EU-Bureau of the BMBFPT-DLRKönigswinterer Str. 550-55453227 BonnGermany

Phone: +49 228 / 38 21-630Fax: +49 228 / 38 21-649

eub@dlr.dewww.eubuero.de

Financial Rules of the 7th Research Framework

Programme

Nicole SchröderINCO-NET MIRA

- Training Seminar for Palestine Information Point in Cyprus

Content

• Project Funding • Reimbursement of costs• Eligible Costs• Financial Management• Funding Limits• Budget Calculation• Grant Negotiation• Grant Agreement and Consortium

Agreement

General

• Topmost principle: no profit (Annex II.18.3)

• Total amount of payment by the Commission shall not exceed in any circumstances the amount of the contribution (Annex II.18.4)

• Calculating the budget in accordance with the usual accounting and management principles and practices of the beneficiary (Annex II.14.1.d)

Remark

• All themes open to third countries in FP7• institutions

– can be consortium members in most projects – however: without receiving funds by the commission

unless funding is in a specific call explicity announced or

unless participation is essential for carrying out a project (industrialised countries funded only if indispensable for the project)

• have to calculate the person months and costs according to their usual accounting and management principles

• input should be identified in Annex I • estimated budget will be included as part of the total

costs of the project (but not as part of the EC contribution)

Pre-Financing

• Contribution shall be paid to the coordinator• Coordinator passes the

contribution on to the partners (Annex II.2)

– in accordance with • Grant Agreement • decisions taken by the consortium

–without unjustified delay

Upper Funding Limits

• Contribution shall be determined by applying the upper funding limits per activity (Annex II.18)

• Activities:– Research and technological development activities

(RTD) incl. innovation related activities• Creating new knowledge, new technology and products

– Demonstration activities • Designed to prove the viability of new technologies

(prototypes)

– Other activities• Dissemination, networking, intellectual property, • Management activities• Training activities

Upper Funding Limits

• Research & Development: max. 50% except:

– Non-profit public bodies, secondary and higher education establishments; research organisations (non-profit): max. 75%

– Small and Medium Enterprise (SME) max. 75%

• Demonstration activities: max. 50%

• Coordination and support actions: max. 100%

• Other Activities: max. 100%

Grant Agreement, (Annex II.16)

Actual (real and not estimated) cost

Incurred during the duration of the project (exception: costs relating to final reports)

have been indicated in the estimated overall budget annexed to Annex I

Recorded in the accounts of the benficiary

Determined according to the usual accounting and management principles and practices of the beneficiary

Used for the sole purpose of achieving the objectives of the project

Principles of economy, efficiency and effectiveness

Identifiable indirect taxes including value added tax (airport taxes may be not real taxes but a fee for a service and therefore may be eligible)

Duties

Interest owed

Provisions for possible future losses or charges

Exchange losses, cost related to return on capital

Costs declared or incured, or reimbursed in respect to another Community project

Debt and debt service charges

Excessive or reckless expenditure

Positive definition Negative definition

Eligible Costs

Eligible Costs – Direct Costs

Direct costs (Annex II.15.1)

• can be attributed directly to the project• in accordance with the accounting principles

and the usual internal rules of the beneficiary• direct costs:

– personnel costs• only costs of actual hours worked by the persons directly

carrying out the work may be charged

– travel costs– consumables– equipment

Grant Agreement (Annex II.15.1)

Eligible Costs – Indirect Costs

Indirect costsalso called Overhead • cannot be identified as being directly attributed to

the project• incurred in direct relationship with the eligible

direct costs• can be identified and justified by the accounting

system as being incurred• may not include any eligible direct costs • examples for indirect costs:

– renting or depreciation of buildings, water/gas/electricity, office equipment, communication and postage

– horizontal services such as administrative managementGrant Agreement (Annex II.15.2)

Eligible Costs – Indirect Costs

• Indirect costs may be identified according to one of the following methods:– Based on actual indirect costs

• Beneficiaries which have an analytical accounting system• Use of simplified method of calculation is acceptable,

where organisation does not have an accounting system with detailed cost allocation

– Beneficiaries may opt for a flat rate of 20% • of its total direct eligible costs• excluding subcontracting and recources made availabe

by third parties

Eligible Costs – Indirect Costs

– Some beneficiaries may opt for a flat rate of 60%• of its total direct eligible costs, excluding subcontracting and

resources made availabe by third parties• as non-profit public bodies, secondary and higher education

establishments, research organisations and SME‘s• if they are unable to identify with certainty their real indirect

costs • when participating in collaborative project or network of

excellence • called special transition flat rate, because it may be reduced

under calls closing after 31 December 2009

– Exception: coordination and support actions• Indirect costs may reach a maximum of 7% of total direct eligible

costs– excluding subcontracting and recources made availabe by third

parties

Budget Calculation (an example)

SME as partner in a large research project

Activity Direct Costs

Percentage for Indirect Costs

Indirect Costs

Total Direct + Indirect Costs

Funding Rate

EU Contribution

Research 250.000 60% 150.000 400.000 75% 300.000

Subcontract

20.000 ----- ------ 20.000 15.000

Management

100.000 60% 60.000 160.000 100% 160.000

Dissemination

10.000 60% 6.000 16.000 16.000

Total 380.000

216.000

596.000 491.000

Eligible Costs - Lump sums for ICPC

• Lump sums for International Cooperation Partner Countries (ICPC)– Palestinia is an ICPC– ICPC – Countries got the option being reimbursed on

the basis of eligible costs or may opt for lump sums– Lump sum contribution is definded per country

income group in the „list of ICPC economies“Economy contribution

(€/researcher/year) low income 8 000 €

lower middle income 9 800 €upper middle income 20 700 €

– Upper funding limits has to be applied– Lump sum is deemed to cover all costs

Guide to Financial Issues, p. 59 ff

Eligible Costs - Lump sums for ICPC

Example: a university is participant in a small collaborative project, duration 3 years, with 4 reseachers full time and 1 researcher part time working on the project

Palestina - lower middle income countryonly carries out RTD-activities=> country income group :

lower middle income 9 800 € / researcher / year

=> contribution:9 800 EUR*4.5*3*0.75 = 99 225 €

(Income group)*(researcher-years)*(duration)*(reimbursement rate)=contribution

incl. personnel, travel, equipment, consumables, subcontracts, indirect costs

• Reporting incl. Financial

reporting

• Audits

• Facing the Irregularities

• All reports and deliverables shall be delivered by the coordinator ( Annex II.2.3)

• Periodic reports, including financial statements of each benefiaciary

• final report and final financial statement

Reporting duty according to Annex II.4

Reporting

• Periodic reports to be submitted by coordinator 60 days after end of period:– overview of progress of the work, including a publishable

summary report,– use of the resources and – Financial Statement (Form C)

• Final reports to be submitted by coordinator 60 days after end of project:– publishable summary report, conclusions and

socioeconomic impact,– covering wider societal implications and a plan on use and

dissemination of foreground

Reporting

• Commission has 105 days to evaluate and execute the corresponding payment – No tacit approval of reports

• After reception Commission may:– Approve– Suspend the time-limit requesting

revision/completion– Reject them giving justification, possible

termination

– Suspend the payment

(Financial Guide)

ICPC beneficiaries with a reimbursement on the basis of

lump sums:

• only have to report on the time devoted to the project and not on the costs incurred

• will include the financial Form C and the number of actual hours worked by the researchers on the project

–beneficiary will keep a record of time (e.g. timesheets)

Reports for ICPC

Direct Costs- Personal Cost

Beispiel eines timesheets

Reports - Financial Statement (Form C)

30000050000200000300000

0

850000637500

200000

1000018000

0

4800024000

2000020002000024000

0

6600066000

0000

0

00

34000052000230000342000

0

964000727500727500

Certification

Certificate on financial statement (Audit Certificate):

• shall be submitted when the amount of the contribution claimed by a beneficiary equals or exceeds 375 000 €, when cumulated with all previous payments (except for project of 2 years or less: CFS submitted at the end)

• shall certify that the costs meet the conditions required by the Grant Agreement

• does not need to be submitted for beneficiaries paid on the basis of lump sum

• if a certification on the methodology is provided only one financial statement is required at the end

(Annex II.4.4., Version 06.02.07)Certificates on the Financial Statements Form D – Annex VII• Certificate has to be submitted when the amount of the

grant claimed by one beneficiary is equal or superior to 375.000 EUR, cumulated by all previous payments

Duration of one partner with four reporting periods

300.000 € 450.000 €

Financial report, certificate on the financial statement

300.000 € 150.000 € 150.000 € 150.000 €

600.000 €

Financial report, no certificate on the financial statement

Pre-financing

Sum of prefinancing 750.000 €

Final payment

Certificate on the Financial Statements

Liability

The Financial Responsibility of each beneficiary shall be limited to its own debts (II.20)

• Participants implement the work jointly and severally towards the Community and carry out work of a defaulting partner unless the Commission relieves them of that obligation (not = FP6 financial collective responsibility)

• Commission to assess risk of default and establishes a Guarantee Fonds, a mechanism to cover financial loss (i.e. to replace financial collective responsibility in FP 6)

• If implementation of the project is impossible or participants fail to implement it, the Commission shall ensure its termination

•

P

Liability – Guarantee Fonds

P1- failing

Beneficiary

UNI P K

1% of the

Financial Contribution5 % interests

COM

of the Financial Contribution (Pre-financing)

5%

Amount due to the COM

Recovery

Recovery Order against the failing beneficiary issued by the COM to the benefit of the Fonds

Audits

• Commission has the right to carry out technical and financial audits of EU-projects during project implementation and up to five years after the completion of the project

• Audits can be carried out by – Specialised commission staff or OLAF– Subcontractors of the commission– European Court of auditors

• Audits are usually carried out on the basis of a random sample (institutions with several EU-projects will be audited sooner or later)

• Audits will be carried out on the basis of a specific audit programme carrying out certain tests

Audits

Technical Audits:• The aim of a technical audit is to assess the work carried

out under the project over a certain period, by evaluating the project reports and relevant deliverables:

– fulfillment of the project work plan and the related deliverables;

– resources planned and utilized in relation to the achieved progress, in a manner consistent with the principles of economy, efficiency and effectiveness;

– the management procedures and methods of the project;– the beneficiaries’ contributions and integration within the

project;– the expected potential impact in economic, competition and

social terms, and the– beneficiaries' plan for the use and dissemination of

foreground.

Audits

Financial Audits: • Financial audits may cover financial, systemic and other aspects

(such as accounting and management principles) relating to the proper execution of the grant agreement

• Participants shall keep the originals or, in exceptional cases, duly authenticated copies – including electronic copies - of all documents relating to the grant agreement for up to five years after the project

• Auditors must have access to the beneficiary's offices, to its computer data, to its accounting data and to all the information needed to carry out those audits, including information on individual salaries of persons involved in the project

• The Commission shall take all appropriate measures, including the issuing of recovery orders regarding all or part of the payments made by it and the application of any applicable sanction

Consequences of Irregularities

• Repayment of unjustified EU-contribution including interest

owned

– Will be deduced by GD-Budget from next payment of the

Commission independent from programme and project

• In case of apparent systematic irregularities appear (VAT

generally not deducted, use of wrong degression rate,

wrong hourly rates for labour costs):

– Commission can decide to audit additional projects

• In severel cases: financial penalties and temporary

exclusion from further EU-projects of the whole institution

Consequences of Irregularities

• Participants making false declarations or have

seriously failed to meet their obligations under the

grant agreement shall be liable to financial

penalties of between 2% and 10% of their EU-grant

• The rate may be increased to 4% - 20% in the event

of a repeated offence within five years following the

first infringement

• In this case, beneficiaries shall be excluded from all

Community grants for a maximum of two years

Irregularities

Frequent Irregularities:• VAT not deducted

• Missing time sheets for personell costs

• Calculation of personell costs with average hourly rates

• Purchase of equipment before project start

• Purchase of equipment not necessary for project implementation (or:purchase not the best solution)

• Degression rate not justified

• Unjustified travel costs

• Indirect costs contain elements not relevant for project

Information

• Information on research programmesand projects: http://cordis.europa.eu/

• EU research: http://ec.europa.eu/research

• Seventh Framework Programme: http://ec.europa.eu/research/fp7

• RTD info magazine: http://ec.europa.eu/research/rtdinfo/

• Information requests: http://ec.europa.eu/research/enquiries/

Sources of Information

NCPs (exist in each country for each programme)• http://cordis.europa.eu/fp7/ncp_en.html

Internet

• Kommission: www.cordis.europa.eu

• Europa-Server: www.europa.eu

• German Portal to FRP: www.forschungsrahmenprogramm.de

• EU-Büro des BMBF: www.eubuero.de

EU-Bureau Contact

For further information, please contact

Nicole SchröderTel: +49 228 3821-658

Nicole.Schroeder@dlr.de

Marita Düsterhöft-Lange Tel: +49 228 3821-652

Marita.Duesterhoeft-Lange@dlr.de

EU-Bureau of the BMBFwww.eubuero.de

www.forschungsrahmenprogramm.de