The European Court of Auditors’ annual report for the 2024 financial year has been published. The report provides information on the audits carried out by the European Commission. Within the scope of these audits, a total of 99 projects — 65 under Horizon 2020 and 34 under Horizon Europe — were examined and their results evaluated. The audited beneficiaries were located in 17 EU Member States and 4 non-EU countries.
Among the 99 audited projects in the representative sample, measurable errors were found in 26 projects (26%). Despite the simplifications introduced under Horizon Europe to facilitate cost reporting by beneficiaries, the audit results show no significant difference between Horizon 2020 and Horizon Europe in terms of the eligibility of expenditures.
The key findings are classified by cost category:
Personnel Costs: Errors were identified in 24 of the 99 audited projects (24%) concerning personnel costs, which constitute the largest share of total costs in most research projects. No significant difference was observed between Horizon 2020 and Horizon Europe in this regard. In addition to these measurable errors, two non-quantifiable errors were reported under Horizon Europe, arising from the incorrect application of personnel cost calculation rules.
Compliance with Horizon Europe Rules: Under Horizon 2020, beneficiaries were required to calculate annual or monthly hourly rates and multiply them by the hours spent on EU projects. With Horizon Europe, these rules were simplified — calculations are now based on daily rates and the number of days worked. However, the audits showed that some beneficiaries still applied the old method or did not fully comply with the new rules. In 5 out of 34 Horizon Europe projects in the sample, this issue was identified, leading to incorrect cost claims in 3 of them.
Researchers Seconded from Other Institutions: Both research programmes allow the declaration of personnel costs for researchers employed by another organisation and temporarily seconded to the project. However, if the researcher’s employer is also a beneficiary of the same project, only the employing beneficiary can claim these costs. Eligible costs are limited to those actually incurred by the employing organisation and approved by the Commission. The audits found errors in the costs claimed for seconded personnel in four projects within the sample.
Other Personnel Errors: Other personnel-related errors included the use of estimated instead of actual costs, the declaration of costs not actually incurred by the beneficiary, and the charging of project days during absences. Additionally, in some cases, average costs were not calculated in accordance with either the beneficiary’s accounting practices or the Commission’s rules.
Other Ineligible Direct Costs: A basic eligibility condition is that costs must be incurred in connection with the project and be necessary for its implementation. As in previous years, in 2024, four audited transactions failed to meet this condition. In two of these cases, the beneficiary declared costs for conferences not directly related to the project, or including social activities not necessary for the project. Among 12 research projects where equipment costs were audited, four errors were identified in equipment cost declarations. Ten additional measurable errors were detected in other cost categories in the sample, including: declaring deductible VAT, including ineligible internally invoiced goods and services, declaring costs incurred after the audited reporting period, missing supporting documentation, and using incorrect exchange rates.
Simplification through the Lump Sum Funding Model: Although the Commission aims for at least 50% of the Horizon Europe call budget to be implemented through lump sum funding by 2027, this type of funding has so far remained limited (accounting for only 15% of all grants in 2024). Moreover, the Commission stated in its July 2024 assessment that lump sum funding shifts the focus from costs to project content, thereby reducing the administrative burden in grant management and financial reporting. However, the Commission has not yet completed ex-post technical reviews. In an audit of a biomedical project in the Netherlands, it was observed that even though the beneficiary had not reported certain budget modifications, the Commission had made the full payment.
Management of Financial Support to Third Parties: Shortcomings were also identified in the management of support provided to smaller projects and organisations under Horizon 2020 and Horizon Europe. The audits revealed that, in cases where the financial support to third parties exceeded the EUR 60,000 threshold, sufficient justification was not provided. Furthermore, only three projects fully incorporated all obligations stipulated in the grant agreement into their sub-grant contracts.
In this context, the European Court of Auditors emphasises in its report that, in addition to increasing the use of lump sum funding, the Commission should implement stricter control measures to reduce errors and ensure the efficient use of EU funds.
You can access the full report published by the European Court of Auditors via the provided link and contact us at ncpfinance@tubitak.gov.tr for any questions.