1. The Preparation Phase: Part III: financial issues
Juras Ulbikas

2. Proposal writing - Resources to be Committed
Essentially a budgeting exercise
Many researchers don’t know how to do that
The Commission will never increase the budget
The Commission may reduce the budget, so don’t budget too tightly
Value for money

3. Proposal writing - Resources to be Committed
Estimating costs and preparing the budget
Direct vs. indirect costs
Direct = directly attributable to the project
Indirect = overheads
Majority of the costs are for personnel (time x salary)
Overheads are not allowed on subcontracting costs

4. Proposal writing - How to substantiate costs
General principles
Break down costs into categories
Depreciate equipment costs according to normal accounting principles
Justify levels of human resources
Different countries are expected to charge different rates
If any cost is not clear, review!
Poor justification of costs = storing up problems

5. Budgeting - Eligible Costs
incurred during the project
directly linked to the work as defined in the grant agreement
actual, i.e., really incurred and paid for
determined according to usual accounting and management principles
consistent with the principles of efficiency and effectiveness
exclusive of non-eligible costs (e.g. VAT)

6. Budgeting - Direct Costs
Directly attributable to the work in the project such as:
salaries for people who work directly on the project
costs for materials, components, and consumables that will be purchased solely for the project
costs for equipment
for the percent of time used in the project
it must have a book value
travel and subsistence costs
within reason

7. Budgeting - Indirect Costs
Indirect costs (Overheads)
not directly attributable to the work in the project
necessary to support the overall project, such as:
Salaries for support personnel
Facilities costs including rent, insurance, utilities, IT infrastructure, etc.
Equipment not used directly in the project w ork

8. Budgeting – Personnel costs
Base the hourly rate for the project on the workable hours
Concept of “workable hours” (Example)
52 weeks x 40 hrs = hrs
Vacation = hrs
National holidays = hrs
Sickness leave + other (estim) = 120 hrs
400 hrs
Workable hours: hrs

9. Budgeting – Personnel costs
Calculation example
Salary = 16,800 EUR/year
Workable hours = 1680 hrs
or: 1 Person Month = 1680/12 = 140 hrs
Hourly rate = 16,800 EUR / 1680 = 10 EUR/hr
Overheads: 25 % over the eligible direct costs
= 2.5 EUR per hour declared to the project
A higher salary is beneficial for the institute?

10. Budgeting – Calculation example
20 Person Months
Travelling: 5 travels of average 800 EUR
25% overhead rate
Budget
Personnel: 20 x 140 hrs x 10 EUR/hr = 28,000 EUR
Travel: 5 x 800 EUR = 4,000 EUR
Overheads: 25% x (28, ,000) = 8,000 EUR
Total = 40,000 EUR (costs)

11. Budgeting – Calculation example

12. Budgeting – Calculation example
(x1000 Euro)
Direct
Indirect
Total
Fund%
Total Funding
Uni-1
100 25
125
70%
87.5
SME
160 40
200
140 LE 50
250
175
Uni-2
Mgt 10 35
700
875 -
612.5

13. Budget – Management costs
Project management costs
NOT scientific management
100% or 70% reimbursable depending on project type
Rule of thumb: ~7% (as in FP7)
Include costs of compulsory CFS
Co-ordinators:
consider employing full-time professional project manager

14. Proposal writing - Project Management section
The management capability of the coordinator is critical
Basis is a sound work plan with feasible and measurable deliverables
Describe aspects:
project organisation and decision making structure
communication between partners
progress monitoring
project documentation

15. Proposal writing – Project Management Structure (example)

16. Work-package Co-ordinator
Project Management
Co-ordinator
Project Board
Project Office
Feedback and Control
Reporting
Work-package Co-ordinator
A basic principle of good EC Project Management is to decide carefully upon what is the role of good management in such a project.
The key role of management in an EC project is to perform the tasks and deliver the contractual deliverables in an efficient and timely manner. It could be said, it is about allowing the scientists to get things done or to do the science. But the scientists will also have a clear role in this and they should be clear about their role in the project. Having said that, it is important, where possible, to assign management functions to people who have experience of managing an EC project, whether they be dedicated management professionals or scientists with experience of managing an EC project.
So what does this diagram show?
This project has a designated Project Office - this is where the project managers will be. Their role will be to carry out the project effectively in terms of the contractual requirements (which remember are to ensure that the deliverables (Basically defined by the reporting schedule) are met and on time. The flow of reporting is shown also. Clearly, the Project Office will assist the Coordinator. Since the coordinator can get help from the Project Office, but ultimately the Coordinator is the one responsible for making sure the reports are met.
The decision making is also clear from this diagram. The Coordinator is represented here in a project board. The Project Board will normally be the decision making body. They will have representatives of each partner. Finally
The 2 key things to remember, which go back to the previous slide, is that the decision making and organisational structure must be clear to the assessors. In addition, the communications structure (which is key part of the decision making) has been made clear. In your proposal narrative, you would use a diagram like this along with a few sentences describing the roles of the Project Board and the other bodies illustrated. You would also make clear who does what.
Contractor
Contractor
Contractor
Source: UKRO

17. Proposal writing – PUDF
PUDF = Plan for the Use and Dissemination of Foreground
A kind of Business Plan
exploitation (using the results)
dissemination (spreading the results)
Use and dissemination of the project results
If weakly described, the applicants suggest that the project is proposed for academic satisfaction purposes, and this is not where H2020 is for!