Communication campaign Most common issues identified: - Indirect Costs Thanos BATSILAS FCH JU Financial Officer.

Communication campaignMost common issues identified: - Indirect Costs

Thanos BATSILAS Thanos BATSILAS FCH JUFCH JU

Financial OfficerFinancial Officer

Indirect Costs

Indirect costs (also called overheads)

- Supporting costs of an administrative, technical and logistical nature

- Be cross-cutting for the operations of a beneficiary`s activities

- Cannot be attributed in full to the project- Examples: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.

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Indirect costs are all those eligible costs which cannot be identified by the beneficiary as being directly attributed to the project, but which can be identified and justified by its accounting system as being incurred in direct relationship with the eligible direct costs attributed to the project

Indirect costs are all those eligible costs which cannot be identified by the beneficiary as being directly attributed to the project, but which can be identified and justified by its accounting system as being incurred in direct relationship with the eligible direct costs attributed to the project

Methods of

calculation

Methods of

calculation

Indirect Costs

Actual indirect costsBeneficiaries with an analytical accounting system that can identify their indirect costs and assign them to the different projects and activities

Actual indirect costsBeneficiaries with an analytical accounting system that can identify their indirect costs and assign them to the different projects and activities

Simplified methodBeneficiaries that cannot agregate their indirect costs at a detailed level (centre, department), but only at the level of the legal entity

Simplified methodBeneficiaries that cannot agregate their indirect costs at a detailed level (centre, department), but only at the level of the legal entity

Flat rate 20%Industry whose accounting systems do not make a distinction between direct and indirect costsNon-profit public bodies, secondary and High Education establisments and research organisations (optional)

Flat rate 20%Industry whose accounting systems do not make a distinction between direct and indirect costsNon-profit public bodies, secondary and High Education establisments and research organisations (optional) 3

Indirect Costs reimbursement

4* For this calculation costs of subcontracting and resources made available by third parties outside of beneficiary’s premises must be deducted from direct costs

Identification method

Reimbursement

Actual indirect costs Including simplified methods

Reimbursement of indirect costs with a max of 20% of direct costs(*)

if indirect costs < 20% of DC(*)

=> reimbursement = actual indirect costs

if indirect costs >20% of DC (*)

=>reimbursement = 20% of DC

For CSA: same reasoning but 7%

Flat rate of 20% of direct costs (*)

20% of direct costs (*)

For CSA: same reasoning but 7%

Actual indirect costs

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Indirect costs are all those eligible costs which cannot be identified by the beneficiary as being directly attributed to the project, but which can be identified and justified by its accounting system as being incurred in direct relationship with the eligible direct costs attributed to the project

Indirect costs are all those eligible costs which cannot be identified by the beneficiary as being directly attributed to the project, but which can be identified and justified by its accounting system as being incurred in direct relationship with the eligible direct costs attributed to the project

Linked to the project itself? Linked to the project itself?

Linked to EU-research projects in general? Linked to EU-research projects in general?

Linked to research in general? Linked to research in general? Including other activities such as teaching,

production or sales? Including other activities such as teaching,

production or sales? Including all indirect costs at the level of the organization?

Including all indirect costs at the level of the organization?

Actual indirect costs

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Actual indirect costs

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2010 2011A General and Administrative expenses 346,173.22 360,810.10A1 Consumables 20,197.52 21,961.76

A1.1 Office supplies 2,122.70 2,851.76

A1.2 Electricity 13,545.52 15,235.30

A1.3 Water 4,529.30 3,874.70

A2 Hire and rental expenses 66,756.81 81,001.03A2.1 rental for premises 20,000.00 20,000.00

A2.2 car fleet 15,000.00 15,000.00

A2.3 computer hardware 31,756.81 46,001.03

A3 Repairs and maintenance 33,993.23 32,950.88A4 Insurance 7,929.70 9,283.46A5 Administrative expenses 35,582.31 31,709.70

A5.1 Telecommunication, postal and other G&A expenses 20,000.00 17,000.00

A5.2 Travel and subsistence expenses 15,582.31 14,709.70

A6 Professional fees 15,382.00 20,552.44A6.1 chartered accountant 8,832.00 12,052.44

A6.2 lawyer 7,000.00 8,500.00

A7 Management fees 164,150.50 132,460.50A8 Entertaining 2,181.15 14,691.75A9 Internship costs 0.00 16,198.58B Amortization 15,171.39 17,541.37C Indirect personnel costs 117,853.31 120,056.36D=A+B+C TOTAL INDIRECT COSTS 479,197.92 498,407.83

E DIRECT PERSONNEL COSTS 953,889.69 1,070,474.42

D/E INDIRECT COSTS RATE 50.24% 46.56%

Actual indirect costs

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2010 2011A General and Administrative expenses 346,173.22 360,810.10A1 Consumables 20,197.52 21,961.76

A1.1 Office supplies 2,122.70 2,851.76

A1.2 Electricity 13,545.52 15,235.30

A1.3 Water 4,529.30 3,874.70

A2 Hire and rental expenses 66,756.81 81,001.03A2.1 rental for premises 20,000.00 20,000.00

A2.2 car fleet 15,000.00 15,000.00

A2.3 computer hardware 31,756.81 46,001.03

A3 Repairs and maintenance 33,993.23 32,950.88A4 Insurance 7,929.70 9,283.46A5 Administrative expenses 35,582.31 31,709.70

A5.1 Telecommunication, postal and other G&A expenses 20,000.00 17,000.00

A5.2 Travel and subsistence expenses 15,582.31 14,709.70

A6 Professional fees 15,382.00 20,552.44A6.1 chartered accountant 8,832.00 12,052.44

A6.2 lawyer 7,000.00 8,500.00

A7 Management fees 164,150.50 132,460.50A8 Entertaining 2,181.15 14,691.75A9 Internship costs 0.00 16,198.58B Amortization 15,171.39 17,541.37C Indirect personnel costs 117,853.31 120,056.36D=A+B+C TOTAL INDIRECT COSTS 479,197.92 498,407.83

E DIRECT PERSONNEL COSTS 953,889.69 1,070,474.42

D/E INDIRECT COSTS RATE 50.24% 46.56%

Actual indirect costs

• Telecommunication, postal and other G&A expenses

- Once the accounting system considers these costs as indirect, ensure they are not claimed as direct costs. If claimed as direct costs, they should be removed from the IC pool

• Travel and subsistence expenses

- Once the accounting system considers these costs as indirect, ensure they are not claimed as direct costs. If claimed as direct costs, they should be removed from the IC pool

- Expenses by non-productive employees should be removed

- Expenses by productive employees but not linked to the project should be removed• Lawyer fees

- Eligible if incurred in direct relationship with the eligible DC attributed to the project• Entertaining expenses (e.g. team building, receptions etc)- Non eligible, to be removed

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20% flat rate

Subject to the accounting principles of the beneficiaries, the following items may be considered as indirect eligible costs: -costs related to general administration and management; -costs of office or laboratory space, including rent or depreciation of buildings and equipment, and related expenditure such as water, heating, electricity, maintenance, insurance and safety costs; -communication expenses, network connection charges, postal charges and office supplies; -common office equipment such as PC's, laptops, office software; -miscellaneous recurring consumables; etc.

provided they can be identified and justified by the accounting system of the participant as being incurred in direct relationship with the eligible direct costs attributed to the project.

Such costs are normally deemed to be covered by the flat rate (20%) and cannot be charged as direct costs unless it is established that the accounting principles of beneficiaries consider them as direct costs.

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Indirect costsCommon errors:•ICM Actual/Simplified-IC pool includes ineligible items e.g. VAT, marketing & sales costs, financing costs, exchange rate losses, goodwill, costs of purchasing other companies, costs of sales offices, costs of arranging loans, costs not incurred in direct relationship with the eligible DC -Subjective or arbitrary keys. Usual fair "keys" or "drivers" to distribute these costs from the "pool" of indirect costs into the different projects are via personnel, either as a percentage of personnel costs or a fixed hourly rate-or already claimed as DC although the accounting system considers them as IC (depending on the characteristics of the operation in question, it is possible that some costs can be considered either direct costs or indirect costs, but no cost can be taken into account twice as a direct cost and an indirect cost.-Budgeted IC or based on 20% flat rate (NB! In case of ICM Actual, this 20% flat rate is rate for reimbursement and not rate to define and claim IC-1 IC ratio for reporting period spread in more than 1 fiscal year (exception: only if the accounts are not available)

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Indirect costs

• Common errors:• ICM 20% flat rate- Indirect costs claimed as direct costs without being considered as DC by the

accounting principles of the beneficiary• General- Mistake in choice of ICM during the first participation in FP7

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For further info: Guide to Financial Issues for beneficiaries of FCH JU Programme

Questions?

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