Project Financial Management The most important element in EC projects
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Main Documents The most important documents concerning financial management are: •The Administrative and Financial Rules contained in the Guide for Applicants enclosed to the Call for Proposals •The Administrative and Financial Manual for the relevant year •The Agreement with the European Commission •The Agreement between promoter / partner •The project application
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The Project Bank Account • It is always advised to open a specific account for the project, especially if you are the coordinator. Please note that: • The cost for opening and managing the project bank account in principle are not eligible costs • If the funds on the account generate an interest, this will have to be given back to the project promoter or the European Commission.
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Exchange Rate The exchange rate applied is fixed all over the project period. • It is the rate applied on the month when the first payment was made by the Commission to the project coordinator. • The rate is the official EU currency exchange rate which is available at: – http://ec.europa.eu/budget/inforeuro/index.cfm?Language=en
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Value Added Tax • VAT may be considered an admissible cost ONLY if the institution can demonstrate they are not able to recover it. • Each partner will therefore have to make a specific declaration on this issue. • Exceptions maybe in some programmes that VAT is not eligible at all (e.g. FP7)
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Type of Costs The Project budget is divided into: • Direct Costs: – – – – –
Staff Travel, Accommodation and Subsistence ICT Subcontracts Other
• Indirect Costs – – – – – –
Communication costs Infrastructure costs (rent, electricity etc) Photocopying Office supplies (N.B. up to 7% of the total eligible direct costs) These costs do not need to be justified by accounting documents
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Eligible Expenditure To be considered as eligible costs, the expenditures should satisfy the following general criteria: • Directly connected with the carrying out of the approved activities, on the basis of the work plan; • Are necessary for performance of the action; • Are reasonable and respect a sound financial management in accordance with the economy and efficiency principles; • Are actually incurred by the partner and recorded in their accounts. • Are identifiable and verifiable (i.e. justified with appropriate accounting documents). • Made during the project life cycle • Conform to the rules set out in the Financial and Administrative Manual of the funding programme. 7
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Ineligible Expenditure The following costs are not admissible and therefore should not be included in any of the expenses categories: • Costs related to opening and operating bank accounts • Debt services charges • Exchange losses • Expenditure that is already funded by other Community sources • Excessive expenditure • Cost of buy out option at the end of lease periods • Expenditure for the substitution of staff who participate in the project • Fines, financial amendments and legal costs. 8
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Financial Report • In order to justify your expenditure you should fill in the Financial Report Form and enclose all the required documents
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Staff Costs These costs can include the following categories of staff: • Staff having either a permanent of temporary employment contract with the partner • Staff costs should be calculated on the basis of the real daily salary of the employee concerned, multiplied by the number of days dedicated to the project. • The gross cost calculation should include all the normal contributions paid by the employee, for example social security, while bonuses, incentives or profit share schemes should be excluded.
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Staff Costs In order to calculate the staff costs, different types of personnel are classified in 4 categories. – – – –
1) 2) 3) 4)
Managers; Directors Researchers; Teachers; Trainers Technical staff Administrative staff
• For each category there is a maximum daily cost which changes from country to country . • Staff daily costs cannot exceed the maximum rate for the relevant country. Any surplus is considered ineligible. 11
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Staff Costs The staff costs should be justified using some if not all of the above: • Time sheets • Declaration of method of calculation • Employment contracts • Specific employment letter related to the project • Payslips • Bank statements of payments made
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To remember for staff costs • Each cost described in the report is supported by the related accountancy documents • The cost per day for each typology of staff is within the ceiling • For EACH staff member you have enclosed: timesheets; Payslips ; Employment contracts; employment letter related to the project; Bank statements of payments made; Declaration of method of calculation. • There is not mixing up between staff costs and subcontracting costs 13
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Travel Costs • Travel costs are admissible only if they are directly connected to specific and clearly identifiable project related activities. • Travel costs should be related only to staff (therefore the names of travellers should be consistent with the names included in the “Staff” budget heading. • Non staff members should be accounted for under the “Other Costs” or “Subcontracting Costs” budget headings. • Partners are required to choose the cheapest mean of travel, where this is not the case a full explanation should be provided. • Hire of cars (maximum class B car may be used) or taxi costs are eligible only if not excessive compared to other means of travel, or if there are other influencing factors (e.g. time, excessive luggage etc.). 14
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Travel costs cont. • Expenditure for travel by car is admissible but must be calculated on the basis of the following criteria (whichever is the cheapest): – a) The cost of the correspondent rail/bus/plane fare ticket. Only ONE ticket shall be reimbursed regardless of the number of people who travel in the car; – b) A rate per Km in accordance with the internal rules of the partner concerned up to a max of 0,22 euro per km.
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Travel Costs cont. Travel costs should be justified using: • Detailed Expenditure sheet for each person , each enclosing: • Invoices of Travel Agency • Plane/Train/Bus ticket • For planes: Boarding Card • Invoice of Car Rental Company • Taxi receipts • N.B. All documents enclosed should be translated into English and converted into Euro , specifying the currency conversion rate applied (use the official EU one)
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Travel Costs cont. Travel costs should be justified using: • Detailed Expenditure sheet for each person , each enclosing: • Invoices of Travel Agency • Plane/Train/Bus ticket • For planes: Boarding Card • Invoice of Car Rental Company • Taxi receipts • N.B. All documents enclosed should be translated into English at some level and converted into Euro , specifying the currency conversion rate applied (use the official EU one) 17
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Subsistence Costs • Accommodation (hotel invoice) • Meals (breakfast, lunch and dinners. No extras, no room service) • Local travels (excluding those to travel from the point of origin to the destination) • Subsistence costs are admissible as long as they: – Are necessary and reasonable – Do not exceed the maximum daily amount per person in the destination country
• Where there is no overnight stay the costs are reduced by 50%.
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Subsistence costs cont. • If a partner hosting a project meeting pays for a social meal, the rate paid by the hosting partner will be deducted from the maximum rate for subsistence. • The cost will have to be divided, by the project promoter, among each of the other partners at the interim/final report stage and added to the rest of their subsistence costs for that meeting. The related cost will therefore have to be diverted from each partners’ budget to the budget of the partner who paid for the social meal. • Therefore, the recommendation, in order to avoid the above mentioned complicated procedure, NO SOCIAL MEAL will have to be PAID by any of the partners. Each partner should cover each of their own costs for subsistence. • However, some tips to subsidise by just one partner a social meal may be applied 19
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Subsistence Costs cont. Reimbursement of subsistence costs may be made on the basis of the internal rules of the Partner organisation, and therefore on the basis of: •Actual costs (reimbursement of receipts) •Daily Allowance basis N.B. In both cases, proof of attendance and of overnight accommodation is required Subsistence costs should be related only to staff Non staff members should be accounted for under the “Other Costs” or “Subcontracting Costs” budget headings. 20
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Subsistence Costs Cont. Not eligible subsistence costs: • Mini bar in the hotel • Snacks and drinks (unless they are part of a main meal) • Bar costs (unless it is for breakfast) • Telephone costs in the hotel
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Subsistence Costs cont. Subsistence costs should be justified using: • Detailed Expenditure sheet for each person enclosing: • Declaration for Daily Allowance + Hotel Invoices Or • Reimbursement Sheet enclosing: • Restaurant Invoices • Hotel Invoice • Bus ticket • Taxi receipt N.B. All documents enclosed should be their main part translated into English and converted into Euro , specifying the currency conversion rate applied (use the official EU one) 22
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Things to consider for subsistence costs • Each cost described in the report is supported by the related accountancy documents • The subsistence cost per day for each country is below the maximum ceiling also taking into account the 50% off related to the last day of stay. • The subsistence cost ceiling is reduced if the hosting partner covered the cost for the lunch / dinner. • For EACH staff member you have enclosed a specific expenditure sheet –
including : hotel invoices; restaurants receipts, taxi tickets etc. NB Expenditure sheets for more than one person are not accepted.
• For each staff member you have filled in a different line in the report.
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Equipment Cost • Expenditure for the purchase, leasing or hiring of hardware and ICT equipment are admissible only if strictly necessary for carrying out the project activities. • When choosing to lease, hire or purchase ICT equipment, the least expensive option should be chosen. • Only the portion of equipment’s depreciation corresponding to the duration of the action and the percentage of use may be taken into account (see example). • Equipment used for project administration (e.g. PCs, laptop etc) is covered by the “Indirect Costs” budget heading. • The total expenditure for equipment can be up to 10% of the total direct costs 24
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Equipment Cost cont. Equipment costs should be justified using: • Invoice + depreciation rate calculation + percentage of use calculation • Declaration demonstrating that the acquisition of equipment for necessary and functional for the project (and not related to project management)
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Subcontracting Costs • Expenditure made to an external organisation who is not a member of the partnership that carried out a specific and limited project activity, must be included in the “Subcontracting” cost category. • Sub-contracting activities may include translation, interpreting, and printing services, carried out by external organisations who are not members of the project partnership. • This expenditure is only admissible when the personnel of the partner organisations does not possess the necessary skills to carry out the activity in question. 26
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Subcontracting costs cont. • For significant sub-contracted activities the project coordinator should draw up an agreement with the sub-contractor. • The agreement should include the following information: – – – – – – –
Type of sub-contract Start date and end date of the sub-contract Sum to be paid Detailed description of the costs Work programme or phases Payment procedure (total sum, spread out etc,) Penalty clauses in the case that the agreement is not respected
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Subcontracting Costs cont. • It is not possible to sub-contract any of the fundamental project activities so as not to distort the concept of the partnership. • So, the beneficiary cannot sub-contract the entire management and general administration of the project and none of the partners can sub-contract all or a large part of the activities assigned to them.
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Subcontracting Costs cont. The following rules regarding procurement apply to: • Contracts with a value below €12.500 can be paid on a presentation of an invoice; • Contracts with a value between €12.500 and €25.000 are subject to a procedure involving at least three tenderers; • Contracts between €25.000 and €60.000 are subject to a procedure involving at least five tenderers; • For contracts of a value over €60.000, national rules with regard to procurement apply N.B. As a rule of good practice, you are strongly advised to apply a procedure involving at least three tenders/offers in all the cases
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Subcontracting Costs cont. • For translations, only expenditure connected directly with the translation from and to the official languages of the E.U. and of the countries participating in the programme are accepted (e.g. Turkey). • The translation costs must not exceed the normal market prices for translation in the country where the translation takes place. • The total expenditure on sub-contracting must not exceed 30% of the total eligible costs of the project. Any expenditure declared which exceeds this amount will not be considered admissible. 30
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Subcontracting Costs cont. Sub contracting costs should be justified using: – Minimum number of offers as result from the call for tenders – Contract with the specified details – Invoice – Proof of Payment (i.e. bank statement)
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Other Costs • Other costs which are not included in the previously mentioned categories may also be considered admissible, as long as they: – – – –
Are Are Are Are
necessary for the project activities for a reasonable sum of money justified with suitable administrative documents not included in any other cost category
• Example of “Other Costs”: – Press releases and publicity – Purchase of copyright – Purchase of information materials (e.g. books; studies; electronic data) – Conference fees – Rental of exhibition spaces 32
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Indirect Costs • Communication costs • Infrastructure costs (rent, electricity, even PCs sometimes, etc) • Photocopying • Office supplies • The maximum eligible indirect costs are up to 7% of the total eligible direct costs. • These costs can be justified with a declaration enclosing the method of calculation.
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