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Should beneficiaries' "in kind" contributions be eligible under Axis 4?

Article 55.2 of Regulation 1198/2006 on the European Fisheries Fund states that "in-kind" contributions, depreciation costs and overheads may be treated as expenditure paid by beneficiaries, provided that this is permitted by the rules of eligibility defined at the national level.

The beneficiaries of Axis 4 are usually local actors, many of whom (including the FLAGs themselves) may have restricted access to sources of finance. This may be due to their small scale, the nature of the organisation they belong to, the very needs which their project seeks to address or other demands or commitments on their financial resources. The financial crisis has placed severe restrictions on many sources of funding and this is impacting on the ability of many project promoters to access finance. Where project promoters are required to provide a certain amount of "own (match) funding" to projects financed from Axis 4, they may therefore not have the capacity to provide all of this contribution in cash (i.e. expenditure which may be documented).

One possible solution for Axis 4 beneficiaries is that the Managing Authorities allow part of their own contribution to be provided in the form of an "in-kind" contribution. By "in-kind" contribution we mean that a third party puts a physical product/ tangible asset or a service at the disposal of the beneficiary for free. Therefore an "in-kind" contribution does not entail a cost to the beneficiary and is not registered in its accounting. It should be borne in mind that the use of paid staff of the beneficiary does not constitute an “in-kind” contribution, since the remuneration of this staff involves a cost to the beneficiary.

EFF Article 55.2 requires that the following conditions be satisfied for “in-kind” contributions:
-    The amount of expenditure covered by such contributions is justified by accounting documents having a probative value equivalent to invoices, and
-    Such contribution do not result in a net financial benefit to the beneficiary (no cash can be drawn against the "in-kind" contribution); this means, for instance, that a project with a total budget of EUR 100, of which EUR 60 is contributed in kind, with an aid intensity of 50%, will not obtain EUR 50, but only EUR 40 public contribution.

It should also be borne in mind that the rules of implementation of the Financial Regulation   (Art. 172) specify that - if the physical product/ tangible asset represents a cost supported by the third party - the value of the "in kind" contribution must not exceed the costs actually borne and duly supported by accounting documents of the third party; if the physical product/ tangible asset does not represent a cost for the third party, the value of the "in kind" contribution must not exceed the costs generally accepted on the market in question (e.g. for voluntary workers). Moreover, the value of such a contribution should be fixed at the moment of the grant approval and should not be re-valued at a later stage. Finally, it excludes that contributions in the form of real estate (e.g. provision of office space) be considered as eligible costs.

It is recommended that the programme authorities provide the beneficiaries with clear and explicit guidelines specifying the types of costs that may be covered by "in-kind" contributions, the above-mentioned restrictions on such contributions, the acceptable bases of justification and the required format for the reporting of these costs by beneficiaries and/or FLAGs, as well as the limits concerning the maximum amount of "in-kind" contribution which programme management authorities may decide to set.

Such guidelines should in particular require that:  
-    The beneficiary demonstrates why it is justified and appropriate to provide an "in kind" contribution, why this contribution is clearly additional and why it provides real benefits to the project which would not otherwise have been achieved;
-    The calculation of the value of "in-kind" contribution is fully justified in the project application/budget;
-    The final amount of grant is conditional on the beneficiary providing proof that the declared "in kind" contribution has actually been provided (depending on the nature of the contribution this could include timesheets showing voluntary labour contribution, invoices or statements of expenditure by third parties, photos of events showing equipment made available, etc.).