1. Ninth Lead Partner Information Seminar Financial requirements Project monitoring & reporting Audit & controls Communication => Practical information to support Lead Partners in their daily tasks Agenda 19-20 April 2012 WELCOME!

2. FINANCIAL REQUIREMENTS What project promoters need to know about INTERREG IVB NWE project management WELCOME!

3. Table of contents The Lead Partner Principle The Partnership Agreement The Audit Trail Eligibility of Expenditure Project Modifications The Payment Procedure Financial Requirements

4. General considerations: the big picture EU regulations in general, esp. General Regulation 1083/2006. Regulations (EC) 1080/2006 and 1828/2006 Regulations (EC) 846/2009 amending Regulation 1828/2006 Public procurement rules State aid Country specific eligibility rules (Wallonia, Ireland…) NWE Guidance notes Financial Requirements Part I

5. The Lead Partner Principle Financial Requirements

6. The Lead Partner Principle (LPP) article 20 of ERDF Regulation (EC) 1080/2006 Financial Requirements The Lead Partner Principle One project partner that steps up as the overall responsible partner on behalf of the whole partnership. They are the administrative link between the programme and the project (flow of information and fund). As such, they bear responsibility for ensuring the project’s implementation. => a Partnership Agreement becomes mandatory.

7. Devolved legal and financial responsibility Compulsory For the 2007-2013 programming period Financial Requirements The Lead Partner Principle The Lead Partner ensures sound management and the delivery of outputs drafts the Partnership Agreement, establishing mutual rights, obligations and duties among project partners. ensures that expenditure is eligible, even if partners remain liable for their own actions and related expenditure is responsible for reporting and other administrative actions to the JTS distributes ERDF to partners

8. Financial Requirements The Lead Partner Principle Lead Partner Principle Partnership Agreement Overall responsibility project implementation: project content + financial management Responsibility for Project Management Signature of Subsidy Contract Transfer of received ERDF funds to partners Organisation of audit of all expenditure Contact with JTS Submission of progress reports, payment claims, audit reports, project modifications, day-to- day questions…

9. Implementation stage Compulsory For the 2007-2013 programming period Financial Requirements The Lead Partner Principle Joint implementation: activities must be carried out and coordinated by all partners. Reporting and monitoring: jointly, timely, activities + expenditure. Progress Reports make a link with the Application and the Payment Claim. First Level Control and control regulations: national rules apply Payments: the principles of post-reimbursement, the time lag between expenditure and reimbursement and the grant rate must be clear. Irregularities / recoveries: prevention is better than cure Decommitment issues: information plays a vital role!

10. Closure & project evaluation Compulsory For the 2007-2013 programming period Financial Requirements The Lead Partner Principle Final Report: the LP must make sure from the beginning of the Project that duties and requirements for the completion of the Project are clear to all partners. Eligibility: the LP should make sure that the partners are aware of deadlines and procedures for closure, forward all eligible expenditure in due course and know the filing requirements. Project evaluation: projects are strongly recommended to assess how successful the Project has been in terms of processes, level of cooperation and quality of management.

11. The Partnership Agreement Financial Requirements Basics

12. Poll: partnership agreement Financial Requirements Partnership Agreement Who has already drafted the partnership agreement? Who has signed it?

13. Recommended clauses (1) Does your partnership agreement address all these points? Compulsory For the 2007-2013 programming period Financial Requirements Partnership Agreement Common project objectives; Duration of the Agreement - from the day all partners sign until the LP discharges its obligations towards the MA (years after project closure!); Role and responsibilities of the LP; Roles and responsibilities of the project partners; Detailed information on project activities - the project work plan; Organisational structure of the partnership - steering group?; Deadlines and penalties for non-compliance;

14. Recommended clauses (2) Does your partnership agreement address all these points? Financial Requirements Partnership Agreement Cooperation with third parties - ultimate responsibility remains within the partnership; third parties need to be selected according to public procurement rules; Definition of eligible expenditure; Monitoring, reporting and evaluation requirements to be fulfilled by the LP and other partners; Financial control and audit requirements; Communication and publicity requirements; Dissemination of project outcomes - issue of intellectual property rights;

15. Recommended clauses (3) Does your partnership agreement address all these points? Financial Requirements Partnership Agreement No commercial use and full public access to project results Confidentiality agreement within the partnership; Dispute settlement and changes in the partnership; Reimbursement to the LP in case of non-completion of obligations; Working language; Applicable national legislation and optional clauses of 'force majeure'; Concluding provisions on how to make changes to the Partnership Agreement. How to deal with common costs

16. The Partnership Agreement must be signed by all partners and received by the JTS before the first payment can be made to the project. Financial Requirements Partnership Agreement No obligation to send it with the Subsidy Contract or the first payment claim: transmit it as soon as it’s signed!

17. The audit trail Financial Requirements Basics

18. What is the audit trail? Financial Requirements Audit trail The audit trail is a comprehensive set of documents which provide a complete history of a project and provide evidence that proper procedures were applied and outcomes achieved.

19. Organise your controls Financial Requirements Audit trail Internal controls at partner and project level Ensure smooth implementation: know what you’ve done and where you’re going, content-wise and financially. Always have a good overview! First Level Controls Controls at project level, prior to the submission of payment claims. Other controls Second level controls, DG Regio and Member States audits, Certifying Authority audits, Quality controls, etc… Every partner in every project will be controlled several times and by different bodies during the project’s lifetime. Save time and money with an efficient organisation!

20. First Level Control Financial Requirements Audit trail The First Level Control checks the expenditure declaration included in each payment claim. The expenditure must be real, actually incurred, supported by documents of probative value and eligible. Real: the good or service exists and can be shown. Actually incurred: expenditure was paid out. Invoices can only be included if they have been paid in full by a partner => advances are not eligible. Supported by documents of probative value: a receipt, an invoice or a document that has an accounting value is compulsory. Eligible: in line with Programme, EU and national rules, as well as with Subsidy contract and Application Form

21. Quiz Financial Requirements Audit trail The finance manager buys a car and includes its cost in the payment claim. Is it eligible? the good or service exists and can be shown expenditure was paid out. There is a receipt i.e. in line with EU and national rules, direct & demonstrable connection with the Application Form, incurred in the lifetime of the project as set in the Subsidy Contract NO Is it real? Is it actually incurred? Is it supported by documents of probative value? Is it eligible?

22. Financial Requirements Audit trail Regulation (EC) 1080/2006 (Article 20): The Lead Partner shall:  lay down the arrangements for its relation with the partners participating in the project in an agreement (i.e. sound financial management)  be responsible for ensuring the implementation of the entire project  ensure that all the project expenditure presented has been incurred for the purpose of implementing the project and corresponds to the Application Form  verify that all project expenditure presented has been validated by the controllers  be responsible for transferring the ERDF contribution to the partners Role of the Lead Partner controller

23. Financial Requirements Audit trail Role of the Lead Partner controller Implications: The LP controller: checks the expenditure of all partners against the approved Application Form. checks whether it fits with the budget planning (avoid exceeding 120%) verifies that the partners’ expenditure is in line with what was agreed within the partnership agreement (importance for the controller to read the partnership agreement, the subsidy contract; to know the internal procedures,…) verifies the validation by the partner controllers verifies that the controllers are those approved by the MS verifies that the controllers’ signature is backed by checklists,… checks that all copies are available at Lead Partner premises verifies that the ERDF contribution has been paid to the partners

24. Eligibility of expenditure Financial Requirements Basics

25. Eligibility period Financial Requirements Eligibility of expenditure Start date: Costs are eligible from the start date indicated on the Application Form, at the earliest one year prior to the closure of the call for proposals as long as the actions are not completed before that date. End date: The end date indicated in the Application Form is the date by which the final report should be submitted to the Secretariat. Any expenditure (including costs linked to the project closure) incurred, invoiced or paid after the official project end date is ineligible.

26. Partner staff Financial Requirements Eligibility of expenditure Staff costs are the costs of the actual time worked by the persons directly carrying out the work under the project and directly employed by the partners. Remuneration costs must be calculated individually for each employee and must be based on the monthly payslip. Working time must be recorded (eg. timesheets) throughout the duration of the action. The records should be certified at least once a month. Estimates of hours/days worked are not acceptable. Overhead costs cannot be added to staff costs and are considered as administration costs Calculation method: payslip x (time spent on project/total time worked) Calculation method No estimates

27. External Experts & Consultants Financial Requirements Eligibility of expenditure Work done by independent consultants must be essential to the project and reasonably priced (limited to 800€/day). Costs must be paid on the basis of contracts and against invoices. It is the Partner’s responsibility to ensure that public procurement rules are respected and that contracts are awarded at normal market prices. Travel and accommodation expenses for external experts should be recorded under the external experts budget line. Exceptions: specific actions such as website development or communications should be recorded under the "Publicity" budget line; all audit related costs are recorded under the “Audit/First level control" budget line. Maximum per day Public procurement

28. Travel costs Financial Requirements Eligibility of expenditure All tickets, invoices and receipts must be kept by partners so that their eligibility can be checked and audited. Costs must be directly related to, and essential for, the effective delivery of the project and cover economy class travel on public transport. Additional costs for business or first class travel are not eligible. Recommendation for maximum daily subsistence allowances are based on the Commission subsistence allowances paid to experts on assignments requiring an overnight stay. Expenses for individuals other than staff should be included under the appropriate budget line (external expert, audit, communication). Outside the eligible area Maximum daily subsistence No lump sums

29. Meetings & seminars Financial Requirements Eligibility of expenditure Costs related to the organisation of meetings and events (renting of premises and equipment, meals, etc), participation in meetings and seminars related specifically to the project are eligible under this budget line. Related travel costs and external expert costs must not be claimed under this budget line (external expert, audit, communication).

30. Publicity Financial Requirements Eligibility of expenditure Expenditure with the main aim of promoting the Project should be part of this cost category. This includes website, promotional material and printed publications. Public procurement rules must be observed in selecting company or individual who will carry out the assignment. Missing logo Call for tender

31. Equipment Financial Requirements Eligibility of expenditure Durable equipment charged to the project must be essential for the delivery of the project and used for that purpose. A clear distinction must be made between what is included in the investment budget line (where the total cost is eligible) and the equipment budget line (where depreciation is the rule). Depreciation should be made in accordance with the internal accounting rules of the partners and generally accepted for items of the same kind. Only the portion of the equipment's depreciation corresponding to the duration of the project and the rate of actual use for the purpose of the project may be taken into account. Once the eligible amount is determined, it must be claimed in full at once upon purchase of the equipment. Goods purchased before the start of the project can be claimed at a depreciated rate as long as they have not previously been financed by any other source. Depreciation Pro rata

32. Investments Financial Requirements Eligibility of expenditure All eligible expenditure must be fully described in the approved Application Form. Changes Call for tender

33. Administration costs Financial Requirements Eligibility of expenditure Administration costs include items such as office rent, maintenance and furniture, electricity, heating, water, insurances, telephone, fax, internet, stationary and other administrative structure costs. Since April 2011, there is a flat rate of 11% of partner staff budget for administration costs. The rate is automatically calculated based on the partners’ actual staff costs.

34. Revenue Financial Requirements Eligibility of expenditure The Lead Partner must keep separate accounts for the project so that all expenditure (costs) and all revenue (receipts) can be posted and audited, and detailed summary reports drawn up. All revenue generated from sales, rentals, subscriptions, fees or other equivalent sources must be reported and must be deducted from the eligible costs. A separate budget line for revenue is included in the Application Form and the payment claim. In case of a revenue-generating projects, the current value of the net revenue from the investment must be estimated over a specific reference period. Where it is not possible to estimate the revenue in advance, the revenue generated within 5 years following project closure must be reported (article 55 of EU regulation No 1083/2006).

35. Expenditure outside eligible area Financial Requirements Eligibility of expenditure For partners from the NWE area, any expenditure incurred outside the eligible area (for example, costs of a meeting or conference held outside the area) must be justified in full and a clear need for the expenditure to be incurred outside the area must be demonstrated. Projects must get formal approval from the Secretariat before incurring expenditure outside of the NWE area.

36. In-kind contribution Financial Requirements Eligibility of expenditure This consists of the provision of land or real estate, equipment or raw materials, research or professional work or unpaid voluntary work provided free of charge to the partners. Staff paid by the partner organisation is not contribution in kind. In-kind contribution can only be included in Payment Claims if it was included in the Approved Application Form attached to the Subsidy Contract.

37. Ineligible costs Financial Requirements Eligibility of expenditure (non-exhaustive list) National banking charges VAT unless it is genuinely and definitively borne by the final beneficiary Fines, financial penalties and expenditure on legal disputes Interest on debt Decommissioning of nuclear power stations Housing Further Information: General Regulation (EC) No 1083/2006 - article 56 ERDF Regulation (EC) No 1080/2006 - articles 7 and 13 Implementation Regulation (EC) No 1828/2006 - articles 48-53

38. Preparation costs Financial Requirements Eligibility of expenditure Costs related to project development and application are eligible if: - The activities show a direct, demonstrable connection to the development of the project. - Costs were incurred up to one year prior to the closure date of the call. They may include costs on all budget lines. Preparations costs must be claimed by at the same time (usually in Payment Claim 1) They are limited to a ceiling of €100,000 total eligible cost

39. Coordination costs Financial Requirements Eligibility of expenditure Costs related to coordination and the management of the project must be recorded under the partner who will incur the expenditure. Partners can contribute financially to the coordination costs but this should not be mentioned neither in the budget, nor in the Payment Claim. LP cannot slice coordination costs off the top of payments to partners (article 80 regulation 1083). Shared costs

40. Project modifications Financial Requirements Part II

41. Project modifications Financial Requirements The project’s implementation plan and budget are approved as part of the Application Form. During the lifetime of a project, you may wish to amend the partnership, change the budget line split, modify the envisaged project implementation or the project end date. Theses changes are allowed a total of 3 times, no later than 6 months before the end date of the Project and only upon formal request and approval by the Secretariat or the Programme’s Steering Committee – depending on the significance of the changes. The “request for changes” form must be used. The Secretariat should be notified of minor changes as soon as possible by official letter from the Lead Partner. This would be, for example, a change of bank account, a new contact person, a change of address, etc. Project modifications

42. Project changes: budget/finances Financial Requirements Budget Line Modifications (BLM) Projects can overspend a maximum of 20% on an individual budget line. Increases of more than 20% on individual budget lines must be submitted and duly justified to the Secretariat using the request for changes form. The project will receive formal approval from the Secretariat if appropriate. Other financial changes Ex: a reduction of grant rate at partner level, a decrease in TEC budget -> use the request for changes form. Project modifications

43. Project changes: activities/output Financial Requirements The approved Application Form details the project content and management structure, as well as the expected results, outputs and impacts, and concrete deliverables of the Project. The Lead Partner must inform the Secretariat about any changes to the Application Form and use the request for changes form. Depending on their significance, approval might be given by the Secretariat or the Programme’s Steering Committee. Project modifications

44. Payment procedure Financial Requirements

45. Payment procedure Financial Requirements

46. Some basic rules Financial Requirements Payment procedure Payment will be made only if both the Progress Report and Payment Claim are deemed acceptable. Payment Claims and Progress Reports must be filled out in English, submitted together, twice a year (end of April and end of October). “First come, first served” applies. Plan your cash flow as the reimbursement can take from one month to several months. Once the claim and progress report are approved, the JTS sends an email to the LP with the monitoring report and the templates for the next period. The Certifying Authority emails a letter confirming payment. A maximum of 85% of the ERDF project budget can be paid before the submission of the final claim.

47. How to speed up the process? Financial Requirements Payment procedure Check that both the Payment Claim and the Progress Report are correct before you submit them. All required information must be filled in : dates, signatures, etc. There must be a full set of verification sheets and annexes. Fill in the comment sections completely. Answer the JTS queries as soon and as accurately as possible. Circulate the assessment report to all partners and implement the JTS’ recommendations for improvement. Be proactive and communicate with the JTS: inform us of any delay or project modifications before they have substantial consequences.

48. The first payment claim Financial Requirements Payment procedure The following documents are necessary for payment of the first claim: a signed Subsidy Contract. a signed Partnership Agreement. first level controller approbation certificates for all partners submitting expenditure and, in any case, the Lead Partner. a letter confirming the project’s bank details for payments, ideally with a bank document showing the IBAN.

49. Payment claim template Financial Requirements Payment procedure Financial reporting uses the Payment Claim Template. Note that a new template will be sent to you after each payment (data is cumulated), in an MS-Excel format. There is a worksheet per partner and each partner worksheet feeds the project claim sheet. There are formulas and links in the document: be careful when handling it. Any “damaged” files will be rejected for administrative reasons (upload in our programme monitoring system). All controller declarations must be filled in and signed. Verification sheets of expenditure must be fully completed and annexed to the Payment Claim.

50. VoE Financial Requirements Payment procedure Quiz: what documents need to be submitted with the PC ? Completed Payment claim template Consolidated individual Partner claims Verification sheets for all partners Signed FLC declarations for all partners

51. VoE Financial Requirements Payment procedure Why is it important to communicate with the JTS? early warning to find suitable solutions (N+2, BLM, spending…) JTS can support you with partnership issues Advice on spending targets, project changes,.. Advice on project management issues We welcome informal exchanges outside of reporting periods!!!

52. VoE Financial Requirements Payment procedure What do these documents look like? The payment claim template and verification of expenditure sheets Let’s start with the VoE!