1. General Principles
1.1 The EC Authority for the LEADER lies in the Rural Development Regulation ( EC) no 1698/2005. Authority has been given via the Scotland Rural Development Programme to use European Agriculture Fund for Rural Development ( EAFRD) monies for Axis IV of the regulation to fund the LEADER approach to rural development in Scotland.
1.2 Scottish Statutory Instrument No 2008/66, The LEADER Grants (Scotland) Regulations 2008 gave effect to LEADER.
http://www.opsi.gov.uk/legislation/scotland/ssi2008/ssi_20080066_en_1
1.3 This Statutory Instrument sets out the principal rules for LEADER and enables the Scottish Ministers to:
- Give financial assistance to Local Action Groups towards eligible expenditure subject to overall limits which restrict the amount of financial assistance payable and the circumstances in which it may be paid;
- Permits Local Action Groups to pay LEADER grant in support of projects.
- Specify the way in which the financial assistance can be claimed by the LAG and what information should support each claim;
- Revoke approval, reduce, withhold or recover financial assistance in certain circumstances;
- Explain the meaning of certain terms as they relate to LEADER, eg eligible applicant, beneficiary, etc.
1.4 The Statutory Instrument provides for an agreed financial ceiling to be paid to each selected Local Action Group.
1.5 The Statutory Instrument is the source from which the administrative arrangements for LEADER are derived. They must be referred to in any case of doubt about the interpretation of the rules and must be read as a whole in context.
1.6 This guidance should also be read in conjunction with the following regulations. It should be borne in mind that the regulations take precedence over the guidance document. There are new rules in this guidance and the Leader+ guidance should NOT be used.
Regulation ( EC) 1698/2005
Implementing Regulation ( EC) 1974/2006
Control Regulation ( EC) 1975/2006
State Aid to SMEs 70/2001
State aid to Agriculture products 1857/2006
State Aid De Minimis 1998/2006
State Aid regional Aid 1628/2006
1.7 As a general rule Action 1 projects receiving financial support from LEADER under the SRDP should be located in the LAG area. In exceptional circumstances, where the project would have difficulty achieving its objectives, the project level activity may be eligible outside the LAG area.
Action 2 projects may be located in Scotland - inter territorial where two or more LAGs in Scotland are involved; Action 2 transregional projects involve co-operation with other LAGs in the UK; and Action 2 transnational projects involve co-operation with other LAGs in Europe.
1.8 The LEADER contribution should be the minimum amount required to allow the project to proceed. LEADER funding is the last brick in the wall and requires all match funding to be in place prior to approval.
1.9 Evidence of match funding must be provided prior to the issue of the final approval letter offering LEADER grant. Examples of this are committee minutes, budgets, offers of grant from funders, bank statements, etc. An indication of potential LEADER grant may be issued prior to this to encourage and secure match funding however all funding must be in place before the LEADER grant is approved. If match funding has not been finalised approval can be given subject to confirmation but no work can be started until the LAG is satisfied that all funding is in place.
1.10 Proof of expenditure - All payments must be supported by a fully transparent audit trail including transaction lists traceable through bank statements or such other verifiable means. Receipted invoices vouching individual items of expenditure are ideal. Where this cannot be done, payments must be supported by cleared, or other accounting documents of equivalent probative value. For example salaries might be supported through payroll records, BACS lists and bank statements. All applicants are under an obligation to maintain a properly vouched audit trail of payments. All expenditure must be incurred (with the exceptions above) and defrayed (ie left the bank account) before it is included in a claim.
Documents must be retained by the LAG for a period of 3 years following final payment of the final balance of funds by the European Commission to the Scottish Government as Managing Authority. This probably means 2019 at the earliest. Beneficiaries must retain documentary proof for a period of 5 years after the last claim has been paid.
1.11 VAT which is recoverable by whatever means is ineligible. Irrecoverable VAT can be claimed as an eligible cost provided the claim is substantiated by an appropriate VAT declaration statement or evidence from the applicants Accountants. Beneficiaries not registered for VAT are able to claim the VAT element incurred in delivering a project.
1.12 Responsibility of the Applicant - All applicants are responsible for ensuring:
- The projects sound financial management.
- The implementation, reporting, monitoring and control of the project, and specifically for ensuring no double funding for the approved activity.
- The availability and retention of all project documentation with a clear audit trail through to bank statements.
1.13 Additional Responsibilities of Lead Applicant. Where there is a partnership project a lead applicant will be appointed by the group. The lead applicant is responsible for ensuring:
- A clear relationship between partners in the project including arrangements for payments and monitoring
- That all expenditure presented by and declared on behalf of the partners in the project has been incurred and defrayed for the purpose of implementing the project, and that it has met all the other rules with regard to LEADER
- Provision by other partners in the event of any request for information etc. by the Scottish Government as Managing Authority or its agents.
1.14 State Aids - Projects must comply with the prevailing State Aid Rules. See appendix E.
1.15 Project Income - Accounting Treatment of receipts. Projects are intended to be sustainable and this will inevitably mean that some "profit" is generated and retained for the future running of the project. This is acceptable where the "profits" will be spent on community benefits - either through the continuing project itself or on some other project which benefits the same community. LAGs should make themselves happy with future proposals for profits generated by a project.
What is not acceptable would be the situation where the profit is retained and used to offset the beneficiary contribution/match funding element of the project. If this were to happen then the income generated and retained during a project's life from, for example, sales, rentals, services, or other equivalent receipts representing income, which might reduce the net cost of projects and thereby the amount of LEADER funding required for the project in question, would be deducted from the project's eligible expenditure and no later than at the final claim stage. There are powers to recover money with interest if necessary.
1.16 Winding Up - In the event of an applicant community proving insolvent (or prospect of) the Managing Authority should be advised as soon as possible. Filed copies of project documents should be retained. On no account should documents be destroyed without the prior consent of the Managing Authority.