Joint technical Secretariat Project budget planing 19 January 2010, Saldus 21 January 2010, Līvāni Latvia–Lithuania Cross Border Cooperation Programme 2007–2013 WORKSHOP “How to prepare good application?”

 Principles, general rules  Eligibility of expenditure  Budget lines  Non eligible costs  Revenue  Costs sharing  Changes in the project budget  Common mistakes in AF  Budget planning 2 Content

 Programme Document  Programme Manual  Subsidy Contract  Relevant EU and national legislation including National Eligibility Rules  Guidelines for First Level Controllers (FLC)  FLC guidelines for PP and LP Which ever rule is stricter - applies! 3 Eligibility: Legal Framework

Sound Financial Management Council Regulation no 1605/2002 of 25 June 2002  The principle of efficiency is concerned with the best relationship between resources employed and results achieved  The principle of effectiveness is concerned with attaining the specific objectives set and achieving the intended results  The principle of economy requires that the resources used by the institution for the pursuit of its activities shall be made available in due time, in appropriate quantity and quality and at the best price 4 Main Principles

5 General Rules Applicable to Project Budget:  Avoiding Corruption and Conflict of Interest  No Double Financing  Ownership of Project Results  Public Benefit  No Sub-Contracting Between PPs

6 Eligibility of Expenditure  Costs are definitively born by the LP or PP and would not have arisen without the project  Expenditure has actually been paid out  Expenditure is considered to be paid when the amount is debited from the partner institution’s bank account  In case of shared costs the expenditure is considered paid when the payment was made by the implementing partner  Project costs are proved by delivery of works, services or supplies (at least partial delivery

7 Eligibility of Expenditure  Expenditure is directly linked to the Project  Expenditure is reported under the correct BL and WP  Expenditure is reported in the same Reporting Period as it was paid  The reported expenditure must not exceed approved eligible Project budget  Exspenditure in BL4, BL6, BL7,BL8 should be indicated and not exceed limits set in AF

 BL1 Personnel  BL2 Direct Administration costs  BL3 Indirect Administration costs  BL4 External Services  BL5 Travel and Accommodation  BL6 Equipment and Infrastructure  BL7 In Kind costs  BL8 Preparation costs 8 Budget Lines

9 BL1: Personnel costs Includes:  Salaries, wages  Employment taxes, social security  Health insurance and pension contributions of the staff directly engaged in the project and employed by the Partner institution on the basis of an employment/ labor contract Requirements:  The actual salary rate has to be applied!  Costs must be certified on the basis of job agreements, decrees, time sheets, record of tasks carried out Not eligible:  Daily work of staff members, which would be carried out regardless of the project implementation

BL1: Personnel costs Hourly rate calculation ( 1 līmeņa kontrole/LV LT territoriālās Sadarbības Programma / stundas likmes kalkulācija)  Full time  Part time 10 BL1: Personnel costs/ LV

11 BL2:Direct Administration costs Directly linked to the project and fulfilling the following conditions:  Essential for the project’s implementation and would not have been incurred if the project had not been carried out  If possible, consumables to be reported as project expenditure should be purchased separately from other office consumables

12 BL3: Indirect Administration costs (Overhead costs) - share of regular monthly payments for rent, electricity, heating, depreciation costs and other similar costs directly related to project activities and calculated pro rata according to justified and clear method Usually the share calculation is based on:  The working time of staff members  Office space used for the project indirect Administrative costs can be up to 5 % of the total eligible project budget

13 BL3: Indirect Administration costs  The cost of depreciation of equipment, for which there is a direct link with the project is eligible expenditure, provided that:  national or Community grants have not contributed towards the purchase of such equipment  the depreciation is calculated in accordance with the relevant accountancy rules  Purchase of office furniture, computers and other office equipment cannot be placed here. They have to be placed under the BL6 “Equipment and Infrastructure”  Administration costs of the external experts must be included in the costs listed under the BL 4 “External Services”

14 BL3: Indirect Administration costs

15 BL4: External Services  Expenses paid by PP to external providers  Basis: supply contracts, service contracts, enterprise agreements, invoices  Costs are reasonable according to the standard rates in the country where the contracting Partner is located; average market rates resulting from public procurement procedures apply  Only expertise specified in the Application Form  Quality of produced outputs is to be ensured

16 BL5: Travel and Accommodation  Travel and accommodation costs of employees of the project partner institutions and related to their participation in project meetings, seminars or events  Travel costs are eligible only if they are directly related to and essential for the effective delivery of the project  The most economic or reasonable way of transport must be used  Despite the PP legal status (NGOs) the subsistence allowances rates as well as accommodation costs must not exceed the set limits for the public authorities under national regulations

17 BL5: Travel and Accommodation  The travel and accommodation costs of external experts participating in project activities have to be budgeted under BL4 “External Services” The following costs are not eligible:  costs exceeding national limits (e.g. rate per room per night); unless justification is provided and allowed according to the national legislation  travels in the first or business class, unless it is clearly proved that there was no other option or that this was the most economic/less expensive option (documentation on the justification is required)  use of car or taxi if public transport is available, unless duly justified (documentation on the justification is required)  daily travels of project personnel from home to office and back

 BL1 Personnel  BL2 Direct Administration costs  BL3 Indirect Administration costs  BL4 External Services  BL5 Travel and Accommodation  BL6 Equipment and Infrastructure  BL7 In Kind costs  BL8 Preparation costs 18 Budget lines Travel costs: External expertise Personnel Guests Administration costs: Personnal External expertise  BL1 Personnel  BL2 Direct Administration costs  BL3 Indirect Administration costs  BL4 External Services  BL5 Travel and Accommodation  BL6 Equipment and Infrastructure  BL7 In Kind costs  BL8 Preparation costs

19 BL6: Equipment and Infrastructure  Public procurement rules must be followed  Investments should be aimed at public use and their ownership and the way of use cannot be changed 5years after the project has been finalized  Only investments specified in the Application Form  Quality of produced outputs is to be ensured Recommendations: Justify need of investments for the project Specification of investments: sufficient details versus flexibility Describe cross-border benefit of investments Describe who and how will maintain the infrastructure

20 BL6: Equipment and Infrastructure  In case the project plans to install the infrastructure, the relevant PP has to be the owner of the land and/ or have the building rights on the land  If project plan construction or renovation works one copy of a full set of documents required under the national building laws must be submitted to the JTS together with the AF (P.M. 5.2)  If costs under this budget line exceed EUR 50,000 the LP has to submit a Feasibility study (P.M. 5.2)  PP should not forget to plan costs which is required by law in order to, but are not part of construction contract (building supervisor, permits etc.)

21 BL7: InKind Only unpaid voluntary work is eligible. (work that is done on a voluntary basis for which the person does not receive any remuneration from whatever source)  minimum monthly or hourly official national net salary level is followed when calculating the value of in-kind contribution.  essential to the project and based on a written agreement  Limited to up 15%, of partners budget.

22 BL8:Preparation Costs  Only preparation of technical documentation for the project is eligible  Feasibility study; Investment project,  Technical project; Environmental impact assessment; Permits for building  Translation of technical documents and Application Form are eligible.  Preparation costs are eligible if the payments are made not earlier than 24 months before the JMSC decision.  Up to 5% of the total eligible project budget but no more than EUR  Preparation costs have to follow the rules applicable to the BL “External Expertise” as well as all rules on eligibility of costs.

23 Examples of Non-eligible Costs  VAT, other taxes and charges, if these are legally recoverable  Luxury goods and services, presents  Costs already supported by a European or other international or national grant  Staff costs arising from the statutory responsibilities of the public authority, which would be carried out regardless of the project implementation  Payments for political or religious activities  Fines, financial penalties and expenses of litigation  Cost-sharing method, when the LP is withholding a certain amount of PP expenditure after receiving payment from CA See full list in Programme Manual, Chapter 9.6

24 Revenue  If a project generates revenue, for example, through services, conference participation fees, sales of brochures or books, it must be deducted from eligible costs  Project revenue generated up to 5 years after closure must be recorded/reported and reduced from the eligible costs

25 10% & 20% Rules  No more than 20% of the Programme total eligible public funds will be granted to project partners from Kaunas region  Up to a limit of 10% of the Programme’s budget may be used outside the Programme area and the European Community  Rules apply on Programme level not on Project level

26 Cost Sharing  Division of certain project costs among project partners according to transparent and equitable method  Implementing partner  Paying partners  Detailed information – Programme Manual 8.4 and FLC Guidelines

De-commitment  The MA has rights to withhold ERDF co-financing if it has not been spent in time and if Programme is subject to decommitment procedure by EC  Projects having the under-spending rate of more than 20 % can be subject to the de-commitment procedure  Plan vs reality (INTERREG IIIB) 27

Changes in the Project  Types of changes:  Budget reallocation  Project can reallocate the budget between the budget lines and/or work packages up to 30 % of the total eligible project budget  As a rule, Project changes can be requested only once during the project implementation  Change of project activities and/or outputs; Prolongation of project duration  Change of Project Partners  All minor changes (e.g. changes in contact information, minor rescheduling of activities, small budget implementation plan deviations) can be reported as ‘deviations’ in Progress Reports 28

29 Project starting date JuneJulyAugustSeptemberOctoberNovember 2010 Max perriod for clarifications Sc is send to LP LP sent signed SC with Partnership agreement with annex 2 to JTS Max 2 weeksMax 1 month after SC signing 18d. Project starting date

30 Reporting periods  6 months reporting periods  July 1 – December 31  January 1- June 30  The first and the last periods can be longer or shorter

31 Reporting 0 Start months LP PP 1 period 6 2 period FLC <= 10 working days Partner report Confirmation <= 1 month FLC Progres report 9 >= 10 working days Max 3 months JTS 3 weeks 15 3 period Check Max 6 months CA JTS-Joint technical secretariat FLC –First level control CA Certifying authority

Audit and Control  First Level Control (FLC): 100% of expenditures. FLC guidelines - publicly available  Audit: on a sample basis.  Other Possible Checks: – European Commission’s audit services; – European Court of Auditors; – JTS/ Managing Authority; – Certifying Authority. 32

Common mistakes in AF (1)  Planned costs are not specified, only lump sums are mentioned and cost breakdown is not provided  Justification is not provided for planned costs (e.g. purchase of video projector). Project Applicant has to explain purpose of this purchase and justify the necessity of this purchase for the Project implementation  If division of budget between PP is not balanced, LP should provide justification for such a division  First Level Control costs are not planned for Partners from Lithuania or insufficient amount is planned (normally it should be in the range of 3-4% of Partners’ from Lithuania planned budget)  Planned expenditures related to implementation of activities taking place in adjacent region and outside the EU territory and Programme area are not indicated in relevant table of worksheet “V. Project budget” 33

Common mistakes in AF (2)  Amounts indicated in the Application Form are not matching the amounts indicated in supporting documents (Technical Documents and/or Feasibility Study)  “Maximum budget allowed” principle was used  Staff costs are not specified and remuneration rates for staff members are not indicated  Technical documentation should always include total costs estimation in cases when planned investments consist of several parts  Projects did not plan PP budget division to BL (it is not asked in AF). After project approval problems arise 34

35 Budget planning(1)  Plan:  Activities and purchases  Work Packages  All costs  Each planned cost has to be ascribted to: – Project partner – Reporting period – Work package – Budget line

36 Budget planning tools