To consider the report on the review of the current Financial Regulations (report to follow).
This balance between financial control and risk reduction had always been a consideration when reviewing purchasing and invoicing instructions and procedures. The Council’s current position was that the business systems were only partly integrated, and set up in such a way as to mimic the paper systems in use a decade or so ago that an immediate IT solution to the problem of delivering effective and efficient transactional processing was not possible. It should however be noted that the planned review of business systems was intended and would complete by the 30 September 2020.
Improvements to transaction management could be improved in the interim to ensure control and a return from investment in recent management changes regarding the Council’s restructure, to make procurement and payment transactional costs including procedures simpler and more efficient. This also allowed the Council to improve and learn before the implementation of improved systems from April 2021 (at the latest).
Currently the approach used IT systems (supported by a significant amount of paper vouchers and controls), emails and double signatures on relatively small items and values well within budget. This was cumbersome, bureaucratic and added to real transactional costs and opportunity costs with managers reviewing and signing paperwork already validated by others.
In line with the majority of accountability and responsibility for budgets being passed to team managers, it was proposed to use this approach and that the designated budget holder (usually a team manager) could make purchases and authorise payments with a value of £24,999 or less that were within the designated budget. It was only for purchases and payments of £25,000 and / or in excess of budget that required a second signature from a director.
To ensure the process was controlled:
· A list of budget holders and the financial codes they could operate was already known and maintained securely.
· Monthly, finance business partners could update this list for any changes of budget overspend issues.
· Email and electronic signature and instruction could replace signed paper records as electronic sign off could be counted as a prime record and was as at least as safe and secure as a paper signature.
Increasingly managers were asking for a faster and more rapid ways of securing goods and services. Technology allowed for a virtual rather than a real card to be broadly issued with spending controls at transaction, overall limit or nature of the goods and services purchased level. Details of the transactions were received electronically and could be reconciled and posted to the main finance system with ease. Therefore, the proposal was to issue real or virtual purchase cards to all budget holders and directors and expect all purchase below £1,000 to be made by this route and where applicable purchases of £1,000 to £4,999 to also be made by this route. The default approach to these cards was to set a credit limit of £5,000 a month and limit them to the subjective areas covered by the designated budget, i.e. remove the ability to access cash or buy an unexpected item or service.
Purchase would be reviewed monthly as part of the transaction posting process. Variation of the above limits and approach could be approved by the Section 151 Officer, e.g. for the emergency purchasing role of the Executive Director of Commercial and Regulatory Services.
The Council was trying to modernise the way it worked, as currently systems were fragmented and bureaucratic for small spend, but retain a framework of governance. This approach would be re-examined as part of the more major review of systems and process during 2020/21. The plan was for this change to be delivered by a small start and finish project to be completed no later than the 30 April 2020. The project group will consist of:
• Interim Strategic Director (resources soon to be Chief Operating Officer)
• Section 151 Officer
• Procurement Lead
• Payment Lead
• Representative of NatWest bank (for card issue)
• Internal audit representative
Councillor S Heap queried how important was it that those amounts of money needed to be spent so quickly, how often did this happen and was the card real? The Service Director (Business Services) replied that she would have to find out how often fast payments were needed and report back to the Councillor later. However, there was governance in place and although it was a real card, the money had to be in the budget. Councillor S Jones added that only the budget holder was designated to spend it.
Councillor J Philip said it made sense that if officers were imparted with holding budgets, they should be able to spend that budget if it was under £25,000. The Financial Regulations could always be reviewed at a later date. He proposed that a review be undertaken in a year’s time by the Audit and Governance Committee, which was agreed by the Working Group.
That a report be made to Council recommending:
(1) That a change to the current delegations and standing financial instructions to require only one sign off signature (electronic or physical) by the designated budget holder (usually a team manager) for purchases and payments with a value of £24,999 or less that were within budget and only purchases and payments off £25,000 and / or in excess of budget to require a second signature from a director, be approved. (This was to retain control whilst significantly reducing transaction costs and paperwork pending a major system review and change timetabled for April 2021);
(2) That the issues of real or virtual purchase cards to all budget holders and directors and to expect all purchase below £1,000 to be made by this route and where applicable purchases of £1,000 to £4,999 to also be made by this route, be approved. (This was to retain control whilst significantly reducing transaction costs and paperwork pending a major system review and change timetabled for April 2021);
(3) That pursuant to Recommendation (1) and (2) above, the Monitoring Officer be authorised to make necessary revisions to the Council’s Constitution; and
(4) That the Audit and Governance Committee review the Financial Regulations in a year’s time.