Wiltshire Schools Finance Manual September 2008

Transcription

1 SUMMARY OF CONTENTS 1. Regulaton and Control 1.1 General 1.2 Responsbltes of Chef Fnance Offcer 1.3 Responsbltes of Schools 1.4 Responsbltes of the Local Authorty 1.5 Ths Manual 2. Fnancal Management 2.1 Captal Expendture 2.2 Revenue Expendture 2.3 Accountng Standards 2.4 Budgetng 2.5 Fnancal Reportng 2.6 Fnancng of School Expendture 2.7 Fundng of School Expendture 2.8 Best Value 2.9 Chargng of Schools Budget Shares 2.10 Interest on School Balances 2.11 Cash flow management 3. Purchasng, Tenderng & Contractng Requrements 3.1 Purchasng 3.2 Tenderng 3.3 Contractng 3.4 Constructon Industry Scheme 4. Internal and External Audt 5. Income 6. Bankng Arrangements 7. Stores & Other Assets 7.1 General 7.2 Inventory Regsters 7.3 Dsposal of Assets 8. Value Added Tax 9. Insurance 10. Payroll 10.1 Mnmum Specfcaton of Servce 10.2 Responsbltes of School & Payroll Provder 1 Wltshre County Councl

2 APPENDICES AND SPECIFIC GUIDANCE NOTES Contents Menu In addton to the man secton of ths manual, a number of appendces are attached whch amplfy specfc ssues. Also, n the future, addtonal gudance notes may be requred to assst schools. Appendces Appendx A: Appendx B: Appendx C: Appendx D: Appendx E: Appendx F: Appendx G: Schedule G1: Appendx H: Appendx J: Appendx K: Appendx L: Appendx M: Appendx N: Appendx O: Appendx P: Segregaton of Dutes Bref Summary of EU Provsons Proflng of Cash Advances Formats for LA Reportng Packs and Budget Templates Detals of Accountng Standards Lst of Approved Fnancal Insttutons Chart of Accounts Ledger Code/CFR Lne Mappng LMS Fundng Formula Factors ICT Securty Polcy Prncples of Best Value Dsputes Procedure Tenderng Checklst Form of Tender (example) Tender Return Label (example) Schools Consderng Changng Ther Fnancal Management System Gudance Notes (see notes followng appendces) Operatng the VAT Reclam Procedure Please use the lnk above to access the VAT Electronc Gudance Notes 2 Wltshre County Councl

3 1. REGULATION AND CONTROL Contents Menu 1.1 General 1. These Regulatons shall be compled wth by the governng bodes of all schools operatng under schemes of local management. 2. Both regulatons, whch are mandatory to comply wth the law, and advce on good practce, whch has been adopted by the Councl, and s recommended to governng bodes, are ncluded. 3. Cabnet means the Cabnet or any replacement commttee or sub commttee of Wltshre County Councl, whch s the Local Authorty (LA). 4. No exceptons to these Regulatons or amendments or exceptons to the supples procedure may be authorsed except by the Cabnet. 5. These Regulatons are ssued to provde detaled gudance as provded by paragraphs of the Scheme for Fundng Schools. 6. The proper conduct of affars requres that each party s clear about the nature and extent of the rghts, dutes and responsbltes placed on them. Ths s partcularly mportant gven the large amounts of publc money delegated to the control of school governng bodes. The followng paragraphs descrbe the dvson of responsbltes between the County Councl (as LA) and the school. 1.2 Responsbltes of the Chef Fnance Offcer 1. Under Secton 151 of the Local Government Act 1972 the County Councl has apponted the Chef Fnance Offcer as the offcer wth responsblty for the proper admnstraton of the County Councl s fnancal affars. 2. In order that he/she may fulfl these statutory oblgatons: 2.1 The Chef Fnance Offcer wll ssue such accountng and fnancal system nstructons as he/she consders necessary. 2.2 No fnancal procedure or system shall be vared wthout hs pror agreement. It s expected schools wll deploy fnancal system software to support ther accountng and fnancal management responsbltes. It s further antcpated that schools wll contnue to use the currently nstalled software n the majorty of cases ths s the SIMS fnancal system. If any school wshes to replace ther current fnancal system software, the Chef Fnance Offcer (or any offcer delegated by hm) must gve pror approval. Ths s to ensure that the software s capable of meetng accountng and reportng standards approprate to schools, the LA and external agences. Further gudance on ths s gven n Appendx P 3 Wltshre County Councl

4 2.3 The Chef Fnance Offcer shall be ultmately responsble for the producton and dstrbuton of fnancal management nformaton to the Councl, commttees, sub commttees, panels, workng partes and other smlar bodes of the Councl and therefore wll have the ultmate rght to specfy the accountng and reportng standards to be followed by all parts of the Councl, ncludng all mantaned schools. 2.4 The Chef Fnance Offcer (or any offcer delegated by hm/her) shall have the rght of access to the fnancal records and other relevant documentaton held by any part of the Councl, ncludng all mantaned schools. 3. Where provded n ths manual, the Chef Fnance Offcer wll deal reasonably and promptly wth any requests by schools for specfc permssons or authortes. 1.3 Responsbltes of Schools 1. The responsblty for proper admnstraton of the school s fnancal affars rests wth the governng body. 2. Each governng body s responsble specfcally for: 2.1 The observance of these Regulatons wthn ther establshment and for the complance of ther staff wth accountng and fnancal system nstructons ssued under paragraph of these Regulatons; 2.2 the accountablty of staff, and for the securty of all other resources and assets n ther establshment, n accordance wth procedures agreed wth the Chef Fnance Offcer; 2.3 montorng and controllng the present and projected fnancal performance of ther establshment. 3. Governng bodes must consder delegatng the exercse of ther responsbltes under these Regulatons to a Responsble Offcer typcally the headteacher (or School Manager where so desgnated) or to share ths delegaton between such a Responsble Offcer and a fnance sub commttee of governors, subject to the followng: 3.1 governng bodes must consder the extent to whch ther powers are to be so delegated; 3.2 the decson (and any subsequent varaton) s recorded n the mnutes of the governng body; 3.3 a wrtten Scheme of Delegaton s provded to the Responsble Offcer. Ths scheme must be updated to reflect any subsequent varatons resolved by the governng body. Ths scheme has the status of relevant fnancal documentaton as referred to under paragraph of these Regulatons. 4 Wltshre County Councl

5 3.4 governng bodes cannot delegate away the requrement to consder on a regular bass reports descrbng the fnancal performance of ther establshment. 3.5 In ths manual, where the statement of a responsblty s preceded by the words the school or the headteacher, then ths s a responsblty whch can be delegated by the governng body. If however a statement of responsblty s preceded by the words the governng body then ths s a responsblty whch cannot be delegated typcally these relate to recevng and consderng reports on varous subjects. 3.6 The Responsble Offcer must at least once n every fnancal year report to the governng body on the exercse of the responsbltes delegated to hm/her by the governng body. Ths report should be explctly ncluded n the mnutes of the governng body. 3.7 Where a governng body wshes to appont a person other than the headteacher as the Responsble Offcer, then specfc wrtten permsson must be obtaned from the Chef Fnance Offcer. 4. Where requred, the school wll provde such nformaton statstcal, fnancal or otherwse to the LA as t reasonably requres to fulfl ts functons under the Scheme for Fundng Schools. Such nformaton wll be provded n the form, format and tmetable that the LA requres. Should such nformaton not be forthcomng, the LA wll not accept responsblty for any consequences. 5. The school s requred to establsh a Regster of Busness Interests. The Regster must lst, for every member of the governng body and the headteacher, any busness nterests that they or any member of ther mmedate famly have. The governng body and school staff have a responsblty to avod any conflct between ther busness and personal nterests and affars and nterests of the school. A Regster of Busness Interests must be mantaned for every member of the governng body, the headteacher and any member of staff nvolved wth the procurement and strategc/fnancal management procedures of the school. The Regster must nclude all busness nterests such as drectorshps, shareholdngs and other appontments of nfluence wthn a busness or other organsaton, whch may have dealngs wth the school. The dsclosures should also nclude busness nterests of relatves and other ndvduals who may exert nfluence. The school should ensure the Regster s up to date and complete, ncludes all governors and relevant staff and n ths regard nl returns are also requred. All entres should be sgned and dated by the ndvduals. The Regster must be revewed frequently at least annually. The mnutes of the governng body must offcally note that a revew of the Regster has taken place. 5 Wltshre County Councl

6 The members of the governng body and the headteacher have the duty to notfy any changes to the nformaton held on the Regster. The Regster must be made avalable for nspecton by governors, staff and parents. For admnstratve convenence the school may defne any reasonable means for governors, staff or parents to exercse ther rght to nspect the Regster. The Chef Fnance Offcer may rule defntvely on the reasonableness of any partcular arrangement set up by a school. 1.4 Responsbltes of the LA 1. The LA wll supply schools wth all nformaton statstcal, fnancal or otherwse held at LA level whch s reasonably requred for schools to effcently plan ther fnancal affars. 2. The LA wll publsh the fnancal statements n respect of delegated and centrallyretaned expendture on the Schools Budget coverng: Annual Budget Estmates Outturn Expendture n accordance wth the statutory requrements and tmetable. These statements wll be avalable to every mantaned school and to the publc at the Councl s offces and on the Councl s webste. 3. The LA wll publsh a Statement of the Wltshre Schools Fundng Formula refer to Secton 2.7 and Appendx H of ths manual. 1.5 Ths Manual The LA wll consult Schools Forum before any changes and these wll be reflected n the annual budget statement whch s requred to be publshed under regulatons n force at that tme. 1. Ths manual remans the ntellectual property of the Chef Fnance Offcer. No part of ths manual or ts contents may be used for other purposes wthout hs/her express permsson. 2. Ths manual s provded for the use of schools and LA staff who have dealngs wth schools. One copy s provded free of charge to each school, approprate LA staff and headteacher assocatons. 3. Recpents of ths manual may make copes for use wthn ther establshment only. Further copes may be obtaned from the Chef Fnance Offcer or from the Department for Chldren & Educaton free of charge. 4. In the event of any dspute regardng the contents of the manual, the verson held by: 6 Wltshre County Councl

7 The Manager, Accountng & Budget Support Team Resources, Improvement & Young People Branch Department for Chldren & Educaton County Hall, Trowbrdge wll be deemed to be the defntve verson. 5. Ths manual s ntended to be a lvng document and wll change over tme to reflect current stuatons. The Chef Fnance Offcer welcomes any postve contrbuton to the contents of ths manual and any nput to ts development. Any such comments should, n the frst nstance, be addressed to ether: or or The Manager, Accountng & Budget Support Team The School Fnance & Fundng Manager (both Department for Chldren & Educaton) the Chef Accountant, Resources Department 6. Any updates to the manual wll be sent (one copy) to the headteacher of all mantaned schools, the managers of approprate LA teams and the char of fnance sub commttees of headteacher assocatons. They are then responsble for ensurng that any other copes held n ther establshment are approprately updated. The LA wll not accept any responsblty for any occurrence resultng from the falure of any recpent to update any extant copes of ths manual held wthn ther establshments, or for any falure to take note of the contents of any amendments. 7 Wltshre County Councl

8 2. FINANCIAL MANAGEMENT Contents Menu 2.1 Captal Expendture 1, Ths secton refers to expendture on the followng tems whch are normally ncluded n the captal programme: v acquston of land and buldngs; constructon works, ncludng alteratons or addtons to the buldng fabrc; purchases of plant, equpment, furnture and vehcles; professonal fees n connecton wth any of these tems. 2. The general responsblty for captal expendture s not delegated. Expendture by the LA on captal s specfcally excluded from the Schools Budget quantum by regulatons ssued under Secton 46 of the School Standards & Framework Act However, schools wll receve devolved Formula Captal Standards Funds and these may be spent for purposes prescrbed by DCSF and communcated to schools annually. 3. Under paragraph 2.14 of the Scheme for Fundng Schools, schools are specfcally permtted to apply funds from ther accumulated delegated revenue funds to undertake captal projects. 4. Before commttng captal funds, schools should consult the LA s School Managed Project Gudance, submt an applcaton for approval f necessary and reassure themselves that they wll comply wth statutory requrements and LA gudance. Captal funds must be spent on hgh prorty Asset Management Plan prortes. 5. Where the premses of the school are owned by the LA, the consent of the LA to the proposed works must be sought through the notfcaton process outlned n paragraph above. 6. The captal de mnms value s the level above whch spendng from the revenue budget s classfed as captal. Ths value s currently set at 2, Revenue Expendture 1. Funds are avalable to support expendture by schools under two man categores delegated funds and earmarked devolved funds. 2. Schools may spend delegated funds only for the purposes of the school. Ths s broadly defned n S.46 of the School Standards & Framework Act 1998 as the actvtes under the Indvdual Schools Budget, not countng those actvtes performed by the LA on behalf of all schools or ndvdual pupls. The Chef Fnance Offcer has the rght to decde whether any partcular expendture s properly defnable as for the purposes of the school. 3. Delegated funds are also known as the School s Budget Share. Ths s determned by the applcaton of the LA s Fundng Formula to the Indvdual Schools Budget quantum as defned by S.46 of the Schools Standards & Framework Act Wltshre County Councl

9 4. Schools may spend Earmarked Devolved Funds only for the purpose(s) for whch they are allocated, wthn the tme perod for whch they are allocated. Actual expendture by a school whch s n excess of the funds allocated must be found from delegated funds, whle any surplus of allocated funds over actual expendture must be returned to the LA. 5. Schools have the freedom to use delegated mones to purchase support servces to assst n the management of the school. Funds were delegated from 1 Aprl 1999 for the followng fnancal support servces (whch are avalable, on a tradng bass, from the LA): - Budgetng and Accountng - Fnancal Advce - Fnancal Tranng Certan other fnancal support actvtes wll also be avalable to schools at no charge, beng funded from centrally retaned mones: - Internal Audt - VAT Advce - Fnancal Results Consoldaton and Corporate Reportng 6. If any advce gven by a source external to the County Councl conflcts wth any past, present or future recommendaton/opnon or decson gven by the County Councl, then the school must accept/adopt the latter as beng correct and defntve. 2.3 Accountng Standards 1. Schools wll mantan adequate records whch wll support all fnancal transactons related to Delegated, Earmarked Devolved and Prvate Funds. 2. Where accountng records are mantaned n electronc form: then the software used must be approved by the Chef Fnance Offcer (refer to Secton 1.2 paragraph 2.2 above); schools must have due regard for the requrements of the ICT securty gudance set out n Appendx J; Charts of Accounts must dentfy separately ncome and expendture relatng to Delegated, some Earmarked Devolved*, extended schools and Prvate Funds. * There s no longer a general requrement to dentfy all Standards Funds separately, although schools may keep separate records f they so wsh for nternal purposes. However, schools are requred to dentfy some devolved Standards Funds separately, e.g., Formula Captal Fundng & Expendture whch has to be recorded separately to meet external reportng requrements. Other funds whch must be dentfed separately n schools accounts wll be advsed as and when necessary. 9 Wltshre County Councl

10 v Charts of Accounts must also be capable of supportng the reportng requrement contaned n these Regulatons (cf Secton 2.5 below). The mnmum subjectve analyss to be used s shown n Appendx G, along wth other Charts of Accounts ssues. v v Each record n the electronc accountng system wll be supported by approprate manual source documents. The software used must support statutory VAT accountng requrements. 3. Schools wll account to the LA for ncome and expendture on an accruals bass. The techncal defnton of ths s contaned n Appendx E, along wth sample transacton formats. Accounts prepared under ths paragraph wll form the defntve statement of the school s fnancal poston at any pont n tme. 4. Any queres related to Charts of Accounts, standard book-keepng entres or accountng standards should be addressed to: 2.4 Budgetng Normal Procedures The Manager, Accountng & Budget Support Team, Department for Chldren & Educaton 1. As a mnmum requrement, each school shall produce a budget for each fnancal year, wthn the lmt of Delegated and Earmarked Devolved Funds. 2. The format of the budget wll be as lad out n Appendx D, and wll requre the separate dentfcaton of net spendng aganst: Delegated Budget Share for the fnancal year Earmarked Devolved Funds for the fnancal year (where requred) Accumulated reserves brought forward from prevous years. 3. Schools wll submt ther budget templates, approved by the governng body or commttee wth delegated authorty, n the requred format by the end of June each year, relatng to the fnancal year startng the precedng Aprl. 4. Notwthstandng the detal contaned n submtted budget templates, schools are free to restate ther plans at any tme by movng between budget heads. Ths s the general power of Vrement. In ther Scheme of Delegaton (refer to Secton above), governng bodes must specfy the value of vrements above whch ther express authorsaton s requred. 10 Wltshre County Councl

11 Such authorsaton must be recorded n the mnutes of the governng body. The school wll ensure that all approved vrements are recorded n ther accountng system so that routne fnancal montorng statements always show correct varances. The general power of vrement s applcable to Delegated Funds, the School Development Grant and the School Standards Grant. Schools may not vre Formula Captal or any other standards funds other than the School Development Standards Fund Grant. 5. It s good practce to ncorporate the costs of school mprovement prortes n the school budget plan, and to revew progress towards delverng those prortes regularly Defct Budgets 1. Schools are requred to set a net expendture budget wthn the total fundng avalable whch s made up as follows: Delegated Budget Share for the fnancal year Earmarked Devolved Funds for the fnancal year Accumulated Reserves brought forward from prevous years 2. Therefore n the normal course of events, spendng above allocated fundng (also known as a defct budget) s not allowed. 3. However, f a school faces an unavodable crcumstance or set of crcumstances, whch makes t mpossble to formulate a net expendture budget wthn avalable fundng, then the school may apply to the LA for permsson to set a defct budget. Such an applcaton must be accompaned by a comprehensve Recovery Plan detalng how the school ntends to reduce net expendture to the level consstent wth aggregate fundng. Ths must be accompaned by budgets, covered by the Recovery plan, untl such tme as the forecast accumulated reserves of the school returns to at least zero. The maxmum defct perod s fve years. 4. Should the LA approve the settng of a defct budget, t may set specal condtons on the school whch wll depend on the ndvdual crcumstances, and may nclude, but not be restrcted to, the followng: that School Standards Grant must be used to offset the defct ncreasng the frequency of routne fnancal reportng by the school to the LA requrng more detaled and/or more extensve forecastng of annual net expendture (ths wll be lmted to the tme span of the approved Recovery Plan) chargng of nterest on any addtonal cash suppled by the LA to support any approved defct budget 11 Wltshre County Councl

12 a representatve of the Chef Fnance Offcer attendng governng body meetngs. 5. Defct Budget Recovery Plans should be formally revewed durng the lfetme of the plan. These revews should take place at least annually f for no other reason than to restate the plan nto the new year prce base. 2.5 Fnancal Reportng It s also recommended that plans should be revewed mmedately f any change s detected n any factor whch s materal to the fulflment of the Recovery Plan and the Manager, Accountng & Budget Support nformed mmedately. 1. Generally schools wll report to the LA on ther fnancal performance on a quarterly bass accordng to the followng tmetable, and usng the formats shown n Appendx D: Fgures as at: (n CFR Format) end September end December end March end October end January end Aprl 2. The quarterly School Fnancal Return pack wll contan the followng element: Income & Expendture Account showng actual results and forecast for the full year 3. Also, a statement detalng the ntended use of accumulated reserves, f these reserves exceed the thresholds set out n the Controls on Surplus Balances Scheme, wll be requred once fnal outturn fgures for the precedng fnancal year have been confrmed. Schools wth reserves lower than the stated thresholds may voluntarly complete ths statement. Ths statement should be submtted wth the annual budget template no later than 30 June. 4. In addton, schools wll also submt, at the end of each quarter along wth the paper reports mentoned n paragraph 2 above, a Tral Balance extracted from the local ledger software. Ths Tral Balance wll consst of the current balance held aganst all accounts (Balance Sheet and Income & Expendture) n the school s ledger. These balances must be the same as are reported n the Actual Year-to-Date porton of the paper reports. Ths data wll be loaded nto the corporate accountng system to allow for consoldaton of school accounts. 5. LA Reportng Packs must be countersgned by the Responsble Offcer (normally the headteacher) and the char of governors (or the char of fnance sub commttee f ths s ncluded n the school s Scheme of Delegaton). 12 Wltshre County Councl

13 2.6 Fnancng of School Expendture Wltshre Schools Fnance 1. Schools can opt for a system of fnancng expendture from the followng lst: 1.1 The optons are: Corporate Integraton Ths opton s not yet avalable. Full Cash Under ths opton, the total fundng avalable to the school from Delegated Fundng (e, budget share) s advanced n cash to the school s account wth an approved bank or buldng socety. The school wll then be responsble for rasng payments for all expendture ncludng payroll. 1.2 Where a school has delegated responsblty for payroll management and opts for a provder of ths servce other than the LA, then t must choose the Full Cash opton. 1.3 The fnancng opton chosen must run for a complete fnancal year; therefore t s not possble to change fnancng optons md-way through a fnancal year. 2. Where a school chooses the cash opton ( per paragraph 1.1 above) the cash wll be advanced monthly. The phasng and tmng of these cash advances wll be determned n accordance wth the consderatons n Appendx C of ths manual. 3. Fnancng of Earmarked Devolved Fundng wll n general follow the pattern of fnancng establshed n paragraph 1 above. Earmarked Devolved Fundng whch s dstrbuted by means of a formula applyng to all schools of any class of schools wll be fnanced n accordance wth the choce each school has made n relaton to Delegated Fundng under paragraph 1 above. Payments wll n general be consoldated wth those coverng delegated funds. All other Earmarked Devolved Funds wll be fnanced by reference to the nature of the funds and the school s preferred fnancng opton. In general payments are made separately from the normal fnancng stream but work s currently underway to unfy varous funds nto one payment. 2.7 Fundng of School Expendture 1. Wltshre schools wll receve fundng for the expendture requred to fulfl ther delegated responsbltes by the operaton of a Formula. 2. The basc shape of ths Formula s to apply a Cost Rate to a Factor Drver to derve a Formula Funded Value. 13 Wltshre County Councl

14 Factor Drvers and Cost Rates are dfferentated to reflect the dfferent phases, characters or levels of delegated responsbltes. 3. The overall formula dentfes a number of Factor Drvers whch attract fundng. The detals of the Factor Drvers are publshed annually and dstrbuted to schools. 4. Fundng for Delegated Responsbltes can only be made by operaton of the Formula no specal cases can be allowed. 5. Over tme the shape of the Formula can be changed by: addng or removng Factors addng or removng phase or character dfferentaton 2.8 Best Value Any such change wll be the subject of open consultaton wth Schools Forum pror to mplementaton. 1. Schools are requred to nclude, when submttng ther annual budget template, a statement settng out the steps they wll be takng to ensure that expendture, partcularly, but not restrcted to, large servce contracts, wll reflect the prncples of the Best Value regme. 2. The current formulaton of Best Value prncples s summarsed n Appendx K. 2.9 Chargng of Schools Budget Shares General Provsons 1. In the normal course of operatons, schools may purchase goods and/or servces from the LA. In all such cases, tradng wll be carred out on an arms length bass. Thus all the normal purchasng procedures outlned elsewhere n ths manual wll apply. Normal County Councl procedures for the management of trade debtors wll also apply. 2. There are a number of specal crcumstances where the LA may also charge schools budget shares. These are dscussed further n paragraph below. 3. Because of the legal relatonshp between the LA and mantaned schools, any tradng dspute s not open to legal resoluton. Therefore a Dsputes Procedure s defned to deal wth any such stuaton. Ths s outlned n paragraph below. 4. The preferred admnstratve method of dealng wth payments by schools to the LA s by drect debt on the school s bank account. 14 Wltshre County Councl

15 2.9.2 Specal Crcumstances Wltshre Schools Fnance 1. The LA may charge a school s budget share n a prescrbed lst of crcumstances. Ths power s granted by Secton 6 of the LA s Scheme for Fundng Schools. 2. The LA wll consult the school on ts ntenton to make such a charge under ths provson and wll formally notfy the school when such a charge s made. 3. The LA cannot act unreasonably n the exercse of the power granted by Secton 6 of the Scheme for Fundng Schools. A charge can only arse where the LA has a statutory responsblty and has ncurred a lablty Dsputes Procedure 1. The steps n the dsputes procedure are outlned n Appendx L attached. 2. The man characterstcs of the procedure are: t s based on facts; t nvolves assessment of the facts by non-actve partes; conclusons are bndng on both partes Interest on School Balances 1. The ssue of payng/chargng nterest on school balances wth the LA s ntmately correlated wth the fnancng opton chosen. For consderaton of ths refer to paragraph 2.6 of ths manual. 2. Corporate Integraton Opton Ths opton s not currently avalable to schools. Consderaton of the nterest poston wll be ncluded n any future consultaton on ths opton. 3. Full Cash Opton In ths opton all cash relatng to school actvtes s held n ts own bank or buldng socety account. Interest on these balances wll be payable by the bank or buldng socety under ts current terms and condtons. Further consderaton s outsde the scope of ths manual Cash flow management 1. Cash flow s the movement of money n and out of the school bank account durng the year 2. Cash flow forecastng s a fnancal tool used to chart the expected flow of ncome and expendture through the school bank account 15 Wltshre County Councl

16 3. The constructon of cash flow forecasts s not a requrement under these Fnancal Regulatons; however t s recommended good practce and s an element of the Fnancal Management Standard n Schools: 3.1 To ensure you have suffcent funds to pay for your operatons; 3.2 To dentfy any sgnfcant cash balances; 3.3 To foresee cash flow dffcultes so that approprate correctve acton can be taken; 3.4 To avod an overdrawn school bank account; whch s n contraventon of Fnancal Regulatons; 3.5 To produce an ntal cash flow forecast alongsde the annual budget plan, and thereafter undertake perodc revews. 16 Wltshre County Councl

17 3. PURCHASING, TENDERING AND CONTRACTING REQUIREMENTS Contents Menu 3.1 Purchasng 1. Introducton 1. Ths secton provdes basc gudance to schools on the procurement of goods and servces. Although the text s dvded up nto specfc procurement processes, e.g., tenderng and contractng, many of the ponts are applcable to other procurement processes. 2. The governng body must have regard to value for money consderatons, that s, of qualty or ftness for purpose and delvery aganst prce, n all purchases of works, equpment, goods and servces. Except where there are good reasons to the contrary, contracts must be placed on a compettve bass, the lowest tender or prce to be accepted; where a dfferent decson s taken the reasons for t must be documented. 2. General Prncples Contracts should also be revewed and renegotated at regular ntervals where approprate. 1, Schools wll award orders for the purchase of goods and servces whch wll be pad for wth publc funds. Therefore schools not only need to mantan the ntegrty of publc funds, they must also be seen to do so. Ths entals three dstnct aspects: Probty demonstrate that all partes are dealt wth on a far and equtable bass and that there s no prvate gan, favourtsm or corrupton nvolved n the contractual relatonshps of the school. Accountablty the school s publcly accountable for ts expendture and the conduct of ts affars. Value for money to demonstrate economy, effcency and effectveness n the use of publc funds. 3. Value for Money 1. There are three man elements to value for money (VFM) economy, effcency and effectveness although the boundares are often not clear cut. Economy s mnmsng the costs of resources used wthn schools, havng regard to the approprate qualty. Effcency s the relatonshp between output, n terms of goods, servces or other results, and the resources used to produce them. 17 Wltshre County Councl

18 Effectveness n the extent to whch objectves have been acheved and the relatonshp between the ntended results and actual results of an actvty. 2. The school must always have regard to value for money consderatons. Ths may not always result n purchase of the cheapest goods or servce. Consderaton must be gven to other factors such as qualty, sutablty, delvery date, credt terms, relablty of a suppler and the fnancal poston of a suppler. 3. The school may wsh to mantan a lst of approved major and regular supplers whch should be revewed at least annually. Ths should ensure that orders are only placed wth supplers who have a proven capacty to provde qualty, quantty and tmely delvery at a compettve prce and also comples wth the governors responsbltes n ths regard. Volume dscounts and credt terms should be taken nto account both when placng orders and when makng payment. 4. Payments shall normally be made aganst orgnal nvoces, not photocopes, delvery notes, statements, faxes or remnders provded by supplers. In the event of the orgnal beng lost, a copy must be obtaned from the suppler, and must be clearly marked as such. There may be nstances where payments have to be made wthout an nvoce havng been receved, e.g., some payments must accompany an order. In such cases, all documents should be attached to the copy order form as supportng nformaton. 5. There may be benefts from buldng relatonshps wth supplers. Ths can manfest tself n hdden advantages such as soft servce, for example, advce and after sales servce beyond the normal contractual relatonshp. There are strong ncentves for supplers to look after customers and schools should bear ths n mnd. 4. Identfcaton of Potental Supplers 1. The followng sources may be useful: v v v v busness drectores (e.g., Yellow Pages) trade journals vsts from sales reps/mal shots supplers catalogues nformaton from other schools nformaton from the LA other procurement meda such as Schoolquote or OPEN 18 Wltshre County Councl

19 5. Orders and Quotatons Wltshre Schools Fnance 1. Orders should be made n wrtng and placed at the tme and on the bass agreed wth the suppler. It should be exceptonal for orders to be made verbally and these must be subsequently confrmed n wrtng. There may be occasons when standng orders are placed and goods and servces are drawn aganst the orgnal order. In these crcumstances the tems drawn must be recorded aganst the orgnal order and records mantaned to montor when that order s completed. 2. Order forms should be pre-numbered. If manual order forms are used, they should be pre-numbered. (If the computersed accountng package used by the school automatcally prnts numbers on the order forms when ssued, order forms cannot be pre-numbered.) Access to order forms should be controlled to ensure that blank forms are restrcted to authorsed staff only. Orders must be sgned by the person requestng the order and then approved by sgnature by an authorsed person wthn the lmts of ther authorty and ther budget. Where value and/or delvery dates are crtcal these should be stated on the order. All copes of spoled orders should be marked as such and retaned for completeness. 3. Orders and requests for quotatons should be clear and as specfc as possble to avod any msunderstandng. The followng are relevant consderatons: v v v detaled specfcaton of requrements; quantty; delvery date and address the address should always be the school s address except n exceptonal crcumstances where specfc authorsaton s gven by the headteacher; terms and condtons t s good practce to have these pre-prnted onto orders as acceptance of the order by the suppler can mply acceptance of the purchasng organsaton s terms and condtons; quotaton reference, authorsaton and date (f an order); method to transmt quotatons, e.g., telephone or letter (f a quotaton). 4. For larger purchases a formal tenderng procedure should be followed. Advce on tenderng s gven n Secton 3.2 below. 5.1 Use of Payment Cards The governng body or delegated commttee s responsble for ensurng that there are adequate controls n place over the use of the school payment cards. These should be revewed regularly. The governors must adhere to the followng fnancal procedural rules: 19 Wltshre County Councl

20 v v v v v x x x x x Cards must only be ssued n the name of the school. The governng body must nomnate a responsble member of staff to have control over the care and PIN. The card must be kept n a secure place, eg, school safe, at all tmes and should not be taken home at any tme (t s good practce to keep the card n an envelope, whch s sgned and sealed after each use). The card should only be used by nomnated offcers and must not be gven out to members of staff for ther own use. Purchases made usng the card must relate to offcal funds for school actvtes only and all goods and servces must be suppled to the school. The delvery address should always be the school and not home addresses, etc. Personal tems must NOT be purchased usng the card. The card should only be used for low value purchases and the governng body should agree on a maxmum lmt for sngle transactons, daly and total monthly spend. There must be a prudent lmt set on the card (ths could be lnked to the school scheme of delegaton) based on projected suppler spend, and agreed by the governng body. Ths lmt must not be ncreased or exceeded wthout proper authorsaton from the governng body. To restrct mproper use of the card, merchant/retaler types could be restrcted by the card ssuer to prevent expendture on non approved tems. Schools should dscuss ther requrements wth the card provder. Cards must only be used after the correct authorsaton to purchase has been obtaned. Cash must NOT be wthdrawn usng the card. Recepts must be attached to the statements to show a clear audt tral. VAT rules stll apply to purchases made usng the card; therefore VAT recepts must be requested. There should be a clear segregaton of dutes between the requstonng/orderng and card purchasng processes and the reconclaton of the monthly statement and settlement payments made to the card ssuer. Statements must be addressed and sent to the headteacher at the school and not to named ndvduals. 20 Wltshre County Councl

21 xv xv xv xv The FULL balance must be pad off by the due date after all payment transactons lsted have been checked (by a person other than the nomnated card holder) and the statement has been reconcled. A spreadsheet or transacton log can be mantaned to ad reconclaton and ensure that credt lmts are not exceeded. Falure to settle the full balance by the due date wll be construed as borrowng, whch s not permtted. Payments to the card ssung company must be made va cheque or, preferably, drect debt and not usng petty cash. Payments made by drect debt should be processed n SIMS FMS as a cash book journal: VAT can be reclamed provded that a vald VAT recept s obtaned. Schools need to ensure that any suppler refunds are re-credted to the card account correctly. In the event of the card beng lost, stolen or compromsed the card ssuer must be contacted mmedately. 5.2 Internet Purchases v v v v Purchases over the nternet should only be used where the goods or servces cannot be effectvely or economcally obtaned va tradtonal methods and the school consders that best value s beng acheved. The cost of P&P and any returns needs to be taken nto account. If purchasng goods or servces usng the nternet, the school should only purchase from secure stes (those dsplayng https at the start and dsplayng a padlock symbol). Indvduals orderng goods and servces should make t clear that these are beng ordered on behalf of the school. When orders are placed wth the suppler an order confrmaton wll usually be dsplayed or an emal receved together wth the method of payment. Ths must be prnted off and kept wth the authorsaton to purchase (along wth all transacton documentaton and assocated emals). The school should use the same procedures on recept and payment of goods and servces from the nternet as per tradtonal methods, e.g., authorsaton from budget holders. The school should also consder the rsks when usng the nternet, to look at ther card balances, etc, and ensure that the account s password protected and that only a lmted number of personnel know the password. Some smaller traders may use thrd party payment agents (e.g., PayPal) who are unable to ssue VAT recepts or nvoces. Schools 21 Wltshre County Councl

22 must ensure that they obtan a vald nvoce/recept from the suppler drect. v x Schools may wsh to purchase and download software. Payments could be requred n foregn currences ($ and - dollars and euros). Lcence keys wll need to be kept safe. There s a rsk of vruses as well as conflcts wth Wndows or other applcatons. Schools should not clck on lnks to on-lne shops n emals, as they may lnk to fraudulent stes, and addresses should be typed manually. 6. Recept of Goods or Servces 1. All goods and servces should be checked on recept aganst the copy order for qualty and quantty. Ths check should be recorded (sgned for) on the copy order. The carrer/shpper should be notfed promptly of any shortages or rejected tems. For contracts and captal projects ths may nvolve recordng the recept of goods or servces over a long perod of tme aganst one order. In these crcumstances separate systems should be ntated to ensure that the recept of all goods and servces s recorded and that the documentaton s stored n an approprate format. 2. The school should mantan clear polces on returned goods. A goods returned book should be mantaned n order to document the return to the suppler. Ths wll nclude a descrpton of the goods and reason for the return. A procedure wll be requred to ensure that replacements or credts are receved for all returns. 7. Processng Purchase Invoces 1. Invoces for payment should be matched wth a note of the recept of goods or work carred out. The nvoce should be checked and marked off for accuracy of quantty, prce and calculaton aganst the orgnal order. All these checks should be recorded on the nvoce a rubber stamp grd s deal. Payment should only be made n respect of tems whch are properly due and nvoced. The checkng and approval of nvoces should be carred out only by authorsed members of the school staff. 2. Suppler statements should be reconcled regularly to the outstandng nvoces. Where a detaled credtors ledger s mantaned, the suppler statements should be reconcled wth each ndvdual suppler account. 3. Segregaton of dutes should be adequately mantaned wth reference to staff avalable. Segregaton between ncurrng expendture and authorsng payments s essental. The segregaton of dutes relatng to the orderng and recept of goods and between the recept of goods and the authorsaton of payments s hghly desrable. In schools where staff numbers are lmted, compensatng controls can be ntroduced to supplement the segregaton of dutes. Further gudance on segregaton of dutes s gven n Appendx A attached to ths manual. 22 Wltshre County Councl

23 4. An essental part of any purchasng system s a faclty whch enables commtments and credtors to be dentfed. Commtments are where orders have been placed for whch goods or servces have not been receved. Credtors are where goods and servces have been receved but payment has not been made. Ths faclty need not be especally sophstcated (t need not, for example, nvolve the school acqurng an addtonal commtment accountng computer module) but t s necessary to ad budgetary control. 5. Polces and procedures for makng partal payments, takng of cash dscounts and the settlement of dsputed tems should be establshed to ensure the school obtans all savngs due and all outstandng tems are resolved n a approprate manner. 8. Issues for Negotaton 1. Further savngs may be acheved by examnaton of the followng areas: v v A breakdown of the composton of the prce: there may be tems n a contract or agreement that are not essental for the school s needs and could be excluded. Quantty dscounts: schools should enqure as to the quanttes necessary to obtan dscounts and consder makng a larger order and/or a call-off contract, partcularly f the goods or servce s used on an ongong bass. A school should balance the potental benefts aganst the loss of potental nterest earned on cash balances expended and the rsks of holdng stock, such as plferage, obsolescence and damage. Movng delvery dates to sut supplers producton schedules and off peak perods: consderaton should be gven to the costs of holdng stock as outlned above. Varatons n payment and credt terms: schools should, however, be conscous of the dangers of makng payment n advance of recept of all or part of the goods or servce. Frst, f a frm were to go bankrupt the school would rank as an unsecured credtor, effectvely the last n lne to be pad. Secondly, f the goods or servce are unsatsfactory, reclamng payments may prove dffcult and costly. Intally askng for less than the actual requrement as a negotatng tool wth sales staff to obtan more favourable terms: ths approach may be detrmental to a school attemptng to buld a relatonshp wth a suppler resultng for example n the loss of soft servce or preferental treatment. 9. Leasng and Rental of Equpment 1. There are two knds of leases, operatng leases and fnance leases. Fnance leases are n substance borrowng and therefore schools are not empowered to enter nto such leases wthout specfc borrowng approval from the Secretary of State. Operatng leases are n substance rental agreements and are 23 Wltshre County Councl

24 therefore an opton avalable to schools. However, the rules that a LA must use to defne leases changed from 1 Aprl 2004 and are now subject to a strcter test. The defnton of a fnance lease s one that: transfers substantally all the rsks and rewards of ownershp of an asset to the lessee; the present value of the mnmum lease payments amounts to substantally all (>90%) of the far value of the asset; the present rate value should be calculated by usng the nterest rate mplct n the lease. (If ths rate s not determnable t should be estmated by reference to the rate whch a lessee would be expected to pay on a smlar lease.) If a lease meets any of these crtera t s a fnance lease and the school must not enter ths agreement. Leases not meetng any of these crtera can be consdered operatng leases. These new rules wll manly mpact on the leasng of IT equpment. As they deprecate quckly, leasng companes wll not typcally hold large resdual values n them. Therefore, the mnmum lease payments wll usually amount to 90% or greater of ts far value even f the lease s as short as three years. Where schools are ntendng to enter nto any lease agreement approprate advce should be sought from the Chef Fnance Offcer s Corporate Fnance Secton, unless use s made of bulk buyng arrangements establshed by the Chef Fnance Offcer (eg, Investec scheme). Schools should always read the terms and condtons of operatng leases and rental agreements very carefully. Partcular care should be taken over cancellaton clauses whch can be extremely onerous, e.g., some photocoper contracts. 2. The opton of rentng a pece of equpment can be a worthwhle consderaton, partcularly f the need s short term or the equpment may become obsolete quckly. Short term rental may cost a fracton of the purchase prce. Other factors to consder are: the costs of repar and nsurance are usually the responsblty of the hrng company; ths, of course, should be checked and be specfcally stated n the hre contract; equpment that does not lve up to expectaton or s used less frequently than antcpated can be returned. Indeed, equpment can be rented to ascertan whether usage would make purchase or further rental cost effectve; contracts can be termnated n tmes of fnancal constrant as a cost savng measure; 24 Wltshre County Councl

25 v v v the full purchase prce s not payable and nstalments spread the cost thus mprovng cash flow; rental can be the most cost effectve way of procurng equpment that s used nfrequently; long term rental may ultmately be more expensve than outrght purchase. 10. EU Regulatons 1. EU law requres that certan procedures must be followed up wth regard to contracts awarded by publc bodes that exceed certan thresholds. The values of these thresholds are detaled n Appendx B to ths manual together wth a bref summary of the requrements. 2. The basc prncples are as follows: v v v a ban on any dscrmnaton of the grounds of natonalty; transparency of award procedures by the requrement to publsh notce of the contract n the Offcal Journal of the European Communtes; ndcaton of whch type of tender procedure has been adopted: open, restrcted or negotated. The drectves gve specfc gudance as to whch may be adopted. A bref outlne of thee procedures s gven n the secton on tenderng. transparency of the crtera to be used to select contractors; complance wth techncal standards. In ths respect, European standards must take precedence over natonal standards; certan oblgatons at the begnnng of the budgetary year to gve notce of works, supples and servces contracts above the stated thresholds that a body ntends or hopes to award. Ths s not a call to tender but s an ndcatve notce to allow frms to be prepared f and when such a tender nvtaton s publshed. 3. Schools wth a potental contract that may exceed the thresholds should refer to the relevant drectves and statutory nstruments. These are: Councl Drectve 93/36/EC (The Publc Supples Drectve) Councl Drectve 93/37/EC (The Publc Works Drectve) Councl Drectve 92/50/EC (The Publc Servces Drectve) Councl Drectve 89/655/EC (The Publc Remedes Drectve) The Publc Works Contracts Regulatons Wltshre County Councl

26 11. Purchasng Controls Wltshre Schools Fnance (Statutory Instrument 1991 No 2680) The Publc Servces Contracts Regulatons 1993 (Statutory Instrument 1993 No 3228) The Publc Supply Contracts Regulatons 1995 (Statutory Instrument 1995 No 201) Copes of these drectves are avalable n the European Commsson publcaton Publc Procurement n Europe The Drectves and together wth the Statutory Instruments are avalable from The Statonery Offce. The nterpretaton of these detaled requrements s very complex and f approprate schools are advsed to seek expert advce. 1. Governng bodes should set monetary lmts clearly defnng the level of expendture staff can authorse wthout the approval of the governng body. 2. All paperwork and documentaton should be retaned for all quotaton and tenderng exercses. Ths should clearly show the bass upon whch a purchasng decson has been made, especally f the chosen opton s not the lowest ntal cost. 3. Any member of the school staff must dsclose to the governng body and the headteacher any nterest that he or she may have, ncludng that of relatves and frends, n any purchasng decson n whch they may be nvolved. Staff who face such a conflct of nterest should not partcpate n the decson wth whom to place the contract. Ths wll nclude the appontment of staff. The governng body must extend ther regster of busness nterests to nclude all staff nvolved n purchasng decsons. 4. Governng bodes must expressly prohbt dvsble contracts. These arse where one contract whch would exceed a partcular level of authorty s broken down nto two or more smaller contracts. Ths s often done where staff have faled to take account of the longer tmescales that may be nvolved or where the tender process wll be nvoked by the value of the proposed purchase. The need for forward plannng s therefore stressed n the context of purchasng decsons. If the control procedure s avoded value for money may not be acheved and there s a loss of accountablty and a fundamental contraventon of the controls establshed by the governng body. 5. Purchasng and adherence to approved procedures should therefore be revewed on a regular bass by someone ndependent of the purchasng process to ensure complance. 12. Petty Cash 1. Petty cash s useful for makng small purchases wth a mnmum of fuss. However, snce cash s portable and desrable, t s mportant that proper 26 Wltshre County Councl