Guidance

ESF National Eligibility Rules and Programme Guidance

Updated 14 December 2023

Purpose

This document forms part of the legal basis for the implementation of projects supported by the English European Social Fund (ESF) Operational Programme (OP) for the 2014-20 programme period.

The eligibility rules and programme guidance as set out in this document should be used alongside information and guidance located on the European Structural and Investment Funds (ESIF) on GOV.UK which includes, but is not restricted to:

• Selection Criteria
• Scoring Framework
• Technical Assistance Guidance
• Simplified Cost Option(SCO) Guidance
• Data Evidence Requirements: eligibility and results
• Branding and Publicity Requirements
• Output and result indicator definitions Guidance
• Guidance on Community Led Local Development.

Where Action Notes are referred to they are published on GOV.UK.

European Union Regulations

The two main European Regulations governing European Structural Investment Funds of which the European Social Fund is a strand are Regulation (EU) No 1303/2013 (the Common Provisions Regulation) and the more specific ESF Regulation (EU) No 1304/2013.

Please Note: It is the responsibility of Projects and Co-Financing Organisations (CFOs) to ensure they are compliant with all of the ESF Requirements detailed in the ESF OP for the 2014-20 programme period and associated guidance produced by the Managing Authority (MA).

Introduction

This document sets out the National Eligibility Rules for the 2014-2020 ESF Programme in compliance with Article 65 of EC Regulation 1303/2013 (the Common Provisions Regulation (CPR)) and supporting programme guidance. All projects receiving ESF must comply with the eligibility rules, as failure to do so can incur financial penalties of up to 100%. If the European Commission (EC) consider there has been systemic failure on eligibility issues, they could enforce a flat rate correction across the whole of the Programme.

To attract ESF support, expenditure incurred by ESF projects must be eligible in terms of the ESF OP for the 2014-2020 programme, the relevant EU Regulations and these National Eligibility Rules. The CPR states that the eligibility of expenditure shall be determined on the basis of national rules, except where specific rules are laid down in or on the basis of the CPR or the Fund-specific rules.

ESF contributes to the cost of delivering a project but will usually require the remaining balance of the costs to be met by the project – the project contribution is known as match funding. ESF eligibility rules apply to all project spend which includes Match Funding.

ESF Delivery Models

The ESF programme in England in 2014-2020 is delivered through two frameworks, Co-financing Organisations (CFOs) and non CFOs (Direct Bids).

The national CFOs are:

• Department for Work and Pensions (DWP)
• Education and Skills Funding Agency (ESFA)
• The National Lottery Community Fund (TNLCF)
• Her Majesty’s Prison and Probation Service (HMPPS)

The MA has also appointed a number of local CFOs. Arrangements that apply to national CFOs also apply to local CFOs.

The MA enters into a Funding Agreement (FA) with each direct bid project. For each CFO, the MA enters into either a Memorandum of Understanding (MoU) or FA which defines the selected project. For each individual project operated by a CFO there will be a separate FA or MOU.

CFOs provide the required eligible Match funding and use their expertise to procure and contract manage, or grant fund, ESF provision. In the 2014-2020 ESF programme most CFOs fund locally defined activities through an open, transparent and competitive grant-giving or procurement process. CFOs have different procedures in place regarding procurement and application deadlines.

In addition to CFO delivery some ESF projects are delivered as a result of a successful Direct Bid application. MA representatives work with ESIF Sub-Committees within Local Enterprise Partnerships (LEPs) to develop, draft and publish Calls that meet the needs of the local area and are compliant with the ESF OP for the 2014-20 programme. Calls are published through Funding Finder on GOV.UK.

Any public or private organisation that is a legal entity can apply to deliver an ESF project in response to a Call.

This document sets out what is eligible and ineligible for ESF support. Projects must comply with applicable rules covering State Aid and Procurement and these rules are applicable to all projects from their effective date of expenditure.

Location of Operations/Projects

For the ESF 2014-2020 programme project activity must be delivered in England. The location of where the activity is being delivered determines where the ESF support is counted as occurring. Any eligible individual with reasonable access to the activity may be supported. Different rules apply to the Youth Employment Initiative (YEI), since participants must reside in an area which is eligible for YEI funding.

Category of Region

All geographical areas in England have been designated a Category of Region (CoR) as defined by the EC, based on that area’s Gross Value Added (GVA) rate. There are three CoR:

• More Developed
• Transition
• Less Developed

Each CoR attracts a different percentage of ESF support known as the intervention rate (how much ESF will contribute to the project) defined by where the project is being delivered. The majority of England is More Developed where the ESF and Match contribution is equal, 50% provided by ESF and 50% provided by Match. In the nine Transition areas, 60% is provided by ESF and 40% provided by Match. In Cornwall and the Isles of Scilly the only Less Developed area, 80% is provided by ESF and 20% provided by Match.

Except in YEI areas, ESF support is based on delivery site location and not a participant’s address. Where a project covers more than one CoR, it is the location where the activity is delivered which determines the intervention rate.

Technical Assistance projects delivering in more than one CoR can apply a pro-rata approach, where each CoR contributes in proportion to the amount of the activity that is delivered in each CoR. Details are agreed in conjunction with the MA and detailed in the FA between the project and MA. Guidance on Technical Assistance can be found on GOV.UK.

Community Led Local Development

The Community Led Local Development (CLLD) funding stream, which is part of the wider ESF 2014-2020 Programme, uses European Structural Funds, including the European Social Fund and European Regional Development Fund, to deliver support for economic, social and environmental development.

To deliver CLLD, Local Action Groups were required to be established, comprising of local public, private and civil society representatives, to bring forward and fund projects identified through a CLLD strategy approved by the ESF MA. In conjunction with the Accountable Body who will act as the applicant for the implementation stage, the same Local Action Groups are also be accountable for the financial performance and compliant delivery of the resulting CLLD projects.

More specific detailed guidance about CLLD can be viewed on GOV.UK.

Youth Employment Initiative

The YEI is targeted at young people not in education, training or employment (NEET). YEI is targeted geographically at areas with 25% youth unemployment in 2012 (Eurostat data). Eligible YEI areas are Inner London, Merseyside, Tees Valley & Durham and the West Midlands. European Union regulations require that at least 90% of Youth Employment Initiative funding is targeted in these areas.

The remaining 10% is targeted at four areas with youth unemployment rates above 30% in 2012. These are: Kingston-Upon-Hull, Leicester, Nottingham and Thurrock.

YEI participants must be aged 15 to 29 inclusive when they start on YEI provision. They must be residing in an area eligible for the Youth Employment Initiative and they must be (NEET). Full time students are excluded from Youth Employment Initiative support.

Match Funding

The contribution from ESF finances a specified percentage of the total eligible costs of a project. The percentage is based on the categorisation of the region (as less developed, more developed or transitional). Match-funding is a key requirement for receiving European Structural & Investment funds. Applicants should be able to confirm the amount and source of match-funding at the funding application stage.

The requirement to Match ESF is central to the operation of ESIF programmes. Most of England is covered by the more developed category of region and the ESIF intervention rate (that is the ratio between ESF and Match) is 50:50. In the less developed area (Cornwall & Isles of Scilly) Match funding must contribute at least 20% of total eligible project costs. In the nine English ‘transition’ areas Match contribution is 40%.

At an individual project level intervention rates may be varied, as the Match Funding element is the expected minimum contribution by a project. So, where offered, a project can provide a higher rate of Match Funding than usually required in that category of region. In such cases, the project must still be able to evidence the source and amount of proposed Match Funding as part of their ESF funding application. A project cannot have an intervention rate where their Match Funding rate is lower than the rate applicable in that category of region.

Match Funding is treated the same as ESF regardless of source, this means that the total eligible expenditure, including the Match Funding element, must be used for the agreed purposes and defrayed and evidenced in the same way as the eligible ESF expenditure element.

All expenditure must be evidenced, auditable, and defrayed prior to the inclusion in any claim and follow all other ESF compliance rules. Auditors will select and test Match funds as part of their audit regime. Failure to demonstrate an audit trail for Match could lead to financial penalties for the project.

The following conditions must be applied when considering activities eligible to be used for Match Funding:

• Match funding must be for activity deemed to be eligible within the Operational Programme
• it must be for activity deemed to be eligible within the ESF OP for the 2014-2020 programme and the Priority Axis which the project will deliver in
• it must meet the eligibility rules described in this document and all of the other ESF eligibility requirements
• it must be drawn from the same CoR where the project activities are being delivered

In addition, when deciding on an eligible source of Match an applicant or project consider the following:

• is the Match related to the project?
• is the Match clean and not being used for other EU programmes or be drawn from any other EU funding?
• Is the Match auditable?

The answers to these questions are important because Match must relate to the project, its activities and its objectives, Match cannot include or be from the same or other EU funding streams and Match expenditure must be auditable.

Match may be from either public or private funds, which is a change from previous ESF programme where only public Match was eligible.

Applicants should ensure they take account of the classifications listed below, when completing their ESF Application. These lists are not exhaustive and there may be other public/private Match Fund sources that can be considered. If you are unsure if a source is public or private, ask the MA for advice.

Sources of public Match Funding include:

• Local Authority funds
• University Funds
• Public Sector Reserves
• Growth Deal
• National Lottery Community Fund
• Health Service Funds
• Non-Departmental Public Body Funds
• Central Government Funds

Sources of private Match Funding include:

• bank loan
• private sector reserves
• project income
• SME contributions
• private sector investment
• third sector funds
• volunteer time (In Kind Contribution)

Organisations applying for new ESF funds should ensure they apply the correct classifications in their online funding application. Existing projects should apply the relevant classifications when completing a Project Change Request (PCR) which affects their ESF project funding. This is to ensure full alignment with the ESIF ECLAIMS system used to administer ESF funding and also support compliance with EU Commission requirements on reporting public funding contributions.

Volunteer Time in Kind as Match Funding

Projects that have volunteers working on their ESF project can use the volunteer time as Match Funding, this is known as Volunteer Time in Kind. In addition to the normal rules for Match Funding, the following conditions apply:

• ESF participants cannot be treated as volunteers during their time on the project
• volunteer-time contributions must be calculated using the method and guidance provided
• volunteers must be made aware when they start volunteering, that they are helping the project in their own private time and they are not employed on the project
• complete, accurate and up-to-date records must be kept which provide a description of the duties the volunteer undertakes and the time they spend volunteering
• information held should match annual reports or final reports when the project ends, if they do not it is not eligible as Match
• volunteer time of any paid employee performing additional duties on a voluntary basis is not eligible as Match

The value of the work undertaken by a volunteer should be recorded as the verified time and the rate of remuneration for equivalent work. The rate can be obtained from the UK Annual Survey of Hours and Earnings (ASHE) which is available via the Office for National Statistics website.

It is important to remember that the value of volunteer time is based on the theoretical value of the tasks performed by the volunteer for the project and not the current earnings of an individual in their usual paid employment.

Where Volunteer Time in Kind is being used as match, the notional value of the cost can be included in a claim as staff costs. When calculating the hourly rate for volunteer time, notional on-costs (national insurance, pension contribution etc) must not be included.

The MA will require a project using volunteer time in kind as Match to have as a minimum 10% cash Match funding and a complete, accurate and up-to-date audit trail that provides a description of the duties the volunteer undertakes and evidence of the time they spend volunteering, for example timesheets.

The Apprenticeship Levy as Match Funding

From April 2017 the Government required employers with an annual wage bill of £3 million or more to contribute to the Apprenticeship Levy (AL) and from May 2017 the way apprenticeships are funded in England was simplified. Some employers are not eligible to pay the AL although they are able to access AL funds to pay training costs for apprentices they employ.

Employers and Approved Apprenticeship Training Providers access the AL via a Digital Account. This system is managed by the Education and Skills Funding Agency (ESFA) - the MA has no access or responsibility for it.

The Digital Account shows all transactions between an employer and a provider delivering apprenticeship skills. Providers receive funds into their Digital Account, when they have evidenced delivery of agreed training and assessment activities through their monthly return.

The MA has established that applicants whose ESF projects were approved on or after 24 October 2017, can (where existing Match requirements are met) use the AL as Match funding. Please note: grant recipients (approved prior to 24 October 2017) are unable to submit a request to use the AL as Match.

The approach taken by ESF applicants wishing to use the AL as Match, should be the same as for any other Match source. Details of Match must be provided at the application stage, the Match is treated the same as ESF regardless of source and it must be evidenced, auditable, and, defrayed before a claim is made.

Applicants wishing to use the AL as Match Funding for their ESF project must include the organisation providing Match Funding as a delivery partner and list them as part of their ESF funding application.

It is recognised that applicants using the AL as Match, may not be able to provide the written evidence/letters of intent required at application stage. Therefore, if an applicant opts to use the AL as Match they will need to provide as a minimum:

• details of how the activities delivered by the AL relate to the ESF project, its activities and its objectives
• details of the amount of match that will be generated by the AL
• evidence of the need or demand in the local area for the applicant’s specific training

Each application is considered and appraised on its own merits. A project using the AL as Match should be able to achieve compliance if they maintain a detailed audit in line with ESF requirements.

Using the AL as Match does not give ESF applicants access to AL cash, it is the activities apprentices receive provided and paid for by the AL that are “accessed” and used as Match not the money. The activities/provision must be eligible within the OP and compliant with ESF requirements to be used as Match.

The ESF project using the AL as Match can fund additional activities that are not part of apprenticeship training delivered using the AL. For example, ESF could be used to provide wrap-around support to individuals to help them successfully pass their apprenticeship, or to support others, who are not apprentices to increase their employability or skills or be used to create more apprenticeship opportunities.

ESF applicants may wish to engage directly with providers delivering apprenticeship training and qualifications, to access the AL. The list of approved apprenticeship providers can be found on GOV.UK.

The MA do not have any input or control over what the AL pays for. Guidance published on the activities that can be supported by the AL is the responsibility of the ESFA.

Expenditure (Project Costs)

For organisations applying for ESF funds through the Single-Stage Application process, the effective date for incurring eligible ESF expenditure will be the day after the relevant open call closing date. Any expenditure incurred by an ESF Direct Bid project prior to this date is ineligible.

However, any expenditure incurred by an ESF applicant, up to and including the date on which an ESF Funding Agreement is fully executed, will be at the applicant’s own risk.

Direct costs are the costs which directly relate to initiating and implementing the agreed project activities. A direct link between the cost and agreed activities must be demonstrated and easily quantified without the need to consider arbitrary apportionment methodologies. Direct costs may cover (as an example):

• salaries of staff directly engaged in ESF activity (direct staff costs)
• participant costs (such as allowances)
• costs to fund support for children of ESF participants, as part of a wider holistic package of support, to help tackle issues which are deemed as a barrier to work for the adult participant and forms part of their journey towards work
• childcare costs
• other costs that are solely attached to the delivery of the ESF project (other direct costs).

Indirect costs are, by default, all other eligible costs that do not meet the above definition of a direct cost. Indirect costs are shared organisational costs, which cannot be directly linked to project activity because it is difficult, or impossible, to quantify a precise amount attributable solely to a single operation/project. Indirect costs may cover (as an example):

• premises costs
• recruitment expenses
• accountancy costs
• cleaning costs
• telephone
• utility charges

It is recognised that some organisations will deliver ESF activities themselves and also sub-contract delivery to other organisations. In these circumstances the project will incur both running costs and contract costs for the sub-contractor. Specific details on eligible and ineligible expenditure incurred through both or either of these routes is covered in this section.

Where a project is claiming direct costs the expenditure must be declared on the basis of actual ESF expenditure which includes Match funding. Actual ESF expenditure requires a full and verifiable audit trail through to bank statements and must be evidenced by supporting paid invoices or other appropriate accounting documents. Expenditure must be incurred and defrayed before it is included in any claim.

Where original expenditure evidence documentation is only available in electronic format, printed hard copies or screen shots should be retained.

ESF Direct Bid Projects who choose to include indirect costs within their eligible costs must claim and calculate these in line with one of the two permitted, methodologies set out in the ESF Simplified Cost Option guidance published on GOV.UK.

Eligible Expenditure

Bursaries and Stipends

ESF can be used to provide financial support in the form of a bursary or stipend but this should only be considered where market failure can be demonstrated, where all other funding options have been considered and where there is clear evidence an individual participant is disadvantaged.

Stipends are awarded to students to cover their maintenance costs whilst undertaking postgraduate training leading to the award of a post-graduate degree. Bursaries are usually small amounts of funding, paid to a student to cover specific costs directly linked to their study, for example text books, small items of equipment.

Stipends or Bursaries funded via ESF cannot be used to fund tuition fees, or costs covered by Government grants and loan schemes or learning/learner support packages.

Projects must:

• clearly state the maximum amount of Stipend they will award per participant and demonstrate how this amount is compatible with the Research Council UK Stipend thresholds
• clearly state the maximum amount of Bursary they will award per participant and demonstrate how this amount has been determined
• provide a draft copy of the funding checklist they will use for each participant where a stipend or Bursary is being considered
• provide a draft copy of the Stipend Agreement they intend use with each participant
• provide a copy of the specific criteria they will use to determine if a participant is ‘disadvantaged’ in the context of Stipend/Bursaries and the full rationale underpinning that criteria
• be able to demonstrate how any Stipend and/or Bursary costs being proposed in their application are proportionate and compliant with the ESF requirements.

Consumables

A list of required consumables, with the estimated expenditure, should be included in the application. Computer software should be treated in line with the usual accounting policy of the project organisation.

Direct Staff Costs

Staff costs can include employer’s national insurance and superannuation costs. The application for funding must include any expected increases in grade or pay scales for the staff involved. Staff costs may include those costs covered in a person’s contract of employment that are taxable incentives linked to pay and pension contributions.

The claim for staff costs must be based on actual salary costs relating to time spent on ESF activity. The claim can be evidenced in the following ways:

• staff employed wholly or for a specific part of their duty on ESF related activity need to have a letter of appointment and job description that clearly states starting and finishing dates (if appropriate) and makes clear that they will be wholly employed on ESF-related activity

• sick or maternity pay can be claimed if it is in line with the organisation’s staff policy or on the individual’s contract of employment. Alternatively, an organisation may claim for replacement staff costs but only if maternity or sick pay is not being claimed

• if an organisation provides their staff with sick pay, they can submit a claim for salary costs for a period of COVID-related self-isolating as per their policy or contract with the employee. If the organisation does not provide sick pay, then Statutory Sick Pay would need to be considered for periods of self-isolation

If a staff member is spending all of their time on ESF activity the organisation should claim actual salary costs for the period they are employed on the project. If a staff member is working full-time but only working part of their time on ESF, then only those hours spent on ESF can be claimed. Direct Staff Costs for individuals working part of their time on an ESF project can only be calculated and claimed by using one of the allowed methodologies set out in the ESF Simplified Cost Options guidance published on GOV.UK.

Fees

This should include any work done by an independent consultant if the work was essential to the project and the costs were reasonable. Costs of independent project evaluations can be included if the work is essential to the project and or a condition of grant. Accounting and audit costs can be claimed if they relate to requirements imposed by the MA. The cost of guarantees provided by a bank or other financial institution to the extent to which the guarantees are required by National or community legislation can be included.

Hire and lease of equipment

Where equipment is used exclusively by ESF participants the actual costs of leasing such equipment, including VAT where this applies is eligible for the period of time covered by ESF activity.

Finance leases: these are similar to hire-purchase agreements. The person who pays to lease the equipment from someone else is responsible not just for maintaining the equipment but also for insurance, repairs and so on. At the end of the lease the equipment becomes their property. The costs of leasing equipment under a finance lease are not eligible. Rather, the item leased should be treated as a fixed asset and depreciated (the loss in its value) in line with the organisation’s accounting policy.

Operating leases: under this type of lease, the equipment remains the property of the person who owns the equipment and leases it out. The costs of operating leases can be claimed if it can be shown that the costs of the lease are competitive and are similar to the rates charged in the market place. However, the leasing charge for equipment (in any one year) must be under £1,000.

Insurance

Insurance of buildings, contents and public liability are eligible provided it can be clearly demonstrated that the cost incurred relates directly to ESF delivery and are an additional insurance cost to the organisation due to delivering ESF support. Professional indemnity is also eligible provided it is essential to the delivery of the ESF project and additional to standard provision that organisations/individuals should hold.

Participant Costs

For employed participants, wages and allowances paid by their employer for the time they spend on ESF funded activity may be claimed; this can include employers’ National Insurance and superannuation contributions. Alternatively, the cost of employing replacement staff to cover for a staff absence on ESF funded activity may be claimed but not both. All costs must have supporting evidence of actual salary and time sheets if appropriate.

For costs relating to external courses, the length of the course, and the cost of travel, board and lodging must be shown. Costs for external courses should be claimed under ‘other costs’.

Costs for caring for children or other dependants should show the net weekly or hourly costs involved, excluding any contributions from participants towards these costs.

In cases where expenditure on items for participants might be perceived to be for non-ESF as well as ESF purposes, projects are able to claim this type of expenditure where appropriate controls are in place. For each purchase projects must keep documentary evidence of:

• the justification for the expenditure
• a signed commitment from the participant confirming that they will use the item(s) exclusively for ESF purposes

The type of items this might apply to may include travel passes, bicycles, work boots and IT devices.

Refreshment costs for participants that are reasonable and evidenced are permitted.

Participant Housing Costs

A major barrier to employment for some participants is the fact that they are homeless or have no fixed address and this can become a barrier that many feel prevents them from increasing their knowledge/skills or searching for work. Where a participant is unable to focus on improving their skills or entering into work due to a housing crisis and only where there is no other help available, ESF is able to help participants overcome this barrier.

There must be robust evidence to show that without this specific type of ESF support the participant would be unable to move towards the labour market or into work and this must also be supported with evidence that there is no other help available from any other source to address this need. In all cases, this must be justified and an integral part of the package of support that is being offered to that individual.

Where support with housing costs are being considered projects must:

• demonstrate that the costs are an integral part of a set of actions that will support a participant to achieve the project’s outcome
• demonstrate that the support contributes to the success of the project
• evidence that there is no other help available from any other source to address this need
• assess each case on its own merits
• be compliant with ESF rules
• have robust evidence to show that without this specific type of ESF support the participant would be unable to move towards the labour market or into work

It is important to remember that in most areas Deposit and Bond Guarantee schemes are run by local councils, authorities or charities and information about these in England can be found on the Shelter website.

ESF should not duplicate existing provision.

Participant allowances

If used as part of the project, participant allowances can be claimed. Although there is no upper limit for the allowances paid to participants, it is important to consider the following:-

• the MA will decide if allowances conform to levels within the locality and if the allowance represents value for money
• allowances may affect the level of benefits a participant is entitled to, this should be discussed beforehand with the local Jobcentre Plus office
• HM Customs and Revenue may regard some allowances as taxable benefits, so it is imperative to check with them before setting the allowance levels
• small incentive/bonus payments or gifts are allowable. These must be small and proportionate. No individual may receive cash or gifts as incentives in excess of £50 per project

Petty Cash

The use of Petty Cash as a vehicle to facilitate low level cash purchases is allowable in ESF project delivery within the following rules:

• no more than £50 may be used on one transaction from petty cash. No deviations from this limit will be allowed
• all expenditure must be receipted – receipts should clearly show the amounts involved and, if necessary, additional documentation should be available to show the nature or reason for the purchase. This should be capable of being linked to a specific individual
• only ESF eligible items may be included in claims

Projects must be able to demonstrate the link between defrayal from the organisations bank account and the petty cash account (that is how and from what source the petty cash account is routinely replenished) and need to show how the petty cash operation is reconciled to the bank account.

Premises

Additional premises costs are only eligible where they demonstrate an actual additional cost and these are fully and directly related to the delivery of the project. Project expenditure should be over and above existing operating costs, for example, if you have to rent/lease additional premises which are wholly used for ESF activity, the rental or lease costs can be claimed as eligible expenditure.

Eligible costs include the actual cost of rent, rates, heat, light, telephone, internet, cleaning and service charges associated with the premises, where it can be clearly demonstrated that these are incurred by the organisation solely for the project.

Notional rental charges where the applicant owns the premises, or occupies premises rent-free, are ineligible.

From 1 February 2020, where projects have incurred cancellation and other costs related to event bookings that cannot go ahead due to local COVID-related restrictions, such costs can be considered as eligible expenditure and will need to be evidenced.

However the following must be taken into account:

• the expenditure will not be considered eligible if there is an insurance contract in place and the project can claim the cost

• if a credit note has been issued, costs are not eligible

• the project should have exhausted all possibilities to claim the expenditure incurred by other means e.g. travel insurance

• if the project can obtain a partial repayment, only the remaining costs are eligible

Projects must provide detailed background information about the circumstances leading to the cancellation of any event where costs are being claimed to help show that such costs were unavoidable.

Small items of equipment

It is recognised that there might be a need to purchase small items of equipment. Accordingly, a list of required small items, with the estimated expenditure, should be included in the application form.

No single item can cost £1,500 or more. There is no set limit to the number of small items of equipment under £1,500 which can be claimed, but the total expenditure on small items of equipment will be taken into account when assessing the project’s value for money, bearing in mind that ESF is not a capital programme.

Where the MA requires an ESF project to purchase specific, mandatory software, the associated costs will be an eligible cost.

Additionally, where items referenced in the project’s application for funding are purchased to address barriers to work for participants with disabilities, for example those items considered a reasonable adjustment or covered by the Equality Act, the associated cost will be eligible. Where the project did not set out the purchase of these items in their application for funding, the project will need to discuss this with the Managing Authority before costs are included within a claim. For the avoidance of doubt, this covers costs associated with participants only.

Staff Training

The costs of training in connection with ESF activity can be claimed, although it is expected that all organisations who submit an application are in a position to deliver the project. Staff training costs can be claimed only if an individual has specific needs for training that could not have been identified before the project began. This needs to relate to the acquiring of specialist knowledge.

Staff Travel and Subsistence (T&S)

Staff travel and subsistence costs must be directly related to and essential for the effective delivery of the project. Actual costs up to a maximum of mileage at the public sector rate per mile (or comparable) or economy class travel on public transport can be claimed. Subsistence that is in line with the employer’s internal T&S policy can be claimed. Evidence to support certified travel and subsistence claims must be retained. More information on mileage rates.

Other Costs

It is not possible to include details of all items that can be classed as eligible expenditure in guidance, therefore provided the project can clearly demonstrate that the expenditure they wish to claim is directly related and essential to the delivery of the project they may include it within a claim. This could include any expenditure related to marketing and publicity of the project and ESF, stationery, teaching materials, postage and other reasonable costs where it can be clearly demonstrated that these are directly related.

Ineligible Expenditure

The following costs are not eligible for ESF support:

• preparation of annual accounts, year-end auditing
• payments to HMRC for the Apprenticeship Levy
• bad debts
• bank charges
• costs involved in winding up a company
• debit interest, charges for financial transactions, foreign exchange commissions and losses and other purely financial expenses
• fines, financial penalties and expenses of litigation
• gifts
• interest on debt
• loan charges
• legal fees
• payments that support activity intended to influence or attempt to influence the UK Parliament, Government, political parties, European Union Institutions, or attempting to influence the awarding or renewal of contracts and grants, or attempting to influence legislative or regulatory action in the United Kingdom or the European Union
• purchase of furniture and vehicles
• purchase of equipment (other than small items of equipment under £1,500)
• purchase of second hand equipment
• purchase of infrastructure
• purchase of land
• purchase of real estate
• redundancy costs if people leave the employment of the organisation at the end of or during the life of the project
• service charges
• Value Added Tax (VAT), except where it is non-recoverable under national VAT legislation
• working from home allowance

This list is not exhaustive. Any queries about the eligibility of costs should be addressed with the MA.

Participant Eligibility

On 31 December 2020 the transition period following the UK’s departure from the European Union will end. European Economic Area (EEA) nationals who arrive in the UK from 1 January 2021 will be subject to new Immigration Rules.

In order to be eligible for ESF support, EEA nationals already in the UK must meet one of the following conditions:

• hold settled status granted under the EU Settlement Scheme (EUSS)
• hold pre-settled status granted under the EUSS

EEA nationals arriving in the UK from the 1st January must hold leave to remain with permission to work granted under the new Points Based Immigration system to be eligible for ESF support.

EEA nationals and their family members who are lawfully resident in the UK by 31 December 2020 (the end of the transition period) but have yet to apply for status under the EUSS, will have their rights protected during the grace period which ends on 30 June 2021 (and until the final determination of any EUSS application made by that date). They will therefore be eligible for ESF support.

Non-EEA nationals who hold leave to enter or leave to remain with a permission to work (including status under the EUSS where they are an eligible family member of an EEA national) are also eligible for ESF support whilst in the UK.

Projects will need to establish the eligibility of participants prior to enrolment. If projects cannot determine an individual’s immigration status, individuals can go to View and prove your immigration status to confirm their immigration status.

Projects seeking further information about the new rules should access the published Home Office guidance.

Some examples showing how an EEA national and an ESF project may be impacted by the new rules are set out below:

Example 1

• an EEA national with EU Settlement Scheme (EUSS) (settlement or pre-settlement) who is currently on an ESF project or about to be enrolled on an ESF project. This person is eligible for ESF support under the new rules

Example 2

• an EEA national with no EUSS status currently on an ESF project or about to be enrolled on an ESF project. Under the new rules, this person is eligible for ESF support, but the participant must apply for EUSS by the 30 June 2021 if they intend to remain in the UK and to remain on the project beyond that date. During this period, they are eligible for ESF support until their application for EUSS is decided. If they are successful, good practice would be to inform the project who should ask for evidence to confirm their status if they are participating on the project beyond 30 June 2021

Example 3

• An EEA national being enrolled on a project from or after 1 January 2021 will need to meet the new requirements by providing evidence they hold either:

  • settled status granted under the EU Settlement Scheme (EUSS) or
  • pre-settled status granted under the EUSS

If the person does not hold either of the above, but is an EEA national, then they are covered by the grace period up to 30 June 2021 as outlined in Example 2 above.

ESF support has no upper age limit. However, ESF support is for individuals who will contribute to the growth of the economy through employment or increased skills levels. It will be the responsibility of projects for ESF support to show that participants meet these criteria.

As an exception to the general rule that ESF is only available to people who can work in the EU, the ESF Operational Programme in 2014-2020 allows additional ESF support for at risk young people from age 15 to prevent them becoming NEET.

Croatian Citizens

Restrictions on Croatian Citizens expired in June 2018. Croatian Citizens are eligible for ESF support, provided they meet the eligibility requirements set out in this document.

Economically inactive

Economically inactive people such as. those who do not satisfy the International Labour Organisation definition of unemployed (available to work and are actively seeking) are eligible for ESF support. It is not a requirement that inactive individuals are in receipt of benefits.

Full Time Students

Full time students are not eligible for YEI support but may be eligible to access ESF provision.

People at risk of redundancy

ESF can support participants at risk of redundancy whether or not they have received notice of redundancy.

Support for ESF participants at risk of redundancy must not involve wage subsidies but may include eligible activities such as retraining, up-skilling, careers advice.

People in prison

ESF is primarily aimed at people who are available to work in the job market. The following eligibility criteria applies to people in custody:

• people sentenced to less than three years can access ESF at any point during their sentence
• people sentenced to more than three years can only access ESF during the last three years of their sentence
• people sentenced to an indeterminate tariff (including life prison sentence and Imprisonment for Public Protection - IPP) must have regular reviews to determine eligibility status based on the likely length of sentence to be served during the lifetime of the programme
• individuals who are on remand are eligible for ESF support. When their status changes their eligibility will be reviewed in the context of the bullet points above

Asylum Seekers

Asylum seekers are individuals who flee their home country and seek international protection in another country. Those who are found to have a well-founded fear of persecution based on race, religion, nationality, membership of a particular social group, or political opinion are granted refugee status. Asylum seekers are not usually eligible for ESF support, but refugees are.

The European Council Directive 2003/9/EC (the ‘Reception Conditions Directive’) lays down minimum standards for the reception of asylum seekers in Member States. It was transposed into UK law through changes to the Immigration Rules, the Asylum Support Regulations 2000 and the Asylum Seekers (Reception Conditions) Regulations 2005. The UK currently remains bound by Directive 2003/9/EC. Article 11 of the Reception Conditions Directive 2003/9/EC covers employment for asylum seekers. It allows Member States to deny access to the labour market for up to 12 months and impose conditions on employment for those who are granted permission to work.

Asylum seekers are allowed to work in the UK if their claim has been outstanding for 12 months or more, through no fault of their own. Following a Supreme Court judgment, the Immigration Rules were amended on 9 September 2010 so that failed asylum seekers whose further submissions have been outstanding for more than 12 months can also apply for permission to work. However, the amended rules also introduced new restrictions on all asylum seekers’ employment rights.

An asylum seeker given permission to work will not be allowed to become self-employed and will only be allowed to take up a job which is included on the list of shortage occupations published by the Home Office.

Asylum seekers who do not have permission to work may be supported through ESF pre-vocational provision which might take the form of:

• initial English for speakers of other languages, other basic skills (literacy, numeracy and IT) where they are not part of provision that is designed to lead to employment
• orientation provision to raise awareness of UK labour market needs asylum seekers’ rights and responsibilities
• provision of information about further education and voluntary work they can take part in
• general advice about life in Britain for those given leave to remain (information about law, culture, housing, welfare, health, educating and employment)
• involvement in voluntary activity

Those individuals whose asylum claim is deemed to be unfounded and have not obtained permission to work may only be supported by ESF in the following circumstances:

• where they have signed up to return home as soon as they can and are taking all reasonable steps to leave the UK and that they meet one of the following criteria

  a. they are unable to leave due to physical impediment to travel or other medical reason

  b. if in the opinion of the Secretary of State, there is no safe route of return for them

  c. if permission has been granted for a Judicial Review

  d. if support is necessary to avoid a breach of ECHR examples.

People with zero hour contracts

A potential ESF participant with a zero-hour contract should not be treated as being employed simply because they have a zero-hours contract. An individual’s employment status for ESF purposes is determined on the basis of whether an individual is in paid employment on the day of joining (the day when eligibility is assessed) the ESF project - regardless of whether or not they have a zero-hours contract.

It is important to ensure that potential participants will benefit from the intervention supported by ESF and that the evidence required to support the decision is available for verification/audit purpose. This is to protect ESF spend and ensure that irregularities do not occur.

For example, an individual with a zero hours’ contract, working 5 days a week doing 8 hours a day would not be eligible to receive ESF support under Priority Axis 1. However, an individual with a zero hours’ contract and who either doesn’t work at all over a period of time or works a minimal number of hours a couple of days a week could potentially be deemed as unemployed and supported by ESF. In these circumstances the project must be confident that all eligibility conditions are met and evidenced.

Please refer to the ESF Output and Results Indicator Definitions Guidance published on GOV.UK.

Self employed

Self-employed people who want to access ESF must be able to show that they are genuinely self-employed and that their business activities are registered with HM Revenue and Customs (HMRC).

Co-Financing Organisations Information

Effective date for expenditure

For Co-financing organisations the effective date for expenditure is generally when their application is selected (approved) into the programme

Retrospection

Exceptions will be made for retrospection back to 1st January 2014 for ESF Co-financing Organisations and may also be agreed by the MA for individual, specific operations:

• Retrospection arrangements will end on 31 January 2016, unless a specific exception to this is agreed by the MA
• all exceptions must be supported by clear, strong, written evidence and agreed by the MA in advance of any payments being made
• each call for applications must include an annex stating whether retrospection does or does not apply to that call, the terms and conditions of any retrospection and the earliest applicable date for retrospection applicable to that call

All cases for retrospection must be subject to:

• the applicant agreeing, in writing, that any expenditure incurred prior to formal selection, is at their own risk and will not necessarily be reimbursed *the applicant and operation meeting all MA retrospection criteria
• the case for retrospection being supported by strong, clear, written evidence and subsequently fully agreed by the MA
• any additional retrospection tests to be carried out by the MA being fully undertaken and passed before payment is made

Administration Costs

Under the Co-Financing Organisation (CFO) framework ESF delivery to participants is undertaken by sub-projects, put in place either by the CFO carrying out their own procurement of sub-contractors or by them running their own, competitive grant award exercise. The CFO may claim the administration costs involved in the procurement/grant award and management of their sub-projects from the MA. CFO administration costs must be based on actual activity and cannot be more than a maximum of 10% of the total declared costs incurred.

The activities below are eligible administration costs:

• Contracting/Competitive Grant Awards
• consulting and publicity events for the prospectus, tendering documents and/or grant competition documents;
• preparing the CFO prospectus, tendering document and/or the competitive grant award equivalents
• handling tenders/grant applications from providers
• negotiations after tenders or grant applications have been received
• financial appraisal
• appraising contract/grant application quality with providers

Administration also covers developing and implementing policy, systems and processes for:

• managing sub-contracted/grant projects
• information management including IT systems
• innovative activity to support ESF delivery
• monitoring the performance of providers
• monitoring the quality of providers
• auditing providers including retention and collation of evidence
• evaluating and researching projects
• publicising the projects
• preparing claims for ESF support
• preparing and submitting ESF monitoring returns
• attending monitoring and committee meetings
• financial management
• training staff on ESF systems and processes

The claim for administration costs must be based on actual costs plus any eligible overheads, be reasonable and represent value for money and supported by evidence.

Staff costs should be supported by:

• a HR letter
• job description
• contract of employment or another contractual document issued by the employer to the employee
• pay scales
• payroll system reports
• any other HR document to identify the actual salary costs for the individual

Staff not employed wholly on ESF may also need to record the time spent on ESF on a time sheet, diary or other recording system as set out in the published Simplified Cost Option guidance.

If a CFO intends to include eligible overheads in their claim they must agree which overheads will be included and the basis on which they will be calculated with the MA. Overhead expenditure must be based on actual costs, related to the implementation of ESF, allocated on a fair and equitable basis and supported by relevant documentation such as invoices.

Records to support the claim for administrative costs need only be kept at an agreement level rather than priority level.

Initial Advance Payments

CFOs may make an initial advance payment to their providers to help ease cash flow. As such advance payments are contractual payments; they can legitimately be claimed by the CFO from the MA in the next claim.

CFO Match Funding

The ESFA, HMPPS, DWP and GLA use the contracted costs of eligible domestic programmes that are delivering similar, eligible activities to ESF to Match fund ESF. The National Lottery Community Fund uses cash Match for its ESF contracts.

Local CFOs are also required to provide Match funding that meets all of the eligibility rules described in this document and all of the other ESF requirements. Since the Match funding is financing part of the cost of the project, it must be integral to the project, its activities and its objectives.

General ESF Information

Delegated Grant Schemes

There are two defrayal models available to new or existing ESF Projects who are operating Delegated Grant Schemes in the ESF 2014-2020 Programme.

Future applicants and existing projects including CFOs should note that these are the only two defrayal options eligible for use in the ESF Programme for Delegated Grant Scheme projects.

Model 1 – Defrayal at the Lowest Level

The published CLLD Accountable Body (AB) Guidance on GOV.UK confirms that, for this specific type of Delegated Grant Scheme, the AB may only claim costs from the ESF Managing Authority when they have evidence that “the local grant recipient has defrayed the expenditure”. If evidence of defrayal cannot be secured the costs will be ineligible for European Social Fund support.

This model is a mandatory model for all Community Led Local Development projects. Under this model, the amount paid by the AB should be supported by a grant claim from the grant recipient that sets out the amount of total expenditure incurred and the amount being claimed from the AB.

The grant claim must be accompanied by evidence that costs have been incurred (copies of invoices/pay roll) and evidence that the grant recipient has defrayed the costs (copies of bank statements). This model is a mandatory model for all CLLD projects. The AB grant claims to the Managing Authority must only include:

• costs that have been defrayed by the local Grant Recipients (GRs) and for which the AB has evidence
• costs defrayed by the local GRs against which the AB has reimbursed ERDF or ESF monies

The AB must have paid ESF to the local grant recipient prior to including costs in its claim to the MA.

This model is also available for use by non-CLLD ESF Projects, including both Direct Bid and CFO Delegated Grant Scheme projects. Where a non-CLLD ESF Project chooses to use this defrayal model, this methodology should be used across the whole of the ESF Project covered by the relevant Funding Agreement/MOU and should be made clear in the project application.

Model 2 – Defrayal at the Accountable Body Level

This model is not available to ESF CLLD projects, but can be adopted by other non-CLLD ESF Delegated Grant Scheme projects, including those operated by ESF CFOs.

Applicants and existing GRs should note that, as this is a higher risk model, the AB is responsible for ensuring they have sufficient, robust and effective control measures in place.

The AB will be required to provide a detailed description of the management and compliance regime they undertake with all of their local grant recipients at the application stage. This will be checked and tested by the ESF Managing Authority as part of the subsequent Project Inception Visit and Article 125 checks on the ESF project. As a minimum, the Accountable Body regime must include the following elements: -

• a clear mechanism for local grant recipients to report their actual, detailed expenditure to the Accountable Body on a regular basis
• confirmation of the person(s) in the Accountable Body who will be responsible for reviewing and checking the accuracy, completeness and eligibility of the local grant recipient expenditure detailed in each report
• a fair, open and random methodology for sampling items of reported expenditure from the local grant recipient, for more detailed evidence checks
• a robust and effective checking process, to obtain relevant and compliant defrayal evidence from the local grant recipient for all sampled expenditure, including who in the Accountable Body will be responsible for undertaking the sample checks – including the frequency of visits to be undertaken to verify local grant recipient delivery
• a clear description of the evidence to be requested from local grant recipients to support expenditure checks, including defrayal

Where errors are discovered in the eligibility of expenditure or the compliance of defrayal evidence, a clear mechanism for the AB to recover the affected funds from the local grant recipient.

Accountable Bodies should note that, under this model, they are wholly responsible for the recovery of funds from their local grant recipients. If errors or omissions are found by the Accountable Body or ESF Managing Authority as a result of the respective checking regimes, then any affected ESF funds paid to the Accountable Body will be subject to recovery by the Self-Declared Adjustment process or via the Irregularities process. Any shortfall in funding encountered by the Accountable Body as a result will be at their own risk, if they cannot in turn recover the funding from the local grant recipient.

Where a non-CLLD ESF Project chooses to use this defrayal model, this methodology should be used across the whole of the ESF Project covered by the relevant FA/MOU and should be made clear in the project application.

Any proposed changes in the model used for an ESF Project must be discussed with the ESF MA in advance, as a formal Project Change Request (PCR) may be required.

Document and Record Retention

As stated in Article 140 of (EU) Regulation 1303/2013 all documents and records relating to the project and its implementation must be retained in an acceptable format, so they can be inspected when necessary.

These must be kept either in the form of the originals, certified true copies of the originals, on commonly accepted data carriers including electronic versions of original documents or documents existing in electronic version only.

Where documents exist in electronic form only, the computer systems used shall meet accepted security standards and can be relied on for audit purposes.

All projects delivered as part of the ESF 2014-2020 Programme must ensure they keep all documents and records for 10 years after their final ESF claim is paid by the ESF MA. This is to ensure documents are made available to the European Commission and European Court of Auditors upon request. Further information can be found in the ESF guidance on document retention published on GOV.UK.

Electronic Data Storage

General Data Protection Regulation (GDPR) requires the ESF MA and all delivery partners who have access to or store or otherwise process personal customer information to adhere to a set of data and security requirements.

For the purposes of the 2014 to 2020 Programme, DWP MA is defined as the Data Controller and any organisation delivering provision on behalf of DWP is defined as the Data Processor.

For Direct Bid organisations, details of the role and responsibilities of the Data Processor and information regarding data storage requirements are contained in the FA with the MA.

For CFOs or Intermediate Bodies (IBs) operating within a Memorandum of Understanding (MOU), details of the role and responsibilities of the Data Processor and information regarding data storage requirements has been provided directly from the MA.

Electronic signatures

The use of electronic signatures on ESF documentation is permissible. Regulations make provision for signature evidence to be held electronically and for “wet” signatures to be digitised. All such documentation should be retained. For the purposes of the ESF programme an electronic signature is the electronic equivalent of a written signature.

Revenue Generating Projects

Article 65 of CPR 1303/2013 relates specifically to revenue generating projects, these are not permitted in the ESF 2014-20 programme. Therefore, Article 65 does not apply to ESF projects.

Verification and Audit

Projects must ensure that a complete audit trail is maintained to demonstrate the effective and compliant implementation of the programme and the eligibility of expenditure declared. All relevant records and documents should be made available on request to facilitate verification and audit.

Documents can be electronic (digital records, records that originate in digital form or hard-copy documents converted into digital form) or paper records (a ‘hard-copy’) that contain relevant information or data.

Verification checks are undertaken by the MA on every project. These could be ‘desk-based’ checks performed remotely from MA offices or involve visits to where records are kept and, if different, where the project activities take place.

National audits are undertaken by the Government Internal Audit Agency (GIAA) being the designated programme Audit Authority for the EU Structural Funds programmes. These audits involve visits to where records are kept and, if different, where the project activities take place. Audits may also be undertaken by the European Commission.