ESIF Programme Monitoring Committee minutes: November 2024

Attendees and apologies

• Hilary Pearce (HP) - Scottish Government (Chair)
• Susan Tamburrini (ST) - Scottish Government
• Ryan Gunn (RG) - Scottish Government
• Robert Buntin (RB) - Scottish Government
• Patrick Douglas-Early (PDE) - Scottish Government
• Ashley Ross (AR) - Scottish Government
• Euan Barclay (EB) - Scottish Government
• Anthony Carrick (AC) - Scottish Government
• Anna Fowlie (AF) - Scottish Charity for Voluntary Organisations (SCVO)
• Brian McLaren (BM) - EKOS
• Rob Clarke (RC) - Highlands and Islands Enterprise (MS Teams)
• Christine Mulligan (CM) - Skills Development Scotland (SDS)
• Francesca Gianini (FG) - Scottish Enterprise (SE)
• Gavin Bruce (GB) - Scottish Funding Council (SFC)
• Joanne Knight (JK) - European Commission
• Peter Matthijis (PM) - European Commission (MS Teams)
• Alice Arnaldi (AA) - European Commission

Apologies

• Colin Cook (CC) - Scottish Government
• Damien Yeates (DY) - Skills Development Scotland (SDS)
• Douglas Colhoun (DC) - Scottish Enterprise (SE)
• Diane Greenless (DG) - Skills Development Scotland (SDS)
• Kayleigh MacLean (KMc) - Scottish Government
• Tracey Gillon (TG) - Scottish Government

Items and actions

Agenda

• welcome and apologies
• conflict of interest
• minute of previous PMC meeting – 9 May – including action log
• ex-post evaluation – EKOS – presentation
• financial/operational performance update
• communication update
• programme closure update
• any other business
• actions

Welcome and apologies

HP welcomed all to the meeting. This will be the penultimate meeting, the final meeting will take place next year, which is likely to be concluded by written procedure once the Final Implementation Report (FIR) is complete. As we near the end of the programmes, HP thanked members for their support in delivery of the programmes, particularly through challenging times such as previous suspensions, COVID-19 and the complexities throughout.

HP further added that the data contained in the reports is confidential and tentative. A final position incorporating further adjustments will be publicly released next year. The figures contained in the current reports are subject to further adjustments.

Conflict of interest

HP asked members if there are any conflicts of interest to be noted. No conflicts of interest were reported.

Minute of previous PMC meeting – 9 May (paper) – including action log

Draft minutes were circulated to members alongside the actions prior to the meeting. Members agreed the minutes were an accurate representation of the meeting, however FG noted that her attendance was listed despite not being present. HP responded that this will be corrected.

HP spoke to the action log, noting that there was one action to be completed which was done via a note on the performance of the SME Holding Fund. This was circulated to members with the papers.

The EKOS report refers to the SME Holding Fund at section 7.3 and reports the outturn was £36.6 million out of a possible £42.6 million in grant allocation. The SME Holding Fund was utilised to the extent of 86% of available funds.

Ex-Post Evaluation – EKOS – presentation

BM opened the presentation by outlining key topics covered, focussed on main findings and emerging lessons from the post programme evaluation of the ESIF 2014-2020 Programme, comprising of both ERDF and ESF programmes. 

The report considered whether the programme has met its financial and operational targets in relation to the original targets from the outset of the programme as well as against the subsequent reprofiled targets. It examines what has been successful along with the challenges and barriers that have impacted the activities of the programme, and finally the lessons that can be drawn on from the programme in its entirety.

Informed through surveys and engagement with 32 Lead Partners (LP), 56 Delivery Agents (DA) and 83 SMEs; the information obtained from these surveys were drawn together and analysed into a report, which this presentation summarises. 

BM spoke to the limitations of the survey data, stating that as the programme began approximately 10 years ago there have been many changes in personnel resulting in a loss of historical knowledge. 

Furthermore, EKOS had to rely on 3rd parties to distribute surveys both to DAs and SMEs, for example LPs delivered and promoted the survey to their DAs. Notably, the response from SMEs was somewhat underwhelming. This limited the potential to perform a full economic impact assessment. 

External factors such as COVID-19, the on-going impact of Brexit, and the cost of living crisis represent significant challenges that have impacted the activity of the programmes. Internal factors include the development and subsequently, the delivery of the programmes. 

There were delays from the outset of the programme, which is partially due to the Managing Authority (MA) being under resourced. The MA also had to manage the closure of the 2007-2013 programme during the launch of the 2014-2020 programme, contributing to delays. All these factors resulted in a knock-on effect of delays, with delivery beginning substantially later than originally anticipated. 

Guidance was subject to a number of revisions throughout the programme, which had implications for LPs regarding the types of evidence required to be collected to support claims.

BM noted two organisations that were underrepresented in the programme; Universities and 3rd Sector partners. Universities withdrew from the programme due to cost of administration and it was ultimately decided to not be worthwhile, while match funding requirements proved to be a struggle for 3rd Sector partners.

Establishing firmer timescales for the programme would have been beneficial due to backlogs in terms of the submission and verification of claims. BM noted this as one of the important lessons from the programme.

BM continued that the programme suspension was a major challenge in particular as this required a huge amount of work for the MA, the AA and LPs. Additionally, there has been extensive reprofiling of financial and operating targets which has impacted the performance of outcomes. 

In ESF Employability programmes especially, there has been under reporting mainly due to evidence requirements to demonstrate eligibility. Within the context of evidence requirements, LPs have consistently spoken to the fact that far more clients were taken on that could be claimed for due to the complex lives of the client base. BM added that these issues are also evident in Business Support within ERDF, such as through Scottish Enterprise’s Innovation programmes and Business Gateway. 

In regard to how the programmes have performed against original expectations, BM stated that the original total value of ESIF was €1.9 billion; €923 million in grant from the Commission and €985 million in match funding. The grant figure EKOS had at the time of reporting was €652 million, which is a 29% reduction in what was originally projected. BM noted it is important to consider external factors which caused a significant impact such as COVID-19 and Brexit in this context. 

COVID-19 had a suppressing effect on business demand, where businesses focused on survival rather than growth for 2-3 years. This also affected demand for and delivery of services. However, BM noted that the SME Holding Fund performed well and an evaluation was conducted which demonstrated strong economic returns.

Despite all these challenges, the programme has achieved and delivered a substantial amount of benefits for Scotland. In relation to the Innovation theme, BM stated that there was a substantial expansion of innovation support to reach a large number of businesses. For the theme of Business Competitiveness, the programme also contributed to a significant expansion of support to businesses which the evidence contained in the report from SMEs highlights. 

Employability has also been a fundamentally important part of the programme, and although it is difficult to demonstrate for numerous reasons, it has enabled LPs to support those facing multiple barriers to employment to get enter into the labour market.

Against the reprofiled targets, match funding performance was strong; contributing to developing new and stronger existing partnerships. In reference to previous programmes, BM stated that one of the aims of the 2014-2020 programmes was to simplify the administrative processes. 

However, this became far more complicated than previous programmes and the opportunity to simplify the administration of the programme was not realised. Additionally, during the period of the programme, SG brought in other funding programmes that were easier to administer and less complex. This meant that some LPs favoured these programmes, creating competition with ESIF which likely led to decommitment.

BM added that tensions between LPs, the MA and AA persisted through the programme, asserting that a collaborative approach would have been helpful from the start. While the programme demonstrated some flexibility, the processes involved were often cumbersome and lengthy.

BM concluded that overall ESIF has been crucially important to Scotland for the last 50 years. The programme supported an improvement and expansion of a range of services that would have otherwise not been possible, although it could have inevitably delivered more. 

HP asked members if there are any comments or questions.

Regarding the previous programme, PM noted that there was also corrections required and additional work particularly in closure. The new IT system, EUMIS, had delays which not only impacted Scotland but other nations. Ahead of the 2014-2020 programme, the Commission aimed for significant simplification to allow countries to begin their programmes early. 

Although at first the roll out of EUMIS added additional complexity and confusion. The impact from Brexit should not be underestimated as there was bound to be a lower amount of interest in the programmes as a consequence. As a result, the programme was no longer seen as a long term solution and a worthwhile investment of time and effort. PM continued that this also may have led to a lack of initiative to find new ways of absorbing funds. 

Referring to PM’s point on Brexit, BM agreed that there are non-financial issues but these are difficult to evidence. The alternative funding programmes that began during the 2014-2024 ESIF programme may have been more attractive to LPs as a less administrative option and additionally, it could be viewed as a longer term option due to Brexit. 

Regarding the interaction between the MA and LPs, BM noted that this was an issue throughout and a more collaborative approach ought to have taken place right from the outset. BM attributed this tension to the risk passed down through the governing structure of the programme.

In regard to the complexity of the programme, JK noted that COVID-19 within the STEP proposal was very much simplified. Otherwise, there is a great deal of complexity in the programme. In regards to ESF, JK asked what evidence the Commission had requested for participants that LPs were unable to provide.

HP replied that, unlike Scotland, other countries may not have had the same issues with proof of residence as they have ID cards.

Concerning ESF specifically, CM responded that the complexity of the participants lives meant that they did not have a passport or driving license, for example. Therefore, it was difficult in these circumstances to provide their eligibility for the programme. 

With regards to the relationship between LPs and the MA, no LPs have tried to work around the system, rather most have done what they could with the evidence that could be provided by participants. Despite these issues, DAs in many cases also continued with the work, although they could no longer be reimbursed by ESF.

FG spoke to the level of evidence requirements, stating that it is not proportionate to the kind of beneficiaries that we were trying to support. FG noted that for other European funding, such as Horizon Europe, the acceptable standard was the same as that of Audit Scotland. This was not the case for ESIF, which seems unjustifiable as it suggests that Audit Scotland’s standards are not robust. The evidence requirement for ESIF has a challenging level of detail that SMEs and beneficiaries cannot provide.

FG echoed CM’s point, that LPs have not sought to work around the system, but rather there have sought out further collaboration. Notably, experienced LPs that worked on the programme for decades suddenly experienced difficulties in 2014-2020 programme.

In reference to the evidence requirements, HP noted that there is a fundamental irony that the ESF programmes were aimed to deliver beneficial projects to the most disadvantaged individuals with multiple barriers to employment or training, but these individuals have the hardest evidence to collect due to the fact they are disadvantaged. The focus on quantitative rather than qualitative data is questionable as it may be out of touch.

AF added that the evidence can be out of touch with the reality of these situations, such as the cases of refugees.

Concerning the evidence requirements, BM further added that even this singular element has raised the financial risk across the programme for different actors across the entire programme structure.

FG noted that it impacted on the ambition of the programme, leading to the programme becoming more conservative as there was less of an incentive to take risks leading to missed opportunities. A comparative analysis with similar European countries could be useful to deepen our understanding.

Regarding the comparative analysis, HP responded it is anticipated that this will be done in due course. In such a case where a large organisation such as Scottish Enterprise is reluctant to take on risks, HP stated it is evident that a 3rd sector organisation would have been much more reluctant to do so.

Regarding the 3rd sector, AF noted that there was the existential threat of not being reimbursed, which could lead to business failure. The issue for collecting evidence such as birth certificates notably does not only impact people from other countries, but also care givers who also often can have difficulty providing this. Therefore, this issue was systemic and HP’s point about ID cards is reasonable.

CM spoke to the EPSA Audit in 2018, stating that the Commission representative responded that the solution is to use ID cards. However, the programme started in Scotland in 2016, meaning that alternative evidence had to be found in hindsight. The EKOS report accurately represents the situation, Scotland was trying to catch up with evidence retrospectively. CM added that this would have a significant impact on results.

Regarding the evidence for participants, PM stated this mainly concerns YEI as age and geographical limitations plays a role. This information is sometimes complex particularly in terms of procurement. At the level of the MA, AA, LP and DAs there has been somewhat of an overreaction, particularly during the suspension.

In response, HP noted that this concerned apprenticeship programs as well and not just YEI. 

HP concluded this part of the meeting by stating that the EKOS report was thorough, comprehensive, accurate, fair and balanced. HP expressed gratitude to EKOS for this work. HP also thanked LPs, DAs and all involved in the delivery of the programmes.

Financial/operational performance update

HP stated that the penultimate declaration to the Commission was provided at the end of July 2024, which was the biggest ever declaration at €326 million and the final declaration provided in October 2024 was €46.4 million. The STEP regulation allowed members to extend the end date for their final declaration, as well as the final accounts and closure package. 

The MA decided to make use of STEP, which will have an effect on the final absorption rate, but this will not be known until the final article 127 (A127) checks have been completed. The use of this regulation is summarised in section 4.7 of the paper, which contains risks.

Members will be updated when these final figures are known. The Unit Cost expenditure claims is summarised under this methodology, these are the claims the MA have made to the Commission under Unit Cost methodology which has come to just under €216 million in total. As these claims were paid out on an expenditure basis, there will be a loss in terms of what is claimed and paid out which is currently estimated as €13-14 million.

Closure activity is examined in this paper, although importantly a significant data review is being undertaken been undertaken by the Governance team which is due to be completed in the first quarter of 2025, with a total of 75,000 records already revised.

Referring to table 4, PM stated that this paper looks unusual as there is confusion where it appears more has been received in grant that can be covered by Unit Cost. This may be due to overbooking, which mostly concerns YEI. PM emphasised the importance of overbooking.

HP responded that RG and RB will ensure that the overbooking will be used to the best possible advantage of Scotland. The information on table 4 is a provisional position.

Regarding the Final Implementation Report, PM noted that there is not even raw data ready yet and that it is better to resolve any issues prior to the final submission. PM stated that this can be shared with the Commission prior to deadline.

HP ensured that drafts will be sent prior to submission.

Regarding the risk to self-correction, FG asked how this will work at this stage in the programme.

HP responded that if errors are found in the A127 checks within the AA that are above 2%, then that amount will be replaced by claims not previously counted due to overbooking.

When an article A127 identifies an irregularity, FG asked how will this self-correction work at the LP level.

HP responded that there will be a chance for LPs to provide additional evidence once article A127s are completed. If there is an error that cannot be corrected then this will be taken into account in the final consolidation exercise.

Typically a risk register is included in PMC paper, therefore FG asked why it was not included in the papers for this meeting.

HP replied that many of the risks are no longer relevant, such as the risk of not receiving all final claims within the timescale. There are remaining risks, however. There is an up-to-date risk register still in use for the programme board, which can be circulated to members of the PMC.

Communication update

HP began by noting the occurrence of the LP event in October 2023 and the upgraded SG website pages. There was significant media interest in May and June 2024 during the general election, following that further media interest is expected in the Spring Summer of 2025 when the MA is finalising the financial position of the 2014-2020 programme. 

The Deputy First Minister will provide a further statement in Parliament next year to set out the final ESIF position and correct the misinformation spread in the media in summer 2024.

As PM and BM have discussed during the meeting, HP stated that the final absorption rate will be above 90% in the reprofiled allocation, but in comparison to original allocation at the beginning of the programme it will be considerably less. This is as a result of N+3 decommitments due to the programme not meeting financial targets, which was a challenge for the reasons outlined throughout this meeting.

HP concluded by referencing the summary of communication activity over the period of the 2014-2020 programme, which includes many different events, visits, e-bulletins, and Parliamentary Questions.

HP asked members if there are suggestions for a ministerial visit.

RC responded that this will be given some thought and will return on this point in time.

As PDE is soon to move post, HP thanked him for his hard work over the years and noted that AR will be dealing with communications from now on.

Programme closure update

In regards to closure, HP stated that the reports are yet to be finalised, although around 50 reports are in the last stages. The reports are being worked on within the MA, with a total of 247 to be completed alongside the ongoing data review which focuses on outputs and results. 

The regulatory A61 and A71 checks are starting soon, which was noted to LPs on 1 November 2024. The AA’s A127 checks have started for the July declaration and sample will soon be done on the October declaration. All of this work will factor into the Final Implementation Report next year.

HP asked members for any question regarding closure.

PM noted that normally the closure paper should contain consultation within the PMC.

HP responded that PMC agreement will be sought once this is finalised.

With regards to staffing, 25 staff have left the MA and 2 more are due to leave at the end of December which will bring the MA to 49 members of staff. By March more staff will have left, but everyone who has left or will be leaving has a new legacy objective added to their objectives. This will require staff to respond to ESIF queries when required to do so. There is expected to be a budget for 18 posts to continue the final work, which should be sufficient for closure.

The AA have permanent staff, with contractors utilised for particular work.

HP asked if members have any questions concerning the closure report.

FG questioned the closure report, asking if there is a timescale for letters issued to LPs.

HP replied that the final balance letter will be issued to LPs individually, and the MA has done trial runs for operations which will be sent shortly although this is subject to A127 checks being finalised.

ST noted this will vary according to each LP, as if there are A127 checks yet to be resolved then these letters cannot be issued.

FG spoke to the A127s, asking how all checks can be completed within 4 months.

ST responded that the various checks will be done in parallel.

From now until the final closure report, PM stated that there will be a number of questions from auditors where swift responses are required. Ultimately, the regulatory dates for submission is 15 February 2026 and then the Commission has 5 months to finalise. 

PM added that the MA should keep a record of current progress. Records must also be kept up to 3 years after submission. Especially for the MA, it is important that there is a swift closure where key personnel can still be contacted for information and evidence.

HP responded that a list of key contacts will be provided. In terms of IT, the EUMIS service contract was renewed recently.

RG noted that the contract was renewed in September 2024 for another 4 years.

Regarding EUMIS, CM asked if LPs will still have access to EUMIS during this period, although it will not be as admin.

RG stated that viewing access will be available only. This will also apply to the MA, and no more upgrades will be made.

Any other business

HP asked if there was any other business. None noted. HP thanked all members of the PMC for their support and advice over the years and concluded the meeting. 

Actions

• minutes of 9 May 2023 to amend to show FG gave apologies and did not attend
• slide presentation by Brian McLaren, EKOS, to be circulated to all PMC members
• PMC risk register to be amended to show all existing risks as past, except risk of errors and correction arising from A127 or EC audit checks resulting in financial corrections and penalties, and, risk of media/parliamentary scrutiny focussing unduly on challenges to the programme and not on achievements and benefits