Financial rules in Horizon 2020 - ETNA 2020 training workshop, Athens September 6, 2016
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Financial rules in Horizon 2020
ETNA 2020 training workshop, Athens
September 6, 2016
Katarina Rohsmann
Austrian Research Promotion Agency (FFG),
NCP Academy Partner
Overview
Funding instruments and funding rates
The project budget in the proposal
Eligibility of costs
Cost categories
Financial reporting and payments
Audits
Frequent mistakes
FFG, September 6, 2016
Financial information in the Grant Agreement
derived from
the proposal
Grant Agreement
H2020
Eligibility of costs: mainly in art. 6 (art. 10 to 15 for Third Parties)
http://ec.europa.eu/research/participants/data/ref/h2020/mga/gga/h2020-mga-gga-multi_en.pdf
FFG, September 6, 2016
Funding instruments and funding rates
Instrument Funding rate
Research and innovation actions (RIA) 100%
Innovation actions (IA) 70% / 100%
Coordination and support actions (CSA) 100%
SME instrument phase 1 € 50.000 (lump sum)
SME instrument phase 2 70 %
Fast Track to Innovation 70% / 100%
Prizes fixed amount (see ‚rules
of the contest‘)
• Innovation Actions, Fast track to innovation: 100% for ‚non-profit
organisations‘
• The total costs (direct and indirect costs) are multiplied with the funding
rate
FFG, September 6, 2016
Budget for the proposal
Starting point:
• What are the organisation’s tasks in the project? and/or
• How many people from the organisation will work for the project?
part A
(tables)
part B
(narrative part)
Make sure that the two parts match!
FFG, September 6, 2016
Budget table in part A (full proposal)
25 % flat-rate, except subcontracting
and ‚in-kind contributions not used on the premises‘
transport
only if projects:
explicitly n/a
mentioned
total requested
• Only the white fields must be completed amount
• RIA, CSA: Costs of Linked Third Parties are added to the beneficiary’s costs
• IA: separate column for costs of Linked Third Parties
FFG, September 6, 2016Budget table in Part A (stage 1 of
a two-stage proposals)
• Only the total requested amount for the action must be indicated
• No major deviations allowed between stage 1 and 2
FFG, September 6, 2016Budgetary information in part B
3.4 Resources to be committed
Please provide the following:
• a table showing number of person/months required (table 3.4a)
• a table showing ‘other direct costs’ (table 3.4b) for participants
where those costs exceed 15% of the personnel costs
------------------
4.2: Third Parties involved in the action
• include information on subcontractors, Linked Third Parties and
third parties providing in-kind contributions (must be indicated in
Annex 1 of the Grant Agreement in order to be eligible costs)
FFG, September 6, 2016Table 3.4a: staff effort
Table 3.4a: Summary of staff effort
Please indicate the number of person/months over the whole duration of the planned
work, for each work package, for each participant. Identify the work-package leader for
each WP by showing the relevant person-month figure in bold.
WPn WPn+1 WPn+2 Total Person/
Months per Participant
Participant Number/Short
Name
1 PM: 1/12 of
ParticipantNumber/
the annual
Short Name
productive
Participant Number/
hours
Short Name
Total Person/Months
FFG, September 6, 2016 9Table 3.4b: other direct costs
Table 3.4b: ‘Other direct cost’ items (travel, equipment, other goods and
services)
Please complete the table below for each participant if the sum of the costs for’
travel’, ‘equipment’, and ‘goods and services’ exceeds 15% of the personnel
costs for that participant.
Participant Number/Short Cost (€) Justification
Name
if below 15%: can
Travel be completed
Equipment voluntarily
Other goods and services
Total
FFG, September 6, 2016 10Eligibile costs: overview
FFG, September 6, 2016General eligibility criteria for actual costs
• Incurred by the beneficiary
• incurred during the duration of the action (except travel costs
for kick-off meeting and costs for final reporting)
• indicated in the estimated budget of the action
• identifiable and verifiable
• necessary for the action as described in the GA
• in compliance with national laws on taxes, labour and social security
• in compliance with beneficiary's usual accounting practice (may not
contradict the rules of the Grant Agreement)
• reasonable, justified, sound financial management
N.B.: Non-refundable VAT is eligible
FFG, September 6, 2016Personnel costs: overview
UNIT COSTS
ACTUAL
PERSONNEL
COSTS
Calculated by the Fixed by
beneficiary according Commission for
Calculation to its usual accounting SME owners
method defined practices and natural
in the model (‘average personnel persons without
grant agreement costs’) a salary
FFG, September 6, 2016Calculation of personnel costs
on a yearly basis
personnel costs = hourly rate x hours worked for the project
Annual gross salary:
Calculation of the hourly rate: basic salary
social security contributions
taxes and duties
annual gross salary other mandatory compo-
------------------------------------------- nents of the basic salary
annual productive hours
(3 options) ≠ bonuses, extra payments for
participating in the project…
FFG, September 6, 2016Annual productive hours
Option 1: „1720 fixed hours“:
• standard number which may be used by any
beneficiary (pro-rata for part-time employees)
Option 2: „Individual annual productive hours“:
• calculation: ‘annual workable hours’ of the individual employee
+ overhours – absences (sick leave etc. – not [bank] holidays)
Option 3: „Standard annual productive hours“
• calculated according to the usual accounting practises
• must correspond to at least 90 % of the ‚standard annual workable hours‘
No more hours than the „annual productive hours“ may be
charged on all EU-funded projects per person and year
FFG, September 6, 2016‚Last closed financial year‘
• Only for calculation of personnel costs on a yearly basis:
• If the financial year is not closed at the time of reporting, the
beneficiary must use the hourly rate of the last closed financial year
available
• No adjustments!
salary rises lead to
financial losses
FFG, July 6, 2016Calculation of personnel costs
on a monthly basis If parts of the remuneration are
generated over a period longer
monthly gross salary than a month, the beneficiaries
------------------------------------------- may include only the share which
annual productive hours / 12
(option 1 or 3)
is generated in the month
(irrespective of the amount
actually paid for that month)
Each beneficiary must use only one option (per full financial
year or per month) for each full financial year for all H2020
projects
FFG, September 6, 2016‚Standard‘ and ‚additional‘ remuneration
Standard remuneration
Additional remuneration
Mandatory complements
Bonus payments
• resulting from law, collective
agreement or working contract • only eligible for non-profit
organisations
Basic • mandatory fixed complements (e.g.
• payed for additional work or
remuneration holiday pay, complement for hazardous
expertise
work)
• mandatory variable complements (e.g. • strict requirements – see
for merit or performance) not triggered Annotated Grant Agreement
by the work in specific projects
FFG, September 6, 2016Personnel costs – decision tree
See: Annotated Model Grant Agreement, p. 52
FFG, September 6, 2016Situation 1
Mr A is the founder of the start-up company „A Ltd“. He is self-employed and doesn‘t receive a salary.
The company „A Ltd“ has four employees, however its tasks in the project shall mainly be carried out by
A himself.
A says: „If I participate in this project, I cannot accept anything less than my standard hourly rate of
EUR 75.“
Solution:
• A cannot charge his “standard hourly rate“
• „A Ltd“ can claim “costs of SME owners who do not receive a salary” for A
• These costs are unit costs which must be calculated according to the rules of the Grant Agreement
• Further information: Annotated Grant Agreement on art. 6.2.A.4 (p. 71-72 of v.2.1.1 of the AGA):
http://ec.europa.eu/research/participants/data/ref/h2020/grants_manual/amga/h2020-
amga_en.pdf
FFG, September 6, 2016Situation 2
Ms B has been working for „ABC cars“ (a large company in the automotive industry) since 2005.
Due to an internal headcount limit of „ABC cars“, B is employed by the temporary work agency
„PeoplePower“, which is responsible for the payroll tasks.
B says: „This is just a formality. I consider myself as a full member of my team at ABC cars“.
Solution:
• B is not employed by the beneficiary, but by a Third Party
• Rules regarding secondment of personnel do not apply because the Third Party is a temporary work
agency
• The beneficiary cannot charge B‘s costs as personnel costs, but only as costs of a service (other
direct costs) or subcontracting
• Further information: Annotated Grant Agreement on art. 6.2.A.2 (p. 64 of v.2.1.1 of the AGA):
http://ec.europa.eu/research/participants/data/ref/h2020/grants_manual/amga/h2020-
amga_en.pdf
FFG, September 6, 2016Situation 3
Dr C is a specialised researcher at „ABC electric vehicles“, an affiliate of „ABC cars“.
Her expertise is needed for one task of a project in which „ABC cars“ participates.
C says: „I will contribute to this task and ABC cars will charge my personnel costs in its financial
statement – after all we are from the same company group“.
Solution:
• Dr C is not employed by the beneficiary, but by a Third Party (affiliate of the beneficiary)
• His personnel costs cannot be included in the financial statement of the beneficiary as if he was an
employee of the beneficiary
• The affiliate could join the project as a Linked Third Party and claim Dr C‘s costs in its own financial
statement (there are more possibilities, but this is the most obvious solution)
• Further information: Annotated Grant Agreement on art. 14 (p. 135 ff. of v.2.1.1 of the AGA):
http://ec.europa.eu/research/participants/data/ref/h2020/grants_manual/amga/h2020-amga_en.pdf
FFG, September 6, 2016Situation 4
Mr D is a freelancer and supports different organisations in the management of international
projects. He works from his home office, using his own office equipment. „ABC cars“ is looking for
someone to support the management of a H2020 project on a freelance basis.
D says: „I always wanted to be my own boss. Working under someone‘s instructions just isn‘t my
thing.“
Solution:
• In principle, D‘s costs could be claimed as „costs for natural persons working under a direct
contract”
• However, one of the requirements would be that D works “under the beneficiary’s instructions”
• N.B.: In some countries, it is legally impossible to fulfill this requirement
• Further information: Annotated Grant Agreement on art. 6.2.A.2 (p. 64f. of v.2.1.1 of the AGA):
http://ec.europa.eu/research/participants/data/ref/h2020/grants_manual/amga/h2020-
amga_en.pdf
FFG, September 6, 2016Situation 5
Prof E works for the „University of E-City“. Like all professors in his country, he is employed by the
government and receives his salary directly from the government. Prof. E is supposed to act as a head
scientist in a H2020 project.
E says: „The university does not incur any costs for me. Does this mean that I must do all the work for
free?“
Solution:
• Prof E is considered an „in-kind contribution provided by a Third Party free of charge“
• The Third Party and its contribution has to be identified in Annex 1 of the GA (otherwise, the costs
could be approved retroactively, but at the full discretion of the EC/agency)
• Rules regarding „receipts“ do not apply in this case, because Prof E was not provided to the
beneficiary „specifically for the action“ (all professors are employed by the government)
• Further information: Annotated Grant Agreement on art. 12 (p. 126 ff. of v.2.1.1 of the AGA); receipts:
AGA p. 31 f.: http://ec.europa.eu/research/participants/data/ref/h2020/grants_manual/amga/h2020-
amga_en.pdf
FFG, September 6, 2016Types of personnel costs in H2020
A.1: Costs for employees (or equivalent)
A.2: Costs for natural persons working under a direct contract
(observe requirements – legally impossible in some countries)
A.3: Costs for personnel seconded by a third party against
payment
A.4: Costs of SME owners
A.5: Costs of ‘beneficiaries that are natural persons’
NOT personnel employed by a temporary work agency
Details: see Annotated Grant Agreement
FFG, September 6, 2016Natural persons working under a
direct contract
FFG, September 6, 2016Time records
• Only the hours worked for the project must be recorded
• Exception: persons working exclusively on one project (‚declaration‘
• Time records are the proof that the personnel costs have incurred
• if the time recording system is not deemed to be ‚reliable‘, all
personnel costs may be rejected
FFG, September 6, 2016Time records
Minimum requirements: signature
• title and number of the action • reference to task or work package
• beneficiary’s full name
• full name, date and signature of
the person working for the action
• number of hours worked for the
action
• supervisor’s full name and
FFG, September 6, 2016Subcontracting
• A purchase of goods, works or services that are identified in
Annex 1 as action tasks
• Tasks to be implemented and estimated costs must be set out in the
proposal (table 4.2)
• Based on ‘business conditions’: best value for money or lowest price,
• Subcontracting to affiliates: only allowed if ‚usual provider‘ or
framework contract
• No indirect costs on subcontracting
FFG, September 6, 2016Other direct costs (1)
Travel costs and related subsistence allowance:
• must be necessary for the action and
• in line with the beneficiary‘s usual practises on travel
Equipment, infrastructures and other assets:
• only the depreciation costs are eligible
• only the part of the equipment‘s „full capacity“ used for the
project can be charged (must be recorded)
• rent/lease eligible if not exceeding depreciation costs
FFG, September 6, 2016Other direct costs (2)
Costs of other goods and services:
• the beneficiary carries out a task itsself and is supported by
third party (unlike subcontracting)
• best value for money or lowest price
• e.g. consumables and supplies, dissemination costs, rent for
meeting rooms, IRP-related costs, certificates on the financial
statements
FFG, September 6, 2016Costs of Linked Third Parties
• May carry out work in the project and report its own costs
• rules regarding eligibility of costs, funding rates and third
country participation apply
• Name and tasks of the Linked Third Party must be indicated in
the proposal
FFG, September 6, 2016Exercise on eligibility and budget
categories (1)
• costs for drafting the CA before the project starts: ineligible (not incurred during the
duration of the action)
• catering during full-day project meeting: eligible (other direct costs/costs of other
goods and services)
• 1st. class train ticket - company usually books 2nd. class: ineligible (not in line with
the beneficiary‘s usual practises)
• test series performed by external company (task 4.2): eligible (subcontracting –
purchase of a service identified as an action task)
• costs for attending a conference (no ‚active‘ contribution): ineligible (no ‚active
contribution‘, therefore not necessary for the project)
• costs for Certificate on the Financial Statement (CFS): eligible (other direct costs/
costs of other goods and services)
FFG, September 6, 2016Exercise on eligibility and budget
categories (2)
• consulting service on IPR issues: eligible (other direct costs/costs of other goods
and services)
• non-refundable VAT included in hotel bill: eligible (other direct costs/travel costs)
• tickets for visiting Acropolis during kick-off meeting: ineligible (social activity, not
considered necessary for the project)
• article processing charge (APC) for open access publication eligible (other direct
costs/costs of other goods and services)
• costs for externalising the coordinator‘s tasks to a project management agency:
tasks of the coordinator (as defined in art. 41.2 of the GA) may not be subcontracted
FFG, September 6, 2016Reporting and Payments
Pre-financing Interim Interim
Balance Payment
payment payment
30 days after GA enters 90 days 90 days 90 days
into force/10 days before
the project starts
Reporting Reporting Reporting
Period 1 Period 2 Period 3
Periodic Periodic Periodic Final
report report report + report
The coordinator distributes the payments FFG, September 6, 2016 35Periodic reporting
Two parts to be completed:
• Periodic technical report
• Periodic financial report:
→ Individual financial statement, explanation on the
use of resources
→ Periodic summary financial
statement (= request for interim payment)
To be submitted within 60 days after the end of a
reporting period
FFG, September 6, 2016Financial reporting in the
Participant Portal
• Click to complete
‚use of resources‘
• Other direct costs
only need to be
explained if they
exceed 15% of the
personnel costs
FFG, September 6, 2016Certificate on the Financial Statements (CFS)
• Required at the end of the project if funding per partner
(or Linked Third Party) exceeds 325.000 EUR (only actual
costs and ‚average personnel costs‘)
• may be performed by any qualified auditor
• costs are eligible as other direct costs
• template/further info: Annex 5 of the Grant Agreement
FFG, September 6, 2016EU audit (2nd. level audit)
• May take place within two years after the balance payment
• Possible consequences: rejection of costs, reduction of the
grant, recovery; extension to other projects in case of
‘systematic errors’
N.B.: records and supporting information must be kept for
five years after the balance payment
FFG, September 6, 2016Frequent mistakes
• Costs claimed are not substantiated (no proper documentation…)
• Costs claimed are not linked to the project
• Third parties and subcontracting costs are not properly reported
• Depreciation costs are not correctly charged/full price is charged
• Personnel costs:
• incorrect calculation of productive hours
• charging of hours not worked for the project
• errors related to time records (inconsistent with information on sick
leave/travels/holidays, ‚signed‘ while a person was absent…)
FFG, September 6, 2016Guarantee Funds
• Similar to an insurance between all beneficiaries – no „collective
financial responsability“ of the consortium
• 5 % of the pre-financing payment are transferred directly to the
fund (and released at the balance payment)
• Cases covered: amounts owed by a beneficiary to the funding
body (e.g. due to bancruptcy)
• Cased not covered: amounts owed by a beneficiary to
another beneficiary (e.g. due under-/owerspending)
FFG, September 6, 2016When in doubt…
• Have a look at the H2020 Online Manual:
http://ec.europa.eu/research/participants/docs/h2020-funding-guide/index_en.htm
• Look for information in the Annotated Grant Agreement:
http://ec.europa.eu/research/participants/data/ref/h2020/grants_manual/amga/h2020-amga_en.pdf
• Ask your legal and financial NCP:
http://ec.europa.eu/research/participants/portal/desktop/en/support/national_contact_points.html
• Contact the Research Enquiry Service:
http://ec.europa.eu/research/participants/portal/desktop/en/support/research_enquiry_service.html
FFG, September 6, 2016THANK YOU FOR YOUR ATTENTION
Katarina Rohsmann
Expert for legal and financial issues
in the EU framework programme
Austrian Research Promotion Agency (FFG)
Sensengasse 1, 1090 Vienna, Austria
phone: +43/5/7755-4009
email: katarina.rohsmann@ffg.at
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