Tuesday, 1 August 2017

H2020 real funding level

Under its Financial Regulation, when the EU provides grants, it cannot fund all the resource needed to carry out the work: it must be co-financed from other sources. In H2020, many grants are reimbursed 100% of eligible costs. Where is the co-financing? One answer is in the overheads, which are limited to 25% of direct costs, even though overheads in most organisations are much higher.

In the annexes to its “Interim evaluation of H2020”, the EC gives an estimate of how much difference the overheads make. Based on a comparison with organisations which claimed their real overheads in FP7, they calculated for large companies that H2020 grants cover 58% of their real costs. And for all types of organisation involved in IA (Innovation Actions) and RIA (Research and Innovation Actions), the grants cover 70% of their real costs.

This analysis addresses only overheads, and not the impact of normal accounting practices on personnel costs through the calculation of productive days. This might further reduce the real funding level!

Kind regards
Singleimage Limited

Wednesday, 28 June 2017

Don’t panic!

A new version (4.0.1) of the 700 plus page Annotated Model Grant Agreement has been released by the EC. Oh no! Do we have to read the whole document to find the minor changes which the EC has made but decided were too minor (or embarrassing) to highlight with its magic green markers?

Luckily, the answer is no. The “History of Changes” at the front of 4.0.1, which usually includes “Other minor corrections and clarifications”, on this occasion mentions only an index. Wonderful, you might think: it is often difficult to find the many references within the document to a particular topic.

Sadly, this is not what they mean. The EC’s index is simply a reference added to the bottom of most pages to tell you which of the 58 articles in which of the 16 model grant agreements are currently under discussion. So if you don’t know which page you are reading, the index helps. But if you don’t know which page you should be reading, it is no help at all!

Kind regards
Singleimage Limited

Friday, 26 May 2017

EC changes its mind. Again!

In January, we described how the EC changes its mind through the medium of its 700+ page Annotated Model Grant Agreement (AMGA). On that occasion, the question was whether the cost of PhD students working on H2020 projects and funded through scholarships, stipends and similar non-employment agreements are an eligible cost. AMGA v2.1 said no, because such agreements were training oriented. Then in v2.2, they announced that PhD agreements were work oriented, not training oriented, and so the related costs were eligible.

Similarly, AMGA v2.1 said depreciation costs of equipment which is shared between multiple projects must be calculated based on the total capacity of the equipment, rather than share of total actual use, which often is less than capacity. In contrast, subsequent versions of AMGA say that share of use is the right way to calculate the eligible cost.

Version 4.0 of AMGA, issued in late April, reveals more changes, this time related to the cost of an SME owner manager without salary. If the owner manager has no salary (instead, for example, paying themselves through dividends), then their work on an H2020 project can be claimed by a “unit cost”, in this case a standard rate determined by the EC.

Earlier editions of AMGA stated that this unit cost could not be used in a specific case, called “in-kind contributions”. For example, if the SME owner manager spent some time at a university working on the university’s H2020 project, the cost of that time would not be an eligible cost. The reason given was that it was a unit cost, not an actual cost. But if the same person did receive a salary, then the contribution in kind would be eligible. AMGA v4.0 now says the unit cost is eligible.

Luckily for the EC, the front cover of AMGA includes a notice which says “Neither the Commission nor the its executive Agencies (or any person acting on their behalf) can be held responsible for the use made of this guidance document”.
Kind regards

Thursday, 27 April 2017

Five year audit

This month, the European Ombudsman released a report concerning a financial audit of a Non-Governmental Organisation (NGO) and its participation in three FP7 projects. The audit took place in 2011 and concluded that all personnel costs claimed were not substantiated and so the related grant should be reimbursed to the EC. The problem, according to the auditors, was that the time recording system was unreliable.

The NGO disagreed with the auditor’s draft report, drawing attention to timesheets which were not considered by the auditors but which provide the base for summary reports cited by the auditors. The time sheets were based on those described by the EC in its FP7 Financial Guidelines. The NGO’s comments were included in the draft audit report.

In July 2013 the NGO met with the EC to explain their time sheet system. While the EC accepted that the system was adequate, in 2014 they started to recover the (allegedly) over claimed personnel costs from the NGO. This was because the meeting – set up by the EC to discuss the audit results - took place after the 30 day deadline for submitting comments on the audit report.

However, because the NGO had drawn the EC’s attention to the additional information on time recording in its comments included in the draft audit report, the Ombudsman concluded that the EC should have considered these before finalising the audit report and implementing the results by recovering the (alleged) over payments. It recommended that the EC should review its position, re-examine the timesheets and, if the timesheets are in fact reliable, reverse its decision.

Despite receiving the Ombudsman’s recommendation in August last year, no response from the EC has been published. So, more than five years after the audit, the case is unresolved. Could this be a record?
Kind regards

Monday, 3 April 2017

H2020: Internal invoices

Following lots of pressure from the research community, the EC has decided to accept the cost of internal invoices for the use of research facilities as an eligible cost. These invoices were eligible costs in FP7. But in H2020 the EC required that the consumption of each resource involved – such as the time of staff supporting the equipment, consumables and depreciation – be measured directly for each H2020 project using the facility.

Under the new version 4.0 of the grant agreement, the cost of internally invoiced goods and services used directly for an H2020 project can be claimed based on an average cost per unit of use (per hour, for example), called a “unit cost”. The unit cost must be based on actual costs of items directly linked to the production of the goods or services to be invoiced, excluding overheads.

Interestingly, the cost of support staff, consumables and depreciation of research facilities can potentially also be charged as direct costs under the EC’s LRI (Large Research Infrastructure) option. But the calculation method for this must be certified by the EC. And it is restricted to organisations with at least €20m of expensive equipment, which must represent at least 75% of their fixed assets. Last month we reported that the EC had issued only four LRI certificates during H2020. Will internal invoices allow H2020 participants to avoid the restrictions of LRI?

Kind regards
Singleimage Limited

Tuesday, 28 February 2017

Brexit invoice

The precise make-up of the €60bn “Brexit invoice” will be revealed when the UK triggers Article 50 of the Lisbon Treaty. One speculation is that the UK’s usual share of EU expenditure from 2014 to 2020 is included. This is because the UK agreed the EU’s seven year “Multiannual financial framework” (MFF) back in 2013. If this agreement is legally binding, then the UK would be obliged to contribute amounts similar to its current annual payments to the EU each year until the end of 2020, with lesser amounts due for several years after that. In this scenario, it might make financial sense for the UK to postpone its departure until the end of 2020, in order to continue to receive EU payments to its regions, farmers and researchers.

What happens if the UK and the EU disagree about these MFF payments? In public sessions in the UK parliament, lawyers are arguing which legal authority could decide. The conclusion - so far - is that the European Court of Justice (ECJ) would have jurisdiction on the interpretation of the relevant laws. However, since the UK will not be subject to these laws after leaving the EU, the ECJ could not enforce their implementation!

None of the discussions so far take into account the UK’s government’s proposed “Great Repeal Bill”, which will transfer much EU law into UK law when the UK leaves the EU. We look forward to many more hours of learned debate.

Kind regards
Singleimage Limited

Tuesday, 31 January 2017

Switzerland returns

From 1st January 2017, Switzerland is associated to all parts of H2020. Following a referendum in February 2014 against mass immigration, Switzerland was allowed to be associated to – and therefore receive funding from - only the Excellent Science component of H2020. For Societal Challenges and Enabling and Industrial Technologies, Swiss organisations could participate without EU funding. The Swiss government stepped in to fund these Swiss participants.

At the end of 2016, the Swiss government agreed to extend free movement of labour to Croatian citizens, at the same time initiating measures to prioritise Swiss job seekers when vacancies occur. As a result, Switzerland regained the status of Associated Country which it held during FP7.

Kind regards