General Eligibility of Costs (Article 6.1)

ARTICLE 6

ELIGIBLE AND INELIGIBLE COSTS AND CONTRIBUTIONS

In order to be eligible, costs and contributions must meet the eligibility conditions set out in this Article. 6.1 General eligibility conditions The general eligibility conditions are the following: (a) for actual costs: (i) they must be actually incurred by the beneficiary (ii) they must be incurred in the period set out in Article 4 (with the exception of costs relating to the submission of the final periodic report, which may be incurred afterwards; see Article 21) (iii) they must be declared under one of the budget categories set out in Article 6.2 and Annex 2 (iv) they must be incurred in connection with the action as described in Annex 1 and necessary for its implementation (v) they must be identifiable and verifiable, in particular recorded in the beneficiary’s accounts in accordance with the accounting standards applicable in the country where the beneficiary is established and with the beneficiary’s usual cost accounting practices (vi) they must comply with the applicable national law on taxes, labour and social security and (vii) they must be reasonable, justified and must comply with the principle of sound financial management, in particular regarding economy and efficiency (b) for unit costs or contributions (if any): (i) they must be declared under one of the budget categories set out in Article 6.2 and Annex 2 (ii) the units must: - be actually used or produced by the beneficiary in the period set out in Article 4 (with the exception of units relating to the submission of the final periodic report, which may be used or produced afterwards; see Article 21) - be necessary for the implementation of the action and (iii) the number of units must be identifiable and verifiable, in particular supported by records and documentation (see Article 20) (c) for flat-rate costs or contributions (if any): (i) they must be declared under one of the budget categories set out in Article 6.2 and Annex 2 (ii) the costs or contributions to which the flat-rate is applied must: - be eligible - relate to the period set out in Article 4 (with the exception of costs or contributions relating to the submission of the final periodic report, which may be incurred afterwards; see Article 21)

1. Eligible costs The grant can only reimburse eligible costs (and, where applicable, contributions; see Article 6.2.F), i.e. costs that comply with the general and specific conditions set out in this Article.

Therefore, beneficiaries/affiliated entities must enter ONLY eligible costs into the estimated budget (see Article 5.4), and later on into the financial statements (see Article 21). If ineligible costs are declared, they will be rejected (see Article 27).

Article 6.1 lists the general eligibility conditions for each form of funding (actual costs, unit, flat-rate, lump sum, costs according to usual cost accounting practices, financing not linked to costs); Article 6.2 refers to the specific eligibility conditions for each budget category.

Cost eligibility is NOT the same as beneficiary/action eligibility. The latter are normally checked upstream (before grant signature/amendment), in order to make sure that only eligible beneficiaries/actions are selected for a grant. Loss of beneficiary/action eligibility during an ongoing grant normally leads to termination or change of status (see Articles 32 and 39); costs become automatically ineligible as from the date of loss of eligibility.

For a consolidated list of eligibility issues relating to specific situations/legal framework in individual countries, see AGA — List of country-specific issues.

2. General eligibility conditions for actual costs In order to be eligible, actual costs must be:

− actually incurred by the beneficiary/affiliated entity, i.e.:

− real and not estimated, budgeted or imputed and

− definitively and genuinely borne by the beneficiary/affiliated entity (not by any other entity)

− incurred during the action duration, i.e. the generating event that triggers the costs must take place during the action duration set out in the Data Sheet.

If costs are invoiced or paid later than the end date, they are eligible only if the debt existed already during the action duration (supported by documentary evidence) and the final cost are known at the moment of the final report.

Example

Costs of services or equipment supplied to a beneficiary may be invoiced and paid after the end date of the action, e.g. because of warranty periods, if the services or equipment were used by the beneficiary during the action duration. By contrast, costs of services or equipment supplied after the end of the action (or after GA termination) are normally not eligible.

− entered as eligible costs in the estimated budget, under the relevant budget category in Annex 2

This requirement is in practice automatically ensured by the IT system, since the financial statements mirror the budget categories that are available for the estimated budget. The only thing you need to pay attention to, is whether all the special cost categories (visible in the estimated budget and financial statements for the programme) are really eligible under the specific call you applied for (e.g. financial support to third parties (FSTP), etc; see call conditions). If not, you should leave those columns empty and NOT enter any costs (they are ineligible and will be rejected).

The requirement also has no impact on budget flexibility; costs may be transferred between beneficiaries and eligible budget categories without amending the Grant Agreement, under the conditions set out in Article 5.5.

− connected to the action and necessary for its implementation as described in Annex 1, i.e. to achieve the action’s objectives

The grant cannot be used to finance activities other than those approved by the granting authority.

Examples: 1. The activities of the project cost less than foreseen so the beneficiary decides to conduct additional activities including for example hiring additional staff, organising an additional event, renewing office equipment. Additional activities regularly require a change of the description of the action (Annex 1). To be eligible, such reallocation of ‘savings’ need to be pre-discussed with the granting authority and may regularly require an amendment. 2. Activities that violate the Grant Agreement (e.g. activities that are against the call conditions, against applicable law, against EU values, etc.) can never be necessary for the implementation of the action and therefore any cost related to such activities do not fulfil the general eligibility conditions.

− identifiable and verifiable, i.e. come directly from the beneficiary/affiliated entity’s accounts, be directly reconcilable with them and supported by documentation

The records and supporting documents must show the actual costs of the work, i.e. what was actually paid or recorded in the beneficiary’s profit and loss accounts (see Article 20).

Costs must be calculated according to the applicable accounting rules of the country in which the beneficiary is established and according to the beneficiary’s usual cost accounting practices.

Example

If a beneficiary always charges a particular cost as an indirect cost, it must do so also for EU and Euratom grants, and should not charge it as a direct cost.

Be aware however, that the usual cost accounting practices may NOT be used as an excuse for non-compliance with other Grant Agreement provisions. You must bring your usual cost accounting practices in line with the Grant Agreement (e.g. conditions for calculating personnel costs; conditions for charging depreciation costs, etc.).

− in compliance with applicable national laws on taxes, labour and social security

and

− reasonable, justified and must comply with the principles of sound financial management, in particular regarding economy and efficiency (i.e. be in line with good housekeeping practice when spending public money and not be excessive).

‘Economy’ means minimising the costs of resources used for an activity (input), while maximising quality; ‘efficiency’ is the relationship between outputs and the resources used to produce them.

Examples: 1. The beneficiary may NOT increase the remuneration of its personnel, upgrade its travel policy or its purchasing rules because of the grant support. 2. Entertainment or hospitality expenses (including gifts, special meals and dinners) are generally not eligible. 3. Tips which are not obligatory are not eligible. By contrast, in some countries the invoice includes a certain mandatory amount as payment for the ‘service’. In this case, the amount may be considered eligible — if the other eligibility conditions are fulfilled.

Double funding risk

A cost item or element can NOT be declared more than once within the

Specific cases (actual costs):

Costs related to preparing, submitting and negotiating the proposals — Can generally NOT be declared as eligible for the action (they are incurred before the action starts), this includes cost for the preparation of the consortium agreement which should be signed before the action starts. However, costs related to updating the consortium agreement may be eligible if incurred during the action duration and in line with the general and specific eligibility conditions, in particular being necessary for the implementation of the action.

Travel costs for the kick-off/closing meeting — Even if the first leg of the journey takes place before the action starting date (e.g. the day before the kick-off meeting), the costs may be eligible, if the meeting is held during the action duration. The same applies for the last leg of a journey after the end of the action duration for a closing meeting.

Costs for reporting at the end of the action

Costs related to drafting and submitting

Those costs include the cost of certificates on the financial statements (CFS) required by the Grant Agreement and the cost of participating in a project review carried out by the granting authority before the submission of the final report. They may also include the cost of personnel necessary for the project review or to prepare the final report. However, they can NOT include any other action activities foreseen in the Annex 1 and undertaken after the end date of the action. For the daily rate to use for such personnel costs, see Article 6.2.A.1.

Costs to allow for the participation of disabled people (e.g. costs for sign language interpreters required for dissemination events organised under the action) — Are eligible if they fulfil the general and specific eligibility conditions listed under Articles 6.1 and 6.2. The beneficiaries must keep records (see Article 20) to prove in case of an audit, check or review the actual costs incurred and that they were necessary for the implementation of the action.

Examples: 1. When subcontracting the organisation of an event that is necessary for the implementation of the action, a beneficiary may select an offer that ensures full accessibility for persons with disability under the consideration of best value for money instead of the lowest price. 2. When purchasing goods that are necessary for the implementation of the action, a beneficiary may purchase goods that ensure accessibility for disabled persons even if this entails a higher expense than comparable goods that do not offer accessibility.

Cost for security measures

Where the implementation of an action requires additional

3. General eligibility conditions for unit costs In order to be eligible, unit costs or contributions must be:

− calculated by multiplying the number of actual units used to carry out the work (e.g. number of hours worked on the action, number of tests performed, etc.) or produced by the amount per unit

− the number of units must be necessary for the action

− the units must be used or produced during the action duration

and

− the beneficiaries must be able to show the link between the number of units declared and the work on the action.

The records and supporting documents must show that the number of units declared was actually used for the action (see Article 20). The actual costs of the work are not relevant.

Example

A beneficiary which is an SME declares for its owner who does not receive a salary 50 days worked for an action in 2022. If there is an audit, the SME beneficiary must be able to show a record of the number of days worked by the owner for the action.

Specific cases (unit costs):

Costs declared on the basis of the usual cost accounting practices — If this option is activated in the Grant Agreement (e.g. HE, DEP, EDF, CEF, UCPM, HUMA: Average personnel costs; HE, DEP, EDF: Internally invoiced goods and services), the beneficiaries must use unit costs using their own usual cost accounting practices. In this case: neither the amount per unit, nor the calculation method will be set out in Annex 2a of the Grant Agreement.

4. General eligibility conditions for flat-rate costs In order to be eligible, flat-rate costs or contributions must be:

− calculated by applying a flat rate to certain costs (whether actual, unit or lump sum costs).

Example (7 % flat rate for indirect costs — most programmes):

A beneficiary is working on an action and uses a daily rate of EUR 240 for personnel costs. The beneficiary declares as eligible 40 day-equivalents of personnel costs + EUR 1 400 for other goods, works and services + EUR 1 500 for subcontracting during the first reporting period. Eligible direct costs: (40 x 240 = 9 600) + 1 400 + 1 500 = 12 500 Eligible indirect cost: 7 % flat-rate of 12 500= EUR 875 Total eligible costs: 12 500 + 875 = EUR 13 375. Funding rate of 70 % = EUR 9 362,50. Example (25 % flat rate for indirect costs — HE, EDF): A beneficiary is working on an innovation action and uses a daily rate of EUR 240 for personnel costs. The beneficiary declares as eligible 40 day-equivalents of personnel costs + EUR 1 400 for other goods and services + EUR 1 500 for subcontracting during the first reporting period. Eligible direct costs: (40 x 240 = 9 600) + 1 400 + 1 500 = 12 500 Eligible indirect cost: 25 % flat-rate of 9 600 + 1 400 (not the 1 500 for subcontracting as the flat-rate does not apply on this specific cost category) = EUR 2 750 Total eligible costs: 12 500 + 2 750 = EUR 15 250 Funding rate of 70 % = EUR 10 675.

The records and supporting documents must show that the costs to which the flat-rate is applied are eligible (see Article 20). If a flat-rate is applied, the actual indirect costs are not relevant for the granting authority and it is not necessary to calculate them precisely nor to keep any supporting document related to these.

5. General eligibility conditions for lump sum costs In order to be eligible:

− the lump sum costs or contributions must correspond to the amount of lump sum costs set out in Annex 2

− the work must have been carried out in accordance to Annex 1 of the Grant Agreement

− the output or result triggering payment of the lump sum must have been achieved during the action duration.

The records and supporting documents must show that the action tasks have been carried out as described in Annex 1. The actual costs of the work are not relevant.

6. Financing not linked to costs In order to be eligible:

− the results must be achieved or the conditions must be fulfilled as described in Annex 1 of the Grant Agreement during the action duration.

7. Direct and indirect costs ‘Direct costs’ are specific costs directly linked to the performance of the action and which can therefore be directly booked to it.

They are:

− either costs that have been caused in full by the activities of the action

− or costs that have been caused in full by the activities of several actions (projects), the attribution of which to a single action can, and has been, directly measured (i.e. not attributed indirectly via an allocation key, a cost driver or a proxy).

The beneficiaries must be able to show (with records and supporting evidence) the link to the action.

‘Indirect costs’ are costs that cannot be identified as specific costs directly linked to the performance of the action.

In practice, they are costs whose link to the action can NOT be (or has not been) measured directly, but only by means of cost drivers or a proxy (i.e. parameters that apportion the total indirect costs (overheads) among the different activities of the beneficiary).

Which kinds of cost fall under direct or indirect cost depends on the nature of the action and may therefore vary between programmes and calls. Where they are reimbursed as flat-rate (e.g. budget category E. Indirect costs in the EU action grants), you do NOT need to calctulate the indirect costs incurred for the action. They are covered by the flat-rate and automatically calculated by the IT system.

8. Conditions for eligible in-kind contributions for free (HE) If eligible under the Grant Agreement (only for HE), the beneficiaries/affiliated entities may charge costs for in-kind contributions made available for free.

What? These cover the costs, which a third party has for resources it contributes to the action for free (i.e. made available for free for use by the project).

They must be declared under the budget category the beneficiary would use if they were their own costs (e.g. ‘Personnel costs for seconded persons’, ‘Equipment costs’, ‘Costs for other goods, works and services’, etc), as actual or unit cost, depending on the rules of the budget category.

Example

Depreciation costs of equipment contributed free of charge must be declared under cost category C.2 Equipment (see Article 6.2.C.2).

In addition to the general and specific eligibility conditions of the budget category used (see Article 6.1 and 6.2), they must be limited to the direct costs incurred by the third party.

Example

A person not receiving a salary and who is the (co)owner of a SME is being seconded by this SME (third party) to a beneficiary. The direct costs incurred by the SME can be declared via the SME owner unit cost (daily rate) (see Article 6.2.A.4).

Moreover, the in-kind contribution and the contributing third party must be mentioned in Annex 1 (simplified approval procedure; see below).

Specific cases (in-kind contributions eligible):

Simplified approval procedure (new in-kind contributions)

If the need for an in-kind

Internal invoicing of goods and services (HE)

For Horizon Europe, the granting