FINANCIAL REPORTING CONTROLS AND AUDITS Legal and Financial

FINANCIAL REPORTING, CONTROLS AND AUDITS Legal and Financial framework in H 2020 proposals. HNN 2. 0 Rome 28 th October 2015 Gonzalo AREVALO. ISCIII

Index

Contents • Periodic and Final Reporting • Completion of the Form C per cost category • Reporting of third party Costs • Art 10 &13 • Art 12 • Art 14 • • • Other issues on reporting: Unit Costs, Exchange rate, etc Payment schedule and cash-flow management Financial responsibility and the EU guarantee fund CFS and ex-post Controls Conclusions 10/27/2020 3

Contents • Periodic and Final Reporting • Completion of the Form C per cost category • Reporting of third party Costs • Art 10&13 • Art 12 • Art 14 • • • Other issues on reporting: Unit Costs, Exchange rate, etc Payment schedule and cash-flow management Financial responsibility and the EU guarantee fund Receipts and final EU funding calculation CFS and ex-post Controls 10/27/2020 4

Periodic and Final Reporting: Main Principles • • Allways to be delivered by the coordinator 60 days deadline for their delivery No-paper, but through the Participant Portal Financial and Technical reports are `declarations‘, thus, no need of justifying docs or similar (but ready in the ‚backoffice‘. 10/27/2020 5

Periodic Reporting • Number of periodic report fixed in the GA (usually each 12 -18 months) • Periodic technical report: • Explanation of work • Overview of the progress • Summary with statistics for publishing • Periodic Financial Report, • ‘n’ Individual financial statements At beneficiary level • ‘n’ Explanation on the use of resources • 1 Periodic summary financial report (automatically generated) (n= number of beneficiaries) 10/27/2020 6

Final Reporting • Deadline 60 days after the end of the GA • Quite similar to periodic reports, main differnces related to the action • • Conclusions Socio-economic impact Final summary Financial statement For the financial report, each beneficiary with EU contribution on direct costs(1) over 325. 000 € should also provide CFS (1) Only related to direct costs reported on actual basis 10/27/2020 7

Contents • Periodic and Final Reporting • Completion of the Form C per cost category • Reporting of third party Costs • Art 10&13 • Art 12 • Art 14 • • • Other issues on reporting: Unit Costs, Exchange rate, etc Payment schedule and cash-flow management Financial responsibility and the EU guarantee fund Receipts and final EU funding calculation CFS and ex-post Controls 10/27/2020 8

Completion of the Financial Statement (former form-c) Completed at beneficiary level E-signed by the F-SIGN Declaration, but subject to request the justifying docs. Adjustments possible to former periods. Thus, last FS can not be adjusted. • FS directly submitted by Beneficiary to the EU, if a correction is needed, it should come through the COOR • COOR has the capacity of rejecting costs? • • 10/27/2020 9

Reporting Staff Costs • Done on a thriple dimension basis: • Person: • Total Labour eligible cost • Actual hours devoted to the action • Institution: Dr. Perez • WP 1: 1, 25 PMs 5. 000 € • WP 3: 2 PMs 8. 000 € • WP 5: 0, 5 PMs 2. 000 € TOTAL: 3, 75 PMs 15. 000 € • Method for productive hours calc. • Project: • Breakdown per WP 10/27/2020 Dr. Perez WP 1, 3 and 5: 3, 75 PMs 15. 000 € 10

Reporting Other Direct Costs ry a n i m Preli • Costs claimed under "other direct costs" are considered as minor, if they are equal or less than 15% of claimed personnel costs for that reporting period. • • No explanation for other direct costs below 15% of claimed personnel costs, If "other direct costs" are higher than 15% of claimed personnel costs, then major cost items need to be explained in the report by the beneficiary to a level that the remaining costs are below 15% (only if not foreseen in the Do. A) 10/27/2020 e to r a s ' t n e uipm q e t a h t t and e t forge s o u n o o t D g • ordin c c a d e g r be cha ill be n w o i s t c a i o c d e r g dep tifyin s u j , t i d u e of a s a c n I • all need for 11

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Contents • Periodic and Final Reporting • Completion of the Form C per cost category • Reporting of third party Costs • Art 10 & 13 • Art 12 • Art 14 • • • Other issues on reporting: Unit Costs, Exchange rate, etc Payment schedule and cash-flow management Financial responsibility and the EU guarantee fund Receipts and final EU funding calculation CFS and ex-post Controls 10/27/2020 14

Third Parties reporting: Art 10 vs Art 13 ART. 10 Cover Contracts with third parties that are not action tasks. Thus included in the beneficiary FS in ‘Other direct costs‘. • Can not be invoiced by other beneficiaries • Generate Indirect costs • Not needed to be included in the GA Some examples: IPR experts, and Publication costs, catering services, CFS 10/27/2020 ART. 13 Covers Subcontrcting of action tasks. Thus included in the beneficiary FS in ‘Subcontracting costs‘. • Can not be invoiced by other beneficiaries • Generate Indirect costs • Not needed to be included in the GA Some examples: Screening, sampling services, 15

Third Parties reporting: Art 10 vs art 13 ART. 10 Cover Contracts ART. 13 Covers with third parties that are Subcontrcting of action not action tasks. Thus. COMMON FEATURES: tasks. Thus included in theonbeneficiary FS in • Always a best-value for money basis FS in • ‘Other direct costs‘. procurement ‘Subcontracting costs‘. Following beneficiary procedures • Can not be invoiced bybeneficiary/ies • Can not be invoiced by • Responsibility of the other beneficiaries VALID FOR BOTH • Generate Indirect costs • Generate EXAMPLE Indirect costs • to Project • Not needed be Web site • Not needed to be included in the GA Some examples: IPR and Publication costs, Screening, sampling catering services, CFS services, 10/27/2020 16

Third Parties reporting: Art 10 vs art 13 Summary ART. 10 Cover Contracts ART. 13 Covers with third parties that are Subcontrcting of action not action tasks. Thus. COMMON FEATURES: tasks. Thus included in theonbeneficiary FS in • Always a best-value for money basis FS in • ‘Other direct costs‘. procurement ‘Subcontracting costs‘. Following beneficiary procedures • Can not be invoiced bybeneficiary/ies • Can not be invoiced by • Responsibility of the other beneficiaries VALID FOR BOTH • Generate Indirect costs • Generate EXAMPLE Indirect costs • to Project • Not needed be Web site • Not needed to be included in the GA Some examples: IPR and Publication costs, Screening, sampling catering services, CFS services, 10/27/2020 17

Third Parties reporting Art. 12 refers to those TTPP making resources available for a beneficiary free of charge, and not for the just purpose of the action. Always included in the beneficiary's FS Two possibilities Incurred in the Beneficiary's Premises As a normal beneficiary cost Incurred in the TTPP Premises Specific column in FS, and should include 25% Indirect costs In both cases: justifying docs and registered in the TTPP account 18

Third Parties Reporting: Art 14 Art. 14 refers to implementation of tasks by ‘legal’ linked third party to a beneficiary. Main features: • Broad relation (not specific for the action) • TTPP declare its costs (not prices) • Beneficiary remains responsible • Usually incured in the TP facilities Third party • Complete and paper sign its own form c Beneficiary • Keep paper version fo the form c • Include TP costs within PP in a separate form • E-sign the agregation of FS: Benef + TP 325. 000 criteria for CFs applies separately for Benef and TP 10/27/2020 19

Contents • Periodic and Final Reporting • Completion of the Form C per cost category • Reporting of third party Costs • Art 10&13 • Art 12 • Art 14 • • Other issues on reporting: Unit Costs, Exchange rate Payment schedule and cash-flow management Financial responsibility and the EU guarantee fund CFS and ex-post Controls 10/27/2020 20

Other issues on reporting: Unit Costs are usable in H 2020 for: • Staff Costs: • SME owners or natural persons without a salary • Staff costs based on ‘average personnel costs • Specific Unit costs (ie Clinical trials) Calculation by multiplying units, per amount per unit (as indicated in the GA). In case of audit, should be documented: • Number of units • Actual direct eligible costs (t-1) to reach the unit cost value 10/27/2020 21

Other issues on reporting: Exchange Rate Main principle: All reporting is to be done in € Beneficiaries/TP with accounts in €, use their own usual practices to convert Beneficiaries/TP with accounts in non-€: • daily euro exchange rate is published in the C series of the Official Journal of the European Union (shortcut to ECB website) • If NO daily euro exchange rate is published: using the average of the monthly accounting rates over the corresponding reporting period, using the currency converter on the Commission’s website 10/27/2020 22

Contents • Periodic and Final Reporting • Completion of the Form C per cost category • Reporting of third party Costs • Art 10 &13 • Art 12 • Art 14 • • • Other issues on reporting: Unit Costs, Exchange rate, etc Payment schedule and cash-flow management Financial responsibility and the EU guarantee fund CFS and ex-post Controls Conclusions 10/27/2020 23

Payment Schedule and Project Cash Flow EU Adv Payment PR 1, 2, P-1 Final report: Project Balance: + Accepted Final eligible costs - EU Payments - Action receipts (Usually 100% EU/RP) (Accepted eligible costs) 5% EU Contr to EU GF Distributed among partners according execution and to CA and GA (1) Distributed among partners according final balance (1) Maximum cash flow advanced from the EU is 90% (85% considering also the GF) 5% EU Contr to EU GF if needed according to the balance Remaining amount to be distributed among partners according to CA and GA 10/27/2020 24

Payment Schedule and Project Cash Flow Final report: Project Balance: Some issues to consider: + Accepted Final eligible costs EU Adv Payment PR 1, 2, P-1 - EU at Payments 1. 85% is the maximum amount level of cash flow (Usually 100% EU/RP) (Accepted eligible costs) - Action receipts action level 2. Prefinancing payment from EC is 30 days from signature 5% EU Contr to 3. EU GFPR payments Distributed among partners according deadline is 90 days Distributed among partners according execution and to CA and GA (1) final balance 4. Coord, if written in the CA, can/should have Remaining amount to be distributed among autonomy for budget administration partners according to CA 5. Guarantee Fund protects only during the action, 5% EU Contr to EU GF if and GA (1) Maximum cash flow needed according to the thus, be careful o level of partners execution and balance advanced from is payments by the end of the EU action. 90% (85% considering also the GF) 10/27/2020 25

Contents • Periodic and Final Reporting • Completion of the Form C per cost category • Reporting of third party Costs • Art 10&13 • Art 12 • Art 14 • • • Other issues on reporting: Unit Costs, Exchange rate, etc Payment schedule and cash-flow management Financial responsibility and the EU guarantee fund Receipts and final EU funding calculation CFS and ex-post Controls 10/27/2020 26

Financial responsibility and the EU guarantee fund The guarantee fund is the mechanism for the beneficiary to recover any due amount of a beneficiary: i) after the termination of a beneficiary participation, thus an amendment is needed ii) and in a running action (before the balance payment) 10/27/2020 27

Financial responsibility and the EU guarantee fund Some remarks: • As an amended is needed, that termination be The guarantee fund is the mechanism for theshould beneficiary to initiated the of endaofbeneficiary: the project recover any due before amount • The coordinator has to show: • Acted following CA i) after the termination of a beneficiary • Payments done participation, thus amendment is needed • Done its best to an recover the due amount ii) and in a running action (before the balance One Advice: Foresee in the CA how too handle adv payment) payment to partners Once the project is OVER the FG just protect the EC! 10/27/2020 28

Contents • Periodic and Final Reporting • Completion of the Form C per cost category • Reporting of third party Costs • Art 10&13 • Art 12 • Art 14 • • • Other issues on reporting: Unit Costs, Exchange rate, etc Payment schedule and cash-flow management Financial responsibility and the EU guarantee fund CFS and ex-post Controls Conclusions 10/27/2020 29

CFS Certificate on Financial Statement: First Level Audit Ø Why? To give certainty and security on expenses justified Ø Who? Beneficiary/linked third party Ø When? At the end of the project EU contribution based on actual costs over 325. 000 € Ø How? A certified auditor (Internal/external) Following Annex 5 (CFS Model) Ø Where? The Participant Portal will request it automatically 10/27/2020 30

CFS Certificate on Financial Statement: post justified x To give certainty and security on expenses e n a nst i a g a y int a t r : e s c k l r lega for ema Beneficiary/linked r s y e e g s o Ø Who? third party o l m p o o S sup hod t t e o for n M s d n e e o r o e e D d t i • ons tifica c r e e c b a t o i ot t has of the project n Ø When? aud Atficthe end y r e a r i a s ded unt e o e bene. EU contribution n m a f a i f I t based on actuals’costs • onlyover 325. 000 € , tha , s t s o c o er c staff h t g o n ‘ i l i r e nde 00 c u 0 y , l l 5 a 2 u 3 Ø How? A ccertified t, us auditor (Internal/external) s o e l ib • Elig Following Annex 5 (CFS Model) Ø Why? Ø Where? 10/27/2020 The Participant Portal will request it automatically 31

Ex-post Controls Ex -post controls: Two kind of Ex-post controls Ø EU Commission: Ø Ø Ø Ø Mainly (80% in FP 7) by an audit company hired by the EC, but sometimes EU Auditors, From PR 1 delivery until 2 years after the end of the action (payment of the balance) Usually several actions are audited Done on a contradictory basis Usually Financial audits, but can also be technical or joint audits Extrapolation is a possibility if systematic errors are identified Usual stages: On Site Audit Comm Preparatory documents Final report Draft report Further docs request Official response to draft report Implementation of findings Ø Cort of Auditors Ø Quite similar but the entity audited is the EC and not the beneficiary 10/27/2020 32

Contents • Periodic and Final Reporting • Completion of the Form C per cost category • Reporting of third party Costs • Art 10&13 • Art 12 • Art 14 • • • Other issues on reporting: Unit Costs, Exchange rate, etc Payment schedule and cash-flow management Financial responsibility and the EU guarantee fund CFS and ex-post Controls Conclusions 10/27/2020 33

Conclusions • No big changes compared to FP 7 • Coherence with usual procedures is a key issue • Regulation is somehow simpler, but this does not mean it is simple • There is no black and white decision always, but many times is a grey graduation 10/27/2020 34

Index

This project has received funding from the European Union’s Horizon 2020 research and innovation programme 10/27/2020 36