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Memorandum relating to capital grants for other risk management authorities in England (2020)

Memorandum relating to capital grants for risk management authorities in England (Authorities) under the Flood and Water Management Act 2010.

This grant memorandum provides guidance on applying for capital grants for flood and coastal erosion risk management projects and sets out the conditions that apply to such grants. This grant memorandum applies to projects securing Outline Business Case approval after 26 June 2020.

1. Introduction

We (the Environment Agency) provide capital grants to other risk management authorities (Authorities) under section 16 of the Flood and Water Act Management Act 2010. This grant memorandum applies to flood and coastal erosion projects which secure Outline Business Case approval after 26 June 2020. Projects which reach that stage on or before 26 June 2020 should follow the grant memorandum in force at the time the Outline Business Case was approved.

This memorandum explains the processes Authorities should follow when applying for capital grants. It also sets out conditions upon which we provide capital grants and that you must comply with. The terms of this grant memorandum are consistent with arrangements for capital grants made by government. Local authorities can also make applications on behalf of communities or private organisations.

We aim to treat everyone applying for capital grants fairly and at the same time try to make sure that government outcomes are delivered. Many of the principles set out in this grant memorandum are the same as those in earlier memoranda, but the amount of capital grant for projects depends on Defra’s partnership funding policy applicable to projects securing Outline Business Case approval after 26 June 2020.

All the capital grant we provide is bid-based and funded from government grant in aid. We may also make grants for projects out of local levy monies we have raised from Lead Local Flood Authorities, provided we have the consent of the relevant Regional Flood and Coastal Committee (RFCC) to spend local levy in this way.

Under Department for Levelling Up, Housing and Communities (DLUHC) rules (previously MHCLG), a local authority receiving grant funded by central government has flexibility as to how such grants are spent. In practice, we award capital grants to approved projects and release the money as the project progresses. The methods for paying capital grants will stay the same as those that Authorities are familiar with from earlier grant memoranda. Most of the requirements set out in this grant memorandum apply to both flood risk management and coastal erosion risk management projects. There are differences with:

  • Coast protection: (including Coast Protection Act 1949)
  • Other FCERM: (including Land Drainage Act 1991)

1.1 Definitions

In this grant memorandum certain words have the following meanings:

“Authority” means an English risk management authority other than the Environment Agency, such as district, metropolitan district and county councils, unitary authorities, Internal Drainage Boards (IDBs), London boroughs, Highways Authorities and water companies.

“Capital grant” means a grant for capital expenditure on a project undertaken by an Authority and provided by us under section 16 of the Flood and Water Management Act 2010 on the conditions set out in this grant memorandum and the forms listed in this document.

FCERM” means flood and coastal erosion risk management and includes the management of the shoreline on the seaward side of boundaries. It also includes management of all forms of flooding other than sewer flooding caused otherwise than by increased rainwater and flooding caused by burst water mains. This includes flooding by the sea and water-level management in land benefiting from watercourses in the care and control of an authority.

“Outcome” means an FCERM benefit delivered by a project (for example, properties better protected from flooding or new habitats created). Defra’s partnership funding policy provides a tariff (payment) for each outcome delivered.

“Project” means a scheme, strategy or study.

“Scheme” means a proposal for constructing altering or improving works to manage a risk of flooding or coastal erosion in England.

“Strategy” means a strategic appraisal of options to manage risk where there are credible options to investigate that may reduce complex flood or coastal erosion risks across several interconnected areas.

“Study” means an investigation into an FCERM problem and appraisal of potential solutions or an investigation into the environmental effects of FCERM on an area that has a statutory environmental designation.

“you” and “your” means the Authority applying for or in receipt of a capital grant (as the case may be).
“we”, “us” and “our” means the Environment Agency.

We may pass information you provide to us to other people or organisations or third parties under the Freedom of Information Act 2000 and Environmental Information Regulations 2004.

2. How to apply for capital grant

The National Flood and Coastal Erosion Risk Management Strategy for England sets a framework for FCERM which aims to reflect both national and local priorities. It sets out our Vision for a nation ready for, and resilient to, flooding and coastal change as well as 3 ambitions for:

  1. climate resilient places.
  2. today’s growth and infrastructure resilient in tomorrow’s climate.
  3. a nation ready to respond and adapt to flooding and coastal change.

Continued investment in projects is crucial to achieving this. projects are identified for all Authorities through the capital investment programme. We carry out an annual refresh of the capital investment programme inviting Authorities to confirm present projects they wish to be considered for capital grant allocation. Following the review, we update the list of projects that are eligible for a capital grant.

You can then make a formal application to have a listed project approved. Applications must be made by completing form FCERM 2 (Schemes) or form FCERM 7 (studies and strategies) and sending it, together with all relevant supporting information (such as the Business Case or Short Form Business Case), to our Flood and Coastal Risk Manager in your local area.

2.1 Coast protection

For coast protection projects applications must be made by completing forms CPA 1 and CPA 2.

3. What capital grants can be used for

We can provide funding for projects intended to manage coastal erosion or flooding from any source other than sewer flooding (unless caused by increased rainwater) and flooding caused by burst water mains. This includes surface water flooding, groundwater flooding and property flood resilience projects.

DLUHC rules mean that grants to local authorities cannot be specific to a particular function. However, because of their nature and cost, projects must be bid for. We will only provide capital grants in response to a bid to investigate and deal with a flood or coastal erosion problem in line with Defra’s updated partnership funding policy and the National Flood and Coastal Erosion Risk Management Strategy for England.

Formally capital grant is only due once you have successfully completed your project. However, because of the general scale of the projects, we can make interim payments of capital grant as the project progresses. If you do not deliver your project, it will no longer be eligible for capital grant funding as no capital asset has been created.

When you apply for capital grant, you must show how any capital assets constructed, altered or improved by your project will be properly maintained. If you fail to maintain the project for its planned lifecycle, we may take this into account when assessing any future application for capital grant.

3.1 Studies and strategies

Capital grant is available towards funding studies. You can use a study to investigate a FCERM problem and appraise potential solutions or investigate the environmental effects of FCERM on an area that has a statutory environmental designation. A typical study will define the problem, identify a range of potential solutions and undertake a technical, environmental and economic appraisal to determine the outline design of an optimum solution that can be developed into a capital scheme.

The study will also demonstrate that the solution has outline planning approval, define the most appropriate procurement strategy for delivering the solution and provide an assessment of the risks, dependencies and constraints. To help you investigate a problem, we have decided to fund, as the study or strategy progresses, 100% of the costs. If we approve funding for a scheme resulting from a study, we will use the whole cost, including the cost of the study, to decide the amount of capital grant.

If the study does not result in a Scheme, you may need to consider how you account for the capital grant under the DLUHC capital rules.

You must send details of the scope of the study to us using form FCERM 7 and we must approve them before you begin your study. The FCERM 7 form should set out your initial assessment including:

  • what you want to study, including the geographic area of the study the objectives of the study
  • how you plan to achieve these objectives
  • how the Study links to catchment flood management plans (CFMPs), shoreline management plans (SMPs) and local flood risk management strategy and is consistent with the National Flood and Coastal Erosion Risk Management Strategy for England
  • a schedule of the main parts of the study and their estimated costs
  • an outline schedule for completion, showing how long you expect the Study to take. You must meet the following conditions:
    • you must complete the study and publish the findings
    • your study report must identify problems and reach conclusions
    • you must make the results of the study available to other Authorities

If the scope of the study shows that any emerging Scheme may need extensive investment over more than five years or involve long lengths of river, estuary or coastline or complex sources of flood risk which affect each other, you should consider a study to prepare a strategy, complete with a strategic environmental assessment (SEA) environmental report, for approval by us. If you prepare a strategy, the principles set out in paragraphs 3.4 and 3.5 shall apply as they do to studies.

We do not specify the format of the study report, but we strongly recommend that it follows the 5-case model format as defined by HM Treasury. Presenting the study in this format will reduce the work involved in developing a Scheme Outline Business Case. The format of a strategy should follow the Strategy Appraisal Report (StAR) template available from your local Environment Agency contact.

3.2 Schemes

Capital grant is available towards Schemes for capital spending that have been approved for improving existing or constructing new, flood or coastal erosion risk management and water level management works. Within this category, capital grant is available for a Scheme, whether it is recommended by an approved study.

Capital grant is also available for:

  • an estuary or beach-management project (recharging, replenishing, recycling and monitoring), as long as it is part of an agreed long-term beach-management plan
  • a project designed to manage water levels for various reasons, including environmental benefits, which may also support surface irrigation through increased water levels. We will give priority to a project in sites of international and national conservation importance (note: We will not give a capital grant for a project where the main objective is spray irrigation or water supply)
  • purchasing land for habitat compensation to allow Schemes to meet obligations under the Conservation of Habitats and Species Regulations 2017

4. The criteria for capital grant

We assess projects based on the outcomes proposed to be delivered and the costs and benefits. We decide which projects to priorities’ and approve capital grant for on this basis. We decide the amount of capital grant by looking at the costs of the project and cap it at the amount set by the partnership funding tariff associated with the outcomes proposed to be delivered.

Allocations to schemes, the partnership funding contributions, outcome measures Schemes should contribute towards and the efficiency savings required will be in line with Defra’s partnership funding policy for the 2021 to 2027 FCERM programme.

You must follow these requirements in developing and implementing projects, for example taking into account any efficiency savings released in order to meet the efficiency requirements before claiming contingency for a project.

When considering a capital grant application, we will assess the following:

  • has the problem been correctly identified and validated with historic evidence?
  • has the full range of options been the subject of a proportionate technical, environmental and economic appraisal?
  • has the preferred option been selected in accordance with the FCERM Appraisal Guidance or HM Treasury’s Green Book?
  • does the proposal comply with all applicable legal requirements, including under applicable FCERM, health and safety and environmental legislation?
  • where the proposal is for a Scheme, is it on the Sanctioned List of projects we have agreed are eligible for capital grant?
  • can the proposed solution be fully funded under the terms of Defra’s partnership funding policy and is it eligible for capital grant under section 16 of the Flood and Water Management Act 2010?
  • are reliable commitments for non-grant funding (partnership match funding) in place?

Authorities must also meet the conditions relevant to flood risk management work under section 14A of the Land Drainage Act 1991 or, for coastal protection work, relevant requirements of section 4 of the Coast Protection Act 1949.

4.1 Coast protection

Applications in relation to coastal Schemes need to be accompanied by form CPA 1.

5. The costs that are eligible for capital grant

Defra’s partnership funding policy affects the way we decide to award capital grants. Under that policy the amount of capital grant available for a project is decided on the basis of its outcomes. You should try to get contributions from beneficiaries for your project but under the partnership funding policy the amount of capital grant we provide will be capped depending on the cost of the project or its outcomes.

Guidance is available for partnership funding.

Local authorities can include in their business case the costs of people working on the project including the overheads for them.

5.1 Coast protection

Work eligible for a capital grant – work necessary because another project at the same or a nearby location would cause a negative effect.

6. What is not eligible for capital grant

Defra’s partnership funding policy and the DLUHC rules on government grants remove barriers to how the capital grant can be used. However, if any of the following applies, we will not consider awarding a capital grant:

  • the project has not already had approval (unless done in an emergency under section 5(6) of the Coast Protection Act 1949)
  • you have failed, without reasonable cause, to modify the project, as specified in a notice served by any government department or other statutory authority
  • the project forms part of your maintenance tasks (as opposed to capital renewals) or it is work arising from a lack of regular maintenance or repair
  • the project arises from damage or negligence caused by others
  • the project is on top of, or not essential for, FCERM requirements, except for a reasonable allowance for environmental aspects and to support existing amenities, which might be lost as a result of approved work
  • the project is needed to cater for new development
  • the project is for works that should be done under public health legislation, for example sewerage work

While IDBs and local authorities other than the councils of non-metropolitan districts may do work for other people (for example, riparian owners) under sections 20(1) and 20(2) of the Land Drainage Act 1991, we are currently unable to award capital grants for projects that involve undertaking such works. (This may change, depending on national policy priorities and the availability of funds.)

Capital grants are not available to support activity intended to influence or attempt to influence Parliament, government or political parties, or attempting to influence the awarding or renewal of contracts and grants or attempting to influence legislative or regulatory action.

7. Overheads and capital grant

Although, under DLUHC rules, there is some freedom in how the funds are used, a key principle is that we should not pay capital grant on costs funded by other government departments so that there is no ‘double funding’ by the Exchequer.

If the Regional Flood and Coastal Committee consents to us making a grant to your project out of local levy monies (alongside capital grant), the levy monies should be for additional costs you (the risk management authority) have, and you should pay the cost of the overheads.

8. Land purchase and compensation

Your capital grant application should include a schedule of estimated spending for land purchase and compensation payments. You should, where practical, aim to purchase land by negotiation
before beginning compulsory purchase. If you need a compulsory purchase order, you must get authorisation from the Minister by writing to the:

Secretary of State for Environment, Food and Rural Affairs

Seacole Building

2 Marsham Street



See DLUHC’s detailed guidance on compulsory purchase.

You should complete all land-purchase and access (easement) agreements before you award the construction contract.

You may have to pay compensation if someone is affected by you carrying out the project. You are eligible for a capital grant to cover these payments.

You should survey and record the condition of the site and any affected nearby buildings before you begin the work. This will help when deciding on any compensation to be paid.

Interest paid on compensation is eligible for capital grant, as long as it was not run up as a result of your delay in processing the claim. You should provide details of the reasons for interest and for any delay in settling compensation.

We will not give capital grant on spending on a claim that has arisen as a result of negligence or damage that was otherwise avoidable.

If, as a result of carrying out the work, you expect to have to pay to reinstate or make good structures or work done by someone else (for example, roads and bridges), we may award a capital grant for the cost (instead of a compensation payment). This will depend on you having carried out a survey of the condition of the site before you began the work. We will not award a capital grant for improvement work.

We can pay a capital grant if a land-purchase or compensation claim has been legally agreed and the agreement is authenticated. We will need a valuation certificate signed by a qualified valuer for all land-purchase claims of £10,000 or more, and £5,000 or more for all other compensation claims. Also, we will only pay the capital grant if your claim is supported by a plan showing the location related to the reason for payment.

8.1 Coast protection

Under section 19 of the Coast Protection Act 1949, maritime local authorities may have to pay compensation if the value of the land reduces as a consequence of carrying out a project or if you disturb a person’s enjoyment of the land. These payments are eligible for a capital grant.

9. Contributions towards the cost of a project

Wherever possible, we expect you to get contributions towards the cost of your projects from people who will benefit from it or whose actions or requests have led to the project being carried out. Under Defra’s partnership funding policy, we will cap the capital grant at a level depending on the cost of the project or its outcomes.

If contributions are made towards work which is on top of, or not essential for, FCERM (for example within projects with joint objectives and non-FCERM benefits), we will deduct these contributions and their associated spending before we calculate the amount of capital grant. These are known as ‘deductible contributions.

Deductible contributions should apply:

  • if part of the work will allow new development (development after 1 January 2012 cannot be included in a bid for a capital grant)
  • if, through local choice, an option for reducing risk is chosen that is an improvement (for example, through replacing or repairing existing roads, bridges or other property or through improving amenities or economic potential) but is more expensive than would otherwise be necessary
  • for work which removes the existing duties of care or responsibly or service
  • for work carried out as a result of subsidence due to coal mining or other operations involving extraction, where you have asked mine owners or the Coal Authority for contributions

9.1 Examples of other contributions

Environment Agency grants can include monies we receive from other bodies. In particular, we may make a grant to a project out of local levy received from Lead Local Flood Authorities.

Capital grant can also be matched by contributions received from private companies, public companies, NGOs, charities etc. If a project has many objectives, and contributions from other government-funded bodies (such as Natural England) it can still be eligible for capital grant.

10. Approval

10.1 Studies and strategies

To seek formal financial approval for a Study or a Strategy you should complete an FCERM 7 form including the confirmation that the application meets the grant conditions and send it to your Area Flood and Coastal Risk Manager for approval. You should include the information required in section 3 above in sufficient detail to explain the reasons for the Study or Strategy, the work planned and the likely outcomes.


To seek formal financial approval for Schemes you must complete an FCERM 2 form including the undertaking to comply with the grant conditions. You should draw the attention of consultants employed on the project to these conditions relating to approval. You should send your completed FCERM 2 form to your Area Flood and Coastal Risk Manager for approval.

You must also provide an Outline Business Case for the Scheme in line with the HM Treasury five case model setting out the option you prefer. An Outline Business Case confirms the choice of option and the strategy for delivery and demonstrates how this conclusion has been reached through an appropriate and proportionate appraisal. We will assess the Outline Business Case and, to help you negotiate contributions, may pass it for technical approval. This does not mean we have approved your project for an award of capital grant at that stage, but it is intended solely to help you to move forward and get agreement to contributions to funding.

Once you have confirmed that all funding requirements are in place, including through the capital investment programme allocation and local levy, we will provide formal financial approval to allocate the capital grant. This allocation is a commitment to funding on the terms of this grant memorandum. You will need a formal allocation letter from us, confirming the approved capital grant, before work can begin (except in emergencies). The capital grant offer is a capped sum based on the cost or tariff for the outcomes of the project. The allocation letter will confirm both the capital grant and any local levy amounts allocated to your project.

10.2 Coast protection

You should send us form CPA 1 together with an Outline Business Case to gain technical approval of a coastal project. Following technical approval, the tendering process can be carried out and once concluded you should submit form CPA 2 to confirm all necessary stages are complete and to obtain formal financial approval for a capital grant.

If the tender prices are in line with the estimates included in the Outline Business Case then no further support is necessary. If costs are higher the CPA 2 should be accompanied by a revised Outline Business Case identifying the amendments.

11. Changing the design of a project after approval

You can make changes to a project without our approval, as long as they do not alter the outcomes of the project. However, if the changes affect the cost, extent, scope or type of outcome, you will need to fill in an FCERM 4 form to get our approval before you make the changes. If you do not get our approval beforehand, we may not award you a capital grant to make the changes.

If you make a significant change to the design of a project, particularly one that changes its effect on the environment, you may need to reapply for planning or other approvals. All consents for the project may need to be reconsidered and the project may have to be re-advertised for consultation.

12. If the costs of the project are more than the amount of capital grant allocated

The capital grant is based on cost or partnership funding outcomes and caps our contribution from government grant in aid. All Project business cases include a sum to show the risk of unexpected events increasing costs − this sum is called the contingency. We manage contingency at a programme level and do not allocate contingency to individual projects. Your allocation can be increased up to the value of the contingency included in the Outline Business Case approval amount. If you want to increase the capital grant you have been allocated you will need to fill in form FCERM 4.

You should also use FCERM 4 if the project is going to cost more than the amount approved in the Outline Business Case. You should send us this form as soon as you realise you will need to spend more than the approved amount to complete your project. With the form, you should provide details of the reasons why the project will cost more than expected the impact of the extra costs on the Outline Business Case and how the overrun is to be managed and financed. This should include the steps you have taken to generate efficiencies to offset the need for additional sums.

We are keen to make sure that all projects are delivered, and we will support you in your efforts to get extra funding. capital grants are normally capped, depending on the cost or the outcomes delivered. If you do not get our approval for spending over the approved capital grant amount, we may not allocate a supplementary capital grant. Please refer to the programme efficiency target and note that any efficiency target is expected to be sought for all capital grant allocations. When savings are successfully claimed, their use to offset materialisation of risk and / or inflation is recorded and approved. In short, efficiency claims record how the saving was used to offset the need to draw down additional contingency. Efficiencies should be attributed pro-rate to the contributions received.

13. If you do not complete the project

We provide capital grant for the specific project being carried out as approved. If you propose not to complete a project, we have approved or are prevented from doing so by circumstances beyond your control you must tell us immediately. You must also fully explain the reasons for this. In these circumstances we may withhold any capital grant payments that we would have otherwise paid.

14. Sale of surplus land or assets funded by the capital grant

If you sell land or assets funded by the capital grant, you must repay a share of the proceeds, based on the original purchase financed from the capital grant.

15. Who else you need to consult

To be eligible for capital grant you should make sure that you carry out all necessary consultations. This will include consulting our relevant Area offices, including our National Environmental Assessment Service (NEAS), Natural England, other environmental bodies, for example the Marine Management Organisation (MMO), and neighbouring risk management authorities and planning authorities.

You must consult well in advance of undertaking your project so that statutory plans and environmental effects can be considered from the outset along with engineering and economic objectives. Also, if relevant, we advise that you consult coastal groups to make sure your project is compatible with shoreline management plans (SMPs).

By law, you may be required to carry out an environmental impact assessment or strategic environmental assessment for your project. If necessary, you must produce an environmental report or an environmental statement (or both), in line with relevant legislation on Environmental Impact Assessment and Strategic Environmental Assessment.

Before carrying out any work that may affect a site of special scientific interest (SSSI) (whether the project involves work within the affected site), you must follow relevant procedures for notifying Natural England. You should get any necessary permission from Natural England before applying for a capital grant for any project that is likely to damage a SSSI. As part of carrying out their roles properly, IDBs and local authorities have duties to take steps consistent with their statutory functions to further the conservation and enhancement of SSSIs. You should consider this and include it in the design of your project from the outset, in consultation with Natural England.

If your project is likely to have a significant effect on a European site (Special Protection Area (SPA) or Special Area of Conservation (SAC)) or a Ramsar site (Wetlands of International Importance) then, unless your project is directly connected with or necessary to the management of that European site / Ramsar site, you must undertake an appropriate assessment in accordance with the Conservation of Habitats and Species Regulations 2017. You must consult Natural England on this assessment and take account of their comments. This must be done before you apply for a capital grant. You will need to get written confirmation from Natural England that they are content with the project before applying for a capital grant.

Natural England objections to a project, whether made under conservation regulation, planning regulation or otherwise, including concerns about environmental issues not dealt with elsewhere, are important. We will not give capital grant to a project if objections to the project have not been resolved.

15.1 Coast protection

Objections as a result of notices served on statutory consultees under section 5 of the Coast Protection Act 1949 are of major importance. You should start discussions with statutory consultees early and try to reach a solution both parties agree with. However, if a statutory consultee objects and states in writing that they are not going to withdraw their objection, you should send the objection to the Secretary of State for Environment, Food and Rural Affairs. The Secretary of State may order that a local inquiry be held under section 5(4) of the Coast Protection Act 1949.

16. What to do in an emergency

Coast protection emergency works receive special treatment to enable us to approve projects to progress without prejudice before completing the business cases. This provision does not apply to non- coast protection projects. Any non-coast protection emergencies should be referred to the Area Flood and Coastal Risk Manager for urgent inclusion in the Capital Investment Programme.

16.1 Coast protection

In an emergency (for example where major repairs are needed to restore a standard of protection following a storm), you can begin urgent work under section 5(6) of the Coast Protection Act 1949 without getting formal project approval beforehand. However, you must tell us beforehand and tell relevant IDBs before or as soon as possible after commencement of the project. You must also tell the nearest office of Natural England (particularly if a site of special scientific interest (SSSI) is involved).

You must, as soon as possible, also make an application for capital grant (using the Short Form Business Case) and fill in forms CPA 1 and CPA 2.

Whether we pay you a capital grant will depend on the funds we have available and whether we think your project is eligible.

17. Your obligations

You must comply with this grant memorandum. If you fail to do so we may withhold Capital Grant due to you in connection with your Project and/or take this into account when assessing any future application for Capital Grant.

Neither we nor Defra accept liability if a Project is found to be inadequate or defective.

The fact you have financial approval does not relieve you of any obligation you may have, by law or otherwise. It is your responsibility to get all necessary environmental, planning and other consents required for your Project. Our approval of a Capital Grant is made strictly on this condition. Approval shall not in itself mean that we will respond in any particular way to any Project consultations or approve any regulatory consents necessary for your Project and for which we are responsible.

You must properly maintain all FCERM work constructed using Capital Grant and undertake all necessary repairs adequately and promptly. If you do not, we will take this into account when assessing any future application for a Capital Grant.

Capital Grant contributions made towards a Project under the partnership funding policy are made on the basis of ‘whole life’ costs so include an allowance for future maintenance. You should use this commuted element to provide funding for future years.

18. Access to work and records

You must make sure that our officers and other people we authorise can enter the work area and inspect work undertaken in connection with a Project at all reasonable times (this includes the land on which you are doing the work).

So that we can evaluate the Project once you have completed it, and carry out a technical review, you must make sure our officers and other people we authorise can inspect records relating to the Project at all times.

19. Acknowledging the capital grant

If you put up construction signboards or permanent commemorative plaques or publish material about a Project, including via newspaper, journal and magazine articles, websites and social media posts, you should include a reference to the fact the Project was supported by a Capital Grant and/or a local levy grant provided by the Environment Agency.

20. Starting and completing the work

You must tell us the date you start your Project and when you finish it. This helps us to schedule funds. If you do not give us this information we may withhold your Capital Grant. You must also send us a project completion form (FCERM 8) once the Project has been ‘substantially completed’ (that is, the earliest date on which the benefits of the Project are fully realised).

21. What rates of capital grant are available?

Capital Grant is provided for the cost of the Project up to the amount defined by partnership funding outcomes. The amount of Capital Grant a Project is eligible for depends on the outcomes a Project delivers. There is one restriction – Studies and Schemes that do not provide evidence that they have assessed costs and benefits strategically will be capped at a Capital Grant rate of 45% of the approved partnership funding outcomes. This is intended to reduce the risk of several one-off Schemes in the same rate area trying to claim the same benefits.

22. How do you claim capital grant?

We will pay the Capital Grant as your Project progresses. If you do not keep to the conditions which apply to the Capital Grant, we may withhold it.

Capital Grant becomes due once a Project is satisfactorily completed. However, because the cost of Projects can be significant for an Authority, we pay interim Capital Grants. You must apply for this interim Capital Grant using an Application for interim payment of grant funding form (FCERM 3), on the basis of what you have spent as at the date of completing the form and forecast spending up to three months thereafter, as long as this is within the current financial year. We will only pay once we have received written confirmation (including by post or email) that your Project has begun.

If we are providing a grant from local levy funding we will pay that grant as in point 21 above. Our letter approving a Project will set out the Capital Grant as well as the local levy grant payments. You should make a single claim using the FCERM 3 form and we will make sure that you receive the correct amount of grant.

We will pay the grant to your bank account, normally within one month of receiving your FCERM 3 form.

We may withhold the Capital Grant if you do not tell us the start date of the Project, or if the amount of Capital Grant you need changes over more than one financial year without our agreement beforehand.

23. Evaluating your project

We or Defra may select some Projects for Post Project Evaluation. The aim of this is to improve how Projects are assessed, designed, managed and implemented. You must make any relevant information (including any information obtained through monitoring or maintenance) freely available to us and Defra, or any consultants we have authorised.

24. Monitoring the progress of the work

To help us manage Capital Grant payments, you must tell us if you think that the amount you will claim in a financial year changes by more than £100,000. We need to manage the amount of Capital Grant that all Authorities may claim. At the start of each financial year, you will have to fill in an Grant eligible claim profile FCERM 6 form, which sets out proposed claim dates and their expected value. This enables us to arrange for funding to be available for you when you submit your claim. If these dates or amounts change, you must send us an amended FCERM 6 form as soon as possible. When you send us an FCERM 4 form, you should send your revised FCERM 6 form with it to allow us to set up and maintain a current profile for expected claims.

When we ask, you must give us information on the progress of the Project, such as estimated dates the Project will be completed and estimates of Capital Grant claims, dates and values, to help our financial and other planning.

25. Sending us final accounts

Once you have completed the Project and returned form FCERM 8, you have two years to send us a final account, using form FCERM 5. If there are land-purchase and compensation issues outstanding, you should nevertheless complete form FCERM 5 but make a note on the form that you will send form FCERM 5A once these issues are finalised. You must also send us a list of the land- purchase and compensation issues and highlight those not cleared.

You have up to six years to send form FCERM 5A if land-purchase and compensation issues, for example arbitration, prevent the account being closed. You can also use an FCERM 5A form if a compensation issue that you could not have expected happens. We may, under the partnership funding rules, consider paying a supplementary Capital Grant in these cases.

When sending us a final account, you must send an FCERM 4 form if there have been any final changes in the Project or the way you have used the Capital Grant funding. The final FCERM 4 form should provide a record from the original amount you were allocated to the amount you spent, including any use of contingency and supplementary Capital Grant approval.

Form FCERM 5A should include a list of people you have paid compensation to and all amounts you have paid them. We also need evidence, including plans with Ordnance Survey map referencing, relating to claims you have settled.

For Studies, once you have sent form FCERM 8 with the date your Study report is complete, this date will begin the 24-month period you have for completing your final statement of account (to be sent on form FCERM 5).

The deadlines given above are the very latest you should aim for in normal circumstances. In practice, we expect you to send us final accounts as soon as possible. If you do not meet these deadlines you may no longer be entitled to the Capital Grant unless there are exceptional circumstances.

We will normally process final accounts within four months of receiving them, and make any final payments for the Capital Grant we pay, if necessary.

26. Competitive tendering, contracts and procurement

When procuring work, equipment, goods and services you should aim to achieve the best overall value for money. In general, this is most likely to result from competitive tendering and you should use this method unless you are satisfied that there are good reasons to use another method.

You must also comply with all applicable procurement laws and your procurement policy should reflect guidance from the Cabinet Office including their Procurement Policy Guidance and Notes. The Cabinet Office website will have the most up-to-date information.

If you require that a contractor enter into a bond as a guarantee of fulfilling the contract any extra cost for the bond may be considered for a Capital Grant. You may accept a tender without further reference to us if you consider it to be the best overall value for money and it is within the cost estimate approved for the Project. We may ask for a copy of the signed contract or priced bill of quantities.

You should consider using the contracts secured by us which are available for other risk management authorities to use. You may also use term contracts where the cost of tendering would be greater than the benefits of competition. You may also consider procuring services through a public or private partnership including private finance initiatives, but should consult us first.

26.1 Loans and overdrafts for Internal Drainage Boards

Internal Drainage Boards (IDBs) may apply to the Minister for consent to them entering into a loan or overdraft agreement for the following purposes:

  • to borrow for a period of not more than 50 years to meet the IDB’s share of the cost (less grant) for an approved Project
  • temporary borrowing (an overdraft) if loan negotiations at (a) above are not complete before work is approved to start on a Project
  • to borrow for a period of not more than 50 years to meet the cost of an unapproved Project, as long as the IDB meets the following conditions:
    • the proposals are compatible with all currently applicable strategies for flood or coastal erosion risk management, in particular the Flood and Coastal Erosion Risk Management Strategy for England
    • statutory environmental assessment procedures are satisfactorily completed
    • the loan can be financed from the IDB’s expected revenue over the period of the loan agreement
    • an overdraft is for either the Project spending or revenue for operating expenses where the IDB needs to borrow temporarily until it receives revenue from rates
  • the Minister may consider requests for consent to loans for purposes other than (a) to (d) in exceptional circumstances

An IDB must request the Minister’s consent under section 55 of the Land Drainage Act 1991. The application should be made in a formal letter signed on behalf of the IDB by the clerk or their authorised deputy, giving at least two weeks’ notice of the intention to enter into a loan or overdraft.

The application should show:

  • the Project concerned or other purpose of the loan or overdraft
  • the period of the loan or overdraft (overdrafts are normally granted for a maximum of 12 months up to the end of the financial year), and the date of repayment
  • the amount you need
  • in the case of overdrafts, the expected revenue from rates and special levies in the financial year concerned

The IDB clerk or finance officer should send the application letter to the:

Senior Finance Business Partner – Grant Administration and External Funding


Manley House, Kestrel Way





They will send it, with supporting comments, to Defra colleagues dealing with Ministerial consents. Any applications Defra’s Ministerial team receives without Finance Business Partner support will be returned.

An IDB must not enter into a proposed loan or overdraft unless they have received the Minister’s consent.

26.3 Can loan charges be included for Capital Grant?

The costs of raising loans and interest payments on overdrafts by IDBs are not eligible for Capital Grant.

26.4 Public Works Loan Board

The Public Works Loan Board makes loans to IDBs – you can find details on the Public Works Loan Board website. However, the choice of lender is up to the IDB. The fact that the Minister may consent to an IDB entering into a loan or overdraft does not mean they have considered whether the IDB is creditworthy. Neither we nor Defra will be responsible for repaying the loan or overdraft under any circumstances.

27. Annexe 1 – forms and returns

You can find all forms on Flood and coastal defence funding: for risk management authorities.

  • FCERM 2 – Flood Defence Schemes: application for grant
  • FCERM 3 – Application for interim payment of grant funding
  • FCERM 4 – Application for prior approval of variations of approved schemes/studies
  • FCERM 5 – Final statement of account for projects or studies on site
  • FCERM 5A – Final statement of account for outstanding land purchase and compensation claims
  • FCERM 6 – Grant eligible claim profile
  • FCERM 7 – Application for approval for preliminary studies and strategies
  • FCERM 8 – Project closure report
  • CPA 1 – Certificate of statutory consultations and responses to them
  • CPA 2 – Application for formal approval of a coast protection project

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