Building a budget – and a bit of financial reporting

Horizon 2020 Legal and finance training

2nd – 3rd November 2015

Melanie Büscher DASTI, NCP Academy Partner

What are we going to discuss?

1. Personnel costs

2. Other direct costs

3. Subcontracting

4. Budget transfers

“Budget for the proposal” – (A) Personnel costs

Personnel

1. Employees (both permanent staff and temporary). They have an employement contract or equivalent appointing act with the beneficiary and they are ”assigned to the action”

2. Natural persons working under a direct contract

3. Personnel seconded by a third party against payment

4. SMEs owners not receiving a salary

5. Natural persons not receiving a salary, when they are a beneficiary themselves

Personnel costs when budgetting

Have your clients thought about …

• Who should work on the project?

• When will the project start?

• Any internal rules for (automatic) wage increase and how much should be allocated to that?

• Do you have a reasonable buffer?

• Are there any internal rules that your client should be aware of?

Personnel costs in the proposal – Person/Months

Talk to your neighbour

Is the number of person months per Work Package binding?

What happens if a participant works more/ less in a particular WP than indicated?

2 minutes

Example from Ireland

http://www.ucd.ie/bursar/postaward/H2020%20Budget%20Calculators.html

Personnel costs when claiming costs (Financial Statement) Can be charged to the project:

• Gross salary (including the employee’s social security contributions, taxes and other costs (by law or similar) included in the remuneration

• Salary paid during parental leave

• Salary for PhD students

Cannot be charged:

• Recruitment costs (unless ERC)

Participants have to charge an hourly rate.

Calculation of hourly rate

Calculation of hourly rate

”Personnel costs” = Number of registered hours x hourly rate

Hourly rate = Eligible annual salary costs Number of annual productive hours

NB: hourly rate used has to be based on last closed financial year

Common mistakes

• No employment (or similar) contract with the beneficiary • but with the daughter company, different legal entity etc. ”because it made

sense” • NCP question: WHO will be working on the project. Are they all from YOUR

legal entity?

• Hourly rate miscalculated (including more than just costs) • In particular when consultancies involved • NCP question: are you aware that you cannot charge your normal price to the

Commission? You have to use your company’s COSTS, not your normal rates

• Missing time records • NCP advice: remember to document the time you have used on the project –

per WP (on paper, by excel, in your normal time registration….)

More details to be found in your folder…

Reflection (2 minutes): Personnel costs

• What were the main points for you?

• Anything unclear?

Short break to stretch your legs

“Budget for the proposal” - (B) Other direct costs

Other direct costs

• Travel costs and related subsistence allowances both for the personnel working on the project and external experts (if indicated in the DoA)

• Equipment , infrastructures and other assets (depreciation!)

• Costs of other goods and services: e.g. consumables and supplies, publications, conferences, patents, certificates on financial statements, certificates on methodology, translations, in-kind contributions against payment or free of charge

And when claiming costs….

• Documentation for all costs needs to be available

• Durable equipment: the costs have to be measurable and verifiable. Only for the number of hours, the equipment actually was used on the project

• ”Best value for money” needs to be documented: • How did you chose the venue/ supplier/ consultant? What

criteria did you use? Make a note for your paper work.

VAT?

Critical question: What does national VAT legislation say for the respective legal entity? • Is VAT deductible under national law: not an eligible cost

• VAT not deductible according to national law: eligible cost

• VAT that cannot be identified: eligible cost

• VAT in EU is considered to be identifiable:

http://ec.europa.eu/taxation_customs/resources/documents/taxation/vat/how_vat_works/rates/vat_rates_en.pdf

Discuss with your colleagues at the table

Which questions could you ask to your clients when helping them with the direct costs in the budget phase?

Who else could contribute to the project?

Selling services or material – Art. 10 (”tool” for the participant) In-kind contributions provided by third parties - Art. 11+12

Subcontractor - Art. 13 (Implements action tasks for one of the participants) Linked third party- Art. 14 (Implements action tasks)

“Budget for the proposal” - more third parties

Budget transfers

• The budget is an estimation. Transfers among the beneficiaries, linked third parties or between budget categories are allowed, without requesting an amendment of Annex 1

UNLESS:

• The transfer reflects a significant change of Annex 1 , then, an amendment is normally required!

NCP advice: ask your client to draw up a realistic budget – but calm him/ her down: if changes need to be made at a later point, this is possible