“Eligible costs” are costs which meet all the criteria listed in Article 6 of the Humanitarian Aid Model Grant Agreement (HUMA MGA). Please note that these criteria apply to all Partners signing the HUMA MGA (coordinator and co-partners) and their potential implementing partners.

Only costs that are directly linked to the action implementation and can therefore be attributed to it directly are eligible as direct costs.

DG ECHO recognises the following categories of eligible costs

Please check below the conditions for the eligibility of actual costs.

A cost is incurred when the related goods, equipment, services or works have been used in connection with the Action.

The fact that a legal commitment has been made (e.g. signature of a legally binding agreement or issuing a purchase order) is not sufficient for the costs to be eligible. This means that:

a) in the case of services and works, the costs should relate to activities performed during the implementation period of the Action,

b) in the case of supplies, the costs should relate to supplies distributed/made available to the beneficiaries during the implementation period of the Action.

Partners should be able to demonstrate that a cost has been actually incurred, for instance, during ECHO audits. Auditors may ask to visit specific Action locations (e.g. distribution points, shelter construction sites, etc.) to verify that the supplies have been delivered or used during the implementation period. During an HQ audit, auditors will check all the supporting documents related to the Action and the relevant dates (i.e. distribution lists, logbook, employment/service contracts, reports on end of works, post-distribution monitoring report, but also payment vouchers, bank statements, tender files including bids not accepted, derogation forms signed at applicable level, etc.). Supporting documents may refer to costs incurred by co-partners and/or implementing partners.

Costs must be incurred in the period set out in Article 4 of the MGA, with the exception of costs relating to the submission of the final periodic report which may be incurred afterwards.

As a best practice, in case the Partner realises that some costs will be incurred after the end of the implementation period, it should inform ECHO as soon as possible and ask for a no-cost extension through a modification request.

If costs are invoiced or paid later than the end date of the Action, they are eligible only if the debt existed already during the action duration (supported by documentary evidence) and the final costs are known at the moment of the final report. Such costs must be booked as debts in the accounts of the relevant partner until the cost is paid. In case the costs are not paid at the time of the audits without a justification, the actual and real nature of the costs may be challenged.

Costs relating to the submission of the final report include:

b) post-distribution monitoring activities, including costs for the staff in charge of post distribution monitoring and related running costs;

c) final evaluation of the Action: costs relating to the drafting of the final evaluation report, both external and internal;

d) final audit of the Action: costs related to audit are eligible, but only if such audit is mandatory under the applicable national legislation maintain the authorisation to operate in the country.

All costs must be included in the overall Action budget, under one of the cost categories identified by Article 6.2 of the HUMA MGA (also reported in Annex 2).

The fundamental eligibility requirement is that costs are eligible when they are useful and needed for the achievement of the results. The costs must be essential for the performance of the operation in question. In other words, they would not have been incurred if the action had not taken place.
 

In some cases, the assessment of the fulfilment of the “necessity” requirement is not easy. This is the case, for instance, of equipment purchased towards the end of the Action. At this regard, please note that equipment purchased towards the end of the action is in most cases considered as not necessary for the Action and will be declared ineligible unless duly justified from an operational perspective.

The costs must be:

• recorded in the accounting records of the partner or co-partner and be directly reconcilable;
• compliant with the accounting standards of the country of registration of the partner and its usual cost accounting practices;
• backed by supporting evidence (e.g. invoices, receipts, agreements, time-sheets, etc.).

The Partners do not have to provide the supporting evidences with the Final Report, they just need to have them available at DG ECHO's request or in the context of checks, reviews, audits or investigations . Indirect costs do not need to be backed by supporting evidence during audits.

The Partner must comply with the applicable tax and social legislation e.g. the legislation of the country of registration of the partner and of the country of implementation of the Action.

The principle of sound and financial management entails that the budget of the Action must be used in accordance with the principles of economy and efficiency.

• The principle of economy requires that the resources used in the pursuit of an activity are made available in due time, in appropriate quantity and quality and at the best price.

• The principle of efficiency refers to the best relationship between resources employed and results achieved.

The Partner shall ensure that this principle is respected throughout the implementation of the Action. When this is not the case, at the end of the Action,  the Partner must justify the reasons and its impact on the result. When no valid justification is provided, costs may be declared ineligible.

Finally, please note that DG ECHO will only pass judgement as to the actual eligibility of costs at the liquidation stage when determining the balance to be paid. Costs that do not meet the eligibility conditions will be declared ineligible and disallowed accordingly.

The mere fact that certain costs are being mentioned in the Single Form or in the budget at proposal stage and thereafter is irrelevant, as this cannot overrule the otherwise applicable eligibility conditions.