Interpretation of the council’s financial regulations

Question

I’m trying to find a way to explain to my colleagues the difference between approving payment of a bill/invoice and approval of the decision to purchase. For example, full council meets and decides what to do about the need for an item or contract, some time later, full council meets and approves the accounts for payment, then the bill/invoice is paid. If the bill/ invoice is less than £1000 the RFO can approve the payment so no need to present it for approval but rather to note.

Colleagues are struggling to understand that ‘being able to approve payments under £1k’ does not mean that you can make the decisions which the council would ordinarily meet to consider and make, it means that you don’t need to bring the payment back to the full council for approval. Consequently some colleagues are gifting use of rooms rent free, choosing how to address the request for and siting of a small asset, arranging meetings and agreeing things with members of the public and God knows what else. These are not emergency decisions and are not being fed back to council at the next available meeting either.

Colleagues have cheerfully adopted the phrase ‘approval to spend’ from somewhere to describe what they’re doing here. Which is undemocratic, but surely also unlawful.

Is the process I am trying to explain written down anywhere so that I can point colleagues towards it please?

Answer 1

look up your financial regs our say the ROF can spend up to £1000. In conjunction with the chairman of the council

Comments

Your financial regs may say that this is in an emergency, or that the RFO can ‘authorise expenditure’ this is not the same as the council debating an issue and deciding what to do, how to do it and agreeing to pay for it.

Answer 2

My Council's Financial Regulatons said "  The Clerk & Financial Officer is authorised to a) spend £X in consultation with the Chairman when an emergency arises, b) settle utility bills where the council has previously entered into a contract for the provision of a service, and c) place order for the provision of routine stationery and settle the bill in due course.  In all cases, where such payments are made, they will be reported to the next available council meeting.

That may help.  I hope it does.

Comments

Yes mine are not so explicit which is where the potential for creative interpretation comes in.

Answer 3

Are there 2 parts to that question?
The part about vote - approve - pay is all quite self explanatory (and a situation I too am unfathomably struggling to get understanding and adoption of after years of suppression)
Old / bad habits are hard to break it seems.  A written motion is presented, voted, approved including costs, if the invoice matches the quote there is no need to again vote to approve the payment at a later PC meeting - this just adds delay, duplication and frustration for any trade waiting to get paid.
Then there is the second part about room hire which, if I'm reading it right, doesn't seem to fit with part 1??

Comments

Because the clerk/RFO believes that they can ‘approve a spend’ of up to £1000 themselves, they have, for example, offered rooms to a local group, which normally have a rental fee, for free and bunged in some refreshments and then presented the decision to council for our information. They do not realise that what they have is a delegated authority to approve the payments the council makes in respect of bills and invoices, for the reason you give (avoiding delay) up to £1000, not the decision to spend it and what on.

Answer 4

I would go back to basics. No Councillor is allowed to act on their own, and no one can spend any money, or agree to purchase or gift anything unless there is a specific delegated power to do so, and powers can only be delegated to officers of the Council, not individual Councillors. Your financial regulations have allowed a delegation of spending up to £1000 to your clerk/rfo ONLY and in conjunction with chairman or whoever. Anything else has to be agreed at full council ( or committee of delegated to them)

Comments

The delegation to the RFO is not to begin making decisions that the council should be making though? Even if they are going to cost less than £1000

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What do your regulations say? Ours are the model ones that allow the Clerk to purchase something in an emergency up to £1000 in agreement with the chairman and to be ratified at the next meeting. If it’s something budget related and we are within budget and it needs paying ahead of the next meeting I can do so and again it’s ratified at the next meeting. In your case decisions seem to be made by Cllrs outside the meeting, they can’t. Cllrs cannot make decisions outside of a council meetings, the Clerk maybe able to dependant on delegated authority

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These are the relevant paragraphs of the FinRegs

‘4. Budgetary control and authority to spend
4.1. Expenditure on revenue items may be authorised up to the amounts included for that class of expenditure in the approved budget. This authority is to be determined by:
• Full Council, in advance, for all items over the lower of £1,000 or a duly delegated committee limit;
• a duly delegated committee of the Council for items over £1,000 up to its delegated limit;
• The RFO, with clearance of the Chair of the Council or Chair of the appropriate
committee, for any items between £500 and £1,000;
• The RFO, for items below £500 or the Town Clerk if expenditure relates to a project.
Such authority is to be evidenced by a minute or email produced by the Town Clerk or RFO, and where necessary also by the appropriate Chairman.
Contracts may not be disaggregated to avoid controls imposed by these regulations.
4.2. No expenditure may be authorised that will exceed the amount provided in the revenue budget for that class of expenditure other than by resolution of the Council, or duly delegated committee. During the budget year and with the approval of Council having considered fully the implications for public services, unspent and available amounts may be moved to other budget headings or to an earmarked reserve as appropriate (‘virement’).
4.3. Unspent provisions in the revenue or capital budgets for completed projects shall not be carried forward to a subsequent year.
4.4. The salary budgets are to be reviewed at least annually in October for the following financial year and such review shall be evidenced by a hard copy schedule signed by the Town Clerk and the Chair of Council or relevant committee. The RFO will inform committees of any changes impacting on their budget requirement for the coming year in good time.
4.5. In cases of extreme risk to the delivery of Council services, the RFO in conjunction with the Town Clerk may authorise revenue expenditure on behalf of the Council which in the Town Clerk’s judgement it is necessary to carry out. Such expenditure includes repair, replacement or other work, whether or not there is any budgetary provision for the expenditure, subject to a limit of £5,000. The Town Clerk shall report such action to the Chairman as soon as possible and to the Council as soon as practicable thereafter.
4.6. No expenditure shall be authorised in relation to any capital project and no contract entered into or tender accepted involving capital expenditure unless the Council is satisfied that the necessary funds are available and the requisite borrowing approval has been obtained.
4.7. All capital works shall be administered in accordance with the Council's standing orders and financial regulations relating to contracts.
4.8. The RFO shall regularly provide the Council with a statement of receipts and payments to date under each head of the budgets, comparing actual expenditure to the appropriate date against that planned as shown in the budget. These statements are to be prepared at least at the end of each financial quarter and shall show explanations of material variances. For this purpose “material” shall be in excess 15% of the budget.
4.9. Changes in earmarked reserves shall be approved by Council as part of the budgetary‘

Answer 5

It sounds as though your council is not using the NALC model financial regulations. As others have stated, the model doesn't give the Clerk any delegated authority to spend in isolation, apart from the emergency power "in cases of extreme risk to the delivery of council services." No Councillor may make spending decisions.

The other important factor is that expenditure may only be approved "up to the amounts included for that class of expenditure in the approved budget." If your budget is simply broad headings, this doesn't help your case, but if you have a more detailed budget, it's worth checking whether these payments comply.

Comments

Thank you DavetheClerk. If our financial regulations, having been altered from the model, could be interpreted by some as giving the clerk authority to make decisions to spend money on non emergency, non day to day matters, do they trump the policies and terms of reference of the council?

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Your council has the power to modify the model standing orders and/or financial regulations, or even to write their own, as long as they do not conflict with the legislation. The reason many councils adopt the model documents is that somebody else has done the hard work of ensuring legislative compliance.

In the situation you've outlined here, delegation to the Clerk, as an officer of the council, is permissible, but delegation to an individual member of the council is not, as the legislation does not permit this.

The model financial regulations do not include the specific delegation to the Clerk that you have in your version. The model states:-

"4.1. Expenditure on revenue items may be authorised up to the amounts included for that class of expenditure in the approved budget. This authority is to be determined by:
•the council for all items over [£5,000];
•a duly delegated committee of the council for items over [£500]; or
•the Clerk, in conjunction with Chairman of Council or Chairman of the appropriate committee, for any items below [£500].
Such authority is to be evidenced by a minute or by an authorisation slip duly signed by the Clerk, and where necessary also by the appropriate Chairman."

The replacement of "in conjunction" with "with clearance" waters down the Chairman's oversight significantly in my opinion. Whilst it is clear that there is no intention to provide the Clerk with routine spending powers in the model document, for what I would consider obvious reasons, the legislation does not prevent this, as long as your financial regulations were adopted by a meeting of the council and are reviewed annually.

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We still have terms of reference for the subcommittee and a policy which state that decisions will be made by that subcommittee. The budget for that area is very small and the expenditure on this matter will exceed that budget. It could be argued that it will come under ‘admin’ or something, I guess . As it is an item which will be an asset (I presume) is it capital expenditure rather than revenue?
The financial regs were adopted last year. I didn’t vote for them, but, you know, factionalism. So I think that you’re saying that financial regs trump our policies and terms of reference?

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The problem with your fin regs is that the bullet points are not mutually exclusive and create certain anomalies. The first bullet point is relatively clear, but if the relevant committee limit is £1,500 and the job is £1,200, the Council must give authority. The second is more problematic, as, in the example mentioned above, it indicates that the committee must give authority. Committees can spend over £1,000, but not under £1,000. Why? The third bullet gives sole authority for expenditure between £500 and £1,000 to the Clerk "with clearance of the Chair" which could include a blanket all-encompassing approval along the lines of "just do it."

The challenge is to create mutually-exclusive powers of approval in your financial regulations and to align your fin regs with your committee's terms of reference and delegation. The usual way to achieve that is to give the committee power to spend £0 to £x and the Council £x+

Answer 6

Colonel    Looks interesting and I note the many replies.  IMHO the provision of free rooms and refreshments needs to be sorted.  It is a gift in kind to a third party and its cost needs to be shown in the councils accounts (as a grant or whatever).  We are unravelling some of this stuff going back to 1947 where parish council and charity assets were allowed to be used free of charge and on a nod and a wink.   As noted, if the clerk has delegated authority to do this (decide who gets free use or not) then fine, although the councillor remain accountable for that delegation decision, and the appropriate funding arrangements are clearly visible in the accounts.  If one group is not charged, then why would any other?