7.2 Cost categories

The following sections provide an overview on the eligibility principles for the different cost categories of each Project Partner:

• Staff
• Office and administration
• Travel and accommodation
• External expertise and services
• Equipment
• Infrastructure and construction works

For each cost category, a definition is provided as well as guidance for budgeting and reporting. Project Partners are strongly recommended to seek advice from the Permanent Secretariat if there is any issue related to the eligibility of expenditure that is not answered by the present rules. Please note that these rules apply to MUA or AUA and Delivery Partners that claim costs, but not to Transfer Partners as their expenditure are covered by a lump sum.

Staff costs cover gross employment costs of persons employed directly by the Project Partner and working full or part time on the project in line with their respective employment document or other similar document under national law.

The following cost components are eligible:

• Salary payments (fixed in an employment/work contract).
• Other costs directly linked to salary payments (e.g. employment taxes, social security, holidays, overtime, including health coverage, taxable benefits or pension contributions) that are:
  • Fixed in an employment document or by law.
  • In accordance with the legislation referred to in the employment document and with standard practices in the country and/or organisation.
  • Not recoverable by the employer.

The following cost components are eligible:

• Voluntary payments (e.g. payments not in line with the employment contract, the employment policy of the Project Partner, or payments without any legal commitment).
• Staff costs for employees not officially assigned to the project are ineligible.
• Dividends[1].
• Overheads as already included under cost category “office and administration”.

Any working person not directly employed by the Project Partner (i.e. not appearing on the organisation’s payroll) and having an invoiced-base relationship with the Project Partner should rather be considered under the external expertise and services cost category. In the case of national specific rules or specific cases not following the EUI-IA Guidance rules (e.g. self-employed companies, mother-daughter companies, cooperatives companies, dividend paid owners), the project should contact the Permanent Secretariat to agree on the proper cost category allocation.

Staff costs may be calculated based on the following two options:

• Option 1: Flat rate 20% on all costs of the Project Partner under external expertise and services, equipment, and infrastructure and construction works
• Option 2: Standard scale of unit costs

Each Project Partner decides on the option to apply in the Application Form. This choice is valid for all staff members of the Project Partner in question and cannot be modified during the entire project duration. This also means that within the same project, different Project Partners may follow different options.

7.2.1.1 Staff costs based on a flat rate

The staff costs are calculated as flat rate of 20% of the total eligible amount declared by the Project Partner under the following cost categories:

• External expertise and services costs
• Equipment
• Infrastructure and construction works

When budgeting or reporting staff costs using this option, the distribution of staff costs between Work Packages follows the distribution between Work Packages of the underlying costs.

This option is not authorised for Project Partners foreseeing to include in their costs works contracts or supply or service contracts which exceed in value the thresholds of the EU public procurement Directives (for more details, see section “7.5.6. Procurement”).

7.2.1.2    Staff costs based on standard scale of unit costs

The staff costs are calculated based on standard scale of unit costs defined by the Project Partner. Project Partner must report the staff costs based on the number of hours worked by their employees. The standard unit cost is an hourly rate, and it applies to every employee regardless of the position. The Project Partner can only report the hours of an employee working under an employment contract or equivalent and cannot declare more than 1,720 hours per full time employee per calendar year. This maximum number of hours is reduced to a pro-rata of 1,720 hours for employees working part-time. This maximum number of hours is also reduced to a pro-rata of 1,720 hours for reporting periods shorter than 12 months.

During financial controls, Project Partners present to the FLC all documents that justify the standard unit cost they have determined including payrolls, pay slips, working contracts, accounting export, accounts, and other documentation relevant to local regulation. Project Partners may update the hourly rate only once a year. Any updates must be duly justified to the FLC during the Financial Claim controls. Once validated, Project Partners apply the standard unit cost throughout the project lifetime.

Calculation of the standard unit cost

Method of calculation:

• Hourly rate: standard scale of unit for staff cost per Project Partner, in EUR per hour
• Annual payroll: total staff costs of the Project Partner[2] per year, in EUR
• Full Time Equivalent: number of full-time equivalents employed by the organisation corresponding to the staff costs of the annual payroll
• 1,720: maximum number of hours per full time employee per calendar year

Office and administration expenditure covers operating and administrative expenses of Project Partners that could be considered as indirect costs. The items considered under the office and administration cost category are exhaustively listed below:

• Office rent.
• Insurance and taxes related to the building where the staff is located and to the equipment of the office (e.g. fire and theft insurances).
• Utilities (e.g. electricity, heating, water).
• Office supplies (e.g. paper, files, pencils).
• General accounting (provided inside the partner organisations).
• Archives.
• Maintenance, repair and cleaning.
• Security.
• IT systems (hardware and software of general nature).
• Communication (e.g. telephone, fax, internet, postal service, business card).
• Bank charges for opening and administering an account.
• Charges for transnational financial transactions.

Office and administration expenditure is covered by a flat rate of 15% of the reported staff costs[3] (irrespective of the option chosen for staff cost: 20% flat rate or standard scale of unit costs). All above-listed items are to be considered as covered by the flat rate; they cannot be reported under any other cost category. If no staff costs are reported, no office and administration costs can be charged. Office and administration costs are considered as paid in due proportion to the reported and validated staff costs.

This cost category covers travel and accommodation costs of employees of Project Partners that relate to project activities. The items considered under the travel and accommodation category are exhaustively listed below:

• Travel (e.g. tickets, travel and car insurance, fuel, car mileage, toll and parking fees).
• Meals.
• Accommodation.
• Visa.
• Daily allowances.
• Services contracted by Project Partners for arranging the travel and accommodation of their own staff members (e.g. travel agencies, etc.).

Travel and accommodation expenditure is covered by a flat rate of 5% of the reported staff costs[4] (irrespective of the option chosen for staff cost: 20% flat rate or standard scale of unit costs). All above-listed items are covered by the flat rate and cannot be reported under any other cost category. If no staff costs are foreseen and reported, no travel and accommodation costs can be charged.

Travel and accommodation costs of non-employed staff of Project Partners (external experts, service providers or other third party) are not covered by this flat rate but are eligible as real costs under the external expertise and services cost category.

This cost category covers expenses related to professional services and expertise provided by external service providers (other than the Project Partners) contracted to carry out certain activities linked to the delivery of the project (e.g. tasks that cannot be carried out by the Project Partners themselves). The work of external service providers must be necessary for the project and should be linked to activities foreseen in the Application Form. These expenses are to be declared as real costs and can include[5]:

• Studies or surveys (e.g. evaluations, strategies, concept notes, design plans, handbooks).
• Training.
• Translations.
• IT systems and website development; modifications and updates.
• Promotion, communication, publicity or information items.
• Financial management.
• Services related to the organisation and implementation of events or meetings (including rent, catering or interpretation).
• Participation in events (e.g. registration fees[6]).
• Legal consultancy and notarial services, technical and financial expertise, other consultancy and accountancy services.
• Intellectual property rights (IPR) and consultancy fees.
• Provision of guarantees by a bank or other financial institution when required by Union or national law or in a programming document.
• Travel and accommodation costs for external experts, speakers, chairpersons of meetings, service providers of the project or other third party involved in the project.
• Other specific expertise and services needed.
• Unpaid volunteer work (see Chapter 7.5.3 “Project Partner contribution” for more details).
• Financial schemes implemented by Project Partners, supporting the distribution of financial contribution as a reward following a contest (such as prizes, vouchers, or grants) to the benefit of third parties (individuals or organisations) that are not part of the Project Partnership.
  Such schemes must respect the principles of transparency and equal treatment, should promote the achievement of policy objectives of the EU and contribute to the project’s objectives and results. Projects need to monitor and control that winner beneficiaries are using the individual award according to the selected concepts. A recovery procedure should be in place in case of misuse.
  
  It should be noted that, like with any other project expense, only the amount paid out by the Project Partner / MUA to or for each third party can be claimed to EUI-IA[7]. The individual award must not exceed EUR 60 000 and no beneficiaries can receive more than EUR 60 000 in total from a project.
  
  A financial scheme planned at the application stage must be properly described in the Application Form with the following details of the scheme, either in a dedicated Work Package, activity or deliverable (depending on the importance of the scheme): the purpose of the scheme, the rules of the contest, the award criteria, the value of the individual award, the total amount of the award, the payment arrangements, target groups.

The following principles must be obeyed for any external expertise cost:

• The applicable procurement rules must be followed.
• As legal basis, a written contract (or any document of equivalent probative value) specifying the service to be delivered is necessary between the Project Partner and the service provider.
• The services or expertise are essential to the project and should be linked to activities foreseen in the Application Form.
• Any expenses based on contracts concluded between Project Partners are ineligible; no Project Partner shall be contracted as service providers by any other Project Partner (to avoid any conflict of interest in the procurement of services and goods).
• Contractual advances are eligible if they are in line with normal commercial law and practice, stipulated in a written contract between the Project Partner and the expert/service provider, supported by receipted invoices and provided that the service/supply has been delivered within the project eligibility period.
• The costs of services contracted by Project Partners for arranging the travel and accommodation of their own staff members (e.g. travel agencies, etc.) are covered by the travel and accommodation flat rate.
• Promotional giveaways[8] (e.g. project gadgets) are eligible if they relate to the project communication activities. The cost of the single item must remain limited and in any case below EUR 50.
• Costs related to EUI Experts (including their travel and accommodation) and FLC are directly covered by the EUI; therefore, no budget should be foreseen.

This cost category covers equipment purchased, rented or leased by a Project Partner, other than those covered by the office and administration cost category. It also includes costs of equipment already in possession by the Partner organisation and used to carry out project activities:

• Office equipment.
• IT hardware and software.
• Furniture and fittings.
• Laboratory equipment.
• Machines and instruments.
• Tools or devices.
• Vehicles.
• The purchase of consumables necessary for the operating of laboratory equipment or other tools or devices (e.g. chemicals, reagents, fuel etc.) used for the implementation of content related activities and where directly attributable to the project.
• Any other equipment necessary for the project.

Equipment is eligible on real costs basis provided it is necessary for the project purpose, either as:

• Accessory equipment: a tool or device used to carry out project activities. It is necessary for the implementation of project activities and for the delivery of the project outputs and used for that purpose. Examples: a beamer used for the project team to present project progress, small instruments needed for gardening activities, etc.
  
  or
   
• Investment equipment: a tool or device considered as a project investment (or part of a project investment) and produced as result of the ERDF funding given to the project that will remain in use by the target group after the completion of the project. Examples: 3D printer for the vocational centre, server to manage traffic data, solar panels, batteries to store energy…

Equipment depreciation rule

Accessory equipment

Depreciation only applies to accessory equipment (that are accessory to project implementation and necessary for the delivery of the project outputs). For this type of equipment, a pro-rata depreciation value needs to be calculated based on a justified and equitable method, considering two aspects: (i) the depreciation period of the equipment (if applicable according to local legislation) and (ii) its percentage of use by the project. For accessory equipment, the full purchase price is eligible if used solely for the purpose of the project and depreciable within the eligible period.

Investment equipment

No depreciation applies to costs related to investment equipment: its full purchase price is eligible.

The following principles have to be obeyed:

• Equipment and depreciation are eligible if it is not covered by the office and administration costs (e.g. the IT system of the Partner is covered by the cost category office and administration while any IT system developed for the project specifically can be included under equipment).
• The relevant public procurement rules must be respected and properly documented by all Project Partners that are subject to public procurement law.
• Second-hand equipment is eligible if not originally acquired with the support of EU funds and if its price does not exceed the generally accepted market price.
• Costs related to the site preparation, delivery, installation, maintenance or reparation of the equipment are eligible.
• Costs of equipment which are purchased, rented or leased from another Project Partner are not eligible.
• Investment equipment must comply with the investment ownership and durability principles applying to productive investments (see Chapter 7.5.5 “Ownership and durability”).

The infrastructure and construction works cost category covers costs related to investments in infrastructure that do not fall into the scope of other cost categories. This includes costs for:

• Purchase/provision of land (limited to maximum 10% of the total project budget.
• Purchase/provision of real estate.
• Site preparation.
• Building permits.
• Building materials.
• Delivery.
• Handling.
• Installation.
• Renovation.
• Specialised interventions (e.g. soil remediation, mine-clearing).
• Other costs necessary to the implementation of construction works.

A Project Partner can report full costs of infrastructure and works that are implemented within the project. Infrastructure and construction works are eligible on a real cost basis only if crucial for the achievement of the project's outputs and results.

The following principles have to be obeyed:

• All costs are subject to applicable EU, EUI, national and internal procurement rules. The Project Partners in charge of the infrastructure and construction works are responsible for ensuring that these rules are respected.
• The full cost of infrastructure and construction works can be reported under this cost category insofar as it is fully justified as part of the project’s activities (no depreciation applied).
• Infrastructure and construction works have to comply with the investment ownership and durability principles applying to investments in infrastructure (see Chapter 7.5.5 “Ownership and durability”).