CFS understanding the scope
Navigating the financial aspects of Horizon 2020, the European Commission’s primary program for research and innovation, involves a critical component known as the Certificate on the Financial Statements (CFS). This certificate stands as evidence of the accountability and transparency expected from participants in the project.
Fundamentally, the Certificate on Financial Statements functions as a safeguard, verifying the accuracy and dependability of the financial information submitted by Beneficiaries and acting as the first level of the audit. It is an official document issued by an external auditor, confirming that the financial statements accurately depict the financial position, performance, and cash flows of the project.
Within the Horizon 2020 framework, this certificate assumes a pivotal role in ensuring the responsible and effective utilization of funds allocated for groundbreaking research and innovation initiatives. Project participants are obliged to comply with rigorous financial regulations and reporting standards, and the certificate serves as tangible proof of adherence to these standards.
When is a CFS required?
The Certificate on the Financial Statements (CFS) is a component of the coordinator’s Final Report, which is to be submitted within 60 days following the conclusion of the last reporting period.
The Final Report comprises two essential sections: (a) a ‘final technical report’ featuring a summary suitable for publication, and (b) a ‘final financial report’ that includes a ‘final summary financial statement’ and a ‘certificate on the financial statements.’
According to Article 20.4, the Certificate on the Financial Statements is prepared in line with Annex 5 of the Grant Agreement. This requirement applies to each Beneficiary involved in an action, as well as to each linked third party. It becomes mandatory if the Beneficiary requests a total contribution of EUR 325,000 or more, as reimbursement of actual costs and unit costs calculated based on its usual cost accounting practices (see Article 5.2 and Article 6.2).
Is the cost for CFS considered eligible?
The costs associated with a mandated Certificate on the Financial Statements (CFS), applicable solely when attaining the specified threshold, are considered eligible within the cost category 6.2.D.3, denoted as “other goods and services.”
Who and what will be audit?
A Certificate on the Financial Statements (CFS) can be issued by any qualified auditor within the European region, as per Grant Agreement: “qualified to carry out statutory audits of accounting documents in accordance with Directive 2006/43/EC of the European Parliament and of the Council of 17 May 2006 on statutory audits of annual accounts and consolidated accounts, amending Council Directives 78/660/EEC and 83/349/EEC and repealing Council Directive 84/253/EEC or simular national regulations.”
In Romania, you can secure this information by checking the ASPAAS official website.
Our partner is registered as a licensed auditor holding license AF4881 while the company is registered as an audit company holding license FA238/338/22.
What is the process for issuing a CFS?
Using the “Model for the Certificate on the Financial Statements” from Annex 5 of the Grant Agreement, the auditor issue “Terms of Reference” (a model delineating the agreement between the participant and the auditing firm) and the template for the certificate. The auditor is tasked with identifying and reporting any irregularities or errors detected during the examination. The European Commission assumes responsibility for determining the implications of errors as highlighted by the auditor.
How does the process help the Beneficiary?
From our experience, Beneficiaries who do not receive guidance from a consultant after signing the Grant Agreement encounter challenges in accurately declaring costs. Various issues arise mostly during the calculation of personnel, subcontracting, and even travel costs. The ultimate benefit derived from conducting a Certificate on the Financial Statements (CFS) is that it enlightens Beneficiaries about these errors and provide the opportunity to correct them.
Our company not only performs the CFS but also identifies deficiencies in existing processes. We compile a comprehensive report of recommendations for rectifying these deficiencies, providing assistance in their implementation. Furthermore, we offer support in the audit process, whether conducted by a third party or necessitated as a second level of audit by the European Commission. The objective is to optimize current resources from an operational standpoint, enabling Beneficiaries to redirect their focus toward strategic endeavors.
Formal Reference
Guidance from the “H2020 Online Manual” and “the Horizon2020 Online Manual”
Please refer for more information to the EC online trainings: CFS Training (Youtube): Introduction to the CFS
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