Introduction
If your organisation is claiming more than a certain threshold in EU funding, you’ll be asked to provide a Certificate on Financial Statements (CFS). This is a formal document, produced by an independent auditor, that confirms your reported costs are accurate and eligible.
For many finance teams, the CFS is the most stressful part of Horizon Europe reporting. It’s expensive. It requires deep coordination between project management and finance. And if the auditor finds discrepancies, the consequences can be severe.
But here’s the truth: the CFS isn’t a trap. It’s a compliance checkpoint. If your cost reporting is clean, traceable, and based on real accounting records, the CFS process should be straightforward.
This guide explains what a CFS is, when it’s required, what auditors check, and how to prepare without last-minute chaos.
What Is a CFS?
A Certificate on Financial Statements (CFS) is an independent auditor’s report that verifies the accuracy of the costs you’ve declared in your Horizon Europe financial statement.
The auditor checks that:
- Costs are correctly recorded in your accounting system
- Costs are eligible according to the Grant Agreement rules
- Supporting documentation exists and is traceable
The CFS is defined under Article 24.2 of the Horizon Europe Grant Agreement and follows a standardised template provided by the European Commission.
The certificate doesn’t guarantee that costs will be accepted. It simply confirms that they were declared in line with your usual accounting practices and the Grant Agreement conditions.
When Is a CFS Required?
The CFS threshold and schedule are set out in Data Sheet Point 4.3 of your Grant Agreement. The requirement depends on:
- The amount of EU contribution to costs you’re requesting (not the total project budget)
- The reporting period (interim or final)
As of 2025, the standard CFS threshold is:
- EUR 430,000 of requested EU contribution to costs
This means:
- If your organisation requests less than EUR 430,000, no CFS is required
- If your organisation requests EUR 430,000 or more, a CFS is mandatory at final payment (and sometimes at interim reporting, depending on your Grant Agreement)
The threshold applies per beneficiary, not per consortium. Each partner is assessed individually.
Example:
Your consortium has 5 partners. At final payment:
- Partner A requests EUR 500,000 → CFS required
- Partner B requests EUR 380,000 → No CFS required
- Partner C requests EUR 450,000 → CFS required
- Partner D requests EUR 200,000 → No CFS required
- Partner E requests EUR 600,000 → CFS required
Each partner above the threshold must submit their own CFS.
What Does the CFS Auditor Check?
The CFS auditor performs an agreed-upon procedures engagement based on the official template. This is not a full financial audit. It’s a targeted verification of specific cost categories.
The auditor checks:
1. Personnel Costs
- Are salaries correctly recorded in the payroll system?
- Do time records exist and match the claimed costs?
- Are rates calculated according to the beneficiary’s usual accounting practices?
- Are social charges and employer contributions properly documented?
2. Subcontracting Costs
- Are subcontractor invoices genuine and paid?
- Do contracts exist and match the claimed amounts?
- Were procurement rules followed?
3. Purchase Costs (including equipment, consumables, and other goods/services)
- Are invoices and payment proofs available?
- Are costs recorded in the general ledger?
- Are purchase orders and delivery confirmations traceable?
4. Travel and Subsistence Costs
- Do travel reports and receipts exist?
- Are claimed amounts in line with internal travel policies?
5. Other Direct Costs
- Are costs properly categorised and justified?
- Are supporting documents available?
6. Indirect Costs (if not using the flat rate)
- Are overheads calculated according to the beneficiary’s usual cost accounting practices?
- Is the methodology consistently applied?
The auditor also verifies that:
- Costs are identifiable and verifiable in the accounting system
- Costs are necessary for the action as described in Annex 1
- Costs comply with national tax, labour, and social security laws
What Happens If the Auditor Finds Errors?
If the auditor identifies discrepancies, they must report them in detail in the CFS. Common findings include:
- Timesheet inconsistencies (hours claimed don’t match time records)
- Missing supporting documents (invoices, contracts, or receipts not available)
- Costs charged to the wrong project (allocation errors)
- Ineligible costs included (e.g., costs incurred before the project start date)
The European Commission will review the auditor’s findings and decide on next steps. Possible consequences:
- Cost rejection (the ineligible costs are deducted from your funding)
- Grant reduction (the total EU contribution is lowered)
- Repayment demand (if ineligible costs were already paid)
In severe cases, repeated errors can trigger a full audit of your organisation.
How to Prepare for a CFS Without Panic
The CFS process can take 8-12 weeks from start to finish. Don’t wait until the reporting deadline to start preparing.
1. Know Your Threshold
Check your Grant Agreement Data Sheet (Point 4.3) to confirm:
- Whether a CFS is required
- At which reporting period (interim or final)
- What the threshold is for your programme
2. Choose a Qualified Auditor Early
The auditor must be:
- Independent (external to your organisation)
- Qualified according to EU Directive 2006/43 (or equivalent national legislation)
Public bodies may use an independent public officer instead of an external auditor, provided they are independent “in fact and in appearance.”
Do not wait until the last minute to engage an auditor. They need time to:
- Understand your accounting system
- Review your cost categories
- Perform the agreed-upon procedures
- Draft and finalise the certificate
3. Organise Supporting Documents
The auditor will request evidence for every cost category. Prepare:
- Payroll records and time sheets
- Invoices and payment proofs
- Purchase orders and delivery confirmations
- Travel reports and receipts
- Subcontractor contracts and invoices
If documents are missing or incomplete, the auditor cannot verify the costs, and they will be flagged in the certificate.
4. Reconcile Claimed Costs with Accounting Records
The auditor will trace your declared costs back to your general ledger. If the numbers don’t match, you have a problem.
Before the audit:
- Cross-check your financial statement against your accounting system
- Ensure all costs are properly allocated to the project
- Verify that journal entries are complete and accurate
5. Use a Digital System to Maintain Traceability
The biggest challenge in CFS preparation is gathering evidence from multiple sources. If your project data is scattered across spreadsheets, emails, and local folders, assembling the required documentation becomes a multi-week scramble.
A digital control system like Kronis ensures that:
- All costs are linked to supporting documents
- Time records are complete and traceable
- Financial statements are pre-filled from real accounting data
- Evidence is always accessible, even years after the fact
This doesn’t just speed up CFS preparation. It reduces the risk of auditor findings.
Final Thought
The CFS isn’t designed to catch you out. It’s a compliance checkpoint to ensure that EU funds are being spent properly.
If your organisation is above the threshold, don’t treat the CFS as a bureaucratic burden. Treat it as an opportunity to validate that your financial management is audit-ready.
Because if you can pass a CFS review, you can pass any audit.
What Happens During a Horizon Europe Project Review (And How to Prepare)
How to Manage Multiple Horizon Europe Projects Without Losing Control
The Hidden Cost of Manual EU Grant Management (And Why It Matters)
