Communication campaign Most common issues identified: - Indirect Costs

1. Communication campaign Most common issues identified: - Indirect Costs Thanos BATSILAS FCH JU Financial Officer

2. Indirect Costs Indirectcostsare all those eligiblecosts which cannot be identified by the beneficiary as being directly attributed to the project, but which can be identified and justified by its accounting system as being incurred in direct relationshipwith the eligible direct costs attributed to the project

3. IndirectCosts Actual indirect costs Beneficiarieswithananalyticalaccountingsystemthat can identifytheirindirectcosts and assignthemtothedifferentprojects and activities Simplified method Beneficiariesthatcannotagregatetheirindirectcosts at a detailedlevel (centre, department), butonly at thelevel of the legal entity Methods of calculation Flat rate 20% Industrywhoseaccountingsystems do notmake a distinctionbetweendirect and indirectcosts Non-profitpublicbodies, secondary and High Educationestablisments and researchorganisations (optional)

4. Indirect Costs reimbursement * For this calculation costs of subcontracting and resources made available by third parties outside of beneficiary’s premises must be deducted from direct costs

5. Actual indirectcosts Indirectcostsare all those eligible costs which cannot be identified by the beneficiary as being directly attributed to the project, but which can be identified and justified by its accounting system as being incurred in direct relationship with the eligible direct costs attributed to the project • Linked to the project itself? • Linked to EU-research projects in general? • Linked to research in general? • Including other activities such as teaching, production or sales? • Including all indirect costs at the level of the organization?

6. Actual indirectcosts

7. Actual indirectcosts

8. Actual indirectcosts

9. Actual indirectcosts • Telecommunication, postal and other G&A expenses - Once the accounting system considers these costs as indirect, ensure they are not claimed as direct costs. If claimed as direct costs, they should be removed from the IC pool • Travel and subsistence expenses - Once the accounting system considers these costs as indirect, ensure they are not claimed as direct costs. If claimed as direct costs, they should be removed from the IC pool - Expenses by non-productive employees should be removed - Expenses by productive employees but not linked to the project should be removed • Lawyer fees - Eligible if incurred in direct relationship with the eligible DC attributed to the project • Entertaining expenses (e.g. team building, receptions etc) • Non eligible, to be removed

10. 20% flat rate Subject to the accounting principles of the beneficiaries, the following items may be considered as indirect eligible costs: • costs related to general administration and management; • costs of office or laboratory space, including rent or depreciation of buildings and equipment, and related expenditure such as water, heating, electricity, maintenance, insurance and safety costs; • communication expenses, network connection charges, postal charges and office supplies; • common office equipment such as PC's, laptops, office software; • miscellaneous recurring consumables; etc. provided they can be identified and justified by the accounting system of the participant as being incurred in direct relationship with the eligible direct costs attributed to the project. Such costs are normally deemed to be covered by the flat rate (20%) and cannot be charged as direct costs unless it is established that the accounting principles of beneficiaries consider them as direct costs.

11. Indirectcosts Common errors: • ICM Actual/Simplified • IC pool includes ineligible items e.g. VAT, marketing & sales costs, financing costs, exchange rate losses, goodwill, costs of purchasing other companies, costs of sales offices, costs of arranging loans, costs not incurred in direct relationship with the eligible DC • Subjective or arbitrary keys. Usual fair "keys" or "drivers" to distribute these costs from the "pool" of indirect costs into the different projects are via personnel, either as a percentage of personnel costs or a fixed hourly rate • or already claimed as DC although the accounting system considers them as IC (depending on the characteristics of the operation in question, it is possible that some costs can be considered either direct costs or indirect costs, but no cost can be taken into account twice as a direct cost and an indirect cost. • Budgeted IC or based on 20% flat rate (NB! In case of ICM Actual, this 20% flat rate is rate for reimbursement and not rate to define and claim IC • 1 IC ratio for reporting period spread in more than 1 fiscal year (exception: only if the accounts are not available)

12. Indirectcosts • Common errors: • ICM 20% flat rate • Indirect costs claimed as direct costs without being considered as DC by the accounting principles of the beneficiary • General • Mistake in choice of ICM during the first participation in FP7

13. For further info: Guide to Financial Issues for beneficiaries of FCH JU ProgrammeQuestions?