The Horizon Europe program funds multi-annum consortium-based projects, typically research projects. The funding is essentially public funding, and as such projects funded under this program are subject to scrutiny. The program funding mechanism consists of several layers and building blocks. There is the work plan, which includes objectives, work packages, deliverables, and milestones. Then there are reporting periods and the associated payments schedule set by the EC for your project.
How do these building blocks link and what are the relations between them? This article is here to explain all that.
To do that, we should break the process into elements, explain them individually, and then tie them all back together to get the full picture.
The process of funding such projects involves several layers:
Layer #1 – The work plan
The basis is the implementation/work plan, which includes the work packages, deliverables, milestones, etc. that are defined in the project proposal. This is the project’s backbone. When your project is selected for funding, you will be invited to launch the ‘Grant preparation process (GAP)’. Part of the GAP is to convert the work plan depicted in the project proposal into the ‘Description of Action (DoA)’, which becomes an integral part of the Grant Agreement (GA). Once you sign the GA you are obliged to perform and deliver according to the implementation plan provided in the DoA.
A work plan consisting of work packages will typically look something like this:
The DoA work plan also includes Deliverables and Milestones, stemming from the work done in the work packages. Completing the work (the Work Packages), delivering the deliverables, and reaching the milestones according to the timing set in the DoA are all contractual obligations of the grant beneficiaries.
Layer #2 – The period reports
The Horizon Europe collaborative projects are multi-annum projects. The project duration is set by the applicants (in the project proposal). In most cases, the EC will respect that and set the project duration accordingly. The typical duration of these projects is anywhere between 2 to 5 years.
The EC, as the funding authority, will monitor the progress of the project and its ongoing funding, using ‘periodic reports’. These are essentially checkpoints set within the lifetime of the project, in which
the consortium is required to provide a periodic progress report and periodic financial report. These are typically followed by a progress review by the EC (with external experts).
Effectively, the reporting periods are segmenting the project in the following manner. In the example below, the red dotted vertical lines represent how this project has 3 reporting periods. As you can see, this segmentation might be artificial and may not necessarily be adjusted to the original project plan. In this example, it is evident that there are work packages that span over several reporting periods (i.e. WP1, WP4, WP7). Many times, this might not be a big issue, but we do recommend noting this, especially in the cases where the project is funded by the ‘Lump sum model’.
Another thing to notice in this example is the links between WP2 and WP4 & WP5, and how WP2 is feeding the work of WP4 & WP5. Note that WP2 is going to be fully reported in the 1st periodic report, WP4 will be reported partially in the 1st periodic report, and then again, partially, in the 2nd periodic report. WP5 will be reported only in the 2nd periodic report. On one hand, this might not be an issue at all, but then again it may generate problems, such as in the following scenario: Since the work between WP2, WP4, and WP5 is linked, the motivation is to have a single unified manner of reviewing the work done in these 3 WPs over time. But, no one guarantees us that the same people who will review the 1st periodic report will also review the 2nd periodic report, which will take place at least one year later (or even more in some cases), as the EC may assign different reviewers (it can happen) each time. In addition to that, keep in mind that people change positions and status over time, and this may include the project officers. Clearly, there is no way of anticipating and/or controlling such a scenario, but it is possible to better plan the project, in a way that will minimize the risk of having such scenarios.
We recommend minding this aspect, alongside other factors, when drafting the work plan in the project proposal. You can learn more about the entire issue of planning the work packages in this article.
The EC will continue to fund the project based on the (preferably positive) outcomes of the periodic reviews. In that context, we should mention also that under some circumstances, it may alternatively withhold funding, especially in cases of underperformance of partners or in cases where there are issues with the project’s progress towards the achievement of the project’s objectives. See more about that in the ‘Payments’ section below.
At this point, we hope you have a better understanding of the link between the work plan and the periodic reports. The link to the payments is elaborated in the following section. But before going there, we should attend to some practical aspects of the reporting periods, which are worth mentioning:
- The EC sets the timing of the reporting periods only when the project enters the Grant Preparation Process (GAP), after being selected for funding.
- Normally, the reporting periods are set to be either 12 or 18 months (there are some exceptions to that, but these are rare cases). The decision about the schedule is made by the EC based on various factors: nature of the grant/project, funding model, duration of the project, budget size, etc.
- Effectively it means that at the time of preparing the project work plan (and work package structure), you don’t know what would be the expected schedule of the reporting periods (except for EIC grants, see more below).
- This may hamper your ability to plan your work plan, to properly meet the periodic reporting requirements on one hand, and the payment schedule on the other hand. In the case of a project plan that is implemented using the traditional ‘actual cost model’ this might not be a big issue (due to the inherent flexibility of the ‘actual cost model’). However, in case the project is implementing the ‘lump sum model’, the effect might be much bigger. Refer to our complete guide about the ‘lump sum model’ here.
- The good news is that the scheduling of the reporting periods is something that can be raised and negotiated with the Project Officer (PO) of your project during the GAP. Basically, there are two options in such a case:
- Option I: Ask the PO to adjust the reporting periods to your work plan. For example, let’s assume that during the project preparation phase, you assumed two reporting periods (for a 3-year project), once every 18 months, but when you got to the GAP, the EC decided to have 3 reporting periods, once every 12 months. In such a case, you may ask the PO to reconsider and change the schedule according to your original plan. Make sure that you have a very good justification for that. This may increase the chances that the PO will accept your request.
- If that does not work, go to Option II: Ask the PO for permission to amend the work plan (during the GAP, meaning before signing the Grant Agreement) and adjust its timing to the periodic reporting schedule (but without changing the content, objectives, and actual anticipated work). With proper justification, the PO is likely to accept and allow you to do that.
- For EIC grants there is a pre-defined schedule of reporting periods (available in the EIC grants proposal templates). Hence, this information is available for you when you prepare the work plan.
- EIC Pathfinder Open / Challenges
- EIC Transition (which is limited to 3 years)
Payments schedule
After covering the work plan and periodic reports, it is time to link all these to the payment schedule.
The EC strives to keep the funded projects with a positive cash flow to allow them to act freely. For that matter, they set a relatively generous payment schedule. This is the typical structure of payments:
- Pre-financing payment, to be paid just before the project start date. The pre-financing can be set to be anywhere between 30% to 90% of the overall approved grant.
- The remaining balance is transferred via interim payments (associated with the respective periodic reports).
And a final payment at the end of the project, following the final progress report. - Note that the EC payments are considered to be the property of the EC until the respective budget segments are approved in the periodic reviews.
Technically speaking, the EC will transfer the payments to the project’s coordinator. In turn, the project coordinator will distribute it to the consortium members. In principle the coordinator is obliged to distribute these funds to the partners ‘without unjustified delay’ (MGA, article 7.b.iii). However, it is possible to set up an internal payment mechanism in the Consortium Agreement, linked to the work plan and the partner’s performance during the project (MGA, article 7). This option might be more relevant to projects that are implemented using the ‘lump sum model’. We’d recommend reading about this option in this article.
Now, let’s examine how the payment schedule links to the work plan and the periodic reports, using our example.
At the beginning of the project, just before it starts, the EC will transfer the ‘pre-financing’ payment. This will allow the project to start using a positive cash flow.
At the end of RP1 (1st reporting period), the consortium will have to submit a progress report and a financial report. These reports should cover the work that was done during RP1 and the associated costs (in the ‘actual cost model’ projects), or the completed work packages (in the ‘lump sum model’ projects).
Based on these reports, the EC project officer, with the help of experts, will review, in each reporting period, the project’s progress and approve or decline the project’s outcomes and/or reported costs, and/or the declaration about completed work packages (in the case of lump sum projects).
60/90 days (depending on the RP, to be defined in the GA Datasheet) after submitting the periodic report, the EC will transfer the next payment, be it an interim payment or final payment.
At this point, we would like to mention that the EC reserves the right to reduce, withhold payments or even recover funds, due to unsatisfactory performance of the project in general, or specific partners. However, in the scope of this article, we will not get into the issue of such recoveries and financial penalties.
Conclusion
To sum up – the EC trusts you to fully execute the project that you have planned. For that matter the EC will transfer funds to your project, to allow you and your partners to work while relying on a positive cash flow. At each of the checkpoints (the periodic reviews), the EC will ask you to provide information about the progress of the project and will check this. If everything is fine, then they will simply continue funding the project, until the end.
If you need further assistance on this topic, do not hesitate to contact us here.