PSAA Corporate Governance Framework

Appendix 4 – Financial policies

Background

1. The Company’s core objectives include a commitment to being financially responsible and safeguarding fees charged to audited bodies. This document sets out the Company’s arrangements for meeting that objective.
2. The Company’s financial policies set out the high-level financial controls for securing value for money for the taxpayer. They also set out the role and responsibilities of the Board, the Chief Executive and the Chief Financial Officer.
3. The Company’s financial policies form part of the Company’s Corporate Governance Framework. The Board is responsible for approving the financial policies or any changes as recommended by the Audit Committee.
4. The Company’s financial procedures set out the day-to day arrangements and delegated responsibilities for implementing the financial policies. The Audit Committee reviews the Company’s financial procedures at least once a year and reports to the Board on amendments.
5. The Company’s financial policies and financial procedures are consistent with the relevant sections of the Companies Act 2006 and the principles of HM Treasury’s Managing Public Money where appropriate.

Responsibilities for financial management

The Board

6. Part 3 of the Corporate Governance Framework sets out the roles and powers reserved to the Board on financial management.

The Chief Executive

7. The Chief Executive has overall executive responsibility for the effective delivery of the Company’s strategic and day-to-day financial affairs. He/she must advise the Board on the legal obligations set out in the Companies Act 2006 and the principles set out in HM Treasury’s Managing Public Money.
8. The Chief Executive role carries with it personal responsibility to ensure that appropriate advice is given to the Company on all matters relating to financial propriety and regularity, for keeping proper accounts, and for the efficient and effective use of resources.
9. In line with the principles set out in Managing Public Money, the Company’s Chief Executive has the following specific responsibilities that he/she cannot delegate to another officer:
   • Ensuring that the Company operates effectively and to a high standard of probity.
   • Ensuring that the Company has effective internal control systems for financial procedures, governance, risk and performance management.
   • Maintaining the Company’s financial policies including:
     • Annual review. Completing a review and reporting proposed changes to the Audit Committee for recommendation to the Board for approval as part of the Company’s annual review of its Corporate Governance Framework.
     • Ongoing review. Keeping the financial policies up-to-date as the Company’s circumstances change and reporting proposed amendments to the Audit Committee for recommendation to Board for approval.
   • Approving and maintaining the financial procedures setting out the delegations and detailed arrangements for implementing the Company’s financial policies including:
     3. Providing the Audit Committee with a copy of the financial procedures for scrutiny as it considers the report on the annual review of financial policies.
     4. Advising the Chair of the Audit Committee on any changes to the financial procedures required between annual reviews

10. In line with the principles set out in Managing Public Money, the Chief Executive also has overall responsibility for all other aspects of financial management. He/she may formally delegate these responsibilities, but not the accountability for them, to other Company officers in line with the requirements set out in these financial policies and through the Company’s detailed financial procedures.
11. The Chief Executive’s overarching financial management accountabilities and responsibilities are:
    • Ensuring the Company uses its resources efficiently, economically and effectively, avoiding waste and extravagance.
    • Ensuring the provision of effective financial advice to the Board and Audit Committee.
    • Planning and delivering the financial framework agreed with the Board.
    • Carrying out project appraisals objectively and fairly, seeking good value for the public sector as a whole.
    • Using management information systems to secure assurance about value for money and the quality of delivery and making timely adjustments.
    • Ensuring the Company avoids undue compliance costs, either on its own staff or on its customers and stakeholders.
    • Using internal and external audit to improve internal controls and performance.

The Chief Financial Officer

12. The Chief Financial Officer is a key member of the management team.
13. He/she must be actively involved in, and able to bring influence to bear on, all material business decisions to ensure immediate and longer term implications, opportunities and risks are fully considered.
14. To deliver these responsibilities the Chief Financial Officer must be professionally qualified and suitably experienced. He/she must work closely with the Chief Executive at all times, leading on his/her behalf on financial issues at Board and Audit Committee meetings.
15. In line with the principles set out in Managing Public Money, the Chief Financial Officer has the following financial management responsibilities:
    • Providing financial advice to the Board at both a strategic and operational level.
    • Setting standards, leading, motivating and developing awareness of the finance function within the Company.
    • Providing sound financial advice, especially on affordability and value for money, to support effective decision making on all proposals with a significant financial implication.
    • Coordinating the planning and budgeting processes applying discipline in financial management, including managing debt and cash flow, with appropriate segregation of duties.
    • Leading on the preparation of the annual report and accounts.
    • Preparing timely monthly management accounts.
    • Reporting on compliance with financial delegations, policies and procedures.
    • Leading on day-to-day liaison with the external auditor and internal auditor on behalf of the Chief Executive.
    • Leading on review of financial policies and procedures on behalf of the Chief Executive.

Other Company staff

16. All members of staff have a general responsibility for safeguarding public money and ensuring value for money. The Company’s financial procedures describe other staff members’ specific financial management responsibilities.

Status and scope of the Company’s financial policies

17. Board members and all employees must comply with the Company’s financial policies. Any member of staff failing to comply with the financial policies may be subject to disciplinary action under the Company’s disciplinary policy. The Chief Executive will report any significant breaches of Company financial policies to the Audit Committee.
18. Members of the management team are responsible for making sure their staff have read the Company’s financial policies and financial procedures and that their staff understand and comply with their financial management responsibilities.
19. The Company’s financial policies are consistent with the Company’s policies for ICT and HR and employees should read them in parallel.

Amendment of the Company’s financial policies

20. The Audit Committee is responsible for reviewing changes to the financial policies proposed by the Chief Executive and making recommendations for change to the Board.

The financial policies

Capital investment and asset management

21. The Company will make any decision to buy, lease or dispose of assets on a case-by-case basis.

Treasury management and banking

22. The Company will seek to ensure the security of its deposits over maximising investment income. The Company will keep enough liquidity (through cash, cash equivalents, short-term investments or overdraft) to meet its current commitments.
23. The Company will make investments in line with the treasury management policy. The Local Government Association will provide administrative services. The Audit Committee will review these arrangements annually and any amendments will be recommended to the Board for approval.

Trade receivables

24. The Company normally expects debtors to pay trade receivable invoices within 30 days of the date of the invoice. Considering the costs and benefits of recovery, the Company will seek recovery of sums still owing after this period.

Procurement

25. The Company will ensure all purchases comply with relevant legislation and government directions. Purchases must be for essential goods and services only.

Trade payables

26. The Company will comply with agreed payment terms and will aim to pay 80 per cent of undisputed trade invoices within 10 days of the invoice date.

Taxation

27. The Company will seek to ensure it identifies and pays its tax liabilities on time.

Business and financial planning

28. The Company will review and update its medium-term financial plan as often as necessary to reflect changing strategic assumptions. The medium-term financial plan will support the Company’s strategy.

Budgetary control

29. The Company will ensure its budget setting procedures are efficient and effective and will hold managers to account for their budget responsibilities.

Authorisation of expenditure

30. Items of expenditure up to £100,000 will be authorised by the Chief Executive, a Senior Management Team member or Governance and Contract Manager. Expenditure above this limit requires authorisation by the Chief Executive and a Senior Management Team member.
31. Expenditure must be within the approved budget will not be authorised without a valid purchase order. Any exceptions will require prior approval from the CFO. Purchase orders will only be allocated by the Chief Financial Officer or the Finance and Contract Manager or the Assistant Manager Finance and Contracts. To maintain segregation of duties, these staff cannot authorise expenditure.
32. Distribution of surplus income to audited bodies, as agreed from time to time by the Board, will be made by BACs payments. The payment instructions will be calculated and set up with Barclays bank (through the LGA) by the Chief Financial Officer. The Chief Executive and a nominated management team member (not the CFO) will review the payment instructions by checking the accuracy of the amounts to be refunded and by verifying a sample of the audited bodies’ bank details to confirmations received directly from the bodies.

Amount of purchase order	Purchase order approved by
£0 – £10,000	Chief Executive or Senior Management Team member excluding CFO or Governance and Contract Manager
£10,001 – £100,000	Chief Executive or Senior Management Team member excluding CFO
Above £100,000	Chief Executive and a Senior Management Team member* excluding the CFO

34. *If either of these officers is not going to be available in sufficient time then the other officer will consult with the Chair. The Chair will have discretionary power to authorise a Senior Management Team member (excluding the CFO) to be the second authoriser. The Chair will consult with the rest of the Board if he/she considers it to be appropriate to do so.

Risk management and insurance

35. The Company will ensure it identifies, evaluates and manages risks. The Company will evaluate insurable risks and maintain a suitable insurance strategy.
36. The Company will manage risks in accordance with the risk management strategy and policy.

Internal control

37. The Company will put in place an effective internal control environment with controls providing reasonable assurance of effective and efficient operations, financial stewardship, probity and compliance with laws and policies.

Internal audit

38. The Audit Committee will review the effectiveness of the internal audit function annually.

External audit

39. The Audit Committee will review the external audit function annually to ensure it remains independent and effective.

Annual statutory accounts

40. The Company will produce an annual report and accounts on time, following FRS102, other relevant accounting standards and the other requirements of the Companies Act 2006.

Claims and litigation

41. The Company will put arrangements in place to ensure that it handles all claims and existing or potential litigation properly. These will reflect the Company’s statutory functions, the need to achieve value for money, and relevant commercial principles.

Fraud

42. The Company requires all staff always to act honestly and with integrity, and to safeguard the public assets for which they are responsible. The Company will not tolerate any fraud perpetrated against it by its staff or any third party and will actively follow up any loss suffered. The Company’s financial procedures set out the requirement to have a fraud response plan and to comply with money laundering legislation.

Fees and charging

43. The Company will review scales of fees annually so it can meet its statutory responsibilities for setting such fees.

Audit contracts management

44. The Company will only approve payments to, or invoices for payments from, accounting firms under its audit contracts on receipt of properly validated quarterly data returns from the firms. The Company will check on a cyclical basis that the firm’s processes and controls regarding the quarterly data returns are operating effectively.  
45. Invoices to firms for payments will be raised by the Chief Financial Officer or the Finance and Contract Manager or Assistant Manager Finance and Contracts and will be authorised by the Chief Executive or the nominated senior management team member (not the CFO).

Expenses

46. The Company will reimburse reasonable out-of-pocket expenses properly incurred while on authorised business. It is the employee’s and Board member’s responsibility to ensure that costs are reasonable. The Company reserves the right not to pay back expenses where a claim is not compliant with the expenses policy, including submission of claims made after the period specified in the Company’s financial procedures and expenses policy. The Company will discipline any employee that knowingly claims expenses in breach of this policy or makes a false claim.

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