General financial conditions

The final budget for a CRAFT Project is drawn up during the contract negotiations. The total budget is between 0.3 and 2 million euro.

The estimated budget is broken down per partner and different cost categories (see chapter 3.4). It is possible to transfer costs between partners and different cost categories as long as the objective of the project is not fundamentally modified.

The CRAFT Contract is based on the principle that the European Commission finances a maximum of 50 % of the total cost of a project.

The RTD Performers receive 100 % funding from the Commission. The amount of work performed by the RTD Performers for the SMEs must account for at least 40 % of the total cost of the project and at least 50% of the total number of man hours devoted to the project.

An individual SME Proposer can be reimbursed for a maximum of 50% of costs incurred. However, this funding cannot exceed 10% of the total cost of the project.

The two figures below show examples of who finances the project and who carries out the work. For an example of a project consortium, please see section two.

The Commission pays the financial contribution to the Co-ordinator of the project who then transfers it to the RTD Performers. The payment is made in the following steps:

• Advance payment: Within 60 days after signing the contract an amount up to 40% of the total contribution is paid.

• Instalments: Within 60 days after the approval of each report and cost statement, the instalment is paid.

• Final payment: 15% of the EU's financial contribution will be paid within 60 days after the approval of the last report and cost statement.

3.3 Financial rules for the Exploratory Award

The Exploratory Award gives SMEs funding to prepare a proposal for an EU RTD programme. The funding amounts to 75 % of the total costs, up to a maximum of 22 500 euro.

Example of a budget:

Costs EC funding requested

30 000 0,75 x 30 000 = 22 500

A contract is established between the SME Co-ordinator and the European Commission as well as between the participating SMEs. The Co-ordinator receives the payment from the Commission after to submitting the following:

• A payment request. This should include a written request for payment and a table showing what costs have been incurred for the different activities performed.

• An eligible proposal for a CRAFT Project.

Cost categories

There is a range of categories to be specified when the budget or a financial report is to be put together. These categories are:

• personnel costs

• travel and subsistence

• subcontracting

• durable equipment

• consumables

• computing

• other specific project costs

• protection of knowledge

• overhead costs

• Value Added Tax (VAT)

Allowable and non-allowable costs for partners of a CRAFT Project

Allowable costs for a CRAFT Project are the contractors' actual necessary costs for carrying out the project. The costs must be incurred during the contract period. They shall be determined in accordance with accounting principles relating to historical costs and the internal rules of the contractor.

However, several types of costs cannot be reimbursed by the European Commission. These are e.g. costs for marketing, sales and distribution, interest, provisions for future losses or liabilities, indirect taxes and duties including VAT, resources made available to a contractor free of charge, costs incurred or reimbursed in another international or national project and entertainment expenses unless necessary for carrying out the work under the contract.

Cost basis

There are two types of cost basis that are possible to use in a CRAFT Project. Which one you should use depends on your company's accounting system. An organisation can only use one of the two models.

• Full cost system, actual overhead rate model: For organisations which have an accounting system where it is possible to allocate direct and indirect costs to a project.

• Full cost, flat overhead rate model: To be used by organisations where it is not possible to identify indirect costs through the accounting system.

Personnel costs

Personnel costs are generally expressed in euro per man-day. You can charge actual hours worked by persons directly carrying out scientific and technical work under the project.

Expenses for administrative and secretarial staff are to be included in the overhead costs (see below). An exception are the co-ordination costs of the Co-ordinator.

The number of man-months expended by the SME Proposers must equal that expended by the RTD Performers.

The co-ordination costs should represent on average 5-10 % of the total project costs.

Staff expenses include all direct costs related to salaries (social charges, pension schemes, unemployment compensation etc.). It is also possible to use an average employment cost if this does not differ considerably from the actual employment cost.

All hours reported for work on the project must be recorded by using e.g. time records. They should also be certified at least every month by the Co-ordinator or another senior person. For an example of time records, see the end of this section.

The cost for a full-time person is based on 12 man-months per year. It is recommended that 135 productive hours per month be expended. The following example shows how the cost for staff should be calculated:

Personnel costs per month: 6 075 EUR

Number of productive hours per month: 135 hours

Labour rate per hour: 45 EUR

Average yearly inflation rate (applied to salaries): 5 %

Labour rate with inflation: 6 075 x 1.05 = 47.25 EUR

135

The cost per man-hour is 47.25 EUR.

Equipment needed for the project can be purchased or leased. If it is hired, it should be classified as cost for subcontracting. The equipment has to be leased or purchased within six months before the start of the project. Depreciation costs for equipment bought under a previous RTD Contract signed with the Commission are also allowable costs. Type of eligible equipment is:

• data processing equipment

• other equipment for general us

• special equipment.

The amount to be reimbursed is based on the following formula:

A/B x C x D

where

A = number of months during which the equipment will be used for the project after invoicing

B = depreciation period of 60 months (36 months for computer equipment costing less than 25 000 EUR)

C = cost of the equipment

D = percentage of use of the equipment for the project.

An example of how to calculate for computer equipment:

An example of how to calculate for durable equipment:

Subcontracting

Subcontracting can be done for purchasing of e.g goods, supplies and services, except the services of RTD Performers.

Travel and subsistence

Travel expenses necessary for the project are generally allowable. For travelling outside the EU, prior approval by the Commission is necessary.

Consumables

Costs for consumables, including particularly software licences, which are bought especially for the project are allowable. Costs which are usually included in the overheads are not allowed, e.g. pencils, paper, electricity etc.

Computing

Computer costs can be included in the overheads. If they represent an important amount, they can instead be charged as direct costs. If so, proper invoices should verify the costs and the computer usage should be recorded.

Protection of knowledge

Costs for protection of knowledge generated in the project are allowable. Prior approval by the Commission is necessary. The costs can for example include the cost related to the filing of an application for the granting of an industrial property right. Costs to be exluded are e.g translation costs.

Other specific costs

This item covers expenditures, e.g. prototypes, manufactured equipment, use of large testing equipment and simulators or direct costs for setting up financial guarantees requested by the Commission. Prior approval must be obtained from the Commission.

An example of how to calculate for special equipment

Administrative and financial co-ordination.

It is only the Co-ordinator that can charge administrative and financial co-ordination costs. An exception is if the work is subcontracted to someone else.

Indirect costs - overhead costs

Indirect costs (overhead costs) related to the project may include for example administration and management, depreciation of buildings and equipment, water, electricity, telephone and postal costs, office supplies and administrative personnel. The costs shall be calculated according to the general principles of the contractor.

If the Flat overhead rate model is used, overheads can be calculated as a lump sum of 80% of the eligible personnel costs.

Cost statements are to be submitted together with each periodic progress report stating the cost during the period. It is the responsibility of the Project Co-ordinator to collect this information and submit it to the Commission.

The information is to be given both in national currency and in euro. Currency losses cannot be financed by the Commission. The exchange rate to be used is available on the following home page: www.europa.eu.int/comm/dg19/inforeuro/en/index.htm

If cost statements are not submitted according to the contract, the Commission will delay the payment.

Be prepared that the Commission can ask for verifications of all costs covered in the cost statement. Financial audits might be carried out by the Commission up to five years after the last payment to the project.

EC PROJECT TIME RECORD

EC contract N° : ......................................................

Name of employee: .................................................................

Period accounted for: .................................................................

*) Out of a total of ___ hours/day.

Date: ............ / ............ 19...........

Signature: .....................................................................................

(Project manager / Authorised senior employee)