Finance

C - Risk management and control of resources

1

Risk management

1.1

It is essential to develop and maintain on an integrated basis, robust systems for identifying and evaluating all significant operational risks to the County Council. These systems should actively involve all staff associated with planning and delivering services.

1.2

The Chief Executive is responsible for preparing the Council’s risk management policy statement, for promoting it throughout the County Council, and for advising the Cabinet on proper insurance cover where appropriate.

1.3

The Chief Executive is responsible for ensuring regular corporate assessments of risk and chief officers for reviewing risks annually.

1.4

All organisations, whether in the private or public sectors, face risks to people, property and their continued operations. Risk is the chance or possibility of loss, damage or injury or failure to achieve objectives caused by an unwanted or uncertain action or event. Risk management is the planned and systematic approach to the identification, evaluation and control of risk. Its objectives are to secure the assets of the organisation and to ensure its continued financial and organisational well being. In essence it is therefore an integral part of good business practice. Risk management is concerned with evaluating an organisation’s existing methods of managing identified risks and then saying what it should do to control these risks effectively.

1.5

The Cabinet has overall responsibility for approving the County Council’s risk management strategy, and for promoting a culture of risk management awareness throughout the County Council.

Responsibilities of the Chief Executive

1.6

To prepare and promote the County Council’s risk management policy statement.

1.7

To advise the Cabinet on proper insurance cover where appropriate.

1.8

To ensure regular corporate assessments of risk.

1.9

To chair the risk management board which assists the Chief Executive in developing the County Council’s risk management strategy.

Responsibilities of the County Treasurer

1.10

To advise the Cabinet about the budgeted level of insurance cover.

Responsibilities of chief officers

1.11

To take responsibility for risk management in their department having regard to advice from the Chief Executive and other specialist officers (egg crime prevention, fire prevention, health and safety, internal audit).

1.12

To ensure there are regular reviews of risk in their departments.

Responsibilities of financial managers

1.13

To notify the Chief Executive immediately of any loss, liability or damage that may lead to a claim against the County Council, together with any information or explanation required by the Chief Executive.

1.14

To ensure that employees, or anyone covered by the County Council’s insurances, do not admit liability or make any offer to pay compensation that may prejudice the assessment of liability in respect of any insurance claim.

1.15

To consult the Chief Executive on:

a) all new risks and liabilities that may need insuring

b) any alterations that may affect existing insurances

c) all leases of property granted by or to the County Council that may involve a transfer of insurance cover

d) the terms of any indemnity that the County Council is asked to give.

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2

Internal control

2.1

Internal control refers to the systems of control to ensure that (a) the County Council’s objectives are achieved in a way that promotes economical, efficient and effective use of resources, and (b) the County Council’s assets and interests are safeguarded.

2.2

The County Council has statutory obligations to meet, and, therefore, requires internal controls to identify, meet and monitor compliance with these obligations.

2.3

The County Council faces a wide range of financial, administrative, technological and commercial risks, both from internal and external factors, which threaten the achievement of its objectives. Internal controls are necessary to manage these risks.

2.4

The system of internal control is established in order to provide measurable achievement of:

a) efficient and effective operations

b) reliable financial information and reporting

c) compliance with laws and regulations

d) risk management.

2.5

The key controls and control objectives for internal control systems are:

a) key controls should be regularly reviewed and the framework of internal control should be reviewed annually to ensure it is operating effectively in practice

b) managerial control systems including defining policies, setting objectives and plans, monitoring financial and other performance and taking appropriate anticipatory and remedial action. The key objective of these systems is to promote ownership of the control environment by defining roles and responsibilities

c) financial and operational control systems and procedures, which include physical safeguards for assets, segregation of duties, authorisation and approval procedures and information systems

d) an effective internal audit function that is properly resourced. It should operate in accordance with the principles in the Auditing Practices Board’s auditing guideline Guidance for Internal Auditors, the Code of Practice for Internal Audit in Local Government in the United Kingdom and in any other statutory obligations and regulations.

Responsibilities of the County Treasurer

2.6

To advise on effective systems of internal control. These arrangements need to ensure compliance with all applicable statutes and regulations, and other relevant statements of best practice. They should ensure that public funds are properly safeguarded and used economically, efficiently, and in accordance with the statutory and other authorities that govern their use.

2.7

To maintain an adequate and effective internal audit.

Responsibilities of chief officers

2.8

Chief officers are responsible for establishing sound arrangements to achieve their financial performance targets. They must also arrange for planning, appraising, authorising and controlling their operations in order to achieve continuous improvement, economy, efficiency and effectiveness.

2.9

To ensure an appropriate control environment and effective internal controls which provide reasonable assurance of effective and efficient operations, financial stewardship, probity and compliance with laws and regulations.

2.10

To manage processes to check that established controls are being adhered to and to evaluate their effectiveness, in order to be confident that resources are being properly used, objectives achieved and risks managed

2.11

To review existing controls in the light of changes affecting the County Council and establish and implement new ones in line with County Treasurer’s guidance. Chief officers should also be responsible for removing controls that are unnecessary or not cost or risk effective – for example because of duplication.

2.12

To ensure staff have a clear understanding of the consequences of a lack of control or non-compliance with controls.

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3

Audit requirements

Internal audit

3.1

The Accounts and Audit Regulations 1996 require the County Treasurer to maintain an adequate and effective internal audit.

3.2

Internal audit is an independent and objective appraisal function established by the County Council for reviewing the system of internal control. It examines, evaluates and reports on the adequacy of internal control as a contribution to the proper economic, efficient and effective use of resources.

Responsibilities of the County Treasurer

3.3

To ensure that internal auditors have the authority to:

a) access Council premises at reasonable times

b) access all assets, records, documents, correspondence and control systems

c) receive any information and explanation considered necessary concerning any matter under consideration

d) require any employee of the County Council to account for cash, stores or any other County Council asset under their control

e) access records belonging to third parties, such as contractors when required.

3.4

To approve the strategic and annual audit plans prepared by the Chief Internal Auditor to take account of the characteristics and relative risks of the activities involved.

3.5

To ensure that effective procedures are in place to investigate promptly any fraud or irregularity and that the Chief Internal Auditor has direct access to the Chief Executive and the Standards Committee.

Responsibilities of chief officers and financial managers

3.6

To ensure that internal auditors are given access at all reasonable times to premises, personnel, documents and assets which the auditors consider necessary for their work.

3.7

To ensure that auditors are given any information and explanations they seek in the course of their work

3.8

To consider and respond promptly to recommendations in audit reports.

3.9

To ensure that any agreed actions arising from audit recommendations are carried out in a timely and efficient fashion

3.10

To notify the County Treasurer immediately of any suspected fraud, theft, irregularity, improper use or misappropriation of the County Council’s property, resources or systems. Pending investigation and reporting, the chief officer should take all necessary steps to prevent further loss and to secure records and documentation against removal or alteration.

3.11

To ensure that new systems for maintaining financial records, or records of assets, or changes to such systems, are discussed with and agreed by the Chief Internal Auditor before implementation.

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External audit

3.12

The Audit Commission is responsible for appointing external auditors to the County Council. The basic duties of the external auditor are governed by Section 15 of the Local Government Finance Act 1982, as amended by Section 5 of the Audit Commission Act 1998.

3.13

Section 4 of the 1998 Act requires the Audit Commission to prepare a code of audit practice that external auditors follow when carrying out their duties. The code of audit practice issued in March 2000 sets out the auditor’s objectives to review and report on:

a) the financial aspects of the County Council’s corporate governance arrangements

b) the County Council’s financial statements

c) aspects of the County Council’s arrangements to manage its performance, including the preparation and publication of specified performance information and compliance in respect of the preparation and publication of the BVPP.

3.14

The County Council’s accounts are scrutinised by external auditors, who must be satisfied that the statement of accounts ‘presents fairly’ the County Council’s financial position and its income and expenditure for the year in question and complies with the legal requirements.

3.15

3.15 The external auditor has rights of access to all documents and information necessary for audit purposes.

Responsibilities of the County Treasurer

3.16

To ensure that external auditors are given access at all reasonable times to premises, personnel, documents and assets that the external auditors consider necessary for their work.

3.17

To ensure there is effective liaison between external and internal audit.

3.18

To work with the external auditor and advise the full Council, Cabinet and chief officers on their responsibilities in relation to external audit.

Responsibilities of chief officers and financial managers

3.19

To ensure that external auditors are given access at all reasonable times to premises, personnel, documents and assets that the external auditors consider necessary for their work.

3.20

To ensure that all records and systems are up to date and available for inspection. The County Council may, from time to time, be subject to audit, inspection or investigation by external bodies such as HM Customs and Excise and the Inland Revenue, who have statutory rights of access.

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4

Preventing fraud and corruption

4.1

The County Council will not tolerate fraud and corruption in the administration of its responsibilities whether from inside or outside the County Council.

4.2

The County Council’s expectation of propriety and accountability is that members and staff at all levels will lead by example in ensuring adherence to legal requirements, rules, procedures and practices.

4.3

The County Council also expects that individuals and organisations (for example suppliers, contractors, service providers) with whom it deals , will act with integrity towards the County Council.

Responsibilities of the County Treasurer

4.4

To develop and maintain procedures to prevent fraud and corruption.

4.5

To maintain adequate and effective internal control arrangements.

Responsibilities of chief officers

4.6

To maintain a departmental register of interests.

4.7

To ensure that all suspected financial irregularities are reported to the Chief Internal Auditor.

Responsibilities of financial managers

4.8

To ensure that all suspected financial irregularities are reported to the Chief Internal Auditor.

4.9

To make staff aware of policy for reporting concerns at work.

4.10

To ensure that all break-ins at County Council premises are reported to the police.

4.11

To instigate the County Council’s disciplinary procedures if the outcome of an audit investigation indicates improper behaviour.

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5

Management of assets

5.1

The County Council holds assets in the form of property, vehicles, equipment, furniture and other items worth many millions of pounds. It is important that assets be safeguarded and used efficiently for providing services and that there be arrangements for the security of both the assets and the information required for service operations (intellectual property).

5.2

Separate registers are maintained for the following fixed assets:

  • land and buildings (other than highway land)

  • vehicles and plant

  • furniture and equipment financed from capital

  • infrastructure and expenditure

  • highway furniture and land

  • museum exhibits and works of art

  • County Records Office documents

5.3

Inventories must be maintained for all moveable assets with a value above a limit agreed with the County Treasurer.

5.4

It would be uneconomic and inefficient for the cost of assets to outweigh their benefits. Obsolete, non-reparable or unnecessary resources should be disposed of in accordance with the law and the County Council’s regulations.

5.5

Assets for disposal should be identified and disposed of at the most appropriate time and only when it is in the County Council’s best interests , and that the best price is obtained, bearing in mind other factors such as environmental issues. For items of significant value, disposal should be by competitive tender or public auction.

5.6

Procedures protect staff involved in the disposal from accusations of personal gain

5.7

Intellectual property is a generic term that includes inventions and writings. If these are created by the employee during the course of employment, then in general they belong to the employer, not the employee. Various Acts of Parliament cover different types of intellectual property.

5.8

Certain activities undertaken within the County Council may give rise to things that may be subject to copyright, for example, the development of software. These are collectively known as intellectual property.

5.9

If the County Council decides to become involved in the commercial exploitation of inventions, the matter should proceed in accordance with its approved intellectual property procedures.

Responsibilities of the County Treasurer

5.10

To ensure that asset registers are maintained in accordance with good practice for fixed assets. The function of asset registers is to provide the County Council with information about fixed assets so that they are:

  • safeguarded

  • used efficiently and effectively

  • adequately maintained

5.11

To ensure that assets are valued in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom: A Statement of Recommended Practice (CIPFA/LASAAC).

5.12

To report to the Executive member any significant write-off of stocks and stores.

5.13

To issue guidelines representing best practice for the disposal of assets.

5.14

To ensure appropriate accounting entries are made to remove the value of disposed assets from the County Council’s records and to include the sale proceeds if appropriate.

Responsibilities of chief officers

5.15

The Director of Property, Business and Regulatory Services must maintain asset registers in a form approved by the County Treasurer for all land, buildings, vehicles and plant currently owned or used by the County Council. Any use of property by a department or establishment other than for direct service delivery should be supported by documentation identifying terms, responsibilities and duration of the use.

5.16

To ensure the proper security of all buildings and other assets under their control.

5.17

Where land or buildings are surplus to requirements, a recommendation for the sale of land should be the subject of a joint report by the chief officer and the County Treasurer.

5.18

To pass the title deeds to the Chief Executive, who is responsible for custody of all title deeds.

5.19

To ensure that the department maintains an inventory of moveable assets in accordance with arrangements defined by the County Treasurer.

5.20

To ensure that controls are in place to ensure that staff do not carry out private work in Council time and that staff are aware of an employer’s rights with regard to intellectual property.

Responsibilities of financial managers

All assets

5.21

To ensure that no County Council asset is subject to personal use by an employee without proper authority.

5.22

To ensure the safe custody of vehicles, equipment, furniture, stock, stores and other property belonging to the County Council.

5.23

To consult the County Treasurer whenever security is thought to be defective or it is considered that special security arrangements may be needed.

5.24

To record all disposal or part exchange of assets. Assets valued at £1,000 or more should be disposed of or part exchanged by competitive tender or public auction unless the County Treasurer agrees otherwise.

5.25

To arrange for the valuation of assets for accounting purposes to meet requirements specified by the County Treasurer.

5.26

To seek advice from the Director of Property, Business and Regulatory Services on the disposal of surplus or obsolete materials, stores or equipment.

5.27

To ensure that income received for disposal of an asset is properly banked and coded.

5.28

Assets for disposal should be identified and disposed of:

a) at the most appropriate time

b) when it is in the County Council’s best interests

c) for the best price (taking into account factors such as environmental issues).

5.29

Disposal procedures are put in place to protect staff involved in the disposal from accusations of personal gain.

Land, buildings and other assets

5.30

To ensure that leaseholders and other prospective occupiers of Council land are not allowed to take possession or enter the land until a lease or agreement, in a form approved by the chief officers in consultation with the Chief Executive, has been established as appropriate

Moveable assets

5.31

To ensure that assets are identified, their location recorded and that they are appropriately marked.

5.32

To maintain inventories and record an adequate description of furniture, fittings and equipment, and plant and machinery whose value exceeds a limit set by the chief officer in consultation with the County Treasurer.

5.33

To carry out an annual check of all items on the inventory in order to verify location, review condition and take action in relation to surpluses or deficiencies, annotating the inventory accordingly. Attractive and portable items such as computers, cameras and video recorders should be identified with security markings as belonging to the County Council.

5.34

To make sure that property is only used in the course of the County Council’s business unless the chief officer concerned has given permission otherwise.

Stocks and stores

5.35

To make arrangements for the care and custody of stocks and stores in the department. Records must be kept in a form agreed with the County Treasurer.

5.36

To ensure stocks are maintained at reasonable levels and subject to a regular independent physical check (at least once a year). All discrepancies should be investigated and pursued to a satisfactory conclusion.

5.37

To authorise or write-off disposal of redundant stocks and equipment. Procedures for disposal of such stocks and equipment where their value is over £1,000 should be by competitive quotations or auction unless the Director of Property, Business and Regulatory Services advises otherwise in a particular case.

5.38

Where the disposal value is less than £1,000 the financial manager must dispose of the item in a fair and effective manner and keep a record of the disposal.

5.39

With the advice of the County Treasurer, to seek executive approval to the write-off of redundant stocks and equipment in excess of £1,000.

Cash

5.40

To ensure cash holdings on premises are kept to a minimum.

5.41

To ensure that keys to safes and similar receptacles are carried on the person of those responsible at all times.

Information

5.42

To ensure that all employees are aware that they have a personal responsibility for the protection and confidentiality of information, whether held in manual or computerised records. Information may be sensitive or privileged, or may possess some intrinsic value, and its disclosure or loss could result in a cost to the County Council in some way.

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6

Treasury management, investments and trust funds

6.1

Many millions of pounds pass through the County Council’s books each year. This led to the establishment of codes of practice. These aim to provide assurances that the County Council’s money is properly managed in a way that balances risk with return, but with overriding consideration being given to the security of the County Council’s financial assets.

6.2

The County Council has adopted CIPFA’s Code of Practice for Treasury Management in Local Authorities.

6.3

The full Council is responsible for approving the treasury management policy statement setting out the matters detailed in paragraph 15 of CIPFA’s Code of Practice for Treasury Management in Local Authorities. The policy statement is proposed to the full Council by the Cabinet on the advice of the County Treasurer. The County Treasurer has delegated responsibility for implementing and monitoring the statement.

Responsibilities of the County Treasurer

6.4

All the County Council’s financial transactions are controlled by the County Treasurer.

6.5

The County Treasurer is responsible for reporting to the Cabinet a proposed treasury management strategy for the coming financial year at or before the start of each financial year.

6.6

All decisions on borrowing, investment or financing are to be delegated to the County Treasurer who must act in accordance with CIPFA’s Code of Practice for Treasury Management in Local Authorities.

6.7

The County Treasurer is responsible for reporting to the Cabinet at least twice in each financial year on the activities of the treasury management operation and on the exercise of delegated treasury management powers.

6.8

One report will cover the strategy for the year and the other (which must be presented by 30 September of the next financial year) will comprise an annual report on treasury management including the operation and exercise of powers in the year against the agreed strategy.

Investments and borrowing

6.9

To ensure that all investments of money are made in the name of the County Council or in the name of nominees approved by the full Council.

6.10

To ensure that all securities which belong to the County Council or its nominees and the title deeds of all property owned by the County Council’s are held in the custody of the appropriate person or organisation.

6.11

To effect all borrowings in the name of the County Council.

6.12

To act as the County Council’s registrar of stocks, bonds, mortgages and to maintain records of all borrowing of money by the County Council.

Responsibilities of chief officers

Investments and borrowing

6.13

To ensure that loans are not made to third parties and that interests are not acquired in companies, joint ventures, or other enterprises without the full Council’s approval, following consultation with the County Treasurer.

6.14

To ensure that investment or borrowing is done only by the County Treasurer unless his approval has been obtained.

Donated asset, trust funds and funds held for third parties

6.15

To arrange for all trust funds to be held, wherever possible, in the name of the County Council. All officers acting as trustees by virtue of their official position must deposit securities etc relating to the trust with the County Treasurer unless the deed provides otherwise.

6.16

If funds are held on behalf of third parties, to arrange for their secure administration, approved by the County Treasurer, and maintain written records of all transactions.

6.17

To ensure that trust funds are operated within any relevant legislation and the specific requirements for each trust.

Responsibilities of financial managers

6.18

To be responsible for accounting for all money, property, and assets handled by them in the course of their employment in addition to any accountability to other bodies or persons.

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7

Banking arrangements

7.1

The County Council’s asset that is most at risk of misappropriation is cash. It therefore needs to be managed carefully and closely accounted for. Control over the management of bank accounts, therefore, rests with the County Treasurer.

Responsibilities of the County Treasurer

7.2

All arrangements with bankers must be made only by the County Treasurer, who is authorised to operate any bank accounts considered necessary.

7.3

To give authority for the ordering of cheques and National Giro payment forms and make proper arrangements for their safe custody.

7.4

All maintained schools may have an external bank account but all banking arrangements must be approved by the County Treasurer.

7.5

To ensure that all cheques drawn on the County Council’s main banking account bear a facsimile signature of the County Treasurer or be signed personally by him or by officers authorised to do so. All alterations and amendments to cheques must similarly be signed.

7.6

To approve arrangements to safeguard the County Council against loss if payments are transmitted electronically.

7.7

To provide employees of the County Council with cash or bank imprest accounts to meet minor expenditure on behalf of the County Council and to prescribe rules for operating thee accounts. Minor items of expenditure should not exceed £100.

7.8

To determine the petty cash limit and to maintain a record of all transactions and petty cash advances made, and periodically review the arrangements for the safe custody and control of these advances.

7.9

To reimburse imprest holders as often as necessary to restore the imprests but normally not more than monthly.

Responsibilities of financial managers

7.10

To follow the instructions on banking issued by the County Treasurer.

7.11

To follow the instructions on banking issued by the County Treasurer.

The responsibilities of managers operating an imprest account are to:

a) obtain and retain vouches to support each payment from the imprest account. Where appropriate, an official receipted VAT invoice must be obtained

b) make adequate arrangements for the safe custody of the account

c) produce upon demand by the County Treasurer, cash and all vouchers to the total value of the imprest amount

d) record transactions promptly

e) reconcile and balance the account at least monthly; reconciliation sheets to be signed and retained by the imprest holder

f) provide the County Treasurer with a certificate of the value of the account held at 31 March each year

g) ensure that the float is never used to cash personal cheques or to make personal loans and that the only payments into the account are the reimbursement of the float and change relating to purchases where an advance has been made

h) ensure that bank accounts do not become overdrawn or incur interest charges

i) ensure that when an employee leaves the County Council’s employment or otherwise ceases to be entitled to hold an imprest advance, the person accounts to the County Treasurer for the amount advanced to him/her

j) receive guidance on the running of imprest account and follow it accordingly.

7.12

To bank all euro receipts separately to the credit of the County Council’s euro bank account: locally based bank accounts must not be converted to euro without the County Treasurer’s authority.

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8

Staffing

8.1

To provide the highest level of service, it is crucial that the County Council recruits and retains high calibre, knowledgeable staff, qualified to an appropriate level. It is therefore important that the County Council has an appropriate staffing strategy and policies by which it matches staffing requirements and budget allocations.

Responsibilities of the Chief Executive

8.2

The Chief Executive is responsible for determining how officer support will be organised for the Cabinet and Executive members and for all other member roles within the County Council.

8.3

The Chief Executive is responsible for providing overall management o staff and for ensuring that there are systems for the proper evaluation of pay for all staff.

Responsibilities of the County Treasurer

8.4

To ensure that budget provision exists for all existing and new employees.

8.5

To act as an advisor to chief officers on such matters as National Insurance and pension contributions as appropriate.

Responsibilities of chief officers

8.6

To be responsible for controlling total staff numbers by:

  • advising the Executive members on the budget in any given year to cover estimated staffing levels

  • adjusting the staffing levels within approved budget provision, varying the provision necessary within that constraint in order to meet changing operational needs

  • the proper use of appointment procedures, workforce plans and verified personnel information.

8.7

To ensure that the staffing budget is an accurate forecast of staffing levels and is equated to an appropriate revenue budge provision (including on costs and overheads).

8.8

To monitor staff activity to ensure adequate control over such costs as sickness, overtime, training and temporary staff.

8.9

To ensure that the staffing budget is not exceeded without due authority and that it is managed to enable the agreed level of service to be provided.

8.10

To ensure that the County Treasurer is immediately informed if the staffing budget is likely to be materially overspent or underspent.

8.11

To ensure that all staff appointed are checked to ensure that they are appropriately qualified, experienced and trustworthy.

8.12

To ensure that the standing payroll information relating to all staff is verified at least annually.

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