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COSME Webinar10 January 2019
Financial management and reporting
AIMS OF THE WEBINAR
To provide beneficiaries with a set of guidelines and best
practices on:
- Appropriate financial management
- Correct reporting
To avoid recurrent errors identified during ex-post audits
For questions: [email protected]
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TARGET AUDIENCE
• COS-CLUSTER-2015-3-02
• COS-DESIGN-2015-3-03-1
• COS-DESIGN-2015-3-06
• COS-EarlyWarningEU-2016-4-01
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WHY IS REPORTING IMPORTANT?
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In final implementation phase, reporting is near!
Report should cover entire project duration
Do not repeat project proposal Focus on results!
Tell a true story – What went well, and what wrong
What changed?
Any staff changes?
Did you have issues with subcontracting?
Did you shift the budget from one heading to another?
Any other major changes during implementation?
Which deliverables performed well, and which faced difficulties?
Were your amendments effective?
INTELLECTUAL PROPERTY RIGHTS (GDPR)
Which deliverables are private, and which ones are public?
WHY IS REPORTING IMPORTANT?
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Focus on achievements
What performance indicators were measured?
How did you manage the risks / unforeseen circumstances?
What is in plan for the future?
Focus on continuation and sustainability
Talk about lessons learnt
Highlight how the results fit into the general EU policy
WHY IS REPORTING IMPORTANT?
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Last but not least!
Work on publishable summary
Think about style, include a photo or two, and highlight results
Spellcheck!
Prepare one Technical Final Report, but remember
ALL partners contribute to the final report (Financial Report):
encode actual costs
DOs (1)
1st February: All partners to check access to the periodic reporting
Inform EASME/project coordinator immediately should you not receive a notification
+ contact [email protected] in case of problems
DOs (2) Finalise the Continuous Reporting (Deliverables, Milestones before sending report) coordinator (Work Package leader)
Relationship data:
• In the Financial Statements: total amount for each beneficiary
• EASME provides the state of relationship data as encoded in the EYE IT tool on 1 February 2019. Please send the file back as Annex to your Technical Report and explain discrepancies between it and your financial statement (if any)
Conflicts/disagreements between partners and LIO: to be solved before report submission ( consortium agreement)
DOs (3)
Make sure that both LEAR and PFSIGN are validated and appointed (e.g. after change in your organisation)
otherwise submission of report without that partner (or
delayed)
Respect both EYE funding ceilings:
75% of programme management costs
(direct personal costs, other direct costs, subcontracting, indirect costs)
+
up to 100% NE budget
DOs (4)
• Unit costs for SME owners/natural beneficiaries without salary
• Possible Helpdesk interventions in case this category is not available (contact your PO)
• Declare the number of actual hours worked by the SME owner at the unit rate
DONTs (1)
• Don't wait until the end of the submission deadline to gather data from partners
• Don't submit any supporting document unless explicitly asked to do so
• Don’t modify the templates provided
• Don't mix cost-categories
• Don't contact the EYE Support Office regarding Final Reporting
FINAL REPORTING
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• Technical Report
• Financial Report
REPORTING – FINANCIAL DOCUMENTS
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Final report
• Final technical report
• Final financial report, including:
• Individual financial statement (see annex 4)
• Explanation of the use of resources
• Final summary financial statement
• CFS (see annex 5), if applicable
SOME DEFINITIONS TO BEGIN WITH
• Eligible costs
• What are not eligible costs
• Direct and indirect costs
• VAT
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• Costs actually incurred, identifiable and verifiable,
recorded in the accounts, etc.
• non-deductible VAT paid is also eligible Actual costs
• Not Applicable to your grant agreement Unit costs
• A percentage to be calculated on the direct costsFlat rate
• Not Applicable to your grant agreement
Lump sum
Forms of cost
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BUDGET CATEGORIES AND FORMS OF COSTS
Personnel Subcontracting
Financial
support to 3rd
parties
Other
Actual costs NA
Unit costs NA NA
Flat-rate
costs
Lump sum
costs NA
INDIRECT
COSTS
DIRECT COSTS SPECIFIC
CATETORIES
OF COSTS
FORMS OF
COSTS
BUDGET CATEGORIES
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EXAMPLES OF GENERAL ERRORS DETECTED IN EX-POST AUDITS
• Amounts claimed in financial statements do not reconcile with the costs incurred and booked in the accounting system
• Declaration of costs based on budget estimates instead of amounts spent
• Lack of supporting documents to substantiate costs(lack/incomplete timesheets, miscalculation of
hourly/daily/monthly rates, lack of supporting documents related to procurement procedures…)
• Costs incurred outside of eligibility period
• Miscalculations of costs
• Durable equipment not depreciated / purchase costs not reasonable / no link to project
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PERSONNEL COSTS
PERSONNEL COSTS Errors identified during the ex-post audits
Lack of supporting documents
Lack of reconciliationbetween the
FS and accounting
records
Clericalerrors
Indirect costs
claimedas direct
costs
Unreliable time records
Differences in time units between
timesheets and FS
Ineligibleelements
included in the rate
Eligible elements
not included in the rate
Incorrect methodology
for calculating the rates
Incorrect calculation of
the annual productive
hours
Wrong classification
of costs
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ERRORS RELATED TO PERSONNEL COSTS
• Wrong calculation of annual productive hours
• Lack of timesheets (or other evidence) to record the time worked on the project
• Timesheets do not comply with the minimum requirements as set in Grant Agreement
• Hours claimed cannot be supported / impossible number of hours claimed
• Salary costs include ineligible elements or they do not include eligible elements
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ERRORS RELATED TO PERSONNEL COSTS
• Consultants or external staff costs are incorrectly declared as personnel costs
• Beneficiaries without personnel wrongly declare personnel costs
• Charging of 'billable hours' (commercial rate) instead of actual costs
• Criteria for in-house consultants not met
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1.Categories of personnel eligible under staff costs:
• Employees: Staff working for the beneficiary under a
written employment contract (or equivalent appointing act)
• Natural persons working under a direct contract with
the beneficiary other than an employment contract (in-
house consultants)
• Seconded by a third party against payment
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2. Categories of personnel to be considered assubcontracting:
• A person employed under a contract with a third intermediaryparty (e.g. interim action employment, consultancy company).
• Natural persons working under a direct contract with thebeneficiary other than an employment contract, if:
the contract fixes only a global remuneration (withoutspecifying time to be worked), the remuneration is based ondeliverables;
or when the eligibility criteria for being considered as in-houseconsultant under staff costs are not met
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3.Category of personnel to be considered as other
direct costs:
• Trainees, including the costs of their recruitment and
remuneration
Prior approval of EASME is necessary for being
claimed in the financial statement!
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Components of the annual personnel costs for the
person
Must be limited to:
The gross salary stated on payroll
2. Social security contributions
3. Taxes included in the remuneration
Other costs included in the remuneration
(e.g. fee paid by the beneficiary for a complementary healthinsurance scheme for the employee, 13th month, complementfor hazardous work or night shifts, transportation allowance,lunch vouchers etc.)
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Annual personnel costs
Annual productive hours
Actual Personnel Cost =
Hours worked for the project x Hourly rate
Hourly rate =
The hourly rate is to be calculated per financial year
If the financial year is not closed at the time of reporting,
the beneficiary must use the last closed financial year available.
Actual personnel costs: calculation
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Three options for the annual productive days / hours
calculation
1. 1720 fixed hours: for persons working full time (pro rata forpersons working part time or working only part of the year forthe beneficiary)
2. Individual annual productive hours: total number of days/hoursworked by the persons in the year for the beneficiary
3. Standard number of annual hours generally applied by thebeneficiary for its personnel in accordance with its usual costaccounting practices.
The beneficiary has the possibility to change from one option to theother. Within the same financial year, the same option shouldapply.
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Reporting period (example)
2017 2018 2019
01/10/2017 31/03/2019
Hourly rates of 2018 will also be used for these
months
ADVANTAGES FOR THE BENEFICIARIES
NO ADJUSTMENTS TO BE DECLARED IN THE NEXT PERIOD
LEGAL CERTAINTY: NO DOUBTS ABOUT WHAT PERIOD AND WHAT DATA MUST BE USED FOR THE CALCULATION
REMOVES ERRORS DUE TO INCORRECT CALCULATIONS FOR FRACTIONS OF A YEAR
Use of the last closed financial year
Actual personnel costs: Calculation
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Example of calculation of individual annual productive hours:Dr Rossi -full-time project manager (working 8 hrs/day, from Mon-Fri). Hiscontract includes 22 working days of annual leave, plus 8 days of publicholidays. In the financial year covered by the reporting period, Dr Rossiworked 29 hrs of overtime and was on sick leave for 5 days.
• The individual annual workable hours are:
365 days- 104 days (Saturdays and Sundays)- 22 days (annual leave)- 8 days (public holidays) =
231 days
231 days x 8 hours per day = 1 848 hours• Individual annual productive hours for Dr. Rossi:
1 848 Annual workable hours+ 29 overtime (hours)- 40 annual sick leave (5 days x 8 hours)=
1837
• Individual annual productive hours for Dr Rossi = 1 837
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Example for calculation of standard annual productive hours:According to employment contract Dr. Bianchi – full time project manager –works 8 hours/day, from Mon-Fri. National legislation provides for 22 workingdays annual leave+8 days of public holidays. The collective labour agreementadds 3 days of annual leave.Standard annual workable hours:365 days — 104 days (Saturdays and Sundays) — 22 days (annual leave) —8 days (public holidays) — 3 days (collective agreement) = 228 days x 8hours per day = 1824 hoursStandard annual productive hours :The Company uses its usual cost accounting to calculate hourly rates for EUactions.Annual workable days = 228 days minus- average annual sick leave (days) = 3- days of general training (days) = 4- other unproductive activities (days) = 9productive days = 212 days x 8 working hours per day = standard annualproductive hours = 1 696This number must be compared with 90 % of standard annual workable hours(1 824).90 % of 1824 = 1 6421 696 hours (usual cost accounting practice) > 1 642 hours (90 % annualworkable hours). The Beneficiary may apply its number of standard annualproductive hours (i.e. 1 696)30
Calculations of staff costs to be charged in the financial statements
• Hourly/daily/monthlyrate
Time unit charged to the action
(hourly/daily/monthly)x
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Be careful!
• The rate must be calculated by financial year (i.e. for 12-month period reported in the annual accounts of theBeneficiary)
• The rate has to be based on full closed financial year.
• At the end of the reporting if the financial year is notclosed, data from the last full closed financial yearneeds to be used.
• The beneficiary has the possibility to change methodologyused for calculating the rates from one option to the other.Within the same financial year, they should apply thesame option.
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Declaration on exclusive work for the action
OR
In most cases you will need to record hours spent on the project.Please do it at least on a monthly basis, and have your timesheetscountersigned by supervisor!
Time recording
Time sheets
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Timesheets should include the following minimum information
1. Title and number of the action, as specified in the GA;
2. Beneficiary’s full name, as specified in the GA;
3. Full name, date and signature of the person working for
the action;
4. Counter-signature from supervisor’s or other
relevant person - Every timesheet needs to be
countersigned !
5. Number of hours worked for the action in the period
covered by the time record, with at least month level
granularity.34
Natural persons working under a direct contract
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Most frequent errors in relation to natural persons working under a
direct contract as staff costs identified during the ex-post audits:
Lack of consultancy agreement
Lack of invoices
Natural persons
costs do not meet the 4 cumulative
criteria
Costs not recorded
in the accounting
system
Consultancycontract witha legal entity
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Natural persons working under a direct contract
Cumulative conditions to be met for being considered eligible under staff costs:
1. There must be a direct contract between the natural person (individual) and thebeneficiary.
2. The person must work under the beneficiary's instructions and, unlessotherwise agreed with the beneficiary through a teleworking agreement, on thebeneficiary's premises.
3. The result of the work carried out must belong to the beneficiary.
4. The costs are not significantly different from those for personnel performingsimilar tasks under an employment contract with the beneficiary.
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Natural persons working under a direct contract
For the monthly/daily/hourly rate, the beneficiary must use one of the following
options:
• if the contract specifies a monthly/daily/hourly rate: this rate must be used;
• if the contract states a fixed amount for the services of the natural person and
the number of hours to be worked: this global amount must be divided by the
number of months/days/hours to be worked for the beneficiary under that contract.
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Natural persons working under a direct contract
• If the contract fixes only a global amount and does not specify thetime to be worked, the costs can NOT be declared as personnelcosts, but may be eligible as purchase of a service (see Article 9 ofthe GA) or a subcontract (see Article 10 of the GA), provided that thespecific eligibility conditions set out in Article 9 or 10 are met.
• Beneficiaries who are using this type of contract should notify EASMEand should request a budget transfer from personnel tosubcontracting cost categories, at the latest at the time of submission ofthe final report.
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PROCUREMENT
Errors related to procurement: purchase of goods, works and services,
subcontracting
• Lack of evidence that procurement procedure was sound (best valuefor money, transparency and equal treatment)
• Where competitive tendering was not used, this was not sufficientlydocumented and justified
• Participant's own normal practice not applied
• Sub/contracting to a related party (conflict of interest)
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Subcontracting
Article 10.1 MGA
“The beneficiaries must award the subcontractsensuring the best value for money or, ifappropriate, the lowest price. In doing so, theymust avoid any conflict of interests”
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Basic principles of procurement
• The beneficiary must provide evidence that theprinciple of best value for money, transparency andequal treatment has been respected when selecting thesuppliers.
• The beneficiary must avoid any conflict of interest whenawarding contracts.
• Public authorities need to follow national rules onprocurement, private entities their own rules andprocedures
• Compliance with the principles of procurement should beapplied in following costs categories:
Subcontracting
Equipment
Other goods and services43
Other direct costs
• Travel and subsistence
• Equipment
• Costs of other goods and services
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Travel and subsistence
In the travel category, action related travels of staff assigned to the action should be claimed only.
Certain travel costs cannot be claimed under travel and subsistence costs category, but can be declared under other categories:
• Travel costs of subcontractors should be claimed under subcontracting;
• Travel costs of trainees should be claimed under other direct costs;
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Equipment
• The depreciation cost of equipment, infrastructure or otherassets are eligible if:• they are purchased in compliance with the basic principle of
procurements• the assets are included in the asset register of the beneficiary• the depreciation is recorded in the beneficiary’s accounts and is
calculated in accordance with international accounting standardsand beneficiary’s usual accounting practices.
• The basis for depreciation = acquisition value (excluding VAT,eventually discounts received).
• Only portion of costs which corresponds to the duration of theaction and the rate of actual use for the purpose of the actioncan be charged to the project
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Example of depreciation calculation
(A/B) x C x D
• A = period the asset was used by the Beneficiary
• B = estimated useful life (total period of depreciation)
• C = actual cost of equipment
• D = percentage of use for the purposes of the action
Example: Purchase of a computer at a cost of €6,000. Estimated useful life of 3 years. Installed on 01/01/2014.
Action runs from 01/01/2013 to 31/12/2015.
50% used for the purposes of the action.
Which depreciation cost should be charged to the action
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Equipment
= (24/36) * 6000* 50%= (0.6667) * 3000= €2000 = eligible depreciation cost for the project
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Equipment
The cost of renting or leasing equipment, infrastructureor other assets are also eligible, if:
• If they do not exceed the depreciation costs of similarequipment
• And do not include any financing fees
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BUDGET RE-ALLOCATION OR AMENDMENTS
Budget re-allocation or Amendment
Budget transfers and re-allocation
Amendment needed?
From one beneficiary to another NO
From one budget category to another NO
Transfer of budget with substantial change of Annex I – Description of the Action
YES
Transfers between forms of costs (actual costs, unit costs, etc.)
YES if no budget was foreseen for the "form" receiving the transfer
New subcontractsYES (strongly advised. Please check
with your PA)
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Example of Budget transfer for a co-beneficiary
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Total budget at Consortium level must remain as initially foreseen
CALCULATION OF THE FINAL GRANT AMOUNT – 4 STEPS
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This amount is calculated by the Agency in the following steps:
• Step 1 – Application of the reimbursement rate to the eligible costs
• Step 2 – Limit to the maximum grant amount
• Step 3 – Reduction due to the no-profit rule
• Step 4 – Reduction due to improper implementation or breach of other obligations
Requested EU Contribution = declared costs X Reimbursement rate %
Useful links:
Cosme Funding Opportunities:
https://ec.europa.eu/easme/en/cosme-0
Reference documents
• Guidelines to financial reporting for Coordinators and Beneficiaries of the COSME Grant Agreements (2014-2020), February 2016.
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SPEAKERS
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EASME Unit C.1 Finance
Sector C.1.5 COSME
Head of Sector – Cedric De Ridder
Senior Financial Officer – Paolo Roz
Financial Adviser – Simona Da Corta Fumei
EASME Unit A.1 COSME
Sector A.1.5 Competitiveness
Project Adviser – Alan Vella
