1. WELCOME! Lead Partner Information Seminar Agenda
21-22 September 2010
WELCOME!
Lead Partner Information Seminar
Financial requirements
Project monitoring & reporting
Audit & controls
Communication
=> Practical information to support Lead Partners in their daily tasks
Until 5pm tonight and tomorrow morning from 9am
Bathroom next to the elevator
Coffee in between meeting rooms

2. WELCOME! FINANCIAL REQUIREMENTS
What project promoters cannot ignore about INTERREG IVB NWE project management

3. General considerations: the big picture
Financial Requirements
The Basics
General considerations: the big picture
EU regulations in general, notably 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.

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

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

6. The Lead Partner Principle (LPP)
Financial Requirements
The Lead Partner Principle
The Lead Partner Principle (LPP)
article 20 of ERDF Regulation (EC) 1080/2006
One project partner that steps up as the overall responsible partner on behalf of the whole partnership.
He is the administrative link between the programme and the project (flow of information and fund).
As such, they bear responsibility for ensuring the project’s implementation.
=> a Partnership Agreement becomes 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.

7. Financial Requirements
The Lead Partner Principle
Devolved legal and financial responsibility
The Lead Partner
ensures a sound management and the delivery of outputs
drafts the Partnership Agreement, setting mutual rights, obligations and duties among project partners.
ensures that expenditure is eligible, even if partners remain liable for their own actions and related expenditure
is responsible for reporting and other administrative actions
to the JTS
distributes ERDF to partners
Compulsory For the 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 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.

8. 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…
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”.

9. 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 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 expenditures 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):
o 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;
o enforce stringent reporting procedures;
o set up realistic spending plan together with the project budget, which should be the basis for the LP's monitoring of project expenditures;
o anticipate future bottlenecks through frequent updates on forecasts of expenditure by project partners (e.g. together with periodic progress
reports);
o strict budgetary control.

10. 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 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.

11. The Partnership Agreement
Financial Requirements
The Basics
The Partnership Agreement
Compulsory document

12. Poll: partnership agreement
Financial Requirements
Partnership Agreement
Poll: partnership agreement
Who has already drafted their partnership agreement?
Who has signed it?

13. Recommended clauses (1)
Financial Requirements
Partnership Agreement
Recommended clauses (1)
Does your partnership agreement address all these points?
Compulsory For the 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;

14. 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;

15. 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

16. 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.
No obligation to send it with the Subsidy Contract or the first payment claim: transmit it when it’s signed!

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

18. 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 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 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 period concept of project controller (or project auditor) will no longer apply in the majority of cases in the 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.

19. 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, actually incurred, supported by documents of probative value and eligible.
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 has really been delivered
Eligible:
in line with AF: direct link with AF, foreseen in AF, right partner done it, …
In line with Subsidy contact: expense incurred after start date and before end date…

20. Case study Financial Requirements NO
Audit trail
Case study
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

21. 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

22. 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 From.
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 (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

23. Eligibility of expenditure
Financial Requirements
The Basics
Eligibility of expenditure

24. Eligibility period Financial Requirements Start date:
Eligibility of expenditure
Eligibility period
Start date:
All costs are eligible 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.

25. Use of rates incomplete timesheets
Financial Requirements
Eligibility of expenditure
Use of rates incomplete timesheets
Partner staff
Staff costs are the costs of the actual time worked by the persons directly carrying out the work under the project and directly employed by the partners.
All staff costs must be based on real costs, supported by proper documentation (payslips and timesheets) and calculated on the following basis:
Remuneration costs (taken from payroll) = total gross remuneration + employer’s portion of social charges. Remuneration costs must be calculated individually for each employee and must be based on the monthly payslip.
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 (to be included under "Administration costs“).
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

26. Financial Requirements
Eligibility of expenditure
External Experts & Consultants
Work done by independent consultants must be essential to the project and reasonably priced. Costs must be paid on the basis of contracts and against invoices.
It is the Partner’s responsibility to ensure that public procurement rules are respected and that contracts are awarded at normal market prices.
Travel and accommodation expenses for external experts should be
recorded under the external experts budget line.
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

27. Outside the eligible area
Financial Requirements
Eligibility of expenditure
Outside the eligible area
Travel costs
All tickets, invoices and receipts must be kept by partners so that their eligibility can be checked and audited. Costs must be directly related to, and essential for, the effective delivery of the project and cover economy class travel on public transport. Additional costs for business or first class travel are not eligible. Recommendation for 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

28. Meetings & seminars Financial Requirements
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 specifically to the project are eligible under this budget line.
Related travel costs and external expert costs must not be claimed under this budget line (external expert, audit, communication).

29. Publicity Financial Requirements
Eligibility of expenditure
Missing logo
Call for tender
Publicity
Expenditure with the main aim of promoting the Project should be part of this cost category. 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.

30. Equipment Financial Requirements Eligibility of expenditure
Depreciation
Pro rata
Equipment
Durable equipment charged to the project must be essential for the delivery of the project and used for that purpose.
A clear distinction must be made between what is included in the investment budget line (where the total cost is eligible) and the equipment budget line (where depreciation should be the rule).
The 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.
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.

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

32. Administration costs Financial Requirements
Eligibility of expenditure
No link
calculation method
ceiling
Administration costs
Administration costs include items such as office rent, maintenance and furniture, electricity, heating, water, insurances, telephone, fax, internet, stationary and other administrative structure costs.
Under the IVB NWE Programme, administration costs are limited to a maximum 10% of the total eligible budget at project level and 20% of the staff costs at partner level.
When claiming administration costs, partners have 2 options:
Direct costs: partners directly claim, cost item per cost item. Paid invoices are the underlying proof of expenditure.
Indirect costs or overheads: partners must use the calculation of the total overheads of their organisation and a distribution key related to the partner staff involved in the project. This must be properly documented and periodically reviewed.

33. 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).

34. Expenditure outside eligible area
Financial Requirements
Eligibility of expenditure
Expenditure outside eligible 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.
Projects must get formal approval from the Secretariat before incurring expenditure outside of the NWE area.
For information on partners outside the NWE area, see Guidance Note 4 “Partnership”.

35. In-kind contributions
Financial Requirements
Eligibility of expenditure
In-kind contributions
This consists of the provision of land or real estate, equipment or raw materials, research or professional work or unpaid voluntary work provided free of charge to the partners. Staff paid by the partner organisation is not contribution in kind.
In-kind contribution can only be included in Payment Claims if it was included in the Approved Application Form attached to the Subsidy Contract.
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.

36. 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
Exchange rate loss (or gain)
Further Information:
General Regulation (EC) No 1083/ article 56
ERDF Regulation (EC) No 1080/ articles 7 and 13
Implementation Regulation (EC) No 1828/ articles 48-53

37. 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 may include staff, external experts, travel and subsistence, meetings, publicity.
Preparations costs must be claimed all at once in a Payment Claim (usually the first or second one)
They are subject to a ceiling of €100,000 total eligible cost

38. Coordination costs Financial Requirements
Eligibility of expenditure
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.

39. Project modifications
Financial Requirements
Project modifications

40. Project modifications
Financial Requirements
Project modifications
Project modifications
The project’s implementation plan and budget are approved as part of the Application Form. 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.
Theses changes are allowed 3 times in total, no later than 6 months before the end date of the Project and only upon formal request and approval by the Secretariat or the Programme’s Steering Committee – depending on the significance of the changes. The “request for changes” form must be used.
The Secretariat should be notified of minor changes as soon as possible by official letter from the Lead Partner. This would be, for example, a change of bank account, a new contact person, a change of address, etc.

41. Project changes: budget/finances
Financial Requirements
Project modifications
Project changes: budget/finances
Budget Line Modifications (BLM)
Projects can be overspent by a maximum of 20% on an individual budget line. Increases of more than 20% on individual budget lines must be submitted and duly justified to the Secretariat using the request for changes form. The project will receive formal approval from the Secretariat if appropriate.
Other financial changes
Ex: a reduction of grant rate at partner level or a decrease in the overall budget -> use the request for changes form.
Note: it is not possible to increase the project’s total ERDF amount.

42. Project changes: activities/output
Financial Requirements
Project modifications
Project changes: activities/output
The approved Application Form details the project content and management structure, as well as the expected results, outputs and impacts, and concrete deliverables of the Project.
The Lead Partner must inform the Secretariat about any changes to the Application Form and use the request for changes form.
Depending on their significance, approval might be given 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.

43. Financial Requirements
Payment procedure

44. Financial Requirements
Payment procedure

45. Some basic rules Financial Requirements
Payment procedure
Some basic rules
Payment will be made only if both the Progress Report and Payment Claims are deemed acceptable.
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” applies. Plan your cash flow as the reimbursement can take from one month to several months.
Once the claim and progress report are approved, the JTS sends an to the LP with the monitoring report and the templates for the next period. The Certifying Authority s a letter confirming payment.
A maximum of 85% of the ERDF project budget can be paid
before the submission of the final claim.

46. 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. They must bear all the required dates and signatures and be supported by a full set of verification sheets and annexes.
Fill in the comment sections as much as possible.
Answer the JTS queries as soon and as accurately as possible.
Circulate the assessment report to all partners and find ways to implement the recommendations for improvement that will be listed.
Be proactive and communicate with the JTS: inform us of any delay or project modification since these may have substantial consequences.
If the controllers’ names do not match the approbation certificates, the payment claim will be rejected.

47. The first payment claim
Financial Requirements
Payment procedure
The first payment claim
The following documents are necessary for payment of the first claim:
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.
if applicable, the calculation method for overheads
approved by the first level controller.
If the controllers’ names do not match the approbation certificates, the payment claim will be rejected.

48. Payment claim template
Financial Requirements
Payment procedure
Payment claim template
Financial reporting uses the Payment Claim Template. Note that a new template will be sent to you after each payment (data is cumulated), in an MS-Excel format.
There is a worksheet per partner and each partner worksheet feeds the project claim sheet. There are formulas and links in the document: be careful when handling it. Any “damaged” files will be rejected for administrative reasons (upload in our programme monitoring system).
All controller declarations must be filled in and signed.
Verification sheets of expenditure must be fully completed
and annexed to the Payment Claim.

49. What do these documents look like?
Financial Requirements
Payment procedure
What do these documents look like?
The payment claim template and verification of expenditure sheets
Let’s start with the VoE!
VoE