Preparation

2.1. The financial year runs from 1 April until 31 March. All Budgets and estimates are prepared using that timeframe.

2.2. The Head of Finance is responsible for the preparation of the Budget and the Revised Budgets/estimates for consideration by the Executive Team, Chair and the Commission, in accordance with the requirements and timetable set out in the Framework Agreement.

Budget

2.3. The Head of Finance is responsible for the operation of the Budget, the production of Budgetary information and Revised Budgets. 

2.4. The Head of Finance will prepare an annual Budget estimate each year for DLUHC. The process normally starts in Quarter 3 of the preceding year. The default Budget (or starting point) is the amount included in the most recent Spending Review (“SR”). SR’s are prepared by the Head of Finance as and when requested by DLUHC and are multi-year Budget plans (covering normally 3 or 5 years).

2.5. The Budget is allocated to cost centres which represent the different parts of the business. Each cost centre has a Budget holder.

2.6. Budget holders, in discussion with the Head of Finance, will provide detailed Budget estimates, supported by suitable working papers providing the rationale and justification for each line of expenditure for which they are responsible. The estimates will be profiled or calendarised to reflect the financial commitments for each month.

2.7. The Head of Finance will work with each Budget holder to ensure they understand the process and that they can demonstrate the contractual/business requirement for each line of expenditure.

2.8. The Head of Finance will use these estimates and the proposed headcount agreed with the Executive Team and the HR Business Partner to estimate a proposed Budget. The proposed Budget will be submitted to the Executive Team for approval.

2.9. A summary of the proposed Budget is submitted to DLUHC and the amount of the Budget (comprising the Net admin resource Departmental Expenditure Limit (DEL), (including Pay, Non-Pay, Payment of Pensions, Income and depreciation), the admin capital expenditure (including IFRS16 capital for new rental agreements), and including the resource AME (Annually Managed Expenditure, including Pension Service costs) for the forthcoming financial year is agreed and the amount of Grant-in-Aid is notified by DLUHC.

2.10. The final Budget is then submitted to the Commission for approval, normally in Quarter 4 (February) of the preceding year. Once the approval process has been completed Budget holders will be issued with an electronic copy of the approved Budget, profiled across the 12 accounting periods.

2.11. If the Budgets have not been approved by the Commission by 31 March, the Accounting Officer (AO), will, on behalf of the Commission, authorise expenditure to ensure the day-to-day operations of the Commission may continue.

2.12. The compilation of all the Budget holder reports and expenditure profiles will be used to support the claim of the Grant-in-Aid throughout the following year.

Budgets for Cost centres

2.13. The AO is accountable to the Commission for managing actual expenditure against the Budgets. Budget holders are accountable to the Chief Executive Officer (CEO) for the management of expenditure against their Budgets in accordance with policies and procedures approved by the Commission. The Head of Finance will send an email of Budget delegation to each Budget holder.

2.14. The Head of Finance will monitor expenditure against Budgets and provide regular monthly information to Budget holders, the Executive Team and the Leadership Team. The Budget holders report will be sent electronically and contains the agreed details of transactions as well as a summary by each line of the expenditure/income and the variance compared to the Budget (or Revised Budget).

2.15. The Head of Finance will alert the AO to any areas of concern in relation to the Budgetary arrangements and Budget management of the organisation and will report to ET each month. The AO will report the total financial position to the Commission quarterly and is ultimately responsible for alerting the Commission and DLUHC to any matters of major concern.

Budget holder’s authority to incur expenditure 

2.16. Once Budget holders have been notified of their Budgets for the year, they will have authority to incur expenditure provided:

• it is a proper charge to the Commission;
• it can be contained within an approved Budget;
• it is in accordance with the Commission’s financial regulations and financial instructions;
• it is in accordance with the Commission’s policies and plans for the development and operation of the service;
• it is allocated to the appropriate area of expenditure; and
• it demonstrates value for money and is in accordance with the guidelines set out in Managing Public Money, the Framework Agreement and Cabinet Office Controls.

2.17. Budget holders may delegate the operation of the Budget to a member of their team including the power to authorise expenditure or authorise a commitment (a Purchase Order). They will ensure that such authority has been duly delegated for any period in which they are absent from work. Details of such delegation will be given to the Head of Finance. The monetary limits of each staff member’s authority are included in Appendix A.

Budgetary control

2.18. Budget holders are responsible for ensuring that their Budgets are not overspent without prior authority.

2.19. The Budget holder’s main areas of responsibility are: 

• estimating the individual detailed Budgets;
• revising the individual detailed Budgets every quarter;
• establishing suitable monthly profiles for all income/expenditure types;
• monitoring the expenditure against profile;
• identifying key variances and providing explanations/reasons for Budget variances;
• adhering to the procurement and purchasing arrangements as detailed in section 7 of this document and with reference to the LGSCO Procurement manual;
• adhering to the end of year procedures;
• producing non-financial information to report key performance indicators;
• identifying potential Budget overspends, informing the Head of Finance and taking actions to mitigate overspends; and
• reporting to the CEO any concern over the management and contractual liabilities incurred through the operation of the Budget.

Revised Budget estimates

2.20. Budget holders, with the Head of Finance, will be required to review their approved Budget from time to time, usually quarterly but certainly in November each year in order for LGSCO to submit a Supplementary Estimate to DLUHC in December. The outcome of this review will be presented to the Executive Team; any Revised Budget arising from the review will be approved by the Executive Team.

2.21. Any Revised Budget will be reported to DLUHC. In the case of increases in Budget, this will require DLUHC approval.

2.22. The AO has the authority to report a reduced Revised Budget (declare an under spend) to DLUHC or request a Revised Budget increase (an over spend) without the formal approval of the Commission. However, where such a change in the Budget is either:

• i. greater than +/- £500k, or
• ii. of a sensitive nature (at the discretion of the AO),

then the AO must firstly inform the Chair of the Audit and Risk Assurance Committee and the Chair and then seek approval from the Chair. As this is likely to occur between Commission meetings, it will be done by email or correspondence. In all cases of any change in the Budget, the Commission will be informed retrospectively at the next Commission meeting.

2.23. All approvals/virements of the Budget or Revised Budget must not exceed the Original Budget approved by the Commission unless DLUHC has authorised an increase, usually through the approval of a submitted Business Case.

Virement

2.24. A virement is when money is moved between different lines of expenditure in the Budget. Budget holders cannot vire between their Budget lines without the approval of the Executive Team.

2.25. DLUHC will not allow ‘Revenue’ Budgets to be vired to ‘Capital’ Budgets or ‘AME’ Budgets, but viring within the total ‘Revenue’ Budgets is now allowed (for example viring from ‘Non-Pay’ to ‘Pay’ or vice-versa).