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Financial Handbook for Schools Hertfordshire County CouncilTable of Contents Page i April 2003

FINANCIAL HANDBOOK FOR SCHOOLSTABLE OF CONTENTS

INTRODUCTION iACKNOWLEDGEMENTS iGLOSSARY OF TERMS AND ABBREVIATIONS v

PART I SCHOOLS AND THE LEA’S FINANCIAL FRAMEWORK 1

PART II SCHEME FOR FINANCING SCHOOLS 6Section 1 Introduction 7Section 2 Financial Requirements: Audit 11Section 3 Instalments of Budget Share: Banking 19

arrangements 19Section 4 The treatment of surpluses and deficit balances 22

arising in relation to budget sharesSection 5 Income 24Section 6 The charging of school budget shares 26Section 7 Taxation 29Section 8 The provision of facilities and services by the 30

Authority 30Section 9 Private and Public Partnership projects 32Section 10 Insurance 33Section 11 Miscellaneous 34Section 12 Former grant maintained schools’ balances 38Section 13 Responsibility for repairs and maintenance 39Section 14 Power to provide community facilities 40

Annex A Schools to which the Scheme will apply 48Annex B Responsibility for repairs and maintenance 56Annex C Approved banks and building societies 68Annex D National Westminster Bank: pooling 70

arrangements for schools 70Annex E Health and Safety 72Annex F DfES Statement on Best Value and schools 5Annex G Fees to be deducted from teachers’ salaries and

remitted to the General Teaching Council forEngland

Glossary To The Scheme For Financing Schools 9

Financial Handbook for Schools Hertfordshire County CouncilTable of Contents Page ii April 2003

PART III FINANCIAL REGULATIONSSection 1 Financial management and internal control 3Section 2 Financial planning and budget monitoring 4Section 3 Financial reporting to the authority and parents 6Section 4 Audit, inspection and financial records 7Section 5 Control of assets and security 9Section 6 Banking arrangements and cash holdings 12Section 7 Private and voluntary funds 15Section 8 Capital 16Section 9 Purchasing strategies, leasing and Best Value 17Section 10 Ordering of goods and services and payment of accounts 18Section 11 Income 21Section 12 Value Added Tax 23Section 13 Personnel and payroll 23Section 14 Construction Industry Scheme 25

PART IV GUIDANCE

SECTION 1 FINANCIAL MANAGEMENT AND INTERNALCONTROL

Contacts 33

Financial management1.1 Introduction 351.2 Governing Body responsibilities 351.3 Register of Business Interests 361.4 Whistleblowing 361.5 Delegation of Governing Body responsibilities 371.6 Template for a Schedule of Financial Delegation 38

Internal control1.7 Introduction 441.8 Financial control features 451.9 Formal allocation of responsibilities 451.10 Organisation 461.11 Segregation of duties 461.12 Personnel 471.13 Authorisation and supervision 481.14 Secure and effective systems 481.15 Documentation 481.16 Arithmetical and accounting accuracy 49

Appendix A Guidance notes on Register of Business Interests 51

Financial Handbook for Schools Hertfordshire County CouncilTable of Contents Page iii April 2003

SECTION 2 FINANCIAL PLANNING AND BUDGETMONITORING

Contacts 57

Financial planning2.1 Introduction 592.2 Financial planning in the medium term 592.3 Benchmarking and Management Information 602.4 Annual budget preparation 61

2.4.1 Budget approval 612.4.2 Registration of budget holders 612.4.3 Budget preparation timetable 61

Budget Monitoring2.5 Introduction 632.6 Timetable

632.7 Monitoring Process 64

2.7.1 Profiling the budget 642.7.2 Recording income, expenditure and commitments 642.7.3 Format of budget monitoring reports 652.7.4 Reviewing budget monitoring reports 652.7.5 Variances 662.7.6 Correcting variances 672.7.7 Recording budget monitoring activity 69

SECTION 3 FINANCIAL REPORTING TO THE AUTHORITY ANDPARENTS

Contacts 72

Financial Reporting to the Authority3.1 Introduction 743.2 Financial returns and formula funding data 743.3 Timetable for submission of financial returns 75

Financial Reporting to Parents3.4 Introduction 753.5 Governing Body eport 753.6 Statutory content 763.7 Discretionary content 763.8 Statutory requirements 77

Financial Handbook for Schools Hertfordshire County CouncilTable of Contents Page iv April 2003

Appendix A Approved Annual Budget Return andBest Value Statement 78

Appendix B Quarterly Returns and Revised ForecastStatement 84

Appendix C End of Year Statement of Accounts 98

SECTION 4 AUDIT AND INSPECTION REQUIREMENTSAND FINANCIAL RECORDS

Contacts 115

Audit and Inspection4.1 Audit and Inspection requirements 1174.2 Internal Audit standards 1174.3 Financial records 1184.4 Controlled financial stationery 118

4.4.1 Controls over cheque stationery 1194.5 Funding the Internal and External Audits 1204.6 Internal Audit – intervals and scope 1204.7 Internal Audit Report and Recommendations 1204.8 External Audit 1214.9 Office for Standards in Education (Ofsted) inspections 121

Retention and Disposal of Financial Records4.10 Legal requirements 1224.11 What financial records must be retained 1224.12 How long to keep records 122

Appendix A Controlled finance stationery 125available to schools 125

Appendix B Scope of thes school internal audit 127

SECTION 5 CONTROL OF ASSETS AND SECURITY

Contacts 134

Control of Assets 1365.1 Introduction 1365.2 Responsibilities 1365.3 Inventories 136

5.3.1 Content of the Inventory 1375.3.2 Completing the Inventory 137

5.4 Stock control record 1385.5 Keys 1385.6 Disposals 139

Financial Handbook for Schools Hertfordshire County CouncilTable of Contents Page v April 2003

Insurance5.7 Introduction 1395.8 Cover provided by the Authority 1395.9 Optional extensions of cover 1425.10 Governors’ liabilities and insurance of governors 144

The Data Protection Act 1998 1445.11 Introduction 1445.12 The Data Protection Act 1998 1455.13 Obligations under the Data Protection Act 1998 1455.14 Use of Personal Data 1475.15 Notification 148

5.15.1 Notifying for the first time 1485.15.2 Renewing your school’s notification 1485.15.3 Penalties for non-notification 148

5.16 Definition of Terms 1485.17 Code of Practice for CCTV Systems 1495.18 Fair Processing Notices 1505.19 Further advice and guidance 150

Computer Systems And Security of Data5.20 Security and control of data 151

5.20.1 Networks 1515.20.2 Backups 1515.20.3 Viruses 1525.20.4 Passwords 1525.20.5 Preventing snooping 1535.20.6 Preventing theft at work 1545.20.7 Keeping laptops safe 1545.20.8 Disposal of unwanted IT equipment 155

Appendix A Inventory 156Appendix B Stock Record Card 158Appendix C Sample Disposals Policy 159Appendix D Sample Form for external insurer’s confirmation of cover 163

SECTION 6 BANKING ARRANGEMENTS AND CASH HOLDINGS

Contacts 167

Banking Arrangements6.1 Introduction 1686.2 Internal controls and separation of duties 1686.3 Banking arrangements for County Council funds 1696.4 Pooled banking arrangements 1696.5 Transfer of School Budget Share 1706.6 Interest deduction 170

Financial Handbook for Schools Hertfordshire County CouncilTable of Contents Page vi April 2003

6.7 Eligible expenditure from the school’s bank accountholding public funds 172

6.8 Governors as authorised signatories 1726.9 Overdrafts and borrowings 1736.10 Banking services for schools 173

6.10.1 Business cards 1736.10.2 Banking courier service 1736.10.3 Cheque stationery 173

6.11 Insurance cover 173

Cash Holdings6.12 Management of petty cash 175

Appendix A Bank charges for schools within thepooled banking arrangements 176

Appendix B Change of authorised signatory forms for schoolswithin the pooled banking arrangements 178

Appendix C Business Card 183Appendix D Banking Courier Service 193

SECTION 7 PRIVATE AND VOLUNTARY FUNDS

Contacts 197

7.1 Introduction 1997.2 Public and private funds 1997.3 Internal Audit coverage 2007.4 Other accounts 200

Appendix A Tests to determine eligible expenditure 203

SECTION 8 CAPITAL EXPENDITURE

Contacts 207

8.1 Introduction 2098.2 Sources of funding for capital projects 2098.3 Definition of capital expenditure 2108.4 Notification of capital works 2118.5 Commissioning and undertaking capital works 2118.6 Construction Industry Scheme (CIS) 2118.7 Value Added Tax and Voluntary Aided schools 2128.8 Financial administration 213

Financial Handbook for Schools Hertfordshire County CouncilTable of Contents Page vii April 2003

Appendix A Guidance notes for financial administrationof capital projects 215

Appendix B Schools Loan Scheme 219

SECTION 9 PURCHASING STRATEGIES, LEASING ANDBEST VALUE

Contacts 225

Purchasing Strategies9.1 Introduction 2279.2 Purchasing goods and services 2279.3 Responsibility for purchasing 2289.4 Process for purchasing 2289.5 Organisation 2299.6 Purchasing strategy 2299.7 Specifications 2309.8 Choosing the provider 2309.9 Delivery and monitoring 2329.10 Review 232

Leasing of Equipment9.11 Introduction 2339.12 Definition of a 'Lease' 2339.13 Types of lease 2339.14 Controls on leases 2349.15 Operating leases 2349.16 Lease costs 2359.17 Lease arrangements through County Supplies 2359.18 Schools Loan Scheme 2359.19 Photocopier Contracts 236

Best Value9.20 Best Value 2369.21 Applicability by schools 2369.22 Management implications 2369.23 Best Value guides 237

Appendix A Purchasing conditions and guidelines 239Appendix B Code Of Purchasing Practice 243Appendix C Photocopier contracts 247Appendix D Purchasing of electricity and gas 251

Financial Handbook for Schools Hertfordshire County CouncilTable of Contents Page viii April 2003

SECTION 10 ORDERING OF GOODS AND SERVICES ANDPAYMENT OF ACCOUNTS

Contacts 256

10.1 Introduction 25810.2 Orders for goods and services 25810.3 Ordering via the Internet 26010.4 Payment of accounts 26010.5 Payment of accounts via ITNET Accounts Payable 26110.6 Payment of Headteachers’ expenses 26110.7 Recording the transactions in the accounts 26210.8 Separation of duties 262

Appendix A Sample pro forma invoice 264Appendix B Guidance notes on completion of

A529 And A14 Forms 266

SECTION 11 INCOME

Contacts 273

11.1 Introduction 27511.2 Security of cash holdings 27511.3 Collection and banking of school income 27511.4 Income records 27611.5 Collection and banking of income on behalf of County Council 27611.6 Hirings income 27711.7 School meals and milk 27711.8 Banking intact 27711.9 VAT on taxable goods and services 27811.10 Debt recovery 27811.11 Writing off debts 27911.12 Charging and Remissions 280

11.12.1Voluntary contributions 28011.12.2Residential trips 28011.12.3Instrumental music lessons 28111.12.4Public examinations 28111.12.5Transportation costs 281

Appendix A Income Record Sheets 283Appendix B Guidance for educational visits and journeys 285Appendix C The County Council's Charging and Remissions Policy 289

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SECTION 12 VALUE ADDED TAX

Contacts 293

12.1 Introduction 29512.2 General notes 29512.3 Categories of VAT 29512.4 Special treatment of local authorities 29612.5 Input and Output Tax 29712.6 Penalties and interest 29712.7 Recovery of VAT on purchases 29712.8 Documentation required to recover VAT 29812.9 Purchases made from donated funds 29812.10 Income 30012.11 Calculation of VAT in gross amounts 30112.12 Liaison with Customs and Excise 30112.13 VAT on School Fund (Private) Accounts 301

Appendix A Examples of VAT tax invoices 304Appendix B VAT - Specific Issues 308

SECTION 13 PERSONNEL AND PAYROLL

Contacts 331

13.1 Introduction 33313.2 Payroll process 33313.3 Employment status of persons engaged by the school 33413.4 Taxable expenses and benefits in kind 33413.5 Authorised signatories 33513.6 Inland Revenue 33513.7 Review of payroll reports 33613.8 Inland Revenue concession for payments to performers,

guest lecturers and speakers 33613.9 Payroll provider 33613.10 Information and returns required from schools with

external payroll arrangements 337

Appendix A Employed or self-employed? 342Appendix B General agreement with the Inland Revenue on

payment to performers, guest lecturers andspeakers, Etc. 350

Appendix C Guidelines for schools’ travel and subsistence expenses 352Appendix D Authorised signatory Listing 369Appendix E Requirements for a payroll provider 371Appendix F Monthly and annual returns required from schools

with external payroll arrangements 373

Financial Handbook for Schools Hertfordshire County CouncilTable of Contents Page x April 2003

SECTION 14 CONSTRUCTION INDUSTRY SCHEME (CIS)

Contacts 380

14.1 Introduction 38214.2 How does the scheme work? 38214.3 What is a subcontractor? 38314.4 What is a contract? 38314.5 What are construction operations? 38314.6 When can payment be made? 38314.7 When should the deduction be made? 38414.8 Should the deduction be made from the whole payment? 38414.9 County Council arrangements 38414.10 CIS certificates 38514.11 Executive summary 38614.12 CIS and Voluntary Aided schools 386

Appendix A Definitions of Construction 389

Financial Handbook for Schools Hertfordshire County CouncilTable of Contents Page i April 2003

INTRODUCTION

The Financial Handbook for Schools (“the Handbook”) contains key documents setting outthe financial relationship and financial management requirements between the Authority andits schools. This Handbook applies to all community, voluntary, foundation and specialschools maintained by the Authority.

The Handbook is divided into four parts:

PART I: Schools and the LEA’sFinancial Framework

Sets out the delegation of powers fromthe Finance Director to the AssistantDirector (Resources) of ChildrenSchools & Families of HertfordshireCounty Council to the GoverningBodies of schools.

PART II: Scheme for Financing Schools Sets out the financial relationshipbetween the Authority and maintainedschools. It contains requirementsrelating to financial management andassociated issues, binding on both theAuthority and on schools.

PART III: Financial Regulations Provides the regulatory frameworkwithin which the financial affairs ofschools operate.

PART IV: Guidance Provides information and practicalguidance to enable schools to fulfil theirfinancial responsibilities.

The Handbook is written in plain English, however, the use of some technical terms isunavoidable and a glossary of terms and abbreviations has been provided.

Material within the Handbook will be reviewed annually and revised text will be circulated asnecessary.

Further copies of the Handbook are available from School Funding Unit on 01992 555722.

Comments and suggestions for improving the Handbook are welcomed. Please providedetails on the form overleaf or, alternatively, e:mail Lyn Stainton [email protected].

Financial Handbook for Schools Hertfordshire County CouncilTable of Contents Page ii April 2003

Financial Handbook for Schools Hertfordshire County CouncilTable of Contents Page iii April 2003

FINANCIAL HANDBOOK FOR SCHOOLS

Please use this form to make suggestions for improving the Handbook.

Please return to: Lyn StaintonSchool Funding UnitResources DivisionCounty HallHertford SG13 8DF

e-mail: [email protected]

Contact: Telephone No:

School Name\Department: School No:

Financial Handbook for Schools Hertfordshire County CouncilAcknowledgements Page iv July 2001

ACKNOWLEDGEMENTS

This Handbook has been compiled using and reproducing materials from:

• The County Council’s Financial Regulations, Standing Orders, Purchasing Conditions andGuidelines, Code of Purchasing Practice and A Finance Guide for Managers

• Ofsted and The Audit Commission’s publications Keeping your Balance and Getting theBest from Your Budget

• Department for Education and Skills Rainbow Pack

and additional material relevant to the financial administration of schools.

Financial Handbook for Schools Hertfordshire County CouncilGlossary Page v Issue 3 : April 2003

GLOSSARY OF TERMS AND ABBREVIATIONS

TERMS AND DEFINITIONS

Asset register (See Inventory)

Audit (External) Checks by auditors appointed by the Audit Commissionfor Local Authorities in England and Wales

Audit (Internal) Checks by auditors from within HCC

Authorised signatories Formal list of the school's employees who the Governorshave agreed may sign cheques (with stated financiallimits), or authorise payments through ITNET(Hertfordshire County Council's accounts payable agent)

Banking courier service Collectors of monies from schools. Details of theservice may be found in Part IV, Section 6

Best Value statement A formal Governing Body statement that the school'sbudgets reflect the principles of the Best Value regime

Business card Special charge credit card issued by HCC's bankers. SeePart IV, Section 6

Business supplies Formal definition of goods and services which attractvarying VAT rates, some being specifically varied forschools. See Part IV, Section 12 for further information

Capita Capita Education Services – an education servicesprovider. In Hertfordshire their services include supportof management information. Nationally, they administerteachers’ pensions.

Capital expenditure Spending on the acquisition, enhancement orreplacement of buildings and the acquisition, renewal orreplacement of plant, machinery and major items ofequipment

Central BuyingConsortium

Bulk buyers of goods. Their rates for photocopiers areparticularly competitive

Charging and remissionspolicy

County Council and schools policy for charging andremitting certain charges to pupils

Financial Handbook for Schools Hertfordshire County CouncilGlossary Page vi Issue 3 : April 2003

Chief Financial Officer now Finance Director

Climate Change Levy A government tax imposed on electricity and gas bills.Foundation, Voluntary Aided and Voluntary Controlledschools are exempt from payment subject to thecompletion and return of the appropriate form. SeeSection 9, Appendix D.

Code of purchasingpractice

The precepts of purchasing procedures, set out in detail inPart IV, Section 9

Community school A category of school defined by the School Standards andFramework Act 1998: Maintained School. LEAresponsible for staffing, ownership of land and buildingsand admission arrangements.

Consortia Groups of schools coming together to buy goods at morecompetitive prices than a single school could achieve

Construction IndustryScheme (CIS)

Inland Revenue tax deduction scheme for theConstruction Industry

Contract Officer A person appointed by the Finance Director to handlepurchasing contract matters

Curriculum trip A journey made by pupils for the furtherance of theNational Curriculum

Data users Those who use personal data (as defined by the DataProtection Act). See Part IV, Section 5

Earmarked funding Money allocated by the Authority separate from theschool budget share, to be spent only for the purposespecified by the Authority. Year end reporting required

Education ForumulaSpending Share

Amount of DfES funding provided for education

Fair Funding The principles governing the financing of maintainedschools

Fidelity guarantee Insurance protecting schools against the loss of money orproperty arising from dishonesty of school employees

Financial Handbook for Schools Hertfordshire County CouncilGlossary Page vii Issue 3 : April 2003

Finance Director (previously Chief Financial Officer) - has overallresponsibility for financial administration of CountyCouncil’s finances

Finance Committee A subgroup of the Governing Body

Finance Planner The Authority’s software program to facilitate a school'sbudget planning

Formula Funding data Information on the characteristics of a school used todetermine its annual budget share

Foundation School A category of school defined by the School Standards andFramework Act 1998: Maintained School. GoverningBody responsible for staffing and admissionarrangements. Ownership of land and buildings may beresponsibility of either Governing Body or Trustees

General Account Bank account for official County Council Funds

HCC Loan Scheme A system of loans towards capital expenditure availableto schools within the pooled banking arrangements

Input tax VAT paid on purchases

Internal control Controls set up within a school by governors andHeadteachers to ensure that all systems and proceduresare working efficiently

Inventory Also called Asset Register. A record of all assets andtheir details. See Part IV, Section 5 for items to beincluded and importance of inventory

Lease purchase A hire purchase arrangement under which, at the end ofan agreed period, the goods become the property of thelessee

Lease rental Another name for finance lease. A type of hire purchasearrangement under which, at the end of an agreed period,the goods remain the property of the lessor, but canusually be purchased by the lessee for a reduced agreedperiod, the goods become the property of the lessee

Non-business supplies Formal definition of goods and services which attractvarying VAT rates, some being specifically varied forschools. See Part IV, Section 12

Financial Handbook for Schools Hertfordshire County CouncilGlossary Page viii Issue 3 : April 2003

Operating lease The same as a lease rental, but at the end of the agreedperiod the goods can only be bought by the lessee onpayment of the full market value

Output tax VAT added to invoices for sales (of goods or services).See Part IV, Section 12

Pooled BankingArrangements

An arrangement between the Authority and NationalWestminster Bank to treat the bank balances of allschools within the pooled arrangements as part of theCounty Council’s overall bank balance.

Register of businessinterests

A record of the Governors' and staff's financial interestsoutside the school which might possibly conflict with theschool's interests

Section 52 – BudgetStatement

Document providing details of LEA budget for educationdetailing amounts delegated to schools. This documentis available for both schools and the public

Section 52-OutturnStatement

Document providing details of LEA and schools spendingfor education. This document is available for bothschools and the public

Schedule of charge fortaxation

Part of tax law under which a particular type of income ischargeable. For example, the self-employed are liableunder Schedule D; employees under Schedule E. Thereare further Schedules applicable to income outside thescope of this guidance.

Schedule of delegation A record of the tasks and responsibilities within a schoolwhich are passed from the Governing Body to theHeadteacher, and from the Headteacher to the staff.

School DevelopmentPlan

The overall statement of the school's aims and objectives.All activities, purchases, sales and other procedures mustfit within the financial and other aims of this plan

Tax exemptioncertificate

Documentary proof that a subcontractor is properlyentitled to be paid under the CIS

Financial Handbook for Schools Hertfordshire County CouncilGlossary Page ix Issue 3 : April 2003

VAT rates The varying rates of VAT are defined in Part IV,Section 12

Virement Moving funding from one budget to another

Voluntary Aided School A category of school defined by the School Standardsand Framework Act 1998: Maintained School.Governing Body responsible for staffing and admissionarrangements. Ownership of land and buildings may beresponsibility of Governing Body or Trustees

Voluntary ControlledSchool

A category of school defined by the School Standardsand Framework Act: Maintained School. LEAresponsible for staffing and admission arrangements.Ownership of land and buildings may be theresponsibility of Governing Body or Trustees

Financial Handbook for Schools Hertfordshire County CouncilGlossary Page x Issue 3 : April 2003

ABBREVIATIONS AND ACRONYMS

A Level Advanced level qualificationABR Approved budget return – school’s summary of intended budget

spendingAFM (see APS)AMG Annual maintenance grantAMP Asset management plan – describes the condition, suitability and

sufficiency of school premisesAPS Amey Property Services (formerly AFM)– outsourced company doing

work previously done by HCC Property DepartmentAS Level Advanced supplementary level qualificationAST Advanced skills teacherATL Association of Teachers and Lecturers – a trades unionAVCs Additional voluntary (pensions) contributionsAWPU Age weighted pupil unit – factor in pupil-led formula funding

BACS Bankers’ automated clearance systemBISCUIT Business information system for central units to support internal

trading – the system that supports trading units with schoolsBS British standardBV Best value

C & E Customs & ExciseCCT Compulsory competitive tendering – re contractsCCTV Closed circuit televisionCD Compact discCFR Consistent Financial ReportingCEO Chief Education Officer – statutory role which is the Director of

Children, Schools and Families within HertfordshireCFO Chief Financial Officer (now Finance Director)CFR Consistent Financial ReportingCFU Central Finance Unit – within Resources division of CSFChRIS Child related information systemCIPFA Chartered Institute of Public Finance Accountancy – professional

accountancy bodyCIS Construction Industry Scheme – for taxation purposesCoSHH Control of substances hazardous to healthCP Child protectionCSF Children, Schools & Families Department – incorporates former

Education Department and parts of former Social Services DepartmentCSCS County Supplies & Contract Services – a department within HCC

DfEE Department for Education & Employment (now DfES)DfES Department for Education & Skills (formerly DfEE)

Financial Handbook for Schools Hertfordshire County CouncilGlossary Page xi Issue 3 : April 2003

EBD Emotional & behavioural difficulties – type of SENEDI Electronic Data InterchangeEDP Education development planEEC European Economic CommunityELP Early learning plan – scheme of 2 admission dates for nursery pupilsESC Education Support CentreEPF Earmarked Pupil FundingEWT Equivalent whole time

FAQ Frequently Asked QuestionsFAS Funding Agency for Schools – re GM schools; no longer in operationFD Finance Director (formerly Chief Financial Officer)FE Forms of entryFLA Foreign Language AssistantFMS6 Financial Management Systems, version 6FSM Free school mealsFSS Financial Services for Schools – part of the School Funding UnitFTE Full time equivalent – staffingFUG Finance User Group – refer to the School Funding UnitFUN Finance User Network – refer to the School Funding Unit

GCSE General Certificate of Secondary Education – qualificationGM Grant Maintained schools – now either Foundation, VA or CommunityGNVQ General National Vocational Qualification

H&S Health & Safety – refer to Property Unit of Resources DivisionHASSH Hertfordshire Association of Secondary HeadteachersHCC Hertfordshire County CouncilHEADLAMP Headteachers Leadership and Management ProgrammeHGfL Hertfordshire Grid for LearningHI Hearing impaired – type of SENHMI Her Majesty’s InspectorHSE Health & Safety Executive

IB International Baccalaureate – a qualificationICT Information & Communications TechnologyINSET In-service education and trainingISAS In-school accounting service – provided by FSSISB Individual schools budgetISR Individual School RangeISO International Standards OrganisationIT Information TechnologyITNET ITNET Managed Services – outsourced payroll and IT functions

JCC Joint Consultative CommitteeJM Junior mixed school

Financial Handbook for Schools Hertfordshire County CouncilGlossary Page xii Issue 3 : April 2003

JMI Junior mixed and infants school

KPI Key Performance IndicatorsKS Key stage

LEA Local education authorityLFM Local financial managementLLSC Local Learning Skills CouncilLMNS Local management of nursery schoolsLMS Local management of schoolsLMSS Local management of special schoolsLRM4/5 Local Resources Management version 4/5 – schools accounting systemLSA Learning Support AssistantLSB Local schools budgetLSC Learning and Skills Council – a body which has replaced the TEC, and

funds Post-16 education in schoolsLWA London Weighting Allowance

MECSS Minority Ethnic Curriculum Support Service – part of SchoolStandards & Curriculum division

MFL Modern foreign languageMIU Management Information Unit – part of Resources divisionMLD Moderate learning difficulties – type of SENMPLS Multi-professional local service – within CSF structureMSA Midday supervisory assistant – a “dinner lady”

NAGM National Association of Governors and ManagersNAHT National Association of HeadteachersNAS/UWT National Association of Schoolmasters/Union of Women TeachersNC National CurriculumNDS New Deal for SchoolsNGfL National Grid for LearningNIC National Insurance contributionsNJC National Joint CouncilNNEB National Nursery Examination BoardNOF New Opportunities FundNOR Numbers on roll, i.e. pupil numbersNPQH National Professional Qualification for HeadshipNQT Newly qualified teacherNSSEN Non-statemented special educational needsNVQ National Vocational QualificationNTL National Telecommunications Ltd – schools service provider for NGfLNUT National Union of Teachers

OfSTED Office for Standards in Education

Financial Handbook for Schools Hertfordshire County CouncilGlossary Page xiii Issue 3 : April 2003

PANDA Performance and Assessment dataPAT Professional Association of TeachersPAYE Pay as you earn – taxationPDRS Primary Dinner Register SystemPE Physical education – see also PTPFI Private Finance InitiativePGCE Post-graduate Certificate in EducationPH Physically handicappedPHF Primary Heads ForumPI Physically impaired – type of SENPICSI Pre-inspection context and school indicatorPLASC Pupil Level Annual School CensusPNI Physical and neurological impairment – type of SENPNSU Permanent non-school usePPA Pre-school Playgroups AssociationPPP Public & Private PartnershipPRC Premature retirement compensationPRU Pupil Referral Unit – now referred to as Education Support CentrePSE Personal & social educationPT Physical trainingPTA Parent Teacher AssociationPTR Pupil : teacher ratio

QCA Qualifications & Curriculum Authority

R&M Repairs and maintenanceRE Religious educationRoA Record of AchievementRSA Royal Society of ArtsRSG Rates Support GrantRTG Real Terms Guarantee

S122 Section 122 – Statement of Education Budget and ExpenditureS&L Speech and language difficultiesS&S Supplies and servicesSACRE Standing Advisory Council on Religious EducationSATs Standard Assessment TasksSCAA School Curriculum & Assessment AuthoritySCC Schools Causing ConcernSCP Scale point for staffingSDA School development adviserSDP School development planSFU School Funding UnitSEN Special educational needsSENCO SEN co-ordinatorSHA Secondary Heads Association

Financial Handbook for Schools Hertfordshire County CouncilGlossary Page xiv Issue 3 : April 2003

SIAS School Improvement & Advisory ServiceSIMS Schools information management system – accounting systemSITSS Schools IT Systems Support – part of Resources divisionSLA Service level agreementSLD Severe learning difficulties – type of SENSLS Schools Library ServiceSMASH School meals administrative system for HertfordshireSMP Statutory Maternity PaySpLD Specific learning difficulty – type of SENSRB Single Regeneration BudgetSSA Standard Spending AssessmentSSA Senior supervisory assistantSSFA School Standards & Framework (the legislation behind Fair Funding)SSC School Standards & Curriculum – division within CSFSSP Statutory sick pay

TEC Training & Enterprise Council – now Learning and Skills CouncilTES Times Educational Supplement – weekly education-focused newspaperTP Teachers Pensions (previous TPA Teachers Pensions Agency)TSF The Standards Fund – series of grants funded by DfES and LEA

UPN Unique pupil number

VA Voluntary aided – ownership of school premisesVAT Value added taxVC Voluntary controlled – ownership of school premisesVDU Visual display unitVFM Value for moneyVI Visually impaired – type of SEN

ZIP A means of storing back-up computer data

Financial Handbook for Schools Hertfordshire County CouncilPart I: Schools and the LEA's Financial Framework Page 1 RESO3514: April 2003

PART I SCHOOLS AND THE LEA’S FINANCIALFRAMEWORK

Schools are funded from public funds and are, therefore, bound by the same obligations as theCounty Council and any other public body for the proper stewardship of and accountabilityfor public funds.

Local management has significant implications for the way in which school budgets aremanaged, and hence how the Finance Director of the County Council discharges his statutoryand general duties. It does not in any way reduce the duties of the Finance Director nor is itinconsistent with those duties. Therefore, the Finance Director still retains ultimateresponsibility for ensuring compliance with statutory and other financial requirements.

To meet his responsibilities, the Finance Director will:

• determine and maintain a regulatory framework, consistent with his statutory dutiesfor the stewardship of public money

• determine and maintain a system of financial reporting to the Authority, to ensure thatpublic funds are properly accounted for

• monitor schools' financial performance and, in the case of schools at risk, activate acorrective or recovery programme.

Further, LEAs are required to adopt a monitoring role towards schools. LEAs exercise littledirect, detailed control over the bulk of spending in schools but have a vital overallresponsibility to implement effective arrangements for the control and proper use of publicfunds.

There are a number of key areas where the LEA has a lead function. It will:

• determine the total resources available to schools• establish and manage the Scheme for Financing Schools and funding formulae• in conjunction with the Finance Director set out the financial control environment

within which Governing Bodies must operate• operate sanctions, including withdrawal of delegation, where appropriate• support Governing Bodies with professional advice and guidance

This Handbook sets out the framework of responsibility and accountability for GoverningBodies and school staff and the general conditions applying to delegation of public funds. Italso provides guidance to support schools in implementing and maintaining robust financialprocedures and systems to ensure compliance with the County Council's FinancialRegulations.


Roles and Responsibilities and Delegation of Powers

The County Council's Financial Regulations are intended to clarify responsibilities forparticular functions and provide a framework within which decisions are made. Where thereare specific statutory powers and duties, the Financial Regulations seek to ensure compliancewith, as well as reflecting best professional practices and the decisions of the County Council.

The Financial Regulations complement various County Council general regulations and applyto the Governing Body of all maintained schools covered by the Scheme for FinancingSchools. They also apply to Headteachers and all others to whom functions may be delegated.The Financial Regulations include sensible measures of internal control and as such representa minimum standard. Governing Bodies are required to act in accordance with all of theCounty Council's regulations but can tailor specific provisions as long as the minimumstandards are met.

The Finance Director

The Finance Director (“FD”) is the financial adviser to the County Council.

The FD is required by Section 151 of the Local Government Act 1972 to secure properfinancial management of the Authority’s affairs. The FD is therefore responsible for decidingthe Authority’s accounting procedures, systems, and the form of its accounts and supportingrecords.

Under the Accounts and Audit Regulations 2003 the FD must produce an Annual Reportdetailing the Authority’s income and expenditure and its assets and liabilities. This is thensubject to examination by the Authority’s external auditors. This duty encompasses allmaintained schools and creates the need for schools to make returns and supply otherinformation for this purpose. Under the Accounts and Audit Regulations, the FD needs toensure that the accounting systems are observed and that the accounts and supporting recordsare kept up to date.

Under Section 114 of the Local Government Finance Act 1988 the FD is required to stop andreport to the Authority:

• any items of unlawful expenditure• any item which would cause a loss to the Authority• any situation where the Authority’s total expenditure seems likely to exceed the

resources available to meet it.

When such a report is made, the FD will send a copy to the County Council’s externalauditors and to each member of the County Council.

In order to comply with these duties, the FD and any staff to whom he has delegated powersshall be provided with any information required and shall have access todocuments and records for this purpose.


The Assistant Director (Resources) and Board of Governors

The FD has delegated power in relation to schools to the Assistant Director (Resources) andreference elsewhere in this Handbook reflects this delegation, and further delegations togetherwith any reporting requirements on exercising such.

The Assistant Director (Resources) in turn, delegates power to Governing Bodies. They, inexercising their delegated financial responsibilities, must confirm and document these in aschedule of delegation. This schedule sets out the responsibilities of each party, and furtherdelegations.

Subject to any statutory limitation, the Board of Governors can delegate their powers andduties to committees or the Headteacher. Where this is done, ultimate responsibility remainswith the Governing Body as a whole.

External Audit and the Audit Commission

Schools are subject to external audit by auditors appointed by the Audit Commission forLocal Authorities in England and Wales. The current external auditors to HertfordshireCounty Council are the District Audit Service.

The District Audit Service has direct responsibilities to the County Council, to the localtaxpayers and to the public at large. It operates to a strict Code of Practice that outlines itsresponsibilities in matters of legality, regularity and best value.

The external auditor’s powers to obtain documents and information are conferred by Section16 of the Local Government Finance Act 1982 as amended by the Local Government Act1988. This provides that the external auditor:

• shall have a right of access at all reasonable times to all such documents relating to thebody whose accounts are under audit as appear necessary for the purpose of theauditor’s functions under the 1982 Act

• is entitled to require from any person holding or accountable for any such documentsuch information and explanation as the auditor thinks necessary for the purpose of theauditor’s functions under the 1982 Act

• may require any such person to attend in person to give information or explanation orto produce any such document

• is entitled to require any officer or member of the body whose accounts are under auditto provide such information and explanations as appear necessary for the purposes ofthe auditor’s functions under the Act

• may require any such officer or member to attend in person to give the information orexplanation.


Her Majesty’s Chief Inspector of Schools

The School Inspection Act 1996 requires the “efficiency with which the financial resourcesmade available to schools are managed” are to be inspected under the arrangements set out byHer Majesty’s Chief Inspector of Schools in the Framework for Inspection of Schools.

The inspection of financial administration, as opposed to the wider aspects of efficientresource management, will be reported within the section on school management andadministration.

Judgements about the efficiency of financial control will be based on a self-reportingquestionnaire. In this, the Headteacher of a school can summarise the school’s currentpractice in financial administration and how it applies best value principles in its managementand use of resources. The judgements will also consider a copy of the most recent auditor’sreport. The information from the Headteacher will be validated by the inspectors' first-handevidence gained when reviewing the school’s procedures during the course of theirinspection.

The Governing Body and the Headteacher should consider and respond promptly to anyrecommendations made by inspectors. The Headteacher should also notify the registeredinspector of any suspected irregularity.

The Internal Audit Service

The Accounts and Audit Regulations 2003 require all local authorities to maintain anadequate and effective system of internal audit. Any officer of member of the authority mustprovide such documents, information and explanation, as the authority considers necessary forthat purpose.

The main role of Internal Audit is:

• to inspect regularly accounts of schools with delegated budgets as set out in the SchoolStandards 7 Framework Act 1998; the inspection is made in terms of the accuracy ofthe financial records kept and the adequacy of systems and controls in relation to thefinancial procedures at a school

• to review the arrangements for delegation and the management of a school's delegatedbudget

• to ensure that management arrangements exist to minimise the opportunity for fraudand to detect the results of any significant fraud

• to report findings to the Headteachers and Chair of Governors, makingrecommendations for improvement where appropriate.

Financial Handbook for Schools Hertfordshire County CouncilPart II: Scheme for Financing Schools Page 6 RESO3515 – Issue 3 : April 2003Contents

PART II SCHEME FOR FINANCING SCHOOLS

CONTENTSPage

Section 1 Introduction 7Section 2 Financial requirements: Audit 11Section 3 Instalments of budget share: Banking arrangements 19Section 4 The treatment of surpluses and deficit balances arising in 22

relation to budget sharesSection 5 Income 24Section 6 The charging of school budget shares 26Section 7 Taxation 29Section 8 The provision of services and facilities by the Authority 30Section 9 Private and Public Partnership projects 32Section 10 Insurance 33Section 11 Miscellaneous 34Section 12 Former grant maintained schools’ balances 38Section 13 Responsibility for repairs and maintenance 39Section 14 Power to provide community facilities 40

ANNEX

A Schools to which the Scheme will apply 48

B Division of responsibility for building and grounds 56maintenance between the Authority and schools

C Approved banks and building societies 68

D National Westminster Bank 70pooling arrangements for schools

E Health and Safety 72

F DfES Statement on Best Value and schools 5

G Fees to be deducted from teachers’ salaries andremitted to the General Teaching Council for England 7

Glossary to the Scheme for Financing Schools 9

7Financial Handbook for Schools Hertfordshire County CouncilPart II: Scheme for Financing Schools Page 7 RESO3515 – Issue 3 : April 2003Annex G: Fees to be deducted from teachers’

salaries and remitted to the GeneralTeaching Council for England

SECTION 1 INTRODUCTION

1.1 The Funding Framework

The funding framework that replaces Local Management of Schools is based on thelegislative provisions in sections 45-53 of the School Standards and Framework Act 1998.

Under this legislation, local education authorities determine for themselves the size of theirSchools Budget and LEA Budget – although the Secretary of State has power to require anLEA to increase its Schools Budget to a prescribed level. The categories of expenditurewhich fall within the two budgets are prescribed under regulations made by the Secretary ofState, but included within the two, taken together, is all expenditure, direct and indirect, on anAuthority’s maintained schools.

Local authorities may retain funding for purposes defined in regulations made by theSecretary of State under section 45a of the Act. The amounts to be retained centrally aredecided by the Authority concerned, subject to any limits or conditions prescribed by theSecretary of State. The balance of the Schools Budget left after deduction of centrallyretained funds is termed the Individual Schools Budget (ISB). Expenditure items in the LEAbudget must be retained centrally (although earmarked allocations may be made to schools).Local education authorities may retain an unallocated reserve within the ISB, but mustotherwise distribute the ISB amongst their maintained schools using a formula which accordswith regulations made by the Secretary of State, and enables the calculation of a budget sharefor each maintained school. This budget share is then delegated to the governing body of theschool concerned, unless the school is a new school which has not yet received a delegatedbudget, or the right to a delegated budget has been suspended in accordance with section 51of the Act. The financial controls within which delegation works are set out in a schememade by the Authority in accordance with section 48 of the Act and approved by theSecretary of State. All revisions to the scheme must also be approved by the Secretary ofState, who has power to modify schemes or impose one.

Subject to provisions of the scheme, governing bodies of schools may spend budget shares forthe purposes of their school. They may also spend budget shares on any additional purposesprescribed by the Secretary of State in regulations made under Section 50.

The Authority may suspend a school's right to a delegated budget if the provisions of theschool financing scheme (or rules applied by the scheme) have been substantially orpersistently breached, or if the budget share has not been managed satisfactorily. There is aright of appeal to the Secretary of State. A school's right to a delegated budget share may alsobe suspended for other reasons (section 17 of the School Standards and Framework Act1998), but in that case there is no right of appeal.

Each Authority is obliged to publish each year a statement setting out details of its plannedSchools Budget and LEA Budget, showing the amounts to be centrally retained, the budget



share for each school, the formula used to calculate those budget shares, and the detailedcalculation for each school. After each financial year the Authority must publish a statementshowing out-turn expenditure at both central level and for each school, and the balances heldin respect of each school.

The detailed publication requirements for financial statements and for schemes are set out inregulations, but each school must receive a copy of the scheme and any amendment, and eachyear's budget and out-turn statements so far as they relate to that school or centralexpenditure.

Full details of the formula and centrally retained expenditure will be published in the Section52 Budget Statement, annually by 31 March.

1.2 The role of the scheme

The scheme is founded on seven principles:

• Raising standards in schools• Self-management for schools• Clear accountability of both LEA and school• Transparency of school finances• Opportunity for schools to take greater responsibility for management decisions• Equity between the new categories of community, voluntary and foundation schools• Value for money for schools and the LEA The scheme sets out the financial relationship between the Authority and the maintainedschools that it funds. It contains requirements relating to financial management andassociated issues, binding on both the Authority and on schools. 1.2.1 Application of the scheme to the Authority and maintained schools The scheme applies to all community, voluntary, foundation, community special and

foundation special schools maintained by the Authority. A list of all schools coveredby the scheme is shown at Annex A.

New maintained schools will be covered by the scheme by virtue of section 48 of the

Act. 1.2.2 Responsibility of the governing body

All governing bodies have full responsibility for the management of the school'sbudget and for the appointment and dismissal of teaching and non-teaching staff,taking into account the professional advice of the Director of Children, Schools &Families and the headteacher.



Governing bodies are required:

• to spend their budgets in a manner which is consistent with the implementationof the National Curriculum; with the statutory requirements relating to thecurriculum as a whole, including religious education and worship;

• to operate an effective and efficient education service within the strategicframework set by the Authority for the benefit of their pupils;

• to operate within their budget share;• to meet the actual cost of all expenditure from their delegated budget.

The Authority will issue documents of instruction, advice and guidance, and will

otherwise provide support to governing bodies and headteachers to assist them in theexercise of their responsibilities, including advice on personnel and employmentissues. In particular, schools are referred to the documents listed in paragraph 11.10.

1.3 Publication of the scheme A copy of the scheme will be supplied to the headteacher and to the governing body of eachschool covered by the scheme, and any approved revisions will be notified to each suchschool. 1.4 Revision of the scheme Any proposed revisions to the scheme will be the subject of consultation with schools andwill require approval by the Secretary of State. 1.5 Delegation of powers to the headteacher The governing body is required to consider the extent to which it wishes to delegate itsfinancial powers to the headteacher, and to record its decision (and any revisions) in theminutes of the governing body. There are some powers that should not be delegated, inparticular approval of the annual budget. Further information on this is set out in Part IVSection 1 of Financial Handbook for Schools. Such decisions by the governing body will besubject to any requirements of regulations to be made under section 38 of the Act, andSchedule 11 thereto. 1.6 Maintenance of Schools The Local Education Authority is responsible for maintaining the schools covered by thescheme, and this includes the duty of defraying all the expenses of maintaining them (exceptin the case of a voluntary aided school where some of the expenses are, by statute, payable by



the governing body). Part of the way an Authority maintains schools is through the fundingsystem put in place under sections 45 to 53 of the School Standards and Framework Act 1998.

Financial Handbook for Schools Hertfordshire County Council Part II: Scheme for Financing Schools Page 11 RESO3515 - Issue 3: April 2003 Section 2: Financial requirements: audit

SECTION 2 FINANCIAL REQUIREMENTS: AUDIT 2.1.1 Application of financial controls to schools

Schools are required to abide in the management of their delegated budgets by theAuthority's requirements on financial controls and monitoring, not only those in theScheme but also those contained in the publications set out in section 11.10. In theevent of serious or persistent non-compliance, the Authority would exercise its right towithdraw delegation.

2.1.2 Provision of financial information and reports

Schools are required to provide the Authority each quarter with details of anticipatedand actual expenditure and income, at times determined by the Authority.

Current arrangements for the format of reports and the timetable for returns are set outin Part IV, Section 3 of the Financial Handbook for Schools. The Authority provides and supports software that allows forms to be processedautomatically in a required format.

2.1.3 Payment of salaries; payment of bills

All salaries, wages, fees and other remuneration due to staff and other individuals,whether under formal contract of employment or not, must be paid through a payrollsystem approved by the Finance Director.

The criteria defining a system acceptable to the Finance Director are set out in Part IV,Section 13 of the Financial Handbook for Schools.

Where the school seeks a payroll provider other than the County Council’s payrollagent, any costs, calculated on the basis of a published schedule, arising from theconsolidation of returns, including TPA, would be payable by the school.

Procedures for payment of salaries, wages and fees and other remuneration due to staffand other individuals are laid out in the Financial Handbook for Schools, Part IV,Section 13 and its Appendices. Regulations place a duty on the employer of teachers at maintained schools registeredwith the General Teaching Council (GTC) to deduct and remit the GTC fee in respectof a teacher who has not already paid the fee to the GTC, where the GTC has notifiedthe employer to deduct and remit the fee of that teacher. In order to ensure the performance of the duties to deduct and remit the fee imposedon employers by the Regulations, conditions are imposed on the Authority and


governing bodies of all maintained schools covered by this Scheme in relation to theirbudget shares. Full details of these conditions are set out in Annex G on page 77.

The governing body should ensure procedures and best practice are exercised toobtain goods and services in the most cost effective way, from the cheapest sourcescommensurate with the required quality, performance and delivery. Purchasing by schools is subject to the Authority’s contract tendering procedures andto the Authority’s general regulations regarding purchasing which are covered by thePurchasing Conditions and Guidelines, Code of Purchasing Practice and ContractRegulations. These are set out in the Financial Handbook for Schools, Part IV,Section 9 Appendices A, B and C. Schools must adhere to the Authority’s proceduresfor placing orders for goods and services and the payment of accounts; these can befound in Part IV, Section 10 of the Financial Handbook for Schools.

The procedures will vary according to the position on delegation of funds and anybuyback of services which is in place.

2.1.4 Control of assets

Each school is required to maintain an inventory of its moveable non-capital assets, ina form to be determined by the Authority.

The governing body should authorise all write-offs and disposals of surplus stocks andequipment with a value above £500. All items for disposal above a predeterminedsum should be subject to competitive quotations.

Items of property, other than land or buildings, funded through the budget share maybe sold, where they are considered surplus to educational needs and where disposaldoes not interfere with the efficient running of the school. Any such disposal shall bemade at the best obtainable price and the funds should be re-deposited in the School’sGeneral Account. Other items may not be disposed of without the prior approval ofthe Director of Children, Schools & Families.

All disposals should be recorded. There may be a VAT liability in the sale proceeds.Further information is set out in Part IV, Section 12 of the Financial Handbook forSchools.

Thefts should be reported to departmental management and Internal Audit and, whereappropriate, the Insurance Officer and Police.

The governing body shall ensure that assets such as land, buildings, plant etc. aremanaged properly and are safeguarded against misuse, theft and undue deterioration. Governors cannot dispose of land and buildings; however the Incentive Scheme mayallow a governing body to take a share of the proceeds of such a sale.

Further regulations and standards on the control of assets and the content of aninventory record are provided in Part IV, Section 5 of the Financial Handbook for


Schools. The inventory record should be kept up to date in terms of acquisitions,disposals, etc. and should be checked at least annually and certified correct.

2.1.5 Accounting Policies (including year-end procedures)

Schools are required to abide by procedures issued by the Authority relating toaccounting policies; these can be found in the Part IV, Section 3 of the FinancialHandbook for Schools and as issued by the Authority from time to time.

2.1.6 Writing off of debts

Schools are required to draw up a policy or procedure for dealing with any debtsleading, if necessary, to their write-off. Such a policy should ensure that staff areclear about how to deal with debts and that debtors receive consistent treatment. PartIV, Section 11 of the Financial Handbook for Schools provides guidance on this.

A debt may only be written off with the prior approval of the relevant officer or body,which depends on the amount of the debt as shown below:

• Up to £500 – the governing body may authorise a write off, where incomeaccrues to the school. Otherwise the approval of the Director of Children,Schools & Families is required, who will consult with the Finance Director.

• Over £500 – the governing body, with agreement of the Finance Director.

Where the governing body write off debts, these shall be formally recorded and therecord retained for seven years.

The County Secretary, who will advise on the correct course of action, may onlyinitiate legal action in respect of outstanding debts.

2.2 Basis of accounting Annual reports and accounts, including forecasts, furnished to the Authority must be on anaccruals basis. Quarterly reports may be on either an accruals or a cash basis. Further information is set out in Part IV, Section 3 of the Financial Handbook for Schools. 2.3 Submission of budget plans Each school must submit a plan to the Authority by 1 May showing its intentions forexpenditure in the current financial year and the assumptions underpinning the budget plan.This budget plan should take account of the estimated deficit/surplus at the previous 31March. Schools will be required to complete a revised budget forecast on each quarterlyreturn submitted to the Authority. This should take account of any virements made and thelatest financial information available to the school.


The Authority will specify the format of the plan, and the current format can be found in thePart IV, Section 3 of the Financial Handbook for Schools. The Authority will publish, alongside the Budget Share information, guidance to schools onassumptions likely to be the same for all schools e.g. on inflation. These assumptions willalso be embedded in the software available. Part IV, Section 2 of the Financial Handbook forSchools, gives details of what schools can expect to receive at the same time as their budgetshares are issued. The Authority will supply schools with school income and expenditure data that it holds,which is necessary to the efficient planning by schools. This will be in the form ofmanagement information and Section 52 Budget and Out-turn Statements. 2.4 Best value The governing body of each school will be required to submit a statement, with its annualbudget return, setting out what steps it will be taking in the course of the year to ensure thatexpenditure, particularly in respect of large service contracts, will reflect the principles of thebest value regime. The DfES’s statement ‘ Best Value and Schools’ is attached as Annex F. 2.5 Virement Schools are allowed to vire freely between budget heads in the expenditure of their budgetshares. This does not apply to earmarked funds. 2.6 Audit: General The accounts of all schools with delegated budgets are subject to regular internal audit, andshould also be available for inspection as necessary by Hertfordshire’s external auditors(currently District Audit). In this respect schools will be audited within the regime set out inPart IV, Section 4 of the Financial Handbook for Schools. The auditors’ roles include: • the assessment of the adequacy of schools’ stewardship of public funds by recording

compliance with standards of financial management contained in this scheme, the , theCounty Council’s financial regulations and standing orders and the school’s owninternal control arrangements;

• assessing the achievement of value for money; and• investigation of fraud and irregularity. Whilst schools may be subject to direct external audit, generally speaking the District AuditService will assess the reliance it can place on the County Council’s Internal Audit Service to


avoid duplication of effort, and will therefore not engage significantly in the inspection ofindividual schools’ accounts. Schools that contract with external payroll providers are expected to make provision withintheir contracts to allow access on the part of the LEA’s auditors to relevant records held bythe bureau, should such access prove necessary, and for reasonable co-operation to enable theLEA’s auditors to complete their enquiries effectively. The governing body and school staff are required to provide auditors and inspectors with anyexplanations the latter consider necessary in the performance of their duties. The headteacher should consider and respond promptly to the recommendations in audit andinspection reports and report directly to the governing body on the results of audit or anyaction to be taken by the school. The headteacher or governing body should immediately notify the Director of Children,Schools & Families of any suspected irregularity, who in turn should immediately inform theChief Internal Auditor. 2.7 Separate external audits A governing body may spend funds from its budget share to obtain external audit certificationof its accounts, separate from any Hertfordshire internal or external audit process. This auditwould need to take into account the status of the school as a spender of LEA funds, ratherthan a grant maintained institution. 2.8 Audit of voluntary and private funds Schools are required to provide to the Chief Internal Auditor an annual certified statement ofthe balances held by them in all private or voluntary funds, and of the accounts of any tradingorganisations, under the control of the governing body. The Chief Internal Auditor willspecify the format of this return. This requirement does not apply to Charitable Trusts or funds of separate organisations or management committees, such as parent teacher associations. Failure by a school to comply with this requirement by a date specified by the Chief Internal Auditor will constitute a breach of the scheme, and the Authority may takeaction on that basis. In addition, within the routine programme of audit visits, schools may elect for Internal Auditto review the effectiveness of the internal control procedures operating in relation to one oftheir private accounts without charge. Schools may purchase additional audit resources tocover any other accounts within their control. For accounts which schools have not elected to be audited by Internal Audit, the ChiefInternal Auditor may require that the annual certificate is certified by an appropriate qualifiedindependent person. This does not imply that the LEA requires access to such funds. 2.9 Register of business interests


The governing body of each school is required to maintain a register which lists, for eachmember of the governing body and the headteacher, any business interests they or anymember of their immediate family have; the register must be kept up to date with notificationof changes and through annual review of entries, and must be made available for inspectionby governors, staff and parents, Authority auditors and Ofsted inspectors. A suggested formatfor the register and further guidance can be found in Part IV, Section 1, of the FinancialHandbook for Schools. 2.10 Purchasing, tendering and contracting requirements Schools are required to abide by the Authority's financial regulations and standing orders inpurchasing, tendering and contracting matters except where these would require schools:

• To do anything incompatible with any of the provisions of the scheme, or any statutoryprovision, or any EU Procurement Directive.

• To seek LEA officer countersignature for any contracts for goods or services for a valuebelow £60,000 in any one year.

• To select suppliers only from an approved list.• To seek fewer than three tenders or quotations in respect of contracts with a value

exceeding £10,000 in any one year. Schools should assess in advance, where relevant, the health and safety competence ofcontractors, taking account of the LEA's policies and procedures. Schools are required to achieve best value for money from all of their purchases. Thegoverning body must ensure that proper procedures and best practice are exercised to obtaingoods and services in the most cost-effective way. They must be purchased from the cheapestsources commensurate with the required quality, performance and delivery. There are variousways of establishing whether the prices being obtained are competitive. Consulting CountySupplies and Contract Services (CSCS), checking trade journals and catalogues and seekingquotations or formal tenders are all examples of good practice, depending upon the nature andvalue of the purchase concerned. Part IV, Section 9 and Appendices of the FinancialHandbook for Schools, highlights the procedure schools should adopt in testing the market. All payments to contractors should take into account the Authority’s procedures in connectionwith the Construction Industry Scheme (see 7.2). 2.11 Application of contracts to schools All Corporate contracts rely upon the commitment of participants throughout their term. Inthe case of contracts such as energy, or equipment maintenance and servicing arrangements,schools will have been given the opportunity to withdraw prior to any commitment beingentered into by the County Council. In these cases, schools will remain committed for the term of the contract. There will be no extension of the contract or any new commitmententered into by the Authority, on behalf of any school, without the agreement of the school.


In the case of the payroll provider contract where the Authority has an existing commitmenton behalf of schools, a school may only withdraw from the contract if it meets the conditionsset out in Part IV, Section 13 of the Financial Handbook for Schools (see 2.1.3) and givesfour months notice of its intention to withdraw. In all other cases the school may opt out of the relevant contract in accordance with thetermination notice required. 2.12 Central funds and earmarking The Authority is authorised to make sums available to schools from central funds, in the formof allocations that are additional to and separate from the schools’ budget shares (e.g. throughthe Standards Fund regulations). Such allocations will be subject to conditions showing thepurpose or purposes for which the funds may be used, as set out in the and/or regulations thatmay be published from time to time. Earmarked funding from centrally retained funds can only be spent on the purposes for whichit is given, or on other budget heads for which earmarked funding is given, and cannot bevired into the budget share. The Authority will recover funds that are not spent for thepurposes prescribed or not spent in the specified time period. All earmarked funds must bereported in the form laid down by the Authority. 2.13 Spending for the purposes of the school Governing bodies can spend their budget shares for the purposes of providing education for children on the school roll, as provided for in the School Standards & Framework Act 1998and other relevant legislation, and in the Articles of Government of the school. This willinclude expenditure on:

• the employment of staff• the upkeep and improvement of premises, including the cost of equipment and routine

repairs and maintenance• the provision of the curriculum• the general duties and responsibilities relating to the management and government of

the school Under section 50(3)(b) of the SSAF Act 1998 the Secretary of State may prescribe additionalpurposes for which expenditure of the budget share may occur. 2.14 Capital spending from budget shares The governing bodies can use their budget shares to meet the cost of capital expenditure onthe school premises. This includes expenditure by the governing body of a voluntary aidedschool on work that is its responsibility under paragraph 3 of Schedule 3 of the SSAF Act1998. The definitions of capital for this purpose are set out in Annex B. The governing bodymust notify the County’s Capital Programme Co-ordinator of all capital expenditure. Schoolsmust take into account any advice from the Director of Children, Schools & Families as to the


merits of proposed expenditure which exceeds £12,000. If the County Council owns thepremises, the governing body should seek its consent to the proposed works. Schools are required to separately identify these works in any financial returns made to theAuthority.

Financial Handbook for Schools Hertfordshire County Council Part II: Scheme for Financing Schools Page 19 RESO3515 – Issue 3 : April 2003 Section 3: Instalments of budget share: banking arrangements

SECTION 3 INSTALMENTS OF BUDGET SHARE: BANKINGARRANGEMENTS

3.1 Frequency of instalments The budget share will be made available to governing bodies on the following basis:

• For schools within the County Council pooled banking arrangements the budget share,less the interest deduction set out in paragraph 3.3, will be in one instalment on 1 Aprileach year (or the nearest bank day in April);

• For schools with other banking arrangements, instalments will be made on a monthlybasis preceded by an instalment paid on 1 April equivalent to 1/3 of the monthlyinstalment. Payment of equal monthly instalments will be made from April toFebruary with an instalment equal to 2/3 being made in March. These will be made onthe banking day closest to the 15th day of each month.

3.2 Proportion of budget share payable at each instalment

The whole of each school’s budget share, less any deduction for interest deduction if relevant,is paid into the school’s bank account in equal instalments in line with the frequencies set outin the preceding paragraph. The budget share includes all pay costs that are delegated toschools. All inflation and pay factors included in the budget share are set out in the budgetinformation sent out to schools as discussed in paragraph 2.3.

3.3 Interest deduction

For schools within the County Council’s pooled banking arrangement the Authority willdeduct from budget share instalments an amount equal to the estimated interest lost by theAuthority in making available the budget share in advance. The basis of the calculation of thisdeduction is as follows.

D = A x i ( 1 - i + i2)2 2 4

where D = the deductionA = the school’s budget sharei = the assumed rate of interest

No deduction will be made for schools outside the pooled arrangements.

The LEA will make no deduction, in respect of interest costs to the LEA, from payments toschools of devolved specific or special grant.


3.4 Bank and building society accounts

All Hertfordshire maintained schools have external bank accounts into which their budgetshare instalments are paid. Schools retain all interest payable on the account. Hertfordshireprovides a pooled arrangement for all bank accounts, in which all schools may participate.This arrangement is particularly beneficial for schools, and the details of it are set out inAnnex D.

New bank account arrangements may only be made with effect from the beginning of eachfinancial year.

3.4.1 Restrictions on accounts

The banks or building societies authorised to be used by schools for the purpose ofreceiving budget share payments are listed in Annex C. These are the ten top-ratedUnited Kingdom banks and building societies. This list will be reviewed on an annualbasis. However, former GM schools may nominate, as the account for budget sharepayments, the account used in 1998/99 for payments of annual maintenance grant bythe Funding Agency for Schools, even if it is not on the list contained in the scheme.

Any school closing an account used to receive its budget share and opening anothermust select the new bank or building society from the approved list, even if the closedaccount was not with an institution on that list.

All schools must notify the Head of School Resources of all banking arrangements.Schools should not set up bank accounts for official County Council funds and shouldnot invest County funds in any way other than in bank accounts set up through theHead of School Resources.

Schools may have accounts for budget share purposes, which are in the name of theschool rather than the Authority; however, the bank accounts within the pooledarrangement will be in the name of Hertfordshire County Council but specific to eachschool.

Money paid by the Authority and held in such accounts remains LEA property untilspent.

3.5 Overdrafts and borrowing by schools

Schools should not go into overdraft except in exceptional circumstances. If a schoolanticipates that this is likely to occur it should immediately inform the Head of SchoolResources. Any costs arising from this situation will be borne by the school.

Governing bodies may borrow money only with the written permission of the Secretary ofState. This requirement does not, however, apply to the Schools Loan Scheme (see paragraph4.9).


3.6 Other provisions

A school must have a minimum of two and a maximum of four cheque signatories, one ofwhich must be the headteacher. A second signatory must be a senior member of staff e.g.deputy headteacher or a governor. This does not normally extend to the secretary or bursar,as this is unlikely to result in an adequate segregation of duties. However, in certaincircumstances where the secretary or bursar is not involved in payment processing andaccounting and provided that an adequate level of internal control is maintained they may be asignatory. No member of the governing body who is not an employee of the Authority or ofthe governing body may be authorised to sign cheques unless the school can demonstrate thatit has arranged insurance to indemnify the Authority against loss.

All cheques of £2,000 and above must be signed by the headteacher and another authorisedsignatory. Cheques below the value of £2,000 may be signed by the headteacher only or,where three or four cheque signatories are appointed, by any two of the other signatories.

All direct debit and standing order mandates must be signed by the headteacher and anotherauthorised cheque signatory. The bank will confirm the details with one of the authorisedsignatories before it is actioned.

A governing body may set a lower (but not a higher) limit than the £2,000 above whichcheques must be countersigned.

The Head of School Resources and her representatives will have full and immediate access toall documents and records relating to bank accounts. All documents and records, relating tobank accounts must be held in a form suitable for inspection by Internal Audit, external audit,the Inland Revenue, Customs and Excise and any other authorised persons.

Any discrepancy in the bank account, or any breach of the banking terms, must be reportedimmediately by the headteacher to the Head of School Resources.

Part IV, Section 6 and Appendices of the Financial Handbook for Schools, provide furtherguidance on banking issues.

Financial Handbook for Schools Hertfordshire County CouncilPart II: Scheme for Financing Schools Page 22 RESO3515 – Issue 3 : April 2003Section 4: The treatment of surpluses

and deficit balances arisingin relation to budget shares

SECTION 4 THE TREATMENT OF SURPLUSES ANDDEFICIT BALANCES ARISING IN RELATIONTO BUDGET SHARES

4.1 The right to carry forward surplus balances

Schools will carry forward from one financial year to the next any shortfall in expenditurerelative to the school's budget share for the year plus/minus any balance brought forward fromthe previous year.

4.2 Reporting on the intended use of surplus balances

All schools are required to report, as a Memorandum item on end of year returns, surplusbalances held by them.

Governing bodies may be required to report to the Authority on the use which the schoolintends to make of surplus balances, in cases where the total balance exceeds 5% of thebudget share for the year.

4.3 Interest on surplus balances

Balances held by the Authority on behalf of schools will attract interest according to the termsof Hertfordshire’s published arrangements for pooled accounts as set out in Annex D.

4.4 Obligation to carry forward deficit balances

Where deficits arise, the school’s budget plan for the following year should showarrangements for redress, and unless there are exceptional circumstances the Authority willexpect that any deficit will be repaid during that period.

At the Authority’s discretion and in exceptional circumstances the school and the Authoritywill jointly prepare an action plan for eliminating the deficit.

If a school has such a licensed deficit, and the school proposes to spend amounts received byit in respect of School Standards Grant on purposes other than reducing the licensed deficit,the LEA will agree to such a proposal unless, in its view, the proposed expenditure isunreasonable in the school’s financial circumstances.

4.5 Planning for deficit budgets

A governing body cannot budget for a deficit and must act during the year to avoid deficitsoccurring.

Financial Handbook for Schools Hertfordshire County CouncilPart II: Scheme for Financing Schools Page 23 RESO3515 – Issue 3 : April 2003Section 4: The treatment of surpluses

and deficit balances arisingin relation to budget shares

4.6 Charging of interest on deficit balances

The overdraft costs relating to deficit balances will be an issue between the school and thebank of its choice.

4.7 Writing off deficits

The Authority cannot write off the deficit balance of any school.

4.8 Balances of closing and amalgamating schools

When a school closes, any balance (whether surplus or deficit) reverts to the LEA; it cannotbe transferred as a balance to any other school, even where the school is a successor to theclosing school.

The formal consultation document relating to school re-organisation would set out anyarrangements for allocations to schools which have the effect of giving them the benefit ofadditional sums which are equal to or less than the balances of the relevant closing schools.

4.9 Schools Loan Scheme

The Authority will operate a loan scheme for schools wishing to borrow to finance items ofcapital expenditure. The loans fund will be drawn from those school balances held inaccounts included in the pooling arrangements operated by the Authority’s banker. Thereforeonly schools whose accounts are within the pooling arrangements will be eligible for loans.

4.10 Former grant maintained schools' balances

See Section 12.

Financial Handbook for Schools Hertfordshire County CouncilPart II: Scheme for Financing Schools Page 24 RESO3515 – Issue 3 : April 2003Section 5: Income

SECTION 5 INCOME

5.1 Income from lettings

Schools are allowed to retain income from lettings of the school premises that wouldotherwise accrue to the LEA, subject to alternative provisions arising from any joint use orPFI agreements. Income from lettings should not normally be paid into voluntary or privatefund accounts held by the school. Foundation and Voluntary Aided schools have discretionover the destination of lettings income. However, a contribution should be made to theSchool Budget Share Account in lieu of relevant expenditure eg caretaking and energy. Thiscontribution is subject to VAT. Schools are permitted to cross-subsidise lettings forcommunity and voluntary use with income from other lettings, provided there is no net cost tothe budget share. However, schools are required to have regard to directions issued by theLEA as to the use of school premises, as permitted under the School Standards andFramework Act 1998 for various categories of schools.

Governing bodies should ensure that their hiring policy does not conflict with the duty toprovide education for children registered at the school.

Guidance on the booking process, charging rates for different types of hire and formsassociated with the hiring of premises can be found in the Premises and Sites Manual – Hiringand Accommodation section.

5.2 Income from fees and charges

Schools can retain income from fees and charges except where a service is provided by theLEA from centrally retained funds. However, schools are required to have regard to anypolicy statements on charging produced by the Authority.

Details of the Authority’s charging and remission policy can be found in the, Part IV,Section11 Appendix C of this Handbook.

5.3 Income from fund-raising activities

Schools are allowed to retain income from fund-raising activities.

5.4 Income from the sale of assets

Schools can retain the proceeds of sale of assets except in cases where the asset waspurchased with non-delegated funds (in which case it should be for the LEA to decidewhether the school should retain the proceeds), or the asset concerned is land or buildingsforming part of the school premises and is owned by the LEA.

Financial Handbook for Schools Hertfordshire County CouncilPart II: Scheme for Financing Schools Page 25 RESO3515 – Issue 3 : April 2003Section 5: Income

5.5 Administrative procedures for the collection of income

All schools should abide by the procedures outlined in Part IV, Section 11 of the FinancialHandbook for Schools for the collection, accounting and banking of income.

Advice on charging VAT and the implications of fund-raising activities and sale of assets canbe found in the Financial Handbook for Schools, Part IV, Section 12 and its Appendices.

5.6 Purposes for which income may be used

Income from sale of assets purchased with delegated funds may only be spent for thepurposes of the school.

Financial Handbook for Schools Hertfordshire County CouncilPart II: Scheme for Financing Schools Page 26 RESO3515 – Issue 3 : April 2003Section 6: The charging of school budget shares

SECTION 6 THE CHARGING OF SCHOOL BUDGET SHARES

6.1 General provision

The budget share of a school can be charged by the Authority without the consent of thegoverning body only in accordance with the provisions of the scheme set out in paragraph 6.2.In such circumstances the Authority will consult schools as to the intention to so charge, andwill notify schools when it has been done.

6.1.2 Salaries of School-based staff

The Authority is required to charge the salaries of school-based staff to school budgetshares at actual cost.

6.2 Circumstances in which charges may be made

6.2.1 Where premature retirement costs are incurred without the prior written agreement ofthe Authority to bear such costs (the amount chargeable being only the excess overany amount agreed by the Authority);

6.2.2 Other expenditure incurred to secure resignations where the school had not followedAuthority advice;

6.2.3 Awards by courts and industrial tribunals against the Authority, or out of courtsettlements, arising from action or inaction by the governing body contrary to theAuthority's advice. Such advice should take account of the role of aided schoolgoverning bodies under s.60(5) of the SSAF Act 1998;

6.2.4 Expenditure by the Authority in carrying out health and safety work or capitalexpenditure for which the Authority is liable where funds have been delegated to thegoverning body for such work, but the governing body has failed to carry out therequired work;

6.2.5 Expenditure by the Authority incurred in making good defects in building workcarried out by governing bodies;

6.2.6 Expenditure incurred by the Authority in insuring its own interests in a school wherefunding has been delegated but the school has failed to demonstrate that it hasarranged cover at least as good as that which would be arranged by the Authority(see also section 10);

6.2.7 Recovery of monies due from a school for services provided to the school, where adispute over the monies due has been referred to a disputes procedure set out in aservice level agreement, and the result is that monies are owed by the school to theAuthority;


6.2.8 Recovery of penalties imposed on the Authority by the Board of Inland Revenue, theContributions Agency or HM Customs and Excise as a result of school negligence,where governing bodies fail to comply with the requirements set out in the FinancialHandbook for Schools, Part IV, Section 13 and Appendices;

6.2.9 Correction of Authority errors in calculating charges to a budget share (e.g. pensiondeductions). The LEA will consider in each case whether it would be reasonable tomake such a charge;

6.2.10 Additional expenditure incurred by the Authority in relation to decisions made by thegoverning body on the length of the school day, e.g. transport costs, and failure tonotify the Authority of non-pupil days resulting in unnecessary costs in relation tobudgets;

6.2.11 Legal and support costs which are incurred by the Authority because the governingbody did not accept the advice of the Authority (see also section 11);

6.2.12 Deleted

6.2.13 Costs of necessary health and safety training for staff employed by the Authority,where funding for training had been delegated but the necessary training not carriedout (see Annex E);

6.2.14 Compensation paid to a lender where a school enters into a contract by which thegoverning body is bound and there is a breach of the terms of the arrangement and thecontract is of no effect (Part IV, Section 9 of the Financial Handbook for Schoolsprovides guidance on this);

6.2.15 Costs incurred by the Authority, because the governing body did not abide by theScheme, resulting in additional work for Financial Services to Schools or InternalAudit beyond their regular programme of work;

6.2.16 Costs incurred by the Authority as a result of withdrawal of delegation (see section2.1.1);

6.2.17 The Lottery Heritage Fund requires that the Authority supports schools that submitbids for grants for specific projects. In the event that a school that had received agrant failed to complete the project in a satisfactory manner, the Authority would berequired to return the funding. In such a case, the Authority will recover the fundsfrom the school’s account.

6.2.18 Any increase in contract costs resulting from a school withdrawing from a Corporatecontract before the end of the contract term, where the contract has been entered intovoluntarily or where the scheme binds a school to it.


6.2.19 The amounts of any payments made by the LEA to a complainant following a findingby the Local Government Ombudsman of maladministration causing injustice, wheresuch maladministration was caused by the action or inaction of any member of staff atthe school and/or the governing body. A deduction will also be made where paymentis made under the terms of an early settlement of a complaint made to the Ombudsmanwithout formal investigation and report.

Financial Handbook for Schools Hertfordshire County CouncilPart II: Scheme for Financing Schools Page 29 RESO3515 – Issue 3 : April 2003Section 7: Taxation

SECTION 7 TAXATION

7.1 Value Added Tax

Schools should abide by the Authority’s regulations in order to utilise the Authority's abilityto reclaim VAT on expenditure relating to non-business activity. Any amounts so reclaimedwill be passed back to the school.

The Financial Handbook for Schools, Part IV, Section 12 and Appendices provide moredetailed guidance.

7.2 CIS (Construction Industry Scheme)

Schools are required to abide by procedures issued by the Authority in connection with CIS.

The Financial Handbook for Schools, Part IV, Section 14 and Appendices provide moredetailed guidance.

Financial Handbook for Schools Hertfordshire County CouncilPart II: Scheme for Financing Schools Page 30 RESO3515 – Issue 3 : April 2003Section 9: Private and public partnership projects

SECTION 8 THE PROVISION OF FACILITIES AND SERVICESBY THE AUTHORITY

8.1 Provision of services from centrally retained budgets

The Authority will not discriminate between categories of schools in its provision of servicesand facilities except where such discrimination is justified by differences in statutory duties orwhere funding has been delegated to some categories but not others.

Allocations from outside the Local Schools Budget will only be available in very exceptionalcircumstances, and necessarily by decision of the County Council, in the light of large,unforeseen in-year cost increases or major emergencies affecting all schools.

Where a school experiences a large, unforeseen change in pupil numbers, i.e. 5% above theestimate used to determine the school’s budget share and subject to a minimum increase of 10pupils, it will be given, during the course of the year, an advance on the following year’sretrospective pupil number adjustment.

Additional allocations may be made to correct any significant error in the application of theresource allocation formula.

A payment may also be made from the central contingency fund in the event of anemergency, i.e. major costs falling on individual schools, which are of an exceptional butunavoidable nature, and which are not the result of a deliberate decision by the governors orfailure by them to take action at an earlier stage.

Premature retirement and redundancy costs, to the extent that they fulfil the criteria in theLEA scheme, are part of a centrally retained budget. Where schools are consideringpremature retirement or redundancy they need to make an application to the Head of HumanResources. If such procedures are not met then a charge may be made against the schoolbudget share (see 6.2.1 – 6.2.2).

8.2 Timescales for the provision of services bought back from the LEA usingdelegated budgets

The term of any arrangement with a school, starting on or after 1 April 1999, to buy servicesor facilities from the Authority is limited to a maximum of three years from the inception ofthe scheme or the date of the agreement, whichever is the later. Any subsequent agreementrelating to the same services cannot exceed a period of five years. Centrally funded premisesand liability insurance are specifically excluded from these requirements.

8.2.1 Packaging


Schools are free to choose which services they wish to buy from the range of HCCtraded services in respect of areas of delegated funding.

8.3 Service level agreements

8.3.1 If services or facilities are provided under a service level agreement - whether free oron a buyback basis - the terms of any such agreement starting on or after the inceptionof the scheme will be reviewed at least every three years if the agreement lasts longerthan that. Centrally funded premises and liability insurance are specifically excludedfrom these requirements.

8.3.2 Services provided under SLAs will also be available on an ad hoc basis but these maybe charged at different rates from those provided under an extended agreement.


SECTION 9 PRIVATE AND PUBLIC PARTNERSHIP PROJECTS

The Authority may from time to time bring forward proposals for Private and PublicPartnership (PPP) projects. These proposals might include variations to the scheme andwould be subject to the agreement of governing bodies. This would include the power of theLEA to charge to the school’s budget share amounts agreed under a PPP agreement enteredinto by the governing body. The Authority would need to seek positive endorsement on aschool-by-school basis for such a scheme.

Financial Handbook for Schools Hertfordshire County CouncilPart II: Scheme for Financing Schools Page 33 RESO3515 – Issue 3 : April 2003Section 10: Insurance

SECTION 10 INSURANCE

Any school that arranges property and liability insurances other than through the schemeoffered by the Authority will be required to demonstrate that cover relevant to the Authority’sinsurable interests, under a policy arranged by the governing body, is at least as good as therelevant minimum cover arranged by the LEA.

The Authority must have regard to the actual risks which might reasonably be expected toarise at the school in question in operating such a requirement, rather than applying anarbitrary minimum level of cover for all schools.

See also section 6.2.6.

Financial Handbook for Schools Hertfordshire County CouncilPart II: Scheme for Financing Schools Page 34 RESO3515 – Issue 3 : April 2003Section 11: Miscellaneous

SECTION 11 MISCELLANEOUS

11.1 Right of access to information

Governing bodies shall supply all financial and other information which might reasonably berequired to enable the Authority to satisfy itself as to the school's management of its delegatedbudget share, or the use made of any central expenditure by the Authority (e.g. earmarkedfunds) on the school.

11.2 Liability of governors

As the governing body is a corporate body, and because of the terms of section 50(7) of theSSAF Act 1998, governors of maintained schools will not incur personal liability in theexercise of their power to spend the delegated budget share provided they act in good faith.

11.3 Governors' expenses

Governing bodies may make a scheme to pay any member of the governing body orcommittee a payment by way of an allowance in respect of expenditure necessarily incurredfor the purpose of performing any duty as a governor or committee member. The categoriesof such allowances are specified in regulations. Schools must not duplicate any paymentsmade for expenses paid by the Secretary of State to additional governors appointed by him toschools under special measures.

Reimbursement of travel expenses should be at Public Transport Mileage Rate, for carjourneys, or actual cost. All other reimbursements should be at cost and fully supported byreceipts.

If governing bodies approve the reimbursement of such expenses, they must report thisspending in the governors’ annual report to parents.

11.4 Responsibility for legal costs

Unless the governing body acts in accordance with the advice of the LEA, legal costs incurredby the governing body will be charged against the school’s budget share. Such costs relate tolegal actions, including costs awarded against the LEA, not the cost of legal advice provided.(See also section 6 – The Charging of School Budget Shares.).

In the case of a conflict of interest between the LEA and the Governing Body, the governingbody is free to use its budget share to obtain independent legal advice.


11.5 Health and Safety

Governing bodies are required to have due regard to duties placed on the Authority in relationto health and safety, and the Authority's policy on health and safety matters in expending theschool’s budget share. (See Annex E - Health & Safety)

11.6 Right of attendance for Finance Director

The Finance Director or his representative is permitted to attend meetings of the governingbody at which any agenda items are relevant to the exercise of his responsibilities.

This attendance will normally be limited to items that relate to issues of probity or overallfinancial management; such attendance will not be regarded as routine. Wherever practicableprior notice of attendance will be given.

11.7 Delegation to new schools

The Authority may delegate some functions and responsibilities to the governing body of aschool ahead of its opening date. This may be in the form of an advance against its delegatedbudget.

11.8 Option to receive delegated funding

Schools should advise the Head of School Resources, by the end of December each year, ofany change in decision relating to areas of delegation.

This relates to optional delegation for admissions and appeals funding.

11.9 Provision of SEN

The 1996 Education Act requires schools to use their best endeavours to ensure that thespecial educational needs of all pupils on roll are met. The Authority delegates significantlevels of funding to schools for this purpose through the AWPU, and allocations based on freeschool meal entitlements, Key Stage assessments, Cognitive Ability Tests and nursery andinfant baseline assessments. Earmarked pupil funding is also made available through an SENaudit and individual Statements of SEN.

Schools are expected to ensure that information about its policies and SEN supportarrangements is available to staff and parents. This includes reporting in the AnnualGovernors' Report.

The LEA has a duty to monitor pupil progress and the use of these resources. This work isgenerally undertaken by the LEA Advisers (School Standards & Curriculum division) withinput from the SEN Advisers, Educational Psychologists and Operations Teams. Inexceptional circumstances the LEA may need to consider withdrawal of delegation but everyeffort will be made to work with schools to avoid this.


11.10 Other publications

Additional information is available in the following documents that are published by theChildren, Schools & Families Department and updated from time to time:

• Financial Handbook for Schools• Section 52 statement• Personnel Guide• Premises and Sites Manual• Health & Safety: Policy & Guidelines Manual• Value for Money Guides (Purchasing and contracting, ICT, Telecommunications,

Integrated financial & school improvement planning, School meals etc.)• Contract regulations• Guide to good commercial practice• LEA – School Relations: Code of Practice in Hertfordshire

11.11 School meals

Funding for the provision of free meals to pupils with a statutory entitlement, and to providepaid meals to other pupils, is delegated to all primary, secondary and special schools. Theresponsibility delegated to these schools covers the repair and maintenance of schoolkitchens, and health and safety aspects associated with them.

11.12 Child Protection

Funding is retained centrally to provide cover for teachers who are required to attend caseconferences in respect of pupils on the Child Protection Register.

11.13 School Standards Grant

Amounts included in school budget shares pursuant to regulation 29(1) of the Financing ofMaintained Schools (England) Regulations 2002, will be placed at the disposal of thegoverning body of each school by 22 May 2002, irrespective of any instalment arrangementapplicable to the remaining amount of the budget share. The making available of this sumshall also be irrespective of the existence of any deficit relating to expenditure of the school’sbudget share. No interest clawback will be applied to the amount before it is made available.


11.14 Teachers’ Pension Arrangements

In order to ensure the performance of the duty on the Authority to supply Teachers’ Pensionswith information under the Teachers’ Pensions Regulations 1997, the following conditionsare imposed on the Authority and governing bodies of all maintained schools covered by thisScheme in relation to their budget shares and come into effect on 1 November 2002.

The conditions only apply to governing bodies of maintained schools who have not enteredinto an arrangement with the Authority to provide payroll services.

A governing body of any maintained school, whether or not the employer of the teachers atsuch a school, which has entered into any arrangement or agreement with a person other thanthe Authority to provide payroll services, shall ensure that any such arrangement oragreement is varied to require that person to supply salary, service and pensions data to theAuthority which the Authority requires to submit its annual return of salary and service toTeachers’ Pensions and to produce its audited contributions certificate. The Authority willadvise schools each year of the timing, format and specification of the information required.A governing body shall also ensure that nay such arrangement or agreement is varied torequire that Additional Voluntary Contributions (AVCs) are passed to the Authority withinthe time limit specified in the AVC Scheme. The governing body shall meet anyconsequential costs from the school’s budget share.

A governing body of any maintained school which directly administers its payroll shallsupply salary, service and pensions data to the Authority which the Authority requires tosubmit its annual return of salary and service to Teachers’ Pensions and to produce its auditedcontributions certificate. The Authority will advise schools each year of the timing, formatand specification of the information required from each school. A governing body shall alsoensure that Additional Voluntary Contributions (AVCs) are passed to the Authority within thetime limit specified in the AVC scheme. The governing body shall meet any consequentialcosts from the school’s budget share.

Financial Handbook for Schools Hertfordshire County CouncilPart II: Scheme for Financing Schools Page 38 RESO3515 – Issue 3 : April 2003Section 12: Former grant maintained schools'

balances

SECTION 12 FORMER GRANT MAINTAINED SCHOOLS’BALANCES

From 1 April 1999 former GM schools continue to have the right to spend any surplusbalances that they brought with them from the period during which FAS funded them. Wherea deficit balance existed at the end of FAS funding, it must be carried forward. Any schedulefor eliminating the deficit agreed with the FAS (or the Authority in the case of deficitsincurred when the school was previously maintained by the Authority, and carried over intothe change of status under the GM Finance Regulations) must continue to be rigorouslyadhered to.

The LEA, where repayment is not made directly to the Secretary of State, may chargerepayment of loans, made to former GM schools from FAS, against schools’ budget shares.

Financial Handbook for Schools Hertfordshire County CouncilPart II: Scheme for Financing Schools Page 39 RESO3515 – Issue 3 : April 2003Section 13:Responsibility for repairs and

maintenance

SECTION 13 RESPONSIBILITY FOR REPAIRS ANDMAINTENANCE

The categories of work which governing bodies must expect to finance from their budget areshown in Annex B. Annex B applies to all schools: maintenance work which is theresponsibility of the governing bodies of voluntary aided schools and which is rechargeable tothem under existing arrangements is not varied to increase the LEA’s maintenanceresponsibility as defined in the Annex.

All funding for repairs and maintenance is delegated to schools. Only capital expenditure isto be retained by the Authority.

The definition of capital for this purpose is set out in Part IV, Section 8 of this Handbook.The Authority will not use a de minimis limit to distinguish between capital and revenueexpenditure.

Voluntary Aided governors statutory liabilities are unchanged. Full details of theseresponsibilities are set out in the DfES document “Voluntary Aided and Special AgreementSchools – Determination of Financial Liability”. VA governors will continue to be eligiblefor grant from the DfES in respect of their statutory responsibilities for capital projects. Inaddition they will have responsibility for other repair and maintenance items on the samebasis as Community and Foundation schools.

Monies for the repair and maintenance of kitchens and kitchen equipment is retained centrallyfor nursery schools, which have not had school meals delegated.

Financial Handbook for Schools Hertfordshire County CouncilPart II: Scheme for Financing Schools Page 40 RESO3515 – Issue 3 : April 2003Section 14: Power to provide community facilities

SECTION 14 POWER TO PROVIDE COMMUNITY FACILITIES

14.1 Introduction

14.1.1 Definition

Community facilities are defined in the Education Act 2002 as “any facilities orservices whose provision furthers any charitable purposes for the benefit of:

• pupils at the school or their families, or• people who live or work in the locality in which the school is situated.”

14.1.2 Application of the Scheme for Financing Schools to the community facilitiespower

Governing bodies which choose to exercise the power conferred by Section 27(i) ofthe Act to provide community facilities will be subject to a range of controls.

Firstly, regulations made under Section 28(ii) if made can specify activities which maynot be undertaken at all under the main enabling power. Secondly, the governingbody of the school is obliged to consult the LEA and have regard to advice from theauthority. Thirdly, the Secretary of State issues guidance to governing bodies about arange of issues connected with exercise of the power and they must have regard tothat.

However, under Section 28(1) the main limitations and restrictions on the power willbe:

• those contained in schools’ own Instruments of Government if any; and• in Hertfordshire’s Scheme for Financing Schools, made under Section 48 of the

School Standards and Framework Act 1998. Paragraph 2 of Schedule 3 of theEducation Act 2002 extends the coverage of schemes to the powers of governingbodies to provide community facilities.

Governing bodies are therefore subject to prohibitions, restrictions and limitations inthe Scheme for Financing Schools.

14.1.3 School’s budget share

The budget share of a school may not be used to fund community facilities – eitherstart-up costs or ongoing expenditure – or to meet deficits arising from such activities.


14.1.4 Exceptions

This section of the scheme does not extend to joint use agreements, transfer of controlagreements, or agreements between the LEA and schools to secure the provision ofadult and community learning.

14.2 Consultation with the LEA 14.2.1 Requirement to consult the LEA Section 28(4) of the Education Act 2002 requires that, before exercising the

community facilities power, governing bodies must consult the local educationauthority and have regard to advice given to them by their LEA.

14.2.2 Requirement to seek LEA advice The LEA would encourage any school governing body considering the provision of

community facilities to make contact at the earliest possible stage in theirdeliberations, and to avail themselves of advice from officers with the relevantprofessional expertise in advance of formal consultation.

Formal consultation with the LEA will commence when the full consultation material

has been submitted in writing, and the response period will begin from receipt of thefull material. Uses of the power where services have an expected annual turnover inexcess of £100,000, or capital schemes costing more than £100,000, will receive aformal written response within eight weeks. In other cases advice will be providedwithin six weeks. The governing body should inform the LEA of the action taken inresponse to this advice.

The governing body should provide the following information in the formal

consultation document:

• A full business plan for the provision of the proposed community facilities orservices covering the first three years of operation.

• Details of the employment arrangements of all those staffing the communityfacility. These should cover pay and conditions, redundancy and disciplinaryprocedures.

• The full plans and costing of any capital project which affects existing buildingson the school site and/or the construction of new buildings.

• Details of any planning and environmental considerations, and evidence ofdiscussions with relevant regulatory agencies.

• Details of Health and Safety considerations.


• Expressions of support from potential user groups, parents of pupils at theschool, District and Parish Councils, local community groups, relevantpartnership groups of the Authority, neighbouring schools and businessrepresentatives as appropriate.

• Details of how the facility will be managed, and how this will relate to themanagement of the school.

• Details of the extension of any existing service provision or contracts, toencompass the additional costs associated with the community facilities.

• A statement that the proposed activities will not interfere with the overridingpurpose of the school in achieving higher standards for pupils.

• Details of any proposed funding agreements with third parties.

• The proposed insurance arrangements.

• The consultation document should be sent to the Head of School Resources,Children Schools & Families, County Hall, Hertford SG13 8DF.

14.3 Funding agreements – LEA powers

14.3.1 Funding agreements with third parties

The provision of community facilities in many schools may be dependent on theconclusion of a funding agreement with a third party that will either be supplyingfunding or supplying funding and taking part in the provision. A wide range of bodiesand organisations are potentially involved.

Any proposed funding agreements with third parties should be submitted to the LEAfor comments and advice, and any such draft agreement should form part of theconsultation with the LEA.

Funding agreements with third parties should contain adequate provision for access bythe County Council to the records and other property of those parties which are heldon school premises, in order for the County Council to satisfy itself as to the proprietyof expenditure on the facilities in question.

14.3.2 Agreements seriously prejudicial to the interests of the school or the Authority

Governing bodies should be aware that if an agreement has been or is to be concludedagainst the wishes of the LEA, or has been concluded without informing the LEA,which in the view of the Authority is seriously prejudicial to the interests of the schoolor the Authority, that may constitute grounds for suspension of the right to a delegatedbudget.


14.3.3 Projects with significant financial risk

The Authority may require that, in a specific instance of use of the communityfacilities power by a governing body, the governing body concerned shall makearrangements to protect the financial interests of the Authority, either by carrying outthe activity concerned through the vehicle of a limited company formed for thepurpose, or by obtaining indemnity insurance for risks associated with the project inquestion, as specified by the LEA.

The Authority is required to operate this provision in a reasonable fashion, imposingsuch a requirement only where it has good reason to believe that the proposed projectcarries significant financial risks.

14.4 Financial accounts and information

14.4.1 Banking arrangements

The County Council considers that best practice in respect of community facilities isto use the same accounting and reporting procedures as are used for the school’s mainbudget share, ensuring that community facilities activities are separately identified andare accounted for on a full cost basis. We expect that schools will wish to managesuch facilities through separate accounts. Governing bodies are referred to Section 3.4of the Scheme relating to banks and building societies, and should note that only thosebanks and building societies listed at Annex C to the Scheme may be used for suchseparate accounts.

Governing bodies are also reminded that they may borrow money only with thewritten permission of the Secretary of State.

14.4.2 Financial statements

Where a governing body keeps separate accounts for community facilities, it mustprovide a summary statement to the Authority every six months, showing the incomeand expenditure for the community facility for the previous six months and, on anestimated basis, for the next six months. A standard form for the purpose of providingsuch statements will be provided to schools, and should be returned to the Head ofSchool Resources, Children Schools & Families, County Hall, Hertford SG13 8DF.

If the County Council believes there to be cause for concern as to the financialmanagement of the community facilities power by a governing body, then it may, aftergiving notice to the governing body, require financial statements to be supplied morefrequently. It may also require the submission of a recovery plan for the activity inquestion.

Financial information relating to community facilities is required to be included inreturns made under the Consistent Financial Reporting framework.


14.4.3 Audit and access to schools’ records

The governing body is required to ensure that adequate arrangements are in place forthe audit of the financial records connected with the exercise of the communityfacilities power. Where external auditors are employed, the contract should cover thecommunity facilities activities.

14.5 Treatment of income and surpluses 14.5.1 Retention of income

Governing bodies may retain all income derived from community facilities exceptwhere otherwise agreed with the funding provider. If at the end of the financial year asurplus exists after proper charge of all costs including relevant overheads, then thesurplus may be carried over from one financial year to the next. The surplus may beretained as a separate community facilities surplus or, subject to the County Council’sagreement, all or part of it may be transferred to the budget share balance. However,where such transfer is made, the school must continue to identify the communityfacilities element of its balances as distinct from its main budget share balance, in casethe community facilities surplus is subsequently required to offset any deficit or thirdparty liability in respect of the community facilities operation.

14.5.2 Deficits Governing bodies must ensure that no deficit arises from the operation of the

community facility. All the costs of maintaining any facility used for these purposesmust be covered by the income.

14.5.3 Premises funding

Since expenditure incurred by the governing body in the exercise of the communityfacilities power may not be met from the budget share, the school’s budget share willnot include any funding element relating to premises used exclusively for communityfacilities.

14.5.4 Schools ceasing to be maintained When a school ceases to be maintained by the County Council, any accumulated

retained income from the exercise of the community facilities power will revert to theCounty Council unless there is some other agreement with a funding provider.

14.5.5 Liabilities to third parties Liabilities to third parties incurred in the exercise of this power are a charge on all the

income retained by the governing bodies from these activities.


14.6 Taxation issues

14.6.1 Value Added Tax

VAT and other taxation issues are increasingly complex. Schools should be awarethat governing bodies, or any organisation set up by them to manage communityfacilities, will be treated as a separate legal entity. In these circumstances, the LEAwill be unable to secure any VAT recovery on their behalf. Governing bodies shouldtherefore obtain independent advice if they are unclear on their tax position.

14.6.2 Income Tax and National Insurance

Where individuals are engaged to work in relation to the Community Use activity,careful consideration should always be given to their status for tax purposes and anyobligation to operate PAYE. This responsibility will reside with the contractualemployer, or possibly with the person responsible for paying the individual. Thus, ifthe governing body employs an individual and pays him or her from the Private Fund,those obligations will reside with the governing body. If the individual is paid fromthe General Account, the PAYE responsibilities may reside with the LEA, but ineither case those administratively responsible at the ‘school’ will need to follow thenecessary procedures.

Self-employed persons should be engaged under written Contracts for Services.Where that person is an individual, it would be prudent to seek advance approval fromthe Status Inspector at the responsible Tax Office.

14.6.3 Corporation Tax

The governing bodies of schools are potentially liable to Corporation Tax although, ingeneral, the charity exemptions in the Taxes Acts will apply to their activities.

However, those Acts provide only for a limited exemption from tax for the profits oftrades carried on by Charities. To qualify for exemption, the profit must be usedsolely for the purposes of the Charity. There are other conditions to be met, if theprofits are to be exempt from Tax. Governing bodies should therefore seekindependent professional advice, and/or advance clearance from the Inland Revenue,on their proposed course of action.

The governing body is potentially liable to Corporation Tax on any income from, or

generated by, community facilities activities, but Inland Revenue have indicated thatthey will not levy any tax provided that:

• the activities are broadly educational, support the running of the school, or are

for charitable purposes. (The Financial Handbook for Schools, Part IV, Section7, Appendix A, provides further guidance.)

• the activities used to generate funds are not “business-like” in their scale ornature, although major fund-raising activities, and/or the income generated from


assets financed through these accounts, may not attract a tax liability. Priordiscussion with the Inland Revenue may be advisable where a private, voluntaryor trading account becomes involved in major initiatives.

• the accounts are subject to regular and adequate audit. 14.6.4 Construction Industry Scheme

Governing bodies are generally required to abide by procedures issued by theAuthority in connection with the Construction Industry Scheme (CIS).Comprehensive guidance is shown in the Financial Handbook for Schools, Part IV,Section 14.

It should be noted that the LEA is compelled to operate CIS in schools because of itsstatus as a ‘Deemed Contractor’ under tax law. Thus, CIS applies both to buildingwork contracted for directly by the LEA as Principal and by governing bodies actingas its agent.

A governing body is not, however, a ‘Deemed Contractor’. Therefore where agoverning body contracts for construction work in its own right as Principal, withoutthe contractual involvement or ultimate responsibility of the LEA, then CIS will notapply. Professional or Inland Revenue advice should be sought in distinguishing suchcases.

14.7 Insurance

It is the responsibility of the governing body to make adequate arrangements for insuranceagainst risks arising from the exercise of the community facilities power. A governing bodyproposing to provide community facilities should, as an integral part of its plans, undertake anassessment of the insurance implications and costs, seeking professional advice if necessary.Details of the arrangements to be made should be included in the formal consultation materialsent to the County Council. Such insurance should not be funded from the school budgetshare.

The County Council will undertake its own assessment of the insurance arrangements madeby the governing bodies in respect of community facilities and, if it judges thosearrangements to be inadequate, may, if necessary, make arrangements itself, charging theresultant cost to the school. This is particularly to safeguard the Council against possiblethird party claims.

14.8 Health and safety

14.8.1 Extension of health and safety provisions

The health and safety provisions of the main Scheme extend to the communityfacilities power.


14.8.2 Criminal records clearance

The governing body is responsible for the costs of securing Criminal Records Bureauclearance for all adults involved in community activities taking place during theschool day. Governing bodies are free to pass on such costs to a funding partner aspart of an agreement with that partner.

Financial Handbook for Schools Hertfordshire County CouncilPart II: Scheme for Financing Schools Page 48 RESO3515 – Issue 3 : April 2003Annex A Schools to which the Scheme will apply

ANNEX A SCHOOLS TO WHICH THE SCHEME WILL APPLY

Abbey (C of E)VA PrimaryAbbots LangleyAbel SmithAboyne LodgeAdeyfieldAlban Wood Infant & NurseryAlban Wood JuniorAlbury (C of E) VA PrimaryAldbury (C of E) PrimaryAll Saints C of E Primary & NurseryAlmond Hill JuniorAmwell ViewAndrew’s Lane PrimaryAnstey FirstApplecroftArdeley St Lawrence (C of E) VA PrimaryArnett Hills JMIAshfield JuniorAshlynsAshtree PrimaryAshwell PrimaryAstley Cooper, TheAston St Mary’s (C of E) Aided PrimaryAycliffe Drive Primary

Barclay, TheBarkway VA (C of E) FirstBarley (C of E) VC FirstBarncroft PrimaryBarnwellBatchwoodBayford (C of E) VC PrimaryBeaumontBedmond Village Primary & NurseryBedwell PrimaryBeech Hyde Primary & NurseryBeechfieldBellgate PrimaryBelswains PrimaryBengeo PrimaryBenington (C of E) PrimaryBernard’s Heath InfantsBirchwood Avenue PrimaryBirchwood High

Bishop Wood (C of E) JuniorBishop’s Hatfield Girls’Bishop’s Stortford High, TheBonneygrove County PrimaryBournehall JMIBovingdon PrimaryBowmansgreen PrimaryBoxmoor HouseBoxmoor PrimaryBrandlesBreachwood Green JMIBreakspeareBridgewaterBroadfield InfantsBroadfield JuniorBrockswood PrimaryBromet PrimaryBrookland Infant & NurseryBrookland JuniorBrookmans ParkBroom Barns JMIBroxbourne, TheBroxbourne C of E PrimaryBurleigh PrimaryBurydale JuniorBushey HallBushey Heath PrimaryBushey Manor JuniorBushey Meads

Camp Primary & NurseryCamps Hill Community PrimaryCassiobury InfantCassiobury JuniorCavendish, TheCentral PrimaryChambersbury PrimaryChancellor’sChater InfantChater JuniorChaulden Infants’ & NurseryChaulden JuniorChauncy, TheCherry Tree Primary


CheshuntChorleywood PrimaryChrist Church (C of E), ChorleywoodChrist Church (C of E) VA Primary & Nursery, WareClore ShalomCoates Way JMI & NurseryCockernhoe Endowed C of E PrimaryCodicote (C of E) PrimaryCollenswoodCollett, TheColnbrookColney Heath JMICommonswoodCountess Anne VA (C of E) PrimaryCowley HillCrabtree Infants’Crabtree JuniorCranborne PrimaryCranbourne Primary, TheCreswick JMI & NurseryCuffleyCunningham Hill InfantCunningham Hill Junior Mixed

Dame Alice Owen’sDatchworth JMIDewhurst St Mary (C of E) PrimaryDivine Saviour RC PrimaryDownfield JMIDundale Primary & Nursery

Eastbrook PrimaryEastbury Farm JMI & NurseryEdwinstree (C of E) MiddleEssendon (C of E) Primary

Fair Field JuniorFairfields Primary & NurseryFairlands PrimaryFalconerFawbert & Barnard Infants’FearnhillFeatherstone Wood Primary & Nursery

Field InfantField JuniorFirs JuniorFive Oaks Primary & NurseryFlamsteadFlamstead End Infant & Nursery*Flamstead End JM** Amalgamating as Flamstead End PrimarySchool from 1 September 2003Fleetville Infants’Fleetville JuniorForres PrimaryFour Swannes PrimaryFrancis BaconFrancis Combe School & CommunityCollegeFreeman CollegeFurneaux Pelham C of E

Gaddesden Row JMIGade Valley JMI & NurseryGarden Fields JMIGarston Infants’Garston ManorGeorge Street PrimaryGiles Infants’Giles JuniorGoffsGoffs Oak JMI & NurseryGoldfield Infants’ & NurseryGrange JMGraveley JMIGreat Gaddesden (C of E) PrimaryGreen Lanes PrimaryGreenfields JMI & NurseryGreensideGreenway FirstGreneway, TheGrove Infant & Nursery, TheGrove Junior, TheGrove Road Primary

Hailey HallHammond JMI & NurseryHartsbourne Primary


Hartsfield JMIHarvey Road PrimaryHarwood Hill JMI & NurseryHavers, TheHaywood GroveHazelgrove PrimaryHeathcote, TheHeathlandsHemel Hempstead, TheHertford Heath JMIHertford St Andrew’s (C of E) PrimaryHertfordshire & Essex High, TheHertingfordbury County PrimaryHertsmere Jewish PrimaryHertswoodHexton JMIHigh Beeches PrimaryHigh Wych (C of E) PrimaryHighbury Infant & NurseryHighfield, TheHighover JMIHighwood PrimaryHillmead JMIHillshott Infant & NurseryHitchin Boys’Hitchin Girls’Hobbs Hill Wood PrimaryHobletts Manor Infants’Hobletts Manor JuniorHockerill Anglo-European CollegeHoldbrook PrimaryHollybush PrimaryHoltsmere End Infant & NurseryHoltsmere End JuniorHolwell PrimaryHoly Family RC JMI, TheHoly Rood RC Infants’Holy Rood RC JuniorHoly Trinity (C of E) PrimaryHolywell JMIHomerswood PrimaryHormead (C of E) PrimaryHow Wood PrimaryHowe Dell PrimaryHunsdon JMIHurst Drive Primary

Ickleford PrimaryIcknield Infant & NurseryIcknield Walk First

JenynsJohn F Kennedy RCJohn Henry Newman RC, TheJohn Warner, TheJupiter Drive JMI

Kenilworth PrimaryKilligrew Infant & NurseryKilligrew JuniorKimpton PrimaryKings LangleyKings Langley PrimaryKingshill InfantKingsway Infants’Kingsway JuniorKnebworth PrimaryKnights Templar, TheKnightsfieldKnutsford

Ladbrooke JMILakesideLannock JMILarwoodLaurance Haines Primary & Nursery, TheLayston (C of E) FirstLea Farm JuniorLea Primary, TheLeavesden Green JMILetchmore Infants’ & NurseryLeventhorpe, TheLeverstock Green (C of E) PrimaryLey Park PrimaryLeys Primary & Nursery, TheLime Walk PrimaryLittle Furze JMILittle Gaddesden (C of E) VA PrimaryLittle Green Junior


Little Hadham PrimaryLittle Heath PrimaryLittle Munden (C of E) VC PrimaryLittle Reddings PrimaryLodge Farm PrimaryLondon Colney JMILong Marston VA (C of E) PrimaryLongdeanLonglands Primary & NurseryLongmeadow Infant & NurseryLongmeadow JuniorLonsdaleLordship Farm PrimaryLoreto RC Girls’

Malvern Way Infant & NurseryMandeville Primary, SawbridgeworthMandeville Primary, St AlbansManland PrimaryManor Fields PrimaryMaple Cross JMIMapleMargaret Wix PrimaryMarkyate Village School & NurseryMarlboroughMarriottsMartindale Primary & NurseryMartins Wood PrimaryMary Exton JMIMayfield Infants’ & NurseryMeadow WoodMeriden, TheMeridian, TheMerry Hill Infant & NurseryMeryfield PrimaryMicklem PrimaryMiddletonMill MeadMillbrookMillfield First & NurseryMonk’s WalkMonksmeadMorgans JMIMoss Bury Primary & NurseryMount GraceMount Pleasant JMIMusley Infant (until 31 August 2003)

Nascot Wood Infant & NurseryNascot Wood JuniorNash Mills (C of E) PrimaryNew Briars Primary & NurseryNewberries JMINicholas Breakspear RCNobel, TheNorthaw (C of E) PrimaryNorthchurch St Mary’sNorthfields Infants & NurseryNorthgate Primary

Oaklands PrimaryOakmere PrimaryOakwood PrimaryOffley Endowed JMIOnslow St Audrey’sOrchard Primary, TheOughtonPrimaryOur Lady RC Primary, Welwyn Gdn CityOur Lady’s RC Primary, HitchinOxhey Infants’Oxhey Wood Primary

Panshanger PrimaryPark Street (C of E) VA PrimaryParkgate Infants & NurseryParkgate JuniorParkside Community PrimaryParmiter’sPeartree PrimaryPeartree Spring Infants’Peartree Spring JuniorPines JMI, The (until 31 August 2003)Pin Green Primary & NurseryPinewoodPirtonPixies Hill JMIPixmore JuniorPonsbourne St Mary’s JMIPope Paul RC PrimaryPotten End First (C of E)Prae Wood PrimaryPresdalesPreston Primary (VC)


Priors Wood PrimaryPriory, ThePuller Memorial (C of E) VA PrimaryPurwell Primary

Queens’

Radburn PrimaryRalph SadleirRedbourn Infants’ SchoolRedbourn Junior MixedReddings Primary, TheReed FirstReedings JuniorRichard HaleRichard Whittington Primary, TheRickmansworthRickmansworth Park JMIRoebuck PrimaryRoger de Clare (C of E) VC First and NurseryRoman Way FirstRoselands PrimaryRossgate PrimaryRound Diamond JMIRoundwood ParkRoundwood PrimaryRowans PrimaryRoysia MiddleRussell, TheRyde, TheRyelands Primary

Sacred Heart RC Primary, WareSacred Heart RC Primary, BusheySaffron Green PrimarySamuel Lucas JMISandon JMISandridgeSandringhamSarratt C of ESauncey Wood PrimarySele, The

Shenley PrimaryShephall Green Infant & NurseryShepherd JMI & NurserySheredesSheredes PrimarySimon BalleSir Frederic OsbornSir John LawesSkyswood PrimarySouthfieldSouth Hill PrimarySpellbrook PrimarySpencer JuniorSpringmead JMISt Adrian RC PrimarySt Alban & Stephen RC Infant & NurserySt Alban & Stephen RC JuniorSt Albert the Great RC PrimarySt Albans Girls’St Andrew’s (C of E) Primary & Nursery, Much HadhamSt Andrew’s (C of E) VA Primary, HitchinSt Andrew’s (C of E) VC Primary, Stanstead AbbotsSt Anthony’s RC PrimarySt Augustine’s RC PrimarySt Bartholomew’s (C of E) VA PrimarySt Bernadette RC RC PrimarySt Catherine of Siena RC PrimarySt Catherine’s (C of E) Primary, WareSt Catherine’s VC (C of E) Primary,

HoddesdonSt Clement DanesSt Clement’s (C of E) VA JuniorSt Cross RC PrimarySt Cuthbert Mayne RC JuniorSt Dominic RC PrimarySt George’sSt Giles’ (C of E) PrimarySt Helen’s (C of E) PrimarySt Ippolyts C of E (Aided) PrimarySt Joan of Arc RCSt John Fisher RC JMISt John RC Primary, Mill End, RickmansworthSt John the Baptist VA (C of E) Primary, Ware


St John’s (C of E) Infant & Nursery, RadlettSt John’s RC Primary, BaldockSt John’s VA (C of E) Primary, DigswellSt John’s VA (C of E) Primary, LemsfordSt Joseph’s RC Primary, Waltham CrossSt Joseph’s Catholic Primary, Bishops StortfordSt Joseph’s RC Primary, HertfordSt Joseph’s RC Primary, WatfordSt Luke’sSt Margaret Clitherow RC PrimarySt Mary’s (C of E) VA High, CheshuntSt Mary’s (C of E) Primary, RickmansworthSt Mary’s Infants’, BaldockSt Mary’s JMI, North MymmsSt Mary’s Junior Mixed, BaldockSt Mary’s RC Primary, RoystonSt Mary’s RC, Bishops StortfordSt Mary’s VC (C of E), WareSt Meryl JMISt Michael’s (C of E) VA Primary Bishops StortfordSt Michael’s (C of E) VA Primary, St AlbansSt Michael’s RC, WatfordSt Michael’s Woolmer Green PrimarySt Nicholas (C of E) JMI, NortonSt Nicholas (C of E) Primary & Nursery, StevenageSt Nicholas (C of E) VA Primary, HarpendenSt Nicholas Elstree (C of E) VA PrimarySt Paul’s (C of E) VA Primary, ChipperfieldSt Paul’s (C of E) Primary, LangleyburySt Paul’s RC Primary, Waltham CrossSt Paul’s Walden PrimarySt Peter’s (C of E) VA Primary, Mill EndSt Peter’s, St AlbansSt Philip Howard RC PrimarySt Rose’s RC Infants’St Teresa’s RC PrimarySt Thomas More RC Primary, LetchworthSt Thomas More RC Primary, BerkhamstedSt Thomas of Canterbury RC PrimarySt Vincent de Paul RC PrimaryStanboroughStapleford Primary

StonehillStrathmore Infant & NurseryStream Woods JMIStudlands Rise FirstSummercroft Infant & NurserySummercroft JuniorSummerswood PrimarySunnybank PrimarySwallow Dell PrimarySwing Gate First & Nursery

Tanners Wood JMITannery DriftTemplewood PrimaryTewin C of E VA PrimaryTherfield FirstThomas Alleyne, TheThomas Coram (C of E) VA Middle, TheThorley Hill PrimaryThorn Grove PrimaryThundridge (C of E) PrimaryTonwell St Mary’s (C of E) PrimaryTower PrimaryTownsendTringTrotts Hill Primary & NurseryTudor JMI & NurseryTurnfordTwo Waters Primary

Valley, TheVerulamVictoria (C of E) First

Walkern PrimaryWareside (C of E) PrimaryWarren Dell PrimaryWatchlytesWatford Grammar School for BoysWatford Grammar School for GirlsWatling ViewWatton-at-Stone Primary & NurseryWelwyn St Mary’s (C of E) VA PrimaryWestbury Primary & Nursery


Westfield Community, WatfordWestfield First, BerkhamstedWestfield Primary, HoddesdonWeston PrimaryWheatcroft PrimaryWheatfields Infants’Wheatfields Junior MixedWhitehill JuniorWidfordWilbury JuniorWilliam Ransom Primary, TheWilshere-Dacre JuniorWindermere JMIWood EndWoodfieldWoodhallWoodlandsWoodside PrimaryWoolenwick Infants’Woolenwick JuniorWoolgroveWroxham, TheWymondley JMI

Yorke Mead Primary

Financial Handbook for Schools Hertfordshire County CouncilPart II: Scheme for Financing Schools Page 56 RESO3515 – Issue 3 : April 2003Annex B Responsibility for repairs and

maintenance

ANNEX B RESPONSIBILITY FOR REPAIRS ANDMAINTENANCE

Responsibility of:-Description Schooll LEA

STRUCTURE

Foundations - All structural work to foundations including underpinning orpropping, piles, ground beams, piers, bases and brick or concrete footings.

L

Frames - All structural members in steel, timber, or concrete frames. L

Floors - Floor structure and ducting excluding screeds and finishes. L

Flat roofs – Replacement of all or substantially all of the structure,screed, insulation, finish, edge trim, fascia and roof lights.

Repair/ replacement of part of structure, screed, insulation, finish, edge trims,flashings and fascias.

Note: responsibility for the repair/replacement of part of structure, screedetc. is the responsibility of secondary schools. For primary and specialschools the responsibility lies with the LEA.

Redecoration of all associated painted areas. Reglazing, repair andreplacement of individual roof-lights.

S

S

L

L

Pitched roofs – All as for flat roofs.

Rainwater goods - All rainwater goods including rainwater tanks, butts,parapet outlets and perimeter gutters.Cleaning and clearing out gutters and downpipes.

S

S

External walls - Repair of an existing structure e.g. repointing/recladding aproportion of a wall where failure has occurred.

Renewal of cladding, repointing to most or all of a building.

S

L

External surfaces - Applied surface finishes, i.e. rendering, tile hanging,pointing, balcony rails or fronts.

S

Windows and doors - repair/renewal of individual frames, windows anddoors.

S

Repair/renewal of ironmongery including cutting keys. S


maintenance


STRUCTURE (Contd)

Replacement of all or substantially all windows and doors to completeelevations.

L

Glazing - To include all glazing throughout (i.e. windows, doors, borrowedlights, rooflights, verandahs, window walls etc.)

S

Staircases - Complete renewal of staircase structure.

Repair/renewal of balustrades, handrails, treads, nosings and floor finishes. S

L

Ceilings - Suspended ceiling structures, plaster, tiles or sheet finishes,including suspended ceiling finishes.

S

Timber preservations - All work associated with the prevention oreradication of wood rot or beetle (except through school maintenancedefault).

L

External redecoration - Cleaning down and decorating. S

FINISHINGS, FURNITURE AND FITTINGS

Internal redecoration - Cleaning down, preparing and decorating to walls,ceiling and all internal wood and metal work usually painted (except schoolmeals kitchens in non-residential schools).

Responsibility for internal redecoration of school meals kitchens lies withthe school, except in the case of nursery schools, which do not haveresponsibility for school meals delegated to them.

S

Internal wall finishes - Plaster, tiles or sheet wall finishes. Pin up andnotice boards.

S

Floor coverings and finishes - All floor and stair coverings includingskirtings, nosings etc. of carpets, lino, PVC sheeting or tiles, cover andexpansion strips.

Repair, sanding and sealing of woodblock and wood strip floors andgranwood tile floors.

Complete replacement of a woodblock, wood strip or granwood tile floor.

S

S

L


maintenance


FINISHINGS, FURNITURE & FITTINGS (contd)

Staircase coverings and finishes - As above. S

Internal joinery fixtures - Cupboards, shelving, picture rails, coat rails,notice or display boards, fixed benches, (excluding school meals kitchens innon-residential schools).

S

Ceiling finishes - Plaster, tiles or sheet finishes, including suspended ceilingfinishes (but not structural members).

S

Fixed seating - All permanent internal fixed seating together with itscoverings.

S

Gymnasium equipment - Repairs of all fixed sports and gymnasiumequipment including court markings in sports halls, gymnasiums, halls, etc.

S

Blinds, nameplates, curtains etc. - Supply and the fixing of all internalsigns, blinds (roller and Venetian, vertical, dim-out, etc.) curtain tracks, etc.,and their cleaning.

S

Solid fuel enclosed fires and fireplaces – Includes fire grating,cheeks and hearth.

S

WATER SERVICES

Internal water supply, distribution taps and valves - Cold water servicepiping and valves, and booster pumps. Hot water distribution service pipingand valves (i.e. between hot water storage and taps). Hot and cold waterstorage tanks, cylinders and cistern and overflows to same. Insulation to theforegoing items.Annual servicing of cold water tanks and siliphos units.

S

S

Sanitary fittings - Repair and replacement of sinks and drainers, baths,washbasins, shower trays, WWPs, WC suites, drinking fountains.

Taps and fittings, stands, brackets and bath panels in connection withforegoing items (including enamel re-painting inside baths).

S

S

Waste pipework - Cleansing including traps. Repair, renewal of traps,waste pipes, soil and termination pipes, anti-syphonage pipes, sleeves andflashings to pipes internally and externally.

S


maintenance


EXTERNAL WORKS

Demolition - Taking down, removal and clearance of sites of buildings,including sealing off all drains and engineering services.

L

Roads, playgrounds, car parks and paths – Access paths, courts, patios,drying areas, steps, fire appliance roads, hard standings, car parks,playgrounds, garage approaches, roads.

Car park and playground markings.

S

S

Exterior walls, piers, gates and retaining walls - All perimeter orboundary walls, piers, gates, playwalls.

Retaining walls - repointing, repairs, replacement of copings.

Retaining walls - replacement of all or substantially all of a wall.

S

S

L

Fencing - All fencings and their gates, both to boundaries and withinthe site including screens to bin or kitchen areas, etc.

S

External joinery fixtures - Sign boards, notices, name plates, flag poles andother external joinery fixtures.

S

Bins, refuse containers, clothes line posts etc. - Up-keep and maintenanceof refuse containers, litter bins, etc.

S

Pest control - Special works carried out to the fabric of a building solelythrough the need for disinfection (e.g. insecticidal spraying, wasp and rodentcontrol).

S

Upkeep of grounds - Grounds maintenance, playing field amenities,landscaping and boundary hedging.

S

Mains drainage - Drains, gullies, grease traps and manholes betweenbuildings and sewers. Includes all internal floor gratings, channels, covers,etc., including sewage plant, soakaways, catchment pits.

Cleansing to the above, clearing and unblocking drains, gullies andmanholes.

S

S

Ancillary buildings - All building maintenance to garages, huts,greenhouses etc.

S


maintenance


EXTERNAL WORKS (Contd.)

Temporary buildings - All external building maintenance work onrelocatable or demountable or similar buildings.

S

External services - All gas/electrical/water/drainage services, pipework andcable repairs and replacements.

Replacement of external services where the cost is in excess of £6,000

S

L

MISCELLANEOUS

Asbestos encapsulation – including fees for testing etc.

Asbestos removal - Including fees for testing etc.Where the cost is in excess of £1,500 and the removal of damaged asbestosis identified as being required by the County Council’s asbestos consultants

All other asbestos removal

S

S

L

Vandalism/malicious damage - shall be the responsibility of theschool or LEA respectively, depending upon the type of damage forwhich each is liable.

ENGINEERING

ELECTRICAL (INCLUDING TEMPORARY BUILDINGS)

Servicing - All work of testing, adjustment and repair including cyclicalmaintenance service contracts of all electrical plant and equipment as definedbelow:-

General electrical installation - All switchgear and interconnecting cables,protective conduits and trunking and fixings, including labels and circuitlists. Fixed sub-circuit wiring and conduit, trunking or other means ofmechanical protection including fixings, wiring accessories and conduitboxes, luminares including those inaccessible to caretakers. All externallighting including columns, floodlights, road lighting, interconnecting wiringand control equipment, time switches, photo-electric cells, all power suppliesand wiring to temporary classrooms.

S


maintenance


ENGINEERING

ELECTRICAL (INCLUDING TEMPORARY BUILDINGS) (Contd.)

Alarm, emergency and time systems - All battery units includingbatteries, interconnections, cabinets and control equipment used foremergency lighting, fire detection and alarm systems, intruder alarmsystems (except resulting after activating), master clock systems and callbell systems. All wiring systems associated with these systems includinglow voltage types. All emergency lighting luminares including self-contained types, operating relays and associated controls.

S

All fire detection and alarm system automatic detectors, (heat or smoke),break glass pushes, sounders, control and indicator panels, electromagneticdoor holders (but excluding door closers). All clocks and connectorsconnected to a master clock system including controllers and master clocks.All lesson change sounders and programmers. All call bell systemsincluding pushes, reset units meter and indicator boards, sounders, relays,hand sets.

S

All intruder alarm system detectors, sounders, alarm lights, control panels,electric override switches and wiring, including CCTV installations,cameras, monitors. All door access systems including pushes, card readers,power supply, electric door releases and wiring.Reset of intruder alarms, fire detection or other similar systemsincluding time controls and time clocks.

S

Replacement of all lamps, tubes and plugs, minor repairs to clocks andbells, maintenance of any systems purchased by schools.

All portable equipment, cleaning, maintenance and replacements.

S

S

Fan convectors - All internal wiring, external flexes and connections,isolators and switches, controls, filter elements, fans and motors.

Cleaning heat emitting batteries and casings of heater units.

Fixed wiring supplying heaters including wall mounted remote thermostatsand external controls, isolators, time switches and frost protection controls.

S

S

S


maintenance

Responsibility ofDescription School LEAENGINEERING

ELECTRICAL (INCLUDING TEMPORARY BUILDINGS) (Contd)

Heating and ventilation (electrical elements) including temporarybuildings – Electric storage and instantaneous water heating units andshower units, wall or floor mounting including immersion heaters incylinders. Elements, thermostats, controls, time switches, isolators andfinal flexible connection to heater.

S

Off peak heating units, including Electricaire type units, elements,thermostats, cut-out controls, internal fans, wiring, refractory blocks,internal thermal insulation, grilles, casings, external controls, thermostatsand final connections.

S

Electric incinerators and macerators including elements, combustionlining, controls, casing, switches, and isolators.

S

Extract fans, wall and roof mounted, including impellers, motors,capacitors, mountings, covers, controllers, isolators, wiring, flexibleconnections (excluding cleaning surfaces of canopies and fan apertures).

S

Cleaning equipment and fans generally, including ducting andcanopies.

S

Canteen kitchen equipment – Repair and replacement of fixed cookingequipment, ovens, ranges, fryers, boilers, boiling pans, steamers, roastingovens, grilles and mixers.Portable heated trolleys, complete. Refrigerators, freezers, walk-incold rooms complete. Fixed water boilers, sterilising sink heaters andcontrols.Servicing of all kitchen equipment.

Note: responsibility for these items lies with the school, except in thecase of nursery schools, which do not have responsibility for schoolmeals delegated to them.

))) See note))))

Laundry equipment - Repair and servicing of fixed washing machines,tumble dryers, spin dryers, hydro-extractors and rotary irons.

S


maintenance

Responsibility of:-Description School LEA

ENGINEERING

ELECTRICAL (INCLUDING TEMPORARY BUILDINGS) (Contd)

Lifts, hoists, barriers and lifting aids - The whole of the passenger orgoods lift installation including wiring, controls, doors, guides, motor,gearbox, pulleys, cables, safety equipment and lift car finishes. Electricallyoperated doors including motors, controls, wiring, door glazing and tracks.Window cleaning cradles, beams, cables and winches.

L

Specialist external equipment - Structure, earthing and lightningprotection of aerial masts for communication aerials, aerial array andcoaxial cabling. Television aerials, amplifiers, outlets and cabling systems.Lightning conductors and external earthing systems complete.

S

Standby generators - Complete installation including wiring, controlpanel, motor, batteries, alternator, exhaust system and acoustic enclosures.

S

Temporary classrooms - The whole of the installation within thetemporary building including switchgear, wiring, lighting, power, heatingand the supply cable including catenary and poles from the permanentbuilding to the classroom.

S

Capital replacement - replacement of wiring, fire alarm systems,distribution boards, mains intake and internal lighting to all or substantiallyall of a block ( except temporary classrooms ).

L

MECHANICAL (INCLUDING TEMPORARY BUILDINGS)

Servicing - All work of testing, adjustment and repair including cyclicalmaintenance service contracts of all mechanical plant and equipment asdefined below:-

S

Forced draught and atmospheric gas fired burners - Forced draught andatmospheric gas fired heating and HWS burners including burner train,flame failure controls, thermostats, gas booster sets and refractories.

S


maintenance


ENGINEERING

MECHANICAL (INCLUDING TEMPORARY BUILDINGS) (Contd.)

Pressure jet oil fired burners - Pressure jet oil fired heating andHWS burners including burner train, flame failure controls, thermostats andrefractories.

S

Automatic controls and boiler house electrics - Heating and HWSheating controls, including zone controls, optimum start controls, energymanagement controls, control panels, detectors, motorised valves andactuators.

S

Smoke density alarms, including sensors and control panels, gasdetectors, including sensors, control panels, thermal safety devices, thermallinks, emergency stop switches and solenoid valves. Mains signallingsystems controlling heating and HWS systems. General mains power, lowvoltage and lighting in boiler house.

S

Boiler house ancillary equipment - Heating circulating pumps, HWSprimary and secondary pumps and sump pumps. HWS storage cylindersand calorifiers, isolating valves, pipework and fittings, thermal insulation,temperature/altitude and oil tank content gauges. Oil storage tanks,including emergency shut off devices, valves and thermal linkages, traceheating devices and associated electrical wiring, heating elements, controlpanel, thermostats and detectors. (Include oil storage tanks for electricalgenerators).

S

Boilers - LP and MPHW heating and HWS boilers including cleaningaccess doors, door seals, hinges, fasteners, boiler casing and flue cleanbrushes. Boiler house steel flues including dampers, explosion relief doors,draught diverters, flue stabilisers and annual cleaning.

Additional boiler cleaning between contract service intervals.

Replacement of complete boiler.

S

S

L

All chimneys Inspection of chimneys

Steel chimneys – Repair or replace guy ropes, holding down bolts, flanges,webbs and gussets, cladding and insulation trims and cowls, cleaning accessdoors and condense drain points and external protective finishes.

S

S


maintenance


ENGINEERING

MECHANICAL (INCLUDING TEMPORARY BUILDINGS)(Contd)

Replacement of main steel chimney structure.

Masonry chimneys Repairs up to the value of £1,500

Repairs in excess of £1,500

S

L

L

Heating, HWS and General Service Distribution Systems - LP andMPHW heating, HWS, cold water and gas distribution services includingmild steel, copper polyethylene, ABS and PVC pipework, valves andfittings at tap, appliance or service point. Feed expansion tanks, coldwater storage tanks, remote HWS storage cylinders and calorifiers,thermal insulation, radiators, natural convector, pipe coils and heatedtowel rails. All external mains distribution services (gas, water, etc.).

Replacement of distribution mains with a cost greater than £6,000.

S

L

Shower mixing valves - Manual and thermostatically controlled showermixing valves and blenders including strainers, check valves and isolatingvalves.

Shower heads.

S

S

Direct gas fired hot water units - Direct gas fired hot water heating unitsincluding flues where appropriate.

S

Special pump sets - Including sewage pumps, water booster pump sets,fixed pump lifting gear, cleaning or emptying of sewage chambers.

S

Air conditioning and ventilation equipment - Air handling units includingcabinets, heating/cooling coils, heat recovery units, fans, motors, filters,dampers, quadrants damper motors and linkages, ductwork and thermalinsulation and acoustic materials. Condensing units, compressors, pipeworkand fittings. Control panels and associated automatic controls. Ventilationfans, controllers, controls, grilles, louvres, dampers, ductwork and greasefilters.

Cleaning of ductwork and simple wall or roof fans.

S

S


maintenance


ENGINEERING


Direct oil and gas fired room heaters - Direct oil fired heater unitsincluding guards, flues, controls, thermostats, dedicated oil storage tanks, oilcontents gauges, oil pipework services and fittings.

S

Fan convector heaters - Fan convector heater casings, grilles, heatexchangers, isolating valves and fittings, remote thermostats.

S

Dishwashers - Repair and servicing of equipment including shelving, racks,ventilation equipment and ductwork where appropriate, all associatedinternal controls, heating elements, pumps and motors, etc.

S

Water softeners - Including automatic controls, storage and regenerationvessels, inline filters, strainers, check valves, water pressure regulators.

Regeneration salts cleaning unit and other water treatment chemicals.

S

S

Non canteen gas cooking equipment - Gas cooking equipment includingcontrols, burners, thermostats and all fittings, motors, fans, ignition systems,water level control devices and servicing.

S

Swimming pools - joint use costs in accordance with theagreement in force - Filtration plant, circulation pumps and controls, watertreatment chemical dosing equipment all distribution pipework includingvacuum lines and skimmers pots.

S

Heating boilers and burners including their fuel storage tanks and associatedfittings, heat exchangers, humidity and ventilation controls, ventilation fans,heat recovering units and their associated controls. Solar heating plant andequipment.

S

Chemical dosing, cleaning and minor maintenance. S

Fire fighting equipment - Portable gas, water and foam extinguishers, fireblankets and their containers including all servicing.

Fixed hose reels, auto rewind mechanisms and nozzles.

S

S


maintenance


ENGINEERING


Fume cupboards - Extract fans, motors, ductwork, duct terminals, electricalsafety devices, warning signs and test labels and gas/water/electricalservices.

S

Pressure vessels for compressed air – Statutory inspection and insurance. S

Bottled gas - Storage installation. S

Fixed gas installations - For natural gas supplied by British Gas or pipedgases from storage installations.

S

NOTE

Voluntary schools - Maintenance work which is the responsibility of schoolgovernors or managers and which is rechargeable to them under existingarrangements is not varied to increase the LEA's maintenance responsibilityas defined in this schedule.

Financial Handbook for Schools Hertfordshire County CouncilPart II: Scheme for Financing Schools Page 68 RESO3515 – Issue 3 : April 2003Annex C: Approved banks and building societies

ANNEX C APPROVED BANKS AND BUILDING SOCIETIES

United Kingdom branches of the following:

Abbey National

Bank of Scotland

Barclays

Halifax

HSBC

Lloyds

National Westminster

Nationwide Building Society

Royal Bank of Scotland

Woolwich

Financial Handbook for Schools Hertfordshire County CouncilPart II: Scheme for Financing Schools Page 69 RESO3515 – Issue 3 : April 2003Annex C: Approved banks and building societies

Financial Handbook for Schools Hertfordshire County CouncilPart II: Scheme for Financing Schools Page 70 RESO3515 – Issue 3 : April 2003Annex D: National Westminster Bank:

pooling arrangements for schools

ANNEX D NATIONAL WESTMINSTER BANK: POOLINGARRANGEMENTS FOR SCHOOLS

Schools banking with the National Westminster Bank within the pooling arrangementsreceive their full budget share on 1 April each year. This is credited to their General Account.This has the advantage over payment of instalments, in that cash flow monitoring is notrequired.

Interest is transferred from HCC’s General Account into the school’s General Account on thelast working day of each month. This is calculated at base rate on the cleared balances for thatmonth, including balances brought forward.

The interest deduction from the budget share is calculated at the estimated average baserate for the year on the budget share for the year (excluding balances brought forward).If the actual base rate during the year exceeds the estimate, schools keep all theadditional interest. If the actual rate falls more than 0.5% below the estimate, schoolsreceive compensation for the shortfall.

The rate of interest is greater than on other accounts available to schools. It is equivalent tothe earning power of a high interest deposit account. In addition, since it is a single account:

• the amount of interest earned is maximised• it eliminates the need to monitor account balances, and the inconvenience of having to

switch funds repeatedly between accounts• reconciliation between bank and school records is simplified.

Schools are also able to make instant withdrawals without loss of interest.

There is no annual maintenance fee for the account. Bank charges relate only to transactionsfor which funds have been devolved to schools. The bank charges, set out in Part IV, Section6 of this Handbook , are substantially lower than those on offer to other standard smallbusiness customers.

Schools within the pooling arrangement may also to have one Fund Account which attractsinterest at 1% below base rate. There is no interest clawback in respect of this.

Administration of banking arrangements for schools within the pooling arrangements iscarried out by the School Funding Unit.

Financial Handbook for Schools Hertfordshire County CouncilPart II: Scheme for Financing Schools Page 71 RESO3515 – Issue 3 : April 2003Annex D: National Westminster Bank:

pooling arrangements for schools

Financial Handbook for Schools Hertfordshire County CouncilPart II: Scheme for Financing Schools Page 72 RESO3515 – Issue 3 : April 2003Annex E: Health and safety

ANNEX E HEALTH AND SAFETY

The responsibilities on schools to manage Health and Safety are set out fully in thedepartmental “Health & Safety: Policy and Guidance” manual, and in the County Policies andGuidance manual.

Governors have responsibility for the duty under Section 4 of the Health and Safety at Worketc. Act 1974. as persons who have control of non-domestic premises made available as aplace of work to persons who are not their employees. The duty is to take such measures asare reasonable for a person in his/her position to ensure, so far as is reasonably practicable,that the premises are safe and without risk to health.

In accordance with the School Standards & Framework Act 1998, the maintenance ofpremises (excluding structural repairs and capital expenditure) is the responsibility of schools.The division of responsibility between the Authority and the governors is set out in Annex B.Where a repair is the responsibility of the Authority, governors are still responsible fornotifying the Authority of any hazard which comes to their attention.

The expected cost of repairs which are the responsibility of the governors will be included inthe individual schools budget, and allocated to schools through the formula.

Where the governing body of a school with a delegated budget fails to comply with theAuthority’s policy on Health and Safety, the Authority will arrange for the required work tobe carried out, and will charge the costs to the school’s budget (see section 6.2.4).

Financial Handbook for Schools Hertfordshire County CouncilPart II: Scheme for Financing Schools Page 5 RESO3515 – Issue 3 : April 2003Glossary to Scheme for Financing Schools

ANNEX F DfES STATEMENT ON BEST VALUE ANDSCHOOLS

1. This statement is intended to assist schools in considering the relevance of best valueprinciples to the expenditure of funds from their delegated budget share. Whensubmitting annual budget plans, schools are required to say how best value principlesare being followed.

2. Best value will be a statutory duty to deliver services to clear standards, covering bothcost and quality, the most effective, economic and efficient means available.Legislation is to place a duty on local authorities to secure best value in respect of theway in which they exercise their functions. The new duty is not intended to apply tothose functions which are exercised by the governing bodies of LEA maintainedschools. However, schools will be encouraged to adopt the best value performancemanagement framework.

3. In relation to schools and expenditure from delegated budgets, the main features of bestvalue can be summarised as a need for the governing body of a school to ensure:

a. the existence of a programme of performance review which will aim for continualimprovement. Existing mechanisms such as school development plans and post-OFSTED inspection plans can be developed to satisfy the requirements forreview. The reviews should include:- challenging how and why a service is provided (including consideration of

alternative providers);- comparison of performance against other schools taking into account the

views of parents and pupils;- mechanisms to consult stakeholders, especially parents and pupils;- embracing competition as a means of securing efficient and effective

services.

b. the development of a framework of performance indicators and targets which willprovide a clear practical expression of a school’s performance, taking nationalrequirements into account;

c. that the following are included in school development plans:- a summary of objectives and strategy for the future;- forward targets on an annual and longer term basis;- description of the means by which performance targets will be achieved;- a report on current performance

d. that internal and external audit takes place ensuring that performance informationis scrutinised. LEA oversight of school finances provides external review.


4. The independent inspection and intervention elements of the best value framework willbe the responsibility of other bodies and therefore not relevant to demonstration by agoverning body of adherence to best value principles.


ANNEX G FEES TO BE DEDUCTED FROM TEACHERS’SALARIES AND REMITTED TO THE GENERALTEACHING COUNCIL FOR ENGLAND

The General Teaching Council for England (Deduction of Fees) Regulations 2001 (“theRegulations”, S.I. 2001 No. 3993) came into force on 10 January 2002. The Regulationsapply to teachers at maintained schools registered with the General Teaching Council forEngland (“the GTC”) or required to be so registered by the Teachers (CompulsoryRegistration) (England) Regulations 2001 (S.I. 2001 No.1266). The Regulations place a dutyon the employer of such teachers to deduct and remit the GTC fee in respect of a teacher whohas not already paid the fee to the GTC where the GTC has notified the employer to deductand remit the fee of that teacher. This includes teachers who have indicated to the GTC thatthey wish to pay the fee by a salary deduction as well as teachers who have not indicated howthey wish to pay the fee.

In order to ensure the performance of the duties to deduct and remit the fee imposed onemployers by the Regulations the following conditions are imposed on the Authority andgoverning bodies of all maintained schools covered by this Scheme in relation to their budgetshares and come into effect on 28 February 2002:

1. By virtue of section 46 of the School Standards and Framework Act 1998 and theregulations made under that section (at present the Financing of Maintained Schools(England) Regulations 2001 (S.I. 2001 No.475, Part II and Schedule 1) the costs ofpayroll administration for teachers in the Authority’s maintained schools fall to be metfrom the budget shares which are allocated to governing bodies pursuant to section 47of the Act, and which are delegated to them pursuant to sections 49-50. Accordingly,by virtue of Chapter IV of Part II of that Act and this Scheme, governing bodies ofmaintained schools are responsible for making suitable arrangements (or ensuring thatsuch arrangements are made) for the administration of payroll services in respect oftheir teachers.

2. A governing body of a community school, community special school or a voluntarycontrolled school, though not the employer of the teachers at such a school, shall:-

a. where the governing body has entered into any arrangement or agreement withthe Authority to provide payroll services, ensure that any such arrangement oragreement is amended to allow for the deduction and remittance of fees by theAuthority to the GTC. The governing body shall meet any consequential costsfrom the school’s budget share;

b. where the governing body has entered into any arrangement or agreement with

a person other than the Authority to provide payroll services, ensure that anysuch arrangement or agreement is amended to allow for the deduction and


remittance of fees by that person to the Authority or directly to the GTC wherethis has been agreed between the GTC and the Authority. The governing bodyshall meet any consequential costs from the school’s budget share; and

c. where the governing body directly administers the payroll, deduct and remit

the fees to the Authority or directly to the GTC where this has been agreedbetween the GTC and the Authority. The governing body shall meet anyconsequential costs from the school’s budget share.

3. A governing body of a foundation school, a foundation special school or a voluntaryaided school, as the employer of its teachers, is by virtue of the Regulations under aduty to deduct (or arrange for the deduction of) the fee and to remit the fee to the GTC.Accordingly, a governing body shall:-

a. where the governing body has entered into any arrangement or agreement withthe Authority to provide payroll services, ensure that any such arrangement oragreement is amended to allow for the deduction and remittance of the fees bythe Authority to the GTC on the governing body’s behalf. The Authority shallagree to any such amendment. The governing body shall meet anyconsequential costs from the school’s budget share;

b. where the governing body has entered into any arrangement or agreement with

a person other than the Authority to provide payroll services, ensure that anysuch arrangement or agreement is amended to allow for the deduction andremittance of the fees by that person to the GTC or to the governing body foronward transmission to GTC. The governing body shall meet anyconsequential costs from the school’s budget share; and

c. where the governing body directly administers the payroll, deduct and remit

the fees to the GTC. The governing body shall meet any consequential costsfrom the school’s budget share.

4. All this shall be done whether the funding for the salary payments is paid to theAuthority by the school from budget share instalments which have been held by theschool in an independent bank account, or the salary costs are directly charged by theAuthority to the school’s budget share account.


GLOSSARY TO THE SCHEME FOR FINANCING SCHOOLS

ABS Acrilonitrile butadiene styreneAMG Annual maintenance grantAVC Additional voluntary contributionsCCTV Closed circuit televisionCIPFA Chartered Institute of Public Finance AccountantsCIS Construction Industry SchemeCSCS County Supplies and Contract ServicesDfES Department for Education & SkillsEU European UnionHCC Hertfordshire County CouncilHWS Hot water servicesISB Individual schools budgetJMI Junior mixed infantsJPs Justices of the PeaceLEA Local education authorityLMS Local management of schoolsLP (= LPHW) Low pressure hot waterLSB Local schools budgetMPHW Medium pressure hot waterPAYE Pay as you earn (Income tax)PE Physical educationPFI Private finance initiativePPP Public and private partnershipPVC Polyvinyl chlorideSEN Special educational needsSLA Service level agreementSSAF School Standards & Framework Act 1998VA Voluntary aidedVAT Value added taxWC Water closetWWP Waste water preventer

Financial Handbook for Schools Hertfordshire County CouncilPart III: Financial Regulations Page 1 RESO3516 – Issue 2 : April 2002

PART III FINANCIAL REGULATIONS

CONTENTSPage

Section 1 Financial management and internal control 3Section 2 Financial planning and budget monitoring 4Section 3 Financial reporting to the Authority and parents 6Section 4 Audit, inspection and financial records 7Section 5 Control of assets and security 9Section 6 Banking arrangements and cash holdings 12Section 7 Private and voluntary funds 15Section 8 Capital 16Section 9 Purchasing strategies, leasing and Best Value 17Section 10 Ordering of goods and services and payment of accounts 18Section 11 Income 21Section 12 Value Added Tax 23Section 13 Personnel and payroll 23Section 14 Construction Industry Scheme 25


PART III FINANCIAL REGULATIONS


SECTION 1 FINANCIAL MANAGEMENT AND INTERNAL CONTROL

FR 1.1 The Governing Body must comply with the Scheme for Financing Schools,Financial Regulations, standing orders and other relevant legislation.

FR 1.2 The Governing Body must establish proper financial managementarrangements and accounting procedures and maintain sound systems ofinternal control to minimise the risk of loss and fraud. In particular, thesemanagement arrangements must include an appropriate level of separation ofduties. These arrangements must be documented and reviewed on a regularbasis, and must comply with the Financial Regulations contained in thisHandbook. A record of the reviews must be maintained.

FR 1.3 The Governing Body must ensure there are robust systems for identifying,controlling and monitoring all significant operational risks.

FR 1.4 The Governing Body must establish and maintain the following documents:

• the roles and responsibilities of the Governing Body, its committeesand other staff are clearly defined, formally allocated and documentedin a schedule of financial delegation or similar document; this willinclude the financial limits of delegated authority and reportingrequirements;

• The day-to-day responsibilities (basic tasks and checks) of thoseinvolved in finance related issues;

• a Register of Business Interests that will be open to inspection bygovernors, staff, parents, auditors and Ofsted inspectors.

The Governing Body must review these documents on a regular basis andcommunicate all changes to all relevant personnel.


SECTION 2 FINANCIAL PLANNING AND BUDGET MONITORING

FINANCIAL PLANNING

FR 2.1 The Governing Body must submit to the School Funding Unit, an approvedbudget for the financial year 1 April to 31 March, in the prescribed formatby 1 May each financial year. A Best Value statement must be submittedwith the school's Approved Budget Return.

FR 2.2 The Governing Body must supply, on request, data on pupil numbers, thetermly Return of Staff and Organisation and other standing or formulafunding data specified by the Authority. All data required must besubmitted by the required date to allow the calculation and notification ofbudget shares to schools.

FR 2. 3 The Governing Body must ensure that information about budgeting issuedby the School Funding Unit prior to the commencement of each financialyear is taken into account when setting the school’s annual budget plan.

FR 2.4 Schools will be notified of the amount of their budget share by 7 Marchprior to each financial year. The budget allocation will be at outturn pricesand will not vary during the financial year, other than in exceptionalcircumstances.

FR 2.5 The amount available for planned expenditure in the year is the notifiedbudget share, adjusted for any surplus or deficit carried forward from theprevious year, plus earmarked funds and any additional income that accruesto the school.

FR 2.6 The Governing Body cannot budget for a deficit and must act during theyear to prevent deficits occurring. If, exceptionally, a deficit does occur, itwill be carried forward to the following year, thus reducing the resourcesavailable for spending in that year.

FR 2.7 The total net expenditure shown in the approved budget must be containedwithin the amount available for planned expenditure and be used solely foreducational purposes related to the school and solely for the pupils on roll.


FR 2.8 The Governing Body must ensure that funds devolved to the school on anearmarked basis are used only for the purposes given, or on other budgetheads for which earmarked funding is given, and cannot be vired into thebudget share. The Authority will recover funds that are not spent for thepurposes prescribed or not spent in-year. All earmarked funds must bereported in the form laid down by the Authority.

BUDGET MONITORING

FR 2.9 The Governing Body must make arrangements to ensure that there is anadequate process for monitoring and controlling actual expenditure andincome against the approved budget. The Governing Body must nominatean appropriate body, either a committee of the Governing Body or theGoverning Body as a whole, to carry out this function and its remit andmembership should be reviewed annually.

FR 2.10 The Governing Body should agree with the Headteacher the minimumfrequency, level of detail and general format of the financial information tobe provided to it for budget monitoring purposes.

FR 2.11 The body specified for monitoring purposes must meet at least termly, toreview a financial monitoring statement showing actual expenditure andcommitments against the budget. Minutes of the meetings should record alldecisions and responsibility for actions to be taken.

FR 2.12 The Governing Body may delegate to the Headteacher authority to approvechanges to the revenue budget during the financial year. The extent ofdelegation and any changes to it must be formally recorded in the school’sschedule of financial delegation or similar document.

FR 2.13 All changes to the revenue budget during the financial year must beauthorised and documented according to the school's schedule of financialdelegation or similar document and communicated to all relevant personnel.

FR 2.14 The Governing Body must ensure that any changes to spending plans do notexceed available resources. Adjustments must be made to the budget plan toensure that a deficit does not occur.

FR 2.15 The Governing Body must ensure that financial returns are submitted to theSchool Funding Unit within the prescribed timescales.


FR 2.16 The Governing Body must immediately notify the Head of SchoolResources if the school anticipates ending the year in a deficit position.

FR 2.17 Where the school carries forward a surplus in excess of 5% of the budgetshare for the year, the Governing Body must provide, on request, a reportsetting out the reasons for the surplus.

FR 2.18 The Authority may charge the school’s budget for costs incurred as a resultof governors' actions or failure to act. Section 6 of the Scheme forFinancing Schools sets out the conditions under which a charge will bemade against the school’s budget.

SECTION 3 FINANCIAL REPORTING TO THE AUTHORITY AND PARENTS

FINANCIAL REPORTING TO THE AUTHORITY

FR 3.1 The Governing Body must establish arrangements and procedures to ensurethat accurate financial returns are prepared and submitted to the SchoolFunding Unit by the required deadlines.

FR 3.2 Failure to provide financial returns by the specified deadlines will beconsidered a breach of the Authority’s provisions contained in the Schemefor Financing Schools. In these cases:

• the Authority will send a reminder to the Governing Body andHeadteacher

• four weeks after the deadline, the Assistant Director (Resources) maymake arrangements for the financial returns to be prepared; the costincurred will be charged to the school's budget

• persistent failure to provide financial returns may result in the initiationof an internal audit of the school and, depending on the Chief InternalAuditor’s recommendation, the withdrawal of delegation.

FR 3.3 The revised budget forecast column of Quarterly Financial Returns must becompleted and should take into account any changes to the revenue budgetand the latest financial information.


FR 3.4 The form and content of financial returns are specified in the appendices toPart IV, Section 3 of this Handbook. The Authority will amend these fromtime to time, as is necessary for the Authority’s reporting requirements.

FR 3.5 Financial returns must be prepared in accordance with the accountingprinciples, policies and practices of the County Council.

FR 3.6 In addition to the specified financial returns, the school must provide anyadditional information regarding its accounts and its financial transactionsthat is requested by the Assistant Director (Resources) or the Authority’sauditors.

FINANCIAL REPORTING TO PARENTS

FR 3.7 The Governing Body must prepare and present a financial statement in theirannual report to parents as required by the School Standards and FrameworkAct 1998. See Part IV, Section 3 of this Handbook for further guidance.

SECTION 4 AUDIT, INSPECTION AND FINANCIAL RECORDS

AUDIT AND INSPECTION REQUIREMENTS

FR 4.1 The school must give access to internal and external auditors, RegisteredInspectors or their inspection teams and Her Majesty’s Taxation Authoritiesfor the purposes of audit or inspection. They have the right of access to allsuch documents and assets that they consider necessary to carry out the auditor inspection.

FR 4.2 Where a school has payroll arrangements other than with the CountyCouncil’s payroll agent, then provision must be made within the contract toallow access by the Authority’s auditors to relevant records held by thebureau to enable the auditors to complete their enquiries effectively.

FR 4.3 The Governing Body and school staff must provide the auditors andinspectors with any explanations the latter consider necessary in theperformance of their duties.


FR 4.4 The Governing Body must consider any recommendations in audit orinspection reports. The Governing Body must ensure that any such reportsare responded to promptly and any resulting action to be taken by the schoolis implemented.

FR 4.5 The Headteacher or the Governing Body must immediately notify theDirector of Children, Schools and Families of any suspected irregularity.The Director will immediately inform the Chief Internal Auditor. Thisrequirement also applies where the irregularity is suspected or discovered byany other auditors engaged by the school, or if an irregularity is suspected ordiscovered in any other account under the control of the governors.

RETENTION AND DISPOSAL OF FINANCIAL RECORDS

FR 4.6 The Governing Body must ensure that security arrangements for financialrecords will safeguard the documents against loss, destruction orunauthorised alteration. This will apply to documents that are paper based,held on computer files or other non-paper media.

FR 4.7 The Headteacher must ensure that all records are filed, stored and accessibleand are readily available for inspection.

FR 4.8 Documents must be retained for the periods shown in Part IV, Section 4 ofthis Handbook. These requirements also relate to the retention of data onelectronic or other media.

FR 4.9 The Headteacher must exercise care in disposing of documents containingsensitive information. It is recommended that the documents be incinerated.Disposal with general household or commercial waste is not acceptable.



SECURITY OF ASSETS

FR 5.1 The Governing Body must ensure that assets such as land, buildings, plant,etc. are managed properly and are safeguarded against misuse, theft andundue deterioration.

FR 5.2 The Governing Body is responsible for the safe custody of stocks, stores,cash and valuables at the school and in transit. All moveable property must,wherever possible, be marked as school property.

FR 5.3 The Governing Body must ensure holdings of cash are kept to the minimumnecessary for efficient administration.

FR 5.4 The Governing Body must ensure that private property held by the school onbehalf of individuals is safeguarded.

FR 5.5 Thefts must be reported to the school’s insurance provider, Internal Auditand the Police and a crime number obtained.

INVENTORIES

FR 5.6 The Governing Body must ensure that inventories are maintained of theschool’s moveable non-capital assets.

FR 5.7 The Governing Body must ensure that inventories are stored securely, arekept up to date and checked at least annually. Inventories must be certifiedand dated to record the annual check. A second copy of the inventoryshould be retained away from the school site.

FR 5.8 All inventories must be available for inspection by Internal Audit andauthorised officers within the County Council.

DISPOSAL OF ASSETS

FR 5.9 Governors cannot dispose of land and buildings; however, the IncentiveScheme may allow a Governing Body to take a share of the proceeds of sucha sale.


FR 5.10 The Governing Body must authorise all write-offs and disposals of surplusstocks and equipment with a residual value above £500. The disposal of allitems above a predetermined value set by the Governing Body should besubject to competitive quotations.

FR 5.11 The Governing Body must ensure that any disposal of school assets is madeat the best obtainable price and the funds re-deposited in the school’s budgetshare bank account.

FR 5.12 The Governing Body must ensure that VAT is charged, where appropriate,on any proceeds from the sale or disposal of school property.

FR 5.13 The Governing Body must ensure that disposal of school property isrecorded in the inventory. The entry should include full details of thedisposal including authority, reason and method of disposal and, whereappropriate, sale proceeds.

INSURANCE

FR 5.14 The Governing Body must demonstrate that an insurance policy is arrangedfor property and liability insurance. The policy must cover the Authority’sinsurable interests, and it must be at least as good as the relevant minimumcover offered by the Authority.

FR 5.15 The Governing Body must liaise with the County Council or the school’sinsurance agents to review all risks annually to ensure that the sums insuredare commensurate with risks. The review will include alterations affectingexisting insurance as well as new risks, property, equipment and vehicles.

FR 5.16 Schools should not provide an indemnity to a third party without the writtenconsent of their insurers, the County Council or their agent.

FR 5.17 The Headteacher must immediately inform its insurers, the County Councilor their agent of all losses, accidents and other incidents which give rise toan insurance claim. No admission of fault or liability should ever be madeby an employee of the County Council to a third party.

FR 5.18 In the event of a claim, the Headteacher must provide information andsupport the Insurance Section and/or Insurance Company in supporting thedefence of claims.


FR 5.19 Insurance arrangements must cover the use of school equipment, e.g.musical instruments or computers, away from the school site. (Note: mostpolicies will exclude cover whilst in transit.)

COMPUTER SYSTEMS AND THE DATA PROTECTION ACT 1998

FR 5.20 The Governing Body and the Headteacher must ensure that they are properlyregistered in accordance with the Data Protection Act 1998 and that theschool's computers and systems comply with the Act.

FR 5.21 The Headteacher must ensure that there are effective back-up procedures forcomputer-based management systems. All back-up disks, tapes etc. shouldbe periodically tested and securely retained off site or in a fireproof safe.The school must also have a disaster recovery plan in the event of loss ofaccounting facilities or financial data.

FR 5.22 The Governing Body and Headteacher must ensure that only authorised staffhave access to computer facilities. Passwords must not be disclosed andmust be changed regularly.

FR 5.23 Internal Audit inspections review the major financial and managementinformation systems and packages used by schools and the corporate PayrollSystem. If schools choose to depart from those packages and systemssupported by the Authority, they must advise the School Funding Unit andInternal Audit. The school may be charged for any additional audit workthat is required to establish that other systems and arrangements providesatisfactory internal control.



BANK ACCOUNTS

FR 6.1 County Council funds must be invested in banks or building societiesauthorised to be used by schools for this purpose. These are listed in AnnexC of the Scheme for Financing Schools. Former grant maintained schoolsmay continue to use the bank account used for payments of annualmaintenance grant by the Funding Agency for Schools. However, if thisbank account is closed, the new bank account to be used to receive budgetshare funding must be selected from the approved list.

FR 6.2 Schools must notify the Head of School Resources of all bankingarrangements for County Council funds.

FR 6.3 The Head of School Resources and her representatives must have full andimmediate access to all documents and records relating to bank accounts forCounty Council funds. These documents must be held in a form suitable forinspection by Internal Audit, external audit, the Inland Revenue, Customsand Excise and any other authorised persons.

FR 6.4 All bank accounts must be designated in the name of the school. Schoolswithin HCC’s pooled banking arrangements will have one bank account forCounty Council funds designated in the form of “HCC (name of School)General Account” and may also have one School Fund (Private) account.Schools outside the pooled banking arrangements may have more than oneaccount for County Council funds but these should be kept totally separatefrom any private or governors’ accounts.

FR 6.5 The bank account mandate of any account for County Council funds mustprovide that the Authority is:

• the owner of the funds in the account;

• entitled to receive statements; and

• entitled to take control of the account if the school’s right to a delegatedbudget is suspended.


CHEQUES AND CHEQUE SIGNATORIES

FR 6.6 Schools must have a minimum of two and a maximum of four chequesignatories, one of whom must be the Headteacher. The other appointedsignatories must then be senior members of staff such as a DeputyHeadteacher. Exceptions may be made for small schools that may be unableto appoint a signatory other than the Headteacher.

FR 6.7 No member of the Governing Body who is not an employee of the Authorityor school may be authorised to sign cheques unless the school candemonstrate that it has arranged insurance to indemnify the Authorityagainst loss.

FR 6.8 All cheques for £2,000 and above must be signed by the Headteacher andanother authorised signatory. Cheques below the value of £2,000 may besigned by the Headteacher only, OR where three or four cheque signatoriesare appointed, by any two of these other signatories. The Governing Bodymay set a lower, but not a higher, limit above which cheques must becountersigned.

FR 6.9 For schools within the pooled banking arrangements, changes of chequesignatory must be notified to the School Funding Unit using formsLMSBANK1 for the General Account and LMSBANK2 for the SchoolFund (Private) Account. See Part IV, Section 6, Appendix B to thisHandbook for sample forms.

FR 6.10 All cheques must be crossed 'account payee only'. Cheques must be madeout with the current date and must be signed, by hand, but only once all ofthe payment details have been completed.

FR 6.11 Cheques may only be used to settle official invoices or claims.

OPERATION OF BANK ACCOUNTS

FR 6.12 All direct debit and standing order mandates must be signed by theHeadteacher and another authorised cheque signatory and a copy maintainedfor the school’s records. For schools within the pooled bankingarrangements, the bank will confirm the details with one of the authorisedsignatories before it is actioned. For schools outside the pooled bankingarrangements, their contract with the bank must make this stipulation.

Financial Handbook for Schools Hertfordshire County CouncilPart III: Financial Regulations Page 14 RESO3516 – Issue 2: April 2002

FR 6.13 The Governing Body must establish and maintain strict controls for themanagement of the school’s banking arrangements. The Governing Bodymust ensure that there is an adequate separation of duties and that the rolesand responsibilities and financial limits of delegation are documented in theschool’s schedule of financial delegation or similar document.

FR 6.14 Governing Bodies that operate bank accounts for County Council fundsoutside of HCC’s pooled banking arrangements and/or are responsible forfidelity guarantee insurance cover, must ensure that the cover is adequate toprotect the school against all losses.

FR 6.15 The Headteacher must ensure that bank accounts are reconciled at leastmonthly to the financial records held at the school. Any discrepanciesidentified must be investigated. Bank reconciliations must be certified bythe person performing the reconciliation, and independently reviewed andcountersigned by the person with delegated responsibility for this task.

FR 6.16 Any discrepancy in bank accounts, breach of the banking terms or breach ofthese regulations must be reported immediately by the Headteacher to theHead of School Resources.

FR 6.17 Schools’ bank accounts holding County Council funds and fund (private)accounts within the pooled banking arrangements, must not be operated witha credit, debit, smart or cash point card. The exception to this is the businesscard arrangements operated by the County Council's bankers. See Part IV,Section 6, Appendix C for details.

OVERDRAFTS AND BORROWINGS

FR 6.18 Schools should not go into unauthorised overdraft and must inform Head ofSchool Resources if this is likely to occur. Any costs arising from thissituation will be charged to the school’s budget.

FR 6.19 Governing Bodies may not borrow money or enter into any loan agreementswithout the written permission of the Secretary of State. This does not applyto the HCC Schools Loan Scheme.


CASH HOLDINGS

FR 6.20 The Governing Body must agree an appropriate amount of petty cash to beheld. The school must ensure that the likely maximum value of cash held onsite is covered by insurance.

FR 6.21 The Governing Body must ensure that cash held on the school site is secureand that insurance limits are not breached for any official and audited funds.

FR 6.22 Only authorised staff may have access to petty cash. Payments must belimited to minor items for which there is proper authority and provision inthe budget. All payments must be supported by invoices or receipts, orwhere, exceptionally, these are not available, pro formas.

FR 6.23 The school must not use petty cash for transactions with regular suppliers.

FR 6.24 The Headteacher must ensure that all school employees authorised toadminister petty cash are aware of their responsibilities and the correctfinancial process.

FR 6.25 Personal cheques must not be encashed from petty cash.

FR 6.26 The Headteacher must arrange for periodic checks on the completeness offinancial records maintained for petty cash.


AUDIT REQUIREMENTS

FR 7.1 The Governing Body must submit an annual certified statement of thebalances held by them in all private or voluntary funds, and of the accountsof any trading organisations controlled by the Governing Body. The ChiefInternal Auditor will specify the format of this return and the timetable forits submission. Failure to comply with this requirement by the datespecified will constitute a breach of the Scheme for Financing Schools.


FR 7.2 The Governing Body must provide the Chief Internal Auditor with details ofeach private, voluntary or trading organisation account and notify him of anyadditions or changes to these.

FR 7.3 The Chief Internal Auditor may require that the person who certifies theannual certificate is an appropriately qualified, independent person in thecase of accounts which are not subject to audit by Internal Audit.

OPERATION OF BANK ACCOUNTS

FR 7.4 County Council funds may not be transferred from the ‘school budget shareaccount’ into a private or other account. Funds that are intended for theschool budget share account must not be diverted into a private or otheraccount.

FR 7.5 The Headteacher must ensure that expenditure that should properly be metfrom a private or other account is not met from the school budget shareaccount. Equally, income due to the school budget share account should notbe paid into a private or other account. Schools should observe the principlethat any income generated/received should be paid into the account thatmeets any corresponding expenditure.

FR 7.6 Any fraud or irregularity in the operation of a private, voluntary or tradingaccount must be notified to the Chief Internal Auditor immediately. TheAuthority accepts no responsibility for the investigation of such matters,except where a school has opted to include the audit of one private accountas part of the coverage provided by Internal Audit. However, the ChiefInternal Auditor needs to be able to make an assessment of whether anyofficial account or publicly funded resources could have been defrauded orsuffered any loss.

SECTION 8 CAPITAL

FR 8.1 The Governing Body must take into account the advice of the Director ofChildren, Schools and Families as to the merits of proposed expenditure thatexceeds £15,000.

FR 8.2 The Governing Body should seek consent of the Area Planning Officer toany proposed capital works if the County Council owns the premises or ifthe school has voluntary controlled status.


FR 8.3 The Governing Body must notify the County’s Capital Programme Co-ordinator of all capital expenditure.

FR 8.4 Expenditure relating to capital works must be separately identified in anyfinancial returns to the Authority.

SECTION 9 PURCHASING STRATEGIES, LEASING AND BEST VALUE

PURCHASING STRATEGIES

FR 9.1 The Governing Body must ensure that delegated powers to incur expenditureare recorded in the school’s schedule of financial delegation or similardocument. A list of delegated powers and limitations should be available toall relevant staff.

FR 9.2 The Governing Body must ensure that proper procedures and best practiceare exercised to obtain goods and services in the most cost-effective way.They must be purchased from the cheapest sources commensurate with therequired quality, performance and delivery.

FR 9.3 Purchasing by schools is subject to the Authority's Contract Regulations,tendering procedures and to the general regulations regarding purchasing.

LEASING

FR 9.4 The Governing Body must seek the advice of the Finance Director prior toentering a leasing agreement. Leasing, rental or other deferred paymentagreements must not conflict with the Authority's application of Governmentcapital expenditure controls.


BEST VALUE

FR 9.5 The Governing Body of each school must submit a statement, with theApproved Budget Return, setting out the way it will reflect principles of theBest Value regime. See Appendix A to Part IV, Section 3 for a samplestatement.

SECTION 10 ORDERING OF GOODS AND SERVICES AND PAYMENT OFACCOUNTS

ORDERING OF GOODS AND SERVICES

FR 10.1 The Governing Body must ensure that delegated powers and limitations forordering are recorded in the school’s schedule of financial delegation (orsimilar document) and listing of authorised signatories.

FR 10.2 The authorised signatory to the order must be satisfied that the intendedgoods or services are appropriate and needed, that there is adequatebudgetary provision and that quotes or tenders have been obtained ifnecessary.

FR 10.3 Orders for all goods and services must be made on the school’s official, pre-numbered order forms, except:

• for utilities (e.g. water, electricity and gas), rents, national non-domestic rates and petty cash payments

• in cases of emergency, where a verbal order may be made

In the latter circumstances, the order must be immediately confirmed on anofficial order form ('confirmatory order'), marked CONFIRMATION ONLYto avoid duplicate delivery.

FR 10.4 Order forms must be securely retained when not in use.

FR 10.5 Orders must be used only for goods and services provided to the school.Individuals or other organisations associated with the school (e.g. PTAs)must not use official orders to obtain goods and services for their privateuse.


FR 10.6 The authorised signatory must ensure that order forms are properlycompleted and ruled off below the last item or service ordered, so as toprevent alteration or additions. Copy orders must be securely retained innumber order.

DELIVERY AND PAYMENT OF GOODS AND SERVICES

FR 10.7 Goods and services must be checked on receipt, to ensure that they are inaccordance with the order. The check should be recorded on the order andcarried out by someone other than the person who signed the order.Incomplete, disputed or unsatisfactory deliveries (or those exceeding theorder) should be clearly noted on the order.

FR 10.8 Payment must not be made unless a proper VAT invoice has been received,and the following checks made:

• satisfactory receipt of the goods or services must be recorded on thecopy order (if not recorded this must be established prior to payment)

• expenditure must be properly incurred and within budget provision

• prices must accord with quotations, tenders, contracts or catalogueprices, and arithmetic must be checked as correct

• discounts where available must have been taken

• the correct accounting treatment of VAT must be made

• the invoice must be correctly coded

• copy orders, inventories and accounting records must be properlyendorsed.

FR 10.9 All invoices for goods and services must be made out in the name of theschool.

FR 10.10 A pro forma invoice must be used where there is no formal invoice, e.g. inthe case of reimbursement to a teacher. The pro forma invoice must be fullysupported with appropriate documentation to validate the originaltransaction. See Part IV, Section 10, Appendix A to this Handbook for asample pro forma invoice.


FR 10.11 The pro forma invoice for reimbursements to staff must be signed by theclaimant and authorised by the Headteacher (or other authorised signatorywhere this responsibility has been further delegated).

FR 10.12 The Governing Body, or a governor or sub-committee (to whom thisresponsibility has been formally delegated) must approve anyreimbursement made to the Headteacher for expenditure on behalf of theschool. However, the Governing Body may set a level (both for individualamounts and in aggregate for the financial year) below which such approvalis not specifically required. These figures should be formally recorded inthe school’s schedule of financial delegation (or similar document) andshould be reasonable and prudent.

The Headteacher and another authorised signatory must sign the cheque.

FR 10.13 The Headteacher’s travel claim or claim for other personal expenses must beapproved by a member of the Governing Body, or governor or sub-committee (to whom this responsibility has been formally delegated) andauthorised for payment by a member of staff who is an authorised signatory.However, the Governing Body may set a level (both for individual amountsand in aggregate for the financial year) below which such approval is notspecifically required. These figures should be formally recorded in theschool’s schedule of financial delegation (or similar document) and shouldbe reasonable and prudent.

FR 10.14 An authorised member of staff must certify invoices for payment. Whereverpossible, this should be neither the person who signed the order nor theperson who checked the receipt of the goods or services. The school shouldmaintain a list of staff authorised to sign invoices.

FR 10.15 The Headteacher must ensure that all invoices are paid within the prescribedpayment terms in accordance with the Late Payment of Commercial Debts(Interest) Act 1998. Schools must ensure appropriate arrangements aremade during school holiday periods.

FR 10.16 The Headteacher must ensure that an up to date authorised signatory listingis held by the County Council’s accounts payable agent (ITNET). See PartIV, Section 13, Appendix D of this Handbook for a sample form and furtherguidance.

Financial Handbook for Schools Hertfordshire County CouncilPart IV: Guidance - Section 1 Page 21 RESO3516 – Issue 3: April 2003

FR 10.17 All paid invoices must be marked 'Paid', cross-referenced to the chequenumber and stored securely.

FR 10.18 Payments must not be made on a photocopied invoice or a statement from asupplier or an invoice without the supplier's VAT registration number(where VAT is to be claimed).

SECTION 11 INCOME

COLLECTION AND TREATMENT OF INCOME

FR 11.1 Income from lettings should not normally be paid into voluntary or privatefund accounts held by the school. Foundation and Voluntary Aided schoolshave discretion over the destination of lettings income.

FR 11.2 The Governing Body must ensure that income is collected promptly and infull, that it is properly recorded, and that it is banked intact (i.e. without anydeductions for payments or to supplement a float) to an official account assoon as possible.

FR 11.3 The Headteacher must ensure that where goods or services are provided oncredit, accounts are raised and settled with minimum delay. Such provisionmay have to be accompanied by a detailed invoice. See Part IV, Section 11,Appendix A of this Handbook for sample of invoice formats.

FR 11.4 VAT must be charged on taxable goods and services sold by the schoolthrough the school budget share account.

FR 11.5 Monies received by the school itself or on behalf of the County Councilmust be banked at a minimum weekly, or more frequently if insurance limitsare likely to be exceeded.

FR 11.6 The Governing Body must ensure that all necessary controls are in place tocollect and bank school meal income due to the Authority. The school musttake all reasonable measures to recover any outstanding payments due. Theschool should follow the procedures set out in the Authority’s Meals and


Milk Administration Handbook and complete all documentation asprescribed therein.

POLICIES FOR CHARGING AND REFUNDING SURPLUSES

FR 11.7 The Governing Body must establish a charging policy for the supply ofgoods or services. The school must ensure the policy is aligned with theAuthority’s charging policy and within statutory limitations. See Part IV,Section 11 to this Handbook.

FR 11.8 The Governing Body must establish a policy for refunding surpluses (e.g.surpluses for school journey contributions).

DEBT RECOVERY AND WRITE-OFFS

FR 11.9 The Governing Body must establish a policy or procedure for dealing withany debts leading, if necessary, to their write-off. Such a policy shouldensure that staff are clear about how to deal with debts and that debtorsreceive consistent treatment.

FR 11.10 A debt may only be written off with the prior approval of the relevant officeror body, which depends on the amount of the debt as shown below:

• up to £500 – the Governing Body may authorise a write off, whereincome accrues to the school; otherwise the approval of the Director ofChildren, Schools and Families is required, who will consult with theFinance Director

• over £500 – the Governing Body, with agreement of the FinanceDirector.

FR 11.11 Where the Governing Body writes off debts this must be formally recordedand the record retained for seven years.

FR 11.12 Schools must contact the Children, Schools and Families' solicitor to initiatelegal action in respect of outstanding debts.



FR 12.1 The Governing Body and Headteacher are responsible for ensuring theproper treatment of VAT on all income and expenditure and that VAT isreclaimed and paid promptly.

FR 12.2 The school should submit a VAT Reimbursement Claim together with a“coding grid” (showing VAT rates). This should be certified by anauthorised signatory and submitted each month to the School Funding Unitusing either:

• Form A278, or

• a VAT submittal report produced by a computerised accountingsystem

Schools must ensure that the school's name and county reference number isclearly shown on the reimbursement claim form.

FR 12.3 Schools will be charged for penalties or interest incurred by the CountyCouncil as a result of the incorrect treatment of school's income andexpenditure and non-compliance with advice issued from the FinanceDirector, or his representatives.

FR 12.4 Schools must notify the Finance Director of any error in its VAT treatmentof income and expenditure. The Finance Director, or his representatives,will provide direction on identifying its value and will arrange for correctionto be made in compliance with UK VAT regulations.


PAYROLL SYSTEMS AND PROVIDERS

FR 13.1 The Governing Body must ensure that all salaries, wages, fees and otherremuneration (including honorariums) due to staff and other individuals,whether under a formal contract of employment or not, are paid through apayroll system approved by the Finance Director. This is to allow theFinance Director to ensure compliance with appropriate legislationregarding income tax, National Insurance, pensions, sickness benefit, etc.


FR 13.2 Unless covered by an Inland Revenue dispensation, all benefits in kind suchas accommodation, use of telephone, etc., and all reimbursements ofemployee expenses should be processed through PAYE or recorded onforms P11D as appropriate. Failure to observe these conditions may resultin a tax liability or penalty being incurred by the Authority, which will becharged to the school's budget.

FR 13.3 Where a school elects to use a payroll bureau other than the Authority’sagent, then provision must be made within the contract to allow access bythe Authority’s auditors to relevant records held by the bureau.

FR 13.4 The Governing Body must ensure that all statutory commitments andrequirements of a payroll provider are met. See Part IV, Section 13,Appendix E for further guidance.

FR 13.5 Where the Governing Body fails to comply with these requirements, anyresulting expenditure falling on the Authority will be charged against theschool's budget.

PAYROLL ADMINISTRATION

FR 13.6 The Governing Body must establish procedures for the administration ofpersonnel responsibilities. These procedures must be formally documentedand a record of the annual review should be maintained. The key areas are:

• permanent and temporary appointments• promotions and other contract variations• terminations of employment• payment of casual staff (building contractors, consultants and similar

providers of services and occasional staff)• expenses.

The key objectives should be to ensure:

• payments are made only to bona fide employees• payments are in accordance with individuals’ conditions of

employment• payments are made only in respect of services provided to the school• deductions including income tax and National Insurance contributions

are properly administered• amendments to the payroll are promptly and properly processed.


FR 13.7 The Governing Body must maintain a list of authorised signatories forpayroll administration:

• for schools using the Authority’s payroll agent, a copy must be sent toITNET. See Part IV, Section 13, Appendix D to this Handbook forfurther information.

• for schools making other payroll arrangements, a copy must be sent tothe payroll bureau or provided to payroll administration staff.

FR 13.8 The Governing Body must ensure that the processes of completing, checkingand authorising all documents, and claims related to appointments,terminations of employment and expenses, are not the sole responsibility ofone person.

FR 13.9 The Governing Body should ensure that, where practicable, the duties ofauthorising appointments, making changes to individuals' conditions orterminating the employment of staff are separated from the duties ofprocessing claims.

FR 13.10 The school must retain personnel records securely and administer thoserecords held on computer files in accordance with the provisions of the DataProtection Act 1998. Part IV, Section 5 provides further guidance on theprovisions of the Data Protection Act.

SECTION 14 CONSTRUCTION INDUSTRY SCHEME

FR 14.1 School staff responsible for payment of invoices for repair and maintenancework must:

• have access to the Inland Revenue CIS publication (constructionindustry series IR14/15) and any other advice or guidance issued bythe Authority.

• be familiar with the regulations appertaining to the ConstructionIndustry Scheme.

FR 14.2 Where a relevant invoice is dealt with incorrectly, without the schoolseeking advice from the Authority or payment through the Authority’s


accounts payable agent, ITNET, any incorrect treatment resulting in anadditional cost will be chargeable to the school's budget.



TABLE OF CONTENTS

Page

CONTACTS 33

FINANCIAL MANAGEMENT1.1 Introduction 351.2 Governing Body responsibilities 351.3 Register of Business Interests 361.4 Whistleblowing 361.5 Delegation of Governing Body responsibilities 371.6 Template for a Schedule of Financial Delegation 38

INTERNAL CONTROL1.7 Introduction 441.8 Financial control features 451.9 Formal allocation of responsibilities 451.10 Organisation 461.11 Segregation of duties 461.12 Personnel 471.13 Authorisation and supervision 481.14 Secure and effective systems 481.15 Documentation 481.16 Arithmetical and accounting accuracy 49

Appendix A Guidance Notes on Register of Business Interests 51

Financial Handbook for Schools Hertfordshire County CouncilPart IV: Guidance - Section 1 Page 32 RESO3517 – Issue 2 : April 2002



CONTACTS

General queries Lyn Stainton 01992 555946School Funding Unit

Internal Audit Helpline 01992 55531201992 555322

Copies of the Financial Sarah Moor 01992 555722Handbook for Schools School Funding Unit

The Authority’s Whistleblowing Mick Connah 01992 588590procedure Head of Human Resources



FINANCIAL MANAGEMENT

1.1 Introduction

The delegation of funding gives schools freedom and flexibility to spend their budget share inaccordance with locally determined needs and priorities. However, self-management alsobrings with it responsibility and accountability for the stewardship and use of public money.

It is important that governors and staff not only act impartially, but are also seen to actimpartially. The Nolan Committee (now the Neill Committee) published a number of reportson standards in public life and this Handbook builds on these, and gives guidance in particularareas. An important means by which a school may demonstrate that it is applying theseprinciples is by maintaining a Register of Business Interests. Another, more difficult issue, issetting up clear mechanisms for dealing confidentially with allegations of malpractice.

This Section provides information on the Governing Body responsibilities and gives practicalguidance in developing systems of sound financial management.

1.2 Governing Body responsibilities

Governing Bodies in exercising their delegated financial responsibilities must comply with thefollowing:

• national legislation• directives from the European Community• circulars from the Department for Education and Skills• legislation related to Income Tax issued by the Inland Revenue• value added tax directives from Customs and Excise• Construction Industry Scheme directives from the Inland Revenue• the Authority’s

– Scheme for Financing Schools– Financial Regulations– LEA – School relations Code of Practice in Hertfordshire– Standing Orders for contracts– Purchasing Conditions and Guidelines– Code of Purchasing Practice– Charging and Remissions Policy− Hiring Policy (community use, adult education and youth and community service).


1.3 Register of Business Interests

Governors have a duty at all times to act, and to be seen to act, impartially in relation tofinancial matters in the conduct of the school.

The Governing Body should establish and maintain a Register of Business Interests for thegovernors, headteacher and staff that should be open to inspection by governors, staff, parents,auditors and Ofsted inspectors. Governors and the headteacher should sign a declaration todisclose any interests, or to state that they have none. Other staff should be made aware of theexistence of the register and their obligation to disclose any interests that could be seen toconflict with their role in the school.

For example, governors and staff should declare any links they have with local firms fromwhich the school may wish to buy goods or services. It is important for anyone involved inspending public money to demonstrate that they do not benefit personally from decisions thatthey make.

It follows therefore, that all governors and employees should use a Register of BusinessInterests and to identify any business/commercial/financial interests they, or their immediatefamily, have which might give rise to a potential conflict of interest. For example, that they,or a close friend or relative, are an owner, director or employee of a supplier to the school.(This would not strictly be necessary if they have no influence on the selection of suppliers, orinvolvement in payments to suppliers, or other significant dealings with the supplier, such asapproving their work/deliveries, or if the sum at issue were insignificant.)

Potential conflicts of interest might conceivably extend to other situations. For example, if arelationship existed between two people and one could influence the appointment,advancement or pay of another (perhaps granting overtime, approving pay claims or expenses,awarding pay adjustments, etc.)

Essentially, the Governing Body should ask the governors and staff to consider whether theyhave any interests (or relationships) that could in some circumstances lead to suggestions thattheir objectivity and integrity is compromised. These are then recorded confidentially forconsideration by the Headteacher and governors (or their representatives).

The register should be held on the school site, as it forms part of the school records. It mustbe held securely.

Appendix A to this Section, provides a suggested format for a register, with guidance notes onits completion.

1.4 Whistleblowing

Schools should ensure that clear mechanisms are set up for dealing confidentially withallegations of malpractice. Staff should be able to raise their concerns properly and withoutprejudice to their personal position. An effective system for raising concerns should include


respect of staff confidentiality and an opportunity to raise concerns outside the linemanagement structure.

Staff and school governors who wish to complain about financial management or financialimpropriety at the school should report in the first instance to the Headteacher. Exceptionally,if they believe that the matter cannot be resolved in this way, they should report it direct to theChief Internal Auditor. Each case will be investigated thoroughly, with the aim of notifyingthe informant of the outcome of the investigation as quickly as possible. Full details of theAuthority’s whistleblowing procedure, and contact details for advice, are published in thePersonnel Policies and Procedures Handbook.

1.5 Delegation of Governing Body responsibilities

To ensure all involved in schools are clear about their roles and responsibilities, theGoverning Body should establish the limits of delegated authority. They should also definechannels of reporting to the Governing Body and any subsidiary financial committee.Delegated authority should be recorded in a schedule of financial delegation or similardocument. A template for a schedule of financial delegation is provided in the following sub-section.

It should cover:

• what responsibility is being delegated by the Governing Body• to whom it is delegated (e.g., the Headteacher, committee or other responsible officer)• any limits on the exercise of delegations• any procedures for reporting on the exercise of delegation.

Where any powers or duties are delegated, the governors still retain overall responsibility forthem. It is an overriding requirement that the governors ensure their approach to delegationprovides for an effective system of financial management in the school.

Some powers cannot be delegated. In particular the Governing Body must approve the budgetfor the year, and the governors have an individual and a joint responsibility to report anypossible deficit to the Assistant Director (Resources).

Suitable individuals or bodies capable of taking on delegated powers or duties will varydepending on the nature of the powers and duties concerned and on the nature of the school,its Governing Body and its staff. Individuals or bodies who might receive delegated powersare listed below:

• committees of the Governing Body• a group formed partly of governors and partly of school staff• the Headteacher• the Deputy Headteacher(s) or other members of the school management team• a group of school staff• the School Manager or Bursar (where applicable).


There are a number of considerations to bear in mind when considering any delegation:

• Do the people have the time?• Do they have the necessary knowledge and skills?• Will giving them this role lead to any conflicts?• Are there any issues of confidentiality?• Are there effective arrangements to deal with the absence of key financial personnel?• Can the Governing Body assure itself that its responsibilities will be carried out?• Is there an adequate separation of duties to minimise the risk of error or fraud?

1.6 Template for a Schedule of Financial Delegation

The paragraphs below provide a template of roles and responsibilities that a school shouldincorporate into a schedule of financial delegation or similar document. The Governing Bodywill decide the various financial and time limits mentioned.

(a) The Board of Governors of a school will:

• approve an ongoing development plan and take stock of the progress of the plan on a[time] basis

• approve the school's medium term financial plan and review this document in the lightof any significant factors that come to the attention of the Governing Body (ref PartIV, Section 2)

• approve the school’s annual budget and best value statement and its submission to theAuthority by 1 May each year (ref Part IV, Section 3)

• approve virements over [£ amount] between budget headings (ref Part IV, Section 2)• review the budget monitoring reports and the projected out-turn position quarterly• approve any financial returns required by the Authority (ref Part IV, Section 2)• approve the annual financial report to parents for publication by 31 October following

the financial year in question (ref Part IV, Section 2)• consider the Internal Audit report and the action plan for implementing the

recommendations proposed by the Headteacher (ref Part IV, Section 4)• review the implementation of the recommendations by the school• set house rules for a purchasing policy, and monitor and review the rules in accordance

with County Council guidelines (ref Part IV, Section 9)• approve orders for all goods and services above £10,000 (ref Part IV, Part 10)• approve the charging policy for income (ref Part IV, Section 11)• approve and periodically review the policy for security arrangements at the school

(including procedures for call-out and key replacements)• to determine a value above which assets should be recorded on the school’s inventory

(ref Part IV, Section 5)• to determine a value above which discrepancies in the inventory should be reported to

the Governing Body (ref Part IV, Section 5)


• approve the policy for disposal of surplus stock and equipment and the sale ofproperty, other than land and buildings (ref Part IV, Section 5)

• authorise items for disposal above a residual value of [£ amount]• ensure that an annual return or audit certificate is submitted to the Chief Internal

Auditor for every private, voluntary or trading account controlled by the GoverningBody (ref Part IV, Section 7)

• ensure that the school’s Data Protection Registration is renewed annually (ref IV,Section 5)

• ensure the maintenance of a Register of Business Interests of governors and staff (refAppendix A to this Section)

(b) The Finance Committee will:

• consider the draft school development plan and review and monitor it• consider the school's medium term budget plan in the light of the development plan

and the level of future resources• consider the draft school budget and key issues and proposal of the balanced budget

for the year for the approval of the Governing Body• approve virements of money between budget headings over [£ amount] and up to a

limit of [£ amount]• monitor and control expenditure against the budget during the financial year• consider the annual financial report to parents• set a charging policy for consideration by the Governing Body• approve and write off bad debts accruing to the school over [£ amount] and up to a

value of £500; items above £500 must be referred to the Finance Director for approval• undertake an assessment of risk management for insurance purposes at the school• open bank accounts and approve or vary signatories thereto• approve all payments made to the Headteacher personally, i.e. reimbursement of

payments for goods/services purchased on behalf of the school and/or personalexpenses incurred, e.g. travel expenses. (Note: The Governing Body may agree anamount for a single payment, and/or an amount for the cumulative level of payments ina financial year, below which no approval is specifically required. These amountsshould be recorded in this Schedule of Delegation.)

(c) The Headteacher

The role and financial responsibilities of the Headteacher cover several budgetary, planning,control and reporting subheadings as follows.

Budget management

• Prepare the school’s development plan in consultation with the Finance, Personnel andPremises Committees for consideration by the Governing Body.


• Secure the implementation of the development plan with the collective support of theschool staff.

Financial planning: the Medium Term Financial Plan (ref Part IV, Section 2)

• Prepare a three-year medium term budget on the basis of the cost of current policies,the proposals for change (drawn from the school's development plan) and estimate thelevel of future resources.

Annual Budget Plan and Best Value Statement (ref Part IV, Section 3)

• Prepare the school's draft annual budget and best value statement, on the basis of theagreed objectives of the school as set out in the development plan and key issuespaper; these are for consideration by the Finance Committee.

Budget monitoring and control (ref Part IV, Section 2)

• Draw up a virement between budget headings up to a value of [£ amount].• Monitor and control expenditure against the budget during the financial year; including

preparation and approval of reports for the Finance Committee and Governing Bodyand the production of a register of staff responsible for managing budgets.

Annual timetable for budget management (ref Part IV, Section 2)

• Prepare a timetable with key dates for annual budget management.

Financial reporting to the Authority (ref Part IV, Section 3)

• In conjunction with the Chair of Governors, prepare and approve all year-end accountsand any financial returns required by the Authority.

Financial reporting to parents (ref Part IV, Section 3)

• Prepare an annual financial report to parents, for publication by 31 Octoberimmediately after the financial year in question.

Audit and Inspection Reports (ref Part IV, Section 4)

• Produce a formal response to the Internal Audit report, and an action plan showinghow the recommendations will be implemented.

Retention and disposal of accounting records (ref Part IV, Section 4)

• Maintain complete financial accounts and full supporting financial records for allaccounts.

Computer systems and the Data Protection Act 1998 (ref Part IV, Section 5)


• Ensure that the school complies with the requirements of the Data Protection Act 1998.• The setting up and maintaining of access profiles for system users and the production

and security of back-up disks and files, to [named individual].

Banking arrangements (ref Part IV, Section 6)

• Authorise payments and be the sole signatory of cheques to an upper limit of £2,000(the school may opt for a lesser value).

• Approve bank reconciliations on a monthly basis.• Approve the arrangements made to bank monies.

Petty cash (ref Part IV, Section 6)

• Agree, with the Governing Body, an appropriate amount of petty cash to be held andthe periodic check of the completeness of financial records. Level not to exceed[£ amount].

Personnel and payroll (ref Part IV, Section 13)

• Periodically reconcile gross pay with contracts and other authorised documents.• Determine employee status for all individuals working on behalf of the school.

Purchasing - provision of goods and services (ref Part IV, Section 9)

• Monitor purchasing regulations to ensure compliance by the school.• Ensure that a minimum of [number] quotes or tenders are obtained for purchases and

contracts valued at over [£ amount] and up to a value of [£ amount]. (Some categoriesmay be subject to referral to the governors for approval, e.g. contracts for more thanone period, such as leases, or of a particular type, e.g. those that relate to premises.) Ifthis function is further delegated to a member of staff, the details – including limits –must be reflected in this schedule.

• Maintain a list of contacts for guidance and advice.

Leasing (ref Part IV, Section 9)

• Seek approval for any non-exempt leases from the Authority’s Finance Director.

Orders for goods and services and payment of accounts (ref Part IV, Section 10)

• Control the placing of orders for the purchase of all goods and services, up to a valueof [£ amount]. A member of the Governing Body must countersign orders above thatamount.

• The authorisation of employee-related expenses to be paid through the school’s payrollprovider (e.g. employees’ overtime, special allowances, travel expenses, etc.) If this is

• further delegated within the school, the details need to be included in this schedule.


• Authorisation of payments to the Headteacher should comply with the arrangementsagreed with the Governing Body. For example, the governors should approve allpayments except where the governors have agreed an amount for a single payment,and/or an amount for the cumulative level of payments in a financial year, belowwhich no approval is specifically required. These amounts should be recorded in thisSchedule of Delegation.

Income (ref Part IV, Section 11)

• Set suitable controls for the recording and collection of monies due, and for themovement and banking of monies for all accounts under the control of the school.

• Write off bad debts up to [£ amount] (this may be confined to certain categories ofdebt).

• Ensure the security of monies held on site.

Security of stocks and other property (ref Part IV, Section 5)

• Produce and implement a policy for security arrangements at the school (includingprocedures for call-out and key replacements).

• Ensure the physical security of the school’s assets, and maintain and periodicallyinspect an up-to-date inventory.

• Prepare a policy for the disposal of surplus stock and equipment and property, otherthan land and buildings, and authorise items for disposal up to a maximum value of

• [£ amount].• Maintain a register of key holders.

Insurance (ref Part IV, Section 5)

• Initiate adequate insurance cover for the school, and maintain a register of policiestaken out.

Supervise contractors and service providers (ref Part IV, Section 9)

• Supervise contractors and service providers to ensure the receipt of best value formoney and compliance with legislation.

(d) Delegations from the Headteacher

The Headteacher may delegate the following responsibilities.

Budget monitoring and control (ref Part IV, Section 2)

• The control and monitoring of budgets may be delegated to departmental heads[named individuals].

Financial reporting to the Authority (ref Part IV, Section 3)


• The preparation of the year-end accounts and other returns required by the Authorityfor consideration by the Headteacher, to [named individual].

Retention and disposal of accounting records (ref Part IV, Section 4)

• The retention, secure storage and disposal of accounting records in accordance withboth legal and Authority requirements, to [named individual].

• The maintenance of full financial records for all accounts, to [named individual].

Computer systems and the Data Protection Act 1998 (ref Part IV, Section 5)

• Ensure that the school complies with the requirements of the Data Protection Act1998. [named individual].

• The setting up and maintaining of access profiles for system users and the productionand security of back-up disks and files, to [named individual].

Banking arrangements (ref Part IV, Section 6)

• The signing of cheques, for less than £2,000, by other authorised signatories [one ormore named individuals]. The school may wish to specify under what circumstancesother signatories should be used.

• The control and reconciliation of the school’s bank accounts for consideration by theschool’s Headteacher or Deputy Headteacher to [named individual]. (If this role isdelegated from the Headteacher this should be clearly recorded in the schedule.)

• The preparation of receipts for banking, to [named individual], and the physicalbanking of monies to [named individual].

Petty cash (ref Part IV, Section 6)

• The maintenance of accounting records, the security and regular reconciliation of pettycash, to [named individual].

Personnel and payroll (ref Part IV, Section 13)

• The maintenance of an authorised signatory list for employment contracts and paydocuments, to [named individual].

• The filing and storage of personnel and pay records, to [named individual].

Leasing (ref Part IV, Section 9)

• The maintenance of a register for all leases held by the school, to [named individual].

Orders for goods and services and payment of accounts (ref Part IV, Section 10)


• The maintenance of an authorised signatory list for orders (subject to the limitationsagreed), to [named individual].

• The authority for the signing of official orders for the purchase of goods and servicesup to the value of [£ amount], other than by the Headteacher, to [named individual].

• The confirmation of the receipt of goods and services, to [named individual].• The preparation of cheques for payment of services, to [named individual].

Value Added Tax (ref Part IV, Section 12)

• To monitor the regulations on VAT, ensuring compliance by the school, to [namedindividual].

• To complete and submit the reimbursement claim for VAT on a [time] basis, to[named individual].

Construction Industry Scheme (CIS) (ref Part IV, Section 14)

• To monitor the CIS regulations to ensure compliance by the school, to [namedindividual].

Income (ref Part IV, Section 11)

• The control and collection of all income, to [named individual].

Security of stocks and other property (ref Part IV, Section 5)

• The security of physical assets, to the inventory co-ordinator.• The notification of any changes in physical assets, to [named individual] (or the

inventory controller).• The physical inspection of the inventory on an annual basis, to [named individual].

INTERNAL CONTROL

1.7 Introduction

Schools have many systems and procedures such as purchasing, payments, payroll and incomecollection, which are vital to the running of the school. Governors and Headteachers will needto rely on the information provided by these systems to inform their decisions. Accordingly,this information must be accurate. Moreover, the Governing Body will need assurance that allincome and expenditure is proper and authorised.

By building checks – known as internal controls – into systems and procedures, schoolsshould be confident that transactions will be properly authorised and processed so that errorswill be detected promptly. Internal controls can also go some way to reducing the risk offraud.


In practice, systems of control within schools vary according to the size, organisation andparticular needs of each school. Nevertheless, sound control arrangements must be developedand maintained by all Governing Bodies over their schools' income, expenditure and use ofresources.

This Section sets out in general terms the main features of a sound system of financial controlwithin a school. This is in contrast to other sections of this Handbook, which deal with theinternal controls in relation to specific areas of financial administration.

This Handbook does not fully prescribe all aspects of internal control within a school, in viewof differing individual circumstances. It does, however, set out the minimum standard againstwhich any particular system of financial control will be measured.

1.8 Financial control features

The basic control features, which each area of financial administration should contain are:

• the responsibilities of the Governing Body and school personnel should be clearlydefined, allocated, documented and communicated

• there should be a clear organisational structure with identified lines of reporting for alloperations

• duties must be properly allocated to individuals whose capabilities match the tasksassigned to them

• levels of authorisation and supervision by responsible persons, of transactions withfinancial implications, should be specified, documented and communicated to relevantstaff

• the financial arrangements should ensure that all systems are effective and secure• all aspects of the financial arrangements should be fully and properly documented

1.9 Formal allocation of responsibilities

Internal controls built into schools' financial procedures and systems provide importantassurances for Governing Bodies. It is not necessary or practical that Governing Bodies areactually part of the internal controls. It is vital, however, that the Governing Body is involvedin and aware of the internal controls used in the school, and is satisfied with the adequacy ofthose controls and that they are being complied with. This is essential for sound financialcontrol and should take the form of written directions. To achieve this, the Governing Bodymay wish to nominate one member to oversee this task and to review the arrangements atregular intervals.

Clearly, different individuals have different strengths in such diverse areas as planning,budgeting, staffing or the use of computers. It would be right for the Governing Body to takethese different strengths into account when allocating particular functions. The overridingcriterion is to ensure adequate supervision of all finance-related work.


1.10 Organisation

The Governing Body must document its own organisational structure and those of itscommittees, the Headteacher and other staff involved in the administration and managementof school finances. There should be clearly defined and properly used channels of reporting tothe Governing Body and any subsidiary financial committee. Management can be sharper ifany delegation of budgets follows the organisational structure.

The organisation of the school should encourage regular interaction between those makingfinancial decisions and those affected by them. There should be prompt exchange ofinformation to support decision-making on a sound and timely basis.

Documentation of systems, procedures, duties and responsibilities should be accessible andwill form a guide on best practice in order to maintain standards.

This Handbook forms a part of the school’s financial procedures and should be accessible tostaff, Headteacher and governors with financial responsibilities. See list of contacts for thisSection to obtain further copies of this Handbook.

1.11 Segregation of duties

One of the best controls is to divide responsibilities or duties so that no single individual canrecord and process a complete transaction. Segregation of duties reduces the risk of error orintentional manipulation of financial figures if each person is required to check a particularpart of the transaction. Suitable checks can be built into the key financial procedures in aschool in this way. Functions that should be separated include those of:

• authorisation• execution• custody• recording• in the case of a computer-based accounting systems, the responsibility for system

development should be separated from the operation of the system• further separation of duties for computer-based accounting systems may be achieved

by use of access profiles

The Headteacher is responsible to the Governing Body for distributing the duties of staffconcerned with financial transactions. As far as possible these should be distributed so that atleast two people are involved with both receipts and payments. The work of one person thenacts as a check on the work of the other. All such checks should be documented when carriedout.


The duty of providing information, calculating, checking and recording money due to or fromthe school should, as far as possible, be separated from the duty of collecting or paying outmoney.

In some schools, where it is not possible to have full separation of all responsibilities, theGoverning Body should satisfy itself that there is adequate segregation and that spot checksare in place to ensure that the risk of error or fraud is minimised

The basic staff tasks and checks may be recorded in a document entitled, for example, ‘StaffResponsibilities and Duties’. It should cover:

• the duties of staff, recording who is responsible for individual tasks; who will receivethe results; the levels at which responsibilities will change

• method, stating how the tasks are to be carried out; and how completion is to berecorded

• purpose, explaining why the tasks are necessary; and what should be achieved on theircompletion

• timing and frequency, stating when the tasks should be carried out. For example,weekly, monthly, annually, on specified dates, or whenever specific activities orprocesses occur.

1.12 Personnel

Inevitably, the proper functioning of any system depends on the competence and integrity ofthose operating it. The qualifications, experience and personal qualities of those involvedwithfinancial arrangements are important features of a control system. Consequently, theGoverning Body must establish procedures to ensure that:

• personnel are competent, suitably qualified and trained to perform at a levelcommensurate with their responsibilities

• clear statements of the criteria for personnel selection and formal job descriptions are maintained

• the staffing levels of finance personnel are adequate• there are effective arrangements to deal with the absence of key financial personnel

The Governing Body should consider carefully what sort of financial expertise it needs tosupport the work of the Headteacher and administrative staff. This could involve refreshingand updating the skills of existing staff, employing additional staff on a part-time basis, orbuying in skills.

Where a school has governors with relevant financial expertise, their skills may be useful inhighlighting the areas to which special attention should be given. They can then check thatthe support the school has acquired is adequate and is providing good value for money.


The financial responsibilities of the Governing Body are very important. It is therefore vitalthat the Governing Body considers very carefully the development of financial expertiseavailable to it as an area of high priority.

1.13 Authorisation and supervision

All transactions should require authorisation or approval by an appropriately responsibleperson. The types and limits of these authorisations should be specified in the allocation ofresponsibilities to the Headteacher and other school personnel.

Any system of internal control should include arrangements for the supervision of day-to-daytransactions. All transactions and the supervision and checks must be recorded.

1.14 Secure and effective systems

The school needs effective procedures. They must be designed to ensure that all transactionsare accurately recorded and reported against plans and budgets.

All financial transactions must be traceable from the original documentation to the accountingrecords and vice versa. For example, it should be possible to trace an item of expenditure inthe accounts from the invoice, to the cheque and, ultimately, to the copy order. Equally, itshould be possible to perform the same exercise in reverse.

Only authorised staff should be permitted access to the accounting record, and it must belocked away or secured when not in use.

Alterations to any original documents such as cheques, invoices, orders and other vouchersmust be signed, authorised and made clearly in ink or other permanent form. The use ofcorrecting fluid or the erasure of information is not acceptable.

The school must hold accounting records securely. Vouchers or other documents relating tothe financial transactions of the school must not be destroyed except in accordance witharrangements approved by the Authority. Part IV, Section 4 of this Handbook providesfurther guidance.

1.15 Documentation

All financial procedures and business transactions should be documented. These descriptionshelp to ensure a degree of formality and clarity which is essential in financial managementprocedures. It can help considerably with continuity in the absence of key staff or during anychanges of staff. It also reduces the chance of error, assists in proper and timely accountingand reporting, and ensures all items are accounted for. Documentation should cover areassuch as:


• accounting systems• key financial decisions of the Governing Body• computer systems• operating procedures• security of personnel and payroll data• security systems• individual duties and responsibilities

Schools must document procedures as they are evolving, thereby developing a useful andworkable set of instructions. Documents should be kept in a secure location. They shouldinclude the following.

• Individual job descriptions setting out clearly the defined levels of financialresponsibility and the segregation of duties. These documents should cover theHeadteacher, bursar and all others involved in the financial management of the school,including their relationship with the Governing Body.

• Job procedures stating why specific tasks are needed and their place in the school's meeting its overall financial management objectives.

• Job instructions, giving step-by-step instructions on the execution of tasks. Theyshould indicate frequency, the segregation of duties and the levels of authorisation required.

• Systems procedures, giving clear step-by-step procedures on the operation and use of systems and security arrangements.

1.16 Arithmetical and accounting accuracy

These are the controls within the recording function which check the arithmetical accuracy ofthe records, the maintenance and checking of totals, reconciliations, control accounts andmaintenance of accounting documents. Examples of suitable controls are explained in thesections of this Handbook dealing with individual areas of financial administration carried outin a school.


APPENDIX A GUIDANCE NOTES ON REGISTER OF BUSINESSINTERESTS

Why is a Register necessary?

The staff and governors of a school clearly have an obligation to avoid any conflict ofinterest between their own affairs and those of the school.

In keeping with the expectations of Ofsted and the Audit Commission, schools arerecommended to give effect to this by establishing a ‘Register of Business Interests’.Specifically, Standard A.6 in the Ofsted/Audit Commission publication Keeping Your Balance- Standards for Financial Management in Schools states:

“The governing body should establish a register of business interests of governors, theheadteacher and other staff who influence financial decisions. This should be open toexamination by governors, staff, parents and the LEA.”

What should be included in the Register?

It follows, therefore, that a Register of Business Interests should be used by allgovernors, the headteacher and any other employees to whom it is relevant to identifyany business/commercial/financial interests they have which might give rise to apotential conflict of interest. For example, that they, or a close friend, or relative, are anowner, director, or employee of a supplier to the school. This would not strictly benecessary if they have no influence on the selection of suppliers, or involvement inpayments to suppliers, or other significant dealings with the supplier, such asapproving their work/deliveries, or if the sum at issue were minor.

Potential conflicts of interest might conceivably extend to other situations, such as if arelationship existed between two people where one could influence the appointment,advancement, or pay of another, (eg granting overtime, approving pay claims orexpenses, awarding pay adjustments, etc.).

Essentially all governors and staff should be asked to consider whether they have anyinterests (or relationships) which could in some circumstances lead to suggestions thattheir objectivity and integrity is compromised, and record these confidentially forconsideration by the Headteacher and governors (or their representatives).

Any interest or relationship needs be described in no more detail than is necessary tomake clear in what circumstances an individual’s position might be compromised. Forexample:


‘I am an employee of XYZ Ltd (or ‘I am employed by XYZ Ltd as Job Title) - a likelysupplier or contractor to the school’.

‘My sister is a director of XYZ Ltd - a likely supplier or contractor to the school’.

‘My brother-in-law is a Supply Teacher - who may be engaged by the school’.

What action should be taken in response to a declared interest or relationship?

The Headteacher and/or Chair of Governors should make arrangements to avoid aconflict of interest arising. For example a governor might withdraw from any part in thestaff appointment process if a relationship with a candidate exists, or from the award ofa contract if they have a connection with one of the firms being considered. Similarly ifa member of staff has a connection to a supplier they should not be involved in placingorders with, or approving payments to, that supplier. (Special arrangements may have tobe adopted where their routine duties include this).

Who should have access to the Register?

Under the Scheme for Financing Schools, the Register must be made available forinspection by governors, staff and parents, Authority auditors and Ofsted Inspectors.

Each Governing Body should decide under what circumstances interested parties couldinspect the Register. We would expect the Headteacher and Chair of Governors (and/or theChair of the Finance Committee) to have full access.


DECLARATION OF BUSINESS INTERESTS

SCHOOL GOVERNORS AND STAFF

SCHOOL NAME: SCHOOL NO.

GOVERNOR/STAFF NAME:

DATE OF ENTRY:DATE OFANNUAL REVIEW:

Description of Interest:

SIGNATURE: DATE:



TABLE OF CONTENTS

Page

CONTACTS 57

FINANCIAL PLANNING2.1 Introduction 592.2 Financial planning in the medium term 592.3 Benchmarking and Management Information 602.4 Annual budget preparation 61

2.4.1 Budget approval 612.4.2 Registration of budget holders 612.4.3 Budget preparation timetable 61

BUDGET MONITORING2.5 Introduction 632.6 Timetable 632.7 Monitoring Process 64

2.7.1 Profiling the budget 642.7.2 Recording income, expenditure and commitments 642.7.3 Format of budget monitoring reports 652.7.4 Reviewing budget monitoring reports 652.7.5 Variances 662.7.6 Correcting variances 67


CONTACTS

Budget preparation

Budgeting software and assistance inpreparation of budget plans

Financial Services forSchools

01992 555720

Finance Planner software Financial Servicesfor SchoolsWebsite

01992 555720

www.thegrid.org.uk/ trade/fss

Benchmarking and ManagementInformation

HCC Management Information

Ofsted

Audit Commission

Submission of Approved BudgetReturns

Alex Gooding-WilliamsManagement InformationUnitWebsite

Publications OrderlineWebsite

Publications OrderlineWebsite

Sarah MoorSchool Funding Unit

01992 556724

www.thegrid.org.uk/info/miu

020 7421 6800www.ofsted.gov.uk

020 7828 1212www.audit-

commission.gov.uk

01992 555722

Return of Formula Funding Data Chris HartSchool Funding Unit

01992 555810


Formula Funding

Primary and Secondary Schools

Nursery and Special Schools

Gill TrebleSchool Funding Unit

Kirsty AlfordSchool Funding Unit

01992 555942

01992 555707

Budget monitoring and control Lyn StaintonSchool Funding Unit

01992 555946

Internal Audit Helpline 01992 55531201992 555322

Completion and submission ofFinancial Returns

Sarah MoorSchool Funding Unit

01992 555722



FINANCIAL PLANNING

2.1 Introduction

The budget should be an expression of the way in which the school intends to use its resourcesfor educational priorities.

The Governing Body is required to prepare detailed estimates of how it intends to use thebudget share and other resources available to the school.

The preparation of detailed budget proposals will usually be delegated to the Headteacher,who will then make recommendations to the Governing Body. Only the Governing Body mayapprove the budget.

The process of setting the budget should reflect the school's aims and objectives in monetaryterms, and not simply be an incremental process from one year to the next. As the SchoolDevelopment Plan may lead to changes in priorities for expenditure in successive years, theemphasis should be on the objectives that the school wants to achieve rather than on themonetary inputs. If this is not done, the Governing Body will be unable to assess whetherrequests for expenditure are warranted and in line with overall objectives of the SchoolDevelopment Plan.

2.2 Financial planning in the medium term

If the school is to make effective use of its resources, it needs to produce a 3-year financialplan that is aligned to its 3-Year School Development Plan. The Authority has developed atool, ‘Finance Planner’, to assist schools with the production of such plans. This software isrevised annually and is available from Financial Services for Schools or can be downloadedfrom the website at www.thegrid.org.uk/trade/fss.

This tool enables schools to:

• plan for a range of alternative options• ensure that the priorities outlined in the School Development Plan are both affordable

and sustainable• develop contingencies to deal with unexpected events.

Planning is a strategic activity, and any plans need to be shared with and reviewed by theGoverning Body and the senior management team of the school. The school should establish


formal procedures and timetables for planning the budget to ensure that all relevant factorsboth financial and non-financial are considered. The school should formulate clear guidelines,targets, assumptions and constraints to be observed when preparing estimates.

2.3 Benchmarking and Management Information

Benchmarking and management information should be used to understand and challenge theimpact of local spending decisions on agreed educational targets.

Annual comparisons should be made between the school’s educational outcomes and those ofsimilar schools to identify where the school needs to improve and target resources. In thiscontext, the DfES has developed a consistent financial reporting framework (CFR). Theintroduction of CFR has two major purposes:

• firstly, to provide a national benchmarking tool for schools; and• secondly, to enable electronic transmission of financial information between schools,

the LEA and the DfES

A number tools are available to support schools in benchmarking activities. The Authorityproduces management information for schools in the form of an individual school profile,which can be compared, on a countywide basis with schools within the relevant benchmarkinggroup. The profile provides contextual information for senior management teams andGoverning Bodies. It can be used to review and develop planning activities and can alsoprovide schools with an indication on how their decisions compare with countywide practice.Management information is published on the Management Information Unit website andfurther information and guidance is available from the contacts to this Section.

Ofsted and the Audit Commission also produce tools and guidance to promote strategicapproaches to financial decision making in schools. Keeping your Balance is designed to givea very broad picture of the way in which a school meets standards for financial administrationand control. Whilst the diagnostic software Finances Self Evaluation Tool goes into greaterdetail probing the robustness of schools’ financial controls and financial management througha series of self-assessment questions. A feedback table and action plan is producedsummarising the school’s scores and identifying areas for improvement in priority order.

Use of the questionnaire or the diagnostic software is a voluntary but useful activity forschools especially in preparing for audit or inspection.

Keeping your Balance can be obtained from Ofsted or downloaded from their website. TheFinances Self Evaluation Tool can be found on the Audit Commission website. Please seecontacts to this section for further details.


2.4 Annual budget preparation

The Headteacher should prepare estimates of expenditure and income sufficiently in advanceof each financial year to allow for consideration and approval by the Governing Body.

Even if details of the school's funding have not been finalised, it is important that theGoverning Body considers spending priorities in the light of an estimated or indicative budget.There should also be a clear, identifiable link between the school's annual budget and itsSchool Development Plan.

Clear and documented notes should be maintained to support budget preparation and financialreporting.

The budget should also be detailed and clearly documented to enable actual expenditure to beclosely monitored against it.

The Authority supports software and provides budget preparation materials to facilitate budgetpreparation. Information about budgeting software and assistance in budget preparation isavailable from Financial Services for Schools. Please refer to the contact list for this Section.

2.4.1 Budget approval

The Governing Body should ensure that planned expenditure for each financial year,including commitments carried forward from the previous year, does not exceed theavailable resources, adjusted for estimated or actual balances brought forward fromprevious years.

The Governing Body must not plan for a deficit, except in certain exceptionalcircumstances and with the prior agreement of the Assistant Director (Resources). Inthese circumstances, schools will be required to adhere strictly to the Action Planprocess determined by the Assistant Director (Resources).

2.4.2 Registration of budget holders

The staff responsible for managing budgets (known as budget holders) should beclearly identified by name in the school's organisation structure.

A register should detail the allocated budget heading and expenditure limits against thename of each budget holder.

2.4.3 Budget preparation timetable

Undoubtedly the time scale for budget preparation, consideration and approval is ashort and intense one for schools and the Authority alike. It is vital, therefore, that the


school develops a clear process and timetable for budget preparation. This mustincorporate an early consideration of budget issues, both in terms of projected income(mainly the budget share) and specific spending plans. A broad outline of such aprocess and timetable may be as follows:

• Provision of school standing (formula) data to the Authority Nov/Dec• Consideration of standing data such as changes in pupil numbers Nov/Dec• Assessment of the impact of changes in the Scheme for Nov/Dec

Financing Schools and in the funding formula on theschool's budget

• Identification of specific issues arising from actual spending in Nov/Decthe current year which may have a continuing impact

• Completion and return of the Annual Schools’ Census Januaryto the Authority

• Preparation of a standstill budget (the cost of existing Januarycommitments)

• Preparation of detailed estimates of options for meeting new Mid Januarydevelopment plan targets

• Preparation of a key issues paper for consideration by the Mid February Governing Body

• Notification by the Authority of budget share 7 March• Checking the budget share to ensure the funding formula has March

been applied correctly to the school• Balancing the budget March/April• The annual budget is approved by the Governing Body March/April• The approved budget return is submitted to the Authority 1 May• The approved budget is circulated to those with responsibility April/May

and authority for expenditure

At the same time as the budget shares are issued, schools can expect to receive:

• notification of those elements of earmarked funding, where details areavailable, and the purpose for which such funding is made available

• advice on budget preparation together with other budget preparation materials;these will include pay and inflation tables and computerised budget calculationsoftware

• a standard template for submitting the approved budget and best valuestatement to the Authority (if not produced using software supported by theAuthority). Part IV, Section 3, Appendix A of the Handbook provides sampleformats of these documents


BUDGET MONITORING

2.5 Introduction

Regular monitoring of income and expenditure against the agreed budget is central to effectivefinancial management. It allows governors, the Headteacher and staff to maintain financialcontrol by reviewing the current position and taking any remedial action.

The Governing Body may wish to delegate this function and this would normally be to theHeadteacher, who will report as agreed to the Governing Body and/or its Finance Committee.The Governing Body should also ensure that links are in place so that:

• committees understand the financial implications of the decisions they make; and• the Finance Committee is aware of all decisions that have a financial implication.

To enable control to be exercised and decisions to be taken, and to ensure actual spendingmatches available funding, schools need to put in place processes which compare actualspending against the overall school budget and individual budget headings. Budget monitoringreports should contain details of actual and committed expenditure compared with a profiledexpected spend to date. They also need to project actual expenditure to provide a revisedforecast of the budgetary position for the whole financial year.

Budget monitoring reports must be made available to all budget managers to ensure thatbudgets are reviewed on a regular basis and to enable budget managers to take any necessaryremedial action. The Headteacher should assess the adequacy of such reviews and anyproposed action to deal with variances. The Headteacher should also periodically consult theGoverning Body and other staff involved in the budget monitoring process to ensure that thefinancial and management information they receive is relevant, timely, reliable andunderstandable. Schools should not lose sight of other monitoring information that may havean impact on their financial position, such as pupil numbers and changes in contracts - bothstaffing and traded services.

The Governing Body should:

• monitor its budget at least termly and record its findings, discussions and actions• take all reasonable steps to avoid deficits• report any potential or projected year end deficits to the Head of School Resources• prepare in the specified form and submit by the specified date financial reports to the

Authority.

2.6 Timetable

The Governing Body must establish an annual timetable for financial reporting and control,both within the school and to the Authority. It should cover:

• long-term financial planning and monitoring• annual budget setting• periodic budget monitoring


• production of year end statement of accounts and other financial returns.

2.7 Monitoring Process

Budget monitoring is a continuous process and the success of this activity is reliant on theproduction of monthly reports that are accurate and timely. It follows, therefore, thataccounting systems from which the information is produced must accurately record incomeand expenditure against the latest approved budget so that the reports produced show both themonthly budgetary position and a projection for the entire financial year.

Budget monitoring consists of a number of stages described below.

2.7.1 Profiling the budget

Many items of expenditure and income do not occur evenly throughout the financialyear. It is, therefore, necessary to establish profiles or spending patterns for individualbudget accounts to enable actual spend to be compared with the proportion of thebudget expected to be spent at that point in the year.

Profiles need to take into account of

• seasonal variations – energy consumption and termly spending patterns• pay and price changes – pay awards and increments• volume changes – staff numbers between the three terms• changes to timing of payment processing arrangements

Once the approved budget is input on the accounting system at the beginning of thefinancial year, it should be profiled to reflect the anticipated spending pattern for theyear. Profiles should be regularly reviewed to ensure that they continue to representwhat is expected to happen in practice especially when changes have been made to theapproved budget. For example, the transfer of resources between budget accountsduring the financial year would create a different profile or pattern of spending.

2.7.2 Recording income, expenditure and commitments

Actual income and expenditure represents items processed through the school’s bankaccount. Commitments relate to orders raised but where no payment has been made todate, or anticipated income that has not been received to date. To enable effective budget monitoring, it is essential that both actual and committedincome and expenditure are accurately recorded against the appropriate budgetprovision.

Financial staff having responsibilities for recording transactions on the accountingsystem must have access to information about planned income and expenditure in theapproved budget.


2.7.3 Format of budget monitoring reports

The Governing Body (and/or its Finance Committee) and the Headteacher shoulddetermine the format and detail required for budget monitoring reports. In doing so,they should have due regard for the resources available to produce financial reports. Accounting software supported by the Authority produces a number of standard anduser defined reports that will meet general budget monitoring requirements. However,for effective monitoring and control of trading activities, such as catering, andsignificant activities or projects, additional reports may be required. Any such reportshould clearly provide detail from which it can be readily determined whether theactivity is trading in accordance with the budget objectives.

2.7.4 Reviewing budget monitoring reports In reviewing the budget monitoring reports the following issues should be taken intoconsideration to assess the school’s true financial position relative to its budget.

• The information in the accounts may not be complete

The value of recharges, bills and invoices that have been posted to the accountsmay not reflect the true costs relative to the accounting period unless amountsowing have been recorded as a commitment or otherwise accrued. Fundingreceived by the school may not have been posted to the accounts e.g., additionalfunding, the proceeds from new or established sources of income, etc. Amountsthat have been posted to suspense or holding accounts may not be reflected in thebudget monitoring reports.

• The budget monitoring report may not reflect all commitments, liabilities oramounts owed to the school

A school may be committed to various types of expenditure, of either a one-offor ongoing nature, that the accounting system is not designed to easily capture.For example, new staff whose salaries have yet to be charged to the school, thecosts of new or changes to contracts for supplies or services where paymentshave yet to be made or over which there is doubt about costs to be incurred.

Conversely the school may be expecting income from a grant bid, or aninsurance claim where there may be some uncertainty about the amount that willbe received.

Some schools may choose to formally accrue for these amounts if theiraccounting system offers that facility. However, many will need to be aware ofthese items and take them into account as known or estimated adjustments to thelevels of income or expenditure shown on the monitoring reports.


• Income shown in the monitoring reports may be earmarked or committed

Earmarked income may only be used for the purpose for which it is provided.For example, a grant may have conditions attached restricting spending to certainactivities, products or services or within specific periods of time. Suchearmarked funds, not yet spent, should be clearly identified since they cannot betreated as available to offset any other budget overspends, or to finance otherspending plans or needs.

Equally the school may be in possession of other funds that it does not have thediscretion to spend. For example, payments received for school trips yet to takeplace. These funds are not available for “general expenditure”, and must bediscounted in the calculation of the budget remaining, since they are needed tomeet expenditure in relation to the school trip.

• The full costs of projects or plans may not be fully reflected in the budget

The school may be committed to a project or course of action the full costs ofwhich have not been included within the approved budget. Contracts and ordersmay not have been placed and there may remain some discretion with respect toparticular expenditure or commitments. For example, where a school isrefurbishing an area within the school, estimates within the original budget planmay be too low in relation to the associated costs of furniture, equipment,additional utilities, cleaning, etc.

2.7.5 Variances

Any budget monitoring reports should compare the amount spent or committed to dateagainst budget expectations or profiles. Variances should be clearly identified andinvestigated in detail and corrective action should be taken where appropriate. Onceestablished, the reason for significant variances should be recorded, as a part of thebudget monitoring and reporting information.

Comparison of actual and committed income and expenditure against the budgetprofile may produce differences (over- or underspends) known as variances.


There are six principal reasons for variances:

• changes in policies• changes in price• changes in volume• problems of timing• profile errors• accounting and coding errors Variances may also arise for reasons other than as a true disparity between expectedand actual expenditure. For example, where additional funding is received after thebudget has been set then a 100% variance may arise since the spending of theadditional funds will not be matched in the budget by the corresponding income. Toovercome this, governors may approve a revised budget, which can be presentedalongside the original budget so that revisions and the latest budget position can bereadily seen. Coding errors will distort the comparison of actual figures to the budget. If income orexpenditure is coded to different budgets from those assumed, then both the originaland the “new” budget may exhibit variances. These “false” variances can easily becorrected by journal transfer or by virement from the original budget to the “new”budget. It is important that both the producers and users of the budget monitoring reports needto be clear about the effect of the various potential factors listed above on anyvariances appearing in the monitoring reports. Failure to take these factors intoaccount may produce a false representation of the budgetary position. Explanations may need to accompany the standard monitoring reports where figuresfrom the accounting system do not reflect the true position. Alternatively, where anumber of adjustments are required, then it is recommended that these be categorisedby type, as follows: • significant commitments not recorded in the accounts• significiant debtors, creditors or other accurals not recorded in the accounts• earmarked funds• funds intended for specific projects, etc.• coding errors not yet corrected.

2.7.6 Correcting variances

Variances, particularly adverse ones (overspends) should never be allowed toaccumulate before action is taken. If delayed in this way they may become too largeever to be fully corrected, resulting in overspending at the year-end. Clearly, theearlier action is contemplated and agreed upon the better.

Whether or not corrective action is necessary will depend on the cause of the variance.Therefore, it is essential to establish the cause of the variance and whether it is a one-


off occurrence or is continuing (perhaps with an ever-increasing liability), so that theright response can be chosen. It is also important only to take action where a problemis material.

Briefly, variances should be treated thus:

• small under spending or overspending – no action required• large under spending or overspending – requires investigation and possibly

corrective action• major under spending or overspending – requires immediate investigation and

corrective action taken

The definition of small, large or major will depend upon the type of expenditure andincome and the size and organisation of the school. These matters will be a matter ofjudgement for each school.

The following represent the options for corrective action.

• Virement

This term means the transferring of resources from one budget account toanother after an initial budget has been set. The Governing Body can delegatethe power to approve virements, for example to a committee or to theHeadteacher subject to the agreed delegated limits. Normally such a delegatedpower would be subject to an upper limit.It is, therefore, important to record, within the school’s Schedule of Delegation(or similar document, the arrangements for authorising virements and the limitsof that delegation, and to communicate this to the relevant staff.

It is important that all virements are properly documented and authorised, andGoverning Bodies should satisfy themselves from time to time that the school'sarrangements are being operated properly. However, virement is not theanswer to all spending problems. It is certainly no substitute for tackling theroot cause of an overspend.

• Reduce the planned expenditure

Cut back on future spending plans:

- on the same type of expenditure as the overspend (e.g. offset overspendingon electricity by introducing economies on gas consumption)

- on another type of expenditure.


• Income generation

It may be worth considering:

- approaches to national and local commercial organisations to seekdonations; this can be achieved by regular or one-off donations

- private and commercial hire of premises- appeals for voluntary contributions from parents, former pupils and their

parents

• Draw on School Contingency or Reserves

Transfer resources from this fund to the appropriate budget account, bearing inmind that such a one-off use of funds cannot support recurring costs in the longerterm.

Where savings have been achieved, and before a decision is taken to commit theschool to any increased spending which has a continuing liability (for example anincrease in staffing), it would be prudent to judge whether foreseeable funding levelscan support such a commitment. It is also worth bearing in mind that the phasing outof transitional protection arrangements or changes in pupil numbers may have asignificant impact on a school's budget.

2.7.7 Recording budget monitoring activity

Financial administration staff, budget managers, Headteachers and governors shouldensure that all budget monitoring activity is evidenced. This can be easily achieved byannotation of reports that have been considered. The detail will show that significantvariances have been considered and, where appropriate, the remedial action taken forredress.

The Governing Body should ensure that budget monitoring activity is evidenced in theminutes of the Finance Committee and/or full Governing Body and should ensure thatthe following detail is recorded:

• the type and date of the monitoring reports received• the key elements of discussions in relation to the reports• any decisions or actions agreed which will include details of persons

responsible for undertaking the action and any required timescales

Financial Handbook for Schools Hertfordshire County CouncilPart IV: Guidance - Section 3 Page 70 RESO3519 - Issue 3 : April 2003


TABLE OF CONTENTS

PageCONTACTS 72

FINANCIAL REPORTING TO THE AUTHORITY 743.1 Introduction 743.2 Financial Returns and Formula Funding Data 743.3 Timetable for submission of financial returns 75

FINANCIAL REPORTING TO PARENTS75

3.4 Introduction 753.5 Governing Body Report 753.6 Statutory Content 763.7 Discretionary content 763.8 Statutory requirements 77

Appendix A Approved Annual Budget Return and Best Value Statement 78Appendix B Quarterly Returns and Revised Forecast Statement 84Appendix C End of Year Statement of Accounts 98



CONTACTS

Completion of Financial Returns

Schools purchasing financialsystems support from FinancialServices for Schools

General queries about FinancialReturns

RMMS Cash AccountsHelpline

CAPITA SIMS Helpline

Jonathan BurberryLyn StaintonSchool Funding Unit

01992 555713

01992 555753

01992 55594301992 555946

Copies of Financial Returns Sarah MoorSchool Funding Unit

01992 555722

Formula funding

Primary and Secondary Schools

Nursery and Special Schools

School Funding UnitWebsite

Gill TrebleSchool Funding Unit

Kirsty AlfordSchool Funding Unit

www.thegrid.org.uk/info/sfu

01992 555942

01992 555731

Return of Formula Funding Data Chris HartSchool Funding Unit

01992 555810

Annual reporting to parents Martin DavisonSchool Governance

01582 830378

Copies of DfES Circulars DfES Website dfes.gov.uk

DfES Publications 0845 602 2260



FINANCIAL REPORTING TO THE AUTHORITY

3.1 Introduction

This Section sets out:

• the financial reporting requirements of the Authority for it to fulfil its statutoryresponsibilities for reporting and monitoring school spending

• the financial reporting timetable and arrangements required of Governing Bodies • the content and format of financial returns for submission to the Authority. 3.2 Financial Returns and Formula Funding Data The financial returns fall into three main categories and from April 2002 are produced in the DfESconsistent financial reporting format. • Annual Approved Budget Return and Best Value Statement. See Appendix A. • Quarterly Financial Statements including Income and Expenditure Statement and

Revised Forecast, Bank Reconciliations, Schedule of Earmarked Funding and BalanceSheet for accruals accounting. See Appendix B.

• End of Year Statement of Accounts, including Income and Expenditure Statement,

Balance Sheet, Bank Reconciliations, Schedules of Accruals, Schedule of EarmarkedFunding and Special Educational Needs Earmarked Funding Income and ExpenditureStatement. See Appendix C.

Standards, format and explanatory notes are contained in the Appendices to this Section. Annual returns of school standing or formula funding data will be required to calculate theschool's budget share.


3.3 Timetable for submission of financial returns Schools must adhere to the following timetable for submission of returns.

Required by:

School standing or formula funding data End of November (prior to start of financial year) Annual Approved Budget Return and 1 May Best Value Statement Quarterly Income and Expenditure andRevised Forecast Statement:

Quarter 1 15 September Quarter 2 15 November Quarter 3 15 February

End of year Statement of Accounts 15 May FINANCIAL REPORTING TO PARENTS 3.4 Introduction The Governing Body to prepare an annual financial report to parents. This must contain: • a summary of the steps taken by the Governing Body in the discharge of their

functions during the period since their last report and • such other information as regulations may require. Details of the information to be included in Governors’ Annual Reports are published in DfESCirculars 7/99 Governors’ Annual Reports in Primary Schools and 8/99 Governors’ AnnualReports in Secondary Schools. These are available from the DfES website – dfes.gov.uk orfrom the Department for Education and Skills Publications. See contacts list for this Section for further information about help and assistance available. 3.5 Governing Body Report The Governing Body's report, while needing to fulfil statutory requirements, need not be abland set of financial statements. Financial statements should explain how budgets and actualspending achieve or are intended to achieve the school's policies and objectives. They should


show how the school will achieve its Development Plan or post-Ofsted Action Plan and itspublished targets. 3.6 Statutory Content The Governing Body, as part of its report to the annual parents' meeting, is required to: • reproduce or summarise any financial statement of which a copy has been furnished to

the Governing Body by the Authority, since the last governors’ report was prepared • indicate, in general terms, how any sum made available to the Governing Body by

the Authority was used in respect of the school's budget share in the period covered by the report

DfES Circulars 7/99 (Primary Schools) and 8/99 (Secondary Schools) also require that thereport includes a financial statement which: • indicates how any funding provided by the Authority was spent • gives details of any gifts received by the school • gives details of governors’ travelling and subsistence expenses (if any). In practice, this means including a copy or summary of the latest available version of: • Table 1 of the Section 52 Budget Statement - Total Budgeted Expenditure by the

Authority under its Scheme for Financing Schools • Table 1 of the Section 52 Out-turn Statement - Total Spending by the Authority

under its Scheme for Financing Schools • the figures given for your school in Table 2 – School level information of the Section

52 Budget Statement • the figures given for your school in Table 2 – School level information of the Section

52 Out-turn Statement

3.7 Discretionary content

Schools have discretion as to the exact format and level of detail of these financial statements.There is no requirement to publish information about individual salaries. A global heading'staff costs' (not even necessarily broken down between teaching and non-teaching) would beadequate.The Authority's registration under the Data Protection Act allows the use of personal data for,among other things, management purposes and statutory returns. This would permit the use,


by Headteachers and those directly involved in the management of the budget, of dataconcerning individual earnings.

However this would not permit the wider publication of information, which could allow anindividual's earnings to be deduced. In other words, staffing expenditure shown in the AnnualReport to Parents should be in summary form. In a small school, this may entail the inclusionof only two staffing figures – one for teaching staff and the other for non-teaching staff. Insome cases, it may be necessary to give one combined figure for all staff.

3.8 Statutory requirements

The Authority is required to provide the Governing Body of each school covered by itsScheme for Financing Schools with a copy of a budget and out-turn statement for eachfinancial year. The Authority is also required to publish the document by:

• making a copy available for reference without charge at its education offices • making a copy available for reference without charge at each public library in the

LEA’s area • furnishing a copy to the DfES The budget statement must be published before 1 April of the year in question.

The out-turn statement must be published by 31 October immediately after the financial yearin question.

Copies of the annual report must be available free of charge for all parents and further copiesmust be available for inspection at the school. Copies should be available at least two weeksbefore any parents' meeting.

The Governing Body of each school covered by the Scheme for Financing Schools in anyfinancial year is required to have available for inspection at the school, a copy of the budgetand out-turn statements furnished by the Authority. They must be available at all reasonabletimes and free of charge.


APPENDIX A APPROVED ANNUAL BUDGET RETURN AND BESTVALUE STATEMENT

The annual budget plan will reflect the school’s intention towards the provision of thecurriculum, including provision of staff and educational equipment and the development andmaintenance of the school site. The annual budget plan should reflect the financial objectivesof the school and will incorporate all areas of influence affecting the operation of the school,including the School Development Plan. The Governing Body is also required to submit, with its annual budget return, a Best ValueStatement. This statement will set out the steps the Governing Body will take to ensure thatexpenditure reflects the principles of the Best Value regime. The DfES’s statement ‘BestValue and Schools’ is reproduced in this Handbook as Annex F in Part II, Scheme forFinancing Schools. From April 2002, the format for annual budget returns is based on the DfES consistentfinancial reporting framework (CFR). See Part IV, Section 2 of this Handbook for furtherinformation about CFR and benchmarking. A sample annual budget return and Best Value Statement are appended to this Appendix andare also available from the School Funding Unit and can be downloaded from the SchoolFunding Unit website. See list of contacts for this Section. The Authority supports softwareand provides manual budget preparation forms and information about budgeting software.Assistance in budget preparation is available from Financial Services for Schools. Pleaserefer to the list of contacts for this Section. Further information on best value is contained in Part IV, Section 9 of this Handbook.


LMSFR 1

Approved Budget Return

School Name School Number

REVENUE EXPENDITURE

Equivlent Whole Time staff numbers per term

EWT EWT EWT £ £ £

Direct Staffing Costs Summer Autumn SpringE01 Teaching StaffE02 Supply StaffE03 Education Support StaffE04 Premises StaffE05 Administrative and Clerical StaffE06 Catering StaffE07 Cost of Other Staff

Total Direct Staffing Costs a

Non Pay CostsE08 Indirect Employee ExpensesE09 Staff Development and TrainingE10 Supply Teacher InsuranceE11 Staff Related InsuranceE12 Building Maintenance and ImprovementE13 Grounds Maintenance and ImprovementE14 Cleaning and CaretakingE15 Water and SewerageE16 Energy

ElectricityGasOilTotal for Energy

E17 RatesE18 Other Occupation CostsE19 Learning Resources (not ICT)E20 ICT Learning ResourcesE21 Examination FeesE22 Administrative SuppliesE23 Other Insurance PremiumsE24 Special FacilitiesE25 Catering SuppliesE26 Agency Supply StaffE27 Bought-In Professional Services-CurriculumE28 Bought-In Professional Services-OtherE29 Loan InterestE30 Direct Revenue Financing (revenue contributions to capital)

ContingencyTotal Non Pay Costs b

TOTAL REVENUE EXPENDITURE c=a+b

CAPITAL EXPENDITURECE01 Acquisition of Land and Existing BuildingsCE02 New Construction, Conversions and RenovationsCE03 Vehicles, Plant, Equipment and MachineryCEO4 ICT Capital Expenditure

TOTAL CAPITAL EXPENDITURE

Issued by: School Funding Unit, Resources Division


LMSFR 1Approved Budget Return

REVENUE INCOME £ £ £

I01 Funds Delegated by the LEAGross School Budget Share (except SEN and Sixth Form components – see lines 102 and103)School Standards GrantStandards Fund Infant Class Size GrantOther Earmarked Funding

Total for Funds Delegated by the LEAI02 Funding for Sixth Form StudentsI03 SEN Funding

Gross School Budget Share-Non-Statemented SEN FundingGross School Budget Share-Special Unit FundingSchool Budget Share-Earmarked Pupil FundingSchool Budget Share-Funding for Pupils with StatementsStandards Fund-SENOther SEN Earmarked Funding

Total SEN FundingI04 Funding for Minority Ethnic Pupils

Standards Fund-Ethnic Minority Pupils and TravellersOther Funding for Minority Ethnic Pupils

Total for Funding for Minority Ethnic PupilsI05 Standards Fund Revenue Income (except grants in lines I01, I03, I04, CI01)I06 Other Government GrantsI07 Other Grants and Payments ReceivedI08 Income from Facilities and ServicesI09 Income from CateringII0 Receipts from Supply Teacher Insurance ClaimsIII Receipts from other Insurance ClaimsII2 Income from Contributions to VisitsII3 Donations and/or Private Funds

Projected Over/Underspend from Previous Financial Year

TOTAL REVENUE INCOME

CAPITAL INCOME

CI01 Capital IncomeStandards Fund-Devolved Formula CapitalStandards Fund-Seed Challenge GrantStandards Fund-School Security GrantOther Capital Income

Total for Capital IncomeCI02 LoansCI03 Private IncomeCI04 Direct Revenue Financing

TOTAL CAPITAL INCOME

APPROVED BY THE GOVERNING BODY ON (Date)

APPROVED BY


Issued by: School Funding Unit, Resources Division

School Name School No

BEST VALUE STATEMENT

As part of the School Development Planning Process do you:

i) Ask how and why a service is provided and consider the use of alternativeproviders? Internal (within school) – eg - class organisation - curriculum visits - minor repairs External - eg - purchase of HCC traded services - IT support agreements - major contracts

YES / NO

YES / NO

ii) Compare performance against other schools taking into account the views ofparents or pupils? e.g. - use of Management Information publications - use of the PANDA - feedback from parental meetings/correspondence

YES / NO

iii) Have mechanisms in place to consult parents, pupils and other stakeholders? YES / NO iv) Have a regular schedule of service and contract review, as set out in the

Financial Handbook for Schools, Part IV, Section 9.10? YES / NO

Do you have or are you developing a framework of performance indicators andtargets that take into account national and Hertfordshire requirements?

YES / NO

Within your School Development Plan do you have:

i) a summary of objectives and strategy for the future? YES / NO

ii) forward targets on an annual and longer term basis? YES / NO

iii) description of the means by which performance targets will be achieved? YES / NO iv) a report on current performance? YES / NO Are the financial roles and responsibilities of the governing body, its committeesand school staff regularly reviewed to ensure security and control of the schoolsystems and processes?

YES / NO

Are there effective monthly processes within the school to ensure that financeinformation (including pupil intakes) is scrutinised regularly?

YES / NO

Are there processes to ensure the recommendations of auditors are fullyimplemented?

YES / NO

Please attach this form, or an alternative statement demonstrating how best value principles are beingfollowed, to the approved budget return.

Signed Headteacher Chair of Governors


1. This statement is intended to assist schools in considering the relevance of best value

principles to the expenditure of funds from their delegated budget share. Whensubmitting annual budget plans, schools are required to say how best value principlesare being followed.

2. Best value is a statutory duty to deliver services to clear standards, covering both cost

and quality, the most effective, economic and efficient means available. Legislationplaces a duty on local authorities to secure best value in respect of the way in which theyexercise their functions. This duty is not intended to apply to those functions which areexercised by the governing bodies of LEA maintained schools. However, schools areencouraged to adopt the best value performance management framework.

3. In relation to schools and expenditure from delegated budgets, the main features of best

value can be summarised as a need for the governing body of a school to ensure:

a. the existence of a programme of performance review which will aim for continualimprovement. Existing mechanisms such as school development plans and post-OFSTED inspection plans can be developed to satisfy the requirements for review.The reviews should include:

- challenging how and why a service is provided (including consideration ofalternative providers);

- comparison of performance against other schools taking into account theviews of parents and pupils;

- mechanisms to consult stakeholders, especially parents and pupils; - embracing competition as a means of securing efficient and effective

services.

b. the development of a framework of performance indicators and targets willprovide a clear practical expression of a school’s performance, taking nationalrequirements into account;

c. that the following are included in school development plans: - a summary of objectives and strategy for the future; - forward targets on an annual and longer term basis; - description of the means by which performance targets will be achieved; - a report on current performance

d. that internal and external audit takes place ensuring that performance informationis scrutinised. LEA oversight of school finances provides external review.

4. The independent inspection and intervention elements of the best value framework will

be the responsibility of other bodies and therefore not relevant to demonstration by agoverning body of adherence to best value principles.


APPENDIX B QUARTERLY RETURNS ANDREVISED FORECAST STATEMENT

The Governing Body is responsible for monitoring the approved budget to ensure the school’sfinancial viability. To enable control to be exercised and decisions taken, the school should ensure processes arein place: • to compare actual and committed spending against the overall school budget and

individual budget headings

• to project actual income and expenditure to gain a picture of the budgetary position for the whole financial year.

When completed, the quarterly statement and supporting documents will give a clear pictureof the school’s current and anticipated year end financial position. The returns must besubmitted by the specified deadlines. This is to enable the Authority to fulfil its statutory dutywith regard to the sound management of public funds. The statements can be completed on either a cash or accruals accounting basis. Put simply, quarterlyreturns prepared on: • A Cash Basis – record actual income and expenditure for the period, reconciled to the

bank statement(s). The statements to be completed for the cash basis of accountingare:

- Income and Expenditure Statement and Revised Forecast (LMSFR 2) - Reconciliation of the school’s bank accounts holding School Budget Share

funding (public funds) (LMSFR 5) or equivalent for each bank account - Where schools have more than one bank account holding School Budget Share

funding (public funds) a summary of the bank accounts must be completed(LMSFR 5sum)

- Statement of Petty Cash balance - Schedule of Earmarked Funding (LMSFR 8)

• An Accruals Basis – record the true costs for the period, reconciled to the bankstatement(s) and accounting system ledger balances. The statements to be completedfor the accruals basis of accounting are:

- Income and Expenditure Statement and Revised Forecast (LMSFR 2) - Quarterly Summary Balance Sheet (LMSFR 4Q) - Reconciliation of the school’s bank accounts holding School Budget Share

funding (public funds) (LMSFR 5) or equivalent for each bank account


- Where schools have more than one bank account for holding School BudgetShare funding (public funds) a summary of the bank accounts must becompleted (LMSFR 5sum)

- Statement of Petty Cash balance - Schedule of Earmarked Funding (LMSFR 8)

When accounting for creditors, debtors, prepayments and receipts in advance, schools shouldconsider whether an item is material. It is probably not worth listing very small amountsowing or due. The school should determine what is considered material in terms of affectingwhether or not the quarterly return reflects the true cost of running the school. In the absenceof any other considerations, a 'rule of thumb' of 0.1% of budget share can be applied. It is notnecessary to account for every penny. The watchword is materiality. The school shouldexercise discretion. Schools should note the following definitions when preparing quarterly returns on an accrualsbasis. • Debtors Income should be recorded at the point when it is due to the school, whether or not

received by the end of the accounting period. When income is owed to a school inrespect of goods and services provided by the school during the financial period, theperson or organisation owing the money is a debtor. An example of this would bewhere payment was not received in respect of invoices for hire of school premises thattook place during the accounting period.

• Receipts in advance Income received in advance should be properly accounted for in the relevant

accounting period. For example, income received for a school journey or day trip thatwill take place in a following accounting period.

• Prepayments

Payments made in advance for goods or services to be received in the next accounting period. For example, payments of deposits for a field study visit to takeplace during the next accounting period are allocated to that period.

• Creditors

Expenditure should be recorded in the accounting period when the goods and serviceswere received. For example, goods or services have been received during theaccounting period but the invoice has not yet been paid. This is known as a creditor.

Goods and services ordered during but not received by end of the relevant quarterlyaccounting period must not be included as creditors and must be accounted for in thefollowing quarterly accounting period.


The Revised Forecast column must be completed in all cases. This column should provide anup-to-date forecast, reflecting the approach the school will take to remain within its expected incomefor the year. In calculating the Revised Forecast, schools should use actual income/expenditure to datetogether with an estimate of income/expenditure for the remainder of the financial year.

From April 2002, the format of the Income and Expenditure Statement (LMSFR 2) is based on theDfES consistent financial reporting format (CFR). See Section 2 for further information about CFRand benchmarking.

Sample forms for the quarterly financial returns are available from the School Funding Unit or can bedownloaded from the School Funding Unit website. See list of contacts for this Section.

The following notes provide further guidance, describing the types of expenditure to bereported on each line of the return.

A negative figure should be recorded within brackets e.g. (£ amount).

QUARTERLY INCOME AND EXPENDITURE STATEMENT (LMSFR 2)

The categories and the allocation of expenditure headings to each category are based on theDfES CFR guidelines and may be subject to change in light of further revision or clarificationfrom the DfES.

Line No. Narrative Definition

REVENUE INCOMEI01 FUNDS DELEGATED

BY THE LEAThis is the major part of funding provided by the LEA toschools:• School Budget Share• Funding for nursery pupils• Teachers’ pay grants• School Standards Grant• Class Size Grant• Earmarked Funding - any additional Non-Standards

Fund, non-SEN funding from LEA that is not formallyincluded in the school's delegated budget but ismanaged by the school

I02 FUNDING FOR SIXTHFORM STUDENTS

Funding from public sources for sixth form students:• Learning and Skills Council Funding• Post 16 Collaboration


Line No. Narrative Definition I03 SEN FUNDING All delegated and/or devolved funding for pupils with

special educational needs, including:• Funding for Pupils with Statements• Earmarked Pupil Funding• Non-Statemented SEN Funding• Special Unit Funding• Non-Delegated Special Unit and Bases• Standards Fund-SEN• Other SEN Earmarked Funding

I04 FUNDING FORMINORITY ETHNICPUPILS

• TSF funding to support ethnic minority and travellerpupils

• Single Regeneration Budget funding• any other government funded source to support ethnic

minority pupils

I05 STANDARDS FUND Standards Fund Revenue Income excluding TSF fundingrecorded on lines I01, I03, I04 and CI01

I06 OTHERGOVERNMENTGRANTS

The total of all development and other non-capital grantsfrom the government, including:• funding related to the Single Regeneration Budget not

already included in line I04• any funding at school level for Education Action Zones

I07 OTHER GRANTS ANDPAYMENTS RECEIVED

• New Opportunities Funding;• European Union funding• payments received from other schools, e.g., from

beacon schools to meet supply cover costs, etc.

I08 INCOME FROMFACILITIES ANDSERVICES

Income from assets, including:• hire of premises, equipment or other facilities• all other income from facilities and services• bank account interest

I09 INCOME FROMCATERING

Where the school runs its own catering service, incomederived from:• catering• school milk provision• vending machines• any payments received from catering contractors, e.g.,

where a contractor is in default of contract or haspreviously overcharged the school

I10 RECEIPTS FROM

SUPPLY TEACHERINSURANCE CLAIMS

Income from staff absence insurance claims for teachingstaff



I11 RECEIPTS FROM

OTHER INSURANCECLAIMS

All insurance receipts in respect of claims for losses,including:• Insurance benefit for non-teaching staff and nursery

nurses• Insurance reimbursements

Note: Insurance receipts for capital item claimsshould firstly be recorded under this heading and thenmoved into Capital Income via Direct RevenueFinancing E30

I12 INCOME FROMCONTRIBUTIONS TOVISITS

Income from parental contributions requested by the schoolfor educational visits and field trips, including boardingfees.

I13 DONATIONS AND/ORPRIVATE FUNDS

All income from private sources under governing bodycontrol available for purposes of the school or for thepurposes of the maintenance of any part of the schoolpremises, including:• Business sponsorship• Income from fund-raising activities• Income from foundation, diocese or trust funds• any contributions from parents that are used to provide

educational benefits for students• monies from a trust fund used during the year to support

educational needs at the school

TOTAL REVENUE

INCOME Total for lines I01 to I13

REVENUE EXPENDITURE E01 TEACHING STAFF Full time and part time teachers employed directly by the

school; including supernumerary/peripatetic teachers onshort term contracts

E02 SUPPLY TEACHERS Salaries and wages of supply staff employed directly by theschool covering:• long-term absence• sickness absence• training absence• curriculum release This excludes supply staff employed through an agency –see line E26



E03 EDUCATION SUPPORT

STAFF Salaries and wages of support staff employed directly by theschool including:• nursery assistants• classroom assistants• learning support assistants• childcare staff• nurses and medical staff• workshop and technology technicians• librarians• foreign language assistants

E04 PREMISES STAFF Premises staff employed directly by the school including:• caretakers• cleaners• maintenance staff• grounds staff• porters• messengers• security staff

E05 ADMINISTRATIVEAND CLERICAL STAFF

Administrative and clerical staff employed directly by theschool, including:• bursars• school secretaries• typists• receptionists• telephonists• clerk to the governing body

E06 CATERING STAFF Catering staff employed directly by the school associatedwith catering including:• chefs and cooks• servers• kitchen porters• cashiers

E07 COST OF OTHERSTAFF

Cost of other staff employed directly by the schoolincluding:• meal time assistants• staff supervising students before and after school

sessions and during breaks• escorts• liaison officers• education welfare officers• staff employed to manage and support special facilities

available at the school



E08 INDIRECT EMPLOYEE

COSTS Indirect employee costs, including:• cost of recruitment advertising and other recruitment

costs• employee and governor travel and subsistence• duty meals• pensions payments including any premature retirement

payments made by the school• lump sum compensation and redundancy payments• medical fees• relocation fees

E09 STAFFDEVELOPMENT ANDTRAINING

Staff development costs for teaching staff, support staff andgovernors, including cost of:• all in-service training courses and other development

opportunities• equipment and resources to provide in service training

E10 SUPPLY TEACHERINSURANCE

Premiums paid to insurers for supply teacher cover

E11 STAFF RELATEDINSURANCE

Cover for non-teaching staff absence and employee relatedinsurance for accident and liability, assault, fidelityguarantee, libel and slander

E12 BUILDINGMAINTENANCE

Charges by contractors for internal and external repair,maintenance and improvement to buildings and fixed plantincluding:• costs of labour and materials• related professional and technical services, including

labour costs where supplied as part of thecontract/service

• costs of materials and equipment used by directlyemployed staff for internal and external repair,maintenance and improvement to buildings and fixedplant

E13 GROUNDS

MAINTENANCE• Maintenance and improvement of gardens and grounds,

including car parking, play areas, sports fields andpitches on the school site

• related professional and technical services, includinglabour costs where supplied as part of thecontract/service

E14 CLEANING AND

CARETAKING• Supplies used in cleaning and caretaking• cost of equipment• contractor charges for cleaning and caretaking services• related professional and technical services



E15 WATER AND

SEWERAGE All costs related to water and sewerage and emptying ofseptic tanks

E16 ENERGY All costs related to fuel and energy, including:• fuel oil• solid fuel• electricity• gas

E17 RATES Rates expenditure

E18 OTHER OCCUPATIONCOSTS

• Rents• lease or hire charges for premises• refuse collection;• hygiene services• security patrols and services• landlord's service charges

E19 LEARNINGRESOURCES (NOTICT)

• Books• charges for the school library• teaching materials• school trips• equipment (not ICT)• reprographic resources and equipment for teaching

purposes• purchase, lease, hire or maintenance contracts for audio-

visual or other equipment used for teaching• furniture used for teaching• revenue costs associated with vehicles used for

curriculum purposes

E20 ICT LEARNINGRESOURCES

• Educational software, including site or other licences,used for teaching purposes

• purchase, lease, hire or maintenance contracts of ICTused for teaching

• costs of broadband, ISDN, ASDL or other dedicatedphone lines

E21 EXAMINATION FEES • Costs of text and examination entry fees

• Any accreditation costs related to pupils



E22 ADMINISTRATIVE

SUPPLIES• Administrative stationery, printing and reprographics• postage• bank charges• advertising (not recruitment-see E08)• telephone charges (not internet-see E20)• medical and domestic supplies• purchase, hire or maintenance contracts of ICT or other

equipment• furniture and equipment not used for teaching purposes• revenue costs associated with vehicles used for

administration purposes

E23 OTHER INSURANCEPREMIUMS

• Premises related insurance• vehicle insurance• accident and public liability insurance for persons not

employed directly by the school

E24 SPECIAL FACILITIES • Community education• joint use of swimming pools and sports centres• boarding provision• rural studies and farm units• payments to another school for the benefit of pupils at

the other school

E25 CATERING SUPPLIES • Non-capital catering equipment• provisions• other catering supplies• purchase, rent, lease or hire of vending machines• full cost of service contract• related professional and technical services• repairs and maintenance of kitchen equipment,

including safety checks

E26 AGENCY SUPPLYSTAFF

Cost paid to an agency for teaching staff, includes cover ofany period and for all reasons, including illness, absence fortraining, or leave

E27 BOUGHT-INPROFESSIONALSERVICES -CURRICULUM

• Professional services, consultancy and advice purchasedfrom the LEA or third party in support of thecurriculum

• ICT consultancy services for the curriculum• payments to any visiting lecturers/ speakers• courses purchased for students from external providers



E28 BOUGHT-IN

PROFESSIONALSERVICES - OTHER

Professional services, consultancy and advice to staff andgovernors purchased from the LEA or an external partyrelating to:• management• financial• legal• personnel• premises• clerking service• management fee on PPP/PFI contracts

E29 LOAN HCC Loan repayments and interest

E30 DIRECT REVENUE All amounts transferred to CI04 to be accumulated to fundcapital works. This will match exactly the figure at CI04;and receipts from insurance claims for capital lossesreceived into income under I11

TOTAL REVENUE

EXPENDITURE Total for lines E01 to E30

EXCESS OF REVENUE

INCOME OVERREVENUEEXPENDITURE

Net difference between Revenue Income and RevenueExpenditure. A negative figure should be recorded withinbrackets, e.g., (£ amount)

CAPITAL INCOME

CI01 CAPITAL INCOME Capital funding from public sources managed by thegoverning body, including:• Capital funding from LEA• Standards Fund Devolved Formula Capital• Standards Fund Seed Challenge Grant• other Capital Standards Fund Grants• proceeds from the sale of fixed assets

CI02 LOANS Loan income

CI03 PRIVATE INCOME Private income dedicated for use as capital funds

CI04 DIRECT REVENUEFINANCING

Amount from revenue applied to capital financing; this isan exact match to E30

TOTAL CAPITAL

INCOME Total for lines CI01 to CI04


Line No. Narrative Definition CAPITAL EXPENDITURE

CE01 ACQUISITION OFLAND AND EXISTINGBUILDINGS

• Cost of land acquisition including fees and chargesrelated to the acquisition

• costs of acquiring existing buildings, including fees andcharges related to the acquisition

CE02 NEW CONSTRUCTION,

CONVERSION ANDRENOVATION

• Cost of new construction, including fees• cost of conversions and renovations forming a new

structure• costs of extension to existing premises

CE03 VEHICLES, PLANT,EQUIPMENT ANDMACHINERY

Any capitalised expenditure, including the acquisition,renewal or replacement of vehicles, equipment ormachinery to be used at the school

CE04 INFORMATION ANDCOMMUNICATIONSTECHNOLOGY (ICT)

Purchase of computer hardware and software where theseare to be capitalised or are funded from capital grant

TOTAL CAPITAL

EXPENDITURE Total for lines CE01 to CE04

EXCESS OF CAPITAL

INCOME OVERCAPITALEXPENDITURE

Net difference between Capital Income and CapitalExpenditure. A negative figure should be recorded withinbrackets, e.g., (£ amount)

BALANCE BROUGHT

FORWARD AT APRIL 1 Underspend or overspend brought forward from theprevious financial year. Any overspend brought forwardshould be recorded within brackets, e.g., (£ amount)

BALANCE CARRIEDFORWARD

Total of amounts recorded on lines:• Excess of Revenue Income over Revenue Expenditure• Excess of Capital Income over Capital Expenditure• Balance brought forward at April 1 A negative figure should be recorded within brackets, e.g., (£ amount)

BALANCES CARRIED FORWARD

B01 STANDARDS FUNDBALANCE (REVENUE)

Not mandatory for quarterly returns.

B02 OTHER REVENUEBALANCES

Total revenue balances if Standards Fund Revenue Balanceis not shown separately above



B03 DEVOLVED FORMULACAPITAL BALANCE

Not mandatory for quarterly returns

B04 OTHER STANDARDSFUND CAPITALBALANCES

Not mandatory for quarterly returns

B05 OTHER CAPITALBALANCES

Total capital balances including Devolved Formula Capitaland Other Standards Fund Capital Balances if not shownseparately above

TOTAL BALANCESCARRIED FORWARD

Total for lines B01 to B05. This will be equal to theamount for Balance Carried Forward

SUMMARY BALANCE SHEET (LMSFR 4(Q)) This statement summarises the financial information contained in all other quarterlystatements of accounts, and provides a summary of the assets and liabilities of the school. Totals recorded on lines 5, 10 and 11 and 18 must agree and reconcile to the balance carriedforward on the Quarter End Return (LMSFR 2). BANK RECONCILIATION (LMSFR 5 OR EQUIVALENT) This statement provides confirmation that the cash book balance recorded in the accountingsystem reconciles to the corresponding bank statement balance. The information requested on LMSFR 5 can be provided in the form of a copy of the generalaccount bank reconciliation produced as part of routine accounting and monitoring. It is notnecessary for the information to be transcribed on to LMSFR 5, which is provided ready foruse where the details are not otherwise available. The information provided by the school should clearly show every transaction that is includedin the bank reconciliation. A separate bank reconciliation should be completed for each bank account holding SchoolBudget Share funding (public funds).


SUMMARY STATEMENT OF RECONCILED BANK ACCOUNTS FOR SCHOOLBUDGET SHARE FUNDING (PUBLIC FUNDS) AND PETTY CASH (LMSFR 5sum) Where schools have more than one bank account holding School Budget Share funding(public funds) a summary of the bank accounts must be completed (LMSFR 5sum) This statement provides a summary of the reconciled balances for all of the school’s bankaccounts holding School Budget Share funding together with the petty cash balance. The totalwill show the actual cash position of the school. SCHEDULE OF EARMARKED FUNDING (LMSFR 8) This statement provides details of Earmarked Funding received from the Authority during thefinancial year.


APPENDIX C END OF YEAR STATEMENT OF ACCOUNTS

The Assistant Director (Resources) is required under the Accounts and AuditRegulations 1983, to produce an annual report detailing the County Council’s incomeand expenditure and its assets and liabilities (which is then subject to examination bythe Authority’s external auditors). This duty encompasses all maintained schools andcreates the need for schools to complete the statements listed below: • Summary Income and Expenditure Statement (LMSFR 3)• Summary Balance Sheet (LMSFR 4)• Reconciliation of the school’s bank accounts holding School Budget Share

funding (public funds) (LMSFR 5) or equivalent for each bank account• Where schools have more than one bank account holding School Budget Share

funding (public funds) a summary of the bank accounts must be completed(LMSFR 5sum)

• Statement of Petty Cash balance• Schedule of Debtors and Prepayments (LMSFR 6)• Schedule of Creditors and Receipts in Advance (LMSFR 7)• Schedule of Earmarked Funding (LMSFR 8)• Summary of Income and Expenditure for Special Educational Needs Funding

(LMSFR 9) From April 2002, the format of the Summary Income and Expenditure Statement(LMSFR 3) is based on the DfES consistent financial reporting format (CFR). SeeSection 2 for further information about CFR and benchmarking. Sample forms for end of year statements of accounts are available from the SchoolFunding Unit or can be downloaded from the School Funding Unit website. See listof contacts for this Section. The following pages provide further guidance and information about the content ofeach end of year statement.


SUMMARY INCOME AND EXPENDITURE STATEMENT(LMSFR 3) This statement must be completed on an accruals accounting basis. Put simply, thestatement will record the true costs of the school during the financial year 1 April to31 March, namely: • income received and expenditure made, and• provisions set aside for amounts known to be owing to creditors or owed by

debtors to the school. Accruals accounting is essential, as, although it is important that the Governing Bodyis aware of its cash position, it is particularly important that it is aware of its actualliability at any specific point in time. When accounting for creditors, debtors, prepayments and receipts in advance, schoolsshould consider whether an item is material. It is probably not worth listing verysmall amounts owing or due. The school should determine what is consideredmaterial in terms of affecting whether or not the end of year return reflects the truecost of running the school. In the absence of any other considerations, a 'rule ofthumb' of 0.1% of budget share can be applied. It is not necessary to account forevery penny. The watchword is materiality. The school should exercise discretion. Schools should note the following definitions when preparing this statement. • Debtors

Income should be recorded at the point when it is due to the school, whether ornot received by the end of the accounting period. When income is owed to aschool in respect of goods and services provided by the school during thefinancial year, the person or organisation owing the money is a debtor. Anexample of this would be where payment was not received in respect ofinvoices for hire of school premises that took place during the accountingperiod. All significant debtors must be taken into account on the year endstatement.

• Receipts in advance

Income received in advance should be properly accounted for in the relevant accounting period. For example, income received for a school journey or daytrip that will take place in a following accounting period. All significantreceipts in advance must be taken into account on the year-end statement.

• Prepayments

Payments made in advance for goods or services to be received in the nextaccounting period. For example, payment of deposits for a field study visit totake place during the next accounting period is allocated to that period. Allsignificant prepayments must be taken into account on the year-end statement.


• Creditors Expenditure should be recorded in the accounting period when the goods andservices were received. Where a school has received goods or services duringthe financial year and has not yet paid for them, whether or not an invoice hasbeen received, these are known as creditors.

Goods and services ordered during the financial year but not received by 31 Marchmust not be included as creditors and must be accounted for in the followingfinancial year. All significant creditors must be taken into account on the year endstatement. A negative figure should be recorded within brackets e.g. (£ amount). The following notes provide further guidance, describing the types of expenditure to bereported on each line of the return. COLUMN HEADING DEFINITIONS Column 1

This column seeks a report of the school’s actual financialperformance from 1 April to 31 March.

Column 2 This column records summary totals for debtors and

creditors taken from: • Schedule of Debtors and Prepayments (LMSFR 6)• Schedule of Creditors and Receipts in Advance

(LMSFR 7)

Column 3 This column records summary totals for prepayments andreceipts in advance taken from: • Schedule of Debtors and Prepayments (LMSFR 6)• Schedule of Creditors and Receipts in Advance

(LMSFR 7)

Column 4 This column totals columns 1, 2 and 3. Schools using a ledger based accounting system may not be able to provide theaccruals detail for completion of Columns 2 and 3. In these circumstances, Column 4only should be completed. However, the Schedule of Debtors and Prepayments(LMSFR 6) and the Schedule of Creditors and Receipts in Advance (LMSFR 7) mustbe completed.


SUMMARY INCOME AND EXPENDITURE STATEMENT (LMSFR 3)

The categories and the allocation of expenditure headings to each category are basedon the DfES CFR guidelines and may be subject to change in light of further revisionor clarification from the DfES. Line No. Narrative Definition

REVENUE INCOME I01 FUNDS DELEGATED

BY THE LEA This is the major part of funding provided by the LEA toschools:• School Budget Share• Funding for nursery pupils• Teachers pay grants• School Standards Grant• Class Size Grant• Earmarked Funding - any additional Non-Standards

Fund, non-SEN funding from LEA that is not formallyincluded in the school's delegated budget but ismanaged by the school

I02 FUNDING FOR SIXTH

FORM STUDENTS Funding from public sources for sixth form students:• Learning and Skills Council Funding• Post 16 Collaboration

I03 SEN FUNDING All delegated and/or devolved funding for pupils withspecial educational needs, including:• Funding for Pupils with Statements• Earmarked Pupil Funding• Non-Statemented SEN Funding• Special Unit Funding• Non-Delegated Special Unit and Bases• Standards Fund-SEN• Other SEN Earmarked Funding

I04 FUNDING FORMINORITY ETHNICPUPILS

• TSF funding to support ethnic minority and travellerpupils

• Single Regeneration Budget funding• any other government funded source to support ethnic

minority pupils

I05 STANDARDS FUND Standards Fund Revenue Income excluding TSF fundingrecorded on lines I01, I03, I04 and CI01

I06 OTHERGOVERNMENTGRANTS

The total of all development and other non-capital grantsfrom the government, including:• funding related to the Single Regeneration Budget not

already included in line I04• any funding at school level for Education Action Zones



I07 OTHER GRANTS AND

PAYMENTS RECEIVED• New Opportunities Funding;• European Union funding• payments received from other schools, e.g., from

beacon schools to meet supply cover costs, etc.

I08 INCOME FROMFACILITIES ANDSERVICES

Income from assets, including:• hire of premises, equipment or other facilities• all other income from facilities and services• bank account interest

I09 INCOME FROMCATERING

Where the school runs its own catering service, incomederived from:• catering• school milk provision• vending machines• any payments received from catering contractors, e.g.,

where a contractor is in default of contract or haspreviously overcharged the school

I10 RECEIPTS FROM

SUPPLY TEACHERINSURANCE CLAIMS

Income from staff absence insurance claims for teachingstaff

I11 RECEIPTS FROMOTHER INSURANCECLAIMS

All insurance receipts in respect of claims for losses,including:• Insurance benefit for non-teaching staff and nursery

nurses• Insurance reimbursements

Note: Insurance receipts for capital item claimsshould firstly be recorded under this heading and thenmoved into Capital Income via Direct RevenueFinancing E30

I12 INCOME FROMCONTRIBUTIONS TOVISITS

Income from parental contributions requested by the schoolfor educational visits and field trips, including boardingfees.

I13 DONATIONS AND/ORPRIVATE FUNDS

All income from private sources under governing bodycontrol available for purposes of the school or for thepurposes of the maintenance of any part of the schoolpremises, including:• Business sponsorship• Income from fund-raising activities• Income from foundation, diocese or trust funds• any contributions from parents that are used to provide

educational benefits for students• monies from a trust fund used during the year to support

educational needs at the school



TOTAL REVENUE

INCOME Total for lines I01 to I13

REVENUE EXPENDITURE E01 TEACHING STAFF Full time and Part Time Teachers employed directly by the

school; including supernumerary/peripatetic teachers onshort term contracts

E02 SUPPLY TEACHERS Salaries and wages of supply staff employed directly by theschool covering:• long-term absence• sickness absence• training absence• curriculum release This excludes supply staff employed through an agency –see line E26

E03 EDUCATION SUPPORTSTAFF

Salaries and wages of support staff employed directly by theschool including:• nursery assistants• classroom assistants• learning support assistants• childcare staff• nurses and medical staff• workshop and technology technicians• librarians• foreign language assistants

E04 PREMISES STAFF Premises staff employed directly by the school including:• caretakers• cleaners• maintenance staff• grounds staff• porters• messengers• security staff

E05 ADMINISTRATIVEAND CLERICAL STAFF

Administrative and clerical staff employed directly by theschool, including:• bursars• school secretaries• typists• receptionists and telephonists• clerk to the governing body



E06 CATERING STAFF Catering staff employed directly by the school associated

with catering including:• chefs and cooks• servers• kitchen porters• cashiers

E07 COST OF OTHERSTAFF

Cost of other staff employed directly by the schoolincluding:• meal time assistants• staff supervising students before and after school

sessions and during breaks• escorts• liaison officers• education welfare officers• staff employed to manage and support special facilities

available at the school

E08 INDIRECT EMPLOYEECOSTS

Indirect employee costs, including:• cost of recruitment advertising and other recruitment

costs• employee and governor travel and subsistence• duty meals• pensions payments including any premature retirement

payments made by the school• lump sum compensation and redundancy payments• medical fees• relocation fees

E09 STAFFDEVELOPMENT ANDTRAINING

Staff development costs for teaching staff, support staff andgovernors, including cost of:• all in-service training courses and other development

opportunities• equipment and resources to provide in service training

E10 SUPPLY TEACHERINSURANCE

Premiums paid to insurers for supply teacher cover

E11 STAFF RELATEDINSURANCE

Cover for non-teaching staff absence and employee relatedinsurance for accident and liability, assault, fidelityguarantee, libel and slander



E12 BUILDING

MAINTENANCE Charges by contractors for internal and external repair,maintenance and improvement to buildings and fixed plantincluding:• costs of labour and materials• related professional and technical services, including

labour costs where supplied as part of thecontract/service

• costs of materials and equipment used by directlyemployed staff for internal and external repair,maintenance and improvement to buildings and fixedplant

E13 GROUNDS

MAINTENANCE• Maintenance and improvement of gardens and grounds,

including car parking, play areas, sports fields andpitches on the school site

• related professional and technical services, includinglabour costs where supplied as part of thecontract/service

E14 CLEANING AND

CARETAKING• Supplies used in cleaning and caretaking• cost of equipment• contractor charges for cleaning and caretaking services• related professional and technical services

E15 WATER ANDSEWERAGE

All costs related to water and sewerage and emptying ofseptic tanks

E16 ENERGY All costs related to fuel and energy, including:• fuel oil• solid fuel• electricity• gas

E17 RATES Rates expenditure

E18 OTHER OCCUPATIONCOSTS

• Rents• lease or hire charges for premises• refuse collection;• hygiene services• security patrols and services• landlord's service charges



E19 LEARNINGRESOURCES (NOTICT)

• books• charges for the school library• teaching materials• school trips• equipment (not ICT)• reprographic resources and equipment for teaching

purposes• purchase, lease, hire or maintenance contracts for audio-

visual or other equipment used for teaching• furniture used for teaching• revenue costs associated with vehicles used for

curriculum purposes

E20 ICT LEARNINGRESOURCES

• Educational software, including site or other licences,used for teaching purposes

• purchase, lease, hire or maintenance contracts of ICTused for teaching

• costs of broadband, ISDN, ASDL or other dedicatedphone lines

E21 EXAMINATION FEES • Costs of text and examination entry fees

• any accreditation costs related to pupils

E22 ADMINISTRATIVESUPPLIES

• Administrative stationery, printing and reprographics• postage• bank charges• advertising (not recruitment-see E08)• telephone charges (not internet-see E20)• medical and domestic supplies• purchase, hire or maintenance contracts of ICT or other

equipment• furniture and equipment not used for teaching purposes• revenue costs associated with vehicles used for

administration purposes

E23 OTHER INSURANCEPREMIUMS

• Premises related insurance• vehicle insurance• accident and public liability insurance for persons not

employed directly by the school

E24 SPECIAL FACILITIES • Community education• joint use of swimming pools and sports centres• boarding provision• rural studies and farm units• payments to another school for the benefit of pupils at

the other school



E25 CATERING SUPPLIES • Non-capital catering equipment

• Provisions• other catering supplies• purchase, rent, lease or hire of vending machines• full cost of service contract• related professional and technical services• repairs and maintenance of kitchen equipment,

including safety checks

E26 AGENCY SUPPLYSTAFF

Cost paid to an agency for teaching staff, includes cover ofany period and for all reasons, including illness, absence fortraining, or leave

E27 BOUGHT-INPROFESSIONALSERVICES –CURRICULUM

• Professional services, consultancy and advice purchasedfrom the LEA or third party in support of thecurriculum

• ICT consultancy services for the curriculum• payments to any visiting lecturers/ speakers• courses purchased for students from external providers

E28 BOUGHT-INPROFESSIONALSERVICES - OTHER

Professional services, consultancy and advice to staff andgovernors purchased from the LEA or an external partyrelating to:• management• financial• legal• personnel• premises• clerking service• management fee on PPP/PFI contracts

E29 LOAN HCC Loan repayments and interest

E30 DIRECT REVENUE All amounts transferred to CI04 to be accumulated to fundcapital works. This will match exactly the figure at CI04;and receipts from insurance claims for capital lossesreceived into income under I11

TOTAL REVENUE

EXPENDITURE Total for lines E01 to E30

EXCESS OF REVENUE

INCOME OVERREVENUEEXPENDITURE

Net difference between Revenue Income and RevenueExpenditure. A negative figure should be recorded withinbrackets, e.g., (£ amount)



CAPITAL INCOME CI01 CAPITAL INCOME Capital funding from public sources managed by the

governing body, including:• Capital funding from LEA• Standards Fund Devolved Formula Capital• Standards Fund Seed Challenge Grant• other Capital Standards Fund Grants• proceeds from the sale of fixed assets

CI02 LOANS Loan income

CI03 PRIVATE INCOME Private income dedicated for use as capital funds

CI04 DIRECT REVENUEFINANCING

Amount from revenue applied to capital financing; this isan exact match to E30

TOTAL CAPITAL

INCOME Total for lines CI01 to CI04

CAPITAL EXPENDITURE CE01 ACQUISITION OF

LAND AND EXISTINGBUILDINGS

• Cost of land acquisition including fees and chargesrelated to the acquisition

• costs of acquiring existing buildings, including fees andcharges related to the acquisition

CE02 NEW CONSTRUCTION,

CONVERSION ANDRENOVATION

• Cost of new construction, including fees• cost of conversions and renovations forming a new

structure• costs of extension to existing premises

CE03 VEHICLES, PLANT,EQUIPMENT ANDMACHINERY

Any capitalised expenditure, including the acquisition,renewal or replacement of vehicles, equipment ormachinery to be used at the school

CE04 INFORMATION ANDCOMMUNICATIONSTECHNOLOGY (ICT)

Purchase of computer hardware and software where theseare to be capitalised or are funded from capital grant

TOTAL CAPITAL

EXPENDITURE Total for lines CE01 to CE04

EXCESS OF CAPITAL

INCOME OVERCAPITALEXPENDITURE

Net difference between Capital Income and CapitalExpenditure. A negative figure should be recorded withinbrackets, e.g., (£ amount)



BALANCE BROUGHT

FORWARD AT APRIL 1 Underspend or overspend brought forward from theprevious financial year. Any overspend brought forwardshould be recorded within brackets, e.g., (£ amount)

BALANCE CARRIED

FORWARD Total of amounts recorded on lines:• Excess of Revenue Income over Revenue Expenditure• Excess of Capital Income over Capital Expenditure• Balance brought forward at April 1

A negative figure should be recorded within brackets, e.g.,(£ amount)

BALANCES CARRIED FORWARDB01 STANDARDS FUND

BALANCE (REVENUE)Balance of Standards Fund revenue balance carried forward(except Standards Fund capital balances recorded on linesB03 and B04 below)

B02 OTHER REVENUEBALANCES

Total revenue balances less amounts recorded on line B01above

B03 DEVOLVED FORMULACAPITAL BALANCE

Balance of Standards Fund Devolved Formula Capitalcarried forward

B04 OTHER STANDARDSFUND CAPITALBALANCES

Other Standards Fund capital balances carried forward(except Standards Fund Devolved Formula Capital balancerecorded on line BO3 above)

B05 OTHER CAPITALBALANCES

Total capital balances less amounts recorded on lines BO3and BO4 above

TOTAL BALANCESCARRIED FORWARD

Total for lines B01 to B05. This will be equal to theamount for Balance Carried Forward

SUMMARY BALANCE SHEET (LMSFR 4)

This statement summarises the financial information contained in all other end of yearstatements of accounts and provides a summary of the assets and liabilities of theschool. Totals recorded on lines 5, 10, 11 and 18 must agree and reconcile to thebalance carried forward on the Summary Income and Expenditure (LMSFR 3).


The Memorandum Items section must be completed to provide statistical informationto the School Funding Unit about the school's balances.

BANK RECONCILIATION (LMSFR 5 OR EQUIVALENT)

This statement provides confirmation that the cash book balance recorded in theaccounting system reconciles to the corresponding bank statement balance.

The information requested on LMSFR 5 can be provided in the form of a copy of thegeneral account bank reconciliation produced as part of routine accounting andmonitoring. It is not necessary for the information to be transcribed on to LMSFR 5,which is provided ready for use where the details are not otherwise available.

The information provided by the school should clearly show every transaction that isincluded in the bank reconciliation.

A separate bank reconciliation should be completed for each bank account holdingSchool Budget Share funding (public funds).

SUMMARY STATEMENT OF RECONCILED BANK ACCOUNTS FORSCHOOL BUDGET SHARE FUNDING (PUBLIC FUNDS) AND PETTYCASH (LMSFR 5sum)

Where schools have more than one bank account holding School Budget Sharefunding (public funds) a summary of the bank accounts must be completed (LMSFR5sum)

This statement provides a summary of the reconciled balances for all of the school’sbank accounts holding School Budget Share funding together with the petty cashbalance. The total will show the actual cash position of the school.

SCHEDULE OF DEBTORS AND PREPAYMENTS (LMSFR 6)

This statement provides details of the debtors and prepayments recorded in columns 2and 3 of Summary Income and Expenditure (LMSFR 3)

Schools should note the following definitions when preparing this statement.

• Debtors Income should be recorded at the point when it is due to the school, whether ornot received by the end of the accounting period. When income is owed to aschool in respect of goods and services provided by the school during thefinancial year, the person or organisation owing the money is a debtor. An


example of this accounting would be where payment was not received inrespect of invoices for hire of school premises that took place during theaccounting period. All significant debtors must be taken into account on theyear end statement.

• Prepayments

Payments made in advance for goods or services to be received in the next accounting period. For example, payment of deposits for field study visits totake place during the next accounting period. All significant prepayments mustbe taken into account on the year end statement.

SCHEDULE OF CREDITORS AND RECEIPTS IN ADVANCE (LMSFR 7) This statement provides details of the debtors and prepayments recorded in columns 2and 3 of Summary Income and Expenditure (LMSFR 3). Schools should note the following definitions when preparing this statement. • Receipts in advance

Income received in advance should be properly accounted for in the relevantaccounting period. For example, income received for a school journey or daytrip that will take place in a following accounting period. All significant receiptsin advance must be taken into account on the year-end statement.

• Creditors

Expenditure should be recorded in the accounting period when the goods andservices were received. Where a school has received goods or services duringthe financial year and has not yet paid for them, whether or not an invoice hasbeen received, these are known as creditors. Goods and services orderedduring the financial year but not received by 31 March must not be included ascreditors and must be accounted for in the following financial year. Allsignificant creditors must be taken into account on the year-end statement.

SCHEDULE OF EARMARKED FUNDING (LMSFR 8) This statement provides details of Earmarked Funding received from the Authorityduring the financial year. The total amount reported on this return must equal the amount shown on “OtherAllocations” line on Summary Income and Expenditure (LMSFR 3).


SUMMARY OF INCOME AND EXPENDITURE FOR SPECIALEDUCATIONAL NEEDS FUNDING (LMSFR 9) This statement provides details of the use of earmarked special educational needsfunding received by the school, the main categories of which are: • Earmarked Pupil Funding (page 2 of the School Budget Share document,

Resources Summary)• Individual pupils with statements• Earmarked Units and Bases (page 2 of the School Budget Share document,

Resources Summary).

The following tables provide information about the typical areas of expenditurewithin schools on SEN earmarked funding.

EMPLOYEE COSTS

SEN Teaching Staff Additional teaching staff designated to support specificSEN pupils

Learning Support Clearly designated to support specific SEN pupilsAssistants

Lunchtime Supervision Identified clearly with specific SEN projects for pupils

NON-STAFF COSTS

Teaching Resources Books and equipment used by pupils specifically forSEN purposes



TABLE OF CONTENTS

Page

CONTACTS 115

AUDIT AND INSPECTION4.1 Audit and Inspection requirements 1174.2 Internal Audit standards 1174.3 Financial records 1184.4 Controlled financial stationery 118

4.4.1 Controls over cheque stationery 1194.5 Funding the Internal and External Audits 1204.6 Internal Audit – intervals and scope 1204.7 Internal Audit report and recommendations 1204.8 External Audit 1214.9 Office for Standards in Education (Ofsted) inspections 121

RETENTION AND DISPOSAL OF FINANCIAL RECORDS4.10 Legal requirements 1224.11 What financial records must be retained 1224.12 How long to keep records 122

Appendix A Controlled Finance Stationery Available to Schools 125Appendix B Scope of the School Internal Audit 127



CONTACTS

Audit programme and frequencies Chris Kay 01992 555320Chief Internal Auditor

Nigel Studley 01992 555326Internal Audit

Assistance in the completion of Financial Services for 01992 555720Ofsted finance forms Schools

Controlled Finance Stationery Debbie Johnson 01992 588906ITNET Managed Services



AUDIT AND INSPECTION

4.1 Audit and Inspection requirements

The Scheme for Financing Schools incorporates a requirement for there to be an internal andexternal audit of locally managed schools. The accounts of schools with delegated budgetsare subject to regular internal audit and should also be available for inspection as necessary bythe Authority’s external auditors.

The role of internal audit includes:

• the assessment of the adequacy of a school's stewardship of public funds; they willachieve this by reviewing compliance with standards of financial administrationcontained in this Handbook, in the County Council's financial regulations and standingorders, and in the school's own internal control arrangements

• identifying scope to improve value for money• investigation of fraud and financial irregularities.

The role of the Authority’s external auditors is to certify the County Council’s accounts (ofwhich schools’ accounts form a part) and grant claims, to assess the adequacy of internalcontrols and compliance with those controls, and to assess the achievement of value formoney.

Auditors have wide ranging experience in financial management, computer security, contractprocedures and the achievement of value for money. Schools can take advantage of this byasking for advice in such areas.

Inspections of schools by Ofsted will also include financial matters. Inspectors may requestcopies of auditors’ reports to facilitate their work.

4.2 Internal Audit standards

Internal Audit complies with the standards set out in the Auditing Practices Board’s Guidanceto Internal Auditors. The auditors also comply with the audit principles and guidance issuedfrom time to time by CIPFA (Chartered Institute of Public Finance and Accountancy).Meeting the Financial Regulations contained in this Handbook will in general result in a cleanbill of health.


4.3 Financial records

Schools should ensure that their accounts, financial reports and statements are kept up to dateand see that all documents and records are maintained in a logical and organised manner thatsupports the accounts.

Properly organised and referenced financial records reduce the scope for omission and error.They also promote efficient procedures, and facilitate audit or inspection of the accounts andfinancial records.

It is important that schools maintain the ‘audit trail’ within the accounts and financial records.This shows which members of staff have authorised, recorded and checked a particulartransaction or accounting entry and all the records that relate to it. The audit trail should allowevery entry in the accounts to be traced back to the records that support it and vice versa.

4.4 Controlled financial stationery Controlled finance stationery describes any category of forms or documents used to initiate orrecord financial transactions, decisions or authorisation that must be strictly accounted for.Ordinarily, controlled finance stationery is pre-numbered to meet this requirement. It follows, therefore, that the issue and use of controlled finance stationery should be properlyrecorded, and that stocks of controlled finance stationery and additions to or issues from thosestocks should be logged. It should be possible to determine from these records who wasresponsible for the use of any items of controlled finance stationery. Controlled financestationery should be stored securely and access to it should be restricted. Stocks of controlledfinance stationery should not be stock piled and should be kept to the minimum required forthe school’s day to day operations. Any controlled finance stationery that is spoilt orcancelled should be clearly marked as such and should be kept and not thrown away. Controlled finance stationery is normally issued to County Council departments andestablishments, including schools, by ITNET on behalf of the County Council. It should beused only by the establishment to which it was issued, and should never be passed to anotherestablishment for use without the express agreement of the section responsible for its originalissue. In order to account for all controlled finance stationery, it may be necessary to conductreconciliations of the movement between opening and closing stock and records of itemsissued and used. Schools may use their own controlled finance stationery, e.g. debtor invoices, and the controlover it should meet the requirements described above.


Controlled finance stationery can be ordered from ITNET Managed Services (see contact forthis section), and a current list of items available to schools is appended as Appendix A to thissection. This is in the form of an order form that must be completed and signed by the staffmember who is an authorised signatory for this purpose. 4.4.1 Controls over cheque stationery Where schools use ‘printer cheque stationery’ (as opposed to conventional cheque-

books) certain controls should be in place to ensure adequate security over the blankcheques.

• Cheques should be ordered only by members of staff authorised to do so (the

stationery supplier should be instructed in writing to accept orders only from thesepersons). Orders should be placed in writing specifying the number of blankcheques to be supplied.

• When delivered, the cheques should be compared to the order to confirm thenumber of blank cheques supplied, and to record the cheque number range. Whileit is unnecessary to count the number of cheques, it is recommended that a fewspot checks are made, to confirm that the sequence of numbers is continuous.

• The cheque number range should be recorded in a log, and blank cheques shouldbe stored securely, ideally in safe. Access should be strictly limited to appropriatepersonnel.

• When cheques are issued for payment runs, the cheque log should be completedand signed by the person(s) removing the cheques from their secure storage andthe person(s) accepting them for use in the payment run (where different).

• The number of cheques issued should be reconciled to the number used in everypayment run. Any void, spoilt or cancelled cheques must be accounted for (theseshould be stored securely and not disposed of). These cheques must also beclearly marked as cancelled to prevent the possibility of their use.

It is essential that there is adequate separation of duties within the procedures describedabove. It is preferable that an individual does not order blank cheques, account for them onreceipt and have access to them. If any individual responsible for preparing payments (in theabsence of an effective internal in that function), is also responsible for the performance ofbank reconciliations, then the identification of an error or illegitimate payment would bedependent upon budget monitoring or the vigilance of the cheque signatory. Cheque stationery can be ordered via the Authority, and further details are published in PartIV, Section 6 of this Handbook.


4.5 Funding the Internal and External Audits

Both Internal and External Audit are statutory. As such, both services are centrally funded.Schools do not have to make their own arrangements for the audit of their accounts. However,a school may, in addition, engage private firms to undertake external audits at the school’sown expense. Schools who arrange additional audit services will still be subject to regularinternal audit.

Funding for Ofsted Inspections is held by Her Majesty's Chief Inspector of Schools, andinspections are awarded to Registered Inspectors on the basis of competitive tender.

4.6 Internal Audit – intervals and scope

The intervals between inspections by Internal Audit for each type of school are agreed withthe Director of Children, Schools & Families in advance of each financial year. If,exceptionally, Internal Audit find that the standard of financial administration at a school fallsbelow a certain level, or carries certain risks, Internal Audit may reduce the interval betweenaudits until they are satisfied that the situation has improved.

The scope of the Internal Audit of schools is kept under regular review and, where necessary,is adapted to the circumstances encountered. The scope and emphasis of the audit will varysomewhat, according to the type of school: primary, secondary, special, nursery and in turnthe category of school: Foundation, Community, Voluntary Aided/Controlled, etc.

The Internal Audit approach seeks to address all the significant financial management andcontrol issues that apply under the Scheme for Financing Schools, as well as the expectedreview of the probity of transactions. Appendix A to this Section outlines the principal areasexpected to be covered during the internal audit.

The Chair of Governors as well as the Headteacher is notified in advance in writing that aninternal audit is to take place. Dates and times will have been verbally confirmed with theschool prior to this.

4.7 Internal Audit report and recommendations

At the close of the audit, a verbal report will be made by the auditor(s) to the Headteacher,Finance Officer and any members of the Governing Body who wish to attend, on the findingsfrom the audit testing. This will give the school an opportunity to clarify any queries or issuesraised by the auditor, to ensure that the report correctly reflects the systems operated by theschool.

Every audit results in a written report. It is management's responsibility to ensure that internal


audit recommendations are addressed, and it is therefore to the Headteacher that the report isissued in the first instance.

The Headteacher will be requested to respond to the factual accuracy of the report and therecommendations set out in it within three weeks of the date of issue. The response shoulddetail what action the school proposes to take on the recommendations made, together with adate for implementation.

Once a response is received, a copy of the report, including the Headteacher’s response, willbe sent to the Chair of Governors for information. However, if the response requires anysignificant amendments to be made to the report, the Headteacher will see a copy of theamended version prior to it being issued to the Chair of Governors. The report willrecommend that it is placed on the next agenda of the Governing Body.

If a response is not received from the Headteacher, then, following reminders, the report willbe issued to the Chair of Governors advising them that no response has been received. If asatisfactory response is still not received, then the matter will be referred to the Director ofChildren, Schools & Families.

Internal Audit also ensure that Chief Officers, the Finance Director, Members of the CountyCouncil and the external auditor are all kept apprised of the overall findings of school auditsand of the extent to which recommendations are implemented.

4.8 External Audit

The main role of an external audit is to certify the County Council's accounts and grant claims,to assess the adequacy of internal controls and compliance with those controls, and to assessthe achievement of value for money. The District Audit Service also carries out research at alocal level for the Audit Commission annual 'theme' studies.

Generally speaking, the District Audit Service will assess the reliance it can place on theInternal Audit Service to avoid duplication of effort, and will not therefore engagesignificantly in the inspection of an individual school's accounts.

4.9 Office for Standards in Education (Ofsted) inspections

Ofsted is a non-ministerial government department established in September 1992, followingthe enactment of the Education (Schools) Act 1992.

The scope of Ofsted inspections in relation to the financial matters of a school is contained inan Ofsted publication entitled Inspection of Schools.

Ofsted and the Audit Commission have also published a document, Keeping Your Balance:Standards for Financial Management in Schools, which reflects many of the financial


guidelines issued by Authority and the Department for Education and Skills (DfES). Thestandards outlined in that document are incorporated in this Handbook.

RETENTION AND DISPOSAL OF FINANCIAL RECORDS

4.10 Legal requirements

The reasons for the retention of finance-related documents are two-fold.

• To comply with the statutes of limitation. For example, legal proceedings must bestarted within six years (the period of limitation) to recover debts on simple contracts.

• To allow their inspection by auditors, either internal or external, by the Inland Revenueand by Customs and Excise who may need to investigate records going back someyears.

4.11 What financial records must be retained

The Headteacher needs to ensure that prime financial documents and other supporting recordsare filed and stored in an accessible way. When records are no longer in day-to-day use, theyshould be placed in storage boxes or files clearly labelled with contents and financial periodand a date for destruction. They must also be available for inspection if the need arises.Prime documents include: paid invoices; copies of accounts raised; bank statements; copies ofreceipts; paid (returned) cheques; paying-in books and a complete paper record of transactionsfor each year from the computerised accounting system. Other supporting records includeofficial orders, hiring records and school meal records.

The regulations to this section reflect provisions in law to retain accounting records. Forexample, an Inland Revenue or Customs and Excise investigation may require detailed recordsdating back several years. Records should also be available to auditors or other officials andinspectors who may wish to examine them. Another example of the use of historical recordsis during an investigation of suspected fraud or financial irregularity. Here the extent of anysuspected fraud is assessed by investigating primary documentation over a number of years.

4.12 How long to keep records

The following list provides details of the retention period for financial records. The retentionperiod relates to the number of years for which a complete set of financial records is required.

Document Retention period

Budgets – detailed working papers 6 yearsApproved Budget Returns 6 years


Document Retention period

Income and expenditure statements (Quarterlyand year end returns)

6 years

School’s local income and expenditure records(computerised or manual) 6 yearsMonitoring and control records 6 yearsTravel and expense claim sheets 6 yearsPayments and Receipt Vouchers 6 yearsPaid/spoilt/cancelled cheques (where returnedfrom Bank)

6 years

Paying-in/Credit Transfer books 6 yearsBank statements 6 yearsSchool meals records:

Dinner tickets 3 yearsSCC6 Till reconciliation sheets 3 yearsDinner registers 3 yearsTeacher/visitor registers 3 years

Paying-in books 3 yearsMonthly banking records 3 yearsPDRS records:

Copy registers 3 yearsDummy paying-in slips 3 yearsTerm end debtor/creditor lists 3 yearsSMASH forms 3 years

Cooks’ monthly returns 3 yearsFree meals authorisation 3 yearsTermly debtor/creditor returns 3 yearsVAT reimbursement claimsOfficial order books

6 years3 years

Delivery notes 3 yearsPetty cash book 3 yearsPostage book 3 yearsStock records 3 yearsSales books 3 yearsInvoices (debtors) 6 years

Lettings diary3 years

School journey books 3 yearsSchool trip recordsMusic records, including (MUS 3) contracts

3 years3 years

Copy registers 3 yearsRemission records 3 years

Any supplementary income recordsInventory

3 yearsIn perpetuity

Staff contracts 6 years *Timesheets (claim paid and overtime) 6 yearsNew starter appointments 6 years *


Document Retention periodVariation forms 6 years *Maternity leave 6 yearsOther allowances 6 yearsEx criteria/honoraria 6 yearsEmergency payments 6 years

LeaversAttendance registers

6 years3 years after completion

* Keep records in perpetuity for current employees


APPENDIX A CONTROLLED FINANCE STATIONERYAVAILABLE TO SCHOOLS

HCC CONTROLLED STATIONERYORDER FORMITNET Managed Financial Services on behalf of Hertfordshire County CouncilCounty HallHertford SG13 8T

This form should be completed to order HCC Controlled Stationery. Please ensure that stationeryordered it not more than the school reasonably needs for a six month period.

Completed order forms can be faxed to Debbie Johnson on 01992 555720 or posted to DebbieJohnson, ITNET Business and Customer Services Section, Third Floor, County Hall, Pegs Lane,Hertford SG13 8TN.

SCHOOL NAME:

SCHOOL NO.

ReferenceNo. DOCUMENT TYPE DESCRIPTION Quantity

Required

A205 General Receipt Book200 receipts per book (2 part)

For general use1 receipt per page 4” x 5”

A386a Receipt Book200 receipts per book (3 part)

Suitable for School Fund account use5 receipts per page

A395 SM Bank Paying-in Book(Pink)

For paying-in school meals money only

A395 OTH Bank Paying-in Book(Buff)

For paying-in all other monies excludingschool meals

Colour ! No. RollsRedGreenPurpleBlue

PMT Pupil Meal Tickets 1000 Tickets per roll

Please tick box to specifycolour required

OrangeRedAMT

FREEAdult Meal Tickets Free For issue to adults where no

payment is required GreenAMTPAID

Adult Meal Tickets Paid For issue to adults wherepayment is required

BlueOnly

AUTHORISED SIGNATORY

Signed: ………………………………………………………………………………………...Headteacher

Date: …………………………………………….


APPENDIX B SCOPE OF THE SCHOOL INTERNAL AUDIT

Set out below are all of the areas most likely to be included in the school audit. Thislist is not necessarily exhaustive, and coverage will be based on an assessment of riskand thereby prioritised within the time available. Accordingly some of these areasmay not be included in a particular audit.

1. Overall arrangements for financial management and control

1.1 General adherence to the principles of internal control through the allocationof roles and responsibilities for financial administration within a clear andcoherent organisational structure (as set out in the schools’ schedule offinancial delegation or equivalent); the maintenance of ‘separation of duties’where necessary; the application of suitable authorisation and supervisioncontrols; and the full documentation of all transactions/accounting entries toprovide a complete ‘audit trail’.

1.2 Compliance with the Scheme for Financing Schools, supporting Financial

Regulations and the relevant sections of the Personnel Guide and PremisesManual. (This should also ensure compliance with Keeping Your Balance:Standards for Financial Management in Schools, Ofsted - Audit Commission,2000).

Documents required for audit – ‘Schedule of Financial Delegation’ (or equivalentdocuments defining the roles and responsibilities of governors and staff for financialadministration functions), Committee Terms of Reference, Register of BusinessInterests, internal financial policies or procedures, minutes of the governing body, andits committees, (possibly job descriptions).

2. Budgetary control and management information

2.1 Controls to ensure that (monitoring) information is complete, accurate, up-to-date, produced in a suitable format and on a timely basis, and is properlyattended to.

2.2 School Development Plan incorporates financial implications satisfactorily. 2.3 Monitoring returns required by the Authority are properly made. 2.4 Where the level of brought forward balances is significant, that financial

planning is adequate.


Documents required for audit - copies of Approved Budget Return, quarterly andyear-end monitoring returns, budget reports regularly extracted from the school’sfinancial system, reports submitted to the governors, access to minutes of the FinanceCommittee and Governing Body, school development plan, other reports/recordsrelating to financial planning and monitoring, e.g. variance reports and virementrecords.

3. General Account (bank account(s) holding official County Council funds)

3.1 Local payments - proper recording and substantiation of transactions - compliance with Financial Regulations and legal

requirements (notably for PAYE and VAT). 3.2 Reconciliation of account - frequency, method and evidence of proper

recording. 3.3 Orders - use as part of payment controls and for commitment accounting. 3.4 VAT - correct treatment for both expenditure and income. 3.5 Compliance with the Construction Industry Scheme as it applies to the County

Council and thereby the schools funded by the County Council. 3.6 Maintenance of subsidiary records, e.g. for journeys, trips and other activities

meriting the use of such records (see also 3.3 above).

Documents required for audit - bank statements, cheque books and stubs, returnedcheques (if applicable), ledgers (access to and/or reports from financial accountingpackages)*, paid invoices, receipts, orders, VAT claims, petty cash and postagerecords, receipts, other expenditure records, etc.* The auditor(s) may wish to access the system personally, but very often will simplyask a member of school staff to print off certain reports. Accordingly specialarrangements to provide audit access to the system should not usually be necessary.

4. Income

4.1 Records and controls - for all significant sources (e.g. music fees, lettings,sales, etc.) to ensure that all income due is received, accounted for andbanked.

4.2 Operation of the school’s charging/debt policies. 4.3 Maintenance of subsidiary records detailing income due and received.


Documents required for audit - charging/debt policy; records showing income due(e.g. music registers, lettings schedules, sales made), daybooks (where used), journeybooks, trip sheets, invoices raised, receipts issued and amounts received; bank payingin books; stock records (where applicable).

5. Staffing/Payroll

5.1 Controls to check that staff are paid in accordance with contracts and theschool’s pay policy, and that payroll direct debits are correct.

5.2 Salary costs are correctly posted to the accounts. 5.3 Compliance with Financial Regulations and PAYE requirements.

5.4 Compliance with the requirements of Teachers’ Pension Agency consolidation

(only applies to schools outside the HCC contract for payroll services withITNET)

5.5 Where the payroll is provided by an external bureau service, that:

• the contract ensures the discharge of the school’s responsibilities forPAYE and does not expose it to any avoidable risks or potential costs

• the charge to the school account is correct.

Documents required for audit - school pay policy, access to all staff contracts,contract or service level agreement with any payroll bureau other than ITNET, payrolldirect debit printouts or recharge records, records of any overtime, expense or otheramounts paid to staff.

6. Direct Debits and Credits made by the Authority

6.1 Controls to ensure that the accuracy of these is checked and that theapplication of earmarked funds is correct, e.g. for traded services, centralpayments, earmarked funds, School Budget Shares, etc.

Documents required for audit - direct debit/credit reports and corresponding recordsheld in school, e.g. copy invoices / claims

7. School meals provision

7.1 For those schools with Shire County catering providing school meals underthe block contract, the test will be as for other income areas (Section 3) plus areconciliation to SMASH returns (where appropriate), school meals monthlybanking returns and Shire Catering control sheets.


7.2 Where another catering provider is used, our coverage will depend on thenature of the contract / agreements, but will focus on how this incorporatesadequate controls over income and expenditure, provision of managementinformation and compliance with legal requirements.

7.3 Where the school makes direct provision we will examine controls over

income and expenditure, stocks, provision of management information, andcompliance with legal requirements.

7.4 For all schools, we will check that those pupils receiving free school meals

have valid authorisation.

Documents required for audit – register information, PDRS details, monthly returnsby schools and Shire Catering, termly debtor/creditor statements, paying-in books,and free meals authorisations.

8. Security of computer data and assets

8.1 Computer systems and files - access and back-up controls, Data Protection Act1998 registration.

8.2 Assets, equipment, stocks and other property - maintenance of a complete,

accurate and up-to-date inventory (and other stock records necessary), generalsecurity of assets (particularly cash and valuable/attractive/portable items) andcontrols over their movement, insurance arrangements.

Documents required for audit - Data Protection registration, Inventory, schedule ofkey holders, insurance cover.

9. Capital expenditure

9.1 Compliance with Authority accounting and reporting requirements.

10. Pupil number returns

10.1 Compliance with the instructions for PLASC and other pupil number returns.


11. Other School Fund (Private) Account – where requested

We will examine the ongoing procedures and controls for the operation of thisaccount and comment on these.

11.1 Proper recording and substantiation of all payments. 11.2 Proper recording and substantiation of all receipts. 11.3 Maintenance of such additional and subsidiary records as are necessary to

support 11.1 and 11.2, e.g. records of income expected and received fromindividual sources.

11.4 Use of the account for appropriate purposes only. 11.5 Reconciliation of account - frequency, method and evidence of proper

recording. 11.6 Regular reporting of and monitoring of income, expenditure and the net

position on the account by the Headteacher and Governing Body. 11.7 Separation of duties in the key accounting functions. 11.8 Identification of turnover on ‘business’ activities where this may exceed the

VAT registration threshold. 11.9 Clear separation of funds and transactions from other accounts.

Documents required for audit - as for the General account and income records

12. Other areas

12.1 Petty cash and postage - controls over use and recording.

12.2 School journeys - maintenance of adequate records for all income andexpenditure relating to each journey/trip (if the amounts are significant thenthis area will be covered as part of 3.1 above)

12.3 Coaches, minibuses, etc. - (where school vehicles are operated) to identify the

records kept of their use.

Documents required for audit - petty cash and postage records, receipts, etc., journeybooks, trip sheets, other income records, logs of vehicle usage, records of expenditureattributable to vehicles.

Financial Handbook for Schools Hertfordshire County CouncilPart IV: Guidance - Section 5 Page 132 RESO3521 Issue 3 : April 2003


TABLE OF CONTENTS

Page

CONTACTS

CONTROL OF ASSETS

134

1365.1 Introduction 1365.2 Responsibilities 1365.3 Inventories 136

5.3.1 Content of the Inventory 1375.3.2 Completing the Inventory 137

5.4 Stock control record 1385.5 Keys 1385.6 Disposals 139

INSURANCE5.7 Introduction 1395.8 Cover provided by the Authority 1395.9 Optional extensions of cover 1425.10 Governors’ liabilities and insurance of governors 144

THE DATA PROTECTION ACT 19985.11 Introduction 1445.12 The Data Protection Act 1998 1455.13 Obligations under the Data Protection Act 1998 1455.14 Use of Personal Data 1475.15 Notification 148

5.15.1 Notifying for the first time 1485.15.2 Renewing your school’s notification 1485.15.3 Penalties for non-notification 148

5.16 Definition of Terms 1485.17 Code of Practice for CCTV Systems 1495.18 Fair Processing Notices 1505.19 Further advice and guidance 150

COMPUTER SYSTEMS AND SECURITY OF DATA5.20 Security and control of data 151

5.20.1 Networks 1515.20.2 Backups 1515.20.3 Viruses 1525.20.4 Passwords 1525.20.5 Preventing snooping 153


5.20.6 Preventing theft at work 1545.20.7 Keeping laptops safe 1545.20.8 Disposal of unwanted IT equipment 155

Appendix A Inventory 156Appendix B Stock Record Card 158Appendix C Sample Disposals Policy 159Appendix D Sample Form for External Insurer's Confirmation of Cover 163



CONTACTS

General queries about Internal Audit Helpline 01992 555312inventories and stock 01992 555322control records

General advice on insurance policies Pauline TinnellyMichael PegramInsurance Section

01992 55558601992 555587

Property claims and advice Sue GravesDavid TurnerInsurance Section

01992 55559701992 555583

Motor claims and advice Sarajane GardnerInsurance Section

01992 555585

Liability claims and advice Michael PegramInsurance Section

01992 555587

Personal Accident – pupils and workexperience and school journey

Joanne ReesInsurance Section

01992 588549

Third Party hirers, PTA, annualtravel scheme and off-site activities

David TurnerInsurance Section

01992 555583

Risk manager Paul DudleySafety, Emergency andRisk Management Unit

01992 555532

HCC’s Sickness Supply CoverScheme

Lyn StaintonSchool Funding Unit

01992 555946

General enquiries about minibusassessment test and planning minibusjourneys

Guy BradleyRoad SafetyDevelopment Officer

01727 816968

Copies of Premises and Sites Manual Office ManagerPlanning Division

01992 555742


Copies of Health and Safety Policyand Guidance Manual

Health and SafetyWebsite

www.thegrid.org.uk/info/healthandsafety

Notification for the DataProtection Act and CCTV Code ofPractice

Data ProtectionWebsite

Data ProtectionHelpline

www.dataprotection.gov.uk

01625 545740

Advice about the Data Protection Act Schools IT SystemsSupport Helpline

Website

01582 830310

www.thegrid.org.uk/info/dataprotection

Disposal of unwanted IT equipment Rachel LockyerSection BuyerCounty Supplies andContract Management

01992 588312



CONTROL OF ASSETS

5.1 Introduction

Schools often have attractive and portable items of equipment such as computers, videos andtelevisions. It is therefore important that such valuable assets should be kept under propercontrol. Headteachers should make arrangements to identify these items as school property,to record the location of the assets and to insure them for off-site use.

Most schools also carry stocks, mainly of the kind which are in constant use such asstationery, cleaning materials and sports equipment. Generally, they are consumable items,and their costs are charged to the various budget allocations as each purchase is made.Schools should keep a close watch on the quantities ordered and the frequency of ordering,and ensure that stock records are maintained. It is also important that stocks are adequatelysafeguarded and under the charge of a responsible member of staff.

5.2 Responsibilities

The Headteacher is responsible to the Governing Body for the safe custody and control ofcash and other property belonging to the school.

The Headteacher should ensure that stocks are maintained at reasonable levels and subject to aregular, independent physical check. A stock record should be kept where this is appropriate.

5.3 Inventories

Inventories should be maintained of all attractive or portable items with a value in excess of£1,000 e.g. videos, cameras and televisions, with a note of their serial numbers whereappropriate. Such items should be identified with security marking stating that they belong tothe school. There should be a routine procedure to add newly acquired items to thisinventory. Schools are free to determine their own arrangements for keeping a register ofassets worth less than £1,000.

The Headteacher should arrange for inventories to be checked at least once per year againstphysical items. Any discrepancies should be investigated and pursued to a satisfactoryconclusion. The Headteacher should report to the Governing Body discrepancies over apredetermined sum as defined in the schedule of financial delegation.

Whenever school property, e.g. musical instruments or computers, is taken off the school sitea separate record should be set up and it should be signed and noted accordingly.

An inventory is an important tool for resource management in schools. It can:


• form an important part of the school's procedures, ensuring that staff takeresponsibility for the safe custody of the school's assets

• enable school management to undertake independent checks on the safe custody ofassets, as a deterrent against theft or misuse

• help the school to manage the effective use of the school's assets and to plan for theirreplacement

• support insurance claims in the event of fire or other disasters. 5.3.1 Content of the Inventory

The inventory should provide the following details for each asset:

• a basic description, plus identity or serial number• the quantity• the date of acquisition, and a cross-reference to the purchase order and invoice• the purchase price or, if this is not known, the replacement cost• the location (department or room)• a schedule for its periodic inspection• disposal details, such as date, method and price obtained.

An inventory that satisfies the above standards is reproduced in Appendix A to thisSection.

5.3.2 Completing the Inventory

The following are examples of items that should be recorded. It does not claim to bean exhaustive list.

• computer equipment and software packages, calculators, adding machines, etc.• typewriters, photocopiers, duplicators, etc.• equipment or appliances for use in a domestic environment, such as microwaves,

kitchen equipment, sewing machines, telephones which can be unplugged, etc.• tools and equipment of both a scientific and non-scientific nature, including

equipment for the garden or for grounds maintenance, leisure equipment, vehicleaccessories, etc.

• audio and video equipment, including televisions, radios, video recorders, camerasand accessories, projection equipment, etc.

• musical instruments, etc.• removable carpets and furniture that could be resold, or might be of use to a

private individual.

The cost of items (excluding VAT) should be recorded where this is known. Inventories that are introduced or updated as a result of this Handbook need not recordthe cost of items where this is not known and where finding the information would


present some difficulty. However, items subsequently added to the inventory musthave their values recorded. Electrical equipment or appliances, including computer equipment, should have theirserial numbers recorded in the inventory. In the case of computers, the componentparts (keyboards, disk drives, monitors, etc.) and peripheral equipment (printers,scanners, plotters, speakers, mice, etc.) should be separately recorded with theirindividual serial numbers. Entries for disk drives should specify the type, e.g. floppy,CD, CD-RW, etc. Entries for computer software packages should specify the names of packages andversion or release numbers (these will be printed on the box and/or instruction bookand/or the disk/CD label); the number of software disks included in it must berecorded. For example: Database, Version 2.5: 1 system disk/CD 1 utilities disk/CD 1 tutorial disk/CD Other floppy disks/CDs, etc. should be regarded as consumables and need not berecorded. Entries in an inventory do not necessarily indicate ownership by the Authority. Allitems that belong to or are in the care, custody, or safekeeping of the Authority, whichsatisfy the above criteria, should be recorded. This is regardless of whether they werepurchased using official funds, unofficial funds, obtained by donation, or acquired inany other way. Items purchased in the name of Hertfordshire County Council are invariably theproperty of the Authority. This is automatically the case if the purchase was properlymade net of VAT. Items that belong to members of staff, pupils, residents, etc. should not be recordedunless the Authority is officially responsible for them.

5.4 Stock control record Stock control records should provide for the following: • stock in - order number, date received and number of units• stock out - date of issue, number of units, signature of recipient• stock-in-hand - balance of stock.

A sample stock control record standards is reproduced in Appendix B to this Section.

5.5 Keys

Safes and similar receptacles should be kept locked and their keys removed. Keyholders


should normally carry the keys on their person. Keys should not be left in the vicinity of thesecure area. The loss of any keys should be reported immediately to the Headteacher.

Keys or combinations to safes or receptacles containing cash, etc. must be removed off-site(outside school opening hours) to meet the requirements of insurance cover. This requirementextends to keys for the ‘storage of cash’ on the premises, e.g. vending machines, pay phones,etc.

5.6 Disposals

The governors should approve a Disposals Policy, which incorporates the requirements ofFinancial Regulations in Section 5, Part III of this Handbook.

This should identify:

• what types of item may be disposed of without the governors’ prior approval• whether such disposals should be subsequently reported to the Governing Body• where items are to be sold, rather than scrapped• what steps must be taken to achieve the best reasonable return.

The policy should make it quite clear in what circumstances members of staff or theirrelatives, etc. may acquire ex-school property. This guards against possible suggestions ofimpropriety. An example of a disposals policy is provided in Appendix C to this Section. INSURANCE 5.7 Introduction Schools, like any other organisation are exposed to various types of risk as they go about theirdaily business. The main areas of risk for schools are those relating to legal liability to staffand third parties, and to property. Insurance does not prevent loss and is not a substitute for risk management. Advice on riskmanagement is contained within the Children, Schools and Families Department’s Premisesand Sites Manual which is accessible from www.thegrid.org.uk/info/healthandsafety. The following guidance summarises policies provided as standard to those schoolssubscribing to the County Council’s scheme. 5.8 Cover provided by the Authority Material damage


Buildings and contents are covered on a reinstatement basis (a repair or a replacement itemshould be equivalent to, but not better or more expensive than the model or condition whennew) when fire, lightning, explosion, riot, civil commotion or aircraft causes damage. The policy includes business interruption cover to meet additional expenses following a majorincident, e.g. hire of other buildings. Under new funding arrangements introduced in April 2002, the governors of Voluntary Aidedschools have responsibility for the costs of insuring the school’s buildings, premises and sites,with the exception of the playing fields and related buildings. Insurance cover the VoluntaryAided schools is currently being discussed on a national level and information will be issuedas soon as the position has been clarified. Public liability Protects the County Council, school, employees and governors against claims for damagesthat they may be legally liable to meet following accidental bodily injury, death, illness,disease or property damage suffered by third parties, arising out of the County Council’s or aschool’s usual activities. Although insurance cover may be in place, a defence to a claim may be weakened if theappropriate guidance is not followed. Please therefore also refer to the Children, Schools andFamilies Health and Safety Policy and Guidance Manual which is accessible fromwww.thegrid.org.uk/info/healthandsafety. You must ensure that contractors arrange public liability insurance, and that the CountyCouncil will be indemnified in the event of their negligence. The same applies to workexperience placements and other organisations visiting the school. A minimum limit ofindemnity of £5m is recommended. Also see notes under Third Party Hirers.

Employers’ liability Protects the County Council, school, employees and governors against claims for damagesthat they may be legally liable to meet following accidental bodily injury, death, illness ordisease suffered by employees during the course of their employment. The County Council’s policy, unlike those of some insurers, will extend this indemnity togovernors, particularly of Voluntary Aided schools. Any school not arranging insurancethrough the County Council MUST obtain written confirmation of cover from its Insurer. SeeAppendix D for sample forms to be used for this purpose.


Officials’ indemnity Protects the County Council, school, employees and governors against their legal liability tothird parties for breach of duty due to a negligent act, error or omission whilst carrying outtheir official duties which gives rise to financial loss. Libel and slander Protects schools and governors against the legal liability for libels in publications normal inthe school’s business, and slanders in the course of employees’ or governors’ officialbusiness. Personal accident - assault of employees Provides a benefit following death or serious bodily injury as a result of an assault whilstcarrying out official duties. Personal accident - volunteers Provides a benefit following death or serious bodily injury whilst carrying out schoolactivities. Personal accident - pupils on work experience Provides a benefit following death or serious bodily injury whilst a pupil is on workexperience. A proposal form must be completed. Engineering Covers items such as pressure vessels, lifts, lifting equipment and machinery, and providesstatutory inspections. Fidelity guarantee Covers the loss of money or property belonging to or in the custody of the school, resultingfrom fraud or dishonesty on the part of schools’ employees. Additional cover can be arranged at a school’s expense to indemnify governors and to includeloss of unofficial and Parent Teacher Association (PTA) school funds. Money Covers the loss of money, luncheon vouchers etc. from school premises, employee’s privateresidence or whilst in transit. Limit dependent upon means of storage or type of safe. Noexcess applies. Additional cover can be arranged at a school’s expense for unofficial and PTA school funds.


Motor contingent liability Covers the County Council, school and governors for the death or bodily injury of thirdparties, or damage to third parties’ property, arising from the use of employees’ andgovernors’ private cars on school business. Employees using their own vehicles on businessuse must still arrange the appropriate cover through their own motor insurer – also see notesunder ‘Motor’. 5.9 Optional extensions of cover Schools have the option to purchase a number of additional covers, which are administered bythe Insurance Section, Corporate Services Department. Balance of Risks buildings and contents Insurance for various perils in addition to those listed under ‘Material Damage’, e.g. waterdamage, theft, impact, accidental or malicious damage. Although ‘blanket cover’ is provided, a regularly revised inventory of all equipment must beretained, with a second copy retained in a secure place away from the school site, e.g.detached caretaker’s building or nearby school.

Keys must be removed from the school site out of hours.

An excess is applicable.

A few schools subscribe to an ‘all risks’ scheme, and must supply the Insurance Section withan inventory of equipment to be insured, i.e. this cover is not on a blanket basis, although allrisks (perils) are insured unless specified otherwise. Motor Comprehensive cover can be arranged for vehicles and trailers belonging to, leased to or onpermanent hire to either the County Council or the school, and used by the school, in respectof: • damage to an insured vehicle or trailer• legal liability for death or injury of third parties• legal liability for damage to third parties’ property The Insurance Section must be informed of all additions and deletions to the fleet, includingtemporary hire, as an additional premium may be due. The make, model, registration numberand, if applicable, dates of hire must be provided. For clarification of the following brief points, please refer to guidance contained in theMinibus Manual available from the Road Safety Unit.


Drivers of minibuses must have passed the County Council’s minibus assessment test.

Although the policy covers use of vehicles in EU countries with no change to the level ofcover, the Road Safety Unit within the Environment Department must be contacted beforeany trip is planned. A copy of the insurance certificate should be taken on the trip. Thisincorporates the bail bond required when travelling to Spain. Some schools allow private individuals or groups to make use of their minibuses. The CountyCouncil’s insurances do not necessarily cover such use, and an extension may need to bearranged, possibly for an additional premium. Responsibility for insurance of a contracted vehicle rests with the individual or firm providingthe service. Employees, governors and volunteers using their private vehicle on CountyCouncil business must inform their insurer and obtain the appropriate policy endorsement toinclude business. Particular attention should be paid to policies in the name of a spouse orother business’ name. It is a criminal offence to drive without proper insurance cover in force. Third party hirers Provides public liability insurance for hirers of the school site who do not have their ownpolicy, with a minimum limit of indemnity of £5,000,000. This includes Pre / After Schooland Summer clubs run by the PTA, parents or an outside body. The premium should becharged to the hirer on top of the letting fee. An excess is applicable and should be met by the hirer. Parent Teacher Associations Such associations, being a separate legal entity, are not indemnified by the liability policy.Public liability insurance can however be arranged, and the following insurances can also beattached to that policy: property all risks, money and personal accident. School journeys (individual) or off-site activities (annual block policy) It is a County Council requirement that travel insurance is arranged for trips involving anovernight stay, and those abroad. Cover can be arranged as and when necessary provided thatthe appropriate proposal form is completed, and two weeks notice is given. Alternatively anannual policy can be arranged. Excesses apply. Sickness Supply Cover Scheme Details of this scheme are available from the School Funding Unit. See contacts list to thisSection.


Personal accident - pupils Provides a benefit following death or permanent serious bodily injury. Premium payable byparents or guardians, and cover operative all year round. 5.10 Governors’ liabilities and insurance of governors Some examples of potential liabilities for governors are: Contracts Where governors enter into contracts they do so on behalf of the County Council. They thenhave statutory protection against personal liability, provided that the contracts are entered intoin good faith, i.e. honestly, with no ulterior motive, and in accordance with the requirementsof the Scheme for Financing Schools. Negligence Cover for governors is included as standard in the school’s liability policies. For example, ifa school purchased a faulty piece of equipment which resulted in personal injury. The County Council’s Public and Employers’ Liability policies have specifically beenextended to cover school governors. Notices served by the Health and Safety Executive Failure to comply with statutory duties under the Health and Safety at Work Act etc. couldlead to service of Notices of the Health and Safety Executive. Such Notices could be servedupon members of a Governing Body. If they are not complied with, the Notices attractcriminal liability resulting in fines, and neither insurers nor the insurance fund can assist. THE DATA PROTECTION ACT 1998

5.11 Introduction ICT is increasingly being used in schools alongside paper systems for accounting,management, reporting and information sharing purposes. Under the Data Protection Act1998, there is a legal requirement to protect personal data that is held on computer systems orin manual filing systems. Personal data is any information from which a living individual canbe identified and there is a requirement for every school to notify the InformationCommissioner about any such data that they hold.


5.12 The Data Protection Act 1998 The Data Protection Act 1998 has been in force since 1 March 2000. It provides thatcollections of personal information processed either automatically or manually within the UK,that are referenced to a living individual or referenced to criteria relating to the individual,must be processed in accordance with set rules of good practice. It achieves this byestablishing and enforcing certain standards. Personal information covers everything from date of birth and qualifications to references andreports concerning individuals. It also includes personal bank account numbers, payrollreferences and any other identifiers or codes relating to individuals. The manual records covered by the Act are those where specific information relating to anindividual is readily accessible. The Act does not define the terms ‘specific’ or ‘readilyaccessible’, but as a general rule if you know what you are looking for, and know where tofind it, then such filed data will fall within this definition. Schools hold a lot of personal information, such as admission and attendance records, classlists, teacher references, curricular records etc. Where a school is not acting on behalf of itsAuthority in collecting and keeping personal data, the Information Commissioner has statedthat it must then notify on its own behalf and separately from its Authority’s notification. The Governing Body and the school are notified as one body and will have one entry on theData Protection Register. 5.13 Obligations under the Data Protection Act 1998 The Data Protection Act 1998 places certain obligations on people who keep and processpersonal information. These obligations form the 'Eight Data Protection Principles' whichmake up the basis of the Act. These principles must be adhered to by anyone who processespersonal data. The Information Commissioner has the power to prosecute if he feels that anyof the principles have been broken. The Eight Data Protection Principles are: 1. Personal data shall be processed fairly and lawfully and in particular, shall not be

processed unless: - at least one of the conditions in Schedule 2 is met and- in the case of sensitive personal data, at least one of the conditions in Schedule 3

is also met. (See below for the conditions in these schedules.)2. Personal data shall be obtained only for one or more specified lawful purposes. They

shall not be further processed in any manner incompatible with the specified purposes.3. Personal data shall be adequate, relevant and not excessive in relation to the purposes

for which they are processed.4. Personal data shall be accurate and where necessary, kept up-to-date.


5. Personal data processed for any purpose or purposes shall not be kept for longer thanis necessary for such purposes.

6. Personal data shall be processed in accordance with the rights of data subjects underthis Act.

7. Appropriate technical and organisational measures shall be taken against unauthorisedor unlawful processing of personal data and against accidental loss, destruction, ordamage to personal data.

8. Personal data shall not be transferred to a country or territory outside the EuropeanEconomic Area unless that country or territory ensures an adequate level of protectionfor the rights and freedoms of data subjects in relation to the processing of personaldata.

Schedule 2 Conditions The criteria contained in Schedule 2 are as follows and at least one of these conditions mustbe met before personal data may be processed: • the individual has given his/her consent• the processing is necessary for the performance of a contract with the individual• the processing is required under a legal obligation• the processing is necessary to protect the vital interests of the individual• the processing is required to carry out public functions• the processing is necessary in order to pursue the legitimate interests of the business

(unless prejudicial to the interests of the individual).

Schedule 3 Conditions

The criteria contained in Schedule 3 are as follows and at least one of these conditions mustbe met in addition to at least one condition from Schedule 2 before sensitive data may beprocessed: • the individual has given explicit consent• there is a legal obligation to use the data in the context of employment• the data are required to protect the vital interests of the individual where consent

cannot be given or is withheld by certain non-profit bodies about their members• the information has already been made public• the data are needed in legal proceedings• the data are needed to carry out certain public functions• the data are needed for medical purposes• the data are needed for ethnic or racial monitoring for the purpose of equal

opportunities• the data are to be revealed by order of the Secretary of State.

Sensitive data about an individual are defined in Part II of the Act as: • the racial or ethnic origin of the data subject, and his or her political opinions• religious or other beliefs


• membership of a trade union• physical or mental health or condition• sexual life• commission or alleged commission of any offence, or any proceedings for any offence

committed or alleged to have been committed, the outcome of such proceedings or therelevant court sentence.

5.14 Use of Personal Data Whilst not intended as an exhaustive list, the processing of personal data relating to schoolsbroadly falls into the following three areas of ownership: • Local Education Authority (Hertfordshire County Council) - personal data in

this category will be notified separately by HCC

- Staff records (teaching and non-teaching); these are held in the school on behalfof the Authority to enable the school to fulfil its duties in operating the payroll,appointing staff, etc.

- Supplier and contractor records; these are held in the school in connection withspending a budget delegated by the Authority.

• Governing Body - personal data in this category must be notified as part of the

school’s notification

- Admission and attendance registers; required by The Pupils' RegistrationRegulations 1956.

- Curricular records of pupils required by the Education (Pupil Information)(England) Regulations 2000.

- Records of cases where the National Curriculum has been modified or does notapply to individual pupils; this is to enable statistical returns to be made to theAuthority as required by the Education (School Curriculum and RelatedInformation) Regulations 1989.

- Public examination entry details for pupils; in connection with duties in Section402 of the Education Act 1996.

- Staff records (teaching and non-teaching) that go beyond those required to enablethe Authority to fulfil its duties.

- Supplier and contractor records, where these are held in connection with spendingthe school's own funds.

• School

- Results of assessments made under the National Curriculum assessmentarrangements; this is to enable the Headteacher to undertake obligations underSection 357(1) – 400(4) of the Education Act 1996, to secure implementation ofthe National Curriculum.

- Annual reports to parents on pupils' achievements, as required by The Education(Individual Pupils' Achievements) (Information) Regulations 1997.


- Disciplinary records of pupils; in connection with the duty related to discipline inSection 154 of the Education Act 1996.

- Teaching projects where pupils record personal details on computer. 5.15 Notification Every school must notify the Information Commissioner of all personal data it holds and thisnotification must be renewed annually at a current cost of £35. 5.15.1 Notifying for the first time

The easiest way to notify the Information Commissioner is to use the Data Protectionwebsite. The Internet address is www.dataprotection.gov.uk Select the “notification” option, then the “completing the notification” option. The website will guide you through the whole process of completing the notificationform, after which you are asked to print the form, sign it and send to the InformationCommissioner together with payment. Alternatively, you may choose to notify via the telephone, 01625 545740.

5.15.2 Renewing your school’s notification

Schools should be aware that a number of bogus companies are making fraudulentrequests for re-registration fees of £95 and so any renewal of the school’s notificationshould be made directly to the Information Commissioner. Only one notification will need to be made at the time when the first entry expires.For schools that had separate registrations for the Governing Body and for the school,these will be amalgamated into one notification. However, you will need to know theold registration numbers for each when making your notification application.

5.15.3 Penalties for non-notification

The penalty for failing to notify under the Data Protection Act 1998 could be a fine ofcurrently up to £5,000 in the Magistrates’ Court or an unlimited amount if referred tothe Crown Court. A case can be brought against the Governing Body or school as awhole, or any individual of that Governing Body or school.

5.16 Definition of Terms

Data Controller


The term 'data controller' is defined in detail in the Data Protection Act 1998. Essentially adata controller is a person who owns the contents and use of a collection of 'personal data'.

Processing The definition of processing has been significantly widened to mean obtaining, recording, orholding the data, or carrying out any operations, or set of operations, on the data. Theseinclude: • organising, adapting or altering the data• retrieving, consulting or using the data• disclosing the data by transmission or dissemination, or otherwise making the data

available• aligning, blocking, erasing or destroying data. Accessible records There are some special arrangements likely to arise involving ‘accessible records’. Thedefinition of this term includes ‘an education record’ meaning information relating to pupils,processed by the governing body or maintained school and supplied by: • such a school• the Local Education Authority• the pupil or• the parent of the individual.

These arrangements ensure access to personal files for individuals who are already entitled toinformation held about them by the school and/or the Authority.

5.17 Code of Practice for CCTV Systems A number of schools now make use of CCTV systems for the detection and prevention ofcrime, the safety of public, staff and pupils and monitoring security of the premises. TheInformation Commissioner has released a Code of Practice for the use of CCTV and asummary of the main points is given below. Headteachers and Governing Bodies should ensure that if a CCTV system is installed, localarrangements are put in place as soon as possible to meet the requirements of the Code ofPractice. The Information Commissioner has the power to issue Enforcement Notices wherehe considers that there has been a breach of one or more of the Eight Data ProtectionPrinciples. An Enforcement Notice would set out the remedial action required to ensurecompliance. A Summary of the Code of Practice


• Establishments must establish what purpose(s) CCTV is required for, e.g. preventionof crime, safety of public, staff and pupils.

• Establishments should produce policies relating to the security, retention anddisclosure of damages.

• Establishments should consider carefully where the CCTV is to be sited. Theequipment should be sited in such a way that it only monitors those spaces that areintended to be covered by the equipment.

• Signing is required if CCTV is to be used. Signs should be placed so that the public isaware that they are entering an area that is covered by surveillance equipment. Thefollowing wording is recommended: “Images are being monitored for the purposes ofcrime prevention and public safety. This scheme is controlled by the Governing Bodyof [school name]. For further information contact [school telephone number]”. Signsare available from County Supplies and Contract Services.

• Images should not be retained for longer than necessary.• Images that are retained should be stored securely.• Access and disclosure of images to third parties should be restricted to those persons

who have a legitimate interest in the image, e.g. if the purpose of the CCTV is crimeprevention, the police would have a legitimate interest in seeing the footage. This isnot only to ensure the rights of individuals are preserved, but also to ensure that thechain of evidence remains intact should the images be required for evidentialpurposes.

• Establishments should have procedures on how to deal with requests to see the CCTVfootage from the person(s) caught on camera.

• Establishments should have procedures on how to deal with enquiries and/orcomplaints.

A full copy of the Commissioner’s Code of Practice can be downloaded fromwww.dataprotection.gov.uk and further advice may be obtained from the relevant contact forthis Section.

5.18 Fair Processing Notices

The Data Protection Act places an obligation on Data Controllers (holders of ‘personal data’)to notify individuals of the details of data held, the purposes for which data is held and detailsof any third parties that may have access to the data. This is referred to as a “Fair ProcessingNotice”. Headteachers and Governing Bodies are required, therefore, to issue Fair ProcessingNotices to all pupils, parents and staff.

Information and guidance about the publication of Fair Processing Notices is provided bySchools IT Support Services and can be accessed from www.thegrid.org.uk/info/dataprotection. This guidance also includes examples of Fair Processing Notices that can beadopted by Schools.

5.19 Further advice and guidance For further information and advice on any aspect of Data Protection, please see the contactsfor this Section.


COMPUTER SYSTEMS AND SECURITY OF DATA 5.20 Security and control of data 5.20.1 Networks

Schools with networked computers should ensure that the network is configured toprevent unauthorised access to data held on the network. All network operators with access to Management Information should have their own‘user id’ and password.

5.20.2 Backups

Keep a copy of all data to ensure that, if there are any accidents – fire, flood, theft,corruption, accidental deletion – the data can be retrieved. Ways to back up datainclude: • the use of autosave• saving work frequently• saving work on the file server• if a stand-alone (non-networked) machine or laptop is used, backups must be

taken either on tape or disk• copying to floppy disk• copying to a ZIP cartridge• copying to a different area of the hard disk.

The following standards should be applied to the rotation of backup media taken from

fileservers: It is recommended fileservers have 15 DAT tapes.


Label the backup media: Monday Tuesday Wednesday Thursday Friday – 1 Friday – 2 Friday – 3 Friday – 4 End of month – 1 End of month – 2 End of month – 3 End of term – 1 End of term – 2 End of term – 3 End of financial year It is essential that backups are verified regularly. Where automated backup is in use,

ensure the backup log is viewed every day the backup tape is changed. 5.20.3 Viruses

• Schools should have anti-virus software on their computers and the settings should not be changed

• Only use software and data from reputable sources.• Don’t bring in disks from a private computer (unless a special arrangement has

been made).• If a stand-alone machine is used, make sure that the anti-virus software is kept

up to date.• If a laptop is used, ensure that it has the latest copy of the anti-virus software.• Schools should consider purchasing anti-virus protection software licences

which allow for installation onto staff and pupil home computers. 5.20.4 Passwords

• Do not let anybody else use your user-id or personal password and neverattempt to use anyone else’s.

• Do not tell anyone your personal password – not even your boss or the person fixing your computer (both have their own passwords to access the system).

• Change your password regularly (at least every six months). If you think somebody might have found your password, change it.

• Write your password down, put it in a sealed envelope and leave this – clearly marked in the school safe.

• Be careful of your choice of password, make it easy for you to remember, butdifficult for anyone else to guess. The best passwords include numbers as wellas letters and, don't forget, your password can include punctuation andunprintable characters as well.


Do not use: • any first name• any surname• any date of birth• your user ID• any telephone number• the word 'password'• any previous password• any car registration number• the name of any of your pets• the PIN number of any personal account of your own• any password which follows a sequence, e.g. months of the year• any word to be found in a dictionary, unless it has been altered in some way.

You can use someone else’s PC in your network, by using your own name andpassword to log onto the network. You do not need to know their password.

Some so-called 'passwords' are not personal passwords at all; e.g. keywords may haveto be used to access a particular system. These should be kept secret within the groupneeding to know them.

5.20.5 Preventing snooping

Follow these rules to stop confidential information being read from your monitor andto stop unauthorised use of your PC.

• In reception areas, place monitors so members of the public cannot read them.• In open plan offices try to place monitors where passers-by cannot read them.• Monitors should not be left showing data, log-off when you are not using your

PC. (Do not forget lunchtimes and when you go home.)• Lock away any paper, magnetic tapes, disks, CD-ROM’s etc., which have any

confidential data on them. This also goes for any backups you make for yourself.

• Confidential print outs should not be left lying around for anyone to pick up.• Hackers really do search through waste bins in order to find clues to help them

break into computer systems. All confidential waste, such as passwords and lists of users and anything that could help a hacker get into your computer system should be shredded or burnt.


5.20.6 Preventing theft at work

How can I stop thieves targeting my PC?

• If passers-by can look in at your office window, close the blinds at night.• When you have a new computer delivered, do not advertise it by leaving the

empty boxes lying around• If your computer is stolen, be especially careful for the next few weeks.

Thieves often steal one lot of computers and then come back to steal their replacements.

How can I keep thieves out?

• Ground floor offices should not be left empty with windows open.• If you are the last one to leave a room, shut the windows. Follow the school's policy for identifying staff and visitors.

How can I put thieves off?

• Lock away laptops and confidential papers. Ensure that all keys are kept in a

safe place.• Only have out papers and disks that you are using. Leave your desk clear

overnight.• Your PC should have its postcode stencilled on it.

You should have a notice on your window warning thieves that yourequipment is security marked.

How can I stop IT equipment going missing?

• Follow the school’s prescribed formal procedures for borrowing equipment

and checking its return.• If there aren’t any such procedures, set them up.

5.20.7 Keeping laptops safe

• Lock laptops away when you are not using them.• Be extra careful when travelling with laptops (don't damage them by crushing; don't let

them get wet; don't leave them on trains; etc.)• Password-protect laptops.• Check that laptops are on the school’s inventory and that they are insured for

use at home as well as in the office.• Mark laptops with the school's postcode.• Do not leave an exposed laptop in an unattended car. Always put out of sight.


5.20.8 Disposal of unwanted IT equipment

Do not give away confidential information with your old PC. The hard drive of yourold PC must be overwritten before you dispose of it, even if it is to be used bysomeone else in the school.

County Supplies and Contract Services has a contract in place covering the collectionand appropriate disposal of unwanted IT equipment. See contacts to this Section forfurther information.


APPENDIX A INVENTORY

INVENTORY RECORD

School Name: School No:

Location (Department or Room):

See overleaf for Periodical Inspection and Change of Headship

No Date of Source Description Qty Identity or Purchase DisposalAcquisition of

Fundingof Item Serial Number Price Date Method

and Price(1) (2) (3) (4) (5) (6) £ (7) Obtained

(8)1

2

3

4

5

6

7

8

9

10

11

12

13

14

TOTAL

PERIODICAL INSPECTION AND CHANGE OF HEADSHIP


Date ofInspection

HeadteacherSignature

Comments


APPENDIX B STOCK RECORD CARD

This is an example of a form that you may wish to adapt for your own purposes

STOCK IN HAND FOR PERIOD BEGINNING .

ITEM: SWEATSHIRTS No.of Rec’d by BankedPRICE: £6.50 £7.50 Items Money By whom Sec’y Cr. slip/

24 26 28 30 M L Sold collected (initials) (initials) DateOPENINGSTOCK IN

HANDSOLD TO/DATE1/5/01Brown

1 1 £6.50 CE JS 1001214/5/99

4/5/01Eaton

1 1 FOC Authorised by head

4/5/01Harland

1 1 2 Vouchersto come

Cross-referenced toBanking when received

TOTALSALES

GOODSRECEIVEDDATE

CHEQUENUMBERDELIVERYNOTE No:DATE

BALANCE ATEND OFPERIOD(Date)


APPENDIX C SAMPLE DISPOSALS POLICY

Background

The Governing Body has a responsibility to ensure that an inventory of valuable or portableassets is maintained and kept up to date. The record should be checked to the physical assetson an annual basis to ensure that the whereabouts of the items are known and that thecondition can be assessed and replacements planned for. Section 5.3 provides furtherinformation and guidance about maintaining an inventory.

Items that may no longer be required should be disposed of in accordance with the GoverningBody’s disposal policy and the following provides guidance and a sample policy. This maybe adapted to suit the local requirements of the Governing Body.

The overriding requirement is that the systems for disposal must be fair and seen to be fairand that everyone who wishes to obtain an item has an equal chance in doing so.

The Governing Body will need to record within the disposal policy, the method that will beused to estimate the residual value of an item identified for disposal. The following twomethods are recommended as a simple means of arriving at a reasonable estimate of theresidual value of an item.

• Method 1Take the following into consideration to form a judgement of the residual valueof an item:

- the original cost- the age- condition- replacement cost- second-hand value

• Method 2

Use a simple formula that takes the original cost of the item divided by the number ofyears since it was acquired.

This formula will provide a simple straight line depreciation figure yet not require thecalculation of depreciation. Any asset that cost a significant amount of the time ofpurchase will have a relatively high residual value. Whereas low value assets andthose that are many years old, will have a relatively low residual value.

Sample Disposals Policy


The Governing Body has formulated this Disposal Policy to ensure that assets of the schoolare disposed of in a consistent manner.

The Headteacher has delegated responsibility to dispose of items up to a maximum value of£[amount]. All items with a residual value in excess of this limitation must be referred to theGoverning Body.

1. Residual value of an item for disposal

The Governing Body has adopted the following method of estimating the residual value of anitem for disposal. [Insert either Method 1 or 2 above or replace with the Governing Body’smethodology].

2. Disposals by sale

Any items that may have a commercial interest or with a residual value in excess of£[amount] will be sold in the first instance to an outside interest (dealer, shop, etc.). Aminimum of [number] valuations will be obtained.

Items for sale with a residual value below £[amount], will be offered for sale to staff and/orparents who will be notified of the minimum amount that would be expected. Confidentialbids will be accepted up to a pre-determined date and the highest bid will be accepted. VATwill be included in the total amount of the bid.

All income will be paid into the general (public funds) bank account and VAT declared on theincome. Details of the disposal will be recorded in the inventory, including residual value,person/company the items was sold to and the entry will be signed by [named individual].

3. Disposal by donation

[Where the item/equipment for disposal will have a continued use in an educational setting,for example, specialist educational equipment, then the Governing Body may wish to donatethe equipment to educational establishments in the local community. This section can be usedto specify types of equipment/items for disposal that this would apply].

4. Disposal by scrapping

Any items with a residual value below [£ amount] or that has no commercial value or residualvalue for staff, parents or other educational establishments, will be scrapped. The equipmentwill be made unusable and disposed of at the nearest household/commercial waste disposalsite. Computers will have the hard drive wiped of all information prior to disposal. [Seecontacts list to the Section for County Supplies and Contract Services contract for disposal ofunwanted IT equipment].

Details of the disposal will be recorded in the inventory, including the method used to disposeof the equipment and, where appropriate, the company use. The entry will be signed by[named individual].


5. Write-offs

Items considered to be write-offs will be recorded in the inventory and sighed by [namedindividual]. Such items will include equipment that is broken or in such bad condition thatthe item is unusable. All other items much be referred to the Governing Body prior todisposal.


APPENDIX D SAMPLE FORM FOR EXTERNAL INSURER’SCONFIRMATION OF COVER

Name and Address of School: …………………………………………………………

We wish to arrange our own insurance portfolio from 1 April [year] and we accept joint andseveral responsibility for the arrangement of all the school’s insurances from this date up toand including 31 March [year].

Signed ………………………………. Signed ………………………………….Headteacher Chair of Governors

Policy Number: .......................................................................

Insurer’s Name and Address: .......................................................

.......................................................................

.......................................................................

.......................................................................

Period of Insurance: .......................................................................

Premium Paid: ....................................................... YES

Property Insured: Material Damage Buildings and Contents

Sum Insured: £ ..................................................................... Reinstatement basis

Insured Perils: Fire/Lightning/Explosion/Aircraft/Riot/Malicious Damage/Earthquake/Storm/Flood/Escape of Water/Impact/Impact onVehicles/Accidental Damage/Theft/Subsidence.

(Delete if NOT insured)

Deductible/Excess: ................................................


Business Interruption: Revenue andAdditional Expenses

Sum Insured: £Indemnity Period months

Interest of LEA recorded as joint insured: YES

Retroactive date Claims made Claims occurring

*There are no restrictions imposed regarding the Perils ofFire/Lightning/Explosion/Aircraft/Riot and Earthquake

The LEA will be given 21 days notice, in writing, of cancellation or non renewal of thepolicy for whatever reason.

We certify the above information is true and correct in every respect.

To be completed and signed by the insurers or authorised Brokers acting on behalf ofthe School

Signed …………………………………………… Date ……………………

Company ……………………………………………



TABLE OF CONTENTS

Page

CONTACTS 167

BANKING ARRANGEMENTS 1686.1 Introduction 1686.2 Internal controls and separation of duties 1686.3 Banking arrangements for County Council funds 1696.4 Pooled banking arrangements 1696.5 Transfer of School Budget Share 1706.6 Interest deduction 1706.7 Eligible expenditure from the school’s bank account holding public

funds172

6.8 Governors as authorised signatories 1726.9 Overdrafts and borrowings 1736.10 Banking services for schools 173

6.10.1 Business cards 1736.10.2 Banking courier service 1736.10.3 Cheque stationery 173

6.11 Insurance cover 173

CASH HOLDINGS6.12 Management of petty cash 175

Appendix A Bank Charges for Schools within the pooled banking arrangements 176Appendix B Change of Authorised Signatory forms for schools within the pooled

banking arrangements178

Appendix C Business Card 183Appendix D Banking Courier Service 193



CONTACTS

Pooled banking Karen Gibbs 01992 555734arrangements School Funding Unit

National Westminster Schools Liaison Team 0208 344 1229Bank

Business cards and cheque Karen Gibbs 01992 555734stationery School Funding Unit

Banking courier service Louise Arnott 01707 281985County Supplies andContract Services

Schools loan scheme Peter Hudson 01992 555812School Funding Unit

Banking insurance Pauline Tinnelly 01992 555586Insurance SectionCorporate Services

Approval of overdrafts and Claire Cook 01992 555736borrowings Head of School Resources

School Funding Unit



BANKING ARRANGEMENTS

6.1 Introduction

The proper administration of bank accounts is a fundamental financial control. Regular bankreconciliations are essential and where schools operate suspense accounts, these should bereviewed on a monthly basis and balances transferred out as part of the monthly reconciliationprocess. They prove that balances are correct and provide assurance that the underlyingaccounts have been properly compiled and are accurate. Auditors pay particular attention tothe completion and frequency of bank reconciliations. They view failure to keep them up-to-date as an indication of potential error or fraud, and as a breakdown in the system of internalcontrol.

The Head of School Resources oversees the banking arrangements for County Council fundsrelating to schools. The Head of School Resources and representatives retain the right of fulland immediate access to all documents and records relating to bank accounts holding CountyCouncil funds. All documents and records relating to bank accounts must be held in a formsuitable for inspection by Internal Audit, external audit, Inland Revenue, Customs and Exciseand any other authorised person.

6.2 Internal controls and separation of duties

In Hertfordshire, every school has its entire delegated budget share paid into its bank account.All items of income and expenditure are transacted through bank accounts. This means thatschools may have very significant sums within their bank accounts at any one time. Financialregulations are therefore designed to safeguard this vulnerable asset as far as possible, and toprovide checks and balances within a school to protect school staff and the Governing Body.

The Governing Body, in conjunction with the Headteacher, should ensure that the school'sinternal controls over banking are documented and communicated to the relevant staff. TheGoverning Body (or a nominated governor) should satisfy itself on a regular basis that theschool's internal controls over banking are being complied with.

The Governing Body should also satisfy itself that adequate controls are in place to ensure therisk of error and fraud is minimised. Attention must be given to an adequate segregation ofduties between staff, so that no one person performs all the tasks associated with an individualtransaction. Thus, it should not be possible for the same person to authorise an order, takedelivery, certify the invoice and sign the cheque for payment. Cheque books and bank cards(where used) should be held securely. Part IV, Section 4 of this Handbook provides guidanceabout controls over cheque stationery.


6.3 Banking arrangements for County Council funds

Banks and building societies authorised to be used by schools for County Council funds areset out in the Scheme for Financing Schools, Annex C.

Former grant maintained schools may nominate, as the account for County Council funds, thebank account used in 1998/99 for payments of annual maintenance grant by the FundingAgency for Schools. However, if this bank account is closed, any new banking arrangementsfor County Council funds must be set up with banks or building societies selected from theapproved list published in the Scheme for Financing Schools.

All schools must notify the Head of School Resources of all banking arrangements for CountyCouncil funds. Bank accounts for County Council funds should not go into overdraft, andschools must immediately notify the Head of School Resources if, exceptionally, this occurs.

Hertfordshire provides pooled banking arrangements with National Westminster Bank, inwhich all schools may participate. See Section 6.4 for further details. Schools that operatebank accounts for County Council funds outside of the pooled banking arrangements mustensure that they are operated in accordance with the Scheme for Financing Schools and thefinancial regulations contained in Part III, Section 6 of this Handbook.

6.4 Pooled banking arrangements

Schools banking with National Westminster Bank within the pooled banking arrangementswill receive their full budget share on 1 April each year or the nearest banking day in April.This is credited to their General Account. This has the advantage over payment byinstalments in that cash flow monitoring is not required.

Interest is transferred from the County Council’s General Account into the school’s GeneralAccount on the last working day of each month. This is calculated at base rate on the clearedbalances for that month, including balances brought forward.

The rate of interest is greater than on other accounts available to schools. It is equivalent tothe earning power of a high interest deposit account. In addition, since it is a single account:

• the amount of interest earned is maximised• it eliminates the need to monitor account balances, and the inconvenience of having to

switch funds repeatedly between accounts• reconciliation between bank and school records is simplified. Schools can also make instant withdrawals without loss of interest.


There is no annual maintenance fee for the account. The bank charges, set out in Appendix Ato this Section, are substantially lower than those offered to other standard small businesscustomers. Schools within the pooled banking arrangements may also have one Fund (Private) Accountwhich attracts interest at 1% below base rate. There is no interest claw-back in respect of this. Administration of banking arrangements for schools within the pooled banking arrangementsis carried out by the School Funding Unit. Any changes to the authorised signatories of theschool must be notified to the School Funding Unit on forms LMSBANK1 or LMSBANK2.Copies of these forms are reproduced in Appendix B of this Section. 6.5 Transfer of School Budget Share The school budget share will be made available to Governing Bodies on the following basis: • For schools within the County Council’s pooled banking arrangements the budget

share, less the interest deduction, set out in the following sub-section, will be paid inone instalment on 1 April each year (or the nearest bank day in April).

• For schools with other banking arrangements, payment of equal monthly instalments

will be made on a monthly basis from April to February. These will be made on thebanking day closest to the 15th day of each month. An instalment equivalent to one-third of the monthly instalment will be paid on the first banking day in April, and afinal payment equal to two-thirds of the monthly instalment will be made in thefollowing March.

6.6 Interest deduction

For a school within the County Council’s pooled banking arrangements, the Authority willmake a deduction from the school's budget share instalment. This deduction is an amountequal to the estimated interest lost by the Authority in making the budget share available inadvance. The County Council finances its expenditure from various sources, the main ones being grantsfrom central government and the charge on council tax and business rate payers. However, some of the Authority’s expenditure is met by income it receives in the form ofinterest earned on cash balances. The County Council has therefore used the excess of interestearned (net of bank charges) to sustain its current level of spending on all services includingeducation. If schools are to retain the interest earned on cash balances within their local bankaccounts, the County Council needs to offset the interest it has foregone. Without an interestdeduction, expenditure on education as a whole would increase at the expense of the localtaxpayer.


Interest deduction is based upon an estimated bank base rate for the year. While it is intended that the interest rate deduction and the interest earned by schools is financially neutral, overall there may be marginal winners and losers. The actual position willdepend on a school's local spending patterns and the actual level of the bank base rate. The loss of interest is calculated as follows:

D = A " i (1 – i + i 2)

2 2 4 Where D = the deduction

A = a school's budget share i = the assumed interest rate for the year

If the bank base rate is on average higher than that assumed in the interest deduction, schoolswill keep the benefit of the additional interest earned. If, over the year, the average bank base rate should prove to be lower than that assumed, theCounty Council will compensate the schools in respect of any difference of more than 0.5%.Such an adjustment will be made retrospectively once the actual average bank base rate isknown. No deduction will be made for schools outside the pooled banking arrangements. Does the County Council have enough cash to put all schools' budget shares in theiraccount on 1 April? The simple answer is no. The County Council receives its funding (grants from centralgovernment and the charge on local taxpayers) in instalments throughout the year. This iscurrently possible because the budget shares are advanced from one account to each schoolaccount within a set of accounts all held by one bank (this is known as the 'pooled bankingarrangements’). Therefore, while the County Council’s bank account may be in deficit, the bank uses theoverall change to balances of all accounts operated under the pooling arrangements. If, forillustrative purposes, the County Council’s bank account is ‘nil’ at 1 April and it advances£400 million to schools, the Bank would register that the County Council’s bank account is£400 million in deficit and that schools' accounts are £400 million in credit. Overall, theCounty Council’s accounts within the pooling arrangements would be ‘nil’. It is the CountyCouncil’s pooled banking arrangements with its banker which make this arrangement possiblewithout resorting to further borrowing.


6.7 Eligible expenditure from the school’s bank account holding public funds Any items processed through the school’s general (public funds) bank account should relate toall official income and expenditure of the school, regardless of the source of finance for suchspending (whether from the school’s budget share or from allocated excepted or earmarkedfunds). It is a key responsibility of the Governing Body and Headteacher to ensure that funding heldin this account is spent on the provision of education and is targeted to maximise its impact onraising education standards. The key areas of expenditure for a school are defined in Part IV, Section 3, Appendices B andC of this Handbook, and reflect the DfES consistent financial reporting (CFR) framework. Generally, the Headteacher will have delegated authority to authorise expenditure on behalf ofthe school, subject to any limitations recorded in the school’s Schedule of Delegation (orsimilar document). However, the Governing Body should authorise expenditure that fallsoutside of the CFR framework or that may give rise to questions about appropriate use ofpublic funds. This will safeguard both the Governing Body and the Headteacher, andpromotes accountability and sound audit controls. 6.8 Governors as authorised signatories A key role of the members of the Governing Body is to satisfy themselves that there areadequate internal controls over cheque preparation, and that the controls are being applied. Ifthe Governing Body wishes to authorise the raising of a cheque over a predetermined limit,this may still be achieved by a separate authorisation slip rather than by a governor being acheque signatory. Moreover, control can be exercised at an earlier stage of the process, by theGoverning Body authorising orders over a predetermined limit, together with the internalcontrols built into the payment process.

The Authority does not recommend that governors act as authorised signatories. This is forthe following reasons: • this may be impractical, where governors are not available on a daily basis• employees are required to account to internal and external audit in a way that

governors are not• there can be no County Council disciplinary sanctions to deal with any financial

irregularity committed by a governor• the County Council’s fidelity insurance scheme does not cover governors, only

employees• no checks are undertaken on the suitability of governors in terms of previousfinancial conduct (except bankruptcy).

Where a member of the Governing Body wishes to be authorised to sign cheques, the schoolmust demonstrate that it has arranged insurance to indemnify the Authority against loss.


6.9 Overdrafts and borrowings

The Governing Body should ensure that the school’s spending plans are developed andformulated within the financial constraints of resources available to the school, and that theseplans are closely monitored to ensure that the school does not overspend. The Head of SchoolResources should be informed immediately if the school is likely to go into an overdraftposition.

The Governing Body must seek approval from the Head of School Resources if it wishes toborrow money or enter into loan agreements. Schools banking within the pooled bankingarrangements with National Westminster Bank may borrow money through the Schools LoanScheme (see details below). However, for any other borrowing the written permission of theSecretary of State is required before schools enter into any agreement.

6.10 Banking services for schools

6.10.1 Business cards

Appendix C to this Section provides information about National Westminster’sBusiness Cards scheme for schools within the pooled banking arrangements.

6.10.2 Banking courier service

The Authority and County Supplies and Contract Services have organised a bankingcourier service for the collection of monies from schools. Appendix D to this Sectionprovides further details of the service.

6.10.3 Cheque stationery

Schools may order cheque stationery via the Authority enabling them to benefit frombulk order discounts. Orders are collected from schools, and bulk orders are placed ona termly basis. Further information is available from the contacts to this Section, andadvice and guidance about the control and security of cheque stationery is published inPart IV, Section 4 of this Handbook.

6.11 Insurance cover

Schools must have insurance cover for banking of official County Council’s funds. TheCounty Council arranges the following insurance cover for schools.

Limit of any one loss£


1. Non-negotiable money, (e.g. cheques, money orders) inthe situations specified in items 2.a, 2.b, 2.c.i and2.c.ii below 50,000

2. Other money

a. in transit in the custody of employees, or in transit by registered post, or in the bank's night safe 5,000

b. in transit in the custody or control of a security company

or similar organisation nil

c. on school premises:

i. in the custody of or under the actual supervisionof employees 4,000

ii. in locked safes or strongrooms:

if model of safe not approved by Insurer 1,000*if model of safe approved by Insurer 5,000*

iii. in locked receptacles (other than safes orstrongrooms) 250

* Please note that the limits quoted in 2.c.ii are also maximum sums insured per establishment.If approval of a safe is required, please write to the Insurance Section, Corporate Services atCounty Hall, quoting full details of the make and model of the safe, its position within thebuilding, weight if known and whether or not it is free-standing. Keys must be removed fromthe school site out of hours.

Schools must be able to demonstrate that “reasonable care has been taken” in relation toclaims for loss or theft of monies or injury resulting from theft for purposes of the CountyCouncil’s insurance policy. It is recommended that members of staff undertaking banking areaccompanied and banking routines are varied. Schools may also wish to consider using thebanking courier service organised through the Authority. Details are provided in Appendix Dto this Section.

The County Council arranges a Personal Accident Assault policy, which covers all staff.There is a capital benefits limit of £35,000, which is based on the Continental Scale ofCompensation, with a weekly benefit of £50 for temporary total disablement.

If a private vehicle is used to transport monies to a bank, you must ensure that suitable vehicleinsurance is arranged, i.e. business use. Some insurers will provide this coverage at no extracharge.


Any school that requests delegation will be required to demonstrate that cover arranged by theGoverning Body, relevant to the County Council’s insurable interests, is at least as good as therelevant minimum cover arranged by the Authority.

CASH HOLDINGS

6.12 Management of petty cash

Petty cash is administratively convenient for making small payments, particularly if thesignatories of the main bank account are not available. However, cash is a vulnerable assetthat must be properly controlled and held securely.

The Governing Body should ensure that the size of the cash holding is appropriate, that it isused only for approved purposes, that proper records are maintained and that there are regularreconciliations and occasional spot checks to verify that the sums in hand are correct.

The Governing Body should ensure that the school's controls over petty cash are documentedand communicated to the relevant staff.

Payments from petty cash should be limited to minor items which have been approved inadvance by an authorised member of staff. All expenditure must be supported by a receipt,identifying any VAT paid. It should be signed by the recipient and countersigned by anauthorised member of staff.

Personal cheques should not be encashed from petty cash.


APPENDIX A BANK CHARGES FOR SCHOOLS WITHIN THEPOOLED BANKING ARRANGEMENTS

The County Council regularly puts its banking contract out to competitive tendering. Schoolscan benefit from the County's purchasing and negotiating power as a large organisation.The current tariff of bank charges (operative from 5 June 2000) is reproduced below.

Charge per entry£

A. Entries on bank statement

• DEBIT: cheques drawn by school 0.055

• CREDIT: Manual - Deposits paid in by the school over the bank counter 0.20

Automated - Direct credit or standing order initiated by a third party 0.32

Charge per £100 £ B. Bank handling charges

• Paying in cash 0.095

• Paying in cash (via courier/cash centre) 0.055

• Paying-out cash (cheque drawn for cash) 0.105

• Cash exchanged (notes exchanged for coins) 1.25 Charge per item £ Items collected (charge for each cheque paid in by the school) 0.07

• Items collected (via courier or cash centre) 0.0325

• Unpaid inwards (cheques paid in by the school but returnedunpresented ('refer to drawer') 1.65


Charge per item

£ C. Other services

• Night safe usage 1.75

• Stopped cheques 3.00 Banking transactions should always be carried out at the school’s local National WestminsterBank branch. Banking transactions performed at other banks or non-local branches ofNational Westminster Bank incur banking transmission charges that are currently paid by theAuthority. However, under the Scheme for Financing Schools the Authority reserves the rightto recharge the school for any additional charges incurred on behalf of the school. Schools should contact Karen Gibbs, School Funding Unit, to discuss banking arrangementswhere charges will be incurred.


APPENDIX B CHANGE OF AUTHORISED SIGNATORY FORMSFOR SCHOOLS WITHIN THE POOLED BANKINGARRANGEMENTS

For schools within the pooled banking arrangements, sample forms for changes to authorisedsignatories, LMS Bank 1 and LMS Bank 2, are reproduced on the following pages. Copies are available from:

Karen Gibbs School Funding Unit Resources Division Room 171, County Hall Hertford, SG13 8DF Telephone: 01992 555734


Hertfordshire County Council LMS Bank 1

School's GENERAL Bank Account - Change of Authorised Cheque Signatories

School School number (HCC)

The Governing Body agrees the following members of staff are to be authorised cheque signatories for the school and is satisfied that thearrangements provide an adequate level of internal control.

Effective Date

of change

Authorised by the Chairman of the Governing Body (and dated)

1. Name Block Capitals

Title Designation Headteacher

Signature

Limitations


Title Designation

Signature

Limitations


Title Designation

Signature

Limitations


Title Designation

Signature

Limitations

Account Number


Hertfordshire County Council LMS Bank 2

School's FUND Bank Account - Change of Authorised Cheque Signatories

School School number (HCC)

The Governing Body agrees the following members of staff are to be authorised cheque signatories for the school and is satisfied that thearrangements provide an adequate level of internal control.

Effective Date

of change

Authorised by the Chairman of the Governing Body (and dated)


Title Designation Headteacher

Signature

Limitations


Title Designation

Signature

Limitations


Title Designation

Signature

Limitations


Title Designation

Signature

Limitations

Account Number


APPENDIX C BUSINESS CARD

National Westminster Bank operates a MasterCard, a charge card especially designed for business use. Schools within the pooled banking arrangements may choose to operate a business card accountin conjunction with the school’s General Bank Account. The business card is accepted wherever the MasterCard or Eurocard sign is displayed. HOW IT WORKS The business card operates like a personal credit or charge card. • Each school may have an individual business card account. • Each school account can have up to three cardholders within a school. • Each card will bear the name of the school and the cardholder. • Upon receipt the user will sign the card bearing his or her name. • Business cards are usually valid for two years; on expiry, they are usually renewed

automatically. • Each card remains the property of the bank at all times and the school will be responsible for

recovering and returning cards to the bank on request. • The school receives monthly statements showing card use, with a breakdown by individual

cardholder and an overall summary. This shows what was purchased, when, where and bywhom.

• Depending on the date of a purchase, the school may gain up to 33 days of interest-free

credit. • The total expenditure on all cards is claimed from your local school bank account by direct

debit. This occurs three days after the date on the business card statement. • The cost of the scheme is an annual service charge per cardholder (currently £12). • There is a minimum credit limit of £500 per cardholder. There is a maximum credit limit of

£2,000. • The bank will credit the business card account with the amount of any refund only on receipt

of a properly issued refund voucher.


• The bank’s business card services department will take care of all day-to-day matters, e.g.,

statement queries, lost or stolen cards and other operational matters. • The bank will be instructed not to issue PIN numbers for the withdrawal of cash from

automated bank tills. Withdrawal of cash from the bank is not permitted. MANAGEMENT ISSUES FOR SCHOOLS Schools need to have a formal written policy on the use of business cards. An example proformais attached. A copy of the policy should be sent to the School Funding Unit for reference. The policy defines matters such as: • who should be a cardholder – under what circumstances cards will be issued or

withdrawn • the authority to incur expenditure – purposes for which the card can be used • where appropriate, limits set on individual transactions • the security of cards – whether cards are retained in school, issued as and when required

and returned promptly afterwards, or under the permanent control of the cardholder • what actions must be taken with regard to lost or stolen card

For example, on losing a card:

- immediately contact Karen Gibbs, School Funding Unit, on 01992 555734

- in the event Karen Gibbs is not available contact 01702 213300

- also confirm immediately in writing to Karen Gibbs, School Funding Unit

The school will be liable for up to £25 losses incurred, prior to receipt by the bank ofnotice of the loss or theft of the card.

The school and cardholder must give the bank all available information as to thecircumstances of the loss of the card, and take all reasonable steps to assist the bank torecover the missing card.


The policy also defines:

• the need for sales vouchers to be retained and passed promptly to appropriate personnel,for accounting purposes

• the need for each cardholder to be made aware of their obligations (for example, a

cardholder would have to accept full personal responsibility for the use of the card andhave to agree to use it for the predetermined conditions set out by the governors orFinance Committee; and the cardholder must obtain, in addition to the sales voucher, afull VAT invoice where appropriate; VAT cannot be recovered without it)

• approval of each cardholder’s application form by authorised signatories • which named individual will be responsible for advising all originators of continuous

transactions (e.g. direct debits for say, annual subscriptions) when one or more cards arecancelled

• a total credit limit for the school account best suited to its needs, (for all cardholders);

the limit should be enough, say, to meet the likely expenses of all cardholders over a twomonth period

• the need to maintain:

– a register of business card details – a business card issue register (for use when cards are retained in school showing

each issue and return) The following forms should be used as the Register of Business Card Details and Business CardIssue Register. All business card administration is carried out by the School Funding Unit. If you wish to applyfor a business card or make changes to existing arrangements, please refer to the contact list forthis Section.


EXAMPLE PRO FORMA FOR SCHOOL POLICY

SCHOOL POLICY ON THE USE OF BUSINESS CARDS

SCHOOL NAME

COUNTY REFERENCE

The Governing Body agree the policy stated below. Effective Date : .................................... 200 ..... Signature : ......................................................... Date : .................………... 200 ..... (Chair of Governing Body) 1. Staff nominated as cardholders:

a. Name (block capitals) .............................................................. Designation: ..............................................................

CONDITIONS OF USE

Purposes for which card can be used .................................................................................................................. .................................................................................................................. .................................................................................................................. .................................................................................................................. Limit on individual transactions, if any. .................................................................................................................. .................................................................................................................. .................................................................................................................. Card limit £....................... (minimum limit £250)


SECURITY OF CARD

Card retained in school, and issued as and when required ! and returned promptly afterwards Under permanent control of the cardholder !

(please tick appropriate box)

b. Name (block capitals) .............................................................. Designation: ..............................................................

CONDITIONS OF USE

Purposes for which card can be used .................................................................................................................. .................................................................................................................. .................................................................................................................. .................................................................................................................. Limit on individual transactions, if any .................................................................................................................. .................................................................................................................. .................................................................................................................. Card limit £....................... (minimum limit £250)

SECURITY OF CARD


(please tick appropriate box)


c. Name (block capitals) .............................................................. Designation: ..............................................................

CONDITIONS OF USE

Purposes for which card can be used .................................................................................................................. .................................................................................................................. .................................................................................................................. .................................................................................................................. Limit on individual transactions, if any. .................................................................................................................. .................................................................................................................. .................................................................................................................. Card limit £....................... (minimum limit £250)

SECURITY OF CARD


(please tick appropriate box) 2. Actions to be taken immediately by individual cardholder with regard to lost or stolen

cards.

a. Contact: Karen Gibbs School Funding Unit

Telephone: 01992 585734 or in the event Karen Gibbs is not available contact 01702 213300


b. Confirm in writing:

Karen Gibbs School Funding Unit County Hall Hertford Herts SG13 8DF

3. Individual responsible to advise all originators of continuous transactions (e.g. direct

debits for, say, annual subscriptions) when the card(s) has (have) been cancelled. Name (block capitals) .............................................................. Designation .............................................................. 4. Credit Limit for School - the limit for all cardholders must not be lower than £250. The

limit should be enough, say, to meet the likely expenses of all cardholders over a twomonth period.

Total Credit Limit for School £.....................

5. Cardholder obligations

Each cardholder to be aware of their obligations (in writing) as set out below. a. conditions of use - purpose and limit on individual transactions, if any b. security of card - issuing arrangements c. lost or stolen card - procedure and contact d. sales vouchers - retained, and passed promptly to appropriate personnel, for

accounting purposes.


REGISTER OF BUSINESS CARD DETAILS

Information taken from actual card

CARDHOLDER

NAME

ORIGINAL CARD

RENEWAL

REPLACEMENT CARD

Number(last four

digits)

Valid From

Expires

End

Valid From

Expires

End

Number (last four digits)

Valid From

Expires From


BUSINESS CARD ISSUE REGISTER

For use when cards are retained in school, and issued as and when, and returnedafterwards.

CARDNUMBER

OUT IN

(last fourdigits)

Date Signature of Cardholder Date Signature of School Custodian


APPENDIX D BANKING COURIER SERVICE

The School Funding Unit and County Supplies and Contract Services have organised abanking courier for the collection of monies from schools. The monies are collected from schools and delivered to a cash centre on the followingday. Entries will appear on bank statements by the next working day. Transactioncharges to schools paying in through cash centres will be less than those for paymentsmade at a branch. This is because the cash centres have fewer overheads and are morecost-effective. The cash centres have asked us to pass the following information to schools when payingmonies in by this method: • to speed processing, coinage (including notes) and cheques should be banked

using separate credit clips and within separate bags • foreign currency should not be banking via the banking courier service • bags should not exceed a maximum weight of 11kgs. Current Contract The contract is currently set up with Securicor Cash Services Limited and the charge foreach collection is £12.79. The minimum contract period is one year. Charges for this service will be debited each month via the Central Payments andEarmarked Funding statement on account code 3719, and are calculated as follows:

Total price per collection £12.79 A Number of cash collections per week B Total price of collections per week (A " B) = C

Total annual price of collections (C " 38 weeks) = D Total monthly price (D ÷ 12)

Any credits due to a school following complaints will be given on the statement. Preferences for collection arrangements will be taken into account and mutually agreedbetween the school and the banking courier.


Petty cash Schools using the Banking Courier Service may reimburse the school's petty cash floatfrom cash collected, rather than making unnecessary visits to the bank. The followingconditions apply: • all transactions must be fully documented so that there is a complete trail from the

income collection to the point that the cash is utilised for reimbursing the pettycash

• petty cash reimbursements should remain at their current level and should not be

increased purely because of the availability of additional funds on site.

If you would like further information on this contract, refer to contacts list for thisSection.



TABLE OF CONTENTS

Page

CONTACTS 197

7.1 Introduction 1997.2 Public and private funds 1997.3 Internal Audit coverage 2007.4 Other accounts 200

Appendix A Tests to determine eligible expenditure 203



CONTACTS

Private, voluntary and trading accounts,including audit and submission of annualaudit certificates for these accounts

Income Tax legislation

VAT queries

Nigel StudleyInternal Audit

Edward DevilleTaxation ServicesCorporate Services

Gary ElmesAlex FitzpatrickTaxation ServicesCorporate Services

01992 555326

01992 555381

01992 55531101992 555365



7.1 Introduction

This Section sets out:

• the Authority’s position in relation to these accounts and the distinctions betweenofficial accounts, governor controlled accounts and the funds and accounts of otherbodies associated with the school

• the requirement to submit an annual audit certificate to the Chief Internal Auditor forall such accounts

• general guidance on the operation of such accounts including their tax status(Appendix A sets out some ‘tests’ as a guide to whether the use of the funds in theseaccounts could be regarded as reasonable).

7.2 Public and private funds It is important to distinguish between those public funds provided by the LEA/Government,and possibly other official bodies, and those generated or raised by the governors or school.Funds falling into the first category are governed by the Authority’s Scheme for FinancingSchools and the provisions of this Handbook. Funds falling into the second category arecontrolled by the Governing Body and will be held in a separate (private) account. A thirdcategory of funds may exist belonging to bodies which, although they may be closelyassociated with the school, are not part of it and therefore the accounts and transactions shouldbe wholly separate, e.g. parent teacher associations. More guidance regarding this separationof accountability is provided below, under Section 7.4. Although the funds held in a private, voluntary or trading account are not the responsibility ofthe Authority, parents, pupils and, arguably, the wider community should expect standards ofpropriety and stewardship in relation to these funds to match those expected for ‘official’funds. This is particularly relevant since such funds will often be administered by members ofstaff as part of their duties. The Governing Body is potentially liable to Corporation Tax on any income and gains arisingfrom, or generated by, these accounts, but the Inland Revenue has indicated that it will notlevy any tax provided that: • the funds are used for activities which are broadly educational, support the running of

the school, or are for charitable purposes (Appendix A to this Section provides furtherguidance);

• the activities used to generate funds are not ‘business like’ in their scale or nature (although major fund raising initiatives and/or the income generated from assets


financed through these accounts may not attract a tax liability – but prior discussion with the Inland Revenue may be advisable where a private, voluntary or tradingaccount becomes involved in major initiatives, e.g. in connection with Lotterybids);

• the accounts are subject to regular and adequate audit. In relation to VAT please refer to Part IV, Section 12, for advice on purchases made fromdonated funds and for advice on VAT on private, voluntary and trading accounts. 7.3 Internal Audit coverage Where a school has opted to have a private, voluntary or trading account included as part ofInternal Audit’s normal coverage, then the audit will seek to establish that the followingcontrols are in place: • proper recording and substantiation of all payments• proper recording and substantiation of all receipts• maintenance of such additional and subsidiary records as are necessary to support the

first two bullets, e.g. records of income expected and received from individual sources• recording of transactions and balances at a level of detail sufficient to properly reflect

the sources of income to the account and the purposes for which the funds are used• use of the account for appropriate purposes only• reconciliation of account - frequency, method and evidence of proper recording• regular reporting of and monitoring of income, expenditure and the net position on the

account by the Headteacher and Governing Body• separation of duties in the key accounting functions• identification of turnover on ‘business’ activities where this may exceed the VAT

registration threshold• clear separation of funds and transactions from other accounts.

7.4 Other accounts

Charitable Trusts and the funds and accounts of separate organisations, e.g. parent teacherassociations, should be separated from those controlled and managed by the governors andschool staff.

These ‘Other’ accounts would include the ‘Governors’ accounts of Voluntary Aided andVoluntary Controlled Schools, since these accounts are subject to the control/influence of aseparate body, e.g. the local Diocese.

The fund raising or management committee for other funds/accounts will normally be set upand constituted as a separate body, whose members may be wholly or partly non-County


Council employees. These funds will generally be controlled by a nominated member of thatbody, whereas decisions regarding the use of funds in the school’s private, voluntary ortrading account(s) can be determined only by the governors of the school, (although the day-to-day running of the account is usually delegated to the Headteacher).

Donations to the school from these organisations can be made to the General Account or to aprivate, voluntary or trading account(s). Once monies have been donated to any of theseaccounts the donor ceases to have any control over the fate of these monies, although bothschool employees and governors should be expected to act in good faith to use the donation inaccordance with the wishes of the donor, especially where this is agreed in advance.


APPENDIX A TESTS TO DETERMINE ELIGIBLE EXPENDITURE

The funds in these accounts are expected to be used for activities that are broadly educationalin their nature and/or support the running of the school.

The governors are potentially liable to pay corporation tax on these accounts, but the InlandRevenue has indicated that it will not levy any tax provided that the funds are used in this wayor for charitable purposes.

A number of ‘tests’ should be applied to judge whether expenditure from the account is properand reasonable.

a. Is the expenditure for items or activities that contribute to the education of the pupilsor the running of the school?

b. Would the people who raised or donated money (or contributed towards the cost of

certain activities) be likely to regard the expenditure as appropriate? c. Should the expenditure be more properly met from another source, e.g. a specific

collection from among staff, parents and pupils, or a specific fund raising initiative? d. Is the scale of the expenditure reasonable? e. Would this expenditure breach any financial regulations in law, e.g. some ‘cash in

hand’ payments to persons for services rendered? f. Has the expenditure been approved in advance by the Headteacher or Governing

Body? (For the more sensitive areas of expenditure such as hospitality, etc,development of a policy by the Governing Body is recommended.)

The following paragraphs set out what Internal Audit regards as the appropriate treatment ofcertain types of expenditure which have been made through these accounts.

• Refreshments including alcohol: such purchases are not expected other than for modesthospitality, for visitors, etc, and any provision for staff and governors should beincidental to its provision for visitors, guests, etc. The Governing Body should alwayssanction the use of funds in this way. Such expenditure should be reported separatelyin the accounts in an ‘Entertainment/Hospitality/Refreshments’ column.


• Leaving gifts for regular members of staff etc. should not normally be paid for fromthe account unless funded by specific collections, and even small tokens ofappreciation for casual staff or helpers, flowers for sick staff etc., may be regarded bythe Inland Revenue as a taxable benefit. The Governing Body should always sanction the use offunds in this way.

• Cash payments to any individuals, whether they are normally employed by the school

or not, e.g. swimming instructors, parent helpers, etc. should not be paid from theaccount unless self-employed status has been confirmed using the questionnaire in PartIV, Section 13, Appendix A.

• Activities organised by the Parent Teacher Association (PTA) should not be transacted

through the school’s fund account(s), but should be accounted for and administeredwholly separately. The PTA should be set up and constituted as a separate body. Thefinances of the PTA will generally be controlled by a member of that body, whereasthe fate of money passing through the fund account can only be determined by theHeadteacher and governors of the school.

Financial Handbook for School Hertfordshire County CouncilPart IV: Section 8 Page 205 RESO3524 – Issue 3 : April 2003


TABLE OF CONTENTS

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CONTACTS 207

8.1 Introduction 2098.2 Sources of funding for capital projects 2098.3 Definition of capital expenditure 2108.4 Notification of capital works 2118.5 Commissioning and undertaking capital works 2118.6 Construction Industry Scheme (CIS) 2118.7 Value Added Tax and Voluntary Aided schools 2128.8 Financial administration 213

Appendix A Guidance notes for financial administration of Capital Projects 215Appendix B Schools Loan Scheme 219



CONTACTS

Planning ManagersNorth Pauline Davies 01992 555865South Sarah Vize 01992 555863West Paul Wray 01992 555860East Julie Evans 01992 555864

Asset Management Plan and John Procter 01992 555740Repairs and Maintenance (all schools Keith Hutt 01992 555743other than Voluntary Aided) Planning Division

General advice, guidance and DfES Darlington www.teachernet.gov.uk/funding for premises related works VA Team website vacontactsfor Voluntary Aided Schools

Roman Catholic Schools Sally Livesey 020 7798 9005Education OfficerWestminster Diocese

Church of England Schools Alick Burge 01707 386025School Buildings OfficerSt Albans Diocese

Funding for Capital Projects Paul Wray 01992 555860(all schools other than Voluntary Planning DivisionAided Schools)

Health and Safety and Security Claire Saunders 01992 555741Funding Health, Safety and Risk Manager

Planning Division

Schools Loan Scheme Peter Hudson 01992 555812School Funding Unit

Finance Planner software Financial Services for Schools 01992 555720Website www.thegrid.org.uk/

trade/fss

Copies of The Standards Fund: Sarah Moor 01992 555722A guide for Schools School Funding UnitCapital Accounting Issues Eileen O’Dowd 01992 555724


County Capital ProgrammeCo-ordinator

Mouchel Property Services School’s Surveyor 01992 513500

List of Approved Contractors Chris May 01992 555325Financial Strategy Group

Processing invoices via ITNET Eileen Rice 01992 555349and Contractors’ CIS Certificates Margaret Fisher

ITNET Acounts Payable

ITNET Authorised Signatory Margaret Dewell 01992 555422listing for Schools ITNET Payroll Services

Supplies of A529 and A14 County Supplies Department 01992 281800finance stationery

Construction Industry Scheme Edward Deville 01992 555381Taxation ServiceCorporate Services

Value Added Tax Alex Fitzpatrick 01992 555365Gary Elmes 01992 555311Taxation ServiceCorporate Services



8.1 Introduction

Funding for capital projects is accessed through the County Council’s capital programme orthe Voluntary Aided Schools’ capital programme. Hertfordshire’s Asset Management Plan(AMP) has been developed in line with DfES requirements in consultation with headteachersand governors to co-ordinate the different needs for capital investment and to provide anagreed basis for capital spending priorities for Hertfordshire schools.

8.2 Sources of funding for capital projects

Funding for capital projects comes from the following sources:

• The County Council

• DfES Voluntary Aided schools’ capital • Standards Fund grants including devolved Formula Capital and Seed Challenge grant • Schools’ Loan Scheme operated by the Authority

• Other DfES grants including Modernisation and Schools Access Initiative

The County Council’s Capital Programme As part of the AMP, condition surveys were initially carried out at all schools in 1999 and arerepeated as a part of a three year rolling programme. New surveys were undertaken in 2002.Suitability and sufficiency data was also collected in 2002 and the new condition survey datais used to ensure that resources are allocated and spent against agreed priorities. The PlanningDivision administers the AMP and further information and guidance is available from KeithHutt (see contacts for this Section). Voluntary Aided schools’ Capital Programme Under new funding arrangements introduced in April 2002, the governors of Voluntary Aidedschools have responsibility for the entirety of the school’s buildings, premises and sites, withthe exception of the playing fields and related buildings. Capital funding in excess of the deminimis level of £2,000 in relation to Voluntary Aided schools is accessed via the DfES inDarlington.


Further information and guidance is available from the relevant contacts to this Section andthe DfES publication, Funding for premises-related work at Voluntary Aided (VA) Schools inEngland, DfES/0276/2002. Standards Fund – Devolved Formula Capital This funding is notified to schools (other than Voluntary Aided schools) on an annual basis aspart of the Standards Fund grant allocations issued together with the schools’ budget shareinformation. Guidance and information about the use of this source of capital funding ispublished annually in The Standards Fund: A guide for schools. Standards Fund – Seed Challenge This funding is allocated to schools on a bid basis. The Planning Division notifies schoolsannually of the criteria and process for bidding. All schools, including Voluntary Aidedschools, may apply for funding of up to 50% of the cost of primary and special schoolprojects, and up to 33% of the cost of secondary school projects. At least 75% of the balanceof funding for the capital project must be “new” funding, not derived from recycled grantincome or savings from revenue funding. However, if the proposed project meets DfESannual priorities, the “new” money element is waived. Further guidance and informationabout the use of this funding is published annually in The Standards Fund: A guide forschools. Schools Loan Scheme This loan scheme is available to schools within the HCC’s pooled banking arrangements withNational Westminster Bank, and full details are appended to this Section as Appendix B.Under the Scheme for Financing Schools, this is the only source of borrowing that schoolsmay enter into without the permission of the Secretary of State. 8.3 Definition of capital expenditure The classification of capital and revenue expenditure is complex, and the accounting treatmentis different for each category of expenditure. Capital expenditure is, broadly, expenditure on the following items that will be of use orbenefit in providing services, beyond the financial year: • the acquisition, construction, preparation, enhancement or replacement of buildings• the acquisition, renewal or replacement of plant, machinery and major items of

equipment• the purchase of land .


Enhancement (referred to in the previous paragraph) is: • the substantial lengthening of the useful life of an asset and/or• a substantial increase in the extent to which the asset can or will be used for school

purposes.

8.4 Notification of capital works

The Scheme for Financing Schools requires that schools should inform the County CapitalProgramme Co-ordinator of all capital projects funded from LEA sources, includingStandards Fund grants, prior to the commencement of a capital scheme. The school shouldalso inform the Area Planning Manager if the scheme exceeds £15,000.

For further advice and guidance please see contacts for this Section.

8.5 Commissioning and undertaking capital works Schools may commission works through one of the County Council’s Property Servicesproviders (currently Mouchel or Mace), and in doing so may be confident that the contractorengaged complies with all of the legislative and HCC requirements for contractors. Schoolsare responsible for negotiating the fees for specific projects. Schools using other contractorsmust ensure that they fully comply with the legislative and HCC requirements for contractors.Please see the contacts for this Section for details of the HCC Approved List of Contractors. 8.6 Construction Industry Scheme (CIS) All Community and Foundation schools are required to comply with CIS. However,Voluntary Aided schools are, for the time being, excluded from CIS in respect of buildingwork that is the legal and contractual responsibility of the Governing Body. Further detailabout this aspect of CIS is provided in Part IV, Section 14 of this Handbook. Where CIS applies, payment of invoices to contractors or subcontractors for all works with alabour element above £1,000 (excluding VAT and materials) must be made through theAuthority’s accounts payable agent, ITNET. Where building contractors other than the County Council’s Property Services arecommissioned for capital works, the school must check (prior to engagement andcommencement of the contract) that the contractor has the required CIS certification, and thatITNET holds a copy of the contractor’s certificate. See the relevant contact to this Section forfurther details about processing information via ITNET. Additional information about CIS is published in the Premises and Sites Manual, Section 17and in Part IV, Section 14 of this Handbook.


8.7 Value Added Tax and Voluntary Aided schools Under new funding arrangements introduced in April 2002, the governors of Voluntary Aidedschools have responsibility for the entirety of the school’s buildings, premises and sites, withthe exception of the playing fields and related buildings. Capital funding in relation toVoluntary Aided schools is accessed via the DfES in Darlington. The circumstances in which VAT can be recovered are identified in the following table:

VAT Recovery Decision Table

Source of funds Responsibility for works

LEA Governors School budget share received via the LEA YES YES Capital grant administered and received via the LEA YES YES Donations YES NO Governing Body/Diocese/Trustees YES NO Grants received directly from the DfES NO NO The following points should be noted: • The VAT incurred in undertaking a project is recoverable to the extent that the above

criteria are met. • Any project where the LEA is responsible for the works must be conducted through

the School’s General (Public) Account. Those capital works that are wholly theresponsibility of the Governing Body and on which no VAT can be recovered shouldnot be processed through the School’s General (Public) Account.

• Works expenditure funded from LEA sources of capital funding must in all

circumstances be processed through the LEA’s central accounting systems. Seeguidance notes in Appendix A to this Section.

• VAT recovery, where permitted, is subject to the possession of satisfactory

documentary evidence. See Section 12 Value Added Tax for further guidance. • Where the governors have contracted for works that are entirely their responsibility

and part of the cost is being met from school budget share or capital grant administeredby the LEA, satisfactory documentary evidence will be required. This will includecopies of VAT invoices addressed to either the Governing Body, Diocese or Trustees,together with additional documentation that clearly links payment from school budgetshare funding or capital grant funding administered by the LEA.


8.8 Financial administration

Appendix A to this Section provides information and guidance about processing invoices forcapital works, and additional information about the recovery of VAT for Voluntary Aidedschools.


APPENDIX A GUIDANCE NOTES FOR FINANCIALADMINISTRATION OF CAPITAL PROJECTS

FINANCIAL ADMINISTRATION

All expenditure in relation to capital works funded from LEA sources must be processedthrough HCC’s central accounting system. This is to ensure:

• that capital expenditure can be separately monitored to fully comply with capital grantconditions and other capital accounting requirements; and

• compliance with Construction Industry Scheme regulations.

Therefore, all capital projects must be notified to the County Capital Programme Co-ordinatorso that schools capital expenditure can be monitored and accurately recorded in the CountyCouncil’s accounts.

All capital works orders and invoices processed via ITNET Accounts Payable require codinginstructions. The codes used will ensure that capital expenditure can be identified andincorporated into the County Council’s accounts. This eliminates the need for schools tocomplete a separate capital expenditure report. For certain capital projects, specific capitalcodes are issued by the County Capital Programme Co-ordinator, and these should be usedwhen coding capital works orders and processing invoices. Please see coding instructionsbelow and list of contacts to this Section for further information.

Official finance forms for commissioning capital works and processing invoices should beused, and are available from County Supplies. The forms are:

• Official Works Orders - County Supplies Re-Order No. 461103For commissioning capital works (and general repairsand maintenance works)

• A529S (pink) - County Supplies Re-Order No. 740155For approving the payment of invoices processed through ITNET Accounts Payable for capital expenditure other than sub-contractors’ fees

• A529R (yellow) - County Supplies Re-Order No. 740202For approving the payment of invoices processed through ITNET Accounts Payable for sub-contractors’

fees


• A14 - County Supplies Re-Order No 740112For authorising payment of invoices processed throughITNET Accounts Payable

Please refer to Part IV, Section 10, Appendix A for sample forms and further informationabout the approval and authorisation of A529 and A14 forms.

ITNET Accounts Payable can only make payments to contractors where they hold a copy ofthe contractor's CIS certificate. Therefore, schools that commission works with buildingcontractors that are not on the County Council’s Approved Contractors List must contactITNET to determine if the required CIS certificate is registered with ITNET prior to thecommencement of the project and the engagement of the contractor.

ITNET will contact the contractor if they do not hold a copy of the CIS certificate, and thismay delay payment.

PROCESSING INVOICES AND CODING WORKS ORDERS

The financial forms described above require coding instructions for cost centre, account codeand, for some capital projects, a sub-ledger code. The cost centre is unique to the school, theaccount code indicates the type of capital expenditure and the sub-ledger code, whererequired, indicates the specific capital project.

Cost Centre This is a seven-character alpha/numeric code. The first four charactersindicate the school type followed by the three-digit school number.

School Type: E010 NurseryE320 Primary, Infant and FirstE330 Middle and SecondaryE070 Special

School Number: Must be shown as three digits. For example,School number “1” will be shown as “001”.

Therefore, cost centre code for school number “1” is “E330001”.

Account Code Schools should use an appropriate account code from the following list:

75742 TSF Seed Challenge – Construction75743 TSF Seed Challenge – Equipment75744 TSF Seed Challenge – ICT Equipment75745 TSF Seed Challenge – Fees


75752 Devolved Formula Capital – Construction75753 Devolved Formula Capital – Equipment75755 Devolved Formula Capital – Fees

75762 TSF School Security – Construction75763 TSF School Security – Equipment75765 TSF School Security – Fees

75772 Other Capital – Construction75773 Other Capital – Equipment75774 Other Capital – ICT Equipment75775 Other Capital – Fees

Sub-Ledger These codes are issued by the County Capital Programme Co-ordinator.

VAT and Voluntary Aided Schools

Voluntary Aided schools may recover VAT incurred for capital works, subject to theconditions shown in subsection 8.7.

Partial recovery of VAT for capital works would only be expected to arise where both ofthe following apply:

• the works are the joint responsibility of the LEA and the governors; and• funds are being transferred into the school’s General (Public) Account to meet the

total cost of works (inclusive of VAT) which are not the responsibility of theLEA, and are not being funded by the LEA.

Those capital works that are wholly the responsibility of the Governing Body and onwhich no VAT can be recovered should not be processed through the school’s General(Public) Account. Recovering VAT for Voluntary Aided Schools Where VAT can be recovered in full - invoices must be submitted in the name of the school and processed following the instructions detailed in the coding section below.The VAT element will be recovered centrally, and the school will only be charged the netvalue of the invoice. Where a portion of the VAT cannot be recovered - the expenditure concerned mustbe coded gross and shown separately from any expenditure on which VAT can berecovered. Invoices must be submitted together with an A529 coding slip showingseparate entries as follows:


• For the portion of expenditure for which VAT cannot be recovered. The gross

amount of that expenditure (inclusive of VAT) should be entered in the “NetAmount” column with the VAT category box completed with an “O” (OutsideScope).

• For the portion of expenditure for which VAT can be recovered. The net amount

of that expenditure (exclusive of VAT) should be entered in the “Net Amount”column with the VAT category box left blank

The cost centre, account and subledger codes for all entries should be completed inaccordance with the coding instructions above.

Where works are commissioned through the County Council’s Property Servicesprovider - the Official Works Order Form must clearly show the breakdown of thesource of funds.

Charging for capital works and transfer of fundingFollowing payment of invoices processed via ITNET, capital expenditure will be chargedto the school on the monthly billing statement.


APPENDIX B SCHOOLS LOAN SCHEME

HERTFORDSHIRE SCHOOLS LOAN SCHEME

RULES AND CONDITIONS

Who can apply for a loan?

The Scheme is open to all Primary, Secondary, Nursery and Special Schools within theCounty Council’s pooled banking arrangements, currently with National WestminsterBank. Voluntary aided schools will not be eligible for loans to carry out works whichfall within the governors’ responsibility for buildings.

What can a loan be used for?

Schools can apply for a loan to cover the cost (in full or in part) of any project which:

• is of a capital nature – i.e. will provide a substantial benefit to the school forlonger than one year such as building or grounds improvements, major equipmentpurchases, furniture purchase or replacement, health and safety or securityprojects;

• does not conflict with the LEA’s plans for school sites and buildings;• will not cause the school to incur significant ongoing revenue commitments

which it cannot reasonably afford;• can be an enhancement to an LEA-funded capital scheme. In what circumstances might a loan be refused? A loan may be refused if, in the LEA’s view: • a school already has sufficient resources at its disposal to proceed with the

scheme/purchase• a scheme is of a speculative nature and relies on future income generation to

cover running costs• a scheme could have an adverse effect on the LEA’s future planning for the

provision of school places, because of implications for changes in the school’sstandard number/admission limit, nursery places etc, or because it could lead tothe creation of surplus places in the area


• a scheme has significant annual running costs and there is an expectation that theLEA will meet/contribute to these but is not prepared to do so

• the repayments on the level of loan requested could pose the school significantfinancial difficulties

• a building project does not comply with our project approval system, which seeksto ensure that relevant regulations are met.

If the fund is oversubscribed by eligible applications, what will be the priorities fordeciding which loans are approved?

The following order of priorities (drawn from the LEA’s capital strategy) will be used.

Priority 1 Health and Safety and security projects

Priority 2 Work to remedy deficiencies in accommodation and provide furtherschool places where “basic need” is not provable

Priority 3 Work to replace or upgrade accommodation which is sub-standard interms of sufficiency, condition and suitability

Priority 4 Providing an opportunity for schools to receive voluntary or private sectorfunding by enabling the school to use the loan as its “matching” funding

Priority 5 Purchase of information technology or other large curriculum-relatedequipment.

How much can a school borrow?

Loans will be limited to between 1% and 5% of the school’s current budget share, theupper limit to include the outstanding balance of any earlier loan(s). No other form ofborrowing is permitted under the terms of the Scheme for Financing Schools.

What are the repayment terms?

The maximum period of a loan will be 5 years (3 years for equipment purchases). Theminimum period will be 2 years. Schools can select any repayment period within thisrange, in multiples of quarter-years.

The amount of the loan will be repaid in equal quarterly instalments. The first quarterlyrepayment will be made at the end of the first quarter following the loan start date.


Interest will also be charged quarterly (at the same time as loan repayment instalments)based on the balance of the loan outstanding and calculated at base rate (currently3.75%).

Therefore, if the interest rate stays static, the amount of interest chargeable each quarterwill reduce as the loan is repaid. The interest rate will, however, vary in line with bankbase rate changes. (Base rate is the interest rate schools in the pooled bankingarrangements receive on their general account balances.) Repayments and interest willbe charged to schools through the monthly traded services direct debit prints. Therefore,for loans starting on 1 July the first repayment and interest charges will fall due on 30September, and will be debited to school accounts on 15 October (or nearest bankingday) via the October traded services print.

What are the administrative requirements?

A formal decision by the Governing Body to seek a loan is required. The LEA’s LoanApplication Form must be used, and this must be signed by the Headteacher andChairman of Governors. Subject to LEA approval, the school is then bound by the termsand conditions of the scheme, and repayments of principal and interest will be chargedautomatically to the school’s budget.

Each loan application must be accompanied by a three year financial forecast, includingthe pupil number data used to produce this forecast. These reports can be generated bythe “Finance Planner” software, which is available from Financial Services for Schools.See contacts to this Section.

If at any time the school ceases to be subject to the LEA’s school funding scheme or theLEA’s pooled banking arrangements, immediate repayment of the outstanding balanceand interest will be required.

If an application is approved, the LEA will notify the school in writing of that approval.The LEA will not pay the amount of the loan into the school’s bank account, but willissue a central expenditure code or codes which the school must use in the processing ofany invoices relating to the loan project. Once coded, invoices should be sent in to ITnetfor payment. These will be charged centrally and not against the school’s bank account.However, should the total of payments exceed the loan approval, the excess amount willbe recharged to the school’s own bank account. Loan repayments and interest will becalculated on the total amount of the loan approval from the approved start date. Therepayments and interest are not affected by the rate at which a school may choose to takeup the amount of loan approval.

There will not be specific arrangements to enable schools to increase the size of a loan,for example in relation to an increase in the costs of a building project. Any approval toincrease the value of a loan would be at the discretion of the Assistant Director


(Resources) and would depend on the level of additional funding sought and theavailability of resources from the fund.

What if the school cannot meet the repayments?

This will not arise. The LEA will deduct repayments and interest charges automaticallyfrom the school. The Governing Body must ensure when applying for a loan, and whenit sets its budget each year, that provision is made to meet those charges. The annualbudget plan must include such provision, and it will continue to be illegal for aGoverning Body to set a deficit budget.

How will loan requests be assessed by the LEA?

Loan requests will be considered by appropriate officers, and loans will be authorised bythe Assistant Director (Resources). If the fund is oversubscribed by eligible applications,requests will also be considered by a Management Committee set up by the ResourcesManagement Partnership Group, who will assess the relative priorities of the bids in thelight of the criteria and priorities set out above.

What is the timetable for loan applications and approvals?

The start date of a loan may be on 1 April, 1 July, 1 October or 1 January. Schools maymake loan applications at any time, and should specify the preferred start date for theloan. A minimum of one month should be allowed between the date of receipt of theapplication and the start date of the loan. In the event that the fund is oversubscribed, andan assessment of relative priorities by the Management Committee is required, twomonths should be allowed for this approval process. Please bear in mind that theschool will be charged for repayments and interest from the approved start date ofthe loan.

The loans fund will comprise approximately 25% of the total of schools’ balances withinthe National Westminster Bank pooling arrangements, as at the end of the previousfinancial year. Depending on demand, up to 40% of the fund (approximately £1.7m) willbe available for loan in any one year.

Application forms may be obtained from Peter Hudson, School Funding Unit, CountyHall, Hertford. Telephone 01992 555812.

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PURCHASING STRATEGIES9.1 Introduction 2279.2 Purchasing goods and services 2279.3 Responsibility for purchasing 2289.4 Process for purchasing 2289.5 Organisation 2299.6 Purchasing strategy 2299.7 Specifications 2309.8 Choosing the provider 2309.9 Delivery and monitoring 2329.10 Review 232

LEASING OF EQUIPMENT9.11 Introduction 2339.12 Definition of a 'Lease' 2339.13 Types of lease 2339.14 Controls on leases 2349.15 Operating leases 2349.16 Lease costs 2359.17 Lease arrangements through County Supplies 2359.18 Schools Loan Scheme 2359.19 Photocopier Contracts 236

BEST VALUE9.20 Best Value 2369.21 Applicability by schools 2369.22 Management implications 2369.23 Best Value guides 237

Appendix A Purchasing conditions and guidelines 239Appendix B Code of Purchasing Practice 243Appendix C Photocopier Contracts 247Appendix D Purchasing of electricity and gas 251



CONTACTS

Purchasing policy and strategy Steve Gilbey 01707 281700Head of CSCS

Ros Aird 01707 281710Head of Purchasing and Supply

General matters of purchasing Evelyn Poulton 01707 281880practice Purchasing Consultant

John Swade 01707 281741Purchasing Consultant

Contracts and tendering exercises Carol Weller 01707 281919Contract Development Manager

Computer purchases, hardware, Rachel Lockyer 01992 556688software, and consumables Senior Purchasing Officer

Disposal of unwanted IT equipment Rachel Lockyer 01992 556688Senior Purchasing Officer

Curriculum materials and sports Jenni Christian 01707 281722equipment Senior Purchasing Officer

Energy Phil Godfrey 01707 281712Energy Manager

Chris Llewellyn 01707 281808Purchasing Support Officer

Furniture, equipment and leases Eddie Wilkinson 01707 281714Senior Purchasing Officer

Photocopiers Eric Wilson 01707 281728Buyer

Schools Loan Scheme Peter Hudson 01992 555812School Funding Unit


Service contracts and management Maurice Halls 01707 281929(grounds, catering, cleaning, Contract Managerbanking courier services)

Vehicles Alan Smith 01707 885716Fleet Manager

Climate Change Levy exemption Peter Hudson 01992 555812forms School Funding Unit

General advice on operating David O’Connor 01992 555382leases Corporate Services

Education Solicitor for Richard Freeth 01992 555520legal advice County Secretary’s Department

Best Value guides Alex Pettit 01992 555728School Funding Unit



PURCHASING STRATEGIES

9.1 Introduction

Governors of schools maintained by the Authority are empowered to make purchases againsttheir schools' approved budget and are subject to the Authority’s Contract Regulations,tendering procedures and to general regulations regarding purchasing. Section 9.4 andAppendices to this Section provide further information and guidance.

Schools will want to achieve best value for money from all their purchases, and are required todo so. Value for money in this context means getting what is needed in the correct quality,quantity and time, at the best price possible. Although price is not always the overridingfactor in deciding which supplier to use, it is an important one. There are various ways ofestablishing whether the prices being obtained are competitive. Consulting County Suppliesand Contract Services (CSCS), checking trade journals and catalogues and seeking quotationsor formal tenders are all examples of good practice depending upon the nature and value ofthe purchase concerned. This Section highlights the procedures schools should adopt intesting the market.

9.2 Purchasing goods and services

The range of goods and services to be purchased by schools is diverse. It includes:

• professional services relating to an ever-changing and demanding curriculum• books, stationery and general supplies• computer hardware and software (both educational and administrative), scientific

equipment, general furniture and equipment• building works (repairs and maintenance), catering, cleaning, grounds maintenance

and related professional services• training for educational and administrative staff and senior managers• non-educational professional services, such as payroll, finance, legal and personnel

services. Banking, insurance, marketing, consultancy and fund raising are also services some educational organisations now seek.

Public sector providers exist for many non-educational services (e.g. personnel, payroll,finance, property services). Established private sector providers may also be available,although their experience of schools may be limited.


9.3 Responsibility for purchasing Formal responsibility for purchasing decisions in schools lies with the Governing Body.However, decisions about different types of services may be delegated to sub-committees, Headteachers, senior managers in the schools and Heads of Department. More and more,purchasing decisions will involve virtually all members of staff. Some Governing Bodies willbe directly involved in the decision-making process for particular services, especially in fieldsin which they have particular knowledge. 9.4 Process for purchasing In any organisation, there is never enough money to do all the things which may be desired.In schools, the priority will always be maximising the resources dedicated to the education ofchildren. Getting value for money is, therefore, always paramount. Having clear and rigorousprocesses for purchasing provides the platform for the school becoming an effectivepurchaser. The key elements include: • organisation, in terms of defining responsibilities, processes and procedures• having a purchasing strategy linked to the aims and objectives of the organisation• specification – determining what exactly it is you want to buy• choosing the right supplier• effective day-to-day contact with suppliers• monitoring the supply of goods and services• regularly reviewing purchasing decisions• maintaining a Contract Register (see Appendix 1 to HCC’s Contract Regulations) Contract Regulations are maintained in the Document Library on Connex under CorporateContracts. A hard copy is available from County Supplies and Contract Services (see contactsfor this Section). Experience has shown that schools very quickly get to understand services. Over time theybecome discerning purchasers of the whole range of services with which they were previouslyunfamiliar. Further guidance on purchasing is provided in appendices to this Section. See Appendix APurchasing Conditions and Guidelines, Appendix B Code of Purchasing Practice andAppendix D Purchasing Electricity and Gas. The guidelines “Best Practice in Procurement”,mentioned in Contract Regulations, are available from County Supplies and Contract Services.


9.5 Organisation

Any institution must organise itself for its purchasing role. The sophistication of anyarrangements will obviously differ according to the size and culture of individual schools, butthe principles should be the same. For schools facing a wider range of purchasing decisions, it is crucial that they organisethemselves effectively to make a lot of decisions in a very short space of time. They must alsoconsider how contracts and suppliers are monitored and reviewed. This may be difficultwhere time is short and at a time when there are also so many changes in the educational activities of the school. In schools, and particularly primary schools, much of the burden will fall on the Headteacherand the Chair of Governors. The critical organisational issue is to sort out the responsibilitiesand the degree of involvement of governors, the Headteacher and the staff. Much can beachieved by effective delegation of the purchasing function. In many instances, it will beunreasonable for the Headteacher to be leading in all areas in which purchasing decisions needto be made, although the Headteacher must play a key co-ordinating role. In larger schools itis easier to distribute purchasing responsibilities within set parameters. Whichever way the purchasing role is organised, a clear framework for decision making isprovided by a purchasing strategy. 9.6 Purchasing strategy

Apart from the natural desire always to purchase good quality, value-for-money goods andservices, all schools are subject to either internal or external audit inspection, or both.

Arrangements for inspecting schools include requirements for inspectors to comment on theefficient and effective use of resources in schools. A key element in achieving these aims andrequirements is to have a clear purchasing strategy. This must rigorously analyse the need forgoods and services in relation to the organisation's aims and priorities. For example, all schools have review and development plans which state the aims, policies,values and development priorities of the school. The achievement of the plan depends ongovernors, Headteacher, senior managers and staff working together but, as with everything inthis world, success also depends on available resources – in this case the school's budget. It iscrucial, therefore, that purchasing plans fit hand in glove with the school's review anddevelopment plans and the available budget. To achieve this you may wish: • to draw up a list of available services• wherever possible, to break down discrete elements of the service which could be

purchased separately


• to develop a set of criteria, which will help decide which goods and services areessential, desirable and optional within available resources; these could be linked

• closely to the school's aims, or be related to the risk associated with not buying aparticular service

• if the range of decisions to be made is too broad, to select the areas you most want toscrutinise in terms of the level, quality and provider of the service.

Some services naturally fall into the “essential” category without much reference to thecriteria. For example, every organisation has to pay its employees, so a payroll service or in-housefunction is essential. It should be noted that even for services which are clearly essential,there are still usually different levels of services available. 9.7 Specifications To define a specification merely as a statement of what you want to buy over-simplifies theprocess of defining requirements. It may be simple for goods and general supplies, but it ismuch more difficult to do where the provision of services is involved. But a clearspecification is essential in order: • to make clear what it is you want to buy in terms of the level of service and the

standard to which it should be delivered• to ensure that, where a service is required to meet statutory duties, this actually

happens• to make comparisons between alternative providers on a like-for-like basis• to provide a basis for effective monitoring of performance. A good specification will define the purpose of the purchase and the ‘output’ or result that iswanted – it will not use ‘brand’ names or be unnecessarily specific. In many instances, a school seeks to buy services just because it does not have the requisiteexpertise, and it will feel vulnerable to being exploited. Under these circumstances it isdifficult for schools to prepare a specification starting from a blank sheet of paper. Professional advice may well be available within the Authority; indeed, examples of similarspecifications may already exist at other schools. Failing this, it can be helpful to seekguidance from suppliers in the particular sphere, but there are dangers. Most good supplierswill explain the range of services available, but the school must make it clear that thisguidance is sought without commitment. Wherever possible, advice should be obtained frommore than one source. 9.8 Choosing the provider


There is a range of ways in which a school may wish to meet its needs:• in-house provision - doing it yourself• using a private sector provider• using the Authority or another public sector provider. The number of available providers will also vary service by service. There may be manymore alternative providers in some non-educational services than in specific educationalservices, but this will continue to change over time. Each of the options is also overlaid by the possibility of schools organising themselves intoconsortia. These consortia may benefit from economies of scale, increasing purchasing power to provide services from within to other consortium members. This may be a particularlyeffective approach for primary schools. Doing it yourself may have limited appeal to schools. This is especially true for primaryschools, which may not have expertise in some of the non-educational services, and where itwould be too expensive to establish and maintain such expertise in the school. For instance,running an in-house payroll function for a school may be both expensive and fraught withdifficulty. Many will decide the headache is too great. One temptation in schools that have particular professionals on their Governing Bodies, is fora governor to provide services to the school at no charge, thus saving the school money. Thisis possible, but it must be recognised that even where governors make a genuine offer to dothis, they are volunteers; they are likely to have their own jobs, and they may leave theGoverning Body for a variety of reasons at any time. Acting in this way may also distract keygovernors from their important primary role. Governors must also be careful where they have potential conflicts of interest. This may ariseif the school is in need of a service and one of the potential providers is a company for whichthe governor works. Key considerations in choosing providers include the following. • What is the track record of the provider?• Who are the provider's main customers and is it possible to obtain a customer

reference?• Has the provider experience of education sector customers?• Is the price so low that it would indicate that the provider was loss-leading?• Is the provider reasonably sound financially so that continuity of service can be

assured?• How flexible is the provider to possible changes in the school's need?• Have they agreed to accept the Authority’s Contract Conditions?• Does the provider have, and maintain acceptable levels (minimum £5m) of public

liability, employers’ liability and professional indemnity insurance?


9.9 Delivery and monitoring In the simplest example, a signature on a supplier’s delivery note entitles the supplier topayment – so it is important to check that the delivery was correct. More complex contractsmust be monitored during the year as well as reviewing purchasing decisions annually orwhen they are due for renewal. The benefits lie in: • gathering information about performance• providing early warning signals of things going wrong.• effective day-to-day liaison with suppliers. At its simplest, the purchaser must tell the

supplier they are unhappy about some aspect of the service, to give the supplier anopportunity to get it right. But day-to-day liaison also allows the supplier to respond tochanging needs and to listen to customers who have ideas about how the service mightbe improved.

In designing monitoring arrangements, it is important to recognise that the formal purchasermay not be the ultimate recipient of the service. For example, in a school the Headteacher ora Governing Body may formally agree a purchase, but may not be closely involved in thedelivery of a particular service. So monitoring and day-to-day liaison needs to be made theresponsibility of people directly affected by the services or goods being purchased. 9.10 Review As well as continuously monitoring, it is always worth standing back and reviewing allaspects of the purchasing process, either across all services or by focusing on certain keyareas. This should cover the following. • Service needs

– Was the purchasing strategy right? – Have circumstances changed to alter the plan?

• Specification

– Was the level of service specified well enough? – Were there areas of misunderstanding with the provider about what you

expected for your money? – How can the specification be improved? – Is the level of service still right or is a higher or lower level of service required? – Was the standard of service expressed adequately for both the purchaser and

the provider?


• Choice of provider

– Did the supplier meet the specification both in level and standard of service? – Have new providers emerged which are worth investigating? – How did the supplier respond to queries and changing circumstances? – How well did the supplier understand you as a customer? – How did the supplier respond to complaints, and how quickly?

LEASING OF EQUIPMENT 9.11 Introduction Leasing is becoming an increasingly attractive option for schools who need to spread expenditure onmajor assets over an extended period. It is, however, an area where it is easy to make mistakes, andthese can prove very costly, given that the repercussions last the length of the lease contract. There may also be a detrimental effect upon the finances of the Authority if thewrong type of lease is taken up. 9.12 Definition of a 'Lease' A lease may be defined as a legally binding arrangement whereby a lessor puts plant orequipment at the disposal of a lessee for an agreed period, after which the subject of the leasereturns fully to the ownership of the lessor (owner). The cost of a lease will normally take the form of a credit arrangement or a rental payment. 9.13 Types of lease There are numerous types of leasing arrangements including the following. • Lease purchase – This is not a true lease, but a hire purchase agreement. In effect, the

equipment is bought over an agreed period by the payment of regular amounts. At theend of the payment period the equipment is owned by the lessee. Generally noupgrading is possible in this type of lease.

• Lease rental (Finance lease) – This is similar to lease purchase but the payments are

generally less, as the ownership of the equipment remains with the leasing company.The equipment can usually be retained at the end of the period by the payment of a'peppercorn' rent – typically an annual payment equivalent to one quarterly payment.


• Operating lease – This form of lease is similar to lease rental, except that at the end ofthe lease period the equipment can only be retained at a genuine market value rent. Inother words, it cannot be leased at a peppercorn rent.

9.14 Controls on leases A local authority has strict controls placed on it, concerning the level of its capitalexpenditure, through the Local Authorities (Capital Finance) Regulations 1997. Under theseRegulations non-exempt leases are treated as credit arrangements. In those circumstances, theCounty Council either loses borrowing approval or must make a provision for the fullcapitalised value of payments made under the lease agreement. The only type of lease recognised within the regulations as being exempt from theGovernment's capital controls is an Operating Lease. The use of non-exempt leases as a method of acquiring capital items will have a detrimentaleffect upon the County Council's capacity for capital financing and hence its capitalprogramme. The Governing Body must therefore exercise great care in respect of the leasetype to be used. 9.15 Operating leases For all substantial acquisitions, and for most practical purposes in the information technologyfield, only an operating lease should be considered as being available. Such leases must meet all the following criteria: • Ownership must remain with the lessor (leasing company) and not with the lessee (the

County Council). This is always clearly stated within the leasing agreement. • The lessee (the County Council) cannot acquire ownership of, or realise the value of,

the item either directly or indirectly at the end of the lease period. Leases generallystate quite clearly that leased items must be returned to the lessor. Advice should besought concerning any other arrangement.

• If an extension of the lease period is agreed, the payments relating to the extension

must be based upon the genuine market value of the item at the time (i.e. not apeppercorn rate). This is not usually spelt out in the lease, and there are oftencomplicated proposals for upgrading or extension. Advice should be sought beforeconsidering these options. Please refer to the contacts list for this Section.

The residual value of the leased equipment at the end of the lease must be a minimumof 10% of the original value. An assessment of the value must be made prior to thecommencement of the lease. This is rarely stated within the lease agreement, and it isthe responsibility of the County Council to ensure that a genuine assessment does


indicate this level of residual value. Clearly this is an area where a best estimate has tobe made, and advice and guidance should be sought before proceeding with any leaseagreement.

This process is also applicable to any extension of the lease based upon a valuation ofmarket value at the time of extension. The lessor must carry all the risk of a minimum10% residual value not being realised. There must be no changes in the lease whichtransfer such risk or responsibility to the lessee.

Leases which fail to meet the above criteria will be regarded as finance leases and would haveto be counted against the County Council's permitted total capital expenditure limits. Toavoid this situation the Governing Body must seek the advice of the Finance Director.

9.16 Lease costs

Clearly the purpose of any lease is to spread the cost of major purchases over an extendedperiod. A lease will include a charge for interest, and this means that the lease may costconsiderably more than an outright purchase cost. An operating lease can be beneficialbecause the amount financed is reduced by the residual value; i.e. you do not pay the total costof the item leased.

Lease costs are generally quoted on the basis of 'per £1,000 financed', and rates are generallyquoted either annually in advance or quarterly in advance. Annual rates are slightly lowerthan for quarterly payments. The cost of leasing is subject to variation in interest rates overthe life of the lease, if the lease agreed is a variable rate one. Leases at fixed interest rates arealso available which would not vary with changes in interest rates.

9.17 Lease arrangements through County Supplies

Schools contemplating entering into a lease arrangement should contact County Supplies whocan offer advantageous terms. See contacts list for this Section. Moreover, by taking up anoperating lease through this route there is no further requirement to clear this through theSchool Funding Unit.

9.18 Schools Loan Scheme

Schools within the pooled banking arrangements may wish to consider, as an alternative to aleasing arrangement, taking out a loan from the Authority for the purchase of certainequipment e.g. computer networks. See Part IV, Section 8, Appendix B and the contacts listfor this Section.


9.19 Photocopier Contracts

Advice issued by County Supplies and Contract Services is reproduced in Appendix C to thisSection.

BEST VALUE

9.20 Best Value

Best value requires local authorities to seek continuous improvement in the way theirfunctions are exercised, having regard to economy, efficiency and effectiveness. As part ofthis Local Authorities are required to carry out a regular programme of review of theirfunctions which should:

• Challenge why, how and by whom a service is provided• Compare performance with that of other authorities• Consult with service users, the local community etc.• use fair Competition, wherever practicable, to secure efficient and effective services.

These ‘four Cs’ are referred to as the principles of best value.

9.21 Applicability by schools

Schools are not covered directly by Best Value legislation. However, schools do spenddirectly a large amount of the financial resource, and the LEA’s Schemes for FinancingSchools requires schools to demonstrate that they are following best value principles in theirspending decisions. Governing bodies are required to submit, with their annual budget plans,a statement setting out the steps they will take to ensure that expenditure reflects the principlesof best practice. OFSTED have developed their school inspection framework to take accountof the Best Value agenda.

9.22 Management implications

Headteachers should consider the following main features of best value in schools:

• the existence of a programme of performance review which will aim for continualimprovement. School development plans and post-inspection action plans can bedeveloped to satisfy the requirements for review

• reviews should follow the principles of the ‘four Cs’:


- challenging why, how and by whom a service is provided- comparing performance against other schools, and using benchmarking

data to challenge spending decisions- using mechanisms to consult all stakeholders, especially parents and

pupils, such as in relation to new school policies, for instance homeschool contracts

- using competition as a means of securing efficient and effective servicesthrough the use of tenders and quotations

• the development of a framework of performance indicators and targets which willprovide a clear practical expression of a school’s performance, taking nationalrequirements into account

• the inclusion in school development plans of:

- a summary of objectives and strategy for the future- forward targets on an annual and longer-term basis- description of the means by which the performance targets will be

achieved- a report on current performance- a statement on both the short and long term resource implications of

school priorities

• internal and external audit to ensure performance information is scrutinised.

9.23 Best Value guides

The Authority is publishing a series of guides for Hertfordshire schools offering practicaladvice on how to secure value of money within schools.

Four guides have been issued and can be downloaded from the School Funding Unit website(see contacts to this Section): Good Value in Purchasing and Contracting, April 2000, GoodValue in Purchasing Telecommunications, March 2001 and Purchasing ICT, July 2001, GoodValue in Purchasing Payroll, March 2003.

Please refer to the contact list for this Section for further information on publication of futureguides.


APPENDIX A PURCHASING CONDITIONS AND GUIDELINES

1. General principles

Circular 9/88 from the then Department of Education and Science set out in paragraph 4.41 –4.42 (Financial Regulations and Auditing) the general conditions applicable to the purchasingof goods and services by schools with delegated budgets. As a principle, the Secretary ofState will expect such arrangements to observe the right balance between giving schools thefreedom necessary to exercise their delegated authority, and maintaining due regard to theproper accountability for and control over the expenditure of public funds.

In this context, a series of general rules and guidelines concerning purchasing arrangementshave been drawn up, which set out both to meet the provisions of the Circular and to drawattention to basic principles and codes of practice recommended by the Authority.

In the first instance, the Authority recognises and supports the concept of organised centralpurchasing of goods and services. It recommends that Governing Bodies should make thefullest use of the present facilities available through County Supplies and Contract Services(CSCS). The service provided includes the purchase of goods and services and thedissemination of advice on matters concerned with procurement and purchasing regulations.

The purchasing power of CSCS is enhanced by membership of the largest Local Authoritypurchasing Consortium (the Central Buying Consortium) which involves the collatedrequirements of 17 local authorities.

The Authority is concerned that the practice adopted by schools with delegated budgetsshould reflect a desire to obtain value for money and a need to observe propriety in dealingswith commercial organisations. Governing Bodies are recommended to have due regard to theCode of Purchasing Practice set out in Appendix B of this Section.

2. Methods of purchasing

Governors and Headteachers are required to comply with the following arrangements forpurchasing goods and services, which incorporate appropriate provisions of the CountyCouncil's Contract Regulations.


Major purchases

The County Council's Contract Regulations require that any purchase of a single item ofgoods, services or works which will exceed £10,000 over the term of the contract, or 4 years ifthe term is longer, should be subject to formal tender procedures. This requirement will alsohave effect if there is an aggregate commitment, above this level of expenditure, on anyparticular category of purchase or expenditure with any single supplier.

The conduct of competitive exercises is laid down within the County Council’s ContractRegulations.

The Regulations are set in the context of purchases made by the County Council'sdepartments, but the principles apply to schools. The concept of a separation of dutiesbetween a 'Chief Officer' (member of the Governing Body), a Contracting Officer and aContract Manager nominated by the 'Chief Officer', can be readily translated into the school'sprocedure.

The recommended delegations should enable sufficient flexibility for any purpose. Guidlinesare available in respect of these procedures, either in the form of a publication, GuidelinesBest Practice in Procurement available in the document library on Connex (under CorporateContracts), or from County Supplies and Contract Services 01707 281741 or by seeking directadvice from the Head of Purchasing and Supply at CSCS 01707 281700.

Minor purchases

For minor purchases of less than £10,000, (either one-off or as an aggregated purchase)Contracting Officers should follow ‘Departmental Rules’(i.e. the procedures that may beincluded in the school’s schedule of delegation or similar document). Where ‘DepartmentalRules’ have not been established and agreed, the ‘Default Process’ outlined in Best Practice inProcurement should be adopted. This simply requires:

• that the 'product' is specified in writing• that suppliers are identified who offer the product or service• that the best price or rate and conditions are negotiated, and that these are adequately

recorded, with at least two written quotations for purchases between £1,000 - £10,000• that provisions for the adjustment in price or any special conditions are agreed and

recorded in writing Exceptionally, a single supplier may be identified, where the product is required so urgentlythat a competitive exercise cannot be followed. This holds good provided that the reason forthe urgency is not within the control of the Governing Body. It should be noted that these provisions do not apply to single or aggregate purchases of anyvalue made through County Supplies and Contract Services or to purchases made throughCSCS contracts or those of other County Council departments. In these cases it is deemedthat a suitable competitive exercise will have been carried out on behalf of purchasers.


Some orders must be referred either to the County Secretary or to the Head of CountySupplies and Contract Services (for items in common use). For example, orders for goods orservices in excess of a current figure of £154,477 (for review 1 January 2004) across the lifeof the contract, or over four years, whichever is the lesser period, and which may be subject tothe provisions of European Procurement Directives. This upper limit is reviewed at leastevery two years. The current ceiling will always be set out in paragraph C4 of the ContractRegulations. Where orders are proposed based upon the requirements of more than one school or on behalfof groups of establishments, the value of the purchase for the purpose of these regulationsshall be deemed to be the total value of the combined purchased requirement. Governors are advised that CSCS has a wide experience of seeking tenders and competitivequotations for all manner of goods and services. The assistance of CSCS staff in complyingwith the requirements set out in this Appendix is available to all maintained schools. CSCScan conduct any tender exercise required under these regulations on behalf of governors; andthe use of CSCS for any purchase by schools will be accepted as evidence that therequirements of these guidelines have been complied with.


APPENDIX B CODE OF PURCHASING PRACTICE

Precepts Those persons with delegated authority to manage funds on behalf of the Authority shallcomply in all respects with the appropriate regulations concerning the purchase of goods andservices. They: • shall not use their delegated powers or office for personal gain and shall maintain an

unimpeachable standard of integrity in all their business relationships, both inside andoutside the organisation for which they have delegated responsibility, or within whichthey are employed

• shall foster the highest possible standards of competence in respect of purchasingmatters among those for whom they are responsible, including the need to askprofessional advice where appropriate

• shall reject any business practice which might reasonably be deemed improper. In applying these precepts, governors and others to whom authority is delegated should followthe guidance set out below. Declaration of interest

Any personal interest should be declared which may impinge or might reasonably be deemedby others to impinge on his or her impartiality in any matter relevant to his or her duties inrespect of the purchase of goods or services. Confidentiality and accuracy of information The confidentiality of commercial information received in the course of duty should berespected and should never be used for personal gain. Information given in the course of dutyshould be true and fair and never designed to mislead. Competition While bearing in mind the advantages to the school concerned of maintaining a continuingrelationship with a supplier, any arrangement which might, in the long term, prevent theeffective operation of fair competition should be avoided.


Business gifts Business gifts, other than items of very small intrinsic value such as business diaries orcalendars, should not be accepted. Hospitality It is a normal courtesy of a business relationship that modest hospitality may be offered.However, the essential ingredient in dealing with such offers is openness on behalf of therecipient. This is a matter for the judgement of the individual concerned, but it isrecommended that such occurrences be recorded in an appropriate document kept by eachGoverning Body. The recipient should not allow himself or herself to reach a positionwhereby he or she might be or might be deemed by others to be influenced in the making of abusiness decision as a consequence of accepting such hospitality. In all matters of doubt, advice should be sought from an appropriate senior officer within theCounty Council. Legal or binding agreements In all cases where legal or binding agreements or contracts are required in the execution of apurchase agreement, advice concerning the extent of the commitment should be sought fromthe Education Solicitor, before signature. Do remember that a legally binding agreement can be created outside the tendering / quotationprocess – a contract does not need to be in writing, if the necessary components are there itwill be legally enforceable. Governors, or persons delegated by governors, are advised that many agreements containhidden commitments in respect of forward pricing, notice of termination, etc. The CountySecretary and County Supplies and Contract Services can provide advice. Complex agreements can be found in every market place, and particular concerns includeagreements relating to office equipment, photocopiers, vending or hygiene equipment, mobilephones and energy. Standards Governors, or persons delegated by governors, should ensure that appropriate standards (e.g.ISO and BS) are used in the specification and production of goods and delivery of servicesthat they are arranging to purchase. Care should be exercised in ensuring that conditions ofcontract comply with appropriate legislation and Health and Safety rules.


Control of stock A record of all inventories should be maintained including the receipt of stock, stock held andstock issued or written off. It is recommended that regular checks are made to ensureaccuracy and the effective use of funds, and for the prevention of over commitment. Commitment Any commitment entered into which is not the subject of a contract between the establishmentand the supplier should nevertheless be honoured wherever practical. Of particular concernare commitments to contract arrangements provided by the Authority, where the continuedviability of such arrangements in respect of all users may be affected by unexpectedfluctuations in participation. Ordering practice All purchases of goods or services should be the subject of an appropriate order authorised inthe proper manner and only by an accepted signatory. Any terms, conditions or prices agreedin respect of an order should be clearly shown within the order at the time of authorisation. Written quotations It is good practice to obtain a written quotation in respect of any purchase or to confirm, in thecase of a listed price, that such a price continues to be current. It is desirable that anycommitment over a period relating to the purchase of goods or services should beaccompanied by clear and calculable methods of reviewing price levels. Late offers Any invitation to suppliers to provide quotations should carry a closing date for offers whichis applicable to all those asked to quote. Offers received after the stipulated date should berejected unless there are overriding circumstances; then appropriate advice should be soughtconcerning the manner in which the matter should be reviewed. The Head of County Suppliesand Contract Services is able to assist with such difficulties. Post-tender amendment No amendment to a tender or competitive quotation shall be permitted unless the amendment,if made to all the other offers, would not make any other offer the best.


APPENDIX C PHOTOCOPIER CONTRACTS

The following represents advice issued by County Supplies. a. You may find yourself under great pressure from photocopier suppliers offering to

change your photocopier at what appear to be highly advantageous terms. b. Beware such approaches - all too often such deals, carefully presented, seem

unbeatable but turn out to be heavily overpriced. It proves to be impossible toextricate yourself without unbelievably high cost penalties.

c. If you are approached by any photocopier company offering a deal on your

photocopier, please take advice. There are copier companies claiming to have theapproval of County Supplies and Contract Services. However, unless they are listedbelow, do not believe them without checking first. Some sales personnel employed bythese companies are totally unscrupulous and their only interest is in making as muchmoney out of you as they can.

d. If you do have such an approach we hope you find the following advice helpful.

• Do not sign anything, or even acknowledge that you wish to see a trialmachine. Cases have arisen where a salesman has obtained a signature on ablank form and then filled in what turns out to be a contract agreement at highlydisadvantageous terms. Because it has a valid signature, it is enforceable.

• Do not allow your existing machine to be taken away without ensuring that you

know exactly what the terms are.

• Do check the length of any proposed agreement. No agreement should be formore than five years.

• Be wary of contracts that are priced for copy cost only, especially if they have a

very high minimum monthly usage. In most schools copiers are only used for10 months of the year. Be sure any minimum quantity takes this into account.

• Check all small print carefully, or better still ask us to check it. Some contracts

have clauses that allow the price to be increased at 15% p.a. and they areenforced. This means that at the end of a five-year agreement, you will bepaying double the original figure.

• Check that the agreement includes all consumables. Often an agreement willlook good value; only later do you learn that you have to pay for all tonersupplies at vastly inflated prices!


• Beware particularly of salesmen who offer to install a copier and pay off anexisting lease, all at better rates than you are used to – there is always a catch tothis. All photocopier agreements consist of two elements – the cost of serviceand the cost of the machine. If a salesman offers to buy out your existingagreement he will have to pay off the lease company who financed youroriginal deal at punitive rates. This cost will be included in the figures hequotes you. Treat any such offers with deep suspicion.

• Beware of being offered too small a machine for the job to be done. It is a

common ploy to offer a smaller machine. The rates appear cheap and aftersome time it will not cope with the demand. The salesman will then talk youinto another agreement which will tie you in to a further five years. With aclever salesman you can be caught indefinitely.

• Make sure you retain a copy of any offer. Any reprographic company worth its

salt will be only too pleased to leave their contracts and proposals for CountySupplies to look at. Beware of those salesmen who will not.

• All the above are common occurrences. We are constantly hearing of schools

who are involved in photocopier contracts sold to them by unscrupuloussalesmen for which the cost of release is exorbitant. Do not be the next; checkwith us before you sign.

List of Approved Suppliers (valid to September 2004):

• RICOH• Konika• Canon• Xerox

Hertfordshire County Supplies and Contract Services and the Central Buying Consortiumoffer photocopiers at very competitive rates. Their contract offers protection from all forms ofsharp practice and avoids confrontation with disreputable dealers and avaricious financecompanies. We exist to provide unbiased advice and we are happy to spend time obtaining the bestpossible deal for you. This will cost you nothing and our total loyalty is to you. The benefitsof our arrangements include:

• low cost• no penalty for up-grading or down-grading• there is no contract to sign


• we offer a four-hour average response time• the deal involves service, parts, labour, callout and black toner• the copiers conform to EEC Environmental levels• CoSHH data provided at installation

Note, however, that coloured toner and paper is not included

For further information and advice, please contact Eric Wilson on 01707 281728.


APPENDIX D PURCHASING OF ELECTRICITY AND GAS

The following represents advice issued by County Supplies & Contract Services.

1. The Deregulated Market

a. During the 1990s the electricity and gas supply markets were deregulated. Thismeans that customers have a choice in selecting who supplies them withelectricity and gas.

b. The market place is constantly changing and there is a bewildering range of tariffson offer. Schools need to be aware that some suppliers and energy brokers adoptquestionable selling techniques that can result in long term contracts with dubiousprice escalation clauses and hefty contract termination clauses.

c. If you are approached by anyone claiming to save money on your electricity andgas bills please take independent expert advice. ‘Door to Door’ sales agents arecommission based and there are, unfortunately, a number of these that willpromise the earth in order to get a signature on a contract, and therefore theircommission.

d. If you do have such an approach we hope that you find the following advicehelpful. If you have any questions or concerns please contact us.

Do not sign anything, unless you are willing to enter a contract. These agentswill use many slick phrases in an attempt to convince you to sign. We haveincluded below, some of the most common.

• “Just sign here for more information”This will NOT be the case. It is very likely that you will be signing a contract.Once they have your signature they can then complete the contract and youwill not be able to refute it, as there will be a valid signature.

• “I am here to read your meter” and then “Please sign here to say that Ihave been”The representative of the company responsible for reading your meters, willhave identification with them, which will include a number that you can call toconfirm their identity. They will have an electronic device that they programthe readings into and they will NOT ask you to sign confirming their visit. Thefact that they have recorded your reading is proof enough that they have been.

• “You can get out of the contract at anytime”


This will not be true. All suppliers have a clause in their contract terms andconditions that states there is a penalty fee for early termination of the contract.The amount varies, but is between a third and a half of the cost of yourelectricity and gas for the remainder of the contract period, in addition to theactual bills from you new supplier. I.e. if you spend £1,200 per annum onelectricity and sign for a five year contract the cost for the period of thecontract would be £6,000. If you try to terminate the contract after the firstyear the penalty fee could be £2,400. You would also have the bills from thenew supplier.

• “You can change your mind within 7 to 28 days and cancel the contract”This ONLY applies to a domestic contract where there is a regulatoryrequirement to have a minimum ‘Cooling Off Period’ of seven days. There isNO ‘Cooling Off Period’ for commercial contracts. Once you have signed youare stuck.

Please remember that although the salesperson may be representing aparticular company it does not mean that they are authorised to amend anyterms of the contract. Suppliers have thousands of contracts coming in weeklyand will not check to see if there are any amendments. The paperwork issued to‘Door to Door’ salespeople is standard and cannot be amended by the salesperson.Any changes made are only an attempt to make their prices look cheaper whichmeans that they are not. Examples of changes are:

• including VAT• only charging the day rate, and not all the relevant unit rates• quoting prices that are not applicable to your site or area• using fictitious prices that are not backed up by supplier issued sales literature• deleting the early termination clause from the terms and conditions.

If you are approached then please do not hesitate to use our services to ensure thatyou get a good deal. An honest sales person will be willing to leave a copy of thecompleted, but unsigned, contract for you to reflect over and then call back toanswer any questions and pick up the signed agreement.

2. CSCS Energy Supply Contracts

CSCS, in conjunction with fourteen other local authorities in the Central BuyingConsortium, has a specialist energy buying section that offers competitivelypriced and properly written electricity and gas contracts to schools throughoutHertfordshire. All billing is checked and paid by the County Council’s accountspayable agent (ITNET) who then pass appropriate charges to schools via thetraded statement system. Energy consumption data is monitored by the CountyCouncil’s Energy Manager who will investigate any unusual variations in demandand advise schools accordingly.


For further information on Electricity and Gas supply contracts, please contactChris Llewellyn on 01707 281808 or Phil Godfrey on 01707 281712.

3. Climate Change Levy

The Climate Change Levy (CCL) was introduced in April 2001 and is applied to energybills at the following rates:

Electricity 0.43 of a penny per kilowatt hourGas: 0.15 of a penny per kilowatt hour

However, the following schools are exempt:

FoundationVoluntarily aidedVoluntary controlled

In order to ensure that they are not charged CCL, schools in the above categoriesmust complete a CCL exemption form. This is available from Peter Hudson ofthe School Funding Unit on 01992 555812.



TABLE OF CONTENTS

Page

CONTACTS 256

10.1 Introduction 25810.2 Orders for goods and services 25810.3 Ordering via the Internet 26010.4 Payment of accounts 26010.5 Payment of accounts via ITNET Accounts Payable 26110.6 Payment of Headteachers’ expenses 26110.7 Recording the transactions in the accounts 26210.8 Separation of duties 262

AppendixA Sample proforma invoice 264Appendix B Guidance notes on completion of A529 and A14 forms 266



CONTACTS

General advice Lyn Stainton 01992 555946School Funding Unit

Separation of duties issues Internal Audit Helpline 01992 55531201992 555322

Official order forms and County Supplies Department 01707 281800finance stationery

ITNET Accounts Eileen Rice 01992 555356Payable ITNET Accounts

Payable

Authorised Signatory Margaret Dewell 01992 555446forms and Schools Listing ITNET Payroll

Services



10.1 Introduction

Once a school has made its purchasing decision and an order is placed, this commits it toexpenditure against its approved budget. It is important, therefore, that all orders are properlyauthorised and that procedures ensure that the school only receives the goods and serviceswhich it has ordered, and that payment is made only for items that have been received.

Part IV, Section 9 provides guidance on purchasing practice and strategies.

The regulations to this Section are designed to provide internal controls within a school overorders which commit expenditure against the school's budget and the subsequent payment ofinvoices against those orders.

The key to minimising the chance of error, omission and fraud is a sensible separation ofduties among school staff over the ordering and payment process. The extent to which this ispossible and reasonable will depend on the size of the school. Subsection 10.8 gives details ofa model for separation of duties.

10.2 Orders for goods and services

Key points to remember are:

• always use the school’s pre-numbered official order forms• resources must be available to meet expenditure• order must be signed and authorised by a member of staff who has the delegated power

to do so• County Supplies orders must be coded, see below. Official serially numbered order forms (A223R) are available from County Supplies. Alternatively, schools may use order forms generated from their local accounting system.Access and distribution of order forms should be controlled, and should only involve staffwith delegated powers. Further guidance about controlled finance stationery can be found inPart IV, Section 4 of this Handbook. When completing an official order form, whether it is an A223R or any other, there are anumber of procedures that must be followed.


a. Clearly mark the name and address of the supplier to whom the order is to besent.

b. Ensure that the completed order contains a delivery address for the goods, and

an invoice address. If these are the same then it should be stated on the form.Both addresses should include contact names, to ensure that both the goodsand the invoice reach the correct destination and can be dealt with quickly.

c. Ensure that all goods required are itemised on the order form and that the

quantity is correctly specified. Pay careful attention to suppliers' cataloguesfor the correct units of quantity. Rule off below the last item ordered toprevent subsequent alteration of the order.

d. Complete the expenditure code section on the order form for your own

information and to aid the budget monitoring process. e. For orders to County Supplies, the school's cost centre and account code must

be entered on the A223R. See Appendix B to this Section for guidance oncoding financial stationery.

f. The order must be signed and authorised by a member of staff with delegated

power to do so, ideally the budget holder. g. The top copy of the order is to be sent to the supplier and the duplicate copy

retained within the order book. Orders should be used sequentially andduplicates must not be removed from the order book.

h. Details of the delivery should be recorded on the order highlighting any

discrepancies. i. If an order has been given over the telephone, a written order should be sent

immediately (see Financial Regulations to Section 9, Purchasing Strategies,Leasing and Best Value). This order must be marked 'Confirmation Order' toensure that delivery is not duplicated.

j. When ordering from external suppliers remember to ask whether VAT and

carriage have been included in the price. See Part IV, Section 12 ValueAdded Tax, for treatment of VAT on payment of the invoice. Some suppliersmay offer discounts to the County Council so remember to check on this.

To enhance budgetary control, it is wise to record the estimated cost of orders placedas committed expenditure against the appropriate budget allocation. This way theyfeature in any subsequent budget monitoring reports. On receipt of goods and services, schools will receive either a delivery note andsubsequently an invoice or just an invoice. The school should check that the goodsand services received


are as ordered. Delivery notes and invoices should be cross-referenced to the copyorder. Completed orders should be clearly designated as such, so that part completeor outstanding orders can be readily identified. 10.3 Ordering via the Internet With the rapid growth of the Internet and increased emphasis on electronic datainterchange for schools, use of the Internet is becoming a feasible option for thepurchasing of goods. Before embarking on purchasing goods on-line, the school should ensure that a policyis established clearly setting out appropriate use of the Internet for purchasing goods.The policy should be approved by the Governing Body and should include details of: • members of staff with delegated authority to place orders via the Internet

• limitation for monetary value, volume and frequency of orders

• list of approved suppliers and credit limits

• procedure for placing orders, including documentation required, authorisationprocess and approved methods of payment.

Wherever possible, schools should set up accounts with approved suppliers so thatpayment of goods can be made against invoices subsequently issued. This willsafeguard the school against fraud and loss for non-delivery of goods, ensure thatappropriate financial records are maintained and enable the school to recover VAT,where appropriate.

If this is not possible, then, at the point of order, a pro forma invoice should beproduced and authorised by the person with delegated authority. In this circumstance,VAT will not be recoverable since an official VAT invoice is not provided by thesupplier. Where payment must be made at the point of order, then the school shouldensure that they hold a National Westminster Business Card. Further details aboutbusiness cards are published in Part IV, Section 6 to this Handbook. Schools shouldbe careful to avoid the use of staff member credit cards, to safeguard against potentialproblems including liability, guarantees and issues over ownership of the goods. 10.4 Payment of accounts Key points to remember are: • check the goods or services received against original orders• match the order (and, where available, the delivery documentation for the

goods or services) against the original invoice


• check that prices which include discounts, and all the arithmetic, are correct• ensure that payment is sanctioned by the approved member of staff• ensure that the cheque is made payable to the supplier shown on the invoice.

Special care should be exercised where the school is asked to make thecheque payable to an alternate payee, to ensure that the payment islegitimate.

The internal checks which should be carried out on invoices are important, to verifythat the correct goods and services have been received and the sum due to the supplieris correct. Checks should be completed prior to the preparation of a cheque payment.Authorised cheque signatories should ensure such checks have been carried outbefore signing a payment. This can be achieved by a pre-printed slip or a stamp withthe relevant internal checks listed on it.

Payments should not be made against copy invoices or account statements.

Similar internal checks should be carried out for all direct debit charges. Direct debitcharges, for example, charges on the HCC monthly direct debit report, should bechecked for accuracy and any discrepancies investigated. The person responsible forcarrying out these duties should record any follow-up work required and sign thereport to verify that the check has taken place.

10.5 Payment of accounts via ITNET Accounts Payable

All invoices submitted to ITNET Accounts Payable for payment must beaccompanied by an A529 coding slip and must also be listed on an A14 form. Theseforms document the school’s approval and authorisation of invoices processed forpayment.

Guidance on completion of A529s and A14s and sample copies of these forms areprovided on Appendix B to this Section.

Schools must register the signatures of authorised members of staff that havedelegated responsibility for the authorisation of payments on behalf of the school.ITNET carry out an annual review of authorised signatories. However, schoolsshould ensure that any changes are notified to ITNET immediately to ensure that theauthorised signatory listing is kept up to date.

Further guidance and a copy of the form for notifying changes of authorisedsignatories are reproduced in Part IV, Section 13, Appendix D to this Section.

10.6 Payment of Headteachers’ expenses

A member of the Governing Body must approve any reimbursement made to theHeadteacher for expenditure on behalf of the school. Headteachers and Governorsmay face some practical difficulties in approving payments to Headteachers in


accordance with Financial Regulations 10.12 and 10.13. While it is essential that theprinciple underlying these regulations is observed, arrangements can be made to dothis, where necessary, through retrospective approval of payments, or the setting of aminimum value level below which explicit approval is not routinely required.

Where the reimbursements are by cheque, we recommend that the cheques arecountersigned by an authorised signatory (usually a senior member of staff).

10.7 Recording the transactions in the accounts

The payment of invoices or direct debit charges should be recorded in the accountswith the following detail:

• date of payment/charge• amount including details of VAT, where appropriate• cheque number/direct debit charge reference• invoice reference• description of payment/charge• budget heading and account code.

For there to be effective budget monitoring it is essential that payments/charges arematched against the relevant budget provision. Finance staff with responsibilities forrecording transactions on the accounting system should have access to the detail ofthe budget plan.

10.8 Separation of duties

The five key stages in the ordering and payment process are:

i. placing and authorising the orderii. receipt of the goods or services and their confirmationiii. the verification of the invoice and certification for payment, andiv. the authorisation of payment, e.g. signing chequesv. recording the payment in the accounts.

No one person should be able to complete all five stages. However, the extent towhich a complete separation of duties can be achieved will depend on the size andorganisation of the school, the benefits of separation will need to be balanced againstthe efficiency of the process.

A suggested separation of duties is shown below, but it is for Governing Bodies todecide how best to implement this in their schools.


Process Small primaryschool

Average primary ormiddle school

Secondary school

Authorisation of orders(subject to limitations)

Headteacher Headteacher Budget holders

Confirmation of receiptof goods and services

Secretary Secretary Budget holder orBursar

Verification of invoicedetails and certificationfor payment

Secretary Secretary Bursar/FinanceOfficer

Chequeauthorisation

Headteacher or othercheque signatories

Headteacher or othercheque signatories

Headteacher orother chequesignatories

Recording paymentin the accounts

Secretary Secretary Bursar/FinanceOfficer


APPENDIX A SAMPLE PRO FORMA INVOICE

PRO FORMA INVOICE/CHEQUE REQUISITION

Cheque No:

Date:

Request from:

Please raise payment by means of a cheque, made out as follows:

Amount to be drawn: £

Account to be drawn from: General Fund/Petty Cash

Date cheque required by: / /

Purpose of cheque:

Payee:

Supporting documents with VAT registration number (where applicable) should beattached.

Claimant’s signature:

Headteacher/authorised signatory:

Date: / /


APPENDIX B GUIDANCE NOTES ON COMPLETION OFA529 AND A14 FORMS

Schools should use official finance forms to process invoices for payment via ITNETAccounts Payable. These forms are available from County Supplies.

A529S (pink) This form provides coding instructions andapproval forRe-order no. 740155 payment of the invoice for general expenditure.

A529R (yellow) This form provides coding instructions andapproval forRe-order no. 740202 payment of invoices for sub-contractors where

Construction Industry Scheme regulations apply(see Part IV, Section 14 of this Handbook).

A14 This form provides the school’s authorisationfor theRe-order no. 740112 payment of invoices.

Schools must register the signatures of authorised members of staff that havedelegated responsibility for the authorisation of payments on behalf of the school.See Part IV, Section 13, Appendix D for information and guidance about theregistration of authorised signatories.

Completion instructions and sample copies of A529 and A14 forms are providedoverleaf.


Sample A529 Form and Completion Instructions

Completion of A529 Forms

This form provides coding instructions and approves the payment of invoices to beprocessed via ITNET Accounts Payable. A separate invoice must be completed foreach invoice to be processed.

Coding instructions for cost centre and account code are required. A sub-ledger codemay be required for invoices in relation to capital expenditure (please refer to Part IV,Section 8 for further guidance).

Cost centre This is a seven-character, alpha/numeric code. The first fourcharacters indicate the school type, and are followed by thethree digit school number.

School type E010 NurseryE320 Primary, Infant and FirstE330 Middle and Secondary

HERTS C.C. Finance Dept. Use Only A529 S (01.93)

Payment Checks Vendor/Pay1. Order Number Number2. Goods received/service performed3. Prices Checked Chq4. Discounts and Credits Checked Due Date attach5. Calculations Checked6. Copy order marked off7. Reconciliation checks (where appropriate) P.C.K.

Confirmed that above checks have been completed and Terms Internal Invoiceinvoice/claim is properly payable Code Ref HCC

VAT Category Exempt

Approving Officer Zero

Remit Message Outside Scope

VAT only Future Use

ACCOUNT £ p CR VAT

Re-Order on County Supplies Code 740155NETT TOTAL

COMM. REF

ACCOUNTING CONTROL KEY (ACK)

Standard Rate (Leave Blank)

P/FCOST CENTRE SUBLEDGER NETT AMOUNT

V

EZ

O


E050 Education Support CentresE070 Special

School number Must be shown as three digits. Forexample, School number “1” will beshown as “001”.

Therefore, the cost centre code for school number “1” is “E330001”.

Account code This is specific to the type of expenditure. An appropriatecode must be selected from the account code list publishedand distributed with the monthly Central Payments,Earmarked Funds and Traded Services Report

Sub Ledger Only required for capital expenditure

P/F Leave blank

Net Amount Enter amount of the invoice (or credit note) exclusive of VAT

CR Enter “CR” if a credit note is attached

VAT Enter appropriate code:Standard Rated - Leave blankExempt - EZero - ZOutside Scope - 0

Comm. Ref Leave blank

Net Total Total of all amounts listed on A529

Once the coding instructions have been completed, all blank lines should be ruledthrough.

Any alterations must be initialled and the form should then be approved for paymentby a staff member with delegated responsibility.

All invoices approved for payment must then be listed on an A14 to authorise thepayment.


Sample A14 Form and Completion Instructions

COUNTY SUPPLIESRE-ORDER CODE 740112

E 5821

A14 (02.00)HCC CREDITORS SYSTEM

£ p £ p

1 17

2 18

3 19

4 20

5 21

6 22

7 23

8 24

9 25

10 26

11 27

12 28

13 29

14 30

15 31

16 32

Departm ent/School/Area Cancel all unused linesSign all alterations

School Num berSEND TOP TW O COPIES TO

Authorised for paym ent in accordance ITNET MANAGED SERVICESwith guidelines for the paym ent of creditor invoices COUNTY HALL

PRINT NAME(Authorised O fficer)

Authorised Officer DateA14 (02.00)

INCLUDING VATINVOICE GROSS AMOUNT


Completion of A14 Form

This form provides the school’s authorisation for invoices to be processed via ITNETAccounts Payable.

List all invoices that have been approved for payment using an A529 coding slip.Enter the name of the payee and the full amount of the invoice (including VAT).Total the invoices listed on the A14.

Any alterations must be initialled and a line must be drawn through all unused lines.

The A14 must then be authorised by a member of staff with delegated responsibilityfor this and whose signature has been registered with ITNET Accounts Payable. SeePart IV, Section 1 for further information about delegation of responsibilities and therequirements of a Schedule of Delegation, and Part IV, Section 13 for informationabout registering authorised signatories with ITNET.

The two top copies of the A14 together with the A529 coding slips and originalinvoices should be sent to ITNET Accounts Payable. Photocopies of the invoicesshould be retained together with the school’s copies of the A14.

Financial Handbook for Schools Hertfordshire County CouncilPart IV: Guidance - Section 11 Page 271 RESO3527- Issue 1 : April 2001

SECTION 11 INCOME

TABLE OF CONTENTS

Page

CONTACTS 273

11.1 Introduction 27511.2 Security of cash holdings 27511.3 Collection and banking of school income 27511.4 Income records 27611.5 Collection and banking of income on behalf of County Council 27611.6 Hirings income 27711.7 School meals and milk 27711.8 Banking intact 27711.9 VAT on taxable goods and services 27811.10 Debt recovery 27811.11 Writing off debts 27911.12 Charging and Remissions 280

11.12.1 Voluntary contributions 28011.12.2 Residential trips 28011.12.3 Instrumental music lessons 28111.12.4 Public examinations 28111.12.5 Transportation costs 281

Appendix A Income record sheets 283Appendix B Guidance for education visits and journeys 285Appendix C The County Council's Charging and Remissions Policy 289


SECTION 11 INCOME

CONTACTS

General advice on income collection Lyn Stainton 01992 555946and record keeping School Funding Unit

Official finance stationery County Supplies Department 01707 281800

Banking Courier Service Louise Arnott 01707 281985County Supplies and ContractServices

Advice on all aspects Alex Fitzpatrick 01992 555365of VAT legislation Gary Elmes 01992 555311

Taxation ServiceCorporate Services

Education Solicitor Richard Freeth 01992 555520for debt recovery guidance County Secretary’s Department

General advice Lyn Stainton 01992 555946Charges and Remissions Policy School Funding Unit

Application for remission of fees Brenda George 01582 830380for individual tuition for Hertfordshire Music 01582 830381musical instruments/vocal tuition Service

Grant applications from Joanne Harris 01992 588525Hertfordshire Educational Resources DivisionFoundation

Copies of Premises manual ‘Hiring Sandra Norris 01992 555749Accommodation and Index’ Planning Division


School Meals and Milk

Copies of School Meals Gabby Stephens 01992 555913and Milk Administration Central Finance UnitHandbook School Funding Unit

Website www.thegrid.org.uk/info/sfu

Banking Arun Sri 01992 555708Gabby Stephens 01992 555913Central Finance Unit

School meals bad debts Jenny Reed 01707 280142Shire CateringArun Sri 01992 555708Central Finance Unit

Free school meals authorisations Customer Service Centre 01438 73750001923 471500

Refunds Arun Sri 01992 555708Gabby Stephens 01992 555913Central Finance Unit

SMASH Forms and Reconciliation Jenny Reed 01707 280142Shire Catering

Free school milk Arun Sri 01992 555708Central Finance Unit

Refunds Arun Sri 01992 555708Gabby Stephens 01992 555913Central Finance Unit

232M Forms Arun Sri 01992 555708Central Finance Unit


SECTION 11 INCOME

11.1 Introduction

Income is a vulnerable asset and the income collection system should ensure that:

• all income due to the school is identified• all collections are receipted and banked promptly and completely• the accounting records and debtors’ accounts are properly and promptly updated• there is adequate segregation between the individuals responsible for identifying

income due, collecting or receiving it, recording it in the accounts and banking it.(Where staffing limitations make this difficult, compensating controls in the form ofspot checks etc. should be introduced.)

Where possible, schools should obtain income in advance of supplying goods or services, asthis improves the school's cash flow and also avoids the time and cost of administering debts. 11.2 Security of cash holdings When cash is held at the school, the Headteacher should: • identify senior staff who hold keys to the safe or the secure area• keep monies locked in a cash tin in a secure place• keep petty cash monies separate from income collected• be aware of the insurance limits for cash holdings and money in transit to the bank• bank income regularly; do not allow cash holdings to accumulate• wherever possible, members of staff should be accompanied when depositing sums of

money at the bank• when banking, ensure that a large bag is used, so that money bags can be kept hidden

inside it• vary the time of day and the route taken when visiting the bank• if using a car, park as close as possible to the bank, and walk on pathways which are

well used by other people

11.3 Collection and banking of school income

The Governing Body shall ensure there is an adequate division of responsibility for thecollection and banking of income, e.g. between class teachers and the school secretary.

There must be a permanent receipted record of the transfer of cash from one individual toanother. The school secretary or bursar should always check that the cash received is intact.


Where a person is authorised by the Governing Body to receive money, he or she is requiredto give an adequate discharge for it and a receipt book must be available for this purpose. Thenumber of receipt books in use at one time must be kept to a minimum and be held securely.Only one receipt should be issued for monies received.

Bank paying-in slips must show clearly the split of cash and cheques, and individual chequesmust be identifiable by reference to the cheque numbers and names of the debtor and somereference, e.g. a receipt number. The number of people authorised to receive monies must bekept to the absolute minimum.

Schools should never make personal loans to staff from official monies, or cash personalcheques.

11.4 Income records

All income should be recorded on an appropriate record sheet and totals of income receivedcross-referenced to paying slips. Appendix A to this Section provides further guidance andexamples of appropriate record sheets.

Guidance about the administration of educational visits and journeys is contained inAppendix B to this Section.

11.5 Collection and banking of income on behalf of County Council

Monies received on behalf of the County Council should be banked using credit transfer form(A395). The front of the credit transfer form must be completed using a carbon sheet so thatthere is a copy on the duplicate provided. Sufficient detail should be given to enable theCouncil's code to be added to the amounts entered, (the school's name and number are vital).When paying in monies settling accounts raised by the County Council, quote the accountnumber in the 'details' column and complete the 'amount' column for each such item.However, do not write anything in the coding section between these columns. Complete theback separately; no carbon is required. The cashier at the receiving bank will remove theBank Giro Credit Form and stamp the duplicate copy, which must not be removed from thebook. Provision has been made for up to seven cheques to be entered on the Bank Giro CreditForm in this manner. Where more than seven cheques are included in the amount to bebanked, they should all be entered in the supplementary paying-in book and the total onlytransferred to the Bank Giro Credit Form. More than one form may be used for any onebanking operation, but each form must be complete in itself.

When a banking is made, the prime record, i.e. the receipt book, cash register print-outs, cashbook etc., must be totalled and ruled off, and a cross reference made to the date of bankingand the number of the paying-in slip.


11.6 Hirings income

The Governing Body is responsible for the use of school premises outside normal schoolhours. The Authority wishes to encourage, and in certain cases has to make provision for,community and other uses. For example, planning for and acting in civil emergencies; publicconsultations; in-service training; out-of-school-hours activities for pupils; adult educationclasses; activities organised by the Youth Service or other youth clubs and communityorganisations and groups. The Authority may require governors to make premises availablefor these activities.

With the exception of certain defined community activities, schools are responsible for thedetermination of hiring charges and receive the income accruing to these hirings. Theactivities for which schools are responsible also include those which they themselvesorganise, including Parent Teacher Associations (PTA) fundraising events and PTABadminton in relation to which particular arrangements formerly obtained.

Schools are responsible for the hiring charge and receive the money accruing to these hirings.In order to encourage the use of school premises by these community groups, the CountyCouncil will support certain voluntary organisations through grant aid. The organisations willbe divided into three categories: youth organisations; pre-school provision; community groupsand a civic purpose.

Voluntary Aided Schools are exempt from these arrangements, except in so far as theauthority’s interests are relevant and its assessment of maximum charges and actual costs.

For further information on hiring please refer to Premises manual Hiring Accommodation andIndex which is available from the Property Unit of the Resources Division. See contacts listfor this Section.

11.7 School meals and milk

Schools are responsible for the collection and banking of school meals income. TheHeadteacher should ensure that there are adequate controls in place for the collection ofincome and take all reasonable measures to recover any outstanding debt.

Further guidance is available from the Meals and Milk Administration Manual circulated to allschools. Additional copies of the Manual can be obtained from the contacts shown on thecontacts list for this Section.

11.8 Banking intact

All income must be banked intact without any deductions for payments or to supplement apetty cash float.


The only exception to this rule is when schools use the Banking Courier Service, otherwise itwould represent a breach of the financial regulations. See Part IV, Section 6 of this Handbookfor further details of the Banking Courier Service.

Cash collected which is due to be banked with the Banking Courier Service may be used toreimburse the school’s petty cash float, rather than making unnecessary visits to the bank.However, the school should follow these guidelines:

• all transactions should be fully documented so that there is a complete trail from theincome collection to the point that the cash is utilised for reimbursing the petty cash

• petty cash reimbursements should remain at their current level and should not beincreased just because of the availability of additional funds on site

The school must reconcile monthly the sums collected to the sums deposited at the bank. 11.9 VAT on taxable goods and services The main items of taxable goods and services are sales of private photocopying and privatetelephone calls. VAT collected by the school from such taxable supplies should be itemisedseparately on the VAT Reimbursement Claim Form and deducted from the total VATreclaimed. Further information about VAT is contained in Part IV, Section 12 of thisHandbook. 11.10 Debt recovery Schools need to define a policy for dealing with any debt which may arise. The policy should cover: • the normal ‘settlement period’ for all significant sources of income and how this is

communicated to parents, and others• the action to be taken to remind debtors that their debt remains outstanding once the

normal settlement period has passed (see below for guidance on the issue of reminders)• in what circumstances further ‘credit’ will be withdrawn from a parent, etc. as a

temporary or permanent measure based on their settlement record and the amounts atissue

• whether in certain circumstances the school would seek to recover the costs of debtrecovery on top of the debt itself

• the specification of which individuals or committees have authority to exercise theirdiscretion within the policy, and what the limits on this discretion are. (For example,the negotiation of repayment terms, the variation of the reminder issue procedure, theextension of the settlement period, etc.)


First reminder letter The school needs to outline how long after the income was due a formal reminder letter shouldbe issued, e.g. two weeks. If action is to proceed further, it is necessary to prove that allreasonable attempts have been made to recover the debt, and that these attempts have beenmade in a timely manner, i.e. at the time that the debt first became overdue. Second reminder letter The policy should identify when a second reminder letter is to be issued, e.g. a further weekafter the initial reminder. Using reminder letters Should a debt need to be taken beyond two reminder letters, formal written evidence may haveto be produced. It is therefore important that at least one, but preferably two, writtenreminders are sent. Details of all reminders, whether verbal or in writing, should bemaintained. Where a letter is issued, a copy must be retained on file. Failure to respond to reminders If no response is received from the reminders issued, the school needs to establish what stepsshould be taken, e.g. referral to County Hall (County Secretary’s Department, Legal andAdministration). The school should decide when consideration should be given to writing offa debt, e.g. based on the value of the outstanding debt and other background circumstancessuch as financial arrangements. Bad debts The school should already have outlined who has the authority to write off a debt accruing tothe school, and identified any limitations to this authority in its schedule of financialdelegation or similar document. The school’s debt recovery policy should be cross-referencedto this schedule. 11.11 Writing off debts The following criteria should be applied for all intended debt write-offs: • all reasonable steps have been taken to recover the debt• there is no reasonable prospect for cost effective recovery• sufficient budgetary provision exists for the debt to be written off.


11.12 Charging and Remissions The Education Act 1996 set out the law on charging in all schools maintained by localeducation authorities. The objectives of the charging provisions in the Act are: • to maintain the right to free school education• to establish that activities offered wholly or mainly during normal teaching time should

be available to all pupils regardless of their parents' or guardians’ ability or willingnessto help to meet the cost

• to give local education authorities and schools the discretion to charge for optionalactivities provided wholly or mainly out of school hours, while emphasising that thereis no statutory requirement to charge for any form of education or related activity

• to confirm the right of local education authorities and schools to invite voluntarycontributions for the benefit of the school, or in support of any activity organised bythe school, whether during or outside school hours.

Local education authorities and the Governing Bodies of schools are required to draw up, andkeep under review, their policies in respect of charges and remission arrangements. Thestatement of policies in Appendix C to this Section sets out the current policies ofHertfordshire County Council. The charging and remissions policies adopted by schoolGoverning Bodies may be more or less generous than the policies of the Authority, providedthey meet the requirements of the law. 11.12.1Voluntary contributions The Governing Body may ask parents for voluntary contributions towards the cost of:

• any activity which takes place during school hours, including non-curriculumactivities

• school equipment• school funds generally.

The contribution must be genuinely voluntary and the pupils of parents or guardianswho are unable or unwilling to contribute may not be discriminated against. Wherethere are not enough voluntary contributions to make an activity possible, and there isno way to make up the shortfall, then it must be cancelled.

11.12.2Residential trips

The Governing Body may charge parents for board and lodging costs for residentialtrips, except for parents who receive:

• Income Support


• Income-based Jobseeker's Allowance• Working Families' Tax Credit• Disabled Person's Tax Credit

These parents or guardians must have board and lodging remitted to them if the triptakes place mainly in school hours.

Fees for residential trips outside of school hours may not be charged to such parents or

guardians where the education provided during the trip forms part of the syllabus for aprescribed public examination or is a part of the National Curriculum or the syllabusfor religious education.

The Hertfordshire Educational Foundation is a small registered charity that may be

able to support pupils taking part in educational visits arranged by schools. Seecontacts list for this Section for information about the grant application process.

11.12.3Instrumental music lessons

A charge may be made for instrumental music tuition whether in or out of schoolhours, unless the tuition forms part of the syllabus for a prescribed public examination,or is part of the National Curriculum or the syllabus for religious education. TheAuthority operates a remission policy in relation to fees for individual instrumental orvocal tuition. Details of the current scheme are available from the contacts shown onthe contacts list for this Section.

11.12.4Public examinations

Generally, no charges may be made for entering pupils for a prescribed publicexamination. However, an examination fee may be charged under the circumstancesset out in the Authority’s Charging and Remissions Policy. See Appendix C to thisSection.

11.12.5Transportation costs

Any transport provided within school hours by the Authority or a school to carrypupils between a school and any other places where education is to be provided by theAuthority or school must be provided free of charge. In the case of work experience,however, parents may be asked to meet the cost of travel.


APPENDIX A INCOME RECORD SHEETS

PRO FORMA INCOME RECORD SHEET

(Heading)…………………………………………………………..

CLASS LIST CLASS: 2

Surname Forename Sliprec’d

w/e w/e w/e w/e w/e

Adcock JoshuaAllsop LisaAtkins MarkBrooks TobyBrown SusanCheenor FrancesEaton RichardFarmer RobertFalkinham JohnFord SheilaGeorge AndrewHarland MichaelIqbal NahimMason CarolMitchell JessicaO’Doyle BeattiePearman ErnestineShaw PeterSimpson BartTaylor FredaWoodman Stuart

Collector’s initialsDate

Received (signature of secretary)

BANKING Credit slip No.Date:

Basic Income Record for use with all areas of income collection, eg milk, sponsored spell,trips and activities, swimming etc.

Subsidiary records may also be required, eg for Trips: a record of how the cost wasarrived at, and an eventual analysis of actual income and expenditure incurred.


APPENDIX B GUIDANCE FOR EDUCATIONAL VISITS ANDJOURNEYS

1. Which account?

Educational school trips (curricular related) can be processed through the school'sGeneral Account, in order to reclaim the VAT on a trip.

Non-educational school trips should be processed through the School Fund (Private)Account.

2. VAT requirements

Please see Section 12, Appendix B, paragraph 3, School Trips for guidance. 3. Accounting and record keeping

i. Journeys

Prior to the journey a detailed costing must be undertaken considering all applicablecosts, including insurance, entry fees to museums etc., refreshments, transport and anyreconnaissance visits. The cost of any supply cover necessitated by the journey canalso be included in such calculations. The individual charge per pupil is thencalculated from this information. Parents should be advised of the types of costsincluded in the overall charge, particularly where staff or other persons are attendingfree of charge or at a subsidised rate. Parents should also be advised of the school’spolicy in relation to refunds in the event of

• cancellation of the journey as a whole• reimbursement of contributions where a student withdraws from the journey; or• reimbursement of surplus contributions.

If the lead teacher takes his or her spouse on the journey, this may be acceptable, but ifone or more of their own children also go, then payment should be made for at leastthe children – providing that the spouse acts as a helper.

Individual journey books should be completed for each journey. These are availablefrom County Supplies (Order number A488) and include further guidance on how toaccount for journeys and visits. These books are designed to help schools account forall transactions relating to each journey, to allow for their verification against theledger records. To simplify reconciliation against the ledger, separate budgetheadings/cost centres for each school journey in any financial year should be set upwithin the ledger.


Money collected should be recorded in the journey book as it is received. It should bepaid over to the office once a week, or more often if the amount in hand exceeds £10.Personal cheques from members of staff should not be substituted for cash collected,nor should any visit transactions be financed through a teacher's personal bankaccount. Receipts should be given to all individuals who make a contribution to thecosts of a journey, preferably by a signed entry on a personal visit card. Parents shouldbe made aware that cancellation by an individual pupil may result in the loss of adeposit.

The secretary or bursar should sign the visit book for each amount paid over by theteacher. This then allows the income received to be traced to the relevant banking andfinancial ledgers.

Cheque payments should be fully supported by invoices or receipts. Particular careshould be taken to ensure that, where cash or currency is withdrawn, its disposal isproperly documented and supported by vouchers. The record of pocket-moneypayments should be retained. Any balance of cash, currency or travellers' chequesremaining at the end of the visit should be repaid to the school secretary or bursarimmediately on return.

At the back of the journey book is a receipt and payments account. This must besigned off by the teacher in charge of the journey and also the Headteacher within areasonable time after the journey (no more than one month). In addition, there is acash account for cash used to pay for small items where a cheque cannot be used (e.g.entrance fees). This cash account is also used where pupils pay the school pocketmoney. All documents should be retained with the journey books for audit purposes.

ii. Visits

As for journeys, school visits are paid for by the pupils involved, although payment forvisits in school hours is voluntary.

The completion of a trip sheet for smaller journeys is recommended. This providesinformation on the estimated costs and details of the income received to tie back to thefinancial ledgers. These records should be completed in the same way as those forjourneys, and cross-referenced to the relevant receipts and invoices. On completion,the trip sheet should be signed by the teacher in charge of the visit and theHeadteacher, to confirm the accuracy of the figures. A recommended form forrecording day visit income is obtainable from County Supplies, Order Ref. No. (AB)46118.


4. Refunds

At the end of each journey or visit, the surplus or deficit should be calculated from thejourney book or visit sheet and confirmed against the ledger records.

If the journey or visit makes a surplus, then parents and guardians should be offered arefund where the sum involved per pupil might reasonably be expected to be refunded.As a guideline, any surplus of 5% or more of the contribution per head (orproportionate amount where full per head costs was not paid), should be offered as arefund (or whole pounds below this amount). Five pounds is regarded as a reasonablethreshold to warrant refunds.

The school can ask for parental permission in advance of the journey to treat anysurplus below a given sum as a contribution to school funds. This will ease thefinancial administration of the journey. Although there is no legal obligation upon theschool to refund surpluses – where a voluntary contribution is requested – schoolsshould not use journeys as a backdoor method of fund raising. Any refunds should bemade as soon as possible after the visit, either to pupils or parents by cheque or cashagainst signed receipts.


APPENDIX C THE COUNTY COUNCIL'SCHARGING AND REMISSIONS POLICY

The Charging Policy

The Authority's policy is to charge for the following areas of activity as permitted underthe Education Act 1996:

• board and lodging on residential visits • costs associated with individual tuition in playing a musical instrument whether in

or out of school hours, unless it is provided as part of the syllabus for a prescribedpublic examination or is required by the National Curriculum

• optional extra activities which take place wholly or mainly outside school hours,

but which are not provided as part of the syllabus for a prescribed publicexamination, and are not required in order to fulfil statutory duties relating to theNational Curriculum or to religious education, participation in any such activitiesto be on the basis of parental choice and a willingness to meet such charges as aremade

• the cost of entering a pupil for a public examination not prescribed in regulations,

and for preparing the pupil for such an examination outside school hours • the cost of re-sits of prescribed public examinations where no further preparation

has been provided by the school • the cost of entering a pupil for a second public examination when preparation by

the school enables the pupil to take more than one examination • the cost of any scrutiny of examination results if so requested by parents • the cost in cash or in kind of ingredients and materials needed for practical

subjects such as home economics and craft, design and technology, if parentshave indicated in advance a wish to own the finished product.

The Remissions Policy • The charge for the board and lodging costs of a residential visit, where the

education on that visit must otherwise be provided free, will be remitted in thecase of pupils whose parents or guardians are in receipt of:


- Income Support - Income-based Jobseeker’s Allowance - Working Families’ Tax Credit - Disabled Person’s Tax Credit

For example, if the activity takes place wholly or mainly in school hours, and/or isprovided as part of the syllabus for a prescribed public examination, or is requiredin order to fulfil statutory duties relating to the National Curriculum or toreligious education.

• The Authority operates a remission policy in relation to individual tuition in

playing a musical instrument. Details of the current scheme are available fromBrenda George, Hertfordshire Music Service on 01582 830380/81.



TABLE OF CONTENTSPage

CONTACTS 293

12.1 Introduction 29512.2 General notes 29512.3 Categories of VAT 29512.4 Special treatment of local authorities 29612.5 Input and Output Tax 29712.6 Penalties and interest 29712.7 Recovery of VAT on purchases 29712.8 Documentation required to recover VAT 29812.9 Purchases made from donated funds 29812.10 Income 30012.11 Calculation of VAT in gross amounts 30112.12 Liaison with Customs and Excise 30112.13 VAT on School Fund (Private) Accounts 301

Appendix A Examples of VAT tax invoices 304Appendix B VAT - specific issues 308



CONTACTS

Advice on all aspects Alex Fitzpatrick 01992 555365of VAT legislation Gary Elmes 01992 555311

Taxation ServiceCorporate Services

Submission of VAT Karen Gibbs 01992 555734reimbursement claims School Funding Unit

Setting up County Supplies County Supplies Department 01707 281800Customer Account Number

Copies of Premises Manual Sandra Norris 01992 555749“Hiring Accommodation and Index” Hiring and Letting Administrator

Property Unit



12.1 Introduction

Value Added Tax (VAT) was introduced in 1973 to replace Purchase Tax. It is technicallytermed a 'simple tax', although it is far from simple in its application.

VAT is a tax on consumer expenditure and is chargeable on most supplies of goods andservices within the UK except those specifically exempted or zero-rated. It is administeredby Her Majesty's Customs and Excise (C&E), whose officers may carry out visits to all VATregistered persons. During these visits they examine business and accounting records toensure compliance with all VAT regulations.

It is vital that staff who deal with income and/or expenditure are aware of the VAT rules. Thecorrect treatment of VAT is important, as penalties can be incurred if errors are made. If anassessment is made by C&E due to VAT errors, the cost may be met by the schoolsconcerned.

12.2 General notes

The general principles of VAT apply to a local authority and its schools in the same way as toother organisations. However, local authorities benefit from a more generous treatment inmany respects. For example, a local authority is allowed to reclaim via C&E most of the VATwhich it has paid out on expenditure. Expenditure in schools' accounts is therefore chargednet of VAT, and the VAT element is charged to a VAT code and reclaimed by submission of aVAT reimbursement claim to the School Funding Unit at County Hall. It is important,therefore, that schools take care to identify the VAT element of any expenditure, as well ascharging VAT on income where applicable.

Reimbursement claims submitted by schools form part of the County Council’s legaldeclaration to C&E. It is therefore essential that, in accordance with the FinancialRegulations, reimbursement claims are accurate, certified by an authorised signatoryand submitted to the School Funding Unit on a monthly basis. Failure to submitaccurate and timely returns might result in an assessment being made by C&E. As per12.1 and 12.6 any such assessment, plus interest and penalties (if charged), will have tobe met from a school’s budget.

12.3 Categories of VAT

As a VAT registered body, we must charge the appropriate rate of VAT on the supplies ofgoods and services that we make, and as consumers we pay the appropriate rate of VAT onthe goods and services we purchase. The various VAT rates are as follows.


a. Standard-ratedThe standard rate of VAT is currently 17.5%.

b. Zero-ratedThese are taxable supplies, but Parliament has determined that the tax to be chargedis currently zero per cent.

c. Reduced rateThe reduced rate of VAT is currently 5%. This applies to qualifying use of fuel andpower and certain women’s sanitary protection products.

d. ExemptCertain supplies of goods and services are exempt from VAT. They are not taxableand, in most cases, a business that makes all or mostly exempt supplies cannotrecover all the VAT on its purchases. However, there is a special concession for localauthorities, whereby VAT on supplies purchased for exempt activities may bereclaimed, as long as the total of such tax amounts to less than 5% of the VATincurred on all purchases. At present under this rule, Hertfordshire can reclaim allVAT incurred on purchases of goods or services for exempt activities.

Where the County Council makes business supplies – these being supplies that arecomparable with or which are, or could be, in competition with similar supplies madein the private sector – they will be categorised for VAT purposes in one of the above.

e. Outside the scopeSupplies, which are non-business fall outside the scope of VAT.

Supplies made by the County Council which are classified as non-business are thosefor which it has a statutory monopoly, or where there is a statutory duty through UKlegislation, or where a statutory fee is charged.

As you can see from the various categories, only a. and c. give rise to a VAT cost, in thecase of purchases made, or a VAT income, in the case of supplies made.

12.4 Special treatment of local authorities

Most VAT registered bodies can only recover VAT paid on purchases which are for businessactivities. However, local authorities are in a special position, in that they are also allowed toreclaim VAT paid on purchases, which are for non-business activities. Schools’ GeneralAccounts are part of the County Council’s global VAT registration and hence benefit fromthis favourable treatment, as they do with the treatment of purchases for exempt activitiesoutlined above. Where the LEA is providing services to schools, VAT is not chargeable, asthe suppliesbeing made are internal to the County Council.


12.5 Input and Output Tax

The VAT paid on purchases is called Input Tax; the VAT element of income received onsupplies made is called Output Tax. For the County Council as a whole, and for schools, inputtax is normally greater than output tax, and the difference is repaid to the County Council byC&E.

12.6 Penalties and interest

Where errors made in accounting for VAT, across the County Council, total less than £2,000net in a single month, they can be rectified on the Council’s VAT Return for the followingmonth with no penalty imposed. Errors totalling more than £2,000 net, which are disclosed byourselves under the ‘Voluntary Disclosure’ procedure, rather than discovered by C&E, willattract an interest charge for late payment where monies are owed to C&E.

C&E can levy a Misdeclaration Penalty for significant underpayments of VAT, arising from‘innocent’ errors which have not been voluntarily disclosed. The penalty, which is in additionto the interest charge for late payment, is 15% of the VAT involved.

There is a separate penalty for evasion of VAT owed to C&E which involves dishonesty, andthis is 100% of the VAT evaded.

Penalties can also be imposed for failing to keep adequate VAT records and for theunauthorised issue of VAT invoices.

All invoices for purchases and supplies made and any supporting documents, such ascash records, must be kept for at least six years.

The penalties can be costly, particularly if they are to come from a school’s budget. It istherefore recommended that where there is any doubt over the VAT treatment of atransaction, advice should be sought from the Taxation Service.

12.7 Recovery of VAT on purchases

VAT CAN ONLY BE RECOVERED ON PURCHASES PROCESSED THROUGHTHE SCHOOL’S BUDGET SHARE ACCOUNT (GENERAL ACCOUNT).

There are a number of important points to bear in mind:

• these purchases must be for educational purposes for pupils on the school roll, eitherfor use in delivering the curriculum or for the general running of the school

• a school must place the order, receive the supply, receive a VAT invoice addressed toit or the County Council, and make payment from its General Account


• a school’s General Account cannot be used to recover VAT on purchases of goods orservices, where they are being provided to and paid for by a third party, e.g. a ParentTeacher Association (PTA) or for the private benefit of a member of staff.

• Voluntary Aided schools, with the exception of the circumstances outlined in item 14of Appendix B to this Section, cannot reclaim VAT on works which are theresponsibility of the Governing Body. For more information regarding the respectiveresponsibilities of governing bodies and the County Council, please refer to the DfESManagement and Finance publication ref. DfES/0276/2002 Funding for premises-related work at Voluntary Aided (VA) Schools in England.

Schools will only incur VAT on purchases of standard-rated goods and services where theyare purchased from a VAT registered supplier.

12.8 Documentation required to recover VAT

Legislation dictates that certain information must appear on a VAT invoice for it to besufficient evidence to reclaim the VAT element. The amount of detail required depends on thevalue of the invoice. Currently, a less detailed invoice is sufficient for instances where thetotal charge, including VAT, is £100 or less. For values above this, all the details must bepresent.

In Appendix A at the end of this Section, examples 1 and 2 give the detail needed on bothtypes of invoice.

No invoice is required for telephone calls, purchases from coin-operated machines and for off-street car parking. This will only apply for purchases up to a maximum of £25, includingVAT.

Till receipts and petty cash - see sub-sections of Appendix B to this Section for guidance oncurrent acceptable practice.

12.9 Purchases made from donated funds

Schools can reclaim VAT paid on purchases made with funds donated to them for a specificeducational purpose, e.g. a donation from a PTA to a school for the purchase of a computer.However, the following two conditions must both be satisfied.

a. A school must place the order, receive the supply, receive a VAT invoice addressed toit or the County Council and make payment from its General Account. A donation ofthe VAT exclusive cost is then made from the school's Fund (Private) Account or PTAaccount to reimburse the school's General Account, and the VAT is recovered in thenormal way.

b. The County Council through the school must retain legal ownership of the purchase.


Sufficient records should be kept to evidence the purchase and its purpose.


The ‘retention of ownership’ and the use for ‘educational purposes’ are conditions designed tomake sure that purchases are not made on behalf of third parties. One of the implications ofthese conditions is that any item so purchased is the County Council’s property. Thus, forexample, a minibus purchased through a school’s General Account with funds donated fromits Fund (Private) Account would become County Council property, and must be used as partof the provision of education. If the school later sells the minibus, VAT must be charged onthe sale price because the County Council is VAT registered. (The proceeds must be paid intothe school’s General Account and the VAT accounted for in the normal way.)

12.10 Income

Charging VAT

The County Council and its establishments, including schools, must charge VAT where asupply of standard-rated (or reduced rate) goods and/or services is made. The only exceptionsare where supplies are made to other parts of the Council, i.e. internal transactions, in whichcase VAT should not be charged.

Where a standard-rated (or reduced rate) supply is made, a VAT invoice must be provided, ifrequested by the person to whom the supply has been made. See example 3 in Appendix A tothis Section.

The school should only charge VAT on standard-rated (and reduced rate) supplies madethrough the General Account. Common types of standard-rated income on which VAT mustbe charged include; private telephone calls and photocopying, meals paid for by adults andcoin-operated telephones (if operated through General Account). VAT collected by the schoolfrom such supplies should be itemised on the monthly VAT Reimbursement Claim.

Some lettings are standard-rated, including certain lettings of sports facilities and forinformation on this area you should see the Premises Manual – Hiring Accommodation andIndex, sent out by the Planning Division.

Correcting VAT Errors

Where a school has failed to charge VAT on standard-rated income, the VAT position mustbe corrected. This will involve correcting the position for the previous three years or fromwhen the error first occurred if less than three years. Depending on the size of the error andthe method by which the Taxation Service is required to disclose it to C&E, interest may becharged by C&E in respect of late declaration.

Please contact the Taxation Service, Corporate Services (see contacts for this Section fordetails) for guidance as to how you should correct any errors that you discover.

You may be required to prepare a schedule that details the amounts of VAT which shouldhave been recognised in your VAT control account and when this should have happened.


VAT errors will represent a cost to the school unless you are able to go back to yourcustomers and collect the VAT that was not charged to them. In most cases, this will not bepossible and in these circumstances, when calculating the value of the VAT error, cashactually received by the school will be taken to be the gross amount, i.e. it is inclusive ofVAT. Please refer to the next point for guidance on calculating the VAT element of a grossamount.

12.11 Calculation of VAT in gross amounts

To find the VAT element in a gross amount, and the amount exclusive of VAT, the followingcalculations can be carried out.

Gross amount × 17.5 = VAT element117.5

Gross amount × 100 = Amount exclusive of VAT117.5

The VAT fraction for 17.5% can be simplified to 7/47.

12.12 Liaison with Customs and Excise

You should not contact C&E direct if you have a problem with VAT. Advice is availablefrom the Taxation Service, Corporate Services (see contacts for this Section for details).

12.13 VAT on School Fund (Private) Accounts

School Fund (Private) Accounts ARE NOT PART of the County Council's VATregistration AND ARE THE RESPONSIBILITY OF THE GOVERNORS.

If the value of taxable supplies (taxable turnover) that you make through the Fund (Private)Account is forecast to exceed a predetermined limit, currently £56,000, within a rolling 12month period, then the Fund Account must be registered for VAT, and will be subject to theaccounting requirements for VAT.

Schools must consider carefully the level of activity of a taxable nature that they conductthrough the Fund Account. Particular areas of activity that could generate significant levels oftaxable income include :

• Vending MachinesThis applies only where the Governors, through the Fund Account, own/rent themachines and operate them, or alternatively employ a catering provider to operatethem on their behalf. If a catering provider supplies the machines and operates them,with the Fund Account simply receiving a profit share in return for providing a space


into which the machines can be placed, the profit share will not count towards taxableturnover.

• Uniform

Please note that VAT registration is not recommended because of both the impact that itmight have on the total Fund (Private) Account income and the accounting requirementslaid down by Customs and Excise.

Schools should be aware that if Governors operate other accounts as well, the taxableturnover from all of them needs to be consolidated when determining whether or notVAT registration is required.

If the level of taxable turnover through your Fund (Private) Account gives you cause forconcern, please ring the Taxation Service, Corporate Services. They may be able tosuggest ways to manage the taxable turnover in such a way that the account remainsbelow the registration threshold.


APPENDIX A EXAMPLES OF VAT TAX INVOICES

Example 1

Detail required fortax invoices for purchases less than £100

Name and Address of Supplier Date of Supply

VAT Registration Number

Description of Goods or Services Supplied Total Amount

Description of goods or services supplied

Rate of Value Added Tax

Total Amount Payableincluding VAT


Example 2

Detail required for tax invoices forpurchases over £100

Name and Address of Supplier Invoice Number

Date of Supply


Name and Address of Customer


Description of goods or services supplied including quantity ofgoods or extent of services

Net Amount Payable

Rate of Value Added Tax Amount of Tax

Total Amount Payable


Example 3

Detail required for tax invoices issued by schoolsfor

standard-rated supply of goods or services

Name and Address of School Invoice Number

Date of Supply


214 5278 77

Name and Address of Customer


Description of goods or services supplied, including quantity ofgoods or extent of services

Net Amount Payable

Rate of Value Added Tax Amount of Tax

Terms of Payment Total Amount Payable


APPENDIX B VAT - SPECIFIC ISSUES

1. Sales to pupils

Hertfordshire schools can take advantage of a scheme that allows them to sell to their pupils,without charging VAT, goods and services which are closely related to their supply of freeeducation.

The types of items that are sold under this scheme are:

• stationery – pens, paper, exercise books, rubbers, rulers, etc.• book bags• portable musical instruments• textbooks• calculators. Any VAT charged on the purchase of goods and services for sale to pupils under the schemecan be recovered, subject to the purchases having been made through the school GeneralAccount. In addition, all of the following specific conditions must be fulfilled: • the sales are made 'in class' via the Headteacher or teacher• the sale price to pupils is either at or below the cost of purchase to the school• the pupil will use the items in the classroom, in a subject that is part of the normal

curriculum, at least once a week throughout the school year• the items are 'portable', i.e. easily carried by hand. The first bullet point above is not strictly applied, as it is not possible for a large school tooperate such sales in this way. The general rule of thumb is that the sales can be made fromthe secretary's office or stockroom, but there must not be a "dedicated shop". Such a shopwould probably be making a profit and as such would not meet the second bullet's condition. With regard to this second bullet point, C&E have recently revised their views as to what theyconsider ‘at cost’ to mean. For the purpose of this scheme, you may now include the followingcosts within your selling price: i. The actual unit cost of the item, exclusive of VAT, paid to the supplier. ii. The actual packaging/postage cost that has been charged in addition to the unit cost,

by the supplier. Where the cost relates to a number of items, it should be split in amanner that reflects the nature of the items concerned i.e. bulkiness/weight/fragility.


iii. An administrative charge to reflect the cost of staff involved in providing items topupils under this scheme. This charge can include the costs associated with purchasingand distribution to pupils.

Under no circumstances must a profit element be included – see warning below. C&E do not permit the addition of a flat rate percentage to the actual unit cost i.e. youcannot simply add say 10% to each item. The school must be able to demonstrate to C&E that the amount which it charges per item is afair and reasonable reflection of the costs it incurs in providing them to pupils. To this end,any school contemplating the addition of an administrative charge should: a. Prepare a costed calculation of the estimated time which will be spent on this activity

over the next twelve months. This should be based on historical experience havingregard for any known changes, yet to be implemented e.g. to offer a wider or narrowerrange of items.

b. Prepare an estimate of the quantities of items likely to be sold in the next twelvemonths. This should be based on the quantities of each item sold in the previoustwelve months. Again, due regard should be given for any changes likely to lead toincreased/decreased sales.

The school should then spread the cost identified under a. across b. as they consider fit. It isdifficult to provide guidance in this respect, but we would suggest that the price at whichitems are sold should always be less than that at which they could be obtained by the generalpublic. We recommend that schools err on the side of caution in implementing any revision of prices.Furthermore, we would recommend that this change in the view taken by C&E be used onlyas an opportunity to recoup perhaps a small contribution towards costs, rather than the fullamount identified by the above calculation. Schools can, of course, continue as before and notmake any administration charge, so avoiding beyond doubt the following: WARNING If C&E determine that items are being sold at a profit, the School will be liable to payVAT on the full value of sales, not just the ‘profit’ element, for a period going back up tothree years, plus interest. Note We have on occasion received calls querying whether the rounding up of the actual costof items, where the unit cost includes a fraction of a penny, breaks the ‘at cost’ rule.Please note that C&E would not take this view. Laptop computers Where all of the above conditions are met, and subject to the following stipulations, schoolsmay sell laptop computers to their pupils without charging VAT.


• Orders should not be placed until such time that payment has been received from thepurchaser and the payment has cleared.

• It is the responsibility of the school to take whatever steps it considers necessary toensure that warranties etc. can legally be transferred to the purchaser. It is recommended that the school obtain written confirmation to this effect from the supplierconcerned, and that a copy of this is passed to the purchaser. Please note that the schoolmay have to provide the purchaser with a receipted invoice (payment received in full) inorder to evidence that ownership has been ‘transferred’.

Materials to be used in class Where materials are sold to pupils for use in subjects such as Home Economics, Metalwork,Technology and Woodwork, they may be sold free of VAT as long as the previouslymentioned conditions for sales to pupils are complied with. In this case, ‘regular classroomuse’ will only be for the duration of the project. 2. Uniform, sports clothing and equipment (including plimsoll/swimming bags) These items are specifically excluded from the above scheme. It is not generally appropriate to pay for such items from the school's General Account, unlessthe school is to retain ownership. This is because VAT would need to be declared on sales topupils except where the items qualified for zero-rating (see below). Most schools operate sales of uniform and/or sporting clothing and equipment through theschool’s Fund (Private) Account. If the annual level of sales made through the account isbelow the VAT registration threshold, then such sales can be operated on a recovery of costbasis (see paragraph 12.13 to this Section). Note that no VAT can be recovered on purchasesmade through this Account. Current legislation provides that articles designed as clothing or footwear for young children,which are not suitable for older persons, can be zero-rated. There are complex regulations laiddown by C&E for the clothing industry as to what is classified as young children's clothing.C&E have agreed with the clothing and footwear trades that the upper age limit of a ‘youngchild’ can be taken as the eve of the child's 14th birthday. Generally, garments will only bezero-rated if they do not exceed the body size measurements prescribed by C&E. Clothing suppliers are allowed to zero-rate the supply of official school uniform,irrespective of size, where both of the following conditions are met: a. “The garments must be unique to that school by design, such as a prominent

badge or piping in colours, and held out for sale as being for that school only.” b. The school must cater exclusively for pupils under fourteen years of age. Whatever account such sales are processed through, it is obviously beneficial to obtain zero-rating where the conditions can be satisfied, as the cost to the pupil will then be free of VAT.


It is recommended that the application of zero-rating is confirmed and agreed with thesupplier at the time of the order. 3. Music tuition and hire of musical instruments Music tuition HCC has always treated the provision of music tuition as a non-business activity, whether ornot a charge has been made to the pupil. C&E now take the view that, if a pupil is charged for the music tuition, the supply of tuition isexempt from VAT. Where no charge is made for the tuition, this will continue to be a non-business activity and as such, outside the scope of VAT. This view has now been accepted byHCC. Hire of musical instruments

HCC has always standard-rated hire charges on the basis that we could not comply withthe ‘at or below cost’ principle. C&E had done nothing to alter this view until theyreviewed their position in relation to tuition. Following this review, C&E now consider that the hire of musical instruments should followthe liability of the supply of music tuition, therefore: • When non-business music tuition is provided for no charge, the hire of the musical

instrument in conjunction with that tuition will also be non-business and as suchoutside the scope of VAT.

• When exempt music tuition is provided for a charge, the hire of the musical instrument

in conjunction with that tuition will also be exempt from VAT. Thus whether or not a charge is made for tuition, VAT should no longer be charged on theassociated musical instrument hire. This change took effect from the start of the 2001/02 academic year. Where a musical instrument is hired and no music tuition is provided, the hire chargewill continue to be taxable at the standard rate of VAT.


4. Sales of musical instruments to pupils – for use in conjunction with tuition forwhich a charge is made

As identified in item 3, the provision of music tuition for a charge is exempt from VAT.Where a charge is made, we would not expect that the tuition was being provided as part ofthe normal curriculum (see Section 11). In these circumstances, it would not be possible tosell an instrument free of VAT, under the scheme outlined in item 1, unless of course the pupilalso received tuition without charge as part of the normal curriculum. However, where a charge is made, musical instruments may still be sold to pupils free ofVAT, as long as the following conditions are met: a. It is the school which provides the tuition through either a member of staff or

someone that the school has contracted with, for the provision of tuition to its pupils. b. The tuition must be provided to pupils of the school or pupils of other HCC schools. (Please note that the difference between sales under this item as opposed to item 1, is that thesales are Exempt from VAT as opposed to Outside the Scope of VAT. There is no apparentdifference though from the pupil’s viewpoint.) 5. School trips Any visit arranged for pupils by a school can be considered to be non-business if it is providedfree of charge. C&E has now agreed that an educational school trip which is not provided free of charge maybe treated as a non-business activity for VAT purposes, provided that the trip is part of anagreed curriculum. The Education (National Curriculum) (Attainment Target andProgramme of Study in Physical Education) Order 1992 is quoted as a statutory reference forthe core of teaching in this area, in which educational school trips play a part. Schools can thus recover the VAT exclusive cost of a ‘curriculum trip’ from parents, and theVAT from C&E via the VAT Reimbursement Claim. To recover the VAT on a trip, a schoolneeds to place the order, receive the supply, receive a tax invoice addressed to it or the CountyCouncil and make payment from the school's General Account. Contributions from parentsshould also be paid into the school's General Account. Until recently, schools were unable to obtain a VAT invoice on which VAT could berecovered, where the supplier of their school trip was classed as a tour operator under the TourOperators Margin Scheme. Schools should now check when planning a trip as to whether thetrip supplier is classed as a tour operator, and if so whether it is cleared by C&E to issue VATinvoices to LEA schools.


Where the tour operator can issue you with a VAT invoice, you will be expected – by C&Estipulation – to provide the operator with a written statement confirming that the trip is of a non-business educational nature. Please contact the Taxation Service, Corporate Services, forhelp with this. What is a Curriculum Trip? C&E have agreed that for the foreseeable future, until more detailed guidance can beoffered, a school trip will be considered as curriculum, provided that the Headteacherauthorises that the trip is part of the curriculum. The school’s Link Adviser will be able to provide advice on whether or not a planned schooltrip will fulfil National Curriculum requirements. 6. Photographs C&E’s current view is that the supply of facilities is made by the Headteacher on behalf of theGoverning Body, who have control of the school's Fund (Private) Account. Community, Foundation and Voluntary Controlled schools No VAT should be charged on the commission (discount) and it should not be paid into theGeneral Account. Voluntary Aided schools As above, no VAT should be charged on the commission (discount) and it should not be paidinto the General Account. The Governing Body can pay the commission into the school's Fund (Private) Account asan alternative to paying it into its own account. VAT will be chargeable if the commission is paid into the account of a Governing Bodywhich is VAT registered. The collection of and accounting for any VAT in such a situation isa matter for the Governing Body. It does not have any bearing on the County Council’s VATregistration. 7. Retailers’ till receipts – reclaiming VAT paid where the total amount is £100 or

less (including VAT) Schools can reclaim VAT where a till receipt is the only evidence of a purchase being made,SUBJECT to the till receipt showing sufficient information for it to be classified as a ‘lessdetailed invoice’. The two prime concerns of C&E in deciding whether a till receipt isadequate for reclaiming VAT are, firstly, whether there is sufficient evidence that VAT hasbeen paid and, secondly, when it was paid. The rules for what information must appear on a ‘less detailed invoice’ appear, on the face ofit, to be quite rigid. The Taxation Service suggests that there is some flexibility:


a. Name and address of the retailer• the name must always appear on the receipt.• there must be sufficient address detail to enable C&E to identify the location of

the retailer. Many receipts have a shortened address, e.g. John Lewis, Welwyn, orWH Smith Ltd, St. Albans. Both of these should be acceptable because there is,for instance, only one John Lewis in Welwyn.

b. Date of supply This must always appear on the receipt.

c. VAT registration number

This also must always appear on the receipt. d. A description which identifies the goods or services supplied

The description must be sufficient to prove to C&E that the goods or services that you have been supplied with are standard-rated, i.e. have had 17.5% VAT added to them. In order that you may reclaim the VAT you must know beyond doubt that the costsdescribed on the receipt include VAT. If you are not sure, please contact the TaxationService, Corporate Services, for advice.

e. The total amount payable for a single/multiple of the same item, inclusive of any

VAT charged This must always appear on the receipt.

f. VAT rate charged

The verbal advice received suggests that, if a till receipt complies in all other respects, then the lack of a ‘rate of VAT’ will not be held up as a reason why the VAT paid cannot be reclaimed. Should future legislation lead to the introduction of different rates of VAT (apart from the current situation where VAT of 5% is applied to fuel and power for qualifying use and certain women’s sanitary protection products), then theadvice received will no longer apply.

Appendix A to this Section, example 1, shows the details required on till receipts forless than £100.

8. Retailers’ till receipts/tax invoices – reclaiming VAT paid where the total amount

is more than £100 (including VAT) It is unlikely that a ‘till receipt’ will be issued for goods over £100 that will comply with allthe requirements of a full ‘tax invoice’. Listed below, however, are the additional detailswhich are required for ‘tax invoice’ purposes, for such amounts. Points a. to d. of 7 above apply, plus some additional items as follows: e. the name and address of the customer f. an identifying number for the invoice


g. the quantity of goods h. the net amount payable i. the rate of tax j. the total amount of tax k. the total amount payable. Appendix A to this Section, example 2, shows the details required on ‘tax invoices’ or ‘tillreceipts’ for over £100. 9. What can I do if a till receipt contains insufficient information to reclaim VAT? A retailer is obliged to provide a VAT tax invoice to a taxable person (the County Council) onrequest. We are aware that there may be odd occasions where schools may, for reasons of expediency,make purchases from small local retail outlets. Very often such outlets will have onlyrudimentary till receipts, which do not meet the conditions required for till receipts for £100 orless. In this situation, schools should request that the retailer provide a VAT tax invoice. If theretailer is unable/unwilling to provide an invoice, VAT recovery may still be possible if youare able to obtain alternative evidence from the retailer. Alternative evidence Please note that C&E may or may not accept your alternative evidence and, for this reason,schools who follow the suggestion below do so in the knowledge that C&E may at a laterdate disallow the VAT reclaimed and charge interest on the amount concerned. This course of action must not be used on a regular basis, as it is strictly for ‘one-offs’.Furthermore it is not recommended under any circumstances, where the total value of all itemsshown on the till receipt, inclusive of VAT, is more than £100.00 . We would suggest that you obtain the following as a bare minimum: a. The till receipt in question should be attached to either a compliment slip or a piece of

headed notepaper from the retail outlet. b. The retailer should write on the compliment slip or headed notepaper all items of

information missing from the till receipt, which are necessary for it to comply with all the conditions in item 7. Please note that it is not acceptable for the school to complete

this information. c. The retailer should sign, print their name and date the slip/notepaper.


Finally, schools should consider giving their custom to those retailers who can provide eithera suitable till receipt or a VAT invoice, where reclaiming the VAT will effect a saving over asimilar purchase made elsewhere, where the VAT cannot be reclaimed. Another tip If at all possible, school purchases should be made on a separate receipt from any personalpurchases made at the same time. 10. Business Cards Schools may wish to consider using a business card as a method of payment. It can in somecases provide a more ‘convenient’ means of obtaining the necessary documentation forreclaiming VAT, where the total amount is for at least £5 but no more that £100, includingVAT. A retailer may, at the time of a sale, adapt the sales voucher which is given to the cardholder,so that it can serve as a ‘less detailed invoice’. The credit card voucher should already showthe retailer’s name and address, the charge made, inclusive of any VAT, and the date of sale. The retailer must add to the voucher, their VAT Registration Number, the rate of VAT anda description of the goods or services supplied. 11. Catering, tuck shops and vending machines Significant changes have taken place in relation to the VAT treatment of the above in the lastfew years. The latest guidance provided by C&E is shown below and, following this,directions have been provided as to how you should proceed in determining how it applies toyour own circumstances, whether you use Shire Catering or any other caterer. The guidance and references to previous treatment apply to the treatment of sales of‘meals of a traditional type’ i.e. prepared dinners/snacks, and to sales of taxable foods,e.g. chocolate, sweets, crisps and soft drinks, conducted through the General (budgetshare) Account.


We are aware that many schools sell taxable foods through tuck shops and vending machines, and that these are often operated through the Fund (Private) Account. Schools may wish, aftertaking on board the information that follows, to transfer such operations to the General Account. In reaching a decision, consideration needs to be given to the fact that there may beless flexibility as to how the income generated is spent. Those schools that wish to continueusing the Fund Account should bear in mind the advice given in point 12.13 of the mainsection. Please note that these changes could be particularly beneficial to schools, especially thosewith vending machines. GUIDANCE The whole school site is now considered to be a single outlet for catering purposes. This is the key change. Previously the school dining hall/canteen/cafeteria was considered tobe an outlet in its own right and, if there was also a snack bar/tuck shop located elsewhere inthe school, it was also considered to be an outlet. There is now a single test that determines whether or not VAT must be accounted for onsales of food and drink to pupils (taxable foods and the normal catering). The supply by a school of all forms of catering and taxable foods to its pupils, from whateverlocation and however dispensed, will not be subject to VAT as long as the sales, when takenas a whole, are sold at or below cost. Previously it was the case that taxable foods could be sold to pupils free of VAT, from anoutlet, provided that supplies of catering were expected to predominate over sales of taxablefoods at that outlet. If vending machines were located in an outlet, the sales of taxable foods made from them(normally 100%), had to be included in the ‘predominate’ calculation. If cateringpredominated, then whether taxable foods were dispensed from the vending machines or overthe counter, such sales to pupils could be made free of VAT. Significantly, where a vendingmachine was located anywhere other than an outlet, ALL sales of taxable foods were subjectto VAT. Now that a school is considered to be a single outlet, the location of vending machines nolonger matters. THERE IS NO CHANGE IN RESPECT OF SALES TO STAFF AND VISITORS I.E.NOT TO PUPILS, WHERE VAT MUST CONTINUE TO BE CHARGED. How VAT is dealt with in relation to such sales from vending machines is dealt with later inthe text.


Note HCC schools can only provide food and drink to pupils free of VAT, where the ‘at orbelow cost’ criterion is met AND THE SUPPLY OF THE FOOD AND DRINK ISINCIDENTAL TO THE PROVISION OF EDUCATION. DIRECTIONS Calculating ‘At or Below Cost’ C&E have defined cost as being the ‘fully overhead-inclusive cost of bringing the food anddrink to the pupils’. In determining whether the ‘at or below cost’ criterion can be met, it is only necessary to carryout such calculations as are needed to prove that the condition can be met. Obviously, if theinitial calculations are not conclusive, you should look at your costs in greater detail. If you still find that your school is unable to meet the condition, C&E will accept separatecalculations for what would have previously been considered separate outlets i.e. you mayfind that you can meet the condition in respect of the canteen alone but not if you include thevending machine (treated as an outlet) in the 6th form common room. In this situation, sales topupils from the canteen will be free from VAT but ALL sales from the common room vendingmachine will be subject to VAT. • The costs, exclusive of VAT, that could be brought into the calculations include : Direct Costs

- Purchases of food & drink- Purchases of sundry materials (e.g. cleaning)- Staff (preparation/serving/cleaning)- Heat, light, water, (separately metered and solely used in the provision of food

& drink)- Telephone (solely used in relation to the provision of food & drink)- Repairs & maintenance (which can be identified as relating solely to areas used

to prepare and serve food & drink) Indirect Costs

- Rates (based on the appropriate floor area)- Free school meals- Any costs of a type identified under ‘direct costs’ which cannot be allocated

entirely to the service of providing food & drink but where it is reasonable toallocate an amount to the service using an equitable method of apportionment.

• Income – This is simply, actual monies collected.


Collecting cost and income information Much of the information that you will require should be readily available either from yourcatering provider or from the trading records that they provide to you. We would recommend that a calculation is made at least once per year, and at any time that amaterial change takes place in the provision of food and drink to pupils. WARNING It is the school’s responsibility to ensure that the correct VAT treatment is applied.Documentary evidence of the calculations made should be retained with backing workingpapers, in order that this information can be made available to C&E, should they require it. Where C&E determine that the condition has not been met, the school will be liable to payVAT on the full value of affected sales, not just those that take the school into a profitsituation, for a period going back up to three years, plus interest. Where the school has failedon a ‘whole school’ calculation, C&E will allow ‘separate outlet’ calculations as describedpreviously to reduce the level of affected sales; there must, of course, be adequate records inexistence to allow these calculations to be made. Vending machine sales to staff and visitors i.e. not to pupils This item applies to schools who run vending through the General Account, and applieswhether school staff operate the machines or the school’s catering provider. Schools that operate their vending machines through the Fund (Private) Account are notaffected by this item. As it would be administratively difficult to monitor and ‘police’ sales made from vendingmachines to staff and visitors, an apportionment of sales has been agreed with C&E torecognise these particular sales. The reduction will be of the order of £1.47 per £1,000 of income. If Shire Catering operate your vending machines, they will carry out the apportionment andVAT accounting described below, in conjunction with the Taxation Service. All other affected schools need to comply with the arrangements set out below. Apportionment Calculation: Income emptied from a vending machine should be apportioned using a fixed ratio of

1:100 (1 teacher for every 100 pupils equals 101 customers) and VAT accounted foron the income attributable to staff. For example:


Vending machine takings £1,010.00 Staff element (divide by 101) £10.00 VAT in staff element £10 x 7/47 £1.49 (7/47 = the VAT fraction for 17.5%) Net staff element £8.51 Therefore, the pupils' element £1,000.00 The VAT on the income attributable to staff must be declared on the VAT

Reimbursement Claim which is submitted to the School Funding Unit in accordancewith the schools Financial Regulations in the Handbook.

12. Catering contract considerations As briefly mentioned above, the supply of food and drink to pupils, VAT free, is onlypermitted where the supply is incidental to the provision of education. Only where the school (LEA) itself provides the food and drink to its pupils will thesupply be incidental. If you are considering entering into a catering contract with any party other than HCC’s in-house provider, Shire Catering, it is CRITICAL that the contract clearly identifies that theschool provides the meals to its pupils, NOT THE CATERER. (Shire Catering, as part of HCC, falls under the same VAT registration as schools andconsequently no VAT implications can arise from any contractual relationship between aschool and Shire.) Framework ‘VAT free’ treatment, subject of course to the previously discussed ‘at or below cost’requirement, can be achieved where the Caterer acts as Agent of the school. That is, thecaterer acts as a managing agent, purchasing, preparing and serving food and drink on behalfof the school. (A slight but acceptable variation to this is where the caterer acts as principal in respect ofpurchases only.) Please note that, for C&E purposes, an agent is a ‘legal person’ who acts for, or represents,someone else (the principal) in arranging supplies of goods or services. VAT Records - To evidence Input Tax (VAT paid on purchases) and Output Tax (VATdeclared on income) A school should receive a regular invoice from the caterer, supported by a trading account,and this should show, in some form or another, the following VAT amounts:


a. The amount of input tax expended on behalf of the school in purchasing taxable items. This will be a 'memorandum item' i.e. the Caterer's invoice provides a convenient

means of informing you of the amount of input tax that you can recover. The evidencein respect of this amount should be held by the Caterer in accordance with the contract,and be available to you at reasonable notice, if you need to satisfy C&E that you areentitled to recover it.

b. The amount of input tax due on the Caterer's management fee for which the invoice is

the evidence. The invoice may also show the following VAT amount: c. The amount of output tax which the school needs to declare to C&E in respect of

taxable sales i.e. for any sales that do not meet the ‘at or below’ cost rule and/or salesto staff and visitors. As with a. above, this would be a memorandum item. It is notdefinite that the Caterer will report this amount because, in order to do so, they wouldneed detailed knowledge of the circumstances in which the school must declare outputtax. Furthermore, the Caterer may feel that calculating the output tax due to C&E fallsoutside the requirements of the 'keeping and maintaining VAT records' contract clause.

Whether or not the output tax figure has been calculated for you, the Caterer shouldsupply you with such trading records as you consider necessary in order for you to eitherdetermine your output tax liability or verify the Caterer's figure. The evidence supporting your declaration of output tax is held by the Caterer; the sameconditions as mentioned for input tax in a. will apply. Note It is far simpler to resolve VAT problems before contract negotiations have been finalised,rather than once the contract has been signed! We would recommend that, at the earliestpractical opportunity, you satisfy yourself that the DRAFT contract correctly reflects the agentrelationship, and that you see samples of the documentation, so as to confirm that they fulfilyour record requirements. 13. Purchases from County Supplies and Contract Services (CSCS) If a school purchases goods from CSCS for curriculum and non-curriculum purposes,charging the cost to the school's General Account and Fund (Private) Account respectively, itwill require two CSCS 'Customer Numbers'.


The reason for this is that CSCS set up schools as 'VAT Not Chargeable' customers for their curriculum purchases. In other words, CSCS will not add VAT to the purchase price(remember that the school's General Accounts and CSCS fall under the same VATregistration). Fund (Private) Accounts do not fall under the same VAT registration and consequently CSCSmust charge VAT when non-curriculum purchases are made (this VAT will not berecoverable). Please ring CSCS on 01707 281800 if you require a Fund (Private) Account CustomerNumber. (Where schools choose to have more than one General Account Customer Number, e.g. forthe purpose of identifying the purchases of different departments, schools should confirm withCSCS that they have all been set up as 'VAT Not Chargeable' customers.) There may be circumstances where the school wishes to purchase goods for curriculumpurposes that are to be paid for using monies held in the Fund (Private) Account;perhaps monies which have been donated or derived from fund-raising. If this appliesPLEASE SEE paragraph 12.9 of this Section, as it may be appropriate to donate theVAT exclusive cost to the school's General Account and to make the purchases from thisaccount. 14. Voluntary Aided schools It was previously the case that VAT could not be reclaimed in any circumstances on worksthat are the responsibility of the Governing Body. Following the changes introduced by the School Standards and Framework Act 1998, C&Ehave now issued guidance which provides for VAT to be recovered in certain circumstances. PART IV, SECTION 8 OF THIS HANDBOOK PROVIDES A DETAILED EXPLANATIONOF PROCEDURES FOR RECOVERING VAT. 15. School lockers There is no VAT to account for where a pupil is charged a deposit for the 'use of a locker',which is refundable subject to the safe return of the key and there being no damage to thelocker. Where all or part of the deposit is forfeited – due to the key not being returned or because ofdamage to the locker – the amount retained will not be subject to VAT.


Where schools charge a non-returnable fee for the use of a locker and the following conditionapplies: • replacement or repair of lockers is paid for from the school's General Account the fee income should be paid into the school's General Account and 7/47 of this incomeshould be declared as VAT. Where schools charge an amount which is part non-returnable fee and part returnable deposit,7/47 of the fee element will need to be declared as VAT. 16. VAT treatment of recharges for use of school premises This point applies to schools that have entered into agreements of a dual/joint use nature toshare their sports facilities (sports hall, pitch etc.) with other parties, who will operate themoutside of the times that they are in use by the schools themselves. Such parties include: • District/Borough Councils• Facility Management Committees• School Governing Bodies; and• Further Education Colleges

This point does not apply to normal lettings of sports facilities using the ‘LT01Application to Hire Accommodation’ or similar.

VAT treatment

If:

a. the other party is a separate legal entity; andb. NO licence, lease or sublease has been granted by the school to that party; ***

then any recharge, e.g. to recoup costs incurred in connection with cleaning, heat, light, water,repairs, insurance and rates, raised by the school upon the other party or vice versa will beconsidered to be in respect of a management charge.

Any such management charge will be taxable at the standard rate of VAT (ie 17.5%),unless the recharge constitutes a true disbursement, in which case it will be outside thescope of VAT.

*** In order to determine the VAT treatment where there is a license, lease or sublease,please contact the Taxation Service, Corporate Services (see contacts for this Sectionfor details).


Disbursements The only items likely to qualify as disbursements are payments for insurance and rates, andthen only in the following circumstances:

HCC (the School) = Insurance Policy Holder and Rateable PersonIf the other party pays the Insurer and Ratings Authority, perhaps because this is‘administratively convenient’, and at a later time HCC reimburses the full amount, then thepayment should be treated as a disbursement. However, if only a percentage isreimbursed, the payment will be taxable at the standard rate.

Other Party = Insurance Policy Holder and Rateable PersonShould HCC pay the bills, then the same rules as above will apply, except in this case HCCmay recharge the full cost (disbursement) or a percentage (taxable) to the other party.

If you believe you have a disbursement situation, please contact Alex Fitzpatrick or GaryElmes.

Implementation of VAT treatment

1. Where the facilities are shared with a party other than a District or Borough Councilthe above VAT Treatment has always applied.

2. Where the facilities are shared with a District or Borough Council, the above VAT

treatment applies to charges raised for periods which begin on or after 1 April 2001.

For periods prior to the 1 April 2001, the recharge can be treated as outside thescope of VAT. For periods that overlap the 1 April 2001, the charge must be splitin an equitable manner between that which relates to the period ending 31 March(outside the scope) and that which commences on the 1 April (taxable).

Please notify Gary Elmes of any invoices where VAT should have been charged.

Please note that each party must raise a tax invoice in respect of the full value of supplieswhich they have made. NETTING OFF IS NOT PERMITTED under any circumstances.

17. After School Clubs and Breakfast Clubs

These Clubs should be operated as ‘private ventures’ unless agreement has been reachedwith the School Funding Unit that it is appropriate to conduct these activities through theGeneral Account. As private ventures, which are not within HCC’s VAT registration, VATWILL NOT BE RECOVERABLE ON PURCHASES.

" Such private ventures should have a “free standing” Management Committee" They should have a separate bank account for income and expenditure" Staff should be contractually employed by the Management Committee


" The Management Committee should ensure that they have adequate insurance cover.18. Where an original VAT invoice has been misplaced/lost, what is an acceptable

replacement for VAT recovery purposes?

To quote C&E, “You should ask your supplier to provide you with a copy of the invoice. Thismust clearly be marked by the supplier as a duplicate - it is not enough just to get aphotocopy."

Similarly, C&E will not accept a faxed copy of the original invoice.

19. Miscellaneous

a. Goods purchased from the County Supplies and Contract Services (CSCS)Catalogue on behalf of private Nurseries and private After School Clubs, locatedon school sites

This item applies to those schools that use their General Account customer referencewith CSCS to order goods on behalf of enterprises such as the above. Please rememberthat CSCS will not charge you VAT because CSCS and schools’ General Accountsboth come under HCC’s VAT registration (you cannot charge yourself VAT).However, when you supply these goods on to another party, which is not part of HCC,then VAT MUST BE CHARGED where the goods concerned are liable to VAT.

b. Mobile phone top-up cards and vouchers

Top-up cards – As long as the original VAT tax invoice or till receipt is held, VATbecomes recoverable at the point that the card is topped up.

Vouchers - As long as the original VAT tax invoice or till receipt is held, VATbecomes recoverable at the point at which the voucher is activated. As long as thevoucher is activated on the same day as purchase, problems with recovering VAT atthe wrong time should not be encountered.

c. British Telecom (BT) telephone bills

In 2001 BT altered their billing practice such that only those accounts where thecustomer status was set to business automatically received a VAT tax invoice. Aproject was undertaken in response, to ensure that, where any accounts were set toresidential status, BT would also provide VAT tax invoices for these. All schoolsusing BT should therefore be receiving VAT tax invoices.

On the evidence seen, the VAT tax invoice is always the last page of the document set.Care should be taken to ensure that it is not lost or disposed of, and is kept with thepayment documents in order to support VAT recovery.


d. Sales to staff

As with the provision of private phone calls and photocopying (see also Section 11),VAT must be accounted for on sales to staff where the goods or services provided areliable to VAT, e.g. goods obtained through the CSCS catalogue.

e. Sales of second-hand redundant equipment

VAT must be accounted for in respect of sales of equipment where:

- the equipment is the property of the School/HCC, i.e. it was purchased using official monies or it was donated to the School; and

- it is sold to any party outside the HCC VAT registration; and

- the equipment is liable to VAT.

Common examples of where VAT must be accounted for include sales to staff andparents.

f. Sales of motor vehicles

The rules in (e) normally apply. However, where the vehicle was already second-handwhen purchased, VAT may not be due on the entire sale proceeds. Please contact theTaxation Service for further information.

g. Commemorative souvenirs – given or sold to pupils

Advice is often sought as to whether VAT is recoverable on the costs of purchasingsouvenirs such as commemorative mugs, which are to be given or sold to pupils.Several scenarios are shown below with the VAT consequences.

Purchased through the General Account - funded from Budget Share monies –souvenirs given to pupils:Where the relevant points in item 12.7 of the main text are complied with, any VATcharged on the purchase cost can be recovered.

Purchased through the General Account - funded from PTA or Private FundAccount donation – souvenirs given to pupils:In this case, the second condition in item 12.9 of the main text cannot be compliedwith, and hence any VAT charged on the purchase cost cannot be recovered. In thesecircumstances the PTA or the Private Fund Account should purchase the souvenirs.


Purchased through the General Account - funded from Budget Share monies –souvenirs sold to pupils:Where the relevant points in item 12.7 of the main text are complied with, any VATcharged on the purchase cost can be recovered. However, VAT must also be declaredon the income using the calculation in item 12.11 of the main text. If the souvenirswere to be sold at a price in excess of the purchase cost, it would be more VATefficient for the Private Fund Account to purchase the souvenirs (presuming that theFund Account is not VAT registered).

20. Typical items and their VAT liability for quick reference

Examples of typical business supplies which might be made by HCC

Standard-rated - 17.5%Private telephone calls to staff or external organisationsPrivate photocopying to staff or external organisationsSale of second-hand goods/commercial vehicles and scrapSponsorship when a benefit is supplied to the sponsorSales to staff, e.g. stationerySecondment of staffCatering services supplied to an external organisationAccountancy services supplied to an external organisationConsultant services supplied to an external organisationHire of cassettes, video and CDs including charges for late returnsThe testing and repair of equipmentAdmission to parks, entertainments, museums and art galleriesCommission on sales, e.g. at artists’ exhibitionsCleaning and laundry servicesThe sale of refuseReinstatement work to highways (if requested to do so)Provision of parking facilitiesPrivate street worksThe sale of petrolAdvertising servicesGas, electricity and fuel oil supplied to commercial buildings

Zero-rated - 0%Sales of books, leaflets and pamphletsDesign and printing work where the final product is a book, leaflet or pamphletPassenger transport fares (bus and coach)

Reduced rate - 5%Gas, electricity and fuel oil supplied to domestic or charitable non-business buildingsSale of women’s sanitary products


ExemptVocational training supplied to external organisationsSupply of education for which a fee is charged to external organisationsLease/lettings of County property on a commercial basis - mostly exempt with an option to tax

NB lettings of playing fields, or sports halls, where the hirer will use the facilities, arestandard-rated.There are special rules relating to the long term hire of sporting facilities which allowexemption of the hire.

Examples of commonly met Goods and Services

Standard-rated 17.5%Cars and vansStationery – pens, paper, invoice pads etc, see Appendix B subsection (1)Furniture and equipment – computers, photocopiers, printers, etc.Accountancy servicesUniforms and other adult clothingTelephone rental and callsFuel and power to commercial buildingsCrisps, chocolate, soft drinks, alcoholCatering servicesTaxi hireCleaning services

Reduced rate 5%Fuel and power to domestic and charity buildings for a qualifying purposeWomen’s sanitary products

Zero-rated 0%Books, newspapers, mapsMost basic foodDomestic water and seweragePassenger transport – more than 12 seats including the driverChildren’s clothing, including cycle helmets


ExemptMost land transactions – letting, leases, salesInsurance by an insurance brokerPostal services by the Royal Mail (Consignia)LotteriesBank charges for monetary transactionsVocational trainingExamination entry fees

Outside the ScopeCharitable donationsGrantsSalaries and wages

Please note that items purchased from a business which is not VAT registered will not showVAT, even if the items listed are liable to VAT. Such purchases are outside the scope.



TABLE OF CONTENTS

Page

CONTACTS 331

13.1 Introduction 33313.2 Payroll process 33313.3 Employment status of persons engaged by the school 33413.4 Taxable expenses and benefits in kind 33413.5 Authorised signatories 33513.6 Inland Revenue 33513.7 Review of payroll reports 33613.8 Inland Revenue concession for payments to performers, guest

lecturers and speakers336

13.9 Payroll provider 33613.10 Information and returns required from schools with external payroll

arrangements337

Appendix A Employed or self-employed 342Appendix B General agreement with the Inland Revenue on payments 350Appendix C Guidlines for schools' travel and subsistence expenses 352

Annex A Reimbursement of travel expenses 364Appendix D Authorised signatory listing 369Appendix E Requirements for a payroll provider 371Appendix F Monthly and annual returns required from schools with external

payroll arrangements373



CONTACTS

External payroll arrangements Lyn Stainton 01992 555946School Funding UnitSchool Funding UnitWebsite www.thegrid.org.uk/info/sfu

Payment of TP and Prudential AVC Jackie Baker 01992 556284Contributions for schools outside ITNET Payroll Servicescentral payroll contract FAX 01992 555425

Payment of contributions to Local Therese Lea 01992 555385Government Pension Scheme Corporate Finance

Payment of additional or AVC ITNET Pensions Helpdesk 01992 555467contributions for Local GovernmentPension Scheme members

Pay and Inflation Tables for Schools Sarah Moor 01992 555722School Funding Unit

ITNET Accounts Payable Service Eileen Rice 01992 555356ITNET Accounts Payable

Authorised Signatory Forms and Margaret Dewell 01992 555446Schools Listing ITNET Payroll Services

Income Tax legislation Edward Deville 01992 555381Taxation ServiceCorporate Services

Travel and expenses payment queriesQueries about expense claims forms: Amy King 01992 555432EXP1 Schools Delegated (white form) ITNET Payroll

EXP1 Schools Non-delegated Amy King 01992 555432(green form) ITNET Payroll

VAT queries Alex Fitzpatrick 01992 555365Gary Elmes 01992 555311Taxation ServiceCorporate Services


Audit Commission data Susan Groom 01992 555329matching information Internal Audit



13.1 Introduction

Contracting the Authority or a bureau to administer payroll does not relieve the GoverningBody and the Headteacher of all responsibility in this area. They must still ensure that:

• payments are made only to bona fide employees

• payments are made in accordance with individuals' conditions of employment

• payments are made only in respect of services provided to the school

• deductions, including income tax and national insurance, are properly administered

• amendments to the payroll are promptly and properly processed.

• employees have a proper contract of employment and a current copy of the contract isheld at the school

13.2 Payroll process

All salaries, wages, fees, other remuneration (including honorariums) and the reimbursement ofexpenses to employees, whether to established staff or casual, must be processed through apayroll system. This is to ensure proper deductions are made for income tax, national insuranceand, where applicable, superannuation. Please refer to sub-section 13.3 and Appendix A tothis Section to determine employment status of individuals engaged by the school.

Where, during periods of school closures, self-certified timesheets are submitted, the schoolmust ensure that a formal procedure is in place. This will check to see that all expenditureincurred during self-certified periods is appropriate and is reconciled to the payroll monitorreport.

Schools using the Authority’s payroll agent must process any pay or expenses through ITNET.Further guidance for the reimbursement of expenses to employees is provided in Appendix C tothis Section, Guidelines for Schools’ Travel and Subsistence Expenses.

Schools that have other payroll arrangements must ensure that systems set up to reimburseemployee expenses meet Inland Revenue tax deduction and reporting requirements.


13.3 Employment status of persons engaged by the school

The Authority, and all schools and other establishments funded by the Authority, have a duty toidentify any individuals to whom they make payments who should be regarded as an employee.The onus is on the potential employer to determine whether the nature of the engagement hasthe characteristics of an employment – if so the individual engaged must be treated as anemployee. The effect of the PAYE Regulations is to place the responsibility for making thisdecision and settling any tax and national insurance liabilities on the employing party, not onthe individual. This applies whether or not that person later declares those earnings. Therefore,making the wrong initial judgement could have a serious impact in grossing up the schools'costs.

Appendix A to this Section provides guidance on how to determine whether an individual isemployed or not. It is important to note that an individual’s self-declared status as “self-employed” (even when supported by his/her accountant or Tax Office) should not be solelyrelied upon. Schools must rigorously follow the guidance set out in Appendix A to determineemployment status and are recommended to keep a record of the reasons for their decision. Ifthere is any doubt at all, then the individual must be asked to complete the questionnaire at theend of Appendix A and submit this to the County Council’s Tax Inspector for a ruling on thecase.

13.4 Taxable expenses and benefits in kind

Schools must be aware that certain expenses paid to employees may be taxable, dependingupon the nature of the expenses, the level of those expenses and the circumstances in whichthey are paid. For example, travel costs between home and the normal place of work areprivate, andany reimbursement is ordinarily taxable. With reimbursed business travel, any excess ofmileage rates above those accepted by the Inland Revenue attract tax and, where relevant,Employers’ and Employees’ Class 1 National Insurance.

Equally any benefits in kind provided to employees may attract tax and Employers’ Class 1ANational Insurance. These include for example:

• accommodation provided at less than market rent (although there are exceptions wherean employee is required to live on site to fulfil his/her duties)

• use of school vehicles for private use

• clothing provided to employees, except where this meets specific conditions to beclassed as a uniform. In particular, if the clothing is in any way suitable for social orexternal use, it should bear a permanent, fixed logo bearing the name of the school.This should avoid tax and national insurance contribution issues

• school equipment and facilities made available to employees for private use. However,important exceptions include:


- insignificant private use of equipment and machinery on school premises. Forexample, modest and sporadic use of photocopiers and PCs

- private use of employer-owned computer equipment with an original cost of£2,500 or less

- private use of employer owned mobile telephones.

These exceptions apply for tax and national insurance contribution purposes and are obviouslysubject to normal, disciplinary procedures as to the use of Authority equipment.

Facilities and equipment used privately at home, (other than those excepted above) will also beliable to tax and national insurance. This particularly applies to fixed, home telephones wherethe bill is paid by the school.

Essentially, any other goods, services or facilities made available to employees at less than theirmarket value may be deemed to be a taxable benefit. Accordingly any such benefits should bepaid via the EXP1 expenses claim and identified as taxable, where appropriate, or otherwisedeclared to the Inland Revenue. Expense claim forms must be processed via the school’spayroll provider, and the EXP1 expense claim form has been developed for this purpose forschools within the HCC ITNET payroll service contract. Schools that have other payrollarrangements must ensure that a similar mechanism is set up with their payroll provider toensure that, where appropriate, tax and national insurance contributions are correctly deducted.These schools are strongly advised to obtain a dispensation from the Inland Revenue for thepayment of any expenses other than through their payroll provider, and they must makearrangements with their payroll provider to process any taxable expenses as such.Schools will be liable for any unpaid tax, national insurance and penalties thereon.

13.5 Authorised signatories

Headteachers must maintain a list of authorised signatories for payroll administration. Forschools using the Authority’s payroll agent, a copy must be sent to ITNET. ITNET carry out anannual review of authorised signatories. However, schools should ensure that any changes arenotified to ITNET immediately to ensure the authorised listing is kept up to date.

Further guidance and a copy of the form for notifying changes to authorised signatories arereproduced in Appendix D to this Section.

For schools that have other payroll arrangements, a copy must be sent to the payroll bureau orprovided to payroll administration staff.

13.6 Inland Revenue

In employing staff, the Governing Body must, by law, declare to the Inland Revenue paymentsmade to its staff. It follows that, where contractual arrangements are made on behalf of the


Authority, these should be paid through a payroll system. The necessary deductions andemployer's contributions must be calculated, and the school charged with the full cost. It is notcorrect to assume that the employee is responsible for declaring this income for his or her owntax purposes.

The liability of the County Council extends to paying to the Inland Revenue any tax or nationalinsurance due that has not been deducted, and this would be passed on to the school. Inaddition, under the Authority's Scheme for Financing Schools, any fines, penalties orsurcharges levied on the County Council in such circumstances can be charged against theschool's budget.

13.7 Review of payroll reports

Whether paying its own staff or using a payroll bureau (the bureau will provide a payrolltransaction report) the school should ensure through monthly reviews that all, and only, bonafide staff are included, and that all payroll changes are correct. The payroll transaction reportshould be signed and dated to evidence this check.

The school should also check, at least annually, that gross pay agrees with contracts or otherauthorised documents, and that deductions have been correctly determined.

13.8 Inland Revenue concession for payments to performers, guest lecturers andspeakers

Difficult situations can arise when schools purchase services from external suppliers, if theschool does not know whether they are employed or self-employed for tax purposes. It hasbeen recognised by the Inland Revenue that this situation creates work for schools and theaffected departments within the County Council. To try to help with this, Hertfordshire CountyCouncil has negotiated a ‘concession’ in this area where, in the appropriate circumstances, apayment of up to £350 can be paid to an individual gross, without considering his or hertaxation status. This does not, of course, apply where a short term employment contract isintended. This concession is only available to schools within HCC’s contract with ITNET forpayroll services. All schools with external payroll arrangements must separately negotiate asimilar concession with Inland Revenue.

Appendix B to this Section sets out the detailed conditions for this concession; please refer to itand Appendix A before seeking to apply this concession.

13.9 Payroll provider

The Governing Body must seek the advice of the Assistant Director (Resources) before enteringinto contractual arrangements with a payroll bureau other than the County Council's payrollagent (ITNET), or if it is proposing the use by the school of a computerised payroll softwarepackage. The school or payroll bureau would need to comply with the requirements set out in


Appendix E to this Section.The Authority’s Best Value Guide no 4, Good Value in Purchasing Payroll, providesinformation and advice in the selection of a payroll provider. This publication can bedownloaded from the School Funding Unit website. See contacts for this Section.

The contract with such a provider should include:

• job specifications• details on the ownership of programs and data files• identification of who is responsible for

– control and accuracy of data– authorising the bureau to make changes to the data– providing back-up arrangements in the event of systems breakdown

• provision for access for the school's staff and auditors• funding dates if the bureau originates payments• provision for the payment of income tax, national insurance, statutory sick and

maternity pay, superannuation (teachers' and local government) and other deductions.

The Governing Body should review any current contract arrangement regularly and critically.

13.10 Information and returns required from schools with external payrollarrangements

Teachers’ Pensions Regulations

Under the Teachers' Pensions Regulations the Authority is regarded as the employer forpension purposes for all maintained schools. In essence this means that the Authority isresponsible for sending monthly contribution payments, annual salary and service returns andappointment and leaver notifications to Capita, Teachers' Pensions. The responsibility alsocovers payments of Additional Voluntary Contributions (AVCs) to Prudential. This does notaffect the employer/employee relationship in Foundation and Voluntary Aided schools.

The specification for payroll services provided to schools by an external agency must includeprovision for audit access to provide assurance that the correct level of contributions is beingmade over to the Authority.

The arrangements for the consolidation of TP and Prudential AVC payments for schools usingan external payroll provider are as follows:

Monthly

• The external payroll provider must supply ITNET with a report by the last working dayof each month in the formats attached in Appendix F to this Section. The detail mustinclude the total:


– superannuable pay– total number of teachers– employees' contributions– additional contributions– employers' contributions– arrears paid (Elected Further Employment elections)– arrears paid (letters previous years)– refunds made (previous years only)– short term pensions– TR22 election amounts deducted– teachers' Prudential AVCs

Payment arrangements:

- BACS: ITNET will debit the school bank account and credit the HCC bankaccount (both transactions by BACS) with the amounts shown in the monthlyreport on the last working day before the 7th of the following month.

- Standing Order: Payment should credit the HCC bank account on the lastworking day before 7th of the following month.

- Cheque: Payment should be received by ITNET by the 3rd working day of thefollowing month.

• ITNET will maintain records of monthly payments for year-end purposes.

Late Returns

• Returns received after the last working day will be processed with the followingmonth’s contributions.

• Teachers' Pensions charge a penalty of 8% per day for late payment.

• Teachers paying Prudential AVCs will loose interest on contributions if payment isreceived late.

• Any penalty charges levied by TP or Prudential AVCs for underpayment will berecharged to the school, where this is the result of underpayment by the school or theschool's payroll provider.

Annual

• The external payroll provider must supply a detailed employee listing of the followingyear-end details for TP payments to ITNET by the last working day of April:

– superannuable pay– total number of teachers– employees' contributions


– additional contributions– employers' contributions– arrears paid (Elected Further Employment elections)– arrears paid (letters previous years)– refunds made (previous years only)– short term pensions– TR22 election amounts deducted

This information must be provided in the format attached at Appendix F to this Section.

Copies of letters received from the TP for additional contributions and previous years'adjustments must also be included.

• An initial reconciliation will be carried out by ITNET. Schools will be notified if year-end returns do not agree with monthly statements, or if contributions do not agree withsuperannuable pay. The school will be responsible for resolving any discrepancies bythe last working day of May.

• Once the reconciliation is complete, all details will be included in HCC's annual return(PENTR17A) to Capita, Teachers' Pensions.

Late Returns

• Teachers' Pensions charge a penalty of 8% per day interest for underpayment at year-end.

• Any penalty charges levied by TP or Prudential AVCs for underpayment will berecharged to the school, where this is the result of underpayment by the school or theschool's payroll provider.

This information is only acceptable in paper form. The monthly returns may be faxed toITNET but a copy of the original must also be sent. See contacts for this Section.

Annual Teachers’ Service and Salary Return for Teachers’ Pensions

Teachers’ Pensions require that the Authority provide an annual return confirming the serviceof all teachers employed within the Authority. Therefore, Human Resources and ITNET willcontact schools with external payroll arrangements in February of each year to request theinformation in the format prescribed by Teachers’ Pensions.

Local Government Pension Scheme

All non-teaching staff have the option of joining the Local Government Pension Scheme.Hertfordshire County Council administers the scheme, and all contributions to the schemeshould be paid over monthly. The arrangements are as follows:


Monthly

• The school or external payroll provider must supply Corporate Finance with a formdetailing employee’s and employer’s local government pension contributions by the 19th

of the month following deductions from the individual’s salary. See Appendix F for aformat of the monthly form. Corporate Finance will issue new forms every March,which should be used as a master and photocopied as necessary.

• The school or external payroll provider should pay over all contributions by the 19th ofthe month following the deductions from individuals’ salaries. Contributions can bepaid by cheque (made payable to Hertfordshire County Council) or by BACS. Eachpayment should be accompanied by the monthly form.

• The employer’s contribution rate varies every year, and the school will be informed ofthe rate for the new financial year in March each year by Corporate Finance.

• If an employee is purchasing added years, these contributions should also be paid overto the County Council and filled into the relevant box on the monthly form.

• However, if an employee is making AVC (Additional Voluntary Contributions) theseshould be paid directly to Equitable Life or Standard Life and not sent to the CountyCouncil. See contacts to this Section for further details.

Annually

• Corporate Finance will provide the school with a year end form in March each year,which should be completed and returned by the end of May. This summarises thepayments during the year to facilitate reconciliation.

• In addition, the school will need to provide ITNET Pensions with the details ofindividual employees’ contributions during the year to enter onto the Pensionsdatabase. The information required for each individual is: name, national insurancenumber, NI earnings, employees contributions, added years contributions (if applicable)and date started or left, if this happened during the year. See contacts to this Section forfurther details.

Audit Commission data matching

The County Council participates in the annual National Fraud Initiative undertaken by theAudit Commission. This initiative is a data matching exercise designed to reduce the search forfraudulent claims made upon Authorities.

Schools that have external payroll arrangements are required to participate by providinginformation on an annual basis. The Chief Internal Auditor will contact schools and provide


guidance about the information required, format and timescales for this process. See contactslist for this Section for further information.


APPENDIX A EMPLOYED OR SELF-EMPLOYED?

1. Employment Status

Introduction

Where a school engages individuals – other than contracted staff – to carry out officialactivities for which a payment is made from the General Account, the school needs to considerthe payee status of the individual for purposes of income tax and national insurance.

A self-employed person is responsible for his/her own income tax and national insurancepayments.

However, it is the employer (the school) who is responsible for the correct calculation anddeduction of income tax and national insurance from the pay of an employee, and is also liableto pay an employer's national insurance contribution. Failure to account for the above willresult in the school being charged with the unpaid monies, plus any fines, penalties orsurcharges levied.

The law does not define 'employment' and 'self-employment' and the school cannot simplychoose to call a job 'employment' or 'self-employment'.

The issue is determined by considering the circumstances of the working arrangements.

In summary, employment status affects who is responsible to the Inland Revenue for thepayment of income tax and national insurance.

Employed or Self-employed?

The circumstances of the working arrangements are central to the issue. A majorconsideration is the type of contract or agreement. Such a contract need not be in writing; itcan be oral or expressed or implied by the working arrangements. There are two types ofcontract:

• a contract of service• a contract for service.

Neither contract has a precise legal definition. Inland Revenue rely on 'tests' which haveemerged from case law and apply these to the facts of individual cases. Unfortunately, the testsare not exhaustive and therefore do not apply to all possible situations.

These tests aim to establish whether or not a 'master/servant' relationship exists. Control is seenas significant in the determination of status.It is not sufficient for a person to call themselves self-employed, even if that self-employedstatus is recognised by his or her tax office.


An individual can be employed and self-employed at the same time in different jobs.Each and every contract that an individual undertakes must, therefore, be considered on its ownmerits by reference to the conditions and requirements of that particular engagement.

PAYE considerations do not generally apply to genuine limited companies which are engagedby the school.

However, because unincorporated traders sometimes use the phrase “company” in a colloquialfashion, it is important to exercise care in making gross payments in such an engagement.

• Check that the purported company truly exists.

• Enter into a contract only with the company and not with its shareholders or directors intheir personal capacity.

• Make payments on the production of an invoice only to the company.

Tests: Individuals

a. People with a contract of employment (commonly called a contract of service) aredeemed, for purposes of income tax and national insurance, to be employees. As statedabove, a contract of service need not be in writing: it can be oral or expressed or impliedby the working arrangements.

If the answer 'yes' arises from a majority of the following questions, the individualengaged is likely to be an employee and therefore, employed.

• Does the person provide education, in the role of a teacher, lecturer or instructor?

• Does the individual undertake the work, rather than hire someone else?

• Is the individual supervised (in other words instructed what to do or when and how to doit)?

• Is the individual paid a rate by the hour, the day, etc.?

• Does the individual work set hours determined by the school?

• Does the individual work at a place or places decided by the school?

• Does the school supply the equipment needed to perform the work?

In these circumstances, the payment must be processed through the payroll system toensure proper deductions are made for income tax, national insurance and, whereapplicable, superannuation.


b. On the other hand, people who supply services as independent contractors (under whatis sometimes called a contract for service) are regarded as self-employed.

If the answer 'yes' arises from a majority of the following questions, the individualengaged is likely to be self-employed.

• Is the individual not subject to the control, or to the right of control, of the schoolas to what he or she does, and when and how he or she does it?

• May the individual work elsewhere than on the school's premises or at a place orplaces decided by the school?

• Is the work not person-specific? In other words, must the work be done by aperson the school can specify; or may the person involved send a substitute orinvite other people to do the work that he or she has agreed to undertake?

• Is the individual taken on to perform a service which could not be described as'part and parcel' of the employer’s business or organisation'?

• Is a fee paid for the job (rather than a rate per hour, day or week, etc.)?

• Does the individual provide the main items of equipment needed to perform thejob, not just small tools that many employees provide for themselves?

• Does the individual have to correct unsatisfactory work at no cost to the school?

• Could the individual make a loss on the contract?

• Is the individual's business registered for VAT?

Examples:

As a guide only, the following rulings are provided.

Employed

Peripatetic music teacherPiano accompanistTutor or lecturerSwimming instructor

Self-employed

Craftsmen (competent)

It is a question of applying the tests to the facts of a particular case and arriving at a balance ofprobabilities from the evidence. In some cases, satisfying or alternatively failing just one of the


tests will be overwhelming in establishing the position. In other cases, an even number of testswill be in conflict and the decision will be finely balanced.

If in doubt, follow the questionnaire procedure in the next section.

Dispute as to whether Employed or Self-employed

Where there is doubt, the school – until advised otherwise by the Authority's tax office – musttreat the individual's engagement as an employment and therefore process any paymentsthrough the payroll system.

Also, to establish schedule of charge for taxation, the school must request the individual tocomplete the questionnaire reproduced at the end of this Appendix.

For its part, the Authority assents to the use of the questionnaire procedure by the InlandRevenue as providing, in difficult circumstances, its best protection against unexpected PAYEarrears. Persons completing the questionnaire should note that the answers given are theirresponsibility, as is the taking of necessary advice in relation to both the questions asked andany consequent discussions with the Inland Revenue.

The completed questionnaire quoting reference 9517/H1/WW must be forwarded to:

H.M. Inspector of TaxesInland RevenueChapel Wharf AreaTrinity Bridge House2 Dearman’s PlaceSalford M3 5BS

2. What to do next?

Employer

Where an employer/employee relationship applies, all payments to the individual concernedmust be made through the payroll system.

Payroll appointment processes should be followed and claims submitted for payment throughstandard authorisation procedures.

The actions required can be summarised as follows.


Appointment Form/P45 or P46

The purpose of the appointment form is to create a payroll record. The school must complete anappointment form and obtain from the individual their Inland Revenue P45 form (issued bytheir previous employer). If there is no P45 the individual must complete Inland Revenue P46form (PAYE: Employer's notice to tax office) to ascertain the individual's tax code status.

Either the P45 or the P46 must be attached to the appointment form and sent to CSF HumanResources at County Hall, Hertford.

Treatment of Income Tax

Tax will be determined by reference to the P45.

If a P46 is completed, an emergency tax code will initially be used. However, if the individualis unable to sign statements 'A' or 'B', because they have other paid employment or pension,then basic rate tax will be deducted.

The P46 will then be forwarded to the Authority's Inspector of Taxes office, for determinationof tax status.

Treatment of National Insurance

In the main, deductions depend upon the level of earning. No deductions are made if earningsare below a threshold, which is reviewed annually by the Department of Social Security. Thefull rate is applied above the threshold.

Alternatively:

a. a reduced rate is applied if a validly held 'married women's reduced rate certificate' isproduced by the individual; or

b. no national insurance liability arises for individuals over state retirement age, subject tothe employer's receipt of a 'non-liability NI' certificate.

Method of payment

The standard method of payment is a cheque, sent to the home address of the individual.

Alternatively, monies can be paid direct into the individual's bank account (electronic fundtransfer), if details are provided.


Employment contract and pay documents

Category of employee Appointment form Periodic pay formPeripatetic music teacherPiano accompanistTutor or lecturerSwimming instructor

PAY 1 A/EDPAY 1 A/EDPAY 1 A/EDPAY 1 A/ED

FIN 19aFIN 9PAY 8PAY 8

Self-employed

Payment for work where the matter is clear cut, for example a building or electrical contractor.

Payments to contractors and subcontractors who undertake repair and maintenance, where theinvoice contains a labour element, are subject to the Construction Industry Scheme (CIS)regulations. For guidance, please refer to Part IV, Section 14 of this Handbook.

3. Other considerations

Out-of-school activity

Where the school is facilitating an out-of-school activity, and payments to the individualconducting the activity are effectively made by the parents, the school would not be theemployer, provided that the monies are not represented as having been due from and a liabilityof the school.

An out-of-school activity is 'exempt', therefore, only if:

a. it takes place out of school hours

b. the school is not involved in collecting monies and paying these over to the provider ofthe activity or is clearly not directing that activity.


QUESTIONNAIRE TO ESTABLISH SCHEDULE OF CHARGE FOR TAXATIONPURPOSES (EMPLOYER’S PAYE REF: 951/H1/WW)

Dear Sir or Madam

If you consider that your recent engagement with the School is a self-employment, as opposedto an employee appointment, please complete the following information questions to enable thisaspect to be fully considered.

I would stress that, if you have a contract of employment either written or verbal with youremployer, any income (salary, expenses and benefits in kind) from such a contract willconstitute emoluments that will fall within the Schedule E charge (Inland Revenue'srequirements for employed individuals). As such, they will be correctly subject to PAYE (PayAs You Earn). If no such contract exists and there are other arrangements, details of which willbe revealed by the following questions, your employer is required, as an interim measure, tooperate PAYE against those emoluments pending further advice from this office.

1. Full name

2. Home address

3. Tax District and reference to which your returns are sent. (HCC's reference is951/H1/WW)

4. National Insurance number

5. What arrangements have you made or do you intend making with regard to payment ofNI contributions? If you have consulted the Inland Revenue (NI Contributions) Officealready with regard to the type of contributions relevant to this engagement, what wastheir response and could I see copies of any correspondence?

6. Location of this engagement.

7. Date of commencement and length of the engagement.

8. Have you previously worked for Hertfordshire County Council Education Authority, ifso, how do your present terms of engagement differ at all?

9. What exactly is the nature of the work you have undertaken?

10. How did you obtain the job? Was it advertised? If so, did you attend an interview orwhat were the other circumstances of your engagement?

11. Is there a written contract or correspondence concerning your engagement; if so, may Isee copies?


12. If no written contract exists, what oral arrangements were made and with whom were they made?

13. Is your work subject to the control of a senior member of the school staff?

14. Who decides what is to be done and when it is done?

15. Do you attend the school for a set number of hours? If so, what are these and who sets them?

16. Can you substitute your services with those of another person without prior consultationwith the school? If so, who would engage them and who would be responsible forpaying them?

17. If equipment is required in the course of your duties, who provides and maintains it?Please specify what equipment you provide if any?

18. On what basis are you paid, i.e. hours, or a fixed rate regardless of hours worked?

19. Do you submit invoices to the school prior to payment? If so, with what frequency?

20. Does the school pay you any expenses you incur including any travel costs to theirpremises?

21. If you are absent, are you entitled to sick pay and do you have any pension entitlements?

22. Do you provide similar services elsewhere, if so, to whom?

23. Are you entitled to a period of notice in the event that your services are no longer required?

24. Any other information you consider relevant.

The above questions are by no means exhaustive and it may well be necessary to seek furtherdetails from you as required.

On completion of the questionnaire, attach any relevant copies of information requested andplease forward it direct to this office at the following address: HM Inspector of Taxes, InlandRevenue, Chapel Wharf Area, Trinity Bridge House, 2 Dearman’s Place, Salford M3 5BS,Reference 951/HI/WW.

Yours faithfullyR ElkinHM Inspector of Taxes


APPENDIX B GENERAL AGREEMENT WITH THE INLANDREVENUE ON PAYMENTS TO PERFORMERS, GUESTLECTURERS AND SPEAKERS, ETC.

The appropriate circumstances and the conditions applying to this concession are as follows.

1. The individual concerned should be an outsider and should be engaged to provideservices which are not normally provided by the school staff. This will usually excludemembers of staff and staff members from other schools; they would merely beextending their activities outside their usual establishment.

2. The concession is intended to apply in ‘one-off’ situations, (e.g. a professional musicianat a Christmas concert, or an actor discussing approaches to Shakespeare, either personattending the school for only a matter of hours). It is not intended to apply to a series ofengagements, or to payment by instalments. (The Inland Revenue are naturally wary ofattempts at fragmenting a large contract into a series of smaller payments. A £350 limitapplies, therefore, to the totality of the arrangement.)

3. Despite what is said under (2) above, each school can apply the £350 limitindependently and in isolation. It is possible for a single individual to visit severalschools – perhaps spontaneously, perhaps on recommendation – and in thosecircumstances the £350 limit applies to each assignment.

Obviously, any attempts to fragment payments, under a larger, centrally commissionedcontract would not be acceptable.

4. The concession is not intended to apply to everyday situations such as supply teachingor caretakers’ overtime, even if the duties performed are exceptional.

5. This concession is intended for the convenience of all concerned. The benefit arisesfrom not having to worry about the tax position in the circumstances outlined.

It does not follow that, because situations fall outside the above parameters, there willnecessarily be a problem. It does mean, however, that the Inland Revenue requirefurther discussion in such circumstances and the concession described above cannot beapplied without such discussion.


APPENDIX C GUIDELINES FOR SCHOOLS’ TRAVEL ANDSUBSISTENCE EXPENSES

INTRODUCTION

“Self Assessment” tax rules require the Authority to provide employees with the information tocomplete their tax returns correctly. In order to comply with the Inland Revenue rules, theAuthority is required to complete form P11D on an annual basis for the Inland Revenue tomonitor taxation.

All schools must, therefore, ensure that systems are set up to reimburse employee expenses tomeet Inland Revenue tax deduction and reporting requirements.

To facilitate this, the Authority has designed expense forms (EXP1) for use by schools inconjunction with the Authority’s central payroll contract with ITNET. Schools that haveother payroll arrangements must ensure that systems for reimbursement and reporting ofemployee expenses meet all of the Inland Revenue requirements.

COMPLETION AND PROCESSING OF THE AUTHORITY’S EXPENSE FORM FORSCHOOLS WITHIN THE CENTRAL PAYROLL CONTRACT

All reimbursement of employee expenses must be made through the central payroll system sothat any taxable deductions can be made from them. The reimbursement will then be paiddirectly into the employee’s bank account with their normal monthly or weekly pay.

Travel and expenses paid into employees’ bank accounts are not automatically taxed: onlythose that are taxable will have the deductions made.

EXP1 Schools Delegated (White Form)

Schools must submit their employees’ claims to ITNET by the 10th day of each month, to meetthe payroll run for expenses to be paid in that month’s salary. For example, claims for expensesincurred in May must reach ITNET by 10th June for expenses to be paid in June’s salary.Payments of expenses will be reported on the schools’ monthly payroll report.

EXP1 Schools Non-Delegated (Green Form)

Schools must submit their employees’ claims to Offices Services by the 3rd day of each month,to meet the payroll run for expenses to be paid in that month’s salary.

It is important that claims reach ITNET by their payroll run for expenses to be paid in thatmonth’s salary, because of the implications which could arise in relation to the deduction ofnational insurance contributions.Does Self-Assessment affect employees?


Yes. Although not all employees will receive a tax return, all employees will be affected to theextent that everyone has a legal obligation to keep proper records for tax purposes and to notifythe Inland Revenue of any new untaxed sources of income. If employees receive a “Self Assessment” tax return, they will be required to return it to theInland Revenue by the required date. Employees in receipt of benefits and expenses will beprovided with a form P11D from Hertfordshire County Council setting these out in detail. WHAT ARE THE PRINCIPLES FOR CLAIMING TRAVEL AND SUBSISTENCEEXPENSES? 1. The principle of these allowances is the reimbursement of expenses incurred in the

course of an employee’s official duties. Any payments made in excess of reimbursementof actual expenses are deemed to be a taxable benefit. In addition, subsistence allowancethat is claimed within a five mile radius of their normal place of work, then a taxliability is incurred on the amount claimed. The Inland Revenue imposes stringentguidelines in this area and employees are legally bound to supply details to them.

2. The Single Status agreement effective from 1st July 2000 has changed the payment for

subsistence allowances. Payment for subsistence will normally be made only in wherean out of county trip is made or an overnight stay is involved. In addition an employeebecomes eligible for subsistence allowance when:

• prevented by their official duties from taking a meal at their home, administrativecentre or establishment where meals are normally taken

• additional expenditure is incurred to that when following normal mealarrangements

• a suitable meal is not provided.

Where a meal is provided within the cost of a training course but the employee choosesnot to take the meal, they cannot claim subsistence against any expenditure they incurfor an alternative meal. This includes any out of county training.

3. Under no circumstances may an employee claim for expenditure that is not actuallyincurred or mileage that is not actually travelled.

4. The post held by an employee using their car on County Council business will have

designated to it a user allowance. Employees using their car on County Councilbusiness and claiming expenses must have an insurance policy that covers business useand third party claims, including passengers.

5. Wherever possible employees should travel by train or bus at 2nd class passenger rate or

car share when making the same journey. Staff may choose to travel by first classpublic transport but they will only be reimbursed the cost of 2nd class travel.


CAR MILEAGE PAYMENTS AND TAX Business journeys are defined as those journeys made by the employee, during the course oftheir official duties, to somewhere other than their permanent place of work. Home to work journeys are defined as those which start from home and finish at the employee’spermanent work place and/or start from the permanent work place and finish at home. It isHertfordshire County Council’s policy not to pay costs incurred by employees for their home towork travel. Where an employee makes a business journey from home to somewhere other than theirpermanent work place, or vice versa, Hertfordshire County Council requires the employee todeduct their normal home to permanent work place expenses, thus only claiming the additionalexpenses incurred. • Note the exception to this is where an employee makes a second journey of the day to

their permanent place of work e.g. evening meetings or a journey on a day that they donot normally work. In this instance the employee can claim the mileage from home totheir permanent place of work. However, the Inland Revenue will treat any payment forany second trip from home to permanent place of work as taxable and any paymentmade in relation to such journeys will be taxed.

And/or • Where an employee is required to make a second journey or a journey on a day that they

do not normally work and it is to somewhere other than their permanent place ofwork. This journey from home to work can be claimed without offset of normalcommuting and is not taxable.

And/or • Single status has changed the payments in relation to excess travel and travel time

allowance for an employee who has been re-deployed as follows:

The previous two schemes have been replaced with a single payment (which will bemade in two instalments over two consecutive tax years if the employee requests, toavoid pushing annual earnings over a tax threshold). The value of the payment dependson the difference between existing home to work return journey and the newjourney.


Payment will be as follows: 1-4 miles £5185-9 miles £1,55310-14 miles £2,07015-19 miles £2,84620-25 miles £3,623

Each April the rate will be reviewed and increased in line with national annual payaward applicable at that date for all staff in schools whose conditions of service relate tothe National Joint Council for Local Government Services (The Green Book).

Employees receiving the payment must sign an undertaking confirming that if they leavethe County Council within one year of receiving the payment (or an instalment if it ispaid in two parts) they will repay 75% of the sum they have received, 50% if they leavewithin two years.

Inland Revenue travel rules effective from 6.4.98 in relation to business journeys otherthan to the permanent workplace.

Generally speaking, tax relief is available for the full amount of any other necessary andreasonable business journeys, either undertaken from home, or from the permanent workplace.

However, the rules that apply in the County Mileage Policy are quite distinct from those thatapply for tax purposes. Where an employee makes a business journey from home, the MileagePolicy requires the deduction of ‘home to permanent place of work’ miles under the appropriatecolumns on the reverse of form EXP1.

1. Schools-based travel to be met from schools’ delegated budgets

The County Mileage Policy must be adhered to for all staff in schools whose conditions ofservice relate to the National Joint Council for Local Government Services (The Green Book).

Whilst we would recommend schools adopt the County Mileage Policy as good practice,schools are able to write their own Mileage Policy and apply this when making payments fromtheir delegated budgets (except in the case of staff mentioned above). If schools decide toimplement their own policy, the policy must ensure that home to work mileage is taxable; thisfact is not variable. The school may choose to vary the reimbursement rate according to itsreimbursement policy. Schools could, under their own Mileage Policy, choose to pay the totalmileage incurred from home to place visited and return. This could apply only to staff inschools whose conditions of service do not fall under the remit of the Green Book.

Schools should be aware that mileage rates paid in excess of the recommended rates will resultin a taxable benefit for staff members and that there is a legal obligation to report the benefit tothe Inland Revenue.


2. Travel expenses to be met from non-delegated budgets

The County Council Mileage Policy will be followed for all claims made for travel andsubsistence met from this budget.

It will therefore be a requirement that home to permanent place of work miles are deductedunder the appropriate columns of the EXP1 Schools Non-Delegated (Green Form).

3. Record keeping

It is important for all employees to keep a careful record of their overall business mileage andnot merely that element of the mileage which the school and/or Hertfordshire County Council isprepared to reimburse.

Such records will facilitate any claims that they make to the Inland Revenue for additionalrelief, which they may be entitled to where the Inland Revenue provisions differ from that ofthe employer.

TRAVELLING ARRANGEMENTS FOR OUT OF COUNTY TRIPS

It is not possible to prescribe what these will be since they will vary on each occasiondepending on the reason for the journey.

It is the County Council’s policy to encourage the use of public transport. Journeys to Londonshould usually be by train. Remember to use railcards, particularly Network card, wheneveryou can. Employees should agree the best travel option for the journey with their manager priorto making the journey.

Wherever possible employees should arrange to travel together when going by car. The driveris able to claim the current passenger rate per mile per passenger carried only if the journey ispaid at the public transport rate.


COMPLETING FORM EXP1 SCHOOLS DELEGATED (WHITE) AND EXP1SCHOOLS NON-DELEGATED (GREEN)

EXP1 Schools Delegated (White)

Employees must use this form where the expenses incurred are to be paid from the school’sbudget. E.g. all day-to-day school based travelling expenditure would be met from the schoolbudget. Annex A to this Appendix provides details of travelling expenditure to be met from theschools’ budget.

EXP1 Schools Non-delegated (Green)

Employees must use this form where the expenses are not paid from the school’s budget, butfrom the non-delegated budget held centrally and managed by the Office Services Manager atCounty Hall. Annex A to this Appendix provides details of travelling expenditure to be metfrom non-delegated centrally held budgets.

Mileage employees can claim

• Journeys which start and finish at the school. Claim all miles. • Journeys made on the way to or from the school. Total all the miles travelled and

deduct your normal home to school miles. Claim any excess on business miles.

Example: Base LetchworthHome HitchinJourney made From home (Hitchin) to Stevenage = 8 miles

Then from Stevenage to base (Letchworth) = 11 milesTotal = 19 miles minus Hitchin to Letchworth 3 miles

Claim 16 business miles

• Out of the school all day. Total all your miles travelled and deduct your normal home toschool and return miles. Claim any excess business miles.

Example: Base HertfordHome WareJourney made From Ware to Bishops Stortford = 15 miles, Bishops Stortford

To Stevenage = 23 miles, Stevenage to Hoddesdon = 15 miles,Hoddesdon to Ware = 6 milesTotal = 59 miles minus Ware to Hertford and return 8 miles

Claim 51 business miles • Evening and weekend meetings. Claim from home to place/s visited. NB Remember

the journey will be taxable if to the permanent workplace, not otherwise.


• Attending training courses, seminars, conferences. Deduct your normal home to schooltravel. Claim the balance. Training miles paid at the public transport rate.

• Disturbance mileage. (Applicable to staff who have been redeployed and are claiming

excess miles). Claim according to prior written agreement. Claim forms must be completed in full and correctly approved and authorised. Failure to do sowill result in ITNET returning the claim form to the school for amendment. Mandatory items to be completed as follows: • Full name• Home address and postcode• School• Job title• Payroll reference number Staff will find this on their pay slip• National Insurance Number Staff will find this on their pay slip• Category of user Casual/Essential/Lease car/non-designated.• Car make and model• Actual CC Precise details are needed for tax calculations• Vehicle registration• Vehicle Insurance HCC requires that staff using their vehicles for

official business journeys must be covered forbusiness use on their insurance. There is an elementof the mileage rate paid that contributes towards this.Staff are required by law to carry valid insurancefor all journeys.

• All unused lines on reverse side of form must be crossed through to ensure that no otherentries can be added.

• Expenditure code(s) For Schools’ delegated travel the following accountcodes are the only ones under which paymentsshould be made.

2409 Travel and subsistence 241 Travel and subsistence – Training 3401 Subsistence3405 Governor travel and subsistence343 Other Indirect Employee Costs


The cost centre is the seven-character reference asfollows:

E010xxx Nursery E050xxx Education Support Centres E070xxx Special E320xxx Primary E330xxx Middle/Secondary

Note: “xxx” represents the school number andshould be replaced with your school number (e.g.030, 299, 591, 634, 910 etc.

For non-delegated travel EXP1 (Green) please leaveexpenditure codes blank to be completed by OfficeServices.

• Authorised for payment For EXP1 Schools Non-delegated (Green) thisshould be left blank for completion by OfficeServices.

For EXP1 Schools Delegated (White) for all staff(excluding Headteacher claims), this should beauthorised by the Headteacher or other authorisedsignatory with delegated powers. For theHeadteacher’s claim, the form should be approvedby a member of the Governing Body. Please refer toPart IV, Section 10 of this Handbook for furtherguidance about approving the payment ofHeadteachers’ expenses. The claim form shouldthen be authorised for payment by an authorisedsignatory with delegated powers.

• Approved signature For EXP1 Schools Non-delegated (Green) this

must be left blank for approval by Office Services.

For EXP1 Schools Delegated (White) by designatedofficer within the school. Signature of claimant mustbe completed in both sections of the form.

• Signature of claimant Must be completed in both sections of the form. Sections to be completed as a matter of good practice • Claim period This will help identification for school’s budget

monitoring.


• Column A - Date of journey For audit purposes this date must tally with theemployee’s diary.

Columns that must be completed in order to process for payment through ITNET • Column B - Started from Important to enable correct payment of miles to be

made and determine taxable and non-taxablemileage.

• Column C - Places visited Need to be clear about where employee went and

the reasons why to enable correct mileage rate to bepaid. This information should also be recorded in theemployee’s diary for audit purposes.

• Column D - Finished at As column B

• Column E - Total miles This must be the total miles travelled.

• Column F - Home to school In this column enter the miles you must deduct forhome to school travel.

• Column G - Miles claimed These will be the balance of column E minuscolumn F.

• Column H - Training miles Enter any miles travelled and being claimed forin relation to training, attendance at conferences,seminars. This will be column E less column F

• Column I - Public transport miles All non-designated travel and out of county miles are paid at single mileage rate and must be entered inthis column. These will be the balance of column Eminus column F. In some instances it may also beminus column H.

• Column J - Number of passengers Passenger miles are only paid when public transportrates are being paid for the journey.

• Column K – Disturbance and This column must be used to claim any home tohome to work miles work miles for additionaljourneys outside normal working hours, topermanent work place, or approved disturbancemiles. Remember these are taxable.

• Column L - Fares and car parking Can be claimed in full and receipts must be attached.

• Column M - Subsistence Enter subsistence amount claimed. Remember to


enter the reason for the claim in column C. Receiptsfor all expenses must be attached.

• Column N - Other and cycle miles All claims for items not covered in column G tocolumn M should be shown here.

• Telephone calls Staff must ensure when claiming that they submit a VAT recoverable invoice for business calls made from home.

• Totals of columns Any miles in columns F to K on each line completedmust add up to the number of miles at column E.Ensure that each column is totalled at the bottom ofthe column. Total mileage to date (1) will beprevious mileage figure (from 1 April in the currentyear) + column G figure. Total mileage to date (2)will be previous disturbance mileage (from 1 Aprilin the current year) + column K miles. The final boxwill be the total of 1 and 2 and this is the figure to beentered on the next claim in the “previous miles from1 April” section.

• Normal place of work box Number of miles from home to permanent work base(bottom right corner of claim) must be entered hereto ensure correct calculations on deductions of hometo permanent work base miles.

• Excess travel time allowance To be completed as appropriate in individuallyapproved cases. (Usually in accordance withredeployment policy.)

The information from the reverse of the form is transferred to the corresponding rows on thefront of the form. Current mileage rates inserted and calculations made to complete grosscolumn, VAT element, VAT amount and net amount. Please make sure that the information istransferred accurately to the front of the form. EXAMPLE • Row 1 miles claimed would be the figure in column G.• Enter the appropriate mileage rate.• Multiply the mileage rate by the number of miles in the mileage column to give you the

gross figure.• Enter the VAT element on the mileage rate in the appropriate column.• Multiply the VAT element by the number of miles, divide the answer by 100, this will

give the VAT amount to be entered in the column. This figure is then subtracted fromthe gross figure to give the net figure.


• The figures must then be entered onto the tear off portion, in the corresponding rows,with a cost code and account code next to every entry for EXP1 Schools Delegated(White). For EXP1 Schools Non-delegated (Green) the cost centre and account is to beleft blank to be completed by Office Services.

• In some instances it may be necessary to split the cost over more than one account. Thiscan be done, but the information must be fitted into the box.

• Ensure all columns are totalled.• The claim should now be fully completed and can be sent to ITNET for payment.

WHAT HELP IS AVAILABLE?

• Please contact Amy King, ITNET Payroll on 01992 555432 if you have payment queriesabout EXP1 Schools Delegated – the white form.

• Please contact Amy King, ITNET Payroll on 01992 555432 if you have any queries

about EXP1 Schools Non-delegated – the green form. • VAT queries should be directed to Gary Elmes on 01992 555311 or Alex Fitzpatrick on

01992 555365. • Income Tax queries should be directed to Edward Deville on 01992 555381.

GOOD FINANCIAL PRACTICE

Schools are advised to do the following:

Retain copies of information claimed on EXP1 Schools Delegated (white) and EXP1 SchoolsNon-delegated (green) claim forms for a period of six audited years plus the current year.

Ensure that anyone using their car to make journeys for official school business has their carinsured for business use.

Claims from non-employees, e.g. external candidates’ interview expenses may be paid locallyin school using the form A50 or T1. The form should then be retained in schools for six years.


ANNEX A REIMBURSEMENT OF TRAVEL EXPENSES

The following chart sets out recommended reimbursement mileage rates for school basedtravel that is met from the schools’ delegated budget.

Activity/journey Rate Applicable

School trips or journeys, (including planning and preparationvisits)

Single Status Rate

School sporting events, (whether held at the school or at othervenues, e.g. inter-school events)

Single Status Rate

Any journey connected with out-of-school activities, (such asvisits to swimming pools, music centres, teachers centres)

Single Status Rate

Transport of ancillary or relief staff Single Status Rate

Any visits to other education establishments within theCounty (e.g. Primary/Secondary liaison, school/collegeliaison)

Single Status Rate

Official visits to pupils’ homes Single Status Rate

Carrying sick/injured pupils home, to doctor or to hospital Single Status Rate

Journeys connected with pupil work experience (includingpreparation and follow up visits, travel to venues offeringformal, simulated work experience)

Single Status Rate

Collection of equipment from, for example, Hertsmedia Single Status Rate

All training events Public Transport

Interview expenses for teachers attending interview at yourschool (this includes travel and subsistence claims)

Public Transport

Attendance at case conferences for pupils attending yourschool

Single Status Rate

Visits to other schools where pupils are placed temporarily(e.g. special schools or units)

Single Status Rate

Visits to school annexes for teaching purposes (split-sitetravel)

Single Status Rate


Visits to other schools for joint planning and teachingactivities

Single Status Rate

The banking of money on behalf of the school or Authority Single Status Rate

Journeys from home to work for ‘directed’ activities outsidenormal school hours, connected with attendance at staffmeetings, parent consultation meetings, PTA Committeemeetings and Governing Body meetings. Travel from home towork and work to home is subject to the deduction of incometax and payment is made through payroll.

Public Transport

Travel expenses to be met from non-delegated budgets

Journeys and expenses connected with the following activities will be met from non-delegatedbudgets.

Travel for ‘official’ County business

Reimbursement of the cost of travel for ‘official’ County business listed below to eventsorganised by or on behalf of the authority. Where journeys do not fall into one of the categoriesbelow the school must meet the costs.

Activity/journey Rate Applicable

Official attendance at events on behalf of the Authority, (e.g.funerals or special events at the invitation of local industry orother agencies.

Single Status Rate

Extraordinary meetings of education-related organisations atdistrict, divisional, County or national level. These must be ofclear benefit to the Authority (e.g. Hertfordshire Teachers’organisations, Herts Sports Association Committee or othersporting activities not at school level). This does not includeTrade Unions or Associations, or routine divisional meetingsof heads not arranged by the Authority.

Single Status Rate

Meetings or exhibitions arranged by or at the request of theAuthority.

Single Status Rate

Travel to official, LEA sponsored in-service training activitieswhere participation is as a tutor or direct contributor. Thisdoes not include as a recipient of training.

Single Status Rate


Travel Rates Applicable from 1 April 2003

Mileage Rate VAT elementSingle Status RateUp to 10,000 miles 40.00p 1.58pOver 10,000 miles 25.00p 1.58p

Training Rate 27.30p 1.58pPassenger Miles - only paid with training rate 2.76p 0


APPENDIX D AUTHORISED SIGNATORY LISTING

1. It is a fundamental principle of internal control that all transactions should be authorisedin line with the County Council’s financial regulations. ITNET maintains, on behalf ofthe Authority, a full list of schools’ authorised signatories and uses the list to check theauthorisation of payroll, accounts payable and accounts receivable items.

2. Authorised signatories will be those employees of the school that have been delegatedresponsibilities in accordance with the school’s Schedule of Delegation for authorisingpayments. Please refer to the Financial Handbook for Schools, Part IV, Section 1 forfurther details.

3. Each authorised signatory within the school must complete a copy of the attached formand provide two specimen signatures in the boxes provided. The form must then beauthorised by the Headteacher or, where the form relates to the Headteacher, by theChair of Governors.

4. Completed forms should be returned to:

Margaret DewellITNET Payroll ServicesCounty HallHertford SG13 8TN

A copy must be retained within the school for future reference.

5. Schools should ensure that the authorised signatory listing held by ITNET is kept up todate and changes are notified as and when they occur. The form overleaf can be usedfor this purpose.

6. ITNET will check the authorisation of payroll, accounts payable and accountsreceivable items against the authorised signatory listing for the school. Due to thevolume of transactions processed on behalf of schools, these checks will be carried outon a rolling programme of sample checking of transactions.


AUTHORISED SIGNATORY FORM ITNET Managed Financial Services on behalf of Hertfordshire County CouncilCounty HallHertford SG13 8T

This form should be completed to register details of new authorised signatories of the school or to make changes to existinginformation. Schools must ensure the authorised signatory listing held by ITNET is kept up to date and any changes arepromptly notified. The Headteacher can authorise changes to authorised signatories for staff within the school. The Chair ofGovernors must authorise changes to the authorised signature of the Headteacher.

Please complete this form in BLACK ink. Completed forms should be sent to the above address for the attention of theAuthorised Signatory Administrator. A copy must be retained for school records.

For queries about the completion of this form, please call Margaret Dewell on 01992 555446.

1 ACTION: # ADD # DELETE # REVISETick one box only

AUTHORISED SIGNATORY DETAIL

2 PRINTED NAME: JOB TITLE:

SPECIMEN SIGNATURE Sign both boxes for verification

AUTHORISED TO SIGN Tick relevant boxes

Accounts Payable and Receivable3 Personnel and Payroll Forms# E156 or PAY1A New Starter Appointments# E156 or PAY1A Employment Contract Variation

(Change of Contract)# E156 or PAY1A Other Allowances# Fin5, FIN10, PAY8 PAY 20 Temporary Amendment

Timesheets# PAY3 Employment Contract Termination (Leavers)# Application for ExGratia Pay/Honoraria# Application for Maternity Absence# Application for Emergency Payments# INS Sickness Supply Claim

# A14 HCC Creditors System# EXP1 Travel/Expense Claim Form (only for schools within HCC ITNET Payroll Contract)

Delegated Limit (if any): ……………………………

# W01 Debt Write Off

Delegated Limit (if any): ……………………………

4 SCHOOL NAME: SCHOOL NO.SCHOOL TYPE: Ring as appropriate: E010-Nursery E050 – ESCs E320-First/Primary E330-Middle/Secondary E070-Special

5 DECLARATION:The above member of staff is authorised to sign the documents indicated within the limits defined.

Signed: ………………………………………………………………………………………...Headteacher/Chair of Governors

Date:……………………………………………….

For use by ITNET: Received: …………………………………………… Database Updated: …………………………………………….


APPENDIX E REQUIREMENTS FOR A PAYROLL PROVIDER

1. Statutory commitments

• Income tax and national insurance: as defined in the Inland Revenue’s YearEnd Pack. In particular, The Employer’s Quick Guide to PAYE; TheEmployer’s Further Guide to PAYE (CWG2) and Booklet 480, Expenses andBenefits: A Tax Guide.

• National insurance contributions: as defined in the Employer’s Manual on National Insurance Contributions

• Statutory Sick Pay (SSP): as defined in the Employer’s Manual on Statutory Sick Pay

• Statutory Maternity Pay (SMP): as defined in the Employer’s Manual on Statutory Maternity Pay

• Working Families Tax Credit and Disabled Person’s Tax Credits (see Year EndPack)

• Recovery of Student Loans (see Year End Pack).

2. Conditions of Service

• Apply the relevant Scheme of Conditions of Service in relation to all payment matters, or any local variations as defined by the LEA.

3. Teachers Pensions Scheme

• Calculate and collect contributions in accordance with the DfES requirements.• Pay over the collected contributions to the LEA for submission to the DfES

monthly.• Calculate and pay amounts due to teachers' dependants under the Short Term

Pension Regulations and make the recovery from the DfES.• Provide the relevant year-end returns relating to contributions, required by the

DfES.

4. Local Government Pension Scheme

• Calculate and collect contributions in accordance with the Regulations.• Pay over the collected contributions to the Local Government Pension Scheme

monthly.• Produce an annual schedule of contributions.

5. Other deductions


Calculate, collect and pay over, the collected contributions for:

• court orders - attachment of earnings- child maintenance- debt recovery- council tax

• voluntary subscriptions(as requested)

- National Union of Teachers- Local Government Officers Association- National Union of Public Employees

• Teachers' Benevolent Fund• UNISON Benevolent Fund• rent (of county council property)• loan repayments.


APPENDIX F MONTHLY AND ANNUAL RETURNS REQUIREDFROM SCHOOLS WITH EXTERNAL PAYROLLARRANGEMENTS

TEACHERS’ PENSION SCHEME CONTRIBUTIONS

Monthly TP and Prudential (AVC) contributions deducted by payroll provider on behalf of: -

School Name School No.

Month Year

Superannuable Pay–This period £ Total No. of Teachers’

TEACHERS’ PENSIONS Code: 711 / 0480 / 9493

This PeriodEmployees’ Employees’

AdditionalEmployers’ Total

Contributions £ £ £ £Previous YearsArrears Paid(in respect of EFE elections) £ £ £

Arrears Paid(letters of adjustment in respect ofprevious years)

£ £ £ £

Refunds Made(previous years only) £ £ £ £

Short Term Pensions £ £

TR22 Election Amounts Deducted £ £

Totals £ £ £ £

PRUDENTIAL – AVC’s Code: 711 / 0490 / 9493 Total

Employees Contributions - Listings attached £

Notification should be made promptly and in any case no later than the last working day of the month.

Payment method: (please delete the methods not applicable)• BACS -I authorise ITNET to transfer the above amount from the school account to HCC.• Standing Order - The above amount will credit the HCC A/C on __________________.• Cheque - Enclosed.

Signed: ______________________ Position: _________________________

Print Name: ______________________ Date: _________________________

Please return this form to: Jackie Baker, ITNET Payroll SupportCounty Hall, Pegs Lane, Hertford SG13 8TNFax: 01992 555425 email: [email protected]

For use by ITNET Payroll Support

Received by: ______________________Date: ____________________________


Format for - MONTHLY RETURN OF PRUDENTIAL (AVC) PAYMENTS

TEACHERS PRUDENTIAL (AVC) PAYMENTS

School Name School No.

Month Year

Teachers’ AVC - % / FIXED Amount

Pay Ref Surname & Initials NI Number Sex Amount

111111 Andrews A AB123456A F 40.00

222222 Bale B AB654321B M 20.00

Total 60.00

Please return this form to: Jackie Baker, ITNET Payroll SupportCounty Hall, Pegs Lane, Hertford SG13 8TN

Fax: 01992 555425 email: [email protected]


Received by: ______________________ Date: ____________________________

Format for - ANNUAL RETURN OF TEACHERS’ PENSION PAYMENTS

TEACHERS’ PENSIONS ANNUAL SUPERANNUATION RETURN

School Name School No. Year

Current Year Previous YearsPay

RefSurname

andInitials

SuperPay

Addit.Conts.

EE’sConts.

ER’sConts.

Arrears Paid(EFE

elections)

Arrears Paid (lettersprevious years)

Refunds Made(previous years only)

ShortTerm

Pension

TR22ElectionAmountsDeducted

ResignedDate

EES ERS EES Add ERS EES Add ERS ERS Add111111 Andrews

A29,255.00 1,755.30 2442.79

222222 Bale B 12,518.50 751.11 1045.29 62.30 76.84

333333 Carter C 25,472.00 1,528.32 2126.91 89.66

444444 Dicks D 27,460.00 282.30 1,647.60 2292.91

555555 Evans E 4,723.42 283.41 394.41 2535.00 21/05/99

TOTALS 99,428.92 282.30 5,965.74 8302.31 0.0 0.0 62.30 0.0 76.84 0.0 89.66 0.0 2535.00 0.0

Total Number of Teachers – 5

Please return this form to: Jackie Baker, ITNET Payroll SupportCounty Hall, Pegs Lane, Hertford SG13 8TN

Fax: 01992 555425 email: [email protected]


Received by: ______________________ Date: ____________________________

Financial Handbook for Schools

Hertfordshire C

ounty Council

Part IV: G

uidance – Section 13 Pa ge 45

RES03529 Issue 3 : A

pril 2003


FORMAT FOR MONTHLY LOCAL GOVERNMENT PENSION SCHEME RETURNS

HERTFORDSHIRE LOCAL GOVERNMENT PENSION FUND

PENSION SCHEME CONTRIBUTIONS

Monthly pension contributions paid by participating LGPS employers to the administeringauthority, Hertfordshire County Council, in accordance with the Local Government PensionScheme Regulations 1997 (as amended).

To be completed on behalf of XYZ SCHOOL

Details of pension contributions for the month/quarter ending [date] as shown below.

Type of Contributions Cost Centre Detail Code AmountEmployee’s Basic X490xxx 9641Employee’s Additional X490xxx 9661Employer’s X490xxx 9642

TotalAdjustments (if applicable)

Please note: Payments should be made promptly and in any case no later than the 19th day ofthe month following the payment period, e.g. for the monthly payments, by 19th May inrespect of contributions collected for the period 1st - 30th April.

Payment method : Cheque enclosed / BACS (please delete the method not applicable).

Certified correct by : __________________________________

Job Title : __________________________________

Date : __________________________________

Please return this form to: Sandy Campbell, Corporate ServicesHertfordshire County Council, Pegs LaneHERTFORD SG13 8DQ

For use by Hertfordshire County Council Corporate Services

Received by : ______________________ Receipt No : ____________________

Date : ______________________ Batch Date : ____________________


FORMAT FOR ANNUAL LOCAL GOVERNMENT PENSION SCHEME RETURNS

STATEMENT OF CONTRIBUTIONS PAID OVER FOR THE PERIOD

Ref: XXX Name of Employer: XYZ SCHOOL

Please list contributions, in respect of employees’ basic employees’ additional, and employer,paid over to Hertfordshire County Council for the year.

Month Employees’Basic

£

Employees’Additional

£

Employer’s

£

Date Paid

AprilMayJuneJulyAugustSeptemberOctoberNovemberDecemberJanuaryFebruaryMarchAdjustmentsTotal

Certified correct by: _________________________________________

Job Title: _________________________________________

Date: _________________________________________

Please return this form to: Sandy Campbell, Corporate ServicesCounty Hall, Pegs Lane, HertfordHerts SG13 8DQ

____________________________________________________________________

For use by Corporate Finance

Reconcile to Access Signed ……………………….. Date ………………..

Journal Completed Signed ………….…………….. Date ………………..



TABLE OF CONTENTS

Page

CONTACTS 380

14.1 Introduction 38214.2 How does the scheme work? 38214.3 What is a subcontractor? 38314.4 What is a contract? 38314.5 What are construction operations? 38314.6 When can payment be made? 38314.7 When should the deduction be made? 38414.8 Should the deduction be made from the whole payment? 38414.9 County Council arrangements 38414.10 CIS certificates 38514.11 Executive summary 38614.12 CIS and Voluntary Aided schools 386

Appendix A Definitions of Construction 389Appendix B Specimen copies of Subcontractor registration cards 391



CONTACTS

Processing invoices Eileen Rice 01992 555356via ITNET and Margaret Fisher 01992 555355subcontractors ITNET Limiteddocumentation Accounts Payable Service

Official finance stationery County Supplies Department 01707 281800

Approved contractors Chris May 01992 555325Financial Strategy Group

Construction Industry Scheme Edward Deville 01992 555381technical tax issues Taxation Service

Corporate Services



14.1 Introduction

The Construction Industry Scheme (CIS) was introduced by the Inland Revenue to combat tax evasionin the construction industry. The Scheme was significantly tightened with effect from 1 August 1999,and the old 714 Certificates were withdrawn from that date.

Payments to contractors and subcontractors who undertake repair and maintenance work for schools,where the invoice contains a labour element, are subject to the regulations contained in the scheme.The regulations relating to the CIS are contained in the Inland Revenue publication 'ConstructionIndustry Scheme - Construction Industry Series IR 14/15' which accompanies this Handbook.

It is important to comply with the provisions of the scheme as, where a payment is deemedto be dealt with incorrectly, the tax liability will fall on the school. This will result in anunnecessary additional cost against the school's budget.

The only areas of exception are “small payments” (see 14.2 below) and certain works onVoluntary Aided schools (see 14.12 below).

Before engaging contractors or subcontractors, the school must ascertain whether theworks will be subject to CIS legislation. In the event that CIS applies, then the schoolmust confirm that the contractor or subcontractor holds a valid registration card or taxcertificate as specified in Section 14.6 below.

In addition, the school should confirm that a copy of the registration card and taxcertificate is held by ITNET Accounts Payable to ensure that payments can beprocessed.

The Inland Revenue are currently consulting with a view to reforming and simplifying CIS.Any resulting changes are likely to operate from April 2005. Future editions of thisHandbook will accommodate these changes.

14.2 How does the scheme work?

Under the scheme, a contractor (local authority) has to make a deduction in certain situationswhen making a payment to a subcontractor under a contract relating to constructionoperations.

Note that, by Inland Revenue regulation, CIS is disapplied in schools in relation tocontracts with a total labour element of £1,000 or less (ie £1,000 excluding VAT andmaterials).


Such contracts can be settled directly by the school without compliance with CIS. Whatfollows, including the necessity to inspect certificates, applies only to contracts in excessof that limit.

14.3 What is a subcontractor?

The term subcontractor includes:

• a company, any corporate body or public body, as well as any individual self-employedperson running a business or partnership

• a labour agency or staff bureau which contracts either to get work done with its ownworkforce, or to supply workers to a contractor

• a foreign business, if the construction operations for which it is being paid take place inthe United Kingdom

• a local authority (and its Direct Service or Labour Organisation) or public body (or itssubsidiaries), if they are engaged on construction operations for someone else

• a gang leader who agrees with a contractor on the work to be done, and in turn receivespayment for the work of the gang.

14.4 What is a contract?

A contract means any legally binding agreement or arrangement under which one person doeswork or provides services for another person. A contract includes an agreement made byword of mouth as well as a written document.

14.5 What are construction operations?

The definitions of construction and which types of work come under the scheme are shownin Appendix A to this Section. It is important to note that what might be regarded as fairlycosmetic operations (e.g. painting and decorating) come within the definition.

14.6 When can payment be made?

Payment can only be made where the subcontractor holds:

• a temporary Registration Card CIS(4)(T) or a Permanent Registration Card CIS(4)(P)• a subcontractor’s Tax Certificate CIS(6) or• a Construction Tax Certificate CIS(5) or a certifying document relating to it.Please see specimen copies of these items at Appendix B to this Section.


Unless a subcontractor holds and can produce one of these documents, it infringes tax law topay him. Failure to observe this prohibition can result in a penalty of £3,000.

14.7 When should the deduction be made?

If the subcontractor holds Registration Cards CIS(4)(T) or CIS(4)(P), tax has to be deductedfrom the payment, where the total (excluding VAT and materials) exceeds £1,000.

A deduction under the scheme should not be made where the person is an employee. InsteadPay As You Earn (PAYE) must be applied in all circumstances to the payments.Please refer to Part VI, Section 13, Appendix A for further information on decidingemployment status.

14.8 Should the deduction be made from the whole payment?

The following should be excluded when working out the amount of payment from which thededuction should be made:

a. Value Added Taxb. the direct cost, to any other person, of materials, consumables stores, fuel (except fuel

for travelling), plant or plant hire used in the construction operationsc. the cost of manufacture or prefabrication of materials used in the construction

operationsd. any Construction Industry Training Board levy.

Any travelling expenses (including fuel costs plus profit element) and subsistence paid to thesubcontractor should be included in the payment from which the deduction is made.

14.9 County Council arrangements

CIS is undoubtedly a complex scheme. To simplify matters, the County Council operates thefollowing arrangements.

a. Invoices under a contract with a total value of £1,000 or less, (excluding VAT andmaterials) may be paid by the school.

b. Such invoices over £1,000 should be processed and sent either:

i. to the County Council's accounts payable agent, ITNET, Accounts PayableService, County Hall, Hertford, SG13 8TN; or

ii. to the County Council’s Property Services (when relevant under the tradingarrangements)


When the school receives the invoice for payment, providing the work is satisfactory, itshould be authorised by the Headteacher for payment. In order to do this, an A529R (yellow)coding slip must be completed and attached to the invoice. An A14 form should also becompleted and attached to the invoice, and properly authorised. See Part IV, Section 10,Appendix B for guidance on completion of these finance forms.

14.10 CIS certificates

Where a subcontractor is not on the County Council's approved list, the school must ascertainwhether the subcontractor holds valid tax exemption certificates, CIS(5) or CIS(6), orRegistration Cards CIS(4).

Where the subcontractor holds a valid certificate CIS(5) (or relevant certifying documents), orCIS(6), the original certificate – not a copy – must be produced.

What checks should the school apply?

Is it genuine?

Check that the certificate is one issued by the Inland Revenue – examples are shown atAppendix B to this Section. Please also see the checks prescribed by the Inland Revenue inBooklet IR14/15, circulated with this Handbook.

Is it in date?

Check that the 'valid from' date (where shown) has passed and that the 'expires end' date hasnot been reached. (CIS in its present form was introduced in 1999, and certificates issued thenare renewable during 2002. Please take care to ensure that the certificate is current and valid.)

Is this the certificate holder?

Check that the photograph on the certificate is the person presenting it. Ask for a specimensignature and check to see that it matches the signature on the certificate. If there is still somedoubt, the school should ask for further proof of identity.

A copy of the (original) certificate must be annotated with the following words 'Originalcertificate seen and correct' and signed by the Headteacher or other authorised signatory. Itshould then be sent with the payment documents either to the County Council's accountspayable agent, ITNET, Accounts Payable, County Hall, Hertford SG13 8TN, or to the CountyCouncil’s Property Services, as appropriate.

Where a contractor does not have a ‘tax exemption certificate’ an invoice is required whichidentifies the labour and material elements separately. Because this will form the basis fordeduction of tax by ITNET, it is most important that this apportionment is obtained and is


considered to be an accurate and realistic breakdown in the light of the school’s knowledge ofthe work undertaken.

The school should attach a copy of the Registration Card to the A14. ITNET will then make avariable deduction (presently set at 18%) from the invoice total before payment is made.

If in any doubt, contact the County Council's accounts payable agent, ITNET. See contactslist for this Section.

Remember – any failure to comply could result in the school having to pay the deduction.

14.11 Executive summary

• If the labour element of the total contract is less than £1,000, CIS is suspended and theabove rules do not apply. The school can pay the subcontractor direct.

• If the labour element exceeds £1,000, decide whether the contract involves a'construction operation'.

• If a construction operation is involved and the subcontractor is not on the CountyCouncil’s approved list, ascertain whether a registration card or a certificate is held andcarry out the necessary inspections. Remember, if neither is held, payment cannotbe made.

• In the case of registration cards, ensure that the invoice contains a proper breakdownof labour and materials costs.

• Authorise the payment and process centrally as appropriate.

14.12 CIS and Voluntary Aided schools

Voluntary Aided schools are, for the time being, excluded from CIS in respect of buildingwork which is the legal and contractual responsibility of the Governing Body. The InlandRevenue have recently made the following public statement:

“While the treatment of most types of school under CIS has been settled, the positionof Voluntary Aided schools has not been resolved ………… It has not yet beendetermined whether such schools are definable as “contractors” under CIS. They arenot, therefore, liable to operate the Scheme for the time being. This may change if it isdecided in future that they fall within the legal definition of contractor, and the matterwill then be given appropriate publicity.”

This is a rare exception, and proves the rule that all other schools, Community andFoundation, are considered by the Inland Revenue to be within CIS. Moreover, the Authoritytakes the view that it remains a ‘deemed contractor’ in relation to its legal and contractual


responsibilities for the internal fabric and grounds of a Voluntary Aided school, and CISshould continue to be operated where the appropriate facts arise.


APPENDIX A DEFINITIONS OF CONSTRUCTION

1 The following operations are considered to be construction operations.

a. The construction, alteration, repair, extension, demolition or dismantling ofbuildings or structures (whether permanent or not), including offshoreinstallations.

b. The construction, alteration, repair, extension or demolition of any worksforming, or to form, part of the land, including walls, road-works, power-lines,telecommunication apparatus, aircraft runways, docks and harbours, railways,inland waterways pipelines, reservoirs, water mains, wells, sewers, industrialplant and installations for purposes of land drainage, coast protection or defence.

c. The installation in any building or structure of systems of heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fireprotection.

d. The internal cleaning of buildings and structures, when this forms part of thecourse of their construction, alteration, repair, extension or restoration.

e. Operations which form an integral part of, or are preparatory to, or are tocomplete such operations as previously described in this subsection, including siteclearance, earth-moving, excavation, tunnelling and boring, the laying offoundations, erection of scaffolding, site restoration, landscaping and theprovision of roadways and their access works.

f. Painting or decorating the internal or external surfaces of any building orstructure.

2 The following operations are not considered to be construction operations.

a. Drilling for, or extracting, oil or natural gas.

b. The extraction (whether by underground or surface working) of minerals;tunnelling or boring or construction of underground works for this purpose.

c. The manufacture of building or engineering components or equipment, materials,plant or machinery, or the delivery of any of these things to a site.

d. The manufacture of components for systems of heating, lighting, air-conditioning,ventilation, power supply, drainage, sanitation, water supply or fire protection, ordelivery of any of these things to a site.


e. The professional work of architects or surveyors, or of consultants in buildings,engineering, interior or exterior decoration or in the laying-out of landscape.

f. The making, installation and repair of artistic works such as sculptures, muralsand other works which are wholly artistic in nature.

g. Sign writing and the erecting, installing and repairing of signboards andadvertisements.

h. The installation of seating, blinds and shutters.

j. The installation of security systems, including burglar alarms, closed circuittelevision and public address systems.

k. Carpet fitting, even if it is included in part of a building contract.


APPENDIX B SPECIMEN COPIES OF SUBCONTRACTORREGISTRATION CARDS