European Social Fund in England

Financial Good Practice

This section only applies to ESF projects that are being funded through Alternative Bidding arrangements. It does not apply to ESF projects being funded through Co-financing.

The Verification and Audit Team from the ESF Division will carry out audit inspection visits to a representative sample of organisations based on Commission Regulation (EC) No 438/2001 Chapter IV "Sample checks on operations" and checks will cover at least 5% of total eligible expenditure in each year.

Delivery of all projects is verified by comparing reports of actuals with profiles and checks of claims submitted (Article 4). The Verification and Audit Team co-ordinate the inspection process and delegate the regionally administered projects to the Government Office Auditors whilst retaining responsibility for centrally administered projects and Gibraltar. Verifications are made on the spot on a sample basis. Working papers are prepared and reports are made, in accordance with a prescribed process (Article 10).

A systems based approach is followed by sample checks of costs, matched funding and beneficiary records, down to source documentation. This process follows guidance written in order to comply with the verification requirements of (Article 11).

Any systemic issues identified will necessitate a review of any previous years for the project and any similar projects run by the organisation with an action plan agreed to prevent any occurrence.

Government Offices can refer issues to VAT or Special Investigations Unit (SIU) if necessary.

1. Who will inspect your records?

The Auditors could be one or several of the following:

• ESF Division, Verification and Audit Team
• Government Office Inspection Teams
• External Auditors

Depending on the type of your organisation you could also be visited by:

• National Audit Office
• The EC auditors
• The European Court of Auditors
• European Anti Fraud Office

2. What is the purpose of the audit visit?

To verify that:

• Expenditure has been incurred in a proper manner
• Financial management has been sound
• The project actually ran and was delivered in line with the approved ESF application and project closure report
• Interim / project closure report entries are supported by evidence of activity and expenditure
• The project represented value for money

3. How will the visit be arranged?

• Where possible 4 weeks notice will be given
• For European Court of Auditors, EC auditors or European Anti Fraud Office notice of the visits may be less
• Organisations will be contacted by phone initially and then formally in writing
• We may also ask you to provide year end accounts prior to the visit

4. What do you need to do before the audit?

• Identify key staff and ensure they are available to answer questions:
• who compiled the claim
• where the source documentation is held
• who managed the project
• who was in charge of the finance
• Where records are computerised ensure an operator will be on hand
• Ensure relevant staff are available all day
• Identify suitable accommodation
• It is advisable to have a dummy audit

Any item may be subject to review therefore the organisation needs to:

• Ensure all invoices are available and clearly labelled
• Be prepared to explain and demonstrate with source documentation how staffing costs are attributed to ESF project
• If organisation / college costs methodology has been used provide information used in the construction of the claim
• Give explanation and provide source documentation of apportionment and allocation of indirect and overhead costs
• Ensure any revenue is accounted for in interim claims and project closure reports

5. What documents will be inspected?

The following documentation should be available for each project dossier:

• Original ESF application form
• Letter of approval / contract
• Public Authority Support Certificates
• Advance and interim claim forms
• External auditor's report
• Project Closure Report forms
• General Statements of Expenditure
• Evidence to substantiate match funding in-kind support
• Letters from DWP, GO and other responsible authorities
• Sub-contract Arrangements

Project Records:

• Project timetable and programme, including modules
• Application / eligibility assessment forms
• List of beneficiaries on the project
• Project register and attendance records
• Project start and finish dates
• In and end year monitoring
• Records of achievement
• Follow-up information

Individual Beneficiary Records:

• Application form, including a signed declaration
• Terms and conditions of training, including individual project / training programme
• Individual attendance records including start and end date
• Suitability / assessment records
• Monitoring beneficiary progress
• Work experience records if relevant
• Copies of certificates gained
• Course evaluation forms by beneficiary
• Beneficiary follow-up form

Financial Records:

• All items on the interim claim and project closure report must be supported by source documentation:
• working papers which show how the claim was compiled
• staff costs - detailed salary records
• beneficiary costs
• other costs
• match funding
• Invoices and payment receipts
• Accounts and bank statements
• Organisation / college based unit cost calculation (HEIs only)
• Apportionment methodology

6. What level of detail is required?

The level of detail should be sufficient to demonstrate the:

• Actuality of the expenditure
• Propriety of the expenditure
• Eligibility of the expenditure
• Links to approved activities

The eligibility of expenditure will be assessed against the:

• Date when the expenditure was incurred which must be within the dates of the approved application
• Purpose of the expenditure, which must be in accordance with the approved application
• Type of expenditure
• Level of expenditure

We will also require an overview of your organisation:

• Overview of applicant organisation and partnership arrangements
• Comprehensive project specification
• Market needs analysis and market research
• The decision making process for determining the need for the ESF project
• Applicant's ESF checking and in-year monitoring systems
• Interim claims and project closure report completion
• Project evaluation and follow-up
• Project file

7. How will audit findings be reported?

• The 'wash-up' where the organisation will receive feedback at the end of the visit to allow concurrent activity
• A written report will be sent to the organisation to formalise the findings and provide information and support

8. What action may be taken as a result of an inspection visit?

• The organisation may be asked to recalculate and resubmit project closure report
• Project closure report may be reduced if items claimed cannot be substantiated
• Internal system changes may be requested in line with audit recommendations
• No action

9. What are the main areas of concern from previous audits?

• Significant changes not reported to the administrating authority i.e. Project not meeting its original objectives as outlined on approved application form
• Lack of recorded checks of information on beneficiary eligibility form
• Added value not transparent
• Actual detail not recorded on claim, i.e. includes notional or estimated items
• Insufficient detail to explain or substantiate entries, e. g. vague headings, unjustifiably high or low costs
• Unjustified central overhead costs
• Inconsistencies in the methodologies used in calculations
• Use of weighting
• Lack of management checking on claims, e. g. eligibility, arithmetic
• Full costs of project not included
• Revenue not declared or included in calculations
• Match funding not received
• In-kind support not recorded or able to be substantiated
• More ESF received than actually paid out
• Nil or inadequate publicity
• Inappropriate use of consultants

10. What further guidance is available?

The ESF Good Practice Guide Introduction covers:

• Content, aims and objectives
• Document requirements for ESF applicants
• Audit and inspection visiting methodology
• How to prepare for an inspection visit

11. Points of contact

In the first instance you should contact your Government Offices. The Government Offices contact us if they need clarification of policy or procedures.