Stimulating new ways of Entrepreneurship

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Stimulatingnew ways ofEntrepreneurship Regional
Framework Operation Kick-off meeting in Iseo
lake, Brescia 2005-03-11 Financial Manager
Ulla-Britt Engström www.stiment.net
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BUDGET LINES
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BUDGET LINES

• STAFF COSTS
• Personnel costs for partners of the operation
• salary, tax, employers contribution for
  social security in accordance with national
  legislation
• based on real costs (actual salary rate)
• certified on the basis of documents like
  contracts, time sheets, payslips and other
  documentation of payments

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BUDGET LINES

• EXAMPLE Calculation of Staff costs
• Hours spent on project activities (see time
  sheet) 120 h
• Employees gross salary 50 000,00 EUR
• Employers contribution 25 000,00 EUR
• Total costs 75 000,00 EUR
• Hours worked per year (Check your rules!) 1700
  h
• Hourly rate 44,12 EUR
• (Total costs/hour worked per year 75000/1700
  44,12 EUR)
• Staff costs to be reported 5 294,40 EUR
• (Hourly rate hours spent 44,12 120 h 5
  294,40 EUR)

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BUDGET LINES

• ADMINISTRATION COSTS (1)
• Linked to the operation
• Direct general costs (Office rent, mail, fax,
  phone, heating, electricity etc)
• Administration costs liked to services provided
  by external experts must be reported under the
  budget line External Expertise
•  

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BUDGET LINES

• ADMINISTRATION COSTS (2)
• Indirect general costs (Overheads)
• Related to the operation
• Based on real costs
• Calculated on a pro rata basis, according to
  the duly
• justified, fair and equitable method
• Documentation of the calculation method!

•  

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BUDGET LINES

• TRAVEL AND ACCOMODATION
• Have to be in accordance with the existing
• INTERNAL RULES of Lead Partner organisation and
  NATIONAL RULES of the respective Member State
• Based on actual costs
• In case of subsistence costs, payment on a daily
  allowance basis possible if this is foreseen in
  internal rules of the organisation and payment
  evidence available

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BUDGET LINES

• EXTERNAL EXPERTISE
• Has to be consistent with the specification
  provided in
• the application
• No new items can be added in the report!
• Public procurement
• Documentation (contract, invoices etc)
• Subcontracting of partners is not allowed!

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BUDGET LINES

• INVESTMENTS
• Have to be consistent with the specification
  provided in the application
• No new items ca be added in the report
• Reporting either as a total amount or as
  depreciations (National rules)
• Documentation invoices, depreciation method etc.

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BUDGET LINES

• OTHERS
• Has to be consistent with the specification
  provided in the application
• No new items ca be added in the report!
• Documentation

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COMMISSION REGULATION (EC) No 448/2004Eligibilit
y of expenditure

• Annex
• Rule No 1 Expenditure actually paid out
• Rule No 2 Accounting treatment of receipts
• Rule No 3 Financial and other charges and legal
  expenses
• Rule No 4 Purchase of second-hand equipment
• Rule No 5 Purchase of land
• Rule No 6 Purchase of real estate
• Rule No 7 VAT and other taxes and charges
• Rule No 8 Venture capital and loan funds
• Rule No 9 Guarantee funds
• Rule No 10 Leasing
• Rule No 11 Costs incurred in managing and
  implementing the SF
• Rule No 12 Eligibility of operations depending
  on the location

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• Rule No 1 Expenditure actually paid out
• Payments by Final Beneficiaries
• Proof of Expenditure
• Subcontracting
• Rule No 2 Accounting treatment of receipts
• Revenues/incomes must be deducted from the
  operations eligible expenditure in their
  entirety
• Rule No 3 Financial and other charges and legal
  expenses
• Financial charges
• Bank charges on accounts
• Legal fees for advice, notary fees, the costs of
  technical or financial expertise, and
  accountancy or audit costs
• Costs of guarantees provided by a bank or other
  financial inst.
• Fines, financial penalties

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• Rule No 4 Purchase of second-hand equipment
• Declaration stating the origin and confirmation
  that it has not been purchased during the
  previous 7 years with the aid of nat. or EU
  grants.
• The price shall not exceed its market value and
  shall be less than the costs of similar new
  equipment.
• The equipment shall have the technical
  characteristics necessary for the operation and
  comply with applicable norms and standards.
• Rule No 7 VAT and other taxes and charges
• VAT does not constitute eligible expenditure
  except where it is genuinely and definitely borne
  by the final beneficiary or individual recipient
  (). VAT which is recoverable, by whatever means,
  cannot be considered as eligible ().
• VAT which is not recoverable by the final
  beneficiary or individual recipient by virtue of
  the application of specific national rules shall
  constitute eligible expenditure (in compliance
  with the 6th Council Directive 77/388/EEC on
  VAT).

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LESSONS LEARNED FROM PREVIOUS REPORTS

• Booking the auditor in good time before the
  deadline for sending the report to Lead partner
  or Lead participant
• Keep attention to the EU regulations and National
  rules
• - Eligibility of expenditure No 448/2004
• - Information and publicity measure No
  1159/2000

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Reporting by the Lead Partner

• TWO KINDS OF REPORTS TO THE JTS in Rostock
• Preparation cost report
• (Costs before the date of projectperiod
  start)
• Progress report
• (Period report)
• (The Lead Partner has to ensure the proper
  financial management of the whole operation
  (monitoring constantly and carefully the
  Participant/Partner budgets activities)!

MRB 20030910
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Reporting by lead participant
REPORTING

• Participant in SUB-project
• Lead Participant in SUB-project
• Makes a summary report incl all
  participants

• Region partners

• Lead Partner
• Makes a summary report incl all participants and
  partners

Joint Technical Secretariat (JTS) in Rostock
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AUDITING
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Certification of expenditure

• THE REPORTED EXPENDITURE MUST BE CONFIRMED BY AN
  INDEPENDENT AUDITOR
• Independent from the operations activities
  and finances (independent organisational unit)
• Qualified, meaning familiarised with
  accounting and ERDF rules, especially the rules
  concerning eligible expenditure
• Country specific requirements. First level
  controls
• Auditor could be external or internal!
• Look at the AUDIT GUIDELINES

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Certification of expenditure

• PROCEDURE for auditing
• - Checking 100 or a sample
• When not checking 100 of the expenditure, but
  performed on a sample the used sampling method
  must be clearly described and documented
• Check recorded verifications of individual
  operations on the spot (incl a complete breakdown
  of expenditure and invoices)
• The records state
• The work done
• The results of the verification
• The measures taken in respect of discrepancies
• (e.g. Expenses not eligible, expenses not
  covered and/or not documented, etc)
• Documented the auditing in an internal audit
  report!

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Confirmation by an independent auditor

• Points in the SUB report for audit confirmation
• 1. AMOUNT
• For this report the total paid and cerified
  expenditure amounts to EURO..
• ELIGIBILITY RULES
• The general eligibility rules have been
  observed, including, but not limited to
• rules governing the eligibility of
  expenditure, in
• particular COM 448/2004,
• rules described in Decision Letter and
  Conditions
• (including Annexes)
• rules concering co-financing activities from
  the
• ERDF,
• rules on state aid, ect.

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Confirmation by an independent auditor

• 3. ACCOUNTING SYSTEM and AUDIT TRAIL
• Receipts and payments are accurately recorded in
  the operations accounting system, assets are
  correctly revorded and amounts are correctly
  reflected in demands for payments.
• The necessary audit trail exists for all
  activities, providing evidence in the form of
  contracts, invoices and payments records.
• In case of staff costs, direct costs, overheads
  and in-kind contributions, the necessary evidence
  exists in a form of timesheets, listings of costs
  or formula descriptions and cost calculations.
  (COM No 2355/2002)

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Confirmation by an independent auditor

• SERVICES, SUPPLIES AND WORKS PROCURED
• Services, supplies and works have been procured
  on the basis of proper call for tenders.
• Sound contral have been exerted over the opening
  of the tenders and all tenders have been fully
  evaluated before the final decision has been made
  on service provider, supplier or works
  contractor.

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Confirmation by an independent auditor

• PROGRESS MADE
• Progress made has been fully and fairly
  reflected in the report. On the spot there is
  evidence that the reported activities have taken
  place, delivery of services and goods, and works
  are in progress or have been completed.

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Confirmation by an independent auditor

• INFORMATION
• The partners have complied with Community rules
  on publicity, information, equal opportunities,
  protection of environment and any other Community
  policy.
• CERTIFICATION BY AUDITOR
• All input for progress report received from
  partners were certified by an independent
  auditor.
• PROJECT PERIOD
• The operations activities have stated and are
  implemented in accordance with the project
  decision.

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Confirmation by an independent auditor

• COUNTRY SPECIFIC REQUIREMENTS
• Countries with centralised 1st level control
  system
• Latvia, Lithunia, Poland, Slovakia, Slovenia,
  Czech Republic, Hungary, Malta, Cyprus, Estonia
• Greece, Italy, Portugal
• Implications for the operations! Potential
  delays with the reports!
• Check the most updated information om programme
  web site

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Confirmation by an independent auditor

• Checkpoints (1) for auditing the SUB-report
• Eligibility rules
• Have the invoices been paid out during the
  current reporting period and are the payment
  documented?
• Is the expenditure reported under External
  expertise mentioned in the approved application?
• Is the expenditure reported under Other
  mentioned in the apporoved applications?
• Is the expenditure reported under Investments
  mentioned in the approved application?

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Confirmation by an independent auditor

• Checkpoints (2) for auditing the SUB-report
• Eligibility rules
• Products purchased must be physically available
• Is the delivery clearly documented?
• - Exchange rate based on
• a. daily calculation (the date of paying the
  invoice)
• b. average rate (e.g. Monthly rate by the
  Commission) of the
• month the invoice was paid. Look at
  http/europa.eu.int/comm/budget/inforeuro/index
• c. fixed date (30.06./31.12.)
• d. average monthly exchange rate of the last
  month of
• reporting period, as set by the Commission
• The program must choose one of the options a-d
  and use that for the entire operation period. We
  choose option b for our program.

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Confirmation by an independent auditor

• Checkpoints (3) for auditing the SUB-report
• Accounting system and audit trail
• Check the set up and maintenance of an adequate
  and reliable accounting system and audit trail
  for the operation
• Is it following the regulations 438/2001 and
  2355/2002?
• Services, supplies and works procured
• - Check the documentation, EU and National
  regulations

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Confirmation by an independent auditor

• Checkpoints (4) for auditing the SUB-report
• Progress made
• Crosscheck reported expenditure vs. Operation
  activities.
• Are products and services delivered necessary for
  the implementation of the approved actions?
• Is there any expenditure reported that incurred
  before the approval of the operation by the Lead
  partner.
• What is the date when the first operation costs
  incurred?
• Is the delivery clearly documented?
• Are products/goods purchased physically
  available?

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SUB- REPORTS
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Reporting by the Lead Participant /Participants
SUB REPORT

• has to be sign by the authorized signatory
• has to be sign by the authorized signatory
• befor auditing sign
• has to be sent to the lead partner or lead
• participant in good time before deadline

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Reporting by the Lead Participant /Participants

• SUB REPORTED EXPENDITURE
• has to be paid out during the reporting period
• has to be eligible INTERREG IIIC rules, EU
• rules, National rules
• has to be assigned to the correct budget line
• CHECK the current budget status does
• budget line exist/is there still budget left?
  
• has to be documented e.g. for personnel
• costs time sheets

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Reporting by the Lead Participant /Participants

• SUB REPORT Financial report
• The financial report has to provide information
  about
• Allocated costs per component 2-4
• Used finance sources and the confirmation by an
  independant auditor
• Specified costs for external experts, others and
  investments during the reporting period

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SUB REPORT FORM Excel sheet
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(No Transcript)
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PAYMENTS
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Payments

• Procedure
• After the Progress report is accepted, the
  payment will be made in one sum directly to the
  bank account of the Lead partner.
• The money will be transferred in EURO. Any
  exchange risk is to be born by the Lead partner.
• If the Lead partner is not an EURO account, the
  corresponding exchange will be done by your local
  bank.

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Payments

• The Lead partner will be informed via e-mail
  (Payment letter) about the executed payment.
• The transfer of money will last 1-2 weeks after
  payment letter.
• The Lead partner is responsible for distributing
  the funding among to the partners.

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Payment procedur EU-funding

• JTS
• Lead partner
• Lead participant Region Partners
• Participants

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Payment procedure National-funding

• Region partner
• Region SUB-Project Participants
• (check with the region for the form for payment
  of national funding)

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• Questions?

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Tanks!