Audit Process in H2020. Vittorio Morelli DG RTD.J.2 CAS

Transcription

1 HORIZON HORIZON Audit Process in H2020 Vittorio Morelli DG RTD.J.2 CAS

2 Answer to question n 27 - Certificate on Methodology to calculate Unit Costs (CoMUC) Potential candidate; 11 State of play 10 th March 2017 On-going EC; 6 On-going EC On-going Beneficiary Rejected Withdrawn Potential candidate Total requests 29 Withdrawn; 1 Rejected; 1 On-going Beneficiary; 10 2 The information is not legally binding

3 Answer to question n 37 - Direct Costing for Large Research Infrastructures LRI state of play 10 th March The information is not legally binding

4 Answer to question n 37 - Direct Costing for Large Research Infrastructures Conditions for declaring direct costs Direct relationship with the project For capitalized costs: the implementation of the project specifically requires the use of the infrastructure For operating costs: the functioning of the infrastructure specifically requires the assignment of support staff or the award if specific service or supply contracts The Annotated Model Grant Agreement provides: a full set of examples on how to comply with the conditions, including examples of evidence to produce for every single cost item or cost category (usual management practices of the beneficiary) indication for specific cases like works contracts (facilities, equipments, infrastructures built-in by own resources): a statement of work in progress, a delivery status, is acceptable the possibility to rely on alternative evidence produced by the beneficiary according to its cost-accounting practices 4 The information is not legally binding

5 Other Costs Answer to question n 37 - Direct Costing for Large Research Infrastructures Conditions for declaring direct costs Measurement A large infrastructure (the same entity may have several large infrastructures) Project's cost statement Direct Costs Direct link If measurable Direct costs Core with a direct link Other Costs Non Core without a direct link Indirect link No link 25% OH Full organisational costs Conglomeration costs Project costs 5 The information is not legally binding

6 Answer to question n 37 - Direct Costing for Large Research Infrastructures Conditions for declaring direct costs Measurement Examples and best practices are provided for every type of cost for capitalised costs: depreciation costs (and project time) for the buildings: rental or lease costs (and project time) for administrative personnel: time recording for other operating costs (maintenance and repair, consumables, materials and spare parts, facilities management, energy supply): specifically explicitly labelled invoice (and project time) Alternatives are provided in case it is factually impossible or economically unfeasible to measure the portion of the cost absorbed by the project 6 The information is not legally binding

7 Table of Contents 1. Framework for external audits 2. Audit process 3. Communication flow 4. Coherence between FP7 and H Additional info 7 The information is not legally binding.

8 1. Framework for external audits External audits ARE ruled by Article 22.1 of the H2020 Model Grant Agreements: H2020 General MGA Ex-post controls: 1. in-house (CAS) approx. 20% 2. outsourced (External Audit Firms) approx. 80% External audits ARE NOT : Agreed Upon Procedures performed by CFS auditors Controls done by operational officers on deliverables Ex-ante controls Controls done by financial officers on Financial Statements (Forms C) 8 The information is not legally binding.

9 1. Framework for ex-post audits Horizon 2020 One set of rules MGA One set of annotations AMGA One governing body Common Support Centre (CSC) AND One Common Audit Service (CAS) performing the audits One Indicative Audit Programme AND One set of consequences of findings applied by CAS, KPMG, PwC, and Moore Stephens Equality of treatment Consistency of audit reports Legal certainty 9 The information is not legally binding

10 1. Framework for ex-post audits Selection of the External Audit Firms (e-tendering) Exclusion criteria Selection criteria Award criteria Winners 9 Offers Civil, criminal and tax record Absence of CoI Capacity Legal and regulatory Allowed to pursue the professional activity Economic and financial Minimum volume of business Professional risk insurance Technical and professional Recognition by competent authorities Proven professional experience Capacity to draft reports in native EN level Technical criteria Execution and reporting standards Working methods (e.g. IAP) Methods to identify and report CoI Communication solutions Best price-quality ratio 1. KPMG 2. PwC 3. Moore Stephens 10 The information is not legally binding

11 2. Audit process Audit Strategy and Planning Audit Strategy and Planning Example: 100 audits selected External Audit Firms (outsourced) 80 audits CAS (own resources) 20 audits KPMG CoI & capacity check for 80 audits OK = 50 audits Cascade principle KPMG performs 50 audits PwC CoI & capacity check for 30 audits OK =20 audits PwC performs 20 audits Moore Stephens CoI & capacity check for 10 audits OK = 8 audits Moore Stephens performs 8 audits CAS performs 2 audits 11 The information is not legally binding

12 2. Audit process Main steps Initiation Letter of Announcement Cooperation is critical during all stages of the audit process Planning & Preparation Agree fieldwork dates Information request Collection of audit evidence Examination Desk review Visit on-the-spot Collection of audit evidence Provide appropriate,! sufficient and persuasive evidence Indicative Audit Programme Preliminary findings Closing meeting Implementation of audit findings Post audit Managed by the EC operational services (not the CAS) Reporting & Closure 1. Preliminary Audit Report (PAR) reviewed by CAS consulted internally (units managing the actions) 2. Contradictory procedure carefully review preliminary! findings and recommendations submit appropriate, sufficient and persuasive evidence 3. Draft Audit Report (DAR) incorporating beneficiary's comments reviewed by CAS (including by the quality control) all comments are carefully reviewed and responded consulted internally (units managing the actions, legal advice, internal committees etc.) 4. Final Audit Report (FAR) 5. Letter of conclusion 12 The information is not legally binding

13 2. CAS message to External Audit Firms The Audit Program and consequences of findings The audit report must be self-standing There should always be a reference to the Article(s) of the MGA or AGA Closing meeting and its outcome clearly mentioned in the audit report Detailed reply to every beneficiary's comment presented during contradictory procedure 13 The information is not legally binding

14 2. CAS message to External Audit Firms Take contact with the auditee soon after the LoA Timely inform the CAS when field work is delayed beyond reasonableness Timely discuss with the Beneficiary any missing supporting documents and/or clarification Timely respond to all comments of the CAS Clear deadlines for the contradictory procedure with possible (limited) extension 14 The information is not legally binding.

15 3. Communication flow 3.1 How to avoid "bad-surprise" in an audit 3.2 Communication during the audit process 3.3 Communication after the closure of the audit 15 The information is not legally binding.

16 3.1. How to avoid "bad-surprise" in an audit Few, simple, clear words Discipline Prudence Perseverance Reality Headache during the weekend! In case of doubt, consult: EC services, PO/FO, Enquiry service 16 The information is not legally binding.

17 3.2 Communication during the audit process Hypothetical examples and best practices Hypothetical example 1: On-site visit does not signal missing documents, but the draft audit report proposes adjustments on that ground Best practice 1: During the contradictory phase, the Beneficiary and the auditor should carefully discuss: any missing supporting documents and their impact; any mutual additional clarification; (limited) extension of the contradictory procedure, if necessary. 17 The information is not legally binding.

18 3.2 Communication during the audit process Hypothetical example 2: No preliminary findings highlighted during closing meeting, but adjustments proposed in the final audit report and pre-information letter follows for recovering significant amounts Best practice 2: In a normal audit process no surprise should occur - be attentive to ALL audit phases: For the Beneficiary For the CAS Be cooperative Provide appropriate, sufficient and persuasive evidence prior and during the visit on-the-spot and during the contradictory stage Comment on ALL findings and recommendations during the contradictory procedure Closing meeting summarizes preliminary 18 audit findings The information is not legally binding. Listen to the Beneficiary Carefully assess and respond to ALL comments of the Beneficiary Clearly explain the audit position Reference findings to the relevant Articles of the H2020 MGA Quality control to ensure equal treatment

19 3.2 Communication during the audit process Hypothetical example 3: The Beneficiary is given insufficient time to submit comments on the draft audit report and there are severe misunderstandings/mistakes in the final audit report Best practice 3: How to avoid this kind of situation: Respond in a timely manner to all information requests of the auditors (prior and during the visit on-the-spot and contradictory process) The contradictory procedure is one month, if insufficient please inform the Auditors/CAS Ask for a (limited) extension of the time granted to submit comments, if necessary 19 The information is not legally binding.

20 3.3 Communication after the closure of the audit EC services responsible for the implementation of the audit findings where applicable 1. Calculate the amount of EU financial contribution (to recover or to offset) AND Inform the Beneficiary providing details and contradictory period (deadline to respond) 2. Taking in due account the comments and observations, the EC services: revise the amount of the EU financial contribution; confirm the amount to be recovered; offset (deduct from a next payment). 3. Issue debit note Inform 1. Information letter 2. Comments 3. Debit note CAS Final Audit Report and Letter of Closure Beneficiary Submit comments on the Information letter within indicated timeframe Debit note may be challenged before the Court of Justice of the European Union (Art 57.2 of the H2020 MGA) 20 The information is not legally binding.

21 4.1. Coherence FP7 vs H2020 General conditions of eligibility are very similar Some important changes and simplification occur in Personnel and Indirect costs Personnel costs represent more than 73 % of direct costs declared in FP7 Errors in personnel costs represent nearly 60% of the amount of adjustments in direct costs in favour of the EU budget Budget category FP7 H2020 Personnel costs Reliable Time Recording System Minimum requirements (including monthly granularity) Timesheets for the H2020 actions Declaration for exclusive involvement Indirect costs Several ICM 1 single flat rate 23 The information is not legally binding.

22 4.2 How often could I be audited? The H2020 Audit Strategy takes into account the H2020 Regulation: "a revised control strategy, shifting focus from minimisation of error rates towards risk-based control and fraud detection, should reduce the control burden for the participants" Audits may be started up to two years after the payment of the balance "Extrapolation" (now extension of audit findings) cannot apply to grant agreements for which the payment of the balance occurred two years or more before the date of the letter of conclusion As an indication: a maximum of 7% of the number of beneficiaries to be audited during H2020 The creation of the CSC - and the CAS in particular - allows a better coordination of Horizon 2020 audits and will prevent over-auditing the beneficiaries 24 The information is not legally binding.

23 5. Additional info Participant Portal At: Horizon 2020 Annotated Grant Agreement Horizon 2020 On-line Manual Questions? Research Enquiry Service 25 The information is not legally binding.

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