Greater Manchester Centre for Voluntary Organisation

European Social Fund (ESF) State Aid Guidance 2016

The Department of Work and Pensions (DWP) this month, November 2016, issued guidance on State Aid as part of the European Social Fund (ESF).

The full guidance can be downloaded by following the embedded link at the end of this article but here are highlights of the document that are particularly relevant to VCSE organisations.

State Aid - A quick definition

Guidance provides a definition of State Aid as, funding or aid put towards organisational activity which provides “[an] advantage compared to other [organisations] and can distort competition”.

A crude understanding of State Aid is that funding should not support or subsidise the operational costs of an organisation or enterprise but this definition is open to interpretation and exemption.

State Aid – A word of caution

Aid or funding that is classed as “State Aid” is very broad. State Aid: The Basics Guide (Dept. Business Innovation & Skills (BIS) – July 2015) includes a flow-chart of questions for organisations to ask themselves to understand if they receive State Aid. BIS recommends that organisations familiarise themselves with State Aid rules before paying out any money and where possible redesign projects or take “a well-trodden path” of project delivery so as not to stray into State Aid.

State Aid is very complicated and it is recommended that organisations use the resources included on this page and within the Basic Guide (p.10) to stay up to speed with State Aid regulations. Also, use the contact details on page 10 of the State Aid Basic Guide for further specialist support.

State Aid - The De Minimis Regulation

Section 2 of the DWP’s Guidance (pp.2-3) outlines the rules and principles of the De Minimis Regulation.

What does de minimis mean?

De Minimis: meaning a "trifling" matter or something of limited or little importance.

The De Minimis principle defines when the burden of justifying or evidencing authorities, in the UK for ESF the DWP, of activity is reduced because the work, time and money required to fully investigate activity would exceed the work, time and money put into the activity itself.
For example, you wouldn’t call the police to investigate where your missing £5 note went (did you check the sofa?).

The De Minimis Regulation in State Aid for ESF.

Guidance allows “enterprise[s] to receive up to £178,000 (converted) in aid across three fiscal years” (p.2).

To be eligible for the De Minimis Regulation the DWP has outlined standards that funded organisations will need to meet. These include:

• Detailed records of any de minimis aid received, filed for ten years;
• Participation in initial verification meetings to ensure that Regulation rules are understood;
• A suitably robust monitoring system within the organisation so that the DWP can get an accurate picture of what funds the organisation has received. A full overview of monitoring requirements can be found at the top of page three within the State Aid Guidance.

General Block Exemption Regulation (GBER)

Section three of guidance outlines the GBER. As a quick summary of this section the GBER includes:

• Aid to individuals is NOT included under State Aid. So most activity under ESF Priority Axis 1 (Inclusive Labour Markets) would not count as State Aid;
• Not-for-profit, voluntary, charitable and cultural organisations would not fall within State Aid rules so long as the organisations are not involved in “economic activity” (DWP have included a definition of “economic activity” on p.4);
• Some elements of Priority Axis 2 (Skills for Growth) are also exempt from State Aid regulations. Funding that is not retained by the funded provider organisation would not be included with State Aid. This is known as “flow through”; all aid/funding goes towards an individual so the organisation receiving the money gains no financial benefit.

Rules of State Aid for ESF apply to activity from 1st March 2016 onwards and cannot be applied retrospectively.

Further and full details are within the Guidance on State for ESF found here. Also, carefully read through ERDF State Aid guidance to add to your knowledge.

Are the guidance documents outlining State Aid useful?

Are there any elements that you would like to be explained further?

Get in touch with GMCVO for support as well as to give us your feedback.