Friday, 27 April 2018

#H2020 Simplification fails

In preparing for H2020, the EC proposed measures to simplify claiming costs which they felt would reduce errors found when auditing. One addressed the topic of productive hours, where they proposed that the grant agreement should – unlike its predecessors - contain the number of annual productive hours to be used for the calculation of hourly personnel rates. As a result, the H2020 grant agreement includes three detailed options for calculating productive hours.

At a number of H2020 coordinators’ days held by the EC, their audit staff presented their forecast of errors which they expected to find in financial statements once H2020 auditing began. These were (i) direct costs apportioned, not measured (ii) timesheets missing or unreliable (iii) best value for money in subcontracting and purchasing not achieved (iv) confusion between basic and additional remuneration and (v) cost of in-house consultants not justified. Errors in productive hours did not feature.

In April, EC audit staff presented their first analysis of the H2020 audits (see table). The unit of measurement is the number of audits which found the error type listed. Many of the forecast errors can be seen there. “Direct costs apportioned, not measured” are in both the equipment category and other goods and services, the latter restated as “indirect costs claimed as direct”. Timesheets are in “incorrect time” and contribute to “other” in personnel costs. “Best value for money” appears directly and also as “inadequate supporting documents” and additional remuneration occurs under personnel costs. Consultants don’t feature – maybe they are hiding in “incorrect remuneration”, though this might also cover mistakes in personnel costings using the last closed financial year method– an H2020 simplification not forecast by the EC auditors to produce problems. But the biggest source of errors is “incorrect productive hours calculation”, which is also not in the EC auditors’ forecast top five, with a prize-winning 31% of the total!

Kind regards

Thursday, 29 March 2018

#H2020: Simplification is complicated!

So says a briefing paper written by the European Court of Auditors (ECA). And since they audit the European Commission (EC), they must be right.

The briefing paper was requested by the European Parliament and the Council of Ministers as an input to discussions on FP9, the successor to H2020. As usual, the ECA advocates wider use of “lump sums”: a fixed amount of money given if the proposed work is carried out satisfactorily, as well as unit costs (fixed numbers with limited relationship to actual costs, as used in the Marie Sklodowska-Curie programme) and flat rates, such as the current 25% of direct costs provided as a substitute for overheads. Not surprisingly, all of these produce lower error rates in audits than using actual costs, though they often generate funding for beneficiaries which is lower than actual costs.

But one of the ECA’s observations points in the opposite direction: reducing the rigid interpretations auditors place on the existing legal rules. They point out that auditors sometimes use examples given in the 750 page advisory document “Annotated Model Grant Agreement” as the only acceptable interpretations of the legal rules in the grant agreement and legislation. The ECA says that such examples should not limit the room for different interpretations. Now all they have to do is convince the EC’s auditors!

Kind regards Singleimage Limited

Wednesday, 28 February 2018

#H2020 Travel time: eligible or not eligible?

A common question especially from those new to H2020 funding is whether the time spent beyond normal working hours travelling to meetings is an eligible cost. The answer is surprisingly complicated, as shown in the flow chart below.

The simplest case is if the researcher is not filling time records but instead uses the exclusive declaration. No time recording of the extra hours is required, but if extra payments are made for the additional hours, these are eligible costs.  

Next simplest are those working for an organisation with a flexible working policy. The extra hours spent travelling will later be balanced by an equal number of hours of additional holiday. The cost of travel time is eligible for H2020 funding.

If travel time cannot be balanced by additional holiday, then another possibility is that the organisation pays overtime. If it does not pay overtime, then the organisation is not incurring any cost for the extra hours, so there are no costs to claim.

If the organisation does pay overtime, then the costs are eligible, though calculating them depends on their method for calculating productive hours. Those using option 1 (1720 hours per year) or 3 (standard) will increase the cost of the person but not their productive hours, according to the EC. So the hourly cost will increase as well as the hours worked, with the result that eligible costs are greater than real costs. The eligible costs will only be capped if the overtime exceeds the time spent working on non-H2020 activities.

Option 2 – individual productive hours –is less complicated: the hourly rate adjusts for both overtime hours and overtime payments, so the real overtime cost will be eligible.

None of the paid overtime scenarios described above takes account of reimbursement based on last completed financial year. But that’s another story!

Kind regards

Wednesday, 24 January 2018

Brexit December agreement

The agreement reached between the EU and the UK in December includes provisions to support UK participation in H2020 until the end of the programme and completion of all projects.

To achieve this, the UK will contribute to the EU annual budgets for the years 2019 and 2020 as if it had remained in the EU. It will also contribute its share of the financing of the budgetary commitments outstanding at 31 December 2020. The UK also agreed that the UK and UK beneficiaries will respect all relevant EU legal provisions relating to participation in H2020.

So eligibility to apply to participate in EU programmes and EU funding for UK participants and projects will be unaffected by the UK’s withdrawal from the Union for the entire lifetime of such projects.

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