6 - Resource Allocation and Budgeting

Training Module:

The MED-Dialogue project (611433) is co-funded by the European Community's ICT Programme under FP7

6 - Resource Allocation and Budgeting

H2020 Finance - Key Data

• Core Contract – provides details of contract finances

• Annex II Grant Agreement (or GA) – provides general financial terms and conditions

• EU Financial Guidelines

Website address to search for a key document:

http://ec.europa.eu/research/participants/portal/desktop/en/funding/reference_docs.html

February 2014 MED-Dialogue Training - www.MED-Dialogue.eu 2

H2020 Funding Instruments

Reimbursement of Costs – ‘Co-operation’ Pillar

The same rate for all beneficiaries and all activities:– Up to 100% for Research and Innovation

actions– Up to 70% for innovation (non-profit entities up

to 100%)


Funding Schemes

Two basic principles govern all FP7 cooperation projects:

1. Collaboration 2. Cost Sharing

Collaborative:“All the beneficiaries (partners) together form a consortium with equal rights and obligations”

“Partners are allowed to transfer budget between different activities and between themselves.”


Funding Schemes: Collaborative

What does this mean for the budget ?

– It is indicative, i.e. stating the foreseen costs and funding.

– The total funding requested is the maximum amount that can be paid by the EC. It is in no way a guaranteed payment.

– The budget can be changed between cost categories and partners.


Funding Schemes: Collaborative

What does this mean for the work to be done ?

– The partners decide who is doing what, defined in the Description of Work (DoW) - a contractually binding document.

– The partners can jointly decide to change this DoW and seek approval from the EC.

– If one partner fails, the rest of the consortium has to find an appropriate remedy.


Funding Schemes: Cost Sharing

Cost Sharing:The costs incurred for implementing the project are “shared” between the partners and the EC on the basis of the funding rate.

Only real costs can be claimed !If you spent less than planned you will receive less funding.

Example: You estimated 5000 Euro for travelling, on 70% funding this would mean 3500 Euro from the EC.You only spent 3000 Euro at the end of the project, so you can only claim 2100 Euro.


H2020 Cost Model – Eligible Costs

• The cost of personnel assigned to the project. Working time to be charged must be recorded by any reasonable means (e.g. timesheets).

• Travel cost and subsistence allowances for staff taking part in the project.

• The purchase costs of durable equipment (depreciated cost, the portion of the equipment used in the project may be charged).

• The cost of consumables and supplies.• Subcontracting (if defined in the contract).• Non-deductible VAT.

Anything else is not eligibleFebruary 2014 MED-Dialogue Training - www.MED-Dialogue.eu 8

NEW

Financial Issues - DepreciationThe national tax laws of a partner determine if equipment has to be depreciated and over which time. For example: • A H2020 contract for a 36-months project is signed in

March 2014.• Equipment is purchased in May 2014 for €100,000,

with a depreciation period of 36 months. • The equipment would be used 34 months, and

therefore, 34/36 financially depreciated, i.e. €94,444.44 can be claimed as cost.

• If the equipment is only used partially in the project (e.g. 50%), only that share can be claimed as cost.

• Equipment bought before the start of the contract can not be charged to the project !


H2020 Cost Model – Indirect Cost

Indirect costs (overheads) are all those structural and support eligible costs of an administrative, technical and logistical nature:• which cannot be identified as being directly

attributed to the project.• which can be identified and justified by its

accounting system as being incurred in direct relationship with the eligible direct costs attributed to the project.

• which are cross cutting for the operation of the beneficiary body’s various activities and cannot therefore be attributed in full to a specific project.


H2020 Cost Model – Indirect Cost

In H2020 there is only one method for calculation of indirect costs:

• A Flat Rate of 25% of total direct costs, excluding subcontracting, costs of third parties and financial support to third parties

• If provided in WP, lump sum or unit costs


Calculating Staff Time

Calculate “Number of Productive Hours” per year

Determined by deducting holidays, national holidays, sick leave and other entitlements e.g. training

365 days/year – 104 days of weekends – 30 days of holiday leave – 15 days of statutory holidays – 6 days of sick leave = 210 productive days x 8 working hours/day = 1680 productive hours per year

Hourly Rate = Annual gross salary / 1680 hours


Time Recording

Q. Who needs to do this?A. Any staff member working on a project,

unless full-time on the project

Requirements as are follows:• Record actual (not estimated) hours

including time spent on all projects • Record either start and end time, or number

of hours each dayN.B. If total hours exceed annual amount,

hourly rate will be reduced, thus best to work standard hours


EC Financial Contribution

Maximum contribution cannot be exceeded and includes:

– Single Pre-Financing (see slides below)– Interim payments following each Reporting

Period– Final Payment plus any prior period

adjustments

EC withhold 10% retention until date of last payment so pre-financing and interim payments shall not exceed 90%


Pre-Financing 1

Only 1 pre-financing (or advance) payment to be made at the beginning of project.

To be transferred from the EC not later than 30 days of contract start date (unless special clause)

Coordinator must distribute to members:-

– Once all members have signed and returned Form A (accession form)


Pre-Financing 2

General Rule for projects with more than 2 reporting periods (RPs) - 160% of average EU funding per RP less 5% Guarantee Fund

For projects with 1 or 2 RPs – between 60%-80% of the total EC contribution (specified in contract)

Reasons for variations to Pre-Financing:1. Project with heavy initial investment – increased2. Project with low expenditure in 1st period -

decreased


Guarantee FundAims to cover financial risks incurred by EC and participants during project5% of the total EC contribution retained by the EC and transferred to separate EC fund at time of pre-financing paymentPaid into EC bank account and interest earned should cover risks of non reimbursement of amounts due by project membersReturned to beneficiaries via Coordinator at point of final payment.Maximum deduction of 1% of EC contribution may be permanently retained excluding public bodies


Pre-Financing Example 1

Project running over 3 reporting periods (RPs) with total EC contribution of €3,000,000

a) Average EC contribution = €1,000,000 (i. e. 3,000,000 / 3 years)

b) 160% of average contribution = €1,600,000

c) Contribution to Guarantee Fund @ 5% = €150,000

d) Pre-financing to Coordinator = €1,450,000


Pre-Financing Example 2

Project running over 18 months with 1 RP with total EC contribution of €900,000

a) Pre-financing 75% as stated in EC contract = €675,000

b) Contribution to Guarantee Fund @ 5% = €45,000

c) Pre-financing to Coordinator = €630,000


Interim Payments

EC will pay all accepted costs of previous Reporting Period as next interim payment

Does not require Audit Certificate unless total accepted costs have reached €375,000.

Interim payments continue during life of project up to threshold of 85% of total budget (10% retention, 5% guarantee fund)


Cash Flow in the project

How is the cash flow in the project over it’s entire duration, until the final payment

has been made ?


Cash-flow ExampleMaximum EC Contribution: 510,48010% Retention ceiling 459,432

5% Guarantee Fund Contribution 25,524

Project Reporting Periods 3

Average per period 170,160

Project Start: 01/01/2011

Project End: 31/12/2013

Cost claims Amount Date Accummulated

Pre-financing (160% of average/period) - 5% 246,732 15/02/11Accepted cost 1st period (31/12/2011) 170,0001. Interim Payment 170,000 01/04/12 416,732Accepted cost 2nd period (31/12/2012) 170,0002. Interim Payment (up to 10% ceiling and 5% GF) 17,176 01/04/13 433,908Accepted cost 3rd period (31/12/2013) 170,480Final Payment after closing of project incl GF recovery 76,572 01/09/14 510,480

510,480

Payment by EC

Example calculation for one partner of a project


Cash-flow Example

For well over 15 months negative cash flow (15% = 76 kEuro)

0

100,000

200,000

300,000

400,000

500,000

600,000Ja

n-11

Mar

-11

May

-11

Jul-1

1

Sep

-11

Nov

-11

Jan-

12

Mar

-12

May

-12

Jul-1

2

Sep

-12

Nov

-12

Jan-

13

Mar

-13

May

-13

Jul-1

3

Sep

-13

Nov

-13

Jan-

14

Mar

-14

May

-14

Jul-1

4

Sep

-14

Costs Claimed EC Payments Ceiling

End of Project


Project Reporting 1

1. All contractually defined reports (= Deliverables)

2. Periodic Reports – due within 60 days after end of each Reporting PeriodConsortium Requirements:

• Overview of progress towards objectives

• Explanation of use of resources• Financial statement – FORM C for each

partner plus consolidated report (Annex IV).


Project Reporting 2

3. Final Reports – due within 60 days after end of project

Consortium Requirements:– Final summary report of results,

conclusions etc.– Report covering wider societal implications,

dissemination plans etc.Plus: Coordinator must submit report on distribution of EC contribution to partners 30 days after receipt of final payment


Documents

6 - Resource Allocation and Budgeting