fpa training bangkok day 2

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The FPA 2008

Training for DG ECHO experts and partners

Bangkok, June 2008

Version 27.05.08

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Training programme

Preparing

Implementing

Closing

Launching

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Training programme

Preparing

Implementing

Closing

Launching

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Implementing the humanitarian action

Amending the agreement

Force majeure and suspension

Intermediate reporting

Transmission of documents between DG ECHO and the partner

Exercises

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Exercises

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Amendments

Amendments are modifications of the agreement

They must:aim to adapt Agreement to changing circumstancesbe duly justifiedclearunequivocal

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What cannot be changed:”The untouchables”

Changes impossible if:

They would call into question the award of the grant, in other words: they would have been rejected at proposal stage, had they been part of the proposal

Against financing decision (eg. crisis, geographic scope, duration, objectives)

Against Humanitarian Aid Regulation

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What cannot be changed:”The untouchables”

No changes of:

Action title

Action’s specific objective

Articles 1 (purpose) and 8.3 (nature of implementing modalities) of the Agreement

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Special case:the confirmation reply

This is NOT an amendment, but

an agreement by both parties to apply an existing provision.

Partner: Can I do this on the basis of the rules? Is this a correct interpretation of the rules?DG ECHO: Yes. (circumstances to remain unchanged after the reply)

E.g.: application of a single quote procedure on the basis of the provisions of Annex IV for A-partners.

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Amendment methods

Three different methods:Unilateral modificationsExchange of letters Supplementary Agreements

Choice of method depends on what is amended

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Unilateral modifications – what?

Is a modification by the partner which does not require DG ECHO’s consent

Possible when the modification does not affect a basic element of the action nor articles 1, 2, 3, 4, 5 and 8 of the agreement

Basic elements include the action's results, beneficiaries, indicators, area of implementation andwhen relevant, sustainability.

In practice often used to modify parts of the proposal:integral part of the Agreementliving document to reflect the implementation of the action

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Unilateral modifications – what?

Examples:

Changes of activities, means and costs (NEW: 15% rule no longer applicable) but without changes in results, indicators, beneficiaries or other basic elements

Changes in contracting arrangements and potential contractors

Changes of bank accounts (article 6 agreement) or address (article 7 agreement)

Changes of Annex II (financial overview) if no change of total amount of budget or of co-financing rate

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Partner makes change and informs DG ECHO in the next report (intermediate or final).

Partner informs DG ECHO by letter for change of bank account or of contact addresses.

Possible reactions DG ECHO:No reaction = tacit approvalIf DG ECHO agrees = may be advisable to reply for legal securityIf DG ECHO does not agree (e.g. the change affects the results) = necessary to reply

If DG ECHO is not informed : non-eligibility of related expenditure.

Unilateral modifications – how?

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Exchange of letters – what?

Is a modification on the basis of two letters (a letter requesting a modification and a reply letter accepting the modification)

NEW: Possible when the modification affects:a basic element of the action or Articles 4 (reporting) or 5 (payment arrangements)

If the change of the basic element has an impact on Annex I of the agreement (LogFrame), the amended LogFrame must be added to the exchange of letters

E.g.new subsectorsPostponing submission final reports

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Exchange of letters – how?

Partner sends formal request to DG ECHO in a timely fashion, i.e. asap and before the modification is implemented (except in case of force majeure and suspension)

In case of acceptance: DG ECHO should reply within short delay; reply must clearly identify the object of the amendment Entry into force amendment following positive reply;

After end of implementation period, all amendments are done by exchange of letters;

NEW: Can be signed on partner’s behalf by personidentified in Article 7 agreement

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Supplementary Agreement - What?

Is a modification on the basis of an additional agreement

NEW: For modifications which affect one of the following Articles of the agreement:

Article 2 (entry into force, implementation and eligibility period)Article 3 (budget and co-financing rate) Article 8.1 - supplementing clausesArticle 8.2 - derogating clausesNOT Article 8.3 – qualification clauses: never to be changed

In case of modification of Article 3: modification Annex II to the agreement (financial overview) necessary and often also includes change Article 5 (payment arrangements)

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Supplementary Agreement – How?

Supplementary agreement to be concluded before end implementation;

If DG ECHO accepts partner’s request, DG ECHO sends 2 copies of supplementary agreement to partner

Agreement only contains changed articles

Partner returns signed copy; signed on behalf of partner by legal representative (person who signed initial agreement)

Entry into force when DG ECHO receives copy signed by partner

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Something went wrong…

Partner did not respect rules? Partner should inform DG ECHO as soon as possible and in any case before the final report

DG ECHO has 2 options:

DG ECHO takes note and reacts at liquidation stage

In exceptional cases, if repercussions for the future implementation of the operation, DG ECHO may issue an amendment covering future impact

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What about the Single Form?

In case of a unilateral modification, exchange of letters or supplementary agreement :

Single Form is adapted at next reporting stage to reflect amendments Single Form mentions the amendments (section 1.11)

In case of in depth changes, DG ECHO may request partner to adapt Single Form before next reporting stage

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Post mortem…

Amendment request after the end of the implementation but before final report (ex tempore request) must be particularly well justified

Only for obligations still to be fulfilled, e.g.:• transfer of remaining supplies• extension of the implementation period (need to react

quickly to avoid legal insecurity)

Always by exchange of letters

Parallelism of signatures – same level as initial agreement

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Amendment request in final report?

Ex tempore amendments no longer possible

DG ECHO may, in well justified cases, accept such request

DG ECHO’s reply will be in the final liquidation only. No additional document confirming DG ECHO’s position.

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Who signs what?

What Who signs

Confirmation reply Desk

Exchange of letters (during implementation period) Head of Unit

Exchange of letters (ex tempore) Subdelegated Authorising

Officer (= same person as person who signed original agreement) + Visa B2

Supplementary agreement

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Exercises

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What is force majeure?

Any unforeseeable exceptional situation or event beyond the Parties’ control which

prevents either of them from fulfilling any of their contractual obligations, is not attributable to error or negligence on their part (or the part of their implementing partners, contractors or employees), proves insurmountable in spite of all due diligence

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Consequences of force majeure

Examples of Force majeure: e.g.circumstances which occur regardless of any human will or intervention, eg. natural disasters, fire, earthquakes, floods.“Fait du prince”: decisions taken by authorities affecting implementation of actions, eg. import blockades, refusal of access.

Partner nor ECHO shall be held liable for breach of their obligations if due to force majeure.

Possible procedural consequencessuspension of the agreementtermination of the agreement

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What is suspension?

A temporary stop of activities of the implementation of the Action due to difficulties in the field.

Can be invoked by partner or

DG ECHO

Importance of a good risk assessment in the Single Form

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Suspension by the partner

Partner may suspend the action’s implementation when changes in circumstances in the field make further implementation of the action impossible or excessively difficult, notably in the event of

force majeure, serious threat to the safety of humanitarian workers (security concerns), and incompatibility between further implementation of the Action and compliance with humanitarian principles or conflict of interests.

Examples: Actions by third parties for whom the partner has no responsibility, eg. riots, attacks against refugee camps

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Start suspension by partner (1)

As a general rule, partner informs DG ECHO asap of difficulties (even when it is not yet clear whether there should be a suspension):

Article 1.3 GC: the parties inform each other immediately in writing of any circumstances likely to hamper or delay the implementation of the Action

Date of informing DG ECHO = date of start suspension

Partner sends to ECHO asapreasons for suspensionmeasures adopted and expenses expected to be incurredthe expected date of resumption of activities

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Start suspension by partner (2)

DG ECHO and partner discuss available funds for further implementation action.

DG ECHO confirms implementation arrangements (identifying suspension period and eligible costs during suspension period)

Partner must take all reasonable measures to reduce damages to a minimum

Partner may submit additional requests for suspension

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End suspension by partner

Partner informs DG ECHO asap of resumption of activities

Letter contains:Date of resumptionChanges that the Partner wishes to have integrated in grant agreement

If DG ECHO accepts resumption, DG ECHO issues supplementary agreement with new implementation period and other possible changes (e.g. budget).

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DG ECHO may request the partner to suspend the implementation of the Action in the event of:

serious threat to the safety of humanitarian workers on the site, orincompatibility between further implementation of the Action and compliance with humanitarian principles or conflict of interests.

Suspension by DG ECHO

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Start suspension by DG ECHO

No retro-active suspension: DG ECHO informs partner asap.

DG ECHO sends letter to partner indicating:reasons for suspensionimplementing arrangements

Partner has 15 calendar days after receipt of suspension request to reply to DG ECHO.

If the partner does not react or if DG ECHO rejects the partner’s observations, the action shall be suspended or terminated

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End suspension by DG ECHO

DG ECHO assesses conditions for resumption (or termination)

In case of resumption: supplementary agreement (with revised implementation period and other changes, if necessary)

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To suspend or not to suspend

Suspension might be envisaged when: The action cannot be executed as foreseen due to unforeseen difficulties; and It is likely that certain aspects of the agreement will need to be modified

Other options (eg. when more time is needed to implement the action not due to unforeseen circumstances):

Extend the duration with budgetary changes Extend the duration without budgetary changes (no-cost extension)

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Duration suspension period(s)

Several suspension periods possible

If total duration suspension exceeds 1/3 of the implementation period of the action, DG ECHO may terminate the Agreement

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Example of a suspension timeline

Partner informs ECHO asap of

suspension

Partner informs ECHO about

reasons, costs,

duration

Reply ECHO: acceptance suspension

Partner informs ECHO:

wishes to extend

suspension > 1/3

Reply ECHO: acceptance extension

ResumptionPartner

informs ECHO asap of

resumption and changes Agreement

ECHO issues supplementary

Agreement

Suspension period

1/3 of duration action

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Continuing the implementation after suspension

Possible that implementation continues after expiry of the financing decision.

During implementation period after expiry of the financing decision, partner may incur new costs, but within the budget (i.e. Commission contribution may not be increased)

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Exercises

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Objectives of the intermediate report

Assess where the partner stands: What was done, what is still to be done? Will the results be achieved?Compare between the intentions (objective, results, activities) and the achievements. Are changes necessary?

only indication of significant changes that may affect the achievement of the results

NEW:Only narrative: drafted on the Single Form No financial report (except reporting on financial overview in section 11 and section 4.3.2)

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How to appraise the intermediate report?

1. Relevance

2. Feasibility

3. Factors for success and impact

4. Cost effectiveness(see yesterday: how to appraise the proposal)

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The (action assessment) MatrixResults and effectiveness

Economy and efficiency

Formalism and procedures

Proposal What are the intended results?What will be the added value of DG ECHO's intervention?Respect of DG ECHO's mandate and financing decision?

Are the intended means and costs necessary and reasonable to achieve the results?

Respect of financial procedures?Respect of DG ECHO's mandate and financing decision?


Where does the partner stand now? What must still be done to achieve the results?Is there a need to change?Lessons learned for programming other actions?

Is there any need to revise the means and costs?Can we learn lessons in terms of economy and efficiency of the used means and costs for programming other actions?

Respect of financial procedures?Respect procedures for A-control mechanisms?

Final reporting

Which results were actually achieved?What was the added value of DG ECHO's intervention?Lessons learned for programming other actions?

Were the used means and costs necessary and reasonable to achieve the results? Can we learn lessons in terms of economy and efficiency of the used means and costs for programming other actions?

Did the partner respect the procedures (e.g. in the area of procurement)?Which costs are eligible?

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NEW: special attention for A control mechanisms

Are procurement rules respected?

Is the financial management of the action healthy?

Is the action management well under control?

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Reporting requirements

Date of submission of the intermediate report laid down in Article 4 Special Conditions. NEW: By default 3 months before the end of the Action (may be specified differently in Article 4)

Report covers:elapsed implementing period up to one month before the reporting dateReport covers the whole action, irrespective of financing modality (partial or 100% financing)

Specific reporting requirements are possible (supplementing clauses in Article 8 of the agreement)

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A couple of technicalities (1)

Report in language of the Agreement

NEW: Partner must only complete the sections in the Single Form starting with [INT]

NEW: Section 1.11: list of supplementary agreements and exchanges of letters since signature original agreement

NEW: Procurement table (Annex 1 Agreement): only to be updated in case of actions subject to A control mechanisms

DG ECHO may always request additional information; to be provided by the partner within 30 days

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NEW and for info: overview of sections where key data may be changed in “strikethrough”:

1.4; 1.5; 1.6; 1.74.1; 4.2.1; 4.2.2; 4.2.7; 4.3.1; 4.5.2.; 4.5.3 8.2.2; 8.2.3; 10.1; 12.3; 12.4; 12.5

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If no submission of intermediate report…

In case of failure to submit intermediate report within the agreed deadlines and without any valid justification DG ECHO may :

terminate agreement with advance notice (ground = partner's failure to comply with its obligations under the agreement), orrefuse payment of indirect costs

Repeated failure to send reports = serious breach of the FPAto be taken into account for annual assessment partners may be reason to suspend/terminate FPA

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Need for 2nd pre-financing?

For actions with a long implementation period and in case first pre-financing was 50%, partner may request 2nd prefinancing of 30% (committed expenses must be higher than 70% of the first pre-financing)

In intermediate report

Before intermediate report: NEW: request must include

updated section 4.3 (focusing on main means and costs committed)updated section 11For A-control mechanism: also annex A

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Exercises

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Language

Any exchange of documents between DG ECHO and the partner relating to the agreement (incl. regarding controls and audits) are in the language in which the grant agreement was drafted

Translation costs are eligible (Be prepared, possible to translate key documents for headquarters or eventual audits)

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NEW: Transmission of documents by partner

Partner sends:In paper copy

final version of the Action proposal, signed original of the Grant Agreement or Supplementary Agreements.

By electronic meansunilateral modificationsamendment requestsIntermediate reportAll communications which were sent in paper copy

Partner submits final reports in one paper copy and by electronic means.

DG ECHO only officially accepts mails sent to DG ECHO e-mail address ([email protected])

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NEW: Transmission of documents by DG ECHO

DG ECHO sends In paper copy

AgreementsSupplementary AgreementsStop the clock letters.

By electronic meansConfirmation replies and replies to amendment requests by exchange of lettersAll communications which were sent in paper copy

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Date of receipt

Date of official receipt (registration) of documents = the first date of receipt, be it on paper or by electronic means, whichever happens first.

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NEW: Contact persons

Communications sent to the persons and addresses, including electronic addresses, identified in Article 7 of the Special Conditions (unless otherwise agreed)

If not, communication shall be considered null and void.

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Exercises

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Oops

Supercalifragilisticexpialidocious is an NGO whose actions are subject to an A control mechanism. In its intermediate report the NGO mentioned that it did not respect the procurement rules for the purchase of certain goods, and that it had not requested derogation. DG ECHO did not notice that the procurement rules were not respected. With its final report the NGO now claims the reimbursement of the full price for the related purchases. What should we do?

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It’s all in the Memo

During the implementaion of an action, the authorities of Hellistan suddenly impose on a DG ECHO partner the signature of a Memorandum of Understanding (MoU). Without such MoU, the partner is not granted access to the disaster struck region of Devil’s Breath. Pursuant to the MoU, the authorities need to give their approval to the partner's project documents (such as the reports), the employment of local and international workers etc. In addition, the partner would have to open a joint bank account with a state controlled organisation which can access the funds at any time. The partner signs and then contacts you…

What to do?

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Training programme

Preparing

Implementing

Closing

Launching

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Closing the Action

What to do with left over supplies?

Which costs are eligible?

How to report on the achieved results and claim final payment?

Exercises

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Closing the Action




Exercises

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Remaining supplies…

At the end of the action, partner may still have remaining supplies, notably:

Equipment (durable equipment and small equipment): economic lifespan longer than a single use

Goods: items which can only be used once (consumables)

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… must be donated to…

At the end of the action, the partner must donate the remaining supplies to any of the following categories:

Beneficiaries of the actionLocal implementing partnersLocal authorities (eg. hospitals and schools):

Beware: no « diversion » for other purposes allowed (e.g. generator) NEW: Prior agreement of DG ECHO required (exchange of letters)

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… but never to

Never donation to:

Subcontractors or commercial organisations

Commission staff, experts, etc.

Partner staff

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NEW: How to donate?

Partner donates the remaining supplies

No need of prior information or agreement of DG ECHO except in case of donation to local authorities

Partner reports on donation in final report (see later)

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No donation obligation if (1)

NEW: DG ECHO is not the single largest donor

Supplies were purchased under multidonor action

Partner charged depreciation costs for the equipment

NEW: It concerns remaining goods with a residual value up to € 500 per category of items or equipment with a value up to € 500

Even if no donation obligation: necessary to identify the related supplies in final report

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No donation obligation if (2)

NEW: Equipment covered by the low value allowance (G.C. art. 18.4 and 19.1)

Allowance covers low value equipment fully purchased with DG ECHO’s financial support

Conditions:Donation not suitable, not advisable or contrary to the principles of sound financial managementHumanitarian Organisation pledges to use it to the benefit of humanitarian ActionsThe maximum cost per single item <= € 2.000 The costs must be itemised and proven.

Amount of the allowance = the amount of costs actually incurred with a maximum of:

€ 5.000 if total budget Action <= € 500.000 € 15.000 if total budget Action > € 500.000

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Exception: transfer to another project (1)

Follow-up project must be funded by the Commission (DG ECHO, DG AIDCO, …), but it can be in another country, area, beneficiaries, objective…

DG ECHO pays the remaining supplies under first action after signature of Agreement for follow-up project

This does not negate but only postpones the obligation to donate at the end of the follow-up projects

If no donation in the follow-up project: recovery costs under first action

Durable equipment may be transferred to several consecutive projects, goods only once

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NEW: transfer procedureNo longer distinction between 100% financing and co-financing

Partner submits to DG ECHO justified request with an inventory of the remaining supplies and a proposal concerning their use.

DG ECHO replies by exchange of letters if submitted before submitting final reports

If submitted with final reports, DG ECHO decides during liquidation

Exception: transfer to another project (2)

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For specific specialised equipment (e.g. satellite telephones, de-mining) DG ECHO makes a case-by-case assessment of the applicable donation obligations (derogation in Article 8.2 of Special Conditions possible)

Exceptionally, donation to other categories (e.g. international NGOs) may be considered but these need to be confirmed by derogation in Article 8.2.

Other exceptions

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Reporting on end use (1)

Both in case of donation and of transfer to a follow up project, partner must report on the end use of the remaining supplies in the final reports.

For verification purposes partner keeps documentary proof of any transfer of property (e.g. donation certificate).

In case of non-compliance, the related costs may not be eligible and will, if necessary, be recovered

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For remaining supplies >= 5.000 EUR: Copy donation certificate required with final reportThe donation certificate must stipulate:

Donated supplies to be used for humanitarian purposes;Donated supplies to be identified in beneficiary’s inventory, or – in case of individual donation – beneficiaries must be clearly identified;No double funding (from DG ECHO or other donor) for donated supplies.

For remaining supplies > 500 EUR and < 5.000 EUR: donation list in final reports is sufficient

Reporting on end use (2)

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Closing the Action




Exercises

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Eligibility Principles (1)

Costs are eligible if they are:necessary and reasonable;actual costs complying with the principles of sound financial management, committed during the eligibility period of the Action, with the exception of:

costs relating to the winding-up of the Action, and expenditure committed before the submission of the Action proposal related to the constitution of stocks.

Cfr. Article 18.1 G.C.

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Eligibility Principles (2)

Costs are eligible if they are:identifiable and recorded in the accounting records of the partner or its implementing partners,determined according to the applicable accounting standards and to the usual cost-accounting practices of the partner;backed by original supporting evidence comply with the requirements of applicable tax and social legislation.

Cfr. Article 18.1 G.C.

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Not eligible

Debts and provisions for possible future losses or debts;Interest owed by the partner to any third party;Items already financed from other sources;Purchases of land or buildings;NEW: cessions and rebates by the Implementing Partners, contractors or staff of the partner;Taxes, duties and charges, unless the partner is not able to reclaim them under the applicable national legislation. Special case: VAT (see later)

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In more details:

1. Equipment2. Stocks3. Cost allocation4. Cash payment5. VAT

6. Financial fees7. Exchange rates8. Liabilities9. Contributions in

kind10.Other costs

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1. Equipment

Purchase

• Reminder: Equipment have an economic lifespan longer than a single use (whilst goods are consumables)

• For the purchase of durable equipment, Partner may charge to DG ECHO:

– Full purchase price, or– Depreciation costs calculated on the basis of

• DG ECHO depreciation rates, or• other depreciation rates (if action submitted to P-control mechanism)

– Allowance for low value equipment (see earlier)

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1. Equipment

NEW: DG ECHO depreciation rates

Purchase value Depreciation rate

≤ € 2.000 50% per year (24 months)

>€ 2.000 and ≤ € 10.000

33% per year (36 months)

>€ 10.000 and ≤ € 30.000

25% per year (48 months)

> € 30.000 20% per year (60 months)

No donation obligation at end action (see earlier)

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1. Equipment

NEW: Partner’s depreciation policy• Conditions for application of other rates than the DG ECHO rates on the basis of the partner’s own depreciation policy:

– Application P-control mechanism– conformity with the national legislation of partner’s country of establishment; – Identification in a regularly updated inventory covering the partner’s assets; – codification of the accounting practices and the method to be used for the depreciation of equipment; – Transparency, guaranteeing equal treatment of donors and consistency with the operations financed with the partner’s own resources.

• No donation obligation at end of action (see earlier)

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2. Stocks

Eligibility of stocks

• Stocks consist of goods (consumables) or equipment

• Two situations:– Stocks constituted before Action– Stockpiling

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2. Stocks

Constituted stocks (1)

• If stocks constituted before submission of proposal:

– Expenditure related to constitution of stocks to be used in action may be eligible– Expenditure = historical cost– For purchase of stock, partner must have respected own procedures as well as mandatory principles of Annex IV

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2. Stocks

Constituted stocks (2)

• If stocks constituted between proposal and signature of agreement:

– Expenses incurred after eligibility date set in Article 2.3 of the Special Conditions are eligible

– if expenses incurred after eligibility date in Article 2.3 of SC: not eligible expense

– Annex IV of the FPA applies to the purchase (difference between A- and P-control mechanisms)

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2. Stocks

Stockpiling: creation and sustainability

• The constitution of emergency stocks not intended for immediate use and without link to identified crisis, but with objective to create an early response capacity.

• Financing decision must include reinforcement of disaster preparedness as specific objective

• Reporting on use (how managed and how kept sustainable?).

• Stocks must be available to all DG ECHO partners

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2. Stocks

Stockpiling: use

• As a general rule, stocks will be used in the case of emergencies.

• When stocks are used:– partner must identify stocks as having been paid by DG ECHO.– replenishment (to ensure sustainability of capacity).

• Costs = costs of reconstitution (may be different from historical costs).

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3. NEW: Cost allocation systems

If partner shares out costs to different projects according to a cost allocation system, the related costs may be eligible if they are:

linked to the Action andin proportion of the different sources of funding.

cost allocation system must be a standard accounting practice, justifiable and reasonable. Partner must be able to demonstrate how the costs charged were derived at any time.

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4. Cash payments

VouchersCash linked to an associated activityDirect cost-recovery systemsNon-direct cost recovery systemUnconditional cashMicro-credits

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4. Cash payments

Vouchers is considered as a distribution method and can thus be accepted

Cash linked to an associated activityCash for returnees: consists of providing returnees (refugees and displaced persons), in the context of their voluntary repatriation to their country of origin and resettlement, with a monetary grant to facilitate their return and settlementCash for work: the beneficiaries receive aid in cash as remuneration for work carried out. The work should correspond to work of public or Community interest which is related to the implementation of humanitarian projects.Support of a professional activity with the free distribution of equipment and tools

can be accepted under some control conditions

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4. Cash payments

Direct cost-recovery systemsthe proceeds/results from the sale of goods and services of whatever nature bought with DG ECHO funds or supplied by DG ECHO, are used to purchase agreed replacement goods that are resold at market prices, full cost or at subsidised rates. As a general rule, at the end of the project, the products of the sale are considered as revenue of the project and should be deducted from the final payment


Example: sale of drugs/vaccines at primary healthcare centres, income used to buy new drugs/vaccines

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4. Cash payments

Non-direct cost recovery systemThe proceeds/results from the sale of items produced with DG ECHO funded equipment or inputs, are used in order to guarantee the sustainability of the project. In this case, the sale proceeds remain with the intermediate beneficiary (i.e. owner of the donated source).


Example: sale of water produced with ECHO-funded pumpin order to generate funds for spare parts and petrol

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4. Cash payments

Unconditional cashPreviously not possible. Now it can be done

if:the financial support is not the primary aim of the ActionThe conditions for the giving of the support are strictly defined in the agreement with no margin for discretion (in Single Form)For agreements with NGOs: the maximum amount for support in 1 agreement is 100.000 EUR and max. 10.000 EUR per beneficiary (For IO/UN these limits don’t apply)

Micro-credits: still not covered by our mandate

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5. VAT

VAT not eligible, but:Partner must request exemption and report on VAT status

If exemption not granted: VAT= eligible If exemption granted after final report, partner reimburses DG ECHO.

Partner may carry over lack of exemption to subsequent actions – to be explained at proposal stageNEW since 01/05/07 (Financial Regulation): No longer distinction between EU and third countries.

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6. Financial fees

Bank chargesHQ account? Indirect costAccount related to project: eligibleNOT interest charges or exchange rate losses.

Interest from loansNEVER!Operational leasing (pure rental): eligibleFinancial leasing (option to buy): not eligible

What if no financial institutions available or financial practices differ?

If costs of financial transactions are supported by evidence: eligible

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7. Exchange rates: the problem

PARTNER Implementation in the field

Prefinancing€

€

$

£

Financial reporting

system of the partner

Financial transactions

in the field

Liquidation€

€ / £/ $

How to report on this correctly?

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7. Exchange rates: the solution

PARTNER Implementation in the field

Prefinancing€

€

$

¥

Financial transactions

in the field

Liquidation€

€ / £/ $

It is a question of reporting… : a default rate from which a derogation may be made in the Agreement

Tim

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Financial reporting

system of the partner

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8. Liabilities and insurance

Partner solely responsible for complying with its obligationsDG ECHO not liable for damagesInsurance?

Adequate and as comprehensive as possibleEligible if clearly linked to the action

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ExamplesEmployee and vehicle insurance: individualisedInternational transport insuranceLocal in-country insurance: see circumstancesCosts of bank guarantees (if requested by DG ECHO).

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Absence of insurance to be justified in Single Form (e.g. high risk, war, too expensive)Losses without insurance? DG ECHO may intervene

Case-by-case assessmentCf. mitigating actions by partner

Relevant info to be put in section 8.1 Single Form

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9. Contributions in kind

Contributions in-kind received or made by the partner may not be considered as

co-financing nor as eligible costs.

Costs directly related to accepting or distributing contributions in-kind may be considered eligible to the extent that they comply with the eligibility conditions.

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10. Other eligible costs (1)

Transport, storage and distribution costs relating to goods and services delivered to the beneficiariesExpenditure related to the award of contracts Costs of staff assigned to the ActionActual costs incurred by the implementing partnersCountry office costs of the partner in the area of the action

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10. Other eligible costs (2)

NEW: Compensations in kind, by voucher or in cash to beneficiaries for activities not covered by an employment contract, to encourage motivation, availability and involvementNEW: Costs of activities by personnel of national administrations to the extent that the concerned administrations would not have carried out these activities if the Actions were not undertaken (e.g. per diem and transport costs for doctor validating health centers);Costs relating to the dissemination of information, evaluation, reporting, translation, reproduction, insurance, etc.Headquarter costs if directly linked to and necessary for the Action (to be duly justified)

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Closing the Action




Exercises

102

Objectives

One basic question:Was the outcome of the action a success or not?

Too late for amendments !

No longer preliminary final reports

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Two final reports

The partner submits two final reports and a payment request:

Narrative report: focus on operational assessment of implemented Action did the partner achieve the envisaged objectives and results? drafted on the Single Form

Financial report: focus on financial information related to the Action;NEW: derived from the financial system of the partnerNEW: Structured on the basis of the chapters defined by the partner in section 11 (left column).

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The (action assessment) Matrix

Results and effectiveness

Economy and efficiency

Formalism and procedures

Proposal What are the intended results?What will be the added value of DG ECHO's intervention?Respect of DG ECHO's mandate and financing decision?

Are the intended means and costs necessary and reasonable to achieve the results?

Respect of financial procedures?Respect of DG ECHO's mandate and financing decision?


Where does the partner stand now? What must still be done to achieve the results?Is there a need to change?Lessons learned for programming other actions?

Is there any need to revise the means and costs?Can we learn lessons in terms of economy and efficiency of the used means and costs for programming other actions?

Respect of financial procedures?Respect procedures for A-control mechanisms?

Final reporting

Which results were actually achieved?What was the added value of DG ECHO's intervention?Lessons learned for programming other actions?

Were the used means and costs necessary and reasonable to achieve the results? Can we learn lessons in terms of economy and efficiency of the used means and costs for programming other actions?

Did the partner respect the procedures (e.g. in the area of procurement)?Which costs are eligible?

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How to appraise the final reports?

1. Relevance

2. Feasibility

3. Factors for success and impact

4. Cost effectiveness(see yesterday: how to appraise the proposal)

5. Formalism and procedures

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Does the final financial report contain all necessary information to allow DG ECHO to formulate an opinion on:

The fulfilment of the specific objective and achievement of the action results (linked to the necessity of the associated costs); andThe eligibility of the costs claimed, that they are actual costs and that they were committed during the action.

Were the procedures (e.g. in the area of procurement) respected?

5. Formalism and Procedures

How to appraise the final reports?

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Reporting requirements

Reports must be submitted within three months following the end of the Action

Reports cover the whole implementing period and the whole action, irrespective of financing modality (partial or 100% financing)

Specific reporting requirements are possible (supplementing clauses in Article 8 of the agreement)

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Reports drafted in language of the Agreement

NEW: Partner must only complete the sections in the Single Form starting with [FIN]

ECHO may always request additional information; to be provided by the partner within 30 calendar days

NEW: No strikethrough anymore. Explanation of real figures and reasons behind in [FIN]

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On the final financial report:NEW: Partner uses own standard internal financial reporting formats.

Issues reported on in the financial report do not have to be repeated in the narrative report and vice-versa. The 2 reports should be linked and make reference to each other when appropriate.

Report must be consistent with the accounts and ledgers of the Partner (and implementing partner, if relevant) which may be reviewed by the European Commission

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On the final financial report:Sufficient level of detail for the costs (guidelines will be shortly available)

In-kind donations or contributions may be mentioned on the financial table without any financial amounts or estimations.

Many actions take place in countries where European standards for invoices are either not realistic or unavailable. Try to be as complete as possible and document weaknesses

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If no submission of final report

In case of failure to submit a final report without justification DG ECHO may terminate the Agreement with immediate effect.

pre-financing = „loan” (property of the Community); if no report, no approval costs possible and thus reimbursement loan

Repeated failure to send reportsserious breach of the FPAto be taken into account for annual assessment partners may be reason to suspend/terminate FPA

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Final payment in two phases

DG ECHO proceeds with final payment in two phases

1. Acceptance of the reports

2. Validation of payment request

These are different processes.

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First phase: acceptance of the reports

Objective: is the report „certified correct”? Assessment of quality of the action

NEW: If partner does not submit the final reports in due time – i.e. within 3 months of end implementation action - the deadline for the acceptance of the Final reports is extended for a period equivalent to the duration of the delay (the partner will be informed of the extension of the period by letter).

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First phase: acceptance of the reports

Geo Unit has 45 days to accept the reportsIf DG ECHO does not react, reports are deemed acceptedIf DG ECHO requests additional info during this first period, the deadline for acceptance of report is suspended

Acceptance of final reports is not a recognition of the eligibility of the costs, neither of the regularity, authenticity, completeness and correctness of the information in the reports.

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Second phase: validation payment request

Aim: is there supporting evidence for payment request; is expenditure eligible?

DG ECHO – Unit B2 - has 45 days for validation of payment request after acceptance of final reports

DG ECHO may request additional info during this second 45 days period; deadline for payment request is then suspended

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Second phase: validation payment request

Partner has no automatic right to receive payment after expiry of the 90 days periods (+ X days for possible delay report partner + Y days for additional information requested)

Payment is only possible after validation payment request by DG ECHO

NEW: DG ECHO will pay automatically interest in case of late payment if interest is higher than EUR 200

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Final payment: schematic overview

45 daysGeo unit

X days(delay

Partner)

45 daysUnit B2

Acceptance reports Verification payment request

“Stop the clock” if DG ECHO requests additional info

If no reply within 30 days:

Refuse reports

Continue on basis of available info

Continue “stop clock”

Inform partner

Interests payable as from 90 + X days + suspended periods, if > 200 Euro

Extra 45 days + suspended periods

for verification payment request

DG ECHO receives additional info after liquidation

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Possible problematic situations

1. Partner underspends: DG ECHO may limit its contribution to percentage of actual expenditure

2. Partner overspends: DG ECHO applies maximum amount of contribution established in the agreement

3. No underspending but results not achieved: pro rata reduction of DG ECHO contribution possible, but need of quantifiable data in proposal!

4. Reduction indirect costs if eg. clear link between role HQ and poorly executed action.

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Practical advice (1)

Format to report costs is not fixed but for each category of cost reported, minimum information is needed (see Guidelines on Financial Reporting).

During final distribution of stock or preparation final report, costs may be accepted in the 3-month period after the end of the action provided that they are winding-up costs (e.g. fuel) or final distribution of goods/equipment committed during the action (see earlier).

Costs must be described in the simplest terms. Therefore avoid generic or non-specific terms. E.g. not 'vehicles' but ‘motorcycles’, ‘cars’, ‘trucks’;

Evaluation or audit reports to be added, if paid by the action

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Practical advice (2)

If the cost has been apportioned to several actions or to several accounting posts DG ECHO may request an explanation of the calculations (e.g. depreciation, pro-rata, and averages).

Need to keep adequate and complete documentation, for possible verification by DG ECHO (must be kept for a period of 5 years after the end of implementation period).

Donation certificates: to be signed by recipients and added to report (for equipment > 5.000 EUR, otherwise donation list)

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Interests

Pre-financing interest (Partner pays)Yearly reporting not necessary any more (= change in new Financial Regulation)Not applicable to International OrganisationsOnly applicable to NGOs – if project >12 months and pre-financing > € 750,000May be integrated as income in financial overview (and used by the action) or will be recovered after the action

Late Payment interest (EC pays)After the 45 days x 2, including suspension periods: per day and at our rates

Late Payment interest on Debts (Partner pays)

Debit note not paid within the time delay: Accountant imposes interest.

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Closing the Action




Exercises

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Guarantees

For its watsan action Hamburger Help had a subcontractor build a water tower. Upon delivery of the water tower, Hamburger Help paid 95% of the price to the subcontractor. Both parties contractually agreed that the last 5% would only be paid one year after the delivery in case the water tower would still be functioning properly. Before expiry of the one year period, Hamburger Help closes the action and requests DG ECHO to pay 100% of the purchase price. What should DG ECHO do?

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Insurance

Tralala Truckers implement their first DG ECHO funded action in Gangmaniastan. It consists of trucking medicines to the main hospitals of the capital. In the risk assessment of their proposal, Tralala Truckers described the security situation. They also indicated that they are insured. On a sunny afternoon, one of their trucks is stolen. After a first assessment, it turns out that the insurance does not cover such situations, since the Truckers normally undertake their activities in the peaceful Irish countryside.

What is your assessment?

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VAT

Vétérinaires sans Animaux is implementing an action in Bolivia. They have been reimbursed the VAT Vétérinaires had paid on the purchases made the first 6 months of the DG ECHO action. They now wish to re-invest this amount in the same action. At the same time they have been reimbursed the VAT paid in a previous action already liquidated by DG ECHO, and declared eligible at that moment. They want to reinvest this amount in the current action as well.What would you suggest?

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De-mining

DG ECHO co-finances 40% of a de-mining action implemented by the NGO Poodle Power. At the end of the action, Poodle Power requests DG ECHO to keep the de-mining equipment rather than donating it to local beneficiaries. Such donation would be too dangerous as the equipment would risk falling in the wrong hands. Poodle Power explains that it intends to use the same equipment for a de-mining project planned to take place 10 months later and which is likely to be funded by DG AIDCO. What should you tell Poodle Power? Which procedure should be followed?

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Main novelties in a nutshell

So what was

new?

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Main novelties (1)

Assessment of actions:Strengthened results based approachDifferent focus for each phase of the action (proposal, intermediate, final)Increased responsibilisation partnersNew format of the Single Form

Financing decisions:Possibility of eligibility period of three months after expiry decision for winding-up activities

Financing modalitiesIOs: either 100% financing or partial financing, notably multidonor (respecting the three criteria)

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Main novelties (2)

New format for the agreements Introduction of control mechanisms:

To strengthen diversity of partnershipinfluence i.a. on funding thresholds and applicable procurement rules

ProcurementP control mechanism: application own rules, as well as mandatory principles and special rules of Annex IVA control mechanism: application all sections of Annex IV and DG ECHO’s Humanitarian Aid Guidelines on Procurement

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Main novelties (3)

Clear distinction between communication, visibility and information/publication

Amendments:Less through supplementary agreements, more through exchange of letters

Communication between DG ECHO and partners

More through e-mails (system to be advised)

Intermediate reportNo financial report (but financial info in sections 11 and 4.3.2)

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Main novelties (4)

End use of remaining suppliesMore cases where donation at end action is not requiredLighter procedures for end use

Eligible costsEquipment:

encouraging depreciation allowance for low value equipment

VAT: no distinction between European Union and third countriesCost allocation systemsCash payments: more widely applicable but strict conditions

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Main novelties (5)

Final reportingTwo reports: narrative and financialPartner uses own financial reporting systemDelay submission reports extends DG ECHO’s deadline for accepting the reportsLate payment interests must be paid by DG ECHO

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Check out our

website:link to “new FPA

2008”

135

Please do not forget the evaluation form

Thank you

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Education

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