Procurement under EU grants: what a donor audit really checks
A donor audit of procurement under an EU grant checks not only that goods were bought and paid for, but also how the supplier was chosen: whether the organisation followed its usual procedures, whether it selected the tender offering best value for money or the lowest price, and whether there was any conflict of interest. If the documents do not show this, the cost may be declared ineligible or the grant may be reduced.
We have already written about procurement in grant projects in general. This article takes a different angle: what the EU financial rules actually say and how those provisions turn into the auditor’s questions about your procurement files.
What the EU rules are based on
The general rules for grants from the EU budget are set by Regulation (EU, Euratom) 2024/2509 of 23 September 2024 on the financial rules applicable to the general budget of the Union (recast). Text: EUR-Lex. Four provisions are key for procurement by beneficiaries.
- Article 208(1). Where the action requires a contract, the beneficiary may award it in accordance with its usual purchasing practices, provided the contract goes to the tender offering best value for money or, as appropriate, the lowest price, while avoiding any conflict of interests.
- Article 208(2). For contracts worth more than EUR 60 000, the authorising officer may, if duly justified, require the beneficiary to follow additional special rules. They must be proportionate and are included in the grant agreement.
- Article 61. A conflict of interests exists where the impartial and objective exercise of functions is compromised for reasons involving family, emotional life, political or national affinity, economic interest or any other direct or indirect personal interest.
- Article 132(4). In case of irregularities or breach of obligations, the grant may be reduced in proportion to the seriousness of the breach.
Separately, Article 189(3) requires costs to be reasonable, justified and in line with the principle of sound financial management, in particular regarding economy and efficiency. The specific procedures, thresholds and document forms are set out in your grant agreement and its annexes, so read them first: that is what the auditor works from.
Who this applies to
- civil society organisations and foundations that received an EU grant directly or as a consortium partner;
- sub-grantees who received part of the funds from the lead beneficiary: Article 129 requires third parties involved in implementing EU funds to grant equivalent access rights for checks;
- managers who themselves choose suppliers of training venues, equipment, printing and consultants;
- accountants who pay invoices and need to see that the procurement was documented before payment.
What to do and when
- At the start of the project, extract the procurement rules, thresholds and document requirements from the grant agreement and annexes. Compare them with your internal procedure.
- If you have no procurement procedure of your own, approve one by order. Article 208(1) allows you to use your usual practices, but you must show the auditor that they exist on paper and were applied consistently.
- Keep a file for each purchase: the need and terms of reference, the request for offers, the offers received, the criteria, selection minutes with reasons, the contract and acceptance documents.
- Before each selection, obtain a declaration of no conflict of interest from committee members and the manager. If there is a conflict, the person steps out and this is recorded in the minutes.
- If a purchase exceeds EUR 60 000, check whether your agreement provides special rules for such contracts.
- Agree any deviation from the procedure (urgent need, single supplier) with the donor in writing before the purchase, not afterwards.
What the auditor actually checks
| Auditor’s question | Provision behind it | What to show |
|---|---|---|
| Do you have an internal procurement procedure, and was it applied consistently? | Art. 208(1): the beneficiary’s usual practices | Approved policy, the same file structure for every purchase |
| Why was this supplier chosen? | Art. 208(1): best value for money or lowest price | Comparison of offers, criteria, minutes with reasons |
| Is there any link between the supplier and your people? | Art. 61 and Art. 208(1): avoid conflicts of interests | Declarations, check of the supplier’s owners, minutes |
| Were special rules for large contracts followed? | Art. 208(2): above EUR 60 000, if the agreement contains such rules | Procedure documents as required by the agreement |
| Is the price reasonable? | Art. 189(3): economy and efficiency | Market offers, an explanation if the cheapest was not chosen |
Common errors and where they lead
- Three quotes collected after payment. Offers dated later than the contract are visible at once. The auditor will treat this as no procedure at all.
- Minutes without reasons. “Company X selected” with no criteria does not show that the offer was the best value for money.
- A relative on the committee. Family ties are named directly in Article 61. Even if the price was at market level, the auditor will report the conflict of interest risk.
- Splitting a purchase. One need is divided into several small contracts to avoid a more demanding procedure. The auditor adds up contracts with one supplier over the period and sees the total.
- A procedure that differs from the agreement. If the grant agreement sets special rules, an internal policy does not replace them.
The consequence under Article 132(4) is a reduction of the grant in proportion to the seriousness of the breach. Under Article 205(1) the grant amount becomes final only after the final reports are approved, and later audits and checks remain possible. Where problems are systemic, Article 205(2) allows the findings to be extended to other grants of the same beneficiary awarded under similar conditions.
FAQ
Do you have to collect three quotes under an EU grant?
Regulation 2024/2509 does not set a number of offers: it requires choosing best value for money or the lowest price and avoiding conflicts of interests. Look for the number of quotes and thresholds in your grant agreement and its annexes.
What is a conflict of interest in grant procurement?
Under Article 61 of the Regulation, it is a situation where the objectivity of the decision maker is compromised by family, emotional, political or national ties, an economic or any other personal interest. That person is excluded from the process and this is documented.
Can the whole cost be disallowed for a procurement breach?
Article 132(4) allows the grant to be reduced in proportion to the seriousness of the breach. The size of the correction is decided by the donor under its agreement and rules, so it cannot be predicted in advance.
How we help
We audit and verify expenditure of grant projects and, before the donor arrives, review procurement files: the procedure, minutes, declarations and compliance with the agreement. See grant audit, NGO audit and our article on EU grant audits. For project teams we run free webinars for NGOs. You can reach us via contacts.
Prepared by the MK Audit team