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  • Amy Murphy

PART 2: Lump Grants and Project Management in Horizon Europe programmes

What is the Impact of Lump Sum Funding on Project Management, Work packages, Deliverables and Milestones?


Staying on course and achieving project goals while following the proposed plan is essential in Lump Sum projects, as it is with any other Horizon Europe projects. Any plan changes should be explained with valid reasons in periodic progress reports. The key difference with lump sum grants, as we'll discuss more, is that reporting and payments are tied to completed work packages.



Reporting & the Payment Process

Lump sum funding depends on the reporting through the Work Packages project design system. *Note: For those new to Horizon Europe project management, it's important to understand the concept of Work Packages. These are divisions within a project's work plan, outlining collaborative efforts, participants, tasks, and milestones. Work Packages also validate the allocated budget for the project.


The payment process depends on the completion of Work packages: by the end of the periodic reporting period, completed work packages within that timeframe will be verified and declared, supported by the corresponding periodic technical report.


With the Lump Sum system, reporting employs standard Horizon Europe reporting templates. The coordinator justifies work packages as Completed or Not completed based on the technical periodic report.

  • Incomplete work packages can be completed and paid in subsequent reporting periods.

  • At the final reporting period, Partially Completed Work Packages may be reported, with their percentage of completion.

The financial reporting process is streamlined and automated, generating a financial statement for beneficiaries.

Work Package Budget Table
Source: European Commission











Important to note: For projects with long durations, there is the possibility to split or break down these work packages along reporting periods. This ensures activities can be paid before the reporting period.


Payment installments

The payments involve pre-financing, akin to other grants, managed by the coordinator based on the consortium agreement.  Interim payments entail the disbursement of lump sum shares for completed and approved work packages within reporting periods, allowing for one or more interim payments.  The final payment marks the grant's conclusion, with provisions for partial payments for partially completed work packages. Additionally, the retained amount of the Mutual Insurance Mechanism is released upon final payment.

Work Package Acceptance:

Visual - WP accepted if activities are carried out. Amedments  can be made. If a WP is rejected, project officers' observations can be addressed.

In practice: Around 44% of lump sum work packages of 2022 were declared completed, with 99% fully accepted and paid (694 work packages).



Project Evaluation

Evaluation Criteria of Lump Sum Horizon Europe Mechanism

As mentioned

earlier, there are no modifications concerning the project evaluation process. The only novelty is that the evaluation of implementation includes an assessment of cost estimations.Experts validate reasonable cost estimations aligned with proposed activities and assess adequacy of allocated lump sum. Overestimations prompt budget adjustment recommendations, impacting the final sum. Inaccurate estimations impact implementation scores.



Budget Allocation

The Budget Allocation in the Budget Table (Annex 2 of the grant agreement) outlines the distribution per beneficiary per work package and the overall share for each work package. The maximum grant amount corresponds to the lump sum, which is the aggregate of all total shares per work package (refer to the table below).

Annex 2 to the Grant Agreement
Source: European Commission

Budget Management

The usage of the budget of lump sum grants is flexible, provided the project's implementation remains intact. The European Commission (EC) does not intervene in the project's actual distribution of funds, as it is invisible to them. This flexibility mainly applies to budget transfers between budget categories and, to some extent, among partners.


However, when there is a need to change budget allocations between specific work packages: a budget transfer between work packages is possible but requires a mandatory contract amendment if wished to be reflected in the grant agreement. Transfers between Work Packages can be made IF:

1) The Work Package has not already been completed

2) The transfer is supported by valid technical and scientific justifications



Amendments:

Possible Lump Sum Amendment Types

Lump sum grants can be amended, following the same procedures as traditional Horizon grants. However, it is important to highlight that Work Packages that have already received lump sum payments cannot be amended. Deviations from the work plan can be highlighted in periodic reports.



Ex-post Controls:

Projects engage in ex-post controls that prioritize technical implementation and compliance with non-financial obligations such as IPR obligations, Ethics, Dissemination & Open Science policy etc). There are no financial audits - this shift away from financial checks enables project teams to concentrate on the technical excellence and impact of their work.


Conclusion:

In a nutshell, Lump Sum Grants bring several advantages to project management:

  1. Less paperwork: No need for detailed expense tracking since there is no actual cost reporting.

  2. More focus on work: Automated financial reporting saves time.

  3. Effective cash flow: Money is distributed as you complete project stages, keeping your finances steady.

The key impact of Lump Sum Funding on EU project management is its flexibility in fund usage. There's no strict guidance on how funds should be used, allowing projects to adapt to changes or seize new opportunities. Additionally, the absence of financial audits reduces administrative burden.


While the European Commission highlights these benefits, the introduction of Lump Sum funding has faced criticism and reservations (see PART 3, PART 1 ).


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Read the other articles of this 3-part series on lump sum funding:

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