Purchase to Pay Process

Transcription

1 National Financial Regulations Purchase to Pay Process Contents MAIN CHAPTERS Chapter Description Page No. 1. Purchase to Pay (General) Purchase To Pay Tendering Process Purchase to Pay Specific Topics Capital Projects and Property Transactions...44 APPENDICES Additional Information Re; Chapter 1, Purchase to Pay (PTP) on page 55 Chapter 2 Tendering on page 74 Chapter 3 Non Order Payments on page 82 Chapter 4 Capital Projects & Property on page 84 GLOSSARY OF TERMS on page 133 to Refer Chapter 5 Topic 3 for Purchase to Pay Capital Specific Provisions Ver /20/2013 Page 1 of 133

2 PTP - SUMMARY OF MAIN STEPS PURCHASING PROCESS - SUMMARY 1 IDENTIFICATION AND NOTIFICATION OF NEED Identify Need Validate Need Classify spend at some point from up to PO generation Comply with local Purchasing Arrangements Complete Standard Requisition Form Submit Requisition Form to Budget Holder / Nominee 2 CONFIRMATION OF AVAILABILITY OF FUNDS & APPROVAL TO SPEND Receive confirmation of availability of funds Resolve any regulatory issues ( e.g tax clearance, licensing, statutory permissions) Maintain readily available record of formal confirmation 3 SOURCING OF SUPPLIERS TO PROVIDE GOODS & SERVICES Check goods held in Storage Check existing valid contracts Invite 3rd Party Supplier to Supply Refer to Central Procurement if appropriate Select Appropriate Sourcing Option. Complete Quotation/ Tender process as appropriate Select supplier 4 EXPENDITURE APPROVAL AND ISSUE OF PURCHASE ORDER Complete purchase order/ requisition form Prepare relevant documentation Obtain approval for purchase order/ requisition Issue purchase order / requisition Send purchase order/requisition to relevant parties Maintain record of all relevant documentation RECEIVING & SIGN-OFF PROCESS - SUMMARY A PHYSICAL RECEIPT AND CUSTODY OF GOODS & SERVICES PHYSICAL RECEIPT accept goods 'subject to inspection POD ensure 'Stores Issue' or 'Proof of Delivery' documentation is received CUSTODY maintain safe custody of goods INSPECTION inspect & check goods received (as soon as possible after delivery) Verify & record actual delivery of goods* B DOCUMENTATION AND RECORDING OF RECEIPT AND CUSTODY OF GOODS & SERVICES GRN GRN Approval GRN - RECORDING make and record decision to sign off receipt manager confirms that goods can be paid for on receipt of a valid payment request recognise liability to pay for goods by inputting into accounting system. record expenditure against relevant Budget Holder Receiving process is now complete Legend; PoD Proof of delivery, GRN goods received note. Note ; The above is a representation which illustrates the PTP process, some are set out in more detail within further on in the document. The number, timing/sequence and details of these steps may not apply to all transactions. Ver /20/2013 Page 2 of 133

3 1 Purchase to Pay (General) The key requirements of the financial regulations are contained within the main chapters. However, this should be read in conjunction with additional information set out in the more detailed elements of the regulations, contained within the respective appendices (by chapter). 2a. Scope 2b. Objective of the Financial Regulations in respect of the Purchase to Pay Process. below 2c. Purchase to Pay regulations are Minimum Requirements on page 4 2d. Purchasing Process Main Requirements on page 6 2e Receiving Process Main Requirements on page 19 2f Payment Process Main Requirements on page 25 APPENDIX - More Information re. Chapter 2 Topics on page 55 to 74 2a. Scope The regulations within this section are intended to set out the Primary Financial Control requirements for all non-pay expenditure (i.e. expenditure not processed through the payroll system). Summary of Purchase to Pay (PTP) basic steps / stages 1. PURCHASING Obtaining expenditure approval, Sourcing of appropriate goods / services from 3rd parties or Stores to meet identified service needs. Formally requesting the selected 3rd party to provide specified goods or services by issue of PO or contract. 2. RECEIVING ( receipt of goods or services) Receipt and checking / inspection of goods and services. Confirmation that they are fit for purpose, and match what was ordered or contracted for. Approval that Goods/Service can be paid for upon receipt of an appropriate request for payment 3. PAYMENT For goods and services generally on foot of invoices or other payment requests. A Key control within this process is the checking and verification of the invoiced price of good or services to the purchase order price. 2b. Objective of the Financial Regulations in respect of the Purchase to Pay process The objectives of the Financial Regulations in respect of the Purchase to Pay Process are to ensure the HSE, its Budget Holders, Managers and Staff; Ver /20/2013 Page 3 of 133

4 Comply with Government and EU Procurement requirements and ensure that the procurement process is open and competitive. Properly assess the HSE procurement requirements on a periodic basis to enable proper procurement planning. Demonstrate full accountability and probity as well as the highest ethical standards in respect of the public funds expended in the purchasing process. Acquire goods and services that are most appropriate and represent best value for money for the health service in terms of full life-cycle costs. Make best use of the purchasing power of the HSE by entering into contracts including national contracts, wherever appropriate. Aggregate Gi demand to optimise purchasing power. Obtain formal approval from the appropriate Budget Holder or their nominee before requesting the provision of any goods, services or works. Do not engage in purchasing above the limits of the budget available. Operate the 'Purchase To Pay' process in an efficient and effective manner that facilitates the timely production of accurate and comprehensive Annual Financial Statements (AFS). Properly manage their contacts with suppliers and provide full clarity to suppliers as regards what is expected of them in relation to all aspects of the process. Consistently apply high standards with respect to evidencing and recording of Receiving of Goods/Services and custody of goods. 2c. Purchase to Pay regulations establish PTP Minimum Requirements 2.2. These regulations set out what are minimum requirements around many aspects of the purchase to pay process including: 1. Number of quotes / tenders required. (details on page 51) 2. Value thresholds for different sourcing options. (details on page 51) 3. Approval levels. (details on page 52) 4. Time periods for receipt of quotes / tenders The requirements set out in this chapter relate to Non Pay expenditure. In addition, there are other requirements that arise due to the specific nature of expenditure and which are governed by separate protocol. These include; Capital Projects Project Approval is governed by Capital Projects Approval Protocol Property Transactions - is governed by the Property Transaction Protocol - Protocol for the Acquisition and disposal of Property Funding of Voluntary Organisations (Not for Profit/Grants). Ver /20/2013 Page 4 of 133

5 2.4. It is a requirement that managers operating these regulations will apply higher than the minimum control level (e.g. next level up authorisation) if this is necessary to ensure the objectives set out above at 2.B. are consistently achieved. Example: A manager may decide that in the case of purchase of routine medical consumables for one of his/ her hospitals he/she needs to get a Grade Vl to approve any purchase between 5,000 and 10,000 (see Table 2 - normally a Grade V can approve expenditure up to 10,000 for routine expenditure) because of any one or a combination of the following: He needs a tighter level of financial control for the remainder of the financial year in order to clear an overspend earlier in the year He does not have a sufficiently experienced Grade V He decides that the complexity of the equipment or its purchasing process warrants it The actual steps, the number of steps and the sequencing of steps in the process that is being referred to as Purchase to Pay will vary depending on a number of factors including: Type and complexity of goods or service being acquired. For more complex services, works and equipping, third party sign-off shall be required at each stage of the Purchase to Pay process. Frequency of purchase of specific goods / services Value The source of the goods or services Specific service unit or area acquiring the goods / services etc The level of computerisation within the process but the fundamental process and the required financial controls are common. Ver /20/2013 Page 5 of 133

6 PURCHASE PROCESS 2d. PURCHASING/PROCUREMENT; MAIN REQUIREMENTS 2.6. Definition For the purpose of these regulations purchasing includes all activities up to the point where: A supplier(s) has been selected The supplier(s) has been formally requested to provide goods /services FOUR KEY ELEMENTS for each Purchasing Transaction It is clear that each and every purchasing transaction will have the following elements: 1 Identification and notification of need. Page 9 2 Confirmation of availability of funds and approval to spend. Page 10 3 Sourcing of supplier(s) to provide goods or services. Page 11 4 Expenditure Approval and Issue of Purchase Order or Contract to Supplier Page General Application of Purchasing Regulations These regulations cover the entire HSE which is a large and very diverse organisation. It is not practical to cover all potential situations or differences that may exist regarding: Exactly by whom or in what manner a need for goods or services is identified and communicated At what precise stage or by whom the approval to spend available funds is decided Exactly how the supplier of goods or services is to be sourced in each specific case. Use of HSE standard procedures should be availed of where appropriate The precise manner and by whom the formal request to the supplier to provide the goods or services is made Budget Holders must ensure that there are documented Purchasing Arrangements in place for Managers and Users for each respective location /main category of spend Application of Purchasing Regulations to Bodies funded by the HSE Where works and related service contracts are being awarded by external organisations and are funded more than 50% the requirements of these regulations as regards sourcing of suppliers are applicable Budget Holders must ensure that relevant voluntary, not for profit or other such organisations are aware of this requirement and it should be included as part of any service agreement or other contract with such organisations Refer to NFR-31 Grants to Outside Agencies for further details Ver /20/2013 Page 6 of 133

7 MANDATORY CONTROLS WITHIN PURCHASING. These regulations prescribe the following mandatory controls within the Purchasing process: I. Segregation of Duties within Purchasing Ref as below II. Procurement Planning Ref on page 8 III. Identification and notification of need Ref on page 9 IV. Confirmation of Availability of Funds and Approval to Spend Ref on page 10 V. Sourcing of Suppliers to Provide Goods and Services Ref on page 11 VI. End of Purchasing Stage; Approval & Issue of Purchase Order Ref on page 16 ( I ) Segregation of Duties within Purchasing Appropriate segregation of duties is a key element of any financial control framework. In the context of the purchasing process the following requirements are mandatory; At some point between initial identification of need and the issue of a purchase order or contract at least one other staff member in addition to the final decision maker must be involved in the process. This must be evidenced by signatures appearing on purchasing documents e.g. requisition, purchase orders No manager (or staff) should have the final decision regarding the issue of a purchase order or contract for any goods or service that is for their own day to day use There must be a clear separation of tasks between the person raising a Purchase Order and Recording the Receipt of the respective goods/service There is a mandatory requirement to obtain appropriate professional procurement input where the value of purchases exceeds 25, Decisions to authorise expenditure (i.e. to issue purchase order or contract) above 25,000 must be formally written and recorded. These decisions must be recommended by a manager at least at Grade V who must not be the same person that has 'signed off' the initial decision A minimum of two staff one whom must have expenditure authority equal to estimate value of contract or otherwise approved by Assistant National Director of Portfolio & Category Management must be involved in both the opening and evaluation of all tenders. (see Table 2: Purchase Order/Contract Approval-Financial Limits by Grade,) Ver /20/2013 Page 7 of 133

8 Managers responsible for evaluating tenders (i.e. above 25,000) must not have the final decision as regards selection of the successful tenderer and / or approval to issue the purchase order or contract Procurement must be notified of and co-ordinate all tenders above the EU threshold except those tenders relating to Capital Projects which are the responsibility of the Estates Office Procurement is responsible for the Commercial Evaluation of all EU Tenders (other than Works agreed specialist supplies). The person responsible for procurement shall co-ordinate procurement process and prepare tender analysis report for purchase approver/budget holder s evaluation The Budget holder/purchase approver makes the decision to proceed / sign-off a tender based on tender report prepared by Commercial Evaluator Budget holders must maintain a list of Commercial evaluators N2 for the Tender process Segregation of duties (SOD) within purchasing should be read in conjunction with Segregation of duties within receipt/receiving of Goods and Services. ( II ) Procurement Planning Budget Holders must, within twelve months of the coming into force of these regulations, ensure that they have reviewed and analysed their likely purchasing requirements over the following 3 years They must put in place a procurement plan, in conjunction with procurement/ Materials Management/ Estates/ICT as appropriate to address: Appropriate categorisation and rationalisation of suppliers Contracts to be renewed or terminated/allowed to lapse and their timeframes Additional contracts to be put in place Main service developments (new services, service expansions, service reductions) likely to impact on procurement over the following 12 months Any other relevant matters Procurement plans should be updated annually and replaced every three years. Given the need for obtaining value for money and making best use of scarce staffing resources there is a requirement to co-ordinate and aggregate procurement plans. N 2 Commercial Evaluators provide support through the procurement process by (a) Co-ordinating the procurement process (b) provide commercial tender analysis (c) ensure purchase systems and procedures are implemented, (d) procure supplies in line with current purchasing policies and procedures. Ver /20/2013 Page 8 of 133

9 Specific Assistant National Director(s) delegated by a National Leadership Team Member must take the lead in the procurement planning process with appropriate professional procurement input It is a mandatory requirement that procurement plans identify any likely purchases which will require the use of a tendering process or the EU Procurement Procedure, based on the value thresholds Account must be taken of the full likely HSE requirement for the goods or service in deciding which value threshold and related sourcing option is appropriate. ( III ) Identification and Notification of Need Managers and staff who identify and communicate needs for goods and services must satisfy themselves and be in a position to demonstrate that the need: Is genuine and is appropriate to their service Takes account of prevailing policies and constraints (including statutory compliance requirements) together with resource constraints under which their service is operating Person Approving expenditure must be aware of cost/value of items/service required and knowledge of budget Has been identified following a review of existing goods and services that may already be available to the service There is a requirement to obtain appropriate professional procurement input where the value of purchases exceeds 25,000 i.e. for purchases in excess of 25,000 the procurement function should be contacted and guidance sought In communicating the need for goods or services to the relevant Budget Holder, or their nominee, the manager or staff member must: Fully comply with the formal documented purchasing arrangements N3 put in place by or on behalf of the Budget Holder Fully comply with any requirement of their own manager Clearly communicate, in written form, unless otherwise permitted, the following: Date of Request Specification of goods / services required Name/source of request Purpose for which goods / services required Cost Centre / Internal Order Material Code / GL Preferred delivery address Timescales within which required Likely cost if known & quantity /duration etc N3 Budget Holders need to be pragmatic in drawing up the mandatory formal documented purchasing arrangements described at 1.above as regard (a) Value of goods and services and (b) Routine versus non-routine goods and services Ver /20/2013 Page 9 of 133

10 The normal requirement is for requests for the purchase of goods or services to be submitted on a standard pre-formatted sequentially numbered requisition form Such standardised requisition forms are particularly important where a purchasing location receives a high volume of requests from a number of remote locations Requisitions must be submitted using the financial information system where required by the relevant Budget Holder Adequately record the request so that it is readily available for future reference or inspection / audit. ( IV ) Confirmation of Availability of Funds and Approval to Spend Depending on the specific circumstances of any particular purchasing transaction confirmation of availability of funds may be required: Before a need is communicated to the manager or staff nominated to source suppliers and issue purchase orders or contracts to same, or At the same time and/or by the same manager with authority to issue requests to suppliers to provide goods or services (i.e. the person who approves purchase orders or contracts) Expenditure approval thresholds set out in Table 2; Purchase Order/Contract Approval Financial Limits by Grade(page 52) Mandatory Requirements It is not intended to prescribe the detail of this element of the purchase process, however the following are mandatory requirements: Budget Holders must document purchasing arrangements for their area to ensure there is clarity in respect of: 1. The point at which approval to spend is confirmed 2. By whom approval to spend is confirmed Formal confirmation of available funding and approval to spend must be obtained prior to issuing a purchase order or contract to provide goods or services to a Third party supplier Regulatory issues must be resolved prior to the issuing of a purchase order or contract. Such issues may include the following which is not intended to be an exhaustive list: 1. Any licensing issues 2. Other statutory permissions or requirements Ver /20/2013 Page 10 of 133

11 3. Tax Clearance Certificates /Tax status issues N A record must be readily available whether by reference to the Financial Information System (FIS) Gii record, signature on copy purchase order or other means Exceptions are only allowed where they can be clearly demonstrated as necessary to prevent material adverse impacts: To clients To members of the public To staff To the service generally To property or other assets of the Health Service Executive All exceptions must be clearly recorded for future audit and must be rectified by obtaining the necessary approval on the next available working day. ( V ) Sourcing of Suppliers to Provide Goods or Services Budget Holders responsibility in relation to Sourcing Budget holders and their nominees must; Monitor their purchasing activity on an ongoing basis. They must identify opportunities for appropriate extension of centralised contracting. These opportunities should be pursued with Procurement Document their sourcing procedures as part of their formal local purchasing arrangements and all such sourcing procedures must comply with the National Financial Regulations Have regard to the need to avoid ordering excess quantities of goods it is important to balance the requirement to ensure goods are available when needed against the issues associated with over ordering including: 1. Lack of appropriate storage 2. Excess goods may not last and have to be scrapped These requirements should be addressed in the context of meeting the need for procurement planning as set out above. 1st required preference; Source from Stock or Existing Contract It is a specific responsibility of each Budget Holder to ensure that: to the greatest extent practicable and where consistent with achieving value for money as many purchases of goods and services are from : N4 A Tax Clearance Certificate(TCC) is a written confirmation from Revenue authorities that a person's tax affairs are in order at the date of issue of the certificate. Under Section 1095 of the Taxes Consol. Act,199, it is mandatory that all vendors in receipt of 10,000 or more(inclusive of VAT), within any 12 months period, produce either a valid C2 certificate or a general Tax Clearance Certificate. Such contracts can involve the purchase, hiring, leasing of goods, services property. The requirement applies even where the provision of goods or services is not the subject of a formal written contract. Ref ( Ver /20/2013 Page 11 of 133

12 (i) Stock (Stores) - Goods held and issued from Stores/ storage location. (ii) Contracts - Acquired by ordering off a pre-existing and still valid contract, or Requirement to Utilise Contracts that are in place and still valid It is incumbent to establish whether an existing contract is already in place and, if so, to utilise this contract (Health Service Procurement Policy) The terms of any given contract must make clear the extent to which the HSE commits to purchasing from the suppliers who have been awarded the contract In the negotiation of any contract care must be taken to very clearly state the terms upon which the HSE agrees to any exclusive use of the supplier and their goods or services Particular consideration must be given to HSE locations or services that may have low volume or low value requirements or may be geographically remote The following should be the over riding factor in Putting in Place contracts; 1. the achievement of value for money including the use of scarce staff resources (within procurement and service delivery) 2. At all times, one must fully comply with Public procurement requirements The non-use of a relevant existing valid contract, other than as clearly provided for the contract, must be approved by the specifically delegated Assistant National Director (delegated by National Leadership Team Member) or by the Head of Procurement. The Head of Procurement must be notified in all cases Where contracts have already been negotiated this simplifies the purchasing process. It should enable the relevant staff member to focus on selecting the required goods from the contract list or catalogue. 2 nd required preference; Invitation to 3rd Party Supplier to supply General If goods or services cannot be sourced from stock or by calling off an existing contract then it will be necessary to source a supplier(s) directly It is a mandatory requirement of these regulations that a competitive process should be used unless there are justifiably exceptional circumstances Where HSE funds external organisations; which are awarding works or related services contracts and HSE is funding these contracts by 50% or more then these organisations must comply with the sourcing requirements in these regulations. Ver /20/2013 Page 12 of 133

13 2.30. This provision applies to both commercial and voluntary / not for profit organisations funded by HSE Every manager sourcing a supplier has an obligation to ensure that they are in a position to accurately and clearly specify their requirements to potential suppliers, regardless of value threshold Value Thresholds for Sourcing of Suppliers- General The value of the likely purchase is the major factor in choosing the required method for sourcing the supplier All values should be applied excluding VAT unless otherwise stated. 1. Goods The threshold should be applied in respect of the need for the same or similar goods for the remainder of the current financial year. 2. Services (including construction related services) - The threshold should be applied in respect of the need for the same or similar services for the remainder of the current financial year. 3. Works The threshold relates to the specific construction works. Authorisation of Capital Projects, and the related Expenditure Approval and Sourcing of Supplies and Services must be undertaken and managed by Estates Function In applying the value thresholds for sourcing managers must take account requirements for the same or similar goods or services in as wide an area of the overall HSE service as possible Prohibition on Splitting of Purchases to avoid value thresholds Splitting of Purchases occurs where a staff member separates what is in effect one requirement into two or more separate lots for the purpose of applying a lower than appropriate value threshold. This practice represents a very serious breach of the Financial Regulations and is prohibited Value Thresholds for Sourcing represent the minimum acceptable control levels. A Budget Holder must, if they believe it appropriate, require the use of the more open methods of sourcing suppliers even where the expected value does not make this mandatory. Such an approach would be required, for example, if they deem it necessary to: Ensure proper controls are in place Achieve best value for money Ver /20/2013 Page 13 of 133

14 2.35. SOURCING OPTIONS THAT COMPLY WITH THIS FINANCIAL REGULATION Table 1; A summary of main requirements with regard to Sourcing of Suppliers is set out in Table 1 on page 51. This includes the Methods of Sourcing, Number and form of quotes/tenders and minimum time for receipt of quotes/tenders allowed by these regulations for different bands of spend The following options may be utilised in cases where either acquiring from stock or from an existing contract are not possible: 1. Direct approach to one or more potential suppliers seeking quotes see variations below but operates within 1 to 25,000 range, excluding VAT. 2. Public Invitation of Tenders (Non EU) see variations below but operates between 25,000 to 200,000, excluding VAT for goods / services 5,000,000 for works). 3. EU Public Tender see variations below but operates for anything over the thresholds listed at 2 above If there is any uncertainty as to which value range the required goods / services fall into then the next highest range should be assumed and the sourcing options required for that value range are to be utilised Budget Holders and their nominees are required to use the sourcing options required by the higher value ranges where it is probable that this will yield better value for money. They must satisfy themselves that any additional expense and / or additional time involved can be justified Authorisation to seek quotes / tenders N Each Budget Holder or their nominee must set out the appropriate authorisation to be obtained prior to seeking quotes or tenders. This must be covered in the formal documented purchasing arrangements that is required to put in place As a minimum the following must be complied with: 1. Grade VI or higher must approve in advance any proposal to seek tenders (above 25k) up to the EU threshold levels 2. Grade VIII or higher must approve in advance any proposal to seek tenders requiring EU tendering procedures The General Requirements with regard to Tendering are set out on page 35 and include Tender Receipt, Custody and Opening, Tender Evaluation, Tender Award, Notification of Results and Documentation Please refer to section Professional Input to Tendering which details the requirements to obtain appropriate professional procurement input where the value of purchases exceeds 25, Issue of Tender Forms / Documentation A record must be kept of each request for tender documentation detailing when received, when responded to and documentation issue. N5 Quotations/Quotes (for the purpose of these regulations) refers to values up to 50,000, the term Tender or bid refers to a more formal submission by a supplier to supply goods or services greater than 50,000. Ver /20/2013 Page 14 of 133

15 2.41. Minimum time to be allowed for receipt of quote/tender. ( The times specified are the minimum allowed. Managers are required to allow additional time where doing so could be considered reasonably necessary Additional time should be allowed if it is considered necessary to secure the minimum number of quotes / tenders or to achieve best value for money Real time constraints that may exist around meeting service needs must be taken account of when considering allowing additional time Receipt of less than the required number of quotes Above the 25,000 threshold the receipt of less than the minimum required number of quotes means that there is a requirement for the next level up of authorisation to approve the resulting purchase order or contract. For example - ordinarily these regulations provide that a Grade V can approve purchase orders up to 10,000 for routine expenditure but in the event that only 2 quotes are obtained for goods costing 9,000 then the approval of a Grade VI is required The relevant manager is required to consider whether the objective of achieving best value for money would be better served by restarting the quotation process in an effort to achieve the required minimum number of quotes All potential suppliers must have equal access to information All potential suppliers must be informed in a consistent way as to any criteria that may be used to evaluate their quotes or tenders HSE staff must not give any real or perceived advantage to any potential supplier It is essential that any information or clarification provided to one supplier is provided in the same format and at the same time to all potential suppliers regardless of whether they have requested it or not Evaluation of Quotes and Tenders The general principles regarding evaluation of tenders must be applied to the quotation process. Evaluation of quotes must involve the use of objective and fair criteria that are consistently applied The Most Economically Advantageous Tender (MEAT) Giii or Lowest Price achieved must be accepted As the value threshold for quotes is lower than for tenders (quotes up to 25k, Tenders thereafter) it is expected that the quotation process will be less formal than the tender process and will require less documentation A clear record should be kept of the evaluation of all quotes and tenders - in particular where the lowest priced quote is not accepted the reasons for this must be recorded for future audit. Ver /20/2013 Page 15 of 133

16 ( VI ) End of Purchasing Stage Expenditure Approval and Issue of Purchase Order or Contract. Once an appropriate supplier has been sourced, the final stage in the tendering/selection process is to obtain approval for the expenditure and then to formally request the supplier(s) to provide the required goods, services or works. This is normally done through the issue of a purchase order or letter of offer to the supplier Expenditure Approval - Fundamental Requirement of these Regulations It is a fundamental requirement of these regulations that expenditure approval; is obtained prior to any request being issued to a supplier to provide goods or services (via Purchase order or contract etc) can only be issued once availability of funding has been confirmed Expenditure Approval - Financial Limits by Grade Expenditure approval is a key control within the Purchase to Pay process Table 2 Purchase Order/contract Approval Financial Limits by Grade, on page 52 sets out the approval levels for ranges of expenditure based on a hierarchy of grades Expenditure approval is based on hierarchy of grades utilising the main clerical/administrative grades to represent the standard approval levels Persons approving expenditure must be a formally appointed budget holder or must be nominated by a budget holder Non clerical/administrative grades can be nominated by budget holders as expenditure approvers Responsibility of Managers who approve expenditure It is essential that every manager who signs off on expenditure is fully aware of the meaning of that action as they will be held accountable for same This applies to any form of expenditure approval including approval for: The issue of a purchase order. The issue of a contract. Expenditure by any other means In effect the manager is confirming that he has taken all reasonable steps to assure him/herself that: 1. The expenditure is appropriate to meet the need. 2. Proper procurement has taken place. 3. The expenditure is within the available budget. 4. The Financial Regulations have been complied with. 5. It is in order to request supplier to provide goods/services. Ver /20/2013 Page 16 of 133

17 In assessing whether sufficient budget is available to cover any proposed purchase the manager must take account of all expenditure to date including commitments and known additional expenditure to the end of the financial year It is a mandatory requirement that requests to suppliers are in writing in the form of: System Purchase Orders Manual Purchase Orders Contracts Other written format approved by the relevant Assistant National Director of Finance Purchase orders must actually be sent to suppliers once issued. Where there is a necessity to place orders verbally the appropriate purchase or other written request as approved, must be issued to the supplier on the next available working day and must be clearly marked confirmation of verbal order dated xx/xx/xx Information regarding the acceptance of any tender can only be given to unsuccessful tenderers after the relevant Budget Holder has approved the expenditure and the award of the contract Value thresholds are applied to determine the level of managerial approval required in respect of any given purchase order / contract or expenditure Splitting of Expenditure Approvals Prohibited Expenditure approvals must not be artificially divided up or split so as to avoid the proper application of the expenditure approval limits set out in Table 2 on page Purchases extending over a number of months The approval of expenditure for goods or services to be provided over an extended period of time should be treated as one expenditure approval and requires the appropriate grade of manager to approve This applies for example to grants to outside agencies (s.65 s etc) the approval of the annual grant for the year and any subsequent adjustments to that grant are deemed to be expenditure approval decisions The processing of the monthly / quarterly grant payments are not expenditure approval decisions but do require appropriate validation and sign-off in terms of satisfactory receipt of services Departure from the Financial Limits by Grade Where it can be shown that there is a pressing need individual staff members can be authorised to hold the expenditure approval limit of the next grade above them Contingency arrangements Giv should be prepared to ensure that short term gaps that require temporary departure from financial limits. For example procedures to be put in place to address holiday and sickness cover The relevant Assistant National Director/ Hospital Network Manager must approve such arrangements. These do not take effect until they are notified to the relevant Assistant National Director of Finance Departures from limits applies only to Grade IV and above. Ver /20/2013 Page 17 of 133

18 Such departures must be treated as exceptional and must be reviewed at least annually and formally re-approved if they are required to continue Requirement for Written Decisions General There is a mandatory requirement to ensure that sufficient documentation is retained to facilitate any necessary future review of the rationale behind any expenditure approval For purchases below 25,000 appropriately filed and accessible copy letters, requests, quotes etc will provide sufficient documentation to meet this requirement. The approval of the appropriate manager must be clearly noted and dated above their signature on a purchase order or other relevant documentation For expenditure above 25,000 a formal written decision must be retained along with other written decisions of the relevant manager Expenditure Approval on Financial Information System /Accounting System Whenever practical the aim should be to facilitate the streamlining of the expenditure approval process without any reduction in financial control. This aim can be achieved by ensuring that managers approving the issue of purchase orders / contracts e.g. do so using accounting system directly. Transitional arrangements will operate for those locations with accounting systems with insufficient functionality to allow on-line approval. Ver /20/2013 Page 18 of 133

19 RECEIVING PROCESS 2e. RECEIVING; MAIN REQUIREMENTS Definition The receipt / receiving process for goods or services cover the following activities: 1. Checking and recording that the goods or services received match the specification of what was ordered or contracted by the HSE. 2. Checking and recording that the goods or services that have been received are in good order and are deemed to be fit for the purpose for which they were supplied. The receipt / receiving process are complete when 1. to 2. are complete The Key control within the Receiving process is to ensure that the quantity and quality of goods specified have been satisfactorily delivered to meet the customer requirements At this stage it is appropriate to record the accounting entries in the Financial Information System (FIS) to: i) recognise the liability to pay for the goods, services or works ii) record the expenditure against the relevant Budget Holder This is achieved by inputting a Goods Received Note (GRN) onto the FIS. It is important that the receiving process is completed efficiently and without undue delay to ensure that the HSE recognises its liabilities and records expenditure at the earliest appropriate time Receipt / Receipting Key Control Stage Receipt / receipting is the second and final key control stage in the purchase to pay process. Once this stage has been appropriately reached what remains are important but lesser control points around invoice checking When a manager makes a decision that the receiving process is complete they are in effect making a decision to pay for the goods and services provided an appropriate payment request (invoice) is subsequently received.. They may never see the invoice unless their personal involvement is required to address any mismatch between the invoice and the goods received These regulations support the need to move away from the inefficient process of having invoices circulating around the HSE to be certified This is becoming increasingly unnecessary with modern financial systems that can automate the matching of invoices against purchase orders and delivery documents (Goods Received Notes). Ver /20/2013 Page 19 of 133

20 2.45. General Application of Receipt / Receiving regulation These regulations cover the entire HSE and, given the diversity inherent in the HSE, variations may occur in the detail around: Exactly by whom or in what manner goods or services are received At what precise stage or by whom the checking of what has been received against the price, quantity and specification of what was ordered or contracted for will be carried out The precise manner and by whom it will be decided that it is in order to pay for the goods or services upon request Who exactly performs the related accounting entries involving inputting what FIS refers to as a Goods Received Note that has the effect of : Recording a liability in the accounts of the HSE Recording the expenditure against the budget of the relevant Budget Holder. It is not intended to prescribe the detail of exactly how the receipt / receiving process will operate in specific locations, however, the following are mandatory requirements: Mandatory Controls within Receiving. A. Segregation of Duties within Receipt / receiving of goods and services Page 21 B. Procedures for receiving to be put in place by Budget Holders Page 21 C. Delivery of Goods/Services to Nominated Receipting Location Page 22 D. Inspection, Checking and Matching of Receipt Page 22 E. Authorisation and Sign-off for Receipt of Goods and Services. Page 23 Ver /20/2013 Page 20 of 133

21 A. Segregation of Duties within Receipt / receiving of goods and services No manager can both make the decision to issue a purchase order or contract and also sign-off on the receipt of the goods or service There must a clear separation of duties between the Purchase Ordering and Receiving Required Sign-off on receipt of goods or services : 1. Up to 5,000, receipt must be approved by grade III 2. Up to 25,000, receipt must be approved by grade lv 3. Above 25,000, receiving must involve at least 2 managers one of whom must be at Grade V or above Example of Receipt of Goods greater than 25,000. Example A: Staff member A initially receives the goods and physically inspects and signs off that the goods are in order etc and can be paid for when invoiced. A separate staff member must carry out the accounting entries i.e. by recording the receipt on the system. Example B: Staff member A initially receives the goods and carries out all the inspection checks etc. Staff member B signs off that receipt is complete and it is in order to pay for goods once invoice received. Two people have now been involved in the process so either staff member can complete the accounting entries or a third staff member can do so No manager can have the sole sign-off on receipt of goods or services that are intended primarily for his or her own day to day use. B. Procedures for Receiving to be put in place by Budget Holders Receiving Procedures and Locations Receiving of good or services may occur at designated receiving points e.g. hospital stores or a health centre within community care. The purchase order should state the designated point of delivery Responsibility rests with the relevant Budget Holder to ensure appropriate receiving procedures are in place to enable compliance with these regulations Budget Holders must put in place clearly documented procedures for the efficient operation of the main elements of the receiving process outlined above A key control is ensuring that issues with goods or services received are identified as soon as possible after receipt and notified to the supplier The receipt / receiving arrangements put in place must be formally reviewed and updated at least annually and the output of these reviews must be held available for future audit. Ver /20/2013 Page 21 of 133

22 C. Delivery of Goods/Services to Nominated Receipting Location Gv Initial Receipt of Goods / Services The person who initially physically receives the goods or services may not be the person who carries out any or all of the checking referred to above. The mandatory requirement is that all staff who initially receives goods or services on behalf of the HSE is aware that their minimum obligation is to: i) Accept the goods/services provided that they have not been formally precluded from doing so ii) Accept the goods or services on a subject to inspection / confirmation basis only if they are not in a position to carry out the necessary checking while the deliverer waits. iii) They must clearly mark this on any documentation they are signing for the deliverer. iv) Obtain and retain a copy of any delivery documentation including anything signed by them for the deliverer and pass it to the appropriate staff member. v) Maintain safe custody of the goods until they are brought within whatever local inventory / asset management arrangements are in force for that location. vi) Immediately, or as soon after as is practical, notify the appropriate staff who is responsible for carrying out the remaining or next step in the process Derogation ; Budget Holders may, with the approval of the Assistant National Director/Hospital Network Manager or equivalent salary grade (or nominee) co-signed by the relevant Assistant National Director of Finance put in place alternative arrangements. Such arrangements may involve random sample verification or other measures not involving full confirmation of delivery for each specific direct delivery prior to payment. There is a balance to be struck between the value of the goods or services and the cost of verifying their receipt. D. Inspection, Checking and Matching of Receipt Procedure following Initial Physical Receipt Goods or services must be inspected and checked on a timely basis. This should take place at the time of delivery or if not, then as soon as possible after actual delivery of goods or services. Delivery of goods or services must be inspected and checked in respect of: i. Match to specification i.e. was it what was ordered in terms of quantity, type etc ii. Fitness for purpose i.e. are they fit for the purpose for which they were purchased or are there any obvious defects etc. iii. Match to price indicated on the purchase order or contract Timing of Inspection / Checking of goods or services received There is a mandatory requirement to inspect goods and services as soon as is practical following delivery. Ver /20/2013 Page 22 of 133

23 It is important that Budget Holders ensure that this aspect of the receipting process is carefully managed to ensure the HSE does not suffer any loss due to late checking of goods or services received Suppliers generally have set time periods within which they must be notified of any problems with goods or services delivered by them In respect of services this requirement is particularly important given that services can generally not be returned a. Matching to purchase order specification Discrepancies against the original purchase order or contract must be identified and a decision made as to what action, if any, is required to resolve the issue All material discrepancies and action taken to resolve must be recorded Where some of the goods do match what was ordered then a decision must be taken and recorded as to whether these goods will be accepted or whether the entire delivery should be rejected Return of Goods to the Supplier Faulty or excess goods or goods that do not match what was ordered should be returned immediately or as soon as possible to the supplier The HSE should not suffer the cost of returning goods to any supplier where they are defective or do not match what was ordered. E. Authorisation and Sign-off for Receipt of Goods and Services Sign-off on Receiving Process It is a mandatory requirement that at the conclusion of the receiving process a decision is made and appropriately recorded Managers must be pragmatic around how this is achieved and in most cases a note on the purchase order or delivery document signed by a manager at the appropriate level will suffice The signing off on the satisfactory receipt of a good or service is an important control. It represents the point of no return in respect of most purchases. However, it is a lesser control than that required to authorise expenditure in the first place Professional Input to Receipting Goods/Services over 25, Depending on the nature of the goods or services (remembering that services includes building services) it may be necessary to obtain professional and / or technical advice internally or externally as to the receipt of goods or services. Ver /20/2013 Page 23 of 133