Eligible expenditure

What it means

Eligible expenditure is the project spending that the provider of a grant or EU funds may reimburse. To be eligible, a cost must meet the conditions of the call and the grant agreement: it must relate directly to the project, arise in the eligible period, be reasonable and economical, properly documented and actually paid.

Each call contains a list of eligible and ineligible categories. Machines, software, construction work or the project team's salaries are often eligible. Frequently ineligible are routine operating costs, interest, fines, purchase of used assets without meeting conditions, or VAT where the recipient can deduct it. The co-financing rate is then calculated from total eligible expenditure.

Eligibility is not assessed only once. A cost may be eligible when the budget is approved and later become ineligible if procurement rules were broken when buying it, if it is insufficiently documented or if the asset is not used as agreed. It is therefore important to track the conditions throughout the project and after it ends.

How it works in practice

When preparing a project we recommend building the budget exactly along the call's categories and checking for each item whether it is eligible and what document will prove it. For costs above a certain threshold, the rules of public procurement or procurement for private recipients must be followed, otherwise a financial correction is likely.

Costs are reimbursed on the basis of a payment claim supported by invoices, bank statements, contracts, handover protocols and other documents. Project accounting is kept separately, usually through analytical accounts or job codes, so that costs can be clearly assigned. In grant accounting, income and accruals are also tracked.

After the project ends comes the sustainability period, during which the company must use the assets for the agreed purpose and meet measurable indicators. If it fails to, the provider may reclaim part or all of the grant. The eligibility of a cost is therefore only finally confirmed once that period has passed.

What to watch out for

The most common mistake is a cost incurred before the eligible period starts, such as a machine order signed before the application was filed. Under many schemes that makes the cost entirely ineligible. Before every commitment, check whether implementation may already begin.

Watch VAT too. If the company is a VAT payer and can deduct VAT, the VAT is not eligible and the project must fund its full amount from own resources until the tax office refunds it. This is often forgotten when planning project cash flow, and the company then runs short of cash.