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FINANCIAL REGULATIONS

Clackmannanshire Council Financial Regulations

Clackmannanshire Council April 2006GreenfieldAlloa

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TABLE OF CONTENTS

Definitions 4

Section A - Introduction 61. Status of Financial Regulations 6

Section B – Financial Administration and Budgeting 72. Financial Administration 73. Budgets 74. Budgetary Controls 85. Budget Transfers (Virement) and Budget Changes 86. Accounting 9

Section C – Control Arrangements 107. Document Retention 108. ICT Security (Information & Communications Technology) 109. Segregation of Duties 1010. Following the Public Pound 10

Section D – Income and Expenditure 1211. Income 1212. Sundry Debt Write-Off 1213. Purchasing of Goods and Services 1214. Orders for Goods and Services 1215. Payment for Goods and Services 1316. Salaries, Wages, Pensions and Expense Claims 1517. Payments to Councillors 15

Section E – Assets and Security 1718. Inventories 1719. Stocks and Stores 1720. Vehicles 1821. Assets 1822. Estates and Property Security 1823. Cash Security 1924. Data Protection Act 19

Section F – Internal Audit, Risk and Insurance 2025. Internal Audit 2026. Risk Management and Business Continuity 2127. Insurance 21

Section G – Banking, Treasury and Capital Investment 2228. Banking Arrangements and Cheques 2229. Treasury Management 2230. The Prudential Code 23

Section H – Imprests, Advances and Other Funds 2431. Imprests / Petty Cash 2432. Advances 24

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33. Independent Funds 2434. Client Funds 2535. Protection of Private Property 2536. Trust Funds 2637. Variation of Financial Regulations 26

Appendix 1 - Document Retention Periods 27

Appendix 2 – Internal Audit Charter 30

Appendix 3 - Prevention & Detection of Fraud & Corruption 34

Appendix 4 – Benefits Sanctions Policy 39

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DEFINITIONS

This section defines terminology used within the Financial Regulations.

The Council - Clackmannanshire Council

Chief Officer – Any of the Chief Executive, Directors or Heads of Service of the Council. The financial function of a Chief Officer may be carried out by a substitute or delegated officer but the responsibility remains with the Chief Officer.

Head of Finance – The Head of Finance or any authorised substitute or delegated officer.

Emergency – An unplanned event that requires an immediate response to safeguard life, health or property.

Guidelines / procedures – Any guideline, procedure, or similar document issued by the Head of Finance under the authority given to him by Financial Regulation 1.3.

Councillor – an Elected Member of the Council

Officer – an employee of the Council.

Accountable Stationery – Any document that is of sufficient importance that for audit and control purposes each document should be accounted for. This is done by having sequential numbers and controlling the issue and use of the documents.

Authorised Signatory – A person officially nominated, either on an official form or on a controlled computer system, by a Chief Officer to authorise payments. Each Section or Service should be aware of its own up to date list of authorised signatories with units etc. There will be a centrally held list that will be maintained by Internal Audit. Extracts will be made available to Services as and when required. All staff must have received proper authorisation by their Director or Head of Service, indicating what they are authorised to sign for, and what limit has been put in place. Signature levels below Head of Service will be restricted to £30,000 unless a Director authorises otherwise. In addition, budgetary considerations must always be adhered to in authorising expenditure. (i.e. must not exceed the amount provided in the relevant budget). The following is a list of authorisation categories, responsible sections and where the location of file copies are retained.

Authorisation to: Responsible Section: File Copy:Starters, Leavers, Transfers Payroll/HR Internal AuditTravel and Subsistence Claim Forms Payroll Internal AuditOvertime Claims Payroll Internal AuditTimesheets Payroll Internal AuditPurchase Orders Creditors Internal AuditInvoice Payments Creditors Internal AuditCheque Requests Creditors Internal AuditOpen, Amend, Close Imprests Internal Audit Internal AuditAbsences Payroll Internal AuditRegradings Payroll / Human Resources Internal AuditIdentity Cards Individual Services Individual ServicesKey Holder Individual Services Individual ServicesLegal Agreements Legal Services Internal AuditLicences Legal Services Internal AuditCancellations of Sundry Income Revenues / Individual Services Internal AuditProposed Write-offs Revenues Internal AuditStanding Orders and Direct Debits Creditors Internal AuditCheque Signatories /Amendments Treasury Internal AuditElectronic Transfers Creditors Internal AuditStops Creditors/Payroll Internal Audit

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Code Insertion/Deletion Accounting and Budgeting Internal AuditJournal Entries Accounting and Budgeting—all areas except creditors /

Property Contracts / EducationInternal Audit

Borrowing/Lending Treasury Management Internal AuditStock Write Offs Individual Services Individual Services

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These Financial Regulations form part of the Standing Orders approved by the Council and must be read in conjunction with the remaining Standing Orders and the Contract Standing Orders.

SECTION A - INTRODUCTION

1. STATUS OF FINANCIAL REGULATIONS

1.1. The Council’s Financial Regulations are designed to ensure the highest standards of probity in dealing with public money and to assist and protect staff in such dealings.

1.2. The Head of Finance is, for the purposes of Section 95 of the Local Government (Scotland) Act 1973, the “Proper Officer”, under the general direction of the Council and the Chief Executive, for the administration of the Council's financial affairs.

1.3. In addition to these Regulations, the Head of Finance may issue financial guidelines and instructions. Official guidelines, procedures etc issued by the Head of Finance have the same status as the Financial Regulations. Subject to the approval of the Head of Finance, Chief Officers may also issue financial guidelines for activities within their Service.

1.4. Every Committee, Sub-Committee, Councillor and officer of the Council will adhere to these Financial Regulations. Chief Officers will ensure that all officers are made aware of the Regulations and the requirement to comply with them.

1.5. The Head of Finance can authorise exemptions from the Financial Regulations subject to alternative, adequate control arrangements being in place.

1.6. Any officer discovering a possible breach of these Financial Regulations must report the matter immediately to his / her supervisor or to the Head of Finance. Failure by any officer to comply with the Regulations, or in the case of staff with supervisory responsibilities, failure to ensure the compliance of others, could be treated as misconduct which might give rise to disciplinary consequences up to and including dismissal. Some breaches of Financial Regulations may be treated as offences giving rise to criminal proceedings. The Council‘s Policy on Prevention and Detection of Fraud forms an appendix to these Financial Regulations and is to be treated as part of the Regulations.

1.7. In addition to these Financial Regulations, Councillors must abide by the Councillors’ Code of Conduct, and staff must comply with the Code of Conduct for Local Authority staff.

1.8. Financial transactions are aggregated for the purposes of these Financial Regulations and therefore financial limits cannot be avoided by deliberately splitting transactions into smaller components.

1.9. An officer can incur expenditure which is essential to meet any immediate need created by an emergency, subject to any such action being reported to the appropriate Head of Service at the earliest opportunity. This could include the prevention of the destruction of Council property, as well as non-property related expenditure.

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SECTION B – FINANCIAL ADMINISTRATION AND BUDGETING

2. FINANCIAL ADMINISTRATION

1.10. Meetings of the Council regulate and control the finances of the Council in conformity with these Regulations. Officers will keep Councillors informed as to the state of the Council’s finances and will report on the accounts of each financial year as soon as practicable.

1.11. The Head of Finance will:

report to the Council on the level of financial resources proposed to be used in each financial year,

report to the Performance and Audit Committee, as well as meetings of The Council, regarding the Council's finances and financial performance.

1.12. Chief Officers must consult with the Head of Finance on the financial aspects of any report to Council or before any commitment is incurred which may significantly affect the finances of the Council. All such reports may, as appropriate, be approved by the Executive Team in advance of the Performance and Audit Committee or Council Meeting.

1.13. Chief Officers are responsible for ensuring that there are adequate Financial and Non Financial internal controls in place to carry out all Council business in as correct and secure manner as possible and in accordance with best practice. In respect of the Annual Accounts the Chief Executive and the Head of Finance will be required to sign an Internal Controls Assurance Statement, which will cover all financial and non-financial controls.

1.14. Chief Officers, in consultation with the Head of Finance, are also responsible for ensuring that necessary manuals are in place to ensure that all staff have proper written guidance regarding the systems and procedures they are using. If changes occur, these manuals should be updated accordingly. The purpose of these manuals is to ensure that everyone is working in the same, consistent manner, and also to assist in the training and development of any new members of staff.

1.15. It is the responsibility of all Chief Officers to ensure that all staff within their jurisdiction or Service are made aware of the existence of the Standing Orders and Financial Regulations. Staff should receive any training which may be required to perform their jobs according to the requirements of the Standing Orders, Contract Standing Orders, and Financial Regulations. Any necessary training will be carried out with the involvement of the Finance Service.

3. BUDGETS

1.16. The Head of Finance will determine the format of the budget that is approved by the full Council. The format will comply with all legal requirements and with CIPFA’s Best Value Accounting Code of Practice.

1.17. Chief Officers will prepare detailed revenue and capital budgets for consideration by the Council in compliance with accounting guidance provided by the Head of Finance.

1.18. When drawing up draft budget requirements, Chief Officers will have regard to Policy requirements approved by the Council.

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1.19. The draft revenue budgets will be submitted to the Council for approval no later than the date prescribed by statute, in order that Council Tax and Rent levels can be fixed.

1.20. The Head of Finance will prepare and submit reports to the Council on the resources available to fund aggregate spending plans over the medium term (3 years), and the implications for the level of Council Tax subject to that information being made available from the Scottish Executive.

1.21. Chief Officers in consultation with the Head of Finance will integrate budget plans from service planning, so that budget plans can be supported by financial and non-financial performance measures.

1.22. The inclusion of items in approved revenue or capital budgets will, assuming they comply with other requirements, such as Contract Standing Orders, constitute authority to the Committee or Chief Officer, as appropriate in terms of the Scheme of Delegation, to incur such expenditure.

4. BUDGETARY CONTROLS

1.23. The Head of Finance will establish an appropriate framework of budgetary management and control to ensure that:

budget management is exercised within annual budgeted limits;

Chief Officers are provided with monthly information of income and expenditure in sufficient detail to enable managers to fulfil their budgetary responsibilities;

Significant variances from approved budgets are investigated and reported by budget managers as appropriate.

1.24. Chief Officers will ensure that an accountable budget manager is identified for each cost centre under their control.

1.25. The Head of Finance will submit regular performance statements of revenue and capital income and expenditure against budgets to the Performance and Audit Committee.

1.26. The Head of Finance, after consultation with each Chief Officer, will inform the Council (for consent, if necessary) if it is forecast that the total revenue or capital income or expenditure for a Service is likely to vary significantly from the approved budget.

5. BUDGET TRANSFERS (VIREMENT) AND BUDGET CHANGES

1.27. Virement is intended to enable Chief Officers to manage budgets with a degree of flexibility within the overall approved revenue or capital budget.

1.28. Chief Officers may exercise virement on budgets under their control for amounts up to £30,000 on any one budget head during the year, following notification to the Head of Finance. A budget head is considered to be a line in the approved estimate booklet.

1.29. Amounts greater than £30,000 require the approval of the Performance and Audit Committee following a joint report by the Head of Finance and the Chief Officer.

1.30. Virement that is likely to impact on the level of service activity of more than one Chief Officer should be implemented only after the approval of the relevant officer.

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1.31. No virement relating to a specific financial year should be made after 31 March in that year.

1.32. Schools should adhere to the virement and budget carry forward rules contained within the Scheme of Devolved School Management.

1.33. Where an approved budget is a lump-sum budget or contingency intended for allocation during the year, its allocation will not be treated as a virement.

1.34. For capital budgets, and taking 5.2 above into consideration, the Council must approve any changes to the approved capital programme over £30,000.

1.35. For revenue budgets the Council must approve any new proposals that have revenue consequences.

6. ACCOUNTING

1.36. All accounts and accounting records of the Council will be compiled under the direction of the Head of Finance. The Head of Finance will exercise supervision over any records and financial systems maintained by other Services, particularly with regard to ensuring uniformity.

1.37. The Head of Finance is responsible for the Council’s statement of accounts which must be prepared in accordance with proper practices as set out in the Code of Practice on Local Authority Accounting in the United Kingdom: A Statement of Recommended Practice (the SORP) published by CIPFA and LASAAC.

1.38. The Head of Finance will draw up the timetable for final accounts preparation and will advise staff and external auditors accordingly. Chief Officers will comply with accounting guidance provided by the Head of Finance and will supply information when required.

1.39. The Head of Finance will prepare for audit and publish the draft statement of accounts by the statutory deadline for 30 June in each financial year. The draft accounts will be presented to the Performance and Audit Committee at the first available meeting following the 30 June.

1.40. The Head of Finance will present the audited statement of accounts to Council for approval at the first available meeting following completion of the annual audit (normally 30 September).

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SECTION C – CONTROL ARRANGEMENTS

7. DOCUMENT RETENTION

1.41. Chief Officers should ensure that arrangements are in place for the proper management of financial, legal and other documents and that these documents are retained in accordance with any specific statutory requirements, the requirements of the Data Protection Act, the Freedom of Information (Scotland) Act, and any approved Council and / or management policies and procedures.

1.42. The Head of Legal Services, following consultation with Internal Audit, will determine the retention periods for specific documents.

1.43. The recommended retention periods for records are summarised in Appendix 1. However in the case of externally funded projects, all documents relating to external grant funding must be retained until the final completion and audit of the relevant programme. It has been agreed with all relevant external bodies that invoices paid through the Creditors Section will be scanned and the paper copies destroyed.

1.44. Disposal of records should where practicable be carried out under controlled conditions by two persons, and an appropriate record should be completed, dated and signed by both as evidence.

1.45. The Head of Legal Services shall be responsible for the custody of securities, property deeds, etc.

8. ICT SECURITY (INFORMATION & COMMUNICATIONS TECHNOLOGY)

1.46. Officers should adhere to the Council’s ICT Security Policies issued by or on behalf of the Director of Corporate Development.

1.47. Officers must not write down or divulge their computer passwords to any other person, nor should passwords be shared between officers.

9. SEGREGATION OF DUTIES

1.48. No officer should have sole responsibility for any financial transaction.

1.49. Officers involved in calculating or recording any income due to the Council should not collect or process the related income.

1.50. Cash collection and cash accounting records should be examined and checked by a second officer.

1.51. It is best practice for the authorised signatory for invoices to be different to the authorised signatory signing the related order. If not then other appropriate controls, as approved by the appropriate Head of Service, should be in place.

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10. FOLLOWING THE PUBLIC POUND

1.52. Reference should be made to the Council’s Code of Guidance covering all matters pertaining to funding given to external organisations. It is anticipated that this Code will be reviewed and updated as necessary by the summer of 2006. There should also be compliance with the COSLA / Accounts Commission Guidance.

1.53. Where any external organisation receives significant funding, as defined in the COSLA / Accounts Commission Code of Practice on Following the Public Pound, it will be a condition of funding that Internal Audit have such rights of access to the organisation’s premises, records and staff as are necessary to form an opinion as to the adequacy of the organisation’s internal control arrangements.

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SECTION D – INCOME AND EXPENDITURE

11. INCOME

1.54. Chief Officers will at least annually, in consultation with the Head of Finance, review all scales of charges or tariffs relating to their Service.

1.55. Chief Officers are responsible for identifying all sources of income within their Service, for calculating the income due to the Council and for monitoring to ensure all income is received. Finance Services may assist Services in the collection and monitoring of income. No internal accounts worth £75 or less should be raised without the specific approval of the Head of Finance.

1.56. Chief Officers will promptly provide the Head of Finance with the details necessary to raise accounts for sums due to the Council.

1.57. All income received by an officer will immediately be acknowledged by the issue of an official receipt or other document approved by the Head of Finance. Exceptions to this rule may be permitted with the specific approval of the Head of Finance.

1.58. All receipts and other forms of stationery used to record income will be in a form approved by the Head of Finance. They should be treated as accountable stationery and will be ordered, controlled and issued under arrangements approved by the Head of Finance.

1.59. All money received by an officer on behalf of the Council must be paid in full and without delay into an official nominated bank account.

12. SUNDRY DEBT WRITE-OFF

1.60. Officers are referred to the Council’s Corporate Debt Policy for information on the procedures that must be adhered to in respect of all Council debtors.

13. PURCHASING OF GOODS AND SERVICES

1.61. Any officer who enters into an agreement for the supply of goods or services to the Council must ensure that the agreement complies with Contract Standing Orders.

1.62. All instructions, advice, guidelines etc. issued by the Council’s Procurement Manager must be adhered to at all times.

14. ORDERS FOR GOODS AND SERVICES

1.63. Official orders will be in a form approved by the Head of Finance. They should be treated as accountable stationery and will be ordered, controlled and issued under arrangements approved by the Head of Finance.

1.64. Official orders will be issued for all goods or services to be supplied to the Council.

1.65. No official order is necessary if purchasing cards or business credit cards are being used. However, appropriate controls over the issue of cards, authorisation limits and checking of statements sanctioned by the Head of Service must exist. The Head of Finance must

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also be satisfied with the control arrangements in place. Credit Card users must obtain receipts, both as an Internal Control and also to enable VAT. to be reclaimed.

1.66. Although traditional order forms do not apply to e-procurement, appropriate new controls must exist which should cover authorisation, ICT security and other checks prior to payment.

1.67. Orders must be given to the supplier in advance of any work, goods or services being provided to the Council. If a verbal order is given, this must be confirmed in writing as soon as possible and marked “confirmation order”. Exceptions can be approved by the Head of Finance. It is stressed that verbal orders should seldom be used. They should be the exception rather than the rule, and used only in genuine emergency situations.

1.68. All orders and internal requisitions (Accounts to be Rendered) to another Service will be signed by an authorised signatory. Internal Audit and the Services will maintain lists of such authorised signatories.

1.69. The officer authorising an order must be satisfied that:

the expenditure is legal and within the power of the Council;

there is sufficient budget provision (this must always take precedence);

best value has been achieved;

the timing of the order and the quantities ordered are appropriate;

the price, quantity, and details pertaining to delivery have been agreed;

the nature and quantity of goods or services to be supplied are clearly stated on the order;

a correct ledger code has been provided;

the order is within their authorisation limit;

the order in no way contravenes either the Financial Regulations or the Contract Standing Orders;

All instructions, guidelines, advice, and best practise advised by the Council’s Procurement Manager must be complied with.

15. PAYMENT FOR GOODS AND SERVICES

1.70. All payments, except those out of imprests (petty cash) and advances, will be by cheque or by the automated transfer of funds or by procurement via the internet, from the Council’s main bank accounts.

1.71. Any request for payment without a proper invoice must be supported by appropriate documentation signed by the authorised signatories who ordered the goods or services, and who approved the payment. This should seldom happen, and it should be noted that the Council is unable to reclaim VAT without a proper invoice. In any instance where it is necessary to make a payment to account, a proper invoice for the full amount must subsequently be obtained. Chief Officers will supply and update the Head of Finance with the names and specimen signatures of such authorised signatories.

1.72. All invoices must be certified by an authorised signatory. This will normally be by an appropriate authorised member of staff within the Service to which the payment pertains. Chief Officers and Internal Audit will maintain lists of such authorised signatories. In all

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cases, except those referred to in 14.2, the invoice must be agreed and attached to a copy of the order form, prior to submission for payment.

1.73. It is best practice for the authorised signatory of the invoice to be different from the authorised signatory signing the related purchase order. This is referred to in Financial Regulation number 9.4.

1.74. The officer certifying an invoice or other payment must be satisfied that:

the goods or services have been received, examined and approved;

the invoice price matches the purchase order price;

the arithmetic is correct including discounts, credits and VAT;

appropriate entries have been made in inventories or stock records;

the invoice is in the name of Clackmannanshire Council or an integral part of it;

the invoice is a proper liability of the Council;

the relevant expenditure has been properly incurred and is within the relevant provision subject to these Financial Regulations;

the invoice complies with the requirements of HM Customs and Excise, where VAT is involved (e.g. must have VAT number, proper address, and all other relevant details);

no charge for carriage has been added to the invoice if none was agreed at the time of the order.

1.75. Care must be taken not to make duplicate payments especially if the invoice is a fax, copy invoice, photocopied invoice or the documentation is a statement. In addition, particular care should be given to the requirement that the supplier must give a declaration that no payment has been made on the original invoice. Payment will only be made on a hard copy invoice with the wording “this is a true and certified copy”.

1.76. Prepaying for goods or services is strongly discouraged and should only be undertaken where the advantages clearly outweigh the inherent risks of potential non-delivery of goods or services, or of the supplier company ceasing to trade. In such instances Heads of Service must authorise the prepayment and must use judgement on what level of prepayment is appropriate given the circumstances of the case.

1.77. In all situations where discounts are available, care should be taken that the relevant time period is adhered to.

1.78. Certified invoices will be promptly input to the creditors payment system for payment. Lists of invoices which have been input by Services must be certified by an authorised signatory.

1.79. All payments must be made on time, to comply with the requirements of the Late Payment of Commercial Debts (Interest) Act 1998. This Act enables an organisation being paid at a date later than required to charge interest at the Bank of England Base Rate plus 8%. To avoid the possibility of such penalties, as well as potential damage to the Council’s reputation, all Services must do everything possible to ensure that all payments are made by the due date.

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16. SALARIES, WAGES, PENSIONS AND EXPENSE CLAIMS

1.80. The payment of all salaries, wages, pensions and other payments to officers or former officers of the Council will be made by the Head of Finance.

1.81. All documents which form the basis of a payment must be in a format approved by the Head of Finance.

1.82. All documents which form the basis of a payment must be certified by an authorised signatory as required. Chief Officers will supply and update the Head of Finance with the names and specimen signatures of such authorised signatories.

1.83. The certifying officer must be satisfied that:

Any payment conforms with approved terms and conditions for the employee concerned;

forms and claims have been completed accurately and are correct;

claims are not excessive or anomalous;

in the case of expense claims, journeys were necessary and authorised, expenses were properly and necessarily incurred and allowances were properly due. In addition, all receipts must be kept, both as verification and to enable VAT to be reclaimed. If receipts are not attached to the claim, the officer authorising it must obtain an acceptable explanation, and that must be written on the claim, prior to being signed by such officer;

in the case of overtime claims, the officer was authorised to work the additional hours and they were actually worked.

1.84. Chief Officers will notify the Head of Human Resources and the Head of Finance as soon as possible of all matters affecting the payment of officers.

1.85. Appointments of all officers and changes to grades will be made in accordance with approved establishments, grades and rates of pay and any procedures approved by the Head of Service and Head of Human Resources.

1.86. Chief Officers will have regard to the reasonableness of the amount of overtime worked and will ensure that the Working Time Directive is adhered to.

1.87. The re-imbursement of expenses must be in accordance with the Council’s approved scheme, and any Guidance issued by the Head of Finance. Claims may only be made in respect of expenditure that was actually incurred.

1.88. Claims should be submitted on a monthly basis with receipts attached. Claims submitted more than three months after the event will only be paid if authorised by the relevant Chief Officer and countersigned by the Head of Finance.

1.89. The Head of Human Resources and the Head of Finance will keep all Directors informed of changes to conditions of service, pension benefits and other relevant matters.

17. PAYMENTS TO COUNCILLORS

1.90. Payments to Councillors, including co-opted Councillors and Justices of the Peace, will be made by the Head of Finance or under arrangements approved by the Head of Finance. A properly completed standard claim form must be completed in accordance with:

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guidelines issued by the Council on Councillors Allowances;

Sections 46-49 (as amended) and any regulations made by the Scottish Ministers in terms of Section 50 of the Local Government (Scotland) Act 1973.

1.91. Councillors may claim travelling and subsistence allowances at the approved COSLA rates.

1.92. All claims for a financial year are to be submitted before the end of April in respect of the Financial Year Ending on 31 March (i.e. within one month of the Year End).

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SECTION E – ASSETS AND SECURITY

18. INVENTORIES

1.93. Chief Officers will make arrangements for inventory lists to be drawn up. The inventory should include office equipment, furnishings, plant and machinery and any other valuable property. A purchase price of £ 500 may be used to determine if an item should be included on an inventory list, however other factors such as attractiveness and portability should be taken into consideration.

1.94. For insurance purposes a copy of the inventory list should be kept off site.

1.95. Inventories should be kept up to date, with at least an annual check of all items. Any significant discrepancies should be reported to the Head of Finance.

1.96. Wherever practical, valuable property should be clearly marked as the property of the Council.

1.97. Council property should not be removed from Council premises, other than in the course of proper Council business, except with the specific authority of the relevant Head of Service.

1.98. The Head of Business Improvement & Technology Services and the Head of Finance should be consulted before disposing of any IT equipment. The disposal of other inventory items should be undertaken in accordance with Financial Regulation 19.2.

19. STOCKS AND STORES

1.99. Chief Officers are responsible for the control of their stocks and stores. They will ensure that:

stock is securely stored;

stock levels are maintained at the minimum level required to meet operational requirements;

stock records are sufficient and reliable taking into consideration the value and risk of the stock;

stocks are counted at least once per year and checked by a person independent of the day-to-day administration of the stock. The appropriate Manager or Supervisor will sign the Final Stock Certificate to confirm agreement with the Final Valuation;

Any surpluses or deficiencies found on stocktaking or at any other time are investigated and reported to the Manager within the Service, and, if material, to the Head of Finance.

1.100. All stock write-offs must be authorised in writing by a manager independent of the day-to-day administration of the stock. This in turn must be sanctioned in writing by the Head of Finance.

1.101. Any significant stock losses or write-offs should be reported to the Head of Finance.

1.102. Surplus stocks can be disposed of as follows:

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if the income realised is expected to be under £1,000, Chief Officers can authorise its disposal;

if over £1,000, dispose of by competitive tender, public auction or equivalent;

when appropriate, especially on electrical items, there should be some statement denying liability for anything that may go wrong with the item sold.

20. VEHICLES

1.103. The Fleet Manager is responsible for ensuring that all vehicles are maintained in a satisfactory state of repair, and will take action or issue advice to ensure that all legal and safety requirements are complied with. “Vehicles” includes all those owned, leased, hired by, or otherwise in the custody or control of the Council.

1.104. Each Chief Officer is responsible for the operation and control of vehicles in use within their Service and for compliance with any advice issued by the Fleet Manager.

1.105. Vehicles will only be used for the purposes of the Council, and by such persons and in such a manner as the Chief Officer directs.

1.106. No officer may take a vehicle home except on official stand-by duty unless the prior permission of the Chief Officer has been granted. Permission will only be given if use of the vehicle is essential for the conduct of Council business. The unofficial or unauthorised use of a vehicle including the carrying of unauthorised passengers is prohibited.

1.107. If any vehicle is involved in an accident, whether or not there is injury or damage, the person in charge of the vehicle at the time of the accident will complete an accident report on the standard form and forward it immediately to the Fleet Manager and to the Head of Finance. Where there is personal injury the Insurance Officer should also be notified.

1.108. All use of vehicles will be recorded in such logbooks as the Chief Officer, in consultation with the Fleet Manager, may require.

1.109. All vehicles surplus to the requirements of the Council will be disposed of by public auction, or by such other method as the Fleet Manager and the Head of Finance may jointly determine.

21. ASSETS

1.110. The Head of Finance will maintain a record of all vehicles, plant and equipment in an Asset Register. All assets will be valued and depreciated in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom. All Heads of Service will ensure that all purchases, sales, write-offs etc. of assets are promptly reported to the Head of Finance to ensure that the register can be updated on an ongoing basis.

22. ESTATES AND PROPERTY SECURITY

1.111. The Head of Property Services will maintain a register of all properties owned or leased by the Council recording the purpose for which held, location, extent and plan reference, purchase details, particulars or nature of interest and rents payable and particulars of any tenancies granted. All properties will be revalued periodically, to ensure that market

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values continue to be reflected, and in line with the Code of Practice on Local Authority Accounting in the United Kingdom.

1.112. The Head of Legal Services will have the custody of all title deeds under secure arrangements.

1.113. Each Chief Officer is responsible for maintaining proper security of all buildings, stocks, stores, furniture, equipment, cash, etc. under their control.

23. CASH SECURITY

1.114. Directors and Heads of Service will advise the Head of Finance of all changes in circumstances within the Service where cash is held or is otherwise under the control of officers of the Council. They will ensure that the minimum level of cash is held subject to the practicalities of individual circumstances. Cash should never be used in any instance where a purchase order can be raised, and the goods or services paid for in the normal way through the creditors. When cash is held, risk management and insurance implications must always be considered. Changes to the list of authorised signatories must be promptly notified to Internal Audit Section, where the central database is kept.

1.115. The transfer of cash or incoming cheques through the Cash Offices should be evidenced by a receipt or written record.

1.116. Authorised Officers are responsible for the security of safes and similar receptacles. Access should be limited and security should be as tight as is practical in the circumstances. A register of keyholders should be maintained and the loss of any key should be reported immediately to the relevant Chief Officer and to the Head of Finance.

1.117. All employees who may be required to receive or hold cash or property on behalf of the Council, and such other employees or groups of employees as Heads of Services may direct, will be furnished with an identity card bearing a photograph of the holder, and must produce the card to any person having reasonable grounds to know the identity of the holder.

1.118. All mail received by the Council should be opened in a secure area by two members of staff. In the case of mail opened that contains cash, cheques, postal orders, or any other form of payment, this should be recorded in a register. The amount of the payment, the date of payment, and details of who made the payment, should be noted. The signatures or initials of the two officials opening the mail should be written next to these details.

24. DATA PROTECTION ACT

1.119. Matters concerning the proper privacy and security of information held by officers (either manually or computer records) should be carried out in accordance with the Council’s Data Protection policy.

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SECTION F – INTERNAL AUDIT, RISK AND INSURANCE

25. INTERNAL AUDIT

1.120. The Head of Finance will make arrangements for a continuous and effective Internal Audit of the accounting, financial and other operations of the Council. The Internal Audit Charter (see Appendix 2) will define the role and responsibilities of Internal Audit.

1.121. The Chief Internal Auditor reports directly to the Head of Finance, but has the right where circumstances warrant it to report in her / his own name and without fear or favour to the Chief Executive and to all officers and members. In addition, the Chief Internal Auditor presents reports on relevant topics, including the Annual Audit Plan, The Annual Audit Review, and details of Strategic Plans, to the Performance and Audit Committee. The Chief Internal Auditor will also report summarised findings of Audit Reports and on implementation of agreed Internal Audit Findings. The Chief Internal Auditor has freedom of access at all times to all officers and members.

1.122. Chief Officers are responsible for ensuring that adequate internal control systems, both financial and non-financial, are in place and that Value for Money is achieved. Internal Audit’s role is to provide an independent check that satisfactory controls and procedures are in place.

1.123. Internal Audit will review and report on the adequacy and effectiveness of internal controls, and in particular:-

The safeguarding of assets;

The economic, efficient and effective use of resources;

The suitability and reliability of management information;

Compliance with the Standing Orders and Contract Standing Orders, The Financial Regulations, and any specific Service Procedures;

Compliance with Audit Scotland and CIPFA instructions and guidelines;

Compliance with Housing Benefit Legislation and with the Verification Framework;

Compliance with European Legislation (e.g. re Purchasing).

1.124. Internal Audit complies with the most recent update of the CIPFA Code of Practice for Internal Audit in Local Government in the United Kingdom.

1.125. Where Internal Audit write a report with recommendations, Chief Officers, should confirm in writing within the specified timescale the action taken, or give an explanation why no action will be taken. It should be clearly understood, that in all instances where no action is taken, for whatever reason, that management have taken on board the risk that arises from failure to implement an Internal Audit recommendation. This is in line with the principles of risk management and corporate governance.

1.126. Chief Officers are required to notify Internal Audit of all proposed changes to systems, or the establishment of new systems, where these have an impact on financial control.

1.127. All Officers and Members of the Council are required to promptly notify Internal Audit of all financial irregularities or of any circumstances that may suggest the possibility of irregularities.

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1.128. Any officer has the right to use the Council’s Policy on reporting serious concerns at work. This may include contacting either the Head of Finance or Chief Internal Auditor on any financial irregularity issue which gives them cause for concern.

26. RISK MANAGEMENT AND BUSINESS CONTINUITY

1.129. Chief Officers will ensure that appropriate Risk Management measures are taken within their Service. A Risk Management Plan will be drawn up and kept constantly updated. Heads of Service will maintain Risk Management Action Plans for their own areas and this will be co-ordinated through the Risk Management Group and the Corporate Management Team.

1.130. Chief Officers must have a comprehensive Business Continuity Plan(s) to cover all their operational activities and locations. Staff must be trained and the Plans must be tested annually.

1.131. Updated copies of Business Continuity Plans must be passed to the Emergency Planning Section, which will act in a corporate co-ordinating capacity for the Plans.

1.132. The Emergency Planning Section will maintain the Council’s Emergency Plan for dealing with emergencies affecting the public in the Clackmannanshire Council area. Chief Officers must assist with this plan, for example, by providing regular updated information.

27. INSURANCE

1.133. The Head of Finance will make appropriate insurance arrangements and will negotiate all claims via the Council’s Insurers.

1.134. Chief Officers will notify the Head of Finance promptly of any changes in properties, vehicles, equipment and other assets, any new or increased risks and any activities that might result in claims against the Council.

1.135. Chief Officers will immediately notify the Head of Finance in writing of any loss, liability or damage or any event likely to lead to a claim. Chief Officers will inform the Police where there is a legal liability to do so or where the Insurance Section has advised them to do so.

1.136. Chief Officers will notify the Head of Finance, Head of Legal Services and Head of Human Resources of all cases involving personal injury.

1.137. All appropriate officers of the Council will be included in suitable fidelity guarantee insurance.

1.138. Chief Officers will consult the Head of Finance and the Head of Legal Services regarding the terms of any indemnity that the Council is requested to give.

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SECTION G – BANKING, TREASURY AND CAPITAL INVESTMENT

28. BANKING ARRANGEMENTS AND CHEQUES

1.139. All arrangements with the Council's bankers, including indemnities, will be made by, or under arrangements approved by, the Head of Finance who is authorised to operate such bank accounts as may be considered necessary.

1.140. The Head of Finance will ensure that secure arrangements are in place for the ordering, storage and issue of pre-signed cheques.

1.141. Cheques drawn on the Council's main bank accounts will bear the facsimile signature of the Head of Finance or be signed by the Head of Finance or other officers formally authorised by the Head of Finance.

1.142. All arrangements for transfer, receipt, or payment using any form of automated bank transfer will be made by, or under arrangements approved by, the Head of Finance.

1.143. Personal cheques cannot be cashed out of money held on behalf of the Council or substituted for cash collected on behalf of the Council.

1.144. The Head of Finance shall ensure that banking services are put out to tender every five years.

1.145. All Council bank accounts, and other bank accounts operated by Council staff as part of their work with the Council, must be reconciled at least once a month.

29. TREASURY MANAGEMENT

1.146. This Council adopts CIPFA’s “Code of Practice for Treasury Management in Local Authorities”.

1.147. All borrowing and lending will be performed in the name of the Council.

1.148. All funds in the hands of the Council will be aggregated for the purposes of Treasury Management and will be under the control of the Head of Finance.

1.149. All executive decisions on borrowing, investment or financing shall be delegated to the Head of Finance, who will all be required to act in accordance with the CIPFA Code and in particular:-

all loans to the Council will be negotiated by the Head of Finance and wherever possible will be paid direct by the lender or his agent to the Council’s bank account;

all Council loan certificates will, prior to use, be in the custody of the Head of Finance and issued by him only when required for completion;

All heritable securities which are the property of or in the name of the Council and the title deeds of all property in its ownership will be held in custody of the Head of Legal Services;

Any trust funds will wherever possible be in the name of the Council.

1.150. The Council has adopted a Treasury Policy Statement. The Head of Finance will report to the Council as follows:

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an Annual Strategy at the commencement of each financial year;

an Annual Review of the Treasury function for presentation by at the end of each year.

1.151. The Head of Finance will be the Council's registrar of stocks, bonds and mortgages granted by the Council and will maintain records of all borrowing of money by the Council.

1.152. There will be no unlimited authorisation below Head of Service level, and no authorisation level below Head of Service level shall exceed £ 30,000.

30. THE PRUDENTIAL CODE

1.153. This Council adopts CIPFA’s Prudential Code for Capital Finance in Local Authorities.

1.154. The Head of Finance is responsible for ensuring that all matters required to be taken into account are reported to Council in line with the Code, and will monitor performance.

1.155. Before the start of each financial year the Head of Finance will prepare a report setting out the prudential indicators for the following three years. These will be based on the capital and revenue spending plans submitted for approval.

1.156. There will be no unlimited authorisation below Head of Service level, and no authorisation level below Head of Service level shall exceed £ 30,000.

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SECTION H – IMPRESTS, ADVANCES AND OTHER FUNDS

31. IMPRESTS / PETTY CASH

1.157. The Head of Finance will provide such imprests as considered appropriate for such Officers of the Council as may need them for the purposes of defraying petty cash and other expenses.

1.158. Where appropriate, the Head of Finance will open a bank account for use by the imprest holder who will not cause such account to be overdrawn. Bank accounts will not be opened by any Officer other than the Head of Finance.

1.159. Subject to the approval of the Head of Finance, Heads of Service may determine arrangements to enable minor items of expenditure, which are considered reasonable and appropriate by the Head of Finance, to be paid for Imprest Accounts. Such payments will be supported by receipted vouchers whenever possible.

1.160. No income received on behalf of the Council may be paid into an imprest account but must be banked or paid to the Authority as provided elsewhere in these Regulations.

1.161. An Officer responsible for an imprest will, when requested, provide the Head of Finance with a certificate as to the state of this imprest.

1.162. Officers will be personally responsible for imprests which they hold and on leaving the employment of the Council or otherwise ceasing to be entitled to hold an imprest, they shall account to the Head of Finance for the amount advanced.

1.163. Formal records of the imprests will be retained in the Service concerned for inspection.

1.164. All imprest accounts will be maintained in accordance with guidance notes issued by the Head of Finance.

1.165. Imprest or petty cash funds cannot be used for the reimbursement of staff travel, subsistence, or associated expenditure.

32. ADVANCES

1.166. An advance can be issued to an officer who is likely to incur substantial expenditure on behalf of the Council out of their own pocket. This practice is not intended for routine expense claims that should not involve substantial amounts of money and should cover only reasonably anticipated expenditure.

1.167. Advances will be issued and operated in accordance with detailed procedures issued by the Head of Finance.

33. INDEPENDENT FUNDS

1.168. Independent funds are those operated by Council officers by reason of their employment with the Council. Examples include school funds, donation accounts and The Community Chest.

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1.169. Funds should be operated in accordance with any specific guidance issued by the Head of Finance, and will be made available for examination by Internal Audit as and when requested.

1.170. Authorised Officials are responsible for:-

authorising the establishment of funds;

maintaining a register of all funds and bank accounts;

ensuring that proper books of account and other records are maintained and are always up to date;

ensuring all funds with their own bank accounts are audited annually;

Ensuring that any concerns are immediately notified to the appropriate Head of Service, and, if involving concerns over potential financial irregularity, to the Head of Finance or the Chief Internal Auditor.

1.171. All bank accounts, purchases, contracts etc must be in the name of the Council or, with the agreement of the Head of Finance, the name of the establishment (e.g. the school name). The establishment’s address must be used for all correspondence and for the delivery of all goods ordered and paid for from the account.

1.172. The Head of the Establishment is responsible for ensuring that income and expenditure are properly monitored and that accounts remain in credit at all times.

1.173. Independent Funds should be regarded as public money and therefore all purchases must comply with the Public Procurement Directive and other requirements on fair competition, best value etc.

34. CLIENT FUNDS

1.174. Any officer who, by reason of their employment with the Council, is responsible for the custody or management of cash or property belonging to a third party will employ standards of stewardship no less than those laid down elsewhere in these Regulations.

1.175. Officers will adhere to any guidance issued by their Head of Service.

1.176. Each officer will, if so required by the Head of Finance or by the Director / Head of the Service concerned, provide immediately a full account of all cash and property received from, or on behalf of a third party.

35. PROTECTION OF PRIVATE PROPERTY

1.177. Circumstances may arise where the Council is required to assume legal responsibility over the movable property of a third party. For example, a list of personal possessions left in an abandoned house or a client moving into care.

1.178. Chief Officers must prepare a detailed inventory of all such property. The inventory should be assessed for items of value or legal importance, and arrangements made for their safe custody and eventual disposal.

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36. TRUST FUNDS

1.179. Trust funds are money or other assets to be used for the purpose(s) specified in the trust deed. Trust funds are commonly used as a method of donating money for the benefit of a community or project, for example bequests from the public.

1.180. Trust funds and bequests will be operated under the directions of the Head of Finance and the Head of Legal Services.

1.181. A trust deed setting out the terms and conditions of the trust should be deposited with the Head of Legal Services.

1.182. Trustees are bound by the terms of the trust deed and trust legislation and when they have responsibility for cash or other assets should employ standards no less than those laid down elsewhere in these Regulations.

37. VARIATION OF FINANCIAL REGULATIONS

38.1 The Head of Finance shall be authorised to amend these Regulations as and when required, to take account of alterations in Financial Practice and Legislation. Such changes will be reported to Council.

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APPENDIX 1 - DOCUMENT RETENTION PERIODS

Type of Document Retention Period in Years(Including Current Year)

ContractsFinal Accounts of contracts executed under hand 6Final accounts of contracts executed under seal 12

Successful tenders 3 years after final paymentUnsuccessful tenders Retain until final payment is made

Creditor RecordsCopy orders 3Credit Notes 6Creditors Invoices 6Delivery Notes 3Imprest documentation (e.g. petty cash) 3Periodic payment records 6

Income RecordsCash Books 6Correspondence (income—but 6 years if re VAT) 3Debtors accounts (records non-current) 3Income posting slips and tabulations 3

Receipt books 3Record of receipt books issued 3Registrar’s quarterly returns 3Sales records 3

Miscellaneous RecordsCar Leasing and mileage records 6 years from end of leaseCar Loans 6 years from date of repaymentComputer system documentation 3

Inland revenue documentation 6Internal requisition (e.g. printing) 1

Inventory recordsLand searches 6Councillor allowances (Statutory registers) 6Minutes 3Postal Remittances registers 3Road fund licence records 3School meals records 3

Stock Lists 3Travel Claims 6Vehicle logs 3

Accountancy/FinancialAbstract of accounts 6

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Budgetary control records 6

Estimate working papers 3Financial ledgers 6Grant claim records 6Investment records 3Journals, etc. 6Leasing records 3Record re closing ledgers 6School Fund records 3

*VAT claims 6*VAT records 6Voluntary fund accounts 6

Bank Related RecordsBank Paying-In Books/Slips 6Bank reconciliation 6Bank Statements 6Cancelled Cheques 3Cheque Books and Counterfoils 6Cheque Lists (creditors/payrolls) 3Loan Records and Correspondence 3

Insurance RecordsExpired insurance contracts Retain indefinitelyInsurance claims (fire) 4Insurance claims (motor vehicles) 4Insurance claims (public/employer’s liability) 6Insurance Policy documentation Retain indefinitelyInsurance register Retain indefinitely

PayrollBACS amendments and output 3Building Society tabulations 3Copy payslips 6Correspondence 6FE Claims 6

6Life Certificates 3Monthly BACS listings 3NI file cashbook 3NI number changes 3Payroll adjustment documentation 6Part-time employees’ claim forms 6Pensions personal records Retain indefinitely

SSP records 4SSP variations 3Staff transfer records 6

Starters forms 2

* These records can be kept on microfiche or electronically if Customs and Excise are notified in writing.*

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Tax and NI records 6Tax Code notifications 3Teachers’ pension records Retain indefinitelyTimesheets 6Union documents (e.g. Subs, records) 3Weekly BACS listings 3

PersonnelPersonnel files (non-current) 3Staff Contracts (non-current) 6Unsuccessful applicants’ employment application forms 2

Purchasing, Partnership AgreementsHowever, reference should be made to Regulation 7.3, whereby Retention periods relating to Partnership Agreements must be as long as each individual programme states, if longer than the 6 years plus current year.

(at least seven years)

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APPENDIX 2 – INTERNAL AUDIT CHARTER

1. The purpose of the Internal Audit Charter a) The Council has adopted the Code of Practice for Internal Audit in Local Authorities in the

United Kingdom (referred to in this charter as “The CIPFA Code”) published in September 2003 by the Chartered Institute of Public Finance & Accountancy. One of the requirements if the Code is that the purpose, authority and responsibilities of Internal Audit should be formally defined by the authority. This Charter fulfils that requirement.

b) The Charter also fulfils a requirement in the Council’s Financial Regulations to define the role and responsibilities of Internal Audit.

c) The Charter sets out the role of Internal Audit within Clackmannanshire Council, the professional standards which will be maintained by Internal Audit staff, and the co-operation which should be given to Internal Audit by members and officers of the Council.

2. The Role of Internal Audit Within Clackmannanshire Council a) The role of Internal Audit is to provide an independent assessment of the standards of

internal control within the Council. Internal Audit will review each of the Council’s activities and will report on the extent to which exposure to risk, particularly but not exclusively financial risk, has been kept to an acceptable level by the application of appropriate controls.

b) Council managers are responsible individually and collectively for managing the risks associated with activities carried out under their direction. Where Internal Audit give advice or make recommendations with a view to reducing exposure to risks, managers may decline to accept these and may instead choose to accept any additional risks arising as a result.

3. Internal Audit’s Position Within the Council a) Internal Audit are part of the Finance Service and report through the Head of Finance to the

Director of Corporate Development.

b) The Chief Internal Auditor has the right to report directly to the Chief Executive, the Chair of the Performance & Audit Committee, the full Performance & Audit Committee or the full Council. Decisions as to whether the circumstances of a particular case merit such action will be entirely a matter for the professional judgement of the Chief Internal Auditor.

c) Internal Audit may provide advice, assistance or training to Services on internal control matters. This may include the carrying out of specific projects at the request of management or the participation in working groups, steering groups etc where these are examining matters which have a bearing on the Council’s control environment. Requests for assistance of this type will only be accepted if the Chief Internal Auditor is satisfied that this will not compromise Internal Audit’s ability to give an independent and objective opinion on controls within the same or other Services.

d) Senior Internal Audit staff may also take on responsibilities connected with the wider management of the Finance Service or the Council as a whole, provided that this does not detract from Internal Audit’s operational independence.

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4. The Scope of Internal Audit a) Internal Audit’s scope covers all activities of the Council including all sources of income and

all types of expenditure.

b) Where the Council enters into a partnership or joint working arrangement, whether the partner(s) be in the public or the private sector, Internal Audit have the right to examine the partnership’s records to the extent that this is necessary to safeguard the Council’s interests. As part of the partnership agreement, or as subsequently agreed between the Chief Internal Auditors of the partner organisations, it may be agreed that Internal Audit cover for the partnership will be provided by the Internal Audit section of one or other of the partner organisations.

c) Internal Audit may, at the request of the relevant Service Manager, review the operation of independent bodies with whom the Council has a significant involvement through the provision of funding or otherwise. Where Internal Audit’s right of access to the records of the organisation is not specified in the agreement between the Council and the organisation, the Service Manager will seek to obtain the organisation’s consent to allow Internal Audit to carry out the review. In carrying out any such review Internal Audit will at all times act in the interests of the Council, even where these may conflict with the interests of the organisation.

d) With the agreement of the Head of Finance and where permitted by law, the Chief Internal Auditor may agree to provide internal audit services to external organisations on the basis of full cost recovery. Such services will only be agreed where they can be carried out without compromising either the operational capacity or the independence of Internal Audit.

5. Internal Audit's Right of Access a) Internal audit staff will carry official identification and will show this on request to any officer

of the Council.

b) Internal Audit staff have the right of access to all Council premises, documents, computer records and personnel, at all times and without prior notice or appointment. On receipt of a request from the Chief Internal Auditor, Systems Administrators for any information system operated by the Council will provide designated Internal Audit staff with passwords and access rights which allow them to view, download and print off any information held within such a system.

c) Internal Audit may require any Council officer to produce for examination, without prior notice, any cash, accountable stationery, stocks or other property for which the officer is responsible.

d) Internal Audit’s right of access extends to all funds and other property listed under Section 32 of the Council’s Financial Regulations (Independent Funds).

e) All Council staff are required to co-operate fully with Internal Audit and to provide such explanations as may be necessary concerning any matter under examination. Wilful obstruction of Internal Audit work, and the deliberate or reckless provision of untrue or misleading information to Internal Audit, will be treated as disciplinary offences.

6. The Internal Audit Role in Respect of Theft, Fraud and Other Irregularities a) Managers are responsible for the prevention of fraud and irregularity within their Services.

Internal Audit’s role is to provide advice on internal controls which will contribute towards this objective, and to investigate cases where there are grounds to believe that fraud has taken place.

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b) All cases of suspected fraud, theft or other irregularity should be reported to Internal Audit immediately.

c) The Chief Internal Auditor will review all such reports and will decide whether a formal investigation is to be undertaken. The Chief Internal Auditor may consult with appropriate senior managers before reaching this decision but has the right where circumstances demand to carry out an investigation without reference to Service or corporate management.

d) In reporting the results of a fraud investigation Internal Audit will seek to advise senior management whether:-

fraud or other irregularity has occurred, and if so, its estimated scale;

there is sufficient evidence to instigate disciplinary proceedings in respect of any member of staff;

there are grounds for referring the matter to the Police;

improvements should be made to the internal controls in the area that has been investigated (regardless of whether or not fraud has been established);

there are grounds for believing that similar control weaknesses exist elsewhere in the Council.

7. Conduct of Internal Audit Work a) Internal Audit will plan, conduct and report on their work to a standard which complies with

accepted best practice. The Council has adopted CIPFA’s “Code of Practice for Internal Audit in Local Authorities in the United Kingdom” as the standard to be maintained.

b) Internal Audit will carry out their duties in a way which minimises disruption to Services, will give managers the opportunity to comment on areas of proposed work, and will ensure that management’s views are taken into account in the reporting of audit findings and recommendations. In particular:-

i. Service managers and Executive Team members will be invited to comment on proposed areas of audit coverage during the preparation of Internal Audit Strategic and Annual plans.

ii. Internal Audit will meet the managers of services which are about to be audited, to agree the terms of reference for the audit.

iii. As far as practical, Internal Audit assignments will be scheduled to avoid known peaks in workload or other critical times for the service being audited.

iv. Internal Audit will not make unreasonable demands on staff time where the audit objectives can reasonably be achieved by other means.

v. Internal Audit will respect the confidentiality of all information received during an audit, and will not disclose this to any other party other than through approved reporting procedures, except where this is necessary for the completion of the audit.

vi. Where Internal Audit staff are given access to financial or other systems of the Council (other than those which are generally available to other employees of the Council) they will use this access, and any information obtained as a result, only in connection with authorised Internal Audit activities.

vii. Before a final report is issued, service managers will be given the chance to comment on its factual accuracy, the validity of its conclusions and the appropriateness of recommendations.

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viii. Management will be invited to complete a short questionnaire giving their views on the conduct of each audit.

ix. Senior Internal Audit staff will be available to meet managers to discuss any concerns they have about the conduct of audits within their services.

8. Relationship With The Performance & Audit Committee a) The Chief Internal Auditor will submit reports to the Performance & Audit Committee, at

such intervals as the Committee may determine, on the following:-

i. An Assessment of Audit Needs which describes the resources, including the number of staff and their mix of skills, qualifications and experience, which the Chief Internal Auditor considers necessary to enable Internal Audit to discharge its responsibilities to the Council.

ii. A Strategic Plan which describes the main activities, systems and functions of the Council, assesses the risks associated with each of these, and outlines a programme of audit work designed to ensure that all areas receive appropriate audit coverage over the period of the Strategic Plan.

iii. An Annual Plan which sets out in more detail the Internal Audit work planned for the coming year.

iv. A report on completed Internal Audit assignments (i.e. those for which a final report has been issued) which includes an opinion on the adequacy of internal controls within each of the areas audited, and which advises members of any significant control weaknesses which still require to be addressed.

v. An update report on previous Internal Audit recommendations, highlighting any areas where a failure to implement agreed recommendations is giving cause for concern.

vi. A report showing progress against the current year’s Annual Plan and highlighting any significant changes to the Plan previously approved by the Committee.

vii. An Annual Report summarising the key findings of Internal Audit work during the year and comparing the performance on Internal Audit with previously agreed targets.

viii. An Annual Assurance Statement as required by current best practice.

b) Reports submitted by the Chief Internal Auditor will, so far as practical, be subject to the Council’s approved procedures for inclusion of reports on committee agendas. Where the Chief Internal Auditor has good reason to believe that this would compromise Internal Audit’s ability to discharge their responsibilities to the Council, s/he has the right to report directly to the Committee without prior reference to other officers of the Council.

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APPENDIX 3 - PREVENTION & DETECTION OF FRAUD & CORRUPTION

1. Introduction

a) Clackmannanshire Council expects the highest standards of honesty and integrity from its members, employees, service users and suppliers. The Council will not tolerate fraud or corruption in any circumstances.

b) This policy describes the measures the Council will take to prevent fraud and corruption from happening, and the action to be taken by anyone who suspects that they have occurred. It sets out the responsibilities of members, employees, managers and all those who deal with the Council.

c) The aims of the policy are:-

To minimise the risk of fraud and corruption.

To make sure that where fraud or corruption does happen it is quickly identified and investigated.

To allow appropriate disciplinary, civil or criminal action to be taken against any person who is guilty of fraud or corruption.

To protect innocent people from malicious accusations.

d) Benefit Fraud is statistically the single most prevalent fraud whose investigation is the responsibility of the Council. The powers to investigate and dispose of cases of benefit fraud are derived from the Secretary of State through the appointment of appropriately trained and qualified Counter Fraud Officers who are fully conversant with and capable of carrying out criminal investigations. For this reason it is necessary to have a separate policy covering benefit fraud and accordingly this policy does not apply to such cases.

2. Definitions

a) For the purposes of this policy fraud is any deliberate act of deception designed to induce any person or organisation to pay out money or to provide goods or services which would not have been provided, or would have been provided on less favourable terms, if the deception had not occurred.

b) Among the key elements of this definition are:-

Fraud involves a deliberate act. Genuine mistakes do not constitute fraud.

A person can be guilty of fraud even if they have no prospect of direct personal gain. For example, giving false information to obtain funding for a local organisation would be fraud, regardless of how worthy the organisation’s aims might be.

If the Council is satisfied that fraud has been committed, it will be open to us to pursue disciplinary action in respect of the employee and / or to recover any sums by way of a civil action, irrespective of whether a criminal conviction has been secured.

“Deception” includes the deliberate falsification of documents or computer records. Fraud can therefore be used to cover up other offences, for example by falsifying cash or stock records to conceal a theft.

It is possible for employees to commit fraud on behalf of the Council, for example by submitting false information on a grant claim in an attempt to obtain additional funding.

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c) Corruption is the offer, acceptance or seeking of any payment, gift, favour or other benefit in return for someone deliberately failing to perform their duties properly. Corruption can occur even if the person who directly benefits is different from the person who acts improperly – for example an employee who improperly awards a contract to a close relative may be guilty of corruption.

3. Prevention of Fraud and Corruption

a) The Council has adopted policies, procedures and rules which will help to prevent fraud and corruption. The most important of these are:-

Financial Regulations

Contract Standing Orders

National Code of Conduct for Councillors (issued by the Scottish Executive)

Code of Conduct for Council Employees (issued by COSLA)

Register of Gifts and Hospitality

The Council’s Personnel Policies and Procedures (in particular those relating to Recruitment, Selection, Staff Conduct and Discipline)

Procurement procedures (including Standard Terms & Conditions for Contracts)

Guidelines and procedures issued by the Head of Finance (for example on the payment of travel and subsistence expenses)

Operating procedures and instructions issued by Services

b) We expect all our members and employees to comply with both the letter and the spirit of these documents. Councillors and senior managers have a particular responsibility to set a good example by complying with approved procedures at all times.

c) All employees are responsible for making sure that they understand the parts of these documents which apply to their work.

d) Managers are responsible for making sure, as far as possible, that they only appoint people who can be trusted to act honestly and with integrity, and who will be able to carry out the responsibilities of their job. Managers are also responsible for making sure that all new employees receive appropriate induction which includes fraud awareness, and for making sure that all their staff receive appropriate training and support.

e) Employees in some jobs have a particularly important role to play in preventing fraud and corruption. Examples are employees who place orders or certify invoices, those who are responsible for conducting job interviews and appointing staff, those who negotiate contracts on behalf of the Council and those who regularly deal with cash or other valuable assets. Managers should make sure that these employees receive additional fraud awareness training so that they can recognise the warning signs that a fraud may be occurring.

4. Detecting and Investigating Possible Cases of Fraud and Corruption

a) The most likely ways in which the Council will become aware of frauds or attempted frauds are:

An employee, councillor or member of the public becomes suspicious and reports their suspicions to us;

Routine monitoring by management shows unexplained expenditure which is then investigated;

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Internal or External Audit find evidence of fraud or corruption during a routine audit.

b) In most large organisations, “tip offs” from employees or members of the public are the biggest single way that frauds are identified. We will actively encourage anyone who suspects that fraud or corruption is being committed to report their suspicions to us. The Public Interest Disclosure Act 1998 and the Council’s policy on Raising Concerns at Work (“Whistle Blowing”) give protection to employees who report cases of suspected criminal activity. This protection applies to all reports made in good faith, even if the suspicions turn out to be mistaken, but the Council’s policy also makes it clear that deliberately making false accusations is a disciplinary offence.

c) Managers should take seriously any suspicions raised by employees or members of the public, and should bear in mind that even the most unlikely of suspicions may have a basis in fact.

d) It is important that any initial inquires carried out by the manager do not prejudice any subsequent criminal and / or disciplinary investigation. For example:-

Potential culprits could become aware of the investigation and have an opportunity to destroy or tamper with evidence;

Other staff who become aware of the investigation could make assumptions as to guilt before investigations are concluded;

Time and effort may be spent on insignificant issues.

e) For these reasons managers should seek advice from colleagues in Internal Audit prior to carrying out any investigation.

f) The Chief Internal Auditor will examine all reports of suspected fraud or corruption and will decide whether a formal investigation is needed. The Head of Service and the Chief Internal Auditor may agree that an investigation will be done jointly by employees from both services. Any investigation will be done in accordance with appropriate professional standards and with Internal Audit’s own approved procedures.

g) At the end of the investigation Internal Audit will prepare a report for the senior management team of the relevant service and the Head of Finance. The report will address the following issues:-

whether on the basis of the evidence available Internal Audit are satisfied that there has been fraud or corruption and if so, an estimate of the monetary value;

whether on the basis of the evidence there is justification for referring the matter to the police.

5. Action to be Taken When Fraud or Corruption is Found

a) Where on the balance of the evidence the senior management team of the relevant service and the Head of Finance are satisfied that fraud or corruption has occurred the Council will, where appropriate, seek to:-

recover financial losses from those responsible;

take disciplinary action against those responsible;

have criminal charges brought against those responsible.

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Recovery of Losses

b) The Council’s policy will be to take appropriate action to recover all losses incurred as a result of fraud or corruption. This policy will be pursued even if the person committing the fraud had no prospect of any direct personal gain.

c) In this context the term “losses” includes, but is not restricted to:-

The full value of any money, goods or services;

Excess costs incurred, for example as a result of overcharging by a supplier;

All legal costs.

d) It is not necessary for the Council to have enough evidence to establish guilt “beyond reasonable doubt.” Legal Services will assess each case and will advise on whether there is sufficient evidence to support civil recovery action. In all cases where Legal Services advise that there is sufficient evidence, the Head of Finance will arrange for an invoice to be issued for the full amount due. Thereafter the debt will be pursued through the Council’s approved debt recovery procedures.

e) For amounts up to £100 where the Head of Service believes that in the circumstances of a particular case it would be unduly harsh to pursue the debt they should ask the Head of Finance not to raise the invoice. If the request is agreed by the Head of Finance the cost will be borne by the Service.

Disciplinary Action

f) Acts of fraud and corruption constitute gross misconduct and as such will be dealt with in accordance with the Council’s Disciplinary Policy and Procedures.

g) Disciplinary action may also be taken against any employee whose failure to perform their duties to a satisfactory standard has allowed a fraud to be committed, even if they had no knowledge of the fraud.

Reporting To The Police

h) The Public Interest Disclosure Act gives employees the right in certain circumstances to report suspicions of fraud directly to the Police. These rights are incorporated into the Council’s policy on Reporting Concerns at Work (“Whistle Blowing”). These rights are not affected by the current Fraud Policy.

i) The Council, its members and employees will co-operate fully with any police investigation into suspected criminal activity.

j) The Council will notify the Fraud Unit of Central Scotland Police of any cases where it may be appropriate to launch a criminal investigation. This notification will usually come from the Head of Finance after discussion with the Chief Internal Auditor and the Head of Administration & Legal Services.

k) In deciding whether to refer a matter to the police, the following matters will be taken into account:-

The amount and / or value of money or services involved;

The length of time over which the fraud was perpetrated;

The nature of the fraud;

The position of the member of staff in the organisation (for example, the degree of breach of trust involved);

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Advice from Legal Services;

Cost / benefit analysis;

The health and other relevant circumstances of the person;

Other mitigating or exacerbating circumstances.

l) The cost / benefit analysis will take account of the fact that the benefit arising from a successful prosecution (for example, in deterring others from attempting the same kind of fraud) may far outweigh the monetary value of the fraud. The possible costs to be borne by other agencies such as the Police or the Scottish Courts Service are matters for those agencies to consider and are not relevant factors in deciding whether the Council should report a matter to the Police.

6. Frauds Which Benefit the Council

a) Although most of the fraud covered by this policy will be committed against the Council, we recognise that there may be times when the Council benefits as a result of fraud. For example an employee may deliberately provide false information which is then used in grant claims or statutory returns, resulting in overpayments to the Council from central government or another funding agency.

b) The Council will not knowingly accept any payment or other benefit which has been based on false information. In all cases where we find that this has happened we will explain the circumstances to the organisation which provided the funding, and we will offer to repay the full amount.

c) It will be a disciplinary offence for any employee to provide information which they know or believe to be false in order to obtain additional funding for the Council. Any senior employee who uses their position of authority to ask another employee to provide false information will also be subject to disciplinary action which may lead to dismissal.

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APPENDIX 4 – BENEFITS SANCTIONS POLICY

1. Background

a) Clackmannanshire Council has a stated commitment to implement and maintain high legal, ethical and moral standards. In 2002 the Council established a policy to facilitate the development of procedures intended to assist in the investigation, prevention, detection and deterrence of fraud, specifically Welfare Benefit Fraud and to protect public finances from abuse.

b) Following recommendations from the Benefit Fraud Inspectorate, this document updates the previous policy to ensure compliance with changes in legislative and procedural practices that have occurred since 2002.

2. Scope of Policy

a) This policy applies to any irregularity, or suspected irregularity, involving any benefits administered by Clackmannanshire Council and / or the Department for Works and Pensions and other agencies. It provides details of sanctions available as a means of disposing of cases and the mechanism for applying them in benefit fraud cases.

b) Any investigative activity required will be conducted without regard to any person’s relationship to or with Clackmannanshire Council. This includes any suppliers, vendors, contractors, consultants or any other person who may have a relationship with the authority either as a consumer or provider of services to/with the Council.

3. Suspicion, Reporting and Confidentiality

a) Any detected or suspected cases of benefit fraud must be reported immediately to the Fraud Section currently located at 47 Drysdale Street, Alloa or the nearest Jobcentre-plus (Social Security) Office. Benefits and other Staff must use the appropriate electronic ‘Report of Suspected Fraud’ form. Any other reports may be submitted in writing, by phone / Fax or electronic mail.

b) Confidentiality will be maintained over reports made in good faith but which, following investigation, cannot be substantiated. No action will be taken against employees who make reports under this policy in good faith. Any person making a referral may request their identity remain anonymous. Such requests will be respected (this applies primarily to external sources).

c) Staff should not attempt to personally conduct investigations into cases of suspected fraud, except for the gathering of sufficient information to allow an investigation to proceed. The Fraud Manager is the Council’s appointed Authorised Officer for the purposes of the various Social Security acts. A Fraud Interview is specialist in nature and will only be carried out by an appropriately trained and designated Fraud Officer.

d) Council employees have a duty to their employer to report cases where they suspect fraud may have taken or is taking place, (this applies equally to other fraud as it does to benefit fraud). Anyone who knowingly allows or participates in the perpetration of a fraudulent benefit claim may find themselves the subject of a fraud investigation and / or disciplinary action.

e) The results of or progress with investigations will be disclosed only to those people who have a legitimate need to know. This may include Auditors, management and staff in other external agencies, such as the Department for Works and Pensions, Her Majesty’s

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Revenues and Customs etc. This ‘legitimate need to know’ is crucial to avoid damaging the reputations of persons suspected but subsequently found innocent of wrongful conduct. Information in the course of an investigation will only be disclosed in accordance with data protection legislation.

4. Investigation Responsibilities

a) The Revenue Services Manager has primary responsibility for the proper administration of all Housing & Council Tax Benefits.

b) The Fraud Manager has primary responsibility for benefits security and the investigation of all cases of suspected benefit fraud. The Fraud Manager is appointed under the Social Security act 1992 by the Secretary of State as an ‘Authorised Officer’ to conduct relevant and necessary investigations to obtain information that may assist in an investigation.

c) The Fraud Section may from time-to-time call upon other members of staff to assist in an investigation. If called upon by the Fraud Manager or other Investigation staff for assistance, the Council expects staff to comply with such requests. This includes relevant and necessary information gathering such as examination of files.

d) If called upon the Fraud Manager / Section will provide support / advice and assistance to other internal / external departments and / or agencies on specific fraud related issues and investigations.

e) When conducting criminal investigations, Investigators will obtain evidence to establish a reasonable basis for any recommendation required. No opinion will be expressed regarding the guilt or innocence of any person or any party.

f) When conducting criminal investigations, Investigation staff will at all times have regard to the law. In particular the Fraud Manager will ensure that the various Social Security acts and laws, Housing Benefit and Council Tax Benefit Regulations, the Data Protection Act and the Human Rights Act, are not breached.

5. Sanctions

a) Any person who, on balance of probability or on their own admission, has been instrumental in the perpetration of a fraudulent benefit claim, may be the subject of a ‘sanction’ through the offering of an Administrative Caution, Administrative Penalty (Admin Penalty) or, where the fraud is regarded as more serious, be the subject of a report to the Procurator Fiscal with a view to prosecution.

Administrative Cautions

b) A Caution is a means of disposing of cases where the value of the fraud is not so great as to consider some other form of sanction. As a guideline, a Caution should apply in all cases of benefit fraud where the overpayment of benefit exceeds £200.

c) Cautions may be offered in those cases where the fraud is of a minor nature or in cases where the Fraud Manager considers the public interest would be best served by the application of a caution.

d) An Administrative Caution interview may only be carried out by the Fraud Manager or appropriately trained and designated other officer of sufficient seniority as to ensure recipients of the Caution are adequately informed of the gravity of their offence and the consequences of repeated similar offences.

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e) In all cases where a caution is applicable the person to whom the caution applies must have admitted their offence under caution and agreed to accept an administrative caution. If a person refuses a caution, the matter should be referred to the Procurator Fiscal.

Administrative Penalties

f) The legislation governing the use of penalties is contained in section 115A of the Social Security Administration Act 1992, as inserted by section 15 of the Social Security Administration (Fraud) Act 1997 and the Social Security (Penalty Notice) Regulations 1997.

g) An Administrative Penalty is the offer to a person to agree to pay a financial penalty if that person, by act or omission, has caused benefit to be overpaid to them. A person may be offered the choice of agreeing to pay an administrative penalty as an alternative to the matter being reported to the Procurator Fiscal, but without prejudice to any other action deemed appropriate in the circumstances.

h) The decision to offer an administrative penalty is made on behalf of the Secretary of State. There is no right of appeal against the decision nor can the person ask the Secretary of State to review the amount of the penalty that is prescribed in the legislation.

i) The Amount of any penalty is 30% (rounded down to the nearest penny) of the gross adjudicated overpayment of benefit that the person has received falsely. A single penalty can only be applied for the overpayment of a single benefit and needs to be sufficiently significant to act as a deterrent.

j) There is no requirement for the person to admit to an offence before an administrative penalty can be offered. However, an administrative penalty can only be offered where there are sufficient grounds for reporting the matter to the Procurator Fiscal with a view to instituting criminal proceedings in respect of the overpaid benefit.

k) Prior to the offer of an administrative penalty, the Fraud Manager will ensure that sufficient evidence is gathered so that in the event of a penalty being refused, the case may be advanced to the Procurator Fiscal.

6. Conditions That Will Normally Apply In Penalties Cases The gravity of the offence is not so serious that it should be considered for

prosecution at the outset.

An interview under caution (IUC) has been conducted by an appropriately designated Fraud Officer and the allegation(s) put to the person to establish / confirm that an offence has been committed by the person and to provide evidence for the purpose of referring the matter to the Procurator Fiscal if required, unless the person fails to keep a maximum of 4 appointments for an IUC.

If the person fails to attend an IUC as above, the Fraud Manager will refer the file and associated documents to the Procurator Fiscal should this be necessary.

There are grounds to refer the matter to the Procurator Fiscal for consideration to proceed towards criminal proceedings.

The case is considered by the Fraud Manager appropriate to be recommended for criminal proceedings.

The person has been notified of the decision to recover an overpayment and of their appeal rights on the amount and recoverability of the overpayment.

The above list is not exhaustive, and each case will be considered individually.

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7. Reporting Cases to the Procurator Fiscal

a) In certain circumstances it will be necessary to consider reporting cases to the Procurator Fiscal.

b) At all times, regard will be given to the following;

The amount of benefit the person has received falsely

The length of time a fraudulent claim has been made

Repeat offences

The claimant’s health

Other unspecified circumstances such as a recent family bereavement.

c) The types of cases where reporting to the Procurator Fiscal will be the preferred option are listed below. The list is indicative and not exclusive or exhaustive; each case will be judged on its own merit, balancing aggravating factors with any mitigation:-

The gross overpayment is substantial. As a national guide, the DSS advise that overpayments of £1,500.00 or more should be considered for reporting from the outset.

The person has declined the offer of an administrative caution or penalty or has withdrawn their agreement to pay an administrative penalty. All such cases should be reported to the Procurator Fiscal.

The fraud has continued over an extended period, for example 6 months or more.

The fraud was ‘calculated & deliberate’ for example the claimant planned the fraud from the outset by making a false statement on a new or repeat claim form.

The person has previously been convicted of Social Security Fraud.

The person was / is in a position of trust, e.g. member of staff.

The case has arisen from a collusive employer investigation, except where the fraud is of a very ‘minor’ nature.

d) Cases for prosecution will be referred by the Fraud Manager through the Specialist Reporting Agencies secure website.

e) The Fraud Manager will ensure all cases submitted for consideration of prosecution contain sufficient evidence to allow the matter to progress without undue delay. Each file will contain appropriate and case specific documentation and evidence along with any other pertinent material.

f) The Fraud Section will maintain detailed and accurate records of the verdict in each prosecution case, in order to meet statutory and audit requirements.

g) An employee who is the subject of or may have information that can assist an investigation is expected by the Council to co-operate in the investigation into any alleged offence.

h) If an employee is found guilty of benefit fraud, the Fraud Manager will advise the Head of Human Resources, the Chief Internal Auditor and the employee’s line manager respectively of the outcome of the case and of the sentence passed by the court. These in turn will decide what action, if any, should be taken.

i) If an elected member is convicted of benefit fraud, the outcome of the case will be passed to the Chief Executive and the Council’s Monitoring Officer.

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8. Conclusion

a) The Benefit Fraud Cautions, Administrative Penalties & Prosecution Policy reinforces the Council’s commitment to tackle the problem of benefit fraud in a robust but fair-handed manner. It is designed to meet the requirements of the ‘Good Practice’ guidelines issued by the Benefit Fraud Inspectorate.

b) This amended policy ensures the council is committed to protecting the public purse against unwarranted and illegal activities thereby reinforcing its determination to uphold the highest moral, ethical & legal standards.

c) The policy is created to avoid doubt about what action the authority will take against those claimants who purposely and often systematically commit fraud within the welfare benefits systems.

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