Financial Reporting for SWITCH-Asia projects - presentation

European Union
Implementation of grants
contracts by beneficiaries
1

Agenda
PART I
Basic principles
General Obligations
Contract-award procedures
Eligible costs
Payment procedures
Technical and Financial reporting
PART II
Grants 2013
2

What is a grant?
Financial contribution, by way of donation,
in order to co-finance:
action
3

The principle of non-cumulative
No single beneficiary may receive more than one grant
4
financed by the European Union for a given action.

The principle of non-retroactive
Grants may only cover costs incurred after the date
on which the contract is signed.
5

The principle of co-financing
Grants may not finance the entire cost of the action
6

The principle of non-profit
Grants may not have the purpose or effect of
producing a profit for the beneficiary
(profit = surplus of receipts over the costs)
7

Agenda
PART I
Basic principles
General Obligations
Contract-award procedures
Eligible costs
Payment procedures
Technical and Financial reporting
PART II
Grants 2013
8

I
Contractual framework
Description of the action
II General Conditions
III Budget
IV Contract-award procedures
V
Standard request for payment
VI Template for narrative and financial reports
(interim and final)
VII Template for expenditure verification
VIII Template for financial guarantee
In case of doubt, read carefully all the
documents !
9

Key responsibilities of the main parties
in project implementation
The European Union
• Contracting Authority
• Endorses all documents
required by the grant contract
• Makes payments as required
in the grant contract and after
approval of relevant reports
• Conducts financial and
technical monitoring of the
project
• Conducts necessary ex-post
checks on Beneficiary’s
compliance with contractual
requirements
The Beneficiary
• Directly responsible for
project implementation
• Ensures project is carried out
according to the action plan,
indicators, and resources set
out in Description of Action
in Annex 1
• Provides interim and final
reports and request for
payments
• Facilitates monitoring by EU
• Ensures an adequate project
publicity/visibility
10

Agenda
PART I
Basic principles
General Obligations
Contract-award procedures
Eligible costs
Payment procedures
Technical and Financial reporting
PART II
Grants 2013
11

Contract-award Procedures
If implementation of the Action involves the
conclusion of contracts by the Beneficiary, the
contract-award procedures set out in
Annex IV shall apply.
12

Contract-award Procedures
General Principles:
• BEST VALUE FOR MONEY = the contract must be
awarded to the technically compliant tender being
the most economically advantageous one (ie, the
tender offering the best price-quality ratio);
• following the principles of transparency and fair
competition for potential contractors and taking care
to avoid any conflicts of interest;
• must comply with the rules set out in Annex IV which
includes rules of origin;
• In the event of failure to comply with the above
rules, expenditure on the operations in question is
not eligible for Community financing;
• The EC will carry out ex post checks on Beneficiaries'
compliance with the rules.
13

Nationality Rule
Definition:
Participation in tender procedures is open on equal terms to natural
and legal persons of certain nationalities.
Applicable regulation:
DCI: Financing instrument for the cooperation development
(Regulation (EC) N° 1905/2006 of the EP and of the Council - OJ L
378/1 of 27.12.2006)
http://ec.europa.eu/europeaid/work/procedures/implementation/eligibility/index_en.htm
• All European Union member States
Includes but is not limited to:
• Malaysia, China, India, Indonesia, Philippines, Thailand
• Exclude Singapore, Hong Kong, Japan, South Korea (= not eligible)
14

Rule of Origin (supplies)
Definition
Supplies must originate from certain states, and contractors must
present proof of origin.
Applicable regulation:
DCI: Financing instrument for the cooperation development
(Regulation (EC) N° 1905/2006 of the EP and of the Council - OJ L
378/1 of 27.12.2006)
http://ec.europa.eu/europeaid/work/procedures/implementation/eligibility/index_en.htm
Includes but is not limited to:
• All European Union member States
• Malaysia, China, India, Indonesia, Philippines, Thailand
• Exclude Singapore, Hong Kong, Japan, South Korea (= not eligible)
15

Contract-award Procedures
Services
> €200,000
Restricted
international
tender,
following
publication of
procurement
notice
< €200,000 but > €10,000
Negotiated procedure without
publication
≤ €10,000
Single tender
Supplies
> €150,000
International
open tender
procedure,
following
publication of
procurement
notice
€10,000
Negotiated
procedure
without
publication
≤ €10,000
Single tender
Works
≥ €5,000,000
International
open tender
procedure,
following
publication of
procurement
notice
€10,000
Negotiated
procedure
without
publication
≤ €10,000
Single tender
16

Contract-award Procedures
≤ €10,000 Single tender
The Beneficiary may place orders on the
basis of a single tender
This rule does not prohibit the
Beneficiary to consult more than one
service provider/supplier
17

Contract-award Procedures
< €200,000 but > €10,000 Negotiated
procedure (service contracts)
• The Beneficiary does not have to publish the
procurement notice;
• The Beneficiary consults at least three suppliers of its
choice and negotiates the terms of the contract with
one or more of them;
• The Terms of References (TORs) and/or Technical
Specifications must be drafted clearly.
• The time-limits for receipt of offers and requests to
participate must be long enough to allow interested
parties a reasonable and appropriate period to prepare
and submit their tenders.
18

Agenda
PART I
Basic principles
General Obligations
Contract-award procedures
Eligible costs
Payment procedures
Technical and Financial reporting
PART II
Grants 2013
19

Eligible costs
Definition:
• Real Costs incurred by the beneficiary
• During implementation of action
• Indicated in the estimated budget
• Necessary for implementing action
• Identifiable + verifiable
• Compliant with accounting standards
• Reasonable and justified
20

Eligible costs
Definition:
• Incurred by the beneficiary
• During implementation of action
• Indicated in the estimated budget
• Necessary for implementing action
• Identifiable + verifiable
• Compliant with accounting standards
• Reasonable and justified
21

Eligible costs
• Indicated in the estimated overall budget
To be considered eligible, all costs must have
been entered as eligible costs in the estimated
budget.
Any amendment of the estimated budget (higher
than 15% per heading) which would alter the
action or work programme planned may be
allowed only if it has been subject of a written
supplementary agreement between the parties.
22

Direct eligible costs
Necessary to implement the action
• Staff – Heading 1
• Travel expenses – Heading 2
• Equipment and supplies – Heading 3
• Local office – Heading 4
• Other costs and services – Heading 5
• Others - Heading 6
Real costs : analytical accounting system
Indirect eligible costs
Flat-rate : max 7% of direct costs
23

Eligible or ineligible?
Which of the following can be considered eligible for a grant financed by the Commission:
cost of bank transactions
cost of external auditing
credits to third parties
cost of translation
provision for reserve
currency exchange losses
cost of financial guarantee
purchase of land or buildings (real estate)
cost of electricity for the part of building used to implement the project
debts and provisions for losses
security cost of the building for the part used to implement the project
costs covered by another action;
administrative and management cost
cost of new computers to be used only by the project staff
insurance cost
maintenance cost
interest owed
rent
24

Eligible or ineligible?
Which of the following can be considered eligible for a grant financed by the Commission:
cost of bank transactions
cost of external auditing
credits to third parties
cost of translation
provision for reserve
currency exchange losses
cost of financial guarantee
purchase of land or buildings (real estate)
cost of electricity for the part of building used to implement the project
debts and provisions for losses
security cost of the building for the part used to implement the project
costs covered by another action;
administrative and management cost
cost of new computers to be used only by the project staff
insurance cost
maintenance cost
interest owed
rent
25

Preparation of The budget
26

The budget
Question :
You are analyzing the Human
Resources heading of the budget
that has been distributed. What
are your remarks? Are there any
not acceptable costs?
27

The budget
• Article 14 of General Conditions:
Direct costs (Art. 14.2.)
• Human Resources
• Actual gross salaries including social security
charges and other remuneration-related costs
• It concerns staff from Beneficiary or its
partners
• They must not exceed those normally borne by
the Beneficiary or its partners
• No fees accepted!
28

The Budget
• Article 14 of General Conditions:
Direct costs (Art. 14.2.)
• Subsistence costs
• Per diems:
• Covers accommodation, meals and local travel
within the place of mission
• requires an overnight stay away from the base
of operations
• Must not exceed the rates at the time of
contract signature and those normally borne
by the beneficiary or its partners
29

Agenda
PART I
Basic principles
General Obligations
Contract-award procedures
Eligible costs
Payment procedures
Technical and Financial reporting
PART II
Grants 2013
30

Payment Procedures
See Article 4 of the Special Conditions and
Article 15 of the General Conditions
1. Initial Pre-financing, paid within 45 days, as from
the date of reception by the Contracting authority of
signed contract
2. Further Pre-financing, paid within 45 days of the
Contracting Authority approving interim report
3. Final Payment, paid within 45 days of the
Contracting Authority approving final report
31

Pre-financings
conditions of payments
• Detailed in the grant contract
• Determined by:
• Duration
• Progress of the action
• Costs incurred by the beneficiary
32

1. First pre-financing
2. Further instalments of pre-financing
3. Final payment
33

First pre-financing
Maximum amount to pay (Art 15.1. GC)
Option 1: < 12 months & < 100.000 EUR
80% of the EC contribution
Option 2: >12 months & > 100.000 EUR
80% of the part of the estimated budget for Year 1
financed by Contracting Authority
34

First pre-financing
Reception of the signed contract
Check correct amounts in Article 4.2. of Special
Conditions
Article 4.3. of Special Conditions no need of
payment request if Art 4.3. reads as follows:
“The first installment of pre-financing, shall be paid to
the Beneficiary within 45 days, as from the date of
reception by the Contracting authority of signed
Contract…”
Original payment request, if applicable
Only in the absence of Article 4.3. (see above)
35

First pre-financing
Payment delays
Contractual deadlines: Article 4.3. of the
Special Conditions
45 days after receipt of signed contract
36

1. First pre-financing
2. Further instalments of pre-financing
3. Final payment
37

Further instalments of pre-financing
Amount to pay (Article 15.1. of GC)
Designed to normally cover the Beneficiary’s
financing needs for each 12 months period
Percentage to eligible costs laid down in Article
3.2. of SC
38

Further instalments of pre-financing
Necessary documents:
Article 15.1. of General Conditions
• Request for payment conforming to Annex V
• Expenditure Verification report, if required under Art
15.6
• Interim report
• Budget forecast for the next 12 month period
39

Further instalments of pre-financing
Check amount to be paid
Art. 15.1. of GC:
-Rule of 70%
• Further instalment of pre-financing if part of the
expenditure actually incurred funded by the EC = 70% of
previous payment and 100% of any previous payment
• Where consumption < 70%, the next instalment of pre-
financing payment is reduced by unused amount of
previous instalment of pre-financing.
-Total sum of pre-financing never > 90% of the total
amount financed by the Contracting Authority.
40

Further instalments of pre-financing
Reporting Obligations
Article 2 of GC:
• The reports must contain a narrative and a financial
section and shall conform to the model in Annex VI
• Every request for payment must be accompanied by
an interim report
• Any additional reporting requirement shall be set out
in the Special Conditions
• Every 12 month-period If the Beneficiary fails to
comply with this obligation, he must inform the
Contracting Authority of the reasons and provide a
summary of progress in the Action.
41

Further instalments of pre-financing
Expenditure Verification report
Definition: report on the verification of the
Action´s expenditure produced by an approved
auditor who meets the specific conditions of ToR.
Purpose:
The Auditor examines the factual information in the
Financial Report of the Beneficiary and compares it with
the terms and conditions of the Grant Contract.
It is not an exhaustive control but based on a sampling
methodology.
He does not provide an audit opinion. The EC will
assess itself the factual findings by budgetary heading
and draws its own conclusions.
42

Further instalments of pre-financing
Article 15.6. of General Conditions
Based on the expenditure verification report the
Contracting Authority determines the total amount
of eligible expenditure which may be deducted from
the total sum of pre-financing under the contract
(clearance).
43

Further instalments of pre-financing
Expenditure Verification report
When: (Art. 15.6)
• Any request for pre-financing in case of grants > EUR
750.000
• Any final report for grants > EUR 100 000
Template: in line with model in Annex VII
44

Further instalments of pre-financing
Article 15.7, 15.9, 15.10 and 15.11 of
General Conditions
Any interest or equivalent benefits accruing from
pre-financing paid shall be mentioned in the interim
and final reports
Conditions:
Pre-financing < 250 000 EUR
not due to the EC and may be used to the Action
250 000 EUR < Pre-financing < 750 000 EUR
deducted from the payment of the balance
Pre-financing > 750 000 EUR
recovery at the end of each financial year
45

Further instalments of pre-financing
Main further checks:
Compliance with templates (Annex VI)
Amounts are arithmetically correct
Expenditure incurred within implementation period
No double-counting of direct costs in previous
reports
Exchange rates applied are correct (Art. 15.8. of
GC)
Transfers limit to 15% of initial amount of main
heading (Art. 9.2. of GC)
Contingency reserve authorised in advanced (Art
14.3 of GC)
46

1. First pre-financing
2. Further instalments of pre-financing
3. Final payment
47

Necessary documents:
Article 15.1. of the General Conditions:
• Request for payment of the balance (Annex V)
• Expenditure verification report
• Final report
Final payment
Contractual Conditions
• Transfer of ownership, if applicable (Art 7.3. =>
equipment and vehicles with purchase cost > EUR
5000)
Approval by EC of the final implementation
report and validation of expenditure in the final
statement
All work done must correspond to the objectives laid
down in the grant agreement.
Conclusions from Ops will be taken into account when
assessing financial report
48

Final payment
Contractual Conditions
Main further checks:
Respect of deadline for submission of final report: 3 or 6
months after end date of implementation (Art. 2.3. of
G.C.)
Compliance with templates (Annex VI)
Amounts are arithmetically correct
No double-counting of direct costs in previous reports
Exchange rates applied are correct (Art. 15.8. of GC)
Transfers limit to 15% of initial amount of main heading
except taxes (Art. 9.2. of GC)
Contingency reserve authorised in advanced (Art 14.3
of GC)
Transfers of ownership attached to the report (Art 7.3.)
49

Final payment
Determination of final amount
Co-financing (Art. 3 of SC):
The amount does not exceed the maximum
absolute value for the Community Grant
The % of the total eligible costs is also
respected
50

Final payment
Determination of final amount
The amount of the grant becomes final:
After acceptance of the final reports !
Possible notified Suspension by Contracting
Authority
clarification/ corrections maximum 30 days
Art 2.3 / 15.1.CG
51

Agenda
PART I
Basic principles
General Obligations
Contract-award procedures
Eligible costs
Payment procedures
Technical and Financial reporting
PART II
Grants 2013
52

Reporting
• There are 2 types of reporting (Article 2.1 General Conditions):
1. Interim Report :
• A mid-term report (generally covers 12 months period)
• Consists of narrative and financial sections
• If no expenditure verification report required, the
financial section is accompanied by a list detailing each
item of expenditure incurred in the period covered by
the report, and indicating for each its title, amount,
relevant heading in the Budget of the Action and the
reference of the justifying document
• Should be submitted within 30 days of the end of the
period covered by the report
2. Final Report :
• Covers the entire period of implementation
• Summarizes and updates all the information
contained in the Interim Reports completed with the
last period; references to previous reports will not be
considered
• Consists of narrative and financial sections
• Must be submitted within 3 to 6 months after the end
of implementation period.
53

Reporting
Important note:
The information provided in the narrative report
must correspond to the financial information
that appears in the financial report
54

Reporting
• Report should:
- conform to the format in Annex VI
- be drafted in English
- be clear and concise
- focus on assessment of progress towards achieving
results (“results-based reports”), and not simply list
activities undertaken and inputs provided
- cover the activities as a whole regardless of which
part of it is financed by the EU
- Include details on the progress of visibility activities
• Any report will be considered approved if there is no
written approval by the EU within 45 days of submission
• The EU may request additional information at any time and
the information must be supplied within 30 days of the
request
55

Financial Report
• conform to the format in Annex VI
• conversion into euro of the real costs shall be done at the
rate made up by the average of the rates published in
InforEuro for the months covered by the relevant report
InforEuro:
http://ec.europa.eu/budget/inforeuro/index.cfm
Month Currency Rate Average
déc-11 EUR/SGD 1,7306
nov-11 EUR/SGD 1,7588
oct-11 EUR/SGD 1,7626
sept-11 EUR/SGD 1,7399
août-11 EUR/SGD 1,7169
juil-11 EUR/SGD 1,7799
juin-11 EUR/SGD 1,7613
1,755725
mai-11 EUR/SGD 1,8191
avr-11 EUR/SGD 1,7782
mars-11 EUR/SGD 1,754
févr-11 EUR/SGD 1,7542
janv-11 EUR/SGD 1,7132
56

GRANTS 2013
57

Main changes: Call For Proposals
Eligibility of applicants
New:
- Multi-Beneficiary
contract
- Beneficiary (ies),
coordinator
- Affiliated entities
58

Main changes: Call For Proposals
BEFORE 2013
implementing
partner 1
Only 1 LEF is entered in the system
Applicant
CONTRACT is
signed by
applicant only
(Beneficiary)
implementing
partner 2
59

Main changes: Call For Proposals
AS FROM 01.01.2013
MULTI-BENEFICIARY CASE
All the signatory LEFs are entered in the
system.
Co-applicant 1
Mandate
Lead Applicant
CONTRACT is
signed by all the
beneficiaries
Mandate
Co-applicant 2
60

Main changes: Call For Proposals
MULTI – BENEFICIARY GRANT CONTRACT
= More than one beneficiary is part of the
contract
61

Main changes: Call For Proposals
Applicant/ Coordinator:
- Plays the role of lead applicant/ Main beneficiary
- Gets a mandate from the rest of co-applicants
:
- To submit the proposal
- To sign the contract
- To represent all during execution of the
contract
- Assumes all financial responsibility of the contract
62

Main changes: Call For Proposals
AS FROM 01.01.2013
MULTI-BENEFICIARY CASE WITH AFFILIATED ENTITIES
Note : Applicants and
Beneficiaries may (or
not) have affiliated
entities, but these never
sign the contract.
All the signatory LEFs are entered in the
system.
Co-applicant 1
Affiliated Entity 1
Affiliated Entity 2
Lead Applicant
CONTRACT is
signed by all the
beneficiaries
Co-applicant 2
Affiliated Entity 3
63

Main changes: Call For Proposals
Affilitiated enities:
- They are third parties to the contract but benefit
partially from beneficiaries rights (eligibility
of
costs)
- Entities forming part of a beneficiary, with legal
or capital link with the beneficiary
- Their costs are considered costs of the entity to
which they are affiliated
64

Main changes: Call for Proposal
Simplified cost options
(lump sums, unit costs, flat-rate
funding)
- Limited to € 60.000 per beneficiary to the grant
contract (exclusive of 7% of indirect costs)
- Proposed by the beneficiary
- Approval of Contracting Authority during contract
phase
- Guidelines and check-list (NEW annex K)
- The used methods should be clearly described
65

Main changes: Contractual matters
Interest on pre-financing:
- Not due to the Union any more
- No need to open interest bearing accounts
- No more reporting
Payments deadlines:
- One single time limit
- No more sub limits for approval
- 30/60/90 depending on the type of payment
66

Main changes: Contractual matters
Expenditure verification report needed with
Previous:
Any request for pre-financing
: > € 750 000
New:
Any request for pre-financing: > € 5 000 000
67

Main changes: Contractual matters
‣ Amendments to the contracts:
Ceiling increased from 15% to 25% for transfers
between main budget headings
Not to be used to modify:
- Amounts or rates of the simplified cost options
- Contributions in kind
- Indirect costs 68

shana.IMPENS@ec.europa.eu
69

Thank You
70