Guidance Notes for the Operation of Schools Local … Notes for the Operation of Schools Local Bank ... adjustment to reflect under/over ... Guidance Notes for the Operation of Schools

Guidance Notes for the Operation of Schools Local Bank Account Updated October 2017

Guidance Notes for the Operation of Schools Local Bank Account

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CONTENTS

SECTION 1 INTRODUCTION 3

SECTION 2 BANKING ARRANGEMENTS 4

2.1 Bank Details 4

2.2 Terms and Conditions 5

2.3 Administration of the School Account 5

2.4 Internet Banking 5

2.5 BAC's 5

2.6 Credit Card 5

SECTION 3 FUNDING OF ACCOUNTS 6

3.1 Balances 6

3.2 Closure of Imprest Accounts/New Petty Cash 6

3.3 Funding Arrangements & Payment of budget share 6

3.4 Payroll 7

SECTION 4 PAYMENT PROCEDURES 8

4.1 The Access Rights Matrix 8

4.2 Cheques 8

SECTION 5 INCOME PROCEDURES 9

5.1 Income 9

5.2 Unofficial School Funds 9

SECTION 6 ACCOUNTING INFORMATION 10

6.1 Authority requirements 10

6.2 Additional year end requirements 10

6.3 Monthly Oracle reconciliation 11

SECTION 7 CENTRAL CHARGES/REIMBURSEMENTS 11

SECTION 8 VAT REQUIREMENTS 12

SECTION 9 RETENTION OF RECORDS 13

SECTION 10 SUSPENSION OF BANK ACCOUNT 14

SECTION 11 INTERNAL AUDIT SERVICE 15

SECTION 12 CONTACTS AND USEFUL NUMBERS 15


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SECTION 1: INTRODUCTION

These guidance notes have been written specifically to ensure consistent accounting practice in all of the bank account schools.

Regulations under Section 48 of the School Standards and Framework Act 1998 require the Authority to include within its Scheme for Financing Schools a provision which permits any school covered by the scheme to request that it operates its own local bank account. Section 3.5 of the Authority's Scheme.

Schools must give the Authority a minimum of three months' notice and complete the "request to operate a bank account" pro forma before the start of the Authorities financial year in which the school want to operate a bank account. Schools can only commence at the start of the financial year, 1 April.

A financial health check will be completed prior to approval. The risk assessment may not prevent a school from operating a local bank account but may be recommended against it and possibly pending remedial action.

It is a requirement that suitable representatives from each school will have attended Finance 6 training sessions before the bank account becomes operative.

The Authority will refuse a request for a local bank account where a school has a deficit balance.

Schools using a computerised accounting system must ensure that back up procedures are regularly followed.

The Local Authority will charge for both the set up and ongoing maintenance of authority processes to facilitate the school operating a bank account.

The Local Authority will charge for substantial or persistent support to a school.

Failure to meet any requirements will result in delay or removal of being allowed to operate a bank account.


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SECTION 2: BANKING ARRANGEMENTS

2.1 BANK DETAILS

The Scheme for Financing Schools - Section 3.5 Bank and Building Society Accounts, details the bank arrangements for a school operating a local bank account.

School bank accounts - approved financial institutions

The following institutions have been approved by the Director of Financial Resources for the operation of school bank accounts:-

Major High Street UK Banks (members of the Clearing Banks Committee)

Barclays

Lloyds

HSBC

National Westminster

Royal Bank of Scotland

Halifax

Yorkshire Bank

The Co-operative

Nationwide Building Society

Santander UK

Building Societies (members of the Building Societies Association and have a presence within Lancashire)

Skipton

Funds should be invested directly in the account with the approved institution and no investment should be arranged via any intermediary.

The following details must be provided to Financial Management, Development and Schools Team by the school at least two months before the account becomes operative: -

Bank Name

Account Name

Branch Sort Code

Names of all authorised signatories and their positions within the school

Specimen signatures

Confirmation that the bank mandate complies with Section 3.5.1 of the Scheme for Financing Schools, that for all accounts held by the school for the purpose of operating a local bank account that:

The account mandate provides that Lancashire County Council (the Authority) is the owner of the funds in the account; that is is entitled to receive statements; and that it can take control of the account if the school's right to a delegated budget is suspended by the Authority.


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2.2 TERMS AND CONDITIONS

Terms and conditions of the banking institution must meet the control requirements set out in the Authority’s scheme.

Any charges relating to the operation of the bank account will be met from the school’s own delegated budget.

Schools must not make arrangements for loans or overdrafts and will not be allowed to offer any security.

For any such account the account mandate must state that the Authority is the owner of the funds in the account; that it is entitled to receive statements; and can take control of the account where the school's right to a delegated budget is suspended by the Authority.

Budget share funds paid by the Authority and held in school accounts remain authority property until spent. (s.49(5) of the Act).

2.3 ADMINISTRATION OF THE SCHOOL ACCOUNT

A monthly bank statement must be obtained detailing transactions up to and including the last working day of each month.

Schools must reconcile their Finance 6 or other local records to the bank statement each month. Refer BT Lancashire training document for full procedures.

The school bank account must never become overdrawn.

Procedures governing the annual process for the closure of accounts will be issued by the Authority before the end of each financial year.

2.4 INTERNET BANKING

Any use of internet banking facilities by a school and appropriate controls, need to be included within a schools financial regulations. Access should be by authorized users only, under password protection. Facilities available would typically be restricted to 'view only' and/or the transfer of fund between accounts held by the school.

2.5 BACS

The Governing Body must approve the use of BACS to make payments from the schools bank account.

There are important security issues to consider and adequate internal control procedures need to be in place to minimise risks.

2.6 CREDIT CARD'S

The Governing Body must authorise any cards to be used having considered the potential risk over and above that of the purchase order system and appropriate controls over usage.


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A Credit Card Policy should be approved by full Governors this will include the following details:

A list of authorised users

Restrictions on the use of the cards' spending limits

Written instructions on the scope and use of the cards

Documenting proof (including a VAT receipt) of any goods purchased with the card including details of the nature and cost of those goods, should be returned to the person responsible for recording credit card transactions after each purchase.

Transactions should be reconciled to statements regularly and must be by someone other than a card signatory.

The balance on the account must be cleared in full by the due date each month, to ensure that the use of these cards is not considered to infringe the borrowing restrictions imposed on schools.

SECTION 3: FUNDING OF ACCOUNTS

3.1 BALANCES

Schools which have accumulated credit balances will have these balances as at 1 April transferred to their local bank account. The balance transferred on 1 April will be based on an estimate supplied by and agreed with the school. This will subsequently be adjusted to reflect the actual opening balance when this has been determined. Such adjustments, including interest, will be added to or deducted from the monthly advances. Schools with local bank accounts cannot invest any accumulated surplus with the Authority.

3.2 CLOSURE OF IMPREST ACCOUNTS/NEW PETTY CASH

Schools should submit their final imprest claim before the end of February. The Payables team will enter the income return transactions into Oracle in the current financial year.

3.3 FUNDING ARRANGEMENTS & PAYMENT OF BUDGET SHARE

Budget share means the school’s budget share as determined by the Authority under arrangements made in accordance with section 47 of the School Standards and Framework Act 1998.

Schools will receive payments into their bank account on 15th of each month. These payments are summarised below.


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Schools Budget Block

paid in 12 equal instalments on 15th of each month

High Needs Block Paid in 12 instalments on 15th of each month with termly adjustments made to reflect June, November & January count

Early Years Paid in 12 instalments on 15th of each month and termly adjustments made to reflect June, November & January count.

PPG Paid in 12 instalments on 15th of each month based on a provisional figure, adjustment to reflect under/over will be made generally around December

Exclusions/ Inclusions

deducted/paid after termly certificates issued

Sixth Form Funding

Paid in 12 instalments on 15th of each month

April to July based on prior years August to July funding agreement from EFA

August to March based on current years August to July funding agreement from EFA

3.4 PAYROLL

Advances to the bank account are based on the whole budget share i.e. including the pay element. Schools have a choice as to how the pay transactions are made:

Option (a) - Payroll processed at school/external provider

External payroll provider – Under this option the school must at year end submit a breakdown of staff salaries over £50k together with a breakdown of any exit packages made in year.

Advances to the bank account are based on the whole budget share and pay related transactions are made through the bank account in accordance with the school's agreement with the payroll provider. In this case, the school would be responsible for accounting for employer’s contributions and deductions from employees’ pay. (Note: Moving to this option may require arrangements to be made whereby the Authority is in a position to provide returns and remittances to the Teachers Pensions Agency by the 7th of the following month.)

Option (b) – Payroll processed by the Authority

The Authority makes the initial payment of net pay to employees from the Authority’s bank account and process a direct debit to recover gross pay and employers’ contributions from the school’s bank account. Under this arrangement, accounting for pay transactions would be automatically fed into Oracle centrally. This recovery of funds by the Authority may in some circumstances only be affected after the Oracle period end date; this will be a number of days after the salary payment date. In the event of a delay an interest charge may be made.


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SECTION 4: PAYMENT PROCEDURES

4.1 OPERATION OF FINANCIAL SYSTEMS - THE ACCESS RIGHTS MATRIX

Schools must ensure that the duties of authorising orders, certifying invoices and signing cheques are performed by separate members of staff.

Responsibility for each area must be clearly defined in any accounting system in use, along with the authorised signatories required by the financial institution and the Director of Financial Resources.

If You Can:

Then You Can: But You Can’t:

Authorise Orders

Order Cheques

Sign Cheques

Authorise Invoices Hold Stock of Cheques Prepare Cheques for Signature Reconcile Bank Account

Authorise Invoices

Hold Stock of Cheques

Prepare Cheques for Signature

Reconcile Bank Account

Order Cheques

Sign Cheques

Sign Cheques Order Cheques

Authorise Orders

Authorise Invoices Hold Stock of Cheques Prepare Cheques for Signature Reconcile Bank Account

4.2 CHEQUES

Schools are responsible for all costs and ordering cheques in the correct format they require, from their financial institution or secure printer.

Schools must maintain a stock record of cheques held. The serial numbers of cheques must be examined immediately upon receipt and recorded in the stock record. The stock record must be updated to reflect the cheques issued.

The cheques must be verified monthly to the stock record, which must be certified by a member of staff who is not involved in the cheque control procedures. Any discrepancies must be investigated and if not resolved must be notified immediately to the Director of Financial Resources.

Cheques must be kept locked in a safe or cabinet when not in use. The issue and use of keys must be strictly controlled with no more than two keys being held independently by staff who are not authorised cheque signatories. Keys must not be left when the premises are closed.

Cheques must never be pre-signed nor have pre-printed signatures.

Authorised signatories should not have access to blank cheques nor prepare cheques for signature.


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Wasted and spoiled cheques must be retained for examination by audit. A separate record of wasted or spoiled cheques should be maintained.

For Audit purposes samples of paid (cleared) cheques should be available for return on request from the financial institution. Any charges arising from such requests will be met from the school's own delegated budget.

Adequate procedures must be established to allow control over the writing-off, amendment, re-direction or cancellation of uncleared cheques returned by the financial institution, payee, or other agency for whatever reason.

When a replacement cheque is issued, the payment record should be endorsed with reference to the original cheque but no further entry should be made in the accounting record, in order to avoid “double-counting” the expenditure.

If a cheque remains unpaid after six months there is a requirement to credit any VAT as directed in S26A VAT Act 1994.

Adequate procedures must be established regarding action to be taken in respect of misappropriated or lost cheques in order to eliminate the possibility that lost or stolen cheques are cashed. These procedures should cover the responsibility to contact the financial institution to place a stop on the cheques, to obtain indemnities from the payee before a replacement cheque is issued and to ensure that stopped cheques are not subsequently paid, and, in cases where misappropriations or irregularities are suspected, to notify the Director of Financial Resources and liaise with the Police.

SECTION 5: INCOME PROCEDURES

5.1 INCOME

All income must be receipted and banked promptly, in full, and in the form in which it was received.

Income must be recorded in a permanent record, or computerised accounting system, as soon as possible after receipt. This record, and copy receipts, must be retained for audit purposes.

Payments into the school bank account must be made using a paying-in book, and not individual slips. Copy paying-in slips must be retained in the book.

Income intended for Unofficial School Funds must not be banked in the school bank account.

Contributions from Unofficial School Funds must be receipted using the official receipt and identified on the record of income, stating the purpose for which it was made.


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SECTION 6: ACCOUNTING INFORMATION

6.1 AUTHORITY REQUIREMENTS

The Authority requires information relating to payments and income through the school's bank account for the maintenance of the Authority's accounts, monitoring expenditure, statutory requirements, preparation of final accounts, reclaiming VAT on behalf of the school, and possibly, where the Authority is not providing the payroll service for the school, to account centrally to HM Revenue and Customs and other agencies for deductions from pay.

Schools will receive monthly reports from the authority of the transactions held in its accounting system. Where the Authority is providing the payroll service, details of employee costs for input to the schools local accounting records will be detailed on a separate report.

Schools are required to submit the following each month to the Authority:

Cash and Bank Reconciliation statement – To be completed on a monthly basis and should be done to the last working day of the month and before the period is closed. When completed a hardcopy of the form should also be held in the schools records which has been signed by the Head teacher or person designated who is able to certify the information is correct and verified by a person independent of the bank reconciliation process.

Trial Balance by Ledger code

Unreconciled Payments/Receipts – this should be as at the end of the month and should only show outstanding amounts for the last three months

Journal Audit Trail, this file will feed direct into Oracle and the relevant Finance 6 postings will appear on your monthly print as SIMS journal postings

NOTE:

1. The Authority should receive all information required by the 10th of the following month. Delay in the submission will result in the late reimbursement of VAT.

2. Schools should be aware that they are still required to submit monthly information throughout school holidays and no delays will be accepted.

3. The Schools Financial Services Team offers a service level agreement to complete the monthly bank reconciliation process including the preparation and sending of the required returns to the Authority. Further information is available on the SFS website or contact your Finance Officer.

School Financial Management Information Software

The appropriate Financial Management Information package to be used by a school is a matter for each school, but the Scheme for Financing School in Lancashire specifies that whatever system a schools chooses, they must be able to provide the County Council with their accounts in the required format, or meet the costs of modification.

The costs associated with any development work to ensure new systems can provide data to the County Council in the required format are estimated at around £4,000 the first time a new supplier was engaged by a Lancashire school.


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Schools are also asked to give six months notice of any change of software to the County Council, to enable time for the relevant compatibility developments to be made.

Please email [email protected] to provide notification of a proposed change.

6.2 ADDITIONAL YEAR END REQUIREMENTS

Schools will need to ensure they adhere to the yearend guidance which will be issued in January

Submission of the March files will be before the end of March and before Easter holidays if schools break up early

Copy bank statement(s), including any money market balances.

6.3 MONTHLY ORACLE RECONCILIATION

The data transferred from Finance 6 into Oracle under the automated arrangements will include all bank account transactions. It will therefore be possible to balance each subjective code exactly to Oracle by simply checking the totals.

Balances should be checked on each subjective using a trial balance, "ledger code balances only".

Oracle will include details of every individual bank transaction. It should, therefore, be possible to check off individual transactions from Oracle to Finance 6 if necessary. To reduce the number of transactions posted to Oracle, the automated system ignores any Finance 6 journal transactions where the debits and the credits net to nil on the same Oracle subjective code.

It is the schools responsibility to ensure Oracle and Finance 6 are reconciled on a monthly basis and any irregularities are resolved promptly by the school.

SECTION 7: CENTRAL CHARGES/REIMBURSEMENTS

Reimbursements to the school for costs incurred in relation to central services will be carried out by direct transfer into the school bank account.

Previous arrangements for payments to utilities will no longer apply. Schools will need to notify utility companies that bills should be sent direct to the school. Schools should contact Borough Councils to ensure rates bills are addressed to the school but still sent via Property Group. This is to ensure a checking and appeals service with correct central records for the following year's budget. Invoices will be forwarded to the school immediately after receipt in Property Group to enable prompt payment.

All charges and reimbursements will be through the bank account, if the school has been charged or reimbursed by journal in error the school should contact the originator and request that this is rectified. This posting should not be copied into finance 6 and should be noted separately as the difference between the two systems until an opposite entry appears to cancel the journal out.

For any queries please contact [email protected]

mailto:[email protected]



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SECTION 8: VAT REQUIREMENTS

Schools should be aware of the strict regulations in respect of VAT that will affect the procedures they will adopt under the Local Bank Account scheme. The procedures are consistent with advice and guidance for the operation of local bank accounts issued by the DCSF after consultation with HM Revenue and Customs.

Further guidance about VAT and latest updates can be found from the link below:

Schools' Portal

SECTION 9: RETENTION OF RECORDS

The Authority's requirements for retention of records generally do not exceed those required for VAT or any other statutory purposes. However, schools need to be aware that any external funding source may stipulate further requirements

Further guidance about the retention of records is available from the link below:

http://www.lancashire.gov.uk/practitioners/supporting-children-and-families/education/schools-forum/schools-forum-policies.aspx

https://schoolsportal.lancsngfl.ac.uk/view_sp.asp?siteid=733&pageid=1006&e=e




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SECTION 10: SUSPENSION OF BANK ACCOUNT

Where there is substantial or persistent failure to comply with the agreed procedures, the Head of Financial Management; Development & Schools will have the authority to suspend the local bank account until the position is rectified to their satisfaction.

Triggers for Local Authority intervention in the operation of local school bank account

Trigger 1 : Supportive

Trigger 2: Intervention Trigger 3: Removal of Local Bank Account facility

Criteria:

Return of Information (Journal Audit Trail,, Trial Balance, Unreconciled items)

Three months late without satisfactory explanation

Additional month late or any further misses without satisfactory explanation

Continuing delay at six months

Adverse Internal/ External Audit in relation to the 7local bank account

N/A

N/A

Unacceptable operation of bank account

Cash and Bank Reconciliations (between bank statement and Finance 6)

Three months unreconciled without satisfactory explanation

Additional month unreconciled without satisfactory explanation

Unreconciled at six months without satisfactory explanation

Action to be taken:

Financial management: Development & Schools

Notify school and reason for trigger being met, request corrective action and formal response from school

Notify internal audit

Notify school and notify internal audit. Request formal response from school of corrective action being taken. Financial management Team visit school to rectify position and correct / amend accounting records for which a charge will be levied

Seek approval by the Head of Financial management Development & Schools to proceed

Notify school of action to be taken and charge for closing bank account

Notify Internal Audit

Internal Audit

N/A

N/A

Retrieval of key documentation and closure of bank account

Financial Management Development & Schools

Internal Audit in conjunction with Schools Financial Services

Identify whether training needs are required by the school and organise formal training session. A charge may be levied for this

Review training received and its effectiveness. Reinforce training with on the job training provided by School Financial Services with possible charge levied.

Reconciliation of bank account and investigation into financial irregularities.


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SECTION 11: INTERNAL AUDIT SERVICE

Investigations by the Internal Audit Service into suspected financial irregularities will be at the discretion of the Director of Financial Resources. In order to achieve this, the Internal Audit service has the right of unrestricted and direct access to the records (however held), assets, premises and staff. The Internal Audit service has the authority to obtain all such information and explanations as it considers necessary to satisfy any matter under consideration.

SECTION 12: CONTACTS AND USEFUL NUMBERS

Financial management: Development & Schools

[email protected]

VAT Team

[email protected]

Connect2Education

[email protected]

Lancashire Procurement Services

[email protected]





Documents

Guidance Notes for the Operation of Schools Local … Notes for the Operation of Schools Local Bank ... adjustment to reflect under/over ... Guidance Notes for the Operation of Schools