Strasbourg, 29 December 2006

Dear Mr V.,

On 24 October 2005, you submitted a complaint, on behalf of a company called X., to the European Ombudsman concerning the Commission's decision of 3 March 2005 to recover EUR 52 864.19 out of a total sum of EUR 98 000 paid to the company in the framework of the Leonardo da Vinci programme.

On 6 December 2005, I forwarded the complaint to the President of the Commission. The Commission sent its opinion on 27 March 2006. I forwarded it to you with an invitation to make observations, which you sent on 29 May 2006.

I am writing now to let you know the results of the inquiries that have been made.

THE COMPLAINT

According to the complainant, the facts can be summarised as follows:

The complaint is lodged by a lawyer on behalf of a company called X. (hereafter "the complainant").

On 15 December 1995, the complainant signed a Financial Agreement with the Commission for a maximum amount of EUR 140 000, corresponding to 41,18% of the total cost of the project. The project was designed to help the European banking world to prepare for the single currency, the future European legislation and the harmonisation of accountancy and bank ratios by creating a banking simulation game. The Financial Agreement came into force on 1 December 1995 and was to terminate on 30 November 1997. The Commission paid a first amount of EUR 56 000 and a second amount of EUR 42 000.

On 17 December 2001, after the examination of the final report, the Commission informed the complainant that certain matters were not compliant with the provisions of the Financial Agreement and the Financial and Administrative Handbook (hereafter "the Handbook") and requested the reimbursement of EUR 392. The Commission considered that the following expenditure was not eligible:

1. EUR 16 073 (overheads, travel and subsistence costs) for the first contractual period, and
2. EUR 104 762 (staff costs, travel and subsistence costs, subcontracting costs) for the second contractual period.

According to the Commission, the eligible expenditure amounted to EUR 237 027 and, consequently, the part to be paid by the Commission was EUR 97 608 (that is, 41,18% of the eligible expenditure, as provided for in the agreement). As the complainant had already received EUR 98 000, it was requested to refund EUR 392.

On 16 January 2002, the complainant challenged the Commission's decision. It explained that the interim report had been accepted, which meant that the expenditure for the first contractual period had been approved. It did not understand why subcontracting costs were rejected for the second contractual period while they had been approved for the first one. It indicated that the issues mentioned were only examples. It asked the Commission to review its position.

On 1 February 2002, the Commission replied to the complainant. It approved all the expenditure for the first contractual period because the complainant had not been informed that all expenditure could be re-examined at the closure of the project. As regards the subcontracting costs, it explained that no supporting evidence had been provided, despite its request, which explained why they were ineligible (EUR 23 000). As regards staff costs, it explained that some expenditure had been incurred outside the eligibility period and had thus been rejected (EUR 56 073). As regards travel costs, the complainant had recognised that a calculation error had occurred regarding some of them, while for others supporting evidence were missing (EUR 8 425). The Commission considered that the eligible expenditure amounted to EUR 270 364 and agreed to pay EUR 13 335.90 to the complainant.

On 19 February 2002, the complainant again challenged the Commission's decision. It provided supporting evidence as regards the subcontracting costs. It disagreed with the calculation of staff costs. Having received no reply from the Commission, on 8 May 2002, the complainant sent a reminder to the Commission.

On 6 June 2002, the Commission replied to the complainant. It re-examined the costs on the basis of the documents provided by the complainant and accepted some of the subcontracting costs. The Commission considered that the total eligible expenditure amounted to EUR 280 364 and agreed to pay EUR 17 453.90 to the complainant.

On 9 August 2002, the complainant replied to the Commission, giving its position on the amount of ineligible subcontracting costs, staff costs and travel costs.

By letter dated 16 September 2002, the Commission re-examined the subcontracting costs and accepted them. However, as the amount planned in the budget for these costs had been exceeded, an amount of EUR 13 000 remained ineligible. It confirmed its decision as regards staff costs. It agreed to pay EUR 17 453.90 to the complainant and requested a quick reply.

As the Commission received no reply from the complainant to its letter of 16 September 2002, it decided, on 28 October 2002, to carry out an audit of the project in accordance with Article 7.5 of the Financial Agreement. On 6 December 2002, the complainant accepted the Commission's decision of 16 September 2002 and asked for confirmation of the total sum to be paid by the Commission. On 19 December 2002, the Commission informed the complainant that an audit of the project would be carried out by external auditors.

On 18 December 2003, the audit took place.

On 18 August 2004, the Commission informed the complainant of its conclusions as regards the audit:

(1) As regards staff costs, supporting documents were not provided to the auditors. The Commission stated that, according to Articles 7.4 and 7.5 of the Financial Agreement, all measures should be taken by the complainant to allow audits to be carried out.

Moreover, sworn statements or statements signed by unidentified persons could not be taken into account by the auditors, as they did not comply with Title IV of the Handbook.

(2) As regards overheads, the expenditure was not supported by original documents.

(3) As regards travel costs, the amount of ineligible expenditure mentioned in the audit report was inferior to that found by the Commission on the basis of the documents provided by the complainant.

(4) As regards computer costs, some costs were ineligible because they were incurred outside the eligibility period.

The Commission suggested to the complainant either to provide the supporting evidence (pay slips, fees, time sheets for staff costs and original documents for other costs) which were not made available to the auditors or to allow an internal auditor of the Commission to carry out an on-the-spot inspection of these documents.

On 17 September 2004, the complainant received a copy of the audit report, which concluded that the complainant should refund the Commission an amount of EUR 64 020.26. According to the auditors, the following expenditure was ineligible:

(1) EUR 222 500.68 for staff costs (no timesheets, no proof of payment, services outside the eligibility period);

(2) EUR 27 092 for overheads (no supporting documents);

(3) EUR 5 417.78 for travel and subsistence costs (double recording, lack of supporting documents);

(4) a budget overrun of EUR 13 000 for subcontracting costs;

(5) EUR 7 336.39 for computer and audiovisual costs (expenditure incurred outside the eligibility period).

On 19 October 2004, the complainant challenged some points of the audit report, arguing, on the basis of the following points, that it was flawed:

(1) The auditors stated that they carried out the on-the-spot audit on 18 and 19 December 2003. The complainant indicated that the auditors were present only on 18 December 2003.

(2) The auditors stated on page 5, paragraph 1.1, of the audit report that the company had only one employee on its payroll. The complainant indicated that this was wrong and that, during the contractual period, there was no employee on the payroll and that, during 2003-2004, there were two employees. The complainant added that such information had never been requested by the auditors.

(3) The auditors gave the list of administrators on page 5, paragraph 1.1, of the audit report. He stated that this list corresponded to the list when the company was created and was no longer up to date and that the auditors should have consulted the commercial register.

(4) The auditors stated on page 5, paragraph 1.2, of the audit report that no audited accounts were provided to them and that they were only provided with the balance sheet and the P&L (profit and loss) account relating to fiscal year 1997. The complainant indicated that this was true but pointed out that the auditors never requested the audited accounts, either during the audit or after the audit.

(5) On 18 December 2003, in front of a witness, the auditors were unable to provide the auditee with information on the framework of the audit.

(6) On page 6, paragraph 1.3 of the audit report, the auditors referred to a Commission letter dated 9 December 2002 (dealing with transfers between different categories of costs and variations allowed within a limit of 15% or EUR 5 000) which was never received by the complainant. The complainant considered that if the auditors were referring to a Commission letter dated 6 December 2002, then the auditors had not carried out a neutral and impartial audit, since information had been given by the Commission beforehand.

(7) On page 10, paragraph 4.5, of the audit report, the auditors stated that "most partners did not provide timesheets to justify the time presented for the project. The contractor stated that no such documents would be available due to the fact that the project was carried out in 1996 and 1997. The contractor requested and obtained certified confirmation of the time spent by the different partners. [The auditors] noticed though that those confirmations were signed by people who performed the hours themselves or were signed by unidentified persons. Therefore and considering that a daily fee rate was used, that no proof of payment was provided and that part of the services was rendered outside the eligibility period, an amount of EUR 222 500, 68 was considered ineligible". According to the complainant, the auditee was never informed of the failures described. It added that the auditors requested certificates, and that these certificates were presented to them. It was clear that some certificates could not be signed by the Directors in office at the time because they had since retired or they no longer worked for the company. At no point did the auditors request further explanations. The complainant noted that the auditors should have known that there were signature books that would allow them to check signatures. In deciding that the expenditure was ineligible, the auditors stated that the persons who signed were liars, without providing any evidence. Moreover, the auditors never requested proof of payment between partners and their providers. Finally, the complainant also challenged the auditors' comment made in paragraph 4.8 that "staff expenses were presented for the period running till May 30, 1998 while eligibility period only runs till November 30, 1997. In absence of detailed timesheets [the auditors] applied a rule of proportionality to reject expenses incurred outside the eligibility period. (...) computers were acquired at the end or even outside the eligibility period. For those acquired within the eligibility period, [the auditors] used a pro rata based on an economical life time of three years. The expenses outside the eligibility period were considered ineligible (...)". The complainant considered that, without checking the work done, the auditor could not give an opinion as regards the issue of the eligibility period.

(8) The auditors stated on page 10, paragraph 4.5, that "no supporting documentation was provided to justify expenses recorded under overhead. [The auditors] received a certification from the different partners but no information was made available about the allocation key and the computation basis that were used". The complainant considered that it was surreal to request, seven or eight years after the facts, details about overheads, the allocation key and the supporting documents. It added that the auditors refused to consider the results achieved which nevertheless constituted a tangible and irrefutable proof of the work done and the expenses incurred.

(9) As regards travel and subsistence costs, the auditors stated on page 10, paragraph 4.5, that some expenses were only partly evidenced with supporting documentation and that the differences between amounts presented and amounts evidenced were considered as being ineligible. The complainant referred to its comments made in objection (6).

The complainant also stated that the Commission's position on this file changed totally and considered that the Commission did everything possible to avoid paying the amounts due to the complainant. The complainant also expressed surprise with the delays in the handling of the case. It finally drew attention to the fact that the complainant is a very small enterprise. It informed the Commission that all supporting evidence would be sent again.

On 7 December 2004, the Commission confirmed its decision. It noted that its request to send original supporting evidence or to allow an internal auditor to check these documents had not been taken into account. It referred to the Handbook which explained the documents to be provided by the complainant. It added that the documents sent by the complainant on 19 October 2004 had not been received and gave two weeks to the complainant to submit them.

On 22 December 2004, the complainant again challenged the audit, stating that the Commission had not taken into account its observations made in its letter of 19 October 2004 and that all available documents were at the disposal of the auditors during the audit. It requested a copy of the Handbook. It agreed to a new audit and indicated that further documents would be sent to the Commission.

On 3 March 2005, the Commission replied that the complainant's observations had been taken into account and that, at its request, the auditors had replied to them. It noted that documents had still not been submitted. It confirmed its decision, which was based on the auditors' findings except for the overheads which were accepted. It closed the case definitively, requesting the reimbursement of EUR 52 864.19.

On 1 April 2005, the complainant maintained its position.

On 11 April 2005, the Commission maintained its position.

On 20 June 2005, the complainant received a debit note for an amount of EUR 52 864.19.

In the present complaint, the complainant argued that the Commission did not comply with the right to good administration (Article 41 of the European Charter of Fundamental Rights(1)) for the following reasons:

(1) Lack of consistency

The complainant alleged that the Commission failed to comply with Article 10 of the European Code of Good Administrative Behaviour(2), because

(i) although discussions between the complainant and the Commission were ongoing for nearly a year and resulted in the Commission's decision to pay EUR 17 453.90 to the complainant, they were terminated at the end of 2002, when the Commission informed the complainant of its decision to carry out an audit;

(ii) there were no discussions between the complainant and the Commission after the audit carried out in 2003; and

(iii) although sworn statements provided by the complainant to justify staff costs were accepted by the Commission when the complainant submitted the interim report, the same documents were rejected by the auditors (time sheets or pay slips were requested) and the Commission, after the audit.

(2) Violation of the rights of the defence

The complainant alleged that the Commission did not comply with Article 16 of the European Code of Good Administrative Behaviour(3), as the complainant always provided the documents which were requested by the auditors, but it was never informed by them that they were insufficient.

(3) Lack of reasoning of decisions

The complainant alleged that the Commission did not comply with Article 18 of the European Code of Good Administrative Behaviour(4) because it based its decision to recover funds only on the findings of the audit, without taking into account the complainant's objections:

(i) it alleged that the Commission did not reply to the complainant's objections to the auditors' findings and it wrongly reproached the complainant, in its letter of 7 December 2004, for not having sent some documents;

(ii) the complainant alleged that the Commission indicated that the auditors had replied to the complainant's objections, without further explanation.

4. Non-compliance with a reasonable time-limit

The complainant alleged that the Commission did not comply with Article 17 of the European Code of Good Administrative Behaviour(5), as the Financial Agreement was signed in 1995 and closed in 2005, seven years after the planned date (1997).

The complainant claimed that the Commission's decision to recover EUR 52 864.19 should be annulled and that it should confirm its decision of 5 June 2002 to pay EUR 17 453.90 to the complainant. The complainant also claimed compensation for the delays in the handling of the file. Finally, if the above-mentioned claims were not met, it claimed that a new audit should be carried out.

On 6 December 2005, the Ombudsman informed the complainant and the Commission that it was opening an inquiry into allegations (1)(ii) and (1)(iii), (2), (3) and (4) and into the claims. He considered that the admissibility conditions were not met as regards allegation (1)(i) because it was not made within two years of the date on which the facts on which it was based came to the attention of the complainant. The Ombudsman also asked the complainant to specify and substantiate its claim for compensation.

THE INQUIRY

The Commission's opinion

The Commission's opinion can be summarised as follows:

1. Background

On 15 December 1995, a Financial Agreement was signed between the Commission and the complainant and entered into force on 1 December 1995 for 24 months. This agreement provided for a financial participation from the Commission of EUR 140 000, paid in three instalments:

(1) an advance of 40% within 30 days of the receipt of the signed agreement (that is, EUR 56 000);

(2) 30% after the receipt and validation of the interim report (that is, EUR 42 000);

(3) the balance (EUR 42 000) after the receipt of the final report and its acceptance by the Commission.

The first instalment was made on 19 July 1996.

The complainant requested an extension of the deadline to submit the final report until 30 May 1998. This date was confirmed by the Technical Assistance Office ("TAO") on 27 March 1998.

On 11 December 1996, the TAO sent the complainant various documents, including a copy of the Handbook.

On 13 June 1997, the TAO received the interim report.

On 30 October 1997, the second instalment was paid.

On 3 August 2000, the Commission received the final report. It noted that some documents had not been submitted in order to complete the financial evaluation and, by fax of 6 September 2000, it granted the complainant 30 extra days to provide these documents.

On 26 September and 26 October 2000, the complainant sent some documents. As other documents were still missing, the Commission, on 7 December 2000, granted 10 extra days to the complainant in order to submit these documents.

On 11 January and 2 February 2001, the Commission received some documents.

On 17 December 2001, after the evaluation of the final report, the Commission sent to the complainant a debit note amounting to EUR 392.

On 16 January 2002, the complainant challenged the debit note.

On 1 February 2002, the Commission informed the complainant that it owed it EUR 13 335.90 and requested missing documents that it had asked for on 7 December 2000.

On 14 and 19 February 2002, the complainant challenged the amount mentioned by the Commission, in particular the ineligible expenditure for the second period. On 8 May 2002, a reminder was sent to the Commission.

On 6 June 2002, the Commission offered to refund the complainant EUR 17 453.90 and requested again the missing documents within 30 days.

At the complainant's request, the delay to provide documents (that is, 6 September 2002) was extended to 60 days.

On 9 August 2002, the complainant challenged again the Commission's position and sent some documents.

On 16 September 2002, the Commission maintained its position, although some documents were considered acceptable.

On 6 December 2002, the complainant indicated that it would take a definitive position, once the Commission confirmed, unconditionally and without further decreases, the amount to be paid to the complainant (that is, EUR 17 453.90).

On 19 December 2002, the Commission informed the complainant that, having had no news from it, it had decided to launch an audit.

On 19 March 2003 and 9 October 2003, the Commission provided the complainant with information as regards the audit.

On 18 December 2003, the audit took place.

In the audit report dated 15 April 2004, the auditors concluded that EUR 64 020.26 out of EUR 98 000 already paid should be reimbursed by the complainant. This amount corresponded to ineligible expenditure for the following reasons:

(1) Lack of supporting evidence. The complainant refused to submit supporting evidence because of a conflict of interest between the external auditors and the partners of the project.

(2) The relevant expenses had not been incurred during the eligibility period.

On 18 August 2004, the Commission informed the complainant of the audit findings which were the following:

(1) the auditor did not have access to supporting documents concerning staff costs, statements signed by the persons concerned or identified persons could not be taken into account;

(2) overheads were not supported by original documents;

(3) the total amount of ineligible expenditure as regards travel expenditure is inferior to the amount found by the Commission because appropriate supporting documents had been submitted; and

(4) some computer expenditure was considered ineligible because they took place outside the eligibility period.

The Commission also asked the complainant to provide supporting documents within 30 days or to allow an internal auditor from the Commission to check these documents.

As the audit report was sent to the complainant only on 17 September 2004, the delay was extended until 29 October 2004.

On 19 October 2004, the complainant challenged the audit findings.

On 7 December 2004, the Commission replied to the complainant, recalling Article 7.5 of the Financing Agreement concerning audits and Title IV to the Handbook. The Commission noted that the auditor was not given access to a number of documents and that the complainant did not reply positively to the Commission's request to provide these documents or to allow one of its auditors to check these documents and granted 15 extra days.

On 3 January 2005, the Commission received the complainant's reply dated 22 December 2004, containing certificates concerning its partners. The complainant agreed to a second audit and offered to send the Commission the whole file.

Between 7 January 2005 and 3 March 2005, the complainant sent documents to the Commission.

On 3 March 2005, the Commission wrote to the complainant, indicating that some supporting documents were still missing. It also stated that the complainant's observations had been taken into account and that, at its request, the auditor had replied to them. It confirmed its decision, which was based on the auditor's findings except for the overheads which were accepted. It closed definitively the case requesting the reimbursement of EUR 52 864.19.

On 1 April 2005, the complainant confirmed its position that the Commission should pay EUR 17 453.90.

On 11 April 2005, the Commission confirmed its position.

On 20 June 2005, the Commission sent a debit note to the complainant for an amount of EUR 52 864.19.

On 20 July 2005, the complainant challenged the debit note and sent an invoice to the Commission for an amount of EUR 17 453.90.

On 3 August 2005, the Commission sent a reminder and on 9 August 2005 refused the invoice.

On 9, 10 and 11 August 2005, the complainant maintained its position.

On 29 August 2005, the Commission confirmed its position.

On 16 September 2005, the Commission sent a first formal notice for an amount of EUR 53 346.49. A second was sent on 29 September 2005 for an amount of EUR 53 450.98.

Meanwhile, the external auditor firm was informed of a complaint, lodged by the complainant on 3 August 2005, with a body checking the work of auditors ("Conseil de l'Institut des Réviseurs d'Entreprises") about the external audit firm's audit of the complainant. On 20 December 2005, the body closed the case, finding no shortcomings on the part of the auditors.

2. Commission's observations on the complainant's allegations

The Commission noted that the European Code of Good Administrative Behaviour was not binding for the Commission and that it adopted its own code on 17 October 2000. However, provisions of the Commission's Code are similar to those of the European Code:

(1) Article 10 corresponds to the principle of consistency (Article 1(6));

(2) Article 16 corresponds to the right of parties to be heard (Article 3(7));

(3) Article 18 corresponds to the obligation to give reasons (Article 3(8)); and

(4) Article 17 corresponds to Article 4 regarding the commitment to answer enquiries in the most appropriate and timely manner possible(9).

2.1 The complainant's allegation that the Commission did not act consistently

The Commission kept revising its breakdown each time the complainant sent new documents and finally proposed, on 6 June 2002, to pay EUR 17 453.90 to the complainant. Subsequently, the Commission maintained its position and the complainant challenged it. In its letter of 16 September 2002, the Commission offered again to pay EUR 17 453.90 and asked the complainant to reply as soon as possible. As no reply was received, the Commission assumed that the complainant was still in disagreement. It is only on 9 December 2002, three months after the deadline, that the Commission received a reply from the complainant.

The Commission recalled the rules as regards the checking of supporting documents. While the Commission accepts photocopies when it makes the financial assessment of a project, the same practice does not apply in the case of an audit. In this case, the rules are provided for in the Handbook. According to paragraph IV.1 of the Handbook, "the Contractors are advised to ensure that all the original documentation likely to be examined by the auditors is available, and if necessary, to contact their Partners in order to collect any missing original documents". According to paragraph IV.2.1, "in order to be taken into consideration, supporting documents must satisfy the following conditions:

• they must be original, dated and numbered documents;
• such documents must be from third parties and not drawn up internally (...)".

If the audit findings were that the complainant should reimburse EUR 64 020.26, it was because the auditors were not able to check the reality of the expenditure and did not have access to complete, exact and well-documented information. The complainant did not comply with the provisions of the Handbook. However, the Commission agreed to revise the amount claimed in view of the documents provided by the complainant after the audit. This revision led to a decrease in the amount to be claimed (that is, EUR 52 864.19).

The Commission applied the provisions of the Handbook and made the following conclusions:

(1) As regards staff costs, according to paragraph IV.2.2, "[i]n addition to the employment contracts and declaration of hours (...), the Contractor should also be able to provide either all the individual pay slips for persons who have worked on the project, or an official list from the financial department or personnel division summarising all the payments made to these persons. Separate supporting documents, from these same departments, should also be available for employers’ contributions."

(i) The complainant's staff:

No contract was received for one member of staff, only a bank statement was received and was accepted. The Commission agreed with the auditors' findings that EUR 124 300 were ineligible.

As regards two other members of staff, the staff costs should be under subcontracting costs and EUR 13 000 were therefore ineligible.

(ii) Staff of partner A:

The Commission received statements signed by the person responsible for the project. While the Commission did not question the statements, it could not, on the basis of these documents, verify whether the relevant costs had in fact been incurred. However, the Commission did accept one of these documents. The other costs for which no valid supporting documents were provided (EUR 8 195.27) were ineligible, as the auditors had concluded.

(iii) Staff of partner B:

The Commission received statements from an unidentified person with regard to three members of staff. While the Commission did not question the statements, it could not, on the basis of these documents, verify whether the relevant costs had in fact been incurred and considered, as had the auditors, that they were ineligible (EUR 25 560).

The Commission received statements from an unidentified person for the first period in relation to the work performed by another member of staff in the context of the same project. While the Commission did not question the statements, it could not, on the basis of these documents, verify whether the relevant costs had in fact been incurred and considered, as had the auditors, that they were ineligible (EUR 16 636. 29).

(iv) Staff of partner C:

The Commission received statements signed by the Director-General of the project and a chartered accountant. While the Commission did not question these statements, it could not, on the basis of these documents, verify whether the relevant costs had in fact been incurred and considered, as had the auditors, that part of the expenditure was ineligible (EUR 7 102. 12).

(v) Staff of partner D:

The Commission received statements signed by an unidentified person. While the Commission did not question these statements, it could not, on the basis of these documents, verify whether the relevant costs had in fact been incurred and considered, as had the auditors, that part of the expenditure was ineligible (EUR 17 148).

(2) As regards overheads, according to paragraph IV.2.3, "[s]ince only actual costs and not fixed sums may be financed by the Leonardo da Vinci programme, Contractors and their Partners should ideally set up an analytical system allowing them to identify overheads linked directly with the project. In all cases, Contractors must be in a position to explain how the amount indicated in the final report was calculated. They must also provide, for each Partnership member organisation which has incurred overheads as part of the project, a document signed by the organisation’s financial manager confirming the amount of the costs in question, as well as proof of its transfer from the account assigned to the project to a general account belonging to the organisation." No document supporting overheads for each partner was provided by the complainant during the audit. Subsequently, certificates signed by the complainant were provided to the auditors, who refused them on the grounds that they were not adequate. The auditors noted, however, in their report that the proportion of overheads was reasonable. On 22 December 2004, the complainant provided certificates signed by the legal representative of each partner. The Commission thus accepted all overheads.

(3) As regards travel costs, the complainant did not comment on these costs. The amount of ineligible costs (EUR 5 417.78) found by the auditors was inferior to that found by the Commission.

(4) As regards subcontracting costs, all invoices were submitted to the auditors. However, according to the Handbook, these costs were limited to EUR 5 000 or 15%. The auditors limited the acceptable amount to EUR 10 000. The ineligible amount was EUR 13 000. As regards the complainant's argument that it did not have a copy of the Handbook when the contract was signed, according to Article 6 of the Financial Agreement, the Handbook would be provided at a later date: it was sent to the complainant on 11 December 1996.

(5) As regards computer costs, the invoices were not provided during the audit but subsequently. The dates on these invoices were outside the eligibility period and they could thus not be accepted (EUR 7 336.39).

The total amount of ineligible expenditure was EUR 52 864.19.

2.2 The complainant's allegation that there was no dialogue after the audit

The Commission did not understand the complainant's allegation. The Commission adopted an open approach, giving the complainant the possibility to provide missing documents directly to the Commission and to accept a visit by a Commission internal auditor. The Commission always replied to the complainant's letters and granted several extensions of deadlines. It thus considered that it maintained dialogue with the complainant.

2.3 The complainant's allegation that it was never informed by the auditors that the documents provided were insufficient

On the day of the audit, the complainant was unable to provide documents as regards staff costs. Such documents were provided after the audit on 23 December 2003 and 9 January 2004. It can be inferred that the documents provided on the day of the audit were insufficient and that the complainant was informed because it provided other documents subsequently.

As regards the documents that the complainant refused to show to the auditors because of a conflict of interest, the Commission proposed that they be sent to it directly.

The documents sent by the complainant were not compliant with the Handbook. Paragraph 2 of Article II.3.2 of the Handbook states that "[l]es frais du personnel devront être calculés sur base du salaire journalier réel de l'employé/prestataire multiplié par le nombre de jours (temps plein comportant le nombre d'heures défini dans la législation nationale) effectivement consacrés au projet (...)". Paragraph 3 of the same Article makes a distinction between a person specifically hired for the project by an institution that is a member of the partnership and a person employed by a member of the partnership who devotes all or part of his/her time to the project. In the first case, a work agreement should be signed, in the second case, the person should make an official statement on a special document. The following elements should be present in both documents:

• daily salary,
• working time in days on the project,
• detailed description of the work,
• dates when the convention started and ended,
• the amount paid,
• the signature of the employee, and
• the signature of the legal representative.

Article IV.2.2 of the Handbook states that "[o]utre les conventions et les déclarations de travail, telles que décrites au point II.3.2. du manuel, le contractant devra être à même de produire soit toutes les fiches de rémunération individuelles des personnes ayant travaillé dans le cadre du projet, soit une liste officielle émanant du département financier ou du service du personnel et reprenant l'ensemble des paiements effectués en faveur de ces personnes". In the present case, only certificates signed by the persons concerned or unidentified persons were provided instead of pay slips. Consequently, neither the auditors nor the Commission could verify whether the relevant costs had in fact been incurred. These documents did not include in particular the breakdown of hours spent on the project or time sheets. This was mentioned in the audit report.

The complainant was aware of the provisions of the Handbook since 11 December 1996 and could not ignore that the documents provided were not compliant with the Handbook and were thus likely to be deemed insufficient.

2.4 The complainant's allegation that the Commission did not reply to the complainant's objections and did not reason its decision

Contrary to what the complainant stated, the Commission took into account the observations made in its letter of 19 October 2004. The Commission immediately contacted the auditors and asked them to reply to the objections. If the Commission did not consider that the reply from the auditors (which was attached to the opinion) had to be sent to the complainant, it took into account its content in its letter of 7 December 2004.

As to each one of the objections raised by the complainant in its letter of 19 October 2004, the Commission made the following comments:

With regard to the first point in the complainant's letter according to which the auditors stayed on its premises for only one and not two days, the Commission asked the auditors to provide an explanation. They admitted that, given the lack of supporting documents, only one day had been spent at the complainant's premises and that the second day had been spent in their own offices drafting the first report. The Commission did not inform the complainant of this reply because the length of the audit had no impact on the audit findings. The length of the audit came under the contract between the Commission and the audit firm. However, the final audit report dated 5 July 2005 was corrected and only referred to 18 December 2003.

The complainant noted in the second point of its letter a mistake in the number of employees. The audit firm used the information provided by the complainant. This explanation had no impact on the audit findings.

The same applied to objections 3, 5 and 6; the explanations provided by the audit firm did not change the audit findings.

The Commission recalled that, on 9 October 2003, it informed the complainant of the audit, indicating the name of the external audit firm. The firm was to contact directly the complainant, which it did by e-mail on 24 October 2003.

The Commission also indicated that, on page 4 of the audit report, the references of the framework contract and the specific agreement within which the audit was carried out were mentioned.

As regards objection 6 concerning a letter mentioned in paragraph 1.3 of the report, the auditors recognised that there was a mistake in the date of a letter referred to: reference should have been made to a letter dated 16 September 2002 and not 9 December 2002. In this letter dated 16 September 2002, the Commission recalled that, in accordance with the provisions of the Handbook, the subcontracting costs could not exceed the planned amount plus 15%. This letter referred to two previous letters from the Commission, dated 6 June 2002 and 22 July 2002, which also referred to the problem arising from exceeding the planned amount plus 15%.

On the other hand, objections 4, 7 and 8 raised the question of the submission of supporting documents which were important for the audit findings. As regards audited accounts, the auditor explained that the list of documents to be prepared by the complainant included the submission of the supporting documents. It had been agreed between the auditor and the auditee that all documents requested should be available from the beginning of the audit. The auditor mentioned this agreement in the e-mail dated 24 October 2003 and asked for confirmation thereof from the auditee. The auditor also provided a checklist enabling the auditee to prepare and gather all necessary documents. The auditee should not only have ensured that the documents existed, but should also have prepared them and submitted them to the auditor. Consequently, the auditor had no obligation to make an explicit request.

In its letter dated 7 December 2004, the Commission replied to the complainant's objections by quoting Article 7 of the Financial Agreement relating to the audit of the project and Title IV to the Handbook. These explanations were repeated on 3 March 2005.

The complainant's objection 8 that it made no sense to request details of costs, the allocation key and supporting accounting documents seven or eight years after the project was carried out could not be taken into account. In effect, Article 7 of the Financial Agreement provides that the documents should be kept during five years after the last payment concerning the closure of the project. In the present case, the final payment was never made, because the complainant never agreed to it within the deadlines. Since the file had not been closed, the complainant should have kept all relevant supporting documents even if they date back seven or eight years.

The Commission's conclusions could not be changed after it noted that the auditors did not have access to all the requested documents and that they did not receive the originals despite repeated requests.

The complainant could not therefore reproach the Commission for not having reasoned its decision. The Commission has always tried to find a solution to the present case while complying with the principle of equal treatment of all beneficiaries of the Leonardo da Vinci subsidies. The Commission did not limit itself to the audit findings. In its letters of 18 August 2004 and 7 December 2004, it offered the complainant the possibility to send it the relevant documents or to have one of its internal auditors come to the complainant's premises.

2.5 The complainant's allegation that the Commission did not act within a reasonable deadline

The Financial Agreement, which was meant to last for two years, came into force on 1 December 1995. It should have ended on 30 November 1997.

Article 6 of the Financial Agreement provides that the interim report for the period from 1 December 1995 to 30 November 1996 be sent at the latest on 6 January 1997 and that the final report, concerning the total contractual period, be sent at the latest on 5 January 1998. However, the complainant benefited from an extension of the deadline to submit the final report until 30 May 1998. The Commission recalled that the interim report was received on 13 June 1997 with a five-month delay, the final report on 3 August 2000 with a 26-month delay.

According to Article 5 of the Financial Agreement, the amounts paid may be recovered if the reports are not provided on time. The Commission recalled this provision in its letter to the complainant dated 11 May 2000. Although the complainant was already in the wrong, the Commission agreed to grant a further extension of the deadline until 29 May 2000, after which date it was in a position to recover all sums already paid. The Commission showed flexibility by accepting the final report on 3 August 2000, while it could have applied Article 5.

The Commission's decision to close the file was taken on 21 December 2001, that is, some months after the assessment of the documents sent by the complainant.

The financial assessment lasted until the complainant provided the supporting documents requested by the Commission on 6 September 2000, 7 December 2000 and 28 February 2001.

Consequently, the Commission expressed its surprise with the complainant's statement that the Financial Agreement should have been closed in 1998, since it was only in 2000 that it complied with its obligation to provide the final report.

The aim of the audit was to find a solution to the problems faced by both parties. The Commission argued that the complainant could not deny that, between the audit, the transmission of the audit report and the debit note of 20 June 2005, there had been extensive exchanges of correspondence. Thus, the Commission never brought the dialogue with the complainant to an end.

If the complainant had not challenged the Commission's position, the file would have been closed in 2001.

In conclusion, the Commission confirmed the audit findings and its decision to recover EUR 52 864.19 with interests.

The complainant's observations

The complainant's observations can be summarised as follows:

(1) The dispute between the Commission and the complainant dealt mainly with the eligibility of staff costs. The complainant justified these costs by providing either sworn statements from persons having worked on the project, or certificates from the directors of partners. Such documents were accepted by the Commission to establish the eligibility of the expenditure when the interim report was established and assessed. However, at the end of the audit, the auditors, who themselves had asked for such documents, considered that they were insufficient and requested time sheets or pay slips. The Commission came to agree with this position. The complainant stated that it was never agreed that staff costs had to be justified by time sheets, because this is not the practice in small- and medium-sized businesses, such as the complainant. Therefore, the complainant acted in good faith.

The complainant never refused to provide documents, as stated by the Commission. As regards the Commission's reference to time sheets, such documents were not completed during the contract period. The complainant informed the auditors accordingly. Concerning the Commission's reference to pay slips, the director of one of the complainant's partners questioned, during the audit, whether such a request was legitimate. Due to a conflict of interest, the complainant requested the auditors to provide their own pay slips. It was obvious that there was a difference between salaries and daily rates for projects.

(2) As regards the Handbook, when the interim report was submitted, the Commission never referred to it in order to reject some expenditure. The second instalment of funds, which is not paid in case of dispute, was paid to the complainant. The complainant could therefore, in good faith, rely on the Commission's position and justify, in its final report, the expenditure using the same documents.

The complainant did not remember having received the Handbook. In 1995, according to the complainant, the Handbook was being drawn up. The final version should have been sent later.

Furthermore, the Commission never indicated on which manual the auditors based their work. The auditors were unable to provide such information.

(3) The complainant recognised that it confused extension of the contract period with extension of the deadline to provide the final report, but this did not justify a proportional dividing up of costs according to the contract period, as the works had been carried out according to a schedule agreed by the Commission.

(4) From summer 1997 until spring 2000, the complainant did not hear from the TAO or the Commission. There was no follow-up and the provisional report was never endorsed.

(5) In its letter dated 9 August 2002, the complainant never challenged the amount of EUR 17 453.90. According to the complainant, the Commission contradicted itself when stating that it did not hear from the complainant after 9 August 2002. Furthermore, the Commission stated that the lack of reply within a certain deadline would be considered as a formal approval. The complainant did not understand the Commission's change in attitude.

(6) The complainant noted that, as regards staff costs, the Commission seemed to accuse it of forgery, in particular of forging signatures. Moreover, contrary to what the Commission stated, the complainant did provide a copy of the salary slip of one of its employees by letter of 23 December 2003.

(7) As regards computer costs, the complainant provided pro forma invoices issued during the eligibility period, the invoices and the corresponding proof of payment. These documents were disregarded by the auditors.

(8) The complainant criticised the quality of the audit. According to it, the auditors' attitude was not serious and called into question the audit findings. Only an audit of the financial statements was carried out, without checking the achievements of the project. The complainant considered that it should be checked whether the audit was only an audit of the financial statements or if the Commission asked an IT-specialist to check the software, which was the end result of the project.

(9) The Commission reproached the complainant for its delays in replying. However, the Commission was late or requested a reply within tight deadlines: the audit was decided on 19 December 2002, but the external auditor firm was informed in October 2003; the Commission replied on 6 June 2002 to a letter dated 19 February 2002; the Commission's letters were often sent one week after they were signed which shortened the deadline granted to the complainant.

(10) The complainant regretted that the Commission never replied positively to its proposal to organise a meeting.

The complainant was at the disposal of the Ombudsman to meet him and discuss the situation.

THE DECISION

1 Preliminary remark

1.1 The complaint is lodged by a lawyer on behalf of a company called X. (hereafter "the complainant"). In its observations, the complainant made a number of new allegations, not included in the initial complaint. The Ombudsman considers that it would not be appropriate to deal with them in the context of the present inquiry. However, the complainant may consider submitting a new complaint to the Ombudsman about these matters after having made relevant appropriate administrative approaches with the Commission.

2 Relevant provisions of the Financial Agreement and of the Financial and Administrative Handbook

The Financial Agreement provides, in relevant part, the following:

"6.2 Les rapports devront se conformer au Manuel Administratif et Financier et aux formulaires que le Bureau adressera au Contractant pendant le déroulement de la présente convention.

(...)

6.4 Le contenu du rapport d'étape devra porter sur le développement du projet et du produit et devra notamment comprendre:

6.4.1 - une évaluation d'ensemble des résultats du projet par rapport aux objectifs initiaux, comprenant entre autres, un bilan quantitatif des résultats obtenus;

- la description détaillée sur le développement, les progrès et les acquis du projet y compris, le cas échéant, des informations sur l'interaction avec d'autres projets;

- la présentation de l'état d'avancement des produits de formation en préparation,

- la procédure interne d'évaluation,

- un résumé, en anglais, en français ou en allemand, des principaux résultats acquis (ne dépassant pas 5 pages); les éventuels frais de traduction seront considérés éligibles dans le cadre du projet;

- le décompte détaillé total de la période considérée de toutes les dépenses réelles en ECU encourues dans le cadre du projet, conformément au cadre financier qui est précisé dans le Manuel Administratif et Financier et les formulaires relatifs aux rapports, ainsi qu'une estimation des dépenses pour la deuxième période de la convention;

- le programme de travail correspondant à la deuxième période de la convention;

- un résumé en anglais, en français ou en allemand, des principaux développements prévus pour la deuxième période du contrat (ne dépassant pas 5 pages); les éventuels frais de traduction seront considérés éligibles dans le cadre du projet;

- les produits attendus.

(...)

6.5 Le rapport final devra porter sur la finalisation du projet et du produit et devra notamment comprendre:

(...) le décompte final détaillé de la période entière de la convention, de toutes les dépenses réelles en ECU encourues dans le cadre du projet, conformément au cadre financier qui sera précisé dans le Manuel Administratif et Financier et dans les formulaires relatifs aux rapports;

(...)

7.4 Le Contractant tiendra à disposition de la Commission l'ensemble des documents techniques et financiers lui permettant de vérifier que ledit programme de travail est en cours de réalisation ou a été réalisé. Ces documents pourront, le cas échéant, être vérifiés sur les lieux où ils sont normalement conservés.

7.5 Le Contractant prendra toutes les dispositions nécessaires pour permettre les contrôles (dossiers, documents comptables et financiers) tant de la Commission que de la Cour des comptes des Communautés européennes. Ces contrôles peuvent s'exercer sur place et consister en un examen de la comptabilité et des pièces justificatives relatives au projet faisant l'objet de la présente convention. A cet effet, les pièces en question seront conservées pendant 5 ans après le dernier paiement relatif au dit projet et la clôture de celui-ci".

The Financial and Administrative Handbook(10) states the following:

"II.3.2. Staff costs

Any payment made to a person attached to a member organisation of the Partnership or working regularly or recurrently for the project must be charged against the “Staff costs” heading.

Staff costs must be calculated on the basis of the actual daily salary/fee of the employee/service provider, multiplied by the number of (full time(11)) days actually worked on the project. This figure should include all the usual contributions paid by the employer, such as social security contributions, but should exclude any bonuses, incentive payments or profit-sharing schemes.

The time actually worked on the project must be identifiable and certified by a document signed by the employer and the employee/service provider. There may be two cases:

- If a member organisation of the Partnership calls upon the services of an employee/service provider specifically for the project, a contract should be drawn up between this person and the member organisation of the Partnership (Contractor, Coordinator or Partner) using his or her services.

This contract should include the following information:

• the daily salary of the provider;
• the time to be worked on the project, expressed in (full-time) days;
• a precise description of the work/activities to be carried out by the employee/service provider;
• the dates on which the contract begins and ends;
• the total gross amount paid to the employee/service provider together, where applicable, with employers’ contributions;
• the signature of the employee/service provider;
• the signature of the organisation’s legal representative.

- If a permanent employee of a member organisation of the Partnership works some or all of his or her time on the project, this person should declare this officially in a document drafted for this purpose.

This declaration should include at least the following information:

• the daily salary of the employee;
• the time to be worked on the project, expressed in (full-time) days;
• a precise description of the work/activities to be carried out by the employee;
• the dates of these services;
• the total gross amount corresponding to this working time or the cost to the employer for making the employee/service provider available to the project;
• the signature of the employee/service provider;
• the signature of the organisation’s legal representative.

These contracts and declarations should be kept by the Contractor in accordance with the Contract.

(...)

The maximum amounts authorised for personnel costs, for a full-time day and including all contributions, are set at ECU 450 for a manager, ECU 250 for an office employee and ECU 125 for a secretary. These are maximum amounts and cannot under any circumstances be considered as lump-sum amounts, as only actual staff costs are taken into account in the total eligible cost.

Under no circumstances may working time remunerated in full by member organisations of the Partnership or from other sources be financed by the Community.

II.3.3. Overheads

Overheads include the following indirect costs:

• communication (fax, telephone, mail, etc.)
• photocopies;
• insurances;
• hire of conference or training rooms.

This budget heading may under no circumstances include staff costs or any other costs specifically included under another heading.

Only actual costs, and not lump sums, will be accepted, and the total of these costs may not exceed 10% of the total cost of the project. This means that the overheads directly generated by the project must, where possible, be made identifiable through an appropriate system.

(...)

III Reports

The evaluation procedure plays a crucial role in the project cycle insofar as it makes it possible to take stock and make a qualitative and quantitative assessment of:

• the results achieved in relation to the objectives (with regard to activities/results);
• the means utilised for obtaining such results in relation to the revised budget (with regard to the financial aspect).

As the interim and final reports are the main tools for this evaluation, they must provide as true a picture of the programme as possible.

(...)

In cases where certain documents are required and must be sent as a supplement to the reports, the Contractor should send documents (originals or photocopies depending on the case) of the type described in Chapter IV of the Handbook.

(...)

IV Audits

IV.1 Purpose of audits

[t]hese audits have a dual purpose. The first is to verify that the financial reports submitted for project payment concur and comply with the Contractor’s basic accounting. The second is to ensure that Community funds have been spent in accordance with the provisions of the Contract and its Annexes, the objectives of the project have been accomplished and the products/results have been achieved. These audits also provide a good opportunity for the auditors to meet the Contractor so that the two parties can exchange notes. If any management problems have been found, the auditors will work with the Contractor to try to find a solution and, if necessary, improve existing internal procedures in order to make optimum use of Community funds. The auditors will be open to any remarks and/or suggestions from Contractors and Partners.

(...)

IV.2.1 General conditions

In principle, in order to be taken into consideration, supporting documents must satisfy the following conditions:

• they must be original, dated and numbered documents;
• such documents must be from third parties and not drawn up internally

(...)

IV.2.2. Staff costs

In addition to the employment contracts and declaration of hours as described in paragraph II.3.2 of the Handbook, the Contractor should also be able to provide either all the individual pay slips for persons who have worked on the project, or an official list from the financial department or personnel division summarising all the payments made to these persons(...)".

3 Alleged lack of consistency from the Commission

3.1 The complainant alleged that the Commission failed to comply with Article 10 of the European Code of Good Administrative Behaviour, because

(i) although discussions between the complainant and the Commission were ongoing for nearly a year and resulted in the Commission's decision to pay EUR 17 453.90 to the complainant, they were terminated at the end of 2002, when the Commission informed the complainant of its decision to carry out an audit;

(ii) there were no discussions between the complainant and the Commission after the audit carried out in 2003; and

(iii) although sworn statements provided by the complainant as justification of staff costs were accepted by the Commission when the complainant submitted the interim report, the same documents were rejected by the auditors (time sheets or pay slips were requested) and the Commission, after the audit.

3.2 As regards point (i), the Ombudsman recalls that, as mentioned in his letter of 6 December 2005, this allegation was not taken up for inquiry because it was not made within two years of the date on which the facts on which it is based came to the attention of the complainant.

3.3 As regards point (ii), the Commission, in its opinion, made the following remarks: if the audit findings were that the complainant should reimburse EUR 64 020.26, it was because the auditors were not able to check if the expenditure had occurred and did not have access to complete, exact and well-documented information. However, the Commission agreed to revise the amount claimed in view of the documents provided by the complainant after the audit, leading to a decrease, that is, EUR 52 864.19. The Commission did not understand the complainant's allegation. It adopted an open approach, giving the complainant the possibility to provide directly to the Commission missing documents and to accept a visit by a Commission internal auditor. The Commission always replied to the complainant's letters and granted several extensions of deadlines. It thus considered that it maintained dialogue with the complainant.

3.4 The Ombudsman notes that principles of good administration, embodied in Article 10 of the European Code of Good Administrative Behaviour, require that the Commission be consistent in its administrative behaviour. The Ombudsman recalls that, according to Article 7.5 of the Financial Agreement, the contractor should take all necessary arrangements to allow checks from the Commission and the Court of Auditors and that supporting documents should be kept during five years after the last payment and after the closure of the project. The Ombudsman notes that, on 18 August 2004, the Commission informed the complainant of the audit findings and suggested that it either provide the Commission with the missing supporting documents or allow an internal auditor from the Commission to carry out the check of these documents and that, on 17 September 2004, the complainant received a copy of the audit report. The Ombudsman further notes that there was an extensive exchange of correspondence between the Commission and the complainant after the audit:

(1) letters from the Commission to the complainant dated 7 December 2004, 3 March 2005, 11 April 2005, 20 June 2005, 3, 9 and 29 August 2005, 16 and 29 September 2005;

(2) letters from the complainant to the Commission dated 19 October 2004; 22 December 2004; 4, 7, 10, 17, 19, January 2005; 25 February 2005; 1 April 2005; 20 July 2005; 9, 10 and 11 August 2005.

Finally, the Ombudsman notes that, in its letters of 17 September 2004 and 7 December 2004, the Commission agreed to extend the deadlines granted to the complainant for its reply.

3.5 In view of the above, the Ombudsman takes the view that the Commission maintained a dialogue with the complainant after the audit and that the complainant's argument that the Commission failed to continue discussing with it after the audit has not been substantiated. The Ombudsman therefore concludes that there appears to be no maladministration by the Commission as regards this aspect of the case.

3.6 As regards point (iii), the Commission made, inter alia, the following observations. If the Commission accepts photocopies when it makes the financial assessment of a project, the situation is not equivalent when there is an audit. In this case, the rules are provided for in the Handbook. The Commission referred, in particular, to sections IV.1, IV.2.1 and IV.2.2 of the Handbook. The Commission applied the provisions of the Handbook and concluded that, as regards staff costs, work contracts were missing, certificates were signed by inappropriate persons, staff costs should have been registered under subcontracting, there was no breakdown of hours spent on the project and time sheets were missing.

3.7 In its observations, the complainant stated that it was never agreed that staff costs had to be justified by time sheets. This is not the practice in small- and medium-sized businesses such as the complainant. Therefore, the complainant acted in good faith. It further added that the Commission did not refer to the Handbook when it approved the interim report. As this report had been approved, it could justify its position in the final report, using the same supporting documents.

3.8 The Ombudsman notes that, according to the Financial Agreement (Article 6.4.1), the interim report should contain "a detailed breakdown for the period in question of all actual costs incurred in the framework of the project, in accordance with the Financial and Administrative Handbook (...)." The chapter of the Handbook concerning the interim report (chapter III.1) provides that the relevant information should be provided in three types of tables, but does not refer to any supporting documents that should be submitted with the interim report (apart from copies of subcontracts) or be approved together with it. The Ombudsman further notes that, according to Article 5.1 of the Financial Agreement, the second instalment of funds would be paid after approval of the interim report by the Commission.

3.9 In light of the above, the Ombudsman takes the view that the acceptance of the complainant's interim report did not seem to necessitate or imply an acceptance of supporting documents which might have been submitted by the complainant along with the report. Moreover, there is no element showing that the Commission accepted, as supporting documents for staff costs, sworn statements provided by the complainant at the stage of the approval of the interim report. Hence, the complainant's relevant allegation that the Commission acted inconsistently with its prior behaviour, by not accepting these sworn statements after the audit, has not been substantiated. Therefore, the Ombudsman finds no maladministration as regards this aspect of the complaint.

3.10 As regards the complainant's argument that, since the second instalment of funds was paid after the submission of the interim report, the complainant could therefore, in good faith, rely on the Commission's position and, in its final report, justify the expenditure using the same documents, the Ombudsman recalls that, according to established case-law, three conditions must be satisfied in order to claim entitlement to the protection of legitimate expectations. First, precise, unconditional and consistent assurances originating from authorised and reliable sources must have been given to the person concerned by the Community authorities. Second, those assurances must be such as to give rise to a legitimate expectation on the part of the person to whom they are addressed. Third, the assurances given must comply with the applicable rules(12). In the present case, it has been neither argued nor shown that the Commission gave the complainant, in the context of the payment of the second instalment of funds, any specific assurances that sworn statements were acceptable supporting documents for staff costs. Since the first of the above-mentioned conditions is not met, the Ombudsman finds no maladministration as regards this aspect of the complaint.

4 Alleged violation of the rights of the defence

4.1 The complainant alleged that the Commission did not comply with Article 16 of the European Code of Good Administrative Behaviour. It stated that the day the audit took place and following the dispatch of the auditors' provisional conclusions by e-mail, the auditors asked for certain documents, as justification of expenses by the complainant. It argued that, although it always provided the documents which were requested by the auditors, it was never informed by them that they were insufficient.

4.2 In its opinion, the Commission stated that, on the day of the audit (18 December 2003), the complainant was unable to provide documents as regards staff costs. However, such documents were provided after the audit, on 23 December 2003 and 9 January 2004. It can be inferred, the Commission said, that the documents provided on the day of the audit were insufficient and that the complainant was informed of that, because it provided other documents subsequently. In its observations, the complainant did not comment on these statements made by the Commission.

The Commission's opinion further pointed out that the documents sent by the complainant were not compliant with the Handbook (paragraphs II.3.2 and IV.2.2). Only certificates signed by the persons concerned or unidentified persons were provided instead of pay slips. Consequently, neither the auditors nor the Commission could verify whether the relevant costs had in fact been incurred. These documents did not include in particular the breakdown of hours spent on the project or time sheets. This was mentioned in the audit report. In conclusion, the Commission stressed that the complainant was aware of the provisions of the Handbook since 11 December 1996 and could not ignore that the documents provided were not compliant with the Handbook and were thus likely to be deemed insufficient.

4.3 The Ombudsman, first, notes that, according to the settled case-law of the Community Courts, respect for the rights of defence constitutes a general principle of Community law which must be observed even in the absence of an express provision(13). This principle applies to any procedure which may result in a decision perceptibly affecting a person's interests in an adverse way(14). The Commission has not contested that the rights of defence came into play in the context of the audit here concerned. Relatedly, the Ombudsman also notes that, according to Article IV.1 of the Handbook "[t]hese audits have a dual purpose. The first is to verify that the financial reports submitted for project payment concur and comply with the Contractor’s basic accounting. The second is to ensure that Community funds have been spent in accordance with the provisions of the Contract and its Annexes, the objectives of the project have been accomplished and the products/results have been achieved. These audits also provide a good opportunity for the auditors to meet the Contractor so that the two parties can exchange notes. If any management problems have been found, the auditors will work with the Contractor to try to find a solution and, if necessary, improve existing internal procedures in order to make optimum use of Community funds. The auditors will be open to any remarks and/or suggestions from Contractors and Partners."

4.4 As regards the present case, the Ombudsman notes that (i) during the audit they conducted on 18 December 2003, the auditors detected problems concerning the existence of appropriate documents justifying, the eligibility of certain costs declared by the complainant; (ii) the complainant apparently received relevant information and was given the opportunity to present its views and provide such documents, before the audit report; (iii) it appears that the complainant did that on 23 December 2003 and 9 January 2004; (iv) the audit report dated 15 April 2004 made references to and took into account these submissions; (v) the complainant has referred only in general terms to "documents (...) requested by the auditors" and has not shown that, in view of the content of these requests and the relevant information provided by the auditors, it could not reasonably expect that the documents it gave to the auditors would be considered by them as insufficient. Under these circumstances, the Ombudsman does not accept the complainant's allegation. Accordingly, he finds no maladministration as regards this aspect of the complaint.

5 Alleged lack of reasoning of decisions

5.1 The complainant alleged that the Commission did not comply with Article 18 of the European Code of Good Administrative Behaviour(15) because it based its decision to recover funds only on the findings of the audit, without taking into account the complainant's objections. More specifically, the complainant alleged that the Commission did not reply to the complainant's objections to the auditors' findings and it wrongly reproached the complainant, in its letter of 7 December 2004, for not having sent some documents.

5.2 In its opinion, the Commission stated that, contrary to what the complainant stated, it took into account the observations made in its letter of 19 October 2004. The Commission contacted the auditors and asked them to reply to the objections. Although the Commission did not consider that the reply from the auditors had to be sent to the complainant, it took the content of this reply into account in its letter of 7 December 2004. In its opinion, to which a copy of this reply was attached, the Commission explained its position in respect of each one of the complainant's objections. The Commission also added that, in its letter of 7 December 2004, it replied to the complainant's objections by recalling the provisions of Article 7 of the Financial Agreement and Title IV to the Handbook. The Commission reiterated these explanations in its letter of 3 March 2005. In conclusion, the Commission rejected the allegation that its decision was not reasoned.

Alleged lack of reply to the complainant's objections dated 19 October 2004

5.3 The Ombudsman first notes that the complainant's allegation is based on the argument that the Commission reached its challenged decision without taking into account the complainant's objections as expressed in its letter of 19 October 2004. In order to examine the merits of this allegation, which refers to lack of reasoning of the challenged decision, the Ombudsman finds it appropriate to examine whether these objections were relevant to the grounds of this decision and whether the Commission has provided a reply to these objections.

In this regard, the Ombudsman recalls that, by letter of 18 August 2004, the Commission informed the complainant of the audit findings which were the following:

(1) the auditor did not have access to supporting documents concerning staff costs, statements signed by the persons concerned or identified persons could not be taken into account;

(2) overheads were not supported by original documents;

(3) the total amount of ineligible expenditure as regards travel expenditure was below the amount found by the Commission, because appropriate supporting documents had been submitted;

(4) some computer costs were considered ineligible because they took place outside the eligibility period.

The Commission invited the complainant to send the supporting documents or to allow one of its auditors to check the documents on the complainant's premises.

The Ombudsman further notes that the Commission's letter of 18 August 2004 was apparently based on the audit report sent to the complainant on 17 September 2004. In reply, on 19 October 2004, the complainant made several objections to the audit report. Each of these objections will be examined separately:

(1) Length of the audit

5.4 According to the complainant, the auditors stated that they carried out an on-the-spot audit on 18 and 19 December 2003. The complainant indicated that the auditors were present only on 18 December 2003.

In its letters of 7 December 2004 and 3 March 2005, the Commission did not reply to this objection.

In its opinion on the complaint, the Commission indicated that it asked the auditors to provide an explanation. They admitted that, given the lack of supporting documents, they spent only one day on the complainant's premises and that the second day had been spent in their own offices drafting the report. The Commission did not inform the complainant of this explanation because the length of the audit had no impact on the audit findings. The length of the audit came under the contract between the Commission and the audit firm. However, the final audit report dated 5 July 2005 was corrected and only referred to 18 December 2003.

The Ombudsman notes that the Commission failed to reply specifically to this objection in its letters to the complainant, but provided a reply through the present inquiry. Most importantly, this objection does not refer to specific findings made in the audit report and supporting the challenged decision. Moreover, the complainant has not contested the Commission's observation that the error as regards the length of the audit had no impact on the audit findings. Relatedly, it must also be noted that the mere fact the on-the-spot audit was carried out only on 18 December 2003 cannot be considered sufficient, at least on the basis of the information provided to the Ombudsman, to call into question, in general, the propriety of the audit report and its findings.

(2) The number of employees

5.5 According to the complainant, the auditors stated on page 5, paragraph 1.1, of the audit report that the company had only one employee on its payroll. The complainant indicated that this was wrong and that, during the contractual period, there was no employee on the payroll and that, during 2003-2004, there were two employees. The complainant added that such information had never been requested by the auditors.

In its letters of 7 December 2004 and 3 March 2005, the Commission did not reply to this objection.

In its opinion on the complaint, the Commission stated that the audit firm used the information provided by the complainant. Moreover, it indicated that this information had no impact on the audit findings.

The Ombudsman notes that the Commission failed to reply specifically to this objection in its letters to the complainant, but provided a reply through the present inquiry. Most importantly, this objection does not refer to specific findings made in the audit report and supporting the challenged decision(16). Relatedly, the Ombudsman also notes that the complainant has not contested the Commission's suggestion that the above statement regarding the number of employees had no impact on the audit findings.

(3) The list of administrators

5.6 According to the complainant, the auditors gave the list of administrators on page 5, paragraph 1.1, of the audit report. He stated that this list corresponded to the list at the time the company was created and was no longer up to date and that the auditors should have consulted the commercial register.

In its letters of 7 December 2004 and 3 March 2005, the Commission did not reply to this objection.

In its opinion on the complaint, the Commission stated that the explanations provided by the audit firm did not change the audit findings.

The Ombudsman notes that the Commission failed to reply specifically to this objection in its letters to the complainant, but provided an explanation through the present inquiry. Most importantly, this objection does not refer to specific findings made in the audit report and supporting the challenged decision(17). Relatedly, the Ombudsman also notes that the complainant has not argued that the issue of the names of the administrators is somehow related to the audit findings concerning the eligibility of the expenses at issue.

(4) The audited accounts

5.7 According to the complainant, the auditors stated on page 5, paragraph 1.2, of the audit report that no audited accounts were provided to them and that there were only provided with the balance sheet and the P&L (profit and loss) account relating to fiscal year 1997. The complainant indicated that this was true but pointed out that the auditors never requested the audited accounts, either during the audit or after the audit.

In its letter of 7 December 2004, the Commission recalled, in this regard, the provisions of Article 7.5 of the Financial Agreement and Title IV to the Handbook, which deal, inter alia, with documents to be made available during an audit (see point 2 of the present decision).

In its opinion on the complaint, the Commission stated that, as regards audited accounts, the auditor explained that the list of documents to be prepared by the complainant provided for the submission of these documents. It had been agreed between the auditor and the auditee that all documents requested should be available from the beginning of the audit. The auditor mentioned this in the e-mail dated 24 October 2003 and asked for confirmation from the auditee. The auditor also provided a checklist enabling the auditee to prepare and gather all necessary documents. The auditee should not only have ensured that the documents existed, but should also have prepared them and submitted them to the auditor. Consequently, the auditor had no obligation to make an explicit request.

The Ombudsman notes that the Commission replied to the complainant's objection in its letter of 7 December 2004 and provided further explanation through the present inquiry. He also notes that the complainant has not contested that the audited accounts were mentioned in the list of documents requested by the auditors.

(5) The framework of the audit

5.8 According to the complainant, on 18 December 2003, in front of a witness, the auditors were unable to provide the auditee with information on the framework of the audit.

In its letter of 7 December 2004, the Commission referred to the provisions of Article 7.5 of the Financial Agreement and Title IV to the Handbook.

In its opinion on the complaint, the Commission indicated that page 4 of the audit report mentioned the references of the framework contract and the specific agreement within which the audit was carried out.

The Ombudsman notes that the Commission replied to the complainant's objection in its letter of 7 December 2004 and also provided further relevant information through the present inquiry.

(6) Letter dated 9 December 2002

5.9 According to the complainant, on page 6, paragraph 1.3, of the audit report, the auditors referred to a Commission letter dated 9 December 2002, which dealt with transfers between different categories of costs and variations allowed within a limit of 15% or EUR 5 000. He went on to point out that this letter was never received. The complainant considered that if the auditors were referring to a Commission letter dated 6 December 2002, then they did not carry out a neutral and impartial audit, since information had been given by the Commission beforehand.

In its letters of 7 December 2004 and 3 March 2005, the Commission did not reply to this objection.

In its opinion on the complaint, the Commission explained that the auditors recognised that there was a mistake in the date of a letter referred to: reference should have been made to a letter dated 16 September 2002 and not 9 December 2002. In this letter, dated 16 September 2002, the Commission recalled that the subcontracting costs could not exceed the planned amount plus 15% in accordance with the provisions of the Handbook. This letter referred to two previous letters from the Commission, dated 6 June 2002 and 22 July 2002, which also presented the problem arising from exceeding the amount.

The Ombudsman notes that the Commission failed to reply specifically to this objection in its letters to the complainant, but provided a reply through the present inquiry. Most importantly, this objection does not call into question the propriety of audit findings concerning the eligibility of the expenses at issue.

(7) Supporting documents for staff costs

5.10 According to the complainant, on page 10, paragraph 4.5, of the audit report, the auditors stated that "most partners did not provide timesheets to justify the time presented for the project. The contractor stated that no such documents would be available due to the fact that the project was carried out in 1996 and 1997. The contractor requested and obtained certified confirmation of the time spent by the different partners. [The auditors] noticed though that those confirmations were signed by people who performed the hours themselves or were signed by unidentified persons. Therefore and considering that a daily fee rate was used, that no proof of payment was provided and that part of the services was rendered outside the eligibility period, an amount of EUR 222 500.68 was considered ineligible". According to the complainant, the auditee was never informed of the failures described. It added that the auditors requested certificates, which were presented to them. It was clear that some certificates could not be signed by the Directors in office at the time because they had since retired or they no longer worked for the company. At no point did the auditors request further explanations. The complainant noted that the auditors should have known that there were signature books, which allowed one to check signatures. In deciding that the expenditure was ineligible, the auditors stated that the persons who signed were liars, without providing any evidence. Moreover, the auditors never requested proof of payment between partners and their providers. Finally, the complainant also challenged the auditors' comment made in paragraph 4.8 that "staff expenses were presented for the period running till May 30, 1998 while eligibility period only runs till November 30, 1997. In absence of detailed timesheets [the auditors] applied a rule of proportionality to reject expenses incurred outside the eligibility period. (...) computers were acquired at the end or even outside the eligibility period. For those acquired within the eligibility period, [the auditors] used a pro rata based on an economical life time of three years. The expenses outside the eligibility period were considered ineligible (...)". The complainant considered that, without checking the work done, the auditor could not give an opinion as regards the issue of the eligibility period.

In its letters of 7 December 2004 and 3 March 2005, the Commission recalled, in this regard, the provisions of Article 7.5 of the Financial Agreement and Title IV to the Handbook and pointed out that, in its letter of 18 August 2004, it had asked the complainant to provide the missing documents or to allow one of its auditors to come on the complainant's premises.

In its opinion on the complaint, the Commission stated that it had been agreed between the auditor and the auditee that all documents requested should be available from the beginning of the audit. The auditor mentioned this agreement in the e-mail dated 24 October 2003 and asked for confirmation from the auditee. The auditor also provided a checklist enabling the auditee to prepare and gather all necessary documents. The auditee should not only have ensured that the documents existed, but should also have prepared them and submitted them to the auditor. Consequently, the auditor had no obligation to make an explicit request. In its letter dated 7 December 2004, the Commission replied to the complainant's objections by referring to Article 7 of the Financial Agreement relating to a potential audit of the project and to Title IV to the Handbook. These explanations were repeated on 3 March 2005.

The Ombudsman notes that the Commission replied to the complainant by referring to the relevant rules of the Financial Agreement and the Handbook and requested the missing documents. He also notes that information relating to the need to produce these documents was given to the complainant both in the context of the audit procedure and after its completion and that further explanations were given in the Commission's opinion.

(8) Supporting document for overheads

5.11 The auditors stated, on page 10, paragraph 4.5, that "no supporting documentation was provided to justify expenses recorded under overhead. [The auditors] received a certification from the different partners but no information was made available about the allocation key and the computation basis that were used". The complainant considered that it was surreal to request, seven or eight years after the facts, details about overhead, the allocation key and the supporting documents. It added that the auditors refused to consider that the results achieved constituted tangible and irrefutable proof that the work had been done and the expenses had been incurred.

In its letter of 7 December 2004, the Commission referred to Article 7.5 of the Financial Agreement and to Title IV of the Handbook.

In its opinion on the complaint, the Commission explained that the complainant's objection could not be taken into account. In effect, Article 7 of the Financial Agreement provides that the documents should be kept during five years after the last payment concerning the closure of the project. In the present case, the final payment was never made, because the complainant never agreed to it within the deadlines. The file not being closed, the complainant should have kept all relevant supporting documents even if they dated back seven or eight years.

The Ombudsman notes that the Commission replied to the complainant's objection in its letter of 7 December 2004.

(9) Supporting documents for travel and subsistence costs

5.12 According to the complainant, as regards travel and subsistence costs, the auditors stated on page 10, paragraph 4.5, that some expenses were only partly substantiated by means of supporting documentation and that the differences between amounts presented and amounts substantiated were considered ineligible. The complainant referred to its comments made in the context of its objection (6).

The Ombudsman, thus, refers to his observations in point 5.9 above.

5.13 In light of the above, the Ombudsman concludes that the Commission replied, by its letters of 7 December 2004 and 3 March 2005, to the complainant's objections to certain audit findings relating to the eligibility of the expenses at issue. He finds therefore no maladministration as regards this aspect of the complaint.

Argument that the Commission wrongly reproached the complainant for not having sent some documents

5.14 As regards the complainant's argument that, in its letter of 7 December 2004, the Commission wrongly reproached the complainant for not having sent some documents, the Ombudsman notes that, in its letter of 18 August 2004, the Commission requested the complainant to provide originals such as pay slips, fees and time sheets of all partners concerned for the staff costs, as well as original supporting documents for overheads.

He also notes that, in its letter of 7 December 2004, the Commission stated the following: "l'auditeur n'a pas eu accès à un certain nombre de documents justificatifs originaux lors de l'audit effectué en vos bureaux et que notre demande du 18 août 2004 de nous fournir les originaux de ces documents, ou de pouvoir envoyer sur place un auditeur interne, n'a pas été prise en compte dans votre lettre en objet".

5.15 The Ombudsman further notes that, in its opinion, the Commission provides the following explanations as regards the ineligible expenditure:

(1) as regards staff costs:

(i) The complainant's staff:

No contract was received for one member of staff, only a bank statement was received and was accepted. The Commission agreed with the auditors' findings that EUR 124 300 were ineligible.

As regards two other members of staff, the staff costs should be under subcontracting costs and EUR 13 000 were therefore ineligible.

(ii) Staff of partner A:

The Commission received statements signed by the person responsible for the project. While the Commission did not question the statements, it could not, on the basis of these documents, verify whether the relevant costs had in fact been incurred. However, the Commission did accept one document. The other costs, for which no valid supporting documents were provided (EUR 8 195.27), were ineligible, as the auditors had concluded.

(iii) Staff of partner B:

The Commission received statements from an unidentified person with regard to three members of staff. While the Commission did not question the statements, it could not, on the basis of these documents, verify whether the relevant costs had in fact been incurred and considered, as had the auditors, that they were ineligible (EUR 25 560).

The Commission received statements from an unidentified person for the first period in relation to the work performed by another member of staff in the context of the same project. While the Commission did not question the statements, it could not, on the basis of these documents, verify whether the relevant costs had in fact been incurred and considered, as had the auditors, that they were ineligible (EUR 16 636.29).

(iv) Staff of partner C:

The Commission received statements signed by the Director-General of the project and by a chartered accountant. While the Commission did not question these statements, it could not, on the basis of these documents, verify whether the relevant costs had in fact been incurred and considered, as had the auditors, that part of the expenditure was ineligible (EUR 7 102.12).

(v) Staff of partner D:

The Commission received statements signed by an unidentified person. While the Commission did not question these statements, it could not, on the basis of these documents, verify whether the relevant costs had in fact been incurred and considered, as had the auditors, that part of the expenditure was ineligible (EUR 17 148).

(2) as regards overheads:

No document justifying overheads for each partner was presented during the audit. Subsequently, the complainant provided statements that he signed. These statements were rejected by the auditors because they considered that they were not adequate. The auditors noted, however, in their report that the proportion of overheads was reasonable. On 22 December 2004, statements signed by legal representative of each partner were provided. The Commission accepted all costs as eligible.

(3) as regards travel costs:

The complainant did not comment on these costs. The amount of ineligible costs (EUR 5 417.78) found by the auditors was inferior to that found by the Commission.

(4) as regards subcontracting costs:

All invoices relating to these costs were submitted to the auditors. However, the Handbook limits the variations by post to 15% or EUR 5000. The ineligible amount is EUR 13 000.

(5) as regards computer costs:

The invoices were not provided during the audit but subsequently. The dates on these invoices were outside the eligibility period and they could thus not be accepted (EUR 7 336.39).

The total amount of ineligible expenditure was EUR 52 864.19.

In its opinion, the Commission added that the documents sent by the complainant were not compliant with the Handbook. Paragraph 2 of Article II.3.2 of the Handbook states that "[l]es frais du personnel devront être calculés sur base du salaire journalier réel de l'employé/prestataire multiplié par le nombre de jours (temps plein comportant le nombre d'heures défini dans la législation nationale) effectivement consacrés au projet (...)". Paragraph 3 of the same Article makes a distinction between a person specifically hired for the project by an institution that is a member of the partnership and a person employed by a member of the partnership who devotes all or part of his/her time to the project. In the first case, a work agreement should be signed; in the second case, the person should make an official statement on a special document. For both documents, the following elements should be present:

• daily salary,
• working time on the project in days,
• detailed description of the work,
• dates when the convention started and ended,
• the amount paid,
• the signature of the employee, and
• the signature of the legal representative.

Article IV.2.2 of the Handbook states that "[o]utre les conventions et les déclarations de travail, telles que décrites au point II.3.2. du manuel, le contractant devra être à même de produire soit toutes les fiches de rémunération individuelles des personnes ayant travaillé dans le cadre du projet, soit une liste officielle émanant du département financier ou du service du personnel et reprenant l'ensemble des paiements effectués en faveur de ces personnes". In the present case, only certificates signed by the persons concerned or unidentified persons were provided instead of pay slips. Consequently, neither the auditors nor the Commission could verify whether the relevant costs had in fact been incurred. In particular, these documents did not include the breakdown of hours spent on the project or time sheets. This was mentioned in the audit report.

5.16 In its observations, the complainant indicated that a copy of the contract of one of its employees had been provided to the auditors by letter of 23 December 2003.

However, the Ombudsman notes that the auditors considered that this document was not compliant with the provisions of the Financial Agreement and the Handbook.

5.17 The Ombudsman takes the view that, on the basis of the information submitted to him in the context of the present inquiry and, in particular, in light of the relevant rules of the Financial Agreement and of the Handbook (see point 2 of the present decision), the pertinent findings of the audit report (see Section 4 and Annexes 1 and 2) and the elaborate explanations given by the Commission in its opinion, it has not been established that the Commission wrongly considered that the complainant had not made available to it appropriate supporting documents in relation to certain expenses declared by the complainant. The Ombudsman finds therefore no maladministration as regards this aspect of the complaint.

6 Alleged non-compliance with a reasonable time-limit

6.1 The complainant alleged that the Commission did not comply with Article 17 of the European Code of Good Administrative Behaviour, as the Financial Agreement was signed in 1995 and closed in 2005, seven years after the planned date (1997).

6.2 In its opinion, the Commission explained that the Financial Agreement started on 1 December 1995 and was meant to be in effect for two years. It should, therefore, have ended on 30 November 1997. According to the Financial Agreement, the interim report should have been submitted on 6 January 1997 and the final report on 5 January 1998. The Commission granted the complainant two extensions of the deadline to submit the final report. The Commission recalled that the interim report was received on 13 June 1997 with a five-month delay, the final report on 3 August 2000 with a 26-month delay. The Commission showed flexibility by accepting the final report on 3 August 2000, while it could have applied Article 5, which provides for the recovery of the amounts paid if the reports are not provided on time.

The Commission's decision to close the file was taken on 21 December 2001. The financial assessment was completed only after the complainant had provided the supporting documents requested by the Commission on 6 September 2000, 7 December 2000 and 28 February 2001.

Consequently, the Commission expressed its surprise at the complainant's statement that the Financial Agreement should have been closed in 1998, given that it was only in 2000 that it complied with its obligation to provide the final report.

The aim of the audit was to find a solution to the problems faced by both parties. The Commission argued that the complainant could not deny that, between the audit, the transmission of the audit report and the debit note of 20 June 2005, there were extensive exchanges of correspondence. Thus, the Commission never brought the dialogue with the complainant to an end. If the complainant had not challenged the Commission's position, the file would have been closed in 2001.

6.3 The Ombudsman notes that the complainant submitted the final report with considerable delay and that the Commission had to request further supporting documents which were not attached to the report. He further notes that, after assessment of the final report, the Commission reached a conclusion on 17 December 2001. It noted that the complainant failed to comply with the provisions of the Financial Agreement and the Administrative and Financial Handbook. It further explained that the Leonardo da Vinci subsidy had been recalculated and requested the reimbursement of part of this subsidy (that is, EUR 392). The Ombudsman observes that, on 16 January 2002, the complainant challenged the Commission's letter dated 17 December 2001.

The Ombudsman further notes that, by letter of 1 February 2002, the Commission replied to the complainant's objections, indicating that the complainant's file had been reviewed and proposing to pay the complainant EUR 13 335.90. On 14 and 19 February 2002, the complainant replied to the Commission, repeating his disagreement with the expenditure declared ineligible. By letter of 8 May 2002, the complainant reminded the Commission that it had not replied to its letters.

By letter of 6 June 2002, the Commission indicated that the complainant's objections had been examined and that it would pay the complainant EUR 17 453.90. It added that, if no reply were received from the complainant within 30 days, this would mean that the complainant agreed to this amount. On 5 July 2002, the complainant expressed his disagreement with the time-limit to reply and with the Commission's interpretation of some costs. By letter of 9 August 2002, after the Commission agreed to extend the deadline, the complainant explained in detail why it disagreed with the Commission's interpretation.

By letter of 16 September 2002, the Commission replied to the complainant, indicating that it would pay EUR 17 453.90 and asking to reply as quickly as possible to this letter. On 6 December 2002, the complainant asked for the confirmation of the amount to be paid by the Commission before taking a final decision.

By letter of 19 December 2002, the Commission informed the complainant that, on 28 October 2002, as no reply had been received, it had decided to launch an audit.

6.4 The Ombudsman notes that, according to Article 7.5 of the Financial Agreement, "Le contractant prendra toutes les dispositions nécessaires pour permettre les contrôles (dossiers, documents comptables et financiers) tant de la Commission que de la Cour des Comptes des Communautés européennes. Ces contrôles peuvent s'exercer sur place et consister en un examen de la comptabilité et des pièces justificatives relatives au projet faisant l'objet de la présente convention. A cet effet, les pièces en question seront conservées pendant 5 ans après le dernier paiement relatif au dit projet et la clôture de celui-ci".

6.5 The Ombudsman further notes that the audit took place on 18 December 2003 and that the complainant submitted additional documents on 23 December 2003 and 9 January 2004. The Commission informed the complainant of the audit findings by letter of 18 August 2004 and sent the complainant the audit report on 17 September 2004. By letters of 19 October 2004 and 22 December 2004, the complainant made objections to the audit report. The Commission replied to these objections by letters of 7 December 2004 and 3 March 2005. The Commission's letter of 3 March 2005 constitutes the definitive closure of the case.

6.6 In light of the above and, in particular, of the various issues in dispute and disagreements between the Commission and the complainant, both before and after the audit, the Ombudsman considers that there was no unjustified delay in the Commission's making a decision, on 3 March 2005, to close definitively the case and to request the reimbursement of EUR 52 864.19.

7 Claims

7.1 The complainant claims that the Commission's decision to recover EUR 52 864.19 should be annulled and that it should confirm its decision of 5 June 2002 to pay EUR 17 453.90 to the complainant. Finally, if the above-mentioned claim is not met, it claimed that a new audit should be carried out.

7.2 In view of the findings in points 3, 4 and 5 above, the Ombudsman considers that the complainant's claims cannot be sustained.

8 Conclusion

On the basis of the Ombudsman's inquiries into this complaint, there appears to have been no maladministration by the Commission. The Ombudsman therefore closes the case.

The President of the Commission will also be informed of this decision.

Yours sincerely,

 

P. Nikiforos DIAMANDOUROS

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(1) Article 41 of the European Charter of Fundamental Rights states that:

"1. Every person has the right to have his or her affairs handled impartially, fairly and within a reasonable time by the institutions and bodies of the Union.

2. This right includes:

• the right of every person to be heard, before any individual measure which would affect him or her adversely is taken;
• the right of every person to have access to his or her file, while respecting the legitimate interests of confidentiality and of professional and business secrecy;
• the obligation of the administration to give reasons for its decisions (...)".

(2) Article 10 of the European Code of Good Administrative Behaviour states that "[t]he official shall be consistent in his own administrative behaviour."

(3) According to Article 16 of the Code, "[i]n cases where the rights or interests of individuals are involved, the official shall ensure that, at every stage in the decision making procedure, the rights of defence are respected."

(4) According to Article 18 of the Code, "[e]very decision of the institution which may adversely affect the rights or interests of a private person shall state the grounds on which it is based by indicating clearly the relevant facts and the legal basis of the decision."

(5) According to Article 17 of the Code, "[t]he official shall ensure that a decision on every request or complaint to the Institution is taken within a reasonable time-limit".

(6) Article 1 of the Commission's Code states that "[t]he Commission shall be consistent in its administrative behaviour and shall follow its normal practice. Any exceptions to this principle must be duly justified."

(7) Article 3 states that "[w]here Community law provides that interested parties should be heard, staff shall ensure that an opportunity is given to them to make their views known."

(8) Article 3 further states that "[a] Commission decision should clearly state the reasons on which it is based and should be communicated to the persons and parties concerned.

As a general rule full justification for decisions should be given. However, where it may not be possible, for example because of the large number of persons concerned by similar decisions, to communicate in detail the grounds of individual decisions, standard replies may be given. These standard replies should include the principal reasons justifying the decision taken. Furthermore, an interested party who expressly requests a detailed justification shall be provided with it."

(9) Article 4 states that "[ t]he Commission is committed to answering enquiries in the most appropriate manner and as quickly as possible."

(10) As stated by the Commission, this Handbook was sent to the complainant on 11 December 1996. The Commission made numerous references to this document in its letters (notably 7 December 2000, 17 December 2001, 6 June 2002, 16 September 2002, 18 August 2004, and 7 December 2004). On the basis of the information provided to the Ombudsman in the context of the present inquiry, it seems that at no time during the execution of the contract or, subsequently, during his extensive correspondence with the Commission until the end of 2004 did the complainant indicate that it had not received this document as provided for in the Agreement. This document was essential for the proper execution of the Agreement.

(11) A "full-time" day means the number of hours defined as such in the national legislation.

(12) See Case T-203/97 Forvass v Commission [1999] ECR-SC I-A-129 and II-705, paragraph 70; Case T-199/01 G v Commission [2002] ECR-SC I-A-217 and II-1085, paragraph 38; Case T-347/03 Branco v Commission, judgment of 30 June 2005, not yet reported, paragraph 102.

(13) See, e.g., Case T-11/03 Afari v European Central Bank [2004] ECR-SC I-A-43 and II-164, paragraph 49.

(14) See Case C-315/99 P Ismeri Europa v Court of Auditors [2001] ECR I-5281, paragraph 28.

(15) Article 18 of the European Code of Good Administrative Behaviour states the following:

"1. Every decision of the Institution which may adversely affect the right or interests of a private person shall state the grounds on which it is based by indicating clearly the relevant facts and the legal basis of the decision.

2. The official shall avoid making decisions which are based on brief or vague grounds or which do not contain individual reasoning".

(16) The relevant information is contained in part III, section 1 ("Background Information"), subsection 1.1 ("Legal status and characteristics of the organisation") of the audit report. This subsection simply gives general information about the complainant (more specifically, date of incorporation, legal form, seat, main object, number of employees, name of its director and managers, entrustment of its accounting to a third party) and does not contain any references to the auditor's findings regarding the eligibility of expenses made during the implementation of the Financial Agreement between the Commission and the complainant.

(17) See note 16 above.