European Structural and Investment Funds: Management and Control System

Managing Authority

2.1. Managing Authority and its main functions

2.1.1. The status of the Managing Authority (national, regional or local public body or private body) and the body of which it is part

As the designated Manaing Authority (MA), the SG is responsible for the efficiency and probity of the management and implementation of the programmes. The European Structural Funds and Subsidy Control Division is responsible for discharging all the obligations and verifications required in Article 125 of Regulation (EU) No 1303/2013 and Regulations 1304/2013 and 1301/2013 of the European Parliament and of the Council which pertain to the delivery of the ESIF programmes for ESF and ERDF in Scotland. The MA is deemed a National Body.

2.1.2. Specification of the functions and tasks carried out directly by the Managing Authority

Management of the operational programmes:

• support the work of the Programme Monitoring Committee
• draw-up and submit annual and final implementation reports
• make information available to beneficiaries that is relevant to the execution of their tasks, including guidance and procedures
• operate a system to store all appropriate data in computerised form
• ensure that data is collected, entered and stored

Selection, appraisal and approval of operations in line with the operational programmes and community rules:

• draw up appropriate selection criteria
• prepare application form and guidance
• assess and approve operation applications 
• issue an offer of grant setting out conditions of support including specific requirements of delivery under the operation
• ensure that the operation falls within the scope of the Fund
• satisfy itself that the operation has the administrative, financial and operational capacity to fulfil the conditions of the operation
• satisfy itself that, where the operation has started before the submission of an application for funding to the managing authority, applicable law relevant for that operation has been complied with
• ensure that operations selected for support from the Funds do not include activities which have been part of an operation which has been or should have been subject to a procedure of recovery

Financial management and control of the operations:

• payment of claims
• ensure beneficiaries maintain a separate accounting system or adequate accounting code for transactions relating to an operation
• put in place effective and proportionate anti-fraud measures taking into account the risks identified
• carry out administrative verifications in respect of each claim
• carry out on-the-spot verification of operations
• put procedures in place to ensure that there is an adequate audit trail relating to all documents regarding expenditure and audits
• draw up the management declaration and annual summary
• verify that the co-financed products and services have been delivered and that the expenditure declared by the operation has been paid and complies with applicable law, the operational programme and the conditions for support of the operation 

The MA does not carry out any functions of the CA. Section 3 describes the CA and its main functions and organisation.

2.1.3. Specification of the functions formally delegated by the managing authority, identification of the intermediate bodies and the form of the delegation (underlying that the managing authorities maintains the full responsibility for the delegated functions), under Article 123(6) and (7) of Regulation (EU) No 1303/2013. Reference to relevant documents (legal acts with empowerments, agreements). Where applicable, specifications of the functions of the controllers foreseen in Article 23(4) of Regulation (EU) 1299/2013, for European Territorial Cooperation programmes

The MA has not formally delegated any of its functions or tasks to an intermediate body under Article 123(6) and (7) of Regulation (EU) No 1303/2013. Within this Programme, Scotland also does not have a controller function for any of the ETC programmes in which it is involved.

The MA has chosen to clarify the internal control functions which should be operated by a LP to ensure that the Strategic Intervention they deliver are delivered in a manner which is compliant with the Regulations. All documentation provided to the LP should be read in this manner. This in no way delegates responsibility or authority for actions required by the MA and all first line checks for legality and probity remain, at all times, the responsibility of the MA.

2.1.4. Description of the procedures for ensuring effective and proportionate anti-fraud measures taking account of the risks identified, including reference to the risk assessment carried out (Article 125(4)(c) of Regulation (EU) No 1303/2013)

The anti-fraud measures set out are:

• the programmes are developed using a risk-based system to ensure adequate and proportionate preventive measures are in place to mitigate the residual risk of fraud to an acceptable level
• anti-fraud measures will be structured around the four key elements of: prevention, detection, correction and prosecution
• a fraud risk assessment has been undertaken to identify the impact and likelihood of fraud risks relevant to the key processes in the programmes. The fraud risk assessment will be updated annually. Responsibility for the result of the fraud risk assessment and actions arising rests with the Head of the MA.
• the anti-fraud plan arises from the fraud risk assessment and is aimed at ensuring measures are in place to deal with suspected and detected cases of fraud. Guidance will confirm the clear reporting mechanisms on both suspicion of fraud and also control weaknesses ensuring sufficient co-ordination with the AA, Scottish investigative authorities as appropriate, the Commission and OLAF
• appropriate processes are in place and detailed in Division’s Suspected Fraud Response Plan for following up any suspected cases of fraud and related recoveries of EU funds spent in a fraudulent manner. Processes, procedures and controls connected to the potential or actual fraud will be reviewed and fed into the fraud risk assessment follow-up reviews

The Fraud Risk Plan (Annex 1) sets out:

• anti-fraud Policy Statement
• anti-fraud Mission Statement
• approach to tackling fraud
• review processes
• reporting processes
• promotion processes
• conflicts of interest
• the Suspected Fraud Response Plan

2.1.5. Strategic risk management and mitigation

The Head of the MA is responsible for overseeing the management of strategic risks associated with European structural funding, including providing regular monthly updates to the Directorate risk register, the divisional risk register, risk reports to the ESF Joint Programme Board, escalation of risks where required to SGACC, and, for financial risks to Scottish Government’s Chief Financial officer through close liaison with the division’s Finance business partner. Political and reputational risks are managed in consultation with Scottish Ministers and special advisers and through close liaison with external representative organisations including Cosla and SCVO. Risks to resourcing capacity is managed through the MA Resourcing Plan and through close liaison with the Director and HR business partner.

Within the MA, risk to the delivery of programmes are managed and mitigated at every stage of the process for disseminating funding and monitoring delivery. Growth team staff hold regular portfolio meetings with all lead partners at which any actual or potential risks to delivery are discussed and action taken to mitigate the risk. Risk considerations and scoring is an integral part of all applications at Managing Authority Approval Panel (MAAP) meetings and are discussed at Programme Monitoring Committee and Highlands and Islands Territorial Committee meetings. The mandatory training courses on tackling fraud, information and asset management all include risk modules and are undertaken by all staff. These are recorded on the Divisional training matrix by the dedicated Training team within the division.

The work of the MA has interdependencies with that of the Certifying Authority (CA) and Audit Authority (AA) and Subsidy Control team. These are continually monitored and assessed through collaborative working and liaison.

The risks to the programmes are highlighted at the correct levels and are managed and mitigated through applying effective and efficient processes, reinforced by robust and regular staff training, and a clear and consistent working culture.

2.1.6. Employment related counselling service

For those operations converted to the retrospective ‘employment related counselling services’ unit cost exercise please see section 2.2.3.6.

2.2. Organisation of the Managing Authority

2.2.1. Organisation and specification of the functions of the units

Skills requirements

The MA is staffed with SG employees having a mix of skills, abilities and knowledge of the delivery of the Structural Fund programmes. Each post is allocated a specific staff grade based on the existing SG HR policy which defines the various responsibilities which can be carried out by staff employed at each grade. This policy sets out the competencies which are required by grade. The number, size and complexity of the programmes together with the roles set out within the detailed instructions of this MCS inform the number and grades of staff needed to ensure the effective delivery of the Programme. Managers within the MA use their experience of the programmes to agree the number and grades of staff with the Head of the MA who is responsible for ensuring these resources are made available.

The Head of the MA is the Deputy Director for ESFSCD and is a Senior Civil Servant.

The Team Leaders are C grade staff and are experienced operational line managers. The teams are staffed with a mix of B grade staff. The B3 and B2 grades are experienced managers and staff developing skills in this area. The B1 staff are experienced officers. A proportion of the staff have been involved in the previous management and delivery of the programmes and this, combined with staff new to Structural Funds, will bring a balance of existing delivery knowledge coupled with new approaches and ways of working.

The particular skills required for the delivery of the programme include project appraisal, compliance and monitoring and evaluation. Staff appointed to roles within the MA will either have these skills on appointment or develop a training programme to ensure they are developed to a level to ensure efficient delivery of the Programme. Staff new to these roles are supervised by an experienced member of the MA which ensures the consistent delivery of these functions. Where appropriate, MA staff may attend as observers visits carried out by the AA to enhance their understanding of the way in which the AA works and to learn from their approach. 

The SG performance management system requires that individual training needs are managed though Personal Learning Plans which are reviewed annually as part of the staff appraisal. Additionally the training programme set out in 2.2.3.15 ensures that staff are trained in these skills for this programme.

Where specialised skills are required, for example in the field of State Aid, Finance, Procurement, Analytical and Legal Services and Information Technology these will be sought from resources held by the SG. The SG is of a scale where all skills are available and where not, can be procured externally.

An organogram showing the structure of the European Structural and Investment Fund Teams is available at Annex 1.

Managing Authority

The structure, capacity and capability of the MA is set out and managed through the MA resourcing Plan.

The organogram shows that the MA is split in to three growth teams, a Governance and Policy Team, Procurement Team, Programme Performance Team and a Regulation Support Team. 

Each of the growth teams is led by a C1 Team Leader focused around one of the three major European themes:

• Smart Growth
• Sustainable Growth
• Inclusive Growth

Each team divide the specific thematic objectives amongst the team and a specialist team be devoted to specialist roles. Each of these units (Smart 1, Inclusive 2 etc) is led by a B3 Senior Manager. The thematic units are multi-functional and comprise staff with compliance, verification and portfolio management knowledge and expertise. The focus and functions of these teams is detailed below.

Smart Growth team

• Smart 1 – Developing Scotland’s Workforce, and Youth Employment Initiative
• Smart 2 - Business, Innovation, Finance

Sustainable Growth team

• Sustainable 1 – Low Carbon Economy, Low Carbon Transport
• Sustainable 2 - Resource Efficient Circular Economy, Green Infrastructure, 8th City (Digital)
• Procurement Managers

Inclusive Growth team

• Inclusive 1 – Employability
• Inclusive 2 – Social Inclusion and Combating Poverty

The growth team functions ensure that the MCS is fully adhered to in the implementation of the Structural Fund Programmes in Scotland. The focused growth teams consist of multi-functional posts, and will:

• be the first point of contact for the submission of applications for Structural Funds support, ensuring compliance with the EU Regulations and operational programmes 
• communicate to Lead Partners that all relevant guidance and application forms are maintained on the SG web site
• be responsible for submitting applications to the Scrutiny and Risk Panels – see 2.2.3.4 for details
• issue grants agreements
• ensure timeous submission of claims for reimbursement by the LP
• ensure units being claimed under Commission Delegated Regulations are eligible and have been delivered
• undertake Article 125 visits (administrative and on-the-spot)
• ensure that any irregular expenditure is removed and that supported actions are implemented in line with their approved applications 
• prior to an expenditure declaration on the Scottish Structural Funds Programmes, the Growth Teams will liaise with the CA in respect of their Thematic Objectives, to ensure that any issues raised in the management verifications have been fully addressed
• where recoveries are identified, will ensure that these have been fully actioned
• be responsible for reporting to the CA, AA and EC on any activity relating to approved applications

There are only two instances where the MA would be considered a beneficiary:

Technical Assistance

Technical Assistance (TA) claims would be in relation to Technical Assistance (TA) claims against ESF staff costs. TA is only claimed against staff who work 100% of their time in the delivery of the ESF programmes, which is effectively all staff in the MA. No TA is claimed against the costs of Deputy Director and the CA. TA claims are processed in the following order:

• the claims are prepared by the Finance Team (Divisional BCLO) who provide the MA (Stakeholder Engagement and Governance Team) with details of the claim, in the agreed template, along with all evidence including payroll report, unit costs calculation and any invoices relating to the claim
• the Stakeholder Engagement and Governance Team after checking will submit the claim on EUMIS
• the MA (Sustainable Growth and Procurement) will then check the accuracy of the claim by reviewing all the submitted evidence
• once the claim is verified and approved on EUMIS, the MA will send an internal journal transfer request to the Directorate’s Business Management Team to arrange payment

Retrospective unit costs exercise

As part of the 2017 and 2018 Early Preventive System Audit (EPSA) reports, European Commission auditors expressed concerns with some of the cost models being used by the MA in relation to the 2014 to 2020 ESF Programme. It was subsequently agreed that the MA could remove any affected costs from the Annual Accounts and re-declare these costs on the basis of a standard scale of unit costs. It was also agreed that the units can be claimed retrospectively from the start of the 2014–2020 Programme. The unit cost options available to the MA are contained within Commission Delegated Regulation (EU) 2019/379 - Annex VI of which contains unit cost models that are available to be used by all Member States.

A methodology document for this exercise has been developed and is linked to this document – this outlines the processes that will be followed with regards to the Scottish Government claiming eligible units back from the Commission. This can be found at Annex 1.

As in the 2007-13 programmes it is envisaged that there will be no staff in sensitive posts i.e. any post whose occupant could cause adverse effect to the integrity and functioning of the institution by virtue of the nature of his/her responsibility. The structure of ESFSCD has been designed to ensure this is not the case and as no single person has the authority to compromise the operation of the MCS there are therefore no individuals working in sensitive posts.

There is a clear separation of functions between the MA, CA and AA. Procedures are in place to ensure appropriate separation of functions within the MA are ensured and these are detailed in other parts of this document. It should be noted that in relation to any potential conflicts of interest, which can arise at any point in the delivery of the programmes, all civil servants employed by the SG are bound by the provision of the Civil Service code and are expected to perform duties with honesty and impartiality. The Conflict of Interest part within the Standards of Propriety section of the SG intranet gives clear guidance on this. All staff, regardless of grade, are aware of the requirements of the Civil Service Code and related consequences of failing to adhere to those requirements as this is a condition of their employment. Members and staff attending all meetings are asked to declare any conflicts of interest, the Chair of the meeting will take whatever action is deemed necessary to ensure the integrity of the process. Any member of staff is required to declare and conflicts of interest when they are carrying out their duties as specified in the MCS, their immediate line manager will take whatever action is deemed necessary to ensure the integrity of the process.

Governance and Policy Team

The Governance and Policy Team, led by a C1 Team Leader and mix of B Band staff is responsible for:

• ensuring the coordination of policy development across the Division, including formulating any policy responses to changes in regulations, and any changes to the direction of the operational programmes as a result of evaluation findings or changing economic conditions
• analysis, monitoring, evaluation and reporting on the programmes
• design and implementation of the monitoring and evaluation and communication strategies
• reporting on the programmes to Ministers, the Commission and UK Government
• the main interface with the Commission, UKG and member states on ESIF and cohesion policy
• secretariat for the governance arrangements including PMC, HITC and MAAP
• engagement and communication with a diverse range of stakeholders
• responsible for review and maintenance of the Management Information System (EUMIS)
• production and maintenance of control documents to monitor spend against targets in relation to the N+3 target
• responsible for updating the website, including updating relevant guidance and forms

Programme Performance Team

The Programme Performance Team, led by a C1 Team Leader and mix of A and B Band staff is responsible for:

• annual review and maintenance of the Management and Control system
• systematic monitoring and quality assurance of programme performance against the approved guidance within the MCS and National Rules
• production and maintenance of quality internal and external guidance/desk instruction in line with the MCS and National Rules
• effective co-ordination of the Article 125 5(b) checks for the programmes
• effective co-ordination with the AA on their Article 127 checks and systems audits
• liaison with EC Auditors and ECA during visits to Scotland to undertake audit work in relation to the programmes, and ensuring EC systems are fully utilised in line with the regulations e.g. AFIS system
• planning and production of closure reports for programmes ensuring narrative reflects programme performance and lessons learned

Regulation Support Team

• establishing systems for the recovery of ESF grant from the European Commission on the basis of a standard scale of unit costs
• responding to the European Commission Early Preventive Systems Audit (EPSA) audits relating to the 2014–2020 European Structural Funds Programme
• providing assistance with responses to the AA system audits

2.2.2. Framework to ensure that an appropriate risk management exercise is conducted when necessary, and in particular in the event of major modifications to the activities (management and control system)

Risk based approach

The programme architecture for 2014-20 has been carefully structured to manage compliance risks. This relies upon:

• strategic delivery, led by large-scale organisations who are capable of managing the compliance burden as well as delivering results with a more significant impact
• the use of simplified cost methodologies, contracting and procurement to give certainty of costs up front and mitigate the risk of poor record keeping in respect of complex actual costs

The key stages in the delivery of the 2014-20 programmes have been designed as a risk based control environment.

Lessons learned from previous Programmes led to the identification of a smaller number of lead partners who would have the systems to enable the irregularities found previously to be best avoided. This led to the selection of the 32 local authorities in Scotland as well as a small number of others including Scottish Enterprise, Highlands and Islands Enterprise and Scottish Natural Heritage. The Lead Partners are responsible for collating and submitting applications for approval to the MA but are not responsible for approving these submissions. Lead Partners can refuse applications for funding but only on the basis that they do not fulfil the eligibility criteria set. Calls to submit proposals for funding from the programmes were issued to all lead partners.

The SG operates a well-established risk management framework. From this framework, the MA operates a Divisional Risk Register to highlight major issues affecting the operational programmes. Any issues identified through this process will be notified to the MAAP. With regards to the Retrospective Unit Costs exercise, all operations will be given a ‘Medium’ risk rating.

The management of risk is built into the procedures for the stages in the programme implementation including the assessment and selection of SIs, the assessment and selection of Operations and the administrative and on the spot verifications of the outcomes of the Operations.

An assessment of the overall risks relating to a SI are set out in the SI Offer Letter/Email. The SI Offer Letter/Email is customisable depending on the characteristics of each individual LP.

The SI Scoring and Risk Assessment identifies those areas which need to be addressed prior to the submission of the underlying Operations Applications. These will be incorporated in the SI Grant Offer Letter. The MA Operations Check Sheet will ensure that the risks identified in the SI Grant Offer Letter/Email have been addressed and will also determine if there are any additional issues specific to that Operation and detail any mitigating actions to be taken when developing the Operations Verification Plan (OVP).

The Operations Verification Plan determines the sampling level for management verification undertaken by the MA. This Operations Verification Plan will be monitored throughout the implementation of the Operation and the risk level updated as required depending on the results of all management verification carried out by the MA, AA or EC.

Strategic Intervention and Operation application change process

The vast majority of changes to Operations will be reviewed and authorised by the Portfolio and Compliance Manager (PCM). If the change could impact on N+3 or on the Strategic Intervention’s ability to deliver the agreed activity the Senior Portfolio and Compliance Manager (SPCM) must be informed. Changes to a Strategic Intervention will be approved by the Senior Portfolio and Compliance Manager. When changes at operation or SI level could have a significant impact on the SI and as a result the Priority Axis the MAAP must be informed. In some circumstances the MAAP will need to approve the proposed changes. The tables set out at Annex C of the MA Change Request Desk Instruction details who can make each level of change and when the MAAP must be informed. The change request process can be found at Annex 1.

A change which has a significant impact on the Strategic Intervention would for example include but not be limited to the following:

• an impact on the ability of the Operation, SI or Priority Axis to meet the agreed indicators
• an increase or decrease in the grant request
• an impact on the ability to meet N+3
• a change to the scope of the work being undertaken

Annex A of the MA Change Request Desk Instruction also outlines who is required to approve each level of change and the authorisation levels for increases in grant for an Operation or SI.

All Financial, Timescale or Target related changes regardless of size will require a revised Offer of Grant Letter to be issued. The only exception to this will be for challenge fund operations where the operation on EUMIS may reduce and another operation for the same value added. As these are all classed as the same operation no new offer of grant will be issued.

Process for all requests for change being referred to SPCM or MAAP

The PCM will forward the change request template form to the SPCM detailing the changes and their recommendation/comments. When the SPCM is approving the change they will record their comments on this form and approve on EUMIS. 

Consideration by Managing Authority Approval Panel

Where there is a change to an Operation which has a significant impact on the Strategic Intervention then ALL such changes must be brought to a MAAP meeting for notification or approval, although separate arrangements are available for operations that have converted to the Employment Related Counselling Service unit cost model. Change request guidance is available at Annex 1 (via EUMIS), as are the Terms of Reference for the Managing Authority Approvals panel.

In such circumstances the MAAP Changes Overview template must be prepared by the MA and presented to the MAAP for its approval. The responsibility for completing this template lies with the SPCM.

Once the MAAP has accepted the request for change then the Growth Team Leader or SPCM will inform the PCM who will update EUMIS and the template accordingly.

Rejection of changes

The MA has the right to reject any requested change or request further information. The LP will be informed of the reasons for the decision taken. The LP will have the opportunity to appeal as per the process set out in the MCS.

Changing risk level for an Operation

An Operation Risk Level is based on the formal assessment carried out by the MA during the appraisal of the applications of Operations. Should any of the constituent parts of this assessment change then the MA will consider if the overall Risk Score requires to be amended. Movement between Risk Levels is only possible when evidence driven.

Changing risk level at MAAP

Where in the opinion of the Senior Portfolio and Compliance Manager that any issue found requires an immediate increase in the Risk Level (not verification related) the Growth Team Leader will bring this to the MAAP. The MAAP will consider whether this is an isolated or systemic issue and agree the level and scope of any additional verifications work required. The MAAP will also consider if the issue might have a systemic issue across similar Operations and/or LP.

2.2.3. Description of the following procedures (that should be provided in writing to the staff of the Managing Authority and intermediate bodies; date and reference)

The guidance and desk instructions prepared for the use of the bodies responsible for the management and control of the operational programmes will be maintained electronically in SG Electronic Record and Document Management System (eRDM). 

These desk instructions, containing National Rules and EUMIS instructions, will be available to all staff within ESFSCD. The MA and CA will maintain their own desk instructions which will be stored in eRDM. Desk instructions are working documents and are subject to change. Each update will be coordinated by the Programme Performance Team and logged on the version control cover sheet with a brief description of the amendment. Changes to the MCS will be with the agreement of the MA and CA, whilst individual desk instructions will be signed off following a two stage process, being fully reviewed and assessed by the division’s Programme Guidance Group (PGG). The PGG will make recommendations to the members of the Programme Operating Meeting (POM) who will make a final decision. The PGG is made up of staff from across all the teams in the division, with the POM representation being Team Leader, Head of Performance and Governance, and Head of Structural Fund Programmes. These desk instructions will be updated as required. In exceptional/time critical circumstances, desk instruction can proceed straight to POM.

Amendments or new procedures which are to be included in guidance will be the responsibility of the Programme Performance Team within the MA who, once the amendments have been approved, will ensure that guidance is updated and that all staff are aware of the changes. Training and support will be provided to staff to inform them of the changes and to ensure the processes are clear. A dedicated training manager has been appointed. The detail of this will vary by the level of change made and could include formal training or simple notification of a change.

2.2.3.1. Procedures to support the work of the monitoring committee

The European Structural and Investment Funds (ESIF) in Scotland for 2014-20 will have a single Programme Monitoring Committee (PMC) to encourage and maintain alignment across the Regional Development and Social Funds.

The Committee is required to carry out a wide set of duties, set out in the Common Provisions Regulations Article 47-49; and 110. These span a range of technical (e.g. guidance, selection criteria for operations) and strategic (evaluation of the overall effectiveness of the programmes) topics. To ensure the right levels of expertise are available to advise the MA on this broad range, the PMC is supported by, and delegates initial review and opinions on particular functions to, the Highland and Islands Territorial Committee.

The Highland and Islands Territorial Committee reports to the PMC and carry out the first scrutiny and discussion of defined issues within their remit, making recommendations to the PMC. All sub-structures operate under the full responsibility of the PMC and cannot replace it in executing its regulatory tasks. The final decision on any recommendations to the MAs will always rest with the PMC to ensure compliance with the European Commission Regulations, although in practice there may be some issues in which operational and territorial committees take a greater and more detailed interest than the PMC. The structure is shown below and the Terms of Reference are set out separately.

Scrutiny panels are not part of the formal governance, but rather a mechanism to ensure that the MA can take advice in its duty to select appropriate operations (Strategic interventions) under Article 125. Membership will be drawn from specific policy and field expertise relevant to a call for proposals (for example low carbon). Membership of a scrutiny panel is therefore for a specific scrutiny round, and is not permanent.

Programme Monitoring Committee

The role of the PMC will be to monitor progress towards the overall strategic direction set out in the Partnership Agreement, and advise Scottish Ministers and the MAs on any adjustments required to programmes, schemes or strategic interventions in order to ensure and maintain performance towards the targets and objectives of the Partnership Agreement.

To carry out this role, the PMC will:

• monitor performance against the Partnership Agreement (PA) and the Scottish Operational Programmes (OPs) for the Structural Funds (ERDF and ESF) in Scotland
• make any corrective recommendations in relation to the performance of these programmes to ensure that targets and objectives of the PA and OPs are met
• approve the annual implementation reports and the reviews of performance against the PA in 2017 and 2019
• advise on any proposed alterations to the PA, OPs, and annual or multi-annual budget profiling which would affect the targets and profiling set out in the Partnership Agreement and programme documents
• consider the impact on consistency between and alignment across ESF and ERDF programmes and other European Funds, on the focus and implementation of schemes or operations which could impact the common strategy and/or demarcation between the Funds
• take advice from the Highland and Islands Territorial Committee on technical aspects specified below, and consider this advice in making any final recommendations on evaluations, communications, selection criteria, adjustments to budget lines and the implementation of horizontal themes

Highland and Islands Territorial Committee

There will be one Territorial Committee responsible for monitoring and reviewing the planned activity and its impact on specific geographic areas. This will monitor the impact of the funds, especially the national approaches, on the Highlands and Islands region of Scotland to ensure that the approach remains viable and effective in this “transition region”. This committee will advise the PMC on any desirable adjustments in these specific areas to ensure the MAs maintain their strategic focus. The Territorial Committees may report issue to the PMC.

The Highlands and Islands Territorial Committee will:

• monitor and report to the PMC on performance and spend in relation to Structural Funds in the transition region, particularly the achievements of the targets, financial management, absorption rates, and targeting of funds
• periodically review and report on progress made in other European Programmes including LEADER and Axis 4 (EMFF) and Community Initiatives and advise the MA’s and the Operational Committees on possible improvements to achieve better impacts in the region
• review the scope of and financial balance between Strategic Interventions and suggest recommendations for any amendments in agreement with Lead Partners as appropriate, and particularly for the mid-programme review, to ensure performance and suitability of activity for the transition region
• promote coordination between strategic interventions and lead partners within the transition region
• recommend to PMC evaluations specific to outcomes in the Transition region where these are different from or in addition to national evaluations
• make recommendations to the PMC, as appropriate, on any amendments which could be implemented to improve the effectiveness of the delivery of the funds including its financial management

The remainder of the structural funds programmes in this territory will be overseen by the PMC.

2.2.3.2. Procedures for a system to collect, record and store in computerised form data on each operation necessary for monitoring, evaluation, financial management, verification and audit, including, where applicable, data on individual participants and a breakdown of data on indicators by gender when required

A fully integrated, web-based, IT system has been developed to enable the MA to manage the 2014-20 programmes. The detail of this is set out in Section 4 Information System. The system, called EUMIS, supports all phases of the process, including applications, claims, progress towards targets, payments and recoveries, and compliance and verification checks. The system holds detailed financial data on all operations, including forecast spend, activity due and dates due allowing the MA to track and monitor progress. All supporting documentation in respect of this information will be held in eRDM.

It will record units met, expenditure defrayed and all claim data required for reporting to the Commission. The system also holds targets and progress made towards indicator outputs and results. It holds data on individuals receiving support, breaking this down by the required characteristics. All indicators will be broken down by gender where appropriate using EC monitoring guidance. The data on individuals supported and activity undertaken will be uploaded and then checked and verified by the MA through the claims and verifications processes. The system has a flexible reporting tool to meet all reporting requirements.

2.2.3.3. Procedures for the supervision of the functions formally delegated by the Managing Authority under Article 123(6) and (7) of Regulation (EU) No 1303/2013

The MA has not formally delegated any of the functions specified under Article 123 (6) and (7) of the Regulation No 1303/2013.

2.2.3.4. Procedures for appraising, selecting and approving operations and for ensuring their compliance, for the entire implementation period, with applicable rules (Article 125(3) of Regulation (EU) No 1303/2013), including instructions and guidance ensuring the contribution of operations to achieving the specific objectives and results of the relevant priorities in accordance with the provisions of Article 125(3)(a)(i) of Regulation (EU) No 1303/2013 and procedures to ensure that operations are not selected where they have been physically completed or fully implemented before the application for funding by the beneficiary (including the procedures used by the intermediate bodies where the appraisal, selection and approval of operations have been delegated)

The ERDF and ESF Scottish Operational Programmes 2014-20 were formulated on the principle of groups of operations, Strategic Interventions (SI). These SI are of sufficient scale, longevity and ambition that can achieve long term change, but also ensure long-term stability of funding in support of that identified required change. Selection of operations will therefore operate on two levels, with the SI selected first, and the individual operations within it able to be added over a longer timeframe to ensure that the whole group performs and delivers the expected results. Several rounds of applications for both SI and Operations are planned within the overall Programme timetable. SI will be selected based on their:

• fit with EU and Scottish policy priorities, particularly where long-term policy is changing considerably and requires support for implementation
• transformational potential in respect of an identified need or development potential
• long-term sustainability and ability to be mainstreamed beyond EU funding support
• affordability within the EU Funds envelope, and certainty of match funding, to ensure absorption and balanced programmes

Strategic Interventions

SI are selected by the following process;

• a call for applications is published to lead partners
• applications are received by the MA who carry out a technical and eligibility check
• applications are passed to the Scrutiny and Risk Panel for comment
• submission is prepared for the MAAP, who decide whether the SI is approved or not

The following documents and templates are used in this selection process and are referenced at Annex 1:

• SI Application Process
• SI Application Guidance - MA checksheet
• SI Operation Application – MA checksheet – Guidance
• SI - Scrutiny and Risk Panel - Assessment Form – Template
• SI - Scrutiny and Risk Panel - Minute and Formal Record - template
• SI and Operation Application - MA Approval Panel - terms of Reference
• SI and Operation Application - MA Approval Panel - Recommendations Overview Sheet – Template
• SI and Operation Application - MA Approval Panel - Appeals Process

At various stages during the Programme, LPs will be invited to submit SI applications by a given deadline for approval by the MA. Process is as follows:

• call for SI applications is advertised as a blog post on the Structural Funds blog, tweeted and by email

All applications received are recorded and progress tracked. The call for Strategic Interventions and Operation Applications specifies a mailbox for applicants to submit the application form and associated documentation.

Strategic Intervention application processing

Following receipt, the application is processed according to the SI Application Process – see Annex 1.

The SI application appraisal process involves a technical check undertaken by the MA, including an assessment against the SI Scoring and Risk Assessment Framework. The views of the Scrutiny and Risk Panel will be sought as set out below. 

Scrutiny and Risk Panel (SARP)

The Scrutiny and Risk Panel will scrutinise and evaluate SI applications submitted by LPs to ensure alignment with EU 2020 targets, the relevant Priority Axis within the Operational Programmes and SG policy. The panel will review and consider any potential risks which will need to be addressed/monitored, and make recommendations to the MA on whether the Strategic Intervention applications should be approved or rejected in line with policy objectives and the scoring framework agreed by the PMC. There will be 3 panels structured around one of the themes of Smart Growth, Sustainable Growth and Inclusive Growth to ensure that there is appropriate expertise to appraise applications under each of these themes.

Membership of the Scrutiny and Risk Panels will comprise individuals, as deemed appropriate by the MA, to undertake the necessary checks on the applications. This will routinely involve individuals with analytical skills, financial skills, procurement and state aids expertise and knowledge of the relevant policy areas being discussed. Other experts will be co-opted in as and when required e.g. individuals with appropriate knowledge of other EU funds, to ensure that there are synergies between ESIF and the other EU funds. Whilst the Growth Team Leader will chair the SARP and provide detailed information on the operations to the MAAP, they will declare an interest in that strategic intervention and therefore take no part in the final decision on the application.

Strategic Intervention approval and invitation to submit operation application

In parallel with appraising the applications against the scoring framework, panels will also be asked to assess the level of risk within each SI against the four compliance themes of:

• programme compliance
• legal compliance
• financial compliance
• performance compliance

The results of this risk assessment will importantly highlight areas where the compliance regime should focus throughout the lifetime of the SI. A tailored risk management plan is included within the SI Approval Letter, which will be monitored by the MA. This will mean that compliance checks can be more proportionate and focussed and will reduce unnecessary checking. The tailored risk management plan will be included in the SI Approval and Invitation to submit Operation application letter.

Decisions taken

Strategic Interventions

• SI approved - the MA will notify the LP in writing, using the SI Approval Letter/Email
• SI rejected - the MA will notify the LP in writing, advising of the reasons for the rejection, providing details of the appeals process

Operations applications

Following the approval of a SI the LP is invited to submit applications for Operations. When received, the MA:

• records receipt of the application and saves a copy of the application, submission email and associated documents on eRDM
• maintains the record of the application on eRDM as the appraisal process proceeds

The following guidance and templates are used in the appraisal of Operation applications and are referenced at Annex 1:

• SI Operation Application Process
• SI Operation Application – MA checksheet
• SI Operation Application – MA checksheet – guidance
• SI - Scrutiny and Risk Panel - assessment form – template
• SI - Scrutiny and Risk Panel - minute and formal record - template
• SI and Operation Application - MA Approval Panel - terms of reference
• SI and Operation Application - MA Approval Panel - recommendations overview sheet – template
• SI and Operation Application - MA Approval Panel - appeals process

• SI Operation Application - overall assessment and risk scoring- template
• SI Operation Application - State Aid feedback form
• SI Operation Application offer of grant guidance

Assessment takes place through the process outlined below. To ensure no conflict of interest arises, the Terms of Reference for MA Approval Panel identifies this as an important requirement for all members when assessing an application and makes clear that the Chair of the panel will ensure any potential conflicts are raised at meetings of the panel.

Staff are required to abide by the SG Standards of Conduct, including the section on ‘Conflict of Interest’ which identifies that “as a public servant you have a particular duty to ensure that your official position is not used to further your own personal interests or the personal or other interests of others who have no legitimate entitlement to benefit. You also have a duty to ensure that in your conduct no appearance of such bias or misuse of position is given, or can reasonably be inferred.”

Decisions taken

Operations

• the decision to approve or reject the proposed operation will be taken by the MAAP in accordance with the MAAP Terms of Reference

• where the operation is approved by the MAAP, and endorsed by Scottish Ministers, the application will be approved on the EUMIS system by the MA. An offer of grant letter will be created and issued to the LP
• where the operation is rejected by the MA, the MA will notify the LP in writing, giving reasons for the rejection and providing details of the appeal process
• a centralised record of all applications received and assessed will be maintained by the Growth and Programme Performance Teams recording acceptance or rejection of each application. A record of all approved applications and the grant values will be maintained by the Governance Team

Appeals procedure

An appeal against the decision to accept or reject an application can only be made on the process followed in dealing with the individual application, not the outcome reached in the decision. Any appeal will be conducted in line with the MA Approval Panel – Appeals Process (Annex 1). The appeals process is published on the ESIF pages of the SG website.

2.2.3.5. Procedures to ensure the provision to the beneficiary of a document setting out the conditions for support for each operation, including procedures to ensure that beneficiaries maintain either a separate accounting system or an adequate accounting code for all transactions relating to an operation

As detailed in the procedures for appraising, selecting and approving operations above a legally binding offer of grant will be issued to the LP setting out conditions of support for each operation concerning the products and services to be delivered. The financial compliance section of the operation application and guidance asks beneficiaries specifically to confirm that they will maintain either a separate accounting system or an adequate accounting code for all transactions relating to an operation. Approval is contingent on compliance. Confirmation of this will be done as part of the management verification process prior to first payment of grant.

2.2.3.6. Procedures for the verifications of operations (in line with requirements under Article 125(4) to (7) of Regulation (EU) No 1303/2013), including for ensuring the compliance of operations with the Union policies (such as those related to partnership and multi-level governance, promotion of equality between men and women, non-discrimination, accessibility for persons with disabilities, sustainable development, public procurement, State aid and environment rules), and identification of the authorities or bodies carrying out such verifications. The description shall cover administrative management verifications in respect of each application for reimbursement by beneficiaries and on-the-spot management verifications of operations, that may be carried out on a sample basis. Where the management verifications have been delegated to intermediate bodies, the description should include the procedures applied by the intermediate bodies for those verifications and the procedures applied by the managing authority to supervise the effectiveness of the functions delegated to the intermediate bodies. The frequency and coverage shall be proportionate to the amount of public support to an operation and to the level of risk identified by these verifications and audits by the audit authority for the management and control system as a whole

All Operations will be verified for compliance with the requirements of Article 125(5) of Regulation (EU) No 1303/2013. Three stages of management verification are planned:

• verification during project selection
• administrative verification on in respect of each application for reimbursement by beneficiaries
• on the spot verification as per the Stage 2 OTS Pre-Visit selection methodology (Annex 1)

Segregation of duties within the management verifications is assured as the Admin verification process is a multi-officer function, and the Stage 2 OTS check by a Lead Officer from a different Growth Team to that managing the implementation process.

Verification during project selection

The guidance set out in EGESIF 14-0012 02 final 17/09/2015 “Guidance for Member States on Management Verifications” has been developed into Desk Instructions for carrying out the administrative and on the spot verifications together with checklists and forms to be completed as part of those checks. Verification during project selection is covered in 2.2.3.4 above, including the use of a risk based approach to project selection. Medium/High Risk Operations will undergo additional checks to those identified as Low Risk and set out in the OVP annex in the Offer of Grant Letter. 

Administrative verification

An administrative verification will be carried out in respect of each application for reimbursement by beneficiaries. This will be based on an examination of the claim and its supporting documentation. All applications for reimbursement will be checked. A record will be kept of each verification stating the work performed, the date and the results. This will be recorded on a standard template which will be stored in eRDM and the main findings logged on the EUMIS IT System for reporting purposes. Should any follow-up work be required this will also be recorded, along with measures taken in respect of any irregularities detected. 

All administrative verification checks will cover a minimum of the following with a sample selected using guidance included at Annex 1:

• the correctness of the application for reimbursement
• compliance with the approved operation
• compliance with the approved financing rate (where applicable)
• the correctness of unit cost methodologies (where applicable)
• the eligibility and status of a sample of participants/recipients (where applicable)
• the expenditure declared and the existence and compliance of the audit trail for a sample of expenditure items
• any items considered to be higher risk based on the eligibility of previous claims

The following general process will be followed for an administrative verification check (Desk Instruction at Annex 1):

• administrative checks by the individual MA Growth Teams drawing on the information available through the EUMIS IT system
• claims will be passed for approval with all being checked for reasonableness of eligibility of items and that costs have been defrayed
• the MA growth team will carry out checks of eligible expenditure across cost model types in each claim using a representative and random sampling methodology. This will be checked against source documents
• at this time, any identified items of ineligible expenditure or ineligible units will be rejected and not paid. This will be reflected in the verification check and error rate recorded. Section 2.2.2 sets out the procedures to be adopted should the check indicate a change to the risk level is warranted
• subsequent claims will be scrutinised using the same process with a focus on any similar expenditure re-appearing
• checks will be recorded and all documentation relating to the check will be held in eRDM until closure of the programmes has been agreed by the European Commission

On the spot verification

Operations will be verified for compliance within the requirements of Article 125(5) of Regulation (EU) No 1303/2013. This may be through a Stage 2 OTS verification visit to Lead Partners undertaken by a Lead Officer and Growth Team Portfolio and Compliance Managers (PCMs) supported by Portfolio and Compliance Officers (PCOs). 

The Stage 2 OTS verifications will be planned to happen when the operation is well under way both in terms of physical and financial progress. The nature, specific characteristics of an operation, amount of public support, risk level and the extent of administrative verifications influence the timing of a Stage 2 OTS verification. The timing of the visits will be as per the Stage 2 OTS Priority List and Sampling Methodology and agreed between the MA and the beneficiary. 

The level of checking for On the Spot visits is set when an Operation is confirmed by the MAAP, and is communicated to the Lead Partner through the Operation Verification Plan. See section 2.2.3.4 for details of these processes. 

Desk Instructions for the Stage 2 OTS Verifications are contained at Annex 1. The MA will visit, throughout the programme period, operations selected using a risk-based approach and in line with the Sampling Methodology document noted above.

Stage 2 OTS checks will verify the reality of expenditure and check compliance with the previously approved guidance on project selection and appraisal as well as:

• tendering/procurement
• State Aid
• horizontal themes
• revenue generation
• outcomes and publicity
• beneficiary costs, if appropriate

In order to achieve greater consistency, visiting officers will hold a wash-up meeting on the day of the visit and highlight any issues identified. The visit report will detail any issues and explain the next steps. MA will undertake any necessary recovery action.

The level of checking set out above is indicative and is proposed at the beginning of the programme in the absence of evidence levels and accuracy of claims and error rates. While it represents the clear intention, it is subject to change in the light of experience. If the evidence emerging from the analysis of findings supports an adjustment to the level or type of checks required, the MA will propose and agree amendments with the AA prior to implementation.

Supplementary checks

In addition to the regulatory checks outlined above, the MA may undertake visits or supplementary checks on an operation or strategic intervention and in line with the Risk Management Plan. 

Analysis of findings from the management verifications

The MA will monitor the findings of the administrative and OTS management verifications and report these to the Programme Operating Meeting (POM). Issues to be considered when reporting will include:

• whether lessons from one operation that can be shared with other operations
• whether there are early indications of systemic errors which require action by the MA or Lead Partner to address
• review the systems used by the MA in carrying out the verifications which may result in changes to the MCS or Desk Instructions and Guidance which support it

Actions arising from the report and POM will be included in the Minute of the POM meeting for tracking and close out. A summary of the report and the results of the actions arising may be shared with Lead Partners in order to share best practice and ensure a consistent approach across the programmes. The report will be recorded and stored in eRDM.

Evidence and record keeping

Detailed evidence, both physical and electronic, will be kept of:

• all applications for reimbursement will be checked. A record will be kept of each verification stating the work performed, the date and the results. Documentation will be stored in EUMIS and eRDM
• should any follow- up work be required this will also be recorded, along with measures taken in respect of any irregularities detected
• these records will constitute the supporting documentation and information for the annual summary to be prepared by the MA
• all planned management verifications will be completed in time to enable inclusion of certified expenditure in the accounts of a given accounting year

Operations converted to the retrospective ‘employment related counselling services’ unit cost exercise

As part of the 2017 and 2018 Early Preventive System Audit (EPSA) reports, European Commission auditors expressed concerns with several of the cost models being used by the MA in relation to the ESF Programme – specifically, ‘Procurement with Match’ and the incorrect application of the ‘Direct Staff Costs plus 40%’ Flat Rate cost model.

It was subsequently agreed that the MA can remove any affected costs from the Annual Accounts and re-declare these costs on the basis of a standard scale of unit costs. It was also agreed that the units can be claimed retrospectively from the start of the 2014–2020 Programme.

The MA are using option 3 of Commission Delegated Regulation (EU) 2019/379 - Annex VI - ‘Employment Related Counselling Service’ units.

As a result, a number of ESF operations have been converted to the ‘employment related counselling service’ unit and therefore, the associated expenditure claims no longer form part of a declaration to the European Commission. The ‘ESF Cost Model – Complete Overview’ document (A28920907) confirms which ESF operations have been converted to ‘employment related counselling service’ units.

As per Article 14(1) of the ESF Regulation, the MA will claim units from the Commission on the basis of Commission Delegated Regulation (EU) 2019/379 - Annex VI, option 3, but will distribute the ESF payments between eligible ESF operations (that have converted to the ‘employment related counselling service’ unit) in line with the original cost models outlined in their individual Offers of Grant and taking into account the provisions of:

• article 129, CPR - The Member State shall ensure that by the closure of the operational programme, the amount of public expenditure paid to beneficiaries is at least equal to the contribution from the Funds paid by the Commission to the Member State
• article 132, CPR - The managing authority shall ensure that a beneficiary receives the total amount of eligible public expenditure due in full and no later than 90 days from the date of submission of the payment claim by the beneficiary

However, as per the Commission’s Guidance on standard scales of unit costs and lump sums adopted under Article 14(1) Reg. (EU) 1304/2013 (page 15): if the Commission or the AA carries out an audit, the financial control will stop at the verification of the conditions for the reimbursement of the standard scale of unit cost… and will not audit the accounting practices of the Member State. 

The MA understand this to mean that neither the AA or Commission will not perform any audit expenditure claims that no longer form part of a declaration to the Commission or audit how the ESF grant is distributed between the eligible ESF operations and this reimbursement does not need to be documented in the Annual Accounts.

Separate Unit Cost Methodology documents (A26019583, A34511442), Desk Instructions, verification templates, Lead Partner Guidance and Standard Wording exists for the retrospective exercise. Similarly, for those expenditure claims that no longer form part of a declaration to the Commission, the claims and verification process has been streamlined in line with Scottish Government grants guidelines and separate Desk Instructions exist [add reference numbers?]. Therefore, the general provisions of the MCS relating to the claims and verification process does not apply (unless expressly stated) to either the unit cost claims or the expenditure claims that no longer form part of a declaration to the Commission.

However, as per the per the Commission’s Guidance on standard scales of unit costs and lump sums adopted under Article 14(1) Reg. (EU) 1304/2013 (page 15):

“It remains possible for the Commission and the AA to carry out checks at beneficiary level of aspects that are not linked to accounting practices (e.g. eligibility of participants, absence of double declaration, proof of completion of the course by the participant, respect of Union Law and national law relating to its application, etc.). An audit on the application of the general principles is also possible…”

These aspects of the ESF operation will therefore still be checked in line with the standard processes outlined in the MCS.

Information to CA for verification

The MA will provide all data as required by the CA on verification outcomes via the Programme Performance Team Control Documents.

2.2.3.7. Description of the procedures by which applications for reimbursement are received from beneficiaries, verified, and validated, and by which payments to beneficiaries are authorised, executed and accounted for, in line with obligations set out in Article 122(3) of Regulation (EU) No 1303/2013 as from 2016 (including the procedures used by the intermediate bodies where processing of applications for reimbursement has been delegated), in view of respecting the deadline of 90 days for payments to beneficiaries under Article 132 of Regulation (EU) No 1303/2013

Defrayed expenditure and all data around supported beneficiaries is entered into EUMIS and the LP submits a claim. The claim can include costs and units from one or multiple operations within the SI. All costs are listed separately within the claim and total costs grouped by operation.

The MA checks the claim and then starts the verification process (detailed within 2.2.3.6 administrative verification above).

EUMIS percentage of costs to be verified is related to the risk level of an operation which is set out initially in the Offer of Gant and supporting Operation Verification Plan. Selecting the costs to be verified is covered by a detailed Desk Instruction on picking a random sample (Annex 1) and the MA may add additional items to check. The MA then informs the LP that the items have been selected so they can supply all relevant evidence. The MA will complete the verification and either accept or reject all individual items on EUMIS. Once the verification check is completed satisfactorily the MA accepts and approves the claim for payment.

Payments are approved on EUMIS and the system then links to the SG’s accounting system, and payment will be made to the LP.

To ensure payments are made within the 90 days required by Article 132 of Regulation (EU) No 1303/2013, the MA will review the claim and start the verification process as soon as practicable after receipt of the claim. Once all evidence has been gathered the MA will complete the verification check and make payment within the 90 day requirement. 

This will be monitored by the MA Growth teams to ensure valid claims within their teams stay within these deadlines and this can also be monitored through the system reports by the programme performance team. If for any reason the LP does not provide the necessary supporting documentation to verify any of the items selected, the MA may delay payment until this is provided or the relevant item rejected and so removed from the claim payment.

The above process will be followed for all claims, with the exception of the claims submitted relating to the Retrospective Unit Costs exercise (this process is detailed in the Unit Costs Methodology). Processes relating to claiming these unit costs in the future are currently being developed and will be added to the Unit Cost Methodology in due course.

2.2.3.8. Identification of the authorities or bodies carrying out each step in the processing of the application for reimbursement, including a flowchart indicating all bodies involved

The LP and the MA are both involved in the claims process. A claim can include items from a number of operations within the SI. The LP is responsible for updating activity within their operation, uploading recipient data (for example an individual participant or an organisation), activity achieved by that recipient, units or costs relating to this, and the date achieved. They will also update match funding and any income received. 

The LP reviews the units and costs waiting to be claimed for their operations and once a level of activity has been reached they will generate and submit a claim to the MA.

The MA reviews the claim and starts the verification process. The LP collates evidence and confirms they are satisfied with this at which point the MA checks the supporting documentation. The MA approves or rejects the selected items and then makes payment to the LP.

The process will be followed for all claims, with the exception of the claims submitted relating to the Retrospective Unit Costs exercise (this process is detailed in the Unit Costs Methodology). Processes relating to claiming these unit costs in the future are currently being developed and will be added to the Unit Cost Methodology in due course.

2.2.3.9. Description of how information is transmitted to the certifying authority by the Managing Authority, including information on deficiencies and/or irregularities (including suspected and established fraud) detected and their follow-up in the context of management verifications, audits and controls by Union or national bodies

The MA will provide data on claim payments, verification outcomes and irregularities via reports from EUMIS. EUMIS holds a record of all costs and units claimed and verified. The format of this report has been agreed with the CA.

Copies of other verification visits will be made available to the CA by way of a notification from the relevant growth team that such a document is available and stored on EUMIS or eRDM as appropriate.

2.2.3.10. Description of how information is transmitted to the Audit Authority by the Managing Authority, including information on deficiencies and/or irregularities (including suspected and established fraud) detected and their follow-up in the context of management verifications, audits and controls by Union or national bodies

The MA will provide the necessary data on claim payments, verification outcomes and irregularities via reports from the EUMIS system which will hold a record of all costs and units claimed and verified. The format of this report will be agreed with the AA.

Copies of other verification visits will be made available to the AA by way of a notification from the relevant growth team that such a document is available and stored on EUMIS or eRDM as appropriate.

2.2.3.11. Reference to national eligibility rules laid down by the Member State and applicable to the operational programme

The National Rules laid down by the Member State and applicable to the operational programmes identified in Section 1 of this report can be found on the SG website Forms and Guidance section, and at Annex 1.

2.2.3.12. Procedures to draw up and submit to the Commission annual and final implementation reports (Article 125(2)(b) of Regulation (EU) No 1303/2013), including the procedures for collecting and reporting reliable data on performance indicators (Article 125(2)(a) of Regulation (EU) No 1303/2013)

From 2016 until and including 2023 the MA will submit to the Commission an annual report on the implementation of each Programme in the previous European Commission financial year. In addition, the MA will submit a final report on the implementation of the programme for ERDF and ESF by the deadline established in the Fund-specific rules. The format of the AIR will follow Guidance from the EC where available.

Annual implementation reports (AIRs) are required to set out key information on the implementation of the programmes and its priorities by reference to the financial data, common and programme-specific indicators and quantified target values, including changes in the value of result indicators where appropriate and, beginning with the AIR to be submitted in 2017, the milestones defined in the performance framework. This information will be sourced from EUMIS. Included with the Reports shall be a synthesis of the findings of any evaluations of the programme that have become available during the previous financial year, any issues which affect the performance of the programme, and measures taken. 

In addition to the above, the AIR submitted in 2017 shall set out progress made towards achieving the objectives of the programme, including the contribution of the ESI Funds to changes in the value of result indicators, when evidence is available from relevant evaluations. This AIR shall set out the actions taken to fulfil the ex-ante conditions not fulfilled at the time of the adoption of the programme. It shall also assess the implementation of actions to take into account the role of partners in the implementation of the programme and report on support for climate change objectives.

The AIR submitted in 2019 and the final report for the ESI Funds shall, in addition to the above, include information on, and assess progress towards, the achievement of the objectives of the programme and its contribution to achieving the Union strategy for smart, sustainable and inclusive growth.

The annual and final reports shall be approved by the PMC prior to submission to the Commission and will be made available to the public. 

2.2.3.13. Procedures for drawing up the management declaration (Article 125(4) (e) of Regulation (EU) No 1303/2013)

Article 125(4)(e) of the Common Provisions Regulation states that the MA has the responsibility for drawing up and submitting the Management Declaration to the Commission. Guidance on the preparation and a model form is detailed in EGESIF_15-0008-05 03/12/2018, ‘Guidance for Member States on the drawing of Management Declaration and Annual Summary’ and will be used by the MA.

The Management Declaration will be based on the information provided in the Annual Summary and this will be submitted to the European Commission using SFC 2014.

The first Management Declaration will be prepared for the period ending 30 June 2016 and will be submitted to the European Commission by 15 February 2017. Thereafter the Management Declaration will be prepared on an annual basis and will be submitted on or before the 15 February of the following year. 

2.2.3.14. Procedures for drawing up the annual summary of the final audit reports and of controls carried out, including an analysis of the nature and extent of errors and weaknesses identified in systems, as well as corrective action taken or planned (Article 125(4)(e) of Regulation (EU) No 1303/2013)

The MA will draw up the Annual Summary by carrying out the following procedures

• prepare a summary of the final audit reports and of controls carried out. This will include all administrative verifications and OTS checks performed by the MA
• prepare a global picture of management verifications, controls and audit performed in relation to expenditure declared during an accounting year and entered into the accounts
• include a list of controls carried out by the AA

The summary of controls will include an analysis of the nature and extent of any errors and weaknesses identified as well as any corrective actions taken.

The summary of final audit reports will include an analysis of the nature and extent of the errors and weaknesses identified in the systems including identification of problems of a systemic nature.

The Annual Summary together with any relevant supporting documentation will be made available to the AA to enable the AA to carry out its formal assessment. Further details of this are set out in section 3.

2.2.3.15. Procedures concerning the communication to staff of the above procedures, as well as an indication of training organised/foreseen and any guidance issued (date and reference)

Communication

• guidance, policy and desk instructions are stored securely on eRDM and all staff have the links to the these documents via Annex 1 contained within this document These documents will be individually dated and cross referenced when released to staff and this will be detailed in the version control pages within those documents
• appropriate guidance and reference documents are also held on the European Structural Funds section of the SG’s website for staff and stakeholder reference
• divisional emails are sent to alert staff to any changes/updates in policy or guidance
• the use of video conferencing equipment allows staff over all three sites to maintain regular contact and participate in team meetings so they kept up to date with any policy and guidance developments
• regular Divisional all staff team meetings are also in place to facilitate good communication across the three sites

Training - general

• the Division’s Training Manager who also acts as Training and Liaison Officer supported by the Directorate’s Development Advisor will ensure gaps in training or perceived training needs identified at bi-annual Divisional meetings, regular Management Team, and general team meetings are filled appropriately
• there is a Directorate-wide Learning and Development Plan to ensure all staff have the skills required to carry out their wider role with confidence
• there is also a regularly updated Divisional Training Plan. This is a living document that is continually updated to include training as and when needs are identified
• each member of staff attending a training event must complete the Division’s Training Matrix
• completion of training is monitored monthly by the Division’s Training Officer through the Training Matrix
• training is evaluated following every event using staff feedback surveys. Material is regularly updated based on this feedback
• each member of staff completes an individual Personal Learning Plan (PLP) by the end of May each year identifying known learning and development needs
• Personal Learning Plans are discussed and reviewed as part of monthly conversations to ensure progress is being made against the development needs identified

Training – organised and foreseen

• EUMIS specific training has been provided to all staff, and staff new to the division will receive EUMIS training appropriate to their role. A programme of training for Growth Team staff will be reviewed and delivered as and when required by the Division’s Training Manager. This will be to train staff on the procedures set out within the MCS and especially those associated with management verifications
• Pricing Schedule Verification training will be provided for those staff within each growth team who will carry out Pricing Schedule Verification checks. This training will be developed in conjunction with SG Procurement Directorate to ensure it reflects the recent and forthcoming changes to Procurement legislation and guidance
• staff joining the teams will be supervised and their training needs assessed by their line manager. Divisional Induction events will be delivered to new staff including training for core elements of their specific job role
• State Aid overview training will be delivered to appropriate staff

Guidance issued

The ESFSCD section of The SG’s website contains links to all regularly updated guidance issued. The Programme Performance Team within the Division are specifically charged with keeping guidance accurate, up to date and relevant, and also with ensuring all staff are kept informed of any changes. This is managed through a Programme Guidance Group with membership taken from across the divisions teams. The Governance and Policy Team are tasked with keeping the website up-to-date. There is a specific section within the site entitled ‘Forms and Guidance’ where all guidance is electronically stored. All guidance specifies the task and indicates the job role responsible to maintain a segregation of duties. The job role can be subject to change depending on the organisational structure, however, segregation of duties will always be observed.

All versions of all guidance are stored on eRDM and our publications strategy is linked at Annex 1.

2.2.3.16. Description, where applicable, of the procedures of the Managing Authority in relation to the scope, rules and procedures concerning the effective arrangements set out by the Member State* (Footnote 15: reference to the document or national legislation where these effective arrangements have been set out by the Member State) for the examination of complaints concerning the ESI Funds, in the context of Article 74(3) of Regulation (EU) No 1303/2013

All complaints received by the CA and the MA will be handled in the same way.

To allow a complaint to be made about the work of the MA, the address of a dedicated complaints mailbox is highlighted on the ESFSCD website to allow complaints. Complaints will be handled as set out below:

• complaint received via dedicated mailbox
• letter/email logged on internal computerised storing system spreadsheet. Date of receipt, complainants name, address and brief description of complaint registered. Team Leader made aware
• Team Leader assigns investigation of the complaint to appropriate member of staff
• within 20 working days of receipt of the complaint the investigation will be completed and a response issued. The response will include notice of the appeals process. Spreadsheet updated to reflect this and reference number of letter added to register and stored on computer system
• should complainant appeal, the appeal will be investigated by the Team leader
• letter/email logged on internal computerised storing system spreadsheet. Date of receipt and brief description of why complainant still has outstanding issues registered
• response issued within 10 working days of receipt. Spreadsheet updated to reflect this and reference number of new letter added to register
• complainant not satisfied with response and seeks final appeal
• letter/email logged on internal computerised storing system spreadsheet. Date of receipt and brief description of why complainant still has outstanding issues registered
• complaint dealt with by Head of European Structural Funds
• final decision of the MA letter issued within 5 working days of receipt. Spreadsheet updated to reflect this and reference number of letter added to register

2.3. Audit trail

2.3.1. Procedures to ensure an adequate audit trail and archiving system, including with respect to the security of data, taking account of Article 122(3) of Regulation (EU) No 1303/2013, in accordance with national rules on the certification of conformity of documents (Article 125(4)(d) of Regulation (EU) No 1303/2013 and Article 25 of Delegated Regulation (EU) No 480/2014)

The MA will comply with the requirements of Article 122 (3) of Regulation (EU) No 1303/2013. Specifically the Management Information System will ensure that all exchanges of information between beneficiaries and the MA, CA and AA can be carried out by electronic data exchange by 31 December 2015.

The MA will also comply with the detailed requirements of Article 25 of Commission Delegated Regulation (EU) No 480/2014 in line with their management verification guidelines.

2.3.2. Instructions given on keeping supporting documents available by beneficiaries/intermediate bodies/Managing Authority (date and reference)

The MA has detailed instructions on Document Retention Guidance on the ESIF website which ensures compliance with Article 140 of (EU) Regulation 1303/2013 requirements. These are included at Annex 1.

• the EUMIS system and eRDM maintains all of the data required to be provided by Commission Regulation Article 25 of Commission Delegated Regulation (EU) No 480/2014 in respect of each operation and each claim and payment of public contribution all of the data in respect of the selection criteria, grant approval documents relating to public procurement procedures, progress reports and reports on verifications and audits carried out will be retained in either the EUMIS system and/or eRDM
• a specific report is run by the CA extracting all data authorised by the MA for inclusion in the Certificate of Payments to be sent by the CA to the Commission. This report is retained on eRDM and enables the reconciliation of the amounts submitted to the Commission with the underlying data
• EUMIS will hold details of all costs and units selected and checked within a claim as part of the MA’s verification process. The check sheets confirming the nature of the documents provided to confirm the accuracy of the costs claimed will be saved on eRDM. All management verification check sheets will be scanned in and stored in the eRDM system in the project folder. The MA will undertake the checks on each claim, and safeguard all documents provided by the beneficiary organisation in line with the agreed desk instructions on these checks
• the details of the identity and location of bodies holding the supporting documents relating to expenditure are recorded on a control document, maintained by the Programme Performance Team. Beneficiary organisations will be provided with detailed guidance, at pre application stage, covering all eligible activity, the accuracy of claims, separate accounting headings for European Funding, accurate reporting of progress against targets, the audit trail required and the holding of relevant documentation to demonstrate the accuracy of all expenditure and grant claimed. Details of all the audits carried out are maintained by the MA and an overall summary of the audit activities is maintained by the CA

2.3.2.1. Indication of the period during which documents are to be held

The instructions given on the retention of supporting documents by beneficiaries are included in each grant offer letter. A separate document retention guidance is published on the SGs website. Extracts from the offer of grant offer letter are detailed below:

2.3.2.2. Format in which the documents are to be held

European Commission Regulations allow for documents to be retained as either the original paper copies or as an electronic copy of the originals. The regulations allow for the electronic storage of documents provided that they are stored on a recognised data carrier (e.g. CD ROM, Hard Disk or Magnetic Disk), are certified as being copies of the original, meet national standards and are auditable.

For the purposes of our verifications and audits Lead Partners are advised to keep a document that describes the procedures undertaken to obtain the necessary assurance that adequate IT security standards are in place to rely on the information held electronically/digitally. Beneficiaries using scanning, e-archiving or image processing systems (where original paper documents are scanned and stored in digital form) will be instructed to ensure that certification processes and controls are in place.

The documents shall be kept either in the form of the originals, or certified true copies of the originals, or on commonly accepted data carriers including electronic versions of original documents or documents existing in electronic version only.

Where paper documents are the true/original source of the scanned documents and the latter cannot be relied on for audit purposes (e.g. due to incorrect or incomplete scanning of the document, indications that the documents may have been forged), it means that the procedure laid down on the basis of Article 140(5) CPR has not been complied with, in which case corrective measures are required, including financial corrections where deemed appropriate.

2.4. Irregularities and recoveries

2.4.1. Description of the procedure (that should be provided in writing to the staff of the Managing Authority and intermediate bodies: date and reference) on reporting and correction of irregularities (including fraud) and their follow-up and recording of amounts withdrawn and recovered, amounts to be recovered, irrecoverable amounts and amounts related to operations suspended by a legal proceeding or by an administrative appeal having suspensory effect

It is important to recognise that our risk-based, pre-payment approach means that ineligible activities and/or expenditure will mostly be detected prior to payment of grant by the MA and, by extension, prior to such expenditure being included in declarations to the European Commission. Detection and treatment of errors at this early stage means that ineligible expenditure should be stripped out before any ‘charging (of) an unjustified item of expenditure to the Community Budget.’ Any ineligible expenditure identified during the pre-payment checks will not be paid and will count as an error against the operation and the error rate will be recorded as part of the article check record within EUMIS.

Nevertheless, ineligible expenditure may still be detected post-payment. If ineligible expenditure is identified after a claim is paid, an irregularity must be recorded on the system.

The MA will manage the day to day operation of the Irregularity and Recovery process through EUMIS and where required will input these directly onto OLAF’s Anti-Fraud Information System, AFIS.

Irregularities are recorded against each claim for each operation and as per the correct irregularity classification types. For operations which are still live, the grant due will automatically be recovered from the next claim for the relevant operation, where a claim is forthcoming in the next 3-6 months. Where an operation is no longer live, or a claim is unlikely this will be recovered through issuing an invoice to the beneficiary. Annex 1 includes a link to the withdrawn/de-commitment guidance. All such invoices will be raised by our divisions administrative colleagues when instructed by the Growth Team. In preparation for the each payment application the MA will ensure that irregularities subject to recovery through the invoicing procedure have been actioned and are brought to the CA attention.

Where operations are suspended by a legal proceeding or by an administrative appeal having suspensory effect identified out with the verifications process and notified to the MA, no further claims will be paid and an irregularity entered onto EUMIS as a post payment irregularity. These sums would then be removed from the next declaration and until such time as the suspension is resolved.

Annex 1 includes guidance on the Types and Classification of Irregular Expenditure. The status of all irregularities and recoveries will be kept on EUMIS. 

2.4.2. Description of the procedure (including a flowchart setting out the reporting lines) to comply with the obligation to notify irregularities to the Commission in accordance with Article 122(2) of Regulation (EU) No 1303/2013

All irregularities, including those in excess of €10,000 grant, are recorded on EUMIS and will be classified in accordance with the Types and Classification of Irregular Expenditure Guidance. Checks will be carried out during the verification process to confirm whether irregularities exceed the €10,000 grant limit in aggregate. Where such an irregularity exceeds €10,000 grant the irregularity will be entered onto AFIS in accordance with the published guidance. 

A desk instruction for staff setting out the reporting of irregularities is included at Annex 1.