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How to comply with EU financial rules in Horizon Europe projects

7th December 2023 at 3:51 pm

In the previous blog post of our EU finance series, we navigated the essentials of EU project financial management, unravelling the complexities of how to set up a Horizon Europe proposal budget. Today, we dive a bit deeper into the EU financial rules and requirements to watch out for in an ongoing Horizon Europe project. Failure to comply with these can not only cause delays in receiving funding for the whole consortium but can also affect the overall success of the project implementation. Furthermore, precise financial reporting aligns with the European Commission’s emphasis on transparency and accountability, ensuring that the European taxpayers’ funds are used effectively and as intended. Join us to uncover how to navigate potential pitfalls and keep your project’s financial reporting efficient and compliant.

For the previous EU framework programme Horizon 2020, the EU performed an analysis that revealed the most common mistakes they observed in financial statements during audits. A similar study for Horizon Europe is not yet available, but as the financial rules remain the same or similar in large parts, the most common pitfalls and sources of errors persist and we will present some tips on how to avoid these.

Time sheetsIt is as simple as that – it is a must to record the time your employees work on a project. In case you do not have a formal time sheet system embedded in your organisation, the EC provides a time declaration template tailored to Horizon Europe actions that meets their minimum reporting requirements. Monthly signatures by the employees on these time declarations or on time sheets are recommended for accuracy and compliance.
Eligibility periodYou cannot claim costs that occurred before the official project start or after the end of the project (except staff costs related to the preparation of the final reports after the end of the project that can still be claimed).
Personnel costsIn the most common case of “normal” employees, calculate as follows (it might be slightly different in specific cases):
· Daily rates: For each employee and completed year, calculate a daily rate by dividing the annual personnel costs of the employee by 215.
Sidenote: you may wonder where this strange number is coming from. Those of you who have been in H2020 projects may recall that there was the option to use a standard number of 1.720 productive hours per year. With 8 hours per day, this converts to 1720/8 = 215 days.
· Days worked on the project: Multiply the daily rate by the number of days worked on the project (strictly speaking, it is “day-equivalents”, as if you worked 16 hours on the project over several days, it would still be 2 day-equivalents).
· Person Months: One Person Month is equal to 215/12= 17.9 days. However, in this case, the EC rounds up to the closest half, which makes it 18 days.
· Working days per year: The total number of working days claimed per employee per year cannot be higher than 215 (1720 hours / 8 hours per day).
Work timeThis may sound straightforward, but you can only claim time worked on the project. This means that the working time documented in the timesheets must match records of annual leave, sick leave, and other types of leave. You cannot claim hours during absences such as annual leave or sick leave. However, you can deduct the actual working days spent on parental leave from the fixed number of 215 days.
Yearly staff costsThe yearly claimed staff costs for an employee cannot be higher than the total staff costs recorded in your accounts (for that same person in the same year).  
RemunerationThe remuneration should be in line with your usual employment practice and must reflect the actual salaries and costs consistent with the organization’s standard payroll practices. If your organization utilizes project-based remuneration, it should be consistent with such practices and not be adjusted upwards solely for the EU project. It is essential that these remuneration policies are documented and applied uniformly across the organization and are justifiable in the event of an audit.
DocumentationMaintain critical documentation such as payroll records, salary slips, and employment contracts (which are standard practices for any well-organized entity). In case the EC requests a financial audit, which they can do up to 2 years after the final payment of the balance, you will need to provide them with these documents as proof.
Overhead costsAs a general rule, costs that occur for several projects or the whole company and cannot be attributed to an individual project should be considered overhead costs and be covered by the 25% flat rate for indirect costs. Typical examples of such costs are office rent, heating, electricity and basic IT infrastructure, but also general office software licenses or costs for general support staff such as IT or facility management. These costs cannot be declared as direct costs for a project.
PurchasesThe purchase of goods and services (in particular subcontracting, but also other direct costs) must follow the “best value for money” principle. Usually, collecting at least 3 offers is an acceptable procedure. If, for certain purchases, specific procedures are defined internally or prescribed by applicable law, then you must be able to demonstrate that these procedures were followed.

Of course, there are many more detailed rules which we cannot all cover here. For those seeking more specific guidance, particularly for exceptional cases, we recommend consulting the latest version of the Annotated Grant Agreement. For help regarding country-specific regulations, you can always contact your National Contact Point (NCP).

Involving accelopment in your Horizon Europe projects for project management support is a good idea as well because then you can send us your detailed finance questions anytime.

Dr. Johannes Ripperger
Research & Innovation Manager

Andreia Cruz
Research & Innovation Project Manager

Robin Vanneste
Business & Finance Associate

Disclaimer: The information provided in this blog post represents our understanding and interpretation of the current EU rules and guidelines. It is intended for general informational purposes only and should not be considered as legal or financial advice. While we strive to keep the information up-to-date and accurate, we cannot be held liable for any errors or omissions, nor can we be held responsible for the results of any actions taken based on this information. EU regulations and guidelines are subject to change, and as such, the definitive source of information for your project should always be the governing contracts and applicable laws. We recommend consulting with the EC or your National Contact Point (NCP) for specific advice tailored to your project’s needs.