This stage is split into four sections:
The rules for the financial management and reporting of EU projects are explained in detail in the Guide to FP7 Financial Issues [pdf].
As mentioned before, the administrative overhead for follow-up of EU projects is not negligible, and in cases of significant involvement of CERN and/or CERN being a Project Coordinator, it may be necessary to employ additional staff for project management and administration. In view of the high salary costs of CERN staff, the EU funding for management costs is not always sufficient, and it is up to the departments concerned to make sure that they (will) have the necessary resources for administrative and financial follow up of these projects.
The EU co-funding is managed by the Project Coordinator, who is responsible, in line with the conditions specified both in the Grant and Consortium Agreements, for its distribution among the partners. In FP7 the Coordinator can ensure that, within the specified conditions, partners who fail to meet their obligations receive no (further) funding, and the consortium is able to adapt the project budget appropriately.
Soon after the signature of the Grant Agreement, the Project Coordinator will receive a significant fraction of the overall funding, called pre-financing – usually equivalent to 160% of the average EU funding per reporting period – and should distribute it quickly to the other partners.
At contractually pre-determined reporting periods, typically every 12 or 18 months, CERN (and all other participants) will have to submit a financial claim (through the Coordinator, if that is not CERN) to the EC reporting on all costs that have been incurred to the project during the reference reporting period. Further funding for the project will only be made available when the aggregate claim has been approved by the EC.
In FP7 a special Guarantee Fund has been created, with the purpose of covering the financial risks incurred by the EU and the participants during the implementation of FP7 projects. It is a kind of insurance contract by the beneficiaries to guarantee the financial losses of the projects that may be due, for example, to defaulting partners who fail to meet their contractual obligations and deliverables. This contribution of each FP7 project to the Guarantee Fund is equivalent to 5% of the total EC funding, which is withheld with the first payment (pre-financing), and is restored with the last payment (after the end of the last reporting period).
In FP7, unlike previous Framework Programmes, there are no “cost models”, and all costs related to the execution of a project may be claimed as eligible costs. In order to be considered for reimbursement, costs incurred by the beneficiaries in the course of the project, must satisfy the eligibility criteria laid down by the Grant Agreement:
The FP7 financial guidelines distinguish between direct and indirect costs for EU projects. Direct costs are all those eligible costs that can be attributed directly to the project and are identified by the beneficiary as such, in accordance with its accounting principles and its usual internal rules. The following is a non-exhaustive list of direct eligible costs in FP7 projects:
Indirect costs, also called overheads, on the other hand, are all those eligible costs that cannot be identified and calculated by the beneficiary as being directly attributed to each project. Overheads comprise 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, etc., and costs connected with horizontal services such as administrative and financial management, human resources, training, legal advice, documentation, etc.
CERN is using the special transition flat rate of 60% for its indirect costs (overheads) in FP7 projects.
Detailed explanations about the principles for accounting and financial follow-up of EU projects at CERN can be found at the web-page of the DG-RPC-EUT.
Once the maximum EU contribution for CERN’s participation in an EU Project has been agreed by the project consortium, the CERN Project Leader has to ask DG-RPC-EUT service for the estimated CHF equivalent, which should be used as a basis for any preliminary budget planning. When the first payment from the EU Commission is received, DG-RPC-EUT service will fix the exchange rate, which shall be used for budget planning for the full duration of the EU Project, unless significant changes occur. Consequently, the Project Leader will provide DG-RPC-EUT service with a budget breakdown in CHF by year and by nature (Materials/ Personnel) for the full duration of the EU Project concerned.
In collaboration with the Departmental Planning Officer(s) concerned, and the Resources Planning and Control group (DG-RPC), the Project Leader has to ensure the creation of EU Project structure in EDH. Once the EU Project structure is created, the DPO(s) should initiate the creation of the necessary budget code(s) in collaboration with DG-RPC.
The internal CERN procedures for the preparation of cost claims (Form C) require that for each element of the financial claim, the personnel costs, the equipment costs, and the travel costs must be clearly separated. Any such costs must be recorded in the accounts through (one of) the budget code(s) attributed to the project.
It is very important that all orders made on the project codes for both equipment and personnel, and the related entries in the accounts, should mention the project name, and originate from or be authorised by the CERN project leader, or by another participant in the project who has been given the right of signature to these budget code(s).
Financial cost claims need to be prepared at the end of each reporting period, typically once in 12 or 18 months, depending on the duration of the project. At the time of preparing the claim (Form C of the Grant Agreement, see Model Grant Agreement Annex IV examples), whose format depends on the funding scheme, attention must also be given to the question of appropriate justification. A project file with all relevant documentation for project expenses, e.g. invoices, orders, travel claims, etc., must be maintained to prepare for those (hopefully infrequent) cases where the project is subsequently selected for an audit by the EU, which may take place up to 5 years after the end of the project.
The basis of the dossier is formed from the CET extracts referred to the project budget code(s), which should be printed out and held by both the project administration and by FI-EU Service.
For expenditure on equipment the Finance Department stores the original documents, such as the requisition, order and invoice. However, it must be ensured that the requisition and order were authorised by the project leader (and not by a CERN staff member, however senior, having no specific role in the project).
For personnel expenditure Finance and HR departments store the original documents (e.g. fellow or staff contracts). It must be ensured that every person working for the project, especially on a part-time basis, has completed the necessary timesheets, signed by his supervisor. The original of the timesheets should be stored by the project administration.
Cost claims (Financial Statements) for EU Projects shall be prepared by the Project Leaders, and afterwards verified and signed by DG-RPC. Audit Certificates (Certificates on the Financial Statements) shall be issued and signed by Internal Audit.