common provisions

Anna McClintock, Financial Desk Slide n°1 LIFE09 Kick-off Meeting, 13 January, 2011, Warsaw

COMMON PROVISIONS

2. FINANCIAL ASPECTS


• GRANT• The EU contributes to the costs• The EU does not pay for a service/deliverable/product

• Successful utilisation of the grant depends on:• Successful implementation of the project, AND• The quality of the project accounts/financial report• If the the financial rules are not followed to costs may

be declared ineligible – as a result the final grant may be reduced.

CONGRATULATIONS


Grant Agreement (Art 1 & 2)Common Provisions (CP) (Art 15.2, 24, 25 and

26)Application guide (Env p 42-52, Inf p 45-54 ,

Nat p 60-70)Financial Forms

Guidelines to forms,http://ec.europa.eu/environment/life/toolkit/

pmtools/lifeplus/financial_reporting.htm or /timesheets

Reference documents


• The grant agreement sets the contribution as a fixed percentage of total eligible costs and a maximum contribution amount. (art. 24.1)

• It may not exceed the amount necessary to balance project expenses and revenues.

• All revenues generated by the project must be declared. (art. 24.4)

• If an associated beneficiary reduces its contribution, the coordinating beneficiary must find additional resources. (art. 4.5) The Life contribution will not be increased !

• Commission may proportionally reduce the Community contribution. (art. 18 and 24.5)

• Eligible expenses are limited to the amounts foreseen by cost categories. (30 000 € and 10% overspending rule) (art 15.2)

CONTRIBUTION PRINCIPLES


• General rule : 3 instalments :1st pre-financing = 40 % of contribution max. amountMid-term pre-financing = 30 % of contribution max.

amountFinal payment = Balance (maximum 30 %)

• Small projects with an implementation period ≤ 24 months or a Community contribution ≤ 300 000 € :

1st pre-financing increased to 50 % of contribution max. amount

Final payment = Balance (maximum 50 %)

(art. 28)

METHODS OF PAYMENT OF THE CONTRIBUTION

Anna McClintock, Financial Desk Slide n°6

• Grant agreement is signed by both parties• Payment request states coordinating beneficiary

and bank data details• A guarantee issued by a bank or an insurance

company may be requested by the Commission during the revision phase:

• equals the amount of the 1st pre-financing • covers the duration of the project + 6

months

(art. 28.2)THE 1st PRE-FINANCING

LIFE09 Kick-off Meeting, 13 January, 2011, Warsaw


• The coordinating beneficiary shall inform the Commission of the amount of any interest or equivalent benefits yielded by the 1st pre-financing amount.

• Interest will be deducted from the final payment.• Exceptions :

When 1st pre-financing ≥ 750.000 € : beneficiary informs the Commission every January how much interest has been earned – Commission sends a Recovery Order.

When 1st pre-financing ≤ 50.000 € : interest not due

INTERESTS ON PRE-FINANCING(art 24.7)


Member States and interest on pre-financing

For Coordinating Beneficiaries registered as public law bodies by

the Commission:→ Ministries, regions; departments, länder, provinces etc.→ Cities, municipalities, communes→ Research centres, universities

• Interest on pre-financing will not be recovered by the Commission.

• However, it must be reported in the financial statement as income to the project.

• These beneficiaries are not entitled to interest in case of late payment of the grant by the Commission .


• After at least 150 % of 1st pre-financing has been used • Exception : Mid-term payment possible even if the 1st pre-

financing payment has not been paid : when at least 60 % of max. contribution has been

spent amount = % set in grant agreement x eligible costs

to date • Paid upon approval by the Commission of :

a request for payment a mid-term technical report + statement of

expenditure auditor’s details

• Mid-term reports must be submitted no later than 9 months before the end of the project

THE MID-TERM PRE-FINANCING(art. 28.3)



• Upon approval, by the Commission, of : the final technical report the final statement of expenditure and

income the audit report if required (cf. art. 31)

• Final reports must be submitted no later than 3 months after the end of the project

THE BALANCE (FINAL PAYMENT)(art. 28.4)



• An independent auditor, nominated by the coordinating beneficiary, shall verify the final statement of expenditure and income for all projects with a max. Community contribution ≥ 300

000 € following the format provided on the Life website / toolkit

• The auditor will verify : the implementation of the project the eligibility of declared costs + compliance with CP compliance of costs with national legislation and

accounting rules the declaration of all project income (including interests on

pre-financing) compliance with rules for public and/or competitive tender

(art 8.4) the origin of beneficiaries’ own contribution

Independent Financial Audit (art. 31)



• Financial report covers the same period as the technical report

• Reports follow the guidelines & templates cf. Life website / toolkit

• In €• When beneficiary’s accounting is not in €: exchange rate of

the 1st working day of the year in which the expenditure is paid (cf. E C B website http://www.ecb.int/stats/exchange/eurofxref/html/index.en.html)

• The coordinating beneficiary certifies that the submitted information is full, reliable, true and complies with the CP, that costs are actual, that all income has been declared

• Financial supporting documents are not attached but may be requested later. Retained by coordinating beneficiary (art 6.1)

REPORTING REQUIREMENTS(art. 29)



Project reference

Statement of expendituresTotal real costs

with non-recoverable VAT

Total eligible costs with non-

recoverable VATStatement of income € % of eligible

costs

Personnel EU contribution Travel Contribution of the coordinating

beneficiary External assistance Contribution of the associated

beneficiaries Durable goods - Infrastructure Other sources of funding Durable goods - Equipment Direct income Durables goods - PrototypesLand/rightspurchase/leaseConsumable materialOther direct costsOverheadsTOTAL ELIGIBLE COSTS € 0,00 € 0,00 TOTAL € 0,00

Date signature

Consolidated Cost Statement for the Project

Date and signature


• Provided for in the budget of the project or have been authorized through an amendment to the grant agreement

• Directly linked to, and necessary for, carrying out the project• Reasonable and comply with the principles of sound

financial management• Compliant with applicable tax and social legislation• Incurred and recorded in the beneficiaries’ accounts during

the lifetime of the project: legal obligation to pay contracted after the signature of

the grant agreement corresponding action implemented after start date and

before end date of the project fully paid before the submission of the final report

ELIGIBLE COSTS (art. 25)



Supporting Documents

PERSONNEL COSTS (art. 25.2)

Principles•Based on actual time devoted to the project Timesheets•Based on actual gross salary / wages

+ obligatory social charges Pay slips

Related to employees salaries (no external assistance)

Service contracts : mandatory condition : work in the beneficiary’s premises and under its supervision (timesheets)

NB : civil servants salary costs: sum of public bodies’ contributions must exceed by at least 2 % the sum of civil servants’ costs



CIVIL SERVANTS’ SALARY COSTS

Example of budget:

Personnel Civil servants 105 €Others 20 €

External Assistance 50 €Equipment 25 €

Total 200 €

Life+ contribution = 50%

butMinimum own contribution

from public beneficiaries= 105 € + 2 % = 107,10 €

Maximum Life+ contribution = 92,90 €

(art. 25.2)



Annual personnel costs


1. Annual gross salary actually paid – no estimates.2. Obligatory social charges 3. Private Pension contributions are eligible if the employer is

legally obliged to provide it.4. Compensation received from insurance or other schemes in

case of sickness, maternity leave, re-employment schemes to reactivate unemployed people etc. must be deducted from annual salary.

5. Not eligible: i.e. company car, bonuses, similar fringe benefits


Productive time


Time of actual work, including:• Overtime and Time worked during

national holidays or week ends. • Meetings• Mandatory Training courses


Non productive time


1. Holidays actually taken2. National holidays3. Flexitime compensation4. Week ends5. Sickness/other absences (including

maternity leave etc)


Calculation of personnel costs

A Annual gross salary for the relevant calendar year including 13th (or more) month salary.

B + Compulsory social charges (employee and employer)

C + Compulsory pension contribution D + Compulsory holiday allowance E + Other compulsory allowances

F = A+B+C+D+E = Gross annual salary costs G Annual time units including extra hours (*) H Annual holidays I Week-ends, flexitime compensation J National holidays K Sickness/other absences (maternity leave)

L = G-H-I-J-K Annual working hours

M=F/L Annual time unit rate


Recommendations for time sheets/time registration

• Identify employee and LIFE project• Daily registration• Ideally detailed per action• Ideally document total hours worked to

secure correct calculation of time unit rate• Signed and validated during the first week

following the month of registration


Model time sheet


Example 2 – a reliable time sheet


Example of an unreliable time sheet – 29/31

February


Example of an unreliable time sheet – monthly

subtotals


Example of an unreliable time sheet- generic time


Supporting DocumentsPrinciples

TRAVEL COSTS (art. 25.3)

Charged in accordance with internal rules of the beneficiary

Flight tickets, hotel bills,….Journeys by car : based on distance and internal rules

Internal rules for re-imbursement of travel expenses Detailed specification of travel expenses, two lines if

necessary, i.e. destination, # of persons, # km, # nights etc. Group low value travel expenses (supported by accounting

documents offering same level of detail, eg. driving log-book). Excluding costs incurred by external consultants, journeys

between home and work place.



EXTERNAL ASSISTANCE (art. 25.4 & application guide)


1. Tender procedures • must comply with Community and national

legislation.• Naming the subcontractor in the revised

budget does not exempt the beneficiary from applying the normal tendering procedure.

• NEW for LIFE+ - competitive tenders for private beneficiaries – obligatory for orders over €125.000.

2. Project beneficiaries/co-financiers cannot act as subcontractors/suppliers.


DURABLE GOODS(art. 25.5- 25.12 & Application guide)


•For infrastructure and equipment (LIFE ENV, LIFE INF, LIFE BIO) - depreciation only is eligible.•Each beneficiary applies its internal accounting rules for depreciation charges. National accounting standards and the principle of consistency must be respected. •Only depreciation strictly related to the use for the project is eligible: the calculation must take into account the period and the rate of the actual use for the project.•Durable goods which must be depreciated:

placed on the beneficiary's inventory of durable goodstreated as capital expenditure


• The Maximum Eligible depreciation charges:

Infrastructure costs: 25% of the total purchase cost

Equipment costs: 50% of the total purchase cost

• Depreciation of durable goods purchased before the start of the project is not eligible for LIFE+ funding. It is covered by Overheads.

DURABLE GOODS(art. 25.5- 25.12 & Application guide)



PROTOTYPE – 100% eligible(Only for Life+ Env and Life+ Bio)

• Has never been commercialised• Not available as a serial product• Can not be used for commercial activities or sold

during 5 years after the project end date

DURABLE GOODS (art. 25.5- 25.12 & Application guide)



Life+ NAT projects

If the beneficiary is a public body or a non-governmental / private non-commercial organisation:100% eligible for infrastructure and equipment used extensively in project implementation and assigned to nature conservation after the end of the project.

If the beneficiary if a commercial organisation:Durable goods must be depreciated.

DURABLE GOODS (art. 25.5- 25.12 & Application guide)



• Costs of land purchase or long-term lease of land/use rights are only eligible for Life+ Nature projects

• Purchase prices are based on market terms• Assign the purchased assets definitively to nature conservation

activities beyond the end of the project • Coordinating beneficiary ensures that the entry in the land

register includes a guarantee that the land will be assigned definitively to nature conservation

• Land purchased by private organizations: guarantee that the land property will be transferred to a legal body primarily active in the field of nature protection (if the beneficiary ceases to exist)

LAND PURCHASE LIFE+ Nature:“Environmental clause” (art. 35.1)



• OVERHEADS (art. 25.13)maximum 7 % of the total amount of eligible direct costs, excluding land purchase costs

• CONSUMABLE MATERIAL (art. 25.11) General office supplies are covered by Overheads

Supporting Documents

Budget Posts

• OTHER COSTS (art. 25.12)Costs necessary for the project, not falling within a defined category

Invoices not needed

OTHER BUDGET POSTS

Detailed invoices

Detailed invoices


• Income (art. 24.4)Associated beneficiaries, co-financiers and direct revenues

Receipts etc


Overheads


Total overheads/indirect costs with non-recoverable VAT€0,00

A B C D E F G H I J

Seq n° Year Description of cost itemInvoiced amount in national currency

without VAT

Invoiced amount in national currency with non-recoverable VAT

Invoiced amount in national currency

without VAT attributed to the project

Invoiced amount in national currency with non-recoverable VAT

attributed to the project

Exchange rate

Invoiced amount without VAT

attributed to the projectin in € (D/H)

Invoiced amount with non-recoverable VAT

attributed to the projectin in € (E/H)

1 1,00000 2 1,00000 3 1,00000 4 1,00000 5 1,00000 6 1,00000 7 1,00000 8 1,00000 9 1,00000

10 1,00000 11 1,00000 12 1,00000 13 1,00000 14 1,00000 15 1,00000 16 1,00000 17 1,00000 18 1,00000 19 1,00000 20 1,00000 21 1,00000 22 1,00000

23 1,00000

24 1,00000

25 1,00000

26 1,00000

27 1,00000

28 1,00000

29 1,00000

30 1,00000 €0,00 €0,00Total


Income


Name of associated beneficiary Amount in national currency

Year Exchange rate

Amount of co-funding in €

1,00000

1,00000

1,00000

1,00000

1,00000

Total €0,00

Name of co-financer Amount in national currency

Year Exchange rate

Amount of co-funding in €

1,00000 1,00000 1,00000 1,00000 1,00000

Total €0,00

Description of the direct income Amount in national currency

Year Exchange rate Amount in €

1,00000 1,00000 1,00000 1,00000 1,00000

Total €0,00

Direct income

Contribution of associated beneficiaries

Other sources of funding


• Costs in any category of expenditure over and above that foreseen in the budget plus 10% and 30 000 € (as referred to in art. 15.2)

• VAT (see art. 30) • Costs incurred in relation to activities not foreseen in the

project• Costs incurred for the purchase of durable goods or

communication material not bearing the LIFE logo (and the Natura 2000 logo, when applicable)

• Cost incurred for an action which benefits from aid under other Community financial instruments

• Costs for which a beneficiary already receives an operating grant from the Commission during the period in question

• Costs related to any action considered as a compensatory measure

• Costs relating to management plans, action plans and similar plans, drafted or modified in the context of a LIFE+ project, if the related plan is not legally operational before the project end date

INELIGIBLE COSTSNon exhaustive list. See art. 26 of Common Provisions



Partnership agreementsart. 4.8 of Common Provisions


•The Commission does not accept or reject partnership agreements - the Commission only highlights possible problems.•To ensure that the participants have the tools to solve their problems.•Not sufficient to refer to the Common Provisions, i.e. liabilities between participants, member states laws in case of dispute, payments from CB to AB.


Specific instructions for Financial Reporting

• Do not wait until the mid-term or the final report before preparing the Statement of Expenditures. It is required:

• In all reports (Art. 12.2 CP)• At the occasion of all Monitoring Visits

• Ensure that Coordinating Beneficiary receives data from Associated Benefifiaries on a regular basis.



• Be careful: self-invoicing and invoicing among beneficiaries is not allowed.

• Verify that all columns of the financial forms are properly filled-in

•Send as soon as possibile the declaration for the non-recoverability of VAT by beneficiaries.

Specific instructions for Financial Reporting



All beneficiaries• Must contribute financially to the project’s costs • Shall maintain up to date books of accounts• Shall keep all supporting documentation for all

expenditure and income for at least 5 years after the final payment

• Ensure that all invoices include a clear reference to the project and a link to the analytical accounting system

• May not act as sub-contractor/supplier to each other (no invoicing among partners !!)

A FEW REMINDERS …(art. 6)



Ineligible on formal grounds -

difficult to rectify at a later stage


•Register time worked for the project on a daily basis using time sheets.•Respect the public tender/competitive tender.•Provide all information asked for in the financial reporting.•Provide sufficiently detailed description (quantity where appropriate) to justify eligibility.•Costs incurred by non-beneficiaries (Company groups) – not eligible if separate legal entities.•Purchases from sister companies (separate legal entities) and sister departments (same legal entity) – best value and excluding profit, overheads etc (art 26 9th)


• Read and re-read the Common Provisions !!• Give the Common Provisions to all your

associated beneficiaries and make sure they read and understand them.

• Make sure your associated beneficiaries send you accounting documentation on a regular basis.

• Monitor project expenses, compare them against the budget.

A FEW MORE HINTS …



Thanks for your attentionPlease direct your questions through

the monitorsGood luck with your projects!

http://ec.europa.eu/environment/life/toolkit/pmtools/index.htm
