RECOMMENDATIONS AND CONCLUSIONS
1. We believe the Government should quantify the
potential administrative savings for service providers that can
be generated by co-financing and identify ways in which these
savings can be realised. (Paragraph 56)
One of the main reasons why the Government introduced
Co-financing in England was to reduce administrative burdens and
costs for providers. Co-financing removes the requirement on applicants
to supply their own 'match funding' before they can access ESF.
The second evaluation of Co-financing found that the majority
of providers thought that the application process was simpler
under Co-financing than previously. However, the two evaluations
of Co-financing to date have not sought to quantify potential
savings for service providers. The Government intends to undertake
a further evaluation of Co-financing as part of the evaluation
strategy of the England Objective 3 programme in 2004-06. This
will seek to assess the potential administrative savings for service
providers and identify further ways in which these savings can
be realised.
2. We further recommend that the DWP compares the
implementation of ESF in areas where there are a few Co-Financing
Organisations with those areas, such as London, where a larger
number of CFOs operate and, in consultation with the ODPM, describe
how it proposes to improve the co-ordination between CFOs to the
benefit of applicants. (Paragraph 57)
DWP is already working with Government Offices to
ensure that good practice in co-ordination between CFOs is identified,
disseminated and adopted across England.[2]
The second evaluation of Co-financing examined co-ordination between
CFOs in all regions of England. It found that, in most regions,
good regional partnerships meant that all CFOs liaised reasonably
effectively and that, in particular, the two largest players -
the LSC and Jobcentre Plus - worked closely with Government Offices
to identify potential overlaps.
Government Offices will continue to work closely
with CFOs to strengthen co-ordination and ensure a 'joined-up'
approach for applicants in all regions. Examples of initiatives
to strengthen co-ordination include:
- In the South East region, the
eight CFOs (six local LSCs, Jobcentre Plus and the South East
England Development Agency) have worked together to develop a
common prospectus, application form and timetable for bidders.
They have also held joint consultation events for providers to
ensure that respective responsibilities, interests and requirements
are clear.
- In London, the five local LSCs will hold a joint
pan-London application round in 2004, to meet strategic needs
that cannot be achieved within the scope of local LSC Co-financing
plans. Also in London, CFOs will be asked to stagger tendering
rounds in 2004, to help providers likely to seek funding from
more than one CFO.
- In the East Midlands, the CFOs, which include
Lincolnshire County Council as well as five local LSCs and Jobcentre
Plus, negotiate between themselves, on a county basis, the division
of activity in the Regional Development Plan, and hold joint consultation
and launch events. There are regular meetings between the CFOs,
and bi-monthly meetings with the Regional Committee and Government
Office.
- In the North East, the four local LSCs, Jobcentre
Plus and Government Office held a joint bidding round in September
and October 2003.
3. We recommend that steps should be taken by
the Government to make the EU rules on additionality, and specifically
that match-funding need not be additional, more widely understood.
(Paragraph 64)
The Government welcomes the Committee's finding that
Co-financing is consistent with EU rules on additionality. It
accepts that some organisations do not appear to understand these
rules and will seek to make them more widely understood through
guidance to applicants and publicity materials.
Public expenditure, including Government programme
money, has always been a major source of match funding for ESF
projects in the UK. The new system of ESF co-financing in England
has not altered the nature of match funding, but has simplified
the process of accessing both ESF and match funding. Instead
of making separate applications for ESF and match funding, applicants
make a single application to a CFO which brings together ESF and
match funding. CFO plans must indicate the activities that ESF
will fund against the corresponding activities and outcomes funded
through match funding. These arrangements have been agreed with
the European Commission. Therefore, under Co-financing, ESF funding
continues to be additional to domestic public expenditure.
4. We recommend that the DWP investigates the
possibility of providing a fast track procedure for relatively
small grant applications, such as those under £50,000. We
also recommend that the DWP ensures that suitable transitional
funding is in place before the end of the current programming
period as protection against delays in granting programme and
project approval at the start of the next programming period.
(Paragraph 68)
The Government shares the Committee's concern that
the process between application and decision should be as short
as possible. Since 2000, the Government has sought to simplify
the England Objective 3 application process, within the constraints
imposed by EU regulations and the need to ensure proper consideration
of funding applications. It has introduced two major changes.
First, Co-financing has made the application process simpler for
most applicants. Second, Global Grants programmes have been introduced
to enable small non-governmental organisations to access ESF with
the minimum of bureaucracy. The Global Grants programmes are run
by intermediary bodies which are responsible for awarding ESF
grants of up to £10,000 through a streamlined application
procedure. It usually takes no more than one or two months to
award grants, and in some cases two to three weeks.
The Government believes that these changes are significant
steps to simplify application processes, while ensuring the necessary
checks and balances are in place to protect public funds. Creating
a fast track procedure for grant applications below £50,000
is unlikely to meet European Commission requirements that CFO
application procedures comply with open and competitive tendering
rules. These rules require that all applications are treated similarly
to ensure that selection arrangements are applied consistently
to all bidders. It would also make it difficult to comply with
Commission requirements that detailed information is collected
for programme management, monitoring and evaluation. The Government
does not believe there is any scope for introducing a fast track
procedure in addition to the Co-financing and Global Grants reforms.
The Government will take decisions on whether to
make available transitional funding at the start of the next programming
period, in the light of negotiations and decisions at EU level
on post-2006 arrangements. The European Commission has stated
its intention to seek to secure agreement to regulations governing
the post-2006 period in 2005, so that preparations can be made
in good time for successor arrangements to be in place from 1
January 2007.
Subject to guidance from the European Commission,
it is likely that some ESF activities funded by the 2000-06 programmes
will be able to continue for a short period beyond 31 December
2006. DWP will produce guidance for ESF applicants on the date
by which activities funded under the current programmes must be
completed.
5. We recommend that the Government considers
changes in the way in which project approval is considered. We
would like to see service providers, possibly in the form of advisory
groups, included more in drawing up the plans and specifications
if a conflict of interest can be avoided. (Paragraph 75)
The Government believes that the existing structures
of advisory and partnership groups, which are involved in the
development of Co-financing plans and specifications, enable partners,
including service providers, to influence the overall shape of
co-financed activity. CFOs are required to consult partners and
other interested organisations on their plans. Although the first
evaluation of Co-financing found some weaknesses in consultation
processes, the second evaluation found that CFOs are generally
now more systematic in consulting with local and other interest
groups.
It would not be possible to engage service providers
more directly in the project approval process, without risking
conflicts of interest and compromising EU rules that processes
for awarding funds must be open, competitive and transparent.
6. We suggest that some direct funding be retained
as a safety net for those worthwhile projects that fall between
specifications. We therefore recommend that some direct funding
be retained in all regions and re-introduced in London. (Paragraph
76)
Most ESF Objective 3 funds in England will be distributed
through Co-financing for the remainder of the 2000-06 programme
period. The eight regions that currently distribute some funds
through the alternative system of direct bidding, intend to retain
some direct funding to cater for ESF projects that cannot be supported
through Co-financing arrangements.
In London, the CFOs cover a wider range of activity
than in other regions, as they include the Association of London
Government and Business Link for London. The Government Office
for London remains confident that this variety of CFOs in London
is sufficiently broad to cater for the range of provision and
suppliers needed to deliver its priorities for Objective 3 in
the London Regional Development Plan (RDP).
An independent appraisal of most of the current Co-financing
plans, which were approved in 2002, confirmed that there was comprehensive
coverage of priorities identified for support in the London RDP.
A further independent evaluation of the extent to which targets
in Co-financing plans and the RDP were being met by CFOs was undertaken
in summer 2003. This concluded that, on the evidence available,
priorities identified in the RDP were being met. There was also
evidence which confirmed that the level of funding awarded by
CFOs to voluntary and community sector organisations - at over
40% - was largely the same as that awarded under alternative bidding
by the Government Office; and that a significant number of organisations
awarded funds had not previously bid to the Government Office,
thereby introducing new voluntary sector providers to ESF.
Early in 2004, the Government Office for London will
discuss with partners on its Regional Committee proposals for
updated Co-financing plans. In view of the positive conclusions
and recommendations of the 2003 evaluation, it does not propose
to recommend re-introducing direct funding. However it will continue
to monitor progress carefully. Should any gaps in provision arise
subsequently that cannot be met by CFOs, it will recommend to
the Regional Committee that direct funding be re-introduced to
enable these gaps to be filled.
7. It is our belief that a detailed statistical
analysis of the awarding of grants is needed. We recommend that,
in replying to this report, the DWP investigates the concerns
expressed by some members of the Community and Voluntary sector
that funding under co-financing is being channelled through mainstream
programmes at the expense of the C&V sector organisations.
We have already recommended that the Government undertakes a comparative
study into direct bidding and co-financing. We suggest that that
study also investigates whether there are any marked differences
under the two systems with respect to the types of projects supported
and rejected. (Paragraph 77)
The Government is committed to delivering ESF in
partnership with a range of interests including voluntary and
community organisations. Voluntary and community organisations
have an important role to play in delivering ESF to help people
who are excluded from the labour market and who may not otherwise
be reached by mainstream programmes. As part of the ESF evaluation
strategy, the Government will undertake a statistical analysis
of the awarding of grants and will examine whether there are any
marked differences between Co-financing and direct bidding in
terms of the type of projects supported and rejected. The focus
of this study will be on ensuring that ESF is continuing to reach
those in greatest need in the labour market.
The Government is pleased that the evidence currently
available shows that voluntary and community organisations are
benefiting from Co-financing. The second evaluation of Co-financing
concludes that:
'The survey of providers demonstrates conclusively
that CFOs are contracting with very significant numbers of voluntary
sector and [other] organisations new to ESF. This suggests that
the opportunity to tender has been widely promoted and that sufficiently
interested prospective bidders have been able to access tender
documentation. Accordingly it is difficult to sustain as a general
proposition that co-financing is systematically disadvantaging
the voluntary sector and/or small organisations.'[3]
The evaluation found that 60% of voluntary and community
providers surveyed thought that the quality and availability of
provision for hard-to-reach groups had improved under Co-financing,
while only 25% thought that it had deteriorated. This compares
with 59% of all providers who thought that it had improved, and
19% deteriorated.
Data on providers contracted by CFOs also show that
voluntary and community organisations are continuing to play a
substantial role in the delivery of ESF. In June 2003, 31.5% of
providers contracted with CFOs were voluntary and community organisations.[4]
Furthermore, voluntary and community organisations made up half
of the providers in the measures that help socially excluded groups
(the same proportion as under direct bidding earlier in the programme),
and 30% of providers in the measure that promotes access to lifelong
learning. This indicates that voluntary and community organisations
are not only maintaining a very strong presence in the social
inclusion measures, but also increasing their participation in
other measures.
8. We recommend that the Government guarantees
that bids which include support for childcare are not disadvantaged
compared with bids that do not budget for such costs. (Paragraph
80)
The Government will strengthen ESF plans and guidance
to make clear that all ESF projects are encouraged to provide
childcare for participants who need it, and that bids that include
childcare will not be at a disadvantage compared with those that
do not, subject to the costs of the childcare providing value
for money. The need to secure value for money means that the Government
cannot give any absolute guarantee.
The Government recognises that childcare is one
of the most commonly reported barriers to work among non-working
parents, especially lone parents. ESF programmes in the UK have
been designed to reflect the important role of childcare in helping
parents back to work. They support specific projects to tackle
barriers to labour market participation faced by people with childcare
and other caring responsibilities. In addition, all projects are
encouraged to provide for the care of participants' children and
other dependants, where this would otherwise be a barrier to participation.
Childcare costs, such as the provision of crèches, are
eligible expenditure. This applies to the newer approach of
Co-financing ESF with domestic funding, as well as to the alternative
process of bidding directly to Government Offices.
9. The accuracy of those making claims needs to
be tightened up. In view of the high error rate we recommend that
the design of the claim form also needs to be drastically improved
and streamlined and that the process for settling claims be speeded
up, including making greater use of claiming over the internet.
(Paragraph 84)
In England, interim claim forms were revised in 2003
to capture additional management and financial information. These
changes were introduced to enable Government Offices to monitor
project progress more closely, enabling potential difficulties
to be identified at an earlier stage. The revised claim form is
easier to complete, has led to projects providing more accurate
information, and has reduced error rates. Work is now being undertaken
to make the claim form interactive, which will help to improve
accuracy further.
In Scotland, a business process review of ESF administration
has resulted in the development of new IT systems, and the introduction,
in 2003, of web-based application and claim forms. The new claim
forms have reduced the amount of information required, improved
the accuracy of information submitted, and allowed prompt payment
against valid claims.
The experience of the different nations will be reviewed
at the annual UK operational meeting for ESF programme authorities,
which the Government intends to introduce in response to recommendations
10 and 15.
10. In order to reduce the risk of wide regional
variations, we consider that the DWP should press the European
Commission for greater clarification on how intense the monitoring
regime should be. (Paragraph 85)
There are regular meetings between the European Commission
and Member States on technical issues related to the management
of the Structural Funds, including the monitoring regime for claims
for payments. The European Commission also audits Member States'
systems to ensure they meet the requirements of EU regulations.
Arrangements in the UK satisfy EU requirements.
There are some differences between the countries
of the UK because of the different approaches adopted by their
respective political authorities within the UK's devolved arrangements.
For example, the Co-financing system in England, which uses open
and competitive tendering to award funds, requires a different
monitoring regime than the direct bidding system which continues
to operate in Scotland and Wales. The Government intends to introduce
an annual operational meeting between the ESF programme authorities
in the four nations of the UK to discuss their administrative
procedures and management issues, with a view to establishing
transferable useful practice.
There are consistent monitoring standards across
the English regions for both Co-financing and direct bidding.
Consistency is assured through annual prescribed monitoring visits
carried out by either DWP or Government Offices.
11. We request that an assessment be undertaken
into the total administrative costs (both direct and indirect)
that organisations face when dealing with ESF. We recommend that
the DWP undertakes a value for money study into the use of technical
assistance in the delivery of ESF. (Paragraph 89)
The Government will ensure that the evaluation strategy
for the second half of the Objective 3 programme in England includes
an assessment of the total administrative costs (both direct and
indirect) that organisations face when dealing with ESF. This
will be co-ordinated with the further evaluation of co-financing
mentioned in responses to other recommendations. The evaluation
strategy will also address value for money issues relating to
the use of technical assistance in the delivery of ESF.
As part of their regular review of the Programme
Management Executive (PME) model in Scotland, the Scottish authorities
have commissioned a value for money study of the five PMEs. The
study will assess the costs of the different PMEs, while taking
account of their differing operational environments, and compare
with a series of benchmark comparators drawn from other nations.
12. We recommend that the Government ensures that
all newly approved projects are assessed for their risk and are
subject to a monitoring regime that is proportionate to that risk.
(Paragraph 90)
The Government agrees with the Committee. At the
moment, as a matter of course, new providers are assessed as being
at risk because of their lack of experience in dealing with ESF.
This means that they are more likely to be monitored. In addition,
risk assessment techniques are used by all Government Offices
to select projects for audit visits, although these do vary in
standard. The risk criteria include the size of the project, the
nature and type of provider, and the provider's track record.
To ensure consistency and build on good practice, guidance on
risk selection was issued to Government Offices in December 2003.
The Government believes that visits should not only involve inspections,
but should also help providers to deliver projects efficiently
and in line with EU regulations.
13. We recommend that a fast track service for
processing claims be more widely available and that the authorities
make clear that, subject to certain conditions, an emergency cash
advance could be made available. (Paragraph 91)
The Government believes that the right balance needs
to be struck between minimising the administrative burden on providers
and protecting public funds. At present, all directly funded projects
receive an advance of up to 30% of the ESF funding agreed for
the first year of their contract, to cover their start-up costs.
Co-financed projects are initially paid on an agreed profile,
and this should also cover their start-up costs. CFOs are required
to ensure that providers are funded so that there are no adverse
cash flow implications. The DWP issued guidance in May 2003 which
reiterated the requirement for CFOs to provide advance funding
where appropriate.
Once running, directly funded projects are paid on
their actual costs incurred. Co-financed projects are paid on
their performance, in particular the delivery of agreed services
and outputs. Any further emergency advances, beyond the advance
funding, would indicate either that the project is underperforming
and therefore not successful, or that the provider has financial
management weaknesses. It would be inappropriate to provide a
further cash advance of public funds in these circumstances.
14. We recommend that Objective 3 funding should
continue to be widely available. (Paragraph 97)
The Government will continue to make Objective 3
funding widely available in all parts of Great Britain (except
the Objective 1 areas of Cornwall and the Isles of Scilly, Merseyside,
South Yorkshire, West Wales and the Valleys, and the Highlands
and Islands) until the end of 2006. Arrangements after 2006 will
depend on new regulations agreed at EU level for the next financial
period.
15. We recommend that the DWP provides a comparative
analysis of any variation in monitoring standards across the UK
and reassures us that monitoring of service providers is proportionate
to their assessed risk and broadly comparable across the UK and
the EU. (Paragraph 101)
The Government will undertake an analysis of monitoring
activity across the UK. Standards for monitoring and financial
control activity are governed by EU regulations, although additional
monitoring activity may be required in order to protect public
funds. This would be particularly the case in areas of potential
risk or on new initiatives.
In England, monitoring and financial control activity
is controlled centrally by DWP. Standards are set and guidance
is issued to Government Offices, including guidance on how to
select visits to service providers. Standard monitoring and audit
working papers are also provided. Feedback from audit visits is
provided by Government Offices on a quarterly basis. Monitoring
and financial control arrangements in Government Offices are also
reviewed regularly by Government auditors. The reviews indicate
very little variation between Government Offices.
Scotland, Wales and Northern Ireland control their
own monitoring and audit activity. The Welsh Assembly Government
has adopted much of the guidance issued by DWP, while the Scottish
Executive and Northern Ireland have developed approaches which
are appropriate to their respective administrative arrangements.
There are regular UK network meetings for ESF auditors, which
are attended by the Scottish Executive and Welsh Assembly Government,
to discuss standards and share good practice. The annual operational
meeting between UK ESF programme authorities, which is proposed
in the response to recommendation 10, would also consider monitoring
standards.
16. We recommend that the Government considers
ways in which it can provide more support to potential applicants,
before and after formal applications are made. We believe that
all rejected applicants should be provided with reasonably full
written feedback that identifies clearly the areas in which the
tender could be improved. We urge the Government to review the
use of the standard pro formas used by Jobcentre Plus when informing
applicants that they have been unsuccessful. (Paragraph 103)
The Government is committed to administering ESF
funds through open, transparent and consistent procedures, so
that public money is used to support projects that offer better
quality and more effective services for unemployed and disadvantaged
people.
CFOs must adhere to European Commission rules regarding
open and competitive tendering when selecting applications for
approval. Providing specific help and advice to applicants on
completing application tender documents would not comply with
open and competitive tendering. However there are a number of
positive ways in which CFOs can and do support potential applicants
with more generic assistance. These include holding widely advertised
open days and consultation events for service providers to improve
understanding of respective responsibilities, interests and requirements.
The Government will encourage CFOs to provide such generic support
where it does not conflict with open and competitive selection.
Jobcentre Plus has reviewed the format of its feedback
to unsuccessful applicants. It has confirmed that written feedback
is provided either as a matter of course or by request in all
regions. Feedback takes the form of an individual written response,
which is tailored to the specific bid that has not been successful.
The response provides details of areas where the bid was good,
but also tries to help the provider by explaining where the bid
failed and what the provider should do to improve its chances
of success in the future. Where necessary, a follow up face-to-face
meeting can be provided for further discussions.
17. We request that the Government explains the
reasons for the omission of the social inclusion agenda from the
Government's consultation paper. We also recommend that the Government
assures us that work on the labour market and countering social
exclusion, which is funded by the ESF, will not be lost under
the Government's proposals for the post-2006 regime and that
proper transitional funding will be in place in good time. (Paragraph
115)
The Government set out its high level goals for Structural
Fund reform in its consultation document, 'A Modern Regional Policy
for the United Kingdom'. In that paper, the Government made clear
that its proposed 'EU Framework for Devolved Regional Policy'
would be based on the Lisbon agenda, including the objectives
of 'creating more and better jobs and combating social exclusion'.[5]
The Lisbon priorities are fully consistent with the Government's
aims of building both economic prosperity and social justice.
The consultation document did not comment in detail
on individual Structural Funds or the policies that they support.
Further information on particular policy agendas is given in the
Secretary of State for Trade and Industry's statement to Parliament
on 11 December 2003 and the accompanying paper which was deposited
in the Library of the House. This statement and paper also provide
further details of the EU Framework approach and the Government's
financial guarantee that the nations and regions will not lose
out from its proposals to reform the Structural Funds.
Although it is not possible to say now exactly what
the domestic institutional arrangements will be after 2006, nor
to say exactly how increased domestic funding would be distributed
or focused, the statement and paper set out the direction of the
Government's thinking. In particular, the EU Framework would reflect
the Government's priorities to promote employment opportunities
for all and raise participation and attainment in learning.
The EU Framework approach provides the opportunity
to build on the strengths of current Structural Fund programmes,
including partnership working. In England, the Framework would
extend two of the key principles of the ESF Co-financing system:
greater strategic coherence with national and regional employment
and skills priorities; and reduced bureaucracy for service providers.
This will help to ensure assistance for socially excluded groups
that currently benefit from ESF-funded employment and training
activities.
As indicated in the response to Recommendation 4,
the Government will take decisions on transitional funding in
the light of the outcome of negotiations at EU level on arrangements
after 2006, including whatever transitional funding is available
from EU resources. These negotiations are at an early stage. The
European Commission is expected to publish its proposals in its
Third Cohesion Report in early 2004 and to table draft regulations
a few months later.
2 Although Government Offices are part of ODPM, they
work to a number of Government departments, including DWP for
ESF purposes. ODPM and DWP co-chair regular meetings of Government
Office European Directors at which issues about the implementation
of the Structural Funds are addressed. Back
3
Fraser Associates, Second Evaluation of ESF Co-financing in England,
Draft Final Report, November 2002. Back
4
Administrative data from Government Offices. Back
5
HMT/DTI/ODPM, 'A Modern Regional Policy for the United Kingdom'
(March 2003), page 27 Back
| 
