EU auditors call for simpler payment rules in Horizon Europe

The European Court of Auditors says the rules for paying staff costs in the EU research programme should be simplified, but wants more checks on payments to small businesses.

In its annual audit of EU expenditure, the court said incorrect claims for staff expenses are a major source of error, in particular in the case of payments to small and medium-sized enterprises (SMEs).

In the past, researchers have criticised what they say are onerous bookkeeping rules in Horizon 2020, the EU’s research funding programme. Both the European Commission and members of the European Parliament say they want simpler rules for Horizon Europe, the programme’s successor.

The audit report says the main sources of error in 2018 were “overdeclaring costs, such as personnel costs, other direct costs, overheads or ineligible subcontracting costs.”

More than half of errors involved payments to private companies, particularly salary claims submitted by SMEs. As one case in point, auditors found errors in nine out of ten items examined in a €1.1 million claim by a UK healthcare SME.

Overcomplicated rules could be partly to blame. The auditors said although Horizon 2020 generally has simpler rules than the previous Framework programme 7, “in some respects the methodology for calculating personnel costs has increased in complexity, thereby increasing the risk of error.”

An error is defined as any irregularity that means the EU makes a payment the recipient is not entitled to, but it doesn’t necessarily point to fraud. In 2018, the auditors referred nine potential cases of fraud to OLAF, the EU’s anti-fraud office, but would not say if any of those involved research grants.

Research overrepresented in financial errors

Auditors said research spending carries a higher risk of error because of the extra rules involved in reimbursing researchers’ costs. In contrast, other areas, such as the Erasmus student mobility programme don’t generally involve paying expenses claims, meaning simpler rules and fewer errors.

The estimated error rate for EU competitiveness programmes as a whole is fairly low, at two per cent. Any less than that is deemed “free from material error” by the auditors.

The most errors in EU spending in 2018 involved the cohesion budget aimed at the EU’s poorer regions, which had an error rate of five per cent. Natural resources, the largest chunk of the budget, which includes the EU’s massive farm subsidies – had an error rate of 2.4 per cent. The EU’s administration budget was free from material error.