Grant: Maximum Amount, Funding Rate, Budget & Flexibility (Article 5)

ARTICLE 5

GRANT

For the definition, see Article 183(2)(a) EU Financial Regulation 2024/2509: ‘action grant’ means an EU grant to finance “an action intended to help achieve a Union policy objective”. See Article 125 EU Financial Regulation 2024/2509.

1. Form of grant EU grants are normally ‘budget-based mixed actual cost’ grants (meaning grants, broken down by budget categories and participants, and based on actual costs incurred and other simplified forms of funding (e.g. normally unit costs for SME owners/natural person beneficiaries and volunteers, if applicable and flat rate costs for indirect costs).

However, depending on the programme and on the type of action, grants may also be:

− pure actual cost grants (e.g. some operating grants)

− pure lump sum grants

− pure unit grants

− ‘activity-based mixed actual cost’ grants, i.e. broken down by budget categories as well as by activities

or

− any other combination of costs and/or contributions.

For guidance on other types of grants, see How to manage your lump sum grants.

2. Maximum grant amount The maximum grant amount set out in this Article defines the maximum amount of funding that the granting authority has available for the grant. It is a ceiling and not necessarily the ‘final grant amount’ and in any case not a ‘price’ due to the beneficiaries. It can NOT be exceeded, e.g. to accommodate higher or anticipated cost.

The maximum grant amount can NOT be increased — even if the eligible costs of the action are higher than planned.

Specific cases (maximum grant amount):

Contingency reserve (RELEX)

In some programmes, the maximum grant amount

3. Funding rate EU grants are normally subject to ‘co-financing’ or ‘co-funding’, meaning that the EU granting authority does only provide a part of the funding of the action and the remaining parts must be financed from the beneficiaries’ own resources, income generated by the action (e.g. by selling results), or financial or in-kind contributions from third parties (e.g. grants from national or private funding programmes). As such, the EU grants are normally subject to a single funding rate for the entire action — which is expressed as a fixed percentage and announced in the call conditions. Through the application of the funding rate (a percentage of the eligible cost), co-financing is ensured as the remaining no eligible cost will need to be

covered from other sources. Normally the granting authority does not require any further information on the sources of co-financing, unless specifically requested for the action.

For some programmes and types of action (e.g. HE, DEP, EDF, CEF, I3, ERDF-TA, SMP, RELEX), there are however several funding rates inside the project. These may depend on:

− the type of beneficiaries (e.g. SMEs; for-profit or non-profit legal entities, place of establishment etc)

− the type of cost categories to be covered (e.g. FSTP)

− the type of activities to be performed (for activity-based grants).

Where funding rates are based on the type of beneficiary, beneficiaries and their affiliated entities will be assessed separately. The funding rate of a beneficiary does NOT condition the funding rate of its affiliated entities.

Example

The beneficiary is entitled to a 70 % funding rate, it has an affiliated entity entitled to a funding rate of 100 %. The cost incurred by the affiliated entities will be funded at 100 % — despite the lower funding rate of the beneficiary to which it is linked.

In order to avoid abuse, the budget flexibility is restricted. Changes that would entail a higher funding rate (e.g. change between budget category or activity, relocation of budget (and tasks) to a beneficiary with higher rate) are always subject to an amendment. Changes between beneficiaries with different funding rates will be monitored closely, to ensure that no disproportionate amount of tasks and budget is transferred from the beneficiary to its affiliated entity or vice versa in order to unduly profit from funding rate differences (budget transfers that result in substantive or important changes, i.e. changes that would also affect the description of the action in Annex 1, are subject to a mandatory amendment).

Conditions for the funding rate must normally be complied with throughout the action. Thus, a change of activity, type of beneficiary, etc. affecting the conditions for the funding rate, would also require a change of the funding rate (including specific increases or bonuses based on pre-set conditions) in line with the original call conditions.

4. Estimated budget The estimated budget of the action is calculated on the basis of the estimated eligible costs and — if applicable —contributions submitted by the consortium, and is annexed to the Grant Agreement (Annex 2).

The estimated budget also determines the maximum grant amount for each beneficiary/affiliated entity and for the action as a whole (see above).

5. Budget categories and forms of funding The budget categories are listed in Article 6.2 and reflected, for each programme and type of action, in the budget table in Annex 2.

The standard budget categories which usually apply are the following:

− Personnel costs

− Costs for employees (or equivalent)

− Costs for natural persons working under a direct contract

− Costs of personnel seconded by a third party against payment

− Costs for SME owners/beneficiaries that are natural persons without salary (not all programmes)

− Costs for volunteers’ work (not all programmes)

− Costs for other personnel categories (only SMP ESS, CUST/FISC)

− Subcontracting costs

− Purchase costs

− Travel costs, accommodation costs and subsistence costs (all programmes except RFCS, CCEI)

− Equipment costs

− Costs of other goods, works and services

− Other cost categories

− Financial support to third parties (FSTP) (all programmes except RFCS, EUAF, CUST/FISC, CCEI, PERI, TSI, UCPM)

− Internally invoiced goods and services (only HE, DEP and EDF)

− Indirect costs

Depending on the EU programme and on the the type of action, additional programme-specific budget categories may apply, for instance:

− HE Access to research infrastructure costs (see Article 6.2.D.X HE_RI)

− HE PCP/PPI procurement costs (see Article 6.2.D.X HE_PCP/PPI)

− HE ERC additional funding (see Article 6.2.D.X HE_ERC_Additional funding)

− CEF Studies (see Article 6.2.D.X CEF_Studies)

− CEF Synergetic elements (see Article 6.2.D.X CEF_Synergetic elements)

− CEF Works in outermost regions (see Article 6.2.D.X CEF_Works in outermost regions)

− CEF Land purchase ( see Article 6.2.D.X CEF_Land purchase)

− LIFE Land purchase (see Article 6.2.D.X LIFE_Land purchase)

− AMIF EMN ad hoc queries (see Article 6.2.D.X AMIF_EMN ad hoc queries)

These budget categories may be cost-based (actual costs, unit costs, flat-rate costs, lump sum costs, costs according to usual cost accounting practices) or contribution-based, i.e. fixed by the granting authority on the basis of a cost-related methodology including e.g. indirect cost (unit contribution, lump sum contribution, flat-rate contribution) or a non-cost related methodology (financing not linked to cost). Which of these forms of funding applies, is shown, for each budget category, in the estimated budget (Annex 2).

If unit costs or contributions are used, the details on the calculation will be explained in Annex 2a of the Grant Agreement.

6. Budget transfers (budget flexibility) The budget in Annex 2 is an estimation. The budget is therefore in principle flexible (with certain exceptions, see below).

A transfer can NOT lead to an increase of the maximum grant amount. Moreover, you should be aware that the budget table is considered by the granting authority to reflect the actual situation and may therefore be the basis for certain decisions, such as the calculation of amounts to be offset from (pre-financing) payments for beneficiaries that have outstanding debts to the Commission (see Article 22).

As a general principle, beneficiaries may transfer budget among themselves, between affiliated entities or between budget categories (without requesting an amendment; see Article 39) and — at the time of reporting — declare costs that are different from the estimated budget provided that the action remains in line with the description of the action in Annex 1 (if this is not the case, an amendment is needed, under the conditions of Article 39).

If the incurred eligible costs during the action implementation turn out to be lower than the estimated eligible costs, the difference can thus be allocated to another beneficiary or another budget category. The amount reimbursed for the other beneficiary/other budget category (to which the budget transfer is intended) may thus be higher than planned.

Example

The estimated budget includes personnel costs of EUR 60 000 for beneficiary A and EUR 75 000 for beneficiary B. However, at the end of the action, the actual personnel costs of beneficiary A are EUR 75 000 due to an increase in salaries or to the need to employ additional personnel to carry out the tasks mentioned in Annex 1 while the actual personnel costs of beneficiary B are EUR 60 000. This may be acceptable provided the additional costs of beneficiary A fulfil the eligibility requirements of Article 6 and up to the maximum grant amount in Annex 2 (at the level of the action).

The following changes always require an amendment:

− changes to the description of the action in Annex 1

− changes to the budget category for volunteers (if used)

− changes to budget categories with lump sums costs or contributions (if used; including financing not linked to costs)

− changes to budget categories or activities with higher funding rates or budget ceilings (if used)

− activation of the contingency reserve (where foreseen in the Grant Agreement).

The following require either an amendment or a simplified approval procedure:

− addition of amounts for subcontracts not provided for in Annex 1

− other changes in certain specific cost categories, if specifically provided for in Article 6.2.

Best practice: In case of doubt, the coordinator should consult the granting authority on whether a change requires an amendment or — at least — a simplified approval procedure.

Specific cases (grant)

Simplified approval procedure (general)— For some cases and types of cost indicated, the Grant Agreement provides for simplified approval procedures, meaning that beneficiaries can ask for an ex post approval by the granting authority to accept costs which have been incurred, but were not planned in the estimated budget. For such simplified approval, they must declare the costs in question in the next periodic report and flag and justify them. Simplified approval is however at the full discretion of the granting authority. This means that the beneficiaries bear the risk that the costs might not be approved at interim or final payment-stage later on.

Flexibility caps

If this option is activated in the Grant Agreement, transfers between

this case, unauthorised changes going beyond the threshold may be rejected (cost rejection, applied to beneficiaries concerned/equally among the consortium members).

Financial support to third parties (FSTP)

A transfer from the budget category of