THE BACKGROUND TO THE COMPLAINT

1. The complainant is a German guild of automobile experts. The guild participated as beneficiary in a project ('the project') which formed part of the Leonardo da Vinci-programme. This programme is funded by the Commission and concerns vocational training. On 30 August 2001, the guild submitted its final project report.

2. In September 2007, the complainant received a telephone call from a London-based audit firm. It explained that it had been contracted by the Commission to conduct a financial audit at the complainant's premises between 18 and 21 September 2007. The Commission did not inform the complainant of its intention to carry out an audit until after this telephone call, namely, on 13 September 2007.

3. On 14 September 2007, the complainant sent two letters to the Commission stating that, in its view, the deadline for an audit of the project had lapsed, given that the grant agreement had expired more than six years previously. It asked the Commission to review its decision.

4. By letter of 26 September 2007, the Commission insisted that it was legally entitled to carry out an audit. It explained that, pursuant to the grant agreement, audits could be carried out within a period of five years from the end of the contract, that is to say, within five years of the final payment or repayment date. Given that the Commission received the final repayment on 27 March 2006, an audit could be carried out at any time up until 26 March 2011.

THE SUBJECT MATTER OF THE INQUIRY

5. The complainant explained to the Ombudsman that it did not understand why it received an audit order relating to a project which had been completed a long time ago, and in relation to which the Commission had ceased to accept complaints as far back as 2005. It presented the following allegations and claim:

Allegations

1. The Commission's decision to order a financial audit at the complainant's premises more than six years after the final project report has been submitted (i) is not in conformity with the relevant contract and (ii) infringes the complainant's legitimate expectations.
2. The modalities of ordering the financial audit were not in conformity with the relevant contract. In particular, a telephone call by the audit company contracted by the Commission had preceded the complainant's receipt of the Commission's actual audit order.
3. No reasons were given for the need for an audit.
4. (i) The short time period given for preparation; (ii) the duration of the audit of four days; and (iii) the requirement to present originals instead of copies are disproportionate.

Claim

The complainant claimed that the Commission should revoke its order.

6. After examining the submissions made by the Commission and the complainant, (see paragraphs 7-8 below), the Ombudsman considered that the Commission had still not addressed a number of issues concerning the preparation, ordering and performance of the audit. He considered it necessary, therefore, to reword the complainant's second allegation as follows:

2 . The modalities of preparing, ordering and performing the audit were not in conformity with principles of good administration and the relevant contract.

THE INQUIRY

7. The complaint was lodged on 1 November 2007. On 5 December 2007, the Ombudsman asked the President of the Commission for an opinion. On 24 April 2008, the Commission sent its opinion. The opinion was forwarded to the complainant with an invitation to make observations. The complainant sent its observations on 2 June 2008.

8. In light of the Commission's opinion and the complainant's observations, further inquiries proved necessary. On 29 October 2008, the Ombudsman thus requested further information from the Commission. The Commission's reply was received on 4 February 2009. It was forwarded to the complainant for possible observations, which were sent on 24 February 2009.

9. On 9 July 2009, the Ombudsman asked the Commission to comment on the complainant's reworded second allegation (see paragraph 6 above) in light of specific issues he had identified. The Commission sent its reply on 19 October 2009. The reply was forwarded to the complainant for possible observations, which were sent to the Ombudsman on 3 November 2009.

THE OMBUDSMAN'S ANALYSIS AND CONCLUSIONS

Preliminary remarks

10. Commenting on the reworded second allegation, the Commission expressed the view that there had been no need for rewording. It also commented on all the aspects highlighted by the Ombudsman in this respect (see paragraphs 30-35 below). Apart from underlining that it is he alone who, in line with the applicable legal framework, determines the course of his inquiries, the Ombudsman, therefore, sees no need to further address the Commission's view that there was no need for rewording.

11. In its opinion, the Commission stated that it received the audit report on 27 February 2008. In its reply to the Ombudsman's request for further information, however, it stated that it received the audit report on 17 August 2009. In its observations, the complainant criticised this discrepancy. The Ombudsman notes that the Commission indicated that the preliminary audit report was received on 27 February 2008, and the final audit report on 17 August 2009. There is, therefore, no need for him to investigate this aspect any further.

12. To avoid any misunderstanding, it is important to underline that the present inquiry concerns only the legality and the modalities of the audit. It does not, therefore, extend to the Commission's follow-up, if any, of the audit findings. Given the factual connection between the first, second and fourth allegations, it would appear sensible to consider them together.

A. As regards the legality of the audit order and the modalities of the audit (the complainant's first, second and fourth allegations)

13. The complainant alleged that the Commission's decision to order a financial audit at the complainant's premises more than six years after the final project report had been submitted (i) was not in conformity with the relevant contract and (ii) violated the complainant's legitimate expectations. It also alleged that the modalities of preparing, ordering and performing the audit did not conform to the principles of good administration and the relevant contract. The complainant, moreover, alleged that (i) the short period of time allowed for preparation; (ii) the four day duration of the audit; and (iii) the requirement to present originals instead of copies, were disproportionate.

14. In its opinion, the Commission explained that the Court of Auditors of the German state (Land) of Schleswig-Holstein had carried out an audit of one of the project partners and, following that audit, it had contacted the European Court of Auditors ('ECA'). On 10 December 2004, the ECA, in turn, had recommended that the Commission should (i) recover certain unduly paid funds and (ii) start verification procedures with regard to the projects in which the said partner had participated. In accordance with the second recommendation, the Commission decided to have a complete audit of the project carried out and the complainant was informed accordingly on 13 September 2007.

15. Furthermore, the Commission pointed out that, pursuant to Article 3.5 of the third part of annex III to the grant agreement, the beneficiary is obliged to keep all documents relating to the grant agreement for a period of five years following the last payment, or the end of the project. Given that the last payment was made on 20 November 2002, the Commission was of the opinion that an audit could be carried out up until 19 November 2007. The Commission also invoked Article 13.2 of part B of annex II to the grant agreement, which foresees that the way in which funds are spent may be controlled for the duration of the agreement as well as for a period of five years after the end of the agreement. The Commission explained that the audit was originally envisaged for October 2007. However, with the complainant's agreement, it was postponed until 26 November 2007. The Commission stated that it seemed contradictory that the complainant objected to the recovery of certain funds unduly received, but did not oppose having the audit carried out on the agreed date, nor the audit itself.

16. The Commission, moreover, stated that it instructed Moore Stephens LLP to carry out the audit. Standard procedure requires the Commission to contact beneficiaries before auditors do so themselves. The Commission conceded that, in this case, the audit firm contacted the beneficiary on 5 September 2007, whereas it did not send the announcement of the audit to the complainant until 8 days later, namely, on 13 September 2007. The Commission expressed its regret for this delay.

17. The Commission also submitted that no specific deadline was set by which the audit had to be carried out after its announcement. However, generally speaking, according to the Commission's current practice, an audit is actually carried out one month after it is announced. This is to allow the beneficiary sufficient time in which to prepare information which it might be asked to provide. Given that the audit was announced on 13 September 2007, and the visit on the complainant's premises took place on 26 November, the Commission considered that the complainant benefited from a total of two months and 21 days in which to prepare for the audit.

18. As regards the duration of the audit, the Commission confirmed that it lasted for four days. It explained that each audit starts with an information meeting and closes with a final meeting. In the course of the latter, findings are explained. The Commission stated that the duration of the audit in question corresponded to the average duration of an audit mission of average complexity.

19. With regard to the requirement to present original documents, the Commission explained that the International Federation of Accountants' recognised international standards require presentation of original documents for the justification of expenses incurred. For this reason, originals had been required with regard to the audit in question.

20. In its observations, the complainant submitted that it failed to understand why, after being recommended to do so by the ECA, it took the Commission three years to decide to order an audit, just two months before the deadline for performing audits was due to expire. The complainant also pointed out that it had repeatedly opposed the audit in its correspondence with the Commission, as was clearly apparent from its letters of 14 September and 5 October 2007, and from the fact that it had complained to the Ombudsman. The complainant stated that the reason the audit took place on 26 November 2007 was because the person in charge at the complainant's office was on annual leave from 4 October to 2 November 2007. The audit firm contracted by the Commission originally announced that the audit was to take place between 18 September and 21 September 2007. This would have been only two working days after the complainant received the Commission's relevant announcement. Moreover, in its correspondence with the complainant, the audit firm gave the impression that it would be virtually impossible to postpone the date of the audit.

21. The complainant furthermore drew attention to a note for the file dated 18 July 2005, which the Commission enclosed with its opinion. In this note, the Commission recommended that the project should be brought to an end, with the complainant's project partner repaying unduly received funds. The complainant also stated that the Commission did not comment on what the complainant perceived to be an inconsistency, namely, that the Commission waited until 2007 before ordering an audit when, as early as 2005, it had ceased to accept project-related complaints from the beneficiary or its partners.

22. The complainant also stated that, in addition to its letters of 14 September 2007 (see paragraph 3 above), it sent a further letter to the Commission on 5 October 2007 in which it requested the Commission to re-examine and/or explain the audit order. It pointed out that its letter of 5 October 2007 remained unanswered.

23. The complainant furthermore noted that, in its letter of 26 September 2007, the Commission stated that an audit of the project could be carried out up until 26 March 2011. In the complainant's view, this was inconsistent with the position the Commission took in its opinion, where it stated that an audit could be carried out up until 19 November 2007.

24. The complainant also pointed out that it had not been provided with a German translation of the preliminary audit report.

25. In his request for additional information, the Ombudsman asked the Commission to explain why it had taken more than two years to act on the ECA's recommendation to order an audit. In its reply, the Commission stated that, apart from the internal organisation of its work relating to the auditing of projects, it could give no particular reasons for this delay. As regards the said failure to provide a German translation of the preliminary audit report, the Commission stated that external audits are performed by audit companies and, in the present case, the audit company concerned was Moore Stephens LLP. The relevant contract with the audit company did not provide for a German translation of the audit report, which was to be drafted in English. The audit company informed the complainant accordingly.

26. In its observations, the complainant took the view that the Commission's reply to the Ombudsman's request for additional information was not satisfactory. It also pointed out that the grant agreement did not provide that a British audit company should be charged with the performance of external audits. It submitted that all project-related correspondence with the Commission had been conducted in German. According to the complainant, it was the Commission's responsibility to provide it with a German translation of the preliminary audit report. As a regional organisation, it did not have a sufficient knowledge of foreign languages and, as a result, it could not understand many of the technical terms used in the audit report.

27. The complainant also submitted that, more than one year had elapsed since the audit, and it had still not heard anything from the Commission regarding this matter. It stated that, in light of this experience, it would certainly refrain from participating in any future EU projects.

28. In his additional request for further information, the Ombudsman considered that the Commission had not yet addressed a number of issues relating to the preparation, ordering and performance of the audit. The Ombudsman noted that the following six issues were of particular concern:

(a) It appeared that the Commission did not ensure that the auditors it contracted were able to communicate sufficiently with the complainant in the German language.

(b) In its opinion, the Commission stated that (i) it informed the complainant of its decision to conduct an audit on 13 September 2007, and (ii) the audit was due to commence in October 2007. According to the complainant, however, the auditors informed it on 11 September 2007 that the audit would start on 18 September 2007.

(c) In 2004, the Commission was informed of irregularities concerning the complainant's project partner. In 2005, the Commission decided to end the project, with unduly paid funds being repaid by the complainant's project partner. It then took the Commission more than two years to revisit the case. However, in its reply to the Ombudsman's request for further information, the Commission was unable to submit any plausible reason for this delay.

(d) In its letter to the complainant dated 26 September 2007, the Commission stated that, in its view, audits may be performed until 26 March 2011. In its opinion, however, the Commission indicated 19 November 2007 as the relevant deadline. There appears, therefore, to be a possibility that the Commission is contemplating carrying out further audits in relation to the project.

(e) The Commission does not appear to have replied to the complainant's letter of 5 October 2007.

(f) The auditor apparently refused to provide the complainant with a German version of the audit report. However, it is not clear what could have entitled the Commission to require the complainant to undergo the audit in the English language.

29. The Ombudsman asked the Commission to comment on the complainant's second allegation, as reworded, in light of these six issues. Moreover, he asked the Commission to inform him of the current state of affairs regarding the audit.

30. In relation to (a), the Commission referred to the relevant terms of reference ('the Framework Contract') and the audit contract with Moore Stephens LLP concerning the project. It took the view that every effort had been made to ensure that the auditors were able to communicate with the complainant sufficiently in the German language, and that the auditors complied with their contractual obligations.

31. Concerning (b), the Commission pointed out that, in its letter of 13 September 2007, it stated that the audit was to take place within two months of the date of that letter and, therefore, by 13 November 2007, at the latest. On 5 September 2007, the auditors informed the complainant that it should have received a letter from the Commission. This was not the case. The letter from the audit company also stated that an auditor "would be able to come to your offices from the 18 to 21 September 2007 to perform the mentioned audit". Following an e-mail from the complainant, the audit company confirmed that the audit would start on 26 November 2007. The Commission pointed out that, in its opinion, it had expressed its regret for not sending the complainant the official note to which the audit company referred in its letter of 5 September 2007. It also explained that procedures had since been changed to ensure that auditors would not contact beneficiaries before the Commission's audit order had been sent out. The Commission, moreover, submitted that the complainant had agreed to the audit visit following "a perfectly normal exchange of information".

32. As regards (c), the Commission acknowledged that it could have reacted to the ECA's recommendation in a more timely fashion. As previously stated, it could give no specific reason, other than reasons of an internal organisational nature, for its delay of more than two years before launching the audit. Even though it might have reacted sooner to the ECA's recommendation, the Commission underlined that the decision to audit a project was its sole responsibility, and the only time limits with which it had to comply were those set by the grant agreement. The Commission reiterated that it had fully respected the relevant time limits. In addition, it submitted that the complainant, by signing the grant agreement, agreed that the Commission has the right to launch an audit at any time within the terms of the contract.

33. In relation to (d), the Commission stated that it wished to retract its note in which it stated that project-related audits may be performed until 26 March 2011, and it stated that it regretted "this course of events". It pointed out that, pursuant to the applicable contract, a payment or recovery order launched as a result of an audit does not cause a further period of five years to start to run. The Commission could not, therefore, launch a further audit in relation to the project.

34. As far as (e) is concerned, the Commission acknowledged and regretted the fact that it had failed to reply to the complainant's letter of 5 October 2007. It stated that its failure to reply could be explained partially by the fact that there had already been an exchange of correspondence during the second half of September 2007, and that e-mails and notes might possibly have crossed each other. It added that procedures have been reviewed to ensure that letters are properly registered and handled. While the Commission acknowledged its mistake, as well as the fact that it might have given rise to confusion on the complainant's part, it also pointed out that this issue was not linked to the audit as such.

35. Commenting on (f), the Commission submitted that every effort had been made to communicate with the complainant in the German language, in line with the relevant provisions of the audit contract. There were no grounds to assume that the complainant was unable to understand the preliminary audit findings, which were not contested by the latter.

36. The Commission finally explained that the complainant validated the audit findings. On 15 July 2009, the Commission's services proceeded to the internal validation of the audit findings. On 17 August 2009, the auditors sent the final audit report. The Commission indicated that it might implement the auditor's recommendations, which could lead to it seeking a recovery of funds.

37. In its observations, the complainant took the view that the Commission's replies to the Ombudsman's questions were not satisfactory. In relation to (f), it maintained that, to date, it had not received a copy of the audit report in the German language. The complainant submitted that it was incorrect to state that it had not contested the preliminary audit findings, given that it did not know what they were. The complainant also denied validating the audit findings. It stated that it had not heard from the Commission since the audit was carried out in November 2007, and it was, therefore, unaware of the measures the Commission intended to take on the basis of the audit report.

38. The complainant also considered the Commission's behaviour to be contradictory. On the one hand, it referred to an exchange of information between the complainant and the auditors to explain why it considered that the Commission itself did not have to take a position. On the other hand, it did not take the complainant's correspondence with the auditors into consideration. The complainant submitted that it would not accept a recovery of funds.

The Ombudsman's assessment

39. The Ombudsman will first examine whether the Commission was legally entitled to order an audit in view of (i) the grant agreement and (ii) the complainant's legitimate expectations. He will then examine the modalities of the audit, which extend to its preparation, ordering and performance, in light of the applicable contractual rules, as well as principles of good administration.

As regards the legality of the audit order

40. In its letter of 26 September 2007, the Commission justified carrying out the audit by referring to Article 13.2 of part B of annex II to the grant agreement. In its opinion, it also referred to Article 3.5 of the third part of annex III to the grant agreement. It therefore needs to be ascertained whether auditing the project was in conformity with these provisions.

41. Article 13.2 reads as follows:

"The contractor declares to agree to the fact that the Commission and the Court of Auditors of the European Union may control the actual spending of the funding pursuant to the Financial Regulation of 21 December 1977 on the general budget of the European Communities, as amended, for the entire duration of the contract as well as for a period of 5 years after the expiration of the contract."[1]

The parties do not dispute that the grant agreement has expired. The issue remains, however, as to whether the audit was carried out within the five year time limit after its expiry, as stipulated in Article 13.2. In order to determine whether this was the case, the Ombudsman, therefore, needs to ascertain the meaning of the notion of "expiration of the contract".

42. In its correspondence with the Commission, the complainant took the view that 31 July 2001, the date of expiry of the grant agreement, was to be taken as the expiration of the contract. Thus, in its view, an audit of the project in the autumn of 2007 was outside the time limit of five years. Contrary to this, the Commission considered that the expiration of the contract was to be understood as the date of the "final payment or repayment"[2]. Noting that the last repayment was received on 27 March 2006, the Commission stated that the project could be subjected to an audit until 26 March 2011. The Commission, in the course of the inquiry, explicitly retracted the latter statement. It explained that the beneficiary is under an obligation to keep all project-related documents for a period of five years after the final payment in the framework of the project and the end of the project[3]. A payment or recovery order, however, which results from an audit does not cause a new five year time limit to start to run. It therefore stated that it could not launch a further audit in relation to the project.

43. The Commission stated that the last payment in connection with the project was made on 20 November 2002. The complainant does not contest this. The Ombudsman notes that Article 3.5, in order to allow for inspections, requires relevant documents to be kept for five years after the end of the project and the final payment in the framework of the project. In view of the fact that these two dates do not normally coincide, the Ombudsman considers that, for the purposes of Article 13.2, the end of the time period must be calculated on the basis of whichever of the two dates is the later. In the present case, the final payment was made after the contract expired. It follows that the contract expiry date cannot be the decisive date. Article 3.5, therefore, clearly supports the Commission's view that, in September 2007, the time period of five years, foreseen in Article 13.2, had not yet expired in view of when the last payment was made in the framework of the project.

44. The Ombudsman notes that the audit commenced on 26 November 2007, which was, therefore, after the relevant contractual deadline had expired. This point was not, however, raised by the complainant during the inquiry. The Ombudsman therefore takes the view that, for the purposes of deciding whether ordering an audit was in conformity with the grant agreement, the date of launching the audit is decisive. In view of the above, he concludes that the launching of the audit in September 2007 was in conformity with the relevant provisions of the grant agreement.

45. Turning to the second aspect of the complainant's first allegation, namely, the alleged infringement of the complainant's legitimate expectations, it needs to be borne in mind that principles of good administration require the Commission to respect the legitimate expectations of citizens.[4] The principle of the protection of legitimate expectations is one of the fundamental principles of the Union[5]. The Ombudsman points out that, according to the established case-law of the Union Courts, three cumulative 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 be given to the person concerned by the Union 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[6]. The Ombudsman therefore has to determine whether the Commission gave precise assurances to the complainant which gave rise to the justified hope that it would not launch an audit of the project, even though, on the basis of the grant agreement, it was still entitled to do so.

46. The Ombudsman notes the complainant's observation that it failed to understand why the Commission waited three years, after receiving the ECA'S recommendation, before deciding to order an audit, by which time only two months were left before the deadline expired. However, he finds nothing to indicate that the Commission gave the complainant any precise, unconditional and consistent assurances, in light of the ECA's recommendation or otherwise, which could have given rise to a legitimate expectation on the complainant's part that the Commission would refrain from launching an audit within the period stipulated by the grant agreement.

47. In view of the above, the Ombudsman does not, therefore, find anything to indicate that the complainant's legitimate expectations, in a legal sense, could have been infringed.

48. At the same time, he is mindful of the fact that this aspect of the complainant's first allegation could also be understood as relating to an overall expectation that the Commission will act fairly and reasonably. Given that the complainant's second and fourth allegations, among other things, extend to the modalities of preparing, ordering and performing of the audit and their conformity with principles of good administration, it appears useful to address this issue in the context of the complainant's second and fourth allegations.

As regards the modalities of the audit

49. The Ombudsman notes that the complainant's second and fourth allegations cover a range of issues. As has become apparent in the course of the inquiry, these issues are:

• the timing of the Commission's follow-up to the ECA's recommendation;
• the modalities of informing the complainant of the audit and the time given to the complainant to prepare for the audit;
• the alleged failure to reply to the complainant's letter of 5 October 2007;
• the use of the German language during the audit and in the audit report;
• the duration of the audit;
• the requirement to present originals in the course of the audit.

The Ombudsman considers that these issues should be addressed in turn.

50. As regards the timing of the Commission's follow-up to the ECA's recommendation, the parties agree that more than two years elapsed after the recommendation before the Commission launched an audit.

51. The Commission took the view that the decision to launch an audit is its sole responsibility and that its only obligation is to comply with the contractual time limits. The Ombudsman, therefore, has to address the question as to whether he can assess the timing of the Commission's follow-up, which, as noted above, was in conformity with the relevant provisions of the grant agreement.

52. The Ombudsman recalls that a measure adopted by a Union institution, even if it does not infringe any relevant rule of law, can still constitute an instance of maladministration if it is not in accordance with a principle that is binding upon the institution[7].The same must be true of an omission to take a measure which should have been taken. This is a consequence of the definition of the notion of 'maladministration' that has been adopted by the Ombudsman and approved by the European Parliament. According to this definition, "maladministration occurs when a public body fails to act in accordance with a rule or principle which is binding upon it". Thus, the fact that the Commission complied with the relevant contractual deadline alone cannot exclude a finding of maladministration by the Ombudsman. It follows that the Ombudsman can assess whether the fact that it took the Commission more than two years to revisit the case is compatible with principles of good administration.

53. Principles of good administration require Union institutions to take action within a reasonable period of time if, following the emergence of new evidence, they take the view that such action is needed. The Ombudsman agrees that the fact that an institution faces a heavy workload may be relevant when deciding what constitutes a reasonable period of time. However, he considers that specific and precise reasons must, in any event, be given to explain the length of time taken by the institution.

54. In the present case, two years and more than nine months elapsed before the Commission informed the complainant of its follow-up to the ECA's recommendation. This is a considerable period of time, particularly if one considers that all the Commission needed to do was decide whether or not an audit should be initiated. In its opinion, the Commission tried to justify the fact that it had taken it so long to proceed with the case by making a general reference to the internal organisation of its workload. In its reply to a specific question on this issue put to it by the Ombudsman, the Commission pointed out that it had no particular reasons to explain the delay, and admitted that it could have reacted earlier. In these circumstances, the Ombudsman concludes that the Commission failed to decide to launch the audit within a reasonable period of time. This constitutes an instance of maladministration.

55. As regards the modalities of informing the complainant of the audit and its date, the Ombudsman notes that the Commission informed the complainant of the audit on 13 September 2007, while the auditors had already contacted the complainant on 5 September 2007. The Commission admitted that this course of events was not in line with standard procedure and expressed its regret. Given that the Commission and the complainant appear to agree on this point, and that the Commission expressed its regret, the Ombudsman takes the view that there is no need for him to take any further action in relation to this aspect. The Ombudsman is pleased to note the Commission's statement that procedures have since been changed to ensure that auditors do not contact beneficiaries before the Commission has informed the latter of the audit.

56. Concerning the time given to the complainant to prepare for the audit, the Ombudsman notes that, according to the complainant, the auditors informed it on 11 September 2007 that the audit would start on 18 September 2007. In its opinion, however, the Commission asserted that the original plan was for the audit to be carried out in October 2007. The Commission, moreover, submitted that there was no fixed period of time that had to expire between the announcement of an audit and its actual performance. However, current practice generally allows beneficiaries a period of one month to prepare information which could be requested in the course of the audit.

57. On the basis of the documents submitted to him, the Ombudsman finds no support for the Commission's view that the audit was originally foreseen for October 2007. Bearing in mind that the Commission sent the audit announcement on 13 September 2007, he considers that the time period between the Commission's letter and the starting date of the audit, as originally envisaged, amounted to only four calendar days. The Commission admitted that such short notice would not have been in line with its current practice.

58. The Ombudsman notes, however, that an agreement was subsequently reached according to which the audit would be carried out only in November 2007. In these circumstances, the Ombudsman takes the view that there is no need for him to take any further action with regard to this aspect of the case.

59. As regards the Commission's alleged failure to reply, the Commission conceded that it failed to reply to the complainant's letter of 5 October 2007. It stated that it was possible that its letters had crossed with those of the complainant. The Ombudsman considers that, in its letter of 5 October 2007, the complainant asserted that the Commission had not yet replied to its letter of 14 September 2007 and, reiterating its arguments, questioned the legality and correctness of the audit. It appears that the Commission replied to the complainant's letter of 14 September 2007 in a letter dated 26 September 2007. It is, therefore, perfectly possible that this letter and the complainant's letter of 5 October 2007 may have crossed. However, it would nevertheless have been courteous of the Commission to inform the complainant that it had already answered its letter of 14 September 2007 when it received the complainant's letter of 5 October 2007. Taking into account that the Commission expressed its regret for its failure to reply to the letter of 5 October 2007, the Ombudsman considers that there is no need for him to take any further action in relation to this point.

60. Turning to the issue of the use of the German language, the Ombudsman understands this aspect of the complainant's second allegation to relate to the Commission's alleged failure to provide it with a German translation of the preliminary audit report. He notes at the outset that the Commission is not obliged to contract an audit company of the same nationality as the beneficiary to be audited. At the same time, he considers that the Commission needs to ensure that preliminary audit findings are made available to beneficiaries in a language which they can understand.

61. The Ombudsman notes that the grant agreement between the Commission and the complainant was drafted in German. The same appears to be the case with all the project-related correspondence. Moreover, there does not appear to be any provision in the grant agreement requiring the complainant's staff to have a sufficient knowledge of English in order to successfully complete the project, or undergo a relevant audit. The issue of the language in which the audit report was to be drafted was addressed in the relevant contracts between the Commission and the auditors. Thus, according to the Framework Contract, "reports for the Commission must be written in English or French". The Specific Contract provides that the auditors have to prepare the audit report in English. However, contracts between the Commission and the auditors clearly cannot create obligations with which the complainant has to comply. It therefore seems to be perfectly clear that neither the Commission, nor the auditors contracted by it, had any right to oblige the complainant to accept that the audit should be carried out in English. By the same token, the complainant was, therefore, also entitled to be informed of the results of the audit in German, or in a language it understood. In view of these circumstances, and in light of the complainant's submission that it could not fully understand the preliminary report drafted in English, the Ombudsman sees no basis for the Commission's assertion that the complainant must have understood the preliminary audit report. It appears useful to add that the complainant could not be expected to contest the preliminary audit findings until after it had read, and fully understood, the preliminary audit report. The Commission's argument that the complainant did not contest the preliminary audit findings is, therefore, unconvincing in the present context.

62. Against this background, the Ombudsman takes the view that the Commission should have taken adequate measures to ensure that the complainant received a copy of the preliminary audit report in the German language. At the very least, it should have provided the complainant with a German translation. Failing to do so constitutes an instance of maladministration by the Commission.

63. With regard to the duration of the audit, the Ombudsman notes that it lasted four days. This included an information meeting to open the audit, and a closing meeting. According to the Commission, this corresponds to the average duration of an audit mission of average complexity. The complainant did not challenge this statement. However, it should first be noted that the total value of the project is rather modest, given that it amounts to approximately EUR 150 000. Furthermore, it should be noted that the complainant is a small company with few members of staff. Therefore, an audit lasting four days is bound to have a major impact on the functioning of such a company. Lastly, consideration should be given to the fact that the present audit was triggered by certain irregularities which were found in relation to one of the complainant's project partners. It was not the complainant itself, nor its behaviour, which gave rise to this audit. Taking all of the above into account, the Ombudsman takes the view that the Commission did not sufficiently explain why an audit lasting four days was proportionate in a case such as the present one. This constitutes an instance of maladministration.

64. In relation to the requirement to present originals, the Commission referred to the internationally recognised standards of the International Federation of Accountants[8] which requires originals to be presented for the justification of expenses incurred. The Ombudsman notes that, apart from disputing the proportionality of the audit as such, the complainant did not comment on this requirement. He takes the view that the Commission cannot be criticized for applying recognised professional standards in this area. According to the 2008 edition of the 'Handbook of international auditing, assurance, and ethics pronouncements' of the International Federation of Accountants, "[e]vidence provided by original documents is more reliable than evidence provided by photocopies or facsimiles"[9]. The Ombudsman notes that, against this background, the Commission's position appears to be reasonable. No maladministration is, therefore, found with regard to the third aspect of the complainant's fourth allegation.

B. As regards the alleged failure to explain the need for an audit (the complainant's third allegation)

Arguments presented to the Ombudsman

65. In its complaint, the complainant alleged that the Commission failed to give reasons why an audit was necessary.

66. In its opinion, the Commission took the view that, by signing the grant agreement, the complainant accepted that audits could be performed without the Commission having to provide any further justification. In the given context, the Commission referred to Article 13.2 of part B of annex II to the grant agreement (quoted in paragraph 41 above). It also reiterated that, in conformity with the ECA's recommendation, it had decided to order an audit of all projects in which one of the complainant's project partners had participated.

67. In its observations, the complainant maintained that it did not understand why an audit at its premises was necessary, since its former project partner, which had been the subject of the ECA's recommendation, had been audited in November 2007. Therefore, in the complainant's view, there was no necessity for a further audit.

The Ombudsman's assessment

68. The Ombudsman observes that the grant agreement, and in particular Article 13.2 of part B of its annex II, gives the Commission the right to perform inspections with regard to the actual spending of funds within a certain period of time. The grant agreement does not appear to stipulate a requirement for the Commission to give reasons for performing inspections within this period of time. At the same time, the Ombudsman points out that, pursuant to Article 18(1) of the European Code of Good Administrative Behaviour, "[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." Point 3 of the Commission's Code of Good Administrative Behaviour provides for a similar duty to give reasons.

69. The Ombudsman notes that the Commission did not provide any specific reasons in its correspondence with the complainant as to why an audit at the complainant's premises was necessary, but explanations were given during the course of the inquiry. One of the aims pursued by the duty to state reasons is to give the complainant the opportunity to defend its rights. The Ombudsman, therefore, is not convinced that giving reasons after a decision has been taken is compatible with that duty.

70. The Ombudsman therefore considers that it was maladministration on the Commission's part when it failed to give reasons for its decision to proceed to an audit before the latter was launched.

C. As regards the complainant's claim

71. The complainant claimed that the Commission should revoke the audit order.

72. In its observations, the Commission stated that it had respected the conditions stipulated in the grant agreement with regard to the audit.

The Ombudsman's assessment

73. Given that the audit has already taken place, the Ombudsman considers that the complainant's claim has become obsolete. Therefore, there are no grounds for further inquiries regarding the complainant's claim.

D. Conclusions

74. In the course of examining this complaint, the Ombudsman identified a number of instances of maladministration by the Commission. When the Ombudsman finds that there has been an instance of maladministration, if feasible, he makes a friendly solution proposal or a draft recommendation to the institution concerned.

75. The Ombudsman notes that the instances of maladministration identified in the present decision relate to procedural issues concerning an audit which has already been launched and carried out. He therefore considers that it is no longer possible for the Commission to remedy the instances of maladministration he has identified.

76. It would still be possible for the Commission to provide the complainant with a German translation of the preliminary audit report. It should be noted, however, that the complainant did not submit a claim to this effect. Moreover, according to the information provided by the Commission during the course of the present inquiry, the auditors sent their final audit report on 17 August 2009. In view of the fact that the audit findings have since been finalised, the Ombudsman considers that no useful purpose would be served by asking the Commission to provide the complainant with a German version of the preliminary audit report. The Ombudsman further notes that the complainant does not yet appear to have asked for a German version of the final audit report.

77. In view of the above, the Ombudsman considers that no useful purpose would be served by making a friendly solution proposal or a draft recommendation to the Commission in the present case.

78. The Ombudsman notes the Commission's statement that it might implement the recommendations contained in the auditors' final audit report, which may lead to a recovery of funds. Should the Commission indeed proceed to a recovery of funds, the complainant obviously remains free to consider submitting a new complaint to the Ombudsman in this matter. If this were to occur, the Ombudsman would have to consider whether, by failing to provide the complainant with a German translation of the preliminary audit report, the Commission also failed to respect the complainant's rights of defence.

79. In view of the above considerations, the Ombudsman closes his inquiry with the following critical remark:

Principles of good administration require Union institutions to take action within a reasonable period of time if, following the emergence of new evidence, they take the view that such action is needed. In the present case, the Commission failed to follow-up on the ECA's recommendation within a reasonable period of time. This constitutes maladministration.

The Commission should have taken adequate measures to ensure that the complainant received a copy of the preliminary audit report in the German language. At the very least, it should have provided the complainant with a German translation. This failure to do so constitutes maladministration by the Commission.

The Commission failed sufficiently to explain why an audit lasting four days was proportionate in the present case. This constitutes another instance of maladministration.

The Commission's failure to give reasons for its decision to launch an audit constitutes a further instance of maladministration.

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

 

P. Nikiforos DIAMANDOUROS

Done in Strasbourg on 4 March 2010

---

[1] Ombudsman's translation from the German original: "Der Vertragsnehmer erklärt sich damit einverstanden, daß die Kommission und der Rechungshof der Europäischen Union die tatsächliche Verwendung des Zuschusses gemäß der Haushaltsordnung vom 21. Dezember 1977 für den Gesamthaushaltsplan der Europäischen Gemeinschaften - in der jeweils geänderten Fassung - kontrollieren können, und zwar während der gesamten Laufzeit des Vertrags sowie während eines Zeitraums von fünf Jahren nach dem Ende des Vertrags."

[2] The relevant passage of the Commission's letter of 26 September 2007 reads as follows: "Gemäß Art. 13.2 des Anhangs II des Vertrages kann die Verwendung des Zuschusses während eines Zeitraums von fünf Jahren nach dem Ende des Vertrags, d.h. nach der Schlusszahlung bzw. Rückzahlung, kontrolliert werden."

[3] This obligation results from Article 3.5, which reads as follows: "The contractor takes all necessary steps to enable inspections (documentation, receipts and audit documents) by the Commission or the Court of Auditors of the European Communities. These inspections may take the form of an on the spot-audit of the accounting and receipts, which relate to the funded project. For this purpose, the relevant documentation is to be kept for a period of five years after the final payment in the framework of the project and the end of the project."

[4] Complaint 693/2006/(BM)FOR, point 1.17.

[5] Case C-17/03 Vereniging voor Energie, Milieu en Water e.a. [2005] ECR I-4983, para. 73; Case C-104/97 P Atlanta v European Community [1999] ECR I-6983, para. 52; and Joined Cases C-37/02 and C-38/02 Di Lenardo and Dilexport [2004] ECR I-6945, para. 70.

[6] 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; and Case T-347/03 Branco v Commission [2005] ECR II-2555, paragraph 102.

[7] Special Report from the European Ombudsman to the European Parliament following the draft recommendation to the Council of the European Union in complaint 2395/2003/GG, paragraph 1.2.

[8] The International Federation of Accountants is the worldwide organization for the accountancy profession which, founded in 1977, is comprised of 157 members and associates in 123 countries, representing more than 2.5 million accountants employed in public practice, industry and commerce, government, and academe. The Federation's role is inter alia to promote adherence to high quality international standards. See http://www.ifac.org.

[9] International Federation of Accountants, Handbook of international auditing, assurance, and ethics pronouncements, Part I, p. 205.