ANNEX A - I. Note: it is important that each tenderer has read the Working Practice and its annexes very carefully.

Transcription

1 ANNEX A - I Note: it is important that each tenderer has read the Working Practice and its annexes very carefully. WORKING PRACTICE 1.GENERAL INFORMATION 1.1.THE AUDIT CO-ORDINATOR The Audit Co-ordinator must: Maintain all contacts with the JUs and the auditors. He will be the unique access point with the JUs and will regularly meet with the JUs, typically on a monthly basis; Transmit to the JUs all the required documentation and reports on behalf of the auditors and as specified in the framework service contract and each specific contract; Transfer to the auditors all the documents related to the audits to be carried out on behalf of the JUs; Ensure proper instructions and monitoring of the auditors on the work to be carried out; Ensure consistency in the audit approach (the Audit Co-ordinator is responsible for the quality control). Ensure that there is no conflict of interest with reference to the organisations to be audited. In case there is a conflict of interest the Audit Co-ordinator will inform the respective JUs service without delay (see also point and 3.1.3). Ensure that, in particular the audit work is carried out in conformity and in application of any relevant JUs legal interpretation, guidance note or audit approach or practice issued or applied by the JUs' services and of which the Contractor has been made aware. Ensure that the auditors are familiar with the Rules for submission of proposals and the related evaluation, selection and ward of each Joint Undertaking and the financial provisions of their grant agreements to be audited, and in particular with any special conditions that may exist. Ensure that the auditors are familiar with the requirements of the framework service contract and each specific contract with the JUs. Clarify and resolve to the extent possible any problems that the auditors may encounter during an audit If necessary, the Audit Co-ordinator may request a meeting with the JUs Audit Services to clarify any problems that have not been resolved. 1

2 It is the responsibility of the Audit Co-ordinator to ensure that the time table for the audits is respected. In particular, the Audit Coordinator is responsible for adopting and monitoring the application of comprehensive common procedures and policies, including the relationship with the auditee and the scheduling of the field work, to ensure respect of the timetable. The Audit Co-ordinator must inform the JUs Audit Services of possible problems with the audited organisations without delay. These problems could include inexistence at the given address, non co-operation, lack of supporting documents for the costs claimed, inappropriate bookkeeping and/or elements of fraud The Audit Co-ordinator must review all audit reports for quality, completeness and consistency before sending them to the JUs Audit Services. The Audit Coordinator must implement adequate quality review procedures in line with professional audit standards in order to ensure that audit reports are free of material errors in form and content In cases where there is disagreement with the audited organisation on the conclusions reached by the auditors, the Audit Co-ordinator shall provide the JUs with all the elements to support and defend the conclusions reached THE RESPONSIBLE COUNTERPARTS FOR AUDITS OF THE JU For each Batch the unit responsible for audit of the concerned JU will be indicated in the specific contract. In the case of a participant in the JUs programs having concluded grant agreements with more than one JU, each JU will keep the responsibility for the audit related to its grant agreements The person(s) responsible for audit of each JU involved in a specific contract will be the only contact point for the Audit Co-ordinator DOCUMENTATION The JUs are entitled to verify how the contractor works and to have access to all the internal documentation, information, working papers and the like of the Contractor (including to obtain copies of these documents), which concern the services to be provided. In case all the internal documentation, information, working papers and the like are not kept at the premises of the Audit Coordinator, the JUs may request the Audit Co-ordinator to collect all related documentation and to make it available at his premises. The JUs are also entitled to have access to the premises of the Contractor. The contractor is obliged to keep all working papers related to audits carried out for the whole duration of the framework contract plus two years after the end of the framework contract. 2

3 2.WORK TO BE UNDERTAKEN 2.1.BATCH ASSIGNMENTS Each assignment will be carried out in order to verify whether the costs incurred, claimed and declared on the basis of the EU grant agreements being audited, taking into account the costs accepted and any adjustments made "ex-ante" by the JUs, are claimed according to the financial provisions defined in each specific audited grant agreement The audit of the eligibility of costs comprises (1) validation of the total costs incurred for the project in the respective reporting period and (2) assessing the correct application of upper funding limits according to the Grant Agreements, Annex II General Conditions As a general rule, each audit procedure should follow the Indicative Model Audit Programme attached as Annex A-I INDIVIDUAL ASSIGNMENTS Individual Assignments consist of ad hoc services for specific cases. As an example, the work to be carried out may consist of: A complete financial audit Audit related services in connection with the batch assignments comprising extrapolation of audit results and calculation of residual error rates. A specific assignment to assess the level of the in-kind contributions following the requirements of the JU's Council Regulations. A compliance audit focusing on specific contractual obligations, A specific audit evaluating aspects such as reliability of processes, integrity of data, information security, and performance measurement, A follow up audit with respect to contractor's compliance regarding the implementation of audits results, An examination of accounting records at a pre-contract stage, in order to e.g. ensure that the budgeted hourly personnel rates are appropriate; A review of the system of project accounting and provide an opinion as to its acceptability; A cost category control, A systems-based review of the personnel and overhead rates applied to projects funded by the JU and provide an opinion on their acceptability; Technical audit assistance to the JU; A forensic audit 1 Including cost claims of participants not receiving JU funding but providing only in-kind contributions, that may also be subject to audit services. Therefore, for the purpose of these tender documents the words (1) 'participant' and 'beneficiary' and (2) 'costs reported' and 'costs claimed' are synonymous. 3

4 3.AUDIT ASSIGNMENT PROCEDURES 3.1.BATCH ASSIGNMENTS The individual JU will present a list of organisations to be audited in a batch as request for services. The audit of each organisation will cover cost claims from different numbers of specific contracts (up to 7), with either up to 3 or between 4 and 9 cost claims in total per organisation The JU will provide the Contractor (auditing company) with a list of organisations to be audited. In cases where the Contractor (auditing company) has a conflict of interest (see point 3.1.3) with any of the organisations on the list, or does not have the resources available to complete the assignment in the requested timeframe, it shall inform the JU accordingly. The Contractor will provide the JU in Brussels with the final list of organisations that it can audit within 7 calendar days after receipt of the initial list from the JU. Should the Contractor fail to provide the final list within this time limit, he will be considered as being unavailable to provide the service within the meaning of point A conflict of interest will always be assumed if there is a commercial relationship between the Contractor and any of the organisations to be audited or if the Contractor has had a commercial relationship with an organisation to be audited within the last three years before the signature of the contract between the JUs and the organisation to be audited. The organisations with which the Contractor had a conflict of interest can be grouped in a new Batch and assigned to the second contractor. If the latter is also considered unavailable (see causes under point 3.1.4), the Contractor will have released the JU from any contractual obligation and will have waived any rights towards the JU in relation with the proposed Batch without this involving termination of the Contract or payment of compensation by the JU for services specified in the request of services. In this case, the JU will have the right to send a request for services to the third Contractor selected under the framework service contract The Contractor shall be considered unavailable if: - he fails to inform the JU of the existence or non-existence of a conflict of interest within 7 calendar days after receipt of the request for service; - he acts after 7 calendar days after receipt of the request for service sent by the JU; - he refuses in writing to return any of the above-mentioned documents or provide any of the above-mentioned information. 4

5 In this case, the Contractor will have released the JU from any contractual obligation and will have waived any rights towards the JU in relation to the proposed Batch Assignment without this involving termination of the framework contract or payment of compensation by the JU for services specified in the request of services. In this case too, the JU will have the right to send a request for services to the next Contractor selected following the present tendering procedure and with whom a framework contract has been concluded and in case of his unavailability within the meaning of this point to the third Contractor After due acceptance by the Contractor of a final list of organisations to be audited, the JU will prepare a specific contract. The specific contract shall be signed by the Contractor within 7 calendar days after receipt and returned to the JU. Attention is drawn to the provisions of point and the consequences of unavailability The JU will, after having retrieved the specific contract signed by the Contractor, inform all organisations to be audited of the forthcoming audit by sending a Letter of Announcement and remind the organisations of their contractual obligations relating to auditing. A copy of this letter will be sent to the Audit Co-ordinator The JU will as a minimum supply the Audit Co-ordinator with the following information (audit input files): - A list of organisations, contracts and periods to be audited; - Copies of related financial statements; - A copy of the model grant agreement applied and any special conditions; The dates for the audit to take place at the premises of the organisation will need to be agreed upon between the Contractor and the organisation to be audited. The organisation should be given reasonable time to prepare all the documentation necessary to justify the costs claimed. 3.2.INDIVIDUAL ASSIGNMENTS In the case of a proposed Individual Assignment, the Contractor shall return a duly justified estimate of the resources (person-day) to be allocated for the execution thereof within 7 calendar days after receipt of the request for service. Should the JU consider the estimate reasonable and appropriate, it shall send a specific contract to the Contractor. The Contractor shall indicate his approval to carry out the Auditing Service requested by the JU by signing and returning the specific contract to the JU without delay and not later than within 7 calendar days The Contractor shall be considered unavailable if: - he fails to inform the JU of the existence or non-existence of a conflict of interest within 7 calendar days after receipt of the request for service sent by the JU; - he fails to return the justified estimate or the specific contract within 7 calendar days after receipt; - he fails to accept the Individual Assignment; 5

6 - he refuses in writing to return any of the above-mentioned documents or provide any of the above-mentioned information; - the JU is in disagreement with the Contractor on his estimate of the resources to be allocated. In these cases, the Contractor will have released the JU from any contractual obligation and will have waived any rights towards the JU in relation to the proposed Individual Assignment without this involving termination of the framework contract or payment of compensation by the JUs for services specified in the specific contract. In this case too, the JU will have the right to send a request for services to the next Contractor selected following the present tendering procedure and with whom a framework contract has been concluded and in case of his unavailability within the meaning of this point to the third Contractor The assignment procedure will be determined for each specific case. In the case where a complete audit is to be performed, the assignment procedure could be the following: The JU will arrange a preliminary meeting between the Contractor and the organisation to be audited, at which meeting the JUs may be represented The purpose of the meeting will be to explain the objectives of the audit, determine the scope, identify possible problem areas and define practical details concerning the commencement of the audit The JU will provide confirmation of such visits and their objectives in writing for each audit assignment Within 14 calendar days of the preliminary meeting the Contractor having assessed the audit work to be conducted, will send to the JU: a) Minutes of the preliminary meeting b) An audit proposal detailing: - The problems foreseen, if any; - The audit approach foreseen; - The detailed audit work plan; - Composition of the audit team, including qualifications, competences, experiences and grade (CVs); - Commencement date foreseen; - Duration of the audit; - Budgeted cost in euro After acceptance of the audit proposal, the JU will prepare a specific contract. Attention is drawn to the provisions of point and the consequences of unavailability Prior to the signature of a specific contract, the JUs are under no obligation to refund the Contractor for costs incurred. 4. REPORTING PROCEDURES AND TIME LIMITS 6

7 The Contractor is required to provide all the services contracted for within the time limit specified in each specific contract. In doing so, it needs to take into account the reporting procedures specified below and the time limits accorded to the audited organisation(s) and the JU. The Contractor is required to provide all the Final Audit Reports within the specified time limits unless otherwise provided for in this Working Practice section or a specific contract. Monthly Audit Status Reports (MASR) should be provided (in a format such as provided in Annex A-I.2.) by the Audit Co-ordinator for all the audits in progress, both Batch and Individual Assignments, to all participating JUs. Each audit should be listed in such a way as to enable an easy identification of the underlying specific contract. All audits comprised in a Batch Assignment should be listed together. All Draft, Pre-final and Final Audit Reports should be sent to the JUs in electronic format and also in paper copy where this is indicated in the Working Practice. The content of the Draft, Pre-final and Final Audit Reports is shown in Annex A.I.5. Note that the content and the layout may be subject to amendments and changes, if these are deemed necessary by the JU and the Contractor. All changes made in Draft and Pre-final Audit Reports must be shown in "track changes" mode in order that the changes can easily be identified by the JU s services. The Contractor is in charge of the overall time management of the batch audits and has to ensure that the schedule is appropriate to achieve all deliverables within the time frame foreseen for the batch. Based on the JUs' needs, the specific contract specifies whether the Batch Assignment must be completed within 4, 5 or 6 months (i.e. time between 'completion date' and 'start date' as defined below). If not explicitly stated otherwise in the specific contract, the start date of a Batch Assignment is the date on which the Contractor has signed the specific contract, or the date on which the JU has sent out the audit announcement letters to the auditees, or the date on which the audit input files are provided, whichever is the latest. If not explicitly stated otherwise in the specific contract, the due date for the completion of all deliverables that is in general the delivery of all Final Audit Reports as well as the provision of the Final Assignment Report is set at 4, 5 or 6 months after the start date. The completion date of a Batch Assignment is the date on which the Contractor has actually submitted to the JU the last of all Final Audit Reports to be delivered, duly signed and dated, both in a standard Microsoft Word format (or similar format) and in a standard Adobe PDF format (or similar format). Tables shall also be provided in a standard Microsoft Excel format (or similar format). The calculation of liquidated damages as specified in the General conditions and the Special conditions is based upon the time that has elapsed between the due date and the completion date. The delivery of the last of all Final Audit Reports does not exempt the Contractor to also provide in due time all other deliverables 7

8 specified in the working practice or in the specific contract, such as hard copies of the Final Audit Report and the Final Assignment report. 4.1 BATCH ASSIGNMENTS During the first MASR meeting the Audit Co-ordinator presents a schedule board showing all fixed dates for the fieldwork, agreed upon with the auditees, for each audit of a Batch Assignment. Changes to the schedule board are presented and explained in subsequent MASR meetings As soon as the auditor has completed the fieldwork of an audit, he arranges an exit meeting with the auditee and presents and explains all findings Workflow for reporting on audit accomplishments Within 21 calendar days after the exit meeting and completion of the fieldwork, the auditor issues a Draft Audit Report in a standard Microsoft Word format (the content of which is indicated in Annex A- I.3) and submits it both to the responsible JU via the Audit Co-ordinator and the auditee. Tables shall also be provided in a standard Microsoft Excel format (or similar format) If in exceptional cases the auditor needs further guidance or feedback by the JUs before sending the Draft Audit Report to the auditee, he submits within 14 calendar days after the exit meeting a copy to the responsible JU, clearly indicating the need for guidance or feedback. The JU replies within 7 calendar days and provides further guidance, or decides to stop the audit and the respective reporting process. Both the guidance and the decision to stop the audit are communicated via the Audit Co-ordinator The JUs and the auditee will have 14 calendar days to make comments and to suggest any amendments to the Draft Audit Report. The auditee sends the comments to the auditor in writing In case of findings giving raise to systematic errors, the auditor shall collect any available comment or evidence useful to assess the nature of the error and the potential financial impact on the non audited contracts. The auditor shall explicitly solicit a specific comment of the auditee in this regard Within 14 calendar days after having received the JU's and auditee's comments, the auditor issues a Pre-final Audit Report in a standard Microsoft Word format (the content of which is indicated in Annex A- I.5) that takes those comments into account if appropriate, and that shows the auditee's comments as annex of the report. 2 Tables shall also 2 At this stage the auditor, in case of findings giving raise to systematic errors, shall collect any available comment or evidence useful to assess the nature of the error and the potential financial impact on the non-audited contracts. The auditor shall explicitly solicit a specific comment of the auditee in this regard. 8

9 be provided in a standard Microsoft Excel format (or similar format). The auditor submits the Pre-final Audit Report via the Audit Coordinator to the responsible JU for final approval The responsible JU either approves the Pre-final Audit Report within 14 calendar days or, if necessary, asks for justified alterations or amendments or additional fieldwork necessary to substantiate findings. In the latter cases the auditor may perform the former work step again within 21 calendar days until the Pre-final Audit Report is approved The auditor issues the Final Audit Report, duly signed and dated, and submits it to the responsible JU via the Audit Co-ordinator within 7 calendar days after the JU's approval of the Pre-final Audit report in both a standard Microsoft Word format (or similar format) and a standard Adobe PDF format(or similar format). Tables shall also be provided in a standard Microsoft Excel format (or similar format). At least 10 paper copies are submitted within 30 calendar days after the approval Reporting on Batch accomplishments Once all Draft Audit Reports have been submitted to the responsible JU, the Audit Co-ordinator shall send to the JU an Intermediate Assignment Report within 14 calendar days (in a format such as provided in Annex A-I.4) Once all Final Audit Reports have been approved by the JUs, the Audit Co-ordinator shall send to each participating JU within 14 calendar days (1) a Final Assignment Report (in a format such as provided in Annex- I.6) and (2) a duly filled in 'Audit Database' (in a format such as provided in Annex-I.7) comprising separate information for each organisation within the Batch. Note that the content and the layout may be subject to changes, if these are deemed necessary by the JUs and the Contractor. 4.2.INDIVIDUAL ASSIGNMENTS Having completed the fieldwork of an audit as defined in the specific contract, the auditors shall arrange an exit meeting with the auditee and shall present and explain all findings In the case of a complete audit, within 21 calendar days after the exit meeting and completion of the fieldwork, the auditors shall issue a Draft Audit Report and submit it to both the responsible JU as well as to the auditee. 9

10 The JU and the auditee will have 14 calendar days to make comments and to suggest any amendments to the Draft Audit Report On receipt of the JU s and the auditee's comments, the Contractor will revise the Draft Audit Report, taking both the JUs' as well as if appropriate the auditee's comments into account, and issue an amended version (Pre-final Audit Report) that shall be sent to the JUs for approval within 14 calendar days The procedure outlined under point will be repeated by the JUs and the Contractor until the Pre-final Audit Report is finally approved by the JUs. This process needs to be completed within the time frame set in the respective specific contract After having received the final approval of a Pre-final Audit Report, the Contractor shall issue the Final Audit Report, duly signed and dated. Copies of the Final Audit Report, both in a Microsoft Word format (or similar format) and in an Adobe PDF format (or similar format), shall be submitted to the responsible JU within 7 calendar days after the approval, and a number of paper copies shall be submitted within 30 calendar days after the approval. Tables shall also be provided in a standard Microsoft Excel format (or similar format). ANNEXES Annex A-I.1 : Indicative Model of Audit Programme Annex A-I.2 : Monthly Audit Status Report Annex A-I.3 : Draft Audit Report Annex A.I.4: Intermediate Assignment Report Annex A.I.5: Indicative Model of Audit Report (, Draft, Pre-final and Final) Annex A.I.6: Final Assignment Report 10

11 ANNEX A-I.1 INDICATIVE MODEL OF AUDIT PROGRAMME This model audit programme is designed as a guideline intended to orient the Contractor in his accomplishment of the service assignment. The prime objective of each audit will always be to ensure that the costs incurred on research projects funded by grant agreements have been claimed 3 in compliance with the financial provisions defined in each specific grant agreement under audit. The content of this audit programme may be subject to changes, if these are deemed necessary by the JUs. In the case of an individual assignment, the auditor needs to design each programme in accordance with the scope of the assignment. Detailed Steps: System review Assess the adequacy and reliability of the internal control system with regard to the segregation of duties, authorisation of transactions, retention of records, monitoring of operations, and reporting procedures (reference to other auditors work where appropriate). Assess the usual accounting practices/conventions of the auditee. Review the cost accounting system and check the method of recording project related costs. If applicable, check the analytical/standard cost accounting system used to determine average/standard costs claimed in the context of research grant agreements. Assess the reliability of the auditee's system used to record the hours worked on the project. The complete time recording system must allow for a reconciliation of total hours in cases where personnel work on several projects during the same period. An effective time-recording system is a requisite for the eligibility of the costs. Direct costs (Article II.14 and 15. as per Grant Agreement - Annex II General Conditions) Direct costs are all those eligible costs which can be attributed directly to the project and are identified by the auditee as such, in accordance with its accounting principles and its usual internal rules. Check that all direct costs comply with the financial provisions. Determine whether costs claimed are in accordance with the usual accounting practice of the auditee. Check that all claimed direct costs are substantiated by supporting documentation. 3 Including cost claims of participants not receiving JU funding but providing only in-kind contributions, that may also be subject to audit services. Therefore, for the purpose of these tender documents the words (1) 'participant' and 'beneficiary' and (2) 'costs reported' and 'costs claimed' are synonymous. 11

12 Check that personnel costs are substantiated by supporting documentation and that labour contracts of the personnel involved in the projects comply with the financial provisions of the grant agreement. If the auditee has asked for a certification (1) on the methodology for the calculation of costs that it uses to prepare its claims with regard to both personnel and indirect costs and the related control systems ('CoM' Grant Agreement, General Conditions article II.4.4) or (2) on the methodology to use average personnel costs ('CoMav' Grant Agreement, General Conditions article II.14.1) ensure that the auditee's methodology was certified (Independent report of factual findings on the methodology; Grant Agreement- ANNEX VI - Form E) and approved by the Joint Assessment Committee of the Commission (JAC), ensure the claimed personnel costs were calculated based upon the certified methodology, and asses whether the methodology used is acceptable. The JUs need assurance that actual personnel costs of the auditee's research staff working on projects funded by grant agreements do not significantly differ from claimed personnel costs, and that the methodology is not systematically applied to the disadvantage of the JUs. Example: In order to assess the methodology a suitable audit sampling approach may be used for a sufficiently large sample of research staff's salary payments to achieve a sufficient degree of reliability. Determine whether all direct costs claimed were eligible, as defined in Article II.14 Grant Agreement - Annex II General Conditions. In order to be eligible they have to be actual, incurred by the auditee during the duration of the project (with some exceptions), determined in accordance with the usual accounting principles and practices of the auditee, respecting the accounting rules of the State in which the auditee is established, used for the sole purpose of achieving the objectives of the project and its expected results, consistent with the principles of economy, efficiency and effectiveness, recorded in the accounts of the auditee, and must be indicated in the estimated overall budget in Annex I. Check that the monthly/hourly labour rates have been correctly calculated, and that the number of chargeable hours/the productive time used for the calculation of the hourly rate is reasonable. Check that the labour time claimed corresponds with the time actually spent (checking the time recording system used by the auditee). Reconcile the number of hours used for the calculation of personnel costs with the number of hours reported by the auditee in internal project reports. Subcontracting: Verify the compliance of subcontracting with the principles of best value for money (best price-quality ratio), transparency and equal treatment. Check eligibility of other direct costs. In particular, check that identifiable indirect taxes, including VAT and other ineligible expenses (Article II.14.3 Grant 12

13 Agreement ANNEX II General Conditions) have been excluded in the auditee's cost claim. Check whether all costs claimed have been assigned to the correct cost category/type of activity in mandatory reporting templates. Determine the necessary adjustments for all errors found by carrying out the checks outlined above. Indirect costs (Article II.14 and 15 as per Grant Agreement - Annex II General Conditions) Indirect costs must meet the criteria as established in Article II.15.2 Grant Agreement - Annex II General Conditions. Indirect costs are all those eligible costs which cannot be identified by the auditee as being directly attributed to the project but which can be identified and justified by its accounting system as being incurred in direct relationship with the eligible direct costs attributed to the project. They may not include any eligible direct costs and shall represent a fair apportionment of the overall overheads of the organisation. They may be identified based on either actual indirect costs or on a flat rate of its total direct eligible costs, excluding costs for subcontracting and the costs of resources made available by third parties which are not used on the premises of the beneficiary. If the auditee has asked for a certification on the methodology ('CoM'- Grant Agreement, General Conditions article II.4.4)) or the simplified method of calculating indirect costs (Grant Agreement, General Conditions article II.15.2.a), ensure that the auditee's methodology was certified (Independent report of factual findings on the methodology; Grant Agreement- ANNEX VI - Form E) and approved by the Joint Assessment Committee of the Commission (JAC), ensure the claimed costs were calculated based upon the certified methodology. asses whether the methodology used is acceptable. The JUs need assurance that the auditee's actual indirect costs do not significantly differ from claimed indirect costs, and that the methodology is not systematically applied to the disadvantage of the JUs. Example: In order to assess the methodology a suitable audit sampling approach like the stratified mean per unit may be used for a sufficiently large sample of overhead cost items to achieve a sufficient degree of reliability. If the auditee has opted for the method of 'Actual Indirect costs': Review the system of allocating indirect costs to projects and the calculation method, and determine the adequacy of this system. Ensure that indirect costs are equitably allocated to all operations and that they are not burdened with allocations of overhead pools providing no benefit to the research work. 13

14 Check whether the cost driver (e.g. number of hours worked, personnel cost) used for the allocation of indirect costs is reasonable, and whether it was correctly applied. Reconcile overhead allocation base to the Beneficiary's records and agree account balances with general ledger and/or subsidiary ledgers. If necessary, perform a reconciliation. Perform adequate checks of indirect labour accounts to ascertain that direct type labour is not being charged to overhead accounts. Review in detail and check eligibility of the cost categories included in the indirect costs to be distributed according to the drivers chosen; Test sensitive accounts related to non-eligible costs such as identifiable indirect taxes including VAT or duties, interest owed, provisions for possible future losses or charges, exchange losses, costs declared, incurred or reimbursed in respect of another Community project, costs related to return on capital, and debt and debt service charges, and ensure that such costs have been excluded. Scan the accounts for miscellaneous credits and assess whether adjustments to the overhead pool and allocation base are necessary. Check that indirect costs do not contain excessive or reckless expenditure. If the auditee has opted for the method based on a 'Flat rate' of its total direct eligible costs, excluding its direct eligible costs for subcontracting and the costs of resources made available by third parties which are not used on the premises of the beneficiary: Check its correct calculation taking into consideration the impact of any adjustment on direct costs above. In general: Check compliance with the financial provisions of the grant agreements. Conclude on the eligibility of the indirect costs claimed and determine the necessary adjustments for all errors found by carrying out the checks outlined above. Receipts of the project (Article II.17 as per Grant Agreement - Annex II General Conditions) Check whether there have been receipts of the project as defined in the Grant Agreement, or whether there has been income generated by the project, as defined in Article II.17b Grant Agreement - Annex II General Conditions, and decide whether the receipts and/or the income need to be considered in the calculation. 14

15 Check whether pre-financing provided by the JUs yielded interest as defined in Article II.17.b Grant Agreement - Annex II General Conditions, was reported as such to the JUs. Systematic findings: State if any of the audit findings are of a systematic nature or due to systemic weaknesses in the auditee's costing and accounting methodology or internal control system, and note this in the audit report. In case of findings giving raise to systematic errors, collect any available comment or evidence useful to assess the nature of the error and the potential financial impact on the non audited contracts. Explicitly solicit a specific comment of the auditee on this regard. Audit Database: Fill in the Audit Database for the particular auditee following the format of Annex A.I.7, in order to establish the aggregated database of qualitative audit findings for the entire Batch (see section 4.1 Reporting on Batch accomplishments) 15

16 ANNEX A-I.2 AUDIT STATUS REPORT FOR THE MONTH OF... Audit Reference Responsible JU Country Organisation Audited Audit on the Spot Draft Audit Report sent to JU Start (date) End (date) (actual date) Comments N.B. Planned dates should be typed in Italics and actual dates in bold. 16

17 ANNEX A.I.3 INDICATIVE MODEL OF DRAFT AUDIT REPORT Currently it is foreseen that the Draft Audit Report has the same format as the Pre-final Report and the Final Report (see Annex A.I.5). The template may be subject to changes. 17

18 ANNEX A-I.4 INTERMEDIATE ASSIGNMENT REPORT Audit Reference Responsible JU Country Organisation Audited Draft Audit Report sent to the JU 'Draft' error rate Comments Deadline 4 Actual date 4 Within 30 calendar days after the exit meeting and completion of the fieldwork. 18

19 ANNEX A.I.5 INDICATIVE MODEL AUDIT REPORT The content of the Draft, Pre-final and Final Audit Reports is shown. Note that the content and the layout may be subject to amendments and changes, if these are deemed necessary by the JUs and the Contractor.

20 This report is the property of the Joint Undertaking and should not be distributed to third parties without the written approval of the Joint Undertaking FRAMEWORK SERVICES CONTRACT IMI.2017.FWC.215 PRELIMINARY / DRAFT / FINAL AUDIT REPORT AUDITED ORGANISATION: PROJECTS AUDITED: AUDIT REFERENCE NUMBER: AUDIT DATE This report has been prepared by request of the Joint Undertaking. The views expressed herein are those of the auditor and do not represent any official view of the Joint Undertaking. The use of this report is restricted to the Joint Undertaking, those EU official authorities having regulatory right of access to it (such as for example the European Court of Auditors and the European Anti-Fraud Office), other EU funding bodies as well as those stakeholders of the FP7 project as determined by the Joint Undertaking. Restricted use 20

21 This report is the property of the Joint Undertaking and should not be distributed to third parties without the written approval of the Joint Undertaking Table of contents page PART 1 EXECUTIVE SUMMARY 23 Audit Opinion Report 23 Opinion Audit adjustments and recommendations for systems improvement Follow-up of previous audits carried out 28 PART 2 GENERAL INFORMATION Information on the audited organisation 30 Legal status 30 Summary of financial figures 30 Dependence on EC funding 30 Accounting System and basis 30 Time recording System (including the procedure to record absence) 31 PART 3 AUDIT WORK AND FINDINGS Personnel costs 32 Work performed 32 Productive hours calculation and hourly rate calculation 33 Findings Subcontracting 33 Work performed 33 Findings Other direct costs 34 Work performed 34 Findings Description of method used to calculate indirect costs 36 Work performed 36 Findings Receipts Interest (only applicable to mono beneficiary s and managing entities) Conversion rates Co-ordinator/managing entity role and/or money received from managing entity 37 PART 4 ANALYSIS OF BENEFICIARY S COMMENTS 38 PART 5 ANNEXES TO THE AUDIT REPORT 39 Annex 1 Costs claimed according to the financial statements and audit adjustments 40 Annex 2 Analysis of direct personnel costs and its impact on indirect costs 41 Restricted use 21

22 This report is the property of the Joint Undertaking and should not be distributed to third parties without the written approval of the Joint Undertaking Annex 3 Beneficiary s Comments 42 Annex 4 Analysis of sub-contracting and other direct costs 43 Annex 5 Audited financial statements 44 Restricted use 22

23 This report is the property of the Joint Undertaking and should not be distributed to third parties without the written approval of the Joint Undertaking PART 1 EXECUTIVE SUMMARY AUDIT OPINION REPORT In connection with the Framework Services Contract IMI.2017.FWC.215 signed with the Innovative Medicines Initiative 2 Joint Undertaking, we have audited the financial statement as set out in the table below submitted to the Joint Undertaking (hereinafter referred to as JU) by (insert name of the Beneficiary) (the Beneficiary ): Grant agreement (insert project number and acronym) Cost claimed Period audited (dd/mm/yyyy dd/mm/yyyy) Euro Total amount claimed (insert total amount claimed) Granting Body JU Framework Programme Framework Programme 7 Grant agreement (insert project number and acronym) Cost claimed Period audited (dd/mm/yyyy dd/mm/yyyy) Euro Total amount claimed (insert total amount claimed) Granting Body JU Framework Programme Framework Programme 7 Grant agreement (insert project number and acronym) Cost claimed Period audited (dd/mm/yyyy dd/mm/yyyy) Euro Total amount claimed (insert total amount claimed) Granting Body JU Framework Programme Framework Programme 7 Responsibility of the Beneficiaries for the Financial Statements The Beneficiary is responsible for the preparation and fair view of the financial statements in accordance with the Grant Agreement(s) and to maintain adequate accounting records and documentation to support and justify the costs reported. The Beneficiary is also responsible for such internal controls as are necessary to enable the preparation of financial statements that are free from misstatement, whether due to error or fraud. Auditor s Responsibility Our responsibility is to express an independent opinion, based on our audit procedures, on the financial statements of the above mentioned Grant Agreement(s) only as to whether the costs have been properly incurred and are eligible costs, as defined under the Grant Agreement(s). We conducted our audit taking into account the provisions of the audited Grant Agreement(s) under the 7 th Research and Technological Development Framework Programme and in accordance with International Standards on Assurance and Audit Engagements as they are applicable solely in relation to the special scope of this engagement only. Those standards require that we comply with ethical requirements and plan and perform an audit to obtain reasonable assurance that the financial statements are free of material misstatement. An audit engagement involves performing relevant procedures to obtain evidence about the amounts claimed in the financial statements. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. Restricted use 23

24 This report is the property of the Joint Undertaking and should not be distributed to third parties without the written approval of the Joint Undertaking In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances relevant for the scope of this engagement, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control as a whole. An audit also includes evaluating the appropriateness of accounting policies used for the preparation of the financial statements submitted to the JU as well as evaluating the overall presentation of these financial statements. We believe that the evidence we have obtained is sufficient with respect to the objectives relevant for our engagement and appropriate to provide a basis for our opinion. Additional Conditions Our audit work has been undertaken so that we might state to the JU those matters we are required to state in our audit report and for no other purpose. We are thus responsible solely to the JU for our work and the opinion we have formed. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the JU unless such responsibility has been expressly accepted. Our work is not designed specifically to identify incidences of fraud. Accordingly, fraud may occur and not be detected. We have nevertheless obtained representations made by the Beneficiary in relation to the authenticity and completeness of the supporting documentation provided to us. Our audit work in assessing the necessity of costs incurred for the implementation of a project is limited to verifying, to the extent that we are qualified and able to, that those costs have been incurred solely for the intended purpose of the Grant Agreement(s). This normally implies verifying that specific costs are provided for in the budget proposals sent to the JU prior to the signature of the Grant Agreement(s) (or otherwise reflected and prescribed within the project technical specifications as set out in Annex I to the audited research Grant Agreement(s)) and that those costs when actually incurred are processed, validated and approved within an accounting system and related internal control structure that would meet or exceed the generally accepted international principles of sound financial management. Our audit work relating to the certification that costs are economic and reflect the Beneficiary s economic environment is limited to, to the extent that we are able and qualified to: verifying that claimed costs are incurred in line with the usual administrative and management practices of the Beneficiary and; assessing whether these costs, in pure monetary terms, are evidently extravagant or unreasonable as defined within the Grant Agreement(s) terms and conditions. It is not a value for money or performance audit. It is a report by exception. As such, it cannot normally create legitimate expectations on the conformity of the costs declared or the methods of calculation used. OPINION During our audit we noted: adjustments of xx,xxx in favour of the JU / Beneficiary for project GA No. GA Name; adjustments of xx,xxx in favour of the JU / Beneficiary for project GA No. GA Name;; and adjustments of xx,xxx in favour of the JU / Beneficiary for project GA No. GA Name;. These are set out in the Summary of Audit Adjustments presented in section 1.1. Restricted use 24

25 This report is the property of the Joint Undertaking and should not be distributed to third parties without the written approval of the Joint Undertaking In our opinion, except for the effect of the matters as detailed in section 1.1, the audited financial statements properly reflect eligible costs, receipts and interests, which: are actual; have been incurred by the Beneficiary during the duration of the project and in the financial periods audited; have been determined in accordance with the usual accounting and management principles and practices of the Beneficiary; have been used for the sole purpose of achieving the objectives of the project and its expected results, in a manner consistent with the principles of economy, efficiency and effectiveness; have been recorded in the accounts of the Beneficiary and in the case of third parties, they have been recorded in the accounts of the third parties; have been incurred for prospective research conducted in a Member State or an Associated Country; have been indicated in the estimated overall budget in Annex I; and are exclusive of any non-eligible costs established in the second paragraph of Article II.13.6 of the Grant Agreement with JU. The audit further comprised: assessing that receipts are properly reflected in accordance with Article II.16 of the Grant Agreement(s); assessing whether the total amount of the interest yielded by the pre-financing received from the JU for the period covered by the financial statements (if applicable and only for Managing Entities), has been accounted for correctly and completely. Based on our audit and except for the matters as described in section 1.1, we can conclude that the financial management of the project was (not) carried out in an acceptable manner and (not) in compliance with the requirements of the Grant Agreement(s). Audit firm auditor s signature Date Restricted use 25

26 This report is the property of the Joint Undertaking and should not be distributed to third parties without the written approval of the Joint Undertaking 1. AUDIT ADJUSTMENTS AND RECOMMENDATIONS FOR SYSTEMS IMPROVEMENT 1.1 Audit findings and adjustments The adjustments required to the costs accepted by the JU are summarised below: (a) Project Number - Name Cost Categories RTD Management Training Other TOTAL Personnel Subcontracting Other direct costs thereof travel & subs thereof consumables thereof durable equipment - thereof protection of knowledge - thereof other costs INDIRECT COSTS TOTAL Receipts Interests * Please adapt the different types of activities depending on the Funding Scheme (use the Form Cs as a basis) (Please comment shortly on the adjustments per cost category). (e.g.) Personnel costs Travel costs Indirect Costs Restricted use 26

27 This report is the property of the Joint Undertaking and should not be distributed to third parties without the written approval of the Joint Undertaking 1.2 Systematic errors We consider none/the following errors to be of a potentially systematic nature: (Please list the systematic errors) 1.3 Observations and Recommendations for systems improvement (Please describe system weaknesses identified during the audit work and insert relevant recommendations to the Beneficiary. Cross reference these observations recommendations with the cost category related to). Observation X: Recommendation X: Observation Y: Recommendation Y: Restricted use 27

28 This report is the property of the Joint Undertaking and should not be distributed to third parties without the written approval of the Joint Undertaking 2. FOLLOW-UP OF PREVIOUS AUDITS CARRIED OUT We have inquired whether other EU Research Grants under the 6 th or the 7 th Research and Technological Development Framework, in which the Beneficiary may have participated, have been already audited. Based on these enquiries only, (select the applicable statement below:) The Beneficiary has never been audited for other FP6 and/or FP7 projects. The Beneficiary has been audited for other FP6 and/or FP7 projects. (Insert, for each previous audit, the project number and acronym, audit reference number and DG or Agency or Joint Undertaking having launched that audit. If there was no previous audit, delete the rest of this chapter.) Project Number and acronym Audit Reference Number DG or Agency or JU Where the reports of these previous audits have identified systematic issues which might potentially impact other projects, we inquired during the normal course of our work concerning the projects subject to our current audit assignment, whether the Beneficiary has taken measures to prevent the recurrence of these previous issues. We present below a summary of the follow-up made by the Beneficiary of the previous systematic issues relevant for the present Grant Agreement under audit, as noted by us during the normal course of our work for the projects subject to the present audit assignment: e.g. Cost category involved For example: Description of the issue identified in the previous audit report Description of the observation made during the current audit assignment Previous issue resolved? (Yes or No) Personnel Systematic overstatement of hourly rate due to incorrect method of calculation of the cost of holiday leave entitlement In the current project, we observed that the method of calculation of the cost of vacation pay has been corrected by the Beneficiary Yes Or else (if applicable): Restricted use 28