Part 10 - Financial Procedure Rules - Appendix D

4.01

Service units have many systems and procedures relating to the control of the authority's assets, including purchasing, costing and management systems. Service units are increasingly reliant on computers for their financial management information. The information must therefore be accurate and the systems and procedures sound and well administered. They should contain controls to ensure that transactions are properly processed and errors detected promptly.

4.02

The chief finance officer has a professional responsibility to ensure that the authority's financial systems are sound and should therefore be notified of any new developments or changes.

4.03

To make arrangements for the proper administration of the authority's financial affairs, including to:

• issue advice, guidance and procedures for officers and others acting on the authority's behalf;
• determine the accounting systems, form of accounts and supporting financial records;
• establish arrangements for the audit of the authority's financial affairs;
• approve any new financial systems to be introduced; and
• approve any changes to be made to existing financial systems.

4.04

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

4.05

To ensure that vouchers and documents with financial implications are not destroyed except in accordance with arrangements approved by the chief finance officer.

4.06

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.

4.07

To incorporate appropriate controls to ensure that, where relevant:

• all input is genuine, complete, accurate, timely and not previously processed;
• all processing is carried out in an accurate, complete and timely manner; and
• output from the system is complete, accurate and timely.

4.08

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.

4.09

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

4.10

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

4.11

To consult with the chief finance officer before changing any existing financial system or introducing new financial systems.

4.12

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

4.13

To supply lists of authorised officers, with specimen signatures and delegated limits, to the chief finance officer, together with any subsequent variations.

4.14

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 within the building.

4.15

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.

4.16

To ensure that relevant standards and guidelines for computer systems issued by the head of information technology are observed.

4.17

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

4.18

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

• only software legally acquired and installed by the council is used on its computers;
• staff are aware of legislative provisions; and
• in developing systems, due regard is given to the issue of intellectual property rights.

4.19

Income can be a vulnerable asset and effective income collection systems are necessary to ensure that all of 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 authority's cashflow and also avoids the time and cost of administering debts.

4.20

Key controls for income are:

• all income due to the authority is identified and charged correctly in accordance with an approved charging policy which is regularly reviewed;
• all income is collected from the correct person, at the right time using the correct procedures and the appropriate stationery;
• all money received by an employee on behalf of the authority is paid without delay to the authority's bank or national giro account and properly recorded. The responsibility for cash collection should be separated from that:
  • for identifying the amount due; and
  • for reconciling the amount due to the amount received;
• effective action is taken to pursue non-payment within defined timescales;
• formal approval for debt write-off is obtained;
• appropriate write-off action is taken within defined timescales;
• appropriate accounting adjustments are made following write-off action;
• all appropriate income documents are retained and stored for the defined period in accordance with the document retention schedule; and
• money collected and deposited is reconciled to the bank account by a person who is not involved in the collection or banking process.

4.21

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

4.22

To order and supply to units all controlled stationery and satisfy himself/herself regarding the arrangements for their control.

4.23

To agree the write-off of bad debts up to £5,000 in each case and to refer larger sums to the executive.

4.24

To approve all debts to be written off in consultation with the relevant service unit head and keep a record of all sums written off up to £5,000 and to adhere to the requirements of the Accounts and Audit Regulations 1996.

4.25

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

4.26

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.

4.27

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

4.28

To issue official receipts or maintain other documentation for income collection.

4.29

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

4.30

To hold securely receipts, tickets and other records of income, for the appropriate period.

4.31

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

4.32

To ensure that income is paid fully and promptly into the appropriate council bank account in the form in which it is received. Appropriate details should be recorded on to paying in slips to provide an audit trail. Money collected and deposited must be reconciled to the bank account on a regular basis.

4.33

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

4.34

To supply the chief finance officer with details relating to work done, goods supplied or services rendered or other amounts due, to enable the chief finance officer to record correctly the sums due to the authority and to ensure accounts are sent out promptly.
To do this service unit heads should use established performance management systems to monitor recovery of income and flag up areas of concern to the chief finance officer. Service unit heads have a responsibility to assist the chief finance officer in collecting debts that they have originated, by providing any further information requested by the debtor, and in pursuing the matter on the authority's behalf. Only up to approved levels of cash can be held on the premises.

4.35

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

4.36

To recommend to the chief finance officer all debts to be written off. Once raised, no bona fide debt may be cancelled except by full payment or by its formal writing off. A credit note to replace a debt can only be issued to correct a factual inaccuracy or administrative error in the calculation and/or billing of the original debt.

4.37

To notify the chief finance officer of outstanding income relating to the previous financial year as soon as possible after 31 March in line with the timetable determined by the chief finance officer and not later than 30 April.

4.38

Public money should be spent with demonstrable probity and in accordance with the authority's policies. Authorities have a statutory duty to achieve best value in part through economy and efficiency. The authority'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, contracts and ordering and payments system.

4.39

Every officer and member of the authority has a responsibility to declare any links or personal interests which they may have with purchasers or suppliers and/or contractors if they are engaged in contractual or purchasing decisions on behalf of the council in accordance with appropriate codes of conduct.

4.40

Official orders must be in a form approved by the chief finance officer. Official orders must be issued for all work, goods or services to be supplied to the authority except for supplies of utilities, periodic payments such as rent or rates, petty cash purchases or other exceptions.

4.41

Each order must conform with the guidelines approved by the full council on the ordering and payments system. Standard terms and conditions must not be varied without the prior approval of the chief finance officer.

4.42

Official orders must not be raised for any personal or private purchases, nor must personal or private use be made of authority contracts.

4.43

All official stationery will be obtained and controlled by Financial Services.

4.44

The key controls for ordering and paying for work, goods and services are:

• all goods and services are ordered only by authorised officers and correctly recorded;
• all goods and services shall be ordered in accordance with the authority's code of practice for tenders and contracts;
• goods and services received are checked to ensure they are in accordance with the order;
• payments are not made unless goods have been received by the authority to the correct price, quantity and quality standards;
• all payments are made to the correct person, for the correct amount and are properly recorded;
• all appropriate evidence of the transaction and payment documents are retained and stored for the defined period in accordance with the document retention schedule;
• all expenditure including VAT, is accurately recorded against the right budget; and
• in addition, the effect of e-business/e-commerce and electronic purchasing requires that processes are in place to maintain the security and integrity of data for transacting business electronically.

4.45

To ensure that all of the authority's financial systems and procedures are sound and properly administered.

4.46

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

4.47

To make payments from the authority's funds on the service unit head's authorisation that the expenditure has been duly incurred in accordance with financial regulations.

4.48

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

4.49

To make payments to contractors on the certificate of the appropriate service unit head, which must include details of the value of work, retention money, amounts previously certified and amounts now certified within authorised limits.

4.50

To ensure that unique pre-numbered official orders are used for all goods and services.

4.51

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

4.52

To ensure that only those staff authorised by him/her sign orders and to maintain an up-to-date list of such authorised staff, including specimen signatures identifying in each case the limits of their authority. The authoriser of the 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 authority's approach to procurement. Value for money should always be achieved.

4.53

To ensure that goods and services are checked on receipt to verify that they are in accordance with the order. This check should, be carried out by a different officer from the person who authorised the order. Appropriate entries should then be made in inventories.

4.54

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

• receipt of goods or services;
• that the invoice has not previously been paid;
• that expenditure has been properly incurred and is within budget provision;
• that prices and arithmetic are correct and accord with quotations, tenders, contracts or catalogue prices;
• correct accounting treatment of tax;
• the invoice is correctly coded;
• discounts have been taken where available; and
• that appropriate entries will be made in accounting records

4.55

To ensure that two authorised members of staff are involved in the ordering, receiving and payment process. In every case a different officer from the person who signed the order should authorise the invoice.

4.56

To ensure that the service unit maintains and reviews periodically a list of staff approved to authorise invoices. Names of authorising officers together with specimen signatures and details of the limits of their authority shall be forwarded to the chief finance officer.

4.57

To ensure that payments are not made on a photocopied or faxed invoice, statement or other document other than the formal invoice. Any instances of these being rendered should be reported to the chief internal auditor.

4.58

To ensure that the unit obtains best value from purchases by taking appropriate steps to obtain competitive prices for goods and services of the appropriate quality, with regard to the guidelines and best practices which are in line with best value principles and contained in the authority's code of practice for tendering and contracts.

4.59

To utilise the purchasing procedures in putting purchases, where appropriate, out to competitive quotation or tender. These will comply with the code of practice on tenders and contracts and will cover:

• authorised officers and the extent of their authority;
• advertisement for tenders;
• procedure for creating, maintaining and revising a standard list of contractors;
• selection of tenderers;
• compliance with UK and EC legislation and regulations;
• procedures for the submission, receipt, opening and recording of tenders;
• the circumstances where financial or technical evaluation is necessary;
• procedures for negotiation;
• acceptance of tenders;
• the form of contract documentation;
• cancellation clauses in the event of corruption or bribery; and
• contract records.

4.60

To ensure that loans, leasing or rental arrangements are not entered into without prior agreement from the chief finance officer. This is because of the potential impact on the council's debt free status, to protect the authority against entering into unapproved credit arrangements and to ensure value for money is being obtained.

4.61

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

4.62

With regard to contracts for construction and alterations to buildings and for civil engineering works, to document and agree with the chief finance officer, 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 validation of sub contractors' tax status.

4.63

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

4.64

4.65

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 authority and accord with an 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.

4.66

The key controls for payments to employees and members are that:

• proper authorisation procedures are in place and that there is adherence to corporate timetables in relation to:
  • starters
  • leavers
  • variations
  • enhancements and that payments are made on the basis of timesheets or claims;
• frequent reconciliation of payroll expenditure against approved budget and bank account;
• all appropriate payroll documents are retained and stored; and
• Inland Revenue regulations are complied with.

4.67

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

4.68

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

4.69

To make arrangements for the payment of all travel and subsistence claims or financial loss allowance.

4.70

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

4.71

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

4.72

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

4.73

To complete all Inland Revenue returns regarding PAYE

4.74

To ensure appointments are made in accordance with the regulations of the authority and approved establishments, grades and scales of pay, and that adequate budget provision is available.

4.75

To notify the head of personnel and training of all appointments, terminations, or variations which may affect the pay or pension of an employee or former employee.

4.76

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

• payments are only authorised to bona fide employees;
• payments are only made where there is a valid entitlement;
• conditions and contracts of employment are correctly applied; and
• employees' names listed on the payroll are checked at regular intervals to verify accuracy and completeness.

4.77

To ensure that payroll transactions are processed only through the payroll system. Service unit heads should give careful consideration to the employment status of individuals employed on a "self employed consultant or sub contract" basis. The Inland Revenue applies a tight definition for employee status and in cases of doubt, advice should be sought from the head of personnel and training.

4.78

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 council, ensuring that cost-effective use of travel arrangements is achieved. Due consideration should be given to tax implications.

4.79

To ensure that the details of any employee benefits in kind are notified to the head of personnel and training to enable full and complete reporting within the income tax self assessment system.

4.80

To ensure that all persons employed by the authority are added to the authority's payroll and tax deducted from any payments, except where the individuals are bona fide self employed or are employed by a recognised staff agency.

4.81

To ensure that all appropriate payroll documents are retained and stored.

4.82

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

4.83

Like all organisations, the authority 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.

4.84

The key controls on taxation are:

• budget managers are provided with relevant information and kept up-to-date on tax issues;
• budget managers are instructed on required record keeping;
• all taxable transactions are identified, properly carried out and accounted for within stipulated timescales;
• records are maintained in accordance with instructions; and
• returns are made to the appropriate authorities within the stipulated timescale.

4.85

To complete a monthly return of VAT inputs and outputs to HM Customs and Excise.

4.86

To provide details to the Inland Revenue regarding the Construction Industry Tax Deduction Scheme.

4.87

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.

4.88

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

4.89

Trading accounts and business units have become more important as local authorities have developed a more commercial culture. Under best value, authorities are required to keep trading accounts for services provided on a basis other than straightforward recharge of cost. They are also required to disclose the results of significant trading operations in the BVPP.

4.90

To advise on the establishment and operation of trading accounts and business units.

4.91

To observe all statutory requirements in relation to business units, including the maintenance of a separate revenue account to which all relevant income is credited and all relevant expenditure, including overhead costs, is charged, and an annual report in support of the final accounts.

4.92

To ensure that the same accounting principles are applied in relation to trading accounts as for other services or business units.

4.93

To ensure that each business unit prepares an annual business plan.