THE NATIONAL ASSOCIATION OF LOCAL COUNCILS
109 GREAT RUSSELL STREET LONDON WC1B 3LD
MILLOM without PARISH COUNCIL
These Financial Regulations were approved by the Council at its Meeting held on 4 November 2019
These financial regulations govern the conduct of financial management by the council and may only be amended or varied by resolution of the council. Financial regulations must be observed in conjunction with the council’s standing orders and the Internal Financial Control System.
The council is responsible in law for ensuring that its financial management is adequate and effective and that the council has a sound system of internal control which facilitates the effective exercise of the council’s functions, including arrangements for the management of risk.
The council’s accounting control systems must include measures:
for the timely production of accounts;
that provide for the safe and efficient safeguarding of public money;
to prevent and detect inaccuracy and fraud; and
identifying the duties of officers.
These financial regulations demonstrate how the council meets these responsibilities and requirements.
At least once a year, prior to approving the Annual Governance Statement, the council must review the effectiveness of its system of internal control which shall be in accordance with proper practices.
Deliberate or wilful breach of these Regulations by an employee may give rise to disciplinary proceedings.
Members of Council are expected to follow the instructions within these Regulations and not to entice employees to breach them. Failure to follow instructions within these Regulations brings the office of councillor into disrepute.
The Responsible Financial Officer (RFO) holds a statutory office to be appointed by the council. The Clerk has been appointed as RFO for this council and these regulations will apply accordingly.
acts under the policy direction of the council;
administers the council's financial affairs in accordance with all Acts, Regulations and proper practices;
determines on behalf of the council its accounting records and accounting control systems;
ensures the accounting control systems are observed;
maintains the accounting records of the council up to date in accordance with proper practices;
assists the council to secure economy, efficiency and effectiveness in the use of its resources; and
produces financial management information as required by the council.
The accounting records determined by the RFO shall be sufficient to show and explain the council’s transactions and to enable the RFO to ensure that any income and expenditure account and statement of balances, or record of receipts and payments and additional information, as the case may be, or management information prepared for the council from time to time comply with the Accounts and Audit Regulations.
The accounting records determined by the RFO shall in particular contain:
entries from day to day of all sums of money received and expended by the council and the matters to which the income and expenditure or receipts and payments account relate;
a record of the assets and liabilities of the council; and
wherever relevant, a record of the council’s income and expenditure in relation to claims made, or to be made, for any contribution, grant or subsidy.
The accounting control systems determined by the RFO shall include:
procedures to ensure that the financial transactions of the council are recorded as soon as reasonably practicable and as accurately and reasonably as possible;
procedures to enable the prevention and detection of inaccuracies and fraud and the ability to reconstruct any lost records;
identification of the duties of officers dealing with financial transactions and division of responsibilities of those officers in relation to significant transactions;
procedures to ensure that uncollectable amounts, including any bad debts are not submitted to the council for approval to be written off except with the approval of the RFO and that the approvals are shown in the accounting records; and
measures to ensure that risk is properly managed.
The council is not empowered by these Regulations or otherwise to delegate certain specified decisions. In particular any decision regarding:
setting the final budget or the precept(council tax requirement);
approving accounting statements;
approving an annual governance statement;
writing off bad debts;
declaring eligibility for the General Power of Competence; and
addressing recommendations in any report from the internal or external auditors,
shall be a matter for the full council only.
In addition the council must:
determine and keep under regular review the bank mandate for all council bank accounts;
approve any grant or a single commitment in excess of £500; and
in respect of the annual salary for any employee have regard to recommendations about annual salaries of employees made by the relevant committee in accordance with its terms of reference.
In these financial regulations, references to the Accounts and Audit Regulations or ‘the regulations’ shall mean the regulations issued under the provisions of section 27 of the Audit Commission Act 1998, or any superseding legislation, and then in force unless otherwise specified.
In these financial regulations the term ‘proper practice’ or ‘proper practices’ shall refer to guidance issued in Governance and Accountability for Local Councils - a Practitioners’ Guide (England) issued by the Joint Practitioners Advisory Group (JPAG), available from the websites of NALC and the Society for Local Council Clerks (SLCC).
ACCOUNTING AND AUDIT (INTERNAL AND EXTERNAL)
All accounting procedures and financial records of the council shall be determined by the RFO in accordance with the Accounts and Audit Regulations, appropriate guidance and proper practices.
On a regular basis, at least once in each quarter, and at each financial year end, a member other than the Chairman [or a cheque signatory] shall be appointed to verify bank reconciliations (for all accounts) produced by the RFO. The member shall sign the reconciliations and the original bank statements (or similar document) as evidence of verification. This activity shall on conclusion be reported, including any exceptions, to and noted by the council.
The RFO shall complete the annual statement of accounts, annual report, and any related documents of the council contained in the Annual Return (as specified in proper practices) as soon as practicable after the end of the financial year and having certified the accounts shall submit them and report thereon to the council within the timescales set by the Accounts and Audit Regulations.
The Clerk shall ensure that there is an adequate and effective system of internal audit of its accounting records, and of its system of internal control in accordance with proper practices. The Clerk or any member of the council shall, If the Internal Auditor require, make available such documents and records as appear to the council to be necessary for the purpose of the audit and shall, as directed by the council, supply the internal auditor, or external auditor with such information and explanation as the council considers necessary for that purpose.
The internal auditor shall be appointed by and shall carry out the work in relation to internal controls required by the council in accordance with proper practices.
The internal auditor shall:
be competent and independent of the financial operations of the council;
report to council in writing, or in person, on a regular basis with a minimum of one annual written report during each financial year;
to demonstrate competence, objectivity and independence, be free from any actual or perceived conflicts of interest, including those arising from family relationships; and
have no involvement in the financial decision making, management or control of the council.
The RFO shall make arrangements for the exercise of electors’ rights in relation to the accounts including the opportunity to inspect the accounts, books, and vouchers and display or publish any notices and statements of account required by Audit Commission Act 1998, or any superseding legislation, and the Accounts and Audit Regulations.
The Clerk shall, without undue delay, bring to the attention of all councillors any correspondence or report from internal or external auditors, unless the correspondence is of a purely administrative nature.
ANNUAL ESTIMATES (BUDGET)
The Clerk must each year, by no later than the end of December , prepare detailed estimates of all receipts and payments including the use of reserves and all sources of funding for the following financial year in the form of a budget to be considered by the council.
The council shall consider annual budget proposals in relation to the council’s forecast of revenue and capital receipts and payments including recommendations for the use of reserves and sources of funding and update the forecast accordingly.
The council shall fix the precept (council tax requirement), and relevant basic amount of council tax to be levied for the ensuing financial year not later than by the end of January each year. The Clerk shall issue the precept to the billing authority and shall supply each member with a copy of the approved annual budget.
The approved annual budget shall form the basis of financial control for the ensuing year.
BUDGETARY CONTROL AND AUTHORITY TO SPEND
The Clerk shall provide the Council with up to date financial figures, which will include a detailed statement of receipts and payments along with actual v budget figures, at least on a quarterly basis, at a council meeting.
The Clerk shall have authority to incur any item of expenditure up to £250 arising from the administration of Council business.
Any two of the Chairman, the Vice-Chairman and the Clerk shall have the authority to incur any item of expenditure up to £500 where it is in their view necessary or desirable to act without delay.
All three, Chairman, Vice-Chairman and the Clerk, shall have the authority to incur any item of expenditure up to £1000 where it is in their view necessary or desirable to act without delay.
Any exercise of such delegated authorities shall be reported to the Council as soon as practicable thereafter.
Any decision under delegated authority that exceeds budgeted expenditure should be notified to Council/
No expenditure shall be incurred in relation to any capital project and no contract entered into or tender accepted involving capital expenditure unless the Council is satisfied that the necessary funds are available or the requiste borrowing approval has been obtained.
The Council shall include an amount in the budget for contingencies. When it is agreed that funds shall be spent from this account a virement will be made by the Clerk to the appropriate allocation in the budget with a note of the power to spend..
The salary budgets are to be reviewed at least annually in October for the following financial year and such review shall be evidenced by a hard copy schedule signed by the Clerk and the Chairman of Council.
Changes in earmarked reserves shall be approved by council as part of the budgetary control process.
BANKING ARRANGEMENTS AND AUTHORISATION OF PAYMENTS
The council's banking arrangements, including the bank mandate, shall be made by the Clerk and approved by the council; banking arrangements may not be delegated to a committee. They shall be regularly reviewed for safety and efficiency.
The Clerk shall prepare a schedule of payments requiring authorisation, forming part of the Agenda for the Meeting and, together with the relevant invoices, present the schedule to council. The council shall review the schedule for compliance and, having satisfied itself shall authorise payment by a resolution of the council. A detailed list of all payments shall be disclosed within the minutes of the meeting at which payment was authorised. Personal payments (including salaries, wages, expenses and any payment made in relation to the termination of a contract of employment) may be summarised to remove public access to any personal information.
All invoices for payment shall be examined, verified and certified by the Clerk to confirm that the work, goods or services to which each invoice relates has been received, carried out, examined and represents expenditure previously approved by the council.
The Clerk shall examine invoices for arithmetical accuracy and analyse them to the appropriate expenditure heading. The Clerk shall take all steps to pay all invoices submitted, and which are in order, at the next available council meeting.
The Clerk shall have delegated authority to authorise the payment of items only in the following circumstances:
If a payment is necessary to avoid a charge to interest under the Late Payment of Commercial Debts (Interest) Act 1998, and the due date for payment is before the next scheduled Meeting of council, where the Clerk certify that there is no dispute or other reason to delay payment, provided that a list of such payments shall be submitted to the next appropriate meeting of council;
Members are subject to the Code of Conduct that has been adopted by the council and shall comply with the Code and Standing Orders when a decision to authorise or instruct payment is made in respect of a matter in which they have a disclosable pecuniary or other interest, unless a dispensation has been granted.
PAYMENT OF ACCOUNTS
The council will make safe and efficient arrangements for the making of its payments.
Following authorisation under Financial Regulation 5 above, the council, a duly delegated committee or, if so delegated, the Clerk shall give instruction that a payment shall be made.
All payments shall be effected by cheque or other instructions to the council's bankers, or otherwise, in accordance with a resolution of council.
Cheques or orders for payment drawn on the bank account in accordance with the schedule as presented to council or committee shall be signed by two members of council in accordance with a resolution instructing that payment. A member who is a bank signatory, having a connection by virtue of family or business relationships with the beneficiary of a payment, should not, under normal circumstances, be a signatory to the payment in question.
To indicate agreement of the details shown on the cheque or order for payment with the counterfoil and the invoice or similar documentation, the signatories shall each also initial the cheque counterfoil.
Cheques or orders for payment shall not normally be presented for signature other than at a council (including immediately before or after such a meeting). Any signatures obtained away from such meetings shall be reported to the council at the next convenient meeting.
If thought appropriate by the council, payment for utility supplies (energy, telephone and water) and any National Non-Domestic Rates may be made by variable direct debit provided that the instructions are signed by two members and any payments are reported to council as made. The approval of the use of a variable direct debit shall be renewed by resolution of the council at least every two years.
If thought appropriate by the council, payment for certain items (principally salaries) may be made by banker’s standing order provided that the instructions are signed, or otherwise evidenced by two members are retained and any payments are reported to council as made. The approval of the use of a banker’s standing order shall be renewed by resolution of the council at least every two years.
If thought appropriate by the council, payment for certain items may be made by BACS or CHAPS methods provided that the instructions for each payment are signed, or otherwise evidenced, by two authorised bank signatories, are retained and any payments are reported to council as made. The approval of the use of BACS or CHAPS shall be renewed by resolution of the council at least every two years.
If thought appropriate by the council payment for certain items may be made by internet banking transfer provided evidence is retained showing which members approved the payment.
Where a computer requires use of a personal identification number (PIN) or other password(s),for access to the council’s records on that computer, a note shall be made of the PIN and Passwords and shall be handed to and retained by the Chairman of Council in a sealed dated envelope. This envelope may not be opened other than in the presence of two other councillors. After the envelope has been opened, in any circumstances, the PIN and/or passwords shall be changed as soon as practicable. The fact that the sealed envelope has been opened, in whatever circumstances, shall be reported to all members immediately and formally to the next available meeting of the council. This will not be required for a member’s personal computer used only for remote authorisation of bank payments.
No employee or councillor shall disclose any PIN or password, relevant to the working of the council or its bank accounts, to any person not authorised in writing by the council or a duly delegated committee.
Regular back-up copies of the records on any computer shall be made and shall be stored securely away from the computer in question, and preferably off site.
The council, and any members using computers for the council’s financial business, shall ensure that anti-virus, anti-spyware and firewall software with automatic updates, together with a high level of security, is used.
Where internet banking arrangements are made with any bank, the Clerk shall be appointed as the Service Administrator. The bank mandate approved by the council shall identify a number of councillors who will be authorised to approve transactions on those accounts. The bank mandate will state clearly the amounts of payments that can be instructed by the use of the Service Administrator alone, or by the Service Administrator with a stated number of approvals.
Access to any internet banking accounts will be directly to the access page (which may be saved under “favourites”), and not through a search engine or e-mail link. Remembered or saved passwords facilities must not be used on any computer used for council banking work. Breach of this Regulation will be treated as a very serious matter under these regulations.
Changes to account details for suppliers, which are used for internet banking may only be changed on written hard copy notification by the supplier and supported by hard copy authority for change signed by [two of] the Clerk [the RFO][a member]. A programme of regular checks of standing data with suppliers will be followed.
Any Debit Card issued for use will be specifically restricted to the Clerk and will also be restricted to a single transaction maximum value of £500 unless authorised by council or finance committee in writing before any order is placed.
The council will not maintain any form of cash float. All cash received must be banked intact. Any payments made in cash by the Clerk (for example for postage or minor stationery items) shall be refunded on a regular basis, at least quarterly.
PAYMENT OF SALARIES
As an employer, the council shall make arrangements to meet fully the statutory requirements placed on all employers by PAYE and National Insurance legislation. The payment of all salaries shall be made in accordance with payroll records and the rules of PAYE and National Insurance currently operating, and salary rates shall be as agreed by council, or duly delegated committee.
Payment of salaries and payment of deductions from salary such as may be required to be made for tax, national insurance and pension contributions, or similar statutory or discretionary deductions must be made in accordance with the payroll records and on the appropriate dates stipulated in employment contracts, provided that each payment is reported to the next available council meeting, as set out in these regulations above.
No changes shall be made to any employee’s pay, emoluments, or terms and conditions of employment without the prior consent of the council.
Each and every payment to employees of net salary and to the appropriate creditor of the statutory and discretionary deductions shall be recorded in a separate confidential record (confidential cash book). This confidential record is not open to inspection or review (under the Freedom of Information Act 2000 or otherwise) other than:
by any councillor who can demonstrate a need to know;
by the internal auditor;
by the external auditor; or
by any person authorised under Audit Commission Act 1998, or any superseding legislation.
The total of such payments in each calendar month shall be reported with all other payments as made as may be required under these Financial Regulations, to ensure that only payments due for the period have actually been paid.
Any termination payments shall be supported by a clear business case and reported to the council. Termination payments shall only be authorised by council.
Before employing interim staff the council must consider a full business case.
LOANS AND INVESTMENTS
All borrowings shall be effected in the name of the council, after obtaining any necessary borrowing approval. Any application for borrowing approval shall be approved by Council as to terms and purpose. The application for borrowing approval, and subsequent arrangements for the loan shall only be approved by full council.
Any financial arrangement which does not require formal borrowing approval from the Secretary of State (such as Hire Purchase or Leasing of tangible assets) shall be subject to approval by the full council. In each case a report in writing shall be provided to council in respect of value for money for the proposed transaction.
The council will arrange with the council’s banks and investment providers for the sending of a copy of each statement of account to the Chairman of the council at the same time as one is issued to the Clerk.
All loans and investments shall be negotiated in the name of the council and shall be for a set period in accordance with council policy.
The council shall consider the need for an Investment Strategy and Policy which, if drawn up, shall be in accordance with relevant regulations, proper practices and guidance. Any Strategy and Policy shall be reviewed by the council at least annually.
All investments of money under the control of the council shall be in the name of the council.
All investment certificates and other documents relating thereto shall be retained in the custody of the Clerk.
Payments in respect of short term or long term investments, including transfers between bank accounts held in the same bank, or branch, shall be made in accordance with Regulation 5 (Authorisation of payments) and Regulation 6 (Instructions for payments).
The collection of all sums due to the council shall be the responsibility of and under the supervision of the Clerk.
The council will review all fees and charges at least annually, following a report of the Clerk.
Any sums found to be irrecoverable and any bad debts shall be reported to the council and shall be written off in the year.
All sums received on behalf of the council shall be banked as soon as practicable intact by the Clerk.
The origin of each receipt shall be entered on the paying-in slip.
Personal cheques shall not be cashed out of money held on behalf of the council.
The RFO shall promptly complete any VAT Return that is required. Any repayment claim due in accordance with VAT Act 1994 section 33 shall be made at least annually coinciding with the financial year end.
ORDERS FOR WORK, GOODS AND SERVICES
An official order or letter shall be issued for all work, goods and services unless a formal contract is to be prepared or an official order would be inappropriate. Copies of orders shall be retained by the Clerk.
All members and the Clerk are responsible for obtaining value for money at all times. An officer issuing an official order shall ensure as far as reasonable and practicable that the best available terms are obtained in respect of each transaction, usually by obtaining three or more quotations or estimates from appropriate suppliers, subject to any de minimis provisions in Regulation 11 below.
A member may not issue an official order or make any contract on behalf of the council.
The Clerk shall verify the lawful nature of any proposed purchase before the issue of any order, and in the case of new or infrequent purchases or payments, the Clerk shall ensure that the statutory authority shall be reported to the meeting at which the order is approved so that the minutes can record the power being used.
Procedures as to contracts are laid down as follows:
Every contract shall comply with these financial regulations, and no exceptions shall be made otherwise than in an emergency provided that this regulation need not apply to contracts which relate to items (i) to (vi) below:
for the supply of gas, electricity, water, sewerage and telephone services;
for specialist services such as are provided by solicitors, accountants, surveyors and planning consultants;
for work to be executed or goods or materials to be supplied which consist of repairs to or parts for existing machinery or equipment or plant;
for work to be executed or goods or materials to be supplied which constitute an extension of an existing contract by the council;
for additional audit work of the external auditor up to an estimated value of £500 (in excess of this sum the Clerk/RFO shall act after consultation with the Chairman and Vice Chairman of council); and
for goods or materials proposed to be purchased which are proprietary articles and/or are only sold at a fixed price.
11.2 Only one quotation need be obtained for work not exceeding the sum of £1,000, unless members of the Council or the Clerk are not satisfied with the quotation (see 10.2 above).
11.3 Where work exceeds the sum of £1,000 in value for the supply of goods or materials or for the execution of works, but is under £10,000, every reasonable endeavour will be made to obtain three quotations.
11,4 Where the value of any intended contract exceeds £10,000 but is under £25,000, all reasonable endeavours will be made to obtain 3 quotations, but in the event of fewer than 3 quotations being available, the Clerk will place a notice of the work and give at least three weeks public notice of such intention in the same manner as public notice of meetings of the Council is given.
11.5 For work exceeding £25,000 the Council will use the Contract Finder website and other light touch rules in the Public Contracts Regulations Act 2015 (the 2015 Regulations).
11.6 Work exceeding £181,302 is subject to other detailed and complex requirements in the 2015 Regulations.
11.7 The Council is not bound to accept the lowest tender, if there is an appropriate reason for not doing so.
11.8 The Public Contracts Regulations 2015/102 thresholds shall apply.
PAYMENTS UNDER CONTRACTS FOR BUILDING OR OTHER CONSTRUCTION WORKS
Payments on account of the contract sum shall be made within the time specified in the contract by the RFO upon authorised certificates of the architect or other consultants engaged to supervise the contract (subject to any percentage withholding as may be agreed in the particular contract).
Where contracts provide for payment by instalments the RFO shall maintain a record of all such payments. In any case where it is estimated that the total cost of work carried out under a contract, excluding agreed variations, will exceed the contract sum of 5% or more a report shall be submitted to the council.
Any variation to a contract or addition to or omission from a contract must be approved by the council and Clerk to the contractor in writing, the council being informed where the final cost is likely to exceed the financial provision.
ASSETS, PROPERTIES AND ESTATES
The Clerk shall make appropriate arrangements for the custody of all title deeds and Land Registry Certificates of properties held by the council. The Clerk shall ensure a record is maintained of all properties held by the council, recording the location, extent, plan, reference, purchase details, nature of the interest, tenancies granted, rents payable and purpose for which held in accordance with Accounts and Audit Regulations.
No tangible moveable property shall be purchased or otherwise acquired, sold, leased or otherwise disposed of, without the authority of the council, together with any other consents required by law, save where the estimated value of any one item of tangible movable property does not exceed £250.
No real property (interests in land) shall be sold, leased or otherwise disposed of without the authority of the council, together with any other consents required by law. In each case a report in writing shall be provided to council in respect of valuation and surveyed condition of the property (including matters such as planning permissions and covenants) together with a proper business case (including an adequate level of consultation with the electorate).
No real property (interests in land) shall be purchased or acquired without the authority of the full council. In each case a report in writing shall be provided to council in respect of valuation and surveyed condition of the property (including matters such as planning permissions and covenants)together with a proper business case (including an adequate level of consultation with the electorate).
Subject only to the limit set in Regulation 14.2 above, no tangible moveable property shall be purchased or acquired without the authority of the full council. In each case a report in writing shall be provided to council with a full business case.
The Clerk shall ensure that an appropriate and accurate Register of Assets and Investments is kept up to date. The continued existence of tangible assets shown in the Register shall be verified at least annually, possibly in conjunction with a health and safety inspection of assets.
Following the annual risk assessment (per Regulation 17), the Clerk shall effect all insurances and negotiate all claims on the council's insurers.
The Clerk shall give prompt notification to the Council of all new risks, properties or vehicles which require to be insured and of any alterations affecting existing insurances.
The Clerk shall keep a record of all insurances effected by the council and the property and risks covered thereby and annually review it.
The Clerk shall be notified of any loss liability or damage or of any event likely to lead to a claim, and shall report these to council at the next available meeting.
All appropriate members and employees of the council shall be included in a suitable form of security or fidelity guarantee insurance which shall cover the maximum risk exposure as determined by the council.
Where the council is sole managing trustee of a charitable body the Clerk shall ensure that separate accounts are kept of the funds held on charitable trusts and separate financial reports made in such form as shall be appropriate, in accordance with Charity Law and legislation, or as determined by the Charity Commission. The Clerk shall arrange for any audit or independent examination as may be required by Charity Law or any Governing Document.
The council is responsible for putting in place arrangements for the management of risk. The Clerk shall prepare, for approval by the council, risk management policy statements in respect of all activities of the council. Risk policy statements and consequential risk management arrangements shall be reviewed by the council at least annually.
When considering any new activity, the Clerk shall prepare a draft risk assessment including risk management proposals for consideration and adoption by the council.
SUSPENSION AND REVISION OF FINANCIAL REGULATIONS
It shall be the duty of the council to review the Financial Regulations of the council from time to time. The Clerk shall make arrangements to monitor changes in legislation or proper practices and shall advise the council of any requirement for a consequential amendment to these Financial Regulations.
The council may, by resolution of the council duly notified prior to the relevant meeting of council, suspend any part of these Financial Regulations provided that reasons for the suspension are recorded and that an assessment of the risks arising has been drawn up and presented in advance to all members of council.