If your Horizon Europe project is selected for an EC audit, you’ll need to respond quickly, organise your records, and document each declared cost clearly. Financial audits are not rare; they are part of the Commission’s broader system of controls and apply to all types of beneficiaries, from large research consortia to single-partner SMEs.
A successful audit, however, starts long before the audit itself. From supporting projects with their financial management, we’ve learned that the everyday habits – how costs are recorded, how documentation is organised, how consistently teams keep track of their work – make the biggest difference. When this foundation is strong, the audit becomes a much smoother process and far less challenging, simply because everything you need is already in place.
This guide breaks down what to do at each stage of a financial audit:
- Steps to take when you receive the audit letter
- How to handle the verification visit
- What the draft audit report means and how to respond
- What documentation gaps typically lead to rejected costs
The steps below follow European Commission guidance and agency procedures, combined with our first-hand experience in project coordination and financial management support.
What financial audits cover under Horizon Europe?
The Commission, the Research Executive Agency (REA), or external contractors may audit a Horizon Europe beneficiary at any point during the project or for several years after the final payment.
These financial audits verify whether the declared costs are:
- Eligible under Article 6 of the Grant Agreement
- Allocated correctly across reporting periods and work packages
- Linked to project objectives and supported by documentation
An audit can cover a specific reporting period, a cost category, or a risk-based sample of costs. If auditors detect a pattern of errors, the findings may be extended to other projects managed by the same organisation, particularly when internal accounting or cost allocation methods are shared across grants.
What to do when you receive an audit letter?
The audit starts with a Letter of Announcement (LoA), typically emailed to your legal signatory. This letter sets the scope of the audit and proposes a timeline for documentation submission and the verification visit. It also includes an annex with a checklist of required documents.
When you receive the LoA/audit letter:
- Log into Funding & Tenders Portal → Formal Notifications.
- Open the notification and acknowledge (sign with EU-Login) within 15 days.
- Select communication means (electronic vs paper) if prompted.
Next:
- Review the annex(es) with the requested documents ( Annex I: Supporting documents before and during the audit, Annex II: Internal Control Questionnaire, Annex III: Detailed Cost Breakdown (Excel format)).
- Note all listed evidence categories and deadlines.
- Form internal audit-preparation team (finance, project lead, HR, legal/compliance).
- Confirm that Portal roles (LEAR / AUCO / PLSIGN / Account Admin) are current.
Planning:
- Set internal deadlines that leave time for quality checks before the auditor visit.
- Assign responsibilities for each evidence category (who gathers, who checks).
The required documents include:
- Breakdown of actual costs by budget category
- Contracts and procurement records
- Time declarations and monthly timesheets
- Internal control procedures for project accounting
- Payment evidence: bank statements, invoices, receipts
Create a central archive, ideally using cloud-based storage accessible by your audit team. Use a standard file naming structure, such as “WP4_travel_receipt_FRANKFURT_OCT2022.pdf”. Keep copies of scanned originals, and ensure paper copies are available if requested.
A Certificate on the Financial Statements (CFS) is required for any beneficiary (or affiliated entity) whose total EU contribution reaches €430,000 or more, calculated across the entire project including indirect costs. The CFS, issued by a qualified auditor, is submitted only with the final financial report, even if interim certificates are prepared. Its cost is eligible under “other goods, works or services” (category C.3) and should be budgeted at the proposal stage. Download the official CFS template here.
Note: This €430,000 threshold applies only to Horizon Europe. Other programmes (including Horizon 2020, AMIF, ISF, etc.) use different, often lower thresholds, so always check the rules of the specific funding scheme.
Preparing for the verification visit
The verification visit may take place remotely or onsite. Auditors will contact you beforehand to request initial documents, and during the visit, they review your supporting evidence, interview key staff, and clarify open points. A visit can last several days, depending on the complexity of the claim. After the visit, auditors often follow up with additional questions or requests for further documentation.
Preparation tips:
- Confirm staff availability: make sure those who managed cost reporting and document filing are present and briefed
- Share documents in advance: this saves time and lets auditors prepare detailed questions
- Use the same document structure as the audit annex: this shows you’re aligned and reduces friction
- Prepare to explain grey areas: for example, justify subcontracting decisions or unusual staff allocations
- Keep a log of all auditor questions and your responses, especially if multiple people are involved
By the end of the visit, auditors will outline preliminary findings and inform you of the next steps. You won’t get the final word at this stage, but you will know what issues are emerging.
Responding to the draft audit report
The draft audit report outlines the auditor’s findings, preliminary conclusions, and any cost categories flagged as ineligible. This is your opportunity to correct misunderstandings, explain costs more clearly, or submit overlooked documentation.
In this phase:
- Review the report line by line and group responses by finding
- Match each comment with supporting evidence: contracts, screenshots, and clarifications from internal policy
- Use concise, factual language and avoid unnecessary commentary
- Ask questions early if findings seem inconsistent or vague
- Prepare and submit the Letter of Representation, signed by your legal representative, stating that the response is accurate and complete
Delays in this stage can result in automatic acceptance of the original findings, even if they’re based on missing context or documents you can still provide. It’s also worth having one person coordinate the response; this reduces the risk of contradictory replies from different departments.
What happens after your response
Once your observations are reviewed, the EC or agency sends a final audit report and a Letter of Conclusions. These documents confirm:
- Which costs were accepted or rejected
- Whether systemic errors were identified
- Whether a recovery order will be issued
Rejected costs may be subtracted from future payments, offset against other grants, or requested as direct reimbursement. If systemic errors are identified, the EC can extend the audit results to other projects from your organisation. This may lead to broader audits or suspensions of payments until corrections are made.
In rare cases, unresolved audit disputes can be referred to the Court of Auditors or OLAF if fraud or abuse is suspected. However, in most cases, detailed record-keeping and timely responses typically resolve audit concerns without escalation.
What gets flagged most often
According to the EC’s own error analysis from Horizon 2020, the most frequent audit findings include:
- Personnel costs declared without reliable time tracking
- Subcontracting costs unsupported by formal contracts or competitive selection
- Incorrect hourly rate calculations, especially when applying actual vs unit cost models
- Travel reimbursements with missing invoices or travel justifications
- Declared costs falling outside the eligibility period stated in the Grant Agreement
Even when the work was completed and the money was spent, auditors will reject costs if the documentation doesn’t support them.
With the right financial management throughout the project, an audit doesn’t have to be scary. If you’d like us to help you keep your project’s finances organised and audit-ready, our team at Future Needs can support you every step of the way through our Project Management services, so you’re fully prepared when the time comes.
Sources
- EU Funding & Tenders Portal – Checks, audits, reviews & investigations
- Indicative Audit Programme (IAP), European Commission
- SPA Procedure, European Commission, 2025
- Best Practices for Record Keeping – REA MSCA
- EC – How to Avoid Errors When Claiming Costs (2019)
- Formal Notifications for audits – IT How To – Funding Tenders Opportunities
About the authors
Anna Palaiologk, the founder of Future Needs, is a Research & Innovation Consultant with 18 years of experience in proposal writing and project management. She has worked as a project Coordinator and Work Package leader in 30+ EU projects and has authored 50+ successful proposals. Her research background is in economics, business development and policy-making. Email Anna at anna@futureneeds.eu.
Lina Giannivasili is Head of the EU Project Implementation Team and an exploitation expert, with extensive experience in proposal writing and project management across Horizon Europe’s Cluster 1: Health; Cluster 4: Digital, Industry & Space; Cluster 5: Climate, Energy & Mobility; and Research Infrastructures. With a background in economics and gender equality, she focuses on integrating these perspectives to maximize the societal and commercial impact of EU-funded projects. Email Lina at lina@futureneeds.eu.
