Five percent of the maximum EU grant is deducted from the pre-financing payment at the start of the project and paid into the Guarantee Fund. This amount will be invested profitably and transferred to the coordinator at the end of the action. The Guarantee Fund uses proceeds from interest to intervene in the event of defaults in payment.
Guarantee Fund interventions
The Guarantee Fund will intervene during an ongoing project if a beneficiary withdraws from the project and does not or is not able to repay the excess amount received (i.e. the amount which the beneficiary has received as part of the pre-financing payment but has not yet charged to the project). The amount owed will be transferred from the Guarantee Fund to the coordinator to provide sufficient budget to carry out and complete the tasks of the beneficiary who has withdrawn from the project.
After the end of the project the Guarantee Fund will intervene if the EU Commission issues a recovery order at the balance payment, because the total amount paid to the consortium exceeds the agreed amount. If the recovery order fails, the Guarantee Fund will intervene and transfer the amount owed to the EU Commission.
The Guarantee Fund will also intervene when repayment as as result of an audit fails by transferring the amount owed directly to the EU Commission.
No Guarantee Fund interventions
The Guarantee Fund will not intervene in the event of open claims within the consortium. This is primarily the case during the action when one beneficiary breaches the agreement and does not respond to claims for repayment of pre-financing, without, however, withdrawing from the project.
The coordinator may also be required to reclaim money from individual beneficiaries after the end of the action and distribute it among the other consortium members without the EU Commission having an open claim against the beneficiary. These are also cases where the Guarantee Fund will not intervene and an internal solution within the consortium will need to be found.
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