Effectively preparing for the audit process of a European project:

As part of the projects financed by the various European Union programmes, audits are carried out to verify the compliance and legality of the use of the funds allocated by the EU. More specifically, the audits aim to ensure that the funds granted are used in accordance with the rules and objectives defined by the EU and that the beneficiaries comply with the contractual and legal obligations associated with European funding. In order to be well prepared for this exercise, here are a few practical tips to follow.

Understanding the audit objectives and approach

To have a successful audit, it is essential to understand its objectives and expectations.
The objectives of audits are multiple and generally include the verification of:

– Compliance of expenditure: Expenditure incurred by beneficiaries must comply with the established agreement and EU regulations.

– The effectiveness of the funds: European funds must be used efficiently to achieve the objectives set by the project.

Who are the auditors?

Audits may be carried out directly by auditors from the European Commission and its agencies, or by external service providers, including specialist audit firms or control bodies, depending on the specific requirements of each funding programme. These auditors are generally experts in finance, management, regulatory compliance and audit procedures. They are responsible for carrying out rigorous and impartial reviews of the activities and expenditure of EU-funded projects.

As part of a payment claim for an EU-funded project, two types of checks with different but complementary objectives are carried out.

Financial audit

The financial audit focuses mainly on verifying that the expenditure incurred complies with the financial regulations laid down by the European Union and the managing authorities. Its objective is to examine the reliability and accuracy of the financial information presented in the application for payment, including budgets, financial statements and evidence of expenditure. In particular, the financial auditor ensures that expenditure has been incurred in accordance with procurement rules, EU funding rules and applicable accounting principles. The financial audit aims to ensure the transparency, integrity and legality of financial transactions related to the project.

Technical audit

The technical audit focuses on verifying the quality and compliance of the activities carried out in relation to the project’s objectives and technical standards. Its aim is to assess the effectiveness and efficiency of the project’s processes, methods and technical results. The technical audit aims to assess the adequacy of the deliverables produced and analyse the results and achievement indicators in order to determine the final impact of the project.

Familiarize yourself with the audit process

The audit process is generally divided into three main stages:

The preparatory phase: this involves gathering and organizing the relevant documents (financial reports, technical reports, accounting vouchers…) to facilitate their consultation by the auditors. Prior to the audit, auditees receive an audit notification letter specifying the period to be audited, the audit date and the names of the auditors. This phase also includes establishing a list of correspondents within the project organization who will be available to answer the auditors’ questions.

On-site visits: this stage can be carried out either by physical audits on the project site, or remotely by videoconference. The auditors meet with project managers and check that project activities are being carried out in accordance with the work plan and established standards.

Audit report: once all the information has been gathered, the auditors draw up a report detailing their observations, conclusions and recommendations. This document is then shared with the funding recipient for comments and possible corrective action, before the final report is drawn up.

To ensure that expenses are reported in accordance with the rules, and to secure your grant, we recommend that beneficiaries of European funds:

– Know and respect the rules: It is crucial to understand the specific requirements of the program funding your project, and to ensure that all activities are carried out in compliance with these rules.

– Maintain complete and structured documentation: Keep accurate records of all expenditure, activities carried out and results obtained, so as to be able to justify the use of funds and facilitate audits.

– Implement sound internal controls: Establish effective internal control procedures to ensure that expenditure is compliant and properly monitored.

– Collaborate with auditors: Facilitate the work of auditors by providing all necessary information and documents in a transparent manner, and by answering questions raised during the audit.

– Follow-up on recommendations: In the event of audit findings or recommendations, take appropriate corrective action to remedy the problems identified and improve financial management practices.

Some good practices to keep in mind:

– If personnel costs are charged to the project, the auditors will check the method of calculating the hourly rate, as well as its compliance with the requirements of the funding program.

– For any expenses incurred, it is crucial to keep evidence (invoices, tickets) to justify these expenses to the auditors. It is important to document potential project risks and the actions taken to prevent them throughout the project. Auditors will pay particular attention to this documentation.

– The designation of a person or team responsible for ensuring compliance with applicable rules and requirements throughout the project can greatly facilitate your payment claims, as can the establishment of clear procedures for the management, documentation and control of project expenditure and income.

By scrupulously following the guidelines and criteria of the funding program, maintaining meticulous documentation and establishing effective internal control mechanisms, beneficiaries of European funds can ensure compliance, transparency and optimal use of the resources allocated. So, by adopting a proactive approach and adhering to financial management standards, it’s entirely possible to get through the audit stage and contribute to the overall success of your project.