Louis Vervloet, General director, ESF Agency Flanders Simplified Cost Options in European Cohesion policy, yesterday and tomorrow Louis Vervloet, General director, ESF Agency Flanders

Purpose of the presentation Present the origin of “simplified cost options” (SCO’s) and their main features Present the SCO’s included in the Cohesion Regulations for 2014-2020 Name of your presentation

Origin of simplified cost options Flat rate for indirect costs in the original ESF Regulation. Majority of errors found by ECA in structural actions expenditure due to the complexity of the rules ECA 2007 annual report: making a greater use of ‘lump sum’ or ‘flat rate’ payments instead of ‘real costs’ Recovery plan November 2008: ESF amendment to allow unit costs and lump sums. Provisions extended to the ERDF: ERDF applies ESF rules. Amendments adopted in 2009. Options already exist in the Financial Regulation or some other policies Name of your presentation

SCO’s in 2007-2013 eligible cost = direct costs + (% of direct costs) Flat rate for indirect costs: indirect costs calculated as a % of direct costs (maximum 20%) eligible cost = direct costs + (% of direct costs) Standard scales of unit costs: reimbursement calculated on the basis of delivered quantities multiplied by a unit cost Ex: eligible cost = nb of trainees x cost by trainee Name of your presentation

SCO’s in 2007-2013 Lump sums (<50 kEUR): reimbursement when pre-defined terms of agreement on activities and/or outputs are completed Eligible cost = lump sum amount (if completed) or 0. Name of your presentation

Key points of SCO’s in 2007-2013 Optional ESF and ERDF only Only for grants (no operations or projects subject to public procurement contracts) SCOs shall be calculated ex ante on a fair, equitable and verifiable basis. Simplification! No audit of underlying financial documents. Amounts paid considered as paid expenditure if justified by direct costs (flat rate) or “quantities” (standard scales and lump sums) Name of your presentation

Evolution MS started using flat rates after approval of EC Very slow implementation of standard scales and lump sums due to legal uncertainty ECA annual report 2012 The Court did not detect any errors related to the specific use of SCOs. This indicates that projects whose costs are declared using SCOs are less error prone. Thus a more extensive use of SCOs would normally have a positive impact on the level of error. Name of your presentation

SCO’s 2014-2020: guiding principles Simplified costs = keys in terms of simplification and in terms of better focus on results: Maintain the ‘acquis’ Extend the use Harmonise the options while taking account of specificities (and the acquis) Improve legal certainty The Regulations provide for a toolbox of different possibilities from which you can choose according to your needs. Name of your presentation

Result based approach and SCO’s More emphasis on Results More correct and more focused Spending Better Partnership Compliance easier to fulfill Name of your presentation

Simplified Cost Options Standard scales of unit costs SCO’s in 2014-2020 regulation Simplified Cost Options Standard scales of unit costs Art.67b) CPR Lump sums Art.67c) CPR Flat rate financing Art.67d) CPR Name of your presentation

Calculation methods Ex ante evaluation Fair, Equitable and Verifiable method Use of existing EU schemes (for similar type of operation and beneficiary) Use of existing own national schemes Use of specific rates and methods from the CPR and Fund specific regulations Draft budget (ESF with public support <100.000€ for unit costs, lump sums and flat rates) Name of your presentation

What are standard scales of unit costs A training costs 1,000€ per person completing the training Output foreseen 7 people will follow the training = a total of 7 persons completing the training Maximum grant 7 persons x 1,000€ = 7,000€ Real output 1 trainee dropped-out at the middle of the course = 6 persons trained Real grant 6 persons trained x 1,000€ = 6,000€ Name of your presentation

How to calculate standard scales of unit costs (1) STEP 1 Define clearly the nature of the requested projects/operations in the call = the cost drivers of your call for projects STEP 2 Check the historical data (real costs) on similar projects/operations Look for possible benchmarks PES, education system, other experiences Name of your presentation

How to calculate standard scales of unit costs (2) STEP 3 Calculate the averages and define STEP 4 Check and discuss with colleagues in MA-CA-AA STEP 5 Decide Communicate and Implement IMPORTANT : stay constructive – critical and be your own “devils advocate” Name of your presentation

What are lump sums Lump sum Output foreseen Maximum grant Real output On the basis of a draft budget, a training is expected to cost 7,000€ Output foreseen 7 people will be trained Maximum grant If 7 people complete the training = 7,000€ Real output 1 person drops out and only 6 people are trained Real grant Only 6 person were trained and not 7 as agreed = 0€ Name of your presentation

How to calculate lump sums (1) STEP 1 - define the nature of the project/operation and the result wanted the result is your cost driver STEP 2 - define a detailed list of items/actions that appear in a reasonable budget STEP 3 - Check historical data or look for benchmarks in public and private sector for the whole and for each item if possible Name of your presentation

How to calculate lump sums (2) STEP 3 Calculate the averages and define STEP 4 Check and discuss with colleagues in MA-CA-AA STEP 5 Decide Communicate and Implement IMPORTANT : stay constructive – critical and be your own “devils advocate” Name of your presentation

Limits of lump sums Only for projects with a max of 100.000 EUR public contribution Never use lump sums if you cannot define your result as a realistic and achievable single unit Name of your presentation

The application of a percentage: … Remaining eligible costs What are flat rates The application of a percentage: - to calculate … - to one or several categories of costs … Indirect costs Art. 68 1) CPR … Remaining eligible costs Art. 14 2) ESF reg. … Other categories of costs Art. 67 1) d) CPR Name of your presentation

How to calculate flat rates for indirect costs Directly related to an individual activity of the entity INDIRECT COSTS: Cannot be connected directly to an individual activity of the entity Name of your presentation

How to calculate flat rates for indirect costs Up to 25% of eligible direct costs Fair, equitable and verifiable methodology Existing similar national methodology Draft budget Up to 15% of eligible direct staff costs No need to make any calculation Using a flat rate applied in Union policies (Delegated act) For a similar type of operation and beneficiary Name of your presentation

How to calculate hourly staff costs (art 68,2 CPR) Annual gross employment costs 1720 hours Hourly rate applicable Name of your presentation

How does art 14,1 ESF work MS submits its data COM makes an assessment Delegated act is adopted Unit cost or lump sum methodology enters into force Financial management and control based on outputs and results Name of your presentation

What is the difference between article 67 CPR and article 14.1 ESF? MA/CA agreed UC/LS 1 people = 100€ Eligible expenditure 10 people justified x 100€ = 1000€ Project = outcome 10 people Project

What is the difference between article 67 CPR and article 14.1 ESF? COM Reimbursement 1000€ x %ESF UC/LS 1 people = 100€ Claims reimbursement 10 x 100€ = 1000€ MA/CA Outcome 10 people MA/CA MA/CA Eligible expenditure 10 people justified x 100€ = 1000€ agreed UC/LS 1 people = 100€ Project Project = outcome 10 people

Reimbursement on the basis of national rules What is the difference between article 67 CPR and article 14.1 ESF? COM COM UC/LS 1 people = 100€ Reimbursement 1000€ x %ESF Claims reimbursement 1000€ Reimbursement 1000€ x %ESF MA/CA Outcome 10 people MA/CA MA/CA Claims reimbursement Reimbursement on the basis of national rules Eligible expenditure 10 people justified x 100€ = 1000€ Declares outcome 10 people agreed UC/LS 1 people = 100€ Project Project = outcome 10 people Project Outcome = 10 people

When to use SCO’s Real costs are difficult to verify/justify High error rates Risk on retention of documents (SCOs = less paper but not paperless !) Want to focus on outputs and results Reliable data on financial and quantitative implementation Operations/projects are not 100% procured (except 14.1 ESF) Need to reduce administrative burden When you are sufficiently prepared ! Name of your presentation

Flat-rate financing (1) General (Art 67,1 d): examples Reminder: Never compare rates directly! Compare also the categories of costs calculated with the rate, and the categories of costs to which the rate is applied. Name of your presentation

Flat rate financing (2)calculate indirect costs (Art 68 CPR) * ESF, for grants < EUR 100.000 Name of your presentation

Comparison current / future - flat rate to calculate indirect costs -> flat rate to calculate any type of costs - increase of lump sum threshold - more calculation methods - lump sums / unit costs compulsory for small ESF grants But everything that is used now is usable in the future! Name of your presentation

Key points for implementation (1) Consider, consult and involve all stakeholders in the development and implementation of SCO’s Keep It Simple and Clear Timely and transparent communication prevent frustrations and misunderstanding Name of your presentation

Key points for implementation (2) Change the mindset: First SCO’s – only if proven impossible – real costs are allowed SCO’s are averages, some will gain but some will lose Simplification is key for better results Name of your presentation

Key points for implementation (3) Always keep in mind the simplification purpose. Compare the options and decide before the start of the programme! type of operations, data availability, legal certainty or flexibility, Define where your national rules block you Name of your presentation

Relevant legal references and documents For the current period: COCOF note on simplified cost options For the future: Updated guidance note (exp. end 2014) Simplified cost options: Art 67 & 68 Common Regulation (applicable to the 5 CSF Funds) Art 14 ESF Regulation (applicable to ESF) Art 18 ETC Regulation (applicable to ETC) Name of your presentation

References General director ESF-Agency Flanders Louis Vervloet General director ESF-Agency Flanders Gasthuisstraat 35 5th floor 1000 BRUSSELS louis.vervloet@esf.vlaanderen.be Name of your presentation

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Reimbursement on the basis of national rules What is the difference between article 67 CPR and article 14.1 ESF? COM COM UC/LS 1 people = 100€ Reimbursement 1000€ x %ESF Claims reimbursement 1000€ Reimbursement 1000€ x %ESF MA/CA Outcome 10 people MA/CA MA/CA Claims reimbursement Reimbursement on the basis of national rules Eligible expenditure 10 people justified x 100€ = 1000€ Declares outcome 10 people agreed UC/LS 1 people = 100€ Project Project = outcome 10 people Project Outcome = 10 people

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