3.3. Project audits and ex-post controls

Owned by Varmo Pilt
02 December 2021
5 min read

Various funders may carry out audits or ex-post controls at any time during the project lifecycle and after the end of a project within the time frame laid down in the terms and conditions of the contract or decision with an aim to verify whether the funds have been used for their intended purpose and have been documented properly.

After receiving an audit notice, the project manager must send it to the Research Administration Office to Marika.Lunden@taltech.ee and to the Finance Office to Siret.Malleus@taltech.ee, who will forward it to the contact person in their unit related to the project and to the university’s internal auditor for information. At the end of the audit, the project manager must also include the audit or control report in his/her project folder, where it will be archived later. If an audit is carried out after the end of the project and the folder has been archived already, the report shall be submitted to the Research Administration Office, who will arrange for the report to be added to the archived documents.

The purpose of the audits is to analyse and verify the following aspects:

  • that the operation was selected in accordance with the selection criteria for the project, was not physically completed or fully implemented before the beneficiary submitted the application for funding under the operational programme, has been implemented in accordance with the approval decision and fulfilled any conditions applicable at the time of the audit concerning its functionality, use, and objectives to be attained;
  • that the expenditure declared corresponds to the accounting records and that the required supporting documentation demonstrates an adequate audit trail;
  • that the expenditure declared complies with Community legislation;
  • the outputs and results underpinning payments to the beneficiary have been delivered, participant data or other records related to outputs and results are consistent with the information submitted and that the required supporting documentation demonstrates an adequate audit trail;
  • that the notification requirements have been fulfilled (in particular in the case of infrastructure projects, buildings, acquisitions, etc.).

 

The contact persons from the Project Accounting and Reporting Division and the Research Administration Office, who have experience in carrying out audits, must be involved at the kick-off meeting of an audit.

An auditor may request more information than he/she is entitled to, but the project implementer is not required to provide such documents. For example, in the case of projects funded based upon fixed unit costs, the auditor is usually not entitled to request expense receipts, unless otherwise specified in the contract, e.g. as the obligation to provide proof of a contract concluded or payment made in the case of target grants. 

When preparing replies to the auditor, assistance can be obtained from the Research Administration Office and in financial matters from the Project Accounting and Reporting Division of the Finance Office.

 

Projects funded by the European Commission (e.g. Horizon202, Erasmus+)

The European Commission may order an audit or carry it out itself at any time during the implementation of the project or 2 years after the final payment and carry out the following activities:

  • CHECK - used to verify the proper implementation of the action and compliance with the obligations resulting from the aid granted, including assessing deliverables and reports.

Example: after receiving the reports, the Commission checks the different documents (explanation of the work carried out, overview of the progress, explanation of the use of resources, etc.) for consistency with the description and work plan. Also, the Commission regularly performs double-funding and plagiarism checks on documents submitted by consortia.

  • REVIEW - carried out to confirm the proper implementation of the action (including assessment of deliverables and reports), compliance with the obligations under the grant agreement and continued scientific or technological relevance of the project. Reviews normally refer mainly the technical implementation of the project (i.e. its scientific and technological relevance), but may also cover financial and budgetary aspects or compliance with other obligations under the grant agreement.

Reviews may be started up to 2 years after the payment of the balance and may include on-the-spot visits or review meetings (on Commission premises or anywhere relevant for the project).  On the basis of the review findings, a review report will be prepared.

  • In case of fraud suspicions, the European Anti-fraud Office (OLAF) may conduct investigations (e.g. on-the-spot inspections and witness interviews) into EU-funded projects to check that expenditure has been used correctly. OLAF cooperates with national authorities (through information exchange, on-the-spot checks, coordination of forensic audits etc.) OLAF may decide to open an investigation upon receipt of suspicious information by the Commission or from other sources.

An audit can be conducted by the Commission’s own staff or outsourced to external bodies from Estonia or from another Member State of the European Union.

On the basis of the audit findings, a draft audit report will be drawn up, which will be sent to the project manager for comments. Within a certain period of time you will be able to provide your observations, which are taken into account or not taken into account, and a final audit report will be prepared and sent to you for approval, after which follow-up activities will be carried out – the grant amount may be reduced, an ex-post audit may be agreed.

If systematic errors are found, the European Commission may extend the findings of the audit results to non-audited grant agreements or non-audited periods.  Besides these corrections, other measures may be taken, including financial and administrative penalties. This means that if a systemic error (e.g. in the calculation of personnel costs) is found in a project, the amount of grant of all the projects implemented at the university may be reduced or payments to all the projects may be suspended without carrying out an audit.

Projects financed by Structural Funds

The rules governing the use of structural assistance are specific. Errors in application for grants, the preparation and conducting of the procurement procedure can lead to financial corrections, i.e. to grant reduction, which may mean refusal to pay the grant or the reclaiming of a grant already paid. Audits are usually unexpected and can be very stressful, since the questions about the procurement procedure and the performance of the procurement contract require comprehensive and detailed replies. Each reply and document submitted is of great importance. Awareness of the most common problems helps mitigate the risks of reclaiming of the grants.

The audits and inspections of structural assistance granted may involve:

  • On-the-spot checks (inspections). In the case of on-the-spot checks, documents on the expenditure incurred are not checked, but usually the acquisitions or constructed/renovated buildings are inspected. It is important that the notification requirements are met and that the acquisitions comply with the project. In the case of on-site-inspection, the funder also involves a construction expert and, if necessary, a landscaping expert and “counts all the trees around the house”.
  • Document audits. This audit includes on-site activities and remote investigation. As a rule, the supporting documents relating to expenditure are examined and an extract from the accounting records is taken on the spot.

It is important to ensure an adequate audit trail and appropriate documentation (in particular timesheets, etc.).

Before the start of an audit, it is recommended to review and compile all the documents in cooperation with the Research Administration Office and the Finance Office.