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6 BUDGETARY CONTROL

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6 BUDGETARY CONTROL Powered By Docstoc
					CHAPTER 7 - BUDGETARY CONTROL
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Budget Holder Responsibilities
Delegation Letters
Profiles
Forecasts
Variance Analysis
Business Plans
Budget Reviews
Budget Versions
Funding
Ring Fencing
Income
Virement
Alternative Sources of Funding
Management Checks

Annexes


Guides


Work Instructions


Glossary of Terms


7.1    Scope
7.1.1 This chapter describes the controls necessary to ensure that public funds are
      safeguarded, with accountability maintained at all stages.

7.1.2 Definitions of roles and terminology within this chapter can be found within the
      Glossary, or by hovering the mouse over relevant words

       Potential Risks and Controls associated with Budgetary Control
7.2   Policy

7.2.1 Budget Holder Responsibilities

      All Budget Holders must ensure:

         The principles of regularity, propriety and value for money are adhered to at
          all times
         All expenditure from their budget is authorised prior to being incurred
         All income falls within the scope of their agreed budget, and where it does
          not, it is surrendered to the Consolidated Fund
         Regular reviews of budgetary performance, including forecasting and
          variance analysis

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7.2.2 Delegation Letters

   a) All Budget Holders must be in receipt of a delegation letter. Delegation letters
      may only be issued by another Budget Holder, and must be to a nominated
      individual. Delegation letters may not be addressed to posts (e.g. Head of
      Department). Copies of delegation letters must be kept in accordance with the
      details set out in Annex C

   b) Delegation Letters must set out the following information
       Amount of budget, and financial year (or part thereof) in which it may be
         spent.
       Scope of budget (i.e. on what items/ services it may be spent)
       Limits (if any) to the authority delegated.
       Where no authority exists (for example, disposals, and management/
         business consultant recruitment)
       Reporting requirements – including to whom reports are to be made, on
         what timetable, and what detail.

   c) Examples of delegation letters can be found in Annex B. These templates
      must be used as the basis for locally issued delegations.

   d) Delegation Letters must be issued for each Financial Year, and must be issued
      no later than 3 weeks into the financial year. This may involve the release of an
      interim delegation letter, which is explained in the delegation letter guide

   e) Budget Holders may appoint a Budget Manager to assist them in monitoring
      their budget.

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7.2.3 Profiles

  a) All budgets must be profiled across the financial year, and must reflect the
     expected income or expenditure appropriate to the periods within the financial
     year. Guidance on how to load and amend budget profiles on Phoenix can be
     found in Phoenix Procedures PRO3001Y,
  b) Guidance on running reports to view data currently held on Phoenix can be
     found in Phoenix Work Instructions WI3019; WI3025: WI3026: WI3027; and
     WI3029

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7.2.4 Forecasts

  a) Forecasts must be based upon known, or predicted future expenditure and
     agreed locally, with information provided up the delegation line in accordance
     with the timetables set out in delegation letters.

  b) Budget Holders must ensure forecasts are accurate - unspent provision may
     not be apportioned over remaining months without justification.

  c) Guidance on how to load and amend budget forecasts on Phoenix can be
     found in Phoenix Procedures PRO3001Y

  d) Guidance on running reports to view data currently held on Phoenix can be
      found in Phoenix Work Instructions WI3019; WI3025: WI3026: WI3027; and
      WI3029

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7.2.5 Variance Analysis

   a) Budget Holders must investigate all instances where actual budgetary
      performance differs to the forecast.

   b) Actions must be taken to address identified variances.

   c) Overspends must not occur without specific authority to do so. This authority
      must be confirmed in writing, or be given by the Governor during a minuted
      meeting.

   d) Underspends must not be allocated to new, unplanned activities unless specific
      authority has been given by the Governor.

  e) Guidance on running reports to view data currently held on Phoenix can be
      found in Phoenix Work Instructions WI3019; WI3025: WI3026: WI3027; and
      WI3029

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7.2.6 Business Plans

      The financial implications of business plans must be identified, and resources
      agreed prior to their approval.

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7.2.7 Budget Reviews
      Budgets must be reviewed throughout each financial year to ensure income
      and expenditure is correctly accounted for. Budgets must also be reviewed to
      ensure the allocations remain appropriate.

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7.2.8 Budget Versions

      Budgets must be re-issued (with sequential version numbers) where changes
      have occurred to allocations. This process is managed by FC&A, who issue
      revised budgets to each Directorate. These must be promptly disseminated to
      all relevant Budget Holders upon receipt.

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7.2.9 Funding

      As a Central Government Department, taxpayers’ monies fund the Prison
      Service. Parliament votes to agree the allocation of the Prison Service’s
      budget, and agrees the purpose of the funding (referred to as the ambit of the
      vote). All income and expenditure must fall within theambit of the vote.

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7.2.10 Ring Fencing

      Ring Fenced Budgets must be spent in accordance with the terms applied.
      Underspends must be returned to the fund owner (unless authority has been
      given otherwise). Overspends must be funded from local budget provision.
      Variance from agreed ring-fenced budgets must be investigated, and corrective
      action taken to minimise the impact.

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7.2.11 Income

   a) Income must only be Appropriated in Aid (A in A’d) where authority has been
      given (i.e. where income falls within agreed budgets). In all other cases,
      income must be surrendered to the Consolidated Fund (this is referred to as
      CFERs, or Consolidated Fund Extra Receipts). Annex D contains examples of
      income that must be CFER’d; and the CFERs guide explains how to account
      for monies to be surrendered, and what ultimately happens to such funds.


      The shared Service Centre will, on a quarterly basis, seep the balances held in
      this account across all business units, and clear the amounts down. They will
      then process a single payment to the Consolidated Fund to clear the liability.

  a) Strategic plans and budget proposals must include all income.

  b) Before implementing new income generating plans, Governors must consider if
     the additional income can be contained within their A-in-A provision. If it
     cannot, Governors must seek approval through their Area Accountant.
c) All new income proposals must be assessed against Regularity and Propriety, and
   advice sought from Financial Policy in cases of doubt.

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  7.2.12 Virement

      a) Virement rules are set out in ANNEX A. FC&A approval must be sought in
         advance for all virement proposals involving transfers between subheads.
         ANNEX E contains guidance on the different subheads, and the funds that
         apply to each

      b) Virement is permitted locally within a delegated budget consisting of only one
         specific category of funding.

      c) All proposals involving virement must be agreed by the Head of Finance, Area
         Accountant, or Directorate Accountant.

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  7.2.13 Alternative Sources of Funding

      a) All alternative sources of funding must be properly brought to account. Funds
         from Other Government Departments, including European Grants/ Funding
         must be brought to account as income, with our expenditure increased
         accordingly (i.e. Appropriated in Aid). Funding source segments must be used
         to separate this income, and associated expenditure from HMPS baselines.

      b) FC&A, Financial Policy Section must be informed of all proposals to seek
         alternative sources of funding, and of all successful bids.

      c) Where prior FC&A approval has been obtained, funds from individuals, or
         private organisations must be accounted for as Special Funds

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  7.3    Management Checks
         The Governor must ensure a series of management checks is implemented to
         demonstrate mandatory requirements have been met. Further guidance can be
         found in the Risk Management and Control chapter, and in the guide on
         Budgetary risks and controls

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         Relevant Work Instructions

         WI3006 – Budget Freeze
         WI3014- Define Budgets
         WI3018-Reporting on archived budgets
       WI3020-Copying Actuals to Forecast
       WI3021 –Copying Budgets
       WI3023-Budget Enquiries

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End of Chapter

                               Glossary of Terms
BUDGET HOLDER
A person who has been delegated a budget, in writing, for which they are personally
responsible
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BUDGET MANAGER
A person appointed by the budget holder to manage the budget on their behalf
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REGULARITY
All income and expenditure is legitimate (i.e. within scope of relevant legislation),
authorised within delegated authority, and in accordance with Government Accounting.
 In other words, is it within the rules? Does this expenditure contribute towards HMPS
aims and Objectives? Does this expense fall within my delegation letter.
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PROPRIETY
All expenditure and receipts should be dealt with in accordance with Parliament’s
intentions and the principles of Parliamentary control. In other words, is this activity
morally correct (i.e. is it right for HMPS to undertake this activity?) Have all options
been considered? Has everyone been treated equally? Additional considerations are
fairness; integrity; avoidance of personal profit; avoidance of waste and extravagance;
and the even-handedness in the appointment of staff and the letting of contracts.
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VALUE FOR MONEY
Best achievable product/ service for the best achievable price. Also, the efficiency
(maximum output from resources used), economy (using the right quantity & quality of
resources at the lowest cost), and effectiveness (achieving the required results
(Measured by KPI’s)) are to be considered
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DELEGATION LETTERS
The method of formally delegating authority to a nominated individual. The authorities
that can be delegated include Budgetary, Financial, Procurement, and staffing. The
delegation letter should clearly set out all limits to authorities delegated, and any areas
where no authority is delegated. Further information, such as reporting requirements
can also be included.
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BUDGETS
A financial plan covering expenditure and income. It incorporates a set amount of
funds, net of any income, to deliver a specific set of aims and objectives.
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FORECASTS
Predicted income and expenditure, split over periods of the financial year, based upon
known, or expected activity. The forecast gives an indication as to the financial
position at the year end.
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RING FENCED BUDGETS
Funds used for a specific purpose. These can be externally, or internally ring fenced –
external will be funds provided by another department; internal will be funds to be used
in the delivery of specific projects or activities
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APPROPRIATED IN AID (ALSO APPROPRIATIONS IN AID; OR A IN A)
Income used to reduce the overall funding requirement of the Service. Only income
that has been approved may be appropriated in aid, although the Prison Service does
have Treasury approval to A in A up to £3m per year of income derived through
entrepreneurial activities.
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CONSOLIDATED FUND EXTRA RECEIPTS (ALSO CFERS)

HM Treasury controlled account to which all income that is not budgeted for (i.e.
unexpected receipts) must be surrendered.
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VIREMENT
The act of transferring budgets. Virement is subject to strict Treasury controls when
moved between Administration, Programme and Capital Subheads. Movement within
a subhead it permitted
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BUSINESS PLANS
A plan setting out the direction of a given area for a given time, including key
deliverables and responsibility for delivery. Also a plan setting out the justification for a
proposed action or activity, and include cost and resource implications.
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VARIANCE (ALSO VARIANCE ANALYSIS)
Any deviation from expected performance, in terms of budgets, where income or
expenditure did not occur as expected. Variance analysis is the act of determining the
drivers for those deviations
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UNDERSPENDS
Where actual expenditure is less than expected; or where income generated is higher
than expected
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OVERSPENDS
Where actual expenditure is greater than expected; or where income is less than
expected
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AMBIT OF THE VOTE
The scope of funding given (voted) to the Prison Service; i.e. keeping prisoners in safe
custody; running and maintaining prisons; and cross criminal justice agency working
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SUB-HEADS
Specific categories of provision within budget allocations. There are two main sub-
heads – Capital and Resource, although resource is sub-divided into Administration
and Programme
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ADMINISTRATION
Budgets associated within support functions of an organisation (e.g. HQ Groups)
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PROGRAMME
Budgets associated with the delivery of front line services (e.g. Establishments)
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CFERs

Where funds have been identified as having to be surrendered, the appropriate business
unit must credit those funds to the following charge account:

1-xxx-9500-950-09150-95-00000-000000

The shared Service Centre will, on a quarterly basis, seep the balances held in this account
across all business units, and clear the amounts down. They will then process a single
payment to the Consolidated Fund to clear the liability.

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                Budgetary Control – Risks and Controls
Objective:

To plan, monitor, control and adapt resources to meet agreed business objectives
whilst remaining within notified limits


Potential Risks:

      Inappropriate allocation of resources – failure to meet business objectives
      Inability to adapt to unexpected events
      Poor decision-making
      Inadequate / inaccurate records
      Fraud/ Theft – financial loss
      Departmental embarrassment
      Business interruption
      Inefficient use of resources


Possible Controls:

      Delegation letters
      Forecasting
      Variance Analysis
      Business planning (including challenge – review plan / planning process)
      Communication between Budget Holders and Budget Managers
      Regular Finance Meetings.
      Use and dissemination of Phoenix reports.
      Training and guidance (including non-finance staff).
      Continuously challenging assumptions used in setting plan.
      Area & Central Monitoring – up and down the line
      Exception reporting
      Process to capture and record information
      Consistent methodology –
      Standardisation of output

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