Appendix 5 1 Redesigning Processes and Organisation Structures

Appendix 5. 1 Redesigning Processes and Organisation Structures Version 1. 0 The following slides provide an illustration of how finance process and responsibilities might be redesigned on an end-to-end basis and shared between the shared service and the retained corporate function. Although they focus on finance, they provide an illustration of the sort of work that will be needed in redesigning work for any shared service. © CIPFA 2010.

Record to Report Process Overview: Purchase to Pay Supplier and Service Department s Calls & Queries Purchase to Pay Audit Controls & Stewardship Purchase Ordering & Goods Receipting Supplier Master File Maintenance • • • New Supplier identification/request Align with Preferred Supplier Initiatives Supplier database maintenance • • • Raise purchase orders • Receipt goods and services • Make adjustment s and track outstanding purchase order commitments Amend Supplier Records Housekeep Supplier Records Maintain strong audit controls to prevent fraudulent setup Combined responsibility SSA responsibility Receive and process invoices Scan invoices and issue for electronic authorisation • EDI Invoice Uploads • Error resolution • • Authorise invoices and inform SSA of reasons for mismatches Discrepancy resolution and process adjustments on system Supplier Reconciliation/AP Reporting Payments Processing Invoice Processing • • Process payment run Transmit payment to Bank • • Reconcile supplier statements Analyse debit balances and secure repayment Issue standard AP reports electronically to procurement and service departments Close AP/ GL and reconcile

Record to Report Split of Effort: Purchase to Pay Respective roles of Local Finance and SSA Local Finance 1. Supplier Masterfile Maintenance SSA 10% 2. Purchase Ordering 100% 3. Goods Receipting. 100% 4. Invoice Processing Effort Split 10% 90% 5. Payments Processing 100% 6. AP Reconciliation 100% 7. AP Reporting 100% 8. Supplier Related Queries 9. Control/ Stewardship 5% 95% Business and SSA equally responsible • Supplier Masterfile Maintenance-SSA will receive notification from Local Finance for a new supplier to be setup. Amendments to suppliers details received at SSA • Purchase Ordering- Service Departments / procurement raise purchase orders for all Goods & Services • Goods Receipting- Service Departments Receipt Purchase orders and deal with variances where possible • Invoice processing-SSA will receive invoices centrally and scan in for electronic authorisation by Service departments via email. Maximise electronically received invoices and EDI. Discrepancy resolution - jointly resolved with primary onus on purchase orderer to notify when goods receipting ( defined in SLAs) • Payments Processing- automated when PO matches GRN and invoice according to terms & conditions contained in the system. Automated links for transmission to bank for payment by BACS • AP Reconciliation - Integrated system should ensure integrity. Supplier statement reconciliations performed on exception basis • AP Reporting – AP reports available online • Internal/External Supplier Queries- Service departments & suppliers information and queries will be satisfied with secure web online access for uptodate status • Control/Stewardship- SSA will coordinate the external auditing and will provide information when required in coordination with Local Finance.

Purchase to Pay Strategic / tactical procurement Authorise Invoices Policies Validate and authorise expenses Place purchase orders: • Determine requirements • Raise requisition • Approve requisition • Place order (all types) • Notify supplier • Amend / cancel orders Goods Receipting: • Inspection • GRN raising Financial control: • Maintain / approve authorisation hierarchy • Ensure data accuracy / completeness Manage supplier base: • Identify & select suppliers • Define terms • Approve new suppliers • Approve vendor modifications • Catalogues / prices • Monitor supplier performance Resolve queries / disputes Shared Services Goods Receipting: • Upload GRN to AP for matching Financial Control: • Ensure data accuracy / quality • Maintain authorisation hierarchy • Run / check control a/cs • Perform supplier reconciliations • Invoice control log • Controls in place & operated? • Produce control information • Process corrections, journals & invoices • PO / GRN control • Process vendor queries • Adjust invoices / request credit notes • Process part payments • Produce VAT documentation Employee expenses: • Receive expense report • Process credit card statements • Check / validate • Raise / progress queries • Notify payment date • Process payments Invoice processing: • Receive invoice • Register / enter invoice • Scan invoice • Obtain valid PO number • Match to PO and/or GRN • Query mismatches • Create asset projects • Review for payment • Claim discounts • Release for payment • Copy invoices • Maintain authorisation lists and hierarchies • Issue for authorisation / process pre-authorised invoices • Validate authorisation • Monitor / chase ‘issued’ invoices Document scanning and workflow Manage supplier base: • Control & maintain suppler database • Supplier set up on ERP • Block suppliers / invoices Payment / Cash Control: • Approve funds release Petty Cash processing: • Manage cash float • Check / validate PC requests • Input Miscellaneous processing: • Customer refund requests • Proforma invoices • Acquisitions • Self-billing • Process upfront payments • Process nett-off payments • Process EDI bills, etc. • One-time vendor processing • Commissions • Utilities invoices • Recurring invoices Management information: • Standard financial control reporting • SSC service level reporting Process Payments: • Receive Non-AP payment requests • Cheque requisitions • Upfront payments • Part payments • Reimburse cash • Debt payments • Interest /loan payments • Settle inter-ledger balances • Payroll payments • Foreign currency payments • Run payment proposals • Review payment proposals • Check funds availability • Authorise payment run • Manage local/emergency payments • Generate remittance advices • Recall payments SLA / service management Management Information: • Service Dept Finance analysis Service Department Buyers & Authorisers, Goods Receiving, Procurement & Local Finance Departments

Redesigning Processes and Organisation Structures Sales Order to Cash

Record to Report Process Overview: Sales Order to Cash Customer and Service Department Calls & Queries Customer to Cash Audit Controls & Stewardship Customer Master File Maintenance Sales Order Processing • New customer request • Raise sales orders • Set credit limit criteria & agree exceptions • Deliver goods and services • Credit Control Assessment • Customer database maintenance • Amend customer Records • Housekeep customer records Combined responsibility SSA responsibility Credit Control & AR Reconciliation/ Reporting Sales Invoice Processing • Generate sales invoices • Chase debts • Despatch invoices • Respond to queries • Issue statements • Process adjustments within agreed rules/tolerance • • Dispute resolution and agree adjustments to debts outside tolerance Bad debt provisioning • Issue reminders • Deal with legal • Close AR period • Run & Issue AR reports Cash Application Processing Apply cash against customer account • • Process journal adjustments eg bank charges/ write offs • Bank reconciliations • Bank cheques and transmit banking details to SSA to apply to Sales ledger

Record to Report Split of Effort: Sales/Fees Order to Cash Respective roles of Local Finance and SSA Effort Split Local Finance 1. Customer Masterfile Maintenance SSA 10% 2. Sales Ordering 100% 3. Deliver Goods/Service 100% 4. Sales Invoice Processing 5. Credit Control 90% 20% 6. AR Reconciliation /Reporting 80% 100% 7. Cash Application 5% 95% 8. Customer Related Queries 5% 9. Control/ Stewardship Business and SSA equally responsible • Customer Masterfile Maintenance-SSA will receive notification from Local Finance for a new customer to be setup. Amendments to customer details received at SSA • Sales Ordering- Service Departments raise sales orders for all Goods & Services • Deliver Goods/Services Service Departments deliver goods & services –system to trigger sales invoices • Sales Invoice Processing-SSA will generate invoices centrally and despatch electronically or via automatic mailroom. • Credit Control – Debt chasing with automated scheduling software. Clear rules based escalations process for dispute resolution. Automated bad debt provisioning and write-offs within tolerance. Electronic links with legal to effectively chase old debts • AR Reconciliation - Integrated system should ensure integrity. Customer statement reconciliations available online • AR Reporting – Make AR DSO and aged debt reports available online • Customer Related Queries- Service departments & suppliers information and queries will be satisfied with secure web online access for up to date status • Control/Stewardship- SSA will coordinate the external auditing and will provide information when required in coordination with Local Finance.

Sales Order to Cash Strategic customer decisions Customer approval and set up: • credit limit • contract Policies Contract management Monitor/sign off financial controls Set up specific agreements with customer: • credit terms • rent / deposits • general terms / pay plans • pricing & discounts SSC Analyse management information Account closure Authorisation Ensure data accuracy / completeness Customer set up: • credit checking • contract details / changes • DD authorisation • Set up on system Treasury policy Cash & Bank: • Receipts processing • Receipts reconciliation • Financialcontrols • Maintain master data • Internal control reports Banking relationships Credit control: • Dunning / chasing activities • Monitor credit status • Agree escalation actions with service departments • credit suspend/stop • Payment plans • Legal referral • Referral to collections agency Management & financial control: • Ensure data quality/accuracy • Ensure timeliness of billing • Financial Controls operated • Update GL from SL • Reconcile control a/cs • Produce control info. • Produce customer statements • Process corrections, journals, etc. • VAT documentation Customer maintenance: • Maintain customer data on system • Close account • System archives • Automation / bespoke routines Initiate invoice / credit note / recharge process Invoicing: • Raise invoice • Credit notes / invoice adjustments • Issue refunds • Recharges / refunds • Issue statements Maintain paper / doc image records & archives Produce management information: SLA / service management Query management Management information: • Standard SO 2 C reporting • SSC service level reporting Payments & Cash: • Receive payments • Allocate cash Credit control: • Customer dialogue • Approve CC actions • Review CC issues Produce statutory information Service/ Local Finance Departments SLA / service management Management Information: • Service Dept SO 2 C analysis Cashiers

Redesigning Processes and Organisation Structures Hire to Pay

Record to Report Process Overview: Hire to Pay Employee and Service Department s Calls & Queries Hire to Pay Audit Controls & Stewardship Employee Records Master File Maintenance • • New employee contract details Manager/ Employee Self Service • Changes to existing employee records • • Employee record maintenance • Amend employee records • Housekeep employee records • Maintain strong audit controls to prevent fraudulent setup Payroll Processing Submit authorised employee changes requests eg promotions • Submit authorised employee pay adjustments- eg overtime, annual review • • Combined responsibility SSA responsibility Receive and process pay changes on payroll system Run gross to net payroll • Make adjustments • Error resolution • Authorise payroll and inform SSA of changes/ adjustments on system Run Final authorised gross to net payroll Payroll Reconciliation/ Payroll Reporting Payments Processing • Process payroll payment run • Reconcile payroll accounts • Transmit payroll payments to bank • • Make payroll related payment deductions eg PAYE/NI Issue standard payroll reports electronically to service departments • Close payroll and reconcile payroll GL accounts

Record to Report Split of Effort: Staff Hire to Pay Respective roles of Local Finance and SSA Effort Split Local Finance 1. Employee Masterfile Maintenance 2. Manager Self Service 100% 3. Employee Self Service 100% 4. Payroll Processing 5. Payroll Payments Processing SSA 10% 10 % 90% 100% 6. Payroll Reconciliation 100% 7. Payroll Reporting 100% 8. Payroll Related Queries 9. Control/ Stewardship 20% 80% Business and SSA equally responsible • Employee Masterfile Maintenance-SSA will receive notification from HR for a new employee to be setup. Amendments to employees details updated via employee self service • Manager Self Service - Service Departments submit employee changes eg promotions online • Employee Self Service – Employees make changes online eg address / bank details • Payroll processing-SSA will receive payroll changes from service departments electronically online. After gross to net payroll run, submitted electronically to authorised individuals for sign off • Payroll Payments Processing- automated when electronic authorisation received. Automated links for transmission to bank for payment by BACS • Payroll Reconciliations- Integrated HR system with Finance should ensure integrity. Payroll reconciliations performed on exception basis with automated checks • Payroll Reporting – Payroll reports available online in secure environment • Employee Payroll Queries- Service departments & employees information and requests/ queries will be satisfied with secure web online access • Control/Stewardship- SSA will coordinate the external auditing and provide information when required in coordination with Local Finance.

Hire to Pay Authorise Employee Changes Human Resources Policies Resolve queries / disputes Recruitment Hire Requests: • Determine requirements • Raise jobs requisition • Approve job requisition • Applications/ Interviews • Job Offers & Acceptances • Contracts Authorisation New hire details from Service departments Staff Overtime etc Processing: • Load Overtime details in payroll system • Promotions, changes to hours etc • Annual / periodic changes to salaries Payroll processing: • Process payroll changes • Generate payroll run • Review for payment • Copy payslips • Maintain authorisation lists and hierarchies • Validate authorisation • Respond to queries Payroll Reconciliations & Reporting: • Reconcile Payroll/ GL • Reconcile Other Payroll Accounts • Make payments to external agencies • Provide external agencies with periodic/ annual returns Process Payroll Payments: • Process Gross to Net • BACs processing • Cheques raised • Authorise payment run • Manage local/emergency payments • Generate payslips • Recall payments Management information: • Standard payroll reporting • SSC service level reporting Queries from Employees and Service Managers/ Pensioners Manager Self Service Shared Services New Employee Record Processing: • Load New Employee details in payroll system Document scanning and workflow Employee Self Service Treasury SLA / service management Queries from external Parties/ agencies Management Information: • Service Dept Payroll analysis HR , Service Departments and Local Finance, External Agencies

Redesigning Processes and Organisation Structures Record to Report

Record to Report Process Overview: Record to Report Requests for Financial Information Control & Stewardship Financial Data Maintenance • Co. A structure identification/request • Non- standard Journal entry identification • Financial data request Local, Actual, Budget) • Standard journal identification • Journal entry • • Co. A structure maintenance Finance subsystems criteria maintenance • Cost codes maintenance • • Journal entry posting • Finance subsystems • validation Maintain different financial data dimensions • Automated Data Entry Reconciliation Manual Data Entry • Journal & back up documentation archiving Combined responsibility SSA responsibility Reporting • • Run subsystem cycle Closing timetable creation Standard reports generation • • Provide sub-system information Closing timetable validation • Execute draft close Reporting information submission to Local management • Validate draft close/Final adjustments • • Final closing Provision of core financial data and respond to transactional queries • Cost centre standard management reporting generation Sub-system integrity analysis Sub-system entries: • Interface validation • Error resolution • Exception accounts analysis • Discrepancy resolution Standard statutory reporting • Review & authorise final reports • Decision support & adhoc management reporting • • Closing Bank reconciliation • Validation • Error resolution

Record to Report Split of Effort: Record to Report Respective roles of Business and SSA Effort Split Local Finance 1. Financial Data Maintenance SSA 10% 2. Manual journals 20% 3. Automated data entry/Recon. 5% 4. Closing 90% 80% 95% 10 % 5. Reporting 90% 100% • Standardreporting • Adhoc/Mgmt reporting 6. Response to User Queries 7. Stewardship 100% 10 % 90% 5% 95% Business and FSS equally responsible Note that the respective roles of Local Finance and SSA are described only when an interactive relationship exists • Financial Data Maintenance- SSA will receive notification from Local Finance and update chart of accounts/financial data dimensions accordingly. • Manual Data entry - Business submits journal request/proposal and journals are entered and posted by FSS. If desired, some designated users from Local Finance will be able to post journal entries directly into GL. • Automated data entry- SSA will validate interfaces and will solve discrepancies together with Local Finance • Closing- SSA will create closing timetable & coordinate closing activities. SSA will perform close procedure, Local Finance will review and validate balance of the accounts • Reporting- For local management reporting: SSA will provide financial data to the businesses and they will develop their own customised reports. with BI tools SSA will only provide and design standard reports for Local Finance. SSA will prepare local statutory reporting for review and signoff locally. • User Queries- Local Finance & service departments w ll request information from the SSA based on the general ledger data and the SSA will run the queries when necessary. • Stewardship- SSA will coordinate the external auditing and will provide information when required in coordination with Local Finance.

Record to Report Chart of Accounts maintenance: • Approve changes to structure Capital and Other Financing Policies Posting Approval: • Approve journals • Approve sales adjustments • Approve allocations & recharges Management & Financial controls: • Review / approve Balance sheet reconciliations • Reviews • Internal audit • Co-ordinate external audit process SSC Processing & Posting: • Maintain & allocate profiles • Journals - create & post • Uplifts / uploads • Accruals & prepayments • API/ interface management • EDI interface management • Banking system/ sales adjustments • Banking transactions • Other GL interfaces • Allocations & recharges • Journal Adjustments Budget & Forecast maintenance: • Load budgets & forecasts into GL • Maintain Forecasts Period End Processing: • Close ledgers, sub ledgers and feeder systems • GL close and roll-over • Re-open sub-ledgers • Prior period postings? Budget & Forecast • Agree budgets • Maintain Forecasts Chart of Accounts maintenance: • Add cost centres • Add account codes • Rearrange Co. A Management & Financial controls: • Balance sheet reconciliations • Control / validate data from feeder systems • Manual controls • Reviews • Treasury Period End reporting: • Flash reporting • Standard management reports & Data extracts • KPIs • Corporate reporting • Consolidation • Capital reporting • Statutory data / information • VAT reporting • Tax reporting Quarterly / Half-Year / Yearend reporting: • Flash reporting • Standard management reports & Data extracts • KPIs • Corporate reporting • Consolidation • Capital reporting • Statutory data / information • VAT reporting • Tax reporting Business Intelligence Business Analysis & Review: • Challenge vs budget/ f’cast • Decision support • Accounting judgement • Risk analysis • Capital appraisals Period End Processing: • Determine / publish cut-offs External Returns Produce Analysis Data: • Standard reporting packs • Standard performance data Annual/ periodic reporting Service Departments and Local Finance, External Agencies Management reporting: • Reporting commentaries • Analysis & dissemination of results

Redesigning Processes and Organisation Structures Budgeting & Planning

Record to Report Process Overview: Budgeting & Planning (including Capital Projects) Requests for Budgeting & Planning (including Capex) Information Control & Stewardship Budgeting & Planning Assumpti ons & Inputs Budgeting & Planning Preparation • • • Decide on budget process & timetable for completion • Notify service depts of their key requirements & commitments Set framework for Capex Project Process • • • Prepare timetable and instructions • Liaise with budget / capex holders for any changes and issue instructions, assist with queries • Provide assumptions and framework for budgets, forecasts and capex related projects Maintain budgeting & planning models Process changes to assumptions and calculations in models Validate assumptions Provide impact assessment to budget / capex holders Local responsibility SSA responsibility Budget & Forecast Data Processing & Iterations • Budgeting & Capex System • Input data • Generate outputs • Error identification & resolution Identify changes required & notify/ assist with error resolution Process changes & iterations Identify changes required and agree final version Finalise Outputs Generate Budget & Forecast Reports Prepare Budget & Forecasting Packs • Generate & Issue version for review • Budget, forecast capex report generation • Review , identify and notify changes • • Finalise Reports ready for sign off including standard commentary Load information in core reporting / BI systems etc for comparison against actuals/ for tracking purposes • Respond to queries • Standard periodic reporting • Adhoc analysis via BI tools • Finalise commentary & signoff final version

Record to Report Split of Effort: Budgeting & Planning (including Capital Projects) Respective roles of Local Finance and SSA Effort Split Local Finance 1. Planning & Preparation SSA 50% 2. Provide Assumptions 20% 3. Data Entry & Processing 5% 4. Iterations 20% 50% 80% 95% 80% 5. Reporting 100% • Standard “rules based” reporting 100% • Adhoc analysis reporting 6. Response to User Queries 7. Stewardship 10% 90% 5% 95% Local Finance & SSA equally responsible Note that the respective roles of Local Finance and FSS are described only when an interactive relationship exists • Budgeting & Planning Preparation - SSA will receive notification from Local Finance of framework approach and Local Finance / SSA will jointly liaise with service departments in planning etc • Provide Assumptions – Local Finance provide assumptions and SSA updates to models with these changes in assumptions • Data Entry & Processing- SSA will process the data and validate/ solve certain discrepancies together with Local Finance. • Iterations- Local Finance will review and request changes. SSA will process these changes • Reporting- For local reporting: SSA will provide standard rules based reports. With BI tools local Finance can generate adhoc reports locally • User Queries- Local Finance & service departments will request information from the SSA where elements are under their control • Stewardship- SSA will be responsible for quality of data processing and generating outputs and Local Finance will be responsible for the overall final agreement and signoff of figures and commentary.

Budgeting & Forecasting Set budget parameters & assumptions: • Inflation • Targets • Exchange rates • Timescales • Strategic assumptions Review Update initial budget to produce “various iterations” SSC Compile public sector relevant data eg funding sources Compile “initial version” of budget using defined assumptions. Compile historic (actual) data pes ud of b s plie Ap Budget /forecasting control: • Maintain budget parameters /budget holders, etc. • Manage controls • Manage budget workflows Upload final budget to budget system Regular reporting: forecasts vs. budgets Compile historic (actual) financial data get ll ty Management reporting: Analysis & interpretation Compile overhead data a s to Approve? Compile next forecast (actuals to-date + forecast to end of year ) Upload approved forecast to budget/forecast system Update forecast to produce next forecast Review Approve? Service Departments and Local Finance/ Corporate Finance Business Intelligence Business Analysis & Review: • Budget/ forecast challenge • Judgement • Risk analysis

Redesigning Processes and Organisation Structures Treasury Management

Record to Report Split of Effort: Treasury Mgt Respective roles of Business and SSC Effort Split Local Finance 1. Annual cash flow forecast 4. Treasury policy & strategy 20 % 80% 6. Short term borrowing 20% 9. Investments 80% 20% 8. Debt management 80% 20% 5. Capital financing 7. Long term borrowing 80% 2. Maintain a daily cash flow forecast 3. Maintain the daily cash position SSC 80% 20% 80% Overall Note that the respective roles of Local Finance and FSS are described only when an interactive relationship exists • Annual Cash Flow Forecast- SSC is liaise with relevant service managers to produce draft forecast for detailed review and follow-up by client • Daily cash flow forecast- maintain up to date with reference to actual cash flows and anticipated changes. Client to monitor and to be involved by exception • Daily cash position – SSC will maintain the cash balance within pre-defined parameters. • Treasury policy & strategy SSC to obtain expert advice and advise the Section 151 Officer on all aspects of policy, strategy, implementation and monitoring. • Capital financing - SSC to advise the Section 151 officer on the financing of the Council’s capital expenditure. To include evaluation of the various financing options. • Short /long term borrowing – SSC to undertake the necessary short term borrowing as part of maintaining the short term cash position. Also to ensure that long term borrowing arrangements are in place in accordance with the requirements of the capital financing strategy. • Debt management – SSC to report to the Section 151 Officer on opportunities for debt re-scheduling in order to minimise future costs of borrowing. • Investments - SSC to advise the Section 151 Officer and have arrangements in place for maximising the Councils investment opportunities.

Redesigning Processes and Organisation Structures Internal Audit

Record to Report Split of Effort: Internal Audit Respective roles of Business and SSC • Review of internal controls- SSC to undertake audit tests to assess and evaluate strength of internal controls. Local Finance SSC Evaluate the extent to which the Council facilitates good practice in managing risk. • Management reviews- Undertake reviews and examine the extent to which performance and best value reviews are incorporated into business processes. 10% 90% 1. Review of internal controls • External audit- SSC to liaise with external audit in compliance with the audit code of practice and managed 90% 10% 2. Management audits/reviews audit requirements. Involvement of the client in ensuring 10% an effective managed audit process is essential. 3. External audit 90% • Internal audit strategy- SSC to undertake a risk needs 10% 90% 4. Internal audit strategy assessment to inform the audit strategy and to produce an annual audit plan. The Section 151 will undertake a 90% 5. Internal audit reports 10% detailed review of this work. 10% • Internal audit reports- SSC to draft all internal audit 90% 6. Systems auditing reports in compliance with the agreed format, content and 90% 10% 7. Computer auditing timescales. • Systems auditing- SSC to undertake a risk based 90% 10% 8. Contract auditing approach to systems audits including testing and reviewing 20% 80% controls as well as providing a professional opinion on the 9. Fraud & corruption adequacy, effectiveness and reliability of the system. • Computer auditing- Specialist work undertaking an assessment of the adequacy of controls in a complex environment • Contract auditing- SSC to undertake tests in compliance with standing orders and financial regulations Note that the respective roles of Local Finance and FSS are described only when an • Fraud & corruption- Bringing to the attention of the Section 151 Officer any primae facie evidence of fraud and interactive relationship exists corruption Effort Split

Record to Report Process ERP Application Architecture: Total Finance • Manual journal entry proposals and financial data updates will be sent to SSC using workflow • Where local budgeting systems exist, a standard capability to load budget balances into the GL will be provided • The ability to extract data will be provided for local management reporting purposes SSC Interface Other Systems Services Council Tax Ctax Payroll Systems Payroll Housing Data Extracts SSC ERP System FA Invoices Co. A FA Budgeting Systems Budget Data Bens/Allow Billing Collection AR Workflow Actual Journal Data Budgeting Data Payments AP P. O. Receipts GL Reporting Database PO Consolidated Data