3.5. Budget & finance
Basic requirements of costs:
- have arisen and are necessary to implement the project
- are identifiable, indicated in the estimated overall budget attached to the grant agreement
- are reasonable, justified, and comply with the requirements of sound financial management, in particular regarding economy and efficiency
- has arisen during the project period determined in your decision on support
- are verifiable and compatible with EU legal and national regulations
- meets the conditions specified in your decision on support
A cost is not eligible if it has been part of another EU project or financed through any other public support.
Eligible costs must:
- be characterised by cost-effectiveness:
- Economical: the resources used must be of the quality and quantity needed
- Efficient/ effective: resources must be used in the best way to achieve the expected result.
- Fit for purpose: projects must be implemented so that they reach the goal and the expected result in the best possible way
- comply with applicable procurement or purchasing rules
- comply with the rules on information obligations.
All eligible costs can be proven by invoice copies, accounting documents or other documents that have been booked in accordance with good accounting practice (i.e. pay slips and timesheets justifying the actual staff costs declared, receipts, boarding passes and used tickets must always be kept as supporting evidence of travel costs paid), or that meet the requirements that apply to simplified accounting alternatives.
Evidences justifying costs must be kept by the beneficiary for five years following final payment by the Commission
Procurement of external services
Expenditures for external expertise and external services to implement the project are eligible for support.
Consulting services and other external services must, as a general rule, be procured or produced in competition. They are covered by the requirement that projects must be conducted in a cost-effective manner, which means that the most efficient alternative must be chosen.
Documentation showing how and on what grounds the choice of supplier was made must always be available. In connection with the cost being reported in the application for payment, documentation of the various steps in the procurement procedure must be provided.
The documentation relating to the purchase of services must state the extent, timing and nature of work performed or service provided. The basis can be an agreement or specification for an invoice.
- seek competitive tenders from potential contractors
- award the contract to the bid offering the best value for money, i.e. the best price-quality ratio
- follow the principles of transparency and equal treatment of potential contractors
- take care to avoid any conflict of interests.
Building the budget
Eligible costs are divided in:
- direct costs (costs directly related to the running of the project): A beneficiary will have to provide evidence for all of these items if he/she wishes to claim back the money. This will include:
- recruitment costs,
- staff salaries for the hours directly spent on the project (actual salaries plus social security charges and other statutory costs included in the remuneration, are eligible),
- staff training,
- staff/volunteer expenses,
- travel, accommodation and subsistence allowances (reasonable rates available on the market and do not exceed the scales approved periodically by the Commission),
- marketing and promotion,
- publication/ communications materials (description, an estimate of the number of pages and copies planned the frequency and language of publication, an indication of the production costs per copy as well as an estimate of the distribution costs where appropriate),
- translation (must include: number of languages, pages to be translated, the rate applied per page),
- interpretation (must include: number of languages, number of interpreters, number of days and the daily rates must be specified. The accepted daily fee of an interpreter may not exceed 700 EURO (including VAT). Interpreters should be hired locally, if not a reasonable reason must be provided.),
- evaluation (if required).
- room/venue hire,
- equipment purchase/hire,
- participant costs/incentives,
- training delivery costs.
- indirect costs (costs that cover the overheads and office/ administrative costs that cannot be directly related to the ESF+ project).
The total amount of money to be spent on indirect costs will usually be limited to a maximum flat-rate of 15% of the direct staff costs and will form part of the total project costs. A beneficiary doesn’t need to provide evidence for items that are included in indirect costs, such as:
- central staff costs (HR/management)
- IT Support
- mailing postage,
- telephone/ fax costs, heating,
- electricity or other forms of energy, water,
- office rent (unless solely used for ESF related activity)
- office furniture,
- insurance, etc.
Minimum information you need to provide for the project budget:
- total project costs,
- total project yearly breakdown,
- yearly breakdown for each delivery partner (if there are any),
- staff costs master list (with the hourly rate information where applicable).
Both match funding and ESF should be included in the budget.
At Project level, the yearly total and project total figures for:
- ESF direct staff costs,
- ESF other direct costs (if applicable),
- flat rate indirect costs (if applicable).
The above should match the same figures in the Financial Annex submitted with the Full Application.
The following expenses are ineligible and not accepted:
- contributions in kind: these are contributions that are not invoiced, e.g. voluntary,
- work, equipment or premises made available free of charge,
- return on capital,
- debt and debt service charges,
- doubtful debts,
- provisions for losses or potential future liabilities,
- interest owed,
- exchange losses,
- VAT, unless the beneficiary can show that he/she is unable to recover it. It should be noted that VAT paid by a public body to operators who are subject to VAT (when purchasing goods or supplying services within the framework of the implementation of the co-financed action) is not eligible. The VAT thus collected by operators liable for tax will in fact be returned to accounts of the Member State of the public body. Considering this VAT as an eligible cost would lead to double financing (by the Community and by the fiscal revenue),
- excessive or reckless expenditure,
- costs declared by the beneficiary and covered by another action or work programme receiving a Community grant,
- expenses incurred outside the PROGRESS-participating countries,
- recruitment costs,
- the cost of purchasing infrastructure equipment, including buildings, land and second-hand equipment (except up to the amount of the annual depreciation of the equipment purchased).
Simplified Cost Option (SCO)
The term “simplified cost options” (SCOs) refers to a simplified approach for calculating and reporting costs in projects funded by the European Union (EU). SCOs aim to streamline and simplify the administrative burden associated with cost calculations, making it easier for beneficiaries to manage and report their project expenditures.
Thanks to the simplification of the management process they facilitate access to the European Structural and Investment Funds (ESF+ and ERDF, the funds of interest to social service providers, are also included in this category of funds) and allow organisations to focus more on the achievement of the objectives.
Under the simplified cost options, beneficiaries can use
- unit costs,
- lump sums,
- or flat rates,
to determine their project expenses. These predetermined rates are established by the EU and are typically based on average costs or estimates for specific project activities or outputs. By using these simplified methods, beneficiaries can avoid the need for individual cost justifications, provided that they comply with the eligibility and reporting requirements of the EU funding program.
The use of simplified cost options (SCOs) in programs such as the European Social Fund (ESF+), the European Regional Development Fund (ERDF), and Interreg varies depending on the specific guidelines and regulations of each program. SCOs are generally encouraged and promoted as a means to simplify cost calculations and reduce administrative burden for beneficiaries. However, whether their use is mandatory or not can depend on several factors.
In some cases, the use of SCOs may be mandatory for certain project activities or cost categories within these programs. For example, specific types of costs, such as personnel costs or overhead costs, may have predetermined rates or standard scales that must be applied by beneficiaries.
However, it’s important to note that not all project costs may be eligible for SCOs, and certain costs may still require detailed documentation and individual justifications. Additionally, the specific requirements and guidelines related to SCOs can vary between different regions, member states, or specific calls for proposals within these programs.
To determine the exact rules and requirements regarding SCOs in ESF+, ERDF, or Interreg, it is essential to consult the official guidelines and documentation provided by the relevant managing authorities or programme administrators.