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  1. (Not legally binding) The Negotiation Process: Validation of participants Financial capacity of participantsThird parties/subcontracting FP7 Grant Agreement Negotiations A Directorate F initiative for coordinators from FP7-HEALTH-2010-single-stage call and NCPs Brussels, 16th April 2010 Konstantinos PrilidisAdministration and Finance UnitHealth Directorate,DG Research 22/08/2014

  2. (Not legally binding) Grant Agreement • Negotiation covers • Validation of the participants (registration of organisation and Participant Identification Code PIC) • Composition of the consortium • Verification of the financial capacity of participants • Check of the budget • Generation of Grant Agreement GA • Principles of the research GA: • Transparency and equal treatment • Non Profit • Co financing • Ex post controls 22/08/2014

  3. (Not legally binding) Validation • At an early stage identify the validated / non validated participants • Appoint LEAR and send necessary documents to the Unique Registration Facility Central Validation Team URF-CVT • Refer to Cordis: • http://ec.europa.eu/research/participants/portal/appmanager/participants/portal • Documents to be sent: VAT extract, extract of registration, law, statutes of a company (to identify its character profit – non profit, research – non research, specific documents for SMEs) • Check the participant’s status and its role in the consortium => additional financial documents to submit for participant(s) subject to the verification of its (their) financial capacity 22/08/2014

  4. (Not legally binding) Validation • Status of the participant: natural person, legal person, Non profit, Research Organisation, Public Body, International organisation (of european Interest), Secondary and higher education establishment, Enterprise, SME • Determines: • Indirect Cost Model (ICM) • Maximum EC reimbursement rate 22/08/2014

  5. (Not legally binding) Validation • Problematic cases: • SME: because of the additional documents (SME checklist and SME check) • Natural person: because of the different type of documents (copy of the passport / ID card) • Attention: Certificate on the average personnel costs ! 22/08/2014

  6. (Not legally binding) Composition of the consortium • Principle of FP7: beneficiary shall have the necessary resources to implement the action BUT…in exceptional cases • Subcontracting • Third parties • Identify them at an early stage because additional documents & info to be submitted • Must be described in the DoW/TA • Each third party situation is submitted to conditions. If the situation does not respond to the conditions => third party needs to access the GA as beneficiary 22/08/2014

  7. (Not legally binding) Third Parties • Third party= Legal entity that does not sign the GA • Three situations of third parties • Third parties making resources available to the beneficiary (for free or against reimbursement) • Third parties carrying out part of the work • Subcontractors 22/08/2014

  8. (Not legally binding) Subcontracting • Subcontractor =Third party that performs some work for a beneficiary; the payment made by the beneficiary to the subcontractor is recorded in the accounts of the beneficiary and claimed to the Commission. • Conditions: • Subcontractor is not interested in the research • Does not have any rights on the results • Payment includes a profit margin • Subcontractor works without supervision of the beneficiary • Subcontractor is not hierarchically subordinated to the beneficiary • Only part of the project may be subcontracted, subcontract does not concern research work itself but tasks needed in order to carry out the research • Transparent bidding procedures • In DoW/TA unless minor tasks: photocopying, catering,… • No subcontracting between beneficiaries of a grant 22/08/2014

  9. (Not legally binding) Subcontracting “Any subcontract, the costs of which are to be claimed as an eligible cost, must be awarded to the bid offering best value for money (best price-quality ratio), under conditions of transparency and equal treatment.“ Article II.7.2 of GA The procedure to be applied for the award of subcontracts must ensure conditions of transparency and equal treatment and depends on the status of the beneficiary: • Public entities must follow the procurement principles established by their national authorities. For subcontracts exceeding certain amounts, the directive on public procurement of services applies and the publication of a call for tenders is mandatory. However, they should in any case comply with the terms of the GA. • Private legal entities should follow the rules that they usually apply for the selection of procurement contracts, respecting in any case the terms of the GA. The publication of a call for tenders is normally not necessary for private legal entities, but they must at least require submission of several quotes (usually a minimum of three), unless it has an established framework contract for the provision of those services. There should be a proportional relationship between the size in work and cost of the tasks to be subcontracted on the one hand and the degree of publicity and formality of the selection process on the other. At the request of the Commission and especially in the event of an audit, beneficiaries must be able to demonstrate that they have respected the conditions of transparency and equal treatment 22/08/2014

  10. (Not legally binding) Third Parties • Questions helping in the identification of the situation • Who carries out the work? • Criteria: hierarchy, supervision, leadership, authority, ownership, research work • Who claims the costs? • The beneficiary or the third party? • Where are the costs recorded? • In the beneficiary’s accounts or in the third party’s accounts? 22/08/2014

  11. (Not legally binding) Third Parties • Third party carrying part of the work => special clause 10 • Third party claims own costs directly with the Commission and costs are recorded in third party’s accounts • The third party must be linked to the beneficiary: established formal relationship between the third party and the beneficiary defined as follows: • This relationship is broad and not limited to the GA • It goes beyond the GA and predates the GA • This formal relationship has an external recognition: either legal structure or formal: association, common lab, common infrastructure, common ownership. • Ad hoc collaborations to carry out project: no clause 10 22/08/2014

  12. (Not legally binding) Third Parties • Cases specifically covered by the special clause 10: • Joint Research Units • Scientific and economic unity • Last a certain length of time • Recognised by a public authority • EEIG • Council Regulation (EEC) N° 2137/85 of 25 July 1985 • At least 2 legal entities from different members states • Affiliates • Under the direct or indirect control of the beneficiary • Parent companies, holdings, affiliates between themselves • Groupings • Associations, federations • If no legal personality will be treated as a JRU if they meet conditions of JRU • Structures, agreements, units without legal personality created specifically for a participation to GA are not groupings 22/08/2014

  13. (Not legally binding) Third Parties • Third parties carrying out part of the work ( identified in special clause 10) • Names, tasks and resources must be described in DoW/TA • Third parties in Clause 10 must be validated and have a PIC 22/08/2014

  14. (Not legally binding) Third Parties • Third parties making resources available: • Do not carry out part of the work • Are just making resources available • Work is lead by the beneficiary; • Work is usually performed in the beneficiary’s premises; • The resources are under the full and direct control, instructions and management of the beneficiary. • Might be • For free • Against reimbursement • But in both situations it must be the actual costs incurred by the beneficiary (no use of flat rates or average) • Resources = buildings, equipment, personnel 22/08/2014

  15. (Not legally binding) Third Parties • For free • Resources are made available for free by the third party • Costs of these resources are charged by the beneficiary in its Form C • The costs of these resources are not registered in the accounts of the beneficiary Costs of the resources are registered in the accounts of the third party • If these resources are made available specifically for the project they must be considered as receipts 22/08/2014

  16. (Not legally binding) Third Parties • Against reimbursement • Costs incurred by the beneficiary • Costs are recorded in the accounts of the beneficiary • Costs are claimed by the beneficiary • Conditions • Must be a prior agreement that defines the frame in which the resources are made available and that sets the rates of reimbursement • No profit margin reimbursement of costs 22/08/2014

  17. (Not legally binding) Third Parties • Special cases • Foundations, spin off companies created in order to manage the administrative tasks of the beneficiary • Prior agreement • Usually agreements lasting over long period • Usually personnel works on the premises of the beneficiary • Special clause 38 : specific case for coordinator (admin + bank account) • Only for secondary and higher education / public bodies • Third party is controlled or affiliated to the coordinator • Third party has got a mandate • Resources (professor/equipment) working for or used by a university but whose salaries costs are paid by the Government 22/08/2014

  18. (Not legally binding) Assessing the capacity of a participant • Principle of the Research GA: co financing • Goal: • Making sure that the participant has the operational and financial capacity to complete the action • Protecting the EU financial interests 22/08/2014

  19. (Not legally binding) Financial Capacity • Participant subject to a verification of its financial capacity • “Private” legal entity • Coordinating an action • Requesting an EC contribution > 500 000 EUR • Whose financial capacity is doubtful • Content of the check • Financial viability check (financial ratios: solvency, liquidity, profitability) • Co financing / financial exposure flag • Qualifications in audit reports • Substantial findings, … 22/08/2014

  20. (Not legally binding) Financial Capacity • Documents to be provided by the beneficiary: • Balance sheet • Profit and losses accounts • Statutory audit reports of the last accounts if available • An audit report certifying the accounts MUST be submitted if EC contribution > 500 000 EUR • Excell sheet currently available on cordis (gives an indication on the financial viability of an organisation) • Will be changed shortly (+/- July): data collection will be centralised at URF-CVT level 22/08/2014

  21. (Not legally binding) Financial Capacity • Audit report certifying the accounts of the last available financial year • can only be delivered by an approved external auditor • May not be delivered by an internal accountant or by the accountant in charge of making the financial statement Form C • The audit must confirm that the financial statements give a true and fair view of the company at that date 22/08/2014

  22. (Not legally binding) Financial Capacity • Natural person to provide: • Last income tax declaration • Certified declaration of the current patrimony • Exhaustive list of the debts broken down in short and medium/long term debts as certified by its creditors • An audit report if > 500 000 EUR 22/08/2014

  23. (Not legally binding) Financial Capacity • According to the rules (ftp://ftp.cordis.europa.eu/pub/fp7/docs/rules-verif_en.pdf)the participant : • May / May not participate • May participate but not be coordinator • May participate but subject to closer monitoring, … • Commission will inform the coordinator and the relevant participant(s) 22/08/2014

  24. (Not legally binding) • Info available on CORDIS (http://cordis.europa.eu/fp7/find-doc_en.html): • Rules on verification of existence, legal status, operational and financial capacity • ftp://ftp.cordis.europa.eu/pub/fp7/docs/rules-verif_en.pdf • Guide to Financial Issues • ftp://ftp.cordis.europa.eu/pub/fp7/docs/financialguide_en.pdf • Participant Portal • http://ec.europa.eu/research/participants/portal/appmanager/participants/portal 22/08/2014

  25. (Not legally binding) THANK YOU FOR YOUR KIND ATTENTION QUESTIONS? 22/08/2014