Common mistakes in the financial reporting of EU-Funded projects (and how to anticipate them)
One of the main hurdles faced by beneficiaries of European grants with limited experience in EU project management is not so much the technical implementation of the action, but rather the mistakes related to the financial management of the funds received for the project, particularly during the financial reporting of incurred costs. Poor financial reporting may ultimately lead to significant reductions following the Commission’s review or an ex post audit.
Below, we look at some of the most frequent errors identified by the Euro-Funding Project Management Office (PMO) team and, above all, how to anticipate them.
Maximum declarable day-equivalents
One of the most common errors in the current EU framework relates to the treatment of maximum declarable day-equivalents. In Horizon Europe, there is a horizontal ceiling for personnel costs: according to Article 6.2.A.1 of the Horizon Europe Model Grant Agreement, the total number of day-equivalents that a person may declare across all EU and Euratom projects cannot exceed 215 per calendar year. In practice, this limit corresponds to approximately 1,720 working hours per year for a full-time employee (assuming eight hours per day), and serves as a reference ceiling to verify that the days charged to the project are consistent with the employment contract and working time arrangements.
Incorrect calculation of the daily rate
The calculation of the daily rate is probably one of the most frequent sources of error in the financial reporting of EU projects. Under Horizon Europe, it must be based on the actual annual personnel costs incurred for each worker, according to the organisation’s accounts and payroll, and include only eligible remuneration components: salary, social security contributions, taxes and other employment-related costs required by law or contract.
Based on this cleansed annual amount, the daily rate is obtained by dividing the personnel cost by the maximum of 215 day-equivalents per calendar year (or the corresponding limit).
Deviations from this principle often arise from using monthly salaries or prorated amounts instead of the actual annual remuneration; including extraordinary or one-off payments that are not part of regular remuneration nor based on objective criteria; failing to adjust for part-time contracts; or not properly accounting for unpaid absences. In addition, some beneficiaries operate with hourly rates without properly converting them into day-equivalents, even though the rules require personnel costs to be declared on a daily basis.
To ensure compliance with Horizon Europe rules, the daily rate must therefore always be derived from a final, auditable annual personnel cost, adjusted for the percentage of time worked and for periods actually paid, cleansed of non-recurring payments, and divided by the applicable number of day-equivalents. It is also essential to verify that the total number of days declared across all EU-funded projects does not exceed the annual ceiling of 215 day-equivalents per person. A clearly documented calculation methodology helps to ensure internal consistency and facilitates the defence of the justification during any review or audit.
Parental leave and other absences in the calculation of personnel costs
Long-term absences are often a critical point when calculating personnel costs. The most frequent mistake is treating periods of maternity leave, paternity leave or other parental absences as if they were ordinary productive working days, maintaining the same number of day-equivalents as in a full working year. However, in Horizon Europe, parental leave may be deducted from the annual maximum day-equivalents, which implies adjusting both the maximum number of declarable days and the associated daily rate.
In addition, any part of the remuneration reimbursed by Social Security or other national schemes must be excluded from the annual personnel cost: only the costs actually borne by the beneficiary are eligible. In practice, this requires close coordination with the HR department, ensuring that all long absences are recorded and reflected both in the productive days considered and in the annual costs used for the calculation. It is equally important to explicitly document how these periods have been treated, so that in the event of a review or audit, the declared days and applied daily rate can be shown to be consistent with the employment contract and with the amounts actually paid by the organisation.
Lack of rigorous time tracking (timesheets)
In many projects, personnel costs are declared throughout the life of the action without maintaining proper parallel time tracking. It is common to find incomplete timesheets, documents signed in bulk at the end of the year, or even no timesheets at all. Time records that do not match payroll, holidays, or HR-registered absences are also frequent.
This may become a serious problem: in an audit, the auditor may reject the declared hours due to lack of traceability and consider the associated personnel costs ineligible.
To minimise this risk, it is advisable to implement from the very beginning a simple time-tracking system (for instance, a shared spreadsheet or an internal tool) enabling staff to record at least monthly the time worked, with declarations signed by the employee and their supervisor with correct dates. Internal periodic checks should also be conducted to detect inconsistencies (such as people who, across all their projects, declare more than 100% of their working time). In short, maintaining a monthly time-tracking system, signed by both employee and supervisor and consistent with payroll and absences, is exactly what the Commission expects during a review or audit.
Travel not supported by sufficient evidence
Poor documentation of expenses—particularly in the category of Other goods, works and services—is a recurrent source of adjustments in EU projects. Problems typically arise when costs are charged without keeping full supporting documentation or without clearly demonstrating that the expense was necessary for the project. For travel, this occurs when tickets, boarding passes, hotel invoices, invitations or agendas are not kept, or when there is no evidence linking the trip to a consortium meeting, workshop, review with the Commission or a specific task in the work plan.
Similarly, for purchases and services, the risk increases when offers or price comparisons, purchase orders, contracts, detailed invoices or delivery/acceptance records are missing. If it is not clear which work package, deliverable or milestone justifies the cost, the auditor may conclude that it was not necessary for the action or that procurement rules were not respected, and therefore declare it ineligible.
To anticipate these issues, it is useful to define from the outset a checklist of minimum documentation per type of cost. For travel, this should include at least an invitation or agenda, tickets, boarding passes when applicable, personalised invoices and a brief participation report. For purchases and services, it is advisable to keep requests and comparisons of offers (when applicable), internal approvals, contracts or purchase orders, invoices and evidence of delivery or execution. In all cases, each expense should be explicitly linked to a specific project task (WP, deliverable, milestone, meeting, dissemination activity, etc.).
Finally, it is recommended to apply a prudent approach to potentially sensitive expenses: travel above economy class, additional overnight stays without justification, purchases clearly exceeding the project’s reasonable needs, or services contracted without proper transparency. Complete and coherent documentation—both for travel and for purchases and services—significantly reduces the risk of adjustments during a review or audit.
Conclusion: prevention is the best defence
Financial reporting in an EU-funded project should not become an obstacle course at the end, but rather an integrated process embedded in day-to-day management: Plan resources and budget from the outset, always document: how you calculate, which rules you follow, and which evidence you keep and carry out small “internal audits” before submitting each report.
Anticipating these common errors not only reduces the risk of financial cuts, but also reassures partners and the Commission that the project is well managed. And in an increasingly competitive landscape, that is also a strategic advantage.
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