ESIF Programme Monitoring Committee financial/operational performance update paper: May 2022

Context

The purpose of this paper is to provide members with an update on the finalised de-commitment figures for 2021 and a summary of the financial performance of the programmes between January and April.

In addition, this paper informs members of the proposed revision of the European Regional Development Fund (ERDF) Operational Programme (OP) and the principle of the revision of the European Social Fund (ESF) OP to reflect the confirmed de-commitment for 2021.

De-commitment

At the last meeting, 7 December 2021, members were provided with estimated levels of de-commitment:

• ESF: £3,338,101
• ERDF: £11,287,121

The de-commitment figures have now been confirmed by the European Commission (EC):

• ESF: £13,503,455 (€15,799,042)
• ERDF: £10,143,351 (€11,867,721)

These figures differ from the estimated levels, in relation to ERDF this is due to a previously capped Technical Assistance (TA) claim now being counted towards expenditure.

The variation in the ESF programme de-commitment figures is due to over-achieving in the Youth Employment Initiative (YEI) element of the programme and not being permitted to count that expenditure towards the overall N+3 target.

Members will be aware that whilst the YEI operations have collectively underspent, the YEI spend allocated towards the N+3 target for 2021 was exceeded, as a consequence our de-commitment figure within the ESF programme increased significantly.

Revision to ERDF OP

Following the confirmed de-commitment for 2021, €4,072,600 for transition region and €7,795,121 for more developed region, the Managing Authority (MA) is proposing to reflect this by reducing the allocation for Priority Axis (PA) 1 and 4 by equal amounts within both transition and more developed regions.

In addition, the MA are also taking the opportunity to allocate additional funds from PA1 to PA3 within transition as this is currently over-committed.

All outputs and results associated with the revised PAs will be revised to reflect a consistent percentage of change as detailed within the table at annex A. All outputs and results will be monitored through the completion of the Annual Implementation Reports (AIRs).

Revision to ESF OP

Following the confirmed de-commitment for 2021, €6,938,940 for transition and €8,860,102 for more developed regions, the MA is proposing to reflect this by reducing the allocation for PAs 1, 3 and 4 within both transition and more developed regions.

As the ESF programme is already over-committed, it is not possible to absorb this latest de-commitment within the current allocations. The proposed reductions are detailed within annex A however these are subject to change following the outcome of the MA Approval Panel meeting of 25 May. A revised table will be circulated to PMC members for approval ahead of submitted on SFC.

As with the ERDF programme, the outputs and results associated with the revised PAs will also be revised to reflect the movements of funds and percentage of change detailed within the table at annex A. As with the ERDF programme, all outputs and results will be monitored through the completion of the AIRs.

The reduction in funding to PAs 1, 3 and 4 reinforces the importance of identifying potential savings to ensure there is sufficient funding to support the continued, or potentially reduced, delivery of activities within these PAs.

Claims forecast: January to April

Between January to April, a total of 51 claims were forecast to be submitted by Lead Partners (ESF: 31, ERDF: 20) totalling £48.8m (ESF: £31.3m, ERDF: £17.5m).

Of those 51 claims, the MA received 7 ESF claims valued at £7.9m and 8 ERDF claims valued at £5.4m.

Performance towards N+3 (2022)

The MA is aware there can be various reasons why claims are not submitted as per forecast, however this level of performance in the first four months of the year does cause concern over the ability to achieve the N+3 target for 2022 which is £394,496,521 (still to be confirmed by the EC). There is still a significant number of verified claims required to achieve the N+3 2022 target (ESF: £62.3m, ERDF: £65.6m).

There are various work streams ongoing within the MA to accelerate progress towards achieving N+3 for 2022 (e.g. re-introduction exercise, claims prioritisation, etc.) but it is imperative that claims are submitted as per forecasts, where possible, to minimise any de-commitment this year.

PMC working group members supported, in principle, the approach by the MA to revise the OP following de-commitment with the final details being submitted at the PMC meeting on 18 May.

Historically the MA has been able to absorb the de-commitment within both the ESF and ERDF programmes with no impact on our financial commitment to funded activities. However, given the current level of de-commitment, approximately £130m, this will not be possible going forward, and indeed to reflect the 2021 de-commitment figures savings will have to be identified from the ESF programme.

Decisions required

PMC is invited to:

• review the proposed revisions to the ESF and ERDF OPs in annex A
• confirm that you are content for the revised OP for ERDF to be submitted to the EC for final approval
• confirm that you are content with the proposed revised OP for ESF, subject to a revised table being circulated following the MA Approval Panel meeting on 25 May 2022

Annex A

To view the annexes attached to this covering paper, please contact europeanstructuralfunds@gov.scot