Communication campaign
Most common issues identified: - Subcontracting
- Indirect Costs
Thanos BATSILAS
FCH JU
Financial Officer
Third parties & other
sensitive relations
Link with the project
Legal situations
Carry out the projects (core tasks)
1. Beneficiary
Carry out ancillary tasks
2. A third pary working as a sub-contractor
3. A third party linked to a beneficiary working
under special clause 11
Give access to some
resources (staff, lab)
Sell (lease) equiment
4. A third party making available ressources for
free
5. A third party making available ressources
and being reimbursed by the beneficiary
6. A supplier
2
Subcontracts (1)
– Who ?
•
•
•
•
Works under business conditions with profit purpose
Not subordinated to nor under supervision of beneficiary
Not another beneficiary
Not an affiliate
– In What Conditions ?
• Limited and non core part of the project
• Not R&D
• Not the coordinator’s tasks
•
•
•
•
Tasks and amount indicated and justified in technical annex
Beneficiary remains responsible
If IP, it must belong to beneficiary
Best value for money, transparency and equal treatment
Several bids (or public procurement)
Except for pre-existing framework agreement
3
Common errors:
• Subcontracting costs (core tasks) are claimed without being
indicated in the DoW (technical annex-I). If not in the DoW, request
approval/amendment.
• Subcontracting costs (minor tasks e.g. website, catering etc) are
claimed as other direct costs. To be claimed under subcontracting
cost category
• Subcontracting between beneficiaries is not allowed. If beneficiary A
(the “seller”) sells to beneficiary B (the “buyer”), then it is the
beneficiary A (and not the beneficiary B) to claim the costs (NB
without any mark-up and profit, only the costs)
4
Subcontracts (2)
Consultants: sub-contractor or personnel?
Personnel costs
Subcontract
if the following cumulative criteria :
•
beneficiary has a contract with a person to work tasks
under the FCH JU project,
•
person must work under the instructions of the
beneficiary + in the premises of the beneficiary
•
the result of the work belongs to the beneficiary
•
costs of employing the consultant not significantly
different from the employees
•
The remuneration is based on working hours rather
than on the delivering of specific outputs/products and
should be recorded in the accounts of the beneficiary,
•
Travel and subsistence costs related to such
consultants' have to be paid directly by the beneficiary
in order to be eligible.
•
Not a criteria: whether the consultants are selfemployed or employed by a third party,
Common error: claimed as subcontracting costs
if hiring consultants to perform part of the
work & the conditions of Art. II.7 of FCH JU
GA are fulfilled:
 Sub-contracting agreement based on
business conditions w/ profit included
 Sub-contractors do not have any IPR
or ownership rights on the deliverables
 does not usually work on the premises
of the beneficiary and is not under the
direct instruction /hierarchical
supervision by Beneficiary
 remuneration based on the delivering
of specific outputs/products rather than
on working hours ;
 Sub-contrcating between beneficiaries
of the GA cannot be tolerated.
5
Common error: claimed as personnel costs
Indirect Costs
Indirect costs are all those eligible costs which cannot be identified by the
beneficiary as being directly attributed to the project, but 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
Costs excluded
 Identifiable indirect taxes including VAT
 Duties
 Interests owed
 Provisions for possible future losses or charges
 Exchange losses, costs related to return on capital
 Costs declared or incurred, or reimbursed in respect of another FCH JU or
EU/Euratom project
 Debt and debt service charges, excessive or reckless expenditure
6
Indirect Costs
Actual indirect costs
Beneficiaries with an analytical accounting system that can
identify their indirect costs and assign them to the different
projects and activities
Methods of
calculation
Simplified method
Beneficiaries that cannot agregate their indirect costs at a
detailed level (centre, department), but only at the level of
the legal entity
Flat rate 20%
Industry whose accounting systems do not make a distinction
between direct and indirect costs
Non-profit public bodies, secondary and High Education
establisments and research organisations (optional)
7
Indirect Costs reimbursement
Identification
method
Actual indirect costs
Including simplified
methods
Reimbursement
Reimbursement of indirect
costs with a max of 20% of
direct costs(*)
if indirect costs < 20% of DC(*)
=> reimbursement = actual
indirect costs
if indirect costs >20% of DC (*)
=>reimbursement = 20% of DC
For CSA: same reasoning but 7%
Flat rate of 20% of
direct costs (*)
20% of direct costs (*)
For CSA: same reasoning but 7%
* For this calculation costs of subcontracting and resources made available by third parties outside of
beneficiary’s premises must be deducted from direct costs
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Actual indirect costs
Indirect costs are all those eligible costs which cannot be identified by the
beneficiary as being directly attributed to the project, but 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
 Linked to the project itself?
 Linked to EU-research projects in general?
 Linked to research in general?
 Including other activities such as teaching, production or sales?
 Including all indirect costs at the level of the organization?
9
Actual indirect costs
10
Actual indirect costs
A
General and Administrative expenses
2010
346,173.22
2011
360,810.10
A1
Consumables
20,197.52
21,961.76
A1.1
Office supplies
2,122.70
2,851.76
A1.2
Electricity
13,545.52
15,235.30
A1.3
A2
Water
Hire and rental expenses
4,529.30
66,756.81
A2.1
3,874.70
81,001.03
rental for premises
20,000.00
20,000.00
A2.2
car fleet
15,000.00
15,000.00
A2.3
computer hardware
31,756.81
46,001.03
A3
Repairs and maintenance
33,993.23
32,950.88
A4
Insurance
7,929.70
9,283.46
A5
Administrative expenses
35,582.31
31,709.70
A5.1
Telecommunication, postal and other G&A expenses
20,000.00
A5.2
Travel and subsistence expenses
15,582.31
A6
Professional fees
15,382.00
17,000.00
14,709.70
20,552.44
A6.1
chartered accountant
8,832.00
12,052.44
A6.2
lawyer
7,000.00
8,500.00
A7
Management fees
164,150.50
132,460.50
A8
Entertaining
2,181.15
14,691.75
A9
Internship costs
0.00
16,198.58
15,171.39
117,853.31
479,197.92
17,541.37
120,056.36
498,407.83
953,889.69
1,070,474.42
B
Amortization
C
Indirect personnel costs
D=A+B+C TOTAL INDIRECT COSTS
E
D/E
DIRECT PERSONNEL COSTS
INDIRECT COSTS RATE
50.24%
46.56%
11
Actual indirect costs
A
A1
General and Administrative expenses
2010
346,173.22
2011
360,810.10
Consumables
20,197.52
21,961.76
A1.1
Office supplies
2,122.70
2,851.76
A1.2
Electricity
13,545.52
15,235.30
A1.3
A2
Water
Hire and rental expenses
4,529.30
66,756.81
3,874.70
81,001.03
A2.1
rental for premises
20,000.00
20,000.00
A2.2
car fleet
15,000.00
15,000.00
A2.3
computer hardware
31,756.81
46,001.03
A3
Repairs and maintenance
33,993.23
32,950.88
A4
Insurance
7,929.70
9,283.46
Administrative expenses
35,582.31
31,709.70
A5
A5.1
Telecommunication, postal and other G&A expenses
A5.2
A6
20,000.00
Travel and subsistence expenses
Professional fees
15,582.31
15,382.00
17,000.00
14,709.70
20,552.44
A6.1
chartered accountant
8,832.00
12,052.44
A6.2
lawyer
7,000.00
8,500.00
A7
Management fees
164,150.50
132,460.50
A8
Entertaining
2,181.15
14,691.75
A9
Internship costs
0.00
16,198.58
15,171.39
117,853.31
479,197.92
17,541.37
120,056.36
498,407.83
953,889.69
1,070,474.42
B
Amortization
C
Indirect personnel costs
D=A+B+C TOTAL INDIRECT COSTS
E
D/E
DIRECT PERSONNEL COSTS
INDIRECT COSTS RATE
50.24%
46.56%
12
Actual indirect costs
• Telecommunication, postal and other G&A expenses
- Once the accounting system considers these costs as indirect, ensure they are not
claimed as direct costs. If claimed as direct costs, they should be removed from the IC
pool
• Travel and subsistence expenses
- Once the accounting system considers these costs as indirect, ensure they are not
claimed as direct costs. If claimed as direct costs, they should be removed from the IC
pool
- Expenses by non-productive employees should be removed
- Expenses by productive employees but not linked to the project should be removed
•
Lawyer fees
- Eligible if incurred in direct relationship with the eligible DC attributed to the project
• Entertaining expenses (e.g. team building, receptions etc)
- Non eligible, to be removed
13
20% flat rate
Subject to the accounting principles of the beneficiaries, the following items may be
considered as indirect eligible costs:
- costs related to general administration and management;
- costs of office or laboratory space, including rent or depreciation of buildings and
equipment, and related expenditure such as water, heating, electricity, maintenance,
insurance and safety costs;
- communication expenses, network connection charges, postal charges and office
supplies;
- common office equipment such as PC's, laptops, office software;
- miscellaneous recurring consumables; etc.
provided they can be identified and justified by the accounting system of the participant
as being incurred in direct relationship with the eligible direct costs attributed to the
project.
Such costs are normally deemed to be covered by the flat rate (20%) and cannot be
charged as direct costs unless it is established that the accounting principles of
beneficiaries consider them as direct costs.
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Indirect costs
Common errors:
•
-
•
•
-
ICM Actual/Simplified
IC pool includes ineligible items,
not incurred in direct relationship with the eligible DC
or already claimed as DC although the accounting system considers them as IC
(depending on the characteristics of the operation in question, it is possible that some
costs can be considered either direct costs or indirect costs, but no cost can be taken
into account twice as a direct cost and an indirect cost.
Budgeted IC or based on 20% flat rate (NB! In case of ICM Actual, this 20% flat rate
is rate for reimbursement and not rate to define and claim IC
ICM 20% flat rate
Indirect costs claimed as direct costs without being considered as DC by the
accounting principles of the beneficiary
General
Mistake in choice of ICM during the first participation in FP7
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For further info: Guide to Financial Issues for
beneficiaries of FCH JU Programme
Questions?
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