EUROPEAN REGIONAL DEVELOPMENT FUND

 

To:       Governance & Audit Committee – 29 June 2011                

 

Main Portfolio Area:     Corporate

 

By:       External Funding Officer

 

Classification: Unrestricted

Ward:  All

 

Summary:       To update Governance & Audit Committee on the 2000-2006 ERDF Programme

 

1.0              Introduction

1.1              The Council had grants approved of £5,575,715 through the 2000-2006 ERDF programme, for which, The Government Office for the South East (GOSE) was the accountable body.

1.2              The purpose of this report is to summarise the amounts awarded, received and repaid in relation to all projects and the reasons behind these reclaims, where made and action taken to reclaim them.

2.0              Project Summary

2.1              The below table details the amounts approved, claimed and paid to the authority and the amounts repaid on each project:

Ref.

Project Name

Grant Approved (£)

 Amount Claimed and paid to TDC

(£)

 Amount Repaid  (£)

002

Encouraging Social Inclusion - Main

15,909

15,909

1,806

006

Business Networks and Cross Working - Main

78,820

74,062

17,443

007

Events

150,000

149,999

 

008

Ramsgate Renaissance

171,320

158,559

 

009

Waterfront Proposals Margate

183,500

171,028

 

011

Thanet Museum Strategy

170,000

115,990

63,702

012

Green Tourism Strategy

140,000

139,799

 

015

Thanet Tourism Grant Scheme Phase 3

175,000

175,000

52,960

016

Margate Harbour and Turner Centre

220,000

220,000

22,635

024

Educational and Media Initiative

75,100

75,100

 

025

Empty Properties and Public Places

72,751

68,557

 

028

Business Networks and Cross Working - Trans

81,180

64,537

20,159

029

Viking Bay Enhancement

313,000

313,000

 

030

Margate Pedestrian Connection

450,000

140,874

 

031

Organisation and Development Fund - Main

81,000

81,000

16,237

032

Connectivity and Information

68,000

48,295

 

033

Organisation and Development Fund - Trans

100,000

97,737

42,363

034

Marketing and Communications

63,751

38,415

9,924

036

Encouraging Social Inclusion - Trans

128,750

128,750

1,093

037

Thanet Innovation Centre

1,300,000

1,299,765

250,000

049

TA/Programme Support (M1)

17,038

17,038

 

050

TA/Programme Support (M1)

11,841

11,841

 

054

TA/Socio Economic Data Service M2

16,464

16,464

 

055

TA/Socio Economic Data Service M2

23,692

23,692

 

059

Sure Start Thanet Millmead Project

125,000

125,000

 

085

Stimulating Innovation and Entrepreneurship

123,534

26,096

1,797

158

Thanet Tourism Grant Scheme Phase 4

200,000

200,000

81,890

278

Creative Industries Business Advisory Scheme

17,000

17,000

 

288

Speculative Development - Main

20,000

19,500

 

289

Speculative Development - Trans

10,000

10,000

 

451

Delivering Margate's Creative Quarter

973,065

973,065

21,331

497

Final Evaluation

20,000

19,391

 

 

 

 

 

 

 

 

£5,595,715

£5,035,463

£603,341

2.2              The table above demonstrates that of the total funding received (£5,035,463), 12% of funding had to be repaid to GOSE (£603,341), the details of these reclaims are set out below.

3.0              ERDF Reclaims

3.1              Project 002/036 – Encouraging Social Inclusion – Main/Trans - £1,806 + £1,093

3.2              Following an Article 10 audit of both projects by GOSE, some expenditure claimed through the project for salaries could not be evidenced and as such the grant in relation to this expenditure had to be repaid to GOSE.

3.3              Project 006/028 – Business Networks and Cross Working – Main/Trans £17,443 + £20,159

3.4              These projects related to grant payments, however the sums made ineligible by the audit related to match funding that was originally added to the claim by the claim preparer, so the authority was able to claim back 100% of the grants paid out.  There was no evidence on file of where the match was meant to come from and so could not be subsequently evidenced.

3.5              Project 011 – Thanet Museum Strategy - £63,702

3.6              The authority had claimed £63,702.48 in grants paid out to 2 museums, however the authority could not evidence what the museums had spent the funds on, despite attempts to contact the museums in question. 

3.7              The authority sought to reclaim the grants from the museums, but between the time of the grant being paid out and the time of the audit, both museums had closed and the owner of one had passed away, meaning the authority was unable to reclaim the grants.

3.8              Project 015/158 – Thanet Tourism Grant Scheme Phase 3 & 4- £52,960 + £81,890

3.9              Both phases of the scheme faced issues when audited and there were three main reasons for grant repayment, these were:

·         The hotel had been converted into apartments within 5 years of the grant being paid;

·         The hotel was never eligible for a grant, as the grant was approved retrospectively or was for work to restaurants or other facilities that were not allowed under the scheme;

·         The hotel closed within 5 years of the grant being awarded.

3.10          The Council managed to reclaim £10,000 of the total repayment of £134,850 on the scheme. 

3.11          Where the hotels were never eligible for the grant, payment was made to the hotels in error and so a reclaim could not be undertaken.

3.12          Despite the Council pursuing other grant recipients, many of the owners were no longer traceable, because the hotels had been demolished / closed or the companies that the grant had been paid to, had ceased trading.

3.13          Project 016 – Margate Harbour & Turner Centre - £22,635

3.14          Some expenditure, which attracted grant of £22,635 was identified as ineligible by an audit and was subsequently repaid to GOSE.

3.15          Projects 031/033 – Organisational Development Grants Main/Trans - £16,237 & £42,363

3.16          Both projects had an Article 10 audit by GOSE and as a result it was identified that most organisations that had been paid grant, did not provide the authority with any evidence to support what the grant had been used for.

3.17          The authority subsequently wrote to all grant recipients and obtained a large amount of information which helped secure some of the grant.  However, as the audit was not until 5 years after the grants had been paid out, a few of the organisations had ceased trading, some were un-contactable, some had passed away and some did not respond, leaving the authority with an incomplete audit trail.

3.18          The grant offer letter with each grant recipient stated that they were only required to maintain records for 5 years from grant award, though the authority is still required by GOSE to have access to records until 2014.

3.19          The External Funding Officer identified £12,935 of grants that were still within the 5 years and should be sought for reclaim, however the legal department have confirmed that as the second payment was made to these grant recipients confirming that the authority was satisfied with the project progress and evidence at the time, that it is not possible to progress a reclaim against these recipients.

3.20          Project 034 – Marketing and Communications - £9,924

3.21          The reclaim on this project related to expenditure that the authority had tried to claim twice, which was identified through an audit at a later date.

3.22          Project 037 – Thanet Innovation Centre - £250,000

3.23          This was the Council’s single biggest reclaim and the partial repayment related to the authority not fulfilling all of the grant conditions and failing to notify GOSE of changes in the management approach following the original grant offer letter, that were considered substantial changes by GOSE.  The authority has since agreed with GOSE some key changes in the management of the centre in order to overcome further reclaim.

3.24          The partial grant repayment specifically related to the authority running the facility (for VAT reasons) instead of the management being vested in a specialist Board - which resulted in a lower level of business networking than had been envisaged in the grant offer, that TDC had too large a percentage of tenants in the centre that were not innovative start up businesses and that the authority had not maintained fully detailed records of the jobs created and their longevity (including after tenants had moved out of the centre).

3.25          Project 085 – Stimulating Innovation and Entrepreneurship - £1,797

3.26          The reclaim related to ineligible accommodation costs that were claimed through the project, that were subsequently identified by audit.

3.27          Project 451 – Delivering Margate’s Creative Quarter - £21,331

3.28          This was the last project running through the 2000-2006 programme and finished on 31st December 2008.  Unfortunately some of the expenditure claimed related to an invoice that covered a period after the project end date and the rest related to a grant offered at a rate of 45% of total spend, to a grant recipient, however the authority could not reclaim any grant, due to an error on the grant offer letter to the individual company, which stated 31st March 2009 as the end date for the project.

3.29          The authority did manage to attract additional grant from KCC due to invoices provided to them to assist in match funding their own ERDF project.  The funds from this meant that TDC could repay the grant without any adverse impact on its own budgets.

3.30          Under this scheme, a grant of £68,750 was paid towards refurbishment works of 16 Marine Drive and 42 High Street. Works started in 2008 but the scheme has not been completed due to the withdrawal of the developer’s private sector funding. Action has commenced to recover the grant monies and GOSE has agreed that should any funds be recovered, that these could be recycled to support works that meet the original objectives of the programme.

4.0              The Way Forward

4.1              Following the lessons learnt through the old ERDF programme, the authority has now implemented the External Funding Protocol and has a dedicated External Funding Officer.

4.2              The External Funding Protocol came into force on 13 November 2009, this stated that all external funding bids had to be reviewed through correct channels prior to bidding of funds to ensure that:

·         Finance were aware of the grant;

·         That terms and conditions in relation to the grant could be adhered to;

·         That the grant met corporate priorities.

4.3              As a result the External Funding Protocol requires that all external funding bids are examined by the External Funding Officer, who scrutinises the funding stream and requirements, prior to being considered by CMT for approval. 

4.4              Should there be tight deadlines on submitting an application for funding, the Section 151 Officer has delegated authority to approve the funding and CMT are required to retrospectively approve the funding bid.

4.5              Some of the ERDF reclaims were due to poor audit trails maintained either centrally or by the individual departments, as a result, electronic records are now being maintained in line with the protocol, to ensure that large scale repayments due to a lack of audit trail, no longer occur and that all paperwork relating to claims or funding sources are routed through the External Funding Officer as a central point of contact.

4.6              Recommendations

4.7              That Governance & Audit Committee note the report contents on ERDF repayments;

4.8              And that the Committee note the progress made by the authority regarding systems implemented to avoid future grant reclaims.