Tuesday, 3 December 2013

Horizon 2020: Confusion about bonuses

A year ago, at the suggestion of the EC, the Council of Ministers introduced a clause in the H2020 legislation to allow additional remuneration (bonuses) of up to €8000 per year to be reimbursed as part of personnel costs if this was the normal practice of an organisation. This was in response to pressure from the newer Member States, where very large bonuses are paid to those winning competitively awarded grants, partly to compensate for very low levels of pay in their public sector organisations such as universities.

However, the €8000 limit is a long way below the bonuses paid in these countries. These can in fact be 200% and more of normal salary. For the €8000 to be useful, the personnel cost of a researcher would need to be €4000 per year or less! So the new Member States are confused by the EC’s suggestion, which seems to be based on inadequate knowledge of remuneration practices in these countries. If bonuses are limited to the €8000, participation in H2020 will be significantly less attractive than other funding sources.

Meantime, some west European universities are wondering if they should pay the €8000 bonus to their staff working on EU projects. However, this is not consistent with the legislation, which allows the bonus only if it is provided independent of the source of funding, for example for all non-national funding sources.

Bonuses are in fact allowable under FP7, whose Financial Guidelines detail the relevant conditions. Universities in the newer Member States are paying their staff bonuses and claiming the orresponding costs under FP7 projects. EC auditors have checked and accepted that these costs are eligible under the grant agreement. In recent briefings, EC lawyers say that bonuses eligible in FP7 will continue to be eligible in H2020.

Two mysteries remain. Why did the new Member States raise this question, when it was already well addressed in FP7? And why did the EC propose a solution which would not solve the (non-existent) problem – or are they in fact trying to limit all bonuses?

Singleimage - FP7 and H2020 Training Workshops and Advice

Friday, 8 November 2013

The new SME instrument fails to meet expectation

Despite recent presentations by EC officials, key aspects of this instrument remain unclear.

Any topic? According to the legislation, the instrument is bottom up: any topic can be proposed. So you would expect it to appear just once in the soon-to-be-published Workprogramme. But in the current Workprogramme draft it appears thirteen times: in each of the seven Societal Challenges and six Enabling and Industrial Technologies. And the thirteen versions show different interpretations of “bottom up”.

• In the areas of Transport and Climate Change, any topic within their ambit (defined by the H2020 Specific Programme, now agreed by the legislators) can be funded. This is in line with the concept defined in the legislation.

• In Energy, any aspect of low-carbon energy can be funded except energy storage technologies and those related to the electricity grid. Another component of Energy, called “Smart Cities”, does not include use of the SME instrument at all.

• The ICT part of the workprogramme describes its use of the instrument as “Open, disruptive innovation”, without explaining the meaning of “open”. It could be interpreted as a requirement or preference for open source software, which will deter many SMEs.

Free choice of technology partners? Earlier this year, the EC’s designer of the SME instrument said the usual rules on subcontracting – open tendering - would not apply. Now they are saying that the choice of subcontractor will need to be justified. A new special clause is being devised for the grant agreement just for this instrument, but only to allow an exemption to the usual condition that the core work of the project is not subcontracted.

Funding via lump sums? Lump sums are payments according to results, and avoid the need for recording the actual cost of the project and any financial audit. Now it appears this will apply only in the small phase 1 (€50k lump sum): the main phase, with a grant between €1m and €3m, will use actual costs, so the SMEs must record all time spent on the project, work out the hourly cost of their staff and keep records of all expenses.

It seems the ambitions for a simple instrument have been defeated by the Eurocracy.

Singleimage - FP7/H2020 Training Workshops and Advice

Wednesday, 2 October 2013

Simple for SMEs in H2020?

The EC has made significant efforts to make its new SME “instrument” easy to use. So have others designing different parts of H2020. But the result is that there are at least four different sets of financial rules which SMEs might need to follow, depending on which part of H2020 suits their needs.

• The new SME instrument will use “lump sum” funding. This means that payment is made according to the work delivered, with no checking or audit of actual costs incurred and no constraints on subcontracting.

• The designers of Eurostars, for research intensive SMEs, and Active and Assisted Living, which funds many SMEs, decided it would be helpful if national funding rules were used, because the SMEs were likely to be familiar with them. Their cost claims can be audited by the EC.

• But if an SME wishes to work on consortium projects with universities, institutes and large companies in the areas of Societal Challenges and Enabling and Industrial Technologies, they must use the EC’s standard rules on eligible costs, including those for subcontracting, with potential checks and audits of actual costs incurred.

• And finally, there is the possibility of staff exchange projects under the Marie Sklodowska-Curie scheme. Here grants are not based on costs, but determined by the level of experience of the staff, the country they visit for the exchange, and their family responsibilities.

It will be interesting to hear how the EC handles these variations in its upcoming information days dedicated to H2020 opportunities specifically for SMEs.

Singleimage - FP7 Training Workshops and Advice

Monday, 2 September 2013

Outsourcing Horizon 2020

The European Commission proposes to outsource parts of Horizon 2020 through Joint Technology Initiatives. Here we describe another group of activities through which the EC is outsourcing H2020. These are the Public-public Partnerships (P2Ps), which establish separate administrative bodies to develop Workprogrammes, organise calls for proposals and administer EU grants to fund selected projects. In P2Ps, national administrations are the EC’s partners, and provide at least half of the funding. Features of the proposed P2Ps are summarised below.

During FP7, the Eurostars programme supported research intensive SMEs to carry out near to market cross border collaborative research projects on any topic. The programme is administered by Eureka, a non-EU intergovernmental body. National governments could opt to join the programme, through their National Funding Bodies (NFBs). Rules for participating and funding were set by each country for its participants, and so could – and did - vary between countries. National funding for high ranked proposals sometimes did not materialise or was delayed.
Eurostars-2 is configured similarly, but with obligations on the States to fund their participants in at least half of the top ranked proposals. It also commits to increasingly align the various national rules. A first step is that financial viability appraisals will all be conducted by the Eureka administrators, not the NFBs. Also, the minimum number of participants in a consortium will be three, in line with H2020 rules, rather than two, which was the Eurostars rule in FP7.

Active and Assisted Living (AAL-2) succeeds the FP7 Ambient Assisted Living programme. It is similar to Eurostars with participation and funding rules varying by country. In contrast to Eurostars, there is no obligation for the NFBs to fund a defined proportion of the top ranked proposals, nor to align the various national rules. And AAL-2 will not adopt the H2020 IPR rules. So chaos as usual!

The European Metrology Programme for Innovation and Research (EMPIR) is successor to the FP7 EMRP. It mainly funds National Metrology Institutes (NMI) or Designated Institutes (DI), chosen by governments to carry out metrology functions, though 15% of funding is open to any organisation. It will work to H2020 rules, except that EU funding for NMI/DI overheads will be 5% of direct costs, rather than the standard 25%.

European and Developing Countries Clinical Trials Platform (EDCTP-2) is successor to a Framework Programme Six (2002-2006) public-public partnership. It addresses poverty-related diseases including HIV/Aids, tuberculosis and malaria in sub-Saharan Africa. Projects funded through EDCTP-2 will work to H2020 rules.

Singleimage - FP7 Training Workshops and Advice

Monday, 5 August 2013

H2020 budget

The table below shows the H2020 budget breakdown based on reports of the compromise agreed on 25 June. It assumes that the total of €70.2bn budget includes Euratom, which was included in the EC’s original €80bn proposal, made in 2011. The final budget will be updated for inflation since then.

One detail not immediately apparent is the new SME instrument, which will receive 4% of the total (€2.8bn), to be taken from Societal challenges and Enabling & industrial technologies. In contrast, all proposed funding for the European Institute for innovation and Technology (EIT) is shown explicitly, though around half is planned to come from the same two budgets.

Friday, 28 June 2013

Horizon 2020 agreed

The European Parliament and the Council of Ministers have agreed both Horizon 2020 and the overall EU budget, so the new programme can be introduced on schedule at the start of 2014.

Compromises between the two sides which led to the agreement include:

* about €2.8bn (4% of the total budget) reserved for the new SME instrument
* €0.7bn (1%) reserved for measures to increase EU12 (newer Member States) participation in H2020
* Overheads limited to 25% of direct costs (no option for real overheads)
* Time to grant reduced to eight months (12 on average in FP7, but in 2012 close to nine months)
* A pilot run of a “fast track to innovation” funding scheme (details to be worked out).

And, of course, greater acceptance of participants’ own accounting rules, but nobody believes that will ever happen!

Singleimage - FP7 Training Workshops and Advice

Wednesday, 5 June 2013

Horizon 2020 slips some more

Horizon 2020 is one of many components of the EU budget for 2014-2020. While the Council of Ministers, representing the EU member states, has agreed the overall budget, the European Parliament rejected it in March. At that time, agreement was forecast for the end of May. For comparison, the corresponding budget for the FP7 period (2007-2013) was agreed in April 2006.

The disagreement now rests on the difference between commitments – how much the European Commission (EC) is allowed to contract to spend – and actual payments, which happen later and are typically 5% lower. Both the Parliament and the EC would like the two numbers to be equal, increasing the budget for payments. Meeting in late May, the Council refused to change their decision. Further meetings between the three bodies will be held at the beginning of June, meaning any decision by the parliament cannot be taken before the first week in July.

Singleimage - FP7 Training Workshops and Advice

Wednesday, 1 May 2013

Horizon 2020 grant agreement

The European Commission (EC) has discussed its ideas for the Horizon 2020 grant agreement with invited audiences during April. Important features include:

Explicit definition of personnel costs, rather than simply their actual costs as used in FP7 (and FP6). Whether the definition will exclude taxes and charges related to personnel costs, which the EC was forced to accept in FP7, is not clear.

For productive hours per year, three options will be offered:

(i) A single number, for example 1680, which could not be audited. The number would also be the maximum hours that could be claimed in a year for EU projects, which would conflict with the time recording rules of some organisations.

(ii) A standard for an organisation, according to its usual cost accounting practices. However, this could be audited.

(iii) Individual productive hours for each person for those with full time-recording as part of their usual accounting practice. This also could be audited.

Options (ii) and (iii) would be subject to a minimum “to avoid abusive practices or practices incompatible with the cost eligibility criteria”.

Time recording: requirements will be defined, but they are not yet available, even though models exist in FP7 guidance documents. However, the EC emphasised that non-compliance with the rules would be a breach of the grant agreement. So potentially personnel costs claimed using a time recording system not meeting the grant agreement terms would be ineligible for funding.

Direct costs will be as FP7: those generated by the project and measured directly, not by apportionment using a cost driver (and, for FP7, are direct costs in its normal accounting). However, the grant agreement will also list types of costs considered to be direct, which potentially could exclude some direct costs included under the FP7 agreement. The list will also include expensive pieces of equipment, even if they are normally considered an overhead by the beneficiary, so making the proposed flat rate overhead more acceptable to those who calculate their overheads.

Exchange rates: for those who keep accounting records in currencies other than euro, there will be an option to use the average exchange rate for the reporting period, to reduce the impact of currency fluctuations.

Interestingly, no mention was made of broader acceptance of beneficiaries’ usual accounting and management practices, which featured in the EC’s proposals for H2020.

Singleimage - FP7 Training Workshops and Advice

Wednesday, 27 March 2013

The (less) mysterious SME instrument

Following our last blog, the EC contacted us with up to date information on their ideas for this instrument to be introduced in Horizon 2020. This funding scheme involves an optional first stage, a feasibility study, and a second stage which is a project.

For the first stage, EC funding is likely to be limited to €50k, because this ceiling allows simplifications regarding checks on the company. The funding would be paid as a lump sum, meaning that the payment is made if the work is completed, without reference to the actual cost of the work, so simplifying financial administration.
For the second stage, the EC will contribute €1-3m. The EC is currently exploring how this can also be paid as a series of lump sums against deliverables. It is not clear whether each lump sum will be below €50k, which would imply 20-60 payments per project: hardly administration-lite. But the use of lump sums will not only avoid accounting for actual costs incurred. It also avoids the EC’s rules on subcontracting. So SMEs could involve, for example, research and technology organisations in their projects without obtaining alternative quotes.

Forthcoming Singleimage workshops
17-18 Apr
Finance in FP7 – the fuller picture - with guest auditor (Brussels)
23 Apr
Consortium agreements in FP7 (Cambridge)
9 May
Horizon 2020: the story so far... (Cambridge)
18-19 June
Finance in FP7 – the fuller picture (Cambridge)
9 July
Managing FP7 projects (Cambridge)
Work under the SME instrument would be close to market: technology readiness levels (TRL) five and six and above. TRL is used by some national defence departments and the European Space Agency. Level 5 means a “component and/or breadboard validation in a relevant environment”; level 6 means “system/subsystem model or prototype demonstration in a relevant environment”. It is not clear whether research itself would be funded, even though it is allowed by the proposed legislation.

The EC’s ideas are just that: they still have to be agreed by the legislators.

Friday, 1 March 2013

The mysterious SME instrument

In Horizon 2020, SMEs will be able to participate in all parts of the programme, just as they can in FP7. In addition, there will be an “instrument” specifically for them, just as there is R4SMEs in FP7. The instrument – a set of rules defining who can participate and how – allows a minimum of one company to make a proposal, on any topic in the H2020 areas Societal Challenges and Enabling & Industrial Technologies. Only SMEs can apply. An optional first stage would be a feasibility study, the second stage a project.

It looks likely that EU funding for stage one will be in the form of a lump sum, up to either 75k€ or 100 k€, depending on which rumour you prefer. Lump sum means the payment is made if the work is completed, without reference to the actual cost of the work.

Funding for stage 2 projects, costing €1-3m, would be based on the traditional “actual costs” approach. The projects might involve subcontracting tasks to research providers such as universities and research organisations. Under the EC’s proposals, the SMEs would choose the research provider by competitive tender. However, this removes the incentive for research providers to stimulate SME participation, which played a large role in encouraging SME participation in R4SMEs. The European Parliament has proposed an exemption to the competitive tendering rule: whether this can be agreed with the Council of Ministers remains to be seen.

Singleimage - FP7 Training Workshops and Advice

Monday, 4 February 2013

Raindrops of FP7 comfort

The EC has introduced four small improvements which are incorporated in the grant agreement from January 2013:

• Advance payments will be made within 30 days of EC signature of the grant agreement (previously 45 days)
• Forms C can be signed electronically – no submission of paper copies
• The coordinator no longer reports any interest earned on pre-financing
• Interim and final payments will be made within 90 days of receipt of reports (previously 105 days).

The last one is, of course, of little value, because the EC’s clock stops each time they ask a question concerning the reports. Typical payment times for final reports still seem to be more than a year after the project end!

Singleimage - FP7 Training Workshops and Advice