Due diligence, monitoring and reporting requirements
Given their responsibilities for managing public funds, it is up to local authorities to ensure that procedures for administering the grants are suitably robust, including due diligence to mitigate fraud and for audit purposes.
Local authorities are required to be assured of the validity of any supporting information requested in determining eligibility for a grant. The Scottish Government will require local authorities to regularly supply agreed management information by sector and RV class: the number of eligible businesses; awards made and any refused (with rationale); and the number of and amounts of actual payments made.
The Grantee will maintain a log of monies paid under this scheme and provide Scottish Government officials with weekly updates, until the scheme closes (or date agreed with officials).
Local authorities are expected to offer an appeals process for applicants.
State aid / subsidy control
State Aid is a European Commission consideration of public assistance given to undertakings on a discretionary basis and having the potential to distort competition and affect trade between Member States of the European Union. An undertaking is defined as any entity, regardless of its legal status, which is engaged in economic (commercial/competitive) activity relating to a market in comparable goods or services. A grant reduces an undertaking’s current expenditure, and so can be regarded as State Aid.
On 19 March 2020, the European Commission announced a temporary framework to enable Member States to further support the economy in the COVID-19 outbreak.
This temporary framework allows aid to be granted to undertakings facing difficulty as a result of the COVID-19 outbreak, and extends the limit of support to €800,000 in the form of grants, repayable advances and tax or payments advantages. Aid to the fishery and aquaculture sector should not exceed €120,000 per undertaking, and should not exceed €100,000 per undertaking in the primary production of agricultural goods.
The UK Government submitted a UK-wide umbrella scheme COVID-19 Temporary Framework for UK Authorities’ which was approved under the Temporary Framework allowing UK public authorities to grant aid as quickly and as flexibly as possible. Full details can be found in this guidance for local authorities and other public bodies which provides full details on this. Local authorities should ensure that the applicable conditions are met, including obtaining the information required for transparency reporting purposes.
Support under this framework should only offered to properties that can demonstrate they were not in financial difficulty on 31 December 2019. Councils must therefore ensure they hold this information from grants applicants. See paragraph 18 of regulation (EU) No 651/2014 of 17 June 2014 for the definition of a “firm in difficulty”.
The Temporary Framework covers aid granted until 31 December 2020. Local authorities should continue to have regard to these requirements until otherwise advised.
From 1 January 2021
Strategic Framework Business Fund awards issued up to 31 December 2020 were subject to EU State aid regulations. As of 1 January 2021 any grants considered to be a subsidy will need to be complaint with the Trade and Cooperation Agreement (TCA). Further update will be provided separately.
Following the end of the transition period on 31 December 2020, a new Subsidy Control regime came into effect in the UK at 11pm on 31 December. It is anticipated that awards will be made under similar terms to COVID-19 schemes in operation before the 1 January 2021 and additional information will be provided to successful applicants in the award letter and terms and conditions but our interim position is that the terms of the COVID-19 Temporary Framework for UK Authorities should continue to be applied. Use of the Temporary Framework should mitigate the risk of challenge under the Temporary Framework, as well as being an established and flexible mechanism for delivering COVID-19 related support.