Defra’s accounts must be in order and will be laid before Parliament. This has implications for the Department’s reputation and on future budgets allocated to us.
To be prepared for internal audit by the National Audit Office (NAO). The NAO scrutinise Central Government accounts and reports to Parliament on the value for money achieved by Defra’s projects and programmes.
To paraphrase the Management Board’s view on Year End:
‘ In order to achieve faster close again it is vital that we work in partnership; rigorously adhere to all deadlines and ensure that the information provided is right first time and fit for purpose.’
This echoes our approach to Year End too – we need to work together with you to meet our own deadlines, whilst ensuring the deadlines we are given by FFG Finance are also observed. We are also reliant on you to provide accurate info which we don’t have to amend before submitting.
Accounting can be confused between ‘Cash-based’ or ‘Resource-based’ Accounting. Resource Accounting records expenditure when the goods or service is delivered. Cash-based Accounting records expenditure at the exact point it is made.
As an UK Government Department, Defra operates on the Resource Accounting method.
There are 3 main types of accrual that we submit, which are:
By definition a prepayment is the payment of a debt in full before it is due. In practice, an example of this could be payment in full for a report prior to its delivery, or more commonly, prepayment for utilities.
Expenditure - These comprise the majority of our accruals. Accrued expenditure is an expense incurred but not yet paid. Accrued expenditure is the opposite of prepaid expenditure. Future payments are recorded on the balance sheet until the time they are paid. Holiday pay is a common example.
Most of you will be aware of our need to submit monthly accruals. We rely on your knowledge of work areas to inform us of the amounts to be accrued, to ensure that spend against allocated budgets is on track.
It is absolutely critical that you assist us with this process, as budgets not fully spent at Year End may be reduced in size the following FY. If expenditure varies significantly against your forecasts, we could be penalised.
We also have to adhere to set Month End & Year End timetables, and in order to meet the short deadlines on these exercises, the deadlines we set you are shorter. An example of the timetable is attached.
The most important monthly accruals are those made at Year End. It is crucial that you are prepared to capture all accruals, on expenditure, prepayments and income before 31 st March 2010 .
Please note Easter dates this year – Easter Week commences on Monday 29 th March , coinciding with our busiest period. We are aware that some colleagues will be on leave over Easter, a further reason we ask that accrual info is urgently provided to us.
This is the end of the Financial Year and accounting period in 2009/2010, so an especially busy time for all of us.
Actions for you to assist us with getting Y/E Accruals right are as follows:
To reach an agreed Year End position with an identified contact for all Agency/OGD and NDPB Year End accruals . This is essential as we will be required to submit this info to SSD Group Hold Accounts and the NAO.
To contact all relevant Agencies and Departments NOW ensuring an audit trail is kept for all agreed accruals, including applicable emails.
An invoice for contracted R&D work, the report for which will not be completed until May 2010. There is no budget for this work in 2010/11, so a contractual agreement has been reached to pay before 31 st March 2010.
Yes. This should be treated as an expenditure accrual . Although payment is made on 31/03/2010, for a service delivered in FY 2009/10, to ensure that the amount is correctly accrued it should be added as a manual expense accrual.
No. As a PO exists for this work, assuming the amount is receipted on Buy4Defra before close on 31/03/2010, it will be treated as a purchasing accrual . This means there is no need to accrue for the outstanding amount manually, as in example 1.
Yes. This scenario represents a prepayment . There is a separate form on which prepayments should be recorded, in the same way as a manual accrual.
Invoices relating to this FY (09/10) which are not accrued for will have to be paid from 10/11 budgets. This could lead to spend exceeding budget allocations.
A further pressure on budgets is a likely annual savings exercise – therefore it is very much in your interests to accrue at Year End, to ensure your Programme area has sufficient funding for 10/11.
Under Resource Accounting, accruals are reversed to prevent double counting. If budgets in the current FY are not fully spent, this can offset spend in 10/11, making next year’s budget difficult to reconcile.
Receipts for all open Buy4Defra P.Os for which invoices have not arrived, but where the goods or service has been delivered should be made by close on March 31 st . A PO report will be sent listing these details to all users.
Provide details (full dates of absence) of staff with over 4 weeks’ sick leave and staff on maternity leave to the BMT. We will do the paperwork to transfer these costs to an HR Cost Centre Code.
4Me changes for staff both exiting and joining the team should be made promptly. These should include Cost Centre,Activity and Development Manager & location changes. New staff should email IBM to amend their email identifier (FFG) to be on the correct Distribution Lists & Corporate Directory hierarchy.
Complete the NAO accruals template saved on our SharePoint site.
Keep email evidence (on file or on Outlook) for all Agency & NDPB accruals. You will almost certainly be asked for these details!
Please assist us with accruals for your area as much as possible. A successful Year End closing period reflects well on the Portfolio, but more importantly enables policy teams to operate effectively in following years.
Review all open POs , on Buy4Defra before March 31 st 2010.
Observing ‘good financial housekeeping’ and helping us with monthly accruals will alleviate pressures at Year End.