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Welcome to Our Advanced EU Funds Practitioners’ FAQs
Navigating the complexities of EU funding can be challenging, even for seasoned professionals. Our company has amassed a wealth of experience in proposal writing and financial management for EU projects. This FAQ section is designed to share our insights on the most critical and complicated aspects of these processes. Whether you’re looking for tips on crafting compelling proposals or managing intricate financial details, you’ll find expert advice and proven strategies here. Dive in to enhance your expertise and ensure your projects are managed with precision and excellence.

How to calcualte the HE Personnel Unit costs A.6 (new unit cost, from 01.05.2024)?

This cost category is optional, meaning that a Beneficiary can decide whether to use it or not, normally after having analyzed the pros and cons of using this option in terms of simplification vs. accurateness of the personnel cost declaration in the project’s financial statements.

The EC services grant the possibility to use A.6 on the beneficiary’s request, accompanied by a specific Audit Certificate issued by a chartered auditor. This is the template of Audit Certificate. Download  Model of Audit Certificate for A.6 Personnel category

However, once the unit cost is approved, it must be used in all (only) HE actions (i.e. new proposals submitted after the approval date and not yet signed grants under preparation).  This provision applies also to Lump Sum proposals, therefore the monthly unit cost for calculating the estimated budget in the Lump Sum proposal should be equal to the newly calculated A.6 Unit Cost x 18 days (in a month). 

The approved unit cost is valid for at least two years and can be updated every two years after the approval date until 2027.
Indeed, you can withdraw from it and request to revert to actual personnel costs (actual/units A1 to A4), for all future grants signed after the unit cost is withdrawn, but you won’t be able to ask for the A.6 again for the entire duration of the HE programme. 

That said, the calculation is pretty simple:

Should costs of SME owners be considered in the calcualtion of the A.6 Personnel category?

The version of the AGA (V1.0 01.05.2024) states that the Unit Cost (once approved by the EC) can be used for Personnel categories A1, A2, A3, A4 (SME Owner and beneficiaries…). However, it appears not clear whether (and how) the calculation of this Unit value should consider the cost of SME Owners without a salary too.

The formula for calculating the Unit Cost includes the “total staff costs of the beneficiary in the last closed full financial year”, but since SME Owners (by definition) do not receive a salary for their work (even if they can be remunerated for other activities e.g. company management only, dividends, etc), the SME Owners should not be considered in such amount.

HOwever, the calculation of the new Unit cost should be based on the definition of AWU in the EU SME Recommendation 2003/361.  Art. 5 provides the definition of AWU as follows “The staff consists of:(a) employees; (b) persons working for the enterprise being subordinated to it and deemed to be employees under national law; (c) owner-managers; (d) partners engaging in a regular activity in the enterprise and benefiting from financial advantages from the enterprise.” 

If we apply this definition, the SME Owners would seem to be under (c) and therefore would qualify as eligible as staff headcount (AWU).

This would result in a situation where the SME Owners are not counted for calculating the Numerator of the formula for the calculation of the Unit Cost (i.e. “total staff costs of the beneficiary in the last closed full financial year”), but they would be considered in the Denominator (i.e AWUs).  This interpretation would unfairly and artificially reduce the Unit cost calculated based on this formula.

We called upon the EC services for an official interpretation, asking to clarify whether and how the remuneration(s) (different from a salary) of the SME Owners should be considered in the “total staff costs of the beneficiary in the last closed full financial year”, and if subsequently the SME Owner work should be counted in the AWUs.

The EC services replied as follows:

…In accordance with this Decision (DECISION authorising the use of unit costs for personnel costs for actions under the
Horizon Europe and Euratom Programmes, ed.), the Personnel unit cost shall be based on the ‘total expenditure of the beneficiary for all its staff’. This includes SME owners,  if the personnel costs of the SME owners are in the statutory accounts of the beneficiary under the heading ‘staff costs’ in the last closed full financial year. If the costs are not in the accounts then it will not be included in the total personnel costs but the unit cost it is applied to the SME owner. In the same vein, if the SME owner does not count as Staff it is not taken into account in the denominator of the formula for the ‘number of Staff’”.  

We hope this information will be useful for Beneficiaries that are SMEs, with SME owners without a salary, who are planning to ask for the possibility to use personnel category A.6, and therefore are preparing the Audit Certificate.

Personnel claimed 100% on an actual costs-based action, and also claimed in a Lump Sum. Is that possible?!

The Lump Sum (option 2) scheme entails no need to provide evidence of the time (hours/days) worked by a person for the action.

In the Actual Cost based grants, time records are necessary to calculate the personnel costs (hours, or days), and the GA sets a limit to the number of hours/days that can be declared on EU/EURATOM actions (i.e the “Annual Productive Hours” used to calculate the hourly rate in H2020, and the “maximum declarable working days in the reporting period” in Horizon Europe). The above ceilings are set to avoid that a person is claimed in EU funded actions for an amount of hours/days higher than the costs recorded in the Beneficiary accounts (H2020, double-ceiling rule).

However, in the likely case that Beneficiary has 2 projects ongoing at the same time, e.g.

  1. Project 1 Horizon 2020, based on actual costs, and
  2. Project 2 Horizon Europe, based on a Lump Su

in principle, it may be possible that the work of this person on the two actions is reimbursed for an amount higher than his/her salary as registered in the Beneciary’s accounts. This would happen, for example, when the following two cumulative conditions are in place:

  • the hourly rate of this person is calculated using 1720, and the person is claimed for 1720 hours on the H2020 project; and
  • the remaining working time of this person, exceeding 1720 (e.g. the person works 2000 hours in the financial year), is used by this person to work for the Horizon Europe Lump Sum.

In this (exceptional) case, it appears that the person’s cost in the financial year is completely reimbursed by the EU for his/her work on the H2020 action, and it is also paid (as a part of the Lump Sum) under the Horizon Europe project.

In conclusion, it would appear legitimate that a person fully claimed/reimbursed under an actual costs-based funding scheme is also working in a Lump Sum scheme. Does the implementation of the Lump Sum scheme by the EC mean that the formerly known “double-ceiling” rule is no longer in force?

We inquired to EC services for a genuine interpretation of the subject matter, and here’s what we got:

“… The (double, ed. ) ceiling rule is not mentioned in the lump sum grant, because there are no actual personnel costs provisions (and no costs-related provisions in general, as per the very own nature of the lump sum grant agreement).

A beneficiary does not declare any time worked on the action for the purpose of reporting actual personnel costs in a lump sum grant. Hence, a beneficiary does not need to take into account the project(s) funded under a lump sum grant for the purpose of checking compliance with the ceiling rule, when this beneficiary reports also actual personnel costs for another EU/Euratom project (under an actual costs-based grant) running in parallel. 

However researchers participating in a project must be reported, and this can be verified in technical reviews, including in lump sum projects. This information must be consistent with information from other projects, including those under actual costs.

If a researcher exhausts the ceiling of working time in actual cost projects and participates in a lump sum project at the same time, this would obviously be inconsistent, especially if the researcher has an important role in the lump sum project.

In addition, you may keep in mind that for lump sums based on the project budget proposed by applicants, the detailed cost estimation per work package and per beneficiary and affiliated entity (if any) must include only costs that would be considered eligible in an actual costs grant. Therefore, an applicant to a lump sum grant should, to the extent possible, take into account the involvement of a given individual on other EU/Euratom projects when budgeting in the most fair and accurate way the personnel costs for this individual for the lump sum grant.

And beyond ceiling rules, a beneficiary must comply with its applicable national law, including the applicable national labour law (and any legal requirements stemming e.g. from the employment contract or the collective bargaining). This is to be taken into account for what regards, overall, the (maximum) working time that can be performed by an employee (e.g. daily and/or weekly and/or monthly).

Checks on the specific eligibility conditions of costs in the Lump Sum. You need to comply, but no checks are foreseen? Doubts on the interpretation of rules...

In the Lump Sum Type 2, the template for the estimated budget requires to breakdown the personnel cost into personnel categories (A1, A2, etc).

As the costs eligibility condition set in Art. 6 of the MGA Lump Sum defines the two eligibility criteria, notably:

  • (a) costs are set out in Annex 2, and
  • (b) the work packages are completed….”,

what if the specific eligibility criteria for A.1, A.2, etc as defined for the actual costs-based actions are not fulfilled?

Imagine estimating costs for an A2 personnel category in the lump sum estimated budget.  How and when the underpinning contract (qualifying the person as an A.2 category) is checked?  When the cumulative conditions as set in art. 6.2.A.2 of the MGA for actual costs are assessed?

We inquired to EC services for a genuine interpretation of the subject matter, and here’s what we got:

“…In a lump sum proposal, applicants must show the costs and categories of costs covered by the lump sum contribution. The proposal can only contain costs that would be eligible for an actual costs grant. Personnel costs must be resolved per category of personnel (employees, natural persons working under direct contract, seconded persons and SME owners, and natural person beneficiaries).  Lump sum proposals contain detailed cost estimates (including personnel costs resolved by staff category) because this is necessary to define and justify the lump sum. These costs estimates are evaluated by experts who will assess if they are reasonable and not excessive, and in line with the activities described in the proposal.

If the project is selected for funding, the detailed cost estimations are not part of the grant agreement. The budget annex in the grant agreement (Annex 2) is the breakdown of the lump sum per work package and per beneficiary. The consortium can use the budget as they see fit as long as the project is implemented as agreed. The actual distribution of the lump sum is invisible to the Commission services. The grant agreement must describe the tasks allocated to each partner, including the tasks to be subcontracted. There will be no checks of costs actually incurred, and employment contracts will not be checked. However, the consortium must report on which beneficiary implemented the work described in the grant agreement”.

In our opinion, the clarification is not really “clarifying”.

On the one hand, the same eligibility conditions set out for Actual Costs need to be accomplished in the Lump Sum too.  On the other hand, such eligibility conditions are not checked.  In our opinion there’s (at least) something still not running smoothly in the Lump Sum mechanism.

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