Horizon Europe Funding and Audit Requirements Explained

Horizon Europe is one of the largest research and innovation funding programmes in the world, providing substantial opportunities for universities, research organisations, businesses, charities and public sector bodies. Understanding Horizon Europe Funding and Audit Requirements is key for anyone looking to participate successfully in these programmes.

Since the UK’s association to Horizon Europe in 2024, UK organisations have once again been able to participate on the same basis as their European counterparts. This has opened significant opportunities for collaborative research, innovation and international partnerships across a wide range of sectors.

However, securing funding is only part of the process. Organisations must also understand the programme’s financial rules, reporting requirements and audit obligations to ensure funding is retained and claims are accepted.

This guide explains how Horizon Europe funding works, who can apply, which costs are eligible, and what organisations need to know about Certificates of Financial Statements (CFS) and audit requirements.

What Is Horizon Europe?

Horizon Europe is the European Union’s flagship research and innovation programme, running from 2021 to 2027 with a budget of €95.5 billion.

The programme supports:

Scientific research
Technological innovation
Sustainability initiatives
Digital transformation
Healthcare advancements
Climate and environmental projects
International collaboration

Its overall objective is to strengthen Europe’s research and innovation capability while addressing global challenges and promoting economic growth.

The Three Pillars of Horizon Europe

Horizon Europe is structured around three main pillars:

Open Science

Supports world-class research through collaboration, researcher mobility and open access to scientific knowledge.

Global Challenges and European Industrial Competitiveness

Funds projects addressing major societal challenges while enhancing industrial competitiveness.

Open Innovation

Supports breakthrough innovations, new technologies and the commercialisation of research outcomes.

Together, these pillars create opportunities for organisations ranging from universities and research institutes to SMEs and large businesses.

Why Is Horizon Europe Important for UK Organisations?

The UK’s return as an associated member has restored access to one of the most significant international research funding programmes available.

For UK organisations, Horizon Europe offers:

Access to substantial grant funding
Opportunities to collaborate internationally
Participation in large-scale research projects
Access to leading academic and industry networks
Greater visibility and research impact

We often find when speaking to clients that many organisations focus primarily on securing funding, but successful projects also require careful management of reporting and compliance obligations throughout the project lifecycle.

Failure to meet these requirements can lead to funding adjustments, delays in payment or increased scrutiny from funders.

Who Can Apply for Horizon Europe Funding?

A wide range of organisations can participate in Horizon Europe programmes.

Eligible applicants commonly include:

Universities
Research institutions
SMEs
Large commercial organisations
Charities and non-profit organisations
Public sector bodies
NHS organisations
International research partnerships

Individual eligibility will depend on the specific funding call and project requirements.

For organisations unfamiliar with the broader funding landscape, our guide to The Grant Funding Process provides useful context on how grant-funded projects are structured and managed.

How Much Funding Is Available Under Horizon Europe?

Funding levels depend on the type of project and funding mechanism involved.

Research and Innovation Actions (RIA)

Research and Innovation Actions typically provide:

100% funding for all participating organisations

These projects are generally focused on advancing scientific knowledge and early-stage innovation.

Innovation Actions (IA)

Innovation Actions generally provide:

70% funding for for-profit organisations
100% funding for non-profit organisations

These projects are often closer to commercial application and market deployment.

Understanding your funding rate is essential when planning project budgets and forecasting cash flow.

What Costs Are Eligible Under Horizon Europe?

To claim funding successfully, costs must be eligible under Horizon Europe’s financial rules and directly attributable to project activities.

Personnel Costs

Personnel costs often represent the largest area of expenditure.

Eligible costs may include:

Salaries
Employer pension contributions
National Insurance contributions
Other employment-related costs

Organisations should maintain robust supporting documentation, including contracts, payroll records and timesheets where required.

Subcontracting Costs

Subcontracting costs may be eligible where external specialists are required to perform activities that cannot be delivered internally.

Appropriate procurement procedures and documentation should be retained.

Purchase Costs

Purchase costs can include:

Equipment
Consumables
Travel
Accommodation
Goods and services necessary for project delivery

These costs must generally be supported by invoices and payment evidence.

Other Direct Costs

Additional project-specific expenditure may also be eligible where permitted under programme rules.

Indirect Costs

Horizon Europe allows organisations to recover indirect costs through a flat-rate calculation.

Understanding how these costs are calculated and applied is important when preparing claims and financial reports.

Why Is Financial Compliance Important in Horizon Europe?

Financial compliance is not simply an administrative requirement. It plays a crucial role in protecting funding and maintaining confidence among project partners and funders.

Organisations receiving Horizon Europe funding must demonstrate that:

Costs are eligible
Expenditure is supported by evidence
Records are complete and accurate
Funding conditions have been followed
Claims reflect actual project activity

Good governance and strong project controls can significantly reduce the risk of issues arising during reviews or audits.

What Is a Certificate of Financial Statements (CFS)?

A Certificate of Financial Statements (CFS) is an independent report prepared by a qualified auditor that provides assurance on project costs claimed under Horizon Europe.

The purpose of the CFS is to give the European Commission confidence that expenditure included within funding claims complies with programme requirements.

The review focuses on whether claimed costs:

Were actually incurred
Are adequately supported
Meet eligibility requirements
Have been correctly allocated to the project

A CFS acts as an important safeguard for both funders and funding recipients.

When Is a Certificate of Financial Statements Required?

A CFS is required when a beneficiary’s cumulative claim for actual costs reaches the threshold set by the European Commission.

Current Horizon Europe rules require a CFS when total reimbursement of eligible costs exceeds €430,000 for a beneficiary.

The certificate is usually submitted alongside the final financial reporting package.

As funder requirements can evolve over time, organisations should always refer to the latest programme guidance and grant agreement.

What Does a CFS Review Typically Cover?

The auditor performs agreed-upon procedures as detailed by the European Union and involves prescribed testing across several areas of expenditure, including.

Staff Costs

Reviewing:

Employment contracts
Payroll records
Salary calculations
Time recording information
Agreeing payments

Procurement and Purchasing

Reviewing:

Supplier invoices
Procurement processes
Payment records
Contract documentation
Payment evidence

Travel and Subsistence

Reviewing:

Travel claims
Supporting receipts
Approval processes
Project relevance
Payment evidence

Indirect Cost Calculations

Reviewing:

Cost allocation methodologies
Calculation accuracy
Consistency with programme guidance

The exact testing procedures depend on the grant agreement and reporting requirements.

Client Insight

“While perhaps more known for our gardens as opposed to research, we at RBGE have an ever-increasing research portfolio from a range of funders both nationally and internationally. We have used Henderson Loggie on three occasions over the last 12 months, auditing grants for us from UKRI, Darwin Initiative and the EU. The service we received from HL in all three instances was efficient, informative, constructive, helpful and while not a pre-requisite in audit but hugely important to us – friendly. They have an incredibly detailed knowledge of the complexities of research funding which, as a client, was invaluable to us.”

Alexander Walker, Royal Botanic Garden Edinburgh

How to Prepare for a Horizon Europe Audit or CFS Review

Preparation should begin at the start of the project rather than at reporting stage.

1. Review Funding Conditions Thoroughly

Ensure project teams understand:

Eligible expenditure rules
Reporting requirements
Record retention obligations
Audit thresholds

2. Maintain Strong Financial Records

Retain appropriate documentation including:

Contracts
Invoices
Timesheets
Payroll records
Procurement evidence

3. Monitor Claims Throughout the Project

Regular reviews can help identify issues before formal reporting deadlines.

4. Maintain Clear Audit Trails

Every cost claimed should be traceable back to:

Project activity
Supporting documentation
Accounting records

5. Address Issues Early

Where uncertainty exists regarding eligibility, it is usually easier to resolve questions before claims are submitted.

Further guidance can be found in our article on How to Prepare for a Grant Audit.

Common Horizon Europe Audit and Compliance Challenges

Many organisations encounter similar issues during grant assurance reviews.

Common challenges include:

Missing or incomplete timesheets
Weak supporting documentation
Ineligible expenditure
Incorrect cost allocations
Procurement compliance issues
Inconsistent project records
Poor document retention procedures

These challenges can lead to expenditure adjustments or increased scrutiny from funders.

Our article on Common Grant Audit Failures explores these risks in greater detail.

How Good Grant Management Supports Compliance

Successful Horizon Europe projects typically combine strong research delivery with effective financial management.

Good practices include:

Regular internal compliance reviews
Clear governance arrangements
Documented project procedures
Ongoing monitoring of expenditure
Early preparation for reporting requirements

Organisations that integrate compliance into project management from the outset are often better positioned to minimise risk and maximise funding outcomes.

Supporting Successful Horizon Europe Projects

Horizon Europe provides significant funding opportunities for UK researchers, universities, businesses and public sector organisations. However, access to funding brings important responsibilities around financial management, reporting and compliance.

Understanding eligible costs, maintaining robust documentation and preparing early for Certificate of Financial Statements requirements can help organisations avoid common issues and protect valuable funding.

While each project and funding call has its own requirements, a proactive approach to grant management and assurance can support successful project delivery and help maintain confidence among funders, partners and stakeholders.