Capital Spending Budget
Capital Spending Budget document sample
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Section 4 : Budget Monitoring & Financial Records 1. Introduction 2. 4-Weekly Monitoring 3. Reports to Governing Bodies 4. Virements 5. Masterpiece General Ledger 6. MPGL Financial Reports 7. Retention of Financial Documents and Records 8. Capital Spending from Budget Shares 1. Introduction It is essential that schools monitor their budget on a regular basis. This includes not just the ISB but also SEN, Standards Fund, Excellence in Cities and any other funds making up the school’s overall budget allocation. Although school governors may only require a termly budget monitoring report, schools must check their overall financial position every 4 weeks after receiving the 4-weekly MPGL printouts. Masterpiece General Ledger (MPGL) is a computerised system on which all income and expenditure is recorded and represents the official accounts of the Authority. Information on budgeted and actual income and expenditure is maintained to enable schools to monitor their budget throughout the financial year. The 'internal' systems used in schools for budget monitoring (SIMS, Money Manager, Key Solutions) MUST agree to MPGL (the official accounts of the school). The school budget should be input onto the school system and agreed to the Financial Statement and MPGL print Form T5. All changes to the budget are notified to schools during the year via the financial statement and included on MPGL Form T5, these changes should be deducted/added to the school system. All actual expenditure and income showing on the 4-weekly MPGL printouts should be matched against the 'actuals' showing on the school system. 2. 4-Weekly Monitoring School Budget When the (S)B3 form has been signed and submitted to the Lifelong Learning Resources Finance Section, it will be checked by your LMS School Contact Officer. Once approved, the delegated budget will be input into MPGL against the appropriate budget headings. Budget Profiles It is necessary throughout the financial year to estimate the pattern of expenditure and compare it to actual expenditure. Expenditure/Income profiles are created for these patterns and are applied to the individual budget headings. Every 4 weeks the profiles are applied to the budget (giving the profiled budget) and compared to the actual expenditure/income to date. It is recognised that a budget profile can never be completely accurate, but the profiles provide a framework for budget monitoring. MPGL has a package of standard profiles that are applied to certain budget headings. Budgets with no particular spending pattern default to the straight line profile of 13 equal periods. It is not sufficient for schools to prepare a 'budget monitoring report' that compares actual expenditure to date against the budget for the year with the final column showing the budget remaining. This type of report does NOT reflect the current financial position of the school and gives no indication of whether or not the school is currently spending within budget. Whilst the Form T5 may be presented as a monitoring report to Governors, it should be adapted to reflect any known commitments. Such a report would include the following: 1. School budget (Form T5) 2. Profiled budget (Form T5 or the school’s own assessment if felt to be more accurate) 3. Actuals to date (Form T5) 4. Known commitments to date (School records) 5. Variance (columns 2 - 3 - 4) Variances The 'variance' between the profiled budget and actual expenditure will need to be examined and accounted for. Whilst the cause of some variations will be easily recognisable, others may need further, more detailed, investigation. Where investigations show that there will be an overspend on certain budget heads, the Headteacher must study the overall position of the budget and transfer (vire) funds from one budget head currently underspending to one that is overspending. If a transfer (virement) of funds is not possible, the budget will need to be further scrutinised to determine where planning can be altered or funds made available from the SCHOOL’S own contingency fund. 3. Reports to Governing Bodies Monitoring of the school's actual expenditure against the budget should be carried out on a 4-weekly basis by the School Finance Officer/Bursar/ Headteacher. The first 4-weekly monitoring should be carried out no later than Week 12. This is normally the first period for which MPGL reports are sent to schools. This will allow Governors to take any corrective action before the Summer break if it is deemed necessary. Governing Bodies should decide on their own practical arrangements for monitoring the school budget, but a formal monitoring report should be presented at least termly to a meeting of the Governing Body. Any under/overspending variances should be highlighted and discussed at an early stage and appropriate action taken. The Governing Body will also require to be notified at any time of an expenditure variance which has a significant impact on the budget. 4. Virements This is the transfer of an underspending on one budget heading to finance additional spending on another budget heading. Where a school needs to adapt to changing financial circumstances by viring resources, a procedure will need to be established for approving such a virement within school. The Governors may delegate virement up to an agreed limit to the Headteacher. The Governing Body must be notified of virements above this limit. The exact levels to be set will depend upon the size of the school budget and circumstances pertaining to the school. Amounts should be for £100 or more and to the nearest £100 thereafter. Schools must inform their LMS school contact officer in the Lifelong Learning Resources Finance Section of any virement decisions on the V1 proforma for the purpose of amending the school budget record on MPGL (central accounting system). Examples of the Form are shown as Appendix 4A. 4.1 Secondary and Middle Schools Cheque Book System The Cheque Book System for most Secondary and Middle Schools necessitates the school delegated budget being split into a bank budget and non-bank budget. This has implications for any virements, which can fall into 4 categories: a) Virement within the Bank Budget - from Repairs & Maintenance to Supplies & Services b) Virement within the Non-Bank Budget - from F/T teachers to Clerical staff c) Virement from Bank Budget to Non-Bank Budget - from Supplies & Services to Staffing d) Virement to Bank Budget from Non-Bank Budget - from Staffing to Supplies & Services. Virements which fall into categories (c) and (d) will necessitate the transfer of funds between the bank and non-bank budget and, therefore, the bank account itself. The actual amount of the transfer will be spread evenly over the remaining number of payments in the financial year, effectively adjusting the school monthly standard payment. These adjustments will be increases to the standard payment for (d) and decreases for (c). Virements falling into categories (a) and (b) do not affect the bank account. All virements should be completed on the V1 virement form and sent to the office with the 4-weekly returns. 4.2 Cashflow The Secondary and Middle School Cheque Book System necessitates the monitoring of the School's cashflow. The Standard monthly payment to the bank is calculated from the bank budget on the S(B)3 budget form. If any of the budget headings within the bank budget are overspending then there will be insufficient funds in the bank account to cover the costs. If there is a likelihood (at any time) of there being insufficient funds available, a VIREMENT must be actioned by the School, transferring funds from the non-bank to the bank budget. Any overspendings must be reflected on the non-bank budget. The agreed banking terms with the Yorkshire Bank are that the accounts MUST stay in credit. Any cheques written against a bank account with insufficient funds will be returned. 5. Masterpiece General Ledger Most schools maintain their own internal financial records. These are usually computerised, and assist schools in producing the SEA returns for their school bank accounts. In addition to maintaining budget records, some systems also perform other tasks, e.g. producing school orders, raising cheques and in many cases are integrated into other systems (attendance records, timetabling, pupil records). While it is accepted that MPGL will not be as up to date as school records as a result of bank account expenditure, it should be noted that MPGL, being the Authority's official accounts, will always be used as the basis for calculating school balances at the financial year end. It is, therefore, necessary for schools to reconcile their internal records to MPGL on a 4-weekly basis on receipt of the MPGL reports. It is the responsibility of the school to check these and notify their LMS school contact officer if any discrepancy occurs. 5.1 Structure of MPGL The format of the information held on MPGL is known as the structure and consists of several different levels. This is because of the varying level of detail required by services within the Authority. In terms of the school MPGL structure, the highest level will be the school and the lowest level will be detail codes ie the codes where the income and expenditure is posted to. 5.2 Structure of MPGL accounting codes Accounting codes are used to identify the budget which an item of income and expenditure is to be charged against. These codes are used on source documents and when data is passed from feeder systems to MPGL. MPGL accounting codes are structured in their format and have 11 characters (two alphas and nine numeric) and consist of two distinct parts. These are known as the objective and subjective codes. Objective code - consists of 6 characters and identifies the school to which it relates. School objective codes are based on DfES numbers and are either 2 alphas followed by the 4 digit DfES number, or 3 alphas followed by the last 3 digits of the DfES number. Separate objective codes are used for each different element of devolved funding, e.g. there are separate objective codes for each school’s delegated budget, SEN, Standards Fund etc. The alphas used are : Funding Source Primary/ Primary - Secondary Special nursery - DfES no. & Middle & DfES no. DfES no. Starting 3 Starting 7 Starting 2 Delegated Budget EP EP ES EL SEN EQ EQ EW - Standards Fund EZ EZ EZ EZ Excellence in Cities EZA EZB EZH - EMAG ERA EGA EHA EEA Resourced Provision EB EB EB EB An example of how this applies in practice is given below, using fictional schools consisting of two primary schools, DfES numbers 2999 and 3999, a secondary school with DfES number 4999 and a special school with DfES number 7999. Example of School Objective Codes Funding Source Primary Primary Secondary Special DfES no. DfES no. DfES no. DfES no. 2999 3999 4999 7999 Delegated Budget EP2999 EP3999 ES4999 EL7999 SEN EQ2999 EQ3999 EW4999 - Standards Fund EZ2999 EZ3999 EZ4999 EZ7999 Excellence in Cities EZA999 EZB999 EZH999 - EMAG ERA999 EGA999 EHA999 EEA999 Resourced Provision EB2999 EB3999 EB4999 EB7999 Subjective code - consists of 5 characters (all numeric) and identifies the type of expenditure or income, e.g. 05001 is full time teachers' basic pay. Subjective codes are the same for every single school, it is the objective code that identifies which school the expenditure relates to. Therefore, the code for full time teachers' basic pay charged to Honley High School delegated budget would be ES4038-05001 and for, Howden Clough High School would be ES4048-05001. The equivalent codes for SEN would be EQ4038-05001 and EQ4048-05001 and for EMAG would be EHA038-05001 and EHA048-05001. Because of the hierarchical nature of the MPGL code structure, all codes which are "owned", i.e. lie directly below a higher code in the structure, are added together to give the higher code its value. The diagram on the next page illustrates how this would appear for teacher costs being charged to a school’s delegated budget. The diagram below shows the structure of MPGL: ES3000-NETXX ABC School £2,578,849.76 ES3000-INCOM ES3000-GROSS Income Expenditure (£16,122.04) £2,594,971.80 ES3000-AEMXX Employees £2,238,175.81 ES3000-AEM00 Operational Employees £2,028,831.42 ES3000-051XX ES3000-050XX ES3000-052XX P/T Teachers F/T Teachers Claiming £241,484.52 £1,732,160.62 Teachers £55,186.28 ES3000-05001 ES3000-05003 ES3000-05004 ES3000-05006 Basic Pay National Superannuation Other £1,510,243.16 Insurance £106,596.16 Allowances £115,239.45 £81.85 Posting level codes (detail code) - the lowest level of the MPGL coding structure. Whenever an item of income or expenditure is incurred it will be posed to an accounting code at this level. All posting codes have a numeric subjective code. Summary level code (aggregate code) - appearing above posting level codes, these codes add up all codes which are below them in the code structure, i.e. full time teachers is a summary level code and within it includes the totals of basic pay, employer's NI and employer's superannuation. All summary level codes are part alpha and numeric in the subjective element of the code. 5.3 Feeder Systems All data on actual income and expenditure is entered into MPGL by way of a "feeder system", so called because the data "feeds" into MPGL. These systems perform a specific function, e.g. pay employees, reimburse school bank accounts, and then pass over selected information to MPGL so that related income and expenditure is posted to the relevant accounting codes. All feeder systems are allocated a specific source reference when they appear on MPGL. The list below summarises these, along with details regarding the frequency of charges. Reference Source Frequency AP Creditors - Invoice details Weekly AR Design Practice As and when required MN Mentor (Estates - Rents) As and when required SA Salaries (Administration) 4-weekly SS Salaries (Claiming Teachers) Monthly ST Salaries (Teachers) Monthly SE School Cheques (Enabling accs) 4-weekly SK Skyline Property Management As and when required SD Sundry Debtors Weekly WW Wages Weekly YP YPO Weekly 5.4 Accounting Periods The financial year runs from 1 April to 31 March. When referring to the financial year it is often abbreviated to just the start and finish year, i.e. the financial year from 1 April 2003 to 31 March 2004 is referred to as 2003/04. Each financial year is divided into 13 periods of 4 weeks. Each period is allocated a number thus "period 1" is the first 4 weeks of the financial year, "period 8" is weeks 29 to 32 and Period 1 to 8 would be up to and including the 32nd week of the financial year. There is also a period 14 which is used for all transactions occurring after the financial year end, but which relate to the old financial year rather than the new one. Usually these entries will be in the form of special creditors/special debtors. This is not a period of 4 weeks duration but continues until the accounts are finally closed. 6. MPGL Financial Reports MPGL has a facility to produce certain financial reports which assist schools in monitoring their budgets throughout the financial year. Three different MPGL reports are sent to schools at 4-weekly intervals. Listed below are details of each report and the purpose they serve. 6.1 MPGL Report "Form 01" (Summary Financial Ledger) Details expenditure at level of the school code structure Provides cumulative expenditure from the start of the financial year, and also shows the 4-weekly expenditure for a selected period No detailed transactions are included within this report Non-bank expenditure from the current period column on this report should be input to the school financial system An example is shown as Appendix 4B. 6.2 MPGL Report "Form 31" (Ledger Transactions) This report provides the detailed information summarised on "Form 01" Details all transactions showing source details, enabling easy identification of all transactions This report should be checked to ensure all SEA entries have appeared as expected and KDF210 totals have transferred; follow up any discrepancies Shows detail codes only, no summary level (aggregate codes) codes The report sent to schools shows transactions for a 4-weekly period only An example is shown as Appendix 4C 6.3 MPGL Report "Form T5" (Budget Monitoring) This report shows all income and expenditure during the financial year to date and compares this with the profiled budget and shows the total budget for the year. Once a school has submitted its (S)B3 budget form, the information is then entered onto MPGL Each budget heading also has a budget profile which reflects its expenditure pattern and to enable a comparison to be made with the expenditure to date At times during the course of the financial year, some budget figures may change due to virements or additional budget allocations (i.e. increased pupil numbers) The total actual expenditure to date shown on this report will correspond to the total shown on Form 01 An example is shown as Appendix 4D. 6.4 Correction of errors on MPGL reports Sometimes discrepancies will be identified as a result of the checking of MPGL reports to the school system. These are usually the result of incorrect coding. To assist in the checking and correcting of errors, queries should be detailed on the proformas provided (see Appendix 4E). Completed forms should be sent to Lifelong Learning Resources Finance Section, addressed to your LMS School Contact Officer. The forms reflect the MPGL report (Form 31) so that the necessary information can be extracted from the report in the same format. It is advisable to keep a copy in school so that adjustments can be checked on a 4-weekly basis. Common errors appearing on MPGL reports There are errors on MPGL reports that appear to be more common than others. The majority of transactions appearing can be checked against information available in school, e.g. all payroll costs can be checked against KDF210 reports, bank account expenditure is recorded on the SEA1/SEA8/SEA10 forms and SIMS, Key Solutions or Money Manager. Certain types of expenditure which, although correctly charged to schools, are difficult to identify because of the lack of supporting information: - Staff advertising - Wages for relief nursery nurses and support assistants - Transport expenses claims by minute clerks - Disputed charges to teachers cover budget in cases where a school thinks a claim should be covered under the insurance scheme There are two main areas of payroll expenditure where errors occur: (1) Where an employee moves from one school to another, usually at the start of a new academic year; (2) Those employees dealing with SEN who are mainly on temporary contracts and change along with the requirement of the pupils. 6.5 KDF210 - Analysis of Employee Costs The KDF210 report is a detailed analysis of school employee costs. It provides a detailed listing of individual employee costs. The total cost of each type of employee (i.e. teachers, claiming teachers and non-teaching staff) appears on MPGL report Form 31 under the appropriate headings; basic pay, NI, superannuation, etc. An example of a KDF210 report is shown at Appendix 4F and an explanation of what it shows is given on the next page. A Report Headings These provide a number of items of information : a) Organisation In the case of schools this will always be 01 for Kirklees Council b) Payroll Number 004 for full-time teachers, 005 for claiming teachers, 003 for APT&C staff, 002 for weekly wages c) Pay Date, Pay Period, Accounting Week and Period d) MPGL Objective Code e) School name B Employee Information a) Establishment The school reference as held on Delphi; this is based upon the DfES number b) Contract Number 1st digit : 1 = employee transferred from Arcast, (the previous payroll system), digits 2 to 7 are former employee number. 2 = employee started after Delphi introduced, digits 2 to 7 allocated by Delphi. End alpha - some employees have more than one employment on the same payroll; this is used to identify them, using A for the first employment, B for the second and so on. c) Employee name d) Hours For teachers, 32.50 hours is classed as full-time e) Employee type The first 3 digits of the basic pay code for that employee, e.g. 050 for full time teachers, 051 part time teachers etc. f) Pay section The school pay section g) Annual salary The annual salary for that employee h) Percentage Costing This applies when an employee’s salary for a particular employment is being charged to more than one MPGL code. The apportionment is made on every element of pay not just basic pay so overtime or other allowances are also apportioned. C - I Pay for the Period These columns analyse pay into its component parts and largely correspond to the MPGL subjective headings. These totals can be matched up to those on Form 31. J Establishment Total Totals of all pay columns for the establishment. K Objective Code Total Totals of all pay columns for the objective code. It should be noted that the KDF210 report shows employee costs charged to a particular objective code and not total pay costs for each employee. However, it is not unusual to find employees with more than one employment charged to different objective codes and/or with one employment charged to different objective codes by means of percentage costings. For example, one individual may work as a cleaner for the Catering and Cleaning Service and as a lunchtime supervisor in a school. A teacher may have part of their pay charged to Standards Fund and part to the delegated budget. If information is required about the total pay of an individual employee this is best obtained by contacting the Payroll Section. 7. Retention of Financial Documents and Records 7.1 General Rule - Financial Documents and Records As a general rule, documents or records are subject to special legal requirements, and the retention period should be a minimum of three years or six years plus the current financial year where VAT related. Customs, the Audit Commission and Audit have given permission for the prescribed retention periods for invoices/copy invoices, credit/debit notes, delivery notes and purchase orders to be altered. However this provision only applies where services and schools come under the Council’s VAT registration. This concession is for VAT purposes only. Where there are longer retention requirements relating to Inland revenue or Companies acts these must be adhered to. Where records relate to a specific grant, those records will need to be retained until the audit of the grant is complete. The Council also needs to retain documents to protect it from civil claims under the 1980 Limitation Act. The limitation period for contracts not under seal is six years from the expiry of the contract/breach of contract. It is therefore important to ensure that in cases of dispute or potential dispute, no documents are disposed of until a period of six years has passed Type of Record Minimum Retention Period (plus current year) Enabling Account - Expenditure Cheque Books (stubs) 6 years Invoice/copy invoices 4 years Credit notes/debit notes 4 years R1 and YPO Purchase Order Pads 1 year * Delivery Notes 1 year * SIMS/Money Manager Prints 6 years Postage Record 3 years Budget Monitoring Records 3 years *For purchase and delivery notes this may mean that some items are over one year old before being disposed of in order to comply with audit requirements. Enabling Account - Reconciliation Bank Statements and Bank Correspondence 6 years All 'SEA' Reconciliation Forms 6 years Enabling Account - Income Private Telephone & Photocopier Income Records 6 years Income Records/Receipt Books 6 years Paying-in Books 6 years MS/1, MS/2 and MS/3 Milk Returns 6 years Lettings Records including invoices and HSP1 & 2 Forms 6 years Lettings Diary 3 years Copy Caretaker's Timesheets 3 years School Fund School Fund Records and Invoices 6 years Cheque Books (stubs) 6 years Bank Statements 6 years Paying-in Books 6 years Income Records (supporting documentation) 3 years 7.2 General Rule - Non-Financial Documents and Records With regard to non-financial documents and records, other than those where the period is determined by statute or regulation, a retention period of 6 years is advised. However, the period is at the discretion of the Head of Service. Type of Record Minimum Retention Period School Log Book Indefinitely or until closure of school when it should be submitted to Schools Management Section, Oldgate House Admissions Register As above Attendance Registers 3 years from date of last entry School Meals Records - School Responsibility School Meals Registers 3 years from date of last entry Summary Registers 3 years from date of last entry Paying-in Slips 6 years plus current year CRG001s 6 years plus current year Free Meals Tokens/Tickets 3 years plus current year Free School Meals Entitlement Letters Current and previous letter only School Meals Records - DSO Staff Responsibility Day Book 3 years (DSO to advise) Stock Sheets 3 years Employee Signing-in Book 3 years Order Book 6 years Delivery Notes 6 years Kitchen Equipment Inventory Indefinitely Till Audit Rolls 6 years plus current year Paying-in Slips 6 years plus current year CRG001s and Cheque Forms 6 years plus current year Miscellaneous Computer Discs (with financial details) 6 years Unclaimed Lost Property 3 months Lost Property Record 3 years Copies of Governors Minutes 6 years Pupil Records 12 years General Correspondence 6 years GEST/INSET Records/Invoices, etc. 6 years Plans, Services Drawings, Boiler, Maintenance, etc. Indefinitely Register of Pecuniary Interests 6 years Health and Safety File Indefinitely 8. Capital Spending from Budget Shares Paragraph 2.14 of the Scheme for Financing Schools states that "Governing bodies may use their budget shares to meet the cost of capital expenditure on the school premises. This includes expenditure by the Governing Body of a Voluntary Aided school on work which is their responsibility under paragraph 3 of Schedule 3 of the School Standards and Framework Act 1998. If, however, the Governing Body wishes to incur capital expenditure, it must notify the Authority. In respect of proposed expenditure of £15,000 and above, the Governing Body can be required to take into account any advice from the Director of Lifelong Learning as to the merits of the proposed expenditure. If the premises are owned by the Authority, the Governing Body must seek the consent of the Authority to the proposed works". The main reason underlying this requirement is clearly that the Council has a responsibility for planning the most efficient use of its capital resources and its officers need to know when a school has been able, from its own resources, to undertake an outstanding capital scheme. The Council also needs to keep its Asset Management Plan up to date.