Kompas

EU grants are normally subject to ‘co-financing’ or ‘co-funding’, meaning that the EU granting authority does only provide a part of the funding of the action and the remaining parts must be financed by the beneficiary from other sources.

Annotated Grant Agreement of the European Commission (hereinafter referred to as the “grant agreement” specify that projects can be co-financed from:

• beneficiaries’ own resources,
• income generated by the action (e.g. by selling results), or
• financial or in-kind contributions from third parties (e.g. grants from national or private funding programmes).

What cannot be counted as project co-financing?

The following costs or contributions may not be counted as co-financing if they do not comply with the terms and conditions set out in the grant agreement and/or constitute ineligible costs, including:

(i) costs related to return on capital and dividends paid by a beneficiary

(ii) debt and debt service charges

(iii) provisions for future losses or debts

(iv) interest owed (v) currency exchange losses

(vi) bank costs charged by the beneficiary’s bank for transfers from the granting authority

(vii) excessive or reckless expenditure

(viii) deductible or refundable VAT (including VAT paid by public bodies acting as public authority)

(ix) costs incurred or contributions for activities implemented during Grant Agreement suspension

(x) in-kind contributions by third parties

Therefore, in-kind contributions provided by third parties to an EU-funded project cannot be counted as co-financing of the project; however, their provision and use within the project are not prohibited compliant to the requirements set.

In accordance with Section 9.2. of the grant agreement, other third parties may give in-kind contributions to the action (i.e. personnel, equipment, other goods, works and services, etc. which are free-of-charge), if necessary for the implementation. Third parties giving in-kind contributions do not implement any action tasks. They may not charge costs or contributions to the action and the costs for the in-kind contributions are not eligible.

Usually, the EU does not require additional information on the sources of co-financing unless otherwise expressly provided for a specific project. However, please note that co-financing forms part of the official project budget included in the EU grant agreement and therefore constitutes an official requirement. Co-financing is also considered part of the contribution that the beneficiary is required to report to the EU.

The rules applicable to costs financed through co-financing are the same as those applicable to costs financed by the European Commission funds. Accordingly, to be eligible under the project and in accordance with the Grant Agreement, such costs should be:

• identifiable and verifiable, recorded in the beneficiary accounts in accordance with the accounting standards applicable in the country where the beneficiary is established and with the beneficiary usual cost accounting practices;
• actually incurred by the participant (proof of payment, no re-invoicing to other entities);
• incurred in the period set out in the grant agreement;
• declared under the correct budget category set out in the grant agreement;
• incurred in connection with the action (i.e. a direct link between the cost and the action activities as described in the description of the action can be established in the accounting system or other supporting documents);
• compliant with the applicable (national) law (e.g. on taxes, labour and social security);
• do not contain any ineligible elements.

* This material has been prepared by Compass Group experts and reflects solely the views of the authors. It is provided for informational purposes only and does not constitute official legal or professional advice. It does not take into account all circumstances that may be relevant to a particular organisation or project.