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Find answers to Frequently Asked Questions (FAQs) about the financial audit of European Commission (EC) projects.
Will my EC project be audited?
All EC projects are subject to audit.
If your EC award is worth €375,000 (FP7) or €325,000 (H2020 direct costs) or more your project will be automatically audited by UCL’s external auditors once your actual expenditure has reached or exceeded that threshold.
In addition, all EC projects are liable for financial and/or scientific audits for up to 5 years after the projects’ end date by auditors appointed by the EC regardless of the value of the award.
How many times can my project be audited?
For FP7 - the automatic audit after the €375,000 spending threshold has been reached is carried out for every €375,000 spent on the project. In other words, after each audit, the ‘clock’ is reset to 0 until the threshold is reached again at which point a further financial audit will be carried out on expenditure since the last audit.
For H2020 – The audit will be carried out at the end of the project
What does the financial audit entail?
Once the spending threshold is reached the UCL Research Finance Division will issue a terms of reference to the external auditor at the first financial reporting period after the threshold has been reached.
The auditor will request auditable back-up (see question 4 below) for staff and non-staff costs charged to the project account.
Once the auditor has reviewed all of these documents, and is satisfied that any adjustments that may be necessary have been made, a Certificate on the Financial Statements (or ‘audit certificate’) is issued and is then submitted to the EC along with the Form C financial statement (periodic financial report).
What constitutes ‘back-up’ for non-staff costs?
‘Back-up’ refers to the audit trail of a cost item detailing the description of the item, its cost, VAT and any additional charges, the date of purchase, a unique reference number, and the names of the supplier and customer (UCL unit).
The most desirable forms of back-up are invoices and receipts.
It is mandatory to keep ‘back-up’ for all items charged to the project account including goods, services, and expenses, as well as internally supplied goods and services.
What kind of back-up is required for goods and services supplied internally in UCL?
Anything which provides the same information as an external invoice is acceptable back-up for costs incurred internally in UCL provided that it also shows that the goods/services were provided at cost.
Beneficiaries of EC grants are not permitted to generate a profit from EC funding. Goods and services charged to the project account via IDT require back-up such as this in addition to the IDT request form. The IDT request form does not in itself constitute back-up.
Who should keep back-up for goods and services charged to EC grants?
Invoices for externally supplied goods and services, as well as receipts for staff expense claims are archived by UCL Accounts Payable and are therefore available for audit.
Back-up for internal charges should be kept by both departments/units involved in the transaction.
However, it is good practice to keep copies of all invoices/receipts charged to EC grants for up to 5 years after the end of the project as all EC projects are subject to audit (see question 1 above).
Do I need to keep original paper copies of the back-up?
A scanned version of the original document will suffice provided that the scan is of good quality and the document is fully legible.
What happens if the auditor deems a cost to be ‘ineligible’?
VAT is an ineligible cost for all EC grants and this cost is covered by a central UCL fund.
Costs associated with any items charged to an EC grant which are ineligible under the terms of the EC Grant Agreement, charged in duplicate, or a contravention of UCL procedures for reimbursing expenses must be removed from the EC account and borne by a departmental account.
What constitutes ‘back-up’ for personnel costs?
An individual staff timesheet and UCL Contract of Employment is required for every staff member funded by an EC grant, whether in full or in part.