Model Grant Agreement FINANCIAL ISSUES

Transcription

1 HORIZON HORIZON Model Grant Agreement FINANCIAL ISSUES

2 Table of Contents 1. Introduction 2. Cost Categories and Reporting Issues a. Personnel cost calculation b. Other Direct Costs 3. Audit process 4. Reporting 5. Dissemination and exploitation 6. Q&A 2 Disclaimer: Information not legally binding

3 H2020 Information Campaign Built on the experience of FP7 Part of the ex-ante advice to be provided by the Commission services Targets the same main objective: error free financial statements Started at the earliest possible stage of H Disclaimer: Information not legally binding

4 The Framework Programmes timeline Each Framework Programme has its own rules! Horizon Europe 4 Disclaimer: Information not legally binding

5 Background: H2020 vs. FP7 What changed? Single reimbursement rate Main changes (1) More flexible rules for third parties and subcontracting costs Differentiation between contracts and subcontracts Unique flat rate of 25% for indirect costs Introduction of the concept of Large Research Infrastructure 5 Disclaimer: Information not legally binding

6 Background: H2020 vs. FP7 What changed? 3 options for determining annual productive hours Main changes (2) Clearer and simpler obligations on time records More flexibility for average personnel costs Provisions on additional remuneration Eligibility of non-deductible VAT Common Support Centre (CSC) 6 Disclaimer: Information not legally binding

7 Horizon 2020 Model Grant Agreement Specific models ERC MGAs Marie- Sklodowska Curie MGAs H2020 MGA General Model Grant INTRODUCTION Agreement SME instrument MGAs Co-fund MGAs 7 Disclaimer: Information not legally binding

8 Horizon 2020 Model Grant Agreements e.g. Call 8 Disclaimer: Information not legally binding

9 Horizon 2020 Model Grant Agreement A single document with all provisions Core text General conditions Annex 2 Special clauses Specific provisions Annex 3 FP7 9 Disclaimer: Information not legally binding

10 Horizon 2020 Model Grant Agreement Annexes to the grant Annex 1: Description of the action Annex 2: Estimated budget Annex 3: Accession Forms, 3a & 3b Annex 4: Financial statements Annex 5: Certificate on the financial statements Annex 6: Certificate on the methodology 10 Disclaimer: Information not legally binding

11 Forms of costs Actual costs Costs actually incurred, identifiable and verifiable, recorded in the accounts, etc. NEW: non-deductible VAT paid is also eligible Unit costs A fixed amount per unit determined by the Commission Example: SME owners' unit cost For average personnel cost (based on the usual accounting practices with or without Certificate) Lump sum A global amount to cover one or several cost categories Example: Phase 1 of the SME instrument Flat rate A percentage to be calculated on the eligible costs Example: 25 % flat rate for indirect costs 11 Disclaimer: Information not legally binding

12 Budget categories and Forms of costs FORMS OF COSTS Personnel BUDGET CATEGORIES DIRECT COSTS Subcontracting Financial support to 3rd parties Other INDIRECT COSTS SPECIFIC CATEGORIES OF COSTS Actual costs Unit costs Yes for - Average personnel costs - SME owners & natural persons without a salary NEW! (2017) Yes for Internal Invoices Yes if foreseen by Comm. Decision Flat-rate costs Lump sum costs Yes if foreseen by Comm. Decision 12 Disclaimer: Information not legally binding

13 Classifying workforce contracts Is it an employment contract or another type of contract? Is it the only contract with the person or are there several contracts? PERSONNEL COSTS Does the contract establish the working time conditions? Is the contract concluded with a person or with a company? And what about 'consultants'? 13 Disclaimer: Information not legally binding

14 What contract under what budget category Workforce costs 14 Disclaimer: Information not legally binding

15 What contract under what budget category What workforce contracts can you declare under personnel costs? Other cases: Standard case: persons hired by the beneficiary via an employment contract (qualified as such under national law; and for whom the entity pays social security contributions) Natural persons hired directly via a contract other than an employment contract if: o the person works under conditions similar to those of an employee organisation or work, premises, etc.) o The result of the work belongs to the beneficiary (exceptions may apply) o The costs are not significantly different from those of an employee of the beneficiary doing similar tasks Employees of a third party seconded to the beneficiary (must be set in Annex 1!) (e.g. NEW! (2017) 15 Disclaimer: Information not legally binding

16 What contract under what budget category What you can NOT declare under personnel costs? Contracts with companies (e.g. temporary work agencies) to provide staff Natural persons (e.g. consultants) not fulfilling any of the conditions mentioned in the previous slide. e.g. working systematically off-site while employees have to work in the premises of the beneficiary Natural persons (e.g. consultants) paid for deliverables rather than for working time! In the cases above the costs may be eligible under 'Other goods and services' or under 'Subcontracting' but not as personnel costs 16 Disclaimer: Information not legally binding

17 Personnel costs: Calculation Hours worked Hourly rate EUR/hour Additional remuneration Time records and/or Declaration on exclusive work Formula for actual costs 17 Disclaimer: Information not legally binding Applies only to beneficiaries with projectbased remuneration schemes

18 Personnel costs: hours worked for the action Only the hours actually worked on the action can be charged. Think of how you follow different projects You cannot declare: Budgeted time (what you indicated for the budget) Estimated time (e.g. person 'guessing' at the end of the year) Time allocation (e.g. x % of the contractual time of the person)! Hours declared to the action must be supported by reliable records and documentation! 18 Disclaimer: Information not legally binding

19 Time records: supporting documents Depends if the person works exclusively on a H2020 action For this purpose, "working exclusively" refers to an uninterrupted period of at least one full calendar month during which all the hours worked by the employee for the beneficiary were dedicated to the H2020 action. Working exclusively YES NO Records Declaration on exclusive work for the action Time records (i.e. timesheets) Conditions (full details available in the AGA; page 160) only one per reporting period (per person) covering one uninterrupted period of exclusive dedication of at least one calendar month dated and signed at least monthly by the person and his/her supervisor minimum conditions and information needed are detailed in the AGA 19 Disclaimer: Information not legally binding

20 Declaration for persons working exclusively on the action: Model available in the AGA (version 19/12/2014)! Only one declaration can be made per reporting period for each person 20 Disclaimer: Information not legally binding

21 Time recording: common errors Inconsistency with HR records Time sheets not properly dated or signed More than full time employment charged among different projects double funding! Poor or limited information captured 21 Disclaimer: Information not legally binding

22 Auditor's advice: Time sheets I work 100% on the action so I do not have to fill in TS, correct? Correct, but pay attention: Did I spend a significant part of my time building up a network with other entities or other laboratories of my company, for future projects? Did I spend time in writing proposals for the next calls? Did I give lectures for the University? Did I travel for other unforeseen activities? 22 Disclaimer: Information not legally binding

23 Auditor's advice: Time sheets (continued) Do keep time records Time records should include, as a minimum: title and number of the action beneficiary s full name full name, date and signature of the person working for the action number of hours worked for the action supervisor s full name and signature reference to the action tasks or work packages of Annex 1 Information included in time-sheets must match records of annual leave, sick leave, other leaves and work-related travel. 23 Disclaimer: Information not legally binding

24 Personnel costs: hourly rate How to determine the Hourly Rate 1. Actual Costs (standard case) Hourly rate calculated as defined in the model GA 2. if you use average personnel costs Hourly rate calculated by the beneficiary according to its usual accounting practices 3. if you are a SME owner without a salary or a natural person without a salary Hourly rate formula fixed by the Commission ACTUAL COSTS UNIT COSTS 24 Disclaimer: Information not legally binding

25 Personnel costs: hourly rate SME owner without a salary Fixed hourly rate (unit cost) determined in the grant Average personnel costs Average hourly rate (unit cost) calculate in accordance with the beneficiary's practices Actual costs Salary is project-based Per full-financial year Salary is NOT project-based Per month 25 Disclaimer: Information not legally binding

26 Personnel costs: hourly rate If you are a SME owner without a salary or a natural person without a salary Costs must be declared on the basis of the unit cost (hourly rate) fixed by Commission Decision C(2013) 8197 and indicated in Annexes 2 and 2a of the grant agreement. In practice: SYGMA calculates the hourly rate for you by using the formula:! The SME owner or natural person may be remunerated by dividends, service contracts between the company and the owner, etc.; Still, the unit cost must be declared if there is no salary 26 Disclaimer: Information not legally binding

27 Personnel costs: hourly rate If you use average personnel costs You calculate the hourly rate according to your usual cost accounting practice provided that: You applied it in a consistent manner, based on objective criteria, and regardless of the source of funding You calculate the hourly rate using the actual personnel costs recorded in your accounts, excluding ineligible cost or costs included in other budget categories You use one of the options to determine the annual productive hours provided in the Model Grant Agreement 27 Disclaimer: Information not legally binding

28 Personnel costs: hourly rate Actual costs 1A - General case: the salary does not depend on specific projects 1B - Specific case: project-based remuneration Subject to the! provisions on additional remuneration 28 Disclaimer: Information not legally binding

29 ACTUAL personnel costs: hourly rate How do I know if I am in the general case 1A or in the specific case 1B? For example: If your remuneration for time worked in some projects is different from your remuneration for your other duties: you are in the specific case (1B) You get a supplementary employment contract for the work in the project You get a bonus or premium for the time worked in the project Your contract fixes a specific hourly rate for work in specific projects Otherwise, you are in the general case (1A) 29 Disclaimer: Information not legally binding

30 ACTUAL personnel costs: hourly rate Hourly rate = Personnel costs Productive hours NEW! (2016) Annual hourly rate Hourly rates calculated per full financial year Annual personnel costs Annual productive hours Two options Monthly hourly rate Hourly rates calculated per month Monthly personnel costs Monthly productive hours If you are a beneficiary with project-based remuneration (1B), you will only take into account personnel costs and hours corresponding to the H2020 action 30 Disclaimer: Information not legally binding

31 ACTUAL personnel costs: hourly rate Eligible personnel costs Hourly rate = Productive hours Include: Salaries Social security contributions (employers' and employees') Taxes and other costs included in the remuneration if they arise from national law or the employment contract Do not include: Any ineligible item (article 6.5) Any costs included in other budget categories (e.g. indirect costs) For beneficiaries with project-based remuneration (1B): any part of the personnel costs that qualifies as additional remuneration 31 Disclaimer: Information not legally binding

32 ACTUAL personnel costs: hourly rate Hourly rate = Personnel costs Annual productive hours Advice 1720 hours! you must use this option if the employment contract does not specify the working time conditions or if the "annual workable hours" cannot be determined Individual annual productive hours Formula: annual workable hours + overtime - absences Standard annual productive hours According to the beneficiary's usual accounting practices. Minimum threshold: annual productive hours 90 % of the standard annual workable hours 32 Disclaimer: Information not legally binding

33 Hourly rate: CASE 1A (remuneration is not project-based) Annual productive hours options: principles Same option applied to all personnel working in H2020 actions; although different options for different types of personnel, if: the same option is applied at least per group of personnel employed under similar conditions (e.g. same staff category, same type of contract, cost center, etc.); and the options are applied consistently (e.g. the choice of the option is not changed ad-hoc for specific employees) keep the same option(s) for the full financial year Options may be changed for the next financial year 33 Disclaimer: Information not legally binding

34 ACTUAL personnel costs: hourly rate Annual hourly rate specificities Annual personnel costs Annual productive hours! The annual hourly rate is to be calculated per full financial year If the financial year is not closed at the time of reporting, the beneficiary must use the hourly rate of the last closed financial year available. 01/10/ /03/2016 Reporting period (example) Hourly rate of 2014 Hourly rate of 2015 Hourly rate of 2015 also for these months 34 Disclaimer: Information not legally binding

35 ACTUAL personnel costs: hourly rate Monthly hourly rate specificities Monthly personnel costs Monthly productive hours One hourly rate per each month the person works in the action Monthly productive hours = 1/12 of the annual productive hours! Only options 1 (1720) and 3 (standard) are allowed. Option 2 (individual) is NOT allowed for monthly hourly rates. Thirteen salary (and similar) included in each month "pro-rata"; not in full in the month when they are paid. Time spent in parental leave cannot be deducted from the monthly productive hours. However, personnel costs incurred during parental leave may be charged in proportion to the time the person worked for the action. 35 Disclaimer: Information not legally binding

36 Personnel costs: double ceiling Beneficiaries must ensure that: the total number of hours declared in EU and Euratom grants for a person for a year is NOT higher than the number of annual productive hours used for the calculation of the hourly rate hours declared total annual productive hours the total amount of personnel costs declared (for reimbursement as actual costs) in EU and Euratom grants for a person for a year is NOT higher than the total personnel costs recorded in the beneficiary s accounts (for that person for that year). cost declared total personnel costs for the person 36 Disclaimer: Information not legally binding

37 BONUSES Personnel costs: bonuses Arbitrary bonus Ineligible Bonus based on commercial targets (e.g. sales target), fund raising targets or representing profit distribution (dividends) Bonus applied only to EU actions Additional Remuneration (also) Basic Remuneration Triggered by specific projects and resulting in a level of remuneration higher than under national projects Paid for additional work or expertise Part of the usual remuneration practices of the entity Based on objective criteria established in the internal rules! Eligible only for non-profit legal entities If not triggered by specific projects OR if triggered by projects, up to the level of remuneration paid in national projects Scheme authorised by law, collective agreement of contract Determined using objective criteria established in the internal rules 37 Disclaimer: Information not legally binding

38 STILL PUZZLED? Why don t you try the Personnel Cost Wizard? Wizard entry point 38 Disclaimer: Information not legally binding

39 Exercise: Calculation of personnel costs (general case) Ms R. has worked in 2015 and 2016 for the H2020 action whose reporting period runs from 01/10/14 to 31/03/16. How do we calculate the personnel costs to be charged to the action? Step 1 Calculate the hourly rate Step 2 Identify the hours worked for the action Step 3 Multiply the hours worked for the action by the hourly rate 39 Disclaimer: Information not legally binding

40 Exercise: General calculation of personnel costs Hourly rate Step 1.a Calculate the hourly rate: annual personnel costs! As 2016 is on-going at the end of the reporting period, the 2015 hourly rate will apply also for the 2016 months of the reporting period Ms R. has a gross monthly salary of EUR and the employer pays 30 % on top as social security Annual personnel costs = (2 500 X 12) + 30 % = = Disclaimer: Information not legally binding

41 Exercise: General calculation of personnel costs Step 1.b Calculate the hourly rate: annual productive hours Out of the three options offered by the H2020 grant agreement: i. Fixed hours ii. Individual annual productive hours iii. Standard annual productive hours The beneficiary applies option 1 for all its staff Annual productive hours of Ms R. = 1720? What if Ms R. would be a part time employee? 41 Disclaimer: Information not legally binding

42 Exercise: General calculation of personnel costs Step 2 Identify the hours worked for the action Ms R. worked some hours in December 2015 (registered in a timesheet): And in 2016 she signed a declaration of exclusive work in the action covering the period: Hours worked for the action in 2016 = (1720 / 12 months) x 1,5 months = Disclaimer: Information not legally binding

43 Exercise: General calculation of personnel costs Step 3 Multiply the hours worked for the action by the hourly rate! As 2016 is on-going, the 2015 hourly rate will apply also for the 2016 months of the reporting period 215 x = EUR 43 Disclaimer: Information not legally binding

44 Direct costs for the action Direct costs are costs that are directly linked to the action's implementation. They must not include any indirect costs Direct costs are: Identification of Direct Costs: costs that have been caused in full by the action or costs that have been caused in full by several actions Measurement and the attribution to a single action can, and has been, directly measured (e.g. not allocated via cost drivers) 44 Disclaimer: Information not legally binding

45 Direct costs for the action Must be justified by sufficient persuasive evidence showing the direct link to the action Must be properly recorded in order to allow direct measurement of the use for the action and to ensure auditability The measurement system used by the beneficiary must accurately quantify the cost Direct measurement of costs does not mean fair apportionment of costs through proxies, cost drivers or allocation keys. Once you use them, it's indirect cost! In principle, what was considered direct/indirect in FP7 remains the same in H2020 But Now, it is even more important because Indirect Cost is calculated at 25% flat rate 45 Disclaimer: Information not legally binding

46 Examples (1) A beneficiary uses a x-ray machine for the action for few hours and for the rest of the time the x-ray machine is used for other activities. The beneficiary charges the full depreciation costs for the period in the cost statement of the action. NOT ALLOWED! The allocation of the part of the annual depreciation to the H2020 action must be calculated based on the number of hours/days/months of actual use of equipment for the action. The actual use should be directly measured (logbook, etc.). 46 Disclaimer: Information not legally binding

47 Examples (2) The total consumables costs are charged as direct costs on the H2020 action as a proportion of the action hours to total worked hours in the laboratory. NOT ALLOWED! Even if the usual accounting practice of a beneficiary is to consider laboratory consumables as direct costs. The costs of other goods and services should be declared as actual costs e.g. direct consumption for the action should be measured. 47 Disclaimer: Information not legally binding

48 Internal invoices unit cost NEW! (2017) Internal invoices refer to costs of goods or services produced by the same beneficiary who uses them directly for the H2020 action and calculated in accordance with its usual cost accounting practices LEGAL ENTITY Department A Department B Consumables or Services Costs 48 Disclaimer: Information not legally binding

49 EXAMPLES Internal invoices unit cost NEW! (2017) Self-produced consumables e.g. electronic wafers, chemicals, etc. Use of devices or facilities e.g. clean room, wind tunnel, supercomputer, etc. Specialised premises e.g. animal house, aquarium, etc. Standardised processes e.g. genomic test, mass spectrometry analysis, etc. Hosting services for researchers e.g. housing and canteen costs for visiting researchers 49 Disclaimer: Information not legally binding

50 Internal invoices unit cost NEW! (2017) Internal invoices must be calculated in accordance with the usual cost accounting practice of the beneficiary, but adjusted if needed to comply with the cost eligibility conditions OK Direct staff Consumables Depreciation of the item Maintenance and supplies if their costs are directly identifiable NOT OK Indirect staff Costs of central services Shared costs for which the part used for the item is not directly identifiable Ineligible cost (e.g. bank interest) 50 Disclaimer: Information not legally binding

51 Framework for ex-post audits Horizon 2020 One set of rules MGA One set of annotations AMGA One governing body Common Support Centre (CSC) AND One Common Audit Service (CAS) performing the audits One Indicative Audit Programme AND One set of consequences of findings applied by CAS, KPMG, PwC, and Moore Stephens Equality of treatment Consistency of audit reports Legal certainty 51 Disclaimer: Information not legally binding

52 Auditor's advice: Consequences of errors Identified errors may lead to Extension of audit findings (systemic or recurrent errors) Recovery of the ineligible amount Penalties Suspension of payments or termination of the contract Reputational damage Financial losses. 52 Disclaimer: Information not legally binding

53 Audit process Audit Strategy & Planning Audit Strategy and Planning Example: 100 audits selected External Audit Firms (outsourced) 80 audits CAS (own resources) 20 audits KPMG CoI & capacity check for 80 audits OK = 50 audits Cascade principle KPMG performs 50 audits PwC CoI & capacity check for 30 audits OK =20 audits PwC performs 20 audits Moore Stephens CoI & capacity check for 10 audits OK = 8 audits Moore Stephens performs 8 audits CAS performs 2 audits 53 Disclaimer: Information not legally binding

54 Audit process Main steps Initiation Letter of Announcement Cooperation is critical during all stages of the audit process Planning & Preparation Set fieldwork dates Request information Collect audit evidence Examination Desk review /Visit onthe-spot Collect audit evidence Provide sufficient and persuasive evidence Indicative Audit Program Preliminary findings Closing meeting Implementation of audit findings Post audit Managed by the EC operational services (not the CAS)! Reporting & Closure 1. Preliminary Audit Report (PAR) review by CAS (incl. quality control) consult internally (operational units) 2. Contradictory procedure scrutinize preliminary findings and! recommendations submit appropriate, sufficient and persuasive evidence 3. Draft Audit Report (DAR) incorporates beneficiary's comments review by CAS (incl. quality control) scrutinize and address all comments consult internally (units managing the actions, legal advice, internal committees etc.) 4. Final Audit Report (FAR) 5. Letter of conclusion 54 Disclaimer: Information not legally binding

55 Audit process Examination on site Opening meeting Systems Analysis Systems and substantive testing Closure meeting Assessment after fieldwork Usually during 4-5 working days (one week) ( ) General information on: organisation projects financial administration internal control systems Audit agenda for the week Collection of information and audit evidence, analysis of documents, interviews with researchers, project presentations, physical inspections, etc. Discussion on preliminary audit findings and observations Indication of further audit procedure 55 Disclaimer: Information not legally binding

56 Additional info Participant Portal At: Horizon 2020 Annotated Grant Agreement Horizon 2020 On-line Manual Questions? Research Enquiry Service 56 Disclaimer: Information not legally binding

57 HORIZON 2020 Thank you for your attention! Find out more: