If you are — or have previously been — a beneficiary of a Horizon Europe project and have been selected for a financial audit, you may have wondered what is the worst thing auditors can find in your research & innovation project.
Aside from fraud and criminal matters that are dealt with by European bodies such as OLAF, one of the most problematic situations you can face in a standard financial audit is the auditors considering your mistakes as being “systemic or recurrent errors”.
Based on our long experience with financial audits, both by the EC auditors and external entities, we define a systemic or recurrent error as a repeated and widespread issue, affecting a specific methodology or process the beneficiary uses in all its EU-funded projects, as opposed to a single, one-off occurrence.
In the HE Annotated Grant Agreement (AGA), systemic or recurrent errors are detailed in the explanations related to the potential consequences of EC control. Indeed, systematic and recurrent errors can lead to negative outcomes in any type of EC control, such as the Certificate on Financial Statements (CFS) or the project checks, reviews and audits.
In the case of the CFS, the auditors inform the European Commission if they find mistakes of a “systemic nature” that cannot be simply excluded from the corresponding financial statement.
In EC controls such as checks, reviews and audits, the finding of systemic or recurrent errors is reported by the auditors in the audit report. The definition of a mistake as systemic or recurrent may lead to negative consequences for the beneficiary. The most significant consequence would be that the same systemic or recurrent errors would also be applicable to any other EU grants the beneficiary is implementing or has implemented in the past 2 years (“extension of findings to other EU grants”). Additionally, auditors may suggest a suspension of further grant payments or a reduction in the total amount of the grant.
So how can you identify and avoid systemic or recurrent errors in your project? Be careful with mistakes that affect not just a specific occurrence, but that imply the error derives from the way you operate in terms of financial management of EU-funded projects.
A specific example of a systemic or recurrent error would be, for instance, a recurrent irregularity in the calculation of personnel costs, due to a specific mistake in the time recording system template for employees.
On the other hand, a one-off mistake in the calculation of the personnel costs of one single employee would not be considered as systemic or recurrent error.
Want to know more about systemic or recurrent errors, or need support to avoid them? Have auditors spotted a systemic or recurrent error in your project and you want advice on how to deal with it? We can help hello@getpolite.eu!