A.7 The head of paid service is responsible for the corporate and overall strategic management of the authority as a whole. He or she must report to and provide information for the Cabinet, the full council, the overview, scrutiny and standards committees and other committees. He or she is responsible for establishing a framework for management direction, style and standards and for monitoring the performance of the organisation. The head of paid service is also responsible, together with the monitoring officer, for the system of record keeping in relation to all the council's decisions (see below).

A.8 The monitoring officer is responsible for promoting and maintaining high standards of financial conduct and therefore provides support to the standards committee. The monitoring officer is also responsible for reporting any actual or potential breaches of the law or maladministration to the full council and/or to the Cabinet and for ensuring that procedures for recording and reporting 'key decisions' are operating effectively.

A.9 The monitoring officer must ensure that Cabinet decisions and the reasons for them are made public. He or she must also ensure that council members are aware of decisions made by the Cabinet and of those made by officers who have delegated Cabinet responsibility.

A.10 The monitoring officer is responsible for advising all councillors and officers about who has authority to take a particular decision.

A.11 The monitoring officer is responsible for advising the Cabinet or full council about whether a decision is likely to be considered contrary or not wholly in accordance with the policy framework.

A.12 The monitoring officer (together with the Head of Finance) is responsible for advising the Cabinet or council about whether a decision is likely to be considered contrary or not wholly in accordance with the budget. Actions that may be 'contrary to the budget' include:

A.13 The monitoring officer is responsible for maintaining an up-to-date constitution.

Head of Finance

A.14 The Head of Finance has statutory duties in relation to the financial administration and stewardship of the authority. This statutory responsibility cannot be overridden. The statutory duties arise from:

• Section 151 of the Local Government Act 1972
• Local Government Finance Act 1988
• The Local Government and Housing Act 1989
• The Accounts and Audit Regulations 2003.

A.15 The Head of Finance is responsible for:

• the proper administration of the authority's financial affairs
• setting financial management standards and monitoring their compliance
• advising on the corporate financial position and on the key financial controls necessary to secure sound financial management
• providing financial information
• preparing the revenue budget, capital programme and for treasury management.

A.16 Section 114 of the Local Government Finance Act 1988 requires the Head of Finance to report to the full council, Cabinet and external auditor if the authority or one of its officers:

• has made, or is about to make, a decision which involves incurring unlawful expenditure
• has taken, or is about to take, an unlawful action which has or would result in a loss or deficiency to the authority
• is about to make an unlawful entry in the authority's accounts.

Section 114 of the 1988 Act also:

• requires the Head of Finance to nominate a properly qualified member of staff to deputise should he/she be unable to perform the duties under Section 114 personally

• requires that the council provides the Head of Finance with sufficient staff, accommodation and other resources – including legal advice where this is necessary – to carry out the duties under section 114.

Chief officers

A.17 Chief officers are responsible for:

• ensuring that Cabinet members are advised of the financial implications of all proposals and that the financial implications have been considered by the Head of Finance in sufficient time to enable him/her to examine such proposals from a financial point of view and to report as necessary thereon.

• signing contracts on behalf of the authority.

A.18 It is the responsibility of chief officers to consult with the Head of Finance and seek approval regarding any matters which are liable to affect the authority's finances materially, before any commitments are incurred.

Other financial accountabilities in relation to:

A.19 The full council is responsible for agreeing procedures for virement of expenditure between budget headings.

A.20 Chief officers are responsible for agreeing in-year virements within delegated limits, in consultation with the Head of Finance.

A.21 The Head of Finance is responsible for selecting accounting policies and ensuring that they are applied consistently.

A.22 The Head of Finance is responsible for determining the accounting procedures and records for the authority.

A.23 The Head of Finance is responsible for ensuring that the annual statement of accounts is prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom: A Statement of Recommended Practice (CIPFA/LASAAC). The full council is responsible for approving the annual statement of accounts.

FINANCIAL REGULATION B – FINANCIAL PLANNING

Introduction

B.1 The full council is responsible for agreeing the authority's policy framework and budget, which will be proposed by the Cabinet. In terms of financial planning, the key elements are:

• the corporate plan
• the budget
• the capital programme.
• the Community Strategy
• the Performance and Improvement Plan

Policy framework

B.2 The full council is responsible for approving the policy framework and budget.

B.3 The full council is also responsible for approving procedures for agreeing variations to approved budgets, plans and strategies forming the policy framework and for determining the circumstances in which a decision will be deemed to be contrary to the budget or policy framework. Decisions should be referred to the full council by the monitoring officer.

B.4 The full council is responsible for setting the level at which the Cabinet may reallocate budget funds from one service to another. The Cabinet is responsible for taking in-year decisions on resources and priorities in order to deliver the budget policy framework within the financial limits set by the council.

Preparation of the corporate plan, community strategy and performance and improvement plan

B.5 The head of paid service is responsible for proposing the corporate plan, community strategy and performance and improvement plan to the Cabinet for consideration before its submission to full council for approval.

Preparation of the best value performance plan

B.6 The Head of Paid Service is responsible for proposing the best value performance plan to the Cabinet for consideration before its submission to full council for approval.

Budgeting

Budget format

B.7 The general format of the budget will be approved by the full council and proposed by the Cabinet on the advice of the Head of Finance. The draft budget should include allocation to different services and projects (called budget heads), proposed taxation levels and contingency funds.

Budget preparation

B.8 The Head of Finance is responsible for ensuring that a revenue budget is prepared on an annual basis and a general revenue plan on a three-year basis for consideration by the Cabinet, before submission to the full council. The full council may amend the budget or ask the Cabinet to reconsider it before approving it.

B.9 It is the responsibility of chief officers to ensure that budget estimates reflecting agreed service plans are submitted to the Cabinet and that these estimates are prepared in line with guidance issued by the Cabinet.

B.10 The Head of Finance is responsible for providing appropriate financial information to enable budgets to be monitored effectively. He or she must monitor and control expenditure against budget allocations and report to the Cabinet on the overall position on a regular basis.

B.11 It is the responsibility of chief officers to control income and expenditure within their area and to monitor performance taking account of financial information provided by the Head of Finance. They should report on variances within their own areas. They should also take any action necessary to avoid exceeding their budget allocation and alert the Head of Finance to any problems.

Preparation of the capital programme

B.12 The Head of Finance is responsible for ensuring that a capital programme is prepared on an annual basis for consideration by the Cabinet, before submission to the full council.

Guidelines

B.13 Guidelines on budget preparation are issued to members and chief officers by the Cabinet following agreement with the Head of Finance. The guidelines will take account of:

• legal requirements
• medium term planning prospects
• the corporate plan
• available resources
• spending pressures
• best value reviews
• the community strategy
• the performance and improvement plan
• other internal policy documents
• cross cutting issues (where relevant).

Maintenance of reserves

B.14 It is the responsibility of the Head of Finance to advise the Cabinet and/or full council on prudent levels of reserves for the authority.

FINANCIAL REGULATION C – RISK MANAGEMENT AND CONTROL OF RESOURCES

Introduction

C.1 It is essential that robust systems are developed and maintained for identifying and evaluating all significant operational risks to the authority on an integrated basis. This should include the proactive participation of all those associated with planning and delivering services.

Risk management

C.2 The Cabinet is responsible for approving the authority's risk management policy statement and strategy and for reviewing the effectiveness of risk management. The Cabinet is responsible for ensuring that proper insurance exists where appropriate.

C.3 The Head of Finance is responsible for preparing the council's risk management policy statement and for promoting it throughout the authority and for advising the Cabinet on proper insurance cover where appropriate.

Internal control

C.4 Internal control refers to the systems of control devised by management to help ensure the authority's objectives are achieved in a manner which promotes economical, efficient and effective use of resources and that the authority's assets and interests are safeguarded.

C.5 The Head of Finance is responsible for advising on effective systems of internal control. These arrangements need to ensure compliance with all applicable statutes and regulations, and other relevant statements of best practice. They should ensure that public funds are properly safeguarded and used economically, efficiently, and in accordance with the statutory and other authorities that govern their use.

C.6 It is the responsibility of chief officers to establish sound arrangements for planning, appraising, authorising and controlling their operations in order to achieve continuous improvement, economy, efficiency and effectiveness and for achieving their financial performance targets.

Audit requirements

C.7 The Accounts and Audit Regulations 2003, Section 6, require that: A relevant body shall maintain an adequate and effective system of internal audit of its accounting records and accounting control systems in accordance with proper internal audit practices, and any officer or member of that body shall, if the body requires-

1. make available such documents of the body which relate to its accounting and other records as appear to that body to be necessary for the purposes of the audit; and

2. shall supply the body with such information and explanation as that body considers necessary for that purpose.

C.8 The Audit Commission is responsible for appointing external auditors to each local authority. The basic duties of the external auditor are governed by section 15 of the Local Government Finance Act 1982, as amended by section 5 of the Audit Commission Act 1998.

C.9 The authority may, from time to time, be subject to audit, inspection or investigation by external bodies such as HM Customs and Excise and the Inland Revenue who have statutory rights of access.

Preventing fraud and corruption

C.10 The Head of Finance is responsible for the development and maintenance of an anti-fraud and anti-corruption policy.

Assets

C.11 Chief officers should ensure that records and assets are properly maintained and securely held. They should also ensure that contingency plans for the security of assets and continuity of service in the event of disaster or system failure are in place.

Treasury management

C.12 The Council has adopted the key recommendations of CIPFA's Treasury Management in the Public Services: Code of Practice.

C.13 The Council will create and maintain, as the cornerstones for effective treasury management:

• A treasury management policy statement, stating the policies and objectives of its treasury management activities.

• Suitable treasury management practices (TMPs), setting out the manner in which the organisation will seek to achieve those policies and objectives, and prescribing how it will manage and control those activities.

C.14 The Council will receive reports on its treasury management policies, practices and activities, including, as a minimum, an annual strategy and plan in advance of the year, and annual report after its close, in the form prescribed in its TMPs.

C.15 The Council delegates responsibility for the implementation and monitoring of its treasury management policies and practices to the Cabinet, and for the execution and administration of treasury management decisions to the Head of Finance, who will act in accordance with the Council's policy statement, TMPs and CIPFA's Standard of Professional Practice on Treasury Management.

C.16 The Head of Finance is responsible for reporting to the Cabinet on a regular basis on the activities of the treasury management operation and on the exercise of his/her delegted treasury management powers..

Staffing

C.17 The full council is responsible for determining how officer support for Cabinet and non-Cabinet roles within the authority will be organised.

It is the duty of the authority:-

1. To designate one of their officers as the head of their paid service.

2. To provide that officer with such staff accommodation and other resources as are in his or her opinion, sufficient to allow the duties under this section to be performed.

C.18 The head of paid service is responsible for providing overall management to staff. He or she is also responsible for ensuring that there is proper use of the evaluation or other agreed systems for determining the remuneration of a job.

C.19 Chief officers are responsible for controlling total staff numbers by:

• advising the Cabinet on the budget necessary in any given year to cover estimated staffing levels

• adjusting the staffing numbers to that which can be funded within approved budget provision, varying the provision as necessary within that constraint in order to meet changing operational needs

• the proper use of appointment procedures.

FINANCIAL REGULATION D – SYSTEMS AND PROCEDURES

Introduction

D.1 Sound systems and procedures are essential to an effective framework of accountability and control.

General

D.2 The Head of Finance is responsible for the operation of the authority's 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 Head of Finance. However, chief officers are responsible for the proper operation of financial processes in their own departments.

D.3 Any changes to agreed procedures by chief officers to meet their own specific service needs should be agreed with the Head of Finance.

D.4 Chief officers should ensure that their staff receive relevant financial training in consultation with the Head of Finance.

D.5 Chief officers must ensure that, where appropriate, computer and other systems are registered in accordance with Data Protection legislation. Chief officers must ensure that staff are aware of their responsibilities under the freedom of information legislation.

Income and expenditure

D.6 It is the responsibility of chief officers to ensure that a proper scheme of delegation has been established within their area and is operating effectively. The scheme of delegation should identify staff authorised to act on the chief officers' behalf, or on behalf of the Cabinet, in respect of payments, income collection and for placing orders together with the limits of their authority. The Cabinet is responsible for approving procedures for writing off debts as part of the overall control framework of accountability and control.

Payments to employees and members

D.7 The Head of Finance is responsible for all payments of salaries and wages to all staff including payments for overtime and for payment of allowances to members.

Taxation

D.8 The Head of Finance is responsible for advising chief officers, in the light of guidance issued by appropriate bodies and relevant legislation as it applies, on all taxation issues that affect the authority.

D.9 The Head of Finance is responsible for maintaining the authority's tax records, making all tax payments, receiving tax credits and submitting tax returns by their due date as appropriate.

Trading accounts/business units

D.10 It is the responsibility of the Head of Finance to advise on the establishment and operation of trading accounts and business units.

FINANCIAL REGULATION E – EXTERNAL ARRANGEMENTS

Introduction

E.1 The local authority provides a distinctive leadership role for the community and brings together the contributions of the various stakeholders. It must also act to achieve the promotion or improvement of the economic or social or environmental well-being of its area.

Partnerships

E.2 The Cabinet is responsible for approving delegations, including frameworks for partnerships. The Cabinet is the focus for forming partnerships with other local public, private, voluntary and community sector organisations to address local needs.

E.3 The Cabinet can delegate functions – including those relating to partnerships – to officers. These are set out in the scheme of delegation that forms part of the authority's constitution. Where functions are delegated, the Cabinet remains accountable for them to the full council.

E.4 The head of paid service represents the authority on partnership and external bodies, in accordance with the scheme of delegation.

E.5 The monitoring officer is responsible for promoting and maintaining the same high standards of conduct with regard to financial administration in partnerships that apply throughout the authority.

E.6 The Head of Finance must ensure that the accounting arrangements to be adopted relating to partnerships and joint ventures are satisfactory. He or she must also consider the overall corporate governance arrangements and legal issues when arranging contracts with external bodies. He or she must ensure that the risks have been fully appraised before agreements are entered into with external bodies.

E.7 Chief officers are responsible for ensuring that appropriate approvals are obtained before any negotiations are concluded in relation to work with external bodies.External funding

E.8 The Head of Finance is responsible for ensuring that all funding notified by external bodies is received and properly recorded in the authority's accounts.Work for third parties

E.9 The Cabinet is responsible for approving the contractual arrangements for any work for third parties or external bodies.

APPENDIX A: FINANCIAL MANAGEMENT

Financial management standards

Managing expenditure

• scheme of virement

Accounting policies

Accounting records and returns

The annual statement of accounts

APPENDIX A – FINANCIAL MANAGEMENT

Financial management standards

Why is this important?

1.01 All staff and members have a duty to abide by the highest standards of probity in dealing with financial issues. This is facilitated by ensuring everyone is clear about the standards to which they are working and the controls which are in place to ensure that these standards are met.

Key controls

1.02 The key controls and control objectives for financial management standards are:

(a) their promotion throughout the authority

(b) a monitoring system to review compliance with financial standards, and regular comparisons of performance indicators and benchmark standards that are reported to the Cabinet and full council.

Responsibilities of the Head of Finance

1.03 To ensure the proper administration of the financial affairs of the authority.

1.04 To set the financial management standards and to monitor their compliance.

1.05 To ensure proper professional practices are adhered to and to act as head of profession in relation to the standards, performance and development of finance staff throughout the authority.

1.06 To advise on the key strategic controls necessary to secure sound financial management.

1.07 To ensure that financial information is available to enable accurate and timely monitoring and reporting of comparisons of national and local financial performance indicators.

Responsibilities of chief officers

1.08 To promote the financial management standards set by the Head of Finance in their departments and to monitor adherence to the standards and practices within their own areas, liaising as necessary with the Head of Finance.

1.09 To promote sound financial practices in relation to the standards, performance and development of staff in their departments.

MANAGING EXPENDITURE

Scheme of virement

Why is this important?

1.10  The scheme of virement is intended to enable the Cabinet, chief officers and their staff to manage budgets with a degree of flexibility within the overall policy framework determined by the full council, and therefore optimise the use of resources.

Key controls

1.11  Key controls in relation to the scheme of virement are:

(a) that it is administered by the Head of Finance within guidelines set by full council. Any variation from this scheme requires the approval of full council

(b) the overall budget is agreed by the Cabinet and approved by the full council. Chief officers and budget managers are therefore authorised to incur expenditure in accordance with the estimates that make up the budget. The rules below cover virement, that is switching resources between approved estimates or ‘heads’ of expenditure.

(c) that virement does not create additional overall budget liability. Chief officers are expected to exercise their discretion in managing their budgets responsibly and prudently. For example, they should aim to avoid supporting recurring expenditure from one-off sources of savings or additional income, or creating future commitments, including full-year effects of decisions made part way through a year, for which they have not identified future resources. Chief officers must plan to fund such commitments from within their own budgets.

Responsibilities of the Head of Finance

1.12  To prepare jointly with the chief officer a report to the Cabinet where virements beyond the authorisations granted to chief officers by these Regulations are proposed.

Authorisations granted to chief officers

1.13  A chief officer may exercise virements between items of expenditure under his control for individual amounts of up to £10,000 within any budget head for his department and with the written agreement of the Head of Finance and a relevant portfolio holder. However, no virement shall be made in respect of the items "salaries" and "wages" unless the Council Manager has the approval of the Leader or a Portfolio Holder nominated by the Leader. Details are to be noted in the Accounts and reported in the weekly bulletin.

1.14 All other virements require the approval of the Cabinet, following a joint report by the Head of Finance and the chief officer which must specify the proposed expenditure and the source of funding, and must explain the implications in the current and future financial years. Amounts greater than £20,000 require the approval of full council.

1.15 Virement which is likely to impact on the level of service activity of another chief officer should be implemented only after consultation with the relevant chief officer.

1.16 No virement relating to a specific financial year should be made after the end of that financial year.

ACCOUNTING POLICIES

Why is this important?

1.17 The Head of Finance is responsible for the preparation of the authority’s statement of accounts, in accordance with proper practices as set out in the format required by the Code of Practice on Local Authority Accounting in the United Kingdom: A Statement of Recommended Practice (CIPFA/LASAAC), for each financial year ending 31 March.

Key controls

1.18 The key controls for accounting policies are:

1. systems of internal control are in place that ensure that financial transactions are lawful
   
2. suitable accounting policies are selected and applied consistently
3. proper accounting records are maintained
4. financial statements are prepared which present fairly the financial position of the authority and its expenditure and income.

Responsibilities of the Head of Finance

1.19 To select suitable accounting policies and to ensure that they are applied consistently. The accounting policies are set out in the statement of accounts which is prepared at 31 March each year, and covers such items as:

(a) separate accounts for capital and revenue transactions

(b) the basis on which debtors and creditors at year end are included in the accounts

(c) details on substantial provisions and reserves

(d) fixed assets

(e) depreciation

(f) capital charges

(g) work in progress

(h) stocks and stores

(i) deferred charges

(j) accounting for value added tax

(k) government grants

(l) leasing

(m) pensions.

Responsibilities of chief officers

1.20 To adhere to the accounting policies and guidelines approved by the Head of Finance.

ACCOUNTING RECORDS AND RETURNS

Why is this important?

1.21 Maintaining proper accounting records is one of the ways in which the authority discharges its responsibility for stewardship of public resources. The authority has a statutory responsibility to prepare its annual accounts to present fairly its operations during the year. These are subject to external audit. This audit provides assurance that the accounts are prepared properly and that proper accounting practices have been followed and that quality arrangements have been made for securing economy, efficiency and effectiveness in the use of the authority's resources.

Key controls

1.22 The key controls for accounting records and returns are:

(a) all Cabinet members, finance staff and budget managers operate within the required accounting standards and timetables

(b) all the authority's transactions, material commitments and contracts and other essential accounting information are recorded completely, accurately and on a timely basis

(c) procedures are in place to enable accounting records to be reconstituted in the event of systems failure

(d) reconciliation procedures are carried out to ensure transactions are correctly recorded

(e) prime documents are retained in accordance with legislative and other requirements.

Responsibilities of the Head of Finance

1.23 To determine the accounting procedures and records for the authority. Where these are maintained outside the finance department, the Head of Finance should consult the chief officer concerned.

1.24 To arrange for the compilation of all accounts and accounting records under his/her direction.

1.25 To comply with the following principles when allocating accounting duties:

(b) employees with the duty of examining or checking the accounts of cash transactions shall not themselves be engaged in these transactions.

1.26 To make proper arrangements for the audit of the authority's accounts in accordance with the Accounts and Audit Regulations 2003.

1.27 To ensure that all claims for funds including grants are made by the due date.

1.28 To prepare and publish the audited accounts of the authority for each financial year, in accordance with the statutory timetable and with the requirement for the full council to approve the statement of accounts.

1.29 To administer the authority's arrangements for underspendings to be carried forward to the following financial year.

1.30 To ensure the proper retention of financial documents in accordance with the requirements set out in the authority's document retention schedule.

Responsibilities of chief officers

1.31 To consult and obtain the approval of the Head of Finance before making any changes to accounting records and procedures.

1.32 To comply with the principles outlined in paragraph 1.25 when allocating accounting duties.

1.33 To maintain adequate records to provide a management trail leading from the source of income/expenditure through to the accounting statements.

1.34 To supply information required to enable the statement of accounts to be completed in accordance with guidelines issued by the Head of Finance.

THE ANNUAL STATEMENT OF ACCOUNTS

Why is this important?

1.35 The full council is responsible for approving the statutory annual statement of accounts.

Key controls

1.36 The key controls for the annual statement of accounts are that:

• the authority is required to make arrangements for the proper administration of its financial affairs and to secure that one of its officers has the responsibility for the administration of these affairs. In this authority, that officer is the Head of Finance

• the authority's statement of accounts must be prepared in accordance with proper practices as set out in the Code of Practice on Local Authority Accounting in the United Kingdom: A Statement of Recommended Practice (CIPFA LASAAC) (the 'code of practice').

Responsibilities of the Head of Finance

1.37 To select suitable accounting policies and apply them consistently.

1.38 To make judgements and estimates that are reasonable and prudent.

1.39 To comply with the code of practice.

1.40 To sign and date the statement of accounts, stating that it presents fairly the financial position of the authority at the accounting date and its income and expenditure for the year ended 31 March 20xx.

1.41 To draw up the timetable for final accounts preparation and to advise staff and external auditors accordingly.

Responsibilities of chief officers

1.42 To comply with accounting guidance provided by the Head of Finance and to supply the Head of Finance with information when required.

APPENDIX B: FINANCIAL PLANNING

Performance plans

Budgeting

• format of the budget

• revenue budget preparation and control

• Budgets and medium term planning

• resource allocation

• capital programmes

Maintenance of reserves

APPENDIX B – FINANCIAL PLANNING

PERFORMANCE PLAN

Why is this important?

2.01 Each local authority has a statutory responsibility to publish various performance plans, strategies etc. including the best value performance plan. The purpose of performance plans is to explain overall priorities and objectives, current performance, and proposals for further improvement. The authority is required to publish annually the best value performance plan (BVPP) which summarises its performance and position in relation to best value. The BVPP is a key element in the authority's programme of engaging with the public. External audit is required to report on whether the authority has complied with statutory requirements in respect of the preparation and publication of the BVPP.Key controls

2.02 The key controls for performance plans are:

(a) to ensure that all relevant plans are produced and that they are consistent with each other

(b) to produce plans in accordance with statutory requirements

(c) to meet the timetables set

(d) to ensure that all performance information is accurate, complete and up to date

(e) to provide improvement targets which are meaningful, realistic and challenging.

Responsibilities of the Head of Finance

2.03 To advise and supply the financial information that needs to be included in performance plans in accordance with statutory requirements and agreed timetables.

2.04 To contribute to the development of corporate and service targets and objectives and performance information.

2.05 to ensure that systems are in place to measure activity and collect accurate information for use as performance indicators.

2.06 To ensure that performance information is monitored sufficiently frequently to allow corrective action to be taken if targets are not likely to be met.Responsibilities of chief officers

2.07 To contribute to the development of performance plans in line with statutory requirements.

2.08 To contribute to the development of corporate and service targets and objectives and performance information.

BUDGETING

Format of the budget

Why is this important?

2.09 The format of the budget determines the level of detail to which financial control and management will be exercised. The format shapes how the rules around virement operate, the operation of cash limits and sets the level at which funds may be re-allocated within budgets.

Key controls

2.10 The key controls for the budget format are:

(a) the format complies with all legal requirements

(b) the format complies with CIPFA's Best Value Accounting Code of Practice

(c) the format reflects the accountabilities of service delivery.

Responsibilities of the Head of Finance

2.11 To advise the Cabinet on the format of the budget that is approved by the full council.

Responsibilities of chief officers

2.12 To comply with accounting guidance provided by the Head of Finance.Revenue budget preparation, monitoring and control

Why is this important?

2.13 Budget management ensures that once the budget has been approved by full council, resources allocated are used for their intended purposes and that these resources are properly accounted for. Budgetary control is a continuous process enabling the authority to review and adjust its budget targets during the financial year. It also provides the mechanism that calls to account managers responsible for defined elements of the budget.

2.14 By continuously identifying and explaining variances against budgetary targets, the authority can identify changes in trends and resource requirements at the earliest opportunity. The authority itself operates within an annual cash limit approved when setting the overall budget. To ensure that the authority in total does not overspend, each service is required to manage its own expenditure within the cash limited budget allocated to it.

2.15 For the purposes of budgetary control by managers, a budget will normally be the planned income and expenditure for a service area or 'cost' centre. However, budgetary control may take place at a more detailed level if this is required by the chief officer's scheme of delegation.

Key controls

2.16 The key controls for managing and controlling the revenue budget are:

(a) budget managers should be responsible only for income and expenditure which they can influence

(b) there is a nominated budget manager for each cost centre heading

(c) budget managers accept accountability for their budgets and the level of service to be delivered and understand their financial responsibilities

(d) budget managers follow an approved certification process for all expenditure

(e) income and expenditure is properly recorded and accounted for

(f) performance levels/levels of service are monitored in conjunction with the budget and necessary action is taken to align service outputs and budget.

Responsibilities of the Head of Finance

2.17 To establish an appropriate framework of budgetary management and control which ensures that:

(a) budget management is exercised within annual cash limits unless the full council agrees otherwise

(b) each chief officer has available timely information on receipts and payments on each budget that is sufficiently detailed to enable heads of service to fulfil their budgetary responsibilities

(c) expenditure is committed only against an approved budget head

(d) all officers responsible for committing expenditure comply with relevant guidance, and the financial regulations

(e) each cost centre has a single named manager, determined by the relevant chief officer. As a general principle, budget responsibility should be aligned as closely as possible to the decision-making processes that commits expenditure

(f) significant variances from approved budgets are investigated and reported by budget managers regularly.

2.18 To administer the authority's scheme of virement.

2.19 To submit reports to the Cabinet and to full council, in consultation with the relevant chief officer, where a chief officer is unable to balance expenditure and resources within existing approved budgets under his or her control.

2.20 To prepare and submit reports on the authority's projected income and expenditure compared with the budget on a regular basis. Regular reports on Total Receipts and Payments, major sources of income, capital expenditure, recovery rates of Council Tax and Non Domestic Rates to be considered by the Cabinet.

Responsibilities of chief officers

2.21 To maintain budgetary control within their department, in adherence to the principles in 2.17 and to ensure that all income and expenditure is properly recorded and accounted for.

2.22 To ensure that an accountable budget manager is identified for each item of income and expenditure under the control of the chief officer (grouped together in a series of cost centres). As a general principle, budget responsibility should be aligned as closely as possible to the decision-making which commits expenditure.

2.23 To ensure that spending remains within the service's overall cash limit, and that individual budget heads are not overspent, by monitoring the budget and taking appropriate corrective action where significant variations from the approved budget are forecast.

2.24 To ensure that a monitoring process is in place to review performance levels/levels of service in conjunction with the budget and is operating effectively.

2.25 To prepare and submit to the Cabinet reports on the service's projected expenditure compared with its budget, in consultation with the Head of Finance.

2.26 To ensure prior approval by the full council or Cabinet (as appropriate) for new proposals, of whatever amount, which:

(a) create additional financial commitments in future years

(b) change existing policies, initiate new policies or cease existing policies

(c) materially extend or reduce the authority's services.

2.27 To ensure compliance with the scheme of virement.

2.28 To agree with the relevant chief officer where it appears that a budget proposal, including a virement proposal, may impact materially on another service area or chief officer's level of service activity.Budgets and medium term planning

Why is this important?

2.29 The authority is a complex organisation responsible for delivering a wide variety of services. It needs to plan effectively and to develop systems to enable scarce resources to be allocated in accordance with carefully weighed priorities. The budget is the financial expression of the authority's plans and policies.

2.30 The revenue budget must be constructed so as to ensure that resource allocation properly reflects the service plans and priorities of the council. Budgets (spending plans), are needed so that the authority can plan, authorise, monitor and control the way money is allocated and spent. It is illegal for an authority to budget for a deficit.

2.31 Medium term planning (a 3 year planning system) involves a planning cycle in which managers develop their own plans. As each year passes, another future year will be added to the medium term plan. This ensures that the authority is always preparing for events in advance.

Key controls

2.32 The key controls are:

(a) specific budget approval for all expenditure

(b) budget managers are consulted in the preparation of the budgets for which they will be held responsible and accept accountability within delegations set by the Cabinet for their budgets and the level of service to be delivered

(c) a monitoring process is in place to review regularly the effectiveness and operation of budget preparation and to ensure that any corrective action is taken.

Responsibilities of the Head of Finance

2.33 To prepare and submit reports on budget prospects for the Cabinet, including resource constraints set by the Government. Reports should take account of medium-term prospects, where appropriate.

2.34 To determine the detailed form of revenue estimates and the methods for their preparation, consistent with the budget approved by the full council, and after consultation with the Cabinet and chief officers.

2.35 To prepare and submit reports to the Cabinet on the aggregate spending plans of departments and on the resources available to fund them, identifying, where appropriate, the implications for the level of council tax to be levied.

2.36 To advise on the medium term implications of spending decisions.

2.37 To encourage best use of resources and value for money by working with chief officers to identify opportunities to improve economy, efficiency and effectiveness, and by encouraging good practice in conducting financial appraisals of development or savings options, and in developing financial aspects of service planning.

2.38 To advise the full council on Cabinet proposals in accordance with his or her responsibilities under Section 151 of the Local Government Act 1972.

2.39 To prepare estimates of income and expenditure, in consultation with the chief officers, to be submitted to the Cabinet.

2.40 In consultation with the chief officers and in accordance with the laid down guidance and timetable to prepare detailed draft revenue and capital budgets for consideration by the appropriate committee.

Responsibilities of chief officers

2.41 To prepare budgets which are consistent with any relevant cash limits, with the authority's annual budget cycle and with guidelines issued by the Cabinet. The format should be prescribed by the Head of Finance in accordance with the full council's general directions.

2.42 To integrate financial and budget plans into service planning, so that budget plans can be supported by financial and non-financial performance measures.

2.43 To have regard to:

(a) spending patterns and pressures revealed through the budget monitoring process

(b) legal requirements

(c) policy requirements as defined by the full council in the approved policy framework

(d) initiatives already underway

when drawing up draft budget requirements.

Resource allocation Why is this important?

2.44 A mismatch often exists between available resources and required resources. A common scenario is that available resources are not adequate to fulfil need/desire. It is therefore imperative that needs/desires are carefully prioritised and that resources are fairly allocated, in order to fulfil all legal responsibilities. Resources may include staff, money, equipment, goods and materials.

Key controls

2.45 The key controls for resource allocation are:

(a) resources are acquired in accordance with the law and using an approved authorisation process

(b) resources are used only for the purpose intended, to achieve the approved policies and objectives, and are properly accounted for

(c) resources are securely held for use when required

(d) resources are used with the minimum level of waste, inefficiency or loss for other reasons.

Responsibilities of the Head of Finance

2.46 To advise on methods available for the funding of resources, such as grants from central government and borrowing requirements.

2.47 To assist in the allocation of resources to budget managers.

Responsibilities of chief officers

2.48 To work within budget limits and to utilise resources allocated and further allocate resources in the most efficient, effective and economic way.

2.49 To identify opportunities to minimise or eliminate resource requirement or consumption without a detrimental effect on service delivery.

Capital programmes

Why is this important?

2.50 Capital expenditure involves acquiring or enhancing fixed assets with a long-term value to the authority, such as land, buildings, and major items of plant and equipment or vehicles. Capital assets shape the way services are delivered for the long-term and create financial commitments for the future in the form of financing costs and revenue running costs.

2.51 The Government places strict controls on the financing capacity of the authority. This means that capital expenditure should form part of an investment strategy and should be carefully prioritised in order to maximise the benefit of scarce resources.

Key controls

2.52 The key controls for capital programmes are:

(a) specific approval by the full council of the programme for capital expenditure

(b) a scheme and estimate, including project plan, progress targets and associated revenue expenditure is prepared for each capital project, for approval by the Cabinet before any commitment is made.

(c) approval by the Cabinet of the method of finance for each capital scheme.

(d) the development and implementation of asset management plans

(e) accountability for each proposal is accepted by a named manager

(f) monitoring of progress in conjunction with expenditure and comparison with approved budget.

(g) the development and implementation of a corporate capital strategy.

Responsibilities of the Head of Finance

2.53 To prepare capital estimates jointly with chief officers and the head of paid service and to report them to the Cabinet for approval. The Cabinet will make recommendations on the capital estimates and on any associated financing requirements to the full council. Cabinet member approval is required where a chief officer proposes to bid for or exercise additional financing approval not anticipated in the capital programme. This is because the extra financing may create future commitments to financing costs.

2.54 To prepare and submit reports to the Cabinet on the projected income and expenditure and resources compared with the approved estimates

2.55 To provide guidance on the appraisal of capital schemes. The definition of 'capital' will be determined by the Head of Finance, having regard to Government regulations and accounting requirements.

2.56 To obtain authorisation from the Cabinet for individual schemes where the estimated expenditure exceeds the capital programme provision.

Responsibilities of chief officers

2.57 To comply with guidance concerning capital schemes and controls issued by the Head of Finance.

2.58 To ensure that all capital proposals have undergone a project appraisal in consultation with the Head of Finance, including a full revenue appraisal.

2.59 To prepare regular reports reviewing the capital programme provisions for their services. They should also prepare an annual return of estimated final cost of schemes in the approved capital programme for submission to the Head of Finance.

2.60 To ensure that adequate records are maintained in respect of all capital contracts.

2.61 To proceed with projects only when there is adequate provision in the capital programme, and with the agreement of the Head of Finance where required.

2.62 To prepare and submit reports, jointly with the Head of Finance, to the Cabinet, of any variation in contract costs greater than the approved sum.

2.63 To prepare and submit reports, jointly with the Head of Finance, to the Cabinet, on completion of all contracts.

2.64 To ensure that credit arrangements, such as leasing agreements, are not entered into without the prior approval of the Head of Finance and, if applicable, approval of the scheme through the capital programme.

2.65 To consult with the Head of Finance and to seek Cabinet approval where the chief officer proposes to bid for supplementary credit approvals to be issued by Government departments to support expenditure which has not been included in the current year's capital programme.

MAINTENANCE OF RESERVES

Why is this important?

2.66 The local authority must decide the level of general reserves it wishes to maintain before it can decide the level of council tax. Reserves are maintained as a matter of prudence. They enable the authority to provide for unexpected events and thereby protect it from overspending should such events occur. Reserves for specific purposes may also be maintained, such as the purchase or renewal of capital items.

Key controls

2.67 To maintain reserves in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom: A Statement of Recommended Practice (CIPFA/LASAAC) and agreed accounting policies. The specific approval of full council is required to set up a reserve for a particular purpose.

2.68 Authorisation and expenditure from reserves by the appropriate chief officer in consultation with the Head of Finance.Responsibilities of Head of Finance

2.69 To advise the Cabinet and/or full council on prudent levels of reserves for the authority, and to take account of advice of the external auditor in this matter.

Responsibilities of chief officer

2.70 To ensure that resources are used only for the purposes for which they were intended.

2.71 In consultation with the Head of Finance, to obtain Cabinet approval to finance expenditure from reserves.

APPENDIX C: RISK MANAGEMENT AND CONTROL OF RESOURCES

Risk management

Internal controls

Audit requirements

• internal audit
• external audit

Preventing fraud and corruption

Assets

• security
• inventories
• stocks and stores
• asset registers

Treasury management

Staffing, including gifts and hospitality

APPENDIX C – RISK MANAGEMENT AND CONTROL OF RESOURCES

RISK MANAGEMENT

Why is this important?

3.01 All organisations, whether they are in the private or public sectors, face risks to people, property and continued operations. Risk is the chance or possibility of loss, damage or injury or failure to achieve objectives caused by an unwanted or uncertain action or event. Risk management is the planned and systematic approach to the identification, evaluation and control of risk. Its objectives are to secure the assets of the organisation and to ensure the continued financial and organisational well being of the organisation. In essence it is therefore an integral part of good business practice. Risk management is concerned with evaluating the measures an organisation has in place already to manage identified risks and then recommending the action the organisation needs to take to control these risks effectively.

3.02 It is the overall responsibility of the Cabinet to approve the authority's risk management strategy, and to promote a culture of risk management awareness throughout the authority.

Key controls

3.03 The key controls for risk management are:

(a) procedures are in place to identify, assess, prevent or contain material known risks, and these procedures are operating effectively throughout the authority

(b) a monitoring process is in place to review regularly the effectiveness of risk reduction strategies and the operation of these controls. The risk management process should be conducted on a continuing basis

(c) managers know that they are responsible for managing relevant risks and are provided with relevant information on risk management initiatives

(d) provision is made for losses that might result from the risks that remain

(e) procedures are in place to investigate claims within required timescales

(f) acceptable levels of risk are determined and insured against where appropriate

(g) the authority has identified business continuity plans for implementation in the event of disaster which result in significant loss or damage to its resources.

Responsibilities of the Head of Finance

3.04 To prepare and promote the authority's risk management policy statement.

3.05 To develop risk management controls in conjunction with other chief officers.

3.06 To include all appropriate employees of the authority in a suitable fidelity guarantee insurance.

3.07 To effect corporate insurance cover, through external insurance and internal funding, and negotiate all claims in consultation with other officers where necessary.

Responsibilities of chief officers

3.08 To notify the Head of Finance immediately of any loss, liability or damage which may lead to a claim against the authority, together with any information or explanation required by the Head of Finance or the authority's insurers.

3.09 To take responsibility for risk management having regard to advice from the Head of Finance and other specialist officers (eg Crime Prevention, Fire Prevention, Health and Safety).

3.10 To ensure that there are regular reviews of risk within their departments.

3.11 To notify the Head of Finance promptly of all new risks, properties or vehicles which require insurance and of any alterations affecting existing insurances.

3.12 To consult the Head of Finance and the head of legal services on the terms of any indemnity which the authority is requested to give.

3.13 To ensure that council employees, or anyone covered by the authority's insurances, do not admit liability or make any offer to pay compensation which may prejudice the assessment of liability in respect of any insurance claim.

INTERNAL CONTROLS

Why is this important?

3.14 The authority is complex and beyond the direct control of individuals. It therefore requires internal controls to manage and monitor progress towards strategic objectives.

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

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

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

(a) efficient and effective operations

(b) reliable financial information and reporting

(c) compliance with laws and regulations

(d) risk management.

Key controls

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

(a) key controls should be reviewed on a regular basis and the authority should make a formal statement on an annual basis to the effect that it is satisfied that the systems of internal control are operating effectively in practice

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

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

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

Responsibilities of the Head of Finance

3.19 To assist the authority to put in place an appropriate control environment and effective internal controls which provide reasonable assurance of effective and efficient operations, financial stewardship, probity and compliance with laws and regulations.

Responsibilities of chief officers

3.20 To manage processes to check that established controls are being adhered to and to evaluate their effectiveness, in order to be confident in the proper use of resources, achievement of objectives and management of risks.

3.21 To review existing controls in the light of changes affecting the authority and establish and implement new ones in line with guidance from the Head of Finance. Chief officers should also be responsible for removing controls which are unnecessary or not cost or risk effective – for example because of duplication.

3.22 To ensure staff have a clear understanding of the consequences of a lack of control.

AUDIT REQUIREMENTS

Internal audit

Why is this important?

3.23 The requirement for an internal audit function for local authorities is implied by Section 151 of the Local Government Act 1972, which requires that authorities "make arrangements for the proper administration of their financial affairs". The Accounts and Audit Regulations 2003 require that "a relevant body shall maintain an adequate and effective system of internal audit of its accounting records and of its system of internal control in accordance with proper internal audit practices."

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

Key controls

3.25 The key controls for internal audit are:

(a) that it is independent in its planning and operation

(b) the head of internal audit has direct access to the head of paid service, all levels of management and directly to elected members

(c) the internal auditors comply with the Auditing Practices Board's guideline 'Guidance for Internal Auditors', as interpreted by CIPFA's Code of Practice for Internal Audit in Local Government.

Responsibilities of the Head of Finance

3.26 To ensure that internal auditors have the authority to:

(a) access council premises at reasonable times

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

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

(d) require any employee of the authority to account for cash, stores or any other authority asset under his/her control

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

(f) have direct access to the head of paid service, the Cabinet and audit committee.

3.27 To approve the strategic and annual audit plans which have been prepared by the head of internal audit which take account of the characteristics and relative risks of the activities involved.

3.28 To ensure that effective procedures are in place to investigate promptly any fraud or irregularity and to report to the head of paid service who will consider any legal proceedings and disciplinary action in consultation with the appropriate chief officer.

Responsibilities of chief officers

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

3.30 To ensure that auditors are provided with any information and explanations which they seek in the course of their work.

3.31 To consider and respond promptly to recommendations in audit reports.

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

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

3.34  To ensure that new systems for maintaining financial records, or records of assets, or changes to such systems, are discussed with and agreed by the head of internal audit, prior to implementation.

Responsibilities of Internal Auditors

3.34(b) The Internal Audit Section has written terms of reference which establish:

• The responsibilities and objectives of internal audit
• The position of internal audit within the organisation
• The scope of internal audit activity
• Internal audit's rights of access to all records, assets, personnel and premises

The Terms of Reference are included in the Internal Audit Procedure Manual for Service Departments (Section 15 of the Financial Procedures Manual.)

External audit

Why is this important?

3.35 The Local Government Finance Act 1982 set up the Audit Commission which is responsible for appointing external auditors to each local authority in England and Wales. The external auditor has rights of access to all documents and information which are necessary for audit purposes.

3.36 The basic duties of the external auditor are defined in the Audit Commission Act 1998 and the Local Government Act 1999. In particular, section 4 of the 1998 Act requires the Audit Commission to prepare a code of audit practice which external auditors follow when carrying out their duties. The code of audit practice issued in March 2000 sets out the auditor's objectives to review and report upon:

(a) the financial aspects of the audited body's corporate governance arrangements

(b) the audited body's financial statements, and

(c) aspects of the audited body's arrangements to manage its performance, including the preparation and publication of specified performance information and compliance in respect of the preparation and publication of the BVPP.

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

Key controls

3.38 External auditors are appointed by the Audit Commission normally for a minimum period of five years. The Audit Commission prepares a code of audit practice which external auditors follow when carrying out their audits.

Responsibilities of the Head of Finance

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

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

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

Responsibilities of chief officers

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

3.43 To ensure that all records and systems are up to date and available for inspection.

PREVENTING FRAUD AND CORRUPTION

Why is it this important?

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

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

3.46 The authority also expects that individuals and organisations (eg suppliers, contractors, service providers) that it comes into contact with, will act towards the authority with integrity and without thought or actions involving fraud and corruption.

Key controls

3.47 The key controls regarding the prevention of financial irregularities are that:

(a) the authority has an effective anti-fraud and anti-corruption policy and maintain a culture which will not tolerate fraud or corruption

(b) all members and staff act with integrity and lead by example

(c) senior managers are required to deal swiftly and firmly with those who defraud or attempt to defraud the authority or who are corrupt

(d) high standards of conduct are promoted amongst members by the standards committee

(e) the maintenance of a register of interests in which any hospitality or gifts accepted must be recorded

(f) whistle blowing procedures are in place and operate effectively

(g) legislation including the Public Interest Disclosure Act 1998 is adhered to.

Responsibilities of the Head of Finance

3.48 To develop and maintain an anti-fraud and anti-corruption policy.

3.49 To maintain adequate and effective internal control arrangements.

3.50 To ensure that all suspected irregularities are reported to the chief internal auditor, head of paid service, the Cabinet and the audit committee.

Responsibilities of chief officers

3.51 To ensure that all suspected irregularities are reported to the chief internal auditor.

3.52 To instigate the authority's disciplinary procedures where the outcome of an audit investigation indicates improper behaviour.

3.53 To ensure that where financial impropriety is discovered, the Head of Finance is informed, and sufficient evidence exists to believe that a criminal offence may have been committed, the police are called in to determine with the Crown Prosecution Service whether any prosecution will take place.

3.54 To maintain a departmental register of interests.

ASSETS

Security

Why is this important?

3.55 The authority holds assets in the form of property, vehicles, equipment, furniture and other items worth many millions of pounds. It is important that assets should be safeguarded and used efficiently in the delivery of services, and that there should be arrangements for the security of both assets and information required for service operations. An up to date asset register is a prerequisite for proper fixed asset accounting and sound asset management.

Key controls

3.56 The key controls for the security of resources such as land, buildings, fixed plant machinery, equipment, software and information are:

(a) resources are used only for the purposes of the authority and properly accounted for

(b) resources are available for use when required

(c) resources no longer required are disposed of in accordance with the law and the regulations of the authority so as to maximise benefits

(d) an asset register is maintained for the authority and assets are recorded when they are acquired by the authority and this record is updated as changes occur with respect to the location and condition of the asset

(e) all staff are aware of their responsibilities with regard to safeguarding the authority's assets and information, including the requirements of the Data Protection Act and software copyright legislation

(f) all staff are aware of their responsibilities with regard to safeguarding the security of the authority's computer systems, including maintaining restricted access to the information held on them and compliance with the authority's computer and internet security policies.

Responsibilities of the Head of Finance

3.57 To ensure that an asset register is maintained in accordance with good practice for all fixed assets with a value in excess of £10,000. The function of the asset register is to provide the authority with information about fixed assets so that they are:

• safeguarded

• used efficiently and effectively

• adequately maintained.

3.58 To receive information from each chief officer required for accounting, costing and financial records.

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

Responsibilities of chief officers

3.60 The appropriate chief officer shall maintain a property database, in a form approved by the Head of Finance for all properties, plant and machinery and moveable assets currently owned or used by the authority. Any use of property by a department or establishment other than for direct service delivery should be supported by documentation identifying terms, responsibilities and duration of the use.

3.61 To ensure that lessees and other prospective occupiers of council land are not allowed to take possession or enter the land until a lease or agreement, in a form approved by the chief officer, in consultation with the Head of Finance has been established as appropriate.

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

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

3.64 To pass title deeds to the appropriate chief officer who is responsible for custody of all title deeds.

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

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

3.67 To ensure that the department maintains a register of moveable assets in accordance with arrangements defined by the Head of Finance.

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

3.69 To consult the Head of Finance in any case where security is thought to be defective or where it is considered that special security arrangements may be needed.

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

3.71 To ensure that keys to safes and similar receptacles are carried on the person of those responsible at all times; loss of any such keys must be reported to the Head of Finance as soon as possible.

3.72 To record all disposal or part exchange of assets which should normally be by competitive tender or public auction unless, following consultation with the Head of Finance, the Cabinet agrees otherwise.

3.73 To arrange for the valuation of assets for accounting purposes to meet requirements specified by the Head of Finance.

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

Inventories

3.75 To maintain inventories and record an adequate description of furniture, fittings and equipment, plant and machinery above £250 in value.

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

3.77 To make sure that property is only used in the course of the authority's business unless the chief officer concerned has given permission otherwise.Stocks and stores

3.78 To make arrangements for the care and custody of stocks and stores in the department.

3.79 To ensure stocks are maintained at reasonable levels and subject to a regular independent physical check. All discrepancies should be investigated and pursued to a satisfactory conclusion in consultation with the Head of Finance.

3.80 To investigate and remove from the authority's records ie 'write-off' discrepancies as necessary or obtain Cabinet approval if they are in excess of £5,000.

3.81 To authorise or write-off disposal of redundant stocks and equipment. Procedures for disposal of such stocks and equipment should be by competitive quotations or auction unless, following consultation with the Head of Finance, the Cabinet decides otherwise in a particular case.

3.82 To seek Cabinet approval to the write-off of redundant stocks and equipment in excess of £5,000.

3.83 To ensure goods are issued from stores only on submission of a requisition or receipt signed by an authorised person.

Asset disposal

Why is this important?

3.84 It would be uneconomic and inefficient for the cost of assets to outweigh their benefits. Obsolete, non-repairable or unnecessary resources should be disposed of in accordance with the law and regulations of the authority.

Key controls

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

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

Responsibilities of the Head of Finance

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

3.88 To ensure appropriate accounting entries are made to remove the value of disposed assets from the authority's records and to include the sale proceeds if appropriate.

Responsibilities of chief officers

3.89 To seek advice from purchasing advisors on the disposal of surplus or obsolete materials, stores or equipment.

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

TREASURY MANAGEMENT

Why is this important?

3.91 Many millions of pounds pass through the authority's books each year. This led to the establishment of codes of practice. These aim to provide assurances that the authority's money is properly managed in a way which balances risk with return, but with the overriding consideration being given to the security of the authority's capital sum.

Key controls

3.92 That the Council's borrowings and investments comply with the CIPFA Treasury Management and the Public Services, Code of Practice and with the authority's treasury management procedure manual.

• Pre-signed cheque stationery shall be ordered only on the authority of the Head of Finance who shall make proper arrangements for safe custody.

• The following arrangements for signing cheques will be shown on the Bank Mandate:

- The authorised signatories will be the Head of Finance, Senior Accountant and Senior Financial Assistant.

- The Head of Finance shall sign all cheques on the Council's bank account and for this purpose a pre-printed signature shall be sufficient for all cheques less than £5,000.

- Cheques of £5,000 and above shall be manually countersigned by one of three authorised signatories in addition to the pre-printed signature.

• Any direct debit charges on the Council's bank account shall be approved by one of the three authorised signatories.

• All monies due to the Council must be paid into the Council's bank account which may be overdrawn to such limits as negotiated by the Head of Finance with the Council's bankers.

• The bank account shall be in the name of the Council and may carry such additional name as may be necessary to distinguish the purpose for which the account is to be used.

• No new bank account shall be opened save on the express authority of the Cabinet or Returning Officer.

• The bank account will be reconciled to the accounting records on at least a monthly basis.

• The Head of Finance is responsible for negotiations with the banks and for reviewing annually the economy, efficiency and effectiveness of the Council's banking arrangements.

Responsibilities of Head of Finance – treasury management and banking

3.93 To arrange borrowing and investments of the council in such a manner as to comply with the CIPFA Treasury Management in the Public Services, Code of Practice and the authority's treasury management procedure manual.

3.94 To report twice a year on treasury management activities to the Cabinet.

3.95 To operate bank accounts as are considered necessary.Responsibilities of chief officers – treasury management and banking

3.96 To follow the instructions on banking issued by the Head of Finance.

Responsibilities of Head of Finance – investments and borrowing

3.97 To ensure that all investments of money are made in the name of the authority or in the name of nominees approved by full council.

3.98 To ensure that all securities which are the property of the authority or its nominees and the title deeds of all property in the authority's ownership are held in the custody of the appropriate chief officer.

3.99 To effect all borrowings in the name of the authority.

3.100 To act as the authority's registrar of stocks, bonds, mortgages and to maintain records of all borrowing of money by the authority. Responsibilities of chief officers – investments and borrowing

3.101 To ensure that loans are not made to third parties and that interests are not acquired in companies, joint ventures, or other enterprises without the approval of full council, following consultation with the Head of Finance.

Responsibilities of the Head of Finance – imprest accounts

3.102 To provide employees of the authority with cash or bank imprest accounts to meet minor expenditure on behalf of the authority and to prescribe rules for operating these accounts. Minor items of expenditure should not exceed £20.

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

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

Responsibilities of chief officers – imprest accounts

3.105 To ensure that employees operating an imprest account:

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

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

(c) produce upon demand by the Head of Finance, cash and all vouchers to the total value of the imprest amount

(d) record transactions promptly

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

(f) provide the Head of Finance with a certificate of the value of the account held at 31 March each year

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

(h) on leaving the authority's employment or otherwise ceasing to be entitled to hold an imprest advance, an employee shall account to the Head of Finance for the amount advanced to him/her.

STAFFING

Why is this important?

3.106 In order to provide the highest level of service, it is crucial that the authority recruits and retains high calibre, knowledgeable staff, qualified to an appropriate level.

Key controls

3.107 The key controls for staffing are:

(a) an appropriate staffing strategy and policy exist, in which staffing requirements and budget allocation are matched

(b) that procedures are in place for forecasting staffing requirements and cost

(c) that controls are implemented that ensure that staff time is used efficiently and to the benefit of the authority

(d) checks are undertaken prior to employing new staff to ensure that they are appropriately qualified, experienced and trustworthy.

Responsibilities of the Head of Finance

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

3.109 To act as an advisor to chief officers on areas such as National Insurance, pension contributions as appropriate.

Responsibilities of chief officers

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

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

3.112 To ensure that the head of personnel and the Head of Finance are immediately informed if the staffing budget is likely to be materially over or under spent.

APPENDIX D: FINANCIAL SYSTEMS AND PROCEDURES

General

Income and expenditure

• income

• ordering and paying for work, goods and services

• payments to employees and members

Taxation

Trading accounts and business units

APPENDIX D – FINANCIAL SYSTEMS AND PROCEDURES

GENERAL

Why is this important?

4.01 Departments have many systems and procedures relating to the control of the authority's assets, including purchasing, costing and management systems. Departments 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 Head of Finance 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.

Key controls

The key controls for systems and procedures are:

(a) basic data exists to enable the authority's objectives, targets, budgets and plans to be formulated

(b) performance is communicated to the appropriate managers on an accurate, complete and timely basis

(c) early warning is provided of deviations from target, plans and budgets that require management attention

(d) operating systems and procedures are secure.

(e) all financial stationery e.g. receipts, cheques, etc is ordered, controlled and issued in a secure manner.

Responsibilities of the Head of Finance

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

(a) issue advice, guidance and procedures for officers and others acting on the authority's behalf

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

(c) establish arrangements for audit of the authority's financial affairs

(d) approve any new financial systems to be introduced

(e) approve any changes to be made to existing financial systems.

(f) order, control and issue all financial stationery.

Responsibilities of chief officers

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 Head of Finance.

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:

(a) all input is genuine, complete, accurate, timely and not previously processed

(b) all processing is carried out in an accurate, complete and timely manner

(c) 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 Head of Finance before changing any existing system or introducing new systems.

4.12 To establish a scheme of delegation identifying officers authorised to act upon the chief officer'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 Head of Finance, 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 chief officer are observed.

4.17 To ensure systems are in place which protect computer equipment and software from loss and damage through theft, vandalism etc.

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

(a) only software legally acquired and installed by the council is used on its computers

(b) staff are aware of legislative provisions

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

4.19 To sign for fresh supplies of financial stationery. To keep financial stationery in a secure location and ensure that proper records are kept of their use.

INCOME AND EXPENDITURE

Income

Why is this important?

4.20 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.

Key controls

4.21 The key controls for income are:

(a) all income due to the authority is identified and charged correctly in accordance with the approved scale of charges which is regularly reviewed.

(b) all income is collected from the correct person, at the right time using the correct procedures and the appropriate stationery

(c) all money received by an employee on behalf of the authority is paid without delay to the Head of Finance or as he/she directs, 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

(d) effective action is taken to pursue non-payment within defined timescales

(e) formal approval for debt write-off is obtained

(f) appropriate write-off action is taken within defined timescales

(g) appropriate accounting adjustments are made following write-off action

(h) all appropriate income documents are retained and stored for the defined period in accordance with the document retention schedule

(i) money collected and deposited is reconciled to the bank account by a person who is not involved in the collection or banking process.

Responsibilities of the Head of Finance

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

4.23 To order and supply to departments all receipt forms, books or tickets and similar items and satisfy himself/herself regarding the arrangements for their control.

4.24 To agree the write-off of bad debts up to an approved limit of £1,000 in each case.

4.25 To approve all debts to be written off in consultation with the relevant chief officer and keep a record of all sums written off up to the approved limit.

4.26 To obtain the approval of the Cabinet in consultation with the relevant chief officer, for writing off debts in excess of the approved limit.

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

4.28 To ensure that money collected and deposited is reconciled to the bank account on a regular basis.

Responsibilities of chief officers

4.29 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.

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

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

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

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

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

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

4.36 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.

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

4.38 To supply the Head of Finance with details relating to work done, goods supplied or services rendered or grants or other amounts due, to enable the Head of Finance to record correctly the sums due to the authority and to ensure accounts are sent out promptly. To do this chief officers should use established performance management systems to monitor recovery of income and flag up areas of concern to the Head of Finance. Chief officers have a responsibility to assist the Head of Finance 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.

4.39 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.

4.40 To recommend to the Head of Finance 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.

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

Ordering and paying for work, goods and services

4.42 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