FICHE NO 25 APPLICABILITY OF FLAT RATES FOR FINANCING INDIRECT COSTS IN OTHER UNION POLICIES VERSION 1 22/10/2013. Version
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1 FICHE NO 25 APPLICABILITY OF FLAT RATES FOR FINANCING INDIRECT COSTS IN OTHER UNION POLICIES VERSION 1 22/10/2013 Regulation Common Provisions Regulation (CPR) Article 58 of CPR: Article Flat rate financing for indirect costs and staff costs for grants and repayable assistance This document is provisional, without prejudice to the on-going negotiations in the Trilogues between the European Parliament and the Council (in line with the principle that "nothing is agreed until everything is agreed"). This document is a draft that shall be adjusted following the expert meeting. It does not prejudge the final nature of the basic act, nor the content of any delegated or implementing act that may be prepared by the Commission. 1/5
2 1. EMPOWERMENT Article 58 CPR Flat rate financing for indirect costs and staff costs for grants and repayable assistance "1. Where the implementation of an operation gives rise to indirect costs, they may be calculated as a flat rate in one of the following ways: (a) a flat rate of up to 25 % of eligible direct costs, provided that the rate is calculated on the basis of a fair, equitable and verifiable calculation method or a method applied under schemes for grants funded entirely by the Member State for a similar type of operation and beneficiary; (b) a flat rate of up to 15 % of eligible direct staff costs without a requirement for the Member State to execute any calculation to determine the applicable rate; (c) a flat rate applied to eligible direct costs based on existing methods and corresponding rates, applicable in Union policies for a similar type of operation and beneficiary. The Commission shall be empowered to adopt delegated acts in accordance with Article 142 concerning the definition of the flat rate and the related methods referred to in point (c) above." 2. MAIN OBJECTIVES AND SCOPE In order to harmonise the use and application of flat rates between Union Policies and to reduce administrative burden, it should be possible for beneficiaries to use existing methods and corresponding rates applicable in Union policies in order to calculate indirect costs, provided that a similar type of operation and beneficiary is concerned. 3. MAIN ELEMENTS The Delegated Act should define existing methods and corresponding rates applied in other Union policies and the scope for their application in the CPR, and will in particular set out the types of operations and beneficiaries considered to be similar. The Delegated Act does not affect the possibility provided by point b of Art. 58 (1) CPR to apply a flat rate of up to 15% of eligible direct staff costs without a requirement for the Member State to execute any calculation to determine the applicable rate. 4. CONTENT The Delegated Act provides for defining applicable flat rates and methods applied in other Union policies and the scope for their application in the CPR. Two cases need to be distinguished. There are flat rates for indirect costs which are established in the basic act of the relevant Union policy itself (in particular Horizon 2020). Where this is not the case, the Financial Regulation (Article 124 (4)) foresees a flat rate of 7% that can be used for directly managed instruments (e.g. the LIFE programme). In both cases, these rates can be used 2/5
3 without establishing a methodology to justify the level of the rate and therefore represent opportunities for additional simplification Horizon 2020 The main reason for the introduction of point c of Article 58 (1) CPR was to facilitate a harmonised approach to the support of research, development and innovation compared to the period where different rules apply under cohesion policy and the 7 th Framework Programme as regards flat rates for indirect costs. The Delegated Act should therefore define the conditions under which a flat rate for indirect costs may be applied to operations under the ESI Funds corresponding to the possibilities offered in Horizon 2020 [Article 24 (1) of Regulation (EU) No xx/2013 laying down the rules for participation and dissemination in "Horizon the Framework Programme for Research and Innovation ( )"]. All relevant elements of the methodology for the application of the flat rate set out in this regulation must be applied 1. These include the exclusion of direct eligible costs for subcontracting and the costs of resources made available by third parties which are not used on the premises of the beneficiary, as well as financial support to third parties, The preliminary agreement on the legislative framework for Horizon 2020 now establishes a flat rate of 25% of eligible direct costs established in this manner Similar type of beneficiary The flat rate provisions in Horizon 2020 do not restrict the nature of beneficiaries. Thus any beneficiary of ESI Funds implementing a similar type of operation could benefit from this flat rate Similar type of operation Horizon 2020 is focused on research, development and innovation. Hence these provisions should only be applicable to an operation or a project forming part of an operation which is dedicated solely to research, technological development and innovation. It is necessary to define the scope of application of these provisions by (a) investment field (for ERDF) and (b) thematic objective and investment priority (for ERDF) or contribution to a thematic objective (ESF). 1 This de facto excludes the application of this flat rate for expenditure linked to investment in infrastructure. 3/5
4 (a) Intervention category An ERDF operation can be considered similar to those supported under Horizon 2020 if it falls into the following intervention categories under Investment field 2 : Research and development and innovation Investment in infrastructure, capacities and equipment in SMEs directly linked to research and innovation activities (057) Investment in infrastructure, capacities and equipment in large companies directly linked to research and innovation activities (058) Research and innovation activities in public research centres and centres of competence including networking (061) Research and innovation activities in private research centres including networking (062) Technology transfer and university-enterprise cooperation primarily benefitting SMEs (063) Cluster support and business networks primarily benefitting SMEs (064) Research and innovation processes in SMEs (including voucher schemes, process, design, service and social innovation) (065) Research and innovation processes, technology transfer and cooperation in enterprises focusing on the low carbon economy (066) (b) Thematic objective or investment priority/contribution to a thematic objective For ERDF the operation or project forming a part of the operation would need to be carried out under the investment priorities laid down in Article 5 paragraph 1 (a) and (b), paragraph 2 (b), paragraph 3 (a) and (c), and paragraph 4 (f) of Regulation (EU) no xx/2013 [ERDF]. For ESF the operation or project forming a part of the operation would need to contribute to strengthen research, technological development and innovation in accordance with Article 3 paragraph 2 (c) of Regulation (EU) no xx/2013 [ESF] Other EU policies, LIFE in particular Other EU policies may make use of the flat rate of 7% of direct costs as set out by Article 124 (4) of the Financial Regulation. There are instruments under direct management in particular LIFE which support operations similar to those under the ESI Funds. Despite the fact that the flat rate of 7% is much lower than the maximum flat rate defined in point (a) of Art. 58 (1) CPR, the latter requires a fair, equitable and verifiable method to underpin it, while the former can be applied as a pre-established flat rate without a need for an underpinning methodology. An ERDF operation can be considered similar to those supported under LIFE if it falls into the following intervention categories under Investment field 3 : 2 The nomenclature of categories shall be adopted by the Commission by way of implementing act on the basis of empowerments provided in Article 87 of the CPR and Article 7 of the ETC Regulation. 3 The nomenclature of categories shall be adopted by the Commission by way of implementing act on the basis of empowerments provided in Article 87 of the CPR and Article 7 of the ETC Regulation. 4/5
5 Environment Protection and enhancement biodiversity, nature protection (including Natura 2000) and green infrastructure (084) Adaptation to climate change measures and prevention of climate related risks (including erosion, fires, flooding, storms and awareness raising) (085) Risk prevention and management of non-climate related natural risks (i.e. earthquakes) and risks linked to human activities (including awareness raising, civil protection and disaster management systems and infrastructures) (086) In the case of LIFE, similar operations can be supported e.g. by the ERDF under the investment priorities laid down in Article 5 paragraph 5 (a), paragraph 6 (d) of Regulation (EU) no xx/2013 [ERDF] and within the EMFF Prior definition by Member State As with any form of simplified costs, it is important that Member State defines in advance which support schemes or individual operations could benefit from this flat rate. This is relevant not only to inform the applicants/beneficiaries of the applicable rules, but also in order to ensure that the flat rates of other Union policies are indeed only applied to similar operations Adaptation of Delegated Act If a new flat rate is adopted under a Union policy which may support operations and beneficiaries similar to those of the ESI Funds, the delegated act may be extended to the new flat rate, if appropriate. 5/5
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