Wednesday, 7 December 2011

Horizon 2020: proposed financial rules

The EC has released its proposals for Horizon 2020, successor to FP7. The main changes suggested to existing financial rules are:

• One set of rules will cover the successors to FP7, CIP, EIT, the JTIs, Eurostars and Ambient Assisted Living, though the last three may be able to negotiate variations.

• Percentage funding: project costs will no longer be divided into different activity types (eg research, demonstration, management, other) with different % funding rates. Each project will have a single rate: up to 100% for research projects, and up to 70% for projects involving prototyping, testing, demonstrating, experimental development, piloting and market replication.

• Overheads: will be 20% of direct costs excluding subcontracting and similar activities. (An option for not-for-profits to charge actual overheads is mentioned but no rules for this are proposed.) Combined with the funding percentages, this means little change for those using the FP7 60% overhead. For companies using calculated overheads in FP7, the reduction in eligible overheads is offset by the increase in funding percentage. Organisations specialising in project management or dissemination activities will see a reduction in funding.

• Receipts remain as FP7. However, with EU support of 100%, they will always reduce the EU funding.

• VAT might be an eligible cost. It is not listed as ineligible.

• Timesheets will be necessary to support personnel costs claimed, except for those working exclusively on the EU-funded projects. So, for example, a professor responsible for several projects will need to fill out a timesheet, but not the junior researcher working full time on one of them.

• Productive time, used to calculate hourly rate, will be set by the EC in the grant agreement.

• The guarantee fund will continue, though organisations guaranteed by their governments might be exempt from contributing. Other financial guarantees will be neither imposed nor accepted. The latter closes a loophole in the FP7 legislation, which did not prevent an organisation from “volunteering” a guarantee.

The final rules will be negotiated between the Council of Ministers and the European Parliament over the next two years

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Tuesday, 4 October 2011

“The best way to frighten a coordinator

... is to suggest an amendment”. It takes on average about five months from a consortium deciding to request an amendment to signature by the EC. Add to this the timescale for the consortium to agree that an amendment should be requested – at least two months – and you begin to understand the comment made by a coordinator in the survey described earlier. Then add the complication that reporting and amendment cannot take place simultaneously, and amendments cannot be completed if a partner is changing their name or legal address in the EC’s Unique Registration Facility (URF), and you can see how frustrating the process is.

The diagram shows the main amendments requested by coordinators, and here comes another problem. If you wish to add or terminate a partner, it is clear that an amendment is necessary. Likewise if you wish to extend the project duration, or change the work (add or remove tasks). But if you want to transfer some work and budget between partners, is an amendment necessary? According to the grant agreement, the answer is no. According to the amendment guide, the answer is yes if there is substantial change in the distribution of work between beneficiaries. And what is substantial?

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Thursday, 8 September 2011

Late payment

Two months ago we reported that according to the EC over 96% of interim and final payments to FP7 participants were made within the contractual 105 day limit. The 105 days starts when the consortium submits the periodic (and/or final) report and associated deliverables. It is interrupted whenever the EC asks for clarifications or modifications. So in practice the 105 day limit is often extended, making the 96% achievement less impressive.

A further complication is that in the ICT theme, which uses a web system called NEF for reporting, it is not possible to submit a report while an amendment is in process. The EC’s FP7 legal department has now confirmed that the 105 day time limit starts only when the reports are submitted to NEF. So a consortium may send all their reports and deliverables to the EC by email, but the clock does not start. Instead, the consortium must wait until the amendment is complete (usually some months), then submit via NEF, at which point the clock starts. The 96% achievement is based on timings from NEF, which means it is not reliable.

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Friday, 29 July 2011

ERC, timesheets and alternative evidence

When the ERC (European Research Council) was set up, those involved were very keen to distance its operation from the European Commission. This would avoid political interference in its decisions, and also minimise bureaucracy. A symbol of the latter was the separation of financial reporting from scientific reporting, which normally only coincide at the end of the project.

However, the ERC grant agreement is almost identical to that used in the Cooperation and Capacities Programmes in its financial rules, including those that give rise to the need for timesheets. On the other hand, ERC does not have separate financial categories of research, demonstration, management and other, so one reason for timesheets disappeared. Also, many researchers working on ERC projects, according to their employment agreements, work full time on the project, so timesheets were not needed to support calculation of productive time. Finally, the EC’s Financial Guidelines said alternative evidence could be used to support financial claims. Researchers feel that peer-reviewed publications are evidence that they worked well on the project, so timesheets were not filled out. Now ERC’s own auditors are urging all ERC-funded researchers to fill in timesheets. What’s going on?

When the financial guidelines said alternative evidence could be used in place of timesheets, they went on to say that this evidence should give an equivalent level of assurance, to be assessed by auditors. And this is the point. The researchers have to convince auditors, not other scientists.

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Friday, 1 July 2011

University overhead calculations

Under FP7 there are four alternative methods to calculate overheads. Two are flat rates (either 20% or 60% of direct costs excluding subcontracts and similar external costs). The other two are based on the actual costs of overheads. One version takes account of differences in overheads between different parts of the organisation, such as departments. The other, called “simplified”, does not. An advantage of “simplified” is that overheads are calculated only for the most recent completed financial year, rather than for the precise reporting period of a project.

The chart, taken from a presentation by EC audit staff, shows for over a thousand universities which methods were used in research grant agreements signed between May 2009 and May 2010. While most (87.5%) use a flat rate, one in eight calculates their actual overheads. And despite the apparent advantages of the “simplified” method, two thirds of those calculating overheads use the more complicated method.

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Friday, 3 June 2011

Another timesheet requirement?

Several projects report that EC officials are asking for a breakdown of effort required for each deliverable from a project. To do this in a traceable manner (to satisfy auditors) would require timesheets to record hours worked per deliverable, even though the Financial Guidelines make no mention of deliverables in its discussion of time recording.

The FP6 reporting guidelines asked projects to report the person months per deliverable, but few projects did so. Probably as a result, the FP7 reporting guidelines omitted this requirement. On the other hand, consortia do have an obligation under the grant agreement to provide all detailed data requested by the Commission for the purpose of the proper administration of the project. So consortia facing this situation might find it useful to remember the words used in the FP6 reporting guidelines, which asked for “used indicative person months”, to compare with those estimated in the Description of Work.

Forthcoming Singleimage workshops:

21 June - Finance in FP7
22 June - Coordinating FP7 projects
9 August - Finance in FP7
21 Sept - Finance in FP7
22 Sept - Coordinating FP7 projects

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Tuesday, 10 May 2011

Eurostars not so speedy

The Eurostars programme was launched as an SME-friendly, European level funding scheme. 100m€ of FP7 money was added to 300m€ from national governments to fund research in small international consortia consisting primarily of research performing SMEs. The programme is administered by the EUREKA secretariat, established by national governments. Funding works according to the rules of each national agency which support participants from their country.

One of the programme’s objectives was to award contracts within six months of proposal submission. A recent external review of the programme reports that this is not being achieved. For the first two calls of the programme, timescales averaged 11.4 months. This is remarkably similar to the time frames experienced for collaborative research projects funded directly by the EC, which averaged 11.5 months.

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Friday, 8 April 2011

FP8, usual accounting practices and history

While politicians discuss FP8 in terms of “Grand Challenges” and billion euro “Flagship” projects, others are more interested in getting existing funding mechanisms to work. In its consultation paper on FP8, the European Commission (EC) suggests that acceptance of beneficiaries’ own accounting practices in establishing eligible costs (rather than working to EC defined rules) might be “considered”. LERU (the League of European Research Universities) has recently suggested that organisations with an analytical accounting system, responsible for their own finances and subject to annual audit should be able to use their usual accounting practices. EARTO (the European Association of Research and Technology Organisations) has recently asked again that acceptance of usual accounting practices be implemented as a matter of urgency. Why is there such interest in something apparently so simple?

The answer is that, while own accounting rules have been the basis for acceptability of costs from the start of FP6 in 2002, for the last nine years the EC’s own auditors have not accepted the concept. Before 2002, the rule written in the FP5 contract was that own accounting principles were OK if they were acceptable to the Commission. The FP6 contract – and its legal foundation, the Rules for Participation – says eligible costs “must be determined in accordance with the usual accounting principles” of the participant: no mention of acceptability to the Commission. FP7 extended the definition to the “usual accounting and management principles and practices” of participants.

Talk of addressing “Grand Challenges” seems premature when the EC can’t overcome the small challenge of persuading its own audit staff to accept rules agreed in 2002.

Kind regards
Singleimage - FP7 Training Workshops and Advice

Thursday, 3 March 2011

Call 7 Success Rates

The chart below shows the average success rate of proposals for all types of project (collaborative, coordination, support, network of excellence etc) for selected parts of FP7. The data is for all FP7 calls for proposals where evaluation and selection had been completed up to the end of 2009. For two-stage calls, the success rate is calculated by dividing the number of successful proposals by the number of eligible proposals submitted at stage 1. (3% of all proposals submitted were ruled to be non-eligible.) For each FP7 theme, the number in brackets is the total eligible proposals in the calculation. Approximately 600 proposals for joint calls could not be attributed to a specific theme and so were omitted. The average success rate across all selected themes was 16.1%.

Proposals in the theme research infrastructures are usually submitted by owners of expensive infrastructures, of which there are relatively few. So competition is relatively weak, resulting in a high success rate. At the other end of the scale, NMP (nanotechnologies, materials and production technologies) uses almost exclusively the two stage proposal process, which generally produces lower success rates (10.7% compared with 17.3% for the one stage process). For social sciences and humanities, there is no such explanation for the low success rate: all their calls are one stage.


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Wednesday, 9 February 2011

Commission simplifies..........a little!

Nine months after its initial proposals, the EC has issued a revised Annex II to the FP7 grant agreement to simplify its financial rules. The changes, however, relate only to average personnel costs, which are used by relatively few participants.

Large organisations which use averages will welcome the new conditions, which allow them to use their usual calculation methods, provided they are based on actual costs and exclude estimated or budgeted amounts. They are also allowed to use their usual way to calculate productive time if this is based on auditable data, a privilege not enjoyed by other Framework Programme participants. The requirement to have their calculation methods pre-approved by the EC disappears, though they can still opt to do this.

SME owners who do not receive a salary also face a change. In FP6, the EC accepted dividends paid to SME owners as eligible personnel costs. In FP7, this practice was possible only if the method to calculate the costs was first approved by the EC. This requirement is now replaced by claiming personnel costs based on those devised by the EC for the Marie Curie programme. However, SME owners whose calculation method was approved before the new Annex II was published can continue to apply that method.

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Tuesday, 11 January 2011

FP7 - Simplified, not simple

The Commission has proposed simplifications to FP7. The European Parliament has given its views on simplification. So has the Council of Ministers. Even the expert committee in its mid-term review of FP7 drew attention to administrative problems and the need for simplification.

All the talk of simplification brings to mind a presentation made two years ago by a senior Commission official responsible for audit certification in DG Research. The official was explaining a simplification introduced at the start of FP7 concerning overhead calculations. The traditional overhead calculation, known as real indirect costs and identical to the Full Cost overhead calculation in FP6, takes account of differences in overheads between different departments within the organisation. The FP7 simplification was to provide an option to ignore these variations and, in effect, take an average across the whole organisation: the EC calls this “simplified” real indirect costs. The first point of this official’s presentation read “Simplified method: the use of this method is optional, however ‘Simplified’ does not mean ‘Simple’ ”.

So be prepared!