2000-06 WESTERN SCOTLAND OBJECTIVE 2 AND CLYDE WATERFRONT URBAN II PROGRAMMES
ARTICLE 4 MONITIORING ACTION PLAN 2007/2008
UPDATE – MARCH 2008
In accordance with the Article 4 Action Plan agreed with the Managing Authority during February 2007 SEP Ltd carried out the required risk assessment to identify the final schedule of projects to be subject to Article 4 checks under the current Programme during 2007/2008.
This exercise identified a schedule of 194 projects (117 ERDF, 36 ESF and 41 URBAN) to be subject to Article 4 monitoring visits by 30 June 2008. Following agreement of the schedule with the Managing Authority the list of projects to be visited and the updated guidance was posted on the SEP Ltd website to provide advance information for project sponsors. This section of the website has also been kept updated with key matters arising from the visits to provide further advice and information for partners.
By 31 December 2007 SEP Ltd had carried out Article 4 monitoring visits and submitted reports to the Managing Authority for 140 of the projects listed in the schedule (81 ERDF, 25 ESF and 34 URBAN) as summarised below:
Visits have been underway since the beginning of the year to the remaining projects identified by the 2007 risk assessment. As at 29 February 2008 the projects listed below still have visits to be arranged and/or undertaken. The deadline to conclude all visits and issue reports is the end of June.
Other Article 4 Related Activities Undertaken During 2007/Early 2008
Additional Financial Checks
Revisits to a total of 97 projects (70 ERDF and 27 ESF projects) were carried out during February-March 2007. This was to enable additional financial checks to be carried out on a sample of 20% of declared expenditure. At these visits, the recording of samples and findings was carried out according to the standards agreed with the Managing Authority in February 2007. An audit visit by DG Regio in October 2007 confirmed that as a general rule these supplementary checks met the requirement for an Article 4 monitoring visit.
In-House Professional Fees
The DG Regio visit also identified a potential systemic error amongst local authorities related to the use of in-house professionals in ERDF capital projects. The introduction of transaction lists flagged up that local authorities and housing associations often include in-house staff costs in ERDF claims under professional fees. This generally includes an “on costs” element (also known as “uplift” or “departmental charges”) which is not eligible for ERDF grant. In November 2007 SEP Ltd to contacted all local authorities and housing associations to ask that they review all ERDF projects which include professional fees and where “on costs” have been claimed as part of in house staff payments identify the amounts involved. As a consequence of this exercise a limited number of projects will need to make adjustments in final claims and/or be subject to the recovery of a proportion of ERDF grant paid.
Additional Checks for ERDF Grant Schemes
Following the DG Regio audit visit in October 2007 SEP Ltd will be undertaking further checks to a small number of ERDF revenue projects during the period March – May 2008. The projects affected are those where a grant is made to a third party, whether an SME or community group. All future Article 4 monitoring visits to projects of this type will include this additional level of checks detailed below for your information.
Prior to the initial visit to the project sponsor a list of all grants awarded by the project will be required by SEP Ltd. At that visits a sample size of at least 30 will be inspected to verify that a full audit trail is in place. This will include checking the payment documentation held by the project sponsor for the following:
1. Appropriate grant award documentation, including an SME eligibility check.
2. Evidence of payment of the grant to the SME – an accounting record and bank evidence of payment.
3. Evidence of the payment made by the grant recipient for eligible goods and services - a receipted invoice.
The Scottish Government advice to date has been that the preferred format of an audit trail for item (3) includes an invoice supported by a bank statement. This has now been modified to include documents of equal probative value, such as specific correspondence from the supplier confirming the payment, a signed and dated receipt, or a statement of account produced by the supplier, also likely to be acceptable.
During the visit to the project sponsor arrangements will be agreed for subsequent visits to a small sample, normally 3-5, of the grant recipients to further check that:
The SME or community group was in receipt of the full grant declared - this will require an examination of the recipient’s bank statement.
There is some physical evidence of the item or service supported by the grant.
The grant recipient is aware of the contribution of the European Structural Funds.
Please note that the availability of this level of evidence is not just required for Article 4 visits but should be part of the standard documentation retained for this type of project.
For further advice and information of matters related to Article 4 monitoring please contact Clare O’Neill on 0141 572 4454 or clare.oneill@wsep.co.uk
ARTICLE 4 MONITIORING VISITS 2007/2008
UPDATE – SEPTEMBER 2007
The 2007/2008 schedule of monitoring visits is well underway and represents the key activity being undertaken by SEP Ltd Programme Managers. As previously advised the risk assessment carried out during January 2007 was applied to all approved projects under the 2000-2006 Programmes and identified 117 ERDF, 35 ESF and 41 URBAN projects to be visited by the 30 June 2008. Good progress has been made to date with one third of visits already carried out and a second batch scheduled for the remainder of 2007. The final third will be scheduled later this year for early 2008.
This purpose of this update is to alert partners to the four key issues currently emerging from visits which in some cases are preventing visits being concluded and may be indicative systemic errors within an organisation and/or across project types. These issues are as follows:
- Failure to have required documentation available at visits, in particular for procurement and payments.
- Apportionment methodology for overheads – mainly for ERDF revenue and ESF projects.
- Defrayal dates in individual claims inspected being outwith the stated claim period.
- Local authority recharging of in-house professional fees on the basis of day rates rather than actual salary costs supported by time sheets.
As appropriate these and other issues are recorded in the visit report forwarded to both the partner and The Scottish Government for follow up action. Failure to resolve the issues satisfactorily within the agreed timescale may result in further action being taken by The Scottish Government with the ultimate sanction being full decommitment of the project and/or projects.
A further delay in closing off visit reports is the time being taken for partners to address the action points many of which would not be required if all the relevant documentation was available at the visits. In some cases it is taking several months to close of the follow up which has a cascade effect on scheduling other visits.
Partners are reminded that Article 4 monitoring visits are a Regulatory requirement and failure to cooperate with the initial visit and/or any subsequent follow up may be classed as non-compliance resulting in decommitment.
European Regulation (EC) No 438/2001 (Article 4) states that monitoring plays a key part in the implementation of European Structural Funds Programmes in particular as part of the wider compliance requirements. As a consequence monitoring visits are a regulatory requirement and failure to co-operate could be viewed as non-compliance for which the ultimate sanction is decommitment of the project.
SEP Ltd is required to carry out Article 4 checks (monitoring visits) to a minimum of 10% of all approved projects, calculated by value and by volume. The projects to be visited are identified using a risk assessment methodology agreed with the Scottish Executive.
During December 2006/Janaury 2007 the Scottish Executive and SEP Ltd prepared a comprehensive Article 4 Monitoring Action Plan for 2007/2008. This was in response to a series of audit visits by DG Regional Policy in the European Commission to Scottish Programmes in 2005-06.
A preparation of a programme of monitoring visits for 2007-08 is part of that action plan, the key elements of which include:
- a monitoring visit to every URBAN II Community Initiative project
- at least one monitoring visit to each project sponsor in the 2000-06 Objective 2 Programme
- all projects identified as high risk under a standardised risk assessment process to be subject to a monitoring visit
- a minimum of 20% of cumulative declared eligible project expenditure claimed to date to be checked back to source documents at each monitoring visit
- the introduction of a revised monitoring checklist and report form
- all errors identified at a monitoring visit to be reported to the Managing Authority
- all monitoring visits to be concluded by end June 2008
In recognition that there will be no further new project approvals under the 2000-06 Programmes, a risk assessment carried out during January 2007 was applied to all approved projects. As a result during the period March 2007 to June 2008, SEP Ltd staff will be carrying out approximately 188 monitoring visits across the partnership. Projects which will receive a monitoring visit are detailed (link to tbc). As a general rule project sponsors:
- will be given 15 working days notice of a visit together with comprehensive guidance on what is required
- are responsible for ensuring that relevant documentation and staff are available for the visit
- should allow up to a full day for the visit to be undertaken
It is recognised that the administrative workload and pressure on staff resources will be considerable for both project sponsors and SEP Ltd.
Every effort will be made to minimise disruption to project sponsors in scheduling visit dates, for example by avoiding main holiday periods and the run-in to deadlines for submission of claims to count towards expenditure targets (N+2). However the scope for flexibility in this matter is limited by the volume of visits required and the co-operation of all project sponsors in this major exercise will be greatly appreciated.
Further information and reference documents can be found below or by contacting Claire O'Neil or telephoning 0141 572 4454.
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