Background to the complaint

1. The complainant was the coordinator of a project funded under the EU programme for the environment and climate action (LIFE)^[1]. The project started on 1 September 2010 and ended on 28 February 2013.

2. Between 2010 and 2013, the complainant exchanged extensive correspondence with the Commission and the external monitor assisting the Commission, regarding the complainant’s request to add a new investor and a new beneficiary (‘company X’) to the grant agreement.

3. The new investor withdrew its support soon after the complainant submitted its request to change the grant agreement. The complainant subsequently failed to submit the necessary documentation to complete its request before the project ended. As a result, the request to change the grant agreement became obsolete, and the Commission (a) treated the costs incurred by company X as "external assistance" and (b) sought to recover the funds exceeding the maximum amount eligible under that heading^[2]. The Commission sought to recover EUR 446 105.80.

4. In 2014 and 2015, the complainant and the Commission exchanged further correspondence on the issue of the eligible costs and the recovery of funds. The Commission maintained that the grant agreement was the only valid contract to be taken into account, and that it would proceed with recovering the funds in question.

5. Dissatisfied with the Commission’s replies, the complainant turned to the Ombudsman on 5 September 2017.

The inquiry

6. The Ombudsman opened an inquiry into the complainant’s concerns that the Commission (a) took too long to deal with its request to add company X as a new beneficiary to the grant agreement, and as a result, (b) declared certain costs as ineligible, and sought to recover the funds.

7. The Ombudsman asked the Commission to reply to the complaint and to the Ombudsman’s preliminary assessment. In particular, the Ombudsman considered that, by treating the costs incurred by company X as “external assistance” costs and declaring company X’s incurred costs exceeding EUR 277 600 as ineligible, the Commission might not have sufficiently taken into account the principles of proportionality, fairness and reasonableness. In the Ombudsman’s view, the Commission’s strict application of the grant agreement seemed to have harmed the complainant disproportionately. It also seemed to have failed sufficiently to consider the specific circumstances of the case, in particular the fact that the Commission was satisfied with the complainant’s final report and had acknowledged that all costs incurred by company X were technically justified. Therefore, the Ombudsman considered that the Commission should waive the recovery of the funds.

8. The Ombudsman received the Commission’s reply to the complaint and the preliminary assessment.

Arguments presented to the Ombudsman

9. The complainant contended that the Commission took too long to deal with its request to make changes to the grant agreement, namely to add company X as a new beneficiary. For that reason, the Commission should declare the costs incurred by company X to be eligible and abstain from recovering the funds.

10. The complainant stated that from the outset it had made clear to the external monitor and the Commission that company X would be a part of the project. It also contended that the external monitor never informed it that company X’s costs would not be eligible if the request to change the grant agreement was not agreed upon.

11. The Commission stated that it received the complainant’s request for changes less than three months before the end of the project. The request was incomplete as certain forms were missing and other forms were incorrect. Although the external monitor invited the complainant urgently to submit the missing and corrected forms, the Commission received no such forms before the project’s end date. The request for changes to the grant agreement became obsolete thereafter.

12. The Commission added that it had informed the complainant during the project^[3] of the need to add company X to the grant agreement in order to make its costs eligible^[4].

13. The Commission considered that its recovery order was proportionate, fair and reasonable since it was based on the rules regarding requests for changes and ineligible costs^[5], which ensure that companies benefitting from grants are treated equally. Although the complainant had informed the Commission of its intention to submit a request for changes, the Commission could decide not to consider any request received later than three months before the end of the project^[6]. In this case, the Commission received the complete documentation ten months after the project had ended. The Commission further stated that the recovery order was issued in line with the EU financial rules^[7]. It had assessed the eligible costs in a standard manner, taking into account the complainant’s failure to submit the documentation for the change to the grant agreement on time. The Commission stated that it had recognised the good faith of the complainant by accepting as eligible the maximum amount possible under the applicable rules^[8]. The Commission noted that the complainant had in the meantime paid back the funds in question.

14. The complainant did not submit comments on the Commission’s reply.

The Ombudsman's assessment

15. The Commission has clarified that despite reminders from the external monitor, the complainant submitted the complete documentation for its request for changes to the grant agreement ten months after the end of the project. Therefore, it is clear that the Commission could not have added company X to the grant agreement before the end of the project.

16. In addition, the Commission explicitly informed the complainant on a number of occasions that unless company X was added to the grant agreement before the end of the project, its costs would not be eligible as project costs. In its reply to the Ombudsman’s preliminary assessment, the Commission provided correspondence with the complainant^[9], which clearly shows that the complainant was made aware of the consequences of not submitting a complete request for changes to the grant agreement on time. The complainant had not included that correspondence in its initial complaint.

17. At the same time, the Commission accepted as eligible the maximum amount possible for the costs incurred by company X under the budget category “external assistance”, thus recognising the complainant’s good faith.

18. The Ombudsman notes that the complainant has not provided any explanations during the inquiry as to why it failed to submit the requested documentation on time.

19. For these reasons, and in the absence of any comments from the complainant on the Commission’s reply, the Ombudsman considers that the Commission has explained convincingly why it had to declare the costs exceeding EUR 277 600 as ineligible. The Commission has also explained how it sought to apply the principles of proportionality, fairness and reasonableness, by accepting as eligible the maximum amount possible for the costs incurred by company X under the budget category “external assistance”.

20. It is clearly unfortunate that the recovery of funds has placed the complainant in a difficult situation. However, in light of the above, the Ombudsman does not find maladministration in this case.

Conclusion

Based on the inquiry, the Ombudsman closes this case with the following conclusion:

There was no maladministration by the European Commission.

The complainant and the Commission will be informed of this decision.

 

Emily O'Reilly

European Ombudsman

Strasbourg, 03/04/2019

 

[1] The project was implemented under LIFE+, a phase of the LIFE programme that ran from 2007 to 2013. For more information on the LIFE programme, see: https://ec.europa.eu/easme/en/life.

[2] See also Articles 15(2) and 26 of the Common Provisions 2009: http://ec.europa.eu/environment/archives/life/toolkit/pmtools/lifeplus/documents/commonprov_09_en.pdf.

[3] That is, on 14 March 2011, 13 July 2011 and 22 November 2012.

[4] The Commission referred in particular to its letter to the complainant of 22 November 2012, which it attached to its reply. This letter had not previously been part of the complaint file.

[5] Respectively Articles 15 and 26 of the Common Provisions 2009.

[6] In accordance with Article 15 of the Common Provisions 2009.

[7] Articles 97 and 98 of Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014, (EU) No 283/2014, and Decision No 541/2014/EU and repealing Regulation (EU, Euratom) No 966/2012: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32018R1046.

[8] That is, the maximum amount foreseen for the “external assistance” budget plus the amount that it had been allowed to spend beyond the approved budget (EUR 30 000), in accordance with Article 26 of the Common Provisions 2009.

[9] The Commission included its letter to the complainant of 22 November 2012, in its reply to the Ombudsman’s preliminary assessment.