FINANCE GUIDANCE NOTE 2007/3
NON-MAINSTREAM FUNDING ARRANGEMENTS: APPRAISAL, MANAGEMENT, MONITORING AND EVALUATION
Purpose
1. The purpose of this note is to promote good practice in the appraisal, management, monitoring and evaluation of non-mainstream funding arrangements. It is aimed specifically at the constituent parts of the Scottish Executive (including Scottish Executive Agencies). However, the general principles will have relevance to other organisations to which the Scottish Public Finance Manual (SPFM) is directly applicable.
Key Points
2. The Executive has endorsed the Principles of Good Practice for Managing and Monitoring Funding Arrangements identified by the Auditor General.
3. The need to engage customers and stakeholders at each stage is at the centre of the Executive's policy cycle.
4. Business areas must consult their portfolio Finance Teams at the earliest possible stage in the preparation of all policy proposals etc. which may have resource or other finance related implications.
5. Pre-Expenditure Assessments must be prepared for any proposal with significant resource implications.
6. Checklists covering the grant proposal, application and assessment processes and a model Offer of Grant document are available on the Intranet.
7. Plans for evaluation and monitoring must put in place from the outset and finalised in advance of any funding being provided.
Background
8. Good practice in relation to appraisal, management, monitoring and evaluation should of course be applied to all funding arrangements. However, particular concerns were raised with regard to the Executive's funding of "initiatives" in reports by the Auditor General for Scotland and the Scottish Parliament Audit Committee. The Audit Committee - together with the Executive in its formal response to the Committee's report - endorsed the Principles of Good Practice for Managing and Monitoring Funding Arrangements included in the Auditor General's report. These are reproduced in the attached Annex for ease of reference.
Policy Guidance
9. Guidance is available via the Policy Maker's Guide on the Intranet. It includes a Policy Maker's Toolkit, an evidence based online tool, covering the need to involve delivery partners, set specific objectives and measures for success, identify resource requirements and resource implications for delivery partners and establish monitoring and evaluation arrangements. The need to engage customers and stakeholders at each stage is at the centre of the Executive's policy cycle.
Non-Mainstream Funding Mechanisms
10. The Executive employs a range of non-mainstream funding mechanisms and applies them as appropriate to the specific circumstances. All such funding is provided in the form of grant - as opposed to grant in aid - see the section on Grant and Grant in Aid in the SPFM. The circumstances in which non-mainstream funding mechanisms might be applied include:
- piloting to inform policy development;
- pump priming to encourage mainstreaming by delivery partners;
- match funding to lever in financial support from other sources; and
- ring fencing to address specific Ministerial priorities.
11. Business areas across the Scottish Executive must consult the relevant portfolio Finance Teams at the earliest possible stage in the preparation of all policy proposals etc. which may have resource or other finance related implications. Finance Teams will advise on the appropriate funding mechanism.
Pre-Expenditure Assessments
12. Pre-Expenditure Assessments (PEAs) must be prepared for any proposal with significant resource implications. The PEA process involves assessing:
- the aims and objectives of the proposal;
- the options for addressing these objectives;
- the evidence base on the likely economic, social, and environmental impacts and value for money of the proposal, including cost-benefit analyses where appropriate;
- the financial and management arrangements for the proposal, including an assessment of the key risks to successful delivery; and
- the plans for monitoring and evaluation.
13. Detailed guidance is available via the Appraisal & Evaluation section of the SPFM. Staff are encouraged to seek assistance from appropriate areas of expertise within the Executive (e.g. Analytical Services, Finance). Corporate training on objective setting, an integral part of the PEA process, is available through the course on Better Policy Making.
Documentation
14. Appropriate documentation must be put in place for all non-mainstream funding mechanisms, in consultation as necessary with Analytical Services and Finance, covering the application process, the assessment of applications and the offer of grant. Checklists covering the grant proposal, application and assessment processes and a model Offer of Grant document are available on the Scottish Executive Intranet. The model Offer of Grant includes standard conditions of grant reflecting the principles of good practice identified by the Auditor General and schedules covering claims and payments. The model may be adapted in consultation with Finance and, as necessary, the Office of the Solicitor to the Scottish Executive (OSSE).
Period of Funding
15. The period of funding should reflect fairly the time required to deliver the agreed objectives and decisions on future funding should be taken in good time and after full consideration of the impact on delivery partners. There is however a responsibility on delivery partners not to build up unrealistic expectations that funding might continue beyond the life of a particular pilot / project, and to arrange their own business accordingly, if necessary by taking appropriate steps to incorporate any activities which have been successful and which they would wish to continue into their own operations.
Monitoring and Evaluation
16. Guidance is available via the Appraisal & Evaluation section of the SPFM and the Policy Maker's Guide. The PEA process requires plans for monitoring and evaluation to be set out prior to implementation. There is a need for evaluation throughout the process of policy development in order to ensure that the policy remains focused and can be adjusted to take account of changing circumstances.
17. Expert advice on evaluation and monitoring is available from Analytical Services, Finance and the Centre of Expertise. In evaluating whether or not objectives have been met, the Executive should, where appropriate, ensure that the impact on delivery partners and service users is evaluated, and that the views of the wider local community are sought. There is a strong presumption that the results of evaluation will be proactively published.
Scottish Executive Finance
June 2007
ANNEX
Principles of Good Practice for Managing and Monitoring Funding Arrangements
Project strategy, objectives and planning
• A clear strategy and objectives.
• Success criteria which link objectives to desired outcomes.
• Identifying stakeholders and ensuring that an appropriate level of consultation has taken place and their support obtained.
• Evaluating the initiative for strategic fit, feasibility and identifying required skills for delivery.
• Project planning arrangements for managing the initiative's progress.
Development of cost proposals
• A clear methodology determining the costs of achieving the initiatives' objectives.
Delivery arrangements
• Clear and effective announcement of the initiative to potential delivery partners.
• Providing clear guidance to delivery partners so they can align the project and funding claims to fit the objectives.
• A clear methodology for assessing bids to ensure they meet agreed criteria.
• Clear allocation of funds to delivery partners.
• Assurance obtained over delivery partners' ability to deliver and their project planning.
• Documented approval of successful bids.
Monitoring and evaluation
• An agreed framework setting out monitoring and reporting arrangements, including financial, activity and progress against objectives and milestones (at both initiative and project level).
• Efficient use of audit as a method for obtaining assurance that funds are managed robustly and spent appropriately.
• A clear set of outcomes for the initiative and individual projects, and a framework for measuring both their attainment and the impact of the initiative overall.
Agreement or contract
• A formal agreement or contract has been setup between the Executive (funder) and the delivery partners who are in receipt of funding and are responsible for delivery against established objectives. This sets out:
- objectives and purpose of funding
- expected outcomes
- terms and conditions of funding
- roles and responsibilities
- payment arrangements and whether funds are ring-fenced
- monitoring arrangements and outcome assessment
- actions in event of a breach of conditions and penalties
- requirements for audit and/or need for records and expenditure controls.
• A signed agreement is received from the delivery partners.