Practicalities in the Financial Management of FP7 projects - An outlook to audits and Horizon 2020 rules

Transcription

1 Practicalities in the Financial Management of FP7 projects - An outlook to audits and Horizon 2020 rules Gabor Kitley Chief Executive Officer Europa Media Is the FP7 Financial Audit really a nightmare? No, but it can go wrong.. 1

2 Let see if you know the basics What is eligible Exceptions? What is direct/indirect What changed after 2011? Planning and preparation Organisation s system/procedures are set up? Eligible Costs Eligible costs: Actual, except. Incurred during the project, except. Incurred at/by the Beneficiary, except. In accordance with the beneficiary s usual accounting and management principles, except Recorded in the accounts of the beneficiary, except Used for the sole purpose of achieving the objectives of the project NO EXCEPTION! 2

3 Direct / Indirect Costs NO COST MODELS ONLY FC Direct Actual Costs (that can be attributed directly to the project) 1. Personnel costs (can also include in-house consultants ) 2. Sub-contracting/Third Party Assistance i.e.: Costs for Certificates (CFS, CoM) 3. Other Direct Costs: Travel costs for personnel working on the project Costs for consumables Other costs Purchase costs/renting costs of durable equipment (depreciation) Indirect costs All costs that cannot be identified as attributed directly to the project (the running costs: electricity, heating, telephone, internet etc. also called overheads ) Planning organisational level Internal procedures (roles and responsibilities) CFS needed? Budget spending planning (reporting period/work package level) Is this the first FP7 project of your organisation? FP7 rules prevail on exchange rates, timesheets, overhead, etc. National/National/organisation rules to be followed on Equipment Travel documentation Overtime, etc. Justification of costs upon work package/activity How is your accounting software? Identification of project related costs Cooperation between financial and technical officers 3

4 Setting up the system Project management online platform? Excel sheets? Using FP7 management tools? (market) 6-monthly internal reporting? develop the template (part of project tool box e.g.) Who needs training? - guidelines Time recording system All productive hours need to be measured, not just the project related ones! Name of the project (id), Name of the person, Number of hours, activity/wp identification, signature, authorisation, date, comments T i l i t k i ti Typical mistakes in reporting and financial management 4

5 Time recording system Timesheets 5

6 Time recording Typical Mistakes Personnel Costs claimed for people not directly employed nor paid by the beneficiary. Personnel costs claimed based on a budgeted, standard, estimated rates. Average hourly rates used which differs significantly from actual ones. Billable hours are used instead of number of workable hours. For the calculation of the number of productive hours on the project, including time spent related to maintaining general expertise, administration and/or sales. Absence of timesheets. Timesheets not approved by a project leader. Source EC 6

7 Typical Mistakes Personnel For the calculation of the hourly personnel rate, by dividing the payroll costs by the number of productive hours on the project (only) instead of by the total number of productive hours. Personnel costs claimed include overtime hours for which staff have not been paid. Personnel costs claimed include the remuneration of an in-house consultant hired through a contract with a consultancy firm (no labour contract, no direct instructions, not 100% on the premises, commercial rate, etc). Overhead costs included in the personnel cost calculation. Source EC Absence of detailed calculation of direct costs Project information: A few examples based on ENVIRES Project Acronym: ENVIRES Project GA: Funding scheme: Collaborative Project Project duration: 36 months Project starting date: 1 st March 2010 Project end date: 28 th February 2013 Number of reporting periods: 3 Current reporting period (for this Workshop): 01/03/ /02/2011 7

8 How much is eligible? How much is eligible? 8

9 How much is eligible? 9

10 Other Typical Mistakes Incorrect conversion in EUR. Costs claimed include elements not incurred and recorded during eligibility period. Costs include excessive costs and uneconomical expenditure (travel). Costs not relevant to the project (hospitality costs, entertainment costs). Costs cannot be substantiated by yproper p audit trail and full supporting documentation (Invoices, tickets, timesheets). Source EC Legal obligations from the GA (Annex II): The Commission may, at any time during the implementation of the project and up to five years after the end of the project, arrange for financial audits to be carried out, by external auditors, or by the Commission services themselves including OLAF The Commission may initiate a technical audit or review at any eco sso ay tateatec ca aud t o e e at a y time during the implementation of the project and up to up to five years after the end of the project. 10

11 Scope of the financial audit: Done at the Beneficiary s level, to control, (cross-)check and evaluate its financial reports (Form Cs) submitted to one or more FP7 Grant Agreements Can be done directly by the European Commission (i.e. DG RTD M1) or by a subcontracted body (i.e. Deloitte, Polaris International, etc.) representing the EC; or jointly by the ECA/OLAF and the DG RTD ( ) Auditors are generally from the Beneficiary s country, even if they work for the EC in Brussels, or Preferable done after the project closure, or any time during the project s lifetime, but after the acceptance of the first periodic report. In a nutshell: to control whether the reported project costs are real, actual and were needed to the project (i.e.: not a value-for-money normally) The EC s perspective on Financial Audits To remove any systematic (!) and non-systematic errors from the reported (thus reimbursed from the taxpayer s money) expenditures To help the Beneficiary in the correct calculation and classification of the project s costs To analyse and evaluate the relation between the cost(s) and the project To overview the Beneficiary s general accounting systems To validate the Beneficiary s project specific accounting and the relevant internal policies (i.e. travel policies, time-recording, etc.) 11

12 Financial novelties Expected novelties Financial (1) Simplified cost reimbursement system with enhanced use of lump sums, flat rates and scale of unit costs. New forms of funding such as pre-commercial procurement, and prizes. Paid but not recoverable VAT shall be considered as an eligible cost. Additional remuneration may be eligible ibl upto EUR 8,000 per year and per person. 12

13 Expected novelties Financial (2) Non-profit or SME participants EU funding up to 100% of the direct eligible costs Non-profit or SME participants using actual indirect cost calculation method EU funding up to 70% of total t eligible ibl costs. Industry participants EU funding up to 70% of the direct eligible costs Industry participants using actual indirect cost calculation method EU funding up to 50% of total eligible costs. Source: European Commission Expected novelties Financial (3) Indirect eligible costs aflatrateof20/25% (?) of the total direct eligible costs excluding subcontracting Actual indirect costs according to the beneficiary's usual cost accounting practices reimbursement rates for full costs calculation shall apply Indirect costs may be declared in the form of a lump sum or scale of unit costs when provided for in the work programme or work plan. 13

14 Expected novelties Financial (4) The grant agreement shall contain: (a) the minimum requirements for the time recording system as well as; (b) the option to choose between the fixed number of annual productive hours and the method for establishing the number of annual productive hours to be used for the calculation of the hourly personnel rates taking account of the participant's usual accounting practices. CFS The certificate shall only be submitted when that amount is equal to or greater than EUR at the time of claiming the payment of the balance of the grant. Stay Updated! Official EU updates, timeline, policy framework: Stakeholder views, discussions, comments: Views ?trk=myg_ugrp_ovr Practical updates, comparative assessment vis-à-vis FP7: Reconsider system/procedures! 14

15 Good luck and Thank you for your attention! Europa Media It is strictly prohibited to use or distribute the content and design of this presentation without Europa Media s prior consent. 15