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					         LUTON BOROUGH COUNCIL




               LOCAL BANK

           ACCOUNT SCHEME




October 2008



                       C:\Docstoc\Working\pdf\4071760d-f744-4534-9590-1b839c5ee657.doc 23/04/2012
                     LUTON BOROUGH COUNCIL


                    LOCAL BANK ACCOUNT SCHEME

                                                                           Page

Staffing Contacts                                                           2

The Scheme (Section A)
     1.     Banking Arrangements
            1.1   Introduction                                               3
            1.2   Scope                                                      3
            1.3   Choice of Banker                                           3
            1.4   Choice of Accounts                                         4
            1.5   Choice of Banks                                            4
            1.6   Investments                                                5
            1.7   Opening an Account                                         5
            1.8   Advances                                                   6
            1.9   Bank Account Withdrawals                                   7
            1.10 Cheque Administration                                       8
            1.11 Payments by Standing Order or Direct Debit                  8
            1.12 Charge and Credit Withdrawals                               8
            1.13 Overdrafts and Borrowing                                    9
            1.14 Collection of Income                                        9
            1.15 Deposits                                                   10
            1.16 Write Off Procedure                                        10
            1.17 Payroll Costs - scheme 1 only                              10
            1.18 Bank Reconciliation                                        11
     2.     Returns
            2.1   Bank Reconciliation                                       11
            2.2   VAT                                                       11
            2.3   Construction and Industry Tax Deductions                  11
            2.4   Income Tax                                                12

Advice, Guidelines and Accountability (Section B)
      1.     Responsible Officer                                            13
      2.     Lines of Responsibility                                        13
      3.     Separation of Duties                                           14
      4.     Recording of Transactions                                      14
      5.     Information to be retained by School                           14
      6.     Security & Retention of Documents & Data                       15
      7.     Financial Regulations                                          15
      8.     Taxation Penalties                                             16
      9.     Ordering and Payment for Goods and Services                    17
      10.    Authorisation Procedures                                       17
      11.    Leasing of Equipment                                           18

Appendix A
             Calculation for the loss of interest by the Borough Council    20

Appendix B   Example of Invoice Certification Stamp                         21


                                    1
                           LUTON BOROUGH COUNCIL

                           Local Management of Schools

                            LOCAL BANK ACCOUNTS


Staffing Contacts


Subject                      Contact Officer             Telephone (01582)

Bank Reconciliation          School Financial Advisers        548129
Returns                      LMS Team

Banking Arrangements,        Lorraine Byrne, School
Transfer of Funds            Funding Co-Ordinator             548072
                             LMS Team


Taxation advice

   VAT/VAT Returns           VAT and Sytems                   546974
                             Accountant, Stuart House


   Construction Industry     Janice Beeson, Payments
   Scheme (CIS)              Team Leader                      547048


Purchasing                   Chris Addey, Corporate           546867
                             Procurement Manager


Income                       Martin Coles                     546120
                             Chief Cashier


Audit                        Bev Hannah,                      547042
                             Deputy Audit Manager

Exchequer Services           Angela Claridge                  546062
                             Exchequer Services
                             Manager




                                         2
                           LUTON BOROUGH COUNCIL

                           Local Management of Schools

                             LOCAL BANK ACCOUNTS

SECTION A :          THE SCHEME

1.    Banking Arrangements

1.1   Introduction

      Under the School Standards and Framework Act all schools have the right to
      their own bank account, covering all running costs if they wish. This Scheme
      offers this facility together with an option to have payroll costs paid centrally.

      The Finance Manager (Children & Learning) will need to be satisfied that
      schools who operate a local bank account are able to manage the facility in
      an effective, efficient and secure manner.

      As all monies within the Individual School’s Budget will be subject to oversight
      by the Council’s Head of Corporate Finance, under Section 151 of the 1972
      Local Government Act, the LEA reserves the right to withdraw bank account
      facilities if the accounts are mismanaged.

1.2   Scope

      There are two bank account schemes available for schools:


       Scheme 1        -   covers all running costs within the individual
                           school’s budget (including Standards Funds).


       Scheme 2        -   covers all running costs within the individual
                           school’s budget (including Standards Funds), with
                           the exception of payroll costs


      A choice of these schemes is available for schools to use.

1.3   Choice of Banker

      Schools should find that banks and building societies are keen to bid for their
      business and that accordingly special arrangements may be negotiable.
      Schools should be aware of the various services available when choosing
      their banks/building societies. Individual circumstances at schools will dictate
      which banking arrangements are best suited to each school. The school
      should investigate fully its requirements and match these to services
      available.




                                           3
      Schools should consider aspects such as cost (bank charges), type of
      accounts available, interest, information provided to the school and the cost
      of this provision when selecting their bank or building society. Schools may
      wish to consider services such as BACS payments and on-line computer
      banking including balance updates and automatic transfer of funds to high
      interest accounts.

1.4   Choice of Accounts

      Most banks and building societies now offer a choice of accounts for
      businesses. These will include:

      Cheque and Deposit Accounts

      Funds would initially be paid into the deposit account. Transfers to the
      cheque account would be made to pay the school’s bills. With these kinds of
      accounts it is normal that only the deposit account would bear interest and
      any remaining balance in the cheque account would not accumulate any
      interest. This kind of arrangement is often known as sweep accounts, where
      funds from one account are swept into the other to maximise interest in one
      account and ensure solvency in the other.

      Interest Bearing Cheque Accounts

      Advances and other income would be paid directly into and from this account.
      Interest would be paid on cleared balances, i.e. balances which the school
      could withdraw instantly. This would negate the need to sweep funds from
      one account to another to cover expenditure. This type of account may have
      a lower rate of interest than a deposit account, in some cases significantly
      lower and may not be the best option especially if schools have larger
      balances held on reserve.

      Notice Accounts

      These are normally higher interest accounts where a notice period for
      withdrawal of the funds would be required. The school would suffer a loss of
      interest should the funds be required and withdrawn early. Typically these
      earn higher interest because of the withdrawal notice period, and may require
      a minimum value of deposit to achieve higher rates of interest (some
      accounts offer higher rates of interest on higher balances). If schools are
      aware that there are amounts of cash which will not be required on a day to
      day basis, (e.g. reserves being accumulated for a capital project), use may be
      made of these longer term or high interest bearing accounts. This will allow
      schools to maximise the possible return on investment whilst ensuring that
      the school does not suffer cash flow difficulties as a result of typing up funds
      for specific periods of time.

1.5   Choice of Banks

      Schools may need to negotiate their own banking terms and conditions and
      arrange their own transfer of funds between their current and interest earning
      accounts when investing cash surplus to their immediate requirements.
      Where charges are made on accounts by the banker these will be met from
      the school’s delegated budget. The Borough Council will offer advice and
                                          4
      assistance in obtaining the best choice available, particularly in regard to
      investing surplus funds. From time to time the Head of Corporate Finance will
      issue a list of recommended banking institutions. The current list of approved
      banking institutions offering a wide range of facilities is:

      Abbey PLC                                HSBC
      Alliance and Leicester                   Woolwich
      Bank of Scotland PLC                     National Westminster PLC
      Barclays Bank PLC                        Royal Bank of Scotland PLC
      Halifax PLC                              Lloyds/TSB Bank PLC
      Co-operative Bank Ltd

      There are many other Banks and Institutions approved for investment
      purposes and advice should be sought from the Head of Corporate Finance if
      schools wish to make use of these institutions. The written permission of the
      Head of Corporate Finance must be obtained, prior to a School making
      arrangements outside of the approved list shown above.

1.6   Investments

      General
      As stated in 1.5, the Head of Corporate Finance will offer advice and
      assistance to obtain the best deal available, when investing surplus funds. If
      schools wish to pool their resources with the Borough Council’s and obtain
      favourable rates, then this can be arranged as long as the bank account is
      held in the name of Luton Borough Council (followed by the School’s name),
      and the account is held by a bank which can offer pooling facilities with the
      Council. Schools should be aware that whilst the Borough Council’s main
      banker is currently The Co-operative Bank, there is a scheme operated by the
      National Westminster Bank which can offer schools its own bank account with
      preferential rates of interest.

      National Westminster Scheme
      The schools who opt for the National Westminster scheme must have their
      accounts in the name of Luton Borough Council and the appropriate school.
      (see 1.7) The rate applied will be similar to the bank base rate and achieved
      by pooling each school’s bank balance and investing the total sum. Each
      school will receive interest quarterly based on its own balances during the
      quarter. There will be no need for schools to manage their surplus funds as
      this will be done automatically.


      Investing with Luton Borough Council
      Where schools operate an account which does not have pooling facilities with
      the Council then investment opportunities can still be offered through the
      Head of Corporate Finance. Detailed arrangements for operation of this
      scheme are obtainable from the Head of Corporate Finance, but the scheme
      will only be available to investments in excess of £250,000 for a minimum
      investment period of 7 days.

1.7   Opening an Account

      New bank accounts are subject to the approval of the Finance Manager
      (Children & Learning) who will make subsequent arrangements for opening.
                                         5
      The opening of all accounts must be authorised by the governing body who
      should set out, in a formal memorandum, the arrangements covering the
      operation of accounts, including any transfers between accounts and cheque
      signing arrangements. The operation of systems such as Bankers Automatic
      Clearing System (BACS) and other means of electronic transfer of funds
      should also be subject to the same level of control.

      Schools should notify their bank in writing that their bank accounts must not
      become overdrawn at the end of the banking day, or give rise to overdraft
      charges. Schools must therefore ensure that sufficient funds are available to
      meet larger volume transactions such as BACS payment runs which are
      normally subject to a separate contractual arrangement from that governing
      the operation of the school’s bank accounts.

1.8   Advances

      Scheme 1

      The annual sum allocated to each school’s bank account will be the total of its
      LMS delegated budget and Standards Funds budgets. Schools will be
      advanced one twelfth of their total budget per month, with additional funding
      for annual rates allocated in April

      Schools must inform the LMS team of the dates each month on which staff
      salaries are paid. Notification of payroll dates should be supplied annually, in
      advance, for the forthcoming year. Monthly instalments will normally be
      cleared into the school’s nominated bank account three working days prior to
      these dates.

      The governing body should formulate its own profiles of cash requirements. If
      it becomes clear that the standard profile is significantly different from the
      school’s forecasts, and this will cause difficulties at the school, the Group
      Accountant Schools will consider a change to the existing monthly profile in
      order to overcome any difficulty.

      If any change to the profile results in Luton Borough Council incurring a loss
      of interest then it will be necessary to apply the objective formula, shown at
      Appendix A.

      Scheme 2

      The annual sum allocated to each school’s bank account will be that
      proportion of the school’s total budget required to cover the cost of items paid
      locally. Advances will be made twice yearly, in April and October. These
      advances will be based on the individual school’s local budget plan and the
      reconciled bank balance as at 31st March. In the absence of detailed budget
      plans at the beginning of the financial year, the initial advance will be
      estimated.

      Funds will be transferred on the 1st Friday of the financial year (or the
      previous working day if a Bank Holiday is involved) for the first instalment.
      The second instalment will be transferred on the 1 st October or the nearest
      working day if this falls on a weekend. To ensure that Luton Borough Council
                                          6
      does not incur a loss of interest on its balances because of the transfer of
      funds, an adjustment, calculated by the application of an objective formula,
      shown at Appendix A, will be made to the advance. This adjustment should
      be offset by the interest earning capacity of individual schools through the
      investment of funds which are immediately surplus to requirements.

      Schools should monitor their budget plans at regular intervals to ensure that
      sufficient funds have been retained centrally to finance payroll costs. If the
      total of payroll costs made during the year substantially exceeds the budgeted
      amount, schools may be charged interest on the difference between the two
      figures. As the precise date of the overspend occurring cannot be accurately
      determined the interest will be calculated using the formula in Appendix A.

      If, following an investigation, the Finance Manager (Children & Learning)
      believes that any overspend of the payroll costs budget is wilful, or results
      from mismanagement, the local bank account facility can be withdrawn. In
      the event of a dispute the individual case will be reviewed by the Head of
      Corporate Finance, or his representative, whose decision will be final.

1.9   Bank Account Withdrawals

      Schools should implement the following controls, ensuring that:
      (a)   there is segregation of duties between the authorisation, preparation
            and issue of cheques, so that no-one who may sign a cheque may also
            prepare and issue it;

      (b)   suitably authorised documents exist, initiated or approved by non-
            signatories (who need not be governors) in respect of every cheque
            signed;

      (c)   restrictions are in place on the signing of cheques so that, as a
            minimum requirement, dual signatures must be obtained for each
            cheque.

      (d)   cheque signatories should be drawn from a panel of up to four
            nominated by the Headteacher. This panel should be made up of
            employees of the LEA, or employees of the school in the case of
            foundation and aided schools. Employees who are involved in the day
            to day running of the bank account e.g. the Bursar/Finance Assistant
            should not be signatories. Any alterations to this panel should be
            immediately notified to the Group Accountant Schools by the
            Headteacher. Cheques are only to be signed in manuscript by
            members of the approved panel;

      (e)   controls as in (a, (b) and (d) exist over electronic withdrawals and
            electronic transfer of funds, including BACS and direct banking links
            such as telephone banking or computer banking, e.g. for payroll
            purposes or the investment of surplus funds or other transfers of funds
            between accounts;

      (f)   mandates are held by the school’s bankers detailing the arrangements
            in (c), (d) and (e) together with clear instructions that the school’s bank
            accounts must not become overdrawn. A copy of the mandate should

                                          7
             be retained at the school.

       Please note that control (b) does not prevent a school representative on the
       panel of cheque signatories from also being an authorising officer. The key
       point is that he or she should not sign a cheque relating to goods or
       services for which he or she has also authorised the expenditure. It
       does not affect the ability to sign cheques for expenditure authorised by
       others or to authorise expenditure where others sign the related cheque.

       Many banks offer additional security over payments through the use of
       authorisation sheets. These are lists of cheques drawn which are authorised
       by the school and filed with the bank who will only cash cheques if the details
       agree to the authorisation sheet.

1.10   Cheque Administration

       All cheques drawn on the account must be crossed “account payee only” to
       avoid the possibility of improper negotiation of the cheques. Cheques must
       always be made out with the current date and must not be pre-signed.

       Where a cheque written by the school remains unpresented 6 months after
       the date of issue, the school will enter it into its local records as reduced
       expenditure.

1.11   Payments by Standing Order or Direct Debit

       Payment for regular monthly contracts may be made by standing order or
       direct debit. Mandates should be signed by two school signatories and a
       copy retained.

1.12   Charge Card Withdrawals

       Many banks, financial institutions and retail stores produce cards which can
       be used for purchasing. In addition, Luton Borough Council has negotiated a
       purchase card scheme for schools (details are available from the School
       Funding Co-ordinator in the LMS Finance Team). The use of these cards can
       be controlled in various ways such as limiting purchases to those relating to a
       specific commodity by using the Standard Industry Code. The use of these
       cards is not considered to infringe borrowing restrictions as long as the
       balance on the account is cleared in full at the end of each month. It should
       be possible to arrange for payment by direct debit which would satisfy this
       condition.

       The governing body should authorise any cards to be used having considered
       the potential risk over and above that of the purchase order system and
       appropriate controls over usage. The following procedures should be helpful
       when considering the use of these cards.

            The governing body should approve

             -      a list of authorised users;
             -      restrictions on the use of the card’s spending limits;
             -      written instructions on the scope and use of the cards.

                                           8
              -      direct debit instructions to ensure account is cleared in full
                     monthly.

             A member of staff, who is not a card signatory, should be appointed to
              control the use of the cards and a signing-out procedure implemented
              for the issue of cards to authorised staff.

             Documentary proof of any goods purchased with the charge/purchase
              card including details of the nature and cost of those goods, should be
              returned to the person responsible for recording card transactions as
              soon after each purchase as is reasonably practical.

             Transactions should be reconciled to statements by someone other
              than a card signatory.

1.13   Overdrafts and Borrowing

       Schools will not be empowered to incur overdrafts on their accounts or borrow
       funds.

       Schools are not allowed a credit card facility.

       No loans from the school’s private funds to the delegated budget, or vice
       versa, are permitted.

1.14   Collection of Income

       Schools will be required to pay all income related to the School Budget Share
       into their bank accounts including
              Examination Fees.
              Sales
              Lettings
              Private Telephone Calls
              Contributions
              Donations

       Schools will be responsible for the collection of their own income. If schools
       require a sundry debtor invoice to be raised by Luton Borough Council
       appropriate forms can be requested from Exchequer Services.

       Exchequer Services will follow normal debt recovery procedures, however, in
       the case of non recovery the school will be liable for the loss of income.
       Where schools raise their own invoices the Borough Council’s VAT guidelines
       should be followed in particular the inclusion of the Borough’s VAT Number
       198210747. Invoices raised by schools should be included in their normal
       VAT Return. It is advised that invoices must be raised within two months of a
       service/goods being provided, to comply with VAT regulations. However it
       should be considered prudent to obtain payment in advance, wherever
       possible.

       A separation of duties should exist so that the person responsible for raising
       the debtor accounts is not also responsible for receipting income against
       those accounts.

                                            9
       Where particular difficulty with the collection of debtors income is
       experienced, the advice of the Exchequer Services Department should be
       sought.


1.15   Deposits

       All income must be paid into the local bank account. The money received
       must be paid promptly to the bank and held at school for no more than one
       working week in accordance with Schools Financial Regulations.

       No deductions from official income may be made or personal cheques
       cashed. All income received must be entered in detail on the bank paying-in
       slip and counterfoil, showing the amount of each transaction, the debt to
       which it relates and date of receipt. Income should also be entered on to the
       school’s financial system as soon as possible after receipt.

       Cheques paid as income into the local bank account that are returned by the
       bank unpaid will be entered into the school’s local records as reduced
       income.

       Official Income must not be temporarily placed in any other bank accounts,
       e.g. School Fund, prior to banking in an official Luton Borough Council
       Account.

1.16   Write Off Procedure

       No debt should remain outstanding for more than one year from the date of
       invoice, unless there is clear evidence that the debt will be paid. If a debt
       remains irrecoverable after one year or if during the year it becomes clear that
       the debt will remain unpaid (e.g. debtor has left the country), then a report
       must be submitted to the Governing Body for approval to write off the debt.
       The report must give clear reasons as to why the debt is irrecoverable and
       also state the measures taken to collect the debt. The Governing Body should
       supply the Corporate Director of Children & Learning with a copy of such
       resolution.


1.17   Payroll Costs - scheme 1 only

       Scheme 1 of the bank account scheme covers all running costs including the
       payment of salaries and wages.

       Schools will establish payrolls for monthly and, if necessary, weekly paid staff.
       Weekly payrolls are normally more expensive to administer than monthly. It
       may, therefore, be cost effective for all salaries to be paid through one
       monthly payroll.

       Payments to staff should normally be made by bank credit. There should be
       a monthly reconciliation of the total of individual payments to the gross
       salaries amount due where schools operate their own payrolls.




                                           10
       Schools who employ the services of Luton Borough Exchequer Services or a
       payroll bureau should ensure contract payments are checked against the
       payroll analysis and paid over by the due date.

       Schools should discharge their liability for income tax, national insurance and
       pensions within the appropriate deadlines set by the particular agencies.
       Schools who do not employ the services of Luton Borough Council Payroll
       Services must ensure that details of deductions to the Teachers Pensions
       Agency and the accompanying payment are submitted to Exchequer Services
       on a monthly basis. Failure to meet deadlines will result in penalties and
       interest charges being incurred.

1.18   Bank Reconciliation

       Schools should ensure bank statements are received regularly and that
       reconciliations are performed at least on a monthly basis. In operating
       reconciliation procedures they should also ensure that:

            all bank accounts are reconciled to the school’s cash book;

            reconciliations are prepared by staff who are not authorised to sign
             cheques;

            adjustments arising are dealt with promptly.

            unrepresented cheques are cancelled on the school’s financial
             software system if they are not cashed within 6 months of the date of
             issue

            reconciliations are independently reviewed

2.     Returns

2.1    Bank Reconciliation

       Schools will be required to complete and forward to the Group Accountant
       Schools a monthly reconciliation between their own cash records and bank
       statements received from their bank or building society by the 15th day of the
       following month.

       Particular attention must be given to documentation and financial returns to
       close the Statutory Accounts at the year end in accordance with year end
       guidance issued to schools.

       Failure to make the necessary returns or to carry out adequate reconciliation
       procedures may result in the bank account facility being withdrawn.

2.2    VAT

       Schools will be required to forward copies of the VAT monthly returns to the
       VAT Officer, Corporate Finance by the 5th of the following month. These
       reports will be used to complete the VAT return to HM Customs & Excise and
       repayment of VAT to the Local Bank Account the following month. Failure to

                                          11
      follow these procedures may result in non-repayment of VAT.

2.3   Construction Industry Scheme

      Schools are expected to follow the rules relating to the Construction Industry
      Scheme (CIS). Schools now have authorisation by the Inland Revenue to
      operate the Small Payment Concession. Failure to comply with the
      procedures may result in penalties from the Inland Revenue being incurred by
      the school. Detailed guidance is obtainable from Janice Beeson, Exchequer
      Services, telephone number 547048.

2.4   Income Tax

      All payments to individuals including expenses and benefits, must be subject
      to Income Tax and National Insurance. If in doubt seek the assistance of your
      payroll provider. (In the case of Luton Borough Council, this is the Exchequer
      Services Manager). Under no circumstances should any payment be
      made to individuals without being subject to Income Tax and National
      Insurance and appropriate records maintained.

      Where a school operates a payroll other than with Luton Borough Council, it
      will be necessary to contact the Exchequer Services Manager to confirm
      where returns for statutory deductions are required to be made.
      Any dispensations from recording benefits in kind and expenses must be in
      writing and are only acceptable on terms agreed with the Inland Revenue.

      Where individuals are self employed and supply the appropriate certificates, it
      may be necessary to obtain an ‘Inland Revenue questionnaire’. Copies of this
      questionnaire can be obtained from the Exchequer Services Manger. This
      may result in the payments to these individuals being required to be
      processed through a PAYE scheme.




                                         12
                         LUTON BOROUGH COUNCIL

                         Local Management of Schools

                      LOCAL BANK ACCOUNT SCHEME


SECTION B :       ADVICE, GUIDELINES AND ACCOUNTABILITY

1.   Responsible Officer

     The Head of Corporate Finance is the statutory officer under section 151 of
     the Local Government Act 1972 which imposes duties regarding the proper
     administration of all the financial affairs of the Council. Ensuring compliance
     with the Accounts and Audit Regulations (as amended) is also his/her
     responsibility .

     In addition the Head of Corporate Finance has a statutory responsibility under
     Section 114 of the Local Government Act 1988 relating to reporting
     procedures in circumstances where there are illegal losses or unlawful
     financial decisions. In undertaking these duties the Head of Corporate
     Finance has responsibility to lay down procedures to be followed by
     Responsible Officers and ensure Schools have adequate staffing to allow
     statutory financial obligations to be carried out.

     Governing Bodies must ensure that there are adequate staffing and other
     administrative arrangements in place within the school which are sufficient to
     provide the required level of control when a local bank account is operated.
     In some schools this may mean revising the duties of existing administrative
     staff or employing additional staff. A degree of staff training may also be
     required.

     The Headteacher will be the Responsible Officer at the school who shall
     ensure that funds advanced are properly managed, controlled and secured in
     accordance with the scheme and procedures. Responsible Officers will need
     to inform the Internal Audit Service, Customer Corporate and Services,
     promptly of any situation relating to the circumstances outlined above.

2.   Lines of Responsibility

     The Headteacher as responsible officer must ensure that:

          An organisation structure of financial management is maintained with
           named budget holders.

          Levels of authorisation for expenditure are clearly defined and
           recorded.

          Payment documents are approved for payment and certified prior to
           raising cheques or making cash payments.

          Statutory returns and payments are made within the appropriate
           timescales.

                                        13
3.   Separation of Duties

     The separation of duties is a key financial control. The following functions
     should be delegated to at least three members of staff involved with the bank
     account scheme. One person should not undertake all tasks listed below:

          Authorisation of orders.

          Authorisation of invoices for payment.

          Custody of cheque books - Signature of cheques.

          Recording of expenditure.

          Computer based systems maintenance.

     Further advice on this is available from the Internal Audit Service, Customer
     and Corporate Services.

4.   Recording of Transactions:

     Schools should use software approved by the Finance Manager (Children &
     Learning) to record details of transactions under the Scheme.

     There must be a clear transaction trail to link each order and invoice to
     transactions within the system.

5.   Information to be retained by the School:

          Cheque stubs and unissued cancelled cheques, stored in cheque
           number order.

          Copy orders filed in numerical order and marked with the cheque
           number, date invoice paid and amount paid.

          Certified paid invoices together with delivery notes annotated with the
           cheque number and filed in cheque number order.

          Bank and charge/purchase card statements and bank reconciliation
           statements, filed in date order.

          Paying-in slips filed in date order.

          Data held in detail on data disks with separately stored daily backups
           which are recycled each week. In addition it is recommended that a
           back up is taken at the end of each accounting period and year end
           and that these are securely retained.

          For schools having payroll suppliers other than Luton Borough Council
           Exchequer Services, all timesheets and payroll records must be kept
           for a period of six years.

                                         14
NOTE:       No downloading of data for re-analysis and reloading shall be
            allowed. Original data must remain intact.


6.    Security & Retention of Documents & Data

           Cash balances and unused cheques should be stored in a lockable
            container. This will normally be the school safe.

           Data Disks from the finance system must be held on separate
            computer disks for each financial year. A separately stored,
            systematic and regular back-up system of disks and programmes
            should be in place

           All documentation and transaction details remain the property of Luton
            Borough Council and need to be securely stored for the current
            financial year and, for Audit and VAT inspection purposes, the previous
            six years.

Such documents include:

           Copy orders
           Signed delivery notes
           Certified/cancelled paid invoices
           Cheque counterfoils/stubs
           Bank statements
           Bank reconciliation statements
           Paying-in books and cheque listings
           Detailed prints or data disks
           Inventory records
           Contracts for supplies of goods or services
           Copies of VAT returns to VAT Officer, Corporate Finance
           Copies of CITDS returns to Exchequer Service Department
           Payroll records and timesheets (see 5 above)

7.    Financial Regulations

      This scheme significantly increases the accountability required of a school’s
      staff. Greater contact between schools and staff from the Internal Audit
      Service, Exchequer Services and Children & Learning Finance is desirable for
      the assurance of Governors, Headteachers and the Head of Corporate
      Finance.

      The Borough Council’s Financial Regulations authorise the Internal Audit
      Service to visit Departments and other establishments, to have access to
      records, documents and correspondence and to seek other explanations as
      necessary on any matter under examination.

      Statutory and Financial Regulations require that Headteachers notify the
      Head of Corporate Finance immediately of any financial irregularity or
      suspected potential irregularity concerning the resources of the Council. By
      notifying the Finance Manager (Children & Learning) and/or Head of the
                                        15
     Internal Audit Service schools will have complied with this requirement.
     In addition to the above, access to school manual records and electronic data
     must be given to Officers from:


     (i)     Inland Revenue
     (ii)    Department of Social Security
     (iii)   HM Customs and Excise
     (iv)    External Auditors
     (v)     Teachers Pension Agency
     (vi)    Local Government Pension scheme (Bedfordshire County Council)


     If schools are approached by individuals purporting to be officers of these
     agencies, they should check the identification documents of the individuals
     concerned.


     If schools are notified of an inspection from the above officials it would be
     helpful if the Headteacher would inform in advance:

            The Head of Exchequer Services, Corporate Finance where
             inspections from (i), (ii), (iii), (v) and (vi) above will be taking place.

            The Internal Audit Service, Customer and Corporate Services where
             inspections from (iv) above will be taking place.

     Similarly, if Corporate Finance receives prior notification of inspection from
     the above officials, schools will be advised accordingly.


8.   Taxation Penalties

     There are several areas where taxation or other statutory deductions need to
     be made from transactions effected through local payments. Failure to
     complete the correct deductions can lead to financial penalties being
     imposed.

     Where a school incurs a charge through:

            Failure to produce documents for inspection;

            Failure to account properly for moneys due to the Inland Revenue,
             Department of Social Security, HM Customs and Excise, Teachers
             Pension Scheme and Local Government pension scheme.

     Such a charge will be borne by the school’s delegated budget. It is worth
     noting that Government Agencies also have, in the past, imposed penalties
     on a range of establishments based on a visit to a single establishment.

     The continued avoidance of penalties requires the co-operation of schools in
     the prompt and accurate submission of monthly returns and adherence to the
     procedures and processes explained in this document and other relevant
     publications e.g. VAT Guide.
                                            16
9.    Ordering and Payment for Goods and Services Procedures

      Although local purchases may appear to represent a bargain it may be
      prudent to contact the Corporate Procurement Manager for his advice as a
      yardstick for comparison of locally available purchases and a value for money
      check on purchasing options.

      In arranging procedures for payment it is advised that a balance between
      frequency of payment and beneficial cash flow is maintained. (The Luton
      Borough Council standard payments procedure provide for payments to be
      made 30 days after the invoice date.)

      Schools should be advised to follow the guidelines set out in the Late
      Payment of Commercial Debts (Interest) Act 1998, whereby certain
      contractors have the ability to charge interest on payments made after 30
      days. It should be noted that there is not an exception for schools who ‘close’
      during the holidays. Penalties incurred will be borne by the school’s delegated
      budget.

      These guidelines set out the responsibilities of staff who are involved in the
      process of ordering and payment for goods and services.


10.   Authorisation Procedures

      Authorised Officers:

      An invoice will only be processed for payment when it is authorised by a
      designated officer.

      Not Previously Authorised:

      The authorised officer must ensure that the invoice has not been previously
      certified or paid. This will usually be by reference to the official order which
      should be marked as paid as each invoice is passed for payment.

      Goods Received or Work Done:

      Upon receiving an invoice the authorised officer must be satisfied that the
      goods have been received or the work has been completed. Where this is
      not the case the officer shall inform the supplier that the invoice will not be
      passed for payment until this has been done and if necessary, request a
      replacement invoice covering agreed items.

      Quality, Quantity and Prices Correct:

      Having been satisfied that the goods/services have been received, the
      authorised officer shall ensure that the quality and quantity of the goods
      ordered/services received are correct and are in accordance with any overall
      arrangements agreed by the officer ordering the goods/services or the
      Purchasing and Supplies Service. The invoice shall be checked to ensure
      that the price agreed upon ordering the goods/services is the same or any
                                          17
      variation has been agreed.

      Any alteration to the total amount of an invoice, whether by the
      suppliers/contractors or an officer of the Borough Council, shall be signed by
      the authorised officer before payment is processed.

      Discounts for Prompt Payment:

      Invoices attracting a discount for payment shall be given sufficient priority to
      ensure that the discount can be taken.

      The authorised officer shall examine the invoice and deduct any discounts
      that may be allowed if this has not already been done by the supplier. Where
      such a discretionary discount is taken the invoice total must be amended to
      show the net sum payable to the supplier. VAT must not be amended and is
      not subjected to any discount that may be offered in those circumstances.
      See VAT guide for further advice.

      Budget Provision Available:

      The authorised officer shall ensure that there is budget provision for the
      goods/services to be ordered.

      Arithmetic Checks:

      The calculations and additions of all invoices shall be checked. Where an
      error is found the discrepancy shall be referred to the supplier and corrected
      before the invoice is passed for payment. When the invoice requires
      amendment no alteration shall be made to VAT which can only be amended
      by the supplier rendering a supplementary invoice/credit note.

      Certification Stamp:

      When checks, as above, have been completed, the invoice shall be stamped
      with an official certification stamp, an example of which is given at Appendix
      B. Schools should contact their School Financial Adviser for advice on
      obtaining such a stamp.

      The officer(s) who has undertaken the checks should date and initial the
      appropriate blocks and the authorised officer should sign within the space
      provided - facsimile signatures are not accepted.

      Schools must only issue cheques to staff who produce a suppliers receipt.

11.   Leasing of Equipment

      Introduction:

      Many suppliers of photocopiers, computers etc. are offering a leasing facility
      to potential customers as part of a comprehensive sales package. Schools
      should be wary of such arrangements as the potential for unforeseen future
      costs is great.



                                          18
Lease Types:

The only type of lease that schools may enter into is described as an
Operating Lease. The main requirements of this type of lease are:

Ownership must not pass to the Borough Council either during the lease
period or on disposal.

Any renewal at the end of the lease period must be at open market rentals
agreed prior to the end of the leasing period.

The proceeds from the sale of the item which is leased must not accrue
directly or indirectly to the Borough Council.

At the date of the agreement the estimated value of the leased item at the
end of the leasing period must be at least 10% of the initial value.

Any arrangement which does not comply with the above requirements must
be avoided to comply with Government regulations on capital expenditure.


Advice:

The advice of the Finance Manager (Children & Learning) must be sought if
you are considering entering into a leasing agreement or any other agreement
which involves periodic payments.




                                  19
                                                                         APPENDIX A


           Calculation for the loss of interest by the Borough council


1.   Beginning of the financial year

D    =     A     x      I        where           D   =     Deduction
           4                                     A   =     Advance
                                                 I   =     Interest rate of 1%
                                                           below base rate (as of
                                                           previous 1st March).

2.   During the financial year

D    =     A     x      I        x (12-M)
           4                         12 where        D     =      Deduction
                                                     A     =      Advance
                                                     I     =      Interest rate of 1%
                                                                  below base rate
                                                                  (as at end of
                                                                  previous month)
                                                     M     =      Number of full
                                                                  months
                                                                  completed in the
                                                                  financial year.

3.   Central Under/Overspends

D    =     B     x      I                where       D     =      Deduction
           4                                         B     =      Difference
                                                                  between actual
                                                                  and budgeted
                                                                  central
                                                                  expenditure.

                                                     I     =      Interest rate of 1%
                                                                  below base rate
                                                                  as at previous
                                                                  30th September




                                         20
                                                                   APPENDIX B




INVOICE CERTIFICATION STAMP


EXAMPLE


         INVOICE CONTROL STAMP

                             Date       Initials
Order No:
Goods Received
Cost Centre
Quality, Qty, Prices
correct
Payment Due
Cheque Number
Cheque Posting Date
Authorised Signatory


For advice on how to obtain an invoice certification stamp, schools should contact
their School Financial Adviser.




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