First Level Control Office BiH VALIDATION OF THE EXPENDITURES

1. First Level Control Office BiH VALIDATION OF THE EXPENDITURES Sarajevo, 19February 2013

2. Agenda 10.00 – 10.20: Start/Welcome/First Level Control (FLC)for SEE; definition, objective • 10.20 – 10.45: Reporting procedure by Project Partners 10.45 – 11.00: Coffee break • 11.00– 12.00:First Level Control (FLC): areas of attention under the various budget lines 12.00 – 13.00: Lunch break 13.00 – 14.30: First Level Control (FLC): areas of attention under the various budget lines 14.30 – 14.45: Coffee break • 14.45 – 16.30: Q & A / evaluation of the training

3. Training objective To improve the quality of financial reporting by the Project Partnersresulting in an increased level of expenditure that can be validated by the national First Level Control Office (FLCO)

4. First Level Control (FLC) - objective guarantee that expenditure reported and claimed by Project Partneris justified, substantiated, real, actual, incurred and actually paid andin line with the provisions of the Subsidy Contract/ Partnership Agreement concerned andare in line with all legal provisions governing the Programme

5. First Level Control – what is checked? Requires a 100% desk-based administrative verification of documents complemented by on-the-spot checks on a sample basis before the issuance of Declarations on the Validation of Expenditure (DVE)

6. REPORTING PROCEDURE BY THE PROJECT PARTNERS TO FIRST LEVEL CONTROL OFFICE

7. Partner Report • Describes the activities fulfilled and the expenditure incurred and paid by the Project Partner in the given reporting period. • The Partner Reports must be submitted to the competent FLCO who will verify eligible costs

8. Partner Report Consists of two sections: ACTIVITY REPORT: provides information on the achievement of the project’s activities, milestones and outputs FINANCIAL REPORT: provides information on the project’s expenditure related to the activities per budget line and Work Package Must be filled in: • Description of the expenditure • Activity fulfilled according to the approved AF

9. Partner Report • The IPA project partners of the 3rd and 4th CfP shall use the SEE Partner Report template (IPA) annexe 4b • The standard tool template can be download from the SEE Programme website: www.southeast-europe.net • For any technical problem when filling in thePartner Report please contact the SEE Joint Technical Secretariat jts@southeast-europe.net

10. Partner Report • It is recommended that the project partner starts to fill in andregularly updating the periodic Partner Report with respective data already during thereporting period • When the project partner receives theDVE from the Controller (2 copies of signed andstamped paper version) one original of the DVE should be forwarded to the LP together with the final version of the Partner Report

11. Partner Report A Microsoft Excel document containing: • Main data • Activity report • Activities per WPs • Indicators • Financial report • Summary of expenditure • List of invoices • Revenues

12. The Basis Partner Report tool • 1 - Main data worksheet (Project code, Project acronym, Project title, Name of the PP, Starting and end dates of the project, Contact person and legal representative) • 5 - Financial Report worksheet (Table ‘5.1 Total budget of the IPA Project Partner’ .Based on table 5.5 of the AF; Information on state contribution’.) • 3 - Activities per WPs worksheet (Title of the WPs from WP3 on; qualitative and quantitative outputs and results -defined in theAF should be listed for different WPs.) • 4 - Indicators worksheet (The base and target values of the indicators (based on the ‘7 Indicators’ of the AF)

13. The Partner Report • 1 - Main data worksheet (Starting and end date of the respective reporting period;is there any change in main project datain comparison to the ‘basis Partner Report tool’ • 2 - Activity Report worksheet (Summary of the project activities; Project implementation timeframe; Spending targets; Other issues; Project changes) • 3 - Project activities fulfilled in the reporting period by WPs The actual implementation status of each WP - dropdown lists;The titles of the WPs (from WP3 on); Activity description (field should be added to a certain WP when necessary; Public procurement fields should be added to a certain WP as necessary. • 4 – Indicators should be updated according to its status at the end of the reporting period. 5 - Financial Report (Financial progress by WPs table; Information on IPA transfers from LP to PP; Information on state contribution) • 7 – List of invoices per Work Packages • 8. – Revenues

14. Currency and exchange rates Expenditure needs to be reported in euro Expenditures shall be converted into Euro using the monthly accounting exchange rate of the Commission in force in the last month of the reporting period BAM is pegged to € at rate of 1,9558 Rounding to two digits after the comma Example: BAM 1.768,89 equals € 904,4329 which is to be reported as € 904,43

15. Timing for reporting

16. Reporting period 4th Call Projects • 28/9/2012-31/3/2013 • 1/4/2013-30/6/2013 • 1/7/2013-31/12/2013 • 1/1/2014-30/6/2014 • 1/7/2014-30/9/2014 3rd Call Projects • 1/9/2012-28/2/2013 • 1/3/2013-31/5/2013 • 1/6/2013/-30/11/2013 • 1/12/2013-31/5/2014 • 1/6/2014-31/12/2014

17. Reporting the expenditures To be reported: • Expenditures incurred and paid by the end of the reporting period Note: • Invoices not paid by the end of the reporting period should be reported with the next Report Important: • If the Partner Report is not tidy the FLCO can reject the Report.

18. Reporting - Formal requirements • Copy of the Subsidy Contract signed by both parties • Copy of the Partnership Agreement signed by all project partners • Application Form - the electronic version • Declaration on VAT status in original • Addendums to SC or PA as well as revised Application forms if applicable • Partner Report • All supporting documents which prove the eligibility of the amount declared (original and copies) • All invoices and other accounting documents of probative value (they will be sent back to the PP with the DVE)

19. Important • The VAT exemption certificate is obligatory. VAT is not an eligible expenditure. • All project related expenses must be registrated with specific accounting codes or other transparent methods in theaccounting system which allows the identification of costs allocated to the project

20. Budget lines • STAFF COSTS • TRAVEL AND ACCOMMODATION • OVERHEADS • FINANCIAL CHARGES AND GURANTEE COSTS • EXTERNAL EXPERTISE AND SERVICES • EQUIPMENT • SMALL SCALE INVESTMENTS

21. STAFF COSTS • Costs of the personnel for project management and/or tasks for project activities • Staff directly employed by regular working contract or similar type of contract according to national rules • Covers the salaries (gross salary = netto salary + all legal provisions such as holiday entitlement, provision for sick leave, all charges paid both by employee and employer, meal, transport cost,allowance for holiday and excluding voluntary contributions such as institutional pension schemes, fringe benefits, rewards, overtime) of staff of the Project Partner working either on a full-time or part-time basis on the project

22. STAFF COSTS Documents to be presented by PP / checked by FLCO with first Partner Report : The PP will submitted with 1st Partner Report (to be updated during project lifetime) stating as a minimum: • full list of project staff (name of the employee) • work contract, decision on appointment or service order in line with national eligibility rules • job description (qualification, main task, start & end date), clear assignment to the project • the person is working full time or part time on the project • the institutional book of rules («pravilnik o platamaisistematizacijaradnihmjesta» and / or « odluka o utvrđivanjukoeficijenatainačinuobračunaplata »)

23. STAFF COSTS Documents to be presented by PP / checked by FLCO: • Proof on working time spent on the project: Monthly timesheets • The method for calculating the hourly rates and the calculation of staff costs (national guidance) • Payslip & payroll • Proof of payment (salary and social charges)

24. STAFF COSTS Documents to be presented by PP / checked by FLCO: • Monthly timesheets proving the actual time worked on the project: (name of the employee, date, time, description of activity related to the project «Signed by both the employee and the employer, date«  • Template of timesheet (national guidance) • Be carefulwith employee who works on more then one project Note: Beneficiaries are not obliged to use these templates and can use their own format but the minimum information

25. STAFF COSTS Obligatory minimum information on timesheets: • project acronym, title & code, time, date • name & function of the person to which timesheet refers to • extent of employment on the project of person concerned • name of the Project Partner • name & function of the person approving the timesheet on behalf of the Project Partner • description of project activities • extent to which the work is dedicated to the project

26. STAFF COSTS Obligatory : • The calculation is based on real costs( real gross salary proved by payslips) and real worked hours (time spent on the project proved by timesheets) • The Calculation method must be the same as the evidence in timesheet, can not be different • Hourly method of registration in timesheet, use the same method for calculation of monthly salary for reimbursement

27. STAFF COSTS • Calculation of salary based on activities in WP • When calculating the salary on WP, check the amount in WP in budget (over-budget) • During project, the amount of salary of project staff can not be increased Monthly salary +obligatory charges (gross salary) / total working hours in the given month x project worked hours in the given month

28. STAFF COSTS EXAMPLE Basis = gross salary of 2,500 KM for April 2012 for an employee working part time on the project: Salary paid for April 2012: 2,500 No of hours workable during April 2012: 176 Hourly rate: 2,500/176=14.20KM No of hrs worked on project in April 2012:48hrs(27.27%) Total eligible cost: 48*14.20 = 681.60KM 681.60KM/1.95583 = 348,50 € Total to be reported (conversion into €): € 348,50

29. STAFF COSTS Documents to be presented by PP / checked by FLCO: Proof of payment of both the salary and social charges whereby FLCO needs to be able to identify clearly to whom the salary was paid: • Nalog plaćanja • Nalog blagajne kod gotovinskih isplata • Registar plaćanja i faktura (budžetski korisnici) • Izvod banke • Specifikacija uz platu ovjerena od strane Poreske uprave (2001) • Izjava odgovorne osobe da se iznos plate isplaćuje kumulativno za sve uposlene u organizacijii da u taj iznos ulaze i plate zaposlenih na projektu

30. STAFF COSTS MAIN PROBLEMS ENCOUNTERED SO FAR: • Insufficient supporting documentation (e.g. no list of staff or employment contracts submitted) • Lack of proof of actual payment of salaries and other obligatory charges • Lack of information as to how the hourly rate was calculated • No adequate calculation of gross salary (calculation the part of obligatory charges) • Incorrect timesheets

31. TRAVEL & ACCOMMODATION • Covers expenditure related to the travel and accommodation costs of the project staff (travel and accommodation costs of external experts participating in the project have to be charged against the budget line «External expertise» ) • Travel directly related with project activities • Travels within the eligible area • Approved in line with the Project Partners rules, (authorisation of the mission) • Travelling costs of the Associated Strategic Partners are directly paid by ERDF sponsoring Partner (daily allowance are not eligible)

32. TRAVEL & ACCOMMODATION SOME BASIC RULES Assignment of costs • Costs have to be borne by the Project Partner and therefore proof of direct payment by the employee is not sufficient as proof The most economical way of transport • normally public transport (travel by air, bus, train, boat) • economic class is eligible, but business/first class tickets always ineligible (even if allowed by the internal rules of the Project Partner)

33. TRAVEL & ACCOMMODATION SOME BASIC RULES Reasonability of board & lodging costs Accommodation costs - Hotel costs (invoice) can be accepted without reservation if they are in the middle price ranges must be duly justified in each case Duration Any travel should be reasonable and should normally start the day before the event (e.g. meeting) until the day after Note: this requires judgment by the First Level Controller who may ask additional clarifications

34. TRAVEL & ACCOMMODATION SOME BASIC RULES Reporting method • Costs should be reported in line with national rules or specific internal regulations of the PP (pravilnik o službenimputovanjima) • Daily allowance should be in line with entity legislation • Mission report signed by the travelling person

35. TRAVEL & ACCOMMODATION • Start & end date and hours of travel • Calculation of travel allowances ( in country or in board, full or part 30%) • Exchange rate (last month reporting period) • All costs (accommodation, auto park, bus/train/plane tickets (boarding pass-obligatory)fuel??, highway tickets) • Invitation, Decision for mission, List of participants, agenda and minutes

36. TRAVEL & ACCOMMODATION TRAVEL BY OWN / COMPANY CAR Calculation sheet prepared according to national or institutional rules stating at least:(20% of price fuel) • distance • unit rate • total cost If necessary accompanied by additional proof documents

37. TRAVEL & ACCOMMODATION MAIN PROBLEMS ENCOUNTERED SO FAR: • Insufficient supporting documentation (e.g. no travel order, or economic way or clarification no submitted) • Lack of proof of payment • Lack of information as to how the calculation rate was • No adequate costs(extra meals in restaurant, washing car) • Incorrect calculation of exchange rate • One travel order for two persons • Notsubmittedinvitation letter, participants list

38. BUDGET LINE – OVERHEADS

39. OVERHEADS Covers expenditure such as: OFFICE COSTS: electricity, heating, water, cleaning, office rent, office supplies ADMINISTRATIVE COSTS: telephone, fax, internet, mail/postal/courier services, bank charges for national financial transactions related to the normal bank account of the Beneficiary

40. OVERHEADS • “Flat rate” basis up to 8% of staff costs: Overheads costs can be automatically declared using the flat rate defined at programme level without further justification or supporting documents! • “Real costs” basis up to 20% of staff costs: justified by invoices, supporting documents!

41. OVERHEADS TWO CATEGORIES • Direct general costs = overheads directly allocated to the project (charged to the project at actual cost, no lump sums or estimations) • Indirect general costs = overheads allocated proportionally to the project (charged on the basis of a calculation method)

42. OVERHEADS CALCULATION METHODS/BASIS FOR APPORTIONMENT • No. of people working on the project / No. of people working in the organisation • No. of hours worked on the project / No. of hours worked in total in the organisation during the period reported on • Surface used by the personnel working on the project / surface of the organisation

43. OVERHEADS Example of a calculation method to charge the costs of electricity and heatingon the basis of surface of office space used for the purposes of implementing the project whereby: • space used for project purposes = 100 m² • total office space at the disposal of the Project Partner (also for non-project related activities = 400 m²)

44. OVERHEADS Total cost of electricity & heating for the entirepremises of the Project Partneryduring the periodreported on equals to BAM 500 100/400*100=25% 25% (500)= 125 BAM or 63,91 € (125/1,95583)

45. OVERHEADS Example of a calculation method to charge the costs of Interneton the basis of No. of people working on the project whereby: • 3 full-time staff (100%) and one half-time staff (50%) are working on the project • overall staff of the Project Partner (including those not working on the project) is the equivalent of 12 full-time staff members

46. OVERHEADS Total cost of Internet for the entire premises of the Project Partner during the period reported on equals to BAM 200 3,5/12*100=29,17% 29,17% (200)= 58,34 BAM or 29,83 € (58,34/1,95583)

47. OVERHEADS Notes on calculation method used: • The choice of the method used to apportion overhead costs to the project must be attached to the Progress Report • If surface is used then general spaces such as toilet, corridors, canteen(s) etc needs to be excluded from total available space. • Method may become subject to verificationduring an on-the-spot check.

48. OVERHEADS Documents to be presented by PP/checked by FLCO: -Proof of payment -Invoices -Calculation method

49. FINANCIAL CHARGES AND GUARANTEE COSTS Refers to costs related to: • charges for transnational financial transactions, • bank charges for opening and administering the accounts if a separate account for the project has been opened and • cost of bank guarantee(s) if required

50. FINANCIAL CHARGES AND GUARANTEE COSTS Reporting: • Documents proving that all costs are real, directly related to the project and have not been declared under other budget line • Documents evidencing the opening of the bank account for the project • Proof of payment