Last updated: April 18, 2026
Most Horizon Europe beneficiaries will face a financial audit. Very few are truly prepared for what it actually involves.
Based on our experience having a combined financial audit of two concurrently executed Horizon Europe projects under the Actual Cost model, for which our company serves as the official project coordinator, the following insights reflect what happens in practice, where challenges arise, and what organizations should realistically expect.
In parallel, we have also been coordinating two additional Horizon Europe projects operating under the Lump Sum model. All four projects have been executed over largely overlapping periods, while remaining fully independent from one another.
This setup provides a valuable perspective, both in terms of audit exposure under the Actual Cost model and in understanding the practical distinction between the two funding approaches.
In the specific experience that we share, it is also important to note that the audit referred to the first periodic report of each project, not to completed projects. This highlights that financial audits can take place while projects are still ongoing, and not only after their completion.
Projects referred to in this context:
- InvestCEC – Actual Cost model
- FRONTIERS – Actual Cost model (with FSTP component)
- Bio4Human – Lump Sum model
- RISERS – Lump Sum model
The experience described below is based on the two Actual Cost projects, while also informed by the broader coordination context across all four projects.
Extreme intensity: “No stone unturned”
A financial audit should not be underestimated.
In our case, the auditors scheduled a full week of daily meetings, including project-level discussions and individual interviews with selected team members. This was followed by multiple follow-ups, additional questions, and requests for further documentation.
The level of detail was consistently high.
Auditors aimed to understand the exact mechanics behind every audited element. In several cases, questions could not be answered on the spot and required internal follow-up and additional work before a proper response could be provided.
Nothing was superficial. Nothing was assumed.
To illustrate the level of scrutiny, at one point we were asked to present our internal file system in order to verify the “Date Modified” metadata of specific timesheet reports. This was used to confirm when records were actually created and updated on time, and not in retrospect.
Auditors are not only checking the numbers, they are verifying the integrity, timing, and consistency of your record-keeping.
Under Article 25 of the Grant Agreement, auditors are allowed to examine essentially anything they consider relevant in the organization records.
In practice, this often extends beyond the project itself, into organization-wide aspects such as salary structures, bonus policies, and non-mandatory social benefits, all in order to validate that cost claims were made in line with the rules.
In our case, the audit covered two projects that were executed independently, each assessed at the level of its first periodic report. Their execution periods partially overlapped in time, which created an additional layer of scrutiny.
Although each project was assessed independently, certain cost elements were also reviewed from a broader, horizontal perspective across the organization.
This illustrates an important point: even when projects are formally separate, and even at early reporting stages, the financial behavior of the organization may still be reviewed in a combined context.
At the same time, the process was professional and respectful. The auditors were clear about their objectives, open to explanations, and allowed time to complete missing details.
But the depth and intensity remained constant throughout.
The AGA is your bible
For Horizon Europe projects, there is one governing framework:
The Grant Agreement, and its interpretation through the Annotated Grant Agreement (“AGA”).
In line with that, during the audit, the AGA is the only reference point.
Internal logic, operational decisions, or what seemed reasonable at the time are not sufficient if they do not align with this framework.
Most organizations do not operate day-to-day with this level of alignment.
This gap often becomes visible only during the audit.
Reality vs. Compliance
Audits take place today, but examine financial conduct from 2–4 years ago.
This creates an inherent tension.
As John Lennon wrote: “Life is what happens to you while you’re busy making other plans.”
Projects evolve. People change. Priorities shift. Decisions are made in real time.
Later, those same decisions are reviewed under a strict compliance framework.
If something was not done or documented correctly at the time, fixing it in retrospect is often limited, and in many cases not possible.
What are the potential outcomes of an audit?
A Horizon Europe financial audit is not only about verification.
It can have tangible consequences, both positive and negative.
On the positive side, a well-managed and well-documented project can pass the audit smoothly, reinforcing confidence in the organization’s financial and operational practices. In some cases, it can also help validate internal processes and provide clarity for future projects.
On the other hand, gaps between operational reality and formal requirements may lead to financial corrections. These can include partial or full rejection of certain cost items, and in some cases, recovery of funds.
Beyond the immediate financial aspect, audits may also highlight weaknesses in internal processes, documentation practices, or alignment with the Grant Agreement. While not always formal penalties, these findings can have implications for how the organization manages future projects.
The key point is not that audits are inherently problematic, but that their outcomes depend on how well past actions are supported by clear, consistent, and compliant documentation. These outcomes are not driven by intent, but by evidence.
Where challenges typically arise?
Timesheets
Timesheets are a well-known challenge, and one of the key reasons behind the shift toward the lump sum model.
Under the Actual Cost model, they require:
- continuous, detailed tracking of working time, on an hourly basis
- managing parallel work across multiple projects
- converting hours into day-equivalents according to AGA definitions
- ensuring consistency between internal records, reporting, and signed declarations
Maintaining this level of precision over time is difficult in practice.
This complexity is exactly why the Lump Sum model has become such an important alternative, as it significantly relaxes these record-keeping requirements.
Travel expenses
Travel documentation is another area where the expected level of detail is often underestimated.
Auditors may request:
- full breakdown of expenses, including per diam
- VAT treatment and justification where relevant
- exchange rates used
- boarding passes and travel confirmations
- proof of participation in meetings
- clear justification of the relevance of the trip to the project
- booking records that reconcile all associated trip expenses
Even when the trip clearly took place, incomplete documentation can become an issue.
Subcontracting
Subcontracting is often used to simplify execution, relying on external expertise.
However, from an audit perspective, it cannot be treated as a “black box”.
Auditors may examine:
- how the subcontractor was selected, including justification of “best value for money”
- whether a competitive process was conducted
- what exactly was delivered in practice
- how payments relate to specific deliverables or milestones
Maintaining a full audit trail is essential, including selection records, scope of work, delivery evidence, and payment structure.
Internal processes must be real, not just defined
Organizations typically have internal processes for travel, reimbursements, approvals, and more.
During the audit, these processes may be reviewed in detail.
Auditors may request:
- documented procedures, preferably dated and signed
- evidence of when they were defined
- confirmation that they were actually implemented in practice
Interviews with team members may be used to verify that real behavior matches documented processes.
It is not enough to define processes.
They must be documented, consistent, and followed.
Keep your accountant close
A significant portion of the audit relates to how costs are recorded and reflected in the organization’s accounts.
These are not operational questions, they require professional accounting input.
Involving the accountant directly in relevant discussions helps ensure clarity, accuracy, and efficient communication.
What this means in practice
A Horizon Europe audit is not something to address only when it arrives.
It reflects how the project was managed over time, financially and operationally.
Even well-managed projects may face challenges if documentation, processes, or interpretations are not fully aligned with expectations.
This becomes especially visible when working across multiple projects and funding models in parallel, even when each project remains fully independent in scope and execution.
A useful question to consider is:
how prepared would your organization be if an audit started tomorrow?
This applies not only within a single project, but also across projects when activities overlap in time, and not only at project completion, but also during ongoing reporting periods.
Final thought
A Horizon Europe audit is a retrospective of how a project was managed, not just a check of your current books.
Very few organizations experience an audit early enough to fully understand the nuances of the AGA.
Awareness is the first step.
Preparation over time is what makes the real difference, both in the process and in the outcome.
If you want to be better prepared
Financial audits under Horizon Europe involve nuances that are not always visible during project execution.
If you are coordinating or participating in such projects, and want to better understand your level of readiness or potential exposure, feel free to reach out.
We are happy to share further insights based on real experience.