Lump Sum funding is a novel method by the European Commission. Its goal is to simplify budgeting and grant justification, lessening the paperwork. This helps project coordinators in Horizon Europe projects by reducing administrative burdens and making EU funding more accessible. After a successful pilot in Horizon 2020, a significant introduction of Lump Sum calls is planned for 2023-2024. Around 20-25% of large research projects are expected to adopt this approach.
What is lump-sum funding?
Lump Sum grants provide recipients with a fixed amount of funding for their projects. Instead of focusing on tracking every penny spent, these grants provide a fixed amount of money for a project. In the grant agreement, a lump sum share is assigned for each work package in the budget table, which determines the overall lump sum.
How is the Lump Sum amount determined?
The granting authority sets the lump sum based on:
Approximating actual costs.
Applicants proposing an amount based on their project expenses.
Only including eligible costs per Horizon Europe rules.
Although a new mechanism, many aspects of the grant remain the same as for other Horizon Europe projects. Many aspects are similar to other Horizon Europe projects. Standard templates, criteria, and payment schedules are used.
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.
Limits of the Lump Sum Model
1. The Budget May not be that Flexible:
While Lump Funding does allow for some budget flexibility, budget transfers between work packages necessitates mandatory contract amendments. This can delay projects. Compared to the 'actual costs' model with fewer amendments, lump sum flexibility might be more limited.
2. Administrative Strain During Application:
Moving administrative tasks to the grant application stage, requiring a detailed budget breakdown, has pros and cons. It allows better planning but may slow down applications. With Horizon Europe programmes’ low success rate, researchers might hesitate due to longer application times and funding uncertainty.
3. Non- Payment Risk:
Lump sum grants need Work Packages to be completed for payment. This condition can pose a challenge if the project encounters unexpected changes that affect its original implementation plan. If the project is not successfully executed according to the grant agreement, there is a risk that the lump sum funds may not be disbursed. This being said, data from last year's Lump funding pilot shows a 99% payment success rate.