Background to the complaint

1. The complainant is a non-governmental organisation that participated as one of five partners in the implementation of the EU SHARE[1] programme for ASEAN higher education institutions and students. The Delegation of the EU to Indonesia and Brunei Darussalam was responsible for overseeing the programme on behalf of the European Commission. The programme ran from January 2015 to June 2020.

2. The Commission signed a grant contract with the ‘grant coordinator’ to finance the programme. The grant coordinator served as intermediary between the Commission and the complainant. The grant coordinator was also responsible for submitting all relevant supporting documents and for checking and submitting the payment requests.

3. In January 2015, the programme partners started carrying out the programme, and the complainant was reimbursed for the costs incurred for that year.

4. In 2017, the Commission requested additional information from the complainant concerning the costs claimed for one staff member for the year 2016. It asked for a breakdown of the total costs, proof of payment for several months and clarification concerning the difference between the unit rate and the gross salary in the staff member’s employment contract. The complainant, through the grant coordinator, promptly provided the requested information. The Commission then issued an explanatory note in which it stated that it was suspending the payment of the staff costs until the complainant provided the “latest version” of the employment contract of the staff member in question.

5. In 2018, the Commission requested further information. It asked for the timesheets and payslips for the entire reporting period and for a breakdown of the staff costs, amounting to EUR 9 668. The complainant, through the grant coordinator, provided the requested information and documentation.

6. In 2019, the programme was audited. In their draft audit report, the auditors noted that the complainant had disregarded an ‘allocation rate’ for the budget costs of its staff members and consequently deemed ineligible staff costs amounting to over EUR 14 000. The complainant contested this finding. In 2020, following several exchanges in which the complainant explained its calculation method and provided supporting documents, the auditors concluded that the staff costs were reasonable and that the evidence provided by the complainant was sufficient to demonstrate that costs had been incurred.

7. In 2021, the grant coordinator accepted the Commission’s financial position including all ineligible costs. The complainant did not agree with the calculation of the final payment and asked for clarifications. The grant coordinator replied that the Commission did not accept the costs due to incomplete contractual documentation, and that it was the Commission’s prerogative to accept or reject costs independently of auditors’ findings. The complainant stated again that it did not agree with this finding.

8. The complainant then asked the Commission directly why the costs were rejected. The Commission asked the grant coordinator to reply to the complainant and to inform it that the grant contract had been finalised without any outstanding issues or amounts. Following several exchanges with the Commission, the complainant turned to the Ombudsman in February 2022.

The Ombudsman’s proposal for a solution

9. The Ombudsman’s inquiry found that the Commission did not object to how the complainant calculated the costs in question but, rather, that it rejected the costs because it considered that the necessary supporting documents were missing. In particular, the Commission considered that the one-page employment contract that the complainant provided did not meet the minimum requirements for employment contracts, as it does not allow the Commission to verify the costs at issue.

10. The Ombudsman did not agree with this reasoning. She noted that the external auditors considered the staff costs at issue eligible. They concluded that the complainant provided sufficient evidence in support of the costs and that the costs are reasonable.

11. The Ombudsman acknowledged that the Commission is not bound by auditors’ findings. However, she considered that when an EU institution or body departs from the findings of an audit report, it should provide sufficient and convincing explanations for doing so.

12. The Ombudsman found that the Commission had not done so in this case. The Commission did not provide any guidance, at the outset of the programme, on minimum requirements for employment contracts. However, the Commission rejected the staff costs in questions solely because it considered that the employment contract did not meet what it considered to be the minimum requirements for such contracts. In particular, the Commission considered that the contract was too short, and that only longer contracts allow it to verify the costs claimed.

13. The Ombudsman considered that, by unilaterally requiring the contract of only one staff member to meet unspecified criteria ‘ex-post’, that is after the programme had been running for some time, the Commission undermined the principle of legal certainty[2]. The Commission reimbursed the costs incurred for this staff member for the other years of the programme and reimbursed the costs incurred for other staff members with similar contracts for the entire programme. Furthermore, the complainant used similar employment contracts in the context of various other EU-funded programmes in which it has participated, and which were not contested by the Commission. The Ombudsman took the view that the complainant could therefore reasonably expect that the Commission considered the type of employment contract to be sufficient. The Ombudsman also noted that the employment contract in question falls under Belgian employment law. As such, the Commission may seek to establish whether the contract meets the minimum requirements for employment contracts under national law but it cannot impose additional requirements.

14. While employment contracts, irrespective of their length, allow the Commission to verify whether the person for whom staff costs are claimed is in fact employed by the entity claiming the costs, they do not, as such, enable the Commission or any other entity to verify whether the claimed costs have in fact been incurred. This can be verified only through time sheets and corresponding payslips, both of which the complainant provided promptly whenever it was requested to do so.

15. The Ombudsman thus concluded that the Commission had not provided sufficient explanations to justify its decision to deem the costs ineligible. Therefore, she proposed as a solution that the Commission should review its decision on the costs it deemed ineligible and pay the complainant the amount it had withheld, namely EUR 9 668.[3]

16. The Commission agreed with the Ombudsman’s assessment.[4]

17. The Commission stated that it made an error in not considering the employment contract as a valid employment contract under Belgian law. It recognised that the staff member’s employment contract fulfils the minimum requirements under Belgian law and concluded that the related staff costs are eligible.

18. The Commission stated that it will proceed with the payment to the grant coordinator of the amount of EUR 9 668 that it initially deemed ineligible.

The Ombudsman's assessment after the proposal for a solution

19. The Ombudsman welcomes the Commission’s acceptance of her proposal for a solution. She takes note that the Commission is taking the necessary steps to proceed with the reimbursement.

Conclusion

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

By agreeing to pay the complainant EUR 9 668, the Commission has settled the matter.

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

 

Emily O'Reilly

European Ombudsman

Strasbourg, 02/05/2024

 

 

[1] More information available at: https://www.eeas.europa.eu/eeas/eu-support-higher-education-asean-region-eu-share_en

[2] The principle of legal certainty requires that legal rules be clear and precise.

[3] The full text of the proposal for a solution is available at: https://www.ombudsman.europa.eu/solution/185087

[4] The full text of the Commission’s reply to the Ombudsman’s proposal for a solution is available at: https://www.ombudsman.europa.eu/doc/correspondence/185088