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7. IMPLEMENTING PROVISIONS

7.1 Roles and Responsibilities

The following section sets out the roles and responsibilities for the management of the Programme. It covers the identity and duties of the following:

• Managing Authority and the Intermediate Administration Body
• Certifying Authority
• Audit Authority
• Compliance Body
• Strategic Delivery Body

Managing Authority

The Managing Authority of the Programme will be the Scottish Government through the Highlands & Islands Programme Team in the European Structural Funds Division:

In accordance with Article 60 of Regulation 1083/2006, the tasks of the Managing Authority will consist of the following:

• ensuring that operations are selected for funding in accordance with the criteria set out in the Operational Programme and with applicable Community and national rules for the whole of the implementation period;
• verifying that the co-financed products and services are delivered and that the expenditure declared by beneficiaries for operations has actually incurred and complies with Community and national rules and that verifications on-the-spot of individual operations have been carried out on a sample basis in accordance with the detailed rules to be adopted by the Commission in accordance with the procedure referred to in Article 103;
• ensuring that there is a system for recording and storing in computerised form accounting records for each operation under the Operational Programme and that the data on implementation necessary for financial management, monitoring, verifications, audits and evaluations are collected ;
• ensuring that beneficiaries and other bodies involved in the implementation of operations maintain either a separate accounting system or an adequate accounting code for all transactions relating to the operation without prejudice to national accounting rules;
• ensuring that the evaluations of operational programmes referred to in Article 48 are carried out in accordance with Article 47;
• setting up procedures to ensure that all documents regarding expenditure and audits required to ensure an adequate audit trail are held in accordance with the requirements of Article 90;
• ensuring the Certifying Authority receives all necessary information on the procedures and verifications carried out in relation to expenditure for the purpose of certification;
• guiding the work of the Programme Monitoring Committee and providing it with the documents required to permit the quality of the implementation of the operational programme to be monitored in the light of its specific goals;
• drawing up and, after approval by the Programme Monitoring Committee, submitting to the Commission the annual and final reports on implementation;
• ensuring compliance with the information and publicity requirements laid down in Article 69; and
• providing the Commission with information to allow it to appraise major projects.

The Managing Authority will pay all beneficiaries on receipt of valid claims. It will also ensure all monies incorrectly paid are recovered and that any financial irregularities are monitored and reported and amounts recovered in line with Article 58 of Regulation 1083/2006. In this context, the Programme will comply with the protection of European Community financial interests as specified in Regulations 2988/95 and 2185/96.

In addition, the Managing Authority will ensure that public contracts or concessions awarded, concerning projects benefiting from the assistance of the European Social Fund programmes comply with the provisions of Directives 2004/17/EC, 2004/18/EC, Regulation (EC) No 1564/2005 or the Treaty principles where applicable.

Intermediate Administration Body

In accordance with Article 59, the Scottish Government has decided to delegate selected Managing Authority tasks to an Intermediate Administration Body ( IAB). A single body will be responsible for managing and administering these tasks in the ESF Programme for the whole of the region. The principal tasks will be:

• information and publicity: to implement the relevant information and publicity requirements of the EU regulations;
• project applications: to facilitate the process of publicising, overseeing the application process, registering new organisations and provide advice and support to prospective applicants and communicating decisions, key guidance and programme/policy changes to partners;
• project selection: to undertake technical checks on applications and facilitate the assessment of challenge-fund applications and recommendations of awards to the Programme Monitoring Committee;
• project verification: to carry out monitoring visits on all projects in fulfilment of Programme obligations and verify that the co-financed products and services are delivered and that the expenditure declared by beneficiaries for operations has actually been incurred and complies with Community and national rules, particularly Article 13 of the Implementing Regulation;
• reporting: to monitor progress towards programme financial targets and contribute to programme requirements; and
• secretariat to the Programme Monitoring Committee.

The IAB will be accountable to the Managing Authority and act in accordance with the formal contractual agreement. Highlands & Islands Structural Funds Partnership Ltd has been awarded the contract to carry out these delegated functions will be reviewed by 31 December 2009:

Certifying Authority

The Certifying Authority of the Programme will be the Scottish Government through the Certifying Authority Team within the European Structural Funds Division (which has the same address as the Managing Authority above). Certification will be undertaken by a unit within the Department that is functionally independent from the Managing Authority. Its tasks, as set out in Article 61, will be:

• drawing up and submitting certified statements of expenditure and applications for payment to the Commission;
• certifying that the statement of expenditure is accurate, results from reliable accounting systems and is based on verifiable supporting documents, and that the expenditure declared complies with applicable Community and national rules and has been incurred in respect of operations selected for funding in accordance with the criteria applicable to the Programme and complying with Community and national rules;
• ensuring for the purposes of certification that it has received adequate information from the Managing Authority on procedures and verifications carried out in relation to the expenditure included in the statements of expenditure;
• taking account for certification purposes of the results of all relevant audits carried out by or under the responsibility of the audit authority;
• maintaining adequate records in computerised form of expenditure declared to the Commission; and
• keeping an account of amounts recoverable and amounts withdrawn following cancellation of all or a part of a contribution for an operation.

Audit Authority

The Programme Audit Authority will be the Scottish Government through the Finance Directorate.

As described in Article 62, the tasks of the Audit Authority will be:

• ensuring that audits are carried out to verify the effective functioning of the management and control system of the Operational Programme;
• ensuring that audits are carried out on operations on the basis of an appropriate sample to verify expenditure declared;
• presenting to the Commission within nine months of the approval of the Operational Programme an audit strategy covering the bodies which will perform the audits referred to in the previous two sets of tasks, the method to be used, the sampling method for audits on operations and the indicative planning of audits to ensure that the main bodies are audited and that audits are spread evenly throughout the programming period;
• submitting to the Commission an annual control report setting out the findings of the audits carried out during the previous 12 month-period ending on 30 June of the year concerned in accordance with the audit strategy of the Operational Programme and reporting any shortcomings found in the systems for the management and control of the Programme by 31 December each year from 2008 to 2015 (the first report to be submitted by 31 December 2008 shall cover the period from 1 January 2007 to 30 June 2008 and the information concerning the audits carried out after 1 July 2015 shall be included in the final control report supporting the closure declaration referred to below);
• issuing an opinion, on the basis of the controls and audits that have been carried out under the Audit Authority's responsibility, as to whether the management and control system functions effectively, so as to provide a reasonable assurance to the Commission that statements of expenditure presented to the Commission are cored and as a consequence reasonable assurance that the underlying transactions are legal and regular, by 31 December each year from 2008 to 2015;
• submitting, where applicable under Article 88, a declaration for partial closure assessing the legality and regularity of the expenditure concerned, by 31 December each year from 2008 to 2015;
• submitting to the Commission at the latest by 31 March 2017, a closure declaration assessing the validity of the application for payment of the final balance and the legality and regularity of the underlying transactions covered by the final statement of expenditure, which shall be supported by a final control report;
• ensuring that audit work takes account of internationally accepted standards; and
• ensuring that any audits and controls referred to above that are carried out by a body other than the audit authority have the necessary functional independence.

Compliance Body

Article 71 requires that an independent body is designated to give an opinion whether the management and control systems are in compliance with the Articles 58-62, based on a description of the systems to be provided to the Commission within twelve months of the Programme's approval. The 'Article 71' body for the Programme will be the same as the Audit Authority: the Scottish Government through the Finance Directorate.

Strategic Delivery Body

Certain delivery bodies will be designated as Strategic Delivery Bodies and commissioned to deliver parts of the Programme. The Managing Authority will commission these bodies to use Structural Funds to support activity for which they are the only bodies that can deliver, that is clearly additional to the bodies' existing activities and which is fully eligible with the scope of the Programme. Commissioning will take place through outcome agreements setting out planned expenditure, projects to be supported and performance targets. Funding will be expected to support a handful of strategic projects of regional or sub-regional significance.

For the ESF Programme, this body will be the UHI within Priority 3 (Improving Access to Lifelong Learning). The UHI Millennium Institute will be commissioned to deliver a package of funding under Priority 3 of the ESF Programme to invest in lifelong learning systems to improve access to training and improve the teaching capacity of the region, particularly in the more fragile and peripheral communities within the region. Again, this will be set out and reviewed on an annual basis. It will complement funding also provided to the UHI under Priority 2 of the ERDF Programme.

Projects by the UHI will need to be fully compliant with the criteria for project selection under Priority 3, which will be set by the Programme Monitoring Committee in advance of each funding round. The internal selection criteria and procedures used by the UHI as well as the specific projects to be commissioned will be set out in the outcome agreements. These agreements will describe the proposed projects, setting out their rationale, the selection criteria, the EU value added and their contributions to Programme and priority goals. In their capacity as Strategic Delivery Bodies, the UHI will be acting as a beneficiary, as defined by Article 2 or Regulation 1083/2006.

The Managing Authority will commission each outcome agreement for a period of three years. It will have the authority to discontinue the SDB status of the designated body within any three-year period. At the start of the three-year period, each outcome agreement will be reviewed by the Programme Monitoring Committee and decided on by Ministers. Thereafter, the agreement will be formally reviewed on an annual basis by the Managing Authority and the Programme Monitoring Committee for financial and outcome performance, which will also be monitored quarterly by the Managing Authority and the IAB and reported to the Programme Monitoring Committee. Project activity in the outcome agreement may also be revised by the UHI on an annual basis, as appropriate. Where financial and project performance targets set out in the outcome agreement are significantly and unreasonably under-achieved at the end of the first or second year of an agreement, the Programme Monitoring Committee will have the option of re-allocating all or part of the SDB funding for the remaining year(s) to the competitive bidding pot of Priority 3. Towards the end of the first outcome agreement, the Managing Authority will commission an evaluation of the UHI's performance against agreed financial and outcome targets - these will form the basis for decisions on any subsequent outcome agreements by the UHI.

The roles and responsibilities of the UHI will be broadly the same as those for other project beneficiaries. The UHI will be receive awards and be responsible for the overall financial management, reporting and accounting of expenditure (such as the submission of quarterly claims). Verification of project activity will be carried out by the IAB, as for other projects.

7.2 Financial Flows and Payments

The Certifying Authority will make all payment claims to the European Commission, derived from the declarations of expenditure submitted by beneficiaries. The Managing Authority will maintain systems to identify all Commission receipts as well as all payments to beneficiaries. Procedures to ensure that all relevant regulations are complied with and appropriate financial controls will be in place.

Financial flows will operate as follows for all projects (including the Strategic Delivery Body):

1. Beneficiaries declare through interim claims expenditure defrayed to the Managing Authority on a quarterly basis. The financial check obligations set out above are made by the Intermediate Administration Body.

2. The Managing Authority verifies claim expenditure and ensures that the financial management system contains correct information. The Intermediate Administration Body will be responsible for checking claims in the first instance before passing to the Managing Authority.

3. The Managing Authority certifies and authorises payments to beneficiaries and carries out any necessary recovery action.

4. The Certifying Authority submits payment requests to the European Commission at Programme level.

5. The Commission makes payments to a dedicated account.

6. When the Commission requests a refund, the Managing Authority will be responsible for the necessary payments.

Figure 8: Financial flows and payments

7.3 Partnership and Committee Structure

The Operational Programme will be implemented in partnership with the European Commission and with appropriate regional authorities and bodies in the region in accordance with national rules and practice. At the consultation stage, the Programme was developed in partnership with key stakeholders such as Local Authorities, the Enterprise Network, the higher and further education sector, relevant Government departments, social partners, equality commissions, the voluntary and community sector and others with positive contributory role to play. Partnership arrangements will continue as programme activity is prepared, implemented, monitored and evaluated. The Managing Authority will encourage the participation of social partners in Programme activities. It will also encourage participation and access of non-governmental organisations, particularly in projects that will promote social inclusion, gender equality and equal opportunities in the Programme.

At Programme level, partnership will be embodied in the Programme Monitoring Committee, which will be responsible for monitoring the implementation of the Programme. A single PMC will oversee both the ESF and the ERDF Programmes for the Highlands & Islands area, ensuring greater strategic overview in specific project decisions but also in the overall use of Structural Funds for the region. The ESF and ERDF Programmes have been drawn up to complement each other strategically so a single strategic oversight body is appropriate.

Reflecting the principle of partnership, the PMC's membership will be drawn from representatives reflecting the key sectoral and sub-regional interests in the programme, including the economic, environmental and social partners, along with the Scottish Government. As the PMC will bring together both ESF and ERDF interests, membership will be evenly and adequately drawn to ensure full representation of both interests. The European Commission will be represented in an advisory capacity.

The Committee will set its rules of procedures with the Managing Authority within the institutional, legal and financial framework of the Member State. It is expected to meet at least twice a year and will be chaired by a senior Scottish Government representative. The IAB will provide the secretariat function for the PMC and its meetings, under the guidance of the Scottish Government.

In accordance with Article 65 of Regulation 1083/2006, the PMC tasks will be to:

• consider and approve any proposal to amend the content of the Commission decision on the contribution from the Funds;
• consider and approve the criteria for selecting operations eligible for financing under each priority within six months of the Operational Programme approval and approve any revision on those criteria in accordance with programming needs;
• consider and approve annual and final reports on implementation as referred to in Article 67;
• be informed of the annual control report, or of the part of the report referring to the Programme concerned, and of any relevant comments the Commission may make after examining that report or relating to that part of the report;
• propose to the Managing Authority any revision or examination of the Programme likely to make possible the attainment of the Funds' objectives referred to in Article 3 or to improve its management, including its financial management;
• review periodically progress made towards achieving the specific targets on the Programme on the basis of documents submitted by the Managing Authority; and
• examine the results of implementation, particularly the achievements of the targets set for each priority and the evaluations referred to in Article 48.

In addition, the Committee will:

• approve adjustments to applicant guidance;
• monitor co-ordination of funding with ESF, European Agricultural Fund for Rural Development and the European Fisheries Fund in line with the arrangements set out in Chapter 6;
• make recommendations on the SDB outcome agreements and the performance of those agreements, as discussed above;
• consider the recommendations of advisory groups on other projects and set out a list of recommended awards for Scottish Ministers; and
• set up supporting committees, as appropriate.

The Committee will aim to have balanced representation in line with the equal opportunities vision set out in Chapter 8.

7.4 Award Decisions

The Programme is predicated on projects consistent with Programme objectives and contributing to Programme targets being identified for funding either under direct competitive bidding into the priorities or through SDB arrangements. Transparency and peer/partnership appraisal are important aspects of both - these have been traditionally used in Structural Funds appraisal and will continue to be so in the current period. For the competitive funding, bids will be invited into each priority on an annual basis (as shown in Figure 9).

• Applications competing for funding will be exposed to technical/eligibility checks by the IAB ( 1).
• This is followed by peer and policy appraisal by the Scottish Government and advisory groups ( 2). Each priority will be covered by a single advisory group, established by the Managing Authority though where joint appraisals may be required - as in the case of Priority 3 of the ERDF Programme and Priority 1 of the ESF Programme - joint sittings of the groups and other mechanisms of co-ordination may be used. Membership of the advisory groups will reflect expert knowledge, including key regional partners and Scottish Government policy officials as appropriate, and will be chaired by the Managing Authority.
• Proposals/recommendations are then considered by the Programme Monitoring Committee or any sub-committees delegated to consider the recommendations by the PMC ( 3).
• Formal offers of grant are made on behalf of Scottish Ministers ( 4). Arrangements for deciding on SDB projects are discussed separately above.

Figure 9: Project appraisal and decisions

As shown in Figure 10, in the case of the Strategic Delivery Body, a similar process will take place.

• The SDB will determine which projects to put into their outcome agreements. All project activity must be fully in line with the project selection criteria agreed by the Programme Monitoring Committee for the relevant priority) ( 1).
• The outcome agreement will be subject to technical/eligibility checks by the IAB ( 2).
• Following this, the outcome agreement will be subject to policy appraisal by a special advisory group ( 3). The agreement will then be considered by the Programme Monitoring Committee which will make recommendations on the funding of all or part of the outcome agreement ( 4). Where some projects within the outcome agreement are is not recommended, the SDB can propose alternative projects to the Committee for further recommendation.
• Formal approval and offer of grant are made on behalf of Scottish Ministers ( 5). A single offer of grant will cover each outcome agreement.

Figure 10: Project appraisal and decisions for SDB projects

7.5 Transnational Activity

As part of all eligible activity under the Priorities listed in Chapter 4, projects will be able to engage with one or more Member States to carry out research into alternative methods of delivering the objectives specified in the project. Up to 10% of the total ESF award can be used on such activity.

Projects will be expected to explain how they will carry out the transnational element of their activities, though support will be limited to building on or extending existing international networks rather than developing wholly new networks. The lessons from the Equal Community Initiative suggested that this was the most effective approach to transnational working. Valuable transnational partnerships and operations were established through the Highlands & Islands Development Partnership in the 2 ^nd round of EQUAL funding in Scotland, which will inform any transnational activity in the ESF Programme.

The Managing Authority will work with the Commission and appropriate national authorities to ensure that ESF does not support operations being concurrently supported through Community transnational programmes in the field of education and training.

7.6 Information and Publicity

Article 69 of the General Regulation 1083/2006 stipulates that the Managing Authority is responsible for setting out information and publicity actions to ensure the full visibility of the funds throughout the programming area. Publicity forms an integral part of the programming strategy and the Managing Authority will ensure that the benefits of the Funds are communicated to the wider public. The Managing Authority will be the chief body with responsibility for making sure publicity obligations are met.

Innovative publicity activities and campaigns using print, broadcast and creative media as appropriate will be employed by the Managing Authority to clearly promote and position the ERDF brand. These activities will be developed proactively and implemented in collaboration with the European Commission in Brussels, the Representation Office in Edinburgh and information relays and networks in the UK as appropriate, which will ensure the visibility and transparency of the Funds at a local, regional and national level.

Potential projects sponsors and beneficiaries/recipients will be informed of funding opportunities and also the information and publicity requirements linked to receiving ERDF funding during the programming period. Responsibility for this will lie with the Intermediate Administration Body on behalf of the Managing Authority, as set out above.

All project sponsors will be required to respect the information and publicity elements of the General and Implementing Regulations especially with regards to signage - including billboards, plaques and promotional material. These requirements will be set out in detailed guidance to be made available to potential applicants and project sponsors alike.

In conformity with the provisions set out in section 2 of the Implementing Regulation, the Managing Authority will present a communication plan to the Commission no later than four months after the formal adoption of the Programme. The Communication plan will set out the:

• objectives of the plan and the target groups;
• activities in support of publicity and information including events, seminars and project launches, for potential applicants, partners and the wider public;
• bodies/persons responsible for the implementation of the plan;
• budget for implementing the plan; and
• evaluation frameworks for the plan.

The Managing Authority will report on progress in implementing the plan (including examples of publicity activities) to the Programme Monitoring Committee and also in the annual implementation report as discussed in Chapter 9 below). The Communication plan will be easily accessible and will be published on the Managing Authority's website. The use of electronic media - through the Managing Authority's and the IAB's websites - will be the key channel of delivery for disseminating information about the Programme.

Funding for publicity and communications will be provided through the technical assistance budget for the Programme.

7.7 State Aids

Any public support under this The Programme must will comply with the procedural and material rules applicable at the point of time when public support is granted. The Member state, and in particular the Managing Authority, is fully responsible for compliance of the Structural Funds operation within the Programme with the EC State aid rules.

7.8 Exchange of Computerised Information

The Commission has set up a new computer system to permit the secure exchange of data between the Commission and the Member State. The new system - SFC 2007 - will be used for the exclusive official exchange of all information about the Operational Programme, in accordance with the Commission's Implementing Regulation.

The Commission and the Member State will ensure compliance with relevant EU and national provisions on the protection of personal data. Information exchanged will be covered by professional confidentiality and protected in the same way as set out for similar information in national legislation. Information will not be used for any other purpose than that agreed between the Commission and the Member State, unless express consent is given by the Member State.

The system contains information of common interest to the Commission and the Member State. An agreement has been reached with the Commission on the core and categorisation data to be provided. The categories will not change during the Programme lifetime.

The Scottish Government will also put in place an updated computer system for the collection, storage and security of information and documents relevant to the Programme. This will be based on the system employed at the end of the 2000-06 programmes.

Exchange of data and transactions will be signed electronically in accordance with the relevant EU Directive. The Commission will provide the arrangements for use of electronic signatures.

The Commission will regard a document as having been sent once it has been signed by the Member State in the system. The Commission acknowledges that the date of receipt by the Commission will be the date on which the Member State sends the documents.

In cases of force majeure, notably the malfunction of the computer system or the failure of a lasting connection, the Member State may forward information and documents to the Commission in hard copy.

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