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ANNEXES

ANNEX A: DEFINITION OF ACTIVITY INDICATORS

1. ANNEX B: ELIGIBLE COSTS

The following list is indicative of the types of expenditure which will be considered eligible for support and should not be viewed as exhaustive. Applicants do not have to use all of the headings, only those most appropriate to the individual project.

Please use the expenditure headings as they appear in the list adopting the same order and wording.

For the most part eligible costs will follow the eligibility criteria set by the Structural Funds. More information on eligible project costs can be had, if required, from the Programme Executive.

2. Staffing

Staffing costs will normally be considered eligible where personnel are directly engaged on the project and where the applicant can clearly demonstrate that the personnel concerned are employed in additional posts.

Note: Applicants should not list individual staff posts in the application form. A detailed breakdown of staffing should be included in an appendix to the application form.

All staff costs included in the application should be in accordance with the following conditions:

• staffing costs should include employer's National Insurance and Superannuation contributions (commissions and benefits in-kind, e.g. bonuses are not eligible). There should be a clear audit trail for staff costs from payroll records and/or timesheets, via BACs to the bank statements;
• where staff are also engaged in non-project related work, only the portion of staff costs directly attributable to the project should be shown;
• the calculation used for apportionment must be detailed. Actual costs are required for claims and should be backed up by timesheets or other media where time spent on eligible activity can be clearly demonstrated;
• where staff are costed at an hourly rate, the calculations must be acceptable, i.e. the total staff cost divided by the number of hours worked per year;
• where staff are part-time or have joined/left the organisation during the year, a pro-rata rate should be calculated; and
• consultancy fees and sub-contractor fees should not be included in direct labour costs.

Core funding of an organisation is not an eligible activity.

3. Consultancy Fees and Sub-Contract Charges

Costs for work done by an independent consultant or sub-contractor will only be eligible if the work is essential to the project and the costs are reasonable.

• A threshold of £500 per day for non-tendered consultancy fees has been set as the maximum eligible figure to receive support. Daily expenditure on consultancy above this threshold must be met in full by the project applicant and is not considered eligible for support.
• For consultancy fees that have been subject to an approved tender process, the market rate resulting from that exercise may be included for support.
• Costs associated with payment of consultants that provide support in completion of application/claim forms and with management fees are not eligible.

4. Project Evaluation Fees

Costs for independent evaluations are eligible (see consultancy fees above).

5. Travel

Travel costs must be directly related to, and essential for, the effective delivery of the project, and should be broken down into a rate per person per mile, and/or the expected cost of economy class travel on public transport for the forecast number of journeys. Certified travel claims must be retained.

6. Premises and Overheads

This may include rent, rates, heat, light and service charges associated with the premises where it can be clearly demonstrated that these are directly related to the delivery of the project.

Charges relating to the statutory responsibilities of applicants or the applicant's day-to-day management, monitoring and control are not eligible.

Rent and Rates:

• Premises costs must be related solely to the project.
• If only a part of the premises is used for the project then the amount charged should be apportioned accordingly. In this case calculations should show the actual annual rental cost to the applicant, the period of project usage, the proportion of the building used for the delivery of the project and the resultant eligible rental costs.
• Notional rental charges where the applicant owns the premises, or occupy premises rent-free, are not eligible.

Other charges, e.g. heating/lighting:

• Amounts charged to the project should be apportioned as outlined above for rental and rates. Overheads should not include any staff costs.

Note: Applicants should not list individual premises costs in the application form; a detailed breakdown of costs should be included in an appendix to the application form.

7. Marketing

This heading may include costs related to all aspects of marketing specific to the project such as:

• design and production of marketing materials;
• facilitation of appropriate conferences and seminars; and
• targeted advertised campaigns.

8. Leasing Rule

Leasing is eligible within certain qualifications.

• Where premises, equipment, etc. are not used solely for the project ( e.g. equipment is only used 1 day per week), this should be indicated in an explanatory note added showing the apportionment of costs.
• Operating leases are eligible provided the applicant can show that the costs of the lease are competitive and compatible with market rates.
• A leasing charge for equipment (in any one year) which exceeded or closely matched the full cost of purchasing the item would not be eligible.

Lessor

• If the Lessor is receiving grant, the benefits must be passed onto the Lessee.

Lessee

• If the Lessee is in receipt of grant, the grant must be used towards leasing costs.

Sale and Lease-Back

• Rentals under sale and lease-back may be eligible but acquisition costs are not.

9. Administration

This should cover telephone, consumables and other reasonable costs associated with direct delivery of the project where it can be clearly demonstrated that these are additional costs being incurred by the organisation.

Telephone costs must be directly related to and necessary for the effective delivery of the project. It must be possible to provide an itemised audit trail for the specific telephone.

Consumables may include items such as postage, stationery, and other costs, which the applicant can demonstrate as essential to the effective delivery of the project.

10. Assets

Grant cannot be used to support the construction of assets.

• Where the statutory or core activity of the applicant or training deliverer is consistent with the practical activity included in the project, the costs of any materials which are used to construct a permanent physical output are not eligible.
• For all other projects (where the statutory or core activity of the applicant does not relate to the project), the cost of materials used in the project that contribute to the construction of a permanent physical output may be allowed as eligible expenditure, but such costs will not be allowed to exceed 20% of the total eligible project costs.

11. Non-Recoverable VAT

It is recognised that some project applicants are unable to recover VAT. Non-recoverable VAT can be claimed as an eligible cost.

• Project applicants claiming non-recoverable VAT will need to support their claim with appropriate evidence from HM Customs & Excise.
• Organisations electing not to recover VAT that is recoverable cannot count the VAT as eligible.

12. Final Claim Audit Fees

Final claim audit fees may be incurred but cannot be defrayed in advance of the submission of a final claim.

In order to claim these costs the applicant must:

• Complete the final claim audit fees proforma.
• Attach the invoice from the audit.

13. Purchase of Equipment

Only one-off items of equipment which are essential for the delivery of the project; which will be used solely for that purpose and have been purchased from third parties on, or after, the commencement of the project will be considered eligible. Equipment purchased prior to the commencement of the project is not eligible.

The figure for equipment must then be reduced by any estimated residual value of the equipment after the project period of support. If equipment is written off in less than a 3-year period, evidence to justify this should accompany the project application.

For second-hand equipment to be eligible:

• the seller must provide a declaration stating its origin, and confirm that at no point during the previous seven years has it been purchased with the aid of national or EC grants;
• the price must not exceed its market value and shall be less than the cost of similar new equipment; and
• the equipment is necessary for the project and complies with applicable norms and standards.

Note: This also represents acceptable capital expenditure within a revenue project.

A detailed breakdown of all items included under this heading should be provided in an appendix.

In cases where items of equipment have been purchased, an inventory must be retained for audit purposes.

14. Depreciation of Owned Equipment

Depreciation, directly linked to the project, should be calculated in line with your organisation's accounting policy.

• Claims should be based on the actual costs of the owned equipment.
• Any grant used to purchase the asset should be taken off the cost before depreciation is calculated.
• Depreciation may be claimed on second-hand equipment provided the equipment has not been purchased using a local, national or European grant.
• Where deferred credits are used to offset depreciation costs, the amount of the deferred credit must be deducted from the depreciation costs for grant purposes.
• Documentation showing how depreciation costs have been calculated must be kept for audit purposes. This will include invoices; payments records (including BACs lists and bank statements); descriptions and location of the items purchased; the method of depreciation; the time spent using the items ( e.g. one day per week); and, where relevant, the estimated residual value.

The following information is required:

• the cost and description of the item purchased;
• the purchase date;
• the number of years over which the item is being depreciated (this must be a minimum of 3 years);
• the % of the item's use devoted solely to the project, over the life of the item.

ANNEX C: NON-ELIGIBLE PROJECT COSTS

The purpose of this annex is to provide additional guidance in relation to individual project and non-eligible costs. This list is not exhaustive and merely indicates the broad types of expenditure normally considered ineligible. For further advice, please contact the Programme Executive ( PE).

1. Financial Charges

• Loan Charges: the nature and amounts of any loan charges included in the overall project costs should be brought to the attention of the PE.
• Service Charges arising on leases and hire purchase arrangements.
• Costs resulting from the deferral of payments to creditors.
• Costs involved in winding up a company.
• Bad debts.

2. Recoverable VAT

Recoverable VAT is not eligible whether or not the applicant elects to recover.

3. Finance Leases

Similar to hire purchase agreements - at the end of the lease the equipment becomes the property of the Lessee.

4. Legal Costs

This covers costs in respect of litigation.

5. Staff-Related Costs

• Staff costs that are not directly attributable to project delivery.
• Staff training/training that is mandatory under statutory provision.
• Redundancy payments.
• Payments into private pension schemes.
• Payments for unfunded pensions.

6. Other Costs

• Expenditure defrayed outwith the eligible project period.
• Related research or studies carried out in respect of the project prior to the official project start date.
• Gifts.
• Compensation for loss of office.
• Costs of works being carried out as a statutory requirement.

A detailed breakdown of any other costs should be provided as an appendix to the application form.

ANNEX D: CONTACT ADDRESSES FOR STRUCTURAL FUNDS PROGRAMME AREAS

For Lowlands & Uplands Scotland Programmes

ESEP Ltd (Head Office)

Tel: 01383 413141
Fax: 01383 413151
Website: www.esep.co.uk E-mail:
enquiries@esep.co.uk

ESEP Ltd (Glasgow Office)

Tel: 0141 241 6150
Fax: 0141 241 6160

Highlands & Islands (Scotland) Structural Funds Partnership Ltd

Webste: www.hipp.org.uk Fax: 01463 279501
Tel: 01463 279500

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