Financial procedure
Financial procedure 8 - Raising of suppliers and the payment of invoices
Why - to ensure that payments are not made unless goods/services have been received and that they are made to the correct person for the correct amount and properly recorded.
Who - the procedure applies to all officers who authorise or make payments.
What - the procedure sets out the arrangements for creating suppliers and making payments to these suppliers.
When - the procedure will apply whenever officers set up a new supplier, amend a supplier or make a payment.
Where - further information is available from the Assistant Director of Financial Operations, Finance Directorate or the Payments and Contracts Manager.
1. Purpose
1.1. To identify the procedures and responsibilities for the payments of accounts. This is to ensure that all payments are processed in a timely manner and in accordance with the Council's procedures and that the cost is appropriately applied the Council's accounts. To ensure that payments are not made unless goods/services have been received and that they are made to the correct person for the correct amount and properly recorded in the Authority Financial Accounts.
1.2. The procedure sets out the arrangements for creating suppliers and making payments to these suppliers.
Further information is available from the Assistant Director of Financial Operations, Finance Directorate or the Payments and Contracts Manager.
2. Scope
2.1. This Financial procedure covers all payments made by the Council, other than those in respect of salaries, wages and pensions and small items of expenditure paid out of petty cash. The procedures in respect of these types of payments are set out in Financial Procedure 12 and Financial Procedure 32 respectively.
2.2. In placing orders for works, goods or services that will be paid for in accordance with this Financial Procedure, reference should be made to Financial Procedure 7 (Orders for Works, Goods and Services) and Financial Procedure 9 (Schemes of Delegation).
2.3. The procedure applies to all officers who authorise or make payments. Chief Officers and service managers in Directorates and Departments will ensure that these Financial Procedures, together with guidance and instructions issued by the Director of Finance, are complied with at all times.
3. Procedures
3.1. The responsibility of the Director of Finance is to:
- 3.1.1. Ensure that the Council's payments procedures and systems are properly administered;
- 3.1.2. Approve any changes to existing payments systems and to approve any new systems before they are introduced;
- 3.1.3. Issue advice, guidance and best practice procedures for officers and others acting on the Council's behalf.
3.2. The responsibility of Chief Officers is to:
- 3.2.1. Ensure that only approved payments systems are used;
- 3.2.2. Maintain appropriate schemes of delegation (see FP9);
- 3.2.3. Ensure the procedures on creation/amendment of suppliers are followed;
- 3.2.4. Ensure the procedures on authorisation and payment of invoices are followed;
- 3.2.5. Ensure that the records supporting payment are properly maintained and held securely.
4. Payments Systems
4.1. The Authority Financials Creditors is the Council's only computer system for the payment of accounts and the maintenance of suppliers. The system is corporately managed by the Financial Systems Team in the Finance Directorate in an effective manner at all times due to the significant impact on the Council's operations.
4.2. The raising and amendment of suppliers is a centralised function within Finance Directorate but the new suppliers are requested by Service Directorates using the scheme of delegation and the authorised signatories list held by Financial Systems Team.
4.3. There are payments systems in the Council that feed payment information to the Authority Financials Creditors system and are managed by departments outside the Finance Directorate. These systems require the approval of the Director of Finance prior to implementation or amendment.
4.4. A series of forms have been created that are referred to in the instructions below. The forms may be found in http://home.greenwich.gov.uk/btforms/newfinhome.aspx and the authorising officer must use the latest version stored on the intranet.
5. Creation of New Suppliers and Supplier Amendments
5.1. In order to create or amend a supplier, a form is required from a service team. The person who raises the form cannot sign it to authorise the request even if they are an authorised signatory. It must be signed by a different person to authorise the form. The authorising officer must be satisfied that the details are correct.
5.2. With the exception of payments to individuals a new supplier record will only be created in Authority Financials Creditors on receipt of appropriate written documentation from the supplier on company-headed stationery or written authorisation from the Assistant Director of Financial Operations or the Payments and Contracts Manager. The authorising officer must ensure that the supplier is a bona fide person or organisation with whom the Council can properly deal and to whom the authority can make payments. The minimum criteria are as follows:
5.2.1. The request for a new supplier (from a company, not an individual) to be set up must include official headed stationery from the supplier.
5.2.2. The document and/or an official invoice must include:
- 5.2.2.1 The full registered address and telephone number of the company.
- 5.2.2.2 The address used by the company when transacting business with the Authority.
- 5.2.2.3 Company Registration number or charity or other registration number.
- 5.2.2.4 The supplier's bank account details.
- 5.2.2.5 The VAT number of the organisation (if applicable).
5.3 The Central Creditors Team will undertake checks on the details provided in paragraph 5.2.2. Checks on the details provided must be sourced through independent means made before a supplier is set up; for example, a call using the telephone number and a verbal request to confirm the bank account details (do not provide them, ask them to tell us again.)
5.4 Where possible, the practice of setting up a supplier using the first invoice will be discouraged, and the authority to set up the supplier should be gained prior to an order/commitment to spend is made. However, where this is not practical and a supplier is being set up using the 'first invoice received', then there need to be two authorised signatories on the invoice. The supplier invoice that is used to create the supplier record must be copied and the copy must be signed in full by the authorising officers. The original documents must be included with the form.
5.5 The authorised copy supplier invoice must be retained by Central Creditors Team to provide evidence of the entry of the supplier details in the Authority Financials Creditors system and must form part of the audit trail in the event of a future enquiry or review of procedures.
5.6 All documentation used to support the creation or amendment of a supplier account must be annotated with the supplier number, be signed and dated both by the data entry and data authoriser operators and be filed centrally in alphabetical order. The documentation must be subject to the procedures in Financial Procedure 25 in respect of the Retention and disposal of financial and procurement records and documents. Where the Authority Financials Creditors creditor codes are being automatically created from a feeder, then the principles in the requirements outlined in paragraphs 5.1 to 5.7 will apply as appropriate to the feeder system.
5.7 The authorising officer must check Authority Financials Creditors before authorisation to ensure that the input of the supplier details does not override a system warning in respect of the creation of a duplicate supplier in the system.
5.8 Where an amendment is to be made to an existing record, it must be validated by the authoriser before the change is put into effect and the details of the changes requested by the supplier in the form of written documentation on company-headed stationery must be forwarded to the Assistant Director of Financial Operations or the Payments and Contracts Manager. The supplier to be amended must be accurately identified by the existing supplier reference number used on Authority Financials Creditors.
6 Duplicate Suppliers
6.1 Care should be taken when setting up new suppliers to avoid duplications. The occurrence of duplicate suppliers will be monitored closely and reviewed by the Central Creditors team.
6.2 Any member of staff may identify a duplicate suppler. It is the duty of all staff to notify the Central Creditors Team of any duplicate immediately using the Supplier Amendment form.
7 Amendments to Supplier Bank Details
7.1. Given the information received from the National Fraud Initiative, tighter controls may be initiated, and information on this will be given to Section 151 Officers and via a message to all Authority Financial Creditors System users.
7.2. Any request to amend the bank details of an existing supplier must be verified.
7.3. Anyone authorised to sign a creditor set up/ amendment form must check to confirm that the request is genuine.
7.4. In the case of personal payments it is very likely that the department has a letter with a signature which will allow it to be matched.
7.5. In the case of a company or organisation including schools and voluntary agencies, it is not so straightforward. If we receive a request to change the bank details from a supplier, it is still a requirement that this must be on headed paper. But as it may be easy to forge, you must contact the organisation by phone to confirm the change.
7.6. Do not use the telephone number on the letter.
7.7. Check your own records or other suitable sources such as Companies House or a telephone directory source such as 192.com and confirm the correct telephone number.
7.8. When you make contact, make sure you get the name of the person you spoke to and record this information.
8 Payment of Invoices
8.1 Payment to a supplier can only be authorised with evidence that there has been a separation of duties during the procurement and payment process. For LPO’s the invoice must be authorised by a different authorised signatory from the order with the appropriate level of authorisation. The LPO supporting documentation must be attached to the invoice that is to be paid to prove that it has undergone the 2-stage authorisation process. In the event that there is an invoice that does not have an order, e.g. a utility bill, then two authorised signatories will be required to check and authorise the payment.
8.2 Chief Officers or senior officers with delegated powers under a scheme of delegation must ensure that only original invoices from suppliers are processed for payment in the Authority Financials Creditors system.
8.3 Electronic invoices are now classified as an invoice sent by email to the Council or a responsible officer who represents the Council. Electronic invoices must still follow the formal criteria to be considered as valid for payment - see paragraph 8.8. Electronic invoices must be printed and then signed by the first and the second authorised signatories in the same way as a paper invoice received through the post. The Assistant Director of Financial Operations or the Payments & Contracts Manager can be contacted for further guidance on the acceptability of electronic invoices.
8.4 The Director of Finance approval is required where a department wishes to process invoices through a departmental system. The controls required over these systems must match the requirements in the Authority Financials Creditors system. The Assistant Director of Financial Operations or Payments and Contracts Manager will give guidance on the approval of changes.
8.5 Copies of invoices or statements must never be used as a basis for generating a payment to a supplier. If, for some reason, an original invoice from a supplier has been lost, a certified copy must be obtained from the supplier, formally stamped as a certified copy and must show the authoriser’s name, designation, signature and the date. However where doing so would cause an impact on service delivery and cause a delay in payment then the invoice should be treated as a copy invoice and subject to the same additional checks. Subject to the certified copy being stamped and authorised in this manner, it should then be processed as if it were the original invoice.
8.6 Goods and services must not be paid for in advance of the actual receipt of those goods or services unless the payment in advance is for a genuine, unavoidable reason and it has been authorised in advance by a Chief Officer or an authorised signatory. Refer also to Financial Procedure 7 Orders for works, goods and services.
8.7 Chief Officers must ensure that only invoices addressed to the Council are authorised for payment. Each invoice must be authorised within the approved, delegated financial limits by officers who are included in the Directorate or Department’s scheme of delegation (a copy of which must have been provided to the Director of Finance). All authorised signatories must ensure that they clearly print their names next to their signature so that their authorisation levels can be verified. Any invoice that is not signed by such an authorised signatory must be considered to be unauthorised and invalid and the proposed payment must not be made until the correct authorisation has been effected.
8.8 Chief Officers must ensure that all staff in Directorates and Departments involved in the receipt of invoices from suppliers and the payment of accounts are aware that an invoice from a supplier must, at all times, be a valid VAT invoice and must include, as a minimum, the following information:
- 8.8.1 the invoice identifying number;
- 8.8.2 the date of supply of the goods or services to the Council and the time of supply/tax point;
- 8.8.3 the date of the invoice if different to the date of supply;
- 8.8.4 the full name, address and VAT registration number of the supplier (where a company is registered for VAT);
- 8.8.5 the name and address of the Council and the Council establishment to which the supply of goods or services was made;
- 8.8.6 the type of supply e.g. sale, hire purchase, conditional sale, credit sale or similar transactions, loan, exchange, hire, lease or rental, process (making goods from someone else’s materials), sale or return or similar terms;
- 8.8.7 a description which identifies the goods or services supplied. Each description must show the following:
- 8.8.7.1 for each item, the quantity of the goods or the extent of the services, the rate of VAT and the amount payable excluding VAT;
- 8.8.7.2 the gross total including VAT;
- 8.8.7.3 the rate of any discounts applied to the goods or services;
- 8.8.7.4 the total amount of VAT chargeable at each official VAT rate;
- 8.8.7.5 the total amount of VAT chargeable shown in pound sterling (£).
8.9 Where a regular supplier has not provided a VAT invoice for items that are vatable, the service area will be required to establish if the supplier is VAT registered and require VAT invoices in future.
8.10 Detailed responsibilities and procedures in respect of VAT are set out in Financial Procedure 14 - Value Added Tax.
8.11 Chief Officers must ensure that invoices are date stamped by the department on receipt in order to allow the correct received date to be recorded on the creditors system. Where a VAT invoice has been received for payment the invoice date and received date on the invoice will be used. COPA/PA or any other payment documentation dates can only be used where no invoice has been received.
8.12 Chief Officers must ensure that detailed procedures and monitoring are in place to prevent an invoice from a supplier being paid twice. This can be achieved by accurate and timely payment and by careful filing of papers. Correct input of the original invoice with accurate use of supplier invoice numbers will minimize the risk. Invoices will be marked with the payment reference number. Copy orders retained by service managers can be marked with the details of invoices authorised and passed for payment.
8.13 Each invoice for payment from a supplier where no Authority Purchasing official purchase order has been placed, i.e. exempt transactions, must be examined by two authorised signatories. The first authorised signatory will undertake the following checks before authorising the invoice for payment:
- 8.13.1 any discounts to which the Council is entitled, including those for prompt payment, have been properly deducted;
- 8.13.2 confirm whether the invoice is part of a call-off contract;
- 8.13.3 the invoice is arithmetically correct;
- 8.13.4 Council approval has been obtained where this is required;
- 8.13.5 the invoice details conform with the service delivered or goods provided;
- 8.13.6 the goods or services in question have been received satisfactorily;
- 8.13.7 the invoice has not been previously paid;
- 8.13.8 accounting codes for the expenditure net of VAT and the VAT are correct;
- 8.13.9 budget implications have been identified and any relevant action taken.
8.14 Following the authorisation of an invoice by the first authorised signatory the second authorised signatory must sign the invoice to confirm that the first authorised signatory has carried out the required checks set out in paragraph 8.11 and that the invoice has been properly authorised for payment.
8.15 Invoices received from suppliers where the orders were raised on Authority Purchasing will only require one authorised signature. In this case is the authorised signatory will apply the checks shown in paragraphs 8.11.1 to 8.11.9 in addition to confirmation that the invoice details agree with those on the original order.
8.16 Once the invoice has been authorised by the two authorised signatories nominated by the Chief Officer with the authority and responsibility to incur expenditure against the relevant budget codes, payment must be made only through the Council’s Authority Financials Creditors system in accordance with this Financial Procedure and any instructions provided by the Director of Finance. No other means may be used to make a payment to a supplier unless approved by the Director of Finance (e.g. schools expenditure through their bank accounts).
8.17 All documents and records in respect of the creation of a supplier record and the payment of supplier accounts must be sequentially filed, stored in a secure location for a period in line with the requirements set out in paragraph 8.166 below and protected against loss and unauthorised access at all times. Chief Officers must ensure that that the documents and records are made available upon request to the Internal Audit and Anti-Fraud Section and any other persons authorised by the Director of Finance.
8.18 Invoices and associated documents must be retained in accordance with the procedures set out in Financial Procedure number 25 Retention and Disposal of Documents, and in a manner agreed with the Director of Finance to ensure that a full audit trail is maintained. Redundant files must be archived and remaining files organised to allow the easy retrieval of documentation.
9 Authorised Signatories and Authorised Limits
9.1 Authorised Signatories and authorised limits must be determined by Chief Officers who must maintain a detailed, current schedule of authorised signatories and authorised limits in accordance with Financial Procedure 9 Schemes of Delegation.
9.2 Procedures require that two authorised signatories are involved in the whole ordering and payment process. Authorised signatories will be required to ensure that their full name is printed alongside their signature so that validation can be completed. Advice on the level of controls required can be obtained from the Assistant Director of Financial Operations or Payments and Contracts Manager and from Financial Procedure 9 Schemes of Delegation.
10 Starters and Leavers
10.1 Access to the Authority Financials Creditors system for a new starter will only be granted by the Financial Systems Manager on receipt of a formal request authorised by a responsible officer delegated by the appropriate Chief Officer and a training course has been completed.
10.2 The withdrawal of access rights to the Authority Financials Creditors system for a leaver must be reported to the Financial Systems Manager in advance of the member of staff leaving and is the responsibility of the manager of that authorised signatory as well as the appropriate Chief Officer.
11 Payments Targets
11.1 The Director of Finance is required to monitor payments of invoices taking into account the previous best value indicator and any other currently published best practice guidance.
11.2 Where the above monitoring identifies a delay outside normal processing deadlines, the Director of Finance will request information from the relevant managers involved in the processes.
11.3 All service departments and authorised signatories should ensure they endeavour to submit invoices for payment promptly in order to ensure that suppliers are paid on time and avoid late payment and/or interest charges.
12 Payment Methods
12.1 The Council's standard method for the payment of suppliers is BACS. Chief Officers must ensure that Directorates and Departments secure agreement in writing from suppliers to this form of payment before any goods or services are procured from the supplier.
12.2 When a new supplier agrees to receive payment by BACS, the appropriate Directorate or Department must obtain the supplier’s bank account details in writing - see paragraph 5.2. The written information may be sent electronically but only if the document is in secure pdf format.
12.3 Requests from a supplier for payment to be made in a different automated format such as Direct Debit or CHAPS transfer or payment by cheque or cash must be referred to the Assistant Director of Financial Operations or delegated officer in the Finance Directorate whose agreement must be received before any such alternative means of payment is agreed with the supplier.
12.4 The Council is often required to pay an individual on a basis other than the Council/supplier relationship stated above, e.g. Payment of housing benefit. In these cases BACS is still the required method of payment. Instead of headed stationery the individual will be required to complete the appropriate form.
12.5 The Council is sometimes required to pay a supplier in currency other than sterling. The authorised invoice/payment documentation and request form will be required to be submitted to the Treasury Team to allow payment to be made. The creditors system will be updated with the sterling equivalent value following the transfer of funds.