Budgeting

Budget in Horizon Europe Applications

The budget in a Horizon Europe application is an estimate of, among others:

• Direct costs (personnel costs, costs for contracted assignments, other direct costs)
• Indirect costs

The total budget is entered in Part A of the application. The EU funding applied for should also be entered here.

Direct Costs

Direct costs are those costs that can be directly attributed to the project and that are borne in connection with the conduct of the project. Direct costs are:

• Personnel costs
• Contracted assignments
• Other direct costs (e.g. travel, auditors’ attestation, translations, services, purchasing of consumables, etc.).
• Internal invoicing

Personnel Costs and Time Recording

Be aware that you can only include days that can be documented (minimum half a day). Therefore, during the project all staff members must register the days they spend on the specific work package (WP). It is important to be careful in recording, as any lack of recording ultimately may result in repayment in full or in part of the EU funds.

Assignments Contracted out to Third Parties

As a general rule, the project must be conducted by project participants, but in some cases third parties may contribute to the EU project. Such third parties are paid directly by the project participant, and he/she will then settle accounts with the EU. Any such costs must appear from the budget.

It is important to ask for competing bids, since you must document that the selection is based on a ‘best value for money’ practice. Otherwise, you may risk having to pay back part of the funds.

There are four types of third parties:

1. Subcontractor/Affiliated entities
2. Contractor
3. Associate partners
4. In-kind contributions provided by third parties.

Special rules apply to their work under the project.

An affiliated entity is an organisation with a legal connection to the beneficiary. For example, a parent or a subsidiary company of a beneficiary may be entered in the Grant Agreement as a so-called Affiliated entity. Only by appearing from the agreement this parent or subsidiary company can request funding of its costs through the Horizon Europe funding.

Equipment

Costs for equipment, goods, facilities, machinery, etc. used in the project may be eligible for funding. However, only those depreciation periods that fall under the project period can be remunerated by the EU, and only the time the given equipment is used in the project. This means, for instance, that if a machine is used for other tasks 40% of the time, only the other 60% can be entered in the budget and subsequently remunerated over the Horizon Europe project. Do not forget documentation through logbooks.

The duration of the depreciation period of the equipment is fixed in accordance with the general accounting practices of the institution/business and Danish legislation in the field.

Indirect Costs

Indirect costs – also called overhead – are costs that cannot be attributed directly to work conducted under the project.

Often, these indirect costs cover items such as:

• Rent
• Internet
• Heat
• Electricity
• Telephone

An automatic flat rate of 25% of the reported direct costs (subcontracting excluded) is calculated as the EU funding of the beneficiary’s indirect costs.

Budget Reallocation during the Project

The budget is an estimate. It is possible to reallocate between budget categories (already existing in the budget) and between partners. In many cases this can be done without making changes in Annex 1 and Annex 2, but do remember to explain the change in your reporting. If the reallocation is a substantial change, Annex 1 and Annex 2 must be adjusted. This will be the case if, for instance, a partner takes over a work package (WP) from another partner, or if a new subcontractor is introduced, or if a new budget category is to be used.

Eligible Costs and Financial Reporting

Whether the costs are direct or indirect, they must be eligible in EU terms, for you to have these costs covered.

When making your financial reports under the project you can only include costs complying with the following requirements:

• They must be actual, i.e. no estimates, budget figures, or additions
• They must be borne by the beneficiary, i.e. the beneficiary has paid the costs
• They must be incurred within the project period, i.e. the event triggering the costs must happen during the project period
• They must appear from the budget
• They must arise in connection with the work described in the application and be necessary for the conduct of the work
• They must be identifiable and verifiable; in particular, they must be registered in the accounts of the beneficiary in accordance with national accounting rules, and in addition in compliance with general accounting and administration principles of the beneficiary
• They must comply with current, relevant, national legislation (taxes, work conditions, and social security)
• They must be reasonable, justified and in compliance with good economic principles, particularly principles of economy, efficiency, and effectiveness.