The background to the complaint

1. The complainant is an Italian limited liability company providing technical services for the research sector. It managed two projects, IST-2000-26038 PISA and IST-2001-37244 MOSES (hereinafter referred to as the PISA and MOSES contracts or projects respectively), in the context of the Fifth Framework Programme (FP5) of the European Union. The European Commission concluded a grant agreement with the complainant, in order to co-finance those two projects, which the latter carried out as part of a consortium.

2. In January 2007, the Commission initiated an audit procedure, and asked a private audit firm to carry out an audit, as well as to prepare a final audit report, of the two projects mentioned above. The report concluded that the complainant had overstated costs for its participation in the PISA project, while it could have claimed higher costs for its participation in the MOSES project.

3. On 7 September 2007, the complainant turned to, and requested from, the Commission a payment in its favour in the MOSES project. The complainant based its request on the conclusions of the audit report.

4. By letter of 8 January 2008, the Commission informed the complainant that, for any amounts underpaid, the complainant would need to submit revised cost statements within 60 days upon receipt of that letter. Furthermore, it referred to the maximum financial ceiling foreseen in the relevant contract, as well as to the availability of funds.

5. On 5 March 2008, the complainant informed the Commission that it would submit the cost statements accordingly.

6. In a letter to the complainant of 15 August 2008, the Commission referred to the PISA contract and informed the complainant of its intention to recover an amount of EUR 7 571.90 on the ground that "the Commission had calculated the impact of the audit conclusions on the total eligible costs". As a result of this assessment, the Commission concluded that the total costs declared by the complainant and previously accepted by it had been overstated. Furthermore, it asked the complainant to submit comments within one month upon receipt of the letter.

7. The complainant replied to the Commission on 12 September 2008. The complainant agreed with the amount due under the PISA contract. However, taking into account that the MOSES contract had been subject to the same audit, the complainant suggested that the above-mentioned amount be deducted from the amount due to it on the basis of the MOSES contract. Therefore, the complainant requested a payment of EUR 40 829 in its favour from the Commission.

8. In its letter to the complainant of 29 September 2008, the Commission referred to its letter to the complainant of 8 January 2008 and the audit report, and stated: "all complementary payments are limited to the maximum financial ceiling as foreseen in the contract and the availability of funds". It reminded the complainant that a sett-off could only be possible if a payment was due to it by the Commission, and that, for that purpose, it was necessary for the complainant to provide the Commission with revised cost statements for the MOSES project.

9. The complainant received from the Commission a debit note dated 31 October 2008 for the amount of EUR 7 571.90 for the PISA project.

10. The complainant wrote to the Commission again on 1 December 2008 and raised the issue concerning the above-mentioned debit note and the possibility of setting off the amounts, as it had previously suggested in its letter dated 12 September 2008.

11. On 14 January 2009, the Commission replied to the complainant. The Commission submitted that "for a compensation to take place, the complementary payment has to be properly established" and referred to the relevant deadlines for payments and financial ceilings foreseen in the MOSES contract.

12. On 27 May 2009, the complainant wrote to the Commission, stating that the information requested had already been sent to it.

13. On 4 August 2009, the Commission reiterated that it needed the revised cost statements for the MOSES project, which were a prerequisite to establishing a potential additional payment to the complainant.

14. On 18 September 2009, the complainant wrote to the Commission, stating that "we are now sending you the subscribed costs, as revised in the financial audit".

15. In its reply dated 14 December 2009, the Commission reiterated to the complainant that it needed to receive the duly completed cost statements. The Commission also reiterated its view that the audit report did not, as such, constitute new and revised cost statements from the complainant and that the report could not be considered to be a payment request.

16. On 9 February 2010, the complainant sent another letter to the Commission, again asking the latter to proceed with the payment it had requested. The complainant also expressed its intention to take legal action, if no payment would be made to it.

17. On 20 June 2011, the complainant turned to the European Ombudsman with the present complaint.

The subject matter of the inquiry

18. The Ombudsman opened an inquiry into the following allegation and claim.

Allegation

The Commission failed to pay the complainant EUR 40 829 for the technical services it provided.

Claim

The Commission should pay the complainant EUR 40 829 for the technical services it provided.

The inquiry

19. On 30 August 2011, the Ombudsman asked the Commission for an opinion on the complainant's allegation and claim. The Ombudsman also asked the Commission to provide him with copies of the two contracts and any other documents relevant to this complaint. The Commission sent its opinion on 16 December 2011, together with the further documentation requested by the Ombudsman, including copies of the two contracts. The Commission referred to its extensive exchange of correspondence with the complainant. The opinion was then forwarded to the complainant with an invitation to make observations. The complainant submitted its observations on the opinion on 27 February 2012.

The Ombudsman's analysis and conclusions

Preliminary remark

20. Since the complainant's allegation and claim are closely connected, it appears reasonable for the Ombudsman to deal with them together.

A. Alleged failure to pay the complainant EUR 40 829 for the technical services it provided and related claim

Arguments presented to the Ombudsman

21. In its complaint, the complainant alleged, in summary, that, according to the data contained in the audit report, the Commission owes it EUR 40 829 (that is to say, 50 per cent of the sum resulting from a EUR 96 801 credit payment for the MOSES project minus a EUR 15 144 debit payment for the PISA project).

22. The complainant noted that it had sent various letters and e-mails to the Commission concerning its claim. According to the complainant, the Commission never replied with respect to this issue. It allegedly only sent several letters requesting the complainant to pay the debts concerning the PISA project.

23. In its opinion, the Commission made the following points. It pointed out that, according to the MOSES contract, payment requests shall take the form of the submission of specific cost statements forms. The forms are part of the contract and their use is mandatory, pursuant to Article 4(2) of Annex II to the MOSES contract.

24. The Commission added that, during the period covered by the contract, the complainant duly used these forms to submit the five periodic cost statements foreseen in the contract, which gave rise to payments. It noted that after the final EU financial contribution for the project had been established, a last payment was made to the complainant on 6 December 2005. The Commission stated that it had met all its contractual obligations.

25. Noting that Article 26 of Annex II to the MOSES contract relates to financial audits and continues to apply after the completion date of the contract, the Commission indicated that it had initiated the recovery procedure for the monies owed and invited the complainant to submit observations. It continued by saying that audits are not aimed at identifying additional eligible costs which might have been claimed by the contractor, especially when closed contracts are at issue. However, for the sake of transparency and fairness, auditors not only report adjustments in favour of the Commission but also include potential adjustments in favour of the contractor.

26. The audit report concluded the following on adjustments to costs accepted by the Commission in favour of the complainant for the MOSES project.

27. The audit report revealed that for the period of time covered by the contract, an additional amount of EUR 89 121.98 of research costs would have complied with the eligibility criteria set out in the contract. However, the audit report identifying the corresponding potential adjustments in favour of the complainant did not constitute a payment request made by the contractor. The Commission emphasised that only cost statements submitted by the contractor and accepted by the Commission may give rise to payment in accordance with Article 3(1) of Annex II of the contract.

28. For this reason, the Commission invited the complainant five times to submit revised cost statements which would include the eligible costs that were identified in the audit report but not claimed in the periodic cost statements submitted during the periods covered by the contract. The Commission further stated that it had never put into question the admissibility of such request. However, the complainant's request could not be granted in the absence of the revised cost statements.

29. Finally, in its opinion, the Commission referred to its extensive exchange of correspondence with the complainant and also provided the further documentation requested by the Ombudsman, including copies of the two contracts.

30. In its observations, the complainant essentially maintained its position and the arguments it raised in its complaint, by arguing that the Commission should pay it EUR 40 829 for the technical services it provided.

31. It agreed with the Commission that the audit did not aim at identifying additional admissible costs which could be declared by the complainant. The complainant emphasised that, although the report found that it had overstated costs by EUR 15 144.29 for the PISA project, the report also found that costs incurred worth EUR 96 801.80 were admissible and could have been claimed for the MOSES project.

32. The complainant further pointed out that the Commission did not, as it stated, duly inform it in its letter of 8 January 2008 about the procedure to follow in order to carry out the audit's results.

33. The complainant also mentioned that the two projects at hand were the first ones it had carried out with the financial support of the Union and that, as regards the MOSES project, it had not been aware that it could claim back part of the costs until the publication of the audit report and the Commission's statements in this respect.

34. It then argued that, once the cost adjustments included in the audit report had been accepted by the parties involved, they could no longer be questioned. It referred to Article 26 of the Annex II to the MOSES contract in support of this argument.

35. Finally, the complainant reiterated that it had provided all cost statements and supporting documents to the audit company which prepared the audit report, and that it had cooperated with the Commission in good faith.

The Ombudsman's assessment

36. The Ombudsman recalls that the audit report concluded that, while certain costs had been overstated for the PISA project, the complainant could have declared higher costs for the MOSES project. None of the parties to the present complaint disputed this.

37. Moreover, he notes that the Commission did not rule out a set-off as a matter of principle, but rather stated that it could not proceed to a set-off without having first received from the complainant a request for payment in the form of the relevant cost statements.

38. It follows that the issue to be considered by the Ombudsman is whether the Commission's position, that is to say, that following the audit report, the complainant did not submit the required cost statements concerning additional costs for the MOSES project, is reasonable. Given that the dispute at hand concerns the time after the audit, the complainant's argument that it was not aware that it could claim back part of the costs before the publication of the audit report is not relevant.

39. The Ombudsman points out that Article 4(1) of the MOSES contract contains detailed rules concerning the declaration of costs incurred by the complainant. Thus, it stipulates that the coordinator shall submit, among other things, copies of the cost statements required under the contract, in accordance with Article 4 of Annex II of the said contract. Pursuant to Article 4(2)(b) of Annex II, contractors shall submit their cost statements to the Commission in the specific form referred to in part E-1 of that Annex. Accordingly, it appears clear that the findings of an audit report as such do not replace the cost statements that a contractor is required to submit to the Commission. The Ombudsman notes that, in its observations, the complainant referred to Article 26 of Annex II to the MOSES contract. That Article, which grants the Commission the power to take all appropriate measures which it considers necessary, does not exempt the complainant from having to comply with Article 4 of the MOSES contract and therefore from having to provide cost statements. Consequently, the Ombudsman is of the opinion that the Commission's position is reasonable.

40. Furthermore, the Ombudsman considers that the Commission duly informed the complainant, for the first time by letter of 8 January 2008, that in order to claim any amounts underpaid, the complainant would need to submit revised cost statements. In its subsequent correspondence with the complainant, the Commission repeatedly reminded the complainant that the comments made in the audit report on potential adjustments in favour of the complainant did not constitute a payment request made by the contractor. Instead, only cost statements submitted by the contractor and accepted by the Commission may give rise to a payment.

41. As to the complainant's argument that it had provided all the cost statements to the audit company, the Ombudsman notes that the cost statements referred to by the complainant are only the ones that it has submitted to the Commission so far. However, if the complainant wishes to be reimbursed for additional costs incurred, which it has not previously declared, then it has to submit relevant new, revised cost statements to the Commission.

42. In view of the foregoing, the Ombudsman concludes that there was no maladministration in the Commission's activities.

B. Conclusion

On the basis of his inquiry into this complaint, the Ombudsman closes it with the following conclusion:

There was no maladministration in the Commission's activities.

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

 

P. Nikiforos Diamandouros

Done in Strasbourg on 8 May 2013