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INFORMATION
NOTE 23/2000
September 2000
Central Advice Unit
5th Floor
Trevelyan House
Great Peter Street
London SW1P 2BY
INFORMATION
Tel: 020 7271 2833
Fax: 020 7271 2715
GTN: 271 2833
www.property.gov.uk
PROPERTIES SHARED BY GOVERNMENT
BODIES – ACCOUNTING ARRANGEMENTS
A REVISION OF THE TREASURY
GUIDANCE FIRST ISSUED AS AMG 30/95
Purpose The purpose of this Information Note is to advise premises managers
and finance officers in Departments, Agencies and Crown NDPBs of the
revision of AMG 30/95, which is to be incorporated as Appendix 5 in
the yet to be published Civil Estate Occupancy Agreement (CEOA). A
copy of CEOA Appendix 5 is attached as an Annex to this Information
Note. This Information Note replaces IN 8/97, which contained the
previous version of AMG 30/95.
Action Premises managers and finance officers will wish to note the revision
of AMG 30/95 and its application to properties shared by Crown bodies.
They should consider adopting the new procedures in relation to new
and existing MOTOs (Memoranda Of Terms of Occupation).
Background AMG 30/95, originally written by HM Treasury and issued as part of the
Efficiency Scrutiny on the Management of the Civil Estate, outlined the
guidance for the billing of Occupiers in jointly occupied properties. It has
been revised for inclusion in the CEOA, which is a development and
revision of the Departmental Estate Occupancy Agreement (DEOA).
The revised AMG 30/95 is based upon the accounting procedures
developed by the DEOA Review Group and has been cleared by Treasury
as being compliant with Government Accounting and other Treasury
guidance. Further background related to the CEOA and accounting
procedures is contained in Information Notes 6/99, 8/99, 29/99 and
14/00.
Summary of main The following points are key new provisions:
changes
• Holders should provide an interim Reconciliation Statement to
Occupiers of the Annual Service Charge (ASC) at the end of the
third quarter. This process will provide the basis of the fourth
quarter expenditure estimates. End of year reconciliation will take
place at the end of the fourth quarter.
• Recoverable VAT payments should not be passed on by the Holder to the
Occupier. The Holder is responsible for all VAT payments on the lease and any
subsequent recovery of VAT.
• The full cost of Capital Charge incurred by the Holder should be provided for on
its Vote as running costs and any receipts from the Occupier scored as
Appropriations in Aid. Payments by the Occupier to the Holder should also be
provided for on its Vote.
• Where differences between the actual cost and the final revised ASC estimate
falls between the acceptable variance of +/- 10% up to a maximum of £5,000.00,
an additional refund/payment will not be necessary and the Holder should clear
the suspense account using its normal internal procedures.
Application The CEOA is still in draft, but can be applied in conventional MOTO (ie non-PFI scheme)
situations and its use in these circumstances is encouraged. Consequently departments
should note the guidance contained in the revised AMG 30/95 and consider adopting
its procedures in relation to existing and new MOTOs. (Premises managers should note
that changes to the terms of existing MOTOs must be agreed by both parties).
Further Information Further information about this note can be obtained from Bridget Hardy, Estates Advice
Manager, Central Advice Unit:
Telephone: 020 7271 2708
Facsimile: 020 7271 2715
E-mail: bridget.hardy@property.gsi.gov.uk
Fur ther copies of this or previous Information Notes can be obtained from
Kenneth O’Connell on 020 7271 2711. Alternatively, they are available on the PACE
Website at www.property.gov.uk.
Departmental Policy Recipients of this Information Note should also consult adequately within their
departments to ensure that any action taken is at the appropriate delegation level
and complies with their own departmental policy and procedures.
ANNEX
PROPERTIES SHARED BY GOVERNMENT BODIES – ACCOUNTING
ARRANGEMENTS
A revision of Treasury Guidance first issued as AMG 30/95.
1. This note sets out guidance for the billing of Occupiers by Holders in shared
properties. It draws heavily on Government Accounting, which in Chapter 23 says
that each department should bring to account its share of the cost of shared services.
Property divisions are reminded to consult their Finance divisions, and the full text
of Government Accounting, where necessary.
2. In particular, the Civil Estate Occupancy Agreement (CEOA) provides that all
Occupiers will be responsible for their proportion of any general costs. Such costs
should be apportioned as prescribed in the standard Memorandum Of Terms Of
Occupation (MOTO), i.e. on the basis of ALA (Agents Letting Area)/NIA (Net Internal
Area) for most items, but on the basis of staff numbers for certain items (unless
otherwise agreed mutually).
3. The CEOA provides for quarterly advance payment by Occupiers for Annual Service
Charge (ASC) and rates on the basis of estimates provided by the Holder. The
Occupier pays the estimated amount into the suspense account maintained by the
Holder at the beginning of each quarter i.e. 1 April, 1 July and 1 October. At the end
of the third quarter in-year reconciliation will take place comparing actual expenditure
with the estimated expenditure apportioned to the first three quarters of the financial
year.This reconciliation process will provide the basis for fourth quarter expenditure
estimates. In January the Holder will demand, in advance, payments for the fourth
quarter based on the revised estimates and adjusted to account for under or over
payment during the earlier part of the year. At the end of the fourth quarter, end of
year reconciliation will take place. Arrangements for reconciliation of ASC are included
at paragraph 11.
4. HM Treasury’s PES(99)23 states that recoverable VAT payments, in the context of a
MOTO, should not be passed on by the Holder (major occupier) to the Occupier
(minor occupier). The Holder is responsible for all VAT payments on the lease and
any subsequent recovery of VAT, even where leased accommodation and services
are shared by an Occupier. PES(99)23 instructs Occupiers under a MOTO to
surrender recoverable VAT provision and Appropriations in Aid where recoverable
VAT payments have been passed on by the Holder.
5. The Vote accounting arrangements covering the relationship between Holders and
Occupiers will, in most respects (i.e. for rent, rates, maintenance costs and all “bought-
in” services), follow the principles set out in Government Accounting Chapter 23.
This means that each department should score to its Vote its share of the services in
question. The Holder when billed should score its share to its Vote as running costs
where appropriate and the balance to a suspense account. The Occupiers should
charge their shares to their Votes as running costs where appropriate. Money
recovered from the Occupiers by the Holder should be credited to the suspense
account. The date of payment by the Holder will determine the year of the charge
to Votes. Arrangements for “throwback” of costs to the previous financial year
(following final reconciliation of the figures prior to the departments’ books being
closed) are explained in paragraph 11 below.
6. The rules in paragraph 5 above do not, however, apply to Capital Charge and services
provided by in-house staff. For these services, the full cost incurred by the Holder
should be provided for on its Vote as running costs where appropriate and it should
score as Appropriations in Aid in any receipts clawed back from Occupiers who
should score payments to the Holder to their Votes.The cost of Capital Charge and
services provided by the Holder’s in-house staff will be demanded in accordance
with the timetable as set out in paragraph 3 above. See also paragraph 11 below
which explains the arrangements for “throwback” of costs to the previous financial
year.
7. Where space is let by a department on commercial terms to the private sector or
to an NDPB, whether or not on commercial terms, it should provide for the gross
costs on the Vote as running costs where appropriate and score the associated
receipts as Appropriations in Aid.
8. Sections 12.2.7 and 12.2.9 of Government Accounting explain suspense accounts as
follows:
“The term ‘suspense account’ in its widest sense covers any book-keeping
entry opened to record payments and receipts which are not proper to, or
cannot for the time being be carried to the Vote account. Departments must
ensure that they have sufficient funds available to finance advances debited to
suspense accounts, even though the advance will not be debited to the Vote
account when it is made.”
[Suspense accounts are often used] “for adjustable advances made to or by a
department until the final amount chargeable to the Vote is known, eg ... to or
from other Government departments in respect of inter-departmental
transactions.”
9. Suspense accounts should be closely monitored and cleared before the Vote account
is closed for that year (usually towards the end of May); the system of interim
reconciliation and the use of Annual Service Charge (ASC) for certain costs should
facilitate this process:
“All accounts should be reviewed at least once every three months and should
be cleared as quickly as possible. Any charges or credits to suspense accounts
which affect the Vote account for that year should be cleared before the Vote
account is closed. Clearance of suspense accounts for a particular financial
year should neither be deferred to avoid an excess Vote nor accelerated to
absorb a shortfall of expenditure (Government Accounting Section 12.2.10)”.
10. Government Accounting 21.2 says that Holders (major occupiers) must pay bills
from contractors/suppliers promptly, normally within 30 days of receipt of invoice
or in accordance with any contractual commitment.The Late Payment of Commercial
Debts (Interest) Act 1998 enables a business to claim interest if another business
(including Government Departments, Agencies etc.) pays its bills late (see DAO(GEN)
5/98). They should ensure that they limit their orders or commitments to the level
at which payments can be accommodated within the amount voted by Parliament
for the year. However, if a department cannot limit its obligation in this way, it should
meet its obligations to pay, even if this would result in an excess Vote.
11. Suspense accounts must be cleared to nil before the Vote Account is closed (Accounts
branches normally set a deadline of end May). In the event that the account is in
credit, then the amount concerned must be apportioned between Occupiers and
transferred to their Votes. If the account is in debit, then that must be apportioned
to Occupiers and transferred to their Votes in exactly the same way. The debit or
credit is then charged to the Vote for the year just ended (this is called ‘throwback’);
it cannot be charged to the current year’s Vote. With regard to ASC, where the
difference between the actual cost and the final revised ASC estimate falls within the
acceptable variance (+/- 10% of ASC up to a maximum of £ 5,000.00), an additional
payment / refund will not be necessary and the Holder should clear the suspense
account in accordance with its own internal procedures. Where the difference
between actual cost and the final revised ASC estimate falls outside the acceptable
variance then credit or debit should be cleared in full as above. It should be noted
that there is no acceptable variance with regard to other costs, and suspense accounts
should be cleared in full.
12. It follows that it is important that Holders keep Occupiers informed of likely
expenditure against estimates as the year progresses (and should inform them
immediately if any significant and unexpected payments materialise later in the financial
year - the third quarter in-year reconciliation should help in this respect), so that
Occupiers can take steps to increase or reduce provision on their premises subheads
as necessary.
13. After the end of the financial year, the Holder should provide Occupiers with a
record of actual expenditure in that year so that a comparison can be made with
the estimates on which imprest payments were based, and large variations can be
explained. An example of a final reconciliation statement is included as Appendix 6
of the CEOA. On checking of invoices presented by supplying depar tments,
Government Accounting says that:
“The customer department is not expected to incur costs by duplicating the
checks carried out by the supplying department. But the customer department
should satisfy itself that it has received the goods and services provided... and
that charges are consistent with the catalogue prices or quotations (GA
23.3.11)”.
The Occupier will want to scrutinise the annual statements with this in mind.
14. The Holder will also need to ensure that its Appropriations in Aid provision on its
Vote is adequate to cover the anticipated receipts for Capital Charge and shared
services provided by in-house staff, and receipts from any commercial tenants or
NDPBs (whether or not occupying space on commercial terms). Standard Vote
management practice is that any excess Appropriations in Aid on the Vote as a
whole would have to be surrendered as Consolidated Fund Extra Receipts (CFERs).
If it appears likely that expenditure will be above the estimate, and the department
cannot find resources within the same line (subject to GA 11.7.6g) from compensating
underspends or by re-prioritising expenditure, then Treasury may agree to virement
providing that there are adequate savings elsewhere on the Vote and that the proposed
transfer of provision meets the rules set out in Section 11.7 of Government
Accounting (and, in particular, GA 11.7.6f). However, the department should be
aware that they would incur a DEL cash limit breach if savings are not within the
DEL cash limited part of a mixed Vote.
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