CERTIFICATES ISSUED BY EXTERNAL AUDITORS FREQUENTLY ASKED .
CERTIFICATES ISSUED BY EXTERNAL AUDITORSFREQUENTLY ASKED QUESTIONSVERSION JUNE 2012DisclaimerThis document is aimed at assisting beneficiaries and auditors. It is provided for information purposes only and its contents are notintended to replace consultation of any applicable legal sources or the necessary advice of a legal expert, where appropriate. Neither theFCH JU nor any person acting on its behalf can be held responsible for the use made of these guidance notes.
1. GENERAL ISSUES#TOPIC:QUESTION:1Qualifications ofauditorsWho can deliver theCertificates (CFS, CoMand CoMAv)?23Statutory AuditorCompetent PublicOfficerANSWER:-The beneficiary is free to choose a qualifiedexternal auditor (including the statutoryauditor) provided that the external auditor isindependent from the beneficiary and qualifiedto carry out statutory audits of accountingdocuments in accordance with nationallegislation implementing the Directive onstatutory audits of annual accounts andconsolidated accounts.1-Competent Public Officer - please refer toquestion 3.Is it possible for anauditor (who is properlyauthorised to issueCertificates on theFinancial Statements oron the Methodology inan EC country) to certifythe costs of a beneficiarylocated in a differentMember State?-YES.-Auditors who are qualified to provide aCertificate on the Financial Statements or onthe Methodology in one Member State arequalified to provide a Certificate on theFinancial Statements in any other MemberState.Should the statutoryauditor provide theCertificate on theFinancial Statementsand/or on theMethodology?-The advantage of using the statutory auditor(the same auditor of the beneficiary‟s annualfinancial statements) to provide the certificatesis that they are familiar with the in-houseprocedures, which is one of the aspectsreviewed. However, this is not an obligationand the beneficiary is free to choose theauditor.Is there a contradiction inusing the statutoryauditor? If the externalauditor already audits thebeneficiary's financialstatements and/orprovides other servicessuch as tax, consultingetc. does this not restrictthe auditor‟sindependence, in asmuch as there is an“economic” link betweenthe two parties?-There is no contradiction.-Beneficiaries may use their statutory auditors,provided that they are independent. The factthat the beneficiary usually engages the sameauditor does not affect the independence of thelatter.How does a public bodyestablish the legalcapacity of the internal-Relevant national authorities establish thelegal capacity of the internal audit unit (of agiven public body) to act as competent Public1Directive 2006/43/EC of the European Parliament and of the Council of 17 May 2006 on statutory audits of annualaccounts and consolidated accounts, amending Council Directives 78/660/EEC and 83/349/EEC and repealing CouncilDirective 84/253/EEC) or any Community legislation replacing this Directive2
#TOPIC:QUESTION:audit unit to act ascompetent PublicOfficer?42Certificate on theFinancialStatements and onANSWER:Officer.-Although it is not compulsory, based on goodpractice, it is recommended this be notified bya letter to (and subsequent letter ofacknowledgement of receipt from) the FCHJU.Can the competentPublic Officer be a staffmember of the auditedorganisation, as long asthey are not involved inthe Grant Agreementactivity?-YES, the competent Public Officer can be amember of staff but his/her independence hasto be established by the relevant nationalauthorities.How do we demonstratethat the competent publicofficer is completelyindependent of theGrant Agreement activity- scientifically,administratively andfinancially?-An organisation chart and/or a job descriptionof the organisation can show that thecompetent Public Officer is not involved inprocessing the financial claim (Form C).Internal audit officers usually have thisindependence.Do we have to name thecompetent Public Officerto the FCH JU inadvance of a financialstatement?-NO, the name of the competent Public Officerdoes not need to be given in advance.Is an internal auditor ofan InternationalOrganisation2 eligible todeliver Certificate on theFinancial Statements tothat organisation?-International organisations are treated aspublic bodies for the purposes of FCH JUProgramme.Accordingly, such organisations can opt for aninternal auditor.-An internal auditor for a public body mustmeet the criteria described in the FCH JUGuide to Financial Issues (see section onArticle II.4.4 of FCH JU GA).Would it be possible forthe internal audit serviceto present an invoice forthe service to thedepartment whichcould be charged to theproject? Would this costbe eligible?-The principle of using a public competentofficer within the same organisation to preparethe Certificate on the Financial Statementsmeans that the real costs (excluding any profitmargin) of carrying out that work would beeligible.-It is not possible to charge a market price(profit) for work carried out by the samebeneficiary within the EU Grant AgreementAre the modelCertificates on theFinancial Statements(Form D) and on the-YES, the model certificates (Form D and E)provided in the Annex VI of the Model GrantAgreement are mandatory.„International organisation‟ means an intergovernmental organisation, other than the Community, which has legalpersonality under international public law, as well as any specialised agency set up by such an international organisation.3
#5TOPIC:QUESTION:the MethodologytemplatesMethodology (Form E)provided in the FCH JUModel Grant Agreementmandatory?The Certificate onthe Methodology(CoM) versus theCertificate on theMethodology forAverage PersonnelCosts (CoMAv)ANSWER:What is the purpose ofSection 1.8 of Annex VIof Form E?-Sections 1.1 to 1.8 of Annex VI are part of theAgreed-Upon-Procedures defined by theCommission empowered by the FCH JU andconstitute the minimum terms of reference toframe the works undertaken by the auditor.Article 1.8 of the Terms of Reference whichmakes reference to "Other Terms" is in itselfan open point that allows beneficiaries andauditors to insert any specific terms such asauditor's fees, liability, applicable law, etc.Are the certificatesoptional or compulsory?-Following the Commission Decision C(2011)174 on three measures for simplifyingthe implementation of FP7, which wasadopted by the FCH JU, both certificates(CoMandCoMAv)areoptional.Nevertheless, as described under point 2.1below only certain beneficiaries of multiplegrants are eligible to submit a CoM forpersonnel costs (actual or average) andindirect costs. The new criteria for the use ofaverage personnel costs are defined in theCommission Decision C(2011)174 and in Art.II.14 of the FCH JU GA.When to submit a CoMor CoMAv?-A CoM or CoMAv can be submitted at anytime during the implementation of the FCH JUProgramme as well as FP7 and at the earlieston the start date of the project of the firstGrant Agreement signed by the beneficiaryunder the FCH JU Programme or FP7.What information needsto be provided whensubmitting aCoM/CoMAv?-The Certificate on the Methodology should becomposed of three separate documents to befound in Annex VI (Form E) of the ModelGrant Agreement:(1)A list of the minimum terms (sections1.1 to 1.8) required by the Commissionempowered by the FCH JU to beincluded in the engagement letterbetween the beneficiary and the auditor.The engagement letter must be datedand signed by both parties.(2)The model auditor's Report ofFactual Findings (section 1.9) to beissued on the auditor's letterhead anddated, stamped and signed by the auditor(or competent Public Officer).(3)A detailed description (table of AnnexVI - Form E) including the statements4
#TOPIC:QUESTION:ANSWER:made by the beneficiary and theprocedures to be performed by theauditor and the findings expected toresult there from. This table has to bedated, stamped and signed on the onehand by the beneficiary for thestatements in the left-column and on theother hand by the auditor (or competentPublic Officer) for the procedures andthe factual findings. Where options forverification methods are available, theauditortshallindicatetheoption/procedure performed.6Language ofcertificatesIn what language shouldthe certificates beprovided?-The certificates shall be in the languageindicated in Art. 4 of the Grant Agreement.7CostsCosts of audits servicesregarding certificates(CFS/CoM/CoMAv)-Costs incurred for the Certificates on theMethodology issued by the external auditorsare eligible direct costs charged under the"Management"activityinthe"Subcontracting" category. They are thereforesubject to the requirements of best value formoney (Article II.7 of the FCH JU ModelGrant Agreement).-However the costs for the Certificates on theMethodology established by the CompetentPublic Officers can be treated as "Other directcosts" under the "Management" activity.Where it is the usual practice of thebeneficiary to consider these costs as indirectcosts, they cannot be charged as direct eligiblecosts.Cost incurred for theCFS-The cost of the CFS is an eligible cost in theGrant Agreement for which the certificate issubmitted. The cost is linked to a specificproject.Cost incurred for aCoM/CoMAv-The cost of the CoM/CoMAv approved by theCommission empowered by the FCH JU is aneligible cost in any of the financial statementsubmitted in any FCH JU Grant Agreement.Please note that costs are eligible after theacceptance of the certificate. The cost of thecertificate can be claimed only once in thelifetime of FCH JU Programme or/and FP7unless the submission of a new certificate isrequired due to a change of the methodology.Should the cost for aCoM/CoMAv be claimedsolely through one FCHJU or FP7 project orapportioned across them?-The cost has to be claimed once in one singleFCH JU or FP7 Grant Agreement. Therefore itis recommended that the consortium partnersanticipate the submission and identify theestimated costs already at proposal/negotiation stage in order to avoid that this5
#TOPIC:QUESTION:ANSWER:cost disproportionally weigh a specific project.8MethodologiesWhere can thebeneficiary findinformation with regardto the establishment ofthe methodology? Is arecord of approvedmethodologies available?-All necessary information and practical hintsfor the establishment of the CoM and CoMAv(as well as CFS) are available in the GuidanceNotes for Beneficiaries and Auditors onCertificates issued by external auditorsavailable on FCH JU website. Since eachbeneficiary will establish the methodology inline with the usual accounting andmanagement principles depending on thenational legislative and financial frame, r questionsTo whom can I addressfurther questions?-For questions related to CoM/CoMAv, theFP7 Helpdesk web service has been set up toensure a better and quicker processing of therequests. It can be contacted at the followinglink http://ec.europa.eu/research/enquiries-For questions related to the CFS, you cancontact FCH JU at projects@fch.europa.eu.6
.2. SPECIFIC ISSUES RELATED TO CERTIFICATES ON THEMETHODOLOGY FOR PERSONNEL AND INDIRECT COSTS (COM)#TOPIC:QUESTION:1EligibilityWho is eligible for theCoM?ANSWER:-Beneficiaries who fulfil theeligibility criteria are eligible:following Either at least 8 participations in FP6contracts with an EU contribution equal orabove EUR 375,000; Or at least 4 participations in FCH JU and/or FP7 Grant Agreements signed before the1st January 2010 with an EU contributionequal or above EUR 375,000; Or, at least 8 participations in FCH JU and/or FP7 Grant Agreements with an EUcontribution equal or above EUR 375,000at anytime during the implementation ofthe FCH JU Programme or FP7.2Advantages of anapprovedCertificate on themethodologyfor personnelcosts and indirectcosts (CoM)What are the advantages ofthe CoM?-An approved CoM brings the followingadvantages: Early assessment of compliance toprovisions of the Grant Agreement whencalculating personnel and indirect costs; Waiving the requirement for interim CFS; Valid throughout all FCH JU as well as FP7projects; Reduced costs for the whole certificationsystem.3Scope of the CoMCan I submit a CoM even ifI charge individual actualcosts?-YESDoes the CoM have tocover both personnel costsand indirect costs?-YES, the CoM covers both personnel andindirect costs. An approved CoM waives theobligation for beneficiaries to submit interimCertificates on the Financial Statements(CFS).-The Certificate on the Methodology forpersonnel and indirect costs (CoM) can coverthe following cost combinations: Actual or average personnel costs andactual indirect costs (full analyticalaccounting or simplified method) Actual or average personnel costs and flatrate for indirect costs.Can the CoM cover onlythe indirect costs?-NO, the Certificate on the Methodology canNOT be submitted only for the indirect costs.-The CoM must cover both personnel and7
#TOPIC:QUESTION:ANSWER:indirect costs.Which possibilities do Ihave to claim indirectcosts?-Industry who has an analytical accountingsystem that can identify and group theirindirect costs (pool of costs) in accordancewith the eligibility criteria (e.g. exclude noneligible costs) must report their real indirectcosts.-Non-profit public bodies, secondary andhigher education establishments, and researchorganisations who have an analyticalaccounting system must report their realindirect costs or choose the 20% flat rateoption.-If the organisation does not have anaccounting system with a detailed costallocation (e.g centre, department), besidesthe 20% flat rate option, the simplifiedmethod can be used if the minimalrequirements can be met. The simplifiedmethod does not require previous certificationby the Commission empowered by the FCHJU.4Validity of acertificateWhat happens when thebeneficiary changes hismethodology?-The beneficiary has to declare to theCommission empowered by the FCH JU anyfundamental change in its cost accountingmethodology, including the date of the change(e.g. the yearly updates of costing rates to themost recent financial data are not consideredas fundamental changes). A new Certificateon the Methodology has to be submittedaccording to the procedure. Until theacceptance of this new certificate, therequirementtoprovideintermediateCertificate on the Financial Statements willnot be waived.5SubmissionDoes the beneficiary need aCoM for each of itscompanies that participatein a European researchproject?-The CoM is to be submitted at the level of theLegal Entity. Different departments or costcentres which are integrating part of one legalentity will be certified within the certificate ofthe legal entity. Please note that a CoM mayindeed cover different practices used byvarious departments of the legal entity. Insuch a case the methodologies should bedescribed in detail in the table of Form E (andin annexes if necessary).3-Companies (including affiliates) which havean independent identity from a legal point of3With regard to different practices concerning indirect costs this includes the case when a beneficiary opts for the use of a flatrate, but request to insert in the Grant Agreements where an specific department with a more advance accounting systemparticipates the special clause for "departments within a legal entity that can identify their real indirect cost when the wholelegal entity cannot" (special clause 13).8
#TOPIC:QUESTION:ANSWER:view will need to submit a separate certificate.When can I apply for aCoM?-Anytime during the lifetime of FCH JUProgramme as well as FP7, but at the earlieston the start date of the project of the first FCHJU or FP7 Grant Agreement signed with theEU.Is it compulsory to ask foreligibility if I intend tosubmit a CoM?-YES.How to submit a request fora CoM?-Beneficiaries who consider to meet theeligibility criteria may send a request any timeduring the lifetime of FCH JU Programme orFP7 to the following functional ropa.eu-The mail should contain the GrantAgreement/contracts numbers (FCH JU GAor ECGA under FP7 and/or FP6) in whichthey participate/ed.9
3. SPECIFIC ISSUES RELATED TO CERTIFICATES ON AVERAGEPERSONNEL COSTS (COMAV)#TOPIC:QUESTION:ANSWER:1Use of average apersonnel costsIs it necessary to submitCoMAv in order to claimaverage personnel costs inFCH JU projects?Beneficiaries are no longer required to submit aCertificate on Average Personnel Costs (CoMAv)for approval as a prior condition for the eligibilityof the costs. Nevertheless, the CoMAv remains asan option offering beneficiaries the possibility toobtain prior assurance on the compatibility of themethodology used to calculate average personnelcosts in FP7.-If a beneficiary would like to use averagepersonnel costs in their financial statementsunder the FCH JU GA the followingcumulative criteria for the acceptance ofaverage personnel cost methodologies shallapply:(1) The average personnel cost methodologyshall be the one declared by thebeneficiary as its usual cost accountingpractice; as such it shall be consistentlyapplied to all indirect actions of thebeneficiary under the FCH JU Programmeas well as the EU FrameworkProgrammes;(2) The methodology shall be based on theactual personnel costs of the beneficiaryas registered in its statutory accounts,without estimated or budgeted elements;(3) The methodology shall exclude from theaverage personnel rates any ineligible costitem as defined in Regulations (EC) No1906/2006 and (Euratom) No 1908/2006and the Model Grant Agreements and anycosts claimed under other costs categoriesin order to avoid double funding of thesame costs;(4) The number of productive hours used tocalculate the average hourly rates shallcorrespond to the usual managementpractice of the beneficiary provided that itreflects the actual working standards ofthe beneficiary, in compliance withapplicable national legislation, collectivelabour agreements and contracts and thatit is based on auditable data.2Submission Process/ Form EWhat information needs tobe submitted?-The entire Form E consisting of 3 partsshould be submitted. However, with regardto the table of procedures in Form E onlyprocedures 1, 2, and 3 (and not those10
#TOPIC:QUESTION:ANSWER:relating to indirect costs) need to becompleted.3Consequences of theacceptance of aCoMAvIs the approved CoMAvvalid for all FCH JU as wellas FP7 Grant Agreements?-No changes should be made to the standardtemplate. Any deviations should bereported under "exceptions".-This certificate can be introduced onlyby electronic mail to the followingfunctional mailbox: opa.eu-YES, an approved CoMAv is valid for allFCH JU as well as FP7 projects.-NO, the certificate on average personnelcosts does not waive the obligation toprovide an intermediate CFS (whenever thethreshold of EUR 325,000 is reached).Nevertheless, the auditor will only have tofocus on checking compliance with thecertified methodology, omitting individualcalculations.-Further to the adoption of CommissionDecision C(2011)174 on 24 January 2011,SME owners and natural persons who donot receive a salary are no longer requiredor allowed to submit a CoMAv. For thesecases the CoMAv is no longer an option.According to the Commission DecisionSME owners and natural persons who donot receive a salary will charge aspersonnel costs a flat rate based on theallowances used in the People SpecificProgramme ("Marie Curie" flat-rates).-For further details, please refer to the FCHJU Guide to Financial Issues.-The value of the personal work of thoseSME owners and natural persons shall bebased on a flat rate to be determined bymultiplying the hours worked in the projectby the hourly rate to be calculated asfollows:-{Annual living allowancecorresponding to the appropriate researchcategory published in the 'People' WorkProgramme of the year of the publicationof the call to which the proposal has beensubmitted / standard number of annualproductive h
Methodology issued by the external auditors are eligible direct costs charged under the "Management" activity in the "Subcontracting" category. They are therefore subject to the requirements of best value for money (Article II.7 of the FCH JU Model Grant Agreement). - However the costs for the Certificates on the
CERTIFICATES ISSUED BY EXTERNAL AUDITORS GUIDANCE NOTES FOR BENEFICIARIES AND AUDITORS . 2 Introduction These guidance notes have been compiled to guide research beneficiaries and external auditors in the preparation of Certificates on the Financial Statements and on the
through the educational qualification and professional certificates, and objectivity, . and quality factors and audit function as issued by internal and external auditors Institute of Standards consisted of independence, . sample was current external auditors and their number (23) auditors, and potential external auditors and their numbered .
Companies for empanelment as External Auditors for conducting Internal Audit at . The copies of offer/appointment letters issued by other Banks. other certificates etc. need not be submitted along with the application. . copies of registration certificate issued by ICAI, proof of UCN registration issued by RBI etc., within the specified .
Beneficiaries and Auditors on Certificates issued by external auditors available on Cordis (EC portal for FP7) Since each . beneficiary will establishthe methodology in line with the usual accounting and management principles depending on the national legislative and financial frame, the approved methodology cannot be
1 While we recognize that internal auditors also play an important role in detecting fraud, the focus of our study is on the effectiveness of external auditors. As such, we use the word “auditor” to refer to external auditors of the financial statements.
27 Components of a Certification System Request and issue certificates (different categories) with verification of identity Storage of certificates Publishing/distribution of certificates (LDAP, HTTP) Pre-installation of root certificates in a trusted environment Support by OS platforms, applications and services Maintenance of database of issued certificates (no private
safeguards employed by Austraclear is the use of external audi tors. Austraclear' s Internal Audit Department reports directly to its external auditors, KPMG Peat Marwick, who in turn report to Austraclear' s Independent Audit Committee. The external auditors also formally report to all Members (and their auditors) on a quarterly basis.
Schiavo ex rel. Schiavo, _ F.3d _, 2005 WL 648897 (11th Cir. Mar. 23, 2005) (Schiavo I), stay denied, _ S. Ct. _, 2005 WL 672685 (Mar. 24, 2005). After that appeal was taken, the plaintiffs filed an amended complaint on March 22, 2005, adding four more counts, and a second amended complaint on March 24, 2005, adding a fifth count. On the basis of the claims contained in those new .
