Background to the complaint

1. The complainant is a consultancy company established in Portugal. In 2015, the European Commission awarded a grant to the complainant for a project aimed at supporting networks of young entrepreneurs active in the cultural and creative sectors. The complainant was the coordinator of the project, which was carried out with seven other project partners.

2. In 2021, after the project was concluded, an external firm audited the project in order to establish the final amount of the grant. It found certain costs claimed by the consortium to be ineligible and set out the amounts of ineligible costs for each project partner.

3. In July 2022, the Commission informed the complainant that it would recover from it the amount of ineligible costs identified in relation to the complainant’s own activities under the project. 

4. In February 2023, the Commission informed the complainant that it had decided to recover from the complainant, as the coordinator of the project, all ineligible costs identified in the audit report for all project partners concerned. In particular, the Commission explained that, under the ‘grant agreement’[1], the coordinator of the grant was responsible for reimbursing the overall debt to the Commission. The Commission considered that the audit’s findings regarding the ineligible costs for each project partner were based on information about payments and agreements within the consortium, to which the Commission was not a party. The Commission explained that, as it was not involved in these arrangements, it was not responsible for determining the amounts to be paid by each project partner. It stated that the complainant, as the coordinator of the grant was responsible for this.

5. The complainant disagreed with the Commission’s decision to recover the full amount of ineligible costs from it. In particular, it argued that, according to the General Conditions of the Grant Agreement “[w]here an amount is to be recovered [...], the beneficiary concerned by the audit […] findings shall repay the Commission the amount in question”. As an exception to this rule, the grant agreement set out that the coordinator should repay any recoverable amounts only “[w]here the audit findings do not concern a specific beneficiary”.  The complainant argued that, in this case, the findings of the audit did identify ineligible costs for each project partner.

6. The Commission maintained its decision and, in December 2023, issued a debit note to the complainant to recover the overall debt.

7. Dissatisfied with the Commission’s decision, the complainant turned to the Ombudsman in December 2023.

The inquiry

8. The Ombudsman opened an inquiry into how the Commission sought to recover the ineligible costs following the audit of the project concerned.

9. The Ombudsman asked the Commission for clarifications, in particular concerning why the Commission had decided to recover the overall amount from the coordinator of the project when the findings of the audit established amounts to be recovered for each project partner.

10. The Commission replied to the Ombudsman in June 2024. The reply was shared with the complainant.

The Commission’s reply

11. The Commission agreed with the complainant’s interpretation of the grant agreement that, as a rule, the repayment of ineligible costs identified in an ex-post audit should be requested from the project partners to whom ineligible costs have been directly attributed, and not only from the coordinator. This rule is more clearly outlined in the current version of the ‘model grant agreement’ in use for the 2021-2027 funding programmes.

12. However, the Commission explained that, while it had initially calculated, based on the audit conclusions, the amounts to be recovered from each project partner, following complaints from some of the project partners, it found that the audit conclusions were based on internal agreements and payments of the consortium. The Commission thus found that it was not possible to identify grant shares for each project partner and to proceed with individual recoveries. On this basis, it had decided to recover all the ineligible costs from the complainant, as the coordinator of the project.

13. Nevertheless, in the context of the Ombudsman’s inquiry, the Commission reassessed the case and found that it was in fact possible to calculate the share of the grant and amounts to be recovered for each project partner. On this basis, the Commission proposed to cancel the debit note sent to the complainant and to initiate individual recovery procedures from each project partner concerned.

The Ombudsman's assessment

14. The Ombudsman welcomes the Commission’s decision to cancel the debit note and to recover from each project partner the ineligible costs attributable to them.

15. The Ombudsman closes the case with the conclusion that it has been settled.

Conclusion

Based on the inquiry, the Ombudsman closes this case with the following conclusion[2]:

The matter has been settled by the European Commission.

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

 

Tina Nilsson
Head of the Case-handling Unit

Strasbourg, 06/08/2024

 

[1] It referred to article II.26.2 of General Conditions of the Grant Agreement.

[2] This complaint has been dealt with under delegated case handling, in accordance with the Decision of the European Ombudsman adopting Implementing Provisions