Financial FAQ - Application

Financial issues during the Application stage / 28 questions

Activities outside the EU (10% rule (ERDF co-financing))

Should all activities taking place outside the EU (e.g. Russia, China, Norway) that are financed by ERDF-partners be described and their costs estimated in section 3.10.2 ‘Activities taking place outside the EU territory’ of the application form? Would these activities only concern organisations mentioned in section 2.2 ‘Involvement of associated organisations’?

Your interpretation is partly correct. All activities taking place outside the EU (e.g. in Russia, Belarus, Japan, Norway, etc.) that are financed by ERDF-partners should be described and their costs estimated in section 3.10.2 of the application form. But this is valid for all activities taking place outside the EU territory, not only those activities concerning organisations mentioned in section 2.2.
Please note that the information in section 3.10.2 is preliminary. The lead partner is allowed to make changes during the implementation of the project but only after the approval of the Joint Technical Secretariat.

Budget size

Are there any limits for the total budget? Are there any limits for budget lines or work packages?

There are no budget limits, neither for the total budget nor for the budget lines and work packages. However if transnational investments are foreseen in the project, these may not exceed 10 MEUR. All budget sizes have to be justified by the activities. Imbalances in the budget (e.g. WP 1 is bigger than 20%) should be explained in the description of the work packages.

BL2 ‘External services’: Is there an upper limit for the budget size or share in the total project budget or project partner’s budget? Is it possible that a complete work package is provided by externals? Or may a project partner use more than half of his budget for external expertise?

There are no limits regarding budget size or share in the total budget/project partner's budget. If the public procurement rules are applied and if the exceptional budget size/share of external services is clearly justified in the application form, it is possible. However, it should be considered whether using organisation's own staff would not be more valuable for the process of capacity building and maintaining the knowledge inside the organisation also after the project has ended.

Budget size of project partners

How could we explain imbalances between the project partners’ budgets in the application form, e.g. the Lead partner consumes 40% of the total project budget whereas the other partners only use 10%?

You should justify imbalances in the application form sections 2.1 ‘Partnership composition' and 2.3 ‘Partnership details' (field: "Organisation's role in the project) so that we can see were the large proportion of the project's budget is going to. If the Lead partners budget is very large, you should also explain it e.g. through your project co-ordination strategy in work package 1.

Filling application form

Into which category do we have to group special software?

Depending on the nature and use of the software, special software should be grouped in "Multimedia equipment or either "Measurement, research and laboratory equipment". If it does not fit to these groups, it should be included in "Others". For example, special statistic software to evaluate huge amounts of data for a research study should be grouped into category "Measurement, research and laboratory equipment".

Do we have to attach any employment/labour contracts or CVs of the project co-ordinator or financial manager to the application form?

No, you don't have to attach these documents to the application form. But employment/labour contracts have to be available to the first level controller at any time.

Filling application form – External services

What is the minimum limit for external services?

There is no minimum limit for the value of one cost item. But you should pay attention that the value of the groups (of cost items whose value is below 20,000 EUR) is not too little.
For example: A project plans several meetings. The total costs for external services for these meetings amount to 10,000 EUR, of it 1,000 EUR for catering and 9,000 EUR for external speakers. These costs could be part of a bigger group, like "Project events (project meeting facilities, speakers, catering)".
Negative example: On the other hand a group like "Other external services: 100,000 EUR" without any further specification is not acceptable.

How to plan the expenditure of external services? At the moment of the application we do not know the exact amount.

In the application form the values for external service items are only estimated. The specification of external services should help assessors to understand which activities are carried out by external service providers and the specification is followed-up during the project monitoring.
It is recommended to indicate all planned external services in the application form. In this way, the external service is approved with the approval of the application form.

What is meant by “contracting partner” (application form section 4.6.1)?

A "contracting partner" is the project partner who makes the contract with the external service provider.

Do we have to list external service providers as associated organisations in the application?

Pure external service providers should not be listed as associated organisations. But external services should be specified in section 4 of the application form.

How can we describe the external services below 20,000 EUR in the best way?

We recommend describing your external services as concise as possible. This involves:
• Stating the number of contracts and their (average) size.
• Avoiding terms like "external services", "external experts" and replacing them with clear statements about what the service providers are doing (e.g. catering, speakers, premises, marketing material, etc.).
• Replacing whole sentences (e.g. "A number of smaller contracts will be procured") by short statements (e.g. "5-7 contracts").
• Stating the number of the partners involved (e.g. PPs1,4,5-8)
In addition, you should break down your external services below 20,000 EUR into the smallest groups possible.
For example, think if the WP2 activities are for "project meetings and conferences (e.g. catering, speakers, etc.)" or "production of marketing materials (e.g. design, printing)" or "external Information Management".

Filling application form – Project partners

Do we have to specify the project partners’ budget per budget line and per work package?

In the application form you only have to indicate the ERDF/Norwegian/ENPI co-financing, the partner's contribution, the value of unpaid voluntary work and the equipment per project partner.
But it is strongly recommended to have a division of the project partners' budget per budget line, per work package, per fund and per reporting period. This facilitates the calculation of the total project budget and the implementation of the project later on. After the approval it should become a part of the Partnership Agreement.
On the programme website there is a project planning tool that may help you in this issue.

We have problems to fill in the partners’ financial resources. There are no alternatives given in the drop-down list for “The partner will have ENPI budget”.

Please check if the data of the partners is filled in completely. In particular the legal status, country and regions (NUTS areas) are very important. Only when you select an eligible region for all NUTS areas (i.e. NUTS1 - NUTS3) the application "allows" you to answer the question, if the partner is going to apply for ENPI co-financing.

First level control

Do the partners already need to identify a first-level controller as part of the project application? Do they have to submit a certificate for their controller together with the application form?

The partners can but don't have to identify a first level controller (FLC) at the stage of the application. The first level controller certificate should not be submitted together with the application form. It will be requested after the project was approved by the Monitoring Committee together with the first progress report.
But all project partners that have to pay for first level control, have to plan the relevant budget already in the application form (under WP1: BL1 for internal FLC and BL2 for external FLC). This is important as otherwise the project partners do not have enough budget.

Investment

If a construction is a part of the project activities, where do we have to budget the planning costs of the construction?

If the planning of the construction is provided in one package together with the construction itself (i.e. one contract) or if it is provided by the same company, which also implements the construction, then the planning costs fall under BL 4 Equipment and investment. If the planning is a separate service that is not provided by the construction company, then it falls under BL 2 External services.

Investment – Extension stage

We plan to use the extension stage. Do we have to calculate the investment expenses in the project partner budget and/or total budget of stage 1 or do we specify the estimated costs only under “3.8.3. extension stage”?

No, the possible costs for investments implemented during the extension stage are not part of the total or project partner budget of the project applied for in stage 1 and only need to be specified in form of an indicative budget in the section of the Application form mentioned by you.

Involvement of Russia

Should all activities taking place in Russia and planned to be financed by ERDF-partners be described and their costs estimated in section 3.10.2 ‘Activities taking place outside the EU territory’ of the application form? Would these activities only concern organisations mentioned in section 2.2 ‘Involvement of associated organisations’?

Please see the FAQ under "Activities outside the EU", which are listed above in this section.

Marketing costs and conference costs

There is no budget line for meetings and dissemination. Under which budget line should expenditures for the production of marketing materials, such as brochures, bags, etc. be budgeted? What about conference costs (e.g. renting of conference room, renting of equipment)?

It depends on the status of the service provider and the source of materials used. If an external service provider was contracted (e.g. design company, printing house, speaker, caterer, etc.), its expenditure should be planned under BL 2 External services. If the work (e.g. design, presentation) was done by a project partner's own staff member, who used the materials of the project partner organisation, then the personnel costs should be planned under BL 1 Personnel and the depreciation of the equipment belongs to BL 4 Equipment and investment.
All marketing and meeting costs shall be budgeted and later on reported in work package 2 "Communication and information".

Partner’s contribution

Can personnel costs of project partner organisations be used as partner contribution?

The logic is slightly different: the budget is not divided into one part (e.g. travel costs) being paid from ERDF and another part (e.g. personnel costs) being paid from a partner's own contribution - instead each expenditure (e.g. personnel costs) is part-financed by ERDF and the other part is contributed by the project partner.
In practice this means that after the project partner has paid certain costs, he reports all his eligible expenditure - inclusive personnel costs - to the programme. After the report is checked, a certain share (e.g. 75%, depending on the approved co-financing rate) of this expenditure is part-financed by the programme. This share is independent from the share of the personnel costs in the total costs. This means that the amount of personnel costs must not necessarily be equal to the own partner contribution.
Please note that a project partner can only use personnel costs that were paid for staff directly engaged in the project and employed by the project partner institution on the basis of an employment/labour contract or unpaid voluntary work. These costs are eligible under budget line 1 ‘Personnel'. (For details please refer to the chapter about budget lines in the Programme Manual.)
It is important that the relevant staff member is not financed by any other EU or national programme and that the staff member fills in timesheets. A template for these timesheets (incl. calculation of personnel costs) is available on the programme website.

Among others, we plan to provide training courses for unemployed persons and further education courses. Are parts of the unemployment compensation and of the participant’s salary eligible as partner’s contribution?

These kinds of expenditure are not eligible in the Baltic Sea Region Programme.

Can a partner use national grants as partner contribution to the budget?

National grants can be considered as partner contribution, if the following conditions are fulfilled:
  • The national support in cash does not exceed the maximum partner contribution, i.e. 10%-50% depending on the location of the partner.
  • The national support does not originate from any other EU funded source (e.g. a national fund with ESF or ERDF sources).
If one of the conditions is not fulfilled, the exceeding amount is regarded as cash-inflow and has to be deducted from the total eligible costs.


Preparation costs

What happens between the submission of the application and the Monitoring Committee (MC) decision? What kinds of costs are eligible?

The period between submission of the application form and the MC decision day is part of the project preparation phase. During this period the costs of the first three budget lines are eligible if the MC decides to fund the project from the Programme. For example, it may happen that an external expert is working until the day of the closure of the call and submits the invoice only a week later. Or the lead applicant is optimistic about the approval and starts preparation of the project start. It is recommended to do so in order to enable a quick start directly after the MC decision.

How is the limit for the preparation costs calculated? If we discover that we pass the 2 % / 50.000 € threshold, what do we have to do?

The preparation costs should not exceed 50,000 EUR or 2% of the total eligible project budget, whichever is lower. Total eligible project budget is understood as the sum of the budget of all WPs, i.e. WP0-WP7.

In the application form, the budget for preparation cost should not exceed the above-mentioned limit. If your real preparation costs were higher, you should cut them on your own.

Seed Money

Does the seed money instrument exist in the Baltic Sea Region Programme 2007-2013?

No, the seed money instrument was replaced by the possibility of receiving reimbursement of preparation costs directly linked to the development of the project. (For more information please refer to the chapter on preparation costs in the Programme Manual).
Moreover, some countries provide a seed money facility on the national level (e.g. Germany). (More details are provided on the programme website under "Country specific information".)

Sound financial management

What is understood by “sound financial management”?

The principle of sound financial management is defined in Article 27 (1, 2) of Council Regulation (EC, Euratom) No 1605/2002. This regulation says: "That the budget shall be spent "in accordance with the principles of economy, efficiency and effectiveness.
The principle of economy requires that the resources used by the institution for the pursuit of its activities shall be made available in due time, in appropriate quantity and quality and at the best price.
The principle of efficiency is concerned with the best relationship between resources employed and results achieved.
The principle of effectiveness is concerned with attaining the specific objectives set and achieving the intended results."

Spending plan

Should I ask my project partners to plan their budget based on the 6-monthly spending plan or could it be done later (after approval of the application)?

In the application form only the spending target of the whole project has to be indicated per fund (i.e. ERDF, Norway and ENPI).
However, we recommend that the project partners at least agree on the individual spending targets (one amount per period) already during the project planning process. In that way the progress of each partner can be monitored in a better way.
If you want to plan a realistic budget on a six-monthly basis, the project planning tool might be helpful (see eu.baltic.net).
Please note that the expenditure is reimbursed by the programme approximately 1½ year after its incurrence. This means that you should plan your liquidity accordingly.

Strategic projects

What does it mean to be a strategic project? Do I have to think of an extra budget for the extra activities, which are related to being a strategic project?

The programming bodies do not impose extra activities on strategic projects. Strategic projects might be asked to be present at up to 2 meetings of the Monitoring Committee. Therefore, we recommend planning extra expenditures for 1-2 representatives of your project in these meetings in case you intend to become a strategic project.

VAT

Are there any national institutions that can provide us with a clear answer if a project partner is/is not entitled to recover any VAT?

Each partner should consult its own accountancy department - according to our experience the majority of accountants know the project partner's VAT status. In problematic cases the project partner should also consult its first level controller. In some countries there are also national contact points available that might help as well (see our web-page, section Country specific information).