Appendix A
BUDGETARY CONTROL AND
DELEGATION ARRANGEMENTS IN
2014/15
Contents
PART A - BUDGETARY CONTROL AND DELEGATION ARRANGEMENTS ...................................... 3 1.0 INTRODUCTION ...................................................................................................................... 3 2.0 BUDGETS ................................................................................................................................ 3 2.1 Definition ......................................................................................................................... 3 2.2 Time Period of a Budget .................................................................................................. 3 2.3 Budget Reporting .............................................................................................................4 2.4 Responsibilities of Budget Holders .................................................................................. 4 2.5 Budget Holders and Power to Delegate ........................................................................... 4 2.6 Budget Manager and Power to Delegate ......................................................................... 4 2.7 Budget Operator and Power to Delegate ......................................................................... 4 2.8 Differences in Budget Responsibility of the Three Different Levels .................................. 5 3.0 INCOME ................................................................................................................................... 5 3.1 Accounting for Income Budget ......................................................................................... 5 3.2 Pricing of Work and Services - NHS Patient Activity ........................................................ 5 3.3 Income Schemes - Test of Financial Viability ................................................................... 6 3.4 Private Patient Income – Managing the Business Risks .................................................. 6 4.0 STAFFING ESTABLISHMENT/BUDGETS ............................................................................... 6 4.1 Local Pay ........................................................................................................................ 6 5.0 NON-STAFF BUDGETS ........................................................................................................... 7 6.0 BUDGET TRANSFER - VIREMENT ......................................................................................... 7 7.0 DEFINITION OF EXPENDITURE ............................................................................................. 7 7.1 Revenue Non Pay Expenditure ........................................................................................ 7 7.2 Capital Expenditure ......................................................................................................... 8 8.0 AUTHORISATION LEVELS FOR APPROVAL TO INCUR EXPENDITURE ........................... 9 8.1 Internal Approval .............................................................................................................9 8.2 External Procurement of Goods or Services ................................................................... 9 9.0 INTERPRETATION ................................................................................................................10 PART B – CHARITABLE FUNDS ........................................................................................................ 12 1.0 APPROVAL OF CHARITABLE EXPENDITURE ..................................................................... 12 2.0 APPROVAL OF CHARITABLE FUND RAISING APPLICATIONS .......................................... 13 3.0 APPROVAL OF FIVE YEAR BUSINESS PLANS ................................................................... 13 PART C – LOSSES AND SPECIAL PAYMENTS ................................................................................ 14 2
PART A - BUDGETARY CONTROL AND DELEGATION ARRANGEMENTS
1.0
INTRODUCTION
1.1
The Trust is required by statutory provisions to perform its function within total income received and,
therefore, all plans, financial approvals and control system shall be designed to meet that obligation.
1.2
The following rules, procedures etc have been prepared in compliance with the Trust's Standing Orders
and Standing Financial Instructions. The attention of all Executive Directors, Divisional Chairs, Clinical
Directors and Managers (collectively referred to in the remainder of this paper as either Budget
Holders/Managers) is drawn to the following instructions, which govern the financial management of all
resources, staff, activities etc within the Trust. They are to be applied and complied with by all parties.
1.3
The Director of Finance shall, on behalf of the Chief Executive, prepare and submit annual budgets within
the limits of available income firstly to the Clinical Management Board and then the Trust Board for final
approval. The budget shall relate to the Service Plans submitted by the Executives and Divisional Chairs.
During the year, the Trust Board shall be informed at monthly intervals of the cumulative net in year
expenditure/income position compared with budget for each Executive, with supporting information
showing the position of each clinical directorate etc. Directorates’ income and expenditure positions will be
supported by relevant activity and manpower to provide a package of information for monitoring and
control purposes.
1.4
The underlying principle being followed is the encouragement of maximum delegation of responsibility to,
and exercise of accountability by Budget Holders. In fulfilling this role, Budget Holders will be supported by
Divisional Accountants who will provide advice and support across all financial issues.
1.5
Budgets shall take cognisance of the aims and objectives set out in the Trust's Corporate Plan.
2.0
BUDGETS
2.1
Definition
A budget within the Trust may be defined as follows:
"A financial statement, prepared in conjunction with the Budget Holder prior to a defined period of
time, of the plan to be pursued by the Budget Holder during that period for the purpose of obtaining
a set of given objectives which shall be in accordance with those set corporately.”
The plan shall cover one or more of the following:








2.2
Income
Activity
Revenue Expenditure
Capital Charges
Capital Expenditure
Manpower
Quality
Performance Targets
Time Period of a Budget
Budgets will normally be determined and managed over a period of 12 months covering one financial year
i.e. from 1 April in one year to 31 March in next. In certain circumstances it will be necessary to vary the
3
budget agreement within a budget period either by the inclusion of developments, adjustments for pay
and/or price increases or in response to financial or manpower constraints or other changes.
2.3
Budget Reporting
Budget reports covering all elements of a budget will be produced monthly normally within 10 working
days after the end of the month to which the information relates. The Divisional Accountant working with
the Budget Holder/Manager will prepare a detailed analysis of all significant budget variances. It is the
responsibility of the Budget Holder/Manager to prepare a plan aimed at bringing budget variances back
into line.
2.4
Responsibilities of Budget Holders
The requirement of all Budget Holders is to ensure that at the end of the budgetary period i.e. at 31 March,
their overall budget covering income and expenditure items is not overspent. It is the responsibility of each
Budget Holder to ensure that their income and expenditure budget remains in recurrent balance*.
Depending on the corporate position of the Trust, at the discretion of the Chief Executive, a budget holder
may be required to under-spend by a pre-determined figure at the financial year-end.
* Recurrent is defined as the previous years "roll-over" budgets, adjusted for any agreed changes, be
these positive or negative.
2.5
Budget Holders and Power to Delegate
Below is a list of the main budget holders who will each be responsible for specific elements of the total
Trust budget:


All Executive Directors
Divisional Medical Directors
A Budget Holder can delegate budgets under their control to other officers. (In the remainder of this paper
the person to whom a budget has been delegated to is referred to as Budget Manager).
2.6
Budget Manager and Power to Delegate
The Budget Manager has delegated power from a Budget Holder to control a particular budget(s). Such
delegation powers shall be within defined parameters, and shall be in writing.
Examples of Budget Managers are:


Deputy or Associate Directors
Medical General Managers
A Budget Manager may delegate responsibility for in-year control of a budget to a Budget Operator. The
delegation must be within defined parameters as above and shall be recorded in writing.
A Budget Manager may, in accordance with the Budget Delegator arrangements, initiate virement
between the budget lines within a main budget.
2.7
Budget Operator and Power to Delegate
A Budget Operator has delegated power from a Budget Manager to control a particular budget(s). Such
delegation powers shall be within defined parameters and shall be recorded in writing.
Examples of Budget Operators are sub-managers in, for instance, Finance, Estates, and Human
Resources etc.
4
A Budget Operator shall not have the power to delegate budgetary responsibility, except with the written
approval of the Budget Manager. Such delegation that may be agreed must be within pre-determined
parameters and shall be recorded in writing.
2.8
Differences in Budget Responsibility of the Three Different Levels



Level of power to commit resources will reduce between the different levels, e.g. Budget Holder will
have significantly more power than a Budget Operator.
Only the Budget Holder has power to propose virement between main budgets, e.g. Surgery to
Medical.
A Budget Operator may only delegate budgetary responsibility further with the expressed
approval of the Budget Manager.
3.0
INCOME
3.1
Accounting for Income Budget
All service proposals requiring PCT or other commissioner income funding shall be reviewed and
approved in advance by the Finance Department commissioning team.
a) Clinical Activity Income
The activity profiles will be agreed with each Clinical Division at the start of the financial year.
The Trust Commissioning and Costing team will manage the accounting arrangements corporately.
Monthly performance management will be integrated with financial performance reporting and shared
with Divisions to mitigate the risks of underperformance and identify over performance areas to
discuss with the Trusts commissioners.
b) Other Income
Other income such as from the sale of meals to staff, car parking, etc shall be credited to the
appropriate budget and, therefore, the responsibility of the associated budget holder/budget manager.
3.2
Pricing of Work and Services - NHS Patient Activity
Pricing can be sub-divided into four sections:
a) Those areas included within PbR
Per national guidance, these items will be charged at the mandatory national tariff.
b) Those areas excluded from PBR
These areas will be subject to negotiation with PCT’s. The principle used for pricing will be to apply
national or local tariff, whereby an indicative tariff has been published, or to charge unit cost based on
the Trusts most recent Reference Cost submission, plus EBITDA margin.
c) Private Patient Activity
In accordance with specified charges determined by the Trust, which should be in line with equivalent
market rates, the rate chargeable should be considerably in excess of costs, including capital charges,
EBITDA margin and a provision for overheads, and shall comply with relevant national guidance.
d)
Other Income Schemes
To be priced so that the additional income exceeds the additional marginal costs of carrying out the
work, including capital charges and provision for overheads.
Responsibility for determining the method of pricing shall rest with the Director of Finance.
5
3.3
Income Schemes - Test of Financial Viability
Each income initiative will require to be separately documented and, inter alia, include figures showing
total income and total costs. The appropriate Divisional Accountant will be required to be party to the
calculation of total income and costs, and have his/her agreement to all proposals.
The Divisional Accountant will be responsible for monitoring that the proposed income is consistent with
the strategy of the Trust and demonstrate that economic viability of service developments under national
tariff and/or local prices.
3.4
Private Patient Income – Managing the Business Risks
The Budget Holder/Budget Manager is responsible for taking the necessary corrective action to deliver the
agreed level of Private Patient income within budget. It will be the requirement of the appropriate
Divisional Accountant to provide financial support and advice to budget holders in delivering this target.
4.0
STAFFING ESTABLISHMENT/BUDGETS
An agreed detailed staffing establishment showing whole-time equivalents, and grades, will exist in
respect of each budget. Staff budgets will be calculated on the basis of the agreed staff establishment
suitably adjusted for anticipated staff turnover/expected income from DSS for maternity payments.
Budget Holders/Budget Managers will be accountable for ensuring that all staff appointments are made
within the agreed staffing control and budgets.
Increases/Decreases in the whole time equivalent of the funded establishment or changes in the grades
can occur in one of five ways,a)
b)
c)
from changes in income due to the Directorate
from specifically earmarked reserve set up by Trust
from general reserves within the Trust
Approval of Director of Finance is required.
d)
from implementing Cost Improvement Savings
Approval of relevant Executive Director as required.
e)
from Virement of Budget
See Section 6 below for details.
The re-grading of staff may is subject to Agenda for Change terms and conditions and would require
ratification from the Divisions nominated HR advisor, before formal approval via the current Local Pay
Variation proforma.
4.1
Local Pay
It is necessary to distinguish between staff subject to national terms and conditions and those on Trust
Contracts:
a)
Staff on National Terms and Conditions
The national elements of pay scales are determined by the Agenda for Change (AfC) conditions of
pay, approved by the Secretary of State. Any variation by way of local addition to these rates shall be
determined by the Trust Board.
6
b) Staff on Trust Terms and Conditions
Pay Scales shall be determined by Trust Board.
Any variations to additional payments to staff require the written approval of the Director of
Human Resources
Other Terms and Conditions will be in accordance with AfC agreements, unless contained in a variation
approved by the Director of Human Resources.
5.0
NON-STAFF BUDGETS
It will be a requirement of the Budget Holders/Budget Managers to ensure that expenditure is kept within
the total budget for which they are responsible.
6.0
BUDGET TRANSFER - VIREMENT
The facility of virement is available to Divisional Chairmen and to budget holders/managers of other
budgets. Virement can involve the following different types of transfers:
(i)
(ii)
(iii)
(iv)
Transfers between non-pay budgets.
Transfers between staff budgets.
Transfers from staff to non-pay budgets.
Transfers from non-pay to staff budgets.
There is no financial ceiling limiting the amount of any one virement transfer. In all cases, the Divisional
Accountant shall be consulted. It is paramount that virement changes do not undermine the integrity of
the budgets.
To proceed with budget virements the agreement of both parties should be sought by the Divisional
Accountants.
7.0
DEFINITION OF EXPENDITURE
7.1
Revenue Non Pay Expenditure
Revenue Expenditure is defined as:
“Expenditure incurred in the day to day running of the Trust on pay and Non-Pay items and do not fall
within the definition of capital expenditure.”
The main area of potential confusion concerns the classification of repairs and maintenance expenditure
between capital and revenue. Below is an explanation of the issued to be considered.
Expenditure on maintaining capital assets in effective working order, or in good repair, is charged to
revenue whatever the costs. For example interior or exterior redecorating, or re-pointing of the brickwork
would be revenue. The exception is where the repairs include improvements to the original standard, in
which case the cost will be charged to capital if it falls within the above definition of capital expenditure.
Moreover:
a) Repairs are deemed to be restorations by renewal or replacement of subsidiary parts of a whole. Any
improvement of the original standard is capital; if we can clearly apportion between maintenance and
upgrade, then we should apportion. However, if the cost in relation to improvements is less than 50%
of the total, the total scheme would be deemed to be revenue.
7
b) The cost of initial repairs to improve any asset recently acquired to make it fit for NHS user will be
treated as capital expenditure if it falls within the above definition of capital.
c) The cost of initial repairs to remedy normal wear and tear of recently acquired assets will be treated as
revenue expenditure.
7.2
Capital Expenditure
The definition of a capital asset, for capital charges purposes is:
"A tangible / intangible asset which is capable of being used in the Trust's activities for a period of time
which could exceed one year."
.
Costs that can be capitalised on initial acquisition or build are:
Costs that are would have been avoided if the asset was not purchased or constructed is a general
rule for identifying those costs for capitalisation. However, it should be noted it is not always that clear.
a)
b)
c)
d)
e)
f)
g)
h)
i)
j)
k)
l)
Its purchase price, including import and non refundable taxes after deducting discounts and
rebates
Costs directly attributable in bringing the asset to the location and condition necessary to operate
in the manner intended
The initial costs of dismantling and removing the item and restoring the site on which it is located
Costs of employee benefits arising directly from the construction or acquisition of the item of
property, plant and equipment
Cost of site preparation
Initial delivery and handling costs
Installation and assembly costs
Cost of testing that the assets is functioning properly
Professional fees
Cost for dismantling, removing and restoring a site on which an item is located that is incurred
during a particular period of usage
Cost of construction and re-modeling of a facility to bring it the facility to a state necessary for
use. The cost of relocation, salaries etc for this should be expensed
Cost of relocating to another site while the site that is being constructed, as they are as a direct
consequence of the construction and the cost associated is of purchased assets e.g. porta cabins
and the relocation is expected to be for longer than say 6 months
Costs that are not permitted to be capitalised:
General overhead costs or costs that would have been incurred regardless of whether the project would
have been instigated generally cannot be capitalised. However, as per costs which can be capitalised
this needs to be viewed with respect to the actual item being capitalised.
a)
b)
c)
d)
e)
f)
g)
Costs of opening a new facility
Costs of introducing a new product or service (including advertising and promotional activities)
Costs of conducting business in a new location or with a new class of customer (including staff
training costs)
Administration and other general overhead costs
Carrying out feasibility studies of redeploying an item as the item is already in the location and at a
condition necessary for it to be capable of operating as intended
Costs of relocating or re-organising part or all of an entity’s operations
Business cases where one asset or item has not been identified or selection process is still ongoing. A business case generally identify the viability and why a project needs to be done, at which
stage approval has not occurred
8
h)
Project initiation document this gathers all the necessary information necessary for the board to
approve or reject the project (What, Why, Where, Who, How and How much), if the PID has still not
identified a particular item, contractor etc
i)
Tendering costs to choose a contractor or staff to work on the project that are rejected. Only costs
associated with the actual choice is capitalised
j)
Training costs
k) Cost of surveyors or architects fees that are not used in the final asset/item to be capitalised
l)
Moving to a temporary site while a new site is being prepared (this would include removal costs,
rent and set-up costs), as this does not added value to the asset being constructed if for a
refurbishment that occurs frequently or is for less than 6 months in length
m) Relocating equipment from one site to another
8.0
AUTHORISATION LEVELS FOR APPROVAL TO INCUR EXPENDITURE
8.1
Internal Approval
The below table details the internal approval levels and limits applicable for the procurement of goods
and services through the Trust’s procurement order processing system (Oracle):
Approval
Level
1
2
3
4
5
6
7
8
9
10
8.2
Approval Level Titles
CEO / Deputy CEO / Director of Finance
Executive Director
Associate / Deputy Director
DDoP / DMD
Head of Department / Service
Deputy Head of Department / Head of Service
Senior Department / Service Manager
Department / Service Manager
Department / Service Approver
Requestor Only
Approval
Limits (TBC)
£1,000,000
£250,000
£150,000
£50,000
£20,000
£10,000
£5,000
£2,500
£1,000
N/A
External Procurement of Goods or Services
Approval arrangements depend upon whether expenditure is Capital or Revenue and refer to
expenditure not already covered by existing NHS national or local contracts.
Limits below refer to whole life cost of the contract (i.e. an annual contract value of £40,000 over 3 years
requires OJEU tender) and incur non pay expenditure (inc. VAT)
Revenue
1. Below £5,000
2. £5,001 - £50,000
3. £50,000 – £111,676
4. Over £111,676
Non Stock Requisition
Procurement Department for Official Quotations
Official Tender Exercise
European Tender Exercise (OJEU)
Capital
5. Below £5,000
Non Stock Requisition
6. £5,001 - £50,000
Procurement Department for Official Quotations
7. £50,000 – £4.3 million Official Tender Exercise
8. Over £4.3million
European Tender Exercise (OJEU)
9
Contracts (Non NHS Terms and Conditions)
Employees of the Trust should under no circumstances sign a contract provided by a supplier.
All contracts must be forwarded to Procurement with an accompanying note explaining what the
contract relates to.
The approval route for all contracts is:

Terms and Conditions reviewed and agreed by Procurement
o If under £20,000, contract should be signed off by Associate Director of Finance o If over £20,000, contract should be signed off by Chief Executive, Deputy Chief Executive
or Director of Finance Contracts (NHS Terms and Conditions)
All contracts must be forwarded to Procurement with an accompanying note explaining what the
contract relates to.
The approval route for all contracts is:

Reviewed and agreed by Procurement
o If under £20,000, contract should be signed off by Head of Procurement o If over £20,000, contract should be signed off by Associate Director of Finance In all occurrences, the Trust’s Procurement Team must be engaged in the tender process prior
to an official order being raised.
8.3
Business Case Approval
This summary document outlines the business case process that must be followed for all service
changes / developments which have either revenue or capital financial implications. The Trusts
business case process has thus been established to ensure there is full involvement from any party
within the organisation that could be affected by the intended direction of travel. Auditability,
governance and financial principles are critical to ensure there are no unforeseen service, quality or
financial consequences from our investment decisions.
New Business Case
Process Summary.doc
Deputies Forum
Meeting Point
Management Board
F&I Committee
Trust Board
£0 £50,000

£50,001 £250,000


Value*
£250,000£500,000




£500,000 £1M





Above £1M





10
9.0
INTERPRETATION
The Chief Executive shall have final authority in the interpretation of these delegation arrangements on
which he / she shall be advised by the Director of Finance.
11
PART B – CHARITABLE FUNDS
1.0
APPROVAL OF CHARITABLE EXPENDITURE
Expenditure from Charitable Funds shall be conditional upon:
(a)
the item being within the objects of the particular fund
(b)
there being sufficient available resources within the fund to meet the commitment, and
(c)
(i)
the approval of the Divisional Fund Committee £0k to £20k
(ii)
the approval of the Charitable Trust Board for sums exceeding £20k
All expenditure incurred therefore must comply with this requirement and be approved in
Delegated Arrangement decision process set out below:
line with the
Decision Tree for Approval of Charitable Funds in Support of the Trust’s Patient Care Service
Delivery
12
2.0
APPROVAL OF CHARITABLE FUND RAISING APPLICATIONS
In every instance all fund raising proposals shall be subject to the approval of a fund raising application
proforma.
The approval hierarchy is the same as for approving expenditure
The fund raising application forma is attached:
P:\Charitable Funds\
Fundraising\Fund Rais
3.0
APPROVAL OF FIVE YEAR BUSINESS PLANS
All fund holders shall be responsible for preparing a rolling five year income and expenditure business plan.
These plans to be approved annually by the Charitable Trust Board
The business plan proforma is attached
P:\Charitable Funds\
ENDOW 12\Business P
13
PART C – LOSSES AND SPECIAL PAYMENTS
Categories of Losses & Special Payments
LOSSES
1.
Delegated
Limits
Delegated
Signatory
£
Delegated
Checklist Signatory
All individual losses over
£1,000 (2 signatories)
Losses of cash due to:
(a)
Theft, fraud etc.
50,000
1. Director of Finance up to
£25,000
(b)
Overpayments of salaries, wages fees and
allowances.
50,000
2. Chief Executive up to £50,000
(c)
Their causes, including unvouched
or incompletely vouched payments,
overpayments other than those included
under 1b: loss by fire (other than arson).
physical cash losses and losses of stamps
or similar cash equivalents.
2. Fruitless payments (including Capital Schemes).
3. Over £50,000 to Audit
Committee and Trust Board
1. Director of Finance or
nominated deputy
2. Exec Director or Deputy in
the Directorate where the
loss occurred
50,000
250,000
1. Director of Finance up to
£25,000
2. Chief Executive up to £50,000
3. Over£50,000 to Audit
Committee and Trust Board
1. Director of Finance or
nominated deputy
2. Exec Director or Deputy in
the Directorate where the
loss occurred
3. Bad debts and claims abandoned:
(a)
Private patients
50,000
(b)
Overseas Visitors
50,000
(c)
Cases other than a or b
50,000
1. Director of Finance up to
£25,000
2. Chief Executive up to £50,000
3. Over £50,000 to Audit
Committee and Trust Board
1. Director of Finance or
nominated deputy
2. Exec Director or Deputy in
the Directorate where the
loss occurred
4. Damage to buildings, their fittings, furniture and
loss of equipment and property in stores and in
use due to:
(a)
(b)
i.
ii.
Culpable causes eg theft, fraud arson or
sabotage whether proved or suspected,
neglect of duty gross carelessness.
Other causes
Loss by fire (other than arson).
Losses by weather damage or by accident
proved on due enquiry to be beyond the
control of any responsible person.
50,000
1. Director of Finance up to
£25,000
1. Director of Finance or
nominated deputy
50,000
2. Chief Executive up to £50,000
2. Exec Director or Deputy in
the Directorate where the
loss occurred.
3. Over £50,000 to Audit
Committee and Trust Board
iii. Losses due to deterioration in use and
deterioration in store due to some defect in
administration such as:
- over provisioning.
- retention of excess or obsolete stocks.
- storage of items with a known shelf life in
quantities greater than could be turned over
within that life.
- failure to turn over stocks in proper sequence.
- failure to set and to observe property standards
to keep stock in good condition.
Iv .in cases of building the amount to be written
off is:
- the value of building and lost contents
immediately prior to incident if a decision is
made not to repair it or
- if repaired the cost of repair or the estimated
value of contents if destroyed less any sum
received via the sale of scrap.
14
Categories of Losses & Special Payments
SPECIAL PAYMENTS
5.
Compensation payments (made under
Legal obligation e.g. by court order or legally
binding arbitration)
Delegated
Limits
£
Delegated
Signatory
FULL
1. Up to £50,000 - Director
of Finance / Chief
Executive
Delegated
Checklist Signatory
Not applicable
2. Above £50,000 reported
to Audit Committee and
the Trust Board
6.
7.
Extra contractual payments to contractors.
50,000
1. Chief Executive up to
£50,000.
1. Director of Finance or
nominated Deputy
2. Above £50,000 reported
to Audit Committee and
the Trust Board
2. Exec Director or Deputy in
the Directorate where the
loss occurred
1. Up to £10,000 Trust Legal
Department
1. Exec Director or Deputy in
the Directorate where the
loss occurred
Ex-Gratia payments:
(a)
(b)
To patients and staff for loss of personal
effects.
Other clinical negligence cases with
advice
50,000
50,000
including
plaintiffs costs
2. £10,000 to £50,000
Director of Nursing
3. Above £50,000 reported
to Audit Committee and
the Trust Board
(c)
Personal injury claims with advice
50,000
(d)
Other negligence and injury.
50,000
(e) Severance payments and termination of
employment
50,000
(f)
50,000
(g) Patient referrals outside the UK
50,000
(h)
50,000
(i)
8.
Other employment payments
Other losses
maladministration, no financial loss
Extra statutory and extra regulatory payments.
2. One other Executive
Director or nominated
Deputy
50,000
NIL
Department of Health
1. Chairman
2. Chief Executive
Delegated limits are no longer set by the Department of Health. However, any losses due to novel, contentious
or repercussive cases are to be referred to the Department of Health for approval, regardless of value.
15