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FAQ on project management

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10.� What is the difference between expertise and staff costs?��

11.� Is VAT an eligible cost?��

12.� What are other costs?�

13.� What are project preparation costs?��

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1.�� What is the date of approval of the project?

The date of approval is the date when the Steering Committee decided to approve the project.
The Steering Committee can approve projects under conditions; in this case the "approval procedure" is not completed until conditions are fulfilled. In this special case the JTS will contact the LP and ask for clarification of identified problems. After having received all necessary information the JTS will inform the LP in a short letter whether all conditions have been fulfilled or not. In case of fulfilment the date of approval is the date of the letter of the JTS.

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2.�� What are the budget lines of a CADSES project?

Project costs qualifying for a subsidy consist exclusively of project costs listed in the application approved by the Steering Committee.
Projects within CADSES are required to provide a detailed breakdown of the costs foreseen for the whole operation.
Project partners applying for ERDF funds must fit their forecast budget into the following costs categories: (i) Coordination; (ii) Personnel; (iii) Meetings, conferences, seminars; (iv) Travel and subsistence costs for staff taking part in the operation; (v) Promotions and publications; (vi) External expertise and audit; (vii) Others (i.e. costs not comprised under the other headings); (viii) Small Scale investments. The Applicants� Manual provides a wider description of the budget items.
The project finance for external funding foresees the following categories of eligible direct costs: (i) Staff costs; (ii) living costs (per diem); (iii) operational costs (travel, experts/consultants, cost of equipment, small scale infrastructure, conferences/workshops, translation, information and dissemination costs, audit). Moreover, eligible indirect costs include a maximum of 7% of the total amount of eligible direct costs. The indirect costs are eligible provided that they do not include costs assigned for another heading in the project budget included in the Grant contract.

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3.�� What happens if a cost or an activity do not fit exactly the categories foreseen?

The budget items listed in the previous paragraph do not expect to group all the possible expenditures that are carried out in a project. Necessarily not all the possible types of expenditure, because of their characteristics and their tipology, can be foreseen when laying down a list of categories that cannot be completely exhaustive.
Of course, once the project�s framework and goals have been set, one should identify the expenditures and try to fit them into the categories foreseen for Cadses according to the descriptions and the explanations published in the applicants� manual.
If the budget items do not match exactly the needs to incur expenditures, then the project applicant shall follow other criteria that should enable him to make sure that the expenditure is eligible according to the guidelines set by the programme.
The point is that the projects cover suce a wide range of activities that it is hard to foresee in advance all the possible categories that could collect these costs. The budget line �Others� is of help in doubtful cases, i.e. when an expenditure does not fit exactly the specific budget lines foreseen.
In general, anyway, by including the expenditure in the budget one has to keep in� mind the eligibility rules that govern not tonly the expenditures but also the activities. Regulation 1260/99, ERDF and INTERREG Regulation, the programme documents show what activities are eligible for the scopes of territorial management. Once the activities you want to have financed fit these eligibility rules, and once your project �works�, then it will not be difficult to find the right place for the expenditure in your budget.
Some say that also a swimming pool is eligible, provided it fits the scopes of the project, of the programme and of the policies in the field of territorial development!

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4.�� What are the reference documents for the proper financial management of the project?

For the correct management of the finances of a project one should always keep in mind the following framework documents, which also constitute the basic framework for the concept of eligibility:

Council Regulation (EC) 1260/99, namely title III �Contributions and financial management by the funds�;
Council Regulation (EC) 438/2001, about management and control systems for assistance granted under the Structural funds, namely the provisions that are grouped under the concept of �Audit Trail� (�7 and annex I) and the certification of expenditure;
Commission regulation (EC) 448/2004, setting the 12 eligibility rules;

Moreover, the CADSES programme has set some additional requirements or adjustments to these basic rules. These are now listed in the Applicants� manual and in this FAQ section, but will soon be grouped in a specific chapter that will become part of the project management handbook.

In the management of the project costs it is important to make sure that the National provisions for some items such as personnel costs or public procurement are harmonised with the provisions set by the Commission regulations. The first level control bodies and the CCPs, given their �National� working dimension, can assist the project in this tuning process.

Last but not least, the institution participating in the project must verify to what extent its own internal regulations (governing travel costs, dialy allowances, procedures for the purchase of goods and services) are compatible with the EU framework. Also in this case the CADSES management institutions at National level can provide assistance.
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5.�� Has the LP to collect the invoices of all PP?�

No, this is not necessary.
Each PP of the ERDF area has his invoices checked and certified by his respective First level control body. The certifier issues a certification of expenditure, stating that the costs claimed have been incurred respecting the Community and the National provisions, and that they are coherent with the project�s activity plan and schedule.
The Lead Partner will therefore collect only the certifications of expenditure sent by each Project Partner and will submit the overall payment request to the Managing Authority .
The same applies to the beneficiaries of the external funds, provided that the certification in this case is an audit on the Action�s account produced by an approved auditor as defined in paragraph 15.6 of the �Annex 2 � general conditions applicable to��. This audit is done at Financing Lead Partner level.

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6.�� What documents are necessary as an evidence of the incurred cost?

As a rule, costs incurred within the implementation of a project must be supported by documents that can be divided into two groups: documents that justify the incurred expense (e.g. an invoice) and documents that justify the actual payment of the expense itself.
As regards the first category of documents, in general invoices (or, when foreseen, receipts) are the most common document backing an incurred expense. Invoices are issued after the purchase of goods or services from third parties (e.g. catering, publications, renting of rooms for a conference, equipment).
In most cases, anyway, the invoice must be accompanied by the necessary evidence that this cost is eligible according top EU regulations. The Project Partner must be in the position to prove why and how these costs were originated, why one particular sub-contractor or supplier was chosen in case more options were available or a tender was carried out, and if the service or good purchased were delivered correctly and coherently with the project�s scopes. Each expenditure should therefore be backed by the documents that can help depict the �story� that lies behind the cost itself.
This documentation is necessary for the 1st level control body in the certification process. Therefore these supporting documents may vary according to the requirements of the certifying body. Local CCPs can provide further information.
Travels must be backed by tickets testifying not only that the cost was incurred, but also that the person entitled did travel. Therefore, e.g. airplane tickets should be accompanied by the boarding cards, and a train ticket should be duly stamped.
The expense related to internal personnel is not backed by an invoice, but by internal evidence. Please refer to the relevant FAQ.
The second category of documents comprises the evidence showing that the cost has been incurred in cash, and that the relevant amount has definitively been debited in the Project Partner�s accounts. Receipts, payment orders issued by the bank, Bank statements etc. will support each cost claimed and will be checked by the 1st level control body. Also in this case National provisions may differ and your local CADSES representative will be of help.

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7.��Exchange rates

Cost claims must be expressed in Euro. The Project Partners located in countries outside of the Eurozone are required to convert their costs in local currency into Euro. There are several ways to do so but once a project has chosen one calculation method, this should not be changed for the whole duration of the project, for the sake of transparency.
Here we suggest some methods:

use the exchange rate of the very day the cost was incurred;
use an average exchange rate, e.g. for the period covered by the cost claim, provided by some official financial or banking institution;
use the change at some fixed dates (e.g. 30/6 and 31/12)

In any case, the system chosen should be used for the whole duration of the project and should be clearly and quickly demonstrable. The rates used will also be checked by the 1st level control body.
We recommend to refer to the site of the European Central Bank (www.ecb.int) or to the sites of the National Central Banks of the single countries not belonging to the Eurozone.

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8.�� What are staff costs and how should they be calculated for the project?

The internal hourly cost (staff costs) of project partners are eligible expenditure and can therefore be regarded as match funding for projects. They are considered as costs of professional services.
Attention should be paid to the following:

(1) Internal hours of project partners (public or private) are not considered as contribution in kind.
If the expenditure is based on salaries or wages actually paid out, the expenditure is not regarded as contribution in kind but as paid expenditure, which must be supported by specific documents refer to point 1.1. of the eligibility regulation 448/2004. In contrast, unpaid voluntary work is regarded as contribution in kind and therefore the stipulations of rule 1 point 1.7 a) and e) of the eligibility regulation apply.

(2) The hours should be directly attributable to the relevant operation (project) and include real expenditure. This expenditure must be eligible according to the relevant rules and backed up by documentary evidence refer also to rule 11, point 4, as regards expenditure by public administrations relating to the execution of operations. The calculation of the cost should be carried out on the basis of the hourly cost per each staff member working on the project.

(3) All details to ensure the reality of expenditure and to verify that documentary evidence is available shall be governed by the contractual relationship between the Managing Authority and the partner(s).

(4) The value of internal hours used by partners in an operation (project) can be regarded as an eligible expenditure provided it is described in the approved project budget and can be backed by supporting documents, time sheets, payslips, etc. The necessary documents as an evidence both of the worked hours and of the corresponding costs must be agreed upon with your 1st level control body.

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�9.�� Is subcontracting between partners allowed?�

Subcontracting between partners is not allowed. There must be a clear distinction between the status of Project Partner and the status of sub-contractor. The risk is that one PP by providing services to the whole partnership may make profit out of the project activities and this is against the spirit of cooperation governing the CADSES programme.
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10.�� What is the difference between expertise and staff costs?

The budget item �Expertise� is referred to professional services or consultancies provided by third parties or sub-contracts and strictly concerning the carrying out of tasks or activities requiring definite skills not available within the PP�s permanent staff. Experts therefore can perform a wide range of tasks, ranging from the creation of a web page to the release of a study, of a research, and to the delivery of a lecture at some seminar. Their collaboration is time limited and this must be clearly stated in the contract stipulated between the contracting PP and the expert. The cost of the expertise must be in line with the market rate and also needs to be demonstrable as transparently as possible. Within this category are grouped also expenses related to project audit.
The relevant expenditures are backed by an invoice and by the other supporting document which may be required by the 1st level control body and help identify the reason why and how one expert was chosen.
Expenditures for auditing, if any, shall be budgeted in an amount of approx. 3 to 5 % of the total costs.
Staff costs are to be distinguished for several reasons: first of all staff usually refers to permanent employees, or to in-house consultants whose presence within the working structure is not limited to brief time periods; such costs are not backed by an invoice; moreover, because of their status of permanent personnel, employees are not hired in order to fulfil one special and definite task, but to follow several activities which develop day-to-day.
In some countries there are peculiar consultancy contracts according to which experts have sometimes the same contractual status of permanent employees. The eligibility of these costs within a CADSES project must be discussed with the 1st level certifying body.

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11.�� Is VAT an eligible cost?

Commission Regulation (EC) No 448/2004, Rule No 7, states that VAT does not constitute eligible expenditure except when it is genuinely and definitively borne by the final beneficiary. VAT which is recoverable, by whatever means, cannot be considered eligible, even if it is not actually recovered by the final beneficiary or individual recipient.
The certifying body may require from the Legal representative of the Project Partner a declaration or a certificate showing the VAT status of the institution involved.

This budget line covers in particular the expenditures incurred to aquire the equipment necessary for the administration/management of the project. This kind of equipment has not the characteristics of a small scale investment, i.e. it is not an infrastructure with a transnational impact, enabling the projects to demonstrate innovative results (as defined in the Communication from the Commission to the member States of 2 September 2004 C 226/02) INTERREG III Guidelines, point 14) and is not proposed by transnational strategic concepts along with the general provisions of the CIP of the CADSES Neighbourhood Programme (see chapter 4 � general provisions). Additionally due to the fact that the equipment is aquired solely for the purpose of project management the provisions of the article 30 of the Council regulation (EC) 1260/99 of 21 June 1999 laying down general provisions on the Structural Funds, concerning the eligibility cannot be met. The equipment aquired solely for the purpose of the project management will undergo the modifications affecting the implementing conditions.
Thus the eligible expenditures are determined accordingly to the rule no 1 of the Commission Regulation (EC) 448/2004 of 10 march 2004, i.e. on the basis of costs of depreciation relating exclusively to the period of co-financing of the project The depreciation costs must be calculated according to the relevant accountancy rules. The precondition for the eligibility of these costs is a direct link between with the objectives of the project.
In addition the BL �Others� covers direct administrative costs, e.g. rental fees for an office extablished exclusively for the sake of the project management, or purchase of stationary solely and exclusively for the purpose of the management of the project and/or for the execution of project activities.
Any other costs, which do not fit under any of the other BL shall be declared under this BL. The items should be fully detailed (description, number of units, unit rate).

For approved projects up to 2% of the total project budget might be reserved for so called project preparation costs (e.g. journeys to project partners, participation on a partner search forum organised by the programme etc.). It has been agreed to include these in the budget row �Coordination costs�.