Financial Rules of the 7th Research Framework Programme

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Financial Rules of the 7th Research Framework Programme

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Title: Financial Rules of the 7th Research Framework Programme

1
Financial Rules of the 7th Research Framework
Programme

Nicole Schröder
INCO-NET MIRA
- Training Seminar for Palestine Information
Point in Cyprus

2
Content

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

3
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)

4
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)

5
Pre-Financing

Contribution shall be paid to the coordinator
Coordinator passes thecontribution on to the
partners
(Annex II.2)
in accordance with
Grant Agreement
decisions taken by the consortium
without unjustified delay

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6
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

7
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)
8
Eligible Costs

Positive definition Negative
definition

9
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)
10
Eligible Costs Indirect Costs

Indirect costs
also 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
management

Grant Agreement (Annex II.15.2)
11
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

12
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 SMEs
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

13
Budget Calculation (an example)

SME as partner in a large research project

14
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
15
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 country
only carries out RTD-activities
gt country income group
lower middle income 9 800 / researcher /
year
gt contribution
9 800 EUR4.530.75 99 225

incl. personnel, travel, equipment, consumables,
subcontracts, indirect costs
(Income group)(researcher-years)(duration)(reim
bursement rate)contribution
16

Reporting incl. Financial reporting
Audits
Facing the Irregularities

17
Reporting duty according to Annex II.4

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

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18
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

19
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

20
Reports for ICPC

(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)

21
Direct Costs- Personal Cost

Beispiel eines timesheets

22
Reports - Financial Statement (Form C)
300000
20000
20000
0
340000
50000
2000
0
52000
0
20000
0
200000
10000
230000
24000
0
300000
18000
342000
0
0
0
0
0
48000
66000
850000
0
964000
637500
24000
66000
0
727500
727500
23
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

24
Certificate on the Financial Statements

(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

End
Duration of one partner with four reporting
periods
Start
150.000
300.000
150.000
150.000
Pre-financing
Final payment
Sum of prefinancing
300.000
750.000
450.000
600.000
Financial report, certificate on the financial
statement
Financial report, no certificate on the financial
statement
25
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

26
Liability Guarantee Fonds

P1- failing Beneficiary
UNI
P
K
Recovery Order against the failing beneficiary
issued by the COM to the benefit of the Fonds
5
1 of the Financial Contribution
interests
5
of the Financial Contribution
(Pre-financing)
Recovery
Amount due to the COM
COM
27
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

28
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.

29
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

30
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

31
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

32
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 (orpurchase not the best
solution)
Degression rate not justified
Unjustified travel costs
Indirect costs contain elements not relevant for
project

33
Information