The European Commission's proposal on rules for participation for the Seventh Framework Programme (FP7), the EU's research funding programme, 'misses [an] opportunity for a radical change', according to the European Court of Auditors. The main weaknesses in the Commission's proposal concern the transaction cost per euro spent, excessively cumbersome grants and a lack of flexibility. 'Whilst it is recognised that a certain degree of complexity is inevitable, the Court considers that the Commission proposal misses the opportunity to bring about radical changes to the administrative and financial rules for the Seventh Framework Programme,' states the Court's opinion. The paper calls for recognition that scientists often need to react quickly to external and internal changes during the life-cycle of a project, through the awarding of increased decision-making powers to the project coordinator. 'The coordinator should carry the scientific and financial responsibility, and must be able to decide not only on the scientific programme, but also on the allocation of financial resources in accordance with a set of rules previously agreed by all participants in the consortium,' says the Court. 'At the same time, the coordinator must guarantee towards the Commission that the scientific scope and the legally required European character of the action are maintained throughout the project duration,' the opinion continues, adding that the counterpart of increased flexibility must be enhanced scientific and financial accountability towards the Commission. The Court makes six key proposals for simplifying making more flexible the rules for participation: - a centralised and ex-ante verification of legal entities; - Commission services should use common databases and exchange data electronically; - a more flexible governance structure for indirect actions, with the Commission concluding a grant agreement with the coordinator acting on behalf of the other participants, or with the Commission awarding, by Commission decision, a grant without signing a private law contract; - use reviews (or hearings), ideally by peers, as a monitoring tool for indirect actions; - a single cost reimbursement system to allow participants to determine the Community financial contribution in a transparent, robust and simple-to-administer way; - encourage the use and dissemination of results of indirect actions and the transfer of ownership. The Commission did introduce measures to simplify participation, including: the use of lump sums, flat rates and scales of unit cost to simplify the reimbursement of eligible costs; the establishment of a single cost system, together with an increase in upper funding limits; and the setting up of a guarantee fund to cover the financial risk of carrying out indirect research actions. The Court comments on the readability of the Commission's proposal, stating that improvements could be made if the Commission worked on making its definitions more consistent. The opinion also highlights the Commission's obligation to monitor compliance with state aid rules for research and development (R&D). The FP7 Specific Programme 'Capacities' specifically provides for the funding of public and private research infrastructures, combining funding from FP7, other EU funds and national funds. 'The Commission should pay close attention to the potential risks arising from the accumulation of different grants from the Community budget for a single action,' the Court advises, recommending the development of an appropriate monitoring tool for ensuring compliance with state aid rules. While the proposed rules for participation for FP7 are largely similar to those for FP6, there are two new additions: rules on funding under the European Research Council (ERC), and rules on the awarding of grants to the European Investment Bank (EIB) for funding a 'Risk Sharing Finance Facility'. The Court supports the Commission's assertion that the rules for participation should also be applied to funding under the ERC, but notes the absence of provisions for transferring grants should a researcher move from one organisation to another. According to the Commission's proposals, in contrast to other parts of FP7, grants for frontier research from the ERC will be awarded to a specific researcher or research team (rather than a legal entity). In the Court's view, a clause should be inserted in grant agreements stating that the award if the recipient moves to another EU Member State or Associated country, the grant will be transferred if the researcher so wishes, and following a verification of the new organisation by the Commission. On grants awarded to the EIB, the Court calls for further clarification as to the scope of the EIB's loan and guarantee financing activities. The opinion also requests clarification on whether all parts of the rules for participation will apply to grants to the EIB, and how, and according to which rules, the EIB will allocate its loan and guarantee financing. The Court of Auditors concludes by stating that the proposal 'provides some elements of [...] a simplified system, in particular by introducing a single cost system, but falls short of creating a transparent, robust and simple-to-administer system to calculate and report costs and determine the Community financial contribution.' It warns that unless changes are made, participants may be dissatisfied, and the over-declaration of costs by participants will continue under FP7. The Commission is under no obligation to adopt the Court's recommendations, but it remains to be seen whether the Parliament will take them up at its first reading of the proposal in June.