Funding External Bodies and Following the Public Pound

September 2023

IMAGE: The Orkney Islands Council crest appears above the document title “Funding External Bodies and Following the Public Pound” and the date “September 2023”.

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Contents

1. Scope — 4
2. Code of Guidance on Funding External Bodies and Following the Public Pound — 4
3. Payments Over £10,000 — 5
4. Payments Under £10,000 — 7
5. Method of Payment — 8
6. Processing of Payment Vouchers — 8
7. Following the Public Pound Register — 8
8. Conflicts of Interest Register — 8

This document can be made available on request in a range of formats and languages.

1. Scope

The scope of these detailed requirements is limited to payments made to external bodies, which are not already covered by straightforward contractual relationships. Services are required to carry out an options appraisal of the alternative methods of service delivery available before committing to funding an Arms Length External Organisation (ALEO). This options appraisal should be revisited with each renewal period.

Corporate Directors are responsible for authorising staff members to process, certify and record grant payments under schemes operating under their Service umbrella. This includes ensuring comprehensive procedures are laid out, including options appraisals and checklists to track the progress of all applications. The Corporate Director is also responsible for ensuring that the list of authorised schemes (annex 1) is kept up to date and that scheme expenditure is in accordance with the Council’s strategic policies or objectives — subject to compliance with the Financial Regulations and the approved Scheme of Delegation to Officers.

2. Code of Guidance on Funding External Bodies and Following the Public Pound

The Code of Guidance on Funding External Bodies and Following the Public Pound (annex 2) is a national guideline and the Council is obliged to fulfil its requirements, including:

• consistency with Council objectives and principles of Best Value;
• minimum standard of management arrangements in place;
• monitoring arrangements clearly stipulated.

The Following the Public Pound Risk Assessment Model (annex 3) should be used to carry out formal risk assessments on all services considering funding arrangements where payments are made in advance to ALEOs. Where payments of grants are made in arrears on the evidence of expenditure the risk process does not require completion. Completing the risk assessment will assist the Council in demonstrating it has assessed the ALEOs in terms of meeting the objectives of the Council and minimise the financial risk.

The Following the Public Pound Risk Assessment Model is a guide. Each ALEO funding arrangement should be scored against the model, ALEOs with a risk score of over 44 is unacceptable and steps should be taken to lower the risk prior to funding being granted. A risk score of between 33 and 44 demonstrates that the ALEO has a significant risk to the Council, and although funding can be awarded steps should be taken to reduce risks in key categories. Officers will have to use their judgement, in light of the actions taken to reduce the risks, as to whether the funding should be provided / continued. Risk scores under 33 are acceptable — notwithstanding the overall responsibility to reduce the level of risk under each category and in total. The Risk Assessment Model is attached at Annex 3 to this document.

Payment to external bodies not only includes grants or subsidies, but also low-cost or free use of Council property, equipment or staff time. Where it is proposed to provide the use of Council property at either a reduced rent or free of charge, this should be approved through the Committee process. Where it is agreed that a lesser rent is to be charged, dispensation should be sought under Section 74 (2) of the Local Government (Scotland) Act 1973, by applying to Scottish Ministers. Each Corporate Director should ensure that their staff are aware of the information required to support an application to the Scottish Ministers and be prepared to collate the information, notify the Estates section of the Property Division and forward the relevant information to Legal Services for the appropriate application to be made.

Awarding non-cash subsidies represents a cost which needs to be recognised, valued, and recorded. It is important to evaluate the cost of all non-cash subsidies to ensure full disclosure in the Following the Public Pound Register. Non-cash payments should also be included in any agreements between the Council and the ALEO.

The assessment of non-cash rewards should be evaluated in one of two ways:

1. Market Cost, officers should obtain market equivalents for the services provided to ALEOs i.e. the cost for rent on a similar property; or the cost of vehicle / equipment hire over a similar period; or the cost of consultancy services.
2. Actual cost, officers should look to calculate the unit cost for the service provision, i.e. property costs incurred — including repairs; staff costs — employee and employers costs — including apportionment for IT and accommodation; vehicle / equipment maintenance costs — including depreciation.

In general — what would the ALEO have paid had the Council not provided the low-cost or free use of Council property, equipment or staff time.

3. Payments Over £10,000

For payments of £10,000 or more, a written Service Level Agreement (SLA) is required to be in place between the Council and the external body, covering the requirements stated in the Code, prior to the commencement of the provision of services by the external body.

KEY PRINCIPLES

• Purpose — is the council clear about its reasons for transferring funds to the ALEO;
• Financial regime — is there a clear and robust financial management regime in place;
• Monitoring — are there robust arrangements for monitoring its relationship with an ALEO;
• Representation — is the council clear about the purpose of any officer or member representation on ALEOs, and do representatives discharge their responsibilities with due regard to the objectives of the council;
• Limitations — if entering into a substantial funding commitment with an ALEO, has a timetable for the achievement of council objectives been laid down;
• Accountability — are there arrangements for suitable access by internal and external audit.

In all cases, the Corporate Director shall nominate an officer who is responsible for monitoring the relationship between the Council and the external body. The nominated officer should ensure, in conjunction with Legal Services, that an SLA is in place which clearly states the obligations placed on both parties. Reporting mechanisms should be included in the SLA with the nature and frequency of these reports being stated at the outset based on the value and risk associated with the payment. Before certifying a claim for payment, the certifying officer should have satisfied themselves that all conditions of the funding have been met and verified in line with the Financial Regulations. Where payments are made in advance, adequate controls should exist to ensure that the individual financial and monitoring requirements are followed.

Reports from the ALEOs should contain financial, qualitative and performance monitoring information including (but not limited to):

• evidence of receipt of funding, e.g. bank statements, etc.;
• evidence of payments made, e.g. accounts, receipts, payslips etc.;
• aims and objectives of the organisation and how they have been met;
• whether the standards and objectives set by Council have been met; and
• the proposed targets and future plans.

As a guide, reporting from the ALEO should be received on the following frequency:

In terms of payment, the Council recommend the first payment in April, with the second following receipt of signed agreement. The principal reason for the paying of money up front is to demonstrate goodwill to the voluntary sector. There is a risk attached to paying these amounts in advance, however, quarterly monitoring will be in place for higher grant payments.

Corporate Directors should ensure that procedures are in place to ensure that ALEOs are complying with the monitoring conditions included within their SLAs. Where performance measures are included in the monitoring arrangements, these should be assessed against the set targets. Non-compliance with the monitoring requirements contained in the SLA should trigger a review of the funding relationship, and Corporate Directors should ensure that this is standard practice.

On the evidence of the monitoring reports, the Corporate Director should be able to demonstrate that the ALEO is assisting the Council in the achievement of its objectives in the most effective, efficient and economic manner. The “mini” registers submitted by services includes a column confirming the ALEO funding aids the achievement of the Council objectives.

4. Payments Under £10,000

The following rules apply key principles of the Code to funding arrangements of less than £10,000:

1. Applications should be received from external bodies prior to consideration and approval by relevant Officers;
2. All applications have to fall under established grants per the “Orkney Islands Council Grants” list (annex 1). Grant schemes included in this list have to achieve objectives identified in the Council’s Strategic Plan;
3. An officer group will approve or decline the application and inform the external organisation of the decision;
4. Where payments are made in advance controls included under the rules of the individual scheme are followed and an initial payment is made;
5. External organisation incurs costs in line with application submitted;
6. On conclusion of the event a claim form together with receipts (and/or any other information requirements specified under the individual scheme) should be submitted by the external organisation; and
7. On vouching of these receipts and approving the claim, payment vouchers can be certified. Before certifying a claim for payment, the certifying officer shall have satisfied himself that:
   1. The work, goods or services to which the claim relates have been received, carried out, examined and approved;
   2. The prices, extensions, calculations, trade discounts, other allowances, credits and tax are correct;
   3. The expenditure has been properly incurred in line with details on the application and is within the approved provision and the relevant budget constraints;
   4. Appropriate entries have been made in the scheme records as required (records should be maintained for at least 3 years — including any monitoring information received);
   5. The payment voucher has not been previously passed for payment and is a proper liability of the Council;
   6. The appropriate ledger code has been entered on the payment voucher;
   7. Expenditure agreed outwith a budget head by a Committee has the appropriate Committee reference attached to the payment request.

5. Method of Payment

Grant and other payments will be requested through submission of a self-generated indent form / special payment form. The normal methods of payment to the ALEO of money due shall be by direct credit.

6. Processing of Payment Vouchers

Duly certified payment vouchers shall be passed without delay to the Payments Section who shall examine them to the extent that they consider necessary, for which purpose they shall be entitled to make such enquiries and to receive such information and explanations as they may require.

7. Following the Public Pound Register

A comprehensive register of funding of external bodies is maintained by Finance, which will include the key information on all significant payments made. The individual Corporate Directors are responsible for ensuring their annual Service’s “mini” registers are completed swiftly and to timescales given by the Head of Finance.

The completed Register should be included in an annual report to the Policy and Resources Committee during the September cycle of meetings.

8. Conflicts of Interest Register

In addition to the Following the Public Pound Register, the Council also maintains a Conflicts of Interest Register. This register is required to be updated annually whereby all elected members and senior officers (on G12 and above) have to disclose their membership on any boards or committees. Conflicts of Interest can arise between ALEOs and the Council, therefore, the Council must be clear about the purpose of any officer or member representation on ALEOs, and representatives discharge their responsibilities with due regard to Council objectives.

The Employee Code of Conduct (page 4) and the Financial Regulations (para. 5.2) also contain sections covering members and officers duties to declare interests.

Annex 1

Orkney Islands Council Grants

Annex 2

Code of guidance on funding external bodies and following the public pound

IMAGE: Two pages of the “Code of guidance on funding external bodies and following the public pound” are reproduced as scanned pages in three-column layout. The pages contain guidance issued jointly by the Accounts Commission and the Convention of Scottish Local Authorities in 1996, covering the objective and scope of the Code, purposes, financial regime, monitoring arrangements, representation, limitations and accountability. The text is legible in the source image but is not separately available as parsed text.

Annex 3

Following the Public Pound - Risk Assessment Criteria