004 Accounting and Financial Management Policy

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1. Introduction

The Integrated Care Board (ICB) Chief Executive is personally accountable to NHS England (NHSE) for stewardship of the ICB’s allocated resources. Section 3.2 of the ICB’s Standing Financial Instructions (SFIs) sets out the roles the Chief Executive delegates to the Director of Resources. This includes that the Director of Resources is responsible for ensuring there is an effective financial control framework in place to support accurate financial reporting, safeguard assets and minimise risk of financial loss.

2. Purpose / Policy Statement

This policy is part of the ICB’s internal control environment and describes the key elements of the financial control environment that are required to ensure good stewardship of the ICB’s allocated resources.

3. Remit

This policy applies to all ICB staff (including temporary/ bank/agency staff), contractors engaged by the ICB and staff from other MSE ICS Partnership organisations working on behalf of the ICB.

4. Definitions

• Accrual – A charge for a service already provided or for goods already received that have not yet been invoiced, so an entry is made at the end of the accounting period include the cost.
  
• Allocations – NHSE transfers the ICB’s funding for the year as baseline allocations (based on a formula which aims to make geographic distribution fair and objective and reflective of local healthcare needs). During the year additional revenue funds are made available usually for specific ring-fenced projects or initiatives.
  
• Business Information (BI) – module on ISFE providing range of ledger reports.
  
• Budget – a plan expressed in financial terms which is prepared and approved prior to the start of the period (usually one year).
  
• Budgetary Control – the management of approved budgets which involves regularly comparing actual spend with planned spend to identify whether corrective action is required.
  
• Budget Holder – a Director or other senior employee with delegated authority to manage finances in a specified area of the organisation.
  
• Capital Expenditure – spend on an asset (or group of functionally interdependent assets) with a useful life of more than one year and a cost of £5,000 or more. This could include buildings, equipment, and software.
  
• Control Total – agreed surplus or deficit position for an NHS system for the year.
  
• ICS – Integrated Care System – the partners of Mid and South Essex Integrated Care System are Mid and South Essex NHS Foundation Trust, Mid and South Essex Integrated Care Board, Essex Partnership University NHS Foundation Trust, North East London NHS Foundation Trust, Essex County Council, Southend Borough Council, Thurrock Borough Council and Provide Community Interest Company.
  
• ISFE– Integrated Single Financial Environment – uses standard NHS Oracle Release 12 platform to provide a common accounting system with a single Chart of Accounts and standardised processes and reporting to all ICBs.
  
• Local Counter Fraud Specialist (LCFS) – Independent senior manager appointed to undertake work on behalf of NHS organisations with the key objective of combating fraud in the NHS.
  
• NHSE – NHS England.
  
• NHS SBS – NHS Shared Business Services – NHSE mandated provider of ledger system and transactional financial services provider.
  
• Resource limit – the amount that the ICB can spend in any given year – the ICB will be given a revenue resource limit and a capital resource limit.
  
• Revenue expenditure – spend on day-to-day costs including healthcare and non-healthcare contracts and the running costs of the organisation.
  
• Schedule of detailed delegated financial limits – document which shows what authority the Board has delegated to committees or staff under the powers of the Constitution. This is a schedule within the Scheme of Reservation and Delegation (SoRD) within the Constitution.
  
• Senior Financial Services Officer – Refers to either the Head of Financial Services or the Deputy Director of Financial Services.
  
• Service Auditor Reports – provide assurance around the control environment and key controls designed by the service provider to govern its critical systems.
  
• Statement of Financial Position – balance sheet for the ICB.
  
• Tender waiver – document that confirms the organisation’s approval for bypassing the competitive procurement process in specific, exceptional and limited circumstances.
  
• Virement – process of moving a revenue budget to a different budget heading with the approval of the budget holder or senior finance professional and subject to strict criteria. It can be used to amend approved budgets to reflect past events or changes in future income or expenditure.
  
• Web ADI – Web Applications Desktop Integrator – web-based Oracle tool bringing E-business suite functionality to a spreadsheet.

5. Roles and Responsibilities

Director of Resources

The Director of Resources is responsible for supporting a strong culture of public accountability, probity, and governance, ensuring that appropriate and compliant structures, systems, and processes are in place to minimise risk. This includes ensuring that there is appropriate internal audit provision and liaising with external auditors to ensure timely delivery of financial statements for audit and publication in line with regulations.

The Director of Resources is responsible for ensuring that allocated annual revenue and capital resource limits are not exceeded, jointly, with system partners and that the system meets financial targets set by NHSE.

Prior to the start of each financial year the Director of Resources will submit to the ICB Board, for approval, a report showing the total allocations received and their proposed distribution including any sums to be held in reserve. During the year the Board will be notified regularly of any updates to allocations and the purpose for which they have been received. The Director of Resources is responsible for ensuring that both the year to date and forecast financial position are clearly articulated internally and externally as required.

The Director of Resources is responsible for ensuring that a budget holder assurance certification process is designed and kept up to date. All budget holders should obtain this certification before receiving delegation. (During the transition existing budget holders will be required to attend budget holder training and receive certification by January 2023).

Finance & Investment Committee

The Finance & Investment Committee is responsible for ensuring financial information systems and processes are established to make recommendations to the Board on financial planning in line with the strategy and national guidance (Finance and Investment Committee Terms of Reference).

This Committee is also responsible for assuring the Board in relation to the ICB’s procurement and contracting processes and will approve investments and procurements within its delegated limits.

Audit Committee

The Audit Committee is responsible for the activity and results of both Internal and External auditors including reviewing the Annual Report & Accounts, reviewing the audited Annual Report & Accounts for submission to the Board, reviewing the ICB’s annual management letter of representations and the ICB’s accounting policies. The Audit Committee is also responsible for the work of the Local Counter Fraud Specialist and for ensuring that any internal or external audit recommendations are implemented as appropriate.

All tender waiver documentation is taken to Audit Committee along with any losses and special payments that are incurred. Authorisation of these is in accordance with the schedule of detailed delegated financial limits.

On an annual basis the Audit Committee will review the list of authorised signatories provided by the financial services team for appropriateness.

Executive Directors

Directors will work with the Director of Resources to compile budgets for their delegated areas of responsibility. In turn Directors can delegate budgets under their control to staff members who are responsible for specific areas of the ICB’s operations. Directors are responsible for ensuring that delegations are at appropriate levels for the type of expenditure and the experience of the staff member and that Delegation of Authority forms are appropriately completed and signed off and submitted to the financial services team. No delegation amount can exceed the limits set out in the schedule of detailed delegated financial limits.

Directors are responsible for ensuring they approve monthly forecasts of expenditure for key material areas under their responsibility through working with their budget holders and designated finance business partners. Directors will promote a culture where they and their budget holders consult finance business partners or other senior finance personnel as appropriate in key strategic decisions that have a financial impact.

Budget Holder

Budget holders are responsible for working with finance business partners and other senior finance staff as appropriate to determine budget requirements for the new financial year.

On a monthly basis, budget holders liaise with their finance business partners to highlight unusual spend profiles, determine updated forecast outturns, review expenditure variances, and give assurance that budgets will not be overspent at year end. Where potential overspends are identified actions are agreed to bring the expenditure back in line with budget. Any significant overspends that are unlikely to be mitigated by year end are brought to the Board’s attention through the Finance Report and as such must be escalated to the budget holder’s Director and to the finance business partner.

Budget holders are delegated a financial limit via a Delegation of Authority form which is authorised by their Director. Budget holders must not exceed this limit which will have been determined as appropriate for the type and extent of expenditure in the service area delegated to them and will be no higher than permitted in the schedule of detailed delegated financial limits. The limit usually applies to the level of purchase order or invoice that the budget holder can sign off on specified cost centres and the Delegation of Authority form will confirm the extent of this authority. Budget holders are responsible for informing the financial services team or finance business partner where their responsibilities change including where they take on or hand over management responsibility for a new contract or area of spend.

Budget holders are responsible for following the Procurement and Contracting Policy and Creditors and Purchase Policy to ensure that controls are followed and value for money is a key consideration in all purchases.

Financial Services Team

The financial services team is responsible for ensuring that up to date Delegation of Authority forms are received, appropriately authorised, and are in-line with limits set out in the schedule of detailed delegated financial limits. They will maintain a list of all authorised signatories which is reviewed by the Audit Committee on an annual basis.

The financial services team is responsible for managing access controls to the Integrated Single Financial Environment (ISFE) for both finance staff and Directors and budget holders to enable access to generate, code, and authorise purchases and invoices as well as review Business Information (BI) reports as appropriate. It is essential that access rights given to any one individual follow principles of segregation of duties so that no one individual has sole responsibility for any single transaction. Access is confirmed on standard documentation and authorised by the staff member’s Director and all access is reviewed on at least an annual basis.

The financial services team is responsible for ensuring that transactions are recorded as soon and as accurately as possible. All transactions should be accurately coded to align with all guidance provided by NHSE.

The financial services team is responsible for ensuring that reconciliations of key control accounts are undertaken and separately authorised by another senior member of the finance team monthly.

The financial services team is responsible for preparing the financial statements, statutory accounts and financial aspects of the Annual Report including the remuneration report on a timely basis in accordance with the published timetable from NHSE.

The financial services team will ensure that monthly reports are provided for the Finance Report as determined by the Director of Resources. This will include Summary Cashflow, Statement of Financial Position, Aged Creditors and Debtors and performance against the Better Payments Practice Code.

The financial services team is responsible for ensuring that VAT is accounted for appropriately and in accordance with current legislation. They are also responsible for seeking advice on VAT treatment of specific items of revenue and capital expenditure from the specialists at SBS or the ICB’s retained VAT advisors.

Finance Services Team

The financial services team is responsible for ensuring that up to date Delegation of Authority forms are received, appropriately authorised, and are in-line with limits set out in the schedule of detailed delegated financial limits. They will maintain a list of all authorised signatories which is reviewed by the Audit Committee on an annual basis.

The financial services team is responsible for managing access controls to the Integrated Single Financial Environment (ISFE) for both finance staff and Directors and budget holders to enable access to generate, code, and authorise purchases and invoices as well as review Business Information (BI) reports as appropriate. It is essential that access rights given to any one individual follow principles of segregation of duties so that no one individual has sole responsibility for any single transaction. Access is confirmed on standard documentation and authorised by the staff member’s Director and all access is reviewed on at least an annual basis.

The financial services team is responsible for ensuring that transactions are recorded as soon and as accurately as possible. All transactions should be accurately coded to align with all guidance provided by NHSE.

The financial services team is responsible for ensuring that reconciliations of key control accounts are undertaken and separately authorised by another senior member of the finance team monthly.

The financial services team is responsible for preparing the financial statements, statutory accounts and financial aspects of the Annual Report including the remuneration report on a timely basis in accordance with the published timetable from NHSE.

The financial services team will ensure that monthly reports are provided for the Finance Report as determined by the Director of Resources. This will include Summary Cashflow, Statement of Financial Position, Aged Creditors and Debtors and performance against the Better Payments Practice Code.

The financial services team is responsible for ensuring that VAT is accounted for appropriately and in accordance with current legislation. They are also responsible for seeking advice on VAT treatment of specific items of revenue and capital expenditure from the specialists at SBS or the ICB’s retained VAT advisors.

Finance Business Partners

Finance business partners and their teams are responsible for ensuring that budget holders understand their budgets and are equipped to advise and agree forecast outturns monthly. They are responsible for identifying budget holder training needs and ensuring that training is delivered either on a one-to-one or more formal basis.

Finance business partners and their teams are required to support budget holders and directors in all budgeting, coding, and forecasting issues and to identify phasing issues which impact on cashflow management and report them to the financial services team. They are also responsible for ensuring that their budget holder responsibilities are correctly recorded on Delegation of Authority forms and that the financial services team is notified when responsibilities change.

Shared Business Services

Shared Business Services (SBS) are the mandated provider of transactional financial services for all ICBs under a national contract managed by NHSE. SBS are responsible for managing the ISFE Oracle based system and provide many financial controls required – for example checks on new suppliers, payment of invoices, posting cash receipts. It is important that the ICB finance team use the standard documentation, guidance and processes that are in place and liaise with the relevant teams in SBS. Service Auditor Reports (ISAE 3402) are an important part of the external auditors’ assurance at year end.

6. Policy Detail

Allocations

The NHSE allocations process uses a formula to make geographic distribution fair and objective to reflect local healthcare needs.

Budgets & Budget Monitoring

On an annual basis the Director of Resources will compile a financial plan which will include the high-level financial performance framework, summary budgets and the level of savings which are required to meet the ICB’s share of the system control total mandated by NHSE.

The plan will include significant assumptions made, details of major changes to services, resources or workforce required, an evaluation of financial risks and the level of reserves required. The plan will report the budget for running costs separately.

Prior to the beginning of the financial year the Director of Resources will take the financial plan and budgets to the ICB Board for approval. The budgets will be in accordance with the aims and objectives of the financial plan and will have been prepared in discussions with the budget holders and within the available financial resource limit.

Financial performance is monitored monthly and updated forecast outturns are input into the finance system considering additional resource allocations notified by NHSE during the financial year and changes to expected expenditure trends. Monthly financial reporting will include expected delivery against financial targets including capital spend, Statement of Financial Position including details of aged creditors and debtors and progress against the Better Payments Practice Code, delivery against savings targets, explanations of key variances and mitigating actions and the level of financial risk in the forecasts.

Month end processes followed by the finance team are set out in the Budget Holder Guidance.

Monthly reports are prepared for budget holders that show year to date and forecast outturn spend against budget. Finance business partners and their teams will meet regularly with budget holders (proportionate to the size and risk in individual budget holder portfolios) to explain the statements and assist the budget holder to identify variances and formulate actions to mitigate any overspends. These meetings or other forms of communication will also be an opportunity for budget holders to contribute to formulating the latest forecast outturns as well as dealing with any administrative issues such as staff changes, invoicing or purchase order queries and any changes to spend profile and budget holder responsibilities as well as dealing with any budget holder training issues.

Depending on the financial situation for the whole ICB or system a budget holder may be required to underspend at year end as a contribution to meeting the required ICB targets or the system control total. Budget holders will be responsible for delivering savings identified from within their delegated budgets.

Brief notes of the key items discussed and agreed between finance business partner and budget holder should be recorded and accepted by the budget holder by email or physical sign off. These notes are to be retained as audit evidence.

Alliance Directors will be delegated budgets to deliver agreed local objectives. Place based budget holders and budgets are subject to the same requirements as set out in this policy.

Budget Virements

Budget virements are permitted to deal with additional allocations received during the financial year, to move budgets to better match spend, coding classifications or budget holder responsibilities or where service changes mean that a budget is reallocated to a different category of spend. They are also used to move funding out of reserves as it is required for investment or to meet cost pressures.

Virements can be between two areas of a single budget holder’s responsibility or between two separate budget holders providing both budget holders agree. Virements can also be made on the instruction of the Director of Resources. The reasons for, and agreement to, virements should be recorded and virements must be identified as recurrent or non-recurrent.

Non recurrent savings should not be vired to meet recurrent expenditure as that commits the ICB to unfunded expenditure in future years unless the Director of Resources authorises such action.

Journal Good Practice

Journals should be prepared and input via the Web ADI functionality and a list of sequential journal numbers retained. All journals will be saved in a central finance location together with the workings and evidence for all journal entries. The workings must tie up to the journal figures with readily identifiable links to the journal entries and evidence of the calculation method. All back up and evidence must be capable of standing up to audit scrutiny.

All journals should use the following naming convention:

• Organisation code/Initials of journal owner/journal type/posting period.

All accrual journals should use the following narrative convention.

• Organisation code/Initials of journal owner/posting period/customer or supplier name/period of accrual/Invoice number if available/brief description.

All virement and adjustment journals should follow the above narrative convention as far as practical.

All accrual journals should be reversed following each month end and new accruals input for the following month end.

Estimates of accruals and prepayments should be based on available information wherever possible. Where an invoice or purchase order is not available to inform the amount of the accrual or prepayment then estimates should be based on conversations with the relevant budget holder, on trends of expenditure or income in the year to date and by reviewing the forecast outturn from the previous financial year. It is important that accruals are not rolled forward without consideration of any changes in the service and that careful review of possible coding errors has been considered to assess if costs have already been accounted for elsewhere in the ledger.

All estimates and judgements must be fully supported by working papers which include the basis and assumptions made which are in-line with the ICB’s accounting policies. Third party confirmation is the best form of evidence but if this is not available then the working paper should state the assumptions and basis of calculation and/or the name of the budget holder who has informed the decision.

1. Income should only be deferred where there is documentary evidence that cash has been received that relates to goods or services that will be received in a future period. Outstanding sales invoices that relate to a future period should be journaled to debtors and not to deferred income.

A payment should only be accounted for as a prepayment where there is documentary evidence that the payment has been made in advance of goods or services being received. If an invoice has been accrued but not paid the accrual should be reversed.

Provisions are recognised in line with the requirements of International Accounting Standard (IAS) 37 and represent the best estimate of expenditure required to settle a present obligation. A provision should only be recognised if a present obligation has arisen because of a past event, payment is probable (more likely than not), and the amount can be estimated reliably. Working papers for provisions must set out the justification against these three criteria for external audit review.

To maintain segregation of duties it is important that a single individual does not authorise and prepare the same journal. There is no inherent control in ISFE to prevent this happening so access controls should be set up to ensure that individuals who prepare journals do not have rights to authorise journals. If this cannot be achieved, then journal preparers must forward their journals electronically to a separate authoriser.

Delegation of Authority

An important aspect of internal financial control is ensuring that there are sufficient controls in place to assure the Board that all expenditure is appropriately authorised. Delegation of Authority forms are completed which record the amount of expenditure that an individual can commit the organisation to within their areas of responsibility and within their available budget.

The schedule of detailed delegated financial limits sets out the maximum limits that Directors and budget holders can be delegated depending on their level of seniority. However delegated limits should only be as high as the type and value of an individual budget holder’s expenditure requires and should be reviewed on at least an annual basis.

The ISFE system does not allow for an individual’s authorisation limit to be restricted to relevant cost centres or expenditure codes. These codes will be detailed on the Delegation of Authority form and it is important that budget holders do not authorise expenditure either above their financial limit or against codes that are not listed on their Delegation of Authority form. Budget holders must also understand their delegation limit for different types of expenditure as set out on the Delegation of Authority form (for example they may have a higher limit for signing purchase orders or invoices for contractual values than for goods or services that are not supported by signed contracts) and ensure that they do not exceed any of these values.

Delegation of Authority forms are authorised by an individual’s Director and the financial services team will update the details on Oracle. The signed form is stored within the finance drives and copies are forwarded to the procurement department, the HR department and the payroll provider as required.

Budget holders and their line managers are responsible for notifying the finance department of leavers or changes in budget holder responsibilities. New Delegation of Authority forms should be completed unless changes are minor and signed by a senior financial services officer. Care should be taken to delete access for budget holders who leave the organisation or cease to have responsibility for budget areas. The authorised signatory lists and limits on Oracle are regularly reviewed by the financial services team (at least quarterly) and formally reviewed by the Audit Committee on an annual basis.

Submitting a falsified payment is a potential offence under the Fraud Act (2006). If a staff member believes or suspects that a fraudulent payment has been processed, he/she should consult the ICB Counter Fraud, Bribery and Corruption Policy and contact the ICB’s Local Counter Fraud Specialist (Eleni Gill – [email protected]). The ICB’s Counter Fraud, Bribery & Corruption Policy provides more guidance on what to do if fraud is suspected and offers alternative contacts for reporting concerns.

Authorised signatories do not have the authority to delegate the use of their authority. Therefore, personal or executive assistants or colleagues cannot be delegated to apply the authorised signature. If a personal assistant or colleague applies the authorised signatory’s signature on their behalf, documentary evidence of the request by the authorised signatory for the specific transaction must be retained for audit purposes.

Control Accounts

The financial services team will reconcile and clear all control/suspense accounts, usually monthly, and reconciliations should be authorised by a senior financial services officer. Evidence of authorisation must be retained for audit purposes. A list of control accounts and the frequency of reconciliation is retained and maintained by the Deputy Director of Financial Management & Accounting.

Closing Old Year and Opening New Year Balances

The financial services team will check that all opening balances accurately reflect the final audited closing balances from the previous year.

Losses and Special Payments

Losses and special payments are items of expenditure that Parliament would not have contemplated when it agreed funding for the NHS. By their nature they are items that ideally should not arise. Section 10 of the Standing Financial Instructions defines the framework within which the ICB deals with these issues.

HM Treasury approval is required if the transaction exceeds delegated limits or if the nature of the transaction will set a precedent, is novel, contentious, or likely to have repercussions elsewhere in the public sector.

‘Managing Public Money’ – Annex 4.10 Losses & Write Offs and Annex 4.13 – Special Payments (May 2021) contains detailed guidance on Losses and Special Payments. It divides them into different categories and sets out the action to be taken on discovering a loss or receiving or considering a claim for compensation as well as where Treasury approval is required.

In considering Losses and Special Payments, it is important to look beyond whether the proposed write-off or payment represents value for money. The need for corrective action must also be assessed to minimise the number and cost of any future cases. The budget holder must notify the Director of Resources in writing recording the event, the cause and any action taken using the ICB’s standard documentation.

When a loss occurs the budget holder will attempt to recover it and find out the cause and take any corrective action to ensure that it will not recur (including identifying and correcting any weaknesses in controls or supervision).

If arson or theft is suspected the Director of Resources must notify the police. If fraud is suspected the Director of Resources must notify the Local Counter Fraud Specialist.

The Director of Resources is responsible for maintaining a Losses and Special Payments register and for ensuring that the appropriate detail is disclosed. The Director of Resources will report any entries made into the Losses and Special Payments register, to the first available Audit Committee for approval, in accordance with the ICB’s schedule of detailed delegated financial limits to write off losses and make special payments.

As part of new compliance and control procedures ICBs must submit an annual assurance statement confirming details of all exit packages and special severance payments that have been made or agreed during the year. HM Treasury approval must be received before offers are made and special severance payments must be in accordance with NHSE published guidance.

Freedom of Information Requests

The Information Governance team manage all requests for information and reference should be made in line with the Access to Information Policy. Due to the wide range of information requests that include a financial element, all incoming requests will come into the finance team via a nominated officer who will coordinate forwarding to the relevant member of the finance team, monitor time frames and sign off responses before they are forwarded back to the Information Governance team for oversight and return to the enquirer.

7. Monitoring Compliance

NHS SBS produce monthly ISFE metrics which monitor performance against best practice in all major areas. These metrics are shown by category of financial processes and as an overall ranking compared with other ICBs.

The financial services team will include high level progress on ISFE metrics in financial reporting to each meeting of the Finance and Investment Committee along with key indicators such as aged creditor and aged debtor reports.

The ICB’s Internal Auditors undertake an annual review and testing of internal financial controls and report their findings in a report to the ICB Audit Committee together with recommended actions to mitigate any control weaknesses identified.

The ICB’s External Auditors provide an independent opinion on the annual financial statements and the organisation’s value for money arrangements in their audit opinion and outline key findings and issues that need to be highlighted to stakeholders and the public in their annual audit report.

8. Staff Training

Line managers must ensure that all relevant staff are aware of the contents of this policy document and the processes required to comply.

The Director of Resources is responsible for ensuring that appropriate training is given to finance staff and budget holders in order that they can fulfil their responsibilities outlined in this policy document.

9. Arrangements for Review

This policy will be reviewed no less frequently than every two years.  An earlier review will be carried out in the event of any relevant changes in legislation, national or local policy/guidance, organisational change or other circumstances which mean the policy needs to be reviewed.

If only minor changes are required, the sponsoring Committee has authority to make these changes without referral to the ICB Board. If more significant or substantial changes are required, the policy will need to be ratified by the relevant committee before final approval by the ICB Board.

10. Associated Policies, Guidance and Documents

Associated Policies

• NHSEI/NHS Shared Business Services – “Business Process Best Practice in the ISFE Environment” – Version 2.0 (March 2022)
  
• HM Treasury – “Managing Public Money” – May 2021
  
• International Accounting Standards Board – “IAS37 Provisions, Contingent Liabilities and Contingent Assets”
  
• ICB Scheme of Reservation and Delegation
  
• ICB Standing Financial Instructions

12. Equality Impact Assessment

The EIA has identified no equality issues with this policy.

The EIA has been included as Appendix A.

If you would like to download a full copy of the policy in a Microsoft Word format please click the link below.

004 Accounting and Financial Management Policy (docx, 96kb)