, reports, and monitors on a regular basis the requests for financial
audits made by the DG RTD Directorates or other relevant parties. The Unit evaluates
these requests and carries out financial audits as necessary with the required priority
and urgency.
RTD M.1 uses and maintains specific tools and methodologies for the selection of DG
RTD beneficiaries to be audited. The selection is based on the multi-annual Audit
Strategy as endorsed by the Research DGs and Executive Agencies, and focuses on
achieving sufficient and representative audit coverage to support the DGs annual
assurance declaration.
RTD M.1 provides on a regular basis management information as a result of the 'on-
the-spot-controls'. For those DG RTD beneficiaries who fail to comply with the grant
agreement, the Unit recommends financial adjustments and in case of systematic
errors, extrapolation of such adjustments towards non-audited transactions.
RTD M.1, after analysis and synthesis of audit results, gives feedback on its findings
to DG RTD hierarchy and operational Directorates.
RTD M.1, through close co-operation and harmonisation with the other Research DGs
and Executive Agencies, takes the lead in establishing relevant audit policies and
strategies. It therefore organises, chairs and ensures the secretariat for the monthly
CAR group meetings.
RTD M.1, through close co-operation and harmonisation with the other Research DGs
and Executive Agencies, chairs the Extrapolation Steering Committee in which a
coherent Research DG approach is defined on extrapolation of the audit results with
regard to common beneficiaries.
RTD M.1 contributes to the understanding and application of the legal DG RTD
framework through interpretation and guidelines on FP DG RTD financial and
accounting matters. The Unit also contributes in an advisory capacity not only to
Page
49 of
51
CONFIDENTIAL
auditing and accountancy questions and tasks, but also to the legal developments of
(future) participation rules and model DG RTD grant agreements.
RTD M.1 liaises with DG RTD M.4 to provide a timely input for the interactions with
the European Court of Auditors.
RTD M.1 provides operational support for the External Audit activities of DG DG
RTD and, to a certain extent, those of the other Research DGs and Executive
Agencies. This is done in the form of planning coordination, extrapolation monitoring,
preparation of batch audits, liaison with the providers of IT tools and with financial
Units, and by collecting and checking all the data generated by audits and by their
results.
RTD M.1 provides support to the operational Directorates to perform technical audits.
If necessary, the Unit participates in joint financial and technical audits.
RTD M.1 coordinates the relations with OLAF on irregularities and fraud cases which
concern beneficiaries of DG RTD expenditure (external investigations). It ensures the
liaison between OLAF and the operational services on OLAF related matters, manages
the OLAF case files relevant to DG RTD and chairs and provides the secretariat of the
FAIR (=Fraud and Irregularities) Committee with the other Research DGs and
Executive Agencies. In this context, it performs risk-based audits and conducts
specific inquiries in case of suspicion of irregularities. The Unit ensures the regular
reporting to DG RTD hierarchy and the Commissioner on these cases. Moreover, it
actively contributes to the implementation of the DG RTD anti-fraud control strategy
with a particular focus on fraud detection.
Page
50 of
51
CONFIDENTIAL
Mission Statement - RTD M.2 - Implementation of Audit Certification Policy
and outsourced audits
The Unit contributes to the assessment of the legality and regularity of the DG RTD payment
transactions by means of ex-post financial audits performed through independent professional
audit firms. Through the definition and implementation of the cost methodology certification
function for FP7, the Unit contributes in an
ex-ante manner to the legality and regularity of
future DG RTD payment transactions. The aim is to provide an overall basis of reasonable
assurance to the responsible authorising officers, senior management and other stakeholders
(including ultimately the budget discharge authorities) that research grant beneficiaries are in
compliance with the financial rules. The corrective actions and follow-up measures which
result from the ex-post audit activity contribute to the protection and safeguarding of the EU’s
financial interests. On the basis of its experience the Unit provides advice to managers of
research grants and contributes to policy development.
RTD M.2's mission can be broken in the following activities:
To perform, exclusively through independent professional audit firms, a number of
batch audits each year. Ensure that these audits are professionally managed and
supervised, by proper planning and follow-up of audit assignments, quality control of
deliverables, liaison with external audit firm representatives and other DGs of the
'research family'.
On the basis of the audit reports, for those DG RTD contractors that fail to adhere to
the contract, the Unit recommends financial adjustments and, in case of systemic
errors, the extrapolation of such adjustments to non-audited transactions.
To manage the public procurement and follow-up of the audit service framework
contracts.
To ensure support to the implementation of the audit certification, focusing in
particular on the cost methodology certification process introduced under FP7. Upon
request, the Unit also offers advice and guidance on the implementation of the FP6
audit certificate function.
To monitor the implementation of the audit certificate policy in general and co-
ordinate all matters related to audit certification with other DGs of the research family
and vis-à-vis DG BUDG. Where applicable, the Unit ensures liaison with national or
international professional audit bodies.
To provide input for the annual activity report, the budget discharge process and
relations with the European Court of Auditors for matters linked to audit certification
and outsourced audit matters.
To contribute in an advisory capacity to the developments of future policy rules (in
particular (participation rules and model grant agreement provisions) and business
processes, based upon the knowledge gained in the certification process.
Page
51 of
51