UK universities may be forced to return millions of pounds in funding to the European Union and pay penalties because they are failing to properly calculate the cost of research overheads under the EU's main research programme.
This is the warning from Paul Drath, an expert in the EU's Seventh Research Framework Programme (FP7). His concern centres on a mechanism built into FP7 for European universities to recover more of the indirect or overhead costs of research such as infrastructure.
Under new rules, which replace those of FP6, universities that are able to calculate the total cost of research projects, including indirect or overhead costs, are expected to do so. They can then claim up to 75 per cent of all research costs.
As the full economic costing of research is not yet the norm on the Continent, universities that cannot properly calculate overhead costs receive a "flat-rate" payment that is currently 60 per cent of direct costs.
Mr Drath, whose company Singleimage Ltd trains universities in how to apply for European funding, said that "the vast majority" of UK universities are opting to accept flat-rate funding and failing to calculate the correct overhead cost even though they have accounting systems in place to do so.
The consequence, he added, is that if the EU checks UK universities' choice of methodology, the sector may have to pay back the 60 per cent overhead and face a fine.
"It could potentially cost EUR100 million (£78.6 million) a year," Mr Drath said. "The message needs to get to (universities') finance directors so they can take action."
He said UK universities were in danger of falling foul of the European Commission over accounting for the time academics spent on EU projects. The Commission, he said, was keen for anyone working on EU projects to keep full time sheets of their work rather than partial time sheets accounting only for the EU project.
A Universities UK spokesman said the issue, although unlikely to be a problem, was being clarified with the Commission.
He said guidelines on how universities could adapt the methodology they used to calculate the full cost of research to EU framework funding were being produced and a final draft was being reviewed by the Commission.
"Once this is finalised it will be disseminated to the sector," he said.
But Mr Drath said the sector should have already adapted the methodology and be using it now.