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Finance Helpdesk Newsletter #11

Draft Guide to FP7 Financial Issues is available now

Flat Rate 20%

Simplified Method

Actual Indirect Costs

Transitional Flat rate of 60%

SMEs and the 60% Derogation rate – Important Update

 

Draft Guide to FP7 Financial Issues is available now:

In FP6 there were “Financial Guidelines”. In FP7 this document is replaced with the “Guide to Financial Issues”. Please note that this is only a draft with many sections missing or requiring modification. However, it is an excellent document and we highly recommend you read it. 

 

To download please click here.

 

We have been receiving many questions on the different methods for calculating overhead costs and which to choose for EPSS so we have summarised the methods below:

 

Flat Rate 20%

Any organisation can opt for a flat rate of 20% for its initial participation in FP7 if they wish.

The organisation can then decide to upgrade and choose either the “Simplified Method” or “Actual Indirect Costs” in future participations with no penalty for past projects.

 

Simplified Method:

Can be used if an organisation has multiple centres or departments or only one centre or department.

If an Organisation only has the ability to calculate their total overhead costs but cannot systematically allocate actual costs per project or department or person, then they may use the “Simplified Method” for working out their overheads.

The “Simplified Method” is a universal way of calculating overheads by percentages as per the organisation’s normal practice.

For example by:

·          Salary Costs

·          Area Occupied

·          Etc.

 

Actual Indirect Costs:

If an Organisation has the ability to identify and allocate their overhead costs against different projects.

As always, this method has to be as per the organisation’s normal practice.

 

Transitional Flat rate of 60%:

Organisations can use the flat rate if they are either:

·          non-profit public bodies

·          secondary and higher education establishments

·          research organisations

·          SMEs

AND

The organisation is unable to identify with certainty their real overheads per project.

AND

The type of project they are proposing for does not cap the overhead rate.

 

SMEs and the 60% Derogation rate – Important Update:

This is very important and has major implications for SMEs.

If an Organisation currently only has the ability to calculate their total overhead costs and in order to allocate overheads to specific projects they would have to introduce methods such as the “Simplified Method”, then they could initially use the Transitional Flat Rate of 60% until such methods were in place and in line with their normal accounting methods.

 

According to the above; SMEs that have used FCF in the past may be able to use the 60% Derogation rate.

The key is the organisation having the ability to calculate and allocate overheads to specific projects.

 

We are currently in discussions with the Legal Department in the Commission about this and will keep you updated.



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