WELCOME! Tenth Lead Partner Information Seminar Agenda 10-11 January 2013 WELCOME! Tenth Lead Partner Information Seminar Financial requirements Project monitoring & reporting Audit & controls Communication => Practical information to support Lead Partners in their daily tasks

WELCOME! FINANCIAL REQUIREMENTS What project promoters need to know about INTERREG IVB NWE project management

Table of contents Financial Requirements The Lead Partner Principle The Partnership Agreement The Audit Trail Eligibility of Expenditure Project Modifications The Payment Procedure

General considerations: the big picture Financial Requirements Part I General considerations: the big picture EU regulations in general, esp. General Regulation 1083/2006. Regulations (EC) 1080/2006 and 1828/2006 Regulations (EC) 846/2009 amending Regulation 1828/2006 Public procurement rules State aid Country specific eligibility rules (Wallonia, Ireland…) NWE Guidance notes You should be aware of your national legislation as well as national laws from your partners’ countries. Be aware of modifications to regulations.

The Lead Partner Principle Financial Requirements The Lead Partner Principle The LP is the « conductor » of the project partnership.

The Lead Partner Principle (LPP) Financial Requirements The Lead Partner Principle The Lead Partner Principle (LPP) article 20 of ERDF Regulation (EC) 1080/2006 The Lead Partner : is responsible on behalf of the entire partnership. is the administrative link between the programme and the project (flow of information and fund). bears responsibility for ensuring the project’s implementation. A Partnership Agreement is mandatory The LP responsibilities include that all contact with the Programme takes place via the LP. It is the responsibility of the LP to pass on all relevant information to the project partners.

Financial Requirements The Lead Partner Principle Devolved legal and financial responsibility The Lead Partner’s role includes : ensuring sound management and the delivery of outputs drafting the Partnership Agreement, establishing mutual rights, obligations and duties among project partners. making sure that expenditure is eligible, even if partners remain liable for their own actions and related expenditure reporting and other administrative tasks with the JTS distributing ERDF to partners Compulsory For the 2007-2013 programming period The LP needs to ensure that the expenditure presented by the project partnership has been incurred for the purpose of implementing the project and corresponds to the activities agreed between the project partners. Similar to the 2000-2006 programming period, the LP still delivers progress reports, payment claims and documentation to the programme on behalf of the project and transfers the ERDF contributions to the project partners. However, all project partners need to have their own control on expenditures done by a designated controller.

Financial Requirements The Lead Partner Principle Partnership Agreement Lead Partner Principle Responsibility for Project Management Signature of Subsidy Contract Transfer of received ERDF funds to partners Organisation of audit of all expenditure Overall responsibility project implementation: project content + financial management Contact with JTS Submission of progress reports, payment claims, audit reports, project modifications, day-to-day questions… The Partnership Agreement is an agreement between the project partners, which lays down mutual rights and obligations regarding their cooperation. Following Article 20.1a of Regulation (EC) 1080/2006 the LP “shall lay down the arrangements for its relations with the beneficiaries participating in the operation in an agreement comprising, inter alia, provisions guaranteeing the sound financial management of the funds allocated to the operation, including the arrangements for recovering amounts unduly paid”.

Implementation stage Financial Requirements The Lead Partner Principle Implementation stage Joint implementation: activities must be carried out and coordinated by all partners. Reporting and monitoring: jointly, timely, activities + expenditure. Progress Reports make a link with the Application and the Payment Claim. First Level Control and control regulations: national rules apply Payments: the principles of post-reimbursement, the time lag between expenditure and reimbursement and the grant rate must be clear. Irregularities / recoveries: prevention is better than cure Decommitment issues: information plays a vital role! Compulsory For the 2007-2013 programming period Irregularities: the LP puts forward the claim on behalf of the whole project. The LP has a responsibility as it should be monitoring the project’s progress and thus the work that is being undertaken at any one time, thereby not submitting claims that are not “out of keeping”. This does not dismiss partners from their responsibility for the correctness of the expenditure they declare. Decommitment issues: transfer of information plays a vital role in avoiding loss of funds as a result of decommitment. It is the LP's responsibility to keep project expenditure in line with the spending plans. The LP can inform project partners through project meetings, the Partnership Agreement, the project plan, a Project (Financial) Manual etc. Practical ways of dealing with the risk of decommitment are presented below. N+2 risks countermeasures at project level (by LP): Make reference to applicable procedures (reporting, expenditures etc) in the project's Partnership Agreement and if applicable, in a project handbook or manual. It is the responsibility of all partners to ensure that the project does not deviate significantly from the spending plan; enforce stringent reporting procedures; set up realistic spending plan together with the project budget, which should be the basis for the LP's monitoring of project expenditures; anticipate future bottlenecks through frequent updates on forecasts of expenditure by project partners (e.g. together with periodic progress reports); strict budgetary control.

Closure & project evaluation Financial Requirements The Lead Partner Principle Closure & project evaluation Final Report: the LP must make sure from the beginning of the Project that duties and requirements for the completion of the Project are clear to all partners. Eligibility: the LP should make sure that the partners are aware of deadlines and procedures for closure, forward all eligible expenditure in due course and know the filing requirements. Project evaluation: projects are strongly recommended to assess how successful the Project has been in terms of processes, level of cooperation and quality of management. Compulsory For the 2007-2013 programming period Final Report and FLC The Final Report will in most cases not differ greatly from intermediate reports. It covers the whole project and the LP will submit it on behalf of the whole partnership. See Guidance note nr. 24 (new: 25) for the details (revenue-generating projects, durability of operations, filling records and end date for eligibility) · Eligibility The LP has to inform the partnership on the procedures, including those on expenditures related to drafting the final report. It is the LP's responsibility to ensure that partners have put forward eligible expenditures in their claims before the reporting deadline expires. Partners should make sure that they adhere to audit trail requirements (e.g. storing project files) and other project specific requirements. · Assessment Besides the Programme's evaluation on the project's output and results, projects are recommended to perform their own project evaluations on processes and quality of management. All lessons learned should be taken into account, as partnerships are advised to look at continuation of the partnership or other forms of joint follow-up actions.

The Partnership Agreement Financial Requirements Basics The Partnership Agreement Compulsory document

Who has already drafted the partnership agreement? Financial Requirements Partnership Agreement Poll: partnership agreement Who has already drafted the partnership agreement? Who has signed it?

Recommended clauses (1) Financial Requirements Partnership Agreement Recommended clauses (1) Does your partnership agreement address all these points? Compulsory For the 2007-2013 programming period Common project objectives; Duration of the Agreement - from the day all partners sign until the LP discharges its obligations towards the MA (years after project closure!); Role and responsibilities of the LP; Roles and responsibilities of the project partners; Detailed information on project activities - the project work plan; Organisational structure of the partnership - steering group?; Deadlines and penalties for non-compliance;

Recommended clauses (2) Financial Requirements Partnership Agreement Recommended clauses (2) Does your partnership agreement address all these points? Cooperation with third parties - ultimate responsibility remains within the partnership; third parties need to be selected according to public procurement rules; Definition of eligible expenditure; Monitoring, reporting and evaluation requirements to be fulfilled by the LP and other partners; Financial control and audit requirements; Communication and publicity requirements; Dissemination of project outcomes - issue of intellectual property rights;

Recommended clauses (3) Financial Requirements Partnership Agreement Recommended clauses (3) Does your partnership agreement address all these points? No commercial use and full public access to project results Confidentiality agreement within the partnership; Dispute settlement and changes in the partnership; Reimbursement to the LP in case of non-completion of obligations; Working language; Applicable national legislation and optional clauses of 'force majeure'; Concluding provisions on how to make changes to the Partnership Agreement. How to deal with common costs

Financial Requirements Partnership Agreement The Partnership Agreement must be signed by all partners and received by the JTS before the first payment can be made to the project. Do not wait to send it with the Subsidy Contract or the first payment claim: send it as soon as it’s signed!

The audit trail Financial Requirements Basics Tracing expenditure from the quote to the ERDF reimbursement.

What is the audit trail? Financial Requirements It is a comprehensive set of documents which provide a complete history of a project and provide evidence that proper procedures were applied and outcomes achieved. In the 2000-2006 programming period there was some confusion about the terms 'controller' and 'auditor'. Persons carrying out First Level Controls were either called "auditors" or "controllers" and the definition of either term varied from country to country. In the 2007-2013 programming period, the term 'auditors' is used for persons responsible for Second and Third Level Control (Audit Authority and Group of Auditors) only, whereas the 'controller' is designated by the Member State to carry out First Level Control. The 2000-2006 period concept of project controller (or project auditor) will no longer apply in the majority of cases in the 2007-2013 programming period. Rather, all partners will be controlled independently in their own countries by the designated controller. Likewise, the concept of 'internal' controllers will cease to apply, since only controllers designated by the Member State will carry out First Level Controls.

Organise your controls Financial Requirements Audit trail Organise your controls Internal controls at partner and project level Ensure smooth implementation: know what you’ve done and where you’re going, content-wise and financially. Always have a good overview! First Level Controls Controls at project level, prior to the submission of payment claims. Other controls Second level controls, DG Regio and Member States audits, Certifying Authority audits, Quality controls, etc… Every partner in every project will be controlled several times and by different bodies during the project’s lifetime. Save time and money with an efficient organisation! In the 2000-2006 programming period there was some confusion about the terms 'controller' and 'auditor'. Persons carrying out First Level Controls were either called "auditors" or "controllers" and the definition of either term varied from country to country. In the 2007-2013 programming period, the term 'auditors' is used for persons responsible for Second and Third Level Control (Audit Authority and Group of Auditors) only, whereas the 'controller' is designated by the Member State to carry out First Level Control. The 2000-2006 period concept of project controller (or project auditor) will no longer apply in the majority of cases in the 2007-2013 programming period. Rather, all partners will be controlled independently in their own countries by the designated controller. Likewise, the concept of 'internal' controllers will cease to apply, since only controllers designated by the Member State will carry out First Level Controls.

First Level Control Financial Requirements Audit trail First Level Control The First Level Control checks the expenditure declaration included in each payment claim. The expenditure must be : Real: the good or service exists and can be shown. Actually incurred: expenditure was paid out. Invoices can only be included if they have been paid in full by a partner => advances are not eligible. Supported by documents of probative value: a receipt, an invoice or a document that has an accounting value is compulsory. Eligible: in line with Programme, EU and national rules, as well as with Subsidy contract and Application Form Real: The product or service that has really been delivered Eligible: in line with AF: direct link with AF, foreseen in AF, right partner has done it, … In line with Subsidy contract: expense incurred after start date and before end date…

Quiz Financial Requirements NO Audit trail Quiz The finance manager buys a car and includes its cost in the payment claim. Is it eligible? Is it real? the good or service exists and can be shown Is it actually incurred? expenditure was paid out. Is it supported by documents of probative value? There is a receipt Is it eligible? i.e. in line with EU and national rules, direct & demonstrable connection with the Application Form, incurred in the lifetime of the project as set in the Subsidy Contract NO

Role of the Lead Partner controller Financial Requirements Audit trail Role of the Lead Partner controller Regulation (EC) 1080/2006 (Article 20): The Lead Partner shall: lay down the arrangements for its relation with the partners participating in the project in an agreement (i.e. sound financial management) be responsible for ensuring the implementation of the entire project ensure that all the project expenditure presented has been incurred for the purpose of implementing the project and corresponds to the Application Form verify that all project expenditure presented has been validated by the controllers be responsible for transferring the ERDF contribution to the partners

Role of the Lead Partner controller Financial Requirements Audit trail Role of the Lead Partner controller Implications: The LP controller: checks the expenditure of all partners against the approved Application Form. checks whether it fits with the budget planning (avoid exceeding 120%) verifies that the partners’ expenditure is in line with what was agreed within the partnership agreement (importance for the controller to read the partnership agreement, the subsidy contract; to know the internal procedures,…) verifies the validation by the partner controllers verifies that the controllers are those approved by the MS verifies that the controllers’ signature is backed by checklists,… checks that all copies are available at Lead Partner premises verifies that the ERDF contribution has been paid to the partners

Eligibility of expenditure Financial Requirements Basics Eligibility of expenditure

Eligibility period Financial Requirements Start date: Eligibility of expenditure Eligibility period Start date: Costs are eligible from the start date indicated on the Application Form, at the earliest one year prior to the closure of the call for proposals as long as the actions are not completed before that date. End date: The end date indicated in the Application Form is the date by which the final report should be submitted to the Secretariat. Any expenditure (including costs linked to the project closure) incurred, invoiced or paid after the official project end date is ineligible.

Partner staff Financial Requirements Eligibility of expenditure Calculation method No estimates Partner staff the actual time worked by the persons directly carrying out the work on the project People directly employed by the partners. must be based on the monthly payslip and calculated individually per employee Working time must be recorded (eg. timesheets) throughout the duration of the action. The records should be certified at least once a month. Estimates of hours/days worked are not acceptable. Overhead costs cannot be added to staff costs and are considered as administration costs Calculation method: payslip x (time spent on project/total time worked) An external consultant is not part of the project partnership and costs must not be included in staff costs. ONE OF THE MAIN FINDINGS IN 2ND LEVEL CONTROL AUDITS

Financial Requirements Eligibility of expenditure Maximum per day Public procurement External Experts & Consultants Work done by independent consultants must be : essential to the project reasonably priced (limited to 800€/day). paid on the basis of contracts and against invoices. In line with public procurement rules and contracts awarded at normal market prices. Includes travel costs for external experts Exceptions: specific actions such as website development or communications should be recorded under the "Publicity" budget line; all audit related costs are recorded under the “Audit/First level control" budget line. Partners cannot charge a consultant rate to other project partners for services or work carried out during project implementation. This should be recorded under the 'Partner staff' budget line of the relevant partner. PUBLIC PROCUREMENT: N°1 FINDING IN AUDITS

Outside the eligible area Maximum daily subsistence Financial Requirements Eligibility of expenditure Outside the eligible area Maximum daily subsistence No lump sums Travel costs All tickets, invoices and receipts must be kept Costs must be directly related to, and essential for, the effective delivery of the project Economy class travel on public transport only. Additional costs for business or first class travel are not eligible. Maximum daily subsistence allowances are based on the Commission subsistence allowances paid to experts on assignments requiring an overnight stay. Expenses for individuals other than staff should be included under the appropriate budget line (external expert, audit, communication). Per diems are allowed if a) The costs remain below the recommended ceilings b) This is the way the partner’s administration deals with travel

Meetings & seminars Financial Requirements Costs related to the: Eligibility of expenditure Meetings & seminars Costs related to the: organisation of meetings and events (renting of premises and equipment, meals, etc) participation in meetings and seminars related to the project No travel costs under this line

Publicity Financial Requirements Eligibility of expenditure Missing logo Call for tender Publicity Expenditure with the main aim of promoting the project This includes website, promotional material and printed publications. Public procurement rules must be observed in selecting company or individual who will carry out the assignment.

Equipment Financial Requirements Eligibility of expenditure Depreciation Pro rata Equipment Durable equipment must be essential for the delivery of the project and used for that purpose. Depreciation should be made in accordance with the internal accounting rules of the partners and generally accepted for items of the same kind. Only the portion of the equipment's depreciation corresponding to the duration of the project and the rate of actual use for the purpose of the project may be taken into account. Once the eligible amount is determined, it must be claimed in full at once upon purchase of the equipment. investment budget line (where the total cost is eligible) versusequipment budget line (where depreciation is the rule). Goods purchased before the start of the project can be claimed at a depreciated rate as long as they have not previously been financed by any other source. Examples of durable equipment: computers, laboratory equipment, machine-tool, measures instruments, etc.

Investments Financial Requirements Eligibility of expenditure Changes Call for tender Investments All eligible expenditure must be fully described in the approved Application Form.

Administration costs Financial Requirements Eligibility of expenditure Administration costs Since April 2011, there is a flat rate of 11% of partner staff budget for administration costs. The rate is automatically calculated based on the partners’ actual staff costs. No direct costs can be claimed No direct costs can be claimed for admin costs.

Revenue Financial Requirements Eligibility of expenditure Revenue The Lead Partner must keep separate accounts for the project so that all expenditure (costs) and all revenue (receipts) can be posted and audited, and detailed summary reports drawn up. All revenue generated from sales, rentals, subscriptions, fees or other equivalent sources must be reported and must be deducted from the eligible costs. A separate budget line for revenue is included in the Application Form and the payment claim. In case of a revenue-generating projects, the current value of the net revenue from the investment must be estimated over a specific reference period. Where it is not possible to estimate the revenue in advance, the revenue generated within 5 years following project closure must be reported (article 55 of EU regulation No 1083/2006).

Expenditure outside eligible area Financial Requirements Eligibility of expenditure Expenditure outside eligible area Projects must get formal approval from the Secretariat before incurring expenditure outside of the NWE area. . For partners from the NWE area, any expenditure incurred outside the eligible area (for example, costs of a meeting or conference held outside the area) must be justified in full and a clear need for the expenditure to be incurred outside the area must be demonstrated

In-kind contribution Financial Requirements Eligible if : Eligibility of expenditure In-kind contribution Eligible if : it was included in the Approved Application Form consists of the provision of land or real estate, equipment or raw materials, research or professional work or unpaid voluntary work is provided free of charge to the partners. it does not include staff paid by the partner organisation The replacement value of volunteer work should be calculated according to indicative hourly/daily rates of remuneration for equivalent work. In the case of the provision of land or real estate, the value shall be certified by an independent qualified appraiser or duly authorised official body.

Ineligible costs Financial Requirements (non-exhaustive list) Eligibility of expenditure Ineligible costs (non-exhaustive list) National banking charges VAT unless it is genuinely and definitively borne by the final beneficiary Fines, financial penalties and expenditure on legal disputes Interest on debt Decommissioning of nuclear power stations Housing Further Information: General Regulation (EC) No 1083/2006 - article 56 ERDF Regulation (EC) No 1080/2006 - articles 7 and 13 Implementation Regulation (EC) No 1828/2006 - articles 48-53

Preparation costs Financial Requirements Eligibility of expenditure Preparation costs Costs related to project development and application are eligible if: The activities show a direct, demonstrable connection to the development of the project Costs were incurred up to one year prior to the closure date of the call. They are claimed by all partners at the same time (usually in Payment Claim 1) They are limited to a ceiling of €100,000 total eligible cost

Coordination costs Financial Requirements Eligibility of expenditure Shared costs Coordination costs Costs related to coordination and the management of the project must be recorded under the partner who will incur the expenditure. Partners can contribute financially to the coordination costs but this should not be mentioned neither in the budget, nor in the Payment Claim. LP cannot slice coordination costs off the top of payments to partners (article 80 regulation 1083).

Quiz Financial Requirements Eligible expenditure Quiz Where should the following costs be claimed? architects? Is it a consultant or part of an investment? Postage? Included as part of the 11% overhead flatrate Laptops? Equipment or investment? Subpartner staff? Staff Translation costs ? Meeting or publicity?

Project modifications Financial Requirements Part II Project modifications

Project changes: activities/output Financial Requirements Project modifications Project changes: activities/output The approved Application Form details the project’s: content and management structure expected results, outputs and impacts concrete deliverables The Lead Partner must inform the Secretariat about any changes to the Application Form and use the request for changes form. Approval by the Secretariat or the Programme’s Steering Committee In some cases (the drop-out of a partner, unexpected results preventing the project from further advancing in the direction originally planned, unforeseen administrative delays, etc.), projects may notice that they cannot successfully implement all actions of the approved Application Form and / or that they wish to implement other or additional actions.

Project modifications Financial Requirements Project modifications Project modifications The project’s implementation plan and budget are approved as part of the Application Form. The AF is a legal document. Before you do anything, discuss any possible changes with the JTS. Consequence : ineligible expenditure During the lifetime of a project, you may wish to amend the partnership, change the budget line split, modify the envisaged project implementation or the project end date.

Project modifications Financial Requirements Project modifications Project modifications Rules for Request for Changes : Maximum of 3 times during the project lifetime no later than 6 months before the project’s end date only upon formal request and approval “request for changes” form must be used During the lifetime of a project, you may wish to amend the partnership, change the budget line split, modify the envisaged project implementation or the project end date.

Project modifications Financial Requirements Project modifications Project modifications “Big” changes include: End date extension Partnership change Budget line modification Action plan Schedule etc.. Such changes are approved by either the JTS or the Steering Committee, depending on the type of change. During the lifetime of a project, you may wish to amend the partnership, change the budget line split, modify the envisaged project implementation or the project end date.

Project modifications Financial Requirements Project modifications Project modifications “Minor” changes include: a change of bank account a new contact person a change of address change in company name change in VAT status etc… The Secretariat should be notified of ALL changes as soon as possible by official letter from the Lead Partner. During the lifetime of a project, you may wish to amend the partnership, change the budget line split, modify the envisaged project implementation or the project end date.

Project changes: budget/finances Financial Requirements Project modifications Project changes: budget/finances Budget Line Modifications (BLM) Projects can overspend a maximum of 20% on an individual budget line. Increases of more than 20% on individual budget lines must be submitted and duly justified through the request for changes The project will receive formal approval from the Secretariat if appropriate. Other financial changes Ex: a reduction of grant rate at partner level, a decrease in TEC budget -> use the request for changes form. Without JTS approval, costs above 120% will be cut

Quiz Financial Requirements YES Project changes Quiz One of your partners asks to change the site of their investment. Do you need a request for changes? YES Does it require a budget increase? Does the budget line go over 120% of the approved budget? Is there a change in the approved action plan? Are the costs eligible? Only if the change has been approved through a RFC

Financial Requirements Payment procedure

Financial Requirements Payment procedure

Some basic rules Financial Requirements Payment procedure Some basic rules Payment Claims and Progress Reports must be filled out in English, submitted together, twice a year (end of April and end of October). “First come, first served” : plan your cash flow as the reimbursement can take from one month to several months. Payment will be made only if both the Progress Report and Payment Claim are deemed acceptable. The JTS sends the monitoring report to the LP after approval The Certifying Authority emails a letter confirming payment. A maximum of 85% of the ERDF before the final claim. Article x of the SC states : Spending targets are based on the annual budgets provided in the AF. It is important to be proactive communicating with the JTS and PP because: Underspending can hurt your project If JTS is warned early on, it’s easier to find a solution. Tell JTS of any partnership issues.

How to speed up the process? Financial Requirements Payment procedure How to speed up the process? Check that both the Payment Claim and the Progress Report are correct before you submit them. All required information must be filled in : dates, signatures , etc. There must be a full set of verification sheets and annexes. Fill in the comment sections completely. Answer the JTS queries as soon and as accurately as possible. Circulate the assessment report to all partners and implement the JTS’ recommendations for improvement. Be proactive and communicate with the JTS: inform us of any delay or project modifications before they have substantial consequences. If the controllers’ names do not match the approbation certificates, the payment claim will be rejected.

The first payment claim Financial Requirements Payment procedure The first payment claim Quiz: what documents need to be submitted with the PC ? a signed Subsidy Contract. a signed Partnership Agreement. first level controller approbation certificates for all partners submitting expenditure and, in any case, the Lead Partner. a letter confirming the project’s bank details for payments, ideally with a bank document showing the IBAN. All projects approved at PSC7 are expected to claim in October 2011. This means being proactive in getting FLC approved and communicating eligibility rules and procedures to all partners. No payments can be made if the partners haven’t signed the partnership agreement. No payments can be made to partners without an approved FLCer. No payments can be made to projects whose LP has not been approved. If the controllers’ names do not match the approbation certificates, the payment claim will be rejected.

Why is it important to communicate with the JTS? Financial Requirements Payment procedure Why is it important to communicate with the JTS? VoE early warning to find suitable solutions (N+2, BLM, spending…) JTS can support you with partnership issues Advice on spending targets, project changes,.. Advice on project management issues We welcome informal exchanges outside of reporting periods!!! N+2 Use comment sections to explain divergences, why partners aren’t claiming, why there are underspends. Explain in PR when there are delays. update JTS on project management changes We welcome informal communication with projects outside of 6 monthly reports!

Payment claim Financial Requirements Payment procedure Payment claim As of the April 2013 reporting period, all payment claims will be submitted through the On-line Form (OLF). This is a paper free platform developed for the Programme. Fin