Accounting Instruction No. 1

ORDERING, RECEIVING AND PAYMENT OF GOODS AND SERVICES

Financial Regulations Financial Planning B7, B11 & B15 and Systems and Procedures D4, D8, D9 & D13 apply to this accounting instruction and can be found on page 135 of the Gloucestershire County Council Constitution

1. Introduction

1.1 The objective of this Accounting Instruction is to provide employees with guidelines on the approved procedures for purchasing goods and services on behalf of the County Council. These procedures should be treated as a basic framework for the guidance of officers. It is recognised that circumstances may vary and that Directors may wish to issue supplementary instructions to deal with specific situations as required.

1.2 The procedures laid down in these instructions and the Employee Code of Conduct Gloucestershire Staffnet - Code of Conduct for employees, are to protect the County Council and staff against the effects of misuse and misallocation of orders. Any departures from these procedures are likely to remove or reduce this protection. It is considered essential, therefore, that these procedures are followed. Directors and officers designated as being responsible for staff placing orders should ensure that such staff are fully aware of and follow the procedures laid down.

1.3 Council Funds can only be used for appropriate business purposes. Officers are reminded that they are required to obtain value for money in respect of all goods and services ordered for the Council, and that goods and services purchased from GCC funds must only be used for official GCC purposes.

2. When Should Orders Be Placed

2.1 Where possible all orders should be raised in advance on SAP.

2.2 Official orders must be used for the acquisition of all items, with the exception of items on the published SAP order exception list http://thisweek/utilities/action/act_download.cfm?mediaid=12710 . For items on this list specific agreements should be drawn up between the Authority and the supplier.

(i) Recurring items under a specific contract, e.g. a yearly contract for cleaning windows which is paid each quarter. In such cases only an initial order (on at least an annual basis) should be given. Subsequent invoices can be passed against this order.

(ii) Items bought through Petty Cash.

(iii) Items purchased using Purchase Cards

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(iv) Items purchased via specific contracts, which require the use of the suppliers ordering system. The relevant GCC staff will be given appropriate access and training for these systems.

2.3 Orders should be placed electronically through SAP unless the goods or services constitute an exception as outlined by the Director of Strategic Procurement. Orders given by telephone or in person should be confirmed via SAP as soon as possible, thereafter marked “confirming verbal/telephone order”. These orders should be placed by the officer normally responsible for ordering; if this is not possible, then the officer normally responsible for placing orders should agree to the telephone order before the order is made.

3. How Should Goods or Services Be Purchased

The person purchasing any goods or services is required to obtain value for money.

Items / services ordered through an existing pre-tendered, Council framework arrangement do not need to be subject to further competition or three quotations. When shopping through SAP, the approved supplier will be the default. If a supplier other than the preferred supplier is selected the purchase order will be routed via a sourcing pool prior to being sent to the supplier.

Items totalling less than £1,0003.1 The person purchasing any goods or services is required to obtain value for

money but they are not required to retain evidence of having obtained three separate quotes. They should, of course, still obtain comparative prices for purchases below £1,000 whenever possible.

Items totalling from £1,000 to less than £5,0003.2 For orders from £1,000 the following procedure should be adhered to when

obtaining quotes. The values below should be interpreted as applying to an item, any multiple of an item, or groupings of items e.g. camera/tripod/case or desk/chair - even though the individual values may be below a threshold it is the total value of the "camera equipment" or "furniture" that should be considered.

Three prices should be examined and retained for orders from £1,000 to less than £5,000. These prices may be taken from suppliers via the Internet, written or verbal quotations or from current catalogue/price lists. Where catalogues or price lists are used officers must ensure that they are current editions. Where it is not practical to obtain three prices, the Budget Manager/Holder should sign a waiver to this effect which should be retained on file.

Items totalling from £5,000 to £50,0003.3 Independent written evidence, e.g. emails or quotations provided on suppliers

headed note paper, of at least three prices should be obtained and retained for orders from £5,000 to £50,000.

Note: In instances where a Director is satisfied that it would not be practicable to seek prices outlined above, a written waiver, in the form of an email, to this effect must be obtained from the Director and this held on file.

Items totalling more than £50,0003.4 Orders for the supply of goods or services exceeding £50,000 or the regular

supply of goods and services for which the aggregate estimate cost exceeds

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£50,000 must be in accordance with the Contract Standing Orders (see above). Orders should not be split so as to avoid these requirements.

The County Council has produced Procurement Guidance for Tendering and Contract Management (see http://thisweek/index.cfm?articleid=11442) which sets out when financial checks on tenders should be undertaken. Appendix 3 (see http://thisweek/utilities/action/act_download.cfm?mediaid=29848) describes the procedure for obtaining financial references and performance bonds.

Supplier Determined by Another Organisation3.5 In instances where the Council is a member of e.g. a consortium for a

particular supply contract, but is not the lead organisation in negotiating its price, written evidence of the steps taken to determine the price agreed should be obtained from the lead organisation and kept on file. Similarly, in instances where a body or organisation other than the Council has determined which supplier the Council should purchase from (e.g. if the Council is acting as an agent for another organisation), written evidence of this arrangement should be kept on file. Please note – the completion of Gateway Forms and, where appropriate, the seeking of Directors’ waivers is still necessary under these circumstances.

3.6 There are strict rules governing the acquisition of vehicles and equipment via Credit Arrangements.

3.7 Advice, guidance and the County Council Procurement Strategy can be found on the Strategic Procurement pages of staff net. The Director of Strategic Procurement should be consulted on large procurement issues.

4. Ordering Procedure

4.1 Before any order is placed it is essential that the person responsible for placing an order has ensured that there is sufficient budgetary provision for that order. Purchasing should in most instances only be carried out by registered “Shoppers” on SAP. The role of the “Shopper” is specified in Appendix 7. Where an order constitutes an exception to SAP http://thisweek/utilities/action/act_download.cfm?mediaid=12710, a Budget Manager (BM) or Budget Holder (BH) can delegate authority to raise orders against their budgets to other members of staff. This delegation should be in writing and include details of any ordering limits or other requirements. A copy of this delegation should be kept by both parties. If the BH is making the delegation they must inform their BM (the BM has discretion to stop this delegation if they chose to). Even if the BM or BH has delegated responsibility for raising orders, the responsibility for managing the budget remains with the BM or BH. A copy of a general delegation form is attached at Appendix 5 (see http://thisweek/utilities/action/act_download.cfm?mediaid=9921). The link to the e-form for Agency Staff contract with Comensura is http://staffnet.gloscc.gov.uk/index.cfm?articleid=6406.

4.2 Where a purchase is to be made using a purchase card, details of the commitment including the quoted price should be recorded on the cardholder’s transactions log immediately. More information on the use of purchase cards and a list of P Card holders can be found at Gloucestershire Staffnet - P Cards

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4.3 Where orders are placed via the suppliers ordering system (for specific corporate contracts) then appropriate management reports will be made available from these systems to ensure a record of orders is maintained.

5. Receiving Goods

5.1 Where goods / services have been ordered on SAP, goods receipting on SAP must also be carried out promptly. Goods received should be checked against the original order and also to ensure they are in satisfactory condition. Any differences between the delivery note and the goods received should be reported immediately to the supplier.

5.2 Suppliers should be asked for instructions for returning goods that have been received in error or damaged.

5.3 All goods received in respect of purchase card transactions should be recorded on the cardholder’s transactions log (see Gloucestershire Staffnet - P Cards for further information).

5.4 Invoices for part deliveries may be paid providing they only relate to goods which have been already received.

5.5 On specific corporate contracts the recording of goods received may be entered on the suppliers system. Where this applies the relevant GCC staff will be given appropriate access and training for these systems.

6. Payments Of Accounts

6.1 Payments must only be made against an invoice when the goods have been received and been found to be in good order. Statements, delivery notes and acknowledgements of orders should not be used to pay for goods or services received.

Purchase card statements should be reconciled promptly and any discrepancies recorded, brought to the attention of both the supplier and purchase card administrator, and remedied as quickly as possible. See Gloucestershire Staffnet - P Cards for more information on the use of purchase cards.

There is a risk that suppliers who are paid for goods by purchase card will still send an invoice for these goods. It is important that staff are aware this may happen and they ensure goods are not paid for twice. As they are subject to a separate process, goods paid for by Purchase card will not appear as paid on the payment system.If a supplier provides goods via the Purchase Card process then any invoices from this supplier should be checked against the individual’s card log, to ensure the goods have not already been paid for by Purchase Card.

6.2 Invoices which are lost or destroyed should be replaced by obtaining copy invoices from the supplier. Alternatively the supplier may send an invoice electronically via e-mail or fax. These invoices should be clearly marked as “Copy Invoice” with "I certify original has not been paid" and signed by a

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certifying officer after confirming it has not already been paid or entered onto the system for payment.

6.3 Commitments appear on the system when an order is authorised. When the goods are marked as received the commitment is reduced and replaced by a charge to the accounts.

6.4 In many cases the invoice will go straight to the BSC and processed. If it matches with the order it will be paid. It is not scrutinised by the budget holder at this stage.

6.5 Where orders have not been raised through SAP, two people should always be involved in the payment of accounts. One, usually the certifying officer, must have the authority to commit expenditure against a particular budget. The other will be responsible for ensuring the goods have been received.

6.6 The budget against which the invoice is being paid should be identified. This is usually done by completion of coding slips attached to the invoice and should have been determined when the order was placed. (See Section 5)

6.7 If the account is paid by a manual cheque then the cheque number, the date paid and the total amount must be written onto the invoice or a photocopy of the signed cheque attached (unless the manual cheque is raised by the BSC Finance Administration who will do any necessary computer recording). Care needs to be taken when making these payments - refer to BSC Finance Administration.

6.8 Under the terms of the Performance Indicators, GCC is required to pay all invoices within 30 days of receipt.

6.9 On specific corporate contracts, as long as the agreed ordering and goods received/authorisation process has been properly completed this may be sufficient to enable the supplier to produce a consolidated invoice ready for payment by GCC without further authorisation.

7. Payments Through The Payments System

7.1 All invoices paid through the Payments System should have a coding slip (shown below) attached to the invoice. It should be attached in such a way that it does not obscure any of the details on the invoice. Spreadsheets can also be used, once agreed with BSC – Financial Administration.

Please note that the Service User Assistance Form should be used for Social Care emergency and regular payments in respect of service users. For further information, see Gloucestershire Staffnet - Emergency Payments.

7.2 The person who checked receipt of the goods will usually sign the “goods

received/work done” box. The person signing this box is confirming that the goods or service have been received by the County Council.

7.3 The relevant details from the invoice should then be completed by a responsible officer. The following must be completed by them:

Invoice Reference (from the invoice)SAP General Ledger codeAmount to be paid for the goods (from the invoice)

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VAT marker (from the invoice)Transaction date (from the invoice)Date received (when first received by GCC)Amount of VAT to be paid (from the invoice)Total amount to be paid (from the invoice)

The Prices & Arithmetic box should then be signed after checking that the details on the coding slip are correct and add up.

7.4 Payments involving sub-contractor work should be identified and marked accordingly. Refer to http://thisweek/utilities/action/act_download.cfm?mediaid=2048 for clarification on payments.

7.5 All entries on the coding slip should be done in black or blue ink unless a credit entry is needed in which case it should be in red ink. The VAT marker should be either “V2” for VAT at 5%, “V8” for VAT at 15%, “V1” for 17.5%, “VT” for 20%, “V0” for exempt from VAT, “V3” for zero rated VAT, or “V4” for non-business transactions outside the scope of VAT. Refer to the guide "VAT How to Recover VAT on Expenditure" or contact the VAT Officers on (01452) 425882 / 426416.

7.6 The invoice should then be passed to the certifying officer who after checking the invoice and coding slip should ensure that sufficient budget is available. If the budget is not available then, unless the sums involved are immaterial, they must make arrangements to vire money into that budget. When satisfied the certifying officer should sign either the Establishment Certification or the Central Office Certification.

7.7 A sample of a coding slip to be used when making payment against an invoice is shown below.

7.8 The invoice should then be passed to the section responsible for inputting your documents into the Payments system.

7.9 The person entering the payment into the Payments system must check that there are two signatures on the coding slip. Payment input staff must return to the originator any invoice not certified by an authorised certifying officer.

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7.10 All users of the computer system must be fully trained by SAP System Support and be aware of system security and data protection.

7.11 On specific corporate contracts the supplier may send a consolidated invoice file to the Payments Team in the Business Service Centre for payment through the payments system.

7.12 Where an invoice is disputed/queried GCC will amend the received date to be the date of the resolution of the dispute query.

7.13 Any purchases made using a purchase card must be made in accordance with the guidance laid down in Gloucestershire Staffnet - P Cards

N.B. Officers should not accept additional charges imposed by suppliers on goods simply because of the form of payment being used e.g. Purchase Cards.

7.14 If payment has been made by cheque and the status of the payment is required (i.e. whether or not the cheque has been presented), the Tax, Control & Pensions Finance section can advise accordingly on receipt of the cheque number. This check must be made before deciding to place a stop on a cheque.

7.15 Cheques over 6 months old will be reversed on SAP and the invoice reinstated. The invoice will be cancelled. If it requires payment then a new invoice must be created.

8. Interest on Late Payments

8.1 Under the provisions of the Late Payment of Commercial Debts (Interest) Act, 1998 GCC may be charged interest for late payment of creditor invoices. All such charges must be checked and if in doubt, confirmation should be sought from BSC Finance Administration.

8.2 An invoice is late if a credit period agreed with the supplier e.g. 30 days, is exceeded.

8.3 Example: If the current base rate is 2%, then the statutory rate of interest is 10.5% (2% + 8.5%). The 8.5% will remain constant until changed by Parliament.

If the debt is £1,000 and is paid 30 days late (i.e. 30 days after the due date) then the interest owed is:

£1,000 x 10.5% = £105 per annum= 28.77p per day (105/365)

28.77p x 30 days = £8.63

9. Sub-Contractors

9.1 Care must be taken when making Sub Contractor payments. Please refer to http://thisweek/utilities/action/act_download.cfm?mediaid=2048.

9.2 Large contract payments are often paid in stages. Each payment is requested in the form of a certificate.

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As this is not a 'proper' invoice for the purposes of VAT, an authenticated VAT receipt is sent to the Creditor for signing. The blue copy is returned to the paying department and the white copy retained by the Creditor. This receipt should be signed and returned within fourteen days. Procedures for recording such receipts for HM Revenue & Customs inspection can be obtained from Payments Team (ext 5944).

Note: not all contract stage payments are for sub-contractor work. Care must be exercised.

9.3 If a contract exceeds the original tender by £1,000 or 2½% and the final cost of the contract is greater than £50,000, then a report should be made to the appropriate Cabinet Member by the responsible Director. A report does not need to be produced if the Department for Transport will fully reimburse the contract.

10. Value Added Tax (VAT)

Value Added Tax is a tax which is levied on a variety of both goods and services. Gloucestershire County Council (GCC) is a VAT registered organisation and as such, subject to certain conditions, can recover from HM Revenue & Customs most of the VAT it incurs on purchases. When appropriate GCC must also declare VAT on its income, at the correct rate, to HM Revenues & Customs. HMRC have powers to levy substantial penalties for non compliance with VAT regulations.

For comprehensive VAT guidance regarding purchasing please visit Gloucestershire County Council’s VAT guidance How to Recover VAT on Expenditure. VAT guidance generally can be found on Staffnet A-Z (V for VAT). You can also contact the VAT Officers on (01452) 425882 /426416.

11. Duties of The Certifying Officer

11.1 The certifying officer certifies, on behalf of his/her Director, that the budget provision is available, that the goods/services are to be used for official GCC services, good value has been obtained, goods/services have been received at the correct price, that the agreed verification procedures have been carried out, that the invoice is properly chargeable to the appropriate budget and that legislation regarding VAT and sub-contractors tax procedures have been adhered to.

11.2 It is not expected that the certifying officer will personally verify each of these stages but he/she is responsible for seeing that they have all been carried out and accounted for. He/she is moreover, expected to exercise reasonable judgement on the effectiveness of the system and the efficiency of his/her staff and should take note of any circumstances which would warrant a deeper investigation into an invoice.

11.3 Budget Managers are allowed to delegate the responsibility for certifying invoices to other members of their staff, the details of whom must be recorded on a form of delegation see Appendix 4 http://thisweek/utilities/action/act_download.cfm?mediaid=29911. A copy must be forwarded to the section which processes the service’s invoices.

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Responsibility for budgetary control cannot be delegated beyond Budget Holders.

11.4 The certifying process is not meant to be automatic and does entail the need to exercise care and judgement. If sufficient time to do the job properly is not available, then the remedy is to review the delegation of authority.

Additional Information

1. Payments made to individuals must be examined carefully to identify whether they should be made via Payments or Payroll systems.An assessment must be made as to the nature of the relationship between the individual and the Council, rather than the usual employment status of the individual who is carrying out the work. This must be done using the HMRC web based tool http://www.hmrc.gov.uk/calcs/esi.htm. A copy of the results must be printed off and attached to the invoice for payment.The County Council should not be placed in a position with the HM Revenue & Customs whereby tax or National Insurance contributions have been overlooked because of lack of due care and attention. Please refer to "Tax Liabilities on Payments and Staff Benefits: A Guide to your Responsibilities" at Red Tax Book.

2. It is important that the re-issue of payments SHOULD NOT be made until a full investigation is made as to why the original payment has not been received. Issued payments not received MUST be reported to the Payments Team (ext 5712) to enable them to stop cheques or BACs and implement the necessary controls before re-issue.

3. If a cheque has been issued to the correct payee and to a valid address for that payee and the cheque has to be stopped, a replacement payment will not be made until we have written confirmation from our bank that the stop has been actioned. Occasionally the bank may subsequently rescind their confirmation of a stop being actioned. If this occurs, the Payments Team should be immediately advised and if the reissued payment has not already been made it should be stopped until the amount of the original payment has been received in the Authority’s bank account.

4. Any changes in the section's/service's list of certifying officers specimen signatures/initials need to be retained by the department for checking by Internal Audit.

5. Under agreement from HM Revenue & Customs and District Audit, invoices need only be retained for 3 years plus current year.

6. Further guidance on ordering and purchasing can be found on the procurement web pages on Staffnet.

12. Use of Council Funds

County Council funds should only be used for the purchase of goods or services for business purposes.

They must not be used for the purchase of gifts, etc. for members of staff on occasions such as retirements, birthdays, etc., or to fund gatherings or parties associated with such events. Any purchases or payments that are made from private

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collections, contributions, etc. must not be processed through the Council’s creditor or payroll systems.

13. Long Service Awards

Please note however that there are different rules covering Long Service Awards (see the booklet ‘Tax and N.I. Liabilities on Payments and Staff Benefits’ section 8, and Personnel Handbook section D4 and visit Special VAT Rules LONG SERVICE AWARDS AND RETIREMENT GIFTS in VAT Guide How to Recover VAT on Expenditure):

Current Council rates of payment must be observed Gifts must be in the form of tangible articles, not cash (non-cashable

vouchers are acceptable) Payment should be made through the SAP system – reimbursements to

members of staff must not be made

14. Contract Standing Orders

Please see the procurement pages http://thisweek/index.cfm?articleid=11442 for full details.

STRATEGIC FINANCESHIRE HALL,WESTGATE STREET,GLOUCESTER,GL1 2TG

July 2013

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