Thursday, 1 December 2016

Legally binding

The EC operates an information campaign concerning H2020 audits, to help grant beneficiaries avoid errors in their financial reporting. EC staff speak at events held in a range of countries, and similar presentations are used at coordinator days organised by the EC in Brussels. But each slide in their presentations carries a footnote which says “Disclaimer: not legally binding”.

This lack of self confidence in their interpretations of the legal texts governing H2020 also shows up in the EC’s 700 page Annotated Model Consortium Agreement. On its front cover, a disclaimer says “This guide is….provided for information purposes only and is not intended to replace consultation of any applicable legal sources. Neither the Commission nor the Agencies (or any person acting on their behalf) can be held responsible for the use made of this guidance document”.

Similarly, the EC’s Research Enquiry Service adds to all its advice: “The Commission is committed to providing accurate information through enquiry services; however, the information provided has no binding nature. The Commission cannot be held liable for any use made of this information or for its accuracy”.

So even if you follow all the information and advice available from the EC, at audit time you can still be in the wrong!

Friday, 28 October 2016

UK plans for €7.8 billion from #H2020

In August the UK Finance Ministry – the Treasury – announced that it will underwrite payments to UK participants in H2020 grants won up to the date of the country’s departure from the EU. The Treasury has now published its estimate of the money involved.

At the end of February 2016, UK organisations had been awarded H2020 grants of €1.8 billion, representing about 15% of grants awarded. Based on this, they expect the UK to be awarded €2 billion each year for the rest of H2020. The UK Prime Minister has announced that she will trigger article 50 of the Lisbon Treaty in March 2017, giving a departure date of March 2019. This should add €6 billion to the grants so far, giving a total of €7.8 billion. This is more than the €6.9 billion the UK was awarded from FP7 over its seven year life!


Friday, 23 September 2016

€89 million for Human Brain #H2020 project

Following on from its €54 million, 30 month “ramp up” phase, the Human Brain consortium has now signed an H2020 funding agreement for a further €89 million for the two years from 1 April 2016. If all goes well, another €90 million will be provided for the following two years for the 86 member consortium to continue its work on computer simulations of the human brain, all part of a ten year programme supported by the EU.

Interestingly, the project is coordinated by EPFL, a major Swiss university. In a referendum in 2014, Swiss voters mandated their government to restrict immigration, including from the EU, which the government must implement by February 2017. Does Switzerland have something to teach the UK?

Singleimage - H2020 Training Workshops and Advice

Thursday, 1 September 2016

#H2020: Guaranteed funding for UK organisations

Last month we reported that some UK organisations were being excluded from consortia developing H2020 proposals because of doubts that they would be funded to the end of the projects.
UK government has now confirmed that UK participation in H2020 will continue to be funded after the UK leaves the EU, for proposals selected for funding up to that time. The UK Finance Ministry – the Treasury – announced in August that it will underwrite the payment of such grants. This includes funding for projects scheduled to continue after the UK’s departure from the EU. The new UK Prime Minister has said that the UK will not initiate the exit negotiations this year, so the guarantee will over proposals submitted at least until the end of 2018.

Because the negotiation of the UK’s exit has not even begun, how the Treasury’s guarantee will be implemented cannot be defined. However, at the minimum, the funding could be paid directly to UK organisations by its government without interfering with the exit negotiation.

Singleimage - H2020 Training Workshops and Advice

Monday, 1 August 2016

Consortium projects and UK organisations

Following the UK’s referendum, a number of UK organisations have reported that their EU Collaborators were showing reluctance to include them in proposals for H2020 consortium projects. Reasons given were the risk that UK partners might be compelled to leave the consortium half way through the project, creating disruption; that project funding would be reduced; and that evaluators might judge UK participation in a proposal as a negative feature. Here we explore those arguments.

Project disruption: if UK organisations are forced to leave the consortium, replacements might have to be found and an amendment agreed with the EC. This would take lots of time and represents a risk o the success of the project.

This problem is not unique to the UK situation. A recent study commissioned by the EC found that, of a sample of 2300 coordinators in FP6 and FP7, 32% reported changes in consortium membership. They are not unusual, and have a variety of causes, including professors moving to jobs in the USA and SMEs going bankrupt. And to many organisations, the chance to join a project which is already funded is more attractive than preparing a proposal which has a 1 in 7 chance of success.

As Mark Twain said “Reports of my death have been greatly exaggerated”.

Reduction in project funding: this implies that the EC would unilaterally break its contracts with the non-UK members of a consortium, by not allowing them to claim the agreed budget for the agreed work. Not even the “Force Majeure” article of the grant agreement would allow this, because the event causing the EC’s action is foreseeable. The European Court of Justice would be very busy!

Evaluators: for decades, rumours have circulated amongst proposers that the geographical distribution of consortium members influenced project selection. These include the balance between north and south, the level of economic development (rich v poor), and new EU Member States versus old. None of these rumours proved to be true.

Likewise, rumours that evaluators might judge UK participation in a proposal negatively have no foundation. The EC’s standard briefing to evaluators addresses the UK referendum as follows "Experts should not evaluate proposals with UK participants any differently than before”.

The experience of Switzerland is also relevant. Swiss organisations are excluded from EU funding in H2020, except for “Excellent Science”. In the areas excluded from EU funding, the Swiss Government funds any Swiss organisation which participates in a successful proposal. (This corresponds to the third option listed in the box on the previous page). So far, this has resulted in 163 Swiss organisations participating in 315 H2020 consortium projects. In some cases, the Swiss organisation coordinates the project.

The real test in selecting partners is whether they can contribute to the project’s objectives, and this applies to every organisation from every country.

Singleimage - H2020 Training Workshops and Advice

Wednesday, 29 June 2016

UK referendum: what next?

To implement the referendum result, the UK government must initiate the negotiation for the UK’s exit from the EU, which then must be completed in two years. After those two years, UK organisations would no longer receive H2020 grants, unless the negotiation agrees otherwise.

The resignation of the UK prime minister means that a replacement must be appointed before the UK can initiate the exit negotiation. The earliest this can happen is October 2016, giving an end date for UK participation in H2020 of October 2018.

Whether an end date of October 2018 means that all funding – including for running projects – ceases at that date is not pre-defined, but depends on the results of the exit negotiation. When Switzerland held its referendum on free movement of labour and was excluded from much EU research funding, all grant agreements signed at the time were funded by the EU until their completion.

In 2015, 44% of UK exports of goods and services went to the EU. So the UK will want to conclude a trade agreement with the EU before it completes its exit negotiation. Trade deals often take years to prepare: a recent one between the EU and Canada took three to four years to draw up and is still not signed. So it is likely that the new UK prime minister will delay initiating the exit negotiation by a year or two, until the outline of a trade deal with the EU has been agreed.

As a result, instead of negotiating the UK’s exit, EU and UK politicians are now negotiating about when the exit negotiation will begin!

Niels Bohr reportedly said that “Prediction is very difficult, especially about the future”. Currently, it seems likely that H2020 will be business as usual for UK organisations at least until some time in 2019 or 2020, and that projects awarded grants up to that time will be funded by the EU until their completion.

Singleimage - H2020 Training Workshops and Advice

Thursday, 2 June 2016

Audit closes another company

Last month we reported that a German company, GABO, was likely to close as a result of EC audit. This has quickly been followed by the announcement that a French company, Sigma Orionis, has closed as a result of an EC audit.

Like GABO, Sigma Orionis specialises in management of EU research projects. But in this case OLAF – the EC’s anti-fraud office – was involved. The company explains that from nearly two years of auditing, the EC could find no embezzlement, no bogus employment contracts, no fictional invoices, and no extravagant expenditure. But OLAF focussed on the tool used by the company to monitor the amount of time spent on each project by each employee, and prepared a report based on hypotheses and extrapolations. Despite the company’s record of delivering many projects successfully over many years, the EC has decided to suspend all present and future payments to it, forcing it to cease its activities and fire all its 28 employees.

While legal action by both companies is pending, the EC’s suspension of payments will bankrupt them before their cases come to court. Ouch!

Singleimage - H2020 Training Workshops and Advice

Wednesday, 4 May 2016

EC audit may force company to close

As a result of an EC audit of FP6 and FP7 projects, GABO:mi mbH & Co. KG, which specialises in management of EU research projects, looks set to close. Despite objections by the company, in August 2015 the EC confirmed its findings: that over half the costs claimed were ineligible: GABO was asked to repay €1.8m. The EC then stopped all payments to GABO, including those for H2020 projects, and used the money instead to offset against the alleged debt.

GABO has initiated actions against the EC in the EU Court of Justice. The main action aims to overturn the EC’s audit findings, while an urgent “interim measure” requests the Court to order the EC to suspend its actions in recovering the alleged debt. GABO explained that almost all its activities related to management of EU funded projects. Unless the EC ceased its recovery actions under the interim measure, GABO would run out of money in a few months.

From the Court’s decision concerning the interim measure, it is clear that a major criticism in the EC’s audit concerned direct costs claimed by GABO for the time recorded by managers and their administrative assistants, which the auditors said were indirect costs “by nature”. GABO disputes this, citing definitions of direct costs contained in the grant agreements and other EC documents.

However they did not dispute the EC’s claim that, over the five financial years covered by the audits, both managing directors had recorded all their productive time to EU projects exclusively. They failed to record any time on activities of general administration and management necessary to run a company, such as staff recruitment, personnel management, promotion of the company, or on activities related to other projects, such as preparation of new proposals.

In April, the Court rejected GABO’s request for the interim measure. As a result the company will continue to run out of money. It is not clear when the Court will issue its ruling on the main action, which will challenge the EC’s audit findings.

Singleimage - H2020 Training Workshops and Advice

Wednesday, 6 April 2016

FP7 Audits: 29th February confuses EC auditors

The practice of adding an occasional extra day to February was established in the year 45 BC by Julius Caesar, who simultaneously adjusted the days of other months to the ones we use today. Recent reports suggest that auditors checking FP7 projects have not yet caught up with Caesar’s innovations.

Many researchers, like much of the population, are paid on a monthly basis according to Caesar’s calendar. So their actual cost per day (and therefore per hour) varies with the number of working days in a month, and this has been built in to the management accounting systems of many organisations. EC auditors have recently begun to dispute this calculation. They call them “errors due to incorrect calculations for fractions of a year”. Instead they insist on using the average hourly rate for the last completed financial year. Not only does this fail to correspond to actual costs, it also ignores any pay increases in financial years which are incomplete when a cost report is due.

Of course, in H2020 “actual” personnel costs must be calculated from data for completed financial years only. But it looks like EC auditors are applying H2020 contract terms retrospectively to FP7 cases.

Singleimage - H2020 Training Workshops and Advice

Tuesday, 1 March 2016

First convictions for FP6/7 fraud

In 2010, reports emerged of a fraud in the EU’s research programme, with suspicions going back to 2007 or earlier. The fraud was alleged to have involved a network of organisations in Austria, France, Germany, Greece, Italy, Sweden, Slovenia, Poland and the UK. Proposals were submitted including reputable organisations without their permission, who were then replaced by network members. Fictitious staff with fabricated curricula vitae were listed. E-mails between these fictitious staff were generated to make it appear that they had worked on the projects

In 2011, Italian police raided offices in Milan and arrested staff suspected of involvement in the fraud. Almost five years later, eight individuals have been found guilty of the fraud. The Italian authorities estimate that the EU budget suffered a loss of over 1.8 million euro. The EC’s anti-fraud office has released a summary of the fraud, but made no mention whether legal action is being pursued in other countries.

Singleimage - H2020 Training Workshops and Advice

Tuesday, 2 February 2016

#H2020 - More ways to lose money

Many organisations are now beginning to prepare their first reports in H2020 and discovering in practice how the new rules reduce their funding for personnel. Here are the main ones:

• Using only completed financial years to calculate hourly rates for each person. Assuming salaries rise, this can reduce eligible costs by 0.5% or more.

• Luckily, those using average personnel costs are not directly affected by the “last completed financial year” rule, because they can add budgeted or estimated elements for salary increases. However, these elements must be based on objective data (such as CPI – the consumer price index), which is likely to reduce eligible costs compared with actual.

• Adopting the EC’s standard 1720 productive hours per year. For many organisations this is more than their actual productive hours. Those working a 7.5 hour day and so perhaps estimating 1650 productive hours per year can lose 4% of their personnel costs.

•  Opting to use the organisation’s own standard for productive hours, which inevitably involves averaging. Because you can claim at most the standard productive hours for each person, hours worked above the average cannot be claimed. If half of those working on H2020 projects work two days more than average, the organisation can lose about 0.9% of its personnel costs.

One way round the last two problems is for people to work full time on a single project and not fill out time records. In this case they will be assumed to work precisely the productive hours used to calculate their hourly rate!

Singleimage - H2020 Training Workshops and Advice