In Horizon Europe, third parties and affiliated entities play critical roles in project implementation. However, understanding their roles, differences, and implications is essential for successful project execution.
Beneficiaries vs. third parties
The fundamental distinction lies in their relationship with the Grant Agreement:
Beneficiaries are entities signing the Grant Agreement. They assume direct rights and obligations, including receiving EU financial support, implementing project tasks, and being accountable for fulfilling contractual obligations.
Third parties, however, do not sign the Grant Agreement. Their responsibilities and rights are mediated through contractual agreements with beneficiaries.
Types of third parties in Horizon Europe
Affiliated Entities (Art. 8 MGA – Model Grant Agreement)
Affiliated entities, previously known as “linked third parties” in some programmes (new for 2021-2027), are entities legally or financially linked to a beneficiary, a connection that comes before and extends beyond the specific Horizon Europe project. They:
Perform action tasks independently.
Can declare their eligible costs directly to the grant.
Do not directly sign the Grant Agreement but are explicitly named and described within it.
Have their responsibilities enforced through the linked beneficiary.
Affiliated entities typically include:
Permanent legal structures (e.g., an association and its members).
Contractual cooperation extending beyond the action / the project (e.g., ongoing collaboration agreements relevant to the project).
Capital links involving direct or indirect control relationships, including parent companies, subsidiaries, or entities controlled by the same entity.
Practically, affiliated entities are treated similarly to beneficiaries: they have their own financial statements, must provide their own Certificates on Financial Statements (CFS), contribute to technical reports, and submit deliverables.
Other participants involved in the action (Art. 9 MGA)
1. Associated partners (Art. 9.1 MGA)
Associated partners are actively involved in the consortium and implement specific tasks defined in the project's Description of Action (Annex 1), but they do not receive EU funding. They do not sign the Grant Agreement, yet their roles and responsibilities are clearly listed.
Key points about associated partners:
Implement specific action tasks at their own cost.
Listed explicitly in the Grant Agreement.
No requirement for a legal or capital link to beneficiaries.
Beneficiaries remain accountable to the granting authority for their performance.
Beneficiaries must ensure associated partners comply with:
Proper implementation and call conditions (Article 11).
Avoidance of conflict of interest (Article 12).
Confidentiality and security rules (Article 13).
Ethical standards (Article 14).
EU visibility obligations (Article 17.2).
Specific action implementation rules (Article 18, Annex 5).
Information and reporting requirements (Article 19).
Beneficiaries should formalize these obligations with associated partners and facilitate any necessary audits or checks by EU authorities.
2. Third parties providing in-kind contributions (Art. 9.2 MGA)
These entities provide resources - such as personnel, infrastructure, or equipment - for free or against payment.
In-kind contributions allowed but not eligible: Most EU programmes allow beneficiaries to use in-kind contributions from third parties for free, but these are generally not eligible costs and cannot be charged to the project budget. Examples include:
A government-paid civil servant working on a project for a university.
Free use of municipal learning spaces.
In-kind contributions eligible (specific to Horizon Europe): Under Horizon Europe, some in-kind contributions provided by third parties free of charge can be declared as eligible direct costs if they:
Are directly linked and necessary to implement the project.
Meet all general eligibility conditions (Article 6.1), including proper documentation and being recorded in financial statements.
Are explicitly mentioned in Annex 1 or approved through a simplified approval procedure.
If in-kind contributions are declared as eligible, beneficiaries must ensure that auditing bodies (granting authority, European Court of Auditors - ECA, Office Européen de Lutte Antifraude/ European Anti-Fraud Office - OLAF) have access to verify these contributions. Denied access results in cost rejection.
For more information about eligible costs in Horizon Europe, check out our blogs:
3. Subcontractors (Art. 9.3 MGA)
Subcontractors perform specific project tasks listed in the description of the action (Annex 1). Their services must provide the best value for money, and their costs, directly invoiced to beneficiaries, are eligible. For more detailed information on subcontractors, refer to our previous blog post on this topic: Eligible Costs in Horizon Europe: Focus on subcontracting costs.
4. Financial support to third parties (FSTP) (Art. 9.4 MGA)
Also known as cascade funding, this mechanism allows a beneficiary to support additional entities financially to achieve the project's objectives. Conditions are typically defined explicitly in the call and have an established ceiling for third parties.
Recipients of financial support to third parties (FSTP) receive indirect EU funding through beneficiaries, such as sub-grants or prizes. They do not sign the Grant Agreement or perform project tasks themselves but receive support that helps achieve project objectives.
Beneficiaries are responsible for ensuring recipients:
Use the funding correctly.
Avoid conflicts of interest (Article 12).
Follow confidentiality and security requirements (Article 13).
Comply with ethical standards (Article 14).
Provide visibility for EU funding (Article 17.2).
Adhere to specific project implementation rules (Article 18).
Fulfill information and record-keeping requirements (Articles 19 and 20).
Beneficiaries must also guarantee audit access for EU bodies (granting authority, ECA, OLAF) to verify the proper use of funding by recipients.
Key considerations
Legal and financial responsibilities: Beneficiaries carry the legal responsibility for the project's implementation and compliance, including tasks performed by third parties.
Cost eligibility: Costs for third parties must always align with the action objectives and budgetary rules established in the Grant Agreement.
Budget flexibility: Minor budget adjustments among participants and categories are possible without amending the Grant Agreement, but significant changes, particularly involving different types of third parties, typically require formal amendments.
Transparency and conflict of interest: Procedures involving third parties must ensure transparency, fairness, and no conflict of interest.
Documentation and compliance: Effective documentation and adherence to Horizon Europe’s financial rules are crucial, especially in distinguishing between subcontracting and affiliated entities.
Conclusion
Successfully managing third parties and affiliated entities within Horizon Europe projects requires careful planning, clear agreements, and strict compliance with program guidelines. Properly understanding their roles and obligations will significantly simplify project implementation and reporting, ensuring that your project remains aligned with EU expectations and achieves its intended impact. For detailed guidance, please refer to the Annotated Grant Agreement (AGA) included in this blog.
Interested in mastering Horizon Europe funding strategies and managing third-party involvement effectively? Reach out to NETO Innovation today and let's ensure your project maximizes its potential!
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