In FP7, the EC encouraged all beneficiaries to use calculated overheads, in particular by scheduling the removal of a 60% flat rate for overheads half way through the programme (with 75% funding of costs). However, they took a decision to keep the 60% for all of FP7 and then provided only a 25% flat rate – no calculated overheads - in H2020 (with 100% funding). The reason for this change of direction is that, when audited, they found many errors in the beneficiaries’ overhead calculations. Early results in H2020 audits suggest the removal of calculated overheads has led to 28% reduction in error rates compared with FP7.
However, the 25% flat rate penalised those using expensive equipment. The EC’s response, called Large Research Infrastructures (LRI), required certification by the EC and was limited to organisations whose “Infrastructures accounted for at least 75% of the total fixed assets”, so excluding most H2020 participants. Uptake of the LRI certificate has been even lower than that of CoMUC/CoMAv. Eventually, the EC changed its mind and added a new cost category called internal invoices, which allowed some overhead costs to be re-classified as direct costs, and no certificate required.
For Horizon Europe, the EC proposes to add further overheads in costing these internal invoices, which the EC’s supporting documents suggest will involve “fair keys or drivers” to distribute the indirect costs. Is this the EC’s first step in defining standards for overhead cost accounting?