ELIGIBILITY OF COSTS

As stated in the Article 6.1 (a) (ii) of the MGA, costs related to the preparation of the final report shall be deemed eligible even if incurred after the eligibility period of the Action.

Therefore, if linked to the preparation of the final report, office running costs may be eligible, provided that they are reasonable, justified and compliant with the principle of sound financial management, in particular regarding economy and efficiency. In order to avoid costs to be charged twice, in case of follow-up action, these costs are no more eligibile. 

No, unless agreed by DG ECHO in the MGA. 

It's possible to charge a depreciation rate related to the local office building. This is different from a mortgage loan, which is not eligible under the MGA.

Art. 6.2 C of the MGA: [...] If such equipment, infrastructure or other assets are rented or leased, full costs for renting or  leasing are eligible, if they do not exceed the depreciation costs of similar equipment, infrastructure or assets and do not include any financing fees.

There is no fixed threshold applicable to personnel costs, but they must respect the eligibility conditions listed in Article 6.2 (A) of the MGA (e.g. being directly linked and necessary for the Action). If the costs devoted to human resources are very high (for example, in the case of protection activities), it may be advisable to explain the reason in the Single Form.

Depreciation or rental costs for the use of durable equipment may be charged to the ECHO Action in proportion to its actual use as long as the rules on eligibility in Article 6.2 (C.2) are observed. This possibility applies regardless of who owns the durable equipment as long as it was necessary for use in the ECHO funded Action and the normal financial safeguards were ensured. 

The depreciation/rental costs must be reflected in the accounting system in a consistent and verifiable way.

An important exception to this is if the durable equipment was bought using ECHO Funding. In cases where ECHO has already covered or contributed to the purchase cost of  a piece of durable equipment the related depreciation or rental costs can never be charged to a future ECHO funded Action - to do so would be contrary to normal financial safeguards and would constitute double funding. 

In cases where it is not possible to charge rent/depreciation to an ECHO funded Action it may still possible to charge the maintenance and running costs of that durable equipment to the Action's budget.

Under the general applicable rules on cost eligibility, the Commission can only pay for a cost when it has, amongst other criteria, been correctly "incurred". 
In humanitarian aid actions, provisions exist to determine the moment that a cost has been incurred with regard to goods, equipment, services or works used in connection with the Action. No guidance or interpretation, however, exists as yet to determine when, in the context of Actions involving cash distribution to final beneficiaries, the cash transfer or financial transaction is considered complete and the cost is therefore deemed 'incurred'.   

It is widely established that the fact that a legal commitment has been made (e.g. signature of a legally binding agreement or issuing a purchase order) is not sufficient for the costs to be deemed 'incurred'. Likewise the fact that an accounting provision has been made (e.g. money has been placed in an account with a view to being distributed) cannot be sufficient to deem those costs as 'incurred'.
In the case of humanitarian supplies ECHO's provisions require that the costs should relate to supplies distributed/made available to the beneficiaries during the eligibility period of the Action. It would seem appropriate to extend this approach also to cash-based distributions with the following context-specific qualification:

a) where the money to be distributed to the final beneficiaries is held in a bank or other equivalent holding mechanism used by mobile phone operators, hawala agents, etc in the name of one or more humanitarian organisations - the cost shall be deemed incurred when the money has been distributed to the final beneficiary or his/her representative. Money is considered 'distributed' the moment that the beneficiary has access to it.  For example, money does not actually need to be withdrawn for costs to be considered as incurred. 
It is however good practice to provide a specific timeframe to beneficiaries during which the money may be accessed;

b) where the money to be distributed to the final beneficiaries is deposited directly into a bank or equivalent account in the name of the final beneficiaries, or is handed over directly to the beneficiary - the cost shall be deemed incurred at that point.
Partner should be prepared to demonstrate that a cost has been actually incurred, for instance, during ECHO audits or verifications. Auditors or Verifiers may ask to visit specific Action locations (distribution points etc.) to verify that the money has been deposited during the eligibility period. During an HQ audit/verification, Commission representatives may check all the supporting documents related to the Action and the relevant dates (including bank accounts and statements). 

No. Field office costs have to be declared as unit costs in accordance with the Partners' usual accounting practices. It is enough if Partner fill in the column D2 in Annex 2.

No additional details need to be provided in the SF. The methodology and application of the usual accounting practices will be verified at audit stage.

If for the purpose of the grant they have to travel to other locations, then the travel costs and per diem are justified under the condition that they are not getting paid twice  (once by their employer and another time by the beneficiary (ECHO partner). Some 
supporting documents/declarations can be requested at final report stage or audit. 

It’s up to the beneficiary (ECHO partner) to check the status of the personnel involved in the action. If they are performing some extra tasks or extra hours or are detached 
from their health centre and sent to some other locations then the extra remuneration can be justified. 

Low value equipment (equipment with a value below EUR 1000, instead of the previous EUR 750 per item) is exempted from the obligation of transfer. If the cost of the item is between EUR 1001 and EUR 2500 per item, the exception applies if the total costs of the items does not exceed EUR 15 000.

The remaining goods at the end of the Action should, ideally, be distributed by requesting a no cost extension of the Action. If this is not possible and the results of the Action have been achieved, in case of remaining goods not exceeding 20% of goods purchased during the action, the Partner does not have to report to DG ECHO on the final use but the goods have to be used for the benefit of humanitarian aid actions. The final use of these goods will be verified at audit stage. 

In the MGIn the MGA, reimbursement of full price of equipment and goods is the rule, with the obligation to transfer or donate them after the end of the action, unless exempted by DG ECHO. If transfer to another ongoing action is not possible and if agreed by DG ECHO, the Partner can transfer or donate the equipment or goods to the final recipients, local non-profit organisations, international non-profit organisations, international organisations, or local authorities. If not, only the depreciation costs are eligible (regardless of the fact the Commission is the single largest donor of the action).  

In the MGIn the MGA, reimbursement of full price of equipment and goods is the rule, with the obligation to transfer or donate them after the end of the action, unless exempted by DG ECHO. If transfer to another ongoing action is not possible and if agreed by DG ECHO, the Partner can transfer or donate the equipment or goods to the final recipients, local non-profit organisations, international non-profit organisations, international organisations, or local authorities. If not, only the depreciation costs are eligible (regardless of the fact the Commission is the single largest donor of the action).  

Yes. Preparation of final report, post-distribution monitoring, final evaluation and audit  costs are eligible. Those costs are eligible maximum 3 months after the end of the action (deadline for 
submission of the final report). In principle, costs related to the final report are eligible  only after the end of the Action (or at the earliest one month before the end of the  Action).

Co-beneficiaries decide on the allocation of the budget of the action among themselves.

Yes. The costs of leave are to be added to the daily rate.

No. Cost will be eligible only when incurred after the project starting date. 

Staff costs (HQ and field) can be declared on the basis of actual costs and calculated in accordance with the following formula, provided for in the Model Grant Agreement:

{daily rate for the person

multiplied by

number of day-equivalents worked on the action (rounded up or down to the nearest half-day)}.

The daily rate must be calculated as:

{annual personnel costs for the person

divided by

215}

The number of day-equivalents declared for a person must be identifiable and verifiable (for instance through time sheets). Further explanations will be provided in the AGA.

Alternatively, staff costs can be declared as unit costs calculated in accordance with the Partner’s usual costs accounting practices. The different options can be selected by filling in the correct column in the budget (Annex 2) and/or at final report stage (Annex 4). There is no need for any derogation or ex-ante approval. The unit costs methodology as well as the number of the unit declared supported by timesheets or equivalent will be checked at the audit stage.

Examples  can be found in theAnnotated Grant Agreement – article 6.2.A.1

At the final report and/or audit stage

Yes

No, this will not be possible.

They should report only on the incurred costs.

Yes, Low value equipment (equipment with a value below EUR 1000, instead of previous EUR 750 per item) is exempted from the obligation of transfer. If the cost of the item is between EUR 1001 and EUR 2500 per item, the exception applies if the total costs of the items does not exceed EUR 15 000

Explanation provided in the Annotated Grant Agreement (art. 6.2.C.2).

Yes, if transfer is not possible

Yes, further guidelines will be published

Article 6.2 D.1 repeats the conditions set up in the 2018 Financial Regulation (Art. 204) on which basis the EU funds the actions. By filling in section 10 of the SF, in particular section 10.6, the partner provides the required information about financial support to third parties. The amount of support provided to implementing partners must be listed in the budget template under category D.1.

Those are the supplementary payments for personnel assigned to the action and can be included in the calculation of the daily rate if they are part of the beneficiary’s usual remuneration practices and are paid in a consistent manner whenever the same kind of work or expertise is required, the criteria used to calculate the supplementary payments have to be objective and generally applied by the beneficiary, regardless of the source of funding used.

Yes, if duly justified and documented

The definition is provided in the provisional Annotated Grant Agreement (art. 6.3 Ineligible costs and contributions) and reads as follows: ‘Excessive’ means paying significantly more for products, services or personnel than the prevailing market rates or the usual practices of the beneficiary (and thus resulting in an avoidable financial loss to the action). ‘Reckless’ means failing to exercise care in the selection of products, services or personnel (and thus resulting in an avoidable financial loss to the action). 

Yes, it is, the “prove the eligibility of the costs or contributions to what the flat-rate is applied” refers in this context to the direct costs.

Yes, DG ECHO’s decision on staff costs is retroactive to 1st of January 2021. In order to reflect this in the ongoing actions, no modification request is needed. The information on staff costs can be provided at final report stage by filling in the correct column of Annex 4 to the MGA.

Training of staff or IP staff can only be accepted to the extent that it concerns training which is necessary for the purposes of implementing the Action. There should be an explicit result/activity in the SF.

Moreover, any training related to general background capacity-building of the partner or its IPs and their staff and in particular any training concerning non-directly operational skills (such as HR management, IT, accountancy, language courses, etc.) are not considered as eligible direct cost.

In the provisional version of the AGA published on DG ECHO Partners’ website it is not foreseen as eligible costs but this is rectified in the new version (V2) of the AGA that will be published and will replace the previous one.

In principle, according to the new text, days of parental leave during the calendar year may be deducted from the 215 days to calculate the daily rates. The same applies to Partners who use their usual cost accounting practices to calculate personnel costs. However, the Partner may not deduct any other leaves or absences, including long-term sick leave, breastfeeding leave, leave to take care of a sick child and in case of kidnapping and persons in jail.   

Such clarification is considered to be retroactive to 1st of January 2021.  

Headquarter or Regional Office staff costs are not eligible unless the costs relate to the monitoring of the action in the field, the preparation of the Final Report (max. 3 months) or to a specific task necessary for the achievement of the operational results and have accordingly been identified as an operational activity in Annex 1 (only costs of “technical staff” can be eligible, all administrative profiles (financial, HR, desk officer, fund raising officer), are not eligible unless no similar profile is present in the field). 

In addition to pre-constituted stocks, costs of stocks pre-positioned (or stockpiling) in advance of possible disasters are eligible. Pre-positioning/Stockpiling is the constitution of emergency supplies not intended for immediate use, with the objective of reinforcing the emergency/disaster preparedness in third countries. These stocks managed by a partner should be made available to all DG ECHO Certified Partners in case of emergencies. The costs of the supplies will be considered as incurred when the supplies are delivered to the warehouse of the beneficiary.

The pre-positioning should appear in one of the results of the action under which the stocks are purchased. The beneficiary will explain why the stocks should be constituted, the nature of the supplies and how they will be handled (for instance, in case the disaster or emergency, in case limited period of usability).

At report stage, if the stocks were used during the action, the beneficiary shall explain the use that was made of the stocks. If the stocks were not used, they will update the information provided at proposal stage on the handling of the stock.

After the action, in order to avoid risks of double funding, the beneficiary should clearly label the stocks. The partner should also, at any time, be able to trace the stocks and explain its use. (For instance in case of an audit).

Exception: In certain countries, in view of possible follow-up action, beneficiaries may be authorised to pre-position stocks to avoid rupture in the procurement pipeline, subject to the following conditions:

• the delay in procuring or delivering of supplies should be due to objective logistical reasons and should not be due to problems in the procurement process of the partner that may be avoidable or manageable.
• The stocks should be proportionate to the identified possible gap in the procurement chain.
• The other stockpiling conditions (inclusion as a result in Annex 1, reporting obligations, stocks available to other partners if needed) remain applicable.