Appendix D: Standard Section 31 grant conditions for major local transport schemes

This document is intended to show the terms and conditions typically applied to Section 31 Grants for Major Local Transport Schemes. The terms and conditions applied to individual grants may vary.

Definitions

In this annex:

• “Secretary of State” means the Secretary of State for Transport.
• “Department” means the Secretary of State acting by or through staff employed at the Department for Transport.
• “Authority” means an authority listed in Annex A.  
• “Scheme” means [name of scheme] as approved by the Secretary of State.
• “Chief Finance Officer” means the most senior officer in an Authority responsible for its financial management, i.e. the officer appointed under s151 of the Local Government Act 1972.
• “Scheme Contractor(s)” means the company or Authority responsible for the build and overall delivery of the Scheme.
• “Project” means the process from initial design and construction to the Completion of the Scheme.
• “Completion” means the date on which the Scheme is fully brought into public use.
• “Grant Conditions” means the terms and conditions set out in this Annex B.
• "Auditor certification" means certification of the Scheme at the end of the [2007-2008] financial year.  Certification must be by an auditor appointed by the Audit Commission.

Grant terms and conditions

General

The Section 31 grant award described in this determination is solely in respect of the Scheme and is awarded to the relevant Authority.

This award shall not be used for any other scheme or project, nor shall it be transferable to any other person or authority.  Where more than one Authority is progressing the scheme in partnership, one Authority may include in their claims expenditure incurred by the other Authorities and subsequently forward to the latter their share of grant as appropriate.

Section 31 grant is payable quarterly in arrears, based on expenditure lawfully incurred by the Authority. The Authority should note that Section 31 grant claims are therefore made on an accruals basis as set out in “The Code of Practice on Local Authority Accounting in the United Kingdom: A Statement of Recommended Practice” (SORP) issued by the Chartered Institute of Public Finance and Accountancy (CIPFA). 

For the avoidance of doubt this means the Authority will not claim in advance of work having been undertaken but may claim on the basis of work done but not paid for.

The Authority should only include costs directly attributable to bringing the tangible fixed asset into working condition for its intended use, such as:

• costs of transport;
• installation;
• commissioning;
• consultants’ fees and labour costs of own employees arising directly from the construction;
• eligible preparatory costs as defined by the guidance to local authorities seeking funding for major transport schemes; or
• acquisition of the specific tangible fixed asset in accordance with the SORP.

The SORP defines costs which may be properly charged to capital and is fully compliant with the conditions stipulated in Financial Reporting Standard (FRS) 15. Capitalisation of directly attributable costs should cease when substantially all the activities that are necessary to get the tangible fixed asset ready for use are complete, even if the asset has not yet been brought into use. A tangible fixed asset is ready for use when its physical construction is complete.

Scheme costs should not include any revenue costs. Scheme costs should not include VAT, as VAT on local authority expenditure is reclaimable. Nor should the Authority’s fees as agent to the Department, or auditors' fees or administration and other general overhead costs be capitalised. There may be circumstances in which the Authority will determine it is more appropriate to charge particular costs to revenue. In all circumstances it is for the Authority with its advisers to come to decisions on how to account correctly for the relevant expenditure.

The Department shall be kept fully informed in writing of any alterations / problems arising with the process of the build of the Scheme and where these are identified they shall be reported to the Department within 28 days of them arising. Ministers reserve the right to reconsider scheme approval decisions and any award of Section 31 grant as a result of any alterations or problems with the Scheme, or if full notification is not received within the 28 day period.

Continuing approval and an award of Section 31 grant under this determination is made:

• entirely without prejudice to any view that the Secretary of State may take on any future application for Transport and Works Act 1992, or other, planning powers or in accordance with any of the other functions the Secretary of State may be called upon to exercise;
• solely in respect of the Scheme, based upon the evidence submitted;
• entirely without prejudice to the requirements of any statutory process that may develop during detailed design and build and which may lead to any significant changes in Scheme design that could affect the appraisal case;
• entirely without prejudice to any additional action by the Authority which leads to any significant changes in Scheme design, which could affect the appraisal case;
• on the basis that there is no request by the Authority for increased central government contributions;
• on the basis that there is no gross cost increase that could affect the appraisal case;
• on the basis that all information requested of the Authority is provided within 30 days of request; and
• on the basis that the unified reporting and claim form sent quarterly by the Department is submitted on a quarterly basis whether or not a claim for grant is being made. Failure to comply with this condition h), such that it is unclear to the Department if grant is still required, may result in some or all of the grant allocated for the Scheme for [2007-2008] being reallocated elsewhere. The Department also reserves the right to adjust the level of grant awarded for the Scheme for [2007-2008] following a review of the information supplied in the unified reporting and claim form.

The Authority will ensure that all its promotional signage, advertising, marketing information, publications, leaflets and press releases about the Scheme, whether created prior to construction, during construction or after Completion of the Scheme, shall give due acknowledgement to the Department for providing part (or all) of the funding for the Project. The phrase "Part (or wholly) funded by the Department for Transport,” or such similar other wording as the Secretary of State may require, should be used. Where appropriate, the Authority is also required to use the branding requirements of the Cabinet Office initiatives of “Building for the Future” and the “Considerate Contractor” scheme.

During build

The Authority will notify the Secretary of State, via Departmental officials, in writing within 28 days of any of the following:

• a material change in the facts advanced in support of the application for grant occurring at any stage before the Scheme is brought into use;
• any change in the route/overall design of the Scheme; or
• any increase of the estimated cost for the build of the Scheme.

Following completion of build

The Authority will notify the Secretary of State, via Departmental officials, in writing within 28 days of any delay of a period of 28 days or longer in bringing the Scheme or parts of it into use.

The Authority will be responsible for maintaining full records of all capital expenditure on the Project, together with all related correspondence and other documents, including invoices. These records will be maintained for a minimum period of 6 years after the final award of grant under this determination. Record keeping by document imaging will be acceptable.

The Department reserves the right for it or its representatives to conduct onsite reviews during construction of the Scheme, and for a period not exceeding 6 years after Completion, to review relevant documentation held by the Authority.

The Authority will maintain full statistical records, in such format and such detail as the Secretary of State may from time to time require, for a period of no less than 10 years following Completion of the Scheme. These requirements are likely to include data on the patronage, modal shift and increase in revenue for the systems supported by the Department.

The Authority will monitor, in such terms and for such period as may be required by the Secretary of State, the effect of the Scheme on factors which have been put forward in the application for grant (e.g. regeneration).

The Authority will, within 28 days of receipt of a notice in writing from the Secretary of State, allow any person authorised by the Secretary of State access to any records held by the Authority that relate to the Project and/or this determination in order to inspect and take such copies of such records as the Secretary of State may reasonably require.

For a period of 10 years following Completion the Authority will notify the Secretary of State in writing of any discontinuance of use of all or a part of the Scheme which will or is expected to last for a period of more than six weeks. In relation to planned activity the Authority must notify the Secretary of State in writing 28 days before the discontinuance commences. In relation to unforeseen events the Authority must notify the Secretary of State in writing within 28 days of commencement of the discontinuance.

Arrangements for claiming grant

Claims for grant payable shall be made in accordance with the following arrangements, or other such arrangements as may from time to time be required by the Secretary of State and notified in writing to the Chief Finance Officer.

Payment of grant will be made quarterly in arrears against certification, by the Chief Finance Officer, that expenditure has been correctly incurred in accordance with the Grant Conditions. Claims will be made by completing the unified reporting and claim form sent quarterly by the Department to the Authority.  Claims must be submitted by the claim deadline for each quarter as set out in Table 1 below.  The Department will make payments by the payment date for each quarter as set out in Table 1. 

Table 1

	Quarter 1 (Apr-June 2007)	Quarter 2 (July-Sept 2007)	Quarter 3 (Oct-Dec 2007)	Quarter 4 (Jan-Mar 2008)
Claim deadline	Last Friday of July	Last Friday of September	Last Friday of January	Last Friday of April
Payment date	First week of September	First week of November	First week of March	First week of June

 

Claims received after the claim deadline for any quarter will not be paid until the subsequent payment date.  The Authority will be liable for any costs incurred through late payment of claims as a result of missing claim deadlines.

 Within six months of the end of the [2007-2008] financial year, the Authority must submit its annual claim to an auditor appointed by the Audit Commission for Auditor certification. For the final claim for any scheme authorities are required to submit this to an auditor appointed by the audit commission for audit certification within six months of completion. The final payment of grant will only be met on receipt by the Department of the auditor’s certificate.

Cessation, suspension and repayment of grant

If at any time it appears to the Department that there has, or may have,  been any failure by the Authority to observe any of the Grant Conditions, the Secretary of State shall be entitled to cease or suspend payment of Section 31 grant. This will include circumstances where any statement made or document produced by the Authority in support of the grant application is found to be false or incorrect in any material particular. Notice of the cessation or suspension of grant payment will be provided in writing to the Authority.

In circumstances envisaged by the previous paragraph, the Secretary of State further by notice shall be entitled to require the repayment of all or part of the grant already awarded. The Authority undertakes, as a condition of this grant award, to make such repayment of grant as may be specified in a notice from the Secretary of State within 28 days of the date of such notice or within such longer period as the Secretary of State may in writing determine.

In instances where costs have been incorrectly capitalised the Department shall be entitled to require the repayment of the grant paid in respect of such costs.

Recovery of over-claimed grant (and, if applicable, interest thereon) under the previous paragraph will normally be achieved through a reduction of grant paid in respect of future claims including the final claim submitted by the Authority. Where this is not appropriate or possible, recovery may be required through other means (including repayment of grant by the Authority or reduction of payments of other grants to which the Authority is entitled such as Integrated Transport funding).

The Authority is required to ensure that the Scheme continues to operate for a period of no less than 10 years from Completion.  Modification of any element of the Scheme will only be permitted with the written consent of the Secretary of State.  Failure to comply with this requirement may result in the reduction of payments of other grants to which the Authority is entitled commensurate with the cost of the element, or elements, of the Scheme that are no longer in operation.