Reconciliation is required to ensure that you have been paid the correct amount at the end of the contract - based on your returns and the evidence checked through audit - and that this information is available for us to report to GOWM/DWP.  The reconciliation of payments will include the returns you have made and any corrections following LSC local area contact visits and LSC audits.

Much of what is required you will have been doing already to conform to your contractual obligations and to deliver accurate return/claim information.  This process is just verifying that the information is complete.

Firstly, please make sure that you have a copy of the contract and the delivery plan (Schedule 1) for your project.  This is especially important if you were not the person who put it together as it explains what you agreed to deliver, who you agreed to deliver it to and what documentation you were to collect to evidence this delivery.

A 5-step approach

There are five aspects to the reconciliation and closure process.  These steps are:

• Returns, claims and evidence
• Learner data
• Employer data
• Payments
• Evaluation

You will need to make sure that all returns/claims are up to date and complete.  You need to make sure that you have evidence for all the activity and outputs you have reported to us and that it can be made accessible after closure in case the LSC, GOWM or European Auditors wish to audit it. 

The evidence that you agreed to collect is detailed in either Appendix 2 of co-financed contracts or in the main body of the Equal contracts.  All activity and evidence of achievement must be completed by the contract end date of your contract.

If, following your own closure audit, you do not have the evidence to substantiate your return/claim, or have found evidence for further returns/claims, then your return/claim must be updated.  Please go through this evidence with your LSC Local Area Contact and they will inform you how to manage this change.

If your contract is not finishing for sometime, it is still a good idea to have an internal audit of your project now to make sure you are collecting the correct evidence.

Also, please remember that to comply with EU regulations you must retain all project documentation (evidence etc) until December 2014. The preference is for hard copy format though there is guidance on www.esf.gov.uk for electronic storage if hard copy storage is not an option.

Learner data details the types of learners you have engaged and their backgrounds and, as it forms an important part of the Project Closure Report to GOWM and DWP, it must be accurate.  The data comes from the individual learner reports (ILR)/ESF short records (SRs) you have been completing for every learner and entering onto our system.

To make sure that the information you provide is as complete and correct as possible, you need to cleanse the data. You can do this either through your management information system (MIS) or through data extracts from the LSC’s Provider Online system.  You will also receive reports from the LSC highlighting any problems with the learner data for you to update.

Ineligible learners or learners with unclean data will not be counted towards the project closure and will need to be deleted from the database and removed from your achievements and related funding.

The key things to look for are that:

• the learners are eligible on the project in accordance with the detail your contract and the rules of ESF;
• employment data is correctly completed;
• prior education attainment level is entered;
• learner destination information is correct;
• dossier and project numbers are correct.

There should not be any ‘unknowns’ on the forms because the ILR/SR is evidence that the learner existed and that they are eligible for funding and Government uses these figures to show the benefits of ESF funding.

If your contract is engaging with employers to recruit learners, then they must complete a State Aid Declaration form because ESF is a state aid and could distort competition. 

The purpose of this form is two-fold:

• It is used to confirm the eligibility of the employer, as only SMEs are eligible for ESF funding.  You will need this form to confirm eligibility during any LSC, GOWM/DWP or European audit.
• The form also confirms the employer’s state aid status.  This is important for the employer in case they are challenged over the amount of state aid funding they have received.

The state aid forms, De Minimis and Training Aid, are available from the LSC. Please speak to your LSC local area contact for more information.

If your contract is Objective 2 you will need to report the amount of private match you have collected through employee timesheets.  As part of your internal closure audit, make sure that all timesheets are signed and have the appropriate hourly rates on.  Also, ensure that you have appropriate methods of tracking the amount each employer has contributed and received so this can be reported to the LSC.

Every employer needs to have signed a State Aid form to prove they are eligible for your project and conform to EU Competition Law.

Depending on the type of ESF, there are different mechanisms for managing the funding.  The two types are:

• Co-financed contract costs, with unit prices attached to outputs, outcomes and milestones.  This is used for most Objective 3 and all Objective 2 contracts.
• Actual costs, where payments are made on defrayed expenditure.  This can be either EQUAL or Objective 3 Fair Cities and Rover.

Co-financed contract costs

In this case the LSC pays for outputs, outcomes and milestones, which you report to us on the Co-financing Monitor Return forms (CMR) online.  Because the LSC payment is based on the profile and not on what is reported, there may be some variance between the two; these are the arrears or the funds you owe the LSC or that we owe you. 

You can take action in a number of ways to avoid arrears at the end of a project:

• Apply appropriate project management, with monitoring and reviews, to ensure the project meets its targets
• If there are substantial problems, develop an action plan to overcome them.  This may require changes to staffing, working hours, etc to ensure the agreed outputs are met.
• Reprofile the projects to reduce the outputs to be delivered.  Although this may reduce the contract value it is preferable to the financial risk of going into arrears.  We would, of course, prefer you to deliver.

It is important that any signs of arrears are dealt with quickly so that you don’t have to return any funding.

Actual cost contracts

If you have an actual costs contract, you would only have been paid what you have spent and evidenced against the project’s staff, beneficiary and other costs.  You can not get into arrears on this type of contract.

You must ensure that you keep all evidence of the expenditure until December 2014.

Audit Recovery

The outcomes of our audits also need to be taken into account when closing contracts.  If, during the audit, errors in your reporting were found, then funding may be recovered from you, either by amending your claims or sending you an invoice.  

You can find more information in the LSC’s report that we send to you after the audit. If you have any questions please ask your local office contact in the first instance.

It is better to clear any audit issues as they arise rather than leave them to the end of the contract.

Reconciliation

At the end of the contract we will do a reconciliation of the finances to make sure you have been paid the correct amount.  This will take into account:

• The claims you have made
• The funds we have paid you
• Any errors found during audits or checks made by local office advisors that require funds to be recovered
• Any errors in data that make learners uncountable and require funds to be recovered.

We will agree this final figure with you before taking any recovery or payment action.

Please make sure your evidence and data is correct so that no funds are recovered.

ESF funding has achieved a great deal and the processes by which it is distributed have evolved enormously.  In order to capture both the achievements of the projects and get feedback from you on the experience, we will be:

1. Asking you to complete a Project Closure Pack.  Information from this pack is also used to populate the final, aggregate report to GOWM/ESFD.
2. Asking you to complete an evaluation report which also gathers information for a case study on the project.  If you do not have an evaluation output on your project we will provide you with a proforma and this can be completed with your LSC local office contact.
3. Producing marketing material and press releases on the success of the program.

Please remember that ESF funding is used to kick start projects that would not normally receive mainstream funding.  The exit strategy and sustainability of your project are your responsibility and further funding can not be guaranteed.