ESIF Programme Monitoring Committee minutes: May 2021

Attendees and apologies

• Hilary Pearce (HP) - Scottish Government (Chair)
• Cathy Cacace (CC) - Scottish Government
• Susan Tamburrini (ST) - Scottish Government
• Ryan Gunn (RG) - Scottish Government
• Robert Buntin (RB) - Scottish Government
• Euan Barclay (EB) - Scottish Government
• Anna Fowlie (AF) - Scottish Council for Voluntary Organisations
• Christine Mulligan (CM) - Skill Development Scotland
• Malcolm Leitch (ML) - Scottish Local Authorities Economic Development (SLAED)
• Francesca Giannini (FG) - Scottish Enterprise (SE)
• Rob Clarke (RC) - Highlands and Islands Enterprise
• Dave Roberts (DR) - Highland Council
• Andy McCann (AM) - Highland Council
• Linda Cunningham (LC) - Comhairle nan Eilean Siar
• Thomas Glen (TG) - East Dunbartonshire Council
• Michael Wilson (MW) - Scottish Government: Agricultural and Rural Economy Directorate
• Susan Fleming (SF) - European Commission – DG Emploi
• Gavin Bruce (GB) (substitute) - Scottish Funding Council
• Kris Magnus (KM) - European Commission - DG Regio

Items and actions

Agenda

• welcome and apologies
• minute of previous PMC meeting
• force majeure exercise update
• financial performance update
• Operational Programme (OP) changes
• financial forecast update
• update on European Social Fund (ESF) suspension
• Annual Implenetation Reports (AIR) update
• programme closure – 2007 to 2013
• risk register
• communications update
• future funding update
• any other business

Welcome and apologies

HP welcomed everyone to the meeting and thanked participants for their attendance. Participants were reminded of the ground rules for the meeting and advised to issue any questions or comments following the meeting to EB or RB. Participants were advised that an action log would be issued in due course following the meeting.

EB read the apologies for the day. ML noted that he was in attendance in lieu of Sharon Thompson representing the Scottish Local Authorities Economic Development (SLAED) group; LC noted apologies for Angus Murray representing the Western Isles Council.

Minutes of previous PMC meeting

HP spoke to the minutes of the previous meeting (17 December 2020) inviting comments or queries.

ML noted his disapproval of the previous minutes, noting some spelling errors and his view that they lacked coherence and conclusions. ML also felt that there were some actions not captured in the action log. HP noted that she had read the minutes and was generally happy with them but undertook to look at them further. RG echoed the comments of HP who welcomed the submission of any further comments.

DR asked if we might finish each section with a conclusion which might ensure that actions are better captured. HP undertook to review what has been written and issue a revised version of the minutes for approval if required.

Force majeure exercise update

HP spoke to the successful force majeure exercise. €53.8 million is now available between European Regional Development Fund (ERDF) and ESF that would not otherwise have been available if the exercise had not been successful and de-commitments had been applied. HP noted that the critical challenge now is to avoid any de-commitment in 2021 and beyond. HP asked if there were any questions on the Force Majeure exercise.

DR asked if the figures in the paper could reflect the breakdown between the transition and more developed areas. DR also asked if Lead Partners (LP) could be given the opportunity to re-profile any unspent elements and outputs for subsequent years changing the original profiles and forecasts given the COVID-19 pandemic.

HP agreed that the figures should reflect transition and more developed areas and asked RB to comment on the question of re-profiling. RB stated that re-profiling should still be able to take place through the Managing Authority Approval Panel (MAAP) process but that if financial targets would not be met then LPs must make the Managing Authority (MA) aware allowing monies to be reallocated and spent elsewhere. RB further noted that the N+3 target is still in place and unchanged for the end of 2021.

DR stated that expenditure that can be re-profiled might need to be moved into 2021 which in turn means that some expenditure currently in that year might then fall into 2022. HP noted her awareness of the issue noting that this will be discussed further in the meeting. HP stated accurate forecasting and proactive change requests will be crucial in dealing with the issue.

RG noted that MAAP meetings are scheduled each month and the MA will help with this speedy processing of change requests. RG encouraged LPs to begin the exercise without delay.

ML asked whether other programmes from the European Union made similar clams to the force majeure exercise undertaken by the Scottish Government. KM noted that the force majeure clause had indeed been used within other programmes but that the European Commission (EC) had taken a flexible approach within other programmes limiting the need for a wide use of force majeure.

FB asked if a breakdown by investment priority as well as by programme area could be provided as this would help with future programme performance analysis. RB noted that the figures are not yet split by priority as the MA would need to decide which priority these funds would come from.

Financial performance paper update

HP moved the discussion forward to discuss financial performance. The level of commitment in each of the programmes is high (84% in ERDF and 101% in ESF) but the level of claim is low at around 16% in ERDF and 19% for ESF. Claims to be paid in this calendar year (2021) amount to €163 million with €35.9 million pending which means LPs will need to claim €127.5 million fully paid and verified.

HP noted that it is vital to avoid de-commitment in 2021 if at all possible. HP also noted that her team has been encouraged relentlessly to improve the rate at which claims are paid and a training programme has been undertaken to support this enterprise. Recruitment of new staff has also been undertaken to boost capacity within the MA and these new members of staff will be in place in the near future.

HP asked members to work with LPs to ensure fully completed claims are submitted in the coming months. She noted that one element which slows down claims is the lack of evidence through proper documentation along with the subsequent back and forth between LPs and the MA.

HP asked members for their comments, suggestions and solutions to ensure we are in a good place at the end of the year.

ML stated that this could become a major crisis by the end of the programme. He noted in the years of delivery that only 20% of the money has been paid out leaving 80% to be paid. He was not confident if we would be able to get the claims though the system in the time allowed. He noted that additional requirements on payment requests will compromise efforts to have claims paid.

HP noted that she is well aware of the task ahead and asked for suggestions from ML as to how issue could be mitigated. ML described a claim which has been in the system for some months without payment and is concerned that progress might not be made as required.

HP again reiterated her awareness of the scale of the problem noting that ways have been explored which might improve and streamline the process. HP noted it is a tricky balancing act to satisfy auditors and simultaneously turn claims around quickly.

RG noted that he is meeting with colleagues this afternoon to develop ways to address the timescale of claim delivery the outcome of which would be circulated in due course.

HP accepted that there are certainly ways in which the MA could improve its processes and these will be explored. She also felt it was important to mention that many claims are still submitted without basic required information resulting in significant delays.

RB stated that the purpose of the meeting should be to try to work together to resolve the issues. ML agreed that LPs are by no means blameless but retrospective rule changes are a cause for concern. He asked that if a commitment to no such changes could be made this would be of major assistance to LPs. HP confirmed that the impact of retrospective changes has been raised with audit colleagues on several occasions.

DR noted that he accepted that both the LPs and MA have inherited circumstances some of which are not within their control. He asked if an offline claims system could be developed to work in tandem with EUMIS and noted his concern with change requests which add several weeks to the claim cycle. He stated that without radical action the programme may as well be scrapped.

HP noted that having an offline system has been looked at previously and agreed that EUMIS does perpetuate delays. She agreed that the feasibility of a parallel system should explored but advised that comments suggesting that the programme could be scrapped was an extreme response and not helpful at this point.

FG echoed the sentiment that radical changes are required and the PMC meeting offered only limited time to explore solutions. She suggested that a working group be set up to explore issues and solutions andfelt that it would not be prudent to wait until the next meeting in November 2021 as this would be too late.

HP noted that some pre-claim checks have happened before claims are submitted properly. It is difficult to do this for all but it may have some impact on the claim rate. She was supportive of the working group suggestion asking that this be recorded as an action.

TG asked if it is time to communicate the levels of financial loss which we might have to manage given that there might be some media interest if this occurs and suggested that learning from this programme should be communicated with the Shared Prosperity Fund.

HP noted that European Structural and  Investment Funds (ESIF) operational funding is a legal commitment from the Scottish Government so no LP, who had met grant conditions would be left out of pocket should de-commitment occur.

CM noted her support for the working group and spoke to the LP claim forecast exercise noting her disappointment that many of the LPs had not responded. She also noted her concern at the unit cost exercise saying that she was not clear on what MA checks will be undertaken on future claims for those operations converting to unit costs for SG purposes. 

CM described her her disappointment at sporadic communications received from the MA although noted that relations were positive. CM spoke to previous programmes when the MA would sit with the LPs to complete required checks. HP again reiterated her support for a working group but noted that the complexities of the current programme would not allow for the type of checks carried out in previous programmes.

CC briefly explained that the unit costs question regarding claims verification for converting operations is being discussed with the EC and Audit Authority (AA) imminently.

DR spoke to the current checking process which he accepted was a difficult one for the MA to manage recognising the pressure that this creates. He also noted the redeployment of resources that took place due to the COVID-19 pandemic which has resulted in lost ground. He felt that more staffing resources will now need to be deployed to support LPs if significant progress on the programme is to be made. He further noted that he is well aware that the issues are not entirely the fault of the MA.

HP noted that 12 posts have been created and will soon be filled. These posts will provide a significant boost to the existing compliment of staff in the growth teams.

KM noted that he is encouraged that the group are on the same page and aware of the issues to be addressed. He hopes that the working group would lead to a frank and open discussion and that LPs should be able to show what they can absorb within the programme restrictions. He further recommended that the frequency of the PMC meetings be increased to help with discussion. HP agreed that the PMC meetings could be increased and noted that quarterly meetings should be manageable although these meetings do require a significant amount of resources to manage.

ML supported setting up a working group and more frequent PMC meetings noting that he hoped his initial comments had not been taken in the wrong way but that he did feel that more radical approaches need to be considered. He said he would welcome ideas from other areas in the United Kingdom which may help the delivery process in Scotland and was also supportive of more frequent PMC meetings.

HP noted that she is routinely in contact with other delivery areas of the United Kingdom to look for ideas.

FG noted that the more frequent PMC meetings could have a smaller agenda which would allow a more focused discussion. HP noted that the next PMC might be best spent looking at items developed from the proposed working group.

DR added that there are some issues with the papers but that an action should be taken to have members contact the MA with comments.

As no further discussions points presented themselves HP closed this section of the meeting.

OP changes

HP highlighted key points and revisions that reflect reallocation of funds to priority axis one in support of COVID-19. The MA has utilised uncommitted funds and other savings to allocate around £40m to respond to the pandemic.

HP noted that no flexibility now exists to approve new operations at this stage as both programmes are now overcommitted. HP asked LPs to submit change requests promptly.

FG added that re-profiling is crucial and it would be helpful if a timescale is given to prompt LPs to re-profile quickly. FG also noted uncommitted figures are calculated based on approved operations and asked if the £40m included headroom that exists within strategic intervention approvals.

HP advised that the £40m will take into account uncommitted funds at operational level not strategic intervention level. ST advised that her understanding is that uncommitted funds are at the operation level. 

DR asked if it was possible to get the details for how the proposal was put together detailing where uncommitted funds came from. He also referenced a 74% increase in transition region priority one and asked if outputs and results will be noted against the same transition region. He asked if the MA has honoured a commitment to not move money out of the transition area to the more developed area.

HP advised that she would need to discuss this with RB and RG as to how these could be presented. RG confirmed that he can look at the request and refer back to him with the information requested. 

RB confirmed that any money that is currently allocated within the Highlands and Islands will remain in that area and the same is true for the more developed areas. RB further confirmed that outputs will be introduced for the COVID-19 health spend showing where they have been spent.

KM spoke to the proposed text on OP changes recommending that the longer list of potential elements should not be submitted to the EC, as he was aware that only expenditure on personal protective equipment (PPE) would be claimed. He noted that the programme is making use of the 100% co-financing facility and noted the need to act quickly to ensure timescales can be met for declaring this expenditure to the EC. He advised the group that the division between transition region and more developed region should be detailed in the formal submission to the EC.

HP confirmed that the entirety of COVID-19 expenditure is PPE and is sure that the required documentation exists to support this expenditure. ST confirmed that much work has been undertaken with health and audit authority colleagues to ensure that a robust audit trail exists.

CM asked if there is still an option to move funds between the ESF and ERDF programmes. RB confirmed that funds are not able to be moved between programmes or regions but can transfer between priorities if within the same regions.

CM asked why there had not been a request for 2023 forecast expenditure exercise. HP confirmed that we do need a forecast for 2023 but noted that there has not been a good enough response for the information that has been requested.

ML felt that the 100% intervention rate is not covered within the paper and asked if new outputs will be introduced where new health care expenditure is added. He pointed out that the workforce development priority has the lowest spend of all ESF priorities and was not confident that this investment priority could be worked through the claims system. ML asked if the final versions of the OP paper could be shared with the PMC.

RB noted that the 100% intervention rate is not added because it is not specifically relevant to the allocations. He confirmed that the final OP paper will be shared when available.

HP asked if the proposals set out in the paper could be adopted. This was agreed with no objections voiced.

Financial forecast update

HP spoke to the LP financial forecast paper. To date there have been 26 (out of 43) responses with a projected grant claim between April 2021 and December 2022 of £437m. HP noted her concern at the figure and encouraged Lead Partners to respond in a timely fashion.

FG asked if the profiling could be broken down within priority areas, and noted that partners can re-profile more frequently but that if the claims will not be paid in a timeous manner then there is no point in doing so. FG asked if an exercise could support the Lead Partner claim forecast with some assurance that the claims could be paid.

HP noted that is difficult to know if a claim will be paid at the outset without seeing the associated evidence.

TG echoed the comments of FG and said if he has the information showing where accountability lies, whether it be the quality of the claim or the time it takes for the MA to pay a claim, this would allow him to go back to his colleagues and challenge accordingly.

DR noted that he would be more comfortable showing what can be delivered, spent and properly evidenced agreeing the frequency of claims with the MA.

HP noted the difficulties both parties have and that this is something that the working group should strive to tackle.

ML asked if there was a way in getting information to the MA by delivering part of the process offline outside the constraints of EUMIS.

As no further items were forthcoming the it was considered that the group had noted the points raised in the paper.

Update on ESF suspension

HP noted that the ESF suspension has yet to be formally lifted. Some information pertaining to audit checks on procurement verification will soon be sent to the EC. It is hoped that a further update can be communicated in due course.

Annual Implementation Reports (AIR) update

HP noted that the AIR approval process for 2019 has continued and dialogue is ongoing with the EC. Preparation or the 2020 AIR is being developed and drafts for this will be circulated in the next fortnight.

Programme closure: 2007–2013

HP advised the group that programme retention dates for documents remains 3 years after formal programme closure. HP confirmed that relevant dates will be circulated in the next bulletin.

ML asked that the Scottish Government website be updated to show retention dates and that a future PMC could outline the closure dates for the current 2014–2020 programmes.

HP confirmed that the website can be updated but that dates for the current programme had not yet been finalised.

Risk register

HP outlined the current changes to the risk register and asked for comments.

FG asked that the risk register be completely reviewed given the current issues faced by the current programme.

Communications update

HP noted that an online LP event is being planned and further details will be shared in due course.

ML noted that website has not been updated regularly this year and hopes that it will be updated more fully now that the election period has passed. HP noted that there is a communication backlog within SG Digital who must prioritise health related matters. RG confirmed that he has been in communication with SG Digital asking for key documentation to be updated.

DR asked if regional visibility might be helped by working through local Lead Partners. DR felt that short updates could be communicated with the MA and LPs working together to develop these. RG noted that our communications manager (Patrick Douglas-Early) has issued reminders and asked parties for such information with a view to sharing these. RG confirmed that diary permitting that he is happy to work with partners to communicate the work that we do.

Future funding paper

HP asked that EC observers now leave the meeting, thanking them for their attendance and contribution today, as the next item on the agenda discussed future UK funds replacing European structural funds.

HP spoke to the future funding paper which sets out that the position of Scottish Ministers who are pressing UK Government that Devolved Administrations are fully involved in the future design of funding to be administered in Scotland.

Any other business

HP asked the group if any other items required attention.

FG asked if the next PMC meeting should be scheduled for a longer time. HP commented that the next meeting should be more focused but that generally speaking quarterly meetings could be more substantial.

DR asked that if papers could be issued two weeks before the meeting and that the future agenda be timed to keep the discussion moving. DR echoed the view that full PMC meeting be scheduled on a 6 monthly basis with intervening quarterly meetings being more focused. HP noted these points.

HP asked if any other items required discussion. As nothing further was presented HP thanked members for their participation and the meeting was formally closed.

Actions

• a review of the previous minutes will be undertaken and a new version will be issued if required and participants will be invited to circulate comments (HP responsible)
• the ESF and ERDF programme performance against OP should reflect transition and more developed regions (RB responsible)
• the possibility of running an offline claims system in parallel with EUMIS will be explored (RG/CC responsible)
• a working group will be set up to explore issues which will provide meaningful improvements in the timescales of claim payments and claim quality (HP responsible)
• TG committed to exploring claim maximisation and this will be taken to the Society of Local Authority Chief Executives and Senior Managers (SOLACE) (TG responsible)
• LPs will contact EB, RB and RG should they have any comments or queries to be addressed within the papers (all responsible)
• RB will return to DR with further information on how the figures were calculated within the OP changes paper (RB responsible)
• the revised OP paper will be shared with the PMC (RB responsible)
• LPs should contact colleagues to ensure that the outstanding financial forecast submissions are returned as soon as possible (LPs responsible)
• the Scottish Government website will be updated with the required document retention dates (RG responsible)
• the risk register will be reviewed in its entirety and an update will be provided at the next PMC (HP responsible)