ESIF Programme Monitoring Committee minutes: October 2022

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
• Anthony Carrick (AC) - Scottish Government
• Kayleigh McLean (KMc) - Scottish Government
• Patrick Douglas-Early (PDE) - Scottish Government
• Andrew Lightfoot (AL) - Scottish Government
• Eilidh Steele (ES) - Scottish Government
• Anna Fowlie (AF) - SCVO
• Jackie Thomson (JT) - Orkney Island Council
• Angus Murray (AM) - Comhairle Nan Eilean Siar
• John Mundell (JM) - Orkney Council
• Christine Mulligan (CM) - Skills Development Scotland (SDS)
• Sharon Thomson (STh) - Glasgow City Council
• Francesca Giannini (FG) - Scottish Enterprise (SE)
• Robin Clark (RC) - Highlands and Islands Enterprise (HIE)
• Rebecca Fairgrieve-Stewart (RFS) - Scottish Funding Council (SFC) 
• Guus Muijzers (GM) - European Commission
• Peter Matthjs (PM) - European Commission
• Joanne Knight (JKn) - European Commission
• Kris Magnus (KM) - European Commission DG Regio
• Susan Fleming (SF) - European Commission DG Emploi

Items and actions

Agenda

• welcome and apologies
• conflict of interest
• minute of previous PMC meeting on 18 May including action log
• financial/operational performance update
• claims summary update
• communication update
• evaluation strategy update
• risk register
• any other business

Welcome and apologies

HP welcomed all to the meeting, noting that the focus will be on the two papers on performance and claims and the issues around closure and maximising the December declaration. There is also a focus on the need of compliant claims and the uses of unutilised funds.

Conflict of interest

HP asked members if there are any conflicts of interest to be highlighted. No conflicts of interest were reported.

Minute of previous PMC meeting on 18 May including action log

KM stated that drafting suggestions, of particular importance those on page 13, sent in June were not updated.

HP responded that this will certainly be corrected.

Regarding the action log, HP noted that all are completed with the exception action point 7, which was to set dates for the next PMC working group meeting.

RG stated that, since the focus is now on processing claims for the remainder of the year and N+3, a wash-up meeting for the PMC working group has been proposed for early December to assess the performance of the programmes between January and December. In closing, Ryan added the wash-up meeting would be the last meeting of the working group.

RG added this could also assist in preventing further de-commitment. All recommendations put forward by the working group, where practical to do so, have been put into practice. This meeting could also help maximise the December declaration.

HP asked members of their view of having a wash-up meeting in December.

CM responded that a December meeting would be helpful, adding that a conversation about how realistic current N+3 goals are is also necessary. CM noted claims currently on EUMIS that are lacking in detail and if there was to be an earlier working group there ought to be discussion about this as well as if the changes implemented from previous PMC working groups have had an impact on the turnaround of claims.

CM asked RG if further correspondence can be provided in the meantime as there are concerns that will need to be addressed prior to the proposed December meeting. CM added further information may be required.

RG stated that this is welcomed and that the information provided in these papers is aimed to stimulate further discussions.

HP asked if there are any further comments on the action log. No further questions or comments were noted.

Financial/operational performance update

HP summarised that the financial/operational performance update paper shows the performance and revised allocations at tables 1 and 2 following the 2021 de-commitment. The key parts to note are that successful claims sit at below 40% and although some of the larger claims on EUMIS are still being worked on, it is still a worrying position.

Secondly, the forecast is not being adhered to in many cases due to a variety of reasons that will be covered later. Section 5 deals with the current N+3 position, although these figures do not take into account totals emerging from the December declaration which is underway. Although, there is a significant gap to reach the N+3 figures, but there are a lot of claims presently on EUMIS.

Claims summary update

HP spoked to the claims summary paper stating that the claims received is set out on section 2 per quarter for 2022; the number of claims and their value. Section 7 shows the final quarter’s expected claims over £500,000 and section 9 shows Lead Partners (LP) who have not claimed for the first half of 2022. Section 10 shows the claims paid to date and section 11 are claims on EUMIS. Section 12 is outputs and results.

HP added that the number of older operations where the final claim has not been submitted has been surprising, with the oldest having ended in 2016 without a final claim submission. Another claim ended in 2017, 22 finished in 2018 and 23 in 2019; a total of 47 claims that finished between 3-6 years ago.

HP noted there may be reasons behind this, but the age of these claims is nonetheless concerning. The knock-on consequences of this is that there are a large number of claims ending in 2023, with a total of 136. Inevitably this will cause a vast wave of claims in late 2023 and January 2024. HP reminded members that 31 January 2024 is the final date of submission for claims.

HP noted many conversations have taken place regarding increasing the amount of claims submitted as well as increasing the pace of claims being paid. Proposals will be put to LPs which will require a number of different obligations, both for LPs and within the Managing Authority (MA).

The MA also must ensure that claims samples are issued as quickly as possible and that the evidence required under articles 125a and 125b is requested quickly thereafter. LPs will also be reminded that all change requests are submitted by the end of May 2023 at the latest. Discussion are also continuing on the oldest operations and how the MA can address that these claims ensuring payment much sooner than January 2024.

HP opened up to questions on both the financial/operational performance and claims summary update paper as these are likely to be interrelated.

AF agreed that the final claims for operations finished years ago should be addressed and these LPs should be contacted imminently and provided with deadlines, although this should not necessarily be applied to LPs with an issue such as a blocked claim.

RG added there needs to a be claims escalation process within the MA, he also added that when LPs are contacted about their pending claim, many LPs often move the claim forward. RG agreed that further clarity is required to explain the reasons why a claim is blocked.

LS noted that out of the LPs listed on table 9, there was only 3 LPs who could have submitted a claim and that the other LPs already have either a change request or a claim already on EUMIS. The change request process is time consuming, but LPs have been made aware this can be done offline while a claim is being processed.

HP added that this is why all change requests must be submitted by May 2023. Although a claim on the system blocks a subsequent claim, there is nothing to stop claims being compiled and entered onto EUMIS, ready for formal submission once the previous claim is complete.

Regarding this point, AF asked if it had been noticed there is a significant gap between the last claim being completed on EUMIS and the next claim being submitted.

HP noted there are cases of this.

LS responded that it depends on the size of the claims and larger claims can take months to complete. Also, it can take a while to upload all of the claim information and participant data onto EUMIS. LS further noted that there can also be technical issues i.e. problems with EUMIS.

AF spoke to the financial risk and asked would happen if there is remaining information on EUMIS yet to be processed but the claim cannot be paid and the money has been spent by LPs.

HP responded stating that the Scottish Government is obligated to pay what is verified and evidenced, but it does not have liability for costs which are not evidenced, therefore not compliant.

RC noted that the previous statements have been helpful but that more clarity on the issues regarding issues preventing claims from being submitted would be beneficial in advance of the meeting. Considering that claims are now being processed faster than previously due to adjustments to processes, RC asked about programme closure and if the MA was confident that what is now in place which is starting to work will be sufficient to mitigate risks. RC noted this is in particular regard to a bottleneck of claims and asked if there is more to be done to mitigate this risk further.

HP responded that there are a number of actions within the closure programme that are intended to mitigate the risk of a large influx of claims towards the end of the programme. One of these actions is about resourcing, which is currently being dealt with within the MA in order to retain the staff required for this work and HP advised LPs to do the same. The second action is to focus on LPs with the largest claims, on which risk mitigation plans are being drawn upon.

HP added there are special mitigation plans for specific LPs, which could potentially be applied to other LPs if required. The third action is regarding deadlines, which aims to ensure the oldest claims are dealt with as soon as possible. There is also a need to be much more robust with LPs about submitting evidence as HP’s letter issued in May has expressed.

There are 3 reminders and if there is still no evidence after this point, the MA will move to de-commit the operation as it cannot afford to have further delays. At some point soon, this will need to be reduced to 2 reminders and ultimately to 1 in January 2024.

CM noted that there is another scenario in which if a claim is blocking the system on 31 January 2024, and asked where would the liability would be in this situation. CM stated that although LPs can prepare claims offline and on EUMIS, claims that are ready at this point would still not be ‘formally’ submitted and questioned whether these claims would be considered formally submitted legally. The answer to the question is important as this could impact the future pattern of claims.

CM also asked if this would mean the claims would need be re-profiled.

RG responded that the MA would ask for these claims to be re-forecast and a revised forecast submitted to the MA.

CM noted this would be a step in the right direction. Regarding the unit cost process, CM asked if there was any update.

HP spoke to CM’s point regarding blocked claims and responded that we need to ensure all penultimate claims are submitted by October 2023 because, there may not be time to get the final claim in. While we can see the forecasts of claims, the problem is still that there are many LPs who are not adhering to this with claims continually being re-forecast.

RG spoke to the forecast elements and stated that we can give detail of what is blocked and what is not. While there are gaps where LPs could submit a claim where there is no blockage, there are still re-forecasts which may be down to issues like resourcing. RG added, for example, there is approximately £40 million worth of European Regional Development Fund (ERDF) claims that have not been submitted that are not blocked by other claims from June to December.

Following CM’s point on unit costs, HP stated that ES’s team is currently working on batch 6 of unit costs to the European Commission (EC) and these are units for employment counselling services provided. 5 claims have already been completed, totalling approximately €90 million.

ES noted that €90 million has been claimed in expenditure, not grant. Unit claim 6 is looking like €15 million in unit cost expenditure. ES added phase 2 is currently being progressed with LPs and just under half of these have been claimed and the aim is to claim the rest by July 2023. This will also be when phase 3 begins, which will last to the end of the programme.

HP noted that unit costs can be laborious and complex and thanked members who have contributed to this so far. HP added that the unit cost deficit is constantly being calculated, which is the difference between what is being paid out to operations and what we will have paid out by the end of the programme, and what we will have been able to paid on a unit cost basis. This is Scottish Government’s liability, currently estimated at £45-47 million.

CM thanked ES and her team for the work that has gone into managing the unit cost claims adding that 3rd party organisation have provided positive comments from what is happening in SDS. Regarding phase 3, CM noted that SDS finish their contracts with the third sector organisations at the end of this calendar year. These organisations be worked with through phase 3, therefore CM asked if there is a timescale for this.

ES noted early spring is under consideration as this is when phase 3 starts, and there will be an overlap between phase 2 and 3. If contracts are finishing sooner, it would be helpful to be contacted earlier.

CM stated that something will be needed to ensure 3rd party organisations continue to co-operate once contracts have expired next year.

ES responded that this is a good point, and it would be worthwhile asking all LPs if contracts with delivery agents are ending sooner so that they can be prioritised.

RFS stated that planning has been underway at SFC and the claims are significant as they are annual claims. From SFC’s perspective, the only way all claims can be submitted by 31 January 2024 is to submit a 2 year claim, which would take a lot of work and would take a few more months before this information is ready to be submitted.

The MA’s checking process in the last few annual claims submitted has been around 9 months to in excess of a year. RFS added SFC are not in the position to wait another year for a claim to be checked and paid. Considering this, will be a 6 month window for a 2 year claim to be paid while it can take up to a year for a 1 year claim.

HP responded that the length of claim taken by the MA to check a claim is largely contingent on the quality of the evidence when the sample has been requested. The best way of mitigating long delays is for the evidence to be as perfect as possible.

RFS responded that SFC has submitted high quality claims and everything possible is done to ensure this such as multiple checks. RFS noted that it has been mentioned before of ideas to alleviate the burden of checks on the MA which could speed up checks.

HP noted that the PMC working group has looked at various ways of streamlining processes in order to increase the pace of verifying claims. Members of the PMC working group will understand however that it is difficult to get auditors to agree to any reduction of levels and numbers of checks due to fears of non-compliance. Noting RFS’s first point, SFC may have high quality claims but it is worth reminding all LPs that the quality of evidence ensures the quickest possible turnaround of claims.

ST responded that there will be a follow up with RFS to ensure the SFC is dealt with as quickly as possible.

SF spoke to table 1 for European Social Fund (ESF) on the performance paper and stated that the percentage of programme committed for priority 10 has gone down to 69% whereas in previous PMC meetings it was around 100%.

HP noted that this is regarding Highlands and Islands. RB responded it was previously 103%, but there has been large de-commitment from two LPs that would have caused this. HP said RB will clarify this with SF.

KM noted that specifically for ERDF and the N+3 target for this year, there is an amount of £63 million mentioned as a target for the entire year, but at this point the target is still €36 million. KM spoke to the figures for ERDF listed in the tables and asked if there is €10 million in the system that could be theoretically submitted to the EC by the end of this year. KM continued that this N+3 de-commitment would go down from €36 million to €26 million, which is still a significant amount. If claims still do not come in, there will no additional expenditure available to set off N+3 targets.

KM noted that for ERDF there is £50 million which is not committed to projects. The fact that there is no proposal on the agenda today to utilise these funds, the impression is that this £50 million will also be de-committed. KM added this means we are looking at a de-commitment of £75 million for ERDF alone.

RG stated that the paper shows £20 million worth of ERDF pending claims also on the system. There is a re-introduction exercise currently taking place for ERDF. RG added that any de-commitment for ERDF is expected to reduce by the time of the December declaration.

HP added that TG is working on the re-introductions which is the re-introduction of expenditure that was previously withdrawn from prior declarations, but can now be introduced again. This will be added to the theoretical amounts of the December declaration.

ST stated that there has been discussions with agencies, particularly Transport Scotland, in terms of soaking up this expenditure. Areas are looking to use the non-committed ERDF and there are capital projects that would be ideal. There are however two issues; one is that the eligibility criteria is constricting particularly in regards to capital spend and the other is the timescale as most of these projects would not be completed in time.

HP asked all members of PMC to look out for the letter being issued next week that sets out about obligations around the claims process and new deadlines and requirements for older operations. ST will lead on these discussion with SFC. HP noted that if there are LPs that believe an individual risk mitigation plan would be helpful that they contact the MA.

Communication update

PDE stated that this contains a summary of recent developments and noted that there is currently an update to the website which has faced issues with uploading documents and accessibility. Due to Scottish Government rules on accessibility, PDFs have had to be removed from the website. However, PDF versions are still available on EUMIS.

PDE noted that there is a LP event on 30 November 2022 and further information on this will be sent out soon.

HP added the case study booklet for 2022 will be launched once a site visit is arranged for the Minister.

CM stated that the last LP event was generally welcomed and proposed that members are asked to provide questions in advance as there may be pertinent questions that have not been brought up during meetings such as this.

RG asked for views or comments on a potential site visit. All suggestions will be forwarded to the Minister for consideration.

Evaluation strategy update

HP stated that there has been two recent evaluations completed by EKOS: delivery structures and partnership working, and programmes in the Highlands and Islands region. These are now available online. EKOS had also been awarded the contract for evaluation of smart and inclusive growth. The evaluation is now concluded with the final report being placed on the website in due course. A briefing session on this will be organised in early November.

An update on the low carbon thematic evaluation will be provided to members in due course. HP added that this will be last evaluation of 2022. 

The final evaluation of the 2014-2020 programme, post evaluation, will be launched in autumn next year.

HP asked if there are any comments or questions from members. None were noted.

Risk register

HP stated that there are two pages to this, the current risk register and the risks that have been removed for now. The top risks are N+3 expenditure and the risk of de-commitment and the effect this will have at the end of the programme and closure being compliant and timely. HP spoke to removed risks and continued that the use of Coronavirus Response Investment Initiative (CRII) flexibilities had to be used by June 2020 although was extended into 2021, but this had now closed. The risk of ESF suspension continuing has also been removed given that the auditors have confirmed the programme is no longer in suspension, but are still waiting for a signed letter from the commissioner.

SF added that confirmation will follow in due course.

PM stated that this process has been incredibly long and we know today that there is a green light on this decision and as this is at the final stage. Immediately after the letter is sent, the EC will be working to release funds which would normally happen automatically.

HP asked if there are any other comments or questions. None were noted.

Any other business

HP asked members if there is any other business.

Regarding the closure of the Lowlands and Uplands (LUPS) programme, CM asked if there is any update.

LS stated this was raised at the LP meeting in September and at that point we were still waiting on a formal notification. LS will liaise with TG to see if there is any other updates.

CM noted this is concerning as there is a risk relating to document retention as the old programme documents will be kept longer than the current documents.

SF responded that the LUPS is with the EC and the closure letter has been completed, but it seems to have been stuck in system and currently there is an effort to have this dealt with.

HP asked if there are any further comments.

KM noted there have been points for everyone where technical issues have slowed progress. KM added that while the EC were not able to come to this meeting, an effort to meet in person will be made in the future. Going forward, it has been established there are risks in the following months and it is worth noting there are a number of absentees today. KM stated that in the past there was attempts to have more frequent meetings and this should be considered by the MA if there is little progress.

HP stated that there needs to be a balance between focusing directly on individual LPs to ensure claims are coming in and issues are dealt with and reporting back to the PMC. A date has not been set for the PMC meeting, but should be in the first quarter of 2023. HP agreed the attendance issue should be addressed.

HP thanked all members and ended the meeting.