HLG of Independent Stakeholders on Administrative Burdens

By Jeff Washington,2014-07-02 14:37
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HLG of Independent Stakeholders on Administrative Burdens


    Origin of best practice example

    Austria Member State


    community, if


    Responsible Federal Chancellery authority

    Description of best practice example

    (including, if possible, the following information)

     - title of the Introduction of a "flat rate for indirect costs" and “standard scale of unit costs” for staff costs and unpaid work / initiative in-kind contributions of self-employed persons as eligible costs within the Austrian operational programmes

    co-financed by the European Fund for Regional Development (ERDF)

- substantive EU cohesion policy / ERDF co-financed programmes


    - objective(s)

     On EU-level it is expected that the application of the provisions on simplified costs in the framework of the ERDF and

    the ESF will lighten the administrative burden on beneficiaries and management bodies and will contribute both to a

    more efficient and correct use of the Funds. (Source: EC Guidance Note COCOF 09/0025/04-EN, final version of


    The decision to make use of these opportunities within the ERDF in Austria is combined with the purpose to open the

    way for Austrian implementing bodies and beneficiaries to these simplified costs models introduced with the

    amendment of the ERDF Regulation beginning with October 2010.

    Regarding the necessary high efforts and in order to obtain a positive cost-benefit ratio it is however important, that the

    models can be continuously used for the next funding period starting 2014.

    COUNCIL REGULATION (EC) No 1083/2006 of 11 July 2006

    laying down general provisions on the European Regional Development Fund, the European Social Fund and the

    Cohesion Fund and repealing Regulation (EC) No 1260/1999

    REGULATION (EC) No 1080/2006 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 5 July 2006 on - related EU the European Regional Development Fund and repealing Regulation (EC) No 1783/1999 law


    amending Regulation (EC) No 1080/2006 on the European Regional Development Fund as regards the eligibility of

    energy efficiency and renewable energy investments in housing

- related

    national / Subsidiary National Eligibility Rules for expenditure co-financed from the European Regional Development Fund regional / local (ERDF) law if


     detailed In its annual report for 2007 the European Court of Auditors has suggested that the majority of errors found in description structural actions expenditure are partly due to the complexity of the legal and implementing framework. For this of best practice reason it recommended to simplify "the basis of calculation of eligible cost and making greater use of lump sum or flat

    and its effects rate payments instead of reimbursement of 'real costs'". The Financial Regulation applicable to the general budget of

    incl. (to the the European Communities and its implementing rules already allowed such approach for direct management

    expenditure. These provisions are an important step towards simplification. Experience in Member States has shown extent

    that a large proportion of the supporting documents inspected by controllers and auditors are needed to justify a minor possible): part of expenditure. This means that a great deal of the human resources and administrative effort involved in the management of the structural funds is absorbed in accumulating and verifying documents, rather than focusing on the

    achievement of policy objectives.

     1In the context of the “EU-Recovery Package” from November 2008 the European Commission proposed the

    application of flat rate for indirect costs, standard scales of unit costs and lump sums grants within the ERDF by an

    amendment of Article 7 of Regulation (EC) No 1080/2006 (ERDF Regulation).

    Therefore, the ERDF Regulation No 1080/2006 as amended by Regulation (EC) No 397/2009 (OJ L 126, 21.5.2009,

    p.3.) include the possibility of applying flat rate for indirect costs, standard scales of unit costs and lump sums.

    (Source: EC Guidance Note COCOF 09/0025/04-EN, final version of 28.1.2010).

    To be able to implement the “simplified costs models” on the project level, it is necessary to introduce corresponding

    rules into the eligibility rules, which are defined on national level (see article 56(4) of Reg. (EC) 1083/2006).

    Projects from the area of research and development, technology and innovation play a key role within the EU-cohesion

    policy to reach the strategic targets set in EU2020. In Austria it became clear that it is precisely in the areas mentioned

    that the administrative requirements make an adequate implementation of the projects very difficult e.g. due to the

    large share accounted for by personnel costs, which are a crucial element of financial assistance. Due to these difficult

    framework conditions, the bodies involved in the programme assessed the possibilities introduced of being able to

    apply simplified procedures to indirect costs as well as personnel costs under the amendment to the ERDF Regulation

    as urgently needed.

    The Austrian authorities responsible for implementing the structural funds programmes welcomed this development

    and decided to introduce the following models into the “Subsidiary National Eligibility Rules for expenditure co-financed

    from the European Regional Development Fund (ERDF)”:

    1. flat rate for indirect costs on the basis of eligible direct costs from wages and salaries which are directly linked to a

    project as the most

     appropriate basis. This approach both provides a simple calculation method and makes things easier for the

    controlling units of the agencies involved.

    2. Simplified calculation of staff costs. The method is to be applied to the financial assistance granted to projects

    involving personnel costs. These are primarily projects from the area of research and development, technology and

    innovation that play a key role in the Austrian Structural Funds programmes 2007 to 2013. The method may be

    applied to all project carriers and project types for the Objectives “Convergence” and “Regional Competitiveness”,

    because there are no project-specific differences.

    3. Flat rate for unpaid work / in-kind contribution of self-employed persons.

    Within the Objectives “Convergence” and “Regional Competitiveness” it is possible to claim own unpaid work done

    by self-employed persons (single-person entities, members of partnerships, freelancers) within a subsidized

    research, innovation and cooperation project granting a flat rate of ? 30 per hour according to hours worked if the

    defined requirements are met.

    effect on

    beneficiaries Who: Predominantly SMEs, but also e.g. R&D-institutions (who, how How many/how often: Cannot be assessed at the current stage many, how

    often etc.),

     1 Communication from the Commission to the European Council on A European Economic Recovery

    Plan, COM(2008) 800 final, 26.11.2008.

    Reduction of (administrative) effort for accumulating and verifying documents.

    The option of declaring indirect costs on a flat-rate basis acc. Article 7(4) of ERDF means that once direct costs have

    been clearly defined in the granting decision and properly justified by the beneficiaries by means of supporting paid

    invoices, beneficiaries can apply the agreed flat rate to declare and justify indirect costs linked to this ERDF operation,

    improvements without any further justification. This leads to a substantial simplification for both, beneficiaries and implementing

    bodies. to former

     practice The simplified calculation of staff costs means a shift towards an audit of the correct application of the method and the

    services provided within the scope of the project. The audit of the actual payments for personnel expenses and of the

    total annual working hours may be omitted. This leads to a considerable simplification for the beneficiaries as well as

    to a substantial reduction of the efforts for verification on the side of the implementing bodies. This reduction is

    estimated by the implementing bodies on the basis of their experiences with at least 50%.

    date of 17.09.2010 implementation

    duration of February 2009-September 2010 procedure

    costs of No detailed data available; estimated: 95.000? for flat rate; 45.000? for standard scale of unit costs procedure

    e-government no elements

    quantifications At the current stage (March 2011) the intermediate bodies are underway to implement the “flat rate”- & “standard scale

    of cost of unit costs”- models described above within their respective systems. This also requires the adaptation of the

    Management & Control Systems acc. Art. 71 of Reg. (EC)1083/2006. Therefore in this context no specification can be reductions

    made yet. where possible

    any other

    information you would like

    to add

    For further information

    Federal Chancellery IV/4

    Johannes ROSSBACHER

    Contact person Ballhausplatz 2

    1010 Vienna

    t: +43/1/535-34-44

    e: Website (German only)

    Summary of Simplified costs provided by the Commission

The simplified costs method, which is already used for many ESF programmes and

    recently extended to the ERDF, provides new ways of calculating eligible costs for operations co-financed by the structural funds. The 'real cost' method is bureaucratic

    in nature, and due to the complexity of eligibility rules, leads to high error rates and has forced beneficiaries to focus on administration and absorption of funds rather than quality of interventions supported by them. Based on a methodology developed by DG EMPL, chef defile on this file, the possibility to reimburse indirect costs on the basis of a flat rate of direct costs was introduced in 2007 in the ESF Regulation and in 2009 in the ERDF Regulation. It has already reduced many instances as well as substantially the administrative burden for beneficiaries. Further to the recovery plan, two additional simplified cost options to reimburse operations (or part of operations) were introduced in the SF Regulations in 2009: the use of lump sums and the use of standard scales of unit costs. For the first time in the history of structural funds, these two additional methods make it possible to reimburse operations on the basis of outputs and results rather than financial input, paving the way towards a management more focused on results.

    Experts agree that these simplified cost options are real simplifications, especially for the beneficiaries. The administration is simplified as well as the nature of audits: controls focus on the outputs or results.

Austria's method for ERDF

    The Austrian authorities provide a very detailed definition of cost categories as either direct costs, indirect costs or direct costs not taken into account when calculating the indirect costs, but reduce the scope of relevant direct costs to staff related cost. By reducing the scope, they help to increase the specific direct cost items considered the overall flat rate of indirect costs.

    The Austrian Authorities also provide an interesting alternative to the presented historical sampling method, by analyzing the indirect cost structure not on a project level but on the level of the beneficiary.

    With regard to the reduced scope of application, each beneficiary scrutinised is able to demonstrate a share of indirect cost of more or far more than 20% in comparison to the eligible direct costs.

    A further interesting element is the fact that the Austrian authorities combine the flat rate on indirect costs with standard scale of unit costs that are applied on working hours, which represent the direct costs. The flat rate is hence applied on the basis of standard scale of unit costs, which is to be considered as a real simplification with regard to the real cost approach and clearly converges to the overall aim for the future

to reorient reimbursement mechanism stronger on the output.

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