FP6-FP7 external financial audits, compliance with article 57(2) of Financial Regulation 1605/2002, overriding public interest

The request was successful.

Dear Research and Innovation (RTD),

Under the right of access to documents in the EU treaties, as developed in Regulation 1049/2001, I am requesting documents which contain the following information:

I. CONTEXT OF THE APPLICATION

I refer to article 57 of Regulation 1605/2002, as amended (Financial Regulation), which reads:

“1. The Commission may not entrust measures of implementation of funds deriving from the budget, including payment and recovery, to external private-sector entities or bodies, except in the case referred to in Article 54(2)(c) or in specific cases where the payments involved are to be made to beneficiaries determined by the Commission, are subject to conditions and amounts fixed by the Commission and do not involve the exercise of discretion by the entity or body making the payments.

2. The tasks which may be entrusted by contract to external private sector entities or bodies other than those which have a public-service mission are technical expertise tasks and administrative, preparatory or ancillary tasks involving neither the exercise of public authority nor the use of discretionary powers of judgment.”

I also refer to article 40 of Commission Decision 2342/2002, as amended (Implementing Rules), which reads:

“Where the Commission entrusts tasks to private bodies under Article 57(2) of the Financial Regulation, it shall conclude a contract in accordance with the provisions of Title V of Part One of the Financial Regulation.”

According to the Annual Activity Reports of the Research DGs, in the period 2008-2012 external contractors – audit firms have carried out over 2,000 external financial audits of FP6 contractors and FP7 beneficiaries pursuant to articles FP6.II.29 and FP7.II.22 respectively.

It is reasonable to expect that the Research DGs, with DG RTD as the lead service, have not disregarded the provisions of articles 57(2) and 40, having drawn up documents setting out some kind of policy and operational measures of ensuring compliance with those two articles. Furthermore, it is also reasonable to expect that the Research DGs have drawn up documents with directions, guidelines and instructions to the external contractors – audit firms that the audit firms ought to follow in order to ensure compliance with article 57(2).

It is recalled that in the period 2005 – 2010 DG RTD has signed four or five Framework Contracts with the external contractors – audit firms, specifically Blömer accountants en adviseurs (OJ 2006/S 117-123911),
KPMG AG Wirtschaftsprüfungsgesellschaft(2009/S 138-201001), Ernst & Young Reviseurs d'Entreprises Bedrijfsrevisoren (2009/S 138-201001), Lubbock Fine Chartered Accountants (2009/S 138-201001) (hereafter ‘the main contractors’).

II. REQUEST FOR DOCUMENTS

Copies of the following documents drawn up by the Research DGs are kindly requested:

1. The internal preparatory documents – distinct from the specifications of calls for tenders and annexes thereto – according to which the tender specifications of the FP6-FP7 Framework Contracts were to reflect article 57(2).

2. The internal documents confirming that the tender specifications, including the description of the tasks of the audit firms, reflected the requirements of article 57(2).

3. Following the signature of the Framework Contracts, any amendments laying down additional obligations of the external contractors – audit firms as regards compliance with article 57(2).

4. The documents drawn up pursuant to article 40 of Decision 2342/2002 as regards the subcontractors of the main contractors, such the members of the Polaris Group, KPMG Greece and the subcontractors that have carried out field audits in the non-EU Member States.

5. The internal documents according to which the Audit Units of the Research DGs have verified and validated that the draft and final audit reports drawn up by the audit firms have been compliant with article 57(2).

6. The internal documents setting out the policy and operational measures of ensuring compliance with article 57(2) by the external contractors – audit firms.

7. The documents handed over to the external contractors – audit firms with directions, guidelines and instructions, or equivalent, adherence to which would have ensured that the audit firms would have conducted an audit in compliance with article 57(2) and the national laws.

8. The documents handed over to the external contractors – audit firms with directions, guidelines and instructions, or equivalent, about their conduct in the field audit such that article 57(2) would not have been infringed upon. This specifically includes the following recurrent practices of audit firms like KPMG Germany, KPMG Greece, Kypris & Associates, Littlejohn in audits procured by DG INFSO: (i) requesting and collecting copies of documents from the auditee with personal data of third parties to the audited projects (i.e signed time-sheets researchers charged to the audited projects); (ii) requesting to interview researchers; (iii) cross-checking of time booked in different contractors/beneficiaries by a researcher; (iv) disclosure to an auditee about the time a researcher had booked in another – unrelated contractor/beneficiary; (v) classification by the audit firm of unrelated contracts of the auditee with third parties – with the unrelated contracts not charged to the audited projects – as subcontracting; (vi) demands of the audit firm for the handing over a complete copy of the auditee’s general ledger and subsequently the intrusive enquiries by the audit firm of unrelated to the audited projects business transactions of the auditee with third parties; (vii) assessing the academic and professional qualifications of researchers against their work in the audited projects; (viii) assessing compliance of the auditee with Annex I of the contracts/agreements, which is not the subject of a financial audit; (ix) requesting specific and individual information on sick leave of auditee’s employees in order to calculate the total figure of work-hours in a year; (x) disclosing to an auditee information (i.e. personal data) of service providers charged to the audited projects about their previous service provision history to other, unrelated third parties; (vi) criticising an auditee about its time-keeping in the audited projects and drawing negative conclusions (even reaching the point of rejecting all personnel claimed costs), even though the FP6 contract and FP7 grant agreement has no provision whatsoever about it; (vii) relying in the FP6 & FP7 Guides on Financial Issues to reject claimed costs, even though those documents were never formally approved by the Commission, and in any event such kind of ‘guidelines’ cannot be imposed to the auditees as contractual obligations, simply because they are extra-contractual.

9. The cover letters, or equivalent, accompanying the dispatch of the documents under requests (7) & (8) to the main contractors and subcontractors.

10. The legally binding documents with which the main contractors and subcontractors undertook to comply with the directions, guidelines and instructions, or equivalent, referred to in requests under (7) & (8) above.

III. OVERRIDING PUBLIC INTEREST

Compliance with article 57(2) is a matter of public policy. It cannot be accepted that external contractors – audit firms were permitted to act as they saw fit in the external financial audits of the Research DGs. Neither can be accepted that an Audit Unit of a Research DG enjoyed the freedom to instruct, thus cause, an audit firm to conduct an audit infringing article 57(2), or Union and national law.

Due regard is to he had to the other huge issue of compliance with Regulation 45/2001 and Directive 95/46/EC, which is indissociably linked with the external financial audits.

The requested documents will enable the scrutiny of the Research DGs regarding articles 57 of Regulation 1605/2002 and article 40 of the Commission Decision 2342/2002 in their external financial audits.

Consequently, all requested documents are subject of an overriding public interest.

Finally, the applicant respectfully points out that any reliance on the mandatory exceptions of article 4(1)(a) of Regulation 1049/2001 to refuse full access to the requested documents will run contrary to the notion of public interest, because disregard of article 57 could not and did not serve the public interest.

Yours faithfully,

Mr. Sifis RAPTIS

Research and Innovation

1 Attachment

Dear Sir,

 

Thank you for your e-mail dated 14/11/2013.  We hereby acknowledge receipt
of your application for access to documents, which was registered on
18/11/2013 under reference number GestDem 2013/5714.

 

In accordance with Regulation (EC) No 1049/2001 regarding public access to
European Parliament, Council and Commission documents, your application
will be handled within 15 working days. The time limit will expire on
9/12/2013. In case this time limit needs to be extended, you will be
informed in due course.

 

Yours faithfully,

 

Silvia BOJINOVA

Head of Unit

 

[1]cid:image001.png@01CDF26F.EF7D9990

European Commission

DG Research & Innovation

R5

 

ORBN 09/151

B-1049 Brussels/Belgium

+32 229-85891

[2][email address]

 

[3]http://ec.europa.eu/research

 

 

 

 

 

References

Visible links
2. mailto:[email address]
3. http://ec.europa.eu/research

Research and Innovation

1 Attachment

Dear Mr Raptis,

 

We refer to your e-mail dated 14/11/2013 in which you submit a request for
access to documents, registered on 18/11/2013 under the above mentioned
reference number.

Your application is currently being handled. However, we will not be in a
position to complete the handling of your application within the time
limit of 15 working days, which expires on 09/12/2013.

An extended time limit is needed as your application concerns documents
held by different Services which must be consulted.

Therefore, we have to extend the time limit with 15 working days in
accordance with Article 7(3) of Regulation (EC) No 1049/2001 regarding
public access to documents. The new time limit expires on 09/01/2014.

We apologise for this delay and for any inconvenience this may cause.

Yours faithfully,

Silvia BOJINOVA

Head of Unit

 

[1]cid:image001.png@01CDF26F.EF7D9990

European Commission

DG Research & Innovation

R5

 

ORBN 09/151

B-1049 Brussels/Belgium

+32 229-85891

[2][email address]

 

[3]http://ec.europa.eu/research

 

 

References

Visible links
2. mailto:[email address]
3. http://ec.europa.eu/research

Research and Innovation

6 Attachments

Dear Mr Raptis,

We refer to your email dated 14/11/2013 in which you make a request for
access to documents, registered on 18/11/2013 under the above mentioned
Gestdem reference number.

Please see attached the reply of the Directorate-General for Research and
Innovation.

Yours faithfully,

Silvia BOJINOVA

Head of Unit

 

[1]cid:image001.png@01CDF26F.EF7D9990

European Commission

DG Research & Innovation

R5

 

ORBN 09/151

B-1049 Brussels/Belgium

+32 229-85891

[2][email address]

 

[3]http://ec.europa.eu/research

 

References

Visible links
2. mailto:[email address]
3. http://ec.europa.eu/research

Dear Research and Innovation (RTD),

Referring to GestDem 2013/5714, I would like to thank DG RTD for having grated access to the identified documents, and to the maximum extent provided by Regulation 1049/2001.

Yours faithfully,

Mr. Sifis RAPTIS