KATE Welcome to the BBO ESF webinar on Actual costs This webinar is intended to provide some useful prompts for projects in developing systems for recording and claiming actual costs. We will cover areas such as eligibility, defrayal, reprofiling, procurement and indirect costs. We are not going to attempt to cover evidencing of actuals for every type of cost you ll find more detailed information on types of costs in both the finance section of our manual which you can find on our website, and in the Big Lottery Fund s Guide to European Funding. Incidentally today is the last day you can provide feedback on the Big Lottery Fund s Guide so please take this opportunity to review it if you haven t already. Today there will be an opportunity to raise questions via the online chat facility. If we get the chance, we will respond to questions live, but if not, we will communicate responses afterwards by email. This is an area where very detailed questions may arise if you are asking about very specific circumstances we may refer to your individual RSM advisor to ensure that the response fits with the context of your overall project. The webinar is being recorded, and will be available to view on our website hopefully later today, along with the slides. 1
KATE Website - Ecorys is responsible for developing a range of written materials for the BBO ESF programme most recently, an ESF manual. Webinars designed for organisations in stage 2 and early set-up, two on the website already. BLF keen to retain flexibility so we can respond to your needs and interests. So as well as giving us feedback on today s sessions, please let us know what would interest you. Today we have 50 participants and 36 organisations represented in this session. We ll be running a few polls to get a bit of information back from you, so you can get a sense of context from each other. Poll #1: How many organisations will be submitting actual cost info for you to manage? 2
RUSSELL I m just going to start with a few key points to bear in mind for lead and delivery partners once you get started and to set some context Big Lottery has organised BBO so that funds will be paid each quarter, in advance to each lead partner. This is on the basis of forecast costs taken from the grant agreement. Lead partners are in turn expected to pass this advance onto partners fairly and promptly. This is done to ease your cashflow pressures and it is not typical for ESIF funding. All it means is that you have to justify, claim and provide evidence of your costs after you have been paid rather than before. Don t let the fact that you may have already been paid distract you from the need to still account for every penny of BBO funding. Failure to do so may mean that future payments to the lead body are affected. This in turn may effect their payments to partners. It is a critical role of the Lead Partner to ensure that they and all delivery partners understand the concept of actual costs and have a system in place to record them for claims. 3
RUSSELL You should read the BIG Lottery Guidance section 8 for full information on project costs. There are two cost categories - direct and Indirect Direct costs must all be based on actual costs. Indirect costs have been set as 15% of your direct staff costs at each claim. They are to cover costs of things that are required to deliver the project but which cannot easily be attributed to your project such HR staff, heat and light etc. Note that this is not 15% of your total direct costs only of direct staff costs. The FMS works it out for you (we will talk soon about what the FMS is). You do not need evidence of your indirect costs. However if calculate your direct staff costs incorrectly, your indirect sum will need to be corrected too. Agreed headings for your direct cost budget are set out in Stage 2 guidance. This also included guidance on how direct costs should be calculated and the evidence required. We are not repeating that here but do refer to it in assembling your budget 4
Many problems have arisen on ESIF in the past because budgets include items that are ineligible or are not consistently evidenced. Don t put in your BBO budget and Direct costs items which you will not be able to provide actual cost evidence for. They may have to be covered instead by your indirect costs allocation. This should be picked up anyway as you develop your budget with Big Lottery Do however include time for all staff who may work even just a relatively small amount on the projects (e.g. 5% of their time or more), this will ensure that your indirect costs budget is not too stretched and that you can aim for Full cost recovery. Don t forget you ll need timesheets for everyone you claim for as a direct staff cost. Indirect costs are not actual costs so do not require evidence. Alongside your budget, develop the necessary system to identify actual costs and the sources of evidence for each item. This will help you weed out tricky ones early on and make it much easier to claim accurately once you get started. 5
RUSSELL Now I m going to talk about the claims process as you will go through once you start delivering. Key to it all is the FMS (Financial Management Spreadsheet). The FMS is included in the recent BBO Guide to Delivering European Funding. This is perhaps the most important day to day document in tour project. This FMS may be changed slightly before projects start but it will have a drop down list of budget headings taken from your bids/grant agreements The FMS is to be used to compile monthly and in turn quarterly information on spend for lead partners to report to BIG Lottery. Each quarterly return is broken down into separate monthly lists so you should complete it each month. Lead partners are responsible for submitting the FMS to BIG Lottery each quarter (the dates will be in your grant agreement). However, much of the content will be completed by Delivery Partners. Your first claims are likely to be quite small and relatively simple as your project gets 6
up to speed - with costs being incurred probably only under a few headings (e.g. staff) and little participant activity. These are good months to get your system up and running. Its very important that all partners set aside time each month to complete and check the FMS. You can only put in your FMS items which you have actually paid for. Claims will therefore lag behind your actual committed spend. The process will be much easier if you have a dedicated bank account for your BBO project. This is a requirement for Lead partners but is strongly recommended for delivery partners too. It will make it much easier to identify relevant BBO payments that you wish to include on your FMS. The FMS is a list of individual transactions so don t lump payments together. 6
RUSSELL Because you can only put in your FMS items that you have actually paid for, The point of reference for deciding when to submit costs to the lead partner (or BBO) in the FMS should therefore before each partners accounts paid file. All partners will need to show evidence from their bank account that the payment has been made, as well as the original invoice. It is the date of payment from the bank account that decides when you make the claim (e.g. for example your July 2016 FMS should include payments that left your bank account in July (or earlier). Each quarter, it is not expected that the amount claimed via your FMS will exactly match the amount you were paid at the start of the period. It is likely that some forecast costs will not have been incurred, and vice versa. Over the life of the project, adjustments will be made to BBO payments to Lead partners to balance out this difference. By the end of the project, all parties should have received payments for all the eligible actual costs that they have incurred. Don t try to balance or to force your FMS claim to match the advance payment- that is not its purpose. 7
For each individual transaction on your bank statement, assemble the required evidence. This will be at least an invoice and the bank statement showing it being paid. Include that in the FMS file- scan it as secondary evidence but keep the hard copy as primary (And set up a dedicated evidence file). Because of the lag between invoicing and payment, evidence (e.g. invoices) might be dated before the claim - that is fine. It is the bank statement date that matters. Build the evidence chain backwards for each transaction/item: For example E.g. bank statement - accounts paid reference authorisation - invoice proof of service/goods delivered - purchase order - contract procurement (this is just an example - you may not need every stage). Some bank payments will be for blocks of money to one supplier- you ll have to show calculations/further evidence for which proportion is BBO If the evidence is incomplete, don t put the item in the FMS - it can be included later once the evidence is available. This way the only things on your FMS will be items you have paid for and that you have full evidence for. Cross check general information with the delivery team- e.g. find out when/why a venue was used for venue hire costs and check there is evidence- check the date with participant records. Actual costs must have been incurred (Paid by the partner) before they are reported to the lead partner via the FMS. You cannot report invoices received but not paid, or services ordered. Hence bank statements being the default. Doing it this way makes sure the only things on your FMS will be items you have paid for and that you have full evidence for. 7
KATE Staff Costs- likely to be largest cost in the budget and the first test of yours and partners reporting and evidencing systems, occurring from day one of the project. For salary payments this will be one transaction on bank statement but must be broken down on your FMS So highlight overall payment on Bank statement Then include actual payroll list (highlight the ESF funded people you are claiming for) For people not 100% ESF funded, you will need calculation showing how their hourly rate is calculated from their pay slip EU guidance is now fixed as 1720 hours for the division of annual gross employment costs of part-time staff. Then add timesheets for people not 100% ESF activity, date, start and finish to nearest 15 minutes. Then include the hourly cost per person as separate transaction on the FMS Each staff member paid using ESIF should be listed separately and each months salary should have a separate URN. Pay for the function not the person eg. sickness or maternity pay replacement cost, 8
or maternity pay if eligible. Similarly if someone moves off the programme. Cost of replacement more operationally straightforward. 8
KATE We suggest a project contract to your participants that sets out clearly what costs they can claim for, the limits for each claim, the process for doing so and the evidence they must submit, so that partner staff and participants are in no doubt. Issue this to all participants and ask them to sign it. Participant costs: cross check participant file exist, eligible, participating in the project at the time the cost was incurred. Suggest that they submit expenses weekly or fortnightly at most to keep it simple and avoid things getting lost or getting a backlog. They should complete a claim form with a date and description, and sign it. Q: Can they be paid cash? Bank transfer much better as it s auditable. Cash payments must have receipt but should be avoided in all but extremis. Poll #2: What procurement do you expect on your project (if any)? 9
KATE Failures to comply with Public Procurement Law and the Treaty Principles was a leading cause of clawback in the 2007-2013 programme. As procurement is required on the BBO programme for any new partners, who may be receiving significant sums, we do recommend you obtain specialist procurement advice to avoid errors that may result in clawback. Refer to the Managing Authority s guidance note, which must be followed to the letter for any procurement. Refer to our manual for more information on this and on Public Contracts Regulations, but be aware that if they apply, you will need to be familiar with the source documents and may need to get appropriate specialist procurement advice, which we cannot offer. New EU Thresholds thresholds are reviewed by the European Commission every two years new thresholds for 2016. The Cabinet Office has issued the procurement policy note 18/15 - https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/484497/pp N_1815_New_Thresholds_2016.pdf Inadequate record-keeping was a significant cause of irregularities in the 2007-2013 programme, so you should set up a checklist together with your procurement plan to ensure that all documents, including for partner procurements, are in place. A checklist is provided in Chapter Seven of the ESIF Compliance Note. The Light Touch Regime is a specific set of rules for certain service contracts that tend to be of lower interest to cross-border competition and 10
are exempt from the full Public Contracts Regulations similar to old Part B schedule. This may be applicable for BBO grant recipients and they should take advice on whether the LTR can be followed. Be ready even so for a detailed and potentially lengthy procurement process, what this means for project staff working on it, and what impact a procurement process will have on intended timescales. A few pointers that may be relevant Where suppliers have already been selected, or a framework is intended to be used, special care should be taken to make sure that the original contract or framework can be used for the intended services, and that appropriate documentation can be provided to demonstrate compliance. Frameworks have been a significant cause of corrections during the 2007-2013 programme. Note that contracts or frameworks commencing before 26/02/2015 must comply with Public Contracts Regulations 2006. It is essential to ensure non-preferential treatment, where, as is traditional in ESF, relationships with potential suppliers may already be in place. A significant cause of correction in the 2007-2013 was failure to address conflicts of interest, inconsistent application of criteria when assessing different bids, and preferential treatment of some bidders during the procurement process. All relevant information that a known supplier may benefit from, must be shared with other candidates, and adequate time limits set for the receipt of tenders. Given the unpredictable nature of ESF projects, with varying demand and performance across providers, target groups and geographic areas, it would be wise to consider how contracts may need to be varied to allow the project to achieve its stated objectives and avoid underspend. Regulation 72 of the Public Contracts Regulations concerns variation of contracts during their term. You will certainly need to consider this in detail if a variation is required. Worth noting that Regulation 72 a) does permit modification where the modifications, have been provided for in the initial procurement documents in clear, precise and unequivocal review clauses so you are advised to consider such clauses in all provider contracts. You should take particular care if the project necessitates awarding additional services to partners who are signatories to a partnership agreement rather than a contract (those who were identified at Stage 1). You should consider whether a procurement may be necessary, for any additional services that are awarded, and take care to avoid multiple additions below the ESIF procurement threshold that may seem to be a deliberate avoidance of procurement. 10
RUSSELL Here is a broad list of the lead partner role in ensuring actual costs. Partners should agree cost codes and URN template across the partnership so that you have a single coherent system. Every transaction within your partnership must have a unique ID. - Visit all partners regularly particularly in the early stages: Help them develop systems, check systems, encourage dialogue, build relationships- discuss complications they are having with claims; get to know what they are delivering - Issue clear instructions/guidance and a timetable on how to compile the FMA and the types of evidence you expect them to submit and keep. Also state the checks they should make. Perhaps sign this as an accord so its written and agreed. Help to train/brief the finance staff involved. - Ensure the FMS is managed and a timetable agreed and that internal resources are allocated within the lead organisation. Senior management should be involved in checking/signing off claims-particularly the first ones. Set a good example. 11
- Check all evidence, especially for the first few claims - Deal with delivery partners queries and pass on any relevant information/guidance from Big Lottery, RSM or Ecorys - Liaise with RSM/Ecorys on advisory visits and checking of early claims- we are here to help - Take advantage of support offers from Big and other contractors and encourage your delivery partners to do so - Establish a dedicated BBO bank account for all expenditure 11
RUSSELL For delivery partners the task list is different but similar- and you ll only have your own organisation to think about. Time your own FMS assembly with that of the lead partner so they know when its coming. Resource it accordingly Take responsibility for checking your own FMS and evidence Be transparent with your lead partner you are all on the same side- as is BBO Make sure your delivery team know about the financial arrangements as much as you can Strongly recommended that you set up a BBO Bank account 12
KATE Just some of the things to watch for, based on real life - Inconsistent or incorrect calculations of people who are not 100%; inconsistent assumptions around staff roles and time vis a vis budget - Need to check closely between participants and their costs- if they are not eligible or not proven in attendance you need to remove their costs too - Be vigilant against other costs outside the project being squeezed in - Procurement complex area; detailed rules to adhere to and records required. - Often the case that organisational recording of costs does not align with budget headings the higher the number of manoeuvres required to get the correct value, the greater the likelihood that errors will occur be aware and build in safeguards. 13
KATE You should therefore operate a safety first approach throughout, with all partners submitting actual costs information to the lead partner only when it has been incurred and paid and when the evidence to support this is available. Act as if you have not had any advance payment and as if you were making a claim in arrears. The advance payment is made with Big Lottery money, not ESF and is paid at significant risk to BIG Lottery and they claim ESF in arrears as usual. Please complete the short feedback form after this webinar, including your choice of further subjects to cover. Get in touch by phone or email with any questions, and good luck for those of you who are preparing budgets now! 14