VONNE / BIG Lottery – Building Better Opportunities
Overview of EU funding technical compliance issues
1. Introduction
This paper provides an overview of the key compliance issues associated with ESF and ERDF
funding. It also provides information about ESF payment profiles for both open calls and Opt-ins
(Big Lottery, SFA and DWP), and provides a list of links to additional information.
2. Compliance issues
All organisations that bid for European Funding (ERDF or ESF) must be able to clearly demonstrate,
at application stage, that they are able to managing a compliant project. This includes having:
 Robust project management structures in place to support delivery;
 The resources, capacity and experience to effectively manage and deliver an EU funded
project;
 Robust financial management systems and control procedures in place to ensure a compliant
project;
 Processes in place to ensure compliance with statutory requirements and key EU regulations
(procurement, state aid, publicity etc)
 Document management systems in place.
These aspects will all be assessed at the project application stage, and will form a key part of the
project selection criteria. If the applicant is successful, they will also be monitored throughout the
project delivery stage.
Failure to comply, and to be able to evidence compliance, could result in the withdrawal of grant
funding, or the requirement to repay grant. It is therefore essential that all successful grant
applicants have rigorous management and control systems in place.
2.1 Procurement
The applicant needs to define how the project will comply with public procurement regulations.
Any good or services purchased from a third party as part of the project, must comply with public
procurement regulations, and the applicant organisation must be able to clearly demonstrate that
procurement requirements have been met e.g.
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The process which was followed (3 quotes, 5 quotes, open tender, OJEU);
Copies of the invitation to tender / quote;
Evidence of how the opportunity was advertised / promoted;
Copies of all quotes received;
The criteria against which all quotes were assessed;
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 Who was involved in the decision making process;
 How bidders were informed of the outcome.
New procurement regulations will come into force in Feb 2015. There is a link in section 4 below
to a Government website providing information about the new regulations. The site also includes
training materials and a list of FAQ’s.
DCLG, as the managing authority for ERDF, have published a guidance note for applicants about
procurement for use in the current Programme. This will be updated to ensure applicants are able
to comply with the new procurement requirements.
2.2 State aid
Applicants must demonstrate how the project will be state aid compliant and that adequate
systems are in place to ensure that project beneficiaries are complying with state aid
requirements.
Overview
Using taxpayer-funded resources to provide assistance to one or more organisations in a way that
gives an advantage over others may be state aid. However, state aid can be given legally by using
one of a set of approved EU mechanisms for state aid e.g. De Minimis, or General Block Exemption
Regulations (GBER).
 De Minimis: is used to describe small amounts of state aid that do not require European
Commission approval. The total de minimis aid which can be given to a single recipient is
€200,0001 over a 3-year fiscal period. This can be given for most purposes, including operating
aid, and is not project-related. This ceiling takes into account all public assistance given as de
minimis funding over the previous 3 fiscal years. De minimis aid does not affect the level of
state aid that a recipient can receive under any other schemes approved by the Commission
i.e. it is cumulated only with other de minimis aid.
 GBER: covers a range of pre-approved state aid areas that do not require individual approval
from the Commission in advance. The regulation authorises aid in favour of SME’s, research,
innovation, regional development, training, employment of disabled and disadvantaged
workers, risk capital, and environmental protection. The regulation also introduces aid
measures supporting female entrepreneurship, such as aid for young innovative businesses,
aid for newly created small businesses in assisted regions, and measures tackling problems like
difficulties in access to finance faced by female entrepreneurs. The GBER regulation was
updated in June 2014.
Compliance
There are two key issues to take into account when considering state aid:
 Will the EU grant award constitute a state aid to the applicant organisation? i.e. Does the
assistance give an advantage to one or more undertakings over others? For the purposes of
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The sterling equivalent is calculated using the Commission exchange rate applicable on the written date of offer.
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state aid, any organisation, including charities, not-for-profit organisations, and public sector
bodies, engaged in economic activity is defined as an ‘undertaking’. Economic activity means
putting goods or services on the market, where others offer the same goods or services (e.g.
managed workspace).
 Does project delivery involve state aid to project beneficiaries? e.g. will the project give money
(grants or loans) to an organisation that does anything commercial, including charities, social
enterprises, and not-for-profit organisations? This could include workforce training, or funding
to social enterprises to support growth.
If you are not sure whether or not a project involves state aid, always take advice.
If the project does constitute a state aid, the applicant needs to consider whether it fits, or can be
re-designed to fit within one of the state aid exemptions via de minimis or GBER.
Evidence
De Minimis: If the lead applicant is using the de minimis regulation to operate their project, they
must:
 Ensure that the new financial award does not breach the €200,000 ceiling over a 3-year fiscal
period.
 Ask the beneficiary organisation concerned about any aid received during the previous 3 fiscal
years and determine how much of this was awarded as de minimis aid. The beneficiary
organisation should complete a de minimis form providing the required information and
declaring that they comply with the de minimis regulations.
 Inform the beneficiary organisation explicitly that they are receiving de minimis aid, for their
future reference. The offer letter should include the value of the award in euros and the
following paragraph:
‘Under EC regulation 1998/2006 (de minimis aid regulation), this is a de minimis aid. There is a
ceiling of €200,000 for all de minimis aid provided to any one firm over a 3-year period. Any de
minimis aid awarded to you under this offer letter will be relevant if you wish to apply, or have
applied, for any other de minimis aid. For the purposes of the de minimis regulation, you must
keep this letter for 3 years from the date on this letter and produce it on any request by the UK
public authorities or the European Commission. (You may need to keep this letter for longer than
3 years for other purposes.)’
GBER: The General Block Exemption regulation contains detailed guidelines and conditions
particularly as regards definitions, eligible costs, maximum aid amounts and scope (i.e. sectors or
areas that can or cannot be supported). The project applicant should ensure that they are using
the most appropriate exemption, and that they can demonstrably meet the requirements of the
specific exemption.
2.3 Publicity
The applicant needs to set out how it and all delivery partners and / or sub-contractors will meet
the ESIF publicity requirements.
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Interim guidance about ESIF publicity and branding has been published (see link in section 4
below) to provide initial guidance about the minimum requirements to meet the new publicity
regulations. These guidance notes may be updated once the Operational Programmes are formally
agreed.
As a minimum successful applicant organisations and their sub-contractors / delivery partners
must acknowledge the ERDF / ESF contribution e.g. by including the relevant logo in a prominent
position on all electronic and hard copy documentation including:
 Advertisements and job descriptions for posts to be employed in delivering the EU funded
project.
 Promotional materials e.g. leaflets, brochures, posters, newsletters to raise awareness of and
promote the project.
 Event, conference, seminar or workshop materials e.g. invitations, tickets, press releases,
exhibition stands, presentation slides.
 General paperwork e.g. reports and papers.
 Social media tools e.g. Facebook, Twitter and SMS Messages.
 Audio visual materials including films, video, DVDs and CD Roms.
 Websites. A full colour version of the logo must be placed on the website (the homepage or
activity specific pages) of the applicant organisation and their sub-contractors / delivery
partners.
2.4 Contribution to cross-cutting themes:
The applicant must demonstrate that the project meets the environmental sustainability, and
equality and diversity cross-cutting themes?
Sustainability: Sustainable development is about achieving an appropriate balance between
environmental, social and economic objectives. It is an overarching objective of the European
Union and has been established as a cross-cutting priority theme within the ERDF programme
2014-2020. This means that, at a project level, applicants need to demonstrate how any potential
negative environmental impacts associated with their project will be minimised, or mitigated, and
how potential positive impacts will be maximised.
Equality and diversity: Equality is about respect and not treating an individual or group of people
unfairly. It is about giving people equality of opportunity to access services and to fulfil their
potential. Equality is therefore based on the idea of fairness while recognising everyone is
different.
Diversity is about all the ways in which people differ and about recognising that differences are a
natural part of society. No two people are the same and this means that many different elements
make up our local community – something which should be celebrated. Diversity is about treating
people as individuals and making them feel respected and valued.
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At a project level, applicants need to demonstrate that they are able to comply with legislative
requirements for equality and diversity, and that no individual or group will be disadvantaged or
discriminated against by the project. For projects that are targeted at a specific disadvantaged
group e.g. NEET’s, people with learning difficulties, applicants should explain how the project has
been tailored to meet their specific needs, and address disadvantage.
3. Project management
Applicant organisations must demonstrate that they are able to manage a compliant project. This
includes: project management structures, resources, capacity and experience, financial
management, awareness of the compliance requirements, data management and document
management.
3.1 Financial management
Payment profiles
In general, EU grant funded projects are paid quarterly in arrears. Applicant organisations need to
prepare a detailed cash flow forecast for the project to both ensure and demonstrate that they are
able to effectively manage the project, and cover project costs. For partnership projects, with a
lead partner and a number of sub-contractors, the cash flow forecast should also take account of
when grant will be claimed and paid to the lead applicant, and consequently when sub-contractors
/ delivery partners will be paid. (NB: Delivery partners / sub-contractors should do their own cash
flow forecasts to ensure they are able to manage their cash flow, and any potential delays in
payment, without creating a financial risk to their organisation).
There are three potential payment profiles:
 ERDF, ESF and EAFRD Open Calls: All projects funded through an open call procedure will claim
their EU grant quarterly in arrears on the basis of actual defrayed and evidenced expenditure.
In some cases, to aid project cashflow, monthly claims can be submitted.
 ESF Opt-ins (SFA, DWP, NOMS): Based on current co-financed ESF projects supported via the
SFA, DWP and NOMS, grant payments will be made monthly or quarterly in arrears, on the
basis of an agreed outcomes profile. For example, payment will be based on an agreed unit
price per learner / person and paid out against an agreed profile:
Total unit funding per learner / person
- Of which
- Paid on evidence of enrolment
- Paid on evidence of completion of 13 weeks
- Paid on evidence of completion of programme
£2,000
£400
£400
£1,200
To be able to draw down the full grant award, applicants should develop a realistic delivery
profile, taking account of the total number of individuals enrolling and starting on a
programme, the number of weeks they will remain on programme, and the total number of
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individuals that will complete. The number of completions is likely to be lower than the
number of starts, and this should be taken into account when calculating the unit cost, and
payment profile.
 ESF Opt-in (Big Lottery): Big Lottery intend to make payments quarterly in advance to aid
project cash flow. Payments will be based on estimated actual expenditure rather than on an
outcomes based profile.
Evidence of expenditure
To be able to claim grant funding, the lead applicant must provide evidence to substantiate the
information contained in the claim. Each claim will provide details of total eligible project
expenditure, including that incurred by delivery partners / sub-contractors.
 Open call: For all claims submitted on the basis of actual costs, the lead applicant must keep
detailed records of all expenditure and income (match funding), as well as evidence of
expenditure. This could include for example: timesheets, payslips, invoices, receipts, bank
statements.
 ESF Opt-ins (SFA, DWP, NOMS): For claims submitted on the basis of outcomes, the lead
applicant must provide evidence of achievement. This could include for example: a signed
individual learner record for each beneficiary, attendance register, registration with an
awarding body, copy of certificates etc. As a unit cost has been agreed per learner, the
applicant and their partners, only need to provide evidence of the learners / individual
beneficiaries, rather than of expenditure.
 ESF Opt-ins (Big Lottery): to be confirmed
Partnership projects: Claims process
For partnership projects, the lead applicants and partners should develop and agree a clear
process and timetable for the preparation, submission and payment of claims, which should
inform part of any partnership agreement:
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The type of information partners must provide to the lead applicant
The deadline for submission of information (to be included in the next claim)
The deadline for the submission of the claim
When partners will be paid (e.g. once the lead applicant has been paid)
Consequences if partners fail to provide the required information by the stated deadline.
(NB: In some cases there could be a time delay between the submission and payment of a claim,
which could create a delay in the payment of sub-contractors / delivery partners)
3.2 Performance management
All projects that receive an ERDF, ESF or EAFRD grant award are contracted to deliver a specified
number of outputs and outcomes e.g. no of unemployed people supported; no of new FTE jobs
created. Applicants will be required to demonstrate that they have the systems in place to both
monitor the achievement of outputs, and evidence their achievement. A draft guidance note on
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ESIF output definitions, and the information that each applicant organisation is required to keep
has been published. This will be updated once the Operational Programmes have been formally
agreed, and the final output and outcome targets agreed (see attached). An example of an output
definition contained in the draft guidance is below:
(PS1) Number of potential entrepreneurs assisted to be enterprise ready
Terms
Unit of
Measurement
Count Criteria:
What is the activity that can be
recorded against this indicator?
Count Threshold:
What is the threshold or
minimum requirement for
recording (one count) of this
indictor?
Definitions
Number of individuals
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Those of working age, i.e. aged 16 and over, are counted.
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An individual has to receive a minimum of three hours assistance.
There is no maximum level of assistance.
Assistance must be focussed and reported on the following target
groups:
 individuals currently in employment, unemployed or economically
inactive with an interest in exploring alternative career pathways
The assistance will involve some form of direct interaction with
individuals. This may be one-to-one or, one-to-many and take the form
of coaching, mentoring, and workshops constituting part of the
enterprise journey. It could therefore include:
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Count Exclusions: What activity
cannot be counted against this
indicator?
Verification Evidence :
What records need to be
retained to count this
Indicator?
Workshops and sessions to develop understanding of the issues of
starting a business;
Coaching and mentoring to nurture behaviours values and
dispositions to support self-employment and new businesses start
up;
Support to explore appropriate business opportunities, for example
franchise, social enterprise, building enterprise teams;
Community enterprise coaching – using community-based
infrastructures to support people to overcome barriers and actively
explore starting a business;
Supporting those in employment to consider business start-ups and
ownership as a career opportunity.
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An individual who is under 16.
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Individuals may be counted only once regardless of the number of
activities they participate in.
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Assistance which is provided in the form of mail shots either
electronic or hard copy is excluded.
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Sign posting activity alone will not count as a form of assistance
Individual:
 Name, date of birth, address, postcode.
Activity:
 Letter or standard form signed and dated by the individual specifying
what assistance they received and on what date(s).
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(PS1) Number of potential entrepreneurs assisted to be enterprise ready
Additional information
required for indicators
The unit of measurement is the individual (potential entrepreneur), not
whether they actually go on to start a business. However, it is likely that
rate of business start-up will need to be tracked as part of operation and
programme level evaluation.
It is likely that operations need to provide basic information about the
individual they support relating to: age, gender, disability, and ethnicity
this may be collect through survey and evaluations.
 Open call: For all projects supported via an open call, the applicant will need to maintain
appropriate records, based on the requirements described in the output guidance note.
 ESF Opt-ins (SFA, DWP, NOMS): Based on current experience of projects co-financed by the
SFA, DWP and NOMS, it is likely that each organisation will provide their own paperwork which
needs to be completed to provide evidence e.g. the SFA will require each individual beneficiary
supported by an SFA ESF supported project to complete and sign an Individual Learner Record
(ILR). This will provide evidence of engagement and achievement, and will be the evidence
required to trigger payment.
 ESF Opt-ins (Big Lottery): to be confirmed
4. Links to further specialist information
Website
Information
https://www.gov.uk/government/publications/engla
nd-2014-to-2020-european-structural-andinvestment-funds-growth-programmehandbook/england-2014-to-2020-europeanstructural-and-investment-funds-growthprogramme-handbook
ESIF Growth Programme Handbook
PROCUREMENT
https://www.gov.uk/transposing-eu-procurementdirectives
STATE AID
https://www.gov.uk/state-aid
https://www.gov.uk/government/uploads/system/u
ploads/attachment_data/file/261384/bis_131330_state_aid_the_basics.pdf
http://eur-lex.europa.eu/legalcontent/EN/TXT/?qid=1404295693570&uri=CELEX:3
2014R0651
Government website with details of
the new procurement regulations
including training guidance and
FAQ’s
Government website providing state
aid advice and guidance
BIS guidance document – State Aid:
The Basics
GBER regulation
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PUBLICITY
ESIF logos
ERDF logos
ESF logos
Interim Branding and Publicity Guidance
Hyperlink to ESIF logos
Hyperlink to ERDF logos
Hyperlink to ESF logos
Hyperlink to interim ESIF branding
and publicity guidance. (NB: May be
updated once the OP’s are formally
agreed).
CROSS CUTTING THEMES
Integrating Environmental Sustainability into ERDF Projects
Hyperlink to guidance about how to
build environmental sustainability
measures into an ERDF project
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