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!