2Financial viability check Initiated during negotiations if required on the basis of the Rules on verification of existence, legal status, operational and financial capacity (C (2007)/ /06/2007)Only for three categories of participants:Coordinators (if not public bodies, international organisation, secondary or higher education establishment or guaranteed)Beneficiaries requesting more than € EU contribution (if not public bodies, international organisations, secondary or higher education establishment or guaranteed)Others: exceptionally, if there are justified grounds of doubt (EWS (W2, W3, W4 codes), substantial findings of audits)Self-check Excel tool for participants is available on CORDIS (soon to be replaced by “playground” on the portal)
3Financial viability check Supported by NEF, Portal, PDM-URFPilot process for 3 RTD Directorates, standard process from 20111. Automatic check provided by NEF2. REA informs the LEAR/available contact person:The specifies the way how the documents have to be provided: uploaded via the Portal (or sent to the negotiating officer in copy in INFSO projects).3. Communication with the beneficiaries via the Portal:- The LEAR receives the request in an , request seen on the Portal- The LEAR has to upload supporting documents and fill in the simplified balance sheet data on the Portal.4. Validation of data by REAValidated data can be seen from the Portal, available for internal COM staff.5. Decision by the Authorizing Officer by Sub-delegation (AOSD) on the basis of all evidence
4Financial viability check Quick overview NEFLFV Lite: Automatic check forvalidated entitites;Step 1. PO/FO actsto REA; reasons statedPDMStep 2. REA actsFlag in PDM-URFto LEAR from REAURFStep 3. LEAR actsLEAR uploads informationREA validates informationPDM displays ratiosPDMStep 4. REA actsNEF produces LFV reports,displays validated PDM info;checks ABAC for EWS;calculates co-financing;NEFStep 5. PO acts
5Financial viability check - NEF Legal and Financial VerificationLFV LITE - NEF
6Participant Portal - Organisation data Organisation data tab managed by the LEARof the entity on the Portal
11Documents to be submitted Supporting documents of the last financial year for which the accounts were closed:- balance sheet,- profit and loss account and the related notes of the financial statements- statutory audit report(Exception: if the entity is exempt from audit under the national legislation, the COM accepts unaudited statements provided they are recognised in the accounting system of the entity and are established according to the national legislation.)- audit report certifying the accounts, if above €Simplified balance sheet data to be filled in: available via the Portal as seen in the Negotiation Guidance NotesOfficial documents: signed by the authorized representative of the entity, stamped, datedDocuments to be submitted in any budgetary year once.Linked enterprises : Non-consolidated data should be provided, meaning the financial information per PICs- Exception: Start-up companies (provisional data is not part of the validated data of the entity)
12Financial capacity check - elements 1. Financial viability check, Concise analysisLiquidity: capable of covering short-term commitmentsSolvency: capable of covering medium and long-term commitmentsProfitability 1: generates profit/able to self-finance its activitiesMore in depth analysis (if necessary)Financial autonomyProfitability 2Equity flag (comparing total debt to equity)2. Co-financing capacity(if serious qualifications were raised in the audit report on the entity’s co-financing capacity)+ financial exposure flag (if the co-financing check is performed and only for coordinators)3. Early Warning System check4. Checking whether there are serious audit findings or substantial findings relating to the financial capacity in the audit certifying the account for the past 2 years
13Results of the FVC concise analysis Weak ifThe result of the concise analysis is 0-2 pointsConsequence: more in-depth analysisWeak, even if the concise analysis is acceptable/good, butAn audit report of the accounts has been issued with serious qualifications, orWeak equity flag result, orWeak co-financing capacity or financial exposure flag result, orThe entity has been subject to substantial financial findings relating to its financial capacity (last 2 years)protection measuresIf the entity is subject to an EWS warning (EWS 2,3,4):Protection measures have to be considered regardless the positive result of the FVC.
14Results – actions taken If the result of the more in-depth analysis isAcceptable/good: no actionif the co-financing, equity flag results are not weak, if there are no substantial audit findings or serious audit qualifications;otherwise protection measures by the AOSDWeak: protection measures by the AOSDInsufficient: cannot participate unless duly justified reasons are provided by the AOSD according to his/her own risk assessment.
15Assessment – Protections measures Protective measures for weak participants: limited (no bank guarantees, no reduction of pre-financing, no blocked accounts etc.), but reinforcement of sanctions and penaltiesWeak entities (following a more in-depth analysis) cannot be coordinators but can participate as “normal” partnersException: voluntary bank guarantee to allow weak entities to stay coordinators.For any weak entities the COM may initiate a financial audit during the implementation of an FP7 indirect action, which may be accompanied by a technical auditSubject to reinforced monitoring (additional reviews, on-spot checks, etc.)