Download MIDDLESBROUGH COUNCIL Youth Employment Initiative

MIDDLESBROUGH COUNCIL
Youth Employment Initiative (YEI)
Appendix 1 (LMT) Risk assessment
1.
KEY BACKGROUND INFORMATION
1.1
There will be a dedicated YEI Project Team recruited who will be accountable for
the overall contractual compliance of the programmes.
1.2
In Middlesbrough the project management will be incorporated into the structure of
the Middlesbrough Community Learning service (MCL) who have just completed a
very similar project and have the staffing resource to coordinate this type of
activity. MCL are one of the larger delivery partners in Middlesbrough and have
a vested interest in ensuring that the outputs for the town are met.
1.3
Service level agreements will be compiled for each delivery partner to effectively
manage their finances, maintaining evidence and ensuring robust control systems.
The project outputs and performance will be reported through the Learning and
Skills department with updates to the Executive members for Education and skills
and Communities and Public Health.
2.
YEI FINANCE
2.1
The YEI is not payment-on-results but instead a ‘payment on actual expenditure
incurred’, with the Managing Authority providing funding in arrears on a quarterly
basis. This payment method will be mirrored to Delivery Partners and outlined
within their Service Level Agreements (SLA) which reduces the financial risk on
the five Local Authorities. Evidence will be required for all expenditure incurred
before it is claimed and payments will only be made to partners when the funding
is received by Hartlepool Borough Council.
2.2
DWP will also retain 10% of the grant funding until the project closes and all
evidence is verified which will reduce the risk of future claw-back.
2.3
It is worth noting that all Delivery Partners have confirmed that they:

Have the financial capability to deliver their activities prior to being paid in
arrears.

Have the full match contribution.
2.4
Hartlepool Borough Council has completed due diligence checks on all Delivery
Partners and will feedback to each Local Authority if any concerns arise.
2.5
In relation to the YEI Project Team, each of the Local Authorities have committed
£40k of match funding for the Contract Officer and Admin Assistants posts with:
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2.6

Darlington, Redcar and Stockton each employing 1 X Contract Officer and 1 X
Admin Assistant.

Hartlepool employing 2 X Contract Officers and 2 x Admin Assistants (with
Middlesbrough having requested that Hartlepool employ their posts).
Each of the Local Authorities are fully aware that redundancy costs cannot be
charged against the YEI Project and that these costs will be met from their own
budgets.
Match Funding Contributions
2.7
The project delivery allocation for Middlesbrough is £4,523,143.00. This means
that with a 25% match commitment the joint town partnership would need a match
contribution of £1.2m either in cash or in-kind staff time. Each of the providers in
paragraph 8.8 have agreed their 25% match funding commitment.
2.8
Middlesbrough Council’s match contribution of £362,659 is being fully met from the
following existing service budgets:
Stronger Families are providing in-kind staffing match of £293,547 and a
cash match of £30,000. Middlesbrough Community Learning is providing a
cash match of £39,112 to pay 25% of salaries for Middlesbrough Contract
Officer and Admin assistant.
3.
RISK ASSESSMENT
3.1
The current draft Risk Sharing agreement is attached as an annex 1 to this report.
All the Tees Valley legal teams are currently working on the final detailed aspect of
the agreements.
3.2
Hartlepool Borough Council; as Lead Accountable Body, will be required to sign
the Offer Letter/Contract for the project. The standard Offer Letter/Contract will
contain clawback conditions and DWP may require repayment of any grant
funding already drawn down by the Council if, in the opinion of the Managing
Authority, Hartlepool Borough Council has failed to comply with the terms and
conditions of the Offer Letter/Contract. The primary risks are the inability of
delivery partners to meet their outcome targets and clawback due to non
compliance.
3.3
In the first instance, where clawback does arise, Hartlepool Borough Council will
then seek to clawback the grant funding from the relevant Delivery Partner(s).
3.4
However, if Hartlepool Borough Council is unable to clawback funding from the
relevant partner(s) then the five Tees Valley Local Authorities benefitting from YEI
have agreed to share the risk. It should be noted that the maximum clawback
from the ESF Train to Gain project was just over 2%.
In the most recent
Workskills project there has been no clawback to date and this project is very
similar to the YEI.
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3.5
Prior to signing the contract from DWP, Hartlepool Borough Council will ensure
that each Local Authority has signed a Risk Sharing Agreement which will outline
their full financial responsibility in relation to the YEI project. This agreement is
has been developed from a meeting attended by all LA finance reps and is
currently with the legal team at Hartlepool.
4.
4.1
RISKS (MIDDLESBROUGH)
The proposal in this report seeks to develop a partnership of skills providers who
are able to provide relevant skills/mentoring support for young people in the area.
In paragraph 8.4 the overall project value for Middlesbrough is £5,684m. This is
the project value which has to be earned on a payment by expenditure model
which is a low risk approach to earning the full contract value. However, there
remain some risks to the success of the project, which are highlighted below.
a) Financial – Paragraph 10 highlights the financial risk in the form of match
funding. The council would be committed to provide £362,659 of match funding
over the lifetime of the project. £69k is a cash contribution with the remainder as
staff time contributions. Paragraph 10 indicates a risk involving the 2 staff
attached to Middlesbrough in that they would have project close down costs.
b) ESF Clawback from the DWP due to non compliance. Based on the Train to
Gain project Clawback a 2% impact would equate to £443k for the whole
partnership and £88,600 for Middlesbrough.
c) Outcome management – the risk of not achieving partnership outcomes. The
robust project management and previous history with similar projects does
negate this risk. In the previous 2 ESF projects it was common for partners to
over deliver on outputs. The project steering group will re-direct resources if
needed to meet the overall YEI outputs. Within this risk is the very real issue of
potential non compliance and therefore withheld payments. This has been
addressed with a rigorous approach to project management and regular audit
checks.
d) Partnership management – This is a multi partner project and as such has a
risk against the councils reputation if the partnership was to fail. The staff
involved in this project are very experienced at managing multi faceted
partnerships for European outcomes and have been very successful on previous
occasions.
e) Political – Not supporting this project could very well damage the council’s
reputation with the neighbouring authorities as they are all dependant on each
other supporting the project.
In summary the realistic overall financial risk of delivering this project will be in
the region of £0 - £450k.
This figure includes the commitment for match
funding, Clawback and 6k redundancy estimate.
4.2
Delivery Risks to the Community Learning Service
The two primary risks are not achieving the KPI’s and the potential of clawback
due to non compliance. If the Service didn’t achieve its KPI’s it would not get
paid for the activity. The Service has considerable experience in this type of
project and ESF management. This will mitigate the likelihood of clawback to a
minimum. The Service will maintain 10% income contingency fund for the
duration of the project.
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