Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Content
• Project budgeting
• Eligible costs
• Simplifications and changes in H2020
• Estimating your project budget
• MSCA budgets
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Session Aim
• Become familiar with key changes within the
H2020 programme
• Learn good practice for budget estimation
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Content
• Project budgeting
• Eligible costs
• Simplifications and changes in H2020
• Estimating your project budget
• MSCA budgets
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Project Budgeting
• At the proposal development stage budgeting
includes:
• Cost estimation (for an individual)
• Project budget development (for the consortium)
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Project Budgeting
Why is proper budgeting important?
• Why not just allocate an equal share of the
maximum allowable EU grant to each partner?
• Why not just assign an arbitrary budget to each
partner – keeping the largest portion for yourself
of course?
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Project Budgeting
• Partners will be paid based on what their actual
costs are for work that they are contracted to do
in the Description of Work
• Partners who run out of money lose motivation
fast and STOP working!
• BOTTOM UP COSTING is not only Good
Practice but it is a SENSIBLE starting point too
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
What is Bottom-up Costing
• This method looks at the individual components that will make up the cost of the project and adds them together
• Partners develop their own cost estimates based on their understanding of what they will be doing on the project
• This is a much more detailed and accurate way to estimate the cost of a project
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Resources Pool Task 1
Task 2
Task 3
Task 4
Task 5
Task 6
Technicians
Equipment
Consumables
Travel
Engineers
Managers
BUDGET
P
A
R
T
N
E
R
S
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Best Approach to Budgeting
The main downside to Bottom-up costing is that
partners may be inclined to pad out their figures so that
they have excess money to work with
Therefore a TOP DOWN
element is also needed
Final estimates are generated
through an iterative approach
based on what the project
can afford Bottom up
Top down
Bottom up
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Content
• Project budgeting
• Eligible costs
• Simplifications and changes in H2020
• Estimating your project budget
• MSCA budgets
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
(i) they must be actually incurred by the beneficiary;
(ii) they must be incurred in the period set out in Article 3, with the exception of costs relating to the submission of the periodic report for the last reporting period and the final report (see Article 20);
(iii) they must be indicated in the estimated budget set out in Annex 2;
(iv) they must be incurred in connection with the action as described in Annex 1 and necessary for its implementation;
(v) they must be identifiable and verifiable, in particular recorded in the beneficiary’s accounts in accordance with the accounting standards applicable in the country where the beneficiary is established and with the beneficiary’s usual cost accounting practices;
(vi) they must comply with the applicable national law on taxes, labour and social security, and
(vii) they must be reasonable, justified and must comply with the principle of sound financial management, in particular regarding economy and efficiency.
Eligible Costs
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Overarching Principles – Translated!!
• Costs actually incurred during pursuit of activities agreed
in the Description of Work
• Labour/Personnel
• Travel and Subsistence
• Consumables
• Equipment
• Subcontract
• Indirect Costs
Eligible Costs
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
(i) costs related to return on capital;
(ii) debt and debt service charges;
(iii) provisions for future losses or debts;
(iv) interest owed;
(v) doubtful debts;
(vi) currency exchange losses;
(vii) bank costs charged by the beneficiary’s bank for transfers from the [Commission][Agency];
(viii) excessive or reckless expenditure;
(ix) deductible VAT;
(x) costs incurred during suspension of the implementation of the action (see Article 49);
(xi) costs declared under another EU programme
What is not eligible
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Content
• Project budgeting
• Eligible costs
• Simplifications and changes in H2020
• Estimating your project budget
• MSCA budgets
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Financial Information – Main Changes
• LEs have the SAME funding levels as SME partners
• All activities have same funding levels within a project BUT there are
now TWO distinct types of project
• RIA – 100% (TRLs 1-6)
• IA – 70%
• Demonstration (TRLs 6-8)
• Market Replication/First Application (TRL 7-9)
• BUT - Not for Profit organisations funded at 100% for IA
• Overheads are FIXED for ALL at 25%
• Non-deductible VAT is now an eligible project cost
• Only Partners claiming €325k grant need an audit certificate – Just 1
at the end of the project
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Financial Information – Other issues
• Owners of SMEs who do not draw a salary are eligible to claim
costs as a unit rate cost (amount per hour to be established)
• Natural persons who do not draw a salary are eligible to claim
costs as a unit rate cost (amount per hour to be established)
• Third party and in-kind costs an be deemed as eligible costs,
such as seconded personnel, equipment, infrastructure,
contributed goods and services
• Not for profit organisations can claim the payment of a
supplement of up to €8,000 per annum for personnel (If this is a
normal payment forming part of the remuneration package)
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Financial Information – Other issues
• Able to include Linked Third Parties directly in the budget as an
affiliated party
• There is no additional funding for project management
• Breakdown of Other Direct Costs is unnecessary if these are
less than 13% of the total eligible costs (to be clarified)
• Ability to claim for Equipment Costs for use of existing as well
as newly purchased equipment (rules to be clarified)
• EU contract negotiations simplified
• Payment of claims reduced from 105 to 90 days
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
FP7 - Project Budget Form
Various
Indirect Rates
Various Rates
within Project
Various
Funding Rates
for Partners
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
B. Direct costs of
subcontracting
{C. Direct costs
of fin. support}
D. Other direct
costsE. Indirect costs Total Costs
Reimburse
ment rate
%
M aximum EU
contribution
***
M aximum
grant
amount
D.1 Travel
D.2 Equipment
D.3 Other goods
and services
D.4 Cost of large
research
infrastructure
{F.2 Costs of….}**
Flat rate 3
25%
(a) Total (b) No hours Total © (d) (e) (f) (g) No unitsTotal
(h1)Total (h2) (i) (j) (k) (l)
Beneficiary 1
Linked third party 1a
Linked third party 1b
…
Total beneficiary 1
Beneficiary 2
Linked third party 2a
Linked third party 2b
…
Total beneficiary 2
…
Total consortium
ActualActualActual
{F.1 Costs of…}**
Unit 5
Unit 4
xx Euro/hour
Estimated El igible Costs (per budget category) EU Contribution
A. Direct personnel costs {F. Costs of ….}
A.1 Personnel
A.2 Natural persons under direct
contract
A.3 Seconded persons
[A.6 personnel for providing access
to research infrastructure]
A.4 SM E owners
without salary
A.5 Beneficiaries that
are natural persons
without salary
Unit 2
xx Euro/hour
Unit 1ActualForm of costs ****
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
H2020 - Project Budget Estimate Form
B. Direct costs of
subcontracting
D. Other direct
costsE. Indirect costs Total Costs
Reimburse
ment rate
%
M aximum EU
contribution
***
Flat rate 3
25%
(a) (d) (f) (g) (i) (j) (k)
Total beneficiary 1
Total beneficiary 2
Total consortium
ActualActual
Estimated El igible Costs (per budget category) EU Contribution
A. Direct
personnel costs
ActualForm of costs ****
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Easier Budget Administration under H2020
Simpler reimbursement of direct costs, with a broader
acceptance of the beneficiaries' usual accounting practices:
• The possibility of using unit personnel costs (average
personnel costs) in accordance to the beneficiaries´ usual
cost accounting practices; (CoMAV in FP7)
• Abolition of time-recording obligations for staff working
exclusively on an EU project, and simplification of time-
recording requirements for other staff by providing a clear
and basic set of minimum conditions;
• Indirect costs covered by a single flat-rate applied to the
direct costs; removing a major source of financial errors
and complexity;
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Higher Flexibility under H2020
The Horizon 2020 rules provide higher flexibility to adapt
ongoing projects to changing needs and circumstances
An example from an EU-funded project might look like:
‘A researcher from Foundation B, a key person in the project, starts
working for University D, and this change needs to be reflected in the
composition of the consortium for the EU-funded project. This means an
amendment to the Grant Agreement in order to add University D as
beneficiary, and possibly terminate the participation of Foundation B’
Under FP7, the coordinator of the project would face complex
adjustments due to the differences in funding rates and indirect cost
methods applied to the Foundation and the University.
Handling these modifications under Horizon 2020 will be straightforward
due to the single funding rate and indirect costs flat rate.
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
How the funding actually works
• Pre-financing (upon entry into force) for the whole duration
• 5% of total project value goes into the guarantee fund
• Interim payments corresponding to the amount accepted
for each reporting period (EC contribution = eligible cost
justified & accepted * funding rate)
• - Gross pre-financing + interim payments < 90% of max
EC contribution
• Final payment + reimbursement of contribution to the
guarantee fund
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
An example of a typical payment profile
EXAMPLE: Project duration 3 years, EC funding €3m
• Pre-financing = 1.6 €m (160% of annual budget)
(of which 0.15 €m goes to the Guarantee Fund)
• 1st Interim payment, 1 €m accepted, payment 1€m
• 2nd Interim payment, 1 €m accepted, payment 0.1 €m
(retention of 0.3 €m which is 10% of project eligible cost!)
• Final payment, 1 €m accepted, 0.45 €m paid
(retention of 0.3 €m plus 0.15 €m Guarantee Fund returned)
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Example of Payment Profile
0
500
1000
1500
2000
2500
3000
3500
Pre-finance
Typical Spend
€k
12 months 24 months 36 months Start
Pre-finance
Final payment
First Periodic Second periodic
Guarantee Fund
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
How the funding actually works
• The coordinator and partners may agree to distribute the
pre-financing in stages to further minimise financial risk to
the project
• The Consortium Agreement MUST address this aspect
• The Reporting intervals have been getting longer 18
months is more typical and the pre-financing may vary. It
will be specified in the Grant Agreement.
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Content
• Project budgeting
• Eligible costs
• Simplifications and changes in H2020
• Estimating your project budget
• MSCA budgets
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Personnel Costs
Cost to the employer for staff working on the project
• Staff grade
• Actual salary for that grade
• Taxes paid
• Pension contributions
• Other
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Personnel Costs
For Hourly Paid Staff
No of productive hours per month for staff member
• The productive hours have to be clearly justified and must match
the underlying time recording system
= Working days per year x No. hours worked per day
12
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Personnel Costs
Typical Figures:
Working days
= Total days in year – Weekends – Statutory
holidays – Holidays – Sick leave allowance
365 – 105 – 9 – 20 – 6 = 225
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Personnel Costs
Calculating working hours per month:
Working days - 225
Working hours/day – 7.5
Working hours per year – 1,687.5 OR (1,720)
Working Hours/month 1,687.5 = 140.63
12
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Personnel Costs
Calculating salary costs per annum:
Staff Grade A: Management
Gross Salary: €85,000.00
Employment taxes (13%) = €11,050.00
Pension Contribution of Employer (20%) = €17,000.00
Total salary cost per annum = €113,050.00
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Personnel Costs
Calculating personnel cost per month:
Staff Grade A: Management
Total salary cost per annum = €113,050.00
Working hours per annum = 1,687.5
Hourly cost = €66.99
Cost per month = hourly cost x hours worked in a month
= €66.99 x 140.63
= €9,421
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Personnel Costs
Calculating average personnel cost per month:
Staff grade A: Management - €9,421
Time on project 12 person months = €113,052
Staff grade B: Technologist - €8,100
Time on project 24 person months = €194,400
Staff grade C: Technician - €6,750
Time on project 12 person months = €81,000
Total cost = €388,452 for 48 person months
Average cost per person month = 388,452 = €8,092.75
48
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Personnel Costs
Calculating average labour cost per month:
Do not forget potential salary raises!!!
Assuming an increase of 2.5% per annum on a 3 yr project gives:
Year 1 Year 2 Year 3 Ave
€8,093 €8,295 €8,503 €8,295
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Travel and Subsistence
Travel:
Based on actual cost of travel event and normal working practices within participant.
First Class Rail and Economy Air is normal practice
For proposal, work out/estimate the number of meetings needed per participant per activity and multiply by a standard rate.
Eg. €300 per return flight per person
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Travel and Subsistence
Subsistence:
Includes – Accommodation and Subsistence (meals, taxi etc)
2 Choices:
Actual Costs – MUST keep all receipts
Flat Rate – No need to keep subsistence receipts
For Proposal: Best to estimate based on Flat Rates
Typically use: €100 per night for accommodation
€100 per full day for subsistence
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Travel and Subsistence
For a typical project meeting: No of meeting days – 1, arrive the night before, leave the evening
after
One return plane fare
One night at hotel
One days subsistence
Gives: €300 Flight – (Estimated flat rate)
€100 Hotel – (1 x €100)
€100 Subsistence (1 x €100)
Total = €500 per meeting
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Travel and Subsistence
Per Partner build up as follows:
Partner 1: 10 Management Meetings – Gives T&S of €5,000
15 RTD Meetings – Gives T&S of €7,500
Partner 2: 5 Management Meetings - Gives T&S of €2,500
20 RTD Meetings - Gives T&S of €10,000
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Consumables
Per Partner build up as follows:
Estimate the consumables required per WP/Task
Typical consumables:
Materials
Equipment specifically for the project that can not be used
elsewhere (Eg; strain gauges, prototype tooling etc)
Computer software licenses
Make sure these are not covered under your normal ‘Indirect Costs’
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Equipment
Per Partner build up as follows:
Estimate the Equipment required per WP/Task
• New Purchases – To be amortised over the project duration
• Existing Equipment - Can also be claimed if not already
written off in the accounting system
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Equipment
Capital Equipment – Amortised over 10 years
Bought at beginning of 2nd year of a 4 year project
Used 50% of the time for project work alone for the remainder of
the project
Equipment Cost - €250,000
Allowable project cost is – 3 years at 50% of the time used on the project
Therefore 3 years amortised cost – €75,000 at 50% usage = €37,500
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Overheads – Indirect Costs
Basic Rule for H2020 Projects:
Flat Rate – 25%
These apply to all direct costs
except Subcontract and Third Party costs
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Overheads – Indirect Costs
Costs connected with infrastructures and the general operation of the organisation such as:
• Hiring or depreciation of buildings and plant
• Water/gas/electricity
• Maintenance
• Insurance
• Supplies and petty office equipment
• Communication and connection costs
• Postage
+ Costs connected with horizontal services such as: • Administrative and financial management
• Human resources
• Training
• Legal advice
• Documentation, etc.
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Subcontracting
Basic Rule for H2020 Projects
• Should not be for project critical activities
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
• Average Person Month Cost – For staff typically
working on project
• Estimate of person months per task
• Estimate of consumables per task
• Estimate of travel days with overnight stays
• Equipment to be used/purchased
• Subcontracting
Key Information from Partners
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
Content
• Project budgeting
• Eligible costs
• Simplifications and changes in H2020
• Estimating your project budget
• MSCA budgets
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
MSCA - Budgets
Key Information
• Maximum researcher months increased from 500 to 540 on ETN
• Up to 15 full time (36 months each) ESRs in the network
• Only living allowance linked to County Correction Coefficients
• Management and indirect costs now at a fixed per month rate
• No specific costs allocated for consortium management
• Country Correction Coefficients have changed (Serbia 0.671)
• ERs are not eligible to receive funding in ITNs
• 2 Party EID – 180 researcher months
Copyright Pera Consulting (UK) Ltd. 2014 – Confidential
MSCA - Budgets
MSCA Researcher Unit Costs Institutional Unit Cost
person/month person/month
Living allowance
(*CCC) Mobility allowance Family allowance
Research, training
and networking
Management and
indirect costs
ITN 3,110 600 500 1,800 1,200
IF 4,650 600 500 800 650
RISE 2,000 1,800 700