Procedures for allocating budgets in EU projects at CERN Gregory Cavallo FAP-EF External Funding

External Grants (FAP-EF-EG) 18/05/2016 EU projects – Procedures for allocating budgets https://fap-dep.web.cern.ch/ef/european-union-eu-projects

How to build an EU project budget ? In theory Define the needs for the project Personnel: Who? Number of PM Material/Travel Estimate the costs Build the EC budget In practice Maximum budget decided by coordinator How much can we fit in? Number of PM? Who? Material/Travel budget PROPOSAL STAGE Inconsistency between commitment and budget may result in additional costs for CERN. External Grants will check this before submission (EDH) 18/05/2016 EU projects budgets

How to build an EU project budget ? Project accepted for funding Budget defined before project start in CHF Including CERN’s share, if any The amount will not change during the course of the project Exchange rage guaranteed for the full duration Exchange rate risk taken centrally PROJECT START 18/05/2016 EU projects budgets

H2020 - Overheads “Indirect costs (overhead) are costs that cannot be identified as specific costs directly linked to the work done in the project. In practice, they are costs whose attribution to the specific action cannot be or has not been measured directly, but only be distributed among the different activities by means of cost drivers or similar.” 2 types of projects: «Standard» projects : overhead rate = 25% of direct costs Marie Curie projects: overhead merged with management = 15-20% of direct costs 2 internal procedures on the website: Building a H2020 project internal budget Use of the Management budget on a H2020 “Marie Curie” project https://cds.cern.ch/record/2133155/files/H2020-budget-Procedure.pdf 18/05/2016 EU projects budgets

H2020 - Overheads Typical indirect costs are: Telephone charges & office supplies Heating, electricity, water, etc. Administrative support: Direct support: DG-LS, FAP-EF, HR-TA, IPT-EU, Secretariat Indirect support: FAP, HR, IPT, SMB, etc. Distribution of the overheads: Coverage of (some) central costs 40% (i.e. 8% of EC contribution) Coverage of (some) costs supported by departments 30% (i.e. 6% of EC contribution) Coverage of financial loss for the Organization 30% (i.e. 6% of EC contribution) 18/05/2016 EU projects budgets

How to build an EU project budget ? Distribution of the EC contribution (option 1) EC's funding rate 100% Project direct eligible costs 1000 Overheads (25%) 250 Project total costs 1250 Maximum EU contribution Exchange rate / Financial loss coverage 75 Overheads for central costs 100 Overheads for department costs Overheads for project costs Total granted to the project Project costs paid by deparment 100% funded 18/05/2016 EU projects budgets

How to build an EU project budget ? Distribution of the EC contribution (option 2) EC's funding rate 100% Project direct eligible costs 1000 Overheads (25%) 250 Project total costs 1250 Maximum EU contribution Exchange rate / Financial loss coverage 75 Overheads for central costs 100 Overheads for department costs Overheads for project costs Total granted to the project 1075 Project costs paid by deparment 107.5% funded 18/05/2016 EU projects budgets

How to build an EU project budget ? Advantage of Option 1 The Department obtains a fair share of overheads The Department can decide what to do with this money The money is carried forward until the end of the project Disadvantage of Option 1 Costs on the project must be 100% eligible Amount shall be adjusted in case of underspending on the project Advantage of Option 2 More flexibility on the project for ineligible costs Amount included in the project budget (no additional follow-up needed) Disadvantage of Option 2 Costs must be for the project only 18/05/2016 EU projects budgets

How to build an EU project budget ? Distribution of the EC contribution EC's funding rate 70% Project direct eligible costs 1000 Overheads (25%) 250 Project total costs 1250 Maximum EU contribution 875 Exchange rate / Financial loss coverage 52 Overheads for central costs 70 Overheads for department costs Overheads for project costs Total granted to the project 752 Project costs paid by deparment 248 75.2% funded 18/05/2016 EU projects budgets

Exchange rate risk CERN’s costs in CHF EU projects budgets in EUR CERN’s budgets/spending in CHF Costs declared to EC in EUR EC Contribution converted in CHF Exchange rate 1 Exchange rate 2 3 to 7 years Exchange rate 3 Exchange rate 4 18/05/2016 EU projects budgets

Exchange rate risk CERN’s costs in CHF EU projects budgets in EUR CERN’s budgets/spending in CHF Costs declared to EC in EUR EC Contribution converted in CHF 1 Y Risk partially covered Exchange rate 1 6 M Risk not covered Project start Exchange rate 2 3 to 6 Y Risk covered Exchange rate 3 Exchange rate 4 18/05/2016 EU projects budgets

Exchange rate risk FP7 statistics (2010-2014) Average duration of a project: 3.2 years Average variation of exchange rate over a project: 6.3% H2020 statistics (23.01.2015-today) Maximum variation of exchange rate: 8.1% Average exchange rate variation: 4.2% 18/05/2016 EU projects budgets

Exchange rate risk Why can CERN only lose money on exchange rate differences? https://fap-dep.web.cern.ch/ef/exchange-rate-impact 18/05/2016 EU projects budgets

Other financial risk/loss Salary increase of the personnel working on EU projects Budgets are build using the salary position/grid applicable when the person starts to work on the EU project; The subsequent steps/promotions do not decrease the available budget Impact: from 0 to 12.5% of the salary of the person With H2020 rules, personnel costs are now declared using the hourly cost of the last closed year Reimbursement rate is 100% of the declared costs; The declared costs are lower than the real costs; Impact: from 1.2% to 17% of the salary of the person 18/05/2016 EU projects budgets

Other financial risk/loss Thank you 18/05/2016 EU projects budgets