Financial reporting in EU-funded projects is a structured and regulated process designed to ensure transparency, accountability and proper use of EU funds. Partners in so-called Actual cost projects need to submit financial reports every 12 or 18 months throughout the project duration. It is essential to prepare for the financial reporting from the first day of the project, to ensure calculation of costs is done correctly and proper records of all costs incurred are kept. It may take quite a bit of administrative effort, but when done properly from the start, it should not present any insurmountable hurdles! This is our overview based on our experience and the latest EU guidance and templates.
Briefing the partner consortium of the project
Efficient financial reporting begins with clear communication and guidance to all partners involved in the project, as soon as the project gets going. It's essential to provide detailed instructions and proactive support to ensure that everyone understands their responsibilities, and exactly what the EU requirements for the format and content of the reporting are. The cost tracking and reporting process can be time-consuming, but attention to detail is crucial. Organisations might have the knowledge but not the resources, or it might be their first time handling such reports. Therefore, coaching, training and regular briefings are necessary to ensure accuracy and compliance.
Senior EU Finance Consultant Laura Hänninen from Spinverse shares her insights into the reporting process: "Without early guidance, the problems and possible misunderstandings of the rules may only come to light when it’s time to prepare the financial statement. This can be avoided by ensuring that all partners, especially newcomers and SMEs with less resources, know exactly what is expected from them. My experience has shown that when partners are properly briefed about the rules and requirements at the start, it can significantly streamline the reporting process and minimise risks of errors and unnecessary stress."
Advising the Coordinator and reminding partners of their responsibilities
The Coordinator plays an important role in the financial reporting process. They must ensure that all partners have submitted their reports by the given deadline and, before submitting them to the EU, review the individual financial statements to verify consistency with performed tasks, as well as technical completeness and correctness.
Additionally, the Coordinator is responsible for compiling the full periodic report and submitting it to the Commission for review. The Coordinator will also centrally respond to any subsequent queries and update requests from the EU reviewers on behalf of the Consortium.
Laura Hänninen adds: “When we support a consortium in financial reporting, we take some of the burden off the Coordinator’s shoulders by monitoring the completion of the reports by the partners and providing them 1to1 guidance on how to comply with the reporting rules. Because we know what the EU requires, we can reduce additional queries from the EU reviewers by helping partners report their costs in the correct format and with required level of detail.”
Key components of financial reporting
Financial reporting in projects funded by Horizon Europe involves several key components:
- Sufficient internal systems and records for tracking expenditure in the project: This is the starting point for good reporting! The EU expects each partner entity to comply with local and EU accounting standards, and to apply those when recording the costs incurred during the project. All costs reported to the EU must be identifiable and verifiable from the accounting and payroll records of the organisation, and work effort must be reported accurately for each person working on the project.
- Financial statements: These are structured individual and consolidated financial statements completed in the EU portal, to report the direct costs incurred during the reporting period, according to pre-defined categories. For grants above certain thresholds, an external audit of the reported costs is required, to provide a Certificate on Financial Statements to the EU at the end of the project.
- Detailed cost reporting: Most programs require specifications of certain costs, either using a detailed cost reporting (excel) template or the Use of Resources report online. Reported costs and work effort are compared to the budged, and deviations must be explained.
Monitoring the process and providing feedback
Continuous monitoring and feedback are essential to ensure that the financial reporting process stays on track. This involves reviewing portal entries, giving feedback to partners, and asking for more details or justifications when necessary. It's important to instruct and support partners to deliver their reports with accuracy and on time.
Spinverse’s Project Manager for Finance, Mattias Lagerberg reflects on the importance of timeliness in reporting: "Instructing and supporting the partners in reporting is highly valued by them, as it enables the Consortium to submit their reports within deadlines and get grant payments as quickly as possible. Ensuring accuracy and timely submission not only reflects the Consortium’s commitment to compliance towards the EU officers but also enhances trust and collaboration within the Consortium."
Turn to Spinverse for support
Financial reporting takes time and effort, but it does not need to be painful. With good preparation and management, it is possible to get through the reporting rounds with minimum hassle and maximum efficiency, leading to payments of the grant on schedule. Spinverse’s financial experts and project managers are here to help, should you feel the need for an extra pair of hands and eyes. Get in touch with John Sperryn to learn more about our project services for funded EU-projects!
John Sperryn, Director and Team Leader for Innovation Project Services
john.sperryn@spinverse.com
+358 45 314 8404