1. ESF INFORMAL TWG Prague, 2-3 April 2009 Lump sums grants
ESF coordination Unit, European Commission 30 March 2009

2. Lump sums grants A draft guidance note
Additional part presenting the key points on how to use lump sums in order to develop a common understanding on this issue
Paper submitted to the ESF TWG = still DRAFT for reactions and “stimulation” of the debates on the form and the substance.
At this stage no change on the part on standard scales of unit cost, except mistakes/basic clarification

3. Draft guidance note General presentation
Structure of the note: 6 parts
INTRODUCTION
CHAPTER 1: Indirect costs declared on a flat rate basis
CHAPTER 2: Flat rate costs calculated by application of standard scales of unit costs
CHAPTER 3: Lump sums
CHAPTER 4: Common horizontal provisions
ANNEX: Legal basis
Mainly based on information note to Council with additional details

4. Lump sums grants General principles
Pre established lump sum in accordance with pre-defined terms of agreement on activities and/or results
May cover all or part of the operation. May also be added to describe/detail different activities (and different costs) of the same operation
Particularly useful or small operations or small bodies (capping to €50,000 public expenditure) but not exclusively
Well adapted also when no “quantities” to apply unit costs

5. Lump sums grants Key points for managing authorities
Correlation between the realised operation and the payments
Justification of the final amount of the lump sum
Choice of the lump sum
Calculation of the lump sum to be granted

6. Lump sums grants Correlation between the realised quantities and the payments
Basic principle: “Yes or No” payment (not proportional to “quantities” otherwise standard scales of unit cost)
envisage the possibility to have several levels of payments depending on intermediary steps.
Shall be transparent ex-ante … via the grant agreement and/or conditions of the call for proposals, …

7. Lump sums grants Justification of the final amount
Define precisely in the grant agreement the basis on which payments will be issued and how/under which circumstances it may be reduced
“Yes or No” approach
Supporting documents for justification of the lump sum.
When choosing a lump sum, the granting authority should also envisage the procedures & documents necessary to justify it ex post.

8. Lump sums grants Choice of the lump sum
The choice should reflect the type of operation funded, trying to mitigate external factors
Purely outcome based systems may be risky and should not add risk to an existing 0/1 system.
Is the use of grant appropriate if the payments are purely result based?

9. Lump sums grants An ideal lump sum?
Apart from being fair, equitable and verifiable, an ideal lump sum should find a balance between:
Clear link with the operation
Easy and straightforward way to justify it
Ensure the economic balance of the operation and of the beneficiary
Lower the risk of creaming the participants or lowering standards
Clear distinction between grants and public tendering (is the choice of the procedure correct?). …

10. Lump sums grants : Horizontal issues Calculation of Lump sums grants
No method defined by the Regulation but conditions that the methods will have to fulfil. MSs will define the method.
4 conditions to be respected: key issues for sound financial management
Established in advance
Fair
Equitable
Verifiable

11. Lump sums grants : Horizontal issues Calculation of Lump sums grants: a few examples
By type of operations:
Lump sums already used by national/regional authorities if they satisfy the conditions of the Regulation.
At the level of calls for proposals
Operation by operation:
On the basis of draft budgets with real costs and expected output / outcome + comparison to similar operations

12. Lump sums grants: Horizontal issues Operations generating revenues
Revenues must be taken into account (no over financing of the operation)
BUT keep in mind the simplification: no justification of underlying costs at closure!
=> Method to treat revenues should preserve simplification: for example ex ante treatment by a reduction of the allocated lump sum grant.

13. Lump sums grants: Horizontal issues Retrospective entry into force
Why? Ensure legal certainty for some operations already using this kind of approach
BUT: lump sums have to be defined ex ante
very difficult to implement for operations on their way, so not recommended by the Commission
Possible in the case of multi annual operations for the remaining part / period of the operations (capping).

14. Standard scale of unit costs / Lump sum grants Specificities of financial management
“by principle” a lump sum is an approximation of the real costs of the operation.
Certification of the grant by CA based on real progress of the operation, not on (real) expenditure.
Legal agreement can foresee advances, intermediary or only final payment,
BUT expenditure certified to the Commission must rely on progress/completion of the operation certified by the beneficiary and verified by the managing authority/intermediary body
RISK: to declare national advance payments to the Commission, subsequently rejected as not supported by activities

15. Next steps
Your reactions (at this stage reactions from EE, FI on standard scale of unit costs)
Parts to be developed: audit, consequences of these new tools in terms of certification of expenditure to the Commission
Internal EC validations
COCOF Technical Working Group / Discussion with ECA?
Final working document by June?

16. European Social Fund More Info
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