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Online-Training6.9.2011 | www

Carla Chibidziura | FFG

Financial & legal Issues


Overview

• Financial Issues – Costs

• IPR issues during proposal phase

• Consortium Agreement and IPR

• Project Cash-Flow


EU funding contribution is defined by:

• Funding schemes

• Categories of participants

• Types of activities (RTD, demonstration,

management, training etc.)

Basic funding principles


Upper funding limits (direct costs) for Collaborative Project

Research activities – general reimbursement – 50%• SME – 75%

• Non-profit public bodies – 75%

• Universities and other educational org. – 75%

• Research organisations – 75%

Demonstration activities – 50%

Other activities – 100%• Management activities (part of other activities) – 100%

• Training activities (part of other activities) – 100%

• Dissemination activities (part of other activities) – 100%


Maximum Funding Rates

For following Funding Schemes:

• Coordination and support actions: up to 100%

• Frontier research actions (IDEAS): up to 100%

• Training and career development of researchers actions (PEOPLE): up to 100%


Slide 6


Example I

Funding scheme: Collaborative Project

Participant: Research Organisation

Type of activity: Research

• Funding: 75%

Type of activity: Demonstration

• Funding: 50%

Type of activity: Management

• Funding: 100%


Example II

Funding scheme: Collaborative Project

Participant: Industry

Type of activity: Research

• Funding: 50%

Type of activity: Demonstration

• Funding: 50%

Type of activity: Management

• Funding: 100%


Cost categories

Non-eligible

Eligible

Management

RTD

Demonstration

Other

Direct

Indirect Overhead

Other

Equipment

Travel

Personnel


1. actual = not budgeted, not estimated

2. incurred by the beneficiary keep the documents long enough!

3. during the duration of the project for final report until 60 days after projct end

4. determined in accordance with the usual accounting and management principles and practices of the beneficiary recorded in his accounts

Eligible costs I(GA Annex II, II.14)

Principles must not be contracdictory to provisions of the Grant Agreement!


5. for the purpose of achieving the project objectives consistent with the principles of economy, efficiency and effectivenesscosts are essential for achieving project goals

6. they must be recorded in the accounts of the beneficiary

7. they must be indicated in the estimated overall budget in Annex I

Eligible costs II(GA Annex II, II.14)


• indirect taxes (VAT),

• duties,

• interest owed and debt,

• provisions for possible losses or charges,

• exchange losses, costs related to return on capital,

• costs declared in another EU project,

• excessive or reckless expenditure

Non-eligible costs (GA Annex II, II.14)


Costs

indirect costsdirect costs

project costs eligible for reimbursement

eligible costs which can be attributed directly to the project

eligible costs not directly attributed to the project but in direct relationship with the project - “Overheads“


Direct costs

Personnel costs• Definition in GA Annex II Art. II.15.1

• Time recording is necessary for all project employees

Travel costs

Equipment


Personnel costs

• directly hired by the beneficiary• work under the sole technical supervision of the latter• remunerated in accordance with normal practices• time recording needed!

Planning of person-months (~ 140 hours p.m.)• good estimation of costs • average rate of employees who will be working on the

project for budget• consider valorisation/pay rise


Travel costs

Travel costs are reimbursed according to the rules of your organisation•if you are allowed to travel Business Class in your organisation, then it is eligible in the project (if not, not)

Flat rates for subsistence•list of the Commission for hotel and daily allowances – rates can be reimbursed if mentioned in Annex I during GA negotiations


Equipment

• only the depreciation costs can be reimbursed in the project

• Equipment has to be depreciated according to the organisational and national rules

• only the percentage of use in the project can be reimbursed

• Depreciation of equipment bought before project start can be reimbursed in FP7


Example: Calculation of depreciation costs

• research organisation buys equipment (costs: 10.000) for the project which will be used 50% in the EU-project, 50% for a national project

• After national law the equipment has a depreciation range of 5 years

• Project duration: 3 years

Calculation:10.000/5 years depreciation range = 2.000 per year3 project years: 2.000 * 3 = 6.0006.000 * 50% use in the EU-project: 3.000 reimbursed


Indirect costs

• Administration costs• Rental fee• General office equipment • Office supplies• Electricity and heating costs• Phone and copy costs• Cleaning costs• Mail charges

Depends on the overheads-calculation

of your organisation!


Funding of indirect costs I (“Overheads“)

Real indirect costs1.a) Real indirect costs of the project (indicated that the

organisation has an analytical accounting system)• can be taken by all types of organisations

1.b) Simplified method can be used if:

• calculation of overheads at the level of the legal entity possible; cost allocation with key driver (e.g. personnel), in accordance with usual accounting and management principles

• no previous registration/certification by the Commission required, for all organisations possible, except for if they had employed 1.a) before


Funding of indirect costs II(“Overheads“)

Flat rates2.a) Standard flat rate (20%)

• 20% of all direct costs (without subcontracting costs) as indirect costs

• possible for all organisations, except for if they had employed 1.a) or 1.b) before

2.b) 60% Flat rate (60%) • only applicable if the organisation is a SME, university or

other research organisation

• unable to identify its real indirect costs

• only for R&D projects


Funding of indirect costs III (“Overheads“)

Coordination Actions and Support Actions (CSA)

• max. (no flat rate!) 7% of direct costs (without subcontracting) as indirect costs

• for all organisations!


Example: Calculation of funding

• research organisation: 75% for RTD, indirect costs: 60%• Personnel costs RTD: 100.000,--• Equipment costs RTD: 50.000,--• Personnel costs Dissemination: 50.000,-- • Travel & Equipment costs Dissemination: 50.000,--

Calculation:RTD (75%) Dissemination (100%)

Personnel costs 100.000 50.000Other direct costs 50.000 50.000Indirect costs 150.000 * 60% = 90.000 100.000 * 60% = 60.000

Funding rate (150.000 + 90.000) * 75% (100.000+ 60.000) * 100%Requested EU contr. 180.000 160.000


Certificate on the Financial Statements (CFS)

GA Annex II Art. II.4.4: mandatory for all beneficiaries, for all interim or final payments, each time the cumulated EC contribution is not yet certified and ≥ € 375.000

BUDGET: under Management – Subcontracting

EXCEPTIONS:

• Projects ≤ 2 years • if total contribution ≥ € 375.000 only one CFS at the final

payment

• when Certificate of the Methodology (CoM) of the organisation is accepted by the Commission

• no CFS for interim only at the final payment


Subcontracting

…it is possible to have third parties carrying out parts of the work, but:

• tasks have to be indicated in Annex I• covers the execution of a limited part of the project• awarded according to best price-quality ratio (3 offers)• carry out work the partners cannot carry out (e.g.

homepage, etc.)• Framework contracts (between beneficiary and service

provider) are also accepted • Contract before project start, then no offers are needed


Guide for Applicants:

2.4 Resources to be committedIn addition to the costs indicated in part A3 of the proposal, and the staff effort shown in section 1.3 above, please indicate any other major costs (eg. equipment).

Describe how the totality of the necessary resources will be mobilised, including any resources that will complement the EU contribution. Show how the resources will be integrated in a coherent way, and show how the overall financial plan for the project is adequate.

(Maximum length for Section 2.4 – two pages)

Costs in the proposal Part B


Tips for cost description

Recommendation:• Text hand in hand with a graph illustrating it

Common errors:• No balanced cost allocation according to the tasks in the

project • No detailed description why a partner gets a certain

amount• Inconsistency of Part A and Staff Effort Table

– often due to changes in the last minute before handing in• Budget limit of the Call not followed!!! – non eligible• No explanation and justification of costs like Other Costs,

Subcontracting


Overview






IPR issues during the proposal phase

• IPR-management in FP7 projects is crucial

• impact of the project as evaluation criterion is close to IPR-management

• you have to know what IPR are generated• described in detail• ways to protect• preliminary agreements?


Confidentiality AgreementNon-disclosure Agreement

• it is often needed to exchange/share certain information before submitting a proposal

• establishes the obligation of the recipient (i.e. the legal person to whom the information is disclosed) to not disclose the information/ideas to third parties

• information/knowledge which should be protected shall be described in detail

• sanctions/fees shall be foreseen if there is a breach of the Confidentiality Agreement/NDA


Letter of Intent (LoI) / MoU

• both declarations of the intention to conclude an agreement, basic data of the latter agreement

• e.g. sanctions if the proposal is not submitted

• could include a roadmap for proposal submission

• regulation of confidentiality, information exchange etc.

• LoI model: http://www.kowi.de/desktopdefault.aspx/tabid-77/

• MoU (Memorandum of Understanding) model: http://www.ncpwallonie.be/ncp/ressources/propriete-intellectuelle-1/ModeleMOU.pdf


Overview






Introduction

• CA is compulsory – unless otherwise stated in Call

• CA is a treaty between the project partners (rights and obligations) inside the consortium

• European Commission is not a party of the CA

• CA should in principle be negotiated and signed before starting the project

• Clauses in CA cannot derogate from mandatory provisions of the Grant Agreement/RfP – GA always prevails


Important provisions of CA

Consortium bodiestechnical, financial and general provisions

Ownership,Access Rights

Disseminationand Exploitation

Confidentiality

LiabilityResponsibilities

Source: Desca


• Payments from the coordinator to the partners • payment modalities (when, how much etc.)

• Management Structure (bodies, proxy)

• Decision-making e.g. 2/3 majority if it suits the project consortium – always carefully calculate who are the ones deciding!

• Responsibilities and contributions (also in kind) of the partners – when is a partner in breach of contract?

• Beginning/End of the CA, Confidentiality, Dispute settlement

Important provisions of CA


IPR issues in FP7 (I)

Definitions (1):

„Background“

Start of project

„Foreground“


IPR issues in FP7 (II)

Definitions (2):„Use“: means the direct or indirect utilisation of

Foreground in further research activities or for developing, creating and marketing a product or process/service

„Dissemination“: disclosure of foreground by any appropriate means (e.g. publication of Foreground)

„Access rights“: means licences and user rights to Foreground or Background.


IPR issues in FP7 (III)

Joint Ownership (generated jointly): no joint ownership agreement default regime (Annex II.26)

Transfer of ownership:• No notification to the European Commission needed, only

to the other beneficiaries• Transfer to a third party = European Commission may

object to such transfer of ownership of Foreground

Protection of Foreground: adequate and effective


IPR issues in FP7 (IV)

Dissemination (including publications):

• Participants shall use/disseminate the foreground as swiftly as possible

• Consider protection of foreground (IPR) and confidentiality

• Notification of the other participants of all dissemination activities

• There must be a plan for use and dissemination of foreground


IPR issues in FP7 (V)

Access Rights:Access rights requests shall be made in writing

Compulsory access rights on Background and Foreground are granted when needed by a beneficiary (for implementation or use purposes)

•negotiate if royalty-free or compensation!•exclude Background if necessary


Access rightsto background

Access rightsto foreground

Yes, if a beneficiary needs them for carring out his own work under the project

Royalty-free unlessotherwise agreed beforeacceding to the GA

Royalty-free

Yes, if a beneficiary needs them for usingits own foreground

Either royalty-free, or on fair and reasonableconditions to be agreed

Forimplementing

the project

For usepurposes

(exploitation+ furtherresearch)

IPR issues in FP7 (VI)


There are 4 Models of Consortium Agreements in FP7:

DESCA Consortium Agreement Modelhttp://www.desca-fp7.eu/download-desca

IP Model Consortium Agreement EICTA for FP7 http://www.digitaleurope.org/index.php?id=32&id_article=163

EUCAR Model Consortium Agreement FP7http://www.eucar.be/publications/EUCAR%20Model%20of%20Projects%20Consortium%20Agreement

Model CA for the Aeronautics projects in FP7http://www.aerosme.com/news/article.asp?article=250

CA-Models


CA Negotiation

Coordinator:

• Has to choose early enough the model Consortium Agreement which fits to the project and adapt it to the project and the Consortium (Annex I!)

• Send it to all partners for comments, wishes etc.• If the comments cannot be taken into account –

explanation why it is not possible!

Partners:

• take a careful look at the provisions including decision making, financials, dispute settlement and IPR

• critically questioning if everything is ok!


Overview






Maximum EU contribution

• Article 5 of the Grant Agreement

• maximum that will be reimbursed in a project

• maximum EU contribution includes:• Prefinancing (Art. 6 GA)

• interim payments

• final payment


Prefinancing

• FP7 – just one Prefinancing at the beginning

• paid to the Coordinator within 45 days after the entry into force of the GA

• about 160% of the average funding per period (> 2 p.)

• <= 2 periods: 60-80% of the maximum EU contribution

• ownership of Pref.: Commission until final payment

• 5% of the maximum EU contribution goes into the Guarantee Fund, part of Prefinancing


Interest

• interest of Prefinancing on the account of the Coordinator have to be written into the Form C of every period

• will be deducted from the max. EU contribution

• only if the Prefinancing is > 50.000 EUR

• not valid for interest of interim payments!


Interim Payment(s)

• paid within 105 days after receipt of the reports by the Commission

• based on the accepted eligible costs and the upper funding limits for the activities (50%, 75%, 100%)

• Retention: only 90% of the max. EU contr. is paid during the project lifetime – 10% is held back for the final payment


Final Payment

• within 105 days after receipt of the Final Report

• difference between max. EU contribution and amount already paid (~ 10%)

• Commission orders the Guarantee Fund to transfer the money (5%)


• slides and training will be available for download on the Fit for Health website

Information


Carla Chibidziura

Expert for Legal and Financial Issues FP7

FFG European & International Programmes

Tel: +43 5 7755 - 4009

eMail: [email protected]

Contact details

Thank you!

fit for health is funded by the european commission

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