Finance

D - Financial systems and procedures

1

General

1.1

Sound systems and procedures are essential to an effective framework of accountability and control.

1.2

Departments have many systems and procedures relating to the control of the County Council’s assets, including purchasing, costing and management systems. Departments rely on IT for their financial management information. The information must therefore be accurate and the systems and procedure sound and well administered. They should contain controls to ensure that transactions are properly processed and errors detected promptly.

1.3

The County Treasurer has a professional responsibility to ensure that the County Council’s financial systems are sound and should therefore be notified of any new developments or changes.

Responsibilities of the County Treasurer

1.4

The County Treasurer is responsible for the operation of the County Council’s IT systems for financial and business-related purposes, for accounting systems, the form of accounts and the supporting financial records. Any changes made by chief officers to the existing financial systems or the establishment of new systems must be approved by the County Treasurer. However, chief officers are responsible for the proper operation of financial processes in their own departments.

1.5

To make arrangements for the proper administration of the County Council’s financial affairs, including to:

a) issue advice, guidance and procedures for officers and others acting on the County Council’s behalf

b) determine the accounting systems, form of accounts and supporting financial records

c) establish arrangements for auditing the County Council’s financial affairs.

Responsibilities of chief officers

1.6

To agree with the County Treasurer any changes to procedures to meet their own specific service needs.

1.7

To ensure that staff receive relevant financial training which has been approved by the County Treasurer.

1.8

To ensure that, where appropriate, computer and other systems are registered in accordance with data protection legislation.

1.9

To ensure that staff are aware of their responsibilities under the freedom of information legislation.

1.10

With the County Treasurer, to ensure that the organisational structure provides an appropriate segregation of duties to provide adequate internal controls and minimise the risk of fraud or other malpractice.

1.11

To ensure there is a documented and tested disaster recovery plan to allow service delivery processing to resume quickly in the event of an interruption.

1.12

To ensure that systems are documented and staff trained in operations.

1.13

To establish a scheme of delegation identifying officers authorised to act on the chief officer’s behalf in respect of payments, income collection and placing orders, including variations, and showing the limits of their authority.

1.14

To keep and regularly update a record of authorised officers in a manner acceptable to the County Treasurer, and notify him of any changes.

Responsibilities of financial managers

1.15

To ensure that accounting records are properly maintained and held securely.

1.16

To ensure that vouchers, both electronic and paper, and documents with financial implications are not destroyed except in accordance with arrangements approved by the County Treasurer.

1.17

To ensure that a complete management trail, allowing financial transactions to be traced from the accounting records to the original document, and vice versa, is maintained. To incorporate appropriate controls to ensure that, where relevant:

a) all input is genuine, complete, accurate, timely and to previously processed

b) all processing is accurate, complete and timely

c) output from the system is accurate, complete and timely.

1.18

To consult the County Treasurer before changing any existing system or introducing new systems.

1.19

To ensure that effective contingency arrangements, including back-up procedures, exist for computer systems. Wherever possible, back-up information should be securely retained in a fireproof location, preferably off-site, or in an alternative location in the building.

1.20

To ensure that, where appropriate, computer systems are registered in accordance with the data protection legislation and that staff are aware of their responsibilities under the legislation.

1.21

To ensure that relevant standards and guidelines for computer systems issued by the chief officer are observed (see Internet Guidelines and Computer Security).

1.22

To ensure that computer equipment and software are protected from loss and damage through theft, vandalism, etc.

1.23 To comply with the copyright, designs and patents legislation and, in particular, ensure that:

a) only software legally acquired and installed by the County Council is used on its computers

b) staff are aware of what the legislation says

c) in developing systems, due regard is given to the issue of intellectual property rights.

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2

Income and expenditure

Income

Links to Departmental scheme of delegation for write offs Microsoft Word 34kb Dealing with debt 1: Debt Write off, Dealing with Debt 2: Write back of potential debt and Grants Appendix

2.1

Income can be a vulnerable asset and effective income collection systems are necessary to ensure that all the income due is identified, collected, receipted and banked properly. It is preferable to obtain income in advance of supplying goods or services as this improves the County Council’s cash flow and also avoids the time and cost of administering debts.

2.2

Chief officers are responsible for ensuring that a proper scheme of delegation has been established in their area and is operating effectively. The scheme of delegation should identify staff authorised to act on the chief officer’s behalf, or on behalf of the Executive members, in respect of payments, income collection and for placing orders. It must also identify the limits of their authority. As part of the overall control framework for accountability and control, the County Treasurer is responsible for specifying the procedure to be followed for ordering, making payments, and for collecting income and for approving procedures for writing-off debts.

Responsibilities of the County Treasurer

2.3

To agree arrangements for the collection of all income due to the County Council and approve the procedures, systems and documentation for its collection.

2.4

To order and supply on request to departments receipt forms, books or tickets and similar items and be satisfied about the arrangements for their control.

2.5

To approve all debts to be written-off in consultation with the relevant chief officer.

2.6

To keep a central register of all sums written-off and to adhere to the requirements of the Account and Audit Regulations 1996.

2.7

To agree the write off of debt of up to £1,000 in consultation as necessary with the Chief Officer.

2.8

In consultation with the chief officer, to agree the write-off of bad debts of between £1000 and £5,000.

2.9

To obtain the approval of the Executive Member in consultation with the relevant chief officer and legal advice if necessary, for writing-off debts in between £5,000 and £50,000.

2.10

To obtain approval of the Leader in consultation with the relevant chief officer and legal advice if necessary, for writing-off debts over £50,000.

2.11

In consultation with the chief officer, to approve the reversal of accounting entries for the write back of cancelled debt under £10,000.

2.12

To obtain the approval from the Executive member in consultation with the chief officer for cancelled debts between £10,000 and £50,000 and the approval of the Leader for cancelled debts in excess of £50,000.

2.13

To ensure that appropriate accounting adjustments are made following write-off action.

Responsibilities of chief officers

2.14

To establish a charging policy for the supply of goods or services, including the appropriate charging of VAT, and review it regularly, in line with corporate policies

2.15

To inform the County Treasurer of all debts to be written-off. Once raised, no debt may be cancelled except by full payment or by its formal writing-off. A credit note to replace a debt may only be issued to correct a factual inaccuracy or administrative error in the calculation and/or billing of the original debt.

2.16

To approve grants from an approved departmental budget below £5,000 against published criteria and obtain approval from the Executive member for grants in excess of £5,000.

2.17

To obtain approval for grants from the Executive member where the money is coming from a member controlled budget.

2.18

To record approved grants in the grants database.

Responsibilities of financial managers

2.23

To separate the responsibility for identifying amounts due and the responsibility for collection, as far as is practicable.

2.24

To establish and initiate appropriate recovery procedures, including legal action where necessary, for debts that are not paid promptly.

2.25

Where appropriate, to issue official receipts or maintain other documentation for income collection.

2.26

Wherever possible, to ensure that at least two employees are present when post is opened so that money received by post is properly identified and recorded.

2.27

To hold securely receipts, ticket and other records of income, for the appropriate period (three financial years plus current).

2.28

To lock away all income to safeguard against loss or theft, and to ensure the security of cash handling

2.29

To keep only up to approved levels of cash on the premises.

2.30

To ensure that income is paid fully and promptly into the appropriate Council bank account in the form in which it is received. However, official imprest cheques may be cashed using income held, but this must be clearly documented. Appropriate details should be recorded on paying-in slips to provide an audit trail. Money collected and deposited must be regularly reconciled to that financial system and, if applicable, bank account.

2.31

To ensure income is not used to cash personal cheques or other payments.

2.32

To supply the County Treasurer with details relating to work done, goods supplied or services rendered or other amounts due, so that the County Treasurer can record correctly the sums due to the County Council and ensure bills are sent out promptly. To do this, financial managers should use established performance management systems to monitor recovery of income and raise areas of concern to the County Treasurer. Financial managers are responsible for helping the County Treasurer to collect debts they have originated, by providing any further information requested by the debtor and by pursuing the matter on the County Council’s behalf.

2.33

To keep a record of every transfer of money between County Council employees. The receiving officer must sign for the transfer and the transferor must retain a copy.

2.34

To notify the County Treasurer of outstanding income relating to the previous financial year as soon as possible after 31 March in line with the timetable determined by the County Treasurer.

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Ordering and paying for work, goods and services

2.35

Councils have a statutory duty to achieve best value, in part through economy and efficiency. The County Council’s procedures should help to ensure that services can receive value for money in their purchasing arrangements. These procedures should be read in conjunction with the Council’s code of practice on tenders and contracts

2.36

Public money should be spent with demonstrable probity and in accordance with the County Council’s policies. Therefore every officer and member of the County Council is responsible for declaring – in accordance with appropriate codes of conduct – any links or personal interests they have with purchasers or suppliers and/or contractors if they are engaged in contractual or purchasing decisions on the County Council’s behalf

2.37

To fulfil the Late Payment of Commercial Debts (Interest) Act 1998, the County Council’s charter of service states that its policy is to pay suppliers within 30 days of either the work being completed, goods being received or the receipt of the invoice whichever is the later unless other contractual conditions apply.

Responsibilities of the County Treasurer

2.38

To ensure that all payments for goods, supplies and services are made within the statutory 30 days (Late Payment of Commercial Debts (Interest) Act 1988) unless any other terms or conditions have been agreed in writing. Any interest incurred under the Act will be recharged to the cost centre of the original payment.

2.39

To ensure that all the County Council’s financial systems and procedures are sound and properly administered.

2.40

To approve any changes to existing financial systems and to approve any new systems before they are introduced.

2.41

To approve the form of official orders, and associated terms and conditions.

2.42

To make payments from the County Council’s funds when expenditure has been incurred and authorised in accordance with financial regulations.

2.43

To make payments, whether or not provision exists in the estimates, where the payment is specifically required by statute or a court order.

2.44

To pay contractors on the certificate of the appropriate chief officer, which must include details of the value of work, retention money, amounts previously certified and amounts now certified.

2.45

To provide advice and encouragement on making payments by the most economical means.

2.46

To ensure that a budgetary control system is established which enables commitments incurred by placing orders to be shown against the appropriate budget allocation so that they can be taken into account in budget monitoring reports.

Responsibilities of chief officers

2.47

To ensure that orders are processed only by properly authorised staff.

2.48

To ensure that the department reviews periodically a list of staff approved to authorise invoices.

2.49

With regard to contracts for consultancy, construction and alterations to buildings and for civil engineering works, to document and agree with the County Treasurer the systems and procedures to be adopted in relation to financial aspects, including certification of interim and final payments, checking, recording and authorising payments, the system for monitoring and controlling capital schemes, and the procedures for validating subcontractors’ tax status.

2.50

To ensure that employees are aware of the national code of conduct for local government employees (summarised in the procedures and conditions of employment manual) or local conditions if staff are not covered by the code of conduct.

2.51

To follow the County Council’s Contract Standing Orders for tendering for all goods, services or works.

2.52

To ensure that official orders in a form approved by the County Treasurer are issued for all work, goods or services to be supplied to the County Council except for supplies of utilities, periodic payments such as rent or rates, petty cash purchases or other exceptions specified by the County Treasurer.

2.53

To ensure that all official orders indicate clearly the nature and quantity of the materials, work or services to be supplied and details of the agreed or estimated price, relevant discounts and delivery terms. All orders will be serially numbered.

2.54

To ensure that orders are only used for goods and services provided for the Council. Individuals must not use official orders to obtain goods or services for their private use.

2.55

The authoriser of an order should be satisfied that the goods and services ordered are appropriate and needed, that there is adequate budgetary provision and that quotations or tenders have been obtained if necessary. Best value principles should underpin the County Council’s approach to procurement. Value for money should always be achieved. (For more information, consult Contract Standing Orders.)

2.56

To use the central purchasing services provided by Director of Property, Business and Regulatory Services unless a financial manager can clearly demonstrate that an alternative source of supply offers better value for money taking into account quality, convenience and price and the cost of sourcing alternative or where supplies are of such a specialised nature that alternative arrangements are more appropriate.

2.57

To ensure that goods and services are checked on receipt to verify that they are in accordance with the order. Appropriate entries should then be made in inventories or stores records.

2.58

To ensure that payment is not made unless a proper VAT invoice has been received, checked, coded and certified for payment confirming:

a) receipt of goods or services

b) that the invoice has not previously been paid

c) that expenditure has been properly incurred and is within budget provision

d) that prices and arithmetic are correct and accord with quotations, tenders, contracts or catalogue prices

e) correct accounting treatment of tax

f) that the invoice is correctly coded

g) that discounts have been taken where available

h) that appropriate entries will be made in accounting records.

2.59

To ensure that two authorised members of staff are involved in the ordering process.

2.60

To ensure that payments are made only on the formal invoice, not on a photocopied or faxed invoice, statement or other document. Any instances of these being submitted for payment should be reported to the Chief Internal Auditor.

2.61

To encourage suppliers of goods and services to receive payment by the most economical means for the County Council. It is essential, however, that payments by direct debit have the County Treasurer’s prior approval except for schools with local bank accounts.

2.62

To ensure that loans, leasing or rental arrangements are entered into only with the County Treasurer’s prior agreement. This is because of the potential impact on the County Council’s borrowing powers, to protect the County Council against entering into unapproved credit arrangements, and to ensure value for money.

2.63

To notify the County Treasurer of outstanding expenditure relating to the previous financial year as soon as possible after 31 March in line with the timetable determined by the County Treasurer.

2.64

To notify the County Treasurer immediately of any expenditure to be incurred as a result of statute/court order where there is no budgetary provision.

2.65

To ensure that all appropriate payment records are retained and stored for the defined period in accordance with the document retention schedule.

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Payments to employees and members

2.66

Staff costs are the largest item of expenditure for most Council services. It is therefore important that payments are accurate, timely, made only where they are due for services to the County Council and that payments accord with individual’s conditions of employment. It is also important that all payments are accurately and completely recorded and accounted for and that members’ allowances are authorised in accordance with the scheme adopted by the full Council.

Responsibilities of the County Treasurer

2.67

To arrange and control secure and reliable payment of salaries, wages, compensation or other emoluments to existing and former employees in accordance with prescribed procedures, on the due date.

2.68

To record and make arrangements for the accurate and timely payment of tax, superannuation and other deductions.

2.69

To make arrangements for paying all travel and subsistence claims or financial loss allowance.

2.70

To make arrangements for paying members’ travel or other allowances on receiving the prescribed form duly completed and authorised.

2.71

To provide advice and encouragement to secure payment of salaries and wages by the most economical means.

2.72

To ensure there are adequate arrangements for administering superannuation matters on a day-to-day basis.

Responsibilities of chief officers

2.73

To ensure that appointments are in accordance with the regulations of the County Council and approved establishments, grades, scale of pay and that adequate budget provision is available

2.74

To ensure that adequate and effective systems and procedures are operated, so that:

a) payments are only authorised to properly appointed employees

b) payments are only made where there is a valid entitlement

c) conditions and contracts of employment are correctly applied

d) employees’ names listed on the payroll are regularly checked to verify accuracy and completeness

e) payments to suspended staff are regularly reviewed

f) overpayment's to staff are recovered.

Responsibilities of financial managers

2.75

To notify the County Treasurer of all appointments, terminations, or variations that may affect the pay or pension of an employee or former employee, in the form and to the timescale required by the County Treasurer.

2.76

To ensure that payroll transactions are processed only through the payroll system. Financial managers should give careful consideration to the employment status of individuals employed on a ‘self-employed consultant or subcontract’ basis. The Inland Revenue applies a tight definition for employee status and in cases of doubt, advice should be sought from the County Treasurer.

2.77

To certify travel and subsistence claims and other allowances. Certification is taken to mean that journeys were authorised and expenses properly and necessarily incurred, and that allowances are properly payable by the County Council, ensuring that cost-effective use of travel arrangements is achieved. Due consideration should be given to tax implications.

2.78

To ensure that the details of any employee benefits in kind are notified to the County Treasurer to enable full and complete reporting within the income tax system.

2.79

To ensure that all appropriate payroll documents are retained and stored for the defined period in accordance with the document retention schedule.

2.80

To verify at least once annually the standing payroll information relating to employees charged to their responsibility. Reports are available from the County Council’s resource management system to enable them to satisfy this requirement.

Responsibilities of members

2.81

To submit any claims for travel and subsistence allowance on a monthly basis and, in any event, within one month of the year-end.

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3

Taxation

3.1

The County Council is responsible for ensuring its tax affairs are in order. Tax issues are often very complex and the penalties for incorrectly accounting for tax are severe. It is therefore very important for all officers to be aware of their role.

Responsibilities of the County Treasurer

3.2

To advise chief officers on all taxation issues that affect the County Council, in the light of guidance issued by appropriate bodies and relevant legislation.

3.3

To maintain the County Council’s tax records, making all tax payments, receiving tax credits and submitted tax returns by their due date. Responsibilities include:

  • completing all inland revenue returns regarding PAYE

  • completing a monthly return of VAT inputs and outputs to HM customs and excise

  • supplying details to the Inland revenue regarding the Construction Industry Scheme

  • maintaining up-to-date guidance for Council employees on taxation issues in the tax manual.

3.4

To ensure that the correct VAT liability is attached to all income due and that all VAT recoverable on purchases complies with HM Customs and Excise Regulations.

3.5

To ensure that, where construction and maintenance works are undertaken, the contractor fulfils the necessary Construction Industry Scheme requirements.

3.6

To ensure that all persons working for the County Council are added to the County Council’s payroll and tax deducted from any payments, except where the individuals are self-employed or are employed by a recognised staff agency.

3.7

To follow the guidance on taxation issued by the County Treasurer in the County Council’s accounting manual, and VAT manual.

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4

Schools

4.1

Under the scheme for financial management of schools, the County Education Officer must allocate funds to governing bodies and take appropriate action under the Schools Standards and Framework Act 1998 if governors do not satisfactorily use their devolved powers.

4.2

The key features of the budgets delegated to schools are:

  • they are cash limited

  • virement is allowed

4.3

The governing body is responsible for agreeing the budget and level of services within the cash limit.

4.4

Underspendings and overspendings are carried forward to the next financial year and deducted from or added to the budget.

4.5

The governing body is also responsible for ensuring that a school has a strategic financial plan covering at least three years. The plan should include financial costings for agreed courses of action and be updated each year.

5

Business units

5.1

Where appropriate, the County Treasurer and Chief Executive in consultation with the relevant chief officer can agree that areas of operation that wish to trade internally or externally may be treated as business units and have a delegated budget.

5.2

If a service has been approved to operate as a business unit, any surplus or deficit will be carried forward, either individually or collectively as part of a group.  The Cabinet may decide to allocate part of any surplus for an alternative purpose.  The exact carry forward arrangement must be in accordance with an approved management plan or business plan and with the requirements of the Accounting Code of Practice.

5.3

If business units maintain management plans that follow the corporate template and demonstrate commitment to the four Cs – with an emphasis on ‘challenge’ – then this will be taken to meet the requirements of best value for the unit.

Responsibilities of the County Treasurer

5.4

To be responsible, with the Chief Executive and in conjunction with the relevant chief officer, for approving the establishment of and financial procedures for business units.

Responsibilities of chief officers

5.5

To maintain a separate revenue account for each business unit to which all relevant income is credited and all relevant expenditure, including overhead costs, is charged and make an annual report in support of final accounts.

5.6

To ensure there is no cross-subsidisation between business units.

5.7

To ensure that the same accounting principles are applied to business units as other services.

5.8

To ensure that each business unit prepares an annual business plan using the corporate template and reviews progress during the year.

Responsibilities of heads of business units

5.9

To authorise expenditure or transactions involving commitments to expenditure.

5.10

To keep and maintain appropriate accounts and records in accordance with Financial Regulations, corporate accounting systems and practice notes.

5.11

To ensure that the staffing establishment can be met by the delegated budget.

5.12

To prepare estimates of income and expenditure for the forthcoming budget year. The budget must be supported by a current business plan or management plan, which may be required by internal audit.

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