ESIF Programme Monitoring Committee working group update paper: December 2021

Purpose of paper

This paper provides a summary of the discussions, actions and recommendations developed by members of the Programme Monitoring Committee (PMC) Working Group (WG) to streamline and accelerate the claims process.

Background 

At the PMC meeting of May 2021, it was agreed that a WG would be set up to examine the rate and flow of European Social Fund (ESF) and European Regional Development Fund (ERDF) claims submitted by Lead Partners (LP) to the Managing Authority (MA), which are then verified and finally paid to LPs.

The remit of the WG was to identify obstacles impacting on the efficiency of these processes and develop solutions and improvements to streamline and accelerate the claims process. Any solutions and improvements must be compliant with European Commission (EC) regulations, our national rules and audit requirements.

The recommendations and solutions developed by members would be utilised by the MA to support progress toward achieving the N+3 target for 2021 and future years of the programme.

Membership

Membership of the WG included claims practitioners from the MA, a broadly representative cross section of LPs and delivery bodies. Both regions (Highlands and Islands, and Lowlands and Uplands Scotland) and both programmes (ESF and ERDF) were represented on the group. The Audit Authority were invited to attend all meetings in an advisory capacity representing SG Internal Audit and not the European Commission.

Schedule of meetings

The WG has met on four occasions since inception in June 2021, generally every 4-5 weeks, during which various aspects of the claim process were discussed and from this a number of recommendations were developed. These are detailed within the paper.

Summary

The MA provided members with a detailed report of all pending ESF and ERDF claims that had been on the EUMIS system for 90 days or more – 90 days being the target for the payment of claims and for the purposes of the WG, those claims below the 90 day threshold were not considered by members. However, members did acknowledge that some claims were paid within the 90 day threshold.

In developing the pending claims report, the governance team developed guidance to support the completion of the report and various sections within. Members made comment on the consistency of the report and these were taken into account in the presentation of future reports to address the issue of consistency of detail and information across all pending claims.

The paper and detail within was developed to inform discussion between members with the aim of progressing the payment of the claims detailed. Members welcomed the report and level of detail within. The governance team has continued to refine the report for members and will continue to seek monthly updates on the progress of claims. This will promote further collaboration between the MA and LPs as progress toward the payment of the claim is monitored.

To ensure a consistent approach across all claims, the clock officially starts towards the 90 days when a claim is submitted with an accompanying claim declaration letter from a designated signatory stating the claim is correct and true. In some instances there has been a delay between a claim being submitted on EUMIS and the claim letter being received.

Supporting the detailed report, the MA presented members with a table of claims in which the governance team listed a clear recommendation for members to consider and endorse or reject. Members endorsed the recommendations and this was recorded in the table of claims.

Discussion also focused on those claims that were converting to Unit Costs (UC). Whilst members recommended to defer ESF claims where those were converting to UC and would not impact the N+3 target for 2021. This recommendation from members would allow priority to be given to paying those claims not converting which would have a bigger impact on the progress towards achieving the N+3 target for 2021. However, it was agreed that further discussion on UC claims was necessary to properly assess their impact on future N+3 targets.

Members also recommended the prioritisation, or deferral, of ERDF and ESF claims not converting to UC, on a case by case basis considering the information contained within a summary report provided by the Portfolio and Compliance Manager (PCM). This report detailed what stage each claim was at, any known issues (e.g. lack of evidence, difficulties obtaining evidence, etc.) and indicative timescales for payment. Similar to comments earlier in the paper, members stressed the requirement, and importance, for consistency of detail and information within the report.

Lastly, where a claim was being delayed due to a lack of evidence in relation to one cost element of the claim, this cost would be rejected to allow the majority of the claim to be verified and paid with the rejected cost being introduced at a later date e.g. if 80% of the claim can be verified then pay those costs and defer the remaining 20% of the claim until evidence can be obtained. The MA would update all LPs on this development through the usual communication channels i.e. e-bulletins and the LP event scheduled for December 2021.

These WG recommendations were shared with colleagues within the MA and work is ongoing to prioritise claims where possible.

Claims forecast/risk rating review

In March 2021, the MA issued correspondence to all LPs requesting that they complete a pro-forma forecasting all planned claims for 2021 and 2022. This has helped the MA identify claims that are due for submission and put in place sufficient resources to begin the verification process. The MA reviews the forecast data on a weekly basis and issues reminder emails to all LPs who do not submit claims in-line with their forecast.

The MA agreed to expand this exercise to include forecast claims into 2023 and will take steps to complete this action early in the new year.

The MA utilised this data to provide members with papers summarising forecast claims (between April and October) that were currently blocked by outstanding claims on EUMIS.

Member also discussed the current risk rating allocated to operations, specifically whether there was potential to review and revise ratings thereby accelerating the claims process for those claims where the risk rating was reduced.

The governance team expanded and prioritised the outstanding claims for April to October by order of risk (red, amber and green). Revised various risk ratings were allocated to these claims based upon all historic claims from that LP that have been paid previously by the MA with little or no errors found within these historic claims.

In considering the risk ratings, and to ensure a consistent rationale was applied throughout, where a minimum of three out of four checks had not been performed (file, cost, article 125(5)b, article 127(1)) a revised risk rating was not proposed.

When calculating the revised risk rating, the average of checks carried out for each operation was taken and the following scale was applied:

• high (30%+): red
• medium (10-30%): amber
• low (0-10%): green

Members endorsed the revision of risk ratings, subject to Managing Authority Approval Panel (MAAP) consent. Following refinements and a second paper being presented to PMC WG members this has now been endorsed in principle by MAAP and work is ongoing within the MA to take these revisions forward.

These revised risk ratings will ensure that the number of mandatory checks completed on future claims is reduced in accordance with the risk rating which should accelerate the claims process. The MA, through the growth teams, will contact those LPs where the risk rating has been revised to discuss what impact this will have on future claims.

Recommendations

The work carried out by the members with the aim of accelerating progress towards achieving the N+3 target for 2021 has resulted in a mixed level of success. Whilst the ideas discussed will, at least in part, help improve the speed in which claims are processed there are a variety of other variables that must be considered by the MA before these changes are implemented.

The complex audit compliance requirements in verifying and approving claims will continue to impact on the submission and pace that claims are paid to LPs which in turn will impact on the programme’s ability to meet annual N+3 targets.

The creation of the WG and commitment of members has seen positive developments and recommendations over a short space of time. Whilst discussion has been robust, it has always been constructive.

In terms of specific recommendations, members agreed the following:

• to build upon the positive collaboration that has developed through the WG and continue to meet on a quarterly basis throughout 2022 and to the end of the programme if required
• to extend the LP financial forecast exercise into 2023 and continue to press LPs for updates on pending claims that have not been submitted
• update all LPs on the proposal to remove non-compliant units from claims through the usual communication channels i.e. e-bulletins and the LP event scheduled for December 2021
• the review and reassessment of risk ratings and to work with LPs on the impact on the revised risk rating