Background to the complaint

1. The complainant is a Greek company that participated in, and coordinated, a project under the Lifelong Learning Programme (the 'LLP')[1], which was the responsibility of the Education, Audiovisual and Culture Executive Agency (EACEA).

2. In its application for the project, the complainant estimated that its role in the project required 200 working days. It declared that its staff earned EUR 100-200 per day, depending on the category of the staff member. As a result, the complainant estimated that it should receive EUR 35 200 for its work on the project.

3. In February 2016,  the complainant declared in its final report that its staff worked 1350 days on the project at a rate of EUR 26.86 for all staff members, and claimed a total of approximately EUR 36 200. 

4. The EACEA noticed some errors in how the complainant had calculated the number of days worked on the project, as well as the daily rate, and asked the complainant to revise its calculations. In March 2016, the complainant submitted a revised report in which it declared that its staff worked 280.63 days at a rate of EUR 107.52 to EUR 214.20[2].

5. On 5 May 2016, the EACEA accepted the complainant’s recalculation of the days worked. It noted, however, that there were still problems with how the staff costs had been calculated, as the rates did not seem to reflect the staff contracts. After several exchanges, the EACEA stated that by applying the usual policy for remuneration of staff costs[3], the complainant’s staff rate was EUR 57.36 per day for all staff categories. The complainant agreed with the EACEA on the daily rate; however, on the basis of this new rate, it recalculated the number of days it claimed its staff had worked, increasing this to 632.21 days.

6. On 29 June 2016, the EACEA approved the final report, which stated that the complainant had worked 280.63 days at a daily rate of EUR 57.36.

7. On 8 July 2016, the complainant requested that the EACEA review its decision. In particular, it challenged how the EACEA had calculated the working days to be reimbursed.

8. On 12 August 2016, the EACEA replied to the request for review and indicated that it would recognise a total of 340 working days for reimbursement, increasing the number of working days by 60.

9. Dissatisfied with this outcome, the complainant turned to the Ombudsman.  

The inquiry

10. The Ombudsman opened an inquiry into the complainant’s concerns that:

1) The EACEA wrongly calculated the final payment to the complainant, notably as regards the working days to be reimbursed.

2) The complaint’s request for a review of the final payment decision was not dealt with properly by the EACEA.

11. In the course of the inquiry, the Ombudsman asked the EACEA to explain a number of things in relation to the second aspect of the complaint. She subsequently received comments from the complainant in response to the EACEA’s reply. The Ombudsman's decision takes into account the arguments and views put forward by the parties.

Calculation of the final payment

Arguments presented to the Ombudsman

12. The complainant argued that the EACEA had arbitrarily selected a number of working days that it considered eligible for reimbursement. It considered that there was “no legal basis to select the number of working days declared in one previous, rejected calculation in order to combine it with the daily rate from another calculation”. It noted that, by doing so, the EACEA had reduced by 55% the amount of funding that would be received by the complainant for staff costs. This was despite the fact that the EACEA had considered that the project was successfully carried out.

13. The complainant also argued that the EACEA had not taken into account evidence that it had worked on the project more days than initially foreseen in its application. The EACEA had indicated that its assessment was consistent with a guidance rule that the final declaration of costs for EU-funded projects should not differ significantly from the estimate made in the application. However, the complainant argued that, as this ‘rule’ was not mentioned in the project contract, nor in the ‘Project Handbook’[4] available at the time the contract was signed, it should not apply to this case.

14. In the reply to the complainant’s request for review, the EACEA noted that the final calculation of the working days was based on “the sole duly signed and official (with letterhead) document received”. The EACEA added that, through its correspondence with the complainant, it had sought to clarify the situation and help the complainant to submit an acceptable declaration of staff costs, so that the EACEA could ultimately pay these costs.

15. Regarding the days worked, the EACEA stated that the payment of a grant is based on costs actually incurred[5], and not on the estimated budget. The EACEA pointed out that it had already agreed to increase by 40% the working days it would consider as eligible for funding, compared to the initial number the complainant had estimated. This was done to compensate the complainant for the additional work it claimed to have carried out.

16. In particular, the EACEA acknowledged that, as the project coordinator, the complainant had to make additional efforts at the beginning of the project to handle a problem with the bank guarantee and to include an additional partner. For that reason, the EACEA had agreed to add 60 working days to the total number of days which would be eligible for reimbursement. However, the EACEA stated that it would not be reasonable to consider further increasing the number of working days, based on the project’s results. The complainant had received a lower amount of funding than it had been anticipating because it had considerably overestimated its staff costs in its application, and not because of a miscalculation by the EACEA.

The Ombudsman's assessment

17. The following table summarises the different amounts of working days and rates declared by the complainant and calculated by the EACEA at different stages.

	WORKING DAYS	DAILY RATE	APROX. TOTAL
Application form 2013	200	Category 2 €200 Cat. 3. €120 Cat. 4. €100	€35 200
Final report February 2016	1350	€26.86	€36 261
Complainant’s recalculation 24 March 2016	280.63	€107.52 -€214.20	€36 231[6]
Complainant’s recalculation 30 May 2016	632.21	€57.36	€36 263
EACEA decision on Final Report 29 June 2016	280.63	€57.36	€16 096
EACEA decision after review 12 August 2016	340.63	€57.36	€19 538

18. This table shows that the complainant had estimated that it would receive approximately EUR 36 200 for the work it carried out. It recalculated the days and rates on two occasions but the overall amount it was claiming remained roughly the same.

19. The Ombudsman notes that the final declaration of how much the recipient of a grant (the so-called ‘beneficiary’ in a project) has worked is not meant to be a matter for negotiation based on a variable rate, but an “identifiable and verifiable” fact, as provided for in the ‘grant agreement’ applying to the project. Moreover, the costs must be “reasonable, justified, and comply with the principle of sound financial management”.[7]

20. Thus, if the recipient ends up working less than initially foreseen, or is unable to provide proof for some of the time it claims to have worked, it will receive less money at the end of the project. Conversely, if project beneficiaries can prove that they worked more than initially foreseen for justified reasons, they will be paid accordingly.

21. In this case, the complainant did prove that it needed to work more than it had initially foreseen, and the EACEA acknowledged this. In fact, following the request for review, the EACEA increased by 70% the amount of working days it recognised as eligible for reimbursement (140.63 extra days).

22. Despite this increase, the complainant argues that the EACEA was wrong to reduce the overall amount it had expected to be reimbursed for staff costs. This appears to be based on a misunderstanding by the complainant in considering its overall estimate for staff costs in its application to represent the actual staff costs. The EACEA is, however, obliged to reimburse only those staff costs that are based on verifiable days worked at the applicable rates.

23. The complainant has acknowledged that, in its initial application, it had calculated the estimated daily rate based on its staff members’ salaries, plus the income its staff members received from their shares in the company. The complainant considered that this methodology better reflected the value of the staff’s work and qualifications. In the request for review, however, the complainant recognised that the EACEA’s calculation was correct, stating that “our salary's daily rate was correctly calculated to be 57.36 euros”.

24. In its complaint to the Ombudsman, the complainant does not challenge this calculation of the daily rate, but focuses on the number of working days accepted by the EACEA. However, for the sake of completeness, the Ombudsman has verified the daily rate and can confirm that the calculation appears to be correct and in line with the applicable rules. In particular, the grant agreement of the project clearly states that return(s) on capital shall not be considered eligible costs[8]. Similarly, the Project Handbook explains that profit-sharing schemes are to be excluded from the calculation of staff costs[9]. As such, the income from shares should not have been considered by the complainant in calculating its staff costs.

25. Therefore, it seems that, at the outset, the complainant miscalculated how much money it could claim for its staff costs, and has taken this calculation as a reference for the overall amount of funding it should receive for staff costs. Had the complainant calculated its estimated staff costs on the correct basis from the outset, it would have expected to receive approximately EUR 11 500, based on the working time it estimated for the project. This would have been much lower that the final amount it received (EUR 19 500).

26. The complainant’s claim that the EACEA wrongly rejected the working days which exceeded the initial estimation in its application is unfounded. The EACEA took into account the evidence provided by the complainant and, following the review, agreed to recognise 140 additional working days as eligible for reimbursement. The complainant has not provided any evidence to show that the EACEA refused to consider any actual working time spent by its staff on the project as eligible for reimbursement. What the complainant appears to argue is that the EACEA should have recognised a sufficient amount of working days to ensure the complainant received funding for the overall amount of staff costs it had initially estimated in its application. However, as explained in point 19, such an approach would not be in line with the applicable rules.

27. Thus, the Ombudsman concludes that there was no maladministration by the EACEA as regards this matter.

Request for review of the final payment decision

28. In its complaint to the Ombudsman, the complainant was also concerned that its ”appeal” (or review) had been dealt with by the same team that had been responsible for the payment decision it was contesting. Although this was not the main issue of the complaint, the Ombudsman decided to clarify this matter with the EACEA.

Arguments presented to the Ombudsman

29. In its reply to the Ombudsman’s request for clarifications, the EACEA explained that the review procedure is used for decisions on the ‘final grant amount’, as well as for decisions on the selection of the beneficiaries for EU-funded projects[10].

30. Under the review procedure, requests for review should be addressed to the ‘head of the unit’ in charge of the ’grant agreement’ for the project. Project beneficiaries are informed of this procedure in the letter notifying them of the final grant amount. The project officer managing the grant agreement then deals with this request, together with a ‘financial officer’. They make a proposal on whether to reject the request or to modify the amount of the final grant. This proposal is then reviewed by a so-called ‘operational verifying agent’ and a ‘financial verifying agent’, who can decide either to confirm or to amend the proposal. The final proposal is then checked, adopted and signed by the head of unit in his/her capacity as ‘authorising officer’, that is the person legally authorised to take decisions relating to the grant agreement.

31. The EACEA stated that the team involved in the original analysis of a grant project is the one best placed to take a timely and qualified decision concerning the request for review. It also said that the head of unit remains the authorising officer responsible for the grant agreement.

32. The EACEA confirmed that this internal review procedure was the one followed in this case.

The Ombudsman's assessment

33. In this case, the Ombudsman sought to verify that the EACEA followed the established internal procedure. Based on the explanation received from the EACEA and the documents provided by the complainant, it appears that the correct procedure was followed.

34. However, the complainant expressed concerns that the review was carried out by the same team, whereas the EACEA considered that the team involved in the original analysis was the best placed to take a timely decision on the request for review. The Ombudsman notes that although in certain cases it may be useful that persons not involved in the original decision could be involved in the review process, this does not mean that a review process carried out by the same team is as such tainted by irregularity. In fact, in this case the complainant’s request resulted in the EACEA reviewing its decision and recognising additional working days as eligible for reimbursement. In the absence of any concrete argument that would have cast doubt on the impartial character of the review carried out by the EACEA, the Ombudsman finds no maladministration as regards this aspect of the complaint.

 

Conclusion

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

There was no maladministration by the Education, Audiovisual and Culture Executive Agency.

The complainant and the Education, Audiovisual and Culture Executive Agency will be informed of this decision.

 

Emily O'Reilly

European Ombudsman

Strasbourg, 29/10/2018

 

[1] More information is available on: http://ec.europa.eu/education/lifelong-learning-programme_en.

[2] The complainant later explained “we had estimated the daily value of our work based on our salary plus the compensation we receive from our company's shares.”

[3] Daily rate = Gross actual salaries plus social security charges + statutory costs

Total workable days

[4] The Project Handbook 2013 provided the guidelines for administrative and financial management and reporting for this project.

[5] Art. I.3.a., II. I 9. I and 11.20. I of the Grant Agreement.

[6] This calculation is an estimate as the Ombudsman does not have the exact details of the staff costs declared per category, but a general reference to them in an email exchange.

[7] Article II. 19. of the Grant Agreement.

[8] Article II. 19.4 of the Grant Agreement.

[9] Article 2.2 of the Project Handbook.

[10] This practice was established following the recommendation of the European Ombudsman to the Executive Agency for Competitiveness and Innovation (EACI) in own-initiative inquiry OI/8/2013/OV, which is available at: https://www.ombudsman.europa.eu/en/cases/recommendation.faces/en/58120/html.bookmark