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

2. 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
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3. 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
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4. 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
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5. SCO’s in
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.
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6. 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)
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7. 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.
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8. 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.
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9. Result based approach and SCO’s
More emphasis on
Results
More correct and more focused
Spending
Better
Partnership
Compliance easier to fulfill
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10. Simplified Cost Options Standard scales of unit costs
SCO’s in regulation
Simplified Cost Options
Standard scales of unit costs
Art.67b) CPR
Lump sums
Art.67c) CPR
Flat rate financing
Art.67d) CPR
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11. 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 < € for unit costs, lump sums and flat rates)
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12. 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€
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13. 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
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14. 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”
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15. 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€
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16. 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
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17. 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”
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18. Limits of lump sums
Only for projects with a max of EUR public contribution
Never use lump sums if you cannot define your result as a realistic and achievable
single unit
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19. 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
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20. 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
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21. 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
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22. How to calculate hourly staff costs (art 68,2 CPR)
Annual gross employment costs
1720 hours
Hourly rate applicable
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23. 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
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24. 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

25. 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

26. 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

27. 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 !
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28. 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.
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29. Flat rate financing (2)calculate indirect costs (Art 68 CPR)
* ESF, for grants < EUR
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30. 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!
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31. 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
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32. 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
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33. 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
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34. 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)
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35. References General director ESF-Agency Flanders
Louis Vervloet
General director
ESF-Agency Flanders
Gasthuisstraat 35 5th floor
1000 BRUSSELS
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36. Subheadline
Content
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37. 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

38. Subheadline
Content
Name of your presentation