FP7 news - issue 3
October 2011
Welcome
The need to complete timesheets and their value in supporting time charged have long been debated by the research community. At the Annual Conference of the European Association for Research Managers and Administrators (EARMA) held in June, four grant audit experts from our international association, IGAF Polaris, presented seminars on the subject ‘Are timesheets money sheets'? In this issue, Jane Sheridan (who was one of the presenters) reports back on the debate and the issues raised by the delegates.
Why is my project being audited? What will my organisation be required to do? Are my files ready for an audit? You may be asking these and many other questions if you have just received a letter announcing an audit of your FP7 project.
However, if you organise yourself properly, all is not as daunting as might first appear. Frank Verleg, a partner with Blömer in the Netherlands, gives some tips on how to survive.
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David Frame |
Julian Rummins |
Time is money
A key theme at the recent annual meeting of EARMA was the issue of timesheet requirements from both legal and guidance perspectives as set out in Annex II of the FP7 Grant Agreement and the Guide to Financial Issues relating to FP7 Indirect Actions Version 28/02/11. Four grant audit specialists from IGAF Polaris firms, including Littlejohn's Jane Sheridan, led the discussions.
The message delivered was simple; by entering into a contract to receive grant monies from the European Commission, recipient organisations become responsible for spending Community money in accordance with the contract rules.
Two sessions explored the practical interpretation of the rules in respect of time recording systems and the presenters offered practical examples drawn from their substantial experience of auditing grant claims.
The presenters argued that having a simple time recording system is not necessarily enough. To be acceptable to the Commission the system must be robust and systematic with evidence of review and control by appropriate line managers. It is important to be able to substantiate not just the time worked on a project but how that time fits into the researcher's overall time commitments.
Delegates shared their experiences - from those whose organisations have implemented strict time recording procedures where non-compliance is a disciplinary matter, to those where the debate over timesheet completion between the finance team and the researchers has long been at stalemate. Many in the latter category were looking for new ways to try and persuade their researchers to comply.
What became clear was that where researchers accept their responsibilities, it is rarely the result of one person's battle to enforce administrative compliance. Rather, senior management has recognised the need to comply, addressed that need and enforced the policy entity-wide.
A large proportion of research grants are awarded in respect of personnel costs for researchers and it is therefore this area where recipients are most at risk of significant disallowances should the necessary supporting documentation not be available.
Whilst the absence of timesheets does not automatically result in costs being disallowed, the onus to prove that time claimed has actually been incurred does rest with beneficiaries. In the absence of duly completed and authorised timesheets, alternative evidence such as diaries, minutes of meetings, emails or project reports must all be considered, but collating this information to support time charged is a lengthy and time-consuming process. Although these alternative sources can be used to support time claimed, whether there are timesheets or not, they do not quantify the time spent. Subjective estimates are therefore often made as to the proportion of time allowable but this only increases the potential for significant disallowances.
The reality for many recipients is that the importance of a robust time recording system is not fully appreciated until the Commission has disallowed personnel costs and requested repayment of grant monies. So, are timesheets money sheets? ... not necessarily on their own, but a robust, comprehensive time recording system goes a long way to minimise the risk of disallowed costs.
Jane Sheridan is a partner in Littlejohn. She can be contacted on 020 7516 2282 or by emailing jsheridan@littlejohnllp.com
Are you ready for an audit of your FP7 project?
“The Framework Programme is financed from Community funds, so it's important that participants spend this funding carefully”, according to Frank Verleg, Managing Partner of accounting firm Blömer in the Netherlands. “Obviously their in-house accountants will be checking the figures already, but the European Commission has audits carried out to ensure that beneficiaries are following the rules. Interpreting the regulation is relatively complex, even for in-house accountants, and especially if they have had little experience in working with the Framework Programme.”
Be aware
As a beneficiary there are various things you can do to prepare. “You should be aware of what you're taking on before you join the Framework Programme”, says Verleg. “Don't start celebrating as soon as you've received a positive decision. Instead, make very sure that you're on top of the regulation. You can appoint a company like ours which is experienced in interpreting the regulation. For us, project control starts at the acquisition phase. Set up clear project files and avoid systemic errors, so that you're well prepared if you do end up being audited and, if you are audited, be transparent and cooperative”.
Avoid damaging your reputation
Verleg explains that audits can have far-reaching consequences. “If declared costs are not accepted in the audit these must be repaid, and you may be subject to a substantial penalty. You also risk damaging your reputation, which can negatively affect future participation. This is clearly undesirable, particularly when you consider that the European Commission's research and development budget is increasing significantly, to €54 billion for the Seventh Framework Programme and to no less than €80 billion for the Eighth Programme, to be called Horizon 2020.”
Less bureaucracy
According to Verleg, there is plenty of room for the European Commission to improve regulation. “The rules are already being simplified, for example to make it easier for smaller SMEs to participate. There could also be clearer links with companies' own systems and national regulation. This would mean a more customised approach, accepting existing systems and less bureaucracy. In addition to this, there should also be more explanation about how to interpret the regulations, which would make participating much more appealing.”
10 tips for a successful FP7 audit
- Co-operate - Be open and transparent and the auditor will be in return. The engagement is not meant to be adversarial.
- Prepare - Project files must demonstrate the origin and eligibility of all costs claimed.
- Record - Ensure the project file reconciles to the underlying accounting records. Supporting documentation must be easily traceable.
- Be open - If you have a problem reconciling records, tell the auditor straight away.
- Organise - Arrange opening and closing meetings and involve senior people. Make sure senior people are present at the closing meeting as well.
- Respond - Make sure you review the auditor's request for information immediately. If you have questions, ask them straightaway, not when the fieldwork starts.
- Learn - Update your knowledge of the general and financial conditions of the grant before the audit starts. If you have an RTD internal compliance expert, get them to review all information before it is given to the auditor.
- Request - If you genuinely need an extension of time, make sure you send a written justification to the auditor (and the responsible Commission service) as soon as possible.
- Justify - Remember, the onus is on you to justify the eligibility of the costs in accordance with the prescribed contractual rules. You must make available all the information the auditor needs to reach their conclusion.
- Help - The auditor is there to “validate”, not to do the work necessary to provide the audit trail. The prime objective is to confirm eligibility, not disprove it - but you must help them get there.
This article first appeared in Nieuwsbrief KP7 published by AgentschapNL in August 2011.
Fourth FP7 Monitoring Report
The Fourth FP7 Monitoring Report was published on 4 August and provides a cumulative picture of the implementation of the 7th Framework Programme, 2007 to 2010.
The annual report now lists top participants amongst universities, research organisations, industry and SMEs. Universities and research institutes continue to top the funding charts. The participation of SMEs is particularly high in the ‘capacities' programme but SME funding still falls just short of the Commission's 15% target.
The report also includes details of participation by European region and ‘special focus' topics on Information and Communication Technologies and SMEs.
The average time-to-grant, i.e. the period from the end of the call to the conclusion of the grant agreement, is still very long at 348 days, being 57 days longer than in 2007.
The report can be downloaded by clicking here
About Littlejohn
Littlejohn is an independent, top 30 firm of chartered accountants and business advisors based in London's Canary Wharf. The firm is one of the largest single office practices in the UK and provides a full range of audit, tax, accountancy and financial services toUK and overseas-based clients.
Our RTD audit team
Littlejohn's dedicated RTD audit team has worked extensively with the European Commission over the last 12 years on the 4th, 5th and 6th RTD Framework Programme financial audits in both theUK and internationally.
We have significant experience of the whole range of business entities involved in this field, ranging from small owner-managed businesses to large plcs, universities and research organisations. Our work has encompassed all the differing types of research activity that the RTD programmes cover.
We recognise the uniqueness and complexities involved in RTD contacts and our team is able to draw on its extensive experience of working with the EC, applying it to address our clients' individual needs.
Contact us
We believe in building enduring professional relationships with our clients. Our RTD specialist partners are supported by a team of managers and staff. We deliver added value by ensuring that each client receives a significant and ongoing level of partner involvement.
For an initial discussion with our experienced team, contact:
In London:
David Frame
020 7516 2207
dframe@littlejohnllp.com
Jane Sheridan
020 7516 2282
jsheridan@littlejohnllp.com
In Brussels:
Julian Rummins
0032 (0)2 456 89 18
jrummins@littlejohnllp.com
