Shropshire Council

Appendix D - Systems and Procedures

In this appendix:

  1. General
  2. Income
  3. Payments to Employees, former Employees and Members
  4. Ordering and Paying for Work, Goods and Services
  5. Taxation
  6. Trading Accounts and Business Units

 

D.1 General

Why is this important?

D.1.1 The Council has many systems and procedures relating to the control of the Council’s assets, including purchasing, costing and management systems. Directors, managers and budget holders are 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 and data are properly processed and errors detected promptly.

D.1.2 The Section 151 Officer has a professional responsibility to ensure that the Council’s financial systems are sound and should therefore be consulted in advance of any new developments or changes to systems and procedures.

Key controls

  • Basic data exists to enable the council’s objectives, targets, budgets and plans to be formulated.
  • Performance is communicated to the appropriate managers on an accurate, complete and timely basis.
  • Early warning is provided of deviations from target, plans and budgets that require management attention.
  • Operating systems and procedures are secure.

Responsibilities of Section 151 Officer

D.1.3 To make arrangements for the proper administration of the Council’s financial affairs, including to: 

  • Issue advice, guidance and procedures for the Council’s officers and others acting on its behalf.
  • Determine the accounting systems, form of accounts and supporting financial records.
  • Establish arrangements for audit of the Council’s financial affairs.
  • Approve any changes to be made to existing financial systems or new systems introduced.

Responsibilities of directors, managers and budget holders

D.1.4 To ensure that accounting records are properly maintained and held securely.

D.1.5 To ensure that vouchers and documents with financial implications are not destroyed except in accordance with the Corporate Retention Policy

D.1.6 To ensure that a complete management trail, allowing financial transactions to be traced from the original document to the accounting records, and vice versa, is maintained.

D.1.7 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.
  • Output from the system is complete, accurate and timely.

D.1.8 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.

D.1.9 To ensure that there is a documented and tested disaster recovery plan to allow information system processing to resume quickly in the event of an interruption.

D.1.10 To ensure that systems are documented and staff trained in operations.

D.1.11 To consult with the Section 151 Officer and Head of Audit before changing any existing system or introducing new systems.

D.1.12 To consult with the Section 151 Officer and seek a departure from Financial Rules. This should be reported to the next meeting of Cabinet.

D.1.13 To establish a scheme of delegation identifying officers authorised to act upon the directors’ or managers behalf in respect of payments, income collection and placing orders, including variations, and showing the limits of their authority.

D.1.14 To supply lists of authorised officers, with specimen signatures and delegated limits to the Section 151 Officer, together with any subsequent variations.

D.1.15 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.

D.1.16 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.

D.1.17 To ensure that relevant standards and guidelines for computer systems issued by the appropriate director and managers are observed.

D.1.18 To ensure that computer equipment and software are protected from loss and damage through theft, vandalism etc.

D.1.19 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.
  • In developing systems, due regard is given to the issue of intellectual property rights.

D.2 Income

Why is this important?

D.2.1 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 Council’s cashflow and also avoids the time and cost of administering debts.

Key controls

D.2.2 The key controls for income are:

  • All income due to the Council is identified and charged correctly in accordance with the approved scale of fees and charges.
  • All income is collected in advance or at the point of service, unless the approval of the Section 151 Officer is given.
  • 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 Council is paid intact and without delay to the Section 151 Officer or as he/she directs, to the Council’s bank account, and is properly recorded.
  • Effective action is taken to pursue non-payment within defined timescales
  • Formal approval for 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 “Corporate Retention Schedule”

Responsibilities of Section 151 Officer

D.2.3 To agree arrangements for the collection of all income due to the Council and approve the procedures, systems and documentation for its collection.

D.2.4 To order and supply to departments all receipt forms, books or tickets and similar items and satisfy themselves regarding the arrangements for their control.

D.2.5 To ensure that appropriate arrangements and guidance is in place to ensure the security and confidential destruction of all income collection records via credit, debit cards and purchase cards and to ensure the Council is complying with the latest Payment Card Industry Security Standards.

D.2.6 To agree the write-off of bad debts up to £100,000 in each case and to refer larger sums to the appropriate Council bodies.

D.2.7 To approve all debts to be written off and keep a record of all sums written off up to the approved limit.

D.2.8 To obtain the approval of the Council body in consultation with the relevant Director or Head of Legal and Democratic, for writing off debts in excess of the approved limit.

Responsibilities of directors and managers

D.2.9 To establish a charging policy for the supply of goods or services, including the appropriate charging of VAT, and review it regularly, within corporate policies.

D.2.10 To separate the responsibility for identifying amounts due and the responsibility for collection, as far as is practicable. This also to include ensuring the security and confidentiality of income received via credit and debit cards.  Collection of income via credit and debit cards shall be in line with guidance issued by the Head of Finance, Governance and Assurance and in compliance with the Payment Card Industry Security Standards.

D.2.11 To establish and initiate appropriate recovery procedures, including legal action where necessary, for debts which are not paid promptly.

D.2.12 To issue official receipts or maintain other documentation for income collection.

D.2.13 To ensure that at least two employees are present when post is opened so that money received by post is properly identified and recorded.

D.2.14 To hold securely receipts, tickets and other records of income, for the appropriate period.

D.2.15 To lock away all income to safeguard against loss or theft, and to ensure the security of cash handling.

D.2.16 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.

D.2.17 To ensure income is not used to cash personal cheques or make other payments.

D.2.18 To supply the Section 151 Officer with details relating to work done, goods supplied or services rendered or other amounts due, to enable the Section 151 Officer to record correctly the sums due to the Council and to ensure accounts are sent out promptly. Directors and managers have a responsibility to assist the Section 151 Officer in collecting debts that they have originated, by providing any further information requested by the debtor, and in pursuing the matter on the Council’s behalf.

D.2.19 To keep a record of every transfer of official money between employees of the Council. The receiving officer must sign for the transfer and the transferor must retain a copy.

D.2.20 To recommend to the Section 151 Officer all debts to be written off and keep a record of all sums written off up to the approved limit. 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.

D.2.21 To include in the regular Revenue Budget Monitoring report a schedule showing all the amounts written off.

D.2.22 To write off and keep a record of all sums written off up to £5,000.

D.2.23 In agreement with the Section 151 Officer, to approve the write off of individual amounts between £5,001 and £100,000, and amounts for an individual debtor that in total fit within this sum.

D.2.24 To ensure that appropriate accounting adjustments are made following write-of action.

D.2.25 To raise and authorise credit notes for factual inaccuracies or administrative errors in the calculation and/or billing of the original debt. It should be noted that credit notes will not be issued:

  • for irrecoverable debts, as the formal write off procedure should be followed;
  • where the debtor cannot afford to pay at that time. The debt should remain, and revised payment terms agreed, as appropriate;
  • where a debt is to be recovered through deductions from payments. In such circumstances, the deductions made should be offset against the debtor.

D.2.26 To notify the Section 151 Officer of any instalment plan agreed with debtors that will continue to accrue debt and hold the existing debt in abeyance.

D.2.27 To notify the Section 151 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 Section 151 Officer and not later than 30 April.

D.2.28 Schools have full powers of virement within the budgets delegated to them in accordance with the Council’s Fair Funding Scheme.

D.3 Payments to employees, former employees and members

Why is this important?  

D.3.1 Employee costs are the largest item of expenditure for most Council services. It is therefore important that there should be controls in place to ensure that payments are made only where they are due for services to the Council and that payments accord with individual’s contracts of employment and conditions of service.

Key controls

D.3.2 The key controls for payments to existing and former employees and members are:

a) Proper authorisation procedures and adherence to corporate timetables for:

  • Starters
  • Leavers
  • Variations
  • Enhancements

b) Frequent reconciliation of payroll expenditure against approved budget.

c) All appropriate payroll documents are retained and stored for the defined period in accordance with the “Corporate Retention Schedule”.

Responsibilities of the Head of Human Resources

D.3.3 To arrange and control secure and reliable payment of salaries, wages, compensation or other emoluments to eligible existing and former employees in accordance with procedures prescribed by him/her on the due date.

D.3.4 To record and control tax and other statutory and voluntary deductions.

D.3.5 To make arrangements for payment of all travel and subsistence claims or financial loss allowance.

D.3.6 To make arrangements for paying members travel or other allowances upon receiving the prescribed form duly completed and authorised.

D.3.7 To provide advice and encouragement to secure payment of salaries and wages by most economical means.

Responsibilities of directors and managers

D.3.8 To ensure appointments are made in accordance with the rules of the Council and approved establishments, grades, scales of pay and that adequate budget provision is available for the current financial year and subsequent years.

D.3.9 To notify the Head of Human Resources of all appointments, terminations or variations which may affect the pay or pension of an employee or former employee, in the form and to the timescale required by the Head of Human Resources.

D.3.10 To ensure that adequate and effective systems and procedures are operated for personnel and payroll aspects, so that:

  • Payments are only authorised to bona fide employees.
  • Payments are only made where there is a valid entitlement.
  • Conditions, service and contracts of employment are correctly applied.
  • Employees’ details listed on the payroll are checked at regular intervals to verify accuracy and completeness.
  • There is an effective system of checking and certifying payroll forms.
  • Payroll forms are submitted in advance of payroll deadlines.

D.3.11 To send an up-to-date list of the names of officers that can authorise records to the Head of Human Resources, together with specimen signatories.

D.3.12 To ensure that payroll transactions are processed only through the payroll system. Directors and managers should give careful consideration to the employment status of individuals employed on a “self employed consultant or sub-contract” basis. The HM Revenue and Customs applies clear guidelines for employee status and in cases of doubt, advice should be sought from the Section 151 Officer.

D.3.13 To certify travel and subsistence claims and other allowances on a monthly basis. 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 and the Section 151 Officer is informed where appropriate.

D.3.14 To ensure that the details of any employee benefits in kind are notified to the Section 151 Officer to enable full and complete reporting within the Income Tax Self-Assessment system.

D.3.15 To ensure that all appropriate payroll documents are retained and stored securely for the defined period in accordance with the “Corporate Retention Schedule”.

Responsibilities of Members

D.3.16 To submit claims for members’ travel and subsistence allowances on a monthly basis.

Responsibilities of Officers

D.3.17 To submit claims for Officers’ travel and subsistence allowances on a monthly basis.

D.4 Ordering and paying for work, goods and services

Why is this important?

D.4.1 Public money should be spent with demonstrable probity and in accordance with the Council’s policies. The 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 Procurement Strategy and Contract Standing Orders.

General

D.4.2 Every officer and member of the Council 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. The Monitoring Officer maintains a Register of Members’ Interests for this purpose and further advice is given in the Council’s Constitution (Part 5).

D.4.3 Official orders must be in a form approved by the Section 151 Officer. Official orders must be issued for all work, goods or services to be supplied to the Council except for supplies of utilities, periodic payments such as rent or rates and petty cash purchases.

D.4.4 Each order must conform with the directions of the Council on central purchasing and the standardisation of supplies and materials. Standard terms and conditions must not be varied without the prior written approval of the Section 151 Officer and Head of Legal and Democratic.

D.4.5 Apart from petty cash and schools’ own bank accounts, the normal method of payment of money due from the Council shall be by BACS or other instrument drawn on the Council’s bank account by the Section 151 Officer. The use of direct debit shall require the prior agreement of the Section 151 officer.

D.4.6 Official orders must not be raised for any personal or private purchases, nor should personal or private use be made of Council contracts.

D.4.7 Requisitions, orders and associated terms and conditions shall be issued for all works, supplies and services except for:

  • Supplies of public utility services;
  • Periodical payments, e.g. rent;
  • Petty cash purchases;
  • Software licences and insurances
  • Other exceptions applied for via the exemption request guidelines and agreed and authorised in writing by the Section 151 Officer.

D.4.8 The use of purchase cards is only permitted through the Council’s Procurement Card Scheme. No other form of purchase card is permitted.

Key controls

D.4.9 The key controls for ordering and paying for work, goods and services are:

  • All goods and services are ordered only by appropriate persons and recorded.
  • All goods and services shall be ordered in accordance with the Council’s Procurement Strategy and Contract Procedure Rules unless they are purchased from internal sources within the Council.
  • Goods and services received are checked to ensure they are in accordance with the order.
  • Payments are authorised by officers who can certify that goods have been received to price, quantity and quality.
  • All payments are made to the correct person or entity, for the correct amount and are properly recorded.
  • All appropriate payment documents are retained and stored for the defined period in accordance with the Council’s ‘Corporate Retention Schedule’.
  • All expenditure including VAT, is accurately recorded against the right budget and any exceptions corrected.
  • 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.

Responsibilities of Section 151 Officer

D.4.10 To ensure that all of the Council’s financial systems and procedures are sound and well administered.

D.4.11 To approve any changes to existing financial systems and to approve any new systems before they are introduced.

D.4.12 To approve the form of official orders, and associated terms and conditions.

D.4.13 To make payments from the Council’s funds on the directors or managers authorisation that the expenditure has been duly certified in accordance with Financial Rules.

D.4.14 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.

D.4.15 To make payments where electronic matching of invoices within the Financial system has taken place once the authorised officer has approved and updated the system for receipt of the goods and services and the price matches or is below the order price.

D.4.16 To make payments to contractors on the certificate of the appropriate director, which must include details of the value of work, retention money, amounts previously certified and amounts now certified.

D.4.17 To provide advice and encouragement on making payments by the most economic means.

D.4.18 To approve, in exceptional circumstances advance payments to a supplier/ contractor for supplies or work. Following receipt of an Exemption Request (Appendix H) demonstrating why advanced payments are considered the only viable option in order to achieve service delivery.  In addition to the requirements of the Exemption Request Guidance the request should cover how:

  • Outcomes will be achieved, showing clear accountability for the outcomes and the management of the contract.
  • Sound, regular and effective financial management, governance and sustainability of the delivery body is to be reported upon and managed throughout the contract.
  • The body receiving the funds will demonstrate that it is using the money in a sustainable and transparent manner.

D.4.19 To maintain a record of advanced payments and conduct periodic checks on them.

Responsibilities of directors and managers  

D.4.20 To ensure that written and uniquely numbered orders are used for all goods and services other than the exceptions specified in D4.3 or where the Council’s procurement card is used.

D.4.21 To ensure that orders are only used for goods and services provided to the Council. Individuals must not use official orders to obtain goods or services for their private use.

D.4.22 To ensure that only those staff authorised by them authorise orders and to maintain an up-to-date list of such authorised staff, 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 in accordance with Contract Procedure Rules. Value for money should always be taken into consideration in accordance with the Council’s Procurement Strategy.

D.4.23 To ensure that the budgetary control system (SAMIS) is maintained and 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. Where Services maintain details of commitments on other systems, those systems must be reconciled with SAMIS on a monthly basis so as to protect the integrity of the Council’s financial records.

D.4.24 To ensure that goods and services are checked on receipt to ensure they are in accordance with the order. This check should, where possible, be carried out by a different officer from the person who authorised the order.  Appropriate entries should then be made in inventories or stores records.

D.4.25 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 (any evidence of receipt should be retained for 12 months).
  • That the invoice is addressed to Shropshire Council or the appropriate establishment such as a school.
  • 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.
  • That appropriate entries will be made in accounting records.

D.4.26 To ensure that an approved Exemption Request is in place for advance payments to a supplier/ contractor for supplies or work and that adequate records are maintained and scrutinised to justify the payments made.

D.4.27 To ensure that an authorised member of staff, if possible a different officer from the person who authorised the order and in every case a different officer from the person certifying the invoice, authorises invoices.

D.4.28 To ensure that the directors and managers maintain and review periodically a list of staff approved to certify and authorise invoices. Names of authorising officers together with details of the limits of their authority shall be forwarded to the Section 151 Officer.

D.4.29 Payment should not be 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 Head of Audit.

D.4.30 To encourage suppliers of goods and services to receive payment by the most economical means for the Council. Payments should, however, not be made by direct debit unless essential and with the prior approval of the Section 151 Officer.

D.4.31 To ensure that the Council obtain best value for money 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 set out in the Council’s Procurement Strategy and Contract Procedure Rules. These documents 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 rules.
  • Procedures for the submission, receipt, opening and recording of tenders.
  • The circumstances where financial or technical evaluation was necessary.
  • Procedures for negotiation.
  • Acceptance of tenders.
  • The form of contract documentation.
  • Cancellation clauses in the event of corruption or bribery.
  • Contract records.

D.4.32 To ensure that employees are aware of the national code of conduct for local government employees and any locally adopted codes or rules relevant to employees’ conduct.

D.4.33 To ensure that no loans, leasing or rental arrangements are entered into without prior agreement from the Section 151 Officer. This is because of the potential impact on the Council’s borrowing powers, to protect the Council against entering into unapproved credit arrangements and to ensure value for money is being obtained.

D.4.34 To notify the Section 151 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 Section 151 Officer and, in any case, not later than 30 April.

D.4.35 With regard to contracts for construction and alterations to buildings and for civil engineering works, to document and agree with the Section 151 Officer and the appropriate director or manager, 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.

D.4.36 To notify the Section 151 Officer immediately of any expenditure to be incurred as a result of statute or court order where there is no budgetary provision.

D.4.37 To ensure that all appropriate payment records are retained and stored for the defined period in accordance with the “Corporate Retention Schedule”.

D.4.38 Where directors wish to initiate a payment to a third party without a supporting invoice, an official request for payment must be submitted in a form approved by the Section 151 Officer. Any such request must be authorised by an officer designated with an appropriate approval limit in the relevant service Scheme of Financial Delegation. They are responsible for ensuring that all payment details provided are accurate and that supporting records and documentation are available to substantiate the payment, including an official VAT receipt to all for the reclaim of any VAT element.

D.4.39 Non-invoice payments should be requested on an exceptional basis only. Where payments of this type need to be made on a regular basis directors and senior managers must consider, in conjunction with the Section 151 Officer, other alternative options which may be more appropriate.

D.4.40 Payments or reimbursements in respect of salaries and wages, travelling expenses or other employment allowances must be processed through the Payroll system and not treated as a non-invoice payment.

D.5 Taxation

Why is this important? 

D.5.1 Like all organisations, the 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.

Key controls

D.5.2 The key controls on taxation are:

  • Budget holders are provided with relevant information and kept up-to-date on tax issues.
  • Budget holders 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.
  • Returns are made to the appropriate authorities within the stipulated

Responsibilities of Head of Human Resources  

D.5.3 To complete all HM Revenue and Customs returns regarding PAYE.

Responsibilities of Section 151 Officer

D.5.4 To complete a monthly return of VAT inputs and outputs to HM Revenue and Customs.

D.5.5 To provide details to the HM Revenue and Customs regarding the Construction Industry Tax Deduction Scheme. To maintain up-to-date guidance for Council employees on taxation issues in the ‘Accounting Manual’ and the ‘Tax Manual’. Responsibilities of directors and managers.

Responsibilities of directors, managers and budget holders

D.5.6 To ensure that the correct VAT liability is attached to all income and that all VAT recoverable on purchases complies with HM Revenue and Customs and Regulations.

D.5.7 To ensure that, where construction and maintenance works are undertaken, the contractor fulfils the necessary Construction Industry requirements.

D.5.8 To ensure that all persons employed by the Council are added to the Council’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.

D.5.9 To follow the guidance on taxation issued by the Section 151 Officer.

D.6 Trading accounts / Business units

Business Units

Why is this important?  

D.6.1 Compulsory competitive tendering led to the establishment of business units who operate on a fully commercial basis in accordance with statutory requirements. The Council has also established business units to enable staff to prepare for future competition and to demonstrate explicitly that services are valued and provide value for money.  Financial Rules apply equally to the Council’s Business Units.

Responsibilities of directors and managers

D.6.2 To consult with the Section 151 Officer where a business unit wishes to enter into a contract with a third party where the contract expiry date exceeds the remaining life of their main contract with the Council. In general, such contracts should not be entered into unless they are capable of being terminated within the main contract period without penalty.

D.6.3 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.

D.6.4 To ensure that similar accounting principles are applied in relation to trading accounts of other services or Business Units.

D.6.5 To ensure that each Business Unit prepares an annual business plan.