To ask the Scottish Executive what the criteria are for auditing organisations in receipt of European Social Fund funding; who sets the criteria; how organisations in receipt of such funding are advised of the criteria prior to receiving funding; what feedback these organisations receive after audits have taken place; whether all such funding is subject to audit; whether the criteria differ from equivalent criteria in England and, if so, in what way; how any funds deemed to be used inappropriately under the fund are reclaimed; what the basis is for any such reclaim and what arrangements are made to facilitate repayment and mechanisms for appeal against reclaiming of funding, and what funding has been so reclaimed since the establishment of the fund.
(a) What are the criteria for auditing organisations in receipt of European Social Fund (ESF) funding?
Organisations in receipt of ESF are audited by their external auditors for annual accounts and ESF final claims, and they may also be audited by the European Commission (DG Emploi) and the European Court of Auditors.
The Scottish Executive’s expenditure under ESF is subject to annual audit by the Auditor General. Public sector bodies in receipt of ESF monies are also subject to audit by auditors appointed by the Auditor General Scotland (AGS) or the Accounts Commission. In addition, under SSI 2003 No.530 The Public Finance and Accountability (Scotland) Act 2000 (Access to Documents and Information) (Relevant Persons) Order 2003, the AGS has right of access to information held by other organisations in receipt of ESF monies for the purpose of the audit of the Scottish Executive.
In accordance with Article 4 and 10 of Commission Regulation 438/2001 a sample of projects receive monitoring visits by the Programme Management Executive (PME), and on-the-spot checks by the Scottish Executive’s Verification and Compliance (VAC) team (part of the European Structural Funds Division of the Enterprise Transport and Lifelong Learning Department). Regulation 438/2001 sets out the extent of on-the-spot checks as well as the criteria for selection of projects for checking.
The Criteria for all of the bodies that can audit ESF funding is published and can be accessed at: www.interreg3c.net/sixcms/media.php/5/en_general_downloads_eu_438.pdf.
(b) Who sets the criteria:
The criteria are set by the European Commission.
(c) How are organisations advised of the criteria prior to receiving funding?
A copy of the Verification and Compliance (VAC) Guide which explains the legal basis and full details of on-the-spot checks is included with the offer of ESF grant along with information about monitoring checks.
(d) What feedback do these organisations receive after audits have taken place?
Programme Monitoring Executive (PME) Monitoring Checks:
The PME carries out monitoring visits which equate to an agreed percentage of the value of the approvals granted each year. These visits are aimed at addressing any issues as early as possible to allow the applicant to amend processes/practices before the project reaches a conclusion. The grantee is informed in advance of the visit and is provided with a copy of the checklistto be completed by the PME during the visit.
Feedback is given during the visit and any issues are discussed with the grantee. A timescale is agreed for the submission of further information. If there are issues to be followed up the PME provides the grantee with a formal report, detailing any action the grantee is required to take. When the issues have been resolved satisfactorily the PME writes to the grantee confirming this. If issues have not been resolved satisfactorily or cannot be resolved, the PME informs the Managing Authority.
If there are no follow up issues resulting from the visit the PME writes to the grantee confirming this and the check is concluded.
VAC on-the-spot checks: Feedback is given to the grantee during the course of the check. At the end of the check any issues are discussed with the grantee. Any further issues arising from quality control checks by the Head of the VAC team are communicated to the grantee by telephone.
The VAC team prepares a report of the results of the on-the-spot check for issue to European Structural Funds (ESF) Division’s Managing Authority (MA). The MA writes to the grantee raising any issues it considers should be brought to the grantee’s attention, in particular, any results that indicate ineligible expenditure, or any other circumstances that would give rise to recovery of grant. The grantee may challenge the VAC findings at any stage.
The MA’s letter invites the grantee to confirm acceptance of the VAC findings or offer further information. The Head of the MA considers any arguments against the VAC recommendations and makes a decision based on all of the facts presented. The MA sends a letter explaining the decision to the grantee, including an explanation of the calculation of any grant to be repaid. An invoice requesting repayment of the grant will then be sent to the grantee, or recovery is effected by offset from another of the grantee’s projects.
(e) Is all ESF funding is subject to audit?
Yes.
(f) Is the criteria in Scotland different from equivalent criteria in England?
Article 4 and 10 of Commission Regulation 438/2001 applies to all European Union countries. The criteria for carrying out checks are therefore the same in all parts of the United Kingdom.
(g) How are funds deemed to be used inappropriately reclaimed, and what is the basis for such reclaim?
All organisations are aware that on acceptance of a grant award they are legally bound by the terms and conditions of the grant award. If a recovery of previously paid grant is required then the organisation is legally bound to repay any and all sums so requested.
Arrangements to facilitate repayment:
Where a recovery has been identified, the paying authority will first identify whether the organisation from which recovery is to be made has any other projects currently in progress. Where the organisation is operating another project under the same Programme the amount to be recovered will be offset against any future payments on that project. If there is no suitable project, an invoice will be raised for the full amount of the recovery.
Should payment not be received and if the organisation has not replied in an acceptable manner to further correspondence from the Executive, then Solicitors will be contacted to facilitate recovery of the sum due. The Executive will seek recovery of the full amount of the sum due, taking into consideration the financial circumstances of the organisation and seek the sum due in a mannerwhich will not be detrimental to the viability of the organisation.
(h) What are the mechanisms for appeal against reclaiming of funding?
In the case of a VAC on-the-spot check the grantee may challenge the VAC findings or offer additional information to mitigate any proposed recovery. It is also possible to respond to findings arising from Commission or Court of Auditors’ visits although the scope to argue against action to recover grants is rather more limited.
(i) What funding has been so reclaimed since the establishment of the fund?
I refer the member to the answer to question S2W-13023 on 20 January 2005. All answers to written parliamentary questions are available on the Parliament’s website, the search facility for which can be found at
http://www.scottish.parliament.uk/webapp/wa.search.