Impact Evaluation, Cost Rejection, Grant Reduction & Payment Suspensions (Articles 26–30)

ARTICLE 26

IMPACT EVALUATIONS

26.1 Impact evaluation The granting authority may carry out impact evaluations of the action, measured against the objectives and indicators of the EU programme funding the grant. Such evaluations may be started during implementation of the action and until the time-limit set out in the Data Sheet (see Point 6). They will be formally notified to the coordinator or beneficiaries and will be considered to start on the date of the notification. If needed, the granting authority may be assisted by independent outside experts. The coordinator or beneficiaries must provide any information relevant to evaluate the impact of the action, including information in electronic format. 26.2 Consequences of non-compliance If a beneficiary breaches any of its obligations under this Article, the granting authority may apply the measures described in Chapter 5.

1. Impact evaluations In principle, for 2021-2027, all programmes measure the impact of the actions through the key performance indicators (KPIs) that are collected as part of the continuous reporting.

The formal evaluation procedure set out in this provision is therefore currently not in active use by any of the programmes using the General Model Grant Agreement. If needed, the granting authority will provide guidance directly to the beneficiaries.

CHAPTER 5 CONSEQUENCES OF NON-COMPLIANCE SECTION 1 REJECTIONS AND GRANT REDUCTION General > Article 27 — Rejection of costs/contributions

ARTICLE 27

REJECTION OF COSTS AND CONTRIBUTIONS

27.1 Conditions The granting authority will — at beneficiary termination, interim payment, final payment or afterwards — reject any costs or contributions which are ineligible (see Article 6), in particular following checks, reviews, audits or investigations (see Article 25). The rejection may also be based on the extension of findings from other grants to this grant (see Article 25). Ineligible costs or contributions will be rejected. 27.2 Procedure If the rejection does not lead to a recovery, the granting authority will formally notify the coordinator or beneficiary concerned of the rejection, the amounts and the reasons why. The coordinator or beneficiary concerned may — within 30 days of receiving notification — submit observations if it disagrees with the rejection (payment review procedure). If the rejection leads to a recovery, the granting authority will follow the contradictory procedure with pre-information letter set out in Article 22. 27.3 Effects If the granting authority rejects costs or contributions, it will deduct them from the costs or contributions declared and then calculate the amount due (and, if needed, make a recovery; see Article 22).

1. Rejection of costs or contributions What? If the granting authority finds ineligible costs or contributions (in particular, following a check, audit, extension of audit findings, review or investigation), it will reject them (— in full, i.e. for the amount that is ineligible).

Grounds for cost or contribution rejection (by the EU):

▪ Costs or contributions do not comply with the Grant Agreement’s general eligibility rules, see Article 6.1

▪ Costs or contributions do not comply with the Grant Agreement’s specific eligibility rules, see Article 6.2

▪ Costs or contributions fall under the categories of ineligible costs or contributions, see Article 6.3.

Whereas rejection will usually be based on findings of the granting authority under the respective grant, it may also happen that costs or contributions are rejected based on extension of audit findings (see Article 25.5) from other grants, if:

− the other grants were awarded under similar conditions (i.e. same or similar rules applicable)

− the ineligibility is:

− systemic or recurrent, and

− has a material impact across grants.

When? Rejection of costs or contributions can take place at any moment — at the time of beneficiary termination, interim payment, payment of the balance or afterwards (e.g. following ex-post audits).

Cost or contributions must comply with general and specific eligibility conditions and not fall under the categories of ineligible cost. Any cost or contributions that do not comply with all of these conditions may be rejected (see Article 6).

2. Procedure How? The beneficiaries will be informed about the cost rejections and given the opportunity to submit their observations.

Formally speaking, the procedure is slightly different:

− if rejection leads to a recovery: the procedure is a standard contradictory procedure

− if rejection does NOT lead to a recovery (just a decreased payment): the procedure is apayment review procedure.

The difference in the two procedures is in the timing. In case of recoveries, there is nothing to pay out, so the procedure foresees a standard contradictory procedure. In case of positive amount to pay, the procedure switches to the payment review procedure in order to allow the granting authority to immediately pay out undisputed amounts and focus the observations/review on the disputed amounts.

Contradictory procedure:

Step 1

The granting authority informs the coordinator/beneficiary concerned of its

Step 2

The coordinator/beneficiary concerned has 30 days to submit observations. An

Step 3

The granting authority analyses the observations and either stops the

Payment review procedure:

Step 1

The granting authority informs the coordinator about the rejection of costs or

Step 2

If the beneficiaries disagree, the coordinator/beneficiary concerned has 30 days

Step 3

The granting authority analyses the request for review and informs the

Depending on the moment when costs or contributions are rejected, this procedure will be directed either at the coordinator or the beneficiary concerned:

− for rejections at the time of an interim payment or the final payment: normally the coordinator

− for rejections after beneficiary termination and after final payment: normally the beneficiary concerned.

If it is directed at the coordinator, the coordinator must immediately inform the beneficiaries concerned via its usual communication channels (e.g. e-mail, registered letters with proof of delivery, etc) and ask for their comments. It must also inform the other beneficiaries.

If it is directed at the beneficiary during the action, the granting authority will inform the coordinator later on (in a way that preserves confidentiality). Beneficiaries should inform their coordinator if there is the risk of a significant impact on the action (see Article 19.3).

If it is directed at the beneficiary after the action, beneficiaries do not have to inform their coordinators or ask them to submit comments.

3. Effects If the granting authority rejects costs or contributions at beneficiary termination, it will deduct the rejected amount from the costs or contributions that the beneficiary declared in the termination report and calculate the amount due to the beneficiary. If the amount is lower than the (pre-financing and interim) payments received by the beneficiary, the granting authority will recover the difference (see Article 22.3.2).

If the granting authority rejects costs or contributions at the moment of an interim payment or the final payment, it will deduct them and calculate the amount to be paid accordingly (see Articles 22.3.3 and 22.3.4).

If ineligible costs or contributions are found in-between payments, the granting authority will reject them at the next payment (i.e. deduct the amount rejected from the amounts declared in the next financial statement and calculate the amount to be paid accordingly; see Article 22).

If the granting authority rejects costs after the final payment, it will deduct the amount rejected from the amounts accepted for the beneficiary at the final payment and calculate a revised final grant amount for the beneficiary. This may be followed by a recovery if needed (see Article 22.3.5).

General > Article 28 — Grant reduction

ARTICLE 28

GRANT REDUCTION

28.1 Conditions The granting authority may — at beneficiary termination, final payment or afterwards — reduce the grant for a beneficiary, if: (a) the beneficiary (or a person having powers of representation, decision-making or control, or person essential for the award/implementation of the grant) has committed: (i) substantial errors, irregularities or fraud or (ii) serious breach of obligations under this Agreement or during its award (including improper implementation of the action, non-compliance with the call conditions, submission of false information, failure to provide required information, breach of ethics or security rules (if applicable), failure to cooperate with checks, reviews, audits and investigations, etc.), or (b) the beneficiary (or a person having powers of representation, decision-making or control, or person essential for the award/implementation of the grant) has committed — in other EU grants awarded to it under similar conditions — systemic or recurrent errors, irregularities, fraud or serious breach of obligations that have a material impact on this grant (see Article 25). The amount of the reduction will be calculated for each beneficiary concerned and proportionate to the seriousness and the duration of the errors, irregularities or fraud or breach of obligations, by applying an individual reduction rate to their accepted EU contribution. 28.2 Procedure If the grant reduction does not lead to a recovery, the granting authority will formally notify the coordinator or beneficiary concerned of the reduction, the amount to be reduced and the reasons why. The coordinator or beneficiary concerned may — within 30 days of receiving notification — submit observations if it disagrees with the reduction (payment review procedure). If the grant reduction leads to a recovery, the granting authority will follow the contradictory procedure with pre-information letter set out in Article 22. 28.3 Effects If the granting authority reduces the grant, it will deduct the reduction and then calculate the amount due (and, if needed, make a recovery; see Article 22).

1.Grant reduction What? If the granting authority finds (e.g. following a check, audit, extension of audit findings, review or investigation) substantial errors, irregularities or fraud or breach of obligations (e.g. the action has not been properly implemented, non-compliance with the call conditions, submission of false information, failure to provide required information, breach of ethics, values or security rules, etc) under the Grant Agreement or during the award procedure, it may reduce the grant in proportion to the seriousness of the finding.

Grant reductions will be made in proportion to the seriousness of the error, irregularity, fraud or breach (e.g. in case of fraud the reduction may be up to a 100%). If the issues are found before the end of the action, the beneficiaries must take all possible corrective steps to bring the action implementation back into line with the Grant Agreement. 1. The monthly declaration of days worked in the project correctly signed (see Article 20) OR reliable time records will normally be sufficient proof of the assignment to 278 the action — unless there is other contradicting evidence (e.g. the employment contract indicates that the person was hired to work on another project).

Grounds for grant reduction:

▪ Substantial errors, irregularities or fraud OR serious breach of obligations (in this grant)

The granting authority may make a grant reduction if a beneficiary has committed substantial errors, irregularities or fraud or serious breach of obligations — either during the award procedure or under the Grant Agreement.

Serious breach of obligations may cover all kinds of non-compliance with Grant Agreement obligations (including obligations during the award procedure).

Example

False declarations in the proposal form in order to obtain EU funding.

In practice, the most frequent breach is improper implementation of the action/non-compliance with Annex 1 (i.e. if the work performed does not correspond to the activities described in Annex1). This will normally be examined on the basis of the periodic and final technical reports and, if needed, a project review.

Breaches of other obligations, such as the obligation to respect and commit to EU values (see Article 14), may also lead to grant reductions.

Example

A non-governmental organisation campaigning for justice regardless of religious or political background released very controversial statements of xenophobic nature, in particular by calling to destroy country X. One of the activities which was supposed to be implemented by the entity was cancelled by the subcontractor because of these statements. In the specific context of the action in question , these statements were considered a breach of the obligation to respect EU values (non-discrimination). This conduct led to a reduction of the grant amount (among other measures).

▪ Substantial errors, irregularities or fraud OR serious breach of obligations (in other grants)

The granting authority may also make a grant reduction, if such substantial errors, irregularities or fraud or serious breach of obligations were found in other grants, if:

− the other grants were awarded under similar conditions (i.e. same or similar rules applicable) and

− the substantial errors, irregularities or fraud or serious breach of obligations are:

− systemic or recurrent and

− have a material impact on this grant.

When? Grant reductions will be made at beneficiary termination, at the end of the action or after the payment of the balance.

2. Procedure How? The beneficiaries will be informed about the grant reductions and given the opportunity to submit their observations.

Formally speaking, the procedure is slightly different:

− if reduction leads to a recovery: the procedure is a standard contradictory procedure

− if reduction does NOT lead to a recovery (just a decreased payment): the procedure is apayment review procedure.

The difference in the two procedures is in the timing. In case of recoveries, there is nothing to pay out, so the procedure foresees a standard contradictory procedure. In case of positive amount to pay, the procedure switches to the payment review procedure in order to allow the granting authority to immediately pay out undisputed amounts and focus the observations/review on the reduction.

Contradictory procedure:

Step 1

The granting authority informs the coordinator/beneficiary concerned of its

Step 2

The coordinator/beneficiary concerned has 30 days to submit observations. An

Step 3

The granting authority analyses the observations and either stops the

Payment review procedure:

Step 1

The granting authority informs the coordinator about the reduction and notifies

Step 2

If the beneficiaries disagree, the coordinator/beneficiary concerned has 30 days

Step 3

The granting authority analyses the request for review and informs the

Depending on the moment when reduction takes place, this procedure will be directed either at the coordinator or the beneficiary concerned:

− for reductions at the time of the final payment: normally the coordinator

− for reductions after beneficiary termination and after final payment: normally the beneficiary concerned.

If it is directed at the coordinator, the coordinator must immediately inform the beneficiaries concerned via its usual communication channels (e.g. e-mail, registered letters with proof of delivery, etc.) and ask for their comments. It must also inform the other beneficiaries.

If it is directed at the beneficiary during the action, the granting authority will inform the coordinator later on (in a way that preserves confidentiality). Beneficiaries should inform their coordinator if there is the risk of a significant impact on the action (see Article 19.3).

If it is directed at the beneficiary after the action, beneficiaries do not have to inform their coordinators or ask them to submit comments.

3. Effects If the granting authority makes a reduction at beneficiary termination, it will deduct the reduction from the accepted EU contribution based on the costs or contributions that the beneficiary declared in the termination report and calculate the amount due to the beneficiary. If the amount is lower than the (pre-financing and interim) payments received by the beneficiary, the granting authority will recover the difference (see Article 22.3.2).

If the granting authority makes a reduction at the final payment, it will deduct them and calculate the amount to be paid accordingly (see Article 22.3.4).

If the granting authority makes a reduction after the final payment, it will deduct the amount reduced from the accepted EU contribution for the beneficiary at the final payment

and calculate a revised final grant amount. This may be followed by a recovery if needed (see Article 22.3.5).

For more guidance on grant reductions, see the Guidance on grant reductions.

SECTION 2 SUSPENSION AND TERMINATION General > Article 29 — Payment deadline suspension

ARTICLE 29

PAYMENT DEADLINE SUSPENSION

29.1 Conditions The granting authority may — at any moment — suspend the payment deadline if a payment cannot be processed because: (a) the required report (see Article 21) has not been submitted or is not complete or additional information is needed (b) there are doubts about the amount to be paid (e.g. ongoing audit extension procedure, queries about eligibility, need for a grant reduction, etc.) and additional checks, reviews, audits or investigations are necessary, or (c) there are other issues affecting the EU financial interests. 29.2 Procedure The granting authority will formally notify the coordinator of the suspension and the reasons why. The suspension will take effect the day the notification is sent. If the conditions for suspending the payment deadline are no longer met, the suspension will be lifted — and the remaining time to pay (see Data Sheet, Point 4.2) will resume. If the suspension exceeds two months, the coordinator may request the granting authority to confirm if the suspension will continue. If the payment deadline has been suspended due to the non-compliance of the report and the revised report is not submitted (or was submitted but is also rejected), the granting authority may also terminate the grant or the participation of the coordinator (see Article 32).

EU grants provide for different types of suspensions (suspension of the payment deadline (specific pending payment), suspension of all future payments and suspension of the grant agreement). Check the correct guidance

1. Suspension of the payment deadline (by the EU) What? The granting authority must make its payments in accordance with the timeline set out in the Data Sheet (usually 30 days from grant signature/start of project for initial prefinancing and 60 or 90 days from reception of the additional pre-financing/periodic report. If the deadline is missed, late payment interest will be due by the granting authority (see below and Article 22.5) — unless the payment deadline has been suspended.

Suspension of the payment deadline must be distinguished from suspension of payments (see Article 30). Suspension of the payment deadline is an ad hoc measure regarding a pending payment. Suspension of payments is independent of any individual payment request as a measure to stop making payments to a beneficiary which is, for example, suspected of serious misconducts.

The payment deadline may be suspended temporarily on the grounds listed in this Article.

Grounds for suspension of the payment deadline (by the EU):

▪ Payment request is incomplete or requires clarification.

The granting authority may suspend the payment deadline, if the reports (or any of their documents) are incomplete or unclear and the granting authority is therefore not in a position to determine that the action has been properly implemented and the payment is due.

Examples: the reports, the certificate on the financial statement or other supporting documents are missing; the information in the periodic technical report is incomplete; additional information on the coordinator’s new bank account is needed

▪ Doubts on the amount to be paid in the financial statements that require additional verifications.

The granting authority may suspend the payment deadline, if it has doubts (e.g. due to conflicting information between documents, or audit findings in other grants on the eligibility of the costs in the financial statements) and additional checks, reviews, audits or investigations are needed to establish the amount to be paid.

Example

The costs claimed in the financial statements are not consistent with the action tasks described in the technical report.

▪ There are other issues affecting the EU financial interests.

The granting authority may also suspend the payment deadline, if it has other doubts on the eligibility of payment claims. It will request the necessary information or enact other measures including by means of on-the-spot-checks if necessary.

Example

The granting authority has received information that parts of the activities are not properly implemented and subject to fraud.

2. Procedure How? The granting authority will inform the coordinator of the suspension of the payment deadline and explain the reasons why.

There is NO contradictory procedure for the suspension itself. However, if the suspension exceeds two months, the coordinator may ask the granting authority if the suspension is to be continued (i.e. ask to confirm it or lift it). In addition, a contradictory procedure/payment review will be available later on if the granting authority should eventually decide to dispute amounts and make rejections/grant reductions).

3. Effects Suspension starts on the day the notification (announcing payment deadline suspension) is sent to the coordinator (and ends on the day it is lifted).

As soon as the suspension is started, passing days do no longer count towards the 60 or 90 day deadline set out in the DataSheet and accordingly no late-payment interest for the beneficiaries will accrue. With the lifting of the suspension, the remaining payment period starts to run again (as from the day-count on which the suspension started).

If the issues have been resolved satisfactorily (e.g. the coordinator sent the requested information or re-submitted the report) or the granting authority has finished the necessary verifications (e.g. an audit), it will lift the suspension and inform the coordinator.

If a deadline has been suspended for several reasons, it will be lifted only when the consortium has satisfactorily addressed ALL the reasons.

General > Article 30 — Payment suspension

ARTICLE 30

PAYMENT SUSPENSION

30.1 Conditions The granting authority may — at any moment — suspend payments, in whole or in part for one or more beneficiaries, if: (a) a beneficiary (or a person having powers of representation, decision-making or control, or person essential for the award/implementation of the grant) has committed or is suspected of having committed: (i) substantial errors, irregularities or fraud or (ii) serious breach of obligations under this Agreement or during its award (including improper implementation of the action, non-compliance with the call conditions, submission of false information, failure to provide required information, breach of ethics or security rules (if applicable), failure to cooperate with checks, reviews, audits and investigations, etc.), or (b) a beneficiary (or a person having powers of representation, decision-making or control, or person essential for the award/implementation of the grant) has committed — in other EU grants awarded to it under similar conditions — systemic or recurrent errors, irregularities, fraud or serious breach of obligations that have a material impact on this grant. If payments are suspended for one or more beneficiaries, the granting authority will make partial payment(s) for the part(s) not suspended. If suspension concerns the final payment, the payment (or recovery) of the remaining amount after suspension is lifted will be considered to be the payment that closes the action. 30.2 Procedure Before suspending payments, the granting authority will send a pre-information letter to the beneficiary concerned: - formally notifying the intention to suspend payments and the reasons why and - requesting observations within 30 days of receiving notification. If the granting authority does not receive observations or decides to pursue the procedure despite the observations it has received, it will confirm the suspension (confirmation letter). Otherwise, it will formally notify that the procedure is discontinued. At the end of the suspension procedure, the granting authority will also inform the coordinator. The suspension will take effect the day after the confirmation notification is sent. If the conditions for resuming payments are met, the suspension will be lifted. The granting authority will formally notify the beneficiary concerned (and the coordinator) and set the suspension end date. During the suspension, no pre-financing will be paid to the beneficiaries concerned. For interim payments, the periodic reports for all reporting periods except the last one (see Article 21) must not contain any financial statements from the beneficiary concerned (or its affiliated entities). The coordinator must include them in the next periodic report after the suspension is lifted or — if suspension is not lifted before the end of the action — in the last periodic report.

EU grants provide for different types of suspensions (suspension of the payment deadline (specific pending payment), suspension of all future payments and suspension of the grant agreement). Check the correct guidance

1. Suspension of payments (by the EU)

What? The granting authority may suspend pre-financing, interim and final payments (for one or more beneficiaries), on the grounds listed in this Article.

Suspension of payments has NO impact on the action implementation. The beneficiary concerned must continue to work on the action, while addressing the issues that have led to suspension of the payment; costs incurred during suspension of payments are in principle eligible, but there will be no payments.

Grounds for suspension of payments (by the EU):

▪ Substantial errors, irregularities or fraud OR serious breach of obligations (in this grant)

The granting authority may suspend payments, if a beneficiary has committed or is suspected of having committed substantial errors, irregularities or fraud or serious breach of obligations (e.g. the action has not been properly implemented, non-compliance with the call conditions, submission of false information, failure to provide required information, breach of ethics, values or security rules, etc) — either during the award procedure or under the Grant Agreement.

Example

1. False declarations in the proposal form, in order to obtain EU funding 2. Based on information received from a third party, the granting authority suspects that the beneficiary and the person who has powers of control towards the beneficiary are in breach of EU values. The information received indicates that public statements which are discriminatory and incite hate towards women have been made by the person who controls the beneficiary. The granting authority suspended payments to the beneficiary until it confirmed that the allegations were not supported by reliable evidence.

▪ Substantial errors, irregularities or fraud OR serious breach of obligations (in other grants)

The granting authority may also suspend payments, if such substantial errors, irregularities-or, fraud or serious breach of obligations were found in other grants, if

− the other grants were awarded under similar conditions (i.e. same or similar rules applicable) and

− the substantial errors, irregularities or fraud or serious breach of obligations are:

− systemic or recurrent and

− have a material impact on this grant.

Example

During an audit of other grants, the granting authority detected systemic irregularities in the calculation of personnel costs that also affect all other Grant Agreements signed by the audited beneficiary. The grating authority may suspend all outstanding payments for the audited beneficiary until the issue is resolved.

2. Procedure How? Before suspending payments, the granting authority will follow a contradictory procedure to give the beneficiary the possibility to submit observations.Contradictory procedure:

Step 1

The granting authority informs the beneficiary concerned of its intention (and

Step 2

The beneficiary concerned has 30 days to submit observations. An extension

Step 3

The granting authority analyses the observations and either stops the

3. Effects Suspension starts on the day the notification (confirming suspension) is sent to the beneficiary concerned (and ends on the day it is lifted).

During suspension, NO individual financial statements may be submitted for the beneficiary (or beneficiaries) concerned with the periodic reports (except with the report for the final reporting period).

Costs incurred (for continuing to implement the action during suspension) are eligible and may be included in the next financial report, after suspension has been lifted. At the latest, they must be included in the periodic report for the final reporting period (— even if suspension is still ongoing).

Technical reports submitted during suspension must include the work of the beneficiaries concerned.

If payments for one (or some) of the beneficiaries are still suspended at the end of the action, the granting authority will make a partial payment of the balance for the amount that is not suspended (— but ONLY after having received all the necessary information for the final calculations for ALL consortium members, i.e. including the suspended beneficiaries).

The partial final payment that will be paid out in this case is NOT the payment that closes the action for the purposes of the deadlines set out in Point 6 of the Data Sheet. That payment will be made only after the payment suspensions are lifted.