Read the fine print before you spend your Horizon Europe grant - Business Plus
Irish companies drawing down EU research grants are losing five and six-figure sums at closeout stage, often because standard accounting practices don’t match what Brussels will actually reimburse,. . .
Irish companies drawing down EU research grants are losing five and six-figure sums at closeout stage, often because standard accounting practices don’t match what Brussels will actually reimburse, writesDamien Kealy. I work with a number of state bodies that disburse grants, such asEnterprise Ireland,Research Ireland, theEnvironmental Protection Agency (EPA),Marine Institute, and theHealth Research Board. I also work with a number of beneficiaries of awards from European funding programmes such asHorizon Europe. S&W’s role can be varied from scheme design and implementation right through to the assessment of claims, post award verification and final closeout and decommitment of any residual unclaimed or ineligible funding. In some extreme cases there may even be a clawback of funding. For beneficiaries of EU grant awards, the final closeout phase can be the most challenging and the costliest. I come across the same challenges in universities, manufacturing companies, and life sciences firms, albeit the scale of the issue varies. What spending isn’t reimbursed?If a cost on your claim doesn’t meet the scheme’s eligibility criteria, it’s not covered, regardless of whether the spending itself was genuine and reasonable. That’s money the company has incurred for which it will not be reimbursed. For large-scale Horizon Europe projects, the exposure can run to five or six figures. EU grant funding rules are detailed and specific to each programme and in some situations each individual award and a company’s normal accounting policies or cost categories, built for its own accounting requirements, won’t necessarily align with what a particular grant scheme will actually reimburse. I’ve advised companies who spent sizeable sums of money in the belief and expectation that it was eligible and therefore reimbursable only to realise at the end of a project that they couldn’t claim it back, because that category of expenditure wasn’t covered or wasn’t calculated in accordance with the rules of the award. Why depreciation catches people outThe purchase and treatment of plant, equipment and other assets is a case in point. For the purposes of Horizon Europe, you cannot claim the full purchase price of all such equipment. You can only claim the depreciation cost based on the period during which the equipment was used on the project together with the percentage of actual use attributable to the project. In simple terms, if you have a three-year project and you buy a piece of equipment which is used 100% of the time for the full three-year term of the project, then you can only claim 60% of the cost of that item of equipment. Plant and equipment is deemed to have a useful life of five years; therefore over a three-year project three-fifths of the cost can be claimed. Paperwork can be as costly as spendingSometimes the issue may not be the expenditure itself but the other obligations of the award, such as maintaining detailed records of time employees spent on the project. I have seen a number of cases where this has been left until the end of the award and a staff member no longer worked for the company. Consequently the cost of their time spent on the project could not be reimbursed under the terms of the grant as they hadn’t maintained a record of that time. This issue also arises where beneficiaries incur large amounts of expenditure on travelling to meetings, events or conferences that may be necessary for their award. Reimbursement will be denied when they cannot provide documentation to demonstrate that they travelled and attended the event and that the content or purpose of the event was relevant and necessary for the purpose of delivering their project. Auditors or the funder’s own claim reviewers are usually the ones who spot these issues, and often times that is too late for beneficiaries. While the model grant agreement that issues in respect of Horizon Europe grant awards is a daunting document, typically over 100 pages, all of the eligibility conditions and rules are explained in detail and laid out for all to see. And as is the case with all documents of this nature, the devil is literally in the detail. (Pic: Getty Images)Read the document before you spendIf you are considering participating in an Horizon Europe funded project, take the time to review this document in detail ahead of preparing your application and understand what is and isn’t eligible, and prepare your project budget accordingly, in order to maximise the funding available to your business and the financial benefit of the grant. And if you are in any way unsure then seek professional advice. Damien Kealy is Partner and Head of Public Sector Advisory, S&W