The European Court of Auditors' Annual Report for the 2025 financial year has been published. The report presents the audit findings and assessments of financial management concerning programmes implemented under the European Union budget.
In 2025, a total of 126 transactions were examined under the relevant budget heading, of which 37 (29%) were found to contain errors. Based on the audit findings, the estimated level of error was calculated at 2.9%, taking into account quantifiable errors and other findings. This rate exceeds the materiality threshold of 2% set by the European Court of Auditors.
A breakdown of the estimated error rate of 2.9% shows that ineligible personnel costs accounted for the largest share, at 1.8 percentage points, while the absence of essential supporting documents and ineligible other direct costs (VAT, travel and equipment) each contributed 0.5 percentage points.
The key findings are presented below according to the different cost categories.
Personnel Costs: Personnel costs, which constitute a significant proportion of expenditure incurred under European Union Framework Programme projects, were among the main areas in which errors were identified during the audits. Of the 90 transactions examined in the research area (40 under Horizon 2020 and 50 under Horizon Europe), quantifiable errors related to personnel costs were identified in 22 (24%). In addition, two non-quantifiable errors were reported.
Costs Claimed for Time Not Spent on the Project: It was found that beneficiaries had declared costs for days during which personnel had not actually worked on the projects in 7 of the 50 Horizon Europe transactions examined and in 1 of the 40 Horizon 2020 transactions. In some cases, beneficiaries had declared days on which personnel were absent or days that could not be justified by time records.
Calculation of Personnel Costs Based on Hourly and Daily Rates: Under Horizon 2020, personnel costs are calculated using annual or monthly hourly rates, whereas the calculation method was simplified under Horizon Europe by introducing daily rates. However, the audits revealed that some beneficiaries had incorrectly calculated hourly or daily rates under both programmes. These errors included the incorrect determination of productive time, the use of rates calculated for the wrong reference period, and the inclusion of ineligible costs in the calculations.
Ineligible Other Direct Costs: For a cost to be considered eligible, it must be incurred in connection with the project and be necessary for its implementation. The audits identified 10 transactions in which these conditions had not been met. Examples included equipment and inventory costs for items not used in the project, services not delivered during the project period, and travel expenses with no direct link to the project.
Shortcomings in the Lump Sum Funding Model: The European Commission aims to allocate approximately half of the annual budget allocated to Horizon Europe calls through the Lump Sum funding model by the end of 2027. However, the audits revealed shortcomings in the assessment of project budgets and the verification of the completion of work packages under this funding model.
In all three Lump Sum projects examined, although experts had raised certain concerns regarding the proposed budgets, these concerns were not adequately reflected in the final evaluation reports and did not result in the necessary adjustments to the proposed budgets. Furthermore, personnel costs were found not to have been sufficiently assessed against reference data, such as historical costs.
In addition, some key deliverables were not clearly defined in two of the audited projects, while evidence indicated that certain work packages might not have been completed as required under the grant agreement in one project. Nevertheless, the report also highlighted a case in which the Commission accepted the relevant work packages as completed and authorised the payments.
Ineligible Costs Claimed by Beneficiaries in Non-EU Countries: The audits identified cases in which two SMEs operating in non-EU countries had declared ineligible costs under research projects funded by Horizon 2020 and Horizon Europe. In one case, travel expenses claimed for participation in a project meeting included flight tickets for a relative of the company's CEO. In the other case, the beneficiary was unable to provide the underlying calculations supporting personnel costs or reliable evidence justifying the working time claimed. Furthermore, private expenses unrelated to the project were included in travel and miscellaneous costs.
In this context, the European Court of Auditors' report highlights the need to strengthen controls over the eligibility of personnel costs in research projects, improve audit and control mechanisms for budget assessments and the completion of work packages under the Lump Sum funding model, and introduce further measures to prevent the declaration of ineligible costs.
The full report published by the European Court of Auditors can be accessed via this link. For any questions regarding financial and administrative matters related to the Horizon Europe Programme, please contact us at ncpfinance@tubitak.gov.tr.