FAQ for budgets and costs in Horizon Europe projects

What costs are eligible for Horizon Europe funding?

An important rule to keep in mind is that the costs you declare must be incurred during the project duration to be eligible. Costs that you make before the project starts (e.g. writing the proposal or preparing the Grant Agreement) cannot be taken into account. The costs also have to be incurred by the beneficiary listed in the Grant Agreement and must be identifiable and verifiable in their financial records. Additionally, the work realted to the costs must be described in the work packages of the Grant Agreement. You may not declare costs for work that is not described in your project.

What costs categories are distinguished in Horizon Europe?

There are 4 basic types of costs:

• A. Personnel costs
  • For each person working on the project, you calculate the cost per person-month and multiply it by the number of months they will work on the project.
• B. Subcontracting costs
  • These cover tasks assigned to third parties that are not project beneficiaries. Subcontracted work must be clearly described in Annex 1 and follow procurement principles.
• D. Purchase costs
  • This includes travel, equipment, consumables, and purchased services. Best value for money and absence of conflict of interest apply.
• E. Indirect costs
  • Horizon Europe uses a flat rate of 25% of the total eligible direct costs (excluding subcontracting and in-kind contributions not used on premises). These cover overhead such as rent, electricity, and administrative support.

What is a lump sum?

Horizon Europe continues to use lump sum funding in specific calls. A lump sum is a fixed amount awarded for the implementation of the project, agreed in advance and not linked to actual incurred costs. Instead, funding is based on completing the agreed work packages and tasks, as described in the Grant Agreement.

In a lump sum project, you do not have to report on individual cost categories (e.g. personnel or travel costs). Instead, you report on milestone delivery and work completion, and receive payment accordingly.

Lump sums are used in selected EIC calls, ERC Proof of Concept grants, and in simplification pilots for collaborative projects. Always check the call conditions to know whether your proposal will use the lump sum model.

What is a person month?

This metric is used to calculate how much time a person will spend on a project. For example, if one person works for 0.5 FTE (Full-Time Equivalent) on a project, with a duration of 30 months, the number of person months is 15.

How do I calculate the hourly rate per person?

In Horizon Europe, personnel costs are calculated using a daily rate system, rather than an hourly rate (as was the case for Horizon 2020 projects). This is intended to simplify the reporting process. The daily rate is calculated as:

Annual personnel cost / 215 = daily rate

The 215 represents the fixed number of productive days per year, regardless of your organisation’s internal rules. The annual personnel cost includes salary and all mandatory social security contributions paid by the employer. You then multiply the daily rate by the actual number of days worked on the project (recorded in time sheets or equivalent records).

Note: You must use calendar-year-based reporting for each employee. The daily rate must be calculated separately for each calendar year in which the person worked on the project.

How do I comply with the rules for time recording?

In Horizon Europe, beneficiaries must keep daily records of the time their personnel spend on the project. These can be recorded using paper time-sheets or a computer-based time recording system. Time records must:

• Be completed daily or at least monthly,
• Be signed and dated by the person working on the action,
• Be approved by a supervisor,
• Match the person’s employment status and work schedule,
• Be consistent with records of leave, sick days, and other absences.

Each time record must also include:

• The title and number of the action (from the Grant Agreement),
• The beneficiary’s full name,
• The full name of the person and the number of days worked on the action during the period,
• A reference to the work packages or tasks worked on,
• Signature of the person and their supervisor.

Horizon Europe uses daily rates, so the number of days worked (not hours) must be clearly recorded and auditable.

What is included in the ‘other direct costs’ category?

These costs may include travel, purchase of services (mind the best value for money rules, described below), equipment, consumables, etcetera. In Horizon Europe, these types of expenses fall under cost category C: Purchase costs.

Include also some budget for renting meeting rooms and facilities in the travel costs category. You can charge these costs to the budget of the coordinator, or divide it among the participants.

Travel costs will be reimbursed according to your own accounting principles. This means that when you always fly business class, you are allowed to fly business class for this project and declare those costs, provided they are necessary and justifiable for the action.

Equipment costs are based on the depreciation and the time that the equipment is used for the project. For example, if you write off equipment in 5 years, your project duration is 5 years, and you use the equipment only for 20% of the project, you budget 20% of the equipment costs.

What are indirect costs?

You will receive a fixed amount to cover overhead: 25% calculated over the total eligible direct costs, excluding subcontracting and contributions not used on your premises. This includes telephone charges, rent, heating, electricity, and other general administrative costs. You don’t have to declare or specify these costs separately.

What is a third party?

The term ‘third party’ within Horizon Europe is used for all parties that are not a beneficiary in the project, but execute certain tasks or part of tasks.

What are the different types of third parties?

• Linked third party
  • This party has a legal or capital link with one of the beneficiaries in the consortium, for example a sister organisation that performs one of the tasks of the beneficiary.
• Subcontractors
  • Subcontractors can be hired to perform one or more tasks for a beneficiary, for example an animal experiment. They issue invoices and do not report costs themselves.
• Other direct costs: A Service
  • Only a small resource or service is provided that is needed to perform a task by a beneficiary. An example is building a website or an accountant audit to obtain a certificate on the financial statements.
• Third party providing in-kind contributions against payment
  • A non-financial resource of a third party put at the beneficiary’s disposal, but against payment. For example, equipment provided to carry out research.
• Third party providing in-kind contributions without payment
  • A non-financial resource provided free of charge, such as access to equipment or staff time not charged to the project.
• Financial support to third parties
  • This is only used in specific calls. We won’t go into detail here.

How to declare costs from a third party?

• Linked third party
  • A linked third party declares actual costs through the beneficiary with which it has a legal link. They must declare their own actual costs, keep time-sheets, and report any other direct costs. They will also receive the 25% indirect costs over the eligible direct costs.
• Subcontractors
  • A subcontractor may charge the commercial price and will invoice the beneficiary contracting the work. The beneficiary declares these costs under category B: subcontracting costs. Usually the subcontractor makes a profit, which is allowed, but you must comply with the best value for money and no conflict of interest rules.
• Other direct costs: A Service
  • The service provider invoices the beneficiary, who declares the costs in category C: purchase costs. Again, best value for money and no conflict of interest apply.
• Third party providing in-kind contributions against payment
  • The beneficiary declares the actual costs related to the use of the resource or equipment.
• Third party providing in-kind contributions without payment
  • These contributions are reported in the Grant Agreement, but not declared as reimbursed costs since no payment occurs.
• Financial support to third parties
  • These are only used in specific calls. If applicable, strict rules apply on how and when this support can be given.

When do I receive payments from the EC?

The EC always pays the coordinator, who in turn has the responsibility to transfer the money to the other participants. When the Grant Agreement is signed, the coordinator will receive the pre-financing payment usually within 30 days.

The amount of pre-financing to be received is decided per project, but usually 30%-60%. The EC will place 5% of the total amount in their Mutual Insurance Mechanism, which you will receive when closing the project.

After approval of each interim report, the EC has 60 days to pay the amount that was declared. 60 days after approval of the final report, the balance is paid.

Can I make a side contract with a partner?

You are allowed to make side contracts with your partners in the consortium. For example, if you agree on additional payment for a task. These agreements are considered internal arrangements between beneficiaries and do not need to be submitted to the European Commission. However, they must not contradict the terms of the Grant Agreement.

When do I use unit costs for personnel?

This category is used for direct personnel costs of SME owners or natural persons who do not receive a salary from the company they work for. They will declare a unit cost multiplied by the number of actual days worked for the project.

The daily rate is based on the amount set for Marie Sklodowska Curie Actions experienced researchers and is published in the Horizon Europe Unit Cost Decision. These units can only be used if the person does not receive a salary and is directly contributing to the action. The number of days worked must be supported by time records, as with regualr personnel.

How to use special unit costs for clinical trials?

Unit costs are mostly used in clinical trials, only under specific Horizon Europe calls. When you are preparing your proposal, the unit costs should be sufficiently described. You will find a table for this in the template ‘essential information to be provided for proposals including clinical trials/studies/investigations’.

This calculation will be part of the peer review process, and changing the unit costs will not be allowed after your proposal is granted. Unit costs are fixed amounts per study subject enrolled in a given centre and include costs for personnel, consumables, medical equipment and service contracts.

This should be calculated based on the costs in year N-1 at the specific beneficiary and according to a defined methodology. The unit cost is set for the entire duration of the project. If one partner is choosing to use unit costs, other partners may use the actual incurred costs.

What reimbursement rates are used within Horizon Europe calls?

There are differences in the percentage of the project costs that can be funded by the EC between calls, usually either 70% or 100% of the total amount. This is simplified from what was used in FP7, when there were different reimbursement rates for certain tasks within a project.

When the reimbursement rate is less than 100%, you will have to describe and calculate the entire amount that you need to execute the project. Make sure that you present a convincing case that you have or will acquire the funds to ‘match’ the other costs.

What if I need more money than I can receive to execute the project?

The best strategy to cope with this issue depends per project. There are a few options:

• Cut your tasks to fit the maximum amount of funding you can apply for;
• Find another fund to pay for the extra costs, for example an investor. Submit a formal letter of intent or some other proof that the funding is not a problem;
• An in-kind contribution from your institute/organisation.

Can I make shifts in the budget in the project?

You are allowed to shift budgets within the categories and between beneficiaries without an official amendment during the project. It is advised to inform the EC when you prepare major shifts in the budget.

What if I generated income in a project?

You have to declare income that is generated in the project. For example, when you sell equipment that was bought for the project or you charge a fee for participants in a congress that you have organised within the project. This income will be taken into account in the financial assessment and may be deducted from your eligible costs.

When do I need a certificate on the financial statements?

When you declared for more than €430.000 of funding in actual costs (excluding indirect costs), you need to submit a certificate on the financial statements in the final reporting phase. This certificate should be prepared by an independent auditor. You may budget for this in the ‘purchase costs’ category. In general, this will cost around €4.000 to €8.000.

What will happen when my project is audited?

Apart from receiving the certificate on the financial statements, the EC is allowed to contract an external auditor to audit a project. The entire project is checked for compliance with the rules. Also, occasionally the EC itself is audited and this will be done by audits on projects. In case they find inconsistencies, the amount of the grant will be reduced by the amount that was wrongly declared. If an auditor finds consistent issues (e.g. wrong keeping of time-sheets), they may also investigate this within other Horizon Europe projects that you or your partner are participating in.

What is the difference between a deliverable and a milestone?

To write a strong proposal it is essential that the project plan, including the deliverables and milestones is solid, but also achievable. But what is the difference between a deliverable and a milestone?

Deliverables are tangible or intangible objects produced as a result of the project that is intended to be delivered to a stakeholder (either internal or external).  A deliverable could be a report, a document, a server upgrade or any other building block of an overall project.

Milestones are scheduled events signifying the completion of a deliverable or set of related deliverables. There is no work associated with a milestone; it is a flag in the work plan to signify some other work has completed.

A deliverable differs from a project milestone in that a milestone is a measurement of progress toward an output whereas the deliverable is the result of the process. For a typical project, a milestone might be the completion of a product design while the deliverable might be the technical diagram of the product.

What is a PIC code?

The PIC code is a unique nine digit Participant Identification Code that is used to identify organisations (e.g. an academic institute or SME). The PIC code can be used for all future communication and interactions with the European Commission and its agencies. The use of the PIC code for each organisation helps to avoid redundant requests for information and facilitates the effort to keep participant-related information up-to-date.

Where can I find the PIC code of my organisation?

If you are not sure whether your organisation is already registered a PIC search can be performed here.

How to obtain a PIC code?

If your organisation does not have a PIC code you need to register through the ECAS Participants Portal. At the end of the registration process, the PIC number of the organisation will be displayed.

What is the difference between a Gantt chart and PERTH chart?

To visualise project timelines and the breakdown of tasks within the work packages (WP) along with the time it takes to perform the particular task Gantt charts and PERTH charts are frequently used. But what are the differences between a Gantt chart and a PERTH chart?

A Gantt chart is represented as a bar graph and is used to illustrate a project schedule. The Gantt chart shows the start dates, end dates and individually breaks down the project into smaller tasks. Select Gantt charts also show the dependency relationships between activities. The chart shows a horizontal bar which represents the task, while the length of the bar shows the time required to complete the task. On an x-y axis, the x axis represents the time for project completion. Independent tasks are connected using arrows, which show the relationship between two independent tasks.  The relationship stems from the dependency of one task on another, where one task must be finished in order to being the other task. .

The Program Evaluation and Review Technique (PERT) chart is represented as a flow chart and is designed to analyse and represent the tasks involved in completing a given project. The PERT chart also analyses the various different tasks involved in a project and the time it will take to complete each task and subsequently the whole project.

One of the key differences between a PERT chart and a Gantt chart is the way the information is presented. Gantt charts present information in the format of a bar chart. This presentation helps show the percentage of work completed for each task. A PERT chart, on the other hand, displays information as a network model. This means that a PERT chart presents an initial node from which tasks branch out. This helps to visualise the sequence of tasks, as you cannot start on the next activity until the one preceding it is completed.

Request assistance

At PNO we can help you with budgeting and your budgeting questions, as we offer full or modular project management services. Project management is a critical factor for the success of your Horizon Europe project. Our experienced project managers have the expertise to help you manage the non-scientific activities of your research project. Contact us by filling in the form below to find out what we can do for you.