Welsh charities have been warned that they could lose European funding because projects are not being managed properly.
In his annual report released last week, the auditor general for Wales, Sir John Bourn, said that the Welsh European Funding Office (WEFO), the body that distributes EU funding in Wales, could claw back grants from organisations that were not keeping accurate records.
Both public bodies and voluntary organisations in Wales rely heavily on European funding, which is administered through the £1.1 billion Objective One programme and the European Social Fund.
Bourn said: "The results of audit examinations to date highlight several problems that result mainly from the failure of grant recipients to document project spend adequately."
"With the value and volume of European-funded projects expected to increase significantly over the next few years, it is vital to ensure that all these projects are managed properly. Failure to do so could result in the claw back of grant by WEFO from individual project sponsors."
Specific problems identified in the report include inaccuracies in the completion of grant forms, failure to categorise expenditure correctly by calendar and financial year, transfers of expenditure between categories without the agreement of WEFO and the loss of invoices and other documents.
Phil Fiander, European director with the Wales Council for Voluntary Action, said: "There is always a danger of losing funding. But we have set up a voluntary-sector support unit to provide training on record keeping and management. We are trying to ensure that voluntary organisations don't get caught out."
But Fiander claimed that the voluntary sector was probably better at keeping accurate records than other sectors because of its experience of grant funding from other sources such as the National Lottery.
One problem with EU funding was late approval of projects, which means that organisations start projects before final go-ahead from funders and then have to retrospectively amend records when the grant arrives. "It's important to get systems in place before the project starts,
The National Audit Office Wales audited around 10 per cent of EU- funded Welsh projects during 2000-1. Previously only 10-15 per cent of EU funded UK projects were audited.