Constitution Part 4 - Financial procedure rules

2.1 Overview - Control Requirements – Statutory Basis

2.1.1 The Council is a complex organisation and requires internal controls to ensure that it manages and monitors its progress towards the strategic objectives it sets.  

2.1.2 A range of internal control arrangements are established to provide assurance that:

• i) operations are efficient and effective;
• ii) financial information and reporting is reliable;
• iii) there is compliance with laws and regulations.

2.1.3 Managerial control systems exist to define policies, set objectives and plans, monitor financial and other performance indicators and to take appropriate action.

2.1.4 Financial and operational control systems and procedures include physical safeguards for assets, segregation of duties, authorisation and approval arrangements.  

2.1.5 Internal Audit is responsible for independently evaluating organisational systems of internal control and undertaking effective reviews of systems and procedures on a regular basis.

2.1.6 In addition to the methods of internal control the Council is also subject to External Review in terms of its service delivery and also in its financial arrangements through its External Audits.

2.1.7 Director of Finance, IT and Digital’s responsibilities:

• i) Proper administration of the Council’s financial affairs;
• ii) To set financial standards and monitor compliance;
• iii) Prepare, review and amend Financial Procedure Rules and inform Elected Members and staff of the content and implications.
• iv) Provide guidance on the development of the Medium Term Financial Strategy, Local Council Tax Support Scheme and Treasury Management Strategy. 

2.1.8 Responsibilities of Directors and Chief Officers:

• i) Ensure new systems for maintaining financial records are agreed with the Director of Finance, IT and Digital:
• ii) Ensure that the financial implications of new proposals, including the development of new services, changes to existing services and savings/efficiency proposals are agreed with the Director of Finance, IT and Digital;
• iii) Ensure that Financial Procedure Rules are known to all staff;
• iv) Secure compliance with Financial Procedure Rules and promote financial management standards set by the Director of Finance, IT and Digital. 

2.2 Internal Audit

2.2.1 The Director of Finance, IT and Digital has a statutory responsibility for the overall financial administration of the Council’s affairs and is responsible for maintaining an adequate and effective internal audit.

2.2.2 Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organisation’s operations. It helps an organisation accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes.

2.2.3 In undertaking its work, Internal Audit is independent in planning and operation and carries out its activities in accordance with the Public Sector Internal Audit Standards (PSIAS) and any other relevant guidance.

2.2.4 In carrying out the internal audit function the Director of Finance, IT and Digital, or their authorised representative, has authority, subject to any statutory limitations, to:

• i) Enter at all times any Council land or premises;
• ii) Have access to all documents, correspondence and other records relating to the finances of the Council and apply any test or check deemed necessary;
• iii) Require and receive from employees, Elected Members or other persons, information and explanations concerning any matter under examination;
• iv) Require any employee of the Council to produce any cash, stores or other property of the Council under the employee's control. 

2.2.5 Director of Finance, IT and Digital’s responsibilities:

• i) Maintain Strategic and Annual audit plans taking account of relative risk and in consultation with the Chief Executive, Directors and Chief Officers;
• ii) Ensure that Internal Audit have access at reasonable times to all Council premises, records, documents and staff for information and explanations;
• iii) Where appropriate report to the Audit and Governance Committee on any audit actions the Chief Executive, Directors and Chief Officers have formally stated they will not implement or have not been implemented within six months of agreement;
• iv) Report annually to the Audit and Governance Committee on the main issues raised by Internal Audit during the year;
• v) Investigate promptly any fraud or irregularity brought to their attention and report to the Head of Paid Service.

2.2.6  Responsibilities of Directors and Chief Officers:

• i) To ensure that Internal Auditors are given access at all reasonable times to premises, records, documents and staff for the purposes of their work and liaise and co-operate with Internal Auditors on service specific issues;

• ii) To consider and respond promptly to risks identified by Internal Audit, providing an action plan to mitigate risks identified and to confirm in writing when actions have been implemented.  

• iii) Notify the Director of Finance, IT and Digital immediately of any suspected fraud or irregularity. Take all necessary steps to prevent further loss and secure records for any investigation.

2.3 External Audit

2.3.1 Given the special accountabilities attached to public money and the conduct of public business, external audit in local government is characterised by three distinct features:

• i) auditors are appointed independently from the bodies being audited by the Public Sector Audit Appointments Ltd;

• ii) external audit covers not only the audit and opinion on financial statements, but also the financial aspects of corporate governance and aspects of performance management;

• iii) the external audit approach is defined in a statutory Code of External Audit Practice. 

2.3.2 External auditors are responsible for following the Code of External Audit Practice which sets out the National Audit Office view of what constitutes best professional practice and covers the standards, procedures and techniques that auditors should adopt.  

2.3.3 Director of Finance, IT and Digital’s responsibilities:

• i) Liaise with the external auditor in relation to time-tabling audits and working procedures;

• ii) Ensure that external auditors have reasonable access to premises, records, documents and staff for the purposes of their work;

• iii) Follow up on recommendations made by external audit to ensure their implementation and report to Council on actions taken to address recommendations made in the Audit Management Letter.

2.3.4 Responsibilities of Directors and Chief Officers:

• i) To ensure that external auditors are given reasonable access to premises, records, documents and staff for the purposes of their work and liaise and co-operate with External Auditors on service specific issues;

• ii) To ensure that all systems and records are up to date and available for inspection;

• iii) Respond to recommendations and reports from external audit and take appropriate action. 

2.4 Banking Requirements

2.4.1 Being a complex organisation the Council has varied banking requirements. This section sets out the procedures to be followed in the operation of those Bank Accounts.

2.4.2 Key Banking Controls are:

i) All Banking Arrangements in relation to the Council’s business are made through the Director of Finance, IT and Digital. The Director of Finance, IT and Digital or his/her representative is authorised to pay or collect all monies due to or by the Council by whatever means he/she deems appropriate;

ii) All Bank Accounts will have an official title and in no circumstances will accounts be opened in the name of an individual;

iii) All Bank Accounts must be reconciled regularly in accordance with any timescale and procedure note that the Director of Finance, IT and Digital may issue. 

iv) All cheques should be held securely.  

2.4.3 Director of Finance, IT and Digital’s responsibilities:

• To make all overall arrangements to secure the Council’s Banking needs.

2.4.4 Responsibilities of Directors and Chief Officers:

• i) To agree all arrangements for the opening, closing or operation of specific bank accounts relating to the Council as guardian with the Director of Finance, IT and Digital;

• ii) Ensure as far as is practicable the separation of duties to ensure that a single member of staff does not complete all procedures in connection with transactions through bank accounts;

• iii) Ensure that accounts are reconciled regularly and appropriate action taken in regard to any discrepancies identified;

• iv) Ensure that cheques are securely stored. 

2.5 Cash Arrangements

2.5.1 Effective cash collection and control arrangements are essential to ensure that all monies received by the Council are receipted, effectively reconciled, securely controlled and banked properly.

2.5.2 The key controls within the Council’s arrangements are:

• i) the arrangements for the receipt and control of all monies received by the Council will be subject to the control and approval of the Director of Finance, IT and Digital;

• ii) all monies received must be acknowledged, recorded and either paid over to the Director of Finance, IT and Digital or banked in the Council’s name without delay;

• iii) All receipts forms will be ordered and controlled by the Director of Finance, IT and Digital and only official receipts will be issued for monies received on behalf of the Council;

• iv) Cash and receipt forms will at all times be kept in a safe place;

• v) Only official receipts will be issued for money received on behalf of the Council;

• vi) Personal cheques may not be cashed, nor payments made, out of money held on behalf of the Council; 

• vii) Every transfer of official monies from one Officer to another must be evidenced by the signature of the receiving officer;

• viii) Sums may be advanced to employees receiving cash income for the purpose of giving change.  The employee is personally responsible for such sum and must sign for its receipt.

2.5.3 Director of Finance, IT and Digital’s responsibilities:

• i) Approve all arrangements, procedures and systems for the collection of income;
• ii) Order and supply all forms of receipts, tickets etc. and be satisfied with the arrangements for their control.

2.5.4. Responsibilities of Directors and Chief Officers:

• i) To ensure that all receipts, tickets etc. and other records of income are held securely and kept for the appropriate length of time;

• ii) Ensure adequate security arrangements are in place to safeguard income against loss or misappropriation, and to ensure the security of cash handling;

• iii) Ensure adequate separation of duties as far as practicable so that cash received is properly identified and recorded;

• iv) Ensure that all income is promptly paid into an appropriate account of the Council and is recorded to provide an audit trail;

• v) Ensure income is not used to cash personal cheques or make other payments;

• vi) Maintain a record of all transfers of official money between employees. 

2.6 Income and Recovery

2.6.1 The recovery of all sums due to the Council is subject to the control of the Director of Finance, IT and Digital.  Whenever practicable, departments are required to obtain payment in advance of supplying goods or services as this improves the Council’s cash flow and also avoids the time and cost of administering debts and eliminates the risk of bad debts.

2.6.2 The key controls within the Council’s arrangements are:

• i) all monies billed and collected should be in accordance with the scales of rents, fees and charges approved by Council, Policy Committees or delegated to specific Officers; 

• ii) effective action must be taken to pursue non payment of debt within defined timescales;

• iii) no debt, once correctly established and due to the Council, can be written off except if approved under delegated powers or by the Finance and Corporate Affairs Committee. The Director of Finance, IT and Digital is responsible for developing and reviewing appropriate recovery strategies;

• iv) appropriate accounting adjustments will be made following writeoff action within defined timescales;

• v) all appropriate income documents must be retained for the defined period in accordance with the “Guidelines on the Retention of Records”, issued from time to time;

• vi) appropriate credit checks should be carried out in accordance with guidance to be issued by the Director of Finance, IT and Digital.  

2.6.3 Director of Finance, IT and Digital’s responsibilities:

• i) To approve all systems and arrangements for the raising, collection and recovery of all sums due to the Council;

• ii) To establish a recovery strategy and ensure appropriate action in consultation with the appropriate Director/Chief Officer is taken to recover debts, which are not paid promptly;

• iii) To agree the write-off of debts within the approved limit of £50,000;

• iv) To refer unpaid debts above £50,000, in consultation with the appropriate Director/Chief Officer, to the Finance and Corporate Affairs Committee for approval to write-off;

• v) Set a corporate framework within the Medium Term Financial Strategy for charging policies of the Council;

• vi) Ensure appropriate accounting adjustments are made in relation to write-off action;

• vii) Ensure regular review and maintenance of adequate Bad Debt provisions by departments.  

2.6.4 Responsibilities of Directors and Chief Officers:

• i) Review charging policy in line with corporate policies;

• ii) Take appropriate action to minimise increasing and persistent debt;

• iii) Ensure an adequate separation of duties as far as practicable for identifying and billing sums due and collection of monies;

• iv) To maintain records on debts raised sufficient to enable recovery action to be taken for debts unpaid within a reasonable time;

• v) Notify the Director of Finance, IT and Digital of all outstanding income relating to the previous year as soon as possible after the 31 March in line with the timetable determined by the Director of Finance, IT and Digital;

• vi) Review and maintain, in consultation with the Director of Finance, IT and Digital, an adequate departmental Bad Debt provision.

2.7 Ordering and Paying for Goods and Services

2.7.1 The ordering and paying for goods and services is critical to the Council’s ability to deliver services.  It is essential that the Council’s controls are adequate to demonstrate probity and good practice.  Accordingly the following controls exist:

• i) Budget provision is required for all expenditure prior to ordering;

• ii) Budget provision confers authority to spend within that budget;

• iii) All payments other than from payment cards, petty cash or specifically approved bank accounts (primarily Schools) must be made by the Director of Finance, IT and Digital from the Council’s Bank Account in the manner deemed most appropriate by the Director of Finance, IT and Digital;

• iv) All instructions for payment must be authorised by the appropriate budget holder or other person duly approved. This should only be done after acceptable receipt of the goods or services in accordance with the order;

• v) Expenditure must be allocated to the correct heading.

2.7.2 Responsibilities of the Director of Finance, IT and Digital:

• i) To make payments in accordance with the above Council rules;

• ii) To maintain and issue detailed payment instructions; 

• iii) To maintain a list of budget holders or their nominees authorised to incur expenditure;

• iv) To store, or issue instructions in relation to the storage of source documents to support the accounts and taxation responsibilities.

2.7.3 Responsibilities of Directors and Chief Officers:

• i) To ensure that rules and instructions in relation to the authorisation of orders and payments are followed within their service area;

• ii) To ensure that the Director of Finance, IT and Digital is informed of all budget holders and their nominees entitled to authorise expenditure.

2.8 Paying Staff and Elected Members

2.8.1 Staff costs form the largest single element of the Council’s expenditure and appropriate controls are necessary to ensure that payments are only made in accordance with the appropriate terms and conditions. Accordingly the Council has the following controls:

• i) The calculation of all payments to staff/Elected Members must be done by the Director of Finance, IT and Digital supported by appropriate Human Resources/Legal advice;

• ii) All appointments must be made in accordance with appropriate terms and conditions;

• iii) All appointments must have adequate budget provision;

• iv) All prime documents used to calculate pay must be signed by the individual and authorised by an appropriate budget holder or their nominee;

• v) All payments to Elected Members must be in accordance with the approved scheme of allowances;

• vi) The Chief Executive authorises all changes in Chief Officer pay.  

2.8.2 Responsibilities of the Director of Finance, IT and Digital:

• i) To make payments in accordance with the above Council rules;

• ii) To maintain and issue detailed payment instructions;

• iii) To maintain a list of budget holders or their nominees authorised to incur expenditure;

• iv) To store, or issue instructions in relation to the storage of source documents to support the accounts and taxation responsibilities. 

2.8.3 Responsibilities of Directors and Chief Officers:

• i) To ensure that rules and instructions with regard to appointments and authorisation of payments are followed within their service area;

• ii) To ensure that the Director of Finance, IT and Digital is informed of all budget holders and their nominees entitled to authorise expenditure;

• iii) To inform the Director of Finance, IT and Digital promptly of any changes affecting payments to staff.

2.9 Preventing Financial Irregularities

2.9.1 In administering its responsibilities, the Council is committed to the prevention of financial irregularities and in its Anti Fraud and Corruption Strategy, issued from time to time, Council makes it clear that the Council will not tolerate fraudulent or corrupt acts committed either by its Officers, Elected Members, or those companies or organisations with which it does business.

2.9.2 The Council’s expectation on propriety and accountability is that Elected Members and staff at all levels will lead by example in ensuring adherence to rules, procedures and Codes of Conduct.

2.9.3 The Council has in place a network of systems and procedures to cover its stewardship of public funds responsibilities and it maintains a continuous overview of the adequacy of its corporate governance arrangements through its Internal and External Auditors.

2.9.4 The Council’s “Whistleblowing Arrangements” issued from time to time, provide the opportunity for issues to be raised in a confidential manner. In addition, the Council operates defined protocols, such as the procedures to comply with the Proceeds of Crime Act, setting out individual responsibilities for reporting and the subsequent investigation of irregularities.

2.9.5 Director of Finance, IT and Digital’s responsibilities:

• i) Maintain adequate and effective audit arrangements;

• ii) Review the Council’s policies on Anti Fraud and Corruption;

• iii) Ensure irregularities are appropriately investigated and are reported to the Head of Paid Service to determine what further action should be instigated.

2.9.6 Responsibilities of Directors and Chief Officers:

• i) Ensure all staff are aware of the Council’s Anti Fraud and Corruption Strategy; 
• ii) Ensure that all suspected irregularities are reported to the Director of Finance, IT and Digital and if appropriate, the Monitoring Officer.

2.10 Assets, Stocks and Stores

2.10.1 The Council holds assets in the form of property, vehicles, equipment, furniture and other items of significant value. The Council’s arrangements seek to ensure that such assets are safeguarded and used efficiently in the delivery of services.

2.10.2 Each Chief Officer is responsible for the security of assets under his/her control. Where practicable, each asset should be marked as the property of the Council.

2.10.3 Inventories must be maintained by Departments/Establishments of all assets other than land having a value of £500 or more covering plant, equipment, furnishings, fittings, machinery, vehicles and other nonconsumable items. The inventory must record:

• i) description of item including make, model, serial number;
• ii) date of purchase and purchase price;
• iii) whether asset is leased;
• iv) security tag reference (where applicable);
• v) location of asset.

2.10.4 The disposal of surplus or obsolete items will be undertaken in accordance with the ”Guidelines for the disposal of assets and IT equipment". An annual physical asset inventory check should be undertaken and any discrepancies identified and reported to the relevant Head of Service.  All items loaned to Officers and Elected Members e.g. laptop computers should be recorded and a signature obtained.

2.10.5 The Director of Neighbourhoods and Regulatory Services has corporate responsibility for maintaining an Asset Register of all land and buildings owned by the Council and will ensure appropriate valuations and revaluations are carried out. The Director of Legal, Governance and Human Resources is responsible for the safe custody of all deeds. The Council’s assets must not be used for any purpose other than the discharge of the Council’s functions. Any unauthorised or misuse of Council assets will result in appropriate disciplinary action.  

2.10.6 All stock received, transferred, issued or returned must be recorded in a manner approved by the Director of Finance, IT and Digital. In stores, deliveries must be checked for quantity and quality and goods should only be issued from the stores on production of a valid requisition, properly certified.

2.10.7 Stores levels must be reviewed by Chief Officers at regular intervals to ensure that stores are not held in excess of reasonable requirements and to prevent the holding of obsolete stores.

2.10.8 The responsible Head of Service will ensure that arrangements are made for a system of continuous stock checking or an annual stock check is made. A certificate of stockholding at 31 March every year must be made available on demand to the Director of Finance, IT and Digital.

2.10.9 Adjustments of deficiencies or surpluses on stocks or disposal of surplus, obsolete or damaged stock should not be made without the agreement of the Director of Finance, IT and Digital with whom the method of disposal must also be agreed prior to disposal.

2.10.10 Director of Finance, IT and Digital’s responsibilities:

• i) Ensure inventories and asset registers are maintained in accordance with good practice and these procedure rules;
• ii)Advise on best practice for the disposal of assets, stocks and stores. 

2.10.11 Responsibilities of Directors and Chief Officers:

• i) Ensure the maintenance of inventories in accordance with Financial Procedure Rules;
• ii) Carry out annual checks on inventories and take appropriate action in regard to surpluses and deficiencies;
• iii) Make suitable arrangements for the care and custody of assets stocks and stores;
• iv) Agree disposal of assets with the Director of Finance, IT and Digital;
• v) Pass all title deeds to the Director of Legal, Governance and Human Resources;
• vi) Carry out regular stock checks and supply stockholding certificates as required by the Director of Finance, IT and Digital. 

2.11 Gifts and Hospitality

2.11.1 The Council’s policy for Gifts and Hospitality is included in the Staff Information and Recruitment Pack which is provided to all current and new employees.

2.11.2 Employees and Elected Members must be careful not to accept any gift or hospitality, which might interfere with or be perceived as impacting on Council business or services. This does not include gifts of minor value, which are used at work i.e. diaries, pens, calendars etc. However, any other gifts or hospitality offered should be reported to the appropriate Director or Chief Officer who will then determine the action to be taken. In the case of gifts, these may be then returned or donated for the Chairman’s charity use.  Where a gift is not returned the donor will be advised of the use to which it has been put.  

2.11.3 Employees and Elected Members should not accept personal gifts from contractors and outside suppliers.

2.11.4 Employees and Elected Members should only accept offers of hospitality if there is a genuine need to impart information or represent the Council in the community. Offers to attend purely social or sporting functions should be declined, unless they are part of the life of the community or where the Council should be seen to be represented. They should be properly authorised and recorded.

2.11.5 When hospitality has to be declined, those making the offer should be courteously but firmly informed of the procedures and standards operating within the Council.

2.11.6 When receiving hospitality, employees and Elected Members should be particularly sensitive as to its timing in relation to decisions which the Council may be taking affecting those providing the hospitality.  When visits to inspect equipment etc are required, employees should ensure that the Council meets the cost of such visits to avoid compromising the integrity of subsequent purchasing decisions.

2.11.7 Responsibilities of Directors and Chief Officers:

• i) To ensure compliance with the Council’s policy and Codes of Conduct in respect of gifts, hospitality and personal interests;
• ii) To maintain a register of staff interests, gifts and hospitality.