Financial FAQ - Eligibility

General costs can be separated into direct and indirect costs. In the Baltic Sea Region Programme only direct costs are eligible. Such costs have to be incurred through the project and they have to be supported by an itemised invoice that is directly attributable to the project or project staff. If this invoice is provided by other departments of the project partner organisation it is only eligible if the costs allocated to the project were not calculated on a percentage, pro rata, etc. basis and would not exist without the project (value added).
For example:
a) Costs for in-house catering are eligible, because the items consumed by the project are clearly identifiable and have been prepared only for the project (value added).
b) If the project co-ordinator uses a mobile phone, the costs are eligible if an invoice exists that itemises the monthly fix costs and costs of calls.
c) The rent of office premises, which was calculated on a m2- or head-basis is not eligible. In this case a new room has to be rented outside the premises of the project partner.

The Member States of the Baltic Sea Region programme decided to exclude overheads and any kind of general expenditure allocated to the project on a percentage of pro rata basis, because of several reasons:

1) During the second level controls carried out for the predecessor programme BSR INTERREG III B NP, the majority of ineligible costs were overheads (45%). The exclusion of overheads reduces the risk for the projects and the programme.
2) The project partner's first level controllers need a lot of time to verify the complicated calculation methods for overheads. At the same time overheads are only a small part of a project's expenditure. The exclusion of overheads shortens the time needed for first level control.
3) The majority of overheads would also exist if the project were not implemented, i.e. they add no value to the project, which is demanded by the European Commission. The exclusion of overheads uncovers the value added.
4) Compared to the predecessor programme Baltic Sea Region INTERREG III B the co-financing rates increased from 50% to 75% and from 75% to 85%.

Administration costs of external service providers would be eligible in case the project partner and the external service provider agreed in the service contract that the service provider is allowed to invoice administration costs. In case there was no such contractual agreement, the external provider cannot invoice the administration costs. Administration costs of external service providers belong to budget line 2.

Associated organisations may be contracted. But all national and European public procurement rules, as well as the programme's bid-at-three rule have to be complied with.

Before collection of offers, the project partner has to lay down the most important conditions based on which the offers will be evaluated. The first level controller of the project partner has to verify that the procedure followed was transparent and treated all participants equally.

In general, the total of a particular budget line or work package cannot be exceeded by more than 20% or 40,000 EUR, whichever is higher. For example, if the budget of BL1 is 200,000 EUR, then a maximum amount of 40,000 EUR can be moved to BL1. The overspending is calculated on a cumulative basis, i.e. all reallocated amounts are summed up. Any budget changes, which fall under the flexibility rule, are approved by the Joint Technical Secretariat (JTS) afterwards. Every six months the project submits a financial report to the JTS. Among other things, this report automatically calculates the overspending of budget lines and work packages. In this way the JTS is informed about the budget reallocations of the project. The reallocation under the budget flexibility rule is approved when the clarification of the progress report is finalised and the project received the requested amount. Changes of equipment and investment items as well as changes of project partner budgets do not fall under the budget flexibility rule.The project preparation budget cannot be exceeded.

Neither the purchase nor the leasing of a car is eligible. If a car shall be used for business travels in the project, it is important to observe the following: The Programme Manual (chapter about budget line 3) stipulates that eligible travel costs cover the economy class travel on public transport and that the most economic way of transport must be used. Only in exceptional cases project partners may use company cars or private cars for business travels. In this case:

• the decision for the car must be clearly justified and documented (e.g. public transport is not available, company car is the most economic option), and
• only travel costs connected to the business trip within the project are eligible and must be accounted according to the national rules.

Article 57 of Council Regulation (EC) No 1083/2006 stipulates, among other things, that the ownership of investments and other items produced by the project cannot be changed within 5 years after the project closure. Therefore, the ownership of any project outputs and result (e.g. feasibility studies) produced by the project should remain with the project partner(s) for at least 5 years after project closure. If an output or result should be realised by an external company, you should give all operators of the relevant market the chance to realise it (open-source-principle).
It is important that you do not give an undue advantage to a certain private company by financing its development costs (e.g. through a project-financed feasibility study). All companies should be treated equally and competition and trade between the market participants should not be harmed, as otherwise you are subject to state aid and have to repay the co-financing.
Moreover, please note that in case you make the technology in question available to third parties by charges of fees those will be considered as revenues and will in consequence be deducted from project funds during or after the project.
More information about state aid and revenues (part of chapter on cash in-flows) can be found in the Programme Manual.

Invoicing of cost shares is not equal to contracting between project partners. By invoicing the cost shares the implementing partner asks the paying partners for their contribution to the shared costs. This is allowed. On the programme website you may find templates for the billing of shared costs.

No. Cost sharing is understood as splitting of one cost item (e.g. invoice amount) between at least 2 project partners according to a transparent and equitable method. Please refer to the chapter about sharing of project costs in the Programme Manual for more information.

In general, travel costs are not shared. Only if the travel costs were incurred by a person who is responsible for the management of the project (e.g. project coordinator, work package leader) travel costs can be shared. When deciding on the costs to be shared, you should take the following general rule: Only those costs should be shared that result from activities that benefit a number of project partners.

This system is not in line with the programme rules.

Only certain single project expenditures (=not all expenditures) can be shared. These expenditures should derive from project activities that benefit at least two project partners. Cost sharing should be done according to a transparent and equitable method and the key responsibility in the sharing model is given to the implementing partner.

This implementing partner is the project partner who is generating the relevant costs that will be shared later on. (For more details please check the chapter on sharing of project costs in the Programme Manual). Please note that the requirements of cost sharing are very high. With a high probability, sharing the majority of project costs may lead to an intransparent and inequitable system. According to the experience in the predecessor programme BSR INTERREG III B cost sharing requires much higher efforts than standard reporting - provided that the cost sharing documentation was done correctly.

Subsidiaries are defined as separate, distinct legal entities for the purposes of taxation and regulation. Because of this, they differ from divisions/departments, which are fully integrated within the main company, and not legally or otherwise distinct from it.

If the costs of the subsidiary should be directly co-financed by the programme, the subsidiary has to be listed as a project partner in the application form.

In contrast to subsidiaries, costs of divisions/departments of project partner organisations are considered as costs of the project partner organisation.

In general, all EU-lead partners and project partners receiving ERDF co-financing are allowed to pay for activities that are implemented on the territory of countries outside the European Community (e.g. Russia, China, Japan, US, Norway, Belarus). However, such expenditure fall under the so-called 10%-rule (ERDF). This involves certain restrictions:

• Not more than 10 % of the ERDF co-financing of the project can be used to co-finance the activities outside the EU and to involve organisations from outside the EU.
• The above-mentioned activities must be described in the application form (section 3.10.2) and be realised for the benefit of the regions of the EU Member States belonging to the Programme area. Of course they can additionally benefit the country outside the EU (e.g. China, Japan).

Please be aware that business trips within the Programme area (Norway, Belarus, Russia) are eligible without prior approval of the JTS provided they are relevant for the project. However they fall under the so-called 10%-rule (to be reported as expenditure spent outside EU - FR_5 of the progress report).

In case of external service providers and additional condition applies: the project has to select the service provider applying the public procurement rules or the bid-at-three rule of the programme (e.g. asking at least 3 hotels in St. Petersburg for an offer). These requirements cannot be "by-passed" by the 10%-rule!! Also listing Russian organisations as associated organisations in the application form does not change the situation: the public procurement rules must be observed in all cases!!

Eligible examples falling under the 10%-rule are:

• research studies or other external services carried out in China, Russia, etc. that are done by organisations from China, Russia, etc. or the EU and benefit the EU Member States in the Programme area (Budget line 2 ‘External services'),
• costs for the organisation of events in Japan, Russia, etc. (renting, service providing like catering, etc.) that benefit the EU Member States in the Programme area (Budget line 2 ‘External services'),
• travel and accommodation costs of Russian participants that were invited to project events because they have a specific role or importance for these events (Budget line 3 ‘Travel and accommodation'). Also tickets that were bought in the EU for the participation of Russian organisations fall under the 10% rule.
• travel and accommodation costs of EU project partners travelling to Japan (Budget line 3 ‘Travel and accommodation'). Also tickets that were bought in the EU for the participation in the Japanese events fall under the 10% rule.
• Examples that not eligible at all in the Programme are:
• cost items belonging to Budget line 1 ‘Personnel', e.g. salary and social security contributions of staff employed by Russian organisations, etc.
• cost items belonging to Budget line 4 ‘Equipment and investment', e.g. computer for a Russian organisation, inventories for an office in Japan, infrastructure investments in a business park in China, etc.
• cost items belonging to Budget line 5 ‘Other direct costs', e.g. direct administration costs of Russian organisations (e.g. rent, telephone), etc.
• subsistence allowances for e.g. Russian participants that were invited to project events,
• all expenditure for activities that only benefit e.g. Russia, but not the EU member states of the programme area.

 

All activities outside the EU have to be specified in the Application Form (section 3.10.2). In case they were not laid down in the Application Form, the approval of the Joint Technical Secretariat is needed before they are carried out.
It is possible to employ a Russian expert based on a labour or employment contract. But the relevant national labour law and other relevant national rules have to be observed - the expert would most likely need visa, work and residence permit, etc.
As the Russian expert would be directly employed by a project partner who pays the salary of this employee, the expenditure has to be included in Budget line 1 ‘Personnel'.
As the Russian expert would then be an employee of a project partner and the work is carried out in EU, the personnel costs for this employee do not fall under the 10% rule.

Norwegian partners are co-financed by Norwegian national funding. Belarusian partners receive ENPI co-financing. As the 10% rule only applies for ERDF funding, Norwegian and Belarusian partners are not affected by it.

First of all, ENPI partners should apply their national and organisation internal rules for calculation of actual travel and accommodation costs and daily allowances. The per diems rates of the European Commission only work as an upper limit: the total of the actual accommodation costs and daily allowances should not exceed these rates.

The general principle is that the programme rules and documents apply to all funds (i.e. ERDF, ENPI and Norwegian funding) unless exceptions are specifically mentioned in the Programme Manual or Operational Programme. Therefore, there is only one joint application form, one grant contract and the same reporting documents for all funds. The main differences are:

a) Public procurement: The PRAG rules have to be taken into account,

b) Preparation costs: These costs are not eligible for ENPI,

c) First level control: There is a special control system for verification of ENPI expenditure,

d) Payment of the grant: Only ENPI partners receive an advance payment.

Please see the Programme Manual for more information.

In general, expenditure that have no relevance for the project activities and add no value to the project success are not eligible. Entertainment costs belong to this group of expenditure. Examples are: costs for guided city tours, costs for sauna at project events, costs for alcoholic beverages exceeding the agreeable limit, etc.

First and foremost the relation of the costs to the project activities and national, regional and organisation internal rules and regulations of the project partner have to be respected. If there are no clear rules in these documents, the first level controller of the project partner should assess the situation according to the common sense, taking into consideration the characteristics of the event, e.g. country, purpose, target group, etc.

This concerns especially the consumption of alcohol and amount of informal activities.

A low value asset is an asset for which the acquisition and production costs, less any included sales tax, do not exceed a legally pre-defined amount. As the national (tax) legislation defines the limit for low value assets, the project partner who owns the equipment item has to apply its national legislation. If low-value assets can be completely written off within the period in which they are acquired, the whole costs are eligible during the respective reporting period of the project.

The period of depreciation depends on national regulations. Therefore first level controllers in each country should be contacted.

Costs for equipment items of part-time workers (i.e. of staff members that either work only for the project, but with a limited number of hours or that work partly for the project and partly for the organisation or another organisation or project) are only eligible if the equipment:

- is used for the project purposes, and

- is not co-financed from EU funds of any kind (double-financing), and

- is not fully paid by other international, national, regional and/or local funds (double-financing).

Expenditure for freelancers/independent contractors has to be budgeted under BL2. Freelancers are external to the project partner organisation, because they have a separate contract, e.g. service contract. Please be aware that the bid-at-three rule and public procurement rules have to be applied. In certain cases, e.g. private individuals working as lecturers for universities, the project partner should organize interviews to select the right person for the task.

As stated in the question, usually, in-house consultants/internal agencies are part of a project partner organisation. This means that they belong to the project partner organisation and are treated like any other department: their staff members are employed for the project partner organisation through an employment or labour contract and their work is eligible under BL1 Personnel if the eligibility requirements of this budget line were fulfilled (see Programme Manual for further information).
Any fee charged by the in-house consultants/internal agencies is not eligible. For example, in case an internal travel agency books the travels for the staff members, the fee of that internal travel agency is not eligible in the Programme. However, the pure travel and accommodation costs (without any extra charge from the internal agency) can be co-financed by the Programme if they are paid by the project and if travel documentation exists that proves the travel's relevance for the project.
In case the in-house consultants/internal agencies are independent from the project partner organisation, e.g. because they are organised in a separate legal entity that only belongs to the group of the project partner organisation, their work is regarded as external services. In this case it bases on a service contract and their work is eligible under BL2 External services if the eligibility requirements of this budget line were fulfilled - especially Public procurement (see Programme Manual for further information)!

No. Unpaid voluntary work is the only type of in-kind contribution that is eligible in the programme.

This is an investment, if the transnational value can be clearly pointed out in the application form.

The Joint Technical Secretariat considers the planting of trees for these purposes as eligible. They are rather a publicity measure than an investment in the meaning of the programme rules. However, the planned expenditure should be budgeted under the budget line (BL) 4 ‘Equipment and investment'. This also implies that the planting has to be described in detail in the application form, especially in the work plan (WP 2 - Communication and information) and the specification of BL 4. Please also plan further publicity measures in order to make these "forests" known not only for the local public but also for the broader target groups of your project.

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

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

Any kind of standard-level course for project staff is not eligible. Only if a course provides the project staff with a specific knowledge that is relevant to the project it is eligible.

Example: A basic accounting course for a Financial Manager is not eligible, but a course for accounting in EU-funded projects would be eligible. A basic English course for an Information Manager is not eligible, but a course for English writing skills.

Neither a public nor a private Russian organisation can put money into the partners' contribution of a project. However, Russian organisations can finance complementary activities of the project that have to be indicated in the application form, sections 3.10.5 ‘Description of complementary activities' and 3.10.6 ‘Sources of funding for the complementary activities'.
Please note that only the listed project partners can give their partners' contribution. Furthermore a project partner may use contributions from public international funds (e.g. Nordic Council of Ministers) or from public institutions of its nation (e.g. national ministries), region (e.g. country administrations) and/or local area (e.g. city) as its own partner contribution. But such international, national, regional or other subsidy must not exceed the partner's contribution (10%-50% depending on the location of the partner and programme funding source).

The Programme Manual sets the minimum requirements for the calculation of personnel costs and working hours in the project. Moreover, a voluntary timesheet template can be downloaded from the Programme website (section <Management Toolkit>). It supports project employees in recording their working hours and in calculating their personnel costs correctly.
It might happen that the salary for project employees exceeds the average salary level in your country, because more knowledge and language skills are required for project staff. However, the salary should be justified by the experience of the employee and should not be exorbitant or overpriced.

The activities in the project have to be officially assigned to the staff member. Preferably, this should be done through a new employment contract. But it is also possible to attach a written agreement to the existing employment contract that clearly stipulates the new tasks to be carried out in the project and the working time foreseen for them.

The timesheets of the staff members working for the project shall include the total hours worked for the project and, if applicable, the own organization and/or other projects.
These total working hours may include overtime. Such overtime hours are eligible provided that
• the amount of total hours worked does not exceed the limits set by the national, regional, local or institutional rules and regulations, and
• overtime is allowed by the national legislation, the employment contract, institutional rules and regulations, etc.

In case the employer pays out the overtime, this would be eligible if:
• the employment contract (or any other legal document laying down provisions for the employment) foresees a payment of overtime (otherwise the payment of overtime is regarded as a voluntary contribution of the employer),
• this is in line with the national, regional, local or institutional rules and regulations.

Even if the number of potential suppliers is limited, the applicable public procurement rules have to be applied.

Yes. The costs are eligible as preparation costs, but only if institutional, regional, and national, as well as Community public procurement rules were followed also during the project preparation phase.

Each project partner is responsible for ensuring that its procurement complies with the relevant national and EU public procurement rules. The lead partner organisation has the overall responsibility for the project. It represents the project partnership towards the programme, as it is the only contracting partner of the Managing Authority. In case of irregularities, the recovery of the ineligible funds from project partners will be done via the lead partner. Therefore, the Lead partner should include and regulate these issues in the partnership agreements.

Yes. The NGOs receive public funding by the programme co-financing. Therefore, they have to apply the stricter rules for use of public funding (e.g. public procurement rules, limits for travel and accommodation costs), even if they might not apply them for their usual activities outside the project.

Examples of revenues are: Users of a book reimburse the postage fee, which was already co-financed by the programme; Users of an internet-based tool have to pay a user fee; Visitors at a conference pay a participation fee.
The EU legislation states that any revenues during the project implementation and after the project closure (at least 5 years) have to be deducted from the eligible expenditure that was co-financed by the programme. This means that you have to report to the programme any revenues that incurred during the project implementation and during a certain reference period after the project closure (for details see Programme Manual, Horizontal rules applicable to all budget lines, rule no. 8). Your eligible expenditure will then be diminished.
For example:
a) During the project lifetime you have a conference with total costs of 10,000 EUR and you earn 8,000 EUR through e.g. participation fees. Then (10,000 EUR-8,000 EUR=) 2,000 EUR are eligible expenditure and 8,000 EUR are treated as revenues.
b) You developed an internet-based tool during the project. During the reference period after the project lifetime (e.g. 5 years) you earned 8,000 EUR through user fees. At the same time you have operating costs for the tool that have not been paid by the project (e.g. server maintenance) of 3,000 EUR. Then (8,000 EUR-3,000 EUR=) 5,000 EUR are treated as revenues and have to be paid back to the Programme.

Business trips to EU Member States and within the Programme area are eligible, provided that they contribute to achievement of the project objective.

Business trips to destinations outside the EU and the Programme area are eligible, provided that they contribute to achievement of the project objective and have been approved by the programme beforehand. They have to be specified in the application form. In case they were not laid down in the application form, the prior approval of the Joint Technical Secretariat is needed.

Even though these initiatives are very useful the costs for the Carbon-dioxide emission compensation certificate are not eligible, because the certificate is a voluntary contribution of the traveller to the transport company. The projects are encouraged to finance them as complementary activities from own funds.

Yes, this is possible to a certain extent. Project partners may invite associated organisations or other guests to project events if their participation is justified as regards the added-value to and role of the guests at the event. These costs have to be budgeted under budget line 3 Travel and accommodation of the inviting lead partner or project partner. However, for guest only travel and accommodation costs, but no subsistence allowances can be paid.

Travels of external service providers have to be relevant for their activities in the project. Before their travel they have to agree with the project partner that the project partner will pay their travel and accommodation costs. Such costs should be budgeted under budget line 2.

According to the Programme Manual the most economic way of transport has to be used. In well justified cases, it is possible to travel by taxi e.g. during the night. This justification has to be documented and verified by the first level controller of the respective project partner.

An umbrella partnership is not allowed in the Baltic Sea Region Programme. If a lead partner faces the problem that more partners are needed than can be included as a project partner, he is recommended to focus on those organisations that provide the most important financial input. The other organisations should be listed as associated organisations. Only the costs of the project partners will be co-financed by the programme. The associated organisations have to cover their costs from their own budget and should not report any costs through the project partners.

Yes, travel and accommodation costs of unpaid voluntary workers can be covered if the trip is needed for completion of their tasks in the project. Subsistence allowances are not eligible.

Yes, this is a typical example of unpaid voluntary work. Please note that the students must not be employed by the university, e.g. as graduate assistant.

The written agreement has to be concluded between the volunteer and the project partner organisation. It has to lay down the activities that will be taken over by the volunteer. The agreement will be validated by the first level controller.

As the organisation is obliged to pay for these costs, they are eligible. They should be budgeted under BL1 Personnel.

As students mainly carry out research studies as part of their courses, they have to get a mark for their study. If they passed a course they get ECTS points. These are not regarded as remuneration.

This is possible. However, the project partner organisation should clearly separate tasks and time of the unpaid voluntary work and the later employment. There should be no overlaps.

Such deviation is allowed. However in each Progress report the exact amount of unpaid voluntary work must be provided and, in case of significant differences, an explanation to support the change has to be given.
Please remember that, according to the rules set in the Programme Manual, each project partner can report the value of unpaid voluntary work up to the limit of its own individual partner contribution to the project.

In case of special rules regarding the recovery of VAT, project partners are recommended to check the situation with their first level controller and accountant. If there are still doubts, it is recommended to contact the JTS in writing.

According the programme rules recoverable VAT is not eligible. In general all BY partners can apply for a tax exemption for VAT paid in Belarus, therefore VAT paid for services or goods in Belarus is not eligible. On the other hand taxes paid abroad are usually not recoverable e.g. if the partner pays a hotel invoice in Finland, there is Finish VAT added and paid. This VAT is in normal case not refunded by any authority and therefore it can be considered eligible.