Southern Africa Development Community Secretariat – Procurement and Grants Policy (3) As a general rule, grants shall involve co-financing. (4) Grants are non-profit, therefore shall not have the aim or the effect of producing a profit within the framework of the action or the work program of the beneficiary. (5) For purposes of paragraph (4) profit shall be defined as a surplus of the receipts over the eligible cost incurred by the beneficiary, when the request is made for payment of the balance. (6) Grants are awarded through calls for proposals, unless otherwise decided in the legal frame. Only in exceptional circumstances grants may be awarded directly. Article 54. Eligible Costs (1) Grants shall not exceed an overall ceiling expressed in terms of a total value that shall be established on the basis of estimated eligible costs. Grants shall not exceed the eligible cost. (2) Eligible cost, in line with SADC Financial Regulations, are those incurred by the beneficiary of a grant and include the following criteria: (a) they are incurred during the duration of the action, with the exception of the costs related to the final report; (b) they are indicated in the estimated overall budget or work program; (c) they are necessary for the implementation of the action or the work program; (d) they are identifiable and verifiable, in particular being recorded in the accountancy records according to the laws applicable; (e) they comply with the requirements of applicable tax and social legislation; and (f) they are reasonable, justified and comply with the principle of sound financial management. (3) Call for proposals shall specify the categories of costs considered as eligible. (4) Without prejudice to the provisions of legal frame regulating the grant, the following categories of costs shall be eligible when declared as such: (c) costs related to pre financing guarantee given by the beneficiary of the grant when the guarantee is compulsory; (d) costs related to external audits when they are compulsory; (e) Value Added Tax where it is not recoverable under the applicable VAT legislation and is paid by a beneficiary; (f) depreciation cost, provided that the beneficiary incurs them; (g) salaries of the personnel of national administrations to the extent that they relate to the cost of activities, which the relevant public authority would not carry out if the project concerned was not undertaken; and (h) other costs estimated eligible under the call for proposal. Article 55. In-kind contributions (1) Co-financing in the form of contributions in kind shall not be taken into account for the purpose of assessing whether the grant has generated profit or not. (2) In-kind contributions will only be accepted when the Contracting Authority has foreseen them in the guidelines for applicants and they are considered necessary or appropriate. 39