In an EU project there are always two parts to the budget and financing: the total budget of the project and the part of the budget reportable to the EU – the “eligible expenditure.” In many projects they are the same thing. But it is often the case that what the coordinator tells the EU is the “budget of the action” is in fact only a part of a much larger total cost which the partners will need to bear to meet the application’s targets.
Budget forecasting is always a challenge, and in a complex multiannual project like SEAS the ability to see into the future is a useful but rare talent. In SEAS we had to estimate the cost of events over three and a half years in advance. This introduces all kinds of uncertainty and risk questions for partners, especially if they only know their own organisational budgets on an annual basis.
Since the EU will only fund up to 50% of the activities, the ultimate deciding factor on how much EU grant the SEAS partners could apply for as a group was not the real actual cost of the activities, but how much minimum own investment the coordinator and coorganisers were willing to commit to in the grant agreement. In 2007 the EU rules stated that a coorganiser had to make an own investment (or “co-financing” as the jargon calls it) equivalent to least 5% of the total project budget. (The EU abolished the 5% rule for 2008 and subsequent years: the rule was felt to be too onerous for organisations in Eastern Europe such as Sfumato in Bulgaria in the SEAS case.)
All the SEAS coorganisers were therefore in a position where they had to pick a number they could all agree on which would equate to a reasonable grant from the EU while knowing that in all probability the project would cost them much more, but also knowing that even if at the end of the project they had indeed doubled their own investment they cannot ask for an extra matching grant from the EU. EU funding is therefore NOT 50% of the total budget but could be 40% or even as low as 25% of the actual cost as it was in SEAS. At the start of all EU culture grants it is vital to make this clear.
In SEAS the eligible EU budget was €2.7 million (as stated in the application) and included most aspects of the co-production, touring and evaluation of the project but not all. The actual budget was approximately €5 million – if one takes into consideration local costs of partners, associate partners and in-kind support that Intercult and each of the 7 coorganisers had, but from the EU’s point of view, associate partners do not participate in an EU project financially unless their costs are reimbursed by the coordinator or one of the coorganisers.
As a result a very large amount of the total project cost for SEAS and other EU-funded projects is simply not identified in the budget. This must mean that many applications to the EU effectively over-deliver or promise outputs and targets which are out of proportion to the resources the EU puts in. In SEAS case, this financial hinterland included all the small local organisations in each place that contributed to the local artistic programme at their own cost or raised their own grants, the extra hours of work each partner had to put in, the extra fundraising, the extra wheeler-dealing they had to do or the unexpected contingencies they had to meet.
It is not necessary to report this “ineligible expenditure” to the EU, and many organisations do not bother, since the EU offers no reward for this extra work: they tell you categorically that EU support will not be more than the amount requested. And there is no advantage for a coorganiser to report more than their own investment because this will reduce the possibility of another coorganiser to report theirs in full. At our first meeting with the EU Executive Agency for Culture after the grant was awarded, we were told to think of an EU project like a hermetically sealed jar. It can contain only so much money, and only 50% grant and 50% own investment. If more own investment is reported as eligible, the EU will simply take away the excess by reducing the grant.
Faced with this our first step was to talk this through with the partners and agree a total own investment figure which in turn would determine the size of the final grant. We agreed that €150K of own investment would mean the SEAS coorganisers could expect to receive 7 x €150K of EU funding: with Intercult investing a further €345,000 the final EU grant would be just over €1.3 million and the total project budget approximately €2.7 million. This was acceptable. In addition each coorganiser agreed to give (or leave) €50,000 of their “slice” of the EU grant for Intercult’s project management of SEAS and for what were known as “common activities” – things which all partners benefitted from but which Intercult had ultimate responsibility to deliver (project marketing, the international technical team, etc.)
In this way we set a framework in which there was a clear ratio between own investment and EU grant received by each partner. In the case of SEAS this was a 3:2 ratio – €150,000 own to €100,000 EU. Intercult and the coorganisers also signed a cooperation agreement or partnership contract which set out these responsibilities and agreed the budget which was to be sent with the application.
Having calculated the eventual potential grant and the division between the partners, the next step was then to identify which items were to be paid by EU money and what was the responsibility of the coorganiser to fund themselves. The coorganisers all shared their local budgets with Intercult at different time throughout the project in order to agree the appropriate use of EU funding.