REPORT

Accepting University Accounting

Practices under Horizon Europe
A compendium of national and institutional cases

By Thomas Estermann
and Valentina Lisi
September 2018
Copyright © European University Association 2018

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Accepting University Accounting Practices under Horizon Europe

Contents
Definitions .................................................................................................................................................................. 5
Acknowledgments ...................................................................................................................................................... 7
Introduction ............................................................................................................................................................... 8
Part 1 National accounting practices accepted by competitive research programme funders ........................................ 11
Austria ...................................................................................................................................................................... 11
The development of a costing model at Austrian universities .............................................................................................. 11
Accounting practices accepted by national research programme funders ........................................................................... 12
Finland ...................................................................................................................................................................... 15
The development of a cost accounting methodology at Finnish universities ...................................................................... 15
Accounting practices accepted by national research programme funders ........................................................................... 17
Ireland ...................................................................................................................................................................... 20
The development of the Irish FEC accounting model ............................................................................................................ 20
Accounting practices accepted by national research programme funders .......................................................................... 22
Norway ..................................................................................................................................................................... 24
The development of the Norwegian TDI cost accounting model ........................................................................................... 24
Accounting practices accepted by national research programme funders .......................................................................... 27
Sweden ..................................................................................................................................................................... 30
The development of the Swedish SUHF accounting model ................................................................................................. 30
Accounting practices accepted by national research programme funders .......................................................................... 31
United Kingdom ........................................................................................................................................................ 34
The development of the TRAC accounting methodology ..................................................................................................... 34
Part 2. Established institutional accounting practices accepted by national competitive research programme funders .. 37
Belgium, Flanders ...................................................................................................................................................... 37
The development of a cost accounting methodology at Flemish universities .................................................................... 37
Institutional accounting practices accepted by national research programme funders ..................................................... 38
France ....................................................................................................................................................................... 41
The development of a cost accounting model at French universities .................................................................................. 41
Institutional accounting practices accepted by national research programme funders ..................................................... 42
Germany ................................................................................................................................................................... 44
The development of a cost accounting methodology at German universities .................................................................... 44
Institutional accounting practices accepted by national research programme funders ...................................................... 45
Netherlands .............................................................................................................................................................. 48
The development of a cost accounting methodology at Dutch universities ....................................................................... 48
Institutional accounting practices accepted by national research programme funders ..................................................... 50
Poland ...................................................................................................................................................................... 52

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Accepting University Accounting Practices under Horizon Europe

The development of a cost accounting methodology at Polish universities ....................................................................... 52

Institutional accounting practices accepted by national research programme funders ..................................................... 54
Portugal .................................................................................................................................................................... 57
The development of a cost accounting methodology at Portuguese universities .............................................................. 57
Institutional accounting practices accepted by national research programme funders ..................................................... 58
List of Contributors ................................................................................................................................................... 60
References ................................................................................................................................................................ 62

Figures
Figure 1. Use of institutional practices for cost accounting under Horizon 2020 ............................................................ 9
Figure 2. Proposals to improve the acceptance of institutional accounting practices .................................................... 10
Figure 3. The Norwegian full costing model ................................................................................................................ 25
Figure 4. Overview of the TDI model ........................................................................................................................... 25
Figure 5. Cost calculation at the University of Lodz ..................................................................................................... 53

Boxes
Box 1. The Irish FEC model ......................................................................................................................................... 21
Box 2. Focus on Full Economic Cost (FEC) in the United Kingdom and European Project Costs ..................................... 35
Box 3. Design and implementation of TRAC methodology at the University of Birmingham ......................................... 36
Box 4. The accounting model implemented at the University of Amsterdam ............................................................... 49
Box 5. Full costing methodology design at the University of Lodz ................................................................................ 52

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Accepting University Accounting Practices under Horizon Europe

Definitions
Actual cost An identifiable and verifiable cost that was actually incurred and recorded in the
accounts.

Certificate on the Methodo- European Commission certification that beneficiaries can use to declare direct
logy for Unit Costs (CoMUC) personnel costs as unit costs.

Cost The monetary value of resources used or liabilities incurred to perform an activity or
service.

Direct cost A cost that is directly attributable to an activity.

Full Economic Costing (FEC) A full costing methodology based on activity-based costing developed by universities
in the United Kingdom and Ireland.

Flat rate A percentage of the eligible costs calculated for reimbursement purposes. For example,
indirect costs are calculated as a percentage of the total eligible direct costs under
Horizon 2020.

Full costing The ability to identify and calculate all of the direct and indirect costs needed to
accomplish each activity and/or project.

Indirect cost Costs that have been incurred, but which cannot be identified and charged directly to
each individual activity. Sometimes the term “overhead” is used to describe indirect
costs.

Staff cost Costs directly attributable to staff work. As these costs are calculated on the basis of
payroll data they refer to the staff costs actually incurred by the beneficiary during a
specific year.

Project-based funding Universities apply for funds for a specific project. Applications are assessed according
to how far they meet the funding criteria and/or on a competitive basis.

SUHF model This full costing model is based on the costs included in the budget rather than actual
costs. It was designed by the Association of Swedish Higher Education (SUHF).

TDI model A common national full costing methodology designed in Norway to ensure the identi-
fication of the full costs of all activities related to externally funded research projects.
This model is based on the notion that academic staff Time is the primary driver of
both Direct and Indirect costs (TDI).

Time allocation The allocation of time to different tasks and activities (e.g. research, teaching, etc).
Many different techniques are used to allocate time, including staff surveys, inter-
views, sampling or profiling. Time is often measured as a proportion of total working
hours rather than by measuring the exact number of hours spent.

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Accepting University Accounting Practices under Horizon Europe

Time recording A method used to calculate the time spent on a specific activity, for instance through
timesheets.

Transparent Approach to An activity-based costing methodology designed to identify the cost of research and
Costing (TRAC) teaching developed and applied by universities in the United Kingdom.

Unit cost Costs calculated on the basis of a pre-determined fixed amount per unit. Horizon 2020
defines unit costs for staff as the average staff costs calculated according to the ins-
titution’s normal accounting practices.

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Accepting University Accounting Practices under Horizon Europe

Acknowledgments
This compendium gathers information about the national and institutional accounting systems developed in several
European countries from the late 2000s to the early 2010s and provides up-to-date information about their implemen-
tation. It builds on previous work conducted in the context of the EUIMA project and the EU Funding for Universities
campaign organised by EUA.

EUA would like to thank the authors and contributors to the EUIMA project report: Financially Sustainable Universities
- Full costing progress and practice. This report became the starting point for designing the country profiles featured in
this compendium.

EUA is extremely grateful to all the contributors to this report for sharing their experiences and knowledge of the accoun-
ting practices used for managing EU and nationally funded competitive research programmes in their countries and ins-
titutions. EUA is also thankful for their availability to provide up-to-date information about the development and imple-
mentation of full cost accounting methodologies in their countries. Together with an analysis of how these practices could
be applied to the financial management of EU funded projects, this information provides a strong basis for improving the
alignment of European and national financial management practices.

Finally, EUA would like to acknowledge the support of its members and the simplification group experts, who made
several contributions to drafting this report.

Thomas Estermann

Director, Governance, Funding and Public Policy Development

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Accepting University Accounting Practices under Horizon Europe

Introduction
Simplification of EU funding management has attracted considerable attention during preparations for Horizon Europe
- the future EU Framework Programme for Research and Innovation. Despite the progress achieved in the Horizon 2020
Rules for Participation, there is still a lot to do to accomplish impactful simplification for the next generation of EU
funding programmes.

EUA understands simplification of EU funding to mean, “the achievement of a coherent set of rules that take the diver-
sity of actions and beneficiaries covered by the programme into consideration, and that ensure both quality processes and
effective use of resources”1. Universities are the biggest beneficiaries of Horizon 2020 and comply with various funding
programme rules as a result of their involvement in diverse regional, national and European schemes. Universities are
therefore a key stakeholder to consider when developing these processes, in order to increase the added value and impact
of EU funds.

Missed opportunities to further simplify the management of EU funds directly translate into significant costs at all stages
of the project life cycle. Under Horizon 2020, low success rates lead to the waste of top research ideas and new scientific
discoveries. They are also a major source of inefficiency for applicants and public funders who ultimately bear the costs of
unfunded applications. Specifically, the Commission’s Horizon 2020 Interim Evaluation found that only 11.6% of Horizon
2020 proposals received funding, whereas 18.4% had been funded under the 7th Framework Programme (FP7). Moreover,
the proliferation of information in the Horizon 2020 Annotated Model Grant Agreement has led to high error rates during
project implementation phases, increasing the risks of participation and hampering access to the programme.

As argued in the paper Taking simplification of EU funding to the next level - the university perspective, EUA acknowledges
improved acceptance of nationally recognised institutional accounting practices as the simplification with most impact
for EU funding beneficiaries. In a complicated funding landscape, simplification is first and foremost about reducing the
mismatch between EU funding requirements and institutional financial management systems. Therefore, greater vertical
alignment between European, national and regional programmes as well as improved horizontal alignment between the
various EU funding schemes would significantly reduce the administrative burden of managing EU funded projects. EU
funding beneficiaries are also very varied, which means that simplification cannot be achieved by a single set of rules, but
rather through the provision of several options to accommodate different needs.

Despite recent changes to the Model Grant Agreement (MGA) that allow a certain degree of acceptance of institutional
accounting practices, the EUA member consultation on the Horizon 2020 mid-term review showed that participants strug-
gle with their implementation. Over two thirds of respondents still cannot apply their institutional accounting practices
fully when it comes to internal invoicing and personnel unit cost calculations.

1 EUA (2018), Taking simplification of EU funding to the next level - the university perspective, Brussels, February 2018.

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Accepting University Accounting Practices under Horizon Europe

Figure 1. Use of institutional practices for cost accounting under Horizon 2020

Were you able to use institutional accounting practices to manage Horizon 2020 projects?

12%

Yes

With restrictions

Need to set up a
different process

35% 53%

Source: EUA Member Consultation. A Contribution to the Horizon 2020 Mid-Term Review, 2016.

Broader acceptance of institutional accounting practices is best achieved by embracing a trust-based approach, implying
greater flexibility in accepting different eligible costs across the EU. Universities are established institutions with pro-
fessional financial management procedures that are regulated and audited at national level. In several EU countries, full
costing methodologies2 allowed beneficiaries’ costs to be calculated transparently and accurately, which led to national
public and private funders being able to accept institutional accounting and management practices.

Following in the footsteps of national competitive research programme funders, EU policy makers should rely increasingly
on the accounting practices developed by the university sector in several European countries. This could be achieved by
providing a choice of options, which could include certification of the national methodology used to report the costs incur-
red under EU funded projects. Institutional accounting practices could also be certified at the launch of Horizon Europe
using a transparent and suitable procedure with the potential to substantially improve the conditions for programme
participation. This would be particularly relevant to institutions that manage several projects, using sound accounting and
management practices approved by national funders.

The measure that came closest to this acceptance principle was the ability to apply for institutional methodology cer-
tification under FP7. Although the ability to have costs reimbursed on the basis of a certified methodology instead of a
flat rate provided a strong incentive to develop full costing models, this option failed to convince due to the excessively
burdensome rules imposed on beneficiaries.

Attempts by an entire sector to apply for FP7 certification (e.g. in Austria and in the United Kingdom) were also criticised
due to the failure to agree on a compromise over the eligibility of costs, despite the potential for considerable economies
of scale and increased efficiency. TRAC EC-FP7 aimed to adapt the UK TRAC model to FP7 requirements for British univer-
sities but institutions found it too complex to use.

An improved Horizon Europe based on existing Horizon 2020 participation rules must at the very least allow beneficiaries
to select the option best-matched to their own processes. This would also ensure a degree of continuity between the two
programmes and ease EU project management for institutions that have already adapted their models to Horizon 2020.
As Figure 2 shows, there is room to improve the current model by extending the eligibility of additional cost types, and by
simplifying unit cost calculations and time recording rules.

2 Full costing is defined as the ability to identify and calculate all of the direct and indirect costs needed to accomplish each activity and/or project. (EUA 2013).

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Accepting University Accounting Practices under Horizon Europe

Figure 2. Proposals to improve acceptance of institutional accounting practices

Which of the following measures could help improve acceptance of institutional cost accounting practices?

Extend acceptance to all cost types

Extending acceptance of institutional accounting practices to
all cost types is seen as a major step towards simplification

58% Improve acceptance of hiring rules

Acceptance of national hiring rules is particularly relevant for
temporary staff, who are sometimes defined as subcontractors
39% Flexible methodologies for certifying unit costs
36%
33% 32% Beneficiaries would like improved unit cost certification
procedures to make the process faster and more transparent

Improve acceptance of national depreciation rules

16%
Improve accepdance of time recording rules

Improve acceptance of tax refund rules

Source: EUA Member Consultation 2017-2018: Impactful Simplification of the EU Framework Programme for Research and Innovation.

This compendium aims to contribute to the transparency of the discussions that promote broader acceptance of institu-
tional practices as a major step towards simplifying EU funding. It presents a selection of accounting and management
practices developed at institutional or system-level in various European countries. Most use sound costing methodologies
as an effective management tool that ensures financial sustainability, internal control and transparency at institutional
level. National public funders therefore accept them when it comes to reimbursing competitive research programme costs.
At European level, recent changes to the Financial Regulations applicable to the general budget of the Union opened up
concrete opportunities to establish procedures that involve a broader acceptance of standard accounting practices.

The compendium is divided in two parts. The first provides examples of accounting methodologies developed by the
university sector. In many cases these were designed with stakeholders including regulators and funders. National public
and private funders therefore accept these methodologies as the basis for reimbursing beneficiaries’ competitive research
project costs. The second part highlights cases in which several institutions use similar methodologies. Several of these
models are also accepted and audited by national funders. This means that they are both reliable and securely based on
the national regulatory framework.

The cost accounting models reported at the beginning of each country profile were developed in the late 2000s and early
2010s and have since been further improved. Except for the Norwegian case, the descriptions of these models were origi-
nally published in the EU-funded EUIMA project report and have been updated to include the latest sector developments.

The country profiles also feature tables providing technical information about specific institutional accounting practices
and how these could be applied for EU funded projects. As they refer to procedures implemented at selected institutions
(except for the Norwegian country profile), other institutions in the same country may have different experiences, even if
they use the same or similar practices. Gaps in a table indicate that this information is either not available or not applica-
ble to the specific cases described.

The comparison of institutional practices to current Horizon 2020 rules aims to investigate opportunities to align Horizon
Europe with standard institutional procedures so as to reduce the administrative burden and improve cross-reliance on
audits. Some examples show that the acceptance of institutional practices had a major impact on simplifying auditing
procedures at national level (Austria, Ireland and the United Kingdom).

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Accepting University Accounting Practices under Horizon Europe

Part 1. National accounting practices accepted by competitive research

programme funders
AUSTRIA

The development of a costing model at Austrian universities

Austrian universities started to develop a system-wide costing model in the 2000s. New national obligations and changes
to the 7th EU Framework Programme reimbursement rules were major drivers for developing a methodology based on
full costing.

National regulatory reforms effective from the 1st of January 2004 changed Austrian universities’ legal status to that of
autonomous legal entities. The prerequisites needed to implement this major reform included the use of a comprehensive
financial software programme, double-entry bookkeeping and structural changes. Every university was obliged to install a
commercial accounting system, including income and expenditure accounting, and a reporting system. Externally funded
research also had to be fully covered by the funding programme.

2006 saw the development of an indirect costs calculation method that aimed to reconcile national and international
financial rules with the management and accounting principles used by universities. A task force comprising Austrian uni-
versity finance and research staff evaluated the method and the Austrian rectors’ conference agreed to promote it. The
model was also meant to receive the European Commission certification for calculating indirect eligible costs under FP7.

However, the unified approach was abandoned in 2007 for various reasons and due to different obstacles, including:
management changes, uncertainty about the FP7 methodology certification process, fear of making mistakes in inter-
preting regulations and the different sources of funding for university research. Since then individual universities have
adopted different approaches to developing an appropriate system for tracking the costs of teaching, research and other
activities, and implement it according to their own abilities, needs and conditions.

In the early 2010s, the discussions about major changes to government funding involving the separation of teaching and
research funds brought full costing back to the fore. A working group comprising representatives of the Ministry of Higher
Education and Research and university spokespeople was tasked with laying the foundations for a new funding system.
One of its recommendations was to base funding for teaching on the number of active students. Calculations were partly
based on the full costing models already in place at some Austrian universities. The debate on higher education funding
was further revived during the EUIMA-Full Costing Country Workshop, held in Vienna in February 2011.

More recent developments include the adoption of a regulation on standardised costing published in March 2017. This
resulted in an ongoing project implemented by Austrian universities. The objective is to establish monetary and non-mo-
netary reporting standards that can be met by every university. The first phase of the project will result in systems and
software adaptation. The second phase will focus on the reasonability and evaluation of the reported data.

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Accepting University Accounting Practices under Horizon Europe

Accounting practices accepted by national research programme funders

The information reported in the following table describes accounting practices at the Medical University of Innsbruck.
Information specifically referring to Universities of Applied Sciences refers to practices at the FH JOANNEUM University
of Applied Sciences.

Can Nationally-accepted
Calculation of the Different Cost Description of the Accounting Practice
Practices be used for EU Funded
Items to be Reimbursed Used
Projects

1. Staff cost calculations

a. Description of eligible staff cost Staff costs are calculated on the basis of the The same practises are used for nati-
elements and calculation methods gross-salary plus any fringe benefits. Due to onal and EU funded projects.
(salary components, sick leave, holi- the complex salary system (civil servants,
days, pension, etc.) collective agreements, etc.) cost eligibilities
differ from one salary group to another.
Generally speaking, the decision depends
on the part of the salary under scrutiny, e.g.
whether it involves the basic statutory salary
(overpayment is accepted in case of neces-
sity) or supplementary fees for clinical work
or teaching. Costs related to clinical work,
teaching and side contracts are ineligible. If
side letters have been signed for the project,
then only these costs are eligible. One-off
payments are not eligible.

b. Use of unit costs or other options Unit costs are not calculated or applied under N/A
to reimburse staff costs national funding programmes.

c. Staff cost calculation period Staff costs are calculated for the actual
(actual, past year, etc.) period of the claim.

d. Description of how staff time is Project staff provide timesheets. Hourly No adjustment necessary.
accounted for/recorded (timesheets, rates are determined by dividing the costs
profiles, fixed time, contract, etc.) by the number of productive hours. Alterna-
tively, the yearly divider of 1680 hours (until
2014) or 1720 hours (since 2015) is accepted
where full time recording is not available.
At Universities of Applied Sciences (UAS),
daily rates are calculated based on a yearly
divider of 1290 hours, where no basic rese-
arch funding is in place at the institution.
This divider is accepted by the Austrian
Research Promotion Agency (FFG), although
other yearly dividers are used by other (Aus-
trian) funding programmes use other yearly
dividers.

e. Statements and documents to The following documents are requested: The same documents are presented
justify staff costs employment contracts, timesheets, pay roll, for EU projects.
hourly rate calculation information.

2. Other direct cost calculations

a. Equipment (depreciation: amounts Depreciation is calculated monthly based on No adjustment necessary.

and time, etc.) purchase prices in line with the university’s
normal accounting principles.

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Accepting University Accounting Practices under Horizon Europe

b. Infrastructure (recorded as a direct Infrastructure costs are usually ineligible N/A

cost, depreciation, etc.) unless specifically/separately applied for.
Specific infrastructure needed to implement
the scientific programme (not just office
facilities or premises) is eligible for funding
under some Austrian Research Promotion
Agency (FFG) schemes.
In 2016 Austrian national and regional funds
introduced new funding schemes for excel-
lent research infrastructure. Under these
schemes, and contrary to the usual funding
practices, full purchase costs including initial
operation costs are eligible up to a certain
rate, depending on the infrastructure type
and planned use. Up to 85% of the cost
of scientific infrastructure is reimbursed,
whereas 50% of commercial infrastructure is
reimbursed. In the latter case the remaining
amount cannot to be covered by University/
HEI funds but must be paid for by private
third parties.

c. Other Direct Costs Other Direct Costs are reported using the No adjustment necessary.
relevant invoices.

3. Indirect cost calculations

a. Description of the calculation of FFG established a 25% flat rate to cover all The indirect costs for Horizon 2020
indirect costs including cost drivers indirect costs. It is calculated as a percen- projects are also covered by a 25%
tage of total direct costs except third party flat rate.
contributions.

4. Internal invoicing

a. Description of internal invoicing Internal invoices are issued by the service N/A
procedures provider. They are usually priced below
market rates to avoid reimbursement issues.
Full cost calculation has not yet been imple-
mented but is planned.

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Accepting University Accounting Practices under Horizon Europe

Similarities and Inconsistencies

Description of National Funders’ Audi-
Auditing and Control Between EU and National Audi-
ting Practices
ting Practices

1. Description of procedures, audit FFG recently adopted new accounting and Inconsistencies in EU and national
types, reporting deadlines, etc. auditing procedures to improve the financial auditing practices generally result
sustainability of their funding instruments. from EC auditors’ unfamiliarity with
It is a good example of funders aligning with national laws. This is particularly
the regulatory specificities of the sector. true of salary cost calculations.
The funder carries out two different types
of auditing procedures. The most common
procedure is a project-based audit, however
selected beneficiaries can use systems
audits. These comprehensive audits are
carried out once a year and cover various
institutional practices (including quality
management systems, financial manage-
ment and approval processes, strategic
management issues, etc). The ability to audit
institutional procedures rather than single
projects was a real improvement for bene-
ficiaries. It allows for greater institutional
autonomy, responsibility and helps reduce
indirect administrative costs.

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Accepting University Accounting Practices under Horizon Europe

FINLAND

The development of a cost accounting methodology at Finnish universities

In Finland, national funders’ acceptance of institutional accounting practices is based on full costing. European and nati-
onal funding schemes were the main drivers for implementing this methodology.

Finnish universities are required to report to the Ministry of Education on how their income and expenses are allocated
to teaching, research, artistic endeavours and societal activities on an annual basis, since 1997. Universities introduced
a system of activity-based costing that includes a system for working time allocation to be able to fulfil this obligation
properly.

The European Commission’s 7th Framework Programme (FP7) was another important driver of full costing as its specific
rules on cost reimbursement sent a strong signal to national funders.

In annual negotiations with the Ministry of Education the Academy of Finland, one of the two major Finnish research
funding bodies, agreed to accept full costing methodologies in its reimbursement regulations from 2009. The other major
research funding body Tekes (currently Business Finland) made the same decision and allowed full cost budgets as early
as 2008. This removed one of the major obstacles to implementation, and convinced university staff of the need to imple-
ment full costing in order to increase external funding reimbursements. Eventually a model that satisfied all parties was
agreed.

The tight schedule introduced by the Academy of Finland represented another challenge. As of 2009, research funding
applications had to use a full costing methodology. Universities had only six months to establish the methodology and
calculate salary add-ons and general indirect cost rates. Universities had to adapt to the major changes introduced by nati-
onal higher education reform, including several university mergers, at the same time. This combination made inter-uni-
versity cooperation difficult. Each university created its own full costing model, instead of working towards a common
national model. Despite receiving little support from the Ministry of Education, most universities established a full costing
methodology and time allocation system by the end of 2009.

As a result of the lack of cooperation between universities and funding bodies, in 2010 Universities Finland (UNIFI; for-
merly the Finnish Council of University Rectors) expressed its concern over problems encountered during the implementa-
tion of full costing methodologies, which were mainly related to funding applications, reporting, invoicing and work time
allocation. In response, the Academy of Finland established a working group comprising representatives from universities,
the Academy of Finland and the Ministry of Education and Culture,and tasked it with suggesting a number of simplifica-
tions and clarifications. The main outcome was the publication of a 2011 report (that drew on the 2008 EUA report on full
costing,) containing 20 specific recommendations. Finnish universities used the report as a guideline to implement full
costing. In 2015, the Academy of Finland evaluated the impact of the implementation of full costing, resulting in a number
of further recommendations.

Today all Finnish universities use a full costing methodology and national working groups have made recommendations
on the issue. The background to this work was a model total cost methodology for jointly financed activities drafted by a
working group set up by the Ministry of Finance, and its report: Accounting of total costs and financing jointly financed
activities based on total costs (2007).

Finally the Ministry of Education issued a binding regulation on full costing in 2016. The regulation defines elements inclu-
ding eligible and ineligible costs, allocation principles and audit requirements. It applies to all universities and universities
of applied sciences. As a result, the models Finnish universities use now are quite similar. Working time allocation, which

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Accepting University Accounting Practices under Horizon Europe

was one of the most difficult aspects of implementing full costing, is now an established practise.

Although full costing is still not used to its full potential or as a strategic tool, cost-awareness among staff, especially
heads of departments has increased. For instance, decisions concerning the ability to take on a project and its implications
are now taken more consciously, and consider how it is funded, how much self-financing is required and what added value
it represents for the university. Furthermore, further national coordination measures have been taken to standardise the
implementation of full costing.

Acceptance of the model by national funders

Full costing is used, for example, when applying for, invoicing and reporting on external funding provided by the Academy
of Finland and Tekes. In general, full costing typically applies to all external funding, if the funder sets no other guide-
lines. However, the complexity of the certification process for FP7 reimbursement, which was based on a full costing
methodology, meant that no Finnish university applied for certification. All FP7 university beneficiaries used the flat rate.
More recently, some Finnish universities, including Aalto University, applied for unit cost certification under Horizon 2020.
However, they have reported long processing delays and a lack of information and transparency about the procedure.

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Accepting University Accounting Practices under Horizon Europe

Accounting practices accepted by national research programme funders

The table includes information about practices at the Aalto University and the University of Helsinki.

Can Nationally-accepted
Calculation of the Different Cost Description of the Accounting Practice
Practices be used for EU Funded
Items to be Reimbursed Used
Projects

1. Staff cost calculations

a. Description of the elements of At Aalto University, monthly staff costs Aalto University will be able to use
staff costs eligible for reimbursement include direct salary costs and indirect per- its institutional practices for EU
and how they are calculated (salary sonnel costs. Direct salary costs are calcula- funded projects if the Horizon 2020
components, sick leave, holidays, ted monthly based on how long each person CoMUC application is approved
pension, etc.) actually worked on the project (information (please refer to point 1.b.).
taken from the time recording system) and
the actual monthly salary (information taken
from the HR system). Only time actually
worked is charged to the project. Sick leave,
holidays and time spent on other tasks are
excluded from project accounts.
Indirect staff costs are a percentage multi-
plier calculated on the basis of the previous
financial year. Indirect staff costs comprise
statutory employer expenses such as: holiday
compensation, holiday pay, pension expen-
ses, social insurance expenses, disability and
life insurance, unemployment insurance,
daily allowances, social security expenses,
and statutory occupational healthcare.

b. Use of unit costs or other options Some Finnish universities are

to reimburse staff costs seeking to certify their existing
methodology through the Horizon
2020 CoMUC procedure. Certifying
unit costs using this methodology
would allow them to be used in EU
funded project accounts and would
therefore substantially reduce admi-
nistrative burdens.
However, universities report very
long delays in processing the appli-
cation (over 16 months at the time of
drafting this report in April 2018) and
a lack of information and transpa-
rency about the procedure.

c. Staff cost calculation period Aalto University calculates direct salaries Staff costs are calculated on the
(actual, past year, etc.) monthly, whereas indirect costs are calcu- basis of the previous financial year.
lated yearly on the basis of the previous
financial year.

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Accepting University Accounting Practices under Horizon Europe

d. Description of how staff time is The University of Helsinki introduced At the University of Helsinki, acade-
accounted for/recorded (timesheets, SoleTM - an online time recording system mic staff members working on exter-
profiles, fixed time, contract, etc.) in 2007. SoleTM is integrated with the data nally funded projects must record
warehouse and is one of the major systems the time spent on these projects
providing full costing information. At uni- daily through the SoleTM system.
versity level, working time is allocated to The allocated hours for each person
teaching, research, societal interaction and are subsequently matched with his/
administration. Each unit can establish an her salary in the data warehouse,
indefinite number of sub-tasks under each and the salary costs allocated to the
main activity for internal purposes. projects accordingly. The SoleTM
system provides options for pre-re-
Only staff members working on externally cording and profiling, if the time
funded research project record their time on used on certain projects remains
a daily basis. Working time for other staff is the same over a longer period. The
mainly allocated on the basis of work plans system provides the timesheets that
and profiles. No additional recording is requi- must be supplied to funding agen-
red, and plans can be revised during the year cies.
if there are major changes to the proportions
of teaching and research. Aalto University will be able to apply
its institutional practices for time
Academic staff members have an annual allocation to EU funded projects if
workload of 1600 hours, in accordance with the Horizon 2020 CoMUC application
the collective agreement between university is approved.
employers and employees (2010-2012).
Aalto University employees use the Halli
system to record the actual work hours spent
on a project.
All Aalto University employees involved in
externally funded projects report their actual
work hours per project and per day, on a
monthly basis. Teaching staff who do not
work on externally funded projects report a
summary of their hours once a year.
Employees record their working hours on the
basis of the actual time worked on a project.
Working hours are recorded on a daily basis,
and the number of hours and minutes for the
corresponding project is recorded.
Salary allocation combines an employee’s
Halli information about the actual time
worked on each project with the employee’s
salary information from the HR system. The
actual salary is divided up per project based
on their reported working hours and then
multiplied by the indirect personnel cost
multiplier (see section 1.a.) to obtain the
indirect staff costs for the project.

e. Statements and documents to Timesheets, employment contracts, book- No adjustment necessary.

justify staff costs keeping.

2. Other direct cost calculations

a. Equipment (depreciation: amounts Equipment reimbursement procedures vary N/A

and time, etc.) between national funding agencies, which
fund either depreciation or total investment.
Depreciation periods are defined by the orga-
nisation’s accounting principles.

b. Infrastructure (recorded as a direct Accounted as direct costs (see point 2.c). N/A
cost, depreciation, etc.

18
Accepting University Accounting Practices under Horizon Europe

c. Other Direct Costs At Aalto University, Other Direct Costs N/A

include research infrastructure facilities,
travel, office supplies, small equipment, etc.

3. Indirect cost calculations

a. Description of calculation of indi- Finnish funders accept the indirect cost The average indirect cost multiplier
rect costs including cost drivers used multiplier used to calculate staff costs applied at Aalto University is about
(direct salaries + indirect personnel costs) at 80% on top of staff costs. The 25%
Aalto university. The multiplier is calculated flat rate covers about half of the
using working time allocations from the time indirect costs calculated on a full
recording system and functional costs as cost basis.
cost drivers.

4. Internal invoicing

a. Description of internal invoicing A large proportion of internal invoicing at Although accepted by national
procedures Aalto University concerns the use of research funders, EU funders may not accept
infrastructure facilities such as clean rooms. this practice.
Costs related to the use of these research
facilities include the salaries of the staff
working at these facilities, consumables,
equipment depreciations and maintenance
charges. The hourly price for using these
facilities includes the above costs. This price
is invoiced internally and re-invoiced to nati-
onal funders. All of the costs related to the
use of these research facilities (except main-
tenance) can be measured directly as they
are generated at a specific facility. Main-
tenance charges include building deprecia-
tion and maintenance, cleaning, and utilities
costs, which are invoiced by the square meter
by building and by university subsidiary/affi-
liated company.

Similarities and Inconsistencies

Description of National Funders’ Audi-
Auditing and Control Between EU and National Audi-
ting Practices
ting Practices

1. Description of procedures, audit Aalto University is audited by project audi- EU project audits are performed on a
types, reporting deadlines, etc. tors (PwC), regular auditors (KPMG) and EU case-by-case basis and could make
auditors. A standard audit is performed every more use of cross-reliance.
year. National research funding agencies
require project audits when project costs
are over 500,000 euros (Business Finland)
or 1 million euros (Academy of Finland). The
National Audit Office may perform additional
audits.

19
Accepting University Accounting Practices under Horizon Europe

IRELAND

The development of the Irish FEC accounting model

The seven Irish universities developed their accounting practices with a Full Economic Cost (FEC) model initiated collecti-
vely in 2006. The full costing project started in early 2007 and was completed in June 2011.

The Irish government encouraged the process through the Higher Education Authority (HEA), the state higher education
funding agency that initiated a Strategic Innovation Fund (SIF) to support reform and innovation in the Irish higher educa-
tion system.

Growing pressure on university finances because of increasing participation rates and research activities, advances in
technology, increasing pay and pension costs and new societal demands was a major driver for developing and implemen-
ting full costing. It became clear that to address underfunding and sustainability concerns, the university sector needed
to collect clear data to support policy making, and particularly provide evidence to support the case for additional funding.
From a funder’s perspective, full costing was seen as an accountability tool that would deliver greater transparency and
comparability. Universities saw the development of a full costing system as a key management information tool that
would allow them to identify and understand the cost of their activities and thereby support strategic decision-making.

The Irish Universities Association (IUA) successfully applied for SIF programme funding to develop a full costing frame-
work for the sector. Approximately 2 million euros was awarded. This support was a key factor enabling the development
of full costing in Ireland.

The FEC model has now been embedded at universities in Ireland and is consistent across the seven Irish universities. The
model allocates all costs to the university’s primary activities: teaching, research and other activities. FEC outputs are
produced on an annual basis and reported to the HEA. Refinements have been and are made to address any issues that
emerge. These are managed and agreed centrally in order to protect the consistency and comparability of the outputs.

20
Accepting University Accounting Practices under Horizon Europe

Box 1. The Irish FEC model

The process of cost accounting can be divided into six-stages:

Stage 1: costs/resources are identified from the financial statements and then two agreed and FEC-specific cost adjustments
and a number of other adjustments (e.g. pensions) are made to enable the comparability of outcomes. The specific FEC adjust-
ments are:
I. Financing and investment – to cover the cost of borrowing (interest), the opportunity cost of institutional cash used for finan-
cing and a surplus for the rationalisation and development of the institution’s business capability and capacity.
II. Infrastructure – to reflect the full long-term costs of maintaining safe, productive infrastructure to the standard required to
remain competitive.
Stage 2: FEC costs are allocated to academic units (e.g. faculties, schools and disciplines in the case of Trinity College Dublin)
using agreed common cost drivers. For example:
• IT via three pools – (i) costs specific to an academic unit going directly to that unit, (ii) infrastructure costs based on square
meters and (iii) all other costs allocated on the basis of staff and student full time equivalents (FTEs).
• Premises/estates by weighted square meters with the weighting determined by the type of space occupied i.e. highly ser-
viced laboratory, laboratory, classroom/office space, and storage/shed space.
• Central administration – there are five central administration cost pools: student-related costs, staff-related costs, inter-
national student-related costs, research related costs and all other costs; with a different cost driver for each pool.
Stage 3: FEC costs per academic unit are allocated across three categories (teaching, research and other), which are further
sub-divided into nine academic activity cost pools. This allocation is driven primarily by the Academic Activity Profiles (AAP),
which are compiled by academic staff and are one of the key drivers used in the FEC process. Other drivers include AAP staff
costs (based on the staff costs within an academic unit, which are generally based on the AAP-percentage mentioned above),
student FTEs, head of area estimates, etc.
Stage 4: AAP 9 – administration and management costs are allocated over all other eight academic activity cost pools driven by
AAP staff costs.
Stage 5: AAP 5, 6 & 8 – research (no external sponsor with output, other research and scholarly activity) and clinical service
costs are allocated to the three teaching/academic activity cost pools, driven by student FTEs.
Stage 6: full economic cost outcomes are produced giving:
• Cost per student FTE as per HEA (Higher Education Authority) subject category (AAP 1, 2 and 3)
• Research indirect cost rate (AAP 4)
• Total university cost of other income generating activities (AAP 7)

21
Accepting University Accounting Practices under Horizon Europe

Accounting practices accepted by national research programme funders

The information included in the following table refers to practices applied at Trinity College Dublin (TCD).

Can Nationally-accepted
Calculation of the Different Cost Description of the Accounting Practice
Practices be used for EU Funded
Items to be Reimbursed Used
Projects

1. Staff cost calculations

a. Description of eligible staff cost Gross salary, national insurance and pension No adjustment necessary.
elements and calculation methods are included in staff cost calculations. Only
(salary components, sick leave, holi- actual costs are claimed. These are calcula-
days, pension, etc.) ted for the duration of the project.

b. Use of unit costs or other options N/A Trinity College Dublin did not apply
to reimburse staff costs for CoMUC under Horizon 2020. The
certificate is not relevant considering
the full costing system implemen-
ted.

c. Staff cost calculation period Staff costs are calculated based on the It is not possible to apply the same
(actual, past year, etc.) actual duration of the financial claim. practice to EU projects, as costs have
to be calculated monthly.

d. Description of how staff time is In general no timesheets are required for the Timesheets and time declarations
accounted for/recorded (timesheets, allocation of staff costs. required.
profiles, fixed time, contract, etc.)

e. Statements and documents to Pay slips, gross-to-nets, bank statements, The same statements and docu-
justify staff costs and staff contracts. ments are provided as for nationally
funded projects.

2. Other direct cost calculations

a. Equipment (depreciation: amounts Equipment is reimbursed at full cost. Equipment is reimbursed based on
and time, etc.) depreciation.

b. Infrastructure (recorded as a direct Infrastructure is reimbursed as a direct cost. No adjustment necessary.

cost, depreciation, etc.)

c. Other Direct Costs Other Direct Costs are calculated on the basis No adjustment necessary.
of actual costs.

3. Indirect cost calculations

a. Description of the calculation of Indirect costs are paid as a percentage of Horizon 2020 indirect costs are cal-
indirect costs including cost drivers Total Modified Direct Costs (TMDC): 30% culated based on a similar procedure:
(25% for desk-based research) of Total Direct 25% of the direct costs less subcon-
Costs less equipment and subcontracting. tracting.

4. Internal invoicing

a. Description of internal invoicing All internal invoices need to be justified to Irish national funding agencies apply
procedures show that prices are built up from costs not the same rules as the EU for internal
imputed and do not include a margin. charges.

22
Accepting University Accounting Practices under Horizon Europe

Similarities and Inconsistencies

Description of National Funders’ Audi-
Auditing and Control Between EU and National Audi-
ting Practices
ting Practices

1. Description of procedures, audit National funders such as Science Foundation Horizon 2020 auditing and control
types, reporting deadlines, etc. Ireland (SFI) and the Health Research Board procedures are transaction-based
(SFI/HRB) have implemented substantial and differ significantly from the
changes to their auditing procedures. Over control-based audits performed by
the past four years, their approach has national funders. Irish universities
changed from annual transaction-based also report issues with auditors
audits to a single control-based audit every engaged by the Commission to carry
two years. SFI auditors test the controls in out audits on its behalf. Control has
place using a limited number of walk-th- often been of mixed quality and
roughs and then rate each control’s design auditors were not fully familiar with
and operational effectiveness as high, the Model Grant Agreement (MGA).
medium or low. The institution is given
a rating by the auditor across all controls
instead of for individual research projects.
Future audits then only focus on controls
that obtain a low score for operational or
design effectiveness. Audit time has dropped
significantly as a result. This approach has
also meant that HEIs can provide other
funders with a report that ranks its control
environment.

23
Accepting University Accounting Practices under Horizon Europe

NORWAY

The development of the Norwegian TDI cost accounting model

The TDI full costing methodology for research3 is a common national model designed to ensure that the full costs of all
externally funded research project activities are identified. The model is based on the notion that Time spent by academic
staff is the primary driver of both Direct and Indirect costs (TDI). It was developed by the university and college sector for
uses including Norwegian Research Council (RCN) grant applications. Since 2015, the TDI model has been mandatory for
all higher education institutions engaged in externally funded research.

The TDI model provides a method for presenting the full research activity costs incurred by an institution, including for
projects funded by the Norwegian Research Council. Using this model helps promote:

• More accurate financing of actual research project costs

• Better resource management

• Improved Norwegian Research Council knowledge of the resources used in research projects

• Simplified and improved project finance monitoring

In 2011, RCN was involved in developing the principles for the TDI model. The model was then developed by two expert
committees, first to analyse the details full costing, and then proposing how to solve the challenges of including infra-
structure costs. This model is now known as the Norwegian Research Infrastructure Resource model (RIR model), and
forms part of the TDI model.

The TDI model has been designed to be as simple as possible within the legal and financial frameworks, and to avoid
detailed time recording and other administrative burdens for researchers.

Costs

University costs are divided in two categories: core activities and support activities. The first category includes academic
staff salaries and allowances (e.g. travel expenses). These are always direct costs.

Some support activity costs traditionally seen as indirect costs are defined as direct costs in the TDI model. Support acti-
vity costs are now divided as follows:

a) Direct costs: major infrastructure investments and operating costs, instruments, laboratories, buildings and technical
staff costs. These are known as Research Infrastructure Resources (RIR).

b) Indirect costs: costs related to general office and support space expenses, and horizontal services such as administra-
tive and financial management, documentation, human resources, IT, legal advice, libraries, training and more. These
costs are calculated as an average per FTE per institution and therefore do not vary between academic disciplines.

3 Norwegian Association of Higher Education Institutions (2014), The Norwegian Universities’ Methodology on Full Costing, Oslo.

24
Accepting University Accounting Practices under Horizon Europe

The RIR pricing model, which is a crucial part of the TDI model, provides a transparent and simple method for declaring the
costs of using research infrastructure based on the full costs generated by the activity (Direct Measurement). Classifying
the use of research infrastructure as a direct cost leads to more accurate resource allocation at project level, and ensures
sustainable funding, especially regarding future investments in scientific equipment and infrastructure.

Figure 3. The Norwegian full costing model

Direct costs
All costs Salaries + travel expenses Indirect costs
Research infrastructure

Costs have to be specified Residual

Figure 4. Overview of the TDI model

Direct costs Indirect costs

Salaries of academic staff Generic indirect costs

COST
DRIVERS Time
Other project attributed Core activities indirect costs:
salaries Research, education, museums

Cost centre of research

infrastructure

Other consumables

Research Infrastructure Resources model

The implementation of the Research Infrastructure Resources (RIR) model requires institutions to divide their research
infrastructure into a number of clearly defined entities (RIRs). The scope of each RIR must be clearly defined, and the
number of RIRs must be kept as low as possible to minimise the need for administrative support. The RIR model results
in a price (cost per hour/day/week/unit). This price is the result of dividing the full costs of each RIR by its capacity.

RIR costs comprise four elements:

1. Space – building and rental costs for research spaces like laboratories and workshops

2. Scientific equipment – depreciation costs

3. Common operating consumables and service/maintenance contracts, i.e. costs shared by all users

4. Technical support – salary costs for the technical support staff needed to sustain infrastructure operations

25
Accepting University Accounting Practices under Horizon Europe

RIR capacity equals the total number of user hours an RIR is designed to be able to provide under normal operating condi-
tions. Capacity is calculated considering limiting factors like service and maintenance time and opening hours. Actual RIR
use may stray from planned use, but below par exploitation due to poor efficiency cannot be used to set a higher RIR price.

The RIR model is flexible and can be adapted to various types of research infrastructure.

Acceptance of the model by national funders

The Ministry of Education and Research stipulated that all higher education institutions must implement the TDI model
when submitting Norwegian Research Council (RCN) grant applications.

RCN can cover the lump-sum rate for fellowship-holders to reimburse academic payroll costs. RCN also funds the full
operational cost of research infrastructure calculated using the RIR model.

RCN provides basic funding for certain costly research infrastructures (covering the cost of unused capacity for a minimum
of 4 years).

Any gap between RCN funding and budgeted payroll costs must be defined as own funding.

Higher education partners in other countries’ payroll and indirect expenses can be calculated using the respective institu-
tions’ own models, or the employer’s salary costs (including social security charges), through an additional 25% flat rate
for indirect costs.

26
Accepting University Accounting Practices under Horizon Europe

Accounting practices accepted by national research programme funders

Can Nationally-accepted
Calculation of the Different Cost Description of the Accounting Practice
Practices be used for EU Funded
Items to be Reimbursed Used
Projects

1. Staff cost calculations

a. Description of eligible staff cost The following elements are added to basic All of the salary components accep-
elements and calculation methods salaries in Norway: ted by national funders are eligible
(salary components, sick leave, holi- for reimbursement under EU funded
days, pension, etc.) • 12% holiday accrual (14.30% when over projects.
60 years old)
• 11.5% employer’s pension contribution
(may vary – externally determined)
• 14.1% employer’s social security contri-
bution
• NOK 105.83 per month mandatory life
insurance costs

b. Use of unit costs or other options N/A N/A

to reimburse staff costs

c. Staff cost calculation period Internal hourly rates are calculated based on Hourly rates are calculated on the
(actual, past year, etc.) an estimation of the actual cost per annum basis of the previous financial year.
or actual costs.

d. Description of how staff time is Scientific staff time is allocated based on Timesheets are required for EU pro-
accounted for/recorded (timesheets, a) general or individual agreements on time jects (except for staff working exclu-
profiles, fixed time, contract, etc.) spent on core activities and b) agreements sively on a single EU project). There
on time spent on specific, externally funded is therefore a deviation between
projects. The model assumes that academic the cost charged to the project for
employees with a research and teaching internal accounting purposes, and
obligation (the Norwegian University norm the amount reported to the EU.
is a 50/50 split) fulfil their obligations. Extra
specification on time spent is only required Timesheets are submitted electro-
when they work on externally financed pro- nically and approved by the project
jects. Time spent on a project is then speci- leader.
fied as share of annual working hours. Being able to use the TDI model
A full time equivalent (FTE) employee works for EU funded projects would make
1628 hours after weekends, vacation, holi- timesheets unnecessary. Time spent
days and average sick leave rate are sub- on EU projects could then be speci-
tracted. Of the 1628 hours, 6% is spent on fied as a share of annual hours.
administration (98 hours), while the remai-
ning 1530 hours are split between research
and education in line with local guidelines
(at group or individual level). The calculation
of actual work as a share of FTE gives the
number of hours and so no timesheets are
necessary.
For internal accounting purposes, when
employees submit timesheets, staff costs
are calculated on the basis of their yearly
salary categories. For projects that do not
require timesheets, costs are charged using
the formula reported in point 1.a.

27
Accepting University Accounting Practices under Horizon Europe

e. Statements and documents to The agreement on time spent on each project Refer to point 1.d.
justify staff costs by each individual is the basis for calculating
project labour costs. The necessary docu-
mentation, signed by project management,
is provided on a monthly basis. This docu-
mentation also specifies how any exceptions
from the agreement have been handled.

2. Other direct cost calculations

a. Equipment (depreciation: amounts Equipment costs are calculated using the N/A
and time, etc.) depreciation method. Scientific equipment
depreciation time can be 4, 8 or 12 years.
Depreciation is included in the RIR cost (refer
to point 2.b.).

b. Infrastructure (recorded as a direct RIR costs comprise four elements: Some adjustments are required
cost, depreciation, etc.) under current Horizon 2020 rules.
1. Space – building and rental costs for Some cost types are included in
research spaces such as laboratories and RIR costs but must be calculated as
workshops indirect costs for EU funded projects
2. Scientific equipment – depreciation (e.g. space and indirect costs for
costs technical support).

3. Common operating consumables and Necessary adjustments identified

service/maintenance contracts, i.e. concern the following costs:
shared costs for all users • Space (housing) costs
4. Technical support – salary costs for • Indirect staff costs (technical
the technical support staff needed to support)
sustain infrastructure operations
RIR capacity equals the total number of
user hours an RIR is designed to be able to
provide under normal operating conditions.
Capacity is calculated considering limiting
factors like service and maintenance time
and opening hours. Actual RIR use may stray
from planned use, but below par exploitation
due to poor efficiency cannot be used to set a
higher RIR price.

c. Other Direct Costs Travel expenses = actual cost + any social EU funders accept the Other Direct
expenses subject to taxation. Costs calculation.

3. Indirect cost calculations

a. Description of the calculation of Indirect costs include costs for horizontal The average rate of indirect costs
indirect costs including cost drivers services and support activities unrelated for scientific staff is estimated at
to research infrastructure. These include 60-65% of direct staff costs (varying
central university services (administration, from 30% for those on very high
IT, library) and support within the research salaries to 105% for those with the
unit (consumables, office, management and lowest salaries). As the EU also
more). accepts indirect costs under other
costs, the 25% flat rate covers appro-
Some other support activity costs are generic ximately 50% of the actual indirect
and relate to human resources/financial scientific staff costs calculated using
management, IT/telephone and office costs. the Norwegian method.
The same rate/amount is allocated to cover
these costs for all relevant personnel. Remai-
ning indirect costs for support activities are
related to the core teaching and research
activities and are calculated based on use.

28
Accepting University Accounting Practices under Horizon Europe

4. Internal invoicing

a. Description of internal invoicing Internal invoicing procedures can vary Under the Norwegian RIR model,
procedures between institutions. internally invoiced costs are consi-
dered eligible (with the adjustments
described in 2.b.) on the basis of
MGA v.4.0 (and later).

Similarities and Inconsistencies

Description of National Funders’ Audi-
Auditing and Control Between EU and National Audi-
ting Practices
ting Practices

a. Description of internal invoicing In Norway, all public HEIs are audited by the EU audits place a heavy workload on
procedures Office of the Auditor General. Most institu- institutions, especially when they are
tions additionally have internal audit offices. performed through private auditing
companies. This is often seen as
unnecessary bureaucratic work that
duplicates existing national audits.
Performing EU audits as an integ-
rated part of the national auditing
programme would save time and
uncertainty.

29
Accepting University Accounting Practices under Horizon Europe

SWEDEN

The development of the Swedish SUHF accounting model

Swedish universities have developed their accounting practices on the basis of a full costing model. The SUHF model
(where SUHF stands for Association of Swedish Higher Education Institutions) has been used at all Swedish universities
and university colleges since the 1st of January 2011.

Its introduction was coordinated at national level and developed in cooperation by university management, financial
officers and representatives from important research funders. The most important drivers for change came from inside
the institutions, as full costing was needed as a strategic management tool, as well as for decision-making and improved
internal control. There was also a need to improve accounting principles and achieve long-term financial sustainability. An
important external factor was the need to be able to provide accurate and transparent information about indirect costs,
to restore the confidence of funding organisations and allow them to understand these costs. Reimbursement rules in
the first years of FP7 also played an important role.

The SUHF model is based on budgeted rather than actual costs. Corrections for cost deviations must be made retrospec-
tively to reflect actual costs. Each institution uses different time allocation methods, but these are generally based on
management estimations, rather than time records.

National public and private funders supported the adoption of the model. Although the government did not provide any
financial support for its development, governmental research funding bodies accepted the method and adopted new
financing principles. The Swedish Research Council and the Wallenberg Foundation (one of the largest private research
funding organisations in Sweden) fully accept institutional accounting practices for actual staff costs allocated according
to the time commitments to research projects.

No formal agreement to certify the SUHF model for indirect cost calculation was reached under FP7. Stakeholders from
different universities discussed the SUHF model with the EU audit office. The auditors pointed out SUHF model shortco-
mings with regard to the calculation of indirect costs on the basis of budgeted rather than actual costs. The teaching and
research split was also deemed as not auditable.

30
Accepting University Accounting Practices under Horizon Europe

Accounting practices accepted by national research programme funders

The information included in the following table describes accounting practices at Lund University and the University of
Stockholm.

Can Nationally-accepted
Calculation of the Different Cost Description of the Accounting Practice
Practices be used for EU Funded
Items to be Reimbursed Used
Projects

1. Staff cost calculations

a. Description of eligible staff cost Employees receive the monthly salary The various staff cost elements are
elements and calculation methods defined in their contract. Staff costs can be usually eligible for EU project reim-
(salary components, sick leave, holi- divided into the following categories: bursement, with some exceptions.
days, pension, etc.) The flat rate used to calculate some
Cost Element Calculation Method pension fees has caused problems
during audits. The use of flat rates is
Individual salary Actual cost a standard accounting procedure for
all government agencies that receive
Employer Actual cost invoices from the National Gover-
contributions nment Employee Pensions Board
(SPV).
Sick leave Actual cost
Auditors have not always accepted
Holiday Actual cost the cost of occupational healthcare
provision, despite the fact that
Payroll tax Actual cost and flat employers are obliged to provide
rate this by the Work Environment Act.
The wellness contribution has also
Pension Actual cost and flat caused problems on some projects as
rate auditors and/or programme officers
have not always deemed it eligible.
Occupational Flat rate Under nationally funded projects,
health care each employee can claim wellness
contributions (up to a certain limit
Wellness Actual cost, annual
contribution payment set by the organisation) when they
provide receipts to justify the cost
incurred.

b. Use of unit costs or other options

to reimburse staff costs

c. Staff cost calculation period Salaries are recorded monthly in the HR For EU funded projects, staff costs
(actual, past year, etc.) system. can be calculated using two different
methods.
The Swedish funding agency allows universi-
ties to report the salary recorded for a project The first option involves calculating
in their accounting system without any salaries on the basis of each closed
obligation to create and/or provide further financial year. This option requi-
documentation. res adjustments from the national
model because: (a) salaries increase
yearly and the change can create
discrepancies between the informa-
tion included in the project financial
statement and the internal project
accounting system and (b) the insti-
tutional system was not designed to

31
Accepting University Accounting Practices under Horizon Europe

calculate salaries on an annual basis,

and so further calculations using
external tools are necessary.
In general, the main problem of
basing salary costs on the previous
financial year is that the resulting
eligible costs do not match the salary
costs in the project accounts.
The second option involves calcula-
ting salaries on a monthly basis. This
option requires considerable admi-
nistrative work as monthly salaries
usually fluctuate due to holiday
payments and salary increases.

d. Description of how staff time is A researcher is expected to work 1700 hours/ EU funded project time accounting/
accounted for/recorded (timesheets, year. Swedish funding agencies do not allocation requires the creation of
profiles, fixed time, contract, etc.) require justifications of the amount of time timesheets and the calculation of an
staff work on a given project. Local union hourly rate that divides annual staff
agreements on teachers’ and researchers’ costs by 1720 productive hours/year.
working hours can differ between universi- This calculation is not used for any
ties. other project at the university.
The actual salary costs calculated
using the internal accounting system
cannot be reported to the EU. Eli-
gible salary costs must be calculated
based on hourly salary costs and
timesheets. Timesheets are not used
to record time for other projects.

e. Statements and documents to National funders require Swedish univer- Timesheets are only used for EU pro-
justify staff costs sities to submit a cost statement showing jects and in some cases, EU auditors
internal salary calculations. They accept this rejected Excel files as a reliable time
cost statement as proof of staff costs. recording system.

2. Other direct cost calculations

a. Equipment (depreciation: amounts The Swedish National Financial Manage-

and time, etc.) ment Authority (ESV) provides guidelines
on equipment cost reimbursements. For
instance, an item can be considered equip-
ment if it costs more than 25,000 SEK and
has a life expectancy of at least 3 years.
Depreciation is calculated monthly. Internal
institutional guidelines set depreciation rules
and the depreciation periods for different
types of equipment.

b. Infrastructure (recorded as a direct Nationally funded projects record infrastruc- EU funded projects require infra-
cost, depreciation, etc.) ture costs under different accounting cate- structure unit costs to be calculated
gories: depreciation, energy, maintenance, on the basis of the actual costs from
salaries, water. the 2 previous years and actual use
for the project. National funders do
not request or use unit cost calcula-
tions.

c. Other Direct Costs Other Direct Costs are reimbursed on the In principle, no adjustments are
basis of the actual costs incurred (except required to submit a claim for Other
subsistence costs for which flat rates set by Direct Costs. However, deducting
the Swedish Tax Authority apply). the VAT from researcher travel bills
is particularly demanding from an
administrative point of view.

32
Accepting University Accounting Practices under Horizon Europe

3. Indirect cost calculations

a. Description of the calculation of Indirect costs are calculated according to the The methods used to calculate
indirect costs including cost drivers SUHF model and based on: indirect costs can vary significantly
between universities. It is therefore
a) Direct salaries extremely difficult to assess whether
b) Direct salaries and running costs the 25% of direct costs flat rate used
by EU funders is sufficient to cover
The indirect costs calculated using the SUHF the actual indirect costs incurred.
model vary considerably between universities
and between departments within a single SUHF collects and compiles annual
university. university statistics. In 2016, the
total average percentage of indirect
costs on total direct research costs
was 19.6%.

4. Indirect invoicing

a. Description of internal invoicing Internal invoicing for salaries is calculated Horizon 2020 requires substantial
procedures by adding social security expenses and SUHF administrative work to calculate unit
indirect costs to the monthly salary. costs based on actual eligible costs
for the use internal invoices. Inter-
The annual budget calculation for the use of nally invoiced costs are often subsi-
laboratories is then invoiced to users. These dised for internal users and are not
costs are usually based on historical data and calculated yearly.
therefore not actual.
The question of how internal
Internal invoices for goods and services do invoices will be audited also creates
not include indirect costs. uncertainty.

Similarities and Inconsistencies

Description of National Funders’ Audi-
Auditing and Control Between EU and National Audi-
ting Practices
ting Practices

1. Description of procedures, audit The Swedish National Auditing Office usually On previous occasions, EU auditors
types, reporting deadlines, etc. audits universities annually. Their audits have required the following docu-
focus more on processes, policies, inter- mentation:
nal management and control than specific
project accounting. • Timesheets
• Proof of what each employee
worked on each month
• Physical invoices (even though
all Swedish institutions use
e-invoices)
• Bank documents to prove that
a specific cost has been paid,
which is hard as a single insti-
tute makes several thousand
transactions a week
• Proof that social security contri-
butions were paid for a specific
employee. This procedure is
problematic because of the high
number of employees. Monthly
transactions show the amount
for the whole institute, not a
specific person.
Proofs of payment are not required
by any national funding agency. It is
therefore very challenging to extract
this documentation from the SUHF
system.

33
Accepting University Accounting Practices under Horizon Europe

UNITED KINGDOM

The development of the TRAC accounting methodology

The TRAC (Transparent Approach to Costing) methodology has been implemented at all UK universities since 2000. This
model is used to report universities’ income and expenditure under teaching, research and other activities.

Research in the UK is primarily focused within universities, and has long been heavily dependent on competitive, grant-ba-
sed funding. The system operates under the principle of ‘dual support’, whereby universities receive core funding from
the national funding council, designed to cover the cost of the research infrastructure needed to support competitively
funded research projects. The TRAC methodology was developed in the face of underinvestment in core funding, which
failed to keep pace with the significant growth of research activities in the 1980s and 1990s. The UK government therefore
provided additional funding for university infrastructure on condition that universities became more transparent about
the way funds were spent.

TRAC was developed as an activity-based costing methodology. It uses academic staff time allocation surveys (not times-
heets) as cost drivers to allocate all expenditure to relevant activities. TRAC also includes proxy cost adjustments desi-
gned to allow for the fact that universities’ ‘real’ costs are higher than the historic expenditure set out in their accounts,
due to a combination of: understatement of current asset values by some institutions; inadequate investment in physical
assets (seen, for example, in maintenance backlogs) and in student services and support; and the need to allow a surplus
or margin for risk, financing and development.

TRAC revealed universities’ continuing failure to cover the full costs of their research: income from competitive research
funding plus core funds was significantly less (by over 1.2 billion euros a year) than the real costs of the research under-
taken. Encouraged largely by funders and national quality assessment exercises, universities had developed a ‘low-cost
culture’ under which the volume of research activity and its outputs were far more important than cost recovery.

Following a 2003 consultation on the sustainability of research, the UK Government introduced a requirement that uni-
versities should ‘recover, in aggregate, the full economic costs of all their activities’. This resulted in the development of a
national methodology to establish the full economic costs (FEC) of research at project level in 2005. Universities themsel-
ves managed the initiative, and the FEC methodology was funded by the government and developed by a pilot group of
nine universities with different profiles, working in close collaboration with the national funding councils.

Under FEC, universities use their TRAC data to calculate their property and indirect costs. They then identify all of the
direct and indirect research costs at project level, regardless of whether the research sponsor will cover all of these costs.

The government accepted that funding levels needed to increase to sustain volumes and allocated additional funds to
research councils to allow them to cover 80% of the full economic cost of all of the research they funded. The intention
was to eliminate cross-subsidies from research to teaching, and to ensure appropriate infrastructure funding. In return,
universities were expected to demonstrate that research activities were sustainable.

While FEC originally focused on research, a 2005/2006 funding council review extended the use of TRAC to provide cost
data to inform teaching funding. This led to the 2007 introduction of a national framework for costing teaching, based
on TRAC methodology principles – TRAC(T), in order to provide information about the full economic cost of teaching in
different disciplines.

The TRAC model also underwent the process of certification under the EU 7th Framework Programme (FP7). The TRAC
EC-FP7 process aimed to adapt the UK TRAC model to FP7 requirements but was ultimately not used by institutions

34
Accepting University Accounting Practices under Horizon Europe

as they found it too complex. Box 2. Focus on Full Economic Cost (FEC) in the United Kingdom and European Project
Costs details the adaptations made to satisfy European Commission requirements on staff and indirect cost calculation
methods. It was not made compulsory under FEC as considerable administrative work was needed to comply with these
requirements.

The TRAC and FEC process was long, used significant resources and required major university culture changes. The fact
that it was coordinated at national level by universities themselves with full government support (financially and techni-
cally), helped immensely. The key issue here was and is the tension between academic incentives to win funding for
research and publication, and the pressures on universities to cover the real costs of all their activities in whatever way
they can.

TRAC and FEC can be said to have been a success in that they led to a cultural shift at UK universities with regard to
understanding the resource implications of any project. Overall, cost recovery has also improved. While TRAC is primarily
concerned with cost analysis, some universities use the resulting data to inform their internal resource allocation models.

Acceptance of the model by national funders

The model is fully accepted by large private funders of competitive research programmes, such as the Wellcome Trust
and the Kennedy Trust for Rheumatology Research. The latter has used the methodology since 2005 to encourage bene-
ficiaries’ financial sustainability. In order to avoid duplication and administrative burden, private funders also rely on
robust national audit procedures, such as the HEFCE Assurance and Accountability and the UK Research Council’s Funding
Assurance Programme. Under current provisions, funders and charities benefit as a result of the agreement with the
government because the government funds indirect costs, and beneficiaries gain sustainability, a clear knowledge of the
costs of their work and audit assurance.

Box 2. Focus on Full Economic Cost (FEC) in the United Kingdom and European Project Costs4

In 2005/06, Universities UK (UUK) co-ordinated a project to analyse FP6 project costs on a FEC basis, to gain a better under-
standing of the potential effects of introducing FEC on institutional engagement with the programme. The project illustrated
and quantified the funding gap based on use of the additional cost model, and highlighted the issues and academic benefits
of engagement. In 2007 and 2008 UUK co-ordinated a further exercise to determine how TRAC methodology would need to
be modified to meet the requirements of FP7. This required a comparative review of the methodology against FP7 require-
ments. Significantly, the UK methodology met the requirements, although a number of areas were identified for adjustment or
detailed work. In particular, TRAC EC-FP7 required five changes to TRAC-FEC processes:
i) Exclusion of ineligible costs from the indirect cost category
ii) The completion of project timesheets by academic staff who spend a proportion of their total working time on FP7 projects
iii) Reflection of the actual time spent and salary of academics working on FP7 projects
iv) Reflection of actual indirect cost rates and actual time on FP7 projects
v) Additional quality assurance
The ineligible costs that needed to be removed from the indirect cost category were: cost adjustments (the net infrastructure
charge, and gross returns on financing and investment), irrecoverable VAT, VAT on overseas expenditures, exchange rate gains
or losses, any provisions, and the finance elements of any lease costs. In addition, depreciation had to be included on a historic
cost basis rather than on a current cost revaluation basis. These changes were all achievable, although irrecoverable VAT could
have been handled using the partial exemption methods currently applied by UK institutions.
Requiring FP7 project staff to complete full monthly timesheets (showing total productive hours and hours charged to EC FP7
projects) is technically achievable, but will affect staff, as this level of recording was not required at the time.
Timesheet data could have been used to charge staff time to projects, instead of using the time estimates defined at the appli-
cation or award stage, which is the approach used under the standard FEC methodology. The change could lead to additional
processes at most institutions.

4 EUA (2008), Financially sustainable universities. Towards full costing in European universities.

35
Accepting University Accounting Practices under Horizon Europe

Similarly, under standard FEC methodology, indirect costs are charged on an estimated basis (using historic costs), whereas the
EC-FP7 variation requires actual cost calculation (charging after the period ends), except where actual costs are not yet availa-
ble (for example, for the final claim), when an estimate is permitted. This will also require adjustment to institutional operatio-
nal processes.
In terms of additional quality assurance, the UK’s Quality Assurance and Validation process could have been extended to
include a specific review of an institution’s implementation of the EC-FP7 methodology, in order to provide the necessary
assurance.

Box 3. Design and implementation of TRAC methodology at the University of Birmingham

University of Birmingham: Founded in 1900, 26800 students, 6000 staff, comprehensive university.
The process for collecting time use data at the University of Birmingham was originally developed around the year 2000 and
has since undergone several refinements. The university was one of the original nine pilot universities that worked on develo-
ping the Transparent Approach to Costing (TRAC) methodology and has been directly involved in every major development
since. The time allocation process therefore evolved in tandem with the rollout of TRAC across the sector.
A number of key decisions needed to be made at the outset:
• Who should be asked to participate (which staff types)?
• What are they required to do?
• How often should the data be collected?
• How can we ensure that the process produces statistically accurate results?
• How should the information be collected?
In the first round of time allocation surveys, heads of school were provided with a spreadsheet listing all their academic staff
and asked to allocate the proportion of time spent on a number of defined activities over the whole of the previous academic
year.
A full, detailed, schedule explaining the precise definition of these activities was also provided. These definitions were
developed in close cooperation with other universities in the UK and in accordance with TRAC. They covered ‘direct’ time spent
on income-generating activities (teaching, research, other) as well as ‘support’ time (preparing lectures, writing research bids,
etc). Some heads of school completed the spreadsheet themselves, others asked staff to complete them individually and then
performed a quality check. Once completed, the time data was weighted by pay grade and averaged for each school to produce
a time-based method for allocating academic staff costs. Heads of school were asked to sign off the summary level view as
being representative of the balance of activities. All of the data was collected via spreadsheet completion.
The use of timesheets had been discussed earlier, as some academics wanted to report the hours worked, rather than a rough
proportion of the time spent on different activities. However, it was felt that this level of detailed time recording was not requi-
red for full economic costing, and would cause more work than benefits for all involved.
The process has since undergone several refinements including the following key developments:
• Continuously providing staff with information about the purpose of collecting this data and a number of assurances helped
convince employees of the usefulness of the procedure. The university clearly stated that this data would never be used at
individual staff level (e.g. to monitor performance) and would only be used as aggregated data for costing purposes. This
helped overcome union and staff representatives’ scepticism.
• Annual retrospective surveys were replaced by tri-annual retrospective surveys, as the distribution of time between activi-
ties varied considerably between semester 1, semester 2 and the summer period.
• An online password-controlled submission system was developed using a website that also contained background and
supporting information to help staff complete the exercise and facilitate data collection.

• The university decided to collect time data from individual academic staff rather than heads of school for greater accuracy.
Heads of school tend to indicate time distribution in a way that reflects staff profiles and HR plans, rather than how it is
actually used by individual staff. At first this had a negative impact on response rates, which went down to about 65%, as
it was harder to chase individual staff (to be statically valid response rates should be at least around 70%). Nevertheless,
the university considered this change necessary to strengthen process ownership by all academics in the long term.
• Furthermore, non-respondent chasing was devolved to local management at departmental level, which helped push res-
ponse rates up to around 90%.

36
Accepting University Accounting Practices under Horizon Europe

Part 2. Established institutional accounting practices accepted by

national competitive research programme funders
BELGIUM, FLANDERS

The development of a cost accounting methodology at Flemish universities

In Belgium, the language communities are responsible for education and research policies. As a result, universities
operate under two different and independent legal frameworks, whose funding mechanisms are regulated by the Flemish
and French-speaking communities. Although both communities have discussed a full costing methodology, it has been
developed differently in each. The Flemish system is presented in detail below.

Flemish-speaking community

Discussions about implementing a common costing methodology at Flemish universities started in 2007, driven by the
FP7 reimbursement rules. The ability to demonstrate the real costs of university activities to public funders was an addi-
tional incentive.

The Flemish Interuniversity Council (VLIR), which represents the six Flemish universities, committed to support the
implementation process from 2011 to 2013. Preparations began at most universities in 2010, when the necessary human
resources were allocated to the project. University finance departments coordinated the process, sometimes in collabo-
ration with research departments. University management and academics were included in the project steering groups.

Universities achieved different stages of development: some institutions put a system in place, other universities decided
not to proceed with effective implementation, despite the fact that full costing helped them gain a better understanding
of the real costs of their activities. At some Flemish universities, full costing projects have been incorporated into strate-
gic plans and the university board is informed through quarterly reports.

Flemish universities had to overcome common obstacles, such as resistance from members of the academic community
concerned about time allocation mechanisms, and limited implementation resources. However, the Flemish Interuniver-
sity Council supported the process and encouraged universities to share their experiences and exchange good practices.

Regional (VLAIO, FWO) and federal (FOD) competitive research funders rely on institutional accounting practices to reim-
burse the direct costs incurred in research projects. As for EU funded projects, direct costs are claimed on the basis of
actual costs while a flat rate covers indirect costs. National funders accept institutions’ calculation of the actual staff
costs as recorded in the accounts and do not require timesheets (except for state personnel).

37
Accepting University Accounting Practices under Horizon Europe

Institutional accounting practices accepted by national research programme funders

The information reported in the following table refers to the accounting practices applied at Ghent University.

Can Nationally-accepted
Calculation of the Different Cost Description of the Accounting Practice
Practices be used for EU Funded
Items to be Reimbursed Used
Projects

1. Staff cost calculations

a. Description of eligible staff cost Most funding agencies accept the salary It is difficult to use institutional
elements and calculation methods costs as they are calculated in the institu- practices to calculate staff costs for
(salary components, sick leave, holi- tional accounting system, without further EU funded projects because of the
days, pension, etc.) calculations or timesheets. No salary com- provisional components included in
ponents are excluded. They include holiday salaries (e.g. holiday pay). EU audits
and end of year pay provisions, insurance and require proof of actual payment for
commuting costs. these items, which creates a high
administrative burden.

b. Use of unit costs or other options N/A N/A

to reimburse staff costs

c. Staff cost calculation period Staff costs are calculated according to the
(actual, past year, etc.) actual period of the claim.

d. Description of how staff time is Timesheets are not required. If a staff

accounted for/recorded (timesheets, member assigns 50% of their time to a FWO
profiles, fixed time, contract, etc.) project, the university assumes they spent
50% of their time on the project.
Timesheets are only required if a percen-
tage of a statutory staff member’s salary is
claimed.

e. Statements and documents to Most funding agencies accept an extract The same extract from the instituti-
justify staff costs from the institutional accounting system onal accounting system can also be
(loonstaat). used for Horizon 2020 projects. No
adjustments necessary.

2. Other direct cost calculations

a. Equipment (depreciation: amounts Some national/regional funding agencies

and time, etc.) accept the total equipment cost, without
depreciation, for some projects.

b. Infrastructure (recorded as a direct Specific infrastructure projects are designed EU funded projects require infra-
cost, depreciation, etc.) to fund infrastructure purchase, main- structure unit costs to be calculated
tenance and repair, therefore no depreciation on the basis of the actual costs from
is calculated. the 2 previous years and actual use
for the project. National funders do
not request or use unit cost calcula-
tions.

c. Other Direct Costs No adjustments necessary.

38
Accepting University Accounting Practices under Horizon Europe

3. Indirect cost calculations

a. Description of the calculation of The university calculates a maximum flat There is currently no calculation
indirect costs including cost drivers rate of 17% of incoming funds (less if more based on a full costing model avai-
than 17% is paid by the funding agency) to lable for calculating the university’s
cover the reimbursement of indirect costs. indirect costs, therefore it is not clear
whether the Horizon 2020 25% flat
In several cases, national and regional rate is sufficient to cover the costs.
funding agencies pay 20,000 euros indirect
costs per person per year. As a result only
indirect staff costs are reimbursed.

4. Indirect invoicing

a. Description of internal invoicing National and regional funding agencies have Although Framework Programme
procedures no specific internal invoicing rules. beneficiaries can use their own
accounting principles for the reim-
bursement of ‘unit costs for inter-
nally invoiced goods’, Belgian insti-
tutions find it difficult to apply this
procedure. Some of the elements
of the university’s usual unit cost
calculation methodology conflict
with the EU’s list of ineligible costs,
so universities have to exclude all
of the elements ineligible under the
Grant Agreement. This process is
time consuming and risks including
indirect/ineligible costs in the finan-
cial reporting.
Ghent University is currently looking
at ways to set up a centralized
system for managing and invoicing
shared services, but it is impossible
to comply with all of the rules set by
different funders. Given the specifi-
city of EU rules, a specific unit cost
definition for EU projects will be
necessary.

5. Other relevant elements for cost reimbursements

Flemish universities are subject to a mixed Ghent University reports specific

VAT regime and work with a provisional rate issues experienced with VAT reim-
(based on the previous financial year) to bursement under Horizon 2020
determine the deductible amount. projects.
As the deduction ratio is only determined Although ‘recoverable and identi-
at the end of a fiscal year, universities have fiable’ VAT is a cost. However, the
to use the rate from the previous financial university does not claim this cost
year. This requires adjusting the difference because of the high administrative
between the provisional and the final ratio workload involved.
in the next reporting period, which creates
a lot of administrative work for a marginal
difference in total funding. The procedure is
therefore not applied at Ghent University.
In some cases, institutions do not recover
foreign VAT as it is too time-consuming. Only
deductible VAT is therefore claimed as a cost
and reimbursed.

39
Accepting University Accounting Practices under Horizon Europe

Similarities and Inconsistencies

Description of National Funders’ Audi-
Auditing and Control Between EU and National Audi-
ting Practices
ting Practices

1. Description of procedures, audit The Research Foundation – Flanders (FWO) Some EU controls could be covered
types, reporting deadlines, etc. performs audits at the end of projects that by institutions’ audited annual
receive over 450,000 euros funding. They accounts. However, some checks
also perform random audits every year, on a need to be linked to very specific EC
maximum of 30% of the institutions’ pro- regulations that are never audited by
jects. Audits are performed by FWO internal any other funding agency or auditor
auditors. (e.g. staff cost calculations). There-
fore, broader cross-reliance on audits
Host institutions submit an audit report on cannot be achieved when the rules
the previous financial year’s accounts to the are so specific.
FWO before 30th April each year.
Before 15th March, each host institution
submits a certificate from its own indepen-
dent auditor covering the previous financial
year to the FWO, stating that, excluding
any awarded and charged 6% overhead, the
expenditure reported in the financial reports,
matches the host institution’s accounts.
The host institution has a right to reply and
can grant the FWO independent auditor
access to the records of its independent
auditor. These procedures are designed to
avoid double audits.

40
Accepting University Accounting Practices under Horizon Europe

FRANCE

The development of a cost accounting model at French universities

National funding bodies were largely responsible for promoting the development of a common university costing metho-
dology in France. The issue was placed in the context of universities’ financial sustainability, institutional management
and steering. The Ministry of Higher Education and Research also regards full costing as a tool that provides long-term
forecasting information based on a better understanding of costs. The Ministry is currently promoting a unified cost
accounting methodology across the country.

In 2005, the development of full costing was initiated by the AMUE (Agence de Mutualisation des Universités et Établisse-
ments), CPU (the conference of French university rectors) and a group of university representatives, including presidents,
accountants and financial officers. In 2006 and 2007, the launch was followed by a pilot phase. Although AMUE proposed
a methodology, tools, techniques and joint training, each university developed its own approach for its specific context.
The specific 7th Framework Programme (FP7) cost reimbursement methods shaped the development and implemen-
tation of the methodology at some institutions. Projects were usually initiated by university leadership, implemented
by financial officers and managers, and frequently overseen by the vice-president of financial affairs. In the late 2000s,
fewer than 20 universities had reached an advanced stage of implementation. In January 2011, the EUIMA-Full Costing
workshop gave added momentum to implementation plans.

In 2013, the Ministry for Higher Education, Research and Innovation coordinated the development of common guide-
lines for university costing methodologies. The need for greater transparency in calculating the cost of educating stu-
dents drove this renewed process. The Directorate-General for Higher Education set up working groups with the National
Rectors’ Conference and the Conference of Deans of French Schools of Engineering, along with other Ministry units. In
2014, these groups defined a common structure (types of activities, disciplinary groups) and common methodological
guidelines on how to measure costs. These aimed to explain the objectives, major guiding principles and methodologi-
cal choices made by the working groups. However, it was not a procedure describing how to implement the full costing
methodology, which remains specific to each institution.5

A monitoring committee bringing together the various stakeholders representing the diversity of the university commu-
nity issued opinions and recommendations on the outcomes of the working groups. A steering committee, an institu-
tional decision-making body associating the main decision-makers from the Ministry of Higher Education and Research
(Cabinet, DGESIP, DGRI, DAF, Conference of University Rectors and Conference of Deans of French Engineering Schools
(CDEFI)) validated the project.

In 2015-2016, a group of institutions successfully tested the methodology, leading to discussions between the Ministry
and the sector about its further implementation. This momentum also built on an increased focus on the development of
university lifelong learning programmes, and the associated need to adequately cost and price such activities.

As delegated acts of French legislation reasserted the importance of analytical accounting at universities, the Ministry
organised deployment on the basis of the five-year contract negotiations it holds with every institution. In 2017, 30 uni-
versities due to negotiate their contract in 2018-19 were included in the project. A series of workshops were held to help
them adopt the methodology, along with direct monitoring and support from core project team members (university
practitioners experienced in analytical accounting). The Ministry intends to repeat the process with the other university
groups over the next five years.

5 Ministère de l’Éducation nationale, de l’enseignement supérieur et de la recherche (2015), Guide 2015 - comité de suivi du 20 mars 2015, Connaissance des
coûts des activités des établissements d’enseignement supérieur et de recherche, Paris.

41
Accepting University Accounting Practices under Horizon Europe

The goal is to generate and exploit comparable income and expenditure data, consolidated at national level, and that
allows institutional benchmarking. In the absence of additional resources, the Ministry has adopted an approach of regu-
latory requirement combined with training and sector support.

Working groups with a greater focus on contractual research costs were set up to address the issue of flat rates for indi-
rect research costs, as well as to develop a refined methodology to support the distance and blended learning business
model.

Institutional accounting practices accepted by national research programme funders

The information included in the following table refers to the practices implemented at the University of La Rochelle.

Can Nationally-accepted
Calculation of the Different Cost Description of the Accounting Practice
Practices be used for EU Funded
Items to be Reimbursed Used
Projects

1. Staff cost calculations

a. Description of eligible staff cost Statutory staff salaries are not eligible for Statutory staff are eligible for partial
elements and calculation methods funding from the French National Rese- funding under Horizon 2020, making
(salary components, sick leave, holi- arch Agency and the French Agency for the the programme far more generous
days, pension, etc.) Environment. All contractual staff salary than the French National Funding
elements are reimbursed. These include Agency.
employer’s charges, sick leave, holidays,
pension, etc. As a precautionary measure, projects
bonuses and complementary tea-
As a precautionary measure, bonuses and ching time are not included in staff
complementary teaching time are not inclu- cost calculations, although some
ded. bonuses are eligible under Horizon
2020.

b. Use of unit costs or other options N/A N/A

to reimburse staff costs

c. Staff cost calculation period Staff costs are calculated for the actual
(actual, past year, etc.) period of the claim.

d. Description of how staff time is As contractual staff work on the project As a precautionary measure, times-
accounted for/recorded (timesheets, full time, no timesheets are requested. The heets are also required from contrac-
profiles, fixed time, contract, etc.) project name and acronym are specified in tual staff working on Horizon 2020
the employment contract. project. It would ease project fol-
low-up if this this could be avoided.

e. Statements and documents to Researchers’ employment contracts and

justify staff costs agendas would be consulted in the case of
any audits.

2. Other direct cost calculations

a. Equipment (depreciation: amounts Equipment purchase is eligible for French

and time, etc.) National Research Agency funding. Other
Agencies (e.g. the Agency for the Environ-
ment) only allow depreciation calculations.

b. Infrastructure (recorded as a direct

cost, depreciation, etc.)

42
Accepting University Accounting Practices under Horizon Europe

c. Other Direct Costs It is often difficult to justify Other

Direct Costs given the variety of
costs included in this category. The
cost of justification is often dispro-
portionate to the financial issues at
stake as a result. Allowing benefi-
ciaries to choose whether to declare
Other Direct Costs as either actual
costs or a flat rate could reduce
reporting time for small partners.

3. Indirect cost calculations

a. Description of the calculation of The French National Research Agency sets The University of La Rochelle’s total
indirect costs including cost drivers indirect costs at 8% of funding. indirect costs are 24%. The Horizon
2020 flat rate is therefore sufficient
The French Agency for the Environment to cover the indirect costs incurred.
sets indirect costs at 20% of the total costs
(including permanent staff).

4. Internal invoicing

a. Description of internal invoicing Internal invoices are issued on the basis of a Researchers need to use technical
procedures pricing system established and validated by platforms made available within the
the University Board. Costs must be iden- university for EU projects. However,
tified and traceable, but reporting is sim- unit cost calculations do not meet
plified, as funders do not require a detailed commission requirements as they
description of the items included in internal include indirect and ineligible costs.
invoices. Therefore, although the commis-
sion allows internal invoice costs to
be calculated according to internal
accounting practices, universities
generally choose not to claim them
in case of subsequent rejection by
the auditors.

Similarities and Inconsistencies

Description of National Funders’ Audi-
Auditing and Control Between EU and National Audi-
ting Practices
ting Practices

1. Description of procedures, audit Universities can be audited on site. Standard

types, reporting deadlines, etc. audits are usually performed by the Ministry
of Finance (rather than the funding agen-
cies).

43
Accepting University Accounting Practices under Horizon Europe

GERMANY

The development of a cost accounting methodology at German universities

Germany’s federal nature and the different legal frameworks and practices in the 16 federal states influenced the develop-
ment of a harmonised cost accounting methodology at German universities and made it difficult to evaluate the degree
of implementation. These developments were only occasionally coordinated at federal level through working groups and
guidance on the implementation process. Additional resources were generally not available.

Full costing methodologies are mainly used to demonstrate the full costs of externally funded research and consequently
obtain higher reimbursement, notably for indirect costs. This also contributes to an enhanced understanding and aware-
ness of costs at German universities and to more effective use of funds. However, two major challenges were detected:
time allocation and the fact that not all costs are included in university accounting systems (due to different rules and
regulations on building ownership, building maintenance costs, depreciation and pensions).

University accounting has been significantly influenced by two major developments in Germany. The first attempt to
introduce cost accounting was made by the heads of administration working group, which formulated a system of cost
accounting rules in 1999. Most German universities approved these rules at a meeting held in the University of Greifswald
in the same year, resulting in the Greifswald Resolution. These principles were subsequently accepted as a basis for good
practice in university accounting by the German Institute of Chartered Accountants. They were also approved by the Stan-
ding Conference of Ministers of Education and Cultural Affairs. However, the federal finance ministers, who are respon-
sible for the accounting systems used in their respective state, did not grant final approval, and the Greifswald Resolution
was therefore not applied universally. Nevertheless, it significantly influenced university accounting in Germany.

The cost accounting framework developed by the Federal Ministry of Finance in cooperation with the 16 State Ministries
of Finance also shaped accounting practice in German higher education institutions. On the basis of this framework, 16
different systems were developed. However, the framework primarily addressed public administration, not higher educa-
tion needs. To make the situation even more complex, some states were already moving from cameralistic to doub-
le-entry bookkeeping.

FP7 and the Community Framework for State Aid for Research, Development and Innovation (RDI Framework) were major
drivers in the debate on the implementation of full costing. Furthermore, many German universities’ increasing engage-
ment in external cooperations at national level led them to identify the need for appropriate costing methodologies.

44
Accepting University Accounting Practices under Horizon Europe

Institutional accounting practices accepted by national research programme funders

The information reported in the following table refers to accounting practices at the Ludwig-Maximilians-Universität
Munich (LMU Munich) and the Technische Universität Braunschweig (TU Braunschweig).

Can Nationally-accepted
Calculation of the Different Cost Description of the Accounting Practice
Practices be used for EU Funded
Items to be Reimbursed Used
Projects

1. Staff cost calculations

a. Description of eligible staff cost All staff salary cost elements are reimbursed Some elements are removed in order
elements and calculation methods as accounted for by the institution. to calculate the hourly rate, as they
(salary components, sick leave, holi- are ineligible under EU rules (com-
days, pension, etc.) pensation for teaching activities,
additional remuneration).

b. Use of unit costs or other options Reimbursement of costs actually incurred LMU has started to use unit costs for
to reimburse staff costs during the period, as recorded in the project Horizon 2020 projects. However, this
accounts. is not delivering simplification as
the unit costs only apply to technical
and scientific staff - not professors.
This distinction is time consuming
and creates uncertainty about
cost recoverability. Moreover, the
scheme requires the use of specific
tools (timesheets, tools to calculate
staff costs, training sessions, etc).
An application for the certification
of unit costs under Horizon 2020
(CoMUC) is underway and was prepa-
red with KPMG.
TU Braunschweig does not use unit
costs for staff cost calculations and
did not apply for CoMUC.

c. Staff cost calculation period Staff costs are calculated on the basis of the The Horizon 2020 project calcula-
(actual, past year, etc.) actual costs incurred during the reporting tion period is based on the previous
period. financial year.

d. Description of how staff time is German universities have no staff time The EU policy of calculating working
accounted for/recorded (timesheets, recording system in place. No proof of time hours on the basis of timesheets is
profiles, fixed time, contract, etc.) worked is needed for nationally funded pro- not common practice. As a result,
jects. National funders such as the German researchers make mistakes and cont-
Research Foundation (DFG) accept that uni- rols are needed at all levels. Further-
versities charge the costs actually booked to more, artificial solutions have to
the project, without requiring proof of actual be created, for example, in the case
hours worked (e.g. timesheets). of Principal Investigators involved
in ERC funded projects. As German
professors are not subject to any
specific working time regulations,
their work has to be aligned with
other staff categories, irrespective of
any applicable national legislation.

e. Statements and documents to Project accounts. Timesheets, pay slips, employment

justify staff costs contracts, project accounts.

45
Accepting University Accounting Practices under Horizon Europe

2. Other direct cost calculations

a. Equipment (depreciation: amounts The table provided by the German Research Horizon 2020 projects accept LMU
and time, etc.) Foundation (DFG) is used to calculate depre- Munich and TU Braunschweig equip-
ciation values. ment cost accounting practices.

b. Infrastructure (recorded as a direct Infrastructure costs are included in indirect Infrastructure costs are covered by
cost, depreciation, etc.) cost calculations. the indirect costs flat rate.

c. Other Direct Costs Reimbursed according to national and regio- Horizon 2020 projects accept LMU
nal regulations. Munich and TU Braunschweig
accounting practices for travel
expenses, consumables and other
direct costs.

3. Indirect cost calculations

a. Description of the calculation of Indirect costs are usually covered by a flat

indirect costs including cost drivers rate. LMU Munich estimates that its indi-
rect costs are 20% - 45% of the direct costs,
depending on the faculty.
TU Braunschweig calculates that research or
industry project indirect costs are 68% of the
direct staff costs.

4. Internal invoicing

a. Description of internal invoicing LMU Munich usually calculates internally LMU Munich requests proofs as part
procedures invoiced costs on the basis of lump sums of its unit calculation method.
(cost per unit or hour, etc).
TU Braunschweig records the actual
TU Braunschweig usually calculates costs on cost in its accounts.
the basis of the material costs (e.g. consu-
mables, material costs, equipment use).

5. Other relevant elements for cost reimbusements

LMU Munich found it difficult to

use the ‘Third Party Resources’
option under Marie Curie actions.
The problem is particularly relevant
for the University Hospital, which is
defined as a third party that makes
resources available to the university.

46
Accepting University Accounting Practices under Horizon Europe

Auditing and Control

Description of National Funders’ Auditing Practices

Audits are usually ex-post and undertaken by external auditors (either the funder itself or an audit company). Audits can be
either financial or technical.

Similarities and Inconsistencies Between EU and National Auditing Practices

LMU Munich and TU Braunschweig both have a framework contract with an experienced EU funded project auditor for first level
Horizon 2020 audits. The procedures involved are similar to national audits.
LMU Munich regularly undergoes second level audits and has observed divergences in auditors’ EU experience. They sometimes
have little knowledge of the EU participation rules (for example, MSCA actions’ exclusive use of lump sums). Furthermore, the
auditors are not necessarily national companies and are not always familiar with German accounting practices, which requires
additional explanations. These issues are specific to European projects and do not occur under national ones, where the audi-
tors work in Germany and have a good knowledge of the funding rules and accounting procedures.
TU Braunschweig received a second level Horizon 2020 project audit in 2017. The auditing procedure was more detailed than
FP7 or national audits (e.g. standard practices like travel cost calculations were examined in depth) and all documents had to
be provided electronically, making this audit more time-consuming. Sometimes it was difficult to comply with the auditor’s
requests. For instance, TU Braunschweig had to provide proof that employees had actually been paid. This information is diffi-
cult for the university to provide as such payments are issued by the state.

47
Accepting University Accounting Practices under Horizon Europe

NETHERLANDS

The development of a cost accounting methodology at Dutch universities

Most universities have implemented full costing methodologies in the Netherlands. Drivers for implementation included
the terms and conditions of contract research, which offer institutions that can identify the full costs of their activities a
better cost recovery rate, and the need for reliable financial information to support internal decision-making. The Dutch
Government has not required universities to implement full costing despite their considerable financial and operational
autonomy.

In 2007, driven by the 7th Framework Programme (FP7) and its cost reimbursement methods, all Dutch universities agreed
to respect a set of specific principles in developing their full costing methodology. On the advice of the Association of
Universities in the Netherlands (VSNU), these were approved by the individual universities. The aim was to secure a set of
common definitions and to achieve comparable full cost rates.

However, each university has since worked individually on designing and implementing a full costing methodology without
support or guidelines from the national authorities. This has resulted in a very diverse situation. Most universities now
use a full costing methodology, which allows them to identify the costs of most of their activities. However, at many ins-
titutions the system is not integrated into the financial system and runs in supplementary systems. Some institutions
have implemented a very sophisticated methodology that also allows them to use full costing to make strategic decisions.

Universities informally exchanged experiences and good practices very actively when developing full costing. These exch-
anges specifically addressed principles of time allocation, ways to separate indirect costs for teaching and for research, the
relevance of specific cost drivers and the overall model into which the chosen parameters would be integrated. However,
there was some reluctance to develop the system further, as this would require additional changes to financial systems
and a change of institutional management culture.

In 2012, a coordinated initiative explored whether the national research council would accept full costing methodologies.
This was considered another potential driver for further development of this system at Dutch universities. However, the
national research council had still not accepted full costing methodologies at the beginning of 2018.

Universities that have implemented full costing as standard have achieved better cost recovery rates for some contract
partners, increased cost awareness at all levels of the organisation, and identified opportunities to reduce costs.

48
Accepting University Accounting Practices under Horizon Europe

Box 4. The accounting model implemented at the University of Amsterdam

University of Amsterdam: founded in 1632, approximately 33,000 students, over 5,000 staff. Comprehensive university.
Staff costs are by far the biggest expense. As salaries are paid monthly, these costs are time-driven by nature. Most non-staff
costs related to the facilities they use are also time driven (e.g. rent, energy, cleaning, depreciation, interest, etc). Therefore,
measuring the time spent on (academic) staff activities was believed to be the most suitable key for allocating (most) univer-
sity costs.
However, since Dutch universities are not obliged to state the (full) costs of teaching and research separately in their annual
report, there was previously little pressure to implement a time allocation system. Universities reported cost elements (staff
costs, material costs, etc.) and cost centres (faculties, support units, etc). There was no need to report the final cost categories
(teaching, research and other activities).
The situation changed when research contracts began representing a considerable proportion of universities’ activities. The
need for a system that separated the costs of the different activities became more urgent, as most research contracts required
a detailed report of the project costs incurred. Most universities in the Netherlands started to develop a system of time distri-
bution (some were more detailed than others).
The situation changed when research contracts began representing a considerable proportion of universities’ activities. The
need for a system that separated the costs of the different activities became more urgent, as most research contracts required
a detailed report of the project costs incurred. Most universities in the Netherlands started to develop a system of time distri-
bution (some were more detailed than others).
In the 1990s, the University of Amsterdam started applying a simple procedure to the payroll system output: a proportion of a
project employee (involved in a contract project with specific cost reporting conditions) salary was separated out and charged to
a separate project account, according to the proportion of time spent on the project under the project contract.
In the course of time the university noticed two disadvantages to this approach: a) it did not reflect the actual time spent and
b) it only charged direct staff costs (gross salaries) to projects.
Most contract partners do not accept pre-calculations or assumptions: they are only willing to reimburse costs based on actual
data, which reflects the cost of actual time spent. Some contract partners accept values based on full costing. The initial simple
system’s inability to accommodate these two principles led the University of Amsterdam to completely redesign its costing
system.
This redesign process recognised that it was useful to know the full costs, based on time allocation for all staff for all activi-
ties (not only contract research). The university therefore implemented a costing system in which staff time is the central cost
indicator. In this system, contract researchers can record the actual time they spent on projects with the required level of detail
under the contract conditions. This system is presented to them in the form of an employee self-service web-based portal. At
the same time, timesheets are generated for all other academic and support staff, based on the data collected about the time
assigned to their different activities, as agreed in their appointments and work schedules. As a result, information on the time
spent by all staff is provided, whether this information derives from actual entry by the individual employee, or automatic
generation by the system in the background based on planning data.

This dual time recording system is directly integrated in the HR system, the project system and the financial system. This
allows the University of Amsterdam to charge the full costs according to the appropriate salary level of each individual plus the
relevant full cost rate components, to the accounts of each individual project or activity (teaching, research), regardless of the
nature of the funder. The full costs of each activity can therefore be compared against the available budgets, for both contract
and regular activities.
As a result, information on cost objects can also be included in the university’s annual financial report, even though this is not
mandatory in the Netherlands. The information gained helps the University of Amsterdam play a leading role in discussions
about cost recovery and ways to implement policy decisions with financial implications with its partners (Ministry of Education,
National Research Council, other contract parties). The time recording system is an essential part of the University of Amster-
dam’s full costing methodology and has been certified for use in FP7 by the European Commission.

49
Accepting University Accounting Practices under Horizon Europe

Institutional accounting practices accepted by national research programme funders

The information included in the following table refers to practices applied at the University of Amsterdam.

Can Nationally-accepted
Calculation of the Different Cost Description of the Accounting Practice
Practices be used for EU Funded
Items to be Reimbursed Used
Projects

1. Staff cost calculations

a. Description of eligible staff cost Full costs can be divided into direct and The direct component is used as the
elements and calculation methods indirect components. The direct component unit cost under Horizon 2020. FP7
(salary components, sick leave, holi- is defined as the salary (scale/step under the used the complete full costs. In the
days, pension, etc.) university’s collaborative work agreement Netherlands, the direct component
(CAO)), social security contributions and (or actual salary) is used for the nati-
holidays. onal research council and full costs
are used for national government
grants.

b. Use of unit costs or other options The direct component of the full costs (cf. Dutch universities found it dif-
to reimburse staff costs point 1.a.) is used as the unit cost for Horizon ficult to obtain unit cost certifi-
2020. cation under Horizon 2020. For
instance, the University of Amster-
dam obtained certification for its
methodology for calculating (full)
unit costs under FP7. However, the
institution stopped applying for
certification under Horizon 2020 due
to the length of the process and the
amount of information requested.
The University of Amsterdam conti-
nues to use the same system based
on direct unit costs and hopes to
obtain approval through the recent
EU audit.

c. Staff cost calculation period Staff costs are calculated for the actual No adjustment necessary.
(actual, past year, etc.) period of the claim.

d. Description of how staff time is Time spent by staff is the central cost indi- No adjustment necessary. All cont-
accounted for/recorded (timesheets, cator in the full costing model implemented ract researchers record actual time
profiles, fixed time, contract, etc.) at the University of Amsterdam. Contract spent.
researchers can record the required level of
detail for the actual time spent on projects
according to contractual requirements. This
system is presented to them in the form of
an employee self-service web-based portal.
At the same time, timesheets for all other
academic and support staff are generated
based on the data collected about time spent
on their different activities, as agreed in
their appointments and work schedules. As
a result, information on the time spent by all
staff is provided, whether provided by actual
data entry by the individual employee, or
automatic generation by the system based
on planning data.

e. Statements and documents to Print screens from the HR system, appoint- No adjustment necessary.
justify staff costs ment letter and certified timesheets.

50
Accepting University Accounting Practices under Horizon Europe

2. Other direct cost calculations

a. Equipment (depreciation: amounts Time of depreciation of equipment in cont- Under Horizon 2020, the standard
and time, etc.) ract research is equal to the duration of the depreciation time of 60 months is
contract. used for all equipment worth over
10,000 euros, except IT equipment.

b. Infrastructure (recorded as a direct Infrastructure costs are calculated as indirect No adjustment necessary.
cost, depreciation, etc.) costs.

c. Other Direct Costs Other Direct Costs are calculated as actual No adjustment necessary.
costs, based on invoices and staff expenses
claims.

3. Indirect cost calculations

a. Description of the calculation of Indirect costs are calculated using the full In 2015, 25% of the University of
indirect costs including cost drivers costing model applied at the University of Amsterdam’s indirect costs were
Amsterdam. covered by the EU project flat rate;
in 2016 it was 23% and in 2017 it
was 18%. In 2015 part of EU funded
projects were covered by FP7, under
which the UoA claimed full costs.
The value of FP7 projects went down
over time, which explains the dimi-
nishing percentage of indirect costs
covered.

4. Internal invoicing

a. Description of internal invoicing N/A N/A

procedures

5. Other relevant elements for cost reimbusements

N/A N/A

Similarities and Inconsistencies

Description of National Funders’ Audi-
Auditing and Control Between EU and National Audi-
ting Practices
ting Practices

1. Description of procedures, audit The National Research Council does not audit The EU requires a factual finding
types, reporting deadlines, etc. individual projects. report instead of a standard report.
Audit reports are therefore more
Other national grant providers require a expensive and time consuming.
standard audit if the amount awarded is over
125,000 euros. Reports are due 6 months More information is needed to
after the end of the contract. justify costs, i.e. participant lists and
meeting notes.
The EU requires reports to be sub-
mitted 60 days after the end of the
contract.

51
Accepting University Accounting Practices under Horizon Europe

POLAND

The development of a cost accounting methodology at Polish universities

FP7 and its cost reimbursement methods fostered discussions about the development of a full costing methodology in
Poland. Universities, other FP7 beneficiaries, and the Polish National Agency for the Promotion and Support of applicants
to the Framework Programme started debating the implementation of full costing at Polish universities. In 2007 and
2008, the Polish Ministry of Higher Education announced plans to increase the budget for competitive grants and to
reduce institutional core funding. This raised universities’ awareness of the need to improve identification of the costs of
their activities. In 2009 and 2010, public discussions on higher education funding and costs further underlined the need
for transparent financial management.

Current developments also concern new funding models for higher education establishments. In autumn 2018 the country
will undergo significant regulatory changes, mainly through the introduction of a new algorithm for calculating core
funding. The Ministry intends to increase core funding but will substantially increase in parallel the size of competitive
grants.

Despite discussions about the importance of full costing, no Polish universities except the University of Lodz, have imple-
mented this methodology. Lodz started implementing a comprehensive financial management system in 2012. The solu-
tions used were based on the experiences of European universities participating in the EUIMA - Full Costing Project.

However, the University of Lodz initiative was not supported at system level by a coordinated approach or governmental
support in the form of human or financial resources. The regulations on the financial management of higher education
that came into force in 2011 posed additional obstacles to the development of a coherent methodology. The legislation
did not sufficiently consider universities’ research activities, or the flat rate system used to calculate indirect costs both
at national and European level.

Institutions responded to the 2011 legal provisions on financial management and accounting by prioritising the imple-
mentation of changes not linked to full costing. The need to adapt university IT systems poses another challenge as only
the biggest public universities have implemented integrated management systems including HR, accounting and project
management modules.

Box 5. Full costing methodology design at the University of Lodz6

The starting point for developing the methodology at the University of Lodz was the creation of a project team to develop
a Comprehensive Information System (CIS) for managing the University in the mid-2000s. The team included about twenty
teaching and research employees. Accounting systems developed as early as 2007 covered the basic elements of financial
accounting (accounts statements, financial reporting) and the assumptions and accounting system management methods,
such as multi-task costs and results accounting, transferred prices used to value internal services and a performance measuring
system. The CIS was fully implemented at the University of Lodz in July 2012.6
This system assumes that the university carries out teaching and research activities in the form of projects (lasting one or
several years). The university’s second core activity is research, which includes scientific research and development and the pro-
vision of research services. Research is carried out in the form of research projects with different implementation periods and
funding sources. The university’s third fundamental activity is organisational processes, which are covered by project manage-
ment, due to their specific nature.
The following processes were identified to measure the costs, revenues and profits of the university’s various statutory tasks,
in order to integrate them in future process-oriented management:

6 Irena Sobańska, Agnieszka Wencel, Jacek Kalinowski, Project Management in Universities - Accounting Payroll on the Example of the University of Lodz,
Social Sciences, 2014, Nr 1 (83).

52
Accepting University Accounting Practices under Horizon Europe

• Education
• Financial assistance (for students)
• Human resource management
• Infrastructure
• Logistics
• Marketing
• Research processes
• University development
• University management
The resulting multi-purpose system combines the functions of different cost systems, including:
• A standard marginal costing system (multi-step and multi-block)
• A standard full costing system (ABC) with separate cost statements for the basic university processes
• Project life-cycle costing
The system considers the university’s hierarchical organizational structure. Responsibility for accounting is assigned at all
management levels by designating the centres responsible for costs, gross margins and profits.
Bottom-up budgeting is implemented based on guidelines prepared by the top management.
Performance measurement for the entire university and for individual internal units is based on applying a balanced scorecard
principle.
The new internal reporting structure was designed to be suitable for the decentralized management system (budget execution
reports, multi-step profit and loss reports, parametric assessment reports in line with the balanced scorecard structure).

Figure 5. Cost calculation at the University of Lodz

The use of
transfer prices

Number of students
from teaching
Research Project A
projects
Number of students
Classes X from teaching Project A
Project B

Registration of the Number of students

working time/ from teaching
nominative monthly Teaching classes Classes Y Project B Project B
working time
150wh Number of students
from teaching
Project C
Classes Z Project C
10% - 15 wh Number of students
Organisational from teaching
matters Project A

53
Accepting University Accounting Practices under Horizon Europe

Institutional accounting practices accepted by national research programme funders

Information included in the following table refers to practices implemented at the University of Lodz (UL).

Can Nationally-accepted
Calculation of the Different Cost Description of the Accounting Practice
Practices be used for EU Funded
Items to be Reimbursed Used
Projects

1. Staff cost calculations

a. Description of eligible staff cost All the salary components calculated through The University of Lodz is able to
elements and calculation methods the full costing methodology are reimbursed. apply institutional practices for
(salary components, sick leave, holi- Staff costs are calculated on an hourly basis calculating the costs incurred by
days, pension, etc.) and include the following cost types: different types of projects funded by
the national authorities, EU funding
• Gross remuneration programmes (including Horizon
• Compulsory employee social insurance 2020) and the private sector.

• Other mandatory benefits The university’s full costing system

can be adjusted to calculate the
• Some indirect costs from the internal costs of any research project.
unit that employs academic teachers
If a project requires a different
accounting procedure, the change
can be implemented in the system
in the first full costing model calcu-
lation. Costs will therefore be calcu-
lated and integrated accordingly into
the IT system.

b. Use of unit costs or other options N/A The institution did not apply for unit
to reimburse staff costs cost certification (CoMUC) under
Horizon 2020.

c. Staff cost calculation period Actual project costs are calculated annually N/A.
(actual, past year, etc.) as they depend both on salaries (which are
constant) and the number of classes (which
varies monthly). The UL is only able to calcu-
late actual costs at the end of the year (parti-
cularly for teaching projects) as the method
of calculating academic staff costs is based
on transfer prices rather than actual costs.

54
Accepting University Accounting Practices under Horizon Europe

d. Description of how staff time is The University of Lodz assigns academic

accounted for/recorded (timesheets, staff payroll costs according to the following
profiles, fixed time, contract, etc.) table:

Payroll Cost Allocations

University
Staff Category
Teaching Research Organizational

Academics Transfer Prices Actual Costs Actual Costs

Teaching and Working time Working time 10%

research staff schedules schedules

Teaching staff Working time --- 10%

schedules

Researchers --- Working time 10%

schedules

Librarians Working time Working time 10%

schedules schedules

e. Statements and documents to Working time schedules. No adjustment necessary.

justify staff costs

2. Other direct cost calculations

a. Equipment (depreciation: amounts Depends on the period of use. N/A

and time, etc.)

b. Infrastructure (recorded as a direct Standard costing method: this calculation N/A

cost, depreciation, etc.) method allows the university to define the
infrastructure costs for the exact period of
use.

c. Other Direct Costs N/A N/A

3. Indirect cost calculations

a. Description of the calculation of The actual payroll costs for academic tea- N/A
indirect costs including cost drivers ching staff are compared to the cost of remu-
nerations based on transfer prices charged to
the various educational projects at the end
of each calendar and each academic year.
Any deviations from the transfer prices are
charged to teaching projects.

4. Internal invoicing

a. Description of internal invoicing N/A N/A

procedures

55
Accepting University Accounting Practices under Horizon Europe

Similarities and Inconsistencies

Description of National Funders’ Audi-
Auditing and Control Between EU and National Audi-
ting Practices
ting Practices

1. Description of procedures, audit The same bookkeeping system is used to In some cases European auditors
types, reporting deadlines, etc. provide information to national and Euro- required documentation justifying
pean auditors. the exact price of equipment such
as computers, however the system
only stores actual costs, meaning
that factors such as depreciation are
already taken into account.

56
Accepting University Accounting Practices under Horizon Europe

PORTUGAL

The development of a cost accounting methodology at Portuguese universities

In 2007, a new legal framework for higher education set new rules for university governance, which included specific
accounting regulations. Although this theoretically paved the way for cost accounting, national research funding schemes
remained unchanged. Portuguese researchers are therefore predominantly accustomed to securing research funds on an
additional cost basis.

Full costing methodologies were only considered relevant for FP7 projects. FP7 reimbursement rules were among the main
drivers for discussions on the development of full costing. However, there was no coordinated approach at system level
or government support.

Nonetheless, a few universities started to develop a methodology that was also seen as a strategic management tool,
even prior to the impact of European funding. The University of Coimbra started a pilot project at one faculty in 2002 and
extended it to other faculties in the following years. By the early 2010s, four universities had more advanced full costing
methodologies in place. Some of the institutions that discussed implementation faced major difficulties due to a highly
autonomous faculty structure. Clear leadership commitment and communication efforts were usually key to achieving
progress. In general terms, full costing discussions became livelier in the early 2010s.

However, full costing model discussions dwindled due to simplification of the Horizon 2020 indirect cost rules. In fact,
most competitive research programme funders have simplified indirect costs by using flat rates, which are generally
based on Horizon 2020 rules.

57
Accepting University Accounting Practices under Horizon Europe

Institutional accounting practices accepted by national research programme funders

The information included in this table refers to practices applied at the University of Aveiro and at the University of
Coimbra.

Can Nationally-accepted
Calculation of the Different Cost Description of the Accounting Practice
Practices be used for EU Funded
Items to be Reimbursed Used
Projects

1. Staff cost calculations

a. Description of eligible staff cost Permanent and additional staff costs are No adjustment necessary.
elements and calculation methods eligible for funding under almost every natio-
(salary components, sick leave, holi- nal funding programme. These costs include
days, pension, etc.) gross salaries, meal allowances and compul-
sory national social security charges (22.3%
or 23.75% of the gross salary depending on
the type of contract).
The total annual costs are calculated as
follows: gross salaries x 14 months (+ 1%
social charges) + 4.77 euros meal allowance
per working day/actual nº of working hours).

b. Use of unit costs or other options N/A Neither the University of Aveiro or
to reimburse staff costs University of Coimbra applied for
unit cost certification under Horizon
2020.

c. Staff cost calculation period While the University of Coimbra generally Horizon 2020 project staff costs are
(actual, past year, etc.) uses the previous financial year as the basis based on the previous financial year.
for calculating staff costs (only some projects While no adjustments are therefore
require monthly calculations), the University needed at the University of Coimbra,
of Aveiro calculates staff costs for the actual they are required for staff cost calcu-
project implementation period. The actual lations at the University of Aveiro.
number of productive hours is calculated for
each employee on the basis of actual time
records.

d. Description of how staff time is Timesheets are drafted on the basis of time No adjustment necessary.
accounted for/recorded (timesheets, spent on projects and other activities, such
profiles, fixed time, contract, etc.) as teaching or holidays and are signed by
researchers and approved by the lead rese-
archer.
At the University of Aveiro, staff do not have
to complete timesheets if they only work on
one project. Fixed time allocations are used
for INTERREG programmes.

e. Statements and documents to Work contracts, payslips, proof of all payroll No adjustment necessary.
justify staff costs items including social security contributions
and proof of registration in the accounts.

58
Accepting University Accounting Practices under Horizon Europe

2. Other direct cost calculations

a. Equipment (depreciation: amounts Depreciation costs are eligible for funding, No adjustment necessary.
and time, etc.) when calculated on the basis of project
duration and use. National Law defines the
annual depreciation rate for each equip-
ment type used by public institutions. For
example, the rate for hardware is 25% or
for scientific equipment is 20%. Equipment
costs can only be reimbursed on the basis of
the extent to which they are used during the
project.

b. Infrastructure (recorded as a direct Generally speaking, only equipment depreci- No adjustment necessary.
cost, depreciation, etc.) ation costs are eligible.

c. Other Direct Costs Other Direct Costs reimbursed by national No adjustment necessary.
funders include travel and related subsis-
tence allowances, and other goods and
services. The University of Aveiro assigns
each project a dedicated cost centre, where
all direct costs are registered and presented
to funding agencies using national accoun-
ting system categories and project rules. The
institution uses an application that links the
national categories to the project categories.

3. Indirect cost calculations

a. Description of the calculation of The University of Coimbra calculates indi- No adjustment necessary.
indirect costs including cost drivers rect costs as a 25% flat rate of direct costs
(minus subcontracting, costs incurred by
third parties not used on the beneficiaries’
premises and the costs of providing financial
support to third parties).

4. Internal invoicing

a. Description of internal invoicing Not applicable for competitive research Internal invoicing procedures not
procedures programmes funded by national funding applied to Horizon 2020 projects.
agencies.

Similarities and Inconsistencies

Description of National Funders’ Audi-
Auditing and Control Between EU and National Audi-
ting Practices
ting Practices

1. Description of procedures, audit N/A Audits are generally subject to the

types, reporting deadlines, etc. same rules as EU funded projects as
most competitive research program-
mes are funded by Horizon 2020.
However, reports are generally due
every six months, which is a shorter
reporting period than Horizon 2020.

59
Accepting University Accounting Practices under Horizon Europe

List of Contributors
Jean-Serge Boiteau, Project Leader, Directorate General for Higher Education and Employability, French Ministry of Higher
Education and Research and Innovation.

Marianna Bom, Chief Financial Officer, Aalto University.

Michael Casey, Director (Finance and Operations), Irish Universities Association.

Karin Ekborg-Persson, Strategic Development Head of Office, Lund University.

Manuela Groß, Vice-Rector of Finances and IT, Medical University of Innsbruck.

Maryam Hansson Edalat, Head of Research Support Office, Stockholm University.

Andreas Hebbelmann, Structural Fund Supervisor, TU Braunschweig.

Marita Hilliges, Secretary General, Association of Swedish Higher Education.

Paul Jolie, Financial Services Director, KU Leuven.

Jacek Kalinowski, Vice-Bursar, University of Lodz.

Elke Lammertyn, Head of European and International Projects LRD, KU Leuven.

Ragnar Lie, Senior Adviser, Universities Norway (UHR).

Peter Mason, Policy Manager, Europe (Research and Innovation), Universities UK (UUK).

José Fernando Mendes, Vice-Rector for Research and Doctoral School, University of Aveiro.

Marko Niemi, Senior Adviser, Universities Finland (UNIFI).

David O’Shea, Interim Director of Operations, Trinity College Dublin.

Mari Pietikäinen, Head of Research and Innovation Services, Aalto University.

Diana Pustula, Deputy Head of Research Services Office, University of Warsaw.

Jurgen Rienks, Director International Relations, Association of Universities in the Netherlands (VSNU).

Filipe Rocha, Head of Unit at the Planning, Management and Development Division, Coimbra University.

Brice Rousseau, Deputy Head of the Office for International Funding Programmes, LMU Munich.

Dieter Schnick, Director of Research Services and European Office, TU Braunschweig

Clemens Unterberger, Financial Affairs and Infrastructure, Universities Austria (UNIKO).

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Accepting University Accounting Practices under Horizon Europe

Steven Van Luchene, Senior Policy Adviser, Quality Assurance and Internationalisation, Flemish Interuniversity Council
(VLIR).

Lucie Vaucel, Head of Unit, Partnerships and Innovation, University of La Rochelle.

Roswitha Wiedenhofer, Head of Research Organisation and Services, FH JOANNEUM University of Applied Sciences.

Katrien Windels, Research Coordination Unit Officer, Ghent University.

Vanessa Wolters, European Project Controller, University of Amsterdam.

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Accepting University Accounting Practices under Horizon Europe

References
EUA (2018a), EUA Member Consultation 2017-2018: Impactful Simplification of the EU Framework Programme for Rese-
arch and Innovation, Brussels, June 2018.

EUA (2018b), Taking simplification of EU funding to the next level - The university perspective, Brussels, February 2018.

EUA (2017), From Vision to Action: What EUA Proposes for the Next Framework Programme for Research and Innovation
(FP9), Brussels, November 2017.

EUA (2016), EUA Member Consultation: a Contribution to the Horizon 2020 Mid-Term Review, Brussels.

EUA (2013), Financially Sustainable Universities. Full Costing: Progress and Practice, Brussels.

EUA (2008), Financially sustainable universities. Towards full costing in European universities, Brussels.

European Commission (2017), Interim Evaluation of Horizon 2020, Brussels.

Irena Sobańska, Agnieszka Wencel, Jacek Kalinowski (2014), Project Management in Universities - Accounting Payroll on
the Example of the University of Lodz, SOCIAL SCIENCES, 2014, Nr 1 (83).

Ministère de l‘Éducation nationale, de l‘enseignement supérieur et de la recherche (2015), Guide 2015 - Comité de suivi du
20 mars 2015, Connaissance des coûts des activités des établissements d’enseignement supérieur et de recherche, Paris.

Norwegian Association of Higher Education Institutions (2014), The Norwegian universities’ methodology on full costing,
Oslo

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