A:

The auditor is reporting on the project eligible costs not the EU funding.

According to the Financial Guidelines (pages 65-66) the State income should be treated as income, from which we deduce that all the costs need to be stated in Box 2 of from C. As such the auditor will report on total costs.

We quote from the FG’s

3.1.3.2.3- Other sources of Community funding for certain participants

Certain contractors (legal entities established in Regions Objective 1) participating in FP6 projects may receive an additional contribution from the structural funds (hereafter referred to as "bonus") to contribute to their share of counterpart funding. This contribution is an exception to Article 109 of the Financial Regulation established by virtue of Decision 1513/2002/EC of the

European Parliament and Council (27 June 2002 establishing the Sixth Framework Programme). For these contractors, additional funding is possible to fill part of their gap in counterpart funding but this bonus cannot duplicate FP6 funding. The decision to grant this bonus, as well as the amount of any such funding from the Structural Funds, is in the hands of the national

authorities responsible for the management of the Structural Funds.

The provisions of the FP6 model contract consider this complementary funding to be a “receipt” and therefore must be declared in the appropriate “Financial statement Form” (Form C) as such. Article II.23 provides that a financial transfer or contribution in kind from third parties made specifically to finance a resource used by the contractor on the project shall be considered

as a receipt of the project.

Funding through FP6 and the Structural Funds is subject to the rules on State aids, when these apply. Within their own funding mechanism and intensities, both FP6 and the Structural Funds respect the limits imposed by the rules on State aid. This applies also in case of combined contributions to an action under the FP6. Therefore, the ceiling of the possible bonus from the

Structural Funds - combined with the Community contribution under FP6 - expressed as a percentage of the total eligible costs (hereafter “intensity”) – will be determined by the Community Framework for state aid for Research and Development, where applicable or by the Structural Funds Regulation, in particular Article 29 (3) and (4) thereof, for those cases not subject to the rules on State aid (see the example in section 3.1.3.3.4).

Further information is available at: http://www.cordis.lu/era/regions.htm

Please also refer to the subsequent clauses of the FG’s.

There may be other forms of State aid which covers specific parts a project and not the shortfall of the EU funding, but we have no knowledge of these. If they are to finance an individual partner without any EU funding, they should probably be excluded from the financial reporting to EU. There may also be State funding for “associated” parts of the project, which while not being a formal part of the project, it is reliant on this work. Again here the costs and funding should probably be excluded from the financial reporting to EU.