1. October 25, 2005 Pathways To Successful EU-Research Projects Financial management in FP 6 projects Praha, October 25, 2005 Claudia Labisch KoWi Office Brussels cl@kowi.de phone: 0032-2-548.02.12 www.kowi.de

2. October 25, 2005 Problems encountered in EU-research projects:   Which cost model do I have to go for?   Definition of "personnel"   Eligibility of personnel costs   Limited use of subcontracts   Audit certificates   Communication

3. October 25, 2005 Which cost model do I have to go for? Make sure you choose the right cost model as of proposal submission Change of cost model during lifetime of Framework Programme Change of cost model during project's lifetime No change of initially allocated budget!

4. October 25, 2005 Cost Models/ I Full Cost with actual indirect costs (FC): eligible direct and indirect costs are charged by the contractor; EC-contribution ist 50% of the total costs Full Cost with flat rate for indirect costs (FCF): eligible direct costs are charged by the contractor; EC- contribution is 50% of direct costs + flat rate up to 20% of all direct eligible costs (minus subcontracting); Additional direct costs with flat rate for indirect costs (AC): eligible direct additional costs are charged by the contractor; EC-contribution is 100% of all direct additional costs + flat rate up to 20% of all direct additional eligible costs (minus subcontracting).

5. October 25, 2005 Definition of "personnel" within a EU-project Employees having permanent working contracts with the contractor Employees having temporary working contracts with the contractor Personnel made available by a third party on basis of prior agreement (contribution of third parties)

6. October 25, 2005 Eligibility of personnel costs Contractors using the FC- or FCF-model may charge any personnel costs to the project (according to above definition of "personnel"). Contractors using the AC-model may only charge costs of permanent staff involved in the project for management of consortium activities! (or other, if additional costs)

7. October 25, 2005 Eligibility of personnel costs Costs for remuneration of personnel: should be taken form the payroll account; working time to be charged must be recorded throughout duration of project (ex. Time sheets); estimate costs at start of project; claim of actual costs at time of submission of financial statement (c-Form)

8. October 25, 2005 Limited use of subcontracts Core elements of the project can not be subcontracted (project management!) Only for tasks which cannot be carried out by the contractors If there is a subcontract, it must always become part of the contract with the European Commission (contract amendment)

9. October 25, 2005 Limited use of subcontracts Conditions for awarding subcontracts (I) : any subcontract must be offered to the best bid; a public legal entity must apply its internal rules for selection of service providers (public call for tenders); a private legal entity must at least require submission of several quotes (min. of 3), otherwise there must be a framework contract;

10. October 25, 2005 Limited use of subcontracts   Conditions for awarding subcontracts (II): Intellectual property resulting from subcontracted work belongs to the contractor. No audit certificates from subcontractor needed, but Commission and Court of Auditors may carry out financial audits/controls (Article II.29)

11. October 25, 2005 Contributions of Third Parties (I) … ….. ….. To be eligible, they must fulfill following provisions: agreement between contractor and third party prior to third party‘s contribution to the project. third parties and resources to be made available to the contractor must be identified in technical annex to the contract. costs must meet eligibility requirements and be recorded in accounts of the third party at the date of audit certificate.

12. October 25, 2005 Contribution of Third Parties (II) Declaration of costs provided by a third party: They are considered to be costs of the contractor participating in the project and must be declared by the contractor in its Financial Statement (Form C). If they are considered as receipts this must also be indicated in the Form.

13. October 25, 2005 Contribution of Third Parties (III) Certification of third party‘s costs: Costs of the third party have to be certified by an external auditor (either contractor‘s auditor or third party‘s own auditor). Different costs to be audited: - in case third party resources are reimbursed by the contractor; - in case third party resources are not reimbursed by the contractor. Costs of this certification are eligible costs under „management activities“.

14. October 25, 2005 Contribution of Third Parties (IV) The responsibility for establishing audit certificates lies with the contractor. Third parties have neither rights nor obligations towards the Commission, so they are not responsible vis-à- vis the Commission.

15. October 25, 2005 Receipts (I) Financial transfers or Contributions in kind from third parties: Receipts are contributions by a third party allocated to the contractor specifically for use on the project. If there is no full reimbursement by the contractor to the third party, the part which has not been reimbursed has to be considered as a receipt.

16. October 25, 2005 Receipts (II) Income generated by the project itself: e.g. admission fee to a conference carried out by the consortium; sale of an equipment bought for the project;... Income generated in using the knowledge resulting from the project is not considered as a receipt.

17. October 25, 2005 Audit certificates – who can deliver the audit certificate? Each contractor is free to choose any qualified external auditor, including its usual external auditor, provided that it meets the cumulative following professional requirements: external auditor must be independent from the contractor; external auditor must be qualified to carry out statutory audits of accounting documents in accordance with the 8th Council directive 84/253/EEC of 10 April 1984 or similar national regulations. A contractor that is a public body may opt for a competent public officer to provide an audit certificate, provided that the relevant national authorities have established the legal capacity of that competent public officer to audit that public body. (Rules for auditing and auditors: Articles II.26 and II.29, Annex II to the Model Contract)

18. October 25, 2005 Audit certificates /II In case of internal audit (for public bodies), the service concerned may claim only real costs of effecting the audit (no subcontracting). Claim of overheads on audit costs for contractors in AC- model only if costs of audit are additional direct costs; Charge of audit costs in the relevant reporting period;

19. October 25, 2005 Audit certificates / III There is no standard format for an audit certificate; External auditor or public officer should follow model proposed by the Commission (see Annex 7 of Financial Guide) Audit certificate should be issued in one of the official languages of the EU; should be the same language used for all other reports; otherwise, external auditor must attach translation in that language.

20. October 25, 2005 Communication...... on different levels in order to avoid problems and misunderstanding: Internal communication (financial department, legal service) External communication = at consortium level, to clarify important matters (cost model, allocated budget, reimbursement of audit costs, clause 39...)

21. October 25, 2005 Information on Financial Management of EU-Projects within FP6: http://www.cordis.lu/fp6/project-management.htm http://www.cordis.lu/fp6/find-doc.htm#reporting http://www.kowi.de/en/fp/projects/default.htm