Finance

A - Financial management

1

Financial management standards

1.1

All staff and members have a duty to abide by the highest standards of probity in dealing with financial issues. This is achieved by ensuring that everyone is clear about the standards to which they are working and the controls which are in place to ensure these standards are met.

Responsibilities of the County Treasurer

1.2

The County Treasurer is responsible for:

  • the proper administration of the County Council’s financial affairs

  • setting and monitoring compliance with accounting and financial management procedures and standards

  • maintaining an effective and adequate internal audit and all audit arrangements

  • advising on the corporate financial position

  • key financial controls necessary to secure sound financial management

  • providing financial information

  • preparing and controlling forward financial plans, budget strategies, the revenue budget, the capital strategy and capital programme

  • procedures for both treasury management and banking arrangements

  • standards for all financial Heads of Profession

  • schemes of financial delegation

  • financial and related IT systems

  • procedures and controls for ordering services, supplies and works

  • payment of accounts and collection of income

  • pay and pensions.

Responsibilities of chief officers

1.3

To promote the financial management standards set by the County Treasurer in their departments and to monitor adherence to the standards and practices within their own areas, liaising as necessary with the County Treasurer.

1.4

Chief officers are responsible for:

  • ensuring that Executive members are informed of the financial implications of all proposals and that the financial implications have been agreed by the County Treasurer

  • operating financial processes within their departments. To do this, they must ensure that adequate operational controls are in place

  • controlling expenditure and income, monitoring performance and taking the necessary action to remain within budgets and cash limits

  • signing contracts on behalf of the County Council (as set out in Contract Standing Orders)

  • identifying opportunities to improve efficiency, effectiveness and economy.

1.5

Chief officers are responsible for consulting the County Treasurer and seeking approval about any matters that are liable to affect the County Council’s finances materially, before any commitments are incurred.

1.6

Chief officers are responsible for consulting the County Treasurer when a vacancy arises in a senior financial management post, if the post holder has to be a member of one of the accounting bodies specified under Section 113 of the Local Government Finance Act 1988. Chief officers are responsible for ensuring that all financial Heads of Profession posts must also be accountable to the County Treasurer on financial matters.

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2

Managing expenditure

Link to process flow chart Funding additional revenue activities Microsoft Word 38kb

Link to process flow chart Funding additional capital activities. Microsoft Word 51kb

Virement

2.1

The use of virement is intended to enable the Cabinet, executive members, chief officers and their staff to manage budgets with a degree of flexibility within the overall policy framework determined by the full Council, and therefore to optimise the use of resources. Its use is monitored by the County Treasurer within guidelines set by full Council.

2.2

Full Council is responsible for agreeing procedures for virement of expenditure between budget headings.

2.3

Chief officers are responsible for agreeing in-year virements within delegated limits, in consultation with the County Treasurer where required. They must keep a cumulative record of all agreed virements.

2.4

If the accumulated sum of virements for any individual budget item in the budget book reaches £250,000 the virements should be reported to the Executive member for approval.

2.5

All accumulated virements in excess of the lesser of £500,000 or 25% of the budget for any budget item in the budget book division of service indicate a potential change in policy; they should be reported to the Cabinet for approval before implementation.

2.6

Virement into an employee budget to appoint new permanent members of staff is not permitted without the specific approval of the relevant Executive Member.

Responsibilities of the County Treasurer

2.7

To prepare jointly with the chief officer a report to the Executive Member where there are proposed changes that reflect a change of policy or levels of staffing or are in excess of £250,000.

2.8

The County Treasurer has authority to make special payments whether or not provision has been made in the approved estimates, in the following cases:

a) payments specifically required by law

b) payments under a court order

c) payments under agreements entered into by and on behalf of the Council.

d) payments made on the advice of the Chief Executive in the settlement of any action, complaint, or claim against the Council

e) payments made on the advice of the Chief Executive in settlement of any complaint investigated by him or any maladministration identified by the Commissioner for Local Administration.

Responsibilities of chief officers

2.9

A chief officer may exercise virement on budgets under his/her control for amounts up to £250,000 on any one budget heading during the year, following notification to the County Treasurer. For the purposes of this regulation, a budget heading is a line in the County Council’s budget book.

2.10

Amounts greater than £250,000 require the approval of the Executive member, following a joint report by the County Treasurer and the chief officer which must specify the proposed expenditure and the source of funding, and must explain the implications in the current and future financial years.

2.11

All virements in excess of £500,000 or 25% of the budget, whichever is the less, for any budget item in the budget book division of service indicate a potential change in policy; they should be reported to the Cabinet for approval before implementation.

2.12

The prior approval of the Executive member is required for any virement, of whatever amount, where it is proposed to:

  • vire between budgets of different accountable Executive members

  • vire between budgets managed by different chief officers.

2.13

Virement that is likely to affect another chief officer’s level of service activity should be implemented only after that chief officer’s agreement.

2.15

If an approved budget is a ‘lump sum’ budget or contingency intended for allocation during the year, its allocation will not be treated as a virement, provided that:

a) the amount is used for the purposes for which it was established

b) the Executive member has approved the basis and the terms, including financial limits, on which it will be allocated. Individual allocations in excess of the financial limits should be reported to the Executive member.

Responsibilities of financial managers

2.16

Financial managers are expected to exercise their discretion in managing their budgets responsibly and prudently. For example, they should aim to avoid supporting recurring expenditure from one-off sources of savings or additional income, or creating future commitments, including full-year effects of decisions made part way through a year, for which they have not identified future resources.

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Treatment of year-end balances

2.17

The County Council must not plan or budget for a deficit. Balances must be sufficient to cover any potential overspending. In practice, however, service budgets may be overspent or underspent at the year end.

2.18

The full Council is responsible for agreeing procedures for carrying forward under and overspendings on budget headings on advice of the Cabinet and County Treasurer.

2.19

The current policy is to allow service group managers to carry forward 100% of any planned underspendings which are identified and quantified before budget decisions are taken for the following year. Any overspendings must also be carried forward to the following year unless there are exceptional circumstances. The service would normally be allowed to carry forward 50% of any unplanned underspending, with the Cabinet deciding how the remaining 50% would be applied.

Responsibilities of the County Treasurer

2.20

To administer the scheme of ‘carry forward’ within the guidelines approved by full Council.

2.21

To report all overspendings and underspendings to the Cabinet and to full Council.

Responsibilities of chief officers

2.22

Any overspending on service estimates in total on budgets under the control of the chief officer must be carried forward to the following year, and will be the first call on service estimates in the following year. The extent of overspendings carried forward will be reported by the County Treasurer to the Cabinet and the full Council.

Responsibilities of business unit managers

2.23

If a delegated budget under a scheme of local financial management has been approved, any surplus or deficit is carried to the County Revenue Account as prescribed by the current SORP and Cabinet will agree an appropriate adjustment to Trading Unit earmarked reserves.  Any planned use of Trading Unit earmarked reserves must be endorsed by the Executive member and approved during the budget setting process by Cabinet.

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3

Accounting policies

3.1

The County Treasurer is responsible for determining accounting policies and financial systems and ensuring that they are applied consistently.

3.2

The County Treasurer will ensure that:

a) systems of internal control are in place that ensure that financial transactions are lawful

b) suitable accounting policies are selected and applied consistently

c) proper accounting records are maintained

d) financial statements are prepared that present fairly the financial position of the County Council and its expenditure and income.

Responsibilities of the County Treasurer

3.3

To select suitable accounting policies and to ensure they are applied consistently. The accounting policies are set out in the statement of accounts that is prepared at 31 March each year and covers such items as:

a) separate accounts for capital and revenue transactions
b) the basis on which debtors and creditors at year end are included in the accounts
c) details on substantial provisions and reserves
d) fixed assets
e) depreciation
f) capital charges
g) work in progress
h) stocks and stores
I) deferred charges
j) accounting for value added tax
k) government grants
l) leasing
m) pensions.

Responsibilities of chief officers

3.4

To adhere to the accounting policies and guidelines approved by the County Treasurer.

To adhere to the accounting policies and guidelines approved by the County Treasurer.

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4

Accounting records and returns

4.1

The County Treasurer is responsible for determining the accounting procedures and records for the County Council.

4.2

Maintaining proper accounting records is one of the ways in which the County Council discharges its responsibility for stewardship of public resources. The County Council has a statutory responsibility to prepare its annual accounts to present fairly its operations during the year. These are subject to external audit. This audit provides assurance that the accounts are prepared properly, that proper accounting practices have been followed and that proper arrangements have been made for securing economy, efficiency and effectiveness in the use of the County Council’s resources.

4.3

To determine the County Council’s accounting procedures and records. Where these are maintained outside the County Treasurer’s Department, the County Treasurer should consult the chief officer concerned.

4.4

To arrange for all accounts and accounting records to be compiled.

4.5

To comply with the following principles when allocating accounting duties:

a) separating the duties of providing information about sums due to or from the County Council and calculating, checking and recording these sums, from the duty of collecting or disbursing them

b) employees with the duty of examining or checking the accounts of cash transactions may not themselves engage in these transactions.

4.6

To make proper arrangements for the public inspection of the County Council’s accounts in accordance with the Account and Audit Regulations 2003.

4.7

To ensure that all claims for funds, including grants, are made by the due date.

4.8

To prepare and publish the statement of accounts of the County Council for each financial year, in accordance with the statutory timetable and with the requirement for member approval of the statements before 30 June.

4.9

To sign the statement of responsibilities for the statement of accounts confirming that the accounts have been prepared in accordance with proper practices and present fairly the County Council’s financial position.

4.10

To administer the County Council’s arrangements for underspendings and overspendings to be carried forward to the following financial year.

4.11

To ensure that financial documents are retained in accordance with the requirements in the County Council’s document retention guidance.

Responsibilities of chief officers

4.12

To consult and obtain the approval of the County Treasurer before making any changes to accounting records and procedures.

4.13

To comply with the principles outlined in paragraph 4.5 when allocating accounting duties.

4.14

To maintain adequate records to provide a management trail leading from the source of income/expenditure through to the accounting statements.

4.15

To supply information required to enable the statement of accounts to be completed in accordance with the County Treasurer’s guidelines, including information on any potential contingent liabilities and related-party transactions.

Responsibilities of financial mangers

4.16

All financial managers are required to operate within the required accounting standards and timetables.

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5

The Annual Statement of Accounts

5.1

The County Council has a statutory responsibility to prepare its own accounts to present fairly its operations during the year. The Governance Committee is responsible for approving the statutory annual statements of accounts.

Responsibilities of the County Treasurer

5.2

The County Treasurer is responsible for ensuring that the annual statement of accounts is prepared and certified in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom: A Statement of Recommended Practice (CIPFA/LASAAC). The Governance Committee is responsible for approving the annual statement of accounts on the recommendation of the Cabinet.

5.3

To select suitable accounting policies and apply them consistently.

5.4

To make judgements and estimates that are reasonable and prudent.

5.5

To comply with the code of practice in paragraph

5.6

To sign and date the statement of accounts, stating that it presents fairly the financial position of the County Council at the accounting date and its income and expenditure for the year ended 31 March.

5.7

To draw up the timetable for final accounts preparation and to inform staff and external auditors accordingly.

Responsibilities of financial managers

5.7

To comply with accounting guidance provided by the County Treasurer and to supply the County Treasurer with information when required.

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