H2020 Technical Assistance - pks.rs za komunikacije/H2020 TA Events... · sound financial...

H2020 Technical Assistance

Financial engineering for H2020

Copyright Pera Consulting (UK) Ltd. 2014 – Confidential

Content

• Project budgeting

• Eligible costs

• Simplifications and changes in H2020

• Estimating your project budget

• MSCA budgets


Session Aim

• Become familiar with key changes within the

H2020 programme

• Learn good practice for budget estimation


Content


• Eligible costs



• MSCA budgets


Project Budgeting

• At the proposal development stage budgeting

includes:

• Cost estimation (for an individual)

• Project budget development (for the consortium)


Project Budgeting

Why is proper budgeting important?

• Why not just allocate an equal share of the

maximum allowable EU grant to each partner?

• Why not just assign an arbitrary budget to each

partner – keeping the largest portion for yourself

of course?


Project Budgeting

• Partners will be paid based on what their actual

costs are for work that they are contracted to do

in the Description of Work

• Partners who run out of money lose motivation

fast and STOP working!

• BOTTOM UP COSTING is not only Good

Practice but it is a SENSIBLE starting point too


What is Bottom-up Costing

• This method looks at the individual components that will make up the cost of the project and adds them together

• Partners develop their own cost estimates based on their understanding of what they will be doing on the project

• This is a much more detailed and accurate way to estimate the cost of a project


Resources Pool Task 1

Task 2

Task 3

Task 4

Task 5

Task 6

Technicians

Equipment

Consumables

Travel

Engineers

Managers

BUDGET

P

A

R

T

N

E

R

S


Best Approach to Budgeting

The main downside to Bottom-up costing is that

partners may be inclined to pad out their figures so that

they have excess money to work with

Therefore a TOP DOWN

element is also needed

Final estimates are generated

through an iterative approach

based on what the project

can afford Bottom up

Top down

Bottom up


Content


• Eligible costs



• MSCA budgets


(i) they must be actually incurred by the beneficiary;

(ii) they must be incurred in the period set out in Article 3, with the exception of costs relating to the submission of the periodic report for the last reporting period and the final report (see Article 20);

(iii) they must be indicated in the estimated budget set out in Annex 2;

(iv) they must be incurred in connection with the action as described in Annex 1 and necessary for its implementation;

(v) they must be identifiable and verifiable, in particular recorded in the beneficiary’s accounts in accordance with the accounting standards applicable in the country where the beneficiary is established and with the beneficiary’s usual cost accounting practices;

(vi) they must comply with the applicable national law on taxes, labour and social security, and

(vii) they must be reasonable, justified and must comply with the principle of sound financial management, in particular regarding economy and efficiency.

Eligible Costs


Overarching Principles – Translated!!

• Costs actually incurred during pursuit of activities agreed

in the Description of Work

• Labour/Personnel

• Travel and Subsistence

• Consumables

• Equipment

• Subcontract

• Indirect Costs

Eligible Costs


(i) costs related to return on capital;

(ii) debt and debt service charges;

(iii) provisions for future losses or debts;

(iv) interest owed;

(v) doubtful debts;

(vi) currency exchange losses;

(vii) bank costs charged by the beneficiary’s bank for transfers from the [Commission][Agency];

(viii) excessive or reckless expenditure;

(ix) deductible VAT;

(x) costs incurred during suspension of the implementation of the action (see Article 49);

(xi) costs declared under another EU programme

What is not eligible


Content


• Eligible costs



• MSCA budgets


Financial Information – Main Changes

• LEs have the SAME funding levels as SME partners

• All activities have same funding levels within a project BUT there are

now TWO distinct types of project

• RIA – 100% (TRLs 1-6)

• IA – 70%

• Demonstration (TRLs 6-8)

• Market Replication/First Application (TRL 7-9)

• BUT - Not for Profit organisations funded at 100% for IA

• Overheads are FIXED for ALL at 25%

• Non-deductible VAT is now an eligible project cost

• Only Partners claiming €325k grant need an audit certificate – Just 1

at the end of the project


Financial Information – Other issues

• Owners of SMEs who do not draw a salary are eligible to claim

costs as a unit rate cost (amount per hour to be established)

• Natural persons who do not draw a salary are eligible to claim

costs as a unit rate cost (amount per hour to be established)

• Third party and in-kind costs an be deemed as eligible costs,

such as seconded personnel, equipment, infrastructure,

contributed goods and services

• Not for profit organisations can claim the payment of a

supplement of up to €8,000 per annum for personnel (If this is a

normal payment forming part of the remuneration package)


Financial Information – Other issues

• Able to include Linked Third Parties directly in the budget as an

affiliated party

• There is no additional funding for project management

• Breakdown of Other Direct Costs is unnecessary if these are

less than 13% of the total eligible costs (to be clarified)

• Ability to claim for Equipment Costs for use of existing as well

as newly purchased equipment (rules to be clarified)

• EU contract negotiations simplified

• Payment of claims reduced from 105 to 90 days


FP7 - Project Budget Form

Various

Indirect Rates

Various Rates

within Project

Various

Funding Rates

for Partners


H2020 - Project Budget Form


B. Direct costs of

subcontracting

{C. Direct costs

of fin. support}

D. Other direct

costsE. Indirect costs Total Costs

Reimburse

ment rate

%

M aximum EU

contribution

***

M aximum

grant

amount

D.1 Travel

D.2 Equipment

D.3 Other goods

and services

D.4 Cost of large

research

infrastructure

{F.2 Costs of….}**

Flat rate 3

25%

(a) Total (b) No hours Total © (d) (e) (f) (g) No unitsTotal

(h1)Total (h2) (i) (j) (k) (l)

Beneficiary 1

Linked third party 1a

Linked third party 1b

…

Total beneficiary 1

Beneficiary 2

Linked third party 2a

Linked third party 2b

…

Total beneficiary 2

…

Total consortium

ActualActualActual

{F.1 Costs of…}**

Unit 5

Unit 4

xx Euro/hour

Estimated El igible Costs (per budget category) EU Contribution

A. Direct personnel costs {F. Costs of ….}

A.1 Personnel

A.2 Natural persons under direct

contract

A.3 Seconded persons

[A.6 personnel for providing access

to research infrastructure]

A.4 SM E owners

without salary

A.5 Beneficiaries that

are natural persons

without salary

Unit 2

xx Euro/hour

Unit 1ActualForm of costs ****


H2020 - Project Budget Estimate Form

B. Direct costs of

subcontracting

D. Other direct

costsE. Indirect costs Total Costs

Reimburse

ment rate

%

M aximum EU

contribution

***

Flat rate 3

25%

(a) (d) (f) (g) (i) (j) (k)

Total beneficiary 1

Total beneficiary 2

Total consortium

ActualActual

Estimated El igible Costs (per budget category) EU Contribution

A. Direct

personnel costs

ActualForm of costs ****


Easier Budget Administration under H2020

Simpler reimbursement of direct costs, with a broader

acceptance of the beneficiaries' usual accounting practices:

• The possibility of using unit personnel costs (average

personnel costs) in accordance to the beneficiaries´ usual

cost accounting practices; (CoMAV in FP7)

• Abolition of time-recording obligations for staff working

exclusively on an EU project, and simplification of time-

recording requirements for other staff by providing a clear

and basic set of minimum conditions;

• Indirect costs covered by a single flat-rate applied to the

direct costs; removing a major source of financial errors

and complexity;


Higher Flexibility under H2020

The Horizon 2020 rules provide higher flexibility to adapt

ongoing projects to changing needs and circumstances

An example from an EU-funded project might look like:

‘A researcher from Foundation B, a key person in the project, starts

working for University D, and this change needs to be reflected in the

composition of the consortium for the EU-funded project. This means an

amendment to the Grant Agreement in order to add University D as

beneficiary, and possibly terminate the participation of Foundation B’

Under FP7, the coordinator of the project would face complex

adjustments due to the differences in funding rates and indirect cost

methods applied to the Foundation and the University.

Handling these modifications under Horizon 2020 will be straightforward

due to the single funding rate and indirect costs flat rate.


How the funding actually works

• Pre-financing (upon entry into force) for the whole duration

• 5% of total project value goes into the guarantee fund

• Interim payments corresponding to the amount accepted

for each reporting period (EC contribution = eligible cost

justified & accepted * funding rate)

• - Gross pre-financing + interim payments < 90% of max

EC contribution

• Final payment + reimbursement of contribution to the

guarantee fund


An example of a typical payment profile

EXAMPLE: Project duration 3 years, EC funding €3m

• Pre-financing = 1.6 €m (160% of annual budget)

(of which 0.15 €m goes to the Guarantee Fund)

• 1st Interim payment, 1 €m accepted, payment 1€m

• 2nd Interim payment, 1 €m accepted, payment 0.1 €m

(retention of 0.3 €m which is 10% of project eligible cost!)

• Final payment, 1 €m accepted, 0.45 €m paid

(retention of 0.3 €m plus 0.15 €m Guarantee Fund returned)


Example of Payment Profile

0

500

1000

1500

2000

2500

3000

3500

Pre-finance

Typical Spend

€k

12 months 24 months 36 months Start

Pre-finance

Final payment

First Periodic Second periodic

Guarantee Fund


How the funding actually works

• The coordinator and partners may agree to distribute the

pre-financing in stages to further minimise financial risk to

the project

• The Consortium Agreement MUST address this aspect

• The Reporting intervals have been getting longer 18

months is more typical and the pre-financing may vary. It

will be specified in the Grant Agreement.


Content


• Eligible costs



• MSCA budgets


Personnel Costs

Cost to the employer for staff working on the project

• Staff grade

• Actual salary for that grade

• Taxes paid

• Pension contributions

• Other


Personnel Costs

For Hourly Paid Staff

No of productive hours per month for staff member

• The productive hours have to be clearly justified and must match

the underlying time recording system

= Working days per year x No. hours worked per day

12


Personnel Costs

Typical Figures:

Working days

= Total days in year – Weekends – Statutory

holidays – Holidays – Sick leave allowance

365 – 105 – 9 – 20 – 6 = 225


Personnel Costs

Calculating working hours per month:

Working days - 225

Working hours/day – 7.5

Working hours per year – 1,687.5 OR (1,720)

Working Hours/month 1,687.5 = 140.63

12


Personnel Costs

Calculating salary costs per annum:

Staff Grade A: Management

Gross Salary: €85,000.00

Employment taxes (13%) = €11,050.00

Pension Contribution of Employer (20%) = €17,000.00

Total salary cost per annum = €113,050.00


Personnel Costs

Calculating personnel cost per month:

Staff Grade A: Management

Total salary cost per annum = €113,050.00

Working hours per annum = 1,687.5

Hourly cost = €66.99

Cost per month = hourly cost x hours worked in a month

= €66.99 x 140.63

= €9,421


Personnel Costs

Calculating average personnel cost per month:

Staff grade A: Management - €9,421

Time on project 12 person months = €113,052

Staff grade B: Technologist - €8,100


Staff grade C: Technician - €6,750


Total cost = €388,452 for 48 person months

Average cost per person month = 388,452 = €8,092.75

48


Personnel Costs

Calculating average labour cost per month:

Do not forget potential salary raises!!!

Assuming an increase of 2.5% per annum on a 3 yr project gives:

Year 1 Year 2 Year 3 Ave

€8,093 €8,295 €8,503 €8,295


Travel and Subsistence

Travel:

Based on actual cost of travel event and normal working practices within participant.

First Class Rail and Economy Air is normal practice

For proposal, work out/estimate the number of meetings needed per participant per activity and multiply by a standard rate.

Eg. €300 per return flight per person



Subsistence:

Includes – Accommodation and Subsistence (meals, taxi etc)

2 Choices:

Actual Costs – MUST keep all receipts

Flat Rate – No need to keep subsistence receipts

For Proposal: Best to estimate based on Flat Rates

Typically use: €100 per night for accommodation

€100 per full day for subsistence



For a typical project meeting: No of meeting days – 1, arrive the night before, leave the evening

after

One return plane fare

One night at hotel

One days subsistence

Gives: €300 Flight – (Estimated flat rate)

€100 Hotel – (1 x €100)

€100 Subsistence (1 x €100)

Total = €500 per meeting



Per Partner build up as follows:

Partner 1: 10 Management Meetings – Gives T&S of €5,000

15 RTD Meetings – Gives T&S of €7,500

Partner 2: 5 Management Meetings - Gives T&S of €2,500

20 RTD Meetings - Gives T&S of €10,000


Consumables


Estimate the consumables required per WP/Task

Typical consumables:

Materials

Equipment specifically for the project that can not be used

elsewhere (Eg; strain gauges, prototype tooling etc)

Computer software licenses

Make sure these are not covered under your normal ‘Indirect Costs’


Equipment


Estimate the Equipment required per WP/Task

• New Purchases – To be amortised over the project duration

• Existing Equipment - Can also be claimed if not already

written off in the accounting system


Equipment

Capital Equipment – Amortised over 10 years

Bought at beginning of 2nd year of a 4 year project

Used 50% of the time for project work alone for the remainder of

the project

Equipment Cost - €250,000

Allowable project cost is – 3 years at 50% of the time used on the project

Therefore 3 years amortised cost – €75,000 at 50% usage = €37,500


Overheads – Indirect Costs

Basic Rule for H2020 Projects:

Flat Rate – 25%

These apply to all direct costs

except Subcontract and Third Party costs


Overheads – Indirect Costs

Costs connected with infrastructures and the general operation of the organisation such as:

• Hiring or depreciation of buildings and plant

• Water/gas/electricity

• Maintenance

• Insurance

• Supplies and petty office equipment

• Communication and connection costs

• Postage

+ Costs connected with horizontal services such as: • Administrative and financial management

• Human resources

• Training

• Legal advice

• Documentation, etc.


Subcontracting

Basic Rule for H2020 Projects

• Should not be for project critical activities


• Average Person Month Cost – For staff typically

working on project

• Estimate of person months per task

• Estimate of consumables per task

• Estimate of travel days with overnight stays

• Equipment to be used/purchased

• Subcontracting

Key Information from Partners


Content


• Eligible costs



• MSCA budgets


MSCA - Budgets

Key Information

• Maximum researcher months increased from 500 to 540 on ETN

• Up to 15 full time (36 months each) ESRs in the network

• Only living allowance linked to County Correction Coefficients

• Management and indirect costs now at a fixed per month rate

• No specific costs allocated for consortium management

• Country Correction Coefficients have changed (Serbia 0.671)

• ERs are not eligible to receive funding in ITNs

• 2 Party EID – 180 researcher months


MSCA - Budgets

MSCA Researcher Unit Costs Institutional Unit Cost

person/month person/month

Living allowance

(*CCC) Mobility allowance Family allowance

Research, training

and networking

Management and

indirect costs

ITN 3,110 600 500 1,800 1,200

IF 4,650 600 500 800 650

RISE 2,000 1,800 700

H2020 Technical Assistance - pks.rs za komunikacije/H2020 TA Events... · sound financial...

Documents

Transcript of H2020 Technical Assistance - pks.rs za komunikacije/H2020 TA Events... · sound financial...